Recorded record sales of turn-key data center
spaceRaising 2014 guidance
CoreSite Realty Corporation (NYSE:COR), a provider of secure,
reliable, high-performance data center solutions, today announced
financial results for the second quarter ended June 30, 2014.
Quarterly Highlights
- Reported second-quarter funds from
operations (“FFO”) excluding one-time items of $0.51 per diluted
share and unit, representing 13.3% growth year over year
- Including a net benefit of $0.06 of
non-recurring FFO, total reported FFO was $0.57 per diluted share
and unit
- Reported second-quarter total operating
revenues of $65.7 million, representing a 13.9% increase year over
year and data center revenues of $63.7 million, representing a
14.5% increase year over year
- Executed new and expansion data center
leases representing $9.4 million of annualized GAAP rent at a rate
of $159 per square foot
- Realized rent growth on signed renewals
of 2.1% on a cash basis and 8.1% on a GAAP basis and recorded
rental churn of 1.8%
- Commenced 60,587 net rentable square
feet of new and expansion leases with GAAP annualized rent of $135
per square foot, increasing stabilized data center occupancy to
85.4%
Tom Ray, CoreSite’s Chief Executive Officer, commented, “Our
second-quarter financial results reflect continued systematic
execution of our business plan.” Mr. Ray continued, “We are pleased
at the continued progress of our sales and marketing teams, with
new and expansion sales of turn-key data center capacity for the
quarter representing our highest volume since we became a public
company. Second-quarter sales production reflects the execution of
a large lease in the Bay Area and strong leasing across the
remainder of the portfolio led by Los Angeles, Boston, and Northern
Virginia.”
Financial Results
Excluding one-time items discussed below, CoreSite reported FFO
attributable to shares and units of $24.0 million for the three
months ended June 30, 2014, a 13.9% increase year over year and an
increase of 5.1% compared to the prior quarter. On a
per-diluted-share-and-unit basis, FFO, excluding one-time items,
increased 13.3% year over year to $0.51 for the three months ended
June 30, 2014.
For the three months ended June 30, 2014, CoreSite recognized an
impairment of internal-use software of $1.0 million, or a charge of
$0.02 per share, and a benefit of $3.7 million, or $0.08 per share,
related to a true-up of accrued real estate tax liabilities. These
tax liabilities are associated with previously accrued amounts
related to the change in ownership of acquired properties in
association with the Company’s 2010 IPO.
Including the net impact of these two items, CoreSite reported
FFO attributable to shares and units of $26.7 million for the three
months ended June 30, 2014. On a per-diluted-share-and-unit basis,
FFO was $0.57 for the three months ended June 30, 2014, as compared
to $0.45 per diluted share and unit for the three months ended June
30, 2013.
Total operating revenues for the three months ended June 30,
2014, were $65.7 million, a 13.9% increase year over year. Data
center revenues for the three months ended June 30, 2014, were
$63.7 million, a 14.5% increase year over year. CoreSite reported
net income attributable to common shares of $3.9 million, or $0.18
per diluted share.
Sales Activity
CoreSite executed 121 new and expansion data center leases
representing $9.4 million of GAAP annualized rent during the second
quarter, comprised of 58,909 NRSF at a weighted-average GAAP rate
of $159 per NRSF. These new and expansion data center leases
include a lease for 26,500 square feet at CoreSite’s SV3 facility,
which has partially commenced and will continue to commence in
phases through the second quarter of 2016, as previously reported.
As a component of executing this lease, CoreSite executed an early
termination of a 12,600 square foot portion of a previously
existing lease at the building. Net of the early termination at
SV3, new and expansion leasing in Q2 represents 46,309 square
feet.
CoreSite’s renewal leases signed in the second quarter totaled
$7.0 million in GAAP annualized rent, comprised of 41,890 NRSF at a
weighted average GAAP rate of $167 per NRSF, reflecting a 2.1%
increase in rent on a cash basis and an 8.1% increase on a GAAP
basis. The second-quarter rental churn rate was 1.8%, which
includes churn related to amending a single-customer lease at
CoreSite’s SV3 data center and releasing that space to a new
customer.
CoreSite’s second-quarter data center lease commencements
totaled 60,587 NRSF at a weighted average GAAP rental rate of $135
per NRSF, which represents $8.2 million of GAAP annualized rent.
Net of the termination at SV3, second-quarter commencements totaled
47,987 square feet.
Development Activity
CoreSite had 50,000 NRSF of data center space under construction
at VA2 in Northern Virginia at the end of the second quarter. As of
June 30, 2014, CoreSite had incurred $61.1 million of the estimated
$73.9 million required to complete this project.
Balance Sheet and
Liquidity
As of June 30, 2014, CoreSite had $276.8 million of total
long-term debt equal to 2.0 times second-quarter annualized
adjusted EBITDA and $391.8 million of long-term debt and preferred
stock equal to 2.9 times second-quarter annualized adjusted
EBITDA.
At quarter end, CoreSite had $11.1 million of cash available on
its balance sheet and $220.9 million of available capacity under
its credit facility.
Dividend
On May 30, 2014, CoreSite announced a dividend of $0.35 per
share of common stock and common stock equivalents for the second
quarter of 2014. The dividend was paid on July 15, 2014, to
shareholders of record on June 30, 2014.
CoreSite also announced on May 30, 2014, a dividend of $0.4531
per share of Series A preferred stock for the period April 15,
2014, to July 14, 2014. The preferred dividend was paid on July 15,
2014, to shareholders of record on June 30, 2014.
2014 Guidance
Excluding a one-time charge of $0.02 per share and unit in the
first quarter and the one-time net benefit recorded in the second
quarter in the amount of $0.06 per share, CoreSite is increasing
its guidance of FFO per diluted share and unit to a range of $2.07
to $2.15 from the previous range of $2.00 to $2.10. Including the
above-referenced one-time items, CoreSite is increasing its 2014
guidance of FFO per diluted share and unit to a range of $2.11 to
$2.19.
In addition, CoreSite is increasing its 2014 guidance for net
income attributable to common shares to a range of $0.61 to $0.69
per diluted share from the previous range of $0.50 to $0.60 per
diluted share. The difference between FFO and net income is
attributable to 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 Bank of America 2014 Global
Real Estate Conference on September 10th in New York, New York; the
Bank of America 2014 Media, Communications & Entertainment
Conference on September 16th in Beverly Hills, California; and the
Cantor Fitzgerald & Newmark Grubb Knight Frank Data Center
Executive Symposium on September 30th in New York, New York.
Conference Call Details
CoreSite will host a conference call on July 23, 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 13585288. The replay will be available until July 30, 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. 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. Our flexible, high-performance products and
350+ dedicated employees consistently deliver unmatched, scalable
data center options -- all of which leads to a best-in-class
customer experience. 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)
June 30,
2014 December 31, 2013 Assets: Investments in
real estate: Land $ 79,929 $ 78,983 Building and building
improvements 769,056 717,007 Leasehold improvements 98,121
95,218 947,106 891,208 Less: Accumulated
depreciation and amortization (185,230 ) (155,704 )
Net investment in operating properties 761,876 735,504 Construction
in progress 161,377 157,317
Net
investments in real estate 923,253 892,821
Cash and cash equivalents 11,132 5,313 Accounts and other
receivables, net 10,275 10,339 Lease intangibles, net 9,018 11,028
Goodwill 41,191 41,191 Other assets 62,386
55,802
Total assets $ 1,057,255
$ 1,016,494 Liabilities and
equity: Liabilities Revolving credit facility $ 176,750
$ 174,250 Senior unsecured term loan 100,000 - Mortgage loan
payable - 58,250 Accounts payable and accrued expenses 74,289
67,782 Deferred rent payable 9,401 9,646 Acquired below-market
lease contracts, net 6,185 6,681 Prepaid rent and other liabilities
16,872 11,578
Total liabilities
383,497 328,187
Stockholders'
equity Series A cumulative preferred stock 115,000 115,000
Common stock, par value $0.01 211 209 Additional paid-in capital
271,379 267,465 Accumulated other comprehensive loss (136 ) -
Distributions in excess of net income (58,649 )
(50,264 ) Total stockholders' equity 327,805 332,410 Noncontrolling
interests 345,953 355,897
Total
equity 673,758 688,307
Total liabilities and equity $ 1,057,255
$ 1,016,494
Consolidated Statement of Operations (in thousands, except
share and per share data)
Three
Months Ended Six Months Ended
June 30, 2014 March 31, 2014
June 30, 2013 June 30, 2014
June 30, 2013 Operating revenues: Data center
revenue: Rental revenue $ 36,938 $ 34,899 $ 32,355 $ 71,837 $
63,664 Power revenue 16,575 16,002 14,486 32,577 28,015
Interconnection revenue 8,591 8,059 7,053 16,650 13,625 Tenant
reimbursement and other 1,627 2,756
1,770 4,383 3,559 Total
data center revenue 63,731 61,716 55,664 125,447 108,863 Office,
light industrial and other revenue 1,951 2,015
2,003 3,966 3,895
Total operating revenues 65,682 63,731 57,667 129,413 112,758
Operating expenses: Property operating and maintenance
18,534 16,289 15,118 34,823 29,645 Real estate taxes and insurance
(980 ) 2,966 2,304 1,986 4,524 Depreciation and amortization 19,504
17,882 16,261 37,386 32,210 Sales and marketing 3,747 3,588 3,936
7,335 7,725 General and administrative 6,732 7,705 6,177 14,437
13,180 Rent 5,070 5,066 4,756 10,136 9,549 Impairment of
internal-use software 1,037 922 - 1,959 - Transaction costs
9 4 249 13
254 Total operating expenses 53,653
54,422 48,801 108,075
97,087
Operating income 12,029 9,309 8,866
21,338 15,671 Interest income 2 2 2 4 4 Interest expense
(1,415 ) (1,173 ) (783 ) (2,588 )
(1,222 ) Income before income taxes 10,616 8,138 8,085
18,754 14,453 Income tax (expense) benefit 22
(20 ) (206 ) 2 (379 ) Net income 10,638
8,118 7,879 18,756 14,074 Net income attributable to
noncontrolling interests 4,670 3,301
3,176 7,971 5,438 Net
income attributable to CoreSite Realty Corporation 5,968 4,817
4,703 10,785 8,636 Preferred dividends (2,085 )
(2,084 ) (2,085 ) (4,169 ) (4,169 ) Net income
attributable to common shares $ 3,883 $ 2,733 $ 2,618
$ 6,616 $ 4,467 Net income per share
attributable to common shares: Basic $ 0.18 $ 0.13 $ 0.13 $ 0.31 $
0.22 Diluted $ 0.18 $ 0.13 $ 0.12 $ 0.31
$ 0.21 Weighted average common shares
outstanding: Basic 21,131,077 20,992,758 20,829,375 21,062,299
20,752,065 Diluted 21,604,730 21,521,838 21,445,875 21,599,749
21,412,289
Reconciliations of Net Income to
FFO (in thousands, except share and per share data)
Three Months Ended Six
Months Ended
June 30,
2014
March 31,
2014
June 30,
2013
June 30,
2014
June 30,
2013
Net income $ 10,638 $ 8,118 $ 7,879 $ 18,756 $ 14,074 Real estate
depreciation and amortization 18,163
16,836 15,309 34,999
30,451 FFO $ 28,801 $ 24,954 $ 23,188 $ 53,755
$ 44,525 Preferred stock dividends (2,085 ) (2,084 )
(2,085 ) (4,169 ) (4,169 ) FFO available to
common shareholders and OP unit holders $ 26,716 $ 22,870
$ 21,103 $ 49,586 $ 40,356
Weighted average common shares outstanding - diluted 21,604,730
21,521,838
21,445,875
21,599,749 21,412,289 Weighted average OP units outstanding -
diluted 25,360,847 25,360,847
25,353,709
25,360,847 25,353,709 Total
weighted average shares and units outstanding - diluted 46,965,577
46,882,685 46,799,584 46,960,596 46,765,998 FFO per common
share and OP unit - diluted $ 0.57 $ 0.49 $ 0.45
$ 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 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 earnings before interest, taxes,
depreciation and amortization (EBITDA): (in thousands)
Three Months Ended Six
Months Ended
June 30,
2014
March 31,
2014
June 30,
2013
June 30,
2014
June 30,
2013
Net income $ 10,638 $ 8,118 $ 7,879 $ 18,756 $ 14,074 Adjustments:
Interest expense, net of interest income 1,413 1,171 781 2,584
1,218 Income tax (benefit) expense (22 ) 20 206 (2 ) 379
Depreciation and amortization 19,504 17,882
16,261 37,386 32,210 EBITDA $ 31,533 $
27,191 $ 25,127 $ 58,724 $ 47,881 Non-cash compensation 1,532 1,716
1,683 3,248 3,578 Transaction costs / litigation 9 230 399 239 504
Impairment of internal-use software 1,037 922
- 1,959 - Adjusted EBITDA $ 34,111
$ 30,059 $ 27,209 $ 64,170 $ 51,963
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 Investor Relations ContactGreer AvivCoreSite
Investor Relations Director+1-303-405-1012 |
+1-303-222-7276Greer.Aviv@CoreSite.com
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