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): October  25, 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 October  25, 2018, CoreSite Realty Corporation ("CoreSite") issued a press release reporting financial results and operating information for the quarter ended September 30, 2018. 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 October 25, 2018.

 

 

 

99.2

 

Quarter Ended September 30, 2018, Earnings Release and Supplemental Information, dated October  25, 2018.

 

2


 

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: October  25, 2018

By:

/s/ Jeffrey S. Finnin

 

 

Name: Jeffrey S. Finnin

 

 

Title:   Chief Financial Officer

 

 

 

 

 

 

 

By:

/s/ Mark R. Jones

 

 

Name: Mark R.  Jones

 

 

Title:   Chief Accounting Officer

 

3


cor_Ex99_1

 

 

 Picture 1

 

CoreSite Reports Third-Quarter 2018 Financial Results Reflecting
Revenue Growth of 13.1% Year over Year

 

DENVER, CO – October 25, 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 third quarter ended September 30, 2018. 

 

Quarterly Highlights

·

Third-quarter total operating revenues were $139.2 million, a 13.1% increase year over year

·

Third-quarter net income per diluted share was $0.52,  a  13.0% increase year over year

·

Third-quarter funds from operations (“FFO”) was $1.25 per diluted share and unit,  a 13.6% increase year over year

·

Commenced 36,576 net rentable square feet (NRSF) of new and expansion leases representing $5.9 million of annualized GAAP rent at an average rate of $160 per square foot

·

Renewed leases with annualized GAAP rent of $16.2 million, with rent growth of 3.2% on a cash basis and 5.8% on a GAAP basis,  and recorded rental churn of 2.5% in the third quarter 

·

Executed 120 new and expansion data center leases for 31,330 NRSF, representing $6.1 million of net annualized GAAP rent at an average rate of $193 per square foot

 

“We continue to execute our core business strategy focused on high-value customer deployments, which favor direct interconnection to networks and cloud on-ramps. We are expanding our customer ecosystem and benefiting from strong organic growth,” said Paul Szurek, CoreSite’s Chief Executive Officer. “Our core retail colocation business continued its consistent leasing performance at good pricing,  acquiring valuable new logos and expanding with key strategic customers and we made good progress on construction and development activities which will strengthen our scale leasing to edge deployments over the next eighteen months.”  

 

Financial Results

CoreSite’s net income attributable to common shares was $18.6 million, or $0.52 per diluted share, for the three months ended September 30, 2018, compared to $15.8 million, or $0.46 per diluted share, for the three months ended September 30, 2017.  Net income per diluted share decreased 8.8% on a sequential-quarter basis,  primarily reflecting seasonally higher property operating and power expenses and depreciation and amortization expense.

CoreSite’s FFO per diluted share and unit was $1.25 for the three months ended September 30, 2018, an increase of 13.6% compared to $1.10 per diluted share and unit for the three months ended September 30, 2017. FFO per diluted share and unit decreased 2.3% on a sequential-quarter basis,  again reflecting the seasonally higher property operating and power expenses mentioned above.

 

Total operating revenues for the three months ended September 30, 2018, were $139.2 million, a 13.1% increase year over year and an increase of 2.0% on a sequential-quarter basis.

 

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

 


 

Commencements and Renewals

 

CoreSite’s third-quarter data center lease commencements totaled 36,576 NRSF at a weighted average GAAP rental rate of $160 per NRSF, which represents $5.9 million of annualized GAAP rent.

 

CoreSite’s renewal leases signed in the third quarter totaled $16.2 million in annualized GAAP rent, comprised of 97,682 NRSF at a weighted-average GAAP rental rate of $166 per NRSF, a 3.2% increase in rent on a cash basis and a 5.8% increase on a GAAP basis. The third-quarter rental churn rate was 2.5%.

 

As a result of renewals and growth in interconnection and power revenues, monthly recurring revenue per cabinet equivalent increased 7.0% over the prior-year period.

 

Sales Activity

 

CoreSite executed 120 new and expansion data center leases representing $6.1 million of net annualized GAAP rent during the third quarter, comprised of 31,330 NRSF at a weighted-average GAAP rental rate of $193 per NRSF. 

 

Development Activity 

 

As of September 30, 2018,  CoreSite had a total of 160,591 square feet of turn-key data center capacity under construction and had spent $100.7 million of the estimated $281.8 million required to complete the projects, which consist of the following.

 

Los Angeles – CoreSite had 28,191 square feet of turn-key data center capacity under construction at LA2, which capacity is 100% pre-leased. As of the end of the third quarter, CoreSite had incurred $0.4 million of the estimated $21.0 million required to complete the project and expects to complete construction during the second quarter of 2019. 

 

Reston – CoreSite had 49,837 square feet of turn-key data center capacity under construction at VA3 (Phase 1B), inclusive of 9,837 square feet of an infrastructure building to support this phase of the data center campus. As of the end of the third quarter, CoreSite had incurred $56.7 million of the estimated $110.0 million required to complete VA3 Phase 1B and the related portion of the infrastructure building, and expects to complete construction in the first quarter of 2019.

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 third quarter, CoreSite had spent $16.7 million of the estimated $22.0 million required to complete the project, and expects to complete development in the fourth quarter of 2018.

Santa Clara – CoreSite had 58,000 square feet of turn-key data center capacity under construction which represents the first phase of SV8. As of September 30, 2018, CoreSite had incurred $25.3 million of the estimated $127.0 million required to complete this phase of development and expects to complete construction in the third quarter of 2019.

 

 

 

 

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

 


 

Balance Sheet and Liquidity

As of September 30, 2018, CoreSite had net principal debt outstanding of $1,074.2 million, correlating to 3.6 times third-quarter annualized adjusted EBITDA.

 

As of the end of the third quarter, CoreSite had $295.9 million of total liquidity, consisting of available cash and capacity on its revolving credit facility.

 

Dividend

 

On August 31, 2018,  CoreSite announced a dividend of $1.03 per share of common stock and common stock equivalents for the third quarter of 2018. The third-quarter dividend was paid on October 15, 2018, to shareholders of record on September 28, 2018.

 

2018 Guidance 

 

CoreSite is maintaining its 2018 guidance of net income attributable to common shares in the range of $2.12 to $2.20 per diluted share.  In addition, CoreSite is maintaining its guidance of FFO per diluted share and unit in the range of $5.00 to $5.08,  with the difference between net income and FFO being real estate depreciation and amortization. 

 

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 management will participate in Nareit’s REITWorld Annual Conference from November 7-9, 2018, at the San Francisco Marriott Marquis in San Francisco, CA.

 

Conference Call Details

CoreSite will host a conference call on October 25, 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 November 8, 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 13683401.  

 

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.

 

 

 

 

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

 


 

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 1,350 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 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

 

Jeff Finnin

Chief Financial Officer

+1 303.222.7276
InvestorRelations@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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

September 30,

  

December 31,

 

 

 

2018

 

2017 (1)

 

Assets:

 

 

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

 

 

Land

 

$

97,636

 

$

97,258

 

Buildings and improvements

 

 

1,701,832

 

 

1,561,056

 

 

 

 

1,799,468

 

 

1,658,314

 

Less: Accumulated depreciation and amortization

 

 

(560,650)

 

 

(473,141)

 

Net investment in operating properties

 

 

1,238,818

 

 

1,185,173

 

Construction in progress

 

 

199,776

 

 

162,903

 

Net investments in real estate

 

 

1,438,594

 

 

1,348,076

 

Operating lease right-of-use assets

 

 

194,732

 

 

92,984

 

Cash and cash equivalents

 

 

5,306

 

 

5,247

 

Accounts and other receivables, net

 

 

24,458

 

 

28,875

 

Lease intangibles, net

 

 

7,578

 

 

6,314

 

Goodwill

 

 

40,646

 

 

40,646

 

Other assets, net

 

 

106,906

 

 

103,501

 

Total assets

 

$

1,818,220

 

$

1,625,643

 

 

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Debt, net

 

$

1,073,479

 

$

939,570

 

Operating lease liabilities

 

 

204,424

 

 

102,912

 

Accounts payable and accrued expenses

 

 

88,232

 

 

77,170

 

Accrued dividends and distributions

 

 

51,840

 

 

48,976

 

Acquired below-market lease contracts, net

 

 

2,954

 

 

3,504

 

Unearned revenue, prepaid rent and other liabilities

 

 

33,666

 

 

34,867

 

Total liabilities

 

 

1,454,595

 

 

1,206,999

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Common stock, par value $0.01

 

 

363

 

 

338

 

Additional paid-in capital

 

 

487,848

 

 

457,495

 

Accumulated other comprehensive income

 

 

1,758

 

 

753

 

Distributions in excess of net income

 

 

(226,184)

 

 

(177,566)

 

Total stockholders' equity

 

 

263,785

 

 

281,020

 

Noncontrolling interests

 

 

99,840

 

 

137,624

 

Total equity

 

 

363,625

 

 

418,644

 

Total liabilities and equity

 

$

1,818,220

 

$

1,625,643

 

 

(1) Adoption of the new lease accounting standard required that we adjust the consolidated balance sheet as of December 31, 2017, to include the recognition of additional right-of-use assets and lease liabilities for operating leases. See our SEC filings for additional information.

. 

 

 

 

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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

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

    

September 30,

  

September 30,

 

September 30,

 

 

 

2018

 

2018

    

2017

  

2018

 

2017

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data center revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, power, and related revenue

 

$

118,590

 

$

116,147

 

$

103,952

 

$

344,745

 

$

300,932

 

Interconnection revenue

 

 

17,701

 

 

17,422

 

 

16,201

 

 

51,683

 

 

46,038

 

Total data center revenue

 

 

136,291

 

 

133,569

 

 

120,153

 

 

396,428

 

 

346,970

 

Office, light-industrial and other revenue

 

 

2,889

 

 

2,878

 

 

2,915

 

 

8,818

 

 

8,905

 

Total operating revenues

 

 

139,180

 

 

136,447

 

 

123,068

 

 

405,246

 

 

355,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

 

41,161

 

 

37,861

 

 

37,091

 

 

112,870

 

 

98,098

 

Real estate taxes and insurance

 

 

4,699

 

 

4,693

 

 

2,622

 

 

14,329

 

 

10,950

 

Depreciation and amortization

 

 

36,264

 

 

35,558

 

 

32,077

 

 

105,598

 

 

96,622

 

Sales and marketing

 

 

5,180

 

 

5,369

 

 

4,643

 

 

15,629

 

 

13,560

 

General and administrative

 

 

10,074

 

 

10,297

 

 

9,759

 

 

29,556

 

 

27,391

 

Rent

 

 

7,329

 

 

6,547

 

 

6,077

 

 

20,276

 

 

17,970

 

Transaction costs

 

 

 —

 

 

19

 

 

 —

 

 

75

 

 

139

 

Total operating expenses

 

 

104,707

 

 

100,344

 

 

92,269

 

 

298,333

 

 

264,730

 

Operating income

 

 

34,473

 

 

36,103

 

 

30,799

 

 

106,913

 

 

91,145

 

Interest expense

 

 

(9,433)

 

 

(8,907)

 

 

(6,447)

 

 

(26,078)

 

 

(17,512)

 

Income before income taxes

 

 

25,040

 

 

27,196

 

 

24,352

 

 

80,835

 

 

73,633

 

Income tax (expense) benefit

 

 

(20)

 

 

83

 

 

(64)

 

 

30

 

 

(150)

 

Net income

 

 

25,020

 

 

27,279

 

 

24,288

 

 

80,865

 

 

73,483

 

Net income attributable to noncontrolling interests

 

 

6,420

 

 

7,890

 

 

6,446

 

 

22,574

 

 

19,537

 

Net income attributable to CoreSite Realty Corporation

 

 

18,600

 

 

19,389

 

 

17,842

 

 

58,291

 

 

53,946

 

Preferred stock dividends

 

 

 —

 

 

 —

 

 

(2,084)

 

 

 —

 

 

(6,253)

 

Net income attributable to common shares

 

$

18,600

 

$

19,389

 

$

15,758

 

$

58,291

 

$

47,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.52

 

$

0.57

 

$

0.47

 

$

1.69

 

$

1.41

 

Diluted

 

$

0.52

 

$

0.57

 

$

0.46

 

$

1.68

 

$

1.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,512,091

 

 

34,049,391

 

 

33,878,881

 

 

34,504,790

 

 

33,758,971

 

Diluted

 

 

35,721,478

 

 

34,220,321

 

 

34,114,169

 

 

34,693,835

 

 

34,033,842

 

 

 

 

 

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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

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

  

September 30,

 

September 30,

 

 

 

2018

 

2018

 

2017

  

2018

 

2017

 

Net income

 

$

25,020

 

$

27,279

 

$

24,288

 

$

80,865

 

$

73,483

 

Real estate depreciation and amortization

 

 

34,928

 

 

34,245

 

 

30,727

 

 

101,605

 

 

92,635

 

FFO

 

$

59,948

 

$

61,524

 

$

55,015

 

$

182,470

 

$

166,118

 

Preferred stock dividends

 

 

 —

 

 

 —

 

 

(2,084)

 

 

 —

 

 

(6,253)

 

FFO available to common shareholders and OP unit holders

 

$

59,948

 

$

61,524

 

$

52,931

 

$

182,470

 

$

159,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

35,721

 

 

34,220

 

 

34,114

 

 

34,694

 

 

34,034

 

Weighted average OP units outstanding - diluted

 

 

12,378

 

 

13,829

 

 

13,838

 

 

13,342

 

 

13,846

 

Total weighted average shares and units outstanding - diluted

 

 

48,099

 

 

48,049

 

 

47,952

 

 

48,036

 

 

47,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

1.25

 

$

1.28

 

$

1.10

 

$

3.80

 

$

3.34

 

 

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, by excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.

 

We offer this measure because we recognize that investors use FFO as a basis to compare our operating performance with that of other REITs. However, the utility of FFO as a measure of our performance is limited 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. 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.

 

 

 

Picture 7

Picture 5

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

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliations of Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA:

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

    

September 30,

  

September 30,

 

September 30,

 

 

 

2018

 

2018

    

2017

  

2018

 

2017

 

Net income

 

$

25,020

 

$

27,279

 

$

24,288

 

$

80,865

 

$

73,483

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

9,433

 

 

8,907

 

 

6,447

 

 

26,078

 

 

17,512

 

Income taxes

 

 

20

 

 

(83)

 

 

64

 

 

(30)

 

 

150

 

Depreciation and amortization

 

 

36,264

 

 

35,558

 

 

32,077

 

 

105,598

 

 

96,622

 

EBITDAre

 

$

70,737

 

$

71,661

 

$

62,876

 

$

212,511

 

$

187,767

 

Non-cash compensation

 

 

3,052

 

 

3,186

 

 

2,374

 

 

8,864

 

 

6,545

 

Transaction costs / litigation

 

 

 3

 

 

26

 

 

 —

 

 

168

 

 

139

 

Adjusted EBITDA

 

$

73,792

 

$

74,873

 

$

65,250

 

$

221,543

 

$

194,451

 

 

 

EBITDAre is calculated in accordance with the standards established by the National Association of Real Estate Investment Trusts (“Nareit”). EBITDAre is defined as earnings before interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. We calculate adjusted EBITDA by adding our non-cash compensation expense, transaction costs from unsuccessful deals and business combinations and litigation expense to EBITDAre as well as adjusting for the impact of other impairment charges, gains or losses from sales of undepreciated land and gains or losses on early extinguishment of debt. Management uses EBITDAre and adjusted EBITDA as indicators of our ability to incur and service debt. In addition, we consider EBITDAre 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 EBITDAre and adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utilization as a cash flow measurement is limited.

 

 

 

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Picture 5

© 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, EBITDAre 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 September 30, 2018

 

2


 

 

CoreSite Reports Third-Quarter 2018 Financial Results Reflecting Revenue Growth of 13.1% Year over Year


DENVER, CO – October 25, 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 third quarter ended September 30, 2018. 

 

Quarterly Highlights

·

Third-quarter total operating revenues were $139.2 million, a 13.1% increase year over year

·

Third-quarter net income per diluted share was $0.52, a 13.0% increase year over year

·

Third-quarter funds from operations (“FFO”) was $1.25 per diluted share and unit, a 13.6% increase year over year

·

Commenced 36,576 net rentable square feet (NRSF) of new and expansion leases representing $5.9 million of annualized GAAP rent at an average rate of $160 per square foot

·

Renewed leases with annualized GAAP rent of $16.2 million, with rent growth of 3.2% on a cash basis and 5.8% on a GAAP basis, and recorded rental churn of 2.5% in the third quarter

·

Executed 120 new and expansion data center leases for 31,330 NRSF, representing $6.1 million of net annualized GAAP rent at an average rate of $193 per square foot

 

“We continue to execute our core business strategy focused on high-value customer deployments, which favor direct interconnection to networks and cloud on-ramps. We are expanding our customer ecosystem and benefiting from strong organic growth,” said Paul Szurek, CoreSite’s Chief Executive Officer. “Our core retail colocation business continued its consistent leasing performance at good pricing, acquiring valuable new logos and expanding with key strategic customers and we made good progress on construction and development activities which will strengthen our scale leasing to edge deployments over the next eighteen months.”

Financial Results

CoreSite’s net income attributable to common shares was $18.6 million, or $0.52 per diluted share, for the three months ended September 30, 2018, compared to $15.8 million, or $0.46 per diluted share, for the three months ended September 30, 2017. Net income per diluted share decreased 8.8% on a sequential-quarter basis, primarily reflecting seasonally higher property operating and power expenses and depreciation and amortization expense.

CoreSite’s FFO per diluted share and unit was $1.25 for the three months ended September 30, 2018, an increase of 13.6% compared to $1.10 per diluted share and unit for the three months ended September 30, 2017. FFO per diluted share and unit decreased 2.3% on a sequential-quarter basis, again reflecting the seasonally higher property operating and power expenses mentioned above.

Total operating revenues for the three months ended September 30, 2018, were $139.2 million, a 13.1% increase year over year and an increase of 2.0% on a sequential-quarter basis.

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

3

 


 

Table of Contents

Quarter Ended September 30, 2018

 

 

Commencements and Renewals

CoreSite’s third-quarter data center lease commencements totaled 36,576 NRSF at a weighted average GAAP rental rate of $160 per NRSF, which represents $5.9 million of annualized GAAP rent.

CoreSite’s renewal leases signed in the third quarter totaled $16.2 million in annualized GAAP rent, comprised of 97,682 NRSF at a weighted-average GAAP rental rate of $166 per NRSF, a 3.2% increase in rent on a cash basis and a 5.8% increase on a GAAP basis. The third-quarter rental churn rate was 2.5%.

As a result of renewals and growth in interconnection and power revenues, monthly recurring revenue per cabinet equivalent increased 7.0% over the prior-year period.

Sales Activity

CoreSite executed 120 new and expansion data center leases representing $6.1 million of net annualized GAAP rent during the third quarter, comprised of 31,330 NRSF at a weighted-average GAAP rental rate of $193 per NRSF.

Development Activity

As of September 30, 2018, CoreSite had a total of 160,591 square feet of turn-key data center capacity under construction and had spent $100.7 million of the estimated $281.8 million required to complete the projects, which consist of the following.

Los Angeles – CoreSite had 28,191 square feet of turn-key data center capacity under construction at LA2, which capacity is 100% pre-leased. As of the end of the third quarter, CoreSite had incurred $0.4 million of the estimated $21.0 million required to complete the project and expects to complete construction during the second quarter of 2019.

Reston – CoreSite had 49,837 square feet of turn-key data center capacity under construction at VA3 (Phase 1B), inclusive of 9,837 square feet of an infrastructure building to support this phase of the data center campus. As of the end of the third quarter, CoreSite had incurred $56.7 million of the estimated $110.0 million required to complete VA3 Phase 1B and the related portion of the infrastructure building, and expects to complete construction in the first quarter of 2019.

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 third quarter, CoreSite had spent $16.7 million of the estimated $22.0 million required to complete the project, and expects to complete development in the fourth quarter of 2018.

Santa Clara – CoreSite had 58,000 square feet of turn-key data center capacity under construction which represents the first phase of SV8. As of September 30, 2018, CoreSite had incurred $25.3 million of the estimated $127.0 million required to complete this phase of development and expects to complete construction in the third quarter of 2019.

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

4

 

 


 

Table of Contents

Quarter Ended September 30, 2018

 

 

Balance Sheet and Liquidity

As of September 30, 2018, CoreSite had net principal debt outstanding of $1,074.2 million, correlating to 3.6 times third-quarter annualized adjusted EBITDA.

As of the end of the third quarter, CoreSite had $295.9 million of total liquidity, consisting of available cash and capacity on its revolving credit facility.

Dividend

On August 31, 2018, CoreSite announced a dividend of $1.03 per share of common stock and common stock equivalents for the third quarter of 2018. The third-quarter dividend was paid on October 15, 2018, to shareholders of record on September 28, 2018.

2018 Guidance

CoreSite is maintaining its 2018 guidance of net income attributable to common shares in the range of $2.12 to $2.20 per diluted share. In addition, CoreSite is maintaining its guidance of FFO per diluted share and unit in the range of $5.00 to $5.08, with the difference between net income and FFO being real estate depreciation and amortization.

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 management will participate in Nareit’s REITWorld Annual Conference from November 7-9, 2018, at the San Francisco Marriott Marquis in San Francisco, CA.

Conference Call Details

CoreSite will host a conference call on October 25, 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 November 8, 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 13683401.

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.

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

5

 

 


 

Table of Contents

Quarter Ended September 30, 2018

 

 

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 1,350 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 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

Jeff Finnin

Chief Financial Officer

+1 303.222.7276
InvestorRelations@CoreSite.com

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

6

 

 


 

Table of Contents

Quarter Ended September 30, 2018

 

 

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 September 30, 2018

 

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 cloud and network interconnection solutions to a growing customer ecosystem at 21 operating data centers across eight key North American Markets.

Picture 11

 

 

 

 

 

 

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

 

21 operating data centers in eight of the largest commercial and data center markets in the United States, with four more buildings in various stages of development

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 2.0 million NRSF, or 91% 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 1,350 customers

Over 450 network service providers supported by robust interconnection services to key public clouds

 

Experienced and committed operations, facilities and security personnel

27,000+ interconnections

 

24/7 customer support and remote hands

Enabling enterprises with support ecosystems

 

Dedicated implementation resources to ensure a successful onboarding process

 

Quarter Ended September 30, 2018

 

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

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

June 30,

 

September 30,

 

Growth %

 

September 30,

 

September 30,

 

Growth %

    

Summary of Results

 

2018

 

2018

 

2017

 

Y/Y

 

2018

 

2017

 

Y/Y

    

GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

139,180

 

$

136,447

 

$

123,068

 

13.1

%

 

$

405,246

 

$

355,875

 

13.9

%

 

Net income

 

 

25,020

 

 

27,279

 

 

24,288

 

3.0

 

 

 

80,865

 

 

73,483

 

10.0

 

 

Net income attributable to common shares

 

 

18,600

 

 

19,389

 

 

15,758

 

18.0

 

 

 

58,291

 

 

47,693

 

22.2

 

 

Net income attributable to common shares per share - diluted

 

$

0.52

 

$

0.57

 

$

0.46

 

13.0

 

 

$

1.68

 

$

1.40

 

20.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REIT Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations (FFO) to shares and units

 

$

59,948

 

$

61,524

 

$

52,931

 

13.3

%