SECURE, RELIABLE, HIGH-PERFORMANCE DATA CENTER SOLUTIONS

®2018 CoreSite Realty Corporation, All Rights Reserved

Overview

Earnings Release

Company Profile

Summary of Financial Data

Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations 

Reconciliations of Net Income to FFO, AFFO, EBITDAre and Adjusted EBITDA

Operating Portfolio

Operating Properties

Leasing Statistics

Geographic and Vertical Diversification 

10 Largest Customers

Development

Capital Expenditures and Completed Pre-Stabilized Projects 

Development Summary

Capital Structure

Market Capitalization and Debt Summary 

Interest Summary and Debt Covenants

Components of Net Asset Value

2018 Guidance

Appendix

·

First-quarter total operating revenues were $129.6 million, a 12.8% increase year over year

·

First-quarter net income per diluted share was $0.59, a 22.9% increase year over year

·

First-quarter funds from operations (“FFO”) was $1.27 per diluted share and unit, a 12.4% increase year over year

·

Commenced 81,636 net rentable square feet (NRSF) of new and expansion leases representing $16.2 million of annualized GAAP rent at an average rate of $184 per square foot

·

Renewed leases with annualized GAAP rent of $20.2 million, with rent growth of 5.6% on a cash basis and 11.5% on a GAAP basis, resulting in rental churn of 1.9% in the first quarter 

·

Executed 136 new and expansion data center leases for 29,624 NRSF, representing $7.1 million of annualized GAAP rent at an average rate of $239 per square foot, including 47 new customer logos

·

On April 19, 2018, CoreSite closed on an amended and expanded credit facility with total borrowing capacity of $1.05 billion under all arrangements with its syndicate of banks, and extended the maturity of its credit line to 2022

·

On April 20, 2018, CoreSite closed on the acquisition of U.S. Colo, a carrier-neutral, network-dense colocation provider, located in Los Angeles, California, for approximately $8.6 million. The acquisition provides CoreSite with 120+ new customers, increases its economies of scale in downtown Los Angeles, and ends litigation that had been ongoing between CoreSite and U.S. Colo

·

A non-deal roadshow covering the Mid-Atlantic region and Boston on May 8-9, 2018;

·

The J.P. Morgan 46th Annual Global Technology, Media and Communications Conference on May 16, 2018, at The Westin Boston Waterfront in Boston, Massachusetts;

·

REITWeek: NAREIT's Investor Forum from June 5-7, 2018, at the New York Hilton Midtown in New York, New York; and

·

The 6th Annual William Blair Technology Company Growth Conference on June 13, 2018, at the Four Seasons Hotel in Chicago, Illinois.

Secure, Reliable and Compliant

Scalable

•

100% uptime Service Level Agreement guarantees our reliability commitment to customer applications

•

Serving customer requirements from half cabinet to full buildings

•

Physical security standards and rigorous internal security training enable compliance with regulatory requirements

•

20 operating data centers in eight of the largest commercial and data center markets in the United States

•

Consistent compliance across all properties

•

Ability to increase occupied data center footprint on land and buildings currently owned and under contract, including current space unoccupied, under construction and held for development, by approximately 1.7 million NRSF, or 79% of currently occupied space

•

SOC 1  & SOC 2 Type 2 reviews

•

ISO 27001 certified

•

Payment Card Industry Data Security Standard compliant

•

HIPAA validation

High-Performance Interconnection

High-Quality Customer Experience

•

Cloud-enabled, network-rich data center buildings and campuses

•

450+ professionals with dedicated industry expertise supporting over 1,250 customers

•

Over 420 network service providers supported by robust interconnection services to key public clouds

•

Experienced and committed operations, facilities and security personnel

•

25,000+ interconnections

•

24/7 customer support and remote hands

•

Enabling enterprises with support ecosystems

•

Dedicated implementation resources to ensure a successful onboarding process

Three Months Ended

March 31,

December 31,

March 31,

Growth %

Summary of Results

2018

2017

2017

Y/Y

GAAP Financial Measures

Operating revenues

$

129,619

$

125,946

$

114,921

12.8

%

Net income

28,566

27,008

25,060

14.0

Net income attributable to common shares

20,302

14,912

16,292

24.6

Net income attributable to common shares per share - diluted

$

0.59

$

0.44

$

0.48

22.9

REIT Financial Measures

Funds from operations (FFO) to shares and units

$

60,998

$

52,224

$

54,005

12.9

%

Funds from operations (FFO) to shares and units, as adjusted(1)

60,998

56,550

54,005

12.9

Adjusted funds from operations (AFFO)

57,045

43,675

48,294

18.1

EBITDAre

70,113

66,296

62,602

12.0

Adjusted EBITDA

72,878

68,755

64,404

13.2

FFO per common share and OP unit - diluted

$

1.27

$

1.09

$

1.13

12.4

FFO per common share and OP unit - diluted, as adjusted(1)

$

1.27

$

1.18

$

1.13

12.4

(1)

FFO available to shares and units, as adjusted, during the three months ended December 31, 2017, excludes $4.3 million, or $0.09 per share and unit, of non-cash charge related to the original issuance costs associated with our redeemed preferred stock.

As of

March 31,

December 31,

September 30,

June 30,

March 31,

2018

2017

2017

2017

2017

Dividend Activity

Dividends declared per share and OP unit

$

0.98

$

0.98

$

0.90

$

0.90

$

0.80

TTM FFO payout ratio

% 

% 

% 

% 

%

TTM AFFO payout ratio(1)

% 

% 

% 

% 

%

Operating Portfolio Statistics

Operating data center properties

20

20

20

20

20

Stabilized data center NRSF

2,164,778

2,067,257

2,025,594

2,025,594

1,987,231

Stabilized data center NRSF occupied

2,021,268

1,951,491

1,891,014

1,900,699

1,881,908

Stabilized data center % occupied

% 

% 

% 

% 

%

Turn-Key Data Center ("TKD") Same-Store Statistics

MRR per Cabinet Equivalent

$

1,458

$

1,446

$

1,414

$

1,369

$

1,334

TKD NRSF % occupied

% 

% 

% 

% 

%

Market Capitalization, Principal Debt & Preferred Stock

Total enterprise value

$

5,832,403

$

6,420,488

$

6,288,910

$

5,866,955

$

5,164,449

Total principal debt outstanding

$

991,500

$

944,500

$

794,000

$

775,000

$

723,000

Total principal debt and preferred stock outstanding(2) 

$

991,500

$

944,500

$

909,000

$

890,000

$

838,000

Net Principal Debt to:

Annualized Adjusted EBITDA

x

x

x

x

x

Enterprise Value

% 

% 

% 

% 

%

Net Principal Debt & Preferred Stock(2) to:

Annualized Adjusted EBITDA

x

x

x

x

x

Enterprise Value

% 

% 

% 

% 

%

(1)

The TTM AFFO payout ratio included $13.1 million, $11.9 million, $3.3 million, and $3.0 million as of March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively, of recurring capital expenditures associated with replacing our chiller plant at LA2 that we expect to generate a significant return on investment.

(2)

On December 12, 2017 we redeemed our preferred stock at par value plus accrued dividends.

March 31,
2018

December 31,
2017 (1)

Assets:

Investments in real estate:

Land

$

97,295

$

97,258

Buildings and improvements

1,651,967

1,561,056

1,749,262

1,658,314

Less: Accumulated depreciation and amortization

(500,961)

(473,141)

Net investment in operating properties

1,248,301

1,185,173

Construction in progress

121,989

162,903

Net investments in real estate

1,370,290

1,348,076

Operating lease right-of-use assets

88,781

92,984

Cash and cash equivalents

3,079

5,247

Accounts and other receivables, net

25,078

28,875

Lease intangibles, net

5,727

6,314

Goodwill

40,646

40,646

Other assets, net

106,813

103,501

Total assets

$

1,640,414

$

1,625,643

Liabilities and equity:

Liabilities

Debt, net

$

986,974

$

939,570

Operating lease liabilities

97,308

102,912

Accounts payable and accrued expenses

64,036

77,170

Accrued dividends and distributions

48,678

48,976

Acquired below-market lease contracts, net

3,314

3,504

Unearned revenue, prepaid rent and other liabilities

36,778

34,867

Total liabilities

1,237,088

1,206,999

Stockholders' equity

Common stock, par value $0.01

340

338

Additional paid-in capital

460,404

457,495

Accumulated other comprehensive income

1,163

753

Distributions in excess of net income

(191,013)

(177,566)

Total stockholders' equity

270,894

281,020

Noncontrolling interests

132,432

137,624

Total equity

403,326

418,644

Total liabilities and equity

$

1,640,414

$

1,625,643

(1)

Adoption of the new lease accounting  standard required that we adjust the consolidated balance sheet as of December 31, 2017, to include the recognition of additional right-of-use assets and lease liabilities for operating leases. See the filed Form 10-Q for additional information.

Three Months Ended

March 31,

December 31,

March 31,

2018

2017

2017

Operating revenues:

Data center revenue:(1)

Rental revenue

$

71,033

$

68,373

$

64,251

Power revenue

36,403

36,528

30,861

Interconnection revenue

16,560

16,255

14,512

Tenant reimbursement and other

2,572

1,847

2,276

Total data center revenue

126,568

123,003

111,900

Office, light-industrial and other revenue

3,051

2,943

3,021

Total operating revenues

129,619

125,946

114,921

Operating expenses:

Property operating and maintenance

33,848

34,722

29,226

Real estate taxes and insurance

4,937

3,963

4,504

Depreciation and amortization

33,776

32,629

32,338

Sales and marketing

5,080

4,616

4,503

General and administrative

9,185

10,157

8,124

Rent

6,400

6,155

5,962

Transaction costs

56

37

 —

Total operating expenses

93,282

92,279

84,657

Operating income

36,337

33,667

30,264

Interest expense

(7,738)

(6,635)

(5,107)

Income before income taxes

28,599

27,032

25,157

Income tax expense

(33)

(24)

(97)

Net income

28,566

27,008

25,060

Net income attributable to noncontrolling interests

8,264

6,099

6,684

Net income attributable to CoreSite Realty Corporation

20,302

20,909

18,376

Preferred stock dividends

 —

(1,671)

(2,084)

Original issuance costs associated with redeemed preferred stock

 —

(4,326)

 —

Net income attributable to common shares

$

20,302

$

14,912

$

16,292

Net income per share attributable to common shares:

Basic

$

0.60

$

0.44

$

0.49

Diluted

$

0.59

$

0.44

$

0.48

Weighted average common shares outstanding:

Basic

33,935,564

33,893,021

33,558,787

Diluted

34,164,235

34,145,280

33,981,776

(1)

Upon the anticipated issuance by the Financial Accounting Standards Board (“FASB”) and adoption of proposed targeted improvements to the new lease accounting standard, we intend to combine data center rental, power, and tenant reimbursements and other revenue into a single line item. We expect the FASB to approve these changes during the later part of Q2 2018 and will then incorporate the following changes during our Q2 2018 reporting:

Three Months Ended

March 31,

December 31,

March 31,

2018

2017

2017

Rental revenue

$

71,033

$

68,373

$

64,251

Power revenue

36,403

36,528

30,861

Tenant reimbursement and other

2,572

1,847

2,276

Rental, power, and related revenue

$

110,008

$

106,748

$

97,388

Reconciliation of Net Income to FFO

Three Months Ended

March 31,

December 31,

March 31,

2018

2017

2017

Net income

$

28,566

$

27,008

$

25,060

Real estate depreciation and amortization

32,432

31,213

31,029

FFO

$

60,998

$

58,221

$

56,089

Preferred stock dividends

 —

(1,671)

(2,084)

Original issuance costs associated with redeemed preferred stock

 —

(4,326)

 —

FFO available to common shareholders and OP unit holders

$

60,998

$

52,224

$

54,005

Original issuance costs associated with redeemed preferred stock

 —

4,326

 —

FFO available to common shareholders and OP unit holders, as adjusted(1)

$

60,998

$

56,550

54,005

Weighted average common shares outstanding - diluted

34,164

34,145

33,982

Weighted average OP units outstanding - diluted

13,835

13,836

13,851

Total weighted average shares and units outstanding - diluted

47,999

47,981

47,833

FFO per common share and OP unit - diluted

$

1.27

$

1.09

$

1.13

FFO per common share and OP unit - diluted, as adjusted(1)

$

1.27

$

1.18

$

1.13

Reconciliation of FFO to AFFO

Three Months Ended

March 31,

December 31,

March 31,

2018

2017

2017

FFO available to common shareholders and unit holders

$

60,998

$

52,224

$

54,005

Adjustments:

Amortization of deferred financing costs

566

445

369

Non-cash compensation

2,626

2,401

1,802

Non-real estate depreciation

1,344

1,416

1,309

Original issuance costs associated with redeemed preferred stock

 —

4,326

 —

Straight-line rent adjustment

(1,450)

(677)

(1,566)

Amortization of above and below market leases

(175)

(170)

(124)

Recurring capital expenditures(1)

(3,172)

(10,949)

(2,582)

Tenant improvements

(1,437)

(1,466)

(1,848)

Capitalized leasing costs

(2,255)

(3,875)

(3,071)

AFFO available to common shareholders and OP unit holders

$

57,045

$

43,675

$

48,294

Reconciliation of Net Income to EBITDAre and Adjusted EBITDA(1)

Three Months Ended

March 31,

December 31,

March 31,

2018

2017

2017

Net income

$

28,566

$

27,008

$

25,060

Adjustments:

Interest expense

7,738

6,635

5,107

Income taxes

33

24

97

Depreciation and amortization