2015 FFO guidance increased to a range of $2.82
to $2.86 per share
CoreSite Realty Corporation (NYSE:COR), a premier provider of
secure, reliable, high-performance data center solutions across the
U.S., today announced financial results for the third quarter ended
September 30, 2015.
Quarterly Highlights
- Reported third-quarter funds from
operations (“FFO”) of $0.74 per diluted share and unit,
representing 34.5% growth year over year
- Reported third-quarter total operating
revenues of $86.6 million, representing a 22.7% increase year over
year; total data center revenues of $84.6 million increased 23.5%
year over year
- Executed 64,087 net rentable square
feet (NRSF) of new and expansion data center leases representing
$8.8 million of annualized GAAP rent at a rate of $138 per square
foot
- Commenced 66,330 net rentable square
feet of new and expansion leases representing $9.3 million of
annualized GAAP rent at a rate of $139 per square foot
- Realized rent growth on signed renewals
of 4.2% on a cash basis and 9.7% on a GAAP basis and recorded
rental churn of 1.4%
Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are
pleased that our sales momentum carried into the second half of the
year and that our Q3 financial results reflect our work to increase
efficiencies and scale our business.” Mr. Ray continued, “Further,
we continued to execute upon our strategic priorities, including
increasing transaction count; enhancing the network and cloud
density of our portfolio; and diversifying our customer base with a
record number of new logos in the quarter. As we look forward, we
believe the growth potential of our business remains highly
attractive and we believe in our ability to continue to execute
upon our growth plans and deliver superior returns on capital.”
Financial Results
CoreSite reported FFO per diluted share and unit of $0.74 for
the three months ended September 30, 2015, an increase of 34.5%
compared to $0.55 per diluted share and unit for the three months
ended September 30, 2014. On a sequential-quarter basis, FFO per
diluted share and unit increased 8.8%.
Total operating revenues for the three months ended September
30, 2015, were $86.6 million, a 22.7% increase year over year and
an increase of 6.3% on a sequential-quarter basis. Total data
center revenues for the three months ended September 30, 2015, were
$84.6 million, a 23.5% increase year over year and an increase of
6.4% on a sequential-quarter basis. CoreSite reported net income
attributable to common shares of $6.9 million, or $0.26 per diluted
share.
Sales Activity
CoreSite executed 149 new and expansion data center leases
representing $8.8 million of annualized GAAP rent during the third
quarter, comprised of 64,087 NRSF at a weighted-average GAAP rental
rate of $138 per NRSF.
CoreSite’s third-quarter data center lease commencements totaled
66,330 NRSF at a weighted average GAAP rental rate of $139 per
NRSF, which represents $9.3 million of annualized GAAP rent.
CoreSite’s renewal leases signed in the third quarter totaled
$10.5 million in annualized GAAP rent, comprised of 72,031 NRSF at
a weighted-average GAAP rental rate of $145 per NRSF, reflecting a
4.2% increase in rent on a cash basis and 9.7% increase on a GAAP
basis. The third-quarter rental churn rate was 1.4%.
Development Activity
Santa Clara –During the third quarter, CoreSite commenced
construction of Phase 1 of SV7, comprised of a 230,000 square-foot
powered shell plus 80,000 square feet of turn-key data center
capacity within the shell. CoreSite expects to invest $110 million
to complete Phase 1 and expects to substantially complete
construction in the second quarter of 2016. Additionally, as of
September 30, 2015, CoreSite had incurred $10.9 million of the
estimated $30.0 million required to complete the
previously-announced 136,580 square-foot SV6 build-to-suit
development. CoreSite expects to substantially complete SV6 and
commence the associated lease in the first half of 2016.
Northern Virginia – As of September 30, 2015, CoreSite had
96,274 NRSF of data center space under construction in Phase 3 and
Phase 4 at VA2 and had incurred $11.0 million of the estimated
$32.5 million required to complete these projects. CoreSite expects
to complete construction on Phase 3 in the fourth quarter of 2015
and Phase 4 in the first quarter of 2016.
Additional markets – During the third quarter, CoreSite placed
into service 12,500 NRSF at LA2 in Los Angeles, of which 64.8% is
currently leased. CoreSite also placed into service 11,704 NRSF at
CH1 in Chicago, of which 53.9% is leased. As of September 30, 2015,
CoreSite had 14,031 NRSF of turn-key data center capacity under
construction at BO1 in Boston. As of the end of the third quarter,
CoreSite had incurred $3.0 million of the estimated $11.0 million
required to complete this project, and expects to complete
construction in the first quarter of 2016.
Balance Sheet and
Liquidity
As of September 30, 2015, CoreSite had net debt of $350.8
million, correlating to 2.0 times third-quarter annualized adjusted
EBITDA, and net debt and preferred stock outstanding of $465.8
million, correlating to 2.7 times third-quarter annualized adjusted
EBITDA.
At quarter end, CoreSite had $9.5 million of cash available on
its balance sheet and $233.4 million of capacity available under
its revolving credit facility.
Dividend
On August 31, 2015, CoreSite announced a dividend of $0.42 per
share of common stock and common stock equivalents for the third
quarter of 2015. The dividend was paid on October 15, 2015, to
shareholders of record on September 30, 2015.
CoreSite also announced on August 31, 2015, a dividend of
$0.4531 per share of Series A preferred stock for the period July
15, 2015, to October 14, 2015. The preferred dividend was paid on
October 15, 2015, to shareholders of record on September 30,
2015.
2015 Guidance
CoreSite is increasing its 2015 guidance of FFO per diluted
share and unit to a range of $2.82 to $2.86 from the previous range
of $2.75 to $2.83, an increase of 1.8% at the midpoint. In
addition, CoreSite is increasing its 2015 guidance for net income
attributable to common shares to a range of $0.98 to $1.02 from the
previous range of $0.93 to $1.01 per diluted share, with the
difference between FFO and net income being real estate
depreciation and amortization.
This outlook is predicated on current economic conditions,
internal assumptions about CoreSite’s customer base, and the supply
and demand dynamics of the markets in which CoreSite operates. The
guidance does not include the impact of any future financing,
investment or disposition activities beyond what has already been
disclosed.
Upcoming Conferences and
Events
CoreSite will participate in NAREIT’s REITWorld conference on
November 17 and November 18 at the Wynn Las Vegas in Las Vegas,
Nevada.
Conference Call Details
CoreSite will host a conference call on October 22, 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 13620908. The replay will be available until October 29,
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)
September 30,2015
December 31,2014
Assets: Investments in real estate: Land $ 74,819 $ 78,983
Buildings and improvements 1,024,778 888,966
1,099,597 967,949 Less: Accumulated depreciation and
amortization (265,637 ) (215,978 ) Net investment in
operating properties 833,960 751,971 Construction in progress
126,117 178,599
Net investments in
real estate 960,077 930,570 Cash
and cash equivalents 9,477 10,662 Accounts and other receivables,
net 14,194 10,290 Lease intangibles, net 5,249 7,112 Goodwill
41,191 41,191 Other assets 85,421 75,600
Total assets $ 1,115,609
$ 1,075,425 Liabilities and
equity: Liabilities Revolving credit facility $ 110,250
$ 218,500 Senior unsecured term loans 250,000 100,000 Accounts
payable and accrued expenses 56,972 42,463 Accrued dividends and
distributions 22,688 22,355 Deferred rent payable 8,248 8,985
Acquired below-market lease contracts, net 4,909 5,576 Unearned
revenue, prepaid rent and other liabilities 30,439
19,205
Total liabilities 483,506
417,084
Stockholders' equity Series A
cumulative preferred stock 115,000 115,000 Common stock, par value
$0.01 261 212 Additional paid-in capital 336,811 275,038
Accumulated other comprehensive loss (1,507 ) (125 ) Distributions
in excess of net income (81,990 ) (67,538 ) Total
stockholders' equity 368,575 322,587 Noncontrolling interests
263,528 335,754
Total equity
632,103 658,341
Total
liabilities and equity $ 1,115,609
$ 1,075,425
Consolidated Statement
of Operations
(in
thousands, except share and per share data)
Three
Months Ended Nine Months Ended
September 30,2015
June 30,2015
September 30,2014
September 30,2015
September 30,2014
Operating revenues: Data center revenue: Rental revenue $
47,135 $ 44,824 $ 38,315 $ 133,282 $ 110,152 Power revenue 23,716
21,792 18,687 65,177 51,264 Interconnection revenue 11,400 10,595
9,169 32,210 25,819 Tenant reimbursement and other 2,357
2,276 2,328 6,049
6,711 Total data center revenue 84,608 79,487 68,499
236,718 193,946 Office, light-industrial and other revenue
1,947 1,969 2,016 6,050
5,982 Total operating revenues 86,555 81,456
70,515 242,768 199,928
Operating expenses: Property
operating and maintenance 24,376 22,204 20,043 66,360 54,866 Real
estate taxes and insurance 3,216 3,270 3,073 8,421 5,059
Depreciation and amortization 24,347 24,046 20,914 71,209 58,300
Sales and marketing 3,775 4,256 3,806 11,813 11,141 General and
administrative 8,644 7,952 7,145 24,461 21,582 Rent 5,440 5,007
5,113 15,690 15,249 Impairment of internal-use software - - - -
1,959 Transaction costs 6 45 49
51 62 Total operating expenses
69,804 66,780 60,143
198,005 168,218
Operating
income 16,751 14,676 10,372 44,763 31,710 Gain on real estate
disposal - - - 36 - Interest income 1 2 1 5 5 Interest expense
(2,188 ) (1,730 ) (1,361 ) (5,183 )
(3,949 ) Income before income taxes 14,564 12,948 9,012
39,621 27,766 Income tax expense (34 ) (66 )
(22 ) (149 ) (20 ) Net income 14,530 12,882 8,990
39,472 27,746 Net income attributable to noncontrolling
interests 5,526 5,259 3,759
16,193 11,730 Net income
attributable to CoreSite Realty Corporation 9,004 7,623 5,231
23,279 16,016 Preferred stock dividends (2,084 )
(2,085 ) (2,084 ) (6,253 ) (6,253 ) Net income
attributable to common shares $ 6,920 $ 5,538 $ 3,147
$ 17,026 $ 9,763 Net income per share
attributable to common shares: Basic $ 0.26 $ 0.23 $ 0.15 $ 0.71 $
0.46 Diluted $ 0.26 $ 0.22 $ 0.14 $ 0.69
$ 0.45 Weighted average common shares
outstanding: Basic 26,126,332 24,536,583 21,214,825 24,029,106
21,113,700 Diluted 26,549,537 25,055,195 21,708,759 24,544,612
21,679,931
Reconciliations of Net Income to FFO
(in thousands, except
share and per share data)
Three Months Ended Nine Months
Ended
September 30,2015
June 30,2015
September 30,2014
September 30,2015
September 30,2014
Net income $ 14,530 $ 12,882 $ 8,990 $ 39,472 $ 27,746 Real estate
depreciation and amortization 22,818 21,343 18,988 64,414 53,987
Gain on real estate disposal - - - (36) - FFO $ 37,348 $ 34,225 $
27,978 $ 103,850 $ 81,733 Preferred stock dividends (2,084) (2,085)
(2,084) (6,253) (6,253) FFO available to common shareholders and OP
unit holders $ 35,264 $ 32,140 $ 25,894 $ 97,597 $ 75,480
Weighted average common shares outstanding - diluted 26,550 25,055
21,709 24,545 21,680 Weighted average OP units outstanding -
diluted 20,861 22,344 25,361 22,839 25,361 Total weighted
average shares and units outstanding - diluted 47,411 47,399 47,070
47,384 47,041 FFO per common share and OP unit - diluted $
0.74 $ 0.68 $ 0.55 $ 2.06 $ 1.60
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 Nine Months Ended
September 30,2015
June 30,2015
September 30,2014
September 30,2015
September 30,2014
Net income $ 14,530 $ 12,882 $ 8,990 $ 39,472 $ 27,746 Adjustments:
Interest expense, net of interest income 2,187 1,728 1,360 5,178
3,944 Income taxes 34 66 22 149 20 Depreciation and amortization
24,347 24,046 20,914 71,209
58,300 EBITDA $ 41,098 $ 38,722 $ 31,286 $ 116,008 $ 90,010
Non-cash compensation 1,944 1,792 1,518 5,305 4,766 Gain on real
estate disposal - - - (36 ) - Transaction costs / litigation 656 45
49 931 288 Impairment of internal-use software - -
- - 1,959 Adjusted EBITDA $ 43,698 $
40,559 $ 32,853 $ 122,208 $ 97,023
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151022005746/en/
CoreSite Investor Relations ContactGreer Aviv, +1
303-405-1012 | +1 303-222-7276Director of Investor
RelationsGreer.Aviv@CoreSite.com
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