View Filing Data

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2014	Oct. 29, 2014
Document and Entity Information
Entity Registrant Name	CoreSite Realty Corp
Entity Central Index Key	0001490892
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		21,711,368
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2014	Dec. 31, 2013
Investments in real estate:
Land	$ 79,929	$ 78,983
Building and building improvements	772,791	717,007
Leasehold improvements	102,267	95,218
Total investments in real estate	954,987	891,208
Less: Accumulated depreciation and amortization	(200,588)	(155,704)
Net investment in operating properties	754,399	735,504
Construction in progress	171,476	157,317
Net investments in real estate	925,875	892,821
Cash and cash equivalents	9,268	5,313
Accounts and other receivables, net of allowance for doubtful accounts of $436 and $159 as of September 30, 2014, and December 31, 2013, respectively	11,279	10,339
Lease intangibles, net of accumulated amortization of $14,100 and $17,646 as of September 30, 2014, and December 31, 2013, respectively	7,940	11,028
Goodwill	41,191	41,191
Other assets	67,145	55,802
Total assets	1,062,698	1,016,494
Liabilities:
Revolving credit facility	205,250	174,250
Senior unsecured term loan	100,000
Mortgage loan payable		58,250
Accounts payable and accrued expenses	38,979	48,978
Dividends Payable	18,968	18,804
Deferred rent payable	9,196	9,646
Acquired below-market lease contracts, net of accumulated amortization of $4,456 and $4,361 as of September 30, 2014, and December 31, 2013, respectively	5,808	6,681
Prepaid rent and other liabilities	18,161	11,578
Total liabilities	396,362	328,187
Stockholders' equity:
Series A Cumulative Preferred Stock 7.25%, $115,000 liquidation preference ($25.00 per share, $0.01 par value), 4,600,000 shares issued and outstanding as of September 31, 2014, and December 31, 2013	115,000	115,000
Common Stock, par value $0.01, 100,000,000 shares authorized and 21,721,807 and 21,387,152 shares issued and outstanding at September 30, 2014, and December 31, 2013, respectively	212	209
Additional paid-in capital	272,771	267,465
Accumulated other comprehensive income	200
Distributions in excess of net income	(63,084)	(50,264)
Total stockholders' equity	325,099	332,410
Noncontrolling interests	341,237	355,897
Total equity	666,336	688,307
Total liabilities and equity	$ 1,062,698	$ 1,016,494

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
Allowance for doubtful accounts (in dollars)	$ 436	$ 159
Accumulated amortization, lease intangibles (in dollars)	14,100	17,646
Accumulated amortization, acquired below-market lease contracts (in dollars)	$ 4,456	$ 4,361
Series A Cumulative Preferred Stock, dividend rate (as a percent)	7.25%	7.25%
Series A Cumulative Preferred Stock, liquidation preference	$ 115,000	$ 115,000
Series A Cumulative Preferred Stock, liquidation preference (in dollars per share)	$ 25	$ 25
Series A Cumulative Preferred Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Series A Cumulative Preferred Stock, shares issued	4,600,000	4,600,000
Series A Cumulative Preferred Stock, shares outstanding	4,600,000	4,600,000
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized	100,000,000	100,000,000
Common Stock, shares issued	21,721,807	21,387,152
Common Stock, shares outstanding	21,721,807	21,387,152

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Data center revenue:
Rental revenue	$ 38,315	$ 33,428	$ 110,152	$ 97,092
Power revenue	18,687	15,979	51,264	43,994
Interconnection revenue	9,169	7,441	25,819	21,066
Tenant reimbursement and other	2,328	1,873	6,711	5,432
Office, light industrial and other revenue	2,016	1,914	5,982	5,809
Total operating revenues	70,515	60,635	199,928	173,393
Operating expenses:
Property operating and maintenance	20,043	17,368	54,866	47,013
Real estate taxes and insurance	3,073	2,226	5,059	6,750
Depreciation and amortization	20,914	16,424	58,300	48,634
Sales and marketing	3,806	3,206	11,141	10,931
General and administrative	7,145	7,045	21,582	20,225
Rent	5,113	5,082	15,249	14,631
Impairment of internal-use software	0	0	1,959	0
Transaction costs	49	25	62	279
Total operating expenses	60,143	51,376	168,218	148,463
Operating income	10,372	9,259	31,710	24,930
Interest income	1	14	5	18
Interest expense	(1,361)	(708)	(3,949)	(1,930)
Income before income taxes	9,012	8,565	27,766	23,018
Income tax expense	(22)	(56)	(20)	(435)
Net income	8,990	8,509	27,746	22,583
Net income attributable to noncontrolling interests	3,759	3,524	11,730	8,962
Net income attributable to CoreSite Realty Corporation	5,231	4,985	16,016	13,621
Preferred stock dividends	(2,084)	(2,084)	(6,253)	(6,253)
Net income attributable to common shares	$ 3,147	$ 2,901	$ 9,763	$ 7,368
Net income per share attributable to common shares:
Basic (in dollars per share)	$ 0.15	$ 0.14	$ 0.46	$ 0.35
Diluted (in dollars per share)	$ 0.14	$ 0.14	$ 0.45	$ 0.34
Weighted average common shares outstanding
Basic (in shares)	21,214,825	20,871,504	21,113,700	20,793,596
Diluted (in shares)	21,708,759	21,479,971	21,679,931	21,465,710

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 8,990	$ 8,509	$ 27,746	$ 22,583
Other comprehensive income(loss):
Unrealized loss on derivative contracts	397		(357)
Reclassification of other comprehensive income to interest expense	340		795
Comprehensive income	9,727	8,509	28,184	22,583
Comprehensive income attributable to noncontrolling interests	4,160	3,524	11,968	8,962
Comprehensive income attributable to CoreSite Realty Corporation	$ 5,567	$ 4,985	$ 16,216	$ 13,621

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - 9 months ended Sep. 30, 2014 - USD ($) $ in Thousands	Total Stockholders' Equity	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income	Distributions in Excess of Net Income	Noncontrolling Interests	Total
Balance at Dec. 31, 2013	$ 332,410	$ 115,000	$ 209	$ 267,465		$ (50,264)	$ 355,897	$ 688,307
Balance (in shares) at Dec. 31, 2013			21,387,152
Increase (Decrease) in Stockholders' Equity
Issuance of stock awards, net of forfeitures (in shares)			192,982
Exercise of stock options	145		$ 1	144				145
Exercise of stock options (in shares)			141,673
Share-based compensation	5,164		$ 2	5,162				5,164
Dividends declared on preferred stock	(6,253)					(6,253)		(6,253)
Dividends and distributions	(22,583)					(22,583)	(26,628)	(49,211)
Net income	16,016					16,016	11,730	27,746
Other comprehensive loss	200				$ 200		238	438
Balance at Sep. 30, 2014	$ 325,099	$ 115,000	$ 212	$ 272,771	$ 200	$ (63,084)	$ 341,237	$ 666,336
Balance (in shares) at Sep. 30, 2014			21,721,807

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 27,746	$ 22,583
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	58,300	48,634
Amortization of above/below market leases	(438)	(672)
Amortization of deferred financing costs	1,477	1,293
Share-based compensation	4,766	5,337
Bad debt expense	826	241
Changes in operating assets and liabilities:
Accounts receivable	(1,766)	(1,435)
Deferred rent receivable	(2,728)	(1,660)
Deferred leasing costs	(15,540)	(5,373)
Other assets	35	(2,713)
Accounts payable and accrued expenses	(4,264)	3,361
Prepaid rent and other liabilities	6,582	380
Deferred rent payable	(450)	5,250
Net cash provided by operating activities	74,546	75,226
CASH FLOWS FROM INVESTING ACTIVITIES
Tenant improvements	(5,040)	(5,214)
Real estate improvements	(82,118)	(117,964)
Acquisition of NY2		(21,889)
Net cash used in investing activities	(87,158)	(145,067)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options	1,555	630
Offering costs	(24)	(27)
Proceeds from revolving credit facility	72,000	108,000
Payments on revolving credit facility	(41,000)
Proceeds from senior unsecured term loan	100,000
Repayments of mortgage loans payable	(58,250)	(1,125)
Contributions	(1,000)	(2,621)
Payments to net settle equity awards	(1,410)
Dividends and distributions	(55,304)	(42,444)
Net cash provided by financing activities	16,567	62,413
Net change in cash and cash equivalents	3,955	(7,428)
Cash and cash equivalents, beginning of period	5,313	8,130
Cash and cash equivalents, end of period	9,268	702
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of capitalized amounts	2,958	1,250
NON-CASH INVESTING AND FINANCING ACTIVITY
Construction costs payable capitalized to real estate	13,086	32,291
Dividends Payable	$ 18,968	$ 15,051

Organization and Description of Business	9 Months Ended
Organization and Description of Business	Sep. 30, 2014
Organization and Description of Business
Organization and Description of Business	1. Organization and Description of Business CoreSite Realty Corporation (the “Company,” “we,” or “our”) was organized in the state of Maryland on February 17, 2010, and is a fully-integrated, self-administered, and self-managed real estate investment trust (“REIT”). Through our controlling interest in CoreSite, L.P. (our “Operating Partnership”), we are engaged in the business of owning, acquiring, constructing and managing data centers. As of September 30, 2014, the Company owns a 45.6% common interest in our Operating Partnership and affiliates of The Carlyle Group and others own a 54.4% interest in our Operating Partnership. See additional discussion in Note 8.

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by our management in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in compliance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the nine months ended September 30, 2014, are not necessarily indicative of the expected results for the year ending December 31, 2014. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. Intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates, including those related to assessing the carrying values of our real estate properties, goodwill, accrued liabilities and performance-based equity compensation plans. We base our estimates on historical experience, current market conditions, and various other assumptions that we believe to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could vary under different assumptions or conditions.

Adjustments and Reclassifications

Office, light industrial and other revenue, included within the condensed consolidated statements of operations for the three and nine months ended September 30, 2013, and accrued dividends and distributions, included with the condensed consolidated balance sheet as December 31, 2013, have been reclassified to conform to the 2014 financial statement presentation. In addition, certain other immaterial amounts included in the condensed consolidated financial statements for 2013 have been reclassified to conform to the 2014 financial statement presentation.

Investments in Real Estate

Real estate investments are carried at cost less accumulated depreciation and amortization. The cost of real estate includes the purchase price of property and leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized. During land development and construction periods, we capitalize construction costs, legal fees, financing costs, real estate taxes and insurance and internal costs of personnel performing development, if such costs are incremental and identifiable to a specific development project. Capitalization of costs begins upon commencement of development efforts and ceases when the property is ready for its intended use and held available for occupancy. Interest is capitalized during the period of development based upon applying the weighted-average borrowing rate to the actual development costs expended. Capitalized interest costs were $1.2 million and $1.1 million for the three months ended September 30, 2014, and 2013, respectively, and $3.4 million and $3.0 million for the nine months ended September 30, 2014, and 2013, respectively.

Depreciation and amortization are calculated using the straight-line method over the following useful lives of the assets:

Buildings		27 to 40 years
Building improvements		1 to 10 years
Leasehold improvements		The shorter of the lease term or useful life of the asset

Depreciation expense was $16.8 million and $13.7 million for the three months ended September 30, 2014, and 2013, respectively, and $47.7 million and $38.9 million for the nine months ended September 30, 2014, and 2013, respectively.

Acquisition of Investment in Real Estate

Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired. The fair value of the real estate acquired is allocated to the acquired tangible assets, consisting primarily of land, building and building improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, value of in-place leases and the value of customer relationships.

The fair value of the land and building of an acquired property is determined by valuing the property as if it were vacant, and the “as-if-vacant” fair value is then allocated to land and building based on management’s determination of the fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases.

The fair value of intangibles related to in-place leases includes the value of lease intangibles for above-market and below-market leases, lease origination costs, and customer relationships, determined on a lease-by-lease basis. Above-market and below-market leases are valued based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below-market fixed rate renewal periods. Lease origination costs include estimates of costs avoided associated with leasing the property, including tenant allowances and improvements and leasing commissions. Customer relationship intangibles relate to the additional revenue opportunities expected to be generated through interconnection services and utility services to be provided to the in-place lease tenants.

The capitalized values for above and below-market lease intangibles, lease origination costs, and customer relationships are amortized over the term of the underlying leases or the expected customer relationship. Amortization related to above-market and below-market leases where the Company is the lessor is recorded as either a reduction of or an increase to rental income, amortization related to above-market and below-market leases where the Company is the lessee is recorded as either a reduction of or an increase to rent expense and amortization for lease origination costs and customer relationships are recorded as amortization expense. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are written off. The carrying value of intangible assets is reviewed for impairment in connection with its respective asset group whenever events or changes in circumstances indicate that the asset group may not be recoverable. An impairment loss is recognized if the carrying amount of the asset group is not recoverable and its carrying amount exceeds its estimated fair value. No impairment loss related to these intangible assets was recognized for the three and nine months ended September 30, 2014, and 2013.

The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. As of September 30, 2014, and December 31, 2013, we had approximately $41.2 million of goodwill at each date. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. No impairment loss was recognized for the three and nine months ended September 30, 2014, and 2013.

Cash and Cash Equivalents

Cash and cash equivalents include all non-restricted cash held in financial institutions and other non-restricted highly liquid short-term investments with original maturities at acquisition of three months or less.

Deferred Costs

Deferred leasing costs include commissions paid to third parties, including leasing agents, and internal sales commissions paid to employees for successful execution of lease agreements. These commissions and other direct and incremental costs incurred to obtain new customer leases are capitalized and amortized over the terms of the related leases using the straight-line method. If a lease terminates prior to the expiration of its initial term, any unamortized deferred costs related to the lease are written off to amortization expense. Deferred leasing costs are included within other assets in the condensed consolidated balance sheet and consisted of the following, net of amortization, as of September 30, 2014, and December 31, 2013 (in thousands):

	September 30,		December 31,
	2014		2013
Internal sales commissions	$	10,518	$	7,530
Third party commissions	12,969		6,328
External legal counsel	335		301
	$	23,822	$	14,159

Deferred financing costs include costs incurred in connection with obtaining debt and extending existing debt. These financing costs are capitalized and amortized on a straight-line basis, which approximates the effective-interest method, over the term of the loan and are included as a component of interest expense.

Recoverability of Long-Lived Assets

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) are less than the carrying amount of the assets. The estimation of expected future net cash flows is inherently uncertain and relies, to a considerable extent, on assumptions regarding current and future economics and market conditions and the availability of capital. If, in future periods, there are changes in the estimates or assumptions incorporated into the impairment review analysis, the changes could result in an adjustment to the carrying amount of the long-lived assets. To the extent that impairment has occurred, the excess of the carrying amount of long-lived assets over its estimated fair value would be recognized as an impairment loss charged to net income. For the three and nine months ended September 30, 2014, and 2013, no real estate impairment was recognized.

Derivative Instruments and Hedging Activities

We reflect all derivative instruments at fair value as either assets or liabilities on the condensed consolidated balance sheets. For those derivative instruments that are designated and qualify as hedging instruments, we record the effective portion of the gain or loss on the hedge instruments as a component of accumulated other comprehensive income or loss. Any ineffective portion of a derivative’s change in fair value is immediately recognized within net income. For derivatives that do not meet the criteria for hedge accounting, changes in fair value are immediately recognized within net income. See additional discussion in Note 6.

Internal-Use Software

We recognize internal-use software development costs based on the development stage of the project and nature of the cost. Internal and external costs incurred during the preliminary project stage are expensed as they are incurred. Internal and external costs incurred to develop internal-use software during the application development stage are capitalized. Internal and external training costs and maintenance costs during the post-implementation-operation stage are expensed as incurred. Completed projects are placed into service and amortized over the estimated useful life of the software.

During the three and nine months ended September 30, 2014, we recognized $0 and $2.0 million related to an impairment of internal use software, respectively, in the condensed consolidated statements of operations. The impairment is a result of internal-use software previously under development that was discontinued during the period and will not be placed into service. No impairment was recognized during the three and nine months ended September 30, 2013.

During the nine months ended September 30, 2014, we revised the remaining useful life of certain internal-use software from six years to one year. As of September 30, 2014, the remaining net book value of this internal-use software was $2.6 million and it will be fully amortized as of June 30, 2015.

Revenue Recognition

All customer leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the non-cancellable term of the agreements. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rent receivable. If a lease terminates prior to its stated expiration, the deferred rent receivable relating to that lease is written off as a reduction of rental revenue.

When arrangements include multiple elements, the revenue associated with separate elements is allocated based on the relative fair values of those elements. The revenue associated with each element is then recognized as earned. Interconnection services and additional space services are considered as separate earnings processes that are provided and completed on a month-to-month basis and revenue is recognized in the period that services are performed. Customer set-up charges and utility installation fees are initially deferred and recognized over the term of the arrangement as revenue.

Tenant reimbursements for real estate taxes, common area maintenance, and other recoverable costs are recognized as revenue in the period that the related expenses are incurred.

Above-market and below-market lease intangibles that were acquired are amortized on a straight-line basis as decreases and increases, respectively, to rental revenue over the remaining non-cancellable term of the underlying leases. For the three months ended September 30, 2014, and 2013, the net effect of amortization of acquired above-market and below-market leases resulted in an increase to rental revenue of $0.3 million and $0.2 million, respectively. For the nine months ended September 30, 2014, and 2013, the net effect of amortization of acquired above-market and below-market leases resulted in an increase to rental income of $0.4 million and $0.7 million, respectively.

A provision for uncollectible accounts is recorded if a receivable balance relating to contractual rent, rent recorded on a straight-line basis, or tenant reimbursements is considered by management to be uncollectible. At September 30, 2014, and December 31, 2013, the allowance for doubtful accounts totaled $0.4 million and $0.2 million, respectively.

In May 2014, the FASB issued guidance codified in Accounting Standards Codification (“ASC”) 606, Revenue Recognition — Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. The standard is effective for interim and annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the impact of the provisions of ASC 606 on our revenue recognition policies.

Share-Based Compensation

We account for share-based compensation using the fair value method of accounting. The estimated fair value of the stock options granted by us is calculated based on Black-Scholes option-pricing model. The fair value of restricted share-based and Operating Partnership unit compensation is based on the market value of our common stock on the date of the grant. The fair value of performance share awards, which have a market condition, is based on a Monte Carlo simulation. The fair value for all share based-compensation is amortized on a straight-line basis over the vesting period.

Asset Retirement and Environmental Remediation Obligations

We record accruals for estimated retirement and environmental remediation obligations. The obligations relate primarily to the removal of asbestos and contaminated soil during development of properties as well as the estimated equipment removal costs upon termination of a certain lease where we are the lessee. At September 30, 2014, and December 31, 2013, the amount included in prepaid rent and other liabilities on the condensed consolidated balance sheets was approximately $2.3 million and $2.2 million, respectively.

Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2010. To qualify as a REIT, we are required to distribute at least 90% of our taxable income to our stockholders and meet various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we qualify for taxation as a REIT, we generally are not subject to corporate level federal income tax on the earnings distributed currently to our stockholders. If we fail to qualify as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax.

To maintain REIT status, we must distribute a minimum of 90% of our taxable income. However, it is our policy and intent, subject to change, to distribute 100% of our taxable income and therefore no provision is required in the accompanying financial statements for federal income taxes with regards to activities of the REIT and its subsidiary pass-through entities. The allocable share of income is included in the income tax returns of its stockholders. The Company is subject to the statutory requirements of the locations in which it conducts business. State and local income taxes are accrued as deemed required in the best judgment of management based on analysis and interpretation of respective tax laws.

We have elected to treat certain subsidiaries as taxable REIT subsidiaries (“TRS”). Certain activities that we undertake must be conducted by a TRS, such as services for our tenants that could be considered otherwise impermissible for us to perform and holding assets that we cannot hold directly. A TRS is subject to corporate level federal and state income taxes.

Deferred income taxes are recognized in certain taxable entities. Deferred income tax generally is a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes), the utilization of tax net operating losses generated in prior years that previously had been recognized as deferred income tax assets and the reversal of any previously recorded deferred income tax liabilities. A valuation allowance for deferred income tax assets is provided if we believe all or some portion of the deferred income tax asset may more likely than not be not realized. Any increase or decrease in the valuation allowance resulting from a change in circumstances that causes a change in the estimated realizability of the related deferred income tax asset is included in deferred tax expense. As of September 30, 2014, and December 31, 2013, the gross deferred income taxes were not material.

We currently have no liabilities for uncertain income tax positions. The earliest tax year for which we are subject to examination is 2010. Prior to their contribution to our Operating Partnership, our subsidiaries were treated as pass-through entities for tax purposes and 2010 also is the earliest year subject to examination with respect to our subsidiaries.

Concentration of Credit Risks

Our cash and cash equivalents are maintained in various financial institutions, which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts, and management believes that the Company is not exposed to any significant credit risk in this area. We have no off-balance sheet concentrations of credit risk, such as foreign exchange contracts, option contracts, or foreign currency hedging arrangements.

Segment Information

We manage our business as one reportable segment consisting of investments in data centers located in the United States. Although we provide services in several markets, these operations have been aggregated into one reportable segment based on the similar economic characteristics amongst all markets, including the nature of the services provided and the type of customers purchasing these services.

Investment in Real Estate

9 Months Ended

Sep. 30, 2014

Investment in Real Estate

Investment in Real Estate

3. Investment in Real Estate

The following is a summary of the properties owned or leased at September 30, 2014 (in thousands):

				Buildings and		Leasehold		Construction
Property Name	Location	Land		Improvements		Improvements		in Progress		Total Cost
SV1	San Jose, CA	$	6,863	$	124,759	$	—	$	1,223	$	132,845
SV2	Milpitas, CA	5,086		24,885		—		1,124		31,095
SV3	Santa Clara, CA	3,972		46,903		—		192		51,067
SV4	Santa Clara, CA	4,442		88,082		—		228		92,752
SV5	Santa Clara, CA	2,544		20,428		—		—		22,972
Santa Clara Campus(1)	Santa Clara, CA	8,173		8,221		—		13,661		30,055
BO1	Somerville, MA	6,100		79,136		—		2,500		87,736
NY1	New York, NY	—		—		33,216		313		33,529
NY2	Secaucus, NJ	1,158		43,638		—		65,657		110,453
VA1	Reston, VA	6,903		108,554		—		6,798		122,255
VA2	Reston, VA	—		—		—		74,931		74,931
DC1	Washington, DC	—		—		7,782		243		8,025
CH1	Chicago, IL	5,493		83,531		—		434		89,458
LA1	Los Angeles, CA	—		—		59,192		3,125		62,317
LA2	Los Angeles, CA	28,467		134,591		—		769		163,827
MI1	Miami, FL	728		10,063		—		86		10,877
DE1	Denver, CO	—		—		1,201		115		1,316
DE2	Denver, CO	—		—		876		77		953
Total		$	79,929	$	772,791	$	102,267	$	171,476	$	1,126,463

(1)This campus includes office and light-industrial buildings and land held for development in Santa Clara, CA.

Other Assets

9 Months Ended

Sep. 30, 2014

Other Assets

Other Assets

4. Other Assets

Our other assets consisted of the following, net of amortization and depreciation, if applicable, as of September 30, 2014, and December 31, 2013 (in thousands):

	September 30,		December 31,
	2014		2013
Deferred leasing costs	$	23,822	$	14,159
Deferred rent receivable	19,993		17,265
Corporate furniture, fixtures and equipment	7,930		7,346
Internal-use software	8,604		8,525
Deferred financing costs	2,841		3,312
Other	3,955		5,195
Total	$	67,145	$	55,802

Debt

9 Months Ended

Sep. 30, 2014

Debt

Debt

5.Debt

A summary of outstanding indebtedness as of September 30, 2014, and December 31, 2013, is as follows (in thousands):

		Maturity	September 30,		December 31,
	Interest Rate	Date	2014		2013
Revolving credit facility	2.16% and 2.17% at September 30, 2014, and December 31, 2013, respectively	January 3, 2017	$	205,250	$	174,250
Senior unsecured term loan	3.23% at September 30, 2014	January 31, 2019	100,000		—
SV1 - Mortgage loan	Repaid on January 31, 2014, and 3.67% at December 31, 2013	N/A	—		58,250
Total principal outstanding			$	305,250	$	232,500

Revolving Credit Facility

On January 3, 2013, our Operating Partnership and certain subsidiary co-borrowers entered into a second amended and restated senior unsecured revolving credit facility (the “Credit Agreement”) with a group of lenders for which KeyBank National Association acts as the administrative agent. The Credit Agreement maturity date is January 3, 2017, with a one-time extension option, which, if exercised, would extend the maturity date to January 3, 2018. The exercise of the extension option is subject to the payment of an extension fee equal to 25 basis points of the total commitment under the Credit Agreement at initial maturity and certain other customary conditions. The Credit Agreement contains an accordion feature, which allows our Operating Partnership to increase the total commitment from $405 million to $500 million, under specified circumstances.

Under the Credit Agreement, our Operating Partnership may elect to have borrowings bear interest at a rate per annum equal to (i) LIBOR plus 200 basis points to 275 basis points, or (ii) a base rate plus 100 basis points to 175 basis points, each depending on our Operating Partnership’s leverage ratio. At September 30, 2014, the Operating Partnership’s leverage ratio was 17.5% and the interest rate was LIBOR plus 200 basis points.

The total amount available for borrowings under the Credit Agreement is subject to the lesser of the facility amount or the availability calculated based on our unencumbered asset pool. As of September 30, 2014, the borrowing capacity was $405 million. As of September 30, 2014, $205.3 million was borrowed and outstanding, $7.3 million was outstanding letters of credit and $192.4 million remained available for us to borrow under the Credit Agreement.

Our ability to borrow under the Credit Agreement is subject to ongoing compliance with a number of financial covenants and other customary restrictive covenants, including, among others:

a maximum leverage ratio (defined as total consolidated indebtedness to total gross asset value) of 60%, which, as of September 30, 2014, was 17.5%;

a maximum secured debt ratio (defined as total consolidated secured debt to total gross asset value) of 40%, which, as of September 30, 2014, was 0%;

a minimum fixed charge coverage ratio (defined as adjusted consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.75 to 1.00, which, as of September 30, 2014, was 7.68% to 1.00; and

a maximum unhedged variable rate debt ratio (defined as unhedged variable rate indebtedness to gross asset value) of 30%, which, as of September 30, 2014, was 11.5%.

As of September 30, 2014, we were in compliance with all of the covenants under the Credit Agreement.

Senior Unsecured Term Loan

On January 31, 2014, our Operating Partnership and certain subsidiaries entered into a $100 million senior unsecured term loan (the “Term Loan”). The Term Loan has a five-year term and contains an accordion feature, which allows our Operating Partnership to increase the total commitments by $100 million, to $200 million, under specified circumstances. The Term Loan ranks pari passu with our Credit Agreement and contains the same financial covenants and other customary restrictive covenants. As of September 30, 2014, we were in compliance with the covenants under the Term Loan.

The borrowings under the Term Loan bear interest at a rate per annum equal to (i) LIBOR plus 175 basis points to 265 basis points, or (ii) a base rate plus 75 basis points to 165 points, each depending on our Operating Partnership’s leverage ratio. At September 30, 2014, the Operating Partnership’s leverage ratio was 17.5% and the interest rate was LIBOR plus 175 basis points.

On February 3, 2014, we entered into a $100 million interest rate swap agreement to hedge one-month LIBOR variable rate debt, which includes the Term Loan and, if the Term Loan is repaid prior to maturity, the revolving credit facility under the Credit Agreement. The interest rate swap has a five-year term and, at our current leverage ratio, effectively fixes the Term Loan interest rate at 3.23%. See additional discussion in Note 6.

On January 31, 2014, we repaid the SV1 Mortgage loan in its entirety using the proceeds from the Term Loan.

Debt Maturities

The following table summarizes the amount of our outstanding debt as of September 30, 2014, when such debt currently becomes due (in thousands):

Year Ending December 31,
Remainder of 2014	$	—
2015	—
2016	—
2017	205,250
2018	—
2019	100,000
Total	$	305,250

Derivatives and Hedging Activities	9 Months Ended
Derivatives and Hedging Activities	Sep. 30, 2014
Derivatives and Hedging Activities
Derivatives and Hedging Activities	6.Derivatives and Hedging Activities On February 3, 2014, we entered into a $100 million interest rate swap agreement to protect against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows relating to interest payments on $100 million of one-month LIBOR variable rate debt. The interest rate swap was designated for hedge accounting. This interest rate swap is our only derivative outstanding as of September 30, 2014, and there were none outstanding as of December 31, 2013. Risk Management Objective of Using Derivatives We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings. Cash Flow Hedges of Interest Rate Risk Our objectives in using interest rate derivatives are to reduce variability in interest expense and to manage our exposure to adverse interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income or loss on the condensed consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the nine months ended September 30, 2014, the amount recorded in accumulated other comprehensive income was a gain of $0.4 million. The amount reclassified to interest expense on the condensed consolidated statements of operations was $0.3 million and none for the three months ended September 30, 2014, and 2013, respectively, and was $0.8 million and none for the nine months ended September 30, 2014, and 2013, respectively. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and nine months ended September 30, 2014, and 2013, we did not record any amount in earnings related to derivatives as there was no hedge ineffectiveness. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the subsequent twelve months, we estimate that $1.2 million will be reclassified as an increase to interest expense. Derivatives are recorded at fair value in our condensed consolidated balance sheets in other assets and other liabilities, as applicable. We do not net our derivative position by counterparty for purposes of balance sheet presentation and disclosure. We had a $0.4 million derivative asset recognized in other assets in our condensed consolidated balance sheet as of September 30, 2014.

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 30
-Section 45
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4C
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624171-113959

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41620-113959

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4B
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624163-113959

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579240-113959

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4D
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624177-113959

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41641-113959

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579245-113959

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4H
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624258-113959

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 30
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4K
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708775-113959

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4J
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708773-113959

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4A
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5618551-113959

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1B
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5580258-113959

Reference 16: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4E
-URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624181-113959

Reference 17: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 25
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986

Reference 18: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41638-113959

Reference 19: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(n))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

+ Details

Stockholders' Equity

9 Months Ended

Sep. 30, 2014

Stockholders' Equity

Stockholders' Equity

7.Stockholders’ Equity

We have paid the following dividends per share on our Series A Cumulative Preferred Stock and common shares during the nine months ended September 30, 2014:

Declaration Date	Record Date	Payment Date	Preferred Stock			Common Shares
March 6, 2014	March 31, 2014	April 15, 2014	$	0.4531	(1)	$	0.35
May 30, 2014	June 30, 2014	July 15, 2014	0.4531		(2)	0.35
August 29, 2014	September 30, 2014	October 15, 2014	0.4531		(3)	0.35
			$	1.3593		$	1.05

(1)

Dividend covers the period from January 15, 2014, to April 14, 2014.

(2)

Dividend covers the period from April 15, 2014, to July 14, 2014.

(3)

Dividend covers the period from July 15, 2014, to October 14, 2014.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(d),(e))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB TOPIC 4.E)
-URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.29-31)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 4
-Subparagraph (SAB TOPIC 4.C)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Preferred Stock
-URI http://asc.fasb.org/extlink&oid=6521494

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph d
-Article 4

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 29, 30, 31
-Article 5

Reference 16: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 4
-Section E

Reference 17: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Article 4

Reference 18: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 4
-Section C

Reference 19: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Article 3

+ Details

Noncontrolling Interests - Operating Partnership

9 Months Ended

Sep. 30, 2014

Noncontrolling Interests - Operating Partnership

Noncontrolling Interests - Operating Partnership

8.Noncontrolling Interests — Operating Partnership

Noncontrolling interests represent the limited partnership interests in the Operating Partnership held by individuals and entities other than CoreSite Realty Corporation. Since September 28, 2011, the current holders of Common Operating Partnership units have been eligible to have the Common Operating Partnership units redeemed for common stock on a one-for-one basis or cash, at our option. Preferred Operating Partnership units rank senior to the Common Operating Partnership units held by both the Company and noncontrolling interests.

The following table shows the ownership interests in the Operating Partnership as of September 30, 2014, and December 31, 2013:

	September 30, 2014			December 31, 2013
	Number of Units	Percentage of Total		Number of Units	Percentage of Total
The Company	21,235,555	45.6	%	20,896,685	45.2	%
Noncontrolling interests	25,360,847	54.4	%	25,360,847	54.8	%
Total	46,596,402	100.0	%	46,257,532	100.0	%

For each share of common stock issued by the Company, the Operating Partnership issues an equivalent Common Operating Partnership unit to the Company. During the nine months ended September 30, 2014, the Company issued 338,870 shares of common stock related to employee compensation arrangements and therefore an equivalent number of Common Operating Partnership units were issued to the Company by the Operating Partnership.

Holders of Common Operating Partnership units of record as of September 30, 2014, will receive quarterly distributions of $0.35 per unit, which correlates to dividends paid on common shares.

The redemption value of the noncontrolling interests at September 30, 2014, was $833.6 million based on the closing price of the Company’s common stock of $32.87 on that date.

Equity Incentive Plan

9 Months Ended

Sep. 30, 2014

Equity Incentive Plan

Equity Incentive Plan

9.Equity Incentive Plan

The Company’s Board of Directors has adopted and, with the consent of the Company’s stockholders, amended the 2010 Equity Incentive Plan (as amended, the “2010 Plan”). The 2010 Plan is administered by the Compensation Committee of the Board of Directors. Awards issuable under the 2010 Plan include common stock, stock options, restricted stock, stock appreciation rights, dividend equivalents and other incentive awards. We have reserved a total of 6,000,000 shares of our common stock for issuance pursuant to the 2010 Plan, which may be adjusted for changes in our capitalization and certain corporate transactions. To the extent that an award expires, terminates or lapses, or an award is settled in cash without the delivery of shares of common stock to the participant, then any unexercised shares subject to the award will be available for future grant or sale under the 2010 Plan. Shares of restricted stock which are forfeited or repurchased by us pursuant to the 2010 Plan may again be optioned, granted or awarded under the 2010 Plan. The payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2010 Plan.

As of September 30, 2014, 3,550,688 shares of our common stock were available for issuance pursuant to the 2010 Plan.

Stock Options

Stock option awards are granted with an exercise price equal to the closing market price of the Company’s common stock at the date of grant. The fair value of each option granted under the 2010 Plan is estimated on the date of grant using the Black-Scholes option-pricing model. The fair values are amortized on a straight-line basis over the vesting periods.

The following table sets forth stock option activity under the 2010 Plan for the nine months ended September 30, 2014:

	Number of		Weighted
	Shares Subject		Average Exercise
	to Options		Price
Options outstanding, December 31, 2013	1,133,915		$	19.89
Granted	—		—
Exercised	(259,605	)	15.98
Forfeited	(64,148	)	25.95
Expired	(3,947	)	15.80
Options outstanding, September 30, 2014	806,215		$	20.68

The following table sets forth the number of shares subject to options that are unvested as of September 30, 2014, and the fair value of these options at the grant date:

	Number of		Weighted
	Shares Subject		Average Fair
	to Options		Value at Grant
Unvested balance, December 31, 2013	635,739		$	7.10
Granted	—		—
Forfeited	(64,148	)	8.07
Vested	(284,257	)	6.25
Unvested balance, September 30, 2014	287,334		$	7.72

As of September 30, 2014, total unearned compensation on options was approximately $1.6 million, and the weighted-average vesting period was 1.5 years.

Restricted Awards and Units

During the nine months ended September 30, 2014, the Company granted 204,686 shares of restricted stock which had a value of $6.5 million on the grant date. Also during the nine months ended September 30, 2014, the Company issued 10,668 restricted stock units, or RSUs. The principal difference between these instruments is that RSUs are not shares of the Company’s common stock and do not have any of the rights or privileges thereof, including voting rights. On the applicable vesting date, the holder of an RSU becomes entitled to a share of common stock. The restricted awards will be amortized on a straight-line basis to expense over the vesting period. The following table sets forth the number of unvested restricted awards and RSUs and the weighted average fair value of these awards at the date of grant:

			Weighted
	Restricted		Average Fair
	Awards		Value at Grant
Unvested balance, December 31, 2013	495,151		$	25.08
Granted	215,354		31.56
Forfeited	(97,555	)	27.28
Vested	(202,953	)	22.80
Unvested balance, September 30, 2014	409,997		$	29.08

As of September 30, 2014, total unearned compensation on restricted awards was approximately $9.5 million, and the weighted-average vesting period was 2.3 years.

Performance Stock Awards

On March 4, 2014, the Company granted long-term incentives to the Company’s executive officers in the form of performance-based restricted stock awards (“PSAs”) under the 2010 Plan. The number of PSAs earned is based on the Company’s achievement of relative total shareholder return (“TSR”) measured versus the MSCI US REIT Index over a three-year performance period, and the number of shares earned under the PSAs may range from 0% to 150%. The PSAs are earned as follows: (i) 20% of the PSAs are eligible to be earned upon TSR achievement in year one of the performance period, (ii) 20% of the PSAs are eligible to be earned upon TSR achievement in year two of the performance period, (iii) 20% of the PSAs are earned upon TSR achievement in year three of the performance period, and (iv) 40% of the PSAs are eligible to be earned upon a cumulative TSR achievement over the three-year performance period. The PSAs have a service condition and will be released at the end of the three-year performance period provided that the executive continues to be employed by the Company at the end of the three-year performance period. Holders of the PSAs are entitled to dividends on the PSAs, which will be accrued and paid in cash at the end of the performance period. The PSAs initially are granted and issued at 150% of the target amount and thereafter are forfeited to the extent vesting conditions are not met.

The Company granted 91,335 PSAs equal to 150% of the target amount, with an aggregate value of $1.6 million on the grant date. The PSAs, in addition to a service condition, are subject to the Company’s performance versus the MSCI US REIT Index which is a market condition and impacts the number of shares that ultimately vests. Upon evaluating the results of the market condition, the final number of shares is determined and such shares vest based on satisfaction of the service conditions. The PSAs have graded vesting terms and will be amortized on a straight-line basis over the vesting period. During the nine months ended September 30, 2014, 5,484 PSAs were forfeited. As of September 30, 2014, total unearned compensation on performance stock awards was approximately $1.2 million, and the weighted-average vesting period was 2.3 years.

Earnings Per Share

9 Months Ended

Sep. 30, 2014

Earnings Per Share

Earnings Per Share

10.Earnings Per Share

Basic income per share is calculated by dividing the net income attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted income per share adjusts basic income per share for the effects of potentially dilutive common shares, if the effect is not antidilutive. Potentially dilutive common shares consist of shares issuable under the 2010 plan. The following is a summary of basic and diluted income per share (in thousands, except share and per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Net income attributable to common shares	$	3,147	$	2,901	$	9,763	$	7,368
Weighted average common shares outstanding - basic	21,214,825		20,871,504		21,113,700		20,793,596
Effect of potentially dilutive common shares:
Stock options	338,674		391,398		360,707		388,889
Unvested awards	155,260		217,069		205,524		283,225
Weighted average common shares outstanding - diluted	21,708,759		21,479,971		21,679,931		21,465,710
Net income per share attributable to common shares
Basic	$	0.15	$	0.14	$	0.46	$	0.35
Diluted	$	0.14	$	0.14	$	0.45	$	0.34

In the calculations above, we have excluded weighted-average potentially dilutive securities of 146,216 and 211,721 for the three months ended September 30, 2014, and 2013, respectively, and 187,404 and 166,732 for the nine months ended September 30, 2014, and 2013, respectively, as their effect would have been antidilutive.

Estimated Fair Value of Financial Instruments	9 Months Ended
Estimated Fair Value of Financial Instruments	Sep. 30, 2014
Estimated Fair Value of Financial Instruments
Estimated Fair Value of Financial Instruments	11.Estimated Fair Value of Financial Instruments Authoritative guidance issued by FASB establishes a hierarchy of valuation techniques based on the observability of inputs utilized in measuring assets and liabilities at fair values. This hierarchy establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy under the authoritative guidance are as follows: Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the assessment date. Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 — Unobservable inputs for the asset or liability. Our financial instruments consist of cash and cash equivalents, restricted cash, accounts and other receivables, the interest rate swap, the revolving credit facility, the senior unsecured term loan, interest payable and accounts payable. The carrying values of cash and cash equivalents, restricted cash, accounts and other receivables, interest payable and accounts payable approximate fair values due to the short-term nature of these financial instruments. The interest rate swap is carried at fair value. The Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy; however, the credit valuation adjustments associated with its derivative utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Operating Partnership and its counterparties. As of September 30, 2014, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivative portfolio. As a result, the Company classifies its derivative valuation in Level 2 of the fair value hierarchy. The total balance of our revolving credit facility and senior unsecured term loan was $305.3 million as of September 30, 2014, with a fair value that approximated book value, based on Level 3 inputs from the fair value hierarchy. Under the discounted cash flow method, the fair values are based on the Company’s assumptions of market interest rates and terms available incorporating the Company’s credit risk.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2014
Commitments and Contingencies
Commitments and Contingencies	12.Commitments and Contingencies Our properties require periodic investments of capital for general capital improvements and for tenant-related capital expenditures. We enter into various construction and equipment contracts with third parties for the development of our properties. In addition, we enter into contracts for company-wide improvements that are ancillary to revenue generation. At September 30, 2014, we had open commitments related to these contracts of approximately $19.2 million. Additionally, we have commitments related to telecommunications capacity used to connect data centers located within the same market or geographical area and power usage. At September 30, 2014, we had open commitments related to these contracts of approximately $12.4 million. As part of our 2012 acquisition of Comfluent, a Denver, Colorado based data center operator, the former Comfluent owner was employed by us and was entitled to a payment based upon successfully renewing and increasing revenues from the customer base that existed at the date of acquisition. During the three months ended September 30, 2014, the payment calculation date was accelerated from January 1, 2015 to September 1, 2014 and we paid $9.3 million in full satisfaction of our payment obligation. From time to time, we are party to a variety of legal proceedings arising in the ordinary course of business. We believe that, with respect to any such matter to which we currently are a party, the ultimate disposition of any such matter will not result in a material adverse effect on our business, financial condition, cash flows or results of operations.

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

Use of Estimates

Adjustments and Reclassifications

Investments in Real Estate

Depreciation and amortization are calculated using the straight-line method over the following useful lives of the assets:

Buildings		27 to 40 years
Building improvements		1 to 10 years
Leasehold improvements		The shorter of the lease term or useful life of the asset

Acquisition of Investment in Real Estate

Cash and Cash Equivalents

Deferred Costs

	September 30,		December 31,
	2014		2013
Internal sales commissions	$	10,518	$	7,530
Third party commissions	12,969		6,328
External legal counsel	335		301
	$	23,822	$	14,159

Recoverability of Long-Lived Assets

Derivative Instruments and Hedging Activities

Internal-Use Software

Revenue Recognition

Tenant reimbursements for real estate taxes, common area maintenance, and other recoverable costs are recognized as revenue in the period that the related expenses are incurred.

Share-Based Compensation

Asset Retirement and Environmental Remediation Obligations

Income Taxes

Concentration of Credit Risks

Segment Information

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Schedule of useful lives of real estate investment assets

Buildings		27 to 40 years
Building improvements		1 to 10 years
Leasehold improvements		The shorter of the lease term or useful life of the asset

Schedule of deferred leasing costs, net of amortization

Deferred leasing costs are included within other assets in the condensed consolidated balance sheet and consisted of the following, net of amortization, as of September 30, 2014, and December 31, 2013 (in thousands):

	September 30,		December 31,
	2014		2013
Internal sales commissions	$	10,518	$	7,530
Third party commissions	12,969		6,328
External legal counsel	335		301
	$	23,822	$	14,159

Investment in Real Estate (Tables)

9 Months Ended

Sep. 30, 2014

Investment in Real Estate

Summary of properties owned or leased

The following is a summary of the properties owned or leased at September 30, 2014 (in thousands):

				Buildings and		Leasehold		Construction
Property Name	Location	Land		Improvements		Improvements		in Progress		Total Cost
SV1	San Jose, CA	$	6,863	$	124,759	$	—	$	1,223	$	132,845
SV2	Milpitas, CA	5,086		24,885		—		1,124		31,095
SV3	Santa Clara, CA	3,972		46,903		—		192		51,067
SV4	Santa Clara, CA	4,442		88,082		—		228		92,752
SV5	Santa Clara, CA	2,544		20,428		—		—		22,972
Santa Clara Campus(1)	Santa Clara, CA	8,173		8,221		—		13,661		30,055
BO1	Somerville, MA	6,100		79,136		—		2,500		87,736
NY1	New York, NY	—		—		33,216		313		33,529
NY2	Secaucus, NJ	1,158		43,638		—		65,657		110,453
VA1	Reston, VA	6,903		108,554		—		6,798		122,255
VA2	Reston, VA	—		—		—		74,931		74,931
DC1	Washington, DC	—		—		7,782		243		8,025
CH1	Chicago, IL	5,493		83,531		—		434		89,458
LA1	Los Angeles, CA	—		—		59,192		3,125		62,317
LA2	Los Angeles, CA	28,467		134,591		—		769		163,827
MI1	Miami, FL	728		10,063		—		86		10,877
DE1	Denver, CO	—		—		1,201		115		1,316
DE2	Denver, CO	—		—		876		77		953
Total		$	79,929	$	772,791	$	102,267	$	171,476	$	1,126,463

(1)This campus includes office and light-industrial buildings and land held for development in Santa Clara, CA.

Other Assets (Tables)

9 Months Ended

Sep. 30, 2014

Other Assets

Schedule of other assets

Our other assets consisted of the following, net of amortization and depreciation, if applicable, as of September 30, 2014, and December 31, 2013 (in thousands):

	September 30,		December 31,
	2014		2013
Deferred leasing costs	$	23,822	$	14,159
Deferred rent receivable	19,993		17,265
Corporate furniture, fixtures and equipment	7,930		7,346
Internal-use software	8,604		8,525
Deferred financing costs	2,841		3,312
Other	3,955		5,195
Total	$	67,145	$	55,802

Debt (Tables)

9 Months Ended

Sep. 30, 2014

Debt

Summary of outstanding indebtedness

A summary of outstanding indebtedness as of September 30, 2014, and December 31, 2013, is as follows (in thousands):

		Maturity	September 30,		December 31,
	Interest Rate	Date	2014		2013
Revolving credit facility	2.16% and 2.17% at September 30, 2014, and December 31, 2013, respectively	January 3, 2017	$	205,250	$	174,250
Senior unsecured term loan	3.23% at September 30, 2014	January 31, 2019	100,000		—
SV1 - Mortgage loan	Repaid on January 31, 2014, and 3.67% at December 31, 2013	N/A	—		58,250
Total principal outstanding			$	305,250	$	232,500

Summary of amount of the entity's outstanding debt when such debt currently become due

The following table summarizes the amount of our outstanding debt as of September 30, 2014, when such debt currently becomes due (in thousands):

Year Ending December 31,
Remainder of 2014	$	—
2015	—
2016	—
2017	205,250
2018	—
2019	100,000
Total	$	305,250

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2014

Stockholders' Equity

Schedule of dividends paid per share on Series A Cumulative Preferred Stock and common shares

We have paid the following dividends per share on our Series A Cumulative Preferred Stock and common shares during the nine months ended September 30, 2014:

Declaration Date	Record Date	Payment Date	Preferred Stock			Common Shares
March 6, 2014	March 31, 2014	April 15, 2014	$	0.4531	(1)	$	0.35
May 30, 2014	June 30, 2014	July 15, 2014	0.4531		(2)	0.35
August 29, 2014	September 30, 2014	October 15, 2014	0.4531		(3)	0.35
			$	1.3593		$	1.05

(1)

Dividend covers the period from January 15, 2014, to April 14, 2014.

(2)

Dividend covers the period from April 15, 2014, to July 14, 2014.

(3)

Dividend covers the period from July 15, 2014, to October 14, 2014.

Noncontrolling Interests - Operating Partnership (Tables)

9 Months Ended

Sep. 30, 2014

Noncontrolling Interests - Operating Partnership

Schedule of ownership interests in the Operating Partnership

	September 30, 2014			December 31, 2013
	Number of Units	Percentage of Total		Number of Units	Percentage of Total
The Company	21,235,555	45.6	%	20,896,685	45.2	%
Noncontrolling interests	25,360,847	54.4	%	25,360,847	54.8	%
Total	46,596,402	100.0	%	46,257,532	100.0	%

Equity Incentive Plan (Tables)

9 Months Ended

Sep. 30, 2014

Equity Incentive Plan

Schedule of stock option activity

	Number of		Weighted
	Shares Subject		Average Exercise
	to Options		Price
Options outstanding, December 31, 2013	1,133,915		$	19.89
Granted	—		—
Exercised	(259,605	)	15.98
Forfeited	(64,148	)	25.95
Expired	(3,947	)	15.80
Options outstanding, September 30, 2014	806,215		$	20.68

Schedule of unvested shares subject to options

	Number of	Weighted
	Shares Subject	Average Fair
	to Options	Value at Grant
Unvested balance, December 31, 2013	635,739	$	7.10
Granted	—	—
Forfeited	(64,148