UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the quarterly period ended March 31, 2012.
¨
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the Transition Period
From
to
.
Commission file number: 001-34877
CoreSite
Realty Corporation
(Exact name of registrant as specified in its charter)
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|
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Maryland
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27-1925611
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1050 17th Street, Suite 800
Denver, CO
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80265
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(Address of principal executive offices)
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(Zip Code)
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(866) 777-2673
(Registrants telephone number, including area code)
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
.
Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
¨
No
x
The number of shares of common stock outstanding at April 25, 2012 was 20,990,651.
CORESITE REALTY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2012
TABLE OF CONTENTS
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORESITE REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
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|
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March 31,
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December 31,
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2012
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2011
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(unaudited)
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ASSETS
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Investments in real estate:
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Land
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$
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84,738
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|
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$
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84,738
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Building and building improvements
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517,934
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499,717
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Leasehold improvements
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82,660
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81,057
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685,332
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665,512
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Less: Accumulated depreciation and amortization
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(73,571
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)
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(64,428
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)
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|
|
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Net investment in operating properties
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611,761
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601,084
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Construction in progress
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69,519
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73,084
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Net investments in real estate
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681,280
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674,168
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Cash and cash equivalents
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3,998
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6,628
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Restricted cash
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8,712
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9,291
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|
Accounts and other receivables, net of allowance for doubtful accounts of $623 and $465 as of March 31, 2012 and
December 31, 2011, respectively
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7,403
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|
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|
6,562
|
|
Lease intangibles, net of accumulated amortization of $33,107 and $33,711 as of March 31, 2012 and December 31, 2011,
respectively
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30,905
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|
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36,643
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Goodwill
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41,191
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41,191
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Other assets
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37,431
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33,743
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Total assets
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$
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810,920
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$
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808,226
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LIABILITIES AND EQUITY
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Liabilities:
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Revolving credit facility
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$
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40,250
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$
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5,000
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Mortgage loans payable
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91,782
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116,864
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Accounts payable and accrued expenses
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39,096
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38,822
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Deferred rent payable
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3,785
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3,535
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Acquired below-market lease contracts, net of accumulated amortization of $10,241 and $9,267 as of March 31, 2012 and
December 31, 2011, respectively
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10,898
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11,872
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Prepaid rent and other liabilities
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10,755
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11,946
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Total liabilities
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196,566
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188,039
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Stockholders equity:
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Common stock, par value $0.01, 100,000,000 shares authorized and 20,800,379 and 20,747,794 shares issued and outstanding at
March 31, 2012 and December 31, 2011, respectively
|
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|
204
|
|
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|
204
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Additional paid-in capital
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257,338
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256,183
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Accumulated other comprehensive income (loss)
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(47
|
)
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(34
|
)
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Accumulated deficit
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(26,683
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)
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(23,545
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)
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Total stockholders equity
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230,812
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232,808
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Noncontrolling interests
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383,542
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387,379
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Total equity
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614,354
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|
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620,187
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Total liabilities and equity
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$
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810,920
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$
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808,226
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See accompanying notes to condensed consolidated financial statements.
3
CORESITE REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands except share and per share data)
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Three Months Ended March 31,
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2012
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2011
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Operating revenues:
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Rental revenue
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$
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29,493
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$
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25,210
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Power revenue
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12,330
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9,781
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Tenant reimbursement
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1,296
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|
|
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1,720
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Other revenue
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4,165
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|
|
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3,255
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|
|
|
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Total operating revenues
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47,284
|
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39,966
|
|
Operating expenses:
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Property operating and maintenance
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14,395
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12,023
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Real estate taxes and insurance
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2,014
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2,743
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Depreciation and amortization
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15,461
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|
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19,473
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Sales and marketing
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2,129
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|
1,377
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General and administrative
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6,352
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5,617
|
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Transaction costs
|
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|
122
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|
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Rent
|
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|
4,577
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|
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4,547
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|
|
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|
|
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Total operating expenses
|
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|
45,050
|
|
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|
45,780
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|
|
|
|
|
|
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Operating income (loss)
|
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|
2,234
|
|
|
|
(5,814
|
)
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Interest income
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|
|
2
|
|
|
|
66
|
|
Interest expense
|
|
|
(1,018
|
)
|
|
|
(2,252
|
)
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|
|
|
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Income (loss) before income taxes
|
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1,218
|
|
|
|
(8,000
|
)
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Income tax benefits
|
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|
125
|
|
|
|
84
|
|
|
|
|
|
|
|
|
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Net income (loss) per share attributable to common shares:
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$
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1,343
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|
$
|
(7,916
|
)
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Net income (loss) attributable to noncontrolling interests
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|
|
743
|
|
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(4,544
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)
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|
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Net income (loss) attributable to common shares
|
|
$
|
600
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|
$
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(3,372
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)
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Net income (loss) per share attributable to common shares:
|
|
|
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Basic
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$
|
0.03
|
|
|
$
|
(0.17
|
)
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
(0.17
|
)
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|
|
|
|
|
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Weighted average common shares outstanding:
|
|
|
|
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Basic
|
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20,455,875
|
|
|
|
19,458,605
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Diluted
|
|
|
20,694,855
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|
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|
19,458,605
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|
See accompanying notes to condensed consolidated financial statements.
4
CORESITE REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited and in thousands)
|
|
|
|
|
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Three Months Ended March 31,
|
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|
|
2012
|
|
|
2011
|
|
Net income (loss):
|
|
$
|
1,343
|
|
|
$
|
(7,916
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Change in fair value on derivative contracts
|
|
|
(69
|
)
|
|
|
(65
|
)
|
Reclassification of other comprehensive loss to interest expense
|
|
|
41
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
1,315
|
|
|
|
(7,943
|
)
|
Comprehensive income (loss) attributable to noncontrolling interests
|
|
|
728
|
|
|
|
(4,560
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to common shares
|
|
$
|
587
|
|
|
$
|
(3,383
|
)
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
CORESITE REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(unaudited and in thousands except share data)
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|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
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Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
Interests
|
|
|
Equity
|
|
Balance at January 1, 2012
|
|
|
20,747,794
|
|
|
$
|
204
|
|
|
$
|
256,183
|
|
|
$
|
(23,545
|
)
|
|
$
|
(34
|
)
|
|
$
|
232,808
|
|
|
$
|
387,379
|
|
|
$
|
620,187
|
|
Issuance of restricted stock awards, net of forfeitures
|
|
|
26,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
26,049
|
|
|
|
|
|
|
|
408
|
|
|
|
|
|
|
|
|
|
|
|
408
|
|
|
|
|
|
|
|
408
|
|
Amortization of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
747
|
|
|
|
|
|
|
|
|
|
|
|
747
|
|
|
|
|
|
|
|
747
|
|
Dividends and distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,738
|
)
|
|
|
|
|
|
|
(3,738
|
)
|
|
|
(4,565
|
)
|
|
|
(8,303
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
|
|
|
|
|
|
600
|
|
|
|
743
|
|
|
|
1,343
|
|
Change in fair value on derivative contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
(31
|
)
|
|
|
(38
|
)
|
|
|
(69
|
)
|
Reclassification of other comprehensive loss to interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
18
|
|
|
|
23
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2012
|
|
|
20,800,379
|
|
|
$
|
204
|
|
|
$
|
257,338
|
|
|
$
|
(26,683
|
)
|
|
$
|
(47
|
)
|
|
$
|
230,812
|
|
|
$
|
383,542
|
|
|
$
|
614,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
CORESITE REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2012
|
|
|
2011
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,343
|
|
|
$
|
(7,916
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
15,461
|
|
|
|
19,473
|
|
Amortization of above/below market leases
|
|
|
(396
|
)
|
|
|
(390
|
)
|
Amortization of deferred financing costs
|
|
|
436
|
|
|
|
427
|
|
Amortization of share-based compensation
|
|
|
747
|
|
|
|
497
|
|
Amortization of discount to fair market value of acquired loan
|
|
|
|
|
|
|
687
|
|
Bad debt expense
|
|
|
142
|
|
|
|
20
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
427
|
|
|
|
(77
|
)
|
Accounts receivable
|
|
|
(983
|
)
|
|
|
(873
|
)
|
Due to and due from related parties
|
|
|
|
|
|
|
2
|
|
Deferred rent receivable
|
|
|
(1,568
|
)
|
|
|
(859
|
)
|
Deferred leasing costs
|
|
|
(1,982
|
)
|
|
|
(2,038
|
)
|
Other assets
|
|
|
(1,608
|
)
|
|
|
658
|
|
Accounts payable and accrued expenses
|
|
|
1,969
|
|
|
|
2,941
|
|
Prepaid rent and other liabilities
|
|
|
(1,054
|
)
|
|
|
241
|
|
Deferred rent payable
|
|
|
250
|
|
|
|
366
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
13,184
|
|
|
|
13,159
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Real estate improvements
|
|
|
(18,161
|
)
|
|
|
(20,310
|
)
|
Changes in reserves for capital improvements
|
|
|
152
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(18,009
|
)
|
|
|
(20,232
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Offering costs
|
|
|
|
|
|
|
(17
|
)
|
Proceeds from exercise of stock options
|
|
|
408
|
|
|
|
|
|
Proceeds from revolving credit facility
|
|
|
35,250
|
|
|
|
|
|
Repayments of mortgage loans payable
|
|
|
(25,082
|
)
|
|
|
|
|
Payments of loan fees and costs
|
|
|
(109
|
)
|
|
|
(6
|
)
|
Dividends and distributions
|
|
|
(8,272
|
)
|
|
|
(5,940
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
2,195
|
|
|
|
(5,963
|
)
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(2,630
|
)
|
|
|
(13,036
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
6,628
|
|
|
|
86,246
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
3,998
|
|
|
$
|
73,210
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,481
|
|
|
$
|
1,100
|
|
NON-CASH INVESTING AND FINANCING ACTIVITY
|
|
|
|
|
|
|
|
|
Construction costs payable capitalized to real estate
|
|
$
|
3,841
|
|
|
$
|
10,987
|
|
Accrual of dividends and distributions
|
|
$
|
8,489
|
|
|
$
|
5,997
|
|
See accompanying notes to condensed consolidated financial statements.
7
CORESITE REALTY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(unaudited)
1. Organization and Description of Business
CoreSite Realty Corporation, through its controlling interest in CoreSite, L.P. (our Operating Partnership) and the
subsidiaries of the Operating Partnership (collectively, the Company, we, or our), is a fully integrated, self-administered, and self-managed real estate investment trust (REIT). The Company was
organized in the state of Maryland on February 17, 2010, completed its initial public offering of common stock (the IPO) on September 28, 2010, and is the sole general partner of the Operating Partnership.
We are engaged in the business of owning, acquiring, constructing and managing technology-related real estate and as of March 31, 2012, our property
portfolio included 12 operating data center facilities and one development site located in some of the largest and fastest growing data center markets in the United States, including Los Angeles, the San Francisco Bay and Northern Virginia areas,
Chicago, Boston, New York City and Miami.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial
information and in compliance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three months ended
March 31, 2012 are not necessarily indicative of the expected results for the year ending December 31, 2012. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011. Intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the condensed consolidated financial statements
in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the condensed
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates, including those related to assessing the carrying values of our real estate properties, accrued liabilities,
performance-based equity compensation plans, and qualification as a REIT based on estimates of historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results
may vary from those estimates and those estimates could vary under different assumptions or conditions.
Investments in Real Estate
Real estate investments are carried at cost less accumulated depreciation and amortization. The cost of real estate includes the
purchase price of the property and leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized. During the
development of the properties, the capitalization of costs, which include interest, real estate taxes and other direct and indirect costs, begins upon commencement of development efforts and ceases when the property is ready for its intended use.
Interest is capitalized during the period of development based upon applying the weighted-average borrowing rate to the actual development costs expended. Capitalized interest costs were $0.7 million and $0.1 million for the three months
ended March 31, 2012 and 2011, respectively.
Depreciation and amortization are calculated using the straight-line method over the
following useful lives of the assets:
|
|
|
Buildings
|
|
27 to 40 years
|
Building improvements
|
|
1 to 15 years
|
Leasehold improvements
|
|
The shorter of the lease term or useful life of the asset
|
Depreciation expense was $9.4 million and $8.6 million for the three months ended March 31, 2012 and 2011,
respectively.
8
Acquisition of Investment in Real Estate
Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired. The fair value of the real estate acquired
is allocated to the acquired tangible assets, consisting primarily of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, value of in-place leases and
the value of customer relationships.
The fair value of the land and building of an acquired property is determined by valuing the property as
if it were vacant, and the as-if-vacant value is then allocated to land and building based on managements determination of the fair values of these assets. Management determines the as-if-vacant fair value of a property using
methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to
execute similar leases.
The fair value of intangibles related to in-place leases includes the value of lease intangibles for above-market and
below-market leases, lease origination costs, and customer relationships, determined on a lease-by-lease basis. Above-market and below-market leases are valued based on the present value (using an interest rate which reflects the risks associated
with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) managements estimate of fair market lease rates for the corresponding in-place leases, measured over
a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below-market fixed rate renewal periods. Lease origination costs include estimates of costs avoided
associated with leasing the property, including tenant allowances and improvements and leasing commissions. Customer relationship intangibles relate to the additional revenue opportunities expected to be generated through interconnection services
and utility services to be provided to the in-place lease tenants.
The capitalized values for above and below-market lease intangibles, lease
origination costs, and customer relationships are amortized over the term of the underlying leases. Amortization related to above-market and below-market leases where the Company is the lessor is recorded as either an increase to or a reduction of
rental income, amortization related to above-market and below-market leases where the Company is the lessee is recorded as either an increase to or a reduction of rent expense and amortization for lease origination costs and customer relationships
are recorded as amortization expense. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are written off. The carrying value of intangible assets is reviewed for impairment in connection with its
respective asset group whenever events or changes in circumstances indicate that the asset group may not be recoverable. An impairment loss is recognized if the carrying amount of the asset group is not recoverable and its carrying amount exceeds
its estimated fair value.
The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including
identified intangible assets) and liabilities assumed is recorded as goodwill. As of March 31, 2012, we had approximately $41.2 million of goodwill. The Companys goodwill has an indeterminate life and is not amortized, but is tested
for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Cash and Cash Equivalents
Cash
and cash equivalents include all non-restricted cash held in financial institutions and other non-restricted highly liquid short-term investments with original maturities at acquisition of three months or less.
Restricted Cash
The Company is
required to maintain certain minimum cash balances in escrow by loan agreements to cover various building improvements. The Company is legally restricted by these agreements from using this cash other than for the purposes specified therein.
Deferred Costs
Deferred leasing costs include commissions and other direct and incremental costs incurred to obtain new customer leases, which are capitalized and
amortized over the terms of the related leases using the straight-line method. If a lease terminates prior to the expiration of its initial term, any unamortized costs related to the lease are written off to amortization expense.
Deferred financing costs include costs incurred in connection with obtaining debt and extending existing debt. These financing costs are capitalized and
amortized on a straight-line basis, which approximates the effective-interest method, over the term of the loan and are included as a component of interest expense.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) are less than
the carrying amount of the assets. The estimation of expected future net cash flows is inherently uncertain and relies, to a considerable extent, on assumptions regarding current and future economics and market conditions and the availability of
capital. If, in future periods, there are changes in the estimates or assumptions incorporated into the impairment review analysis, the changes could result in an adjustment to the carrying amount of the assets. To the extent that an impairment has
occurred, the excess of the carrying amount of long-lived assets over its estimated fair value would be charged to income. For the three months ended March 31, 2012 and 2011, no impairment was recognized.
9
Derivative Instruments and Hedging Activities
We reflect all derivative instruments at fair value as either assets or liabilities on the condensed consolidated balance sheets. For those derivative
instruments that are designated, and qualify, as hedging instruments, we record the effective portion of the gain or loss on the hedge instruments as a component of accumulated other comprehensive income. Any ineffective portion of a
derivatives change in fair value is immediately recognized in earnings. For derivatives that do not meet the criteria for hedge accounting, changes in fair value are immediately recognized in earnings.
Revenue Recognition
All leases
are classified as operating leases and minimum rents are recognized on a straight-line basis over the non-cancellable term of the agreements. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are
included in deferred rent receivable. If a lease terminates prior to its stated expiration, the deferred rent receivable relating to that lease is written off to rental revenue.
When arrangements include both lease and nonlease elements, the revenues associated with separate elements are allocated based on their relative fair values. The revenue associated with each element is
then recognized as earned. Interconnection, utility and power services are considered as separate earnings processes that are provided and completed on a month-to-month basis and revenue is recognized in the period in which the services are
performed. Utility and power services are included in power revenue in the accompanying statements of operations. Interconnection services are included in other revenue in the accompanying statements of operations. Set-up charges and utility
installation fees are initially deferred and recognized over the term of the arrangement as other revenue or the expected period of performance unless management determines a separate earnings process exists related to an installation charge.
Tenant reimbursements for real estate taxes, common area maintenance, and other recoverable costs are recognized in the period in which the
expenses are incurred.
Above-market and below-market lease intangibles that were acquired are amortized on a straight-line basis as decreases
and increases, respectively, to rental revenue over the remaining non-cancellable term of the underlying leases. For the three months ended March 31, 2012 and 2011, the net effect of amortization of acquired above-market and below-market leases
resulted in an increase to rental income of $0.6 million and $0.4 million, respectively. Balances, net of accumulated amortization, at March 31, 2012 and December 31, 2011, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Lease contracts above-market value
|
|
$
|
8,492
|
|
|
$
|
8,668
|
|
Accumulated amortization
|
|
|
(4,654
|
)
|
|
|
(4,253
|
)
|
|
|
|
|
|
|
|
|
|
Lease contracts above-market value, net
|
|
$
|
3,838
|
|
|
$
|
4,415
|
|
|
|
|
|
|
|
|
|
|
Lease contracts below-market value
|
|
$
|
21,139
|
|
|
$
|
21,139
|
|
Accumulated amortization
|
|
|
(10,241
|
)
|
|
|
(9,267
|
)
|
|
|
|
|
|
|
|
|
|
Lease contracts below-market value, net
|
|
$
|
10,898
|
|
|
$
|
11,872
|
|
|
|
|
|
|
|
|
|
|
A provision for uncollectible accounts is recorded if a receivable balance relating to contractual rent, rent recorded on
a straight-line basis, or tenant reimbursements is considered by management to be uncollectible. At March 31, 2012 and December 31, 2011, the allowance for doubtful accounts totaled $0.6 million and $0.5 million, respectively.
Additions to the allowance for doubtful accounts were $0.2 million and $0.1 million for the three months ended March 31, 2012 and 2011, respectively. Write-offs (recoveries) charged against the allowance were less than
($0.1) million and less than $0.1 million for the three months ended March 31, 2012 and 2011, respectively.
Share-Based
Compensation
We account for share based compensation using the fair value method of accounting. The estimated fair value of the stock
options granted by us is being amortized on a straight-line basis over the vesting period of the stock options. The fair value of restricted share-based and Operating Partnership unit compensation is based on the market value of our common stock on
the date of the grant and is amortized on a straight-line basis over the vesting period.
Asset Retirement Obligations
We record accruals for estimated retirement obligations. The asset retirement obligations relate primarily to the removal of asbestos
and contaminated soil during development or redevelopment of the properties as well as the estimated equipment removal costs upon termination of a certain lease under which the Company is the lessee. At March 31, 2012 and December 31,
2011, the amount included in other liabilities on the condensed consolidated balance sheets was approximately $1.9 million and $1.9 million, respectively.
10
Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the Code), commencing with our taxable year ending December 31, 2010. To qualify as a REIT, we
are required to distribute at least 90% of our taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock
ownership. Provided we qualify for taxation as a REIT, we are generally not subject to corporate level federal income tax on the earnings distributed currently to our stockholders. If we fail to qualify as a REIT in any taxable year, and are unable
to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax.
To maintain REIT status, we will distribute a minimum of 90% of the Companys taxable income. However, it is our policy and intent, subject to
change, to distribute 100% of the Companys taxable income and therefore no provision is required in the accompanying financial statements for federal income taxes with regards to activities of the REIT and its subsidiary pass-through entities.
Any taxable income prior to the completion of the IPO is the responsibility of the Companys prior members. The allocable share of income is included in the income tax returns of the members. The Company is subject to the statutory requirements
of the locations in which it conducts business. State and local income taxes are accrued as deemed required in the best judgment of management based on analysis and interpretation of respective tax laws.
We have elected to treat one of our subsidiaries as a taxable REIT subsidiary (TRS). Certain activities that we undertake must be conducted
by a TRS, such as services for our tenants that would otherwise be impermissible for us to perform and holding assets that we cannot hold directly. A TRS is subject to corporate level federal and state income taxes. Relative deferred tax assets and
liabilities arising from temporary differences in financial reporting versus tax reporting are also established as determined by management.
Deferred income taxes are recognized in certain taxable entities. Deferred income tax is generally a function of the periods temporary differences
(items that are treated differently for tax purposes than for financial reporting purposes), the utilization of tax net operating losses generated in prior years that previously had been recognized as deferred income tax assets and the reversal of
any previously recorded deferred income tax liabilities. A valuation allowance for deferred income tax assets is provided if we believe all or some portion of the deferred income tax asset may not be realized. Any increase or decrease in the
valuation allowance resulting from a change in circumstances that causes a change in the estimated realizability of the related deferred income tax asset is included in deferred tax expense. As of March 31, 2012, the deferred income taxes were
not material.
We currently have no liabilities for uncertain tax positions. The earliest tax year for which the Company is subject to
examination is 2010. Prior to their contribution to our Operating Partnership, our subsidiaries were treated as pass-through entities for tax purposes and the earliest year for which our subsidiaries are subject to examination is 2008.
Concentration of Credit Risks
The Companys cash and cash equivalents are maintained in various financial institutions, which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to any significant credit risk in this area. The Company has no off-balance-sheet concentrations of credit risk, such as foreign
exchange contracts, option contracts, or foreign currency hedging arrangements.
For the three months ended March 31, 2012 and 2011,
total operating revenues recognized from one customer accounted for 10.4% and 12.2%, respectively.
Segment Information
The Company manages its business as one reportable segment consisting of investments in data centers located in the United States.
Although the Company provides services in several markets, these operations have been aggregated into one reportable segment based on the similar economic characteristics amongst all markets, including the nature of the services provided and the
type of customers purchasing these services.
Recent Accounting Pronouncements
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends current comprehensive
income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of stockholders equity. Instead, the Company must report comprehensive income in either a single
continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This new guidance is effective for fiscal years and interim periods beginning after
December 15, 2011. The Company adopted the provisions of this standard effective January 1, 2012 by presenting a separate Condensed Consolidated Statement of Comprehensive Income.
11
3. Investment in Real Estate
The following is a summary of the properties owned and leased at March 31, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Name
|
|
Location
|
|
Acquisition
Date
|
|
|
|
|
|
Buildings and
Improvements
|
|
|
Leasehold
Improvements
|
|
|
Construction
in Progress
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
Total Cost
|
|
1656 McCarthy
|
|
Milpitas, CA
|
|
|
12/6/2006
|
|
|
$
|
5,086
|
|
|
$
|
22,032
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
27,118
|
|
2901 Coronado
|
|
Santa Clara, CA
|
|
|
2/2/2007
|
|
|
|
3,972
|
|
|
|
45,105
|
|
|
|
|
|
|
|
|
|
|
|
49,077
|
|
2972 Stender
|
|
Santa Clara, CA
|
|
|
2/2/2007
|
|
|
|
4,442
|
|
|
|
26,951
|
|
|
|
|
|
|
|
32,130
|
|
|
|
63,523
|
|
Coronado-Stender Properties
|
|
Santa Clara, CA
|
|
|
2/2/2007
|
|
|
|
11,486
|
|
|
|
12,076
|
|
|
|
|
|
|
|
193
|
|
|
|
23,755
|
|
70 Innerbelt
|
|
Somerville, MA
|
|
|
4/11/2007
|
|
|
|
6,100
|
|
|
|
67,834
|
|
|
|
|
|
|
|
713
|
|
|
|
74,647
|
|
32 Avenue of the Americas
|
|
New York, NY
|
|
|
6/30/2007
|
|
|
|
|
|
|
|
|
|
|
|
30,910
|
|
|
|
21
|
|
|
|
30,931
|
|
12100 Sunrise Valley
|
|
Reston, VA
|
|
|
12/28/2007
|
|
|
|
12,100
|
|
|
|
75,449
|
|
|
|
|
|
|
|
23,790
|
|
|
|
111,339
|
|
One Wilshire
|
|
Los Angeles, CA
|
|
|
9/28/2010
|
|
|
|
|
|
|
|
|
|
|
|
45,935
|
|
|
|
867
|
|
|
|
46,802
|
|
900 N. Alameda
|
|
Los Angeles, CA
|
|
|
9/28/2010
|
|
|
|
28,467
|
|
|
|
105,952
|
|
|
|
|
|
|
|
957
|
|
|
|
135,376
|
|
55 S. Market
|
|
San Jose, CA
|
|
|
9/28/2010
|
|
|
|
6,863
|
|
|
|
97,319
|
|
|
|
|
|
|
|
1,869
|
|
|
|
106,051
|
|
427 S. LaSalle
|
|
Chicago, IL
|
|
|
9/28/2010
|
|
|
|
5,493
|
|
|
|
55,606
|
|
|
|
|
|
|
|
8,925
|
|
|
|
70,024
|
|
1275 K Street
|
|
Washington, DC
|
|
|
9/28/2010
|
|
|
|
|
|
|
|
|
|
|
|
5,815
|
|
|
|
22
|
|
|
|
5,837
|
|
2115 NW 22nd Street
|
|
Miami, FL
|
|
|
9/28/2010
|
|
|
|
729
|
|
|
|
9,610
|
|
|
|
|
|
|
|
32
|
|
|
|
10,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
84,738
|
|
|
$
|
517,934
|
|
|
$
|
82,660
|
|
|
$
|
69,519
|
|
|
$
|
754,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Other Assets
Our other assets consisted of the following, net of amortization and depreciation, if applicable, as of March 31, 2012 and
December 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Deferred leasing costs
|
|
$
|
12,798
|
|
|
$
|
11,601
|
|
Deferred rent receivable
|
|
|
12,619
|
|
|
|
11,051
|
|
Deferred financing costs
|
|
|
3,280
|
|
|
|
3,607
|
|
Leasehold interests in corporate headquarters
|
|
|
2,664
|
|
|
|
2,719
|
|
Other
|
|
|
6,070
|
|
|
|
4,765
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,431
|
|
|
$
|
33,743
|
|
|
|
|
|
|
|
|
|
|
12
5. Debt
A summary of outstanding indebtedness as of March 31, 2012 and December 31, 2011 is as follows (in thousands):
|
|
*****
|
|
|
*****
|
|
|
|
*****
|
|
|
|
*****
|
|
|
|
Interest Rate
|
|
Maturity Date
|
|
|
March 31,
2012
|
|
|
December 31,
2011
|
|
Senior secured credit facility
|
|
(1)
|
|
|
December 15, 2014
|
|
|
$
|
40,250
|
|
|
$
|
5,000
|
|
55 S. Market
|
|
LIBOR plus 3.50% (3.74% and 3.75% at March 31, 2012 and December 31, 2011)
(2)
|
|
|
October 9, 2012
|
(3)
|
|
|
60,000
|
|
|
|
60,000
|
|
12100 Sunrise Valley
|
|
LIBOR plus 2.75% (3.00% and 3.06% at March 31, 2012 and December 31, 2011)
(2)
|
|
|
June 1, 2013
|
|
|
|
31,782
|
|
|
|
31,864
|
|
427 S. LaSalleSenior mortgage loan
|
|
LIBOR plus 0.60% (0.86% at December 31, 2011)
|
|
|
Repaid, Feburary 2012
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal outstanding
|
|
|
|
|
|
|
|
$
|
132,032
|
|
|
$
|
96,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
At the Companys election, borrowings under the credit facility bear interest at a rate per annum equal to either (i) LIBOR plus 225 basis points to 300 basis
points, or (ii) a base rate plus 125 basis points to 200 basis points, depending on our leverage ratio. As of March 31, 2012, the weighted average interest rate on outstanding borrowings under the senior secured credit facility was 2.49%.
|
(2)
|
In October 2010, we entered into an interest rate swap agreement with respect to the indebtedness on 55 S. Market and an interest rate cap agreement with respect to the
indebtedness on 12100 Sunrise Valley, each as a cash flow hedge for interest incurred on these LIBOR based loans.
|
(3)
|
The mortgage contains one two-year extension option subject to the Company meeting certain financial and other customary conditions and the payment of an extension fee
equal to 60 basis points.
|
Senior Secured Credit Facility
On December 15, 2011, our Operating Partnership and certain subsidiary co-borrowers entered into an amended and restated senior secured revolving credit facility (the Amended Credit
Agreement) with a group of lenders for which KeyBank National Association acts as the administrative agent. The Amended Credit Agreement amended our Operating Partnerships then existing senior secured revolving credit facility, dated
September 28, 2010 (the Prior Facility), and is unconditionally guaranteed on a senior unsecured basis by us. Our Operating Partnership acts as the parent borrower, and our subsidiaries that own 1656 McCarthy, 70 Innerbelt, 2901
Coronado and 900 N. Alameda are co-borrowers under the Amended Credit Agreement, with borrowings under the facility secured by a lien on these properties on a senior secured basis. In addition, the obligations of each of our Operating Partnership
and the co-borrowers under the Amended Credit Agreement are joint and several.
On February 7, 2012, we repaid the senior mortgage loan
of $25.0 million secured by the 427 S. LaSalle property and subsequently added 427 S. LaSalle as a co-borrower under the Amended Credit Agreement, with borrowings under the facility secured by a lien on such real estate property on a senior secured
basis.
The Amended Credit Agreement increased the commitment from the Prior Facility of $110.0 million to $225.0 million, and
extended the initial maturity date of the Prior Facility from September 28, 2013, to December 15, 2014, with a one-time extension option, which, if exercised, would extend the maturity date to December 15, 2015. An exercise of the
extension option is subject to the payment of an extension fee equal to 25 basis points of the total commitment under the Amended Credit Agreement at initial maturity and certain other customary conditions. As of March 31, 2012 and
December 31, 2011, $40.3 million and $5.0 million, respectively, was outstanding under the facility.
Under the Amended Credit Agreement,
our Operating Partnership may elect to have borrowings bear interest at a rate per annum equal to (i) LIBOR plus 225 basis points to 300 basis points, or (ii) a base rate plus 125 basis points to 200 basis points, each depending on our
Operating Partnerships leverage ratio. The Amended Credit Agreement also contains an accordion feature to allow our Operating Partnership to increase the total commitment by $175.0 million, to $400.0 million, under specified
circumstances.
The total amount available for borrowings under the Amended Credit Agreement will be subject to the lesser of a percentage of
the appraised value of our Operating Partnerships properties that form the designated borrowing base properties of the facility, a minimum borrowing base debt service coverage ratio and a minimum borrowing base debt yield. As of March 31,
2012, $153.6 million was available for us to borrow under the facility.
Our ability to borrow under the Amended Credit Agreement is
subject to ongoing compliance with a number of financial covenants and other customary restrictive covenants, including:
|
|
|
a maximum leverage ratio (defined as consolidated total indebtedness to total gross asset value) of 60%;
|
|
|
|
a minimum fixed charge coverage ratio (defined as adjusted consolidated earnings before interest, taxes, depreciation and amortization to
consolidated fixed charges) of 1.75 times;
|
13
|
|
|
a maximum unhedged variable rate debt ratio (defined as unhedged variable rate indebtedness to gross asset value) of 30%;
|
|
|
|
a maximum recourse debt ratio (defined as recourse indebtedness other than indebtedness under the revolving credit facility to gross asset
value) of 30%; and
|
|
|
|
a minimum tangible net worth equal to at least $468,750,000 plus 80% of the net proceeds of any additional equity issuances.
|
As of March 31, 2012, we were in compliance with the covenants.
Financing costs of $2.3 million and $1.8 million, which were incurred in connection with the execution of the Prior Facility and the Amended Credit
Agreement, respectively, have been capitalized and are included in deferred financing costs. Amortization of these deferred financing costs for the three months ended March 31, 2012 and 2011 totaled $0.3 million and $0.2 million,
respectively, and have been included in interest expense.
55 S. Market
As of March 31, 2012, the 55 S. Market property had a $60.0 million mortgage loan, which matures on October 9, 2012. The mortgage payable contains one two-year extension option provided we
meet certain financial and other customary conditions and subject to the payment of an extension fee equal to 60 basis points. The loan bears interest at LIBOR plus 350 basis points and requires the payment of interest only until maturity. The
mortgage requires ongoing compliance by us with various covenants including liquidity and net operating income covenants. As of March 31, 2012, we were in compliance with the covenants.
On October 7, 2010, we entered into a $60.0 million interest rate swap agreement to protect against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows
relating to interest payments on the $60.0 million 55 S. Market mortgage. The interest rate swap matures on October 9, 2012, and effectively fixes the interest rate at 4.01%.
12100 Sunrise Valley
As of March 31, 2012, the 12100 Sunrise Valley property
had a mortgage loan payable of $31.8 million. The loan is secured by the 12100 Sunrise Valley property and required payments of interest only until the amortization commencement date on July 1, 2011. The loan matures on
June 1, 2013 and we may exercise the one remaining one-year extension option provided we meet certain financial and other customary conditions and subject to the payment of an extension fee equal to 50 basis points. The mortgage loan payable
contains certain financial and nonfinancial covenants. As of March 31, 2012, we were in compliance with the covenants.
On
October 8, 2010, we purchased an interest rate cap to hedge $25.0 million of the indebtedness secured by our 12100 Sunrise Valley property. The interest rate cap matures on October 1, 2012, and hedges against LIBOR interest rate
increases above 2.0%.
427 S. LaSalle
On February 7, 2012, we repaid the $25.0 million senior mortgage loan on the 427 S. LaSalle property.
Debt Maturities
The following table summarizes our debt maturities as of
March 31, 2012 (in thousands):
|
|
|
|
|
Year Ending December 31,
|
|
|
|
Remainder of 2012
(1)
|
|
$
|
60,233
|
|
2013
|
|
|
31,549
|
|
2014
|
|
|
40,250
|
|
|
|
|
|
|
Total
|
|
$
|
132,032
|
|
|
|
|
|
|
(1)
|
The 55 S. Market mortgage, which is scheduled to mature on October 9, 2012, contains one two-year extension option subject to the Company meeting certain financial
and other customary conditions and the payment of an extension fee equal to 60 basis points.
|
14
6. Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks
through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative
financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of
which are determined by interest rates. The Companys derivative financial instruments are used to manage differences in the amount, timing, and duration of the Companys known or expected cash receipts and its known or expected cash
payments principally related to the Companys investments and borrowings.
Cash Flow Hedges of Interest Rate Risk
The Companys objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure
to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of
variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of
variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.
The
effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged
forecasted transaction affects earnings. During the period, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized
directly in earnings. During the three months ended March 31, 2012 and 2011, the Company did not record any amount in earnings related to derivatives due to hedge ineffectiveness.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Companys variable-rate debt. During
2012, the Company estimates that $0.1 million will be reclassified as an increase to interest expense.
As of March 31, 2012, the
Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
Cash Flow Hedge Derivative Summary
|
|
|
|
|
|
|
|
|
|
|
Number of
Instruments
|
|
|
Notional
|
|
Derivative type
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
|
1
|
|
|
$
|
60,000,000
|
|
Interest rate cap
|
|
|
1
|
|
|
|
25,000,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
85,000,000
|
|
|
|
|
|
|
|
|
|
|
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Companys derivative financial instruments as well as their classification on the balance sheet as of
March 31, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values of Derivative Instruments
|
|
|
|
Derivative Assets
|
|
|
Derivative Liabilities
|
|
|
|
As of March
31,
2012
|
|
|
As of December
31,
2011
|
|
|
As of March
31,
2012
|
|
|
As of December
31,
2011
|
|
|
|
(In thousands)
|
|
Balance sheet location
|
|
|
Other Assets
|
|
|
|
Other Assets
|
|
|
|
Other Liabilities
|
|
|
|
Other Liabilities
|
|
Interest rate caps
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
82
|
|
|
$
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement
The table below presents the effect of the Companys derivative financial instruments on the statement of operations for the three months ended
March 31, 2012 and 2011 (in thousands).
|
|
|
*****
|
|
|
|
*****
|
|
|
*****
|
|
|
*****
|
|
|
|
*****
|
|
|
*****
|
|
|
*****
|
|
|
|
*****
|
|
|
|
Income Statement Impact of Derivatives in Cash Flow Hedging Relationships
|
|
|
|
Amount of Gain or
(Loss)
Recognized in OCI on
Derivative (Effective
Portion)
for the
Three Months Ended
March 31,
|
|
|
Location of Gain or
(Loss) Reclassified from
Accumulated OCI into
Income (Effective
Portion)
|
|
Amount of Gain or
(Loss)
Reclassified from
Accumulated OCI into Income
(Effective Portion) for
the
Three Months Ended
March 31,
|
|
|
Location of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
|
|
Amount of Gain or
(Loss)
Recognized in Income on
Derivative (Ineffective Portion
and Amount Excluded
from
Effectiveness Testing) for the
Three Months Ended
March 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
2012
|
|
|
2011
|
|
|
|
2012
|
|
|
2011
|
|
Interest rate derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps
|
|
$
|
|
|
|
$
|
(13)
|
|
|
Interest income / (expense)
|
|
$
|
|
|
|
$
|
|
|
|
Other income / (expense)
|
|
$
|
|
|
|
$
|
|
|
Interest rate swap
|
|
|
(69)
|
|
|
|
(52)
|
|
|
Interest income / (expense)
|
|
|
(41)
|
|
|
|
(38)
|
|
|
Other income / (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(69)
|
|
|
$
|
(65)
|
|
|
|
|
$
|
(41)
|
|
|
$
|
(38)
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision under which if the Company defaults on any of its indebtedness, including default when repayment of the
indebtedness has not been accelerated by the lender, the Company could also be declared in default on its derivative obligations. Such a default may require the Company to settle any outstanding derivatives at their then current fair value. As of
March 31, 2012, the derivative instruments with fair values in a net liability position were not material and the Company has not posted any cash collateral related to these agreements.
7. Noncontrolling Interests Operating Partnership
Noncontrolling interests represent the limited partnership interests in the Operating Partnership held by individuals and entities
other than CoreSite Realty Corporation. Since September 28, 2011, the current holders of Operating Partnership units have been eligible to have the Operating Partnership units redeemed for cash or, at our option, exchangeable into our common
stock on a one-for-one basis. We have evaluated whether we control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement of the Operating Partnership units. Based on
the results of this analysis, we concluded that the Operating Partnership units met the criteria to be classified within equity at March 31, 2012.
The following table shows the ownership interest in the Operating Partnership as of March 31, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
December 31, 2011
|
|
|
|
Number of Units
|
|
|
Percentage of Total
|
|
|
Number of Units
|
|
|
Percentage of Total
|
|
The Company
|
|
|
20,494,331
|
|
|
|
44.7
|
%
|
|
|
20,404,743
|
|
|
|
44.6
|
%
|
Noncontrolling interests consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units held by third parties
|
|
|
25,275,390
|
|
|
|
55.1
|
%
|
|
|
25,275,390
|
|
|
|
55.2
|
%
|
Incentive units held by employees
|
|
|
69,692
|
|
|
|
0.2
|
%
|
|
|
69,692
|
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
45,839,413
|
|
|
|
100.0
|
%
|
|
|
45,749,825
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For each share of common stock issued, the Operating Partnership issues an equivalent Operating Partnership unit to the
Company. During the three months ended March 31, 2012, the Company issued 89,588 shares of common stock related to employee compensation arrangements and therefore an equivalent number of Operating Partnership units were issued.
The redemption value of the noncontrolling interests at March 31, 2012, was $597.9 million based on the closing price of the Companys stock of
$23.59 on that date.
8. Stockholders Equity
On March 14, 2012, we declared a regular cash dividend for the first quarter of 2012 of $0.18 per common share payable to
stockholders of record as of March 30, 2012. In addition, holders of Operating Partnership units also received a distribution of $0.18 per unit. The dividend and distribution were paid on April 16, 2012.
16
9. Equity Incentive Plan
In connection with our IPO, the Companys Board of Directors adopted the 2010 Equity Incentive Plan (the 2010 Plan).
The 2010 Plan is administered by the Board of Directors, or the plan administrator. Awards issuable under the 2010 Plan include common stock, stock options, restricted stock, stock appreciation rights, dividend equivalents and other incentive
awards. We have reserved a total of 3,000,000 shares of our common stock for issuance pursuant to the 2010 Plan, which may be adjusted for changes in our capitalization and certain corporate transactions. To the extent that an award expires,
terminates or lapses, or an award is settled in cash without the delivery of shares of common stock to the participant, then any unexercised shares subject to the award will be available for future grant or sale under the 2010 Plan. Shares of
restricted stock which are forfeited or repurchased by us pursuant to the 2010 Plan may again be optioned, granted or awarded under the 2010 Plan. The payment of dividend equivalents in cash in conjunction with any outstanding awards will not be
counted against the shares available for issuance under the 2010 Plan.
As of March 31, 2012, 1,456,609 shares of our common stock
remained available for issuance pursuant to the 2010 Plan. On April 5, 2012, the Board of Directors approved the issuance of 190,518 shares of restricted stock and options to purchase 211,267 shares of common stock to certain employees under
the 2010 Plan, leaving 1,054,824 shares of our common stock available for issuance pursuant to the 2010 Plan.
Stock Options
Stock option awards are granted with an exercise price equal to the closing market price of the Companys common stock at the
date of grant. The fair value of each option granted under the 2010 Plan is estimated on the date of the grant using the Black-Scholes option-pricing model. For the three months ended March 31, 2012, options to purchase 5,473 shares of common
stock were granted. The fair values are being expensed on a straight-line basis over the vesting periods.
The following table sets forth the
stock option activity under the 2010 Plan for the three months ended March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
Subject
to Option
|
|
|
Weighted-
Average
Exercise Price
|
|
Options outstanding, December 31, 2011
|
|
|
998,051
|
|
|
$
|
15.63
|
|
Granted
|
|
|
5,473
|
|
|
|
20.10
|
|
Forfeited
|
|
|
(15,917
|
)
|
|
|
15.84
|
|
Expired
|
|
|
(156
|
)
|
|
|
16.00
|
|
Exercised
|
|
|
(26,049
|
)
|
|
|
15.68
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, March 31, 2012
|
|
|
961,402
|
|
|
$
|
15.65
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the number of shares subject to option that are unvested as of March 31, 2012 and the
fair value of these options at the grant date:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
Subject
to Option
|
|
|
Weighted-
Average
Fair
Value at Grant
Date
|
|
Unvested balance, December 31, 2011
|
|
|
867,109
|
|
|
$
|
4.92
|
|
Granted
|
|
|
5,473
|
|
|
|
6.10
|
|
Forfeited
|
|
|
(15,917
|
)
|
|
|
4.94
|
|
Vested
|
|
|
(118,133
|
)
|
|
|
4.86
|
|
|
|
|
|
|
|
|
|
|
Unvested balance, March 31, 2012
|
|
|
738,532
|
|
|
$
|
4.94
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2012, total unearned compensation on options was approximately $3.0 million, and the
weighted-average vesting period was 2.8 years.
17
Restricted Awards
During the three months ended March 31, 2012, the Company issued 30,207 shares of restricted stock. Additionally, the Company issued 192 restricted stock units, or RSUs. The principal difference
between these instruments is that RSUs are not outstanding shares of the Companys common stock and do not have any of the rights or privileges thereof, including voting rights. On the applicable vesting date, the holder of an RSU becomes
entitled to one share of common stock for each RSU. The restricted awards are amortized on a straight-line basis to expense over the vesting period. The following table sets forth the number of unvested restricted awards and the weighted-average
fair value of these awards at the date of grant:
|
|
|
|
|
|
|
|
|
|
|
Restricted
Awards
|
|
|
Weighted-
Average Fair
Value at Grant
Date
|
|
Unvested balance, December 31, 2011
|
|
|
343,231
|
|
|
$
|
15.35
|
|
Granted
|
|
|
30,399
|
|
|
|
22.57
|
|
Forfeited
|
|
|
(3,671
|
)
|
|
|
15.78
|
|
Vested
|
|
|
(63,911
|
)
|
|
|
14.98
|
|
|
|
|
|
|
|
|
|
|
Unvested balance, March 31, 2012
|
|
|
306,048
|
|
|
$
|
16.14
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2012, total unearned compensation on restricted awards was approximately $4.3 million, and the
weighted-average vesting period was 2.2 years.
Operating Partnership Units
In connection with the Companys IPO, we issued 25,883 Operating Partnership units, which had a grant date fair value of $15.98 per unit or
$0.4 million in total. The Operating Partnership units are amortized on a straight-line basis to expense over the vesting period. As of March 31, 2012, 8,627 Operating Partnership units have vested and 17,256 Operating Partnership units
were unvested. As of March 31, 2012, total unearned compensation on Operating Partnership units was approximately $0.2 million, and the weighted-average vesting period was 1.5 years.
10. Earnings Per Share
The following is a summary of basic and diluted income (loss) per share (in thousands, except share and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2012
|
|
|
2011
|
|
Net income (loss) attributable to common shares
|
|
$
|
600
|
|
|
$
|
(3,372
|
)
|
Weighted average common shares outstandingbasic
|
|
|
20,455,875
|
|
|
|
19,458,605
|
|
Potentially dilutive common shares:
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
119,963
|
|
|
|
|
|
Unvested restricted awards
|
|
|
119,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingdiluted
|
|
|
20,694,855
|
|
|
|
19,458,605
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to common shares
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
(0.17
|
)
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
(0.17
|
)
|
We have excluded the following potentially dilutive securities in the calculations above as their effect would have been
antidilutive:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2012
|
|
|
2011
|
|
Stock options
|
|
|
841,439
|
|
|
|
1,052,176
|
|
Restricted awards
|
|
|
187,031
|
|
|
|
421,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,028,470
|
|
|
|
1,474,171
|
|
|
|
|
|
|
|
|
|
|
18
11. Estimated Fair Value of Financial Instruments
Authoritative guidance issued by the Financial Accounting Standards Board establishes a hierarchy of valuation techniques based on the
observability of inputs utilized in measuring assets and liabilities at fair values. This hierarchy establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the
absence of market inputs. The three levels of the hierarchy under the authoritative guidance are as follows:
Level 1
Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2
Inputs are quoted prices for
similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and market-corroborated inputs which are derived
principally from or corroborated by observable market data.
Level 3
Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers are unobservable.
Our financial instruments consist of cash and cash equivalents, restricted
cash, accounts and other receivables, interest rate caps, interest rate swaps, senior secured credit facility, mortgage loans payable, interest payable and accounts payable. The carrying values of cash and cash equivalents, restricted cash, accounts
and other receivables, interest payable and accounts payable approximate fair values due to the short-term nature of these accounts. The interest rate caps and interest rate swap are carried at fair value.
The combined balance of our mortgage loans payable was $91.8 million and $116.9 million as of March 31, 2012 and December 31, 2011,
respectively, with a fair value of $91.1 million and $116.1 million, respectively, based on Level 3 inputs from the fair value hierarchy. The carrying value of the senior secured credit facility approximated fair value at March 31,
2012, based on Level 3 inputs from the fair value hierarchy. The fair values of mortgage notes payable and the senior secured credit facility are based on the Companys assumptions of interest rates and terms available incorporating the
Companys credit risk.
Measurements of asset retirement obligations upon initial recognition are based on Level 3 inputs. The
significant unobservable inputs to this fair value measurement include estimates of remediation costs, inflation rate, market risk premium and the expected timing of development or redevelopment. The inputs are derived based on historical data as
well as managements best estimate of current costs.
Derivative financial instruments
Currently, the Company uses interest rate derivative instruments to manage interest rate risk. The fair values of interest rate swaps are determined using
the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on the expectation of future
interest rates (forward curves) derived from observed market interest rate curves. In addition, to comply with the provisions of FASB ASC 820, credit valuation adjustments, which consider the impact of any credit risk to the contracts, are
incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as
collateral postings, thresholds, mutual puts, and guarantees.
Although the Company has determined that the majority of the inputs used to
value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the
Company and its counterparties. However, as of March 31, 2012, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit
valuation adjustment is not significant to the overall valuation of its derivative portfolios. As a result, the Company classifies its derivative valuations in Level 2 of the fair value hierarchy.
The table below presents the Companys assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and
December 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value Measurements
|
|
|
|
Quoted Prices in Active
Markets for Identical Assets
and Liabilities
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant Unobservable
Inputs
|
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total Fair Value
|
|
|
|
As of March
31, 2012
|
|
|
December
31, 2011
|
|
|
As of March
31,
2012
|
|
|
December
31, 2011
|
|
|
As of March
31,
2012
|
|
|
December
31, 2011
|
|
|
As of March
31,
2012
|
|
|
December
31, 2011
|
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
82
|
|
|
$
|
50
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
82
|
|
|
$
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
12. Related Party Transactions
We lease 1,515 net rentable square feet of space at our 12100 Sunrise Valley property to an affiliate of The Carlyle Group. The lease
commenced on July 1, 2008 and expires on June 30, 2013. Rental revenue was less than $0.1 million and less than $0.1 million for the three months ended March 31, 2012 and 2011, respectively.
13. Commitments and Contingencies
As of March 31, 2012, the Company currently leases the data center space under noncancelable operating lease agreements at 32
Avenue of the Americas, One Wilshire and 1275 K Street, and the Company leases its headquarters located in Denver, Colorado under a noncancelable operating lease agreement. The lease agreements provide for base rental rate increases at defined
intervals during the term of the lease. In addition, the Company has negotiated rent abatement periods to better match the phased build-out of the data center space. The Company accounts for such abatements and increasing base rentals using the
straight-line method over the noncancelable term of the lease. The difference between the straight-line expense and the cash payment is recorded as deferred rent payable.
Additionally, the Company has commitments related to telecommunications capacity used to connect data centers located within the same market or geographical area and power usage.
The following table summarizes our contractual obligations as of March 31, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Thereafter
|
|
|
Total
|
|
Operating leases
|
|
$
|
12,826
|
|
|
$
|
17,457
|
|
|
$
|
17,742
|
|
|
$
|
17,620
|
|
|
$
|
17,370
|
|
|
$
|
26,885
|
|
|
$
|
109,900
|
|
Construction Contracts
|
|
|
13,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,811
|
|
Other
(1)
|
|
|
3,665
|
|
|
|
1,384
|
|
|
|
261
|
|
|
|
157
|
|
|
|
142
|
|
|
|
887
|
|
|
|
6,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,302
|
|
|
$
|
18,841
|
|
|
$
|
18,003
|
|
|
$
|
17,777
|
|
|
$
|
17,512
|
|
|
$
|
27,772
|
|
|
$
|
130,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Obligations for tenant improvement work at 55 S. Market Street, power contracts, telecommunications leases and insurance premiums.
|
Rent expense for the three months ended March 31, 2012 and 2011 was $4.6 million and $4.5 million, respectively.
Our properties require periodic investments of capital for general capital improvements and for tenant related capital expenditures. Additionally, the
Company enters into various construction contracts with third parties for the development and redevelopment of our properties. At March 31, 2012, we had open commitments related to construction contracts of approximately $13.8 million.
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities.
Management believes that the resolution of such matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
As previously disclosed, the Company is involved in litigation in Colorado District Court in Denver with Ari Brumer, the former general counsel of its affiliate, CoreSite, LLC, arising out of the
termination of Mr. Brumers employment. The allegations made by Mr. Brumer in his complaint against the Company, certain of our affiliates, and certain affiliates of the Funds and Carlyle also have been previously reported, as
have been the counterclaims asserted against Mr. Brumer by the Company and certain of our affiliates. The case remains in the discovery stage and various discovery matters require resolution by the court. We intend to vigorously
defend the case and pursue our counterclaims against Mr. Brumer. Based on the information currently available, the Company continues to believe that this litigation will not have a material adverse effect on its business, financial
position or liquidity.
One of our former customers, Add2Net, Inc., brought an action against us in April 2009 before the American Arbitration
Association in California asserting claims of breach of contract, unfair business practices, negligent misrepresentation and fraudulent inducement. Add2Net alleged that it suffered damages of approximately $3.5 million, consisting of license
and service fees paid to us, loss of business income and equipment damage, and sought attorneys fees and punitive damages. We counterclaimed for breach of contract and bad faith dealing. On April 6, 2012, we agreed to pay Add2Net $1.5
million to settle the action in its entirety and recorded the expense in general and administrative expense for the quarter ended March 31, 2012.
20
ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this Quarterly
Report), together with other statements and information publicly disseminated by our company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities
Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions.
In
particular, statements pertaining to our capital resources, portfolio performance and results of operations contain certain forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as
believes, expects, may, will, should, seeks, intends, plans, pro forma 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. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Such
statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. The following factors, among others, could cause actual results and future
events to differ materially from those set forth or contemplated in the forward-looking statements: (i) the geographic concentration of our data centers in certain markets and any adverse developments in local economic conditions or the demand
for data center space in these markets; (ii) fluctuations in interest rates and increased operating costs; (iii) difficulties in identifying properties to acquire and completing acquisitions; (iv) the significant competition in our
industry and an inability to lease vacant space, renew existing leases or release space as leases expire; (v) lack of sufficient customer demand to realize expected returns on our investments to expand our property portfolio;
(vi) decreased revenue from costs and disruptions associated with any failure of our physical infrastructure or services; (vii) our ability to lease available space to existing or new customers; (viii) our failure to obtain necessary
outside financing; (ix) our failure to qualify or maintain our status as a REIT; (x) financial market fluctuations; (xi) changes in real estate and zoning laws and increases in real property tax rates; (xii) delays or disruptions
in third-party network connectivity; (xiii) service failures or price increases by third party power suppliers; (xiv) inability to renew net leases on the data center properties we lease; and (xv) other factors affecting the real
estate industry generally.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We
disclaim 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. The risks included here are not
exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this Quarterly Report. Additional information concerning these and other risks and
uncertainties is contained in our other periodic filings with the United States Securities and Exchange Commission, or SEC, pursuant to the Exchange Act. We discussed a number of material risks in Item 1A. Risk Factors of our Annual
Report on Form 10-K for the year ended December 31, 2011. Those risks continue to be relevant to our performance and financial condition. Given these risks and uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
Overview
Unless the context requires otherwise, references in this Quarterly Report to we, our, us and our company refer to CoreSite Realty Corporation, a
Maryland corporation, together with its consolidated subsidiaries, including CoreSite, L.P., a Delaware limited partnership of which CoreSite Realty Corporation is the sole general partner and which we refer to in this Quarterly Report as our
Operating Partnership and CoreSite Services, Inc., a Delaware corporation, our taxable REIT subsidiary, or TRS.
We formed CoreSite Realty Corporation as a Maryland corporation on February 17, 2010, with perpetual existence. We completed our IPO of common stock
on September 28, 2010 and through our controlling interest in our Operating Partnership, we are engaged in the business of ownership, acquisition, construction and management of strategically located data centers in some of the largest and
fastest growing data center markets in the United States, including Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago, Boston, New York City and Miami. Our high-quality data centers feature ample and redundant power, advanced
cooling and security systems and many are points of dense network interconnection. We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the Code), commencing with our taxable year ending
December 31, 2010.
Our Portfolio
As of March 31, 2012, our property portfolio included 12 operating data center facilities and one development site, which collectively comprise over 2.0 million net rentable square feet
(NRSF), of which approximately 1.1 million NRSF is existing data center space. These properties include 279,963 NRSF of space readily available for lease, of which 205,858 NRSF is available for lease as data center space. Including
the space currently under construction or in preconstruction at March 31, 2012, and including currently operating space targeted for future redevelopment, we own land and buildings sufficient to develop or redevelop 888,892 square 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 that
can be developed on land that we currently own at our Coronado-Stender Business Park.
21
We expect that this redevelopment and development potential plus any potential expansion into new markets
will enable us to accommodate existing and future customer demand and position us to significantly increase our cash flows. We intend to pursue redevelopment and development projects and expansion into new markets when we believe those opportunities
support the additional supply in those markets.
The following table provides an overview of our new and expansion data center leasing
activity (in NRSF) during the three months ended March 31, 2012:
|
|
|
|
|
|
|
NRSF
|
|
New and expansion leases signed but not yet commenced at beginning of period
|
|
|
25,571
|
|
New and expansion leases signed during the period
|
|
|
37,563
|
|
New and expansion leases signed during the period which have commenced
|
|
|
(15,195
|
)
|
New and expansion leases signed in previous periods which commenced during period
|
|
|
(15,503
|
)
|
|
|
|
|
|
Total leases signed but not yet commenced at end of period
|
|
|
32,436
|
|
The following table provides an overview of our properties as of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NRSF
|
|
|
|
|
|
|
|
|
Operating
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Center
(
2)
|
|
|
Office
and Light-
Industrial
(
3)
|
|
|
Total
|
|
|
Redevelopment
and
Development
(
4)
|
|
|
|
|
Market/Facilities
|
|
Acquisition
Date
(
5)
|
|
Annualized
Rent
($000)
(
6)
|
|
|
Total
|
|
|
Percent
Leased
(
7)
|
|
|
Total
|
|
|
Percent
Leased
(
7)
|
|
|
Total
(
8)
|
|
|
Percent
Leased
(
7)
|
|
|
Under
Construction
(9)
|
|
|
Vacant
|
|
|
Total
|
|
|
Total
Portfolio
|
|
Los Angeles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Wilshire*
|
|
Aug. 2007
|
|
$
|
22,495
|
|
|
|
157,588
|
|
|
|
68.7
|
%
|
|
|
7,500
|
|
|
|
52.0
|
%
|
|
|
165,088
|
|
|
|
67.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,088
|
|
900 N. Alameda
|
|
Oct. 2006
|
|
|
11,113
|
|
|
|
156,366
|
|
|
|
77.6
|
|
|
|
8,360
|
|
|
|
28.4
|
|
|
|
164,726
|
|
|
|
75.1
|
|
|
|
|
|
|
|
269,433
|
|
|
|
269,433
|
|
|
|
434,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles Total
|
|
|
|
|
33,608
|
|
|
|
313,954
|
|
|
|
73.1
|
|
|
|
15,860
|
|
|
|
39.6
|
|
|
|
329,814
|
|
|
|
71.5
|
|
|
|
|
|
|
|
269,433
|
|
|
|
269,433
|
|
|
|
599,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco Bay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 S. Market
|
|
Feb. 2000
|
|
|
12,153
|
|
|
|
84,045
|
|
|
|
91.9
|
|
|
|
206,255
|
|
|
|
91.9
|
|
|
|
290,300
|
|
|
|
91.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
290,300
|
|
2901 Coronado
|
|
Feb. 2007
|
|
|
9,085
|
|
|
|
50,000
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
1656 McCarthy
|
|
Dec. 2006
|
|
|
7,728
|
|
|
|
76,676
|
|
|
|
90.0
|
|
|
|
|
|
|
|
|
|
|
|
76,676
|
|
|
|
90.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,676
|
|
Coronado-Stender Properties
(10)
|
|
Feb. 2007
|
|
|
1,040
|
|
|
|
|
|
|
|
|
|
|
|
115,560
|
|
|
|
82.5
|
|
|
|
115,560
|
|
|
|
82.5
|
|
|
|
|
|
|
|
13,640
|
|
|
|
13,640
|
|
|
|
129,200
|
|
2972 Stender
(11)
|
|
Feb. 2007
|
|
|
3,014
|
|
|
|
33,129
|
|
|
|
55.9
|
|
|
|
436
|
|
|
|
74.8
|
|
|
|
33,565
|
|
|
|
56.1
|
|
|
|
16,835
|
|
|
|
50,600
|
|
|
|
67,435
|
|
|
|
101,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco Bay Total
|
|
|
|
|
33,020
|
|
|
|
243,850
|
|
|
|
88.1
|
|
|
|
322,251
|
|
|
|
88.5
|
|
|
|
566,101
|
|
|
|
88.3
|
|
|
|
16,835
|
|
|
|
64,240
|
|
|
|
81,075
|
|
|
|
647,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Virginia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12100 Sunrise Valley
|
|
Dec. 2007
|
|
|
17,906
|
|
|
|
168,959
|
|
|
|
81.8
|
|
|
|
61,050
|
|
|
|
72.7
|
|
|
|
230,009
|
|
|
|
79.4
|
|
|
|
32,760
|
|
|
|
|
|
|
|
32,760
|
|
|
|
262,769
|
|
1275 K Street*
|
|
June 2006
|
|
|
1,791
|
|
|
|
22,137
|
|
|
|
72.0
|
|
|
|
|
|
|
|
|
|
|
|
22,137
|
|
|
|
72.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Virginia Total
|
|
|
|
|
19,697
|
|
|
|
191,096
|
|
|
|
80.7
|
|
|
|
61,050
|
|
|
|
72.7
|
|
|
|
252,146
|
|
|
|
78.7
|
|
|
|
32,760
|
|
|
|
|
|
|
|
32,760
|
|
|
|
284,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 Innerbelt
|
|
Apr. 2007
|
|
|
9,000
|
|
|
|
148,795
|
|
|
|
88.1
|
|
|
|
13,063
|
|
|
|
34.2
|
|
|
|
161,858
|
|
|
|
83.7
|
|
|
|
|
|
|
|
111,313
|
|
|
|
111,313
|
|
|
|
273,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
427 S. LaSalle
|
|
Feb. 2007
|
|
|
7,934
|
|
|
|
128,906
|
|
|
|
93.7
|
|
|
|
4,946
|
|
|
|
56.9
|
|
|
|
133,852
|
|
|
|
92.3
|
|
|
|
29,261
|
|
|
|
20,241
|
|
|
|
49,502
|
|
|
|
183,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 Avenue of the Americas*
|
|
June 2007
|
|
|
5,174
|
|
|
|
48,404
|
|
|
|
66.7
|
|
|
|
|
|
|
|
|
|
|
|
48,404
|
|
|
|
66.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2115 NW 22nd Street
|
|
June 2006
|
|
|
1,706
|
|
|
|
30,175
|
|
|
|
55.3
|
|
|
|
1,890
|
|
|
|
100.0
|
|
|
|
32,065
|
|
|
|
58.0
|
|
|
|
|
|
|
|
13,199
|
|
|
|
13,199
|
|
|
|
45,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Facilities
|
|
|
|
$
|
110,139
|
|
|
|
1,105,180
|
|
|
|
81.4
|
%
|
|
|
419,060
|
|
|
|
82.3
|
%
|
|
|
1,524,240
|
|
|
|
81.6
|
%
|
|
|
78,856
|
|
|
|
478,426
|
|
|
|
557,282
|
|
|
|
2,081,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Indicates properties in which we hold a leasehold interest.
|
(1)
|
Represents the square feet at each building under lease as specified in existing customer lease agreements plus managements estimate of space available for lease
to customers based on engineers drawings and other factors, including required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas. Total NRSF at a given facility includes the
total operating NRSF and total redevelopment and development NRSF, but excludes our office space at a facility and our corporate headquarters.
|
(2)
|
Represents the NRSF at each operating facility that is currently leased or readily available for lease as data center space. Both leased and available data center NRSF
includes a factor to account for a customers proportionate share of the required data center support space (such as the mechanical, 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.
|
(3)
|
Represents the NRSF at each operating facility that is currently leased or readily available for lease as space other than data center space, which is typically space
offered for office or light-industrial uses.
|
(4)
|
Represents vacant space in our portfolio that requires significant capital investment in order to redevelop or develop into data center facilities. Total redevelopment
and development NRSF and total operating NRSF represent the total NRSF at a given facility.
|
(5)
|
Reflects date property was acquired by certain real estate funds affiliated with the Carlyle Group and not the date of our acquisition upon consummation of our initial
public offering. In the case of a leased property, indicates the date the initial lease commenced.
|
(6)
|
Represents the monthly contractual rent under existing customer leases as of March 31, 2012 multiplied by 12. This amount reflects total annualized base rent
before any one-time or non-recurring rent abatements and, for any customer under a modified gross or triple-net lease, it excludes the operating expense reimbursement attributable to such lease. On a gross basis, our annualized rent was
approximately $115,270,162 as of March 31, 2012, which reflects the addition of $5,131,286 in operating expense reimbursements to contractual net rent under modified gross and triple-net leases.
|
(7)
|
Includes customer leases that have commenced as of March 31, 2012. The percent leased is determined based on leased square feet as a proportion of total operating
NRSF. The percent leased for data center space, office and light industrial space, and space in total would have been 84.4%, 82.5%, and 83.9%, respectively, if all leases signed in current and prior periods had commenced.
|
(8)
|
Represents the NRSF at an operating facility currently leased or readily available for lease. This excludes existing vacant space held for redevelopment or development.
|
(9)
|
Reflects NRSF for which substantial activities are ongoing to prepare the property for its intended use following redevelopment or development, as applicable. All of
the 78,856 NRSF under construction as of March 31, 2012, was data center space.
|
(10)
|
The Coronado-Stender Business Park became entitled for our proposed data center development upon receipt of the mitigated negative declaration from the city of Santa
Clara in the first quarter of 2011. We have the ability to develop 345,250 NRSF of data center space at this property, which is in addition to the 50,400 NRSF of data center space and 50,600 NRSF of unconditioned core and shell space completed or
under construction at 2972 Stender.
|
(11)
|
We have completed construction on 33,129 NRSF of data center space at this property, and are under construction on an additional 16,835 NRSF of data center space. We
have also developed an incremental 50,600 NRSF of unconditioned core and shell space to be held for potential future development into data center space, subject to our assessment of market demand and alternative uses of our capital.
|
22
The following table shows the March 31, 2012 operating statistics for space that was leased and
available to be leased as of December 31, 2010 at each of our properties, and excludes space for which development or redevelopment was completed and became available to be leased after December 31, 2010 (the December 31, 2010 same
store pool). For comparison purposes, the operating activity totals as of December 31, 2011 and 2010, for this space are provided at the bottom of this table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating NRSF
|
|
|
|
|
|
|
|
|
|
Data Center
|
|
|
Office and Light-
Industrial
|
|
|
Total
|
|
Market/Facilities
|
|
Acquisition Date
|
|
|
Annualized
Rent ($000)
|
|
|
Total
|
|
|
Percent
Leased
|
|
|
Total
|
|
|
Percent
Leased
|
|
|
Total
|
|
|
Percent
Leased
|
|
Los Angeles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Wilshire*
|
|
|
Aug. 2007
|
|
|
$
|
22,495
|
|
|
|
157,587
|
|
|
|
68.7
|
%
|
|
|
7,500
|
|
|
|
52.0
|
%
|
|
|
165,087
|
|
|
|
67.9
|
%
|
900 N. Alameda
|
|
|
Oct. 2006
|
|
|
|
11,113
|
|
|
|
149,473
|
|
|
|
80.7
|
|
|
|
8,360
|
|
|
|
28.4
|
|
|
|
157,833
|
|
|
|
77.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles Total
|
|
|
|
|
|
|
33,608
|
|
|
|
307,061
|
|
|
|
74.5
|
|
|
|
15,860
|
|
|
|
39.6
|
|
|
|
322,921
|
|
|
|
72.8
|
|
San Francisco Bay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 S. Market
|
|
|
Feb. 2000
|
|
|
|
12,153
|
|
|
|
84,045
|
|
|
|
91.9
|
|
|
|
206,255
|
|
|
|
91.9
|
|
|
|
290,301
|
|
|
|
91.9
|
|
2901 Coronado
|
|
|
Feb. 2007
|
|
|
|
9,085
|
|
|
|
50,000
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
100.0
|
|
1656 McCarthy
|
|
|
Dec. 2006
|
|
|
|
7,728
|
|
|
|
76,676
|
|
|
|
90.0
|
|
|
|
|
|
|
|
|
|
|
|
76,676
|
|
|
|
90.0
|
|
Coronado-Stender Properties
|
|
|
Feb. 2007
|
|
|
|
718
|
|
|
|
|
|
|
|
|
|
|
|
78,800
|
|
|
|
74.3
|
|
|
|
78,800
|
|
|
|
74.3
|
|
2972 Stender
|
|
|
Feb. 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco Bay Total
|
|
|
|
|
|
|
29,684
|
|
|
|
210,721
|
|
|
|
93.1
|
|
|
|
285,055
|
|
|
|
87.0
|
|
|
|
495,777
|
|
|
|
89.6
|
|
Northern Virginia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12100 Sunrise Valley
|
|
|
Dec. 2007
|
|
|
|
14,162
|
|
|
|
116,499
|
|
|
|
98.4
|
|
|
|
61,050
|
|
|
|
72.7
|
|
|
|
177,549
|
|
|
|
89.6
|
|
1275 K Street*
|
|
|
June 2006
|
|
|
|
1,791
|
|
|
|
22,137
|
|
|
|
72.0
|
|
|
|
|
|
|
|
|
|
|
|
22,137
|
|
|
|
72.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Virginia Total
|
|
|
|
|
|
|
15,953
|
|
|
|
138,637
|
|
|
|
94.2
|
|
|
|
61,050
|
|
|
|
72.7
|
|
|
|
199,687
|
|
|
|
87.6
|
|
Boston
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 Innerbelt
|
|
|
Apr. 2007
|
|
|
|
9,000
|
|
|
|
133,646
|
|
|
|
98.1
|
|
|
|
13,063
|
|
|
|
34.2
|
|
|
|
146,709
|
|
|
|
92.4
|
|
Chicago
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
427 S. LaSalle
|
|
|
Feb. 2007
|
|
|
|
7,889
|
|
|
|
128,906
|
|
|
|
93.7
|
|
|
|
|
|
|
|
|
|
|
|
128,906
|
|
|
|
93.7
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 Avenue of the Americas*
|
|
|
June 2007
|
|
|
|
5,174
|
|
|
|
48,404
|
|
|
|
66.7
|
|
|
|
|
|
|
|
|
|
|
|
48,404
|
|
|
|
66.7
|
|
Miami
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2115 NW 22nd Street
|
|
|
June 2006
|
|
|
|
1,706
|
|
|
|
30,176
|
|
|
|
55.3
|
|
|
|
1,890
|
|
|
|
100.0
|
|
|
|
32,065
|
|
|
|
58.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Facilities at March 31,
2012
(1)
|
|
|
|
|
|
$
|
103,014
|
|
|
|
997,550
|
|
|
|
85.9
|
%
|
|
|
376,918
|
|
|
|
81.5
|
%
|
|
|
1,374,468
|
|
|
|
84.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Facilities at December 31, 2011
|
|
|
|
|
|
$
|
101,084
|
|
|
|
|
|
|
|
85.6
|
%
|
|
|
|
|
|
|
79.9
|
%
|
|
|
|
|
|
|
83.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Facilities at December 31, 2010
|
|
|
|
|
|
$
|
89,364
|
|
|
|
|
|
|
|
80.5
|
%
|
|
|
|
|
|
|
76.5
|
%
|
|
|
|
|
|
|
79.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Indicates properties in which we hold a leasehold interest.
|
(1)
|
The percent leased for data center space, office and light industrial space, and space in total would have been 87.0%, 81.6%, and 85.3%, respectively, if all leases
signed in current and prior periods had commenced.
|
23
The following table summarizes the redevelopment and development opportunities throughout our portfolio as
of March 31, 2012:
Redevelopment NRSF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently Vacant
|
|
|
Currently Operating
|
|
|
|
|
Facilities
|
|
Under
Construction
(1)
|
|
|
Near-
Term
(2)
|
|
|
Long-
Term
|
|
|
Total
|
|
|
Near-
Term
(2)
|
|
|
Long-
Term
|
|
|
Total
|
|
|
Incremental
Entitled
|
|
|
Total
|
|
Los Angeles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Wilshire*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900 N. Alameda
(3)
|
|
|
|
|
|
|
22,500
|
|
|
|
246,933
|
|
|
|
269,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles Total
|
|
|
|
|
|
|
22,500
|
|
|
|
246,933
|
|
|
|
269,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,433
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco Bay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 S. Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2901 Coronado
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1656 McCarthy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2972 Stender
(4)
|
|
|
16,835
|
|
|
|
50,600
|
|
|
|
|
|
|
|
67,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco Bay Total
|
|
|
16,835
|
|
|
|
50,600
|
|
|
|
|
|
|
|
67,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,435
|
|
|
|
|
|
|
|
|
|
|
|
Northern Virginia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12100 Sunrise Valley
(5)
|
|
|
32,760
|
|
|
|
|
|
|
|
|
|
|
|
32,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,760
|
|
1275 K Street*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Virginia Total
|
|
|
32,760
|
|
|
|
|
|
|
|
|
|
|
|
32,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,760
|
|
|
|
|
|
|
|
|
|
|
|
Boston
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 Innerbelt
(3)
|
|
|
|
|
|
|
|
|
|
|
111,313
|
|
|
|
111,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,313
|
|
|
|
|
|
|
|
|
|
|
|
Chicago
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
427 S. LaSalle
|
|
|
29,261
|
|
|
|
|
|
|
|
20,241
|
|
|
|
49,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,502
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 Avenue of the Americas*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2115 NW 22nd Street
|
|
|
|
|
|
|
|
|
|
|
13,199
|
|
|
|
13,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,199
|
|
Total Redevelopment
|
|
|
78,856
|
|
|
|
73,100
|
|
|
|
391,686
|
|
|
|
543,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
543,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development NRSF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco Bay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coronado-Stender Properties
(6)
|
|
|
|
|
|
|
|
|
|
|
13,640
|
|
|
|
13,640
|
|
|
|
|
|
|
|
115,560
|
|
|
|
115,560
|
|
|
|
216,050
|
|
|
|
345,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Development
|
|
|
|
|
|
|
|
|
|
|
13,640
|
|
|
|
13,640
|
|
|
|
|
|
|
|
115,560
|
|
|
|
115,560
|
|
|
|
216,050
|
|
|
|
345,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Facilities
|
|
|
78,856
|
|
|
|
73,100
|
|
|
|
450,926
|
|
|
|
557,282
|
|
|
|
|
|
|
|
115,560
|
|
|
|
115,560
|
|
|
|
216,050
|
|
|
|
888,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Indicates properties in which we hold a leasehold interest.
|
(1)
|
Reflects NRSF at a facility for which the initiation of substantial activities to prepare the property for its intended use following redevelopment or development, as
applicable, has commenced prior to the applicable period.
|
(2)
|
Reflects NRSF at a facility for which the initiation of substantial activities to prepare the property for its intended use following redevelopment or development, as
applicable, is planned to commence after March 31, 2012 but prior to March 31, 2013.
|
(3)
|
The NRSF shown is our current estimate based on engineering drawings and required support space and is subject to change based on final demising of the space.
|
(4)
|
We have completed construction on 33,129 NRSF of data center space at this property, and are under construction on an additional 16,835 NRSF of data center space. We
have also completed development of an incremental 50,600 NRSF of unconditioned core and shell space to be held for potential future development into data center space, subject to our assessment of market demand and alternative uses of our capital.
|
(5)
|
The remaining 32,760 NRSF of vacant space is being redeveloped into data center space and will deliver in the second quarter of 2012.
|
(6)
|
We are entitled to develop up to 345,250 NRSF of data center space at this property, or an incremental 216,050 NRSF, which is in addition to the leased and vacant NRSF
existing at the property.
|
24
Customer Diversification
As of March 31, 2012, our portfolio was leased to over 700 customers, many of which are nationally recognized firms. The following table sets forth information regarding the ten largest customers in
our portfolio based on annualized rent as of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
|
|
Number
of
Locations
|
|
|
Total
Leased
NRSF
(
1)
|
|
|
Percentage
of Total
Operating
NRSF
(
2)
|
|
|
Annualized
Rent
($000)
(
3)
|
|
|
Percentage
of
Annualized
Rent
(
4)
|
|
|
Weighted
Average
Remaining
Lease
Term in
Months
(
5)
|
|
1
|
|
Facebook, Inc.
|
|
|
3
|
|
|
|
74,091
|
|
|
|
4.9
|
%
|
|
$
|
11,902
|
|
|
|
10.8
|
%
|
|
|
42
|
|
2
|
|
Computer Sciences Corporation
|
|
|
3
|
|
|
|
52,902
|
|
|
|
3.5
|
|
|
|
6,331
|
|
|
|
5.7
|
|
|
|
65
|
|
3
|
|
Akamai Technologies
|
|
|
6
|
|
|
|
34,077
|
|
|
|
2.2
|
|
|
|
4,023
|
|
|
|
3.7
|
|
|
|
15
|
|
4
|
|
General Services Admin - IRS
*(6)
|
|
|
1
|
|
|
|
141,774
|
|
|
|
9.3
|
|
|
|
3,790
|
|
|
|
3.4
|
|
|
|
32
|
|
5
|
|
Nuance Communications
|
|
|
1
|
|
|
|
25,404
|
|
|
|
1.7
|
|
|
|
3,240
|
|
|
|
2.9
|
|
|
|
75
|
|
6
|
|
Verizon Communications
|
|
|
7
|
|
|
|
74,048
|
|
|
|
4.9
|
|
|
|
2,572
|
|
|
|
2.3
|
|
|
|
37
|
|
7
|
|
Govt of District of Columbia
|
|
|
2
|
|
|
|
16,646
|
|
|
|
1.1
|
|
|
|
2,201
|
|
|
|
2.0
|
|
|
|
30
|
|
8
|
|
Tata Communications
|
|
|
2
|
|
|
|
18,476
|
|
|
|
1.2
|
|
|
|
1,875
|
|
|
|
1.7
|
|
|
|
91
|
|
9
|
|
NBC Universal
|
|
|
1
|
|
|
|
11,293
|
|
|
|
0.7
|
|
|
|
1,719
|
|
|
|
1.6
|
|
|
|
4
|
|
10
|
|
Intermedia, Inc
|
|
|
3
|
|
|
|
9,719
|
|
|
|
0.6
|
|
|
|
1,597
|
|
|
|
1.4
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average
|
|
|
|
|
|
|
458,430
|
|
|
|
30.1
|
%
|
|
$
|
39,250
|
|
|
|
35.5
|
%
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Denotes customer using space for general office purposes.
|
(1)
|
Total leased NRSF is determined based on contractually leased square feet for leases that have commenced on or before March 31, 2012. 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.
|
(2)
|
Represents the customers total leased square feet divided by the total operating NRSF in the portfolio which, as of March 31, 2012, consisted of 1,524,240
NRSF.
|
(3)
|
Represents the monthly contractual rent under existing customer leases as of March 31, 2012 multiplied by 12. This amount reflects total annualized base rent
before any one-time or non-recurring rent abatements and, for any customer under a modified gross or triple-net lease, it excludes the operating expense reimbursement attributable to those leases.
|
(4)
|
Represents the customers total annualized rent divided by the total annualized rent in the portfolio as of March 31, 2012, which was approximately
$110,139,000.
|
(5)
|
Weighted average based on percentage of total annualized rent expiring and is as of March 31, 2012.
|
(6)
|
The data presented represents an interim lease in place that expires in May 2014. Upon expiration of the interim lease and the substantial completion of tenant
improvements by us, a new lease that has already been executed by both parties will commence. That lease includes 119,729 NRSF with a ten-year term and a termination option at the end of year eight.
|
25
Lease Distribution
The following table sets forth information relating to the distribution of leases in the properties in our portfolio, based on NRSF (excluding space held for redevelopment or development) under lease as
of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Percentage
|
|
|
|
|
|
Percentage
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Operating
|
|
|
of Total
|
|
|
Annualized
|
|
|
of
|
|
|
|
of
|
|
|
of All
|
|
|
NRSF of
|
|
|
Operating
|
|
|
Rent
|
|
|
Annualized
|
|
Square Feet Under
Lease
(1)
|
|
Leases
(
2)
|
|
|
Leases
|
|
|
Leases
(
3)
|
|
|
NRSF
|
|
|
($000)
(
4)
|
|
|
Rent
|
|
Available
(5)
|
|
|
|
|
|
|
|
%
|
|
|
279,963
|
|
|
|
18.4
|
%
|
|
$
|
|
|
|
|
|
%
|
1,000 or less
|
|
|
972
|
|
|
|
85.6
|
|
|
|
165,749
|
|
|
|
10.9
|
|
|
|
29,705
|
|
|
|
27.0
|
|
1,001 - 2,000
|
|
|
55
|
|
|
|
4.8
|
|
|
|
78,269
|
|
|
|
5.1
|
|
|
|
8,849
|
|
|
|
8.0
|
|
2,001 - 5,000
|
|
|
66
|
|
|
|
5.8
|
|
|
|
198,067
|
|
|
|
13.0
|
|
|
|
20,243
|
|
|
|
18.4
|
|
5,001 - 10,000
|
|
|
20
|
|
|
|
1.8
|
|
|
|
141,452
|
|
|
|
9.3
|
|
|
|
14,271
|
|
|
|
13.0
|
|
10,001 - 25,000
|
|
|
17
|
|
|
|
1.5
|
|
|
|
309,873
|
|
|
|
20.3
|
|
|
|
26,063
|
|
|
|
23.6
|
|
Greater than 25,000
|
|
|
6
|
|
|
|
0.5
|
|
|
|
350,867
|
|
|
|
23.0
|
|
|
|
11,008
|
|
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Total
|
|
|
1,136
|
|
|
|
100.0
|
%
|
|
|
1,524,240
|
|
|
|
100.0
|
%
|
|
$
|
110,139
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents all leases in our portfolio, including data center and office and light-industrial leases.
|
(2)
|
Includes leases that upon expiration will be automatically 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.
|
(3)
|
Represents the square feet at a building under lease as specified in the lease agreements plus managements estimate of space available for lease to third parties
based on engineers drawings and other factors, including required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas.
|
(4)
|
Represents the monthly contractual rent under existing customer leases as of March 31, 2012 multiplied by 12. This amount reflects total annualized base rent
before any one-time or non-recurring rent abatements and, for any customer under a modified gross or triple-net lease, it excludes the operating expense reimbursement attributable to those leases.
|
(5)
|
Excludes approximately 557,282 vacant NRSF held for redevelopment or under construction at March 31, 2012.
|
Lease Expirations
The following table
sets forth a summary schedule of the expirations for leases in place as of March 31, 2012, plus available space, for the remainder of 2012 and for each of the ten full calendar years beginning January 1, 2013 at the properties in our
portfolio. Unless otherwise stated in the footnotes, the information set forth in the table assumes that customers exercise no renewal options and all early termination rights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
|
|
|
|
Number
|
|
|
Operating
|
|
|
Percentage
|
|
|
|
|
|
Percentage
|
|
|
Annualized
|
|
|
Annualized
|
|
|
Rent Per
|
|
|
|
of
|
|
|
NRSF of
|
|
|
of Total
|
|
|
|
|
|
of
|
|
|
Rent Per
|
|
|
Rent at
|
|
|
Leased
|
|
|
|
Leases
|
|
|
Expiring
|
|
|
Operating
|
|
|
Annualized
|
|
|
Annualized
|
|
|
Leased
|
|
|
Expiration
|
|
|
NRSF at
|
|
Year of Lease Expiration
|
|
Expiring
(1)
|
|
|
Leases
|
|
|
NRSF
|
|
|
Rent
($000)
(2)
|
|
|
Rent
|
|
|
NRSF
(3)
|
|
|
($000)
(4)
|
|
|
Expiration
(5)
|
|
Available as of March 31, 2012
(6)
|
|
|
|
|
|
|
279,963
|
|
|
|
18.4
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Remainder of 2012
|
|
|
414
|
|
|
|
260,399
|
|
|
|
17.1
|
|
|
|
27,812
|
|
|
|
25.3
|
|
|
|
106.80
|
|
|
|
27,862
|
|
|
|
107.00
|
|
2013
|
|
|
264
|
|
|
|
181,376
|
|
|
|
11.9
|
|
|
|
18,806
|
|
|
|
17.1
|
|
|
|
103.69
|
|
|
|
19,521
|
|
|
|
107.63
|
|
2014
(7)
|
|
|
230
|
|
|
|
250,205
|
|
|
|
16.4
|
|
|
|
20,180
|
|
|
|
18.2
|
|
|
|
80.65
|
|
|
|
22,845
|
|
|
|
91.31
|
|
2015
|
|
|
73
|
|
|
|
101,204
|
|
|
|
6.6
|
|
|
|
7,299
|
|
|
|
6.6
|
|
|
|
72.12
|
|
|
|
11,284
|
|
|
|
111.50
|
|
2016
(8)
|
|
|
88
|
|
|
|
163,375
|
|
|
|
10.7
|
|
|
|
11,861
|
|
|
|
10.8
|
|
|
|
72.60
|
|
|
|
14,035
|
|
|
|
85.90
|
|
2017
|
|
|
37
|
|
|
|
66,110
|
|
|
|
4.3
|
|
|
|
10,548
|
|
|
|
9.6
|
|
|
|
159.55
|
|
|
|
12,596
|
|
|
|
190.52
|
|
2018
|
|
|
8
|
|
|
|
79,341
|
|
|
|
5.2
|
|
|
|
8,131
|
|
|
|
7.4
|
|
|
|
102.48
|
|
|
|
10,147
|
|
|
|
127.89
|
|
2019
|
|
|
2
|
|
|
|
80,466
|
|
|
|
5.3
|
|
|
|
1,567
|
|
|
|
1.4
|
|
|
|
19.48
|
|
|
|
1,730
|
|
|
|
21.51
|
|
2020
|
|
|
3
|
|
|
|
2,746
|
|
|
|
0.2
|
|
|
|
75
|
|
|
|
0.1
|
|
|
|
27.14
|
|
|
|
78
|
|
|
|
28.51
|
|
2021
|
|
|
9
|
|
|
|
18,155
|
|
|
|
1.2
|
|
|
|
1,872
|
|
|
|
1.7
|
|
|
|
103.13
|
|
|
|
3,883
|
|
|
|
213.91
|
|
2022-Thereafter
|
|
|
8
|
|
|
|
40,900
|
|
|
|
2.7
|
|
|
|
1,988
|
|
|
|
1.8
|
|
|
|
48.61
|
|
|
|
2,626
|
|
|
|
64.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Total / Weighted Average
|
|
|
1,136
|
|
|
|
1,524,240
|
|
|
|
100.0
|
%
|
|
$
|
110,139
|
|
|
|
100.0
|
%
|
|
$
|
88.52
|
|
|
$
|
126,607
|
|
|
$
|
101.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes leases that upon expiration will be automatically 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.
|
(2)
|
Represents the monthly contractual rent under existing customer leases as of March 31, 2012 multiplied by 12. This amount reflects total annualized base rent
before any one-time or non-recurring rent abatements and, for any customer under a modified gross or triple-net lease, it excludes the operating expense reimbursement attributable to those leases.
|
(3)
|
Annualized rent as defined above, divided by the square footage of leases expiring in the given year.
|
(4)
|
Represents the final monthly contractual rent under existing customer leases as of March 31, 2012 multiplied by 12. This amount reflects total annualized base rent
before any one-time or non-recurring rent abatements and, for any customer under a modified gross or triple-net lease, it excludes the operating expense reimbursement attributable to those leases.
|
(5)
|
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.
|
(6)
|
Excludes approximately 557,282 vacant NRSF held for redevelopment or under construction at March 31, 2012.
|
(7)
|
Includes an office lease with General Services AdministrationIRS, which is an interim lease in place that expires on May 31, 2014. Upon the expiration of the
interim lease and the substantial completion of tenant improvements by us, a new lease that has already been executed by both parties will commence. The new lease includes 119,729 NRSF with a ten-year term and a termination option at the end of year
eight.
|
(8)
|
Total operating NRSF of expiring leases in 2016 reflects the expiration of half of a 50,000 NRSF lease, the other half of which expires in 2017.
|
26
Results of Operations
Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(in thousands)
|
|
Operating Revenue
|
|
$
|
47,284
|
|
|
$
|
39,966
|
|
Operating Expense
|
|
$
|
45,050
|
|
|
$
|
45,780
|
|
Interest Expense
|
|
$
|
(1,018
|
)
|
|
$
|
(2,252
|
)
|
Net income (loss)
|
|
$
|
1,343
|
|
|
$
|
(7,916
|
)
|
Operating Revenue.
Operating revenue for the three months ended March 31, 2012 was $47.3 million. This
includes rental revenue of $29.5 million, power revenue of $12.3 million, tenant reimbursements of $1.3 million and other revenue of $4.2 million, primarily from interconnection services. This compares to revenue of
$40.0 million for the three months ended March 31, 2011. The increase of $7.3 million or 18.3% was primarily due to the placement into service of several computer rooms at our newest data center, 2972 Stender, which occurred during
the third quarter of 2011 and the first quarter of 2012 and the completion and subsequent leasing of expansion space at our 12100 Sunrise Valley and 70 Innerbelt properties.
Operating Expenses
. Operating expenses for the three months ended March 31, 2012 were $45.1 million compared to $45.8 million for the three months ended March 31, 2011. The
decrease of $0.7 million was primarily due to a decrease in depreciation and amortization expense of $4.0 million due to the short-term useful life of the lease intangibles acquired in connection with our IPO on September 28, 2010. The
decrease in depreciation and amortization expense was partially offset by an increase in property operating expenses due to the placement into service of additional space at our 2972 Stender, 12100 Sunrise Valley and 70 Innerbelt properties.
Additionally, the decrease in depreciation and amortization expense was further offset by an increase in general and administrative expense due to a $1.5 million settlement expense accrual related to the Add2Net, Inc. matter, offset by the reversal
of a $0.8 million annual cash incentive accrual which was paid in the form of an equity incentive grant under our 2010 Plan with a one-year vesting period.
Interest Expense.
Interest expense, including amortization of deferred financing costs, for the three months ended March 31, 2012 was $1.0 million compared to interest expense of $2.3
million for the three months ended March 31, 2011. The decrease in interest expense was primarily due to an increase in the amount of capitalized interest and the lower debt balance carried for the first half of the quarter compared to the
first quarter of 2011. The amount of interest expense capitalized is directly correlated to the amount spent on construction related activities which can fluctuate on a quarterly basis. We expect the amount of interest capitalized for the three
months ended June 30, 2012, will be lower than the amount capitalized during the three months ended March 31, 2012.
Net Income
(Loss)
. Net income for the three months ended March 31, 2012 was $1.3 million compared to net loss of $7.9 million for the three months ended March 31, 2011. The increase of $9.3 million was primarily due to the
increased operating revenue from the placement into service of several computer rooms at our newest data center, 2972 Stender and the completion and subsequent leasing of expansion space at our 12100 Sunrise Valley and 70 Innerbelt properties.
Additionally, the increase in net income was attributable to a decrease in operating expenses due to decreased depreciation and amortization expense and a decrease in interest expense primarily related to an increase in the amount of capitalized
interest and the lower debt balance carried for the first half of the quarter compared to the first quarter of 2011.
Factors that May
Influence our Results of Operations
A complete discussion of factors that may influence our results of operations can be found in our
Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on February 24, 2012, which is accessible on the SECs website at www.sec.gov.
Liquidity and Capital Resources
Discussion of Cash Flows
Three Months ended March 31, 2012 Compared to Three Months ended March 31, 2011
Net cash provided by operating activities was $13.2 million for the three months ended March 31, 2012, compared to $13.2 million for the prior period. Changes in operating assets and
liabilities were offset by an increase in operating income due to the placement into service of several computer rooms at our newest data center, 2972 Stender and the completion and subsequent leasing of expansion space at our 12100 Sunrise Valley
and 70 Innerbelt properties.
Net cash used in investing activities decreased by $2.2 million to $18.0 million for the three months
ended March 31, 2012, compared to $20.2 million for the three months ended March 31, 2011. This decrease was primarily due to a decrease in cash paid for capital expenditures related to redevelopment and development of data center
space. Capital expenditures will fluctuate on a quarterly basis based on the number and magnitude of construction related activities.
27
Net cash provided by financing activities was $2.2 million for the three months ended March 31,
2012, compared to cash used in financing activities of $6.0 million for the three months ended March 31, 2011. The increase in cash provided by financing activities of $8.2 million was primarily due to increased borrowings under our
revolving credit facility partially offset by an increase in the dividends and distributions paid.
Analysis of Liquidity and Capital
Resources
As of March 31, 2012, we had $4.0 million of cash and equivalents, excluding $8.7 million of restricted cash.
Restricted cash primarily consists of interest bearing cash deposits required by the terms of our loans and cash impound accounts for real estate taxes, insurance and anticipated or contractually obligated tenant improvements as required by several
of our mortgage loans.
We have an effective shelf registration statement filed on September 28, 2011, that allows us to register up to
$800 million of various classes of equity and debt securities. As circumstances warrant, we may issue debt and/or equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing.
Our short-term liquidity requirements primarily consist of funds needed for future distributions to stockholders and holders of our operating partnership
units, interest expense, operating costs including utilities, site maintenance costs, real estate and personal property taxes, insurance, rental expenses and selling, general and administrative expenses and certain recurring and non-recurring
capital expenditures, including for the redevelopment and development of data center space during the next 12 months. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established for
certain future payments, and by incurring additional indebtedness, including by drawing on our revolving credit facility.
Our long-term
liquidity requirements primarily consist of the costs to fund the development of the Coronado-Stender Properties, our 9.1 acre development site that houses five buildings in Santa Clara, California, future redevelopment or development of other space
in our portfolio not currently scheduled, property acquisitions, future distributions to stockholders and holders of our operating partnership units, scheduled debt maturities and recurring and non-recurring capital improvements. We expect to meet
our short and long-term liquidity requirements primarily by incurring long-term indebtedness and drawing on our revolving credit facility. We also may raise capital in the future through the issuance of additional equity or debt securities, subject
to prevailing market conditions, and/or through the issuance of operating partnership units. However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all.
Indebtedness
A summary of
outstanding indebtedness as of March 31, 2012 and December 31, 2011 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
Interest Rate
|
|
Date
|
|
|
2012
|
|
|
2011
|
|
Senior secured credit facility
|
|
(1)
|
|
|
December 15, 2014
|
|
|
$
|
40,250
|
|
|
$
|
5,000
|
|
55 S. Market
|
|
LIBOR plus 3.50% (3.74% and 3.75% at March 31, 2012 and December 31, 2011)
(2)
|
|
|
October 9, 2012
|
(3)
|
|
|
60,000
|
|
|
|
60,000
|
|
12100 Sunrise Valley
|
|
LIBOR plus 2.75% (3.00% and 3.06% at March 31, 2012 and December 31, 2011)
(2)
|
|
|
June 1, 2013
|
|
|
|
31,782
|
|
|
|
31,864
|
|
427 S. LaSalleSenior mortgage loan
|
|
LIBOR plus 0.60% (0.86% at December 31, 2011)
|
|
|
Repaid, Feburary 2012
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal outstanding
|
|
|
|
|
|
|
|
$
|
132,032
|
|
|
$
|
96,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
At the Companys election, borrowings under the credit facility bear interest at a rate per annum equal to either (i) LIBOR plus 225 basis points to 300 basis
points, or (ii) a base rate plus 125 basis points to 200 basis points, depending on our leverage ratio. As of March 31, 2012, the weighted average interest rate on outstanding borrowings under the senior secured credit facility was 2.49%.
|
(2)
|
In October 2010, we entered into an interest rate swap agreement with respect to the indebtedness on 55 S. Market and an interest rate cap agreement with respect to the
indebtedness on 12100 Sunrise Valley, each as a cash flow hedge for interest incurred on these LIBOR based loans.
|
(3)
|
The mortgage contains one two-year extension option subject to the Company meeting certain financial and other customary conditions and the payment of an extension fee
equal to 60 basis points.
|
Senior Secured Credit Facility
On December 15, 2011, our Operating Partnership and certain subsidiary co-borrowers entered into an amended and restated senior secured revolving credit facility (the Amended Credit
Agreement) with a group of lenders for which KeyBank National Association acts as the administrative agent. The Amended Credit Agreement amended our Operating Partnerships then existing senior secured revolving credit facility, dated
September 28, 2010 (the Prior Facility), and is unconditionally guaranteed on a senior unsecured basis by us. Our Operating Partnership acts as the parent borrower, and our subsidiaries that own 1656 McCarthy, 70 Innerbelt, 2901
Coronado and 900 N. Alameda are co-borrowers under the Amended Credit Agreement, with borrowings under the facility secured by a lien on these properties on a senior secured basis. In addition, the obligations of each of our Operating Partnership
and the co-borrowers under the Amended Credit Agreement are joint and several.
28
On February 7, 2012, we repaid the senior mortgage loan of $25.0 million secured by the 427 S. LaSalle
property and subsequently added 427 S. LaSalle as a co-borrower under the Amended Credit Agreement, with borrowings under the facility secured by a lien on such real estate property on a senior secured basis.
The Amended Credit Agreement increased the commitment from the Prior Facility of $110.0 million to $225.0 million, and extended the initial
maturity date of the Prior Facility from September 28, 2013, to December 15, 2014, with a one-time extension option, which, if exercised, would extend the maturity date to December 15, 2015. An exercise of the extension option is
subject to the payment of an extension fee equal to 25 basis points of the total commitment under the Amended Credit Agreement at initial maturity and certain other customary conditions. As of March 31, 2012 and December 31, 2011, $40.3
million and $5.0 million, respectively, was outstanding under the facility.
Under the Amended Credit Agreement, our Operating Partnership may
elect to have borrowings bear interest at a rate per annum equal to (i) LIBOR plus 225 basis points to 300 basis points, or (ii) a base rate plus 125 basis points to 200 basis points, each depending on our Operating Partnerships
leverage ratio. The Amended Credit Agreement also contains an accordion feature to allow our Operating Partnership to increase the total commitment by $175.0 million, to $400.0 million, under specified circumstances.
The total amount available for borrowings under the Amended Credit Agreement will be subject to the lesser of a percentage of the appraised value of our
Operating Partnerships properties that form the designated borrowing base properties of the facility, a minimum borrowing base debt service coverage ratio and a minimum borrowing base debt yield. As of March 31, 2012, $153.6 million
was available for us to borrow under the facility.
Our ability to borrow under the Amended Credit Agreement is subject to ongoing compliance
with a number of financial covenants and other customary restrictive covenants, including:
a maximum
leverage ratio (defined as consolidated total indebtedness to total gross asset value) of 60%;
a minimum
fixed charge coverage ratio (defined as adjusted consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.75 times;
a maximum unhedged variable rate debt ratio (defined as unhedged variable rate indebtedness to gross asset value) of 30%;
a maximum recourse debt ratio (defined as recourse indebtedness other than indebtedness under the revolving credit
facility to gross asset value) of 30%; and
a minimum tangible net worth equal to at least 75% of our
tangible net worth at the closing of our IPO plus 80% of the net proceeds of any additional equity issuances.
As of March 31, 2012, we
were in compliance with the covenants.
55 S. Market
As of March 31, 2012, the 55 S. Market property had a $60.0 million mortgage loan, which matures on October 9, 2012. The mortgage payable contains one two-year extension option provided we
meet certain financial and other customary conditions and subject to the payment of an extension fee equal to 60 basis points. The loan bears interest at LIBOR plus 350 basis points and requires the payment of interest only until maturity. The
mortgage requires ongoing compliance by us with various covenants including liquidity and net operating income covenants. As of March 31, 2012, we were in compliance with the covenants.
On October 7, 2010, we entered into a $60.0 million interest rate swap agreement to protect against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows
relating to interest payments on the $60.0 million 55 S. Market mortgage. The interest rate swap matures on October 9, 2012, and effectively fixes the interest rate at 4.01%.
12100 Sunrise Valley
As of March 31, 2012, the 12100 Sunrise Valley property
had a mortgage loan payable of $31.8 million. The loan is secured by the 12100 Sunrise Valley property and required payments of interest only until the amortization commencement date on July 1, 2011. The loan matures on
June 1, 2013 and we may exercise the one remaining one-year extension option provided we meet certain financial and other customary conditions and subject to the payment of an extension fee equal to 50 basis points. The mortgage loan payable
contains certain financial and nonfinancial covenants. As of March 31, 2012, we were in compliance with the covenants.
On
October 8, 2010, we purchased an interest rate cap to hedge $25.0 million of the indebtedness secured by our 12100 Sunrise Valley property. The interest rate cap matures on October 1, 2012, and hedges against LIBOR interest rate
increases above 2.0%.
427 S. LaSalle
On February 7, 2012, we repaid the $25.0 million senior mortgage loan on the 427 S. LaSalle property.
29
Debt Maturities
The following table summarizes our debt maturities as of March 31, 2012 (in thousands):
|
|
|
|
|
Year Ending December 31,
|
|
|
|
Remainder of 2012
(1)
|
|
$
|
60,233
|
|
2013
|
|
|
31,549
|
|
2014
|
|
|
40,250
|
|
|
|
|
|
|
Total
|
|
$
|
132,032
|
|
|
|
|
|
|
(1)
|
The 55 S. Market mortgage, which is scheduled to mature on October 9, 2012, contains one two-year extension option subject to the Company meeting certain financial
and other customary conditions and the payment of an extension fee equal to 60 basis points.
|
Funds From Operations
We consider funds from operations (FFO) to be 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 disclose
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 an 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. The following table is a reconciliation of our net income (loss) to FFO:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Net income (loss)
|
|
$
|
1,343
|
|
|
$
|
(7,916
|
)
|
Real estate depreciation and amortization
|
|
|
15,008
|
|
|
|
19,237
|
|
|
|
|
|
|
|
|
|
|
FFO
|
|
$
|
16,351
|
|
|
$
|
11,321
|
|
|
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends current comprehensive income guidance. This accounting update
eliminates the option to present the components of other comprehensive income as part of the statement of stockholders equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive
income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. We adopted the
provisions of this standard effective January 1, 2012 by presenting a separate Condensed Consolidated Statement of Comprehensive Income.
30
Distribution Policy
In order to comply with the REIT requirements of the Code, we are generally required to make annual distributions to our shareholders of at least 90% of our taxable net income. Our common share
distribution policy is to distribute a percentage of our cash flow that ensures that we will meet the distribution requirements of the Code and that allows us to maximize the cash retained to meet other cash needs, such as capital improvements and
other investment activities.
We have made distributions every quarter since our IPO. While we plan to continue to make quarterly
distributions, no assurances can be made as to the frequency or amounts of any future distributions. The payment of common share distributions is dependent upon our financial condition, operating results and REIT distribution requirements and may be
adjusted at the discretion of the Board during the year.
Inflation
Substantially all of our leases contain annual rent increases. As a result, we believe that we are largely insulated from the effects of inflation. However, any increases in the costs of redevelopment or
development of our properties will generally result in a higher cost of the property, which will result in increased cash requirements to develop our properties and increased depreciation expense in future periods, and, in some circumstances, we may
not be able to directly pass along the increase in these development costs to our customers in the form of higher rents.
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market
prices and interest rates. The primary market risk to which we believe we are exposed is interest rate risk. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other
factors that are beyond our control contribute to interest rate risk.
As of March 31, 2012, we had $132.0 million of consolidated
indebtedness that bore interest at variable rates, of which $25.0 million of our consolidated indebtedness is hedged against LIBOR interest rate increases above 2.0%. In addition, we entered into a swap agreement that effectively fixed the
interest rate on $60.0 million of consolidated indebtedness under our 55 S. Market mortgage at 4.01% through the maturity date of such indebtedness.
We monitor our market risk exposures using a sensitivity analysis. Our sensitivity analysis estimates the exposure to market risk sensitive instruments assuming a hypothetical 1% change in year-end
interest rates. If interest rates were to increase by 1%, the increase in interest expense on our variable rate debt (excluding the $60.0 million of consolidated indebtedness under our 55 S. Market mortgage that is hedged through our interest
rate swap) would decrease future earnings and cash flows by less than $0.7 million annually. If interest rates were to decrease 1%, the decrease in interest expense (excluding the $60.0 million of consolidated indebtedness under our 55 S.
Market mortgage that is hedged through our interest rate swap) on the variable rate debt would be less than $0.7 million annually.
These
analyses do not consider the effect of any change in overall economic activity that could impact interest rates. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to
the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.
ITEM 4.
|
CONTROLS AND PROCEDURES
|
Evaluation of
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SECs rules
and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is
required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31, 2012, we
carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures. Based on the
foregoing, our Chief Executive Officer and Chief Financial Officer concluded, that our disclosure controls and procedures were effective as of March 31, 2012.
31
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the
Exchange Act) that occurred during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1.
|
LEGAL PROCEEDINGS
|
As previously
disclosed, we are involved in litigation in Colorado District Court in Denver with Ari Brumer, the former general counsel of our affiliate, CoreSite, LLC, arising out of the termination of Mr. Brumers employment. The allegations made
by Mr. Brumer in his complaint against us, certain of our affiliates, and certain affiliates of real estate funds affiliated with the Carlyle Group also have been previously reported, as have been the counterclaims asserted against
Mr. Brumer by us and certain of our affiliates. The case remains in the discovery stage and various discovery matters require resolution by the District Court. We intend to vigorously defend the case and pursue our counterclaims
against Mr. Brumer. Based on the information currently available, we continue to believe that this litigation will not have a material adverse effect on our business, financial position or liquidity.
One of our former customers, Add2Net, Inc., brought an action against us in April 2009 before the American Arbitration Association in California
asserting claims of breach of contract, unfair business practices, negligent misrepresentation and fraudulent inducement. Add2Net alleged that it suffered damages of approximately $3.5 million, consisting of license and service fees paid to us,
loss of business income and equipment damage, and sought attorneys fees and punitive damages. We counterclaimed for breach of contract and bad faith dealing. On April 6, 2012, we agreed to pay Add2Net $1.5 million to settle the action in
its entirety and recorded the expense in general and administrative expense for the quarter ended March 31, 2012.
In the ordinary course
of our business, we are subject to claims for negligence and other claims and administrative proceedings, none of which we believe are material or would be expected to have, individually or in the aggregate, a material adverse effect on our
business, financial condition or results of operations.
There have been no material
changes to the risk factors included in the section entitled Risk Factors beginning on page 15 of our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on February 24, 2012, which is accessible
on the SECs website at www.sec.gov.
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
None.
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
None.
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
Not applicable.
ITEM 5.
|
OTHER INFORMATION
|
None.
32
|
|
|
Exhibit
Number
|
|
Description
|
3.1
|
|
Articles of Amendment and Restatement of CoreSite Realty Corporation.(1)
|
|
|
3.2
|
|
Bylaws of CoreSite Realty Corporation.(1)
|
|
|
4.1
|
|
Specimen certificate representing the Common Stock of CoreSite Realty Corporation.(2)
|
|
|
10.1
|
|
Employment Agreement between CoreSite LLC and Jarrett Appleby, dated as of April 6, 2012.(3)*
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101. INS
|
|
XBRL Instance Document**
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document**
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document**
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document**
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document**
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document**
|
*
|
Represents management contract or compensatory plan or agreement.
|
**
|
Pursuant to Rule 406T of Regulation S-T, the information in Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of Sections
11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
(1)
|
Incorporated by reference to our Registration Statement (Amendment No. 7) on Form S-11 (Registration No. 333-166810) filed on September 22, 2010.
|
(2)
|
Incorporated by reference to our Post-Effective Amendment to our Registration Statement on Form S-11 (Registration No. 333-166810) filed on September 22,
2010.
|
(3)
|
Incorporated by reference to our Current Report on Form 8-K filed on April 10, 2012.
|
33
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 thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
CORESITE REALTY CORPORATION
|
|
|
|
|
Date: April 27, 2012
|
|
|
|
By:
|
|
/s/ Jeffrey S. Finnin
|
|
|
|
|
|
|
Jeffrey S. Finnin
|
|
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
34
Exhibit Index
|
|
|
Exhibit
Number
|
|
Description
|
3.1
|
|
Articles of Amendment and Restatement of CoreSite Realty Corporation.(1)
|
|
|
3.2
|
|
Bylaws of CoreSite Realty Corporation.(1)
|
|
|
4.1
|
|
Specimen certificate representing the Common Stock of CoreSite Realty Corporation.(2)
|
|
|
10.1
|
|
Employment Agreement between CoreSite LLC and Jarrett Appleby, dated as of April 6, 2012.(3)*
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101. INS
|
|
XBRL Instance Document**
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document**
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document**
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document**
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document**
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document**
|
*
|
Represents management contract or compensatory plan or agreement.
|
**
|
Pursuant to Rule 406T of Regulation S-T, the information in Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of Sections
11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
(1)
|
Incorporated by reference to our Registration Statement (Amendment No. 7) on Form S-11 (Registration No. 333-166810) filed on September 22, 2010.
|
(2)
|
Incorporated by reference to our Post-Effective Amendment to our Registration Statement on Form S-11 (Registration No. 333-166810) filed on September 22,
2010.
|
(3)
|
Incorporated by reference to our Current Report on Form 8-K filed on April 10, 2012.
|
35
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