QTS Realty Trust, Inc. (Form: 10-Q, Received: 05/08/2017 17:09:14)

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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 March 31, 2017

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

For the transition period from to

Commission File Number 001-36109

QTS Realty Trust, Inc.

QualityTech, LP

(Exact name of registrant as specified in its charter)

Maryland (QTS Realty Trust, Inc.)	46-2809094
Delaware (QualityTech, LP) (State or other jurisdiction of incorporation or organization)	27-0707288 (I.R.S. Employer Identification No.)

12851 Foster Street, Overland Park, Kansas	66213
(Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code) (913) 312-5503

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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


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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


QTS Realty Trust, Inc. Yes ☒ 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	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐

		Emerging growth company	☐

QualityTech, LP


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒ (Do not check if a smaller reporting company)	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 47,909,306 shares of Class A common stock, $0.01 par value per share, and 133,000 shares of Class B common stock, $0.01 par value per share, of QTS Realty Trust, Inc. outstanding on May 4, 2017.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q of QTS Realty Trust, Inc. (“QTS”) and QualityTech, LP, a Delaware limited partnership, which is our operating partnership (the “Operating Partnership”). 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’s 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 March 31, 2017, its only material asset consisted of its ownership of approximately 87.6% 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 partnership units that are owned by QTS and other partners. On QTS’ consolidated balance sheets, stockholders’ equity includes common stock, additional paid-in capital, 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 is that for net income, QTS retains its proportionate share of the net income 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 audit reports, separate controls and procedures sections, separate Exhibit 31 and 32 certifications, and separate presentation of certain accompanying notes to the financial statements, including Note 8 – Partners’ Capital, Equity and Incentive Compensation Plans. In the sections that combine disclosure for QTS and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of “we,” “our,” “us,” “our company” and “the Company.” Although the Operating Partnership is generally the entity that enters into contracts, holds assets and issues debt, we believe that these general references to “we,” “our,” “us,” “our company” and “the Company” in this context are appropriate because the business is one enterprise operated through the Operating Partnership.

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QTS Realty Trust, Inc.

QualityTech, LP

Form 10-Q

For the Quarterly Period Ended March 31, 2017

INDEX


		Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	Financial Statements of QTS Realty Trust, Inc.	4

	Financial Statements of QualityTech, LP	9

	Notes to QTS Realty Trust, Inc. and QualityTech, LP Financial Statements	14

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	53

ITEM 4.	Controls and Procedures	54

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	55

ITEM 1A .	Risk Factors	55

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

ITEM 3.	Defaults Upon Senior Securities	56

ITEM 4.	Mine Safety Disclosures	56

ITEM 5.	Other Information	56

ITEM 6.	Exhibits	56

	Signatures	59

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS

(in thousands except share data)


	March 31, 2017		December 31, 2016
	(unaudited)
ASSETS
Real Estate Assets
Land	$	74,130	$	74,130
Buildings, improvements and equipment		1,585,183		1,524,767
Less: Accumulated depreciation		(340,830)		(317,834)
		1,318,483		1,281,063
Construction in progress		361,021		365,960
Real Estate Assets, net		1,679,504		1,647,023
Cash and cash equivalents		18,257		9,580
Rents and other receivables, net		42,310		41,540
Acquired intangibles, net		124,507		129,754
Deferred costs, net		38,210		38,507
Prepaid expenses		10,172		6,918
Goodwill		173,843		173,843
Other assets, net		43,779		39,305
TOTAL ASSETS	$	2,130,582	$	2,086,470

LIABILITIES
Unsecured credit facility, net	$	702,105	$	634,939
Senior notes, net of discount and debt issuance costs		292,518		292,179
Capital lease, lease financing obligations and mortgage notes payable		37,365		38,708
Accounts payable and accrued liabilities		72,821		86,129
Dividends and distributions payable		21,382		19,634
Advance rents, security deposits and other liabilities		28,721		24,893
Deferred income taxes		13,604		15,185
Deferred income		23,784		21,993
TOTAL LIABILITIES		1,192,300		1,133,660

EQUITY
Common stock, $0.01 par value, 450,133,000 shares authorized, 48,058,024 and 47,831,250 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively		481		478
Additional paid-in capital		933,399		931,783
Accumulated dividends in excess of earnings		(111,653)		(97,793)
Total stockholders’ equity		822,227		834,468
Noncontrolling interests		116,055		118,342
TOTAL EQUITY		938,282		952,810
TOTAL LIABILITIES AND EQUITY	$	2,130,582	$	2,086,470

See accompanying notes to financial statements.

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QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands except share and per share data)


	Three Months Ended March 31,
	2017		2016
Revenues:
Rental	$	79,117	$	68,426
Recoveries from customers		8,361		5,435
Cloud and managed services		16,965		18,890
Other		1,521		2,017
Total revenues		105,964		94,768
Operating Expenses:
Property operating costs		35,421		31,781
Real estate taxes and insurance		3,147		1,740
Depreciation and amortization		33,948		28,639
General and administrative		22,197		20,286
Transaction and integration costs		336		2,087
Total operating expenses		95,049		84,533

Operating income		10,915		10,235

Other income and expenses:
Interest income		1		—
Interest expense		(6,869)		(5,981)
Income before taxes		4,047		4,254
Tax benefit of taxable REIT subsidiaries		1,521		2,605
Net income		5,568		6,859
Net income attributable to noncontrolling interests		(691)		(970)
Net income attributable to QTS Realty Trust, Inc.	$	4,877	$	5,889

Net income per share attributable to common shares:
Basic	$	0.10	$	0.14
Diluted		0.10		0.14

Weighted average common shares outstanding:
Basic		47,908,709		41,292,445
Diluted		55,620,260		48,973,851

See accompanying notes to financial statements.

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QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF EQUITY

(unaudited and in thousands)


						Accumulated		Total
	Common stock			Additional		dividends in		stockholders'		Noncontrolling
	Shares	Amount		paid-in capital		excess of earnings		equity		interests		Total
Balance January 1, 2017	47,831	$	478	$	931,783	$	(97,793)	$	834,468	$	118,342	$	952,810
Net share activity through equity award plan	227		3		(1,084)		—		(1,081)		(715)		(1,796)
Equity-based compensation expense	—		—		2,700		—		2,700		382		3,082
Dividends to shareholders	—		—		—		(18,737)		(18,737)		—		(18,737)
Distributions to noncontrolling interests	—		—		—		—		—		(2,645)		(2,645)
Net income	—		—		—		4,877		4,877		691		5,568
Balance March 31, 2017	48,058	$	481	$	933,399	$	(111,653)	$	822,227	$	116,055	$	938,282

See accompanying notes to financial statements.

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QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the three months ended March 31, 2017 and 2016


	2017		2016
			(as adjusted)
Cash flow from operating activities:
Net income	$	5,568	$	6,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		33,229		23,309
Amortization of deferred loan costs		872		813
Amortization of senior notes discount		68		64
Equity-based compensation expense		3,082		2,050
Bad debt expense		314		527
Deferred tax benefit		(1,581)		(2,605)
Changes in operating assets and liabilities
Rents and other receivables, net		(1,084)		(3,173)
Prepaid expenses		(3,253)		(4,056)
Other assets		(800)		(129)
Accounts payable and accrued liabilities		(11,815)		(12,089)
Advance rents, security deposits and other liabilities		4,144		1,510
Deferred income		1,791		(406)
Net cash provided by operating activities		30,535		12,674

Cash flow from investing activities:
Additions to property and equipment		(66,119)		(78,053)
Net cash used in investing activities		(66,119)		(78,053)

Cash flow from financing activities:
Credit facility proceeds		67,000		86,000
Debt proceeds		1,920		—
Payment of deferred financing costs		(4)		—
Payment of cash dividends		(17,222)		(13,193)
Distribution to noncontrolling interests		(2,442)		(2,186)
Proceeds from exercise of stock options		42		100
Payment of minimum tax withholdings related to equity based awards		(1,770)		(795)
Principal payments on capital lease obligations		(3,249)		(3,228)
Mortgage principal debt repayments		(14)		—
Equity issuance costs		—		(379)
Net cash provided by financing activities		44,261		66,319

Net increase in cash and cash equivalents		8,677		940
Cash and cash equivalents, beginning of period		9,580		8,804
Cash and cash equivalents, end of period	$	18,257	$	9,744

See accompanying notes to financial statements.

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QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW (continued)

(unaudited and in thousands)

For the three months ended March 31, 2017 and 2016


	2017		2016
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	$	9,368	$	9,304
Noncash investing and financing activities:
Accrued capital additions	$	39,673	$	37,571
Accrued equity issuance costs	$	—	$	7

Acquisitions, net of cash acquired:
Acquired intangibles	$	(3)	$	14,700
Prepaid expenses		—		86
Construction in progress		3		—
Goodwill		—		(10,060)
Accounts payable and accrued liabilities		—		(5)
Deferred income		—		149
Deferred income taxes		—		(4,870)
Total acquisitions, net of cash acquired	$	—	$	—

See accompanying notes to financial statements.

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QUALITYTECH, LP

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS

(in thousands)


	March 31, 2017		December 31, 2016
	(unaudited)
ASSETS
Real Estate Assets
Land	$	74,130	$	74,130
Buildings, improvements and equipment		1,585,183		1,524,767
Less: Accumulated depreciation		(340,830)		(317,834)
		1,318,483		1,281,063
Construction in progress		361,021		365,960
Real Estate Assets, net		1,679,504		1,647,023
Cash and cash equivalents		18,257		9,580
Rents and other receivables, net		42,310		41,540
Acquired intangibles, net		124,507		129,754
Deferred costs, net		38,210		38,507
Prepaid expenses		10,172		6,918
Goodwill		173,843		173,843
Other assets, net		43,779		39,305
TOTAL ASSETS	$	2,130,582	$	2,086,470

LIABILITIES
Unsecured credit facility, net	$	702,105	$	634,939
Senior notes, net of discount and debt issuance costs		292,518		292,179
Capital lease, lease financing obligations and mortgage notes payable		37,365		38,708
Accounts payable and accrued liabilities		72,821		86,129
Dividends and distributions payable		21,382		19,634
Advance rents, security deposits and other liabilities		28,721		24,893
Deferred income taxes		13,604		15,185
Deferred income		23,784		21,993
TOTAL LIABILITIES		1,192,300		1,133,660

PARTNERS' CAPITAL
Partners' capital		938,282		952,810
TOTAL LIABILITIES AND PARTNERS' CAPITAL	$	2,130,582	$	2,086,470

See accompanying notes to financial statements.

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QUALITYTECH, LP

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2017		2016
Revenues:
Rental	$	79,117	$	68,426
Recoveries from customers		8,361		5,435
Cloud and managed services		16,965		18,890
Other		1,521		2,017
Total revenues		105,964		94,768
Operating Expenses:
Property operating costs		35,421		31,781
Real estate taxes and insurance		3,147		1,740
Depreciation and amortization		33,948		28,639
General and administrative		22,197		20,286
Transaction and integration costs		336		2,087
Total operating expenses		95,049		84,533

Operating income		10,915		10,235

Other income and expenses:
Interest income		1		—
Interest expense		(6,869)		(5,981)
Income before taxes		4,047		4,254
Tax benefit of taxable REIT subsidiaries		1,521		2,605
Net income	$	5,568	$	6,859

See accompanying notes to financial statements.

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QUALITYTECH, LP

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

(unaudited and in thousands)


	Limited Partners' Capital			General Partner's Capital
	Units	Amount		Units	Amount		Total
Balance January 1, 2017	54,628	$	952,810	1	$	—	$	952,810
Net share activity through equity award plan	227		(1,796)	—		—		(1,796)
Equity-based compensation expense	—		3,082	—		—		3,082
Dividends to QTS Realty Trust, Inc.	—		(18,737)	—		—		(18,737)
Partnership distributions	—		(2,645)	—		—		(2,645)
Net income	—		5,568	—		—		5,568
Balance March 31, 2017	54,855	$	938,282	1	$	—	$	938,282

See accompanying notes to financial statements.

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QUALITYTECH, LP

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the three months ended March 31, 2017 and 2016


	2017		2016
			(as adjusted)
Cash flow from operating activities:
Net income	$	5,568	$	6,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		33,229		23,309
Amortization of deferred loan costs		872		813
Amortization of senior notes discount		68		64
Equity-based compensation expense		3,082		2,050
Bad debt expense		314		527
Deferred tax benefit		(1,581)		(2,605)
Changes in operating assets and liabilities
Rents and other receivables, net		(1,084)		(3,173)
Prepaid expenses		(3,253)		(4,056)
Other assets		(800)		(129)
Accounts payable and accrued liabilities		(11,815)		(12,089)
Advance rents, security deposits and other liabilities		4,144		1,510
Deferred income		1,791		(406)
Net cash provided by operating activities		30,535		12,674

Cash flow from investing activities:
Additions to property and equipment		(66,119)		(78,053)
Net cash used in investing activities		(66,119)		(78,053)

Cash flow from financing activities:
Credit facility proceeds		67,000		86,000
Debt proceeds		1,920		—
Payment of deferred financing costs		(4)		—
Payment of cash dividends		(17,222)		(13,193)
Partnership distributions		(2,442)		(2,186)
Proceeds from exercise of stock options		42		100
Payment of minimum tax withholdings related to equity based awards		(1,770)		(795)
Principal payments on capital lease obligations		(3,249)		(3,228)
Mortgage principal debt repayments		(14)		—
Equity issuance costs		—		(379)
Net cash provided by financing activities		44,261		66,319

Net increase in cash and cash equivalents		8,677		940
Cash and cash equivalents, beginning of period		9,580		8,804
Cash and cash equivalents, end of period	$	18,257	$	9,744

See accompanying notes to financial statements.

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QUALITYTECH, LP

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW (continued)

(unaudited and in thousands)

For the three months ended March 31, 2017 and 2016


	2017		2016
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (excluding deferred financing costs and amounts capitalized)	$	9,368	$	9,304
Noncash investing and financing activities:
Accrued capital additions	$	39,673	$	37,571
Accrued equity issuance costs	$	—	$	7

Acquisitions, net of cash acquired:
Acquired intangibles	$	(3)	$	14,700
Prepaid expenses		—		86
Construction in progress		3		—
Goodwill		—		(10,060)
Accounts payable and accrued liabilities		—		(5)
Deferred income		—		149
Deferred income taxes		—		(4,870)
Total acquisitions, net of cash acquired	$	—	$	—

See accompanying notes to financial statements.

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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 their subsidiaries, the “Company”) and the subsidiaries of the Operating Partnership, is engaged in the business of owning, acquiring, redeveloping and managing multi-tenant data centers. The Company’s portfolio consists of 25 wholly-owned and leased properties with data centers located throughout the United States, Canada, Europe and Asia.

QTS has elected to be taxed as a real estate investment trust (“REIT”), for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2013. As a REIT, QTS generally is not required to pay federal corporate income taxes on its taxable income to the extent it is currently distributed to its stockholders.

The Operating Partnership is a Delaware limited partnership formed on August 5, 2009 and is QTS’ historical predecessor. As of March 31, 2017, QTS owned approximately 87.6% 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 1, 2017. The consolidated balance sheet data included herein as of December 31, 2016 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.

In 2016, the Company adopted ASU 2015-02, Amendments to the Consolidation Analysis. This standard amends certain guidance applicable to the consolidation of various legal entities, including variable interest entities (“VIE”). The Company evaluated the application of the ASU and concluded that no change was required to its accounting for its interest in the Operating Partnership. However, under the new guidance, the Operating Partnership now meets the definition and criteria of a VIE and the Company is the primary beneficiary of the VIE. As discussed below, QTS’ 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. QTS’ debt is an obligation of the Operating Partnership where the creditors may have recourse, under certain circumstances, against the credit of QTS.

QTS is the sole general partner of the Operating Partnership, and its only material asset consists of its ownership interest in 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

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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 believes, therefore, that providing one set of notes for the financial statements of QTS and the Operating Partnership provides the following benefits:

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

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

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

In addition, in light of these combined notes, the Company believes it is important for investors to understand the few differences between QTS and the Operating Partnership in the context of how QTS and the Operating Partnership operate as a consolidated company. 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 partnership units that are owned by QTS and other partners. On QTS’ consolidated balance sheets, stockholders’ equity includes common stock, additional paid in capital, and accumulated dividends in excess of earnings. The remaining equity reflected on QTS’s 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 is that for net income, QTS retains its proportionate share of the net income based on its ownership of the Operating Partnership, with the remaining balance being retained by the Operating Partnership. These combined notes refer to actions or holdings as being actions or holdings of “the Company.” Although the Operating Partnership is generally the entity that enters into contracts, holds assets and issues debt, management believes that these general references to “the Company” in this context is appropriate because the business is one enterprise operated through the Operating Partnership.

As discussed above, QTS owns no operating assets and has no operations independent of the Operating Partnership and its subsidiaries. Also, the Operating Partnership owns no operating assets and has no operations independent of its subsidiaries. Obligations under the 5.875% Senior Notes due 2022 and the unsecured credit facility, both discussed in Note 6, are fully, unconditionally, and jointly and severally guaranteed by the Operating Partnership’s existing subsidiaries, other than 1) 2470 Satellite Boulevard, LLC, a subsidiary formed in December 2015 that acquired an office building in Duluth, Georgia and has de minimis assets and operations, and 2) QTS Finance Corporation, the co-issuer of the 5.875% Senior Notes due 2022. As such, consolidating financial information for the guarantors is not being presented in the notes to the interim consolidated financial statements. However, the indenture governing the 5.875% Senior Notes due 2022 restricts the ability of the Operating Partnership to make distributions to QTS, subject to certain exceptions, including distributions required in order for QTS to maintain its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the “Code”).

The interim consolidated financial statements of QTS Realty Trust, Inc. for the three months ended March 31, 2017 and 2016, and as of March 31, 2017 and December 31, 2016 present the accounts of QTS Realty Trust, Inc. and its majority owned subsidiaries. This includes the operating results of the Operating Partnership for all periods presented.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and

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assumptions include the useful lives of fixed assets, allowances for doubtful accounts and deferred tax assets and the valuation of derivatives, real estate assets, acquired intangible assets and certain accruals.

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

Reclassifications – The consolidated statement of cash flows at March 31, 2016 reflects a reclassification of $0.8 million of cash outflows from “Accounts Payable and Accrued Liabilities” to “Payment of Minimum Tax Withholdings related to Equity Based Awards” as well as a reclassification of $0.1 million of cash inflows from “Accounts Payable and Accrued Liabilities” to “Proceeds from Exercise of Stock Options” in accordance with the Company’s adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting .

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 March 31, 2017, depreciation expense related to real estate assets and non-real estate assets was $21.4 million and $3.6 million, respectively, for a total of $25.0 million. For the three months ended March 31, 2016, depreciation expense related to real estate assets and non-real estate assets was $17.7 million and $3.0 million, respectively, for a total of $20.7 million. The Company capitalizes certain development costs, including internal costs incurred in connection with development. The capitalization of costs during the construction period (including interest and related loan fees, property taxes and other direct and indirect costs) begins when development efforts commence and ends when the asset is ready for its intended use. Capitalization of such costs, excluding interest, aggregated to $2.5 million and $2.4 million for the three months ended March 31, 2017 and 2016, respectively. Interest is capitalized during the period of development by first applying the Company’s actual borrowing rate on the related asset and second, to the extent necessary, by applying the Company’s weighted average effective borrowing rate to the actual development and other costs expended during the construction period. Interest is capitalized until the property is ready for its intended use. Interest costs capitalized totaled $3.1 million and $2.8 million for the three months ended March 31, 2017 and 2016, respectively.

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

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

Acquired in-place leases are amortized as amortization expense on a straight-line basis over the remaining life of the underlying leases. This amortization expense is accounted for as real estate amortization expense.

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

See Note 3 for discussion of the preliminary purchase price allocation for the Piscataway, New Jersey facility (the “Piscataway facility”) that the Company acquired on June 6, 2016 as well as the preliminary purchase price allocation for the Fort Worth, Texas facility (the “Fort Worth facility”) that the Company acquired on December 16, 2016.

Impairment of Long-Lived Assets, Intangible Assets and Goodwill – The Company reviews its 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 months ended March 31, 2017 and 2016, respectively.

Goodwill is subject to at least an annual assessment for impairment. As a result of the Carpathia Hosting, Inc. (“Carpathia”) acquisition, the Company recognized approximately $174 million in goodwill. In connection with the goodwill impairment evaluation that the Company performed on October 1, 2016, the Company determined qualitatively that there were no indicators of impairment, thus it did not perform a quantitative analysis.

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

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

Deferred financing costs represent fees and other costs incurred in connection with obtaining debt and are amortized over the term of the loan and are included in interest expense. 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 $0.9 million and $0.8 million for the three months ended March 31, 2017 and 2016, respectively. Deferred financing costs related to revolving debt arrangements, net of accumulated amortization are as follows:


	March 31,		December 31,
(dollars in thousands)	2017		2016
	(unaudited)

Deferred financing costs	$	7,131	$	7,128
Accumulated amortization		(579)		(145)
Deferred financing costs, net	$	6,552	$	6,983

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Deferred leasing costs consist of external fees and internal costs incurred in the successful negotiations of leases and are deferred and amortized over the terms of the related leases on a straight-line basis. If an applicable lease terminates prior to the expiration of its initial term, the carrying amount of the costs are written off to amortization expense. Amortization of deferred leasing costs totaled $4.2 million and $3.5 million for the three months ended March 31, 2017 and 2016, respectively. Deferred leasing costs, net of accumulated amortization are as follows:


	March 31,		December 31,
(dollars in thousands)	2017		2016
	(unaudited)

Deferred leasing costs	$	53,227	$	50,026
Accumulated amortization		(21,569)		(18,502)
Deferred leasing costs, net	$	31,658	$	31,524

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

Deferred Income – Deferred income generally results from non-refundable charges paid by the customer at lease inception to prepare their space for occupancy. The Company records this initial payment, commonly referred to as set-up fees, as a deferred income liability which amortizes into rental revenue over the term of the related lease on a straight-line basis. Deferred income was $23.8 million and $22.0 million as of March 31, 2017 and December 31, 2016, respectively. Additionally, $2.6 million and $1.9 million of deferred income was amortized into revenue for the three months ended March 31, 2017 and 2016, respectively.

Equity-based Compensation – All equity-based compensation is measured at fair value on the grant date or date of modification, as applicable, and recognized in earnings over the requisite service period. Depending upon the settlement terms of the awards, all or a portion of the fair value of equity-based awards may be presented as a liability or as equity in the consolidated balance sheets. Equity-based compensation costs are measured based upon their estimated fair value on the date of grant or modification. Equity-based compensation expense was $3.1 million and $2.1 million for the three months ended March 31, 2017 and 2016, respectively.

Rental Revenue – The Company, as a lessor, has retained substantially all of the risks and benefits of ownership and accounts for its leases as operating leases. For lease agreements that provide for scheduled rent increases, rental income is recognized on a straight-line basis over the non-cancellable term of the leases, which commences when control of the space has been provided to the customer. The amount of the straight-line rent receivable on the balance sheets included in rents and other receivables, net was $18.8 million and $17.3 million as of March 31, 2017 and December 31, 2016, respectively. Rental revenue also includes amortization of set-up fees which are amortized over the term of the respective lease as discussed above.

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

Allowance for Uncollectible Accounts Receivable – Rents receivable are recognized when due and are carried at cost, less an allowance for doubtful accounts. The Company records a provision for losses on rents receivable equal to the estimated uncollectible accounts, which is based on management’s historical experience and a review of the current status of the Company’s receivables. As necessary, the Company also establishes an appropriate allowance for doubtful accounts for receivables arising from the straight-lining of rents. The aggregate allowance for doubtful accounts was $4.5 million and $4.2 million as of March 31, 2017 and December 31, 2016, respectively.

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

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The Company periodically enters into capital leases for certain equipment. In addition, through its acquisition of Carpathia Hosting, Inc. on June 16, 2015, the Company is now party to capital leases for property and equipment, as well as financing obligations related to a sale-leaseback transaction. The outstanding liabilities for the capital leases were $15.4 million and $18.1 million as of March 31, 2017 and December 31, 2016, respectively. The outstanding liabilities for the lease financing obligations were $20.0 million and $20.6 million as of March 31, 2017 and December 31, 2016, respectively. The net book value of the assets associated with these leases was approximately $38.7 million and $41.5 million as of March 31, 2017 and December 31, 2016, respectively. Depreciation related to the associated assets is included in depreciation and amortization expense in the Statements of Operations.

See Note 6 for further discussion of capital leases and lease financing obligations.

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

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

Customer Concentrations – As of March 31, 2017, one of the Company’s customers represented 13.2% of its total monthly rental revenue. No other customers exceeded 5% of total monthly rental revenue.

As of March 31, 2017, six of the Company’s customers exceeded 5% of total accounts receivable. In aggregate, these six customers accounted for approximately 85% of total accounts receivable. Three of these six customers individually exceeded 10% of total accounts receivable.

Income Taxes – The Company has elected for two of its existing subsidiaries, Quality Technology Services Holdings, LLC and QTS Finance Corporation, to be taxed as taxable REIT subsidiaries pursuant to the REIT rules of the U.S. Internal Revenue Code.

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

As of December 31, 2014, one of the Company’s taxable REIT subsidiaries’ deferred tax assets were primarily the result of U.S. net operating loss carryforwards. A valuation allowance was recorded against its gross deferred tax asset balance as of December 31, 2014. As a result of the acquisition of Carpathia, the Company determined that it is more likely than not that pre-existing deferred tax assets would be realized by the Company, and the valuation allowance was eliminated. The change in the valuation allowance resulting from the change in circumstances was included in income, and recognized as a deferred income tax benefit in the year ended December 31, 2015. A deferred tax benefit has been recognized in subsequent periods, including in the three months ended March 31, 2017, in connection with recorded operating losses. As of March 31, 2017, this taxable REIT subsidiary has a net deferred tax liability position primarily due to customer-based intangibles acquired as part of the Carpathia acquisition.

The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as the operating performance of the

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taxable REIT subsidiary, tax law changes and future business acquisitions. The taxable REIT subsidiary’s effective tax rates were 39.7% and 37.4% for the three months ended March 31, 2017 and 2016, respectively. The increase in the effective tax rate is primarily due to the elimination of the valuation allowance as a result of the Carpathia acquisition, recorded operating losses of the taxable REIT subsidiary in 2017, and permanent book and tax differences.

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

There are no financial assets or liabilities measured at fair value on a recurring basis on the consolidated balance sheets as of March 31, 2017 and December 31, 2016. The Company’s purchase price allocations of Piscataway and Fort Worth are fair value estimates that utilized Level 3 inputs and are measured on a non-recurring basis. See Note 3 for further detail.

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the current revenue recognition requirements in ASC 606, Revenue Recognition . Under this new guidance, entities should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This ASU also requires enhanced disclosures. In April 2016, the FASB finalized amendments to the guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB finalized amendments to the guidance related to the assessment of collectibility, the definition of completed contracts at transition, and the measurement of the fair value of non-cash consideration at contract inception. The FASB also added new practical expedients for the presentation of sales taxes collected from customers and the accounting for contract modifications at transition. These amendments are not intended to change the core principles of the standard; however, they are intended to clarify important aspects of the guidance and improve its operability, as well as to address implementation issues. The amendments have the same effective date and transition requirements as the new revenue standard, which is effective for annual and interim periods beginning after December 15, 2017. Early adoption was permitted; however, entities were not permitted to adopt the standard earlier than December 15, 2016, the original effective date. Retrospective and modified retrospective application is allowed.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which supersedes the current lease guidance in ASC 840, Leases. The core principle of Topic 842 requires lessees to recognize the assets and liabilities that arise from nearly all leases in the statement of financial position. Accounting applied by lessors will remain largely consistent with previous guidance, with additional changes set to align lessor accounting with the revised lessee model and the FASB’s revenue recognition guidance in Topic 606. The amendments in this ASU are effective for fiscal years beginning after

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December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The standard requires a modified retrospective transition approach.

The Company plans to adopt ASC Topic 842 and ASC Topic 606 effective January 1, 2018, and expects to elect the modified retrospective transition approach for ASC Topic 606. The new lease standard more narrowly defines initial direct costs as only costs that are incremental at the signing of a lease. As the Company does not currently capitalize material non-incremental costs, it expects the impact of this change to be immaterial to the financial statements. As lessee the Company does not anticipate the classification of its leases to change but it will recognize a new initial lease liability and right-of-use asset on the consolidated balance sheet for all operating leases. ASC 606 consolidates and simplifies the accounting for other arrangements such as those within the Company’s cloud and managed services portfolio, and the Company is continuing to evaluate the other impacts of ASC Topic 842 and ASC Topic 606 on its significant accounting policies and consolidated financial statements. The Company will disclose any changes to this analysis as identified.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which amends ASC 718, Compensation – Stock Compensation . The ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including simplified income tax accounting for stock-based compensation, enhanced tax withholding rules, accounting policy options with regard to forfeitures and clarified guidance on statement of cash flow presentation. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard in the three months ended March 31, 2017, and provisions of the standard did not have a material impact on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The standard provides guidance on eight specific cash flow classification issues including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. The standard will be effective for fiscal years beginning January 1, 2018, and subsequent interim periods. The Company does not expect the provisions of the standard will have a material impact on its consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory . Under current GAAP, the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted, but the guidance can only be adopted in the first interim period of a fiscal year. The Company is currently assessing the impact of this standard on its consolidated financial statements.

In January 2017, the FASB issued guidance codified in ASC Topic 2017-01 , Business Combinations (Topic 805): Clarifying the Definition of a Business . The standard changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. As a result of this new guidance acquisitions may now result in an asset purchase rather than a business combination.

In January 2017, the FASB issued guidance codified in ASC Topic 2017-04 , Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1). The guidance will be applied prospectively and is effective for calendar year-end public companies in 2020, with early adoption permitted for annual and interim goodwill

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impairment testing dates after January 1, 2017. The Company does not expect the provisions of the standard will have a material impact on its consolidated financial statements.

3. Acquisitions

Fort Worth Acquisition

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

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

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


	Fort Worth Allocation as of March 31, 2017		Original Allocation Reported as of December 31, 2016		Adjusted Fair Value
Land	$	136	$	136	$	—
Buildings and improvements		610		610		—
Construction in progress		48,987		48,984		3
Acquired intangibles		237		240		(3)
Deferred costs		23		23		—
Other assets		7		7		—
Net Working Capital		86		86		—
Total identifiable assets acquired	$	50,086	$	50,086	$	—

Piscataway Acquisition

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

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

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


	Piscataway Allocation as of March 31, 2017			Original Allocation Reported as of June 30, 2016		Adjusted Fair Value
Land	$	7,466	$	7,440	$	26
Buildings and improvements		80,366		78,370		1,996
Construction in progress		13,900		13,900		—
Acquired intangibles		19,581		21,668		(2,087)
Deferred costs		4,390		4,084		306
Other assets		106		106		—
Total identifiable assets acquired		125,809		125,568		241

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

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

No changes were recorded to the preliminary allocation of the fair value of assets acquired and liabilities assumed during the three months ended March 31, 2017.

4. Acquired Intangible Assets and Liabilities

Summarized below are the carrying values for the major classes of intangible assets and liabilities:


		March 31, 2017						December 31, 2016
	Useful Lives	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Customer Relationships	1 to 12 years	$	95,705	$	(14,423)	$	81,282	$	95,705	$	(12,358)	$	83,347
In-Place Leases	0.5 to 17 years		45,813		(10,971)		34,842		45,813		(9,219)		36,594
Platform Intangible	3 years		9,600		(5,733)		3,867		9,600		(4,933)		4,667
Acquired Favorable Leases	0.5 to 8 years		4,649		(1,382)		3,267		4,652		(1,013)		3,639
Tradenames	3 years		3,100		(1,851)		1,249		3,100		(1,593)		1,507
Total Intangible Assets		$	158,867	$	(34,360)	$	124,507	$	158,870	$	(29,116)	$	129,754

Acquired Unfavorable Leases
Acquired below market leases - as Lessor	3 to 4 years		809		(197)		612		809		(138)		671
Acquired above market leases - as Lessee	11 to 12 years		2,453		(388)		2,065		2,453		(334)		2,119
Total Intangible Liabilities (1)		$	3,262	$	(585)	$	2,677	$	3,262	$	(472)	$	2,790

(1)

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 as well as a reduction to 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 decrease to rental revenue of $0.3 million and a decrease to rent expense of $0.1 million for the three months ended March 31, 2017 and 2016, respectively. The estimated amortization

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of acquired favorable and unfavorable leases for each of the five succeeding fiscal years ending December 31 is as follows (in thousands):


	Rental Revenue Decreases		Rental Expense Decreases
2017 (April - December)	$	768	$	163
2018		682		216
2019		479		216
2020		647		216
2021		46		216
Thereafter		33		1,038
Total	$	2,655	$	2,065

Amortization of all other identified intangible assets was $4.7 million and $4.5 million for the three months ended March 31, 2017 and 2016, respectively. The estimated amortization of all other identified intangible assets for each of the five succeeding fiscal years ending December 31 is as follows (in thousands):


2017 (April - December)	$	14,110
2018		15,383
2019		12,773
2020		12,187
2021		10,946
Thereafter		55,841
Total	$	121,240

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5. Real Estate Assets and Construction in Progress

The following is a summary of properties owned or leased by the Company as of March 31, 2017 and December 31, 2016 (in thousands):

As of March 31, 2017 (unaudited):


Property Location	Land		Buildings, Improvements and Equipment		Construction in Progress		Total Cost

Atlanta, Georgia (Atlanta-Metro)	$	15,397	$	435,409	$	35,317	$	486,123
Richmond, Virginia		2,180		237,765		72,447		312,392
Irving, Texas		8,606		217,178		70,435		296,219
Suwanee, Georgia (Atlanta-Suwanee)		3,521		172,416		2,169		178,106
Chicago, Illinois		9,400		79,910		87,245		176,555
Leased Facilities *		1,130		121,333		7,928		130,391
Piscataway, New Jersey		7,466		82,424		25,381		115,271
Santa Clara, California **		—		99,582		6,988		106,570
Sacramento, California		1,481		62,147		1,430		65,058
Princeton, New Jersey		20,700		32,765		526		53,991
Fort Worth, Texas		136		713		50,840		51,689
Other ***		4,113		43,541		315		47,969
	$	74,130	$	1,585,183	$	361,021	$	2,020,334

* Includes 13 facilities. All facilities are leased, including those subject to capital leases. During the quarter ended March 31, 2017, the Company moved its Jersey City, NJ facility to the “Leased facilities” line item.

** Owned facility subject to long-term ground sublease.

*** Consists of Miami, FL; Lenexa, KS; Overland Park, KS; and Duluth, GA facilities.

As of December 31, 2016:


Property Location	Land		Buildings, Improvements and Equipment		Construction in Progress		Total Cost

Atlanta, Georgia (Atlanta-Metro)	$	15,397	$	434,965	$	32,422	$	482,784
Richmond, Virginia		2,180		237,347		70,580		310,107
Irving, Texas		8,606		204,713		69,653		282,972
Suwanee, Georgia (Atlanta-Suwanee)		3,521		171,376		2,013		176,910
Chicago, Illinois		9,400		45,848		100,623		155,871
Leased Facilities *		1,130		116,290		10,003		127,423
Piscataway, New Jersey		7,466		82,210		17,261		106,937
Santa Clara, California **		—		98,708		7,078		105,786
Sacramento, California		1,481		62,102		390		63,973
Princeton, New Jersey		20,700		32,788		538		54,026
Fort Worth, Texas		136		610		49,116		49,862
Other ***		4,113		37,810		6,283		48,206
	$	74,130	$	1,524,767	$	365,960	$	1,964,857

** Owned facility subject to long-term ground sublease.

*** Consists of Miami, FL; Lenexa, KS; Overland Park, KS; and Duluth, GA facilities.

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6. Debt

Below is a listing of the Company’s outstanding debt, including capital leases and lease financing obligations, as of March 31, 2017 and December 31, 2016 (in thousands):


	Weighted Average
	Coupon Interest Rate at		March 31,		December 31,
	March 31, 2017	Maturities	2017		2016
			(unaudited)
Unsecured Credit Facility
Revolving Credit Facility	2.37%	December 17, 2020	$	206,000	$	139,000
Term Loan I	2.28%	December 17, 2021		300,000		300,000
Term Loan II	2.28%	April 27, 2022		200,000		200,000
Senior Notes	5.88%	August 1, 2022		300,000		300,000
Lenexa Mortgage	4.10%	May 1, 2022		1,906		—
Capital Lease and Lease Financing Obligations	3.62%	2017 - 2025		35,459		38,708
	3.38%			1,043,365		977,708
Less discount and net debt issuance costs				(11,377)		(11,882)
Total outstanding debt, net			$	1,031,988	$	965,826

Credit Facility, Senior Notes and Mortgage Notes Payable

(a) Unsecured Credit Facility – In December 2016, the Company amended and restated its unsecured credit facility, increasing the total capacity by $300 million to a total capacity of $1.2 billion and extending the term. The amended unsecured credit facility includes a $300 million term loan which matures on December 17, 2021, another $200 million term loan which matures on April 27, 2022, and a $700 million revolving credit facility which matures on December 17, 2020, with a one year extension option. Amounts outstanding under the amended unsecured credit facility bear interest at a variable rate equal to, at the Company’s election, LIBOR or a base rate, plus a spread that will vary depending upon the Company’s leverage ratio. For revolving credit loans, the spread ranges from 1.55% to 2.15% for LIBOR loans and 0.55% to 1.15% for base rate loans. For term loans, the spread ranges from 1.50% to 2.10% for LIBOR loans and 0.50% to 1.10% for base rate loans. The amended unsecured credit facility also includes a $300 million accordion feature.

Under the amended unsecured credit facility, the capacity may be increased from the current capacity of $1.2 billion to $1.5 billion subject to certain conditions set forth in the credit agreement, including the consent of the administrative agent and obtaining necessary commitments. The Company is also required to pay a commitment fee to the lenders assessed on the unused portion of the unsecured revolving credit facility. At the Company’s election, it can prepay amounts outstanding under the unsecured credit facility, in whole or in part, without penalty or premium.

The unsecured credit facility requires monthly interest payments and requires the Company to comply with various customary affirmative and negative covenants and quarterly financial covenant requirements relating to the debt service coverage ratio, fixed charge ratio, leverage ratio and tangible net worth, and various other operational requirements.

As of March 31, 2017, the Company had outstanding $706.0 million of indebtedness under the amended unsecured credit facility, consisting of $206.0 million of outstanding borrowings under the unsecured revolving credit facility and $500.0 million outstanding under the term loans, exclusive of net debt issuance costs of $3.9 million. In connection with the unsecured credit facility, as of March 31, 2017, the Company had additional letters of credit outstanding aggregating to $2.1 million. As of March 31, 2017, the weighted average interest rate for amounts outstanding under the unsecured credit facility was 2.31%.

(b) Senior Notes – On July 23, 2014, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership formed solely for the purpose of facilitating the offering of the notes described below (collectively, the “Issuers”), issued $300 million aggregate principal amount of 5.875% Senior Notes due 2022 (the

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“Senior Notes”). The Senior Notes have an interest rate of 5.875% per annum, were issued at a price equal to 99.211% of their face value and mature on August 1, 2022. The proceeds from the offering were used to repay amounts outstanding under the unsecured credit facility, including $75 million outstanding under the term loan. As of March 31, 2017, the discount recorded on the Senior Notes was $1.7 million and the outstanding net debt issuance costs associated with the Senior Notes were $5.8 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 foreign subsidiaries, receivables entities and 2470 Satellite Boulevard, LLC, which is a Delaware limited liability company formed in December 2015 that acquired an office building in Duluth, Georgia and has de minimis assets and operations) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., 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 on April 23, 2015, all of the outstanding originally issued Senior Notes were tendered in an exchange offer for 5.875% Senior Notes due 2022 registered under the Securities Act of 1933, as amended (the “Exchange Notes”). The Exchange Notes did not provide the Company with any additional proceeds and satisfied its obligations under a registration rights agreement entered into in connection with the issuance of the Senior Notes.

(c) Lenexa Mortgage – On March 8, 2017, the Company entered into a $1.9 million mortgage loan secured by its 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.

The annual remaining principal payment requirements as of March 31, 2017 per the contractual maturities and excluding extension options, capital leases and lease financing obligations, are as follows (unaudited and in thousands):


2017	$	48
2018		65
2019		68
2020		206,071
2021		300,074
Thereafter		501,580
Total	$	1,007,906

As of March 31, 2017, the Company was in compliance with all of its covenants.

Capital Leases

The Company has historically entered into capital leases for certain equipment. In addition, through its acquisition of Carpathia on June 16, 2015, the Company acquired capital leases of both equipment and certain properties. Total outstanding liabilities for capital leases were $15.4 million as of March 31, 2017, of which $9.9 million were assumed through the Carpathia acquisition, all of which was related to the lease of real property. Carpathia had entered into capital lease arrangements for datacenter space under two lease agreements expiring in 2018 and 2019 at its Harrisonburg, Virginia and Ashburn, Virginia locations. Total recurring monthly payments range from approximately $0.2 million to $0.5 million during the terms of the leases, in addition to payments made for utilities. Depreciation related to the associated assets for the capital leases is included in depreciation and amortization expense in the Statements of Operations.

Lease Financing Obligations

Through the acquisition of Carpathia, the Company acquired lease financing obligations totaling $20.0 million as of March 31, 2017, of which $18.6 million related to a sale-leaseback transaction where Carpathia has continuing involvement. On December 23, 2011, Carpathia sold the shell of a building and the associated land to an unrelated third party. Carpathia leases the property back and is a party to an agreement with the same third party that constructed a new

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building on the adjoining property for use as a data center. Carpathia is primarily responsible for financing the improvements and outfitting the building with the necessary equipment. The third party leases back the new building in stages to Carpathia as the various stages are completed. In accordance with ASC 840-40, Leases , Carpathia has continuing involvement with the related leased assets; therefore, the Company will continue to account for the existing building shell and the associated land as fixed assets and will capitalize the construction costs of the new building. The financing obligation related to the building and equipment was $17.1 million as of March 31, 2017. In addition, due to Carpathia’s continuing involvement, it was required to defer a gain on the sale of the assets. The deferred gain was $1.5 million as of March 31, 2017, and is also included in lease financing obligations.

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

The Company, through its acquisition of Carpathia, also has a lease financing agreement in connection with a $4.8 million tenant improvement allowance on one of its data center lease agreements. The financing requires monthly payments of principal and interest of less than $0.1 million through February 2019. The outstanding balance on the financing agreement was $1.4 million as of March 31, 2017. Depreciation expense on the related leasehold improvements is included in depreciation and amortization expense in the Statements of Operations.

The following table summarizes the Company’s combined future payment obligations, excluding interest, as of March 31, 2017, on the capital leases and lease financing obligations above (unaudited and in thousands):


2017	$	9,695
2018		9,370
2019		2,844
2020		2,190
2021		2,388
Thereafter		8,972
Total	$	35,459

7. Commitments and Contingencies

The Company is subject to various routine legal proceedings and other matters in the ordinary course of business. One of the Company’s subsidiaries, Carpathia Hosting, LLC (“Carpathia”), was named as a defendant in a lawsuit filed in state court in New York. Carpathia’s customer, Portal Healthcare Solutions (“Portal Ascend”) allegedly had a security breach between November 2012 and March 2013. Portal Ascend has agreed to indemnify Carpathia in this litigation and has provided legal counsel to defend Carpathia. The court denied plaintiffs motion to certify the case as a class action. The litigation is in the early stages, thus this litigation is neither probable nor reasonably estimable.

8. Partners’ Capital, Equity and Incentive Compensation Plans

QualityTech, LP

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

As of March 31, 2017, the Operating Partnership had two classes of limited partnership units outstanding: 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 are now redeemable 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 may be subject to vesting and are pari passu with Class A units. Each Class O unit is convertible into Class

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A units by the Operating Partnership at any time or by the holder at any time following full vesting (if such unit is subject to vesting) based on formulas contained in the partnership agreement.

QTS Realty Trust, Inc.

In connection with its initial public offering (“IPO”), QTS issued Class A common stock and Class B common stock. Class B common stock entitles the holder to 50 votes per share and was issued to enable the Company’s Chief Executive Officer to exchange 2% of his Operating Partnership units so he may have a vote proportionate to his economic interest in the Company. Also in connection with its IPO, QTS adopted the QTS Realty Trust, Inc. 2013 Equity Incentive plan (the “2013 Equity Incentive Plan”), which authorized 1.75 million shares of Class A common stock to be issued under the plan, including options to purchase Class A common stock, restricted Class A common stock, Class O units, and Class RS LTIP units of limited partnership interest. In May 2015, the total number of shares available for issuance under the 2013 Equity Incentive Plan was increased to 4,750,000.

The following is a summary of award activity under the 2010 Equity Incentive Plan and 2013 Equity Incentive Plan and related information for the three months ended March 31, 2017 (unaudited) :


	2010 Equity Incentive Plan					2013 Equity Incentive Plan
	Number of Class O units	Weighted average exercise price		Weighted average fair value		Options	Weighted average exercise price		Weighted average fair value		Restricted Stock		Weighted average grant date value
Outstanding at December 31, 2016	1,134,811	$	24.06	$	3.62	1,058,297	$	31.72	$	6.51	414,691		$	40.67
Granted	—		—		—	468,875		50.66		10.32	227,127			50.66
Exercised/Vested (1)	(26,650)		20.00		3.92	(1,250)		25.51		4.93	(85,624)	(1)		43.36
Cancelled/Expired (2)	—		—		—	(1,500)		37.69		8.77	(34,887)			42.44
Outstanding at March 31, 2017	1,108,161	$	24.16	$	3.61	1,524,422	$	37.54	$	7.68	521,307		$	44.46

(1)

This represents Class O units which were converted to Class A units and Options to purchase Class A common stock which were exercised for their respective columns. This also represents the Class A common stock that has been released from restriction and which was not surrendered by the holder to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common stock.

(2)

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 Class O units, restricted stock and options to purchase shares of Class A common stock granted for the three months ended March 31, 2017 are included in the following table on a per unit basis (unaudited). Class O units and options to purchase shares of Class A common stock were valued using the Black-Scholes model.


		Three Months Ended March 31, 2017
Fair value of restricted stock granted		$ 50.66
Fair value of options granted		$10.11-$10.36
Expected term (years)		5.5-5.9
Expected volatility		28%
Expected dividend yield		3.08%
Expected risk-free interest rates		2.12-2.18%

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The following table summarizes information about awards outstanding as of March 31, 2017 (unaudited).


	Operating Partnership Awards Outstanding
	Exercise prices		Awards outstanding	Weighted average remaining vesting period (years)
Class O Units	$	20.00-25.00	1,108,161	—
Total Operating Partnership awards outstanding			1,108,161


	QTS Realty Trust, Inc. Awards Outstanding
	Exercise prices		Awards outstanding	Weighted average remaining vesting period (years)
Restricted stock	$	—	521,307	2.3
Options to purchase Class A common stock	$	21.00-50.66	1,524,422	1.2
Total QTS Realty Trust, Inc. awards outstanding			2,045,729

All nonvested LTIP unit awards are valued as of the grant date and generally vest ratably over a defined service period. As of March 31, 2017 there were approximately 0.1 million, 0.5 million and 0.7 million nonvested Class O units, restricted Class A common stock and options to purchase Class A common stock outstanding, respectively. As of March 31, 2017 the Company had $29.1 million of unrecognized equity-based compensation expense which will be recognized over a remaining weighted-average vesting period of 1.5 years. The total intrinsic value of the awards outstanding as of March 31, 2017 was $68.6 million.

Dividends and Distributions

The following tables present quarterly cash dividends and distributions paid to QTS’ common stockholders and the Operating Partnership’s unit holders for the three months ended March 31, 2017 and 2016 (unaudited):


Three Months Ended March 31, 2017
Record Date	Payment Date	Per Common Share and Per Unit Rate		Aggregate Dividend/Distribution Amount (in millions)
December 16, 2016	January 5, 2017	$	0.36	$	19.7
				$	19.7


Three Months Ended March 31, 2016
Record Date	Payment Date	Per Common Share and Per Unit Rate		Aggregate Dividend/Distribution Amount (in millions)
December 17, 2015	January 6, 2016	$	0.32	$	15.4
				$	15.4

Additionally, on April 5, 2017, the Company paid its regular quarterly cash dividend of $0.39 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on March 16, 2017.

Equity Issuances

In March 2017, the Company established an “at-the-market” equity offering program (the “ATM Program”) pursuant to which the Company may issue, from time to time, up to $300 million of its Class A common stock. No shares of common stock were issued under the ATM Program during the three months ended March 31, 2017.

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QTS Realty Trust, Inc. Employee Stock Purchase Plan

In June 2015, the Company 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 the Company’s Class A common stock in the open market by an independent broker, with the Company paying the brokerage commissions and fees associated with such share purchases. The 2015 Plan became effective July 1, 2015. The Company reserved 250,000 shares of its 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, the stockholders of the Company approved an amendment and restatement of the Plan (the “2017 Plan”). The 2017 Plan will be effective July 1, 2017 and will be administered by 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 the Company’s Class A common stock at a discount of up to 10% (as determined by the Compensation Committee). Employees of the Company and its majority-owned subsidiaries who have been employed for at least thirty days and who perform at least thirty hours of service per week for the Company are eligible to participate in the 2017 Plan, excluding any employee who, after exercising his or her rights to purchase shares under the 2017 Plan, would own shares representing five percent or more of the total combined voting power or value of all classes of shares of the Company, or who is a Section 16 officer. Under the 2017 Plan, there will be 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 will be subject to a one-year holding period following the purchase date, during which they may not be sold or transferred.

9. Related Party Transactions

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

The transactions which occurred during the three months ended March 31, 2017 and 2016 are outlined below (unaudited and in thousands):


	Three Months Ended
	March 31,
	2017		2016

Tax, utility, insurance and other reimbursement	$	143	$	180
Rent expense		254		253
Capital assets acquired		233		80
Total	$	630	$	513

10. Noncontrolling Interest

Concurrently with the completion of the IPO, QTS consummated a series of transactions pursuant to which QTS became the sole general partner and majority owner of QualityTech, LP, which then became its operating partnership. The previous owners of QualityTech, LP retained 21.2% ownership of the Operating Partnership 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 Class A units are redeemable for cash or, at the election of the Company, common stock of the Company on a one-for-one basis. As a result of these redemptions of Class A units into common stock and the issuance of additional common stock, the noncontrolling ownership interest of QualityTech, LP, was 12.4% as of March 31, 2017.

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11. 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.

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


	Three Months Ended
	March 31,
	2017		2016
Numerator:
Net income available to common stockholders - basic	$	4,877	$	5,889
Effect of net income attributable to noncontrolling interests		691		970
Net income available to common stockholders - diluted	$	5,568	$	6,859
Denominator:
Weighted average shares outstanding - basic		47,909		41,292
Effect of Class A and Class RS partnership units *		6,783		6,801
Effect of Class O units and options to purchase Class A common stock on an "as if" converted basis *		928		881
Weighted average shares outstanding - diluted		55,620		48,974

Net income per share attributable to common stockholders - basic	$	0.10	$	0.14
Net income per share attributable to common stockholders - diluted	$	0.10	$	0.14

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

The computation of diluted net income per share for the three months ended March 31, 2017 does not include 468,875 options with an exercise price of $50.66 as their inclusion would have been antidilutive for that period. The computation of diluted net income per share for the three months ended March 31, 2016 does not include 229,693 options with an exercise price of $45.78 as their inclusion would have been antidilutive for that period.

12. Customer Leases, as Lessor

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


2017 (April - December)	$	250,976
2018		255,011
2019		166,749
2020		113,991
2021		92,528
Thereafter		121,202
Total	$	1,000,457

13. Fair Value of Financial Instruments

ASC Topic 825 requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows based upon

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market yields or by using other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, fair values are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

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

Credit facility and Senior Notes: The Company’s 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 the Company’s Senior Notes was estimated using Level 2 “significant other observable inputs,” primarily based on quoted market prices for the same or similar issuances. As of March 31, 2017, the fair value of the Senior Notes was approximately $306.1 million.

Other debt instruments: The fair value of the Company’s other debt instruments (including capital leases, lease financing obligations 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.

14. Subsequent Events

On April 5, 2017, the Company paid its regular quarterly cash dividend of $0.39 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on March 16, 2017.

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 will fix the interest rate on $400 million of term loan borrowings from January 2, 2018 through the current maturity dates, which are December 17, 2021 and April 27, 2022 ($200 million of swaps allocated to each term loan). The Company's weighted average interest rate on floating rate debt as of March 31, 2017 was approximately 2.31%. The weighted average effective fixed interest rate on the $400 million notional amount of term loan financing, following the execution of these swap agreements, will approximate 3.5%, commencing on January 2, 2018, assuming the current LIBOR spread of 1.5%.

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

The following discussion and analysis presents the financial condition and results of operations of QTS Realty Trust, Inc. (“QTS”), which includes the operations of QualityTech, LP (the “Operating Partnership”), for the three months ended March 31, 2017 and 2016. 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, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions are forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar

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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;

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;

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

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

decreased rental rates or increased vacancy rates;

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

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

environmental uncertainties and risks related to natural disasters;

financial market fluctuations; and

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

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, 2016 and Item 1A. “Risk Factors” of this Form 10-Q.

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Overview

We are a leading provider of secure, compliant data center solutions, hybrid cloud and fully managed services. We refer to our spectrum of core data center products as our “3Cs,” which consist of Custom Data Center (“C1”), Colocation (“C2”) and Cloud and Managed Services (“C3”). Our 3C integrated technology platform provides flexible, scalable, secure IT solutions for web and IT applications.

We operate a portfolio of 25 data centers located throughout the United States, Canada, Europe and Asia. Within the United States, we are located in some of the top U.S. data center markets plus other high-growth markets. Our data centers are highly specialized, full-service, mission-critical facilities used by our customers to house, power and cool the networking equipment and computer systems that support their most critical business processes. We believe that our data centers are best-in-class and engineered to adhere to the highest specifications commercially available to customers, providing fully redundant, high-density power and cooling sufficient to meet the needs of major national and international companies and organizations. This is in part reflected by our operating track record of “five-nines” (99.999%) reliability and by our diverse customer base of more than 1,100 customers, including financial institutions, healthcare companies, government agencies, communications service providers, software companies and global Internet companies.

We account for the operations of all of our properties in one reporting segment.

As of March 31, 2017, QTS owned an approximate 87.6% ownership interest in the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership.

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

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

Our Customer Base

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

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

As a result of our diverse customer base, customer concentration in our portfolio is limited. As of March 31, 2017, only three 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 13.2% of our MRR and the next largest customer accounting for only 4.2% of our MRR. In addition, approximately 60% of our MRR was attributable to customers who use more than one of our 3C products.

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Our Portfolio

We develop and operate 25 data centers located throughout the United States, Canada, Europe and Asia, containing an aggregate of approximately 5.7 million gross square feet of space (approximately 92% of which is wholly owned by us), including approximately 2.5 million “basis-of-design” raised floor square feet, which represents the total data center raised floor potential of our existing data center facilities. This represents the maximum amount of space in our existing buildings that could be leased following full build-out, depending on the configuration that we deploy. We build out our data center facilities for both general use (colocation) and for executed leases that require significant amounts of space and power, depending on the needs of each facility at that time. As of March 31, 2017, this space included approximately 1,377,000 raised floor operating net rentable square feet, or NRSF, plus approximately 1.1 million square feet of additional raised floor in our development pipeline, of which approximately 131,000 NRSF is expected to become operational by December 31, 2017. Of the total 1.1 million NRSF in our development pipeline, none was related to customer leases which had been executed but not yet commenced. Our facilities collectively have access to over 650 megawatts (“MW”) of gross utility power with 600 MW of available utility power. We believe such access to power gives us a competitive advantage in redeveloping data center space, since access to power is usually the most limiting and expensive component in data center redevelopment.

The following table presents an overview of the portfolio of operating properties that we own or lease, based on information as of March 31, 2017:


			Operating Net Rentable Square Feet (Operating NRSF) (3)
Property	Year Acquired (1)	Gross Square Feet (2)	Raised Floor (4)	Office & Other (5)	Supporting Infrastructure (6)	Total	% Occupied (7)		Annualized Rent (8)		Available Utility Power (MW) (9)	Basis of Design ("BOD") NRSF	Current Raised Floor as a % of BOD
Richmond, VA	2010	1,318,353	167,309	51,093	178,854	397,256	88.8	%	$	40,325,072	110	557,309	30.0	%

Atlanta, GA (Metro)	2006	968,695	452,986	36,953	331,426	821,365	95.8	%	$	94,810,202	72	527,186	85.9	%

Irving, TX	2013	698,000	134,360	6,981	119,483	260,824	96.8	%	$	31,325,631	140	275,701	48.7	%

Princeton, NJ	2014	553,930	58,157	2,229	111,405	171,791	100.0	%	$	9,867,695	22	158,157	36.8	%

Chicago, IL	2014	467,124	28,000	-	30,452	58,452	71.2	%	$	1,557,450	8	208,000	13.5	%

Suwanee, GA	2005	369,822	205,608	8,697	107,128	321,433	84.9	%	$	59,511,928	36	205,608	100.0	%

Piscataway, NJ	2016	360,000	88,820	14,311	91,851	194,982	83.2	%	$	13,049,868	111	176,000	50.5	%

Fort Worth, TX	2016	261,836	600	-	1,100	1,700	100.0	%	$	216,600	50	80,000	0.8	%

Santa Clara, CA*	2007	135,322	55,905	944	45,094	101,943	74.3	%	$	23,338,926	11	80,940	69.1	%

Sacramento, CA	2012	92,644	54,595	2,794	23,916	81,305	43.5	%	$	11,449,802	8	54,595	100.0	%

Leased facilities **	2006 & 2015	288,926	108,072	19,626	74,893	202,591	53.1	%	$	73,977,594	27	146,919	73.6	%

Other ***	Misc	147,435	22,380	49,337	30,074	101,790	65.1	%	$	5,780,255	5	22,380	100.0	%

Total		5,662,087	1,376,792	192,965	1,145,676	2,715,432	87.6	%	$	365,211,023	600	2,492,795	55.2	%

(1)

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

(2)

With respect to our owned properties, gross square feet represents the entire building area. With respect to leased properties, gross square feet represents that portion of the gross square feet subject to our lease. Gross square feet includes 347,261 square feet of our office and support space, which is not included in operating NRSF.

(3)

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

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(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 (949,355 square feet as of March 31, 2017) divided by leasable raised floor based on the current configuration of the properties (1,084,001 square feet as of March 31, 2017), expressed as a percentage.

(8)

We define annualized rent as MRR multiplied by 12. We calculate MRR as monthly contractual revenue under executed contracts as of a particular date, which includes revenue from our C1, C2 and C3 rental 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 of a particular date, unless otherwise specifically noted. This amount reflects the annualized cash rental payments. It does not reflect the accounting associated with any free rent, rent abatements or future scheduled rent increases and also excludes operating expense and power reimbursements.

(9)

Represents installed utility power and transformation capacity that is available for use by the facility as of March 31, 2017.

* Subject to long term ground lease.

** Includes 13 facilities. All facilities are leased, including those subject to capital leases. During the quarter ended March 31, 2017, the Company moved its Jersey City, NJ facility to the “Leased facilities” line item.

*** Consists of Miami, FL; Lenexa, KS; Overland Park, KS; and Duluth, GA facilities. During the quarter ended March 31, 2017, the Company moved its Miami, FL facility to the “Other” line item.

Key Operating Metrics

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

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

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

Rental Churn . We define rental churn as the MRR lost in the period due to a customer intending to fully exit the QTS platform in the near term compared to total MRR at the beginning of the period.

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

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

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

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Factors That May Influence Future Results of Operations and Cash Flows

Revenue. Our revenue growth will depend on our ability to maintain the historical occupancy rates of leasable raised floor, lease currently available space, lease new capacity that becomes available as a result of our development and redevelopment activities, attract new customers and continue to meet the ongoing technological requirements of our customers. As of March 31, 2017, we had in place customer leases generating revenue for approximately 88% of our leasable raised floor. Our ability to grow revenue also will be affected by our ability to maintain or increase rental, cloud and managed services rates at our properties. Future economic downturns, regional downturns or downturns in the technology industry could impair our ability to attract new customers or renew existing customers’ leases on favorable terms, or at all, and could adversely affect our customers’ ability to meet their obligations to us. Negative trends in one or more of these factors could adversely affect our revenue in future periods, which would impact our results of operations and cash flows. We also at times may elect to reclaim space from customers in a negotiated transaction where we believe that we can redevelop and/or re-lease that space at higher rates, which may cause a decrease in revenue until the space is re-leased.

Leasing Arrangements. As of March 31, 2017, 34% 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). As of March 31, 2017, approximately 42% of our MRR was attributable to the metered power model. Under the metered power model, the customer pays us a fixed monthly rent amount, plus reimbursement of certain other operating costs, including actual costs of sub-metered electricity used to power its data center equipment and an estimate of costs for electricity used to power supporting infrastructure for the data center, expressed as a factor of the customer’s actual electricity usage. Fluctuations in our customers’ utilization of power and the supplier pricing of power do not significantly impact our results of operations or cash flows under the metered power model. These leases generally have a minimum term of five years. As of March 31, 2017, 66% of our MRR was leased to customers which individually occupied less than 6,600 square feet of space. As of March 31, 2017, approximately 58% of our MRR was attributable to the gross lease model. Under a gross lease, the customer pays us a fixed rent on a monthly basis, and does not separately reimburse us for operating costs, including utilities, maintenance, repair, property taxes and insurance, as reimbursement for these costs is factored into MRR. However, if customers access more utility costs than their leases permit, we are able to charge these customers for overages. For leases under the gross lease model, fluctuations in our customers’ utilization of power and the prices our utility providers charge us will impact our results of operations and cash flows. Our leases on a gross lease basis generally have a term of three years or less.

Scheduled Lease Expirations. Our ability to minimize rental churn and customer downgrades at renewal and renew, lease and re-lease expiring space will impact our results of operations and cash flows. Leases which have commenced billing representing approximately 11% and 30% of our total leased raised floor are scheduled to expire during the years ending December 31, 2017 (including all month-to-month leases) and 2018, respectively. These leases also represented approximately 28% and 28%, respectively, of our annualized rent as of March 31, 2017. 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, Redevelopment and Financing. Our revenue growth also will depend on our ability to acquire and redevelop and subsequently lease data center space at favorable rates. We generally fund the cost of data center acquisition and redevelopment from our net cash provided by operations, 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, and borrowings under our credit facility to fund our redevelopment projects.

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

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company, including employee equity-based compensation. Increases or decreases in our operating expenses will impact our results of operations and cash flows. We expect to incur additional operating expenses as we continue to expand.

General Leasing Activity

During the three months ended March 31, 2017, we entered into customer leases representing approximately $0.4 million of incremental MRR, net of downgrades (and representing approximately $4.3 million of incremental annualized rent, net of downgrades) at $849 per square foot. In addition, $2.9 million of leasing commissions was associated with new and renewal leasing activity for the three months ended March 31, 2017.

During the three months ended March 31, 2017, we renewed leases with a total annualized rent of $7.8 million at an average rent per square foot of $661, which was 2.6% higher than the annualized rent prior to their respective renewals. Customers that renew with adjustments to square feet are reflected in the net leasing activity discussed above. The rental churn rate for the three months ended March 31, 2017 was 3.3%, the majority of which was the result of a single customer termination in one of the Company’s leased facilities in Northern Virginia which was disclosed in prior quarters. Excluding this customer termination, rental churn for the first quarter of 2017 would be 0.7%.

During the three months ended March 31, 2017, we commenced customer leases representing approximately $2.1 million of MRR (and representing approximately $24.7 million of annualized rent) at $418 per square foot.

As of March 31, 2017, our booked-not-billed MRR balance (which represents customer leases that have been executed, but for which lease payments have not commenced as of March 31, 2017) was approximately $3.5 million, or $41.9 million of annualized rent. The booked-not-billed balance is expected to contribute an incremental $15.3 million to revenue in 2017 (representing $27.9 million in annualized revenues), an incremental $2.9 million in 2018 (representing $4.7 million in annualized revenues) and an incremental $9.2 million in annualized revenues thereafter.

We estimate the remaining capital cost to provide the space, power, connectivity and other services to the customer contracts which had been booked but not billed as of March 31, 2017 to be approximately $7 million. This estimate generally includes C1 customers with newly contracted space of more than 3,300 square feet. The space, power, connectivity and other services provided to customers that contract for smaller amounts of space is generally provided by existing space which was previously developed.

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Results of Operations

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

Changes in revenues and expenses for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 are summarized below (unaudited and in thousands):


	Three Months Ended March 31,
	2017		2016		$ Change		% Change
Revenues:
Rental	$	79,117	$	68,426	$	10,691		16%
Recoveries from customers		8,361		5,435		2,926		54%
Cloud and managed services		16,965		18,890		(1,925)		-10%
Other		1,521		2,017		(496)		-25%
Total revenues		105,964		94,768		11,196		12%
Operating expenses:
Property operating costs		35,421		31,781		3,640		11%
Real estate taxes and insurance		3,147		1,740		1,407		81%
Depreciation and amortization		33,948		28,639		5,309		19%
General and administrative		22,197		20,286		1,911		9%
Transaction and integration costs		336		2,087		(1,751)		-84%
Total operating expenses		95,049		84,533		10,516		12%
Operating income		10,915		10,235		680		7%

Other income and expense:
Interest income		1		—		1		*
Interest expense		(6,869)		(5,981)		888		15%
Income before taxes		4,047		4,254		(207)		-5%
Tax benefit of taxable REIT subsidiaries		1,521		2,605		(1,084)		-42%
Net income	$	5,568	$	6,859	$	(1,291)		-19%

not applicable for comparison

Revenues . Total revenues for the three months ended March 31, 2017 were $106.0 million compared to $94.8 million for the three months ended March 31, 2016. The increase of $11.2 million, or 12%, was largely attributable to organic growth in our customer base and placing additional square footage into service in conjunction with the development and expansion of our Irving, Atlanta-Metro, Richmond, Atlanta-Suwanee and Chicago data centers as well as the acquisition of the Piscataway facility on June 6, 2016, which contributed $5.3 million in incremental revenue for the three months ended March 31, 2017.

The increase of $8.8 million, or 10%, in combined rental and cloud and managed services revenue was primarily attributable to rents from newly leased space from ongoing expansions in our Irving, Atlanta-Metro, Richmond, Atlanta-Suwanee and Chicago data centers as well as increases in rents from previously leased space, net of downgrades at renewal and rental churn. Additionally, the acquisition of the Piscataway facility on June 6, 2016 contributed $3.4 million in incremental revenue for the three months ended March 31, 2017.

As of March 31, 2017, our data centers were approximately 88% occupied based on leasable raised floor of approximately 1,084,000 square feet, with approximately 949,000 square feet occupied, with an average annualized rent of $387 per leased raised floor square foot including cloud and managed services revenue, or $319 per leased raised floor square foot excluding cloud and managed services revenue. As of March 31, 2017, the average annualized rent for our

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C1 product, including managed services for our C1 product, was $197 per leased raised floor square foot, and the average annualized rent for our C2 product, including Cloud and managed services combined was $1,327 per leased raised floor square foot. As of March 31, 2016, our data centers were approximately 88% occupied and billing based on leasable raised floor of approximately 896,000 square feet, with approximately 785,000 square feet occupied and paying rent, with an average annualized rent of $420 per leased raised floor square foot including cloud and managed services revenue, or $339 per leased raised floor square foot excluding cloud and managed services revenue. As of March 31, 2016, the average annualized rent for our C1 product, including managed services for our C1 product, was $197 per leased raised floor square foot, and the average annualized rent for our C2 product, including Cloud and managed services combined was $1,245 per leased raised floor square foot. The increase in leasable raised floor between 2016 and 2017 is primarily related to the addition of raised floor square footage from our redevelopment activities primarily in the Irving, Richmond, Chicago, Atlanta-Metro, and Atlanta-Suwanee facilities, as well as the acquisition of the Piscataway and Fort Worth facilities. The decrease in average annualized rent per leased raised floor square foot is primarily due to an increase in mix of C1 customers in our portfolio. As of March 31, 2017, a larger portion of our customers were C1 customers (42% of MRR) compared to March 31, 2016 (36% of MRR). This increase in the proportion of C1 customers has contributed to the reduction in average annualized rent per square foot due to the fact that C1 customers lease larger amounts of space and power for longer periods and lower rates due to economies of scale in addition to reimbursing us for utilities and various other operating expenses, and that reimbursement is excluded from the calculation of annualized rent per square foot.

Higher recoveries from customers for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 were primarily due to reimbursements associated with the acquisition of the Piscataway facility which contributed $1.8 million to the increase. The remaining increase of $1.1 million in recoveries revenue was primarily attributable to the expansion of our Irving data center contributing $0.6 million to the increase and increased utility costs generally related to an increase in utility usage at our Atlanta-Metro data center contributing $0.6 million to the increase, offset by reduced reimbursements of $0.1 million at various other facilities. The $0.5 million decrease in other revenue for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 was primarily due to lower straight line rent as well as a lower level of scrap metal sales.

Property Operating Costs. Property operating costs for the three months ended March 31, 2017 were $35.4 million compared to property operating costs of $31.8 million for the three months ended March 31, 2016, an increase of $3.6 million, or 11%. The breakdown of our property operating costs is summarized in the table below (unaudited and in thousands):


	Three Months Ended March 31,
	2017		2016		$ Change		% Change
Property operating costs:
Direct payroll	$	5,744	$	4,961	$	783		16%
Rent		3,957		4,797		(840)		-18%
Repairs and maintenance		4,483		3,253		1,230		38%
Utilities		10,950		7,939		3,011		38%
Management fee allocation		5,227		5,039		188		4%
Other		5,060		5,792		(732)		-13%
Total property operating costs	$	35,421	$	31,781	$	3,640		11%

The acquisition of Piscataway contributed $2.2 million to the total increase in property operating costs for the three months ended March 31, 2017, of which $0.5 million related to direct payroll, $0.3 million related to repairs and maintenance, $1.1 million related to utilities, $0.2 million related to management fee allocation and $0.1 million related to other property operating costs. The remaining $1.4 million increase in total property operating costs was primarily attributable to the revenue growth and expansion of our existing facilities, which included increased direct payroll allocation of $0.3 million (exclusive of the increase attributable to Piscataway as discussed above), increased repair and maintenance expense of $0.9 million which tends to fluctuate from period to period and increase with the expansion and lease-up of our facilities, and increased utilities expense of $1.9 million, offset by a $0.8 million decrease in rent expense primarily related to the exit of portions of leased facilities as customers migrated to owned facilities as well as reduced

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other expenses of $0.9 million primarily related to increased operating expense reimbursements associated with our newly acquired Fort Worth facility. Management fee allocation for our leased facilities acquired in 2015 is based on 10% of cash rental revenues for each facility and reflects an allocation of internal charges to cover back-office and service-related costs associated with the day-to-day operations of our data center facilities, with a corresponding offset to general and administrative expenses. Management fee allocation for our other facilities is based on 4% of cash rental revenues for each facility.

Real Estate Taxes and Insurance. Real estate taxes and insurance for the three months ended March 31, 2017 were $3.1 million compared to $1.7 million for the three months ended March 31, 2016. The increase of $1.4 million, or 81%, was primarily attributable to property taxes associated with acquired properties in 2016 including our Piscataway and Fort Worth facilities.

Depreciation and Amortization. Depreciation and amortization for the three months ended March 31, 2017 was $33.9 million compared to $28.6 million for the three months ended March 31, 2016. The increase of $5.3 million, or 19%, was primarily due to depreciation expense of $0.6 million and amortization expense of $1.4 million associated with the Piscataway acquisition. The remaining increase of $3.3 million was due to additional depreciation of $3.8 million, which was primarily due to additional depreciation of the Irving, Richmond and Atlanta-Metro data centers, offset by decreased amortization expense of $0.5 million. The decrease in amortization expense was primarily related to an adjustment of $1.0 million to increase amortization expense during the three months ended March 31, 2016 following identified purchase price allocation adjustments.

General and Administrative Expenses. General and administrative expenses were $22.2 million for the three months ended March 31, 2017 compared to general and administrative expenses of $20.3 million for the three months ended March 31, 2016, an increase of $1.9 million, or 9%, which included a reduction of $0.9 million of general and administrative expenses in 2016 associated with the receipt of litigation settlement proceeds. Excluding this settlement, general and administrative expenses increased $1.0 million or 4.9%. The remaining $1.0 million increase in general and administrative expenses was primarily attributable to increased payroll expenses of $1.0 million, of which $0.7 million related to sales and marketing personnel, higher equity-based compensation expense of $1.0 million, higher travel expenses of $0.4 million and higher software license costs of $0.4 million. These increases were partially offset by increased direct payroll allocation of $1.0 million, decreased outside services expense of $0.4 million primarily related to lower consulting fees, increased management fee allocation of $0.2 million, and a reduction in other expenses of $0.2 million.

Transaction and Integration Costs. For the three months ended March 31, 2017, we incurred $0.3 million in transaction and integration costs compared to $2.1 million for the three months ended March 31, 2016. In the current period, $0.3 million in costs were attributable to various activities related to the integration of the Piscataway and Fort Worth facilities acquired in 2016. Acquisition-related costs for acquisitions accounted for as a business combination in accordance with ASC 805, Business Combinations , are expensed in the periods in which the costs are incurred and the services are received.

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Interest Expense. Interest expense was $6.9 million and $6.0 million for the three months ended March 31, 2017 and 2016. The increase of $0.9 million, or 15%, was due primarily to an increase in the average debt balance of $96.1 million, primarily as a result of our ongoing developments as well as expansions and acquisitions, partially offset by issuance of additional common shares. The average debt balance, exclusive of debt issuance costs, for the three months ended March 31, 2017 was $1,026.5 million, with a weighted average interest rate, including the effect of amortization of deferred financing costs, of 3.90%. This compared to an average debt balance, exclusive of debt issuance costs, of $930.4 million for the three months ended March 31, 2016, with a weighted average interest rate, including the effect of interest rate swaps and amortization of deferred financing costs, of 3.77%. Interest capitalized in connection with our redevelopment activities during the three months ended March 31, 2017 and 2016 was $3.1 million and $2.8 million, respectively.

Tax Benefit of Taxable REIT Subsidiaries. The tax benefit of taxable REIT subsidiaries for the three months ended March 31, 2017 was $1.5 million compared to $2.6 million for the three months ended March 31, 2016. One of our taxable REIT subsidiaries had slightly reduced losses in the three months ended March 31, 2017, and did not incur any integration or transaction costs during the three months ended March 31, 2017, whereas the tax effect of integration and transaction costs was approximately $0.7 million in the three months ended March 31, 2016.

Net Income. A summary of the components of the decrease in net income of $1.3 million for the three months ended March 31, 2017 as compared to the three months ended March 31, 2016 is as follows (unaudited and in millions):


	$ Change
Increase in revenues, net of property operating costs, real estate taxes and insurance	$	6.1
Increase in general and administrative expense		(1.9)
Increase in depreciation and amortization		(5.3)
Decrease in transaction and integration costs		1.8
Increase in interest expense net of interest income		(0.9)
Decrease in tax benefit		(1.1)
Decrease in net income	$	(1.3)

Non-GAAP Financial Measures

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

FFO, Operating FFO and Adjusted Operating FFO

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

Due to the volatility and nature of certain significant charges and gains recorded in our operating results that management believes are not reflective of our core operating performance, management computes an adjusted measure

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of FFO, which we refer to as Operating FFO. 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, 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.

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


	Three Months Ended
	March 31,
	2017		2016
FFO
Net income	$	5,568	$	6,859
Real estate depreciation and amortization		29,504		24,869
FFO		35,072		31,728

Operating FFO
Integration costs		272		2,053
Transaction costs		64		34
Deferred tax benefit associated with transaction and integration costs		—		(748)
Operating FFO		35,408		33,067

Maintenance Capex		(796)		(335)
Leasing commissions paid		(4,169)		(5,807)
Amortization of deferred financing costs and bond discount		980		877
Non real estate depreciation and amortization		4,443		3,770
Straight line rent revenue and expense and other		(1,127)		(1,610)
Deferred tax benefit from operating results		(1,521)		(1,857)
Equity-based compensation expense		3,082		2,050
Adjusted Operating FFO	$	36,300	$	30,155

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

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

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

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


	Three Months Ended
	March 31,
	2017		2016
Recognized MRR
Total period revenues (GAAP basis)	$	105,964	$	94,768
Less: Total period recoveries		(8,361)		(5,435)
Total period deferred setup fees		(2,616)		(1,903)
Total period straight line rent and other		(3,118)		(4,268)
Recognized MRR in the period	$	91,869	$	83,162

MRR
Total period revenues (GAAP basis)	$	105,964	$	94,768
Less: Total revenues excluding last month		(70,939)		(63,020)
Total revenues for last month of period		35,025		31,748
Less: Last month recoveries		(2,760)		(1,876)
Last month deferred setup fees		(898)		(676)
Last month straight line rent and other		(933)		(1,716)
MRR at period end *	$	30,434	$	27,480

* Does not include our booked-not-billed MRR balance, which was $3.5 million and $4.3 million as of March 31, 2017 and 2016, respectively.

Net Operating Income (NOI)

We calculate net operating income (“NOI”), as net income (loss), excluding: interest expense, interest income, tax expense (benefit) of taxable REIT subsidiaries, depreciation and amortization, write off of unamortized deferred financing costs, gain (loss) on extinguishment of debt, transaction and integration costs, gain (loss) on sale of real estate, restructuring costs and general and administrative expenses. 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 are allocated a charge of 10% of cash revenues, as a property operating cost and a corresponding reduction to general and administrative expense to

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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:


	Three Months Ended
	March 31,
	2017		2016
Net Operating Income (NOI)
Net income	$	5,568	$	6,859
Interest expense		6,869		5,981
Interest income		(1)		—
Depreciation and amortization		33,948		28,639
Tax benefit of taxable REIT subsidiaries		(1,521)		(2,605)
Integration costs		272		2,053
Transaction costs		64		34
General and administrative expenses		22,197		20,286
NOI (1)	$	67,396	$	61,247
Breakdown of NOI by facility:
Atlanta-Metro data center	$	20,511	$	19,972
Atlanta-Suwanee data center		11,958		11,500
Leased data centers (2)		9,010		11,809
Richmond data center		8,230		6,602
Irving data center		6,440		2,624
Santa Clara data center		3,279		3,764
Piscataway data center		2,403		—
Princeton data center		2,399		2,356
Sacramento data center		1,837		1,922
Chicago data center		647		—
Fort Worth data center		106		—
Other facilities (3)		576		698
NOI (1)	$	67,396	$	61,247

(1)

Includes facility level general and administrative expense allocation charges of 4% of cash revenue for all facilities, with the exception of the leased facilities acquired in 2015, which include general and administrative expense allocation charges of 10% of cash revenue. These allocated charges aggregated to $5.2 million and $5.0 million for the three month periods ended March 31, 2017 and 2016, respectively.

(2)

Includes 13 facilities. All facilities are leased, including those subject to capital leases. During the quarter ended March 31, 2017, the Company moved its Jersey City, NJ facility to the “Leased data centers” line item.

(3)

Consists of Miami, FL; Lenexa, KS; Overland Park, KS; and Duluth, GA facilities.

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

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

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

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

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


	Three Months Ended
	March 31,
	2017		2016
EBITDA and Adjusted EBITDA
Net income	$	5,568	$	6,859
Interest expense		6,869		5,981
Interest income		(1)		—
Tax benefit of taxable REIT subsidiaries		(1,521)		(2,605)
Depreciation and amortization		33,948		28,639
EBITDA		44,863		38,874

Equity-based compensation expense		3,082		2,050
Integration costs		272		2,053
Transaction costs		64		34
Adjusted EBITDA	$	48,281	$	43,011

Liquidity and Capital Resources

Short-Term Liquidity

Our short-term liquidity needs include funding capital expenditures for the redevelopment of data center space (a significant portion of which is discretionary), meeting debt service and debt maturity obligations, including interest payments on our 5.875% Senior Notes due 2022 (“Senior Notes”), funding payments for capital lease and lease financing obligations, funding distributions to our stockholders and unit holders, utility costs, site maintenance costs, real estate and personal property taxes, insurance, rental expenses, general and administrative expenses and certain recurring and non-recurring capital expenditures.

In addition to the $66.1 million of capital expenditures incurred in the three months ended March 31, 2017 we expect that we will incur approximately $260 million to $310 million in additional capital expenditures through December 31, 2017, excluding acquisitions, in connection with the redevelopment of our data center facilities. We expect to spend

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approximately $200 million to $250 million of capital expenditures with vendors on redevelopment, 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. We expect to fund these costs using operating cash flows and draws on our credit facility. 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 flow, cash and cash equivalents and borrowings under our credit facility.

Our cash paid for capital expenditures for the three months ended March 31, 2017 and 2016 are summarized in the table below (in thousands):


	Three Months Ended March 31,
	2017		2016
Redevelopment	$	46,618	$	61,294
Maintenance capital expenditures		796		335
Other capital expenditures (1)		18,705		16,424
Total capital expenditures	$	66,119	$	78,053

(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 capital lease and lease financing obligations, and recurring and non-recurring capital expenditures. We may also pursue additional redevelopment of our Atlanta-Metro, Irving, Fort Worth, Richmond, Piscataway and Chicago data centers and future redevelopment of other space in our portfolio. We may also pursue development on land which QTS currently owns that is adjacent to our data center properties in Atlanta-Metro, Suwanee, Richmond, Irving, Fort Worth, and Chicago. 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 and issuance of additional equity or debt securities, subject to prevailing market conditions, as discussed below.

In March 2016, QTS filed an automatic shelf registration statement on Form S-3 with the SEC. Effective upon filing, the shelf provides for the potential sale of an unspecified amount of our Class A common stock, preferred stock, depositary shares representing preferred stock, warrants and rights to purchase our common stock or any combination thereof, subject to the ability of QTS to effect offerings on satisfactory terms based on prevailing conditions. The shelf registration statement is intended to allow us to have the flexibility to raise such funds in one or more offerings should we perceive market conditions to be favorable. Pursuant to this shelf registration, on April 1, 2016, we issued 6,325,000 shares of QTS’ Class A common stock at a price of $45.50 per share in an underwritten public offering, including the exercise in full of the underwriter’s option to purchase an additional 825,000 shares. We used substantially all of the net proceeds of approximately $276 million to repay amounts outstanding under our unsecured revolving credit facility.

In March 2017, we established an “at-the-market” equity offering program (the “ATM Program”) pursuant to which we may issue, from time to time, up to $300 million of our Class A common stock. No shares of common stock were issued under the ATM Program during the three months ended March 31, 2017.

Cash

As of March 31, 2017, we had $18.3 million of unrestricted cash and cash equivalents.

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Three Months Ended March 31, 2017
Record Date	Payment Date	Per Common Share and Per Unit Rate		Aggregate Dividend/Distribution Amount (in millions)
December 16, 2016	January 5, 2017	$	0.36	$	19.7
				$	19.7


Three Months Ended March 31, 2016
Record Date	Payment Date	Per Common Share and Per Unit Rate		Aggregate Dividend/Distribution Amount (in millions)
December 17, 2015	January 6, 2016	$	0.32	$	15.4
				$	15.4

Additionally, on April 5, 2017 we paid our regular quarterly cash dividend of $0.39 per common share and per unit in the Operating Partnership to stockholders and unit holders of record as of the close of business on March 16, 2017.

Indebtedness

As of March 31, 2017, we had approximately $1,043.4 million of indebtedness, including capital leases and lease financing obligations, and excluding discounts and debt issuance costs.

Unsecured Credit Facility. In December 2016, we amended and restated our unsecured credit facility, increasing the total capacity by $300 million to a total capacity of $1.2 billion and extending the term. The amended unsecured credit facility includes a $300 million term loan which matures on December 17, 2021, another $200 million term loan which matures on April 27, 2022, and a $700 million revolving credit facility which matures on December 17, 2020, with a one year extension option. Amounts outstanding under the amended unsecured credit facility bear interest at a variable rate equal to, at our election, LIBOR or a base rate, plus a spread that will vary depending upon our leverage ratio. For revolving credit loans, the spread ranges from 1.55% to 2.15% for LIBOR loans and 0.55% to 1.15% for base rate loans. For term loans, the spread ranges from 1.50% to 2.10% for LIBOR loans and 0.50% to 1.10% for base rate loans. The amended unsecured credit facility also includes a $300 million accordion feature.

Under the amended unsecured credit facility, the capacity may be increased from the current capacity of $1.2 billion to $1.5 billion subject to certain conditions set forth in the credit agreement, including the consent of the administrative agent and obtaining necessary commitments. As of March 31, 2017, the weighted average interest rate for amounts outstanding under our unsecured credit facility was 2.31%. We are also required to pay a commitment fee to the lenders assessed on the unused portion of the unsecured revolving credit facility. At our election, we can prepay amounts outstanding under the unsecured credit facility, in whole or in part, without penalty or premium.

Our ability to borrow under the amended unsecured credit facility is subject to ongoing compliance with a number of customary affirmative and negative covenants, including limitations on liens, mergers, consolidations, investments, distributions, asset sales and affiliate transactions, as well as the following financial covenants: (i) the 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 two consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent; provided the two fiscal quarter period includes the quarter in which the material acquisition was consummated); (ii) the unencumbered asset pool debt yield cannot be less than 14% (or 12.5% for the two consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent; provided the two fiscal quarter period includes the quarter in which the material acquisition was consummated); (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

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prior two most recently-ended calendar quarters of 1.70 to 1.00; (iv) QTS must maintain a maximum debt to gross asset value (as defined in the amended and restated agreement) ratio of 60% (or 65% for the two consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent; provided the two fiscal quarter period includes the quarter in which the material acquisition was consummated); (v) QTS must maintain tangible net worth (as defined in the amended and restated agreement) cannot be less than the sum of $1,179,931,500 plus 75% of the net proceeds from any future equity offerings; and (vi) a maximum distribution payout ratio of the greater of (i) 95% of the our Funds from Operations (as defined in the amended and restated agreement) and (ii) the amount required for the Company to qualify as a REIT under the Code.

The availability under the revolving credit facility is the lesser of (i) $700 million, (ii) 60% of the unencumbered asset pool capitalized value (or 65% of the unencumbered asset pool capitalized value for the two consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent; provided the two 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 14% (or 12.5% for the two consecutive fiscal quarters immediately following a material acquisition for which the Operating Partnership has provided written notice to the Agent; provided the two fiscal quarter period includes the quarter in which the material acquisition was consummated). 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 agreement) as of the end of the most recently ended quarter for which financial statements are publicly available. The availability of funds under our unsecured credit facility depends on compliance with our covenants.

As of March 31, 2017, we had outstanding $706.0 million of indebtedness under the amended unsecured credit facility, consisting of $206.0 million of outstanding borrowings under our unsecured revolving credit facility and $500.0 million outstanding under the term loans, exclusive of net debt issuance costs of $3.9 million. In connection with the unsecured credit facility, as of March 31, 2017, we had additional letters of credit outstanding aggregating to $2.1 million.

5.875% Senior Notes due 2022. On July 23, 2014, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership formed solely for the purpose of facilitating the offering of the Senior Notes described below (collectively, the “Issuers”), issued $300 million aggregate principal amount of 5.875% Senior Notes due 2022. The Senior Notes have an interest rate of 5.875% per annum and were issued at a price equal to 99.211% of their face value. The proceeds from the offering were used to repay amounts outstanding under the unsecured credit facility, including $75 million outstanding under the term loan. As of March 31, 2017, the discount recorded on the Senior Notes was $1.7 million and the outstanding net debt issuance costs associated with the Senior Notes were $5.8 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 foreign subsidiaries, receivables entities and 2470 Satellite Boulevard, LLC, which is a Delaware limited liability company formed in December 2015 that acquired an office building in Duluth, Georgia and has de minimis assets and operations) 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 July 23, 2014, among QTS, the Operating Partnership, QTS Finance Corporation, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (the “Indenture”).

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

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

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

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.

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 March 31, 2017, including the future non-cancellable minimum rental payments required under operating leases and the maturities and scheduled principal repayments of indebtedness and other agreements (in thousands):


Obligations	2017		2018		2019		2020		2021		Thereafter		Total

Operating Leases	$	13,291	$	12,780	$	10,110	$	9,710	$	9,921	$	73,468	$	129,280
Capital Leases and Lease Financing Obligations		9,695		9,370		2,844		2,190		2,388		8,972		35,459
Future Principal Payments of Indebtedness (1)		48		65		68		206,071		300,074		501,580		1,007,906
Total (2)	$	23,034	$	22,215	$	13,022	$	217,971	$	312,383	$	584,020	$	1,172,645

(1)

Does not include the related debt issuance costs and discount on Senior Notes nor the related debt issuance costs on the term loans reflected as of March 31, 2017. Also does not include letters of credit outstanding aggregating to $2.1 million as of March 31, 2017 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 facility, Senior Notes, capital leases, lease financing obligations and other financing arrangements through the scheduled maturity date, assuming no prepayment of debt, are shown below. Interest payments were estimated based on the principal amount of debt outstanding and the applicable interest rate as of March 31, 2017 (in thousands):

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2017		2018		2019		2020		2021		Thereafter		Total
$	36,098	$	36,156	$	35,971	$	35,605	$	29,343	$	12,529	$	185,702

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Cash Flows


	Three Months Ended
	March 31,
	2017		2016
(in thousands)			(as adjusted)
Cash flow provided by (used for):
Operating activities	$	30,535	$	12,674
Investing activities		(66,119)		(78,053)
Financing activities		44,261		66,319

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

Cash flow provided by operating activities was $30.5 million for the three months ended March 31, 2017 compared to $12.7 million for the three months ended March 31, 2016. There was an increase in cash operating income of $10.5 million from the prior period primarily related to our expansion, leasing activity, and equity based compensation expense, as well as an increase in cash flow associated with net changes in working capital of $7.3 million primarily related to changes in rents and other receivables, advance rents, security deposits and other liabilities, and deferred income.

Cash flow used for investing activities decreased by $12.0 million to $66.1 million for the three months ended March 31, 2017, compared to $78.1 million for the three months ended March 31, 2016. The decrease was due primarily to a decrease in cash paid for capital expenditures of $12.0 million, primarily related to redevelopment of our Irving, Atlanta-Metro, Chicago and Richmond data centers.

Cash flow provided by financing activities was $44.3 million for the three months ended March 31, 2017, compared to $66.3 million for the three months ended March 31, 2016. The decrease was primarily due to lower proceeds of $19.0 million under our unsecured credit facility due to less proceeds being needed for capital expenditures, and higher payments of cash dividends to common stockholders of $4.0 million which was due to the increase in shares outstanding primarily related to the April 2016 equity issuance. Partially offsetting these decreases in cash provided by financing activities was an increase in proceeds of $1.9 million related to entering into the Lenexa mortgage.

Critical Accounting Policies

The Company applies those accounting policies that management believes best reflect the underlying business and economic events, consistent with accounting principles generally accepted in the United States. Inherent in such policies are certain key assumptions and estimates made by management. Management periodically updates its estimates used in the preparation of the consolidated financial statements based on its latest assessment of the current and projected business and general economic environment. Information regarding the Company’s Critical Accounting Policies and Estimates is included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

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

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the extent that there are material increases in utility costs, we generally reserve the right to renegotiate the rental rate to incorporate significant utility rate increases. However, any increases in the costs of redevelopment of our properties will generally result in a higher cost of the property, which will result in increased cash requirements to redevelop our properties and increased depreciation and amortization expense in future periods, and, in some circumstances, we may not be able to directly pass along the increase in these redevelopment costs to our customers in the form of higher rental rates.

Distribution Policy

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

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

The Operating Partnership also includes certain partners that are subject to a taxable income allocation, however, not entitled to receive recurring distributions. The partnership agreement does stipulate however, to the extent that taxable income is allocated to these partners that the partnership will make a distribution to these partners equal to the lesser of the actual per unit distributions made to Class A partners or an estimated amount to cover federal, state and local taxes on the allocated taxable income. No distributions related to allocated taxable income were made to these partners for the three months ended March 31, 2017 and 2016.

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 March 31, 2017, we had outstanding $706.0 million of consolidated indebtedness that bore interest at variable rates.

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 interest rates would increase the interest expense on the $706 million of variable indebtedness outstanding as of March 31, 2017 by approximately $7.1 million annually. Conversely, a decrease in the LIBOR rate to 0% would decrease the interest expense on this $706.0 million of variable indebtedness outstanding by approximately $6.9 million annually based on the one month LIBOR rate of approximately 0.98% as of March 31, 2017.

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amount of term loan financing, following the execution of these swap agreements, will approximate 3.5%, commencing on January 2, 2018, assuming the current LIBOR spread of 1.5%.

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

ITEM 4. Controls and Procedure s

QTS Realty Trust, Inc.

Disclosure Controls and Procedures

Based on an evaluation of disclosure controls and procedures for the period ended March 31, 2017, conducted by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer concluded that QTS’ disclosure controls and procedures are effective to ensure that information required to be disclosed by QTS in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in QTS’ internal control over financial reporting during the period ended March 31, 2017, 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 March 31, 2017, conducted by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer concluded that the Operating Partnership’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Operating Partnership in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in the Operating Partnership’s internal control over financial reporting during the period ended March 31, 2017, 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 Factor s

There have been no material changes to the risk factors disclosed in our Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017, 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 three months ended March 31, 2017 that were not registered under the Securities Act of 1933, as amended (the “Securities Act”).

QTS from time to time issues shares of Class A common stock pursuant to the QTS Realty Trust, Inc. 2013 Equity Incentive Plan (the “2013 Equity Incentive Plan”) upon exercise of stock options issued under the 2013 Equity Incentive Plan, and upon redemption of Class A units of limited partnership of the Operating Partnership (either through Class A units previously held or those received from conversion of Class O units or Class RS LTIP 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 three months ended March 31, 2017, the Operating Partnership issued approximately 16,000 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 of approximately $0.8 million based on the respective dates of the redemptions and option exercises, as applicable.

Repurchases of Equity Securities

During the three months ended March 31, 2017, certain of our employees surrendered Class A common stock owned by them to satisfy their statutory minimum federal and state tax obligations in connection with the vesting of restricted common stock under the 2013 Equity Incentive Plan.

The following table summarizes all of these repurchases during the three months ended March 31, 2017:


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
January 1, 2017 through January 31, 2017	154	(1)	$	51.95	N/A	N/A
February 1, 2017 through February 28, 2017	-			N/A	N/A	N/A
March 1, 2017 through March 31, 2017	34,733	(1)	$	50.47	N/A	N/A
Total	34,887	(1)	$	50.47

(1)

The number of shares purchased represents shares of Class A common stock surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of

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restricted common stock. With respect to these shares, the price paid per share is based on the closing price of our Class A common stock as of the date of the determination of the statutory minimum federal income tax.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibit s


Exhibit Number		Exhibit Description

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

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

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

3.2		Second Amended and Restated Bylaws of QTS Realty Trust, Inc.

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)

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

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

4.4		Supplemental Indenture, dated as of September 28, 2015, by and among QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., the entities identified therein as Guaranteeing Subsidiaries, the entities identified therein as Subsidiary Guarantors, and Deutsche Bank Trust Company Americas, to the Indenture dated, as of July 23, 2014, by and among QualityTech, LP, and QTS Finance Corporation, as issuers, QTS Realty Trust, Inc., each of the subsidiary guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2015 filed with the SEC on November 6, 2015)

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4.5		Supplemental Indenture, dated as of June 23, 2016, by and among QualityTech, LP, QTS Finance Corporation, QTS Realty Trust, Inc., the entities identified therein as Guaranteeing Subsidiaries, the entities identified therein as Subsidiary Guarantors, and Deutsche Bank Trust Company Americas, to the Indenture dated, as of July 23, 2014, by and among QualityTech, LP, and QTS Finance Corporation, as issuers, QTS Realty Trust, Inc., each of the subsidiary guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2016 filed with the SEC on August 5, 2016)

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

10.1		2017 Amended and Restated QTS Realty Trust, Inc. Employee Stock Purchase Plan (Incorporated by reference to Appendix A on the Company’s proxy statement on Schedule 14A filed with the SEC on March 20, 2017)

10.2		Employment Agreement, dated April 11, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services, LLC and Chad L. Williams (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on April 14, 2017)

10.3		Employment Agreement, dated April 11, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services, LLC and Jeffrey H. Berson (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on April 14, 2017)

10.4		Employment Agreement dated February 16, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services Holding, LLC, Quality Technology Services, LLC, and William H. Schafer (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on February 21, 2017)

10.5		Employment Agreement, dated April 11, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services, LLC and James H. Reinhart (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on April 14, 2017)

10.6		Employment Agreement, dated April 11, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services, LLC and Daniel T. Bennewitz (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on April 14, 2017)

10.7		Employment Agreement, dated April 11, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services, LLC and Shirley E. Goza

10.8		Employment Agreement, dated April 11, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services, LLC and Jon D. Greaves

10.9		Employment Agreement, dated April 11, 2017, by and among QTS Realty Trust, Inc., QualityTech, LP, Quality Technology Services, LLC and Steven C. Bloom

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 March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of equity and partners’ capital, (iv) consolidated statements of cash flow, and (v) the notes to the consolidated financial statements

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SIGNATURE S

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: May 8, 2017	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer


DATE: May 8, 2017	/s/ William H. Schafer
	William H. Schafer
	Executive Vice President – Finance and Accounting
	(Principal Accounting Officer)


	QualityTech, LP

	By: QTS Realty Trust, Inc.,
	its general partner


DATE: May 8, 2017	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer


DATE: May 8, 2017	/s/ William H. Schafer
	William H. Schafer
	Executive Vice President – Finance and Accounting
	(Principal Accounting Officer)

Exhibit 3.2

QTS REALTY TRUST, INC.

SECOND AMENDED AND RESTATED BYLAWS

ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICE . The principal office of QTS Realty Trust, Inc. (the “ Corporation ”) shall be located at such place or places as the board of directors (the “ Board of Directors ”) may designate.

Section 2. ADDITIONAL OFFICES . The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. PLACE . All meetings of stockholders shall be held at the principal office of the Corporation or at such other place within the United States as shall be set by the Board of Directors and stated in the notice of the meeting.

Section 2. ANNUAL MEETING . An annual meeting of the stockholders for the election of directors (the “ Directors ”) and the transaction of any business within the powers of the Corporation shall be held each year at a convenient location and on proper notice, on a date and at the time set by the Board of Directors, beginning with the year 2014. Failure to hold an annual meeting does not invalidate the Corporation’s existence or affect any otherwise valid acts of the Corporation.

Section 3. SPECIAL MEETINGS .

(a) General . Each of the chairman of the board, chief executive officer, president and Board of Directors may call a special meeting of stockholders. Except as provided in subsection (b)(4) of this Section 3, a special meeting of stockholders shall be held on the date and at the time and place set by the person or persons calling the meeting. Subject to subsection (b) of this Section 3, a special meeting of stockholders shall also be called by the secretary of the Corporation to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting.

(b) Stockholder-Requested Special Meetings .

(1) Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary (the “ Record Date Request Notice ”) by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the “ Request Record Date ”). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such stockholder (or such agent) and shall set forth all information relating to each such stockholder and each matter

proposed to be acted on at the meeting that would be required to be disclosed in connection with the solicitation of proxies for the election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “ Exchange Act ”). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which a Record Date Request Notice is received by the secretary.

(2) In order for any stockholder to request a special meeting to act on any matter that may properly be considered at a meeting of stockholders, one or more written requests for a special meeting (collectively, the “ Special Meeting Request ”) signed by stockholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority of all of the votes entitled to be cast on such matter at such meeting (the “ Special Meeting Percentage ”) shall be delivered to the secretary. In addition, the Special Meeting Request shall (a) set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the secretary), (b) bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (c) set forth (i) the name and address, as they appear in the Corporation’s books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), (ii) the class, series and number of all shares of stock of the Corporation which are owned (beneficially or of record) by each such stockholder and (iii) the nominee holder for, and number of, shares of stock of the Corporation owned beneficially but not of record by such stockholder, (d) be sent to the secretary by registered mail, return receipt requested, and (e) be received by the secretary within 60 days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the secretary.

(3) The secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing or delivering the notice of the meeting (including the Corporation’s proxy materials). The secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 3(b), the secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.

(4) In the case of any special meeting called by the secretary upon the request of stockholders (a “ Stockholder-Requested Meeting ”), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided , however , that the date of any Stockholder-Requested Meeting shall be not more than 90 days after the record date for such meeting (the “ Meeting Record Date ”); and provided further that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the secretary (the “ Delivery Date ”), a date and time for a Stockholder-Requested Meeting, then such meeting shall be held at 2:00 p.m., local time, on the 90th day after the Meeting Record Date or, if such 90th day is not a business day on the first preceding business day; and provided further that in the event that the Board of Directors fails to designate a place for a Stockholder-Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for a Stockholder-Requested Meeting, the Board of Directors may consider such factors as it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and

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circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. In the case of any Stockholder-Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within 30 days after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder-Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of paragraph (3) of this Section 3(b). Notwithstanding anything to the contrary in these Bylaws, the Board of Directors may submit its own proposal or proposals for consideration at any such Stockholder-Requested Meeting.

(5) If written revocations of the Special Meeting Request have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting on the matter to the secretary: (i) if the notice of meeting has not already been delivered, the secretary shall refrain from delivering the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for a special meeting on the matter, or (ii) if the notice of meeting has been delivered and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting on the matter written notice of any revocation of a request for the special meeting and written notice of the Corporation’s intention to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (A) the secretary may revoke the notice of the meeting at any time before ten days before the commencement of the meeting or (B) the chairman of the meeting may call the meeting to order and adjourn the meeting without acting on the matter. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.

(6) The chairman of the board, chief executive officer, president or Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported Special Meeting Request shall be deemed to have been received by the secretary until the earlier of (i) five business days after actual receipt by the secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the secretary represent, as of the Request Record Date, stockholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five business day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

Section 4. NOTICE . Not less than 10 nor more than 90 days before each meeting of stockholders, the secretary shall give notice to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting. Such notice shall state the time and place (if any) of the meeting, the means of remote communication (if any) by which the stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called. Such notice shall be written and may be delivered either by mail or nationally recognized private delivery service, by presenting it to such stockholder personally, by leaving it at his or her residence or usual place of business, or by any other means permitted under Maryland law, including by transmitting it to such stockholder by electronic mail to any electronic mail address of such stockholder or through any other electronic transmission by the Corporation. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his or her

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post office address as it appears on the records of the Corporation, with postage thereon prepaid. If transmitted electronically, such notice shall be deemed to be given when transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. The Corporation may give a single notice to all stockholders who share an address, which single notice shall be effective as to any stockholder at such address, unless a stockholder objects to receiving such single notice or revokes a prior consent to receiving such single notice. Failure to give notice of any meeting to one or more stockholders, or any irregularity in such notice, shall not affect the validity of any meeting fixed in accordance with this Article II or the validity of any proceedings at any such meeting.

Section 5. SCOPE OF NOTICE . Subject to Section 12(a) of this Article II, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice. The Corporation may postpone or cancel a meeting of shareholders by making a public announcement (as defined in Section 12(c)(3) of this Article II) of such postponement or cancellation prior to the meeting. Notice of the date, time and place to which the meeting is postponed shall be given not less than 10 days prior to such date and otherwise in the manner set forth in this section.

Section 6. ORGANIZATION AND CONDUCT . At every meeting of the stockholders, the chairman of the Board of Directors, if there be one, shall conduct the meeting or, in the case of vacancy in office or absence of the chairman of the Board of Directors, one of the following officers present shall conduct the meeting in the order stated: the chief executive officer, the president, the chief operating officers, if there be any, in their order of rank and seniority, the vice presidents in their order of rank and seniority, or, if no such officer is present, a chairman chosen by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast. The secretary, or, in his or her absence, an assistant secretary, or in the absence of both the secretary and assistant secretaries, a person appointed by the chairman, shall act as secretary.

The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman and without any action by the stockholders, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) maintaining order and security at the meeting; (f) removing any stockholder or any other person who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (g) determining when and for how long the polls should be open and closed; (h) recessing or adjourning the meeting to a later date and time and place announced at the meeting; (i) concluding a meeting; and (j) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 7. QUORUM . At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum, but this section shall not affect any requirement under any statute or under the charter of the Corporation (the “ Charter ”) for the vote necessary for the adoption of any measure. If, however, such

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quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without a new record date and without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

The stockholders present either in person or by proxy at a meeting which has been duly called and at which a quorum was established may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than would be required to establish a quorum.

Section 8. VOTING . A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a Director. Each share of stock may be voted for as many individuals as there are Directors to be elected and for whose election the share of stock is entitled to be voted , without any right to cumulate votes . A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless a different proportion of the votes cast or entitled to be cast is required herein or by rule or regulation or by statute or by the charter of the Corporation. Unless otherwise provided in the Charter, each outstanding share of stock, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Voting on any question or in any election may be by voice unless the presiding officer shall order that voting be by ballot.

Section 9. PROXIES . A stockholder may cast the votes entitled to be cast by the shares of stock owned of record by the stockholder in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Corporation before or at the meeting. No proxy shall be valid more than eleven months after its date unless otherwise provided in the proxy.

Section 10. VOTING OF STOCK BY CERTAIN HOLDERS . Shares of stock of the Corporation registered in the name of a corporation, partnership, limited liability company, corporation or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner, manager or director thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person (1) has been appointed to vote such shares pursuant to a bylaw or a resolution of the governing board of such corporation or other entity or pursuant to an agreement of the partners of the partnership or of the members of the limited liability company, and (2) presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such shares. Any director or other fiduciary may vote shares of stock registered in his or her name as such fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect

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to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified shares in place of the stockholder who makes the certification.

Section 11. INSPECTORS . At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares of stock represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results, hear and determine all challenges and questions arising in connection with the right to vote and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting.

Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 12. ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER PROPOSALS BY STOCKHOLDERS .

(a) Annual Meetings of Stockholders .

(1) Nominations of individuals for election to the Board of Directors and the proposal of business other than nominations of Directors to be considered by the stockholders at an annual meeting of stockholders shall be made: (i) pursuant to the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise by or at the direction of the Board of Directors or (iii) by a stockholder of the Corporation who was a stockholder of record both at the time of giving of notice of the meeting and at the time of the annual meeting, who is entitled to vote at the meeting in the election of directors or on the proposal of other business, as the case may be, and who complied with the notice procedures set forth in Sections 12(a)(2), (4) and (5), in the case of nominations of Directors, and Sections 12(a)(3) and (4), in the case of business other than the nomination of Directors.

(2) For nominations to be properly brought before an annual meeting by a stockholder pursuant to Section 12(a)(1)(iii), the stockholder must have given timely notice thereof in writing to the secretary of the Corporation (the “ Stockholder Notice ”) containing the information specified in this Section 12(a)(2). To be timely, such Stockholder Notice shall be delivered to the secretary at the principal executive offices of the Corporation not later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting nor earlier than the 150th day prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting; provided , however , that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, such Stockholder Notice to be timely must be so delivered not earlier than the 150th day prior to such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to such annual meeting or the tenth day following the day on which public

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announcement of the date of such meeting is first made. Such Stockholder Notice shall set forth: (i) as to each person whom the stockholder proposes to nominate for election or reelection as a Director, (A) a description of all agreements, arrangements or understandings between such stockholder and such beneficial owner (if any) on whose behalf the nomination is made, on the one hand, and such potential nominee and any other person or persons (naming such person or persons), on the other hand, pursuant to which the nomination is to be made by such stockholder, and (B) all other information relating to such potential nominee that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; and (ii) as to the stockholder giving such Stockholder Notice and the beneficial owner (if any) on whose behalf the nomination is made, the additional information specified in Section 12(a)(4) below.

(3) For business other than the nomination of Directors to be properly brought before an annual meeting by a stockholder pursuant to Section 12(a)(1)(iii), the stockholder must have given a timely Stockholder Notice in writing to the secretary of the Corporation containing the information specified in this Section 12(a)(3). To be timely, such Stockholder Notice shall be delivered to the secretary at the principal executive offices of the Corporation not later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting nor earlier than the 150th day prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting; provided , however , that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, such Stockholder Notice to be timely must be so delivered not earlier than the 150th day prior to such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such Stockholder Notice shall set forth: (i) a brief description of the business desired to be brought before the meeting (including the complete text of any proposed resolutions or proposed amendments to these Bylaws or other governing documents of the Corporation), the reasons for conducting such business at the meeting, a brief written statement of the reasons why the stockholder and the beneficial owner (if any) on whose behalf the proposal is made support such business, and any material interest in such business of such stockholder and of such beneficial owner (if any); (ii) a description of any agreement, arrangement or understanding with respect to such business between or among the stockholder and the beneficial owner (if any) on whose behalf the proposal is made, on the one hand, and any of their respective affiliates or associates and any others (including their names) acting in concert with any of the foregoing, on the other hand, and a representation that such stockholder and such beneficial owner (if any) will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date is first made; and (iii) as to the stockholder giving such Stockholder Notice and the beneficial owner (if any) on whose behalf the proposal is made, the additional information specified in Section 12(a)(4) below.

(4) Each Stockholder Notice delivered pursuant to Section 12(a)(2) or Section 12(a)(3) also must contain the following information as to the stockholder giving the Stockholder Notice and the beneficial owner (if any) on whose behalf the nomination is made (in the case of Section 12(a)(2)) or the business other than the nomination of Directors is desired to be brought (in the case of Section 12(a)(3)):

(A) the name and address of such stockholder, as they appear on the Corporation' s books, and of such beneficial owner (if any);

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(B) the class or series and number of shares of stock of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder and such beneficial owner (if any), including the proportionate interest in the shares of stock of the Corporation held, directly or indirectly, by a general or limited partnership in which such stockholder or such beneficial owner (if any) is a general partner or a direct or indirect beneficial owner of an interest in a general partner, as of the date of the Stockholder Notice, and a representation that such stockholder and such beneficial owner (if any) will notify the Corporation in writing of the class or series and number of such shares (including the proportionate interest in the shares held through a general or limited partnership) owned of record and beneficially as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date is first made;

(C) a description of any agreement, arrangement or understanding (including, without limitation, any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into by such stockholder and/or such beneficial owner (if any) as of the date of the Stockholder Notice, the effect or intent of which is to mitigate loss to, manage the risk or benefit of share price changes for, or increase or decrease the voting power of such stockholder or beneficial owner or any of their respective affiliates, and a representation that such stockholder and such beneficial owner (if any) will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date is first made;

(D) a representation that such stockholder intends to appear at the meeting in person or by proxy to make the nomination or propose the other business specified in such Stockholder Notice, as the case may be; and

(E) a representation as to whether such stockholder or such beneficial owner (if any) intends, or is intended to be part of a group (within the meaning ascribed to such term under Section 13(d)(3) of the Exchange Act) that intends, (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding shares of stock required to elect the proposed Director nominee or to approve or adopt the other business proposal, as the case may be, and/or (ii) otherwise to solicit proxies from stockholders in support of such nominee or other business proposal, as the case may be.

(5) Notwithstanding anything to the contrary in this Section 12(a), in the event that the number of Directors to be elected to the Board of Directors is increased and there is no public announcement by the Corporation of such action or specifying the size of the increased Board of Directors at least 130 days prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting, a stockholder’s notice required by Section 12(a)(2) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if the notice is delivered to the secretary at the principal executive offices of the Corporation not later than 5:00 p.m., Eastern Time, on the tenth day immediately following the day on which such public announcement is first made by the Corporation.

(b) Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which Directors are to be elected only (i) pursuant to the Corporation’s notice of the meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that Directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this

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Section 12(b) and at the time of the special meeting, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 12(b). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more Directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election as a Director as specified in the Corporation’s notice of meeting, if the stockholder’s notice containing the information required by paragraph (a)(2) of this Section 12 shall be delivered to the secretary at the principal executive offices of the Corporation not earlier than the 150th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of a postponement or adjournment of a special meeting to a later date or time commence a new time period for the giving of a stockholder’s notice as described above.

(1) Upon written request by the secretary or the Board of Directors or any committee thereof, any stockholder proposing a nominee for election as a Director or any proposal for other business at a meeting of stockholders shall provide, within five business days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory to the secretary or the Board of Directors or any committee thereof, in his, her or its sole discretion, of the accuracy of any information submitted by the stockholder pursuant to this Section 12. If a stockholder fails to provide such written verification within such period, the secretary or the Board of Directors or any committee thereof may treat the information as to which written verification was requested as not having been provided in accordance with the procedures set forth in this Section 12.

(2) Only such persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible for election by stockholders as Directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 12, except as may be required pursuant to Rule 14a-8, or any successor provision, under the Exchange Act or such similar rule promulgated by the Securities and Exchange Commission that governs the inclusion of stockholder proposals in proxy materials for consideration at a stockholders meeting. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or other business is not in compliance with this Section 12, to declare that such defective nomination or proposal be disregarded.

(3) For purposes of this Section 12, “public announcement” shall mean disclosure (i) in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or (ii) in a document publicly filed by the Corporation with the United States Securities and Exchange Commission pursuant to the Exchange Act.

(4) Sections 12(a) and (b) shall be the exclusive means for a stockholder to make nominations or submit business before an annual meeting of the stockholders. Notwithstanding the foregoing provisions of this Section 12, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12; provided , however , that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Sections 12(a) and (b). Nothing in this Section 12 shall be deemed to affect any right of a stockholder to request inclusion of a

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proposal in, nor the right of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to Rule 14a-8, or any successor provision, under the Exchange Act.

(5) Nothing in this Section 12 shall require disclosure of revocable proxies received by a stockholder pursuant to a soliciation of proxies after the filing of an effective Schedule 14A by such stockholders under Section 14(a) of the Exchange Act.

Section 13. TELEPHONE MEETINGS . The Board of Directors or the chairman of the meeting may permit stockholders to participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 14. INFORMAL ACTION BY STOCKHOLDERS . Any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting if a unanimous consent which sets forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and is filed with the records of the stockholders meetings.

Section 15. CONTROL SHARE ACQUISITION ACT . Notwithstanding any other provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (or any successor statute) (the “ MGCL ”) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

ARTICLE III

DIRECTORS

Section 1. GENERAL POWERS . The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. In the case of failure to elect Directors at an annual meeting of the shareholders, the Directors holding over shall continue to direct the management of the business and affairs of the Corporation until their successors are elected and qualify.

Section 2. NUMBER, ELECTION, AND QUALIFICATIONS . At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of Directors; provided, that the number thereof shall never be fewer than the minimum number required by the MGCL, nor more than 15; and further provided, that the tenure of office of a Director shall not be affected by any decrease in the number of Directors. Unless otherwise provided in the Charter or these Bylaws, the Directors shall be elected at the annual meeting of the stockholders, and each Director shall be elected to serve until the next annual meeting of the stockholders and until his or her successor is elected and qualifies or until his or her earlier death, resignation or removal. Any Director may resign at any time by delivering written notice to the Board of Directors, effective upon execution and delivery of such written notice or upon any future date specified in the notice. The acceptance of the resignation shall not be necessary to make it effective unless otherwise stated in the resignation. At least a majority of the Board of Directors shall be directors whom the Board of Directors has determined are independent under the standards established by the Board of Directors and in accordance with the then applicable listing requirements of the New York Stock Exchange. A Director shall be an individual at least 21 years of age who is not under legal disability. The fifth sentence of this Article III, Section 2 shall be effective from and after the commencement of trading of securities of the Corporation on the New York Stock Exchange, and not prior thereto.

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Section 3. ANNUAL AND REGULAR MEETINGS . An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution.

Section 4. SPECIAL MEETINGS . Special meetings of the Board of Directors may be called by or at the request of the chairman of the Board of Directors, the chief executive officer or the president or by a majority of the Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them. The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.

Section 5. NOTICE . Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, U.S. mail or courier to each Director at his or her business or residence address or by any other means permitted under Maryland law. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least 24 hours prior to the meeting. Notice by U.S. mail shall be given at least five days prior to the meeting. Notice by courier shall be given at least two days prior to the meeting. Telephone notice shall be deemed to be given when the Director or his or her agent is personally given such notice in a telephone call to which the Director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the Director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the Director and receipt of a completed answer-back indicating receipt. Notice by U.S. mail shall be deemed to be given when deposited in the U.S. mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 6. QUORUM . A majority of the Board of Directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such Directors are present at said meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to applicable law, the Charter or these Bylaws, the vote of a majority or other proportion of a particular group of Directors is required for action, a quorum must also include a majority of such group.

The Directors present at a meeting which has been duly called and at which a quorum was established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough Directors to leave less than would be required to establish a quorum.

Section 7. VOTING . The action of a majority of the Directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws. If enough Directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of that number of Directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws.

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Section 8. TELEPHONE MEETINGS . Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 9. INFORMAL ACTION BY DIRECTORS . Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed or submitted by electronic transmission to the Corporation by each Director and such written consent is filed with the minutes of proceedings of the Board of Directors.

Section 10. ORGANIZATION . At each meeting of the Board of Directors, the chairman of the Board of Directors or, in the absence of the chairman of the Board of Directors, the vice chairman, if any, of the Board of Directors, or, in the absence of both the chairman and the vice chairman, if any, the chief executive officer or, in the absence of the chief executive officer, the president or, in the absence of the president, a Director chosen by a majority of the remaining Directors present, shall act as chairman of the meeting. The secretary or, in his or her absence, an assistant secretary of the Corporation, or in the absence of the secretary and all assistant secretaries, a person appointed by the chairman, shall act as secretary of the meeting.

Section 11. VACANCIES . If for any reason any or all the Directors cease to be Directors, such event shall not terminate the Corporation, or affect these Bylaws or the powers of the remaining Directors hereunder (even if fewer than a quorum of Directors remain). Any vacancy (including a vacancy created by an increase in the number of Directors) shall be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the Directors, even if the remaining Directors do not constitute a quorum. Any individual so elected as Director shall hold office for the unexpired term of the Director he or she is replacing and until a successor is elected and qualifies.

Section 12. COMPENSATION . Directors shall not receive any stated salary for their services as Directors but, by resolution of the Board of Directors or a duly authorized committee thereof, may receive compensation per year and/or per meeting and for any service or activity they performed or engaged in as Directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof; and for their expenses, if any, in connection with any service or activity performed or engaged in as Directors; but nothing herein contained shall be construed to preclude any Directors from serving the Corporation in any other capacity and receiving compensation therefor.

Section 13. LOSS OF DEPOSITS . No Director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association or other institution with whom moneys or stock have been deposited.

Section 14. SURETY BONDS . Unless required by law, no Director shall be obligated to give any bond or surety or other security for the performance of any of his or her duties.

Section 15. REMOVAL OF DIRECTORS . The stockholders may remove any Director in the manner provided in the Charter.

Section 16. RELIANCE . Each Director, officer, employee and agent of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by

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the Directors or officers of the Corporation, as to matters which the Director, officer, employee or agent reasonably believes to be within the person’s professional or expert competence, regardless of whether such counsel or expert may also be a Director.

Section 17. RATIFICATION . The Board of Directors or the stockholders may ratify and make binding on the Corporation any action or inaction by the Corporation or its officers to the extent that the Board of Directors or the stockholders could have originally authorized the matter. Moreover, any action or inaction questioned in any stockholders’ derivative proceeding or any other proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a Director, officer or stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise, may be ratified, before or after judgment, by the Board of Directors or by the stockholders, and if so ratified, shall have the same force and effect as if the questioned action or inaction had been originally duly authorized, and such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.

Section 18. CERTAIN RIGHTS OF DIRECTORS AND OFFICERS . A Director who is not also an officer of the Corporation shall have no responsibility to devote his or her full time to the affairs of the Corporation. Any Director or officer, in his or her personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to the Corporation.

Section 19. EMERGENCY PROVISIONS . Notwithstanding any other provision in the Charter or these Bylaws, this Section 19 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors under Article III of these Bylaws cannot readily be obtained (an “ Emergency ”). During any Emergency, unless otherwise provided by the Board of Directors, (a) a meeting of the Board of Directors may be called by any director or officer by any means feasible under the circumstances, (b) notice of any meeting of the Board of Directors during such an emergency may be given less than 72 hours prior to the meeting to as many directors and by such means as may be feasible at the time, including publication, television or radio, and (c) the number of directors necessary to constitute a quorum shall be one-third of the entire Board of Directors.

ARTICLE IV

COMMITTEES

Section 1. NUMBER, TENURE AND QUALIFICATIONS . The Board of Directors may appoint from among its members a Nominating and Corporate Governance Committee, an Audit Committee and a Compensation Committee and may appoint other committees, composed of one or more Directors, to serve at the pleasure of the Board of Directors; provided , however , that the membership of each of the Nominating and Corporate Governance Committee, the Audit Committee and the Compensation Committee at all times shall comply with the independence and other listing requirements and rules and regulations of the New York Stock Exchange and the rules and regulations promulgated under the federal securities laws, and any other independence and other requirements set forth in the Company's corporate governance guidelines and applicable committee charters.

Section 2. POWERS . The Board of Directors may delegate to committees appointed under Section 1 of this Article IV any of the powers of the Directors, except as prohibited by law.

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Section 3. MEETINGS . In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another Director to act in the place of such absent member provided that such Director meets the requirements of such committee. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. Each committee shall keep minutes of its proceedings and shall report the same to the Board of Directors at the next succeeding meeting, and any action by the committee shall be subject to revision and alteration by the Board of Directors, provided that no rights of third persons shall be affected by any such revision or alteration.

Section 4. QUORUM . A majority of the members of any committee shall constitute a quorum for the transaction of business at a committee meeting, and the act of a majority present shall be the act of such committee. The Board of Directors, or the members of a committee to which such power has been duly delegated by the Board of Directors, may designate a chairman of any committee, and such chairman or any two members of any committee may fix the time and place of its meetings unless the Board of Directors shall otherwise provide.

Section 5. TELEPHONE MEETINGS . Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 6. INFORMAL ACTION BY COMMITTEES . Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed or submitted by electronic transmission to the Corporation by each member of the committee and such written consent is filed with the minutes of proceedings of such committee.

Section 7. VACANCIES, REMOVAL AND DISSOLUTION . Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.

ARTICLE V

OFFICERS

Section 1. GENERAL PROVISIONS . The officers of the Corporation shall include a president, a secretary and a treasurer and may include a chairman of the Board of Directors, a vice chairman of the Board of Directors, a chief executive officer, one or more chief operating officers, a chief financial officer, one or more vice presidents, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders, except that the chief executive officer or president may appoint one or more vice presidents, assistant secretaries and assistant treasurers or other officers. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his or her successor is elected and qualifies or until his or her death, resignation or removal in the manner hereinafter provided. Any two or more offices except (1) president and vice president and (2) chief executive officer and vice president may be held by the same person. In its discretion, the Board of Directors may leave any office unfilled. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

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Section 2. REMOVAL AND RESIGNATION . Any officer or agent of the Corporation may be removed by the Board of Directors, with or without cause, if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his or her resignation to the Board of Directors, the chairman of the Board of Directors, the chief executive officer, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the notice of resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 3. VACANCIES . A vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 4. CHIEF EXECUTIVE OFFICER . The Board of Directors may designate a chief executive officer. The chief executive officer shall have responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, for the general management and administration of the business and affairs of the Corporation, and for the supervision of other officers. The chief executive officer may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time. In the absence of the chairman of the Board of Directors or the vice chairman of the Board of Directors, if there be one, the chief executive officer shall preside over the meetings of the Board of Directors and of the stockholders at which he or she shall be present.

Section 5. CHIEF OPERATING OFFICER . The Board of Directors may designate one or more chief operating officers. Each chief operating officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer.

Section 6. CHIEF FINANCIAL OFFICER . The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer.

Section 7. CHAIRMAN OF THE BOARD . The Board of Directors may designate a chairman of the Board of Directors and shall provide whether the chairman of the Board of Directors shall also be an officer of the Corporation. The chairman of the Board of Directors shall preside over the meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall in general oversee all of the business and affairs of the Corporation. The chairman of the Board of Directors, if designated as an officer of the Corporation, may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed. The chairman of the Board of Directors shall perform such other duties as may be assigned to him or her by the Board of Directors.

Section 8. PRESIDENT . In the absence of the chairman of the Board of Directors and the chief executive officer, the president shall preside over the meetings of the Board of Directors and of the stockholders at which he or she shall be present. In the absence of a designation of a chief executive officer by the Board of Directors, the president shall be the chief executive officer. The president may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or

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agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors or the chief executive officer from time to time.

Section 9. VICE PRESIDENTS . In the absence of each of the chief executive officer and the president or in the event of a vacancy in all three offices, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to him or her by the chief executive officer or by the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president, as senior vice president or as vice president for particular areas of responsibility. The chief executive officer or, in the event there is no chief executive officer, the president may designate one or more vice presidents as vice president for particular areas of responsibility.

Section 10. SECRETARY . The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors.

Section 11. TREASURER . The treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors.

The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the chief executive officer and Board of Directors, at the regular meetings of the Board of Directors or whenever they may require it, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.

Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS . The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president, the chief executive officer or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors.

Section 13. COMPENSATION . The compensation of the officers shall be fixed from time to time by the Board of Directors or a committee thereof and no officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a Director.

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ARTICLE VI

CONTRACTS, CHECKS AND DEPOSITS

Section 1. CONTRACTS . The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the Directors or by an authorized person shall be valid and binding upon the Board of Directors and upon the Corporation.

Section 2. CHECKS AND DRAFTS . All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 3. DEPOSITS . All funds of the Corporation not otherwise employed shall be deposited or invested from time to time to the credit of the Corporation as the Board of Directors, the chief executive officer, the chief financial officer or any other officer designated by the Board of Directors may determine.

ARTICLE VII

STOCK

Section 1. CERTIFICATES . Except as may be otherwise provided by the Board of Directors, stockholders of the Corporation are not entitled to certificates representing the shares of stock held by them. In the event that the Corporation issues shares of stock represented by certificates, such certificates shall be in such form as prescribed by the Board of Directors or a duly authorized officer, shall contain the statements and information required by the MGCL and shall be signed by the officers of the Corporation in the manner permitted by the MGCL. In the event that the Corporation issues shares of stock without certificates, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates. There shall be no differences in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.

Section 2. TRANSFERS . All transfers of shares of stock shall be made on the books of the Corporation, by the holder of the shares of stock, in person or by his or her attorney, in such manner as the Board of Directors or any officer of the Corporation may prescribe and, if such shares of stock are certificated, upon surrender of certificates duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer. The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the Board of Directors that such shares shall no longer be represented by certificates. Upon the transfer of uncertificated shares of stock, to the extent then required by the MGCL, the Corporation shall provide to record holders of such shares of stock a written statement of the information required by the MGCL to be included on share certificates.

The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.

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Notwithstanding the foregoing, transfers of shares of any class or series of stock of the Corporation will be subject in all respects to the Charter and all of the terms and conditions contained therein.

Section 3. REPLACEMENT CERTIFICATE . Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen, destroyed or mutilated upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen, destroyed or mutilated; provided , however , if such shares of stock have ceased to be certificated, no new certificate shall be issued unless requested in writing by such stockholder and the Board of Directors has determined such certificates may be issued. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his or her discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, destroyed or mutilated certificate or the owner’s legal representative to advertise the same in such manner as he or she shall require and/or to give bond, with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate.

Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE . The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to 5:00 p.m., Eastern Time, on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.

In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than 20 days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days before the date of such meeting.

If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at 5:00 p.m., Eastern Time, on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Board of Directors declaring the dividend or allotment of rights is adopted.

When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.

Section 5. STOCK LEDGER . The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class of stock held by such stockholder.

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Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS . The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred to the books of the Corporation only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 1. AUTHORIZATION . Dividends and other distributions upon the stock of the Corporation may be authorized and declared by the Board of Directors, subject to the applicable provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the applicable provisions of law and the Charter.

Section 2. CONTINGENCIES . Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the Charter, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 1. SEAL . The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year and state of its incorporation. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 2. AFFIXING SEAL . Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to

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a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

To the maximum extent permitted by Maryland law in effect from time to time, and in accordance with applicable provisions of the Bylaws and any indemnification agreement or resolution of the Board of Directors in effect from time to time, the Corporation shall indemnify, and pay or reimburse the reasonable expenses in advance of final disposition of a proceeding to, (a) any present or former director or officer of the Corporation against any claim or liability to which he or she may become subject by reason of service in such capacity, and (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her service in such capacity. In addition, the Corporation may, with the approval of the Board of Directors, provide such indemnification and advancement of expenses to any individual who served a predecessor of the Corporation in any of the capacities described in (i) or (ii) above and to any employee or agent of the Corporation or a predecessor of the Corporation.

Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Charter or these Bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of this Article with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption .

The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person described in the preceding paragraph against any liability which may be asserted against such person.

The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

The Corporation hereby acknowledges that certain of its Directors, including the Directors affiliated with GA QTS Interholdco, LLC (the “ Specified Directors ”), may have certain rights to indemnification and advancement of expenses provided by GA QTS Interholdco, LLC and certain of its Affiliates (collectively, the “ General Atlantic Indemnitors ”). The Corporation hereby agrees and acknowledges that, with respect to matters for which it is required to provide indemnity pursuant to the terms of these Bylaws, (i) it shall be the indemnitor of first resort with respect to the Specified Directors (i.e., its obligations to the Specified Directors are primary and any obligation of the General Atlantic Indemnitors to advance expenses or to provide indemnification for expenses or liabilities incurred by the Specified Directors are secondary), (ii) it shall advance the full amount of expenses incurred and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by the Specified Directors to the extent required by the terms of these Bylaws (or any other agreement between the Company and the Specified Directors), without regard to any rights the Specified Directors may have against the General Atlantic Indemnitors and (iii) it irrevocably waives, relinquishes and releases the General Atlantic

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Indemnitors from any and all claims against the General Atlantic Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof related to the Corporation’s obligations set forth in clauses (i) and (ii) in this paragraph. The Corporation further agrees that no advancement or payment by the General Atlantic Indemnitors on behalf of the Specified Directors with respect to any claim for which the Specified Directors have sought indemnification from the Corporation shall affect the foregoing and the General Atlantic Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Specified Directors against the Corporation.

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE XIV

AMENDMENT OF BYLAWS

These Bylaws may be amended, altered or repealed, and new Bylaws adopted, by the Board of Directors or by the affirmative vote of holders of shares of the Corporation representing not less than a majority of all the votes entitled to be cast on the matter.

ARTICLE XV

BOOKS AND RECORDS

The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of an executive or other committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction.

ARTICLE XVI

SEVERABILITY

If any provision of the Bylaws shall be held invalid or unenforceable in any respect, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable any other provision of the Bylaws in any jurisdiction.

* * * *

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Exhibit 10.7

EMPLOYMENT AGREEMENT

(SHIRLEY E. GOZA)

THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is entered into on April 11, 2017 and effective as of April 3, 2017 (the “ Effective Date ”), by and among QTS Realty Trust, Inc., a Maryland corporation (together with any successor general partner of the Operating Partnership (the “ Company ”), QualityTech, LP, a Delaware limited partnership (the “ Operating Partnership ”), Quality Technology Services, LLC, a Delaware limited liability company and an affiliate of the Company (the “ Employer ”) and Shirley E. Goza an individual (“ Executive ”), with respect to the following facts and circumstances:

RECITALS

WHEREAS, Executive has been employed by Employer as an executive of the Company, the Operating Partnership and the Employer since 2006 and employed pursuant to an employment agreement, dated August 14, 2013 (“ Prior Agreement ”) ;

WHEREAS, the Employer and Executive desire to continue their employment relationship, with the Employer employing Executive to serve as the Company’s, the Operating Partnership’s and the Employer’s General Counsel (“GC”) and Executive accepting such employment and appointments, on the terms set forth below; and

WHEREAS, the parties desire that this Agreement supersede and replace Prior Agreement in its entirety.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE 1
EMPLOYMENT, TERM AND DUTIES

1.1 Employment . During the Term (defined below), the Employer shall employ Executive to serve as, and the Company shall appoint or cause to be appointed the Executive to the position of, the GC of the Company, upon the terms and conditions set forth in this Agreement, and Executive shall report directly to the Chief Executive Officer of the Company (the “ CEO ”), unless otherwise determined by the Board of Directors of the Company (the “ Board ”). In addition, during the Term, Executive shall serve as the GC of the Operating Partnership and the Employer and shall report to the CEO, unless determined otherwise by the Board. For the avoidance of doubt, Executive shall be an employee of the Employer.

1.2 Term . The Employer shall employ Executive, and Executive shall serve as the GC of the Company, commencing upon the Effective Date and continuing thereafter for a two (2)-year term (the “ Term ”), unless earlier terminated under Article 4 ; provided that the Term shall automatically renew for additional two (2)-year periods unless the Employer or Executive gives notice of non-renewal at least thirty (30) days prior to expiration of the Term (as it may have been extended by any renewal period).

1.3 Duties . Executive shall perform all the duties and obligations reasonably associated with the position of GC and consistent with the Bylaws or other governing documents of the Company or the Operating Partnership as in effect from time to time, subject to the supervision of the CEO, and shall perform such other duties of an executive, managerial or administrative nature as shall be specified and designated from time to time by the CEO (including the performance of services for any subsidiary or affiliate of the Company (each, including the Company, a “ QTS Company ”) without any additional compensation). Executive shall perform the duties contemplated herein faithfully and diligently.

Executive shall devote substantially all of his business time and effort to the performance of Executive’s duties hereunder and to the business affairs of the QTS Companies; provided that in no event shall this provision prohibit Executive from (i) performing social, civic, charitable and religious activities, (ii) managing personal investments and affairs, (iii) participating in educational or professional associations, or (iv) any other activities approved by the CEO, so long as the activities set forth in clauses (i) through (iv) above do not materially and adversely interfere with Executive’s duties and obligations hereunder or to the business affairs of the Company.

ARTICLE 2
COMPENSATION

2.1 Salary and Bonus . In consideration for Executive’s services hereunder, the Employer shall pay Executive as follows:

(a) Employer shall pay an annual salary at the rate of $300,000 (“ Base Pay ”), payable in accordance with the Employer’s regular payroll schedule from time to time (less any deductions required for Social Security, state, federal and local withholding taxes, and any other authorized or mandated similar withholdings). The Base Pay shall be reviewed by the Compensation Committee of the Board (the “ Compensation Committee ”), no less frequently than annually.

(b) Executive will have the opportunity to earn a bonus to be paid in accordance with the Employer’s regular bonus payment schedule beginning in 2017 (to be paid in 2018). Executive is eligible for a target bonus (a “ Target Bonus ”) equal to 60% of his Base Pay for threshold performance and additional amounts paid for exceptional performance as determined by the Compensation Committee. Executive’s Target Bonus will be earned based upon Executive’s performance and the performance of the Company or such other factors and criteria that may be established from time to time for the calculation of bonus awards by the Compensation Committee, or, if there is none, the Board. The Employer may award discretionary bonuses in addition to performance bonuses.

2.2 Equity Awards . Equity awards may be made pursuant to the QTS Realty Trust, Inc. 2013 Equity Incentive Plan, or any successor equity incentive plan adopted by the Company or the other QTS Companies, in accordance with the Company’s policies and as deemed appropriate by the Compensation Committee (the “ Equity Awards ”). The Equity Awards will be comprised of a target grant valued at 100% of your Base Salary beginning in calendar year 2017 (to be awarded in 2018), to be awarded based upon Executive’s performance and the performance of the Company or such other factors and criteria that may be established from time to time by the Compensation Committee, or, if there is none, the Board. These Equity Awards typically will be subject to a three (3)-year vesting schedule (33% one-year vesting following grant and 8.375% vesting per quarter following the first year), however, a performance-based component may be included with a different vesting schedule. Additional equity awards may be made in accordance with the Company’s policies and as deemed appropriate by the Compensation Committee.

ARTICLE 3
EXECUTIVE BENEFITS

3.1 Vacation . Executive shall be entitled to four (4) weeks paid vacation each calendar year in accordance with the general policies of the Company and the Employer applicable generally to other senior executives of the Company.

3.2 Employee Benefits . Executive shall receive all group insurance and retirement plan benefits and any other benefits on the same basis as are available to other senior executives of the Company under the personnel policies in effect from time-to-time. Executive shall receive all other such fringe benefits as the Company and the Employer may offer to other senior executives under personnel policies in effect from time-to-time, such as health and disability insurance coverage, paid sick leave and financial planning/tax services.

3.3 Reimbursement for Expenses . Executive shall be reimbursed for all documented reasonable expenses incurred by Executive in the performance of his duties or otherwise in furtherance of the business of the Company, the Operating Partnership or the Employer in accordance with the reimbursement policies in effect from time-to-time. Any reimbursement under this Section 3.3 that is taxable to Executive shall be made by December 31 of the calendar year following the calendar year in which Executive incurred the expense.

ARTICLE 4

TERMINATION

4.1 Grounds for Termination .

4.1.1 Death or Disability . Executive’s employment shall terminate immediately in the event of Executive’s death or Disability. “Disability” means any: (i) physical disability or impairment, (ii) mental disability or impairment, (iii) illness, or (iv) injury, that, in the good-faith judgment of the Board, substantially prevents or would prevent Executive from performing his duties and obligations under this Agreement or participating effectively and actively in the management of the Company for more than three consecutive months or for more than 90 days in any 180-day period.

4.1.2 Cause . The Employer shall have the right to terminate Executive’s employment by giving written notice of such termination to Executive upon the occurrence of any one or more of the following events (which, for purposes of this Agreement, shall constitute “ Cause ”):

(a) Executive’s conviction of, or pleading guilty or nolo contendere to, a crime that constitutes a felony or any lesser criminal offense involving dishonesty or moral turpitude;

(b) any commission by Executive of an act of dishonesty, theft, fraud, or embezzlement; or

(c) any willful act by Executive that has a significant adverse effect on the reputation of the Company or any of the QTS Companies;

4.1.3 Good Reason . Executive may terminate his employment under this Agreement by giving written notice to the Employer upon the occurrence of any one or more of the following events (which, for purposes of this Agreement, shall constitute “ Good Reason ”):

(a) A material diminution in Executive’s authority, duties or responsibilities (including reporting responsibilities), or any significant adverse change in Executive’s title as GC of the Company;

(b) A material diminution in Executive’s Base Pay, as in effect from time to time;

(d) The failure of a successor to the assets or business of the Company and the Operating Partnership to assume the obligations of the Company and the Operating Partnership under this Agreement.

It shall be a condition precedent to Executive’s right to terminate his employment for Good Reason that (a) he shall have first given the Employer written notice stating with reasonable specificity the act(s) on which such termination is premised within forty-five (45) days after Executive becomes aware of such act(s), (b) if such act(s) is susceptible of cure or remedy, it has not been cured or remedied within thirty (30) days after receipt of such notice, and (c) Executive has terminated his employment within twelve (12) months after so notifying the Employer.

4.1.4 Any Other Reason . Notwithstanding anything to the contrary herein, the Employer shall have the right to terminate Executive’s employment under this Agreement at any time without Cause by giving written notice of such termination to Executive, and Executive shall have the right to terminate Executive’s employment under this Agreement at any time without Good Reason by giving written notice of such termination to the Employer. Any notice by Executive hereunder shall be given at least sixty (60) days in advance of such termination.

4.2 Termination Date . Any termination under Section 4.1 shall be effective (i) in the case

of a termination pursuant to 4.1.1, immediately upon death or such Disability, and (ii) in the case of any other termination, upon receipt of notice by Executive or the Employer, as the case may be, of such termination or upon such other later date as may be provided herein or specified by the Employer or Executive in the notice (the “ Termination Date ”).

4.3 Effect of Termination .

4.3.1 Termination with Cause or without Good Reason . In the event that Executive’s employment is terminated by the Employer with Cause or by Executive without Good Reason, the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by applicable law. “ Accrued Obligations ” means the sum of (a) Executive’s Base Pay hereunder through the Termination Date to the extent not theretofore paid, (b) the amount of any accrued but unused vacation pay, (c) any business expense reimbursements incurred by Executive as of the Termination Date and submitted for reimbursement, and (d) any performance bonus or discretionary bonus under Section 2.1 that has been earned or declared for a bonus period ending before the Termination Date but not paid before the Termination Date, in each case, consistent with the policy for such reimbursements, within ten (10) days following the Termination Date.

4.3.2 Termination without Cause, with Good Reason or Due to Company Non-Renewal. In the event that Executive’s employment is terminated by the Employer without Cause, by Executive for Good Reason or due to the Employer’s non-renewal of any Term:

(a) the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by law;

(b) the Employer shall pay to Executive, in a lump sum in cash on the first payroll date following sixty (60) days after the Termination Date, an amount equal to one (1) year of Executive’s Base Pay plus the Target Bonus as in effect on the Termination Date;

(c) Employer shall pay to Executive, in a lump sum in cash on the first payroll date following sixty (60) days after the Termination Date all bonus amounts earned but not yet paid for the year prior to the year in which the Termination Date occurs;

(d) If not previously vested in full, the Equity Awards and any other equity awards granted to Executive that otherwise would vest during the then-current term of this Agreement (whether the initial term or any renewal term) shall fully vest as of the Termination Date;

(e) If Executive elects COBRA coverage, the Employer shall reimburse Executive for his premiums for such coverage for a period of eighteen (18) months following the Termination Date; and

(f) the Employer shall provide to Executive, at the Employer’s expense, outplacement services and support, the scope and provider of which will be selected by Executive, for a period of one (1) year follow the Termination Date.

The Employer’s delivery of any notice under Section 1.2 of this Agreement that the Agreement will not be renewed and any subsequent termination of Executive’s employment at the expiration of such Term of the Agreement shall be considered a termination without Cause, and Executive shall be entitled to any payments and benefits under this Section 4.3.2 under such circumstance.

4.3.3 Termination due to Death or Disability . In the event that Executive’s employment is terminated due to Executive’s death or Disability, the Employer shall pay all Accrued Obligations to Executive or his estate in a lump sum in cash within thirty (30) business days after the Termination Date. If not previously vested in full, all equity awards granted to Executive shall fully vest as of the Termination Date.

4.3.4 Termination upon Change in Control . In the event that Executive’s employment is terminated following a Change in Control, the following provisions shall apply:

(a) Upon the occurrence of a Triggering Event:

(1) the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by law;

(2) the Employer shall pay to Executive a lump sum severance benefit in cash on the first payroll date following sixty (60) days after the Termination Date, which will be in addition to any other compensation or remuneration to which Executive is or becomes entitled to receive from the Employer, in an amount equal to the sum of (i) two (2) times Executive’s Annual Bonus (as defined below) plus (ii) two (2) times Executive’s Base Pay as in effect on the date of the Triggering Event or on the date on which the Change of Control occurs, whichever is higher;

(3) the Employer shall pay or reimburse the cost of health, disability and accidental death, and dismemberment insurance in an amount not less than that provided at the time of the Triggering Event or, if greater, on the date on which the Change in Control occurred, until the earlier of (x) in the event that Executive shall become employed by another employer after a Triggering Event, the date on which Executive shall be eligible to receive benefits from such employer which are substantially equivalent to or greater than the benefits Executive and Executive’s family received from Company or (y) the second anniversary of the date of the Triggering Event. Any reimbursement under this Section 4.3.4(a)(3) that is taxable to Executive or any of his Family Members shall be made (subject to the provisions of such health care plans that may require earlier payment) by December 31 of the calendar year following the calendar year in which Executive or such Family Member incurred the expense; and

(4) the Employer shall provide Executive, at Employer’s expense, with

outplacement services and support, the scope and provider of which will be selected by Executive, for a period of one (1) year following the date of the Triggering Event.

(b) “ Change in Control ” means:

(1) any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) that results in any “person” (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than persons who are stockholders of the Company or their affiliates immediately prior to the transaction), becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the then- combined voting power of the Company’s then outstanding voting securities;

(2) during any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (b) or (c) hereof) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or actual threatened solicitation of proxies or consents by or on behalf of a person other than the Board, cease for any reason to constitute at least a majority of the Board;

(3) the merger or consolidation of the Company with one or more other entities, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 75% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as defined above) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the then combined voting power of the Company’s then outstanding voting securities; or

(4) the consummation of the sale or disposition by the Company or the Operating Partnership of all or substantially all of its respective assets (or any transaction or series of transactions within a period of twelve months ending on the date of the last sale or disposition having a similar effect).

(d) “ Triggering Event ” will be deemed to have occurred if: (i) within two (2) years from the date on which the Change in Control occurred, the Employer assigns Executive duties which are materially inconsistent with the duties assigned to Executive on the date on which the Change in Control occurred and which duties the Employer persists in assigning to Executive despite the prior written objection of Executive and Executive thereafter terminates Executive’s employment with the Employer within such two (2)-year period;

(e) “ Executive’s Annual Bonus ” means Executive’s Target Bonus at the time of a Triggering Event or on the date on which the Change in Control occurred, whichever is higher, calculated on the basis of the maximum bonus available to Executive and the assumption that all performance goals are satisfied at a 100% achievement level by Company and Executive in the year in which such Triggering Event or such Change in Control, as the case may be, occurred.

(f) “ Executive’s Annual Salary ” means Executive’s annual Base Pay at the time of a Triggering Event or on the date on which the Change in Control occurred, whichever is higher.

For the avoidance of doubt, in the event of a change of Control and a Triggering Event under circumstances entitling Executive to payments and benefits under this Section 4.3.4, such payments and benefits shall be in lieu of payments and benefits under Section 4.3.2, and Executive shall not be entitled to any compensation or benefits under Section 4.3.2.

4.3.5 Waiver and Release Agreement . In consideration of the severance payments and other benefits described in Section 4.3.2 and Section 4.3.4, to which severance payments and benefits Executive would not otherwise be entitled, and as a precondition to Executive becoming entitled to such severance payments and other benefits under this Agreement, Executive agrees to execute and deliver to the Employer on or before the sixtieth (60 th ) day after the applicable Termination Date a waiver and general release of claims in favor of the Company and each of the QTS Companies, their respective predecessors and successors, and all of the respective current or former directors, officers, employees, shareholders, partners, members, agents or representatives of any of the foregoing, in a form reasonably satisfactory to the Employer, that has become effective in accordance with its terms, and for which any revocation periods applicable to such release shall have expired on or prior to the sixtieth (60 th ) day following Executive’s Termination Date. If Executive fails to execute and deliver such release agreement on or before the sixtieth (60 th ) day following the applicable Termination Date, if any revocation period applicable to such release has not expired on or before the sixtieth (60 th ) day following Executive’s Termination Date or if Executive revokes such release as provided therein, the Employer shall have no obligation to provide any of the severance payments and other benefits described in Section 4.3.2 or Section 4.3.4 other than any Accrued Obligations.

409A. Such delay shall last six (6) months from the date of Executive’s termination, except in the event of Executive’s death. Within twenty (20) business days following the end of such six (6)-month period, or, if earlier, Executive’s death, the Employer shall make a catch-up payment to Executive equal to the total amount of such payments that would have been made during the six (6)-month period but for this Section 4.4 . Such catch-up payment shall bear simple interest at the prime rate of interest as published by the Wall Street Journal’s bank survey as of the first day of the six (6)-month period, which such interest shall be paid with the catch-up payment. Wherever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A. The Executive will be deemed to have a Termination Date for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A. Any amount that the Executive is entitled to be reimbursed under this Agreement will be reimbursed to the Executive as promptly as practical and in any event not later than the last day of the calendar year after the calendar year in which the expenses are incurred and any right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.

4.6 Non-Exclusivity of Rights . Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Employer, the Company or any of the QTS Companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any other contract or agreement with the Employer, the Company any of the QTS Companies at or subsequent to the Termination Date, which shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement.

4.7 No Set-Off or Mitigation . The Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff, counterclaim, recoupment, defense, or other claim, right or action that the Employer may have against Executive or others, except to the extent of the mitigation and setoff provisions provided for in this Agreement. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

4.8 Excise Tax-Related Provisions . The payments and benefits that Executive may be entitled to receive under this Agreement and other payments and benefits that Executive is or may be entitled to receive under other plans, agreements and arrangements (which, together with the benefits provided under this Agreement, are referred to as “ Payments ”), may constitute Parachute Payments (as defined below) that are subject to Sections 280G and 4999 of the Code. As provided in this Section 4.8 , the Parachute Payments will be reduced if, and only to the extent that, a reduction will allow Executive to receive a greater Net After Tax Amount (as defined below) than Executive would receive absent a reduction.

4.8.1 The Accounting Firm (as defined below) will first determine the amount of any Parachute Payments that are payable to the Executive. The Accounting Firm also will determine the Net After Tax Amount attributable to the Executive’s total Parachute Payments.

4.8.2 The Accounting Firm will next determine the largest amount of Payments that may be made to the Executive without subjecting Executive to tax under Section 4999 of the Code (the “ Capped Payments ”). Thereafter, the Accounting Firm will determine the Net After Tax Amount attributable to the Capped Payments.

4.8.3 Executive will receive the total Parachute Payments or the Capped Payments, whichever provides Executive with the higher Net After Tax Amount. If Executive will receive the Capped Payments, the total Parachute Payments will be adjusted by first reducing the amount of any cash benefits under this Agreement or any other plan, agreement or arrangement (with the source of the reduction to be directed by the Company) and then by reducing the amount of any noncash benefits under this Agreement or any other plan, agreement or arrangement (with the source of the reduction to be directed by the Company). The Accounting Firm will notify Executive and the Company if it determines that the Parachute Payments must be reduced to the Capped Payments and will send Executive and the Company a copy of its detailed calculations supporting that determination.

4.8.4 As a result of the uncertainty in the application of Sections 280G and 4999 of the Code at the time that the Accounting Firm makes its determinations under this Section 4.8 , it is possible that amounts will have been paid or distributed to Executive that should not have been paid or distributed under this Section 4.8 (“ Overpayments ”), or that additional amounts should be paid or distributed to the Executive under this Section 4.8 (“ Underpayments ”). If the Accounting Firm determines, based on either the assertion of a deficiency by the Internal Revenue Service against the Company or the Executive, which assertion the Accounting Firm believes has a high probability of success or controlling precedent or substantial authority, that an Overpayment has been made, the Executive must repay to the Company, without interest, the amount of the Overpayment; provided , however , that no amount will be payable by the Executive to the Company unless, and then only to the extent that, the payment would either reduce the amount on which the Executive is subject to tax under Section 4999 of the Code or generate a refund of tax imposed under Section 4999 of the Code. If the Accounting Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the Accounting Firm will notify the Executive and the Company of that determination and the amount of that Underpayment will be paid to the Executive promptly by the Company.

For purposes of this Section 4.8 , the term “ Accounting Firm ” means the independent accounting firm engaged by the Company immediately before a Change in Control. For purposes of this Section 4.8 , the term “ Net After Tax Amount ” means the amount of any Parachute Payments or Capped Payments, as applicable, net of taxes imposed under Sections 1, 3101(b) and 4999 of the Code and any State or local income taxes applicable to Executive on the date of payment. The determination of the Net After Tax Amount shall be made using the highest combined effective rate imposed by the foregoing taxes on income of the same character as the Parachute Payments or Capped Payments, as applicable, in effect on the date of payment. For purposes of this Section 4.8 , the term “ Parachute Payment ” means a payment that is described in Section 280G(b)(2) of the Code, determined in accordance with Section 280G of the Code and the regulations promulgated or proposed thereunder.

ARTICLE 5
RESTRICTIVE COVENANTS

5.1 Confidential Information .

5.1.1 Obligation to Maintain Confidentiality . Executive acknowledges that, by reason of Executive’s employment by the Employer, the Executive will have access to confidential information (collectively, “ Confidential Information ”) of the Company and the other QTS Companies. Executive acknowledges that such Confidential Information is a valuable and unique asset of the QTS Companies and covenants that, both during and after the Term, Executive shall not disclose any Confidential Information to any individual, firm, corporation, partnership, company, limited liability company, trust, joint venture, association or other entity (“ Person ”) (except as Executive’s duties as a manager, officer or employee of the Company, the Operating Partnership, the Employer or any related entity require) without the prior written authorization of the CEO of the Company. The obligation of confidentiality imposed by this Section 5.1 shall not apply to Confidential Information that otherwise becomes known to the public through no act of Executive in breach of this Agreement or which is required to be disclosed by court order, applicable law or regulatory requirements, nor shall it apply to Executive’s disclosure of Confidential Information to his attorneys and advisors in connection with a dispute between Executive and a QTS Company.

5.1.2 Company Property . All records, designs, business plans, financial statements, customer lists, manuals, memoranda, lists, research and development plans, Intellectual Property and other property delivered to or compiled by Executive by or on behalf of any QTS Company or its providers, clients or customers that pertain to the business of any QTS Company shall be and remain the property of such QTS Company and be subject at all times to its discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities, research and development, Intellectual Property or future plans of a QTS Company that is collected by the Executive shall be delivered promptly to such QTS Company without request by it upon termination of Executive’s employment for any reason. For purposes of this Section “ Intellectual Property ” shall mean patents, copyrights, trademarks, trade dress, trade secrets, other such rights, and any applications therefor.

5.2 Inventions . Executive is hereby retained in a capacity such that Executive’s responsibilities may include the making of technical and managerial contributions of value to the QTS Companies. Executive hereby assigns to the applicable QTS Company all rights, title and interest in such contributions and inventions made or conceived by Executive alone or jointly with others during the Term that relate to the business of such company. This assignment shall include (a) the right to file and prosecute patent applications on such inventions in any and all countries, (b) the patent applications filed and patents issuing thereon, and (c) the right to obtain copyright, trademark or trade name protection for any such work product. Executive shall promptly and fully disclose all such contributions and inventions to the Company, the Operating Partnership and the Employer and assist the Company, the Operating Partnership and the Employer or any other related entity, as the case may be, in obtaining and protecting the rights therein (including patents thereon), in any and all countries; provided , however , that said contributions and inventions shall be the property of the applicable QTS Company, whether or not patented or registered for copyright, trademark or trade name protection, as the case may be. Notwithstanding the foregoing, no QTS

Company shall have any right, title or interest in any work product or copyrightable work developed outside of work hours and without the use of any QTS Company’s resources that does not relate to the business of any QTS Company and does not result from any work performed by Executive for any QTS Company.

5.3 Non-Disparagement .

(a) Executive agrees that he will not talk about or otherwise communicate to any third parties in a malicious, disparaging, or defamatory manner regarding the Company, the Operating Partnership, the Employer or any related entity, their respective owners or their past or present employees, directors, officers or other representatives and will not make or authorize to be made any written or oral statement that may disparage or damage the reputation of the Company, the Operating Partnership, the Employer or any related entity, their respective owners or their past or present employees, directors, officers or other representatives or their past or present employees, officers or other representatives.

(b) The Company, the Operating Partnership and the Employer agree that they will not talk about or otherwise communicate to any third parties in a malicious, disparaging, or defamatory manner regarding Executive and will not make or authorize to be made any written or oral statement that may disparage or damage the reputation of Executive. For purposes of this non-disparagement provision, the Company, the Operating Partnership and the Employer are defined to mean the Company’s executive team and the Board.

5.4 Non-Compete . The Executive agrees that for the period during which the Executive is employed by, or serving as an officer or manager or director of, the Company, the Operating Partnership, the Employer or any related entity and for one (1) year thereafter (the “ Restricted Period ”), the Executive will not, (a) directly or indirectly, engage in any business involving the development, construction, acquisition, ownership or operation of data center properties, colocation facilities and/or the provision of managed or cloud services, whether such business is conducted by the Executive individually or as a principal, partner, member, stockholder, joint venturer, director, trustee, officer, employee, consultant, advisor or independent contractor of any Person or (b) own any interests in any data center facilities, colocation facilities or managed or cloud service providers, in each case in the United States of America as of the Termination Date; provided , however , that this Section 5.4 shall not be deemed to prohibit the direct or indirect ownership by the Executive of up to five (5) percent of the outstanding equity interests of any public company.

or (b) solicit, recruit, induce for employment or hire (on behalf of the Executive or any other person or entity) any employee (other than clerical employees) or independent contractor who has left the employment or other service of the Company, the Operating Partnership, the Employer or any QTS Company within one (1) year of the termination of such employee’s or independent contractor’s employment or other service with the Company, the Operating Partnership, the Employer or any other QTS Company, or (c) solicit any tenants of the Company, the Operating Partnership, the Employer or any other QTS Company to lease, purchase or otherwise occupy data center space in the United States of America or encourage any of the tenants of the Company, the Operating Partnership, the Employer or any other QTS Company to reduce its patronage of the Company, the Operating Partnership, the Employer or any other QTS Company.

5.6 Reasonable and Necessary Restrictions . Executive acknowledges that the restrictions, prohibitions and other provisions hereof, including, without limitation, the Restricted Period set forth in Section 5.4 , are reasonable, fair and equitable in terms of duration, scope and geographic area, as are necessary to protect the legitimate business interests of the Company, the Operating Partnership and the Employer, and are a material inducement to the Company, the Operating Partnership and the Employer to enter into this Agreement.

5.7 Breach of Restrictive Covenants . The parties agree that a breach or violation of any provision of this Article 5 will result in immediate and irreparable injury and harm to the business of the Company, the Operating Partnership, the Employer and each other related entity shall have, in addition to any and all remedies of law and other consequences under this Agreement, the right to seek an injunction, specific performance or other equitable relief to prevent the violation of the obligations hereunder, including without limitation, to address any threatened breach or violation, and to enjoin and restrain Executive and each and every person, firm, company or corporation concerned therewith, from the violation or continuance of such violation or breach. In addition thereto, Executive shall be responsible for all damages, including reasonable attorneys’ fees, sustained by the Company, the Operating Partnership, the Employer and any other related entity by reason of said violation. In addition to any other remedy which may be available at law or in equity, or pursuant to any other provision of this Agreement, the payments by the Employer of any severance to which Executive may otherwise be entitled under this Agreement will cease as of the date on which such violation first occurs.

5.8 Cooperation . At all times during Executive’s employment and after the date of Executive’s termination of employment, Executive agrees to reasonably cooperate (if occurring after termination of employment, to the extent not interfering with Executive’s other full-time business endeavors) (i) with the Company, the Operating Partnership and the Employer in the defense of any legal matter involving any matter that arose during Executive’s employment in the business of the Company, the Operating Partnership and the Employer, and (ii) with all government authorities on matters pertaining to any investigation, litigation or administrative proceeding pertaining to the business of the Company, the Operating Partnership or the Employer. The Company, the Operating Partnership or the Employer, as applicable, will reimburse Executive for reasonable travel and out-of-pocket expenses incurred by Executive in providing such cooperation.

ARTICLE 6
GOVERNING LAW

6.1 Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF KANSAS APPLICABLE TO AGREEMENTS MADE AND TO BE WHOLLY PERFORMED WITHIN THAT STATE, WITHOUT REGARD TO ITS CONFLICT OF LAWS PROVISIONS OR THE CONFLICT OF LAWS PROVISIONS OF ANY OTHER JURISDICTION WHICH WOULD CAUSE THE APPLICATION OF ANY LAW OTHER THAN THAT OF THE STATE OF KANSAS.

6.2 Waiver of Jury Trial . Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation, directly or indirectly, arising out of or relating to this Agreement or any transaction contemplated hereby. Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 6.2 .

ARTICLE 7
MISCELLANEOUS

7.1 Amendments . The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except by the signed written consent of the parties sought to be bound by such waiver, alteration, amendment or repeal.

7.2 Entire Agreement . This Agreement constitutes the total and complete agreement of the parties with respect to the subject matter hereof and thereof and supersedes all prior and contemporaneous understandings and agreements heretofore made, and there are no other representations, understandings or agreements.

7.3 Counterparts . This Agreement may be executed in one of more counterparts, each of which shall be deemed and original, but all of which shall together constitute one and the same instrument.

7.4 Severability . Each term, covenant, condition or provision of this Agreement shall be viewed as separate and distinct, and in the event that any such term, covenant, condition or provision shall be deemed by an arbitrator or a court of competent jurisdiction to be invalid or unenforceable, the court or arbitrator finding such invalidity or unenforceability shall modify or reform this Agreement to give as much effect as possible to the terms and provisions of this Agreement. Any term or provision which cannot be so modified or reformed shall be deleted and the remaining terms and provisions shall continue in full force and effect.

7.5 Waiver or Delay . The failure or delay on the part of the Company, the Operating Partnership, the Employer or Executive to exercise any right or remedy, power or privilege hereunder shall not operate as a waiver thereof. A waiver, to be effective, must be in writing and signed by the party making the waiver. A written waiver of default shall not operate as a waiver of any other default or of the same type of default on a future occasion.

7.6 Successors and Assigns . This Agreement shall be binding on and shall inure to the benefit of the parties to it and their respective heirs, legal representatives, successors and assigns, except as otherwise provided herein. Neither this Agreement nor any of the rights, benefits, obligations or duties hereunder may be assigned or transferred by Executive except by operation of law. The Company, the Operating Partnership and the Employer may assign this Agreement to any affiliate or successor. The Company, the Operating Partnership and the Employer shall require any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, the Operating Partnership or the Employer to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company, the Operating Partnership and the Employer would be required to perform if no such succession had taken place.

7.7 Necessary Acts . Each party to this Agreement shall perform any further acts and execute and deliver any additional agreements, assignments or documents that may be reasonably necessary to carry out the provisions or to effectuate the purpose of this Agreement.

7.8 Notices . All notices, requests, demands and other communications to be given under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service, if personally served on the party to whom notice is to be given, or 48 hours after mailing, if mailed to the party to whom notice is to be given by certified or registered mail, return receipt requested, postage prepaid, and properly addressed to the party at his address set forth as follows or any other address that any party may designate by written notice to the other parties:

To Executive:

Shirley E. Goza

Address on File With the Company

To the Company,

the Employer or the Operating Partnership:

Quality Technology Services, LLC

12851 Foster Street, Suite 205

Overland Park, Kansas 66213

Attention: CEO

Facsimile: (913) 814-7766

7.9 Headings and Captions . The headings and captions used herein are solely for the purpose of reference only and are not to be considered as construing or interpreting the provisions of this Agreement.

7.10 Construction . All terms and definitions contained herein shall be construed in such a manner that shall give effect to the fullest extent possible to the express or implied intent of the parties hereby.

opportunity to do so. Executive has read and understands this Agreement, and has sought the advice of counsel to the extent he has determined appropriate.

7.12 Withholding of Compensation . Executive hereby agrees that the Employer may deduct and withhold from the compensation or other amounts payable to Executive hereunder or otherwise in connection with Executive’s employment any amounts required to be deducted and withheld by the Employer under the provisions of any applicable Federal, state and local statute, law, regulation, ordinance or order.

7.13 Executive Representation . Executive acknowledges that by entering into or complying with any provision of this Agreement he is not breaching or acting in contravention of any other agreement or commitment he has to any other firm, corporation, partnership, organization, person or any other individual or entity.

7.14 D & O Insurance . The Company, the Operating Partner and/or the Employer will maintain directors’ and officers’ liability insurance during the Term and for a period of not less than six (6) years thereafter, covering acts and omissions of Executive during the Term, on terms substantially no less favorable than those in effect on the date of this Agreement. During the Term and for a period of not less than six (6) years thereafter, Executive shall receive the same benefits provided to any of the Company’s or the Employer’s officers and directors under any additional D&O insurance or similar policy, any indemnification agreement, Company or Employer policies or the articles of organization or bylaws of the Company, the Operating Partnership or the Employer as in effect as of the date hereof, provided , however , that in the event that the benefits provided to any of the Company’s or Employer’s officers and directors under any of the foregoing documents or policies are enlarged after the date hereof, Executive shall receive such enlarged benefits.

7.15 Arbitration . Any dispute or controversy arising under or in connection with this Agreement other than a dispute pursuant to Section 5.4 and Section 5.5 , shall be settled exclusively by arbitration in the State of Kansas by three arbitrators in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators’ award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, Employer and Executive each hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the State of Kansas, (ii) any of the courts of the State of Kansas, or (iii) any other court having jurisdiction. Employer and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. Employer and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum. Employer and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party shall bear its or his costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 7.16 ; provided , however , that the party that substantially prevails in an arbitration shall be reimbursed by the other party for all reasonable costs, including reasonable attorneys’ fees and costs, incurred by such prevailing party in connection with the arbitration.

Notwithstanding any provision in this Section 7.16 , Executive shall be paid all compensation due and owing under this Agreement during the pendency of any dispute or controversy arising under or in connection with this Agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

COMPANY

QTS Realty Trust, Inc.


By:	/s/ Chad L. Williams
Name: Chad L. Williams
Title: Chairman, President and Chief Executive Officer


OPERATING PARTNERSHIP

QUALITYTECH, LP

By:		QTS Realty Trust, Inc.,
		General Partner

	By:	/s/ Chad L. Williams
		Name: Chad L. Williams
		Title: Chairman, President and Chief Executive Officer

EMPLOYER

QUALITY TECHNOLOGY SERVICES, LLC


By:	/s/ Chad L. Williams
Name: Chad L. Williams
Title: Chairman, President and Chief Executive Officer


EXECUTIVE

/s/ Shirley E. Goza
Shirley E. Goza

Exhibit 10.8

EMPLOYMENT AGREEMENT

(JON D. GREAVES)

THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is entered into on April 11, 2017 and effective as of April 3, 2017 (the “ Effective Date ”), by and among QTS Realty Trust, Inc., a Maryland corporation (together with any successor general partner of the Operating Partnership, (the “ Company ”), QualityTech, LP, a Delaware limited partnership (the “ Operating Partnership ”), Quality Technology Services, LLC, a Delaware limited liability company and an affiliate of the Company (the “ Employer ”) and Jon D. Greaves an individual (“ Executive ”), with respect to the following facts and circumstances:

RECITALS

WHEREAS, Executive has been employed by Employer as an executive of the Company, the Operating Partnership and the Employer since 2015 pursuant to an employment agreement, dated May 6, 2015, as amended on March 21, 2016 (“ Prior Agreement ”);

WHEREAS, the Employer and Executive desire to continue their employment relationship, with the Employer employing Executive to serve as the Company’s, the Operating Partnership’s and the Employer’s Chief Technology Officer – Security and Solutions Engineering (“ CTO ”) and Executive accepting such employment and appointments, on the terms set forth below; and

WHEREAS, the parties desire that this Agreement supersede and replace Prior Agreement in its entirety.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE 1

EMPLOYMENT, TERM AND DUTIES

1.1 Employment . During the Term (defined below), the Employer shall employ Executive to serve as, and the Company shall appoint or cause to be appointed the Executive to the position of, the CTO of the Company, upon the terms and conditions set forth in this Agreement, and Executive shall report directly to the Chief Executive Officer of the Company (the “ CEO ”), unless otherwise determined by the Board of Directors of the Company (the “ Board ”). In addition, during the Term, Executive shall serve as the CTO of the Operating Partnership and the Employer and shall report to the CEO, unless determined otherwise by the Board. For the avoidance of doubt, Executive shall be an employee of the Employer.

1.2 Term . The Employer shall employ Executive, and Executive shall serve as the CTO of the Company, commencing upon the Effective Date and continuing thereafter for a two (2)-year term (the “ Term ”), unless earlier terminated under Article 4 ; provided that the Term shall automatically renew for additional two (2)-year periods unless the Employer or Executive gives notice of non-renewal at least thirty (30) days prior to expiration of the Term (as it may have been extended by any renewal period).

1.3 Duties . Executive shall perform all the duties and obligations reasonably associated with the position of CTO and consistent with the Bylaws or other governing documents of the Company or the Operating Partnership as in effect from time to time, subject to the supervision of the CEO, and shall perform such other duties of an executive, managerial or administrative nature as shall be specified and designated from time to time by the CEO (including the performance of services for any subsidiary or affiliate of the Company (each, including the Company, a “ QTS Company ”) without any additional compensation). Executive shall perform the duties contemplated herein faithfully and diligently.

ARTICLE 2

COMPENSATION

2.1 Salary and Bonus . In consideration for Executive’s services hereunder, the Employer shall pay Executive as follows:

(a) Employer shall pay Executive an annual salary at the rate of $300,000 (“ Base Pay ”), payable in accordance with the Employer’s regular payroll schedule from time to time (less any deductions required for Social Security, state, federal and local withholding taxes, and any other authorized or mandated similar withholdings). The Base Pay shall be reviewed by the Compensation Committee of the Board (the “ Compensation Committee ”), no less frequently than annually.

(b) Executive will have the opportunity to earn a bonus to be paid in accordance with the Employer’s regular bonus payment schedule beginning in 2017 (to be paid in 2018). Executive is eligible for a target bonus (a “ Target Bonus ”) equal to 50% of his Base Pay for threshold performance and additional amounts paid for exceptional performance as determined by the Compensation Committee. Executive’s Target Bonus will be earned based upon Executive’s performance and the performance of the Company or such other factors and criteria that may be established from time to time for the calculation of bonus awards by the Compensation Committee, or, if there is none, the Board. The Employer may award discretionary bonuses in addition to performance bonuses.

ARTICLE 3

EXECUTIVE BENEFITS

ARTICLE 4

TERMINATION

4.1 Grounds for Termination .

(a) Executive’s conviction of, or pleading guilty or nolo contendere to, a crime that constitutes a felony or any lesser criminal offense involving dishonesty or moral turpitude;

(b) any commission by Executive of an act of dishonesty, theft, fraud, or embezzlement; or

(c) any willful act by Executive that has a significant adverse effect on the reputation of the Company or any of the QTS Companies;

(a) A material diminution in Executive’s authority, duties or responsibilities (including reporting responsibilities), or any significant adverse change in Executive’s title as CTO of the Company;

(b) A material diminution in Executive’s Base Pay, as in effect from time to time;

(d) The failure of a successor to the assets or business of the Company and the Operating Partnership to assume the obligations of the Company and the Operating Partnership under this Agreement.

4.2 Termination Date . Any termination under Section 4.1 shall be effective (i) in the case

4.3 Effect of Termination .

4.3.2 Termination without Cause, with Good Reason or Due to Company Non-Renewal . In the event that Executive’s employment is terminated by the Employer without Cause, by Executive for Good Reason or due to the Employer’s non-renewal of any Term:

(a) the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by law;

(e) If Executive elects COBRA coverage, the Employer shall reimburse Executive for his premiums for such coverage for a period of eighteen (18) months following the Termination Date; and

4.3.3 Termination due to Death or Disability . In the event that Executive’s employment is terminated due to Executive’s death or Disability, the Employer shall pay all Accrued Obligations to Executive or his estate in a lump sum in cash within thirty (30) days after the Termination Date. If not previously vested in full, all equity awards granted to Executive shall fully vest as of the Termination Date.

4.3.4 Termination upon Change in Control . In the event that Executive’s employment is terminated following a Change in Control, the following provisions shall apply:

(a) Upon the occurrence of a Triggering Event:

(1) the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by law;

(4) the Employer shall provide Executive, at Employer’s expense, with

outplacement services and support, the scope and provider of which will be selected by Executive, for a period of one (1) year following the date of the Triggering Event.

(b) “ Change in Control ” means:

(d) “ Triggering Event ” will be deemed to have occurred if: (i) within two (2) years from the date on which the Change in Control occurred, Employer terminates the employment of Executive, other than in the case of a Termination for Cause or (ii) within two (2) years from the date on which the Change in Control occurred, the Executive terminates his employment for Good Reason.

(f) “ Executive’s Annual Salary ” means Executive’s annual Base Pay at the time of a Triggering Event or on the date on which the Change in Control occurred, whichever is higher.

the event of Executive’s death. Within twenty (20) business days following the end of such six (6)-month period, or, if earlier, Executive’s death, the Employer shall make a catch-up payment to Executive equal to the total amount of such payments that would have been made during the six (6)-month period but for this Section 4.4 . Such catch-up payment shall bear simple interest at the prime rate of interest as published by the Wall Street Journal’s bank survey as of the first day of the six (6)-month period, which such interest shall be paid with the catch-up payment. Wherever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A. The Executive will be deemed to have a Termination Date for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A. Any amount that the Executive is entitled to be reimbursed under this Agreement will be reimbursed to the Executive as promptly as practical and in any event not later than the last day of the calendar year after the calendar year in which the expenses are incurred and any right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.

4.8.1 The Accounting Firm (as defined below) will first determine the amount of any Parachute

Payments that are payable to the Executive. The Accounting Firm also will determine the Net After Tax Amount attributable to the Executive’s total Parachute Payments.

4.8.2 The Accounting firm will next determine the largest amount of Payments that may be made to the Executive without subjecting Executive to tax under Section 4999 of the Code (the “ Capped Payments ”). Thereafter, the Accounting Firm will determine the Net After Tax Amount attributable to the Capped Payments.

Code, determined in accordance with Section 280G of the Code and the regulations promulgated or proposed thereunder.

ARTICLE 5

RESTRICTIVE COVENANTS

5.1 Confidential Information .

provided , however , that said contributions and inventions shall be the property of the applicable QTS Company, whether or not patented or registered for copyright, trademark or trade name protection, as the case may be. Notwithstanding the foregoing, no QTS Company shall have any right, title or interest in any work product or copyrightable work developed outside of work hours and without the use of any QTS Company’s resources that does not relate to the business of any QTS Company and does not result from any work performed by Executive for any QTS Company.

5.3 Non-Disparagement .

purpose or authorize or knowingly cooperate with the taking of any such actions by any other Person, or (b) solicit, recruit, induce for employment or hire (on behalf of the Executive or any other person or entity) any employee (other than clerical employees) or independent contractor who has left the employment or other service of the Company, the Operating Partnership, the Employer or any QTS Company within one (1) year of the termination of such employee’s or independent contractor’s employment or other service with the Company, the Operating Partnership, the Employer or any other QTS Company, or (c) solicit any of tenants of the Company, the Operating Partnership, the Employer or any other QTS Company to lease, purchase or otherwise occupy data center space in the United States of America or encourage any of the tenants of the Company, the Operating Partnership, the Employer or any other QTS Company to reduce its patronage of the Company, the Operating Partnership, the Employer or any other QTS Company.

ARTICLE 6

GOVERNING LAW

ARTICLE 7

MISCELLANEOUS

7.3 Counterparts . This Agreement may be executed in one of more counterparts, each of which shall be deemed and original, but all of which shall together constitute one and the same instrument.

or of the same type of default on a future occasion.


To Executive:	Jon D. Greaves Address on File With the Company

To the Company, the Employer or the Operating Partnership:	Quality Technology Services, LLC 12851 Foster Street, Suite 205 Overland Park, Kansas 66213 Attention: CEO Facsimile: (913) 814-7766

7.11 Counsel . Executive has been advised by the Company, the Operating Partnership and the Employer that he should consider seeking the advice of counsel in connection with the execution

of this Agreement and the other agreements contemplated hereby and Executive has had an opportunity to do so. Executive has read and understands this Agreement, and has sought the advice of counsel to the extent he has determined appropriate.

attorneys’ fees and costs, incurred by such prevailing party in connection with the arbitration. Notwithstanding any provision in this Section 7.16 , Executive shall be paid all compensation due and owing under this Agreement during the pendency of any dispute or controversy arising under or in connection with this Agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.


COMPANY

QTS REALTY TRUST, INC.

By:	/s/ Shirley E. Goza
Name: Shirley E. Goza
Title: General Counsel & Secretary


OPERATING PARTNERSHIP

QUALITYTECH, LP

By:		QTS REALTY TRUST, INC.,
		its sole general partner

	By:	/s/ Shirley E. Goza
		Name: Shirley E. Goza
		Title: General Counsel & Secretary

EMPLOYER

QUALITY TECHNOLOGY SERVICES, LLC


By:	/s/ Shirley E. Goza
Name: Shirley E. Goza
Title: General Counsel & Secretary


EXECUTIVE

/s/ Jon D. Greaves
Jon D. Greaves

Exhibit 10.9

EMPLOYMENT AGREEMENT

(STEVEN C. BLOOM)

THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is entered into on April 11, 2017 and effective as of April 3, 2017 (the “ Effective Date ”), by and among QTS Realty Trust, Inc., a Maryland corporation (together with any successor general partner of the Operating Partnership, (the “ Company ”), QualityTech, LP, a Delaware limited partnership (the “ Operating Partnership ”), Quality Technology Services, LLC, a Delaware limited liability company and an affiliate of the Company (the “ Employer ”) and Steven C. Bloom an individual (“ Executive ”), with respect to the following facts and circumstances:

RECITALS

WHEREAS, Executive has been employed by Employer as an executive of the Company, the Operating Partnership and the Employer since 2016 pursuant to an employment agreement, dated August 31, 2016 (“ Prior Agreement ”) ;

WHEREAS, the Employer and Executive desire to continue their employment relationship, with the Employer employing Executive to serve as the Company’s, the Operating Partnership’s and the Employer’s Chief People Officer (“ CPO ”) and Executive accepting such employment and appointments, on the terms set forth below; and

WHEREAS, the parties desire that this Agreement supersede and replace Prior Agreement in its entirety.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE 1

EMPLOYMENT, TERM AND DUTIES

1.1 Employment . During the Term (defined below), the Employer shall employ Executive to serve as, and the Company shall appoint or cause to be appointed the Executive to the position of, the CPO of the Company, upon the terms and conditions set forth in this Agreement, and Executive shall report directly to the Chief Executive Officer of the Company (the “ CEO ”), unless otherwise determined by the Board of Directors of the Company (the “ Board ”). In addition, during the Term, Executive shall serve as the CPO of the Operating Partnership and the Employer and shall report to the CEO, unless determined otherwise by the Board. For the avoidance of doubt, Executive shall be an employee of the Employer.

1.2 Term . The Employer shall employ Executive, and Executive shall serve as the CPO of the Company, commencing upon the Effective Date and continuing thereafter for a two (2)-year term (the “ Term ”), unless earlier terminated under Article 4 ; provided that the Term shall automatically renew for additional two (2)-year periods unless the Employer or Executive gives notice of non-renewal at least thirty (30) days prior to expiration of the Term (as it may have been extended by any renewal period).

1.3 Duties . Executive shall perform all the duties and obligations reasonably associated with the position of CPO and consistent with the Bylaws or other governing documents of the Company or the Operating Partnership as in effect from time to time, subject to the supervision of the CEO, and shall perform such other duties of an executive, managerial or administrative nature as shall be specified and designated from time to time by the CEO (including the performance of services for any subsidiary or affiliate of the Company (each, including the Company, a “ QTS Company ”) without any additional compensation). Executive shall perform the duties contemplated herein faithfully and diligently.

ARTICLE 2

COMPENSATION

2.1 Salary and Bonus . In consideration for Executive’s services hereunder, the Employer shall pay Executive as follows:

(b) Executive will have the opportunity to earn a bonus to be paid in accordance with the Employer’s regular bonus payment schedule beginning in 2017 (to be paid in 2018). Executive is eligible for a target bonus (a “ Target Bonus ”) equal to 50% of his Base Pay for threshold performance and additional amounts paid for exceptional performance as determined by the Compensation Committee. Executive’s Target Bonus will be earned based upon Executive’s performance and the performance of the Company or such other factors and criteria that may be established from time to time for the calculation of bonus awards by the Compensation Committee, or, if there is none, the Board. The Employer may award discretionary bonuses in addition to performance bonuses.

2.2 Equity Awards . Equity awards may be made pursuant to the QTS Realty Trust, Inc. 2013 Equity Incentive Plan, or any successor equity incentive plan adopted by QTS or the Company or other QTS Companies, in accordance with the Company’s policies and as deemed appropriate by the Compensation Committee (the “ Equity Awards ”). The Equity Awards will be comprised of a target grant valued at 100% of your Base Salary beginning in calendar year 2017 (to be awarded in 2018), to be awarded based upon Executive’s performance and the performance of the Company or such other factors and criteria that may be established from time to time by the Compensation Committee, or, if there is none, the Board. These Equity Awards typically will be subject to a three (3)-year vesting schedule (33% one-year vesting following grant and 8.375% vesting per quarter following the first year), however, a performance-based component may be included with a different vesting schedule. Additional equity awards may be made in accordance with the Company’s policies and as deemed appropriate by the Compensation Committee.

ARTICLE 3

EXECUTIVE BENEFITS

ARTICLE 4

TERMINATION

4.1 Grounds for Termination .

(a) Executive’s conviction of, or pleading guilty or nolo contendere to, a crime that constitutes a felony or any lesser criminal offense involving dishonesty or moral turpitude;

(b) any commission by Executive of an act of dishonesty, theft, fraud, or embezzlement; or

(c) any willful act by Executive that has a significant adverse effect on the reputation of the Company or any of the QTS Companies;

(b) A material diminution in Executive’s Base Pay, as in effect from time to time;

(d) The failure of a successor to the assets or business of the Company and the Operating Partnership to assume the obligations of the Company and the Operating Partnership under this Agreement.

4.2 Termination Date . Any termination under Section 4.1 shall be effective (i) in the case

4.3 Effect of Termination .

4.3.1 Termination with Cause or without Good Reason . In the event that Executive’s employment is terminated by the Employer with Cause or by Executive without Good Reason, the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by applicable law. “ Accrued Obligations ” means the sum of (a) Executive’s Base Pay hereunder through the Termination Date to the extent not theretofore paid, (b) the amount of any accrued but unused vacation pay, (c) any business expense reimbursements incurred by Executive as of the Termination Date and submitted for reimbursement, and (d) any performance bonus or discretionary bonus under Section 2.2 that has been earned or declared for a bonus period ending before the Termination Date but not paid before the Termination Date, in each case, consistent with the policy for such reimbursements, within ten (10) days following the Termination Date.

4.3.2 Termination without Cause, with Good Reason or Due to Company Non-Renewal . In the event that Executive’s employment is terminated by the Employer without Cause, by Executive for Good Reason or due to the Employer’s non-renewal of any Term:

(a) the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by law;

(e) If Executive elects COBRA coverage, the Employer shall reimburse Executive for his premiums for such coverage for a period of eighteen (18) months following the Termination Date; and

4.3.3 Termination due to Death or Disability. In the event of Executive’s termination due to death or Disability the Employer shall pay all Accrued Obligations to Executive or Executive’s estate in a lump sum in cash within thirty (30) business days after the Termination Date. If not previously vested in full, all equity awards granted to Executive shall fully vest as of the Termination Date.

4.3.4 Termination upon Change in Control . In the event that Executive’s employment is terminated following a Change in Control, the following provisions shall apply:

(a) Upon the occurrence of a Triggering Event:

(1) the Employer shall pay all Accrued Obligations to Executive in a lump sum in cash within twenty (20) days after the Termination Date or on such earlier date required by law;

(3) the Employer shall pay or reimburse the cost of health, disability and accidental death, and dismemberment insurance in an amount not less than that provided at the time of the Triggering Event or, if greater, on the date on which the Change in Control occurred, until the earlier of (x) in the event that Executive shall become employed by another employer after a Triggering Event, the date on which Executive shall be eligible to receive benefits from such employer which are substantially equivalent to or greater than the benefits Executive and Executive’s family received from Company or (y) the second anniversary of the date of the Triggering Event. Any reimbursement under this Section 4.3.3(a)(3) that is taxable to Executive or any of his Family Members shall be made (subject to the provisions of such health care plans that may require

earlier payment) by December 31 of the calendar year following the calendar year in which Executive or such Family Member incurred the expense; and

(4) the Employer shall provide Executive, at t Employer’s expense, with outplacement services and support, the scope and provider of which will be selected by Executive, for a period of one (1) year following the date of the Triggering Event.

(b) A “ Change in Control ” means:

(4) the consummation of the sale or disposition by the Company or the Operating

Partnership of all or substantially all of its respective assets (or any transaction or series of transactions within a period of twelve months ending on the date of the last sale or disposition having a similar effect).

(d) “ Triggering Event ” will be deemed to have occurred if: within two (2) years from the date on which the Change in Control occurred, Employer terminates the employment of Executive other than in the case of a Termination for Cause or (ii) within two (2) years from the date on which the Change in Control occurred, the Executive terminates his employment for Good Reason.

(f) “ Executive’s Annual Salary ” means Executive’s annual Base Pay at the time of a Triggering Event or on the date on which the Change in Control occurred, whichever is higher.

4.5 Required Delay For Certain Deferred Compensation and Section 409A . In the event that any compensation with respect to Executive’s termination is “deferred compensation” within the meaning of Section 409A of the Code and the regulations promulgated thereunder (“ Section 409A ”), and Executive is determined to be a “specified employee,” as defined in Section 409A (a)(2)(B)(i) of the Code, payment of such compensation shall be delayed as required by Section 409A. Such delay shall last six (6) months from the date of Executive’s termination, except in the event of Executive’s death. Within twenty (20) business days following the end of such six (6)-month period, or, if earlier, Executive’s death, the Employer shall make a catch-up payment to Executive equal to the total amount of such payments that would have been made during the six (6)-month period but for this Section 4.4 . Such catch-up payment shall bear simple interest at the prime rate of interest as published by the Wall Street Journal’s bank survey as of the first day of the six (6)-month period, which such interest shall be paid with the catch-up payment. Wherever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A. The Executive will be deemed to have a Termination Date for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A. Any amount that the Executive is entitled to be reimbursed under this Agreement will be reimbursed to the Executive as promptly as practical and in any event not later than the last day of the calendar year after the calendar year in which the expenses are incurred and any right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.

benefits provided under this Agreement, are referred to as “ Payments ”), may constitute Parachute Payments (as defined below) that are subject to Sections 280G and 4999 of the Code. As provided in this Section 4.8 , the Parachute Payments will be reduced if, and only to the extent that, a reduction will allow Executive to receive a greater Net After Tax Amount (as defined below) than Executive would receive absent a reduction.

For purposes of this Section 4.8 , the term “ Accounting Firm ” means the independent accounting

firm engaged by the Company immediately before a Change in Control. For purposes of this Section 4.8 , the term “ Net After Tax Amount ” means the amount of any Parachute Payments or Capped Payments, as applicable, net of taxes imposed under Sections 1, 3101(b) and 4999 of the Code and any State or local income taxes applicable to Executive on the date of payment. The determination of the Net After Tax Amount shall be made using the highest combined effective rate imposed by the foregoing taxes on income of the same character as the Parachute Payments or Capped Payments, as applicable, in effect on the date of payment. For purposes of this Section 4.8 , the term “ Parachute Payment ” means a payment that is described in Section 280G(b)(2) of the Code, determined in accordance with Section 280G of the Code and the regulations promulgated or proposed thereunder.

ARTICLE 5

RESTRICTIVE COVENANTS

5.1 Confidential Information .

such contributions and inventions made or conceived by Executive alone or jointly with others during the Term that relate to the business of such company. This assignment shall include (a) the right to file and prosecute patent applications on such inventions in any and all countries, (b) the patent applications filed and patents issuing thereon, and (c) the right to obtain copyright, trademark or trade name protection for any such work product. Executive shall promptly and fully disclose all such contributions and inventions to the Company, the Operating Partnership and the Employer and assist the Company, the Operating Partnership and the Employer or any other related entity, as the case may be, in obtaining and protecting the rights therein (including patents thereon), in any and all countries; provided , however , that said contributions and inventions shall be the property of the applicable QTS Company, whether or not patented or registered for copyright, trademark or trade name protection, as the case may be. Notwithstanding the foregoing, no QTS Company shall have any right, title or interest in any work product or copyrightable work developed outside of work hours and without the use of any QTS Company’s resources that does not relate to the business of any QTS Company and does not result from any work performed by Executive for any QTS Company.

5.3 Non-Disparagement .

5.5 Non-Solicitation . The Executive agrees that during the Term or otherwise for the period during which the Executive is employed by, or serving as an officer or manager or director of, the Company, the Operating Partnership, the Employer or any related entity and for one (1) year thereafter, such Executive will not directly or indirectly (a) solicit, induce or encourage any employee (other than clerical employees) or independent contractor to terminate their employment or engagement with the Company, the Operating Partnership, the Employer or any other QTS Company or to cease rendering services to the Company, the Operating Partnership, the Employer or any other QTS Company, and the Executive shall not initiate discussions with any such Person for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other Person, or (b) solicit, recruit, induce for employment or hire (on behalf of the Executive or any other person or entity) any employee (other than clerical employees) or independent contractor who has left the employment or other service of the Company, the Operating Partnership, the Employer or any QTS Company within one (1) year of the termination of such employee’s or independent contractor’s employment or other service with the Company, the Operating Partnership, the Employer or any other QTS Company, or (c) solicit any tenants of the Company, the Operating Partnership, the Employer or any other QTS Company to lease, purchase or otherwise occupy data center space in the United States of America or encourage any of the tenants of the Company, the Operating Partnership, the Employer or any other QTS Company to reduce its patronage of the Company, the Operating Partnership, the Employer or any other QTS Company.

legal matter involving any matter that arose during Executive’s employment in the business of the Company, the Operating Partnership and the Employer, and (ii) with all government authorities on matters pertaining to any investigation, litigation or administrative proceeding pertaining to the business of the Company, the Operating Partnership or the Employer. The Company, the Operating Partnership or the Employer, as applicable, will reimburse Executive for reasonable travel and out-of-pocket expenses incurred by Executive in providing such cooperation.

ARTICLE 6

GOVERNING LAW

6.2 Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation, directly or indirectly, arising out of or relating to this Agreement or any transaction contemplated hereby. Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 6.2 .

ARTICLE 7

MISCELLANEOUS

7.3 Counterparts . This Agreement may be executed in one of more counterparts, each of which shall be deemed and original, but all of which shall together constitute one and the same instrument.

Agreement to give as much effect as possible to the terms and provisions of this Agreement. Any term or provision which cannot be so modified or reformed shall be deleted and the remaining terms and provisions shall continue in full force and effect.


To Executive:	Steven C. Bloom Address on File With the Company

To the Company, the Employer or the Operating Partnership:	Quality Technology Services, LLC 12851 Foster Street, Suite 205 Overland Park, Kansas 66213 Attention: CEO Facsimile: (913) 814-7766

7.9 Headings and Captions . The headings and captions used herein are solely for the purpose of reference only and are not to be considered as construing or interpreting the provisions of

this Agreement.

7.11 Counsel . Executive has been advised by the Company, the Operating Partnership and the Employer that he should consider seeking the advice of counsel in connection with the execution of this Agreement and the other agreements contemplated hereby and Executive has had an opportunity to do so. Executive has read and understands this Agreement, and has sought the advice of counsel to the extent he has determined appropriate.

if the rules of such court relating thereto have been substantially satisfied. Employer and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum. Employer and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party shall bear its or his costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 7.16 ; provided , however , that the party that substantially prevails in an arbitration shall be reimbursed by the other party for all reasonable costs, including reasonable attorneys’ fees and costs, incurred by such prevailing party in connection with the arbitration. Notwithstanding any provision in this Section 7.16 , Executive shall be paid all compensation due and owing under this Agreement during the pendency of any dispute or controversy arising under or in connection with this Agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.


COMPANY

QTS REALTY TRUST, INC.

By:	/s/ Shirley E. Goza
Name:	Shirley E. Goza
Title:	General Counsel & Secretary

OPERATING PARTNERSHIP

QUALITYTECH, LP

By:	QTS REALTY TRUST, INC.,
	its sole general partner


	By:	/s/ Shirley E. Goza
		Name: Shirley E. Goza
		Title: General Counsel & Secretary

EMPLOYER

QUALITY TECHNOLOGY SERVICES, LLC

By:	/s/ Shirley E. Goza
Name:	Shirley E. Goza
Title:	General Counsel & Secretary


EXECUTIVE

/s/ Steven C. Bloom
Steven C. Bloom

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:

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

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;

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;

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

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: May 8, 2017
		/s/ Chad L. Williams
		Chad L. Williams
		Chairman and Chief Executive Officer

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:

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

(a)

(b)

(c)

(d)

(a)

(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: May 8, 2017
		/s/ Jeffrey H. Berson
		Jeffrey H. Berson
		Chief Financial Officer

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:

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

(a)

(b)

(c)

(d)

(a)

(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: May 8, 2017
	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer

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:

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

(a)

(b)

(c)

(d)

(a)

(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: May 8, 2017
	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	Chief Financial Officer

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 March 31, 2017 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:

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

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

7
Date: May 8, 2017
	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer

	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	Chief Financial Officer

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 March 31, 2017 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:

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

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


Date: May 8, 2017
	/s/ Chad L. Williams
	Chad L. Williams
	Chairman and Chief Executive Officer

	/s/ Jeffrey H. Berson
	Jeffrey H. Berson
	Chief Financial Officer