Second-quarter net income per share of $0.37
increased 68% year over year
CoreSite Realty Corporation (NYSE:COR), a premier provider of
secure, reliable, high-performance data center and interconnection
solutions across the U.S., today announced financial results for
the second quarter ended June 30, 2016.
Quarterly Highlights
- Reported second-quarter net income per
diluted share of $0.37, representing 68.2% growth year over
year
- Reported second-quarter funds from
operations (“FFO”) of $0.89 per diluted share and unit,
representing 30.9% growth year over year
- Reported second-quarter total operating
revenues of $96.1 million, representing an 18.1% increase year over
year
- Executed a record 171 new and expansion
data center leases comprising 48,147 net rentable square feet
(NRSF), representing $7.7 million of annualized GAAP rent at a rate
of $159 per square foot
- Commenced 157,642 net rentable square
feet of new and expansion leases representing $8.7 million of
annualized GAAP rent at a rate of $55 per square foot, including
the 136,580 square foot powered-shell build-to-suit in Santa
Clara
- Realized rent growth on signed renewals
of 5.2% on a cash basis and 9.4% on a GAAP basis and recorded
rental churn of 2.1%
Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are
pleased that our focused efforts and consistent execution resulted
in another quarter of solid financial and operational performance.”
Mr. Ray continued, “We made strong progress against our goal of
increasing transaction volume, with a record 171 new and expansion
leases signed in Q2, as well as further diversifying our customer
base with 31 net new logos added across our platform. Our core
colocation and interconnection-solutions business produced strong
results and we believe we continue to drive differentiated value in
our portfolio with the launch of new cloud on-ramps in our
platform. We believe that CoreSite remains well-positioned to
strengthen the value of its communities of interest within its
network-rich, cloud-enabled data center platform.”
Financial Results
CoreSite reported FFO per diluted share and unit of $0.89 for
the three months ended June 30, 2016, an increase of 30.9% compared
to $0.68 per diluted share and unit for the three months ended June
30, 2015. On a sequential-quarter basis, FFO per diluted share and
unit increased 3.5%.
Total operating revenues for the three months ended June 30,
2016, were $96.1 million, an 18.1% increase year over year and an
increase of 3.9% on a sequential-quarter basis. CoreSite reported
second-quarter net income attributable to common shares of $12.0
million, or $0.37 per diluted share.
Sales Activity
CoreSite executed 171 new and expansion data center leases
representing $7.7 million of annualized GAAP rent during the second
quarter, comprised of 48,147 NRSF at a weighted-average GAAP rental
rate of $159 per NRSF.
CoreSite’s second-quarter data center lease commencements
totaled 157,642 NRSF at a weighted average GAAP rental rate of $55
per NRSF, which represents $8.7 million of annualized GAAP rent.
CoreSite’s second-quarter lease commencements include the 136,580
square foot powered-shell build-to-suit at SV6 in Santa Clara,
which commenced on May 1, 2016.
CoreSite’s renewal leases signed in the second quarter totaled
$8.5 million in annualized GAAP rent, comprised of 70,028 NRSF at a
weighted-average GAAP rental rate of $122 per NRSF, reflecting a
5.2% increase in rent on a cash basis and a 9.4% increase on a GAAP
basis. The second-quarter rental churn rate was 2.1%, and included
100 basis points of churn related to CoreSite’s original
full-building customer at SV3, as previously disclosed.
Development Activity
Denver – Subsequent to the end of the second quarter, CoreSite
executed a lease providing for expansion at its DE1 facility. The
10-year lease – with renewal rights for four, 5-year extensions at
fixed rental rates – is for 23,000 square feet of shell capacity to
support CoreSite’s build out of turn-key data center capacity in
two or more phases. CoreSite expects to substantially complete
construction of the initial phase of 8,000 square feet in the first
quarter of 2017, at a cost of approximately $14 million.
Santa Clara – During the second quarter, CoreSite placed into
service 136,580 square feet at SV6, a powered-shell build-to-suit
for a strategic customer; this capacity was 100% leased and
occupied at June 30, 2016. Additionally, as of the end of the
second quarter, CoreSite had 230,000 square feet of turn-key data
center capacity under construction at SV7. As of June 30, 2016,
CoreSite had incurred $151.6 million of the estimated $190.0
million required to complete this development and expects to
substantially complete construction in the third quarter of 2016.
SV7 was 58.5% pre-leased as of the end of the second quarter.
Northern Virginia – During the second quarter, CoreSite placed
into service 48,137 square feet of turn-key data center space at
Phase 4 at VA2. CoreSite’s Reston campus is now fully built out and
was 79.4% occupied as of June 30, 2016.
Los Angeles – During the second quarter, CoreSite placed into
service 43,345 square feet of turn-key data center space at LA2. As
of June 30, 2016, this space was 21.2% leased and 7.1%
occupied.
Balance Sheet and
Liquidity
As of June 30, 2016, CoreSite had net principal debt of $497.8
million, correlating to 2.4 times second-quarter annualized
adjusted EBITDA, and net principal debt and preferred stock
outstanding of $612.8 million, correlating to 3.0 times
second-quarter annualized adjusted EBITDA.
At quarter end, CoreSite had $2.2 million of cash available on
its balance sheet and $345.5 million of capacity available under
its revolving credit facility.
Dividend
On May 20, 2016, CoreSite announced a dividend of $0.53 per
share of common stock and common stock equivalents for the second
quarter of 2016. The dividend was paid on July 15, 2016, to
shareholders of record on June 30, 2016.
CoreSite also announced on May 20, 2016, a dividend of $0.4531
per share of Series A preferred stock for the period April 15,
2016, to July 14, 2016. The preferred dividend was paid on July 15,
2016, to shareholders of record on June 30, 2016.
2016 Guidance
CoreSite is increasing its 2016 guidance of FFO per diluted
share and unit to a range of $3.56 to $3.64 from the previous range
of $3.52 to $3.60. In addition, CoreSite is increasing its 2016
guidance for net income attributable to common shares to a range of
$1.41 to $1.49 from the previous range of $1.28 to $1.36, with the
difference between FFO and net income being real estate
depreciation and amortization.
This outlook is predicated on current economic conditions,
internal assumptions about CoreSite’s customer base, and the supply
and demand dynamics of the markets in which CoreSite operates. The
guidance does not include the impact of any future financing,
investment or disposition activities, beyond what has already been
disclosed.
Upcoming Conferences and
Events
CoreSite will participate in the Cowen and Company
Communications Infrastructure Summit on August 9th in Boulder,
Colorado and the Bank of America Merrill Lynch 2016 Global Real
Estate Conference on September 13th in New York, New York.
Conference Call Details
CoreSite will host a conference call on July 28, 2016, 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 13639460. The replay will be available until August 11,
2016.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging on to CoreSite’s website at
www.CoreSite.com and clicking on the “Investors” link. The on-line
replay will be available for a limited time beginning immediately
following the call.
About CoreSite
CoreSite Realty Corporation (NYSE:COR) delivers secure,
reliable, high-performance data center and interconnection
solutions to a growing customer ecosystem across eight key North
American markets. More than 900 of the world’s leading enterprises,
network operators, cloud providers, and supporting service
providers choose CoreSite to connect, protect and optimize their
performance-sensitive data, applications and computing workloads.
Our scalable, flexible solutions and 350+ dedicated employees
consistently deliver unmatched data center options — all of which
leads to a best-in-class customer experience and lasting
relationships. For more information, visit www.CoreSite.com.
Forward Looking
Statements
This earnings release and accompanying supplemental information
may contain forward-looking statements within the meaning of the
federal securities laws. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can
identify forward-looking statements by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “should,”
“seeks,” “approximately,” “intends,” “plans,” “pro forma,”
“estimates” or “anticipates” or the negative of these words and
phrases or similar words or phrases that are predictions of or
indicate future events or trends and that do not relate solely to
historical matters. Forward-looking statements involve known and
unknown risks, uncertainties, assumptions and contingencies, many
of which are beyond CoreSite’s control that may cause actual
results to differ significantly from those expressed in any
forward-looking statement. These risks include, without limitation:
the geographic concentration of the company’s data centers in
certain markets and any adverse developments in local economic
conditions or the demand for data center space in these markets;
fluctuations in interest rates and increased operating costs;
difficulties in identifying properties to acquire and completing
acquisitions; significant industry competition; the company’s
failure to obtain necessary outside financing; the company’s
failure to qualify or maintain its status as a REIT; financial
market fluctuations; changes in real estate and zoning laws and
increases in real property tax rates; and other factors affecting
the real estate industry generally. All forward-looking statements
reflect the company’s good faith beliefs, assumptions and
expectations, but they are not guarantees of future performance.
Furthermore, the company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes
in underlying assumptions or factors, of new information, data or
methods, future events or other changes. For a further discussion
of these and other factors that could cause the company’s future
results to differ materially from any forward-looking statements,
see the section entitled “Risk Factors” in the company’s most
recent annual report on Form 10-K, and other risks described in
documents subsequently filed by the company from time to time with
the Securities and Exchange Commission.
Consolidated Balance Sheets
(in thousands)
June 30,2016
December 31,2015
Assets: Investments in real estate: Land $ 82,463 $ 74,819
Buildings and improvements 1,174,099 1,037,127
1,256,562 1,111,946 Less: Accumulated depreciation and amortization
(323,919 ) (284,219 ) Net investment in operating
properties 932,643 827,727 Construction in progress 210,415
183,189
Net investments in real estate
1,143,058 1,010,916 Cash and cash
equivalents 2,243 6,854 Accounts and other receivables, net 13,802
12,235 Lease intangibles, net 3,707 4,714 Goodwill 41,191 41,191
Other assets, net 92,329 86,633
Total assets $ 1,296,330 $
1,162,543 Liabilities and equity:
Liabilities Debt, net $ 496,199 $ 391,007 Accounts payable
and accrued expenses 115,533 75,783 Accrued dividends and
distributions 28,326 28,104 Deferred rent payable 7,442 7,934
Acquired below-market lease contracts, net 4,267 4,693 Unearned
revenue, prepaid rent and other liabilities 31,232
28,717
Total liabilities 682,999
536,238
Stockholders' equity Series A
cumulative preferred stock 115,000 115,000 Common stock, par value
$0.01 334 301 Additional paid-in capital 433,637 390,200
Accumulated other comprehensive loss (3,029 ) (493 ) Distributions
in excess of net income (99,942 ) (88,891 ) Total
stockholders' equity 446,000 416,117 Noncontrolling interests
167,331 210,188
Total equity
613,331 626,305
Total
liabilities and equity $ 1,296,330
$ 1,162,543
Consolidated
Statements of Operations
(in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30,2016
March 31,2016
June 30,2015
June 30,2016
June 30,2015
Operating revenues: Data center revenue: Rental revenue $
52,364 $ 50,371 $ 44,824 $ 102,735 $ 86,147 Power revenue 26,401
25,574 21,672 51,975 41,239 Interconnection revenue 12,977 12,742
10,595 25,719 20,810 Tenant reimbursement and other 2,326
1,830 2,276 4,156
3,692 Total data center revenue 94,068 90,517 79,367
184,585 151,888 Office, light-industrial and other revenue
2,022 1,963 1,969 3,985
4,103 Total operating revenues 96,090 92,480
81,336 188,570 155,991
Operating expenses: Property
operating and maintenance 25,576 24,663 22,084 50,239 41,762 Real
estate taxes and insurance 3,070 3,065 3,270 6,135 5,205
Depreciation and amortization 26,227 24,770 24,046 50,997 46,862
Sales and marketing 4,501 4,221 4,256 8,722 8,038 General and
administrative 8,818 8,720 7,952 17,538 15,817 Rent 5,334 5,417
5,007 10,751 10,250 Transaction costs 6 3
45 9 45 Total
operating expenses 73,532 70,859
66,660 144,391 127,979
Operating income 22,558 21,621 14,676 44,179 28,012 Gain on
real estate disposal - - - - 36 Interest income - 1 2 1 4 Interest
expense (2,680 ) (2,012 ) (1,730 )
(4,692 ) (2,995 ) Income before income taxes 19,878 19,610
12,948 39,488 25,057 Income tax expense (43 ) (4 )
(66 ) (47 ) (115 ) Net income 19,835 19,606
12,882 39,441 24,942 Net income attributable to
noncontrolling interests 5,715 6,261
5,259 11,976 10,667 Net
income attributable to CoreSite Realty Corporation 14,120 13,345
7,623 27,465 14,275 Preferred stock dividends (2,085 )
(2,084 ) (2,085 ) (4,169 ) (4,169 )
Net income attributable to common shares $
12,035 $ 11,261 $
5,538 $ 23,296 $
10,106 Net income per share attributable to
common shares: Basic $ 0.38 $
0.37 $ 0.23 $ 0.75 $
0.44 Diluted $ 0.37 $
0.37 $ 0.22 $ 0.74
$ 0.43 Weighted average common
shares outstanding: Basic 32,022,845 30,252,693 24,536,583
31,137,769 22,963,111 Diluted 32,435,606 30,694,747 25,055,195
31,554,157 23,525,316
Reconciliations of Net Income
to FFO
(in thousands,
except per share data)
Three Months Ended Six Months
Ended
June 30,2016
March 31,2016
June 30,2015
June 30,2016
June 30,2015
Net income $ 19,835 $ 19,606 $ 12,882 $ 39,441 $ 24,942 Real estate
depreciation and amortization 24,864 23,385 21,343 48,249 41,596
Gain on real estate disposal - -
- - (36 ) FFO $ 44,699 $ 42,991 $
34,225 $ 87,690 $ 66,502 Preferred stock dividends (2,085 )
(2,084 ) (2,085 ) (4,169 ) (4,169 )
FFO available to common shareholders and OP unit holders
$ 42,614 $ 40,907
$ 32,140 $ 83,521
$ 62,333 Weighted average common shares
outstanding - diluted 32,436 30,695 25,055 31,554 23,525 Weighted
average OP units outstanding - diluted 15,239
16,856 22,344 16,047
23,844 Total weighted average shares and units outstanding -
diluted 47,675 47,551 47,399 47,601 47,369
FFO per common
share and OP unit - diluted $ 0.89
$ 0.86 $ 0.68 $
1.75 $ 1.32
Funds From Operations “FFO” is a supplemental measure of our
performance which should be considered along with, but not as an
alternative to, net income and cash provided by operating
activities as a measure of operating performance and liquidity. We
calculate FFO in accordance with the standards established by the
National Association of Real Estate Investment Trusts (“NAREIT”).
FFO represents net income (loss) (computed in accordance with
GAAP), excluding gains (or losses) from sales of property and
undepreciated land and impairment write-downs of depreciable real
estate, plus real estate related depreciation and amortization
(excluding amortization of deferred financing costs) and after
adjustments for unconsolidated partnerships and joint ventures. FFO
attributable to common shares and units represents FFO less
preferred stock dividends declared during the period.
Our management uses FFO as a supplemental performance measure
because, in excluding real estate related depreciation and
amortization and gains and losses from property dispositions, it
provides a performance measure that, when compared year over year,
captures trends in occupancy rates, rental rates and operating
costs.
We offer this measure because we recognize that FFO will be used
by investors as a basis to compare our operating performance with
that of other REITs. However, because FFO excludes depreciation and
amortization and captures neither the changes in the value of our
properties that result from use or market conditions, nor the level
of capital expenditures and capitalized leasing commissions
necessary to maintain the operating performance of our properties,
all of which have real economic effect and could materially impact
our financial condition and results from operations, the utility of
FFO as a measure of our performance is limited. FFO is a non-GAAP
measure and should not be considered a measure of liquidity, an
alternative to net income, cash provided by operating activities or
any other performance measure determined in accordance with GAAP,
nor is it indicative of funds available to fund our cash needs,
including our ability to pay dividends or make distributions. In
addition, our calculations of FFO are not necessarily comparable to
FFO as calculated by other REITs that do not use the same
definition or implementation guidelines or interpret the standards
differently from us. Investors in our securities should not rely on
these measures as a substitute for any GAAP measure, including net
income.
Reconciliations of earnings before interest,
taxes, depreciation and amortization (EBITDA): (in thousands)
Three Months
Ended Six Months Ended
June 30,2016
March 31,2016
June 30,2015
June 30,2016
June 30,2015
Net income $ 19,835 $ 19,606 $ 12,882 $ 39,441 $ 24,942
Adjustments: Interest expense, net of interest income 2,680 2,011
1,728 4,691 2,991 Income taxes 43 4 66 47 115 Depreciation and
amortization 26,227 24,770 24,046 50,997 46,862
EBITDA $
48,785 $ 46,391 $ 38,722 $ 95,176 $
74,910 Non-cash compensation 2,311 2,093 1,792 4,404 3,361 Gain
on real estate disposal - - - - (36) Transaction costs / litigation
26 3 45 29 275
Adjusted EBITDA $ 51,122 $
48,487 $ 40,559 $ 99,609 $ 78,510
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 as well as adjusting for the impact of
impairment charges, gains or losses from sales of property and
undepreciated land and gains or losses on early extinguishment of
debt. Management uses EBITDA and adjusted EBITDA as indicators of
our ability to incur and service debt. In addition, we consider
EBITDA and adjusted EBITDA to be appropriate supplemental measures
of our performance because they eliminate depreciation and
interest, which permits investors to view income from operations
without the impact of non-cash depreciation or the cost of debt.
However, because EBITDA and adjusted EBITDA are calculated before
recurring cash charges including interest expense and taxes, and
are not adjusted for capital expenditures or other recurring cash
requirements of our business, their utilization as a cash flow
measurement is limited.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160728005189/en/
CoreSiteGreer Aviv, +1 303-405-1012 or +1
303-222-7276Vice President of Investor Relations and Media/Public
RelationsGreer.Aviv@CoreSite.com
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