CoreSite Reports Third Quarter 2020 Financial Results
-- Signed
-- On-Time Completion of the LA3 Phase 1 Development in Mid-October --
Q3 2020 Quarterly Highlights
-
Key Financial Results –
-
Grew operating revenues to
$154.0 million , an increase of 6.3% year over year and 2.3% sequentially -
Delivered net income of
$0.50 per common diluted share, an increase of$0.03 year over year and a decrease of$0.02 sequentially -
Generated Funds From Operations (“FFO”) of
$1.33 per diluted share and unit, an increase of$0.05 , or 3.9%, year over year and a decrease of$0.02 sequentially, or 1.5% -
Paid a dividend of
$1.22 per share for the third quarter onOctober 15 th
-
Grew operating revenues to
-
Lease Commencements –
-
Commenced 130 new and expansion leases for 33,233 net rentable square feet (“NRSF”), representing
$7.2 million of annualized GAAP rent, for an average rate of$216 per square foot
-
Commenced 130 new and expansion leases for 33,233 net rentable square feet (“NRSF”), representing
-
Leasing Activity –
-
Signed 129 new and expansion leases for 72,207 NRSF and
$12.5 million of annualized GAAP rent, for an average rate of$173 per square foot -
Renewed 309 leases for 135,959 NRSF and
$20.7 million of annualized GAAP rent, for an average rate of$152 per square foot, reflecting an increase of 2.9% in cash rent and 5.1% in GAAP rent, and reported churn of 1.9%
-
Signed 129 new and expansion leases for 72,207 NRSF and
Q3 2020 Notable Events
-
Delivered new data center capacity on its
Los Angeles campus in mid-October- Completed Phase 1 of its new LA3 data center, comprised of 51,000 NRSF and 6 megawatts (“MW”), and
- Commenced its previously announced LA3 pre-lease for 38,000 NRSF and 4.5 MWs
-
Completed the NY2 power infrastructure project
- Added an incremental 4 MWs of power to support existing space at its NY2 data center
-
Published its third annual Corporate Sustainability Report
- The report summarizes our commitment to its customers, colleagues, and communities, and
- Discusses the Company’s holistic focus on a broad range of success measures that take into account all of its stakeholders
“Over the last three years, we have added extensive data center capacity to strategically support organic growth, and continue to translate that capacity into larger and better customer communities in our markets,” said
Sales Activity
CoreSite achieved new and expansion sales of
“The hard work of our team resulted in strategic sales wins for the quarter,” said
“Our strong scale leasing this quarter included one relatively modest hyperscale lease, and we expect to continue to use our increased capacity to compete for scale opportunities with those customers who enrich our ecosystem,” said
As of
Other Financial Results
CoreSite’s
Development Activity
CoreSite continues to execute on its property development pipeline. The Company has delivered a significant amount of capacity year-to-date, which enables it generally to turn up services for its customers quickly.
- During the third quarter, CoreSite completed its NY2 power infrastructure project, which adds an incremental 4 megawatts of power to support existing space and completed computer rooms.
- In mid-October, the Company completed and placed into service LA3 Phase 1, comprising 51,000 NRSF and an incremental 6 MWs of turn-key data center capacity. LA3 Phase 1 was 74% pre-leased, and the customer lease commenced in October.
- The Company has completed and placed into service 193,000 NRSF and 22 MWs of capacity year to date, including the completion of LA3 Phase 1.
CoreSite’s ongoing data center development and operational position includes –
- the 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 91.8%, including space unoccupied, under construction, pre-construction or held for development, and
- owning (versus leasing) 92.4% of its current and developable 4.3 million data center NRSF, supporting operational control, expansion and long-term expense management.
Balance Sheet and Liquidity
The Company’s balance sheet remains strong, with a ratio of net principal debt to third quarter annualized adjusted EBITDA of 5.2 times, or 4.9 times including backlog. As of the end of the third quarter, CoreSite had
Financing
On
2020 Guidance
CoreSite increased its 2020 Guidance related to net income attributable to common diluted shares to its new guidance range of
Upcoming Conferences and Events
CoreSite’s management will participate virtually in the
Conference Call Details
CoreSite will host its third quarter 2020 earnings call on
A replay will be available after the call until
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 third quarter 2020 Supplemental Information on its website at CoreSite.com, under the “Investors” link.
About CoreSite
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
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
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 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
Consolidated Balance Sheets |
||||||||
(in thousands, except per share data) |
||||||||
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
|
|
2020 |
|
2019 |
||||
Assets: |
|
|
|
|
|
|
||
Investments in real estate: |
|
|
|
|
|
|
||
Land |
|
$ |
100,432 |
|
|
$ |
94,593 |
|
Buildings and improvements |
|
|
2,148,435 |
|
|
|
1,989,731 |
|
|
|
|
2,248,867 |
|
|
|
2,084,324 |
|
Less: Accumulated depreciation and amortization |
|
|
(829,055 |
) |
|
|
(720,498 |
) |
Net investment in operating properties |
|
|
1,419,812 |
|
|
|
1,363,826 |
|
Construction in progress |
|
|
415,210 |
|
|
|
394,474 |
|
Net investments in real estate |
|
|
1,835,022 |
|
|
|
1,758,300 |
|
Operating lease right-of-use assets, net |
|
|
166,807 |
|
|
|
172,976 |
|
Cash and cash equivalents |
|
|
2,894 |
|
|
|
3,048 |
|
Accounts and other receivables, net |
|
|
31,388 |
|
|
|
21,008 |
|
Lease intangibles, net |
|
|
2,959 |
|
|
|
3,939 |
|
|
|
|
40,646 |
|
|
|
40,646 |
|
Other assets, net |
|
|
103,262 |
|
|
|
101,082 |
|
Total assets |
|
$ |
2,182,978 |
|
|
$ |
2,100,999 |
|
|
|
|
|
|
|
|
||
Liabilities and equity: |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Debt, net |
|
$ |
1,686,810 |
|
|
$ |
1,478,402 |
|
Operating lease liabilities |
|
|
182,068 |
|
|
|
187,443 |
|
Accounts payable and accrued expenses |
|
|
91,310 |
|
|
|
123,304 |
|
Accrued dividends and distributions |
|
|
62,796 |
|
|
|
62,332 |
|
Acquired below-market lease contracts, net |
|
|
2,362 |
|
|
|
2,511 |
|
Unearned revenue, prepaid rent and other liabilities |
|
|
54,848 |
|
|
|
33,119 |
|
Total liabilities |
|
|
2,080,194 |
|
|
|
1,887,111 |
|
|
|
|
|
|
|
|
||
Stockholders' equity |
|
|
|
|
|
|
||
Common stock, par value |
|
|
422 |
|
|
|
373 |
|
Additional paid-in capital |
|
|
551,227 |
|
|
|
512,324 |
|
Accumulated other comprehensive loss |
|
|
(22,355 |
) |
|
|
(6,026 |
) |
Distributions in excess of net income |
|
|
(439,028 |
) |
|
|
(348,509 |
) |
Total stockholders' equity |
|
|
90,266 |
|
|
|
158,162 |
|
Noncontrolling interests |
|
|
12,518 |
|
|
|
55,726 |
|
Total equity |
|
|
102,784 |
|
|
|
213,888 |
|
Total liabilities and equity |
|
$ |
2,182,978 |
|
|
$ |
2,100,999 |
|
Consolidated Statements of Operations |
|||||||||||||||||||||
(in thousands, except per share data) |
|||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
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|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
2020 |
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
||||||||||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Data center revenue:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Rental, power, and related revenue |
|
$ |
130,300 |
|
|
$ |
127,108 |
|
|
$ |
122,598 |
|
|
|
$ |
381,913 |
|
|
$ |
361,534 |
|
Interconnection revenue |
|
|
21,144 |
|
|
|
20,897 |
|
|
|
19,082 |
|
|
|
|
62,126 |
|
|
|
56,274 |
|
Total data center revenue |
|
|
151,444 |
|
|
|
148,005 |
|
|
|
141,680 |
|
|
|
|
444,039 |
|
|
|
417,808 |
|
Office, light-industrial and other revenue |
|
|
2,537 |
|
|
|
2,538 |
|
|
|
3,211 |
|
|
|
|
7,847 |
|
|
|
8,884 |
|
Total operating revenues |
|
|
153,981 |
|
|
|
150,543 |
|
|
|
144,891 |
|
|
|
|
451,886 |
|
|
|
426,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Property operating and maintenance |
|
|
44,986 |
|
|
|
41,037 |
|
|
|
41,251 |
|
|
|
|
126,206 |
|
|
|
117,428 |
|
Real estate taxes and insurance |
|
|
5,989 |
|
|
|
5,599 |
|
|
|
4,973 |
|
|
|
|
17,778 |
|
|
|
17,157 |
|
Depreciation and amortization |
|
|
41,759 |
|
|
|
41,779 |
|
|
|
40,546 |
|
|
|
|
124,529 |
|
|
|
113,188 |
|
Sales and marketing |
|
|
5,901 |
|
|
|
5,837 |
|
|
|
5,476 |
|
|
|
|
17,882 |
|
|
|
16,912 |
|
General and administrative |
|
|
10,854 |
|
|
|
11,603 |
|
|
|
10,671 |
|
|
|
|
33,724 |
|
|
|
33,123 |
|
Rent |
|
|
8,966 |
|
|
|
8,995 |
|
|
|
8,331 |
|
|
|
|
26,360 |
|
|
|
23,752 |
|
Total operating expenses |
|
|
118,455 |
|
|
|
114,850 |
|
|
|
111,248 |
|
|
|
|
346,479 |
|
|
|
321,560 |
|
Operating income |
|
|
35,526 |
|
|
|
35,693 |
|
|
|
33,643 |
|
|
|
|
105,407 |
|
|
|
105,132 |
|
Interest expense |
|
|
(11,384 |
) |
|
|
(10,586 |
) |
|
|
(10,986 |
) |
|
|
|
(33,153 |
) |
|
|
(30,795 |
) |
Income before income taxes |
|
|
24,142 |
|
|
|
25,107 |
|
|
|
22,657 |
|
|
|
|
72,254 |
|
|
|
74,337 |
|
Income tax expense |
|
|
(10 |
) |
|
|
(19 |
) |
|
|
(13 |
) |
|
|
|
(46 |
) |
|
|
(45 |
) |
Net income |
|
|
24,132 |
|
|
|
25,088 |
|
|
|
22,644 |
|
|
|
|
72,208 |
|
|
|
74,292 |
|
Net income attributable to noncontrolling interests |
|
|
3,000 |
|
|
|
4,417 |
|
|
|
5,194 |
|
|
|
|
12,557 |
|
|
|
17,646 |
|
Net income attributable to common shares |
|
$ |
21,132 |
|
|
$ |
20,671 |
|
|
$ |
17,450 |
|
|
|
$ |
59,651 |
|
|
$ |
56,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income per share attributable to common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic |
|
$ |
0.50 |
|
|
$ |
0.52 |
|
|
$ |
0.47 |
|
|
|
$ |
1.50 |
|
|
$ |
1.55 |
|
Diluted |
|
$ |
0.50 |
|
|
$ |
0.52 |
|
|
$ |
0.47 |
|
|
|
$ |
1.49 |
|
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic |
|
|
42,235 |
|
|
|
39,873 |
|
|
|
36,951 |
|
|
|
|
39,823 |
|
|
|
36,590 |
|
Diluted |
|
|
42,404 |
|
|
|
39,993 |
|
|
|
37,132 |
|
|
|
|
39,996 |
|
|
|
36,763 |
(1) Below is a breakout of our contractual data center rental, power, and tenant reimbursements and other revenue: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
2020 |
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|||||
Rental revenue |
|
$ |
82,943 |
|
$ |
81,612 |
|
$ |
77,907 |
|
|
$ |
245,441 |
|
$ |
229,366 |
Power revenue |
|
|
43,112 |
|
|
41,902 |
|
|
41,783 |
|
|
|
126,292 |
|
|
123,602 |
Tenant reimbursement and other |
|
|
4,245 |
|
|
3,594 |
|
|
2,908 |
|
|
|
10,180 |
|
|
8,566 |
Rental, power, and related revenue |
|
$ |
130,300 |
|
$ |
127,108 |
|
$ |
122,598 |
|
|
$ |
381,913 |
|
$ |
361,534 |
Reconciliations of Net Income to FFO |
||||||||||||||||
(in thousands, except per share data) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
2020 |
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|||||
Net income |
|
$ |
24,132 |
|
$ |
25,088 |
|
$ |
22,644 |
|
|
$ |
72,208 |
|
$ |
74,292 |
Real estate depreciation and amortization |
40,136 |
40,162 |
39,092 |
119,713 |
108,852 |
|||||||||||
FFO available to common shareholders and OP unit holders |
|
$ |
64,268 |
|
$ |
65,250 |
|
$ |
61,736 |
|
|
$ |
191,921 |
|
$ |
183,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - diluted |
|
|
42,404 |
|
|
39,993 |
|
|
37,132 |
|
|
|
39,996 |
|
|
36,763 |
Weighted average OP units outstanding - diluted |
|
|
6,030 |
|
|
8,377 |
|
|
11,118 |
|
|
|
8,392 |
|
|
11,437 |
Total weighted average shares and units outstanding - diluted |
|
|
48,434 |
|
|
48,370 |
|
|
48,250 |
|
|
|
48,388 |
|
|
48,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per common share and OP unit - diluted |
|
$ |
1.33 |
|
$ |
1.35 |
|
$ |
1.28 |
|
|
$ |
3.97 |
|
$ |
3.80 |
Reconciliations of Net Income to EBITDAre and Adjusted EBITDA: |
||||||||||||||||
(in thousands) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
2020 |
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|||||
Net income |
|
$ |
24,132 |
|
$ |
25,088 |
|
$ |
22,644 |
|
|
$ |
72,208 |
|
$ |
74,292 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
11,384 |
|
|
10,586 |
|
|
10,986 |
|
|
|
33,153 |
|
|
30,795 |
Income taxes |
|
|
10 |
|
|
19 |
|
|
13 |
|
|
|
46 |
|
|
45 |
Depreciation and amortization |
|
|
41,759 |
|
|
41,779 |
|
|
40,546 |
|
|
|
124,529 |
|
|
113,188 |
EBITDAre |
|
$ |
77,285 |
|
$ |
77,472 |
|
$ |
74,189 |
|
|
$ |
229,936 |
|
$ |
218,320 |
Non-cash compensation |
|
|
4,156 |
|
|
4,172 |
|
|
3,732 |
|
|
|
11,810 |
|
|
10,781 |
Transaction costs / litigation |
|
|
— |
|
|
— |
|
|
7 |
|
|
|
— |
|
|
7 |
Adjusted EBITDA |
|
$ |
81,441 |
|
$ |
81,644 |
|
$ |
77,928 |
|
|
$ |
241,746 |
|
$ |
229,108 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20201029005106/en/
CoreSite Contact
Investor Relations
303-222-7369
InvestorRelations@CoreSite.com
Source:
CoreSite Contact
Kate Ruppe
Investor Relations
303-222-7369
InvestorRelations@CoreSite.com