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 third quarter ended September 30, 2016.
Quarterly and Subsequent
Highlights
- Reported third-quarter total operating
revenues of $101.3 million, representing a 17.2% increase year over
year
- Reported third-quarter net income per
diluted share of $0.36, representing 38.5% growth year over
year
- Reported third-quarter funds from
operations (“FFO”) of $0.90 per diluted share and unit,
representing 21.6% growth year over year
- Executed 162 new and expansion data
center leases comprising 59,991 net rentable square feet (NRSF),
representing $11.2 million of annualized GAAP rent at an average
rate of $187 per square foot
- Commenced 50,455 net rentable square
feet of new and expansion leases representing $7.5 million of
annualized GAAP rent at an average rate of $148 per square
foot
- Realized rent growth on signed renewals
of 4.0% on a cash basis and 6.8% on a GAAP basis and recorded
rental churn of 2.2%
- On October 12, 2016, CoreSite announced
the opening of SV7 on its Santa Clara campus, with 62% of the
230,000 NRSF of turn-key data center capacity leased
Paul Szurek, CoreSite’s Chief Executive Officer, commented, “We
delivered another quarter of solid financial and operational
performance in the third quarter, highlighted by strong earnings
growth and leasing momentum. Our third quarter volume of new and
expansion leasing for deployments of 5,000 net rentable square feet
or less set a company record, as the demand for
performance-sensitive retail colocation solutions remains robust.”
Mr. Szurek continued, “Subsequent to the end of the third quarter,
we opened SV7, our 230,000 net rentable square foot turn-key data
center building in Santa Clara, which was 62% leased upon opening
of the facility, another record for CoreSite. As an organization,
we continue to successfully execute on our business plan in terms
of leasing effectiveness, development, and increasing the value of
our network dense, cloud-enabled platform of assets by enhancing
and diversifying our customer base.”
Financial Results
CoreSite reported net income attributable to common shares of
$12.2 million, or $0.36 per diluted share, for the three months
ended September 30, 2016, compared to $6.9 million, or $0.26 per
diluted share, for the three months ended September 30, 2015, an
increase of 38.5% on a per share basis. On a sequential-quarter
basis, net income attributable to common shares decreased 2.7%.
CoreSite reported FFO per diluted share and unit of $0.90 for
the three months ended September 30, 2016, an increase of 21.6%
compared to $0.74 per diluted share and unit for the three months
ended September 30, 2015. On a sequential-quarter basis, FFO per
diluted share and unit increased 1.1%.
Total operating revenues for the three months ended September
30, 2016, were $101.3 million, a 17.2% increase year over year and
an increase of 5.4% on a sequential-quarter basis.
Sales Activity
CoreSite executed 162 new and expansion data center leases
representing $11.2 million of annualized GAAP rent during the third
quarter, comprised of 59,991 NRSF at a weighted-average GAAP rental
rate of $187 per NRSF.
CoreSite’s third-quarter data center lease commencements totaled
50,455 NRSF at a weighted average GAAP rental rate of $148 per
NRSF, which represents $7.5 million of annualized GAAP rent.
CoreSite’s renewal leases signed in the third quarter totaled
$10.9 million in annualized GAAP rent, comprised of 76,735 NRSF at
a weighted-average GAAP rental rate of $142 per NRSF, reflecting a
4.0% increase in rent on a cash basis and a 6.8% increase on a GAAP
basis. The third-quarter rental churn rate was 2.2%, which included
160 basis points of churn related to a customer move-out at
CoreSite’s VA1 data center.
Development Activity
Santa Clara – During the third quarter, CoreSite had
230,000 square feet of turn-key data center capacity under
construction at SV7. As of September 30, 2016, CoreSite had
incurred $208.2 million of the estimated $211.0 million required to
complete this development. On October 12, 2016, CoreSite announced
the opening of SV7, with 62% of the 230,000 net rentable square
feet of turn-key data center capacity leased.
Denver – During the third quarter, CoreSite had 8,276
square feet of turn-key data center capacity under construction at
DE1. As of September 30, 2016, CoreSite had incurred $2.0 million
of the estimated $12.5 million required to complete this expansion
and expects to substantially complete construction in the second
quarter of 2017.
Los Angeles – During the third quarter, CoreSite had
4,726 square feet of turn-key data center capacity under
construction at LA2, which is 100% pre-leased. As of September 30,
2016, CoreSite had incurred $0.4 million of the estimated $2.0
million required to complete this expansion and expects to
substantially construction in the fourth quarter of 2016.
Balance Sheet and
Liquidity
As of September 30, 2016, CoreSite had net principal debt of
$588.5 million, correlating to 2.8 times third-quarter annualized
adjusted EBITDA, and net principal debt and preferred stock
outstanding of $703.5 million, correlating to 3.4 times
third-quarter annualized adjusted EBITDA.
At quarter end, CoreSite had $6.3 million of cash available on
its balance sheet and $250.8 million of borrowing capacity
available under its revolving credit facility.
Dividend
On September 2, 2016, CoreSite announced a dividend of $0.53 per
share of common stock and common stock equivalents for the third
quarter of 2016. The dividend was paid on October 17, 2016, to
shareholders of record on September 30, 2016.
CoreSite also announced on September 2, 2016, a dividend of
$0.4531 per share of Series A preferred stock for the period July
15, 2016, to October 16, 2016. The preferred dividend was paid on
October 17, 2016, to shareholders of record on September 30,
2016.
2016 Guidance
CoreSite is increasing its 2016 guidance for net income
attributable to common shares to a range of $1.46 to $1.50 from the
previous range of $1.41 to $1.49. In addition, CoreSite is
increasing its 2016 guidance for FFO per diluted share and unit to
a range of $3.61 to $3.65 from the previous range of $3.56 to
$3.64, 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 RBC Technology, Internet, Media
& Telecommunications Conference on November 9-10 at the Westin
Times Square in New York City and NAREIT’s REITWorld conference on
November 15-17 at the JW Marriott Phoenix Desert Ridge Resort &
Spa in Phoenix, Arizona.
Conference Call Details
CoreSite will host a conference call on October 27, 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 844-512-2921 for domestic callers or
412-317-6671 for international callers. The passcode for the replay
is 13646351. The replay will be available until November 10,
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 1,000 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 400+ 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)
September 30,2016
December 31,2015
Assets: Investments in real estate: Land $ 82,463 $ 74,819
Buildings and improvements 1,186,712 1,037,127
1,269,175 1,111,946 Less: Accumulated depreciation and
amortization (345,224 ) (284,219 ) Net investment in
operating properties 923,951 827,727 Construction in progress
272,928 183,189 Net investments in real
estate 1,196,879 1,010,916 Cash and
cash equivalents 6,296 6,854 Accounts and other receivables, net
16,103 12,235 Lease intangibles, net 3,249 4,714 Goodwill 41,191
41,191 Other assets, net 96,274 86,633
Total assets $ 1,359,992
$ 1,162,543 Liabilities and
equity: Liabilities Debt, net $ 590,992 $ 391,007
Accounts payable and accrued expenses 86,129 75,783 Accrued
dividends and distributions 28,630 28,104 Deferred rent payable
7,577 7,934 Acquired below-market lease contracts, net 4,059 4,693
Unearned revenue, prepaid rent and other liabilities 33,444
28,717
Total liabilities
750,831 536,238
Stockholders' equity Series A cumulative preferred stock
115,000 115,000 Common stock, par value $0.01 334 301 Additional
paid-in capital 436,311 390,200 Accumulated other comprehensive
loss (2,141 ) (493 ) Distributions in excess of net income
(105,756 ) (88,891 ) Total stockholders' equity 443,748
416,117 Noncontrolling interests 165,413
210,188
Total equity 609,161
626,305 Total liabilities and
equity $ 1,359,992 $
1,162,543 Consolidated Statements of
Operations (in thousands, except share and per share
data)
Three Months Ended
Nine Months Ended
September 30,2016
June 30,2016
September 30,2015
September 30,2016
September 30,2015
Operating revenues: Data center revenue: Rental revenue $
54,219 $ 52,364 $ 47,135 $ 156,954 $ 133,282 Power revenue 28,844
26,401 23,543 80,819 64,782 Interconnection revenue 13,374 12,977
11,400 39,093 32,210 Tenant reimbursement and other 2,826
2,326 2,357 6,982
6,049 Total data center revenue 99,263 94,068 84,435
283,848 236,323 Office, light-industrial and other revenue 2,011
2,022 1,947 5,996
6,050 Total operating revenues 101,274 96,090 86,382
289,844 242,373
Operating expenses: Property
operating and maintenance 28,283 25,576 24,203 78,522 65,965 Real
estate taxes and insurance 3,524 3,070 3,216 9,659 8,421
Depreciation and amortization 26,981 26,227 24,347 77,978 71,209
Sales and marketing 4,465 4,501 3,775 13,187 11,813 General and
administrative 9,432 8,818 8,644 26,970 24,461 Rent 5,967 5,334
5,440 16,718 15,690 Transaction costs 117 6
6 126 51 Total
operating expenses 78,769 73,532
69,631 223,160 197,610
Operating income 22,505 22,558 16,751
66,684 44,763 Gain on real estate disposal — — — — 36
Interest income 34 — 1 35 5 Interest expense (3,222 )
(2,680 ) (2,188 ) (7,914 ) (5,183 ) Income
before income taxes 19,317 19,878 14,564 58,805 39,621 Income tax
benefit (expense) 2 (43 ) (34 )
(45 ) (149 )
Net income 19,319 19,835
14,530 58,760 39,472 Net income attributable
to noncontrolling interests 5,055 5,715
5,526 17,031 16,193 Net income
attributable to CoreSite Realty Corporation 14,264 14,120 9,004
41,729 23,279 Preferred stock dividends (2,084 )
(2,085 ) (2,084 ) (6,253 ) (6,253 )
Net
income attributable to common shares $ 12,180
$ 12,035 $ 6,920
$ 35,476 $ 17,026
Net income per share attributable to common shares:
Basic $ 0.36 $ 0.38 $
0.26 $ 1.11 $ 0.71
Diluted $ 0.36 $ 0.37
$ 0.26 $ 1.10
$ 0.69 Weighted average common shares
outstanding: Basic 33,425,762 32,022,845 26,126,332 31,906,000
24,029,106 Diluted 33,912,155 32,435,606 26,549,537 32,361,367
24,544,612
Reconciliations of Net Income to FFO
(in thousands, except per share data)
Three Months Ended Nine Months
Ended
September 30,2016
June 30,2016
September 30,2015
September 30,2016
September 30,2015
Net income $ 19,319 $ 19,835 $ 14,530 $ 58,760 $ 39,472 Real estate
depreciation and amortization 25,533 24,864 22,818 73,782 64,414
Gain on real estate disposal — — — —
(36) FFO $ 44,852 $ 44,699 $ 37,348 $ 132,542 $ 103,850
Preferred stock dividends (2,084) (2,085)
(2,084) (6,253) (6,253)
FFO available to common
shareholders and OP unit holders $ 42,768
$ 42,614 $ 35,264 $
126,289 $ 97,597 Weighted average
common shares outstanding - diluted 33,912 32,436 26,550 32,361
24,545 Weighted average OP units outstanding - diluted 13,851
15,239 20,861 15,310 22,839 Total
weighted average shares and units outstanding - diluted 47,763
47,675 47,411 47,671 47,384
FFO per common share and OP
unit - diluted $ 0.90 $ 0.89
$ 0.74 $ 2.65 $ 2.06
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
Nine Months Ended
September 30,2016
June 30,2016
September 30,2015
September 30,2016
September 30,2015
Net income $ 19,319 $ 19,835 $ 14,530 $ 58,760 $ 39,472
Adjustments: Interest expense, net of interest income 3,188 2,680
2,187 7,879 5,178 Income taxes (2) 43 34 45 149 Depreciation and
amortization 26,981 26,227 24,347
77,978 71,209
EBITDA $ 49,486 $
48,785 $ 41,098 $ 144,662
$ 116,008 Non-cash compensation 2,470 2,311 1,944
6,874 5,305 Gain on real estate disposal — — — — (36) Transaction
costs / litigation 158 26 656 187
931
Adjusted EBITDA $ 52,114 $
51,122 $ 43,698 $ 151,723
$ 122,208
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20161027005784/en/
CoreSite ContactGreer
AvivVice President of Investor Relations and Media/Public
Relations+1 303-405-1012+1 303-222-7276Greer.Aviv@CoreSite.com
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