– Delivered Strong Q2 Financial Results, Including 7.7% Revenue Growth Year Over Year – – Executed $7.8 Million of New and Expansion Sales, Driven by Retail Colocation and Small Scale – – Increased Total Data Center Portfolio Occupancy by 220 Basis Points Year-to-Date –

CoreSite Realty Corporation (NYSE:COR) (“the Company”), a premier provider of secure, reliable high-uptime data center campuses with high-performance cloud access and interconnection solutions across the U.S., today announced financial results for quarter ended June 30, 2021.

Q2 2021 Quarterly Highlights

  • Key Financial Results –
    • Grew operating revenues to $162.1 million, an increase of 7.7% year over year and 2.8% sequentially
    • Delivered net income of $0.59 per common diluted share, an increase of $0.07 year over year and $0.08 sequentially
    • Grew adjusted EBITDA to $87.4 million, an increase of 7.1% year over year and 1.6% sequentially
    • Generated FFO, as adjusted, of $1.42 per diluted share and unit, an increase of $0.07, or 5.2% year over year and $0.02, or 1.4% sequentially
    • Paid a dividend of $1.27 per share for the second quarter on July 15th, an increase of 3.25% over the prior quarter
  • Lease Commencements
    • Commenced 133 new and expansion leases for 59,174 net rentable square feet (“NRSF”), representing $8.4 million of annualized GAAP rent, for an average rate of $142 per NRSF
  • Leasing Activity
    • Signed 112 new and expansion leases for 33,135 NRSF and $7.8 million of annualized GAAP rent, for an average rate of $235 per NRSF
    • Renewed 330 leases for 136,564 NRSF and $20.4 million of annualized GAAP rent, for an average rate of $149 per NRSF
    • Renewed leases reflected an increase of 4.2% in cash rent and 7.1% in GAAP rent, and we reported churn of 1.3%

Q2 Notable Events

  • Achieved Stabilization at Our SV8 Data Center During the Quarter
    • During the second quarter, our SV8 data center reached 98% occupancy less than two years after the delivery of SV8 Phase 1
  • Completed the New Boston Chiller Plant Project
    • The multipurpose chiller plant project will provide significantly expanded cooling capacity and generate a positive return on investment through improved power efficiency
    • This project is another leap forward in our ongoing energy efficiency improvement initiative described in our sustainability report

“We are optimistic about the fundamental market drivers supporting our go-to-market strategy,” said Paul Szurek, CoreSite’s President and Chief Executive Officer. “Technology requiring low-latency, high-performance, hybrid-cloud IT architectures continues to play an increasingly important role in the success of businesses. We believe we are well-positioned to capture a good share of the edge needs in our major metropolitan U.S. markets.”

Sales Activity

CoreSite achieved new and expansion sales of $7.8 million of annualized GAAP rent for the quarter, which included annualized GAAP rent of $3.4 million, $3.6 million, and $0.8 million from retail colocation, small scale, and large scale leases, respectively.

“We remain focused on targeting retail and scale customers with performance-sensitive applications requiring high-performance interoperability and hybrid-cloud architectures,” said Steve Smith, CoreSite’s Chief Revenue Officer. “We expect these leases to drive higher yields with incremental power margin and interconnection revenues that we typically see through these types of deployments, while we continue to work on a strong funnel of scale opportunities with longer sales cycles.”

CoreSite had annualized GAAP backlog of $8.1 million, or $15.6 million on a cash basis, for leases signed by not yet commenced. The difference between GAAP and cash backlog is primarily driven by a handful of scale leases with power ramps in the early portion of their lease terms.

Other Financial Results

CoreSite’s $162.1 million of operating revenues for the second quarter, including $136.8 million of rental, power and related revenue, reflecting 7.6% year over year growth, $22.6 million of interconnection revenue, reflecting 8.2% year over year growth, and $2.7 million of office, light-industrial and other revenue. Net income was $28.5 million for the quarter, or $0.59 attributable to each common diluted share.

Development Activity

CoreSite continues to invest and develop new capacity as needed to meet market demand.

  • LA3 Phase 2 comprised of 54,000 NRSF and 6 megawatts (“MW”) is under construction and continues to be on track for its estimated completion in the fourth quarter of 2021.
  • NY2 Phase 4A comprised of 35,000 NRSF and 4 MWs commenced development during the quarter and is scheduled for completion in the first quarter of 2022.

CoreSite’s ongoing data center development and operational position includes –

  • the ability to increase its occupied footprint of purpose-built data centers, both owned and leased, by approximately 1.9 million NRSF, or about 82.4%, including space unoccupied, under construction, pre-construction or held for development, and
  • owning (versus leasing) 93.1% 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, or 4.9 times including GAAP backlog. As of the end of the second quarter, CoreSite had approximately $264.3 million of current liquidity, including $2.9 million of cash and $261.4 million of available capacity on its revolving credit facility.

2021 Updated Guidance

 

 

 

 

 

 

 

 

 

Updated Guidance

 

Previous Guidance

Total operating revenues

$645 - $653 million

 

$642 - $652 million

General and administrative expenses

$46.5 - $50.5 million

 

$47 - $51 million

Adjusted EBITDA

$340 - $348 million

 

$336 - $346 million

Net income attributable to common diluted shares

$1.99 - $2.07

 

$1.81 - $1.91

FFO per common diluted share and OP unit, diluted – as adjusted

$5.52 -$5.60

 

$5.42 - $5.52

 

 

 

 

Cash rent growth on data center renewals

2% - 4%

 

0% - 2%

The increase of $0.09 per share, or 1.6%, at the midpoint of FFO per share, as adjusted, is largely driven by an increase in operating revenues, improved adjusted EBITDA margins, and to a lesser extent, by lower than anticipated interest expense. CoreSite’s full 2021 guidance can be found in the Company’s second quarter 2021 Supplemental Earnings Information on page 21.

Conference Call Details

CoreSite will host its second quarter 2021 earnings call on Thursday, July 29, 2021, 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 5, 2021, and can be accessed dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The passcode for the replay is 13720612.

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 2021 Supplemental Information on its website at CoreSite.com, under the “Investors” link.

Upcoming Conferences and Events

CoreSite’s management will participate in the Cowen 7th Annual Communications Infrastructure Summit on August 10th.

About CoreSite

CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-uptime data center campuses with high-performance cloud access and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,375 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 475+ 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. In Q2 2021, we excluded from adjusted EBITDA a one-time, non-cash benefit of $3.1 million as a result of the release of a tax liability during the quarter that is no longer expected to be incurred.

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,

 

 

 

2021

 

2020

 

Assets:

 

 

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

 

 

Land

 

$

109,400

 

$

104,734

 

Buildings and improvements

 

 

2,289,445

 

 

2,273,536

 

 

 

 

2,398,845

 

 

2,378,270

 

Less: Accumulated depreciation and amortization

 

 

(946,668)

 

 

(867,975)

 

Net investment in operating properties

 

 

1,452,177

 

 

1,510,295

 

Construction in progress

 

 

365,430

 

 

319,411

 

Net investments in real estate

 

 

1,817,607

 

 

1,829,706

 

Operating lease right-of-use assets, net

 

 

164,282

 

 

173,928

 

Cash and cash equivalents

 

 

2,866

 

 

5,543

 

Accounts and other receivables, net

 

 

24,804

 

 

20,849

 

Lease intangibles, net

 

 

1,612

 

 

2,507

 

Goodwill

 

 

40,646

 

 

40,646

 

Other assets, net

 

 

105,406

 

 

103,094

 

Total assets

 

$

2,157,223

 

$

2,176,273

 

 

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Debt, net

 

$

1,751,005

 

$

1,715,911

 

Operating lease liabilities

 

 

180,709

 

 

189,404

 

Accounts payable and accrued expenses

 

 

84,599

 

 

79,140

 

Accrued dividends and distributions

 

 

65,154

 

 

63,878

 

Acquired below-market lease contracts, net

 

 

2,214

 

 

2,313

 

Unearned revenue, prepaid rent and other liabilities

 

 

51,907

 

 

53,149

 

Total liabilities

 

 

2,135,588

 

 

2,103,795

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Common stock, par value $0.01

 

 

436

 

 

422

 

Additional paid-in capital

 

 

566,370

 

 

555,595

 

Accumulated other comprehensive loss

 

 

(13,828)

 

 

(20,526)

 

Distributions in excess of net income

 

 

(533,451)

 

 

(471,910)

 

Total stockholders' equity

 

 

19,527

 

 

63,581

 

Noncontrolling interests

 

 

2,108

 

 

8,897

 

Total equity

 

 

21,635

 

 

72,478

 

Total liabilities and equity

 

$

2,157,223

 

$

2,176,273

 

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,

 

 

2021

 

2021

 

2020

 

 

2021

 

2020

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data center revenue:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, power, and related revenue

 

$

136,793

 

 

$

132,976

 

 

$

127,108

 

 

 

$

269,769

 

 

$

251,613

 

Interconnection revenue

 

 

22,606

 

 

 

22,160

 

 

 

20,897

 

 

 

 

44,766

 

 

 

40,982

 

Total data center revenue

 

 

159,399

 

 

 

155,136

 

 

 

148,005

 

 

 

 

314,535

 

 

 

292,595

 

Office, light-industrial and other revenue

 

 

2,725

 

 

 

2,506

 

 

 

2,538

 

 

 

 

5,231

 

 

 

5,310

 

Total operating revenues

 

 

162,124

 

 

 

157,642

 

 

 

150,543

 

 

 

 

319,766

 

 

 

297,905

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

 

45,964

 

 

 

42,632

 

 

 

41,037

 

 

 

 

88,596

 

 

 

81,220

 

Real estate taxes and insurance

 

 

7,006

 

 

 

6,735

 

 

 

5,599

 

 

 

 

13,741

 

 

 

11,789

 

Depreciation and amortization

 

 

45,367

 

 

 

44,628

 

 

 

41,779

 

 

 

 

89,995

 

 

 

82,770

 

Sales and marketing

 

 

5,804

 

 

 

5,862

 

 

 

5,837

 

 

 

 

11,666

 

 

 

11,981

 

General and administrative

 

 

11,781

 

 

 

11,517

 

 

 

11,603

 

 

 

 

23,298

 

 

 

22,870

 

Rent

 

 

8,839

 

 

 

9,221

 

 

 

8,995

 

 

 

 

18,060

 

 

 

17,394

 

Total operating expenses

 

 

124,761

 

 

 

120,595

 

 

 

114,850

 

 

 

 

245,356

 

 

 

228,024

 

Operating income

 

 

37,363

 

 

 

37,047

 

 

 

35,693

 

 

 

 

74,410

 

 

 

69,881

 

Other income

 

 

3,098

 

 

 

 

 

 

 

 

 

 

3,098

 

 

 

 

Interest expense

 

 

(11,982

)

 

 

(12,123

)

 

 

(10,586

)

 

 

 

(24,105

)

 

 

(21,769

)

Income before income taxes

 

 

28,479

 

 

 

24,924

 

 

 

25,107

 

 

 

 

53,403

 

 

 

48,112

 

Income tax expense

 

 

(4

)

 

 

(9

)

 

 

(19

)

 

 

 

(13

)

 

 

(36

)

Net income

 

 

28,475

 

 

 

24,915

 

 

 

25,088

 

 

 

 

53,390

 

 

 

48,076

 

Net income attributable to noncontrolling interests

 

 

3,226

 

 

 

3,047

 

 

 

4,417

 

 

 

 

6,273

 

 

 

9,557

 

Net income attributable to common shares

 

$

25,249

 

 

$

21,868

 

 

$

20,671

 

 

 

$

47,117

 

 

$

38,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.52

 

 

$

0.52

 

 

 

$

1.11

 

 

$

1.00

 

Diluted

 

$

0.59

 

 

$

0.51

 

 

$

0.52

 

 

 

$

1.10

 

 

$

0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,786

 

 

 

42,378

 

 

 

39,873

 

 

 

 

42,583

 

 

 

38,605

 

Diluted

 

 

42,939

 

 

 

42,592

 

 

 

39,993

 

 

 

 

42,781

 

 

 

38,759

 

(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,

 

 

2021

 

2021

 

2020

 

 

2021

 

2020

Rental revenue

 

$

86,960

 

$

85,207

 

$

81,612

 

 

$

172,167

 

$

162,498

Power revenue

 

 

47,014

 

 

44,360

 

 

41,902

 

 

 

91,374

 

 

83,180

Tenant reimbursement and other

 

 

2,819

 

 

3,409

 

 

3,594

 

 

 

6,228

 

 

5,935

Rental, power, and related revenue

 

$

136,793

 

$

132,976

 

$

127,108

 

 

$

269,769

 

$

251,613

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,

 

 

2021

 

2021

 

2020

 

 

2021

 

2020

Net income

 

$

28,475

 

$

24,915

 

$

25,088

 

 

$

53,390

 

$48,076

Real estate depreciation and amortization

 

 

43,636

 

 

42,889

 

 

40,162

 

 

 

86,525

 

79,577

FFO available to common shareholders and OP unit holders

 

$

72,111

 

$

67,804

 

$

65,250

 

 

$

139,915

 

$127,653

Other Income Adjustment(1)

 

 

(3,098)

 

 

 

 

 

 

 

(3,098)

 

FFO available to common shareholders and OP unit holders, as adjusted(1)

 

$

69,013

 

$

67,804

 

$

65,250

 

 

$

136,817

 

$127,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

42,939

 

 

42,592

 

 

39,993

 

 

 

42,781

 

38,759

Weighted average OP units outstanding - diluted

 

 

5,664

 

 

5,941

 

 

8,377

 

 

 

5,801

 

9,586

Total weighted average shares and units outstanding - diluted

 

 

48,603

 

 

48,533

 

 

48,370

 

 

 

48,582

 

48,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

1.48

 

$

1.40

 

$

1.35

 

 

$

2.88

 

$2.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted, as adjusted(1)

 

$

1.42

 

$

1.40

 

$

1.35

 

 

$

2.82

 

$2.64

(1) FFO available to shares and units, as adjusted, excludes a one-time benefit of $3.1 million, or $0.06 per share and unit, as a result of the release of a tax liability during the quarter that is no longer expected to be incurred.

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,

 

 

2021

 

2021

 

2020

 

 

2021

 

2020

Net income

 

$

28,475

 

 

$

24,915

 

$

25,088

 

 

$

53,390

 

 

$

48,076

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

11,982

 

 

 

12,123

 

 

10,586

 

 

 

24,105

 

 

 

21,769

Income taxes

 

 

4

 

 

 

9

 

 

19

 

 

 

13

 

 

 

36

Depreciation and amortization

 

 

45,367

 

 

 

44,628

 

 

41,779

 

 

 

89,995

 

 

 

82,770

EBITDAre

 

$

85,828

 

 

$

81,675

 

$

77,472

 

 

$

167,503

 

 

$

152,651

Non-cash compensation

 

 

4,680

 

 

 

4,393

 

 

4,172

 

 

 

9,073

 

 

 

7,654

Transaction costs / litigation

 

 

 

 

 

3

 

 

 

 

 

3

 

 

 

Other income adjustment

 

 

(3,098

)

 

 

 

 

 

 

 

(3,098

)

 

 

Adjusted EBITDA

 

$

87,410

 

 

$

86,071

 

$

81,644

 

 

$

173,481

 

 

$

160,305

 

Kate Ruppe Investor Relations Manager 303-222-7369 InvestorRelations@CoreSite.com

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