-- Signed $12.5 Million of New and Expansion
Sales for the Quarter, Our Highest in 4 Quarters --
-- On-Time Completion of the LA3 Phase 1
Development in Mid-October --
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 third quarter ended September
30, 2020.
Q3 2020 Quarterly
Highlights
- Key Financial Results –
- Grew operating revenues to $154.0 million, an increase of 6.3%
year over year and 2.3% sequentially
- Delivered net income of $0.50 per common diluted share, an
increase of $0.03 year over year and a decrease of $0.02
sequentially
- Generated Funds From Operations (“FFO”) of $1.33 per diluted
share and unit, an increase of $0.05, or 3.9%, year over year and a
decrease of $0.02 sequentially, or 1.5%
- Paid a dividend of $1.22 per share for the third quarter on
October 15th
- Lease Commencements –
- Commenced 130 new and expansion leases for 33,233 net rentable
square feet (“NRSF”), representing $7.2 million of annualized GAAP
rent, for an average rate of $216 per square foot
- Leasing Activity –
- Signed 129 new and expansion leases for 72,207 NRSF and $12.5
million of annualized GAAP rent, for an average rate of $173 per
square foot
- Renewed 309 leases for 135,959 NRSF and $20.7 million of
annualized GAAP rent, for an average rate of $152 per square foot,
reflecting an increase of 2.9% in cash rent and 5.1% in GAAP rent,
and reported churn of 1.9%
Q3 2020 Notable Events
- Delivered new data center capacity on its Los Angeles campus
in mid-October
- Completed Phase 1 of its new LA3 data center, comprised of
51,000 NRSF and 6 megawatts (“MW”), and
- Commenced its previously announced LA3 pre-lease for 38,000
NRSF and 4.5 MWs
- Completed the NY2 power infrastructure project
- Added an incremental 4 MWs of power to support existing space
at its NY2 data center
- Published its third annual Corporate Sustainability
Report
- The report summarizes our commitment to its customers,
colleagues, and communities, and
- Discusses the Company’s holistic focus on a broad range of
success measures that take into account all of its
stakeholders
“Over the last three years, we have added extensive data center
capacity to strategically support organic growth, and continue to
translate that capacity into larger and better customer communities
in our markets,” said Paul Szurek, CoreSite’s President and Chief
Executive Officer. “Our edge capacity is crucial to meeting the
customer demand we continue to see in our major metro markets,
especially for enterprises seeking the highest performance, cost
effective, secure and reliable colocation solutions for multi- and
hybrid-cloud IT architectures.”
Sales Activity
CoreSite achieved new and expansion sales of $12.5 million of
annualized GAAP rent for the quarter, which included $5.6 million
of core retail colocation sales and $6.9 million of scale leasing.
Retail colocation pricing was stable, with continued expansion with
strategic customers and strength in new logo acquisition.
“The hard work of our team resulted in strategic sales wins for
the quarter,” said Steve Smith, CoreSite’s Chief Revenue Officer.
“Although we continued to see elongated sales cycles due to the
pandemic, we are now seeing more reprioritization of digital
transformation by enterprises, and we continue to build on and
maintain a robust pipeline to support future quarter sales.”
“Our strong scale leasing this quarter included one relatively
modest hyperscale lease, and we expect to continue to use our
increased capacity to compete for scale opportunities with those
customers who enrich our ecosystem,” said Steve Smith.
As of September 30, 2020, CoreSite had annualized GAAP backlog
of $17.8 million, or $23.6 million on a cash basis.
Other Financial Results
CoreSite’s $154.0 million of operating revenues for the third
quarter included $130.3 million of rental, power and related
revenue, reflecting 6.3% year over year growth, $21.1 million of
interconnection revenue, 10.8% year over year growth, and $2.5
million of office, light-industrial and other revenue. Net income
was $24.1 million for the quarter, or $0.50 attributable to each
common diluted share.
Development Activity
CoreSite continues to execute on its property development
pipeline. The Company has delivered a significant amount of
capacity year-to-date, which enables it generally to turn up
services for its customers quickly.
- During the third quarter, CoreSite completed its NY2 power
infrastructure project, which adds an incremental 4 megawatts of
power to support existing space and completed computer rooms.
- In mid-October, the Company completed and placed into service
LA3 Phase 1, comprising 51,000 NRSF and an incremental 6 MWs of
turn-key data center capacity. LA3 Phase 1 was 74% pre-leased, and
the customer lease commenced in October.
- The Company has completed and placed into service 193,000 NRSF
and 22 MWs of capacity year to date, including the completion of
LA3 Phase 1.
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 91.8%, 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 third quarter annualized adjusted EBITDA of 5.2
times, or 4.9 times including backlog. As of the end of the third
quarter, CoreSite had $326.8 million of current liquidity,
including $2.9 million of cash and $323.9 million of available
capacity on its revolving credit facility.
Financing
On July 14th, the Company received the remaining $50 million of
proceeds from the 7-year $150 million unsecured private placement
of senior notes that it closed on May 6th. CoreSite used the
proceeds to repay outstanding amounts on its revolving credit
facility and for general working capital. The Company ended the
quarter with 7% variable debt and 93% fixed debt.
2020 Guidance
CoreSite increased its 2020 Guidance related to net income
attributable to common diluted shares to its new guidance range of
$1.92 to $1.96 per share from its previous range of $1.81 to $1.91
per share. In addition, CoreSite increased its 2020 FFO per share
guidance to its new guidance range of $5.26 to $5.30 per share from
its previous range of $5.15 to $5.25 per share, and increased its
adjusted EBITDA to $323 million at the midpoint from its midpoint
of $321 million previously. The increase of $0.08 per share at the
midpoint of FFO, or 1.5%, is largely driven by COVID-related travel
and entertainment expense savings, decreased property taxes and
insurance expense, and management of other operating costs.
CoreSite’s full 2020 guidance can be found in the Company’s third
quarter 2020 Supplemental Earnings Information on page 23.
Upcoming Conferences and
Events
CoreSite’s management will participate virtually in the Nareit
REITworld Annual Conference on November 17th and 18th.
Conference Call Details
CoreSite will host its third quarter 2020 earnings call on
Thursday, October 29, 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 November 5,
2020, and can be accessed dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international). The passcode for the replay is
13710893.
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 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 460+ 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)
September 30,
December 31,
2020
2019
Assets:
Investments in real estate:
Land
$
100,432
$
94,593
Buildings and improvements
2,148,435
1,989,731
2,248,867
2,084,324
Less: Accumulated depreciation and
amortization
(829,055
)
(720,498
)
Net investment in operating properties
1,419,812
1,363,826
Construction in progress
415,210
394,474
Net investments in real estate
1,835,022
1,758,300
Operating lease right-of-use assets,
net
166,807
172,976
Cash and cash equivalents
2,894
3,048
Accounts and other receivables, net
31,388
21,008
Lease intangibles, net
2,959
3,939
Goodwill
40,646
40,646
Other assets, net
103,262
101,082
Total assets
$
2,182,978
$
2,100,999
Liabilities and equity:
Liabilities
Debt, net
$
1,686,810
$
1,478,402
Operating lease liabilities
182,068
187,443
Accounts payable and accrued expenses
91,310
123,304
Accrued dividends and distributions
62,796
62,332
Acquired below-market lease contracts,
net
2,362
2,511
Unearned revenue, prepaid rent and other
liabilities
54,848
33,119
Total liabilities
2,080,194
1,887,111
Stockholders' equity
Common stock, par value $0.01
422
373
Additional paid-in capital
551,227
512,324
Accumulated other comprehensive loss
(22,355
)
(6,026
)
Distributions in excess of net income
(439,028
)
(348,509
)
Total stockholders' equity
90,266
158,162
Noncontrolling interests
12,518
55,726
Total equity
102,784
213,888
Total liabilities and equity
$
2,182,978
$
2,100,999
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,
2020
2020
2019
2020
2019
Operating revenues:
Data center revenue:(1)
Rental, power, and related revenue
$
130,300
$
127,108
$
122,598
$
381,913
$
361,534
Interconnection revenue
21,144
20,897
19,082
62,126
56,274
Total data center revenue
151,444
148,005
141,680
444,039
417,808
Office, light-industrial and other
revenue
2,537
2,538
3,211
7,847
8,884
Total operating revenues
153,981
150,543
144,891
451,886
426,692
Operating expenses:
Property operating and maintenance
44,986
41,037
41,251
126,206
117,428
Real estate taxes and insurance
5,989
5,599
4,973
17,778
17,157
Depreciation and amortization
41,759
41,779
40,546
124,529
113,188
Sales and marketing
5,901
5,837
5,476
17,882
16,912
General and administrative
10,854
11,603
10,671
33,724
33,123
Rent
8,966
8,995
8,331
26,360
23,752
Total operating expenses
118,455
114,850
111,248
346,479
321,560
Operating income
35,526
35,693
33,643
105,407
105,132
Interest expense
(11,384
)
(10,586
)
(10,986
)
(33,153
)
(30,795
)
Income before income taxes
24,142
25,107
22,657
72,254
74,337
Income tax expense
(10
)
(19
)
(13
)
(46
)
(45
)
Net income
24,132
25,088
22,644
72,208
74,292
Net income attributable to
noncontrolling interests
3,000
4,417
5,194
12,557
17,646
Net income attributable to
common shares
$
21,132
$
20,671
$
17,450
$
59,651
$
56,646
Net income per share
attributable to common shares:
Basic
$
0.50
$
0.52
$
0.47
$
1.50
$
1.55
Diluted
$
0.50
$
0.52
$
0.47
$
1.49
$
1.54
Weighted average common shares
outstanding:
Basic
42,235
39,873
36,951
39,823
36,590
Diluted
42,404
39,993
37,132
39,996
36,763
(1) Below is a breakout of our contractual
data center rental, power, and tenant reimbursements and other
revenue:
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2020
2020
2019
2020
2019
Rental revenue
$
82,943
$
81,612
$
77,907
$
245,441
$
229,366
Power revenue
43,112
41,902
41,783
126,292
123,602
Tenant reimbursement and other
4,245
3,594
2,908
10,180
8,566
Rental, power, and related revenue
$
130,300
$
127,108
$
122,598
$
381,913
$
361,534
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,
2020
2020
2019
2020
2019
Net income
$
24,132
$
25,088
$
22,644
$
72,208
$
74,292
Real estate depreciation and
amortization
40,136
40,162
39,092
119,713
108,852
FFO available to common
shareholders and OP unit holders
$
64,268
$
65,250
$
61,736
$
191,921
$
183,144
Weighted average common shares
outstanding - diluted
42,404
39,993
37,132
39,996
36,763
Weighted average OP units
outstanding - diluted
6,030
8,377
11,118
8,392
11,437
Total weighted average shares and
units outstanding - diluted
48,434
48,370
48,250
48,388
48,200
FFO per common share and OP
unit - diluted
$
1.33
$
1.35
$
1.28
$
3.97
$
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,
2020
2020
2019
2020
2019
Net income
$
24,132
$
25,088
$
22,644
$
72,208
$
74,292
Adjustments:
Interest expense
11,384
10,586
10,986
33,153
30,795
Income taxes
10
19
13
46
45
Depreciation and amortization
41,759
41,779
40,546
124,529
113,188
EBITDAre
$
77,285
$
77,472
$
74,189
$
229,936
$
218,320
Non-cash compensation
4,156
4,172
3,732
11,810
10,781
Transaction costs / litigation
—
—
7
—
7
Adjusted EBITDA
$
81,441
$
81,644
$
77,928
$
241,746
$
229,108
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029005106/en/
CoreSite Contact
Kate Ruppe Investor Relations 303-222-7369
InvestorRelations@CoreSite.com
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