cor_Current_Folio_8K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


 

FORM 8-K


 

CURRENT REPORT

 

Pursuant to Section 13 OR 15(d) of The

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 8, 2018


 

CoreSite Realty Corporation

(Exact name of registrant as specified in its charter)


 

Maryland

001-34877

27-1925611

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

 

 

 

1001 17th Street, Suite 500

 

Denver, CO

80202

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code: (866) 777-2673

 

N/A

(Former name or former address, if changed since last report.)


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

 

 

 

 


 

Section 2 — Financial Information

 

Item 2.02 Results of Operations and Financial Condition.

 

On February 8, 2018, CoreSite Realty Corporation ("CoreSite") issued a press release reporting financial results and operating information for the quarter ended December  31, 2017. In addition, CoreSite made available on its website supplemental operating and financial data for the same period. The text of the press release and the supplemental information package are furnished herewith as Exhibits 99.1 and 99.2, respectively.

 

The information in this report, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Section 9 — Financial Statements and Exhibits

 

Item 9.01 Financial Statements and Exhibits.

 

(d) The following exhibits are furnished with this Current Report on Form 8-K.

 

Exhibit No.

    

Description

 

 

 

99.1

 

Press Release, dated February 8, 2018.

 

 

 

99.2

 

Quarter Ended December 31, 2017, Earnings Release and Supplemental Information, dated February 8, 2018.

 

2


 

EXHIBIT INDEX

 

Exhibit No.

    

 

 

 

 

99.1

 

Press Release, dated February 8, 2018.

 

 

 

99.2

 

Quarter Ended December  31, 2017, Earnings Release and Supplemental Information, dated February 8, 2018.

 

3


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

CORESITE REALTY CORPORATION

 

 

 

 

 

 

Date: February 8,  2018

By:

/s/ Jeffrey S. Finnin

 

 

Name: Jeffrey S. Finnin

 

 

Title:   Chief Financial Officer

 

4


cor_Ex99_1

Exhibit 99.1

 

 

 Picture 1

 

CoreSite Reports Fourth-Quarter 2017 Financial Results Reflecting
Revenue Growth of 14.0% Year over Year

 

DENVER, CO – February 8, 2018 – CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center and interconnection solutions across the U.S., today announced financial results for the fourth quarter ended December 31, 2017. 

 

Quarterly and Subsequent Highlights

·

Reported fourth-quarter total operating revenues of $125.9 million, representing a 14.0% increase year over year

·

Reported fourth-quarter net income per diluted share of $0.44,  consistent with the prior-year level

·

Reported fourth-quarter funds from operations (“FFO”), excluding a one-time non-cash expense related to the original issuance costs associated with CoreSite’s redeemed Preferred Stock, of $1.18 per diluted share and unit, representing 11.3% growth year over year. As reported, FFO per diluted share and unit was $1.09 

·

Executed 128 new and expansion data center leases comprising 41,521 net rentable square feet (NRSF), representing $7.2 million of annualized GAAP rent at an average rate of $174 per square foot

·

Commenced 52,221 NRSF of new and expansion leases representing $8.2 million of annualized GAAP rent at an average rate of $157 per square foot

·

Realized rent growth on signed renewals of 3.5% on a cash basis and 6.2% on a GAAP basis and recorded rental churn of 0.5% in the fourth quarter 

·

On January 29, 2018, CoreSite acquired a two-acre land parcel in Chicago, Illinois, on which CoreSite expects to build CH2, a 175,000 square foot turn-key data center building, which should have dark fiber campus connectivity to CoreSite’s existing CH1 facility 

 

“We finished out the year with solid results, highlighted by fourth-quarter revenue, adjusted EBITDA and FFO growth, before the one-time Preferred Stock redemption charge, of 14%, 13%, and 11%, year over year, respectively,” said Paul Szurek, CoreSite’s Chief Executive Officer. “Organic growth was driven primarily by the continued expansion of existing customers across the portfolio and also by new logo growth as we continue to attract valuable deployments to our facilities, driving interactions and interconnections among our customers. When looking at 2017 in its entirety, we executed well on our strategic priorities and took important steps to grow our differentiated scalable and flexible campus strategy in key markets, including Santa Clara, Northern Virginia, Los Angeles, and most recently, Chicago.”

 

Financial Results

CoreSite reported net income attributable to common shares of $14.9 million, or $0.44 per diluted share, for the three months ended December 31, 2017, compared to $14.9 million, or $0.44 per diluted share for the three months ended December 31, 2016.  Net income per diluted share declined 4.3% on a sequential-quarter basis, due to a one-time non-cash expense related to the original issuance costs associated with CoreSite’s redeemed Preferred Stock.

CoreSite reported FFO per diluted share and unit, excluding the aforementioned one-time non-cash expense related to the original issuance costs associated with CoreSite’s redeemed Preferred Stock, of $1.18 for the three months ended December 31, 2017, an increase of 11.3% compared to $1.06 per diluted share and unit for the three months ended December 31, 2016. FFO per diluted share and unit, adjusted for the non-cash

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

expense, increased 7.3% on a sequential-quarter basis. FFO per diluted share and unit, as reported, was $1.09 for the three months ended December 31, 2017, an increase of 2.8% year over year. On a sequential-quarter basis, FFO, as reported, declined 0.9%, again reflecting the one-time non-cash expense related to CoreSite’s redeemed Preferred Stock.  

 

Total operating revenues for the three months ended December 31, 2017, were $125.9 million, a 14.0% increase year over year and an increase of 2.3% on a sequential-quarter basis.

 

Sales Activity

 

CoreSite executed 128 new and expansion data center leases representing $7.2 million of annualized GAAP rent during the fourth quarter, comprised of 41,521 NRSF at a weighted-average GAAP rental rate of $174 per NRSF. Leasing to smaller deployments rebounded during the fourth quarter, with annualized GAAP rent signed for leases less than 5,000 square feet increasing 5.2% compared to the trailing twelve-month average.

 

CoreSite’s fourth-quarter data center lease commencements totaled 52,221 NRSF at a weighted average GAAP rental rate of $157 per NRSF, which represents $8.2 million of annualized GAAP rent.

 

CoreSite’s renewal leases signed in the fourth quarter totaled $11.2 million in annualized GAAP rent, comprised of 78,577 NRSF at a weighted-average GAAP rental rate of $142 per NRSF, reflecting a 3.5% increase in rent on a cash basis and a 6.2% increase on a GAAP basis. The fourth-quarter rental churn rate was 0.5%.

 

Development and Acquisition Activity 

During the fourth quarter, CoreSite placed into service 13,735 square feet of turn-key data center capacity at BO1 in Boston and 3,087 square feet of turn-key data center capacity at VA1 in Reston, Virginia.

On January 29, 2018, CoreSite acquired a two-acre land parcel located in downtown Chicago, Illinois, with a total real estate cost of $4.5 million. CoreSite expects to build CH2, a 175,000 square foot turn-key data center building, on the acquired land parcel, upon the receipt of necessary entitlements. The facility is located in close proximity to CoreSite’s existing CH1 facility and network node and CoreSite expects to achieve campus interconnectivity with diverse, high-count dark fiber between CH1 and CH2.

 

In addition, as of December 31, 2017,  CoreSite had a total of 220,336 square feet of turn-key data center capacity under construction and had spent $98.5 million of the estimated $213.6 million required to complete the projects, which consisted of the following.

 

Reston – CoreSite had 24,922 square feet of turn-key data center capacity under construction at VA3 (Phase 1A). As of December 31, 2017, CoreSite had incurred $16.5 million of the estimated $22.3 million required to complete this phase of the project, and expects to complete development late in the first quarter or early in the second quarter of 2018.  During the fourth quarter, CoreSite also had 49,837 square feet of turn-key data center capacity under construction at VA3 (Phase 1B), inclusive of 9,837 square feet of the infrastructure building to support this phase of the data center campus. As of the end of the fourth quarter, CoreSite had incurred $27.4 million of the estimated $100.2 million required to complete VA3 Phase 1B and the infrastructure building, and expects to complete development in the fourth quarter of 2018.

 

Los Angeles – CoreSite had 47,338 square feet of turn-key data center capacity under construction at LA2, which capacity was 78.6% pre-leased. As of December 31, 2017, CoreSite had incurred $43.6 million of the

 

 

 

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

estimated $45.2 million required to complete the expansion and expects to complete construction in the first quarter of 2018. In addition, CoreSite had an incremental 39,925 square feet of turn-key data center capacity under construction at LA2. As of the end of the fourth quarter, CoreSite had spent $6.2 million of the estimated $15.0 million required to complete this expansion and expects to complete construction in the first quarter of 2018. In conjunction with the build-out of the fourth floor at LA2, during the fourth quarter CoreSite spent $8.6 million in recurring capital expenditures to substantially complete a chiller plant replacement and upgrade project at LA2. The project is expected to result in improved energy efficiency and reduced maintenance capital requirements. 

Washington D.C. – CoreSite had 24,563 square feet of turn-key data center capacity under construction at DC2. As of the end of the fourth quarter, CoreSite had spent $4.4 million of the estimated $17.4 million required to complete the project, and expects to complete development in the third quarter of 2018.

Denver – CoreSite had 15,630 square feet of turn-key data center capacity under construction at DE1. CoreSite expects to spend $7.5 million to complete this expansion and expects to complete construction in the third quarter of 2018.

New York – CoreSite commenced construction on 18,121 square feet of turn-key data center capacity at NY2, and expects to spend $6.0 million to complete this expansion in the third quarter of 2018.

 

Balance Sheet and Liquidity

As of December 31, 2017, CoreSite had net principal debt outstanding of $939.3 million, correlating to 3.4 times fourth-quarter annualized adjusted EBITDA.

 

As of the end of the fourth quarter, CoreSite had $180.9 million of total liquidity consisting of available cash and capacity on its revolving credit facility.

 

On December 12, 2017, CoreSite redeemed all 4,600,000 shares of its 7.25% Series A cumulative redeemable Preferred Stock for $25.00 per share, plus all accrued and unpaid dividends in an amount equal to $0.292014 per share, for a total payment of $25.292014 per share. 

 

Dividend

 

On December 7, 2017,  CoreSite announced a dividend of $0.98 per share of common stock and common stock equivalents for the fourth quarter of 2017. The $0.98 per share quarterly dividend represents a $0.08, or 8.9%, increase over the prior quarterly dividend of $0.90 per share that was established in May 2017, and a $0.18, or 22.5%, increase over the dividend rate set in December 2016.  

 

The fourth-quarter dividend was paid on January 16, 2018, to shareholders of record on December 29, 2017.

 

2018 Guidance 

 

CoreSite is introducing its 2018 guidance of net income attributable to common shares in the range of $2.15 to $2.27 per diluted share.  In addition, the company’s guidance of FFO per diluted share and unit is a range of $4.92 to $5.04, with the difference between net income and FFO being real estate depreciation and amortization. 

 

 

 

 

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

CoreSite’s 2018 guidance of FFO per diluted share reflects the company’s adoption of two new accounting standards – revenue recognition and lease accounting, which are cumulatively expected to reduce FFO per diluted share by approximately $0.06 per share.  Absent these accounting changes, CoreSite’s 2018 guidance midpoint would reflect 11.5% year-over-year growth.

 

This outlook is based 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 Citi’s 2018 Global Property CEO Conference on March 5-6, 2018, at The Diplomat Resort & Spa in Hollywood, Florida.

 

Conference Call Details

CoreSite will host a conference call on February 8, 2018, at 12:00 p.m., Eastern Time (10:00 a.m., Mountain Time), to discuss its financial results, current business trends and market conditions.

 

The call will be accessible by dialing +1-877-407-3982 (domestic) or +1-201-493-6780 (international). A replay will be available until February 22, 2018, and can be accessed shortly after the call by dialing + 1-844-512-2921 (domestic) or + 1-412-317-6671 (international). The passcode for the replay is 13674936.  

 

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 and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,200 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.

 

CoreSite Contact

 

Greer Aviv

Vice President of Investor Relations and Corporate Communications

+1 303.405.1012

+1 303.222.7276
Greer.Aviv@CoreSite.com

 

 

 

 

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

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 ability to service existing debt; 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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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

December 31,
2017

  

December 31,
2016

 

Assets:

 

 

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

 

 

Land

 

$

97,258

 

$

100,258

 

Buildings and improvements

 

 

1,561,056

 

 

1,472,580

 

 

 

 

1,658,314

 

 

1,572,838

 

Less: Accumulated depreciation and amortization

 

 

(473,141)

 

 

(369,303)

 

Net investment in operating properties

 

 

1,185,173

 

 

1,203,535

 

Construction in progress

 

 

162,903

 

 

70,738

 

Net investments in real estate

 

 

1,348,076

 

 

1,274,273

 

Cash and cash equivalents

 

 

5,247

 

 

4,429

 

Accounts and other receivables, net

 

 

28,875

 

 

25,125

 

Lease intangibles, net

 

 

6,314

 

 

9,913

 

Goodwill

 

 

40,646

 

 

41,191

 

Other assets, net

 

 

103,501

 

 

96,372

 

Total assets

 

$

1,532,659

 

$

1,451,303

 

 

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Debt, net

 

$

939,570

 

$

690,450

 

Accounts payable and accrued expenses

 

 

77,170

 

 

72,519

 

Accrued dividends and distributions

 

 

48,976

 

 

41,849

 

Deferred rent payable

 

 

9,928

 

 

7,694

 

Acquired below-market lease contracts, net

 

 

3,504

 

 

4,292

 

Unearned revenue, prepaid rent and other liabilities

 

 

34,867

 

 

37,413

 

Total liabilities

 

 

1,114,015

 

 

854,217

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Series A cumulative preferred stock

 

 

 —

 

 

115,000

 

Common stock, par value $0.01

 

 

338

 

 

334

 

Additional paid-in capital

 

 

457,495

 

 

438,531

 

Accumulated other comprehensive income (loss)

 

 

753

 

 

(101)

 

Distributions in excess of net income

 

 

(177,566)

 

 

(118,038)

 

Total stockholders' equity

 

 

281,020

 

 

435,726

 

Noncontrolling interests

 

 

137,624

 

 

161,360

 

Total equity

 

 

418,644

 

 

597,086

 

Total liabilities and equity

 

$

1,532,659

 

$

1,451,303

 

 

 

 

 

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

 

December 31,

 

September 30,

    

December 31,

  

December 31,

 

December 31,

 

 

 

2017

 

2017

    

2016

  

2017

 

2016

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data center revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

68,373

 

$

66,657

 

$

61,106

 

$

264,134

 

$

218,060

 

Power revenue

 

 

36,528

 

 

35,110

 

 

30,722

 

 

134,909

 

 

111,541

 

Interconnection revenue

 

 

16,255

 

 

16,201

 

 

13,984

 

 

62,293

 

 

53,077

 

Tenant reimbursement and other

 

 

1,847

 

 

2,185

 

 

2,104

 

 

8,637

 

 

9,086

 

Total data center revenue

 

 

123,003

 

 

120,153

 

 

107,916

 

 

469,973

 

 

391,764

 

Office, light-industrial and other revenue

 

 

2,943

 

 

2,915

 

 

2,592

 

 

11,848

 

 

8,588

 

Total operating revenues

 

 

125,946

 

 

123,068

 

 

110,508

 

 

481,821

 

 

400,352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

 

34,722

 

 

37,091

 

 

28,690

 

 

132,820

 

 

107,212

 

Real estate taxes and insurance

 

 

3,963

 

 

2,622

 

 

4,591

 

 

14,913

 

 

14,250

 

Depreciation and amortization

 

 

32,629

 

 

32,077

 

 

30,674

 

 

129,251

 

 

108,652

 

Sales and marketing

 

 

4,616

 

 

4,643

 

 

4,308

 

 

18,176

 

 

17,495

 

General and administrative

 

 

10,157

 

 

9,759

 

 

8,399

 

 

37,548

 

 

35,369

 

Rent

 

 

6,155

 

 

6,077

 

 

5,913

 

 

24,125

 

 

22,631

 

Transaction costs

 

 

37

 

 

 —

 

 

 —

 

 

176

 

 

126

 

Total operating expenses

 

 

92,279

 

 

92,269

 

 

82,575

 

 

357,009

 

 

305,735

 

Operating income

 

 

33,667

 

 

30,799

 

 

27,933

 

 

124,812

 

 

94,617

 

Interest expense

 

 

(6,635)

 

 

(6,447)

 

 

(4,698)

 

 

(24,147)

 

 

(12,577)

 

Income before income taxes

 

 

27,032

 

 

24,352

 

 

23,235

 

 

100,665

 

 

82,040

 

Income tax expense

 

 

(24)

 

 

(64)

 

 

(74)

 

 

(174)

 

 

(119)

 

Net income

 

 

27,008

 

 

24,288

 

 

23,161

 

 

100,491

 

 

81,921

 

Net income attributable to noncontrolling interests

 

 

6,099

 

 

6,446

 

 

6,181

 

 

25,636

 

 

23,212

 

Net income attributable to CoreSite Realty Corporation

 

 

20,909

 

 

17,842

 

 

16,980

 

 

74,855

 

 

58,709

 

Preferred stock dividends

 

 

(1,671)

 

 

(2,084)

 

 

(2,085)

 

 

(7,924)

 

 

(8,338)

 

Original issuance costs associated with redeemed preferred stock

 

 

(4,326)

 

 

 —

 

 

 —

 

 

(4,326)

 

 

 —

 

Net income attributable to common shares

 

$

14,912

 

$

15,758

 

$

14,895

 

$

62,605

 

$

50,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

$

0.47

 

$

0.45

 

$

1.85

 

$

1.56

 

Diluted

 

$

0.44

 

$

0.46

 

$

0.44

 

$

1.84

 

$

1.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

33,893,021

 

 

33,878,881

 

 

33,431,318

 

 

33,792,759

 

 

32,289,414

 

Diluted

 

 

34,145,280

 

 

34,114,169

 

 

33,859,539

 

 

34,058,949

 

 

32,732,059

 

 

 

 

 

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliations of Net Income to FFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Months Ended

 

 

 

December 31,

 

September 30,

    

December 31,

  

December 31,

 

December 31,

 

 

 

2017

 

2017

    

2016

  

2017

 

2016

 

Net income

 

$

27,008

 

$

24,288

 

$

23,161

 

$

100,491

 

$

81,921

 

Real estate depreciation and amortization

 

 

31,213

 

 

30,727

 

 

29,354

 

 

123,848

 

 

103,136

 

FFO

 

$

58,221

 

$

55,015

 

$

52,515

 

$

224,339

 

$

185,057

 

Preferred stock dividends

 

 

(1,671)

 

 

(2,084)

 

 

(2,085)

 

 

(7,924)

 

 

(8,338)

 

Original issuance costs associated with redeemed preferred stock

 

 

(4,326)

 

 

 —

 

 

 —

 

 

(4,326)

 

 

 —

 

FFO available to common shareholders and OP unit holders

 

$

52,224

 

$

52,931

 

$

50,430

 

$

212,089

 

$

176,719

 

Original issuance costs associated with redeemed preferred stock

 

 

4,326

 

 

 —

 

 

 —

 

 

4,326

 

 

 —

 

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

 

$

56,550

 

$

52,931

 

$

50,430

 

$

216,415

 

$

176,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

34,145

 

 

34,114

 

 

33,860

 

 

34,059

 

 

32,732

 

Weighted average OP units outstanding - diluted

 

 

13,836

 

 

13,838

 

 

13,851

 

 

13,844

 

 

14,943

 

Total weighted average shares and units outstanding - diluted

 

 

47,981

 

 

47,952

 

 

47,711

 

 

47,903

 

 

47,675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

1.09

 

$

1.10

 

$

1.06

 

$

4.43

 

$

3.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

1.18

 

$

1.10

 

$

1.06

 

$

4.52

 

$

3.71

 

 

(1) FFO available to shares and units, as adjusted, excludes $4.3 million, or $0.09 per share and unit, of non-cash expense related to the original issuance costs associated with our redeemed Preferred Stock.

 

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.

 

 

 

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliations of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA):

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Months Ended

 

 

 

December 31,

 

September 30,

    

December 31,

  

December 31,

 

December 31,

 

 

 

2017

 

2017

    

2016

  

2017

 

2016

 

Net income

 

$

27,008

 

$

24,288

 

$

23,161

 

$

100,491

 

$

81,921

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

6,635

 

 

6,447

 

 

4,698

 

 

24,147

 

 

12,577

 

Income taxes

 

 

24

 

 

64

 

 

74

 

 

174

 

 

119

 

Depreciation and amortization

 

 

32,629

 

 

32,077

 

 

30,674

 

 

129,251

 

 

108,652

 

EBITDA

 

$

66,296

 

$

62,876

 

$

58,607

 

$

254,063

 

$

203,269

 

Non-cash compensation

 

 

2,401

 

 

2,374

 

 

2,018

 

 

8,946

 

 

8,892

 

Transaction costs / litigation

 

 

58

 

 

 —

 

 

 —

 

 

197

 

 

187

 

Adjusted EBITDA

 

$

68,755

 

$

65,250

 

$

60,625

 

$

263,206

 

$

212,348

 

 

 

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We calculate adjusted EBITDA by adding our non-cash compensation expense, transaction costs from unsuccessful deals and business combinations 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.

 

 

 

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© 2018, CoreSite, L.L.C. All Rights Reserved.

 


cor_EX99-2

 

 

 

Picture 22

 

 

 

 

Picture 2

SECURE, RELIABLE, HIGH-PERFORMANCE DATA CENTER SOLUTIONS

 

®2018 CoreSite Realty Corporation, All Rights Reserved

 

 

 


 

Table of Contents

Table of Contents


 

 

Overview

 

Earnings Release 

3

Company Profile 

8

Summary of Financial Data 

9

Financial Statements

 

Consolidated Balance Sheets 

10

Consolidated Statements of Operations 

11

Reconciliations of Net Income to FFO, AFFO, EBITDA and Adjusted EBITDA 

12

Operating Portfolio

 

Operating Properties 

13

Leasing Statistics 

14

Geographic and Vertical Diversification 

16

10 Largest Customers 

17

Development

 

Capital Expenditures and Completed Pre-Stabilized Projects 

18

Development Summary 

19

Capital Structure

 

Market Capitalization and Debt Summary 

20

Interest Summary and Debt Covenants 

21

Components of Net Asset Value 

22

2018 Guidance 

23

Appendix 

24

 

 

 

 

 

 

Quarter Ended December 31, 2017

 

2


 

Table of Contents

 

CoreSite Reports Fourth-Quarter 2017 Financial Results Reflecting Revenue Growth of 14% Year over Year


DENVER, CO – February 8, 2018

CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center and interconnection solutions across the U.S., today announced financial results for the fourth quarter ended December 31, 2017. 

 

Quarterly and Subsequent Highlights

·

Reported fourth-quarter total operating revenues of $125.9 million, representing a 14.0% increase year over year

·

Reported fourth-quarter net income per diluted share of $0.44, consistent with the prior-year level

·

Reported fourth-quarter funds from operations (“FFO”), excluding a one-time non-cash expense related to the original issuance costs associated with CoreSite’s redeemed Preferred Stock, of $1.18 per diluted share and unit, representing 11.3% growth year over year. As reported, FFO per diluted share and unit was $1.09

·

Executed 128 new and expansion data center leases comprising 41,521 net rentable square feet (NRSF), representing $7.2 million of annualized GAAP rent at an average rate of $174 per square foot

·

Commenced 52,221 NRSF of new and expansion leases representing $8.2 million of annualized GAAP rent at an average rate of $157 per square foot

·

Realized rent growth on signed renewals of 3.5% on a cash basis and 6.2% on a GAAP basis and recorded rental churn of 0.5% in the fourth quarter

·

On January 29, 2018, CoreSite acquired a two-acre land parcel in Chicago, Illinois, on which CoreSite expects to build CH2, a 175,000 square foot turn-key data center building, which should have dark fiber campus connectivity to CoreSite’s existing CH1 facility

“We finished out the year with solid results, highlighted by fourth-quarter revenue, adjusted EBITDA and FFO growth, before the one-time Preferred Stock redemption charge, of 14%, 13%, and 11%, year over year, respectively,” said Paul Szurek, CoreSite’s Chief Executive Officer. “Organic growth was driven primarily by the continued expansion of existing customers across the portfolio and also by new logo growth as we continue to attract valuable deployments to our facilities, driving interactions and interconnections among our customers. When looking at 2017 in its entirety, we executed well on our strategic priorities and took important steps to grow our differentiated scalable and flexible campus strategy in key markets, including Santa Clara, Northern Virginia, Los Angeles, and most recently, Chicago.”  

Financial Results

CoreSite reported net income attributable to common shares of $14.9 million, or $0.44 per diluted share, for the three months ended December 31, 2017, compared to $14.9 million, or $0.44 per diluted share for the three months ended December 31, 2016. Net income per diluted share declined 4.3% on a sequential-quarter basis, due to a one-time non-cash expense related to the original issuance costs associated with CoreSite’s redeemed Preferred Stock.

CoreSite reported FFO per diluted share and unit, excluding the aforementioned one-time non-cash expense related to the original issuance costs associated with CoreSite’s redeemed Preferred Stock, of $1.18 for the three months ended December 31, 2017, an increase of 11.3% compared to $1.06 per diluted share and unit for the three months ended December 31, 2016. FFO per diluted share and unit, adjusted for the non-cash expense, increased 7.3% on a sequential-quarter basis. FFO per diluted share and unit, as reported, was $1.09 for the three months ended December 31, 2017, an increase of 2.8% year over year. On a sequential-quarter basis, FFO, as reported, declined 0.9%, again reflecting the one-time non-cash expense related to CoreSite’s redeemed Preferred Stock.

 

 

Quarter Ended December 31, 2017

 

Overview

Financial Statements

Operating Portfolio

Development

Capital Structure

Components of NAV

Guidance

Appendix

3

 


 

Table of Contents

Quarter Ended December 31, 2017

 

 

Total operating revenues for the three months ended December 31, 2017, were $125.9 million, a 14.0% increase year over year and an increase of 2.3% on a sequential-quarter basis.

Sales Activity

CoreSite executed 128 new and expansion data center leases representing $7.2 million of annualized GAAP rent during the fourth quarter, comprised of 41,521 NRSF at a weighted-average GAAP rental rate of $174 per NRSF. Leasing to smaller deployments rebounded during the fourth quarter, with annualized GAAP rent signed for leases less than 5,000 square feet increasing 5.2% compared to the trailing twelve-month average.

CoreSite’s fourth-quarter data center lease commencements totaled 52,221 NRSF at a weighted average GAAP rental rate of $157 per NRSF, which represents $8.2 million of annualized GAAP rent.

CoreSite’s renewal leases signed in the fourth quarter totaled $11.2 million in annualized GAAP rent, comprised of 78,577 NRSF at a weighted-average GAAP rental rate of $142 per NRSF, reflecting a 3.5% increase in rent on a cash basis and a 6.2% increase on a GAAP basis. The fourth-quarter rental churn rate was 0.5%.

Development and Acquisition Activity

During the fourth quarter, CoreSite placed into service 13,735 square feet of turn-key data center capacity at BO1 in Boston and 3,087 square feet of turn-key data center capacity at VA1 in Reston, Virginia.

On January 29, 2018, CoreSite acquired a two-acre land parcel located in downtown Chicago, Illinois, with a total real estate cost of $4.5 million. CoreSite expects to build CH2, a 175,000 square foot turn-key data center building, on the acquired land parcel, upon the receipt of necessary entitlements. The facility is located in close proximity to CoreSite’s existing CH1 facility and network node and CoreSite expects to achieve campus interconnectivity with diverse, high-count dark fiber between CH1 and CH2.

In addition, as of December 31, 2017, CoreSite had a total of 220,336 square feet of turn-key data center capacity under construction and had spent $98.5 million of the estimated $213.6 million required to complete the projects, which consisted of the following.

Reston – CoreSite had 24,922 square feet of turn-key data center capacity under construction at VA3 (Phase 1A). As of December 31, 2017, CoreSite had incurred $16.5 million of the estimated $22.3 million required to complete this phase of the project, and expects to complete development late in the first quarter or early in the second quarter of 2018. During the fourth quarter, CoreSite also had 49,837 square feet of turn-key data center capacity under construction at VA3 (Phase 1B), inclusive of 9,837 square feet of the infrastructure building to support this phase of the data center campus. As of the end of the fourth quarter, CoreSite had incurred $27.4 million of the estimated $100.2 million required to complete VA3 Phase 1B and the infrastructure building, and expects to complete development in the fourth quarter of 2018.

Los Angeles – CoreSite had 47,338 square feet of turn-key data center capacity under construction at LA2, which capacity was 78.6% pre-leased. As of December 31, 2017, CoreSite had incurred $43.6 million of the estimated $45.2 million required to complete the expansion and expects to complete construction in the first quarter of 2018. In addition, CoreSite had an incremental 39,925 square feet of turn-key data center capacity under construction at LA2. As of the end of the fourth quarter, CoreSite had spent $6.2 million of the estimated $15.0 million required to complete this expansion and expects to complete construction in the first quarter of 2018. In conjunction with the build-out of the fourth floor at LA2, during the fourth quarter CoreSite spent $8.6 million in recurring capital expenditures to substantially complete a chiller plant replacement and upgrade project at LA2. The project is expected to result in improved energy efficiency and reduced maintenance capital requirements.

 

Quarter Ended December 31, 2017

 

Overview

Financial Statements

Operating Portfolio

Development

Capital Structure

Components of NAV

Guidance

Appendix

4

 


 

Table of Contents

Quarter Ended December 31, 2017

 

 

Washington D.C. – CoreSite had 24,563 square feet of turn-key data center capacity under construction at DC2. As of the end of the fourth quarter, CoreSite had spent $4.4 million of the estimated $17.4 million required to complete the project, and expects to complete development in the third quarter of 2018.

Denver – CoreSite had 15,630 square feet of turn-key data center capacity under construction at DE1. CoreSite expects to spend $7.5 million to complete this expansion and expects to complete construction in the third quarter of 2018.

New York – CoreSite commenced construction on 18,121 square feet of turn-key data center capacity at NY2, and expects to spend $6.0 million to complete this expansion in the third quarter of 2018.

Balance Sheet and Liquidity

As of December 31, 2017, CoreSite had net principal debt outstanding of $939.3 million, correlating to 3.4 times fourth-quarter annualized adjusted EBITDA.

As of the end of the fourth quarter, CoreSite had $180.9 million of total liquidity consisting of available cash and capacity on its revolving credit facility.

On December 12, 2017, CoreSite redeemed all 4,600,000 shares of its 7.25% Series A cumulative redeemable Preferred Stock for $25.00 per share, plus all accrued and unpaid dividends in an amount equal to $0.292014 per share, for a total payment of $25.292014 per share.

Dividend

On December 7, 2017, CoreSite announced a dividend of $0.98 per share of common stock and common stock equivalents for the fourth quarter of 2017. The $0.98 per share quarterly dividend represents a $0.08, or 8.9%, increase over the prior quarterly dividend of $0.90 per share that was established in May 2017, and a $0.18, or 22.5%, increase over the dividend rate set in December 2016.

The fourth-quarter dividend was paid on January 16, 2018, to shareholders of record on December 29, 2017.

2018 Guidance

CoreSite is introducing its 2018 guidance of net income attributable to common shares in the range of $2.15 to $2.27 per diluted share. In addition, the company’s guidance of FFO per diluted share and unit is a range of $4.92 to $5.04, with the difference between net income and FFO being real estate depreciation and amortization.

CoreSite’s 2018 guidance of FFO per diluted share reflects the company’s adoption of two new accounting standards – revenue recognition and lease accounting, which are cumulatively expected to reduce FFO per diluted share by approximately $0.06 per share. Absent these accounting changes, CoreSite’s 2018 guidance midpoint would reflect 11.5% year-over-year growth.

This outlook is based 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 Citi’s 2018 Global Property CEO Conference on March 5-6, 2018, at The Diplomat Resort & Spa in Hollywood, Florida.

 

Quarter Ended December 31, 2017

 

Overview

Financial Statements

Operating Portfolio

Development

Capital Structure

Components of NAV

Guidance

Appendix

5

 


 

Table of Contents

Quarter Ended December 31, 2017

 

 

Conference Call Details

CoreSite will host a conference call on February 8, 2018, at 12:00 p.m., Eastern Time (10:00 a.m., Mountain Time), to discuss its financial results, current business trends and market conditions.

The call will be accessible by dialing +1-877-407-3982 (domestic) or +1-201-493-6780 (international). A replay will be available until February 22, 2018, and can be accessed shortly after the call by dialing + 1-844-512-2921 (domestic) or + 1-412-317-6671 (international). The passcode for the replay is 13674936.

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 and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,200 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.

CoreSite Contact

Greer Aviv

Vice President of Investor Relations and Corporate Communications

+1 303.405.1012

+1 303.222.7276
Greer.Aviv@CoreSite.com

 

Quarter Ended December 31, 2017

 

Overview

Financial Statements

Operating Portfolio

Development

Capital Structure

Components of NAV

Guidance

Appendix

6

 


 

Table of Contents

Quarter Ended December 31, 2017

 

 

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 ability to service existing debt; 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.

 

 

 

Quarter Ended December 31, 2017

 

Overview

Financial Statements

Operating Portfolio

Development

Capital Structure

Components of NAV

Guidance

Appendix

7

 


 

Table of Contents

Company Profile


CoreSite delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem at 20 operating data centers across eight key North American Markets.

Picture 3

 

 

 

 

 

 

 

Secure, Reliable and Compliant

  

Scalable

100% uptime Service Level Agreement guarantees our reliability commitment to customer applications

 

Serving customer requirements from half cabinet to full buildings

Physical security standards and rigorous internal security training enable compliance with regulatory requirements

 

20 operating data centers in eight of the largest commercial and data center markets in the United States

Consistent compliance across all properties

 

Ability to increase occupied data center footprint on land and buildings currently owned and under contract, including current space unoccupied, under construction and held for development, by approximately 1.7 million NRSF, or 83% of currently occupied space

 

SOC 1  & SOC 2 Type 2 reviews

 

 

 

ISO 27001 certified

 

 

 

Payment Card Industry Data Security Standard compliant

 

 

 

HIPAA validation

 

 

High-Performance Interconnection

 

High-Quality Customer Experience

 

 

 

 

 

Cloud-enabled, network-rich data center buildings and campuses

 

450+ professionals with dedicated industry expertise supporting over 1,200 customers

Over 400 network service providers supported by robust interconnection services to key public clouds

 

Experienced and committed operations, facilities and security personnel

25,000+ interconnections

 

24/7 customer support and remote hands

Enabling enterprises with support ecosystems

 

Dedicated implementation resources to ensure a successful onboarding process

 

 

 

 

 

Quarter Ended December 31, 2017

 

Overview

Financial Statements

Operating Portfolio

Development

Capital Structure

Components of NAV

Guidance

Appendix

8

 


 

Table of Contents

Summary of Financial Data


(in thousands, except per share, NRSF and MRR data) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

Year Ended

 

 

 

 

 

 

December 31,

 

September 30,

 

December 31,

 

Growth %

 

December 31,

 

December 31,

 

Growth %

    

Summary of Results

 

2017

 

2017

 

2016

 

Y/Y

 

2017

 

2016

 

Y/Y