Full-year 2016 operating revenues grew 20% to
$400 million
CoreSite Realty Corporation (NYSE:COR), a premier provider of
secure, reliable, high-performance data center and interconnection
solutions across the U.S., today announced financial results for
the fourth quarter ended December 31, 2016.
Quarterly Highlights
- Reported fourth-quarter total operating
revenues of $110.5 million, representing a 21.5% increase year over
year
- Reported fourth-quarter net income per
diluted share of $0.44, representing 37.5% growth year over
year
- Reported fourth-quarter funds from
operations (“FFO”) of $1.06 per diluted share and unit,
representing 32.5% growth year over year
- Executed 127 new and expansion data
center leases comprising 35,037 net rentable square feet (NRSF),
representing $7.4 million of annualized GAAP rent at an average
rate of $212 per square foot
- Commenced a record 189,050 NRSF of new
and expansion leases representing $34.9 million of annualized GAAP
rent at an average rate of $185 per square foot, which includes
commenced leases at CoreSite’s recently opened SV7 data center in
Santa Clara
- Realized rent growth on signed renewals
of 2.9% on a cash basis and 5.5% on a GAAP basis and recorded
rental churn of 1.9% in the fourth quarter
- On November 10, 2016, CoreSite closed
on its acquisition of a 21.75-acre light industrial / flex office
park to expand its Reston, Virginia data center campus. CoreSite
estimates it can build approximately 611,000 NRSF of incremental
data center capacity across multiple phases; 178,712 NRSF and
48,928 NRSF is currently operating office and light-industrial
space and powered shell data center space, respectively
“We finished 2016 very strongly, reporting record levels of
operating revenues, FFO per share, and cash flow, while continuing
to grow and expand,” said Paul Szurek, CoreSite’s Chief Executive
Officer. “We executed new and expansion leases totaling $49 million
in annualized GAAP rent during 2016, with strength in all three of
our key verticals of network service providers, cloud providers and
enterprises. This success further strengthens our already thriving
customer communities that rely on our high-performance,
cloud-enabled, network-dense, highly interconnected colocation
solutions.”
Financial Results
CoreSite reported net income attributable to common shares of
$14.9 million, or $0.44 per diluted share, for the three months
ended December 31, 2016, compared to $9.3 million, or $0.32 per
diluted share for the three months ended December 31, 2015, an
increase of 37.5%. On a sequential-quarter basis, net income
attributable to common shares increased 22.2%.
CoreSite reported FFO per diluted share and unit of $1.06 for
the three months ended December 31, 2016, an increase of 32.5%
compared to $0.80 per diluted share and unit for the three months
ended December 31, 2015. On a sequential-quarter basis, FFO per
diluted share and unit increased 17.8%.
Total operating revenues for the three months ended December 31,
2016, were $110.5 million, a 21.5% increase year over year and an
increase of 9.1% on a sequential-quarter basis.
For the year ended December 31, 2016, CoreSite reported net
income attributable to common shares of $50.4 million, or $1.54 per
diluted share, an increase of 49.5% compared to $26.4 million, or
$1.03 per diluted share, in 2015. CoreSite reported FFO per diluted
share and unit of $3.71 for 2016, an increase of 29.7% compared to
$2.86 per diluted share and unit in 2015. Total operating revenues
were $400.4 million, a 20.1% increase year over year.
Sales Activity
CoreSite executed 127 new and expansion data center leases
representing $7.4 million of annualized GAAP rent during the fourth
quarter, comprised of 35,037 NRSF at a weighted-average GAAP rental
rate of $212 per NRSF. The fourth-quarter leasing activity brought
the 2016 annual total to 579 new and expansion leases, representing
$48.8 million of annualized GAAP rent, the strongest leasing year
in CoreSite’s history.
CoreSite’s fourth-quarter data center lease commencements
totaled 189,050 NRSF at a weighted average GAAP rental rate of $185
per NRSF, which represents $34.9 million of annualized GAAP rent.
Fourth-quarter commencements include leases at CoreSite’s recently
opened SV7 data center on its Santa Clara campus, which account for
81% of the annualized GAAP rent that commenced.
CoreSite’s renewal leases signed in the fourth quarter totaled
$9.5 million in annualized GAAP rent, comprised of 51,775 NRSF at a
weighted-average GAAP rental rate of $183 per NRSF, reflecting a
2.9% increase in rent on a cash basis and a 5.5% increase on a GAAP
basis. The fourth-quarter rental churn rate was 1.9%.
Acquisition and Development
Activity
Reston – On November 10, 2016, CoreSite closed on its
acquisition of a 21.75-acre light-industrial / flex office park to
expand its Reston, Virginia data center campus. CoreSite estimates
it can build approximately 611,000 NRSF of incremental data center
capacity across multiple phases. At this time, 178,712 NRSF and
48,928 NRSF is currently operating office and light-industrial
space and powered shell data center space, respectively. CoreSite
expects to invest $450 million - $550 million to build out the
incremental 611,000 NRSF of data center space across multiple
phases with new buildings and as existing light-industrial / flex
office leases expire and customers vacate.
During the fourth quarter of 2016, CoreSite’s development
activity consisted of the following.
Santa Clara – CoreSite placed into service 226,911 square
feet of turn-key data center capacity at SV7 and opened the
facility at 62% leased, a record level for a new ground-up
multi-tenant data center development. The building is comprised of
three floors, two of which are 100% leased and occupied, and
included in CoreSite’s stabilized operating NRSF. The third floor,
comprising 76,885 square feet, is 27.0% leased as of December 31,
2016, and is included in CoreSite’s pre-stabilized pool, bringing
the total leased percentage of the facility to 75.3% at the end of
the fourth quarter.
Boston – CoreSite commenced construction on 13,735 square
feet of turn-key data center capacity at BO1. CoreSite expects to
complete construction of this expansion in the third quarter of
2017, at a cost of $7.8 million.
Denver – CoreSite had 8,276 square feet of turn-key data
center capacity under construction at DE1. As of December 31, 2016,
CoreSite had incurred $6.0 million of the estimated $12.5 million
required to complete this expansion and expects to complete
construction in the second quarter of 2017.
Los Angeles – At LA2, CoreSite had 4,726 square feet of
turn-key data center capacity under construction, which is 100%
pre-leased. As of December 31, 2016, CoreSite had incurred $1.7
million of the estimated $2.0 million required to complete this
project and expects to complete construction in the first quarter
of 2017.
Balance Sheet and
Liquidity
As of December 31, 2016, CoreSite had net principal debt
outstanding of $689.6 million, correlating to 2.8 times
fourth-quarter annualized adjusted EBITDA, and net principal debt
and preferred stock outstanding of $804.6 million, correlating to
3.3 times fourth-quarter annualized adjusted EBITDA.
At December 31, 2016, CoreSite had $4.4 million of cash
available on its balance sheet and $151.5 million of borrowing
capacity available under its revolving credit facility.
Dividend
On December 1, 2016, CoreSite announced a 51% increase in its
quarterly dividend to $0.80 per share of common stock and common
stock equivalents for the fourth quarter of 2016. The increased
dividend reflects an annualized dividend rate of $3.20 per share,
compared to the prior annualized dividend rate of $2.12 per share.
The fourth-quarter common stock dividend was paid on January 17,
2017, to shareholders of record on December 30, 2016.
CoreSite also announced on December 1, 2016, a dividend of
$0.4531 per share of Series A preferred stock for the period
October 18, 2016, to January 16, 2017. The preferred dividend was
paid on January 17, 2017, to shareholders of record on December 30,
2016.
2017 Guidance
CoreSite is introducing its 2017 guidance of net income
attributable to common shares in the range of $1.65 to $1.75 per
diluted share. In addition, the company’s guidance of FFO per
diluted share and unit is a range of $4.25 to $4.35, with the
difference between net income and FFO being real estate
depreciation and amortization. More detail regarding the
assumptions underpinning the 2017 annual guidance can be found on
page 23 of the fourth-quarter 2016 earnings supplemental.
This outlook is based on current economic conditions, internal
assumptions about CoreSite’s customer base, and the supply and
demand dynamics of the markets in which CoreSite operates. The
guidance does not include the impact of any future financing,
investment or disposition activities, beyond what has already been
disclosed.
Upcoming Conferences and
Events
CoreSite will participate in Citi’s 2017 Global Property CEO
Conference on March 6, 2017, at The Diplomat Resort & Spa in
Hollywood, Florida.
Conference Call Details
CoreSite will host a conference call on February 9, 2017, 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 will be accessible by dialing +1-877-407-3982
(domestic) or +1-201-493-6780 (international). A replay will be
available until February 23, 2017, and can be accessed shortly
after the call by dialing + 1-844-512-2921 (domestic) or +
1-412-317-6671 (international). The passcode for the replay is
13652426.
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 and interconnection
solutions to a growing customer ecosystem across eight key North
American markets. More than 1,000 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 400+ dedicated
employees consistently deliver unmatched data center options — all
of which leads to a best-in-class customer experience and lasting
relationships. For more information, visit www.CoreSite.com.
Forward-Looking
Statements
This earnings release and accompanying supplemental information
may contain forward-looking statements within the meaning of the
federal securities laws. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can
identify forward-looking statements by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “should,”
“seeks,” “approximately,” “intends,” “plans,” “pro forma,”
“estimates” or “anticipates” or the negative of these words and
phrases or similar words or phrases that are predictions of or
indicate future events or trends and that do not relate solely to
historical matters. Forward-looking statements involve known and
unknown risks, uncertainties, assumptions and contingencies, many
of which are beyond CoreSite’s control, that may cause actual
results to differ significantly from those expressed in any
forward-looking statement. These risks include, without limitation:
the geographic concentration of the company’s data centers in
certain markets and any adverse developments in local economic
conditions or the demand for data center space in these markets;
fluctuations in interest rates and increased operating costs;
difficulties in identifying properties to acquire and completing
acquisitions; significant industry competition; the company’s
failure to obtain necessary outside financing; the company’s
failure to qualify or maintain its status as a REIT; financial
market fluctuations; changes in real estate and zoning laws and
increases in real property tax rates; and other factors affecting
the real estate industry generally. All forward-looking statements
reflect the company’s good faith beliefs, assumptions and
expectations, but they are not guarantees of future performance.
Furthermore, the company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes
in underlying assumptions or factors, of new information, data or
methods, future events or other changes. For a further discussion
of these and other factors that could cause the company’s future
results to differ materially from any forward-looking statements,
see the section entitled “Risk Factors” in the company’s most
recent annual report on Form 10-K, and other risks described in
documents subsequently filed by the company from time to time with
the Securities and Exchange Commission.
Consolidated Balance Sheets (in thousands)
December 31,2016
December 31,2015
Assets: Investments in real estate: Land $ 100,258 $ 74,819
Buildings and improvements 1,472,580 1,037,127
1,572,838 1,111,946 Less: Accumulated depreciation and
amortization (369,303 ) (284,219 ) Net investment in
operating properties 1,203,535 827,727 Construction in progress
70,738 183,189 Net investments in real
estate 1,274,273 1,010,916 Cash and
cash equivalents 4,429 6,854 Accounts and other receivables, net
25,125 12,235 Lease intangibles, net 9,913 4,714 Goodwill 41,191
41,191 Other assets, net 96,372 86,633
Total assets $ 1,451,303 $
1,162,543 Liabilities and equity:
Liabilities Debt, net $ 690,450 $ 391,007 Accounts payable
and accrued expenses 72,519 75,783 Accrued dividends and
distributions 41,849 28,104 Deferred rent payable 7,694 7,934
Acquired below-market lease contracts, net 4,292 4,693 Unearned
revenue, prepaid rent and other liabilities 37,413
28,717
Total liabilities 854,217
536,238 Stockholders'
equity Series A cumulative preferred stock 115,000 115,000
Common stock, par value $0.01 334 301 Additional paid-in capital
438,531 390,200 Accumulated other comprehensive loss (101 ) (493 )
Distributions in excess of net income (118,038 )
(88,891 ) Total stockholders' equity 435,726 416,117 Noncontrolling
interests 161,360 210,188
Total
equity 597,086 626,305
Total liabilities and equity $
1,451,303 $ 1,162,543
Consolidated Statements of Operations (in thousands,
except share and per share data)
Three Months
Ended Year Ended
December 31, 2016
September 30, 2016
December 31, 2015
December 31, 2016
December 31, 2015
Operating revenues: Data center revenue: Rental revenue $
61,106 $ 54,219 $ 50,018 $ 218,060 $ 183,300 Power revenue 30,722
28,844 24,713 111,541 89,495 Interconnection revenue 13,984 13,374
12,024 53,077 44,234 Tenant reimbursement and other 2,104
2,826 2,246 9,086 8,295 Total data
center revenue 107,916 99,263 89,001 391,764 325,324 Office,
light-industrial and other revenue 2,592 2,011
1,918 8,588 7,968 Total operating revenues 110,508
101,274 90,919 400,352 333,292
Operating expenses:
Property operating and maintenance 28,690 28,283 23,840 107,212
89,805 Real estate taxes and insurance 4,591 3,524 3,723 14,250
12,144 Depreciation and amortization 30,674 26,981 24,493 108,652
95,702 Sales and marketing 4,308 4,465 4,117 17,495 15,930 General
and administrative 8,399 9,432 9,718 35,369 34,179 Rent 5,913 5,967
5,385 22,631 21,075 Impairment of internal-use software — — 322 —
322 Transaction costs — 117 — 126
51 Total operating expenses 82,575 78,769
71,598 305,735 269,208
Operating income
27,933 22,505 19,321 94,617
64,084 Gain on real estate disposal — — — — 36 Interest
income — 34 1 35 6 Interest expense (4,698) (3,222)
(1,921) (12,612) (7,104) Income before income
taxes 23,235 19,317 17,401 82,040 57,022 Income tax benefit
(expense) (74) 2 (14) (119)
(163)
Net income 23,161 19,319 17,387
81,921 56,859 Net income attributable to
noncontrolling interests 6,181 5,055 5,960
23,212 22,153 Net income attributable to CoreSite
Realty Corporation 16,980 14,264 11,427 58,709 34,706 Preferred
stock dividends (2,085) (2,084) (2,085)
(8,338) (8,338)
Net income attributable to common
shares $ 14,895 $ 12,180 $
9,342 $ 50,371 $ 26,368
Net income per share attributable to
common shares:
Basic $ 0.45 $ 0.36 $
0.32 $ 1.56 $ 1.05
Diluted $ 0.44 $ 0.36 $
0.32 $ 1.54 $ 1.03
Weighted average common shares outstanding: Basic 33,431,318
33,425,762 28,747,900 32,289,414 25,218,500 Diluted 33,859,539
33,912,155 29,183,879 32,732,059 25,706,568
Reconciliations of Net Income to FFO (in thousands, except
per share data)
Three Months Ended
Year Ended
December 31,2016
September 30,2016
December 31,2015
December 31,2016
December 31,2015
Net income $ 23,161 $ 19,319 $ 17,387 $ 81,921 $ 56,859 Real estate
depreciation and amortization 29,354 25,533 22,873 103,136 87,287
Gain on real estate disposal — —
— — (36 ) FFO $ 52,515 $ 44,852 $
40,260 $ 185,057 $ 144,110 Preferred stock dividends (2,085
) (2,084 ) (2,085 ) (8,338 ) (8,338 )
FFO available to common shareholders and OP unit holders
$ 50,430 $ 42,768
$ 38,175 $ 176,719
$ 135,772 Weighted average common
shares outstanding - diluted 33,860 33,912 29,184 32,732 25,707
Weighted average OP units outstanding -
diluted
13,851 13,851 18,295
14,943 21,694 Total weighted average
shares and units outstanding - diluted 47,711 47,763 47,479 47,675
47,401
FFO per common share and OP unit - diluted
$ 1.06 $ 0.90 $
0.80 $ 3.71 $ 2.86
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.
Reconciliations of Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA): (in thousands)
Three Months Ended Year Ended
December 31,2016
September 30,2016
December 31,2015
December 31,2016
December 31,2015
Net income $ 23,161 $ 19,319 $ 17,387 $ 81,921 $ 56,859
Adjustments: Interest expense, net of interest income 4,698 3,188
1,920 12,577 7,098 Income taxes 74 (2 ) 14 119 163 Depreciation and
amortization 30,674 26,981 24,493
108,652 95,702
EBITDA $
58,607 $ 49,486 $ 43,814
$ 203,269 $ 159,822 Non-cash
compensation 2,018 2,470 1,809 8,892 7,114 Gain on real estate
disposal — — — — (36 ) Transaction costs / litigation —
158 1,750 187 2,681
Adjusted EBITDA
$ 60,625 $ 52,114 $
47,695 $ 212,348 $ 169,903
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. We calculate adjusted EBITDA by
adding our non-cash compensation expense, transaction costs from
unsuccessful deals and business combinations 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/20170209005624/en/
CoreSite Realty
CorporationGreer AvivVice President of Investor
Relations and Media/Public
Relations+1-303-405-1012+1-303-222-7276Greer.Aviv@CoreSite.com
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