OVERLAND PARK, Kan.,
April 27, 2021 /PRNewswire/
-- QTS Realty Trust, Inc. ("QTS" or the "Company") (NYSE: QTS)
today announced operating results for the first quarter ended
March 31, 2021.
First Quarter GAAP & Other Highlights
|
Three Months
Ended
|
|
March
31,
|
($ in thousands
except per share data)
|
2021
|
|
2020
|
Total
revenue
|
$
|
148,732
|
|
|
$
|
126,292
|
|
Net income
|
$
|
7,918
|
|
|
$
|
8,120
|
|
Net income
attributable to common stockholders
|
$
|
794
|
|
|
$
|
965
|
|
Net loss per share
attributable to basic common shares (1)
|
$
|
(0.07)
|
|
|
$
|
(0.01)
|
|
Net loss per share
attributable to diluted common shares (1)
|
$
|
(0.07)
|
|
|
$
|
(0.01)
|
|
FFO available to
common stockholders & OP unit holders (2)
|
$
|
54,518
|
|
|
$
|
43,730
|
|
___________________________________
|
(1)
|
Basic and diluted net
income (loss) per share were calculated using the two-class
method.
|
(2)
|
Includes QTS' pro
rata share of results from its unconsolidated entity.
|
Additional First Quarter Highlights
- Recognized total consolidated revenues of $148.7 million for the quarter ended March 31, 2021, an increase of 17.8% compared to
the same period in 2020. Total consolidated revenues do not include
QTS' pro rata share of revenue attributable to its unconsolidated
joint venture of $2.2 million and
$1.5 million for the quarters ended
March 31, 2021 and 2020,
respectively.
- Reported Adjusted EBITDA of $81.7
million for the quarter ended March
31, 2021, an increase of 22.4% compared to Adjusted EBITDA
of $66.8 million for the same period
in 2020.
- Reported Operating FFO available to common stockholders and OP
unit holders of $56.0 million for the
quarter ended March 31, 2021, an
increase of 27.5% compared to Operating FFO available to common
stockholders and OP unit holders of $43.9
million for the same period in 2020.
- Reported Operating FFO per fully diluted share of $0.76 for the quarter ended March 31, 2021, an increase of 15.2% compared to
Operating FFO per fully diluted share of $0.66 in the same period of 2020.
- Signed new and modified renewal leases during the first quarter
of 2021 aggregating to $20.6 million
of incremental annualized rent, net of downgrades.
- The Company's annualized backlog on a GAAP rent basis was
$80.8 million as of March 31, 2021, compared to $87.1 million as of December 31, 2020. In addition, the Company's
annualized backlog on a cash rent basis was $152.3 million as of March
31, 2021, compared to $154.4
million as of December 31,
2020.
- Through incremental sales of common stock sold on a forward
basis as of the date of this report, the Company had access to
approximately $493.0 million of
undrawn net proceeds from forward sales.
"We are pleased to start the year with a strong performance
during the first quarter with leasing momentum and a largely
pre-leased development plan that materially de-risks our financial
performance for the balance of the year," said Chad Williams, Chairman and CEO of QTS.
Williams added, "The acceleration we have seen in our signed
leasing activity and funnel across our target customer verticals
continues to demonstrate the differentiation of our platform and
supports our strategic focus on delivering near-term value creation
through consistent OFFO per share growth while investing back into
our business at a robust level to support strong future
growth."
Financial Results
QTS recognized net income of $7.9 million in the first quarter of 2021
compared to net income of $8.1 million recognized in the first quarter
of 2020. Net income attributable to common stockholders recognized
in the first quarter of 2021 was $0.8 million compared to net income
attributable to common stockholders of $1.0 million recognized in the first quarter
of 2020.
QTS generated total revenues of $148.7 million in the first quarter of 2021,
an increase of 17.8% compared to total revenue of $126.3 million in the first quarter of 2020.
MRR as of March 31, 2021 was $39.8 million compared to MRR as of
March 31, 2020 of $35.0 million.
QTS generated $81.7 million
of Adjusted EBITDA in the first quarter of 2021, an increase of
22.4% compared to Adjusted EBITDA of $66.8 million for the first quarter of
2020.
Additionally, QTS generated Operating FFO available to common
stockholders and OP unit holders of $56.0 million in the first quarter of 2021,
an increase of 27.5% compared to Operating FFO available to common
stockholders and OP unit holders of $43.9 million in the first quarter of
2020.
Operating FFO per fully diluted share was $0.76 in the first quarter of 2021, an increase
of 15.2% compared to Operating FFO per fully diluted share of
$0.66 in the first quarter of
2020.
Leasing Activity
During the quarter ended March 31, 2021, QTS entered into
new and modified renewal leases aggregating to $20.6 million of incremental annualized
rent. The Company's first quarter leasing results were driven by
balanced performance in its hyperscale and hybrid colocation
customer verticals. Highlighting the first quarter leasing
performance was the signing of an 8 megawatt lease with a
hyperscale customer that will anchor the Company's Ashburn, Virginia (DC - 2) facility, as well
as several larger enterprise hybrid colocation leases signed across
various facilities.
During the quarter ended March 31, 2021, QTS renewed leases
with total annualized rent of $23.0 million at an average rent per square
foot which was 2.2% higher than the annualized rent prior to their
renewals. There is variability in the Company's renewal rates based
on the mix of product types renewed, and renewal rates are
generally expected to increase in the low to mid-single digit
percentage range as compared to pre-renewal pricing.
Rental Churn (which the Company defines as MRR lost in the
period to a customer intending to fully exit the QTS platform in
the near term compared to total MRR at the beginning of the period)
was 0.7% for the three months ended March 31, 2021.
As of March 31, 2021, the Company's backlog (which
represents MRR, excluding cost recoveries, for customer leases that
have been signed but have not yet commenced as of period end) on a
GAAP rent basis represented $6.7
million, or $80.8 million of
annualized GAAP rent, compared to $7.3
million, or $87.1 million of
annualized GAAP rent at December 31,
2020. Of the Company's March 31, 2021 annualized
backlog of GAAP rent of $80.8 million, $35.8 million was attributable to 2021
(expected to contribute an incremental $16.5 million to MRR in 2021), $20.2 million was attributable to 2022
(expected to contribute an incremental $15.1 million to MRR in 2022), and
$24.8 million was attributable
to years thereafter. As of March 31, 2021, the Company's
annualized backlog on a cash rent basis was $152.3 million, of which $73.0 million was attributable to 2021 (expected
to contribute an incremental $29.3
million to MRR in 2021), $30.4
million was attributable to 2022 (expected to contribute an
incremental $19.7 million to MRR in
2022), and $48.9 million was
attributable to years thereafter.
Development
During the quarter ended March 31, 2021, the Company
brought online approximately 18 megawatts of gross power and
approximately 56,000 net rentable square feet ("NRSF") of raised
floor at its Atlanta (DC - 2),
Ashburn (DC - 1), Irving and Hillsboro facilities at an aggregate cost of
approximately $112.4 million
(excluding customer specific capital and leasing commissions).
During the first quarter of 2021, the Company's
significant development activity continued at the Ashburn (DC - 2), Manassas (DC - 2), Atlanta (DC - 2), Richmond, Piscataway, Chicago, Fort
Worth, Santa Clara, Hillsboro, Irving and Manassas (DC - 1) facilities to have space
ready for customers in 2021 and beyond. Including the Company's
proportionate share of development activity related to its
unconsolidated entity, the Company expects to bring an additional
275,000 raised floor NRSF into service through the remainder of
2021 at an aggregate cost of approximately $543.0 million, excluding customer specific
capital and leasing commissions, of which $283.0 million has already been spent as of
March 31, 2021.
Balance Sheet and Liquidity
During 2020 and 2021, QTS issued shares on a forward basis
through its "at-the-market" equity offering programs and via an
underwritten offering in June 2020.
The following table represents a summary of the Company's forward
equity activity through those programs from February 16, 2021, the date of our previous
earnings release, through the date of this report, April 27,
2021 (in thousands):
Offering
Program
|
|
Forward Shares Sold/(Settled)
|
|
Net Proceeds
Available/(Received) (1)
|
|
Shares and net
proceeds available as of February 16, 2021
|
|
9,961
|
|
|
$
|
581,598
|
|
(2)
|
Forward Equity -
Sales
|
|
2,077
|
|
|
127,347
|
|
|
Forward Equity -
Settlements
|
|
(3,865)
|
|
(3)
|
(215,964)
|
|
|
Shares and net
proceeds available as of April 27, 2021
|
|
8,173
|
|
|
$
|
492,981
|
|
|
______________________________________________
|
(1)
|
Proceeds available
remain subject to certain adjustments until settled.
|
(2)
|
Proceeds available
reported in the fourth quarter earnings release were $587.6
million. The $6 million decrease is due to QTS' declared dividends,
which reduces cash expected to be received upon full physical
settlement of the forward shares.
|
(3)
|
Represents the number
of forward shares the Company elected to physically settle during
the period.
|
As shown in the table above, as of April 27, 2021, the
Company currently has access to approximately $493.0 million of undrawn net proceeds through
forward stock sales, subject to certain adjustments.
As of March 31, 2021, the Company's total net indebtedness,
inclusive of its pro rata share of joint venture net debt, was
approximately $1.9 billion. The
Company's net debt to annualized Adjusted EBITDA ratio pro forma
for the effects of cash expected to be received upon the full
physical settlement of, and issuance of 8.2 million shares of
common stock pursuant to forward equity sales described above,
assuming such proceeds were used to repay a portion of the
Company's outstanding debt, is approximately 4.3x. The Company
expects to use proceeds from these forward equity agreements to
fund future capital expenditures. Excluding the proceeds available
related to the aforementioned forward stock sales, the Company's
leverage ratio is 5.8x.
As of March 31, 2021, the Company's total as adjusted
available liquidity is over $1.1 billion, comprised of $493.0 million of available proceeds from forward
equity sales, $634.6 million of
available capacity under the Company's unsecured revolving credit
facility and approximately $14.7 million of cash and cash
equivalents.
Novel Coronavirus (COVID-19)
QTS continues to actively monitor developments with respect to
COVID-19 and has taken numerous actions based on corporate policies
specifically focusing on the safety and wellness of its customers,
partners, and employees, as well as providing continuous and
resilient services. Although the COVID-19 pandemic has caused
significant disruptions to the United
States and global economy and has contributed to significant
volatility in financial markets, as of the date of this report,
these developments have not had a known material adverse effect on
the Company's business. As of the date of this report, each of the
Company's data centers in North
America and Europe is fully
operational and operating in accordance with the Company's business
continuity plans. Across each of the respective jurisdictions in
which the Company operates, the Company's business has been deemed
essential operations, which has allowed the Company to remain fully
staffed with critical personnel in place to continue to provide
service and support for its customers.
2021 Guidance
|
2021 Revised
Guidance
|
|
2021 Original
Guidance
|
($ in millions
except per share amounts)
|
Low
|
|
High
|
|
Low
|
|
High
|
Revenue
|
$
|
602
|
|
|
$
|
616
|
|
|
$
|
599
|
|
|
$
|
613
|
|
Adjusted
EBITDA
|
$
|
332
|
|
|
$
|
341
|
|
|
$
|
330
|
|
|
$
|
340
|
|
Operating FFO per
fully diluted share
|
$
|
2.94
|
|
|
$
|
3.04
|
|
|
$
|
2.92
|
|
|
$
|
3.04
|
|
As a result of outperformance relative to initial expectations
in the first quarter of 2021 and strong year to date leasing
activity, the Company is increasing its 2021 revenue guidance from
a previous range of $599 million -
$613 million to a new range of
$602 million - $616 million. The Company's 2021 guidance assumes
rental churn for the full year of between 3% and 6%.
As a result of the Company's higher revenue outlook and
continued cost controls, the Company is increasing its 2021
Adjusted EBITDA guidance from a previous range of $330 million - $340
million to a new range of $332
million - $341 million. The
Company is also increasing its 2021 OFFO per fully diluted share
guidance from a previous range of $2.92 - $3.04 per
share to a new range of $2.94 -
$3.04 per share.
In addition, for the full-year 2021, QTS is increasing its
guidance on cash capital expenditures from a previous range of
$800 million - $900 million to a new range of $875 million - $975
million. The Company's 2021 capital expenditure guidance
includes its proportionate share of cash capital expenditures
associated with the unconsolidated joint venture. The Company's
2021 guidance excludes the impact of any acquisitions.
The Company's 2021 guidance includes the effects of the
Company's joint venture, which is reflected as an unconsolidated
joint venture on QTS' reported financial statements. Consistent
with GAAP accounting standards, revenue from the unconsolidated
joint venture is not included in QTS' reported consolidated GAAP
financial statements. Also consistent with NAREIT-defined
standards, QTS includes its proportionate ownership of non-GAAP
measures such as EBITDAre and FFO from the joint venture in its
reported EBITDAre and FFO results, respectively.
The Company's 2021 guidance assumes, among other things, that
its facilities continue to operate and it does not experience
significant work stoppages or closures, it is able to mitigate any
supply chain disruptions for its development activities, and it is
able to collect revenues in line with current expectations. While
these are the Company's current assumptions, the COVID-19 pandemic
is a continuously evolving situation and these assumptions could
change, including if the duration of the pandemic is extended,
which could affect outlook.
QTS does not provide reconciliations for the non-GAAP financial
measures included in its guidance provided above due to the
inherent difficulty in forecasting and quantifying certain amounts
that are necessary for such reconciliations, including net income
(loss) and adjustments that could be made for restructuring costs,
transaction costs, lease exit costs, asset impairments and gain
(loss) on disposals and other charges as those amounts are subject
to significant variability based on future transactions that are
not yet known, the amount of which, based on historical experience,
could be significant.
Non-GAAP Financial Measures
This release includes certain non-GAAP financial measures that
management believes are helpful in understanding the Company's
business, as further described below. The Company does not, nor
does it suggest investors should, consider such non-GAAP financial
measures in isolation from, or as a substitute for, GAAP financial
information. The Company believes that the presentation of non-GAAP
financial measures provide meaningful supplemental information to
both management and investors that is indicative of the Company's
operations. The Company has included a reconciliation of this
additional information to the most comparable GAAP measure in the
selected financial information below.
Conference Call Details
The Company will host a conference call and webcast on
April 28, 2021, at 8:30 a.m.
Eastern time (7:30 a.m. Central time) to discuss its financial
results, current business trends and market conditions.
The dial-in number for the conference call is
(877) 883-0383 (U.S.) or (412) 902-6506
(International). The participant entry number is 2174042# and
callers are asked to dial in ten minutes prior to start
time. A link to the live broadcast and the replay will be
available on the Company's website (www.qtsdatacenters.com) under
the Investors tab.
About QTS
QTS Realty Trust, Inc. (NYSE: QTS) is a leading provider of data
center solutions across a diverse footprint spanning more than 7
million square feet of owned data center space throughout primarily
North America and Europe. Through its software-defined
technology platform, QTS is able to deliver secure, compliant
infrastructure solutions, robust connectivity and premium customer
service to leading hyperscale technology companies, enterprises,
and government entities. QTS owns, operates or manages 28 data
centers and supports more than 1,200 customers primarily in
North America and Europe.
QTS Investor Relations Contact
Stephen Douglas – EVP – Finance
ir@qtsdatacenters.com
Forward Looking Statements
Some of the statements contained in this release 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
the COVID-19 pandemic, its impact on the Company and the Company's
response thereto and to the Company's strategy, plans, intentions,
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.
The forward-looking statements contained in this release reflect
the Company's current views about future events and are subject to
numerous known and unknown risks, uncertainties, assumptions and
changes in circumstances that may cause actual results to differ
significantly from those expressed in any forward-looking
statement. 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 the Company's 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 the
COVID-19 pandemic, including, but not limited to, the risk of
business and/or operational disruptions, disruption of the
Company's customers' businesses that could affect their ability to
make rental payments to the Company, supply chain disruptions and
delays in the construction or development of the Company's data
centers; risks related to the Company's international operations;
difficulties in identifying properties to acquire and completing
acquisitions; the Company's 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 the Company operates;
defaults on, or termination or non-renewal of leases by customers;
decreased rental rates or increased vacancy rates; increased
interest rates and operating costs, including increased energy
costs; financing risks, including the Company's failure to obtain
necessary outside financing; dependence on third parties to provide
Internet, telecommunications and network connectivity to the
Company's data centers; the Company's failure to qualify and
maintain its qualification as a real estate investment trust;
environmental uncertainties and risks related to natural disasters;
financial market fluctuations; changes in real estate and zoning
laws, revaluations for tax purposes and increases in real property
tax rates; and limitations inherent in our current and any future
joint venture investments, such as lack of sole decision-making
authority and reliance on our partners' financial condition.
While forward-looking statements reflect the Company's 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. The Company disclaims 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 the Company's future
results to differ materially from any forward-looking statements,
see the section entitled "Risk Factors" in the Company's Annual
Report on Form 10-K for the year ended December 31, 2020, and
other periodic reports the Company files with the Securities and
Exchange Commission, many of which should be interpreted as being
heightened as a result of the ongoing COVID-19 pandemic and the
actions taken to contain the pandemic or mitigate its impact.
Consolidated
Balance Sheets
|
(unaudited and in
thousands except share data)
|
|
March, 31, 2021
(1)
|
|
December 31, 2020
(1)
|
ASSETS
|
|
|
|
Real Estate
Assets
|
|
|
|
Land
|
$
|
164,822
|
|
|
$
|
165,109
|
|
Buildings,
improvements and equipment
|
2,965,488
|
|
|
2,839,261
|
|
Less: Accumulated
depreciation
|
(745,237)
|
|
|
(702,944)
|
|
|
2,385,073
|
|
|
2,301,426
|
|
Construction in
progress (2)
|
1,119,749
|
|
|
1,028,765
|
|
Real Estate Assets,
net
|
3,504,822
|
|
|
3,330,191
|
|
Investments in
unconsolidated entity
|
25,858
|
|
|
22,608
|
|
Operating lease
right-of-use assets, net
|
49,851
|
|
|
51,342
|
|
Cash and cash
equivalents
|
14,652
|
|
|
22,775
|
|
Rents and other
receivables, net
|
124,392
|
|
|
107,563
|
|
Acquired intangibles,
net
|
64,934
|
|
|
68,090
|
|
Deferred costs, net
(3)
|
64,333
|
|
|
63,689
|
|
Prepaid
expenses
|
14,147
|
|
|
10,253
|
|
Goodwill
|
173,843
|
|
|
173,843
|
|
Other assets, net
(4)
|
48,458
|
|
|
48,218
|
|
TOTAL
ASSETS
|
$
|
4,085,290
|
|
|
$
|
3,898,572
|
|
LIABILITIES
|
|
|
|
Unsecured term loans
and revolver, net (5)
|
$
|
1,305,167
|
|
|
$
|
1,335,241
|
|
Senior notes, net of
debt issuance costs (5)
|
492,775
|
|
|
492,534
|
|
Finance
leases
|
42,525
|
|
|
41,718
|
|
Operating lease
liabilities
|
56,327
|
|
|
58,005
|
|
Accounts payable and
accrued liabilities
|
202,552
|
|
|
187,270
|
|
Dividends and
distributions payable
|
41,686
|
|
|
39,373
|
|
Advance rents,
security deposits and other liabilities
|
23,506
|
|
|
19,850
|
|
Derivative
liabilities
|
36,751
|
|
|
53,722
|
|
Deferred income
taxes
|
826
|
|
|
810
|
|
Deferred
income
|
93,495
|
|
|
85,351
|
|
TOTAL
LIABILITIES
|
2,295,610
|
|
|
2,313,874
|
|
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
March 31, 2021 and December 31, 2020, respectively
(6)
|
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 March 31, 2021 and
December 31, 2020, respectively (7)
|
304,223
|
|
|
304,223
|
|
Common
stock: $0.01 par value, 450,133,000 shares
authorized, 68,962,873 and 64,580,118 shares issued and outstanding
as of March 31, 2021 and December 31, 2020, respectively
|
690
|
|
|
646
|
|
Additional paid-in
capital
|
1,834,309
|
|
|
1,622,857
|
|
Accumulated other
comprehensive loss
|
(35,181)
|
|
|
(50,451)
|
|
Accumulated dividends
in excess of earnings
|
(536,031)
|
|
|
(504,313)
|
|
Total stockholders'
equity
|
1,671,222
|
|
|
1,476,174
|
|
Noncontrolling
interests
|
118,458
|
|
|
108,524
|
|
TOTAL
EQUITY
|
1,789,680
|
|
|
1,584,698
|
|
TOTAL LIABILITIES AND
EQUITY
|
$
|
4,085,290
|
|
|
$
|
3,898,572
|
|
______________________________________
|
(1)
|
The balance sheets at
March 31, 2021 and December 31, 2020, have been derived
from the consolidated financial statements at that date, but does
not include all of the information and footnotes required by United
States generally accepted accounting principles for complete
financial statements.
|
(2)
|
As of March 31,
2021, construction in progress included $215.5 million related
to land holdings for which the initiation of development activities
has begun to prepare the property for its intended use.
|
(3)
|
As of March 31,
2021 and December 31, 2020, deferred costs, net included
$5.5 million and $6.0 million of deferred financing costs
net of amortization, respectively, and $58.8 million and
$57.7 million of deferred leasing costs net of amortization,
respectively.
|
(4)
|
As of March 31,
2021 and December 31, 2020, other assets, net included
$44.6 million and $44.8 million of corporate fixed
assets, respectively, primarily relating to corporate offices,
leasehold improvements and product related assets.
|
(5)
|
Debt issuance costs,
net related to the senior notes and term loans aggregating to
$13.9 million and $14.6 million at March 31, 2021
and December 31, 2020, respectively, have been netted against
the related debt liability line items for both periods
presented.
|
(6)
|
As of March 31,
2021, the total liquidation preference of the Series A Preferred
Stock was $107.0 million, calculated as $25.00 liquidation
preference per share times 4,280,000 shares outstanding.
|
(7)
|
As of March 31,
2021, the total liquidation preference of the Series B Preferred
Stock was $316.3 million, calculated as $100.00 liquidation
preference per share times 3,162,500 shares outstanding.
|
Consolidated
Statements of Operations
|
(unaudited and in
thousands except share and per share data)
|
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
2021
|
|
2020
|
|
2020
|
Revenues:
|
|
|
|
|
|
Rental
(1)
|
$
|
144,308
|
|
|
$
|
139,998
|
|
|
$
|
120,081
|
|
Other
(2)
|
4,424
|
|
|
3,899
|
|
|
6,211
|
|
Total
revenues
|
148,732
|
|
|
143,897
|
|
|
126,292
|
|
Operating
expenses:
|
|
|
|
|
|
Property operating
costs
|
46,284
|
|
|
43,388
|
|
|
40,781
|
|
Real estate taxes and
insurance
|
5,022
|
|
|
3,997
|
|
|
3,911
|
|
Depreciation and
amortization
|
55,506
|
|
|
55,887
|
|
|
45,070
|
|
General and
administrative
|
23,641
|
|
|
20,809
|
|
|
20,683
|
|
Transaction,
integration, and impairment costs
|
1,516
|
|
|
2,665
|
|
|
216
|
|
Total operating
expenses
|
131,969
|
|
|
126,746
|
|
|
110,661
|
|
Operating
income
|
16,763
|
|
|
17,151
|
|
|
15,631
|
|
Other income and
expense:
|
|
|
|
|
|
Interest
expense
|
(8,148)
|
|
|
(9,122)
|
|
|
(7,162)
|
|
Debt restructuring
costs
|
—
|
|
|
(18,036)
|
|
|
—
|
|
Other
income
|
—
|
|
|
—
|
|
|
159
|
|
Equity in net loss of
unconsolidated entity
|
(559)
|
|
|
(411)
|
|
|
(677)
|
|
Income (loss) before
taxes
|
8,056
|
|
|
(10,418)
|
|
|
7,951
|
|
Tax benefit
(expense)
|
(138)
|
|
|
(242)
|
|
|
169
|
|
Net income
(loss)
|
7,918
|
|
|
(10,660)
|
|
|
8,120
|
|
Net (income) loss
attributable to noncontrolling interests (3)
|
(79)
|
|
|
1,738
|
|
|
(110)
|
|
Net income (loss)
attributable to QTS Realty Trust, Inc.
|
$
|
7,839
|
|
|
$
|
(8,922)
|
|
|
$
|
8,010
|
|
Preferred stock
dividends
|
(7,045)
|
|
|
(7,045)
|
|
|
(7,045)
|
|
Net income (loss)
attributable to common stockholders
|
$
|
794
|
|
|
$
|
(15,967)
|
|
|
$
|
965
|
|
|
|
|
|
|
|
Net loss per share
attributable to common shares
|
|
|
|
|
|
Basic
(4)
|
$
|
(0.07)
|
|
|
$
|
(0.33)
|
|
|
$
|
(0.01)
|
|
Diluted
(4)
|
$
|
(0.07)
|
|
|
$
|
(0.33)
|
|
|
$
|
(0.01)
|
|
___________________________________
|
(1)
|
Represents lease
revenue, inclusive of recoveries from customers as well as straight
line rent. Recoveries from customers was $16.1 million,
$14.6 million, and $12.3 million for the three months
ended March 31, 2021, December 31, 2020, and March 31,
2020, respectively. Straight line rent was $7.4 million,
$8.7 million and $3.8 million for the three months ended
March 31, 2021, December 31, 2020 and March 31, 2020,
respectively.
|
(2)
|
Includes revenue from
managed services, sales of scrap metals and other unused materials,
management fees, service fees, development fees and various other
non-rental revenue items.
|
(3)
|
The weighted average
noncontrolling ownership interest of QualityTech, LP was 9.0%, 9.3%
and 10.2% for the three months ended March 31, 2021, December
31, 2020 and March 31, 2020, respectively.
|
(4)
|
Basic and diluted net
income (loss) per share were calculated using the two-class
method.
|
Consolidated
Statements of Comprehensive Income (Loss)
|
(unaudited and in
thousands)
|
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
2021
|
|
2020
|
|
2020
|
Net income
(loss)
|
$
|
7,918
|
|
|
$
|
(10,660)
|
|
|
$
|
8,120
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
Foreign currency
translation adjustment gain (loss)
|
(158)
|
|
|
180
|
|
|
(223)
|
|
Increase (decrease) in
fair value of derivative contracts
|
17,253
|
|
|
6,561
|
|
|
(36,715)
|
|
Reclassification of
other comprehensive income to utilities expense
|
(66)
|
|
|
243
|
|
|
354
|
|
Reclassification of
other comprehensive income to interest expense
|
3,375
|
|
|
3,335
|
|
|
758
|
|
Comprehensive income
(loss)
|
28,322
|
|
|
(341)
|
|
|
(27,706)
|
|
Comprehensive (income)
loss attributable to noncontrolling interests
|
(2,558)
|
|
|
30
|
|
|
2,831
|
|
Comprehensive income
(loss) attributable to QTS Realty Trust, Inc.
|
$
|
25,764
|
|
|
$
|
(311)
|
|
|
$
|
(24,875)
|
|
FFO, Operating FFO, and Adjusted Operating FFO
The Company considers funds from operations ("FFO"), to be a
supplemental measure of its 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. The Company calculates 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 its
primary business, impairment write-downs of depreciable real estate
related to its primary business, real estate-related depreciation
and amortization and similar adjustments for unconsolidated
entities. To the extent the Company incurs gains or losses from the
sale of assets that are incidental to its primary business, or
incurs impairment write-downs associated with assets that are
incidental to its primary business, it includes such charges in its
calculation of FFO. The Company's management uses FFO as a
supplemental operating performance measure because, in excluding
real estate-related depreciation and amortization, impairment
write-downs of depreciable real estate 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 the Company's operating results that
management believes are not reflective of its operating
performance, management computes an adjusted measure of FFO, which
the Company refers 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. The Company
generally calculates Operating FFO as FFO excluding certain
non-routine charges and gains and losses that management believes
are not indicative of the results of the Company's operating real
estate portfolio. The Company believes 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. The Company calculates Adjusted Operating
FFO by adding or subtracting from Operating FFO items such as:
maintenance capital investment, paid leasing commissions,
amortization of deferred financing costs, non-real estate
depreciation and amortization, straight line rent adjustments,
income taxes, equity-based compensation and similar
adjustments for unconsolidated entities.
The Company offers these measures because it recognizes that
FFO, Operating FFO and Adjusted Operating FFO will be used by
investors as a basis to compare its 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 the Company's
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 its properties,
all of which have real economic effect and could materially impact
its financial condition, cash flows and results of operations, the
utility of FFO, Operating FFO and Adjusted Operating FFO as
measures of its operating performance is limited. The Company's
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,
the Company's 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 the Company's 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 its cash needs, including its ability to make
distributions to its stockholders.
A reconciliation of net income to FFO, Operating FFO and
Adjusted Operating FFO is presented below (unaudited and in
thousands):
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
2021
|
|
2020
|
|
2020
|
FFO
|
|
|
|
|
|
Net income
(loss)
|
$
|
7,918
|
|
|
$
|
(10,660)
|
|
|
$
|
8,120
|
|
Equity in net loss of
unconsolidated entity
|
559
|
|
|
411
|
|
|
677
|
|
Real estate
depreciation and amortization
|
52,629
|
|
|
52,763
|
|
|
41,700
|
|
Pro rata share of FFO
from unconsolidated entity
|
457
|
|
|
495
|
|
|
278
|
|
FFO
(1)
|
61,563
|
|
|
43,009
|
|
|
50,775
|
|
Preferred stock
dividends
|
(7,045)
|
|
|
(7,045)
|
|
|
(7,045)
|
|
FFO available to
common stockholders & OP unit holders
|
54,518
|
|
|
35,964
|
|
|
43,730
|
|
|
|
|
|
|
|
Debt restructuring
costs
|
—
|
|
|
18,036
|
|
|
—
|
|
Transaction and
integration costs
|
1,516
|
|
|
2,665
|
|
|
216
|
|
Operating FFO
available to common stockholders & OP unit holders
(2)
|
56,034
|
|
|
56,665
|
|
|
43,946
|
|
|
|
|
|
|
|
Maintenance capital
expenditures
|
(1,704)
|
|
|
(2,000)
|
|
|
(1,662)
|
|
Leasing commissions
paid
|
(9,460)
|
|
|
(11,271)
|
|
|
(8,998)
|
|
Amortization of
deferred financing costs
|
1,130
|
|
|
1,180
|
|
|
987
|
|
Non real estate
depreciation and amortization
|
2,876
|
|
|
3,124
|
|
|
3,370
|
|
Straight line rent
revenue and expense and other
|
(7,609)
|
|
|
(8,748)
|
|
|
(3,755)
|
|
Tax expense (benefit)
from operating results
|
138
|
|
|
242
|
|
|
(169)
|
|
Equity-based
compensation expense
|
6,856
|
|
|
6,862
|
|
|
4,875
|
|
Adjustments for
unconsolidated entity
|
46
|
|
|
(72)
|
|
|
66
|
|
Adjusted Operating
FFO available to common stockholders & OP unit holders
(2)
|
$
|
48,307
|
|
|
$
|
45,982
|
|
|
$
|
38,660
|
|
____________________________________
|
(1)
|
No gains, losses or
impairment write-downs associated with assets incidental to our
primary business were incurred during the three months ended
March 31, 2021, December 31, 2020 and March 31,
2020.
|
(2)
|
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.
|
Earnings Before Interest, Taxes, Depreciation and
Amortization for Real Estate (EBITDAre) and Adjusted
EBITDA
The Company calculates EBITDAre in accordance
with the standards established by NAREIT.
EBITDAre represents net income (loss) (computed in
accordance with GAAP), adjusted to exclude gains (or losses) from
sales of depreciated property related to its primary business,
income tax expense (or benefit), interest expense, depreciation and
amortization, impairments of depreciated property related to its
primary business, and similar adjustments for unconsolidated
entities. The Company's management uses EBITDAre as a
supplemental performance measure because it provides performance
measures that, when compared year over year, captures the
performance of the Company's operations by removing the impact of
capital structure (primarily interest expense) and asset based
charges (primarily depreciation and amortization) from its
operating results.
Due to the volatility and nature of certain significant charges
and gains recorded in the Company's operating results that
management believes are not reflective of its operating
performance, management computes an adjusted measure of
EBITDAre, which the Company refers to as Adjusted EBITDA.
The Company generally calculates Adjusted EBITDA 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 the
Company's 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, the Company calculates Adjusted EBITDA excluding certain
non-cash recurring costs such as equity-based compensation. The
Company believes 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 the Company's operating results. Other companies may
not calculate EBITDAre or Adjusted EBITDA in the same
manner. Accordingly, the Company's 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 the Company's
performance and should not be used as substitutes for net income
(loss), as measures of its results of operations or liquidity or as
an indications of funds available to meet its cash needs, including
its ability to make distributions to its stockholders.
A reconciliation of net income to EBITDAre and
Adjusted EBITDA is presented below (unaudited and in
thousands):
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
2021
|
|
2020
|
|
2020
|
EBITDAre
and Adjusted EBITDA
|
|
|
|
|
|
Net income
(loss)
|
$
|
7,918
|
|
|
$
|
(10,660)
|
|
|
$
|
8,120
|
|
Equity in net loss of
unconsolidated entity
|
559
|
|
|
411
|
|
|
677
|
|
Interest
expense
|
8,148
|
|
|
9,122
|
|
|
7,162
|
|
Tax expense
(benefit)
|
138
|
|
|
242
|
|
|
(169)
|
|
Depreciation and
amortization
|
55,506
|
|
|
55,887
|
|
|
45,070
|
|
Pro rata share of
EBITDAre from unconsolidated entity
|
1,106
|
|
|
1,167
|
|
|
819
|
|
EBITDAre
(1)
|
$
|
73,375
|
|
|
$
|
56,169
|
|
|
$
|
61,679
|
|
|
|
|
|
|
|
Debt restructuring
costs
|
—
|
|
|
18,036
|
|
|
—
|
|
Equity-based
compensation expense
|
6,856
|
|
|
6,862
|
|
|
4,875
|
|
Transaction,
integration and implementation costs
|
1,516
|
|
|
2,665
|
|
|
216
|
|
Adjusted
EBITDA
|
$
|
81,747
|
|
|
$
|
83,732
|
|
|
$
|
66,770
|
|
____________________________________
|
(1)
|
No gains, losses or
impairment write-downs associated with assets incidental to our
primary business were incurred during the three months ended
March 31, 2021, December 31, 2020 and March 31,
2020.
|
Net Operating Income (NOI)
The Company calculates 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 costs, other (income) expense, debt
restructuring costs, transaction, integration and impairment costs,
gain (loss) on sale of real estate, restructuring costs, general
and administrative expenses and similar adjustments for
unconsolidated entities. The Company allocates a management fee
charge of 4% of cash revenues for all facilities as a property
operating cost and a corresponding reduction to general and
administrative expense to cover the day-to-day administrative costs
to operate our data centers. The management fee charge is reflected
as a reduction to net operating income.
Management uses NOI as a supplemental performance measure
because it provides a useful measure of the operating results from
its customer leases. In addition, management believes it is useful
to investors in evaluating and comparing the operating performance
of its properties and to compute the fair value of its properties.
The Company's 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 the
Company's performance and should not be used as a measure of
results of operations or liquidity or as an indication of funds
available to meet cash needs, including the ability to make
distributions to stockholders. NOI is a measure of the operating
performance of the Company's properties and not of the Company's
performance as a whole. NOI is therefore not a substitute for net
income (loss) as computed in accordance with GAAP.
A reconciliation of net income to NOI is presented below
(unaudited and in thousands):
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
2021
|
|
2020
|
|
2020
|
Net Operating
Income (NOI)
|
|
|
|
|
|
Net income
(loss)
|
$
|
7,918
|
|
|
$
|
(10,660)
|
|
|
$
|
8,120
|
|
Equity in net loss of
unconsolidated entity
|
559
|
|
|
411
|
|
|
677
|
|
Interest
expense
|
8,148
|
|
|
9,122
|
|
|
7,162
|
|
Depreciation and
amortization
|
55,506
|
|
|
55,887
|
|
|
45,070
|
|
Debt restructuring
costs
|
—
|
|
|
18,036
|
|
|
—
|
|
Other (income)
expense
|
—
|
|
|
—
|
|
|
(159)
|
|
Tax expense
(benefit)
|
138
|
|
|
242
|
|
|
(169)
|
|
Transaction and
integration costs
|
1,516
|
|
|
2,665
|
|
|
216
|
|
General and
administrative expenses
|
23,641
|
|
|
20,809
|
|
|
20,683
|
|
NOI from
consolidated operations (1)
|
$
|
97,426
|
|
|
$
|
96,512
|
|
|
$
|
81,600
|
|
Pro rata share of NOI
from unconsolidated entity (2)
|
1,133
|
|
|
1,172
|
|
|
844
|
|
Total NOI
(1)
|
$
|
98,559
|
|
|
$
|
97,684
|
|
|
$
|
82,444
|
|
___________________________________
|
(1)
|
Includes facility level general and
administrative allocation charges of 4% of cash revenue for all
facilities. These allocated charges aggregated to
$5.5 million, $5.2 million and $4.7 million for the
three months ended March 31, 2021, December 31, 2020 and
March 31, 2020, respectively.
|
(2)
|
QTS' pro rata share
of the unconsolidated entity is 50%.
|
Monthly Recurring Revenue (MRR) and Recognized MRR
The Company calculates MRR as monthly contractual revenue under
signed leases as of a particular date, which includes revenue from
its rental 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 backlog leases as of a particular date, unless otherwise
specifically noted.
Separately, the Company calculates recognized MRR as the
recurring revenue recognized during a given period, which includes
revenue from its rental 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 the Company's customer leases
and customer leases attributable to the Company's 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, the Company's 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 its performance. MRR and recognized MRR
should not be used as measures of the Company's results of
operations or liquidity, nor is it indicative of funds available to
meet its cash needs, including its ability to make distributions to
its stockholders.
A reconciliation of total revenues to recognized MRR in the
period and MRR at period-end is presented below (unaudited and in
thousands):
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
2021
|
|
2020
|
|
2020
|
Recognized MRR in
the period
|
|
|
|
|
|
Total period revenues
(GAAP basis)
|
$
|
148,732
|
|
|
$
|
143,897
|
|
|
$
|
126,292
|
|
Less: Total period
variable lease revenue from recoveries
|
(16,128)
|
|
|
(14,648)
|
|
|
(12,275)
|
|
Total period deferred
setup fees
|
(6,436)
|
|
|
(6,585)
|
|
|
(3,924)
|
|
Total period straight
line rent and other
|
(11,623)
|
|
|
(10,201)
|
|
|
(8,032)
|
|
Recognized MRR in
the period
|
114,545
|
|
|
112,463
|
|
|
102,061
|
|
|
|
|
|
|
|
MRR at period
end
|
|
|
|
|
|
Total period revenues
(GAAP basis)
|
$
|
148,732
|
|
|
$
|
143,897
|
|
|
$
|
126,292
|
|
Less: Total revenues
excluding last month
|
(99,683)
|
|
|
(96,260)
|
|
|
(82,446)
|
|
Total revenues for
last month of period
|
49,049
|
|
|
47,637
|
|
|
43,846
|
|
Less: Last month
variable lease revenue from recoveries
|
(5,163)
|
|
|
(4,953)
|
|
|
(4,156)
|
|
Last month deferred
setup fees
|
(2,179)
|
|
|
(2,207)
|
|
|
(1,410)
|
|
Last month straight
line rent and other
|
(2,370)
|
|
|
(2,349)
|
|
|
(3,669)
|
|
Add: Pro rata share
of MRR at period end of unconsolidated entity
|
472
|
|
|
411
|
|
|
352
|
|
MRR at period
end
|
$
|
39,809
|
|
|
$
|
38,539
|
|
|
$
|
34,963
|
|
View original
content:http://www.prnewswire.com/news-releases/qts-reports-first-quarter-2021-operating-results-301278365.html
SOURCE QTS Realty Trust, Inc.