Data center revenue increased 18% year over
year
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 first quarter ended
March 31, 2015.
Quarterly and Subsequent
Highlights
- Reported first-quarter funds from
operations (“FFO”) of $0.64 per diluted share and unit,
representing 25.5% growth year over year, excluding non-recurring
items in Q1 2014
- Reported first-quarter total operating
revenues of $74.8 million, representing a 17.3% increase year over
year; total data center revenues increased 17.7% year over
year
- Executed 54,385 net rentable square
feet of new and expansion turn-key data center leases representing
$8.9 million of annualized GAAP rent at a rate of $163 per square
foot
- Commenced 60,797 net rentable square
feet of new and expansion leases representing $9.2 million of
annualized GAAP rent at a rate of $152 per square foot, increasing
stabilized data center occupancy to 88.2%
- Realized rent growth on signed renewals
of 5.3% on a cash basis and 11.4% on a GAAP basis and recorded
rental churn of 2.2%
- Following the end of the first quarter,
executed an agreement to construct a 136,580 square-foot powered
shell on the Santa Clara campus 100% pre-leased to an existing
strategic customer
Tom Ray, CoreSite’s Chief Executive Officer, commented, “We had
a solid first quarter, both in financial results and operational
performance, reflecting continued execution of our business plan.”
Mr. Ray continued, “We believe that CoreSite remains well
positioned within our industry and that the supply and demand
dynamics in the markets we serve remain favorable. 2015 is off to a
solid start and we remain optimistic about the internal growth
opportunities inherent in our data center portfolio.”
Financial Results
CoreSite reported FFO attributable to shares and units of $30.2
million for the three months ended March 31, 2015, a 26.9% increase
year over year, excluding non-recurring items in the first quarter
of 2014, and an increase of 4.2% on a sequential-quarter basis. FFO
per diluted share and unit increased 25.5% to $0.64 for the three
months ended March 31, 2015, as compared to $0.51 per diluted share
and unit for the three months ended March 31, 2014, excluding
non-recurring items. On a sequential-quarter basis, FFO per diluted
share increased 4.9%.
Total operating revenues for the three months ended March 31,
2015, were $74.8 million, a 17.3% increase year over year and an
increase of 3.1% on a sequential-quarter basis. Total data center
revenues for the three months ended March 31, 2015, were $72.6
million, a 17.7% increase year over year and an increase of 2.8% on
a sequential-quarter basis. CoreSite reported net income
attributable to common shares of $4.6 million, or $0.21 per diluted
share.
Sales Activity
CoreSite executed 100 new and expansion turn-key data center
leases representing $8.9 million of annualized GAAP rent during the
first quarter, comprised of 54,385 NRSF at a weighted-average GAAP
rental rate of $163 per NRSF.
CoreSite’s first-quarter data center lease commencements totaled
60,797 NRSF at a weighted average GAAP rental rate of $152 per
NRSF, which represents $9.2 million of annualized GAAP rent.
CoreSite’s renewal leases signed in the first quarter totaled
$7.2 million in annualized GAAP rent, comprised of 40,446 NRSF at a
weighted-average GAAP rental rate of $179 per NRSF, reflecting a
5.3% increase in rent on a cash basis and an 11.4% increase on a
GAAP basis. The first-quarter rental churn rate was 2.2%.
Development Activity
Santa Clara – In April 2015, CoreSite began construction on a
136,580 square-foot powered shell data center on land CoreSite owns
on its Santa Clara campus. The building, which will be known as
SV6, is 100% pre-leased. As of March 31, 2015, CoreSite has
incurred $1.2 million of the estimated $27.0 million required to
complete the development project, and expects to deliver the
build-to-suit to a strategic customer in the first half of
2016.
Virginia – During the first quarter, CoreSite placed into
service 44,036 NRSF associated with Phase 1 at VA2 and the lease
for 100% of the space commenced on April 1, 2015. As of March 31,
2015, CoreSite had 48,137 NRSF of data center space under
construction at Phase 2 at VA2 and had incurred $7.4 million of the
estimated $13.3 million required to complete Phase 2. CoreSite
expects to complete construction in the second quarter of 2015.
New York – During the first quarter, CoreSite had 49,050 NRSF
under construction at Phase 2 at NY2, which is expected to be
completed in the second quarter of 2015. As of March 31, 2015,
CoreSite had incurred $7.9 million of the estimated $21.3 million
required to complete this project.
Additional markets – CoreSite had 26,853 NRSF of turn-key data
center capacity under construction as of March 31, 2015, across the
Company’s existing facilities at BO1 (Boston) and CH1 (Chicago). As
of the end of the first quarter, CoreSite had incurred $3.2 million
of the estimated $16.5 million required to complete these
projects.
Balance Sheet and
Liquidity
As of March 31, 2015, CoreSite had $333.8 million of total
long-term debt outstanding, correlating to 2.2 times first-quarter
annualized adjusted EBITDA, and $448.8 million of long-term debt
and preferred stock, correlating to 3.0 times first-quarter
annualized adjusted EBITDA.
At quarter end, CoreSite had $12.1 million of cash available on
its balance sheet and $163.9 million of capacity available under
its revolving credit facility.
Dividend
On March 12, 2015, CoreSite announced a dividend of $0.42 per
share of common stock and common stock equivalents for the first
quarter of 2015. The dividend was paid on April 15, 2015, to
shareholders of record on March 31, 2015.
CoreSite also announced on March 12, 2015, a dividend of $0.4531
per share of Series A preferred stock for the period January 15,
2015, to April 14, 2015. The preferred dividend was paid on April
15, 2015, to shareholders of record on March 31, 2015.
2015 Guidance
CoreSite is maintaining its 2015 guidance of FFO per diluted
share and unit in the range of $2.55 to $2.65. In addition,
CoreSite is maintaining its 2015 guidance for net income
attributable to common shares in the range of $0.75 to $0.85 per
diluted share, with the difference between FFO and net income being
real estate depreciation and amortization.
CoreSite is increasing its guidance for 2015 total capital
expenditures by $30 million to a range of $115 million to $145
million to primarily reflect the development of the powered shell
build-to-suit data center on its Santa Clara campus.
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 NAREIT’s REITWeek conference from
June 9, 2015, through June 10, 2015, at the New York Hilton in New
York, NY.
Conference Call Details
CoreSite will host a conference call on April 23, 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 13604923. The replay will be available until April 30, 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)
March 31,2015
December 31,2014
Assets: Investments in real estate: Land $ 80,398 $ 78,983
Buildings and improvements 928,562 888,966
1,008,960 967,949 Less: Accumulated depreciation and
amortization (231,987 ) (215,978 ) Net investment in
operating properties 776,973 751,971 Construction in progress
165,154 178,599
Net investments in
real estate 942,127 930,570 Cash
and cash equivalents 12,058 10,662 Accounts and other receivables,
net 10,715 10,290 Lease intangibles, net 6,424 7,112 Goodwill
41,191 41,191 Other assets 73,772 75,600
Total assets $ 1,086,287
$ 1,075,425 Liabilities and
equity: Liabilities Revolving credit facility $ 233,750
$ 218,500 Senior unsecured term loan 100,000 100,000 Accounts
payable and accrued expenses 44,666 42,463 Accrued dividends and
distributions 22,374 22,355 Deferred rent payable 8,751 8,985
Acquired below-market lease contracts, net 5,349 5,576 Unearned
revenue, prepaid rent and other liabilities 21,800
19,205
Total liabilities 436,690
417,084
Stockholders' equity Series A
cumulative preferred stock 115,000 115,000 Common stock, par value
$0.01 214 212 Additional paid-in capital 277,181 275,038
Accumulated other comprehensive loss (574 ) (125 ) Distributions in
excess of net income (72,202 ) (67,538 ) Total
stockholders' equity 319,619 322,587 Noncontrolling interests
329,978 335,754
Total equity
649,597 658,341
Total
liabilities and equity $ 1,086,287
$ 1,075,425
Consolidated Statement of Operations
(in
thousands, except share and per share data)
Three
Months Ended
March 31,2015
December 31,2014
March 31,2014
Operating revenues: Data center revenue: Rental revenue $
41,323 $ 39,142 $ 34,899 Power revenue 19,669 19,963 16,002
Interconnection revenue 10,215 9,536 8,059 Tenant reimbursement and
other 1,416 1,991 2,756
Total data center revenue 72,623 70,632 61,716 Office,
light-industrial and other revenue 2,134 1,860
2,015 Total operating revenues 74,757 72,492
63,731
Operating expenses: Property operating and
maintenance 19,780 20,253 16,289 Real estate taxes and insurance
1,935 2,519 2,966 Depreciation and amortization 22,816 22,422
17,882 Sales and marketing 3,782 3,413 3,588 General and
administrative 7,865 6,260 7,705 Rent 5,243 5,148 5,066 Impairment
of internal-use software - - 922 Transaction costs -
- 4 Total operating expenses
61,421 60,015 54,422
Operating income 13,336 12,477 9,309 Gain on real
estate disposal 36 1,208 - Interest income 2 1 2 Interest expense
(1,265 ) (1,362 ) (1,173 ) Income before income taxes 12,109 12,324
8,138 Income tax expense (49 ) (18 ) (20 ) Net income 12,060 12,306
8,118 Net income attributable to noncontrolling interests
5,408 5,557 3,301
Net income attributable to CoreSite Realty Corporation 6,652 6,749
4,817 Preferred stock dividends (2,084 ) (2,085 )
(2,084 ) Net income attributable to common shares $ 4,568
$ 4,664 $ 2,733 Net income per share
attributable to common shares: Basic $ 0.21 $ 0.22 $ 0.13 Diluted $
0.21 $ 0.21 $ 0.13 Weighted average
common shares outstanding: Basic 21,372,157 21,303,795 20,992,758
Diluted 21,978,307 21,794,138 21,521,838
Reconciliations of Net Income to
FFO
(in thousands, except share and per share data)
Three
Months Ended
March 31,2015
December 31,2014
March 31,2014
Net income $ 12,060 $ 12,306 $ 8,118 Real estate depreciation and
amortization 20,253 19,968 16,836 Gain on real estate disposal
(36 ) (1,208 ) - FFO $ 32,277 $ 31,066
$ 24,954 Preferred stock dividends (2,084 ) (2,085 )
(2,084 ) FFO available to common shareholders and OP unit
holders $ 30,193 $ 28,981 $ 22,870
Weighted average common shares outstanding - diluted 21,978 21,794
21,522 Weighted average OP units outstanding - diluted
25,361 25,361 25,361
Total weighted average shares and units outstanding - diluted
47,339 47,155 46,883 FFO per common share and OP unit -
diluted $ 0.64 $ 0.61 $ 0.49
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
March 31,2015
December 31,2014
March 31,2014
Net income $ 12,060 $ 12,306 $ 8,118 Adjustments: Interest expense,
net of interest income 1,263 1,361 1,171 Income tax (benefit)
expense 49 18 20 Depreciation and amortization 22,816
22,422 17,882 EBITDA $ 36,188 $ 36,107 $
27,191 Non-cash compensation 1,569 1,359 1,716 Gain on real estate
disposal (36 ) (1,208 ) - Transaction costs / litigation 230 - 230
Impairment of internal-use software - -
922 Adjusted EBITDA $ 37,951 $ 36,258 $ 30,059
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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