CoreSite Realty Corporation (NYSE:COR), a premier provider of
secure, reliable, high-performance data center and interconnection
solutions across the U.S., today announced financial results for
the first quarter ended March 31, 2017.
Quarterly and Subsequent
Highlights
- Reported first-quarter total operating
revenues of $114.9 million, representing a 24.3% increase year over
year
- Reported first-quarter net income per
diluted share of $0.48, representing 29.7% growth year over
year
- Reported first-quarter funds from
operations (“FFO”) of $1.13 per diluted share and unit,
representing 31.4% growth year over year
- Executed 128 new and expansion data
center leases comprising 46,484 net rentable square feet (NRSF),
representing $9.7 million of annualized GAAP rent at an average
rate of $209 per square foot
- Commenced 37,352 NRSF of new and
expansion leases representing $9.1 million of annualized GAAP rent
at an average rate of $244 per square foot
- Realized rent growth on signed renewals
of 1.9% on a cash basis and 5.5% on a GAAP basis and recorded
rental churn of 1.1% in the first quarter
- Subsequent to the end of the first
quarter, CoreSite closed two separate financing transactions,
resulting in additional liquidity of $275 million to support its
growth and development plans
- On April 24, 2017, CoreSite signed a
contract to acquire a 2-acre land parcel immediately adjacent to
its existing Santa Clara campus. CoreSite estimates that it can
build approximately 160,000 square feet of new data center
capacity, comprising 18 megawatts at full build out on this
parcel.
“We continued our momentum from Q4 and started the year strongly
in the first quarter. Importantly, we continued to execute on our
business objectives while increasing efficiency and effectiveness
across our organization,” said Paul Szurek, CoreSite’s Chief
Executive Officer. “We are pleased to see sustained solid leasing
activity, with new and expansion sales of nearly $10 million in the
first quarter well distributed across each of our key verticals of
network providers, cloud-service providers and enterprises. We
believe our markets continue to generate exceptional demand for
performance and proximity-sensitive colocation requirements. Our
assets in these markets are tailored to address these specific
needs and are located at key intersections of the Internet, with
highly interconnected, robust customer ecosystems.”
Financial Results
CoreSite reported net income attributable to common shares of
$16.3 million, or $0.48 per diluted share, for the three months
ended March 31, 2017, compared to $11.3 million, or $0.37 per
diluted share for the three months ended March 31, 2016, an
increase of 29.7% on a per-share basis. On a sequential-quarter
basis, net income attributable to common shares increased 9.1%.
CoreSite reported FFO per diluted share and unit of $1.13 for
the three months ended March 31, 2017, an increase of 31.4%
compared to $0.86 per diluted share and unit for the three months
ended March 31, 2016. On a sequential-quarter basis, FFO per
diluted share and unit increased 6.6%.
Total operating revenues for the three months ended March 31,
2017, were $114.9 million, a 24.3% increase year over year and an
increase of 4.0% on a sequential-quarter basis.
Sales Activity
CoreSite executed 128 new and expansion data center leases
representing $9.7 million of annualized GAAP rent during the first
quarter, comprised of 46,484 NRSF at a weighted-average GAAP rental
rate of $209 per NRSF.
CoreSite’s first-quarter data center lease commencements totaled
37,352 NRSF at a weighted average GAAP rental rate of $244 per
NRSF, which represents $9.1 million of annualized GAAP rent.
CoreSite’s renewal leases signed in the first quarter totaled
$13.9 million in annualized GAAP rent, comprised of 95,108 NRSF at
a weighted-average GAAP rental rate of $146 per NRSF, reflecting a
1.9% increase in rent on a cash basis and a 5.5% increase on a GAAP
basis. The first-quarter rental churn rate was 1.1%.
Development and Acquisition
Activity
CoreSite had a total of 116,212 square feet of turn-key data
center capacity under construction as of March 31, 2017. As of the
end of the first quarter, CoreSite had spent $16.9 million of the
estimated $106.9 million required to complete the projects, which
consisted of the following.
Reston – CoreSite commenced construction on the expansion
of its Reston, Virginia data center campus, with 24,922 square feet
of turn-key data center capacity within an existing building at VA3
(Phase 1A). As of March 31, 2017, CoreSite had incurred $0.2
million of the estimated $22.3 million required to complete this
phase of the project, and expects to complete development in the
fourth quarter of 2017. With its Reston campus expansion, CoreSite
estimates it can build approximately 611,000 square feet of
incremental data center capacity across multiple phases, including
development of new data center capacity as well as ground-up
development of a centralized infrastructure tower. In mid-year,
CoreSite expects to commence construction on Phase 1B, an
incremental 58,000 square feet of data center capacity. CoreSite
expects investment for this phase of approximately $85 million, $75
million of which is expected to be invested in 2017. During the
first quarter, CoreSite also commenced construction on 3,087 square
feet of turn-key data center capacity at VA1, which had previously
been utilized as data center support space. CoreSite expects to
spend $1.7 million to complete this expansion and expects to
complete construction in the third quarter of 2017.
Washington, D.C. – CoreSite commenced construction on
24,563 square feet of turn-key data center capacity at DC2.
CoreSite expects to complete construction in the fourth quarter of
2017, at a cost of $17.4 million.
Boston – CoreSite had 13,735 square feet of turn-key data
center capacity under construction at BO1. As of March 31, 2017,
CoreSite had incurred $0.2 million of the estimated $7.8 million
required to complete this expansion and expects to complete
construction in the third quarter of 2017.
Denver – CoreSite had 8,276 square feet of turn-key data
center capacity under construction at DE1. As of March 31, 2017,
CoreSite had incurred $8.4 million of the estimated $12.5 million
required to complete this expansion and expects to complete
construction in the third quarter of 2017.
Los Angeles – CoreSite commenced construction on 41,629
square feet of turn-key data center capacity at LA2. As of March
31, 2017, CoreSite had incurred $8.0 million of the estimated $45.2
million required to complete the expansion and expects to complete
construction in the fourth quarter of 2017. In addition, CoreSite
placed 4,726 square feet of turn-key data center capacity into
service at LA2. This incremental turn-key data center capacity was
100% pre-leased and is reflected in CoreSite’s stabilized operating
portfolio.
Santa Clara – On April 24, 2017, CoreSite signed a
contract to acquire a 2-acre land parcel immediately adjacent to
its existing Santa Clara campus. CoreSite estimates that it can
build approximately 160,000 square feet of new data center
capacity, comprising 18 megawatts at full build out on this parcel,
and currently anticipates closing on the land in the third quarter
of 2017, subject to customary due diligence. CoreSite estimates the
cost of the land, building and first phase of turn-key data center
capacity, including costs associated with design, entitlement and
permitting, to be approximately $118 million.
Balance Sheet and
Liquidity
As of March 31, 2017, CoreSite had net principal debt
outstanding of $720.6 million, correlating to 2.8 times
first-quarter annualized adjusted EBITDA, and net principal debt
and preferred stock outstanding of $835.6 million, correlating to
3.2 times first-quarter annualized adjusted EBITDA.
Subsequent to the end of the first quarter, CoreSite executed
two separate financing transactions resulting in additional
liquidity of $275 million, which was used to pay down all
outstanding amounts on the revolving portion of its existing credit
facility and for general corporate purposes.
The first transaction results in an incremental $100 million of
liquidity by expanding the existing $100 million senior unsecured
term loan of CoreSite’s operating partnership, CoreSite, L.P. (the
“Operating Partnership”), originally scheduled to mature in 2019,
to $200 million. This expanded term loan has a new five-year term
maturing in April 2022, and bears interest at a variable rate of
1.5% over LIBOR. In addition, the Operating Partnership issued and
sold an aggregate principal amount of $175 million of its 3.91%
Senior Notes due April 20, 2024, in a private placement.
As a result of the above financings, CoreSite has $362.5 million
of total liquidity consisting of available cash and capacity on the
revolving credit facility.
Dividend
On March 9, 2017, CoreSite announced a dividend of $0.80 per
share of common stock and common stock equivalents for the first
quarter of 2017. The dividend was paid on April 17, 2017, to
shareholders of record on March 31, 2017.
CoreSite also announced on March 9, 2017, a dividend of $0.4531
per share of Series A preferred stock for the period January 18,
2017, to April 16, 2017. The preferred dividend was paid on April
17, 2017, to shareholders of record on March 31, 2017.
2017 Guidance
CoreSite is increasing its 2017 guidance of net income
attributable to common shares in the range of $1.73 to $1.83 per
diluted share. In addition, CoreSite is increasing its guidance of
FFO per diluted share and unit to a range of $4.35 to $4.45, with
the difference between net income and FFO being real estate
depreciation and amortization.
This outlook is based 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 REITWeek: NAREIT's Investor Forum
from June 6, 2017, through June 8, 2017, at the New York Hilton
Midtown in New York, NY.
Conference Call Details
CoreSite will host a conference call on April 27, 2017, 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 will be accessible by dialing +1-877-407-3982
(domestic) or +1-201-493-6780 (international). A replay will be
available until May 11, 2017, and can be accessed shortly after the
call by dialing + 1-844-512-2921 (domestic) or + 1-412-317-6671
(international). The passcode for the replay is 13658058.
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 and interconnection
solutions to a growing customer ecosystem across eight key North
American markets. More than 1,000 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 400+ 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.
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
ability to service existing debt; 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.
Consolidated Balance Sheets
(in thousands)
March 31,2017
December 31,2016
Assets: Investments in real estate: Land $ 97,258 $ 100,258
Buildings and improvements 1,475,029 1,472,580
1,572,287 1,572,838 Less: Accumulated depreciation and
amortization (395,039 ) (369,303 ) Net investment in
operating properties 1,177,248 1,203,535 Construction in progress
98,695 70,738 Net investments in real
estate 1,275,943 1,274,273 Cash and
cash equivalents 2,386 4,429 Accounts and other receivables, net
21,369 25,125 Lease intangibles, net 8,743 9,913 Goodwill 41,191
41,191 Other assets, net 102,957 96,372
Total assets $ 1,452,589 $
1,451,303 Liabilities and equity:
Liabilities Debt, net $ 719,657 $ 690,450 Accounts payable
and accrued expenses 55,164 72,519 Accrued dividends and
distributions 41,097 41,849 Deferred rent payable 9,099 7,694
Acquired below-market lease contracts, net 4,086 4,292 Unearned
revenue, prepaid rent and other liabilities 34,820
37,413
Total liabilities 863,923
854,217 Stockholders'
equity Series A cumulative preferred stock 115,000 115,000
Common stock, par value $0.01 338 334 Additional paid-in capital
444,653 438,531 Accumulated other comprehensive income (loss) 332
(101 ) Distributions in excess of net income (128,797 )
(118,038 ) Total stockholders' equity 431,526 435,726
Noncontrolling interests 157,140 161,360
Total equity 588,666
597,086 Total liabilities and equity $
1,452,589 $ 1,451,303
Consolidated Statements of Operations
(in
thousands, except share and per share data)
Three Months
Ended March 31,2017 December
31,2016 March 31,2016 Operating
revenues: Data center revenue: Rental revenue $ 64,251 $ 54,219
$ 50,018 Power revenue 30,861 28,844 24,713 Interconnection revenue
14,512 13,374 12,024 Tenant reimbursement and other 2,276
2,826 2,246 Total data center
revenue 111,900 99,263 89,001 Office, light-industrial and other
revenue 3,021 2,011 1,918
Total operating revenues 114,921 101,274 90,919
Operating
expenses: Property operating and maintenance 29,226 28,283
23,840 Real estate taxes and insurance 4,504 3,524 3,723
Depreciation and amortization 32,338 26,981 24,493 Sales and
marketing 4,503 4,465 4,117 General and administrative 8,124 9,432
9,718 Rent 5,962 5,967 5,385 Impairment of internal-use software —
— 322 Transaction costs — 117 —
Total operating expenses 84,657 78,769
71,598
Operating income 30,264
22,505 19,321 Gain on real estate disposal — — —
Interest income — 34 1 Interest expense (5,107 )
(3,222 ) (1,921 ) Income before income taxes 25,157 19,317
17,401 Income tax expense (97 ) 2 (14 )
Net income 25,060 19,319 17,387 Net
income attributable to noncontrolling interests 6,684
5,055 5,960 Net income attributable to
CoreSite Realty Corporation 18,376 14,264 11,427 Preferred stock
dividends (2,084 ) (2,084 ) (2,085 )
Net
income attributable to common shares $ 16,292
$ 12,180 $ 9,342
Net income per share attributable to common shares:
Basic $ 0.49 $ 0.36 $
0.32 Diluted $ 0.48 $
0.36 $ 0.32 Weighted
average common shares outstanding: Basic 33,558,787 33,425,762
28,747,900 Diluted 33,981,776 33,912,155 29,183,879
Reconciliations of Net Income to FFO
(in
thousands, except per share data)
Three Months Ended
March 31,2017 December 31,2016 March
31,2016 Net income $ 25,060 $ 23,161 $ 19,606 Real
estate depreciation and amortization 31,029
29,354 23,385 FFO $ 56,089 $ 52,515 $ 42,991
Preferred stock dividends (2,084 ) (2,085 )
(2,084 )
FFO available to common shareholders and OP unit
holders $ 54,005 $ 50,430
$ 40,907 Weighted average common
shares outstanding - diluted 33,982 33,860 30,695 Weighted average
OP units outstanding - diluted 13,851 13,851
16,856 Total weighted average shares and units
outstanding - diluted 47,833 47,711 47,551
FFO per common
share and OP unit - diluted $ 1.13
$ 1.06 $ 0.86
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.
Reconciliations of Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA): (in
thousands)
Three Months Ended March
31,2017 December 31,2016 March
31,2016 Net income $ 25,060 $ 23,161 $ 19,606
Adjustments: Interest expense, net of interest income 5,107 4,698
2,011 Income taxes 97 74 4 Depreciation and amortization
32,338 30,674 24,770
EBITDA $
62,602 $ 58,607 $ 46,391
Non-cash compensation 1,802 2,018 2,093 Transaction costs /
litigation — — 3
Adjusted EBITDA $
64,404 $ 60,625 $ 48,487
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. We calculate adjusted EBITDA by
adding our non-cash compensation expense, transaction costs from
unsuccessful deals and business combinations 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170427005805/en/
CoreSiteGreer AvivVice
President of Investor Relations and Corporate Communications+1
303-405-1012+1 303-222-7276Greer.Aviv@CoreSite.com
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