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EX-99.2 - EX-99.2 - CoreSite Realty Corpa15-16043_1ex99d2.htm

Exhibit 99.1

 

GRAPHIC

 

CORESITE REPORTS SECOND-QUARTER YEAR-OVER-YEAR REVENUE AND FFO PER SHARE GROWTH OF 24% AND 19%, RESPECTIVELY

 

2015 FFO guidance increased to a range of $2.75 to $2.83 per share

 

DENVER, CO — July 23, 2015 — CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center solutions across the US, today announced financial results for the second quarter ended June 30, 2015.

 

Quarterly Highlights

 

·                  Reported second-quarter funds from operations (“FFO”) of $0.68 per diluted share and unit, representing 19.3% growth year over year on an unadjusted basis and 33.3% growth year over year excluding non-recurring items in Q2 2014

·                  Reported second-quarter total operating revenues of $81.5 million, representing a 24.0% increase year over year; total data center revenues increased 24.7% year over year

·                  Executed 243,477 net rentable square feet (NRSF) of new and expansion data center leases representing $19.6 million of annualized GAAP rent at a rate of $81 per square foot, comprised of 106,897 square feet of turn-key data center space in addition to a previously-announced 136,580 square-foot powered-shell build-to-suit on CoreSite’s Santa Clara Campus in California

·                  Commenced 122,872 net rentable square feet of new and expansion leases representing $15.1 million of annualized GAAP rent at a rate of $123 per square foot, increasing stabilized data center occupancy to 89.9%

·                  Realized rent growth on signed renewals of 5.7% on a cash basis and 9.1% on a GAAP basis and recorded rental churn of 1.6%

 

Tom Ray, CoreSite’s Chief Executive Officer, commented, “Our Q2 results reflect continued execution against our stated business plan with solid financial and operational performance.” Mr. Ray continued, “We are pleased to have executed upon our core objectives of increasing the number of smaller leases we sign, continuing to grow interconnection count and revenue, adding key network and cloud deployments to our platform, and making our company more efficient as reflected by our earnings margins. In addition, during the quarter we were pleased to execute upon two larger lease opportunities — our build-to-suit in Santa Clara and a 35,000 square-foot anchor lease at our new SV7 building currently in preconstruction. We are encouraged by our continued strength in the performance-sensitive colocation segment and we remain focused upon executing our business plan in what we believe are strengthening market conditions.”

 

Financial Results

 

CoreSite reported FFO per diluted share and unit of $0.68 for the three months ended June 30, 2015, an increase of 33.3% compared to $0.51 per diluted share and unit for the three months ended June 30, 2014, excluding non-recurring items. On a sequential-quarter basis, FFO per diluted share and unit increased 6.3%.

 

Total operating revenues for the three months ended June 30, 2015, were $81.5 million, a 24.0% increase year over year and an increase of 9.0% on a sequential-quarter basis. Total data center revenues for the three months ended June 30, 2015, were $79.5 million, a 24.7% increase year over year and an increase of 9.5% on a sequential-quarter basis. CoreSite reported net income attributable to common shares of $5.5 million, or $0.22 per diluted share.

 

1



 

Sales Activity

 

CoreSite executed 122 new and expansion data center leases representing $19.6 million of annualized GAAP rent during the second quarter, comprised of 243,477 NRSF at a weighted-average GAAP rental rate of $81 per NRSF. The recently-announced 136,580-square foot powered-shell build-to-suit, SV6, is included in the second-quarter new and expansion leasing results.

 

CoreSite’s second-quarter data center lease commencements totaled 122,872 NRSF at a weighted average GAAP rental rate of $123 per NRSF, which represents $15.1 million of annualized GAAP rent.

 

CoreSite’s renewal leases signed in the second quarter totaled $6.5 million in annualized GAAP rent, comprised of 35,272 NRSF at a weighted-average GAAP rental rate of $185 per NRSF, reflecting a 5.7% increase in rent on a cash basis and 9.1% increase on a GAAP basis. The second-quarter rental churn rate was 1.6%.

 

Development Activity

 

Santa Clara — In April 2015, CoreSite began construction on a 136,580 square-foot powered shell data center on land CoreSite owns on its Santa Clara campus. The building, which will be known as SV6, is 100% pre-leased. As of June 30, 2015, CoreSite has incurred $5.0 million of the estimated $30.0 million required to complete the development project, and expects to deliver the build-to-suit to a strategic customer in the first half of 2016.

 

Northern Virginia — During the second quarter, CoreSite placed into service 48,137 NRSF associated with Phase 2 at VA2. As of June 30, 2015, CoreSite had an incremental 48,137 NRSF of data center space under construction in Phase 3 at VA2 and had incurred $5.7 million of the estimated $14.5 million required to complete Phase 3. CoreSite expects to complete construction in the fourth quarter of 2015.

 

New York — During the second quarter, CoreSite placed into service 49,050 NRSF associated with Phase 2 at NY2, comprised of three computers rooms of approximately 16,000 NRSF each. As of June 30, 2015, one computer room was 100% leased and occupied by a single customer.

 

Los Angeles — During the second quarter, CoreSite began construction of 12,500 NRSF at LA2. As of June 30, 2015, CoreSite had incurred approximately $600,000 of the estimated $1.7 million required to complete the project, and expects to complete construction in the third quarter of 2015.

 

Additional markets — As of June 30, 2015, CoreSite had 26,853 NRSF of turn-key data center capacity under construction across its existing facilities at BO1 (Boston) and CH1 (Chicago). As of the end of the second quarter, CoreSite had incurred $5.4 million of the estimated $16.5 million required to complete these two projects.

 

Balance Sheet and Liquidity

 

As of June 30, 2015, CoreSite had net debt of $344.7 million, correlating to 2.1 times second-quarter annualized adjusted EBITDA, and net debt and preferred stock outstanding of $459.7 million, correlating to 2.8 times second-quarter annualized adjusted EBITDA.

 

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On June 24, 2015, CoreSite executed an amendment to its revolving credit facility, increasing debt capacity to $500 million. The amended unsecured credit facility is comprised of a 4-year $350 million revolving credit facility and a 5-year $150 million term loan. CoreSite used the term loan proceeds to pay down a portion of the balance on its existing revolving credit facility.

 

At quarter end, CoreSite had $7.5 million of cash available on its balance sheet and $241.4 million of capacity available under its revolving credit facility.

 

Dividend

 

On May 21, 2015, CoreSite announced a dividend of $0.42 per share of common stock and common stock equivalents for the second quarter of 2015. The dividend was paid on July 15, 2015, to shareholders of record on June 30, 2015.

 

CoreSite also announced on May 21, 2015, a dividend of $0.4531 per share of Series A preferred stock for the period April 15, 2015, to July 14, 2015. The preferred dividend was paid on July 15, 2015, to shareholders of record on June 30, 2015.

 

2015 Guidance

 

CoreSite is increasing its 2015 guidance of FFO per diluted share and unit to a range of $2.75 to $2.83 from the previous range of $2.55 to $2.65. In addition, CoreSite is increasing its 2015 guidance for net income attributable to common shares to a range of $0.93 to $1.01 from the previous range of $0.75 to $0.85 per diluted share, with the difference between FFO and net income being real estate depreciation and amortization.

 

CoreSite is increasing its guidance for 2015 total capital expenditures by $20 million to a range of $135 million to $165 million primarily to reflect the development of the recently announced SV7 data center on its Santa Clara campus.

 

This outlook is predicated on current economic conditions, internal assumptions about CoreSite’s customer base, and the supply and demand dynamics of the markets in which CoreSite operates. The guidance does not include the impact of any future financing, investment or disposition activities beyond what has already been disclosed.

 

Upcoming Conferences and Events

 

CoreSite will participate in a number of upcoming investor conferences, including the Pacific Crest 17th Annual Global Technology Leadership Forum on August 11th in Vail, Colorado; the Cowen and Company Communications Infrastructure Summit on August 12th in Boulder, Colorado; the Bank of America Merrill Lynch 2015 Media, Communications & Entertainment Conference on September 9th in Beverly Hills, California; and the Bank of America Merrill Lynch 2015 Global Real Estate Conference on September 16th in New York, New York.

 

Conference Call Details

 

CoreSite will host a conference call on July 23, 2015, at 12:00 p.m., Eastern Time (10:00 a.m., Mountain Time), to discuss its financial results, current business trends and market conditions.

 

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The call can be accessed live over the phone by dialing 877-407-3982 for domestic callers or 201-493-6780 for international callers. A replay will be available shortly after the call and can be accessed by dialing 877-870-5176 for domestic callers or 858-384-5517 for international callers. The passcode for the replay is 13611864. The replay will be available until July 30, 2015.

 

Interested parties may also listen to a simultaneous webcast of the conference call by logging on to CoreSite’s website at www.CoreSite.com and clicking on the “Investors” link. The on-line replay will be available for a limited time beginning immediately following the call.

 

About CoreSite

 

CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center solutions across eight key North American markets. More than 800 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 350+ 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.

 

CoreSite Investor Relations Contact

Greer Aviv | CoreSite Investor Relations Director
+1 303.405.1012 | +1 303.222.7276
Greer.Aviv@CoreSite.com

 

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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 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; the company’s failure to obtain necessary outside financing; the company’s 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 the company’s 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.

 

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Consolidated Balance Sheet

(in thousands)

 

 

 

June 30,
2015

 

December 31,
2014

 

Assets:

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

Land

 

$

78,337

 

$

78,983

 

Buildings and improvements

 

1,012,845

 

888,966

 

 

 

1,091,182

 

967,949

 

Less: Accumulated depreciation and amortization

 

(247,655

)

(215,978

)

Net investment in operating properties

 

843,527

 

751,971

 

Construction in progress

 

106,872

 

178,599

 

Net investments in real estate

 

950,399

 

930,570

 

Cash and cash equivalents

 

7,542

 

10,662

 

Accounts and other receivables, net

 

15,269

 

10,290

 

Lease intangibles, net

 

5,815

 

7,112

 

Goodwill

 

41,191

 

41,191

 

Other assets

 

77,569

 

75,600

 

Total assets

 

$

1,097,785

 

$

1,075,425

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

Liabilities

 

 

 

 

 

Revolving credit facility

 

$

102,250

 

$

218,500

 

Senior unsecured term loans

 

250,000

 

100,000

 

Accounts payable and accrued expenses

 

41,903

 

42,463

 

Accrued dividends and distributions

 

22,467

 

22,355

 

Deferred rent payable

 

8,519

 

8,985

 

Acquired below-market lease contracts, net

 

5,126

 

5,576

 

Unearned revenue, prepaid rent and other liabilities

 

24,734

 

19,205

 

Total liabilities

 

454,999

 

417,084

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Series A cumulative preferred stock

 

115,000

 

115,000

 

Common stock, par value $0.01

 

259

 

212

 

Additional paid-in capital

 

337,662

 

275,038

 

Accumulated other comprehensive loss

 

(183

)

(125

)

Distributions in excess of net income

 

(77,772

)

(67,538

)

Total stockholders’ equity

 

374,966

 

322,587

 

Noncontrolling interests

 

267,820

 

335,754

 

Total equity

 

642,786

 

658,341

 

 

 

 

 

 

 

Total liabilities and equity

 

$

1,097,785

 

$

1,075,425

 

 

6



 

Consolidated Statement of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2015

 

March 31,
2015

 

June 30,
2014

 

June 30,
2015

 

June 30,
2014

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

Data center revenue:

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

44,824

 

$

41,323

 

$

36,938

 

$

86,147

 

$

71,837

 

Power revenue

 

21,792

 

19,669

 

16,575

 

41,461

 

32,577

 

Interconnection revenue

 

10,595

 

10,215

 

8,591

 

20,810

 

16,650

 

Tenant reimbursement and other

 

2,276

 

1,416

 

1,627

 

3,692

 

4,383

 

Total data center revenue

 

79,487

 

72,623

 

63,731

 

152,110

 

125,447

 

Office, light-industrial and other revenue

 

1,969

 

2,134

 

1,951

 

4,103

 

3,966

 

Total operating revenues

 

81,456

 

74,757

 

65,682

 

156,213

 

129,413

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

22,204

 

19,780

 

18,534

 

41,984

 

34,823

 

Real estate taxes and insurance

 

3,270

 

1,935

 

(980

)

5,205

 

1,986

 

Depreciation and amortization

 

24,046

 

22,816

 

19,504

 

46,862

 

37,386

 

Sales and marketing

 

4,256

 

3,782

 

3,747

 

8,038

 

7,335

 

General and administrative

 

7,952

 

7,865

 

6,732

 

15,817

 

14,437

 

Rent

 

5,007

 

5,243

 

5,070

 

10,250

 

10,136

 

Impairment of internal-use software

 

 

 

1,037

 

 

1,959

 

Transaction costs

 

45

 

 

9

 

45

 

13

 

Total operating expenses

 

66,780

 

61,421

 

53,653

 

128,201

 

108,075

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

14,676

 

13,336

 

12,029

 

28,012

 

21,338

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on real estate disposal

 

 

36

 

 

36

 

 

Interest income

 

2

 

2

 

2

 

4

 

4

 

Interest expense

 

(1,730

)

(1,265

)

(1,415

)

(2,995

)

(2,588

)

Income before income taxes

 

12,948

 

12,109

 

10,616

 

25,057

 

18,754

 

Income tax benefit (expense)

 

(66

)

(49

)

22

 

(115

)

2

 

Net income

 

12,882

 

12,060

 

10,638

 

24,942

 

18,756

 

Net income attributable to noncontrolling interests

 

5,259

 

5,408

 

4,670

 

10,667

 

7,971

 

Net income attributable to CoreSite Realty Corporation

 

7,623

 

6,652

 

5,968

 

14,275

 

10,785

 

Preferred stock dividends

 

(2,085

)

(2,084

)

(2,085

)

(4,169

)

(4,169

)

Net income attributable to common shares

 

$

5,538

 

$

4,568

 

$

3,883

 

$

10,106

 

$

6,616

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.23

 

$

0.21

 

$

0.18

 

$

0.44

 

$

0.31

 

Diluted

 

$

0.22

 

$

0.21

 

$

0.18

 

$

0.43

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

24,536,583

 

21,372,157

 

21,131,077

 

22,963,111

 

21,062,299

 

Diluted

 

25,055,195

 

21,978,307

 

21,604,730

 

23,525,316

 

21,599,749

 

 

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Reconciliations of Net Income to FFO

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2015

 

March 31,
2015

 

June 30,
2014

 

June 30,
2015

 

June 30,
2014

 

Net income

 

$

12,882

 

$

12,060

 

$

10,638

 

$

24,942

 

$

18,756

 

Real estate depreciation and amortization

 

21,343

 

20,253

 

18,163

 

41,596

 

34,999

 

Gain on real estate disposal

 

 

(36

)

 

(36

)

 

FFO

 

$

34,225

 

$

32,277

 

$

28,801

 

$

66,502

 

$

53,755

 

Preferred stock dividends

 

(2,085

)

(2,084

)

(2,085

)

(4,169

)

(4,169

)

FFO available to common shareholders and OP unit holders

 

$

32,140

 

$

30,193

 

$

26,716

 

$

62,333

 

$

49,586

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

25,055

 

21,978

 

21,605

 

23,525

 

21,600

 

Weighted average OP units outstanding - diluted

 

22,344

 

25,361

 

25,361

 

23,844

 

25,361

 

Total weighted average shares and units outstanding - diluted

 

47,399

 

47,339

 

46,966

 

47,369

 

46,961

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

0.68

 

$

0.64

 

$

0.57

 

$

1.32

 

$

1.06

 

 

Funds From Operations “FFO” is a supplemental measure of our 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 and liquidity. We calculate 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. FFO attributable to common shares and units represents FFO less preferred stock dividends declared during the period.

 

Our management uses FFO as a supplemental performance measure because, in 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.

 

We offer this measure because we recognize that FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our 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 our properties, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. 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 our cash needs, including our ability to pay dividends or make distributions. In addition, our 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 us. Investors in our securities should not rely on these measures as a substitute for any GAAP measure, including net income.

 

8



 

Reconciliation of earnings before interest, taxes, depreciation and amortization (EBITDA):

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2015

 

March 31,
2015

 

June 30,
2014

 

June 30,
2015

 

June 30,
2014

 

Net income

 

$

12,882

 

$

12,060

 

$

10,638

 

$

24,942

 

$

18,756

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

1,728

 

1,263

 

1,413

 

2,991

 

2,584

 

Income taxes

 

66

 

49

 

(22

)

115

 

(2

)

Depreciation and amortization

 

24,046

 

22,816

 

19,504

 

46,862

 

37,386

 

EBITDA

 

$

38,722

 

$

36,188

 

$

31,533

 

$

74,910

 

$

58,724

 

Non-cash compensation

 

1,792

 

1,569

 

1,532

 

3,361

 

3,248

 

Gain on real estate disposal

 

 

(36

)

 

(36

)

 

Transaction costs / litigation

 

45

 

230

 

9

 

275

 

239

 

Impairment of internal-use software

 

 

 

1,037

 

 

1,959

 

Adjusted EBITDA

 

$

40,559

 

$

37,951

 

$

34,111

 

$

78,510

 

$

64,170

 

 

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We calculate adjusted EBITDA by adding our non-cash compensation expense, transaction costs and litigation expense as well as adjusting for the impact of impairment charges, gains or losses from sales of property and undepreciated land and gains or losses on early extinguishment of debt. Management uses EBITDA and adjusted EBITDA as indicators of our ability to incur and service debt. In addition, we consider EBITDA and adjusted EBITDA to be appropriate supplemental measures of our 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 EBITDA 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 our business, their utilization as a cash flow measurement is limited.

 

9