-- Completed Construction of CH2 Phase 1,
Comprised of 55,000 NRSF --
-- Completed the 52,000 NRSF Expansion at
SV8 Phase 3 --
-- Increased Liquidity with $150 Million of
Senior Notes --
CoreSite Realty Corporation (NYSE:COR) (“the Company”), a
premier provider of secure, reliable, high-performance data center,
cloud and interconnection solutions across the U.S., today
announced financial results for the second quarter ended June 30,
2020.
Q2 2020 Quarterly
Highlights
- Key Financial Results –
- Grew operating revenues to $150.5 million, an increase of 5.3%
year over year and 2.2% sequentially
- Delivered net income of $0.52 per common diluted share, a
decrease of $0.01 year over year and an increase of $0.04
sequentially
- Generated Funds From Operations (“FFO”) of $1.35 per diluted
share and unit, an increase of $0.08, or 6.3% year over year and
$0.06 sequentially, or 4.7%
- We declared a dividend of $1.22 per share for the second
quarter, which was paid on July 15th
- Lease Commencements –
- Commenced 121 new and expansion leases for 45,271 net rentable
square feet (“NRSF”), representing $7.9 million of annualized GAAP
rent, for an average rate of $175 per square foot
- Leasing Activity –
- Signed 112 new and expansion leases for 22,191 NRSF and $3.5
million of annualized GAAP rent, for an average rate of $156 per
square foot
- Renewed 333 leases for 174,926 NRSF and $25.0 million of
annualized GAAP rent, for an average rate of $143 per square foot,
reflecting a reduction of 1.5% in cash rent and an increase of 5.5%
in GAAP rent, and 1.0% churn
Q2 2020 Notable Events
- Delivered new data center capacity of approximately 107,000
NRSF
- Completed Phase 1 of our new CH2 building, comprised of 55,000
NRSF, and
- Placed into service our data center expansion at SV8 Phase 3,
comprised of 52,000 NRSF
- Increased Liquidity with Financing and Funding
- On May 6th, executed a $150 million financing and received
proceeds of $100 million, and
- On July 14th, received the remaining proceeds of $50
million
- All proceeds were used to repay outstanding amounts on our
revolving credit facility
“We successfully completed and placed into service Phase 1 of
our new CH2 data center, the first purpose-built, enterprise-class
data center in downtown Chicago, and our third and final phase of
our SV8 development providing over 100,000 NRSF of sellable
capacity in two of our top markets,” said Paul Szurek, CoreSite’s
President and Chief Executive Officer. “During these uncertain
times, the strategic nature of our diverse, network-and-cloud-dense
campuses, and the interoperability of our diverse customer
ecosystem continue to meet the essential needs of our
customers.”
Sales Activity
CoreSite achieved new and expansion sales of $3.5 million of
annualized GAAP rent for the quarter.
“We believe we are well positioned to continue to take advantage
of our available capacity more effectively in the marketplace,”
said Steve Smith, CoreSite’s Chief Revenue Officer. “Although sales
cycles are longer in this economic environment, we continue
translating our new capacity into increased sales opportunities as
we grow with new and existing customers moving to or expanding
high-performance, hybrid-cloud footprints and increasing their data
storage and compute in our major metropolitan markets.”
Development Activity
CoreSite continues to execute on its property development
pipeline.
- Completed Construction
During the second quarter, the Company completed and placed into
service CH2 Phase 1 comprised of approximately 55,000 NRSF and SV8
Phase 3 comprised of approximately 52,000 NRSF.
- Construction in Progress As
of June 30, 2020, CoreSite had a total of approximately 51,000 NRSF
and an incremental 10 megawatts of turn-key data center capacity
under construction, as detailed below.
Costs Incurred
Estimated
Estimated
To-Date
Total Costs
Percent
Power
Market
Building
NRSF
Completion
(in millions)
(in millions)
Leased
(MW)
Under Construction:
Data center expansion
New York - NY2 Power(1)
NY2, Phase 3
—
Q3 2020
$
29.5
$
38.8
—
%
4.0
New development
Los Angeles
LA3, Phase 1
51,376
Q4 2020
94.5
134.0
73.8
6.0
Total under construction
51,376
$
124.0
$
172.8
73.8
%
10.0
(1) In order to meet customer demand and deploy capital
efficiently, the NY2 Phase 3 development project was separated into
two projects, including (1) a 34,589 NRSF computer room, which was
placed into service in Q1 2020, which is being supported with
existing building power infrastructure, and (2) a 4MW power
infrastructure project expected to be completed in Q3 2020, which
will ultimately support the 34,589 NRSF computer room as we lease
the space and customers utilize the power and future computer
rooms.
CoreSite’s ongoing data center
development and operational position includes –
- the ability to increase its occupied footprint of Tier 1,
purpose-built data centers, both owned or leased, by approximately
2.1 million NRSF, or about 91.5%, 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 and
Liquidity
The Company’s balance sheet remains strong, with a ratio of net
principal debt to second quarter annualized adjusted EBITDA of 5.0
times. As of the end of the second quarter, CoreSite had $397.6
million of current liquidity, including $2.7 million of cash,
$344.9 million of available capacity on its revolving credit
facility, and the $50 million of senior notes funded subsequent to
quarter end. The Company’s liquidity provides the ability to fund
our business plan well beyond our remaining committed construction
costs of $65.6 million related to our 2020 capital investment
plans.
Financing
On May 6th, the Company executed a note purchase agreement to
issue a 7-year $150 million unsecured private placement of senior
notes, at an interest rate of 3.75%. We received $100 million of
proceeds at closing and the remaining $50 million of proceeds was
funded on July 14th. CoreSite used the proceeds to repay
outstanding amounts on its revolving credit facility and for
general working capital. The Company ended the quarter with 6% of
variable debt and 94% fixed debt.
2020 Guidance
CoreSite is increasing its 2020 Guidance related to net income
attributable to common diluted shares from its previous range of
$1.74 to $1.84 per share to its new guidance range of $1.81 to
$1.91 per share. In addition, CoreSite’s 2020 FFO per share
guidance has been increased from its previous range of $5.10 to
$5.20 per share to its new guidance range of $5.15 to $5.25 per
share. The increase of $0.05 per share at the midpoint, or
approximately 1%, is largely driven by interest expense savings
resulting from its financing activities earlier this year and lower
rates expected through the rest of this year. Other than the
changes noted, CoreSite’s 2020 guidance and guidance drivers remain
unchanged. CoreSite’s full 2020 guidance can be found in the
Company’s second quarter 2020 Supplemental Earnings Information on
page 23.
Upcoming Conferences and
Events
CoreSite’s management will participate virtually in the Cowen
Communications Infrastructure Summit on August 11th and the KeyBanc
Future of Technology Series on August 12th.
Conference Call Details
CoreSite will host its second quarter 2020 earnings call on
Thursday, July 30, 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 August 6, 2020,
and can be accessed dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international). The passcode for the replay is
13705744.
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 second quarter 2020 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, cloud 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; the effects on our business operations, demand
for our services and general economic conditions resulting from the
spread of the novel coronavirus (“COVID-19”) in our markets, as
well as orders, directives and legislative action by local, state
and federal governments in response to such spread of COVID-19; 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)
June 30,
December 31,
2020
2019
Assets:
Investments in real estate:
Land
$
100,432
$
94,593
Buildings and improvements
2,140,529
1,989,731
2,240,961
2,084,324
Less: Accumulated depreciation and
amortization
(792,281)
(720,498)
Net investment in operating properties
1,448,680
1,363,826
Construction in progress
381,145
394,474
Net investments in real estate
1,829,825
1,758,300
Operating lease right-of-use assets,
net
171,576
172,976
Cash and cash equivalents
2,686
3,048
Accounts and other receivables, net
22,059
21,008
Lease intangibles, net
3,275
3,939
Goodwill
40,646
40,646
Other assets, net
98,823
101,082
Total assets
$
2,168,890
$
2,100,999
Liabilities and equity:
Liabilities
Debt, net
$
1,615,241
$
1,478,402
Operating lease liabilities
186,636
187,443
Accounts payable and accrued expenses
116,580
123,304
Accrued dividends and distributions
62,227
62,332
Acquired below-market lease contracts,
net
2,412
2,511
Unearned revenue, prepaid rent and other
liabilities
54,212
33,119
Total liabilities
2,037,308
1,887,111
Stockholders' equity
Common stock, par value $0.01
420
373
Additional paid-in capital
545,814
512,324
Accumulated other comprehensive loss
(23,840)
(6,026)
Distributions in excess of net income
(408,021)
(348,509)
Total stockholders' equity
114,373
158,162
Noncontrolling interests
17,209
55,726
Total equity
131,582
213,888
Total liabilities and equity
$
2,168,890
$
2,100,999
Consolidated Statements of
Operations
(in thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Operating revenues:
Data center revenue:(1)
Rental, power, and related revenue
$
127,108
$
124,505
$
121,083
$
251,613
$
238,936
Interconnection revenue
20,897
20,085
18,776
40,982
37,192
Total data center revenue
148,005
144,590
139,859
292,595
276,128
Office, light-industrial and other
revenue
2,538
2,772
3,047
5,310
5,673
Total operating revenues
150,543
147,362
142,906
297,905
281,801
Operating expenses:
Property operating and maintenance
41,037
40,183
38,067
81,220
76,177
Real estate taxes and insurance
5,599
6,190
5,988
11,789
12,184
Depreciation and amortization
41,779
40,991
36,996
82,770
72,642
Sales and marketing
5,837
6,144
5,784
11,981
11,436
General and administrative
11,603
11,267
12,282
22,870
22,452
Rent
8,995
8,399
7,733
17,394
15,421
Total operating expenses
114,850
113,174
106,850
228,024
210,312
Operating income
35,693
34,188
36,056
69,881
71,489
Interest expense
(10,586)
(11,183)
(10,311)
(21,769)
(19,809)
Income before income taxes
25,107
23,005
25,745
48,112
51,680
Income tax expense
(19)
(17)
(2)
(36)
(32)
Net income
25,088
22,988
25,743
48,076
51,648
Net income attributable to
noncontrolling interests
4,417
5,140
6,208
9,557
12,452
Net income attributable to
common shares
$
20,671
$
17,848
$
19,535
$
38,519
$
39,196
Net income per share
attributable to common shares:
Basic
$
0.52
$
0.48
$
0.54
$
1.00
$
1.08
Diluted
$
0.52
$
0.48
$
0.53
$
0.99
$
1.07
Weighted average common shares
outstanding:
Basic
39,873
37,336
36,463
38,605
36,406
Diluted
39,993
37,504
36,619
38,759
36,581
(1) Below is a breakout of our contractual data center rental,
power, and tenant reimbursements and other revenue:
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Rental revenue
$
81,612
$
80,886
$
76,529
$
162,498
$
151,460
Power revenue
41,902
41,278
41,316
83,180
81,818
Tenant reimbursement and other
3,594
2,341
3,238
5,935
5,658
Rental, power, and related revenue
$
127,108
$
124,505
$
121,083
$
251,613
$
238,936
Reconciliations of Net Income to
FFO
(in thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
March, 31
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Net income
$
25,088
$
22,988
$
25,743
$
48,076
$
51,648
Real estate depreciation and
amortization
40,162
39,415
35,573
79,577
69,760
FFO available to common
shareholders and OP unit holders
$
65,250
$
62,403
$
61,316
$
127,653
$
121,408
Weighted average common shares
outstanding - diluted
39,993
37,504
36,619
38,759
36,581
Weighted average OP units
outstanding - diluted
8,377
10,796
11,599
9,586
11,600
Total weighted average shares and
units outstanding - diluted
48,370
48,300
48,218
48,345
48,181
FFO per common share and OP
unit - diluted
$
1.35
$
1.29
$
1.27
$
2.64
$
2.52
Reconciliations of Net Income to
EBITDAre and Adjusted EBITDA:
(in thousands)
Three Months Ended
Six Months Ended
June 30,
March, 31
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Net income
$
25,088
$
22,988
$
25,743
$
48,076
$
51,648
Adjustments:
Interest expense
10,586
11,183
10,311
21,769
19,809
Income taxes
19
17
2
36
32
Depreciation and amortization
41,779
40,991
36,996
82,770
72,642
EBITDAre
$
77,472
$
75,179
$
73,052
$
152,651
$
144,131
Non-cash compensation
4,172
3,482
3,617
7,654
7,049
Adjusted EBITDA
$
81,644
$
78,661
$
76,669
$
160,305
$
151,180
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005092/en/
CoreSite Contact Kate Ruppe
Investor Relations 303-222-7369 InvestorRelations@CoreSite.com
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