DENVER--(BUSINESS WIRE)--Jul. 27, 2017-- CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center and interconnection solutions across the U.S., today announced financial results for the second quarter ended June 30, 2017.
“During the second quarter, we again achieved strong financial results, highlighted by year-over-year revenue growth of 23%, adjusted EBITDA growth of 27% and FFO per share growth of 24%,” said Paul Szurek, CoreSite’s Chief Executive Officer. “Our nearly $12 million in annualized GAAP rent signed in new and expansion sales includes a significant expansion with a Fortune 500 customer in the Los Angeles market and several other key deployments. Our leasing activity demonstrates continuing strong demand for larger scale, higher-density, data-intensive deployments seeking campus interconnection to large and diverse carrier-neutral interconnection nodes. We believe these deployments are building blocks for increasing attractiveness to enterprise and network customers.”
CoreSite reported net income attributable to common shares of $15.6 million, or $0.46 per diluted share, for the three months ended June 30, 2017, compared to $12.0 million, or $0.37 per diluted share for the three months ended June 30, 2016, an increase of 24.3% on a per-share basis. On a sequential-quarter basis, net income attributable to common shares decreased 4.2%, reflecting primarily the financings executed in April 2017, which increased CoreSite’s weighted average interest rate to 3.31% from 3.00% in the first quarter, the aforementioned end of lease payments for a prior customer at SV3, and an acceleration of increased seasonal power costs.
CoreSite reported FFO per diluted share and unit of $1.10 for the three months ended June 30, 2017, an increase of 23.6% compared to $0.89 per diluted share and unit for the three months ended June 30, 2016. On a sequential-quarter basis, FFO per diluted share and unit decreased 2.7%, again reflecting the financing transactions executed in April and the acceleration of increased seasonal power costs mentioned above.
Total operating revenues for the three months ended June 30, 2017, were $117.9 million, a 22.7% increase year over year and an increase of 2.6% on a sequential-quarter basis.
CoreSite executed 119 new and expansion data center leases representing $11.9 million of annualized GAAP rent during the second quarter, comprised of 51,568 NRSF at a weighted-average GAAP rental rate of $208 per NRSF. Second-quarter annualized GAAP rent includes contractual payments related to reserved dedicated expansion space, which is excluded from the GAAP annualized rent per leased NRSF rate.
CoreSite’s second-quarter data center lease commencements totaled 25,712 NRSF at a weighted average GAAP rental rate of $256 per NRSF, which represents $6.6 million of annualized GAAP rent.
CoreSite’s renewal leases signed in the second quarter totaled $12.9 million in annualized GAAP rent, comprised of 83,097 NRSF at a weighted-average GAAP rental rate of $156 per NRSF, reflecting a 2.6% increase in rent on a cash basis and a 6.5% increase on a GAAP basis. The second-quarter rental churn rate was 2.6%, which includes 170 basis points of churn related to CoreSite’s original full-building customer at SV3, as previously disclosed.
Development and Acquisition Activity
As of June 30, 2017, CoreSite had a total of 161,846 square feet of turn-key data center capacity under construction and had spent $31.3 million of the estimated $121.9 million required to complete the projects, which consisted of the following.
Reston – CoreSite had 24,922 square feet of turn-key data center capacity under construction at VA3 (Phase 1A). As of June 30, 2017, CoreSite had incurred $5.9 million of the estimated $22.3 million required to complete this phase of the project, and expects to complete development in the fourth quarter of 2017. During the second quarter, CoreSite also had 3,087 square feet of turn-key data center capacity under construction at VA1. CoreSite expects to spend $1.7 million to complete this expansion and expects to complete construction in the third quarter of 2017. In the third quarter of 2017, CoreSite expects to begin construction of a 58,000 square foot turn-key data center building, and a related infrastructure building to serve the entire VA3 campus, which collectively are expected to cost $85 million and be completed in mid-2018.
Washington, D.C.– CoreSite had 24,563 square feet of turn-key data center capacity under construction at DC2. As of the end of the second quarter, CoreSite had spent $1.8 million of the estimated $17.4 million required to complete the project, and expects to complete development in the first quarter of 2018.
Boston – CoreSite had 13,735 square feet of turn-key data center capacity under construction at BO1. As of June 30, 2017, CoreSite had incurred $2.6 million of the estimated $7.8 million required to complete this expansion and expects to complete construction in the fourth quarter of 2017.
Denver– CoreSite had 8,276 square feet of turn-key data center capacity under construction at DE1, which capacity was 35.2% pre-leased. As of June 30, 2017, CoreSite had incurred $9.5 million of the estimated $12.5 million required to complete this expansion and expects to complete construction in the third quarter of 2017.
Los Angeles – CoreSite had 47,338 square feet of turn-key data center capacity under construction at LA2, which capacity was 62.3% pre-leased. As of June 30, 2017, CoreSite had incurred $11.3 million of the estimated $45.2 million required to complete the expansion and expects to complete construction in the first quarter of 2018. In addition, CoreSite commenced construction on an incremental 39,925 square feet of turn-key data center capacity at LA2, and expects to spend $15.0 million to complete this expansion in the first quarter of 2018.
Balance Sheet and Liquidity
As of June 30, 2017, CoreSite had net principal debt outstanding of $752.7 million, correlating to 2.9 times second-quarter annualized adjusted EBITDA, and net principal debt and preferred stock outstanding of $867.7 million, correlating to 3.3 times second-quarter annualized adjusted EBITDA.
As of the end of the second quarter, CoreSite had $367.9 million of total liquidity consisting of available cash and capacity on its revolving credit facility.
On May 30, 2017, CoreSite announced a $0.10, or 12.5%, increase in its quarterly dividend to $0.90 per share of common stock and common stock equivalents for the second quarter of 2017. The increased dividend reflects an annualized dividend rate of $3.60 per share, compared to the prior annualized dividend rate of $3.20 per share. The second-quarter dividend was paid on July 17, 2017, to shareholders of record on June 30, 2017.
CoreSite also announced on May 30, 2017, a dividend of $0.4531 per share of Series A preferred stock for the period April 15, 2017, to July 14, 2017. The preferred dividend was paid on July 17, 2017, to shareholders of record on June 30, 2017.
CoreSite is increasing its 2017 guidance of net income attributable to common shares to a range of $1.78 to $1.86 per diluted share from the previous range of $1.73 to $1.83 per diluted share. In addition, CoreSite is increasing its guidance of FFO per diluted share and unit to a range of $4.39 to $4.47 from the previous range of $4.35 to $4.45, with the difference between net income and FFO being real estate depreciation and amortization.
This outlook is based on current economic conditions, internal assumptions about CoreSite’s customer base, and the supply and demand dynamics of the markets in which CoreSite operates. The guidance does not include the impact of any future financing, investment or disposition activities, beyond what has already been disclosed.
Upcoming Conferences and Events
CoreSite will participate in the Cowen and Company Communications Infrastructure Summit on August 8th in Boulder, Colorado; the Oppenheimer 20th Annual Technology, Internet & Communications Conference on August 8th in Boston, Massachusetts; and the Bank of America Merrill Lynch 2017 Global Real Estate Conference on September 12th in New York, New York.
Conference Call Details
CoreSite will host a conference call on July 27, 2017, at 12:00 p.m., Eastern Time (10:00 a.m., Mountain Time), to discuss its financial results, current business trends and market conditions.
The call will be accessible by dialing +1-877-407-3982 (domestic) or +1-201-493-6780 (international). A replay will be available until May 11, 2017, and can be accessed shortly after the call by dialing + 1-844-512-2921 (domestic) or + 1-412-317-6671 (international). The passcode for the replay is 13664432.
Interested parties may also listen to a simultaneous webcast of the conference call by logging on to CoreSite’s website at www.CoreSite.com and clicking on the “Investors” link. The on-line replay will be available for a limited time beginning immediately following the call.
CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,200 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 430+ 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.
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 ability to service existing debt; 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.