CoreSite Realty Corporation (NYSE: COR), a national provider of
powerful, network-rich data centers, today announced financial
results for the first quarter 2012.
Quarterly Highlights
- Reported first-quarter FFO of $0.36 per
diluted share and unit, representing a 5.9% increase over the prior
quarter and a 44.0% increase over the prior-year quarter
- Reported first-quarter revenue of $47.3
million, representing a 2.7% increase over the prior quarter and a
18.3% increase over the prior-year quarter
- Executed new and expansion data center
leases representing $7.1 million of annualized GAAP rent with a
weighted-average GAAP rental rate of $188 per net rentable square
foot
- Achieved an 85.8% retention ratio with
3.3% rent growth on signed renewals on a cash basis and 12.5% on a
GAAP basis
- Commenced 30,698 net rentable square
feet (“NRSF”) of new and expansion leasing, with GAAP annualized
rent of $241 per square foot
Tom Ray, CoreSite’s Chief Executive Officer, commented, “During
the first quarter of 2012, we continued to successfully execute on
our strategy to expand our position as a network-centric provider
in key domestic markets. Sales remained well-distributed across
verticals and geographies, with particular strength in the cloud
and carrier verticals. We delivered new capacity in Northern
Virginia and Santa Clara and booked new sales in our 2972 Stender
development to bring that site to 19,567 NRSF under executed
licenses at March 31, 2012, representing 59% of the 33,129 NRSF
delivered as of that date.”
Mr. Ray continued, “We continue to make investments to position
CoreSite for ongoing growth. With the recent acquisition of
Comfluent we are entering the Denver market, acquiring the leader
in interconnection in Denver and the Rocky Mountain region. We’re
also pleased to add to our management team with the hiring of
Jarrett Appleby in the newly created position of Chief Operating
Officer. Jarrett brings strong domain expertise in network-centric
data centers and we look forward to his planned start date of May
7, 2012. We remain focused on expanding our national platform and
continuously enhancing our customer experience as we work toward
our goal of becoming the network-centric provider of choice in the
markets in which we compete.”
Financial Results
CoreSite reported funds from operations (“FFO”) of $16.4
million, or $0.36 per diluted share and unit, for the three months
ended March 31, 2012, compared to $11.3 million, or $0.25 per
diluted share and unit, for the three months ended March 31, 2011.
Total operating revenue for the three months ended March 31, 2012,
was $47.3 million, a 2.7% increase on a sequential quarter basis
and an 18.3% increase over the same quarter of the prior year. The
company reported net income for the three months ended March 31,
2012, of $1.3 million and net income attributable to common shares
of $600,000, or $0.03 per diluted share.
Leasing Activity
The company executed new and expansion data center leases
representing $7.1 million of annualized GAAP rent during the
quarter, comprised of 37,563 NRSF at a weighted average GAAP rate
of $188 per NRSF and a weighted average lease term of 4.4
years.
During the first quarter, data center lease commencements
totaled 30,698 NRSF at a weighted average GAAP rental rate of $241
per NRSF, which represents $7.4 million of annualized GAAP
rent.
Renewal leases totaling 15,433 NRSF commenced in the first
quarter at a weighted average GAAP rate of $170 per NRSF,
reflecting a 3.3% increase in rent on a cash basis and a 12.5%
increase on a GAAP basis. The company’s rent retention ratio for
the first quarter was 85.8%.
Development and Redevelopment
Activity
During the first quarter, CoreSite completed construction on
46,303 NRSF of space in Northern Virginia and the San Francisco Bay
Area for a total cost of $21.9 million, or approximately $473 per
NRSF.
At March 31, 2012, the company had 78,856 NRSF of data center
space under construction. Of the estimated $77.8 million required
to complete these projects, the company had incurred costs of $55.4
million through March 31, 2012.
Including the space currently under construction or in
preconstruction at March 31, 2012, as well as currently operating
space targeted for future redevelopment, CoreSite owns land and
buildings sufficient to develop or redevelop 888,892 feet of data
center space, comprised of (1) 78,856 NRSF of data center space
currently under construction, (2) 464,786 NRSF of office and
industrial space currently available for redevelopment, and (3)
345,250 NRSF of new data center space available for development on
land that the company currently owns at its Coronado-Stender
business park.
Balance Sheet and
Liquidity
As of March 31, 2012, the company had $132.0 million of total
long-term debt equal to 10.8% of total enterprise value and equal
to 1.6x annualized adjusted EBITDA for the quarter ended March 31,
2012. The company has no debt maturities until 2014, assuming all
extensions are available and exercised.
At quarter end, the company had $4.0 million of cash available
on its balance sheet and $153.6 million of available capacity under
its revolving credit facility.
Denver Market
Acquisition
In April 2012 the company entered the Denver market with the
acquisition of Comfluent, a carrier-neutral, network-centric
colocation provider, located in Denver, Colorado for a purchase
price of approximately $3.0 million along with the provision for
earn-out payments over the next three years if certain operating
hurdles are met. Comfluent plays a vital role in the
interconnection community in the western U.S., serving more than 75
customers and managing the Rocky Mountain Internet eXchange (RMIX),
the region’s largest Internet exchange, which will be integrated
into CoreSite’s national Any2 Internet Exchange platform as part of
the integration plan for Comfluent. Comfluent currently leases two
sites that total approximately 9,300 NRSF.
Dividend
On March 14, 2012, the company’s board of directors declared a
dividend of $0.18 per share of common stock and common stock
equivalents for the first quarter of 2012. The dividend was paid on
April 16, 2012 to shareholders of record on March 30, 2012.
2012 Guidance
Due to the acquisition of Comfluent, the company is increasing
its 2012 guidance of FFO per diluted share and unit to a range of
$1.38 to $1.52 from its prior range of $1.36 to $1.50. This outlook
is predicated on current economic conditions, internal assumptions
about its customer base, and the supply and demand dynamics of the
markets in which it operates. Further, the company’s guidance does
not include the impact of any additional acquisitions or capital
markets transactions that may become available.
In addition, the company’s estimate of the net income
attributable to common shares is $0.00 to $0.15 per diluted share
with the difference between FFO and net income being real estate
depreciation and amortization.
Upcoming Conferences and
Events
The company will participate in NAREIT’s REITWeek conference
from June 12th through June 14th at the Hilton in New York
City.
Conference Call Details
The company will host a conference call April 26th at 12:00 p.m.
(Eastern 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 and 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 for international callers, 858-384-5517. The passcode
for the replay is 392009. The replay will be available until May 3,
2012.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging on to the company’s website at
www.CoreSite.com and clicking on the “Investors” tab. The on-line
replay will be available for a limited time beginning immediately
following the call.
About CoreSite
CoreSite Realty Corporation (NYSE: COR) is a national provider
of data center products and interconnection services. More than 700
customers such as Global 1000 enterprises, communications
providers, cloud and content companies, financial firms, media and
entertainment, healthcare, and government agencies choose CoreSite
for the confidence that comes with customer-focused data center
products, service and support systems, and scalability. CoreSite
data centers are business catalysts, featuring the Any2 Internet
exchange and network ecosystems, which include access to 200+
carriers and service providers and a growing mesh of more than
15,000 interconnections. The company features a diverse colocation
offering from individual cabinets to custom cages and private
suites, with 12 data center locations in seven major U.S. markets.
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 the company’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 our status as a REIT; financial
market fluctuations; changes in real estate and zoning laws and
increases in real property tax rates; and other factors affecting
the real estate industry generally. All forward-looking statements
reflect the company’s good faith beliefs, assumptions and
expectations, but they are not guarantees of future performance.
Furthermore, the company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes
in underlying assumptions or factors, of new information, data or
methods, future events or other changes. For a further discussion
of these and other factors that could cause the company’s future
results to differ materially from any forward-looking statements,
see the section entitled “Risk Factors” in the company’s most
recent annual report on Form 10-K, and other risks described in
documents subsequently filed by the company from time to time with
the Securities and Exchange Commission.
Consolidated Balance Sheet
(in thousands, except per share data)
March 31,2012
December 31,2011
ASSETS Investments in real estate: Land $ 84,738 $ 84,738
Building and building improvements 517,934 499,717 Leasehold
improvements 82,660 81,057 685,332
665,512 Less: Accumulated depreciation and amortization
(73,571 ) (64,428 ) Net investment in operating properties
611,761 601,084 Construction in progress 69,519
73,084 Net investments in real estate 681,280
674,168 Cash and cash equivalents 3,998 6,628
Restricted cash 8,712 9,291 Accounts and other receivables, net
7,403 6,562 Lease intangibles, net 30,905 36,643 Goodwill 41,191
41,191 Other assets 37,431 33,743
Total assets
$
810,920
$
808,226
LIABILITIES AND EQUITY
Liabilities Revolving credit facility $ 40,250 $ 5,000 Mortgage
loans payable 91,782 116,864 Accounts payable and accrued expenses
39,096 38,822 Deferred rent payable 3,785 3,535 Acquired
below-market lease contracts, net 10,898 11,872 Prepaid rent and
other liabilities 10,755 11,946
Total liabilities
196,566 188,039 Stockholders'
equity Common stock, par value $0.01 204 204 Additional paid-in
capital 257,338 256,183 Accumulated other comprehensive income
(loss) (47 ) (34 ) Accumulated deficit (26,683 )
(23,545 ) Total stockholders' equity 230,812 232,808 Noncontrolling
interests 383,542 387,379
Total equity
614,354 620,187
Total liabilities and equity
$
810,920
$
808,226
Consolidated Statement of
Operations
(in thousands, except share and per share data)
Three
Months Ended:
March 31,2012
December 31,2011
September 30, 2011
June 30,2011
March 31,2011
Operating revenues: Rental revenue $ 29,493 $ 29,064 $
27,616 $ 26,707 $ 25,210 Power revenue 12,330 11,411 11,450 10,760
9,781 Tenant reimbursement 1,296 1,767 1,432 1,425 1,720 Other
revenue 4,165 3,787 3,869
3,592 3,255 Total operating revenues
47,284 46,029 44,367 42,484 39,966
Operating expenses:
Property operating and maintenance 14,395 15,063 14,133 13,830
12,023 Real estate taxes and insurance 2,014 2,064 2,163 2,149
2,743 Depreciation and amortization 15,461 15,743 16,091 17,660
19,473 Sales and marketing 2,129 1,619 1,315 1,433 1,377 General
and administrative 6,352 5,880 4,747 5,602 5,617 Transaction costs
122 0 192 683 0 Rent 4,577 4,588
4,601 4,600 4,547 Total
operating expenses 45,050 44,957
43,242 45,957 45,780
Operating income (loss) 2,234 1,072 1,125 (3,473 ) (5,814 )
Gain on early extinguishment of debt 0 0 (10 ) 949 0 Interest
income 2 2 9 40 66 Interest expense (1,018 ) (838 )
(916 ) (1,269 ) (2,252 ) Income (loss) before
income taxes 1,218 236 208 (3,753 ) (8,000 ) Income tax benefits
125 226 55 165
84 Net income (loss) 1,343 462 263 (3,588 )
(7,916 ) Net income (loss) attributable to noncontrolling interests
743 283 151 (2,058
) (4,544 ) Net income (loss) attributable to common shares $
600 $ 179 $ 112
$
(1,530
)
$
(3,372
)
Net income (loss) per share attributable to common shares: Basic $
0.03 $ 0.01 $ 0.01
$
(0.08
)
$
(0.17
)
Diluted $ 0.03 $ 0.01 $ 0.01
$
(0.08
)
$
(0.17
)
Weighted average common shares outstanding: Basic 20,455,875
19,988,150 19,494,703 19,473,219 19,458,605 Diluted 20,694,855
20,082,003 19,587,961 19,473,219 19,458,605
Reconciliation of Net Income (Loss) to Funds From Operations
(in thousands, except per share data)
Three Months
Ended:
March 31,2012
December 31,2011
September 30,2011
June 30,2011
March 31,2011
Net income (loss) $
1,343
$
462
$
263
$
(3,588
)
$
(7,916
)
Adjustments: Real estate depreciation and amortization
15,008
15,307
15,738
17,391
19,237
FFO available to common shareholders and OP unitholders
$ 16,351 $ 15,769 $ 16,001
$ 13,803 $ 11,321 Weighted
average common shares and OP units outstanding - diluted
46,039,937
45,862,220
45,822,653
45,822,653
45,784,080
FFO per common share and OP unit - diluted $ 0.36 $ 0.34
$ 0.35 $ 0.30 $ 0.25
CoreSite Realty Corporation considers FFO to be a supplemental
measure of 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. The
Company calculates FFO in accordance with the standards established
by 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. 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.
The Company offers this measure because management recognizes
that FFO will be used by investors as a basis to compare operating
performance with that of other REITs. However, because FFO excludes
depreciation and amortization and captures neither the changes in
the value of the 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 the properties, all of which have real economic effect and could
materially impact financial condition and results from operations,
the utility of FFO as a measure of 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 cash needs, including the ability to pay dividends or make
distributions. In addition, the Company’s 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. Investors in the Company’s
securities should not rely on these measures as a substitute for
any GAAP measure, including net income.
Reconciliation of Net Income (Loss) to Earnings Before
Interest, Taxes Depreciation and Amortization (in thousands,
except per share data)
Three Months Ended:
March 31,2012
December 31,2011
September 30,2011
June 30,2011
March 31,2011
Net income (loss) $ 1,343 $ 462 $ 263
$
(3,588
)
$
(7,916
) Adjustments: Interest expense, net of interest income 1,016 836
907 1,229 2,186 Income taxes (125 ) (226 ) (55 ) (165 ) (84 )
Depreciation and amortization 15,461
15,743 16,091
17,660 19,473 EBITDA $ 17,695 $ 16,815
$ 17,206 $ 15,136 $ 13,659 Non-cash compensation 747 693 879 889
497 Gain on early extinguishment of debt 0 0 10 (949 ) 0
Transaction costs / litigation settlement expenses
1,572 0 192
683 0 Adjusted EBITDA $
20,014 $ 17,508 $ 18,287
$ 15,759 $ 14,156
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. The Company calculates adjusted
EBITDA by adding non-cash compensation expense and transaction
costs 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 the Company’s ability to incur and
service debt. In addition, management considers EBITDA and adjusted
EBITDA to be appropriate supplemental measures of the Company’s
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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