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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended December 31, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Transition Period From To

Commission file number 001-34877

CoreSite Realty Corporation

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)

27-1925611
(I.R.S. Employer
Identification No.)

1001 17th Street, Suite 500
Denver, CO
(Address of principal executive offices)

80202
(Zip Code)

(866) 777-2673

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value per share

COR

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated Filer 

Smaller reporting company 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 

The aggregate market value of common equity held by non-affiliates of the registrant was approximately $3,591.8 million as of June 28, 2019, the last trading day of the registrant’s most recently completed second fiscal quarter. For purposes of the foregoing calculation, all directors and executive officers of the registrant and holders of more than 10% of the registrant’s common equity are assumed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 5, 2020, there were 37,694,718 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed in conjunction with the registrant’s 2020 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the registrant’s fiscal year ended December 31, 2019, are incorporated by reference in Part III of this report.

Table of Contents

Table of Contents

Page

PART I

4

ITEM 1. BUSINESS

4

ITEM 1A. RISK FACTORS

17

ITEM 1B. UNRESOLVED STAFF COMMENTS

39

ITEM 2. PROPERTIES

39

ITEM 3. LEGAL PROCEEDINGS

39

ITEM 4. MINE SAFETY DISCLOSURES

39

PART II

40

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

40

ITEM 6. SELECTED FINANCIAL DATA

42

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

44

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

55

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

56

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

88

ITEM 9A. CONTROLS AND PROCEDURES

88

ITEM 9B. OTHER INFORMATION

89

PART III

89

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

89

ITEM 11. EXECUTIVE COMPENSATION

89

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

89

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

89

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

89

PART IV

90

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

90

ITEM 16. FORM 10-K SUMMARY

93

SIGNATURES

94

Exhibit 4.3

Exhibit 21.1

Exhibit 23.1

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

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Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (this “Annual Report”), together with other statements and information publicly disseminated by our company, contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), namely Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the PSLRA and include this statement for purposes of complying with these safe harbor provisions.

In particular, statements pertaining to our capital resources, portfolio performance, business strategies and results of operations contain forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma” 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. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: (i) the geographic concentration of our data centers in certain markets and any adverse developments in local economic conditions or the level of supply of or demand for data center space in these markets; (ii) fluctuations in interest rates and increased operating costs; (iii) difficulties in identifying properties to acquire and completing acquisitions; (iv) the significant competition in our industry, including indirect competition from cloud service providers, and an inability to lease vacant space, renew existing leases or release space as leases expire; (v) lack of sufficient customer demand to realize expected returns on our investments to expand our property portfolio; (vi) decreased revenue from costs and disruptions associated with any failure of our physical infrastructure or services; (vii) our ability to develop and lease available space to existing or new customers; (viii) our failure to obtain necessary outside financing; (ix) our ability to service existing debt; (x) our failure to qualify or maintain our status as a real estate investment trust (“REIT”); (xi) financial market fluctuations; (xii) changes in real estate and zoning laws and increases in real estate taxes; (xiii) delays or disruptions in third-party network connectivity; (xiv) service failures or price increases by third party power suppliers; (xv) inability to renew net leases on the data center properties we lease; and (xvi) other factors affecting the real estate or technology industries generally.

In addition, important factors that could cause actual results to differ materially from the forward-looking statements include the risk factors in Item 1A. “Risk Factors” and elsewhere in this Annual Report. New risks and uncertainties arise from time to time, and we cannot predict those events or how they might affect us. We assume no obligation to update any forward-looking statements after the date of this Annual Report, except as required by applicable law. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

When we use the terms “we,” “us,” “our,” the “Company,” “CoreSite” and “our company” in this Annual Report, we are referring to CoreSite Realty Corporation, a Maryland corporation, together with our consolidated subsidiaries, including CoreSite, L.P., a Delaware limited partnership of which we are the sole general partner and to which we refer to as “our Operating Partnership.”

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PART I

ITEM 1. BUSINESS

The Company

We deliver secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American communication 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 Business

We are a fully integrated, self-administered, and self-managed REIT for federal income tax purposes and we conduct certain activities through our taxable REIT subsidiaries. Through our controlling interest in CoreSite, L.P., a Delaware limited partnership, our “Operating Partnership,” we are engaged in the business of ownership, acquisition, construction and operation of strategically located data centers in some of the largest and fastest growing data center markets in the United States, including the San Francisco Bay area, Los Angeles, the Northern Virginia area (including Washington D.C.), the New York area, Boston, Chicago, Denver and Miami. We are a Maryland corporation organized in 2010.

Our data centers are highly specialized and secure buildings that house networking, storage and communications technology infrastructure, including servers, storage devices, switches, routers and fiber optic transmission equipment. These buildings are designed to provide the power, cooling and network connectivity necessary to efficiently operate this mission-critical equipment. Data centers located at points where many communications networks converge can also function as interconnection hubs where customers are able to connect to multiple networks, cloud companies and other service providers to exchange traffic and interoperate with each other. Our data centers feature advanced reliable and efficient power, cooling and security systems, and many are points of network interconnection that provide the evolved ecosystems our customers need to meet their own competitive challenges, digital transformations, and other business goals. We believe we have the flexibility and scalability to satisfy the full spectrum of our customers’ growth requirements and corresponding data center needs by providing data center space ranging in size from an entire building or large dedicated suite to a cage or half cabinet. Our data center campuses are particularly suitable for customers serving consumers and businesses with low-latency digital products in our major metro markets as well as customers deploying hybrid-cloud / multi-cloud information technology architectures.

The first data center in our portfolio was purchased in 2000 by certain real estate funds (the “Funds”) affiliated with The Carlyle Group, our predecessor, and since then we have continued to acquire, develop and operate these types of data center facilities. Our properties are self-managed, including construction project management in connection with our development initiatives. As of December 31, 2019, our property portfolio included 23 operating data center facilities, office and light-industrial space and multiple development projects and space, which collectively comprise, when fully built-out, over 4.6 million net rentable square feet (“NRSF”), of which over 2.6 million NRSF is existing operating data center space.

Recent Developments

On April 12, 2019, we acquired a 3.8-acre land parcel with a single-story office building located adjacent to our Santa Clara campus for a purchase price of $26 million. We expect to develop an approximately 200,000 NRSF turn-key data center building on the acquired land parcel, which we refer to as SV9, as the existing office tenants vacate upon expiration of their leases and upon the receipt of necessary entitlements.

Our Competitive Strengths

We believe the following key competitive strengths position us to compete, efficiently scale our business, capitalize on the demand for data center space and interconnection services, and thereby grow our cash flow.

Secure, Reliable, and Compliant. We help businesses protect mission-critical data, performance sensitive applications and information technology (“IT”) infrastructure by delivering secure, reliable, and compliant data center

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solutions. Our data centers feature advanced efficient power and cooling infrastructure to support our customers’ IT infrastructures with additional power capacity to support continued growth. We provide twenty-four-hours-a-day, seven-days-a-week in-house data center operations with customizable security features. We also provide the infrastructure and physical security required to support many of our customers’ information, data, and security compliance needs across all of our properties.

High Performance Interconnection. We offer cloud-enabled, network rich data center campuses with over 28,000 interconnections across our portfolio. Our customers have direct access to over 450 carriers and Internet Service Providers (“ISPs”) and over 325 leading cloud and IT service providers, including 10 cloud on-ramps deployed on-site in our campuses currently, which we expect to increase in 2020. In addition to standard interconnection offerings, we also operate the CoreSite Open Cloud Exchange™, and the Any2 Exchange for Internet Peering, the second largest peering exchange in the U.S. The diverse network and cloud connectivity options at many of our data centers provide us with a competitive advantage by creating an ideal environment for enterprises to build holistic, streamlined hybrid and multi-cloud architectures. Many providers in our data center facilities can leverage our sites as revenue opportunities by offering their services directly to other customers within our data centers, while enterprises can reduce their total cost of operations, while increasing their performance, by directly connecting to service providers in the same data center in a cost effective manner.

Scalable. Across 23 operating data centers in eight key North American markets, we lease space to enterprises, cloud and IT service providers, and network and mobility providers. We believe our ability to be both flexible and scalable is a key differentiator. We offer many space, power, and interconnection options that allow customers to select products and services that meet their needs. We believe we have a compelling combination of presence in most of the top data center markets in the U.S. with the ability to meet customers’ growing capacity requirements within those markets.

We have the ability to increase our occupied data center square footage by approximately 2,053,000 NRSF, or 93%, through leasing our 409,000 NRSF of unoccupied space and the development of 196,000 NRSF of space under construction and approximately 1,448,000 NRSF at multiple facilities that are held for future development based on market supply and demand, in each case, as of December 31, 2019.

High-Quality Customer Experience. We believe our 464 professionals deliver best-in-class service by placing customer needs first in supporting the planning, implementation and operating requirements of customers. We provide dedicated implementation resources to ensure a seamless onboarding process for our customers. Our leasing and sales professionals can develop complex data center solutions for the most demanding customer requirements and our experienced and committed operations and facilities personnel are available for extensive management support. We believe one of the data points validating our customer satisfaction is indicated by the 85% of annualized rent signed during the year ended December 31, 2019, which came from existing customers.

Facilities in Key Markets. Our portfolio is concentrated in some of the largest and most important U.S. metropolitan markets and we expect to continue benefitting from this concentration as customers seek new, high-quality data center space and interconnections within our markets, which are many of the key North American network, financial, cloud and commercial hubs. Our data centers are located in the San Francisco Bay area, Los Angeles, the Northern Virginia area (including Washington D.C.), the New York area, Boston, Chicago, Denver and Miami. Many of our facilities are also situated in close proximity to a concentration of key businesses and corporations, driving demand for our data center space and interconnection services.

Diversified Customer Base. We have a diverse, global customer base, which we believe is a reflection of our strong reputation and proven track record, as well as our customers’ trust in our ability to house their mission-critical applications and vital communications technology. Our diverse customer base spans many industries across eight key North America markets. In addition to geographic markets, we group our customers into the following industry verticals:

Enterprises: digital content and multimedia, systems integrators and managed service providers (“SI & MSP”), financial, healthcare, education, government, manufacturing and professional services;
Cloud and IT Service Providers; and

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Networks and Mobility: domestic and international telecommunications carriers, subsea cables, ISPs and Content Delivery Networks (“CDNs”).

Business and Growth Strategies

Our business objective is to continue growing our position as a provider of strategically located data center space in North America. Key components of our strategy include the following:

Increase Cash Flow from In-Place Data Center Space. We actively manage and lease our properties to increase cash flow by:

Leasing Available Space. We have the ability to increase both our revenue and our revenue per square foot by leasing additional space and power services to new and existing data center customers. As of December 31, 2019, our existing data center facilities had approximately 367,000 NRSF of data center space available to lease, or 14.0% of our current operating data center portfolio. We believe our available space, together with available power, enables us to generate incremental revenue within our existing data center footprint.
Increasing Interconnection in our Facilities. As more customers deploy in our data center facilities, it benefits their business partners and customers to deploy with CoreSite in order to gain the full economic and performance benefits of our interconnection services. We believe this ecosystem of customers continues to drive new and existing customer growth, and in turn, increases the volume of interconnection services and the amount of value-add power services such as breakered AC and DC primary and redundant power.

Capitalize on Embedded Expansion Opportunities. We plan to grow by developing new secure, reliable and high-performance data center space. Our development opportunities include leveraging existing in-place infrastructure and entitlements in currently operating properties or campuses. In many cases, we are able to strategically deploy capital by developing space in incremental phases to meet customer demand. Including the space currently under construction, pre-construction projects, and space and land targeted for future development at December 31, 2019, we own land and buildings sufficient to develop approximately 1,644,000 NRSF of data center space. The following table summarizes the NRSF under construction and NRSF held for development throughout our portfolio, each as of December 31, 2019:

Development Opportunities (in NRSF)

Under

Held for

Facilities

 

Construction(1)

Development(2)

Total

 

San Francisco Bay

SV8

54,056

54,056

SV9(3)(4)

200,000

200,000

San Francisco Bay Total

54,056

200,000

254,056

One Wilshire campus

LA1

10,352

10,352

LA3

51,000

109,000

160,000

Los Angeles Total

51,000

119,352

170,352

Northern Virginia

Reston Campus Expansion(4)

809,742

809,742

New York

NY2

34,589

81,799

116,388

Boston

BO1

110,985

110,985

Chicago

CH2

56,000

113,000

169,000

Miami

MI1

13,154

13,154

Total Facilities(5)

195,645

1,448,032

1,643,677

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(1)Represents NRSF for which substantial construction activities are ongoing to prepare the property for its intended use following development. The NRSF reflects management’s estimate of engineering drawings and required support space and is subject to change based on final demising of space.
(2)Represents estimated incremental data center capacity currently vacant in existing facilities or on vacant land in our portfolio that requires significant capital investment in order to develop into data center facilities.
(3)On April 12, 2019, we acquired a 3.8-acre land parcel with a single-story office building located adjacent to our Santa Clara campus for a purchase price of $26 million. We expect to develop an approximately 200,000 NRSF turn-key data center building on the acquired land parcel, which we refer to as SV9. We began pre-construction activities, including environmental permitting and other processes, and we anticipate commencing development as the existing office tenants vacate upon expiration of their leases and upon receipt of the necessary entitlements.
(4)The NRSF for these facilities reflect management’s estimates based on our current construction plans and expectations regarding entitlements. These estimates are subject to change based on current economic conditions, final zoning approvals, and the supply and demand dynamics of the market.
(5)In addition to our development opportunities disclosed within this table, we have land adjacent to our NY2 facility, in the form of an existing parking lot. By utilizing this land, we believe that we could develop 100,000 NRSF on our available acreage in Secaucus, New Jersey, upon receipt of necessary entitlements.

Selectively Pursue Acquisition and Development Opportunities in New and Existing Markets. We evaluate opportunities to acquire or develop data center space with abundant power and/or dense points of interconnection in key markets that will expand our customer base and broaden our geographic footprint. Such acquisitions may entail subsequent development, which requires significant capital expenditures. We also intend to continue to implement the “hub-and-spoke strategy” that we have deployed in our four largest markets, namely Los Angeles, New York, and the San Francisco Bay and Northern Virginia areas. In these markets, we have extended our data center footprint by connecting our newer facilities, the spokes, to our established data centers, our hubs, which allows our customers leasing space at the spokes to leverage the significant interconnection capabilities of our hubs. In order to deploy our “hub-and-spoke strategy,” we typically rely on third-party providers of network connectivity to establish highly reliable network connectivity within and between facilities. Our two ground-up development projects, CH2 and LA3, and our SV9 held-for-development project, when constructed, will be connected via dark fiber to their respective campus hubs.

Leverage Existing Customer Relationships and Reach New Customers. Our strong customer and industry relationships, combined with our national footprint and sales force, afford us insight into the size, timing and location of customers’ planned growth. We historically have been successful in leveraging this market visibility to expand our footprint and customer base in our markets. We intend to continue to strengthen and expand our relationships with existing customers and to further grow and diversify our customer base by targeting growing customers and segments, such as domestic and international telecommunications carriers, content and media entertainment providers, cloud providers and other enterprise customers, including financial, health care, educational institutions and government agencies.

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Our Portfolio

As of December 31, 2019, our property portfolio included 23 operating data center facilities, office and light-industrial space and multiple potential development projects that collectively comprise over 4.6 million NRSF, of which over 2.6 million NRSF is existing data center space. The approximately 1.6 million NRSF of development capacity includes space available for development and construction of new data center facilities. We expect that this development potential plus any incremental investment into existing or new markets will enable us to accommodate existing and future customer demand and position us to continue to increase our operating cash flows. The following table provides an overview of our property portfolio as of December 31, 2019:

Data Center Operating NRSF (1)

Development

Stabilized

Pre-Stabilized (2)

Total

NRSF (3)

Total NRSF

Annualized

Percent

Percent

Percent

Total

Market/Facilities

Rent ($000)(4)

    

Total

    

Occupied(5)

    

Total

    

Occupied(5)

    

Total

    

Occupied(5)

    

Total

    

Portfolio

 

San Francisco Bay

SV1

$

5,994

88,251

76.3

%

%

88,251

76.3

%

88,251

SV2

7,619

76,676

86.3

76,676

86.3

76,676

Santa Clara campus(6)

(SV3-SV9)

96,575

723,181

96.9

723,181

96.9

254,056

977,237

San Francisco Bay Total

110,188

888,108

93.9

888,108

93.9

254,056

1,142,164

Los Angeles

One Wilshire campus

LA1*

30,653

145,776

94.6

17,238

1.6

163,014

84.7

10,352

173,366

LA2

50,578

384,965

92.0

39,925

23.6

424,890

85.5

424,890

LA3

160,000

160,000

LA4*

1,209

21,850

98.2

21,850

98.2

21,850

Los Angeles Total

82,440

552,591

92.9

57,163

17.0

609,754

85.8

170,352

780,106

Northern Virginia

VA1

25,798

201,719

81.0

201,719

81.0

201,719

VA2

22,560

188,446

99.5

188,446

99.5

188,446

VA3

3,398

52,758

100.0

77,646

14.0

130,404

48.8

130,404

DC1*

3,043

22,137

75.1

22,137

75.1

22,137

DC2*

175

24,563

4.4

24,563

4.4

24,563

Reston Campus Expansion(7)

809,742

809,742

Northern Virginia Total

54,974

465,060

90.4

102,209

11.7

567,269

76.2

809,742

1,377,011

New York

NY1*

6,098

48,404

93.8

48,404

93.8

48,404

NY2

16,232

101,742

92.9

18,121

18.5

119,863

81.6

116,388

236,251

New York Total

22,330

150,146

93.2

18,121

18.5

168,267

85.1

116,388

284,655

Chicago

CH1

16,348

178,407

81.4

178,407

81.4

178,407

CH2

169,000

169,000

Chicago Total

16,348

178,407

81.4

178,407

81.4

169,000

347,407

Boston

BO1

15,360

122,730

75.2

19,961

142,691

64.7

110,985

253,676

Denver

DE1*

4,248

14,154

88.7

15,630

35.6

29,784

60.8

29,784

DE2*

471

5,140

74.0

5,140

74.0

5,140

Denver Total

4,719

19,294

84.8

15,630

35.6

34,924

62.8

34,924

Miami

MI1

1,537

30,176

60.8

30,176

60.8

13,154

43,330

Total Data Center Facilities

$

307,896

2,406,512

90.6

%  

213,084

14.3

%  

2,619,596

84.4

%  

1,643,677

4,263,273

Office and Light-Industrial(7)

8,655

364,941

78.0

364,941

78.0

364,941

Reston Office and Light-Industrial(8)

1,186

82,801

100.0

82,801

100.0

(82,801)

Total Portfolio

$

317,737

2,854,254

89.3

%  

213,084

14.3

%  

3,067,338

84.0

%  

1,560,876

4,628,214

*

Indicates properties in which we hold a leasehold interest.

(1)Represents NRSF at each operating facility that is currently occupied or readily available for lease as data center space and pre-stabilized data center space. Both occupied and available data center NRSF includes a factor based on management’s estimate to account for a customer’s proportionate share of the required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas, which may be updated on a periodic basis to reflect the most current build-out of our properties. Operating data center NRSF may require investment of Deferred Expansion Capital (see definition on page 11).
(2)Pre-stabilized NRSF represents projects or facilities that recently have been developed and are in the initial lease-up phase. Pre-stabilized projects or facilities become stabilized operating properties at the earlier of achievement of 85% occupancy or 24 months after development completion.

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(3)Represents incremental data center capacity currently vacant in existing facilities in our portfolio that requires significant capital investment in order to develop into data center facilities. Includes NRSF under construction for which substantial activities are ongoing to prepare the property for its intended use following development and NRSF in pre-construction, which are projects in the design and permitting stages. The NRSF reflects management’s estimate of engineering drawings and required support space and is subject to change based on final demising of space.
(4)Represents the monthly contractual rent under existing commenced customer leases as of December 31, 2019, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement. On a gross basis, our total portfolio annualized rent was approximately $323.6 million as of December 31, 2019, which includes $5.8 million in operating expense reimbursements under modified gross and triple-net leases.
(5)Includes customer leases that have commenced and are occupied as of December 31, 2019. The percent occupied is determined based on occupied square feet as a proportion of total operating NRSF as of December 31, 2019. The percent occupied for stabilized data center space would have been 91.4%, rather than 90.6%, if all leases signed in the current and prior periods had commenced. The percent occupied for our total portfolio, including stabilized data center space, pre-stabilized space and office and light-industrial space, would have been 85.5%, rather than 84.0%, if all leases signed in current and prior periods had commenced.
(6)On April 12, 2019, we acquired a 3.8-acre land parcel with a single-story office building located adjacent to our Santa Clara campus for a purchase price of $26 million. We expect to develop a turn-key data center building on the acquired land parcel, which we refer to as SV9, as the existing office tenants vacate upon expiration of their existing leases and upon receipt of the necessary entitlements. Included within our Santa Clara campus development NRSF is 200,000 NRSF that is being held for development related to SV9.
(7)Represents space that is currently occupied or readily available for lease as space other than data center space, which typically is offered for office or light-industrial uses.
(8)Included within our Reston Campus Expansion held for development space is 82,801 NRSF that is currently operating as office and light-industrial space.

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“Same-Store” statistics are based on space within each data center facility that was leased or available to be leased as of December 31, 2017, excluding space for which development was completed and became available to be leased after December 31, 2017. We track Same-Store space leased or available to be leased at the computer room level within each data center facility. The following table shows the December 31, 2019, Same-Store operating statistics. For comparison purposes, the operating activity totals as of December 31, 2018, and 2017, for this space are provided at the bottom of this table.

Same-Store Property Portfolio (in NRSF)

Data Center

Office and Light-Industrial

Total

Annualized

Percent

Percent

Percent

Market/Facilities

    

Rent ($000)(1)

    

Total

    

Occupied(2)

    

Total

    

Occupied(2)

    

Total

    

Occupied(2)

 

San Francisco Bay

SV1

$

11,967

88,251

76.3

%  

231,919

83.1

%  

320,170

81.2

%

SV2

7,619

76,676

86.3

76,676

86.3

Santa Clara campus (SV3 - SV7)

76,595

615,500

96.3

1,176

87.8

616,676

96.3

San Francisco Bay Total

96,181

780,427

93.1

233,095

83.1

1,013,522

90.8

Los Angeles

One Wilshire campus

LA1*

30,362

139,053

94.2

4,373

64.7

143,426

93.3

LA2

36,213

309,437

90.0

7,417

80.1

316,854

89.8

Los Angeles Total

66,575

448,490

91.3

11,790

74.4

460,280

90.8

Northern Virginia

VA1

27,087

201,719

81.0

61,050

87.8

262,769

82.6

VA2

22,603

188,446

99.5

4,308

26.5

192,754

97.9

VA3

857

52,758

100.0

52,758

100.0

DC1*

3,043

22,137

75.1

22,137

75.1

Reston Campus Expansion

1,186

82,801

100.0

82,801

100.0

Northern Virginia Total

54,776

465,060

90.4

148,159

92.8

613,219

91.0

New York

NY1*

6,112

48,404

93.8

209

100.0

48,613

93.8

NY2

16,490

101,742

92.8

20,735

53.6

122,477

86.1

New York Total

22,602

150,146

93.1

20,944

54.1

171,090

88.3

Chicago

CH1

16,285

178,407

81.3

4,946

31.3

183,353

79.9

Boston

BO1

15,595

122,730

75.2

19,495

53.3

142,225

72.2

Denver

DE1*

2,891

14,154

88.7

14,154

88.7

DE2*

471

5,140

74.0

5,140

74.0

Denver Total

3,362

19,294

84.8

19,294

84.8

Miami

MI1

1,564

30,176

60.8

1,934

74.7

32,110

61.7

Total Facilities at December 31, 2019(3)

$

276,940

2,194,730

89.7

%  

440,363

82.8

%  

2,635,093

88.5

%

Total Facilities at December 31, 2018

$

283,758

92.1

%  

81.6

%  

90.4

%

Total Facilities at December 31, 2017

$

269,173

90.7

%  

83.9

%  

89.6

%

*

Indicates properties in which we hold a leasehold interest.

(1)Represents the monthly contractual rent under existing commenced customer leases as of each respective period, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement.
(2)Includes customer leases that have commenced and are occupied as of each respective period. The percent occupied is determined based on occupied square feet as a proportion of total operating NRSF.
(3)The percent occupied for data center space, office and light-industrial space, and total space as of December 31, 2019, would have been 90.6%, 83.2% and 89.3%, respectively, if all leases signed in the current and prior periods had commenced.

Same-Store annualized rent decreased to $276.9 million at December 31, 2019, compared to $283.8 million at December 31, 2018. The decrease of $6.8 million is primarily due to the move-out of a customer at our BO1 property during the year ended December 31, 2019, partially offset by the commencement of new and expansion leases.

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Capital Expenditures

The following table sets forth information regarding capital expenditures during the year ended December 31, 2019 (in thousands):

Year Ended

    

December 31, 2019

 

Data center expansion

$

382,761

Non-recurring investments

6,429

Tenant improvements

4,267

Recurring capital expenditures

7,404

Total capital expenditures

$

400,861

During the year ended December 31, 2019, we incurred approximately $400.9 million of capital expenditures, of which approximately $382.8 million related to data center expansion activities, including new data center construction, the development of capacity within existing data centers and other revenue generating investments. As we construct data center capacity, we work to optimize both the amount of capital we deploy on power and cooling infrastructure and the timing of that capital deployment. As such, we generally construct our power and cooling infrastructure supporting our data center NRSF based on our estimate of customer utilization. This practice can result in our investment at a later time in “Deferred Expansion Capital”. We define Deferred Expansion Capital as our estimate of the incremental capital we may invest in the future to add power or cooling infrastructure to support existing or anticipated future customer utilization of NRSF within our operating data centers.

During the year ended December 31, 2019, we completed development of 224,000 NRSF comprised of one computer room at BO1, one computer room at LA1, three computer rooms at LA2, two computer rooms at SV8, and at VA3 an infrastructure building, a data center core and shell building, and therein one computer room. As of December 31, 2019, we had ongoing construction projects at CH2, LA3, NY2, and SV8 scheduled to complete development at various times during the year ending December 31, 2020. The following table sets forth capital expenditures spent on data center expansion NRSF placed into service or acquired during the year ended December 31, 2019, and under construction as of December 31, 2019:

NRSF

Data Center

Placed into

Under

Property

    

Expansion

    

Service

    

Construction(1)

 

SV8

$

129,364

107,681

54,056

CH2

85,496

56,000

VA3

54,722

51,233

SV9(2)

27,614

NY2

22,896

34,589

LA3

19,652

51,000

LA2

14,003

28,191

LA1

11,450

17,238

BO1

9,620

19,961

Other

7,944

Total

$

382,761

224,304

195,645

(1)Represents NRSF under construction for which substantial activities are ongoing to prepare the property for its intended use following development and NRSF in pre-construction, which are projects in the design and permitting stages.
(2)On April 12, 2019, we acquired a 3.8-acre land parcel with a single story office building, located adjacent to our Santa Clara campus for a purchase price of $26 million. We expect to develop an approximately 200,000 NRSF turn-key data center building on the acquired land parcel, which we refer to as SV9. We began pre-construction activities, including environmental permitting and other processes, and we anticipate commencing development as the existing office tenants vacate upon expiration of their leases and upon receipt of the necessary entitlements.

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During the year ended December 31, 2019, we incurred approximately $6.4 million in non-recurring investments, of which $2.5 million was a result of internal IT software development and the remaining $3.9 million was a result of other non-recurring investments, such as remodel or upgrade projects.

During the year ended December 31, 2019, we incurred approximately $4.3 million in tenant improvements, which related to tenant-specific power installations at various properties.

During the year ended December 31, 2019, we incurred approximately $7.4 million of recurring capital expenditures within our portfolio, which included required equipment upgrades at our various facilities that have a future economic benefit and was offset by a $1.7 million energy efficiency rebate received from the local power utility related to the replacement of our chiller plant at LA2.

Customer Diversification

The following table sets forth information regarding the ten largest customers in our portfolio based on total portfolio annualized rent as of December 31, 2019:

  

  

  

  

Weighted

Average

Percentage

Percentage

Remaining

Number

Total

of Total

Annualized

of Total

Lease

of

Occupied

Operating

Rent

Annualized

Term in

CoreSite Vertical

Customer Industry

Locations

NRSF(1)

NRSF(2)

($000)(3)

Rent(4)

Months(5)

1

Cloud

Public Cloud

8

203,876

6.6

%

$

40,338

12.7

%

95

 

2

Cloud

Public Cloud

11

305,446

10.0

18,312

5.8

58

3

Enterprise

Digital Content

6

119,447

3.9

17,623

5.5

36

4

Enterprise

Travel / Hospitality

3

73,158

2.4

15,277

4.8

14

5

Cloud

Public Cloud

3

118,691

3.9

13,344

4.2

41

6

Enterprise

SI & MSP

3

62,268

2.0

9,271

2.9

6

7

Network

Global Service Provider

8

31,962

1.0

6,442

2.0

29

8

Enterprise

SI & MSP

1

17,922

0.6

5,461

1.7

26

9

Network

US National Service Provider

16

42,853

1.4

5,245

1.7

42

10

Enterprise

Colocation / Reseller

5

35,469

1.2

4,594

1.5

7

Total/Weighted Average

  

1,011,092

  

33.0

%

$

135,907

  

42.8

%

51

(1)Total occupied NRSF is determined based on contractually leased square feet for leases that have commenced on or before December 31, 2019. We calculate occupancy based on factors in addition to contractually occupied square feet, including required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas.
(2)Represents the customer’s total occupied square feet divided by the total operating NRSF in the portfolio as of December 31, 2019.
(3)Represents the monthly contractual rent under existing commenced customer leases as of December 31, 2019, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement.
(4)Represents the customer’s total annualized rent divided by the total annualized rent in the portfolio as of December 31, 2019.
(5)Weighted average based on percentage of total annualized rent expiring calculated as of December 31, 2019.

Lease Expirations

The following summary table sets forth a schedule of the expirations for leases in place as of December 31, 2019, plus unoccupied space, for each of the five full calendar years beginning January 1, 2020, at the properties in our

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portfolio (excluding space held for development, under construction, or in pre-construction). The information set forth in the table assumes that customers exercise no renewal options or early termination rights.

Total

Annualized

Number

Operating

Percentage

Percentage

Annualized

Annualized

Rent Per

of

NRSF of

of Total

Annualized

of Total

Rent Per

Rent at

Leased

Leases

Expiring

Operating

Rent

Annualized

Leased

Expiration

NRSF at

Year of Lease Expiration

Expiring(1)

Leases

NRSF

($000)(2)

Rent

NRSF

($000)(3)

Expiration(4)

Unoccupied data center

409,180

13.4

%

$

%

$

 

$

 

$

 

Unoccupied office and light-industrial

80,149

2.6

2020

1,300

610,022

19.8

96,090

30.2

158

96,767

159

2021

629

347,782

11.3

56,329

17.7

162

58,033

167

2022

309

363,481

11.9

53,872

17.0

148

54,960

151

2023

71

192,055

6.3

24,330

7.7

127

26,634

139

2024

75

132,940

4.3

16,551

5.2

125

19,201

144

2025-Thereafter

32

564,136

18.4

60,724

19.1

108

72,373

128

Office and light-industrial (5)

140

367,593

12.0

9,841

3.1

27

10,463

28

Portfolio Total / Weighted Average

2,556

3,067,338

100.0

%

$

317,737

100.0

%

$

123

$

338,431

$

131

(1)Includes leases that upon expiration will automatically be renewed, primarily on a year-to-year basis. Number of leases represents each agreement with a customer; a lease agreement could include multiple spaces and a customer could have multiple leases.
(2)Represents the monthly contractual rent under existing customer leases as of December 31, 2019, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement.
(3)Represents the final monthly contractual rent under existing customer leases as of December 31, 2019, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement. Leases expiring during 2019 include annualized rent of $8.3 million associated with lease terms currently on a month-to-month basis.
(4)Annualized rent at expiration as defined above, divided by the square footage of leases expiring in the given year. This metric reflects the rent growth inherent in the existing base of lease agreements.
(5)The occupied office and light-industrial leases are scheduled to expire as follows:

NRSF of

Annualized

Expiring

Rent

Year

  

Leases

  

($000)

2020

37,083

$

1,200

2021

47,501

1,572

2022

78,431

1,470

2023

140,380

3,906

2024

9,190

218

2025-Thereafter

55,008

1,475

Total OLI

367,593

$

9,841

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Lease Distribution

The following table sets forth information relating to the distribution of leases in the properties in our portfolio, based on NRSF (excluding space held for development, under construction, or in pre-construction) under lease as of December 31, 2019:

Total

Percentage

Percentage

Number

Percentage

Operating

of Total

Annualized

of Total

of

of All

NRSF of

Operating

Rent

Annualized

NRSF Under Lease(1)

    

Leases(2)

    

Leases

    

Leases

    

NRSF

    

($000)(3)

    

Rent

 

Unoccupied data center

  

  

%  

409,180

  

13.4

%

$

  

%

Unoccupied office and light-industrial

  

80,149

  

2.6

  

Data center NRSF:

5,000 or less

  

2,332

  

91.2

814,987

  

26.5

136,733

  

43.0

5,001 - 10,000

  

38

  

1.5

261,469

  

8.5

43,322