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8-K - 8-K - CoreSite Realty Corpa15-21447_18k.htm
EX-99.2 - EX-99.2 - CoreSite Realty Corpa15-21447_1ex99d2.htm

Exhibit 99.1

 

GRAPHIC

 

CORESITE REPORTS THIRD-QUARTER REVENUE AND FFO PER SHARE YEAR OVER YEAR GROWTH OF 23% AND 35%, RESPECTIVELY

 

2015 FFO guidance increased to a range of $2.82 to $2.86 per share

 

DENVER, CO — October 22, 2015 — CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center solutions across the U.S., today announced financial results for the third quarter ended September 30, 2015.

 

Quarterly Highlights

 

·                  Reported third-quarter funds from operations (“FFO”) of $0.74 per diluted share and unit, representing 34.5% growth year over year

·                  Reported third-quarter total operating revenues of $86.6 million, representing a 22.7% increase year over year; total data center revenues of $84.6 million increased 23.5% year over year

·                  Executed 64,087 net rentable square feet (NRSF) of new and expansion data center leases representing $8.8 million of annualized GAAP rent at a rate of $138 per square foot

·                  Commenced 66,330 net rentable square feet of new and expansion leases representing $9.3 million of annualized GAAP rent at a rate of $139 per square foot

·                  Realized rent growth on signed renewals of 4.2% on a cash basis and 9.7% on a GAAP basis and recorded rental churn of 1.4%

 

Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are pleased that our sales momentum carried into the second half of the year and that our Q3 financial results reflect our work to increase efficiencies and scale our business.” Mr. Ray continued, “Further, we continued to execute upon our strategic priorities, including increasing transaction count; enhancing the network and cloud density of our portfolio; and diversifying our customer base with a record number of new logos in the quarter. As we look forward, we believe the growth potential of our business remains highly attractive and we believe in our ability to continue to execute upon our growth plans and deliver superior returns on capital.”

 

Financial Results

 

CoreSite reported FFO per diluted share and unit of $0.74 for the three months ended September 30, 2015, an increase of 34.5% compared to $0.55 per diluted share and unit for the three months ended September 30, 2014. On a sequential-quarter basis, FFO per diluted share and unit increased 8.8%.

 

Total operating revenues for the three months ended September 30, 2015, were $86.6 million, a 22.7% increase year over year and an increase of 6.3% on a sequential-quarter basis. Total data center revenues for the three months ended September 30, 2015, were $84.6 million, a 23.5% increase year over year and an increase of 6.4% on a sequential-quarter basis. CoreSite reported net income attributable to common shares of $6.9 million, or $0.26 per diluted share.

 

Sales Activity

 

CoreSite executed 149 new and expansion data center leases representing $8.8 million of annualized GAAP rent during the third quarter, comprised of 64,087 NRSF at a weighted-average GAAP rental rate of $138 per NRSF.

 

CoreSite’s third-quarter data center lease commencements totaled 66,330 NRSF at a weighted average GAAP rental rate of $139 per NRSF, which represents $9.3 million of annualized GAAP rent.

 

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CoreSite’s renewal leases signed in the third quarter totaled $10.5 million in annualized GAAP rent, comprised of 72,031 NRSF at a weighted-average GAAP rental rate of $145 per NRSF, reflecting a 4.2% increase in rent on a cash basis and 9.7% increase on a GAAP basis. The third-quarter rental churn rate was 1.4%.

 

Development Activity

 

Santa Clara —During the third quarter, CoreSite commenced construction of Phase 1 of SV7, comprised of a 230,000 square-foot powered shell plus 80,000 square feet of turn-key data center capacity within the shell. CoreSite expects to invest $110 million to complete Phase 1 and expects to substantially complete construction in the second quarter of 2016. Additionally, as of September 30, 2015, CoreSite had incurred $10.9 million of the estimated $30.0 million required to complete the previously-announced 136,580 square-foot SV6 build-to-suit development. CoreSite expects to substantially complete SV6 and commence the associated lease in the first half of 2016.

 

Northern Virginia — As of September 30, 2015, CoreSite had 96,274 NRSF of data center space under construction in Phase 3 and Phase 4 at VA2 and had incurred $11.0 million of the estimated $32.5 million required to complete these projects. CoreSite expects to complete construction on Phase 3 in the fourth quarter of 2015 and Phase 4 in the first quarter of 2016.

 

Additional markets — During the third quarter, CoreSite placed into service 12,500 NRSF at LA2 in Los Angeles, of which 64.8% is currently leased. CoreSite also placed into service 11,704 NRSF at CH1 in Chicago, of which 53.9% is leased. As of September 30, 2015, CoreSite had 14,031 NRSF of turn-key data center capacity under construction at BO1 in Boston. As of the end of the third quarter, CoreSite had incurred $3.0 million of the estimated $11.0 million required to complete this project, and expects to complete construction in the first quarter of 2016.

 

Balance Sheet and Liquidity

 

As of September 30, 2015, CoreSite had net debt of $350.8 million, correlating to 2.0 times third-quarter annualized adjusted EBITDA, and net debt and preferred stock outstanding of $465.8 million, correlating to 2.7 times third-quarter annualized adjusted EBITDA.

 

At quarter end, CoreSite had $9.5 million of cash available on its balance sheet and $233.4 million of capacity available under its revolving credit facility.

 

Dividend

 

On August 31, 2015, CoreSite announced a dividend of $0.42 per share of common stock and common stock equivalents for the third quarter of 2015. The dividend was paid on October 15, 2015, to shareholders of record on September 30, 2015.

 

CoreSite also announced on August 31, 2015, a dividend of $0.4531 per share of Series A preferred stock for the period July 15, 2015, to October 14, 2015. The preferred dividend was paid on October 15, 2015, to shareholders of record on September 30, 2015.

 

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2015 Guidance

 

CoreSite is increasing its 2015 guidance of FFO per diluted share and unit to a range of $2.82 to $2.86 from the previous range of $2.75 to $2.83, an increase of 1.8% at the midpoint. In addition, CoreSite is increasing its 2015 guidance for net income attributable to common shares to a range of $0.98 to $1.02 from the previous range of $0.93 to $1.01 per diluted share, with the difference between FFO and net income being real estate depreciation and amortization.

 

This outlook is predicated on current economic conditions, internal assumptions about CoreSite’s customer base, and the supply and demand dynamics of the markets in which CoreSite operates. The guidance does not include the impact of any future financing, investment or disposition activities beyond what has already been disclosed.

 

Upcoming Conferences and Events

 

CoreSite will participate in NAREIT’s REITWorld conference on November 17 and November 18 at the Wynn Las Vegas in Las Vegas, Nevada.

 

Conference Call Details

 

CoreSite will host a conference call on October 22, 2015, at 12:00 p.m., Eastern Time (10:00 a.m., Mountain Time), to discuss its financial results, current business trends and market conditions.

 

The call can be accessed live over the phone by dialing 877-407-3982 for domestic callers or 201-493-6780 for international callers. A replay will be available shortly after the call and can be accessed by dialing 877-870-5176 for domestic callers or 858-384-5517 for international callers. The passcode for the replay is 13620908. The replay will be available until October 29, 2015.

 

Interested parties may also listen to a simultaneous webcast of the conference call by logging on to CoreSite’s website at www.CoreSite.com and clicking on the “Investors” link. The on-line replay will be available for a limited time beginning immediately following the call.

 

About CoreSite

 

CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center solutions across eight key North American markets. More than 800 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 350+ dedicated employees consistently deliver unmatched data center options — all of which leads to a best-in-class customer experience and lasting relationships. For more information, visit www.CoreSite.com.

 

CoreSite Investor Relations Contact

 

Greer Aviv | Director of Investor Relations
+1 303.405.1012 | +1 303.222.7276
Greer.Aviv@CoreSite.com

 

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Forward Looking Statements

 

This earnings release and accompanying supplemental information may contain 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 some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond CoreSite’s control that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition; the company’s failure to obtain necessary outside financing; the company’s failure to qualify or maintain its status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; and other factors affecting the real estate industry generally. All forward-looking statements reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, 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 most recent annual report on Form 10-K, and other risks described in documents subsequently filed by the company from time to time with the Securities and Exchange Commission.

 

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Consolidated Balance Sheet

(in thousands)

 

 

 

September 30,
2015

 

December 31,
2014

 

Assets:

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

Land

 

$

74,819

 

$

78,983

 

Buildings and improvements

 

1,024,778

 

888,966

 

 

 

1,099,597

 

967,949

 

Less: Accumulated depreciation and amortization

 

(265,637

)

(215,978

)

Net investment in operating properties

 

833,960

 

751,971

 

Construction in progress

 

126,117

 

178,599

 

Net investments in real estate

 

960,077

 

930,570

 

Cash and cash equivalents

 

9,477

 

10,662

 

Accounts and other receivables, net

 

14,194

 

10,290

 

Lease intangibles, net

 

5,249

 

7,112

 

Goodwill

 

41,191

 

41,191

 

Other assets

 

85,421

 

75,600

 

Total assets

 

$

1,115,609

 

$

1,075,425

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

Liabilities

 

 

 

 

 

Revolving credit facility

 

$

110,250

 

$

218,500

 

Senior unsecured term loans

 

250,000

 

100,000

 

Accounts payable and accrued expenses

 

56,972

 

42,463

 

Accrued dividends and distributions

 

22,688

 

22,355

 

Deferred rent payable

 

8,248

 

8,985

 

Acquired below-market lease contracts, net

 

4,909

 

5,576

 

Unearned revenue, prepaid rent and other liabilities

 

30,439

 

19,205

 

Total liabilities

 

483,506

 

417,084

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Series A cumulative preferred stock

 

115,000

 

115,000

 

Common stock, par value $0.01

 

261

 

212

 

Additional paid-in capital

 

336,811

 

275,038

 

Accumulated other comprehensive loss

 

(1,507

)

(125

)

Distributions in excess of net income

 

(81,990

)

(67,538

)

Total stockholders’ equity

 

368,575

 

322,587

 

Noncontrolling interests

 

263,528

 

335,754

 

Total equity

 

632,103

 

658,341

 

 

 

 

 

 

 

Total liabilities and equity

 

$

1,115,609

 

$

1,075,425

 

 

5



 

Consolidated Statement of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

Data center revenue:

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

47,135

 

$

44,824

 

$

38,315

 

$

133,282

 

$

110,152

 

Power revenue

 

23,716

 

21,792

 

18,687

 

65,177

 

51,264

 

Interconnection revenue

 

11,400

 

10,595

 

9,169

 

32,210

 

25,819

 

Tenant reimbursement and other

 

2,357

 

2,276

 

2,328

 

6,049

 

6,711

 

Total data center revenue

 

84,608

 

79,487

 

68,499

 

236,718

 

193,946

 

Office, light-industrial and other revenue

 

1,947

 

1,969

 

2,016

 

6,050

 

5,982

 

Total operating revenues

 

86,555

 

81,456

 

70,515

 

242,768

 

199,928

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

24,376

 

22,204

 

20,043

 

66,360

 

54,866

 

Real estate taxes and insurance

 

3,216

 

3,270

 

3,073

 

8,421

 

5,059

 

Depreciation and amortization

 

24,347

 

24,046

 

20,914

 

71,209

 

58,300

 

Sales and marketing

 

3,775

 

4,256

 

3,806

 

11,813

 

11,141

 

General and administrative

 

8,644

 

7,952

 

7,145

 

24,461

 

21,582

 

Rent

 

5,440

 

5,007

 

5,113

 

15,690

 

15,249

 

Impairment of internal-use software

 

 

 

 

 

1,959

 

Transaction costs

 

6

 

45

 

49

 

51

 

62

 

Total operating expenses

 

69,804

 

66,780

 

60,143

 

198,005

 

168,218

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

16,751

 

14,676

 

10,372

 

44,763

 

31,710

 

Gain on real estate disposal

 

 

 

 

36

 

 

Interest income

 

1

 

2

 

1

 

5

 

5

 

Interest expense

 

(2,188

)

(1,730

)

(1,361

)

(5,183

)

(3,949

)

Income before income taxes

 

14,564

 

12,948

 

9,012

 

39,621

 

27,766

 

Income tax expense

 

(34

)

(66

)

(22

)

(149

)

(20

)

Net income

 

14,530

 

12,882

 

8,990

 

39,472

 

27,746

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

5,526

 

5,259

 

3,759

 

16,193

 

11,730

 

Net income attributable to CoreSite Realty Corporation

 

9,004

 

7,623

 

5,231

 

23,279

 

16,016

 

Preferred stock dividends

 

(2,084

)

(2,085

)

(2,084

)

(6,253

)

(6,253

)

Net income attributable to common shares

 

$

6,920

 

$

5,538

 

$

3,147

 

$

17,026

 

$

9,763

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.26

 

$

0.23

 

$

0.15

 

$

0.71

 

$

0.46

 

Diluted

 

$

0.26

 

$

0.22

 

$

0.14

 

$

0.69

 

$

0.45

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

26,126,332

 

24,536,583

 

21,214,825

 

24,029,106

 

21,113,700

 

Diluted

 

26,549,537

 

25,055,195

 

21,708,759

 

24,544,612

 

21,679,931

 

 

6



 

Reconciliations of Net Income to FFO

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

Net income

 

$

14,530

 

$

12,882

 

$

8,990

 

$

39,472

 

$

27,746

 

Real estate depreciation and amortization

 

22,818

 

21,343

 

18,988

 

64,414

 

53,987

 

Gain on real estate disposal

 

 

 

 

(36

)

 

FFO

 

$

37,348

 

$

34,225

 

$

27,978

 

$

103,850

 

$

81,733

 

Preferred stock dividends

 

(2,084

)

(2,085

)

(2,084

)

(6,253

)

(6,253

)

FFO available to common shareholders and OP unit holders

 

$

35,264

 

$

32,140

 

$

25,894

 

$

97,597

 

$

75,480

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

26,550

 

25,055

 

21,709

 

24,545

 

21,680

 

Weighted average OP units outstanding - diluted

 

20,861

 

22,344

 

25,361

 

22,839

 

25,361

 

Total weighted average shares and units outstanding - diluted

 

47,411

 

47,399

 

47,070

 

47,384

 

47,041

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

0.74

 

$

0.68

 

$

0.55

 

$

2.06

 

$

1.60

 

 

Funds From Operations “FFO” is a supplemental measure of our performance which should be considered along with, but not as an alternative to, net income and cash provided by operating activities as a measure of operating performance and liquidity. 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), excluding gains (or losses) from sales of property and undepreciated land and impairment write-downs of depreciable real estate, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. FFO attributable to common shares and units represents FFO less preferred stock dividends declared during the period.

 

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.

 

We offer this measure because we recognize that FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures 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 and results from operations, the utility of FFO as a measure of our performance is limited. FFO is a non-GAAP measure and should not be considered a measure of liquidity, an alternative to net income, 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 pay dividends or make distributions. In addition, our calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us. Investors in our securities should not rely on these measures as a substitute for any GAAP measure, including net income.

 

7



 

Reconciliation of earnings before interest, taxes, depreciation and amortization (EBITDA):

(in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

Net income

 

$

14,530

 

$

12,882

 

$

8,990

 

$

39,472

 

$

27,746

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

2,187

 

1,728

 

1,360

 

5,178

 

3,944

 

Income taxes

 

34

 

66

 

22

 

149

 

20

 

Depreciation and amortization

 

24,347

 

24,046

 

20,914

 

71,209

 

58,300

 

EBITDA

 

$

41,098

 

$

38,722

 

$

31,286

 

$

116,008

 

$

90,010

 

Non-cash compensation

 

1,944

 

1,792

 

1,518

 

5,305

 

4,766

 

Gain on real estate disposal

 

 

 

 

(36

)

 

Transaction costs / litigation

 

656

 

45

 

49

 

931

 

288

 

Impairment of internal-use software

 

 

 

 

 

1,959

 

Adjusted EBITDA

 

$

43,698

 

$

40,559

 

$

32,853

 

$

122,208

 

$

97,023

 

 

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We calculate adjusted EBITDA by adding our non-cash compensation expense, transaction costs and litigation expense as well as adjusting for the impact of impairment charges, gains or losses from sales of property and undepreciated land and gains or losses on early extinguishment of debt. Management uses EBITDA and adjusted EBITDA as indicators of our ability to incur and service debt. In addition, we consider EBITDA and adjusted EBITDA to be appropriate supplemental measures of our performance because they eliminate depreciation and interest, which permits investors to view income from operations without the impact of non-cash depreciation or the cost of debt. However, because EBITDA and adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utilization as a cash flow measurement is limited.

 

8