-- Achieved Company Record for New and
Expansion Sales in 2019 --
-- Delivered New Data Center Capacity of
224,000 Square Feet for Year, including 74,000 in Q4 --
-- Additional Capacity Currently Under
Development of 196,000 Square Feet --
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 fourth quarter ended December 31,
2019.
2019 Annual Highlights
- Key Financial Results –
- Grew operating revenues to $572.7 million, an annual increase
of 5.2%
- Delivered net income of $2.05 per common diluted share, an
annual decrease of $0.17
- Generated Funds From Operations “FFO” of $5.10 per diluted
share & unit, an annual increase of $0.04
- Commenced $48.3 million of annualized GAAP rent, an increase of
46.8% over 2018
- Signed $55.0 million of annualized GAAP rent, nearly double the
$27.7 million in 2018
- Delivered new data center capacity of 224,000 square feet
Q4 Quarterly Highlights
- Key Financial Results –
- Grew operating revenues to $146.0 million, an increase of 5.0%
year over year and 0.8% sequentially
- Delivered net income of $0.51 per common diluted share, a
decrease of $0.03 year over year and an increase of $0.04
sequentially
- Generated FFO of $1.30 per diluted share & unit, an
increase of $0.04, or 3.2%, year over year and $0.02
sequentially
- Lease Commencements –
- Commenced 130 new and expansion leases for 86,187 net rentable
square feet (“NRSF”), representing $16.6 million of annualized GAAP
rent, for an average rate of $193 per square foot
- Leasing Activity –
- Signed 129 new and expansion leases for 30,770 NRSF and $6.6
million of annualized GAAP rent, for an average rate of $216 per
square foot
- Renewed 323 leases for 151,057 NRSF and $21.9 million of
annualized GAAP rent, for an average rate of $145 per square foot,
reflecting a decrease of 0.8% in cash rent, an increase of 0.1% in
GAAP rent, and 2.9% churn
Q4 2019 Notable Events
- Placed into Service Data Center Expansions of approximately
74,000 square feet
- Delivered into service SV8 Phase 2 for 54,000 NRSF with 100%
occupancy, and BO1 for 20,000 NRSF
“We executed well on our 2019 priorities for sustainable growth
including achieving a record leasing year,” said Paul Szurek,
CoreSite’s President and Chief Executive Officer. “We delivered
significant new capacity in 2019 with more coming in 2020, and our
pipeline supports agile capacity additions for future growth. We
believe our connected campuses, and the interoperability they
enable for our customers, positions us well to benefit from secular
tailwinds for data center space and the increasing demand for
powerful, scalable hybrid-cloud solutions.”
Sales Activity
CoreSite achieved new and expansion sales of $6.6 million of
annualized GAAP rent for the quarter.
“We delivered a record level of sales for 2019, which included
ongoing growth in core retail colocation as well as strategic scale
leasing,” said Steve Smith, Chief Revenue Officer. “Our new data
center capacity enabled us to achieve $55.0 million in annualized
GAAP rent in 2019, which was nearly double our 2018 sales of $27.7
million. Our results reflect growing traction with enterprises
moving to high performance hybrid cloud architectures within our
customer ecosystems and our success in solving our customers’
dynamic requirements. Also as part of our leasing, annualized GAAP
rent for sales to new logos increased 50% over 2018.”
Development Activity
CoreSite continues to execute on its property development
pipeline and exited 2019 with 25% available capacity in NRSF in its
top five markets, compared to 16% at the end of 2018.
- Completed Construction
During the fourth quarter, CoreSite completed construction of SV8
Phase 2, by delivering approximately 54,000 NRSF, and commenced the
customer lease in December. CoreSite also completed construction of
nearly 20,000 NRSF at BO1. For the year, the Company completed and
placed into service about 224,000 NRSF.
- Construction in Progress As
of December 31, 2019, CoreSite had a total of approximately 196,000
NRSF of turn-key data center capacity under construction, 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
New York
NY2, Phase 3
34,589
Q1 / Q2 2020
21.0
51.0
3.8
%
San Francisco Bay
SV8, Phase 3
54,056
Q2 2020
2.6
42.0
—
Total data center expansion
88,645
$
23.6
$
93.0
1.5
%
New development
Chicago
CH2, Phase 1
56,000
Q2 2020
$
95.5
$
120.0
—
%
Los Angeles
LA3, Phase 1
51,000
Q3 / Q4 2020
48.8
134.0
74.3
Total new development
107,000
$
144.3
$
254.0
35.4
%
Total under construction
195,645
$
167.9
$
347.0
20.0
%
- 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 92.9%, 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
Balance Sheet, Financing and
Liquidity
On November 8, 2019, the Company extended its debt maturity
profile and amended and restated its credit agreement, while
providing additional liquidity of $100 million, which was used to
pay down a portion of the revolving credit facility balance and for
general corporate purposes.
CoreSite also addressed all near-term debt maturities by
combining and extending its 2020 and 2021 term loan maturities into
a $350 million term loan due in April 2025, and extended the
maturity date of its $150 million senior unsecured term loan from
April 2023 to April 2024. Additionally, CoreSite extended the
maturity on its revolving credit facility term from April 2022 to
November 2023, with a one-year extension option.
The Company’s balance sheet remains strong, with a ratio of net
principal debt to fourth quarter annualized adjusted EBITDA of 4.7
times. As of the end of the fourth quarter, CoreSite had $385.6
million of total liquidity, including $3.0 million of cash and
$382.6 million of available capacity on its revolving credit
facility to fund its 2020 data center expansion plans, including
$179.1 million of remaining construction costs on its properties
currently under development.
Operational Excellence
The Company delivered strong 2019 operational results for data
center reliability and Power Utilization Effectiveness (“PUE”).
For 2019, CoreSite achieved an “eight 9’s” level of reliability,
or 99.999999% uptime for power and cooling across its portfolio of
data centers, which exceeded the Company’s target of “six 9s” and
the industry standard of “five 9s”.
Also in 2019, the Company delivered an approximate 4.8%
improvement in PUE on a same-store basis compared to 2018.
CoreSite’s improvement in PUE enables customers and the Company to
be more cost efficient and also contributes to a more sustainable
environment.
Financial Outlook
The Company’s outlook is based on current economic conditions,
internal assumptions about its customer base, and the supply and
demand dynamics of the markets in which it operates. The guidance
does not include the impact of any future financing, investment or
disposition activities, beyond what has already been disclosed.
The Company’s guidance for 2020 includes –
- Net income attributable to common diluted shares in a range of
$1.74 to $1.84, and
- FFO per common diluted share and unit in the range of $5.10 to
$5.20
The difference between net income and FFO represents real estate
depreciation and amortization. For further details on the Company’s
2020 guidance, including operating revenues, Adjusted EBITDA,
depreciation and amortization and capital expenditures, along with
guidance drivers and other information, please see page 23 of
CoreSite’s Supplemental Information.
Upcoming Conferences and
Events
CoreSite’s management will participate in Citi’s 2020 Global
Property CEO Conference in Hollywood, Florida on March 2-3 and
NYU’s 25th Annual REIT Symposium in New York City on March 31.
Conference Call Details
CoreSite will host its fourth quarter 2019 earnings call on
Thursday, February 6, 2020, 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 February 13,
2020, and can be accessed dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international). The passcode for the replay is
13697864.
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 fourth 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 level 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)
December 31,
December 31,
2019
2018
Assets:
Investments in real estate:
Land
$
94,593
$
86,955
Buildings and improvements
1,989,731
1,730,329
2,084,324
1,817,284
Less: Accumulated depreciation and
amortization
(720,498
)
(590,784
)
Net investment in operating properties
1,363,826
1,226,500
Construction in progress
394,474
265,921
Net investments in real estate
1,758,300
1,492,421
Operating lease right-of-use assets,
net
172,976
190,304
Cash and cash equivalents
3,048
2,599
Accounts and other receivables, net
21,008
18,464
Lease intangibles, net
3,939
6,943
Goodwill
40,646
40,646
Other assets, net
101,082
102,290
Total assets
$
2,100,999
$
1,853,667
Liabilities and equity:
Liabilities
Debt, net
$
1,478,402
$
1,130,823
Operating lease liabilities
187,443
202,699
Accounts payable and accrued expenses
123,304
89,315
Accrued dividends and distributions
62,332
55,679
Acquired below-market lease contracts,
net
2,511
2,846
Unearned revenue, prepaid rent and other
liabilities
33,119
37,672
Total liabilities
1,887,111
1,519,034
Stockholders' equity
Common stock, par value $0.01
373
363
Additional paid-in capital
512,324
491,314
Accumulated other comprehensive loss
(6,026
)
(2,193
)
Distributions in excess of net income
(348,509
)
(246,929
)
Total stockholders' equity
158,162
242,555
Noncontrolling interests
55,726
92,078
Total equity
213,888
334,633
Total liabilities and equity
$
2,100,999
$
1,853,667
Consolidated Statements of
Operations
(in thousands, except per share data)
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2019
2019
2018
2019
2018
Operating revenues:
Data center revenue:(1)
Rental, power, and related revenue
$
123,597
$
122,598
$
118,341
$
485,131
$
463,086
Interconnection revenue
19,477
19,082
18,026
75,751
69,709
Total data center revenue
143,074
141,680
136,367
560,882
532,795
Office, light-industrial and other
revenue
2,961
3,211
2,779
11,845
11,597
Total operating revenues
146,035
144,891
139,146
572,727
544,392
Operating expenses:
Property operating and maintenance
39,865
41,251
39,487
157,293
152,357
Real estate taxes and insurance
5,709
4,973
4,910
22,866
19,239
Depreciation and amortization
39,737
40,546
36,035
152,925
141,633
Sales and marketing
5,527
5,476
5,394
22,439
21,023
General and administrative
10,641
10,671
10,534
43,764
40,090
Rent
8,872
8,331
7,420
32,624
27,696
Transaction costs
—
—
—
—
75
Total operating expenses
110,351
111,248
103,780
431,911
402,113
Operating income
35,684
33,643
35,366
140,816
142,279
Interest expense
(10,917
)
(10,986
)
(9,448
)
(41,712
)
(35,526
)
Income before income taxes
24,767
22,657
25,918
99,104
106,753
Income tax (expense) benefit
(22
)
(13
)
(20
)
(67
)
10
Net income
24,745
22,644
25,898
99,037
106,763
Net income attributable to
noncontrolling interests
5,551
5,194
6,267
23,197
28,841
Net income attributable to
common shares
$
19,194
$
17,450
$
19,631
$
75,840
$
77,922
Net income per share
attributable to common shares:
Basic
$
0.51
$
0.47
$
0.54
$
2.06
$
2.23
Diluted
$
0.51
$
0.47
$
0.54
$
2.05
$
2.22
Weighted average common shares
outstanding:
Basic
37,291
36,951
36,300
36,766
34,957
Diluted
37,489
37,132
36,486
36,944
35,137
(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
Year Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2019
2019
2018
2019
2018
Rental revenue
$
79,257
$
77,907
$
74,326
$
308,623
$
293,823
Power revenue
41,804
41,783
41,637
165,406
157,993
Tenant reimbursement and other
2,536
2,908
2,378
11,102
11,270
Rental, power, and related revenue
$
123,597
$
122,598
$
118,341
$
485,131
$
463,086
Reconciliations of Net Income to
FFO
(in thousands, except per share data)
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2019
2019
2018
2019
2018
Net income
$
24,745
$
22,644
$
25,898
$
99,037
$
106,763
Real estate depreciation and
amortization
38,190
39,092
34,853
147,042
136,458
FFO available to common
shareholders and OP unit holders
$
62,935
$
61,736
$
60,751
$
246,079
$
243,221
Weighted average common shares
outstanding - diluted
37,489
37,132
36,486
36,944
35,137
Weighted average OP units
outstanding - diluted
10,797
11,118
11,602
11,275
12,903
Total weighted average shares and
units outstanding - diluted
48,286
48,250
48,088
48,219
48,040
FFO per common share and OP
unit - diluted
$
1.30
$
1.28
$
1.26
$
5.10
$
5.06
Reconciliations of Net Income to
EBITDAre and Adjusted EBITDA:
(in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2019
2019
2018
2019
2018
Net income
$
24,745
$
22,644
$
25,898
$
99,037
$
106,763
Adjustments:
Interest expense
10,917
10,986
9,448
41,712
35,526
Income taxes
22
13
20
67
(10
)
Depreciation and amortization
39,737
40,546
36,035
152,925
141,633
EBITDAre
$
75,421
$
74,189
$
71,401
$
293,741
$
283,912
Non-cash compensation
3,603
3,732
3,174
14,384
12,038
Transaction costs / litigation
—
7
—
7
168
Adjusted EBITDA
$
79,024
$
77,928
$
74,575
$
308,132
$
296,118
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200206005133/en/
Carole Jorgensen Vice President Investor Relations and Corporate
Communications 303-405-1012 InvestorRelations@CoreSite.com
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