UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 2014
CoreSite Realty Corporation
(Exact name of registrant as specified in its charter)
Maryland |
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001-34877 |
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27-1925611 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
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1001 17th Street, Suite 500 Denver, CO |
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80202 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (866) 777-2673
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Section 2 Financial Information
Item 2.02 Results of Operations and Financial Condition.
On July 23, 2014, CoreSite Realty Corporation (CoreSite) issued a press release reporting financial results and operating information for the quarter ended June 30, 2014. In addition, CoreSite made available on its website supplemental operating and financial data for the same period. The text of the press release and the supplemental information package are furnished herewith as Exhibits 99.1 and 99.2, respectively.
The information in this report, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) The following exhibits are furnished with this Current Report on Form 8-K.
Exhibit No. |
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Description |
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99.1 |
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Press Release, dated July 23, 2014. |
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99.2 |
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Quarter Ended June 30, 2014, Earnings Release and Supplemental Information, dated July 23, 2014. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CORESITE REALTY CORPORATION |
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Date: July 23, 2014 |
By: |
/s/ Jeffrey S. Finnin |
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Name: |
Jeffrey S. Finnin |
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Title: |
Chief Financial Officer |
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EXHIBIT INDEX
Exhibit No. |
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99.1 |
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Press Release, dated July 23, 2014. |
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99.2 |
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Quarter Ended June 30, 2014, Earnings Release and Supplemental Information, dated July 23, 2014. |
4
Exhibit 99.1
![](g175081mmi001.jpg)
CORESITE REPORTS SOLID SECOND-QUARTER EARNINGS GROWTH
Recorded record sales of turn-key data center space
Raising 2014 guidance
DENVER, CO July 23, 2014 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, CoreSites 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 Companys 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 CoreSites 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.
CoreSites 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 CoreSites SV3 data center and releasing that space to a new customer.
CoreSites 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 CoreSites 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 CoreSites 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 worlds 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.
CoreSite Investor Relations Contact
Greer Aviv | CoreSite Investor Relations Director
+1 303.405.1012 | +1 303.222.7276
Greer.Aviv@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 CoreSites 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 companys 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 companys failure to obtain necessary outside financing; the companys 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 companys 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 companys future results to differ materially from any forward-looking statements, see the section entitled Risk Factors in the companys 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)
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June 30, 2014 |
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December 31, 2013 |
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Assets: |
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|
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Investments in real estate: |
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|
|
|
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Land |
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$ |
79,929 |
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$ |
78,983 |
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Building and building improvements |
|
769,056 |
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717,007 |
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Leasehold improvements |
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98,121 |
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95,218 |
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|
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947,106 |
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891,208 |
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Less: Accumulated depreciation and amortization |
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(185,230 |
) |
(155,704 |
) |
Net investment in operating properties |
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761,876 |
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735,504 |
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Construction in progress |
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161,377 |
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157,317 |
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Net investments in real estate |
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923,253 |
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892,821 |
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Cash and cash equivalents |
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11,132 |
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5,313 |
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Accounts and other receivables, net |
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10,275 |
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10,339 |
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Lease intangibles, net |
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9,018 |
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11,028 |
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Goodwill |
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41,191 |
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41,191 |
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Other assets |
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62,386 |
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55,802 |
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Total assets |
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$ |
1,057,255 |
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$ |
1,016,494 |
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|
|
|
|
|
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Liabilities and equity: |
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|
|
|
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Liabilities |
|
|
|
|
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Revolving credit facility |
|
$ |
176,750 |
|
$ |
174,250 |
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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 |
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Total liabilities |
|
383,497 |
|
328,187 |
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
Series A cumulative preferred stock |
|
115,000 |
|
115,000 |
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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 |
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Noncontrolling interests |
|
345,953 |
|
355,897 |
|
Total equity |
|
673,758 |
|
688,307 |
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
1,057,255 |
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$ |
1,016,494 |
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Consolidated Statement of Operations
(in thousands, except share and per share data)
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|
Three Months Ended |
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Six Months Ended |
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|
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June 30, 2014 |
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March 31, 2014 |
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June 30, 2013 |
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June 30, 2014 |
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June 30, 2013 |
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Operating revenues: |
|
|
|
|
|
|
|
|
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|
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Data center revenue: |
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|
|
|
|
|
|
|
|
|
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Rental revenue |
|
$ |
36,938 |
|
$ |
34,899 |
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$ |
32,355 |
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$ |
71,837 |
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$ |
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 |
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Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance |
|
18,534 |
|
16,289 |
|
15,118 |
|
34,823 |
|
29,645 |
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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 |
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Sales and marketing |
|
3,747 |
|
3,588 |
|
3,936 |
|
7,335 |
|
7,725 |
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General and administrative |
|
6,732 |
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7,705 |
|
6,177 |
|
14,437 |
|
13,180 |
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Rent |
|
5,070 |
|
5,066 |
|
4,756 |
|
10,136 |
|
9,549 |
|
Impairment of internal-use software |
|
1,037 |
|
922 |
|
|
|
1,959 |
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|
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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 |
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Income tax (expense) benefit |
|
22 |
|
(20 |
) |
(206 |
) |
2 |
|
(379 |
) |
Net income |
|
10,638 |
|
8,118 |
|
7,879 |
|
18,756 |
|
14,074 |
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|
|
|
|
|
|
|
|
|
|
|
|
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.
Exhibit
99.2
![](g175081mo01i001.gif)
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© Copyright
2014 CoreSite. All Rights Reserved. Earnings Release and Supplemental
Information Quarter Ended June 30, 2014
|
![](g175081mo01i002.gif)
|
2 Table of
Contents Overview Earnings Release 3 Company Profile 8 Summary of Financial
Data 10 Financial Statements Consolidated Balance Sheets 11 Consolidated
Statements of Operations 12 Reconciliations of Net Income to FFO, AFFO and
EBITDA 13 Operating Portfolio Operating Properties 14 Leasing Statistics 15
Geographic Diversification and 10 Largest Customers 17 Development Summary
and Capital Expenditures 18 Capital Structure Market Capitalization and Debt
Summary 19 Interest Summary and Debt Covenants 20 2014 Guidance 21 Appendix
22
|
![](g175081mo01i003.gif)
|
3 CORESITE
REPORTS SOLID SECOND-QUARTER EARNINGS GROWTH Overview Financial Statements
Operating Portfolio Development and Capital Expenditures Capital Structure
2014 Guidance Appendix DENVER, CO July 23, 2014 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 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,
CoreSites 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-shareand- unit basis, FFO,
excluding one-time items, increased 13.3% year over year to $0.51 for the
three months ended June 30, 2014.
|
![GRAPHIC](g175081mo03i001.gif)
|
4 Quarter Ended
June 30, 2014 Overview Financial Statements Operating Portfolio Development
and Capital Expenditures Capital Structure 2014 Guidance Appendix For the
three months ended June 30, 2014, CoreSite recognized an impairment of
internaluse 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 Companys 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-dilutedshare- 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 weightedaverage GAAP rate of $159 per NRSF.
These new and expansion data center leases include a lease for 26,500 square
feet at CoreSites 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. CoreSites 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 CoreSites SV3 data center and
releasing that space to a new customer. CoreSites 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.
|
![GRAPHIC](g175081mo03i002.gif)
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5 Quarter Ended
June 30, 2014 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 onetime 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 CoreSites 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.
Overview Financial Statements Operating Portfolio Development and Capital
Expenditures Capital Structure 2014 Guidance Appendix
|
![GRAPHIC](g175081mo03i003.gif)
|
6 Quarter Ended
June 30, 2014 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 CoreSites
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 worlds 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. CoreSite Investor Relations Contact Greer Aviv | CoreSite Investor
Relations Director +1 303.405.1012 | +1 303.222.7276 Greer.Aviv@CoreSite.com
Overview Financial Statements Operating Portfolio Development and Capital
Expenditures Capital Structure 2014 Guidance Appendix
|
![](g175081mo05i001.gif)
|
7 Quarter Ended
June 30, 2014 Forward Looking Statements This earnings release and
accompanying supplemental information may contain forwardlooking 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. Forwardlooking statements involve known and unknown risks,
uncertainties, assumptions and contingencies, many of which are beyond
CoreSites 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 companys 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 companys failure to obtain necessary outside financing; the
companys 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 companys 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 companys future results to differ materially
from any forward-looking statements, see the section entitled Risk Factors
in the companys 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. Overview Financial Statements
Operating Portfolio Development and Capital Expenditures Capital Structure
2014 Guidance Appendix
|
![](g175081mo05i002.gif)
|
8 Company
Profile CoreSite delivers network-dense, cloud-enabled, enterprise-class data
center products and services across eight key North American markets.
Overview Financial Statements Operating Portfolio Development and Capital
Expenditures Capital Structure 2014 Guidance Appendix
|
![](g175081mo05i003.gif)
|
9 Company
Profile NYSE-traded with a strong balance sheet NYSE: COR (2010); REIT
status Predecessor entities founded in 2000 Equity market cap: $1.6
billion at June 30, 2014 Growth capacity: 2.0x debt to annualized adjusted
EBITDA and 2.9x debt and preferred stock to annualized adjusted EBITDA at
June 30, 2014 Scalable and flexible, broad platform in Tier-1 markets
Recent delivery of our newest data center, NY2, located in Secaucus, NJ 16
data centers in eight top North American markets located in network,
financial, cloud and commerce hubs 2.5+ million gross square feet Ability
to nearly double data center footprint on land and buildings currently owned
Dense network connectivity and ecosystems Over 275 network service
providers, 800 customers and 15,000 cross-connects Key ecosystems of
customers and partners consisting of 34% networks and mobility, 24% cloud and
IT service providers, 21% enterprise, 14% digital content and multimedia, and
7% systems integrators and managed services providers Partner-enabled
value-added services supporting cloud computing Secure and reliable with
bestin- class service Six 9s uptime for three consecutive years 350+
professionals with dedicated industry experts and 24x7 security guard
monitoring Cabinet, standard or custom cage, and computer rooms
Cross-connects, Any2 Internet Exchange, and Cloud Exchange Ethernet
Breakered and metered power Overview Financial Statements Operating Portfolio
Development and Capital Expenditures Capital Structure 2014 Guidance Appendix
|
![](g175081mo07i001.gif)
|
10 Summary of
Financial Data (in thousands, except share, per share and NRSF data) Overview
Financial Statements Operating Portfolio Development and Capital Expenditures
Capital Structure 2014 Guidance Appendix Summary of Results June 30, 2014
March 31, 2014 June 30, 2013 June 30, 2014 June 30, 2013 Operating revenues
65,682 $ 63,731 $ 57,667 $ 129,413 $ 112,758 $ Data center revenues 63,731
61,716 55,664 125,447 108,863 Net income 10,638 8,118 7,879 18,756 14,074 Net
income attributable to common shares 3,883 2,733 2,618 6,616 4,467 Funds from
operations (FFO) to shares and units 26,716 22,870 21,103 49,586 40,356
Adjusted funds from operations (AFFO) 21,579 19,356 20,405 40,935 38,112 EBITDA
31,533 27,191 25,127 58,724 47,881 Adjusted EBITDA 34,111 30,059 27,209
64,170 51,963 Per share - diluted: Net income attributable to common shares
0.18 $ 0.13 $ 0.12 $ 0.31 $ 0.21 $ FFO per common share and OP unit 0.57 $ 0.49 $ 0.45 $ 1.06 $ 0.86 $ Three Months Ended Six Months Ended June 30, 2014
March 31, 2014 December 31, 2013 September 30, 2013 June 30, 2013 Dividend
Activity Dividends declared per share and OP unit 0.35 $ 0.35 $ 0.35 $ 0.27 $ 0.27 $ AFFO payout ratio 76% 84% 84% 61% 62% Operating Portfolio Statistics
Operating data center properties 16 16 16 14 14 Operating data center NRSF
1,326,332 1,326,332 1,327,205 1,225,596 1,225,596 Data center NRSF occupied
1,132,894 1,101,305 1,084,444 987,416 986,646 Data center % occupied 85.4%
83.0% 81.7% 80.6% 80.5% Turn-Key Data Center Same Store Statistics MRR per
Cabinet Equivalent 1,407 $ 1,399 $ 1,379 $ 1,352 $ 1,305 $ Data center NRSF %
occupied 79.8% 76.2% 74.6% 75.0% 75.0% Market Capitalization, Debt &
Preferred Stock Total enterprise value 1,945,279 $ 1,831,690 $ 1,852,319 $ 1,869,100 $ 1,734,594 $ Total debt outstanding 276,750 260,000 232,500
166,625 132,000 Total debt and preferred stock outstanding 391,750 375,000
347,500 281,625 247,000 Debt to: Annualized Adjusted EBITDA 2.0x 2.2x 2.1x
1.5x 1.2x Undepreciated book value of total assets 22.3% 21.6% 19.8% 15.0%
12.7% Debt & Preferred Stock to: Annualized Adjusted EBITDA 2.9x 3.1x
3.1x 2.6x 2.3x Undepreciated book value of total assets 31.5% 31.1% 29.6%
25.4% 23.8% As of
|
![](g175081mo07i002.gif)
|
11 Consolidated
Balance Sheets (in thousands) Overview Financial Statements Operating
Portfolio Development and Capital Expenditures Capital Structure 2014
Guidance Appendix 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 income (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 $
|
![](g175081mo07i003.gif)
|
12 Consolidated
Statements of Operations (in thousands, except share and per share data)
Overview Financial Statements Operating Portfolio Development and Capital
Expenditures Capital Structure 2014 Guidance Appendix 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 Six
Months Ended Three Months Ended
|
![GRAPHIC](g175081mo09i001.gif)
|
13
Reconciliations of Net Income to FFO, AFFO and EBITDA (in thousands, except
share and per share data) Reconciliation of Net Income to FFO Reconciliation
of FFO to AFFO Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Overview Financial Statements Operating Portfolio Development and Capital
Expenditures Capital Structure 2014 Guidance Appendix June 30, 2014 March 31,
2014 June 30, 2013 June 30, 2014 June 30, 2013 FFO available to common
shareholders and unit holders 26,716 $ 22,870 $ 21,103 $ 49,586 $ 40,356 $ Adjustments: Amortization of deferred financing costs 449 580 427 1,029 847
Non-cash compensation 1,532 1,716 1,683 3,248 3,578 Non-real estate
depreciation 1,341 1,046 952 2,387 1,759 Straight-line rent adjustment
(1,378) (436) (339) (1,814) (431) Amortization of above and below market
leases (112) (70) (199) (182) (431) Impairment of internal-use software 1,037
922 - 1,959 - Recurring capital expenditures (1,377) (1,673) (935) (3,050)
(2,634) Tenant improvements (1,579) (1,208) (1,027) (2,787) (2,640)
Capitalized leasing costs (5,050) (4,391) (1,260) (9,441) (2,292) AFFO
available to common shareholders and OP unit holders 21,579 $ 19,356 $ 20,405
$ 40,935 $ 38,112 $ 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 $ 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 $ Three Months Ended Six Months Ended
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14 Operating
Properties (in thousands, except NRSF data) Overview Financial Statements
Operating Portfolio Development and Capital Expenditures Capital Structure
2014 Guidance Appendix Pre- Stabilized NRSF(5) Development NRSF(6)
Market/Facilities Annualized Rent ($000)(3 ) Total Percent Occupied (4 )
Total Percent Occupied (4 ) Total(6 ) Percent Occupied (4 ) Total Total Total
Portfolio NRSF Los Angeles One Wilshire Campus LA1* $ 24,469 149,405 77.4 %
4,373 82.8 % 153,778 77.6 % - - 153,778 LA2 15,284 159,617 84.8 7,029 70.8
166,646 84.2 65,296 199,978 431,920 Los Angeles Total 39,753 309,022 81.2
11,402 75.4 320,424 81.0 65,296 199,978 585,698 San Francisco Bay SV1 11,296
84,045 84.0 206,255 84.5 290,300 84.4 - - 290,300 SV2 7,060 76,676 78.3 - -
76,676 78.3 - - 76,676 Santa Clara Campus 24,251 220,676 94.9 71,308 91.7
291,984 94.1 31,497 173,240 496,721 San Francisco Bay Total 42,607 381,397
89.2 277,563 86.4 658,960 88.0 31,497 173,240 863,697 Northern Virginia VA1
23,572 201,719 79.2 61,050 79.2 262,769 79.2 - - 262,769 VA2 - - - - - - - -
198,000 198,000 DC1* 2,846 22,137 87.6 - - 22,137 87.6 - - 22,137 Northern
Virginia Total 26,418 223,856 80.0 61,050 79.2 284,906 79.8 - 198,000 482,906
Boston BO1 13,735 166,026 95.0 19,495 62.4 185,521 91.5 - 87,650 273,171
Chicago CH1 11,492 158,167 86.9 4,946 65.8 163,113 86.3 20,240 - 183,353 New
York NY1* 5,360 48,404 73.1 209 100.0 48,613 73.3 - - 48,613 NY2 - - - - - -
- 52,692 202,367 255,059 New York Total 5,360 48,404 73.1 209 100.0 48,613
73.3 52,692 202,367 303,672 Miami MI1 1,765 30,176 79.8 1,934 38.6 32,110
77.3 - 13,154 45,264 Denver DE1* 704 4,144 100.0 - - 4,144 100.0 - - 4,144
DE2* 178 5,140 77.9 - - 5,140 77.9 - - 5,140 Denver Total 882 9,284 87.8 - -
9,284 87.8 - - 9,284 Total Facilities $ 142,012 1,326,332 85.4 % 376,599 83.1
% 1,702,931 84.9 % 169,725 874,389 2,747,045 Data Center(1 ) Office and
Light- Industrial(2 ) Total Stabilized Operating NRSF * Indicates properties
in which we hold a leasehold interest. (1) (2) (3) (4) (5) (6) Represents the
NRSF at each operating facility that is currently occupied or readily
available for lease as data center space. Both occupied and available data c
enter NRSF inc ludes a fac tor to ac c ount for a c ustomers proportionate
share of the required data c enter support spac e (suc h as the mec hanic al,
telecommunications and utility rooms) and building common areas, which may be
updated on a periodic basis to reflect the most current build-out of our
properties. During the second quarter of 2014, certain facility factors were
adjusted resulting in a 1.4% increase to our date center occupay. Represents
the NRSF at each operating facility that is currently occupied or readily
available for lease as space other than data center space, which is typically
space offered for office or light industrial uses. Represents the monthly
contractual rent on stabilized operating NRSF under existing commenced
customer leases as of June 30, 2014, multiplied by 12. This amount reflects
total annualized base rent before any one-time or non-recurring rent
abatements and excludes power revenue, interconnection revenue and operating
expense reimbursement. On a gross basis, our annualized rent was
approximately $147.0 million as of June 30, 2014, which reflects the addition
of $5.0 million in operating expense reimbursements to contractual net rent
under modified gross and triple-net leases. Represents vacant space and
entitled land in our portfolio that requires significant capital investment
in order to develop into data center facilities as of June 30, 2014. Includes
NRSF under construction for which substantial activities are ongoing to
prepare the property for its intended use following development. In addition
to the amounts above, we may develop an additional 138,000 NRSF at the Santa
Clara Campus and 100,000 NRSF at NY2 upon our receipt of the necessary
entitlements. Includes customer leases that have commenced and are occupied
as of June 30, 2014. The percent occupied is determined based on leased
square feet as a proportion of total operating NRSF. The percent occupied for
data center space, office and light industrial space, and space in total
would have been 88.0%, 83.3%, and 87.0%, respectively, if all leases signed
in current and prior periods had commenced. Represents pre-stabilized NRSF of
projects/facilities which recently have been developed and are in the initial
lease-up phase. Pre-stabilized projects/facilities become stabilized
operating properties at the earlier of achievement of 85% occupancy or 24
months after development completion. Annualized rent and NRSF percent
occupied for pre-stabilized NRSF is $5.3 million and 25.4%, respectively, as
of June 30, 2014.
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15 Leasing
Statistics Data Center Leasing Activity Overview Financial Statements
Operating Portfolio Development and Capital Expenditures Capital Structure
2014 Guidance Appendix GAAP GAAP Leasing Number Total Annualized Annualized
Rental Cash GAAP Activity of Leased Rent per Rent Churn Rent Rent Period
Leases(1) NRSF(2) Leased NRSF ($000) Rate(3) Growth(4) Growth(4) YTD 2014 245
88,712 134 $ 11,915 $ Q2 2014 126 60,587 135 8,152 Q1 2014 119 28,125 134
3,763 Q4 2013 109 116,052 41 (5) 4,808 Q3 2013 110 37,243 180 6,688 Q2 2013
121 42,672 147 6,267 YTD 2014 252 98,692 147 $ 14,507 $ Q2 2014 121 58,909
159 9,368 Q1 2014 131 39,783 129 5,139 Q4 2013 122 26,276 132 3,472 Q3 2013
106 23,294 170 3,965 Q2 2013 115 30,810 188 5,782 YTD 2014 151 64,181 164 $ 10,544 $ 1.5% 2.9% 8.5% Q2 2014 77 41,890 167 7,009 1.8% 2.1% 8.1% Q1 2014 74
22,291 159 3,535 1.2% 4.7% 9.4% Q4 2013 59 50,513 135 6,816 1.9% 3.5% 14.3%
Q3 2013 100 29,567 155 4,575 2.7% 6.6% 10.7% Q2 2013 112 44,702 166 7,404
2.0% 2.9% 9.0% (1) (2) (3) (4) (5) Rent growth represents the increase in
rental rates on renewed leases commencing during the period, as compared with
the previous rental rates for the same space. The GAAP Annualized Rent per
Leased NRSF for new/expansion leases commenced in Q4 2013 includes a 101,721
NRSF built-to-suit lease. Excluding this lease, the GAAP Annualized Rent per
Leased NRSF for new/expansion leases commenced in Q4 2013 would have been
$116. New/expansion leases commenced New/expansion leases signed Renewal
leases commenced Number of leases represents each agreement with a customer;
a lease agreement could include multiple spaces and a customer could have
multiple leases. Total leased NRSF is determined based on contractually
leased square feet for leases that have commenced on or before June 30, 2014.
We calculate occupancy based on factors in addition to contractually leased
square feet, including required data center support space (such as the
mechanical, telecommunications and utility rooms) and building common areas.
Rental churn is calculated based on the annualized rental revenue of expired
leases terminated in the period, compared with total annualized rental
revenue at the beginning of the period.
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16 Leasing
Statistics Lease Expirations (total operating properties, excluding
pre-stabilized) Lease Distribution (total operating properties, excluding
pre-stabilized) Overview Financial Statements Operating Portfolio Development
and Capital Expenditures Capital Structure 2014 Guidance Appendix Total
Number Operating Percentage Percentage of NRSF of of Total of Leases Expiring
Operating Annualized Year of Lease Expiration Expiring(1) Leases NRSF Rent
Available as of June 30, 2014(5) - 256,961 15.1 % $ - - % $ - $ - $ - 2014
386 136,169 8.0 18,975 13.4 139.35 19,370 142.25 2015 362 195,080 11.4 33,129
23.3 169.82 34,370 176.18 2016 309 164,662 9.7 24,173 17.0 146.80 27,050
164.28 2017 224 155,635 9.1 25,200 17.7 162.50 29,387 189.50 2018 67 149,882
8.8 15,471 10.9 103.22 19,036 127.01 2019-Thereafter 58 331,466 19.5 17,884
12.6 53.95 26,871 81.07 Office and light industrial (6) 83 313,076 18.4 7,180
5.1 22.93 7,488 23.92 Portfolio Total / Weighted Average 1,489 1,702,931
100.0 % $ 142,012 100.0 % $ 98.25 $ 163,572 $ 113.17 (1) (2) (3) (4) (5) (6)
($000)(2) NRSF ($000)(3) Expiration(4) Includes leases that upon expiration
will automatically be renewed, primarily on a month-to-month basis. Number of
leases represents each agreement with a customer; a lease agreement could
include multiple spaces and a customer could have multiple leases. Represents
the monthly contractual rent under existing commenced customer leases as of
June 30, 2014, multiplied by 12. This amount reflects total annualized base
rent before any one-time or non-recurring rent abatements and excludes power
revenue, interconnection revenue and operating expense reimbursement.
Represents the final monthly contractual rent under existing customer leases
as of June 30, 2014, multiplied by 12. This amount reflects total annualized
base rent before any one-time or non-recurring rent abatements and excludes
operating expense reimbursement, power revenue and interconnection revenue.
Annualized rent at expiration as defined above, divided by the square footage
of leases expiring in the given year. This metric reflects the rent growth
inherent in the existing base of lease agreements. Excludes NRSF held for
development or under construction. Of the occupied office and light
industrial leases, 9,656 NRSF, 9,380 NRSF, 93,146 NRSF, 35,590 NRSF, 4,207
NRSF and 161,098 NRSF are scheduled to expire in 2014, 2015, 2016, 2017, 2018
and 2019 and thereafter, respectively, which accounts for (in thousands)
$231, $154, $1,782, $591, $117 and $4,305 of annualized rent scheduled to
expire during each respective period. Annualized Rent per Rent at Leased Rent
Leased Expiration NRSF at Annualized Annualized Rent per Annualized Total
Percentage Percentage Number Percentage Operating of Total of of of All NRSF
of Operating Annualized Square Feet Under Lease(1) Leases(2) Leases Leases(3)
NRSF Rent Available colocation(5) - - % 193,438 11.4 % $ - - % Available
office and light-industrial - - 63,523 3.7 - - Colocation NRSF: 5,000 or less
1,355 91.0 453,266 26.6 72,954 51.3 5,001 - 10,000 22 1.5 148,050 8.7 17,399
12.3 10,001 - 25,000 11 0.7 161,518 9.5 26,782 18.9 Greater than 25,000 2 0.1
60,807 3.6 7,269 5.1 Powered shell 16 1.1 309,253 18.1 10,427 7.3 Office and light-industrial
83 5.6 313,076 18.4 7,181 5.1 Portfolio Total 1,489 100.0 % 1,702,931 100.0 %
$ 142,012 100.0 % (1) (2) (3) (4) (5) Annualized Rent ($000)(4) Represents
all leases in our portfolio, including data center and office and light
industrial leases. Includes leases that upon expiration will automatically be
renewed, primarily on a month-to-month basis. Number of leases represents
each agreement with a customer; a lease agreement could include multiple
spaces and a customer could have multiple leases. Represents the square feet
at a building under lease as spec ified in the lease agreements plus
managements estimate of spac e available for lease to third parties based on
engineers drawings and other factors, including required data center support
space (such as mechanical, telecommunications and utility rooms) and building
common areas. Represents the monthly contractual rent under existing
commenced customer leases as of June 30, 2014, multiplied by 12. This amount
reflects total annualized base rent before any one-time or non-recurring rent
abatements and it excludes power revenue, interconnection revenue and
operating expense reimbursement. Excludes NRSF held for development or under
construction.
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17 Geographic
Diversification and 10 Largest Customers Geographic Diversification 10
Largest Customers Overview Financial Statements Operating Portfolio
Development and Capital Expenditures Capital Structure 2014 Guidance Appendix
Percentage of Total Metropolitan Market Annualized Rent San Francisco Bay
30.0 % Los Angeles 28.0 Northern Virginia 18.6 Boston 9.7 Chicago 8.1 New
York 3.8 Miami 1.2 Denver 0.6 Total 100.0 % Weighted Percentage Percentage
Average Number Total of Total of Remaining of Occupied Operating Annualized
Lease Term in Customer Industry CoreSite Vertical Locations NRSF(1) NRSF(2)
Rent(4) Months(5) 1 Technology Digital Content 4 41,811 2.5 % $ 10,459 7.4 %
28 2 Technology Cloud 6 131,632 7.7 7,745 5.5 65 3 Technology Systems
Integration & __Managed Service Provider 3 53,014 3.1 6,726 4.7 38 4
Technology Digital Content 8 49,735 2.9 4,737 3.3 10 5 Government* Enterprise
1 141,774 8.3 4,113 2.9 89 6 Technology Cloud 1 27,036 1.6 3,981 2.8 47 7
Financial Enterprise 2 12,188 0.7 3,041 2.1 8 8 Technology Systems
Integration & __Managed Service Provider 1 6,255 0.4 2,646 1.9 7 9
Managed Services Systems Integration & __Managed Service Provider 1
23,663 1.4 2,381 1.7 105 10 Government Enterprise 2 16,769 1.0 2,328 1.6 60
Total/Weighted Average 503,877 29.6 % $ 48,157 33.9 % 43 * Denotes customer
using space for general office purposes. (1) (2) (3) (4) (5) Total occupied
NRSF is determined based on contractually leased square feet for leases that
have commenced on or before June 30, 2014. We calculate occupancy based on
factors in addition to contractually leased square feet, including required
data center support space (such as the mechanical, telecommunications and
utility rooms) and building common areas. Represents the customers total
occupied square feet divided by the total operating NRSF in the portfolio
which, as of June 30, 2014, consisted of 1,702,931 NRSF. Represents the
monthly contractual rent under existing commenced customer leases as of June
30, 2014, multiplied by 12. This amount reflects total annualized base rent
before any one-time or non-recurring rent abatements and excludes power
revenue, interconnection revenue and operating expense reimbursement.
Represents the customers total annualized rent divided by the total
annualized rent in the portfolio as of June 30, 2014, which was approximately
$143.0 million. Weighted average based on percentage of total annualized rent
expiring calculated as of June 30, 2014. Annualized Rent ($000)(3) San
Francisco Bay 30.0% Los Angeles 28.0% Northern Virginia 18.6% Boston 9.7%
Chicago 8.1% New York 3.8% Miami 1.2% Denver 0.6%
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18 Development
Summary and Capital Expenditures (in thousands, except NRSF data) Completed
Pre-Stabilized Data Center Projects as of June 30, 2014 Data Center Projects
Under Construction as of June 30, 2014 Capital Expenditures Quarter Ended
Overview Financial Statements Operating Portfolio Development and Capital
Expenditures Capital Structure 2014 Guidance Appendix June 30, 2014 March 31,
2014 December 31, 2013 September 30, 2013 June 30, 2013 Data center expansion
(1) 32,082 $ 18,917 $ 46,574 $ 67,688 $ 33,544 $ Non-recurring investments
(2) 2,671 5,714 9,330 3,831 4,526 Tenant improvements 1,579 1,208 2,074 1,578
1,027 Recurring capital expenditures (3) 1,377 1,673 1,612 1,174 935 Total
capital expenditures 37,709 $ 27,512 $ 59,590 $ 74,271 $ 40,032 $ Repairs and
maintenance expense (4) 2,600 $ 2,284 $ 2,665 $ 1,954 $ 1,918 $ (1) (2) (3)
(4) Non-recurring investments include upgrades to existing data center or
office space and company-wide improvements that are ancillary to revenue
generation such as internal system development and system-wide security
upgrades. Recurring capital expenditures include required equipment upgrades
within our operating portfolio, which have a future economic benefit. Repairs
and maintenance expense is classified within property operating and
maintenance expense in the consolidated statement of operations. These
expenditures represent recurring maintenance contracts and repairs to
operating equipment necessary to maintain current operations. Data center
expansion capital expenditures include new data center construction,
development projects adding capacity to existing data centers and other
revenue generating investments. Projects/Facilities Metropolitan Area
Estimated Completion NRSF(1) Incurred todate Estimated Total (2) VA2 Northern
Virginia Q3/Q4 2014 50,000 61,052 $ 73,900 $ Total under construction 50,000
61,052 $ 73,900 $ (1) (2) Reflects managements estimate of cost of
completion based upon the actual cost at quarter-end, plus managements
estimate of the cost to complete construction. NRSF reflec ts managements
estimate based on engineering drawings and required support spac e and is
subjec t to change based on final demising of the space. Costs
Projects/Facilities(1) Metropolitan Area Completion NRSF (1) Cost Percent
Leased(2) Percent Occupied SV4 San Francisco Bay Mar 2013 16,640 13,261 $ 86.6 % 73.2 % LA2 Los Angeles Mar 2013 2,294 320 33.3 33.3 LA2 Los Angeles
Mar 2013 8,122 871 43.6 43.6 LA2 Los Angeles Mar 2013 21,169 8,866 77.9 52.4
SV4 San Francisco Bay Apr 2013 14,857 12,911 0.0 0.0 CH1 Chicago Apr 2013
20,240 5,200 28.1 28.1 NY2 New York Dec 2013 18,103 14,417 79.6 47.0 LA2 Los
Angeles Feb 2014 33,711 9,800 0.0 0.0 NY2 New York Mar 2014 16,484 14,540 0.0
0.0 NY2 New York Mar 2014 18,105 14,540 6.8 6.8 Total completed
pre-stabilized 169,725 94,726 $ 33.3 % 25.4 % (1) (2) These pre-stabilized
projects/facilities are excluded from the stabilized operating NRSF
information in the Operating Properties table. See Appendix for definition of
stabilized and pre-stabilized NRSF. Includes customer leases that have been
signed as of June 30, 2014. The percent leased is determined based on leased
square feet as proportion of total pre-stabilized NRSF.
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19 Market
Capitalization and Debt Summary (in thousands, except per share data) Market
Capitalization Debt Summary (1) Outstanding as of: Debt Maturities Overview
Financial Statements Operating Portfolio Development and Capital Expenditures
Capital Structure 2014 Guidance Appendix Shares or Equivalents Outstanding
Market Price / Liquidation Value as of June 30, 2014 Market Value Equivalents
Common shares 21,616 $33.07 714,841 $ Operating partnership units 25,361
$33.07 838,688 Liquidation value of preferred stock 4,600 $25.00 115,000
Total equity 1,668,529 Total debt 276,750 Total enterprise value 1,945,279 $ Total debt to annualized adjusted EBITDA 2.0x Total debt and preferred stock
to annualized adjusted EBITDA 2.9x Instrument Rate Maturity Date Maturity
Date with Extension June 30, 2014 December 31, 2013 Revolving credit facility
(2) 2.16% 1/3/2017 1/3/2018 176,750 $ 174,250 $ Senior unsecured term loan
(3) 3.23% 1/31/2019 1/31/2019 100,000 - SV1 - mortgage loan N/A N/A - 58,250
Total Debt 276,750 $ 232,500 $ Weighted average debt rate 2.55% Preferred
Stock 7.25% N/A N/A 115,000 115,000 Total Debt and Preferred Stock 391,750 $ 347,500 $ Floating rate vs. fixed rate debt 64% / 36% 100% / 0% Floating rate
vs. fixed rate debt and preferred stock 45% / 55% 67% / 33% (1) (2) (3) See
the most recent filed Form 10-K and 10-Q for information on specific debt
instruments. The revolving credit facility interest rate is based on LIBOR at
June 30, 2014, plus applicable spread. Represents the effective interest rate
as a result of the interest rate swap agreement associated with $100 million
1 month LIBOR variable rate debt. $- $50,000 $100,000 $150,000 $200,000
$250,000 $300,000 2014 2015 2016 2017 2018 2019
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20 Interest
Summary and Debt Covenants (in thousands) Interest Expense Components Debt
Covenants Overview Financial Statements Operating Portfolio Development and
Capital Expenditures Capital Structure 2014 Guidance Appendix Required
Compliance June 30, 2014 March 31, 2014 December 31, 2013 September 30, 2013
June 30, 2013 Fixed charge coverage ratio Greater than 1.75x 7.5x 7.8x 7.2x
7.5x 7.7x Total indebtedness to gross asset value Less than 60% 16.4% 15.6%
15.5% 11.5% 10.0% Less than 40% 0.0% 0.0% 3.7% 3.8% 4.0% Less than 30% 10.2%
9.3% 14.9% 10.8% 9.0% Facility availability $405,000 $405,000 $405,000
$405,000 $405,000 Borrowings outstanding (176,750) (160,000) (174,250)
(108,000) (73,000) Outstanding letters of credit (7,330) (8,390) (8,390)
(8,390) (7,540) Current availability $220,920 $236,610 $222,360 $288,610
$324,460 Revolving Credit Facility & Senior Unsecured Term Loan Secured
debt to gross asset value Unhedged variable rate debt to gross asset value
June 30, 2014 March 31, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Interest expense and fees 1,997 $ 1,762 $ 1,296 $ 3,759 $ 2,258 $ Amortization of deferred financing costs 449 580 427 1,029 847 Capitalized
interest (1,031) (1,169) (940) (2,200) (1,883) Total interest expense 1,415 $ 1,173 $ 783 $ 2,588 $ 1,222 $ Percent capitalized 42.2% 49.9% 54.6% 45.9%
60.6% Three Months Ended Six Months Ended
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21 2014 Guidance
(in thousands, except per share amounts ) Overview Financial Statements
Operating Portfolio Development and Capital Expenditures Capital Structure
2014 Guidance Appendix Projected per share and OP unit information: Low High
Net income attributable to common shares 0.61 $ 0.69 $ Real Estate
depreciation and amortization FFO (1) 2.11 $ 2.19 $ Non-recurring FFO items:
Q2 benefit from real estate tax accrual true-up Q1 and Q2 charges for
software impairment FFO excluding non-recurring items (1) $ 2.07 $ 2.15
Projected operating results: Total operating revenues 265,000 $ 270,000 $ Data center revenue 260,000 $ 265,000 $ General and administrative expenses
28,000 $ 30,000 $ Adjusted EBITDA 127,000 $ 132,000 $ Guidance drivers:
Rental churn rate per quarter 1% 2% Cash rent growth on data center renewals
1% 4% Capital expenditures: Data center expansion 90,000 $ 100,000 $ Non-recurring investments 15,000 $ 20,000 $ Tenant improvements 5,000 $ 10,000 $ Recurring capital expenditures 5,000 $ 10,000 $ Total capital
expenditures 115,000 $ 140,000 $ (1) In the second half of 2014, CoreSite
expects to incur additional non-real estate depreciation expense of
approximately $0.02 to $0.03 per share to FFO. The annual guidance provided
below represents forward-looking projections, which are based on current
economic conditions, internal assumptions about our existing customer base
and the supply and demand dynamics of the markets in which we operate.
Further, the guidance does not include the impact of any future financing,
investment or disposition activities. Please refer to the press release for
additional information on forward-looking statements. 1.50 (0.08) 0.04
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22 Appendix
Definitions This document includes certain non-GAAP financial measures that
management believes are helpful in understanding our business, as further
described below. Our definition and calculation of non-GAAP financial
measures may differ from those of other REITs and therefore may not be
comparable. The non-GAAP measures should not be considered an alternative to
net income as an indicator of our performance and should be considered only a
supplement to net income, cash flows from operating, investing or financing
activities as a measure of profitability and/or liquidity, computed in
accordance with GAAP. Turn-Key Same Store Includes turn-key data center space
that was leased or available to be leased to our colocation customers as of
December 31, 2012, at each of our properties, and excludes powered shell data
center space, SV3 data center space, office and light industrial space and
space for which development was completed and became available to be leased
after December 31, 2012. The turn-key same store space as of December 31,
2012, is 948,427 NRSF. CoreSite tracks same store on a computer room basis
within each data center facility. Monthly Recurring Revenue per Cabinet Equivalent
Represents the turn-key monthly recurring colocation revenue (MRR) per
cabinet equivalent billed. MRR is defined as recurring contractual revenue
under existing commenced customer leases. MRR per cabinet equivalent is
calculated as (current quarter MRR/3) divided by ((quarter end cabinet
equivalents billed plus prior quarter end cabinet equivalents billed)/2)).
Cabinet equivalents are calculated as cage-usable square feet (turn-key
leased NRSF/NRSF factor) divided by 25. Stabilized and pre-stabilized NRSF
Projects and facilities that have been recently developed and are in the
initial lease-up phase are classified as prestabilized NRSF until they reach
85% occupied or have been in service for 24 months. Pre-stabilized projects
and facilities become stabilized operating properties at the earlier of
achievement of 85% occupancy or 24 months after development completion and
are included in the stabilized operating NRSF. Overview Financial Statements
Operating Portfolio Development and Capital Expenditures Capital Structure
2014 Guidance Appendix
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23 Appendix
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. 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. Overview
Financial Statements Operating Portfolio Development and Capital Expenditures
Capital Structure 2014 Guidance Appendix
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24 Appendix
Adjusted Funds From Operations AFFO is a non-GAAP measure that is used as a
supplemental operating measure specifically for comparing year over year
ability to fund dividend distribution from operating activities. AFFO is used
by us as a basis to address our ability to fund our dividend payments. We
calculate adjusted funds from operations by adding to or subtracting from
FFO: 1. Plus: Amortization of deferred financing costs 2. Plus: Non-cash
compensation 3. Plus: Non-real estate depreciation 4. Plus: Impairment
charges 5. Plus: Below market debt amortization 6. Less: Straight line rents adjustments
7. Less: Above and below market leases 8. Less: Maintenance capital
investment 9. Less: Tenant improvement capital investment 10. Less:
Capitalized leasing commissions AFFO is not intended to represent cash flow
from operations for the period, and is only intended to provide an additional
measure of performance by adjusting the effect of certain items noted above
included in FFO. AFFO is a widely reported measure by other REITs, however,
other REITs may use different methodologies for calculating AFFO and,
accordingly, our AFFO may not be comparable to other REITs. Earnings before
Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA -
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 to EBITDA as
well as adjusting for the impact of impairment charges 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. Overview Financial Statements Operating Portfolio Development and
Capital Expenditures Capital Structure 2014 Guidance Appendix
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