CoreSite Realty Corporation (NYSE: COR), provider of network
dense, cloud enabled data center solutions, today announced
financial results for the second quarter ended June 30, 2013.
Quarterly Highlights
- Reported second-quarter funds from
operations (“FFO”) of $0.45 per diluted share and unit,
representing a 21.6% increase year-over-year
- Reported second-quarter operating
revenue of $57.7 million, representing a 13.9% increase
year-over-year
- Executed new and expansion data center
leases representing $5.8 million of annualized GAAP rent at a rate
of $188 of annualized GAAP rent per square foot
- Realized rent growth on signed renewals
of 5.4% on a cash basis and 11.7% on a GAAP basis and rental churn
of 2.0%
- Commenced 42,672 net rentable square
feet of new and expansion leases with annualized GAAP rent of $147
per square foot
Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are
pleased to record a solid quarter of growth for CoreSite, and
importantly, one that reflects the continued success we are seeing
in our network-centric, differentiated strategy. We remain focused
upon continuing to increase the number and quality of customer
deployments in our portfolio and enhancing the value proposition of
the CoreSite Mesh. We executed 115 new and expansion leases in the
quarter including agreements with 33 new customers. Additionally,
we are pleased with the continued evolution we saw in our sales
mix, recording an increasing number of leases bringing high-value
applications to our platform.” Mr. Ray continued, “Regarding
growth, we continue to invest to meet customer demand, with four
data center projects under way. We believe that we have
considerable upside embedded in our portfolio as we increase the
utilization of existing and new inventory, positively mark to
market expiring capacity, and most importantly, continue to drive
increased network density and valuable customer communities across
our data centers.”
Financial Results
CoreSite reported FFO attributable to shares and units of $21.1
million for the three months ended June 30, 2013, a 22.0% increase
year-over-year and an increase of 9.6% sequential
quarter-over-quarter. On a per diluted share and unit basis, FFO
increased 21.6% to $0.45 for the three months ended June 30, 2013,
as compared to $0.37 per diluted share and unit for the three
months ended June 30, 2012. Total operating revenue for the three
months ended June 30, 2013, was $57.7 million, a 13.9% increase
year-over-year. CoreSite reported net income for the three months
ended June 30, 2013, of $7.9 million and net income attributable to
common shares of $2.6 million, or $0.12 per diluted share.
Sales Activity
CoreSite executed new and expansion data center leases
representing $5.8 million of annualized GAAP rent during the
quarter, comprised of 30,810 NRSF at a weighted average GAAP rate
of $188 per NRSF.
CoreSite’s renewal leases signed in the second quarter totaled
44,702 NRSF at a weighted average GAAP rate of $166 per NRSF,
reflecting a 5.4% increase in rent on a cash basis and an 11.7%
increase on a GAAP basis. The second quarter rental churn rate was
2.0%.
CoreSite’s second quarter data center lease commencements
totaled 42,672 NRSF at a weighted average GAAP rental rate of $147
per NRSF, which represents $6.3 million of annualized GAAP
rent.
Development Activity
CoreSite had 236,673 NRSF of data center space under
construction at four key locations as of June 30, 2013. The
projects under construction include new data centers at SV5 (San
Francisco Bay area), VA2 (Northern Virginia area), NY2 (New York)
and additional inventory at LA2 (Los Angeles). As of June 30, 2013,
CoreSite had incurred $59.4 million of the estimated $188.0 million
required to complete these projects.
Balance Sheet and
Liquidity
As of June 30, 2013, CoreSite had $132.0 million of total
long-term debt equal to 1.2x annualized adjusted EBITDA and
long-term debt and preferred stock equal to 2.3x annualized
adjusted EBITDA.
At quarter end, CoreSite had $2.8 million of cash available on
its balance sheet and $324.5 million of available capacity under
its credit facility.
Dividend
On May 24, 2013, CoreSite announced a dividend of $0.27 per
share of common stock and common stock equivalents for the second
quarter of 2013. The dividend was paid on July 15, 2013, to
shareholders of record on June 28, 2013.
CoreSite also announced on May 24, 2013, a dividend of $0.4531
per share of Series A preferred stock for the period April 15,
2013, to July 14, 2013. The preferred dividend was paid on July 15,
2013, to shareholders of record on June 28, 2013.
2013 Guidance
CoreSite is increasing and narrowing its FFO per share and OP
unit guidance to $1.76 to $1.84 from the prior range of $1.72 to
$1.82.
This outlook is predicated on current economic conditions,
internal assumptions about CoreSite’s customer base, and the supply
and demand dynamics of the markets in which CoreSite operates. The
guidance does not include the impact of any future financing,
investment or disposition activities.
Upcoming Conferences and
Events
CoreSite will participate in Bank of America’s 2013 Global Real
Estate Conference from September 11 through September 12 in New
York, New York.
Conference Call Details
CoreSite will host a conference call July 25, 2013, at 12:00
p.m., Eastern time (10:00 a.m. Mountain time), to discuss its
financial results, current business trends and market
conditions.
The call can be accessed live over the phone by dialing
877-407-3982 for domestic callers or 201-493-6780 for international
callers. A replay will be available shortly after the call and can
be accessed by dialing 877-870-5176 for domestic callers or
858-384-5517 for international callers. The passcode for the replay
is 416873. The replay will be available until August 1, 2013.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging on to the company’s website at
www.CoreSite.com and clicking on the “Investors” tab. The on-line
replay will be available for a limited time beginning immediately
following the call.
About CoreSite
CoreSite Realty Corporation (NYSE: COR) is the data center
provider chosen by more than 750 of the world's leading carriers
and mobile operators, content and cloud providers, media and
entertainment companies, and global enterprises to run their
performance-sensitive applications and to connect and do business.
CoreSite propels customer growth and long-term competitive
advantage through the CoreSite Mesh by connecting the Internet,
private networking, mobility, and cloud communities within and
across its 14 high-performance data center campuses in eight
markets in North America. With direct access to 275+ carriers and
ISPs, over 180 leading cloud and IT service providers, inter-site
connectivity, and the nation's first Open Cloud Exchange that
provides access to thousands of lit buildings and multiple key
cloud on-ramps, CoreSite provides easy, efficient and valuable
gateways to global business opportunities. For more information,
visit www.CoreSite.com.
Forward Looking Statements
This earnings release and accompanying supplemental information
may contain forward-looking statements within the meaning of the
federal securities laws. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can
identify forward-looking statements by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “should,”
“seeks,” “approximately,” “intends,” “plans,” “pro forma,”
“estimates” or “anticipates” or the negative of these words and
phrases or similar words or phrases that are predictions of or
indicate future events or trends and that do not relate solely to
historical matters. Forward-looking statements involve known and
unknown risks, uncertainties, assumptions and contingencies, many
of which are beyond CoreSite’s control, that may cause actual
results to differ significantly from those expressed in any
forward-looking statement. These risks include, without limitation:
the geographic concentration of the company’s data centers in
certain markets and any adverse developments in local economic
conditions or the demand for data center space in these markets;
fluctuations in interest rates and increased operating costs;
difficulties in identifying properties to acquire and completing
acquisitions; significant industry competition; the company’s
failure to obtain necessary outside financing; the company’s
failure to qualify or maintain its status as a REIT; financial
market fluctuations; changes in real estate and zoning laws and
increases in real property tax rates; and other factors affecting
the real estate industry generally. All forward-looking statements
reflect the company’s good faith beliefs, assumptions and
expectations, but they are not guarantees of future performance.
Furthermore, the company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes
in underlying assumptions or factors, of new information, data or
methods, future events or other changes. For a further discussion
of these and other factors that could cause the company’s future
results to differ materially from any forward-looking statements,
see the section entitled “Risk Factors” in the company’s most
recent annual report on Form 10-K, and other risks described in
documents subsequently filed by the company from time to time with
the Securities and Exchange Commission.
Consolidated Balance Sheets (in thousands)
June 30,
2013
December 31,
2012
Assets: Investments in real estate: Land $ 76,227 $
85,868 Building and building improvements 652,142 596,405 Leasehold
improvements 91,175 85,907
819,544 768,180 Less: Accumulated depreciation and
amortization (129,038 ) (105,433 ) Net
investment in operating properties 690,506 662,747 Construction in
progress 104,963 61,328
Net investments in real estate 795,469
724,075 Cash and cash equivalents 2,803 8,130
Accounts and other receivables, net 7,930 9,901 Lease intangibles,
net 14,154 19,453 Goodwill 41,191 41,191 Other assets
45,312 42,582
Total assets
$ 906,859 $
845,332 Liabilities and equity:
Liabilities Revolving credit facility 73,000 - Mortgage
loans payable 59,000 59,750 Accounts payable and accrued expenses
50,127 50,624 Deferred rent payable 5,725 4,329 Acquired
below-market lease contracts, net 7,520 8,539 Prepaid rent and
other liabilities 11,590 11,317
Total liabilities 206,962
134,559 Stockholders' equity Series A
cumulative preferred stock 115,000 115,000 Common stock, par value
$0.01 208 207 Additional paid-in capital 263,479 259,009
Distributions in excess of net income (43,078
) (35,987 ) Total stockholders' equity 335,609 338,229
Noncontrolling interests 364,288
372,544
Total equity 699,897
710,773
Total liabilities and equity
$ 906,859 $
845,332 Consolidated Statement of
Operations (in thousands, except share and per share data)
Three Months Ended:
Six Months Ended:
June 30,
2013
March 31,
2013
June 30,
2012
June 30,
2013
June 30,
2012
Operating revenues:
Rental revenue $ 34,205 $ 33,102 $ 30,604 $ 67,307 $ 60,234 Power
revenue 14,486 13,529 12,939 28,015 25,313 Interconnection revenue
7,053 6,572 5,436 13,625 9,091 Tenant reimbursement and other
1,923 1,888 1,657
3,811 3,282 Total operating revenues
57,667 55,091 50,636 112,758 97,920
Operating expenses:
Property operating and maintenance 15,118 14,527 15,274 29,645
29,669 Real estate taxes and insurance 2,304 2,220 2,132 4,524
4,146 Depreciation and amortization 16,261 15,949 15,947 32,210
31,408 Sales and marketing 3,936 3,789 2,581 7,725 4,710 General
and administrative 6,177 7,003 6,036 13,180 12,388 Rent 4,756 4,793
4,691 9,549 9,268 Transaction costs 249
5 161 254 283
Total operating expenses 48,801 48,286
46,822 97,087 91,872
Operating income 8,866 6,805 3,814 15,671 6,048
Interest income 2 2 5 4 7 Interest expense (783 )
(439 ) (1,309 ) (1,222 ) (2,327 ) Income
before income taxes 8,085 6,368 2,510 14,453 3,728 Income tax
expense (206 ) (173 ) (662 ) (379 )
(537 ) Net income 7,879 6,195 1,848 14,074 3,191 Net income
attributable to noncontrolling interests 3,176
2,262 1,022 5,438
1,765 Net income attributable to CoreSite Realty Corporation
4,703 3,933 826 8,636 1,426 Preferred dividends
(2,085 ) (2,084 ) - (4,169 ) -
Net income attributable to common shares $ 2,618
$ 1,849 $ 826 $ 4,467 $ 1,426
Net income per share attributable to common shares: Basic $ 0.13 $
0.09 $ 0.04 $ 0.22 $ 0.07 Diluted $ 0.12 $ 0.09 $
0.04 $ 0.21 $ 0.07 Weighted average common
shares outstanding: Basic 20,829,375 20,673,896 20,532,930
20,752,065 20,494,402 Diluted 21,445,875 21,314,779 20,914,686
21,412,289 20,801,050
Reconciliation of Net Income
to FFO (in thousands, except share and per share data)
Three Months Ended Six Months
Ended
June 30,
2013
March 31,
2013
June 30,
2012
June 30,
2013
June 30,
2012
Net income $ 7,879 $ 6,195 $ 1,848 $ 14,074 $ 3,191 Real estate
depreciation and amortization 15,309 15,142
15,437 30,451 30,445 FFO $
23,188 $ 21,337 $ 17,285 $ 44,525 $ 33,636 Preferred stock
dividends (2,085 ) (2,084
) - (4,169 ) - FFO
available to common shareholders and OP unit holders
$ 21,103 $ 19,253 $ 17,285
$ 40,356 $ 33,636 Weighted average
common shares outstanding - diluted 21,445,875 21,314,779
20,914,686 21,412,289 20,801,050 Weighted average OP units
outstanding - diluted 25,353,709 25,353,709
25,346,097 25,353,709 25,345,590
Total weighted average shares and units outstanding - diluted
46,799,584 46,668,488 46,260,783 46,765,998 46,146,640 FFO per
common share and OP unit - diluted $ 0.45 $ 0.41
$ 0.37 $ 0.86 $ 0.73
Funds from Operations “FFO” is a supplemental measure of our
performance which should be considered along with, but not as an
alternative to, net income and cash provided by operating
activities as a measure of operating performance and liquidity. We
calculate FFO in accordance with the standards established by the
National Association of Real Estate Investment Trusts (“NAREIT”).
FFO represents net income (loss) (computed in accordance with
GAAP), excluding gains (or losses) from sales of property and
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 offer this measure because we recognize that FFO will be used
by investors as a basis to compare our operating performance with
that of other REITs. However, because FFO excludes depreciation and
amortization and captures neither the changes in the value of our
properties that result from use or market conditions, nor the level
of capital expenditures and capitalized leasing commissions
necessary to maintain the operating performance of our properties,
all of which have real economic effect and could materially impact
our financial condition and results from operations, the utility of
FFO as a measure of our performance is limited. FFO is a non-GAAP
measure and should not be considered a measure of liquidity, an
alternative to net income, cash provided by operating activities or
any other performance measure determined in accordance with GAAP,
nor is it indicative of funds available to fund our cash needs,
including our ability to pay dividends or make distributions. In
addition, our calculations of FFO are not necessarily comparable to
FFO as calculated by other REITs that do not use the same
definition or implementation guidelines or interpret the standards
differently from us. Investors in our securities should not rely on
these measures as a substitute for any GAAP measure, including net
income.
Reconciliation of Net Income to EBITDA and
Adjusted EBITDA (in thousands)
Three
Months Ended: Six Months Ended:
June 30,
2013
March 31,
2013
June 30,
2012
June 30,
2013
June 30,
2012
Net income $ 7,879 $ 6,195 $ 1,848 $ 14,074 $ 3,191 Adjustments:
Interest expense, net of interest income 781 437 1,304 1,218 2,320
Income taxes 206 173 662 379 537 Depreciation and amortization
16,261 15,949
15,947 32,210 31,408
EBITDA $ 25,127 $ 22,754 $ 19,761 $ 47,881 $ 37,456 Non-cash
compensation 1,683 1,895 1,779 3,578 2,526 Transaction costs /
litigation 399 105
161 504 1,733 Adjusted
EBITDA $ 27,209 $ 24,754 $
21,701 $ 51,963 $ 41,715
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. We calculate adjusted EBITDA by
adding our non-cash compensation expense, transaction costs and
litigation expense to EBITDA as well as adjusting for the impact of
gains or losses on early extinguishment of debt. Management uses
EBITDA and adjusted EBITDA as indicators of our ability to incur
and service debt. In addition, we consider EBITDA and adjusted
EBITDA to be appropriate supplemental measures of our performance
because they eliminate depreciation and interest, which permits
investors to view income from operations without the impact of
non-cash depreciation or the cost of debt. However, because EBITDA
and adjusted EBITDA are calculated before recurring cash charges
including interest expense and taxes, and are not adjusted for
capital expenditures or other recurring cash requirements of our
business, their utilization as a cash flow measurement is
limited.
CoreSite Investor Relations Contact+1
303.222.7276InvestorRelations@CoreSite.comorCoreSite Media
ContactJeannie Zaemes | CoreSite Marketing Senior Director+1
720.446.2006 | +1 866.777.COREJeannie.Zaemes@CoreSite.com
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