QTS Realty Trust (NYSE: QTS), a retail and wholesale data center operator, today announced that it has agreed to be acquired by Blackstone Infrastructure Partners, Blackstone Real Estate Income Trust (BREIT), and other long-term perpetual capital vehicles managed by Blackstone for $78.00 per common share in an all-cash transaction. Indeed, the purchase price represents a premium of 21% to QTS’ closing share price as of June 4, 2021.

Blackstone is valuing QTS Realty’s common equity at $6.7bn. Incorporating the company’s net debt, preferred stock, noncontrolling interests, and capital expenditures through transaction closing of ~$3.3bn, QTS’ enterprise value equates to ~$10bn. Based on the mid-point of the company’s full-year 2021 guidance for adjusted EBITDA, QTS Realty expects to generate $336.5m of adjusted EBITDA in 2021. Therefore, Blackstone is valuing QTS Realty Trust at 29.7x adjusted EBITDA.

Finally, the transaction is expected to close in the second-half of 2021.

QTS Realty Trust – Overview

QTS Realty operates 28 data centers, representing 330+ megawatts of power capacity. Additionally, these facilities comprise 3.5 million sqft, in the United States and Europe, supporting over 1.2k customers.

QTS Realty’s customers include enterprises, hyperscale companies (e.g., cloud service providers and internet companies), and government agencies. For example, notable customers of QTS include Twitter, Facebook, Uber, Oracle Cloud, Workday, and Citadel.

QTS Realty Trust Data Centers Portfolio Map

Geographically, the company’s key data center markets include Atlanta, Northern Virginia (Ashburn and Manassas), Dallas-Fort Worth, New Jersey, Chicago, and Santa Clara (Silicon Valley).

Transaction Details – QTS Realty and Blackstone

Overall, the merger agreement involves entities of QTS Realty and Blackstone including Volt Upper Holdings LLC, Volt Lower Holdings LLC, Volt Acquisition LP, and QualityTech, LP. Additionally, Chad Williams, Chairman and Chief Executive Officer of QTS has entered into a Support Agreement with these entities to vote in favor of the Blackstone transaction.

Upon completion of the transaction, QTS Realty will be taken-private, with its common stock delisted from the New York Stock Exchange.

Go-Shop Period – QTS Realty Termination

Also, the merger agreement includes a 40-day Go-Shop period that will expire on July 17, 2021. In turn, QTS Realty has the right to terminate the merger agreement with Blackstone and enter into a superior proposal from another party.

Transaction Advisors – QTS Realty and Blackstone

QTS Realty’s financial advisors were Jefferies and Morgan Stanley. Additionally, QTS Realty’s legal advisors were Hogan Lovells and Paul, Weiss, Rifkind, Wharton & Garrison.

Blackstone’s financial advisors were Citigroup, Barclays, Deutsche Bank, Goldman Sachs, and J.P. Morgan. Additionally, Blackstone’s legal advisor was Simpson Thacher & Bartlett.

Investment Strategy – Blackstone

QTS Realty represents an investment that exemplifies one of Blackstone’s highest conviction themes: data proliferation. Additionally, Blackstone’s investment into QTS Realty is being positioned as a long-term holding for Blackstone’s perpetual capital vehicles.

Blackstone Perpetual Capital Assets Under Management AUM Q1 2021

Notably, perpetual capital refers to investments by Blackstone with an indefinite term, with no requirement to return capital to investors. As of Q1 2021, Blackstone had $149bn of perpetual capital assets under management (AUM).

Blackstone’s capital will support the growth of QTS Realty’s data center portfolio for hyperscale customers and enterprises. Indeed, by year-end 2021, QTS expects to complete 11 development projects, which in aggregate will comprise 275k sqft and cost $543m.

Management – QTS Realty

Upon completion of the transaction, Blackstone anticipates that QTS Realty will continue to be led by its senior management team. Additionally, the company will maintain its corporate headquarters in Overland Park, Kansas.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne, CoreSite Realty, QTS Realty, Switch Inc, Iron Mountain (NYSE: IRM), Cyxtera (NASDAQ: CYXT), and many more. Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing. Mary has over 5 years of experience in research and writing for Data Centers.


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