QTS Realty Trust (NYSE: QTS) bills itself as “a leading provider of hybrid colocation and mega scale data center solutions.” At year-end 2020, the company had 28 data centers in service or under development in major markets in the U.S., Canada, and Europe.
Together these sites cover 2.0 million net rentable square feet (NRSF) with capacity to build out to 3.5 million ‘Basis of Design’ NRSF. (Basis-of-design raised floor space is the total data center raised floor potential of its existing data center facilities.)
The company believes it owns and operates one of the largest portfolios of multi-tenant data centers in the U.S., as measured by gross square footage, and has the capacity to nearly double its NRSF space without constructing or acquiring any new buildings.
QTS caters to three main customer groups: hyperscale technology groups like Amazon Web Services, Microsoft Azure and Google, the Fortune 1000 Enterprise companies, and U.S. federal government agencies, both directly and through hyperscalers such as Microsoft. The company offers flexible, scalable, and secure IT solutions including data center space, power and cooling, connectivity and value-added managed services for more than 1,200 customers in the financial services, healthcare, retail, government, and technology industries.
Hyperscalers occupy QTS’ mega scale data centers that range from 100,000 to 500,000 sq.ft. and have power consumption of 5 megawatts or more. Enterprise customers share data center capacity in smaller hybrid colocation facilities that are occupied by dozens of other such customers. The company serves federal agencies typically through a hyperscale cloud provider that is supporting the government.
QTS builds data centers to accommodate both multi-tenant environments (hybrid colocation) and dedicated build-to-suit requirements that involve significant amounts of space and power (hyperscale), depending on the needs and availability of each facility at that time. QTS’ data centers are facilities that power and support customers’ IT infrastructure equipment and provide seamless access and connectivity to a range of cloud, communications, and IT services providers.
In the face of the pandemic, the company signed new leases and renewed existing leases as demand for its data center services grew. QTS reported full-year 2020 revenues of $539 million, up 12 percent from $481 million in 2019. Adjusted EBITDA grew to $299 million, up 20 percent on a year-over-year basis.
Full-year 2020, the company realized an annualized rent increment of about $109 million, up over 40 percent YoY. QTS ended 2020 with a booked-not-billed backlog of $154 million, up 65 percent YoY.
Notable successes with hyperscale and federal government leases included:
- a 12 MW lease in Atlanta with a large hyperscale customer bringing QTS’ leasing to more than 40 MW in its new Atlanta DC-2 site.
- a 5 MW expansion in Manassas with a hyperscale software-as-a-service provider, expected to ramp to full 24 MW capacity through 2021.
- five 5+ MW hyperscale leases during full-year 2020, exceeding its target of 1-3 large, 5MW+ hyperscale leases. The company is raising its 2021 hyperscale leasing volume target to 2-4 large 5+ MW leases.
- a 5+ MW lease with a hyperscale cloud provider supporting the Federal government, bringing the full-year 2020 federal leasing to more than 15 MW.
QTS was active in developing its properties in 2020. Capital expenditures for data center development, maintenance, and other facility investment, and excluding acquisitions, were $794 million, more than double the $348 million spent in 2019. The company is guiding 2021 capex to $800-900 million.
The increased capex supports a record booked-not-billed backlog and strong momentum exiting 4Q20. More than 70 percent of current development capital spending for 2021 is directly tied to signed leases.
The 2021 construction plan calls for adding a total of 302,500 sq.ft. of raised floor space. This expansion includes eight existing properties in Georgia, Texas, Virginia, California, and New Jersey to increase the raised floor capacity from 830,000 sq.ft. to over one million sq.ft.
QTS is building two brand new sites in the strategic northern Virginia market in Ashburn and Manassas, adding another 103,000 sq.ft. A joint-venture project, also in Manassas, adds 11,000 sq.ft to the existing 33,600 sq.ft. facility.
In addition, QTS owns approximately 785 acres of land at its data center properties for expansion capacity to meet future demand from current and new customers.
By John Celentano, Inside Towers Business Editor
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