0001490892false00014908922020-07-302020-07-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 30, 2020

CoreSite Realty Corporation

(Exact name of registrant as specified in its charter)

Maryland

001-34877

27-1925611

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

1001 17th Street, Suite 500

Denver, CO

80202

(Address of principal executive offices)

(Zip Code)

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

N/A

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

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

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

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

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

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

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

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

Emerging growth company

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

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition.

On July 30, 2020, CoreSite Realty Corporation ("CoreSite") issued a press release reporting financial results and operating information for the quarter ended June 30, 2020. In addition, CoreSite made available on its website supplemental operating and financial data for the same period. The text of the press release and the supplemental information package are furnished herewith as Exhibits 99.1 and 99.2, respectively.

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

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

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

Exhibit No.

    

Description

99.1

Press Release, dated July 30, 2020.

99.2

Quarter Ended June 30, 2020, Earnings Release and Supplemental Information, dated July 30, 2020.

101.INS

XBRL Instance – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

2

SIGNATURES

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

CORESITE REALTY CORPORATION

Date: July 30, 2020

By:

/s/ Jeffrey S. Finnin

Name: Jeffrey S. Finnin

Title:   Chief Financial Officer

By:

/s/ Mark R. Jones

Name: Mark R. Jones

Title:   Chief Accounting Officer

3

Graphic

CoreSite Reports Second Quarter 2020 Financial Results

-- Completed Construction of CH2 Phase 1, Comprised of 55,000 NRSF --

-- Completed the 52,000 NRSF Expansion at SV8 Phase 3 --

-- Increased Liquidity with $150 Million of Senior Notes --

DENVER, CO – July 30, 2020 – CoreSite Realty Corporation (NYSE:COR) (“the Company”), a premier provider of secure, reliable, high-performance data center, cloud and interconnection solutions across the U.S., today announced financial results for the second quarter ended June 30, 2020.

Q2 2020 Quarterly Highlights

Key Financial Results –
oGrew operating revenues to $150.5 million, an increase of 5.3% year over year and 2.2% sequentially
oDelivered net income of $0.52 per common diluted share, a decrease of $0.01 year over year and an increase of $0.04 sequentially
oGenerated Funds From Operations (“FFO”) of $1.35 per diluted share and unit, an increase of $0.08, or 6.3% year over year and $0.06 sequentially, or 4.7%
oWe declared a dividend of $1.22 per share for the second quarter, which was paid on July 15th  
Lease Commencements
oCommenced 121 new and expansion leases for 45,271 net rentable square feet (“NRSF”), representing $7.9 million of annualized GAAP rent, for an average rate of $175 per square foot
Leasing Activity
oSigned 112 new and expansion leases for 22,191 NRSF and $3.5 million of annualized GAAP rent, for an average rate of $156 per square foot
oRenewed 333 leases for 174,926 NRSF and $25.0 million of annualized GAAP rent, for an average rate of $143 per square foot, reflecting a reduction of 1.5% in cash rent and an increase of 5.5% in GAAP rent, and 1.0% churn

Q2 2020 Notable Events

Delivered new data center capacity of approximately 107,000 NRSF
oCompleted Phase 1 of our new CH2 building, comprised of 55,000 NRSF, and
oPlaced into service our data center expansion at SV8 Phase 3, comprised of 52,000 NRSF
Increased Liquidity with Financing and Funding
oOn May 6th, executed a $150 million financing and received proceeds of $100 million, and
oOn July 14th, received the remaining proceeds of $50 million
oAll proceeds were used to repay outstanding amounts on our revolving credit facility

“We successfully completed and placed into service Phase 1 of our new CH2 data center, the first purpose-built, enterprise-class data center in downtown Chicago, and our third and final phase of our SV8 development providing over 100,000 NRSF of sellable capacity in two of our top markets,” said Paul Szurek, CoreSite’s President and Chief Executive Officer. “During these uncertain times, the strategic nature of our diverse, network-and-cloud-dense campuses, and the interoperability of our diverse customer ecosystem continue to meet the essential needs of our customers.”

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

1


Sales Activity

CoreSite achieved new and expansion sales of $3.5 million of annualized GAAP rent for the quarter.

“We believe we are well positioned to continue to take advantage of our available capacity more effectively in the marketplace,” said Steve Smith, CoreSite’s Chief Revenue Officer. “Although sales cycles are longer in this economic environment, we continue translating our new capacity into increased sales opportunities as we grow with new and existing customers moving to or expanding high-performance, hybrid-cloud footprints and increasing their data storage and compute in our major metropolitan markets.”

Development Activity

CoreSite continues to execute on its property development pipeline.

Completed Construction

During the second quarter, the Company completed and placed into service CH2 Phase 1 comprised of approximately 55,000 NRSF and SV8 Phase 3 comprised of approximately 52,000 NRSF.

Construction in Progress

As of June 30, 2020, CoreSite had a total of approximately 51,000 NRSF and an incremental 10 megawatts of turn-key data center capacity under construction, as detailed below.

Costs Incurred

Estimated

Estimated

To-Date

Total Costs

Percent

Power

Market

 

Building

 

NRSF

Completion

 

(in millions)

 

(in millions)

Leased

(MW)

Under Construction:

Data center expansion

New York - NY2 Power(1)

NY2, Phase 3

Q3 2020

$

29.5

$

38.8

%

4.0

New development

Los Angeles

LA3, Phase 1

51,376

Q4 2020

94.5

134.0

73.8

6.0

Total under construction

51,376

$

124.0

$

172.8

73.8

%

10.0

(1) In order to meet customer demand and deploy capital efficiently, the NY2 Phase 3 development project was separated into two projects, including (1) a 34,589 NRSF computer room, which was placed into service in Q1 2020, which is being supported with existing building power infrastructure, and (2) a 4MW power infrastructure project expected to be completed in Q3 2020, which will ultimately support the 34,589 NRSF computer room as we lease the space and customers utilize the power and future computer rooms.

CoreSite’s ongoing data center development and operational position includes

othe ability to increase its occupied footprint of Tier 1, purpose-built data centers, both owned or leased, by approximately 2.1 million NRSF, or about 91.5%, including space unoccupied, under construction, pre-construction or held for development, and
oowning (versus leasing) 92.4% of its current and developable 4.3 million data center NRSF, supporting operational control, expansion and long-term expense management

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

2


Balance Sheet and Liquidity

The Company’s balance sheet remains strong, with a ratio of net principal debt to second quarter annualized adjusted EBITDA of 5.0 times. As of the end of the second quarter, CoreSite had $397.6 million of current liquidity, including $2.7 million of cash, $344.9 million of available capacity on its revolving credit facility, and the $50 million of senior notes funded subsequent to quarter end.  The Company’s liquidity provides the ability to fund our business plan well beyond our remaining committed construction costs of $65.6 million related to our 2020 capital investment plans.

Financing

On May 6th, the Company executed a note purchase agreement to issue a 7-year $150 million unsecured private placement of senior notes, at an interest rate of 3.75%. We received $100 million of proceeds at closing and the remaining $50 million of proceeds was funded on July 14th. CoreSite used the proceeds to repay outstanding amounts on its revolving credit facility and for general working capital. The Company ended the quarter with 6% of variable debt and 94% fixed debt.

2020 Guidance

CoreSite is increasing its 2020 Guidance related to net income attributable to common diluted shares from its previous range of $1.74 to $1.84 per share to its new guidance range of $1.81 to $1.91 per share. In addition, CoreSite’s 2020 FFO per share guidance has been increased from its previous range of $5.10 to $5.20 per share to its new guidance range of $5.15 to $5.25 per share. The increase of $0.05 per share at the midpoint, or approximately 1%, is largely driven by interest expense savings resulting from its financing activities earlier this year and lower rates expected through the rest of this year. Other than the changes noted, CoreSite’s 2020 guidance and guidance drivers remain unchanged. CoreSite’s full 2020 guidance can be found in the Company’s second quarter 2020 Supplemental Earnings Information on page 23.

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

3


Upcoming Conferences and Events

CoreSite’s management will participate virtually in the Cowen Communications Infrastructure Summit on August 11th and the KeyBanc Future of Technology Series on August 12th.

Conference Call Details

CoreSite will host its second quarter 2020 earnings call on Thursday, July 30, 2020, at 12:00 p.m. (Eastern Time).  The call will be accessible by dialing 1-877-407-3982 (domestic) or 1-201-493-6780 (international).

A replay will be available after the call until August 6, 2020, and can be accessed dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The passcode for the replay is 13705744.  

The quarterly conference call also will be offered as a simultaneous webcast, accessible by visiting CoreSite.com and clicking on the “Investors” link. An on-line replay will be available for a limited time immediately following the call.

Concurrently with issuing its financial results, the Company will post its second quarter 2020 Supplemental Information on its website at CoreSite.com, under the “Investors” link.

About CoreSite

CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center, cloud and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,350 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 450+ dedicated employees consistently deliver unmatched data center options — all of which leads to a best-in-class customer experience and lasting relationships. For more information, visit www.CoreSite.com.

CoreSite Contact

Kate Ruppe

Investor Relations

303-222-7369
InvestorRelations@CoreSite.com

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© 2020, CoreSite, L.L.C. All Rights Reserved

4


Forward Looking Statements

This earnings release and accompanying supplemental information may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond CoreSite’s control that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the Company’s data centers in certain markets and any adverse developments in local economic conditions or the level of supply of or demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition, including indirect competition from cloud service providers; failure to obtain necessary outside financing; the ability to service existing debt; the failure to qualify or maintain its status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates;  the effects on our business operations, demand for our services and general economic conditions resulting from the spread of the novel coronavirus (“COVID-19”) in our markets, as well as orders, directives and legislative action by local, state and federal governments in response to such spread of COVID-19; and other factors affecting the real estate industry generally. All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in its most recent annual report on Form 10-K, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.

Use of Funds From Operations (“FFO”)

FFO is a supplemental measure of CoreSite’s performance which should be considered along with, but not as an alternative to, net income and cash provided by operating activities as a measure of operating performance. The Company calculates FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“Nareit”). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property and undepreciated land and impairment write-downs of depreciable real estate, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.

CoreSite’s management uses FFO as a supplemental performance measure because, by excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.

CoreSite offers this measure because it recognizes that investors use FFO as a basis to compare its operating performance with that of other REITs. However, the utility of FFO as a measure of the Company’s performance is limited because FFO excludes depreciation and amortization and captures neither the changes in the value of its properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of its properties, all of which have real

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

5


economic effect and could materially impact the Company’s financial condition and results from operations. FFO is a non-GAAP measure and should not be considered a measure of liquidity, an alternative to net income, cash provided by operating activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to pay dividends or make distributions. In addition, CoreSite’s calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from the Company. Investors in CoreSite’s securities should not rely on these measures as a substitute for any GAAP measure, including net income.

Use of Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”)

EBITDAre is calculated in accordance with the standards established by the National Association of Real Estate Investment Trusts (“Nareit”). EBITDAre is defined as earnings before interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. CoreSite calculates adjusted EBITDA by adding its non-cash compensation expense, transaction costs from unsuccessful deals and business combinations and litigation expense to EBITDAre as well as adjusting for the impact of other impairment charges, gains or losses from sales of undepreciated land and gains or losses on early extinguishment of debt. Management uses EBITDAre and adjusted EBITDA as indicators of the Company’s ability to incur and service debt. In addition, CoreSite considers EBITDAre and adjusted EBITDA to be appropriate supplemental measures of its performance because they eliminate depreciation and interest, which permits investors to view income from operations without the impact of non-cash depreciation or the cost of debt. However, because EBITDAre and adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or other recurring cash requirements of the Company’s business, their utilization as a cash flow measurement is limited.

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

6


Consolidated Balance Sheets

(in thousands, except per share data)

  

June 30,

  

December 31,

 

2020

2019

Assets:

Investments in real estate:

Land

$

100,432

$

94,593

Buildings and improvements

2,140,529

1,989,731

2,240,961

2,084,324

Less: Accumulated depreciation and amortization

(792,281)

(720,498)

Net investment in operating properties

1,448,680

1,363,826

Construction in progress

381,145

394,474

Net investments in real estate

1,829,825

1,758,300

Operating lease right-of-use assets, net

171,576

172,976

Cash and cash equivalents

2,686

3,048

Accounts and other receivables, net

22,059

21,008

Lease intangibles, net

3,275

3,939

Goodwill

40,646

40,646

Other assets, net

98,823

101,082

Total assets

$

2,168,890

$

2,100,999

Liabilities and equity:

Liabilities

Debt, net

$

1,615,241

$

1,478,402

Operating lease liabilities

186,636

187,443

Accounts payable and accrued expenses

116,580

123,304

Accrued dividends and distributions

62,227

62,332

Acquired below-market lease contracts, net

2,412

2,511

Unearned revenue, prepaid rent and other liabilities

54,212

33,119

Total liabilities

2,037,308

1,887,111

Stockholders' equity

Common stock, par value $0.01

420

373

Additional paid-in capital

545,814

512,324

Accumulated other comprehensive loss

(23,840)

(6,026)

Distributions in excess of net income

(408,021)

(348,509)

Total stockholders' equity

114,373

158,162

Noncontrolling interests

17,209

55,726

Total equity

131,582

213,888

Total liabilities and equity

$

2,168,890

$

2,100,999

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

7


Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

  

2020

2020

2019

  

2020

  

2019

  

Operating revenues:

 

  

 

 

Data center revenue:(1)

 

Rental, power, and related revenue

$

127,108

$

124,505

$

121,083

$

251,613

$

238,936

 

Interconnection revenue

20,897

20,085

18,776

40,982

37,192

 

Total data center revenue

148,005

144,590

139,859

292,595

276,128

 

Office, light-industrial and other revenue

2,538

2,772

3,047

5,310

5,673

 

Total operating revenues

150,543

147,362

142,906

297,905

281,801

 

 

Operating expenses:

 

Property operating and maintenance

41,037

40,183

38,067

81,220

76,177

 

Real estate taxes and insurance

5,599

6,190

5,988

11,789

12,184

 

Depreciation and amortization

41,779

40,991

36,996

82,770

72,642

 

Sales and marketing

5,837

6,144

5,784

11,981

11,436

 

General and administrative

11,603

11,267

12,282

22,870

22,452

 

Rent

8,995

8,399

7,733

17,394

15,421

 

Total operating expenses

114,850

113,174

106,850

228,024

210,312

 

Operating income

35,693

34,188

36,056

69,881

71,489

 

Interest expense

(10,586)

(11,183)

(10,311)

(21,769)

(19,809)

 

Income before income taxes

25,107

23,005

25,745

48,112

51,680

 

Income tax expense

(19)

(17)

(2)

(36)

(32)

 

Net income

25,088

22,988

25,743

48,076

51,648

 

Net income attributable to noncontrolling interests

4,417

5,140

6,208

9,557

12,452

 

Net income attributable to common shares

$

20,671

$

17,848

$

19,535

$

38,519

$

39,196

 

 

Net income per share attributable to common shares:

 

Basic

$

0.52

$

0.48

$

0.54

$

1.00

$

1.08

 

Diluted

$

0.52

$

0.48

$

0.53

$

0.99

$

1.07

 

 

Weighted average common shares outstanding:

 

Basic

39,873

37,336

36,463

38,605

36,406

 

Diluted

39,993

37,504

36,619

38,759

36,581

 

(1)Below is a breakout of our contractual data center rental, power, and tenant reimbursements and other revenue:

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2020

2020

2019

2020

  

2019

Rental revenue

$

81,612

$

80,886

$

76,529

$

162,498

$

151,460

Power revenue

41,902

41,278

41,316

83,180

81,818

Tenant reimbursement and other

3,594

2,341

3,238

5,935

5,658

Rental, power, and related revenue

$

127,108

$

124,505

$

121,083

$

251,613

$

238,936

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

8


Reconciliations of Net Income to FFO

(in thousands, except per share data)

Three Months Ended

Six Months Ended

 

  

June 30,

March, 31

June 30,

June 30,

  

June 30,

 

  

2020

2020

2019

2020

  

2019

 

Net income

$

25,088

$

22,988

$

25,743

$

48,076

$

51,648

 

Real estate depreciation and amortization

40,162

39,415

35,573

79,577

69,760

 

FFO available to common shareholders and OP unit holders

$

65,250

$

62,403

$

61,316

$

127,653

$

121,408

 

 

Weighted average common shares outstanding - diluted

39,993

37,504

36,619

38,759

36,581

 

Weighted average OP units outstanding - diluted

8,377

10,796

11,599

9,586

11,600

 

Total weighted average shares and units outstanding - diluted

48,370

48,300

48,218

48,345

48,181

 

 

FFO per common share and OP unit - diluted

$

1.35

$

1.29

$

1.27

$

2.64

$

2.52

 

Reconciliations of Net Income to EBITDAre and Adjusted EBITDA:

(in thousands)

Three Months Ended

Six Months Ended

 

  

June 30,

March, 31

June 30,

June 30,

  

June 30,

 

  

2020

2020

2019

2020

  

2019

 

Net income

$

25,088

$

22,988

$

25,743

$

48,076

$

51,648

 

Adjustments:

 

Interest expense

10,586

11,183

10,311

21,769

19,809

 

Income taxes

19

17

2

36

32

 

Depreciation and amortization

41,779

40,991

36,996

82,770

72,642

 

EBITDAre

$

77,472

$

75,179

$

73,052

$

152,651

$

144,131

 

Non-cash compensation

4,172

3,482

3,617

7,654

7,049

 

Adjusted EBITDA

$

81,644

$

78,661

$

76,669

$

160,305

$

151,180

 

Graphic

© 2020, CoreSite, L.L.C. All Rights Reserved

9


Table of Contents

Graphic


Table of Contents

Table of Contents


Overview

Earnings Release

3

Company Profile

8

Summary of Financial Data

9

Financial Statements

Consolidated Balance Sheets

10

Consolidated Statements of Operations

11

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

12

Operating Portfolio

Operating Properties

13

Leasing Statistics

14

Geographic and Vertical Diversification

16

10 Largest Customers

17

Development

Capital Expenditures and Completed Pre-Stabilized Projects

18

Development Summary

19

Capital Structure

Market Capitalization and Debt Summary

20

Interest Summary and Debt Covenants

21

Components of Net Asset Value

22

2020 Guidance

23

Appendix

24

Quarter Ended June 30, 2020

        
       

2


Table of Contents

CoreSite Reports Second Quarter 2020 Financial Results


-- Completed Construction of CH2 Phase 1, Comprised of 55,000 NRSF --

-- Completed the 52,000 NRSF Expansion at SV8 Phase 3 --

-- Increased Liquidity with $150 Million of Senior Notes –

DENVER, CO – July 30, 2020 – CoreSite Realty Corporation (NYSE:COR) (“the Company”), a premier provider of secure, reliable, high-performance data center, cloud and interconnection solutions across the U.S., today announced financial results for the second quarter ended June 30, 2020.

Q2 2020 Quarterly Highlights

Key Financial Results –
oGrew operating revenues to $150.5 million, an increase of 5.3% year over year and 2.2% sequentially
oDelivered net income of $0.52 per common diluted share, a decrease of $0.01 year over year and an increase of $0.04 sequentially
oGenerated Funds From Operations (“FFO”) of $1.35 per diluted share and unit, an increase of $0.08, or 6.3% year over year and $0.06 sequentially, or 4.7%
oWe declared a dividend of $1.22 per share for the second quarter, which was paid on July 15th  
Lease Commencements
oCommenced 121 new and expansion leases for 45,271 net rentable square feet (“NRSF”), representing $7.9 million of annualized GAAP rent, for an average rate of $175 per square foot
Leasing Activity
oSigned 112 new and expansion leases for 22,191 NRSF and $3.5 million of annualized GAAP rent, for an average rate of $156 per square foot
oRenewed 333 leases for 174,926 NRSF and $25.0 million of annualized GAAP rent, for an average rate of $143 per square foot, reflecting a reduction of 1.5% in cash rent and an increase of 5.5% in GAAP rent, and 1.0% churn

Q2 2020 Notable Events

Delivered new data center capacity of approximately 107,000 NRSF
oCompleted Phase 1 of our new CH2 building, comprised of 55,000 NRSF, and
oPlaced into service our data center expansion at SV8 Phase 3, comprised of 52,000 NRSF
Increased Liquidity with Financing and Funding
oOn May 6th, executed a $150 million financing and received proceeds of $100 million, and
oOn July 14th, received the remaining proceeds of $50 million
oAll proceeds were used to repay outstanding amounts on our revolving credit facility

“We successfully completed and placed into service Phase 1 of our new CH2 data center, the first purpose-built, enterprise-class data center in downtown Chicago, and our third and final phase of our SV8 development providing over 100,000 NRSF of sellable capacity in two of our top markets,” said Paul Szurek, CoreSite’s President and Chief Executive Officer. “During these uncertain times, the strategic nature of our diverse, network-and-cloud-dense campuses, and the interoperability of our diverse customer ecosystem continue to meet the essential needs of our customers.”

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Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

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Quarter Ended June 30, 2020

Sales Activity

CoreSite achieved new and expansion sales of $3.5 million of annualized GAAP rent for the quarter.

“We believe we are well positioned to continue to take advantage of our available capacity more effectively in the marketplace,” said Steve Smith, CoreSite’s Chief Revenue Officer. “Although sales cycles are longer in this economic environment, we continue translating our new capacity into increased sales opportunities as we grow with new and existing customers moving to or expanding high-performance, hybrid-cloud footprints and increasing their data storage and compute in our major metropolitan markets.”

Development Activity

CoreSite continues to execute on its property development pipeline.

Completed Construction

During the second quarter, the Company completed and placed into service CH2 Phase 1 comprised of approximately 55,000 NRSF and SV8 Phase 3 comprised of approximately 52,000 NRSF.

Construction in Progress

As of June 30, 2020, CoreSite had a total of approximately 51,000 NRSF and an incremental 10 megawatts of turn-key data center capacity under construction, as detailed below.

Costs Incurred

Estimated

Estimated

To-Date

Total Costs

Percent

Power

Market

 

Building

 

NRSF

Completion

 

(in millions)

 

(in millions)

Leased

(MW)

Under Construction:

Data center expansion

New York - NY2 Power(1)

NY2, Phase 3

Q3 2020

$

29.5

$

38.8

%

4.0

New development

Los Angeles

LA3, Phase 1

51,376

Q4 2020

94.5

134.0

73.8

6.0

Total under construction

51,376

$

124.0

$

172.8

73.8

%

10.0

(1)In order to meet customer demand and deploy capital efficiently, the NY2 Phase 3 development project was separated into two projects, including (1) a 34,589 NRSF computer room, which was placed into service in Q1 2020, which is being supported with existing building power infrastructure, and (2) a 4MW power infrastructure project expected to be completed in Q3 2020, which will ultimately support the 34,589 NRSF computer room as we lease the space and customers utilize the power and future computer rooms.

CoreSite’s ongoing data center development and operational position includes

othe ability to increase its occupied footprint of Tier 1, purpose-built data centers, both owned or leased, by approximately 2.1 million NRSF, or about 91.5%, including space unoccupied, under construction, pre-construction or held for development, and
oowning (versus leasing) 92.4% of its current and developable 4.3 million data center NRSF, supporting operational control, expansion and long-term expense management

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Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

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Quarter Ended June 30, 2020

Balance Sheet and Liquidity

The Company’s balance sheet remains strong, with a ratio of net principal debt to second quarter annualized adjusted EBITDA of 5.0 times. As of the end of the second quarter, CoreSite had $397.6 million of current liquidity, including $2.7 million of cash, $344.9 million of available capacity on its revolving credit facility, and the $50 million of senior notes funded subsequent to quarter end. The Company’s liquidity provides the ability to fund our business plan well beyond our remaining committed construction costs of $65.6 million related to our 2020 capital investment plans.

Financing

On May 6th, the Company executed a note purchase agreement to issue a 7-year $150 million unsecured private placement of senior notes, at an interest rate of 3.75%. We received $100 million of proceeds at closing and the remaining $50 million of proceeds was funded on July 14th. CoreSite used the proceeds to repay outstanding amounts on its revolving credit facility and for general working capital. The Company ended the quarter with 6% of variable debt and 94% fixed debt.

2020 Guidance

CoreSite is increasing its 2020 Guidance related to net income attributable to common diluted shares from its previous range of $1.74 to $1.84 per share to its new guidance range of $1.81 to $1.91 per share. In addition, CoreSite’s 2020 FFO per share guidance has been increased from its previous range of $5.10 to $5.20 per share to its new guidance range of $5.15 to $5.25 per share. The increase of $0.05 per share at the midpoint, or approximately 1%, is largely driven by interest expense savings resulting from its financing activities earlier this year and lower rates expected through the rest of this year. Other than the changes noted, CoreSite’s 2020 guidance and guidance drivers remain unchanged. CoreSite’s full 2020 guidance can be found in the Company’s second quarter 2020 Supplemental Earnings Information on page 23.

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Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
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Guidance

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Quarter Ended June 30, 2020

Upcoming Conferences and Events

CoreSite’s management will participate virtually in the Cowen Communications Infrastructure Summit on August 11th and the KeyBanc Future of Technology Series on August 12th.

Conference Call Details

CoreSite will host its second quarter 2020 earnings call on Thursday, July 30, 2020, at 12:00 p.m. (Eastern Time). The call will be accessible by dialing 1-877-407-3982 (domestic) or 1-201-493-6780 (international).

A replay will be available after the call until August 6, 2020, and can be accessed dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The passcode for the replay is 13705744.

The quarterly conference call also will be offered as a simultaneous webcast, accessible by visiting CoreSite.com and clicking on the “Investors” link. An on-line replay will be available for a limited time immediately following the call.

Concurrently with issuing its financial results, the Company will post its second quarter 2020 Supplemental Information on its website at CoreSite.com, under the “Investors” link.

About CoreSite

CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center, cloud and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,350 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 450+ dedicated employees consistently deliver unmatched data center options — all of which leads to a best-in-class customer experience and lasting relationships. For more information, visit www.CoreSite.com.

CoreSite Contact

Kate Ruppe

Investor Relations

303-222-7369
InvestorRelations@CoreSite.com

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Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

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Table of Contents

Quarter Ended June 30, 2020

Forward Looking Statements

This earnings release and accompanying supplemental information may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond CoreSite’s control that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the Company’s data centers in certain markets and any adverse developments in local economic conditions or the level of supply of or demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition, including indirect competition from cloud service providers; failure to obtain necessary outside financing; the ability to service existing debt; the failure to qualify or maintain its status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; the effects on our business operations, demand for our services and general economic conditions resulting from the spread of the novel coronavirus (“COVID-19”) in our markets, as well as orders, directives and legislative action by local, state and federal governments in response to such spread of COVID-19; and other factors affecting the real estate industry generally. All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in its most recent annual report on Form 10-K, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.

Quarter Ended June 30, 2020

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

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Table of Contents

Company Profile


Low-latency, secure and reliable access to Amazon, Microsoft, Google, Alibaba Cloud, Oracle and IBM from eight key North American Markets.

Graphic

ONE DATA CENTER PROVIDER. EVERYTHING YOU NEED.

CONNECTIVITY TO NETWORKS AND CLOUDS

THE BEST CUSTOMER EXPERIENCE

Connecting to cloud and network providers within the same data center campus can save thousands of dollars a month in networking and data egress fees while reducing latency

•   Optionality to connect to 775+ cloud, IT and network service providers as business needs evolve

•   28,000+ interconnections

•   Peering and cloud exchanges

•   The CoreSite Interconnect GatewaySM allows customers to rapidly optimize application performance with a 100% managed solution

•   CoreSite’s Inter-Site Connectivity allows SDN connectivity between its markets, enabling access to its national ecosystem

450+ team dedicated to ensuring optimal data center performance and meeting the needs of our 1,350+ customers at all times of day

•   Consistent customer satisfaction demonstrated by customer expansion and retention

•   Dedicated move-in and service representatives, and in-house 24/7 data center operations personnel

•   100% uptime Service Level Agreement with a minimum of six-nines portfolio uptime goal

•   Prepared to support and respond to our customers, employees, and communities during the COVID-19 pandemic

•   Direct access through our customer portal to provision new space, power, cross-connects, and monitor temperature, humidity, and power draw

HIGH GROWTH, HIGH-DENSITY SOLUTIONS

LOW LATENCY, EDGE MARKETS, GLOBAL REACH

Cloud connectivity is important, and so is the ability for a data center campus to grow as business evolves

•   The ability to cost-effectively scale from a single cabinet to a large-scale deployment

•   Data center campuses that connect our buildings via short-run dark fiber to a network/cloud dense campus ecosystem

•   Flexible and high-density solutions

The closer a business is to end users, the easier it is to provide a high quality experience

•   24 operating data centers in eight major metros that provide access to 75% of US businesses within 5 milliseconds

•   National footprint with international cloud and data center partnerships for multi-market requirements

•   Subsea cables for international reach

Quarter Ended June 30, 2020

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

8


Table of Contents

Summary of Financial Data


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

For the period of

Growth %

Growth %

Growth %

Summary of Results

Q2 2020

Q1 2020

Q2 2019

Q/Q

Y/Y

YTD 2020

YTD 2019

Y/Y

GAAP Financial Measures

Operating revenues

$

150,543

$

147,362

$

142,906

2.2

%

5.3

%

$

297,905

$

281,801

5.7

%

Net income

25,088

22,988

25,743

9.1

(2.5)

48,076

51,648

(6.9)

Net income attributable to common shares

20,671

17,848

19,535

15.8

5.8

38,519

39,196

(1.7)

Net income per share attributable to common shares - diluted

$

0.52

$

0.48

$

0.53

8.3

(1.9)

$

0.99

$

1.07

(7.5)

REIT Financial Measures(1)

Funds from operations (FFO) to shares and units

$

65,250

$

62,403

$

61,316

4.6

%

6.4

%

$

127,653

$

121,408

5.1

%

Adjusted funds from operations (AFFO)

65,291

60,110

63,303

8.6

3.1

125,401

123,954

1.2

EBITDAre

77,472

75,179

73,052

3.1

6.1

152,651

144,131

5.9

Adjusted EBITDA

81,644

78,661

76,669

3.8

6.5

160,305

151,180

6.0

FFO per common share and OP unit - diluted

$

1.35

$

1.29

$

1.27

4.7

6.3