10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended September 30, 2015

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  ý     No  ¨                            QualityTech, LP Yes  ý     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  ý     No  ¨                            QualityTech, LP Yes  ý     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	ý
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

QualityTech, LP

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	ý  (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  ý                             QualityTech, LP Yes  ¨     No  ý

There were 41,019,436 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 3, 2015.

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”). 

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 is the sole general partner of the Operating Partnership, and, as of September 30, 2015, its only material asset consisted of its ownership of approximately 85.7% 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. 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. The Operating Partnership’s capital includes general and limited common units that are owned by QTS and the other partners. QTS' stockholders’ equity includes common stock, additional paid in capital, accumulated other comprehensive income (loss) and accumulated dividends in excess of earnings. The remaining equity is the portion of net assets that are retained by partners other than QTS, referred to as noncontrolling interests. The primary difference in QTS' Statements of Operations and Comprehensive Income (Loss) 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 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 

QTS Realty Trust, Inc.

QualityTech, LP

Form 10-Q

For the Quarterly Period Ended September 30, 2015

INDEX

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements of QTS Realty Trust, Inc.	4
	Financial Statements of QualityTech, LP	8
	Notes to QTS Realty Trust, Inc. and QualityTech, LP Financial Statements	12
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	57
ITEM 4.	Controls and Procedures	58
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	59
ITEM 1A.	Risk Factors	59
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
ITEM 3.	Defaults Upon Senior Securities	60
ITEM 4.	Mine Safety Disclosures	60
ITEM 5.	Other Information	60
ITEM 6.	Exhibits	61
	Signatures	63

3 

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, 2015			December 31, 2014
	(unaudited)
ASSETS
Real Estate Assets
Land	$	52,430		$	48,577
Buildings and improvements		1,108,758			914,286
Less: Accumulated depreciation		(222,373	)		(180,167	)
		938,815			782,696
Construction in progress		353,782			214,719
Real Estate Assets, net		1,292,597			997,415
Cash and cash equivalents		10,730			10,788
Rents and other receivables, net		31,024			15,579
Acquired intangibles, net		119,402			18,000
Deferred costs, net		38,522			37,058
Prepaid expenses		9,074			3,079
Goodwill		174,697			-
Other assets, net		29,445			24,640
TOTAL ASSETS	$	1,705,491		$	1,106,559
LIABILITIES
Mortgage notes payable	$	70,000		$	86,600
Unsecured credit facility		400,000			239,838
Senior notes, net of discount		297,914			297,729
Capital lease and lease financing obligations		53,023			13,062
Accounts payable and accrued liabilities		80,893			64,607
Dividends and distributions payable		15,349			10,705
Advance rents, security deposits and other liabilities		19,079			3,302
Deferred income taxes		15,634			-
Deferred income		25,046			10,531
TOTAL LIABILITIES		976,938			726,374
EQUITY
Common stock, $0.01 par value, 450,133,000 shares authorized, 41,101,507 and 29,408,138 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively		412			294
Additional paid-in capital		668,246			324,917
Accumulated dividends in excess of earnings		(44,142	)		(22,503	)
Total stockholders’ equity		624,516			302,708
Noncontrolling interests		104,037			77,477
TOTAL EQUITY		728,553			380,185
TOTAL LIABILITIES AND EQUITY	$	1,705,491		$	1,106,559

See accompanying notes to financial statements.

4 

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,
Revenues:	2015			2014			2015			2014
Rental	$	62,744		$	45,448		$	164,270		$	127,993
Recoveries from customers		6,158			6,131			17,404			13,674
Cloud and managed services		18,573			5,242			32,588			14,443
Other		1,415			1,124			4,131			2,116
Total revenues		88,890			57,945			218,393			158,226
Operating Expenses:
Property operating costs		30,925			20,369			72,292			53,121
Real estate taxes and insurance		1,462			1,377			4,421			3,713
Depreciation and amortization		24,486			15,210			58,791			42,274
General and administrative		19,440			11,045			47,893			33,296
Restructuring		-			226			-			1,272
Transaction and integration costs		1,482			(195	)		6,256			958
Total operating expenses		77,795			48,032			189,653			134,634
Operating income		11,095			9,913			28,740			23,592
Other income and expenses:
Interest income		1			-			2			8
Interest expense		(5,418	)		(5,410	)		(15,559	)		(9,683	)
Other (expense) income, net		-			(470	)		(83	)		(580	)
Income before taxes		5,678			4,033			13,100			13,337
Tax benefit (expense) of taxable REIT subsidiaries		2,560			(27	)		5,695			(82	)
Net income		8,238			4,006			18,795			13,255
Net income attributable to noncontrolling interests		(1,229	)		(849	)		(3,072	)		(2,810	)
Net income attributable to QTS Realty Trust, Inc.	$	7,009		$	3,157		$	15,723		$	10,445
Net income per share attributable to common shares:
Basic	$	0.17		$	0.11		$	0.43		$	0.36
Diluted		0.17			0.11			0.43			0.36
Weighted average common shares outstanding:
Basic		40,994,387			29,016,774			36,354,738			29,006,620
Diluted		48,733,417			37,251,769			44,181,583			37,039,603

 See accompanying notes to financial statements.

5 

QTS REALTY TRUST, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF EQUITY

(unaudited and in thousands)

								Accumulated
	Common stock				Additional			dividends in			Total
	Shares		Amount		paid-in capital			excess of earnings			Stockholders’ equity			Noncontrolling interests			Total
Balance January 1, 2015		29,408	$	294	$	324,917		$	(22,503	)	$	302,708		$	77,477		$	380,185
Issuance of shares through equity award plan		263		3		(3	)		-			-			-			-
Reclassification of noncontrolling interest upon conversion of partnership units to common stock		680		7		8,495			-			8,502			(8,502	)		-
Equity-based compensation expense		-		-		4,355			-			4,355			851			5,206
Net proceeds from equity offering		10,750		108		330,482			-			330,590			37,830			368,420
Dividends to shareholders		-		-		-			(37,362	)		(37,362	)		-			(37,362	)
Distributions to noncontrolling interests		-		-		-			-			-			(6,691	)		(6,691	)
Net income		-		-		-			15,723			15,723			3,072			18,795
Balance September 30, 2015		41,101	$	412	$	668,246		$	(44,142	)	$	624,516		$	104,037		$	728,553

See accompanying notes to financial statements.

6 

QTS REALTY TRUST, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the nine months ended September 30, 2015 and 2014

Cash flow from operating activities:	2015			2014
Net income	$	18,795		$	13,255
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		57,347			40,070
Amortization of deferred loan costs		2,372			1,894
Amortization of senior notes discount		184			38
Equity-based compensation expense		5,206			2,901
Bad debt expense		640			402
Write off of deferred loan costs		83			580
Deferred tax benefit		(5,695	)		-
Changes in operating assets and liabilities
Rents and other receivables, net		(2,382	)		104
Prepaid expenses		(4,713	)		(2,245	)
Other assets		(352	)		596
Accounts payable and accrued liabilities		(2,427	)		(7,833	)
Advance rents, security deposits and other liabilities		(437	)		(44	)
Deferred income		3,698			1,637
Net cash provided by operating activities		72,319			51,355
Cash flow from investing activities:
Acquisitions, net of cash acquired		(288,865	)		(91,064	)
Additions to property and equipment		(252,156	)		(156,008	)
Cash used in investing activities		(541,021	)		(247,072	)
Cash flow from financing activities:
Credit facility proceeds		420,162			230,500
Senior Notes proceeds		-			297,633
Debt repayment		(260,000	)		(290,000	)
Payment of deferred financing costs		(577	)		(9,648	)
Payment of cash dividends		(32,756	)		(23,783	)
Distribution to noncontrolling interests		(6,652	)		(6,932	)
Principal payments on capital lease obligations		(4,415	)		(553	)
Mortgage principal debt repayments		(16,600	)		(1,665	)
Equity proceeds, net of costs		369,482			-
Net cash provided by financing activities		468,644			195,552
Net decrease in cash and cash equivalents		(58	)		(165	)
Cash and cash equivalents, beginning of period		10,788			5,210
Cash and cash equivalents, end of period	$	10,730		$	5,045
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	$	17,785		$	4,599
Noncash investing and financing activities:
Accrued capital additions	$	48,540		$	36,381
Capital lease and lease financing obligations assumed	$	43,832		$	-

See accompanying notes to financial statements.

7 

QUALITYTECH, LP

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS

(in thousands)

	September 30, 2015			December 31, 2014
	(unaudited)
ASSETS
Real Estate Assets
Land	$	52,430		$	48,577
Buildings and improvements		1,108,758			914,286
Less: Accumulated depreciation		(222,373	)		(180,167	)
		938,815			782,696
Construction in progress		353,782			214,719
Real Estate Assets, net		1,292,597			997,415
Cash and cash equivalents		10,730			10,788
Rents and other receivables, net		31,024			15,579
Acquired intangibles, net		119,402			18,000
Deferred costs, net		38,522			37,058
Prepaid expenses		9,074			3,079
Goodwill		174,697			-
Other assets, net		29,445			24,640
TOTAL ASSETS	$	1,705,491		$	1,106,559
LIABILITIES
Mortgage notes payable	$	70,000		$	86,600
Unsecured credit facility		400,000			239,838
Senior notes, net of discount		297,914			297,729
Capital lease and lease financing obligations		53,023			13,062
Accounts payable and accrued liabilities		80,893			64,607
Dividends and distributions payable		15,349			10,705
Advance rents, security deposits and other liabilities		19,079			3,302
Deferred income taxes		15,634			-
Deferred income		25,046			10,531
TOTAL LIABILITIES		976,938			726,374
PARTNERS' CAPITAL
Partners' capital		728,553			380,185
TOTAL LIABILITIES AND PARTNERS' CAPITAL	$	1,705,491		$	1,106,559

See accompanying notes to financial statements.

8 

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,
Revenues:	2015			2014			2015			2014
Rental	$	62,744		$	45,448		$	164,270		$	127,993
Recoveries from customers		6,158			6,131			17,404			13,674
Cloud and managed services		18,573			5,242			32,588			14,443
Other		1,415			1,124			4,131			2,116
Total revenues		88,890			57,945			218,393			158,226
Operating Expenses:
Property operating costs		30,925			20,369			72,292			53,121
Real estate taxes and insurance		1,462			1,377			4,421			3,713
Depreciation and amortization		24,486			15,210			58,791			42,274
General and administrative		19,440			11,045			47,893			33,296
Restructuring		-			226			-			1,272
Transaction and integration costs		1,482			(195	)		6,256			958
Total operating expenses		77,795			48,032			189,653			134,634
Operating income		11,095			9,913			28,740			23,592
Other income and expenses:
Interest income		1			-			2			8
Interest expense		(5,418	)		(5,410	)		(15,559	)		(9,683	)
Other (expense) income, net		-			(470	)		(83	)		(580	)
Income before taxes		5,678			4,033			13,100			13,337
Tax benefit (expense) of taxable REIT subsidiaries		2,560			(27	)		5,695			(82	)
Net income	$	8,238		$	4,006		$	18,795		$	13,255

See accompanying notes to financial statements.

9 

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, 2015		36,935	$	380,185			1	$	-	$	380,185
Issuance of shares through equity award plan		263		-			-		-		-
Equity-based compensation expense		-		5,206			-		-		5,206
Net proceeds from QTS Realty Trust, Inc. equity offering		10,750		368,420			-		-		368,420
Dividends to QTS Realty Trust, Inc.		-		(37,362	)		-		-		(37,362	)
Partnership distributions		-		(6,691	)		-		-		(6,691	)
Net income		-		18,795			-		-		18,795
Balance September 30, 2015		47,948	$	728,553			1	$	-	$	728,553

See accompanying notes to financial statements.

10 

QUALITYTECH, LP

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the nine months ended September 30, 2015 and 2014

Cash flow from operating activities:	2015			2014
Net income	$	18,795		$	13,255
Adjustments to reconcile net income to net cash provided by      operating activities:
Depreciation and amortization		57,347			40,070
Amortization of deferred loan costs		2,372			1,894
Amortization of senior notes discount		184			38
Equity-based compensation expense		5,206			2,901
Bad debt expense		640			402
Write off of deferred loan costs		83			580
Deferred tax benefit		(5,695	)		-
Changes in operating assets and liabilities
Rents and other receivables, net		(2,382	)		104
Prepaid expenses		(4,713	)		(2,245	)
Other assets		(352	)		596
Accounts payable and accrued liabilities		(2,427	)		(7,833	)
Advance rents, security deposits and other liabilities		(437	)		(44	)
Deferred income		3,698			1,637
Net cash provided by operating activities		72,319			51,355
Cash flow from investing activities:
Acquisitions, net of cash acquired		(288,865	)		(91,064	)
Additions to property and equipment		(252,156	)		(156,008	)
Cash used in investing activities		(541,021	)		(247,072	)
Cash flow from financing activities:
Credit facility proceeds		420,162			230,500
Senior Notes proceeds		-			297,633
Debt repayment		(260,000	)		(290,000	)
Payment of deferred financing costs		(577	)		(9,648	)
Payment of cash dividends		(32,756	)		(23,783	)
Partnership distributions		(6,652	)		(6,932	)
Principal payments on capital lease obligations		(4,415	)		(553	)
Mortgage principal debt repayments		(16,600	)		(1,665	)
Equity proceeds, net of costs		369,482			-
Net cash provided by financing activities		468,644			195,552
Net decrease in cash and cash equivalents		(58	)		(165	)
Cash and cash equivalents, beginning of period		10,788			5,210
Cash and cash equivalents, end of period	$	10,730		$	5,045
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	$	17,785		$	4,599
Noncash investing and financing activities:
Accrued capital additions	$	48,540		$	36,381
Capital lease and lease financing obligations assumed	$	43,832		$	-

See accompanying notes to financial statements.

11 

QTS REALTY TRUST, INC.

QUALITYTECH, LP

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business 

QTS Realty Trust, Inc. (“QTS”) through its controlling interest in QualityTech, LP (the “Operating Partnership” and collectively with QTS and their subsidiaries, the “Company”) and the subsidiaries of the Operating Partnership, is engaged in the business of owning, acquiring, redeveloping and managing multi-tenant data centers. The Company’s portfolio consists of 25 wholly-owned and leased properties with data centers located throughout the United States, Canada, Europe and the Asia-Pacific region.

QTS was formed as a Maryland corporation on May 17, 2013. On October 15, 2013, QTS completed its initial public offering of 14,087,500 shares of Class A common stock, $0.01 par value per share (the “IPO”), including shares issued pursuant to the underwriters’ option to purchase additional shares, which was exercised in full, and received net proceeds of approximately $279 million. QTS elected to be taxed as a real estate investment trust (“REIT”), for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2013. As a REIT, QTS generally is not required to pay federal corporate income taxes on its taxable income to the extent it is currently distributed to its stockholders.

Concurrently with the completion of the IPO, the Company consummated a series of transactions, including the merger of General Atlantic REIT, Inc. with the Company, pursuant to which the Company became the sole general partner and majority owner of QualityTech, LP, the Operating Partnership. QTS contributed the net proceeds received from the IPO to the Operating Partnership in exchange for partnership units therein. As of September 30, 2015, QTS owned approximately 85.7% of the interests in the Operating Partnership. Substantially all of QTS’ assets are held by, and QTS’ operations are conducted through, the Operating Partnership. QTS’ interest in the Operating Partnership entitles QTS to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to QTS’ percentage ownership. As the sole general partner of the Operating Partnership, QTS generally has the exclusive power under the partnership agreement to manage and conduct the Operating Partnership’s business and affairs, subject to certain limited approval and voting rights of the limited partners. QTS’ board of directors manages the Company’s business and affairs.

2. Summary of Significant Accounting Policies

Basis of Presentation – The accompanying financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

The accompanying financial statements are presented for both QTS Realty Trust, Inc. and QualityTech, LP. References to “QTS” mean QTS Realty Trust, Inc. and its controlled subsidiaries; and references to the “Operating Partnership” mean QualityTech, LP and its controlled subsidiaries.

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 is the sole general partner of the Operating Partnership, and its only material asset consists of its ownership interest in 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 the business through its operations, the direct or indirect incurrence of indebtedness, and the issuance of partnership units. As general partner with control of the Operating Partnership, QTS consolidates the Operating Partnership for financial reporting purposes.

12 

The Company believes, therefore, that 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 applies to both QTS and the Operating Partnership; and

· creates time and cost efficiencies through the preparation of one set of notes instead of two separate sets of notes.

In addition, in light of these combined notes, the Company believes 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. 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. The Operating Partnership’s capital includes general and limited common units that are owned by QTS and the other partners. QTS' stockholders’ equity includes common stock, additional paid in capital, accumulated other comprehensive income (loss) and accumulated dividends in excess of earnings. The remaining equity is the portion of net assets that are retained by partners other than QTS, referred to as noncontrolling interests. The primary difference in QTS' Statements of Operations and Comprehensive Income (Loss) 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. These combined notes refer to actions or holdings as being actions or holdings of “the Company.” Although the Operating Partnership is generally the entity that enters into contracts, holds assets and issues debt, management believes that these general references to “the Company” in this context is appropriate because the business is one enterprise operated through the Operating Partnership.

As discussed above, QTS owns no operating assets and has no operations independent of the Operating Partnership and its subsidiaries. Also, the Operating Partnership owns no operating assets and has no operations independent of its subsidiaries. Obligations under the 5.875% Senior Notes due 2022 and the unsecured credit facility, both discussed in Note 5, are fully, unconditionally, and jointly and severally guaranteed by the Operating Partnership’s existing subsidiaries, other than QTS Finance Corporation, the co-issuer of the 5.875% Senior Notes due 2022. As such, condensed consolidating financial information for the guarantors is not being presented in the notes to the interim condensed consolidated financial statements. However, the indenture governing the 5.875% Senior Notes due 2022 restricts the ability of the Operating Partnership to make distributions to QTS, subject to certain exceptions, including distributions required in order for QTS to maintain its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

The interim condensed consolidated financial statements of QTS Realty Trust, Inc. for the three and nine months ended September 30, 2015 and 2014, and as of September 30, 2015 and December 31, 2014 present the accounts of QTS Realty Trust, Inc. and its majority owned subsidiaries. This includes the operating results of the Operating Partnership for all periods presented.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets, allowances for doubtful accounts and deferred tax assets and the valuation of derivatives, real estate assets, acquired intangible assets and certain accruals.

Principles of Consolidation – The consolidated financial statements of QTS Realty Trust, Inc. include the accounts of QTS Realty Trust, Inc. and its majority-owned subsidiaries. The consolidated financial statements of QualityTech, LP include the accounts of QualityTech, LP and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in the financial statements.

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Real Estate Assets – Real estate assets are reported at cost. All capital improvements for the income-producing properties that extend their useful lives are capitalized to individual property improvements and depreciated over their estimated useful lives. Depreciation is generally provided on a straight-line basis over 40 years from the date the property was placed in service. Property improvements are depreciated on a straight-line basis over the life of the respective improvement ranging from 20 to 40 years from the date the components were placed in service. Leasehold improvements are depreciated over the lesser of 20 years or through the end of the respective life of the lease. Repairs and maintenance costs are expensed as incurred. For the three months ended September 30, 2015, depreciation expense related to real estate assets and non-real estate assets was $15.2 million and $2.7 million, respectively, for a total of $17.9 million. For the three months ended September 30, 2014, depreciation expense related to real estate assets and non-real estate assets was $10.3 million and $1.6 million, respectively, for a total of $11.9 million. For the nine months ended September 30, 2015, depreciation expense related to real estate assets and non-real estate assets was $38.5 million and $6.2 million, respectively, for a total of $44.7 million. For the nine months ended September 30, 2014, depreciation expense related to real estate assets and non-real estate assets was $28.2 million and $4.6 million, respectively, for a total of $32.8 million. The Company capitalizes certain development costs, including internal costs incurred in connection with development. The capitalization of costs during the construction period (including interest and related loan fees, property taxes and other direct and indirect costs) begins when development efforts commence and ends when the asset is ready for its intended use. Capitalization of such costs, excluding interest, aggregated to $2.7 million and $2.9 million for the three months ended September 30, 2015 and 2014, respectively, and $8.6 million and $7.5 million for the nine months ended September 30, 2015 and 2014, respectively. Interest is capitalized during the period of development by first applying the Company’s actual borrowing rate on the related asset and second, to the extent necessary, by applying the Company’s weighted average effective borrowing rate to the actual development and other costs expended during the construction period. Interest is capitalized until the property is ready for its intended use. Interest costs capitalized totaled $2.7 million and $1.3 million for the three months ended September 30, 2015 and 2014, respectively, and $7.1 million and $4.7 million for the nine months ended September 30, 2015 and 2014, respectively.

Acquisitions – Acquisitions of real estate and other entities are either accounted for as asset acquisitions or business combinations depending on facts and circumstances. Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired in accordance with the accounting requirements of ASC 805, Business Combinations, which requires the recording of net assets of acquired businesses at fair value. The fair value of the consideration transferred is allocated to the acquired tangible assets, consisting primarily of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, value of in-place leases, value of customer relationships, trade names, software intangibles and capital leases. The excess of the fair value of liabilities assumed, common stock issued and cash paid over the fair value of identifiable assets acquired is allocated to goodwill, which is not amortized by the Company.

In developing estimates of fair value of acquired assets and assumed liabilities, management analyzed a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, particularly with respect to the intangible assets.

Acquired in-place leases are amortized as amortization expense on a straight-line basis over the remaining life of the underlying leases. Amortization of acquired in place lease costs totaled $0.4 million and $0.5 million for the three months ended September 30, 2015 and 2014, respectively, and $1.3 million and $1.8 million for the nine months ended September 30, 2015 and 2014, respectively. This amortization expense is accounted for as real estate amortization expense.

Acquired customer relationships are amortized as amortization expense on a straight-line basis over the expected life of the customer relationship. Amortization of acquired customer relationships totaled $2.0 million and $0.3 million for the three months ended September 30, 2015 and 2014, respectively, and $3.0 million and $1.0 million for the nine months ended September 30, 2015 and 2014, respectively. This amortization expense is accounted for as real estate amortization expense.

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Other acquired intangible assets, which includes platform, above or below market leases, and trade name intangibles, are amortized on a straight-line basis over their respective expected lives. Platform and trade name intangibles are amortized as amortization expense. Platform amortization expense was $0.8 million and $0.9 million for the three and nine months ended September 30, 2015, respectively. Trade name amortization expense was $0.3 million for the three and nine months September 30, 2015. Above or below market leases are amortized as rent expense, which totaled $0.1 million for both the three and nine months ended September 30, 2015. There was no amortization expense or rent expense related to platform, trade name, and above or below market lease intangibles for the three and nine months ended September 30, 2014. The expense associated with above and below market leases and trade name intangibles is accounted for as real estate expense, whereas the expense associated with the amortization of platform intangibles is accounted for as non-real estate expense.

See Note 3 for discussion of the preliminary purchase price allocation for the acquisition of Carpathia Hosting, Inc. (“Carpathia”) on June 16, 2015.

Impairment of Long-Lived and Intangible Assets – The Company reviews its long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is generally measured by comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset group. If the net carrying value of the asset exceeds the value of the undiscounted cash flows, the fair value of the asset is assessed and may be considered impaired. An impairment loss is recognized based on the excess of the carrying amount of the impaired asset over its fair value. No impairment losses were recorded for the three and nine months ended September 30, 2015 and 2014, respectively.

As a result of the Carpathia acquisition, the Company recognized approximately $175 million in goodwill. The fair value of goodwill is the consideration transferred which is not allocable to identifiable intangible and tangible assets. The Company believes that it has one reporting unit for goodwill purposes, and will assess goodwill for impairment annually on October 1 on that basis.

Cash and Cash Equivalents – The Company considers all demand deposits and money market accounts purchased with a maturity date of three months or less at the date of purchase to be cash equivalents. The Company’s account balances at one or more institutions periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is concentration of credit risk related to amounts on deposit in excess of FDIC coverage. The Company mitigates this risk by depositing a majority of its funds with several major financial institutions. The Company also has not experienced any losses and, therefore, does not believe that the risk is significant.

Deferred Costs – Deferred costs, net, on the Company’s balance sheets include both financing costs and leasing costs.

Deferred financing costs represent fees and other costs incurred in connection with obtaining debt and are amortized over the term of the loan and are included in interest expense. Amortization of the deferred financing costs was $0.8 million and $0.5 million for the three months ended September 30, 2015 and 2014, respectively, and $2.4 million and $1.7 million for the nine months ended September 30, 2015 and 2014, respectively. During the three months ended September 30, 2014, the Company wrote off unamortized financing costs of $0.5 million primarily in connection with paying down $75 million of its unsecured credit facility term loan. No unamortized financing costs were written off during the three months ended September 30, 2015. During the nine months ended September 30, 2015, the Company wrote off unamortized financing costs of $0.1 million in connection with the repayment of the Atlanta Metro equipment loan in June 2015, as discussed in Note 5. During the nine months ended September 30, 2014, in addition to the aforementioned $0.5 million write off, the Company wrote off unamortized financing costs of $0.1 million in connection with the modification of its credit facility that is secured by the Richmond data center. Deferred financing costs, net of accumulated amortization are as follows:

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	September 30,			December 31,
(dollars in thousands)	2015			2014
	(unaudited)
Deferred financing costs	$	18,646		$	18,152
Accumulated amortization		(4,090	)		(1,683	)
Deferred financing costs, net	$	14,556		$	16,469

Deferred leasing costs consist of external fees and internal costs incurred in the successful negotiations of leases and are deferred and amortized over the terms of the related leases on a straight-line basis. If an applicable lease terminates prior to the expiration of its initial term, the carrying amount of the costs are written off to amortization expense. Amortization of deferred leasing costs totaled $3.1 million and $2.5 million for the three months ended September 30, 2015 and 2014, respectively, and $8.6 million and $6.7 million for the nine months ended September 30, 2015 and 2014, respectively. Deferred leasing costs, net of accumulated amortization are as follows (excluding $2.9 million, net of amortization, related to a leasing arrangement at the Company’s Princeton facility in 2014):

	September 30,			December 31,
(dollars in thousands)	2015			2014
	(unaudited)
Deferred leasing costs	$	35,652		$	26,799
Accumulated amortization		(14,565	)		(9,378	)
Deferred leasing costs, net	$	21,087		$	17,421

Advance Rents and Security Deposits – Advance rents, typically prepayment of the following month’s rent, consist of payments received from customers prior to the time they are earned and are recognized as revenue in subsequent periods when earned. Security deposits are collected from customers at the lease origination and are generally refunded to customers upon lease expiration.

Deferred Income – Deferred income generally results from non-refundable charges paid by the customer at lease inception to prepare their space for occupancy. The Company records this initial payment, commonly referred to as set-up fees, as a deferred income liability which amortizes into rental revenue over the term of the related lease on a straight-line basis. Deferred income was $25.0 million and $10.5 million as of September 30, 2015 and December 31, 2014, respectively. Additionally, $1.5 million and $1.1 million of deferred income was amortized into revenue for the three months ended September 30, 2015 and 2014, respectively, and $4.1 million and $3.5 million for the nine months ended September 30, 2015 and 2014, respectively.

Interest Rate Derivative Instruments – The Company utilizes derivatives to manage its interest rate exposure. During February 2012, the Company entered into interest rate swaps with a notional amount of $150 million which were cash flow hedges and qualified for hedge accounting. For these hedges, the effective portion of the change in fair value was recognized through other comprehensive income or loss. Amounts were reclassified out of other comprehensive income (loss) as the hedged item was recognized in earnings, either for ineffectiveness or for amounts paid relating to the hedge. The Company reflected all changes in the fair value of the swaps in other comprehensive income (loss) during the three and nine months ended September 30, 2014, as there was no ineffectiveness recorded in that period. The Company had no interest rate swaps outstanding at September 30, 2015 and December 31, 2014.

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Equity-based Compensation – All equity-based compensation is measured at fair value on the grant date or date of modification, as applicable, and recognized in earnings over the requisite service period. Depending upon the settlement terms of the awards, all or a portion of the fair value of equity-based awards may be presented as a liability or as equity in the consolidated balance sheets. Equity-based compensation costs are measured based upon their estimated fair value on the date of grant or modification. Equity-based compensation expense net of forfeited and repurchased awards was $2.1 million and $0.9 million for the three months ended September 30, 2015 and 2014, respectively, and $5.2 million and $2.9 million for the nine months ended September 30, 2015 and 2014, respectively.

Rental Revenue – The Company, as a lessor, has retained substantially all of the risks and benefits of ownership and accounts for its leases as operating leases. For lease agreements that provide for scheduled rent increases, rental income is recognized on a straight-line basis over the non-cancellable term of the leases, which commences when control of the space has been provided to the customer. The amount of the straight-line rent receivable on the balance sheets included in rents and other receivables, net was $7.3 million and $4.0 million as of September 30, 2015 and December 31, 2014, respectively. Rental revenue also includes amortization of set-up fees which are amortized over the term of the respective lease as discussed above.

Cloud and Managed Services Revenue – The Company may provide both its cloud product and use of its managed services to its customers on an individual or combined basis. Service fee revenue is recognized as the revenue is earned, which generally coincides with the services being provided.

Allowance for Uncollectible Accounts Receivable – Rents receivable are recognized when due and are carried at cost, less an allowance for doubtful accounts. The Company records a provision for losses on rents receivable equal to the estimated uncollectible accounts, which is based on management’s historical experience and a review of the current status of the Company’s receivables. As necessary, the Company also establishes an appropriate allowance for doubtful accounts for receivables arising from the straight-lining of rents. The aggregate allowance for doubtful accounts was $5.3 million and $3.7 million as of September 30, 2015 and December 31, 2014, respectively.

Capital Leases and Lease Financing Obligations – The Company evaluates leased real estate to determine whether the lease should be classified as a capital or operating lease in accordance with U.S GAAP.

The Company periodically enters into capital leases for certain equipment. In addition, through its acquisition of Carpathia Hosting, Inc. on June 16, 2015, the Company is now party to capital leases for property and equipment, as well as financing obligations related to a sale-leaseback transaction. The outstanding liabilities for the capital leases were $29.6 million and $13.1 million as of September 30, 2015 and December 31, 2014, respectively. The outstanding liabilities for the lease financing obligations were $23.4 million as of September 30, 2015. The value of the assets associated with these leases approximates the outstanding obligations as of September 30, 2015 and December 31, 2014, respectively. Depreciation related to the associated assets is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.

See Note 3 for further discussion of the acquisition of Carpathia and Note 5 for further discussion of capital leases and lease financing obligations.

Recoveries from Customers – Certain customer leases contain provisions under which the customers reimburse the Company for a portion of the property’s real estate taxes, insurance and other operating expenses, which include certain power and cooling-related charges. The reimbursements are included in revenue as recoveries from customers in the Statements of Operations and Comprehensive Income in the period the applicable expenditures are incurred. Certain customer leases are structured to provide a fixed monthly billing amount that includes an estimate of various operating expenses, with all revenue from such leases included in rental revenues.

Segment Information – The Company manages its business as one operating segment and thus one reportable segment consisting of a portfolio of investments in data centers located primarily in the United States with others in Canada, Europe and the Asia-Pacific region.

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Customer Concentrations – As of September 30, 2015, one of the Company’s customers represented 8.2% of its total monthly rental revenue. No other customers exceeded 5% of total monthly rental revenue.

As of September 30, 2015, three of the Company’s customers exceeded 5% of total accounts receivable. In aggregate, these three customers accounted for 40% of total accounts receivable. Two of these three customers individually exceeded 10% of total accounts receivable.

Income Taxes – The Company elected for three of its existing subsidiaries to be taxed as taxable REIT subsidiaries pursuant to the REIT rules of the U.S. Internal Revenue Code.

For the taxable REIT subsidiaries, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

As of December 31, 2014, one of the taxable REIT subsidiaries’ deferred tax assets were primarily the result of U.S. net operating loss carryforwards. A valuation allowance was recorded against its gross deferred tax asset balance as of December 31, 2014. As a result of the acquisition of Carpathia, the Company has determined that it is more likely than not that pre-existing deferred tax assets will be realized by the combined entity, and the valuation allowance was eliminated. The change in the valuation allowance resulting from the change in circumstances is included in income, recognized in deferred income tax benefit in the three and nine months ended September 30, 2015.

In addition to the deferred income tax benefit recognized in connection with the elimination of the valuation allowance, a deferred tax benefit is being recognized in the third quarter and nine months ended September 30, 2015 in connection with recorded operating losses. The taxable REIT subsidiary consolidated group has a net deferred tax liability position primarily due to the customer-based intangibles acquired as part of the Carpathia acquisition.

The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as the operating performance of the taxable REIT subsidiary, tax law changes and future business acquisitions. The Company’s effective tax rates were 28.4% and 0% for the nine months ended September 30, 2015 and 2014, respectively. The increase in the effective tax rate is primarily due to the elimination of the valuation allowance as a result of the Carpathia acquisition, as well as recorded operating losses in the current year.

Fair Value Measurements – ASC Topic 820, Fair Value Measurements, emphasizes that fair-value is a market-based measurement, not an entity-specific measurement. Therefore, a fair-value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair-value measurements, a fair-value hierarchy is established that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the level in the fair-value hierarchy within which the entire fair-value measurement falls is based on the lowest level input that is significant to the fair-value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

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As the Company’s previous interest rate swaps matured on September 28, 2014, there are no financial assets or liabilities measured at fair value on a recurring basis on the consolidated balance sheets as of September 30, 2015 and December 31, 2014. The Company’s purchase price allocation of Carpathia is a fair value estimate that utilized Level 3 inputs and is measured on a non-recurring basis. See Note 3 for further detail.

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the current revenue recognition requirements in ASC 606, Revenue Recognition. Under this new guidance, entities should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This ASU also requires enhanced disclosures. In July 2015, the FASB finalized its decision to delay the effective date of the amendments in this ASU by one year, and as such, they are effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted; however, entities are not permitted to adopt the standard earlier than December 15, 2016, the original effective date. Retrospective and modified retrospective application is allowed. The Company is currently assessing the impact of this standard on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and not as a separate deferred charge. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. In June 2015, the Securities and Exchange Commission (“SEC”) stated that given the absence of authoritative guidance within this ASU for debt issuance costs related to revolving debt arrangements, the SEC staff would not object to an entity deferring and presenting such costs as an asset and subsequently amortizing them ratably over the term of the revolving debt arrangement. This announcement confirms that revolver arrangement costs are not within the scope of this ASU. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The amendments are required to be applied on a retrospective basis, and upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. Adoption of this standard will affect the Company’s Consolidated Balance Sheets.

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” that eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The amendments in this ASU are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, and should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company is currently assessing the impact of this standard on its consolidated financial statements.

3. Acquisitions

Carpathia Acquisition

On June 16, 2015, the Company completed the acquisition of 100% of the outstanding stock of Carpathia Hosting, Inc. (“Carpathia”), a Virginia-based colocation, cloud and managed services provider for approximately $354.4 million (based on the preliminary assessment of the fair value of assets acquired and liabilities assumed). Upon completion of this acquisition, the Company assumed all of the assets and liabilities of Carpathia Acquisition, Inc. Carpathia Acquisition, Inc. and its subsidiaries, including Carpathia, became indirect, wholly-owned subsidiaries of the Company. Carpathia is a provider of colocation, hybrid cloud and Infrastructure-as-a-Service (IaaS) servicing enterprise customers and federal agencies, with a customer base of approximately 230 customers as of June 16, 2015. Carpathia utilizes eight domestic data centers located in Dulles, Virginia; Phoenix, Arizona; San Jose, California; Harrisonburg, Virginia and Ashburn, Virginia; and five international data centers located in Toronto; Amsterdam; London; Hong Kong and Sydney.

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The Company accounted for this acquisition in accordance with ASC 805, Business Combinations, as a business combination. The preliminary purchase price allocation was based on an assessment of the fair value of the assets acquired and liabilities assumed, and excludes acquisition-related costs which in accordance with ASC 805 were expensed as incurred. The Company is valuing the assets acquired and liabilities assumed using Level 3 inputs.

The following table summarizes the consideration for the Carpathia acquisition and the preliminary allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (in thousands). This allocation is subject to change pending the final valuation of these assets and liabilities:

		June 16, 2015
Land	$	1,130
Buildings and improvements		78,898
Construction in process		12,127
Acquired intangibles, net		90,947
Net working capital		2,390
Total identifiable assets acquired		185,492
Capital lease and lease financing obligations		43,832
Deferred income taxes		21,673
Total liabilities assumed		65,505
Net identifiable assets acquired		119,987
Goodwill		174,697
Net assets acquired	$	294,684

Goodwill recognized in the transaction relates primarily to anticipated operating synergies, Carpathia’s in-place workforce and access to Carpathia’s broader customer base. Based on the preliminary purchase price allocation, amortization expenses relative to the intangible assets acquired are expected to be approximately $5.9 million, $11.0 million, $11.0 million, $8.8 million and $6.7 million for the years ended December 31, 2015 through December 31, 2019, respectively.

The following table represents the pro forma condensed consolidated statements of operations of the combined entities for the three-month period ended September 30, 2014, and for the nine-month periods ended September 30, 2015 and 2014 (in thousands):

	(Unaudited) Pro Forma Condensed Consolidated Statements of Operations
	Three Months Ended September 30,	Nine Months Ended September 30,
	2014	2015	2014
Revenue	$78,951	$285,769	$218,918
Net income	$1,550	$10,901	$7,949

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These amounts have been calculated after applying the Company’s accounting policies, and give effect to the Carpathia acquisition. The purchase price allocation for this acquisition has been prepared on a preliminary basis. Accordingly, the purchase accounting adjustments made in connection with the development of the unaudited pro forma consolidated statements of operations are preliminary and subject to change.

The unaudited pro forma condensed consolidated financial information is for comparative purposes only and not necessarily indicative of what actual results of operations of the Company would have been had the transactions noted above been consummated on January 1, 2014, nor does it purport to represent the results of operations for future periods.

Revenue and net income generated by Carpathia entities subsequent to the Company’s acquisition from June 16, 2015 to September 30, 2015 were $25.9 million and $0.7 million, respectively.

4. Real Estate Assets and Construction in Progress

The following is a summary of properties owned or leased by the Company as of September 30, 2015 and December 31, 2014 (in thousands):

As of September 30, 2015 (unaudited):

Property Location	Land		Buildings and Improvements		Construction in Progress		Total Cost
Owned Properties
Suwanee, Georgia (Atlanta-Suwanee)	$	3,521	$	146,714	$	16,558	$	166,793
Atlanta, Georgia (Atlanta-Metro)		15,396		386,397		48,403		450,196
Santa Clara, California*		-		93,895		990		94,885
Richmond, Virginia		2,180		166,283		122,746		291,209
Sacramento, California		1,481		61,112		302		62,895
Princeton, New Jersey		20,700		32,583		314		53,597
Dallas-Fort Worth, Texas		5,808		70,710		113,115		189,633
Chicago, Illinois		-		-		43,098		43,098
Miami, Florida		1,777		30,038		306		32,121
Lenexa, Kansas		437		3,511		-		3,948
Wichita, Kansas		-		1,409		-		1,409
		51,300		992,652		345,832		1,389,784
Leased Properties
Carpathia properties ***		1,130		87,425		6,384		94,939
Jersey City, New Jersey		-		27,767		1,566		29,333
Overland Park, Kansas **		-		914		-		914
		1,130		116,106		7,950		125,186
	$	52,430	$	1,108,758	$	353,782	$	1,514,970

* Owned facility subject to long-term ground sublease.
** This does not include the portion of the business that is used for QTS office space or other real estate not used by customers.
*** Includes 13 facilities. All facilities are leased, including those subject to capital leases.

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As of December 31, 2014:

Property Location	Land		Buildings and Improvements		Construction in Progress		Total Cost
Owned Properties
Suwanee, Georgia (Atlanta-Suwanee)	$	3,521	$	138,991	$	6,345	$	148,857
Atlanta, Georgia (Atlanta-Metro)		15,397		356,122		22,693		394,212
Santa Clara, California*		-		90,332		650		90,982
Richmond, Virginia		2,180		127,080		71,794		201,054
Sacramento, California		1,481		60,094		278		61,853
Princeton, New Jersey		17,976		35,951		90		54,017
Dallas-Fort Worth, Texas		5,808		44,053		89,982		139,843
Chicago, Illinois		-		-		21,786		21,786
Miami, Florida		1,777		28,786		129		30,692
Lenexa, Kansas		437		3,298		25		3,760
Wichita, Kansas		-		1,409		-		1,409
		48,577		886,116		213,772		1,148,465
Leased Properties
Jersey City, New Jersey		-		27,318		920		28,238
Overland Park, Kansas **		-		852		27		879
		-		28,170		947		29,117
	$	48,577	$	914,286	$	214,719	$	1,177,582

_____________________________

* Owned facility subject to long-term ground sublease.
** This does not include the portion of the business that is used for QTS office space or other real estate not used by customers.

5. Debt

Below is a listing of the Company’s outstanding debt, including capital leases and lease financing obligations, as of September 30, 2015 and December 31, 2014 (in thousands):

	September 30,		December 31,
	2015		2014
	(Unaudited)
Unsecured Credit Facility	$	400,000	$	239,838
Senior Notes, net of discount		297,914		297,729
Richmond Credit Facility		70,000		70,000
Atlanta-Metro Equipment Loan		-		16,600
Capital Lease and Lease Financing Obligations		53,023		13,062
Total	$	820,937	$	637,229

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Credit Facilities, Senior Notes and Mortgage Notes Payable

(a) Unsecured Credit Facility – On May 1, 2013, the Company entered into a $575 million unsecured credit facility comprised of a five-year $225 million term loan and a four-year $350 million revolving credit facility with a one year extension, subject to satisfaction of certain conditions, and had the ability to expand the total credit facility by an additional $100 million subject to certain conditions set forth in the credit agreement. In July 2014, the Company’s term loan was reduced by $75 million to $150 million in connection with the issuance of the Senior Notes. On December 17, 2014, the Company amended and restated its unsecured credit facility to provide for a $650 million unsecured credit facility comprised of a five-year $100 million term loan scheduled to mature on December 17, 2019 and a four-year $550 million revolving credit facility scheduled to mature on December 17, 2018, with the option to extend one year until December 17, 2019, subject to the satisfaction of certain conditions. The lenders under the unsecured credit facility could issue up to $30 million in letters of credit subject to the satisfaction of certain conditions.  The total unsecured credit facility could be increased from the current capacity of $650 million to up to $850 million subject to certain conditions set forth in the credit agreement, including the consent of the administrative agent and obtaining necessary commitments. As of September 30, 2015, borrowings under the unsecured credit facility consisted of $300.0 million outstanding under the revolving credit facility and $100.0 million outstanding under the term loan.

In October 2015, the Company amended the unsecured credit facility, increasing the total capacity by $250 million and extending the term.  At the same time, the Company terminated its secured credit facility relating to the Richmond data center. The amended unsecured credit facility has a total capacity of $900 million and includes a $150 million term loan which matures on December 17, 2020, another $150 million term loan which matures on April 27, 2021, and a $600 million revolving credit facility which matures on December 17, 2019, with a one year extension option. Amounts outstanding under the amended unsecured credit facility bear interest at a variable rate equal to, at the Company’s election, LIBOR or a base rate, plus a spread that will vary depending upon the Company’s leverage ratio. For revolving credit loans, the spread ranges from 1.55% to 2.15% for LIBOR loans and 0.55% to 1.15% for base rate loans. For term loans, the spread ranges from 1.50% to 2.10% for LIBOR loans and 0.50% to 1.10% for base rate loans. The amended unsecured credit facility also includes a $200 million accordion feature.

The unsecured credit facility requires monthly interest payments and requires the Company to comply with various customary affirmative and negative covenants and quarterly financial covenant requirements relating to the debt service coverage ratio, fixed charge ratio, leverage ratio and tangible net worth and various other operational requirements. In connection with the unsecured credit facility, as of September 30, 2015, the Company had an additional $2.5 million letter of credit outstanding. The letter of credit was reduced to $2.0 million on October 1, 2015. As of September 30, 2015, the weighted average interest rate for amounts outstanding under the unsecured credit facility was 1.89%.

(b) Senior Notes – On July 23, 2014, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership formed solely for the purpose of facilitating the offering of the notes described below (collectively, the “Issuers”), issued $300 million aggregate principal amount of 5.875% Senior Notes due 2022 (the “Senior Notes”). The Senior Notes have an interest rate of 5.875% per annum, were issued at a price equal to 99.211% of their face value and mature on August 1, 2022. The proceeds from the offering were used to repay amounts outstanding under the unsecured credit facility, including $75 million outstanding under the term loan. The Senior Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Operating Partnership’s existing subsidiaries (other than foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Issuers or any other subsidiary guarantor. The Company will not initially guarantee the Senior Notes and will not be required to guarantee the Senior Notes except under certain circumstances. The offering was conducted pursuant to Rule 144A of the Securities Act of 1933, as amended, and the Senior Notes were issued pursuant to an indenture, dated as of July 23, 2014, among the Operating Partnership, QTS Finance Corporation, the Company, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (the “Indenture”).

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On March 23, 2015, the SEC declared effective the Operating Partnership and QTS Finance Corporation’s registration statement on Form S-4 pursuant to which the issuers exchanged the originally issued Senior Notes for $300 million of 5.875% Senior Notes due 2022 (the “Exchange Notes”) that are registered under the Securities Act of 1933, as amended. The exchange offer was completed on April 23, 2015, and all outstanding originally issued Senior Notes were tendered. The Exchange Notes did not provide the Company with any additional proceeds and satisfied its obligations under a registration rights agreement entered into in connection with the issuance of the Senior Notes.

(c) Richmond Credit Facility – In December 2012, the Company entered into a credit facility secured by the Company’s Richmond data center (the “Richmond Credit Facility”). As of September 30, 2015, the Richmond Credit Facility had capacity of $120 million and included an accordion feature that allowed the Company to increase the size of the credit facility up to $200 million. It also required the Company to comply with covenants similar to the unsecured credit facility. The Richmond Credit Facility was scheduled to mature June 30, 2019; however, as discussed above, the Company terminated the Richmond Credit Facility in conjunction with the October 2015 amendment of its unsecured credit facility.

As of September 30, 2015, amounts outstanding under the Richmond Credit Facility bore interest at a variable rate equal to, at the Company’s election, LIBOR or a base rate, plus a spread that ranged, depending upon the Company’s leverage ratio, from 2.10% to 2.85% for LIBOR loans or 1.10% to 1.85% for base rate loans. As of September 30, 2015, the interest rate for amounts outstanding under the Richmond Credit Facility was 2.29%.

(d) Atlanta-Metro Equipment Loan – On April 9, 2010, the Company entered into a $25 million loan to finance equipment related to an expansion project at the Company’s Atlanta-Metro data center (the “Atlanta-Metro Equipment Loan”). The loan originally required monthly interest-only payments and subsequently required monthly interest and principal payments. The loan bore interest at 6.85% and was scheduled to mature on June 1, 2020. This debt was repaid in June 2015 when its prepayment penalties expired.

The annual remaining principal payment requirements as of September 30, 2015 per the contractual maturities and excluding extension options, capital leases and lease financing obligations, are as follows (in thousands). The amounts shown do not include the effects of the October 2015 amendment to the unsecured credit facility discussed above:

2015	$	-
2016		-
2017		-
2018		300,000
2019		170,000
Thereafter		300,000
Total	$	770,000

As of September 30, 2015, the Company was in compliance with all of its covenants.

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Capital Leases

The Company has historically entered into capital leases for certain equipment. In addition, through its acquisition of Carpathia on June 16, 2015, the Company acquired capital leases of both equipment and certain properties. Total outstanding liabilities for capital leases were $29.6 million as of September 30, 2015, of which $18.0 million were assumed through the Carpathia acquisition, $17.9 million of which was related to the lease of real property. Carpathia had entered into capital lease arrangements for datacenter space under two lease agreements expiring in 2018 and 2019 at its Harrisonburg, Virginia and Ashburn, Virginia locations. Total recurring monthly payments range from approximately $0.2 million to $0.5 million during the terms of the leases, in addition to payments made for utilities. Depreciation related to the associated assets for the capital leases is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.

Lease Financing Obligations

Through the acquisition of Carpathia, the Company acquired lease financing obligations totaling $23.4 million at September 30, 2015, of which $20.9 million related to a sale-leaseback transaction where Carpathia has continuing involvement. On December 23, 2011, Carpathia sold the shell of a building and the associated land to an unrelated third party. Carpathia leases the property back and is a party to an agreement with the same third party to construct a new building on the adjoining property for use as a data center. Carpathia is primarily responsible for financing the improvements and outfitting the building with the necessary equipment. The third party leases back the new building in stages to Carpathia as the various stages are completed. In accordance with ASC 840-40, Leases, Carpathia has continuing involvement with the related leased assets; therefore, the Company will continue to account for the existing building shell and the associated land as fixed assets and will capitalize the construction costs of the new building. The financing obligation related to the building and equipment was $19.2 million at September 30, 2015. In addition, due to Carpathia’s continuing involvement, it was required to defer a gain on the sale of the assets. The deferred gain was $1.7 million at September 30, 2015, and is also included in lease financing obligations.

The financing obligation is reduced as rental payments are made on the existing building, which payments started in January 2012. Rental payments, which include amounts attributable to both principal and interest, increased to approximately $0.2 million per month in March 2013, which is when the newly constructed building was inhabited by Carpathia. Depreciation expense on the related asset is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.

The Company, through its acquisition of Carpathia, also has a lease financing agreement in connection with a $4.8 million tenant improvement allowance on one of its data center lease agreements. The financing requires monthly payments of principal and interest of less than $0.1 million through February 2019. The outstanding balance on the financing agreement was $2.5 million as of September 30, 2015. Depreciation expense on the related leasehold improvements is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.

The following table summarizes the Company’s combined future payment obligations, excluding interest, as of September 30, 2015, on the capital leases and lease financing obligations above (in thousands):

2015	$	3,262
2016		12,558
2017		12,388
2018		8,804
2019		2,461
Thereafter		13,550
Total	$	53,023

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6. Interest Rate Derivative Instruments

The Company entered into interest rate swap agreements with a notional amount of $150 million on February 8, 2012, which were designated as cash flow hedges for hedge accounting, and matured on September 28, 2014. For derivative instruments that are accounted for as hedges, the change in fair value for the effective portions of qualifying hedges is recorded through other comprehensive income (loss). The total amount of unrealized gains recorded in other comprehensive income (loss) for the nine months ended September 30, 2014 was $0.2 million, with no unrealized gains or losses recorded for the nine months ended September 30, 2015. Interest expense related to payments on interest rate swaps for the three and nine months ended September 30, 2014 was $0.2 million and $0.5 million, respectively, with no interest expense recorded for the three and nine months ended September 30, 2015.

7. Commitments and Contingencies

The Company is subject to various routine legal proceedings and other matters in the ordinary course of business. The Company does not currently have any litigation that would have a material adverse impact on the Company’s financial statements.

8. Partners’ Capital, Equity and Incentive Compensation Plans

QualityTech, LP

QTS has the full power and authority to do all the things necessary to conduct the business of the Operating Partnership.

As of September 30, 2015, the Operating Partnership had three classes of limited partnership units outstanding: Class A units of limited partnership interest (“Class A units”), Class RS LTIP units of limited partnership interest (“Class RS units”) and Class O LTIP units of limited partnership units (“Class O units”). The Class A Units are redeemable at any time on or after one year following the later of November 1, 2013 (which is the beginning of the first full calendar month following the completion of the IPO) or the date of initial issuance. The Company may in its sole discretion elect to assume and satisfy the redemption amount with cash or its shares. Class RS units or Class O units were issued upon grants made under the QualityTech, LP 2010 Equity Incentive Plan (the “2010 Equity Incentive Plan”). Class RS units and Class O units may be subject to vesting and are pari passu with Class A units. Each Class RS unit and Class O unit is convertible into Class A units by the Operating Partnership at any time or by the holder at any time following full vesting (if such unit is subject to vesting) based on formulas contained in the partnership agreement. In addition, upon certain circumstances set forth in the partnership agreement, vested Class RS units automatically convert into Class A units of the Operating Partnership.

QTS Realty Trust, Inc.

In connection with its IPO, QTS issued Class A common stock and Class B common stock. Class B common stock entitles the holder to 50 votes per share and was issued to enable the Company’s Chief Executive Officer to exchange 2% of his Operating Partnership units so he may have a vote proportionate to his economic interest in the Company. Also in connection with its IPO, QTS adopted the QTS Realty Trust, Inc. 2013 Equity Incentive plan (the “2013 Equity Incentive Plan”), which authorized 1.75 million shares of Class A common stock to be issued under the plan, including options to purchase Class A common stock, restricted Class A common stock, Class O units, and Class RS units. In March 2015, the Board of Directors approved an amendment to the 2013 Equity Incentive Plan to, among other things, increase the number of shares available for issuance under the plan by 3,000,000, subject to stockholder approval. The stockholders approved the amendment at the annual meeting of stockholders held on May 4, 2015, increasing the total number of shares available for issuance under the 2013 Equity Incentive Plan to 4,750,000.

26 

The following is a summary of award activity under the 2010 Equity Incentive Plan and 2013 Equity Incentive Plan and related information for the nine months ended September 30, 2015:

	2010 Equity Incentive Plan												2013 Equity Incentive Plan
	Number of Class O units			Weighted average exercise price		Weighted average fair value		Number of Class RS units			Weighted average grant date value		Options			Weighted average exercise price		Weighted average fair value		Restricted Stock			Weighted average grant date value
Outstanding at December 31, 2014		1,518,717		$	23.49	$	3.75		74,625		$	23.49		584,949		$	22.87	$	4.10		246,785		$	29.13
Granted		—			—		—		—			—		317,497			36.16		8.03		231,722			36.72
Exercised/Vested (2)		(55,066	)		21.78		5.04		—			—		(12,780	)		21.55		3.71		(27,341	)		22.99
Released from restriction (1)		—			—		—		(26,062	)		25.00		—			—		—		—			—
Cancelled/Expired (3)		—			—		—		—			—		(11,407	)		21.00		3.52		(12,278	)		23.64
Outstanding at September 30, 2015		1,463,651		$	23.56	$	3.70		48,563		$	22.68		878,259		$	27.72	$	5.53		438,888		$	33.67

(1) This represents Class RS units that upon vesting have converted to Operating Partnership units.

(2) This represents the Class A common stock that has been released from restriction and which was not surrendered by the holder to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

(3) Includes 12,278 restricted Class A common stock surrendered by certain employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

The assumptions and fair values for restricted stock and options to purchase shares of Class A common stock granted for the nine months ended September 30, 2015 are included in the following table on a per unit basis. Class O units and options to purchase shares of Class A common stock were valued using the Black-Scholes model.

	Three and Nine Months Ended September 30, 2015
Fair value of restricted stock granted	$35.81-$37.69
Fair value of options granted	$8.00-$8.77
Expected term (years)	5.5-6.1
Expected volatility	33%
Expected dividend yield	3.40-3.57%
Expected risk-free interest rates	1.67-1.94%

 The following table summarizes information about awards outstanding as of September 30, 2015.

	Operating Partnership Awards Outstanding
	Exercise prices		Awards outstanding		Weighted average remaining vesting period (years)
Class RS Units	$	-		48,563		1
Class O Units	$	20-25		1,463,651		1
Total Operating Partnership awards outstanding				1,512,214

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	QTS Realty Trust, Inc. Awards Outstanding
	Exercise prices		Awards outstanding		Weighted average remaining vesting period (years)
Restricted stock	$	-		438,888		3
Options to purchase Class A common stock	$	21-37.69		878,259		1
Total QTS Realty Trust, Inc. awards outstanding				1,317,147

All nonvested LTIP unit awards are valued as of the grant date and generally vest ratably over a defined service period. Certain nonvested LTIP unit awards vest on the earlier of achievement by the Company of various performance goals or specified dates in 2015 and 2016. As of September 30, 2015 there were 0.5 million, 0.4 million and 0.4 million nonvested Class O units, restricted Class A common stock and options to purchase Class A common stock outstanding, respectively. As of September 30, 2015, there were no Class RS units outstanding. As of September 30, 2015 the Company had $16.7 million of unrecognized equity-based compensation expense which will be recognized over the remaining vesting period of up to 4 years. The total intrinsic value of the awards outstanding at September 30, 2015 was $58.4 million.

On January 7, 2014, the Company paid its first and prorated dividend to common stockholders of $0.24 per common share and the Operating Partnership made a distribution to its partners of $0.24 per unit in an aggregate amount of $9.0 million. On April 8, 2014, the Company paid its regular quarterly cash dividend of $0.29 per common share and the Operating Partnership made a distribution to its partners of $0.29 per unit in an aggregate amount of $10.7 million. Additionally, a distribution of approximately $200,000 was made to Class O LTIP holders during the three months ended June 30, 2014 to cover federal, state and local taxes on the allocated taxable income of the O LTIPs. On July 8, 2014, the Company paid its regular quarterly cash dividend of $0.29 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on June 20, 2014 in an aggregate amount of $10.7 million.

On January 7, 2015, the Company paid its regular quarterly cash dividend of $0.29 per common share and the Operating Partnership made a distribution to its partners of $0.29 per unit in an aggregate amount of $10.7 million. On April 7, 2015, the Company paid its regular quarterly cash dividend of $0.32 per common share and the Operating Partnership made a distribution to its partners of $0.32 per unit in an aggregate amount of $13.4 million. On July 8, 2015, the Company paid its regular quarterly cash dividend of $0.32 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on June 19, 2015 in an aggregate amount of $15.3 million.

On March 2, 2015, the Company issued 5,000,000 shares of QTS’ Class A common stock and GA QTS Interholdco, LLC, a selling stockholder and an affiliate of General Atlantic LLC, sold 4,350,000 shares of QTS’ Class A common stock at a price of $34.75 per share in an underwritten public offering. The selling stockholder granted the underwriters a 30-day option to purchase an aggregate of up to an additional 1,402,500 shares of QTS’ Class A common stock at the public offering price, which the underwriters exercised. The Company used the net proceeds of approximately $166.0 million to repay amounts outstanding under its unsecured revolving credit facility. The Company did not receive any proceeds from the offering of shares by the selling stockholder.

On June 5, 2015, the Company issued 5,750,000 shares of QTS’ Class A common stock and GA QTS Interholdco, LLC, a selling stockholder, sold 1,250,000 shares of QTS’ Class A common stock at a price of $37.00 per share in an underwritten public offering. The selling stockholder granted the underwriters a 30-day option to purchase an aggregate of up to an additional 1,050,000 shares of QTS’ Class A common stock at the public offering price, which the underwriters exercised. The Company used the net proceeds of approximately $203.4 million to fund a portion of the cash consideration payable by the Company in the Carpathia acquisition, and prior to such use, it used a portion of the net proceeds to repay amounts outstanding under its unsecured revolving credit facility and to pay off its Atlanta-Metro Equipment Loan. The Company did not receive any proceeds from the offering of shares by the selling stockholder.

On August 14, 2015, GA QTS Interholdco, LLC, a selling stockholder, sold 2,400,000 shares of QTS’ Class A common stock at a price of $41.00 per share in an underwritten public offering. The selling stockholder granted the underwriter a 30-day option to purchase an aggregate of up to an additional 360,000 shares of QTS’ Class A common stock at a price of $41.00 per share, of which the underwriters partially exercised the option with respect to 261,000 shares. The Company did not receive any proceeds from the offering of shares by the selling stockholder.

QTS Realty Trust, Inc. Employee Stock Purchase Plan

In June 2015, the Company established the QTS Realty Trust, Inc. Employee Stock Purchase Plan (the “Plan”) to give eligible employees the opportunity to purchase, through payroll deductions, shares of the Company’s Class A common stock in the open market by an independent broker selected by the Company’s Board of Directors (the “Board”) or the plan’s administrator. Eligible employees include employees of the Company and its majority-owned subsidiaries (excluding executives) who have been employed for at least thirty days and who perform at least thirty hours of service per week for the Company. The Plan became effective July 1, 2015 and is administered by the Board or by a committee of one or more persons appointed by the Board. The Company has reserved 250,000 shares for purchase under the Plan and has also agreed to pay the brokerage commissions and fees associated with a Plan participant's purchase of shares. An eligible employee may deduct a minimum of $40 per month and a maximum of $2,000 per month towards the purchase of shares. On June 17, 2015, the Company filed a registration statement on Form S-8 to register the 250,000 shares of the Company’s Class A common stock related to the Plan.

28 

9. Related Party Transactions

The Company periodically executes transactions with entities affiliated with its Chairman and Chief Executive Officer. Such transactions include automobile, furniture and equipment purchases as well as building operating lease payments and receipts, and reimbursement for the use of a private aircraft service by the Company’s officers and directors.

The transactions which occurred during the three and nine months ended September 30, 2015 and 2014 are outlined below (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in thousands)	2015		2014		2015		2014
Tax, utility, insurance and other reimbursement	$	63	$	296	$	208	$	464
Rent expense		254		253		761		772
Capital assets acquired		38		86		163		160
Total	$	355	$	635	$	1,132	$	1,396

10. Noncontrolling Interest

Concurrently with the completion of the IPO, QTS consummated a series of transactions pursuant to which QTS became the sole general partner and majority owner of QualityTech, LP, which then became its operating partnership. The previous owners of QualityTech, LP retained 21.2% ownership of the Operating Partnership.

Commencing at any time beginning November 1, 2014, at the election of the holders of the noncontrolling interest, the Class A units are redeemable for cash or, at the election of the Company, common stock of the Company on a one-for-one basis. During the first, second and third quarters of 2015, approximately 230,000, 300,000 and 150,000 Class A units, respectively, were redeemed for the Company’s Class A common stock. As a result, the noncontrolling ownership interest of QualityTech, LP, after taking into account the Class A units redeemed, the grant of equity awards and the issuance of 5,000,000 and 5,750,000 shares of common stock in March and June 2015, respectively, was 14.3% at September 30, 2015.

29 

11. Earnings per share of QTS Realty Trust, Inc.

Basic income (loss) per share is calculated by dividing the net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share adjusts basic income (loss) per share for the effects of potentially dilutive common shares.

The computation of basic and diluted net income per share is as follows (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Numerator:
Net income available to common stockholders - basic	$	7,009	$	3,157	$	15,723	$	10,445
Effect of net income attributable to noncontrolling interests		1,229		849		3,072		2,810
Net income available to common stockholders - diluted	$	8,238	$	4,006	$	18,795	$	13,255
Denominator:
Weighted average shares outstanding - basic		40,994		29,017		36,355		29,007
Effect of Class A and Class RS partnership units *		6,932		7,797		7,103		7,797
Effect of Class O units and options to purchase Class A common stock on an "as if" converted basis *		807		438		724		236
Weighted average shares outstanding - diluted		48,733		37,252		44,182		37,040
Net income per share attributable to common stockholders - basic	$	0.17	$	0.11	$	0.43	$	0.36
Net income per share attributable to common stockholders - diluted	$	0.17	$	0.11	$	0.43	$	0.36

* The Class A units, Class RS units and Class O units represent limited partnership interests in the Operating Partnership, and are described in more detail in Note 8.

No securities were antidilutive for the three months ended September 30, 2015 and 2014, nor for the nine months ended September 30, 2015 and 2014, and as such, no securities were excluded from the computation of diluted net income per share for those periods.

 
12. Customer Leases, as Lessor

Future minimum lease payments to be received under non-cancelable operating customer leases (inclusive of payments for contracts which have not yet commenced, and exclusive of recoveries of operating costs from customers) are as follows for the years ending December 31 (in thousands):

Period Ending December 31,
2015 (Oct - December)	$	79,926
2016		282,466
2017		213,490
2018		142,574
2019		95,281
Thereafter		280,587
Total	$	1,094,324

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13. Fair Value of Financial Instruments

ASC Topic 825 requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows based upon market yields or by using other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, fair values are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

Short-term instruments: The carrying amounts of cash and cash equivalents and restricted cash approximate fair value.

Credit facilities, Senior Notes and mortgage notes payable: The fair value of the Company’s floating rate mortgage loans was estimated using Level 2 “significant other observable inputs” such as available market information based on borrowing rates that the Company believes it could obtain with similar terms and maturities. The Company’s unsecured credit facility and Richmond Credit Facility did not have interest rates which were materially different than current market conditions and therefore, the fair value of each of the credit facilities approximated the carrying value of each note. The fair value of the Company’s Senior Notes was estimated using Level 2 “significant other observable inputs,” primarily based on quoted market prices for the same or similar issuances. At September 30, 2015, the fair value of the Senior Notes was approximately $297.9 million.

Other debt instruments: The fair value of the Company’s other debt instruments (including capital leases and lease financing obligations) were estimated in the same manner as the credit facilities and mortgage notes payable above. Similarly, because each of these instruments did not have interest rates which were materially different than current market conditions and therefore, the fair value of each instrument approximated the respective carrying values.

14. Subsequent Events

On October 6, 2015, the Company paid its regular quarterly cash dividend of $0.32 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on September 18, 2015.

As discussed in Note 5, in October 2015, the Company amended and restated its unsecured credit facility, and at the same time terminated its Richmond Credit Facility.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents the financial condition and results of operations of QTS Realty Trust, Inc. (“QTS”), which includes the operations of QualityTech, LP (the “Operating Partnership”), for the three and nine months ended September 30, 2015 and 2014. You should read the following discussion and analysis in conjunction with QTS’ and the Operating Partnership’s accompanying consolidated financial statements and related notes contained elsewhere in this Form 10-Q. We believe it is important for investors to understand the few differences between the financial statements of QTS and the Operating Partnership. See “Explanatory Note” for an explanation of these few differences. Since the financial data presented in this Item 2 does not contain any differences between QTS and the Operating Partnership, all periods presented reflect the operating results of the Operating Partnership.

Forward-Looking Statements

Some of the statements contained in this Form 10-Q 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 and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions are 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 Form 10-Q reflect our current views about future eventsand 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;

· 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, including data centers acquired in our acquisition of Carpathia Hosting, Inc.;

· 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;

· increased interest rates and operating costs, including increased energy costs;

· financing risks, including our failure to obtain necessary outside financing;

· decreased rental rates or increased vacancy rates;

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· dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;

· our failure to qualify and maintain QTS’ qualification as a real estate investment trust (“REIT”);

· environmental uncertainties and risks related to natural disasters;

· financial market fluctuations; and

· changes in real estate and zoning laws and increases in real property tax rates.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. 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, 2014 and Item 1A. “Risk Factors” of this Form 10-Q.

Overview

We are a leading owner, developer and operator of state-of-the-art, carrier-neutral, multi-tenant data centers. Our data centers are facilities that house the network and computer equipment of multiple customers and provide access to a range of communications carriers. We have a fully integrated platform through which we own and operate our data centers and provide a broad range of IT infrastructure solutions. We refer to our spectrum of core data center products as our “3Cs,” which consists of Custom Data Center, Colocation and Cloud and Managed Services. We believe that we own and operate one of the largest portfolios of multi-tenant data centers in the United States, as measured by gross square footage, and have the capacity to more than double our leased raised floor without constructing or acquiring any new buildings.

Inclusive of the recent acquisition of Carpathia Hosting, Inc. discussed below, we operate a portfolio of 25 data centers located throughout the United States, Canada, Europe and the Asia-Pacific region. Within the U.S., we are located in some of the top U.S. data center markets plus other high-growth markets. Our data centers are highly specialized, full-service, mission-critical facilities used by our customers to house, power and cool the networking equipment and computer systems that support their most critical business processes. We believe that our data centers are best-in-class and engineered to adhere to the highest specifications commercially available to customers, providing fully redundant, high-density power and cooling sufficient to meet the needs of major national and international companies and organizations. This is in part reflected by our operating track record of “five-nines” (99.999%) reliability and by our diverse customer base of more than 1,000 customers, including financial institutions, healthcare companies, government agencies, communications service providers, software companies and global Internet companies.

On June 16, 2015, we completed the acquisition of 100% of the outstanding stock of Carpathia Hosting, Inc. (“Carpathia”), a Virginia-based colocation, cloud and managed services provider, for approximately $354.4 million (based on the preliminary assessment of the fair value of assets acquired and liabilities assumed). Upon completion of this acquisition, we assumed all of the assets and liabilities of Carpathia Acquisition, Inc. In addition, Carpathia Acquisition, Inc. and its subsidiaries, including Carpathia, became indirect, wholly-owned subsidiaries of us. Carpathia is a provider of colocation, hybrid cloud services and Infrastructure-as-a-Service (IaaS) servicing enterprise customers and federal agencies, with a customer base of approximately 230 customers as of June 16, 2015. Carpathia utilizes eight domestic data centers located in Dulles, VA, Phoenix, AZ, San Jose, CA, Harrisonburg, VA and Ashburn, VA, and five international data centers located in Toronto, Amsterdam, London, Hong Kong and Sydney.

As of September 30, 2015, QTS owned an approximate 85.7% ownership interest in the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership.

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The Operating Partnership is a Delaware limited partnership formed on August 5, 2009 and was QTS’ historical predecessor prior to the initial public offering (“IPO”), having operated the Company’s business until the IPO.

We believe that QTS has operated and has been organized in conformity with the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2013. Our qualification as a REIT, and maintenance of such qualification, depends upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code of 1986, as amended (the “Code”) relating to, among other things, the sources of our gross income, the composition and values of our assets, our distributions to our stockholders and the concentration of ownership of our equity shares.

Our Customer Base

We provide data center solutions to a diverse set of customers. Our customer base is comprised of companies of all sizes representing an array of industries, each with unique and varied business models and needs. We serve Fortune 1000 companies as well as small and medium-sized businesses, or SMBs, including financial institutions, healthcare companies, government agencies, communications service providers, software companies and global Internet companies.

Our Custom Data Center, or C1, customers typically are large enterprises with significant IT expertise and specific IT requirements, including financial institutions, “Big Four” accounting firms and the world’s largest global Internet companies. Our Colocation, or C2, customers consist of a wide range of organizations, including major healthcare, telecommunications and software and web-based companies. Our C3 Cloud customers include both large organizations and SMBs seeking to reduce their capital expenditures and outsource their IT infrastructure on a flexible basis. Examples of current C3 Cloud customers include a global financial processing company and various U.S. government agencies.

As a result of our diverse customer base, customer concentration in our portfolio is limited. As of September 30, 2015, only five of our more than 1,000 customers individually accounted for more than 3% of our monthly recurring revenue (“MRR”) (as defined below), with the largest customer accounting for approximately 8% of our MRR. In addition, greater than 50% of our MRR was attributable to customers who use more than one of our 3C products.

Our Portfolio

Inclusive of the recent acquisition of Carpathia, we develop and operate 25 data centers located throughout the United States, Canada, Europe and the Asia-Pacific region, containing an aggregate of approximately 4.8 million gross square feet of space (approximately 91% of which is wholly owned by us), including approximately 2.2 million “basis-of-design” raised floor square feet, which represents the total data center raised floor potential of our existing data center facilities. This represents the maximum amount of space in our existing buildings that could be leased following full build-out, depending on the configuration that we deploy. We build out our data center facilities for both general use (colocation) and for executed leases that require significant amounts of space and power, depending on the needs of each facility at that time. As of September 30, 2015, this space included approximately 1,076,000 raised floor operating net rentable square feet, or NRSF, plus approximately 1.1 million square feet of additional raised floor in our development pipeline, of which approximately 45,000 NRSF is expected to become operational by December 31, 2015. Of the total 1.1 million NRSF in our development pipeline, approximately 90,000 square feet was related to customer leases which had been executed but not yet commenced. Our facilities collectively have access to over 500 megawatts (“MW”) of gross utility power with 439 MW of available utility power. We believe such access to power gives us a competitive advantage in redeveloping data center space, since access to power is usually the most limiting and expensive component in data center redevelopment.

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The following table presents an overview of the portfolio of operating properties that we own or lease, based on information as of September 30, 2015:

					Operating Net Rentable Square Feet (Operating NRSF) (3)
Property	Year Acquired (1)		Gross Square Feet (2)		Raised Floor (4)		Office & Other (5)		Supporting Infrastructure (6)		Total		% Occupied and Billing (7)			Annualized Rent (8)		Available Utility Power (MW) (9)		Basis of Design NRSF		% Raised Floor
Richmond, VA	2010		1,318,353		121,623		51,093		131,324		304,040		86.2		%	$	26,249,863	110		556,623		21.9		%
Atlanta, GA (Metro)		2006		968,695		417,986		36,953		315,676		770,615		93.1	%	$	79,308,328		72		527,186		79.3	%
Dallas-Fort Worth, TX		2013		698,000		54,014		2,321		35,825		92,160		90.2	%	$	8,441,882		140		292,000		18.5	%
Princeton, NJ		2014		553,930		58,157		2,229		111,405		171,791		100.0	%	$	9,665,340		22		158,157		36.8	%
Suwanee, GA		2005		369,822		185,422		8,697		108,266		302,385		81.8	%	$	52,778,916		36		208,008		89.1	%
Chicago, IL		2014		317,000		-		-		-		-		-	%	$	-		8		133,000		-	%
Santa Clara, CA**		2007		135,322		55,494		944		45,687		102,125		97.2	%	$	24,986,083		11		80,347		69.1	%
Jersey City, NJ*		2006		122,448		31,503		14,208		41,901		87,612		97.9	%	$	12,228,150		7		52,744		59.7	%
Sacramento, CA		2012		92,644		54,595		2,794		23,916		81,305		46.0	%	$	11,523,173		8		57,906		94.3	%
Miami, FL		2008		30,029		19,887		-		6,592		26,479		68.2	%	$	5,111,352		4		19,887		100.0	%
Carpathia facilities ***		2015		154,693		72,332		5,242		14,169		91,743		74.0	%	$	83,389,172		20		96,280		75.1	%
Other		Misc		81,921		5,129		37,854		38,723		81,706		20.4	%	$	891,338		1		5,129		100.0	%
Total				4,842,857		1,076,142		162,335		873,484		2,111,961		87.1	%	$	314,573,597		439		2,187,267		49.2	%

(1) Represents the year a property was acquired or, in the case of a property under lease, the year our initial lease commenced for the property.

(2) With respect to our owned properties, gross square feet represents the entire building area. With respect to leased properties, gross square feet represents that portion of the gross square feet subject to our lease. This includes 218,926 square feet of our office and support space, which is not included in operating NRSF.

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

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

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

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

(7) Calculated as data center raised floor that is subject to a signed lease for which billing has commenced (735,574 square feet as of September 30, 2015) divided by leasable raised floor based on the current configuration of the properties (844,410 square feet as of September 30, 2015), expressed as a percentage.

(8) We define annualized rent as MRR multiplied by 12. We calculate MRR as monthly contractual revenue under executed contracts as of a particular date, which includes revenue from our C1, C2 and C3 rental activities and cloud and managed services, but excludes customer recoveries, deferred set up fees and other one-time and variable revenues. MRR does not include the impact from booked-not-billed contracts as of a particular date, unless otherwise specifically noted.

(9) Represents installed utility power and transformation capacity that is available for use by the facility as of September 30, 2015.

* Represents facilities that we lease.

** Subject to long term ground lease

*** Includes 13 facilities. All facilities are leased, including those subject to capital leases.

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Key Operating Metrics

The following sets forth definitions for our key operating metrics. These metrics may differ from similar definitions used by other companies.

Monthly Recurring Revenue (“MRR”). We calculate MRR as monthly contractual revenue under signed leases as of a particular date, which includes revenue from our C1, C2 and C3 rental and cloud and managed services activities, but excludes customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR does not include the impact from booked-not-billed leases as of a particular date, unless otherwise specifically noted.

Annualized Rent. We define annualized rent as MRR multiplied by 12.

Rental Churn. We define rental churn as the MRR impact from a customer completely departing our platform in a given period compared to the total MRR at the beginning of the period.

Leasable Raised Floor. We define leasable raised floor as the amount of raised floor square footage that we have leased plus the available capacity of raised floor square footage that is in a leasable format as of a particular date and according to a particular product configuration. The amount of our leasable raised floor may change even without completion of new redevelopment projects due to changes in our configuration of C1, C2 and C3 product space.

Percentage (%) Occupied and Billing Raised Floor. We define percentage occupied and billing raised floor as the square footage that is subject to a signed lease for which billing has commenced as of a particular date compared to leasable raised floor as of that date, expressed as a percentage.

Booked-not-Billed. We define booked-not-billed as our customer leases that have been signed, but for which lease payments have not yet commenced.

Factors That May Influence Future Results of Operations and Cash Flows

Revenue. Our revenue growth will depend on our ability to maintain the historical occupancy rates of leasable raised floor, lease currently available space, lease new capacity that becomes available as a result of our development and redevelopment activities, attract new customers and continue to meet the ongoing technological requirements of our customers. As of September 30, 2015, we had in place customer leases generating revenue for approximately 87% of our leasable raised floor. Our ability to grow revenue also will be affected by our ability to maintain or increase rental, cloud and managed services rates at our properties. Future economic downturns, regional downturns or downturns in the technology industry could impair our ability to attract new customers or renew existing customers’ leases on favorable terms, or at all, and could adversely affect our customers’ ability to meet their obligations to us. Negative trends in one or more of these factors could adversely affect our revenue in future periods, which would impact our results of operations and cash flows. We also at times may elect to reclaim space from customers in a negotiated transaction where we believe that we can redevelop and/or re-lease that space at higher rates, which may cause a decrease in revenue until the space is re-leased.

Leasing Arrangements. As of September 30, 2015, 20% of our MRR came from customers which individually occupied greater than or equal to 6,600 square feet of space (or approximately 1 MW of power), and which had metered power. As of September 30, 2015, approximately 33% of our MRR came from C1 customers that are subject to the metered power model. Under the metered power model, the customer pays us a fixed monthly rent amount, plus reimbursement of certain other operating costs, including actual costs of sub-metered electricity used to power its data center equipment and an estimate of costs for electricity used to power supporting infrastructure for the data center, expressed as a factor of the customer’s actual electricity usage. Fluctuations in our customers’ utilization of power and the supplier pricing of power do not significantly impact our results of operations or cash flows under the metered power model. These leases generally have a minimum term of five years. As of September 30, 2015, 80% of our MRR was leased to customers which individually occupied less than 6,600 square feet of space, many of whom are billed on a gross lease basis. Our C2/C3 customers are billed under a gross lease model and as of September 30, 2015, represented 67% of our MRR. Under a gross lease, the customer pays us a fixed rent on a monthly basis, and does not separately reimburse us for operating costs, including utilities, maintenance, repair, property taxes and insurance, as reimbursement for these costs is factored into MRR. However, if customers access more utility costs than their leases permit, we are able to charge these customers for overages. For leases under the gross lease model, fluctuations in our customers’ utilization of power and the prices our utility providers charge us will impact our results of operations and cash flows. Our leases on a gross lease basis generally have a term of three years or less.

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Scheduled Lease Expirations. Our ability to minimize rental churn and customer downgrades at renewal and renew, lease and re-lease expiring space will impact our results of operations and cash flows. Leases representing approximately 3% and 12% of our total leased raised floor are scheduled to expire during the years ending December 31, 2015 (including all month-to-month leases) and 2016, respectively. These leases also represented approximately 9% and 27%, respectively, of our annualized rent as of September 30, 2015. At expiration, as a general matter, based on current market conditions, we expect that expiring rents will be at or below the then-current market rents.

Acquisitions, Redevelopment and Financing. Our revenue growth also will depend on our ability to acquire and redevelop and subsequently lease data center space at favorable rates. We generally fund the cost of data center acquisition and redevelopment from our net cash provided by operations, credit facilities, other unsecured and secured borrowings or the issuance of additional equity. We believe that we have sufficient access to capital from our current cash and cash equivalents, and borrowings under our credit facilities to fund our redevelopment projects.

Operating Expenses. Our operating expenses generally consist of direct personnel costs, utilities, property and ad valorem taxes, insurance and site maintenance costs and rental expenses on our ground and building leases. In particular, our buildings require significant power to support the data center operations conducted in them. Although substantially all of our long-term leases—leases with a term greater than three years—contain reimbursements for certain operating expenses, we will not in all instances be reimbursed for all of the property operating expenses we incur. We also incur general and administrative expenses, including expenses relating to senior management, our in-house sales and marketing organization, cloud and managed services support personnel and legal, human resources, accounting and other expenses related to professional services. We also incur additional expenses arising from being a publicly traded company, including employee equity-based compensation. Increases or decreases in our operating expenses will impact our results of operations and cash flows. We expect to incur additional operating expenses as we continue to expand.

General Leasing Activity

 During the three and nine months ended September 30, 2015, we entered into customer leases representing approximately $0.5 million and $2.5 million of incremental MRR, net of downgrades (and representing approximately $5.6 million and $29.8 million of incremental annualized rent) at $1,686 and $836 per square foot, respectively. In addition, $2.4 million and $9.8 million of leasing commissions was associated with new and renewal leasing activity for the three and nine months ended September 30, 2015, respectively.

During the three and nine months ended September 30, 2015, we renewed leases with a total annualized rent of $9.2 million and $22.1 million at an average rent per square foot of $742 and $784, respectively, which was 0.9% and 2.4% higher than the annualized rent prior to their respective renewals. Customers that renew with adjustments to square feet are reflected in the net leasing activity discussed above. The rental churn rate for the three and nine months ended September 30, 2015 was 0.8% and 2.0%, respectively.

During the three and nine months ended September 30, 2015, we commenced customer leases representing approximately $3.2 million and $6.9 million of incremental MRR (and representing approximately $37.9 million and $82.6 million of annualized rent) at $490 and $549 per square foot, respectively.

As of September 30, 2015, our booked-not-billed MRR balance (which represents customer leases that have been executed, but for which lease payments have not commenced as of September 30, 2015) was approximately $5.1 million, or $61.3 million of annualized rent. The booked-not-billed balance is expected to contribute an incremental $4.1 million to revenue in 2015 (representing $22.5 million in annualized revenues), an incremental $15.4 million in 2016 (representing $21.3 million in annualized revenues), and an incremental $17.5 million in annualized revenues thereafter. We estimate the remaining capital cost to provide the space, power, connectivity and other services to the customer contracts which had been booked but not billed as of September 30, 2015 to be approximately $40 million. This estimate generally includes C1 customers with newly contracted space of more than 3,300 square feet. The space, power, connectivity and other services provided to customers that contract for smaller amounts of space is generally provided by existing space which was previously developed.

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Results of Operations

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014

Changes in revenues and expenses for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 are summarized below (unaudited, in thousands):

	Three Months Ended September 30,
	2015			2014			$ Change			% Change
Revenues:
Rental	$	62,744		$	45,448		$	17,296			38	%
Recoveries from customers		6,158			6,131			27			0	%
Cloud and managed services		18,573			5,242			13,331			254	%
Other		1,415			1,124			291			26	%
Total revenues		88,890			57,945			30,945			53	%
Operating expenses:
Property operating costs		30,925			20,369			10,556			52	%
Real estate taxes and insurance		1,462			1,377			85			6	%
Depreciation and amortization		24,486			15,210			9,276			61	%
General and administrative		19,440			11,045			8,395			76	%
Restructuring		-			226			(226	)		*
Transaction and integration costs		1,482			(195	)		1,677			-860	%
Total operating expenses		77,795			48,032			29,763			62	%
Operating income		11,095			9,913			1,182			12	%
Other income and expense:
Interest income		1			-			1			*
Interest expense		(5,418	)		(5,410	)		(8	)		0	%
Other expense		-			(470	)		470			*
Income before taxes		5,678			4,033			1,645			41	%
Tax benefit (expense) of taxable REIT subsidiaries		2,560			(27	)		2,587			*
Net income	$	8,238		$	4,006		$	4,232			106	%

* not applicable for comparison

Revenues. Total revenues for the three months ended September 30, 2015 were $88.9 million compared to $57.9 million for the three months ended September 30, 2014. The increase of $30.9 million, or 53%, was primarily due to the acquisition of Carpathia on June 16, 2015, which contributed $22.2 million in incremental revenue for the three months ended September 30, 2015, as well as organic growth in our customer base.

The increase of $30.6 million, or 60%, in combined rental and cloud and managed services revenue was primarily due to the acquisition of Carpathia which contributed $22.3 million to the increase, as well as newly leased space and increases in rents from previously leased space, net of downgrades at renewal and rental churn.

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As of September 30, 2015, our data centers were approximately 87% occupied and billing based on leasable raised floor of approximately 844,000 square feet, with approximately 736,000 square feet occupied and paying rent, with an average annualized rent of $427 per leased raised floor square foot including cloud and managed services revenue, or $328 per leased raised floor square foot excluding cloud and managed services revenue. As of September 30, 2015, the average annualized rent for our C1 product, including managed services for our C1 product, was $187 per leased raised floor square foot, and the average annualized rent for our C2 product, including Cloud and managed services combined was $1,167 per leased raised floor square foot. As of September 30, 2014, our data centers were 84% occupied and billing based on leasable raised floor of approximately 687,000 square feet, with approximately 576,000 square feet occupied and paying rent, with an average annualized rent of $344 per leased raised floor square foot including cloud and managed services revenue, or $308 per leased raised floor square foot excluding cloud and managed services revenue. The increase in leasable raised floor between 2014 and 2015 is primarily related to the addition of raised floor square footage from our redevelopment activities primarily in the Dallas-Fort Worth, Atlanta-Metro, and Richmond facilities, as well as the acquisition of Carpathia. The increase in average annualized rent per leased raised floor square foot, both including and excluding cloud and managed services revenue, is primarily due to the acquisition of Carpathia. The increase in average annualized rent per leased raised floor square foot including cloud and managed service revenue from $344 to $427 is primarily due to the increase in C3 product mix associated with the Carpathia acquisition. As of September 30, 2015, a larger portion of our product mix was attributable to C3 revenue (23% of MRR) compared to September 30, 2014 (9% of MRR). Due to the fact that C3 customers utilize less space than C1/C2 customers in proportion to MRR received, our weighted average rent per square feet price has increased.

Higher recoveries from customers for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 were primarily due to increased utility costs generally related to an increase in usage from customers operating under our metered power model at our Atlanta-Metro and Richmond data centers contributing $0.4 million to the increase as well as the opening of our Dallas-Fort Worth data center contributing $0.2 million to the increase and an increase in metered billings to new and existing customers. These increases were offset by a utility credit remitted to customers of $0.2 million related to a retroactive adjustment in billing rates for the current year from Georgia Power, as well as $0.4 million of reduced reimbursements at our Princeton facility due to lower operating costs we incurred from the transition of using our in-house workforce as compared to contracted outside personnel that existed when we acquired the facility in the prior year, with a corresponding increase in cloud and managed services revenue within recurring revenue. The $0.3 million increase in other revenue for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 was primarily due to higher straight line rent.

Property Operating Costs. Property operating costs for the three months ended September 30, 2015 were $30.9 million compared to property operating costs of $20.4 million for the three months ended September 30, 2014, an increase of $10.6 million, or 52%. The breakdown of our property operating costs is summarized in the table below (unaudited, in thousands):

	Three Months Ended September 30,
	2015		2014		$ Change		% Change
Property operating costs:
Direct payroll	$	4,689	$	2,826	$	1,863		66	%
Rent		4,932		1,226		3,706		302	%
Repairs and maintenance		2,442		1,897		545		29	%
Utilities		9,630		8,834		796		9	%
Management fee allocation		4,866		2,279		2,587		114	%
Other		4,366		3,307		1,059		32	%
Total property operating costs	$	30,925	$	20,369	$	10,556		52	%

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The acquisition of Carpathia contributed $9.8 million to the total increase in property operating costs for the three months ended September 30, 2015, of which $0.8 million related to direct payroll, $3.7 million related to rent expense, $0.5 million related to repairs and maintenance, $0.7 million related to utilities, $2.3 million related to management fee allocation and $1.8 million related to other property operating costs. Management fee allocation for Carpathia facilities is based on 10% of cash rental revenues for each facility and reflects an allocation of internal charges to cover back-office and service-related costs associated with the day-to-day operations of our data center facilities, with a corresponding offset to general and administrative expenses. The remaining $0.8 million increase in total property operating costs was primarily attributable to increased direct payroll allocation of $1.0 million, increased software license costs of $0.2 million, increased utility costs of $0.1 million due primarily to increased usage in our Richmond data center, offset by a credit received from Georgia Power related to a retroactive adjustment in billing rates for the current year, increased repairs and maintenance expense of $0.1 million which tends to fluctuate from period to period and will increase with the expansion and lease-up of our facilities, and other costs of $0.2 million. In addition, management fee allocation increased $0.3 million (exclusive of the increase attributable to Carpathia as discussed above). Management fee allocation for QTS facilities is based on 4% of cash rental revenues for each facility. These increases were offset by a $0.7 million reduction in operating expenses primarily related to efficiencies gained at our Princeton facility, as well as a $0.5 million net utility credit received from Georgia Power for bill corrections dating back to 2013.

Real Estate Taxes and Insurance. Real estate taxes and insurance for the three months ended September 30, 2015 were $1.5 million compared to $1.4 million for the three months ended September 30, 2014. The increase of $0.1 million, or 6%, was primarily attributable to property taxes at our Dallas and Atlanta-Suwanee data centers.

Depreciation and Amortization. Depreciation and amortization for the three months ended September 30, 2015 was $24.5 million compared to $15.2 million for the three months ended September 30, 2014. The increase of $9.3 million, or 61%, was primarily due to depreciation expense of $3.8 million and amortization expense of $2.8 million associated with the Carpathia acquisition. The remaining increase of $2.7 million was due to additional depreciation of $2.2 million, primarily due to additional depreciation of the Dallas-Fort Worth data center, as well as expansion of the Richmond, Atlanta-Metro and Atlanta-Suwanee data centers, and higher amortization expense of $0.5 million primarily related to a higher level of leasing commissions.

General and Administrative Expenses. General and administrative expenses were $19.4 million for the three months ended September 30, 2015 compared to general and administrative expenses of $11.0 million for the three months ended September 30, 2014, an increase of $8.4 million, or 76%, of which the acquisition of Carpathia contributed $4.5 million. The remaining increase in general and administrative expenses was attributable to increased payroll expenses related to sales and marketing personnel of $0.2 million, higher equity based compensation expense of $1.1 million, higher net payroll costs of $1.9 million, and other costs of $0.7 million primarily related to outside services for temporary personnel and consulting fees.

Restructuring Costs. For the three months ended September 30, 2014, we incurred $0.2 million in restructuring costs related to severance for various remote employees. No such costs were incurred in the three months ended September 30, 2015.

Transaction and Integration Costs. For the three months ended September 30, 2015 we incurred $0.1 million in costs related to the examination of actual and potential acquisitions. We also recognized $1.4 million in integration costs for the three months ended September 30, 2015 related to the acquisition of Carpathia. For the three months ended September 30, 2014, we recovered $0.2 million due to a refund of previously expensed transaction costs.

Acquisition-related costs for acquisitions accounted for as a business combination in accordance with ASC 805, Business Combinations, are expensed in the periods in which the costs are incurred and the services are received.

Interest Expense. Interest expense was $5.4 million for the three months ended September 30, 2015 and 2014. The increase in the average debt balance of $222.6 million compared to the prior year, which was primarily a result of a higher revolving credit facility balance and the assumption of approximately $43.8 million in capital leases as a result of the Carpathia acquisition on June 16, 2015, was fully offset by a decrease in the weighted average interest rate on our borrowings and higher capitalized interest during the period due to the growth in construction projects. The average debt balance for the three months ended September 30, 2015 was $805.7 million, with a weighted average interest rate, including the effect of amortization of deferred financing costs, of 4.04%. This compared to an average debt balance of $583.1 million for the three months ended September 30, 2014, with a weighted average interest rate, including the effect of interest rate swaps and amortization of deferred financing costs, of 4.62%. Interest capitalized in connection with our redevelopment activities during the three months ended September 30, 2015 and September 30, 2014 was $2.7 million and $1.3 million, respectively.

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Tax (Expense) Benefit of Taxable REIT Subsidiaries. Tax benefit of taxable REIT subsidiaries for the three months ended September 30, 2015 primarily relates to recorded operating losses which includes certain transaction and integration costs.

Net Income. A summary of the components of the increase in net income of $4.2 million for the three months ended September 30, 2015 as compared to the three months ended September 30, 2014 is as follows (in millions):

	$ Change
Increase in revenues, net of property operating costs, real estate taxes and insurance	$	20.3
Increase in general and administrative expense		(8.4	)
Increase in depreciation and amortization		(9.3	)
Decrease in restructuring charges		0.2
Increase in transaction and integration costs		(1.7	)
Increase in tax benefit		2.6
Decrease in other expense		0.5
Increase in net income	$	4.2

41 

Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014

Changes in revenues and expenses for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 are summarized below (unaudited, in thousands):

	Nine Months Ended September 30,
	2015			2014			$ Change			% Change
Revenues:
Rental	$	164,270		$	127,993		$	36,277			28	%
Recoveries from customers		17,404			13,674			3,730			27	%
Cloud and managed services		32,588			14,443			18,145			126	%
Other		4,131			2,116			2,015			95	%
Total revenues		218,393			158,226			60,167			38	%
Operating expenses:
Property operating costs		72,292			53,121			19,171			36	%
Real estate taxes and insurance		4,421			3,713			708			19	%
Depreciation and amortization		58,791			42,274			16,517			39	%
General and administrative		47,893			33,296			14,597			44	%
Restructuring		-			1,272			(1,272	)		*
Transaction and integration costs		6,256			958			5,298			553	%
Total operating expenses		189,653			134,634			55,019			41	%
Operating income		28,740			23,592			5,148			22	%
Other income and expense:
Interest income		2			8			(6	)		-75	%
Interest expense		(15,559	)		(9,683	)		(5,876	)		61	%
Other expense		(83	)		(580	)		497			-86	%
Income (loss) before taxes		13,100			13,337			(237	)		-2	%
Tax benefit (expense) of taxable REIT subsidiaries		5,695			(82	)		5,777			*
Net income (loss)	$	18,795		$	13,255		$	5,540			42	%

* not applicable for comparison

Revenues. Total revenues for the nine months ended September 30, 2015 were $218.4 million compared to $158.2 million for the nine months ended September 30, 2014. The increase of $60.2 million, or 38%, was primarily due to the acquisitions of Carpathia and the Princeton facility, which contributed $34.0 million in incremental revenue for the nine months ended September 30, 2015, as well as organic growth in our customer base and placing additional square footage into service in conjunction with the development and expansion of our Dallas-Fort Worth, Richmond, Atlanta-Suwanee and Atlanta-Metro data centers.

The increase of $54.4 million, or 38%, in combined rental and cloud and managed services revenue was primarily due to the acquisitions of Carpathia and the Princeton facility, which contributed $31.2 million in combined rental and cloud and managed services revenue for the nine months ended September 30, 2015, as well as newly leased space and increases in rents from previously leased space, net of downgrades at renewal and rental churn.

Higher recoveries from customers for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 were primarily due to reimbursements associated with the acquisition of the Princeton facility which contributed $2.6 million to the increase. The remaining increase of $1.1 million in recoveries revenue was primarily attributable to increased utility costs generally related to an increase in usage from customers operating under our metered power model at our Atlanta-Metro and Richmond data centers, which contributed $1.3 million and $0.6 million to the increase, respectively, as well as $0.3 million of increased recoveries related to the opening of our Dallas-Fort Worth data center. These increases were partially offset by a utility credit remitted to customers of $0.6 million related to a retroactive adjustment in billing rates for the current year from Georgia Power, as well as decreased utility costs generally related to a reduction in usage from customers operating under our metered power model at our Sacramento data center reducing the increase by $0.5 million. The $2.0 million increase in other revenue for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 was primarily due to higher straight line rent.

42 

Property Operating Costs. Property operating costs for the nine months ended September 30, 2015 were $72.3 million compared to property operating costs of $53.1 million for the nine months ended September 30, 2014, an increase of $19.2 million, or 36%. The breakdown of our property operating costs is summarized in the table below (unaudited, in thousands):

	Nine Months Ended September 30,
	2015		2014		$ Change		% Change
Property operating costs:
Direct payroll	$	12,212	$	8,616	$	3,596		42	%
Rent		7,983		3,670		4,313		118	%
Repairs and maintenance		6,578		4,228		2,350		56	%
Utilities		25,223		22,528		2,695		12	%
Management fee allocation		9,973		6,275		3,698		59	%
Other		10,323		7,804		2,519		32	%
Total property operating costs	$	72,292	$	53,121	$	19,171		36	%

The acquisitions of Carpathia and the Princeton facility contributed $13.9 million to the total increase in property operating costs for the nine months ended September 30, 2015, of which $2.3 million related to direct payroll, $4.3 million related to rent expense, $1.1 million related to repairs and maintenance, $1.7 million related to utilities, $2.7 million related to management fee allocation and $1.8 million related to other property operating costs. Management fee allocation for Carpathia facilities is based on 10% of cash rental revenues for each facility and reflects an allocation of internal charges to cover back-office and service-related costs associated with the day-to-day operations of our data center facilities, with a corresponding offset to general and administrative expenses. The remaining $5.3 million increase in total property operating costs was primarily attributable to the revenue growth and expansion of our existing facilities, which included increased direct payroll allocation of $1.3 million throughout our facilities, $1.2 million of increased repairs and maintenance expense which tends to fluctuate from period to period and will increase with the expansion and lease-up of our facilities, and a $0.9 million increase in utilities expense primarily related to increased utilities usage in our Atlanta-Metro and Richmond facilities as well as the opening of our Dallas-Fort Worth data center, offset by reduced utilities usage at our Sacramento data center and reduced utilities due to a credit received from Georgia Power related to a retroactive adjustment in billing rates for the current year. In addition, management fee allocation increased $1.0 million (exclusive of the increase attributable to Carpathia and Princeton as discussed above). Management fee allocation for QTS facilities is based on 4% of cash rental revenues for each facility. The remaining $0.9 million increase in other property operating costs was primarily due to higher software license costs, higher outside services expenses from consulting fees and outsourcing of our facility security personnel, which resulted in lower direct payroll costs, offset by an increase in other income related to credits received from Georgia Power for bill corrections related to prior years.

Real Estate Taxes and Insurance. Real estate taxes and insurance for the nine months ended September 30, 2015 were $4.4 million compared to $3.7 million for the nine months ended September 30, 2014. The increase of $0.7 million, or 19%, was primarily attributable to the acquisition of our Princeton data center, which contributed $0.5 million to the increase. The remaining $0.2 million is primarily attributable to a $0.3 million increase in property taxes at our Dallas data center, partially offset by a $0.1 million decrease in property taxes at our Santa Clara data center.

43 

Depreciation and Amortization. Depreciation and amortization for the nine months ended September 30, 2015 was $58.8 million compared to $42.3 million for the nine months ended September 30, 2014. The increase of $16.5 million, or 39%, was primarily due to depreciation expense of $4.5 million and amortization expense of $3.3 million associated with the Carpathia acquisition, and depreciation expense of $0.4 million and amortization expense of $1.1 million associated with the Princeton acquisition. The remaining increase of $7.2 million was due to additional depreciation of $7.0 million, primarily due to additional depreciation of the Dallas-Fort Worth data center, as well as expansion of the Richmond, Atlanta-Metro and Atlanta-Suwanee data centers, and higher amortization expense of $0.2 million primarily related to a higher level of leasing commissions.

General and Administrative Expenses. General and administrative expenses were $47.9 million for the nine months ended September 30, 2015 compared to general and administrative expenses of $33.3 million for the nine months ended September 30, 2014, an increase of $14.6 million, or 44%, of which the acquisition of Carpathia contributed $5.3 million. The remaining increase in general and administrative expenses was attributable to increased advertising expenses of $1.1 million, increased payroll expenses related to sales and marketing personnel of $0.9 million, higher equity based compensation expense of $2.3 million, higher net payroll costs of $2.6 million, and other costs of $2.4 million. Other costs were primarily related to increased outside services for temporary personnel and consulting fees, increased software license costs, and increased travel and entertainment expenses, offset by lower repairs and maintenance expense primarily related to computer and software.

Restructuring Costs. For the nine months ended September 30, 2014, we incurred $1.3 million in restructuring costs related to severance for various remote employees. No such costs were incurred in the nine months ended September 30, 2015.

Transaction and Integration Costs. For the nine months ended September 30, 2015 and 2014 we incurred $4.5 million and $1.0 million, respectively, in costs related to the examination of actual and potential acquisitions. We also recognized $1.8 million in integration costs for the nine months ended September 30, 2015 related to the acquisition of Carpathia. Acquisition-related costs for acquisitions accounted for as a business combination in accordance with ASC 805, Business Combinations, are expensed in the periods in which the costs are incurred and the services are received.

Interest Expense. Interest expense for the nine months ended September 30, 2015 was $15.6 million compared to $9.7 million for the nine months ended September 30, 2014. The increase of $5.9 million, or 61%, was due primarily to an increase in the weighted average interest rate on our borrowings and an increase in the average debt balance of $209.5 million, primarily as a result of our $300 million aggregate principal amount of 5.875% Senior Notes Due 2022 (the “Senior Notes”) issuance in July 2014, as well as the assumption of approximately $43.8 million in capital leases as a result of the Carpathia acquisition on June 16, 2015, partially offset by higher capitalized interest during the period due to the growth in construction projects. The average debt balance for the nine months ended September 30, 2015 was $688.5 million, with a weighted average interest rate, including the effect of amortization of deferred financing costs, of 4.39%. This compared to an average debt balance of $479.0 million for the nine months ended September 30, 2014, with a weighted average interest rate, including the effect of interest rate swaps and amortization of deferred financing costs, of 4.02%. Interest capitalized in connection with our redevelopment activities during the nine months ended September 30, 2015 and 2014 was $7.1 million and $4.7 million, respectively.

Tax (Expense) Benefit of Taxable REIT Subsidiaries. Tax benefit of taxable REIT subsidiaries for the nine months ended September 30, 2015 primarily relates to recorded operating losses, including transaction and integration costs, as well as the reversal of valuation allowances which were related to the deferred tax assets. These deferred tax assets were generally created by net operating losses of the taxable REIT subsidiary, and previously had valuation allowances applied to them in their entirety as there were continuing losses for that entity.  With the acquisition of Carpathia, deferred tax liabilities were created, which in turn caused the Company to release the previously recorded valuation allowances of approximately $3.4 million during the second quarter of 2015. To the extent that the Company’s taxable REIT subsidiaries continue to generate operating losses, a tax benefit will continue to be recognized due to the existing net deferred tax liability of $15.6 million at September 30, 2015.

44 

Net Income. A summary of the components of the increase in net income of $5.5 million for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014 is as follows (in millions):

	$ Change
Increase in revenues, net of property operating costs, real estate taxes and insurance	$	40.3
Increase in general and administrative expense		(14.6	)
Increase in depreciation and amortization		(16.5	)
Decrease in restructuring charges		1.3
Increase in transaction and integration costs		(5.3	)
Increase in interest expense net of interest income		(5.9	)
Increase in tax benefit		5.8
Decrease in other expense		0.4
Increase in net income	$	5.5

Non-GAAP Financial Measures

We consider the following non-GAAP financial measures to be useful to investors as key supplemental measures of our performance: (1) FFO; (2) Operating FFO; (3) Adjusted Operating FFO; (4) MRR; (5) NOI; (6) EBITDA; and (7) Adjusted EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss and cash flows from operating activities as a measure of our operating performance and liquidity. FFO, Operating FFO, Adjusted Operating FFO, MRR, NOI, EBITDA and Adjusted EBITDA, as calculated by us, may not be comparable to FFO, Operating FFO, Adjusted Operating FFO, MRR, NOI, EBITDA and Adjusted EBITDA as reported by other companies that do not use the same definition or implementation guidelines or interpret the standards differently from us.

FFO, Operating FFO and Adjusted Operating FFO

We consider funds from operations (“FFO”) to be a supplemental measure of our performance which should be considered along with, but not as an alternative to, net income (loss) and cash provided by operating activities as a measure of operating performance and liquidity. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss) (computed in accordance with GAAP), adjusted to exclude gains (or losses) from sales of property, real estate related depreciation and amortization and similar adjustments for unconsolidated partnerships and joint ventures. Our management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.

Due to the volatility and nature of certain significant charges and gains recorded in our operating results that management believes are not reflective of our core operating performance and liquidity, management computes an adjusted measure of FFO, which we refer to as Operating FFO. We generally calculate Operating FFO as FFO excluding certain non-routine and primarily non-cash charges and gains and losses that management believes are not indicative of the results of our operating real estate portfolio. We believe that Operating FFO provides investors with another financial measure that may facilitate comparisons of operating performance and liquidity between periods and, to the extent they calculate Operating FFO on a comparable basis, between REITs.

Adjusted Operating Funds From Operations (“Adjusted Operating FFO”) is a non-GAAP measure that is used as a supplemental operating measure for comparing year over year ability to fund dividend distributions from operating activities. We use Adjusted Operating FFO as a basis to address cash flow and our ability to fund dividend payments. We calculate Adjusted Operating FFO by adding or subtracting from Operating FFO items such as: maintenance capital investment, paid leasing commissions, amortization of deferred financing costs and bond discount, non-real estate depreciation, straight line rent adjustments, and non-cash compensation.

45 

We offer these measures because we recognize that FFO, Operating FFO and Adjusted Operating FFO will be used by investors as a basis to compare our operating performance and liquidity with that of other REITs. However, because FFO, Operating FFO and Adjusted Operating FFO exclude real estate depreciation and amortization and capture neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition, cash flows and results of operations, the utility of FFO, Operating FFO and Adjusted Operating FFO as measures of our operating performance and liquidity is limited. Our calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO in accordance with NAREIT guidance. In addition, our calculations of FFO, Operating FFO and Adjusted Operating FFO are not necessarily comparable to FFO, Operating FFO and Adjusted Operating FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us. FFO, Operating FFO and Adjusted Operating FFO are non-GAAP measures and should not be considered a measure of our results of operations or liquidity or as a substitute for, or an alternative to, net income (loss), cash provided by operating activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders.

A reconciliation of net income to FFO, Operating FFO and Adjusted Operating FFO is presented below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
FFO
Net income	$	8,238		$	4,006		$	18,795		$	13,255
Real estate depreciation and amortization		21,022			13,596			51,649			37,663
FFO		29,260			17,602			70,444			50,918
Operating FFO
Write off of unamortized deferred finance costs		-			470			83			580
Restructuring costs		-			226			-			1,272
Integration costs		1,360			-			1,783			-
Transaction costs		122			(195	)		4,473			958
Non-cash deferred tax benefit associated with transaction and integration costs		(1,206	)		-			(1,206	)		-
Non-cash reversal of deferred tax asset valuation allowance		-			-			(3,175	)		-
Operating FFO		29,536			18,103			72,402			53,728
Maintenance Capex		(1,408	)		(1,877	)		(2,034	)		(1,972	)
Leasing commissions paid		(3,005	)		(5,516	)		(9,871	)		(10,604	)
Amortization of deferred financing costs and bond discount		849			522			2,552			1,725
Non real estate depreciation and amortization		3,463			1,612			7,086			4,610
Straight line rent revenue		(1,463	)		(961	)		(3,270	)		(1,283	)
Straight line rent expense		984			72			1,266			221
Non-cash deferred tax benefit from operating results		(1,354	)		-			(1,354	)		-
Equity-based compensation expense		2,068			925			5,206			2,901
Adjusted Operating FFO	$	29,670		$	12,880		$	71,983		$	49,326

46 

Monthly Recurring Revenue (MRR) and Recognized MRR

We calculate MRR as monthly contractual revenue under signed leases as of a particular date, which includes revenue from our C1, C2 and C3 rental and cloud and managed services activities, but excludes customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR does not include the impact from booked-not-billed leases as of a particular date, unless otherwise specifically noted.

Separately, we calculate recognized MRR as the recurring revenue recognized during a given period, which includes revenue from our C1, C2 and C3 rental and cloud and managed services activities, but excludes customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues.

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

A reconciliation of total revenues to recognized MRR in the period and MRR at period end is presented below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Recognized MRR
Total period revenues (GAAP basis)	$	88,890		$	57,945		$	218,393		$	158,226
Less: Total period recoveries		(6,158	)		(6,131	)		(17,404	)		(13,674	)
Total period deferred setup fees		(1,477	)		(1,125	)		(4,135	)		(3,508	)
Total period straight line rent and other		(2,959	)		(1,726	)		(8,221	)		(3,711	)
Recognized MRR (in the period)		78,296			48,963			188,633			137,333
MRR
Total period revenues (GAAP basis)	$	88,890		$	57,945		$	218,393		$	158,226
Less: Total revenues excluding last month		(59,455	)		(38,439	)		(188,958	)		(138,720	)
Total revenues for last month of period		29,435			19,506			29,435			19,506
Less: Last month recoveries		(1,661	)		(1,771	)		(1,661	)		(1,771	)
Last month deferred setup fees		(269	)		(391	)		(269	)		(391	)
Last month straight line rent and other		(1,291	)		(823	)		(1,291	)		(823	)
MRR (at period end) *	$	26,214		$	16,521		$	26,214		$	16,521

* Does not include our booked-not-billed MRR balance, which was $5.1 million and $5.2 million as of September 30, 2015 and 2014, respectively.

47 

Net Operating Income (NOI)

We calculate net operating income (“NOI”), as net income (loss), excluding interest expense, interest income, tax expense (benefit) of taxable REIT subsidiaries, depreciation and amortization, write off of unamortized deferred financing costs, gain on extinguishment of debt, transaction and integration costs, gain (loss) on legal settlement, gain (loss) on sale of real estate, restructuring charge and general and administrative expenses. We allocate a management fee charge of 4% of cash rental revenues for QTS facilities and 10% of cash rental revenues for Carpathia facilities as a property operating cost and a corresponding reduction to general and administrative expense to cover the day-to-day administrative costs to operate our data centers. The management fee charge is reflected as a reduction to net operating income.

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

48 

A reconciliation of net income to NOI is presented below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Net Operating Income (NOI)
Net income	$	8,238		$	4,006		$	18,795		$	13,255
Interest expense		5,418			5,410			15,559			9,683
Interest income		(1	)		-			(2	)		(8	)
Depreciation and amortization		24,486			15,210			58,791			42,274
Write off of unamortized deferred finance costs		-			470			83			580
Tax (benefit) expense of taxable REIT subsidiaries		(2,560	)		27			(5,695	)		82
Restructuring costs		-			226			-			1,272
Integration costs		1,360			-			1,783			-
Transaction costs		122			(195	)		4,473			958
General and administrative expenses		19,440			11,045			47,893			33,296
NOI (1)	$	56,503		$	36,199		$	141,680		$	101,392
Breakdown of NOI by facility:
Atlanta-Metro data center	$	17,964		$	14,752		$	51,605		$	44,348
Atlanta-Suwanee data center		10,376			9,046			30,600			25,798
Santa Clara data center		3,615			3,301			10,566			9,349
Richmond data center		5,340			3,772			14,528			10,158
Sacramento data center		1,870			1,938			5,641			6,601
Princeton data center		2,331			2,066			6,990			2,089
Dallas-Fort Worth data center		1,532			420			3,743			420
Carpathia data centers		12,460			-			14,710			-
Other data centers		1,015			904			3,297			2,629
NOI (1)	$	56,503		$	36,199		$	141,680		$	101,392

(1) Includes facility level general and administrative allocation charges of 4% of revenue for QTS facilities and 10% of revenue for Carpathia facilities which aggregated to $4.9 million and $2.3 million for the three month periods ended September 30, 2015 and 2014, respectively, and $10.1 million and $6.3 million for the nine month periods ended September 30, 2015 and 2014, respectively.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

We calculate EBITDA as net income (loss) adjusted to exclude interest expense and interest income, provision for income taxes (including income taxes applicable to sale of assets) and depreciation and amortization. Management believes that EBITDA is useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base charges (primarily depreciation and amortization) from our operating results.

In addition to EBITDA, we calculate an adjusted measure of EBITDA, which we refer to as Adjusted EBITDA, as EBITDA excluding unamortized deferred financing costs, gains (losses) on extinguishment of debt, transaction and integration costs, equity-based compensation expense, restructuring charge, gain (loss) on legal settlement and gain (loss) on sale of real estate. We believe that Adjusted EBITDA provides investors with another financial measure that can

facilitate comparisons of operating performance between periods and between REITs.

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

A reconciliation of net income to EBITDA and Adjusted EBITDA is presented below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
EBITDA and adjusted EBITDA
Net income	$	8,238		$	4,006		$	18,795		$	13,255
Interest expense		5,418			5,410			15,559			9,683
Interest income		(1	)		-			(2	)		(8	)
Tax (benefit) expense of taxable REIT subsidiaries		(2,560	)		27			(5,695	)		82
Depreciation and amortization		24,486			15,210			58,791			42,274
EBITDA		35,581			24,653			87,448			65,286
Write off of unamortized deferred finance costs		-			470			83			580
Equity-based compensation expense		2,068			925			5,206			2,901
Restructuring costs		-			226			-			1,272
Integration costs		1,360			-			1,783			-
Transaction costs		122			(195	)		4,473			958
Adjusted EBITDA	$	39,131		$	26,079		$	98,993		$	70,997

Liquidity and Capital Resources

Short-Term Liquidity

Our short-term liquidity needs include funding capital expenditures for the redevelopment of data center space (a significant portion of which is discretionary), meeting debt service and debt maturity obligations, including interest payments on our Senior Notes, funding payments for capital lease and lease financing obligations, funding distributions to our stockholders and unit holders, utility costs, site maintenance costs, real estate and personal property taxes, insurance, rental expenses, general and administrative expenses and certain recurring and non-recurring capital expenditures.

In addition to the $252.2 million of capital expenditures, excluding acquisitions, incurred in the nine months ended September 30, 2015, we expect that we will incur between $50 million and $100 million in additional capital expenditures through December 31, 2015 in connection with the redevelopment of our data center facilities. We expect to spend approximately $45 million to $90 million of capital expenditures on redevelopment, and the remainder on recurring capital expenditures and capitalized overhead costs (including capitalized interest, commissions, payroll and other similar costs), personal property and other less material capital projects. We expect to fund these costs using operating cash flows and draws on our credit facilities. A significant portion of these expenditures are discretionary in nature and we may ultimately determine not to make these expenditures or the timing of such expenditures may vary. We continue to evaluate acquisition opportunities, but none are considered probable at this time and therefore the related expenditures are not currently included in these future estimates.

We expect to meet our short-term liquidity needs through operating cash flow, cash and cash equivalents and borrowings under our credit facilities.

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Our cash paid for capital expenditures, excluding acquisitions, for the nine months ended September 30, 2015 and 2014 are summarized in the table below (in thousands):

	Nine Months Ended September 30,
	2015		2014
Redevelopment	$	213,248	$	124,912
Personal property		9,240		6,321
Maintenance capital expenditures		2,034		1,972
Capitalized interest, commissions and other overhead costs		27,634		22,803
Total capital expenditures	$	252,156	$	156,008

Long-Term Liquidity

Our long-term liquidity needs primarily consist of funds for property acquisitions, scheduled debt maturities, payment of principal at maturity of our Senior Notes, funding payments for capital lease and lease financing obligations, and recurring and non-recurring capital expenditures. We may also pursue additional redevelopment of our Atlanta-Metro, Dallas-Fort Worth, Richmond and Chicago data centers and future redevelopment of other space in our portfolio. The redevelopment of this space, including timing, is at our discretion and will depend on a number of factors, including availability of capital and our estimate of the demand for data center space in the applicable market. We expect to meet our long-term liquidity needs with net cash provided by operations, incurrence of additional long-term indebtedness, borrowings under our credit facilities and issuance of additional equity or debt securities, subject to prevailing market conditions, as discussed below.

On November 25, 2014, the Securities and Exchange Commission (“SEC”) declared effective QTS’ universal shelf registration statement allowing QTS to offer, from time to time, up to $1 billion of our Class A common stock, preferred stock, depositary shares representing preferred stock, warrants and rights to purchase our common stock or any combination thereof, subject to the ability of QTS to effect offerings on satisfactory terms based on prevailing conditions. Pursuant to the Operating Partnership’s limited partnership agreement, each time QTS issues shares of stock pursuant to the foregoing programs or other equity offerings, the Operating Partnership issues to QTS, its general partner, an equal number of units for the same price at which the shares were sold, and QTS contributes the net proceeds of such offerings to the Operating Partnership. Our ability to raise funds through sales of common and preferred stock or other securities in the future is dependent on, among other things, general market conditions for REITs, market perceptions about our company and the current trading price of QTS’s Class A common stock. We will continue to analyze which source of capital is most advantageous to us at any particular point in time, but the equity markets may not be consistently available on terms that are attractive or at all. At September 30, 2015, we had approximately $219.4 million remaining under this universal shelf registration statement.

On March 2, 2015, QTS issued 5,000,000 shares of QTS’ Class A common stock and GA QTS Interholdco, LLC, a selling stockholder and an affiliate of General Atlantic LLC, sold 4,350,000 shares of QTS’ Class A common stock at a price of $34.75 per share in an underwritten public offering. The selling stockholder granted the underwriters a 30-day option to purchase an aggregate of up to an additional 1,402,500 shares of QTS’ Class A common stock at the public offering price, which the underwriters exercised. We used the net proceeds of approximately $166.0 million to repay amounts outstanding under our unsecured revolving credit facility. We did not receive any proceeds from the offering of shares by the selling stockholder.

On June 5, 2015, QTS issued 5,750,000 shares of QTS’ Class A common stock and GA QTS Interholdco, LLC, a selling stockholder, sold 1,250,000 shares of QTS’ Class A common stock at a price of $37.00 per share in an underwritten public offering. The selling stockholder granted the underwriters a 30-day option to purchase an aggregate of up to an additional 1,050,000 shares of QTS’ Class A common stock at the public offering price, which the underwriters exercised. We used the net proceeds, after expenses, of approximately $203.4 million to fund a portion of the cash consideration payable by us in the Carpathia acquisition, and prior to such use, we used a portion of the net proceeds to repay amounts outstanding under our unsecured revolving credit facility and to pay off our Atlanta-Metro Equipment Loan. We did not receive any proceeds from the offering of shares by the selling stockholder.

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On August 14, 2015, GA QTS Interholdco, LLC, a selling stockholder, sold 2,400,000 shares of QTS’ Class A common stock at a price of $41.00 per share in an underwritten public offering. The selling stockholder granted the underwriter a 30-day option to purchase an aggregate of up to an additional 360,000 shares of QTS’ Class A common stock at a price of $41.00 per share, of which the underwriters partially exercised the option with respect to 261,000 shares. We did not receive any proceeds from the offering of shares by the selling stockholder.

Cash

As of September 30, 2015, we had $10.7 million of unrestricted cash and cash equivalents.

On January 7, 2015, we paid our regular quarterly cash dividend of $0.29 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on December 19, 2014 in an aggregate amount of $10.7 million.

On April 7, 2015, we paid our regular quarterly cash dividend of $0.32 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on March 20, 2015 in an aggregate amount of $13.4 million.

On July 8, 2015, we paid our regular quarterly cash dividend of $0.32 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on June 19, 2015 in an aggregate amount of $15.3 million.

On October 6, 2015, we paid our regular quarterly cash dividend of $0.32 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on September 18, 2015 in an aggregate amount of $15.3 million.

Indebtedness

As of September 30, 2015, we had approximately $820.9 million of indebtedness, including capital leases and lease financing obligations.

Unsecured Credit Facility. On May 1, 2013, we entered into a $575 million unsecured credit facility comprised of a five-year $225 million term loan and a four-year $350 million revolving credit facility with a one year extension, subject to satisfaction of certain conditions, and had the ability to expand the total credit facility by an additional $100 million subject to certain conditions set forth in the credit agreement. In July 2014 our term loan was reduced by $75 million to $150 million in connection with the issuance of the Senior Notes. On December 17, 2014, we entered into a third amended and restated credit agreement providing for a $650 million unsecured credit facility comprised of a five-year $100 million term loan maturing December 17, 2019 and a four-year $550 million revolving credit facility maturing December 17, 2018, with the option to extend one year until December 17, 2019, subject to the satisfaction of certain conditions. The lenders under the unsecured credit facility may issue up to $30 million in letters of credit subject to the satisfaction of certain conditions. 

In October 2015, we amended our unsecured credit facility, increasing the total capacity by $250 million and extending the term.  At the same time, we terminated our secured credit facility relating to the Richmond data center. The amended unsecured credit facility has a total capacity of $900 million and includes a $150 million term loan which matures on December 17, 2020, another $150 million term loan which matures on April 27, 2021, and a $600 million revolving credit facility which matures on December 17, 2019, with a one year extension option. Amounts outstanding under the amended unsecured credit facility bear interest at a variable rate equal to, at our election, LIBOR or a base rate, plus a spread that will vary depending upon our leverage ratio. For revolving credit loans, the spread ranges from 1.55% to 2.15% for LIBOR loans and 0.55% to 1.15% for base rate loans. For term loans, the spread ranges from 1.50% to 2.10% for LIBOR loans and 0.50% to 1.10% for base rate loans. The amended unsecured credit facility also includes a $200 million accordion feature.

Under the amended unsecured credit facility, the capacity may be increased from the current capacity of $900 million to $1.1 billion subject to certain conditions set forth in the credit agreement, including the consent of the administrative agent and obtaining necessary commitments. As of September 30, 2015, the weighted average interest rate for amounts outstanding under our unsecured credit facility was 1.89%. Under the amended credit facility, the weighted average interest rate would have been 1.72%. We are also required to pay a commitment fee to the lenders assessed on the unused portion of the unsecured revolving credit facility. At our election, we can prepay amounts outstanding under the unsecured credit facility, in whole or in part, without penalty.

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Our ability to borrow under the amended unsecured credit facility is subject to ongoing compliance with a number of customary affirmative and negative covenants, including limitations on liens, mergers, consolidations, investments, distributions, asset sales and affiliate transactions, as well as the following financial covenants: (i) the outstanding principal balance of the loans and letter of credit liabilities cannot exceed the unencumbered asset pool availability (as defined in the third amended and restated credit agreement), (ii) a maximum leverage ratio of total indebtedness to gross asset value (as defined in the third amended and restated credit agreement) not in excess of 60%, (iii) a minimum fixed charge coverage ratio (defined as the ratio of consolidated EBITDA, subject to certain adjustments, to consolidated fixed charges) for the prior two most recently-ended calendar quarters of not less than 1.70 to 1.00, (iv) tangible net worth of at least $958 million plus 80% of the sum of net equity offering proceeds and the value of interests in the Operating Partnership issued upon contribution of assets to the Operating Partnership or its subsidiaries, (v) unhedged variable rate debt not greater than 35% of gross asset value and (vi) a maximum distribution payout ratio of the greater of (a) 95% of our “funds from operations” (as defined in the agreement) and (b) the amount required for QTS to qualify as a REIT under the Code. The interest rate applied to the outstanding balance of the unsecured credit facility decreases incrementally for every 5% below the maximum leverage ratio.

The availability under the amended unsecured revolving credit facility is the lesser of (i) $600 million, (ii) 60% of unencumbered asset pool capitalized value, or (iii) the amount resulting in an unencumbered asset pool debt yield of 14%. In the case of clauses (ii), (iii) and (iv) of the preceding sentence, the amount available under the unsecured revolving credit facility is adjusted to take into account any other unsecured debt and certain capitalized leases. The availability of funds under our amended unsecured credit facility depends on compliance with our covenants. Pro forma for this amendment and the payoff of the Richmond Credit Facility, as of September 30, 2015, we had outstanding $470.0 million of indebtedness under the amended unsecured credit facility, consisting of $170.0 million of outstanding borrowings under our unsecured revolving credit facility and $300.0 million outstanding term loan indebtedness. In connection with the unsecured credit facility, as of September 30, 2015, we had an additional $2.5 million letter of credit outstanding. The letter of credit was reduced to $2.0 million on October 1, 2015.

5.875% Senior Notes due 2022. On July 23, 2014, the operating partnership and QTS Finance Corporation, a subsidiary of the operating partnership formed solely for the purpose of facilitating the offering of the Senior Notes described below (collectively, the “Issuers”), issued $300 million aggregate principal amount of 5.875% Senior Notes due 2022. The Senior Notes have an interest rate of 5.875% per annum and were issued at a price equal to 99.211% of their face value. The proceeds from the offering were used to repay amounts outstanding under the unsecured credit facility, including $75 million outstanding under the term loan. The Senior Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Operating Partnership’s existing subsidiaries (other than foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS, the Issuers or any other subsidiary guarantor. QTS Realty Trust, Inc. will not initially guarantee the Senior Notes and will not be required to guarantee the Senior Notes except under certain circumstances. The offering was conducted pursuant to Rule 144A of the Securities Act of 1933, as amended, and the Senior Notes were issued pursuant to an indenture, dated as of July 23, 2014, among QTS, the Operating Partnership, QTS Finance Corporation, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (the “Indenture”).

On March 23, 2015, the SEC declared effective the Operating Partnership and QTS Finance Corporation’s registration statement on Form S-4 pursuant to which the issuers exchanged the originally issued Senior Notes for $300 million of 5.875% Senior Notes due 2022 (the “Exchange Notes”) that are registered under the Securities Act of 1933, as amended. The exchange offer was completed on April 23, 2015, and all outstanding originally issued Senior Notes were tendered. The Exchange Notes did not provide the Company with any additional proceeds and satisfied its obligations under a registration rights agreement entered into in connection with the issuance of the Senior Notes.

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The Indenture contains affirmative and negative covenants that, among other things, limit or restrict the Operating Partnership’s ability and the ability of certain of its subsidiaries (“Restricted Subsidiaries”) to: incur additional indebtedness; pay dividends; make certain investments or other restricted payments; enter into transactions with affiliates; enter into agreements limiting the ability of the operating partnership’s restricted subsidiaries to pay dividends; engage in sales of assets; and engage in mergers, consolidations or sales of substantially all of their assets. However, certain of these covenants will be suspended if and for so long as the Senior Notes are rated investment grade by specified debt rating services and there is no default under the Indenture. The Operating Partnership and its Restricted Subsidiaries also are required to maintain total unencumbered assets (as defined in the Indenture) of at least 150% of their unsecured debt on a consolidated basis.

The Senior Notes may be redeemed by the Issuers, in whole or in part, at any time prior to August 1, 2017 at a redemption price equal to (i) 100% of principal amount, plus (ii) accrued and unpaid interest to the redemption date, and (iii) a make-whole premium. Thereafter, the Issuers may redeem the Senior Notes prior to maturity at 104.406% of the principal amount at August 1, 2017 and declining ratably to par at August 1, 2020 and thereafter, in each case plus accrued and unpaid interest to the redemption date. At any time prior to August 1, 2017, the Issuers may, subject to certain conditions, redeem up to 35% of the aggregate principal amount of the Senior Notes at 105.875% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of certain equity offerings consummated by us or the Operating Partnership. Also, upon the occurrence of a change of control of us or the Operating Partnership, holders of the Senior Notes may require the Issuers to repurchase all or a portion of the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes to be repurchased plus accrued and unpaid interest to the repurchase date.

Richmond Secured Credit Facility. In December 2012, we entered into a credit facility secured by our Richmond data center (the “Richmond Credit Facility”). The proceeds from our Richmond Credit Facility may be used solely to finance the development of the Richmond property into a data center and to repay indebtedness under our unsecured credit facility. The Richmond Credit Facility required us to comply with covenants similar to the unsecured credit facility.

As amended on June 30, 2014, the Richmond Credit Facility had a stated maturity of June 30, 2019, capacity of $120 million with an accordion feature to provide for total borrowing capacity of up to $200 million. The interest rate for LIBOR loans ranged from 2.10% to 2.85%, with the rate determined by the overall leverage ratio as defined in the agreement.
  

As discussed above, we terminated the Richmond Credit Facility in conjunction with the October 2015 amendment of our unsecured credit facility.

Atlanta-Metro Equipment Loan. In April 2010, we entered into a $25 million loan to finance equipment related to an expansion project at our Atlanta-Metro data center. The loan required monthly interest and principal payments. The loan bore interest at 6.85% per annum and was scheduled to mature on June 1, 2020. This debt was repaid in June 2015 when its prepayment penalties expired.

Contingencies

We are subject to various routine legal proceedings and other matters in the ordinary course of business. While resolution of these matters cannot be predicted with certainty, management believes, based upon information currently available, that the final outcome of these proceedings will not have a material adverse effect on our financial condition, liquidity or results of operations.

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Contractual Obligations

The following table summarizes our contractual obligations as of September 30, 2015, including the future non-cancellable minimum rental payments required under operating leases and the maturities and scheduled principal repayments of indebtedness and other agreements (in thousands):

Obligations	2015		2016		2017		2018		2019		Thereafter		Total
Operating Leases	$	3,914	$	12,184	$	10,445	$	9,884	$	8,299	$	86,599	$	131,325
Capital Leases and Lease Financing Obligations		3,262		12,558		12,388		8,804		2,461		13,550		53,023
Future principal payments of Indebtedness (1)		-		-		-		300,000		170,000		300,000		770,000
Total (2)	$	7,176	$	24,742	$	22,833	$	318,688	$	180,760	$	400,149	$	954,348

___________________________

(1) Does not include the discount on Senior Notes reflected at September 30, 2015 nor the letter of credit of $2.5 million outstanding as of September 30, 2015 under our unsecured credit facility. The letter of credit was reduced to $2.0 million on October 1, 2015.

(2) Total obligations does not include contractual interest that we are required to pay on our long-term debt obligations. Contractual interest payments on our credit facilities, Senior Notes, mortgages, capital leases, lease financing obligations and other financing arrangements through the scheduled maturity date, assuming no prepayment of debt, are shown below. Interest payments were estimated based on the principal amount of debt outstanding and the applicable interest rate as of September 30, 2015 (in thousands):

	2015		2016		2017		2018		2019		Thereafter		Total
$	7,193	$	28,558	$	28,236	$	27,669	$	20,154	$	47,112	$	158,922

As discussed above, we amended our unsecured credit facility in October 2015. If the amendment had closed prior to September 30, 2015, our debt maturity schedule would appear as follows:

Obligations	2015		2016		2017		2018		2019		Thereafter		Total
Operating Leases	$	3,914	$	12,184	$	10,445	$	9,884	$	8,299	$	86,599	$	131,325
Capital Leases and Lease Financing Obligations		3,262		12,558		12,388		8,804		2,461		13,550		53,023
Future principal payments of Indebtedness (1)		-		-		-		-		170,000		600,000		770,000
Total (2)	$	7,176	$	24,742	$	22,833	$	18,688	$	180,760	$	700,149	$	954,348

_______________________________ 

(1) Does not include the discount on Senior Notes reflected at September 30, 2015 nor the letter of credit of $2.5 million outstanding as of September 30, 2015 under our unsecured credit facility. The letter of credit was reduced to $2.0 million on October 1, 2015.

(2) Total obligations does not include contractual interest that we are required to pay on our long-term debt obligations. Contractual interest payments on our credit facilities, Senior Notes, mortgages, capital leases, lease financing obligations and other financing arrangements through the scheduled maturity date, assuming no prepayment of debt, are shown below. Interest payments were estimated based on the principal amount of debt outstanding and the applicable interest rate as of September 30, 2015 (in thousands):

	2015		2016		2017		2018		2019		Thereafter		Total
$	6,991	$	27,749	$	27,427	$	27,142	$	26,719	$	50,203	$	166,231

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Off-Balance Sheet Arrangements

We utilize derivatives to manage our interest rate exposure. During February 2012, we entered into two interest rate swaps with an aggregate notional amount of $150 million which qualified for hedge accounting treatment. These interest rate swaps, which matured on September 28, 2014, were designated as a cash flow hedge of future interest payments. We perform assessments of hedging effectiveness, and any ineffectiveness is recorded in interest expense. There was no ineffectiveness for the periods ended September 30, 2015 or 2014.

Cash Flows

	Nine Months Ended
	September 30,
(in thousands)	2015			2014
Cash flow provided by (used for):
Operating activities	$	72,319		$	51,355
Investing activities		(541,021	)		(247,072	)
Financing activities		468,644			195,552

Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014

Cash flow provided by operating activities was $72.3 million for the nine months ended September 30, 2015, compared to $51.4 million for the nine months ended September 30, 2014. There was an increase in cash operating income of $19.8 million from the prior period, and an increase in cash flow associated with net changes in working capital of $1.1 million primarily relating to changes in rents and other receivables, accounts payable and accrued expenses, deferred income and prepaid expenses.

Cash flow used for investing activities increased by $293.9 million to $541.0 million for the nine months ended September 30, 2015, compared to $247.1 million for the nine months ended September 30, 2014. The increase was due primarily to the acquisition of Carpathia as well as higher cash paid for capital expenditures primarily related to redevelopment of our Dallas-Fort Worth, Atlanta-Metro, Chicago and Richmond data centers of $96.1 million. These expenditures include capitalized soft costs such as interest, payroll and other costs to redevelop properties, which were, in the aggregate, $15.7 million and $12.2 million for the nine months ended September 30, 2015 and 2014, respectively.

Cash flow provided by financing activities was $468.6 million for the nine months ended September 30, 2015, compared to $195.6 million for the nine months ended September 30, 2014. The increase was primarily due to net proceeds from equity offerings completed in March and June of 2015 totaling $369.5 million. Partially offsetting this increase were lower net proceeds of $78.0 million under our unsecured credit facility and Senior Notes (which were issued in 2014), an increase in mortgage principal debt repayments of $14.9 million due to paying off the Atlanta-Metro equipment loan in full in June 2015, an increase in payments of cash dividends to common stockholders of $9.0 million which was due to the increase in shares outstanding related to the March 2015 and June 2015 equity issuances and a higher dividend rate, and an increase in principal payments on capital lease obligations of $3.9 million.

Critical Accounting Policies

The Company applies those accounting policies that management believes best reflect the underlying business and economic events, consistent with accounting principles generally accepted in the United States. Inherent in such policies are certain key assumptions and estimates made by management. Management periodically updates its estimates used in the preparation of the consolidated financial statements based on its latest assessment of the current and projected business and general economic environment. Information regarding the Company’s Critical Accounting Policies and Estimates is included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, with an additional policy noted below for recently acquired goodwill.

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As a result of the Carpathia acquisition in June 2015, the Company recognized approximately $175 million in goodwill. The fair value of goodwill is the consideration transferred which is not allocable to identifiable intangible and tangible assets. The Company believes that it has one reporting unit for goodwill purposes, thus will assess goodwill for impairment annually on October 1 on that basis.

Inflation

Substantially all of our long-term leases—leases with a term greater than three years—contain rent increases and reimbursement for certain operating costs. As a result, we believe that we are largely insulated from the effects of inflation over periods greater than three years. Leases with terms of three years or less will be replaced or renegotiated within three years and should adjust to reflect changed conditions, also mitigating the effects of inflation. Moreover, to the extent that there are material increases in utility costs, we generally reserve the right to renegotiate the rental rate to incorporate significant utility rate increases. However, any increases in the costs of redevelopment of our properties will generally result in a higher cost of the property, which will result in increased cash requirements to redevelop our properties and increased depreciation and amortization expense in future periods, and, in some circumstances, we may not be able to directly pass along the increase in these redevelopment costs to our customers in the form of higher rental rates.

Distribution Policy

To satisfy the requirements to qualify as a REIT, and to avoid paying tax on our income, QTS intends to continue to make regular quarterly distributions of all, or substantially all, of its REIT taxable income (excluding net capital gains) to its stockholders.

All distributions will be made at the discretion of our board of directors and will depend on our historical and projected results of operations, liquidity and financial condition, QTS’ REIT qualification, our debt service requirements, operating expenses and capital expenditures, prohibitions and other restrictions under financing arrangements and applicable law and other factors as our board of directors may deem relevant from time to time. We anticipate that our estimated cash available for distribution will exceed the annual distribution requirements applicable to REITs and the amount necessary to avoid the payment of tax on undistributed income. However, under some circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet these distribution requirements and we may need to borrow funds to make certain distributions. If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.

The Operating Partnership also includes certain partners that are subject to a taxable income allocation, however, not entitled to receive recurring distributions. The partnership agreement does stipulate however, to the extent that taxable income is allocated to these partners that the partnership will make a distribution to these partners equal to the lesser of the actual per unit distributions made to Class A partners or an estimated amount to cover federal, state and local taxes on the allocated taxable income. No distributions related to allocated taxable income were made to these partners for the nine months ended September 30, 2015; however, a distribution of approximately $200,000 was made to Class O LTIP holders during the nine months ended September 30, 2014.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The primary market risk to which we believe we are exposed is interest rate risk. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control, contribute to interest rate risk.

As of September 30, 2015, we had outstanding $470.0 million of consolidated indebtedness that bore interest at variable rates. An interest rate cap of $50 million was in place as of September 30, 2015 with a capped LIBOR rate of 3% through December 18, 2015.

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We monitor our market risk exposures using a sensitivity analysis. Our sensitivity analysis estimates the exposure to market risk sensitive instruments assuming a hypothetical 1% change in year-end interest rates. LIBOR rates are not currently within 1% of our interest rate caps, therefore a 1% increase in interest rates would increase the interest expense on the $470.0 million of variable indebtedness outstanding as of September 30, 2015 by approximately $4.7 million annually. Conversely, a decrease in the LIBOR rate to 0% would decrease the interest expense on this $470.0 million of variable indebtedness outstanding by approximately $0.9 million annually based on the one month LIBOR rate of approximately 0.2% as of September 30, 2015.

The above analyses do not consider the effect of any change in overall economic activity that could impact interest rates or expected changes associated with future indebtedness. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

ITEM 4. Controls and Procedures

QTS Realty Trust, Inc.

Disclosure Controls and Procedures

Based on an evaluation of disclosure controls and procedures for the period ended September 30, 2015, conducted by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer concluded that QTS’ disclosure controls and procedures are effective to ensure that information required to be disclosed by QTS in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in QTS’ internal control over financial reporting during the period ended September 30, 2015, that have materially affected, or are reasonably likely to materially affect, QTS’ internal control over financial reporting.

QualityTech LP

Disclosure Controls and Procedures

Based on an evaluation of disclosure controls and procedures for the period ended September 30, 2015, conducted by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer concluded that the Operating Partnership’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Operating Partnership in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in the Operating Partnership’s internal control over financial reporting during the period ended September 30, 2015, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

58 

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

In the ordinary course of our business, we are subject to claims and administrative proceedings, none of which we believe are material or would be expected to have, individually or in the aggregate, a material adverse effect on us.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors disclosed in our Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (“SEC”) on March 7, 2014, and our Form 10-Q for the quarter ended June 30, 2015, filed with the SEC on August 7, 2015, which are accessible on the SEC’s website at www.sec.gov.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

QTS did not sell any securities during the nine months ended September 30, 2015 that were not registered under the Securities Act of 1933, as amended (the “Securities Act”).

QTS from time to time issues shares of Class A common stock pursuant to the QTS Realty Trust, Inc. 2013 Equity Incentive Plan (the “2013 Equity Incentive Plan”), upon exercise of stock options issued under the 2013 Equity Incentive Plan, and upon redemption of Class A units of limited partnership of the Operating Partnership (either through Class A units previously held or those received from conversion of Class O units from the QualityTech, LP 2010 Equity Incentive Plan). In addition, QTS issued shares of Class A common Stock in underwritten public offerings in March and June of 2015. Pursuant to the partnership agreement of the Operating Partnership, each time QTS issues shares of common stock, the Operating Partnership issues to QTS, its general partner, an equal number of Class A units. The units issued to QTS are not registered under the Securities Act in reliance on Section 4(a)(2) of the Securities Act due to the fact that Class A units were issued only to QTS and therefore, did not involve a public offering. During the nine months ended September 30, 2015, the Operating Partnership issued 0.7 million Class A units to QTS in connection with such redemptions and stock option exercises and issuances pursuant to the 2013 Equity Incentive Plan, with a value of approximately $26.3 million based on the respective dates of the redemptions and option exercises, as applicable. In addition, during the nine months ended September 30, 2015, the Operating Partnership issued approximately 10.8 million Class A units to QTS in connection with the underwritten public offerings in March and June of 2015 with a value of approximately $386.5 million.

Repurchases of Equity Securities

During the nine months ended September 30, 2015, certain of our employees surrendered Class A common stock owned by them to satisfy their statutory minimum federal and state tax obligations in connection with the vesting of restricted common stock under the 2013 Equity Incentive Plan. 

59 

The following table summarizes all of these repurchases during the nine months ended September 30, 2015.

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
January 1, 2015 through January 31, 2015	-	N/A		N/A	N/A
February 1, 2015 through February 28, 2015	-	N/A		N/A	N/A
March 1, 2015 through March 31, 2015	7,091 (1)	$	36.50	N/A	N/A
April 1, 2015 through April 30, 2015	-	N/A		N/A	N/A
May 1, 2015 through May 31, 2015	-	N/A		N/A	N/A
June 1, 2015 through June 30, 2015	2,534 (1)	$	36.27	N/A	N/A
July 1, 2015 through July 31, 2015	-	N/A		N/A	N/A
August 1, 2015 through August 31, 2015	-	N/A		N/A	N/A
September 1, 2015 through September 30, 2015	2,653 (1)	$	43.69	N/A	N/A
Total	12,278 (1)	$	38.01

(1) The number of shares purchased represents shares of Class A common stock surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock. With respect to these shares, the price paid per share is based on the closing price of our Class A common stock as of the date of the determination of the statutory minimum federal income tax.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

60 

ITEM 6. Exhibits

Exhibit Number	Exhibit Description
2.1	Stock Purchase Agreement, dated May 6, 2015, by and among Quality Technology Services Holding, LLC, Carpathia Holdings, LLC and Carpathia Acquisition, Inc. (Filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on May 12, 2015)

2.2 First Amendment to Stock Purchase Agreement, effective as of June 12, 2015, by and among Quality Technology Services Holding, LLC, Carpathia Holdings, LLC and Carpathia Acquisition, Inc. (Filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on June 19, 2015)

3.1 Articles of Amendment and Restatement of QTS Realty Trust, Inc. (Filed as Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on October 17, 2013)

3.2 Amended and Restated Bylaws of QTS Realty Trust, Inc. (Filed as Exhibit 3.2 to the Registration Statement on Form S-11/A filed with the SEC on September 26, 2013)

4.1 Form of Specimen Class A Common Stock Certificate (Filed as Exhibit 4.1 to the Registration Statement on Form S-11/A filed with the SEC on September 26, 2013)

4.2 Indenture, dated July 23, 2014, by and among QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., certain subsidiaries of QualityTech, LP and Deutsche Bank Trust Company Americas (Filed as Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on July 25, 2014)

4.3 Supplemental Indenture, dated as of December 22, 2014, by and among QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., the entities identified therein as Guaranteeing Subsidiaries, the entities identified therein as Subsidiary Guarantors, and Deutsche Bank Trust Company Americas, to the Indenture dated, as of July 23, 2014, by and among QualityTech, LP, and QTS Finance Corporation, as issuers, QTS Realty Trust, Inc., each of the subsidiary guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee (Filed as Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 23, 2015)

4.4 Supplemental Indenture, dated as of September 28, 2015, by and among QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., the entities identified therein as Guaranteeing Subsidiaries, the entities identified therein as Subsidiary Guarantors, and Deutsche Bank Trust Company Americas, to the Indenture dated, as of July 23, 2014, by and among QualityTech, LP, and QTS Finance Corporation, as issuers, QTS Realty Trust, Inc., each of the subsidiary guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee.

4.5 Form of 5.875% Senior Notes due 2022 (included in Exhibit 4.2 hereto)

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (QTS Realty Trust, Inc.)

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31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (QTS Realty Trust, Inc.)

31.3 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (QualityTech, LP)

31.4 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (QualityTech, LP)

32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (QTS Realty Trust, Inc.)

32.2 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (QualityTech, LP)

101 The following materials from QTS Realty Trust, Inc.’s and QualityTech, LP’s Quarterly Report on Form 10-Q for the period ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations and comprehensive income (loss), (iii) condensed consolidated statements of equity and partners’ capital, (iv) condensed consolidated statements of cash flow, and (v) the notes to the condensed consolidated financial statements

62 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	QTS Realty Trust, Inc.
DATE: November 5, 2015	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer
DATE: November 5, 2015	/s/ William H. Schafer
	William H. Schafer
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)
	QualityTech, LP
	By: QTS Realty Trust, Inc.,
	its general partner
DATE: November 5, 2015	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer
DATE: November 5, 2015	/s/ William H. Schafer
	William H. Schafer
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

63 

EX-4.4

Exhibit 4.4

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of September 28, 2015, among Carpathia Acquisition, Inc., a Delaware corporation, Carpathia Hosting, Inc., a Delaware corporation, ServerVault Corp., a Delaware corporation, QTS Investment Properties Carpathia, LLC, a Delaware limited liability company (collectively, the “Guaranteeing Subsidiaries,” and each, a “Guaranteeing Subsidiary”), each a subsidiary of QualityTech, LP (or its permitted successor), a Delaware limited partnership (the “Operating Partnership”), the Co-Issuer, the REIT, the Subsidiary Guarantors (as defined in the Indenture referred to herein) and Deutsche Bank Trust Company Americas, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Operating Partnership has heretofore executed and delivered to the Trustee an indenture, dated as of July 23, 2014, as amended by that certain supplemental indenture dated as of December 22, 2014 (the “Indenture”), providing for the issuance of 5.875% Senior Notes due 2022 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which each Guaranteeing Subsidiary shall unconditionally guarantee all of the Operating Partnership’s obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, each Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1.Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2.Agreement to Guarantee. Each Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 10 thereof.

3.Notices. All notices or other communications to the Guaranteeing Subsidiaries shall be given as provided in Section 12.07 of the Indenture.

4.No Recourse Against Others. No recourse for the payment of the principal of, premium, if any, or interest or Additional Interest, if any, on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the REIT, any Issuer or any of the Guarantors in this Indenture, or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had against any past, present or future incorporator, general partner (including the REIT), limited partner, stockholder, member, officer, director, employee or controlling person in their capacity as such of the REIT, any Issuer, the Guarantors or of any successor Person thereof. Each Holder of Notes, by accepting a Note, waives and releases all

1 

such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

5.Ratification of Indenture; Supplemental Indenture part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder heretofore or hereafter authenticated and delivered shall be bound hereby.

6.NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

7.Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

8.Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

9.The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary and the Operating Partnership.

[Signature pages follow]

2 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

QUALITYTECH, LP, as Issuer

By: QTS Realty Trust, Inc., as the sole General Partner

By: /s/ William H. Schafer                                                                  
        Name: William H. Schafer
       Title: Chief Financial Officer

QTS FINANCE CORPORATION, as Issuer

By: /s/ William H. Schafer                                                                    
        Name: William H. Schafer
        Title: Chief Financial Officer

QTS REALTY TRUST, INC.

By: /s/ William H. Schafer                                                                  
        Name: William H. Schafer
        Title: Chief Financial Officer

[Signatures continue on next page]

3 

THE FOLLOWING PARTY AS TRUSTEE:

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee, Registrar and Paying Agent

By: Deutsche Bank National Trust Company


By: /s/ Jeffrey Schoenfeld                                                       
        Name: Jeffrey Schoenfeld
        Title: Vice President


By: /s/ Debra A. Schwalb                                                        
        Name: Debra A. Schwalb
        Title: Vice President

[Signatures continue on next page]

4 

THE FOLLOWING PARTIES AS GUARANTEEING SUBSIDIARIES

Carpathia Acquisition, Inc.

Carpathia Hosting, Inc.

ServerVault Corp. 

QTS Investment Properties Carpathia, LLC

By: s/ William H. Schafer                                                         
        Name: William H. Schafer
        Title: Chief Financial Officer

5 

THE FOLLOWING PARTIES AS SUBSIDIARY

GUARANTORS:

QUALITY INVESTMENT PROPERTIES IRVING, LLC

QUALITY TECHNOLOGY SERVICES JERSEY CITY, LLC

QUALITY TECHNOLOGY SERVICES, N.J., LLC

QTS INVESTMENT PROPERTIES PRINCETON, LLC

QTS INVESTMENT PROPERTIES CHICAGO, LLC

QUALITY INVESTMENT PROPERTIES GATEWAY, LLC

QUALITY TECHNOLOGY SERVICES LENEXA, LLC

QUALITY INVESTMENT PROPERTIES LENEXA, LLC

QUALITY INVESTMENT PROPERTIES RICHMOND, LLC

QAE ACQUISITION COMPANY, LLC

QUALITY TECHNOLOGY SERVICES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES, N.J. II, LLC

QUALITY TECHNOLOGY SERVICES PRINCETON II, LLC

QUALITY TECHNOLOGY SERVICES CHICAGO II, LLC

QUALITY TECHNOLOGY SERVICES, LLC

QTS CRITICAL FACILITIES MANAGEMENT, LLC

QUALITY TECHNOLOGY SERVICES LENEXA II, LLC

QUALITY TECHNOLOGY SERVICES RICHMOND II, LLC

QUALITY INVESTMENT PROPERTIES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES, NORTHEAST, LLC

QUALITY TECHNOLOGY SERVICES HOLDING, LLC

QUALITY INVESTMENT PROPERTIES METRO, LLC

QUALITY TECHNOLOGY SERVICES METRO II, LLC

QUALITY INVESTMENT PROPERTIES, SUWANEE, LLC

QUALITY TECHNOLOGY SERVICES, SUWANEE II, LLC

QLD INVESTMENT PROPERTIES WICHITA TECHNOLOGY GROUP, L.L.C.

QUALITY TECHNOLOGY SERVICES WICHITA II, LLC

QUALITY INVESTMENT PROPERTIES SACRAMENTO, LLC

QUALITY TECHNOLOGY SERVICES SACRAMENTO II, LLC

QUALITY INVESTMENT PROPERTIES SANTA CLARA, LLC

QUALITY TECHNOLOGY SERVICES SANTA CLARA II, LLC

QUALITY INVESTMENT PROPERTIES MIAMI, LLC

QUALITY TECHNOLOGY SERVICES MIAMI II, LLC

By: s/ William H. Schafer                                                                      
Name: William H. Schafer
Title: Chief Financial Officer

6 

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Chad L. Williams, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of QTS Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2015

/s/ Chad L. Williams

Chad L. Williams

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, William H. Schafer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of QTS Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2015

/s/ William H. Schafer

William H. Schafer

Chief Financial Officer

EX-31.3

Exhibit 31.3

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Chad L. Williams, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of QualityTech, LP;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2015

/s/ Chad L. Williams

Chad L. Williams

Chairman and Chief Executive Officer

EX-31.4

Exhibit 31.4

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, William H. Schafer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of QualityTech, LP;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2015

/s/ William H. Schafer

William H. Schafer

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of QTS Realty Trust, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chad L. Williams, Chairman and Chief Executive Officer of the Company, and I, William H. Schafer, Chief Financial Officer of the Company, certify, to our knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2015

/s/ Chad L. Williams

Chad L. Williams

Chairman and Chief Executive Officer

/s/ William H. Schafer

William H. Schafer

Chief Financial Officer

EX-32.2

Exhibit 32.2

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of QualityTech, LP (the “Company”) on Form 10-Q for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chad L. Williams, Chairman and Chief Executive Officer of the Company, and I, William H. Schafer, Chief Financial Officer of the Company, certify, to our knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2015

/s/ Chad L. Williams

Chad L. Williams

Chairman and Chief Executive Officer

/s/ William H. Schafer

William H. Schafer

Chief Financial Officer

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Real Estate Assets and Construction in Progress (Summary of Properties Owned or Leased by the Company) (Details) $ in Thousands		Sep. 30, 2015 USD ($) property	Dec. 31, 2014 USD ($)
Real Estate Properties [Line Items]
Land		$ 52,430	$ 48,577
Buildings and improvements		1,108,758	914,286
Construction in progress		353,782	214,719
Total cost		1,514,970	1,177,582
Owned Properties [Member]
Real Estate Properties [Line Items]
Land		51,300	48,577
Buildings and improvements		992,652	886,116
Construction in progress		345,832	213,772
Total cost		1,389,784	1,148,465
Owned Properties [Member] | Suwanee, Georgia (Atlanta-Suwanee) [Member]
Real Estate Properties [Line Items]
Land		3,521	3,521
Buildings and improvements		146,714	138,991
Construction in progress		16,558	6,345
Total cost		166,793	148,857
Owned Properties [Member] | Atlanta, Georgia (Atlanta-Metro) [Member]
Real Estate Properties [Line Items]
Land		15,396	15,397
Buildings and improvements		386,397	356,122
Construction in progress		48,403	22,693
Total cost		$ 450,196	$ 394,212
Owned Properties [Member] | Santa Clara, California [Member]
Real Estate Properties [Line Items]
Land	[1]
Buildings and improvements	[1]	$ 93,895	$ 90,332
Construction in progress	[1]	990	650
Total cost	[1]	94,885	90,982
Owned Properties [Member] | Richmond, Virginia [Member]
Real Estate Properties [Line Items]
Land		2,180	2,180
Buildings and improvements		166,283	127,080
Construction in progress		122,746	71,794
Total cost		291,209	201,054
Owned Properties [Member] | Sacramento, California [Member]
Real Estate Properties [Line Items]
Land		1,481	1,481
Buildings and improvements		61,112	60,094
Construction in progress		302	278
Total cost		62,895	61,853
Owned Properties [Member] | Princeton New Jersey [Member]
Real Estate Properties [Line Items]
Land		20,700	17,976
Buildings and improvements		32,583	35,951
Construction in progress		314	90
Total cost		53,597	54,017
Owned Properties [Member] | Dallas, Texas [Member]
Real Estate Properties [Line Items]
Land		5,808	5,808
Buildings and improvements		70,710	44,053
Construction in progress		113,115	89,982
Total cost		$ 189,633	$ 139,843
Owned Properties [Member] | Chicago, Illinois [Member]
Real Estate Properties [Line Items]
Land
Buildings and improvements
Construction in progress		$ 43,098	$ 21,786
Total cost		43,098	21,786
Owned Properties [Member] | Miami, Florida [Member]
Real Estate Properties [Line Items]
Land		1,777	1,777
Buildings and improvements		30,038	28,786
Construction in progress		306	129
Total cost		32,121	30,692
Owned Properties [Member] | Lenexa, Kansas [Member]
Real Estate Properties [Line Items]
Land		437	437
Buildings and improvements		$ 3,511	3,298
Construction in progress			25
Total cost		$ 3,948	$ 3,760
Owned Properties [Member] | Wichita, Kansas [Member]
Real Estate Properties [Line Items]
Land
Buildings and improvements		$ 1,409	$ 1,409
Construction in progress
Total cost		$ 1,409	$ 1,409
Leased Properties [Member]
Real Estate Properties [Line Items]
Land		1,130
Buildings and improvements		116,106	$ 28,170
Construction in progress		7,950	947
Total cost		$ 125,186	$ 29,117
Leased Properties [Member] | Jersey City, New Jersey [Member]
Real Estate Properties [Line Items]
Land
Buildings and improvements		$ 27,767	$ 27,318
Construction in progress		1,566	920
Total cost		$ 29,333	$ 28,238
Leased Properties [Member] | Overland Park, Kansas [Member]
Real Estate Properties [Line Items]
Land	[2]
Buildings and improvements	[2]	$ 914	$ 852
Construction in progress	[2]		27
Total cost	[2]	$ 914	$ 879
Leased Properties [Member] | Carpathia Properties [Member]
Real Estate Properties [Line Items]
Land	[3]	1,130
Buildings and improvements	[3]	87,425
Construction in progress	[3]	6,384
Total cost	[3]	$ 94,939
Number of facilities leased | property		13

[1] Owned facility subject to long-term ground sublease.

[2] This does not include the portion of the business that is used for QTS office space or other real estate not used by customers.

[3] Includes 13 facilities. All facilities are leased, including those subject to capital leases.

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Noncontrolling Interest (Narrative) (Details)	3 Months Ended			9 Months Ended
	Sep. 30, 2015 shares	Jun. 30, 2015 shares	Mar. 31, 2015 shares	Sep. 30, 2015	Oct. 31, 2014
Quality Tech LP ownership percentage in operating partnership					21.20%
Stock conversion ratio				1
Qualitytech, LP [Member]
Quality Tech LP ownership percentage in operating partnership	14.30%			14.30%
Shares issued		5,750,000	5,000,000
Class A Units [Member]
Units redeemed for common stock	150,000	300,000	230,000

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Interest Rate Derivative Instruments (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Feb. 29, 2012	Feb. 08, 2012
Derivative [Line Items]
Unrealized gains or losses on cash flow hedge derivative effective portion			$ 0	$ 200
Interest expense related to payments on interest rate swaps	$ 5,418	$ 5,410	15,559	9,683
Interest Rate Swap [Member]
Derivative [Line Items]
Derivative instruments, notional amount	0		0
Interest expense related to payments on interest rate swaps	$ 0	$ 200	$ 0	$ 500
Cash Flow Hedging [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative inception date			Feb. 08, 2012
Derivative maturity date			Sep. 28, 2014
Derivative instruments, notional amount					$ 150,000	$ 150,000

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Earnings per Share (Computation of Basic and Diluted Net Income per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Earnings per Share [Abstract]
Net income available to common stockholders - basic	$ 7,009	$ 3,157	$ 15,723	$ 10,445
Effect of net income attributable to noncontrolling interests	1,229	849	3,072	2,810
Net income available to common stockholders - diluted	$ 8,238	$ 4,006	$ 18,795	$ 13,255
Weighted average shares outstanding-basic	40,994,387	29,016,774	36,354,738	29,006,620
Effect of Class A and Class RS partnership units *	6,932,000	7,797,000	7,103,000	7,797,000
Effect of Class O units and options to purchase Class A common stock on an "as if" converted basis	807,000	438,000	724,000	236,000
Weighted average shares outstanding-diluted	48,733,417	37,251,769	44,181,583	37,039,603
Net income per share-basic	$ 0.17	$ 0.11	$ 0.43	$ 0.36
Net income per share-diluted	$ 0.17	$ 0.11	$ 0.43	$ 0.36

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Debt (Lease Narrative) (Details) $ in Thousands	1 Months Ended	3 Months Ended	9 Months Ended	28 Months Ended
	Jun. 30, 2015 USD ($) agreement	Sep. 30, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($) agreement	Dec. 31, 2014 USD ($)
Capital Leased Assets [Line Items]
Capital lease and lease financing obligations		$ 53,023	$ 53,023		$ 13,062
Capital lease and lease financing obligations assumed			43,832
Lease financing obligations		23,400	23,400
Real Property [Member]
Capital Leased Assets [Line Items]
Capital lease and lease financing obligations		17,900	17,900
Carpathia Hosting, Inc. [Member]
Capital Leased Assets [Line Items]
Capital lease and lease financing obligations		29,600	29,600
Capital lease and lease financing obligations assumed		18,000
Number of lease agreements | agreement	2			2
Oustandind financing agreement		2,500	2,500
Deferred gain of lease financing obligations			$ 1,700
Lease financing monthly principal and interest payment				$ 200
Lease financing expiration date			Feb. 28, 2019
Carpathia Hosting, Inc. [Member] | Sale-Leaseback Transaction [Member]
Capital Leased Assets [Line Items]
Capital lease and lease financing obligations assumed		20,900
Oustandind financing agreement		19,200	$ 19,200
Carpathia Hosting, Inc. [Member] | Tenant Improvement Allowance [Member]
Capital Leased Assets [Line Items]
Lease financing obligations		$ 4,800	4,800
Minimum [Member] | Carpathia Hosting, Inc. [Member]
Capital Leased Assets [Line Items]
Lease expiration year	2018
Monthly lease payment	$ 200
Maximum [Member] | Carpathia Hosting, Inc. [Member]
Capital Leased Assets [Line Items]
Lease expiration year	2019
Monthly lease payment	$ 500
Lease financing monthly principal and interest payment			$ 100

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Summary of Significant Accounting Policies (Deferred Financing Costs, Net of Accumulated Amortization) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Summary of Significant Accounting Policies [Abstract]
Deferred financing costs	$ 18,646	$ 18,152
Accumulated amortization	(4,090)	(1,683)
Deferred financing costs, net	$ 14,556	$ 16,469

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Fair Value of Financial Instruments (Narrative) (Details) $ in Millions	Sep. 30, 2015 USD ($)
Senior Notes [Member] | Fair Value Measurements, Level 2 [Member]
Fair Value Of Financial Instruments [Line Items]
Fair value of loan based on current market rates	$ 297.9

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Debt (Tables)

9 Months Ended

Sep. 30, 2015

Debt [Abstract]

Outstanding Debt Excluding Capital Leases

Below is a listing of the Company’s outstanding debt, including capital leases and lease financing obligations, as of September 30, 2015 and December 31, 2014 (in thousands):

	September 30,		December 31,
	2015		2014
	(Unaudited)
Unsecured Credit Facility	$	400,000	$	239,838
Senior Notes, net of discount		297,914		297,729
Richmond Credit Facility		70,000		70,000
Atlanta-Metro Equipment Loan		-		16,600
Capital Lease and Lease Financing Obligations		53,023		13,062
Total	$	820,937	$	637,229

Annual Remaining Principal Payment

The annual remaining principal payment requirements as of September 30, 2015 per the contractual maturities and excluding extension options, capital leases and lease financing obligations, are as follows (in thousands).  The amounts shown do not include the effects of the October 2015 amendment to the unsecured credit facility discussed above:

2015	$	-
2016		-
2017		-
2018		300,000
2019		170,000
Thereafter		300,000
Total	$	770,000

Schedule of Combined Future Payment Obligations, Excluding Interest

The following table summarizes the Company’s combined future payment obligations, excluding interest, as of September 30, 2015, on the capital leases and lease financing obligations above (in thousands):

2015	$	3,262
2016		12,558
2017		12,388
2018		8,804
2019		2,461
Thereafter		13,550
Total	$	53,023

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Partners' Capital, Equity and Incentive Compensation Plans (Summary of Award Activity Under 2010 Equity Incentive Plan and 2013 Equity Incentive Plan and Related Information) (Details) - $ / shares		9 Months Ended	12 Months Ended
		Sep. 30, 2015	Dec. 31, 2014
2013 Equity Incentive Plan [Member] | Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Weighted average fair value		$ 4.10
Weighted average fair value, Granted		8.03
Weighted average fair value, Exercised	[1]	$ 3.71
Weighted average fair value, Released from restriction	[2]
Weighted average fair value, Cancelled/Expired	[3]	$ 3.52
Ending balance, Weighted average fair value		$ 5.53	$ 4.10
Options, Granted		(317,497)	584,949
Options, Exercised	[1]	(12,780)
Options, Released from restriction	[2]
Options, Cancelled/Expired	[3]	(11,407)
Ending balance, Options Outstanding		878,259
Beginning balance, Weighted average exercise price options outstanding		$ 22.87
Weighted average exercise price options outstanding, Granted		36.16
Weighted average exercise price options outstanding, Exercised	[1]	$ 21.55
Weighted average exercise price options outstanding, Released from restriction	[2]
Weighted average exercise price options outstanding, Cancelled/Expired	[3]	$ 21.00
Ending balance, Weighted average exercise price options outstanding		$ 27.72	$ 22.87
2013 Equity Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Number of units		246,785
Number of units, granted		231,722
Number of units, Exercised	[1]	(27,341)
Number of units, Released from restriction	[2]
Number of units, Cancelled/Expired	[3]	(12,278)
Ending balance, Number of units		438,888	246,785
Beginning balance, Weighted average fair value		$ 29.13
Weighted average fair value, Granted		36.72
Weighted average fair value, Exercised	[1]	$ 22.99
Weighted average fair value, Released from restriction	[2]
Weighted average fair value, Cancelled/Expired	[3]	$ 23.64
Ending balance, Weighted average fair value		33.67	$ 29.13
2010 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Weighted average exercise price units		$ 23.49
Weighted average exercise price units, Granted
Weighted average exercise price units, Exercised	[1]	$ 21.78
Weighted average exercise price units, Released from restriction	[2]
Weighted average exercise price units, Cancelled/Expired	[3]
Ending balance, Weighted average exercise price units		$ 23.56	23.49
Beginning balance, Weighted average fair value		$ 3.75
Weighted average fair value, Granted
Weighted average fair value, Exercised	[1]	$ 5.04
Weighted average fair value, Released from restriction	[2]
Weighted average fair value, Cancelled/Expired	[3]
Ending balance, Weighted average fair value		$ 3.70	3.75
Beginning balance, Weighted average exercise price options outstanding		$ 23.49
Weighted average exercise price options outstanding, Granted
Weighted average exercise price options outstanding, Exercised	[1]
Weighted average exercise price options outstanding, Released from restriction	[2]	$ 25.00
Weighted average exercise price options outstanding, Cancelled/Expired	[3]
Ending balance, Weighted average exercise price options outstanding		$ 22.68	$ 23.49
Restricted Class A Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Units surrendered		12,278
Class O Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ending balance, Number of units		500,000
Class O Units [Member] | 2010 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Number of units		1,518,717
Number of units, granted
Number of units, Exercised	[1]	(55,066)
Number of units, Released from restriction	[2]
Number of units, Cancelled/Expired	[3]
Ending balance, Number of units		1,463,651	1,518,717
Class RS Units [Member] | 2010 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Options Outstanding		74,625
Options, Granted
Options, Exercised	[1]
Options, Released from restriction	[2]	(26,062)
Options, Cancelled/Expired	[3]
Ending balance, Options Outstanding		48,563	74,625

[1] This represents the Class A common stock that has been released from restriction and which was not surrendered by the holder to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

[2] This represents Class RS units that upon vesting have converted to Operating Partnership units.

[3] Includes 12,278 restricted Class A common stock surrendered by certain employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

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Debt (Richmond Credit Facility Narrative) (Details) - Richmond Credit Facility [Member] $ in Millions	9 Months Ended
	Sep. 30, 2015 USD ($)
Debt Instrument [Line Items]
Credit facility, maturity date	Jun. 30, 2019
Current revolving credit facility	$ 120
Line of credit facility weighted average interest rate outstanding percentage	2.29%
Maximum [Member]
Debt Instrument [Line Items]
Increased borrowing capacity after considering accordion feature	$ 200
Maximum [Member] | Libor Rate [Member]
Debt Instrument [Line Items]
Leverage ratio	2.85%
Maximum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Leverage ratio	1.85%
Minimum [Member] | Libor Rate [Member]
Debt Instrument [Line Items]
Leverage ratio	2.10%
Minimum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Leverage ratio	1.10%

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Acquisitions (Allocation of the Fair Value of Assets Acquired and Liabilities Assumed as of the Acquisition Date) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Jun. 16, 2015
Business Acquisition [Line Items]
Goodwill	$ 174,697
Carpathia Hosting, Inc. [Member]
Business Acquisition [Line Items]
Land			$ 1,130
Buildings and improvements			78,898
Construction in process			12,127
Acquired intangibles, net			90,947
Net working capital			2,390
Total identifiable assets acquired			185,492
Capital lease and lease financing obligations			43,832
Deferred income taxes			21,673
Total liabilities assumed			65,505
Net identifiable assets acquired			119,987
Goodwill		$ 175,000	174,697
Net assets acquired			$ 294,684

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Partners' Capital, Equity and Incentive Compensation Plans (Summary of Information About Awards Outstanding) (Details)	9 Months Ended
	Sep. 30, 2015 $ / shares shares
Operating Partnership [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	1,512,214
QTS Realty Trust, Inc Awards Outstanding [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	1,317,147
QTS Realty Trust, Inc Awards Outstanding [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	438,888
Remaining term of awards	3 years
QTS Realty Trust, Inc Awards Outstanding [Member] | Options to purchase Class A common stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Lower limit of exercise price | $ / shares	$ 21
Upper limit of exercise price | $ / shares	$ 37.69
Awards Outstanding	878,259
Remaining term of awards	1 year
Class O Units [Member] | Operating Partnership [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Lower limit of exercise price | $ / shares	$ 20
Upper limit of exercise price | $ / shares	$ 25
Awards Outstanding	1,463,651
Remaining term of awards	1 year
Class RS Units [Member] | Operating Partnership [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	48,563
Remaining term of awards	1 year

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Debt (Future Payment Obligations) (Details) $ in Thousands	Sep. 30, 2015 USD ($)
Debt [Abstract]
2015	$ 3,262
2016	12,558
2017	12,388
2018	8,804
2019	2,461
Thereafter	13,550
Total lease obligations	$ 53,023

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Acquisitions

9 Months Ended

Sep. 30, 2015

Acquisitions [Abstract]

Acquisitions

3. Acquisitions

Carpathia Acquisition

On June 16, 2015, the Company completed the acquisition of 100% of the outstanding stock of Carpathia Hosting, Inc. (“Carpathia”), a Virginia-based colocation, cloud and managed services provider for approximately $354.4 million (based on the preliminary assessment of the fair value of assets acquired and liabilities assumed). Upon completion of this acquisition, the Company assumed all of the assets and liabilities of Carpathia Acquisition, Inc. Carpathia Acquisition, Inc. and its subsidiaries, including Carpathia, became indirect, wholly-owned subsidiaries of the Company. Carpathia is  a  provider of colocation, hybrid cloud and Infrastructure-as-a-Service (IaaS) servicing enterprise customers and federal agencies, with a customer base of approximately 230 customers as of June 16, 2015.  Carpathia utilizes eight domestic data centers located in Dulles, Virginia; Phoenix, Arizona; San Jose, California; Harrisonburg, Virginia and Ashburn, Virginia; and five international data centers located in Toronto; Amsterdam; London; Hong Kong and Sydney.

The Company accounted for this acquisition in accordance with ASC 805, Business Combinations, as a business combination. The preliminary purchase price allocation was based on an assessment of the fair value of the assets acquired and liabilities assumed, and excludes acquisition-related costs which in accordance with ASC 805 were expensed as incurred. The Company is valuing the assets acquired and liabilities assumed using Level 3 inputs.

The following table summarizes the consideration for the Carpathia acquisition and the preliminary allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (in thousands). This allocation is subject to change pending the final valuation of these assets and liabilities:

	June 16, 2015
Land	$                1,130
Buildings and improvements	78,898
Construction in process	12,127
Acquired intangibles, net	90,947
Net working capital	2,390
Total identifiable assets acquired	185,492
Capital lease and lease financing obligations	43,832
Deferred income taxes	21,673
Total liabilities assumed	65,505
Net identifiable assets acquired	119,987
Goodwill	174,697
Net assets acquired	$           294,684

Goodwill recognized in the transaction relates primarily to anticipated operating synergies, Carpathia’s in-place workforce and access to Carpathia’s broader customer base. Based on the preliminary purchase price allocation, amortization expenses relative to the intangible assets acquired are expected to be approximately $5.9 million, $11.0 million, $11.0 million, $8.8 million and $6.7 million for the years ended December 31, 2015 through December 31, 2019, respectively.

The following table represents the pro forma condensed consolidated statements of operations of the combined entities for the three-month period ended September 30, 2014, and for the nine-month periods ended September 30, 2015 and 2014 (in thousands):

	(Unaudited) Pro Forma Condensed Consolidated Statements of Operations
	Three Months Ended September 30,	Nine Months Ended September 30,
	2014	2015	2014
Revenue	$                                            78,951	$               285,769	$               218,918
Net income	$                                              1,550	$                 10,901	$                   7,949

These amounts have been calculated after applying the Company’s accounting policies, and give effect to the Carpathia acquisition. The purchase price allocation for this acquisition has been prepared on a preliminary basis.  Accordingly, the purchase accounting adjustments made in connection with the development of the unaudited pro forma consolidated statements of operations are preliminary and subject to change.

The unaudited pro forma condensed consolidated financial information is for comparative purposes only and not necessarily indicative of what actual results of operations of the Company would have been had the transactions noted above been consummated on January 1, 2014, nor does it purport to represent the results of operations for future periods.

Revenue and net income generated by Carpathia entities subsequent to the Company’s acquisition from June 16, 2015 to September 30, 2015 were $25.9 million and $0.7 million, respectively.

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Debt (Atlanta-Metro Equipment Loan Narrative) (Details) - Atlanta-Metro Equipment Loan [Member] - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2015	Apr. 09, 2010
Debt Instrument [Line Items]
Loan agreement amount of loan		$ 25
Loan agreement interest rate		6.85%
Member advances, maturity date	Jun. 01, 2020

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Customer Leases, as Lessor (Tables)

9 Months Ended

Sep. 30, 2015

Customer Leases, as Lessor [Abstract]

Future Minimum Lease Payments to be Received Under Non-Cancelable Operating Customer Leases

Future minimum lease payments to be received under non-cancelable operating customer leases (inclusive of payments for contracts which have not yet commenced, and exclusive of recoveries of operating costs from customers) are as follows for the years ending December 31 (in thousands):

Period Ending December 31,
2015 (Oct - December)	$	79,926
2016		282,466
2017		213,490
2018		142,574
2019		95,281
Thereafter		280,587
Total	$	1,094,324

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Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2015

Earnings per Share [Abstract]

Summary of Basic and Diluted Earnings Per Share

The computation of basic and diluted net income per share is as follows (in thousands, except per share data):

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2015	2014	2015	2014
Numerator:
Net income available to common stockholders - basic	$               7,009	$               3,157	$             15,723	$             10,445
Effect of net income attributable to noncontrolling interests	1,229	849	3,072	2,810
Net income available to common stockholders - diluted	$               8,238	$               4,006	$             18,795	$             13,255
Denominator:
Weighted average shares outstanding - basic	40,994	29,017	36,355	29,007
Effect of Class A and Class RS partnership units *	6,932	7,797	7,103	7,797
Effect of Class O units and options to purchase Class A common stock on an "as if" converted basis *	807	438	724	236
Weighted average shares outstanding - diluted	48,733	37,252	44,182	37,040
Net income per share attributable to common stockholders - basic	$                 0.17	$                 0.11	$                 0.43	$                 0.36
Net income per share attributable to common stockholders - diluted	$                 0.17	$                 0.11	$                 0.43	$                 0.36

* The Class A units, Class RS units and Class O units represent limited partnership interests in the Operating Partnership, and are described in more detail in Note 8.

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Customer Leases, as Lessor (Future Minimum Lease Payments to be Received Under Non-Cancelable Operating Customer Leases) (Details) $ in Thousands	Sep. 30, 2015 USD ($)
Customer Leases, as Lessor [Abstract]
2015 (Oct - December)	$ 79,926
2016	282,466
2017	213,490
2018	142,574
2019	95,281
Thereafter	280,587
Total	$ 1,094,324

XML

Debt (Outstanding Debt Including Capital Leases) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Capital lease and lease financing obligations	$ 53,023	$ 13,062
Total debt and lease obligations	820,937	637,229
Unsecured Credit Facility [Member]
Debt Instrument [Line Items]
Outstanding debt	400,000	239,838
Senior Notes Net of Discount [Member]
Debt Instrument [Line Items]
Outstanding debt	297,914	297,729
Richmond Credit Facility [Member]
Debt Instrument [Line Items]
Outstanding debt	$ 70,000	70,000
Atlanta-Metro Equipment Loan [Member]
Debt Instrument [Line Items]
Outstanding debt		$ 16,600

XML

Description of Business (Narrative) (Details) $ / shares in Units, $ in Millions	1 Months Ended	3 Months Ended
	Jun. 30, 2015 USD ($)	Dec. 31, 2013 USD ($)	Sep. 30, 2015 property $ / shares shares	Dec. 31, 2014 $ / shares shares	Oct. 15, 2013 $ / shares shares
Organization And Description Of Business [Line Items]
Number of properties | property			25
Common stock, par value			$ 0.01	$ 0.01
Common stock, shares issued | shares			41,101,507	29,408,138
Net proceeds from issuance of shares | $		$ 279.0
Ownership interest			85.70%
Common Class A [Member]
Organization And Description Of Business [Line Items]
Common stock, par value					$ 0.01
Common stock, shares issued | shares					14,087,500
Net proceeds from issuance of shares | $	$ 203.4

XML

Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Summary Of Significant Accounting Policies [Line Items]
Useful life of property			40 years
Depreciation expense from operation	$ 17,900	$ 11,900	$ 44,700	$ 32,800
Real estate cost capitalized excluding interest cost	2,700	2,900	8,600	7,500
Real estate interest cost capitalized incurred	2,700	1,300	7,100	4,700
Amortization of Below Market Lease	100		100
Annual amortization for intangible assets for 2015	11,000		11,000
Annual amortization for intangible assets for 2016	11,000		11,000
Amortization of the deferred financing costs			2,372	1,894
Deferred leasing costs, net	14,556		14,556		$ 16,469
Unamortized financing costs write down			100
In Place Leases [Member]
Summary Of Significant Accounting Policies [Line Items]
Amortization of lease costs	400	500	1,300	1,800
Tenant Relationship [Member]
Summary Of Significant Accounting Policies [Line Items]
Amoritzation of intangible assets	2,000	300	3,000	1,000
Platform [Member]
Summary Of Significant Accounting Policies [Line Items]
Amoritzation of intangible assets	800		900
Trade Names [Member]
Summary Of Significant Accounting Policies [Line Items]
Amoritzation of intangible assets		0	300	0
Qualitytech, LP [Member]
Summary Of Significant Accounting Policies [Line Items]
Amortization of the deferred financing costs			2,372	1,894
Real Estate Assets [Member]
Summary Of Significant Accounting Policies [Line Items]
Depreciation expense from operation	15,200	10,300	38,500	28,200
Non-Real Estate Assets [Member]
Summary Of Significant Accounting Policies [Line Items]
Depreciation expense from operation	$ 2,700	$ 1,600	$ 6,200	4,600
Minimum [Member] | Real Property [Member]
Summary Of Significant Accounting Policies [Line Items]
Useful life of property			20 years
Maximum [Member] | Real Property [Member]
Summary Of Significant Accounting Policies [Line Items]
Useful life of property			40 years
Maximum [Member] | Leasehold Improvements [Member]
Summary Of Significant Accounting Policies [Line Items]
Useful life of property			20 years
Unsecured Credit Facility [Member]
Summary Of Significant Accounting Policies [Line Items]
Amortization of the deferred financing costs			$ 2,400	$ 1,700
Senior Notes [Member]
Summary Of Significant Accounting Policies [Line Items]
Interest rate	5.875%		5.875%
Senior notes due			2022
Princeton Facility [Member]
Summary Of Significant Accounting Policies [Line Items]
Deferred leasing costs, net					$ 2,900

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation – The accompanying financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

The accompanying financial statements are presented for both QTS Realty Trust, Inc. and QualityTech, LP. References to “QTS” mean QTS Realty Trust, Inc. and its controlled subsidiaries; and references to the “Operating Partnership” mean QualityTech, LP and its controlled subsidiaries.

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 is the sole general partner of the Operating Partnership, and its only material asset consists of its ownership interest in 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 the business through its operations, the direct or indirect incurrence of indebtedness, and the issuance of partnership units. As general partner with control of the Operating Partnership, QTS consolidates the Operating Partnership for financial reporting purposes.

The Company believes, therefore, that 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 applies to both QTS and the Operating Partnership; and

· creates time and cost efficiencies through the preparation of one set of notes instead of two separate sets of notes.

In addition, in light of these combined notes, the Company believes 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. 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. The Operating Partnership’s capital includes general and limited common units that are owned by QTS and the other partners. QTS' stockholders’ equity includes common stock, additional paid in capital, accumulated other comprehensive income (loss) and accumulated dividends in excess of earnings. The remaining equity is the portion of net assets that are retained by partners other than QTS, referred to as noncontrolling interests. The primary difference in QTS' Statements of Operations and Comprehensive Income (Loss) 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. These combined notes refer to actions or holdings as being actions or holdings of “the Company.” Although the Operating Partnership is generally the entity that enters into contracts, holds assets and issues debt, management believes that these general references to “the Company” in this context is appropriate because the business is one enterprise operated through the Operating Partnership.

As discussed above, QTS owns no operating assets and has no operations independent of the Operating Partnership and its subsidiaries. Also, the Operating Partnership owns no operating assets and has no operations independent of its subsidiaries. Obligations under the 5.875% Senior Notes due 2022 and the unsecured credit facility, both discussed in Note 5, are fully, unconditionally, and jointly and severally guaranteed by the Operating Partnership’s existing subsidiaries,other than QTS Finance Corporation, the co-issuer of the 5.875% Senior Notes due 2022.  As such, condensed consolidating financial information for the guarantors is not being presented in the notes to the interim condensed consolidated financial statements.  However, the indenture governing the 5.875% Senior Notes due 2022 restricts the ability of the Operating Partnership to make distributions to QTS, subject to certain exceptions, including distributions required in order for QTS to maintain its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

The interim condensed consolidated financial statements of QTS Realty Trust, Inc. for the three and nine months ended September 30, 2015 and 2014, and as of September 30, 2015 and December 31, 2014 present the accounts of QTS Realty Trust, Inc. and its majority owned subsidiaries. This includes the operating results of the Operating Partnership for all periods presented. 

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets, allowances for doubtful accounts and deferred tax assets and the valuation of derivatives, real estate assets, acquired intangible assets and certain accruals.

Principles of Consolidation – The consolidated financial statements of QTS Realty Trust, Inc. include the accounts of QTS Realty Trust, Inc. and its majority-owned subsidiaries. The consolidated financial statements of QualityTech, LP include the accounts of QualityTech, LP and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in the financial statements.

Real Estate Assets – Real estate assets are reported at cost. All capital improvements for the income-producing properties that extend their useful lives are capitalized to individual property improvements and depreciated over their estimated useful lives. Depreciation is generally provided on a straight-line basis over 40 years from the date the property was placed in service. Property improvements are depreciated on a straight-line basis over the life of the respective improvement ranging from 20 to 40 years from the date the components were placed in service. Leasehold improvements are depreciated over the lesser of 20 years or through the end of the respective life of the lease. Repairs and maintenance costs are expensed as incurred. For the three months ended September 30, 2015, depreciation expense related to real estate assets and non-real estate assets was $15.2 million and $2.7 million, respectively, for a total of $17.9 million.  For the three months ended September 30, 2014, depreciation expense related to real estate assets and non-real estate assets was $10.3 million and $1.6 million, respectively, for a total of $11.9 million. For the nine months ended September 30, 2015, depreciation expense related to real estate assets and non-real estate assets was $38.5 millionand $6.2 million, respectively, for a total of $44.7 million.  For thenine months ended September 30, 2014, depreciation expense related to real estate assets and non-real estate assets was $28.2 millionand $4.6 million, respectively, for a total of $32.8 million. The Company capitalizes certain development costs, including internal costs incurred in connection with development. The capitalization of costs during the construction period (including interest and related loan fees, property taxes and other direct and indirect costs) begins when development efforts commence and ends when the asset is ready for its intended use. Capitalization of such costs, excluding interest, aggregated to $2.7 million and$2.9 million for thethree months ended September 30, 2015 and 2014, respectively,  and $8.6 million and$7.5 million for the nine months ended September 30, 2015 and 2014, respectively. Interest is capitalized during the period of development by first applying the Company’s actual borrowing rate on the related asset and second, to the extent necessary, by applying the Company’s weighted average effective borrowing rate to the actual development and other costs expended during the construction period. Interest is capitalized until the property is ready for its intended use. Interest costs capitalized totaled $2.7 million and $1.3 million for the three months ended September 30, 2015 and 2014, respectively,  and $7.1 million and $4.7 million for the nine months ended September 30, 2015 and 2014, respectively.  

Acquisitions – Acquisitions of real estate and other entities are either accounted for as asset acquisitions or business combinations depending on facts and circumstances. Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired in accordance with the accounting requirements of ASC 805, Business Combinations, which requires the recording of net assets of acquired businesses at fair value. The fair value of the consideration transferred is allocated to the acquired tangible assets, consisting primarily of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, value of in-place leases, value of customer relationships, trade names, software intangibles and capital leases.  The excess of the fair value of liabilities assumed, common stock issued and cash paid over the fair value of identifiable assets acquired is allocated to goodwill, which is not amortized by the Company.

In developing estimates of fair value of acquired assets and assumed liabilities, management analyzed a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, particularly with respect to the intangible assets.

Acquired in-place leases are amortized as amortization expense on a straight-line basis over the remaining life of the underlying leases. Amortization of acquired in place lease costs totaled $0.4 million and $0.5 million for the three months ended September 30, 2015 and 2014, respectively,  and $1.3 million and$1.8 million for thenine months ended September 30, 2015 and 2014, respectively.  This amortization expense is accounted for as real estate amortization expense.

Acquired customer relationships are amortized as amortization expense on a straight-line basis over the expected life of the customer relationship. Amortization of acquired customer relationships totaled $2.0 million and$0.3 million for the three months ended September 30, 2015 and 2014, respectively,  and $3.0 million and $1.0 million for the nine months ended September 30, 2015 and 2014, respectively.  This amortization expense is accounted for as real estate amortization expense.

Other acquired intangible assets, which includes platform, above or below market leases, and tradename intangibles, are amortized on a straight-line basis over their respective expected lives. Platform and trade name intangibles are amortized as amortization expense.  Platform amortization expense was $0.8 million and $0.9 million for the three and nine months ended September 30, 2015, respectively.  Trade name amortization expense was $0.3 million for the three and nine months September 30, 2015. Above or below market leases are amortized as rent expense, which totaled $0.1 million for both the three and nine months ended September 30, 2015. There was no amortization expense or rent expense related to platform, trade name, and above or below market lease intangibles for the three and nine months ended September 30, 2014. The expense associated with above and below market leases and trade name intangibles is accounted for as real estate expense, whereas the expense associated with the amortization of platform intangibles is accounted for as non-real estate expense.

See Note 3 for discussion of the preliminary purchase price allocation for the acquisition of Carpathia Hosting, Inc. (“Carpathia”) on June 16, 2015.  

Impairment of Long-Lived and Intangible Assets – The Company reviews its long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is generally measured by comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset group. If the net carrying value of the asset exceeds the value of the undiscounted cash flows, the fair value of the asset is assessed and may be considered impaired. An impairment loss is recognized based on the excess of the carrying amount of the impaired asset over its fair value. No impairment losses were recorded for the three and nine months ended September 30, 2015 and 2014, respectively.

As a result of the Carpathia acquisition, the Company recognized approximately $175 million in goodwill.  The fair value of goodwill is the consideration transferred which is not allocable to identifiable intangible and tangible assets.  The Company believes that it has one reporting unit for goodwill purposes, and will assess goodwill for impairment annually on October 1 on that basis.

Cash and Cash Equivalents – The Company considers all demand deposits and money market accounts purchased with a maturity date of three months or less at the date of purchase to be cash equivalents. The Company’s account balances at one or more institutions periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is concentration of credit risk related to amounts on deposit in excess of FDIC coverage. The Company mitigates this risk by depositing a majority of its funds with several major financial institutions. The Company also has not experienced any losses and, therefore, does not believe that the risk is significant.

Deferred Costs – Deferred costs, net, on the Company’s balance sheets include both financing costs and leasing costs.

Deferred financing costs represent fees and other costs incurred in connection with obtaining debt and are amortized over the term of the loan and are included in interest expense. Amortization of the deferred financing costs was $0.8 million and $0.5 million for the  three months ended September 30, 2015 and 2014, respectively, and $2.4 million and$1.7 million for the nine months ended September 30, 2015 and 2014, respectively. During the three months ended September 30, 2014, the Company wrote off unamortized financing costs of $0.5 million primarily in connection with paying down $75 million of its unsecured credit facility term loan.  No unamortized financing costs were written off during the three months ended September 30, 2015.  During the nine months ended September 30, 2015, the Company wrote off unamortized financing costs of $0.1 million in connection with the repayment of the Atlanta Metro equipment loan in June 2015, as discussed in Note 5.  During the nine months ended September 30, 2014, in addition to the aforementioned $0.5 million write off, the Company wrote off unamortized financing costs of $0.1 million in connection with the modification of its credit facility that is secured by the Richmond data center.  Deferred financing costs, net of accumulated amortization are as follows:

	September 30,			December 31,
(dollars in thousands)	2015		2014
	(unaudited)
Deferred financing costs	$	18,646	$	18,152
Accumulated amortization		(4,090)		(1,683)
Deferred financing costs, net	$	14,556	$	16,469

Deferred leasing costs consist of external fees and internal costs incurred in the successful negotiations of leases and are deferred and amortized over the terms of the related leases on a straight-line basis. If an applicable lease terminates prior to the expiration of its initial term, the carrying amount of the costs are written off to amortization expense. Amortization of deferred leasing costs totaled $3.1 million and $2.5 million for the three months ended September 30, 2015 and 2014, respectively, and $8.6 million and$6.7 million for thenine months ended September 30, 2015 and 2014, respectively.Deferred leasing costs, net of accumulated amortization are as follows (excluding $2.9 million, net of amortization, related to a leasing arrangement at the Company’s Princeton facility in 2014):

	September 30,		December 31,
(dollars in thousands)	2015		2014
	(unaudited)
Deferred leasing costs	$	35,652	$	26,799
Accumulated amortization		(14,565)		(9,378)
Deferred leasing costs, net	$	21,087	$	17,421

Advance Rents and Security Deposits – Advance rents, typically prepayment of the following month’s rent, consist of payments received from customers prior to the time they are earned and are recognized as revenue in subsequent periods when earned. Security deposits are collected from customers at the lease origination and are generally refunded to customers upon lease expiration.

Deferred Income – Deferred income generally results from non-refundable charges paid by the customer at lease inception to prepare their space for occupancy. The Company records this initial payment, commonly referred to as set-up fees, as a deferred income liability which amortizes into rental revenue over the term of the related lease on a straight-line basis. Deferred income was $25.0 million and $10.5 million as of September 30, 2015 and December 31, 2014, respectively. Additionally,  $1.5 million and $1.1 million of deferred income was amortized into revenue for the three months ended September 30, 2015 and 2014, respectively, and $4.1 million and$3.5 million for thenine months ended September 30, 2015 and 2014, respectively.

Interest Rate Derivative Instruments – The Company utilizes derivatives to manage its interest rate exposure. During February 2012, the Company entered into interest rate swaps with a notional amount of $150 million which were cash flow hedges and qualified for hedge accounting. For these hedges, the effective portion of the change in fair value was recognized through other comprehensive income or loss. Amounts were reclassified out of other comprehensive income (loss) as the hedged item was recognized in earnings, either for ineffectiveness or for amounts paid relating to the hedge. The Company reflected all changes in the fair value of the swaps in other comprehensive income (loss) during the three and nine months ended September 30, 2014, as there was no ineffectiveness recorded in that period. The Company had no interest rate swaps outstanding at September 30, 2015 and December 31, 2014.

Equity-based Compensation – All equity-based compensation is measured at fair value on the grant date or date of modification, as applicable, and recognized in earnings over the requisite service period. Depending upon the settlement terms of the awards, all or a portion of the fair value of equity-based awards may be presented as a liability or as equity in the consolidated balance sheets. Equity-based compensation costs are measured based upon their estimated fair value on the date of grant or modification. Equity-based compensation expense net of forfeited and repurchased awards was $2.1 million and $0.9 million for the three months ended September 30, 2015 and 2014, respectively, and $5.2 million and $2.9 million for the nine months ended September 30, 2015 and 2014,  respectively.

Rental Revenue – The Company, as a lessor, has retained substantially all of the risks and benefits of ownership and accounts for its leases as operating leases. For lease agreements that provide for scheduled rent increases, rental income is recognized on a straight-line basis over the non-cancellable term of the leases, which commences when control of the space has been provided to the customer. The amount of the straight-line rent receivable on the balance sheets included in rents and other receivables, net was $7.3 million and$4.0 million as of September 30, 2015 and December 31, 2014, respectively. Rental revenue also includes amortization of set-up fees which are amortized over the term of the respective lease as discussed above.

Cloud and Managed Services Revenue – The Company may provide both its cloud product and use of its managed services to its customers on an individual or combined basis. Service fee revenue is recognized as the revenue is earned, which generally coincides with the services being provided.

Allowance for Uncollectible Accounts Receivable – Rents receivable are recognized when due and are carried at cost, less an allowance for doubtful accounts. The Company records a provision for losses on rents receivable equal to the estimated uncollectible accounts, which is based on management’s historical experience and a review of the current status of the Company’s receivables. As necessary, the Company also establishes an appropriate allowance for doubtful accounts for receivables arising from the straight-lining of rents. The aggregate allowance for doubtful accounts was $5.3 million and $3.7 million as of September 30, 2015 and December 31, 2014, respectively.

Capital Leases and Lease Financing Obligations – The Company evaluates leased real estate to determine whether the lease should be classified as a capital or operating lease in accordance with U.S GAAP.

The Company periodically enters into capital leases for certain equipment. In addition, through its acquisition of Carpathia Hosting, Inc. on June 16, 2015, the Company is now party to capital leases for property and equipment, as well as financing obligations related to a sale-leaseback transaction. The outstanding liabilities for the capital leases were $29.6 million and $13.1 million as of September 30, 2015 and December 31, 2014, respectively. The outstanding liabilities for the lease financing obligations were $23.4 million as of September 30, 2015.  The value of the assets associated with these leases approximates the outstanding obligations as of September 30, 2015 and December 31, 2014, respectively. Depreciation related to the associated assets is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.  

See Note 3 for further discussion of the acquisition of Carpathia and Note 5 for further discussion of capital leases and lease financing obligations.

Recoveries from Customers – Certain customer leases contain provisions under which the customers reimburse the Company for a portion of the property’s real estate taxes, insurance and other operating expenses, which include certain power and cooling-related charges. The reimbursements are included in revenue as recoveries from customers in the Statements of Operations and Comprehensive Income in the period the applicable expenditures are incurred. Certain customer leases are structured to provide a fixed monthly billing amount that includes an estimate of various operating expenses, with all revenue from such leases included in rental revenues.

Segment Information – The Company manages its business as one operating segment and thus one reportable segment consisting of a portfolio of investments in data centers located primarily in the United States with others in Canada, Europe and the Asia-Pacific region.  

Customer Concentrations – As of September 30, 2015,  one of the Company’s customers represented 8.2% of its total monthly rental revenue. No other customers exceeded 5% of total monthly rental revenue.  

As of September 30, 2015,  three of the Company’s customers exceeded 5% of total accounts receivable. In aggregate, these three customers accounted for 40% of total accounts receivable. Two of these three customers individually exceeded 10% of total accounts receivable.

Income Taxes  –The Company elected for three of its existing subsidiaries to be taxed as taxable REIT subsidiaries pursuant to the REIT rules of the U.S. Internal Revenue Code.

For the taxable REIT subsidiaries, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

As of December 31, 2014, one of the taxable REIT subsidiaries’ deferred tax assets were primarily the result of U.S. net operating loss carryforwards. A valuation allowance was recorded against its gross deferred tax asset balance as of December 31, 2014. As a result of the acquisition of Carpathia, the Company has determined that it is more likely than not that pre-existing deferred tax assets will be realized by the combined entity, and the valuation allowance was eliminated. The change in the valuation allowance resulting from the change in circumstances is included in income, recognized in deferred income tax benefit in the three and nine months ended September 30, 2015.

In addition to the deferred income tax benefit recognized in connection with the elimination of the valuation allowance, a deferred tax benefit is being recognized in the third quarter and nine months ended September 30, 2015 in connection with recorded operating losses.  The taxable REIT subsidiary consolidated group has a net deferred tax liability position primarily due to the customer-based intangibles acquired as part of the Carpathia acquisition. 

The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as the operating performance of the taxable REIT subsidiary, tax law changes and future business acquisitions. The Company’s effective tax rates were 28.4% and 0% for the nine months ended September 30, 2015 and 2014, respectively.  The increase in the effective tax rate is primarily due to the elimination of the valuation allowance as a result of the Carpathia acquisition, as well as recorded operating losses in the current year.

Fair Value Measurements – ASC Topic 820, Fair Value Measurements, emphasizes that fair-value is a market-based measurement, not an entity-specific measurement. Therefore, a fair-value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair-value measurements, a fair-value hierarchy is established that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the level in the fair-value hierarchy within which the entire fair-value measurement falls is based on the lowest level input that is significant to the fair-value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

As the Company’s previous interest rate swaps matured on September 28, 2014, there are no financial assets or liabilities measured at fair value on a recurring basis on the consolidated balance sheets as of September 30, 2015 and December 31, 2014.  The Company’s purchase price allocation of Carpathia is a fair value estimate that utilized Level 3 inputs and is measured on a non-recurring basis.  See Note 3 for further detail.

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the current revenue recognition requirements in ASC 606, Revenue Recognition. Under this new guidance, entities should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This ASU also requires enhanced disclosures. In July 2015, the FASB finalized its decision to delay the effective date of the amendments in this ASU by one year, and as such, they are effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted; however, entities are not permitted to adopt the standard earlier than December 15, 2016, the original effective date. Retrospective and modified retrospective application is allowed. The Company is currently assessing the impact of this standard on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and not as a separate deferred charge. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. In June 2015, the Securities and Exchange Commission (“SEC”) stated that given the absence of authoritative guidance within this ASU for debt issuance costs related to revolving debt arrangements, the SEC staff would not object to an entity deferring and presenting such costs as an asset and subsequently amortizing them ratably over the term of the revolving debt arrangement. This announcement confirms that revolver arrangement costs are not within the scope of this ASU. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The amendments are required to be applied on a retrospective basis, and upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. Adoption of this standard will affect the Company’s Consolidated Balance Sheets.

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” that eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The amendments in this ASU are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, and should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company is currently assessing the impact of this standard on its consolidated financial statements.

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Summary of Significant Accounting Policies (Additional Information 1) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Jun. 30, 2015	Jun. 16, 2015	Dec. 31, 2014	Feb. 29, 2012	Feb. 08, 2012
Summary Of Significant Accounting Policies [Line Items]
Impairment losses	$ 0	$ 0	$ 0	$ 0
Goodwill	174,697		174,697
Amortization of the deferred financing costs			2,372	1,894
Written off unamortized debt cost	0
Amortization of deferred leasing costs totaled	3,100	2,500	8,600	6,700
Deferred income	25,046		25,046				$ 10,531
Amortization of deferred revenue	1,500	1,100	4,100	3,500
Company recorded equity-based compensation expense net of repurchased awards and forfeits	2,100	900	5,200	2,900
Amount of the straight-line rent receivable on the balance sheets included in rents and other receivables	7,300		7,300				$ 4,000
Unsecured Revolving Credit Facility [Member]
Summary Of Significant Accounting Policies [Line Items]
Amortization of the deferred financing costs	800	500
Richmond Credit Facility [Member]
Summary Of Significant Accounting Policies [Line Items]
Written off unamortized cost related to assets securitization				100
Interest Rate Swap [Member]
Summary Of Significant Accounting Policies [Line Items]
Notional amount of derivative	$ 0		0
Derivative ineffectiveness		0		0
Interest Rate Swap [Member] | Cash Flow Hedging [Member]
Summary Of Significant Accounting Policies [Line Items]
Notional amount of derivative								$ 150,000	$ 150,000
Carpathia Hosting, Inc. [Member]
Summary Of Significant Accounting Policies [Line Items]
Goodwill					$ 175,000	$ 174,697
Unsecured Credit Facility [Member]
Summary Of Significant Accounting Policies [Line Items]
Amortization of the deferred financing costs			$ 2,400	$ 1,700
Written off unamortized debt cost		500
Repayment of credit facility		$ 75,000

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Debt (Unsecured Credit Facility Narrative) (Details) - USD ($)		1 Months Ended		3 Months Ended	9 Months Ended		12 Months Ended
	Dec. 31, 2014	Oct. 31, 2015	Jul. 31, 2014	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2015	Dec. 31, 2013	Oct. 01, 2015
Term Loan [Member]
Debt Instrument [Line Items]
Letter of credit outstanding					$ 100,000,000	$ 100,000,000
Richmond Credit Facility [Member]
Debt Instrument [Line Items]
Current revolving credit facility					$ 120,000,000	$ 120,000,000
Line of credit facility weighted average interest rate outstanding percentage					2.29%	2.29%
Letter of Credit [Member]
Debt Instrument [Line Items]
Letter of credit outstanding					$ 2,500,000	$ 2,500,000
Line of credit facility weighted average interest rate outstanding percentage					1.89%	1.89%
Unsecured Credit Facility [Member]
Debt Instrument [Line Items]
Letter of credit outstanding					$ 300,000,000	$ 300,000,000
Subsequent Event [Member] | Term Loan Maturing April 27, 2021 [Member]
Debt Instrument [Line Items]
Maturity date		Apr. 27, 2021
Subsequent Event [Member] | Term Loan Maturing December 20, 2020 [Member]
Debt Instrument [Line Items]
Maturity date		Dec. 17, 2020
Subsequent Event [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Letter of credit outstanding								$ 2,000,000
Subsequent Event [Member] | Unsecured Credit Facility [Member]
Debt Instrument [Line Items]
Line of credit facility accordion feature		$ 200,000,000
Minimum [Member] | Richmond Credit Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Leverage ratio					1.10%	1.10%
Minimum [Member] | Subsequent Event [Member] | Term Loan [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		1.50%
Minimum [Member] | Subsequent Event [Member] | Term Loan [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		0.50%
Minimum [Member] | Subsequent Event [Member] | Revolving Credit Facility [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		1.55%
Minimum [Member] | Subsequent Event [Member] | Revolving Credit Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		0.55%
Maximum [Member] | Richmond Credit Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Leverage ratio					1.85%	1.85%
Maximum [Member] | Subsequent Event [Member] | Term Loan [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		2.10%
Maximum [Member] | Subsequent Event [Member] | Term Loan [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		1.10%
Maximum [Member] | Subsequent Event [Member] | Revolving Credit Facility [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		2.15%
Maximum [Member] | Subsequent Event [Member] | Revolving Credit Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate		1.15%
Unsecured Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility agreement date							May 01, 2013
Credit facility maximum borrowing capacity	$ 650,000,000				$ 650,000,000	$ 650,000,000	$ 575,000,000
Maximum the credit facility may be increased up until					850,000,000	850,000,000
Repayment of debt				$ 75,000,000
Unsecured Credit Facility [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity			$ 150,000,000		$ 100,000,000	$ 100,000,000	$ 225,000,000
Unsecured credit facility term	5 years				5 years		5 years
Maturity date						Dec. 17, 2019
Repayment of debt			$ 75,000,000
Unsecured Credit Facility [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 550,000,000				$ 550,000,000	$ 550,000,000	$ 350,000,000
Unsecured credit facility term	4 years				4 years		4 years
Debt extension period	1 year				1 year		1 year
Line of credit facility accordion feature							$ 100,000,000
Maturity date						Dec. 17, 2018
Unsecured Credit Facility [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity					$ 30,000,000	$ 30,000,000
Unsecured Credit Facility [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity		$ 900,000,000
Increase the amount of line of credit facility		250,000,000
Unsecured Credit Facility [Member] | Subsequent Event [Member] | Term Loan Maturing April 27, 2021 [Member]
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity		150,000,000
Unsecured Credit Facility [Member] | Subsequent Event [Member] | Term Loan Maturing December 20, 2020 [Member]
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity		150,000,000
Unsecured Credit Facility [Member] | Subsequent Event [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity		$ 600,000,000

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Related Party Transactions (Summary of Related Party Transactions) (Details) - Affiliated Entity [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Related Party Transaction [Line Items]
Tax, utility, insurance and other reimbursement	$ 63	$ 296	$ 208	$ 464
Rent expense	254	253	761	772
Capital assets acquired	38	86	163	160
Total	$ 355	$ 635	$ 1,132	$ 1,396

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BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Real Estate Assets
Land	$ 52,430	$ 48,577
Buildings and improvements	1,108,758	914,286
Less: Accumulated depreciation	(222,373)	(180,167)
Total real estate assets	938,815	782,696
Construction in progress	353,782	214,719
Real Estate Assets, net	1,292,597	997,415
Cash and cash equivalents	10,730	10,788
Rents and other receivables, net	31,024	15,579
Acquired intangibles, net	119,402	18,000
Deferred costs, net	38,522	37,058
Prepaid expenses	9,074	3,079
Goodwill	174,697
Other assets, net	29,445	24,640
TOTAL ASSETS	1,705,491	1,106,559
LIABILITIES
Mortgage notes payable	70,000	86,600
Unsecured credit facility	400,000	239,838
Senior notes, net of discount	297,914	297,729
Capital lease and lease financing obligations	53,023	13,062
Accounts payable and accrued liabilities	80,893	64,607
Dividends and distributions payable	15,349	10,705
Advance rents, security deposits and other liabilities	19,079	3,302
Deferred income taxes	15,634
Deferred income	25,046	10,531
TOTAL LIABILITIES	976,938	726,374
EQUITY
Common stock, $0.01 par value, 450,133,000 shares authorized, 41,101,507 and 29,408,138 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively	412	294
Additional paid-in capital	668,246	324,917
Accumulated dividends in excess of earnings	(44,142)	(22,503)
Total stockholders' equity	624,516	302,708
Noncontrolling interests	104,037	77,477
TOTAL EQUITY	728,553	380,185
TOTAL LIABILITIES AND EQUITY	1,705,491	1,106,559
Qualitytech, LP [Member]
Real Estate Assets
Land	52,430	48,577
Buildings and improvements	1,108,758	914,286
Less: Accumulated depreciation	(222,373)	(180,167)
Total real estate assets	938,815	782,696
Construction in progress	353,782	214,719
Real Estate Assets, net	1,292,597	997,415
Cash and cash equivalents	10,730	10,788
Rents and other receivables, net	31,024	15,579
Acquired intangibles, net	119,402	18,000
Deferred costs, net	38,522	37,058
Prepaid expenses	9,074	3,079
Goodwill	174,697
Other assets, net	29,445	24,640
TOTAL ASSETS	1,705,491	1,106,559
LIABILITIES
Mortgage notes payable	70,000	86,600
Unsecured credit facility	400,000	239,838
Senior notes, net of discount	297,914	297,729
Capital lease and lease financing obligations	53,023	13,062
Accounts payable and accrued liabilities	80,893	64,607
Dividends and distributions payable	15,349	10,705
Advance rents, security deposits and other liabilities	19,079	3,302
Deferred income taxes	15,634
Deferred income	25,046	10,531
TOTAL LIABILITIES	976,938	726,374
EQUITY
Partners' capital	728,553	380,185
TOTAL LIABILITIES AND EQUITY	$ 1,705,491	$ 1,106,559

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Debt (Annual Remaining Principal Payment) (Details) $ in Thousands	Sep. 30, 2015 USD ($)
Debt [Abstract]
2015
2016
2017
2018	$ 300,000
2019	170,000
Thereafter	300,000
Total	$ 770,000

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STATEMENTS OF CASH FLOW (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flow from operating activities:
Net income	$ 18,795	$ 13,255
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	57,347	40,070
Amortization of deferred loan costs	2,372	1,894
Amortization of senior notes discount	184	38
Equity-based compensation expense	5,206	2,901
Bad debt expense	640	402
Write off of deferred loan costs	83	580
Deferred tax benefit	(5,695)
Changes in operating assets and liabilities
Rents and other receivables, net	(2,382)	104
Prepaid expenses	(4,713)	(2,245)
Other assets	(352)	596
Accounts payable and accrued liabilities	(2,427)	(7,833)
Advance rents, security deposits and other liabilities	(437)	(44)
Deferred income	3,698	1,637
Net cash provided by operating activities	72,319	51,355
Cash flow from investing activities:
Acquisitions, net of cash acquired	(288,865)	(91,064)
Additions to property and equipment	(252,156)	(156,008)
Cash used in investing activities	(541,021)	(247,072)
Cash flow from financing activities:
Credit facility proceeds	420,162	230,500
Senior Notes proceeds		297,633
Debt repayment	(260,000)	(290,000)
Payment of deferred financing costs	(577)	(9,648)
Payment of cash dividend	(32,756)	(23,783)
Distribution to noncontrolling interest	(6,652)	(6,932)
Principal payments on capital lease obligation	(4,415)	(553)
Mortgage principal debt repayments	(16,600)	(1,665)
Equity proceeds, net of costs	369,482
Net cash provided by financing activities	468,644	195,552
Net decrease in cash and cash equivalents	(58)	(165)
Cash and cash equivalents, beginning of period	10,788	5,210
Cash and cash equivalents, end of period	10,730	5,045
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	17,785	4,599
Noncash investing and financing activities:
Accrued capital additions	48,540	36,381
Capital lease and lease financing obligations assumed	43,832
Qualitytech, LP [Member]
Cash flow from operating activities:
Net income	18,795	13,255
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	57,347	40,070
Amortization of deferred loan costs	2,372	1,894
Amortization of senior notes discount	184	38
Equity-based compensation expense	5,206	2,901
Bad debt expense	640	402
Write off of deferred loan costs	83	580
Deferred tax benefit	(5,695)
Changes in operating assets and liabilities
Rents and other receivables, net	(2,382)	104
Prepaid expenses	(4,713)	(2,245)
Other assets	(352)	596
Accounts payable and accrued liabilities	(2,427)	(7,833)
Advance rents, security deposits and other liabilities	(437)	(44)
Deferred income	3,698	1,637
Net cash provided by operating activities	72,319	51,355
Cash flow from investing activities:
Acquisitions, net of cash acquired	(288,865)	(91,064)
Additions to property and equipment	(252,156)	(156,008)
Cash used in investing activities	(541,021)	(247,072)
Cash flow from financing activities:
Credit facility proceeds	420,162	230,500
Senior Notes proceeds		297,633
Debt repayment	(260,000)	(290,000)
Payment of deferred financing costs	(577)	(9,648)
Payment of cash dividend	(32,756)	(23,783)
Partnership distributions	(6,652)	(6,932)
Principal payments on capital lease obligation	(4,415)	(553)
Mortgage principal debt repayments	(16,600)	$ (1,665)
Equity proceeds, net of costs	369,482
Net cash provided by financing activities	468,644	$ 195,552
Net decrease in cash and cash equivalents	(58)	(165)
Cash and cash equivalents, beginning of period	10,788	5,210
Cash and cash equivalents, end of period	10,730	5,045
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	17,785	4,599
Noncash investing and financing activities:
Accrued capital additions	48,540	$ 36,381
Capital lease and lease financing obligations assumed	$ 43,832

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Summary of Significant Accounting Policies (Additional Information 2) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($) segment	Sep. 30, 2014	Dec. 31, 2014 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Capital lease obligations	$ 29,600		$ 13,100
Lease financing obligations	$ 23,400
Number of operating segments | segment	1
Number of reportable segments | segment	1
Financial assets	$ 0		0
Financial liability	$ 0		0
Effective Income Tax Rate Reconciliation, Percent	28.40%	0.00%
Accounts Receivable [Member]
Summary Of Significant Accounting Policies [Line Items]
Aggregate allowance for doubtful accounts	$ 5,300		$ 3,700
Customer One [Member] | Rental Revenue [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of total revenue	8.20%
Customer Two [Member] | Accounts Receivable [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of total accounts receivable	10.00%
Three Customers [Member] | Accounts Receivable [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of total accounts receivable	5.00%
Other Customers [Member] | Rental Revenue [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of total revenue	5.00%
Five Customers [Member] | Accounts Receivable [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of total accounts receivable	40.00%

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2015

Summary of Significant Accounting Policies [Abstract]

Deferred Financing Costs, Net of Accumulated Amortization

Deferred financing costs, net of accumulated amortization are as follows:

	September 30,			December 31,
(dollars in thousands)	2015		2014
	(unaudited)
Deferred financing costs	$	18,646	$	18,152
Accumulated amortization		(4,090)		(1,683)
Deferred financing costs, net	$	14,556	$	16,469

Deferred Leasing Costs, Net of Accumulated Amortization

Deferred leasing costs, net of accumulated amortization are as follows (excluding $2.9 million, net of amortization, related to a leasing arrangement at the Company’s Princeton facility in 2014):

	September 30,		December 31,
(dollars in thousands)	2015		2014
	(unaudited)
Deferred leasing costs	$	35,652	$	26,799
Accumulated amortization		(14,565)		(9,378)
Deferred leasing costs, net	$	21,087	$	17,421

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Acquisitions (Narrative) (Details)		3 Months Ended	9 Months Ended
	Jun. 16, 2015 USD ($) property customer	Sep. 30, 2015 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Jul. 23, 2014 USD ($)
Business Acquisition [Line Items]
Ownership interest		85.70%	85.70%
Amoritization of intangible assets in the remainder of the year		$ 5,900,000	$ 5,900,000
Amoritization of intangible assets in 2016		11,000,000	11,000,000
Amoritization of intangible assets in 2017		11,000,000	11,000,000
Amoritization of intangible assets in 2018		8,800,000	8,800,000
Amoritization of intangible assets in 2019		6,700,000	6,700,000
Cash consideration paid for acquisition			$ 252,156,000	$ 156,008,000
Carpathia Hosting, Inc. [Member]
Business Acquisition [Line Items]
Ownership interest	100.00%
Acquisition costs	$ 354,400,000
Number of customers of acquired entity | customer	230
Number of domestic data centers acquired | property	8
Number of international data centers acquired | property	5
Revenue since acquisition		25,900,000
Net income since acquisition		$ 700,000
Senior Notes [Member]
Business Acquisition [Line Items]
Notes issued					$ 300,000,000

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Real Estate Assets and Construction in Progress (Tables)

9 Months Ended

Sep. 30, 2015

Real Estate Assets and Construction in Progress [Abstract]

Summary of Properties Owned or Leased by the Company

The following is a summary of properties owned or leased by the Company as of September 30, 2015 and December 31, 2014 (in thousands):

As of September 30, 2015 (unaudited):

Property Location		Land		Buildings and Improvements		Construction in Progress		Total Cost
Owned Properties
Suwanee, Georgia (Atlanta-Suwanee)	$	3,521	$	146,714	$	16,558	$	166,793
Atlanta, Georgia (Atlanta-Metro)		15,396		386,397		48,403		450,196
Santa Clara, California*		-		93,895		990		94,885
Richmond, Virginia		2,180		166,283		122,746		291,209
Sacramento, California		1,481		61,112		302		62,895
Princeton, New Jersey		20,700		32,583		314		53,597
Dallas-Fort Worth, Texas		5,808		70,710		113,115		189,633
Chicago, Illinois		-		-		43,098		43,098
Miami, Florida		1,777		30,038		306		32,121
Lenexa, Kansas		437		3,511		-		3,948
Wichita, Kansas		-		1,409		-		1,409
		51,300		992,652		345,832		1,389,784
Leased Properties
Carpathia properties ***		1,130		87,425		6,384		94,939
Jersey City, New Jersey		-		27,767		1,566		29,333
Overland Park, Kansas **		-		914		-		914
		1,130		116,106		7,950		125,186
	$	52,430	$	1,108,758	$	353,782	$	1,514,970

*    Owned facility subject to long-term ground sublease.
**   This does not include the portion of the business that is used for QTS office space or other real estate not used by customers.
*** Includes 13 facilities. All facilities are leased, including those subject to capital leases.

As of December 31, 2014:

Property Location		Land		Buildings and Improvements		Construction in Progress		Total Cost
Owned Properties
Suwanee, Georgia (Atlanta-Suwanee)	$	3,521	$	138,991	$	6,345	$	148,857
Atlanta, Georgia (Atlanta-Metro)		15,397		356,122		22,693		394,212
Santa Clara, California*		-		90,332		650		90,982
Richmond, Virginia		2,180		127,080		71,794		201,054
Sacramento, California		1,481		60,094		278		61,853
Princeton, New Jersey		17,976		35,951		90		54,017
Dallas-Fort Worth, Texas		5,808		44,053		89,982		139,843
Chicago, Illinois		-		-		21,786		21,786
Miami, Florida		1,777		28,786		129		30,692
Lenexa, Kansas		437		3,298		25		3,760
Wichita, Kansas		-		1,409		-		1,409
		48,577		886,116		213,772		1,148,465
Leased Properties
Jersey City, New Jersey		-		27,318		920		28,238
Overland Park, Kansas **		-		852		27		879
		-		28,170		947		29,117
	$	48,577	$	914,286	$	214,719	$	1,177,582

_____________________________

* Owned facility subject to long-term ground sublease.
** This does not include the portion of the business that is used for QTS office space or other real estate not used by customers.

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Description of Business

9 Months Ended

Sep. 30, 2015

Description of Business [Abstract]

Description of Business

1. Description of Business

QTS Realty Trust, Inc. (“QTS”) through its controlling interest in QualityTech, LP (the “Operating Partnership” and collectively with QTS and their subsidiaries, the “Company”) and the subsidiaries of the Operating Partnership, is engaged in the business of owning, acquiring, redeveloping and managing multi-tenant data centers. The Company’s portfolio consists of 25wholly-owned and leased properties with data centers located throughout the United States, Canada, Europe and the Asia-Pacific region.

QTS was formed as a Maryland corporation on May 17, 2013. On October 15, 2013, QTS completed its initial public offering of 14,087,500shares of Class A common stock, $0.01 par value per share (the “IPO”), including shares issued pursuant to the underwriters’ option to purchase additional shares, which was exercised in full, and received net proceeds of approximately $279 million. QTS elected to be taxed as a real estate investment trust (“REIT”), for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2013. As a REIT, QTS generally is not required to pay federal corporate income taxes on its taxable income to the extent it is currently distributed to its stockholders.

Concurrently with the completion of the IPO, the Company consummated a series of transactions, including the merger of General Atlantic REIT, Inc. with the Company, pursuant to which the Company became the sole general partner and majority owner of QualityTech, LP, the Operating Partnership. QTS contributed the net proceeds received from the IPO to the Operating Partnership in exchange for partnership units therein. As of September 30, 2015, QTS owned approximately 85.7% of the interests in the Operating Partnership. Substantially all of QTS’ assets are held by, and QTS’ operations are conducted through, the Operating Partnership. QTS’ interest in the Operating Partnership entitles QTS to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to QTS’ percentage ownership. As the sole general partner of the Operating Partnership, QTS generally has the exclusive power under the partnership agreement to manage and conduct the Operating Partnership’s business and affairs, subject to certain limited approval and voting rights of the limited partners. QTS’ board of directors manages the Company’s business and affairs.

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BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2015	Dec. 31, 2014
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	450,133,000	450,133,000
Common stock, shares issued	41,101,507	29,408,138
Common stock, shares outstanding	41,101,507	29,408,138

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Earnings per Share

9 Months Ended

Sep. 30, 2015

Earnings per Share [Abstract]

Earnings per Share

11.  Earnings per share of QTS Realty Trust, Inc.

Basic income (loss) per share is calculated by dividing the net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share adjusts basic income (loss) per share for the effects of potentially dilutive common shares.

The computation of basic and diluted net income per share is as follows (in thousands, except per share data):

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2015	2014	2015	2014
Numerator:
Net income available to common stockholders - basic	$               7,009	$               3,157	$             15,723	$             10,445
Effect of net income attributable to noncontrolling interests	1,229	849	3,072	2,810
Net income available to common stockholders - diluted	$               8,238	$               4,006	$             18,795	$             13,255
Denominator:
Weighted average shares outstanding - basic	40,994	29,017	36,355	29,007
Effect of Class A and Class RS partnership units *	6,932	7,797	7,103	7,797
Effect of Class O units and options to purchase Class A common stock on an "as if" converted basis *	807	438	724	236
Weighted average shares outstanding - diluted	48,733	37,252	44,182	37,040
Net income per share attributable to common stockholders - basic	$                 0.17	$                 0.11	$                 0.43	$                 0.36
Net income per share attributable to common stockholders - diluted	$                 0.17	$                 0.11	$                 0.43	$                 0.36

* The Class A units, Class RS units and Class O units represent limited partnership interests in the Operating Partnership, and are described in more detail in Note 8.

No securities were antidilutive for the three months ended September 30, 2015 and 2014, nor for the nine months ended September 30, 2015 and 2014, and as such, no securities were excluded from the computation of diluted net income per share for those periods.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 03, 2015
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Registrant Name	QTS Realty Trust, Inc.
Entity Central Index Key	0001577368
Entity Filer Category	Accelerated Filer
Current Fiscal Year End Date	--12-31
Qualitytech, LP [Member]
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Registrant Name	QualityTech, LP
Entity Central Index Key	0001561164
Entity Filer Category	Non-accelerated Filer
Current Fiscal Year End Date	--12-31
Common Class A [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		41,019,436
Common Class B [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		133,000

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Customer Leases, as Lessor

9 Months Ended

Sep. 30, 2015

Customer Leases, as Lessor [Abstract]

Customer Leases, as Lessor

12.  Customer Leases, as Lessor

Future minimum lease payments to be received under non-cancelable operating customer leases (inclusive of payments for contracts which have not yet commenced, and exclusive of recoveries of operating costs from customers) are as follows for the years ending December 31 (in thousands):

Period Ending December 31,
2015 (Oct - December)	$	79,926
2016		282,466
2017		213,490
2018		142,574
2019		95,281
Thereafter		280,587
Total	$	1,094,324

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STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenues:
Rental	$ 62,744	$ 45,448	$ 164,270	$ 127,993
Recoveries from customers	6,158	6,131	17,404	13,674
Cloud and managed services	18,573	5,242	32,588	14,443
Other	1,415	1,124	4,131	2,116
Total revenues	88,890	57,945	218,393	158,226
Operating Expenses:
Property operating costs	30,925	20,369	72,292	53,121
Real estate taxes and insurance	1,462	1,377	4,421	3,713
Depreciation and amortization	24,486	15,210	58,791	42,274
General and administrative	19,440	11,045	47,893	33,296
Restructuring		226		1,272
Transaction and integration costs	1,482	(195)	6,256	958
Total operating expenses	77,795	48,032	189,653	134,634
Operating income	11,095	9,913	28,740	23,592
Other income and expenses:
Interest income	1		2	8
Interest expense	(5,418)	(5,410)	(15,559)	(9,683)
Other (expense) income, net		(470)	(83)	(580)
Income before taxes	5,678	4,033	13,100	13,337
Tax benefit (expense) of taxable REIT subsidiaries	2,560	(27)	5,695	(82)
Net income	8,238	4,006	18,795	13,255
Net income attributable to noncontrolling interests	(1,229)	(849)	(3,072)	(2,810)
Net income attributable to Parent	$ 7,009	$ 3,157	$ 15,723	$ 10,445
Net income per share attributable to common shares:
Basic	$ 0.17	$ 0.11	$ 0.43	$ 0.36
Diluted	$ 0.17	$ 0.11	$ 0.43	$ 0.36
Weighted average common shares outstanding:
Basic	40,994,387	29,016,774	36,354,738	29,006,620
Diluted	48,733,417	37,251,769	44,181,583	37,039,603
Qualitytech, LP [Member]
Revenues:
Rental	$ 62,744	$ 45,448	$ 164,270	$ 127,993
Recoveries from customers	6,158	6,131	17,404	13,674
Cloud and managed services	18,573	5,242	32,588	14,443
Other	1,415	1,124	4,131	2,116
Total revenues	88,890	57,945	218,393	158,226
Operating Expenses:
Property operating costs	30,925	20,369	72,292	53,121
Real estate taxes and insurance	1,462	1,377	4,421	3,713
Depreciation and amortization	24,486	15,210	58,791	42,274
General and administrative	19,440	11,045	47,893	33,296
Restructuring		226		1,272
Transaction and integration costs	1,482	(195)	6,256	958
Total operating expenses	77,795	48,032	189,653	134,634
Operating income	11,095	9,913	28,740	23,592
Other income and expenses:
Interest income	1		2	8
Interest expense	(5,418)	(5,410)	(15,559)	(9,683)
Other (expense) income, net		(470)	(83)	(580)
Income before taxes	5,678	4,033	13,100	13,337
Tax benefit (expense) of taxable REIT subsidiaries	2,560	(27)	5,695	(82)
Net income	$ 8,238	$ 4,006	$ 18,795	$ 13,255

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Interest Rate Derivative Instruments

9 Months Ended

Sep. 30, 2015

Interest Rate Derivative Instruments [Abstract]

Interest Rate Derivative Instruments

6. Interest Rate Derivative Instruments

The Company entered into interest rate swap agreements with a notional amount of $150 million on February 8, 2012, which were designated as cash flow hedges for hedge accounting, and matured on September 28, 2014.  For derivative instruments that are accounted for as hedges, the change in fair value for the effective portions of qualifying hedges is recorded through other comprehensive income (loss). The total amount of unrealized gains recorded in other comprehensive income (loss) for the nine months ended September 30, 2014 was $0.2 million, with no unrealized gains or losses recorded for the nine months ended September 30, 2015.  Interest expense related to payments on interest rate swaps for the three and nine months ended September 30, 2014 was $0.2 million and $0.5 million, respectively, with no interest expense recorded for the three and nine months ended September 30, 2015.

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Debt

9 Months Ended

Sep. 30, 2015

Debt [Abstract]

Debt

5. Debt

Below is a listing of the Company’s outstanding debt, including capital leases and lease financing obligations, as of September 30, 2015 and December 31, 2014 (in thousands):

	September 30,		December 31,
	2015		2014
	(Unaudited)
Unsecured Credit Facility	$	400,000	$	239,838
Senior Notes, net of discount		297,914		297,729
Richmond Credit Facility		70,000		70,000
Atlanta-Metro Equipment Loan		-		16,600
Capital Lease and Lease Financing Obligations		53,023		13,062
Total	$	820,937	$	637,229

Credit Facilities, Senior Notes and Mortgage Notes Payable

(a) Unsecured Credit Facility – On May 1, 2013, the Company entered into a $575 million unsecured credit facility comprised of a five-year $225 million term loan and a four-year $350 million revolving credit facility with a one year extension, subject to satisfaction of certain conditions, and had the ability to expand the total credit facility by an additional $100 million subject to certain conditions set forth in the credit agreement. In July 2014, the Company’s term loan was reduced by $75 million to $150 million in connection with the issuance of the Senior Notes. On December 17, 2014, the Company amended and restated its unsecured credit facility to provide for a $650 million unsecured credit facility comprised of a five-year $100 million term loan scheduled to mature onDecember 17, 2019 and a four-year $550 million revolving credit facility scheduled to mature onDecember 17, 2018, with the option to extend one year until December 17, 2019, subject to the satisfaction of certain conditions. The lenders under the unsecured credit facility could issue up to $30 million in letters of credit subject to the satisfaction of certain conditions.  The total unsecured credit facility could be increased from the current capacity of $650 million to up to $850 million subject to certain conditions set forth in the credit agreement, including the consent of the administrative agent and obtaining necessary commitments. As of September 30, 2015, borrowings under the unsecured credit facility consisted of $300.0 million outstanding under the revolving credit facility and $100.0 million outstanding under the term loan.

In October 2015, the Company amended the unsecured credit facility, increasing the total capacity by $250 million and extending the term.  At the same time, the Company terminated its secured credit facility relating to the Richmond data center.  The amended unsecured credit facility has a total capacity of $900 million and includes a $150 million term loan which matures on December 17, 2020, another $150 million term loan which matures on April 27, 2021, and a $600 million revolving credit facility which matures on December 17, 2019, with a one year extension option.  Amounts outstanding under the amended unsecured credit facility bear interest at a variable rate equal to, at the Company’s election, LIBOR or a base rate, plus a spread that will vary depending upon the Company’s leverage ratio.  For revolving credit loans, the spread ranges from 1.55% to 2.15% for LIBOR loans and 0.55% to 1.15% for base rate loans.  For term loans, the spread ranges from 1.50% to 2.10% for LIBOR loans and 0.50% to 1.10% for base rate loans.  The amended unsecured credit facility also includes a $200 million accordion feature.

The unsecured credit facility requires monthly interest payments and requires the Company to comply with various customary affirmative and negative covenants and quarterly financial covenant requirements relating to the debt service coverage ratio, fixed charge ratio, leverage ratio and tangible net worth and various other operational requirements.  In connection with the unsecured credit facility, as of September 30, 2015, the Company had an additional $2.5 million letter of credit outstanding.  The letter of credit was reduced to $2.0 million on October 1, 2015.  As of September 30, 2015, the weighted average interest rate for amounts outstanding under the unsecured credit facility was 1.89%.  

(b) Senior Notes – On July 23, 2014, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership formed solely for the purpose of facilitating the offering of the notes described below (collectively, the “Issuers”), issued $300 million aggregate principal amount of 5.875% Senior Notes due 2022 (the “Senior Notes”). The Senior Notes have an interest rate of 5.875% per annum, were issued at a price equal to 99.211% of their face value and mature on August 1, 2022. The proceeds from the offering were used to repay amounts outstanding under the unsecured credit facility, including $75 million outstanding under the term loan. The Senior Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Operating Partnership’s existing subsidiaries (other than foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Issuers or any other subsidiary guarantor. The Company will not initially guarantee the Senior Notes and will not be required to guarantee the Senior Notes except under certain circumstances. The offering was conducted pursuant to Rule 144A of the Securities Act of 1933, as amended, and the Senior Notes were issued pursuant to an indenture, dated as of July 23, 2014, among the Operating Partnership, QTS Finance Corporation, the Company, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (the “Indenture”).

On March 23, 2015, the SEC declared effective the Operating Partnership and QTS Finance Corporation’s registration statement on Form S-4 pursuant to which the issuers exchanged the originally issued Senior Notes for $300 million of 5.875% Senior Notes due 2022 (the “Exchange Notes”) that are registered under the Securities Act of 1933, as amended. The exchange offer was completed on April 23, 2015, and all outstanding originally issued Senior Notes were tendered. The Exchange Notes did not provide the Company with any additional proceeds and satisfied its obligations under a registration rights agreement entered into in connection with the issuance of the Senior Notes. 

(c) Richmond Credit Facility – In December 2012, the Company entered into a credit facility secured by the Company’s Richmond data center (the “Richmond Credit Facility”). As of September 30, 2015, the Richmond Credit Facility had capacity of $120 million and includedan accordion feature that allowed the Company to increase the size of the credit facility up to $200 million.  It also required the Company to comply with covenants similar to the unsecured credit facility. The Richmond Credit Facility was scheduled to matureJune 30, 2019; however, as discussed above, the Company terminated the Richmond Credit Facility in conjunction with the October 2015 amendment of its unsecured credit facility.

As of September 30, 2015, amounts outstanding under the Richmond Credit Facility bore interest at a variable rate equal to, at the Company’s election, LIBOR or a base rate, plus a spread that ranged, depending upon the Company’s leverage ratio, from 2.10% to 2.85% for LIBOR loans or 1.10% to 1.85% for base rate loans. As of September 30, 2015, the interest rate for amounts outstanding under the Richmond Credit Facility was 2.29%.  

(d) Atlanta-Metro Equipment Loan – On April 9, 2010, the Company entered into a $25 million loan to finance equipment related to an expansion project at the Company’s Atlanta-Metro data center (the “Atlanta-Metro Equipment Loan”). The loan originally required monthly interest-only payments and subsequently required monthly interest and principal payments. The loan bore interest at 6.85%and was scheduled to mature on June 1, 2020. This debt was repaid in June 2015 when its prepayment penalties expired.

The annual remaining principal payment requirements as of September 30, 2015 per the contractual maturities and excluding extension options, capital leases and lease financing obligations, are as follows (in thousands).  The amounts shown do not include the effects of the October 2015 amendment to the unsecured credit facility discussed above:

2015	$	-
2016		-
2017		-
2018		300,000
2019		170,000
Thereafter		300,000
Total	$	770,000

As of September 30, 2015, the Company was in compliance with all of its covenants.

Capital Leases

The Company has historically entered into capital leases for certain equipment.  In addition, through its acquisition of Carpathia on June 16, 2015, the Company acquired capital leases of both equipment and certain properties. Total outstanding liabilities for capital leaseswere  $29.6 million as of September 30, 2015, of which $18.0 million were assumed through the Carpathia acquisition, $17.9 million of which was related to the lease of real property.  Carpathia had entered into capital lease arrangements for datacenter space under two lease agreements expiring in 2018 and 2019 at its Harrisonburg, Virginia and Ashburn, Virginia locations. Total recurring monthly payments range from approximately $0.2 million to $0.5 million during the terms of the leases, in addition to payments made for utilities. Depreciation related to the associated assets for the capital leases is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.  

Lease Financing Obligations

Through the acquisition of Carpathia, the Company acquired lease financing obligations totaling$23.4 million at September 30, 2015, of which $20.9 million related to a sale-leaseback transaction where Carpathia has continuing involvement. On December 23, 2011, Carpathia sold the shell of a building and the associated land to an unrelated third party. Carpathia leases the property back and is a party to an agreement with the same third party to construct a new building on the adjoining property for use as a data center. Carpathia is primarily responsible for financing the improvements and outfitting the building with the necessary equipment. The third party leases back the new building in stages to Carpathia as the various stages are completed. In accordance with ASC 840-40, Leases, Carpathia has continuing involvement with the related leased assets; therefore, the Company will continue to account for the existing building shell and the associated land as fixed assets and will capitalize the construction costs of the new building. The financing obligation related to the building and equipment was $19.2 million at September 30, 2015. In addition, due to Carpathia’s continuing involvement, it was required to defer a gain on the sale of the assets. The deferred gain was $1.7 million at September 30, 2015, and is also included in lease financing obligations.

Thefinancing obligation is reduced as rental payments are made on the existing building, which payments started in January 2012. Rental payments, which include amounts attributable to both principal and interest, increased to approximately $0.2 million per month in March 2013, which is when the newly constructed building was inhabited by Carpathia. Depreciation expense on the related asset is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.  

The Company, through its acquisition of Carpathia, also has a lease financing agreement in connection with a  $4.8 million tenant improvement allowance on one of its datacenter lease agreements. The financing requires monthly payments of principal and interest of less than $0.1 million through February 2019.  The outstanding balance on the financing agreement was $2.5 million as of September 30, 2015.  Depreciation expense on the related leasehold improvements is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.  

The following table summarizes the Company’s combined future payment obligations, excluding interest, as of September 30, 2015, on the capital leases and lease financing obligations above (in thousands):

2015	$	3,262
2016		12,558
2017		12,388
2018		8,804
2019		2,461
Thereafter		13,550
Total	$	53,023

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2015

Acquisitions [Abstract]

Schedule of the Preliminary Allocation of the Fair Value of Assets Acquired and Liabilities Assumed in Acquisition

The following table summarizes the consideration for the Carpathia acquisition and the preliminary allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (in thousands). This allocation is subject to change pending the final valuation of these assets and liabilities:

	June 16, 2015
Land	$                1,130
Buildings and improvements	78,898
Construction in process	12,127
Acquired intangibles, net	90,947
Net working capital	2,390
Total identifiable assets acquired	185,492
Capital lease and lease financing obligations	43,832
Deferred income taxes	21,673
Total liabilities assumed	65,505
Net identifiable assets acquired	119,987
Goodwill	174,697
Net assets acquired	$           294,684

Pro Forma Consolidated Statements of Operations Including Acquisition

The following table represents the pro forma condensed consolidated statements of operations of the combined entities for the three-month period ended September 30, 2014, and for the nine-month periods ended September 30, 2015 and 2014 (in thousands):

	(Unaudited) Pro Forma Condensed Consolidated Statements of Operations
	Three Months Ended September 30,	Nine Months Ended September 30,
	2014	2015	2014
Revenue	$                                            78,951	$               285,769	$               218,918
Net income	$                                              1,550	$                 10,901	$                   7,949

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2015

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

13.  Fair Value of Financial Instruments

ASC Topic 825 requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows based upon market yields or by using other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, fair values are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

Short-term instruments: The carrying amounts of cash and cash equivalents and restricted cash approximate fair value.

Credit facilities, Senior Notes and mortgage notes payable: The fair value of the Company’s floating rate mortgage loans was estimated using Level 2 “significant other observable inputs” such as available market information based on borrowing rates that the Company believes it could obtain with similar terms and maturities.  The Company’s unsecured credit facility and Richmond Credit Facility did not have interest rates which were materially different than current market conditions and therefore, the fair value of each of the credit facilities approximated the carrying value of each note.  The fair value of the Company’s Senior Notes was estimated using Level 2 “significant other observable inputs,” primarily based on quoted market prices for the same or similar issuances. At September 30, 2015, the fair value of the Senior Notes was approximately $297.9 million.

Other debt instruments: The fair value of the Company’s other debt instruments (including capital leases and lease financing obligations) were estimated in the same manner as the credit facilities and mortgage notes payable above. Similarly, because each of these instruments did not have interest rates which were materially different than current market conditions and therefore, the fair value of each instrument approximated the respective carrying values.

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Related Party Transactions

9 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions

9.  Related Party Transactions

The Company periodically executes transactions with entities affiliated with its Chairman and Chief Executive Officer. Such transactions include automobile, furniture and equipment purchases as well as building operating lease payments and receipts, and reimbursement for the use of a private aircraft service by the Company’s officers and directors.

The transactions which occurred during the three and nine months ended September 30, 2015 and 2014 are outlined below (in thousands): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in thousands)	2015		2014		2015		2014
Tax, utility, insurance and other reimbursement	$	63	$	296	$	208	$	464
Rent expense		254		253		761		772
Capital assets acquired		38		86		163		160
Total	$	355	$	635	$	1,132	$	1,396

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies [Abstract]

Commitments and Contingencies

7.  Commitments and Contingencies

The Company is subject to various routine legal proceedings and other matters in the ordinary course of business. The Company does not currently have any litigation that would have a material adverse impact on the Company’s financial statements.

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Partners' Capital, Equity and Incentive Compensation Plans

9 Months Ended

Sep. 30, 2015

Partners' Capital, Equity and Incentive Compensation Plans [Abstract]

Partners' Capital, Equity and Incentive Compensation Plans

8.  Partners’ Capital, Equity and Incentive Compensation Plans

QualityTech, LP

QTS has the full power and authority to do all the things necessary to conduct the business of the Operating Partnership.

As of September 30, 2015, the Operating Partnership had three classes of limited partnership units outstanding: Class A units of limited partnership interest (“Class A units”), Class RS LTIP units of limited partnership interest (“Class RS units”) and Class O LTIP units of limited partnership units (“Class O units”). The Class A Units are redeemable at any time on or after one year following the later of November 1, 2013 (which is the beginning of the first full calendar month following the completion of the IPO) or the date of initial issuance. The Company may in its sole discretion elect to assume and satisfy the redemption amount with cash or its shares. Class RS units or Class O units were issued upon grants made under the QualityTech, LP 2010 Equity Incentive Plan (the “2010 Equity Incentive Plan”). Class RS units and Class O units may be subject to vesting and are pari passu with Class A units. Each Class RS unit and Class O unit is convertible into Class A units by the Operating Partnership at any time or by the holder at any time following full vesting (if such unit is subject to vesting) based on formulas contained in the partnership agreement. In addition, upon certain circumstances set forth in the partnership agreement, vested Class RS units automatically convert into Class A units of the Operating Partnership.

QTS Realty Trust, Inc.

In connection with its IPO, QTS issued Class A common stock and Class B common stock. Class B common stock entitles the holder to 50 votes per share and was issued to enable the Company’s Chief Executive Officer to exchange 2% of his Operating Partnership units so he may have a vote proportionate to his economic interest in the Company. Also in connection with its IPO, QTS adopted the QTS Realty Trust, Inc. 2013 Equity Incentive plan (the “2013 Equity Incentive Plan”), which authorized 1.75 million shares of Class A common stock to be issued under the plan, including options to purchase Class A common stock, restricted Class A common stock, Class O units, and Class RS units. In March 2015, the Board of Directors approved an amendment to the 2013 Equity Incentive Plan to, among other things, increase the number of shares available for issuance under the plan by 3,000,000, subject to stockholder approval.  The stockholders approved the amendment at the annual meeting of stockholders held on May 4, 2015, increasing the total number of shares available for issuance under the 2013 Equity Incentive Plan to 4,750,000.

The following is a summary of award activity under the 2010 Equity Incentive Plan and 2013 Equity Incentive Plan and related information for the nine months ended September 30, 2015:  

	2010 Equity Incentive Plan					2013 Equity Incentive Plan
	Number of Class O units	Weighted average exercise price	Weighted average fair     value	Number of Class RS units	Weighted average grant date value	Options	Weighted average exercise price	Weighted average fair     value	Restricted Stock	Weighted average grant date value
Outstanding at December 31, 2014	1,518,717	$ 23.49	$ 3.75	74,625	$ 23.49	584,949	$ 22.87	$ 4.10	246,785	$ 29.13
Granted	—	—	—	—	—	317,497	36.16	8.03	231,722	36.72
Exercised/Vested (2)	(55,066)	21.78	5.04	—	—	(12,780)	21.55	3.71	(27,341)	22.99
Released from restriction (1)	—	—	—	(26,062)	25.00	—	—	—	—	—
Cancelled/Expired (3)	—	—	—	—	—	(11,407)	21.00	3.52	(12,278)	23.64
Outstanding at September 30, 2015	1,463,651	$ 23.56	$ 3.70	48,563	$ 22.68	878,259	$ 27.72	$ 5.53	438,888	$ 33.67

(1) This represents Class RS units that upon vesting have converted to Operating Partnership units.

(2) This represents the Class A common stock that has been released from restriction and which was not surrendered by the holder to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

(3) Includes 12,278 restricted Class A common stock surrendered by certain employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

The assumptions and fair values for restricted stock and options to purchase shares of Class A common stock granted for the nine months ended September 30, 2015 are included in the following table on a per unit basis. Class O units and options to purchase shares of Class A common stock were valued using the Black-Scholes model.

	Three and Nine Months Ended September 30, 2015
Fair value of restricted stock granted	$35.81-$37.69
Fair value of options granted	$8.00-$8.77
Expected term (years)	5.5-6.1
Expected volatility	33%
Expected dividend yield	3.40-3.57%
Expected risk-free interest rates	1.67-1.94%

The following table summarizes information about awards outstanding as of September 30, 2015.

		Operating Partnership Awards Outstanding
	Exercise prices		Awards outstanding	Weighted average remaining vesting period (years)
Class RS Units	$	-	48,563	1
Class O Units	$	20-25	1,463,651	1
Total Operating Partnership awards outstanding			1,512,214

		QTS Realty Trust, Inc. Awards Outstanding
	Exercise prices		Awards outstanding	Weighted average remaining vesting period (years)
Restricted stock	$	-	438,888	3
Options to purchase Class A common stock	$	21-37.69	878,259	1
Total QTS Realty Trust, Inc. awards outstanding			1,317,147

All nonvested LTIP unit awards are valued as of the grant date and generally vest ratably over a defined service period. Certain nonvested LTIP unit awards vest on the earlier of achievement by the Company of various performance goals or specified dates in 2015 and 2016. As of September 30, 2015 there were 0.5 million,  0.4 million and 0.4 million nonvested Class O units, restricted Class A common stock and options to purchase Class A common stock outstanding, respectively. As of September 30, 2015, there were no Class RS units outstanding.  As of September 30, 2015 the Company had $16.7 million ofunrecognized equity-based compensation expense which will be recognized over the remaining vesting period of up to 4 years. The total intrinsic value of the awards outstanding at September 30, 2015was $58.4 million.

On January 7, 2014, the Company paid its first and prorated dividend to common stockholders of $0.24 per common share and the Operating Partnership made a distribution to its partners of $0.24 per unit in an aggregate amount of $9.0 million. On April 8, 2014, the Company paid its regular quarterly cash dividend of $0.29 per common share and the Operating Partnership made a distribution to its partners of $0.29 per unit in an aggregate amount of $10.7 million.  Additionally, a distribution of approximately $200,000 was made to Class O LTIP holders during the three months ended June 30, 2014 to cover federal, state and local taxes on the allocated taxable income of the O LTIPs.  On July 8, 2014, the Company paid its regular quarterly cash dividend of $0.29 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on June 20, 2014 in an aggregate amount of $10.7 million.

On January 7, 2015, the Company paid its regular quarterly cash dividend of $0.29 per common share and the Operating Partnership made a distribution to its partners of $0.29 per unit in an aggregate amount of $10.7 million. On April 7, 2015, the Company paid its regular quarterly cash dividend of $0.32 per common share and the Operating Partnership made a distribution to its partners of $0.32 per unit in an aggregate amount of $13.4 million.  On July 8, 2015, the Company paid its regular quarterly cash dividend of $0.32 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on June 19, 2015 in an aggregate amount of $15.3 million.

On March 2, 2015, the Company issued 5,000,000 shares of QTS’ Class A common stock and GA QTS Interholdco, LLC, a selling stockholder and an affiliate of General Atlantic LLC, sold 4,350,000 shares of QTS’ Class A common stock at a price of $34.75 per share in an underwritten public offering. The selling stockholder granted the underwriters a 30-day option to purchase an aggregate of up to an additional 1,402,500 shares of QTS’ Class A common stock at the public offering price, which the underwriters exercised. The Company used the net proceeds of approximately $166.0 million to repay amounts outstanding under its unsecured revolving credit facility. The Company did not receive any proceeds from the offering of shares by the selling stockholder.

On June 5, 2015, the Company issued 5,750,000 shares of QTS’ Class A common stock and GA QTS Interholdco, LLC, a selling stockholder, sold 1,250,000 shares of QTS’ Class A common stock at a price of $37.00 per share in an underwritten public offering. The selling stockholder granted the underwriters a 30-day option to purchase an aggregate of up to an additional 1,050,000 shares of QTS’ Class A common stock at the public offering price, which the underwriters exercised. The Company used the net proceeds of approximately $203.4 million to fund a portion of the cash consideration payable by the Company in the Carpathia acquisition, and prior to such use, it used a portion of the net proceeds to repay amounts outstanding under its unsecured revolving credit facility and to pay off its Atlanta-Metro Equipment Loan. The Company did not receive any proceeds from the offering of shares by the selling stockholder.

On August 14, 2015, GA QTS Interholdco, LLC, a selling stockholder, sold 2,400,000 shares of QTS’ Class A common stock at a price of $41.00 per share in an underwritten public offering. The selling stockholder granted the underwriter a 30-day option to purchase an aggregate of up to an additional 360,000 shares of QTS’ Class A common stock at a price of $41.00 per share, of which the underwriters partially exercised the option with respect to 261,000 shares. The Company did not receive any proceeds from the offering of shares by the selling stockholder.

QTS Realty Trust, Inc. Employee Stock Purchase Plan

In June 2015, the Company established the QTS Realty Trust, Inc. Employee Stock Purchase Plan (the “Plan”) to give eligible employees the opportunity to purchase, through payroll deductions, shares of the Company’s Class A common stock in the open market by an independent broker selected by the Company’s Board of Directors (the “Board”) or the plan’s administrator.  Eligible employees include employees of the Company and its majority-owned subsidiaries (excluding executives) who have been employed for at least thirty days and who perform at least thirty hours of service per week for the Company.  The Plan became effective July 1, 2015 and is administered by the Board or by a committee of one or more persons appointed by the Board.  The Company has reserved 250,000 shares for purchase under the Plan and has also agreed to pay the brokerage commissions and fees associated with a Plan participant's purchase of shares.  An eligible employee may deduct a minimum of $40 per month and a maximum of $2,000 per month towards the purchase of shares. On June 17, 2015, the Company filed a registration statement on Form S-8 to register the 250,000 shares of the Company’s Class A common stock related to the Plan.

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Noncontrolling Interest

9 Months Ended

Sep. 30, 2015

Noncontrolling Interest [Abstract]

Noncontrolling Interest

10.  Noncontrolling Interest

Concurrently with the completion of the IPO, QTS consummated a series of transactions pursuant to which QTS became the sole general partner and majority owner of QualityTech, LP, which then became its operating partnership. The previous owners of QualityTech, LP retained 21.2% ownership of the Operating Partnership.

Commencing at any time beginning November 1, 2014, at the election of the holders of the noncontrolling interest, the Class A units are redeemable for cash or, at the election of the Company, common stock of the Company on a one-for-one basis. During the first, secondand third quarters of 2015, approximately 230,000,300,000and 150,000Class A units, respectively, were redeemed for the Company’s Class A common stock. As a result, the noncontrolling ownership interest of QualityTech, LP, after taking into account the Class A units redeemed, the grant of equity awards and the issuance of 5,000,000and 5,750,000shares of common stock in March and June 2015, respectively, was 14.3% at September 30, 2015.

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Summary of Significant Accounting Policies (Deferred Leasing Costs, Net of Accumulated Amortization) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Summary of Significant Accounting Policies [Abstract]
Deferred leasing costs	$ 35,652	$ 26,799
Accumulated amortization	(14,565)	(9,378)
Deferred leasing costs, net	$ 21,087	$ 17,421

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Partners' Capital, Equity and Incentive Compensation Plans (Summary of Assumptions and Fair Values for Restricted Stock and Options to Purchase Shares of Class A Common Stock Granted) (Details) - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	33.00%	33.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted stock granted	$ 35.81	$ 35.81
Fair value of options granted	$ 8.00	$ 8.00
Expected term (years)	5 years 6 months	5 years 6 months
Expected dividend yield	3.40%	3.40%
Expected risk-free interest rates	1.67%	1.67%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted stock granted	$ 37.69	$ 37.69
Fair value of options granted	$ 8.77	$ 8.77
Expected term (years)	6 years 1 month 6 days	6 years 1 month 6 days
Expected dividend yield		3.57%
Expected risk-free interest rates	1.94%	1.94%

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation – The accompanying financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

The accompanying financial statements are presented for both QTS Realty Trust, Inc. and QualityTech, LP. References to “QTS” mean QTS Realty Trust, Inc. and its controlled subsidiaries; and references to the “Operating Partnership” mean QualityTech, LP and its controlled subsidiaries.

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 is the sole general partner of the Operating Partnership, and its only material asset consists of its ownership interest in 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 the business through its operations, the direct or indirect incurrence of indebtedness, and the issuance of partnership units. As general partner with control of the Operating Partnership, QTS consolidates the Operating Partnership for financial reporting purposes.

The Company believes, therefore, that 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 applies to both QTS and the Operating Partnership; and

· creates time and cost efficiencies through the preparation of one set of notes instead of two separate sets of notes.

In addition, in light of these combined notes, the Company believes 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. 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. The Operating Partnership’s capital includes general and limited common units that are owned by QTS and the other partners. QTS' stockholders’ equity includes common stock, additional paid in capital, accumulated other comprehensive income (loss) and accumulated dividends in excess of earnings. The remaining equity is the portion of net assets that are retained by partners other than QTS, referred to as noncontrolling interests. The primary difference in QTS' Statements of Operations and Comprehensive Income (Loss) 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. These combined notes refer to actions or holdings as being actions or holdings of “the Company.” Although the Operating Partnership is generally the entity that enters into contracts, holds assets and issues debt, management believes that these general references to “the Company” in this context is appropriate because the business is one enterprise operated through the Operating Partnership.

As discussed above, QTS owns no operating assets and has no operations independent of the Operating Partnership and its subsidiaries. Also, the Operating Partnership owns no operating assets and has no operations independent of its subsidiaries. Obligations under the 5.875% Senior Notes due 2022 and the unsecured credit facility, both discussed in Note 5, are fully, unconditionally, and jointly and severally guaranteed by the Operating Partnership’s existing subsidiaries,other than QTS Finance Corporation, the co-issuer of the 5.875% Senior Notes due 2022.  As such, condensed consolidating financial information for the guarantors is not being presented in the notes to the interim condensed consolidated financial statements.  However, the indenture governing the 5.875% Senior Notes due 2022 restricts the ability of the Operating Partnership to make distributions to QTS, subject to certain exceptions, including distributions required in order for QTS to maintain its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

The interim condensed consolidated financial statements of QTS Realty Trust, Inc. for the three and nine months ended September 30, 2015 and 2014, and as of September 30, 2015 and December 31, 2014 present the accounts of QTS Realty Trust, Inc. and its majority owned subsidiaries. This includes the operating results of the Operating Partnership for all periods presented. 

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets, allowances for doubtful accounts and deferred tax assets and the valuation of derivatives, real estate assets, acquired intangible assets and certain accruals.

Principles of Consolidation

Principles of Consolidation – The consolidated financial statements of QTS Realty Trust, Inc. include the accounts of QTS Realty Trust, Inc. and its majority-owned subsidiaries. The consolidated financial statements of QualityTech, LP include the accounts of QualityTech, LP and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in the financial statements.

Real Estate Assets

Real Estate Assets – Real estate assets are reported at cost. All capital improvements for the income-producing properties that extend their useful lives are capitalized to individual property improvements and depreciated over their estimated useful lives. Depreciation is generally provided on a straight-line basis over 40 years from the date the property was placed in service. Property improvements are depreciated on a straight-line basis over the life of the respective improvement ranging from 20 to 40 years from the date the components were placed in service. Leasehold improvements are depreciated over the lesser of 20 years or through the end of the respective life of the lease. Repairs and maintenance costs are expensed as incurred. For the three months ended September 30, 2015, depreciation expense related to real estate assets and non-real estate assets was $15.2 million and $2.7 million, respectively, for a total of $17.9 million.  For the three months ended September 30, 2014, depreciation expense related to real estate assets and non-real estate assets was $10.3 million and $1.6 million, respectively, for a total of $11.9 million. For the nine months ended September 30, 2015, depreciation expense related to real estate assets and non-real estate assets was $38.5 millionand $6.2 million, respectively, for a total of $44.7 million.  For thenine months ended September 30, 2014, depreciation expense related to real estate assets and non-real estate assets was $28.2 millionand $4.6 million, respectively, for a total of $32.8 million. The Company capitalizes certain development costs, including internal costs incurred in connection with development. The capitalization of costs during the construction period (including interest and related loan fees, property taxes and other direct and indirect costs) begins when development efforts commence and ends when the asset is ready for its intended use. Capitalization of such costs, excluding interest, aggregated to $2.7 million and$2.9 million for thethree months ended September 30, 2015 and 2014, respectively,  and $8.6 million and$7.5 million for the nine months ended September 30, 2015 and 2014, respectively. Interest is capitalized during the period of development by first applying the Company’s actual borrowing rate on the related asset and second, to the extent necessary, by applying the Company’s weighted average effective borrowing rate to the actual development and other costs expended during the construction period. Interest is capitalized until the property is ready for its intended use. Interest costs capitalized totaled $2.7 million and $1.3 million for the three months ended September 30, 2015 and 2014, respectively,  and $7.1 million and $4.7 million for the nine months ended September 30, 2015 and 2014, respectively.

Acquisitions

Acquisitions – Acquisitions of real estate and other entities are either accounted for as asset acquisitions or business combinations depending on facts and circumstances. Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired in accordance with the accounting requirements of ASC 805, Business Combinations, which requires the recording of net assets of acquired businesses at fair value. The fair value of the consideration transferred is allocated to the acquired tangible assets, consisting primarily of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, value of in-place leases, value of customer relationships, trade names, software intangibles and capital leases.  The excess of the fair value of liabilities assumed, common stock issued and cash paid over the fair value of identifiable assets acquired is allocated to goodwill, which is not amortized by the Company.

In developing estimates of fair value of acquired assets and assumed liabilities, management analyzed a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, particularly with respect to the intangible assets.

Acquired in-place leases are amortized as amortization expense on a straight-line basis over the remaining life of the underlying leases. Amortization of acquired in place lease costs totaled $0.4 million and $0.5 million for the three months ended September 30, 2015 and 2014, respectively,  and $1.3 million and$1.8 million for thenine months ended September 30, 2015 and 2014, respectively.  This amortization expense is accounted for as real estate amortization expense.

Acquired customer relationships are amortized as amortization expense on a straight-line basis over the expected life of the customer relationship. Amortization of acquired customer relationships totaled $2.0 million and$0.3 million for the three months ended September 30, 2015 and 2014, respectively,  and $3.0 million and $1.0 million for the nine months ended September 30, 2015 and 2014, respectively.  This amortization expense is accounted for as real estate amortization expense.

Other acquired intangible assets, which includes platform, above or below market leases, and tradename intangibles, are amortized on a straight-line basis over their respective expected lives. Platform and trade name intangibles are amortized as amortization expense.  Platform amortization expense was $0.8 million and $0.9 million for the three and nine months ended September 30, 2015, respectively.  Trade name amortization expense was $0.3 million for the three and nine months September 30, 2015. Above or below market leases are amortized as rent expense, which totaled $0.1 million for both the three and nine months ended September 30, 2015. There was no amortization expense or rent expense related to platform, trade name, and above or below market lease intangibles for the three and nine months ended September 30, 2014. The expense associated with above and below market leases and trade name intangibles is accounted for as real estate expense, whereas the expense associated with the amortization of platform intangibles is accounted for as non-real estate expense.

See Note 3 for discussion of the preliminary purchase price allocation for the acquisition of Carpathia Hosting, Inc. (“Carpathia”) on June 16, 2015.  

Impairment of Long-Lived and Intangible Assets

Impairment of Long-Lived and Intangible Assets – The Company reviews its long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is generally measured by comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset group. If the net carrying value of the asset exceeds the value of the undiscounted cash flows, the fair value of the asset is assessed and may be considered impaired. An impairment loss is recognized based on the excess of the carrying amount of the impaired asset over its fair value. No impairment losses were recorded for the three and nine months ended September 30, 2015 and 2014, respectively.

As a result of the Carpathia acquisition, the Company recognized approximately $175 million in goodwill.  The fair value of goodwill is the consideration transferred which is not allocable to identifiable intangible and tangible assets.  The Company believes that it has one reporting unit for goodwill purposes, and will assess goodwill for impairment annually on October 1 on that basis.

Cash and Cash Equivalents

Cash and Cash Equivalents – The Company considers all demand deposits and money market accounts purchased with a maturity date of three months or less at the date of purchase to be cash equivalents. The Company’s account balances at one or more institutions periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is concentration of credit risk related to amounts on deposit in excess of FDIC coverage. The Company mitigates this risk by depositing a majority of its funds with several major financial institutions. The Company also has not experienced any losses and, therefore, does not believe that the risk is significant.

Deferred Costs

Deferred Costs – Deferred costs, net, on the Company’s balance sheets include both financing costs and leasing costs.

Deferred financing costs represent fees and other costs incurred in connection with obtaining debt and are amortized over the term of the loan and are included in interest expense. Amortization of the deferred financing costs was $0.8 million and $0.5 million for the  three months ended September 30, 2015 and 2014, respectively, and $2.4 million and$1.7 million for the nine months ended September 30, 2015 and 2014, respectively. During the three months ended September 30, 2014, the Company wrote off unamortized financing costs of $0.5 million primarily in connection with paying down $75 million of its unsecured credit facility term loan.  No unamortized financing costs were written off during the three months ended September 30, 2015.  During the nine months ended September 30, 2015, the Company wrote off unamortized financing costs of $0.1 million in connection with the repayment of the Atlanta Metro equipment loan in June 2015, as discussed in Note 5.  During the nine months ended September 30, 2014, in addition to the aforementioned $0.5 million write off, the Company wrote off unamortized financing costs of $0.1 million in connection with the modification of its credit facility that is secured by the Richmond data center.  Deferred financing costs, net of accumulated amortization are as follows:

	September 30,			December 31,
(dollars in thousands)	2015		2014
	(unaudited)
Deferred financing costs	$	18,646	$	18,152
Accumulated amortization		(4,090)		(1,683)
Deferred financing costs, net	$	14,556	$	16,469

Deferred leasing costs consist of external fees and internal costs incurred in the successful negotiations of leases and are deferred and amortized over the terms of the related leases on a straight-line basis. If an applicable lease terminates prior to the expiration of its initial term, the carrying amount of the costs are written off to amortization expense. Amortization of deferred leasing costs totaled $3.1 million and $2.5 million for the three months ended September 30, 2015 and 2014, respectively, and $8.6 million and$6.7 million for thenine months ended September 30, 2015 and 2014, respectively.Deferred leasing costs, net of accumulated amortization are as follows (excluding $2.9 million, net of amortization, related to a leasing arrangement at the Company’s Princeton facility in 2014):

	September 30,		December 31,
(dollars in thousands)	2015		2014
	(unaudited)
Deferred leasing costs	$	35,652	$	26,799
Accumulated amortization		(14,565)		(9,378)
Deferred leasing costs, net	$	21,087	$	17,421

Advance Rents and Security Deposits

Advance Rents and Security Deposits – Advance rents, typically prepayment of the following month’s rent, consist of payments received from customers prior to the time they are earned and are recognized as revenue in subsequent periods when earned. Security deposits are collected from customers at the lease origination and are generally refunded to customers upon lease expiration.

Deferred Income

Deferred Income – Deferred income generally results from non-refundable charges paid by the customer at lease inception to prepare their space for occupancy. The Company records this initial payment, commonly referred to as set-up fees, as a deferred income liability which amortizes into rental revenue over the term of the related lease on a straight-line basis. Deferred income was $25.0 million and $10.5 million as of September 30, 2015 and December 31, 2014, respectively. Additionally,  $1.5 million and $1.1 million of deferred income was amortized into revenue for the three months ended September 30, 2015 and 2014, respectively, and $4.1 million and$3.5 million for thenine months ended September 30, 2015 and 2014, respectively.

Interest Rate Derivative Instruments

Interest Rate Derivative Instruments – The Company utilizes derivatives to manage its interest rate exposure. During February 2012, the Company entered into interest rate swaps with a notional amount of $150 million which were cash flow hedges and qualified for hedge accounting. For these hedges, the effective portion of the change in fair value was recognized through other comprehensive income or loss. Amounts were reclassified out of other comprehensive income (loss) as the hedged item was recognized in earnings, either for ineffectiveness or for amounts paid relating to the hedge. The Company reflected all changes in the fair value of the swaps in other comprehensive income (loss) during the three and nine months ended September 30, 2014, as there was no ineffectiveness recorded in that period. The Company had no interest rate swaps outstanding at September 30, 2015 and December 31, 2014.

Equity-based Compensation

Equity-based Compensation – All equity-based compensation is measured at fair value on the grant date or date of modification, as applicable, and recognized in earnings over the requisite service period. Depending upon the settlement terms of the awards, all or a portion of the fair value of equity-based awards may be presented as a liability or as equity in the consolidated balance sheets. Equity-based compensation costs are measured based upon their estimated fair value on the date of grant or modification. Equity-based compensation expense net of forfeited and repurchased awards was $2.1 million and $0.9 million for the three months ended September 30, 2015 and 2014, respectively, and $5.2 million and $2.9 million for the nine months ended September 30, 2015 and 2014,

Rental Revenue

Rental Revenue – The Company, as a lessor, has retained substantially all of the risks and benefits of ownership and accounts for its leases as operating leases. For lease agreements that provide for scheduled rent increases, rental income is recognized on a straight-line basis over the non-cancellable term of the leases, which commences when control of the space has been provided to the customer. The amount of the straight-line rent receivable on the balance sheets included in rents and other receivables, net was $7.3 million and$4.0 million as of September 30, 2015 and December 31, 2014, respectively. Rental revenue also includes amortization of set-up fees which are amortized over the term of the respective lease as discussed above.

Cloud and Managed Services Revenue

Cloud and Managed Services Revenue – The Company may provide both its cloud product and use of its managed services to its customers on an individual or combined basis. Service fee revenue is recognized as the revenue is earned, which generally coincides with the services being provided.

Allowance for Uncollectible Accounts Receivable

Allowance for Uncollectible Accounts Receivable – Rents receivable are recognized when due and are carried at cost, less an allowance for doubtful accounts. The Company records a provision for losses on rents receivable equal to the estimated uncollectible accounts, which is based on management’s historical experience and a review of the current status of the Company’s receivables. As necessary, the Company also establishes an appropriate allowance for doubtful accounts for receivables arising from the straight-lining of rents. The aggregate allowance for doubtful accounts was $5.3 million and $3.7 million as of September 30, 2015 and December 31, 2014, respectively.

Capital Leases and Lease Financing Obligations

Capital Leases and Lease Financing Obligations – The Company evaluates leased real estate to determine whether the lease should be classified as a capital or operating lease in accordance with U.S GAAP.

The Company periodically enters into capital leases for certain equipment. In addition, through its acquisition of Carpathia Hosting, Inc. on June 16, 2015, the Company is now party to capital leases for property and equipment, as well as financing obligations related to a sale-leaseback transaction. The outstanding liabilities for the capital leases were $29.6 million and $13.1 million as of September 30, 2015 and December 31, 2014, respectively. The outstanding liabilities for the lease financing obligations were $23.4 million as of September 30, 2015.  The value of the assets associated with these leases approximates the outstanding obligations as of September 30, 2015 and December 31, 2014, respectively. Depreciation related to the associated assets is included in depreciation and amortization expense in the Statements of Operations and Comprehensive Income.  

See Note 3 for further discussion of the acquisition of Carpathia and Note 5 for further discussion of capital leases and lease financing obligations.

Recoveries from Customers

Recoveries from Customers – Certain customer leases contain provisions under which the customers reimburse the Company for a portion of the property’s real estate taxes, insurance and other operating expenses, which include certain power and cooling-related charges. The reimbursements are included in revenue as recoveries from customers in the Statements of Operations and Comprehensive Income in the period the applicable expenditures are incurred. Certain customer leases are structured to provide a fixed monthly billing amount that includes an estimate of various operating expenses, with all revenue from such leases included in rental revenues.

Segment Information

Segment Information – The Company manages its business as one operating segment and thus one reportable segment consisting of a portfolio of investments in data centers located primarily in the United States with others in Canada, Europe and the Asia-Pacific region.  

Customer Concentrations

Customer Concentrations – As of September 30, 2015,  one of the Company’s customers represented 8.2% of its total monthly rental revenue. No other customers exceeded 5% of total monthly rental revenue.  

As of September 30, 2015,  three of the Company’s customers exceeded 5% of total accounts receivable. In aggregate, these three customers accounted for 40% of total accounts receivable. Two of these three customers individually exceeded 10% of total accounts receivable.

Income Taxes

Income Taxes  –The Company elected for three of its existing subsidiaries to be taxed as taxable REIT subsidiaries pursuant to the REIT rules of the U.S. Internal Revenue Code.

For the taxable REIT subsidiaries, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

As of December 31, 2014, one of the taxable REIT subsidiaries’ deferred tax assets were primarily the result of U.S. net operating loss carryforwards. A valuation allowance was recorded against its gross deferred tax asset balance as of December 31, 2014. As a result of the acquisition of Carpathia, the Company has determined that it is more likely than not that pre-existing deferred tax assets will be realized by the combined entity, and the valuation allowance was eliminated. The change in the valuation allowance resulting from the change in circumstances is included in income, recognized in deferred income tax benefit in the three and nine months ended September 30, 2015.

In addition to the deferred income tax benefit recognized in connection with the elimination of the valuation allowance, a deferred tax benefit is being recognized in the third quarter and nine months ended September 30, 2015 in connection with recorded operating losses.  The taxable REIT subsidiary consolidated group has a net deferred tax liability position primarily due to the customer-based intangibles acquired as part of the Carpathia acquisition. 

The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as the operating performance of the taxable REIT subsidiary, tax law changes and future business acquisitions. The Company’s effective tax rates were 28.4% and 0% for the nine months ended September 30, 2015 and 2014, respectively.  The increase in the effective tax rate is primarily due to the elimination of the valuation allowance as a result of the Carpathia acquisition, as well as recorded operating losses in the current year.

Fair Value Measurements

Fair Value Measurements – ASC Topic 820, Fair Value Measurements, emphasizes that fair-value is a market-based measurement, not an entity-specific measurement. Therefore, a fair-value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair-value measurements, a fair-value hierarchy is established that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the level in the fair-value hierarchy within which the entire fair-value measurement falls is based on the lowest level input that is significant to the fair-value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

As the Company’s previous interest rate swaps matured on September 28, 2014, there are no financial assets or liabilities measured at fair value on a recurring basis on the consolidated balance sheets as of September 30, 2015 and December 31, 2014.  The Company’s purchase price allocation of Carpathia is a fair value estimate that utilized Level 3 inputs and is measured on a non-recurring basis.  See Note 3 for further detail.

New Accounting Pronouncements

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the current revenue recognition requirements in ASC 606, Revenue Recognition. Under this new guidance, entities should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This ASU also requires enhanced disclosures. In July 2015, the FASB finalized its decision to delay the effective date of the amendments in this ASU by one year, and as such, they are effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted; however, entities are not permitted to adopt the standard earlier than December 15, 2016, the original effective date. Retrospective and modified retrospective application is allowed. The Company is currently assessing the impact of this standard on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and not as a separate deferred charge. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. In June 2015, the Securities and Exchange Commission (“SEC”) stated that given the absence of authoritative guidance within this ASU for debt issuance costs related to revolving debt arrangements, the SEC staff would not object to an entity deferring and presenting such costs as an asset and subsequently amortizing them ratably over the term of the revolving debt arrangement. This announcement confirms that revolver arrangement costs are not within the scope of this ASU. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The amendments are required to be applied on a retrospective basis, and upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. Adoption of this standard will affect the Company’s Consolidated Balance Sheets

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Partners' Capital, Equity and Incentive Compensation Plans (Tables)

9 Months Ended

Sep. 30, 2015

Partners' Capital, Equity and Incentive Compensation Plans [Abstract]

Summary of Award Activity Under 2010 Equity Incentive Plan and 2013 Equity Incentive Plan and Related Information

The following is a summary of award activity under the 2010 Equity Incentive Plan and 2013 Equity Incentive Plan and related information for the nine months ended September 30, 2015:  

	2010 Equity Incentive Plan					2013 Equity Incentive Plan
	Number of Class O units	Weighted average exercise price	Weighted average fair     value	Number of Class RS units	Weighted average grant date value	Options	Weighted average exercise price	Weighted average fair     value	Restricted Stock	Weighted average grant date value
Outstanding at December 31, 2014	1,518,717	$ 23.49	$ 3.75	74,625	$ 23.49	584,949	$ 22.87	$ 4.10	246,785	$ 29.13
Granted	—	—	—	—	—	317,497	36.16	8.03	231,722	36.72
Exercised/Vested (2)	(55,066)	21.78	5.04	—	—	(12,780)	21.55	3.71	(27,341)	22.99
Released from restriction (1)	—	—	—	(26,062)	25.00	—	—	—	—	—
Cancelled/Expired (3)	—	—	—	—	—	(11,407)	21.00	3.52	(12,278)	23.64
Outstanding at September 30, 2015	1,463,651	$ 23.56	$ 3.70	48,563	$ 22.68	878,259	$ 27.72	$ 5.53	438,888	$ 33.67

(1) This represents Class RS units that upon vesting have converted to Operating Partnership units.

(2) This represents the Class A common stock that has been released from restriction and which was not surrendered by the holder to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

(3) Includes 12,278 restricted Class A common stock surrendered by certain employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

Summary of Assumptions and Fair Values for Restricted Stock and Options to Purchase Shares of Class A Common Stock Granted

Class O units and options to purchase shares of Class A common stock were valued using the Black-Scholes model.

	Three and Nine Months Ended September 30, 2015
Fair value of restricted stock granted	$35.81-$37.69
Fair value of options granted	$8.00-$8.77
Expected term (years)	5.5-6.1
Expected volatility	33%
Expected dividend yield	3.40-3.57%
Expected risk-free interest rates	1.67-1.94%

Summary of Information About Awards Outstanding

The following table summarizes information about awards outstanding as of September 30, 2015.

		Operating Partnership Awards Outstanding
	Exercise prices		Awards outstanding	Weighted average remaining vesting period (years)
Class RS Units	$	-	48,563	1
Class O Units	$	20-25	1,463,651	1
Total Operating Partnership awards outstanding			1,512,214

		QTS Realty Trust, Inc. Awards Outstanding
	Exercise prices		Awards outstanding	Weighted average remaining vesting period (years)
Restricted stock	$	-	438,888	3
Options to purchase Class A common stock	$	21-37.69	878,259	1
Total QTS Realty Trust, Inc. awards outstanding			1,317,147

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Partners' Capital, Equity and Incentive Compensation Plans (Narrative) (Details)				1 Months Ended		3 Months Ended							9 Months Ended
	Oct. 06, 2015	Oct. 06, 2015 $ / shares	Aug. 15, 2014 $ / shares shares	Jun. 30, 2015 USD ($) shares	Mar. 31, 2015 shares	Sep. 30, 2015 USD ($) item $ / shares shares	Jun. 30, 2015 USD ($) $ / shares shares	Mar. 31, 2015 USD ($) $ / shares shares	Sep. 30, 2014 USD ($) $ / shares	Jun. 30, 2014 USD ($) $ / shares	Mar. 31, 2014 USD ($) $ / shares	Dec. 31, 2013 USD ($)	Sep. 30, 2015 USD ($) item security shares	Jun. 05, 2015 $ / shares shares	May. 03, 2015 shares	Mar. 02, 2015 $ / shares shares
Partners Capital And Distributions [Line Items]
Number of classes of partnership units outstanding | security													3
Stock transaction date								Mar. 02, 2015
Number of units issued																5,000,000
Proceeds from sale of stock | $								$ 166,000,000
Capital contributions | $								166,000,000
Number of votes per share | item						50							50
Equity based compensation expense unrecognized | $						$ 16,700,000							$ 16,700,000
Equity based compensation expense vesting period													4 years
Equity based compensation awards intrinsic value | $						58,400,000							$ 58,400,000
Aggregate distribution made to stockholders and partners | $						$ 15,300,000	$ 13,400,000	$ 10,700,000	$ 10,700,000	$ 10,700,000	$ 9,000,000
Dividend paid to common stockholders | $ / shares						$ 0.32	$ 0.32	$ 0.29	$ 0.29	$ 0.29	$ 0.24
Partnership distribution per unit | $ / shares						$ 0.32	$ 0.32	$ 0.29		$ 0.29	$ 0.24
Dividends payable, date payable						Jul. 08, 2015	Apr. 07, 2015	Jan. 07, 2015	Jul. 08, 2014	Apr. 08, 2014	Jan. 07, 2014
Dividends payable, date of record						Jun. 19, 2015				Jun. 20, 2014
Net proceeds from issuance of shares | $												$ 279,000,000
QTS Realty Trust, Inc. Employee Stock Purchase Plan [Member]
Partners Capital And Distributions [Line Items]
Shares reserved for purchase under plan				250,000			250,000
Underwriters [Member]
Partners Capital And Distributions [Line Items]
Sale of stock, price per share | $ / shares			$ 41.00
Option to purchase common stock shares			360,000
Shares issued			261,000	1,050,000
General Atlantic REIT, Inc. [Member]
Partners Capital And Distributions [Line Items]
Shares sold								4,350,000
Sale of stock, price per share | $ / shares																$ 34.75
Class O LTIP Holders [Member]
Partners Capital And Distributions [Line Items]
Aggregate distribution made to stockholders and partners | $										$ 200,000
Class O Units [Member]
Partners Capital And Distributions [Line Items]
Nonvested awards outstanding						500,000							500,000
Common Class A [Member]
Partners Capital And Distributions [Line Items]
Sale of stock, price per share | $ / shares														$ 37.00
Shares issued				5,750,000
Net proceeds from issuance of shares | $				$ 203,400,000
Chief Executive Officer [Member]
Partners Capital And Distributions [Line Items]
Percentage of operating partnership unit exchanged													2.00%
Underwriters [Member] | General Atlantic REIT, Inc. [Member]
Partners Capital And Distributions [Line Items]
Option to purchase share of common stock								1,402,500
Qualitytech, LP [Member]
Partners Capital And Distributions [Line Items]
Dividends payable, date of record													Sep. 18, 2015
Qualitytech, LP [Member] | Subsequent Event [Member]
Partners Capital And Distributions [Line Items]
Dividend paid to common stockholders | $ / shares		$ 0.32
Dividends payable, date payable	Oct. 06, 2015
GA QTS Interholdco, LLC [Member]
Partners Capital And Distributions [Line Items]
Sale of stock, price per share | $ / shares			$ 41.00
Shares issued			2,400,000
GA QTS Interholdco, LLC [Member] | Common Class A [Member]
Partners Capital And Distributions [Line Items]
Shares of stock sold by stockholder														1,250,000
Minimum [Member] | QTS Realty Trust, Inc. Employee Stock Purchase Plan [Member]
Partners Capital And Distributions [Line Items]
Monthly diduction from eligible employees for plan | $				40
Maximum [Member] | QTS Realty Trust, Inc. Employee Stock Purchase Plan [Member]
Partners Capital And Distributions [Line Items]
Monthly diduction from eligible employees for plan | $				$ 2,000
Restricted Class A Common Stock [Member]
Partners Capital And Distributions [Line Items]
Nonvested awards outstanding						400,000							400,000
Options to purchase Class A common stock [Member]
Partners Capital And Distributions [Line Items]
Nonvested awards outstanding						400,000							400,000
2013 Equity Incentive Plan [Member]
Partners Capital And Distributions [Line Items]
Authorized shares to be issued under the plan						4,750,000							4,750,000		1,750,000
Additional shares available for issuance under plan approved by Board of Directors					3,000,000

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Debt (Senior Notes) (Details) - USD ($)	9 Months Ended		14 Months Ended
	Sep. 30, 2015	Sep. 30, 2015	Sep. 30, 2015	Jul. 23, 2014
Unsecured Credit Facility [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Maturity date		Dec. 17, 2019
Unsecured term loan outstanding	$ 75,000,000	$ 75,000,000	$ 75,000,000
Senior Notes [Member]
Debt Instrument [Line Items]
Aggregate principal amount				$ 300,000,000
Interest rate	5.875%	5.875%	5.875%
Senior notes due	2022
Maturity date	Aug. 01, 2022
Percentage of issued price equal to face value	99.211%	99.211%	99.211%
Notes issuance date			Jul. 23, 2014

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CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) - 9 months ended Sep. 30, 2015 - USD ($) shares in Thousands, $ in Thousands	Qualitytech, LP [Member] Partnership Units [Member] General Partner [Member]	Qualitytech, LP [Member] Partnership Units [Member] Limited Partner [Member]	Qualitytech, LP [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Dividends in Excess of Earnings [Member]	Total stockholders' Equity [Member]	Noncontrolling Interest [Member]	Total
Beginning balance at Dec. 31, 2014				$ 294	$ 324,917	$ (22,503)	$ 302,708	$ 77,477	$ 380,185
Beginning balance at Dec. 31, 2014		$ 380,185	$ 380,185
Beginning balance, shares at Dec. 31, 2014				29,408
Beginning balance, shares at Dec. 31, 2014	1	36,935
Issuance of shares through equity award plan				$ 3	(3)
Issuance of shares through equity award plan, shares		263		263
Net proceeds from equity offering		$ 368,420	$ 368,420	$ 108	330,482		330,590	37,830	368,420
Net proceeds from equity offering, shares		10,750		10,750
Reclassification of noncontrolling interest upon conversion of partnership units to common stock				$ 7	8,495		8,502	(8,502)
Reclassification of noncontrolling interest upon conversion of partnership units to common stock, shares				680
Equity-based compensation expense		$ 5,206	5,206		4,355		4,355	851	5,206
Dividend to shareholders		(37,362)	(37,362)			(37,362)	(37,362)		(37,362)
Distribution to noncontrolling interests								(6,691)	(6,691)
Partnership distribution		(6,691)	(6,691)
Net income		18,795	18,795			15,723	15,723	3,072	18,795
Ending balance at Sep. 30, 2015				$ 412	$ 668,246	$ (44,142)	$ 624,516	$ 104,037	$ 728,553
Ending balance at Sep. 30, 2015		$ 728,553	$ 728,553
Ending balance, shares at Sep. 30, 2015				41,101
Ending balance, shares at Sep. 30, 2015	1	47,948

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Real Estate Assets and Construction in Progress

9 Months Ended

Sep. 30, 2015

Real Estate Assets and Construction in Progress [Abstract]

Real Estate Assets and Construction in Progress

4. Real Estate Assets and Construction in Progress

The following is a summary of properties owned or leased by the Company as of September 30, 2015 and December 31, 2014 (in thousands):

As of September 30, 2015 (unaudited):

Property Location		Land		Buildings and Improvements		Construction in Progress		Total Cost
Owned Properties
Suwanee, Georgia (Atlanta-Suwanee)	$	3,521	$	146,714	$	16,558	$	166,793
Atlanta, Georgia (Atlanta-Metro)		15,396		386,397		48,403		450,196
Santa Clara, California*		-		93,895		990		94,885
Richmond, Virginia		2,180		166,283		122,746		291,209
Sacramento, California		1,481		61,112		302		62,895
Princeton, New Jersey		20,700		32,583		314		53,597
Dallas-Fort Worth, Texas		5,808		70,710		113,115		189,633
Chicago, Illinois		-		-		43,098		43,098
Miami, Florida		1,777		30,038		306		32,121
Lenexa, Kansas		437		3,511		-		3,948
Wichita, Kansas		-		1,409		-		1,409
		51,300		992,652		345,832		1,389,784
Leased Properties
Carpathia properties ***		1,130		87,425		6,384		94,939
Jersey City, New Jersey		-		27,767		1,566		29,333
Overland Park, Kansas **		-		914		-		914
		1,130		116,106		7,950		125,186
	$	52,430	$	1,108,758	$	353,782	$	1,514,970

*    Owned facility subject to long-term ground sublease.
**   This does not include the portion of the business that is used for QTS office space or other real estate not used by customers.
*** Includes 13 facilities. All facilities are leased, including those subject to capital leases.

As of December 31, 2014:

Property Location		Land		Buildings and Improvements		Construction in Progress		Total Cost
Owned Properties
Suwanee, Georgia (Atlanta-Suwanee)	$	3,521	$	138,991	$	6,345	$	148,857
Atlanta, Georgia (Atlanta-Metro)		15,397		356,122		22,693		394,212
Santa Clara, California*		-		90,332		650		90,982
Richmond, Virginia		2,180		127,080		71,794		201,054
Sacramento, California		1,481		60,094		278		61,853
Princeton, New Jersey		17,976		35,951		90		54,017
Dallas-Fort Worth, Texas		5,808		44,053		89,982		139,843
Chicago, Illinois		-		-		21,786		21,786
Miami, Florida		1,777		28,786		129		30,692
Lenexa, Kansas		437		3,298		25		3,760
Wichita, Kansas		-		1,409		-		1,409
		48,577		886,116		213,772		1,148,465
Leased Properties
Jersey City, New Jersey		-		27,318		920		28,238
Overland Park, Kansas **		-		852		27		879
		-		28,170		947		29,117
	$	48,577	$	914,286	$	214,719	$	1,177,582

_____________________________

* Owned facility subject to long-term ground sublease.
** This does not include the portion of the business that is used for QTS office space or other real estate not used by customers.

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Subsequent Events (Narrative) (Details) - $ / shares			3 Months Ended						9 Months Ended
	Oct. 06, 2015	Oct. 06, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Sep. 30, 2015
Subsequent Event [Line Items]
Dividend paid to common stockholders			$ 0.32	$ 0.32	$ 0.29	$ 0.29	$ 0.29	$ 0.24
Dividends payable, date of record			Jun. 19, 2015				Jun. 20, 2014
Dividends payable, date payable			Jul. 08, 2015	Apr. 07, 2015	Jan. 07, 2015	Jul. 08, 2014	Apr. 08, 2014	Jan. 07, 2014
Qualitytech, LP [Member]
Subsequent Event [Line Items]
Dividends payable, date of record									Sep. 18, 2015
Subsequent Event [Member] | Qualitytech, LP [Member]
Subsequent Event [Line Items]
Dividend paid to common stockholders		$ 0.32
Dividends payable, date payable	Oct. 06, 2015

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Summary of Related Party Transactions

The transactions which occurred during the three and nine months ended September 30, 2015 and 2014 are outlined below (in thousands): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in thousands)	2015		2014		2015		2014
Tax, utility, insurance and other reimbursement	$	63	$	296	$	208	$	464
Rent expense		254		253		761		772
Capital assets acquired		38		86		163		160
Total	$	355	$	635	$	1,132	$	1,396

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Acquisitions (Schedule of Pro Forma Information Related to Acquisition) (Details) - Carpathia Hosting, Inc. [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Pro forma revenue		$ 78,951	$ 285,769	$ 218,918
Pro forma net income (loss)		$ 1,550	$ 10,901	$ 7,949

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Subsequent Events

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

14.  Subsequent Events

On October 6, 2015, the Company paid its regular quarterly cash dividend of $0.32 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on September 18, 2015.  

As discussed in Note 5, in October 2015, the Company amended and restated its unsecured credit facility, and at the same time terminated its Richmond Credit Facility.