2013 funds from operations increased 17% to
$1.82 per share
CoreSite Realty Corporation (NYSE:COR), a provider of
network-dense, cloud-enabled, enterprise-class data center products
and services, today announced financial results for the fourth
quarter ended December 31, 2013.
Quarterly and Subsequent
Highlights
- Reported fourth-quarter funds from
operations (“FFO”) of $0.49 per diluted share and unit,
representing a 16.7% increase year over year
- Reported fourth-quarter operating
revenue of $61.4 million, representing an 11.2% increase year over
year
- Executed new and expansion data center
leases representing $3.5 million of annualized GAAP rent at a rate
of $132 of annualized GAAP rent per square foot
- Realized rent growth on signed renewals
of 3.5% on a cash basis and 14.3% on a GAAP basis and rental churn
of 1.9%
- Increased quarterly dividend by 30% to
$0.35 per share; annual rate of $1.40 per share
- Entered into a new $100 million,
five-year, senior unsecured term loan, and subsequently retired the
approximately $58 million loan secured by its SV1 facility
Tom Ray, CoreSite’s Chief Executive Officer, commented, “In the
fourth quarter we continued to see the financial results driven by
execution upon our plan to sell an attractive product mix to
customers benefitting from our strong foundation in the network and
cloud verticals,” Mr. Ray continued, “We also delivered the first
computer room of turn-key data center capacity at NY2 in Secaucus,
New Jersey, in December, and are pleased with sales activity
surrounding the investment. In addition, we delivered the
build-to-suit at SV5 and look forward to completing construction on
our VA2 development in Northern Virginia toward the second half of
the year. 2014 represents a year of strong opportunity for CoreSite
to leverage our network-dense, cloud-enabled data centers with
excellence in customer service. Our primary focus for the balance
of 2014 centers around increasing the productivity of our existing
sales and marketing resources to sell available and pipeline
capacity and deliver attractive returns on capital.”
Financial Results
CoreSite reported FFO attributable to shares and units of $23.1
million for the three months ended December 31, 2013, a 17.2%
increase year over year and an increase of 5.6% quarter over
quarter. On a per diluted share and unit basis, FFO increased 16.7%
to $0.49 for the three months ended December 31, 2013, as compared
to $0.42 per diluted share and unit for the three months ended
December 31, 2012. Total operating revenue for the three months
ended December 31, 2013, was $61.4 million, an 11.2% increase year
over year. Revenue growth in the fourth quarter was diluted by 1.8%
due to CoreSite’s customer at SV3 decreasing its metered power draw
as it transitions out of that facility. CoreSite reported net
income attributable to common shares of $3.1 million, or $0.15 per
diluted share.
Sales Activity
CoreSite executed 122 new and expansion data center leases,
representing $3.5 million of annualized GAAP rent during the fourth
quarter, comprised of 26,276 NRSF at a weighted average GAAP rate
of $132 per NRSF.
CoreSite’s renewal leases signed in the fourth quarter totaled
$6.8 million in annualized GAAP rent, comprised of 50,513 NRSF at a
weighted average GAAP rate of $135 per NRSF. These results reflect
a 3.5% increase in rent on a cash basis and a 14.3% increase on a
GAAP basis. The fourth-quarter rental churn rate was 1.9%.
CoreSite’s fourth-quarter data center lease commencements
totaled 116,052 NRSF at a weighted average GAAP rental rate of $41
per NRSF, which represents $4.8 million of annualized GAAP rent.
These results include a 101,721 NRSF build-to-suit powered shell
lease for a valued and strategic customer at the Santa Clara
Campus. Excluding this lease, commencements totaled 14,331 at a
weighted average GAAP rental rate of $116 per NRSF.
Development Activity
In the fourth quarter, CoreSite completed and delivered the
build-to-suit powered shell building at SV5 on its Santa Clara
campus. Also during the quarter, the company placed into service
the first computer room at the new NY2 data center in Secaucus, New
Jersey, representing an incremental 18,103 NRSF of TKD
capacity.
As of December 31, 2013, CoreSite had 118,300 NRSF of data
center space under construction at three locations. The projects
under construction include a new data center at VA2 (Northern
Virginia), adjacent to VA1, and additional inventory at NY2 (New
York market) and LA2 (Los Angeles). As of December 31, 2013,
CoreSite had incurred $117.9 million of the estimated $170.4
million required to complete these projects.
Balance Sheet and
Liquidity
As of December 31, 2013, CoreSite had $232.5 million of total
long-term debt equal to 2.1x annualized adjusted EBITDA and $347.5
million of long-term debt and preferred stock equal to 3.1x
annualized adjusted EBITDA.
As of December 31, 2013, CoreSite had $174.3 million drawn on
the credit facility and approximately $222.4 million of available
capacity under the facility.
At quarter end, CoreSite had $5.3 million of cash available on
its balance sheet. On January 31, 2014, CoreSite entered into a new
$100 million, five-year, senior unsecured term loan. The term loan
has an accordion feature, which would allow CoreSite to increase
the total commitments by $100 million, to $200 million, under
specified circumstances. CoreSite used the capacity under the term
loan to retire the $58 million mortgage on its SV1 facility and pay
down a portion of the outstanding balance on its revolving credit
facility.
Dividend
On December 6, 2013, CoreSite announced a 30% increase in its
quarterly dividend to $0.35 per share of common stock and common
stock equivalents for the fourth quarter of 2013. The dividend was
paid on January 15, 2014, to shareholders of record on December 31,
2013.
CoreSite also announced on December 6, 2013, a dividend of
$0.4531 per share of Series A preferred stock for the period
October 15, 2013, to January 14, 2014. The preferred dividend was
paid on January 15, 2014, to shareholders of record on December 31,
2013.
2014 Guidance
CoreSite is introducing its 2014 guidance of FFO per diluted
share and unit in the range of $2.00 to $2.10. More detail
regarding the assumptions behind the 2014 annual guidance can be
found on page 21 of the earnings supplemental.
In addition, the company’s estimate of the net income
attributable to common shares is $0.50 to $0.60 per diluted share,
with the difference between FFO and net income being real estate
depreciation and amortization.
This outlook is predicated on current economic conditions,
internal assumptions about CoreSite’s customer base, and the supply
and demand dynamics of the markets in which CoreSite operates. The
guidance does not include the impact of any future financing,
investment or disposition activities, beyond what has already been
disclosed.
Upcoming Conferences and
Events
CoreSite will participate in Citi’s 2014 Global Property CEO
Conference on March 3, 2014, at The Westin Diplomat in Hollywood,
Florida.
Conference Call Details
CoreSite will host a conference call on February 13, 2014, 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 13574365. The replay will be available until February 20,
2014.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging on to CoreSite’s website at
www.CoreSite.com and clicking on the “Investors” tab. The on-line
replay will be available for a limited time immediately following
the call.
About CoreSite
CoreSite Realty Corporation (NYSE:COR) delivers secure and
reliable data center solutions across eight key North American
markets. CoreSite connects, protects and delivers an optimal
performance environment and continued operation of mission-critical
data and IT infrastructure for enterprises and Internet, private
networking, mobility, and cloud service providers. CoreSite's
scalable platform of over two and a half million square feet of
efficient, network-dense, cloud-enabled data center capacity
enables customers to accelerate business performance, reduce
operating costs and increase flexibility across their IT and
communications systems. CoreSite's 350 professionals deliver
best-in-class service by placing customer needs first in supporting
the planning, implementation and operating requirements
foundational to delivering reliable, secure and efficient IT
operating environments.
More than 750 of the world’s leading enterprises, carriers and
mobile operators, content and cloud providers and media and
entertainment companies choose CoreSite to connect, protect and
optimize their performance-sensitive data, applications and
computing workloads. CoreSite provides valuable gateways to global
business opportunities with direct access to more than 275 carriers
and ISPs, inter-site connectivity and CoreSite's Open Cloud
Exchange, which supports rapid, efficient and scalable Ethernet
access to multiple key public clouds, enabling simple, flexible,
multiple-cloud capabilities.
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 Sheet (in thousands)
December 31,
2013
December 31,
2012
Assets: Investments in real estate: Land $ 78,983 $ 85,868
Building and building improvements 717,007 596,405 Leasehold
improvements 95,218 85,907 891,208
768,180 Less: Accumulated depreciation and amortization
(155,704 ) (105,433 ) Net investment in operating properties
735,504 662,747 Construction in progress 157,317
61,328
Net investments in real estate
892,821 724,075 Cash and cash equivalents
5,313 8,130 Accounts and other receivables, net 10,339 9,901 Lease
intangibles, net 11,028 19,453 Goodwill 41,191 41,191 Other assets
55,802 42,582
Total
assets $ 1,016,494 $ 845,332
Liabilities and equity: Liabilities
Revolving credit facility $ 174,250 $
-
Mortgage loan payable 58,250 59,750 Accounts payable and accrued
expenses 67,782 50,624 Deferred rent payable 9,646 4,329 Acquired
below-market lease contracts, net 6,681 8,539 Prepaid rent and
other liabilities 11,578 11,317
Total liabilities 328,187 134,559
Stockholders' equity Series A cumulative
preferred stock 115,000 115,000 Common stock, par value $0.01 209
207 Additional paid-in capital 267,465 259,009 Distributions in
excess of net income (50,264 ) (35,987 ) Total
stockholders' equity 332,410 338,229 Noncontrolling interests
355,897 372,544
Total equity
688,307 710,773
Total
liabilities and equity $ 1,016,494
$ 845,332 Consolidated
Statement of Operations (in thousands, except share and per
share data)
Three Months Ended Year Ended
December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operating revenues: Data center revenue: Rental revenue $
33,988 $ 33,428 $ 30,251 $ 131,080 $ 116,146 Power revenue 15,669
15,979 14,129 59,663 53,672 Interconnection revenue 7,866 7,441
6,369 28,932 21,637 Tenant reimbursement and other 1,885
1,873 2,506 7,317
7,088 Total data center revenue 59,408 58,721 53,255
226,992 198,543 Office, light industrial and other revenue
2,032 1,914 1,997 7,841
8,391 Total operating revenues 61,440 60,635
55,252 234,833 206,934
Operating expenses: Property
operating and maintenance 17,247 17,368 15,206 64,260 61,235 Real
estate taxes and insurance 1,708 2,226 2,461 8,458 8,765
Depreciation and amortization 17,151 16,424 16,336 65,785 64,327
Sales and marketing 3,474 3,206 3,389 14,405 10,330 General and
administrative 7,092 7,045 7,133 27,317 25,910 Rent 5,028 5,082
4,754 19,659 18,711 Transaction costs - 25
37 279 613 Total
operating expenses 51,700 51,376
49,316 200,163 189,891
Operating income 9,740 9,259 5,936 34,670 17,043 Interest
income 14 14 1 32 13 Interest expense (759 ) (708 )
(1,314 ) (2,689 ) (5,236 ) Income before
income taxes 8,995 8,565 4,623 32,013 11,820 Income tax (expense)
benefit 34 (56 ) (45 ) (401 )
(1,104 ) Net income 9,029 8,509 4,578 31,612 10,716 Net
income attributable to noncontrolling interests 3,809
3,524 2,276 12,771
5,668 Net income attributable to CoreSite Realty Corporation
5,220 4,985 2,302 18,841 5,048 Preferred dividends (2,085 )
(2,084 ) (440 ) (8,338 ) (440 ) Net
income attributable to common shares $ 3,135 $ 2,901
$ 1,862 $ 10,503 $ 4,608 Net income per share
attributable to common shares: Basic $ 0.15 $ 0.14 $ 0.09 $ 0.50 $
0.22 Diluted $ 0.15 $ 0.14 $ 0.09 $ 0.49
$ 0.22 Weighted average common shares outstanding:
Basic 20,924,624 20,871,504 20,607,119 20,826,622 20,537,946
Diluted 21,492,301 21,479,971 21,036,794 21,503,212 20,992,290
Reconciliations of Net Income to FFO (in
thousands, except share and per share data)
Three Months Ended Year
Ended
December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Net income $ 9,029 $ 8,509 $ 4,578 $ 31,612 $ 10,716 Real estate
depreciation and amortization 16,146 15,443
15,566 62,040 61,700
FFO $ 25,175 $ 23,952 $ 20,144 $ 93,652 $ 72,416 Preferred
stock dividends (2,085 ) (2,084
) (440 ) (8,338 )
(440 ) FFO available to common shareholders and OP unit holders
$ 23,090 $ 21,868 $
19,704 $ 85,314 $ 71,976
Weighted average common shares outstanding - diluted 21,492,301
21,479,971 21,036,794 21,503,212 20,992,290 Weighted average OP
units outstanding - diluted 25,360,848
25,353,942 25,353,709 25,355,567
25,347,936 Total weighted average shares and units
outstanding - diluted 46,853,149 46,833,913 46,390,503 46,858,779
46,340,226 FFO per common share and OP unit - diluted $ 0.49
$ 0.47 $ 0.42 $ 1.82 $ 1.55
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. FFO attributable to
common shares and units represents FFO less preferred stock
dividends declared during the period.
Our management uses FFO as a supplemental
performance measure because, in excluding real estate related
depreciation and amortization and gains and losses from property
dispositions, it provides a performance measure that, when compared
year over year, captures trends in occupancy rates, rental rates
and operating costs.
We offer this measure because we recognize
that FFO will be used by investors as a basis to compare our
operating performance with that of other REITs. However, because
FFO excludes depreciation and amortization and captures neither the
changes in the value of our properties that result from use or
market conditions, nor the level of capital expenditures and
capitalized leasing commissions necessary to maintain the operating
performance of our properties, all of which have real economic
effect and could materially impact our financial condition and
results from operations, the utility of FFO as a measure of our
performance is limited. FFO is a non-GAAP measure and should not be
considered a measure of liquidity, an alternative to net income,
cash provided by operating activities or any other performance
measure determined in accordance with GAAP, nor is it indicative of
funds available to fund our cash needs, including our ability to
pay dividends or make distributions. In addition, our calculations
of FFO are not necessarily comparable to FFO as calculated by other
REITs that do not use the same definition or implementation
guidelines or interpret the standards differently from us.
Investors in our securities should not rely on these measures as a
substitute for any GAAP measure, including net income.
Reconciliation of Net Income to EBITDA and
Adjusted EBITDA: (in thousands)
Three Months Ended Year
Ended
December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Net income $ 9,029 $ 8,509 $ 4,578 $ 31,612 $ 10,716 Adjustments:
Interest expense, net of interest income 745 694 1,313 2,657 5,223
Income taxes (34 ) 56 45 401 1,104 Depreciation and amortization
17,151 16,424 16,336 65,785
64,327 EBITDA $ 26,891 $ 25,683 $ 22,272 $ 100,455 $ 81,370
Non-cash compensation 1,433 1,759 1,568 6,770 5,650 Transaction
costs / litigation - 25
328 529 2,354
Adjusted EBITDA $ 28,324 $ 27,467
$ 24,168 $ 107,754 $ 89,374
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 ContactGreer Aviv | CoreSite
Investor Relations Director+1 303.405.1012 | +1
303.222.7276Greer.Aviv@CoreSite.com
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