UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 12, 2015
CoreSite Realty Corporation
(Exact name of registrant as specified in its charter)
Maryland |
|
001-34877 |
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27-1925611 |
(State or other jurisdiction of incorporation) |
|
(Commission File Number) |
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(IRS Employer
Identification No.) |
1001 17th Street, Suite 500
Denver, CO |
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80202 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (866) 777-2673
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 Financial Information
Item 2.02 Results of Operations and Financial Condition.
On February 12, 2015, CoreSite Realty Corporation (CoreSite) issued a press release reporting financial results and operating information for the quarter ended December 31, 2014. In addition, CoreSite made available on its website supplemental operating and financial data for the same period. The text of the press release and the supplemental information package are furnished herewith as Exhibits 99.1 and 99.2, respectively.
The information in this report, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) The following exhibits are furnished with this Current Report on Form 8-K.
Exhibit No. |
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Description |
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99.1 |
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Press Release, dated February 12, 2015. |
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99.2 |
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Quarter Ended December 31, 2014, Earnings Release and Supplemental Information, dated February 12, 2015. |
2
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 hereunto duly authorized.
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CORESITE REALTY CORPORATION |
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Date: February 12, 2015 |
By: |
/s/ Jeffrey S. Finnin |
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Name: |
Jeffrey S. Finnin |
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Title: |
Chief Financial Officer |
3
EXHIBIT INDEX
Exhibit No. |
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99.1 |
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Press Release, dated February 12, 2015. |
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99.2 |
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Quarter Ended December 31, 2014, Earnings Release and Supplemental Information, dated February 12, 2015. |
4
Exhibit 99.1
CORESITE REPORTS FOURTH-QUARTER REVENUE AND FFO PER SHARE GROWTH
OF 18% AND 25% YEAR OVER YEAR, RESPECTIVELY
2014 FFO, excluding non-recurring items, increased 20% year over year to $2.18 per share
DENVER, CO February 12, 2015 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, CoreSites 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.
1
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.
CoreSites 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%.
CoreSites 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 Companys 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.
2
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 companys 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 CoreSites 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 Citis 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 CoreSites 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 worlds 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.
CoreSite Investor Relations Contact
Greer Aviv | CoreSite Investor Relations Director
+1 303.405.1012 | +1 303.222.7276
Greer.Aviv@CoreSite.com
3
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 CoreSites 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 companys 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 companys failure to obtain necessary outside financing; the companys 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 companys 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 companys future results to differ materially from any forward-looking statements, see the section entitled Risk Factors in the companys 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.
4
Consolidated Balance Sheets
(in thousands)
|
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December 31, 2014 |
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December 31, 2013 |
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Assets: |
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|
|
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Investments in real estate: |
|
|
|
|
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Land |
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$ |
78,983 |
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$ |
78,983 |
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Building and improvements |
|
889,341 |
|
812,225 |
|
|
|
968,324 |
|
891,208 |
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Less: Accumulated depreciation and amortization |
|
(215,978 |
) |
(155,704 |
) |
Net investment in operating properties |
|
752,346 |
|
735,504 |
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Construction in progress |
|
178,224 |
|
157,317 |
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Net investments in real estate |
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930,570 |
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892,821 |
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Cash and cash equivalents |
|
10,662 |
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5,313 |
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Accounts and other receivables, net |
|
10,290 |
|
10,339 |
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Lease intangibles, net |
|
7,112 |
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11,028 |
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Goodwill |
|
41,191 |
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41,191 |
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Other assets |
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75,600 |
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55,802 |
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Total assets |
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$ |
1,075,425 |
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$ |
1,016,494 |
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|
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|
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Liabilities and equity: |
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|
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Liabilities |
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|
|
|
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Revolving credit facility |
|
$ |
218,500 |
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$ |
174,250 |
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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 |
|
5
Consolidated Statements of Operations
(in thousands, except share and per share data)
|
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Three Months Ended |
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Year Ended |
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|
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December 31, 2014 |
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September 30, 2014 |
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December 31, 2013 |
|
December 31, 2014 |
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December 31, 2013 |
|
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
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Data center revenue: |
|
|
|
|
|
|
|
|
|
|
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Rental revenue |
|
$ |
39,142 |
|
$ |
38,315 |
|
$ |
33,988 |
|
$ |
149,294 |
|
$ |
131,080 |
|
Power revenue |
|
19,963 |
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18,687 |
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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 |
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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 |
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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 |
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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 |
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|
|
|
|
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 |
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Income tax (expense) benefit |
|
(18 |
) |
(22 |
) |
34 |
|
(38 |
) |
(401 |
) |
Net income |
|
12,306 |
|
8,990 |
|
9,029 |
|
40,052 |
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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 |
|
6
Reconciliations of Net Income to FFO
(in thousands, except share and per share data)
|
|
Three Months Ended |
|
Year Ended |
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|
|
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.
7
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.
8
Exhibit 99.2
|
Earnings
Release and Supplemental Information QUARTER ENDED DECEMBER 31, 2014 ®2015
CoreSite Realty Corporation, All Rights Reserved.
|
|
Overview
Earnings Release 3 Company Profile 8 Summary of Financial Data 10 Financial
Statements Consolidated Balance Sheets 11 Consolidated Statements of
Operations 12 Reconciliations of Net Income to FFO, AFFO, EBITDA &
Adjusted EBITDA 13 Operating Portfolio Operating Properties 14 Leasing
Statistics 15 Geographic & Vertical Diversification 17 10 Largest
Customers 18 Development Capital Expenditures & Completed Pre-Stabilized
Projects 19 Development Summary 20 Capital Structure Market Capitalization
& Debt Summary 21 Interest Summary & Debt Covenants 22 Components of
Net Asset Value 23 2015 Guidance 24 Appendix 25 Table of Contents 2 Quarter
Ended December 31, 2014
|
|
DENVER, CO
FEBRUARY 12, 2015 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, CoreSites 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. CORESITE REPORTS FOURTH-QUARTER
REVENUE AND FFO PER SHARE GROWTH OF 18% AND 25% YEAR OVER YEAR, RESPECTIVELY
3 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL
STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Quarter Ended December 31,
2014
|
|
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. CoreSites 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%. CoreSites 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 Companys 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. Quarter Ended December 31, 2014 4 OVERVIEW
FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE
COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Quarter Ended December 31, 2014
Quarter Ended December 31, 2014
|
|
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
companys 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 CoreSites
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
Citis 2015 Global Property CEO Conference on March 2, 2015, at The Diplomat
Resort & Spa in Hollywood, Florida. Quarter Ended December 31, 2014 5
OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL
STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX 2014 Quarter Ended
December 31, 2014
|
|
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 CoreSites 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 worlds 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. CoreSite Investor Relations Contact
Greer Aviv | CoreSite Investor Relations Director +1 303.405.1012 | +1
303.222.7276 Greer.Aviv@CoreSite.com Quarter Ended December 31, 2014 6
OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL
STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX 2014 Quarter Ended
December 31, 2014
|
|
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 CoreSites 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 companys 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 companys
failure to obtain necessary outside financing; the companys 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 companys 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 companys future results to differ materially
from any forward-looking statements, see the section entitled Risk Factors
in the companys 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. Quarter Ended December 31, 2014
7 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL
STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX 2014 Quarter Ended
December 31, 2014
|
|
Company Profile
CoreSite delivers secure, reliable, high-performance data center solutions
across eight key North American markets. NY2 SILICON VALLEY SV1 SV3 SV5 SV2
SV4 LOS ANGELES LA1 LA2 DENVER HQ DE1 DE2 CHICAGO CH1 N VIRGINIA/DC VA1 DC1
VA2 BOSTON BO1 MIAMI MI1 NEW YORK NY1 NY2 8 OVERVIEW FINANCIAL STATEMENTS
OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015
GUIDANCE APPENDIX 2014 Quarter Ended December 31, 2014
|
|
Company Profile
Secure, Reliable and Compliant Six 9s uptime for four consecutive years
Physical security standards enable regulatory compliance requirements Payment
Card Industry certification Rigorous internal security training Operational
excellence in security and environmental controls Scalable Newest data
centers, NY2 and VA2, located in Secaucus, NJ, and Reston, VA 17 operating
data centers in eight of the US largest commercial and data center markets
2.5+ million gross square feet Ability to nearly double data center footprint
on land and buildings currently owned High-Performance Cloud-enabled,
network-rich data center campuses Over 275 network service providers
supported by robust IX services to key public clouds 15,000+ cross-connects
Enabling enterprise with support ecosystems Best-in-Class Customer Experience
350+ professionals with dedicated industry expertise Experienced and
committed operations and facility personnel Dedicated implementation
resources to ensure a seamless onboarding process 24/7 customer support and
remote hands 9 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT
CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX VA2 2014 Quarter
Ended December 31, 2014
|
|
Summary of
Financial Data (in thousands, except per share and NRSF data) 10 OVERVIEW
FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE
COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Three Months Ended Year Ended Summary of Results December 31, 2014
September 30, 2014 December 31, 2013 December 31, 2014 December 31, 2013Operating
revenues $72,492 $70,515 $61,440 $272,420 $234,833Data center revenues 70,632
68,499 59,408 264,578 226,992Net income 12,306 8,990 9,029 40,052 31,612Net
income attributable to common shares 4,664 3,147 3,135 14,427 10,503Funds
from operations (FFO) to shares and units 28,981 25,894 23,090 104,461
85,314Adjusted funds from operations (AFFO) 23,143 19,111 19,385 83,189
78,061EBITDA 36,107 31,286 26,891 126,117 100,455Adjusted EBITDA 36,258
32,853 28,324 133,281 107,754Per share - diluted: Net income attributable to
common shares $0.21 $0.14 $0.15 $0.66 $0.49FFO per common share and OP unit
$0.61 $0.55 $0.49 $2.22 $1.82As of December
31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31,
2013Dividend Activity Dividends declared per share and OP unit $0.42
$0.35 $0.35 $0.35 $0.35AFFO payout ratio 85.4% 86.2% 76.2% 84.4% 84.4%Operating Portfolio Statistics Operating
data center properties 17 16 16 16 16Stabilized operating data center NRSF
1,323,210 1,334,914 1,326,332 1,326,332 1,327,205Stabilized data center NRSF
occupied 1,156,486 1,153,345 1,132,894 1,101,305 1,084,444Stabilized data
center % occupied 87.4% 86.4% 85.4% 83.0% 81.7%Turn-Key Data Center Same Store Statistics MRR per Cabinet
Equivalent $1,478 $1,447 $1,405 $1,399 $1,379Data center NRSF % occupied
81.7% 80.1% 79.8% 76.2% 74.6%Market
Capitalization, Debt & Preferred Stock Total enterprise value
$2,273,458 $1,967,868 $1,945,279 $1,831,690 $1,852,319Total debt outstanding
318,500 305,250 276,750 260,000 232,500Total debt and preferred stock
outstanding 433,500 420,250 391,750 375,000 347,500Debt to: Annualized Adjusted EBITDA 2.2x 2.3x 2.0x 2.2x
2.1xUndepreciated book value of total assets 24.7% 24.2% 22.3% 21.6% 19.8%Debt & Preferred Stock to: Annualized
Adjusted EBITDA 3.0x 3.2x 2.9x 3.1x 3.1xUndepreciated book value of total
assets 33.6% 33.3% 31.5% 31.1% 29.6% 2014 Quarter Ended December 31, 2014
|
|
Consolidated
Balance Sheets (in thousands) 11 OVERVIEW FINANCIAL STATEMENTS OPERATING
PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE
APPENDIX Consolidated Balance Sheets
(in thousands) December 31, 2014 December 31, 2013 Assets: Investments in real
estate: Land $ 78,983 $ 78,983 Building and improvements 888,966 812,225
968,324 891,208 Less: Accumulated depreciation and amortization (215,978)
(155,704) Net investment in operating properties 751,971 735,504 Construction
in progress 178,599 157,317 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 2014 Quarter Ended December 31, 2014
|
|
Consolidated
Statements of Operations (in thousands, except share and per share data) 12
OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL
STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Three Months Ended Year Ended December 31, 2014 September 30, 2014
December 31, 2013 December 31, 2014 December 31, 2013 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 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 Core Site 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 2014 Quarter Ended December 31, 2014
|
|
Reconciliations
of Net Income to FFO, AFFO, EBITDA and Adjusted EBITDA (in thousands, except
per share data) Reconciliation of Net Income to FFO Reconciliation of FFO to
AFFO Reconciliation of Net Income to EBITDA and Adjusted EBITDA 13 OVERVIEW
FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE
COMPONENTS OF NAV 2015 GUIDANCE APPENDIX 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 Three Months Ended Year Ended December 31, 2014 September 30, 2014
December 31, 2013 December 31, 2014 December 31, 2013 FFO available to
common shareholders and OP unit holders $ 28,981 $ 25,894 $ 23,090 $ 104,461
$ 85,314 Adjustments: Amortization of deferred financing costs 420 448 446
1,897 1,739 Non-cash compensation 1,359 1,518 1,433 6,125 6,770 Non-real
estate depreciation and amortization 2,454 1,926 1,005 6,767 3,745
Straight-line rent adjustment (1,390) (1,709) (304) (4,913) (1,274)
Amortization of above and below-market leases (118) (256) (152) (556) (823)
Impairment of internal-use software - - - 1,959 - Recurring capital
expenditures (254) (1,125) (1,612) (4,429) (5,420) Tenant improvements
(1,059) (666) (2,074) (4,512) (6,292) Capitalized leasing costs (7,250)
(6,919) (2,447) (23,610) (5,698) AFFO available to common shareholders and OP
unit holders $ 23,143 $ 19,111 $ 19,385 $ 83,189 $ 78,061 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 2014 Quarter Ended December 31, 2014
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Operating
Properties 14 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT
CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX See Appendix for
definitions. Data Center Operating
NRSF Stabilized Pre-Stabilized
Total NRSF Under Construction(3) Held for Development NRSF Market/Facilities Annualized Rent ($000)(1)
Total Percent Occupied(2) Total Percent Occupied Total Percent Occupied(2)
Total NRSF Los Angeles One Wilshire Campus LA1* $ 25,007 139,053 82.2 % - - % 139,053
82.2 % - - 139,053 LA2 18,296 161,911 84.0 63,002 34.9 224,913 70.2 - 199,978
424,891 Los Angeles Total 43,303
300,964 83.1 63,002 34.9 363,966 74.8 - 199,978 563,944 San
Francisco Bay SV1 6,731 84,045 83.5 - - 84,045 83.5 - - 84,045 SV2
8,142 76,676 88.2 - - 76,676 88.2 - - 76,676 Santa Clara Campus 27,128
237,316 96.3 14,857 37.1 252,173 92.8 - 210,000 462,173 San Francisco Bay Total 42,001 398,037 92.1
14,857 37.1 412,894 90.1 - 210,000 622,894 Northern
Virginia VA1 23,589 201,719 81.4 - - 201,719 81.4 - - 201,719 VA2 - -
- - - - - 92,173 96,274 188,447 DC1* 3,023 22,137 88.8 - - 22,137 88.8 - -
22,137 Northern Virginia Total 26,612
223,856 82.1 - - 223,856 82.1 92,173 96,274 412,303 Boston
BO1 13,791 166,026 98.2 - - 166,026 98.2 15,149 72,501 253,676 Chicago
CH1 12,857 146,463 87.3 20,240 28.1 166,703 80.1 11,704 - 178,407 New
York NY1* 5,475 48,404 68.7 - - 48,404 68.7 - - 48,404 NY2 2,561 - -
52,692 51.9 52,692 51.9 49,050 146,036 247,778 New York Total 8,036 48,404 68.7 52,692 51.9 101,096 59.9 49,050
146,036 296,182 Miami MI1 1,807 30,176 81.2 - -
30,176 81.2 - 13,154 43,330 Denver DE1* 994 4,144 100.0 - -
4,144 100.0 1,734 - 5,878 DE2* 306 5,140 65.3 - - 5,140 65.3 - - 5,140 Denver Total 1,300 9,284 80.8 - - 9,284
80.8 1,734 - 11,018 Total Data
Center Facilities $ 149,707 1,323,210 87.4 % 150,791 40.1 % 1,474,001
82.6 % 169,810 737,943
2,381,754 Office &
Light-Industrial 6,939 347,120 77.5 - - 347,120 77.5 - - 347,120 Total
Portfolio $ 156,646 1,670,330 85.3 % 150,791 40.1 % 1,821,121
81.6 % 169,810 737,943
2,728,874 * Indicates
properties in which we hold a leasehold interest. (1) On a gross basis, our
total portfolio annualized rent was approximately $161.8 million as of
December 31, 2014, which reflects the addition of $5.2 million in operating
expense reimbursements to contractual net rent under modified gross and triple-net
leases. (2) Includes customer leases that have commenced and are occupied as
of December 31, 2014. If all leases signed during the current and prior
periods had commenced, the percent occupied would have been as follows: Percent
Leased Stabilized Pre-Stabilized Total Total Data Center Facilities
89.7% 52.2% 85.9% Total Portfolio 87.3% 52.2% 84.4% (3) VA2 Phase 1, which is
44,036 NRSF under development, is 100% leased to a single customer as of
December 31, 2014. The customer lease is anticipated to commence on April 1,
2015. 2014 Quarter Ended December 31, 2014
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Leasing
Statistics Data Center Leasing Activity MRR per Cabinet Equivalent (Turn-key
Data Center Same Store) 15 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO
DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX 6.8%
y-o-y 7.2% y-o-y 7.7% y-o-y 7.0% y-o-y 7.1% y-o-y GAAP
GAAP Leasing Number Annualized Total Annualized Rental Cash GAAP Activity of
Rent Leased Rent per Churn Rent Rent Period Leases(1) (000's) NRSF Leased
NRSF Rate Growth Growth New/expansion leases commenced FY 2014 466 $ 22,924
167,735 $ 137 Q4 2014 106 4,943 34,009 145 Q3 2014 115 6,066 45,014
135 Q2 2014 126 8,152 60,587 135 Q1 2014 119 3,763 28,125 134 Q4 2013 109
4,808 116,052 41 (2) New/expansion
leases signed FY 2014 466 $ 33,189 244,477 $ 136 (3) Q4 2014 96 11,075 91,662
121 (3) Q3 2014 118 7,607 54,123 141 Q2 2014 121 9,368 58,909 159 Q1
2014 131 5,139 39,783 129 Q4 2013 122 3,472 26,276 132 Renewal leases signed FY 2014 352 $ 29,327
163,306 $ 180 5.6% 2.9% 8.6% Q4 2014 78 6,705 43,863 153 1.4% 2.6% 5.2% Q3
2014 123 12,078 55,262 219 1.2% 3.0% 10.6% Q2 2014 77 7,009 41,890 167 1.8%
2.1% 8.1% Q1 2014 74 3,535 22,291 159 1.2% 4.7% 9.4% Q4 2013 59 6,816 50,513
135 1.9% 3.5% 14.3% (1) Number of leases represents each agreement with a
customer; a lease agreement could include multiple spaces and a customer
could have multiple leases. (2) The GAAP annualized rent per leased NRSF for
new/expansion leases commenced in Q4 2013 includes a 101,721 NRSF
built-to-suit lease. Excluding this lease, the GAAP annualized rent per
leased NRSF for new/expansion leases commenced in Q4 2013 would have been
$116. (3) During Q4 2014, we signed a 44,036 NRSF lease with a single
customer for the entire VA2 Phase 1 facility under construction as of
December 31, 2014. 2014 Quarter Ended December 31, 2014
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Leasing
Statistics Lease Expirations (total portfolio, including total data center
and office and light-industrial OLI) Lease Distribution (total portfolio,
including total data center and office and light-industrial OLI) 16
OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL
STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Total Percentage Percentage Number Percentage Operating of Total
Annualized of Total of of All NRSF of Operating Rent Annualized Square Feet
Under Lease Leases Leases Leases NRSF ($000) Rent Unoccupied
colocation - - % 256,753 14.1 % $ - - % Unoccupied OLI - - 78,226 4.3 - -
Colocation NRSF: 5,000 or less 1,449 90.8 489,774 26.8 79,557 50.8 5,001 - 10,000
24 1.5 163,274 9.0 22,429 14.3 10,001 - 25,000 15 0.9 204,975 11.3 29,872
19.1 Greater than 25,000 2 0.1 63,545 3.5 7,600 4.9 Powered shell 13 0.8
295,680 16.3 10,249 6.5 OLI 94 5.9 268,894 14.7 6,939 4.4 Portfolio Total 1,597 100.0 % 1,821,121
100.0 % $ 156,646 100.0 % Total Annualized Number Operating Percentage
Percentage Annualized Annualized Rent Per of NRSF of of Total Annualized of
Total Rent Per Rent at Leased Leases Expiring Operating Rent Annualized
Leased Expiration NRSF at Year of Lease Expiration Expiring(1) Leases NRSF
($000) Rent NRSF ($000)(2) Expiration Unoccupied colocation - 256,753
14.1 % $ - - % $ - $ - $ - Unoccupied OLI - 78,226 4.3 - - - - - 2015 599
231,820 12.7 35,858 22.9 155 37,042 160 2016 382 223,197 12.3 32,537 20.8 146
35,253 158 2017 334 219,839 12.1 37,466 23.9 170 41,159 187 2018 82 172,418
9.5 18,405 11.7 107 21,511 125 2019 70 142,020 7.8 9,982 6.4 70 16,132 114
2020-Thereafter 36 227,954 12.5 15,459 9.9 68 22,846 100 OLI (3) 94 268,894
14.7 6,939 4.4 26 6,945 26 Portfolio
Total / Weighted Average 1,597 1,821,121 100.0 % $ 156,646 100.0 % $ 105 $ 180,888 $ 122 2014 Quarter
Ended December 31, 2014
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Geographic and
Vertical Diversification Geographic Diversification Vertical Diversification
17 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL
STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Percentage of Total Data Metropolitan Market Center Annualized Rent Los
Angeles 28.9 % San Francisco Bay 28.0 Northern Virginia 17.8 Boston 9.2
Chicago 8.6 New York 5.4 Miami 1.2 Denver 0.9 Total 100.0 % Percentage of Total Data Vertical Center Annualized Rent Enterprise: Digital Content & Multimedia 27.4 % SI & MSP 12.3 Other Enterprise 12.0 Total Enterprise 51.7 Networks & Mobility 24.4 Cloud 23.9
Total 100.0 % 2014 Quarter Ended December 31, 2014
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10 Largest
Customers 10 Largest Customers (total portfolio, including data center and
office and light-industrial) 18 OVERVIEW FINANCIAL STATEMENTS OPERATING
PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE
APPENDIX Weighted Percentage
Percentage Average Number Total of Total Annualized of Total Remaining of
Occupied Operating Rent Annualized Lease Term in Customer Industry CoreSite
Vertical Locations NRSF NRSF(1) ($000) Rent(2) Months(3) 1 Technology
Enterprise - Digital Content 4 41,811 2.3 % $ 10,692 6.8 % 22 2 Technology
Cloud 8 142,687 7.8 10,089 6.4 55 3 Technology Enterprise - SI & MSP 3
53,014 2.9 6,758 4.3 32 4 Technology Enterprise - Digital Content 10 65,687
3.6 5,932 3.8 10 5 Government* Enterprise - Other 1 130,960 7.2 3,906 2.5 84
6 Technology Cloud 1 28,923 1.6 3,884 2.5 46 7 Financial(4) Enterprise -
Other 2 12,188 0.7 3,130 2.0 116 8 Technology Enterprise - SI & MSP 1
6,417 0.4 2,646 1.7 25 9 Managed Services Enterprise - SI & MSP 1 23,663
1.3 2,381 1.5 99 10 Government Enterprise - Other 2 16,769 0.9 2,373 1.6 54
Total/Weighted Average 522,119 28.7 % $ 51,791 33.1 % 46 * Denotes customer
using space for general office purposes. (1) Represents the customers total
occupied square feet divided by the total operating NRSF in the portfolio
which, as of December 31, 2014, consisted of 1,821,121 NRSF. (2) Represents
the customers total annualized rent divided by the total annualized rent in
the portfolio as of December 31, 2014, which was approximately $156.6
million. (3) Weighted average based on percentage of total annualized rent
expiring calculated as of quarter-end. (4) Customer's lease term includes
auto renewal provisions at the end of years four and six, which the customer
may opt out of by paying termination fees of $0.4 million and $0.3 million,
respectively. 2014 Quarter Ended December 31, 2014
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Capital
Expenditures & Completed Pre-Stabilized Projects (in thousands, except
NRSF data) Completed Pre-Stabilized Projects Capital Expenditures and Repairs
and Maintenance 19 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO
DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Three Months Ended December 31, 2014
September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 Data center
expansion(1) $ 19,147 $ 14,166 $ 32,082 $ 18,917 $ 46,574 Non-recurring
investments(2) 1,838 2,304 2,671 5,714 9,330 Tenant improvements 1,059 666
1,579 1,208 2,074 Recurring capital expenditures(3) 254 1,125 1,377 1,673
1,612 Total capital expenditures $ 22,298 $ 18,261 $ 37,709 $ 27,512 $ 59,590
Repairs and maintenance expense(4) $ 2,485 $ 2,186 $ 2,600 $ 2,284 $ 2,665
(1) Data center expansion capital expenditures include new data center
construction, development projects adding capacity to existing data centers
and other revenue generating investments. (2) Non-recurring investments
include upgrades to existing data center or office space and company-wide
improvements that are ancillary to revenue generation such as internal system
development and system-wide security upgrades, which have a future economic
benefit. (3) Recurring capital expenditures include required equipment
upgrades within our operating portfolio, which have a future economic
benefit. (4) Repairs and maintenance expense is classified within property
operating and maintenance expense in the consolidated statement of
operations. These expenditures represent recurring maintenance contracts and
repairs to operating equipment necessary to maintain current operations.
Projects/Facilities Metropolitan Area Completion NRSF Cost Percent Leased(1)
Percent Occupied LA2 Los Angeles Mar 2013 8,122 $ 871 43.6 % 43.6 % LA2 Los
Angeles Mar 2013 21,169 8,866 83.8 83.8 SV4 San Francisco Bay Apr 2013 14,857
12,911 74.4 37.1 CH1 Chicago Apr 2013 20,240 5,200 28.1 28.1 NY2 New York Dec
2013 18,103 14,417 85.0 69.5 LA2 Los Angeles Feb 2014 33,711 9,800 4.0 2.1
NY2 New York Mar 2014 16,484 14,540 73.4 73.4 NY2 New York Mar 2014 18,105
14,540 65.4 14.6 Total completed pre-stabilized 150,791 $ 81,145 52.2 % 40.1
% (1) Includes customer leases that have been signed as of December 31, 2014,
but have not commenced. The percent leased is determined based on leased
square feet as a proportion of total pre-stabilized NRSF. 2014 Quarter Ended
December 31, 2014
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Development
Summary (in thousands, except NRSF data) Data Center Projects Under
Construction 20 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT
CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Held for Development(1)
Costs Projects/Facilities
Metropolitan Area Estimated Completion NRSF Incurred to-date Estimated Total VA2
Phase 1 (1) Northern Virginia Q1 2015 44,036 $ 76,014 $ 76,100 VA2 Phase 2
Northern Virginia Q2 2015 48,137 1,496 13,300 NY2 Phase 2 New York Q2 2015
49,050 2,266 21,330 DE1 Denver Q2 2015 1,734 711 1,500 CH1 Chicago Q3 2015 11,704 505 7,000 BO1 Boston Q4 2015 15,149 203 9,500 Total under construction 169,810
$ 81,195 $ 128,730 (1) VA2 Phase 1 is 100% leased to a single customer
as of December 31, 2014. The customer lease is anticipated to commence April
1, 2015. Projects/Facilities Metropolitan Area Estimated NRSF Estimated
Sellable Power (Megawatts) Estimated Incremental Costs Estimated Incremental
Cost per MW Incremental Cost per NRSF New construction Santa Clara Campus San Fransisco Bay
210,000 - 348,000 20.0 - 35.0
Secaucus, NJ New York 58,739 - 158,739 3.0 - 9.0 Incremental capacity in existing
facilities VA2 (Phases 3-4) Northern
Virginia 96,274 6.0 $ 35,000 $ 5,833 $ 0.36
NY2 (Phases 3-4) New York 87,297 8.5 57,000 6,706 $ 0.65 BO1 Boston 72,501 6.0 50,000 8,333 $ 0.69 LA2 Los Angeles 199,978 14.0
75,000 5,357 $ 0.38 MI1 Miami 13,154
1.0 7,500 7,500 $ 0.57 Total
incremental capacity 469,204 35.5 $ 224,500 $ 6,324 $ - Total new construction & incremental
capacity 737,943 - 975,943 58.5 - 79.5
(1) Represents data center space that may be constructed on entitled
and unentitled land and incremental data center capacity that may be constructed
in existing facilities. The data presented represents management's best
estimate of incremental costs that may vary based on estimated NRSF and power
and are subject to market conditions and build-out specifications. 2014 Quarter Ended December 31, 2014
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Market
Capitalization and Debt Summary (in thousands, except per share data) Market
Capitalization Debt Maturities Debt Summary (1) 21 OVERVIEW FINANCIAL
STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF
NAV 2015 GUIDANCE APPENDIX Shares or Equivalents Outstanding Market
Price / Liquidation Value as of December 31, 2014 Market Value Equivalents Common
shares 21,757 $39.05 $ 849,611
Operating partnership units 25,361 $39.05
990,347 Liquidation value of preferred stock 4,600 $25.00 115,000 Total equity 1,954,958 Total debt 318,500 Total enterprise value $ 2,273,458
Total debt to annualized adjusted EBITDA 2.2x Total debt and preferred stock
to annualized adjusted EBITDA 3.0x Maturity Outstanding as of: Maturity Date
with December 31, December 31, Instrument Rate Date Extension 2014 2013 Revolving
credit facility (2) 2.17% 1/3/2017 1/3/2018 $ 218,500 $ 174,250 Senior
unsecured term loan (3) 3.23% 1/31/2019 1/31/2019 100,000 - SV1 - mortgage loan N/A N/A - 58,250 Total Debt $ 318,500 $ 232,500 Weighted average debt rate 2.50%
Preferred Stock 7.25% N/A N/A 115,000 115,000 Total Debt and Preferred Stock $ 433,500 $ 347,500 Floating rate
vs. fixed rate debt 67% / 33% 100% / 0% Floating rate vs. fixed rate debt and
preferred stock 50% / 50% 67% / 33% (1) See the most recently filed Form 10-K
and 10-Q for information on specific debt instruments. (2) The revolving
credit facility interest rate is based on LIBOR at December 31, 2014, plus
applicable spread. (3) Represents the effective interest rate as a result of
the interest rate swap agreement associated with $100 million in 1-month
LIBOR variable rate debt. 2014 Quarter Ended December 31, 2014
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Interest
Summary and Debt Covenants (in thousands) Interest Expense Components Debt
Covenants 22 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT
CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX Three Months Ended Year Ended December 31, 2014 September 30, 2014
December 31, 2013 December 31, 2014 December 31, 2013 Interest expense and fees $ 2,183 $ 2,105 $ 1,652 $ 8,047 $ 5,312 Amortization of
deferred financing costs 420 448 446
1,897 1,739 Capitalized interest
(1,241) (1,192) (1,339) (4,633) (4,362) Total interest expense $ 1,362 $ 1,361 $ 759 $ 5,311 $ 2,689 Percent
capitalized 47.7% 46.7% 63.8% 46.6% 61.9%
Revolving Credit Facility & Senior Unsecured Term Loan Required
Compliance December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014
December 31, 2013 Fixed charge
coverage ratio Greater than 1.75x 8.4x 7.7x 7.5x 7.8x 7.2x Total indebtedness
to gross asset value Less than 60% 17.2% 17.5% 16.4% 15.6% 15.5% Secured debt
to gross asset value Less than 40% 0.0% 0.0% 0.0% 0.0% 3.7% Unhedged variable
rate debt to gross asset value Less than 30% 11.6% 11.5% 10.2% 9.3%
14.9% Facility availability $405,000
$405,000 $405,000 $405,000 $405,000 Borrowings outstanding (218,500)
(205,250) (176,750) (160,000) (174,250) Outstanding letters of credit (7,330)
(7,330) (7,330) (8,390) (8,390) Current availability $179,170 $192,420
$220,920 $236,610 $222,360 2014
Quarter Ended December 31, 2014
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Components of
Net Asset Value (NAV) (in thousands) 23 OVERVIEW FINANCIAL STATEMENTS
OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015
GUIDANCE APPENDIX Cash Net Operating Income Development Projects Other Assets
and Liabilities Reconciliation of Net Operating Income (NOI) Q4 2014
Annualized Operating Income $ 12,477 $ 49,908 Adjustments: Depreciation and amortization 22,422
89,688 General and administrative
6,260 25,040 Transaction costs -
- Net Operating Income $ 41,159 $ 164,636 Cash Net Operating Income
(Cash NOI) Net Operating Income $ 41,159 $ 164,636 Adjustments: Straight-line rent (1,390) (5,560) Amortization of above and below-market
leases (118) (472) Cash NOI $ 39,651 $ 158,604 Cash NOI with backlog (84.4%
leased)(1) $ 42,173 $ 168,692 Cash
stabilized NOI (93% leased) $ 46,470 $ 185,881 Data Center Projects Under
Construction Construction in
progress(2) $ 81,195 Remaining
spend(2) 47,535 Total $ 128,730 Targeted annual yields 12% - 16% Annualized pro forma NOI range $15,450 -
$20,600 Other Assets Remaining construction in progress(3) $ 97,404 Cash and cash equivalents
10,662 Accounts and other receivables
10,290 Other tangible assets 24,069 Total other assets $ 142,425 Liabilities Debt $ 318,500 Accounts payable, accrued and other liabilities
84,023 Preferred equity 115,000 Total liabilities $ 517,523 Weighted average common shares and
units - diluted 47,155 (1) Cash
NOI with backlog is adjusted to include one quarter of the cash backlog as of
December 31, 2014, less any leasing of currently occupied NRSF and data
center projects under development. (2) Does not include spend associated with
leasing commissions. See page 20 for further breakdown of data center
projects under construction. (3) Represents the book value of in progress
capital projects, including land and shell building, of future NY2 and VA2
phases and other data center expansion, non-recurring investments, tenant
improvements and recurring capital expenditures. 2014 Quarter Ended December 31, 2014
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2015 Guidance
(in thousands, except per share amounts) 24 OVERVIEW FINANCIAL STATEMENTS
OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015
GUIDANCE APPENDIX The annual guidance provided below represents
forward-looking projections, which are based on current economic conditions,
internal assumptions about our existing customer base and the supply and
demand dynamics of the markets in which we operate. Further, the guidance
does not include the impact of any future financing, investment or
disposition activities. Please refer to the press release for additional
information on forward-looking statements. Projected per share and OP unit
information: 2015 Implied Low High Mid 2014 Growth(1) Net income attributable
to common shares $ 0.75 $ 0.85 $ 0.80 $ 0.66 21% Real estate depreciation and
amortization 1.80 1.80 1.58 Gain on land disposal - - (0.02) FFO $ 2.55 $ 2.65 $ 2.60 $ 2.22 Non-recurring items: Q2 benefit from real estate tax
accrual true-up - - - (0.08) Q1 and Q2 charges for software impairment - - -
0.04 FFO - excluding non-recurring items(2) $ 2.55 $ 2.65 $ 2.60 $ 2.18 19%
Projected operating results: Total operating revenues $ 313,000 $ 323,000 $ 318,000 $ 272,420 17% Data center revenue 305,000 315,000 310,000 264,578 17%
General and administrative expenses 30,000 32,000 31,000 27,842 11% Adjusted
EBITDA(3) 153,000 158,000 155,500 129,634 20% Guidance drivers: Annual rental
churn rate 6.0% 8.0% 7.0% 5.6% Cash rent growth on data center renewals 2.0%
5.0% 3.5% 2.9% Capital expenditures: Data center expansion $ 65,000 $ 80,000
$ 72,500 $ 84,312 Non-recurring investments 10,000 15,000 12,500 12,527
Tenant improvements 5,000 10,000 7,500 4,512 Recurring capital expenditures
5,000 10,000 7,500 4,429 Total capital expenditures $ 85,000 $ 115,000 $ 100,000 $ 105,780 (1) Implied growth is based on the midpoint of 2015
guidance. (2) 2014 FFO was adjusted to exclude non-recurring items, including
a benefit from real estate tax accrual true-up and charges for software
impairment. (3) 2014 Adjusted EBITDA was reported as $133,281 and was also
adjusted to exclude a $3,647 benefit from real estate tax accrual true-up. 2014
Quarter Ended December 31, 2014
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Appendix
Definitions This document includes certain non-GAAP financial measures that
management believes are helpful in understanding our business, as further
described below. Our definition and calculation of non-GAAP financial
measures may differ from those of other REITs and therefore may not be
comparable. The non-GAAP measures should not be considered an alternative to
net income as an indicator of our performance and should be considered only a
supplement to net income, cash flows from operating, investing or financing
activities as a measure of profitability and/or liquidity, computed in
accordance with GAAP. 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. 25 OVERVIEW FINANCIAL STATEMENTS
OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE
APPENDIX 2014 Quarter Ended December 31, 2014
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Appendix
Adjusted Funds From Operations AFFO is a non-GAAP measure that is used as a
supplemental operating measure specifically for comparing year over year
ability to fund dividend distribution from operating activities. AFFO is used
by us as a basis to address our ability to fund our dividend payments. We
calculate adjusted funds from operations by adding to or subtracting from
FFO: Plus: Amortization of deferred financing costs Plus: Non-cash
compensation Plus: Non-real estate depreciation Plus: Impairment charges
Plus: Below market debt amortization Less: Straight line rents adjustment
Less: Amortization of above and below market leases Less: Recurring capital
expenditures Less: Tenant improvements Less: Capitalized leasing costs AFFO
is not intended to represent cash flow from operations for the period, and is
only intended to provide an additional measure of performance by adjusting the
effect of certain items noted above included in FFO. AFFO is a widely
reported measure by other REITs, however, other REITs may use different
methodologies for calculating AFFO and, accordingly, our AFFO may not be
comparable to other REITs. Earnings before Interest, Taxes, Depreciation and
Amortization (EBITDA) and Adjusted EBITDA - 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
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. 26 OVERVIEW FINANCIAL
STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF
NAV 2015 GUIDANCE APPENDIX 2014 Quarter Ended December 31, 2014
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Appendix Data
Center Net Rentable Square Feet (NRSF) Both occupied and available data
center NRSF includes a factor to account for a customers proportionate share
of 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. Stabilized and Pre-Stabilized NRSF Data center projects and
facilities that recently have been developed and are in the initial lease-up
phase are classified as pre-stabilized NRSF until they reach 85% occupancy or
have been in service for 24 months. Pre-stabilized projects and facilities
become stabilized operating properties at the earlier of achievement of 85%
occupancy or 24 months after development completion and are included in the
stabilized operating NRSF. Annualized Rent Monthly contractual rent under
existing commenced customer leases as of quarter-end, multiplied by 12. This
amount reflects total annualized base rent before any one-time or
non-recurring rent abatements and excludes power revenue, interconnection
revenue and operating expense reimbursement. NRSF Under Construction Represents
NRSF for which substantial activities are ongoing to prepare the property for
its intended use following development. The NRSF reflects managements
estimate of engineering drawings and required support space and is subject to
change based on final demising of space. Estimated costs of completion are
based on actual costs at quarter-end and managements estimate of remaining
projects costs. NRSF Held for Development Represents incremental data center
capacity that may be constructed in existing facilities and entitled land in
our portfolio that requires significant capital investment in order to
develop new data center facilities. In addition to entitled land, we may
develop an additional 138,000 NRSF at the Santa Clara Campus and 100,000 NRSF
at NY2 upon our receipt of the necessary entitlements. 27 OVERVIEW FINANCIAL
STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE COMPONENTS OF
NAV 2015 GUIDANCE APPENDIX 2014 Quarter Ended December 31, 2014
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Appendix
Turn-Key Same Store Includes turn-key data center space that was leased or
available to be leased to our colocation customers as of December 31, 2013,
at each of our properties, and excludes powered shell data center space, SV3
data center space, office and light-industrial space and space for which
development was completed and became available to be leased after December
31, 2013. The turn-key same store space as of December 31, 2013, is 948,427
NRSF. We track same store on a computer room basis within each data center
facility. Monthly Recurring Revenue per Cabinet Equivalent Represents the
turn-key monthly recurring colocation revenue (MRR) per cabinet equivalent
billed. MRR is defined as recurring contractual revenue under existing
commenced customer leases. MRR per cabinet equivalent is calculated as
(current quarter MRR/3) divided by ((quarter-end cabinet equivalents billed
plus prior quarter-end cabinet equivalents billed)/2). Cabinet equivalents
are calculated as cage-usable square feet (turn-key leased NRSF/NRSF factor)
divided by 25. Data Center Leasing Metrics Rental Churn Rate represents
data center leases which are not renewed or are terminated during the period.
Rental churn is calculated based on the GAAP annualized rent of data center
expired leases terminated in the period, compared with total GAAP annualized
rent at the beginning of the period. Cash and GAAP Rent Growth represents
the increase in rental rates on renewed data center leases signed during the
period, as compared with the previous rental rates for the same space. Cash
and GAAP rent growth is calculated based on annualized rent from the renewed
data center license compared to annualized rent from the expired data center
license. 28 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT
CAPITAL STRUCTURE COMPONENTS OF NAV 2015 GUIDANCE APPENDIX 2014 Quarter Ended
December 31, 2014
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