Attached files
file | filename |
---|---|
8-K - FORM 8-K - CoreSite Realty Corp | c24368e8vk.htm |
EX-23.1 - EXHIBIT 23.1 - CoreSite Realty Corp | c24368exv23w1.htm |
EX-99.1 - EXHIBIT 99.1 - CoreSite Realty Corp | c24368exv99w1.htm |
Exhibit
99.2
CoreSite Realty Corporation
Pro Forma Condensed Consolidated Financial Statements
(unaudited)
(unaudited)
The unaudited pro forma condensed consolidated statement of operations for the year ended
December 31, 2010, is derived from our Predecessors consolidated financial statements and the
Acquired Properties combined financial statements and is presented as if our initial public
offering (the IPO), which occurred on September 28, 2010, and the resulting formation and
financing transactions had all occurred as of January 1, 2010.
The accompanying pro forma condensed consolidated statement of operations include the
following limited liability companies and limited partnerships, which comprise the CoreSite
Predecessor (the Predecessor), all under common control and management, and the CoreSite Acquired
Properties (the Acquired Properties), all under common management:
Entity Name | Property Name | Date Formed | State of Organization | |||
Predecessor Properties |
||||||
CoreSite 1656 McCarthy, LLC
|
1656 McCarthy | November 28, 2006 | Delaware | |||
CoreSite 32 Avenue of the Americas, LLC
|
32 Avenue of the Americas | June 18, 2007 | Delaware | |||
CoreSite Real Estate 12100 Sunrise Valley Drive, LLC |
12100 Sunrise Valley | December 17, 2007 | Delaware | |||
CoreSite Real Estate 70 Innerbelt, LLC
|
70 Innerbelt | December 19, 2006 | Delaware | |||
CRP Coronado Stender, LLC
|
Coronado-Stender Properties | February 2, 2007 | Delaware | |||
Acquired Properties |
||||||
CoreSite, LLC
|
CoreSite, LLC | September 13, 2001 | Delaware | |||
Carlyle MPT Mezzanine A, LLC
|
55 S. Market | February 3, 2000 | Delaware | |||
CoreSite One Wilshire, LLC
|
One Wilshire | May 7, 2007 | Delaware | |||
CoreSite 1275 K Street, LLC
|
1275 K Street | May 31, 2006 | Delaware | |||
CoreSite Real Estate 427 S. LaSalle, LP
|
427 S. LaSalle | July 19, 2006 | Delaware | |||
CoreSite Real Estate 900 N. Alameda, LP
|
900 N. Alameda | October 6, 2006 | Delaware | |||
CoreSite 2115 NW 22nd Street, LP
|
2115 NW 22nd Street | April 26, 2006 | Delaware |
Prior to the completion of our IPO, all of the entities included in the table above were
wholly owned by one of several Carlyle real estate funds and their affiliates. The entities were
all under common control of their respective funds but were not under common control of The Carlyle
Group. Additionally, all entities were under common management. Our Predecessor includes the
limited liability companies which were wholly owned, directly or indirectly, by CRP Fund V
Holdings, LLC, which was controlled by Carlyle Realty Partners V, L.P. As such, we have combined
these entities as our Predecessor on the basis of common ownership, common control and common
management. The Predecessor did not include the limited liability companies and limited
partnerships which were wholly owned, directly or indirectly, by other Carlyle real estate funds.
The limited liability companies and limited partnerships not included in the Predecessor were all
under common management but were not under common control of The Carlyle Group.
Concurrently with the completion of our IPO, the Carlyle real estate funds or their affiliates
contributed 100% of their ownership interest in the entities that, directly or indirectly, owned or
leased all of the properties that comprised our portfolio and all the other non-cash assets used in
our business. In exchange for this contribution, our operating partnership issued to the Carlyle
real estate funds or their affiliates an aggregate of 34,600,000 operating partnership units.
Concurrently with the completion of our IPO, we purchased from the Carlyle real estate funds and
their
affiliates a portion of these units, 8,435,000 units in the aggregate, in exchange for $125.5
million, and we purchased from our operating partnership an additional 11,000,000 units for $163.7
million. Accordingly, following our IPO, the Carlyle real estate funds or their affiliates held
26,165, 000 operating partnership units which, after the first anniversary of the completion of our
IPO, became redeemable for cash or, at our option, exchangeable into our common stock on a
one-to-one basis.
We determined that CRP Fund V Holdings, LLC was the acquirer for accounting purposes and
therefore, interests contributed by CRP Fund V Holdings, LLC were recorded at historical cost. The
contribution or acquisition of interests in the Acquired Properties were accounted for as an
acquisition under the acquisition method of accounting and recognized at the estimated fair value
of acquired assets and assumed liabilities on the date of such contribution or acquisition. The
fair value of the real estate acquired was allocated to the acquired tangible assets, consisting
primarily of land, building and improvements, and identified intangible assets and liabilities,
consisting of the value of above-market and below-market leases, lease origination costs and the
value of customer relationships.
Also concurrent with the completion of our IPO, we assumed and, in one case, refinanced certain
loans held by the entities that contributed the 427 S. LaSalle property, 55 S. Market property
and 12100 Sunrise Valley property. We refinanced the existing $73.0 million of debt secured by
the 55 S. Market property with a new $60.0 million mortgage and repaid the remaining $13.0 million
of the existing loan with the proceeds from our IPO. Additionally, we entered into a
new $110.0 million revolving credit facility.
CoreSite Realty Corporation (the Company, we, or our) was formed on February 17, 2010
and had no activity prior to our IPO other than the issuance of 1,000 shares of common stock at par
value of $0.01 on February 17, 2010. Upon completion of our IPO, the Company, as the sole general
partner of the Operating Partnership, owned directly or indirectly a 42.6% interest in the
Operating Partnership and has maintained control over major decisions related to the sale or
refinancing of the properties and will continue to conduct all activities through the Operating
Partnership and its subsidiaries.
The pro forma condensed consolidated statement of operations should be read in conjunction
with our historical financial statements, including the notes thereto, included in our filings
under the Securities Act of 1933, as amended, and Securities Exchange Act of 1934, as amended. The
adjustments to our pro forma condensed consolidated statement of operations are based on available
information and assumptions that we consider reasonable. The pro forma condensed consolidated
statement of operations does not purport to represent our results of operations that would have
actually occurred if our IPO was completed on January 1, 2010, nor does the information purport to
project the Companys results of operations as of any future date or for any future periods. All
pro forma adjustments are based on estimates and assumptions and are subject to revision.
CoreSite Realty Corporation
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2010
(unaudited)
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2010
(unaudited)
Coresite Predecessor | Coresite Acquired | Acquisition of the CoreSite | The Company | |||||||||||||||||||||
Historical for the | Properties Historical for | Acquired Properties | Historical for the | |||||||||||||||||||||
period January 1, 2010 | the period January 1, | (Adjustments for the period | period September 28, | |||||||||||||||||||||
through September 27, | 2010 through September | January 1, 2010 through | 2010 through | Other | Pro Forma | |||||||||||||||||||
2010 | 27, 2010 | September 27, 2010) | December 31, 2010 | Adjustments | Company | |||||||||||||||||||
(A) | (B) | (C) | (D) | |||||||||||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||||||||||
Operating revenue: |
||||||||||||||||||||||||
Rental revenue |
$ | 24,377 | $ | 41,041 | $ | 2,587 | $ | 24,428 | $ | | $ | 92,433 | ||||||||||||
Power revenue |
8,520 | 16,928 | | 9,403 | | 34,851 | ||||||||||||||||||
Tenant reimbursement |
1,406 | 2,102 | | 1,501 | | 5,009 | ||||||||||||||||||
Other revenue |
1,254 | 7,594 | | 3,020 | | 11,868 | ||||||||||||||||||
Management fees from related parties |
| 8,846 | | | (8,846) | (E) | | |||||||||||||||||
Total operating revenues |
35,557 | 76,511 | 2,587 | 38,352 | (8,846 | ) | 144,161 | |||||||||||||||||
Operating expenses: |
| |||||||||||||||||||||||
Property operating and maintenance |
14,272 | 19,064 | | 12,107 | | 45,443 | ||||||||||||||||||
Management fees to related party |
3,582 | | | | (3,582) | (E) | | |||||||||||||||||
Real estate taxes and insurance |
1,262 | 3,070 | | 1,642 | | 5,974 | ||||||||||||||||||
Depreciation and amortization |
11,848 | 15,129 | 23,958 | 19,146 | | 70,081 | ||||||||||||||||||
Sales and marketing |
125 | 2,597 | | 1,341 | (352) | (E) | 3,711 | |||||||||||||||||
General and administrative |
2,258 | 15,481 | | 4,987 | 760 | (F) | 22,295 | |||||||||||||||||
(1,191) | (E) | |||||||||||||||||||||||
Transaction costs |
| | | 3,275 | (3,275) | (G) | | |||||||||||||||||
Rent expense |
2,177 | 11,080 | 345 | 4,551 | | 18,153 | ||||||||||||||||||
Total operating expenses |
35,524 | 66,421 | 24,303 | 47,049 | (7,640 | ) | 165,657 | |||||||||||||||||
Operating income (loss) |
33 | 10,090 | (21,716 | ) | (8,697 | ) | (1,206 | ) | (21,496 | ) | ||||||||||||||
Interest income |
2 | 6 | | 77 | | 85 | ||||||||||||||||||
Interest expense |
(1,590 | ) | (4,716 | ) | | (2,325 | ) | 1,338 | (H) | (7,293 | ) | |||||||||||||
Net income (loss) before income taxes |
(1,555 | ) | 5,380 | (21,716 | ) | (10,945 | ) | 132 | (28,704 | ) | ||||||||||||||
Income taxes |
| | | 223 | | 223 | ||||||||||||||||||
Net income (loss) |
$ | (1,555 | ) | $ | 5,380 | $ | (21,716 | ) | $ | (10,722 | ) | $132 | $ | (28,481 | ) | |||||||||
Net (loss) attributable to noncontrolling interests |
| | | (7,371 | ) | (8,319) | (I) | (15,690 | ) | |||||||||||||||
Net income (loss) attributable to common shares |
$ | (1,555 | ) | $ | 5,380 | $ | (21,716 | ) | $ | (3,351 | ) | $ | 8,451 | $ | (12,791 | ) | ||||||||
Pro forma (loss) per share basic and diluted |
$ | (0.66) | (J) | |||||||||||||||||||||
Pro forma weighted average common shares basic and diluted |
19,468,605 | (J) | ||||||||||||||||||||||
See accompanying notes.
CoreSite Realty Corporation
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)
(unaudited)
1. Adjustments to the Pro Forma Condensed Consolidated Statement of Operations
The adjustments to the pro forma condensed consolidated statement of operations for the year
ended December 31, 2010, are as follows:
(A) Reflects the Predecessors historical condensed consolidated statement of operations for
period January 1, 2010 through September 27, 2010.
(B) Reflects the Acquired Properties historical condensed combined statement of operations
for the period January 1, 2010 through September 27, 2010.
(C) Reflects the acquisition and contributions of the Acquired Properties as discussed
above. The acquisition of all interests in the Acquired Properties was accounted for under the
purchase method of accounting and was reflected in the condensed consolidated pro forma statement
of operations for the period January 1, 2010 through September 27, 2010. After September 27,
2010, the acquisition of the Acquired Properties is reflected in the Companys historical
condensed consolidated statement of operations for the period September 28, 2010 through December
31, 2010 as discussed in (D) below.
The adjustments to rental revenue and rent expense represent the resetting of the
straight-line rent amounts to January 1, 2010 and the amortization of the net above- and
below-market lease contracts, all resulting from purchase accounting. Adjustments to depreciation
and amortization expense result from increasing the value of the net real estate assets and the
recording of lease intangible assets, all resulting from purchase accounting.
(D) Reflects the Companys historical condensed consolidated statement of operations for the
period September 28, 2010 through December 31, 2010.
(E) Reflects the elimination of the management fee revenue recorded by the Acquired
Properties for management fees, construction management fees, payroll reimbursements and leasing
commissions earned by the Acquired Properties for services performed on behalf of the Predecessor
for the period January 1, 2010 through September 27, 2010. The elimination of management fee
expense is related to management fees and payroll expense incurred by the Predecessor. The
construction management fees and leasing commissions have been capitalized by the Predecessor.
Finally, the elimination of Sales and Marketing expense related to lease commissions paid to
employees of the Acquired Properties for leasing of the Predecessors properties which amounts
have been deferred and recognized over the respective lease terms.
Subsequent to the completion of our IPO, such management fees were no longer payable and the
management, construction and leasing fees incurred historically have been replaced by direct
payments of compensation and other general and administrative expenses that are paid by the
Company.
(F) Reflects estimated additional general and administrative expenses as a result of
becoming a public company, including but not limited to incremental salaries, board of directors
fees and expenses, directors and officers insurance, Sarbanes-Oxley compliance costs, filing
fees and incremental audit and tax fees.
(G) Reflects the elimination of certain transaction costs incurred in connection with the
Predecessors acquisition of the CoreSite Acquired properties.
(H) Reflects the elimination of interest expense, including the amortization of deferred
financing costs that would have been eliminated if mortgage loans were repaid on January 1, 2010
and includes the pro forma interest expense including amortization of deferred financing costs
and amortization of acquired below market debt for the period from January 1, 2010 through
September 27, 2010. After September 27, 2010, the actual interest expense is reflected in the
Companys historical condensed consolidated statement of operations for the period September 28,
2010 through December 31, 2010 as discussed in (D) above (dollars in thousands).
Interest Expense | ||||
Adjustment | ||||
Interest expense on retired mortgages |
$ | (4,151 | ) | |
Amortization of deferred financing costs on retired mortgages |
(483 | ) | ||
Interest expense on the 55 S. Market mortgage (fixed at 4.01% including the effect of
the interest rate swap) |
1,692 | |||
Amortization of deferred financing costs on refinanced debt and revolving line of credit |
1,003 | |||
Amortization of acquired below market debt |
601 | |||
Decrease in interest expense |
$ | (1,338 | ) | |
(I) Reflects the noncontrolling interests in the earnings of the Operating Partnership for
the period January 1, 2010 through September 27, 2010. After September 27, 2010, the
noncontrolling interests in the earnings of the Operating Partnership is reflected in the
Companys historical condensed consolidated statement of operations for the period September 28,
2010 through December 31, 2010 as discussed in (D) above.
(J) Pro forma loss attributable to common shares basic and diluted is calculated by dividing
pro forma loss attributable to common shares by the number of shares of common stock issued in
connection with our IPO, the initial capitalization of our Company and shares issued to employees
of the Company.