BUY. Stock Report April 18th, 2017 Ticker: DFT. Intrinsic Value. 3-Yr Target Price Recommendation. USF Student Managed Investment Fund

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1 USF Student Managed Investment Fund Current Price Intrinsic Value 3-Yr Target Price Recommendation BUY Analysts L. Arruda, J. Davis, and Q. Nguyen Sector Real Estate Industry Specialized REITs Summary DuPont Fabros Technology is a real estate investment trust (REIT) that owns, acquires, develops and operates wholesale data centers. Its customer base includes Microsoft, Facebook, and Apple. Stock Statistics 52-Wk Range Beta to S&P P/E Ratio 30.3 Price/Book 5.1 Market Cap 4.52B Beta to REIT ETF 0.97 Dividend Yield 3.94% Price/Sales Year Price Performance Revenue/FFO Data % Revenue (Million $) 90.00% 70.00% 50.00% 30.00% Q Q Q Q Funds from Operations (Million $) Year % % DFT Vanguard REIT ETF S&P Investment Rationale Risks DuPont will benefit from increasing data usage, which will drive the need for large data centers DuPont is undervalued relative to its peers and we expect that its multiple will adjust to industry norms The cost-efficient and secure nature of external data centers will drive the need for DuPont's services Loss of key customers could materially affect the firm due to high customer concentration Increasing competition as the industry becomes more attractive Failure to fully lease new data centers and renew existing leases

2 Overview of REITs and Data Center REITs Real estate investment trusts (REITs) are holding companies that own and manage properties, and lease their properties out to lessees. Data center REITs manage facilities that provide all infrastructure necessary to house server equipment, including systems for power distribution, environmental control, fire suppression, and security. The two types of data center REITs are wholesale and retail. Wholesale data centers are the larger of the two types. The total area of these data centers usually range from 50,000-1,000,000 square feet. REITs that operate these types of data centers usually do so on a contractual basis. Tenants are required to sign 7-20 year leases and are billed monthly based on power usage. Wholesale data centers cater to large technology companies that require massive quantities of power for data storage. Retail data centers cater to companies that require less power for data storage. Tenants of these data centers are billed monthly based on the number of server cabinets that they occupy. Business Overview DuPont Fabros Technology is a REIT that leases wholesale data center capacity to some of the world s largest technology companies. The company operates 11 data centers across the U.S. and serves 32 different customers in three states: California, Virginia, and Illinois. Microsoft and Facebook combined accounted for 45.6% of annualized base rent in 2016, as indicated in the table on the right. DuPont also specializes in cloud as 82% of its annualized based rent comes from cloud and cloud-like customers. Customers % of Base Rent Microsoft 25.4% Facebook 20.2% Apple 11.2% Rackspace 9.0% Fortune 500 SaaS Provider 8.0% Yahoo! 6.0% In 2016, the weighted average base rent that DuPont Fabros charged its customers was $102 per kilowatt per month. At the end of the last fiscal year, the firm leased 287,000 kilowatts, totaling $345 million in base rent during the period. In addition, DuPont predominantly adopts a triple net lease system, where the clients are not only responsible for rent costs, but also for energy consumption and certain operating expenses, such as maintenance and security. 2

3 Investment Rationale Increasing Demand for Data Centers Internet of Things The internet of things (IoT) phenomenon is one of the primary growth catalysts for data centers. As the availability of broadband internet reaches more regions and individuals, more and more devices are becoming connected to the world wide web. Traditional non-tech devices such as watches and vehicle communication systems are now connected to the web. According to a recent research report by investment company, JLL, enterprises are expected to increase their investments in smart office devices by 33% over the next 12 months. As technology companies compete to lead in IoT innovation within their respective markets, data storage capacity will need to expand to support their initiatives, thus increase demand for DuPont Fabros s services. Increased Focus on Cloud Services and Infrastructure Per the International Data Corporation (IDC), worldwide spending on cloud services and infrastructure will reach $122.5 billion this year, a 24.4% increase over IDC also projects that spending will grow at a 21.5% compound annual growth rate through Large companies will continue to be the primary drivers of worldwide public cloud services, with spending expected to account for over 50% of cloud spending throughout the period. $215 $195 $175 $155 $135 $115 $95 Worldwide Cloud Services Spending (in Billions) Microsoft, Dupont s largest customer, is committed to continuous improvement and expansion of its cloud computing infrastructure. Azure, the company s proprietary business cloud services platform, experienced revenue growth of of almost 100% in Additionally, revenue attributed to the company s Office 365 platform, a cloud-based version of its popular Office software, grew 47% in the second quarter of Facebook, Dupont s second largest customer, is also committed to expanding its data storage capacity. In its latest earnings call, the company guided expenditures for 2017 at $7.0-$7.5 billion, an annual increase of 56-67% over last year s expenditures. The company attributes the capacity expansion need to the growth in its video streaming services. 3

4 Investment Rationale (Continued) DuPont is Undervalued Relative to Peers In the REIT industry, two metrics that are widely used to analyze a firm s financial health are funds from operations (FFO) and net operating income (NOI). DuPont trades at a lower price-to-ffo and price-to-noi multiples relative to any of its main competitors even though the firm consistently outperforms the REIT industry. The table below contains different metrics that highlights this case. Valuation Ratios DuPont Fabros Tech Digital Realty Trust CoreSite Realty QTS Realty Trust CyrusOne Equinix Average Forward P/E P/B P/S P/NOI P/FFO EV/EBITDA We are confident DuPont s stock price will appreciate given its superior financial health and strong growth prospects. For instance, DuPont benefits from being the only pure-play company in the wholesale data center space, which makes the firm better positioned to capitalize on the trends driving this industry. This pure-play characteristic allows the firm to attract larger clients and creates cost advantages over retail REITs. The table below contains numerous profitability metrics that are commonly used to analyze this industry. Dividends and Profitability Ratios DuPont Fabros Tech Digital Realty Trust CoreSite Realty QTS Realty Trust CyrusOne Equinix Average Dividend Yield 4.6% 3.6% 4.0% 3.1% 3.8% 2.2% 3.6% ROA ROE NOI Margin 67.0% 64.0% 69.7% 63.9% 64.6% 49.6% 63.1% FFO Margin 43.9% 40.5% 44.1% 33.1% 39.7% 20.1% 36.9% Gross Margin 67.0% 64.4% 73.2% 63.9% 64.6% 49.6% 63.8% Operating Margin 40.1% 23.2% 23.6% 9.5% 13.3% 17.1% 21.1% Net Profit Margin 23.5% 15.5% 12.6% 5.4% 3.8% 3.5% 10.7% EBITDA Margin 60% 54% 53% 42% 45% 43% 49.5% The superior metrics seen above is largely a result of DuPont s focus into wholesale data centers. Restricting its operations to wholesale has minimized the number of customers the company serves, but allowed it to acquire larger and more profitable clients. Tech giants like Facebook and Microsoft require data centers that are tailored to their specific needs, which allows DuPont to charge higher prices. Moreover, the size of wholesale data centers make them more adequate to supply the increasingly large and complex needs of tech enterprises. 4

5 Investment Rationale (Continued) Advantages of Outsourced Data Centers More than 70% of data centers are internal. However, having an internal data center exposes businesses to additional security risks and costs. Data center providers such as DuPont Fabros offers businesses significant cost advantages and additional security. Cost Savings Customers using DuPont s data centers can save 36% in costs annually as compared to using internal data centers. They also have the flexibility for additional savings by only paying for electricity consumed and using economies of scale to minimize operating expenses. DuPont constantly strives to make its data centers more cost efficient. In 2014, the firm switched to reclaimed water for evaporative cooling at one of its campuses, reducing the cost of water consumption by 50-65%. Security Information theft is one of the fastest growing forms of business criminality. Each of DuPont s data center entrances are monitored around the clock by security officers, with numerous security challenge points, including access card and biometric authentication. DuPont Fabros also ensures uninterrupted connectivity for businesses if a downtime was to occur by having a backup secondary line. A downtime can cost a business thousands of dollars, depending on its size. In conclusion, cost advantages, superior information and connectivity security are attractive features that will continue to draw businesses towards data center outsourcing, thus benefiting DuPont Fabros. 5

6 Competitive Landscape The data center REIT industry is highly competitive and fragmented. The industry is comprised of both multibillion dollar and small-cap firms. DuPont s closest competitors are Digital Realty Trust, CoreSite Realty, Equinix, CyrusOne, and QTS Realty Trust. Below is a comparison between these firms: Number of Data Centers Occupancy 97% 89% 80% 85% 95% 88% Annualized Base Rent of Leases Expiring ('17-18) 14% 27% N/A 43% 52% 58% Adjusted EBITDA Margin 60% 54% 43% 45% 53% 42% SG&A as % of Revenue 5% 7% 31% 16% 12% 20% Dividend Yield 4.6% 3.6% 2.2% 3.8% 4.0% 3.1% Net Debt to Adjusted EBITDA 3.6x 4.6x 3.6x 4.8x 2.8x 4.9x Corporate Family Rating Ba1 / BB- Baa2 / BBB Ba3 / BB+ B1 / BB- NR / NR B2 / BB- Despite the competitiveness of the industry, DuPont is capable of maintaining superior metrics across the board. As a result of being a pure wholesale company, DuPont is able to achieve higher margins, lower SG&A costs, and longer contracts than competitors. With only 14% of leases expiring , DuPont is also a safer investment than peers such as CoreSite and QTS, both of which have more than 50% of their leases expiring within the same period. 6

7 Competitive Strengths Long-term Leases to Technology Industry Leaders DuPont has contractual obligations with several of the largest technology companies in the world such as Microsoft and Facebook. Contracts with large companies like these range anywhere from 7-20 years and post-contract switching costs are significant. The average lease term for DuPont s 2016 customers was 12.2 years, and the current average lease maturity is 5.4 years. Industry-Leading Occupancy Rates As of late February, Dupont s property occupancy rate was 99%. This rate is higher than its peer group average of 89% and is also the highest in the peer group. This demonstrates DuPont s ability to retain customers and the strong demand for data centers. Strong Development Pipeline 100% 95% 90% 85% 80% 75% 85% 83% 81% 90% 90% 91% Operating Portfolio Occupancy 94% 94% 94% 95% 94% 94% 93% 92% 89% 96% 96% % 97% 97% DuPont has a strong pipeline for future growth. The company currently has 64 MW of capacity that will become available over the next year. Additionally, the company has 298 MW of potential capacity in land held for future developments. In 2016, DuPont purchased land in Ashburn, Toronto, Portland, and executed a contract to purchase 56 acres in Phoenix. Data Center Phase Site Capacity (MW) Delivery ACC9 Phase I Ashburn, VA Q17 ACC9 Phase II Ashburn, VA Q17 SC1 Phase III Santa Clara, CA Q17 TOR1 Phase IA Vaughan, ON 6.0 4Q17 CH3 Phase I Elk Grove Village, IL Q18 Total Current Development Projects:

8 Risks The firm will continue to face intense competition from both current peers and new entrants as the industry becomes more attractive. DuPont Fabros operates in the highly competitive data center REIT industry. The firm competes not only with new entrants, but with larger firms that possess competitive advantages over DFT. As data usage increases and the industry becomes more attractive, we expect the supply of data centers to increase and occupancy and rental rates to become more competitive. Loss of a key customer could materially impact the firm given its level of customer concentration. % of Revenue by S&P Credit Rating DuPont Fabros is highly dependent on the relationships and financial health of its top two customers, Facebook and Microsoft. Although those firms have proven to be highly credible and stable over the years, DuPont s base rent revenue would decline significantly in the event that one of these firms being unable to meet their obligations. In addition, the company could suffer adverse consequences if it is unable to retain customers. DuPont s long term leases, successful history of lease renewals, and customer's credit ratings play NR, 16% BB, 13% IG Like, 17% AA, 13% BBB, 1% A, 2% an important role offsetting this risk. As of Q4 of 2016, 71% of the firm s revenue comes from investment grade or equivalent AAA, 38% customers. DuPont Fabros could suffer material damages if it fails to lease new data centers or renew current leases. The company is dependent on its ability to find new lessees and retain its current clients to maintain and expand its business. This risk is intensified by the fact that management expects to have an additional 50.8 MW available for lease during 2017, of which only 18.9 MW is pre-leased. In addition to competition possibly hindering the firm s ability to renew its leases, DuPont would be negatively impacted if any of its clients opts to develop in-house data management facilities. Historically, existing customers have accounted for 77% of growth. Customers' Growth with DuPont Multiple Leases, 77% One Lease, 23% 8

9 Valuation - Funds from Operations Model Funds from Operations Funds from operations (FFO) is the most commonly used metric to analyze REITS. In this industry, net income is not a meaningful representation of performance given that real estate assets generally appreciate over time. For this reason, we based two of our models on FFO, which adds depreciation, amortization, and subtracts gains from sale of real estate back to net income. FFO Discount Model 2017E 2018E 2019E 2020E 2021E 2022E Net income 154, , , , , ,902 Depreciation and amortization 122, , , , , ,981 Less: Non real estate depreciation and amortization ,009-1,118-1,242-1,386-1,428 Impairment on investment in real estate Gain on sale of real estate NAREIT FFO 276, , , , , ,454 Preferred stock dividends 13,000 13,000 13,000 13,000 13,000 13,000 Issuance costs from redeemed preferred stock NAREIT FFO attributable to common shares and units 263, , , , , ,454 Outputs Intrinsic Value of FFO 5,152,092 Number of Shares 89,000 Intrinsic Value of FFO per share $ Current Price $ Implied Return 14.27% Discounted Values 239, , , , ,137 3,898,095 Assumptions Beta 0.97 Risk Free Rate 2.24% Expected Market Return 9% CAPM 8.80% Applied Discount Rate 10.00% To obtain the intrinsic value of DuPont Fabros, we created a discounted FFO model. The model adjusts the forecasted net income to FFO available to common shareholders and discounts the expected FFOs to present value. Our model uses a discount rate of 10%, which represents the CAPM rate of 8.8% adjusted (+1.2%) for the risks associated with high customer concentration. We also applied a terminal growth rate of 3% to sales. The model resulted on an intrinsic value of $57.89, which indicates an implied return of 14.27%. Sensitivity Analysis We created a sensitivity analysis to account for the limitations associated with the model. The sensitivity analysis shows what the intrinsic value of the firm would be under different scenarios. The column variable represents different levels of MWs added each year, with 0% being our raw forecast and the other columns Discounted FFO Sensitivity Analysis $ % -6.00% -3.00% 0.00% 3.00% 6.00% 9.00% 12.00% $44.15 $44.26 $44.36 $44.47 $44.58 $44.68 $ % $46.89 $47.00 $47.12 $47.23 $47.34 $47.45 $ % $49.98 $50.10 $50.22 $50.33 $50.45 $50.57 $ % $53.48 $53.60 $53.73 $53.86 $53.99 $54.11 $ % $57.48 $57.62 $57.75 $57.89 $58.02 $58.16 $ % $62.10 $62.25 $62.40 $62.54 $62.69 $62.84 $ % $67.50 $67.66 $67.82 $67.98 $68.13 $68.29 $ % $73.88 $74.06 $74.23 $74.40 $74.57 $74.75 $ % $81.55 $81.74 $81.93 $82.12 $82.31 $82.50 $ % $90.92 $91.13 $91.35 $91.56 $91.77 $91.98 $92.19 being 3% increases and decreases to our raw forecast. The row variable represents different discount rates at which the FFOs are being discounted. 9

10 Valuation - FFO Multiple Expansion Model FFO Multiple Expansion Model 2017E 2018E 2019E 2020E 2021E 2022E Net income 154, , , , , ,902 Depreciation and amortization 122, , , , , ,981 Less: Non real estate depreciation and amortization ,009-1,118-1,242-1,386-1,428 NAREIT FFO 276, , , , , ,454 Preferred stock dividends 13,000 13,000 13,000 13,000 13,000 13,000 NAREIT FFO to common shares 263, , , , , ,454 NAREIT FFO per share $3.46 $3.65 $4.06 $4.38 $4.85 $4.93 FFO Multiple 16.10x 17.02x 17.93x 18.53x 19.03x 19.53x Stock Price $55.73 $62.16 $72.80 $81.19 $92.30 $96.39 We expect DFT s multiples to appreciate to the industry average as wholesale data centers gain popularity among large tech enterprises. The model above estimates the 3-year price of the stock as this trend intensifies during the next 5 years. Using the forecasted net income to obtain the expected FFOs during the next 5 years, and assuming that the DFT multiple will expand towards 21x at a constant rate during this period, the model retrieved a 3-year target price of $ Valuation - Net Operating Income Model NOI Multiple Expansion Model 2017E 2018E 2019E 2020E 2021E 2022E Total Revenue 585, , , , , ,955 Cost of Revenue 189, , , , , ,072 Net operating Income 396, , , , , ,883 NOI per share $5.21 $5.55 $5.91 $6.32 $6.78 $6.98 NOI Multiple 10.67x 10.93x 11.20x 11.47x 11.73x 12.00x Stock Price $55.52 $60.71 $66.25 $72.44 $79.55 $83.80 Net operating income is also a widely-used metric in the REIT industry since it measures the ability of the firm s properties to produce an income stream. DuPont Fabros trades at a P/NOI multiple of 10.4x while its closes competitors trade at 11.9x. Using the forecasted net operating income per share, and assuming that the multiple will expand to the industry norm at a constant rate, the model retrieved a 3-year target price of $ Calculation of the 3-Yr Target Price To calculate a 3-year price target for Dupont, we used a weighted average of the values derived from our valuation methodologies. Since funds from operations (FFO) is a superior metric than NOI when valuing REITs, we applied a 75% weight to that price. We applied the remaining 25% to the price generated by our net operating income (NOI) model to arrive at a 3-year price target of $ Year Target Price Metric Price Derived Weight FFO $ % NOI $ % Target Price $

11 Appendix - Revenue Breakdown Revenue Forecast 2012A 2013A 2014A 2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E Wheighted Price per MW per Month Price Growth Rate -5.50% -1.94% 0.00% 0.99% 0.00% 0.00% -1.00% -1.00% -1.00% MW of critical load Annual MW addition Base rent 236, , , , , , , , , ,441 Recoveries from tenants 91, , , , , , , , , ,234 Recovery from tenant % of Base Rent 38.45% 39.24% 43.70% 46.73% 49.18% 50.00% 50.30% 50.60% 50.90% 51.20% Property Revenue 327, , , , , , , , , ,674 Other Revenue 4,586 5,143 7,023 14,278 14,011 7,006 7,356 7,724 8,110 8,515 YoY growth % 12.15% 36.55% % -1.87% % 5.00% 5.00% 5.00% 5.00% Total Revenue 332, , , , , , , , , , ,955 YoY growth % 12.83% 11.33% 8.34% 16.87% 10.75% 10.94% 10.78% 11.08% 11.61% 3.00% 11

12 Appendix - Pro Forma Income Statement (in Thousands except Share and Per Share Data) Income Statement (Thousands) 2012A 2013A 2014A 2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E Total revenue 332, , , , , , , , , , ,955 Property operating costs 94, , , , , , , , , , ,082 Real estate taxes and insurance 12,689 14,380 14,195 21,335 20,180 22,932 25,441 28,184 31,308 34,943 35,991 Cost of revenue 107, , , , , , , , , , ,072 Gross profit 225, , , , , , , , , , ,883 Depreciation and amortization 89,241 93,058 96, , , , , , , , ,981 General and administrative 17,024 16,261 17,181 18,064 23,043 25,671 28,480 31,550 35,047 39,116 40,290 Impairment on investment in real estate , Other expenses 6,919 3,650 9,222 16,859 11,781 5,855 8,445 7,196 7,994 8,922 9,190 Operating income 111, , ,875 39, , , , , , , ,423 Interest expense -51,261-49,792-36,563-43,661-52,006-62,299-74,470-74,898-83,574-84,508-93,521 Gain on sale of real estate , Loss on early extinguishment of debt 0-40,978-1, , Net income (loss) from continuing operations 60,665 53, ,611-4, , , , , , , ,902 Non-controlling interests -7,803-5,214-18,704 5,993-24,248-12,000-12,000-12,000-12,000-12,000-12,000 Preferred stock dividends -27,053-27,245-27,245-27,245-20,739-13,000-13,000-13,000-13,000-13,000-13,000 Redeemed preferred stock issuance costs , Net income (loss) to common shareholders 25,809 21,009 78,662-25, , , , , , , ,902 Diluted shares oustanding 63,754 65,474 66,086 65,184 73,839 76,123 79,167 82,334 85,628 89,053 89,053 Diluted EPS $0.40 $0.32 $1.19 ($0.39) $1.68 $2.03 $2.11 $2.40 $2.59 $2.91 $2.93 Common Size Income Statement 2012A 2013A 2014A 2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E Total revenue 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Property operating costs 28.47% 27.60% 28.10% 28.75% 29.14% 28.41% 28.41% 28.41% 28.41% 28.41% 28.41% Real estate taxes and insurance 3.82% 3.83% 3.40% 4.72% 3.82% 3.92% 3.92% 3.92% 3.92% 3.92% 3.92% Cost of revenue 32.29% 31.43% 31.50% 33.46% 32.96% 32.33% 32.33% 32.33% 32.33% 32.33% 32.33% Gross profit 67.71% 68.57% 68.50% 66.54% 67.04% 67.67% 67.67% 67.67% 67.67% 67.67% 67.67% Depreciation and amortization 26.84% 24.81% 23.18% 23.00% 20.39% 21.00% 21.00% 21.00% 21.00% 21.00% 21.00% General and administrative 5.12% 4.34% 4.11% 3.99% 4.36% 4.38% 4.38% 4.38% 4.38% 4.38% 4.38% Impairment on investment in real estate 0.00% 0.00% 0.00% 27.07% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other expenses 2.08% 0.97% 2.21% 3.73% 2.23% 1.00% 1.30% 1.00% 1.00% 1.00% 1.00% Operating income 33.67% 38.45% 39.00% 8.75% 40.07% 41.29% 40.99% 41.29% 41.29% 41.29% 41.29% Interest expense % % -8.76% -9.65% -9.84% % % % % -9.47% % Gain on sale of real estate 0.00% 0.00% 0.00% 0.00% 4.32% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Loss on early extinguishment of debt 0.00% % -0.41% 0.00% -0.23% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Net income (loss) from continuing operations 18.25% 14.25% 29.84% -0.90% 34.32% 30.65% 29.52% 30.88% 30.83% 31.82% 31.11% Non-controlling interests -2.35% -1.39% -4.48% 1.32% -4.59% -2.05% -1.85% -1.67% -1.50% -1.35% -1.31% Preferred stock dividends -8.14% -7.26% -6.52% -6.02% -3.92% -2.22% -2.00% -1.81% -1.63% -1.46% -1.41% Redeemed preferred stock issuance costs 0.00% 0.00% 0.00% 0.00% -2.36% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Net income (loss) to common shareholders 7.76% 5.60% 18.84% -5.60% 23.45% 26.38% 25.68% 27.41% 27.71% 29.01% 28.39% 12

13 Appendix - Pro Forma Balance Sheet (in Thousands except Share Data) Stock Report April 18th, 2017 Ticker: DFT Balance Sheet 2012A 2013A 2014A 2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E ASSETS Income Producing Property 2,388,696 2,496,942 2,707,332 2,831,139 3,124,251 3,357,417 3,607,983 3,877,250 4,166,613 4,477,571 4,811,736 Less: accumulated depreciation -325, , , , , , , ,053-1,141,259-1,307,632-1,498,259 Net Income producing property 2,062,956 2,083,548 2,202,463 2,270,302 2,462,068 2,598,700 2,738,661 2,881,197 3,025,354 3,169,939 3,313,476 Construction in progress & property held for development 218, , , , , , , , , , ,884 Net real estate 2,281,890 2,385,616 2,561,428 2,571,241 2,793,051 2,977,934 3,173,180 3,379,061 3,595,797 3,823,541 4,062,361 Cash and cash equivalents 23,578 38,733 29,598 31,230 38,624 32,954 38,131 44,624 49,818 50,500 57,510 Rents and other receivables, net 3,840 12,674 8,113 9,588 11,533 12,591 13,969 15,475 17,190 19,185 19,761 Deferred rent, net 144, , , , , , , , , , ,058 Lease contracts above market value, net 10,255 9,154 8,054 6,029 5,138 5,138 5,138 5,138 5,138 5,138 5,138 Deferred costs, net 35,670 39,866 38,495 23,774 25,776 25,776 25,776 25,776 25,776 25,776 25,776 Prepaid expenses and other assets 30,797 44,507 48,295 44,689 41,284 51,781 57,445 63,639 70,692 78,900 81,267 Total assets 2,530,859 2,680,588 2,836,348 2,815,492 3,038,464 3,229,232 3,436,697 3,656,770 3,887,468 4,126,098 4,374,871 LIABILITIES AND STOCKHOLDERS EQUITY LIABILITIES Line of credit 18, , , , , ,000 Mortgage notes payable, net of deferred financing costs 139, , , , , , , , , , ,127 Unsecured term loan, net of deferred financing costs 0 154, , , , , , , , , ,393 Unsecured notes payable, net of discount & deferred financing costs 550, , , , , , ,900 1,045,733 1,111,017 1,179,904 1,249,896 Total Long-term Debt 707, ,000 1,025,000 1,198,210 1,248,018 1,325,501 1,489,390 1,497,962 1,671,479 1,690,156 1,870,416 Accounts payable and accrued liabilities 22,280 23,566 26,973 32,301 36,909 41,341 45,864 50,809 56,440 62,993 64,883 Construction costs payable 6,334 45,444 32,949 22,043 56,428 58,553 64,959 71,962 79,937 89,219 91,896 Accrued interest payable 2,601 9,983 10,759 11,821 11,592 14,069 15,608 17,291 19,207 21,437 22,080 Dividend and distribution payable 22,177 25,971 39,981 43,906 46,352 54,080 59,997 66,465 73,831 82,404 84,876 Lease contracts below market value, net 14,022 10,530 7,037 4,132 2,830 4,241 4,705 5,212 5,790 6,462 6,656 Prepaid rents and other liabilities 35,524 56,576 65,174 67,477 78,232 78,232 78,232 78,232 78,232 78,232 78,232 Total liabilities 810,538 1,041,070 1,207,873 1,379,890 1,480,361 1,576,017 1,758,754 1,787,933 1,984,917 2,030,904 2,219,038 Redeemable noncontrolling interests operating partnership 453, , , , , , , , , , ,644 STOCKHOLDERS EQUITY Preferred stock, $.001 par value, 50 million shares authorized: Series A 185, , , , Series B 166, , , , Series C , , , , , , ,250 Common stock, $.001 par value Additional paid in capital 915, , , , , , , , ,544 1,022,225 1,082,863 Retained earnings (Accumulated deficit) , Accumulated other comprehensive loss , Total stockholders equity 1,266,432 1,252,274 1,115, , ,042 1,003,003 1,053,740 1,107,310 1,163,870 1,223,551 1,284,189 Total liabilities and stockholders equity 2,530,859 2,680,588 2,836,348 2,815,492 3,038,464 3,229,232 3,436,697 3,656,770 3,887,468 4,126,098 4,374,871 13

14 Appendix - Common Size Balance Sheet Balance Sheet 2012A 2013A 2014A 2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E ASSETS Income Producing Property 94.38% 93.15% 95.45% % % % % % % % % Less: accumulated depreciation % % % % % % % % % % % Net Income producing property 81.51% 77.73% 77.65% 80.64% 81.03% 80.47% 79.69% 78.79% 77.82% 76.83% 75.74% Construction in progress & property held for development 8.65% 11.27% 12.66% 10.69% 10.89% 11.74% 12.64% 13.61% 14.67% 15.84% 17.12% Net real estate 90.16% 89.00% 90.31% 91.32% 91.92% 92.22% 92.33% 92.41% 92.50% 92.67% 92.86% Cash and cash equivalents 0.93% 1.44% 1.04% 1.11% 1.27% 1.02% 1.11% 1.22% 1.28% 1.22% 1.31% Rents and other receivables, net 0.15% 0.47% 0.29% 0.34% 0.38% 0.39% 0.41% 0.42% 0.44% 0.46% 0.45% Deferred rent, net 5.72% 5.60% 5.02% 4.58% 4.05% 3.81% 3.58% 3.37% 3.17% 2.98% 2.81% Lease contracts above market value, net 0.41% 0.34% 0.28% 0.21% 0.17% 0.16% 0.15% 0.14% 0.13% 0.12% 0.12% Deferred costs, net 1.41% 1.49% 1.36% 0.84% 0.85% 0.80% 0.75% 0.70% 0.66% 0.62% 0.59% Prepaid expenses and other assets 1.22% 1.66% 1.70% 1.59% 1.36% 1.60% 1.67% 1.74% 1.82% 1.91% 1.86% Total assets % % % % % % % % % % % LIABILITIES AND STOCKHOLDERS EQUITY LIABILITIES Line of credit 0.71% 0.00% 2.12% 0.00% 1.68% 0.00% 2.33% 0.00% 2.06% 0.00% 1.83% Mortgage notes payable, net of deferred financing costs 5.52% 4.29% 4.05% 4.05% 3.64% 3.85% 3.85% 3.85% 3.84% 3.85% 3.84% Unsecured term loan, net of deferred financing costs 0.00% 5.75% 8.81% 8.85% 8.20% 8.54% 8.53% 8.52% 8.51% 8.52% 8.51% Unsecured notes payable, net of discount & deferred financing costs 21.73% 22.38% 21.15% 29.66% 27.56% 28.66% 28.63% 28.60% 28.58% 28.60% 28.57% Total Long-term Debt 27.96% 32.42% 36.14% 42.56% 41.07% 41.05% 43.34% 40.96% 43.00% 40.96% 42.75% Accounts payable and accrued liabilities 0.88% 0.88% 0.95% 1.15% 1.21% 1.28% 1.33% 1.39% 1.45% 1.53% 1.48% Construction costs payable 0.25% 1.70% 1.16% 0.78% 1.86% 1.81% 1.89% 1.97% 2.06% 2.16% 2.10% Accrued interest payable 0.10% 0.37% 0.38% 0.42% 0.38% 0.44% 0.45% 0.47% 0.49% 0.52% 0.50% Dividend and distribution payable 0.88% 0.97% 1.41% 1.56% 1.53% 1.67% 1.75% 1.82% 1.90% 2.00% 1.94% Lease contracts below market value, net 0.55% 0.39% 0.25% 0.15% 0.09% 0.13% 0.14% 0.14% 0.15% 0.16% 0.15% Prepaid rents and other liabilities 1.40% 2.11% 2.30% 2.40% 2.57% 2.42% 2.28% 2.14% 2.01% 1.90% 1.79% Total liabilities 32.03% 38.84% 42.59% 49.01% 48.72% 48.80% 51.18% 48.89% 51.06% 49.22% 50.72% Redeemable noncontrolling interests operating partnership 17.93% 14.45% 18.09% 17.02% 19.45% 20.14% 18.16% 20.83% 19.00% 21.13% 19.92% STOCKHOLDERS EQUITY Preferred stock, $.001 par value, 50 million shares authorized: 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Series A 7.31% 6.90% 6.52% 6.57% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Series B 6.57% 6.20% 5.86% 5.90% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Series C 0.00% 0.00% 0.00% 0.00% 6.62% 6.23% 5.86% 5.50% 5.18% 4.88% 4.60% Common stock, $.001 par value 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Additional paid in capital 36.16% 33.61% 26.94% 24.33% 25.23% 24.83% 24.80% 24.78% 24.76% 24.77% 24.75% Retained earnings (Accumulated deficit) 0.00% 0.00% 0.00% -2.84% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Accumulated other comprehensive loss 0.00% 0.00% 0.00% 0.00% -0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Total stockholders equity 50.04% 46.72% 39.32% 33.97% 31.83% 31.06% 30.66% 30.28% 29.94% 29.65% 29.35% Total liabilities and stockholders equity % % % % % % % % % % % 14

15 Appendix - Debt Overview Debt Summary 2015 Year End 2016 Year End Amounts (thousands) Amount (thousands) % of Total Rate (%) Maturities (Years) Secured $115,000 $111, Unsecured $1,100,000 $1,150, Total $1,215,000 $1,262, Fixed Rate Debt: Unsecured Notes due 2021 $600,000 $600, Unsecured Notes due 2023 $250,000 $250, Fixed Rate Debt $850,000 $850, Floating Rate Debt: Unsecured Credit Facility $50, Unsecured Term Loan $250,000 $250, ACC3 Term Loan $115,000 $111, Floating Rate Debt $365,000 $412, Total $1,215,000 $1,262, DuPont Fabros Debt Maturities ($ in thousands) Year Fixed Rate Floating Rate Total % of Total Rates (%) 2017 $8,750 $8, $102,500 $102, $50,926 $50, $600,000 $600, $250,000 $250, $250,000 $250, Total $850,000 $412,176 $1,262, Dupont s cost of debt is composed of fixed and floating rate instruments.the company has one fixed rate instrument that matures within our investment horizon, which will be subject to refinancing at the future period. Although the instrument s maturity is towards the latter part of our investment horizon, we considered the impact that a refinancing could have on the company s financial health. We constructed a sensitivity analysis to measure the impact refinancing would have at different borrowing levels and interest rates. Refinancing Sensitivity Analysis #REF! 4.40% 4.90% 5.40% 5.90% 6.40% 6.90% 7.40% $450,000 $19,800 $22,050 $24,300 $26,550 $28,800 $31,050 $33,300 $500,000 $22,000 $24,500 $27,000 $29,500 $32,000 $34,500 $37,000 $550,000 $24,200 $26,950 $29,700 $32,450 $35,200 $37,950 $40,700 $600,000 $26,400 $29,400 $32,400 $35,400 $38,400 $41,400 $44,400 $650,000 $28,600 $31,850 $35,100 $38,350 $41,600 $44,850 $48,100 $700,000 $30,800 $34,300 $37,800 $41,300 $44,800 $48,300 $51,800 $750,000 $33,000 $36,750 $40,500 $44,250 $48,000 $51,750 $55,500 15

16 Appendix - Lease Expirations Expiration Year # of Leases Expiring Expiring Commenced Leases Lease Expirations As of January 1, 2017 % Leased Computer Sq Ft Total kw of Expiring Leases % Leased kw % Annualized Base Rent , , , , , , , , , , , , , , , , , , , , After , , Total 124 1,597, ,

17 Leadership Christopher Eldredge has been the president, CEO, and director at DuPont since He has nearly 20 years of experience in the IT infrastructure and telecommunications industry. Prior to joining DuPont, Eldredge led all aspects of data center services in the United States for NTT America Inc., a global IT infrastructure services provider. Jeffrey Foster has served as DuPont s executive vice president and chief financial officer since Prior to joining DuPont, Foster was a senior vice president and chief accounting officer at Global Signal Inc., where he was responsible for a $4 billion NYSE-listed cell tower REIT that tripled in size in Scott Davis has served as DuPont s executive vice president and chief technology officer since Prior to joining DuPont, Davis was a senior director of data center operations at AOL, where he managed the daily operations of AOL s domestic and international data centers. Operating Partnership Structure Similar to many publicly traded REITs today, DuPont Fabros uses a corporate structure referred to as an umbrella partnership REIT, or UPREIT. The firm serves as the general partner of an Operating Partnership and indirectly owns all of its properties. This Operating Partnership is referred to as DuPont Fabros Technology, L.P. As an UPREIT, the firm is able to contribute their real estate property in exchange for operating partnership units that can be converted into REIT shares. This transaction lets DuPont avoid capital gains taxes on appreciated real estate. DuPont currently owns 85% of the common economic interest in the Operating Partnership, with the remaining interest being owned by investors. As the sole general partner the Operating Partnership, DuPont has exclusive control of the Operating Partnership s day-to-day management. Recent Quarter and YTD Highlights In Q4 of 2016, DuPont experienced double digit growth rates as compared to Q4 of 2015, with revenue, funds from operations, and adjusted funds from operations growing 22%, 23%, and 30%, respectively. As of February 2017, 29% of DuPont s properties in development have been pre-leased. The firm s occupancy rates rose to 99% from 97% as of the end of Going forward, DuPont aims to further diversify its customer base and expand its geographic presence while maintaining a 10% profitability growth rate. 17