Total operating revenues grew 16% year over
year
CoreSite Realty Corporation (NYSE:COR), a provider of secure,
reliable, high-performance data center solutions, today announced
financial results for the first quarter ended March 31, 2014.
Quarterly Highlights
- Reported first-quarter funds from
operations (“FFO”) of $0.49 per diluted share and unit,
representing a 19.5% increase year-over-year
- Reported first-quarter total operating
revenues of $63.7 million, representing a 15.7% increase
year-over-year
- Executed new and expansion data center
leases representing $5.1 million of GAAP annualized rent at a rate
of $129 per square foot
- Realized rent growth on signed renewals
of 4.7% on a cash basis and 9.4% on a GAAP basis and rental churn
of 1.2%
- Commenced 28,125 net rentable square
feet of new and expansion leases with GAAP annualized rent of $134
per square foot, increasing stabilized data center occupancy to
83.0%
Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are
pleased that our first-quarter results reflect continued execution
of our business plan, with total operating revenues and adjusted
EBITDA increasing 16% and 21% year over year, respectively.” Mr.
Ray continued, “Importantly, we recorded an increase in new and
expansion sales, with 131 new and expansion leases executed
representing $5.1 million in annualized GAAP rent. This represents
a 48% increase over the prior quarter and a 12% increase over the
trailing-year quarterly average. In addition, we increased the
number of quota-bearing sales reps across our platform by 21%,
reflecting progress against our goal to increase in-place quota
coverage by approximately 35% over the course of 2014.”
Financial Results
CoreSite reported FFO attributable to shares and units of $22.9
million for the three months ended March 31, 2014, an 18.8%
increase year-over-year and a decrease of 1.0% compared to prior
quarter. On a per diluted share and unit basis, FFO increased 19.5%
to $0.49 for the three months ended March 31, 2014, as compared to
$0.41 per diluted share and unit for the three months ended March
31, 2013. Total operating revenues for the three months ended March
31, 2014, were $63.7 million, a 15.7% increase year over year.
CoreSite reported net income attributable to common shares of $2.7
million, or $0.13 per diluted share.
Sales Activity
CoreSite executed 131 new and expansion data center leases
representing $5.1 million of GAAP annualized rent during the first
quarter, comprised of 39,783 NRSF at a weighted average GAAP rate
of $129 per NRSF.
CoreSite’s renewal leases signed in the first quarter totaled
$3.5 million in GAAP annualized rent, comprised of 22,291 NRSF at a
weighted average GAAP rate of $159 per NRSF, reflecting a 4.7%
increase in rent on a cash basis and a 9.4% increase on a GAAP
basis. The first-quarter rental churn rate was 1.2%.
CoreSite’s first-quarter data center lease commencements totaled
28,125 NRSF at a weighted average GAAP rental rate of $134 per
NRSF, which represents $3.8 million of GAAP annualized rent.
Development Activity
In the first quarter, CoreSite delivered two additional computer
rooms totaling 34,589 NRSF of turn-key data center (TKD) capacity
in the New York market at our NY2 facility and placed into service
33,711 NRSF of TKD capacity in Los Angeles at our LA2 facility.
CoreSite had 50,000 NRSF of data center space under construction
at VA2 in Northern Virginia at the end of the first quarter. As of
March 31, 2014, CoreSite had incurred $38.7 million of the
estimated $73.5 million required to complete this project.
Balance Sheet and
Liquidity
As of March 31, 2014, CoreSite had $260.0 million of total
long-term debt equal to 2.2x annualized adjusted EBITDA and $375.0
million of long-term debt and preferred stock equal to 3.1x
annualized adjusted EBITDA.
At quarter end, CoreSite had $10.2 million of cash available on
its balance sheet and $236.6 million of available capacity under
its credit facility.
Dividend
On March 6, 2014, CoreSite announced a dividend of $0.35 per
share of common stock and common stock equivalents for the first
quarter of 2014. The dividend was paid on April 15, 2014, to
shareholders of record on March 31, 2014.
CoreSite also announced on March 6, 2014, a dividend of $0.4531
per share of Series A preferred stock for the period January 15,
2014, to April 14, 2014. The preferred dividend was paid on April
15, 2014, to shareholders of record on March 31, 2014.
2014 Guidance
CoreSite is maintaining its 2014 guidance of FFO per diluted
share and unit in the range of $2.00 to $2.10. In addition,
CoreSite is maintaining its 2014 guidance for net income
attributable to common shares in the range of $0.50 to $0.60 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 the Stephens Spring Investment
Conference on June 3, 2014, at the New York Palace Hotel in New
York, NY and NAREIT’s REITWeek conference from June 4, 2014,
through June 5, 2014, at the Waldorf Astoria in New York, NY.
Conference Call Details
CoreSite will host a conference call on April 24, 2014, 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 13578866. The replay will be available until May 1, 2014.
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” 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 secure and
reliable data center solutions across eight key North American
markets. CoreSite connects, protects and delivers an optimal
performance environment and continued operation of mission-critical
data and IT infrastructure for enterprises and Internet, private
networking, mobility, and cloud service providers. CoreSite's
scalable platform of over two and a half million square feet of
efficient, network-dense, cloud-enabled data center capacity
enables customers to accelerate business performance, reduce
operating costs and increase flexibility across their IT and
communications systems. CoreSite's 350+ professionals deliver
best-in-class service by placing customer needs first in supporting
the planning, implementation and operating requirements
foundational to delivering reliable, secure and efficient IT
operating environments.
More than 800 of the world's leading enterprises, carriers and
mobile operators, content and cloud providers and media and
entertainment companies choose CoreSite to connect, protect and
optimize their performance-sensitive data, applications and
computing workloads. CoreSite provides direct access to more than
275 carriers and ISPs, inter-site connectivity and CoreSite's Open
Cloud Exchange, which supports rapid, efficient and scalable
Ethernet access to multiple key public clouds, enabling simple,
flexible, multi-cloud capabilities.
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
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 Sheet
(in thousands)
March 31,2014
December 31,2013
Assets: Investments in real estate:
Land
$ 79,929 $ 78,983 Building and building improvements 760,624
717,007 Leasehold improvements 96,834 95,218
937,387 891,208 Less: Accumulated depreciation and
amortization (170,132 ) (155,704 ) Net investment in
operating properties 767,255 735,504 Construction in progress
134,725 157,317
Net investments in
real estate 901,980 892,821 Cash
and cash equivalents 10,153 5,313 Accounts and other receivables,
net 10,454 10,339 Lease intangibles, net 9,933 11,028 Goodwill
41,191 41,191 Other assets 61,961 55,802
Total assets $ 1,035,672
$ 1,016,494 Liabilities and
equity: Liabilities Revolving credit facility $ 160,000
$ 174,250 Senior unsecured term loan 100,000 - Mortgage loan
payable - 58,250 Accounts payable and accrued expenses 63,469
67,782 Deferred rent payable 9,530 9,646 Acquired below-market
lease contracts, net 6,426 6,681 Prepaid rent and other liabilities
15,561 11,578
Total liabilities
354,986 328,187
Stockholders'
equity Series A cumulative preferred stock 115,000 115,000
Common stock, par value $0.01 210 209 Additional paid-in capital
269,510 267,465 Accumulated other comprehensive income 288 -
Distributions in excess of net income (54,992 )
(50,264 ) Total stockholders' equity 330,016 332,410 Noncontrolling
interests 350,670 355,897
Total
equity 680,686 688,307
Total liabilities and equity $ 1,035,672
$ 1,016,494
Consolidated Statement of Operations
(in
thousands, except share and per share data)
Three
Months Ended
March 31,2014
December 31,2013
March 31,2013
Operating revenues: Data center revenue: Rental revenue $
34,899 $ 33,988 $ 31,309 Power revenue 16,002 15,669 13,529
Interconnection revenue 8,059 7,866 6,572 Tenant reimbursement and
other 2,756 1,885 1,789
Total data center revenue 61,716 59,408 53,199 Office, light
industrial and other revenue 2,015 2,032
1,892 Total operating revenues 63,731 61,440
55,091
Operating expenses: Property operating and
maintenance 16,289 17,247 14,527 Real estate taxes and insurance
2,966 1,708 2,220 Depreciation and amortization 17,882 17,151
15,949 Sales and marketing 3,588 3,474 3,789 General and
administrative 8,627 7,092 7,003 Rent 5,066 5,028 4,793 Transaction
costs 4 - 5 Total
operating expenses 54,422 51,700
48,286
Operating income 9,309 9,740 6,805
Interest income 2 14 2 Interest expense (1,173 ) (759
) (439 ) Income before income taxes 8,138 8,995 6,368 Income
tax (expense) benefit (20 ) 34 (173 )
Net income 8,118 9,029 6,195 Net income attributable to
noncontrolling interests 3,301 3,809
2,262 Net income attributable to CoreSite Realty
Corporation 4,817 5,220 3,933 Preferred dividends (2,084 )
(2,085 ) (2,084 ) Net income attributable to common
shares $ 2,733 $ 3,135 $ 1,849 Net
income per share attributable to common shares: Basic $ 0.13 $ 0.15
$ 0.09 Diluted $ 0.13 $ 0.15 $ 0.09
Weighted average common shares outstanding: Basic 20,992,758
20,924,624 20,673,896 Diluted 21,521,838 21,492,301 21,314,779
Reconciliations of Net
Income to FFO
(in thousands, except per share data)
Three Months
Ended
March 31,2014
December 31,2013
March 31,2013
Net income $ 8,118 $ 9,029 $ 6,195 Real estate depreciation and
amortization 16,836 16,146
15,142 FFO $ 24,954 $ 25,175 $ 21,337
Preferred stock dividends (2,084 ) (2,085 )
(2,084 ) FFO available to common shareholders and OP
unit holders $ 22,870 $ 23,090 $ 19,253
Weighted average common shares outstanding - diluted
21,521,838 21,492,301 21,314,779 Weighted average OP units
outstanding - diluted 25,360,847 25,360,847
25,353,709 Total weighted average shares and
units outstanding - diluted 46,882,685 46,853,148 46,668,488
FFO per common share and OP unit - diluted $ 0.49 $ 0.49
$ 0.41
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
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.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Three
Months Ended
March 31,2014
December 31,2013
March 31,2013
Net income $ 8,118 $ 9,029 $ 6,195 Adjustments: Interest expense,
net of interest income 1,171 745 437 Income taxes 20 (34 ) 173
Depreciation and amortization 17,882
17,151 15,949 EBITDA $
27,191 $ 26,891 $ 22,754 Non-cash compensation 1,716 1,433 1,895
Transaction costs / litigation 230 - 105 Impairment of internal-use
software 922 -
- Adjusted EBITDA $ 30,059
$ 28,324 $ 24,754
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 and impairment charges to EBITDA as well as
adjusting for the impact of 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.
CoreSite Realty CorporationGreer Aviv, +1 303-405-1012 |
+1 303-222-7276Investor Relations
DirectorGreer.Aviv@CoreSite.com
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