3. Acquisitions

(All references to square footage, acres and megawatts are unaudited)

Fort Worth Acquisition

On December 16, 2016, the Company completed the acquisition of the Fort Worth facility for approximately $50.1 million (based on the preliminary assessment of the fair value of assets acquired and liabilities assumed). This facility is located in Fort Worth, Texas, and consists of 53 acres and approximately 262,000 gross square feet. This facility has a basis of design of 80,000 square feet, 8 gross MW of current available power with an additional 8 gross MW available for further expansion. This acquisition was funded with a draw on the unsecured revolving credit facility.

The Company accounted for this acquisition in accordance with ASC 805, Business Combinations, as a business combination. The Company is generally valuing the assets acquired and liabilities assumed using Level 3 inputs.

The following table summarizes the consideration for the Fort Worth facility 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:


	Fort Worth Allocation as of December 31, 2016
Land	$	136
Buildings and improvements		610
Construction in progress		48,984
Acquired intangibles		240
Deferred costs		23
Other assets		7
Net Working Capital		86
Total identifiable assets acquired	$	50,086

Acquired intangibles are amortized as both amortization expense as well as offsets to rental revenue.

Piscataway Acquisition

On June 6, 2016, the Company completed the acquisition of the Piscataway facility for approximately $125.8 million (based on the preliminary assessment of the fair value of assets acquired and liabilities assumed). This facility is located in the New York metro area on 38 acres and consists of 360,000 gross square feet, including approximately 89,000 square feet of raised floor, and approximately 18 MW of critical power. The Piscataway facility supports future growth with space for an additional approximately 87,000 square feet of raised floor in the existing structure, as well as capacity for over 8 MW of additional critical power. This acquisition was funded with a draw on the unsecured revolving credit facility.

The following table summarizes the consideration for the Piscataway facility 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:


	Piscataway Allocation as of December 31, 2016			Original Allocation Reported as of June 30, 2016		Adjusted Fair Value
Land	$	7,466	$	7,440	$	26
Buildings and improvements		80,366		78,370		1,996
Construction in progress		13,900		13,900		—
Acquired intangibles		19,581		21,668		(2,087)
Deferred costs		4,390		4,084		306
Other assets		106		106		—
Total identifiable assets acquired		125,809		125,568		241

Acquired below market lease		809		568		241
Net working capital		2,019		2,019		—
Total liabilities assumed		2,828		2,587		241

Net identifiable assets acquired	$	122,981	$	122,981	$	—

Acquired intangibles are amortized as both amortization expense as well as offsets to rental revenue. Based on the preliminary purchase price allocation, amortization expenses relative to acquired in place leases are expected to be approximately $4.0 million, $2.9 million, $2.3 million, $1.7 million and $0.5 million for the years ended December 31, 2017 through December 31, 2021, respectively. Additionally, based on the preliminary purchase price allocation, amortization expenses relative to acquired above and below market leases recorded as net offsets to rental revenue are expected to be approximately $1.1 million, $0.7 million, $0.5 million, $0.6 million and $0.0 million for the years ended December 31, 2017 through December 31, 2021, respectively.

Carpathia Acquisition

On June 16, 2015, the Company completed the acquisition of 100% of the outstanding stock of Carpathia Hosting, Inc., a Virginia-based colocation, cloud and managed services provider for approximately $373.6 million (based on the final 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 was 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 utilized 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, Canada; Amsterdam, Netherlands; Hong Kong; London, United Kingdom; and Sydney, Australia. The Company no longer leases the Sydney, Australia data center.

The Company accounted for this acquisition in accordance with ASC 805, Business Combinations, as a business combination. The Company generally valued the assets acquired and liabilities assumed using Level 3 inputs.

In June 2016, the Company finalized the Carpathia purchase price allocation. The following table summarizes the consideration for the Carpathia acquisition and the final allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (unaudited and in thousands):


	Final Carpathia Allocation as of June 30, 2016
Land	$	1,130
Buildings and improvements		78,898
Construction in progress		12,127
Acquired intangibles		108,100
Net working capital		2,851
Total identifiable assets acquired		203,106

Capital lease and lease financing obligations		43,832
Deferred income taxes		35,980
Acquired above market lease		2,453
Total liabilities assumed		82,265

Net identifiable assets acquired		120,841
Goodwill		173,843
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 potential customer base. For tax purposes, QTS acquired goodwill with a tax basis of $16.6 million, which is deductible in subsequent periods. Based on the final purchase price allocation, amortization expenses relative to the intangible assets acquired are expected to be approximately $12.2 million, $9.9 million, $8.0 million, $8.0 million and $8.0 million for the years ended December 31, 2017 through December 31, 2021, respectively. Additionally, based on the final purchase price allocation, amortization expenses relative to acquired above market leases recorded as offsets to rent expense are expected to be approximately $0.2 million for each of the years ended December 31, 2017 through December 31, 2021, respectively.

The following table represents the pro forma condensed consolidated statements of operations of the combined entities for the years ended December 31, 2015 and 2014 (in thousands):


	(Unaudited) Pro Forma Condensed Consolidated Statements of Operations
	Year Ended December 31,
	2015		2014
Revenue	$	352,529	$	299,906
Net income	$	28,109	$	12,919

These amounts have been calculated after applying the Company’s accounting policies, and give effect to the Carpathia acquisition.

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.