10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended September 30, 2019

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol	Name of each exchange on which registered:
Class A common stock, $0.01 par value	QTS	New York Stock Exchange
Preferred Stock, 7.125% Series A Cumulative Redeemable Perpetual, $0.01 par value	QTS PR A	New York Stock Exchange
Preferred Stock, 6.50% Series B Cumulative Convertible Perpetual, $0.01 par value	QTS PR B	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

QTS Realty Trust, Inc. Yes  ☒     No  ◻ QualityTech, LP Yes  ☒     No  ◻

Indicate by check mark whether the registrant has submitted electronically every interactive Data File required to be submitted 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 such files). 

QTS Realty Trust, Inc. Yes  ☒     No  ◻ QualityTech, LP Yes  ☒     No  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

QTS Realty Trust, Inc.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

QualityTech, LP

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

QTS Realty Trust, Inc. Yes  ☐     No  ☒ QualityTech, LP Yes  ☐     No  ☒

There were 58,106,133 shares of Class A common stock, $0.01 par value per share, and 128,408 shares of Class B common stock, $0.01 par value per share, of QTS Realty Trust, Inc. outstanding on November 6, 2019.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q of QTS Realty Trust, Inc. (“QTS”), a Maryland corporation, and QualityTech, LP, a Delaware limited partnership, which is our operating partnership (the “Operating Partnership”). This report also includes the financial statements of QTS and those of the Operating Partnership, although it presents only one set of combined notes for QTS’ financial statements and those of the Operating Partnership.

Substantially all of QTS’ assets are held by, and its operations are conducted through, the Operating Partnership. QTS is the sole general partner of the Operating Partnership, and, as of September 30, 2019, its only material asset consisted of its ownership of approximately 89.7% of the Operating Partnership. Management operates QTS and the Operating Partnership as one business. The management of QTS consists of the same employees as the management of the Operating Partnership. QTS does not conduct business itself, other than acting as the sole general partner of the Operating Partnership and issuing public equity from time to time. QTS has not issued or guaranteed any indebtedness. Except for net proceeds from public equity issuances by QTS, which are contributed to the Operating Partnership in exchange for units of limited partnership interest of the Operating Partnership, the Operating Partnership generates all remaining capital required by our business through its operations, the direct or indirect incurrence of indebtedness, and the issuance of partnership units. Therefore, as general partner with voting control of the Operating Partnership, QTS consolidates the Operating Partnership for financial reporting purposes.

We believe, therefore, that a combined presentation with respect to QTS and the Operating Partnership, including providing one set of notes for the financial statements of QTS and the Operating Partnership, provides the following benefits:

● enhances investors’ understanding of QTS and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

● eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this report applies to both QTS and the Operating Partnership; and

● creates time and cost efficiencies through the preparation of one presentation instead of two separate presentations.

In addition, in light of these combined disclosures, we believe it is important for investors to understand the few differences between QTS and the Operating Partnership in the context of how QTS and the Operating Partnership operate as a consolidated company. With respect to balance sheets, the presentation of stockholders’ equity and partners’ capital are the main areas of difference between the consolidated balance sheets of QTS and those of the Operating Partnership. On the Operating Partnership’s consolidated balance sheets, partners’ capital includes preferred partnership units and common partnership units as well as accumulated other comprehensive income (loss) that are owned by or attributable to QTS and other partners. On QTS’ consolidated balance sheets, stockholders’ equity includes preferred stock, common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated dividends in excess of earnings. The remaining equity reflected on QTS’ consolidated balance sheet is the portion of net assets that are retained by partners other than QTS, referred to as noncontrolling interests. With respect to statements of operations, the primary difference in QTS’ Statements of Operations and Statements of 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 separate presentation of certain accompanying notes to the financial statements, including Note 11 – 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, 2019

INDEX

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements of QTS Realty Trust, Inc.	4
	Financial Statements of Quality Tech, LP	11
	Notes to QTS Realty Trust, Inc. and QualityTech, LP Financial Statements	18
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	47
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	73
ITEM 4.	Controls and Procedures	74
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	75
ITEM 1A.	Risk Factors	75
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
ITEM 3.	Defaults Upon Senior Securities	76
ITEM 4.	Mine Safety Disclosures	76
ITEM 5.	Other Information	76
ITEM 6.	Exhibits	76
	Signatures	80

3

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

	September 30, 2019		December 31, 2018
	(unaudited)
ASSETS
Real Estate Assets
Land	$	127,587	$	105,541
Buildings, improvements and equipment		2,155,810		1,917,251
Less: Accumulated depreciation		(555,562)		(467,644)
		1,727,835		1,555,148
Construction in progress		843,754		790,064
Real Estate Assets, net		2,571,589		2,345,212
Investments in unconsolidated entity		30,742		—
Operating lease right-of-use assets, net		58,551		—
Cash and cash equivalents		13,518		11,759
Rents and other receivables, net		76,163		55,093
Acquired intangibles, net		85,242		95,451
Deferred costs, net		48,312		45,096
Prepaid expenses		8,490		6,822
Goodwill		173,843		173,843
Assets held for sale		—		71,800
Other assets, net		57,042		56,893
TOTAL ASSETS	$	3,123,492	$	2,861,969
LIABILITIES
Unsecured credit facility, net	$	918,631	$	945,657
Senior notes, net of debt issuance costs		395,358		394,786
Finance leases and mortgage notes payable		47,511		4,674
Operating lease liabilities		65,949		—
Accounts payable and accrued liabilities		94,104		99,166
Dividends and distributions payable		32,980		29,633
Advance rents, derivative contracts, security deposits and other liabilities		52,180		32,679
Liabilities held for sale		—		24,349
Deferred income taxes		1,563		1,097
Deferred income		41,404		33,241
TOTAL LIABILITIES		1,649,680		1,565,282
EQUITY
7.125% Series A cumulative redeemable perpetual preferred stock: $0.01 par value (liquidation preference $25.00 per share), 4,600,000 shares authorized, 4,280,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		103,212		103,212
6.50% Series B cumulative convertible perpetual preferred stock: $0.01 par value (liquidation preference $100.00 per share), 3,162,500 shares authorized, issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		304,223		304,265
Common stock: $0.01 par value, 450,133,000 shares authorized, 58,238,145 and 51,123,417 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		582		511
Additional paid-in capital		1,326,087		1,062,473
Accumulated other comprehensive income (loss)		(28,900)		2,073
Accumulated dividends in excess of earnings		(340,943)		(278,548)
Total stockholders’ equity		1,364,261		1,193,986
Noncontrolling interests		109,551		102,701
TOTAL EQUITY		1,473,812		1,296,687
TOTAL LIABILITIES AND EQUITY	$	3,123,492	$	2,861,969

See accompanying notes to financial statements.

4

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands except share and per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues:
Rental	$	121,475	$	104,760	$	345,841	$	305,774
Other		3,780		7,453		11,270		32,413
Total revenues		125,255		112,213		357,111		338,187
Operating expenses:
Property operating costs		44,730		38,217		117,403		112,515
Real estate taxes and insurance		3,713		3,088		10,435		8,896
Depreciation and amortization		42,875		37,900		123,144		111,633
General and administrative		19,504		19,922		59,519		63,187
Transaction and integration costs		827		901		3,080		2,474
Restructuring		—		13,737		—		33,697
Total operating expenses		111,649		113,765		313,581		332,402
Gain on sale of real estate, net		—		—		13,408		—
Operating income (loss)		13,606		(1,552)		56,938		5,785
Other income and expense:
Interest income		22		66		103		92
Interest expense		(6,724)		(6,386)		(20,329)		(22,699)
Other income		370		—		330		—
Equity in earnings (loss) of unconsolidated entity		(317)		—		(992)		—
Income (loss) before taxes		6,957		(7,872)		36,050		(16,822)
Tax benefit (expense) of taxable REIT subsidiaries		(369)		980		(779)		3,245
Net income (loss)		6,588		(6,892)		35,271		(13,577)
Net (income) loss attributable to noncontrolling interests		49		1,610		(1,593)		2,641
Net income (loss) attributable to QTS Realty Trust, Inc.	$	6,637	$	(5,282)	$	33,678	$	(10,936)
Preferred stock dividends		(7,045)		(7,045)		(21,135)		(9,621)
Net income (loss) attributable to common stockholders	$	(408)	$	(12,327)	$	12,543	$	(20,557)
Net income (loss) per share attributable to common shares:
Basic	$	(0.05)	$	(0.25)	$	0.12	$	(0.42)
Diluted		(0.05)		(0.25)		0.12		(0.42)

See accompanying notes to financial statements.

5

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited and in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Other comprehensive income (loss):
Foreign currency translation adjustment gain		(426)		—		(360)		—
Increase (decrease) in fair value of derivative contracts		(5,733)		1,429		(34,192)		9,974
Reclassification of other comprehensive income to interest expense		(235)		(83)		(1,200)		410
Comprehensive income (loss)		194		(5,546)		(481)		(3,193)
Comprehensive (income) loss attributable to noncontrolling interests		(22)		639		52		368
Comprehensive income (loss) attributable to QTS Realty Trust, Inc.	$	172	$	(4,907)	$	(429)	$	(2,825)

See accompanying notes to financial statements.

6

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED STATEMENTS OF EQUITY

(unaudited and in thousands)

The consolidated statement of equity for the nine months ended September 30, 2019:

									Accumulated other		Accumulated		Total
	Preferred Stock			Common stock			Additional		comprehensive		dividends in		stockholders'		Noncontrolling
	Shares	Amount		Shares	Amount		paid-in capital		income (loss)		excess of earnings		equity		interests		Total
Balance January 1, 2019	7,443	$	407,477	51,123	$	511	$	1,062,473	$	2,073	$	(278,548)	$	1,193,986	$	102,701	$	1,296,687
Net cumulative effect upon ASC 842 adoption (see Note 2)	—		—	—		—		—		—		(1,813)		(1,813)		—		(1,813)
Net share activity through equity award plan	—		—	231		3		660		—		—		663		78		741
Decrease in fair value of derivative contracts	—		—	—		—		—		(8,775)		—		(8,775)		(1,078)		(9,853)
Equity-based compensation expense	—		—	—		—		2,928		—		—		2,928		372		3,300
Adjustment to expenses net from Series B Preferred equity offering	—		(42)	—		—		—		—		—		(42)		—		(42)
Proceeds net of fees from common equity offering	—		—	4,000		40		148,650		—		—		148,690		9,973		158,663
Dividends declared on the Series A Preferred Stock	—		—	—		—		—		—		(1,906)		(1,906)		—		(1,906)
Dividends declared on the Series B Preferred Stock	—		—	—		—		—		—		(5,139)		(5,139)		—		(5,139)
Dividends declared to common stockholders	—		—	—		—		—		—		(24,371)		(24,371)		—		(24,371)
Dividends declared to noncontrolling interests	—		—	—		—		—		—		—		—		(2,935)		(2,935)
Net income	—		—	—		—		—		—		19,558		19,558		1,590		21,148
Balance March 31, 2019	7,443	$	407,435	55,354	$	554	$	1,214,711	$	(6,702)	$	(292,219)	$	1,323,779	$	110,701	$	1,434,480
Net share activity through equity award plan	—		—	37		—		505		—		—		505		(326)		179
Decrease in fair value of derivative contracts	—		—	—		—		—		(16,608)		—		(16,608)		(1,998)		(18,606)
Equity-based compensation expense	—		—	—		—		3,832		—		—		3,832		464		4,296
Dividends declared on the Series A Preferred Stock	—		—	—		—		—		—		(1,906)		(1,906)		—		(1,906)
Dividends declared on the Series B Preferred Stock	—		—	—		—		—		—		(5,139)		(5,139)		—		(5,139)
Dividends declared to common stockholders	—		—	—		—		—		—		(24,377)		(24,377)		—		(24,377)
Dividends declared to noncontrolling interests	—		—	—		—		—		—		—		—		(2,932)		(2,932)
Net income	—		—	—		—		—		—		7,483		7,483		52		7,535
Balance June 30, 2019	7,443	$	407,435	55,391	$	554	$	1,219,048	$	(23,310)	$	(316,158)	$	1,287,569	$	105,961	$	1,393,530
Net share activity through equity award plan	—		—	15		—		239		—		—		239		21		260
Decrease in fair value of derivative contracts	—		—	—		—		—		(5,207)		—		(5,207)		(526)		(5,733)
Foreign currency translation adjustments	—		—	—		—		—		(383)		—		(383)		(43)		(426)
Equity-based compensation expense	—		—	—		—		3,979		—		—		3,979		478		4,457
Proceeds net of fees from settlement of forward shares	—		—	2,832		28		102,821		—		—		102,849		6,641		109,490
Dividends declared on the Series A Preferred Stock	—		—	—		—		—		—		(1,906)		(1,906)		—		(1,906)
Dividends declared on the Series B Preferred Stock	—		—	—		—		—		—		(5,139)		(5,139)		—		(5,139)
Dividends declared to common stockholders	—		—	—		—		—		—		(24,377)		(24,377)		—		(24,377)
Dividends declared to noncontrolling interests	—		—	—		—		—		—		—		—		(2,932)		(2,932)
Net income	—		—	—		—		—		—		6,637		6,637		(49)		6,588
Balance September 30, 2019	7,443	$	407,435	58,238	$	582	$	1,326,087	$	(28,900)	$	(340,943)	$	1,364,261	$	109,551	$	1,473,812

See accompanying notes to financial statements.

7

The consolidated statement of equity for the nine months ended September 30, 2018:

									Accumulated other		Accumulated		Total
	Preferred Stock			Common stock			Additional		comprehensive		dividends in		stockholders'		Noncontrolling
	Shares	Amount		Shares	Amount		paid-in capital		income		excess of earnings		equity		interests		Total
Balance January 1, 2018	—	$	—	50,702	$	507	$	1,049,176	$	1,283	$	(173,552)	$	877,414	$	113,242	$	990,656
Net share activity through equity award plan	—		—	434		4		(1,311)		—		—		(1,307)		1,069		(238)
Increase in fair value of derivative contracts	—		—	—		—		—		5,290		—		5,290		692		5,982
Equity-based compensation expense	—		—	—		—		4,337		—		—		4,337		561		4,898
Proceeds net of fees from Series A Preferred Stock offering	4,280		103,184	—		—		—		—		—		103,184		—		103,184
Dividends declared on Series A Preferred Stock	—		—	—		—		—		—		(328)		(328)		—		(328)
Dividends declared to stockholders	—		—	—		—		—		—		(20,971)		(20,971)		—		(20,971)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(2,736)		(2,736)
Net income (loss)	—		—	—		—		—		—		(223)		(223)		(29)		(252)
Balance March 31, 2018	4,280	$	103,184	51,136	$	511	$	1,052,202	$	6,573	$	(195,074)	$	967,396	$	112,799	$	1,080,195
Net share activity through equity award plan	—		—	5		—		(586)		—		—		(586)		(38)		(624)
Increase in fair value of derivative contracts	—		—	—		—		—		2,267		—		2,267		296		2,563
Equity-based compensation expense	—		—	—		—		5,051		—		—		5,051		659		5,710
Adjustment to expenses net from Series A Preferred Stock offering	—		28	—		—		—		—		—		28		—		28
Proceeds net of fees from Series B Preferred Stock offering	3,163		304,426	—		—		—		—		—		304,426		—		304,426
Dividends declared on Series A Preferred Stock	—		—	—		—		—		—		(1,905)		(1,905)		—		(1,905)
Dividends declared on Series B Convertible Preferred Stock	—		—	—		—		—		—		(343)		(343)		—		(343)
Dividends declared to common stockholders	—		—	—		—		—		—		(20,971)		(20,971)		—		(20,971)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(2,736)		(2,736)
Net income (loss)	—		—	—		—		—		—		(5,431)		(5,431)		(1,002)		(6,433)
Balance June 30, 2018	7,443	$	407,638	51,141	$	511	$	1,056,667	$	8,840	$	(223,724)	$	1,249,932	$	109,978	$	1,359,910
Net share activity through equity award plan	—		—	(17)		—		(256)		—		—		(256)		(16)		(272)
Increase in fair value of derivative contracts	—		—	—		—		—		1,263		—		1,263		166		1,429
Equity-based compensation expense	—		—	—		—		3,503		—		—		3,503		458		3,961
Adjustment to expenses net from Series B Preferred Stock offering	—		(161)	—		—		—		—		—		(161)		—		(161)
Dividends declared on Series A Preferred Stock	—		—	—		—		—		—		(1,907)		(1,907)		—		(1,907)
Dividends declared on Series B Convertible Preferred Stock	—		—	—		—		—		—		(5,139)		(5,139)		—		(5,139)
Dividends declared to common stockholders	—		—	—		—		—		—		(20,967)		(20,967)		—		(20,967)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(2,735)		(2,735)
Net income (loss)	—		—	—		—		—		—		(5,282)		(5,282)		(1,610)		(6,892)
Balance September 30, 2018	7,443	$	407,477	51,124	$	511	$	1,059,914	$	10,103	$	(257,019)	$	1,220,986	$	106,241	$	1,327,227

See accompanying notes to financial statements.

8

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the nine months ended September 30, 2019 and 2018

	2019		2018
Cash flow from operating activities:
Net income (loss)	$	35,271	$	(13,577)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		117,448		107,019
Amortization of above and below market leases		126		385
Amortization of deferred loan costs		2,935		2,882
Equity in (earnings) loss of unconsolidated entity		992		—
Equity-based compensation expense		12,052		11,441
Bad debt expense (recoveries)		740		(1,625)
(Gain) loss on sale of assets, net		(13,408)		2,846
Deferred tax expense (benefit)		466		(3,423)
Restructuring costs, net of cash paid		—		18,960
Foreign currency remeasurement (gain) loss		(330)		—
Changes in operating assets and liabilities
Rents and other receivables, net		(20,606)		(3,429)
Prepaid expenses		(1,318)		(3,265)
Due to/from affiliates, net		8,378		—
Other assets		(1,544)		7,060
Accounts payable and accrued liabilities		3,587		13,241
Advance rents, security deposits and other liabilities		(3,719)		1,044
Deferred income		8,163		6,546
Net cash provided by operating activities		149,233		146,105
Cash flow from investing activities:
Proceeds from sale of property, net		52,722		1,496
Acquisitions, net of cash acquired		(69,355)		(36,956)
Additions to property and equipment		(270,879)		(382,221)
Net cash used in investing activities		(287,512)		(417,681)
Cash flow from financing activities:
Credit facility proceeds		306,149		312,000
Credit facility repayments		(334,000)		(362,000)
Payment of deferred financing costs		(182)		(609)
Payment of preferred stock dividends		(21,135)		(2,541)
Payment of common stock dividends		(69,709)		(61,612)
Distribution to noncontrolling interests		(8,601)		(8,024)
Proceeds from exercise of stock options		3,594		48
Payment of tax withholdings related to equity-based awards		(3,143)		(1,481)
Principal payments on finance lease obligations		(2,243)		(6,142)
Mortgage principal debt repayments		(43)		(43)
Preferred stock issuance proceeds, net of costs		—		407,616
Common stock issuance proceeds, net of costs		268,392		—
Net cash provided by financing activities		139,079		277,212
Effect of foreign currency exchange rates on cash and cash equivalents		959		—
Net change in cash and cash equivalents		1,759		5,636
Cash and cash equivalents, beginning of period		11,759		8,243
Cash and cash equivalents, end of period	$	13,518	$	13,879

See accompanying notes to financial statements.

9

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW (continued)

(unaudited and in thousands)

For the nine months ended September 30, 2019 and 2018

	2019		2018
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	$	37,735	$	33,296
Noncash investing and financing activities:
Accrued capital additions	$	41,013	$	75,315
Net increase (decrease) in other assets/liabilities related to change in fair value of derivative contracts	$	(34,192)	$	9,974
Equity received in unconsolidated entity in exchange for real estate assets	$	25,280	$	—
Increase in assets in exchange for finance lease obligation	$	45,024	$	—
Accrued equity issuance costs	$	197	$	139
Accrued preferred stock dividend	$	5,938	$	7,080

See accompanying notes to financial statements.

10

QUALITYTECH, LP

INTERIM CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

	September 30, 2019		December 31, 2018
	(unaudited)
ASSETS
Real Estate Assets
Land	$	127,587	$	105,541
Buildings, improvements and equipment		2,155,810		1,917,251
Less: Accumulated depreciation		(555,562)		(467,644)
		1,727,835		1,555,148
Construction in progress		843,754		790,064
Real Estate Assets, net		2,571,589		2,345,212
Investments in unconsolidated entity		30,742		—
Operating lease right-of-use assets, net		58,551		—
Cash and cash equivalents		13,518		11,759
Rents and other receivables, net		76,163		55,093
Acquired intangibles, net		85,242		95,451
Deferred costs, net		48,312		45,096
Prepaid expenses		8,490		6,822
Goodwill		173,843		173,843
Assets held for sale		—		71,800
Other assets, net		57,042		56,893
TOTAL ASSETS	$	3,123,492	$	2,861,969
LIABILITIES
Unsecured credit facility, net	$	918,631	$	945,657
Senior notes, net of debt issuance costs		395,358		394,786
Finance leases and mortgage notes payable		47,511		4,674
Operating lease liabilities		65,949		—
Accounts payable and accrued liabilities		94,104		99,166
Dividends and distributions payable		32,980		29,633
Advance rents, derivative contracts, security deposits and other liabilities		52,180		32,679
Liabilities held for sale		—		24,349
Deferred income taxes		1,563		1,097
Deferred income		41,404		33,241
TOTAL LIABILITIES		1,649,680		1,565,282
PARTNERS' CAPITAL
7.125% Series A cumulative redeemable perpetual preferred units: $0.01 par value (liquidation preference $25.00 per unit), 4,600,000 units authorized, 4,280,000 units issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		103,212		103,212
6.50% Series B cumulative convertible perpetual preferred units: $0.01 par value (liquidation preference $100.00 per unit), 3,162,500 units authorized, issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		304,223		304,265
Common units: $0.01 par value, 450,133,000 units authorized, 64,906,057 and 57,799,035 units issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		1,098,651		886,866
Accumulated other comprehensive income (loss)		(32,274)		2,344
TOTAL PARTNERS' CAPITAL		1,473,812		1,296,687
TOTAL LIABILITIES AND PARTNERS' CAPITAL	$	3,123,492	$	2,861,969

See accompanying notes to financial statements.

11

QUALITYTECH, LP

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues:
Rental	$	121,475	$	104,760	$	345,841	$	305,774
Other		3,780		7,453		11,270		32,413
Total revenues		125,255		112,213		357,111		338,187
Operating expenses:
Property operating costs		44,730		38,217		117,403		112,515
Real estate taxes and insurance		3,713		3,088		10,435		8,896
Depreciation and amortization		42,875		37,900		123,144		111,633
General and administrative		19,504		19,922		59,519		63,187
Transaction and integration costs		827		901		3,080		2,474
Restructuring		—		13,737		—		33,697
Total operating expenses		111,649		113,765		313,581		332,402
Gain on sale of real estate, net		—		—		13,408		—
Operating income (loss)		13,606		(1,552)		56,938		5,785
Other income and expense:
Interest income		22		66		103		92
Interest expense		(6,724)		(6,386)		(20,329)		(22,699)
Other income		370		—		330		—
Equity in earnings (loss) of unconsolidated entity		(317)		—		(992)		—
Income (loss) before taxes		6,957		(7,872)		36,050		(16,822)
Tax benefit (expense) of taxable REIT subsidiaries		(369)		980		(779)		3,245
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Preferred unit distributions		(7,045)		(7,045)		(21,135)		(9,621)
Net income (loss) attributable to common unitholders	$	(457)	$	(13,937)	$	14,136	$	(23,198)

See accompanying notes to financial statements.

12

QUALITYTECH, LP

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited and in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Other comprehensive income (loss):
Foreign currency translation adjustment gain		(426)		—		(360)		—
Increase (decrease) in fair value of derivative contracts		(5,733)		1,429		(34,192)		9,974
Reclassification of other comprehensive income to interest expense		(235)		(83)		(1,200)		410
Comprehensive income (loss)	$	194	$	(5,546)	$	(481)	$	(3,193)

See accompanying notes to financial statements.

13

QUALITYTECH, LP

INTERIM CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

(unaudited and in thousands)

The consolidated statement of partners’ capital for the nine months ended September 30, 2019:

	Limited Partners' Capital						General Partner's Capital			Accumulated other
	Preferred Units			Common Units			Common Units			comprehensive income (loss)
	Units	Amount		Units	Amount		Units	Amount		Amount		Total
Balance January 1, 2019	7,443	$	407,477	57,799	$	886,866	1	$	—	$	2,344	$	1,296,687
Net cumulative effect upon ASC 842 adoption (see Note 2)	—		—	—		(1,813)	—		—		—		(1,813)
Net share activity through equity award plan	—		—	229		741	—		—		—		741
Decrease in fair value of derivative contracts	—		—	—		—	—		—		(9,853)		(9,853)
Equity-based compensation expense	—		—	—		3,300	—		—		—		3,300
Adjustment to expenses net from Series B Preferred equity offering	—		(42)	—		—	—		—		—		(42)
Proceeds net of fees from equity offering	—		—	4,000		158,663	—		—		—		158,663
Dividends declared on Series A Preferred Units	—		—	—		(1,906)	—		—		—		(1,906)
Dividends declared on Series B Convertible Preferred Units	—		—	—		(5,139)	—		—		—		(5,139)
Common dividends declared to QTS Realty Trust, Inc.	—		—	—		(24,371)	—		—		—		(24,371)
Partnership distributions	—		—	—		(2,935)	—		—		—		(2,935)
Net income	—		—	—		21,148	—		—		—		21,148
Balance March 31, 2019	7,443	$	407,435	62,028	$	1,034,554	1	$	—	$	(7,509)	$	1,434,480
Net share activity through equity award plan	—		—	31		179	—		—		—		179
Decrease in fair value of derivative contracts	—		—	—		—	—		—		(18,606)		(18,606)
Equity-based compensation expense	—		—	—		4,296	—		—		—		4,296
Dividends declared on Series A Preferred Units	—		—	—		(1,906)	—		—		—		(1,906)
Dividends declared on Series B Convertible Preferred Units	—		—	—		(5,139)	—		—		—		(5,139)
Common dividends declared to QTS Realty Trust, Inc.	—		—	—		(24,377)	—		—		—		(24,377)
Partnership distributions	—		—	—		(2,932)	—		—		—		(2,932)
Net income	—		—	—		7,535	—		—		—		7,535
Balance June 30, 2019	7,443	$	407,435	62,059	$	1,012,210	1	$	—	$	(26,115)	$	1,393,530
Net share activity through equity award plan	—		—	15		260	—		—		—		260
Decrease in fair value of derivative contracts	—		—	—		—	—		—		(5,733)		(5,733)
Foreign currency translation adjustments	—		—	—		—	—		—		(426)		(426)
Equity-based compensation expense	—		—	—		4,457	—		—		—		4,457
Proceeds net of fees from settlement of forward shares	—		—	2,832		109,490	—		—		—		109,490
Dividends declared on Series A Preferred Units	—		—	—		(1,906)	—		—		—		(1,906)
Dividends declared on Series B Convertible Preferred Units	—		—	—		(5,139)	—		—		—		(5,139)
Common dividends declared to QTS Realty Trust, Inc.	—		—	—		(24,377)	—		—		—		(24,377)
Partnership distributions	—		—	—		(2,932)	—		—		—		(2,932)
Net income	—		—	—		6,588	—		—		—		6,588
Balance September 30, 2019	7,443	$	407,435	64,906	$	1,098,651	1	$	—	$	(32,274)	$	1,473,812

See accompanying notes to financial statements.

14

The consolidated statement of partners’ capital for the nine months ended September 30, 2018:

	Limited Partners' Capital						General Partner's Capital			Accumulated other
	Preferred Units			Common Units			Common Units			comprehensive income
	Units	Amount		Units	Amount		Units	Amount		Amount		Total
Balance January 1, 2018	—	$	—	57,246	$	989,207	1	$	—	$	1,449	$	990,656
Net share activity through equity award plan	—		—	564		(238)	—		—		—		(238)
Increase in fair value of derivative contracts	—		—	—		—	—		—		5,982		5,982
Equity-based compensation expense	—		—	—		4,898	—		—		—		4,898
Net proceeds from QTS Realty Trust, Inc. equity offerings				—		—	—		—		—		—
Proceeds net of fees from QTS Realty Trust, Inc. Series A Preferred equity offering	4,280		103,184	—		—	—		—		—		103,184
Dividends declared on Series A Preferred Units	—		—	—		(328)	—		—		—		(328)
Dividends declared to QTS Realty Trust, Inc.	—		—	—		(20,971)	—		—		—		(20,971)
Partnership distributions	—		—	—		(2,736)	—		—		—		(2,736)
Net income (loss)	—		—	—		(252)	—		—		—		(252)
Balance March 31, 2018	4,280	$	103,184	57,810	$	969,580	1	$	—	$	7,431	$	1,080,195
Net share activity through equity award plan	—		—	8		(624)	—		—		—		(624)
Increase in fair value of derivative contracts	—		—	—		—	—		—		2,563		2,563
Equity-based compensation expense	—		—	—		5,710	—		—		—		5,710
Adjustments to expenses net from QTS Realty Trust, Inc. Series A Preferred Stock offering	—		28	—		—	—		—		—		28
Proceeds net of fees from QTS Realty Trust, Inc. Series B Preferred equity offering	3,163		304,426	—		—	—		—		—		304,426
Dividends declared on Series A Preferred Units	—		—	—		(1,905)	—		—		—		(1,905)
Dividends declared on Series B Convertible Preferred Units	—		—	—		(343)	—		—		—		(343)
Dividends declared to QTS Realty Trust, Inc.	—		—	—		(20,971)	—		—		—		(20,971)
Partnership distributions	—		—	—		(2,736)	—		—		—		(2,736)
Net (loss)	—		—	—		(6,433)	—		—		—		(6,433)
Balance June 30, 2018	7,443	$	407,638	57,818	$	942,278	1	$	—	$	9,994	$	1,359,910
Net share activity through equity award plan	—		—	(17)		(272)	—		—		—		(272)
Increase in fair value of interest derivative contracts	—		—	—		—	—		—		1,429		1,429
Equity-based compensation expense	—		—	—		3,961	—		—		—		3,961
Adjustments to expenses net from QTS Realty Trust, Inc. Series B Preferred Stock offering	—		(161)	—		—	—		—		—		(161)
Dividends declared on Series A Preferred Units	—		—	—		(1,907)	—		—		—		(1,907)
Dividends declared on Series B Convertible Preferred Units	—		—	—		(5,139)	—		—		—		(5,139)
Dividends declared to QTS Realty Trust, Inc.	—		—	—		(20,967)	—		—		—		(20,967)
Partnership distributions	—		—	—		(2,735)	—		—		—		(2,735)
Net (loss)	—		—	—		(6,892)	—		—		—		(6,892)
Balance September 30, 2018	7,443	$	407,477	57,801	$	908,327	1	$	—	$	11,423	$	1,327,227

See accompanying notes to financial statements.

15

QUALITYTECH, LP

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the nine months ended September 30, 2019 and 2018

	2019		2018
Cash flow from operating activities:
Net income (loss)	$	35,271	$	(13,577)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		117,448		107,019
Amortization of above and below market leases		126		385
Amortization of deferred loan costs		2,935		2,882
Equity in (earnings) loss of unconsolidated entity		992		—
Equity-based compensation expense		12,052		11,441
Bad debt expense (recoveries)		740		(1,625)
(Gain) loss on sale of assets, net		(13,408)		2,846
Deferred tax expense (benefit)		466		(3,423)
Restructuring costs, net of cash paid		—		18,960
Foreign currency remeasurement (gain) loss		(330)		—
Changes in operating assets and liabilities
Rents and other receivables, net		(20,606)		(3,429)
Prepaid expenses		(1,318)		(3,265)
Due to/from affiliates, net		8,378		—
Other assets		(1,544)		7,060
Accounts payable and accrued liabilities		3,587		13,241
Advance rents, security deposits and other liabilities		(3,719)		1,044
Deferred income		8,163		6,546
Net cash provided by operating activities		149,233		146,105
Cash flow from investing activities:
Proceeds from sale of property, net		52,722		1,496
Acquisitions, net of cash acquired		(69,355)		(36,956)
Additions to property and equipment		(270,879)		(382,221)
Net cash used in investing activities		(287,512)		(417,681)
Cash flow from financing activities:
Credit facility proceeds		306,149		312,000
Credit facility repayments		(334,000)		(362,000)
Payment of deferred financing costs		(182)		(609)
Payment of preferred unit dividends		(21,135)		(2,541)
Payment of dividends to QTS Realty Trust, Inc.		(69,709)		(61,612)
Partnership distributions		(8,601)		(8,024)
Proceeds from exercise of stock options		3,594		48
Payment of tax withholdings related to equity-based awards		(3,143)		(1,481)
Principal payments on finance lease obligations		(2,243)		(6,142)
Mortgage principal debt repayments		(43)		(43)
Preferred unit issuance proceeds, net of costs		—		407,616
Common unit issuance proceeds, net of costs		268,392		—
Net cash provided by financing activities		139,079		277,212
Effect of foreign currency exchange rates on cash and cash equivalents		959		—
Net change in cash and cash equivalents		1,759		5,636
Cash and cash equivalents, beginning of period		11,759		8,243
Cash and cash equivalents, end of period	$	13,518	$	13,879

See accompanying notes to financial statements.

16

QUALITYTECH, LP

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW (continued)

(unaudited and in thousands)

For the nine months ended September 30, 2019 and 2018

	2019		2018
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	$	37,735	$	33,296
Noncash investing and financing activities:
Accrued capital additions	$	41,013	$	75,315
Net increase (decrease) in other assets/liabilities related to change in fair value of derivative contracts	$	(34,192)	$	9,974
Equity received in unconsolidated entity in exchange for real estate assets	$	25,280	$	—
Increase in assets in exchange for finance lease obligation	$	45,024	$	—
Accrued equity issuance costs	$	197	$	139
Accrued preferred unit distribution	$	5,938	$	7,080

See accompanying notes to financial statements.

17

QTS REALTY TRUST, INC.

QUALITYTECH, LP

NOTES TO UNAUDITED INTERIM 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 its subsidiaries, the “Company,” “we,” “us,” or “our”) and the subsidiaries of the Operating Partnership, is engaged in the business of owning, acquiring, constructing, redeveloping and managing multi-tenant data centers. As of September 30, 2019 our portfolio consisted of 26 owned and leased properties, including properties associated with unconsolidated entities, with data centers located throughout the United States, Canada, Europe and Asia.

As of September 30, 2019, QTS owned approximately 89.7% 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 of the Operating Partnership 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”) for interim financial information and in compliance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 25, 2019. The consolidated balance sheet data included herein as of December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by 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.

The Operating Partnership meets the definition and criteria of a variable interest entity (“VIE”) in accordance with ASC 810 Consolidation, and the Company is the primary beneficiary of the VIE. As discussed below, the Company’s only material asset is its ownership interest in the Operating Partnership, and consequently, all of its assets and liabilities represent those assets and liabilities of the Operating Partnership. The Company’s debt is an obligation of the Operating Partnership where the creditors may have recourse, under certain circumstances, against the credit of the Company.

QTS is the sole general partner of the Operating Partnership. Management operates QTS and the Operating Partnership as one business. The management of QTS consists of the same employees as the management of the Operating Partnership. QTS does not conduct business itself, other than acting as the sole general partner of the Operating Partnership and issuing public equity from time to time. QTS has not issued or guaranteed any indebtedness. Except for net proceeds from public equity issuances by QTS, which are contributed to the Operating Partnership in exchange for units of limited partnership interest of the Operating Partnership, the Operating Partnership generates all remaining capital required by the 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.

The Company presents one set of notes for the financial statements of QTS and the Operating Partnership.

18

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 4.75% Senior Notes due 2025 and the unsecured credit facility, both discussed in Note 8, are fully, unconditionally, and jointly and severally guaranteed by the Operating Partnership’s existing subsidiaries (other than certain foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Operating Partnership, QTS Finance Corporation (the co-issuer of the 4.75% Senior Notes due 2025) or any subsidiary guarantor. The indenture governing the 4.75% Senior Notes due 2025 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 “Code”).

The interim consolidated financial statements of QTS Realty Trust, Inc. include 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 controlled 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.

We evaluate our investments in unconsolidated entities to determine whether they should be recorded on a consolidated basis. The percentage of ownership interest in the entity, an evaluation of control and whether a VIE exists are all considered in our consolidation assessment. Investments in real estate entities which we have the ability to exercise significant influence, but do not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, our share of the earnings or losses of these entities is included in consolidated net income (loss).

Variable Interest Entities (VIEs) – We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. The determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions, to replace the manager and to sell or liquidate the entity. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion

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continually. As of September 30, 2019, we had one unconsolidated entity that was considered a VIE for which we are not the primary beneficiary. Our maximum exposure to losses associated with this VIE is limited to our aggregate investment, which was approximately $30.7 million as of September 30, 2019.

Reclassifications – Revenue categories in the statement of operations for the three and nine months ended September 30, 2018 have been reclassified to conform to 2019 presentation which is presented in accordance with ASC 842 and the reclassifications consists of two categories instead of four categories presented historically. The statement of operations for the three months ended September 30, 2018 incorporates a reclassification of $1.2 million of straight line rent from the “Other” line item into the “Rental” line item, a reclassification of $11.8 million of “Recoveries from Customers” from its own line item into the “Rental” line item, as well as the combination of $7.5 million of what was previously classified as “Cloud and managed services” revenue and less than $0.1 million of remaining “Other” revenue into a single “Other” line item. The statement of operations for the nine months ended September 30, 2018 incorporates a reclassification of $5.3 million of straight line rent from the “Other” line item into the “Rental” line item, a reclassification of $33.8 million of “Recoveries from Customers” from its own line item into the “Rental” line item, as well as the combination of $31.7 million of what was previously classified as “Cloud and managed services” revenue and $0.7 million of remaining “Other” revenue into a single “Other” line item.

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 for real estate assets 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, 2019, depreciation expense related to real estate assets and non-real estate assets was $29.8 million and $2.9 million, respectively, for a total of $32.7 million. For the three months ended September 30, 2018, depreciation expense related to real estate assets and non-real estate assets was $25.8 million and $3.3 million, respectively, for a total of $29.1 million. For the nine months ended September 30, 2019, depreciation expense related to real estate assets and non-real estate assets was $86.8 million and $8.7 million, respectively, for a total of $95.5 million. For the nine months ended September 30, 2018, depreciation expense related to real estate assets and non-real estate assets was $74.4 million and $9.7 million, respectively, for a total of $84.1 million. We capitalize 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 $4.8 million and $4.5 million for the three months ended September 30, 2019 and 2018, respectively, and $13.1 million and $11.7 million for the nine months ended September 30, 2019 and 2018, respectively. Interest is capitalized during the period of development by applying our weighted average effective borrowing rate to the actual development and other capitalized costs paid during the construction period. Interest is capitalized until the property is ready for its intended use. Interest costs capitalized totaled $8.7 million and $6.7 million for the three months ended September 30, 2019 and 2018, respectively, and $24.9 million and $18.1 million for the nine months ended September 30, 2019 and 2018, respectively.

Acquisitions and Sales – Acquisitions of real estate and other entities are either accounted for as asset acquisitions or business combinations depending on facts and circumstances. When substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction is accounted for as an asset acquisition. In an asset acquisition, the purchase price paid for assets acquired is allocated between identified tangible and intangible assets acquired based on relative fair value. Transaction costs associated with asset acquisitions are capitalized. When substantially all of the fair value of assets acquired is not concentrated in a group of similar identifiable assets, the set of assets will generally be considered a business. When accounting for business combinations 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 assigned to the acquired tangible assets, consisting primarily of land, construction in progress, 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 finance leases. The excess of the fair value

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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. Transaction costs associated with business combinations are expensed as incurred.

In developing estimates of fair value of acquired assets and assumed liabilities, management analyzes 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. 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. This amortization expense is accounted for as real estate amortization expense.

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. Above or below market leases are amortized as a reduction to or increase in rental revenue when we are the lessor as well as a reduction to or increase in rent expense over the remaining lease terms when we are the lessee. The expense associated with trade name intangibles is accounted for as real estate amortization expense, whereas the expense associated with the amortization of platform intangibles is accounted for as non-real estate amortization expense.

We account for the sale of assets to non-customers under Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which provides for recognition or derecognition based on transfer of ownership. During the three months ended March 31, 2019, we sold our Manassas facility to an unconsolidated affiliate in exchange for cash consideration and noncash consideration in the form of an equity interest in the unconsolidated entity. After measuring the consideration received at fair value, we recognized a $13.4 million gain on sale of real estate, net of approximately $5.8 million of transaction costs, associated with our contribution of certain assets in our Manassas facility to the unconsolidated entity. Substantially all of the fair value of the assets contributed to the entity was concentrated in a group of similar identifiable assets and the sale of the assets were not to a customer, therefore the transaction was accounted for as an asset sale. The gain on sale of real estate is included within the “Gain on sale of real estate, net” line item of the consolidated statements of operations.

Impairment of Long-Lived Assets, Intangible Assets and Goodwill – We review our long-lived assets and intangible 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 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, 2019. We recognized $3.3 million and $7.6 million of impairment losses related to certain non-real estate product related assets during the three and nine months ended September 30, 2018, respectively, which was included in the “Restructuring” line item of the consolidated statement of operations.

The fair value of goodwill is the consideration transferred in a business combination which is not allocable to identifiable intangible and tangible assets. Goodwill is subject to at least an annual assessment for impairment. In connection with the goodwill impairment evaluation that we performed as of October 1, 2018, we determined qualitatively that it is not more likely than not that the fair value of our one reporting unit was less than the carrying amount, thus we did not perform a quantitative analysis. As we continue to operate and assess our goodwill at the consolidated level for our single reporting unit and our market capitalization significantly exceeds our net asset value, further analysis was not deemed necessary as of September 30, 2019.

Assets Held for Sale – We completed the sale of the Manassas facility to an unconsolidated entity on February 22, 2019. As of December 31, 2018, prior to our sale of the assets to the entity, the completion of the sale was probable and we

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accordingly reclassified certain assets, as well as liabilities associated with those assets, as held for sale. As of December 31, 2018, the asset value of $71.8 million associated with the held for sale assets was included within the “Assets held for sale” line item of the consolidated statements of financial position and primarily consisted of construction in progress. As of December 31, 2018, the liability value of $24.3 million associated with the held for sale liabilities was included within the “Liabilities held for sale” line item of the consolidated statements of financial position and primarily consisted of accounts payable and accrued liabilities associated with construction in progress assets. See Note 7 for further discussion of the unconsolidated entity.

Cash and Cash Equivalents – We consider 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. Our 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. We mitigate this risk by depositing a majority of our funds with several major financial institutions. We also have not experienced any losses and do not believe that the risk is significant.

Deferred Costs – Deferred costs, net, on our 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. Debt issuance costs related to revolving debt arrangements are deferred and presented as assets on the balance sheet; however, all other debt issuance costs are recorded as a direct offset to the associated liability. Amortization of debt issuance costs, including those costs presented as offsets to the associated liability in the consolidated balance sheet, was $1.0 million for both the three months ended September 30, 2019 and 2018, respectively, and $2.9 million for both the nine months ended September 30, 2019 and 2018, respectively. Deferred financing costs presented as assets on the balance sheet related to revolving debt arrangements, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	11,519	$	11,530
Accumulated amortization		(5,289)		(3,859)
Deferred financing costs, net	$	6,230	$	7,671

Deferred financing costs presented as offsets to the associated liabilities on the balance sheet related to fixed debt arrangements, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	14,609	$	14,501
Accumulated amortization		(4,449)		(2,944)
Deferred financing costs, net	$	10,160	$	11,557

Initial direct costs, or deferred leasing costs, include commissions paid to third parties, including brokers, leasing and referral agents, and internal sales commissions paid to employees for successful execution of lease agreements and are accounted for pursuant to ASC 842, Leases. These costs are incurred when we execute lease agreements and represent only incremental costs that would not have been incurred if the lease agreement had not been executed. To a lesser extent, we incur the same incremental costs to obtain managed service contracts with customers that are accounted for pursuant to ASC 606, Revenue from Contracts with Customers. Because the framework of accounting for these costs and the underlying nature of the costs are the same for our revenue and lease contracts, the costs are presented on a combined basis within our financial statements and within the below table. Both revenue and leasing commissions are capitalized and generally amortized over the term of the related leases or the expected term of the contract using the straight-line method. If a customer lease terminates prior to the expiration of its initial term, any unamortized initial direct costs

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related to the lease are written off to amortization expense. Amortization of deferred leasing costs totaled $6.7 million and $5.5 million for the three months ended September 30, 2019 and 2018, respectively, and $17.7 million and $15.7 million for the nine months ended September 30, 2019 and 2018, respectively. Deferred leasing costs, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred leasing costs	$	70,594	$	63,018
Accumulated amortization		(28,512)		(25,593)
Deferred leasing costs, net	$	42,082	$	37,425

Revenue Recognition – We derive our revenues from leases with customers for data center space which include lease components and nonlease revenue components, such as power, tenant recoveries, cloud and managed services. We adopted Accounting Standards Codification (“ASC”) Topic 842, Leases, the new accounting standard for leases, effective January 1, 2019 using the modified retrospective approach. In addition, we adopted ASC Topic 606, Revenue from Contracts with Customers, the new accounting standard for revenue from contracts with customers, effective January 1, 2018 using the modified retrospective approach. We have elected the available practical expedient to combine our nonlease revenue components that have the same pattern of transfer as the related operating lease component into a single combined lease component under ASC 842. See the “Recently Adopted Accounting Standards” section below for further details.

A description of each of our disaggregated revenue streams is as follows:

Rental Revenue

Our leases with customers are classified as operating leases and rental revenue is recognized on a straight-line basis over the customer lease term. Occasionally, customer leases include options to extend or terminate the lease agreements. We do not include any of these extension or termination options in a customer’s lease term for lease classification purposes or recognizing rental revenue unless it is reasonably certain the customer will exercise these extension or termination options.

Rental revenue also includes revenue from power delivery on fixed power arrangements, whereby customers are billed and pay a fixed monthly fee per committed available amount of connected power. These fixed power arrangements require us to provide a series of distinct services and stand ready to deliver the power over the contracted term which is co-terminus with the lease. Customer fixed power arrangements have the same pattern of transfer over the lease term as the lease component and are therefore combined with the lease component to form a single lease component that is recognized over the term of the lease on a straight line basis.

In addition, rental revenue includes straight line rent. Straight line rent represents the difference in rents recognized during the period versus amounts contractually due pursuant to the underlying leases and is recorded as deferred rent receivable/payable in the consolidated balance sheets. 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 $34.6 million and $29.7 million as of September 30, 2019 and December 31, 2018, respectively.

Rental revenue also includes amortization of set-up fees which are amortized over the term of the respective lease as discussed below.

Variable Lease Revenue from Recoveries

Certain customer leases contain provisions under which customers reimburse us for power and cooling-related charges as well as a portion of the property’s real estate taxes, insurance and other operating expenses. Recoveries of power and cooling-related expenses relate specifically to our variable power arrangements, whereby customers pay variable monthly fees for the specific amount of power utilized at the current utility rates. Our performance obligation is to stand

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ready to deliver power over the life of the customer contract up to a contracted power capacity. Customers have the flexibility to increase or decrease the amount of power consumed, and therefore sub-metered power revenue is constrained at contract inception. The reimbursements are included in revenue as recoveries from customers and are recognized each month as the uncertainty related to the consideration is resolved (i.e. we provide power to our customers) and customers utilize the power. Reimbursement of real estate taxes, insurance, common area maintenance, or other operating expenses are accounted for as variable payments under lease guidance pursuant to the practical expedient and are recognized as revenue in the period that the expenses are recognized. Variable lease revenue from recoveries discussed above, including power, common area maintenance or other operating costs, have the same pattern of transfer over the lease term as the lease component and are therefore combined with the lease component to form a single lease component. Variable lease revenue from recoveries is included within the “rental” line item of the statement of operations.

Other Revenue

Other revenue primarily consists of revenue from our cloud and managed service offerings. We, through our Taxable REIT Subsidiaries (“TRS”), may provide both our cloud product and use of our managed services to our customers on an individual or combined basis. In both our cloud and managed services offerings the TRS’s performance obligation is to provide services (e.g. cloud hosting, data backup, data storage or data center personnel labor hours) to facilitate a fully integrated information technology (“IT”) outsourcing environment over a contracted term. Although underlying services may vary, over the contracted term monthly service offerings are substantially the same and we account for the services as a series of distinct services in accordance with ASC 606. Service fee revenue is recognized as the revenue is earned, which generally coincides with the services being provided. As we have the right to consideration from customers in an amount that corresponds directly with the value to the customer of the TRS’s performance of providing continuous services, we recognize monthly revenue for the amount invoiced.

With respect to the transaction price allocated to remaining performance obligations within our cloud and managed service contracts, we have elected to use the optional exemption provided by ASC 606 whereby we are not required to estimate the total transaction price allocated to remaining performance obligations as we apply the “right-to-invoice” practical expedient. As described above, the nature of our performance obligation in these contracts is to provide monthly services that are substantially the same and accounted for as a series of distinct services. These contracts generally have a remaining term ranging from month-to-month to three years.

Management fees and other revenues are generally received from our unconsolidated affiliate properties as well as third parties. Management fee revenue is earned based on a contractual percentage of unconsolidated affiliate property revenue. Development fee revenue is earned on a contractual percentage of hard costs to develop a property. We recognize revenue for these services provided when earned based on the performance criteria in ASC 606, with such revenue recorded in “Other” revenue on the consolidated statement of operations.

Allowance for Uncollectible Accounts Receivable – We record a provision for uncollectible accounts if a receivable balance relating to contractual rent, rental revenue recorded on a straight-line basis, tenant recoveries or other billed amounts is considered by management to be not probable of collection, and this provision is recorded as a reduction to leasing revenues. We also record a general provision of estimated uncollectible tenant receivables that is based on management’s historical experience and a review of the current status of our receivables deemed probable of collection. This provision is recorded as bad debt expense and recorded within Property Operating Costs within the consolidated statement of operations. The aggregate allowance for doubtful accounts on the consolidated balance sheet was $1.9 million and $3.8 million as of September 30, 2019 and December 31, 2018, respectively.

Deferred Income – Deferred income generally results from non-refundable charges paid by the customer at lease inception to prepare their space for occupancy. We record 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 $41.4 million and $33.2 million as of September 30, 2019 and December 31, 2018, respectively. Additionally, $4.0 million and $3.3 million of deferred income was amortized into revenue for the three months ended September 30, 2019 and 2018, respectively, and $11.1 million and $9.4 million for the nine months ended September 30, 2019 and 2018, respectively.

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Foreign Currency - The financial position of foreign subsidiaries is translated at the exchange rates in effect at the end of the period, while revenues and expenses are translated at average exchange rates during the period. Gains or losses from translation of foreign operations where the local currency is the functional currency are included as components of other comprehensive income (loss). Gains or losses from foreign currency transactions are included in determining net income (loss).

Equity-based Compensation – Equity-based compensation costs are measured based upon their estimated fair value on the date of grant or modification and amortized ratably over their respective service periods. We have elected to account for forfeitures as they occur. Equity-based compensation expense was $4.5 million and $3.9 million for the three months ended September 30, 2019 and 2018, respectively, and $12.1 million and $11.4 million for the nine months ended September 30, 2019 and 2018, respectively. Equity-based compensation expense for the nine months ended September 30, 2018 excludes $3.1 million of equity-based compensation expense associated with the acceleration of equity awards related to certain employees impacted by the Company’s strategic growth plan, all of which was incurred during the six months ended June 30, 2018. The aforementioned equity-based compensation expense is included in the “Restructuring” expense line item on the consolidated statements of operations.

Segment Information – We manage our business as one operating segment and thus one reportable segment consisting of a portfolio of investments in multiple data centers.

Customer Concentrations – As of September 30, 2019, one of our customers represented 9.8% of our total monthly rental revenue. No other customers exceeded 6% of total monthly rental revenue.

As of September 30, 2019, three of our customers exceeded 5% of trade accounts receivable. In aggregate, these three customers accounted for approximately 26% of trade accounts receivable. One of these customers individually exceeded 10% of trade accounts receivable, at approximately 13%.

Income Taxes – We have elected for two of our existing subsidiaries to be taxed as taxable REIT subsidiaries pursuant to the REIT rules of the U.S. Internal Revenue Code. Pursuant to the transaction described in Note 3 - Acquisitions, we also have subsidiaries subject to tax in non-US jurisdictions.

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.

A current and deferred tax expense has been recognized in the nine months ended September 30, 2019, in connection with recorded operating activity. As of September 30, 2019, one of our taxable REIT subsidiaries is in a net deferred tax liability position primarily due to a valuation allowance against certain deferred tax assets. In considering whether it is more likely than not that some portion or all of the deferred tax assets will be realized, it has been determined that it is possible that some or all of our deferred tax assets could ultimately expire unused. We establish valuation allowances against deferred tax assets when the ability to fully utilize these benefits is determined to be uncertain.

We provide a valuation allowance against deferred tax assets if, based on management’s assessment of operating results and other available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The evidence contemplated by management at September 30, 2019 consists of current and prior operating results, available tax planning strategies, and the scheduled reversal of existing taxable temporary differences. Evidence from the scheduled reversal of taxable temporary differences relies on management judgements based on the accumulation of available evidence. Those judgements may be subject to change in the future as evidence available to management changes. Management’s assessment of our valuation allowance may further change based on our generation of or ability to project future operating income, and changes in tax policy or tax planning strategies.

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We provide 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 subsidiaries, tax law changes, and future business acquisitions or divestitures. The taxable subsidiaries’ effective tax rates were (8.5%) and 8.9% for the nine months ended September 30, 2019 and 2018, respectively.

Fair Value Measurements – ASC Topic 820, Fair Value Measurement, 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 we have 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. Our 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 of September 30, 2019, we valued our derivative instruments primarily utilizing Level 2 inputs. See Note 16 – ‘Fair Value of Financial Instruments’ for additional details.

Recently Adopted Accounting Standards

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance codified in ASC Topic 606, Revenue from Contracts with Customers, which supersedes the former revenue recognition requirements in ASC Topic 605, 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. The standard establishes a five-step model framework which recognizes revenue as an entity transfers control of goods or services to the customer and requires enhanced disclosures. We adopted ASC Topic 606 effective January 1, 2018, and elected the modified retrospective transition approach. The adoption did not result in a cumulative catch-up adjustment to opening equity and does not change the recognition pattern of our operating revenues.

Leases

In February 2016, and further amended in 2018, the FASB issued ASC Topic 842, Leases, which supersedes the former lease guidance in ASC 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

We adopted ASC 842 effective January 1, 2019 using the modified retrospective approach, which applied the provisions of the new guidance at the effective date without adjusting comparative periods presented. We elected a package of practical expedients permitted under the transition guidance within the new standard which allowed us to not reassess (i) whether expired or existing contracts contain a lease under the new standard, (ii) the lease classification for existing leases or (iii) whether previously-capitalized initial direct costs would qualify for capitalization under the new standard.

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We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment.

The adoption of ASC 842 impacted our consolidated balance sheet with the recognition of existing operating leases as lessee resulting in $62.9 million of ROU assets and $70.7 million of lease liabilities recorded as of January 1, 2019. We also recognized a $1.8 million cumulative effect adjustment to retained earnings. The adjustment to retained earnings was due to an impairment of certain ROU assets associated with vacant office space for which we are a lessee and assumed in a prior acquisition. See the table below for the impact of adoption of the lease standard on our consolidated balance sheet as of January 1, 2019 (in thousands):

	As Previously		New Lease Standard
	Reported		Adjustment		As Adjusted
Operating lease right-of-use assets	$	—	$	62,922	$	62,922
Operating lease liabilities		—		70,657		70,657
Deferred rent payable		5,922		(5,922)		—

As lessor, accounting for our leases will remain largely unchanged from ASC 840. The new lease standard more narrowly defines initial direct costs as only costs that are incremental to origination of a lease (i.e. costs that would not have been incurred had the lease not been obtained). We did not historically capitalize non-incremental costs, therefore this change will have no impact on the accounting for initial direct costs in the consolidated financial statements on a prospective basis.

Additionally, from a lessor perspective, we elected a practical expedient which allows lessors to combine nonlease components with the related lease components if both the timing and pattern of transfer are the same for the nonlease component(s) and related lease component, and the lease component would be classified as an operating lease. The single combined component is accounted for under ASC 842 if the lease component is the predominant component and is accounted for under ASC 606 if the nonlease components are the predominant components. Lessors are permitted to apply the practical expedient to all existing leases on a retrospective or prospective basis. We elected the practical expedient to combine our lease and nonlease components that meet the defined criteria and will account for the combined lease component under ASC 842 on a prospective basis.

New Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 eliminate the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, valuation processes for Level 3 fair value measurements, and policy for timing of transfers between levels. ASU 2018-13 also provides clarification in the measurement uncertainty disclosure by explaining that the disclosure is to communicate information about the uncertainty in measurement as of the reporting date. In addition, ASU 2018-13 added the following requirements: changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. Finally, ASU 2018-13 updated language to further encourage entities to apply materiality when considering de minimus determination for disclosure requirements. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with the exception of amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used for Level 3 fair value measurements, and the narrative description of measurement uncertainty which will be applied prospectively. Early adoption is permitted. We do not expect the provisions of the standard will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendments in ASU 2018-15 require an entity in a service contract hosting arrangement apply Subtopic 350-40 to identify costs to capitalize or expense related to the service contract. ASU 2018-15 also requires the entity to capitalize the implementation costs of the service contract hosting arrangement and amortize such costs over the

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life of the contract and present the capitalized costs in the same line item as fees associated with the hosting service on the statement of income and statement of cash flows. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with the exception of all implementation costs incurred after the date of adoption which will be applied prospectively. We do not expect this standard will have a material impact on our net income. However, this standard will likely result in certain expenses currently recognized as non real estate depreciation being recognized as general and administrative or operating expense in future periods.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, and ASU 2019-05 in May 2019. The standard, as amended, requires entities to use a new impairment model based on current expected credit losses (“CECL”) rather than incurred losses. The CECL model is designed to capture expected credit losses through the establishment of an allowance account, which will be presented as an offset to the amortized cost basis of the related financial asset. The guidance is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. As the majority of our revenue is generated from operating leases which are governed under ASC Topic 842, we do not currently expect the provisions of the standard will have a material impact on our consolidated financial statements.

We determined all other recently issued accounting pronouncements will not have a material impact on our consolidated financial statements or do not materially apply to our operations.

3. Acquisitions

On April 23, 2019, we completed the acquisition of two data centers in the Netherlands (the “Netherlands facilities”) for approximately $44 million in cash consideration, including closing costs. The two facilities, in Groningen and Eemshaven, have approximately 160,000 square feet of raised floor capacity and 30 megawatts of combined gross power capacity built out and fully available. This acquisition was funded with a draw on our unsecured revolving credit facility.

The acquisition was accounted for as an asset acquisition. The purchase price allocation of the Netherlands facilities is a fair value estimate that utilized Level 2 and Level 3 inputs, including discounted future cash flows and observable market data on replacement costs, leasing rates, and discount rates that were used to measure the acquired assets and liabilities on a non-recurring basis.

The following table summarizes the consideration for the Netherlands facilities and the allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (unaudited and in thousands):

	Purchase Price Allocation		Weighted Avg Remaining Useful Life (in years)
Land	$	1,743	N/A
Buildings and improvements		8,640	24
Construction in progress		29,902	N/A
Acquired intangibles (In-place lease & above market lease)		2,911	3
Deferred costs		906	3
Other assets		128	3
Net Working Capital		554	N/A
Total identifiable assets acquired		44,784
Acquired below market lease		284	3
Total liabilities assumed		284
Net identifiable assets acquired	$	44,500

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4. Acquired Intangible Assets and Liabilities

Summarized below are the carrying values for the major classes of intangible assets and liabilities (unaudited and in thousands):

		September 30, 2019						December 31, 2018
		Gross						Gross
		Carrying		Accumulated		Net Carrying		Carrying		Accumulated		Net Carrying
	Useful Lives	Value		Amortization		Value		Value		Amortization		Value
Customer Relationships	12 years	$	95,705	$	(34,424)	$	61,281	$	95,705	$	(28,461)	$	67,244
In-Place Leases	0.3 to 10 years		34,518		(21,272)		13,246		32,066		(17,670)		14,396
Solar Power Agreement (1)	17 years		13,747		(4,246)		9,501		13,747		(3,639)		10,108
Platform Intangible	3 years		—		—		—		9,600		(9,600)		—
Acquired Favorable Leases
Acquired below market leases - as Lessee	46 years		—		—		—		2,301		—		2,301
Acquired above market leases - as Lessor	0.5 to 8 years		5,024		(3,810)		1,214		4,649		(3,247)		1,402
Tradenames	3 years		—		—		—		3,100		(3,100)		—
Total Intangible Assets		$	148,994	$	(63,752)	$	85,242	$	161,168	$	(65,717)	$	95,451
Solar Power Agreement (1)	17 years		13,747		(4,246)		9,501		13,747		(3,639)		10,108
Acquired Unfavorable Leases
Acquired below market leases - as Lessor	1 to 4 years		1,084		(885)		199		809		(611)		198
Acquired above market leases - as Lessee	11 to 12 years		2,453		(929)		1,524		2,453		(767)		1,686
Total Intangible Liabilities (2)		$	17,284	$	(6,060)	$	11,224	$	17,009	$	(5,017)	$	11,992

(1) Amortization related to the Solar Power Agreement asset and liability is recorded at the same rate and therefore has no net impact on the statement of operations.

(2) Intangible liabilities are included within the “Advance rents, security deposits and other liabilities” line item of the consolidated balance sheets.

Above or below market leases are amortized as a reduction to or increase in rental revenue in the case of the Company as lessor as well as a reduction to or increase in rent expense in the case of the Company as lessee over the remaining lease terms. The net effect of amortization of acquired above-market and below-market leases resulted in a net decrease in rental revenue of less than $0.1 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively. The net effect of amortization of acquired above-market and below-market leases resulted in a net decrease in rental revenue of $0.1 million and $0.4 million for the nine months ended September 30, 2019 and 2018, respectively. The estimated amortization of acquired favorable and unfavorable leases for each of the five succeeding fiscal years ending December 31 is as follows (unaudited and in thousands):

	Net Rental Revenue		Net Rental Expense
	Decrease		Increase/(Decrease)
2019 (October - December)	$	125	$	(56)
2020		659		(216)
2021		151		(216)
2022		51		(216)
2023		24		(216)
Thereafter		5		(604)
Total	$	1,015	$	(1,524)

Net amortization of all other identified intangible assets and liabilities was $3.5 million and $3.1 million for the three months ended September 30, 2019 and 2018, respectively. Net amortization of all other identified intangible assets and liabilities was $9.9 million and $11.5 million for the nine months ended September 30, 2019 and 2018, respectively. The estimated net amortization of all other identified intangible assets and liabilities for each of the five succeeding fiscal years ending December 31 is as follows (unaudited and in thousands):

2019 (October - December)	$	3,214
2020		12,080
2021		10,580
2022		10,069
2023		10,065
Thereafter		28,519
Total	$	74,527

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5. Real Estate Assets and Construction in Progress

The following is a summary of our owned and leased properties as of September 30, 2019 and December 31, 2018 (in thousands):

As of September 30, 2019 (unaudited):

			Buildings,
			Improvements		Construction
Property Location	Land		and Equipment		in Progress		Total Cost
Atlanta, Georgia (Atlanta-Metro)	$	21,016	$	523,859	$	115,354	$	660,229
Irving, Texas		8,606		347,067		113,696		469,369
Richmond, Virginia		2,180		254,495		72,882		329,557
Ashburn, Virginia (1)		37,079		131,695		144,930		313,704
Chicago, Illinois		9,400		153,582		133,521		296,503
Suwanee, Georgia (Atlanta-Suwanee)		3,521		170,396		2,833		176,750
Piscataway, New Jersey		7,466		98,723		37,592		143,781
Santa Clara, California (2)		—		105,759		6,956		112,715
Leased Facilities (3)		—		98,176		1,112		99,288
Fort Worth, Texas		9,079		55,019		26,892		90,990
Dulles, Virginia		3,154		73,373		4,222		80,749
Sacramento, California		1,481		64,997		52		66,530
Manassas, Virginia (1)		—		—		58,741		58,741
Hillsboro, Oregon (1)		—		—		55,574		55,574
Princeton, New Jersey		20,700		34,371		451		55,522
Eemshaven, Netherlands		—		—		32,468		32,468
Phoenix, Arizona (1)		—		—		30,704		30,704
Groningen, Netherlands		1,692		8,389		2,882		12,963
Other (4)		2,213		35,909		2,892		41,014
	$	127,587	$	2,155,810	$	843,754	$	3,127,151

(1) Represent land purchases. Land acquisition costs, as well as subsequent development costs, are included within construction in progress until development on the land has ended and the asset is ready for its intended use.

(2) Owned facility subject to long-term ground sublease.

(3) Includes 9 facilities. All facilities are leased, including those subject to finance leases.

(4) Consists of Miami, FL; Lenexa, KS and Overland Park, KS facilities.

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As of December 31, 2018:

			Buildings,
			Improvements		Construction
Property Location	Land		and Equipment		in Progress		Total Cost
Atlanta, Georgia (Atlanta-Metro)	$	20,416	$	493,446	$	88,253	$	602,115
Irving, Texas		8,606		345,615		99,445		453,666
Richmond, Virginia		2,180		253,098		67,932		323,210
Chicago, Illinois		9,400		130,150		133,095		272,645
Ashburn, Virginia (1)		17,325		63,245		184,951		265,521
Suwanee, Georgia (Atlanta-Suwanee)		3,521		166,298		3,188		173,007
Piscataway, New Jersey		7,466		97,806		33,472		138,744
Santa Clara, California (2)		—		98,548		7,600		106,148
Dulles, Virginia		3,154		72,435		3,852		79,441
Fort Worth, Texas		9,079		18,623		43,715		71,417
Sacramento, California		1,481		64,874		92		66,447
Princeton, New Jersey		20,700		34,046		431		55,177
Leased Facilities (3)		—		43,347		9,334		52,681
Manassas, Virginia (1) (4)		—		—		45,194		45,194
Hillsboro, Oregon (1)		—		—		39,835		39,835
Phoenix, Arizona (1)		—		—		29,562		29,562
Other (5)		2,213		35,720		113		38,046
	$	105,541	$	1,917,251	$	790,064	$	2,812,856

(1) Represent land purchases. Land acquisition costs, as well as subsequent development costs, are included within construction in progress until development on the land has ended and the asset is ready for its intended use.

(2) Owned facility subject to long-term ground sublease.

(3) Includes 10 facilities. All facilities are leased, including those subject to finance leases.

(4) Excludes $71.0 million of construction in progress included within the “Assets held for sale” line item of the consolidated balance sheets.

(5) Consists of Miami, FL; Lenexa, KS and Overland Park, KS facilities.

6. Leases

Leases as Lessee

We determine if an arrangement is a lease at inception. If the contract is considered a lease, we evaluate leased property to determine whether the lease should be classified as a finance or operating lease in accordance with U.S. GAAP. We periodically enter into finance leases for certain data center facilities, equipment, and fiber optic transmission cabling. In addition, we lease certain real estate (primarily land or real estate space) under operating lease agreements with such assets included within the “Operating lease right of use assets, net” line item of the consolidated balance sheets and the associated lease liabilities included within the “Operating lease liabilities” line item on the consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments consist of nonlease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases as lessee typically do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We assess multiple variables when determining the incremental borrowing rate, such as lease term, payment terms, collateral, economic conditions, and creditworthiness. ROU assets also include any lease payments made and exclude lease incentives. Many of our lease agreements include options to extend the lease, which we do not include in our expected lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

We use leasing as a source of financing for certain data center facilities and related equipment. We currently operate one data center facility, along with various equipment and fiber optic transmission cabling, that are subject to finance leases.

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The remaining terms of our finance leases range from two to nineteen years. Our finance lease associated with the data center includes multiple extension option periods, some of which were included in the lease term as we are reasonably certain to exercise those extension options. Our other finance leases typically do not have options to extend the initial lease term. Finance lease assets are included within the “Buildings, improvements and equipment” line item of the consolidated balance sheets and finance lease liabilities are included within “Finance leases and mortgage notes payable” line item of the consolidated balance sheets.

We currently lease six other facilities under operating lease agreements for various data centers and office space. Our leases have remaining lease terms ranging from five to seven years. We have options to extend the initial lease term on nearly all of these leases. Additionally, we have one ground lease that is considered an operating lease which is scheduled to expire in 2052.

Components of lease expense were as follows (unaudited and in thousands):

	Three months ended		Nine months ended
	September 30, 2019		September 30, 2019
Operating lease cost	$	2,479	$	7,502
Finance lease cost:
Amortization of assets		1,091		2,496
Interest on lease liabilities		505		1,204
Sublease income		(46)		(139)
Total lease costs	$	4,029	$	11,063

Supplemental balance sheet information related to leases was as follows (unaudited and in thousands, except lease term and discount rate):

	September 30,
	2019
Operating leases:
Operating lease right-of-use assets	$	58,551
Operating lease liabilities		65,949
Finance leases:
Property and equipment, at cost		50,437
Accumulated amortization		(3,791)
Property and equipment, net	$	46,646
Finance lease liabilities	$	45,753
Weighted average remaining lease term (in years):
Operating leases		13.7
Finance leases		11.7
Weighted average discount rate:
Operating leases		5.1%
Finance leases		4.3%

Supplemental cash flow and other information related to leases was as follows (unaudited and in thousands):

	Nine months ended
	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	7,446
Operating cash flows for finance leases	$	1,180
Financing cash flows for finance leases	$	2,243

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Maturities of lease liabilities were as follows (unaudited and in thousands):

	September 30, 2019
	Operating Leases		Finance Leases
2019 (October - December)	$	2,374	$	1,108
2020		9,589		4,493
2021		9,818		4,514
2022		10,266		4,639
2023		10,393		4,776
Thereafter		57,225		39,908
Total Lease Payments	$	99,665	$	59,438
Less: Imputed Interest		33,716		13,685
Total Lease Obligations	$	65,949	$	45,753

Leases as lessor

Our lease revenue contains both minimum lease payments as well as variable lease payments. See Note 2 for further details of our revenue streams and associated accounting treatment. The components of our lease revenue were as follows (unaudited and in thousands):

	Three months ended				Nine months ended
	September 30,		September 30,		September 30,
	2019		2018		2019		2018
Lease revenue:
Minimum lease revenue	$	103,623	$	92,812	$	304,166	$	271,342
Variable lease revenue (primarily recoveries from customers)		17,852		11,948		41,675		34,432
Total lease revenue	$	121,475	$	104,760	$	345,841	$	305,774

7. Investments in Unconsolidated Entity

During the three months ended March 31, 2019, QTS formed an unconsolidated entity with Alinda Capital Partners (“Alinda”), a premier infrastructure investment firm. QTS contributed a 118,000 square foot hyperscale data center under development in Manassas, Virginia to the entity. The facility, and the previously executed operating lease to a global cloud-based software company pursuant to a 10-year lease agreement, was contributed in exchange for cash and noncash consideration in the form of equity interest in the entity that was measured at fair value pursuant to Topic 820. The equity interest received and any amounts due from the unconsolidated entity are recorded within our consolidated balance sheet and totaled $30.7 million as of September 30, 2019. QTS and Alinda each own a 50% interest in the entity. As we are not the primary beneficiary of the arrangement but have the ability to exercise significant influence, we concluded that the investment should be accounted for as an unconsolidated entity using equity method investment accounting. As of September 30, 2019 the total assets of the entity were $125.9 million and the total debt outstanding, net of deferred financing costs, was $65.8 million.

Under the equity method, our cost of investment is adjusted for additional contributions to and distributions from the unconsolidated entity, as well as our share of equity in the earnings and losses of the unconsolidated entity. Generally, distributions of cash flows from operations and capital events are made to members of the unconsolidated entity in accordance with each member’s ownership percentages and the terms of the agreement, but also provides us with rights to preferential cash distributions as certain phases are completed and leased to the underlying tenant. Any differences between the cost of our investment in an unconsolidated affiliate and its underlying equity as reflected in the unconsolidated affiliate’s financial statements generally result from costs of our investment that are not reflected on the unconsolidated affiliate’s financial statements.

Under the unconsolidated entity agreement, we will serve as the entity’s operating member, subject to authority and oversight of a board appointed by us and Alinda, and separately we will serve as manager and developer of the facility in

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exchange for management and development fees. The entity agreement includes various transfer restrictions and rights of first offer that will allow us to repurchase Alinda’s interest should Alinda wish to exit in the future.

8. Debt

Below is a listing of our outstanding debt, including finance leases, as of September 30, 2019 and December 31, 2018 (in thousands):

	Weighted Average
	Coupon Interest Rate at	Maturities at	September 30,		December 31,
	September 30, 2019 (1)	September 30, 2019	2019		2018
	(unaudited)		(unaudited)
Unsecured Credit Facility
Revolving Credit Facility	2.98%	December 17, 2022	$	224,149	$	252,000
Term Loan I	3.34%	December 17, 2023		350,000		350,000
Term Loan II	3.36%	April 27, 2024		350,000		350,000
Senior Notes	4.75%	November 15, 2025		400,000		400,000
Lenexa Mortgage	4.10%	May 1, 2022		1,758		1,801
Finance Leases	4.35%	2021 - 2038		45,753		2,873
	3.73%			1,371,660		1,356,674
Less net debt issuance costs				(10,160)		(11,557)
Total outstanding debt, net			$	1,361,500	$	1,345,117

(1) The coupon interest rates associated with Term Loan I and Term Loan II incorporate the effects of the Company’s interest rate swaps in effect as of September 30, 2019.

Credit Facilities, Senior Notes and Mortgage Notes Payable

(a) Unsecured Credit Facility – As of September 30, 2019, our unsecured credit facility (the “prior unsecured credit facility”) included two $350 million term loans and an $820 million revolving credit facility. We amended and restated our unsecured credit facility in October 2019 (as so amended and restated, the “new unsecured credit facility”) to include a term loan for $225 million which matures on December 17, 2024 (“Term Loan A”), a $225 million term loan that matures on April 27, 2025 (“Term Loan B”), a $250 million term loan which matures on October 18, 2026 (“Term Loan C”) and a $1.0 billion revolving credit facility which matures on December 17, 2023. The revolving portion of the new unsecured credit facility has a one-year extension option and can be increased up to $2.20 billion in the aggregate, subject to certain conditions, including the consent of the agent and obtaining necessary commitments. Amounts outstanding under the new 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 1.25% to 1.85% for LIBOR loans and 0.25% to 0.85% for base rate loans. For Term Loan A and Term Loan B, the spread ranges from 1.20% to 1.80% for LIBOR loans and 0.20% to 0.80% for base rate loans. For Term Loan C the spread ranges from 1.50% to 1.85% for LIBOR loans and 0.50% to 0.85% for base rate loans. The unsecured credit facility also provides for borrowing capacity of up to $300 million in various foreign currencies.

Our ability to borrow under the new unsecured credit facility is subject to ongoing compliance with a number of customary affirmative and negative covenants.

As of September 30, 2019, we had outstanding $924 million of indebtedness under the prior unsecured credit facility, consisting of $224.1 million of outstanding borrowings under the unsecured revolving credit facility and $700.0 million outstanding under the term loans, exclusive of net debt issuance costs of $5.5 million. In connection with the prior unsecured credit facility, as of September 30, 2019, we had additional letters of credit outstanding aggregating to $4.1 million.

We have also entered into certain interest rate swap agreements. See Note 9 – ‘Derivative Instruments’ for additional details.

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(b) Senior Notes – On November 8, 2017, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership initially formed solely for the purpose of facilitating the offering of the 5.875% Senior Notes due 2022 (collectively, the “Issuers”), issued $400 million aggregate principal amount of 4.75% Senior Notes due November 15, 2025 (the “Senior Notes”) in a private offering. The Senior Notes have an interest rate of 4.750% per annum and were issued at a price equal to 100% of their face value. The net proceeds from the offering were used to fund the redemption of, and satisfy and discharge the indenture pursuant to which the Issuers issued, all of their outstanding 5.875% Senior Notes and to repay a portion of the amount outstanding under our unsecured revolving credit facility. As of September 30, 2019, the outstanding net debt issuance costs associated with the Senior Notes were $4.6 million.

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 certain foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Issuers or any other subsidiary guarantor, other than QTS Finance Corporation, the co-issuer of the Senior Notes. QTS Realty Trust, Inc. does not 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 November 8, 2017, among QTS, the Issuers, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee.

The annual remaining principal payment requirements as of September 30, 2019 per the contractual maturities, excluding extension options and excluding finance leases, are as follows (unaudited and in thousands):

2019	$	16
2020		70
2021		73
2022		225,748
2023		350,000
Thereafter		750,000
Total	$	1,325,907

As of September 30, 2019, we were in compliance with all of our covenants.

9. Derivative Instruments

From time to time, we enter into derivative financial instruments to manage certain cash flow risks.

Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges.

Interest Rate Swaps

Our objectives in using interest rate swaps are to reduce variability in interest expense and to manage exposure to adverse interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

On April 5, 2017, we entered into forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from January 2, 2018 through December 17, 2021 and April 27, 2022, respectively.

On December 20, 2018, we entered into additional forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from December 17, 2021 and April 27, 2022 through December 17, 2023 and April 27, 2024, respectively. Additionally, we entered into forward interest rate swap

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agreements with an aggregate notional amount of $200 million. The forward swap agreements effectively fix the interest rate on $200 million of additional term loan borrowings, from January 2, 2020 through December 17, 2023 and April 27, 2024, respectively.

We reflect our interest rate swap agreements, which are designated as cash flow hedges, at fair value as either assets or liabilities on the consolidated balance sheets within the “Other assets, net” or “Advance rents, security deposits and other liabilities” line items, as applicable. As of September 30, 2019, the fair value of interest rate swaps represented an aggregate $25.1 million liability. As of December 31, 2018, the fair value of interest rate swaps included an asset of $5.3 million as well as a liability of $3.0 million.

The forward interest rate swap agreements are derivatives that currently qualify for hedge accounting whereby we record the effective portion of changes in fair value of the interest rate swaps in accumulated other comprehensive income or loss on the consolidated balance sheets and statements of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of a derivative's change in fair value is immediately recognized within net income. The amount reclassified from other comprehensive income as a reduction in interest expense on the consolidated statements of operations was $0.2 million and $1.2 million for the three and nine months ended September 30, 2019, respectively. The amount reclassified from other comprehensive income to interest expense on the consolidated statements of operations was a reduction of $0.1 million as well as an increase of $0.4 million for the three and nine months ended September 30, 2018, respectively. There was no ineffectiveness recognized for the three and nine months ended September 30, 2019, and 2018. During the subsequent twelve months, beginning October 1, 2019, we estimate that $3.1 million will be reclassified from other comprehensive income as an increase to interest expense.

Interest rate derivatives and their fair values as of September 30, 2019 and December 31, 2018 were as follows (unaudited and in thousands):

				Fixed One Month
Notional Amount				LIBOR rate per			Fair Value
September 30, 2019		December 31, 2018		annum	Effective Date	Expiration Date	September 30, 2019		December 31, 2018
$	25,000	$	25,000	1.989%	January 2, 2018	December 17, 2021	$	(272)	$	331
	100,000		100,000	1.989%	January 2, 2018	December 17, 2021		(1,086)		1,318
	75,000		75,000	1.989%	January 2, 2018	December 17, 2021		(815)		990
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		(707)		667
	100,000		100,000	2.029%	January 2, 2018	April 27, 2022		(1,403)		1,341
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		(707)		666
	100,000		100,000	2.617%	January 2, 2020	December 17, 2023		(4,839)		(782)
	100,000		100,000	2.621%	January 2, 2020	April 27, 2024		(5,279)		(818)
	200,000		200,000	2.636%	December 17, 2021	December 17, 2023		(5,037)		(722)
	200,000		200,000	2.642%	April 27, 2022	April 27, 2024		(4,996)		(648)
							$	(25,141)	$	2,343

Power Purchase Agreements

In March 2019, QTS entered into two 10 year agreements to purchase renewable energy equal to the expected electricity needs of our datacenters in Chicago, Illinois and Piscataway, New Jersey. These arrangements currently qualify for hedge accounting whereby we record the changes in fair value of the instruments in “Accumulated other comprehensive income” or loss on the consolidated balance sheets and statements of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We currently reflect these agreements, which are designated as cash flow hedges, at fair value as liabilities on the consolidated balance sheets within the “Advance rents, security deposits and other liabilities” line items.

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Power purchase agreement derivatives and their fair values as of September 30, 2019 and December 31, 2018 were as follows (unaudited and in thousands):

				Fair Value
Counterparty	Facility	Effective Date	Expiration Date	September 30, 2019		December 31, 2018
Calpine Energy Solutions, LLC	Piscataway	3/8/2019	2/28/2029	$	(2,793)	$	—
Calpine Energy Solutions, LLC	Chicago	3/8/2019	2/28/2029		(3,915)		—
				$	(6,708)	$	—

10. Commitments and Contingencies

We are subject to various routine legal proceedings and other matters in the ordinary course of business. We currently do not have any litigation that would have material adverse impact on our financial statements.

11. 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, 2019, the Operating Partnership had four classes of limited partnership units outstanding: Series A Preferred Units, Series B Convertible Preferred Stock Units, Class A units of limited partnership interest (“Class A units”) and Class O LTIP units of limited partnership units (“Class O units”). The Class A units currently outstanding are now redeemable on a one-for-one exchange rate at any time for cash or shares of Class A common stock of QTS. The Company may in its sole discretion elect to assume and satisfy the redemption amount with cash or its shares. Class O units were issued upon grants made under the QualityTech, LP 2010 Equity Incentive Plan (the “2010 Equity Incentive Plan”). Class O units are pari passu with Class A units. Each Class O unit is convertible into Class A units by the Operating Partnership at any time or by the holder at any time based on formulas contained in the partnership agreement.

QTS Realty Trust, Inc.

In connection with its initial public offering on October 13, 2013 (“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 our 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 2013 Equity Incentive Plan, including options to purchase Class A common stock if exercised. On May 4, 2015, following approval by our stockholders at our 2015 Annual Meeting, the total number of shares available for issuance under the 2013 Equity Incentive Plan was increased by an additional 3,000,000. On May 9, 2019, following approval by our stockholders at our 2019 Annual Meeting, the total number of shares available for issuance under the 2013 Equity Incentive Plan was increased by an additional 1,110,000.

In March 2019, the Compensation Committee completed a redesign of the long-term incentive program for executive officers with the following changes:

● Issued Performance-Based FFO Unit Awards — performance-based restricted share unit awards, which may be earned based on Operating Funds From Operations ("OFFO") per diluted share measured over a two-year performance period ending December 31, 2020 (performance-based FFO units or “FFO Units”), with two-thirds of the earned shares of Class A common stock vesting at the end of the performance period when results have been certified and the remaining one-third of the shares vesting at the end of three years from the award grant date. The number of shares of Class A common stock subject to the awards that can be earned ranges from 0% to 200% of the target award based on actual performance over the performance period, with the number of shares to be determined based on a linear interpolation basis between threshold and target and target and maximum performance.

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● Introduced Performance-Based Relative TSR Unit Awards — performance-based restricted share unit awards, which may be earned based on total stockholder return ("TSR") as compared to the MSCI U.S. REIT Index (the "Index") over a three-year performance period ending December 31, 2021 (the performance-based relative TSR units or “TSR Units”). The number of shares of Class A common stock subject to the awards that can be earned ranges from 0% to 200% of the target award based on TSR compared to an index. In addition, award payouts will be determined on a linear interpolation basis between threshold and target and target and maximum performance; and capped at the target performance level if our TSR is negative.

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, 2019 (unaudited):

	2010 Equity Incentive Plan					2013 Equity Incentive Plan
				Weighted					Weighted		Restricted
		Weighted		average			Weighted		average		Stock /		Weighted			Weighted			Weighted
	Number of	average		fair			average		fair		Deferred		average			average			average
	Class O units	exercise price		value		Options	exercise price		value		Stock		grant price		TSR Units	grant price		FFO Units	grant price
Outstanding at December 31, 2018	102,279	$	24.05	$	5.67	2,037,163	$	36.86	$	7.09	420,309		$	37.83	—	$	—	—	$	—
Granted	—		—		—	135,594		42.27		7.62	268,627			42.05	86,089		54.64	86,089		42.01
Exercised/Vested (1)	(8,375)		20.60		5.11	(118,416)		30.35		6.14	(239,778)			38.87	—		—	—		—
Cancelled/Expired	—		—		—	(112,706)		45.86		9.43	(22,786)	(2)		42.49	(1,739)		54.64	(1,739)		42.01
Outstanding at September 30, 2019	93,904	$	24.36	$	5.72	1,941,635	$	37.11	$	7.05	426,372		$	39.65	84,350	$	54.64	84,350	$	42.01

(1) This represents (i) Class O units which were converted to Class A units, (ii) options to purchase Class A common stock which were exercised, and (iii) 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, with respect to the applicable column.

(2) Includes 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, 2019 are included in the following table on a per unit basis (unaudited). Options to purchase shares of Class A common stock were valued using the Black-Scholes model and TSR Units were valued using a Monte-Carlo simulation that leveraged similar assumptions to those used to value the Class A common stock and FFO Units.

	Nine Months Ended September 30, 2019
Fair value of FFO units and restricted stock granted	$42.01 - $45.58
Fair value of TSR units granted	$54.64
Fair value of options granted	$7.56 - 8.28
Expected term (years)	5.5
Expected volatility	28%
Expected dividend yield	3.89 - 4.19%
Expected risk-free interest rates	2.33 - 2.56%

The following tables summarize information about awards outstanding as of September 30, 2019 (unaudited).

	Operating Partnership Awards Outstanding
				Weighted average
			Awards	remaining
	Exercise prices		outstanding	vesting period (years)
Class O Units	$	20.00 - 25.00	93,904	—
Total Operating Partnership awards outstanding			93,904

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	QTS Realty Trust, Inc. Awards Outstanding
				Weighted average
			Awards	remaining
	Exercise prices		outstanding	vesting period (years)
Restricted stock	$	—	426,372	1.9
TSR units		—	84,350	2.5
FFO units		—	84,350	2.5
Options to purchase Class A common stock	$	21.00 - 50.66	1,941,635	0.6
Total QTS Realty Trust, Inc. awards outstanding			2,536,707

Any remaining nonvested awards are valued as of the grant date and generally vest ratably over a defined service period. As of September 30, 2019 all restricted Class A common stock, TSR units, and FFO units outstanding were unvested and approximately 0.6 million options to purchase Class A common stock outstanding were unvested. As of September 30, 2019 we had $21.1 million of unrecognized equity-based compensation expense which will be recognized over a remaining weighted-average vesting period of 1.3 years. The total intrinsic value of Class O units and options to purchase Class A common stock outstanding at September 30, 2019 was $30.0 million.

Dividends and Distributions

The following tables present quarterly cash dividends and distributions paid to QTS’ common and preferred stockholders and the Operating Partnership’s unit holders for the nine months ended September 30, 2019 and 2018 (unaudited):

Nine Months Ended September 30, 2019
				Aggregate
		Per Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 25, 2019	July 9, 2019	$	0.44	$	27.3
March 20, 2019	April 4, 2019	$	0.44	$	27.3
December 21, 2018	January 8, 2019	$	0.41	$	23.7
				$	78.3
Series A Preferred Stock/Units
June 30, 2019	July 15, 2019	$	0.45	$	1.9
March 31, 2019	April 15, 2019	$	0.45	$	1.9
December 31, 2018	January 15, 2019	$	0.45	$	1.9
				$	5.7
Series B Preferred Stock/Units
June 30, 2019	July 15, 2019	$	1.63	$	5.1
March 31, 2019	April 15, 2019	$	1.63	$	5.1
December 31, 2018	January 15, 2019	$	1.63	$	5.1
				$	15.3

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Nine Months Ended September 30, 2018
				Aggregate
		Per Common Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 20, 2018	July 6, 2018	$	0.41	$	23.7
March 22, 2018	April 5, 2018	$	0.41	$	23.7
December 5, 2017	January 5, 2018	$	0.39	$	22.2
				$	69.6
Series A Preferred Stock/Units
June 29, 2018	July 16, 2018	$	0.45	$	1.9
April 5, 2018	April 16, 2018	$	0.15	$	0.6
				$	2.5

Additionally, subsequent to September 30, 2019, we paid the following dividends:

● On October 4, 2019, the Company paid its regular quarterly cash dividend of $0.44 per common share and the Operating Partnership paid a quarterly cash distribution of $0.44 per unit to stockholders and unit holders of record as of the close of business on September 19, 2019.

● On October 15, 2019, the Company paid a quarterly cash dividend of approximately $0.45 per share on our Series A Preferred Stock to holders of Series A Preferred Stock of record as of the close of business on September 30, 2019 and the Operating Partnership paid a quarterly cash distribution of approximately $0.45 per unit on outstanding Series A Preferred Units held by the Company.

● On October 15, 2019, the Company paid a quarterly cash dividend of approximately $1.63 per share on our Series B Preferred Stock to holders of Series B Preferred Stock of record as of the close of business on September 30, 2019 and the Operating Partnership paid a quarterly cash distribution of approximately $1.63 per unit on outstanding Series B Preferred Units held by the Company.

Equity Issuances

In June 2019, we established a new “at-the-market” equity offering program (the “ATM Program”) pursuant to which we may issue, from time to time, up to $400 million of our Class A common stock, which may include shares to be sold on a forward basis. The use of forward sales under the ATM Program generally allows the Company to lock in a price on the sale of shares when sold by the forward sellers, but defer receiving the net proceeds from such sales until the shares are issued at settlement on a later date.

● During the three and nine months ended September 30, 2019, the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 1.2 million shares of its common stock at an average price of approximately $49 per share, representing available net proceeds upon physical settlement of approximately $56 million (subject to further adjustment as described below). At September 30, 2019, the Company had not settled any of these forward sales and had approximately $343 million of Class A common stock remaining available for sale under the ATM Program.

● Through the date of this report (including the sales during the three and nine months ended September 30, 2019 described above), the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 2.8 million shares of its common stock at an average price of approximately $51 per share, representing available net proceeds upon physical settlement of approximately $139 million (subject to further adjustment as described below). Through the date of this report, the Company had not settled any of these forward sales and had approximately $258 million of Class A common stock remaining available for sale under the ATM Program.

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The Company expects to physically settle (by delivering shares of common stock) these forward sales prior to their first anniversary date. When combined with approximately $36 million of proceeds remaining available under the forward sale in the first quarter of 2019, the Company currently has access to over $175 million of net proceeds through forward stock sales. The Company views forward equity sales under its ATM program as an important capital raising tool that it expects to continue to strategically and selectively use, subject to market conditions and overall availability under the ATM program. We have concluded that the forward sale agreements meet the derivative scope exception for certain contracts involving an entity’s own equity. The initial forward sale price is subject to daily adjustment based on a floating interest rate factor equal to the specified daily rate less a spread, and will decrease by other fixed amounts specified in the forward sale agreement. Until settlement of all of the forward sale agreements, our EPS dilution resulting from the agreements, if any, is determined using the two-class method.

At any time during the term of any forward sale, the Company may settle the forward sale by physical delivery of shares of common stock to the forward purchasers or, at the Company’s election, cash settle or net share settle. The initial forward sale price per share under each forward sale equals the product of (x) an amount equal to 100% minus the applicable forward selling commission and (y) the volume weighted average price per share at which the borrowed shares of our common stock were sold pursuant to the equity distribution agreement by the relevant forward seller during the applicable forward hedge selling period for such shares to hedge the relevant forward purchaser’s exposure under such forward sale. Thereafter, the forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor equal to the specified daily rate less a spread, and is decreased based on specified amounts related to expected dividends on shares of our common stock during the term of the applicable forward sale. If the specified daily rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price.

In February 2019, QTS conducted an underwritten offering of 7,762,500 shares of its Class A common stock, consisting of 4,000,000 shares issued by the Company during the first quarter of 2019 and 3,762,500 shares which will be issued on a forward basis, in each case at a price of $41.50 per share. We received net proceeds of approximately $159 million from the issuance of 4,000,000 shares during the first quarter of 2019, which we used to repay amounts outstanding under our unsecured revolving credit facility. During the three months ended September 30, 2019, we settled a portion of this forward sale by issuing 2.8 million shares of common stock for net proceeds of approximately $110 million, which was used to repay amounts outstanding under our revolving credit facility. Following this partial settlement, we have approximately $36 million of proceeds remaining available under this forward sale, which we expect to physically settle prior to March 1, 2020 with the issuance of approximately 0.9 million shares of common stock, although we have the right to elect settlement prior to that time. We have concluded that the forward sale agreements meet the derivative scope exception for certain contracts involving an entity’s own equity. The initial forward sale price is subject to daily adjustment based on a floating interest rate factor equal to the specified daily rate less a spread, and will decrease by other fixed amounts specified in the forward sale agreement. Until settlement of all of the forward sale agreements, our EPS dilution resulting from the agreements, if any, is determined using the two-class method.

On March 15, 2018, QTS issued 4,280,000 shares of 7.125% Series A Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Stock”) with a liquidation preference of $25.00 per share, which included 280,000 shares of the underwriters’ partial exercise of their option to purchase additional shares. The Company used the net proceeds of approximately $103.2 million to repay amounts outstanding under its unsecured revolving credit facility. In connection with the issuance of the Series A Preferred Stock, on March 15, 2018 the Operating Partnership issued to the Company 4,280,000 Series A Preferred Units, which have economic terms that are substantially similar to the Company’s Series A Preferred Stock. The Series A Preferred Units were issued in exchange for the Company’s contribution of the net offering proceeds of the offering of the Series A Preferred Stock to the Operating Partnership.

Dividends on the Series A Preferred Stock are payable quarterly in arrears on or about the 15th day of each January, April, July and October. The first dividend on the Series A Preferred Stock was paid on April 16, 2018, in the amount of $0.14844 per share for the period March 15, 2018 through April 14, 2018. The Series A Preferred Stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A Preferred Stock will rank senior to common stock and pari passu with the Series B Preferred Stock with respect to the payment of distributions and other amounts. Except in instances relating to preservation of QTS’s qualification as a REIT or pursuant to the Company’s special optional redemption right, the Series A Preferred Stock is not redeemable prior to March 15, 2023. On and after March 15, 2023, the Company may, at its

41

option, redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the date of redemption.

Upon the occurrence of a change of control, the Company has a special optional redemption right that enables it to redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, within 120 days after the first date on which a change of control has occurred resulting in neither QTS nor the surviving entity having a class of common shares listed on the NYSE, NYSE Amex, or NASDAQ or the acquisition of beneficial ownership of its stock entitling a person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in election of directors. The special optional redemption price is $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the date of redemption.

Upon the occurrence of a change of control, holders will have the right (unless the Company has elected to exercise its special optional redemption right to redeem their Series A Preferred Stock) to convert some or all of such holder’s Series A Preferred Stock into a number of shares of Class A common stock, par value $0.01 per share, equal to the lesser of:

● the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends (whether or not declared) to, but not including, the change of control conversion date (unless the change of control conversion date is after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the Common Stock Price; and

● 1.46929 (i.e., the Share Cap);

subject, in each case, to certain adjustments and provisions for the receipt of alternative consideration of equivalent value as described in the prospectus supplement for the Series A Preferred Stock.

On June 25, 2018, QTS issued 3,162,500 shares of 6.50% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) with a liquidation preference of $100.00 per share, which included 412,500 shares the underwriters purchased pursuant to the exercise of their overallotment option in full. The Company used the net proceeds of approximately $304 million to repay amounts outstanding under its unsecured revolving credit facility. In connection with the issuance of the Series B Preferred Stock, on June 25, 2018 the Operating Partnership issued to the Company 3,162,500 Series B Preferred Units, which have economic terms that are substantially similar to the Company’s Series B Preferred Stock. The Series B Preferred Units were issued in exchange for the Company’s contribution of the net offering proceeds of the offering of the Series B Preferred Stock to the Operating Partnership.

Dividends on the Series B Preferred Stock are payable quarterly in arrears on or about the 15th day of each January, April, July and October. The first dividend on the Series B Preferred Stock was paid on October 15, 2018, in the amount of $1.9861111 per share for the period June 25, 2018 through October 14, 2018. The Series B Preferred Stock is convertible by holders into shares of Class A common stock at any time at the then-prevailing conversion rate. The conversion rate as of September 30, 2019 is 2.1279 shares of the Company’s Class A common stock per share of Series B Preferred Stock. The Series B Preferred Stock does not have a stated maturity date. Upon liquidation, dissolution or winding up, the Series B Preferred Stock will rank senior to common stock and pari passu with the Series A Preferred Stock with respect to the payment of distributions and other amounts. The Series B Preferred Stock is not redeemable by the Company. At any time on or after July 20, 2023, the Company may at its option cause all (but not less than all) outstanding shares of the Series B Preferred Stock to be automatically converted into the Company’s Class A common stock at the then-prevailing conversion rate if the closing sale price of the Company’s Class A common stock is equal to or exceeds 150% of the then-prevailing conversion price for at least 20 trading days in a period of 30 consecutive trading days, including the last trading day of such 30-day period, ending on the trading day prior to the issuance of a press release announcing the mandatory conversion.

If a holder converts its shares of Series B Preferred Stock at any time beginning at the opening of business on the trading day immediately following the effective date of a fundamental change (as described in the prospectus supplement) and

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ending at the close of business on the 30th trading day immediately following such effective date, the holder will automatically receive a number of shares of the Company’s Class A common stock equal to the greater of:

● the sum of (i) a number of shares of the Company’s Class A common stock, as may be adjusted, as described in the Articles Supplementary for the 6.50% Series B Cumulative Convertible Perpetual Preferred Stock filed with the State Department of Assessments and Taxation of Maryland on June 22, 2018 (the “Articles Supplementary”) and (ii) the make-whole premium described in the Articles Supplementary; and

● a number of shares of the Company’s Class A common stock equal to the lesser of (i) the liquidation preference divided by the average of the daily volume weighted average prices of the Company’s Class A common stock for ten days preceding the effective date of a fundamental change and (ii) 5.1020 (subject to adjustment).

QTS Realty Trust, Inc. Employee Stock Purchase Plan

In June 2015, we established the QTS Realty Trust, Inc. Employee Stock Purchase Plan (the “2015 Plan”) to give eligible employees the opportunity to purchase, through payroll deductions, shares of our Class A common stock in the open market by an independent broker with the Company paying brokerage commissions and fees associated with such share purchases. The 2015 Plan became effective July 1, 2015. We reserved 250,000 shares of our Class A common stock for purchase under the 2015 Plan, which were registered pursuant to a registration statement on Form S-8 filed on June 17, 2015.

On May 4, 2017, our stockholders approved the 2017 Amended and Restated QTS Realty Trust, Inc. Employee Stock Purchase Plan (the “2017 Plan”). The 2017 Plan became effective July 1, 2017 and is administered by the compensation committee (the “Compensation Committee”) of the board of directors (or by a committee of one or more persons appointed by it or the board of directors). The 2017 Plan permits participants to purchase our Class A common stock at a discount of up to 10% (as determined by the Compensation Committee). Employees of our Company and our majority-owned subsidiaries who have been employed for at least thirty days and who perform at least thirty hours of service per week for our Company are eligible to participate in the 2017 Plan, excluding any employee who, at any time during which the payroll deductions are made on behalf of the participating employees to purchase stocks, owns shares representing five percent or more of the total combined voting power or value of all classes of shares of our Company, or who is a Section 16 officer. Under the 2017 Plan, there are four purchase periods per year, and participants may deduct a minimum of $20 per paycheck and a maximum of $1,000 per paycheck towards the purchase of shares. Shares purchased under the 2017 Plan are subject to a one-year holding period following the purchase date, during which they may not be sold or transferred. We reserved 239,989 shares of our Class A common stock, subject to certain adjustments, for purchase under the 2017 Plan, which were registered pursuant to a registration statement on Form S-8 originally filed on June 17, 2015 and amended on June 30, 2017.

12. Related Party Transactions

We periodically execute transactions with entities affiliated with our 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 our officers and directors.

The transactions which occurred during the three and nine months ended September 30, 2019 and 2018 are outlined below (unaudited and in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Tax, utility, insurance and other reimbursement	$	173	$	128	$	608	$	524
Rent expense		254		254		761		761
Capital assets acquired		53		82		477		286
Total	$	480	$	464	$	1,846	$	1,571

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13. 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 as of the date of the IPO.

Commencing at any time beginning November 1, 2014, at the election of the holders of the noncontrolling interest, the currently outstanding Class A units of the Operating Partnership are redeemable for cash or, at the election of the Company, Class A common stock of the Company on a one-for-one basis. As of September 30, 2019, the noncontrolling ownership interest percentage of QualityTech, LP was 10.3%.

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

Basic income per share is calculated by dividing the net income attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted income per share adjusts basic income per share for the effects of potentially dilutive common shares. Unvested restricted stock awards and our forward sale contract described in Note 11 contain non-forfeitable rights to dividends and thus are participating securities and are included in the computation of basic earnings per share pursuant to the two-class method for all periods presented. The two-class method is an earnings allocation formula that treats a participating security as having rights to undistributed earnings that would otherwise have been available to common stockholders. Accordingly, service-based restricted stock awards and the forward sale contract were included in the calculation of basic earnings per share using the two-class method for all periods presented to the extent outstanding during the period.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Numerator:
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Loss (income) attributable to noncontrolling interests		49		1,610		(1,593)		2,641
Preferred stock dividends		(7,045)		(7,045)		(21,135)		(9,621)
Earnings attributable to participating securities		(2,184)		(206)		(5,999)		(743)
Net income (loss) available to common stockholders after allocation of participating securities	$	(2,592)	$	(12,533)	$	6,544	$	(21,300)
Denominator:
Weighted average shares outstanding - basic		54,928		50,469		53,874		50,401
Effect of Class O units, TSR units and options to purchase Class A common stock on an "as if" converted basis		—		—		463		—
Weighted average shares outstanding - diluted		54,928		50,469		54,337		50,401
Basic net income (loss) per share	$	(0.05)	$	(0.25)	$	0.12	$	(0.42)
Diluted net income (loss) per share	$	(0.05)	$	(0.25)	$	0.12	$	(0.42)

* Note: The calculations of basic and diluted net income (loss) per share above do not include the following number of Class A partnership units, Class O units, TSR units and options to purchase common stock on an “as if” converted basis, and the effects of Series B Convertible preferred stock on an “as if” converted basis as their respective inclusions would have been antidilutive:

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Class A Partnership units		6,668		6,677		6,670		6,645
Class O units, TSR units and options to purchase common stock on an "as if" converted basis		557		363		—		375
Series B Convertible preferred stock on an "as if" converted basis		6,729		6,725		6,729		2,412

15. Contracts with Customers

Future minimum payments to be received under non-cancelable customer contracts including both lease rental revenue components and nonlease revenue components that are accounted for as a combined lease component in accordance with the practical expedient provided by ASC 842 which is discussed above (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 (unaudited and in thousands):

2019 (October - December)	$	98,649
2020		336,431
2021		287,812
2022		206,331
2023		127,071
Thereafter		218,232
Total	$	1,274,526

16. Fair Value of Financial Instruments

ASC Topic 825, Financial Instruments, 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 we 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.

Derivative Contracts:

Interest rate swaps

Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. To comply with the provisions of fair value accounting guidance, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of September 30,

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2019, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We do not have any fair value measurements on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2019 or December 31, 2018.

Power Purchase Agreements

In March 2019, we began using energy hedges to manage risk related to energy prices. The inputs used to value the derivatives primarily fall within Level 2 of the fair value hierarchy, and valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each contract. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including futures curves. The fair values of the energy hedges are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future energy rates (forward curves) derived from observable market futures curves. To comply with the provisions of fair value accounting guidance, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Nonrecurring purchase or sale of assets: During the nine months ended September 30, 2019, we recognized a gain on the sale of real estate assets that is discussed in detail in Note 7. In order to determine fair value of the noncash equity consideration received for the sale of the assets, we utilized estimation models to derive the fair value of the equity interest received in the transaction. These estimation models consisted of a discounted cash flow analysis that included Level 3 inputs including market rents, discount rates, expected occupancy and estimates of additional capital expenditures, and capitalization rates derived from market data.

Credit facility and Senior Notes: Our unsecured credit facility did not have interest rates which were materially different than current market conditions and therefore, the fair value approximated the carrying value. The fair value of our 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, 2019, the fair value of the Senior Notes was approximately $412.0 million.

Other debt instruments: The fair value of our other debt instruments (including finance leases and mortgage notes payable) were estimated in the same manner as the unsecured credit facility above. Similarly, 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.

17. Subsequent Events

In October 2019, we paid our regular quarterly cash dividends on our common stock, Series A Preferred Stock and Series B Preferred Stock. See the ‘Dividends and Distributions’ section of Note 11 for additional details.

As discussed in Note 5, in October 2019, the Company amended and restated its unsecured credit facility. The amendment increased the total potential borrowings, extended maturity dates, lowered interest rates, and provided for an additional term loan under the agreement.

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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., a Maryland corporation (“QTS”), which includes the operations of QualityTech, LP (the “Operating Partnership”), for the three and nine months ended September 30, 2019 and 2018. 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 both QTS and 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, liquidity, portfolio performance, results of operations, anticipated growth in our funds from operations and anticipated market conditions contain forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You also can 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 events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

● adverse economic or real estate developments in our markets or the technology industry;

● obsolescence or reduction in marketability of our infrastructure due to changing industry demands;

● global, national and local economic conditions;

● risks related to our international operations;

● difficulties in identifying properties to acquire and completing acquisitions;

● our failure to successfully develop, redevelop and operate acquired properties or lines of business;

● significant increases in construction and development costs;

● the increasingly competitive environment in which we operate;

● defaults on, or termination or non-renewal of, leases by customers;

● decreased rental rates or increased vacancy rates;

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

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

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

● our failure to qualify and maintain QTS’ qualification as a REIT;

● environmental uncertainties and risks related to natural disasters;

● financial market fluctuations;

● changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates; and

● limitations inherent in our current and any future unconsolidated joint venture investments, such as lack of sole decision-making authority and reliance on our partners’ financial condition.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it was made. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and Item 1A. “Risk Factors” of this Form 10-Q.

Overview

QTS is a leading provider of data center solutions to the world’s largest and most sophisticated hyperscale technology companies, enterprises and government agencies. Through our technology-enabled platform, delivered across mega scale data center infrastructure, we offer a comprehensive portfolio of secure and compliant IT solutions. Our data centers are facilities that power and support our customers’ IT infrastructure equipment and provide seamless access and connectivity to a range of communications and IT services providers. Across our broad footprint of strategically-located data centers, we provide flexible, scalable and secure IT solutions, including data center space, power and cooling, connectivity and value-add managed services for more than 1,100 customers in the financial services, healthcare, retail, government and technology industries. We build out our data center facilities to accommodate both multi-tenant environments (hybrid colocation) and customers that require significant amounts of space and power (hyperscale), depending on the needs of our customers. 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 nearly double our sellable data center raised floor space without constructing or acquiring any new buildings. In addition, we own more than 672 acres of land that is available at our data center properties that provides us with the opportunity to significantly expand our capacity to further support future demand from current and new potential customers.

As of September 30, 2019, we operated a portfolio of 26 data centers located throughout the United States, Canada, Europe and Asia. Within the United States, our data centers are concentrated in the markets which we believe offer the highest growth opportunities. Our data centers are highly specialized, mission-critical facilities utilized by our customers to store, power and cool the server, storage, and networking equipment that support their most critical business systems and 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 the largest companies and organizations in the world. We have demonstrated a strong operating track record of “five-nines” (99.999%) reliability since QTS’ inception.

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Our Customer Base

Our data center facilities are designed with the flexibility to support a diverse set of solutions and customers. Our customer base is comprised of more than 1,100 different 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, retail companies, government agencies, communications service providers, software companies and global Internet companies.

We have customers that range from large enterprise and technology companies with significant IT expertise and data center requirements, including financial institutions, “Big Four” accounting firms and the world’s largest global Internet and cloud companies, to major healthcare, telecommunications and software and web-based companies.

As a result of our diverse customer base, customer concentration in our portfolio is limited. As of September 30, 2019, only five of our more than 1,100 customers individually accounted for more than 3% of our monthly recurring revenue (“MRR”) (as defined below), with the largest customer accounting for approximately 9.8% of our MRR and the next largest customer accounting for only 5.9% of our MRR.

Our Portfolio

As of September 30, 2019, including 100% of unconsolidated joint ventures with which we are affiliated, we operated 26 data centers located throughout the United States, Canada, Europe and Asia, containing an aggregate of approximately 6.5 million gross square feet of space, including approximately 2.9 million “basis-of-design” raised floor square feet (approximately 96.0% of which is owned by us including our data center in Santa Clara which is subject to a long-term ground lease), which represents the total sellable data center raised floor potential of our existing data center facilities. This reflects the maximum amount of space in our existing buildings that could be leased following full build-out, depending on the space and power configuration that we deploy. As of September 30, 2019, this space included approximately 1.6 million raised floor operating net rentable square feet, or NRSF, plus approximately 1.2 million square feet of additional raised floor in our development pipeline, of which approximately 49,000 raised floor square feet is expected to become operational by December 31, 2019. Of the total 1.2 million raised floor square feet in our development pipeline, approximately 40,250 square feet was related to customer leases which had been executed as of September 30, 2019 but not yet commenced. Our facilities collectively have access to approximately 783 megawatts (“MW”) of available utility power. Access to power is typically the most limiting and expensive component in developing a data center and, as such, we believe our significant access to power represents an important competitive advantage.

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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, 2019:

			Net Rentable Square Feet (Operating NRSF) (1)
											Available	Basis of	Current
		Gross									Utility	Design	Raised
	Year	Square	Raised	Office &	Supporting		%		Annualized		Power	("BOD")	Floor as a
Property	Acquired (2)	Feet (3)	Floor (4)	Other (5)	Infrastructure (6)	Total	Occupied (7)		Rent (8)		(MW) (9)	NRSF	% of BOD
Richmond, VA	2010	1,318,353	167,309	51,093	178,854	397,256	52.5	%	$	30,806,532	110	557,309	30.0	%
Atlanta, GA (Metro)	2006	968,695	527,186	36,953	364,815	928,954	97.9	%	$	108,196,944	72	527,186	100.0	%
Irving, TX	2013	698,000	174,160	6,981	179,083	360,224	95.5	%	$	53,422,051	140	275,701	63.2	%
Princeton, NJ	2014	553,930	58,157	2,229	111,405	171,791	100.0	%	$	10,338,627	22	158,157	36.8	%
Chicago, IL	2014	474,979	56,000	1,786	58,182	115,968	93.8	%	$	16,131,336	24	215,855	25.9	%
Ashburn, VA	2017	445,000	38,740	6,096	45,713	90,549	94.4	%	$	5,955,823	50	178,000	21.8	%
Suwanee, GA	2005	369,822	205,608	8,697	107,128	321,433	91.8	%	$	57,776,887	36	205,608	100.0	%
Piscataway, NJ	2016	360,000	98,820	14,311	100,151	213,282	90.2	%	$	19,034,938	111	176,000	56.1	%
Fort Worth, TX	2016	261,836	37,960	14,106	69,466	121,532	93.2	%	$	4,507,828	50	80,000	47.5	%
Santa Clara, CA*	2007	135,322	59,905	944	45,094	105,943	88.8	%	$	19,090,139	11	80,940	74.0	%
Sacramento, CA	2012	92,644	54,595	2,794	23,916	81,305	36.6	%	$	10,535,137	8	54,595	100.0	%
Dulles, VA	2017	87,159	30,545	5,997	32,892	69,434	67.1	%	$	16,471,481	13	48,270	63.3	%
Leased facilities **	2006 & 2015	192,513	63,862	18,650	41,901	124,413	82.7	%	$	27,369,383	14	84,474	75.6	%
Other ***	Misc.	459,549	51,561	49,337	70,636	171,534	82.7	%	$	11,988,521	97	180,380	28.6	%
Consolidated properties		6,417,802	1,624,408	219,974	1,429,236	3,273,618	88.3	%	$	391,625,627	759	2,822,475	57.6	%
Unconsolidated JV Properties - at the JV's 100% Share (10)
Manassas, VA	2018	118,031	22,400	12,663	39,044	74,107	100.0	%	$	8,235,171	24	66,324	33.8	%
Total Properties		6,535,833	1,646,808	232,637	1,468,280	3,347,725	88.5	%	$	399,860,798	783	2,888,799	57.0	%

(1) 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.

(2) 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.

(3) 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. Gross square feet includes 383,761 square feet of our office and support space, which is not included in operating NRSF.

(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 space is occupied (1,178,464 square feet as of September 30, 2019) divided by leasable raised floor (which we define 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 product configuration) based on the current configuration of the properties (1,331,573 square feet as of September 30, 2019), 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 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 contracts (as defined below) as of a particular date, unless otherwise specifically noted, nor does it reflect the accounting associated with any free rent, rent abatements or future scheduled rent increases.

(9) Represents installed utility power and transformation capacity that is available for use by the facility as of September 30, 2019.

(10) Represents the Company’s unconsolidated joint venture at the JV’s 100% share. QTS’s pro rata share of the JV is 50%.

*        Subject to long term ground lease.

**      Includes 9 facilities. All facilities are leased, including those subject to finance leases.

***   Consists of Miami, FL; Lenexa, KS; Overland Park, KS; Eemshaven, Netherlands and Groningen, Netherlands facilities.

Factors That May Influence Future Results of Operations and Cash Flows

Recent Accounting Pronouncements. We adopted the provisions of ASC Topic 606, Revenue from Contracts with Customers, effective January 1, 2018. We also adopted ASC Topic 842, Leases, effective January 1, 2019. For additional information with respect to the impact of the standards on our financial condition and results of operations, refer to Note 2 – Summary of Significant Accounting Policies.

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, 2019, we had in place customer leases generating revenue for approximately 89% of our leasable raised floor. Our ability to grow revenue also will be affected by our ability to maintain or increase rental rates at our properties. Future economic downturns, regional downturns or downturns in the technology industry, new technological developments, evolving industry demands and other similar factors 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

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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, 2019, 51% 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), with the remaining 49% attributable to customers utilizing less than 6,600 square feet of space. As of September 30, 2019, approximately 50% of our MRR was attributable to the metered power model, the majority of which is comprised of customers that individually occupy greater than 6,600 square feet of space. 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, 2019, the remaining approximately 50% of our MRR was attributable to the gross lease or managed service model. Under this model, the customer pays us a fixed amount 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 incur more utility costs than their leases permit, we are able to charge these customers for overages. For leases under the gross lease or managed service 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 generally have a term of three years or less.

Scheduled Lease Expirations. Our ability to minimize rental churn (which we define as MRR lost in the period from a customer intending to fully exit our platform in the near term compared to the total MRR at the beginning of the period) and customer downgrades at renewal and renew, lease and re-lease expiring space will impact our results of operations and cash flows. Leases which have commenced billing representing approximately 7% and 15% of our total leased raised floor are scheduled to expire during the years ending December 31, 2019 (including all month-to-month leases) and 2020, respectively. These leases also represented approximately 13% and 22%, respectively, of our annualized rent as of September 30, 2019. Given that our average rent for larger contracts tend to be at or below market rent 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, Development, and Financing. Our revenue growth also will depend on our ability to acquire and redevelop and/or construct and subsequently lease data center space at favorable rates. We generally fund the cost of data center acquisition, construction and/or redevelopment from our net cash provided by operations, revolving credit facility, 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, borrowings under our credit facility, and the forward equity transaction we completed during the nine months ended September 30, 2019.

Unconsolidated joint venture. On February 22, 2019, we entered into a joint venture amendment with Alinda, a premier infrastructure investment firm, with respect to our Manassas data center. At closing, we contributed cash and our Manassas data center (a 118,000 square foot hyperscale data center under development in Manassas, Virginia), and Alinda contributed cash, in each case in exchange for a 50% interest in the joint venture. The Manassas data center, which is currently leased to a global cloud-based software company pursuant to a 10-year lease agreement, was contributed at an expected stabilized value upon completion of approximately $240 million. At the closing, we received approximately $53 million in net proceeds, which was funded from the cash contributed by Alinda and also borrowings under a $164.5 million secured credit facility entered into by the joint venture at closing that carries a rate of LIBOR plus 2.25%. We used these distributions to pay down our revolving credit facility and for general corporate purposes. Under the joint venture agreement, we will receive additional distributions in the future as and when we complete development of each phase of the Manassas data center and place it into service, which allows us to receive distributions for Alinda’s share of the joint venture based on the expected full stabilization of the asset. These distributions will be based on a 6.75% capitalization rate for each phase delivered during the first three years of the joint venture. Under the joint venture agreement, we will serve as the joint venture’s operating member, subject to authority and oversight of a board appointed by us and Alinda, and separately we will serve as manager and developer of the facility in exchange for management and

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development fees. The joint venture agreement includes various transfer restrictions and rights of first offer that will allow us to repurchase Alinda’s interest should Alinda wish to exit in the future. In addition, we have agreed to provide Alinda an opportunity to invest in future similar entities based on similar terms and a comparable capitalization rate. This joint venture is reflected as an unconsolidated joint venture on our reported financial statements beginning in the first quarter of 2019.

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 a significant portion 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 will 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.

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General Leasing Activity

The following leasing and booked-not-billed (“BNB”) statistics include QTS’ 50% pro rata share of revenue from the unconsolidated joint venture. We define booked-not-billed as our customer leases that have been signed, but for which lease payments have not yet commenced.

Below our sales activity is outlined for the three and nine months ended September 30, 2019:

					Incremental
		Number of	Annualized rent(2)		Annualized Rent(2), Net
	Period	Leases	per leased sq ft		of Downgrades
New/modified leases signed	Three Months Ended September 30, 2019	444	$	404	$	17,385,468
	Nine Months Ended September 30, 2019	1,368	$	466	$	48,314,766
		Number of
		Renewed	Annualized rent(2)
	Period	Leases	per leased sq ft		Annualized Rent(2)		Rent Change
Renewed Leases (1)	Three Months Ended September 30, 2019	88	$	541	$	25,862,052	2.0	%
	Nine Months Ended September 30, 2019	285	$	653	$	51,256,464	1.7	%

(1) We define renewals as leases where the customer retains the same amount of space before and after renewals, which facilitates rate comparability.

(2) We define annualized rent as MRR multiplied by 12.

The following table includes QTS’ 50% pro rata share of BNB revenue from the unconsolidated joint venture and outlines the BNB balance as of September 30, 2019 and how that is expected to affect revenue in 2019 and subsequent years:

Booked-not-billed ("BNB") (1)		2019		2020		Thereafter		Total
MRR	$	1,369,502	$	2,093,345	$	3,184,666	$	6,647,513
Incremental revenue (2)		2,852,497		14,497,170		38,215,992
Annualized revenue (3) (4)	$	16,434,024	$	25,120,140	$	38,215,992	$	79,770,156

(1) Includes the Company’s consolidated booked-not-billed balance in addition to booked-not-billed revenue associated with the unconsolidated JV at QTS’s pro rata share of the booked-not-billed revenue. Of the $79.8 million annualized BNB revenue, approximately $1.8 million related to QTS’s pro rata share.

(2) Incremental revenue represents the expected amount of recognized MRR for the business in the period based on when the booked-not-billed leases commence throughout the period.

(3) Annualized revenue represents the booked-not-billed MRR multiplied by 12, demonstrating how much recognized MRR might have been recognized if the booked-not-billed leases commencing in the period were in place for an entire year.

(4) As of September 30, 2019, incremental annualized monthly recurring revenue from leases that have been signed for which the Company had not started revenue recognition, including straight-line, was $48.2 million, of which $11.4 million was attributable to 2019, $28.2 million was attributable to 2020, and $8.6 million was attributable to years thereafter.

The amounts in the table above represent MRR from our customer leases that have been executed, but for which cash lease payments have not yet commenced.

The Company estimates the remaining cost to provide the space, power, connectivity and other services to the customer contracts which had not billed as of September 30, 2019 to be approximately $140 million. This estimate generally includes customers with newly contracted space of more than 3,300 square feet of raised floor space. 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, 2019 Compared to Three Months Ended September 30, 2018

Changes in revenues and expenses for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 are summarized below (unaudited and in thousands):

	Three Months Ended September 30,
	2019		2018		$ Change		% Change
Revenues:
Rental	$	121,475	$	104,760	$	16,715	16	%
Other		3,780		7,453		(3,673)	(49)	%
Total revenues		125,255		112,213		13,042	12	%
Operating expenses:
Property operating costs		44,730		38,217		6,513	17	%
Real estate taxes and insurance		3,713		3,088		625	20	%
Depreciation and amortization		42,875		37,900		4,975	13	%
General and administrative		19,504		19,922		(418)	(2)	%
Transaction and integration costs		827		901		(74)	(8)	%
Restructuring		—		13,737		(13,737)	(100)	%
Total operating expenses		111,649		113,765		(2,116)	(2)	%
Operating income		13,606		(1,552)		15,158	(977)	%
Other income and expense:
Interest income		22		66		(44)	(67)	%
Interest expense		(6,724)		(6,386)		338	5	%
Other income (expense)		370		—		(370)	*	%
Equity in earnings (loss) of unconsolidated entities		(317)		—		(317)	*	%
Income (loss) before taxes		6,957		(7,872)		14,829	188	%
Tax benefit (expense) of taxable REIT subsidiaries		(369)		980		(1,349)	(138)	%
Net income (loss)	$	6,588	$	(6,892)	$	13,480	196	%

Revenues. Total revenues for the three months ended September 30, 2019 were $125.3 million compared to $112.2 million for the three months ended September 30, 2018. The increase of $13.0 million, or 12%, was largely attributable to growth in our hyperscale and hybrid colocation offerings, primarily through increases in revenues in the Atlanta-Metro, Chicago, Ashburn, Fort Worth and Irving data centers as well as the acquisition of the Groningen data center. Offsetting these increases were revenue reductions in various leased facilities associated with our transition of certain cloud and managed services as a part of the strategic growth plan implemented in the prior year.

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Property Operating Costs. Property operating costs for the three months ended September 30, 2019 were $44.7 million compared to property operating costs of $38.2 million for the three months ended September 30, 2018, an increase of $6.5 million, or 17%. The breakdown of our property operating costs is summarized in the table below (unaudited and in thousands):

	Three Months Ended September 30,
	2019		2018		$ Change		% Change
Property operating costs:
Direct payroll	$	4,919	$	5,640	$	(721)	(13)	%
Rent		3,145		3,199		(54)	(2)	%
Repairs and maintenance		3,093		3,511		(418)	(12)	%
Utilities		21,999		15,841		6,158	39	%
Management fee allocation		4,820		5,123		(303)	(6)	%
Other		6,754		4,903		1,851	38	%
Total property operating costs	$	44,730	$	38,217	$	6,513	17	%

The increase in total property operating costs was primarily driven by increased utilities expense largely related to increased expense associated with increased power usage as well as other expense increases. Offsetting these increases were expense reductions primarily related to reduced management fee allocation on leased facilities, reduced repairs and maintenance costs and reduced payroll expense with these reductions primarily driven by our exit of certain leased facilities tied to our strategic growth plan in the prior year whereby we transitioned away from certain of our cloud and managed services offerings.

Real Estate Taxes and Insurance. Real estate taxes and insurance for the three months ended September 30, 2019 were $3.7 million compared to $3.1 million for the three months ended September 30, 2018. The increase of $0.6 million, or 20%, was primarily attributable to an increase in taxes at our Irving facility.

Depreciation and Amortization. Depreciation and amortization for the three months ended September 30, 2019 was $42.9 million compared to $37.9 million for the three months ended September 30, 2018. The increase of $5.0 million, or 13%, was due primarily to additional depreciation expense relating to an increase in assets placed in service at our Atlanta-Metro, Ashburn and Chicago facilities.

General and Administrative Expenses. General and administrative expenses were $19.5 million for the three months ended September 30, 2019 compared to general and administrative expenses of $19.9 million for the three months ended September 30, 2018, a decrease of $0.4 million, or 2%. The decrease was primarily attributable to the implementation of the aforementioned strategic growth plan in 2018, resulting in a decrease in net payroll expenses.

Transaction and Integration Costs. Transaction and integration costs were $0.8 million for the three months ended September 30, 2019, compared to $0.9 million for the three months ended September 30, 2018. The decrease of $0.1 million, or 8%, indicated a similar level of such costs incurred in the three months ended September 30, 2019.

Restructuring Costs. Restructuring costs, which are costs associated with our strategic growth plan in the prior year, were $13.7 million for the three months ended September 30, 2018, primarily related to employee severance expenses, professional fees, acceleration of equity-based compensation awards and the sale or write-off of certain product-related assets. No such costs were incurred during the three months ended September 30, 2019.

Interest Expense. Interest expense for the three months ended September 30, 2019 was $6.7 million compared to $6.4 million for the three months ended September 30, 2018. The increase of $0.3 million, or 5%, was due primarily to an increase in interest costs related to an increase in the average total debt balance of $287.2 million partially offset by the level of capitalized interest due to ongoing capital development projects.

Other Income (Expense). Other income (expense) represents the impact of foreign currency exchange rate fluctuations on the value of investments in foreign subsidiaries whose functional currencies are other than the U.S. Dollar. We

55

recognized $0.4 million of income on foreign currency translation adjustments related to our investment in the Netherlands facilities during the period, with no such income or expenses incurred during the prior year.

Equity in earnings (loss) of unconsolidated entities. This represents equity in earnings (loss) of our joint venture formed during the first quarter of 2019 that owns our Manassas data center. Our share of equity in net loss was $0.3 million for the three months ended September 30, 2019.

Tax Expense (Benefit) of Taxable REIT Subsidiaries. The tax expense of our taxable REIT subsidiaries for the three months ended September 30, 2019 was $0.4 million compared to a $1.0 million tax benefit for the three months ended September 30, 2018. The change between the current period tax expense and the prior period tax benefit primarily relates to the determination that certain deferred tax assets may not be utilized prior to expiration.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Changes in revenues and expenses for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 are summarized below (unaudited and in thousands):

	Nine Months Ended September 30,
	2019		2018		$ Change		% Change
Revenues:
Rental	$	345,841	$	305,774	$	40,067	13	%
Other		11,270		32,413		(21,143)	(65)	%
Total revenues		357,111		338,187		18,924	6	%
Operating expenses:
Property operating costs		117,403		112,515		4,888	4	%
Real estate taxes and insurance		10,435		8,896		1,539	17	%
Depreciation and amortization		123,144		111,633		11,511	10	%
General and administrative		59,519		63,187		(3,668)	(6)	%
Transaction and integration costs		3,080		2,474		606	24	%
Restructuring		—		33,697		(33,697)	(100)	%
Total operating expenses		313,581		332,402		(18,821)	(6)	%
Gain on sale of real estate, net		13,408		—		13,408	*	%
Operating income		56,938		5,785		51,153	884	%
Other income and expense:
Interest income		103		92		11	12	%
Interest expense		(20,329)		(22,699)		(2,370)	(10)	%
Other income (expense)		330		—		330	*	%
Equity in earnings (loss) of unconsolidated entity		(992)		—		(992)	*	%
Income (loss) before taxes		36,050		(16,822)		52,872	314	%
Tax benefit (expense) of taxable REIT subsidiaries		(779)		3,245		(4,024)	(124)	%
Net income (loss)	$	35,271	$	(13,577)	$	48,848	360	%

_________________________

* not applicable for comparison

Revenues. Total revenues for the nine months ended September 30, 2019 were $357.1 million compared to $338.2 million for the nine months ended September 30, 2018. The increase of $18.9 million, or 6%, was largely attributable to growth in our hyperscale and hybrid colocation offerings in the Atlanta-Metro, Chicago, Ashburn, Fort Worth, Irving, and Piscataway data centers as well as revenue from the Groningen data center which was acquired in April 2019. Offsetting these increases were revenue reductions in various leased facilities associated with our transition of certain cloud and managed services as a part of the strategic growth plan implemented in the prior year.

Property Operating Costs. Property operating costs for the nine months ended September 30, 2019 were $117.4 million compared to property operating costs of $112.5 million for the nine months ended September 30, 2018, an increase of

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$4.9 million, or 4%. The breakdown of our property operating costs is summarized in the table below (unaudited and in thousands):

	Nine Months Ended September 30,
	2019		2018		$ Change		% Change
Property operating costs:
Direct payroll	$	16,688	$	16,817	$	(129)	(1)	%
Rent		9,478		10,127		(649)	(6)	%
Repairs and maintenance		9,378		11,468		(2,090)	(18)	%
Utilities		51,618		43,805		7,813	18	%
Management fee allocation		13,866		15,676		(1,810)	(12)	%
Other		16,375		14,622		1,753	12	%
Total property operating costs	$	117,403	$	112,515	$	4,888	4	%

The increase in total property operating costs was primarily attributable to increased utilities expense offset partly by expense reductions in repairs and maintenance of $2.1 million primarily related to our transition from our cloud and managed services offerings associated with our 2018 strategic growth plan, as well as reductions in management fee allocation, rent expense and direct payroll which were also primarily driven by the 2018 strategic growth plan implementation.

Real Estate Taxes and Insurance. Real estate taxes and insurance for the nine months ended September 30, 2019 were $10.4 million compared to $8.9 million for the nine months ended September 30, 2018. The increase of $1.5 million, or 17%, was primarily attributable to an increase in taxes at our Irving, Ashburn and Chicago facilities.

Depreciation and Amortization. Depreciation and amortization for the nine months ended September 30, 2019 was $123.1 million compared to $111.6 million for the nine months ended September 30, 2018. The increase of $11.5 million, or 10%, was due primarily to additional depreciation expense primarily relating to increase in assets placed in service at our Atlanta-Metro, Ashburn, Chicago and Irving facilities.

General and Administrative Expenses. General and administrative expenses were $59.5 million for nine months ended September 30, 2019 compared to general and administrative expenses of $63.2 million for the nine months ended September 30, 2018, a decrease of $3.7 million, or 6%. The decrease was primarily attributable to the aforementioned strategic growth plan, resulting in a decrease in net payroll expenses and outside services fees.

Transaction and Integration Costs. Transaction and integration costs were $3.1 million for the nine months ended September 30, 2019, compared to $2.5 million for the nine months ended September 30, 2018. The increase of $0.6 million, or 24%, was primarily related to increased non-capitalizeable costs associated with the implementation of a new enterprise resource planning system during the nine months ended September 30, 2019.

Restructuring Costs. Restructuring costs, which are costs associated with our strategic growth plan in the prior year, were $33.7 million for the nine months ended September 30, 2018, primarily related to employee severance expenses, professional fees, acceleration of equity-based compensation awards and the sale or write-off of certain product-related assets. No restructuring costs were incurred during the nine months ended September 30, 2019.

Gain on sale of real estate, net. The gain on sale of real estate net incurred during the nine months ended September 30, 2019 represents the net gain realized upon sale of the Manassas facility to the joint venture and represents the fair value of cash and noncash consideration received in the sale transaction, net of costs directly related to the sale in excess of the carrying amounts of the assets.

Interest Expense. Interest expense for the nine months ended September 30, 2019 was $20.3 million compared to $22.7 million for the nine months ended September 30, 2018. The decrease of $2.4 million, or 10%, was due primarily to a higher level of capitalized interest due to continued ongoing capital development projects, partially offset by an increase in interest costs related to an increase in the average total debt balance of $161.1 million.

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Other Income (Expense). Other income (expense) represents the impact of foreign currency exchange rate fluctuations on the value of investments in foreign subsidiaries whose functional currencies are other than the U.S. Dollar. We recognized $0.3 million of income on foreign currency translation adjustments related to our investment in the Netherlands facilities during the period, with no such expenses incurred during the prior year.

Equity in earnings (loss) of unconsolidated entities. This represents equity in earnings (loss) of our joint venture formed during the first quarter of 2019 that owns our Manassas data center. Equity in net loss was $1.0 million for the nine months ended September 30, 2019.

Tax Expense (Benefit) of Taxable REIT Subsidiaries. Tax expense of our taxable REIT subsidiaries for the nine months ended September 30, 2019 was $0.8 million compared to a tax benefit of $3.2 million for the nine months ended September 30, 2018. The change between the current period tax expense and the prior period tax benefit primarily relates to the determination that certain deferred tax assets may not be utilized prior to expiration.

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) EBITDAre; 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. FFO, Operating FFO, Adjusted Operating FFO, MRR, NOI, EBITDAre and Adjusted EBITDA, as calculated by us, may not be comparable to FFO, Operating FFO, Adjusted Operating FFO, MRR, NOI, EBITDAre 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.

We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. We believe the presentation of non-GAAP financial measures provide meaningful supplemental information to both management and investors that is indicative of our operations. We have included a reconciliation of this additional information to the most comparable GAAP measure in the selected financial information below.

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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. 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 depreciable real estate related to our primary business, impairment write-downs of depreciable real estate related to our primary business, real estate-related depreciation and amortization, and similar adjustments for unconsolidated entities. To the extent we incur gains or losses from the sale of assets that are incidental to our primary business, or incur impairment write-downs associated with assets that are incidental to our primary business, we include such charges in our calculation of FFO. 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, management computes an adjusted measure of FFO, which we refer to as Operating funds from operations (“Operating FFO”). Operating FFO is a non-GAAP measure that is used as a supplemental operating measure and to provide additional information to users of the financial statements. We generally calculate Operating FFO as FFO excluding certain non-routine 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 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 and to provide additional information to users of the financial statements. 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 and amortization, straight line rent adjustments, deferred taxes and non-cash compensation.

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 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 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.

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A reconciliation of net income (loss) to FFO, Operating FFO and Adjusted Operating FFO is presented below (unaudited and in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
FFO
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Equity in net loss of unconsolidated entity		317		—		992		—
Real estate depreciation and amortization		39,969		34,579		114,440		100,479
Gain on sale of real estate, net		—		—		(13,408)		—
Pro rata share of FFO from unconsolidated entity		369		—		754		—
FFO (1)		47,243		27,687		138,049		86,902
Preferred stock dividends		(7,045)		(7,045)		(21,135)		(9,621)
FFO available to common stockholders & OP unit holders		40,198		20,642		116,914		77,281
Restructuring costs		—		13,737		—		33,697
Transaction and integration costs		827		901		3,080		2,474
Tax benefit associated with restructuring, transaction and integration costs		—		(571)		—		(2,247)
Operating FFO available to common stockholders & OP unit holders*		41,025		34,709		119,994		111,205
Maintenance Capex		(381)		(1,660)		(3,323)		(5,202)
Leasing commissions paid		(7,302)		(5,461)		(20,345)		(19,042)
Amortization of deferred financing costs and bond discount		978		959		2,935		2,882
Non real estate depreciation and amortization		2,906		3,320		8,704		11,153
Straight line rent revenue and expense and other		(2,278)		(1,067)		(4,679)		(4,818)
Tax expense (benefit) from operating results		369		(409)		779		(998)
Equity-based compensation expense		4,456		3,961		12,052		11,441
Adjustments for unconsolidated entity		63		—		43		—
Adjusted Operating FFO available to common stockholders & OP unit holders*	$	39,836	$	34,352	$	116,160	$	106,621

(1) FFO for the three and nine months ended September 30, 2018 includes $7.4 million and $14.5 million, respectively, of impairment losses related to certain non-real estate product related assets that were considered incidental to our primary business and were included in the “Restructuring” line item of the consolidated statement of operations. No gains, losses or impairment write-downs associated with assets incidental to our primary business were incurred during the three and nine months ended September 30, 2019.

* The Company’s calculations of Operating FFO and Adjusted Operating FFO may not be comparable to Operating FFO and Adjusted Operating FFO as calculated by other REITs that do not use the same definition.

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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 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 is also calculated to include the Company’s pro rata share of monthly contractual revenue under signed leases as of a particular date associated with unconsolidated entities, which includes revenue from the unconsolidated entity’s rental and managed services activities, but excludes the unconsolidated entity’s customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR reflects the annualized cash rental payments. It 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 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 and customer leases attributable to our business. 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 GAAP revenues to recognized MRR in the period and MRR at period end is presented below (unaudited and in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Recognized MRR in the period
Total period revenues (GAAP basis)	$	125,255	$	112,213	$	357,111	$	338,187
Less: Total period variable lease revenue from recoveries		(17,563)		(11,800)		(41,028)		(33,757)
Total period deferred setup fees		(4,041)		(3,275)		(11,095)		(9,371)
Total period straight line rent and other		(4,768)		(3,872)		(14,195)		(12,649)
Recognized MRR in the period	$	98,883	$	93,266	$	290,793	$	282,410
MRR at period end
Total period revenues (GAAP basis)	$	125,255	$	112,213	$	357,111	$	338,187
Less: Total revenues excluding last month		(81,114)		(75,859)		(312,970)		(301,833)
Total revenues for last month of period		44,141		36,354		44,141		36,354
Less: Last month variable lease revenue from recoveries		(6,369)		(3,896)		(6,369)		(3,896)
Last month deferred setup fees		(1,684)		(1,095)		(1,684)		(1,095)
Last month straight line rent and other		(3,452)		(623)		(3,452)		(623)
Add: Pro rata share of MRR at period end of unconsolidated entity		343		—		343		—
MRR at period end *	$	32,979	$	30,740	$	32,979	$	30,740

* Does not include our booked-not-billed MRR balance, which was $6.6 million and $5.0 million as of September 30, 2019 and 2018, respectively.

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Net Operating Income (NOI)

We calculate net operating income (“NOI”), as net income (loss) (computed in accordance with GAAP), excluding: interest expense, interest income, tax expense (benefit) of taxable REIT subsidiaries, depreciation and amortization, write off of unamortized deferred financing, debt restructuring costs, gain (loss) on extinguishment of debt, transaction and integration costs, gain (loss) on sale of real estate, restructuring costs, general and administrative expenses and similar adjustments for unconsolidated entities. We allocate a management fee charge of 4% of cash revenues for all facilities (with the exception of the leased facilities acquired in 2015, which were allocated a charge of 10% of cash revenues) 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.

A reconciliation of net income to NOI is presented below (unaudited and in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net Operating Income (NOI)
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Equity in net loss of unconsolidated entity		317		—		992		—
Interest income		(22)		(66)		(103)		(92)
Interest expense		6,724		6,386		20,329		22,699
Depreciation and amortization		42,875		37,899		123,144		111,632
Other (income) expense		(370)		—		(330)		—
Tax expense (benefit) of taxable REIT subsidiaries		369		(980)		779		(3,245)
Transaction and integration costs		827		901		3,080		2,474
General and administrative expenses		19,504		19,923		59,519		63,188
Gain on sale of real estate, net		—		—		(13,408)		—
Restructuring		—		13,737		—		33,697
NOI from consolidated operations (1)	$	76,812	$	70,908	$	229,273	$	216,776
Pro rata share of NOI from unconsolidated entity		872		—		1,948		—
Total NOI (1)	$	77,684	$	70,908	$	231,221	$	216,776

(1) Includes facility level general and administrative allocation charges of 4% of cash revenue for all facilities (with the exception of the leased facilities acquired in 2015, which were allocated a charge of 10% of cash revenues through 2018). These allocated charges aggregated to $4.8 million and $5.1 million for the three month periods ended September 30, 2019 and 2018, respectively, and $13.9 million and $15.7 million for the nine months ended September 30, 2019 and 2018, respectively.

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Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA

We calculate EBITDAre in accordance with NAREIT. EBITDAre represents net income (loss) (computed in accordance with GAAP) adjusted to exclude gains (or losses) from sales of depreciated property, income tax expense (or benefit), interest expense, depreciation and amortization, impairments of depreciated property and unconsolidated entities, and similar adjustments for unconsolidated entities. Management uses EBITDAre as a supplemental performance measure because it provides performance measures that, when compared year over year, captures the performance of our operations by removing the impact of our capital structure (primarily interest expense) and asset base charges (primarily depreciation and amortization) from our operating results.

Due to the volatility and nature of certain significant charges and gains recorded in our operating results that management believes are not reflective of operating performance, we compute an adjusted measure of EBITDAre, which we refer to as Adjusted EBITDA. We generally calculate Adjusted EBITDA as EBITDAre excluding certain non-routine charges, write off of unamortized deferred financing costs, gains (losses) on extinguishment of debt, restructuring costs, and transaction and integration costs, as well as our pro-rata share of each of those respective expenses associated with the unconsolidated entity aggregated into one line item categorized as “Adjustments for the unconsolidated entity.” In addition, we calculate Adjusted EBITDA excluding certain non-cash recurring costs such as equity-based compensation. We believe that Adjusted EBITDA provides investors with another financial measure that may facilitate comparisons of operating performance between periods and, to the extent other REITs calculate Adjusted EBITDA on a comparable basis, between REITs.

Management uses EBITDAre and Adjusted EBITDA as supplemental performance measures as they provide useful measures of assessing our operating results. Other companies may not calculate EBITDAre or Adjusted EBITDA in the same manner. Accordingly, our EBITDAre and Adjusted EBITDA may not be comparable to others. EBITDAre 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 EBITDAre and Adjusted EBITDA is presented below (unaudited and in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
EBITDAre and Adjusted EBITDA
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Equity in net loss of unconsolidated entity		317		—		992		—
Interest income		(22)		(66)		(103)		(92)
Interest expense		6,724		6,386		20,329		22,699
Tax expense (benefit) of taxable REIT subsidiaries		369		(980)		779		(3,245)
Depreciation and amortization		42,875		37,899		123,144		111,632
(Gain) loss on disposition of depreciated property and impairment write-downs of depreciated property		—		7,409		(13,408)		14,548
Pro rata share of EBITDAre from unconsolidated entity		867		—		1,945		—
EBITDAre		57,718		43,756		168,949		131,965
Equity-based compensation expense		4,456		3,961		12,052		11,441
Restructuring costs		—		6,328		—		19,149
Transaction and integration costs		827		901		3,080		2,474
Adjusted EBITDA	$	63,001	$	54,946	$	184,081	$	165,029

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Liquidity and Capital Resources

Short-Term Liquidity

Our short-term liquidity needs include funding capital expenditures for the development of data center space (a significant portion of which is discretionary), meeting debt service and debt maturity obligations, funding payments for finance leases, 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 $340.2 million of capital expenditures incurred in the nine months ended September 30, 2019 we expect that we will incur approximately $75 million to $125 million in additional capital expenditures through December 31, 2019 in connection with the development of our data center facilities, which excludes acquisitions and includes our 50% proportionate share of capital expenditures at the Manassas facility that was contributed to a joint venture. We expect to spend approximately $50 million to $100 million of capital expenditures with vendors on development, and the remainder on other capital expenditures and capitalized overhead costs (including capitalized interest, commissions, payroll and other similar costs), personal property and other less material capital projects. 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 expect to meet our short-term liquidity needs through operating cash flows, cash and cash equivalents, borrowings under our credit facility, accessing forward equity aggregate net proceeds, or other capital markets activity. We may also transfer certain projects into unconsolidated entities as another source of capital.

Our net cash paid for capital expenditures for the nine months ended September 30, 2019 and 2018 are summarized in the table below (unaudited and in thousands):

	Nine Months Ended September 30,
	2019		2018
Development	$	191,604	$	313,651
Acquisitions		69,355		36,956
Maintenance capital expenditures		3,323		5,202
Other capital expenditures (1)		75,952		63,368
Total capital expenditures	$	340,234	$	419,177

(1) Represents capital expenditures for capitalized interest, commissions, personal property, overhead costs and corporate fixed assets. Corporate fixed assets primarily relate to construction of corporate offices, leasehold improvements and product related assets.

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 finance leases, dividend payments on our Series A Preferred Stock and Series B Preferred Stock and recurring and non-recurring capital expenditures. We may also pursue new developments and additional redevelopment of our data centers and future redevelopment of other space in our portfolio. We may also pursue development on land which QTS currently owns that is available at our data center properties in Atlanta-Metro, Atlanta-Suwanee, Richmond, Irving, Fort Worth, Princeton, Chicago, Ashburn, Phoenix and Hillsboro, as well as Manassas, through our joint venture. The development and/or 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 facility, access to joint venture capital and issuance of additional equity or debt securities, subject to prevailing market conditions, as discussed below.

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Equity Capital

On March 15, 2018, we issued 4,280,000 shares of 7.125% Series A Cumulative Redeemable Perpetual Preferred Stock with a liquidation preference of $25.00 per share, which included 280,000 shares of the underwriters’ partial exercise of their option to purchase additional shares. We used the net proceeds of approximately $103.2 million to repay amounts outstanding under our unsecured revolving credit facility.

On June 25, 2018, we issued 3,162,500 shares of 6.50% Series B Cumulative Convertible Perpetual Preferred Stock with a liquidation preference of $100.00 per share, which included 412,500 shares the underwriters purchased pursuant to the exercise of their overallotment option in full. We used the net proceeds of approximately $304 million to repay amounts outstanding under our unsecured revolving credit facility.

In February 2019, we conducted an underwritten offering of 7,762,500 shares of Class A common stock, consisting of 4,000,000 shares issued during the first quarter of 2019 and 3,762,500 shares which will be issued on a forward basis, which included 1,012,500 shares of the underwriters full exercise of their option to purchase additional shares, in each case at a price of $41.50 per share. We received net proceeds of approximately $159 million from the issuance of 4,000,000 shares during the first quarter, which were used to repay amounts outstanding under our unsecured revolving credit facility. During September 30, 2019, we settled 2,832,000 shares for total net proceeds of approximately $110 million, which was used to repay amounts outstanding under or revolving credit facility. Following this partial settlement, we have approximately $36 million of proceeds remaining available under this forward sale, which we expect to physically settle prior to March 1, 2020 with the issuance of approximately 0.9 million shares of common stock, although we have the right to elect settlement prior to that time.

In June 2019, we established a new “at-the-market” equity offering program (the “ATM Program”) pursuant to which we may issue, from time to time, up to $400 million of our Class A common stock, which may include shares to be sold on a forward basis. The use of forward sales under the ATM Program generally allows the Company to lock in a price on the sale of shares when sold by the forward sellers, but defer receiving the net proceeds from such sales until the shares are issued at settlement on a later date.

● During the three and nine months ended September 30, 2019, the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 1.2 million shares of its common stock at an average price of approximately $49 per share, representing available net proceeds upon physical settlement of approximately $56 million (subject to further adjustment as described below). At September 30, 2019, the Company had not settled any of these forward sales and had approximately $343 million of Class A common stock remaining available for sale under the ATM Program.

● Through the date of this report (including the sales during the three and nine months ended September 30, 2019 described above), the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 2.8 million shares of its common stock at an average price of approximately $51 per share, representing available net proceeds upon physical settlement of approximately $139 million (subject to further adjustment as described below). Through the date of this report, the Company had not settled any of these forward sales and had approximately $258 million of Class A common stock remaining available for sale under the ATM Program.

The Company expects to physically settle (by delivering shares of common stock) these forward sales prior to their first anniversary date. When combined with the approximately $36 million of proceeds remaining available under the forward sale in the first quarter of 2019, the Company currently has access to over $175 million of net proceeds through forward stock sales. The Company views forward equity sales under its ATM program as an important capital raising tool that it expects to continue to strategically and selectively use, subject to market conditions and overall availability under the ATM program.

At any time during the term of any forward sale, the Company may settle the forward sale by physical delivery of shares of common stock to the forward purchaser or, at the Company’s election, cash settle or net share settle. The initial forward sale price per share under each forward sale equals the product of (x) an amount equal to 100% minus the

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applicable forward selling commission and (y) the volume weighted average price per share at which the borrowed shares of our common stock were sold pursuant to the equity distribution agreement by the relevant forward seller during the applicable forward hedge selling period for such shares to hedge the relevant forward purchaser’s exposure under such forward sale. Thereafter, the forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor equal to the specified daily rate less a spread, and is decreased based on specified amounts related to expected dividends on shares of our common stock during the term of the applicable forward sale. If the specified daily rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price.

Previously, in March 2017, the Company established an “at-the-market” equity offering program (the “prior ATM Program”) pursuant to which the Company could issue, from time to time, up to $300 million of its Class A common stock. The Company terminated the prior ATM program in March 2019 in connection with the expiration of its prior universal shelf registration statement.

Manassas Joint Venture

On February 22, 2019, we entered into a joint venture with Alinda Capital Partners (“Alinda”), a premier infrastructure investment firm, with respect to our Manassas data center, as described above under “Factors That May Influence Future Results of Operations and Cash Flows.” At the closing, we received approximately $53 million in proceeds, which was comprised of the cash contributed by Alinda and also borrowings under a $164.5 million secured credit facility entered into by the joint venture at closing that carries a rate of LIBOR plus 2.25%. We used these proceeds to pay down our revolving credit facility and for general corporate purposes. Under the joint venture agreement, we will receive additional proceeds in the future as and when we complete development of each phase of the Manassas data center and place it into service, which allows us to receive proceeds for Alinda’s share of the joint venture based on the expected full stabilization of the asset. These proceeds will be based on a 6.75% capitalization rate for each phase delivered during the first three years of the venture.

Cash

As of September 30, 2019, we had $13.5 million of unrestricted cash and cash equivalents.

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The following tables present quarterly cash dividends and distributions paid to QTS’ common and preferred stockholders and the Operating Partnership’s unit holders for the nine months ended September 30, 2019 and 2018:

Nine Months Ended September 30, 2019
				Aggregate
		Per Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 25, 2019	July 9, 2019	$	0.44	$	27.3
March 20, 2019	April 4, 2019	$	0.44	$	27.3
December 21, 2018	January 8, 2019	$	0.41	$	23.7
				$	78.3
Series A Preferred Stock/Units
June 30, 2019	July 15, 2019	$	0.45	$	1.9
March 31, 2019	April 15, 2019	$	0.45	$	1.9
December 31, 2018	January 15, 2019	$	0.45	$	1.9
				$	5.7
Series B Preferred Stock/Units
June 30, 2019	July 15, 2019	$	1.63	$	5.1
March 31, 2019	April 15, 2019	$	1.63	$	5.1
December 31, 2018	January 15, 2019	$	1.63	$	5.1
				$	15.3

Nine Months Ended September 30, 2018
				Aggregate
		Per Common Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 20, 2018	July 6, 2018	$	0.41	$	23.7
March 22, 2018	April 5, 2018	$	0.41	$	23.7
December 5, 2017	January 5, 2018	$	0.39	$	22.2
				$	69.6
Series A Preferred Stock/Units
June 29, 2018	July 16, 2018	$	0.45	$	1.9
April 5, 2018	April 16, 2018	$	0.15	$	0.6
				$	2.5

Additionally, subsequent to September 30, 2019, we paid the following dividends:

● On October 4, 2019, the Company paid its regular quarterly cash dividend of $0.44 per common share and the Operating Partnership paid a quarterly cash distribution of $0.44 per unit to stockholders and unit holders of record as of the close of business on September 19, 2019.

● On October 15, 2019, the Company paid a quarterly cash dividend of approximately $0.45 per share on its Series A Preferred Stock to holders of Series A Preferred Stock of record as of the close of business on September 30, 2019 and the Operating Partnership paid a quarterly cash distribution of approximately $0.45 per unit on outstanding Series A Preferred Units held by the Company.

● On October 15, 2019, the Company paid a quarterly cash dividend of approximately $1.63 per share on its Series B Preferred Stock to holders of Series B Preferred Stock of record as of the close of business on

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September 30, 2019 and the Operating Partnership paid a quarterly cash distribution of approximately $1.63 per unit on outstanding Series B Preferred Units held by the Company.

Indebtedness

As of September 30, 2019, we had approximately $1,371.7 million of indebtedness, including financing lease obligations.

Unsecured Credit Facility. We amended and restated our unsecured credit facility in October 2019 (as so amended and restated, the “new unsecured credit facility”) to include a term loan for $225 million which matures on December 17, 2024 (“Term Loan A”), a $225 million term loan that matures on April 27, 2025 (“Term Loan B”), a $250 million term loan which matures on October 18, 2026 (“Term Loan C”) and a $1.0 billion revolving credit facility which matures on December 17, 2023. The revolving portion of the credit facility has a one-year extension. Amounts outstanding under the new 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 1.25% to 1.85% for LIBOR loans and 0.25% to 0.85% for base rate loans. For Term Loan A and Term Loan B, the spread ranges from 1.20% to 1.80% for LIBOR loans and 0.20% to 0.80% for base rate loans. For Term Loan C the spread ranges from 1.50% to 1.85% for LIBOR loans and 0.50% to 0.85% for base rate loans. The new unsecured credit facility also provides for borrowing capacity of up to $300 million in various foreign currencies.

Under the new unsecured credit facility, the capacity may be increased from the current capacity of $1.7 billion to $2.2 billion subject to certain conditions set forth in the credit agreement, including the consent of the administrative agent and obtaining necessary commitments. We are also required to pay a commitment fee to the lenders assessed on the unused portion of the revolving portion of the new unsecured credit facility. At our election, we can prepay amounts outstanding under the new unsecured credit facility, in whole or in part, without penalty or premium.

Our ability to borrow under the new 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 Operating Partnership's and its subsidiaries' consolidated total unsecured debt plus any capitalized lease obligations with respect to the unencumbered asset pool properties may not exceed 60% of the unencumbered asset pool value (or 65% of the unencumbered asset pool value for up to four consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent, provided the four fiscal quarter period includes the quarter in which the material acquisition was consummated); (ii) the unencumbered asset pool debt yield cannot be less than 10.5%; (iii) QTS must maintain 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 1.50 to 1.00; (iv) QTS must maintain a maximum debt to gross asset value (as defined in the amended and restated credit agreement) ratio of 60% (or 65% for the four consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent, provided the four fiscal quarter period includes the quarter in which the material acquisition was consummated); and (v) QTS must maintain tangible net worth (as defined in the amended and restated credit agreement) cannot be less than the sum of $1,686,000,000 plus 75% of the net proceeds from any equity offerings subsequent to June 30, 2019.

The availability under the new revolving credit facility is the lesser of (i) $1.0 billion, (ii) 60% of the unencumbered asset pool capitalized value (or 65% of the unencumbered asset pool capitalized value for the four consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent, provided the four fiscal quarter period includes the quarter in which the material acquisition was consummated) and (iii) the amount resulting in an unencumbered asset pool debt yield of 10.5%. In the case of clauses (ii) and (iii) of the preceding sentence, the amount available under the revolving credit facility is adjusted to take into account any other unsecured debt and certain capitalized leases. A material acquisition is an acquisition of properties or assets with a gross purchase price equal to or in excess of 15% of the Operating Partnership’s gross asset value (as defined in the amended and restated credit agreement) as of the end of the most recently ended quarter for which financial statements are publicly available. The availability of funds under our new unsecured credit facility depends on compliance with our covenants.

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As of September 30, 2019, we had outstanding $924 million of indebtedness under the unsecured credit facility, consisting of $224.1 million of outstanding borrowings under our unsecured revolving credit facility and $700.0 million outstanding under the term loans, exclusive of net debt issuance costs of $5.5 million. In connection with the unsecured credit facility, as of September 30, 2019, we had additional letters of credit outstanding aggregating to $4.1 million.

On April 5, 2017, we entered into forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to the term loans, from January 2, 2018 through December 17, 2021 and April 27, 2022, respectively.

On December 20, 2018, we entered into additional forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from December 17, 2021 and April 27, 2022 through the current maturity dates of the respective term loans which are December 17, 2023 and April 27, 2024, respectively. Additionally, we entered into forward interest rate swap agreements with an aggregate notional amount of $200 million. The forward swap agreements effectively fix the interest rate on $200 million of additional term loan borrowings, $100 million of swaps allocated to each term loan, from January 2, 2020 through the current maturity dates of the respective term loans which are December 17, 2023 and April 27, 2024, respectively.

4.750% Senior Notes due 2025. On November 8, 2017, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership initially formed solely for the purpose of facilitating the offering of the 5.875% Senior Notes due 2022 (collectively, the “Issuers”), issued $400 million aggregate principal amount of 4.75% Senior Notes due November 15, 2025 (the “Senior Notes”) in a private offering. The Senior Notes have an interest rate of 4.750% per annum and were issued at a price equal to 100% of their face value. The net proceeds from the offering were used to fund the redemption of, and satisfy and discharge the indenture pursuant to which the Issuers issued the 5.875% Senior Notes due 2022 and to repay a portion of the amount outstanding under the Company’s unsecured revolving credit facility.

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 certain 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. does not 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 November 8, 2017, among QTS, the Issuers, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (the “Indenture”). As of September 30, 2019, the outstanding net debt issuance costs associated with the Senior Notes were $4.6 million.

The Indenture contains affirmative and negative covenants that, among other things, limits or restricts the Operating Partnership’s ability and the ability of certain of its subsidiaries (the “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 November 15, 2020 at a redemption price equal to (i) 100% of the principal amount, plus (ii) accrued and unpaid interest to the redemption date, and (iii) a make-whole premium. On or after November 15, 2020, the Issuers may redeem the Senior Notes, in whole or in part, at a redemption price equal to (i) 103.563% of the principal amount from November 15, 2020 to November 14, 2021, (ii) 102.375% of the principal amount from November 15, 2021 to November 14, 2022, (iii) 101.188% of the principal amount from November 15, 2022 to November 14, 2023 and (iv) 100.000% of the principal amount of the

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Senior Notes from November 15, 2023 and thereafter, in each case plus accrued and unpaid interest to, but excluding, the redemption date. In addition, at any time prior to November 15, 2020, the Issuers may, subject to certain conditions, redeem up to 40% of the aggregate principal amount of the Senior Notes at 104.750% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the redemption date, with the net cash proceeds of certain equity offerings consummated by the Company 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.

Lenexa Mortgage. On March 8, 2017, we entered into a $1.9 million mortgage loan secured by our Lenexa facility. This mortgage has a fixed rate of 4.1%, with periodic principal payments due monthly and a balloon payment of $1.6 million in May 2022. As of September 30, 2019, the outstanding balance under the Lenexa mortgage was $1.8 million.

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.

Contractual Obligations

The following table summarizes our contractual obligations as of September 30, 2019 (excluding the effects of the amendment to our unsecured credit facility in October 2019), including the future non-cancellable minimum rental payments required under operating leases and the maturities and scheduled principal repayments of indebtedness and other agreements (unaudited and in thousands):

Obligations	2019		2020		2021		2022		2023		Thereafter		Total
Operating Leases	$	2,374	$	9,589	$	9,818	$	10,266	$	10,393	$	57,225	$	99,665
Finance Leases		613		2,579		2,712		2,958		3,229		33,662		45,753
Future Principal Payments of Indebtedness (1)		16		70		73		225,748		350,000		750,000		1,325,907
Total (2)	$	3,003	$	12,238	$	12,603	$	238,972	$	363,622	$	840,887	$	1,471,325

(1) Does not include the related debt issuance costs on Senior Notes nor the related debt issuance costs on the term loans reflected at September 30, 2019. Also does not include letters of credit outstanding aggregating to $4.1 million as of September 30, 2019 under our unsecured credit facility.

(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, mortgages, finance leases, and other financing arrangements through the scheduled maturity date, assuming no prepayment of debt and inclusive of the effects of interest rate swaps, are shown below. Interest payments were estimated based on the principal amount of debt outstanding and the applicable interest rate as of September 30, 2019 (unaudited and in thousands):

2019		2020		2021		2022		2023		Thereafter		Total
$	13,168	$	53,641	$	53,577	$	55,074	$	47,033	$	47,386	$	269,879

Off-Balance Sheet Arrangements

On February 22, 2019, we entered into a joint venture with Alinda Capital Partners (“Alinda”), a premier infrastructure investment firm, with respect to our Manassas data center, as described above under “Factors That May Influence Future Results of Operations and Cash Flows.” As of September 30, 2019, our pro rata share of mortgage debt of the joint venture, excluding deferred financing costs, was approximately $34.0 million, all of which is subject to forward interest rate swap agreements. See Item 3, Quantitative and Qualitative Disclosures About Market Risk, for information on the Company’s interest rate swaps.

In addition, in February 2019, we conducted an underwritten offering of 7,762,500 shares of Class A common stock, consisting of 4,000,000 shares issued during the first quarter of 2019 and 3,762,500 shares which will be issued on a forward basis, in each case at a price of $41.50 per share. We expect to physically settle the forward sale (by the delivery of shares of common stock) and receive aggregate net proceeds of approximately $147 million from the sale of the

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3,762,500 shares of common stock which we expect to occur by March 1, 2020, although we have the right to elect settlement prior to that time. During September 2019, we settled 2,832,000 shares for total net proceeds of approximately $110 million, net of fees.

During the three and nine months ended September 30, 2019, the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 1.2 million shares of its common stock at an average net price of approximately $49 per share, representing available net proceeds upon physical settlement of approximately $56 million (subject to further adjustment as described below). At September 30, 2019, the Company had not settled any of these forward sales and had approximately $343 million of Class A common stock remaining available for sale under the ATM program.

Through the date of this report (including the sales during the three and nine months ended September 30, 2019 described above), the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 2.8 million shares of its common stock at an average price of approximately $51 per share, representing available net proceeds upon physical settlement of approximately $139 million (subject to further adjustment as described below). Through the date of this report, the Company had not settled any of these forward sales and had approximately $258 million of Class A common stock remaining available for sale under the ATM Program.

The Company expects to physically settle (by delivering shares of common stock) these forward sales prior to their first anniversary date. When combined with the approximately $36 million of proceeds remaining available under the forward sale in the first quarter of 2019, the Company currently has access to over $175 million of net proceeds through forward stock sales. The Company views forward equity sales under its ATM Program as an important capital raising tool that it expects to continue to strategically and selectively use, subject to market conditions and overall availability under the ATM Program.

Cash Flows

Cash flow for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 are summarized below (unaudited and in thousands):

	Nine Months Ended
	September 30,
	2019		2018
Cash flow provided by (used for):
Operating activities	$	149,233	$	146,105
Investing activities		(287,512)		(417,681)
Financing activities		139,079		277,212

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Cash flow provided by operating activities was $149.2 million for the nine months ended September 30, 2019 compared to $146.1 million for the nine months ended September 30, 2018. There was an increase in cash operating income of $31.4 million from the prior period primarily related to our expansion of certain data centers and leasing activity in addition to a reduction in restructuring charges, offset by a decrease in cash flow associated with net changes in working capital of $28.3 million primarily related to changes in rents and other receivables and accounts payable and accrued liabilities.

Cash flow used for investing activities decreased by $130.2 million to $287.5 million for the nine months ended September 30, 2019, compared to $417.7 million for the nine months ended September 30, 2018. The decrease was due primarily to cash proceeds of $52.7 million received from the Company’s contribution of assets to a joint venture during the current period as well as a decrease in additions to property and equipment of $111.3 million. These were offset by an increase in cash paid for acquisitions of $32.4 million primarily related to our purchase of the Netherlands facilities in the current period.

Cash flow provided by financing activities decreased by $138.1 million to $139.1 million for the nine months ended September 30, 2019, compared to $277.2 million for the nine months ended September 30, 2018. The decrease was primarily due to lower net equity issuance proceeds of $139.2 million, as well as higher payments of cash dividends to

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common and preferred stockholders of $26.7 million. Offsetting these cash flow decreases was lower net repayments of $22.1 million under our unsecured credit facility.

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.

Effective January 1, 2019, the Company adopted ASC Topic 842, Leases, which resulted in changes to the Company’s critical accounting policy relating to accounting for lease transactions. Refer to Note 2 – ‘Summary of Significant Accounting Policies’ for additional information regarding the new and updated policies as a result of the adoption of ASC Topic 842.

Additional 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, 2018.

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 rate. 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, 2019 and 2018.

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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, 2019, after consideration of interest rate swaps in effect, we had outstanding $524.1 million of consolidated indebtedness that bore interest at variable rates which does not take into account $400 million of swaps that take effect December 17, 2021 and April 27, 2022, and the $200 million of swaps that take effect on January 2, 2020, each as discussed below.

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. A 1% increase in the LIBOR rate would increase the interest expense on the $524.1 million of variable indebtedness outstanding as of September 30, 2019 by approximately $5.2 million annually. Conversely, a decrease in the LIBOR rate to 1.02% would decrease the interest expense on this $524.1 million of variable indebtedness outstanding by approximately $5.2 million annually based on the one month LIBOR rate of approximately 2.02% as of September 30, 2019.

On April 5, 2017, the Company entered into forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from January 2, 2018 through December 17, 2021 and April 27, 2022, respectively, at approximately 3.3% assuming the current LIBOR spread of 1.3%.

In addition, on December 20, 2018, we entered into additional forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from December 17, 2021 and April 27, 2022 through the current maturity dates of the respective term loans which are December 17, 2023 and April 27, 2024, respectively. The weighted average effective fixed interest rate on the $400 million notional amount of term loan financing following the commencement of these swap agreements will approximate 3.9%, commencing on December 17, 2021 and April 27, 2022, assuming the current LIBOR spread of 1.3%. Additionally, the Company entered into forward interest rate swap agreements with an aggregate notional amount of $200 million. The forward swap agreements effectively fix the interest rate on $200 million of additional term loan borrowings, $100 million of swaps allocated to each term loan, from January 2, 2020 through the current maturity dates of the respective term loans which are December 17, 2023 and April 27, 2024, respectively. The weighted average effective fixed interest rate on the $200 million notional amount of term loan financing, following the execution of these swap agreements, will approximate 3.9%, commencing on January 2, 2020, assuming the current LIBOR spread of 1.3%.

In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee ("ARRC") which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. The Company has contracts consisting of the unsecured credit facility and the forward interest rate swap agreements, documented above, that are indexed to LIBOR and is monitoring and evaluating the related risks, which include interest on loans and amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

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.

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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, 2019, 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

On July 1, 2019, the Company implemented a new Enterprise Resource Planning (“ERP”) system designed to upgrade its technology and improve financial and operational information. As a result of this implementation, the Company modified certain existing internal controls as well as implemented new controls and procedures, to accommodate modifications to its business processes related to the new ERP system and to take advantage of the new system’s increased functionality.

Except with respect to the implementation of the ERP, there were no changes in QTS’ internal control over financial reporting during the period ended September 30, 2019, 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, 2019, conducted by the Operating Partnership’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 Operating Partnership’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

On July 1, 2019, the Operating Partnership implemented a new Enterprise Resource Planning (“ERP”) system designed to upgrade its technology and improve financial and operational information. As a result of this implementation, the Operating Partnership modified certain existing internal controls as well as implemented new controls and procedures, to accommodate modifications to its business processes related to the new ERP system and to take advantage of the new system’s increased functionality.

Except with respect to the implementation of the ERP, there were no changes in the Operating Partnership’s internal control over financial reporting during the period ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

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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, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2019, 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, 2019 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, including pursuant to the QTS Realty Trust, Inc. 2013 Equity Incentive Plan (the “2013 Equity Incentive Plan”) upon exercise of stock options issued and grant of restricted stock 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). 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, 2019, the Operating Partnership issued approximately 125,000 Class A units to QTS in connection with Class A unit redemptions and stock option exercises and issuances pursuant to the 2013 Equity Incentive Plan, with a value aggregating approximately $5.7 million based on the respective dates of the redemptions and option exercises, as applicable.

In addition, on March 1, 2019, the Operating Partnership issued 4,000,000 Class A units to QTS in connection with QTS’s underwritten offering of 7,762,500 shares of Class A common stock, consisting of 4,000,000 shares issued by QTS on March 1, 2019 and 3,762,500 shares which will be issued on a forward basis prior to March 1, 2020 (and in connection with which 3,762,500 Class A units will be issued to QTS). These units issued to QTS were 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.

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Repurchases of Equity Securities

During the three months ended September 30, 2019, certain of our employees surrendered Class A common stock owned by them to satisfy their federal and state tax obligations in connection with the vesting of restricted common stock under the 2013 Equity Incentive Plan. 

The following table summarizes all of these repurchases during the three months ended September 30, 2019:

				Total number of
				shares purchased as	Maximum number of
	Total number	Average price		part of publicly	shares that may yet be
	of shares	paid per		announced plans or	purchased under the
Period	purchased (1)	share		programs	plans or programs
July 1, 2019 through July 31, 2019	—	$	—	N/A	N/A
August 1, 2019 through August 31, 2019	980		45.97	N/A	N/A
September 1, 2019 through September 30, 2019	11,042		51.41	N/A	N/A
Total	12,022	$	50.97

(1) The number of shares purchased represents shares of Class A common stock surrendered by certain of our employees to satisfy their 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 federal income tax.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

Exhibit Number	Exhibit Description
3.1	Articles of Amendment and Restatement of QTS Realty Trust, Inc., incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on October 17, 2013 (Commission File No. 001-36109)
3.2	Second Amended and Restated Bylaws of QTS Realty Trust, Inc., incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed with the SEC on May 8, 2017 (Commission File No. 001-36109)
3.3	Articles Supplementary designating QTS Realty Trust, Inc.’s 7.125% Series A Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, $0.01 par value per share, incorporated by reference to Exhibit 3.2 to the Company’s Form 8-A filed on March 15, 2018 (Commission File No. 001-36109)
3.4	Articles Supplementary designating QTS Realty Trust, Inc.’s 6.50% Series B Cumulative Convertible Perpetual Preferred Stock, liquidation preference $100.00 per share, $0.01 par value per share, incorporated by reference to Exhibit 3.3 to the Company’s Form 8-A filed on June 25, 2018 (Commission File No. 001-36109)

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3.5	Articles Supplementary opting out of the Maryland Unsolicited Takeovers Act, incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on September 25, 2018 (Commission File No. 001-36109)
3.6	Articles of Amendment to the Articles of Amendment and Restatement of QTS Realty Trust, Inc., incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on May 10, 2019 (Commission File No. 002-36109)
4.1	Form of Specimen Class A Common Stock Certificate, incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-11/A filed with the SEC on September 26, 2013 (Commission File No. 333-190675)
4.2	Indenture, dated November 8, 2017, by and among QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., certain subsidiaries of QualityTech, LP and Deutsche Bank Trust Company Americas, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on November 8, 2017 (Commission File No. 001-36109)
4.3	Form of 4.750% Senior Notes due 2025 (included as Exhibit A to Exhibit 4.2 hereof)
4.4	Supplemental Indenture, dated as of December 22, 2017, 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 November 8, 2017, 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, incorporated by reference to Exhibit 4.4 to the Annual Report on Form 10-K filed with the SEC on February 28, 2018 (Commission File No. 001-36109)
4.5	Supplemental Indenture, dated as of June 1, 2018, by and among QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., the entity identified therein as a Guaranteeing Subsidiary, the entities identified therein as Subsidiary Guarantors, and Deutsche Bank Trust Company Americas, to the Indenture dated, as of November 8, 2017, 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, incorporated by reference to Exhibit 4.5 to the Quarterly Report on Form 10-Q filed with the SEC on August 2, 2019 (Commission File No. 001-36109)
4.6	Supplemental Indenture, dated as of December 31, 2018 among West Midtown Acquisition Company, LLC, QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., the Subsidiary Guarantors (as such term is defined in the Indenture), and Deutsche Bank Trust Company Americas, as trustee, to the Indenture dated, as of November 8, 2017, 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, incorporated by reference to Exhibit 4.7 to the Company’s Form 10-K filed on February 25, 2019 (Commission File No. 001-36109)
4.7	Supplemental Indenture, dated as of March 29, 2019 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 November 8, 2017, 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.

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4.8	Supplemental Indenture, dated as of June 28, 2019 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 November 8, 2017, 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.
4.9	Supplemental Indenture, dated as of November 1, 2019 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 November 8, 2017, 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.
4.10	Form of stock certificate evidencing the 7.125% Series A Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, $0.01 par value per share, incorporated by reference to Exhibit 4.1 to the Company’s Form 8-A filed on March 15, 2018 (Commission File No. 001-36109)
4.11	Form of stock certificate evidencing the 6.50% Series B Cumulative Convertible Perpetual Preferred Stock, liquidation preference $100.00 per share, $0.01 par value per share, incorporated by reference to Exhibit 4.1 to the Company’s Form 8-A filed on June 25, 2018 (Commission File No. 001-36109)
10.1	Seventh Amended and Restated Credit Agreement dated as of October 18, 2019 by and among QualityTech, LP, KeyBank National Association, as agent, the lenders party thereto, KeyBanc Capital Markets, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Regions Capital Markets and TD Securities (USA) LLC, as joint lead arrangers and joint bookrunners with respect to the Revolving Credit Loans, Term Loans A and Term Loans B, KeyBanc Capital Markets, Inc., Regions Capital Markets, SunTrust Robinson Humphrey, Inc. and TD Securities (USA) LLC as joint lead arrangers and joint bookrunners with respect to the Term Loans C, and Bank of America, N.A., Regions Bank and TD Securities (USA) LLC, as co-syndication agents, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on October 22, 2019 (Commission File No. 001-36109)
10.2	Fifth Amended and Restated Unconditional Guaranty of Payment and Performance dated as of October 18, 2019 by QTS Realty Trust, Inc. (to KeyBank National Association), incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on October 22, 2019 (Commission File No. 001-36109)
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.)
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)

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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, 2019, formatted in iXBRL (inline 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
104	Cover Page Interactive Data File (formatted in iXBRL (inline eXtensible Business Reporting Language) and contained in Exhibit 101).

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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 8, 2019	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer
DATE: November 8, 2019	/s/ William H. Schafer
	William H. Schafer
	Executive Vice President – Finance and Accounting
	(Principal Accounting Officer)
DATE: November 8, 2019	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	Chief Financial Officer
	(Principal Financial Officer)
	QualityTech, LP
	By: QTS Realty Trust, Inc., its general partner
DATE: November 8, 2019	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer
DATE: November 8, 2019	/s/ William H. Schafer
	William H. Schafer
	Executive Vice President – Finance and Accounting
	(Principal Accounting Officer)
DATE: November 8, 2019	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	Chief Financial Officer
	(Principal Financial Officer)

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EX-4.7

Exhibit 4.7

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of March 29, 2019, among QTS Investment Properties Manassas II, LLC, a Delaware limited liability company (the “Guaranteeing Subsidiary”), 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 November 8, 2017,  as amended by that certain Supplemental Indenture dated as of December 22, 2017, that certain Supplemental Indenture dated as of June 1, 2018 and that certain Supplemental Indenture dated as of December 31, 2018 (as amended to date, the “Indenture”), providing for the issuance of 4.750% Senior Notes due 2025 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the 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, the 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.  The 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 Subsidiary shall be given as provided in Section 12.01 of the Indenture.

4.  NO RECOURSE AGAINST OTHERS.  No recourse for the payment of the principal of, premium, if any, or interest 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 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 the Guaranteeing Subsidiary and the Operating Partnership.

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.

[Signature pages follow]

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/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer
QTS FINANCE CORPORATION, as Issuer
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer and Treasurer
QTS REALTY TRUST, INC.
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer

[Signatures continue on next page]

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/ Irina Golovashchuk
Name:	Irina Golovashchuk
Title:	Vice President

[Signatures continue on next page]

THE FOLLOWING PARTY AS GUARANTEEING SUBSIDIARY
QTS INVESTMENT PROPERTIES MANASSAS II, LLC
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer and Treasurer

THE FOLLOWING PARTIES AS SUBSIDIARY

GUARANTORS:

QUALITY INVESTMENT PROPERTIES METRO, LLC

QUALITY INVESTMENT PROPERTIES, SUWANEE, LLC

QUALITY TECHNOLOGY SERVICES METRO II, LLC

QUALITY TECHNOLOGY SERVICES, SUWANEE II, LLC

QUALITY INVESTMENT PROPERTIES SACRAMENTO, LLC

QUALITY TECHNOLOGY SERVICES SACRAMENTO II, LLC

QUALITY INVESTMENT PROPERTIES MIAMI, LLC

QUALITY TECHNOLOGY SERVICES, MIAMI II, LLC

QUALITY INVESTMENT PROPERTIES SANTA CLARA, LLC

QUALITY TECHNOLOGY SERVICES SANTA CLARA II, LLC

QUALITY INVESTMENT PROPERTIES IRVING, LLC

QUALITY TECHNOLOGY SERVICES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES JERSEY CITY, LLC

QUALITY TECHNOLOGY SERVICES, N.J., LLC

QUALITY TECHNOLOGY SERVICES, N.J. II, LLC

QTS INVESTMENT PROPERTIES PRINCETON, LLC

QUALITY TECHNOLOGY SERVICES PRINCETON II, LLC

QTS INVESTMENT PROPERTIES CHICAGO, LLC

QUALITY INVESTMENT PROPERTIES LENEXA, LLC

QUALITY TECHNOLOGY SERVICES CHICAGO II, LLC

QUALITY INVESTMENT PROPERTIES GATEWAY, LLC

QUALITY TECHNOLOGY SERVICES LENEXA, LLC

QUALITY TECHNOLOGY SERVICES LENEXA II, LLC

QUALITY INVESTMENT PROPERTIES RICHMOND, LLC

QUALITY TECHNOLOGY SERVICES RICHMOND II, LLC

QTS CRITICAL FACILITIES MANAGEMENT, LLC

QUALITY TECHNOLOGY SERVICES, LLC

QUALITY TECHNOLOGY SERVICES NORTHEAST, LLC

QUALITY INVESTMENT PROPERTIES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES HOLDING, LLC

QTS INVESTMENT PROPERTIES CARPATHIA, LLC

WHALE VENTURES LLC

QTS INVESTMENT PROPERTIES PISCATAWAY, LLC

QUALITY TECHNOLOGY SERVICES PISCATAWAY II, LLC

QAE ACQUISITION COMPANY, LLC

SERVERVAULT LLC

CARPATHIA HOSTING, LLC

CARPATHIA ACQUISITION, LLC

QTS INVESTMENT PROPERTIES FORTH WORTH, LLC

QUALITY TECHNOLOGY SERVICES FORT WORTH II, LLC

QTS INVESTMENT PROPERTIES HILLSBORO, LLC

BRODERICK ACQUISITION CO., LLC (f/k/a QTS INVESTMENT PROPERTIES ASHBURN, LLC)

QTS INVESTMENT PROPERTIES ASHBURN II, LLC

QTS INVESTMENT PROPERTIES PHOENIX, LLC

NATIONAL ACQUISITION COMPANY, LLC

ASHBURN ACQUISITION CO., LLC

QUALITY TECHNOLOGY SERVICES ASHBURN II, LLC

2470 SATELLITE BOULEVARD, LLC

QUALITY TECHNOLOGY SERVICES PHOENIX II, LLC

WEST MIDTOWN ACQUISITION COMPANY, LLC

By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer and Treasurer

EX-4.8

Exhibit 4.8

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of June 28, 2019, among Quality Technology Services B.V., a Dutch private limited company (the “Guaranteeing Subsidiary”), 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 November 8, 2017,  as amended by that certain Supplemental Indenture dated as of December 22, 2017, that certain Supplemental Indenture dated as of June 1, 2018, that certain Supplemental Indenture dated as of December 31, 2018 and that certain Supplemental Indenture dated as of March 29, 2019 (as amended to date, the “Indenture”), providing for the issuance of 4.750% Senior Notes due 2025 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the 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, the 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.  The 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 Subsidiary shall be given as provided in Section 12.01 of the Indenture.

4.  NO RECOURSE AGAINST OTHERS.  No recourse for the payment of the principal of, premium, if any, or interest 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 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 the Guaranteeing Subsidiary and the Operating Partnership.

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.

[Signature pages follow]

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/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer
QTS FINANCE CORPORATION, as Issuer
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer and Treasurer
QTS REALTY TRUST, INC.
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer

[Signatures continue on next page]

THE FOLLOWING PARTY AS TRUSTEE:
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee, Registrar and Paying Agent
By:	/s/ Jeffrey Schoenfeld
Name:	Jeffrey Schoenfeld
Title:	Vice President
By:	/s/ Irina Golovashchuk
Name:	Irina Golovashchuk
Title:	Vice President

[Signatures continue on next page]

THE FOLLOWING PARTY AS GUARANTEEING SUBSIDIARY
QUALITY TECHNOLOGY SERVICES B.V.
By:	/s/ D.S. Robey
Name:	D. S. Robey
Title:	Managing Director

THE FOLLOWING PARTIES AS SUBSIDIARY

GUARANTORS:

QUALITY INVESTMENT PROPERTIES METRO, LLC

QUALITY INVESTMENT PROPERTIES, SUWANEE, LLC

QUALITY TECHNOLOGY SERVICES METRO II, LLC

QUALITY TECHNOLOGY SERVICES, SUWANEE II, LLC

QUALITY INVESTMENT PROPERTIES SACRAMENTO, LLC

QUALITY TECHNOLOGY SERVICES SACRAMENTO II, LLC

QUALITY INVESTMENT PROPERTIES MIAMI, LLC

QUALITY TECHNOLOGY SERVICES, MIAMI II, LLC

QUALITY INVESTMENT PROPERTIES SANTA CLARA, LLC

QUALITY TECHNOLOGY SERVICES SANTA CLARA II, LLC

QUALITY INVESTMENT PROPERTIES IRVING, LLC

QUALITY TECHNOLOGY SERVICES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES JERSEY CITY, LLC

QUALITY TECHNOLOGY SERVICES, N.J., LLC

QUALITY TECHNOLOGY SERVICES, N.J. II, LLC

QTS INVESTMENT PROPERTIES PRINCETON, LLC

QUALITY TECHNOLOGY SERVICES PRINCETON II, LLC

QTS INVESTMENT PROPERTIES CHICAGO, LLC

QUALITY INVESTMENT PROPERTIES LENEXA, LLC

QUALITY TECHNOLOGY SERVICES CHICAGO II, LLC

QUALITY INVESTMENT PROPERTIES GATEWAY, LLC

QUALITY TECHNOLOGY SERVICES LENEXA, LLC

QUALITY TECHNOLOGY SERVICES LENEXA II, LLC

QUALITY INVESTMENT PROPERTIES RICHMOND, LLC

QUALITY TECHNOLOGY SERVICES RICHMOND II, LLC

QTS CRITICAL FACILITIES MANAGEMENT, LLC

QUALITY TECHNOLOGY SERVICES, LLC

QUALITY TECHNOLOGY SERVICES NORTHEAST, LLC

QUALITY INVESTMENT PROPERTIES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES HOLDING, LLC

QTS INVESTMENT PROPERTIES CARPATHIA, LLC

WHALE VENTURES LLC

QTS INVESTMENT PROPERTIES PISCATAWAY, LLC

QUALITY TECHNOLOGY SERVICES PISCATAWAY II, LLC

QAE ACQUISITION COMPANY, LLC

SERVERVAULT LLC

CARPATHIA HOSTING, LLC

CARPATHIA ACQUISITION, LLC

QTS INVESTMENT PROPERTIES FORTH WORTH, LLC

QUALITY TECHNOLOGY SERVICES FORT WORTH II, LLC

QTS INVESTMENT PROPERTIES HILLSBORO, LLC

BRODERICK ACQUISITION CO., LLC (f/k/a QTS INVESTMENT PROPERTIES ASHBURN, LLC)

QTS INVESTMENT PROPERTIES ASHBURN II, LLC

QTS INVESTMENT PROPERTIES PHOENIX, LLC

NATIONAL ACQUISITION COMPANY, LLC

ASHBURN ACQUISITION CO., LLC

QUALITY TECHNOLOGY SERVICES ASHBURN II, LLC

2470 SATELLITE BOULEVARD, LLC

QUALITY TECHNOLOGY SERVICES PHOENIX II, LLC

WEST MIDTOWN ACQUISITION COMPANY, LLC

QTS INVESTMENT PROPERTIES MANASSAS II, LLC

By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer and Treasurer

EX-4.9

Exhibit 4.9

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of November 1, 2019, among QTS Federal, LLC, a Delaware limited liability company ("QTS Federal"), Quality Technology Services Federal Holding, LLC, a Delaware limited liability company ("QTS Federal Holding) and Quality Technology Services - Manassas Facilities Management, LLC, a Delaware limited liability company ("QTS Manassas Facilities," and together with QTS Federal and QTS Federal Holding, (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 E T H

WHEREAS, the Operating Partnership has heretofore executed and delivered to the Trustee an indenture dated as of November 8, 2017,  as amended by that certain Supplemental Indenture dated as of December 22, 2017, that certain Supplemental Indenture dated as of June 1, 2018, that certain Supplemental Indenture dated as of December 31, 2018, that certain Supplemental Indenture dated as of March 29, 2019 and that certain Supplemental Indenture dated as of June 28, 2019 (as amended to date, the "Indenture"), providing for the issuance of 4.750% Senior Notes due 2025 (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 each Guaranteeing Subsidiary shall be given as provided in Section 12.01 of the Indenture.

4.  NO RECOURSE AGAINST OTHERS.  No recourse for the payment of the principal of, premium, if any, or interest 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 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.

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.

[Signature pages follow]

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/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer
QTS FINANCE CORPORATION, as Issuer
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer and Treasurer
QTS REALTY TRUST, INC.
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer

[Signatures continue on next page]

THE FOLLOWING PARTY AS TRUSTEE:
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee, Registrar and Paying Agent
By:	/s/ Jeffrey Schoenfeld
Name:	Jeffrey Schoenfeld
Title:	Vice President
By:	/s/ Irina Golovashchuk
Name:	Irina Golovashchuk
Title:	Vice President

[Signatures continue on next page]

THE FOLLOWING PARTY AS GUARANTEEING SUBSIDIARY
QTS FEDERAL, LLC
QUALITY TECHNOLOGY SERVICES FEDERAL HOLDING, LLC
QUALITY TECHNOLOGY SERVICES – MANASSAS
FACILITIES MANAGEMENT, LLC
By:	/s/ Jeffrey H. Berson
Name:	Jeffrey H. Berson
Title:	Chief Financial Officer

THE FOLLOWING PARTIES AS SUBSIDIARY

GUARANTORS:

QUALITY INVESTMENT PROPERTIES METRO, LLC

QUALITY INVESTMENT PROPERTIES, SUWANEE, LLC

QUALITY TECHNOLOGY SERVICES METRO II, LLC

QUALITY TECHNOLOGY SERVICES, SUWANEE II, LLC

QUALITY INVESTMENT PROPERTIES SACRAMENTO, LLC

QUALITY TECHNOLOGY SERVICES SACRAMENTO II, LLC

QUALITY INVESTMENT PROPERTIES MIAMI, LLC

QUALITY TECHNOLOGY SERVICES, MIAMI II, LLC

QUALITY INVESTMENT PROPERTIES SANTA CLARA, LLC

QUALITY TECHNOLOGY SERVICES SANTA CLARA II, LLC

QUALITY INVESTMENT PROPERTIES IRVING, LLC

QUALITY TECHNOLOGY SERVICES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES JERSEY CITY, LLC

QUALITY TECHNOLOGY SERVICES, N.J., LLC

QUALITY TECHNOLOGY SERVICES, N.J. II, LLC

QTS INVESTMENT PROPERTIES PRINCETON, LLC

QUALITY TECHNOLOGY SERVICES PRINCETON II, LLC

QTS INVESTMENT PROPERTIES CHICAGO, LLC

QUALITY INVESTMENT PROPERTIES LENEXA, LLC

QUALITY TECHNOLOGY SERVICES CHICAGO II, LLC

QUALITY INVESTMENT PROPERTIES GATEWAY, LLC

QUALITY TECHNOLOGY SERVICES LENEXA, LLC

QUALITY TECHNOLOGY SERVICES LENEXA II, LLC

QUALITY INVESTMENT PROPERTIES RICHMOND, LLC

QUALITY TECHNOLOGY SERVICES RICHMOND II, LLC

QTS CRITICAL FACILITIES MANAGEMENT, LLC

QUALITY TECHNOLOGY SERVICES, LLC

QUALITY TECHNOLOGY SERVICES NORTHEAST, LLC

QUALITY INVESTMENT PROPERTIES IRVING II, LLC

QUALITY TECHNOLOGY SERVICES HOLDING, LLC

QTS INVESTMENT PROPERTIES CARPATHIA, LLC

WHALE VENTURES LLC

QTS INVESTMENT PROPERTIES PISCATAWAY, LLC

QUALITY TECHNOLOGY SERVICES PISCATAWAY II, LLC

QAE ACQUISITION COMPANY, LLC

SERVERVAULT LLC

CARPATHIA HOSTING, LLC

CARPATHIA ACQUISITION, LLC

QTS INVESTMENT PROPERTIES FORTH WORTH, LLC

QUALITY TECHNOLOGY SERVICES FORT WORTH II, LLC

QTS INVESTMENT PROPERTIES HILLSBORO, LLC

BRODERICK ACQUISITION CO., LLC (f/k/a QTS INVESTMENT PROPERTIES ASHBURN, LLC)

QTS INVESTMENT PROPERTIES ASHBURN II, LLC

QTS INVESTMENT PROPERTIES PHOENIX, LLC

NATIONAL ACQUISITION COMPANY, LLC

ASHBURN ACQUISITION CO., LLC

QUALITY TECHNOLOGY SERVICES ASHBURN II, LLC

2470 SATELLITE BOULEVARD, LLC

QUALITY TECHNOLOGY SERVICES PHOENIX II, LLC

WEST MIDTOWN ACQUISITION COMPANY, LLC

QTS INVESTMENT PROPERTIES MANASSAS II, LLC

By:	/s/ Jeffrey H. Berson
	Name: Jeffrey H. Berson
	Title:   Chief Financial Officer and Treasurer
QUALITY TECHNOLOGY SERVICES B.V.
BY:	/s/ D. B. ROBEY
NAME:	D. S. ROBEY
TITLE:	MANAGING DIRECTOR

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.

7
Date: November 8, 2019
	/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, Jeffrey H. Berson, 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 8, 2019
	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	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 8, 2019
	/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, Jeffrey H. Berson, 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.

7
Date:  November 8, 2019
	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	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, 2019 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, Jeffrey H. Berson, 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.

7
Date: November 8, 2019
	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer
	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	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, 2019 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, Jeffrey H. Berson, 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 8, 2019
	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer
	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	Chief Financial Officer

XML

Real Estate Assets and Construction in Progress (Summary of Owned or Leased Properties by the Company) (Details) $ in Thousands	Sep. 30, 2019 USD ($) facility	Dec. 31, 2018 USD ($) facility
Real Estate Properties [Line Items]
Land	$ 127,587	$ 105,541
Buildings, Improvements and Equipment	2,155,810	1,917,251
Construction in progress	843,754	790,064
Manassas, Virginia | Assets Held For Sale
Real Estate Properties [Line Items]
Construction in progress		71,000
Owned Properties
Real Estate Properties [Line Items]
Land	127,587	105,541
Buildings, Improvements and Equipment	2,155,810	1,917,251
Construction in progress	843,754	790,064
Total cost	3,127,151	2,812,856
Owned Properties | Atlanta, Georgia (Atlanta-Metro)
Real Estate Properties [Line Items]
Land	21,016	20,416
Buildings, Improvements and Equipment	523,859	493,446
Construction in progress	115,354	88,253
Total cost	660,229	602,115
Owned Properties | Irving Texas
Real Estate Properties [Line Items]
Land	8,606	8,606
Buildings, Improvements and Equipment	347,067	345,615
Construction in progress	113,696	99,445
Total cost	469,369	453,666
Owned Properties | Richmond, Virginia
Real Estate Properties [Line Items]
Land	2,180	2,180
Buildings, Improvements and Equipment	254,495	253,098
Construction in progress	72,882	67,932
Total cost	329,557	323,210
Owned Properties | Ashburn, Virginia
Real Estate Properties [Line Items]
Land	37,079	17,325
Buildings, Improvements and Equipment	131,695	63,245
Construction in progress	144,930	184,951
Total cost	313,704	265,521
Owned Properties | Chicago, Illinois
Real Estate Properties [Line Items]
Land	9,400	9,400
Buildings, Improvements and Equipment	153,582	130,150
Construction in progress	133,521	133,095
Total cost	296,503	272,645
Owned Properties | Suwanee, Georgia (Atlanta-Suwanee)
Real Estate Properties [Line Items]
Land	3,521	3,521
Buildings, Improvements and Equipment	170,396	166,298
Construction in progress	2,833	3,188
Total cost	176,750	173,007
Owned Properties | Piscataway New Jersey
Real Estate Properties [Line Items]
Land	7,466	7,466
Buildings, Improvements and Equipment	98,723	97,806
Construction in progress	37,592	33,472
Total cost	143,781	138,744
Owned Properties | Santa Clara, California
Real Estate Properties [Line Items]
Buildings, Improvements and Equipment	105,759	98,548
Construction in progress	6,956	7,600
Total cost	112,715	106,148
Owned Properties | Fort Worth, Texas
Real Estate Properties [Line Items]
Land	9,079	9,079
Buildings, Improvements and Equipment	55,019	18,623
Construction in progress	26,892	43,715
Total cost	90,990	71,417
Owned Properties | Dulles, Virginia
Real Estate Properties [Line Items]
Land	3,154	3,154
Buildings, Improvements and Equipment	73,373	72,435
Construction in progress	4,222	3,852
Total cost	80,749	79,441
Owned Properties | Sacramento, California
Real Estate Properties [Line Items]
Land	1,481	1,481
Buildings, Improvements and Equipment	64,997	64,874
Construction in progress	52	92
Total cost	66,530	66,447
Owned Properties | Manassas, Virginia
Real Estate Properties [Line Items]
Construction in progress	58,741	45,194
Total cost	58,741	45,194
Owned Properties | Hillsboro, Oregon
Real Estate Properties [Line Items]
Construction in progress	55,574	39,835
Total cost	55,574	39,835
Owned Properties | Princeton, New Jersey
Real Estate Properties [Line Items]
Land	20,700	20,700
Buildings, Improvements and Equipment	34,371	34,046
Construction in progress	451	431
Total cost	55,522	55,177
Owned Properties | Eemshaven, Netherlands
Real Estate Properties [Line Items]
Construction in progress	32,468
Total cost	32,468
Owned Properties | Phoenix, Arizona
Real Estate Properties [Line Items]
Construction in progress	30,704	29,562
Total cost	30,704	29,562
Owned Properties | Groningen, Netherlands
Real Estate Properties [Line Items]
Land	1,692
Buildings, Improvements and Equipment	8,389
Construction in progress	2,882
Total cost	12,963
Owned Properties | Other
Real Estate Properties [Line Items]
Land	2,213	2,213
Buildings, Improvements and Equipment	35,909	35,720
Construction in progress	2,892	113
Total cost	$ 41,014	$ 38,046
Leased Properties
Real Estate Properties [Line Items]
Number of facilities leased | facility	9	10
Leased Properties | Owned Properties
Real Estate Properties [Line Items]
Buildings, Improvements and Equipment	$ 98,176	$ 43,347
Construction in progress	1,112	9,334
Total cost	$ 99,288	$ 52,681

XML

Acquisitions (Narrative) (Details) $ in Millions	Apr. 23, 2019 USD ($) ft² item MW
Acquisitions [Abstract]
Number of Data Centers Acquired | item	2
Acquisition cash consideration | $	$ 44
Floor capacity (in square feet) | ft²	160,000
Gross power capacity (in megawatt) | MW	30

XML

Summary of Significant Accounting Policies (Deferred Financing Costs, Net of Accumulated Amortization) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Deferred financing costs	$ 11,519	$ 11,530
Accumulated amortization	(5,289)	(3,859)
Deferred financing costs, net	6,230	7,671
Fixed debt arrangements
Deferred financing costs	14,609	14,501
Accumulated amortization	(4,449)	(2,944)
Deferred financing costs, net	$ 10,160	$ 11,557

XML

Derivative Instruments - Interest rate derivatives and their fair values (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 20, 2018	Apr. 05, 2017
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Reclassification of other comprehensive income to interest expense		$ (235)	$ (83)	$ (1,200)	$ 410
Forecast
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Reclassification of other comprehensive income to interest expense	$ 3,100
Interest Rate Swap
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative							$ 400,000	$ 400,000
Interest Rate Swap | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Fair value		(25,141)		(25,141)		$ 2,343
Swap instrument one matures on December 17, 2021 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 25,000		$ 25,000		25,000
Fixed Rate Per annum		1.989%		1.989%
Expiration Date				Dec. 17, 2021
Fair value		$ (272)		$ (272)		331
Swap instrument two matures on December 17, 2021 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 100,000		$ 100,000		100,000
Fixed Rate Per annum		1.989%		1.989%
Expiration Date				Dec. 17, 2021
Fair value		$ (1,086)		$ (1,086)		1,318
Swap instrument three matures on December 17, 2021 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 75,000		$ 75,000		75,000
Fixed Rate Per annum		1.989%		1.989%
Expiration Date				Dec. 17, 2021
Fair value		$ (815)		$ (815)		990
Swap instrument one matures on April 27, 2022 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 50,000		$ 50,000		50,000
Fixed Rate Per annum		2.033%		2.033%
Expiration Date				Apr. 27, 2022
Fair value		$ (707)		$ (707)		667
Swap instrument two matures on April 27, 2022 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 100,000		$ 100,000		100,000
Fixed Rate Per annum		2.029%		2.029%
Expiration Date				Apr. 27, 2022
Fair value		$ (1,403)		$ (1,403)		1,341
Swap instrument three matures on April 27, 2022 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 50,000		$ 50,000		50,000
Fixed Rate Per annum		2.033%		2.033%
Expiration Date				Apr. 27, 2022
Fair value		$ (707)		$ (707)		666
Swap instrument one matures on December 17, 2023 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 100,000		$ 100,000		100,000
Fixed Rate Per annum		2.617%		2.617%
Expiration Date				Dec. 17, 2023
Fair value		$ (4,839)		$ (4,839)		(782)
Swap instrument one matures on April 27, 2024 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 100,000		$ 100,000		100,000
Fixed Rate Per annum		2.621%		2.621%
Expiration Date				Apr. 27, 2024
Fair value		$ (5,279)		$ (5,279)		(818)
Swap instrument two matures on December 17, 2023 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 200,000		$ 200,000		200,000
Fixed Rate Per annum		2.636%		2.636%
Expiration Date				Dec. 17, 2023
Fair value		$ (5,037)		$ (5,037)		(722)
Swap instrument two matures on April 27, 2024 | Cash flow hedging
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative		$ 200,000		$ 200,000		200,000
Fixed Rate Per annum		2.642%		2.642%
Expiration Date				Apr. 27, 2024
Fair value		$ (4,996)		$ (4,996)		$ (648)

XML

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)	9 Months Ended
	Sep. 30, 2019 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of TSR units granted	54.64
Expected term (years)	5 years 6 months
Expected volatility	28.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of FFO units and restricted stock granted	42.01
Fair value of restricted stock granted	$ 7.56
Expected dividend yield	3.89%
Expected risk-free interest rates	2.33%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of FFO units and restricted stock granted	45.58
Fair value of restricted stock granted	$ 8.28
Expected dividend yield	4.19%
Expected risk-free interest rates	2.56%

XML

Earnings per share of QTS Realty Trust, Inc.

9 Months Ended

Sep. 30, 2019

Earnings per Share [Abstract]

Earnings per Share

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

Basic income per share is calculated by dividing the net income attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted income per share adjusts basic income per share for the effects of potentially dilutive common shares. Unvested restricted stock awards and our forward sale contract described in Note 11 contain non-forfeitable rights to dividends and thus are participating securities and are included in the computation of basic earnings per share pursuant to the two-class method for all periods presented. The two-class method is an earnings allocation formula that treats a participating security as having rights to undistributed earnings that would otherwise have been available to common stockholders. Accordingly, service-based restricted stock awards and the forward sale contract were included in the calculation of basic earnings per share using the two-class method for all periods presented to the extent outstanding during the period.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Numerator:
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Loss (income) attributable to noncontrolling interests		49		1,610		(1,593)		2,641
Preferred stock dividends		(7,045)		(7,045)		(21,135)		(9,621)
Earnings attributable to participating securities		(2,184)		(206)		(5,999)		(743)
Net income (loss) available to common stockholders after allocation of participating securities	$	(2,592)	$	(12,533)	$	6,544	$	(21,300)
Denominator:
Weighted average shares outstanding - basic		54,928		50,469		53,874		50,401
Effect of Class O units, TSR units and options to purchase Class A common stock on an "as if" converted basis		—		—		463		—
Weighted average shares outstanding - diluted		54,928		50,469		54,337		50,401
Basic net income (loss) per share	$	(0.05)	$	(0.25)	$	0.12	$	(0.42)
Diluted net income (loss) per share	$	(0.05)	$	(0.25)	$	0.12	$	(0.42)

* Note: The calculations of basic and diluted net income (loss) per share above do not include the following number of Class A partnership units, Class O units, TSR units and options to purchase common stock on an “as if” converted basis, and the effects of Series B Convertible preferred stock on an “as if” converted basis as their respective inclusions would have been antidilutive:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Class A Partnership units		6,668		6,677		6,670		6,645
Class O units, TSR units and options to purchase common stock on an "as if" converted basis		557		363		—		375
Series B Convertible preferred stock on an "as if" converted basis		6,729		6,725		6,729		2,412

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

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”) for interim financial information and in compliance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 25, 2019. The consolidated balance sheet data included herein as of December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by 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.

The Operating Partnership meets the definition and criteria of a variable interest entity (“VIE”) in accordance with ASC 810 Consolidation, and the Company is the primary beneficiary of the VIE. As discussed below, the Company’s only material asset is its ownership interest in the Operating Partnership, and consequently, all of its assets and liabilities represent those assets and liabilities of the Operating Partnership. The Company’s debt is an obligation of the Operating Partnership where the creditors may have recourse, under certain circumstances, against the credit of the Company.

QTS is the sole general partner of the Operating Partnership. Management operates QTS and the Operating Partnership as one business. The management of QTS consists of the same employees as the management of the Operating Partnership. QTS does not conduct business itself, other than acting as the sole general partner of the Operating Partnership and issuing public equity from time to time. QTS has not issued or guaranteed any indebtedness. Except for net proceeds from public equity issuances by QTS, which are contributed to the Operating Partnership in exchange for units of limited partnership interest of the Operating Partnership, the Operating Partnership generates all remaining capital required by the 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.

The Company presents one set of notes for the financial statements of QTS and 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 4.75% Senior Notes due 2025 and the unsecured credit facility, both discussed in Note 8, are fully, unconditionally, and jointly and severally guaranteed by the Operating Partnership’s existing subsidiaries (other than certain foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Operating Partnership, QTS Finance Corporation (the co-issuer of the 4.75% Senior Notes due 2025) or any subsidiary guarantor. The indenture governing the 4.75% Senior Notes due 2025 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 “Code”).

The interim consolidated financial statements of QTS Realty Trust, Inc. include 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 controlled 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.

We evaluate our investments in unconsolidated entities to determine whether they should be recorded on a consolidated basis. The percentage of ownership interest in the entity, an evaluation of control and whether a VIE exists are all considered in our consolidation assessment. Investments in real estate entities which we have the ability to exercise significant influence, but do not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, our share of the earnings or losses of these entities is included in consolidated net income (loss).

Variable Interest Entities (VIEs) – We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. The determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions, to replace the manager and to sell or liquidate the entity. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion

continually. As of September 30, 2019, we had one unconsolidated entity that was considered a VIE for which we are not the primary beneficiary. Our maximum exposure to losses associated with this VIE is limited to our aggregate investment, which was approximately $30.7 million as of September 30, 2019.

Reclassifications

Reclassifications – Revenue categories in the statement of operations for the three and nine months ended September 30, 2018 have been reclassified to conform to 2019 presentation which is presented in accordance with ASC 842 and the reclassifications consists of two categories instead of four categories presented historically. The statement of operations for the three months ended September 30, 2018 incorporates a reclassification of $1.2 million of straight line rent from the “Other” line item into the “Rental” line item, a reclassification of $11.8 million of “Recoveries from Customers” from its own line item into the “Rental” line item, as well as the combination of $7.5 million of what was previously classified as “Cloud and managed services” revenue and less than $0.1 million of remaining “Other” revenue into a single “Other” line item. The statement of operations for the nine months ended September 30, 2018 incorporates a reclassification of $5.3 million of straight line rent from the “Other” line item into the “Rental” line item, a reclassification of $33.8 million of “Recoveries from Customers” from its own line item into the “Rental” line item, as well as the combination of $31.7 million of what was previously classified as “Cloud and managed services” revenue and $0.7 million of remaining “Other” revenue into a single “Other” line item.

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 for real estate assets 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, 2019, depreciation expense related to real estate assets and non-real estate assets was $29.8 million and $2.9 million, respectively, for a total of $32.7 million. For the three months ended September 30, 2018, depreciation expense related to real estate assets and non-real estate assets was $25.8 million and $3.3 million, respectively, for a total of $29.1 million. For the nine months ended September 30, 2019, depreciation expense related to real estate assets and non-real estate assets was $86.8 million and $8.7 million, respectively, for a total of $95.5 million. For the nine months ended September 30, 2018, depreciation expense related to real estate assets and non-real estate assets was $74.4 million and $9.7 million, respectively, for a total of $84.1 million. We capitalize 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 $4.8 million and $4.5 million for the three months ended September 30, 2019 and 2018, respectively, and $13.1 million and $11.7 million for the nine months ended September 30, 2019 and 2018, respectively. Interest is capitalized during the period of development by applying our weighted average effective borrowing rate to the actual development and other capitalized costs paid during the construction period. Interest is capitalized until the property is ready for its intended use. Interest costs capitalized totaled $8.7 million and $6.7 million for the three months ended September 30, 2019 and 2018, respectively, and $24.9 million and $18.1 million for the nine months ended September 30, 2019 and 2018, respectively.

Acquisitions and Sales

Acquisitions and Sales – Acquisitions of real estate and other entities are either accounted for as asset acquisitions or business combinations depending on facts and circumstances. When substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction is accounted for as an asset acquisition. In an asset acquisition, the purchase price paid for assets acquired is allocated between identified tangible and intangible assets acquired based on relative fair value. Transaction costs associated with asset acquisitions are capitalized. When substantially all of the fair value of assets acquired is not concentrated in a group of similar identifiable assets, the set of assets will generally be considered a business. When accounting for business combinations 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 assigned to the acquired tangible assets, consisting primarily of land, construction in progress, 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 finance 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. Transaction costs associated with business combinations are expensed as incurred.

In developing estimates of fair value of acquired assets and assumed liabilities, management analyzes 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. 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. This amortization expense is accounted for as real estate amortization expense.

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. Above or below market leases are amortized as a reduction to or increase in rental revenue when we are the lessor as well as a reduction to or increase in rent expense over the remaining lease terms when we are the lessee. The expense associated with trade name intangibles is accounted for as real estate amortization expense, whereas the expense associated with the amortization of platform intangibles is accounted for as non-real estate amortization expense.

We account for the sale of assets to non-customers under Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which provides for recognition or derecognition based on transfer of ownership. During the three months ended March 31, 2019, we sold our Manassas facility to an unconsolidated affiliate in exchange for cash consideration and noncash consideration in the form of an equity interest in the unconsolidated entity. After measuring the consideration received at fair value, we recognized a $13.4 million gain on sale of real estate, net of approximately $5.8 million of transaction costs, associated with our contribution of certain assets in our Manassas facility to the unconsolidated entity. Substantially all of the fair value of the assets contributed to the entity was concentrated in a group of similar identifiable assets and the sale of the assets were not to a customer, therefore the transaction was accounted for as an asset sale. The gain on sale of real estate is included within the “Gain on sale of real estate, net” line item of the consolidated statements of operations.

Impairment of Long-Lived Assets, Intangible Assets and Goodwill -

Impairment of Long-Lived Assets, Intangible Assets and Goodwill – We review our long-lived assets and intangible 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 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, 2019. We recognized $3.3 million and $7.6 million of impairment losses related to certain non-real estate product related assets during the three and nine months ended September 30, 2018, respectively, which was included in the “Restructuring” line item of the consolidated statement of operations.

The fair value of goodwill is the consideration transferred in a business combination which is not allocable to identifiable intangible and tangible assets. Goodwill is subject to at least an annual assessment for impairment. In connection with the goodwill impairment evaluation that we performed as of October 1, 2018, we determined qualitatively that it is not more likely than not that the fair value of our one reporting unit was less than the carrying amount, thus we did not perform a quantitative analysis. As we continue to operate and assess our goodwill at the consolidated level for our single reporting unit and our market capitalization significantly exceeds our net asset value, further analysis was not deemed necessary as of September 30, 2019.

Assets Held for Sale

Assets Held for Sale – We completed the sale of the Manassas facility to an unconsolidated entity on February 22, 2019. As of December 31, 2018, prior to our sale of the assets to the entity, the completion of the sale was probable and we

accordingly reclassified certain assets, as well as liabilities associated with those assets, as held for sale. As of December 31, 2018, the asset value of $71.8 million associated with the held for sale assets was included within the “Assets held for sale” line item of the consolidated statements of financial position and primarily consisted of construction in progress. As of December 31, 2018, the liability value of $24.3 million associated with the held for sale liabilities was included within the “Liabilities held for sale” line item of the consolidated statements of financial position and primarily consisted of accounts payable and accrued liabilities associated with construction in progress assets. See Note 7 for further discussion of the unconsolidated entity.

Cash and Cash Equivalents

Cash and Cash Equivalents – We consider 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. Our 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. We mitigate this risk by depositing a majority of our funds with several major financial institutions. We also have not experienced any losses and do not believe that the risk is significant.

Deferred Costs

Deferred Costs – Deferred costs, net, on our 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. Debt issuance costs related to revolving debt arrangements are deferred and presented as assets on the balance sheet; however, all other debt issuance costs are recorded as a direct offset to the associated liability. Amortization of debt issuance costs, including those costs presented as offsets to the associated liability in the consolidated balance sheet, was $1.0 million for both the three months ended September 30, 2019 and 2018, respectively, and $2.9 million for both the nine months ended September 30, 2019 and 2018, respectively. Deferred financing costs presented as assets on the balance sheet related to revolving debt arrangements, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	11,519	$	11,530
Accumulated amortization		(5,289)		(3,859)
Deferred financing costs, net	$	6,230	$	7,671

Deferred financing costs presented as offsets to the associated liabilities on the balance sheet related to fixed debt arrangements, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	14,609	$	14,501
Accumulated amortization		(4,449)		(2,944)
Deferred financing costs, net	$	10,160	$	11,557

Initial direct costs, or deferred leasing costs, include commissions paid to third parties, including brokers, leasing and referral agents, and internal sales commissions paid to employees for successful execution of lease agreements and are accounted for pursuant to ASC 842, Leases. These costs are incurred when we execute lease agreements and represent only incremental costs that would not have been incurred if the lease agreement had not been executed. To a lesser extent, we incur the same incremental costs to obtain managed service contracts with customers that are accounted for pursuant to ASC 606, Revenue from Contracts with Customers. Because the framework of accounting for these costs and the underlying nature of the costs are the same for our revenue and lease contracts, the costs are presented on a combined basis within our financial statements and within the below table. Both revenue and leasing commissions are capitalized and generally amortized over the term of the related leases or the expected term of the contract using the straight-line method. If a customer lease terminates prior to the expiration of its initial term, any unamortized initial direct costs

related to the lease are written off to amortization expense. Amortization of deferred leasing costs totaled $6.7 million and $5.5 million for the three months ended September 30, 2019 and 2018, respectively, and $17.7 million and $15.7 million for the nine months ended September 30, 2019 and 2018, respectively. Deferred leasing costs, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred leasing costs	$	70,594	$	63,018
Accumulated amortization		(28,512)		(25,593)
Deferred leasing costs, net	$	42,082	$	37,425

Revenue Recognition

Revenue Recognition – We derive our revenues from leases with customers for data center space which include lease components and nonlease revenue components, such as power, tenant recoveries, cloud and managed services. We adopted Accounting Standards Codification (“ASC”) Topic 842, Leases, the new accounting standard for leases, effective January 1, 2019 using the modified retrospective approach. In addition, we adopted ASC Topic 606, Revenue from Contracts with Customers, the new accounting standard for revenue from contracts with customers, effective January 1, 2018 using the modified retrospective approach. We have elected the available practical expedient to combine our nonlease revenue components that have the same pattern of transfer as the related operating lease component into a single combined lease component under ASC 842. See the “Recently Adopted Accounting Standards” section below for further details.

A description of each of our disaggregated revenue streams is as follows:

Rental Revenue

Our leases with customers are classified as operating leases and rental revenue is recognized on a straight-line basis over the customer lease term. Occasionally, customer leases include options to extend or terminate the lease agreements. We do not include any of these extension or termination options in a customer’s lease term for lease classification purposes or recognizing rental revenue unless it is reasonably certain the customer will exercise these extension or termination options.

Rental revenue also includes revenue from power delivery on fixed power arrangements, whereby customers are billed and pay a fixed monthly fee per committed available amount of connected power. These fixed power arrangements require us to provide a series of distinct services and stand ready to deliver the power over the contracted term which is co-terminus with the lease. Customer fixed power arrangements have the same pattern of transfer over the lease term as the lease component and are therefore combined with the lease component to form a single lease component that is recognized over the term of the lease on a straight line basis.

In addition, rental revenue includes straight line rent. Straight line rent represents the difference in rents recognized during the period versus amounts contractually due pursuant to the underlying leases and is recorded as deferred rent receivable/payable in the consolidated balance sheets. 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 $34.6 million and $29.7 million as of September 30, 2019 and December 31, 2018, respectively.

Rental revenue also includes amortization of set-up fees which are amortized over the term of the respective lease as discussed below.

Variable Lease Revenue from Recoveries

Certain customer leases contain provisions under which customers reimburse us for power and cooling-related charges as well as a portion of the property’s real estate taxes, insurance and other operating expenses. Recoveries of power and cooling-related expenses relate specifically to our variable power arrangements, whereby customers pay variable monthly fees for the specific amount of power utilized at the current utility rates. Our performance obligation is to stand

ready to deliver power over the life of the customer contract up to a contracted power capacity. Customers have the flexibility to increase or decrease the amount of power consumed, and therefore sub-metered power revenue is constrained at contract inception. The reimbursements are included in revenue as recoveries from customers and are recognized each month as the uncertainty related to the consideration is resolved (i.e. we provide power to our customers) and customers utilize the power. Reimbursement of real estate taxes, insurance, common area maintenance, or other operating expenses are accounted for as variable payments under lease guidance pursuant to the practical expedient and are recognized as revenue in the period that the expenses are recognized. Variable lease revenue from recoveries discussed above, including power, common area maintenance or other operating costs, have the same pattern of transfer over the lease term as the lease component and are therefore combined with the lease component to form a single lease component. Variable lease revenue from recoveries is included within the “rental” line item of the statement of operations.

Other Revenue

Other revenue primarily consists of revenue from our cloud and managed service offerings. We, through our Taxable REIT Subsidiaries (“TRS”), may provide both our cloud product and use of our managed services to our customers on an individual or combined basis. In both our cloud and managed services offerings the TRS’s performance obligation is to provide services (e.g. cloud hosting, data backup, data storage or data center personnel labor hours) to facilitate a fully integrated information technology (“IT”) outsourcing environment over a contracted term. Although underlying services may vary, over the contracted term monthly service offerings are substantially the same and we account for the services as a series of distinct services in accordance with ASC 606. Service fee revenue is recognized as the revenue is earned, which generally coincides with the services being provided. As we have the right to consideration from customers in an amount that corresponds directly with the value to the customer of the TRS’s performance of providing continuous services, we recognize monthly revenue for the amount invoiced.

With respect to the transaction price allocated to remaining performance obligations within our cloud and managed service contracts, we have elected to use the optional exemption provided by ASC 606 whereby we are not required to estimate the total transaction price allocated to remaining performance obligations as we apply the “right-to-invoice” practical expedient. As described above, the nature of our performance obligation in these contracts is to provide monthly services that are substantially the same and accounted for as a series of distinct services. These contracts generally have a remaining term ranging from month-to-month to three years.

Management fees and other revenues are generally received from our unconsolidated affiliate properties as well as third parties. Management fee revenue is earned based on a contractual percentage of unconsolidated affiliate property revenue. Development fee revenue is earned on a contractual percentage of hard costs to develop a property. We recognize revenue for these services provided when earned based on the performance criteria in ASC 606, with such revenue recorded in “Other” revenue on the consolidated statement of operations.

Allowance for Uncollectible Accounts Receivable

Allowance for Uncollectible Accounts Receivable – We record a provision for uncollectible accounts if a receivable balance relating to contractual rent, rental revenue recorded on a straight-line basis, tenant recoveries or other billed amounts is considered by management to be not probable of collection, and this provision is recorded as a reduction to leasing revenues. We also record a general provision of estimated uncollectible tenant receivables that is based on management’s historical experience and a review of the current status of our receivables deemed probable of collection. This provision is recorded as bad debt expense and recorded within Property Operating Costs within the consolidated statement of operations. The aggregate allowance for doubtful accounts on the consolidated balance sheet was $1.9 million and $3.8 million as of September 30, 2019 and December 31, 2018, respectively.

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. We record 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 $41.4 million and $33.2 million as of September 30, 2019 and December 31, 2018, respectively. Additionally, $4.0 million and $3.3 million of deferred income was amortized into revenue for the three months ended September 30, 2019 and 2018, respectively, and $11.1 million and $9.4 million for the nine months ended September 30, 2019 and 2018, respectively.

Foreign Currency

Foreign Currency - The financial position of foreign subsidiaries is translated at the exchange rates in effect at the end of the period, while revenues and expenses are translated at average exchange rates during the period. Gains or losses from translation of foreign operations where the local currency is the functional currency are included as components of other comprehensive income (loss). Gains or losses from foreign currency transactions are included in determining net income (loss).

Equity-based Compensation

Equity-based Compensation – Equity-based compensation costs are measured based upon their estimated fair value on the date of grant or modification and amortized ratably over their respective service periods. We have elected to account for forfeitures as they occur. Equity-based compensation expense was $4.5 million and $3.9 million for the three months ended September 30, 2019 and 2018, respectively, and $12.1 million and $11.4 million for the nine months ended September 30, 2019 and 2018, respectively. Equity-based compensation expense for the nine months ended September 30, 2018 excludes $3.1 million of equity-based compensation expense associated with the acceleration of equity awards related to certain employees impacted by the Company’s strategic growth plan, all of which was incurred during the six months ended June 30, 2018. The aforementioned equity-based compensation expense is included in the “Restructuring” expense line item on the consolidated statements of operations.

Segment Information

Segment Information – We manage our business as one operating segment and thus one reportable segment consisting of a portfolio of investments in multiple data centers

Customer Concentrations

Customer Concentrations – As of September 30, 2019, one of our customers represented 9.8% of our total monthly rental revenue. No other customers exceeded 6% of total monthly rental revenue.

As of September 30, 2019, three of our customers exceeded 5% of trade accounts receivable. In aggregate, these three customers accounted for approximately 26% of trade accounts receivable. One of these customers individually exceeded 10% of trade accounts receivable, at approximately 13%.

Income Taxes

Income Taxes – We have elected for two of our existing subsidiaries to be taxed as taxable REIT subsidiaries pursuant to the REIT rules of the U.S. Internal Revenue Code. Pursuant to the transaction described in Note 3 - Acquisitions, we also have subsidiaries subject to tax in non-US jurisdictions.

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.

A current and deferred tax expense has been recognized in the nine months ended September 30, 2019, in connection with recorded operating activity. As of September 30, 2019, one of our taxable REIT subsidiaries is in a net deferred tax liability position primarily due to a valuation allowance against certain deferred tax assets. In considering whether it is more likely than not that some portion or all of the deferred tax assets will be realized, it has been determined that it is possible that some or all of our deferred tax assets could ultimately expire unused. We establish valuation allowances against deferred tax assets when the ability to fully utilize these benefits is determined to be uncertain.

We provide a valuation allowance against deferred tax assets if, based on management’s assessment of operating results and other available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The evidence contemplated by management at September 30, 2019 consists of current and prior operating results, available tax planning strategies, and the scheduled reversal of existing taxable temporary differences. Evidence from the scheduled reversal of taxable temporary differences relies on management judgements based on the accumulation of available evidence. Those judgements may be subject to change in the future as evidence available to management changes. Management’s assessment of our valuation allowance may further change based on our generation of or ability to project future operating income, and changes in tax policy or tax planning strategies.

We provide 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 subsidiaries, tax law changes, and future business acquisitions or divestitures. The taxable subsidiaries’ effective tax rates were (8.5%) and 8.9% for the nine months ended September 30, 2019 and 2018, respectively.

Fair Value Measurements

Fair Value Measurements – ASC Topic 820, Fair Value Measurement, 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 we have 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. Our 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 of September 30, 2019, we valued our derivative instruments primarily utilizing Level 2 inputs. See Note 16 – ‘Fair Value of Financial Instruments’ for additional details.

Derivative Instruments

From time to time, we enter into derivative financial instruments to manage certain cash flow risks.

Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges.

Interest Rate Swaps

Our objectives in using interest rate swaps are to reduce variability in interest expense and to manage exposure to adverse interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

On April 5, 2017, we entered into forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from January 2, 2018 through December 17, 2021 and April 27, 2022, respectively.

On December 20, 2018, we entered into additional forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from December 17, 2021 and April 27, 2022 through December 17, 2023 and April 27, 2024, respectively. Additionally, we entered into forward interest rate swap

agreements with an aggregate notional amount of $200 million. The forward swap agreements effectively fix the interest rate on $200 million of additional term loan borrowings, from January 2, 2020 through December 17, 2023 and April 27, 2024, respectively.

We reflect our interest rate swap agreements, which are designated as cash flow hedges, at fair value as either assets or liabilities on the consolidated balance sheets within the “Other assets, net” or “Advance rents, security deposits and other liabilities” line items, as applicable. As of September 30, 2019, the fair value of interest rate swaps represented an aggregate $25.1 million liability. As of December 31, 2018, the fair value of interest rate swaps included an asset of $5.3 million as well as a liability of $3.0 million.

The forward interest rate swap agreements are derivatives that currently qualify for hedge accounting whereby we record the effective portion of changes in fair value of the interest rate swaps in accumulated other comprehensive income or loss on the consolidated balance sheets and statements of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of a derivative's change in fair value is immediately recognized within net income. The amount reclassified from other comprehensive income as a reduction in interest expense on the consolidated statements of operations was $0.2 million and $1.2 million for the three and nine months ended September 30, 2019, respectively. The amount reclassified from other comprehensive income to interest expense on the consolidated statements of operations was a reduction of $0.1 million as well as an increase of $0.4 million for the three and nine months ended September 30, 2018, respectively. There was no ineffectiveness recognized for the three and nine months ended September 30, 2019, and 2018. During the subsequent twelve months, beginning October 1, 2019, we estimate that $3.1 million will be reclassified from other comprehensive income as an increase to interest expense.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance codified in ASC Topic 606, Revenue from Contracts with Customers, which supersedes the former revenue recognition requirements in ASC Topic 605, 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. The standard establishes a five-step model framework which recognizes revenue as an entity transfers control of goods or services to the customer and requires enhanced disclosures. We adopted ASC Topic 606 effective January 1, 2018, and elected the modified retrospective transition approach. The adoption did not result in a cumulative catch-up adjustment to opening equity and does not change the recognition pattern of our operating revenues.

Leases

In February 2016, and further amended in 2018, the FASB issued ASC Topic 842, Leases, which supersedes the former lease guidance in ASC 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

We adopted ASC 842 effective January 1, 2019 using the modified retrospective approach, which applied the provisions of the new guidance at the effective date without adjusting comparative periods presented. We elected a package of practical expedients permitted under the transition guidance within the new standard which allowed us to not reassess (i) whether expired or existing contracts contain a lease under the new standard, (ii) the lease classification for existing leases or (iii) whether previously-capitalized initial direct costs would qualify for capitalization under the new standard.

We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment.

The adoption of ASC 842 impacted our consolidated balance sheet with the recognition of existing operating leases as lessee resulting in $62.9 million of ROU assets and $70.7 million of lease liabilities recorded as of January 1, 2019. We also recognized a $1.8 million cumulative effect adjustment to retained earnings. The adjustment to retained earnings was due to an impairment of certain ROU assets associated with vacant office space for which we are a lessee and assumed in a prior acquisition. See the table below for the impact of adoption of the lease standard on our consolidated balance sheet as of January 1, 2019 (in thousands):

	As Previously		New Lease Standard
	Reported		Adjustment		As Adjusted
Operating lease right-of-use assets	$	—	$	62,922	$	62,922
Operating lease liabilities		—		70,657		70,657
Deferred rent payable		5,922		(5,922)		—

As lessor, accounting for our leases will remain largely unchanged from ASC 840. The new lease standard more narrowly defines initial direct costs as only costs that are incremental to origination of a lease (i.e. costs that would not have been incurred had the lease not been obtained). We did not historically capitalize non-incremental costs, therefore this change will have no impact on the accounting for initial direct costs in the consolidated financial statements on a prospective basis.

Additionally, from a lessor perspective, we elected a practical expedient which allows lessors to combine nonlease components with the related lease components if both the timing and pattern of transfer are the same for the nonlease component(s) and related lease component, and the lease component would be classified as an operating lease. The single combined component is accounted for under ASC 842 if the lease component is the predominant component and is accounted for under ASC 606 if the nonlease components are the predominant components. Lessors are permitted to apply the practical expedient to all existing leases on a retrospective or prospective basis. We elected the practical expedient to combine our lease and nonlease components that meet the defined criteria and will account for the combined lease component under ASC 842 on a prospective basis.

New Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 eliminate the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, valuation processes for Level 3 fair value measurements, and policy for timing of transfers between levels. ASU 2018-13 also provides clarification in the measurement uncertainty disclosure by explaining that the disclosure is to communicate information about the uncertainty in measurement as of the reporting date. In addition, ASU 2018-13 added the following requirements: changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. Finally, ASU 2018-13 updated language to further encourage entities to apply materiality when considering de minimus determination for disclosure requirements. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with the exception of amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used for Level 3 fair value measurements, and the narrative description of measurement uncertainty which will be applied prospectively. Early adoption is permitted. We do not expect the provisions of the standard will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendments in ASU 2018-15 require an entity in a service contract hosting arrangement apply Subtopic 350-40 to identify costs to capitalize or expense related to the service contract. ASU 2018-15 also requires the entity to capitalize the implementation costs of the service contract hosting arrangement and amortize such costs over the

life of the contract and present the capitalized costs in the same line item as fees associated with the hosting service on the statement of income and statement of cash flows. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with the exception of all implementation costs incurred after the date of adoption which will be applied prospectively. We do not expect this standard will have a material impact on our net income. However, this standard will likely result in certain expenses currently recognized as non real estate depreciation being recognized as general and administrative or operating expense in future periods.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, and ASU 2019-05 in May 2019. The standard, as amended, requires entities to use a new impairment model based on current expected credit losses (“CECL”) rather than incurred losses. The CECL model is designed to capture expected credit losses through the establishment of an allowance account, which will be presented as an offset to the amortized cost basis of the related financial asset. The guidance is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. As the majority of our revenue is generated from operating leases which are governed under ASC Topic 842, we do not currently expect the provisions of the standard will have a material impact on our consolidated financial statements.

We determined all other recently issued accounting pronouncements will not have a material impact on our consolidated financial statements or do not materially apply to our operations.

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Real Estate Assets and Construction in Progress (Tables)

9 Months Ended

Sep. 30, 2019

Real Estate Assets and Construction in Progress [Abstract]

Summary of Owned and Leased Properties by the Company

The following is a summary of our owned and leased properties as of September 30, 2019 and December 31, 2018 (in thousands):

As of September 30, 2019 (unaudited):

			Buildings,
			Improvements		Construction
Property Location	Land		and Equipment		in Progress		Total Cost
Atlanta, Georgia (Atlanta-Metro)	$	21,016	$	523,859	$	115,354	$	660,229
Irving, Texas		8,606		347,067		113,696		469,369
Richmond, Virginia		2,180		254,495		72,882		329,557
Ashburn, Virginia (1)		37,079		131,695		144,930		313,704
Chicago, Illinois		9,400		153,582		133,521		296,503
Suwanee, Georgia (Atlanta-Suwanee)		3,521		170,396		2,833		176,750
Piscataway, New Jersey		7,466		98,723		37,592		143,781
Santa Clara, California (2)		—		105,759		6,956		112,715
Leased Facilities (3)		—		98,176		1,112		99,288
Fort Worth, Texas		9,079		55,019		26,892		90,990
Dulles, Virginia		3,154		73,373		4,222		80,749
Sacramento, California		1,481		64,997		52		66,530
Manassas, Virginia (1)		—		—		58,741		58,741
Hillsboro, Oregon (1)		—		—		55,574		55,574
Princeton, New Jersey		20,700		34,371		451		55,522
Eemshaven, Netherlands		—		—		32,468		32,468
Phoenix, Arizona (1)		—		—		30,704		30,704
Groningen, Netherlands		1,692		8,389		2,882		12,963
Other (4)		2,213		35,909		2,892		41,014
	$	127,587	$	2,155,810	$	843,754	$	3,127,151

(1) Represent land purchases. Land acquisition costs, as well as subsequent development costs, are included within construction in progress until development on the land has ended and the asset is ready for its intended use.

(2) Owned facility subject to long-term ground sublease.

(3) Includes 9 facilities. All facilities are leased, including those subject to finance leases.

(4) Consists of Miami, FL; Lenexa, KS and Overland Park, KS facilities.

As of December 31, 2018:

			Buildings,
			Improvements		Construction
Property Location	Land		and Equipment		in Progress		Total Cost
Atlanta, Georgia (Atlanta-Metro)	$	20,416	$	493,446	$	88,253	$	602,115
Irving, Texas		8,606		345,615		99,445		453,666
Richmond, Virginia		2,180		253,098		67,932		323,210
Chicago, Illinois		9,400		130,150		133,095		272,645
Ashburn, Virginia (1)		17,325		63,245		184,951		265,521
Suwanee, Georgia (Atlanta-Suwanee)		3,521		166,298		3,188		173,007
Piscataway, New Jersey		7,466		97,806		33,472		138,744
Santa Clara, California (2)		—		98,548		7,600		106,148
Dulles, Virginia		3,154		72,435		3,852		79,441
Fort Worth, Texas		9,079		18,623		43,715		71,417
Sacramento, California		1,481		64,874		92		66,447
Princeton, New Jersey		20,700		34,046		431		55,177
Leased Facilities (3)		—		43,347		9,334		52,681
Manassas, Virginia (1) (4)		—		—		45,194		45,194
Hillsboro, Oregon (1)		—		—		39,835		39,835
Phoenix, Arizona (1)		—		—		29,562		29,562
Other (5)		2,213		35,720		113		38,046
	$	105,541	$	1,917,251	$	790,064	$	2,812,856

(1) Represent land purchases. Land acquisition costs, as well as subsequent development costs, are included within construction in progress until development on the land has ended and the asset is ready for its intended use.

(2) Owned facility subject to long-term ground sublease.

(3) Includes 10 facilities. All facilities are leased, including those subject to finance leases.

(4) Excludes $71.0 million of construction in progress included within the “Assets held for sale” line item of the consolidated balance sheets.

(5) Consists of Miami, FL; Lenexa, KS and Overland Park, KS facilities.

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

6. Leases

Leases as Lessee

We determine if an arrangement is a lease at inception. If the contract is considered a lease, we evaluate leased property to determine whether the lease should be classified as a finance or operating lease in accordance with U.S. GAAP. We periodically enter into finance leases for certain data center facilities, equipment, and fiber optic transmission cabling. In addition, we lease certain real estate (primarily land or real estate space) under operating lease agreements with such assets included within the “Operating lease right of use assets, net” line item of the consolidated balance sheets and the associated lease liabilities included within the “Operating lease liabilities” line item on the consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments consist of nonlease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases as lessee typically do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We assess multiple variables when determining the incremental borrowing rate, such as lease term, payment terms, collateral, economic conditions, and creditworthiness. ROU assets also include any lease payments made and exclude lease incentives. Many of our lease agreements include options to extend the lease, which we do not include in our expected lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

We use leasing as a source of financing for certain data center facilities and related equipment. We currently operate one data center facility, along with various equipment and fiber optic transmission cabling, that are subject to finance leases.

The remaining terms of our finance leases range from two to nineteen years. Our finance lease associated with the data center includes multiple extension option periods, some of which were included in the lease term as we are reasonably certain to exercise those extension options. Our other finance leases typically do not have options to extend the initial lease term. Finance lease assets are included within the “Buildings, improvements and equipment” line item of the consolidated balance sheets and finance lease liabilities are included within “Finance leases and mortgage notes payable” line item of the consolidated balance sheets.

We currently lease six other facilities under operating lease agreements for various data centers and office space. Our leases have remaining lease terms ranging from five to seven years. We have options to extend the initial lease term on nearly all of these leases. Additionally, we have one ground lease that is considered an operating lease which is scheduled to expire in 2052.

Components of lease expense were as follows (unaudited and in thousands):

	Three months ended		Nine months ended
	September 30, 2019		September 30, 2019
Operating lease cost	$	2,479	$	7,502
Finance lease cost:
Amortization of assets		1,091		2,496
Interest on lease liabilities		505		1,204
Sublease income		(46)		(139)
Total lease costs	$	4,029	$	11,063

Supplemental balance sheet information related to leases was as follows (unaudited and in thousands, except lease term and discount rate):

	September 30,
	2019
Operating leases:
Operating lease right-of-use assets	$	58,551
Operating lease liabilities		65,949
Finance leases:
Property and equipment, at cost		50,437
Accumulated amortization		(3,791)
Property and equipment, net	$	46,646
Finance lease liabilities	$	45,753
Weighted average remaining lease term (in years):
Operating leases		13.7
Finance leases		11.7
Weighted average discount rate:
Operating leases		5.1%
Finance leases		4.3%

Supplemental cash flow and other information related to leases was as follows (unaudited and in thousands):

	Nine months ended
	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	7,446
Operating cash flows for finance leases	$	1,180
Financing cash flows for finance leases	$	2,243

Maturities of lease liabilities were as follows (unaudited and in thousands):

	September 30, 2019
	Operating Leases		Finance Leases
2019 (October - December)	$	2,374	$	1,108
2020		9,589		4,493
2021		9,818		4,514
2022		10,266		4,639
2023		10,393		4,776
Thereafter		57,225		39,908
Total Lease Payments	$	99,665	$	59,438
Less: Imputed Interest		33,716		13,685
Total Lease Obligations	$	65,949	$	45,753

Leases as lessor

Our lease revenue contains both minimum lease payments as well as variable lease payments. See Note 2 for further details of our revenue streams and associated accounting treatment. The components of our lease revenue were as follows (unaudited and in thousands):

	Three months ended				Nine months ended
	September 30,		September 30,		September 30,
	2019		2018		2019		2018
Lease revenue:
Minimum lease revenue	$	103,623	$	92,812	$	304,166	$	271,342
Variable lease revenue (primarily recoveries from customers)		17,852		11,948		41,675		34,432
Total lease revenue	$	121,475	$	104,760	$	345,841	$	305,774

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

We are subject to various routine legal proceedings and other matters in the ordinary course of business. We currently do not have any litigation that would have material adverse impact on our financial statements.

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Summary of Significant Accounting Policies (Narrative) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($) category	Sep. 30, 2019 USD ($) item	Sep. 30, 2018 USD ($) category
Summary Of Significant Accounting Policies [Line Items]
Operating assets independent of the Operating Partnership	$ 0		$ 0
Maximum exposure to losses	30,700,000		30,700,000
Number of Revenue Categories | category		4		4
Rental	121,475,000	$ 104,760,000	$ 345,841,000	$ 305,774,000
Useful life of property			40 years
Depreciation expense from operation	32,700,000	29,100,000	$ 95,500,000	84,100,000
Real estate cost capitalized excluding interest cost	4,800,000	4,500,000	13,100,000	11,700,000
Real estate interest cost capitalized incurred	8,700,000	6,700,000	24,900,000	18,100,000
Transaction cost			5,800,000
Gain on sale of real estate, net			$ 13,408,000
Number of reporting units | item			1
Reclassification from Other Revenue to Rental Income [Member]
Summary Of Significant Accounting Policies [Line Items]
Prior Period Reclassification Adjustment		1,200,000		5,300,000
Reclassification from Cloud and Managed Services to Other Revenue[Member]
Summary Of Significant Accounting Policies [Line Items]
Prior Period Reclassification Adjustment		7,500,000
Qualitytech, LP
Summary Of Significant Accounting Policies [Line Items]
Operating assets independent of the Operating Partnership	0		$ 0
Rental	$ 121,475,000	104,760,000	345,841,000	305,774,000
Gain on sale of real estate, net			$ 13,408,000
Term Loan Maturing 2025
Summary Of Significant Accounting Policies [Line Items]
Interest rate	4.75%		4.75%
Real Estate Assets
Summary Of Significant Accounting Policies [Line Items]
Depreciation expense from operation	$ 29,800,000	25,800,000	$ 86,800,000	74,400,000
Non-Real Estate Assets
Summary Of Significant Accounting Policies [Line Items]
Depreciation expense from operation	2,900,000	3,300,000	$ 8,700,000	9,700,000
Other | Reclassification from Cloud and Managed Services to Other Revenue[Member]
Summary Of Significant Accounting Policies [Line Items]
Prior Period Reclassification Adjustment				31,700,000
Other | Reclassification Other Revenue [Member]
Summary Of Significant Accounting Policies [Line Items]
Prior Period Reclassification Adjustment				700,000
Recoveries From Customers
Summary Of Significant Accounting Policies [Line Items]
Prior Period Reclassification Adjustment		11,800,000		33,800,000
Minimum | Real Property
Summary Of Significant Accounting Policies [Line Items]
Useful life of property			20 years
Maximum | Real Property
Summary Of Significant Accounting Policies [Line Items]
Useful life of property			40 years
Maximum | Leasehold Improvements
Summary Of Significant Accounting Policies [Line Items]
Useful life of property			20 years
Maximum | Other | Reclassification Other Revenue [Member]
Summary Of Significant Accounting Policies [Line Items]
Prior Period Reclassification Adjustment		100,000
Restructuring Charges [Member]
Summary Of Significant Accounting Policies [Line Items]
Impairment losses	$ 0	$ 3,300,000	$ 0	$ 7,600,000

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Summary of Related Party Transactions

The transactions which occurred during the three and nine months ended September 30, 2019 and 2018 are outlined below (unaudited and in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Tax, utility, insurance and other reimbursement	$	173	$	128	$	608	$	524
Rent expense		254		254		761		761
Capital assets acquired		53		82		477		286
Total	$	480	$	464	$	1,846	$	1,571

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of components of lease expenses

Components of lease expense were as follows (unaudited and in thousands):

	Three months ended		Nine months ended
	September 30, 2019		September 30, 2019
Operating lease cost	$	2,479	$	7,502
Finance lease cost:
Amortization of assets		1,091		2,496
Interest on lease liabilities		505		1,204
Sublease income		(46)		(139)
Total lease costs	$	4,029	$	11,063

Schedule of supplemental balance sheet information

Supplemental balance sheet information related to leases was as follows (unaudited and in thousands, except lease term and discount rate):

	September 30,
	2019
Operating leases:
Operating lease right-of-use assets	$	58,551
Operating lease liabilities		65,949
Finance leases:
Property and equipment, at cost		50,437
Accumulated amortization		(3,791)
Property and equipment, net	$	46,646
Finance lease liabilities	$	45,753
Weighted average remaining lease term (in years):
Operating leases		13.7
Finance leases		11.7
Weighted average discount rate:
Operating leases		5.1%
Finance leases		4.3%

Schedule of cash flow information and other information

Supplemental cash flow and other information related to leases was as follows (unaudited and in thousands):

	Nine months ended
	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	7,446
Operating cash flows for finance leases	$	1,180
Financing cash flows for finance leases	$	2,243

Schedule of maturities of operating lease liabilities

Maturities of lease liabilities were as follows (unaudited and in thousands):

	September 30, 2019
	Operating Leases		Finance Leases
2019 (October - December)	$	2,374	$	1,108
2020		9,589		4,493
2021		9,818		4,514
2022		10,266		4,639
2023		10,393		4,776
Thereafter		57,225		39,908
Total Lease Payments	$	99,665	$	59,438
Less: Imputed Interest		33,716		13,685
Total Lease Obligations	$	65,949	$	45,753

Schedule of components of lease revenue

	Three months ended				Nine months ended
	September 30,		September 30,		September 30,
	2019		2018		2019		2018
Lease revenue:
Minimum lease revenue	$	103,623	$	92,812	$	304,166	$	271,342
Variable lease revenue (primarily recoveries from customers)		17,852		11,948		41,675		34,432
Total lease revenue	$	121,475	$	104,760	$	345,841	$	305,774

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Leases - Components of lease expenses (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Components of lease expenses:
Operating lease cost	$ 2,479	$ 7,502
Amortization of assets	1,091	2,496
Interest on lease liabilities	505	1,204
Sublease income	(46)	(139)
Total lease costs	$ 4,029	$ 11,063

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Description of Business

9 Months Ended

Sep. 30, 2019

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 its subsidiaries, the “Company,” “we,” “us,” or “our”) and the subsidiaries of the Operating Partnership, is engaged in the business of owning, acquiring, constructing, redeveloping and managing multi-tenant data centers. As of September 30, 2019 our portfolio consisted of 26 owned and leased properties, including properties associated with unconsolidated entities, with data centers located throughout the United States, Canada, Europe and Asia.

As of September 30, 2019, QTS owned approximately 89.7% 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 of the Operating Partnership 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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Leases - Maturities of lease liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jan. 01, 2019
Operating Leases Maturities:
2019 (October - December)	$ 2,374
2020	9,589
2021	9,818
2022	10,266
2023	10,393
Thereafter	57,225
Total Lease Payments	99,665
Less: Imputed Interest	33,716
Total Lease Obligations	65,949	$ 70,657
Finance Leases Maturities:
2019 (October - December)	1,108
2020	4,493
2021	4,514
2022	4,639
2023	4,776
Thereafter	39,908
Total Lease Payments	59,438
Less: Imputed Interest	13,685
Total Lease Obligations	$ 45,753

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INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues:
Rental	$ 121,475	$ 104,760	$ 345,841	$ 305,774
Other	3,780	7,453	11,270	32,413
Total revenues	125,255	112,213	357,111	338,187
Operating expenses:
Property operating costs	44,730	38,217	117,403	112,515
Real estate taxes and insurance	3,713	3,088	10,435	8,896
Depreciation and amortization	42,875	37,900	123,144	111,633
General and administrative	19,504	19,922	59,519	63,187
Transaction and integration costs	827	901	3,080	2,474
Restructuring		13,737		33,697
Total operating expenses	111,649	113,765	313,581	332,402
Gain on sale of real estate, net			13,408
Operating income (loss)	13,606	(1,552)	56,938	5,785
Other income and expense:
Interest income	22	66	103	92
Interest expense	(6,724)	(6,386)	(20,329)	(22,699)
Other income	370		330
Equity in earnings (loss) of unconsolidated entity	(317)		(992)
Income (loss) before taxes	6,957	(7,872)	36,050	(16,822)
Tax benefit (expense) of taxable REIT subsidiaries	(369)	980	(779)	3,245
Net income (loss)	6,588	(6,892)	35,271	(13,577)
Net (income) loss attributable to noncontrolling interests	49	1,610	(1,593)	2,641
Net income (loss) attributable to QTS Realty Trust, Inc.	6,637	(5,282)	33,678	(10,936)
Preferred stock dividends	(7,045)	(7,045)	(21,135)	(9,621)
Net income (loss) attributable to common stockholders	$ (408)	$ (12,327)	$ 12,543	$ (20,557)
Net income (loss) per share attributable to common shares:
Basic (in dollars per share)	$ (0.05)	$ (0.25)	$ 0.12	$ (0.42)
Diluted (in dollars per share)	$ (0.05)	$ (0.25)	$ 0.12	$ (0.42)
Qualitytech, LP
Revenues:
Rental	$ 121,475	$ 104,760	$ 345,841	$ 305,774
Other	3,780	7,453	11,270	32,413
Total revenues	125,255	112,213	357,111	338,187
Operating expenses:
Property operating costs	44,730	38,217	117,403	112,515
Real estate taxes and insurance	3,713	3,088	10,435	8,896
Depreciation and amortization	42,875	37,900	123,144	111,633
General and administrative	19,504	19,922	59,519	63,187
Transaction and integration costs	827	901	3,080	2,474
Restructuring		13,737		33,697
Total operating expenses	111,649	113,765	313,581	332,402
Gain on sale of real estate, net			13,408
Operating income (loss)	13,606	(1,552)	56,938	5,785
Other income and expense:
Interest income	22	66	103	92
Interest expense	(6,724)	(6,386)	(20,329)	(22,699)
Other income	370		330
Equity in earnings (loss) of unconsolidated entity	(317)		(992)
Income (loss) before taxes	6,957	(7,872)	36,050	(16,822)
Tax benefit (expense) of taxable REIT subsidiaries	(369)	980	(779)	3,245
Net income (loss)	6,588	(6,892)	35,271	(13,577)
Preferred stock dividends	(7,045)	(7,045)	(21,135)	(9,621)
Net income (loss) attributable to common stockholders	$ (457)	$ (13,937)	$ 14,136	$ (23,198)

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Debt (Unsecured Credit Facility Narrative) (Details) $ in Thousands	1 Months Ended	9 Months Ended
	Oct. 31, 2019 USD ($)	Sep. 30, 2019 USD ($) loan	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Debt issuance costs, net		$ 6,230	$ 7,671
Debt Weighted Average Interest Rate		3.73%
Term Loan
Debt Instrument [Line Items]
Outstanding debt		$ 700,000
Debt issuance costs, net		$ 5,500
Revolving Credit Facility
Debt Instrument [Line Items]
Maturity date		Dec. 17, 2022
Outstanding debt		$ 224,149	252,000
Debt Weighted Average Interest Rate		2.98%
Letter of Credit [Member]
Debt Instrument [Line Items]
Letter of credit outstanding		$ 4,100
Unsecured Credit Facility
Debt Instrument [Line Items]
Number of term loans | loan		2
Outstanding debt		$ 924,000
Debt Instrument, Covenant Compliance		we were in compliance with all of our covenants
Unsecured Credit Facility | Term Loan
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity		$ 350,000
Unsecured Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity		$ 820,000
Unsecured Credit Facility Two
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 2,200,000
Debt extension period	1 year
Unsecured Credit Facility Two | Term Loan Maturing April 27 2025
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 225,000
Maturity date	Apr. 27, 2025
Unsecured Credit Facility Two | Term Loan Maturing December 17 2023
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 1,000,000
Maturity date	Dec. 17, 2023
Unsecured Credit Facility Two | Term Loan Maturing December 17 2024
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 225,000
Maturity date	Dec. 17, 2024
Unsecured Credit Facility Two | Term Loan Maturing October 18 2026
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 250,000
Maturity date	Oct. 18, 2026
Unsecured Credit Facility Two | Minimum | Term Loan A and Term Loan B | LIBOR
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	1.20%
Unsecured Credit Facility Two | Minimum | Term Loan A and Term Loan B | Base Rate
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	0.20%
Unsecured Credit Facility Two | Minimum | Term Loan C | LIBOR
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	1.50%
Unsecured Credit Facility Two | Minimum | Term Loan C | Base Rate
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	0.50%
Unsecured Credit Facility Two | Minimum | Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	1.25%
Unsecured Credit Facility Two | Minimum | Revolving Credit Facility | Base Rate
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	0.25%
Unsecured Credit Facility Two | Maximum
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 300,000
Unsecured Credit Facility Two | Maximum | Term Loan A and Term Loan B | LIBOR
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	1.80%
Unsecured Credit Facility Two | Maximum | Term Loan A and Term Loan B | Base Rate
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	0.80%
Unsecured Credit Facility Two | Maximum | Term Loan C | LIBOR
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	1.85%
Unsecured Credit Facility Two | Maximum | Term Loan C | Base Rate
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	0.85%
Unsecured Credit Facility Two | Maximum | Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	1.85%
Unsecured Credit Facility Two | Maximum | Revolving Credit Facility | Base Rate
Debt Instrument [Line Items]
Debt instrument spread on variable interest rate	0.85%
Operating Partnership And QTS Finance Corporation
Debt Instrument [Line Items]
Maturity date		Nov. 15, 2025
Outstanding debt		$ 400,000	$ 400,000
Debt Weighted Average Interest Rate		4.75%
Operating Partnership And QTS Finance Corporation | Operating Partnership Quality Tech LP And QTS Finance Corporation
Debt Instrument [Line Items]
Debt issuance costs, net		$ 4,600

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Fair Value of Financial Instruments (Narrative) (Details) $ in Millions	Sep. 30, 2019 USD ($)
Senior Notes | Fair Value Measurements, Level 2
Fair Value Of Financial Instruments [Line Items]
Fair value of loan based on current market rates	$ 412.0

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Noncontrolling Interest (Narrative) (Details)	9 Months Ended
	Sep. 30, 2019	Oct. 13, 2013
Stock conversion ratio	1
Qualitytech, LP | QTS Reality Trust
Quality Tech LP ownership percentage in operating partnership	10.30%	21.20%

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Real Estate Assets and Construction in Progress

9 Months Ended

Sep. 30, 2019

Real Estate Assets and Construction in Progress [Abstract]

Real Estate Assets and Construction in Progress

5. Real Estate Assets and Construction in Progress

The following is a summary of our owned and leased properties as of September 30, 2019 and December 31, 2018 (in thousands):

As of September 30, 2019 (unaudited):

			Buildings,
			Improvements		Construction
Property Location	Land		and Equipment		in Progress		Total Cost
Atlanta, Georgia (Atlanta-Metro)	$	21,016	$	523,859	$	115,354	$	660,229
Irving, Texas		8,606		347,067		113,696		469,369
Richmond, Virginia		2,180		254,495		72,882		329,557
Ashburn, Virginia (1)		37,079		131,695		144,930		313,704
Chicago, Illinois		9,400		153,582		133,521		296,503
Suwanee, Georgia (Atlanta-Suwanee)		3,521		170,396		2,833		176,750
Piscataway, New Jersey		7,466		98,723		37,592		143,781
Santa Clara, California (2)		—		105,759		6,956		112,715
Leased Facilities (3)		—		98,176		1,112		99,288
Fort Worth, Texas		9,079		55,019		26,892		90,990
Dulles, Virginia		3,154		73,373		4,222		80,749
Sacramento, California		1,481		64,997		52		66,530
Manassas, Virginia (1)		—		—		58,741		58,741
Hillsboro, Oregon (1)		—		—		55,574		55,574
Princeton, New Jersey		20,700		34,371		451		55,522
Eemshaven, Netherlands		—		—		32,468		32,468
Phoenix, Arizona (1)		—		—		30,704		30,704
Groningen, Netherlands		1,692		8,389		2,882		12,963
Other (4)		2,213		35,909		2,892		41,014
	$	127,587	$	2,155,810	$	843,754	$	3,127,151

(1) Represent land purchases. Land acquisition costs, as well as subsequent development costs, are included within construction in progress until development on the land has ended and the asset is ready for its intended use.

(2) Owned facility subject to long-term ground sublease.

(3) Includes 9 facilities. All facilities are leased, including those subject to finance leases.

(4) Consists of Miami, FL; Lenexa, KS and Overland Park, KS facilities.

As of December 31, 2018:

			Buildings,
			Improvements		Construction
Property Location	Land		and Equipment		in Progress		Total Cost
Atlanta, Georgia (Atlanta-Metro)	$	20,416	$	493,446	$	88,253	$	602,115
Irving, Texas		8,606		345,615		99,445		453,666
Richmond, Virginia		2,180		253,098		67,932		323,210
Chicago, Illinois		9,400		130,150		133,095		272,645
Ashburn, Virginia (1)		17,325		63,245		184,951		265,521
Suwanee, Georgia (Atlanta-Suwanee)		3,521		166,298		3,188		173,007
Piscataway, New Jersey		7,466		97,806		33,472		138,744
Santa Clara, California (2)		—		98,548		7,600		106,148
Dulles, Virginia		3,154		72,435		3,852		79,441
Fort Worth, Texas		9,079		18,623		43,715		71,417
Sacramento, California		1,481		64,874		92		66,447
Princeton, New Jersey		20,700		34,046		431		55,177
Leased Facilities (3)		—		43,347		9,334		52,681
Manassas, Virginia (1) (4)		—		—		45,194		45,194
Hillsboro, Oregon (1)		—		—		39,835		39,835
Phoenix, Arizona (1)		—		—		29,562		29,562
Other (5)		2,213		35,720		113		38,046
	$	105,541	$	1,917,251	$	790,064	$	2,812,856

(1) Represent land purchases. Land acquisition costs, as well as subsequent development costs, are included within construction in progress until development on the land has ended and the asset is ready for its intended use.

(2) Owned facility subject to long-term ground sublease.

(3) Includes 10 facilities. All facilities are leased, including those subject to finance leases.

(4) Excludes $71.0 million of construction in progress included within the “Assets held for sale” line item of the consolidated balance sheets.

(5) Consists of Miami, FL; Lenexa, KS and Overland Park, KS facilities.

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Derivative Instruments

9 Months Ended

Sep. 30, 2019

Derivative Instruments [Abstract]

Derivative Instruments

9. Derivative Instruments

From time to time, we enter into derivative financial instruments to manage certain cash flow risks.

Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges.

Interest Rate Swaps

Our objectives in using interest rate swaps are to reduce variability in interest expense and to manage exposure to adverse interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

On April 5, 2017, we entered into forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from January 2, 2018 through December 17, 2021 and April 27, 2022, respectively.

On December 20, 2018, we entered into additional forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from December 17, 2021 and April 27, 2022 through December 17, 2023 and April 27, 2024, respectively. Additionally, we entered into forward interest rate swap

agreements with an aggregate notional amount of $200 million. The forward swap agreements effectively fix the interest rate on $200 million of additional term loan borrowings, from January 2, 2020 through December 17, 2023 and April 27, 2024, respectively.

We reflect our interest rate swap agreements, which are designated as cash flow hedges, at fair value as either assets or liabilities on the consolidated balance sheets within the “Other assets, net” or “Advance rents, security deposits and other liabilities” line items, as applicable. As of September 30, 2019, the fair value of interest rate swaps represented an aggregate $25.1 million liability. As of December 31, 2018, the fair value of interest rate swaps included an asset of $5.3 million as well as a liability of $3.0 million.

The forward interest rate swap agreements are derivatives that currently qualify for hedge accounting whereby we record the effective portion of changes in fair value of the interest rate swaps in accumulated other comprehensive income or loss on the consolidated balance sheets and statements of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of a derivative's change in fair value is immediately recognized within net income. The amount reclassified from other comprehensive income as a reduction in interest expense on the consolidated statements of operations was $0.2 million and $1.2 million for the three and nine months ended September 30, 2019, respectively. The amount reclassified from other comprehensive income to interest expense on the consolidated statements of operations was a reduction of $0.1 million as well as an increase of $0.4 million for the three and nine months ended September 30, 2018, respectively. There was no ineffectiveness recognized for the three and nine months ended September 30, 2019, and 2018. During the subsequent twelve months, beginning October 1, 2019, we estimate that $3.1 million will be reclassified from other comprehensive income as an increase to interest expense.

Interest rate derivatives and their fair values as of September 30, 2019 and December 31, 2018 were as follows (unaudited and in thousands):

				Fixed One Month
Notional Amount				LIBOR rate per			Fair Value
September 30, 2019		December 31, 2018		annum	Effective Date	Expiration Date	September 30, 2019		December 31, 2018
$	25,000	$	25,000	1.989%	January 2, 2018	December 17, 2021	$	(272)	$	331
	100,000		100,000	1.989%	January 2, 2018	December 17, 2021		(1,086)		1,318
	75,000		75,000	1.989%	January 2, 2018	December 17, 2021		(815)		990
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		(707)		667
	100,000		100,000	2.029%	January 2, 2018	April 27, 2022		(1,403)		1,341
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		(707)		666
	100,000		100,000	2.617%	January 2, 2020	December 17, 2023		(4,839)		(782)
	100,000		100,000	2.621%	January 2, 2020	April 27, 2024		(5,279)		(818)
	200,000		200,000	2.636%	December 17, 2021	December 17, 2023		(5,037)		(722)
	200,000		200,000	2.642%	April 27, 2022	April 27, 2024		(4,996)		(648)
							$	(25,141)	$	2,343

Power Purchase Agreements

In March 2019, QTS entered into two 10 year agreements to purchase renewable energy equal to the expected electricity needs of our datacenters in Chicago, Illinois and Piscataway, New Jersey. These arrangements currently qualify for hedge accounting whereby we record the changes in fair value of the instruments in “Accumulated other comprehensive income” or loss on the consolidated balance sheets and statements of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We currently reflect these agreements, which are designated as cash flow hedges, at fair value as liabilities on the consolidated balance sheets within the “Advance rents, security deposits and other liabilities” line items.

Power purchase agreement derivatives and their fair values as of September 30, 2019 and December 31, 2018 were as follows (unaudited and in thousands):

				Fair Value
Counterparty	Facility	Effective Date	Expiration Date	September 30, 2019		December 31, 2018
Calpine Energy Solutions, LLC	Piscataway	3/8/2019	2/28/2029	$	(2,793)	$	—
Calpine Energy Solutions, LLC	Chicago	3/8/2019	2/28/2029		(3,915)		—
				$	(6,708)	$	—

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Earnings per share of QTS Realty Trust, Inc. (Tables)

9 Months Ended

Sep. 30, 2019

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, and unaudited):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Numerator:
Net income (loss)	$	6,588	$	(6,892)	$	35,271	$	(13,577)
Loss (income) attributable to noncontrolling interests		49		1,610		(1,593)		2,641
Preferred stock dividends		(7,045)		(7,045)		(21,135)		(9,621)
Earnings attributable to participating securities		(2,184)		(206)		(5,999)		(743)
Net income (loss) available to common stockholders after allocation of participating securities	$	(2,592)	$	(12,533)	$	6,544	$	(21,300)
Denominator:
Weighted average shares outstanding - basic		54,928		50,469		53,874		50,401
Effect of Class O units, TSR units and options to purchase Class A common stock on an "as if" converted basis		—		—		463		—
Weighted average shares outstanding - diluted		54,928		50,469		54,337		50,401
Basic net income (loss) per share	$	(0.05)	$	(0.25)	$	0.12	$	(0.42)
Diluted net income (loss) per share	$	(0.05)	$	(0.25)	$	0.12	$	(0.42)

* Note: The calculations of basic and diluted net income (loss) per share above do not include the following number of Class A partnership units, Class O units, TSR units and options to purchase common stock on an “as if” converted basis, and the effects of Series B Convertible preferred stock on an “as if” converted basis as their respective inclusions would have been antidilutive:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Class A Partnership units		6,668		6,677		6,670		6,645
Class O units, TSR units and options to purchase common stock on an "as if" converted basis		557		363		—		375
Series B Convertible preferred stock on an "as if" converted basis		6,729		6,725		6,729		2,412

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Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt [Abstract]

Outstanding Debt Including Capital Leases and Lease Financing Obligations

Below is a listing of our outstanding debt, including finance leases, as of September 30, 2019 and December 31, 2018 (in thousands):

	Weighted Average
	Coupon Interest Rate at	Maturities at	September 30,		December 31,
	September 30, 2019 (1)	September 30, 2019	2019		2018
	(unaudited)		(unaudited)
Unsecured Credit Facility
Revolving Credit Facility	2.98%	December 17, 2022	$	224,149	$	252,000
Term Loan I	3.34%	December 17, 2023		350,000		350,000
Term Loan II	3.36%	April 27, 2024		350,000		350,000
Senior Notes	4.75%	November 15, 2025		400,000		400,000
Lenexa Mortgage	4.10%	May 1, 2022		1,758		1,801
Finance Leases	4.35%	2021 - 2038		45,753		2,873
	3.73%			1,371,660		1,356,674
Less net debt issuance costs				(10,160)		(11,557)
Total outstanding debt, net			$	1,361,500	$	1,345,117

(1) The coupon interest rates associated with Term Loan I and Term Loan II incorporate the effects of the Company’s interest rate swaps in effect as of September 30, 2019.

Annual Remaining Principal Payment

The annual remaining principal payment requirements as of September 30, 2019 per the contractual maturities, excluding extension options and excluding finance leases, are as follows (unaudited and in thousands):

2019	$	16
2020		70
2021		73
2022		225,748
2023		350,000
Thereafter		750,000
Total	$	1,325,907

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Summary of Significant Accounting Policies (Additional Information 1) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Summary Of Significant Accounting Policies [Line Items]
Assets held for sale					$ 71,800
Liabilities held for sale					24,349
Amortization of the deferred financing costs	$ 1,000	$ 1,000	$ 2,935	$ 2,882
Amortization of deferred leasing costs	6,700	5,500	17,700	15,700
Aggregate allowance for doubtful accounts	1,900		1,900		3,800
Deferred income	41,404		41,404		33,241
Amortization of deferred revenue	4,000	3,300	11,100	9,400
Company recorded equity-based compensation expense net of repurchased awards and forfeits	4,500	$ 3,900	$ 12,100	11,400
Equity based compensation associated with the acceleration of equity awards				$ 3,100
Practical Expedient, remaining term			true
Amount of the straight-line rent receivable on the balance sheets included in rents and other receivables, net	$ 34,600		$ 34,600		$ 29,700
Cloud and managed services | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Summary Of Significant Accounting Policies [Line Items]
Remaining term	3 years		3 years

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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net income (loss)	$ 6,588	$ (6,892)	$ 35,271	$ (13,577)
Other comprehensive income (loss):
Foreign currency translation adjustment gain	(426)		(360)
Increase (decrease) in fair value of derivative contracts	(5,733)	1,429	(34,192)	9,974
Reclassification of other comprehensive income to interest expense	(235)	(83)	(1,200)	410
Comprehensive income (loss)	194	(5,546)	(481)	(3,193)
Comprehensive (income) loss attributable to noncontrolling interests	(22)	639	52	368
Comprehensive income (loss) attributable to QTS Realty Trust, Inc.	172	(4,907)	(429)	(2,825)
Qualitytech, LP
Net income (loss)	6,588	(6,892)	35,271	(13,577)
Other comprehensive income (loss):
Foreign currency translation adjustment gain	(426)		(360)
Increase (decrease) in fair value of derivative contracts	(5,733)	1,429	(34,192)	9,974
Reclassification of other comprehensive income to interest expense	(235)	(83)	(1,200)	410
Comprehensive income (loss)	$ 194	$ (5,546)	$ (481)	$ (3,193)

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Debt (Outstanding Debt Including Capital Leases) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Weighted average coupon interest rate	3.73%
Total debt and lease obligations	$ 1,371,660	$ 1,356,674
Less net debt issuance costs	(10,160)	(11,557)
Total outstanding debt, net	$ 1,361,500	1,345,117
Revolving Credit Facility
Debt Instrument [Line Items]
Weighted average coupon interest rate	2.98%
Maturity date	Dec. 17, 2022
Outstanding debt	$ 224,149	252,000
Term Loan I
Debt Instrument [Line Items]
Weighted average coupon interest rate	3.34%
Maturity date	Dec. 17, 2023
Outstanding debt	$ 350,000	350,000
Term Loan II
Debt Instrument [Line Items]
Weighted average coupon interest rate	3.36%
Maturity date	Apr. 27, 2024
Outstanding debt	$ 350,000	350,000
Lenexa Mortgage
Debt Instrument [Line Items]
Weighted average coupon interest rate	4.10%
Maturity date	May 01, 2022
Outstanding debt	$ 1,758	1,801
Finance Leases
Debt Instrument [Line Items]
Weighted average coupon interest rate	4.35%
Maturity date description	2021 - 2038
Outstanding debt	$ 45,753	2,873
Operating Partnership And QTS Finance Corporation
Debt Instrument [Line Items]
Weighted average coupon interest rate	4.75%
Maturity date	Nov. 15, 2025
Outstanding debt	$ 400,000	$ 400,000

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 06, 2019
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2019
Entity File Number	001-36109
Entity Registrant Name	QTS Realty Trust, Inc.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	46-2809094
Entity Address, Address Line One	12851 Foster Street
Entity Address, City or Town	Overland Park
Entity Address, State or Province	KS
Entity Address, Postal Zip Code	66213
City Area Code	913
Local Phone Number	312-5503
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001577368
Amendment Flag	false
Class A Common Stock
Document Information [Line Items]
Title of 12(b) Security	Class A common stock, $0.01 par value
Trading Symbol	QTS
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		58,106,133
Class B Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		128,408
Series A Redeemable Perpetual Preferred
Document Information [Line Items]
Title of 12(b) Security	Preferred Stock, 7.125% Series A Cumulative Redeemable Perpetual, $0.01 par value
Trading Symbol	QTS PR A
Security Exchange Name	NYSE
Series B Convertible preferred stock [Member]
Document Information [Line Items]
Title of 12(b) Security	Preferred Stock, 6.50% Series B Cumulative Convertible Perpetual, $0.01 par value
Trading Symbol	QTS PR B
Security Exchange Name	NYSE
Qualitytech, LP
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2019
Entity Registrant Name	QualityTech, LP
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-0707288
Entity Address, Address Line One	12851 Foster Street
Entity Address, City or Town	Overland Park
Entity Address, State or Province	KS
Entity Address, Postal Zip Code	66213
City Area Code	913
Local Phone Number	312-5503
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001561164
Amendment Flag	false

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Leases - Operating leases (Details)	9 Months Ended
	Sep. 30, 2019 item
Lease as Lessee
Number of operating leases	6
Options to extend - operating leases	true
Number of ground leases under operating leases	1
Minimum
Lease as Lessee
Remaining terms - operating leases	5 years
Maximum
Lease as Lessee
Remaining terms - operating leases	7 years

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

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”) for interim financial information and in compliance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 25, 2019. The consolidated balance sheet data included herein as of December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by 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.

The Operating Partnership meets the definition and criteria of a variable interest entity (“VIE”) in accordance with ASC 810 Consolidation, and the Company is the primary beneficiary of the VIE. As discussed below, the Company’s only material asset is its ownership interest in the Operating Partnership, and consequently, all of its assets and liabilities represent those assets and liabilities of the Operating Partnership. The Company’s debt is an obligation of the Operating Partnership where the creditors may have recourse, under certain circumstances, against the credit of the Company.

QTS is the sole general partner of the Operating Partnership. Management operates QTS and the Operating Partnership as one business. The management of QTS consists of the same employees as the management of the Operating Partnership. QTS does not conduct business itself, other than acting as the sole general partner of the Operating Partnership and issuing public equity from time to time. QTS has not issued or guaranteed any indebtedness. Except for net proceeds from public equity issuances by QTS, which are contributed to the Operating Partnership in exchange for units of limited partnership interest of the Operating Partnership, the Operating Partnership generates all remaining capital required by the 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.

The Company presents one set of notes for the financial statements of QTS and 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 4.75% Senior Notes due 2025 and the unsecured credit facility, both discussed in Note 8, are fully, unconditionally, and jointly and severally guaranteed by the Operating Partnership’s existing subsidiaries (other than certain foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Operating Partnership, QTS Finance Corporation (the co-issuer of the 4.75% Senior Notes due 2025) or any subsidiary guarantor. The indenture governing the 4.75% Senior Notes due 2025 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 “Code”).

The interim consolidated financial statements of QTS Realty Trust, Inc. include 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 controlled 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.

We evaluate our investments in unconsolidated entities to determine whether they should be recorded on a consolidated basis. The percentage of ownership interest in the entity, an evaluation of control and whether a VIE exists are all considered in our consolidation assessment. Investments in real estate entities which we have the ability to exercise significant influence, but do not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, our share of the earnings or losses of these entities is included in consolidated net income (loss).

Variable Interest Entities (VIEs) – We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. The determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions, to replace the manager and to sell or liquidate the entity. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion

continually. As of September 30, 2019, we had one unconsolidated entity that was considered a VIE for which we are not the primary beneficiary. Our maximum exposure to losses associated with this VIE is limited to our aggregate investment, which was approximately $30.7 million as of September 30, 2019.

Reclassifications – Revenue categories in the statement of operations for the three and nine months ended September 30, 2018 have been reclassified to conform to 2019 presentation which is presented in accordance with ASC 842 and the reclassifications consists of two categories instead of four categories presented historically. The statement of operations for the three months ended September 30, 2018 incorporates a reclassification of $1.2 million of straight line rent from the “Other” line item into the “Rental” line item, a reclassification of $11.8 million of “Recoveries from Customers” from its own line item into the “Rental” line item, as well as the combination of $7.5 million of what was previously classified as “Cloud and managed services” revenue and less than $0.1 million of remaining “Other” revenue into a single “Other” line item. The statement of operations for the nine months ended September 30, 2018 incorporates a reclassification of $5.3 million of straight line rent from the “Other” line item into the “Rental” line item, a reclassification of $33.8 million of “Recoveries from Customers” from its own line item into the “Rental” line item, as well as the combination of $31.7 million of what was previously classified as “Cloud and managed services” revenue and $0.7 million of remaining “Other” revenue into a single “Other” line item.

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 for real estate assets 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, 2019, depreciation expense related to real estate assets and non-real estate assets was $29.8 million and $2.9 million, respectively, for a total of $32.7 million. For the three months ended September 30, 2018, depreciation expense related to real estate assets and non-real estate assets was $25.8 million and $3.3 million, respectively, for a total of $29.1 million. For the nine months ended September 30, 2019, depreciation expense related to real estate assets and non-real estate assets was $86.8 million and $8.7 million, respectively, for a total of $95.5 million. For the nine months ended September 30, 2018, depreciation expense related to real estate assets and non-real estate assets was $74.4 million and $9.7 million, respectively, for a total of $84.1 million. We capitalize 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 $4.8 million and $4.5 million for the three months ended September 30, 2019 and 2018, respectively, and $13.1 million and $11.7 million for the nine months ended September 30, 2019 and 2018, respectively. Interest is capitalized during the period of development by applying our weighted average effective borrowing rate to the actual development and other capitalized costs paid during the construction period. Interest is capitalized until the property is ready for its intended use. Interest costs capitalized totaled $8.7 million and $6.7 million for the three months ended September 30, 2019 and 2018, respectively, and $24.9 million and $18.1 million for the nine months ended September 30, 2019 and 2018, respectively.

Acquisitions and Sales – Acquisitions of real estate and other entities are either accounted for as asset acquisitions or business combinations depending on facts and circumstances. When substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction is accounted for as an asset acquisition. In an asset acquisition, the purchase price paid for assets acquired is allocated between identified tangible and intangible assets acquired based on relative fair value. Transaction costs associated with asset acquisitions are capitalized. When substantially all of the fair value of assets acquired is not concentrated in a group of similar identifiable assets, the set of assets will generally be considered a business. When accounting for business combinations 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 assigned to the acquired tangible assets, consisting primarily of land, construction in progress, 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 finance 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. Transaction costs associated with business combinations are expensed as incurred.

In developing estimates of fair value of acquired assets and assumed liabilities, management analyzes 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. 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. This amortization expense is accounted for as real estate amortization expense.

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. Above or below market leases are amortized as a reduction to or increase in rental revenue when we are the lessor as well as a reduction to or increase in rent expense over the remaining lease terms when we are the lessee. The expense associated with trade name intangibles is accounted for as real estate amortization expense, whereas the expense associated with the amortization of platform intangibles is accounted for as non-real estate amortization expense.

We account for the sale of assets to non-customers under Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which provides for recognition or derecognition based on transfer of ownership. During the three months ended March 31, 2019, we sold our Manassas facility to an unconsolidated affiliate in exchange for cash consideration and noncash consideration in the form of an equity interest in the unconsolidated entity. After measuring the consideration received at fair value, we recognized a $13.4 million gain on sale of real estate, net of approximately $5.8 million of transaction costs, associated with our contribution of certain assets in our Manassas facility to the unconsolidated entity. Substantially all of the fair value of the assets contributed to the entity was concentrated in a group of similar identifiable assets and the sale of the assets were not to a customer, therefore the transaction was accounted for as an asset sale. The gain on sale of real estate is included within the “Gain on sale of real estate, net” line item of the consolidated statements of operations.

Impairment of Long-Lived Assets, Intangible Assets and Goodwill – We review our long-lived assets and intangible 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 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, 2019. We recognized $3.3 million and $7.6 million of impairment losses related to certain non-real estate product related assets during the three and nine months ended September 30, 2018, respectively, which was included in the “Restructuring” line item of the consolidated statement of operations.

The fair value of goodwill is the consideration transferred in a business combination which is not allocable to identifiable intangible and tangible assets. Goodwill is subject to at least an annual assessment for impairment. In connection with the goodwill impairment evaluation that we performed as of October 1, 2018, we determined qualitatively that it is not more likely than not that the fair value of our one reporting unit was less than the carrying amount, thus we did not perform a quantitative analysis. As we continue to operate and assess our goodwill at the consolidated level for our single reporting unit and our market capitalization significantly exceeds our net asset value, further analysis was not deemed necessary as of September 30, 2019.

Assets Held for Sale – We completed the sale of the Manassas facility to an unconsolidated entity on February 22, 2019. As of December 31, 2018, prior to our sale of the assets to the entity, the completion of the sale was probable and we

accordingly reclassified certain assets, as well as liabilities associated with those assets, as held for sale. As of December 31, 2018, the asset value of $71.8 million associated with the held for sale assets was included within the “Assets held for sale” line item of the consolidated statements of financial position and primarily consisted of construction in progress. As of December 31, 2018, the liability value of $24.3 million associated with the held for sale liabilities was included within the “Liabilities held for sale” line item of the consolidated statements of financial position and primarily consisted of accounts payable and accrued liabilities associated with construction in progress assets. See Note 7 for further discussion of the unconsolidated entity.

Cash and Cash Equivalents – We consider 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. Our 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. We mitigate this risk by depositing a majority of our funds with several major financial institutions. We also have not experienced any losses and do not believe that the risk is significant.

Deferred Costs – Deferred costs, net, on our 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. Debt issuance costs related to revolving debt arrangements are deferred and presented as assets on the balance sheet; however, all other debt issuance costs are recorded as a direct offset to the associated liability. Amortization of debt issuance costs, including those costs presented as offsets to the associated liability in the consolidated balance sheet, was $1.0 million for both the three months ended September 30, 2019 and 2018, respectively, and $2.9 million for both the nine months ended September 30, 2019 and 2018, respectively. Deferred financing costs presented as assets on the balance sheet related to revolving debt arrangements, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	11,519	$	11,530
Accumulated amortization		(5,289)		(3,859)
Deferred financing costs, net	$	6,230	$	7,671

Deferred financing costs presented as offsets to the associated liabilities on the balance sheet related to fixed debt arrangements, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	14,609	$	14,501
Accumulated amortization		(4,449)		(2,944)
Deferred financing costs, net	$	10,160	$	11,557

Initial direct costs, or deferred leasing costs, include commissions paid to third parties, including brokers, leasing and referral agents, and internal sales commissions paid to employees for successful execution of lease agreements and are accounted for pursuant to ASC 842, Leases. These costs are incurred when we execute lease agreements and represent only incremental costs that would not have been incurred if the lease agreement had not been executed. To a lesser extent, we incur the same incremental costs to obtain managed service contracts with customers that are accounted for pursuant to ASC 606, Revenue from Contracts with Customers. Because the framework of accounting for these costs and the underlying nature of the costs are the same for our revenue and lease contracts, the costs are presented on a combined basis within our financial statements and within the below table. Both revenue and leasing commissions are capitalized and generally amortized over the term of the related leases or the expected term of the contract using the straight-line method. If a customer lease terminates prior to the expiration of its initial term, any unamortized initial direct costs

related to the lease are written off to amortization expense. Amortization of deferred leasing costs totaled $6.7 million and $5.5 million for the three months ended September 30, 2019 and 2018, respectively, and $17.7 million and $15.7 million for the nine months ended September 30, 2019 and 2018, respectively. Deferred leasing costs, net of accumulated amortization, are as follows:

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred leasing costs	$	70,594	$	63,018
Accumulated amortization		(28,512)		(25,593)
Deferred leasing costs, net	$	42,082	$	37,425

Revenue Recognition – We derive our revenues from leases with customers for data center space which include lease components and nonlease revenue components, such as power, tenant recoveries, cloud and managed services. We adopted Accounting Standards Codification (“ASC”) Topic 842, Leases, the new accounting standard for leases, effective January 1, 2019 using the modified retrospective approach. In addition, we adopted ASC Topic 606, Revenue from Contracts with Customers, the new accounting standard for revenue from contracts with customers, effective January 1, 2018 using the modified retrospective approach. We have elected the available practical expedient to combine our nonlease revenue components that have the same pattern of transfer as the related operating lease component into a single combined lease component under ASC 842. See the “Recently Adopted Accounting Standards” section below for further details.

A description of each of our disaggregated revenue streams is as follows:

Rental Revenue

Our leases with customers are classified as operating leases and rental revenue is recognized on a straight-line basis over the customer lease term. Occasionally, customer leases include options to extend or terminate the lease agreements. We do not include any of these extension or termination options in a customer’s lease term for lease classification purposes or recognizing rental revenue unless it is reasonably certain the customer will exercise these extension or termination options.

Rental revenue also includes revenue from power delivery on fixed power arrangements, whereby customers are billed and pay a fixed monthly fee per committed available amount of connected power. These fixed power arrangements require us to provide a series of distinct services and stand ready to deliver the power over the contracted term which is co-terminus with the lease. Customer fixed power arrangements have the same pattern of transfer over the lease term as the lease component and are therefore combined with the lease component to form a single lease component that is recognized over the term of the lease on a straight line basis.

In addition, rental revenue includes straight line rent. Straight line rent represents the difference in rents recognized during the period versus amounts contractually due pursuant to the underlying leases and is recorded as deferred rent receivable/payable in the consolidated balance sheets. 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 $34.6 million and $29.7 million as of September 30, 2019 and December 31, 2018, respectively.

Rental revenue also includes amortization of set-up fees which are amortized over the term of the respective lease as discussed below.

Variable Lease Revenue from Recoveries

Certain customer leases contain provisions under which customers reimburse us for power and cooling-related charges as well as a portion of the property’s real estate taxes, insurance and other operating expenses. Recoveries of power and cooling-related expenses relate specifically to our variable power arrangements, whereby customers pay variable monthly fees for the specific amount of power utilized at the current utility rates. Our performance obligation is to stand

ready to deliver power over the life of the customer contract up to a contracted power capacity. Customers have the flexibility to increase or decrease the amount of power consumed, and therefore sub-metered power revenue is constrained at contract inception. The reimbursements are included in revenue as recoveries from customers and are recognized each month as the uncertainty related to the consideration is resolved (i.e. we provide power to our customers) and customers utilize the power. Reimbursement of real estate taxes, insurance, common area maintenance, or other operating expenses are accounted for as variable payments under lease guidance pursuant to the practical expedient and are recognized as revenue in the period that the expenses are recognized. Variable lease revenue from recoveries discussed above, including power, common area maintenance or other operating costs, have the same pattern of transfer over the lease term as the lease component and are therefore combined with the lease component to form a single lease component. Variable lease revenue from recoveries is included within the “rental” line item of the statement of operations.

Other Revenue

Other revenue primarily consists of revenue from our cloud and managed service offerings. We, through our Taxable REIT Subsidiaries (“TRS”), may provide both our cloud product and use of our managed services to our customers on an individual or combined basis. In both our cloud and managed services offerings the TRS’s performance obligation is to provide services (e.g. cloud hosting, data backup, data storage or data center personnel labor hours) to facilitate a fully integrated information technology (“IT”) outsourcing environment over a contracted term. Although underlying services may vary, over the contracted term monthly service offerings are substantially the same and we account for the services as a series of distinct services in accordance with ASC 606. Service fee revenue is recognized as the revenue is earned, which generally coincides with the services being provided. As we have the right to consideration from customers in an amount that corresponds directly with the value to the customer of the TRS’s performance of providing continuous services, we recognize monthly revenue for the amount invoiced.

With respect to the transaction price allocated to remaining performance obligations within our cloud and managed service contracts, we have elected to use the optional exemption provided by ASC 606 whereby we are not required to estimate the total transaction price allocated to remaining performance obligations as we apply the “right-to-invoice” practical expedient. As described above, the nature of our performance obligation in these contracts is to provide monthly services that are substantially the same and accounted for as a series of distinct services. These contracts generally have a remaining term ranging from month-to-month to three years.

Management fees and other revenues are generally received from our unconsolidated affiliate properties as well as third parties. Management fee revenue is earned based on a contractual percentage of unconsolidated affiliate property revenue. Development fee revenue is earned on a contractual percentage of hard costs to develop a property. We recognize revenue for these services provided when earned based on the performance criteria in ASC 606, with such revenue recorded in “Other” revenue on the consolidated statement of operations.

Allowance for Uncollectible Accounts Receivable – We record a provision for uncollectible accounts if a receivable balance relating to contractual rent, rental revenue recorded on a straight-line basis, tenant recoveries or other billed amounts is considered by management to be not probable of collection, and this provision is recorded as a reduction to leasing revenues. We also record a general provision of estimated uncollectible tenant receivables that is based on management’s historical experience and a review of the current status of our receivables deemed probable of collection. This provision is recorded as bad debt expense and recorded within Property Operating Costs within the consolidated statement of operations. The aggregate allowance for doubtful accounts on the consolidated balance sheet was $1.9 million and $3.8 million as of September 30, 2019 and December 31, 2018, respectively.

Deferred Income – Deferred income generally results from non-refundable charges paid by the customer at lease inception to prepare their space for occupancy. We record 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 $41.4 million and $33.2 million as of September 30, 2019 and December 31, 2018, respectively. Additionally, $4.0 million and $3.3 million of deferred income was amortized into revenue for the three months ended September 30, 2019 and 2018, respectively, and $11.1 million and $9.4 million for the nine months ended September 30, 2019 and 2018, respectively.

Foreign Currency - The financial position of foreign subsidiaries is translated at the exchange rates in effect at the end of the period, while revenues and expenses are translated at average exchange rates during the period. Gains or losses from translation of foreign operations where the local currency is the functional currency are included as components of other comprehensive income (loss). Gains or losses from foreign currency transactions are included in determining net income (loss).

Equity-based Compensation – Equity-based compensation costs are measured based upon their estimated fair value on the date of grant or modification and amortized ratably over their respective service periods. We have elected to account for forfeitures as they occur. Equity-based compensation expense was $4.5 million and $3.9 million for the three months ended September 30, 2019 and 2018, respectively, and $12.1 million and $11.4 million for the nine months ended September 30, 2019 and 2018, respectively. Equity-based compensation expense for the nine months ended September 30, 2018 excludes $3.1 million of equity-based compensation expense associated with the acceleration of equity awards related to certain employees impacted by the Company’s strategic growth plan, all of which was incurred during the six months ended June 30, 2018. The aforementioned equity-based compensation expense is included in the “Restructuring” expense line item on the consolidated statements of operations.

Segment Information – We manage our business as one operating segment and thus one reportable segment consisting of a portfolio of investments in multiple data centers.

Customer Concentrations – As of September 30, 2019, one of our customers represented 9.8% of our total monthly rental revenue. No other customers exceeded 6% of total monthly rental revenue.

As of September 30, 2019, three of our customers exceeded 5% of trade accounts receivable. In aggregate, these three customers accounted for approximately 26% of trade accounts receivable. One of these customers individually exceeded 10% of trade accounts receivable, at approximately 13%.

Income Taxes – We have elected for two of our existing subsidiaries to be taxed as taxable REIT subsidiaries pursuant to the REIT rules of the U.S. Internal Revenue Code. Pursuant to the transaction described in Note 3 - Acquisitions, we also have subsidiaries subject to tax in non-US jurisdictions.

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.

A current and deferred tax expense has been recognized in the nine months ended September 30, 2019, in connection with recorded operating activity. As of September 30, 2019, one of our taxable REIT subsidiaries is in a net deferred tax liability position primarily due to a valuation allowance against certain deferred tax assets. In considering whether it is more likely than not that some portion or all of the deferred tax assets will be realized, it has been determined that it is possible that some or all of our deferred tax assets could ultimately expire unused. We establish valuation allowances against deferred tax assets when the ability to fully utilize these benefits is determined to be uncertain.

We provide a valuation allowance against deferred tax assets if, based on management’s assessment of operating results and other available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The evidence contemplated by management at September 30, 2019 consists of current and prior operating results, available tax planning strategies, and the scheduled reversal of existing taxable temporary differences. Evidence from the scheduled reversal of taxable temporary differences relies on management judgements based on the accumulation of available evidence. Those judgements may be subject to change in the future as evidence available to management changes. Management’s assessment of our valuation allowance may further change based on our generation of or ability to project future operating income, and changes in tax policy or tax planning strategies.

We provide 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 subsidiaries, tax law changes, and future business acquisitions or divestitures. The taxable subsidiaries’ effective tax rates were (8.5%) and 8.9% for the nine months ended September 30, 2019 and 2018, respectively.

Fair Value Measurements – ASC Topic 820, Fair Value Measurement, 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 we have 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. Our 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 of September 30, 2019, we valued our derivative instruments primarily utilizing Level 2 inputs. See Note 16 – ‘Fair Value of Financial Instruments’ for additional details.

Recently Adopted Accounting Standards

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance codified in ASC Topic 606, Revenue from Contracts with Customers, which supersedes the former revenue recognition requirements in ASC Topic 605, 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. The standard establishes a five-step model framework which recognizes revenue as an entity transfers control of goods or services to the customer and requires enhanced disclosures. We adopted ASC Topic 606 effective January 1, 2018, and elected the modified retrospective transition approach. The adoption did not result in a cumulative catch-up adjustment to opening equity and does not change the recognition pattern of our operating revenues.

Leases

In February 2016, and further amended in 2018, the FASB issued ASC Topic 842, Leases, which supersedes the former lease guidance in ASC 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

We adopted ASC 842 effective January 1, 2019 using the modified retrospective approach, which applied the provisions of the new guidance at the effective date without adjusting comparative periods presented. We elected a package of practical expedients permitted under the transition guidance within the new standard which allowed us to not reassess (i) whether expired or existing contracts contain a lease under the new standard, (ii) the lease classification for existing leases or (iii) whether previously-capitalized initial direct costs would qualify for capitalization under the new standard.

We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment.

The adoption of ASC 842 impacted our consolidated balance sheet with the recognition of existing operating leases as lessee resulting in $62.9 million of ROU assets and $70.7 million of lease liabilities recorded as of January 1, 2019. We also recognized a $1.8 million cumulative effect adjustment to retained earnings. The adjustment to retained earnings was due to an impairment of certain ROU assets associated with vacant office space for which we are a lessee and assumed in a prior acquisition. See the table below for the impact of adoption of the lease standard on our consolidated balance sheet as of January 1, 2019 (in thousands):

	As Previously		New Lease Standard
	Reported		Adjustment		As Adjusted
Operating lease right-of-use assets	$	—	$	62,922	$	62,922
Operating lease liabilities		—		70,657		70,657
Deferred rent payable		5,922		(5,922)		—

As lessor, accounting for our leases will remain largely unchanged from ASC 840. The new lease standard more narrowly defines initial direct costs as only costs that are incremental to origination of a lease (i.e. costs that would not have been incurred had the lease not been obtained). We did not historically capitalize non-incremental costs, therefore this change will have no impact on the accounting for initial direct costs in the consolidated financial statements on a prospective basis.

Additionally, from a lessor perspective, we elected a practical expedient which allows lessors to combine nonlease components with the related lease components if both the timing and pattern of transfer are the same for the nonlease component(s) and related lease component, and the lease component would be classified as an operating lease. The single combined component is accounted for under ASC 842 if the lease component is the predominant component and is accounted for under ASC 606 if the nonlease components are the predominant components. Lessors are permitted to apply the practical expedient to all existing leases on a retrospective or prospective basis. We elected the practical expedient to combine our lease and nonlease components that meet the defined criteria and will account for the combined lease component under ASC 842 on a prospective basis.

New Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 eliminate the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, valuation processes for Level 3 fair value measurements, and policy for timing of transfers between levels. ASU 2018-13 also provides clarification in the measurement uncertainty disclosure by explaining that the disclosure is to communicate information about the uncertainty in measurement as of the reporting date. In addition, ASU 2018-13 added the following requirements: changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. Finally, ASU 2018-13 updated language to further encourage entities to apply materiality when considering de minimus determination for disclosure requirements. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with the exception of amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used for Level 3 fair value measurements, and the narrative description of measurement uncertainty which will be applied prospectively. Early adoption is permitted. We do not expect the provisions of the standard will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendments in ASU 2018-15 require an entity in a service contract hosting arrangement apply Subtopic 350-40 to identify costs to capitalize or expense related to the service contract. ASU 2018-15 also requires the entity to capitalize the implementation costs of the service contract hosting arrangement and amortize such costs over the

life of the contract and present the capitalized costs in the same line item as fees associated with the hosting service on the statement of income and statement of cash flows. The guidance will be applied retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with the exception of all implementation costs incurred after the date of adoption which will be applied prospectively. We do not expect this standard will have a material impact on our net income. However, this standard will likely result in certain expenses currently recognized as non real estate depreciation being recognized as general and administrative or operating expense in future periods.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, and ASU 2019-05 in May 2019. The standard, as amended, requires entities to use a new impairment model based on current expected credit losses (“CECL”) rather than incurred losses. The CECL model is designed to capture expected credit losses through the establishment of an allowance account, which will be presented as an offset to the amortized cost basis of the related financial asset. The guidance is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. As the majority of our revenue is generated from operating leases which are governed under ASC Topic 842, we do not currently expect the provisions of the standard will have a material impact on our consolidated financial statements.

We determined all other recently issued accounting pronouncements will not have a material impact on our consolidated financial statements or do not materially apply to our operations.

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Leases - Supplemental cash flow and other information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Leases [Abstract]
Operating cash flows from operating leases	$ 7,446
Operating cash flows from finance leases	1,180
Financing cash flows from finance leases	$ 2,243	$ 6,142

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Earnings per share of QTS Realty Trust, Inc. (Computation of Basic and Diluted Net Income per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings per Share [Abstract]
Net income (loss)	$ 6,588	$ 7,535	$ 21,148	$ (6,892)	$ (6,433)	$ (252)	$ 35,271	$ (13,577)
Loss (Income) attributable to noncontrolling interests	49			1,610			(1,593)	2,641
Preferred stock dividends	(7,045)			(7,045)			(21,135)	(9,621)
Earnings attributable to participating securities	(2,184)			(206)			(5,999)	(743)
Net income (loss) available to common stockholders after allocation of participating securities	$ (2,592)			$ (12,533)			$ 6,544	$ (21,300)
Weighted average shares outstanding - basic	54,928			50,469			53,874	50,401
Effect of Class O units, TSR units and options to purchase Class A common stock on an "as if" converted basis							463
Weighted average shares outstanding - diluted	54,928			50,469			54,337	50,401
Basic net income (loss) per share	$ (0.05)			$ (0.25)			$ 0.12	$ (0.42)
Diluted net income (loss) per share	$ (0.05)			$ (0.25)			$ 0.12	$ (0.42)

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Acquisitions (Allocation of the Fair Value of Assets Acquired and Liabilities Assumed as of the Acquisition Date) (Details) $ in Thousands	Apr. 23, 2019 USD ($)
Acquisitions [Abstract]
Land	$ 1,743
Buildings and improvements	8,640
Construction in Progress	29,902
Acquired intangibles (In-place lease & above market lease)	2,911
Deferred costs	906
Other assets	128
Net working capital	554
Total identifiable assets acquired	44,784
Acquired below market lease	284
Total liabilities assumed	284
Net identifiable assets acquired	$ 44,500
Buildings and improvements weighted avg remaining useful life (in years)	24 years
Acquired intangibles weighted avg remaining useful life (in years)	3 years
Deferred costs weighted avg remaining useful life (in years)	3 years
Other assets weighted avg remaining useful life (in years)	3 years
Acquired below market lease weighted avg remaining useful life (in years)	3 years

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Summary of Significant Accounting Policies (Deferred Leasing Costs, Net of Accumulated Amortization) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Summary of Significant Accounting Policies [Abstract]
Deferred leasing costs	$ 70,594	$ 63,018
Accumulated amortization	(28,512)	(25,593)
Deferred leasing costs, net	$ 42,082	$ 37,425

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Leases - Finance leases (Details)	9 Months Ended
	Sep. 30, 2019 item
Lease as Lessee
Number of finance leases	1
Options to extend - finance leases	true
Minimum
Lease as Lessee
Remaining terms - finance leases	2 years
Maximum
Lease as Lessee
Remaining terms - finance leases	19 years

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Derivative Instruments (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended		21 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Dec. 31, 2018	Dec. 20, 2018	Apr. 05, 2017
Derivative [Line Items]
Interest expense related to payments on interest rate swaps	$ 6,724			$ 6,386			$ 20,329	$ 22,699
Increase (decrease) in fair value of derivative contracts	(5,733)	$ (18,606)	$ (9,853)	$ 1,429	$ 2,563	$ 5,982	(34,192)	$ 9,974
Term Loan
Derivative [Line Items]
Outstanding debt	700,000						700,000		$ 700,000
Interest Rate Swap
Derivative [Line Items]
Derivative instruments, notional amount											$ 400,000	$ 400,000
Ineffectiveness recognized									0
Interest Rate Swap | Term Loan
Derivative [Line Items]
Aggregate principal amount												400,000
Outstanding debt											400,000
Interest Rate Swap | Term Loan Maturing April 27, 2022
Derivative [Line Items]
Derivative instruments, notional amount											200,000	200,000
Interest Rate Swap | Term Loan Maturing December 17,2021
Derivative [Line Items]
Derivative instruments, notional amount											200,000	$ 200,000
Interest Rate Swap | Term Loan Maturing December 17 2023
Derivative [Line Items]
Derivative instruments, notional amount											200,000
Interest Rate Swap | Term Loan Maturing April 27 2024
Derivative [Line Items]
Derivative instruments, notional amount	100,000						100,000		100,000		$ 200,000
Cash flow hedging | Interest Rate Swap
Derivative [Line Items]
Derivative Asset, fair Value										$ 5,300
Derivative Liability, fair Value	25,100						25,100		25,100	3,000
Derivative, Fair Value, Net	$ (25,141)						$ (25,141)		$ (25,141)	$ 2,343

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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)	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Performance-Based Relative TSR Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted (in shares) | shares	86,089
Options, Cancelled/Expired (in shares) | shares	(1,739)
Ending balance, Options Outstanding (in shares) | shares	84,350
Weighted average fair value, granted, options	$ 54.64
Weighted average fair value, cancelled/expired, options	54.64
Ending balance, weighted average fair value, options	$ 54.64
Performance-Based FFO Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted (in shares) | shares	86,089
Options, Cancelled/Expired (in shares) | shares	(1,739)
Ending balance, Options Outstanding (in shares) | shares	84,350
Weighted average fair value, granted, options	$ 42.01
Weighted average fair value, cancelled/expired, options	42.01
Ending balance, weighted average fair value, options	$ 42.01
2013 Equity Incentive Plan | Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Options Outstanding (in shares) | shares	2,037,163
Options, Granted (in shares) | shares	135,594
Options, Exercised (in shares) | shares	(118,416)
Options, Cancelled/Expired (in shares) | shares	(112,706)
Ending balance, Options Outstanding (in shares) | shares	1,941,635
Beginning balance, Weighted average exercise price options outstanding	$ 36.86
Weighted average exercise price options outstanding, Granted	42.27
Weighted average exercise price options outstanding, Exercised	30.35
Weighted average exercise price options outstanding, Cancelled/Expired	45.86
Ending balance, Weighted average exercise price options outstanding	37.11
Beginning balance, weighted average fair value, options	7.09
Weighted average fair value, granted, options	7.62
Weighted average fair value, vested, options	6.14
Weighted average fair value, cancelled/expired, options	9.43
Ending balance, weighted average fair value, options	$ 7.05
2013 Equity Incentive Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Options Outstanding (in shares) | shares	420,309
Options, Granted (in shares) | shares	268,627
Options, Exercised (in shares) | shares	(239,778)
Options, Cancelled/Expired (in shares) | shares	(22,786)
Ending balance, Options Outstanding (in shares) | shares	426,372
Beginning balance, weighted average fair value, options	$ 37.83
Weighted average fair value, granted, options	42.05
Weighted average fair value, vested, options	38.87
Weighted average fair value, cancelled/expired, options	42.49
Ending balance, weighted average fair value, options	$ 39.65
Class O Units | 2010 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance, Number of units (in shares) | shares	102,279
Number of units, Exercised | shares	(8,375)
Ending balance, Number of units (in shares) | shares	93,904
Beginning balance, Weighted average exercise price units	$ 24.05
Weighted average exercise price units, Exercised	20.60
Ending balance, Weighted average exercise price units	24.36
Beginning balance, Weighted average fair value	5.67
Weighted average fair value, Exercised	5.11
Ending balance, Weighted average fair value	$ 5.72

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Acquired Intangibles Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Acquired Intangible Assets and Liabilities [Abstract]

Schedule of carrying values for the major classes of intangible assets and liabilities

Summarized below are the carrying values for the major classes of intangible assets and liabilities (unaudited and in thousands):

		September 30, 2019						December 31, 2018
		Gross						Gross
		Carrying		Accumulated		Net Carrying		Carrying		Accumulated		Net Carrying
	Useful Lives	Value		Amortization		Value		Value		Amortization		Value
Customer Relationships	12 years	$	95,705	$	(34,424)	$	61,281	$	95,705	$	(28,461)	$	67,244
In-Place Leases	0.3 to 10 years		34,518		(21,272)		13,246		32,066		(17,670)		14,396
Solar Power Agreement (1)	17 years		13,747		(4,246)		9,501		13,747		(3,639)		10,108
Platform Intangible	3 years		—		—		—		9,600		(9,600)		—
Acquired Favorable Leases
Acquired below market leases - as Lessee	46 years		—		—		—		2,301		—		2,301
Acquired above market leases - as Lessor	0.5 to 8 years		5,024		(3,810)		1,214		4,649		(3,247)		1,402
Tradenames	3 years		—		—		—		3,100		(3,100)		—
Total Intangible Assets		$	148,994	$	(63,752)	$	85,242	$	161,168	$	(65,717)	$	95,451
Solar Power Agreement (1)	17 years		13,747		(4,246)		9,501		13,747		(3,639)		10,108
Acquired Unfavorable Leases
Acquired below market leases - as Lessor	1 to 4 years		1,084		(885)		199		809		(611)		198
Acquired above market leases - as Lessee	11 to 12 years		2,453		(929)		1,524		2,453		(767)		1,686
Total Intangible Liabilities (2)		$	17,284	$	(6,060)	$	11,224	$	17,009	$	(5,017)	$	11,992

(1) Amortization related to the Solar Power Agreement asset and liability is recorded at the same rate and therefore has no net impact on the statement of operations.

(2) Intangible liabilities are included within the “Advance rents, security deposits and other liabilities” line item of the consolidated balance sheets.

Schedule of estimated amortization of acquired favorable and unfavorable leases

	Net Rental Revenue		Net Rental Expense
	Decrease		Increase/(Decrease)
2019 (October - December)	$	125	$	(56)
2020		659		(216)
2021		151		(216)
2022		51		(216)
2023		24		(216)
Thereafter		5		(604)
Total	$	1,015	$	(1,524)

Schedule of estimated amortization of all other identified intangible assets

2019 (October - December)	$	3,214
2020		12,080
2021		10,580
2022		10,069
2023		10,065
Thereafter		28,519
Total	$	74,527

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Noncontrolling Interest

9 Months Ended

Sep. 30, 2019

Noncontrolling Interest [Abstract]

Noncontrolling Interest

13. 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 as of the date of the IPO.

Commencing at any time beginning November 1, 2014, at the election of the holders of the noncontrolling interest, the currently outstanding Class A units of the Operating Partnership are redeemable for cash or, at the election of the Company, Class A common stock of the Company on a one-for-one basis. As of September 30, 2019, the noncontrolling ownership interest percentage of QualityTech, LP was 10.3%.

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

17. Subsequent Events

In October 2019, we paid our regular quarterly cash dividends on our common stock, Series A Preferred Stock and Series B Preferred Stock. See the ‘Dividends and Distributions’ section of Note 11 for additional details.

As discussed in Note 5, in October 2019, the Company amended and restated its unsecured credit facility. The amendment increased the total potential borrowings, extended maturity dates, lowered interest rates, and provided for an additional term loan under the agreement.

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Description of Business (Details)	9 Months Ended
	Sep. 30, 2019 property
Organization And Description Of Business [Line Items]
Number of properties	26
QualityTech LP
Organization And Description Of Business [Line Items]
Limited Liability Company (LLC) or Limited Partnership (LP), Managing Member or General Partner, Ownership Interest	89.70%

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

9 Months Ended

Sep. 30, 2019

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

	2010 Equity Incentive Plan					2013 Equity Incentive Plan
				Weighted					Weighted		Restricted
		Weighted		average			Weighted		average		Stock /		Weighted			Weighted			Weighted
	Number of	average		fair			average		fair		Deferred		average			average			average
	Class O units	exercise price		value		Options	exercise price		value		Stock		grant price		TSR Units	grant price		FFO Units	grant price
Outstanding at December 31, 2018	102,279	$	24.05	$	5.67	2,037,163	$	36.86	$	7.09	420,309		$	37.83	—	$	—	—	$	—
Granted	—		—		—	135,594		42.27		7.62	268,627			42.05	86,089		54.64	86,089		42.01
Exercised/Vested (1)	(8,375)		20.60		5.11	(118,416)		30.35		6.14	(239,778)			38.87	—		—	—		—
Cancelled/Expired	—		—		—	(112,706)		45.86		9.43	(22,786)	(2)		42.49	(1,739)		54.64	(1,739)		42.01
Outstanding at September 30, 2019	93,904	$	24.36	$	5.72	1,941,635	$	37.11	$	7.05	426,372		$	39.65	84,350	$	54.64	84,350	$	42.01

(1) This represents (i) Class O units which were converted to Class A units, (ii) options to purchase Class A common stock which were exercised, and (iii) 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, with respect to the applicable column.

(2) Includes 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

	Nine Months Ended September 30, 2019
Fair value of FFO units and restricted stock granted	$42.01 - $45.58
Fair value of TSR units granted	$54.64
Fair value of options granted	$7.56 - 8.28
Expected term (years)	5.5
Expected volatility	28%
Expected dividend yield	3.89 - 4.19%
Expected risk-free interest rates	2.33 - 2.56%

Summary of Information About Awards Outstanding

The following tables summarize information about awards outstanding as of September 30, 2019 (unaudited).

	Operating Partnership Awards Outstanding
				Weighted average
			Awards	remaining
	Exercise prices		outstanding	vesting period (years)
Class O Units	$	20.00 - 25.00	93,904	—
Total Operating Partnership awards outstanding			93,904

	QTS Realty Trust, Inc. Awards Outstanding
				Weighted average
			Awards	remaining
	Exercise prices		outstanding	vesting period (years)
Restricted stock	$	—	426,372	1.9
TSR units		—	84,350	2.5
FFO units		—	84,350	2.5
Options to purchase Class A common stock	$	21.00 - 50.66	1,941,635	0.6
Total QTS Realty Trust, Inc. awards outstanding			2,536,707

Schedule of Quarterly Cash Dividends

The following tables present quarterly cash dividends and distributions paid to QTS’ common and preferred stockholders and the Operating Partnership’s unit holders for the nine months ended September 30, 2019 and 2018 (unaudited):

Nine Months Ended September 30, 2019
				Aggregate
		Per Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 25, 2019	July 9, 2019	$	0.44	$	27.3
March 20, 2019	April 4, 2019	$	0.44	$	27.3
December 21, 2018	January 8, 2019	$	0.41	$	23.7
				$	78.3
Series A Preferred Stock/Units
June 30, 2019	July 15, 2019	$	0.45	$	1.9
March 31, 2019	April 15, 2019	$	0.45	$	1.9
December 31, 2018	January 15, 2019	$	0.45	$	1.9
				$	5.7
Series B Preferred Stock/Units
June 30, 2019	July 15, 2019	$	1.63	$	5.1
March 31, 2019	April 15, 2019	$	1.63	$	5.1
December 31, 2018	January 15, 2019	$	1.63	$	5.1
				$	15.3

Nine Months Ended September 30, 2018
				Aggregate
		Per Common Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 20, 2018	July 6, 2018	$	0.41	$	23.7
March 22, 2018	April 5, 2018	$	0.41	$	23.7
December 5, 2017	January 5, 2018	$	0.39	$	22.2
				$	69.6
Series A Preferred Stock/Units
June 29, 2018	July 16, 2018	$	0.45	$	1.9
April 5, 2018	April 16, 2018	$	0.15	$	0.6
				$	2.5

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Acquisitions

9 Months Ended

Sep. 30, 2019

Acquisitions [Abstract]

Acquisitions

3. Acquisitions

On April 23, 2019, we completed the acquisition of two data centers in the Netherlands (the “Netherlands facilities”) for approximately $44 million in cash consideration, including closing costs. The two facilities, in Groningen and Eemshaven, have approximately 160,000 square feet of raised floor capacity and 30 megawatts of combined gross power capacity built out and fully available. This acquisition was funded with a draw on our unsecured revolving credit facility.

The acquisition was accounted for as an asset acquisition. The purchase price allocation of the Netherlands facilities is a fair value estimate that utilized Level 2 and Level 3 inputs, including discounted future cash flows and observable market data on replacement costs, leasing rates, and discount rates that were used to measure the acquired assets and liabilities on a non-recurring basis.

The following table summarizes the consideration for the Netherlands facilities and the allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (unaudited and in thousands):

	Purchase Price Allocation		Weighted Avg Remaining Useful Life (in years)
Land	$	1,743	N/A
Buildings and improvements		8,640	24
Construction in progress		29,902	N/A
Acquired intangibles (In-place lease & above market lease)		2,911	3
Deferred costs		906	3
Other assets		128	3
Net Working Capital		554	N/A
Total identifiable assets acquired		44,784
Acquired below market lease		284	3
Total liabilities assumed		284
Net identifiable assets acquired	$	44,500

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Investments in Unconsolidated Entity

9 Months Ended

Sep. 30, 2019

Investments in Unconsolidated Entity [Abstract]

Investments in Unconsolidated Entity

7. Investments in Unconsolidated Entity

During the three months ended March 31, 2019, QTS formed an unconsolidated entity with Alinda Capital Partners (“Alinda”), a premier infrastructure investment firm. QTS contributed a 118,000 square foot hyperscale data center under development in Manassas, Virginia to the entity. The facility, and the previously executed operating lease to a global cloud-based software company pursuant to a 10-year lease agreement, was contributed in exchange for cash and noncash consideration in the form of equity interest in the entity that was measured at fair value pursuant to Topic 820. The equity interest received and any amounts due from the unconsolidated entity are recorded within our consolidated balance sheet and totaled $30.7 million as of September 30, 2019. QTS and Alinda each own a 50% interest in the entity. As we are not the primary beneficiary of the arrangement but have the ability to exercise significant influence, we concluded that the investment should be accounted for as an unconsolidated entity using equity method investment accounting. As of September 30, 2019 the total assets of the entity were $125.9 million and the total debt outstanding, net of deferred financing costs, was $65.8 million.

Under the equity method, our cost of investment is adjusted for additional contributions to and distributions from the unconsolidated entity, as well as our share of equity in the earnings and losses of the unconsolidated entity. Generally, distributions of cash flows from operations and capital events are made to members of the unconsolidated entity in accordance with each member’s ownership percentages and the terms of the agreement, but also provides us with rights to preferential cash distributions as certain phases are completed and leased to the underlying tenant. Any differences between the cost of our investment in an unconsolidated affiliate and its underlying equity as reflected in the unconsolidated affiliate’s financial statements generally result from costs of our investment that are not reflected on the unconsolidated affiliate’s financial statements.

Under the unconsolidated entity agreement, we will serve as the entity’s operating member, subject to authority and oversight of a board appointed by us and Alinda, and separately we will serve as manager and developer of the facility in

exchange for management and development fees. The entity agreement includes various transfer restrictions and rights of first offer that will allow us to repurchase Alinda’s interest should Alinda wish to exit in the future.

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Partners' Capital, Equity and Incentive Compensation Plans

9 Months Ended

Sep. 30, 2019

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

Partners' Capital, Equity and Incentive Compensation Plans

11. 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, 2019, the Operating Partnership had four classes of limited partnership units outstanding: Series A Preferred Units, Series B Convertible Preferred Stock Units, Class A units of limited partnership interest (“Class A units”) and Class O LTIP units of limited partnership units (“Class O units”). The Class A units currently outstanding are now redeemable on a one-for-one exchange rate at any time for cash or shares of Class A common stock of QTS. The Company may in its sole discretion elect to assume and satisfy the redemption amount with cash or its shares. Class O units were issued upon grants made under the QualityTech, LP 2010 Equity Incentive Plan (the “2010 Equity Incentive Plan”). Class O units are pari passu with Class A units. Each Class O unit is convertible into Class A units by the Operating Partnership at any time or by the holder at any time based on formulas contained in the partnership agreement.

QTS Realty Trust, Inc.

In connection with its initial public offering on October 13, 2013 (“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 our 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 2013 Equity Incentive Plan, including options to purchase Class A common stock if exercised. On May 4, 2015, following approval by our stockholders at our 2015 Annual Meeting, the total number of shares available for issuance under the 2013 Equity Incentive Plan was increased by an additional 3,000,000. On May 9, 2019, following approval by our stockholders at our 2019 Annual Meeting, the total number of shares available for issuance under the 2013 Equity Incentive Plan was increased by an additional 1,110,000.

In March 2019, the Compensation Committee completed a redesign of the long-term incentive program for executive officers with the following changes:

● Issued Performance-Based FFO Unit Awards — performance-based restricted share unit awards, which may be earned based on Operating Funds From Operations ("OFFO") per diluted share measured over a two-year performance period ending December 31, 2020 (performance-based FFO units or “FFO Units”), with two-thirds of the earned shares of Class A common stock vesting at the end of the performance period when results have been certified and the remaining one-third of the shares vesting at the end of three years from the award grant date. The number of shares of Class A common stock subject to the awards that can be earned ranges from 0% to 200% of the target award based on actual performance over the performance period, with the number of shares to be determined based on a linear interpolation basis between threshold and target and target and maximum performance.

● Introduced Performance-Based Relative TSR Unit Awards — performance-based restricted share unit awards, which may be earned based on total stockholder return ("TSR") as compared to the MSCI U.S. REIT Index (the "Index") over a three-year performance period ending December 31, 2021 (the performance-based relative TSR units or “TSR Units”). The number of shares of Class A common stock subject to the awards that can be earned ranges from 0% to 200% of the target award based on TSR compared to an index. In addition, award payouts will be determined on a linear interpolation basis between threshold and target and target and maximum performance; and capped at the target performance level if our TSR is negative.

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, 2019 (unaudited):

	2010 Equity Incentive Plan					2013 Equity Incentive Plan
				Weighted					Weighted		Restricted
		Weighted		average			Weighted		average		Stock /		Weighted			Weighted			Weighted
	Number of	average		fair			average		fair		Deferred		average			average			average
	Class O units	exercise price		value		Options	exercise price		value		Stock		grant price		TSR Units	grant price		FFO Units	grant price
Outstanding at December 31, 2018	102,279	$	24.05	$	5.67	2,037,163	$	36.86	$	7.09	420,309		$	37.83	—	$	—	—	$	—
Granted	—		—		—	135,594		42.27		7.62	268,627			42.05	86,089		54.64	86,089		42.01
Exercised/Vested (1)	(8,375)		20.60		5.11	(118,416)		30.35		6.14	(239,778)			38.87	—		—	—		—
Cancelled/Expired	—		—		—	(112,706)		45.86		9.43	(22,786)	(2)		42.49	(1,739)		54.64	(1,739)		42.01
Outstanding at September 30, 2019	93,904	$	24.36	$	5.72	1,941,635	$	37.11	$	7.05	426,372		$	39.65	84,350	$	54.64	84,350	$	42.01

(1) This represents (i) Class O units which were converted to Class A units, (ii) options to purchase Class A common stock which were exercised, and (iii) 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, with respect to the applicable column.

(2) Includes 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, 2019 are included in the following table on a per unit basis (unaudited). Options to purchase shares of Class A common stock were valued using the Black-Scholes model and TSR Units were valued using a Monte-Carlo simulation that leveraged similar assumptions to those used to value the Class A common stock and FFO Units.

	Nine Months Ended September 30, 2019
Fair value of FFO units and restricted stock granted	$42.01 - $45.58
Fair value of TSR units granted	$54.64
Fair value of options granted	$7.56 - 8.28
Expected term (years)	5.5
Expected volatility	28%
Expected dividend yield	3.89 - 4.19%
Expected risk-free interest rates	2.33 - 2.56%

The following tables summarize information about awards outstanding as of September 30, 2019 (unaudited).

	Operating Partnership Awards Outstanding
				Weighted average
			Awards	remaining
	Exercise prices		outstanding	vesting period (years)
Class O Units	$	20.00 - 25.00	93,904	—
Total Operating Partnership awards outstanding			93,904

	QTS Realty Trust, Inc. Awards Outstanding
				Weighted average
			Awards	remaining
	Exercise prices		outstanding	vesting period (years)
Restricted stock	$	—	426,372	1.9
TSR units		—	84,350	2.5
FFO units		—	84,350	2.5
Options to purchase Class A common stock	$	21.00 - 50.66	1,941,635	0.6
Total QTS Realty Trust, Inc. awards outstanding			2,536,707

Any remaining nonvested awards are valued as of the grant date and generally vest ratably over a defined service period. As of September 30, 2019 all restricted Class A common stock, TSR units, and FFO units outstanding were unvested and approximately 0.6 million options to purchase Class A common stock outstanding were unvested. As of September 30, 2019 we had $21.1 million of unrecognized equity-based compensation expense which will be recognized over a remaining weighted-average vesting period of 1.3 years. The total intrinsic value of Class O units and options to purchase Class A common stock outstanding at September 30, 2019 was $30.0 million.

Dividends and Distributions

The following tables present quarterly cash dividends and distributions paid to QTS’ common and preferred stockholders and the Operating Partnership’s unit holders for the nine months ended September 30, 2019 and 2018 (unaudited):

Nine Months Ended September 30, 2019
				Aggregate
		Per Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 25, 2019	July 9, 2019	$	0.44	$	27.3
March 20, 2019	April 4, 2019	$	0.44	$	27.3
December 21, 2018	January 8, 2019	$	0.41	$	23.7
				$	78.3
Series A Preferred Stock/Units
June 30, 2019	July 15, 2019	$	0.45	$	1.9
March 31, 2019	April 15, 2019	$	0.45	$	1.9
December 31, 2018	January 15, 2019	$	0.45	$	1.9
				$	5.7
Series B Preferred Stock/Units
June 30, 2019	July 15, 2019	$	1.63	$	5.1
March 31, 2019	April 15, 2019	$	1.63	$	5.1
December 31, 2018	January 15, 2019	$	1.63	$	5.1
				$	15.3

Nine Months Ended September 30, 2018
				Aggregate
		Per Common Share and		Dividend/Distribution
Record Date	Payment Date	Per Unit Rate		Amount (in millions)
Common Stock/Units
June 20, 2018	July 6, 2018	$	0.41	$	23.7
March 22, 2018	April 5, 2018	$	0.41	$	23.7
December 5, 2017	January 5, 2018	$	0.39	$	22.2
				$	69.6
Series A Preferred Stock/Units
June 29, 2018	July 16, 2018	$	0.45	$	1.9
April 5, 2018	April 16, 2018	$	0.15	$	0.6
				$	2.5

Additionally, subsequent to September 30, 2019, we paid the following dividends:

● On October 4, 2019, the Company paid its regular quarterly cash dividend of $0.44 per common share and the Operating Partnership paid a quarterly cash distribution of $0.44 per unit to stockholders and unit holders of record as of the close of business on September 19, 2019.

● On October 15, 2019, the Company paid a quarterly cash dividend of approximately $0.45 per share on our Series A Preferred Stock to holders of Series A Preferred Stock of record as of the close of business on September 30, 2019 and the Operating Partnership paid a quarterly cash distribution of approximately $0.45 per unit on outstanding Series A Preferred Units held by the Company.

● On October 15, 2019, the Company paid a quarterly cash dividend of approximately $1.63 per share on our Series B Preferred Stock to holders of Series B Preferred Stock of record as of the close of business on September 30, 2019 and the Operating Partnership paid a quarterly cash distribution of approximately $1.63 per unit on outstanding Series B Preferred Units held by the Company.

Equity Issuances

In June 2019, we established a new “at-the-market” equity offering program (the “ATM Program”) pursuant to which we may issue, from time to time, up to $400 million of our Class A common stock, which may include shares to be sold on a forward basis. The use of forward sales under the ATM Program generally allows the Company to lock in a price on the sale of shares when sold by the forward sellers, but defer receiving the net proceeds from such sales until the shares are issued at settlement on a later date.

● During the three and nine months ended September 30, 2019, the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 1.2 million shares of its common stock at an average price of approximately $49 per share, representing available net proceeds upon physical settlement of approximately $56 million (subject to further adjustment as described below). At September 30, 2019, the Company had not settled any of these forward sales and had approximately $343 million of Class A common stock remaining available for sale under the ATM Program.

● Through the date of this report (including the sales during the three and nine months ended September 30, 2019 described above), the Company utilized the forward provisions under the ATM Program to allow for the sale of up to an aggregate of 2.8 million shares of its common stock at an average price of approximately $51 per share, representing available net proceeds upon physical settlement of approximately $139 million (subject to further adjustment as described below). Through the date of this report, the Company had not settled any of these forward sales and had approximately $258 million of Class A common stock remaining available for sale under the ATM Program.

The Company expects to physically settle (by delivering shares of common stock) these forward sales prior to their first anniversary date. When combined with approximately $36 million of proceeds remaining available under the forward sale in the first quarter of 2019, the Company currently has access to over $175 million of net proceeds through forward stock sales. The Company views forward equity sales under its ATM program as an important capital raising tool that it expects to continue to strategically and selectively use, subject to market conditions and overall availability under the ATM program. We have concluded that the forward sale agreements meet the derivative scope exception for certain contracts involving an entity’s own equity. The initial forward sale price is subject to daily adjustment based on a floating interest rate factor equal to the specified daily rate less a spread, and will decrease by other fixed amounts specified in the forward sale agreement. Until settlement of all of the forward sale agreements, our EPS dilution resulting from the agreements, if any, is determined using the two-class method.

At any time during the term of any forward sale, the Company may settle the forward sale by physical delivery of shares of common stock to the forward purchasers or, at the Company’s election, cash settle or net share settle. The initial forward sale price per share under each forward sale equals the product of (x) an amount equal to 100% minus the applicable forward selling commission and (y) the volume weighted average price per share at which the borrowed shares of our common stock were sold pursuant to the equity distribution agreement by the relevant forward seller during the applicable forward hedge selling period for such shares to hedge the relevant forward purchaser’s exposure under such forward sale. Thereafter, the forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor equal to the specified daily rate less a spread, and is decreased based on specified amounts related to expected dividends on shares of our common stock during the term of the applicable forward sale. If the specified daily rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price.

In February 2019, QTS conducted an underwritten offering of 7,762,500 shares of its Class A common stock, consisting of 4,000,000 shares issued by the Company during the first quarter of 2019 and 3,762,500 shares which will be issued on a forward basis, in each case at a price of $41.50 per share. We received net proceeds of approximately $159 million from the issuance of 4,000,000 shares during the first quarter of 2019, which we used to repay amounts outstanding under our unsecured revolving credit facility. During the three months ended September 30, 2019, we settled a portion of this forward sale by issuing 2.8 million shares of common stock for net proceeds of approximately $110 million, which was used to repay amounts outstanding under our revolving credit facility. Following this partial settlement, we have approximately $36 million of proceeds remaining available under this forward sale, which we expect to physically settle prior to March 1, 2020 with the issuance of approximately 0.9 million shares of common stock, although we have the right to elect settlement prior to that time. We have concluded that the forward sale agreements meet the derivative scope exception for certain contracts involving an entity’s own equity. The initial forward sale price is subject to daily adjustment based on a floating interest rate factor equal to the specified daily rate less a spread, and will decrease by other fixed amounts specified in the forward sale agreement. Until settlement of all of the forward sale agreements, our EPS dilution resulting from the agreements, if any, is determined using the two-class method.

On March 15, 2018, QTS issued 4,280,000 shares of 7.125% Series A Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Stock”) with a liquidation preference of $25.00 per share, which included 280,000 shares of the underwriters’ partial exercise of their option to purchase additional shares. The Company used the net proceeds of approximately $103.2 million to repay amounts outstanding under its unsecured revolving credit facility. In connection with the issuance of the Series A Preferred Stock, on March 15, 2018 the Operating Partnership issued to the Company 4,280,000 Series A Preferred Units, which have economic terms that are substantially similar to the Company’s Series A Preferred Stock. The Series A Preferred Units were issued in exchange for the Company’s contribution of the net offering proceeds of the offering of the Series A Preferred Stock to the Operating Partnership.

Dividends on the Series A Preferred Stock are payable quarterly in arrears on or about the 15th day of each January, April, July and October. The first dividend on the Series A Preferred Stock was paid on April 16, 2018, in the amount of $0.14844 per share for the period March 15, 2018 through April 14, 2018. The Series A Preferred Stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A Preferred Stock will rank senior to common stock and pari passu with the Series B Preferred Stock with respect to the payment of distributions and other amounts. Except in instances relating to preservation of QTS’s qualification as a REIT or pursuant to the Company’s special optional redemption right, the Series A Preferred Stock is not redeemable prior to March 15, 2023. On and after March 15, 2023, the Company may, at its

option, redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the date of redemption.

Upon the occurrence of a change of control, the Company has a special optional redemption right that enables it to redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, within 120 days after the first date on which a change of control has occurred resulting in neither QTS nor the surviving entity having a class of common shares listed on the NYSE, NYSE Amex, or NASDAQ or the acquisition of beneficial ownership of its stock entitling a person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in election of directors. The special optional redemption price is $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the date of redemption.

Upon the occurrence of a change of control, holders will have the right (unless the Company has elected to exercise its special optional redemption right to redeem their Series A Preferred Stock) to convert some or all of such holder’s Series A Preferred Stock into a number of shares of Class A common stock, par value $0.01 per share, equal to the lesser of:

● the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends (whether or not declared) to, but not including, the change of control conversion date (unless the change of control conversion date is after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the Common Stock Price; and

● 1.46929 (i.e., the Share Cap);

subject, in each case, to certain adjustments and provisions for the receipt of alternative consideration of equivalent value as described in the prospectus supplement for the Series A Preferred Stock.

On June 25, 2018, QTS issued 3,162,500 shares of 6.50% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) with a liquidation preference of $100.00 per share, which included 412,500 shares the underwriters purchased pursuant to the exercise of their overallotment option in full. The Company used the net proceeds of approximately $304 million to repay amounts outstanding under its unsecured revolving credit facility. In connection with the issuance of the Series B Preferred Stock, on June 25, 2018 the Operating Partnership issued to the Company 3,162,500 Series B Preferred Units, which have economic terms that are substantially similar to the Company’s Series B Preferred Stock. The Series B Preferred Units were issued in exchange for the Company’s contribution of the net offering proceeds of the offering of the Series B Preferred Stock to the Operating Partnership.

Dividends on the Series B Preferred Stock are payable quarterly in arrears on or about the 15th day of each January, April, July and October. The first dividend on the Series B Preferred Stock was paid on October 15, 2018, in the amount of $1.9861111 per share for the period June 25, 2018 through October 14, 2018. The Series B Preferred Stock is convertible by holders into shares of Class A common stock at any time at the then-prevailing conversion rate. The conversion rate as of September 30, 2019 is 2.1279 shares of the Company’s Class A common stock per share of Series B Preferred Stock. The Series B Preferred Stock does not have a stated maturity date. Upon liquidation, dissolution or winding up, the Series B Preferred Stock will rank senior to common stock and pari passu with the Series A Preferred Stock with respect to the payment of distributions and other amounts. The Series B Preferred Stock is not redeemable by the Company. At any time on or after July 20, 2023, the Company may at its option cause all (but not less than all) outstanding shares of the Series B Preferred Stock to be automatically converted into the Company’s Class A common stock at the then-prevailing conversion rate if the closing sale price of the Company’s Class A common stock is equal to or exceeds 150% of the then-prevailing conversion price for at least 20 trading days in a period of 30 consecutive trading days, including the last trading day of such 30-day period, ending on the trading day prior to the issuance of a press release announcing the mandatory conversion.

If a holder converts its shares of Series B Preferred Stock at any time beginning at the opening of business on the trading day immediately following the effective date of a fundamental change (as described in the prospectus supplement) and

ending at the close of business on the 30th trading day immediately following such effective date, the holder will automatically receive a number of shares of the Company’s Class A common stock equal to the greater of:

● the sum of (i) a number of shares of the Company’s Class A common stock, as may be adjusted, as described in the Articles Supplementary for the 6.50% Series B Cumulative Convertible Perpetual Preferred Stock filed with the State Department of Assessments and Taxation of Maryland on June 22, 2018 (the “Articles Supplementary”) and (ii) the make-whole premium described in the Articles Supplementary; and

● a number of shares of the Company’s Class A common stock equal to the lesser of (i) the liquidation preference divided by the average of the daily volume weighted average prices of the Company’s Class A common stock for ten days preceding the effective date of a fundamental change and (ii) 5.1020 (subject to adjustment).

QTS Realty Trust, Inc. Employee Stock Purchase Plan

In June 2015, we established the QTS Realty Trust, Inc. Employee Stock Purchase Plan (the “2015 Plan”) to give eligible employees the opportunity to purchase, through payroll deductions, shares of our Class A common stock in the open market by an independent broker with the Company paying brokerage commissions and fees associated with such share purchases. The 2015 Plan became effective July 1, 2015. We reserved 250,000 shares of our Class A common stock for purchase under the 2015 Plan, which were registered pursuant to a registration statement on Form S-8 filed on June 17, 2015.

On May 4, 2017, our stockholders approved the 2017 Amended and Restated QTS Realty Trust, Inc. Employee Stock Purchase Plan (the “2017 Plan”). The 2017 Plan became effective July 1, 2017 and is administered by the compensation committee (the “Compensation Committee”) of the board of directors (or by a committee of one or more persons appointed by it or the board of directors). The 2017 Plan permits participants to purchase our Class A common stock at a discount of up to 10% (as determined by the Compensation Committee). Employees of our Company and our majority-owned subsidiaries who have been employed for at least thirty days and who perform at least thirty hours of service per week for our Company are eligible to participate in the 2017 Plan, excluding any employee who, at any time during which the payroll deductions are made on behalf of the participating employees to purchase stocks, owns shares representing five percent or more of the total combined voting power or value of all classes of shares of our Company, or who is a Section 16 officer. Under the 2017 Plan, there are four purchase periods per year, and participants may deduct a minimum of $20 per paycheck and a maximum of $1,000 per paycheck towards the purchase of shares. Shares purchased under the 2017 Plan are subject to a one-year holding period following the purchase date, during which they may not be sold or transferred. We reserved 239,989 shares of our Class A common stock, subject to certain adjustments, for purchase under the 2017 Plan, which were registered pursuant to a registration statement on Form S-8 originally filed on June 17, 2015 and amended on June 30, 2017.

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Contracts with Customers (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Contracts with Customers [Abstract]
2019 (October - December)	$ 98,649
2020	336,431
2021	287,812
2022	206,331
2023	127,071
Thereafter	218,232
Total	$ 1,274,526

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Related Party Transactions (Summary of Related Party Transactions) (Details) - Affiliated Entity - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Related Party Transaction [Line Items]
Tax, utility, insurance and other reimbursement	$ 173	$ 128	$ 608	$ 524
Rent expense	254	254	761	761
Capital assets acquired	53	82	477	286
Total	$ 480	$ 464	$ 1,846	$ 1,571

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INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flow from operating activities:
Net income (loss)	$ 35,271	$ (13,577)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	117,448	107,019
Amortization of above and below market leases	126	385
Amortization of deferred loan costs	2,935	2,882
Equity in (earnings) loss of unconsolidated entity	992
Equity-based compensation expense	12,052	11,441
Bad debt expense (recoveries)	740	(1,625)
(Gain) loss on sale of assets, net	(13,408)	2,846
Deferred tax expense (benefit)	466	(3,423)
Restructuring costs, net of cash paid		18,960
Foreign currency remeasurement (gain) loss	(330)
Changes in operating assets and liabilities
Rents and other receivables, net	(20,606)	(3,429)
Prepaid expenses	(1,318)	(3,265)
Due from affiliates, net	8,378
Other assets	(1,544)	7,060
Accounts payable and accrued liabilities	3,587	13,241
Advance rents, security deposits and other liabilities	(3,719)	1,044
Deferred income	8,163	6,546
Net cash provided by operating activities	149,233	146,105
Cash flow from investing activities:
Proceeds from sale of property, net	52,722	1,496
Acquisitions, net of cash acquired	(69,355)	(36,956)
Additions to property and equipment	(270,879)	(382,221)
Net cash used in investing activities	(287,512)	(417,681)
Cash flow from financing activities:
Credit facility proceeds	306,149	312,000
Credit facility repayments	(334,000)	(362,000)
Payment of deferred financing costs	(182)	(609)
Payment of preferred stock dividends	(21,135)	(2,541)
Payment of common stock dividends	(69,709)	(61,612)
Distribution to noncontrolling interests	(8,601)	(8,024)
Proceeds from exercise of stock options	3,594	48
Payment of tax withholdings related to equity-based awards	(3,143)	(1,481)
Principal payments on finance lease obligations	(2,243)	(6,142)
Mortgage principal debt repayments	(43)	(43)
Preferred stock issuance proceeds, net of costs		407,616
Common stock issuance proceeds, net of costs	268,392
Net cash provided by financing activities	139,079	277,212
Effect of foreign currency exchange rates on cash and cash equivalents	959
Net change in cash and cash equivalents	1,759	5,636
Cash and cash equivalents, beginning of period	11,759	8,243
Cash and cash equivalents, end of period	13,518	13,879
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	37,735	33,296
Noncash investing and financing activities:
Accrued capital additions	41,013	75,315
Net increase (decrease) in other assets/liabilities related to change in fair value of derivative contracts	(34,192)	9,974
Equity received in unconsolidated entity in exchange for real estate assets	25,280
Increase in assets in exchange for finance lease obligation	45,024
Accrued equity issuance costs	197	139
Accrued preferred stock dividend	5,938	7,080
Qualitytech, LP
Cash flow from operating activities:
Net income (loss)	35,271	(13,577)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	117,448	107,019
Amortization of above and below market leases	126	385
Amortization of deferred loan costs	2,935	2,882
Equity in (earnings) loss of unconsolidated entity	992
Equity-based compensation expense	12,052	11,441
Bad debt expense (recoveries)	740	(1,625)
(Gain) loss on sale of assets, net	(13,408)	2,846
Deferred tax expense (benefit)	466	(3,423)
Restructuring costs, net of cash paid		18,960
Foreign currency remeasurement (gain) loss	(330)
Changes in operating assets and liabilities
Rents and other receivables, net	(20,606)	(3,429)
Prepaid expenses	(1,318)	(3,265)
Due from affiliates, net	8,378
Other assets	(1,544)	7,060
Accounts payable and accrued liabilities	3,587	13,241
Advance rents, security deposits and other liabilities	(3,719)	1,044
Deferred income	8,163	6,546
Net cash provided by operating activities	149,233	146,105
Cash flow from investing activities:
Proceeds from sale of property, net	52,722	1,496
Acquisitions, net of cash acquired	(69,355)	(36,956)
Additions to property and equipment	(270,879)	(382,221)
Net cash used in investing activities	(287,512)	(417,681)
Cash flow from financing activities:
Credit facility proceeds	306,149	312,000
Credit facility repayments	(334,000)	(362,000)
Payment of deferred financing costs	(182)	(609)
Payment of preferred stock dividends	(21,135)	(2,541)
Payment of cash dividends	(69,709)	(61,612)
Partnership distributions	(8,601)	(8,024)
Proceeds from exercise of stock options	3,594	48
Payment of tax withholdings related to equity-based awards	(3,143)	(1,481)
Principal payments on finance lease obligations	(2,243)	(6,142)
Mortgage principal debt repayments	(43)	(43)
Preferred stock issuance proceeds, net of costs		407,616
Common stock issuance proceeds, net of costs	268,392
Net cash provided by financing activities	139,079	277,212
Effect of foreign currency exchange rates on cash and cash equivalents	959
Net change in cash and cash equivalents	1,759	5,636
Cash and cash equivalents, beginning of period	11,759	8,243
Cash and cash equivalents, end of period	13,518	13,879
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	37,735	33,296
Noncash investing and financing activities:
Accrued capital additions	41,013	75,315
Net increase (decrease) in other assets/liabilities related to change in fair value of derivative contracts	(34,192)	9,974
Equity received in unconsolidated entity in exchange for real estate assets	25,280
Increase in assets in exchange for finance lease obligation	45,024
Accrued equity issuance costs	197	139
Accrued preferred stock dividend	$ 5,938	$ 7,080

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INTERIM CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Preferred stock, liquidation preference	$ 25.00
Series A Redeemable Perpetual Preferred
Dividend rate (as a percent)	7.125%	7.125%
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, liquidation preference	$ 25.00	$ 25.00
Preferred stock, shares authorized	4,600,000	4,600,000
Preferred stock, shares issued	4,280,000	4,280,000
Preferred stock, shares outstanding	4,280,000	4,280,000
Series A Redeemable Perpetual Preferred | Qualitytech, LP
Dividend rate (as a percent)	7.125%	7.125%
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, liquidation preference	$ 25.00	$ 25.00
Preferred stock, shares authorized	4,600,000	4,600,000
Preferred stock, shares issued	4,280,000	4,280,000
Preferred stock, shares outstanding	4,280,000	4,280,000
Series B Convertible Preferred Units
Dividend rate (as a percent)	6.50%	6.50%
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, liquidation preference	$ 100.00	$ 100.00
Preferred stock, shares authorized	3,162,500	3,162,500
Preferred stock, shares issued	3,162,500	3,162,500
Preferred stock, shares outstanding	3,162,500	3,162,500
Series B Convertible Preferred Units | Qualitytech, LP
Dividend rate (as a percent)	6.50%	6.50%
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, liquidation preference	$ 100.00	$ 100.00
Preferred stock, shares authorized	3,162,500	3,162,500
Preferred stock, shares issued	3,162,500	3,162,500
Preferred stock, shares outstanding	3,162,500	3,162,500
Common stock
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	450,133,000	450,133,000
Common stock, shares issued	58,238,145	51,123,417
Common stock, shares outstanding	58,238,145	51,123,417
Common stock | Qualitytech, LP
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	450,133,000	450,133,000
Common stock, shares issued	64,906,057	57,799,035
Common stock, shares outstanding	64,906,057	57,799,035

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Leases - Supplemental balance sheet information (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Lease as Lessee
Operating lease right-of-use assets	$ 58,551	$ 62,922
Operating lease liabilities	65,949	$ 70,657
Accumulated amortization	(555,562)		$ (467,644)
Real Estate Assets, net	2,571,589		$ 2,345,212
Finance lease liabilities	45,753
Finance leased assets
Lease as Lessee
Property and equipment, at cost	50,437
Accumulated amortization	(3,791)
Real Estate Assets, net	$ 46,646

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Leases - Leases as lessor (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Lease revenue:
Minimum lease revenue	$ 103,623	$ 92,812	$ 304,166	$ 271,342
Variable lease revenue (primarily recoveries from customers)	17,852	11,948	41,675	34,432
Total lease revenue	121,475	104,760	345,841	305,774
Operating Lease, Lease Income	$ 121,475	$ 104,760	$ 345,841	$ 305,774

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Debt (Senior Notes) (Details) - Operating Partnership And QTS Finance Corporation - USD ($) $ in Millions		9 Months Ended
	Nov. 08, 2017	Sep. 30, 2019	Jul. 23, 2014
Debt Instrument [Line Items]
Aggregate principal amount	$ 400
Interest rate	4.75%		5.875%
Senior notes due	2022
Maturity date		Nov. 15, 2025
Percentage of issued price equal to face value	100.00%

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Derivative Instruments - Power Purchase Agreements (Details) $ in Thousands	1 Months Ended	9 Months Ended
	Mar. 31, 2019 agreement	Sep. 30, 2019 USD ($)
Power Purchase Agreements
Derivative [Line Items]
Number of agreements | agreement	2
Term of agreement	10 years
Cash flow hedging | Power Purchase Agreements
Derivative [Line Items]
Fair value		$ (6,708)
Cash flow hedging | Piscataway | Calpine Energy Solutions, LLC
Derivative [Line Items]
Expiration Date		Feb. 28, 2029
Fair value		$ (2,793)
Cash flow hedging | Chicago | Calpine Energy Solutions, LLC
Derivative [Line Items]
Expiration Date		Feb. 28, 2029
Fair value		$ (3,915)

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Partners' Capital, Equity and Incentive Compensation Plans (Summary of Information About Awards Outstanding) (Details)	9 Months Ended
	Sep. 30, 2019 $ / shares shares
QualityTech LP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	93,904
QTS Realty Trust, Inc.
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	2,536,707
Remaining term of awards	7 months 6 days
QTS Realty Trust, Inc. | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	426,372
Remaining term of awards	1 year 10 months 24 days
QTS Realty Trust, Inc. | Performance-Based Relative TSR Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	84,350
Remaining term of awards	2 years 6 months
QTS Realty Trust, Inc. | Performance-Based FFO Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards Outstanding	84,350
Remaining term of awards	2 years 6 months
QTS Realty Trust, Inc. | Options to purchase Class A common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Lower limit of exercise price | $ / shares	$ 21.00
Upper limit of exercise price | $ / shares	$ 50.66
Awards Outstanding	1,941,635
Class O Units | QualityTech LP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Lower limit of exercise price | $ / shares	$ 20.00
Upper limit of exercise price | $ / shares	$ 25.00
Awards Outstanding	93,904

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Acquired Intangibles Assets and Liabilities - Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired above and below-market leases, net			$ 126	$ 385
Amortization of all other identified intangible assets	$ 3,500	$ 3,100	9,900	$ 11,500
Estimated amortization of all other identified intangible assets
Net Carrying Value	85,242		85,242		$ 95,451
Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired above and below-market leases, net	100	$ 100
Acquired favorable and unfavorable leases
Estimated amortization of acquired favorable and unfavorable leases Rental Revenue
2019 (October - December)	125		125
2020	659		659
2021	151		151
2022	51		51
2023	24		24
Thereafter	5		5
Total	1,015		1,015
Estimated amortization of acquired favorable and unfavorable leases Rental Expense
2019 (October - December)	(56)		(56)
2020	(216)		(216)
2021	(216)		(216)
2022	(216)		(216)
2023	(216)		(216)
Thereafter	(604)		(604)
Total	(1,524)		(1,524)
All other identified intangible assets
Estimated amortization of all other identified intangible assets
2019 (October - December)	3,214		3,214
2020	12,080		12,080
2021	10,580		10,580
2022	10,069		10,069
2023	10,065		10,065
Thereafter	28,519		28,519
Net Carrying Value	$ 74,527		$ 74,527

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Summary of Significant Accounting Policies - Recently Adopted Accounting Standards (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment to retained earnings	$ 1,800
Operating lease right-of-use assets, net	58,551	$ 62,922
Operating lease liabilities	$ 65,949	70,657
ASU 2016-02 | Original Allocation Reported
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred rent payable		5,922
ASU 2016-02 | Restatement Adjustment [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets, net		62,922
Operating lease liabilities		70,657
Deferred rent payable		$ (5,922)

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Contracts with Customers

9 Months Ended

Sep. 30, 2019

Contracts with Customers [Abstract]

Contracts with Customers

15. Contracts with Customers

Future minimum payments to be received under non-cancelable customer contracts including both lease rental revenue components and nonlease revenue components that are accounted for as a combined lease component in accordance with the practical expedient provided by ASC 842 which is discussed above (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 (unaudited and in thousands):

2019 (October - December)	$	98,649
2020		336,431
2021		287,812
2022		206,331
2023		127,071
Thereafter		218,232
Total	$	1,274,526

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Deferred Financing Costs, Net of Accumulated Amortization

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	11,519	$	11,530
Accumulated amortization		(5,289)		(3,859)
Deferred financing costs, net	$	6,230	$	7,671

Deferred Leasing Costs, Net of Accumulated Amortization

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred leasing costs	$	70,594	$	63,018
Accumulated amortization		(28,512)		(25,593)
Deferred leasing costs, net	$	42,082	$	37,425

Summary of impact of adoption of the lease standard on our condensed consolidated balance sheet

	As Previously		New Lease Standard
	Reported		Adjustment		As Adjusted
Operating lease right-of-use assets	$	—	$	62,922	$	62,922
Operating lease liabilities		—		70,657		70,657
Deferred rent payable		5,922		(5,922)		—

Fixed debt arrangements

Deferred Financing Costs, Net of Accumulated Amortization

	September 30,		December 31,
(dollars in thousands)	2019		2018
	(unaudited)
Deferred financing costs	$	14,609	$	14,501
Accumulated amortization		(4,449)		(2,944)
Deferred financing costs, net	$	10,160	$	11,557

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Partners' Capital, Equity and Incentive Compensation Plans (Schedule of Quarterly Cash Dividends) (Details) - USD ($) $ / shares in Units, $ in Thousands																				1 Months Ended	3 Months Ended				4 Months Ended	9 Months Ended
	Nov. 08, 2019	Oct. 15, 2019	Oct. 04, 2019	Sep. 30, 2019	Jun. 30, 2019	Jun. 25, 2019	Mar. 31, 2019	Mar. 20, 2019	Dec. 31, 2018	Dec. 21, 2018	Jun. 29, 2018	Jun. 25, 2018	Jun. 22, 2018	Jun. 20, 2018	Apr. 16, 2018	Apr. 05, 2018	Mar. 22, 2018	Mar. 15, 2018	Dec. 05, 2017	Feb. 28, 2019	Sep. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Oct. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Jun. 26, 2018
Partnership distribution per unit			$ 0.44
Dividend rate (as a percent)																		7.125%
Preferred stock, shares issued																		4,280,000
Preferred stock issuance proceeds, net of costs																								$ 103,200			$ 407,616
Preferred stock dividends per share cash paid															$ 0.14844
Preferred stock redemption price per share				$ 25.00																	$ 25.00					$ 25.00
Threshold period of redemption of preferred stock																										120 days
Ownership interest				50.00%																	50.00%					50.00%
Convertible preferred stock par value				$ 0.01																	$ 0.01					$ 0.01
Preferred stock, liquidation preference				25.00														$ 25.00			25.00					25.00
Share cap price				1.46929																	1.46929					$ 1.46929
Net proceeds																										$ 268,392
Preferred Units, Issued																		4,280,000
Series A Preferred Stock
Record Date					Jun. 30, 2019		Mar. 31, 2019		Dec. 31, 2018		Jun. 29, 2018					Apr. 05, 2018
Payment Date					Jul. 15, 2019		Apr. 15, 2019		Jan. 15, 2019		Jul. 16, 2018					Apr. 16, 2018
Per Common Share and Per Unit Rate					$ 0.45		$ 0.45		$ 0.45		$ 0.45					$ 0.15
Dividend/Distribution Amount					$ 1,900		$ 1,900		$ 1,900		$ 1,900					$ 600										5,700	2,500
Series B Preferred Stock
Record Date					Jun. 30, 2019		Mar. 31, 2019		Dec. 31, 2018
Payment Date					Jul. 15, 2019		Apr. 15, 2019		Jan. 15, 2019
Per Common Share and Per Unit Rate					$ 1.63		$ 1.63		$ 1.63
Dividend/Distribution Amount					$ 5,100		$ 5,100		$ 5,100																	$ 15,300
Series B Convertible preferred stock
Preferred stock, shares issued																												3,162,500
Minimum trading days of closing sale price of common stock under preferred stock conversion (in days)																										20 days
Period of average daily volume weighted average price																										10 days
Series B Convertible preferred stock [Member]
Dividend rate (as a percent)												6.50%	6.50%
Preferred stock, shares issued												3,162,500
Preferred stock issuance proceeds, net of costs												$ 304,000
Minimum percentage of closing sale price of common stock under preferred stock conversion (as a percent)																										2.1279%
Maximum trading days of closing sale price of common stock under preferred stock conversion including the last trading day (in days)																										30 days
Preferred stock dividends per share cash paid																									$ 1.9861111
Preferred stock, liquidation preference												$ 100.00
Share cap price				$ 5.1020																	$ 5.1020					$ 5.1020
Series B Convertible preferred stock [Member] | Minimum
Minimum percentage of closing sale price of common stock under preferred stock conversion (as a percent)																										150.00%
Subsequent Event | Series A Redeemable Perpetual Preferred
Record Date		Sep. 30, 2019
Per Common Share and Per Unit Rate		$ 0.45
Subsequent Event | Series B Convertible preferred stock [Member]
Record Date		Sep. 30, 2019
Per Common Share and Per Unit Rate		$ 1.63
Underwriter's Option
Preferred stock, shares issued																		280,000
Underwriter's Option | Series B Convertible preferred stock [Member]
Preferred stock, shares issued												412,500
At Market
Common Stock, Number Of Shares Authorized Under The Program																					1,200,000					1,200,000
Weighted Average Net Price Per Share																					$ 49					$ 49
Forward Sales Provision [Member] | Class A Common Stock
Weighted Average Net Price Per Share	$ 51
Shares issued	2,800,000
The amount of common stock available for sale	$ 258,000																									$ 343,000
Net proceeds	$ 139,000			$ 56,000
Proceeds from stock remaining available for sale																						$ 36,000				175,000
Underwritten Offering | Class A Common Stock
Share price																				$ 41.50
Shares issued																				900,000	2,800,000	4,000,000
Net proceeds																					$ 110,000	$ 159,000
Proceeds from stock remaining available for sale																					$ 36,000
Qualitytech, LP
Preferred stock issuance proceeds, net of costs																											407,616
Net proceeds																										268,392
Qualitytech, LP | Subsequent Event | Series A Redeemable Perpetual Preferred
Per Common Share and Per Unit Rate		0.45
Qualitytech, LP | Subsequent Event | Series B Convertible preferred stock
Per Common Share and Per Unit Rate		$ 1.63
Common stock
Record Date						Jun. 25, 2019		Mar. 20, 2019		Dec. 21, 2018				Jun. 20, 2018			Mar. 22, 2018		Dec. 05, 2017
Payment Date						Jul. 09, 2019		Apr. 04, 2019		Jan. 08, 2019				Jul. 06, 2018			Apr. 05, 2018		Jan. 05, 2018
Per Common Share and Per Unit Rate						$ 0.44		$ 0.44		$ 0.41				$ 0.41			$ 0.41		$ 0.39
Dividend/Distribution Amount						$ 27,300		$ 27,300		$ 23,700				$ 23,700			$ 23,700		$ 22,200							$ 78,300	$ 69,600
Shares issued																						4,000,000
Common stock | Subsequent Event
Record Date			Sep. 19, 2019
Per Common Share and Per Unit Rate			$ 0.44
Common stock | Qualitytech, LP | Subsequent Event
Per Common Share and Per Unit Rate			$ 0.44
Preferred stock | Series A Preferred Stock
Shares issued																								4,280,000
Preferred stock | Series B Preferred Stock
Shares issued																							3,163,000

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Debt (Annual Remaining Principal Payment) (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Debt [Abstract]
2019	$ 16
2020	70
2021	73
2022	225,748
2023	350,000
Thereafter	750,000
Total	$ 1,325,907

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Partners' Capital, Equity and Incentive Compensation Plans (Narrative) (Details)											1 Months Ended	3 Months Ended	4 Months Ended	9 Months Ended
	Oct. 15, 2019 $ / shares	Oct. 04, 2019 $ / shares	May 09, 2019 shares	Jun. 25, 2018	Jun. 22, 2018	Apr. 16, 2018 $ / shares	Mar. 15, 2018	May 04, 2017 USD ($) item shares	May 04, 2015 shares	Oct. 13, 2013 Vote shares	Mar. 31, 2019	Mar. 31, 2019 USD ($)	Oct. 31, 2018 $ / shares	Sep. 30, 2019 USD ($) class shares
Partners Capital And Distributions [Line Items]
Number of classes of partnership units outstanding | class														4
Equity based compensation expense unrecognized | $														$ 21,100,000
Equity based compensation expense vesting period														1 year 3 months 18 days
Preferred stock dividends per share cash paid | $ / shares						$ 0.14844
Partnership distribution per unit | $ / shares		$ 0.44
Preferred Stock, Dividend Rate, Percentage							7.125%
Proceeds net of fees from common equity offering | $												$ 158,663,000
QTS Realty Trust, Inc. Employee Stock Purchase Plan
Partners Capital And Distributions [Line Items]
Shares reserved for purchase under plan														250,000
2017 Plan
Partners Capital And Distributions [Line Items]
Minimum period of service								30 days
Minimum hours per week of service | item								30
Purchase period per year | item								4
Class O Units
Partners Capital And Distributions [Line Items]
Equity based compensation awards intrinsic value | $														$ 30,000,000.0
Class B Common Stock
Partners Capital And Distributions [Line Items]
Number of votes per share | Vote										50
Class A Common Stock | 2017 Plan
Partners Capital And Distributions [Line Items]
Shares reserved for purchase under plan								239,989
Discount rate of purchase price of common stock								10.00%
Series A Redeemable Perpetual Preferred | Subsequent Event
Partners Capital And Distributions [Line Items]
Dividend paid to common stockholders | $ / shares	$ 0.45
Series B Convertible preferred stock [Member]
Partners Capital And Distributions [Line Items]
Preferred stock dividends per share cash paid | $ / shares													$ 1.9861111
Preferred Stock, Dividend Rate, Percentage				6.50%	6.50%
Series B Convertible preferred stock [Member] | Subsequent Event
Partners Capital And Distributions [Line Items]
Dividend paid to common stockholders | $ / shares	1.63
Chief Executive Officer | Class B Common Stock
Partners Capital And Distributions [Line Items]
Percentage of operating partnership unit exchanged										2.00%
Minimum | 2017 Plan
Partners Capital And Distributions [Line Items]
Minimum percentage of combined voting power								5.00%
Deductions per paycheck for purchase of shares | $								$ 20
Maximum | 2017 Plan
Partners Capital And Distributions [Line Items]
Deductions per paycheck for purchase of shares | $								$ 1,000
Restricted Class A Common Stock
Partners Capital And Distributions [Line Items]
Nonvested awards outstanding														600,000
Performance-Based FFO Units
Partners Capital And Distributions [Line Items]
Options outstanding														84,350
Performance-Based FFO Units | Minimum | Class A Common Stock
Partners Capital And Distributions [Line Items]
Percentage of target award											0.00%
Performance-Based FFO Units | Maximum | Class A Common Stock
Partners Capital And Distributions [Line Items]
Percentage of target award											200.00%
Performance-Based Relative TSR Units
Partners Capital And Distributions [Line Items]
Vesting period											3 years
Options outstanding														84,350
Performance-Based Relative TSR Units | Minimum | Class A Common Stock
Partners Capital And Distributions [Line Items]
Percentage of target award											0.00%
Performance-Based Relative TSR Units | Maximum | Class A Common Stock
Partners Capital And Distributions [Line Items]
Percentage of target award											200.00%
Options to purchase Class A common stock
Partners Capital And Distributions [Line Items]
Options outstanding														700,000
Equity based compensation awards intrinsic value | $														$ 30,000,000
2013 Equity Incentive Plan | Class A Common Stock
Partners Capital And Distributions [Line Items]
Authorized shares to be issued under the plan										1,750,000
Additional shares available for issuance under plan approved by stockholders			1,110,000						3,000,000
Qualitytech, LP
Partners Capital And Distributions [Line Items]
Proceeds net of fees from common equity offering | $												$ 158,663,000
Qualitytech, LP | Series A Redeemable Perpetual Preferred | Subsequent Event
Partners Capital And Distributions [Line Items]
Dividend paid to common stockholders | $ / shares	$ 0.45
First portion | Performance-Based FFO Units
Partners Capital And Distributions [Line Items]
Vesting period											2 years
Vesting percentage											67.00%
Second portion | Performance-Based FFO Units
Partners Capital And Distributions [Line Items]
Vesting period											3 years
Vesting percentage											33.00%

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Acquired Intangibles Assets and Liabilities (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Finite-lived intangible assets
Gross Carrying Value	$ 148,994	$ 161,168
Accumulated Amortization	(63,752)	(65,717)
Net Carrying Value	85,242	95,451
Acquired Intangible Liabilities
Acquired intangible liabilities	17,284	17,009
Accumulated Amortization	(6,060)	(5,017)
New Carrying Value	11,224	11,992
Customer Relationships
Finite-lived intangible assets
Gross Carrying Value	95,705	95,705
Accumulated Amortization	(34,424)	(28,461)
Net Carrying Value	$ 61,281	$ 67,244
Customer Relationships | Minimum
Finite-lived intangible assets
Useful Lives	12 years	12 years
In Place Leases
Finite-lived intangible assets
Gross Carrying Value	$ 34,518	$ 32,066
Accumulated Amortization	(21,272)	(17,670)
Net Carrying Value	$ 13,246	$ 14,396
In Place Leases | Minimum
Finite-lived intangible assets
Useful Lives	3 months 18 days	3 months 18 days
In Place Leases | Maximum
Finite-lived intangible assets
Useful Lives	10 years	10 years
Solar Power Agreement
Finite-lived intangible assets
Useful Lives	17 years	17 years
Gross Carrying Value	$ 13,747	$ 13,747
Accumulated Amortization	(4,246)	(3,639)
Net Carrying Value	$ 9,501	$ 10,108
Platform Intangible
Finite-lived intangible assets
Useful Lives	3 years	3 years
Gross Carrying Value		$ 9,600
Accumulated Amortization		$ (9,600)
Below Market Leases As Lessee
Acquired below market leases - as Lessor
Useful Lives	46 years	46 years
Gross Carrying Value		$ 2,301
Net Carrying Value		2,301
Above Market Leases As Lessor
Acquired above market leases - as Lessee
Gross Carrying Value	$ 5,024	4,649
Accumulated Amortization	(3,810)	(3,247)
Net Carrying Value	$ 1,214	$ 1,402
Above Market Leases As Lessor | Minimum
Acquired above market leases - as Lessee
Useful Lives	6 months	6 months
Above Market Leases As Lessor | Maximum
Acquired above market leases - as Lessee
Useful Lives	8 years	8 years
Below Market Leases As Lessor
Acquired below market leases - as Lessor
Gross Carrying Value	$ 1,084	$ 809
Accumulated Amortization	(885)	(611)
Net Carrying Value	$ 199	$ 198
Below Market Leases As Lessor | Minimum
Acquired below market leases - as Lessor
Useful Lives	1 year	1 year
Below Market Leases As Lessor | Maximum
Acquired below market leases - as Lessor
Useful Lives	4 years	4 years
Above Market Lease As Lessee
Acquired above market leases - as Lessee
Gross Carrying Value	$ 2,453	$ 2,453
Accumulated Amortization	(929)	(767)
Net Carrying Value	$ 1,524	$ 1,686
Above Market Lease As Lessee | Minimum
Acquired above market leases - as Lessee
Useful Lives	11 years	11 years
Above Market Lease As Lessee | Maximum
Acquired above market leases - as Lessee
Useful Lives	12 years	12 years
Tradenames
Finite-lived intangible assets
Useful Lives	3 years	3 years
Gross Carrying Value		$ 3,100
Accumulated Amortization		$ (3,100)

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Summary of Significant Accounting Policies (Additional Information 2) (Details) - segment	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Summary Of Significant Accounting Policies [Line Items]
Number of operating segments	1
Number of reportable segments	1
Effective tax rate	(8.50%)	8.90%
Lease, Practical Expedients, Package [true/false]	true
Lease, Practical Expedient, Use of Hindsight [true/false]	false
Customer One | Rental Revenue
Summary Of Significant Accounting Policies [Line Items]
Percentage of total revenue	9.80%
Three Customers [Member] | Accounts Receivable | Trade Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Percentage of trade accounts receivable	26.00%
Three Customers [Member] | Accounts Receivable | Minimum | Trade Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Percentage of trade accounts receivable	5.00%
One of Three Customers [Member] | Accounts Receivable | Minimum | Trade Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Percentage of trade accounts receivable	10.00%
One of Three Customers [Member] | Accounts Receivable | Maximum | Trade Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Percentage of trade accounts receivable	13.00%
No Other Customers | Rental Revenue | Minimum
Summary Of Significant Accounting Policies [Line Items]
Percentage of total revenue	6.00%

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

16. Fair Value of Financial Instruments

ASC Topic 825, Financial Instruments, 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 we 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.

Derivative Contracts:

Interest rate swaps

Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. To comply with the provisions of fair value accounting guidance, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of September 30,

2019, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We do not have any fair value measurements on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2019 or December 31, 2018.

Power Purchase Agreements

In March 2019, we began using energy hedges to manage risk related to energy prices. The inputs used to value the derivatives primarily fall within Level 2 of the fair value hierarchy, and valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each contract. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including futures curves. The fair values of the energy hedges are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future energy rates (forward curves) derived from observable market futures curves. To comply with the provisions of fair value accounting guidance, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Nonrecurring purchase or sale of assets: During the nine months ended September 30, 2019, we recognized a gain on the sale of real estate assets that is discussed in detail in Note 7. In order to determine fair value of the noncash equity consideration received for the sale of the assets, we utilized estimation models to derive the fair value of the equity interest received in the transaction. These estimation models consisted of a discounted cash flow analysis that included Level 3 inputs including market rents, discount rates, expected occupancy and estimates of additional capital expenditures, and capitalization rates derived from market data.

Credit facility and Senior Notes: Our unsecured credit facility did not have interest rates which were materially different than current market conditions and therefore, the fair value approximated the carrying value. The fair value of our 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, 2019, the fair value of the Senior Notes was approximately $412.0 million.

Other debt instruments: The fair value of our other debt instruments (including finance leases and mortgage notes payable) were estimated in the same manner as the unsecured credit facility above. Similarly, 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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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2019

Acquisitions [Abstract]

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

The following table summarizes the consideration for the Netherlands facilities and the allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (unaudited and in thousands):

	Purchase Price Allocation		Weighted Avg Remaining Useful Life (in years)
Land	$	1,743	N/A
Buildings and improvements		8,640	24
Construction in progress		29,902	N/A
Acquired intangibles (In-place lease & above market lease)		2,911	3
Deferred costs		906	3
Other assets		128	3
Net Working Capital		554	N/A
Total identifiable assets acquired		44,784
Acquired below market lease		284	3
Total liabilities assumed		284
Net identifiable assets acquired	$	44,500

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Contracts with Customers (Table)

9 Months Ended

Sep. 30, 2019

Contracts with Customers [Abstract]

Schedule of Future minimum payments to be received under non-cancelable customer contracts

Future minimum payments to be received under non-cancelable customer contracts including both lease rental revenue components and nonlease revenue components that are accounted for as a combined lease component in accordance with the practical expedient provided by ASC 842 which is discussed above (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 (unaudited and in thousands):

2019 (October - December)	$	98,649
2020		336,431
2021		287,812
2022		206,331
2023		127,071
Thereafter		218,232
Total	$	1,274,526

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Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments [Abstract]

Schedule of interest rate derivatives and their fair values

Interest rate derivatives and their fair values as of September 30, 2019 and December 31, 2018 were as follows (unaudited and in thousands):

				Fixed One Month
Notional Amount				LIBOR rate per			Fair Value
September 30, 2019		December 31, 2018		annum	Effective Date	Expiration Date	September 30, 2019		December 31, 2018
$	25,000	$	25,000	1.989%	January 2, 2018	December 17, 2021	$	(272)	$	331
	100,000		100,000	1.989%	January 2, 2018	December 17, 2021		(1,086)		1,318
	75,000		75,000	1.989%	January 2, 2018	December 17, 2021		(815)		990
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		(707)		667
	100,000		100,000	2.029%	January 2, 2018	April 27, 2022		(1,403)		1,341
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		(707)		666
	100,000		100,000	2.617%	January 2, 2020	December 17, 2023		(4,839)		(782)
	100,000		100,000	2.621%	January 2, 2020	April 27, 2024		(5,279)		(818)
	200,000		200,000	2.636%	December 17, 2021	December 17, 2023		(5,037)		(722)
	200,000		200,000	2.642%	April 27, 2022	April 27, 2024		(4,996)		(648)
							$	(25,141)	$	2,343

Schedule of power purchase agreement derivatives

Power purchase agreement derivatives and their fair values as of September 30, 2019 and December 31, 2018 were as follows (unaudited and in thousands):

				Fair Value
Counterparty	Facility	Effective Date	Expiration Date	September 30, 2019		December 31, 2018
Calpine Energy Solutions, LLC	Piscataway	3/8/2019	2/28/2029	$	(2,793)	$	—
Calpine Energy Solutions, LLC	Chicago	3/8/2019	2/28/2029		(3,915)		—
				$	(6,708)	$	—

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

12. Related Party Transactions

We periodically execute transactions with entities affiliated with our 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 our officers and directors.

The transactions which occurred during the three and nine months ended September 30, 2019 and 2018 are outlined below (unaudited and in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Tax, utility, insurance and other reimbursement	$	173	$	128	$	608	$	524
Rent expense		254		254		761		761
Capital assets acquired		53		82		477		286
Total	$	480	$	464	$	1,846	$	1,571

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Acquired Intangibles Assets and Liabilities

9 Months Ended

Sep. 30, 2019

Acquired Intangible Assets and Liabilities [Abstract]

Acquired Intangibles Assets and Liabilities

4. Acquired Intangible Assets and Liabilities

Summarized below are the carrying values for the major classes of intangible assets and liabilities (unaudited and in thousands):

		September 30, 2019						December 31, 2018
		Gross						Gross
		Carrying		Accumulated		Net Carrying		Carrying		Accumulated		Net Carrying
	Useful Lives	Value		Amortization		Value		Value		Amortization		Value
Customer Relationships	12 years	$	95,705	$	(34,424)	$	61,281	$	95,705	$	(28,461)	$	67,244
In-Place Leases	0.3 to 10 years		34,518		(21,272)		13,246		32,066		(17,670)		14,396
Solar Power Agreement (1)	17 years		13,747		(4,246)		9,501		13,747		(3,639)		10,108
Platform Intangible	3 years		—		—		—		9,600		(9,600)		—
Acquired Favorable Leases
Acquired below market leases - as Lessee	46 years		—		—		—		2,301		—		2,301
Acquired above market leases - as Lessor	0.5 to 8 years		5,024		(3,810)		1,214		4,649		(3,247)		1,402
Tradenames	3 years		—		—		—		3,100		(3,100)		—
Total Intangible Assets		$	148,994	$	(63,752)	$	85,242	$	161,168	$	(65,717)	$	95,451
Solar Power Agreement (1)	17 years		13,747		(4,246)		9,501		13,747		(3,639)		10,108
Acquired Unfavorable Leases
Acquired below market leases - as Lessor	1 to 4 years		1,084		(885)		199		809		(611)		198
Acquired above market leases - as Lessee	11 to 12 years		2,453		(929)		1,524		2,453		(767)		1,686
Total Intangible Liabilities (2)		$	17,284	$	(6,060)	$	11,224	$	17,009	$	(5,017)	$	11,992

(1) Amortization related to the Solar Power Agreement asset and liability is recorded at the same rate and therefore has no net impact on the statement of operations.

(2) Intangible liabilities are included within the “Advance rents, security deposits and other liabilities” line item of the consolidated balance sheets.

Above or below market leases are amortized as a reduction to or increase in rental revenue in the case of the Company as lessor as well as a reduction to or increase in rent expense in the case of the Company as lessee over the remaining lease terms. The net effect of amortization of acquired above-market and below-market leases resulted in a net decrease in rental revenue of less than $0.1 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively. The net effect of amortization of acquired above-market and below-market leases resulted in a net decrease in rental revenue of $0.1 million and $0.4 million for the nine months ended September 30, 2019 and 2018, respectively. The estimated amortization of acquired favorable and unfavorable leases for each of the five succeeding fiscal years ending December 31 is as follows (unaudited and in thousands):

	Net Rental Revenue		Net Rental Expense
	Decrease		Increase/(Decrease)
2019 (October - December)	$	125	$	(56)
2020		659		(216)
2021		151		(216)
2022		51		(216)
2023		24		(216)
Thereafter		5		(604)
Total	$	1,015	$	(1,524)

Net amortization of all other identified intangible assets and liabilities was $3.5 million and $3.1 million for the three months ended September 30, 2019 and 2018, respectively. Net amortization of all other identified intangible assets and liabilities was $9.9 million and $11.5 million for the nine months ended September 30, 2019 and 2018, respectively. The estimated net amortization of all other identified intangible assets and liabilities for each of the five succeeding fiscal years ending December 31 is as follows (unaudited and in thousands):

2019 (October - December)	$	3,214
2020		12,080
2021		10,580
2022		10,069
2023		10,065
Thereafter		28,519
Total	$	74,527

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Debt

9 Months Ended

Sep. 30, 2019

Debt [Abstract]

Debt

8. Debt

Below is a listing of our outstanding debt, including finance leases, as of September 30, 2019 and December 31, 2018 (in thousands):

	Weighted Average
	Coupon Interest Rate at	Maturities at	September 30,		December 31,
	September 30, 2019 (1)	September 30, 2019	2019		2018
	(unaudited)		(unaudited)
Unsecured Credit Facility
Revolving Credit Facility	2.98%	December 17, 2022	$	224,149	$	252,000
Term Loan I	3.34%	December 17, 2023		350,000		350,000
Term Loan II	3.36%	April 27, 2024		350,000		350,000
Senior Notes	4.75%	November 15, 2025		400,000		400,000
Lenexa Mortgage	4.10%	May 1, 2022		1,758		1,801
Finance Leases	4.35%	2021 - 2038		45,753		2,873
	3.73%			1,371,660		1,356,674
Less net debt issuance costs				(10,160)		(11,557)
Total outstanding debt, net			$	1,361,500	$	1,345,117

(1) The coupon interest rates associated with Term Loan I and Term Loan II incorporate the effects of the Company’s interest rate swaps in effect as of September 30, 2019.

Credit Facilities, Senior Notes and Mortgage Notes Payable

(a) Unsecured Credit Facility – As of September 30, 2019, our unsecured credit facility (the “prior unsecured credit facility”) included two $350 million term loans and an $820 million revolving credit facility. We amended and restated our unsecured credit facility in October 2019 (as so amended and restated, the “new unsecured credit facility”) to include a term loan for $225 million which matures on December 17, 2024 (“Term Loan A”), a $225 million term loan that matures on April 27, 2025 (“Term Loan B”), a $250 million term loan which matures on October 18, 2026 (“Term Loan C”) and a $1.0 billion revolving credit facility which matures on December 17, 2023. The revolving portion of the new unsecured credit facility has a one-year extension option and can be increased up to $2.20 billion in the aggregate, subject to certain conditions, including the consent of the agent and obtaining necessary commitments. Amounts outstanding under the new 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 1.25% to 1.85% for LIBOR loans and 0.25% to 0.85% for base rate loans. For Term Loan A and Term Loan B, the spread ranges from 1.20% to 1.80% for LIBOR loans and 0.20% to 0.80% for base rate loans. For Term Loan C the spread ranges from 1.50% to 1.85% for LIBOR loans and 0.50% to 0.85% for base rate loans. The unsecured credit facility also provides for borrowing capacity of up to $300 million in various foreign currencies.

Our ability to borrow under the new unsecured credit facility is subject to ongoing compliance with a number of customary affirmative and negative covenants.

As of September 30, 2019, we had outstanding $924 million of indebtedness under the prior unsecured credit facility, consisting of $224.1 million of outstanding borrowings under the unsecured revolving credit facility and $700.0 million outstanding under the term loans, exclusive of net debt issuance costs of $5.5 million. In connection with the prior unsecured credit facility, as of September 30, 2019, we had additional letters of credit outstanding aggregating to $4.1 million.

We have also entered into certain interest rate swap agreements. See Note 9 – ‘Derivative Instruments’ for additional details.

(b) Senior Notes – On November 8, 2017, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership initially formed solely for the purpose of facilitating the offering of the 5.875% Senior Notes due 2022 (collectively, the “Issuers”), issued $400 million aggregate principal amount of 4.75% Senior Notes due November 15, 2025 (the “Senior Notes”) in a private offering. The Senior Notes have an interest rate of 4.750% per annum and were issued at a price equal to 100% of their face value. The net proceeds from the offering were used to fund the redemption of, and satisfy and discharge the indenture pursuant to which the Issuers issued, all of their outstanding 5.875% Senior Notes and to repay a portion of the amount outstanding under our unsecured revolving credit facility. As of September 30, 2019, the outstanding net debt issuance costs associated with the Senior Notes were $4.6 million.

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 certain foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Issuers or any other subsidiary guarantor, other than QTS Finance Corporation, the co-issuer of the Senior Notes. QTS Realty Trust, Inc. does not 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 November 8, 2017, among QTS, the Issuers, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee.

The annual remaining principal payment requirements as of September 30, 2019 per the contractual maturities, excluding extension options and excluding finance leases, are as follows (unaudited and in thousands):

2019	$	16
2020		70
2021		73
2022		225,748
2023		350,000
Thereafter		750,000
Total	$	1,325,907

As of September 30, 2019, we were in compliance with all of our covenants.

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Earnings per share of QTS Realty Trust, Inc. (Antidilutive) (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Class A Common Stock
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Antidilutive shares excluded from the computation of diluted net earning per share	6,668	6,677	6,670	6,645
Class O Units
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Antidilutive shares excluded from the computation of diluted net earning per share	557	363		375
Series B Convertible preferred stock
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Antidilutive shares excluded from the computation of diluted net earning per share	6,729	6,725	6,729	2,412

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Partners' Capital, Equity and Incentive Compensation Plans (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 28, 2019	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2019	Jun. 30, 2019
Partners Capital And Distributions [Line Items]
Proceeds From Issuance Of Common Stock				$ 268,392
Class A Common Stock | Underwritten Offering
Partners Capital And Distributions [Line Items]
Shares under underwritten offering	7,762,500
Shares issued	900,000	2,800,000	4,000,000
Common Stock, Capital Shares Reserved for Future Issuance	3,762,500
Share Price	$ 41.50
Proceeds From Issuance Of Common Stock		$ 110,000	$ 159,000
Class A Common Stock | At Market
Partners Capital And Distributions [Line Items]
Maximum value of stock which may be issued					$ 400,000

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Leases - Other information (Details)	Sep. 30, 2019
Leases [Abstract]
Operating leases - Weighted average remaining lease term (in years)	13 years 8 months 12 days
Finance leases - Weighted average remaining lease term (in years)	11 years 8 months 12 days
Operating leases - Weighted average discount rate	5.10%
Finance leases - Weighted average discount rate	4.30%

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Investments in Unconsolidated Entity (Details) $ in Millions	Sep. 30, 2019 USD ($) ft²
Investments in Unconsolidated Joint Ventures
Ownership interest (as a percent)	50.00%
Joint venture with Alinda
Investments in Unconsolidated Joint Ventures
Area of land contributed | ft²	118,000
Lease term of facility with global cloud-based software company	10 years
Equity method investments	$ 30.7
Ownership interest (as a percent)	50.00%
Assets	$ 125.9
Debt outstanding, net of deferred financing costs	$ 65.8

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INTERIM CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands	Series A Preferred Stock Qualitytech, LP Preferred stock Limited Partner	Series A Preferred Stock Qualitytech, LP Common stock Limited Partner	Series A Preferred Stock Qualitytech, LP	Series A Preferred Stock Preferred stock	Series A Preferred Stock Accumulated dividends in excess of earnings	Series A Preferred Stock Total stockholders' Equity	Series A Preferred Stock	Series B Preferred Stock Qualitytech, LP Preferred stock Limited Partner	Series B Preferred Stock Qualitytech, LP Common stock Limited Partner	Series B Preferred Stock Qualitytech, LP	Series B Preferred Stock Preferred stock	Series B Preferred Stock Accumulated dividends in excess of earnings	Series B Preferred Stock Total stockholders' Equity	Series B Preferred Stock	Qualitytech, LP Preferred stock Limited Partner	Qualitytech, LP Common stock Limited Partner	Qualitytech, LP Common stock General Partner	Qualitytech, LP Accumulated other comprehensive income (loss)	Qualitytech, LP	Preferred stock	Common stock	Additional paid-in capital	Accumulated other comprehensive income (loss)	Accumulated dividends in excess of earnings	Total stockholders' Equity	Noncontrolling interests	Total
Beginning balance at Dec. 31, 2017																$ 989,207	$ 1	$ 1,449	$ 990,656		$ 507	$ 1,049,176	$ 1,283	$ (173,552)	$ 877,414	$ 113,242	$ 990,656
Beginning balance, shares at Dec. 31, 2017																57,246					50,702
Net share activity through equity award plan																$ (238)			(238)		$ 4	(1,311)			(1,307)	1,069	(238)
Net share activity through equity award plan, shares																564					434
Increase (decrease) in fair value of derivative contracts																		5,982	5,982				5,290		5,290	692	5,982
Equity-based compensation expense																$ 4,898			4,898			4,337			4,337	561	4,898
Proceeds net of fees from common equity offering	$ 103,184		$ 103,184	$ 103,184		$ 103,184	$ 103,184
Proceeds net of fees from common equity offering (in shares)	4,280			4,280
Dividends declared on Preferred Stock		$ (328)	(328)		$ (328)	(328)	(328)
Dividends declared to common shareholders																(20,971)			(20,971)					(20,971)	(20,971)		(20,971)
Dividends declared to noncontrolling interests																										(2,736)	(2,736)
Partnership distributions																(2,736)			(2,736)
Net income (loss)																(252)			(252)					(223)	(223)	(29)	(252)
Ending balance at Mar. 31, 2018															$ 103,184	$ 969,580	1	7,431	1,080,195	$ 103,184	$ 511	1,052,202	6,573	(195,074)	967,396	112,799	1,080,195
Ending balance, shares at Mar. 31, 2018															4,280	57,810				4,280	51,136
Beginning balance at Dec. 31, 2017																$ 989,207	1	1,449	990,656		$ 507	1,049,176	1,283	(173,552)	877,414	113,242	990,656
Beginning balance, shares at Dec. 31, 2017																57,246					50,702
Increase (decrease) in fair value of derivative contracts																			9,974								9,974
Dividends declared on Preferred Stock																			(9,621)								(9,621)
Net income (loss)																			(13,577)								(13,577)
Ending balance at Sep. 30, 2018															$ 407,477	$ 908,327	1	11,423	1,327,227	$ 407,477	$ 511	1,059,914	10,103	(257,019)	1,220,986	106,241	1,327,227
Ending balance, shares at Sep. 30, 2018															7,443	57,801				7,443	51,124
Beginning balance at Mar. 31, 2018															$ 103,184	$ 969,580	1	7,431	1,080,195	$ 103,184	$ 511	1,052,202	6,573	(195,074)	967,396	112,799	1,080,195
Beginning balance, shares at Mar. 31, 2018															4,280	57,810				4,280	51,136
Net share activity through equity award plan																$ (624)			(624)			(586)			(586)	(38)	(624)
Net share activity through equity award plan, shares																8					5
Increase (decrease) in fair value of derivative contracts																		2,563	2,563				2,267		2,267	296	2,563
Equity-based compensation expense																$ 5,710			5,710			5,051			5,051	659	5,710
Adjustment to expenses net	$ 28		28	$ 28		28	28
Proceeds net of fees from common equity offering								$ 304,426		$ 304,426	$ 304,426		$ 304,426	$ 304,426
Proceeds net of fees from common equity offering (in shares)								3,163			3,163
Dividends declared on Preferred Stock		(1,905)	(1,905)		(1,905)	(1,905)	(1,905)		$ (343)	(343)		$ (343)	(343)	(343)
Dividends declared to common shareholders																(20,971)			(20,971)					(20,971)	(20,971)		(20,971)
Dividends declared to noncontrolling interests																										(2,736)	(2,736)
Partnership distributions																(2,736)			(2,736)
Net income (loss)																(6,433)			(6,433)					(5,431)	(5,431)	(1,002)	(6,433)
Ending balance at Jun. 30, 2018															$ 407,638	$ 942,278	1	9,994	1,359,910	$ 407,638	$ 511	1,056,667	8,840	(223,724)	1,249,932	109,978	1,359,910
Ending balance, shares at Jun. 30, 2018															7,443	57,818				7,443	51,141
Net share activity through equity award plan																$ (272)			(272)			(256)			(256)	(16)	(272)
Net share activity through equity award plan, shares																(17)					(17)
Increase (decrease) in fair value of derivative contracts																		1,429	1,429				1,263		1,263	166	1,429
Equity-based compensation expense																$ 3,961			3,961			3,503			3,503	458	3,961
Adjustment to expenses net								$ (161)		(161)	$ (161)		(161)	(161)
Dividends declared on Preferred Stock		(1,907)	(1,907)		(1,907)	(1,907)	(1,907)		(5,139)	(5,139)		(5,139)	(5,139)	(5,139)					(7,045)								(7,045)
Dividends declared to common shareholders																(20,967)			(20,967)					(20,967)	(20,967)		(20,967)
Dividends declared to noncontrolling interests																										(2,735)	(2,735)
Partnership distributions																(2,735)			(2,735)
Net income (loss)																(6,892)			(6,892)					(5,282)	(5,282)	(1,610)	(6,892)
Ending balance at Sep. 30, 2018															$ 407,477	$ 908,327	1	11,423	1,327,227	$ 407,477	$ 511	1,059,914	10,103	(257,019)	1,220,986	106,241	1,327,227
Ending balance, shares at Sep. 30, 2018															7,443	57,801				7,443	51,124
Beginning balance at Dec. 31, 2018															$ 407,477	$ 886,866	1	2,344	1,296,687	$ 407,477	$ 511	1,062,473	2,073	(278,548)	1,193,986	102,701	1,296,687
Beginning balance, shares at Dec. 31, 2018															7,443	57,799				7,443	51,123
Partners' Capital, Beginning Balance at Dec. 31, 2018																			1,296,687
Net share activity through equity award plan																$ 741			741		$ 3	660			663	78	741
Net share activity through equity award plan, shares																229					231
Increase (decrease) in fair value of derivative contracts																		(9,853)	(9,853)				(8,775)		(8,775)	(1,078)	(9,853)
Equity-based compensation expense																$ 3,300			3,300			2,928			2,928	372	3,300
Net cumulative effect upon ASC 842 adoption																(1,813)			(1,813)					(1,813)	(1,813)		(1,813)
Adjustment to expenses net								$ (42)		(42)	$ (42)		(42)	(42)
Proceeds net of fees from common equity offering																$ 158,663			158,663		$ 40	148,650			148,690	9,973	158,663
Proceeds net of fees from common equity offering (in shares)																4,000					4,000
Dividends declared on Preferred Stock		(1,906)	(1,906)		(1,906)	(1,906)	(1,906)		(5,139)	(5,139)		(5,139)	(5,139)	(5,139)
Dividends declared to common shareholders																$ (24,371)			(24,371)					(24,371)	(24,371)		(24,371)
Dividends declared to noncontrolling interests																										(2,935)	(2,935)
Partnership distributions																(2,935)			(2,935)
Net income (loss)																21,148			21,148					19,558	19,558	1,590	21,148
Ending balance at Mar. 31, 2019															$ 407,435	$ 1,034,554	1	(7,509)	1,434,480	$ 407,435	$ 554	1,214,711	(6,702)	(292,219)	1,323,779	110,701	1,434,480
Ending balance, shares at Mar. 31, 2019															7,443	62,028				7,443	55,354
Beginning balance at Dec. 31, 2018															$ 407,477	$ 886,866	1	2,344	1,296,687	$ 407,477	$ 511	1,062,473	2,073	(278,548)	1,193,986	102,701	1,296,687
Beginning balance, shares at Dec. 31, 2018															7,443	57,799				7,443	51,123
Partners' Capital, Beginning Balance at Dec. 31, 2018																			1,296,687
Increase (decrease) in fair value of derivative contracts																			(34,192)								(34,192)
Foreign currency translation adjustments																			(360)								(360)
Dividends declared on Preferred Stock																			(21,135)								(21,135)
Net income (loss)																			35,271								35,271
Ending balance at Sep. 30, 2019															$ 407,435	$ 1,098,651	1	(32,274)	1,473,812	$ 407,435	$ 582	1,326,087	(28,900)	(340,943)	1,364,261	109,551	1,473,812
Ending balance, shares at Sep. 30, 2019															7,443	64,906				7,443	58,238
Partners' Capital, Ending Balance at Sep. 30, 2019																			1,473,812
Beginning balance at Mar. 31, 2019															$ 407,435	$ 1,034,554	1	(7,509)	1,434,480	$ 407,435	$ 554	1,214,711	(6,702)	(292,219)	1,323,779	110,701	1,434,480
Beginning balance, shares at Mar. 31, 2019															7,443	62,028				7,443	55,354
Net share activity through equity award plan																$ 179			179			505			505	(326)	179
Net share activity through equity award plan, shares																31					37
Increase (decrease) in fair value of derivative contracts																		(18,606)	(18,606)				(16,608)		(16,608)	(1,998)	(18,606)
Equity-based compensation expense																$ 4,296			4,296			3,832			3,832	464	4,296
Dividends declared on Preferred Stock		(1,906)	(1,906)		(1,906)	(1,906)	(1,906)		(5,139)	(5,139)		(5,139)	(5,139)	(5,139)
Dividends declared to common shareholders																(24,377)			(24,377)					(24,377)	(24,377)		(24,377)
Dividends declared to noncontrolling interests																										(2,932)	(2,932)
Partnership distributions																(2,932)			(2,932)
Net income (loss)																7,535			7,535					7,483	7,483	52	7,535
Ending balance at Jun. 30, 2019															$ 407,435	$ 1,012,210	1	(26,115)	1,393,530	$ 407,435	$ 554	1,219,048	(23,310)	(316,158)	1,287,569	105,961	1,393,530
Ending balance, shares at Jun. 30, 2019															7,443	62,059				7,443	55,391
Net share activity through equity award plan																$ 260			260			239			239	21	260
Net share activity through equity award plan, shares																15					15
Increase (decrease) in fair value of derivative contracts																		(5,733)	(5,733)				(5,207)		(5,207)	(526)	(5,733)
Foreign currency translation adjustments																		(426)	(426)				(383)		(383)	(43)	(426)
Equity-based compensation expense																$ 4,457			4,457			3,979			3,979	478	4,457
Proceeds net of fees from settlement of forward shares																$ 109,490			109,490		$ 28	102,821			102,849	6,641	109,490
Proceeds net of fees from settlement of forward shares (in shares)																2,832					2,832
Dividends declared on Preferred Stock		$ (1,906)	$ (1,906)		$ (1,906)	$ (1,906)	$ (1,906)		$ (5,139)	$ (5,139)		$ (5,139)	$ (5,139)	$ (5,139)					(7,045)								(7,045)
Dividends declared to common shareholders																$ (24,377)			(24,377)					(24,377)	(24,377)		(24,377)
Dividends declared to noncontrolling interests																										(2,932)	(2,932)
Partnership distributions																(2,932)			(2,932)
Net income (loss)																6,588			6,588					6,637	6,637	(49)	6,588
Ending balance at Sep. 30, 2019															$ 407,435	$ 1,098,651	$ 1	$ (32,274)	1,473,812	$ 407,435	$ 582	$ 1,326,087	$ (28,900)	$ (340,943)	$ 1,364,261	$ 109,551	$ 1,473,812
Ending balance, shares at Sep. 30, 2019															7,443	64,906				7,443	58,238
Partners' Capital, Ending Balance at Sep. 30, 2019																			$ 1,473,812

XML

INTERIM CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Real Estate Assets
Land	$ 127,587	$ 105,541
Buildings, improvements and equipment	2,155,810	1,917,251
Less: Accumulated depreciation	(555,562)	(467,644)
Total real estate assets	1,727,835	1,555,148
Construction in progress	843,754	790,064
Real Estate Assets, net	2,571,589	2,345,212
Investments in unconsolidated entity	30,742
Operating lease right-of-use assets, net	58,551
Cash and cash equivalents	13,518	11,759
Rents and other receivables, net	76,163	55,093
Acquired intangibles, net	85,242	95,451
Deferred costs, net	48,312	45,096
Prepaid expenses	8,490	6,822
Goodwill	173,843	173,843
Assets held for sale		71,800
Other assets, net	57,042	56,893
TOTAL ASSETS	3,123,492	2,861,969
LIABILITIES
Unsecured credit facility, net	918,631	945,657
Senior notes, net of debt issuance costs	395,358	394,786
Finance leases and mortgage notes payable	47,511	4,674
Operating lease liabilities	65,949
Accounts payable and accrued liabilities	94,104	99,166
Dividends and distributions payable	32,980	29,633
Advance rents, derivative contracts, security deposits and other liabilities	52,180	32,679
Liabilities held for sale		24,349
Deferred income taxes	1,563	1,097
Deferred income	41,404	33,241
TOTAL LIABILITIES	1,649,680	1,565,282
EQUITY
Additional paid-in capital	1,326,087	1,062,473
Accumulated other comprehensive income (loss)	(28,900)	2,073
Accumulated dividends in excess of earnings	(340,943)	(278,548)
Total stockholders' equity	1,364,261	1,193,986
Noncontrolling interests	109,551	102,701
TOTAL EQUITY	1,473,812	1,296,687
TOTAL LIABILITIES AND EQUITY	3,123,492	2,861,969
Qualitytech, LP
Real Estate Assets
Land	127,587	105,541
Buildings, improvements and equipment	2,155,810	1,917,251
Less: Accumulated depreciation	(555,562)	(467,644)
Total real estate assets	1,727,835	1,555,148
Construction in progress	843,754	790,064
Real Estate Assets, net	2,571,589	2,345,212
Investments in unconsolidated entity	30,742
Operating lease right-of-use assets, net	58,551
Cash and cash equivalents	13,518	11,759
Rents and other receivables, net	76,163	55,093
Acquired intangibles, net	85,242	95,451
Deferred costs, net	48,312	45,096
Prepaid expenses	8,490	6,822
Goodwill	173,843	173,843
Assets held for sale		71,800
Other assets, net	57,042	56,893
TOTAL ASSETS	3,123,492	2,861,969
LIABILITIES
Unsecured credit facility, net	918,631	945,657
Senior notes, net of debt issuance costs	395,358	394,786
Finance leases and mortgage notes payable	47,511	4,674
Operating lease liabilities	65,949
Accounts payable and accrued liabilities	94,104	99,166
Dividends and distributions payable	32,980	29,633
Advance rents, derivative contracts, security deposits and other liabilities	52,180	32,679
Liabilities held for sale		24,349
Deferred income taxes	1,563	1,097
Deferred income	41,404	33,241
TOTAL LIABILITIES	1,649,680	1,565,282
EQUITY
Accumulated other comprehensive income (loss)	(32,274)	2,344
TOTAL EQUITY	1,473,812	1,296,687
TOTAL PARTNERS' CAPITAL	1,473,812	1,296,687
TOTAL LIABILITIES AND EQUITY	3,123,492	2,861,969
Series A Redeemable Perpetual Preferred
EQUITY
Cumulative redeemable perpetual preferred stock / units	103,212	103,212
Series A Redeemable Perpetual Preferred | Qualitytech, LP
EQUITY
Cumulative redeemable perpetual preferred stock / units	103,212	103,212
Series B Convertible Preferred Units
EQUITY
Cumulative redeemable perpetual preferred stock / units	304,223	304,265
Series B Convertible Preferred Units | Qualitytech, LP
EQUITY
Cumulative redeemable perpetual preferred stock / units	304,223	304,265
Common stock
EQUITY
Common stock / units	582	511
Common stock | Qualitytech, LP
EQUITY
Common stock / units	$ 1,098,651	$ 886,866