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 fourth quarter ended December 31, 2017.
Quarterly and Subsequent
Highlights
- Reported fourth-quarter total operating
revenues of $125.9 million, representing a 14.0% increase year over
year
- Reported fourth-quarter net income per
diluted share of $0.44, consistent with the prior-year level
- Reported fourth-quarter funds from
operations (“FFO”), excluding a one-time non-cash expense related
to the original issuance costs associated with CoreSite’s redeemed
Preferred Stock, of $1.18 per diluted share and unit, representing
11.3% growth year over year. As reported, FFO per diluted share and
unit was $1.09
- Executed 128 new and expansion data
center leases comprising 41,521 net rentable square feet (NRSF),
representing $7.2 million of annualized GAAP rent at an average
rate of $174 per square foot
- Commenced 52,221 NRSF of new and
expansion leases representing $8.2 million of annualized GAAP rent
at an average rate of $157 per square foot
- Realized rent growth on signed renewals
of 3.5% on a cash basis and 6.2% on a GAAP basis and recorded
rental churn of 0.5% in the fourth quarter
- On January 29, 2018, CoreSite acquired
a two-acre land parcel in Chicago, Illinois, on which CoreSite
expects to build CH2, a 175,000 square foot turn-key data center
building, which should have dark fiber campus connectivity to
CoreSite’s existing CH1 facility
“We finished out the year with solid results, highlighted by
fourth-quarter revenue, adjusted EBITDA and FFO growth, before the
one-time Preferred Stock redemption charge, of 14%, 13%, and 11%,
year over year, respectively,” said Paul Szurek, CoreSite’s Chief
Executive Officer. “Organic growth was driven primarily by the
continued expansion of existing customers across the portfolio and
also by new logo growth as we continue to attract valuable
deployments to our facilities, driving interactions and
interconnections among our customers. When looking at 2017 in its
entirety, we executed well on our strategic priorities and took
important steps to grow our differentiated scalable and flexible
campus strategy in key markets, including Santa Clara, Northern
Virginia, Los Angeles, and most recently, Chicago.”
Financial Results
CoreSite reported net income attributable to common shares of
$14.9 million, or $0.44 per diluted share, for the three months
ended December 31, 2017, compared to $14.9 million, or $0.44 per
diluted share for the three months ended December 31, 2016. Net
income per diluted share declined 4.3% on a sequential-quarter
basis, due to a one-time non-cash expense related to the original
issuance costs associated with CoreSite’s redeemed Preferred
Stock.
CoreSite reported FFO per diluted share and unit, excluding the
aforementioned one-time non-cash expense related to the original
issuance costs associated with CoreSite’s redeemed Preferred Stock,
of $1.18 for the three months ended December 31, 2017, an increase
of 11.3% compared to $1.06 per diluted share and unit for the three
months ended December 31, 2016. FFO per diluted share and unit,
adjusted for the non-cash expense, increased 7.3% on a
sequential-quarter basis. FFO per diluted share and unit, as
reported, was $1.09 for the three months ended December 31, 2017,
an increase of 2.8% year over year. On a sequential-quarter basis,
FFO, as reported, declined 0.9%, again reflecting the one-time
non-cash expense related to CoreSite’s redeemed Preferred
Stock.
Total operating revenues for the three months ended December 31,
2017, were $125.9 million, a 14.0% increase year over year and an
increase of 2.3% on a sequential-quarter basis.
Sales Activity
CoreSite executed 128 new and expansion data center leases
representing $7.2 million of annualized GAAP rent during the fourth
quarter, comprised of 41,521 NRSF at a weighted-average GAAP rental
rate of $174 per NRSF. Leasing to smaller deployments rebounded
during the fourth quarter, with annualized GAAP rent signed for
leases less than 5,000 square feet increasing 5.2% compared to the
trailing twelve-month average.
CoreSite’s fourth-quarter data center lease commencements
totaled 52,221 NRSF at a weighted average GAAP rental rate of $157
per NRSF, which represents $8.2 million of annualized GAAP
rent.
CoreSite’s renewal leases signed in the fourth quarter totaled
$11.2 million in annualized GAAP rent, comprised of 78,577 NRSF at
a weighted-average GAAP rental rate of $142 per NRSF, reflecting a
3.5% increase in rent on a cash basis and a 6.2% increase on a GAAP
basis. The fourth-quarter rental churn rate was 0.5%.
Development and Acquisition
Activity
During the fourth quarter, CoreSite placed into service 13,735
square feet of turn-key data center capacity at BO1 in Boston and
3,087 square feet of turn-key data center capacity at VA1 in
Reston, Virginia.
On January 29, 2018, CoreSite acquired a two-acre land parcel
located in downtown Chicago, Illinois, with a total real estate
cost of $4.5 million. CoreSite expects to build CH2, a 175,000
square foot turn-key data center building, on the acquired land
parcel, upon the receipt of necessary entitlements. The facility is
located in close proximity to CoreSite’s existing CH1 facility and
network node and CoreSite expects to achieve campus
interconnectivity with diverse, high-count dark fiber between CH1
and CH2.
In addition, as of December 31, 2017, CoreSite had a total of
220,336 square feet of turn-key data center capacity under
construction and had spent $98.5 million of the estimated $213.6
million required to complete the projects, which consisted of the
following.
Reston – CoreSite had 24,922 square feet of turn-key data
center capacity under construction at VA3 (Phase 1A). As of
December 31, 2017, CoreSite had incurred $16.5 million of the
estimated $22.3 million required to complete this phase of the
project, and expects to complete development late in the first
quarter or early in the second quarter of 2018. During the fourth
quarter, CoreSite also had 49,837 square feet of turn-key data
center capacity under construction at VA3 (Phase 1B), inclusive of
9,837 square feet of the infrastructure building to support this
phase of the data center campus. As of the end of the fourth
quarter, CoreSite had incurred $27.4 million of the estimated
$100.2 million required to complete VA3 Phase 1B and the
infrastructure building, and expects to complete development in the
fourth quarter of 2018.
Los Angeles – CoreSite had 47,338 square feet of turn-key
data center capacity under construction at LA2, which capacity was
78.6% pre-leased. As of December 31, 2017, CoreSite had incurred
$43.6 million of the estimated $45.2 million required to complete
the expansion and expects to complete construction in the first
quarter of 2018. In addition, CoreSite had an incremental 39,925
square feet of turn-key data center capacity under construction at
LA2. As of the end of the fourth quarter, CoreSite had spent $6.2
million of the estimated $15.0 million required to complete this
expansion and expects to complete construction in the first quarter
of 2018. In conjunction with the build-out of the fourth floor at
LA2, during the fourth quarter CoreSite spent $8.6 million in
recurring capital expenditures to substantially complete a chiller
plant replacement and upgrade project at LA2. The project is
expected to result in improved energy efficiency and reduced
maintenance capital requirements.
Washington, D.C. – CoreSite had 24,563 square feet of
turn-key data center capacity under construction at DC2. As of the
end of the fourth quarter, CoreSite had spent $4.4 million of the
estimated $17.4 million required to complete the project, and
expects to complete development in the third quarter of 2018.
Denver – CoreSite had 15,630 square feet of turn-key data
center capacity under construction at DE1. CoreSite expects to
spend $7.5 million to complete this expansion and expects to
complete construction in the third quarter of 2018.
New York – CoreSite commenced construction on 18,121
square feet of turn-key data center capacity at NY2, and expects to
spend $6.0 million to complete this expansion in the third quarter
of 2018.
Balance Sheet and
Liquidity
As of December 31, 2017, CoreSite had net principal debt
outstanding of $939.3 million, correlating to 3.4 times
fourth-quarter annualized adjusted EBITDA.
As of the end of the fourth quarter, CoreSite had $180.9 million
of total liquidity consisting of available cash and capacity on its
revolving credit facility.
On December 12, 2017, CoreSite redeemed all 4,600,000 shares of
its 7.25% Series A cumulative redeemable Preferred Stock for $25.00
per share, plus all accrued and unpaid dividends in an amount equal
to $0.292014 per share, for a total payment of $25.292014 per
share.
Dividend
On December 7, 2017, CoreSite announced a dividend of $0.98 per
share of common stock and common stock equivalents for the fourth
quarter of 2017. The $0.98 per share quarterly dividend
represents a $0.08, or 8.9%, increase over the prior quarterly
dividend of $0.90 per share that was established
in May 2017, and a $0.18, or 22.5%, increase over the
dividend rate set in December 2016.
The fourth-quarter dividend was paid on January 16, 2018, to
shareholders of record on December 29, 2017.
2018 Guidance
CoreSite is introducing its 2018 guidance of net income
attributable to common shares in the range of $2.15 to $2.27 per
diluted share. In addition, the company’s guidance of FFO per
diluted share and unit is a range of $4.92 to $5.04, with the
difference between net income and FFO being real estate
depreciation and amortization.
CoreSite’s 2018 guidance of FFO per diluted share reflects the
company’s adoption of two new accounting standards – revenue
recognition and lease accounting, which are cumulatively expected
to reduce FFO per diluted share by approximately $0.06 per share.
Absent these accounting changes, CoreSite’s 2018 guidance midpoint
would reflect 11.5% year-over-year growth.
This outlook is based 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 Citi’s 2018 Global
Property CEO Conference on March 5-6, 2018, at The
Diplomat Resort & Spa in Hollywood, Florida.
Conference Call Details
CoreSite will host a conference call on February 8, 2018, 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 will be accessible by dialing +1-877-407-3982
(domestic) or +1-201-493-6780 (international). A replay will be
available until February 22, 2018, and can be accessed shortly
after the call by dialing + 1-844-512-2921 (domestic) or +
1-412-317-6671 (international). The passcode for the replay is
13674936.
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 1,200 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 450+ 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
ability to service existing debt; 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, except per share data)
December 31,2017
December 31,2016
Assets: Investments in real estate: Land $ 97,258 $ 100,258
Buildings and improvements 1,561,056 1,472,580
1,658,314 1,572,838 Less: Accumulated depreciation and
amortization (473,141 ) (369,303 ) Net investment in
operating properties 1,185,173 1,203,535 Construction in progress
162,903 70,738 Net investments in real
estate 1,348,076 1,274,273 Cash and
cash equivalents 5,247 4,429 Accounts and other receivables, net
28,875 25,125 Lease intangibles, net 6,314 9,913 Goodwill 40,646
41,191 Other assets, net 103,501 96,372
Total assets $ 1,532,659 $
1,451,303 Liabilities and equity:
Liabilities Debt, net $ 939,570 $ 690,450 Accounts payable
and accrued expenses 77,170 72,519 Accrued dividends and
distributions 48,976 41,849 Deferred rent payable 9,928 7,694
Acquired below-market lease contracts, net 3,504 4,292 Unearned
revenue, prepaid rent and other liabilities 34,867
37,413
Total liabilities
1,114,015 854,217
Stockholders' equity Series A cumulative preferred stock —
115,000 Common stock, par value $0.01 338 334 Additional paid-in
capital 457,495 438,531 Accumulated other comprehensive income
(loss) 753 (101 ) Distributions in excess of net income
(177,566 ) (118,038 ) Total stockholders' equity 281,020
435,726 Noncontrolling interests 137,624
161,360
Total equity 418,644
597,086 Total liabilities and equity
$ 1,532,659 $ 1,451,303
Consolidated
Statements of Operations
(in thousands, except share and per
share data)
Three Months Ended Year Ended
December 31, September 30, December 31,
December 31, December 31, 2017 2017
2016 2017 2016 Operating revenues: Data
center revenue: Rental revenue $ 68,373 $ 66,657 $ 61,106 $ 264,134
$ 218,060 Power revenue 36,528 35,110 30,722 134,909 111,541
Interconnection revenue 16,255 16,201 13,984 62,293 53,077 Tenant
reimbursement and other 1,847 2,185
2,104 8,637 9,086 Total
data center revenue 123,003 120,153 107,916 469,973 391,764 Office,
light-industrial and other revenue 2,943 2,915
2,592 11,848 8,588
Total operating revenues 125,946 123,068 110,508 481,821 400,352
Operating expenses: Property operating and
maintenance 34,722 37,091 28,690 132,820 107,212 Real estate taxes
and insurance 3,963 2,622 4,591 14,913 14,250 Depreciation and
amortization 32,629 32,077 30,674 129,251 108,652 Sales and
marketing 4,616 4,643 4,308 18,176 17,495 General and
administrative 10,157 9,759 8,399 37,548 35,369 Rent 6,155 6,077
5,913 24,125 22,631 Transaction costs 37 —
— 176 126 Total
operating expenses 92,279 92,269
82,575 357,009 305,735
Operating income 33,667 30,799 27,933
124,812 94,617 Interest expense (6,635 )
(6,447 ) (4,698 ) (24,147 ) (12,577 )
Income before income taxes 27,032 24,352 23,235 100,665 82,040
Income tax expense (24 ) (64 ) (74 )
(174 ) (119 )
Net income 27,008 24,288
23,161 100,491 81,921 Net income attributable
to noncontrolling interests 6,099 6,446
6,181 25,636 23,212 Net
income attributable to CoreSite Realty Corporation 20,909 17,842
16,980 74,855 58,709 Preferred stock dividends (1,671 ) (2,084 )
(2,085 ) (7,924 ) (8,338 )
Original issuance costs associated with
redeemed preferred stock
(4,326 ) — — (4,326 )
—
Net income attributable to common shares
$ 14,912 $ 15,758
$ 14,895 $ 62,605
$ 50,371 Net income per share
attributable to common shares: Basic $
0.44 $ 0.47 $ 0.45 $
1.85 $ 1.56 Diluted $
0.44 $ 0.46 $ 0.44
$ 1.84 $ 1.54
Weighted average common shares outstanding: Basic 33,893,021
33,878,881 33,431,318 33,792,759 32,289,414 Diluted 34,145,280
34,114,169 33,859,539 34,058,949 32,732,059
Reconciliations of Net Income to FFO
(in thousands, except per
share data)
Three Months Ended Year Months
Ended
December 31,
September 30, December 31, December 31,
December 31, 2017 2017 2016 2017
2016 Net income $ 27,008 $ 24,288 $ 23,161 $ 100,491 $
81,921 Real estate depreciation and amortization 31,213
30,727 29,354 123,848
103,136 FFO $ 58,221 $ 55,015 $ 52,515 $
224,339 $ 185,057 Preferred stock dividends (1,671 ) (2,084 )
(2,085 ) (7,924 ) (8,338 ) Original issuance costs associated with
redeemed preferred stock (4,326 ) — —
(4,326 ) —
FFO available to common
shareholders and OP unit holders $ 52,224
$ 52,931 $ 50,430
$ 212,089 $ 176,719
Original issuance costs associated with redeemed preferred stock
4,326 — — 4,326
—
FFO available to common shareholders and
OP unit holders, as adjusted(1) $ 56,550
$ 52,931 $ 50,430
$ 216,415 $ 176,719
Weighted average common shares outstanding - diluted 34,145
34,114 33,860 34,059 32,732 Weighted average OP units outstanding -
diluted 13,836 13,838 13,851
13,844 14,943 Total weighted
average shares and units outstanding - diluted 47,981 47,952 47,711
47,903 47,675
FFO per common share and OP unit -
diluted $ 1.09 $ 1.10
$ 1.06 $ 4.43 $
3.71 FFO per common share and OP unit -
diluted, as adjusted(1) $ 1.18
$ 1.10 $ 1.06 $
4.52 $ 3.71
(1) FFO available to shares and units, as adjusted, excludes
$4.3 million, or $0.09 per share and unit, of non-cash expense
related to the original issuance costs associated with our redeemed
Preferred Stock.
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 Year Months
Ended December 31, September 30, December
31, December 31, December 31, 2017
2017 2016 2017 2016 Net income $ 27,008
$ 24,288 $ 23,161 $ 100,491 $ 81,921 Adjustments: Interest expense
6,635 6,447 4,698 24,147 12,577 Income taxes 24 64 74 174 119
Depreciation and amortization 32,629 32,077
30,674 129,251 108,652
EBITDA $
66,296 $ 62,876 $ 58,607
$ 254,063 $ 203,269 Non-cash
compensation 2,401 2,374 2,018 8,946 8,892 Transaction costs /
litigation 58 — — 197 187
Adjusted EBITDA
$ 68,755 $ 65,250 $
60,625 $ 263,206 $ 212,348
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. We calculate adjusted EBITDA by
adding our non-cash compensation expense, transaction costs from
unsuccessful deals and business combinations 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/20180208005647/en/
CoreSite Realty CorporationGreer Aviv+1 303-405-1012+1
303-222-7276Vice President of Investor Relations and Corporate
CommunicationsGreer.Aviv@CoreSite.com
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