CoreSite Realty Corporation (NYSE: COR), a national provider of
powerful, network-rich data centers, today announced financial
results for the first quarter 2011.
Highlights:
- Reported revenue of $40 million,
representing an increase of $1.6 million, or 4.2%, over the prior
quarter
- Reported FFO of $0.25 per diluted
share
- Executed gross leasing of 75,000 NRSF,
including 42,583 NRSF of new and expansion data center leases
representing $5.8 million of annualized GAAP rent with a
weighted-average lease term of 6 years
- Achieved a 92.9% rent-retention ratio
with 23.3% GAAP rent growth on renewals
- Increased data center occupancy by 310
basis points over Q4 2010
Tom Ray, CoreSite’s Chief Executive Officer, commented,
“CoreSite executed its plan purposefully and successfully in the
first quarter. We recorded strong leasing momentum marked by robust
new and expansion lease executions. We also achieved solid renewal
activity, achieving a rent-retention ratio of 92.9% and rent growth
of 23.3% on a GAAP basis. Our leasing for the quarter was
distributed throughout our national portfolio, reflecting the
strength of our national platform and the breadth of our business
model. We made significant progress expanding our platform in key
markets and remain on schedule with our construction activities at
Coronado-Stender and 12100 Sunrise Valley Drive. In summary, we are
pleased with our accomplishments for the quarter and excited about
our organization’s position to achieve our goals for the year.”
Financial Results
The Company reported funds from operations (“FFO”) of $11.3
million, or $0.25 per diluted share, for the three months ended
March 31, 2011. Total operating revenue for the three months ended
March 31, 2011 was approximately $40.0 million, a 4.2% increase on
a sequential quarter basis. The Company reported a net loss for the
three months ended March 31, 2011 of $7.9 million and a net loss
attributable to common shares of $3.4 million, or $0.17 per diluted
share. Results from the quarter reflect a charge of $0.6 million in
property tax expenses attributable to prior periods.
A reconciliation of GAAP net loss to funds from operations can
be found in the Company’s supplemental financial presentation
available on its website at www.CoreSite.com.
Operations and Leasing
Activity
The Company signed approximately 75,000 net rentable square feet
(“NRSF”) of gross leasing activity, including 52,134 NRSF of new
and expansion leases during the quarter. The new and expansion
leases were comprised of 42,583 NRSF of data center leases at a
weighted average GAAP rate of $137 per NRSF with a weighted average
lease term of 6.0 years and 9,551 NRSF of office and light
industrial leases at a GAAP rental rate of $30 per NRSF.
During the first quarter, data center lease commencements
totaled 41,812 NRSF at a weighted average GAAP rental rate of $138
per NRSF. Data center occupancy increased to 83.6% for a gain of
310 basis points from the period ended December 31, 2010. The
leases that commenced during the quarter include 22,649 NRSF signed
during the quarter and 19,163 NRSF signed in prior periods. As of
March 31, 2011, the Company had executed and not yet commenced
leases for 40,037 NRSF of space, which upon full commencement will
contribute an additional $6.0 million in annualized rent.
Renewal leases totaling 22,452 NRSF commenced in the first
quarter at a weighted average rate of $158 per NRSF, representing a
retention rate of 92.9% and a 23.3% increase over expiring leases
on a GAAP basis, or a 16.7% increase on a cash basis. The strong
renewal results were driven by activity at the Company’s
network-dense sites.
Development and Redevelopment
Activity
As of March 31, 2011, the Company owned land and buildings
sufficient to increase its operating data center space by 973,590
NRSF, or 86.2%, through the development or redevelopment of (1)
102,686 NRSF of data center space currently under construction, (2)
326,820 NRSF of office and industrial space currently available for
redevelopment, (3) 148,234 NRSF of currently operating space
targeted for future redevelopment, comprised of 45,283 NRSF of
office space and 102,951 NRSF of data center space targeted for
upgrade to more robust specifications, and (4) 395,850 NRSF of new
data center space that can be developed on land that the Company
currently owns at its Coronado-Stender properties.
The total estimated cost to complete the 102,686 NRSF under
construction at March 31, 2011 plus the 97,946 NRSF of
redevelopment the Company plans to commence construction on prior
to December 31, 2011 is $137.7 million. $28.4 million has already
been incurred through March 31, 2011, including investments during
the first quarter of $16.2 million in its 2972 Stender Way project
and $4.2 million in its 12100 Sunrise Valley Drive project. The
Company estimates that the total cost of 2972 Stender will be $67.0
million and the total cost of the 12100 Sunrise Valley Drive
project will be approximately $30.5 million.
Balance Sheet and
Liquidity
As of March 31, 2011, the Company had $125.6 million of total
long-term debt equal to 14.4% of the undepreciated book value of
total assets and equal to 2.2x annualized adjusted EBITDA for the
quarter ended March 31, 2011.
At quarter end, the Company had $73.2 million of cash available
on its balance sheet and $100.8 million of available capacity under
its revolving credit facility.
Subsequent to the end of the quarter, CoreSite closed on a
discounted payoff of a $10.0 million mezzanine loan that was
secured by its 427 LaSalle property, which was scheduled to mature
in March 2012. The debt was repaid at a 5% discount to par,
resulting in a reduction of $500,000 to the principal balance due
at closing. The payoff reduced the Company’s 2012 maturities to
$30.0 million and total long-term debt to $115.6 million.
Dividend
On March 15, 2011, the Company’s Board of Directors declared a
dividend of $0.13 per share of common stock and common stock
equivalents for the first quarter of 2011.
The dividend was paid on April 15, 2011 to stockholders of
record as of March 31, 2011.
Upcoming Conferences and
Events
The Company will participate in NAREIT’s REITWeek conference
from June 7th through June 9th at the Waldorf Astoria in New York,
New York.
Conference Call Details
The Company will host a conference call May 5th at 12:00 p.m.
(Eastern Time) to discuss its financial results, current business
trends and market conditions.
The call can be accessed live over the phone by dialing (877)
407-9039 for domestic callers and (201) 689-8470 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 for
international callers, (858) 384-5517. The passcode for the replay
is 370194. The replay will be available until May 12, 2011.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging on to the Company's website at
www.CoreSite.com and clicking on the “Investors” tab. The on-line
replay will be available for a limited time beginning immediately
following the call.
About CoreSite
CoreSite Realty Corporation (NYSE: COR) delivers powerful,
network-rich data centers that optimize, secure and interconnect
the mission-critical IT assets of the world’s top organizations.
600+ customers, including Global 1000 enterprises, cloud providers,
financial firms, and government agencies, choose CoreSite for
reliability, service and expertise in delivering customized,
flexible data center solutions. CoreSite offers private data
centers and suites, cage-to-cabinet colocation, and interconnection
services, such as Any2, CoreSite’s Internet exchange. The Company’s
portfolio comprises more than two million square feet, including
space held for redevelopment and development, and provides access
to more than 200 network service providers via 11 data centers in
seven key U.S. economic centers. Obtain more information at
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 the Company’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 our 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 annual
report on Form 10-K for the year ended December 31, 2010, 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,
except per share data)
March 31,2011
December 31,2010
Assets: (unaudited) Investments in real estate: Land
$ 84,738 $ 84,738 Building and building improvements 454,018
450,097 Leasehold improvements 76,803 75,800
615,559 610,635 Less: Accumulated depreciation and
amortization (41,365 ) (32,943 ) Net investment in
operating properties 574,194 577,692 Construction in progress
34,913 11,987
Net investments in
real estate 609,107 589,679 Cash
and cash equivalents 73,210 86,246 Restricted cash 14,967 14,968
Accounts and other receivables, net 6,185 5,332 Lease intangibles,
net 60,880 71,704 Goodwill 41,191 41,191 Other assets 25,132
23,906
Total assets $
830,672 $ 833,026
Liabilities and stockholders' equity: Liabilities
Mortgage loans payable $ 125,560 $ 124,873 Accounts payable and
accrued expenses 37,488 26,393 Deferred rent payable 2,643 2,277
Acquired below-market lease contracts, net 15,293 16,415 Prepaid
rent and other liabilities 8,683 8,603
Total liabilities 189,667 178,561
Stockholders' equity Common stock, par value
$0.01, 100,000,000 shares authorized and 19,870,508 shares issued
and outstanding at March 31, 2011; 19,644,042 shares issued and
outstanding at December 31 and September 30, 2010 194 194
Additional paid-in capital 239,933 239,453 Accumulated other
comprehensive income 41 52 Accumulated deficit (13,416 )
(7,460 ) Total stockholders' equity 226,752 232,239
Noncontrolling interests 414,253 422,226
Total equity 641,005 654,465
Total liabilities and stockholders' equity
$ 830,672 $ 833,026
Consolidated Statements of Operations
(in thousands, except share and per share data)
Three
Months Ended:
March 31,2011
December 31,2010
Operating revenues: Rental revenue $ 25,210 $ 24,428 Power
revenue 9,781 9,403 Tenant reimbursement 1,720 1,501 Other revenue
3,255 3,020 Total operating revenues
39,966 38,352
Operating expenses: Property operating
and maintenance 12,023 12,107 Real estate taxes and insurance 2,743
1,642 Depreciation and amortization 19,473 19,146 Sales and
marketing 1,377 1,341 General and administrative 5,617 4,987 Rent
4,547 4,551 Total operating expenses
45,780 43,774
Operating
loss (5,814 ) (5,422 ) Interest income 66 77 Interest
expense (2,252 ) (2,325 ) Loss before income
taxes (8,000 ) (7,670 ) Income taxes 84 223
Net loss (7,916 ) (7,447 ) Net loss attributable to
noncontrolling interests (4,544 ) (4,275 ) Net loss
attributable to common shares $ (3,372 ) $ (3,172 ) Weighted
average common shares outstanding - basic and diluted 19,458,605
19,458,605 Net loss per share attributable to common shares
- basic and diluted $ (0.17 ) $ (0.16 )
Reconciliation of net loss to funds
from operations (FFO):
Three Months Ended:
March 31,2011
December 31,2010
Net loss $ (7,916 ) $ (7,447 ) Adjustments: Real estate
depreciation and amortization 19,237 18,936
FFO available to common shareholders and OP unitholders
$ 11,321 $ 11,489 Weighted average
common shares and OP units outstanding - diluted 45,689,418
45,684,670 FFO per common share and OP unit - diluted $ 0.25
$ 0.25
CoreSite Realty Corporation considers FFO to be a supplemental
measure of 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. The
Company calculates FFO in accordance with the standards established
by NAREIT. FFO represents net income (loss) (computed in accordance
with GAAP), excluding gains (or losses) from sales of property,
real estate related depreciation and amortization (excluding
amortization of deferred financing costs) and after adjustments for
unconsolidated partnerships and joint ventures. 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.
The Company offers this measure because management recognizes
that FFO will be used by investors as a basis to compare operating
performance with that of other REITs. However, because FFO excludes
depreciation and amortization and captures neither the changes in
the value of the 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 the properties, all of which have real economic effect and could
materially impact financial condition and results from operations,
the utility of FFO as a measure of 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 cash needs, including the ability to pay dividends or make
distributions. In addition, the Company’s 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. Investors in the Company’s
securities should not rely on these measures as a substitute for
any GAAP measure, including net income.
Reconciliation of earnings before interest, taxes, depreciation
and amortization (EBITDA): Three Months Ended:
March 31,2011
December 31,2010
Net loss $ (7,916 ) $ (7,447 ) Adjustments: Interest
expense, net of interest income 2,186 2,248 Income taxes (84 ) (223
) Depreciation and amortization 19,473
19,146 EBITDA $ 13,659 $ 13,724 Non-cash compensation
497 517 Adjusted EBITDA $
14,156 $ 14,241
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. We calculate adjusted EBITDA by
adding our non-cash compensation expense to EBITDA. 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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