2014 FFO, excluding non-recurring items,
increased 20% year over year to $2.18 per share
CoreSite Realty Corporation (NYSE:COR), a premier provider of
secure, reliable, high-performance data center solutions across the
US, today announced financial results for the fourth quarter ended
December 31, 2014.
Quarterly Highlights
- Reported fourth-quarter funds from
operations (“FFO”) of $0.61 per diluted share and unit,
representing 24.5% growth year over year
- Reported fourth-quarter total operating
revenues of $72.5 million, representing an 18.0% increase year over
year; data center revenues increased 18.9% year over year
- Executed 91,662 net rentable square
feet of new and expansion turn-key data center leases representing
$11.1 million of annualized GAAP rent at a rate of $121 per square
foot
- Realized rent growth on signed renewals
of 2.6% on a cash basis and 5.2% on a GAAP basis and recorded
rental churn of 1.4%
- Commenced 34,009 net rentable square
feet of new and expansion leases representing $4.9 million of
annualized GAAP rent at a rate of $145 per square foot, increasing
stabilized data center occupancy to 87.4%
- Opened VA2 with 100% of the first phase
of turn-key capacity leased to a single anchor tenant whose lease
commences in April 2015
- Increased quarterly common stock
dividend by 20% to $0.42 per share; annual rate of $1.68 per
share
Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are
pleased to report continued execution of our business plan in the
fourth quarter, delivering another quarter of solid revenue and
earnings growth and finishing out 2014 as a strong year for
CoreSite.” Mr. Ray continued, “We finished 2014 and began 2015 with
accelerating momentum, upon which we will continue to execute as we
focus on capturing opportunities to grow organically in our
existing markets.”
Financial Results
CoreSite reported FFO attributable to shares and units of $29.0
million for the three months ended December 31, 2014, a 25.5%
increase year over year and an increase of 11.9% sequentially. On a
per diluted share and unit basis, FFO increased 24.5% to $0.61 for
the three months ended December 31, 2014, as compared to $0.49 per
diluted share and unit for the three months ended December 31,
2013. On a sequential basis, FFO per diluted share increased
10.9%.
Total operating revenues for the three months ended December 31,
2014, were $72.5 million, an 18.0% increase year over year and an
increase of 2.8% sequentially. Data center revenues for the three
months ended December 31, 2014, were $70.6 million, an 18.9%
increase year over year and an increase of 3.1% sequentially.
CoreSite reported net income attributable to common shares of $4.7
million, or $0.21 per diluted share.
Sales Activity
CoreSite executed 96 new and expansion turn-key data center
leases representing $11.1 million of annualized GAAP rent during
the fourth quarter, comprised of 91,662 NRSF at a weighted-average
GAAP rate of $121 per NRSF. During the fourth quarter, CoreSite
opened VA2 in Reston, Virginia, with the first phase of 44,036 NRSF
of turn-key capacity leased to a single anchor tenant.
CoreSite’s renewal leases signed in the fourth quarter totaled
$6.7 million in annualized GAAP rent, comprised of 43,863 NRSF at a
weighted average GAAP rate of $153 per NRSF, reflecting a 2.6%
increase in rent on a cash basis and a 5.2% increase on a GAAP
basis. The fourth-quarter rental churn rate was 1.4%.
CoreSite’s fourth-quarter data center lease commencements
totaled 34,009 NRSF at a weighted average GAAP rental rate of $145
per NRSF, which represents $4.9 million of annualized GAAP
rent.
Development Activity
CoreSite had 92,173 NRSF of data center space under construction
at VA2 in Reston, Virginia, at the end of the fourth quarter,
comprised of Phase 1 and Phase 2 construction. This amount includes
44,036 NRSF associated with Phase 1 that was 100% leased as of
December 31, 2014. As of December 31, 2014, CoreSite had incurred
$77.5 million of the estimated $89.4 million required to complete
these projects at VA2.
During the fourth quarter, CoreSite began construction on Phase
2 at NY2, comprising 49,050 NRSF expected to be delivered in the
second quarter of 2015. As of December 31, 2014, CoreSite had
incurred $2.3 million of the estimated $21.3 million required to
complete this project.
Additionally, CoreSite had 28,587 NRSF of turn-key data center
capacity under construction at three locations as of December 31,
2014, across the Company’s existing facilities at BO1 (Boston), DE1
(Denver), and CH1 (Chicago). As of December 31, 2014, CoreSite had
incurred $1.4 million of the estimated $18.0 million required to
complete these projects.
Balance Sheet and
Liquidity
As of December 31, 2014, CoreSite had $318.5 million of total
long-term debt, correlating to 2.2 times fourth-quarter annualized
adjusted EBITDA, and $433.5 million of long-term debt and preferred
stock, correlating to 3.0 times fourth-quarter annualized adjusted
EBITDA.
At quarter end, CoreSite had $10.7 million of cash available on
its balance sheet and $179.2 million of capacity available under
its revolving credit facility.
Dividend
On December 8, 2014, CoreSite announced a 20% increase in its
quarterly dividend to $0.42 per share of common stock and common
stock equivalents for the fourth quarter of 2014. The increased
dividend reflects an annualized dividend rate of $1.68 per share,
compared to the prior annualized dividend rate of $1.40 per share.
The fourth-quarter common stock dividend was paid on January 15,
2015, to shareholders of record on December 31, 2014.
CoreSite also announced on December 8, 2014, a dividend of
$0.4531 per share of Series A preferred stock for the period
October 15, 2014, to January 14, 2015. The preferred dividend was
paid on January 15, 2015, to shareholders of record on December 31,
2014.
2015 Guidance
CoreSite is introducing its 2015 guidance of FFO per diluted
share and unit in the range of $2.55 to $2.65. More detail
regarding the assumptions underpinning the 2015 annual guidance can
be found on page 24 of the fourth-quarter 2014 earnings
supplemental.
In addition, the company’s estimate of 2015 net income
attributable to common shares is $0.75 to $0.85 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 2015 Global Property CEO
Conference on March 2, 2015, at The Diplomat Resort & Spa in
Hollywood, Florida.
Conference Call Details
CoreSite will host a conference call on February 12, 2015, 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 13598544. The replay will be available until February 19,
2015.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging on to CoreSite’s website at
www.CoreSite.com and clicking on the “Investors” link. The on-line
replay will be available for a limited time beginning immediately
following the call.
About CoreSite
CoreSite Realty Corporation (NYSE:COR) delivers secure,
reliable, high-performance data center solutions across eight key
North American markets. More than 800 of the world’s leading
enterprises, network operators, cloud providers, and supporting
service providers choose CoreSite to connect, protect and optimize
their performance-sensitive data, applications and computing
workloads. Our scalable, flexible solutions and 350+ dedicated
employees consistently deliver unmatched data center options -- all
of which leads to a best-in-class customer experience and lasting
relationships. For more information, visit www.CoreSite.com.
Forward-Looking
Statements
This earnings release and accompanying supplemental information
may contain forward-looking statements within the meaning of the
federal securities laws. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can
identify forward-looking statements by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “should,”
“seeks,” “approximately,” “intends,” “plans,” “pro forma,”
“estimates” or “anticipates” or the negative of these words and
phrases or similar words or phrases that are predictions of or
indicate future events or trends and that do not relate solely to
historical matters. Forward-looking statements involve known and
unknown risks, uncertainties, assumptions and contingencies, many
of which are beyond CoreSite’s control, that may cause actual
results to differ significantly from those expressed in any
forward-looking statement. These risks include, without limitation:
the geographic concentration of the company’s data centers in
certain markets and any adverse developments in local economic
conditions or the demand for data center space in these markets;
fluctuations in interest rates and increased operating costs;
difficulties in identifying properties to acquire and completing
acquisitions; significant industry competition; the company’s
failure to obtain necessary outside financing; the company’s
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)
December 31,2014
December 31,2013
Assets: Investments in real estate: Land $ 78,983 $ 78,983
Building and improvements 889,341
812,225 968,324 891,208 Less: Accumulated
depreciation and amortization (215,978 )
(155,704 ) Net investment in operating properties 752,346
735,504 Construction in progress 178,224
157,317
Net investments in real estate
930,570 892,821 Cash and
cash equivalents 10,662 5,313 Accounts and other receivables, net
10,290 10,339 Lease intangibles, net 7,112 11,028 Goodwill 41,191
41,191 Other assets 75,600
55,802
Total assets $ 1,075,425
$ 1,016,494
Liabilities and equity: Liabilities Revolving credit
facility $ 218,500 $ 174,250 Senior unsecured term loan 100,000 -
Mortgage loan payable - 58,250 Accounts payable and accrued
expenses 42,463 48,978 Accrued dividends and distributions 22,355
18,804 Deferred rent payable 8,985 9,646 Acquired below-market
lease contracts, net 5,576 6,681 Unearned revenue, prepaid rent and
other liabilities 19,205 11,578
Total liabilities 417,084
328,187
Stockholders' equity Series A
cumulative preferred stock 115,000 115,000 Common stock, par value
$0.01 212 209 Additional paid-in capital 275,038 267,465
Accumulated other comprehensive loss (125 ) - Distributions in
excess of net income (67,538 ) (50,264
) Total stockholders' equity 322,587 332,410 Noncontrolling
interests 335,754 355,897
Total equity 658,341
688,307
Total liabilities and equity
$ 1,075,425 $ 1,016,494
Consolidated Statements of Operations
(in
thousands, except share and per share data)
Three Months Ended Year Ended
December 31, 2014 September 30, 2014 December 31,
2013 December 31, 2014 December 31, 2013
Operating revenues: Data center revenue: Rental revenue $
39,142 $ 38,315 $ 33,988 $ 149,294 $ 131,080 Power revenue 19,963
18,687 15,669 71,227 59,663 Interconnection revenue 9,536 9,169
7,866 35,355 28,932 Tenant reimbursement and other 1,991
2,328 1,885 8,702
7,317 Total data center revenue 70,632 68,499 59,408
264,578 226,992 Office, light-industrial and other revenue
1,860 2,016 2,032 7,842
7,841 Total operating revenues 72,492 70,515
61,440 272,420 234,833
Operating expenses: Property
operating and maintenance 20,253 20,043 17,247 75,119 64,260 Real
estate taxes and insurance 2,519 3,073 1,708 7,578 8,458
Depreciation and amortization 22,422 20,914 17,151 80,722 65,785
Sales and marketing 3,413 3,806 3,474 14,554 14,405 General and
administrative 6,260 7,145 7,092 27,842 27,317 Rent 5,148 5,113
5,028 20,397 19,659 Impairment of internal-use software - - - 1,959
- Transaction costs - 49 -
62 279 Total operating expenses
60,015 60,143 51,700
228,233 200,163
Operating
income 12,477 10,372 9,740 44,187 34,670 Gain on land
disposal 1,208 - - 1,208 - Interest income 1 1 14 6 32 Interest
expense (1,362 ) (1,361 ) (759 ) (5,311
) (2,689 ) Income before income taxes 12,324 9,012 8,995
40,090 32,013 Income tax (expense) benefit (18 ) (22
) 34 (38 ) (401 ) Net income 12,306
8,990 9,029 40,052 31,612 Net income attributable to
noncontrolling interests 5,557 3,759
3,809 17,287 12,771 Net
income attributable to CoreSite Realty Corporation 6,749 5,231
5,220 22,765 18,841 Preferred stock dividends (2,085 )
(2,084 ) (2,085 ) (8,338 ) (8,338 ) Net
income attributable to common shares $ 4,664 $ 3,147
$ 3,135 $ 14,427 $ 10,503 Net income
per share attributable to common shares: Basic $ 0.22 $ 0.15 $ 0.15
$ 0.68 $ 0.50 Diluted $ 0.21 $ 0.14 $ 0.15 $
0.66 $ 0.49 Weighted average common shares
outstanding: Basic 21,303,795 21,214,825 20,924,624 21,161,614
20,826,622 Diluted 21,794,138 21,708,759 21,492,301 21,740,707
21,503,212
Reconciliations of Net Income to FFO
(in thousands, except share and per share data)
Three Months Ended Year Ended
December 31,2014
September 30,2014
December 31,2013
December 31,2014
December 31,2013
Net income $ 12,306 $ 8,990 $ 9,029 $ 40,052 $ 31,612 Real estate
depreciation and amortization 19,968 18,988 16,146 73,955 62,040
Gain on land disposal (1,208 ) -
- (1,208 ) - FFO $ 31,066
$ 27,978 $ 25,175 $ 112,799 $ 93,652 Preferred stock dividends
(2,085 ) (2,084 ) (2,085
) (8,338 ) (8,338 ) FFO available to common
shareholders and OP unit holders $ 28,981 $
25,894 $ 23,090 $ 104,461 $
85,314 Weighted average common shares outstanding -
diluted 21,794 21,709 21,492 21,741 21,503 Weighted average OP
units outstanding - diluted 25,361 25,361
25,361 25,361 25,356
Total weighted average shares and units outstanding -
diluted 47,155 47,070 46,853 47,102 46,859 FFO per common
share and OP unit - diluted $ 0.61 $ 0.55 $ 0.49
$ 2.22 $ 1.82
Funds From Operations “FFO” is a supplemental
measure of our performance which should be considered along with,
but not as an alternative to, net income and cash provided by
operating activities as a measure of operating performance and
liquidity. We calculate FFO in accordance with the standards
established by the National Association of Real Estate Investment
Trusts (“NAREIT”). FFO represents net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from sales of
property and undepreciated land and impairment write-downs of
depreciable real estate, plus real estate related depreciation and
amortization (excluding amortization of deferred financing costs)
and after adjustments for unconsolidated partnerships and joint
ventures. FFO attributable to common shares and units represents
FFO less preferred stock dividends declared during the period.
Our management uses FFO as a supplemental
performance measure because, in excluding real estate related
depreciation and amortization and gains and losses from property
dispositions, it provides a performance measure that, when compared
year over year, captures trends in occupancy rates, rental rates
and operating costs.
We offer this measure because we recognize
that FFO will be used by investors as a basis to compare our
operating performance with that of other REITs. However, because
FFO excludes depreciation and amortization and captures neither the
changes in the value of our properties that result from use or
market conditions, nor the level of capital expenditures and
capitalized leasing commissions necessary to maintain the operating
performance of our properties, all of which have real economic
effect and could materially impact our financial condition and
results from operations, the utility of FFO as a measure of our
performance is limited. FFO is a non-GAAP measure and should not be
considered a measure of liquidity, an alternative to net income,
cash provided by operating activities or any other performance
measure determined in accordance with GAAP, nor is it indicative of
funds available to fund our cash needs, including our ability to
pay dividends or make distributions. In addition, our calculations
of FFO are not necessarily comparable to FFO as calculated by other
REITs that do not use the same definition or implementation
guidelines or interpret the standards differently from us.
Investors in our securities should not rely on these measures as a
substitute for any GAAP measure, including net income.
Reconciliation of earnings before interest, taxes,
depreciation and amortization (EBITDA): (in thousands)
Three Months Ended Year
Ended
December 31,2014
September 30,2014
December 31,2013
December 31,2014
December 31,2013
Net income $ 12,306 $ 8,990 $ 9,029 $ 40,052 $ 31,612 Adjustments:
Interest expense, net of interest income 1,361 1,360 745 5,305
2,657 Income tax (benefit) expense 18 22 (34 ) 38 401 Depreciation
and amortization 22,422 20,914
17,151 80,722
65,785 EBITDA $ 36,107 $ 31,286 $ 26,891 $ 126,117 $ 100,455
Non-cash compensation 1,359 1,518 1,433 6,125 6,770 Gain on land
disposal (1,208 ) - - (1,208 ) - Transaction costs / litigation -
49 - 288 529 Impairment of internal-use software -
- - 1,959
- Adjusted EBITDA $ 36,258 $
32,853 $ 28,324 $ 133,281 $ 107,754
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 as well as adjusting for
the impact of impairment charges, gains or losses from sales of
property and undepreciated land and gains or losses on early
extinguishment of debt. Management uses EBITDA and adjusted EBITDA
as indicators of our ability to incur and service debt. In
addition, we consider EBITDA and adjusted EBITDA to be appropriate
supplemental measures of our performance because they eliminate
depreciation and interest, which permits investors to view income
from operations without the impact of non-cash depreciation or the
cost of debt. However, because EBITDA and adjusted EBITDA are
calculated before recurring cash charges including interest expense
and taxes, and are not adjusted for capital expenditures or other
recurring cash requirements of our business, their utilization as a
cash flow measurement is limited.
CoreSiteInvestor Relations ContactGreer Aviv, +1
303-405-1012 or +1 303-222-7276CoreSite Investor Relations
DirectorGreer.Aviv@CoreSite.com
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