CoreSite Reports Third Quarter 2012 Results Business Wire DENVER -- November 01, 2012 CoreSite Realty Corporation (NYSE: COR), a national provider of powerful, network-rich data centers, today announced financial results for the third quarter ended September 30, 2012. Quarterly Highlights *Reported third-quarter funds from operations (“FFO”) of $0.40 per diluted share and unit, representing an 8.1% increase over the prior quarter and a 14.3% increase over the prior-year quarter *Reported third-quarter revenue of $53.8 million, representing a 6.2% increase over the prior quarter and a 21.2% increase over the prior-year quarter *Executed new and expansion data center leases representing $2.0 million of annualized GAAP rent with a weighted-average GAAP rental rate of $177 per net rentable square foot (“NRSF”) *Achieved a 91.8% retention ratio with 4.0% rent growth on signed renewals on a cash basis and 9.1% on a GAAP basis *Commenced 39,991 net rentable square feet of new and expansion leasing, with GAAP annualized rent of $146 per square foot *Obtained entitlements to expand at our Reston, Virginia, facility Tom Ray, CoreSite’s Chief Executive Officer, commented, “Our third-quarter results reflect solid top and bottom-line growth, continued margin expansion and strong lease commencements. New and expansion bookings were below our trailing average, driven by an absence of bookings exceeding 250 kilowatts and a temporary reduction of sales staff as we transformed to a vertical selling model. During the quarter we also made substantial progress on a new development opportunity, an expansion to our existing facility in Reston, Virginia. “Important in the quarter were the steps we made in our transition from a local to a vertical sales model,” Mr. Ray continued. “While implementing some of these changes was difficult, we believe that we will see a more rapid pace of growth moving forward due to this realignment. As a key component of this transition, we are pleased to welcome Chris Ancell to our executive team as Senior Vice President of Sales and Sales Engineering, as previously announced. Chris is already making progress in re-building his sales team and has integrated seamlessly with our senior leadership team. As we look ahead, we’re excited about the new people we have in place and the rewards we are already seeing from our strategy. We believe that those rewards will begin to show up clearly in our future sales results.” Financial Results CoreSite reported FFO of $18.6 million for the three months ended September 30, 2012, an increase of 7.8% on a sequential quarter basis and a 16.5% increase over the same quarter of the prior year. On a per diluted share and unit basis, FFO was $0.40 for the three months ended September 30, 2012, as compared to $0.35 per diluted share and unit for the three months ended September 30, 2011. Total operating revenue for the three months ended September 30, 2012, was $53.8 million, a 6.2% increase on a sequential-quarter basis and a 21.2% increase over the same quarter of the prior year. The company reported net income for the three months ended September 30, 2012, of $2.9 million and net income attributable to common shares of $1.3 million, or $0.06 per diluted share. Sales Activity CoreSite executed new and expansion data center leases representing $2.0 million of annualized GAAP rent during the quarter, comprised of 11,387 NRSF at a weighted average GAAP rate of $177 per NRSF and a weighted average lease term of 34 months. During the third quarter, data center lease commencements totaled 39,991 NRSF at a weighted average GAAP rental rate of $146 per NRSF, which represents $5.9 million of annualized GAAP rent. Renewal leases totaling 18,332 NRSF commenced in the third quarter at a weighted average GAAP rate of $164 per NRSF, reflecting a 4.0% increase in rent on a cash basis and a 9.1% increase on a GAAP basis. The company’s rent-retention ratio for the third quarter was 91.8%. Development, Redevelopment and Acquisition Activity At September 30, 2012, the company had 70,840 NRSF of data center space under construction. This total is comprised of 50,600 NRSF in Santa Clara, representing the final phase of construction at CoreSite’s building at 2972 Stender Way, and 20,240 NRSF in Chicago. Of the estimated $49.4 million required to complete the current Santa Clara and Chicago projects, the company had incurred costs of $32.2 million through September 30, 2012. Including the space currently under construction or in preconstruction at September 30, 2012, as well as currently operating space targeted for future redevelopment, CoreSite owns land and buildings sufficient to develop or redevelop 1,006,784 square feet of data center space, comprised of (1) 70,840 NRSF of data center space currently under construction, (2) 390,694 NRSF of office and industrial space currently available for redevelopment, and (3) 545,250 NRSF of new data center space available for development in Reston, Virginia, and on land that CoreSite currently owns at its Coronado-Stender business park. During the third quarter, CoreSite took steps to expand its platform by advancing expansion capability in Reston, Virginia. The company received entitlements to expand its facility in Reston, Virginia, by approximately 200,000 useable square feet, comprised of data center, supporting infrastructure and general building support space. CoreSite plans to commence construction on this project in the first half of 2013. The company estimates that construction costs to complete the first phase of development will total $60.0 million and anticipates delivering salable capacity by the beginning of 2014. Balance Sheet and Liquidity As of September 30, 2012, CoreSite had $154.4 million of total long-term debt equal to 11.0% of total enterprise value and equal to 1.6x annualized adjusted EBITDA for the quarter ended September 30, 2012. CoreSite exercised its option to extend the maturity of the loan on its 55 S. Market property to October 9, 2014, and has no further debt maturities until 2014 assuming other extension options are exercised. At quarter end, the company had $13.4 million of cash available on its balance sheet and $131.1 million of available capacity under its revolving credit facility. Dividend On September 10, 2012, the company announced a dividend of $0.18 per share of common stock and common stock equivalents for the third quarter of 2012. The dividend was paid on October 15, 2012, to shareholders of record on September 28, 2012. 2012 Guidance The company is increasing and tightening its 2012 guidance of FFO per diluted share and unit to a range of $1.50 to $1.54 from its prior range of $1.42 to $1.52. This outlook is predicated on current economic conditions, internal assumptions about its customer base, and the supply and demand dynamics of the markets in which it operates. Further, the company’s guidance does not include the impact of any additional acquisitions or capital markets transactions that may become available. In addition, the company’s estimate of the net income attributable to common shares is $0.17 to $0.21 per diluted share with the difference between FFO and net income being real estate depreciation and amortization. Upcoming Conferences and Events CoreSite will participate in NAREIT’s REITWorld conference from November 13 through November 14 at the Manchester Grand Hyatt in San Diego, CA. Conference Call Details The company will host a conference call November 1 at 12:00 p.m. (Eastern Time) to discuss its financial results, current business trends and market conditions. The call can be accessed live over the phone by dialing 877-941-1429 for domestic callers or 480-629-9857 for international callers. A replay will be available shortly after the call and can be accessed by dialing 877-870-5176 for domestic callers, or for international callers, 858-384-5517. The passcode for the replay is 4573751. The replay will be available until November 8, 2012. Interested parties may also listen to a simultaneous webcast of the conference call by logging on to the company’s website at www.CoreSite.com and clicking on the “Investors” tab. The on-line replay will be available for a limited time beginning immediately following the call. About CoreSite CoreSite Realty Corporation (NYSE: COR) is a national provider of data center products and interconnection services. More than 750 customers, such as Global 1000 enterprises, communications providers, cloud and content companies, financial firms, media and entertainment, healthcare, and government agencies choose CoreSite for the confidence that comes with customer-focused data center products, service and support systems, and scalability. CoreSite’s network centric computing platform is a business catalyst, featuring the Any2 Internet exchange and network ecosystems, which include access to 225+ carriers and service providers and a growing mesh of more than 15,000 interconnections. The company features a diverse colocation offering from individual cabinets to custom cages and private suites, with 14 data center locations in nine major U.S. markets. For more information, visit www.CoreSite.com. Forward Looking Statements This earnings release and accompanying supplemental information may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond CoreSite’s control, that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition; the company’s failure to obtain necessary outside financing; the company’s failure to qualify or maintain its status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; and other factors affecting the real estate industry generally. All forward-looking statements reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the company’s most recent annual report on Form 10-K, and other risks described in documents subsequently filed by the company from time to time with the Securities and Exchange Commission. Consolidated Balance Sheet (in thousands, except per share data) September 30, December 31, 2012 2011 Assets: Investments in real estate: Land $ 85,868 $ 84,738 Building and building improvements 573,012 499,717 Leasehold improvements 84,133 81,057 743,013 665,512 Less: Accumulated depreciation and (93,721 ) (64,428 ) amortization Net investment in operating properties 649,292 601,084 Construction in progress 51,565 73,084 Net investments in real estate 700,857 674,168 Cash and cash equivalents 13,421 6,628 Restricted cash 316 9,291 Accounts and other receivables, net 10,071 6,562 Lease intangibles, net 23,359 36,643 Goodwill 41,191 41,191 Other assets 38,187 33,743 Total assets $ 827,402 $ 808,226 Liabilities and equity: Liabilities Revolving credit facility $ 62,750 $ 5,000 Mortgage loans payable 91,615 116,864 Accounts payable and accrued expenses 44,291 38,822 Deferred rent payable 4,198 3,535 Acquired below-market lease contracts, net 9,171 11,872 Prepaid rent and other liabilities 9,049 11,946 Total liabilities 221,074 188,039 Stockholders' equity Common stock, par value $0.01 206 204 Additional paid-in capital 261,138 256,183 Accumulated other comprehensive income (loss) (4 ) (34 ) Accumulated deficit (32,121 ) (23,545 ) Total stockholders' equity 229,219 232,808 Noncontrolling interests 377,109 387,379 Total equity 606,328 620,187 Total liabilities and equity $ 827,402 $ 808,226 Consolidated Statement of Operations (in thousands, except share and per share data) Three Months Ended: September 30, June 30, March 31, December 31, September 30, 2012 2012 2012 2011 2011 Operating revenues: Rental revenue $ 31,461 $ 30,464 $ 29,493 $ 29,064 $ 27,616 Power revenue 14,204 12,910 12,330 11,411 11,450 Tenant 1,446 1,394 1,296 1,767 1,432 reimbursement Other revenue 6,651 5,868 4,165 3,787 3,869 Total operating 53,762 50,636 47,284 46,029 44,367 revenues Operating expenses: Property operating and 16,360 15,274 14,395 15,063 14,133 maintenance Real estate taxes and 2,158 2,132 2,014 2,064 2,163 insurance Depreciation and 16,583 15,947 15,461 15,743 16,091 amortization Sales and 2,231 2,581 2,129 1,619 1,315 marketing General and 6,389 6,036 6,352 5,880 4,747 administrative Rent 4,689 4,691 4,577 4,588 4,601 Transaction 293 161 122 - 192 costs Total operating 48,703 46,822 45,050 44,957 43,242 expenses Operating 5,059 3,814 2,234 1,072 1,125 income Gain on early extinguishment - - - - (10 ) of debt Interest 5 5 2 2 9 income Interest (1,595 ) (1,309 ) (1,018 ) (838 ) (916 ) expense Income before 3,469 2,510 1,218 236 208 income taxes Income tax (expense) (522 ) (662 ) 125 226 55 benefit Net income 2,947 1,848 1,343 462 263 Net income attributable to 1,627 1,022 743 283 151 noncontrolling interests Net income attributable $ 1,320 $ 826 $ 600 $ 179 $ 112 to common shares Net income per share attributable to common shares: Basic $ 0.06 $ 0.04 $ 0.03 $ 0.01 $ 0.01 Diluted $ 0.06 $ 0.04 $ 0.03 $ 0.01 $ 0.01 Weighted average common shares outstanding: Basic 20,554,893 20,532,930 20,455,875 19,988,150 19,494,703 Diluted 21,027,635 20,914,686 20,694,855 20,082,003 19,587,961 Reconciliation of Net Income to Funds From Operations (FFO) (in thousands, except per share data) Three Months Ended: September June 30, March 31, December 31, September 30, 2012 2012 2011 30, 2012 2011 Net income $ 2,947 $ 1,848 $ 1,343 $ 462 $ 263 Adjustments: Real estate depreciation 15,689 15,437 15,008 15,307 15,738 and amortization FFO available to common $ 18,636 $ 17,285 $ 16,351 $ 15,769 $ 16,001 shareholders and OP unitholders Weighted average common shares and 46,374,440 46,260,783 46,039,937 45,862,220 45,822,653 OP units outstanding - diluted FFO per common share $ 0.40 $ 0.37 $ 0.36 $ 0.34 $ 0.35 and OP unit - diluted CoreSite Realty Corporation considers FFO to be a supplemental measure of performance which should be considered along with, but not as an alternative to, net income and cash provided by operating activities as a measure of operating performance and liquidity. The company calculates FFO in accordance with the standards established by NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property 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. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. The company offers this measure because management recognizes that FFO will be used by investors as a basis to compare operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the 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 the properties, all of which have real economic effect and could materially impact financial condition and results from operations, the utility of FFO as a measure of performance is limited. FFO is a non-GAAP measure and should not be considered a measure of liquidity, an alternative to net income, cash provided by operating activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund cash needs, including the ability to pay dividends or make distributions. In addition, the company’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. Investors in the company’s securities should not rely on these measures as a substitute for any GAAP measure, including net income. Reconciliation of Net Income to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (in thousands, except per share data) Three Months Ended: September June 30, March 31, December September 30, 2012 2012 31, 30, 2012 2011 2011 Net income $ 2,947 $ 1,848 $ 1,343 $ 462 $ 263 Adjustments: Interest expense, net of 1,590 1,304 1,016 836 907 interest income Income taxes 522 662 (125 ) (226 ) (55 ) Depreciation and 16,583 15,947 15,461 15,743 16,091 amortization EBITDA $ 21,642 $ 19,761 $ 17,695 $ 16,815 $ 17,206 Non-cash 1,556 1,779 747 693 879 compensation Gain on early extinguishment - - - - 10 of debt Transaction costs / litigation 293 161 1,572 - 192 settlement expenses Adjusted EBITDA $ 23,491 $ 21,701 $ 20,014 $ 17,508 $ 18,287 EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The company calculates adjusted EBITDA by adding non-cash compensation expense and transaction costs to EBITDA as well as adjusting for the impact of gains or losses on early extinguishment of debt. Management uses EBITDA and adjusted EBITDA as indicators of the company’s ability to incur and service debt. In addition, management considers EBITDA and adjusted EBITDA to be appropriate supplemental measures of the company’s performance because they eliminate depreciation and interest, which permits investors to view income from operations without the impact of non-cash depreciation or the cost of debt. However, because EBITDA and adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utilization as a cash flow measurement is limited. Contact: CoreSite Investor Relations Contact +1 303-222-7276 InvestorRelations@CoreSite.com or CoreSite Media Contact Jeannie Zaemes, CoreSite Marketing Senior Director +1-720-446-2006 or +1-866-777-CORE Jeannie.Zaemes@CoreSite.com
CoreSite Reports Third Quarter 2012 Results
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