2015 FFO guidance increased to a range of $2.75
to $2.83 per share
CoreSite Realty Corporation (NYSE:COR), a premier provider of
secure, reliable, high-performance data center solutions across the
US, today announced financial results for the second quarter ended
June 30, 2015.
Quarterly Highlights
- Reported second-quarter funds from
operations (“FFO”) of $0.68 per diluted share and unit,
representing 19.3% growth year over year on an unadjusted basis and
33.3% growth year over year excluding non-recurring items in Q2
2014
- Reported second-quarter total operating
revenues of $81.5 million, representing a 24.0% increase year over
year; total data center revenues increased 24.7% year over
year
- Executed 243,477 net rentable square
feet (NRSF) of new and expansion data center leases representing
$19.6 million of annualized GAAP rent at a rate of $81 per square
foot, comprised of 106,897 square feet of turn-key data center
space in addition to a previously-announced 136,580 square-foot
powered-shell build-to-suit on CoreSite’s Santa Clara Campus in
California
- Commenced 122,872 net rentable square
feet of new and expansion leases representing $15.1 million of
annualized GAAP rent at a rate of $123 per square foot, increasing
stabilized data center occupancy to 89.9%
- Realized rent growth on signed renewals
of 5.7% on a cash basis and 9.1% on a GAAP basis and recorded
rental churn of 1.6%
Tom Ray, CoreSite’s Chief Executive Officer, commented, “Our Q2
results reflect continued execution against our stated business
plan with solid financial and operational performance.” Mr. Ray
continued, “We are pleased to have executed upon our core
objectives of increasing the number of smaller leases we sign,
continuing to grow interconnection count and revenue, adding key
network and cloud deployments to our platform, and making our
company more efficient as reflected by our earnings margins. In
addition, during the quarter we were pleased to execute upon two
larger lease opportunities – our build-to-suit in Santa Clara and a
35,000 square-foot anchor lease at our new SV7 building currently
in preconstruction. We are encouraged by our continued strength in
the performance-sensitive colocation segment and we remain focused
upon executing our business plan in what we believe are
strengthening market conditions.”
Financial Results
CoreSite reported FFO per diluted share and unit of $0.68 for
the three months ended June 30, 2015, an increase of 33.3% compared
to $0.51 per diluted share and unit for the three months ended June
30, 2014, excluding non-recurring items. On a sequential-quarter
basis, FFO per diluted share and unit increased 6.3%.
Total operating revenues for the three months ended June 30,
2015, were $81.5 million, a 24.0% increase year over year and an
increase of 9.0% on a sequential-quarter basis. Total data center
revenues for the three months ended June 30, 2015, were $79.5
million, a 24.7% increase year over year and an increase of 9.5% on
a sequential-quarter basis. CoreSite reported net income
attributable to common shares of $5.5 million, or $0.22 per diluted
share.
Sales Activity
CoreSite executed 122 new and expansion data center leases
representing $19.6 million of annualized GAAP rent during the
second quarter, comprised of 243,477 NRSF at a weighted-average
GAAP rental rate of $81 per NRSF. The recently-announced
136,580-square foot powered-shell build-to-suit, SV6, is included
in the second-quarter new and expansion leasing results.
CoreSite’s second-quarter data center lease commencements
totaled 122,872 NRSF at a weighted average GAAP rental rate of $123
per NRSF, which represents $15.1 million of annualized GAAP
rent.
CoreSite’s renewal leases signed in the second quarter totaled
$6.5 million in annualized GAAP rent, comprised of 35,272 NRSF at a
weighted-average GAAP rental rate of $185 per NRSF, reflecting a
5.7% increase in rent on a cash basis and 9.1% increase on a GAAP
basis. The second-quarter rental churn rate was 1.6%.
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 June 30, 2015, CoreSite has incurred
$5.0 million of the estimated $30.0 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.
Northern Virginia – During the second quarter, CoreSite placed
into service 48,137 NRSF associated with Phase 2 at VA2. As of June
30, 2015, CoreSite had an incremental 48,137 NRSF of data center
space under construction in Phase 3 at VA2 and had incurred $5.7
million of the estimated $14.5 million required to complete Phase
3. CoreSite expects to complete construction in the fourth quarter
of 2015.
New York – During the second quarter, CoreSite placed into
service 49,050 NRSF associated with Phase 2 at NY2, comprised of
three computers rooms of approximately 16,000 NRSF each. As of June
30, 2015, one computer room was 100% leased and occupied by a
single customer.
Los Angeles – During the second quarter, CoreSite began
construction of 12,500 NRSF at LA2. As of June 30, 2015, CoreSite
had incurred approximately $600,000 of the estimated $1.7 million
required to complete the project, and expects to complete
construction in the third quarter of 2015.
Additional markets – As of June 30, 2015, CoreSite had 26,853
NRSF of turn-key data center capacity under construction across its
existing facilities at BO1 (Boston) and CH1 (Chicago). As of the
end of the second quarter, CoreSite had incurred $5.4 million of
the estimated $16.5 million required to complete these two
projects.
Balance Sheet and
Liquidity
As of June 30, 2015, CoreSite had net debt of $344.7 million,
correlating to 2.1 times second-quarter annualized adjusted EBITDA,
and net debt and preferred stock outstanding of $459.7 million,
correlating to 2.8 times second-quarter annualized adjusted
EBITDA.
On June 24, 2015, CoreSite executed an amendment to its
revolving credit facility, increasing debt capacity to $500
million. The amended unsecured credit facility is comprised of a
4-year $350 million revolving credit facility and a 5-year $150
million term loan. CoreSite used the term loan proceeds to pay down
a portion of the balance on its existing revolving credit
facility.
At quarter end, CoreSite had $7.5 million of cash available on
its balance sheet and $241.4 million of capacity available under
its revolving credit facility.
Dividend
On May 21, 2015, CoreSite announced a dividend of $0.42 per
share of common stock and common stock equivalents for the second
quarter of 2015. The dividend was paid on July 15, 2015, to
shareholders of record on June 30, 2015.
CoreSite also announced on May 21, 2015, a dividend of $0.4531
per share of Series A preferred stock for the period April 15, 2015
to July 14, 2015. The preferred dividend was paid on July 15, 2015,
to shareholders of record on June 30, 2015.
2015 Guidance
CoreSite is increasing its 2015 guidance of FFO per diluted
share and unit to a range of $2.75 to $2.83 from the previous range
of $2.55 to $2.65. In addition, CoreSite is increasing its 2015
guidance for net income attributable to common shares to a range of
$0.93 to $1.01 from the previous 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 $20 million to a range of $135 million to $165
million primarily to reflect the development of the recently
announced SV7 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 a number of upcoming investor
conferences, including the Pacific Crest 17th Annual Global
Technology Leadership Forum on August 11th in Vail, Colorado; the
Cowen and Company Communications Infrastructure Summit on August
12th in Boulder, Colorado; the Bank of America Merrill Lynch 2015
Media, Communications & Entertainment Conference on September
9th in Beverly Hills, California; and the Bank of America Merrill
Lynch 2015 Global Real Estate Conference on September 16th in New
York, New York.
Conference Call Details
CoreSite will host a conference call on July 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 13611864. The replay will be available until July 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 Sheet
(in thousands)
June 30, 2015
December 31, 2014 Assets: Investments in real estate:
Land $ 78,337 $ 78,983 Buildings and improvements 1,012,845
888,966 1,091,182 967,949 Less: Accumulated
depreciation and amortization (247,655 ) (215,978 )
Net investment in operating properties 843,527 751,971 Construction
in progress 106,872 178,599
Net
investments in real estate 950,399 930,570
Cash and cash equivalents 7,542 10,662 Accounts and other
receivables, net 15,269 10,290 Lease intangibles, net 5,815 7,112
Goodwill 41,191 41,191 Other assets 77,569
75,600
Total assets $ 1,097,785
$ 1,075,425 Liabilities and
equity: Liabilities Revolving credit facility $ 102,250
$ 218,500 Senior unsecured term loans 250,000 100,000 Accounts
payable and accrued expenses 41,903 42,463 Accrued dividends and
distributions 22,467 22,355 Deferred rent payable 8,519 8,985
Acquired below-market lease contracts, net 5,126 5,576 Unearned
revenue, prepaid rent and other liabilities 24,734
19,205
Total liabilities 454,999
417,084
Stockholders' equity Series A
cumulative preferred stock 115,000 115,000 Common stock, par value
$0.01 259 212 Additional paid-in capital 337,662 275,038
Accumulated other comprehensive loss (183 ) (125 ) Distributions in
excess of net income (77,772 ) (67,538 ) Total
stockholders' equity 374,966 322,587 Noncontrolling interests
267,820 335,754
Total equity
642,786 658,341
Total
liabilities and equity $ 1,097,785
$ 1,075,425
Consolidated Statement of Operations
(in
thousands, except share and per share data)
Three
Months Ended Six Months Ended June 30, 2015
March 31, 2015 June 30, 2014 June 30, 2015
June 30, 2014 Operating revenues: Data center
revenue: Rental revenue $ 44,824 $ 41,323 $ 36,938 $ 86,147 $
71,837 Power revenue 21,792 19,669 16,575 41,461 32,577
Interconnection revenue 10,595 10,215 8,591 20,810 16,650 Tenant
reimbursement and other 2,276 1,416
1,627 3,692 4,383 Total
data center revenue 79,487 72,623 63,731 152,110 125,447 Office,
light-industrial and other revenue 1,969 2,134
1,951 4,103 3,966
Total operating revenues 81,456 74,757 65,682 156,213 129,413
Operating expenses: Property operating and
maintenance 22,204 19,780 18,534 41,984 34,823 Real estate taxes
and insurance 3,270 1,935 (980 ) 5,205 1,986 Depreciation and
amortization 24,046 22,816 19,504 46,862 37,386 Sales and marketing
4,256 3,782 3,747 8,038 7,335 General and administrative 7,952
7,865 6,732 15,817 14,437 Rent 5,007 5,243 5,070 10,250 10,136
Impairment of internal-use software - - 1,037 - 1,959 Transaction
costs 45 - 9 45
13 Total operating expenses 66,780
61,421 53,653 128,201
108,075
Operating income 14,676
13,336 12,029 28,012 21,338 Gain on real estate disposal -
36 - 36 - Interest income 2 2 2 4 4 Interest expense (1,730
) (1,265 ) (1,415 ) (2,995 ) (2,588 )
Income before income taxes 12,948 12,109 10,616 25,057 18,754
Income tax benefit (expense) (66 ) (49 ) 22
(115 ) 2 Net income 12,882 12,060
10,638 24,942 18,756 Net income attributable to noncontrolling
interests 5,259 5,408 4,670
10,667 7,971 Net income
attributable to CoreSite Realty Corporation 7,623 6,652 5,968
14,275 10,785 Preferred stock dividends (2,085 )
(2,084 ) (2,085 ) (4,169 ) (4,169 ) Net income
attributable to common shares $ 5,538 $ 4,568 $ 3,883
$ 10,106 $ 6,616 Net income per share
attributable to common shares: Basic $ 0.23 $ 0.21 $ 0.18 $ 0.44 $
0.31 Diluted $ 0.22 $ 0.21 $ 0.18 $ 0.43
$ 0.31 Weighted average common shares
outstanding: Basic 24,536,583 21,372,157 21,131,077 22,963,111
21,062,299 Diluted 25,055,195 21,978,307 21,604,730 23,525,316
21,599,749
Reconciliations of Net Income to FFO
(in thousands,
except share and per share data)
Three Months Ended Six
Months Ended June 30, 2015 March 31, 2015 June
30, 2014 June 30, 2015 June 30, 2014 Net income $
12,882 $ 12,060 $ 10,638 $ 24,942 $ 18,756 Real estate depreciation
and amortization 21,343 20,253 18,163 41,596 34,999 Gain on real
estate disposal - (36 ) -
(36 ) - FFO $ 34,225 $ 32,277 $ 28,801 $ 66,502 $
53,755 Preferred stock dividends (2,085 ) (2,084 )
(2,085 ) (4,169 ) (4,169 ) FFO available to
common shareholders and OP unit holders $ 32,140 $ 30,193
$ 26,716 $ 62,333 $ 49,586
Weighted average common shares outstanding - diluted 25,055 21,978
21,605 23,525 21,600 Weighted average OP units outstanding -
diluted 22,344 25,361 25,361
23,844 25,361 Total weighted
average shares and units outstanding - diluted 47,399 47,339 46,966
47,369 46,961 FFO per common share and OP unit - diluted $
0.68 $ 0.64 $ 0.57 $ 1.32 $ 1.06
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 Six Months
Ended June 30, 2015 March 31, 2015 June 30,
2014 June 30, 2015 June 30, 2014 Net income $
12,882 $ 12,060 $ 10,638 $ 24,942 $ 18,756 Adjustments: Interest
expense, net of interest income 1,728 1,263 1,413 2,991 2,584
Income taxes 66 49 (22 ) 115 (2 ) Depreciation and amortization
24,046 22,816 19,504
46,862 37,386 EBITDA $ 38,722 $ 36,188 $
31,533 $ 74,910 $ 58,724 Non-cash compensation 1,792 1,569 1,532
3,361 3,248 Gain on real estate disposal - (36 ) - (36 ) -
Transaction costs / litigation 45 230 9 275 239 Impairment of
internal-use software - - 1,037
- 1,959 Adjusted EBITDA $ 40,559 $
37,951 $ 34,111 $ 78,510 $ 64,170
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20150723005644/en/
CoreSiteInvestor Relations Contact:Greer Aviv, +1
303-405-1012 or +1 303-222-7276CoreSite Investor Relations
DirectorGreer.Aviv@CoreSite.com
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