QTS Realty Trust : Q3 2020 Investor Presentation

QTS Realty Trust, Inc.

Investor Presentation

Third Quarter 2020

Forward Looking Statements

Some of the statements contained in this document constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to the COVID-19 pandemic, its impact on the Company and the Company's response thereto and to the Company's strategy, plans, intentions, capital resources, liquidity, portfolio performance, results of operations, anticipated growth in our funds from operations and anticipated market conditions contain forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters.

The forward-looking statements contained in this document reflect the Company's current views about future events and are subject to numerous known and unknown

risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed in any forward-looking statement. The Company does 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 the Company's markets or the technology industry;
• obsolescence or reduction in marketability of our infrastructure due to changing industry demands;
• global, national and local economic conditions;
• risks related to the COVID-19 pandemic, including, but not limited to, the risk of business and/or operational disruptions, disruption of the Company's customers' businesses that could affect their ability to make rental payments to the Company, supply chain disruptions and delays in the construction or development of the
  Company's data centers;
• risks related to our international operations;
• difficulties in identifying properties to acquire and completing acquisitions;
• the Company's failure to successfully develop, redevelop and operate acquired properties or lines of business;
• significant increases in construction and development costs;
• the increasingly competitive environment in which the Company operates; defaults on, or termination or non-renewal of, leases by customers; decreased rental rates or increased vacancy rates;
• increased interest rates and operating costs, including increased energy costs; financing risks, including the Company's failure to obtain necessary outside financing;
• dependence on third parties to provide Internet, telecommunications and network connectivity to the Company's data centers;
• the Company's failure to qualify and maintain its qualification as a real estate investment trust;
• environmental uncertainties and risks related to natural disasters;
• financial market fluctuations;
• changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates;
• and limitations inherent in our current and any future joint venture investments, such as lack of sole decision-making authority and reliance on our partners' financial condition.

While forward-looking statements reflect the Company's good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it was made. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company's future results to differ materially from any forward-looking statements, see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as well as other periodic reports the Company files with the Securities and Exchange Commission, many of which should be interpreted as being heightened as a result of the ongoing COVID-19 pandemic and the actions taken to contain the pandemic or mitigate its impact.

This presentation includes measures not derived in accordance with generally accepted accounting principles ("GAAP"), such as FFO, operating FFO, adjusted Operating FFO, EBITDAre, adjusted EBITDA, NOI, ROIC and MRR. These measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP, and may also be inconsistent with similar measures presented by other companies. Reconciliation of these measures to the most closely comparable GAAP measures are presented in the attached pages. We refer you to the appendix of this presentation for reconciliations of these measures and to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations--Non-GAAP Financial Measures" in our 10-K for further information regarding these measures.

© QTS. All Rights Reserved.

2

Broad Footprint Focused on Top Data Center Markets

3.2 million SF of raised floor capacity1 and 950+ MW of available utility power2

24 DATA CENTERS 14 MARKETS	96% OWNED3

	1.	Represents basis-of-design floor space as of June 30, 2020. Basis-of-design floor space defined as the total data center raised floor potential of existing data center facilities.	3
© QTS. All Rights Reserved.	2.	Represents installed utility power and transformation capacity that is available for use by the facility as of June 30, 2020.
	3.	Based on data center raised floor. Includes Santa Clara, CA which is subject to a long-term ground lease and excludes data centers subject to capital lease obligations.

QTS Key Investment Highlights

• Secular trends support continued growth

• Diversified platform supports consistent performance
• Differentiators enable enhanced value creation opportunity

④	De-risked growth outlook with record booked-not-billed backlog and
fully-funded capital plan through middle of 2021
⑤	Critical nature of data center business supports resilient performance
amidst COVID-19

© QTS. All Rights Reserved.

4

Strong Secular Drivers Support Continued Growth in Data Center Demand

Data Center

Outsourcing

Outsourced data center infrastructure market share expected to double to 66% by 20231

Work From Home

Increased reliance on SaaS platforms and infrastructure capacity

Data Growth

Global data volume expected to reach 175 zettabytes by 2025 (27% CAGR)2 driven by application development and Artificial Intelligence

© QTS. All Rights Reserved.

Digital

Transformation

"There is no alternative to digital transformation; Those that don't adapt will fail"

Jeff Bezos - CEO of Amazon

Cloud

Adoption

51% CAGR of cloud market through 20231

Connected Devices

21B+ devices by 2025 (17% CAGR)3 driven by Internet of Things, autonomous vehicles and 5G

1. Structure research; 2. Statista; 3. IoT Analytics Research

5

Driving Success in Hyperscale & Hybrid Colocation

IT Infrastructure Growing and Moving Off-Premise1

Hyperscale/Cloud					Colocation
				Market ($B)
Market ($B)
2019		2023
		$64
$384
33% $508B		$803B 34%	10%
		CAGR

	Market
51%	Size
CAGR

$74

2019 2023

	Market	$44
	Size
67%
66%

On-Premise		Outsourced	2019	2023

	33% of Revenue2			67% of Revenue2
	Hyperscale		Hybrid Colocation
	World-Class Mega Data Center Infrastructure	Technology-Enabled Colocation Platform

	1.Structure Research	6
© QTS. All Rights Reserved.	2.Based on MRR as of June 30, 2020, including QTS' 50% pro rata share of leases associated with unconsolidated joint ventures

Consistent Performance Enabled by Differentiation Across Diversified Target Customer Verticals

Differentiators

Cost-advantagedmega		Digitized, premium customer experience
scale infrastructure		through QTS' Service Delivery Platform
Industry leadership in		Operational maturity & track record in
sustainability initiatives		highly secure deployments

Diversified Across Target Customers

HYPERSCALE

• Growth accelerant
• Highest credit quality tenants
• 5-10+year contracts and long-term cash flow visibility

HYBRID COLOCATION

FEDERAL

•	Consistency in quarter-to-	•	Growth accelerant
	quarter performance	• Highest barriers to entry
•	Customer diversification	•	Premium ROIC opportunity

• Enhanced ROIC opportunity
• Enhanced capital efficiency

© QTS. All Rights Reserved.

7

Positioned for Continued Capital Efficient Growth

QTS' powered shell capacity represents 5+ years of growth

Powered Shell Capacity

1.4M SF

additional capacity

• Ability to double footprint in pre- built powered shell reduces future capital needs

• Existing capacity in strategic hyperscale markets supports capital efficient future growth

• In addition, have 722 acres of land available in majority of key markets already acquired and pad-ready

55% currently built out

3.2M SF at Full Buildout1,2

© QTS. All Rights Reserved.	1.Full Buildout reflects our "Basis of Design" NRSF at full buildout; does not include additional development which could take place on adjacent, owned land.	8
	2.Includes properties contributed to unconsolidated joint ventures at the JVs' 100% share

SDP Utilization Continues to Ramp Amid Pandemic

Customers leveraging QTS platform and SDP to enable remote

infrastructure tracking and management

20%

17,000+	active SDP users	INCREASE
new unique log-ins
			quarter-over-quarter
Average session time for QTS		Average session time for top
	user base of approximately		SDP users of more than

30			60
	MINUTES		MINUTES
	Approximately double pre COVID-19 level	Approximately double pre COVID-19 level
	Customers utilizing		Recurring revenue signed from	Recurring revenue signed from
	Remote Hands & Eyes		IP Bandwidth Upgrades	Cross Connects
+40%		+85%	+30%
	YEAR-OVER-YEAR		YEAR-OVER-YEAR	YEAR-OVER-YEAR
© QTS. All Rights Reserved.			9

Federal Vertical Remains a Core Focus Area for QTS

Expanding growth opportunity

• Q2 leasing results include a 5MW+ expansion for an existing hyperscale customer supporting the Federal Government
• Deployment across multiple existing QTS facilities is set to commence in mid-2021
• Represents an expansion of the 5MW+ federal lease QTS signed in
  Q2 '19
• Further demonstrates the value of incumbency in the Federal vertical

Uniquely positioned to succeed in Federal vertical

• Strategically invested in the necessary processes, operational capability and talent, capable of supporting highly compliant government agencies
• Track record of success in Federal vertical with strategically located powered shell footprint further supporting enhanced returns on capital

Higher barriers to entry targeting the Federal vertical

• Unique security, personnel and operational requirements
• Incumbency and industry expertise are powerful differentiators for QTS
• Higher barriers to entry create opportunity

to achieve premium ROIC	10

Committed to Deliver on Highest Standards in ESG Principles

QTS publishes second annual ESG Initiatives Report

Environmental	Social	Governance

Procure 100% of power from

renewable sources by 2025 (32% today)

Pursue LEED certification at 90% of QTS properties by

2025 (55% today)

Install EV charging stations in 75% of our facilities by 2025

Conserve at least 15 million gallons of water per year, up from 10 million in 2019

Recycle 600 million pounds of material by 2025

© QTS. All Rights Reserved.

11

Differentiated Platform Supports Consistent Performance

Revenue ($M)1,2

Adjusted EBITDA Margin1,2

$423

$370

	$530	+550bp
$481		53.8%
		52.1%
		51.6%

48.3%

2017	2018	2019	2020	2017	2018	2019	2020
TTM Avg. Signed Leasing ($M)3	Booked-Not-Billed Backlog ($M)4

$111.2

						$21.6	$22.0						$100.9
						$19.0											$93.1
																	$79.8
		$13.5			$14.0	$14.7											$68.1
															$62.6
$10.9	$11.1	$12.5	$12.3	$12.8						$56.6	$57.4	$53.3	$60.0
$10.4			$11.4									$46.8		$54.8
											$39.7

Q2'17	Q1'18	Q4'18	Q3'19	Q2'20	Q2'17	Q1'18	Q4'18	Q3'19	Q2'20
© QTS. All Rights Reserved.	1) 2020 figures represent midpoint of company guidance; 2) 2017 & 2018 figures represent results for Core business only; 3) trailing twelve month incremental annualized revenue signed from new and modified renewal 12
	leases, net of downgrades, 2017 & 2018 represent results for Core business only; 4) backlog of signed but not yet commenced annualized monthly recurring revenue, 2018 represents results for Core business only.

Balance Sheet and Liquidity Summary

Capital Structure ($M)

Unsecured Credit Facility 1,

$1,208

Finance Leases & Other, $46

Series A Preferred Stock,

$107

Series B Convertible$6.6B

Preferred Stock, $316

Pro Rata Share of Unconsol.	Enterprise
JV Debt, $43	Value6
Senior Notes, $400

Market Cap 2, $4,512

Debt Maturities ($M)5

$905

$554

Highlights

• Pro forma leverage of 3.7x3 net debt to annualized adjusted EBITDA, including forward equity proceeds; net debt to LQA adjusted EBITDA of 5.8x at the end of 2Q 2020
• Approximately $1.1B of available liquidity, including $591M4 of undrawn forward equity proceeds
• No significant debt maturities until 2023 and beyond

				$229
$1	$3	$5
2020	2021	2022	2023	2024	2025+

• ~70% of debt is subject to a fixed rate, including interest rate swap agreements

1. Includes three term loans ($700 million in aggregate) and approximately $508 million of borrowings on revolving credit facili ty as of June 30, 2020
2. Market Cap calculated as: Class A and Class B common stock and OP units of 70.4 million incl. common stock sold in forward structure using treasury stock method, multiplied by 6/30/2020 stock price of $64.09 per share.
3. Pro forma for the effects of cash expected to be received upon the full physical settlement of, and issuance of, 10.3 million shares of common stock pursuant to forward equity sales through the date of this report, assuming such proceeds were used to repay a portion of the Company's outstanding debt. The company expects to use the proceeds from th ese forward equity agreements to fund future capital expenditures.
4. Reflects net proceeds available at the Company's election to physically settle the forward equity sales

© QTS. All Rights Reserved. 5.	Includes QTS' pro rata share of debt at the joint venture	13
6.	Net of cash and cash equivalents

Business Momentum Remains Steady Amidst COVID-19

Industry & Tenant Diversification1

Other, 8.8%

Retail, 5.2%

Cloud & IT Services,

32.0%

Healthcare, 7.4%

Customer Highlights

• Well diversified customer base across industries

• 50%+ of in-place revenue is generated from

Content & Digital Media and Cloud & IT Services

industries

• <10% of in-place revenue is generated from

retail, transportation, hospitality and oil & gas

Network, 7.1%

1,200+

customers

Customers

Government &

Security, 5.3%

Financial Services,	Content & Digital
15.3%	Media, 18.9%
1.	Percentage of in-place MRR as of 6/30/20

• As of Q1 earnings release, QTS had received a

modest increase in requests for extended

payment terms from customers representing

approximately 5% of Q1 '20 revenue related to

impact of COVID-19

• Pace of additional incoming requests for

payment relief moderated significantly during Q2

• A number of customers who had previously

asked for extended payment terms have since

resumed payments

Development activity remains on track

• Year-to-dateQTS has successfully delivered on key commitments to customers across all QTS markets
• Remain on schedule to deliver on development commitments to customers tied to QTS' booked-not- billed backlog in 2020, assuming current trends continue

© QTS. All Rights Reserved.

14

Appendix

© QTS. All Rights Reserved.

15

NOI Reconciliation

			Three Months Ended				Six Months Ended
$ in thousands	June 30, 2020	March 31, 2020	June 30, 2019	June 30, 2020	June 30, 2019
Net Operating Income (NOI)
Net income	$	10,209	$	8,120	$	7,535	$	18,329	$	28,683
Equity in net loss of unconsolidated entity		590		677		401		1,267		675
Interest income		(2)		-		(36)		(2)		(81)
Interest expense		6,924		7,162		6,459		14,086		13,605
Depreciation and amortization		47,554		45,070		41,481		92,624		80,269
Other (income) expense		-		(159)		40		(159)		40
Tax expense (benefit) of taxable REIT subsidiaries		138		(169)		199		(31)		410
Transaction, integration and impairment costs		381		216		1,039		597		2,253
General and administrative expenses		21,391		20,683		20,124		42,074		40,015
Gain on sale of real estate, net		-		-		-		-		(13,408)
NOI from consolidated operations	$	87,185	$	81,600	$	77,242	$	168,785	$	152,461
Pro rata share of NOI from unconsolidated entity		927		844		842		1,771		1,076
Total NOI	$	88,112	$	82,444	$	78,084	$	170,556	$	153,537

© QTS. All Rights Reserved.

16

EBITDAre & Adjusted EBITDA Reconciliation

			Three Months Ended				Six Months Ended
$ in thousands	June 30, 2020	March 31, 2020	June 30, 2019	June 30, 2020	June 30, 2019
EBITDAre and Adjusted EBITDA
Net income	$	10,209	$	8,120	$	7,535	$	18,329	$	28,683
Equity in net loss of unconsolidated entity		590		677		401		1,267		675
Interest income		(2)		-		(36)		(2)		(81)
Interest expense		6,924		7,162		6,459		14,086		13,605
Tax expense (benefit) of taxable REIT subsidiaries		138		(169)		199		(31)		410
Depreciation and amortization		47,554		45,070		41,481		92,624		80,269
Gain on disposition of depreciated property		-		-		-		-		(13,408)
Pro rata share of EBITDAre from unconsolidated entity		924		819		863		1,743		1,078
EBITDAre	$	66,337	$	61,679	$	56,902	$	128,016	$	111,231
Equity-based compensation expense		6,082		4,875		4,296		10,957		7,596
Transaction and integration costs		381		216		1,039		597		2,253
Adjusted EBITDA	$	72,800	$	66,770	$	62,237	$	139,570	$	121,080

© QTS. All Rights Reserved.

17

FFO, Operating FFO and Adjusted Operating FFO Reconciliation

					Three Months Ended				Six Months Ended
$ in thousands			June 30, 2020	March 31, 2020	June 30, 2019	June 30, 2020	June 30, 2019
FFO
Net income			$	10,209	$	8,120	$	7,535	$	18,329	$	28,683
Equity in net loss of unconsolidated entity				590		677		401		1,267		675
Real estate depreciation and amortization				44,196		41,700		38,544		85,896		74,471
Gain on sale of real estate, net				-		-		-		-		(13,408)
Pro rata share of FFO from unconsolidated entity				399		278		344		677		385
FFO				55,394		50,775		46,824		106,169		90,806
Preferred stock dividends				(7,045)		(7,045)		(7,045)		(14,090)		(14,090)
FFO available to common stockholders & OP unit holders				48,349		43,730		39,779		92,079		76,716
Transaction and integration costs				381		216		1,039		597		2,253
Operating FFO available to common stockholders & OP unit holders	(1)			48,730		43,946		40,818		92,676		78,969
Maintenance capital expenditures				(4,220)		(1,662)		(2,233)		(5,882)		(2,942)
Leasing commissions paid				(6,805)		(8,998)		(6,528)		(15,803)		(13,043)
Amortization of deferred financing costs				991		987		979		1,978		1,957
Non real estate depreciation and amortization				3,358		3,370		2,937		6,728		5,798
Straight line rent revenue and expense and other				(5,702)		(3,755)		(979)		(9,457)		(2,401)
Tax expense (benefit) from operating results				138		(169)		199		(31)		410
Equity-based compensation expense				6,082		4,875		4,296		10,957		7,596
Adjustments for unconsolidated entity		(1)		(88)		66		(42)		(22)		(20)
Adjusted Operating FFO available to common stockholders & OP unit holders	$	42,484	$	38,660	$	39,447	$	81,144	$	76,324

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

© QTS. All Rights Reserved.

18

MRR Reconciliation

			Three Months Ended				Six Months Ended
$ in thousands	June 30, 2020	March 31, 2020	June 30, 2019	June 30, 2020	June 30, 2019
Recognized MRR in the period
Total period revenues (GAAP basis)	$	131,640	$	126,292	$	119,167	$	257,932	$	231,856
Less: Total period variable lease revenue from recoveries		(12,528)		(12,275)		(12,672)		(24,803)		(23,465)
Total period deferred setup fees		(4,520)		(3,924)		(3,822)		(8,444)		(7,053)
Total period straight line rent and other		(9,327)		(8,032)		(5,485)		(17,359)		(9,428)
Recognized MRR in the period		105,265		102,061		97,188		207,326		191,910
MRR at period end
Total period revenues (GAAP basis)	$	131,640	$	126,292	$	119,167	$	257,932	$	231,856
Less: Total revenues excluding last month		(87,538)		(82,446)		(77,863)		(213,830)		(190,552)
Total revenues for last month of period		44,102		43,846		41,304		44,102		41,304
Less: Last month variable lease revenue from recoveries		(4,350)		(4,156)		(4,222)		(4,350)		(4,222)
Last month deferred setup fees		(1,533)		(1,410)		(1,322)		(1,533)		(1,322)
Last month straight line rent and other		(2,480)		(3,669)		(3,349)		(2,480)		(3,349)
Add: Pro rata share of MRR at period end of unconsolidated entity		352		352		369		352		369
MRR at period end	$	36,091	$	34,963	$	32,780	$	36,091	$	32,780

© QTS. All Rights Reserved.

19