-- Delivered $14.4 Million of New and
Expansion Sales for the Quarter --
-- Placed in Service 54,000 square feet for
Quarter, and 151,000 Year To Date --
-- Pre-leased 74% of Phase 1 Development at
LA3 --
CoreSite Realty Corporation (NYSE:COR) (“the Company”), a
premier provider of secure, reliable, high-performance data center
and interconnection solutions across the U.S., today announced
financial results for the third quarter ended September 30,
2019.
Q3 Quarterly Highlights
- Key Financial Results –
- Grew operating revenues to $144.9 million, an increase of 4.1%
year over year and 1.4% sequentially
- Delivered net income of $0.47 per common diluted share, a
decrease of $0.05 year over year and $0.06 sequentially
- Generated FFO of $1.28 per diluted share and unit, an increase
of $0.03 year over year and $0.01 sequentially
- Lease Commencements –
- Commenced 130 new and expansion leases for 78,244 net rentable
square feet (“NRSF”), representing $15.7 million of annualized GAAP
rent, for an average rate of $200 per square foot
- Lease Sales Activity –
- Signed 122 new and expansion leases for 73,144 NRSF and $14.4
million of annualized GAAP rent, for an average rate of $197 per
square foot
- Renewed 299 leases for 123,445 NRSF and $20.4 million of
annualized GAAP rent, for an average rate of $165 per square foot,
reflecting a decrease of 2.2% in cash rent, an increase of 4.2% in
GAAP rent, and 3.1% churn
Q3 2019 Notable Events
- Delivered SV8 Phase 1 into service with 100% occupancy
–
- Placed into service SV8 Phase 1 for nearly 54,000 NRSF, and
commenced the customer lease
- Construction of SV8 Phase 2 remains on track to be completed in
late Q4 2019
- Executed a Pre-Lease at new Los Angeles Data Center –
- In September 2019, the Company executed a pre-lease for 74% of
LA3 Phase 1
- Construction is on track to deliver LA3 Phase 1 late Q3
2020
“We continue to execute on our 2019 building blocks for
sustainable growth,” said Paul Szurek, CoreSite’s President and
Chief Executive Officer. “We’re on track to deliver significant new
capacity in 2019 and 2020, while creating a pipeline of sustainable
and agile capacity additions for future years, thereby increasing
our sales opportunities and the ability to grow our customer
communities. We believe our ongoing capacity growth, new
connectivity products, and superior customer experience, position
us well to benefit from the secular tailwinds for data center space
and demand for high-performance hybrid-cloud solutions.”
Sales Activity
CoreSite achieved new and expansion sales of $14.4 million of
annualized GAAP rent for the quarter. This included $4.5 million of
core retail colocation sales and $9.9 million of scale leasing.
CoreSite achieved strong new logo sales and ongoing expansion with
strategic customers in the third quarter.
“We believe we are well positioned to continue to compete for
retail colocation and new logos with our connected campuses, rich
ecosystems, and ability to serve the network edge for new and
future applications,” said Steve Smith, CoreSite’s Chief Revenue
Officer. “Enterprises are looking for colocation solutions offering
direct interconnection to cloud and solution providers for their
hybrid and multi-cloud needs to create a seamless service that
addresses increased data volumes and end user preferences for very
low latency. We continue to focus on winning and growing with these
customers as we help solve their dynamic requirements and provide
optionality for future needs.”
“We also delivered strong scale leasing this quarter, including
a major pre-lease at LA3, and expect to continue to use our
increased capacity to compete for scale opportunities with those
customers who value and enrich our ecosystem,” said Smith.
Other Financial Results
CoreSite’s $144.9 million of operating revenues for the third
quarter included $122.6 million of rental, power and related
revenue, $19.1 million of interconnection revenue and $3.2 million
of office, light-industrial and other revenue. Net income was $22.6
million for the third quarter, or $0.47 attributable to each common
diluted share.
Development Activity
CoreSite continues to execute on its property development
pipeline. After entering 2019 with leasable capacity at a lower
level than historical norms, the Company will exit 2019 with
leasable capacity and quickly developable incremental capacity at
the higher levels experienced in previous years.
- CoreSite’s ongoing data center
development and operational position includes –
- the ability to increase its occupied footprint of land and
buildings, both owned or leased, by about 2.1 million NRSF, or
about 99.0%, including space unoccupied, under construction,
pre-construction or held for development, and
- owning (versus leasing) 92.4% of its current and developable
4.3 million data center NRSF, supporting operational control,
expansion and long-term expense management
- Completed Construction
During the third quarter, CoreSite completed construction of 54,000
NRSF of its development at SV8 Phase 1 and commenced the customer
lease. For the year to date, the Company has completed and placed
into service nearly 151,000 NRSF in 2019.
- Construction in Progress
The Company continued to advance construction on its data center
expansions at BO1, NY2 and SV8, as well as its new developments at
CH2 and LA3. CoreSite successfully pre-leased 74% of Phase 1 of its
new data center at LA3, a year in advance of its expected
completion.
As of September 30, 2019, CoreSite had a total of approximately
269,000 NRSF of turn-key data center capacity under construction,
with $128.9 million incurred to date of the $395.0 million of total
estimated costs, as detailed below.
Costs Incurred
Estimated
Estimated
To-Date
Total Costs
Percent
Market
Building
NRSF
Completion
(in millions)
(in millions)
Leased
Under Construction:
Data center expansion
Boston
BO1
19,961
Q4 2019
$
5.2
$
9.0
—
%
New York
NY2, Phase 3
34,589
Q1 2020
4.0
46.0
—
San Francisco Bay
SV8, Phase 2
53,728
Q4 2019
13.1
44.0
100.0
San Francisco Bay
SV8, Phase 3
54,056
Q2 2020
—
42.0
—
Total data center expansion
162,334
$
22.3
$
141.0
33.1
%
New development
Chicago
CH2, Phase 1
56,000
Q2 2020
$
69.0
$
120.0
—
%
Los Angeles
LA3, Phase 1
51,000
Q3 / Q4 2020
37.6
134.0
74.3
Total new development
107,000
$
106.6
$
254.0
35.4
%
Total under construction
269,334
$
128.9
$
395.0
34.0
%
Upcoming Conferences and
Events
CoreSite’s management will participate in Nareit’s REITworld in
Los Angeles, CA on November 12-13th.
In addition, CoreSite will host a Los Angeles Data Center Campus
Tour and a Networking Event in Los Angeles, CA on November
11th.
Conference Call Details
CoreSite will host its third quarter 2019 earnings call on
Thursday, October 31, 2019, at 12:00 p.m. (Eastern Time). The call
will be accessible by dialing 1-877-407-3982 (domestic) or
1-201-493-6780 (international).
A replay will be available after the call until November 7,
2019, and can be accessed dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international). The passcode for the replay is
13695286. The quarterly conference call also will be offered as a
simultaneous webcast, accessible by visiting CoreSite.com and
clicking on the “Investors” link. An on-line replay will be
available for a limited time immediately following the call.
Concurrently with issuing its financial results, the Company
will post its third quarter 2019 Supplemental Information on its
website at CoreSite.com, under the “Investors” link.
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 1,350 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 450+ 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 amount of supply of or 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, including indirect competition from cloud service
providers; failure to obtain necessary outside financing; the
ability to service existing debt; the 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 its 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.
Use of Funds From Operations
(“FFO”)
FFO is a supplemental measure of CoreSite’s 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. The Company calculates 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.
CoreSite’s management uses FFO as a supplemental performance
measure because, by 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.
CoreSite offers this measure because it recognizes that
investors use FFO as a basis to compare its operating performance
with that of other REITs. However, the utility of FFO as a measure
of the Company’s performance is limited because FFO excludes
depreciation and amortization and captures neither the changes in
the value of its 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 its properties, all of which have real economic effect and could
materially impact the Company’s financial condition and results
from operations. 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 the Company’s cash needs, including its
ability to pay dividends or make distributions. In addition,
CoreSite’s 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 the Company. Investors in CoreSite’s securities
should not rely on these measures as a substitute for any GAAP
measure, including net income.
Use of Earnings Before Interest, Taxes,
Depreciation and Amortization for Real Estate
(“EBITDAre”)
EBITDAre is calculated in accordance with the standards
established by the National Association of Real Estate Investment
Trusts (“Nareit”). EBITDAre is defined as earnings before interest,
taxes, depreciation and amortization, gains or losses from the sale
of depreciated property, and impairment of depreciated property.
CoreSite calculates adjusted EBITDA by adding its non-cash
compensation expense, transaction costs from unsuccessful deals and
business combinations and litigation expense to EBITDAre as well as
adjusting for the impact of other impairment charges, gains or
losses from sales of undepreciated land and gains or losses on
early extinguishment of debt. Management uses EBITDAre and adjusted
EBITDA as indicators of the Company’s ability to incur and service
debt. In addition, CoreSite considers EBITDAre and adjusted EBITDA
to be appropriate supplemental measures of its 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 EBITDAre 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 the
Company’s business, their utilization as a cash flow measurement is
limited.
Consolidated Balance Sheets
(in thousands, except per share data)
September 30,
December 31,
2019
2018
Assets:
Investments in real estate:
Land
$
90,300
$
86,955
Buildings and improvements
1,896,820
1,730,329
1,987,120
1,817,284
Less: Accumulated depreciation and
amortization
(686,026
)
(590,784
)
Net investment in operating properties
1,301,094
1,226,500
Construction in progress
389,174
265,921
Net investments in real estate
1,690,268
1,492,421
Operating lease right-of-use assets,
net
177,535
190,304
Cash and cash equivalents
4,703
2,599
Accounts and other receivables, net
26,330
18,464
Lease intangibles, net
4,328
6,943
Goodwill
40,646
40,646
Other assets, net
102,932
102,290
Total assets
$
2,046,742
$
1,853,667
Liabilities and equity:
Liabilities
Debt, net
$
1,380,541
$
1,130,823
Operating lease liabilities
191,725
202,699
Accounts payable and accrued expenses
132,739
89,315
Accrued dividends and distributions
61,783
55,679
Acquired below-market lease contracts,
net
2,562
2,846
Unearned revenue, prepaid rent and other
liabilities
34,066
37,672
Total liabilities
1,803,416
1,519,034
Stockholders' equity
Common stock, par value $0.01
373
363
Additional paid-in capital
508,209
491,314
Accumulated other comprehensive loss
(6,666
)
(2,193
)
Distributions in excess of net income
(321,720
)
(246,929
)
Total stockholders' equity
180,196
242,555
Noncontrolling interests
63,130
92,078
Total equity
243,326
334,633
Total liabilities and equity
$
2,046,742
$
1,853,667
Consolidated Statements of
Operations
(in thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019
2019
2018
2019
2018
Operating revenues:
Data center revenue:(1)
Rental, power, and related revenue
$
122,598
$
121,083
$
118,590
$
361,534
$
344,745
Interconnection revenue
19,082
18,776
17,701
56,274
51,683
Total data center revenue
141,680
139,859
136,291
417,808
396,428
Office, light-industrial and other
revenue
3,211
3,047
2,889
8,884
8,818
Total operating revenues
144,891
142,906
139,180
426,692
405,246
Operating expenses:
Property operating and maintenance
41,251
38,067
41,161
117,428
112,870
Real estate taxes and insurance
4,973
5,988
4,699
17,157
14,329
Depreciation and amortization
40,546
36,996
36,264
113,188
105,598
Sales and marketing
5,476
5,784
5,180
16,912
15,629
General and administrative
10,671
12,282
10,074
33,123
29,556
Rent
8,331
7,733
7,329
23,752
20,276
Transaction costs
—
—
—
—
75
Total operating expenses
111,248
106,850
104,707
321,560
298,333
Operating income
33,643
36,056
34,473
105,132
106,913
Interest expense
(10,986
)
(10,311
)
(9,433
)
(30,795
)
(26,078
)
Income before income taxes
22,657
25,745
25,040
74,337
80,835
Income tax (expense) benefit
(13
)
(2
)
(20
)
(45
)
30
Net income
22,644
25,743
25,020
74,292
80,865
Net income attributable to
noncontrolling interests
5,194
6,208
6,420
17,646
22,574
Net income attributable to
common shares
$
17,450
$
19,535
$
18,600
$
56,646
$
58,291
Net income per share
attributable to common shares:
Basic
$
0.47
$
0.54
$
0.52
$
1.55
$
1.69
Diluted
$
0.47
$
0.53
$
0.52
$
1.54
$
1.68
Weighted average common shares
outstanding:
Basic
36,951
36,463
35,512
36,590
34,505
Diluted
37,132
36,619
35,721
36,763
34,694
(1)
During 2018, the Financial Accounting Standards Board (“FASB”)
issued updates to the new lease accounting standard. As a result of
the updates the Company has combined contractual data center
rental, power, and tenant reimbursements and other revenue into a
single line item as shown below:
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019
2019
2018
2019
2018
Rental revenue
$
77,907
$
76,529
$
74,321
$
229,366
$
219,497
Power revenue
41,783
41,316
40,967
123,602
116,356
Tenant reimbursement and other
2,908
3,238
3,302
8,566
8,892
Rental, power, and related revenue
$
122,598
$
121,083
$
118,590
$
361,534
$
344,745
Reconciliations of Net Income to
FFO
(in thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019
2019
2018
2019
2018
Net income
$
22,644
$
25,743
$
25,020
$
74,292
$
80,865
Real estate depreciation and
amortization
39,092
35,573
34,928
108,852
101,605
FFO available to common
shareholders and OP unit holders
$
61,736
$
61,316
$
59,948
$
183,144
$
182,470
Weighted average common shares
outstanding - diluted
37,132
36,619
35,721
36,763
34,694
Weighted average OP units
outstanding - diluted
11,118
11,599
12,378
11,437
13,342
Total weighted average shares and
units outstanding - diluted
48,250
48,218
48,099
48,200
48,036
FFO per common share and OP
unit - diluted
$
1.28
$
1.27
$
1.25
$
3.80
$
3.80
Reconciliations of Net Income to
EBITDAre and Adjusted EBITDA:
(in thousands)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019
2019
2018
2019
2018
Net income
$
22,644
$
25,743
$
25,020
$
74,292
$
80,865
Adjustments:
Interest expense
10,986
10,311
9,433
30,795
26,078
Income taxes
13
2
20
45
(30
)
Depreciation and amortization
40,546
36,996
36,264
113,188
105,598
EBITDAre
$
74,189
$
73,052
$
70,737
$
218,320
$
212,511
Non-cash compensation
3,732
3,617
3,052
10,781
8,864
Transaction costs / litigation
7
—
3
7
168
Adjusted EBITDA
$
77,928
$
76,669
$
73,792
$
229,108
$
221,543
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191031005473/en/
CoreSite Contact Carole
Jorgensen Vice President Investor Relations and Corporate
Communications 303-405-1012 InvestorRelations@CoreSite.com
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