EX-99.2 3 ex-99d2.htm EX-99.2 cor_EX99-2

 

 

 

Picture 22

 

 

 

 

Picture 2

SECURE, RELIABLE, HIGH-PERFORMANCE DATA CENTER SOLUTIONS

 

®2018 CoreSite Realty Corporation, All Rights Reserved

 

 

 

 

 

 

Quarter Ended September 30, 2018

 

2

 

 

CoreSite Reports Third-Quarter 2018 Financial Results Reflecting Revenue Growth of 13.1% Year over Year

DENVER, CO – October 25, 2018

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 third quarter ended September 30, 2018. 

 

Quarterly Highlights

·

Third-quarter total operating revenues were $139.2 million, a 13.1% increase year over year

·

Third-quarter net income per diluted share was $0.52, a 13.0% increase year over year

·

Third-quarter funds from operations (“FFO”) was $1.25 per diluted share and unit, a 13.6% increase year over year

·

Commenced 36,576 net rentable square feet (NRSF) of new and expansion leases representing $5.9 million of annualized GAAP rent at an average rate of $160 per square foot

·

Renewed leases with annualized GAAP rent of $16.2 million, with rent growth of 3.2% on a cash basis and 5.8% on a GAAP basis, and recorded rental churn of 2.5% in the third quarter

·

Executed 120 new and expansion data center leases for 31,330 NRSF, representing $6.1 million of net annualized GAAP rent at an average rate of $193 per square foot

 

“We continue to execute our core business strategy focused on high-value customer deployments, which favor direct interconnection to networks and cloud on-ramps. We are expanding our customer ecosystem and benefiting from strong organic growth,” said Paul Szurek, CoreSite’s Chief Executive Officer. “Our core retail colocation business continued its consistent leasing performance at good pricing, acquiring valuable new logos and expanding with key strategic customers and we made good progress on construction and development activities which will strengthen our scale leasing to edge deployments over the next eighteen months.”

Financial Results

CoreSite’s net income attributable to common shares was $18.6 million, or $0.52 per diluted share, for the three months ended September 30, 2018, compared to $15.8 million, or $0.46 per diluted share, for the three months ended September 30, 2017. Net income per diluted share decreased 8.8% on a sequential-quarter basis, primarily reflecting seasonally higher property operating and power expenses and depreciation and amortization expense.

CoreSite’s FFO per diluted share and unit was $1.25 for the three months ended September 30, 2018, an increase of 13.6% compared to $1.10 per diluted share and unit for the three months ended September 30, 2017. FFO per diluted share and unit decreased 2.3% on a sequential-quarter basis, again reflecting the seasonally higher property operating and power expenses mentioned above.

Total operating revenues for the three months ended September 30, 2018, were $139.2 million, a 13.1% increase year over year and an increase of 2.0% on a sequential-quarter basis.

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

3

 

 

Table of Contents

Quarter Ended September 30, 2018

 

 

Commencements and Renewals

CoreSite’s third-quarter data center lease commencements totaled 36,576 NRSF at a weighted average GAAP rental rate of $160 per NRSF, which represents $5.9 million of annualized GAAP rent.

CoreSite’s renewal leases signed in the third quarter totaled $16.2 million in annualized GAAP rent, comprised of 97,682 NRSF at a weighted-average GAAP rental rate of $166 per NRSF, a 3.2% increase in rent on a cash basis and a 5.8% increase on a GAAP basis. The third-quarter rental churn rate was 2.5%.

As a result of renewals and growth in interconnection and power revenues, monthly recurring revenue per cabinet equivalent increased 7.0% over the prior-year period.

Sales Activity

CoreSite executed 120 new and expansion data center leases representing $6.1 million of net annualized GAAP rent during the third quarter, comprised of 31,330 NRSF at a weighted-average GAAP rental rate of $193 per NRSF.

Development Activity

As of September 30, 2018, CoreSite had a total of 160,591 square feet of turn-key data center capacity under construction and had spent $100.7 million of the estimated $281.8 million required to complete the projects, which consist of the following.

Los Angeles – CoreSite had 28,191 square feet of turn-key data center capacity under construction at LA2, which capacity is 100% pre-leased. As of the end of the third quarter, CoreSite had incurred $0.4 million of the estimated $21.0 million required to complete the project and expects to complete construction during the second quarter of 2019.

Reston – CoreSite had 49,837 square feet of turn-key data center capacity under construction at VA3 (Phase 1B), inclusive of 9,837 square feet of an infrastructure building to support this phase of the data center campus. As of the end of the third quarter, CoreSite had incurred $56.7 million of the estimated $110.0 million required to complete VA3 Phase 1B and the related portion of the infrastructure building, and expects to complete construction in the first quarter of 2019.

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 third quarter, CoreSite had spent $16.7 million of the estimated $22.0 million required to complete the project, and expects to complete development in the fourth quarter of 2018.

Santa Clara – CoreSite had 58,000 square feet of turn-key data center capacity under construction which represents the first phase of SV8. As of September 30, 2018, CoreSite had incurred $25.3 million of the estimated $127.0 million required to complete this phase of development and expects to complete construction in the third quarter of 2019.

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

4

 

 

 

Table of Contents

Quarter Ended September 30, 2018

 

 

Balance Sheet and Liquidity

As of September 30, 2018, CoreSite had net principal debt outstanding of $1,074.2 million, correlating to 3.6 times third-quarter annualized adjusted EBITDA.

As of the end of the third quarter, CoreSite had $295.9 million of total liquidity, consisting of available cash and capacity on its revolving credit facility.

Dividend

On August 31, 2018, CoreSite announced a dividend of $1.03 per share of common stock and common stock equivalents for the third quarter of 2018. The third-quarter dividend was paid on October 15, 2018, to shareholders of record on September 28, 2018.

2018 Guidance

CoreSite is maintaining its 2018 guidance of net income attributable to common shares in the range of $2.12 to $2.20 per diluted share. In addition, CoreSite is maintaining its guidance of FFO per diluted share and unit in the range of $5.00 to $5.08, 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 management will participate in Nareit’s REITWorld Annual Conference from November 7-9, 2018, at the San Francisco Marriott Marquis in San Francisco, CA.

Conference Call Details

CoreSite will host a conference call on October 25, 2018, 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 November 8, 2018, 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 13683401.

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.

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

5

 

 

 

Table of Contents

Quarter Ended September 30, 2018

 

 

About CoreSite

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 1,350 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

Jeff Finnin

Chief Financial Officer

+1 303.222.7276
InvestorRelations@CoreSite.com

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

6

 

 

 

Table of Contents

Quarter Ended September 30, 2018

 

 

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.

 

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

7

 

 

 

Company Profile

CoreSite delivers secure, reliable, high-performance data center and cloud and network interconnection solutions to a growing customer ecosystem at 21 operating data centers across eight key North American Markets.

Picture 11

 

 

 

 

 

 

Secure, Reliable and Compliant

  

Scalable

•

100% uptime Service Level Agreement guarantees our reliability commitment to customer applications

 

•

Serving customer requirements from half cabinet to full buildings

•

Physical security standards and rigorous internal security training enable compliance with regulatory requirements

 

•

21 operating data centers in eight of the largest commercial and data center markets in the United States, with four more buildings in various stages of development

•

Consistent compliance across all properties

 

•

Ability to increase occupied data center footprint on land and buildings currently owned and under contract, including current space unoccupied, under construction and held for development, by approximately 2.0 million NRSF, or 91% of currently occupied space

 

•

SOC 1  & SOC 2 Type 2 reviews

 

 

 

•

ISO 27001 certified

 

 

 

•

Payment Card Industry Data Security Standard compliant

 

 

 

•

HIPAA validation

 

 

High-Performance Interconnection

 

High-Quality Customer Experience

 

 

 

 

 

•

Cloud-enabled, network-rich data center buildings and campuses

 

•

450+ professionals with dedicated industry expertise supporting over 1,350 customers

•

Over 450 network service providers supported by robust interconnection services to key public clouds

 

•

Experienced and committed operations, facilities and security personnel

•

27,000+ interconnections

 

•

24/7 customer support and remote hands

•

Enabling enterprises with support ecosystems

 

•

Dedicated implementation resources to ensure a successful onboarding process

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

8

 

 

 

 

Summary of Financial Data

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

June 30,

 

September 30,

 

Growth %

 

September 30,

 

September 30,

 

Growth %

    

Summary of Results

 

2018

 

2018

 

2017

 

Y/Y

 

2018

 

2017

 

Y/Y

    

GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

139,180

 

$

136,447

 

$

123,068

 

13.1

%

 

$

405,246

 

$

355,875

 

13.9

%

 

Net income

 

 

25,020

 

 

27,279

 

 

24,288

 

3.0

 

 

 

80,865

 

 

73,483

 

10.0

 

 

Net income attributable to common shares

 

 

18,600

 

 

19,389

 

 

15,758

 

18.0

 

 

 

58,291

 

 

47,693

 

22.2

 

 

Net income attributable to common shares per share - diluted

 

$

0.52

 

$

0.57

 

$

0.46

 

13.0

 

 

$

1.68

 

$

1.40

 

20.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REIT Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations (FFO) to shares and units

 

$

59,948

 

$

61,524

 

$

52,931

 

13.3

%

 

$

182,470

 

$

159,865

 

14.1

%

 

Adjusted funds from operations (AFFO)

 

 

57,700

 

 

56,777

 

 

48,336

 

19.4

 

 

 

171,522

 

 

140,135

 

22.4

 

 

EBITDAre

 

 

70,737

 

 

71,661

 

 

62,876

 

12.5

 

 

 

212,511

 

 

187,767

 

13.2

 

 

Adjusted EBITDA

 

 

73,792

 

 

74,873

 

 

65,250

 

13.1

 

 

 

221,543

 

 

194,451

 

13.9

 

 

FFO per common share and OP unit - diluted

 

$

1.25

 

$

1.28

 

$

1.10

 

13.6

 

 

$

3.80

 

$

3.34

 

13.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

     

September 30,

     

June 30,

     

March 31,

     

December 31,

     

September 30,

     

 

     

2018

     

2018

     

2018

     

2017

     

2017

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share and OP unit

 

$

1.03

 

$

1.03

 

$

0.98

 

$

0.98

 

$

0.90

 

TTM FFO payout ratio

 

 
82.6

% 

 
82.3

% 

 
82.6

% 

 
81.0

% 

 
77.4

%

TTM AFFO payout ratio(1)

 

 
90.0

% 

 
91.0

% 

 
93.9

% 

 
93.4

% 

 
90.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Portfolio Statistics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating data center properties

 

 

21

 

 

21

 

 

20

 

 

20

 

 

20

 

Stabilized data center NRSF

 

 

2,318,220

 

 

2,241,335

 

 

2,164,778

 

 

2,067,257

 

 

2,025,594

 

Stabilized data center NRSF occupied

 

 

2,141,455

 

 

2,084,852

 

 

2,021,268

 

 

1,951,491

 

 

1,891,014

 

Stabilized data center % occupied

 

 
92.4

% 

 
93.0

% 

 
93.4

% 

 
94.4

% 

 
93.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Turn-Key Data Center ("TKD") Same-Store Statistics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MRR per cabinet equivalent

 

$

1,513

 

$

1,483

 

$

1,458

 

$

1,446

 

$

1,414

 

TKD NRSF % occupied

 

 
90.1

% 

 
89.9

% 

 
89.1

% 

 
88.7

% 

 
85.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Capitalization, Principal Debt & Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total enterprise value

 

$

6,445,083

 

$

6,388,352

 

$

5,832,403

 

$

6,420,488

 

$

6,288,910

 

Total principal debt outstanding

 

$

1,079,500

 

$

1,036,964

 

$

991,500

 

$

944,500

 

$

794,000

 

Total principal debt and preferred stock outstanding(2) 

 

$

1,079,500

 

$

1,036,964

 

$

991,500

 

$

944,500

 

$

909,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Principal Debt to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized adjusted EBITDA

 

 
3.6

x

 
3.5

x

 
3.4

x

 
3.4

x

 
3.0

x

Enterprise value

 

 
16.7

% 

 
16.2

% 

 
16.9

% 

 
14.6

% 

 
12.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Principal Debt & Preferred Stock(2) to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized adjusted EBITDA

 

 
3.6

x

 
3.5

x

 
3.4

x

 
3.4

x

 
3.5

x

Enterprise value

 

 
16.7

% 

 
16.2

% 

 
16.9

% 

 
14.6

% 

 
14.4

%

 

 

(1)

The TTM AFFO payout ratio included $10.0 million, $10.3 million, $13.1 million, $11.9 million, and $3.3 million as of September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017, respectively, of recurring capital expenditures associated with replacing our chiller plant at LA2 which has generated a significant return on investment.

(2)

On December 12, 2017 we redeemed our preferred stock at par value plus accrued dividends.

 

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

9

 

 

 

Consolidated Balance Sheets

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

  

September 30,

  

December 31,

 

 

 

2018

 

2017 (1)

 

Assets:

 

 

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

 

 

Land

 

$

97,636

 

$

97,258

 

Buildings and improvements

 

 

1,701,832

 

 

1,561,056

 

 

 

 

1,799,468

 

 

1,658,314

 

Less: Accumulated depreciation and amortization

 

 

(560,650)

 

 

(473,141)

 

Net investment in operating properties

 

 

1,238,818

 

 

1,185,173

 

Construction in progress

 

 

199,776

 

 

162,903

 

Net investments in real estate

 

 

1,438,594

 

 

1,348,076

 

Operating lease right-of-use assets

 

 

194,732

 

 

92,984

 

Cash and cash equivalents

 

 

5,306

 

 

5,247

 

Accounts and other receivables, net

 

 

24,458

 

 

28,875

 

Lease intangibles, net

 

 

7,578

 

 

6,314

 

Goodwill

 

 

40,646

 

 

40,646

 

Other assets, net

 

 

106,906

 

 

103,501

 

Total assets

 

$

1,818,220

 

$

1,625,643

 

 

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Debt, net

 

$

1,073,479

 

$

939,570

 

Operating lease liabilities

 

 

204,424

 

 

102,912

 

Accounts payable and accrued expenses

 

 

88,232

 

 

77,170

 

Accrued dividends and distributions

 

 

51,840

 

 

48,976

 

Acquired below-market lease contracts, net

 

 

2,954

 

 

3,504

 

Unearned revenue, prepaid rent and other liabilities

 

 

33,666

 

 

34,867

 

Total liabilities

 

 

1,454,595

 

 

1,206,999

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Common stock, par value $0.01

 

 

363

 

 

338

 

Additional paid-in capital

 

 

487,848

 

 

457,495

 

Accumulated other comprehensive income

 

 

1,758

 

 

753

 

Distributions in excess of net income

 

 

(226,184)

 

 

(177,566)

 

Total stockholders' equity

 

 

263,785

 

 

281,020

 

Noncontrolling interests

 

 

99,840

 

 

137,624

 

Total equity

 

 

363,625

 

 

418,644

 

Total liabilities and equity

 

$

1,818,220

 

$

1,625,643

 

 

 

(1)

Adoption of the new lease accounting  standard required that we adjust the consolidated balance sheet as of December 31, 2017, to include the recognition of additional right-of-use assets and lease liabilities for operating leases. See our SEC filings for additional information.

 

 

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

10

 

 

 

Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

 

  

2018

  

2018

  

2017

  

2018

  

2017

  

Operating revenues:

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

Data center revenue:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental, power, and related revenue

 

$

118,590

 

$

116,147

 

$

103,952

 

$

344,745

 

$

300,932

 

Interconnection revenue

 

 

17,701

 

 

17,422

 

 

16,201

 

 

51,683

 

 

46,038

 

Total data center revenue

 

 

136,291

 

 

133,569

 

 

120,153

 

 

396,428

 

 

346,970

 

Office, light-industrial and other revenue

 

 

2,889

 

 

2,878

 

 

2,915

 

 

8,818

 

 

8,905

 

Total operating revenues

 

 

139,180

 

 

136,447

 

 

123,068

 

 

405,246

 

 

355,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

 

41,161

 

 

37,861

 

 

37,091

 

 

112,870

 

 

98,098

 

Real estate taxes and insurance

 

 

4,699

 

 

4,693

 

 

2,622

 

 

14,329

 

 

10,950

 

Depreciation and amortization

 

 

36,264

 

 

35,558

 

 

32,077

 

 

105,598

 

 

96,622

 

Sales and marketing

 

 

5,180

 

 

5,369

 

 

4,643

 

 

15,629

 

 

13,560

 

General and administrative

 

 

10,074

 

 

10,297

 

 

9,759

 

 

29,556

 

 

27,391

 

Rent

 

 

7,329

 

 

6,547

 

 

6,077

 

 

20,276

 

 

17,970

 

Transaction costs

 

 

 —

 

 

19

 

 

 —

 

 

75

 

 

139

 

Total operating expenses

 

 

104,707

 

 

100,344

 

 

92,269

 

 

298,333

 

 

264,730

 

Operating income

 

 

34,473

 

 

36,103

 

 

30,799

 

 

106,913

 

 

91,145

 

Interest expense

 

 

(9,433)

 

 

(8,907)

 

 

(6,447)

 

 

(26,078)

 

 

(17,512)

 

Income before income taxes

 

 

25,040

 

 

27,196

 

 

24,352

 

 

80,835

 

 

73,633

 

Income tax (expense) benefit

 

 

(20)

 

 

83

 

 

(64)

 

 

30

 

 

(150)

 

Net income

 

 

25,020

 

 

27,279

 

 

24,288

 

 

80,865

 

 

73,483

 

Net income attributable to noncontrolling interests

 

 

6,420

 

 

7,890

 

 

6,446

 

 

22,574

 

 

19,537

 

Net income attributable to CoreSite Realty Corporation

 

 

18,600

 

 

19,389

 

 

17,842

 

 

58,291

 

 

53,946

 

Preferred stock dividends

 

 

 —

 

 

 —

 

 

(2,084)

 

 

 —

 

 

(6,253)

 

Net income attributable to common shares

 

$

18,600

 

$

19,389

 

$

15,758

 

$

58,291

 

$

47,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.52

 

$

0.57

 

$

0.47

 

$

1.69

 

$

1.41

 

Diluted

 

$

0.52

 

$

0.57

 

$

0.46

 

$

1.68

 

$

1.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,512,091

 

 

34,049,391

 

 

33,878,881

 

 

34,504,790

 

 

33,758,971

 

Diluted

 

 

35,721,478

 

 

34,220,321

 

 

34,114,169

 

 

34,693,835

 

 

34,033,842

 

 

(1)

During Q3 2018, the Financial Accounting Standards Board (“FASB”) issued updates to the new lease accounting standard. As a result of the updates we have combined data center rental, power, and tenant reimbursements and other revenue into a single line item as shown below: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2018

  

2018

  

2017

 

2018

  

2017

 

Rental revenue

 

$

74,321

 

$

74,143

 

$

66,657

 

$

219,497

 

$

195,761

 

Power revenue

 

 

40,967

 

 

38,986

 

 

35,110

 

 

116,356

 

 

98,381

 

Tenant reimbursement and other

 

 

3,302

 

 

3,018

 

 

2,185

 

 

8,892

 

 

6,790

 

Rental, power, and related revenue

 

$

118,590

 

$

116,147

 

$

103,952

 

$

344,745

 

$

300,932

 

 

 

 

 

 

Ber 30, 2018

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

11

 

 

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

(in thousands, except per share data)

 

Reconciliation of Net Income to FFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

  

September 30,

 

June 30,

 

September 30,

  

September 30,

  

September 30,

 

 

  

2018

 

2018

 

2017

  

2018

  

2017

 

Net income

 

$

25,020

 

$

27,279

 

$

24,288

 

$

80,865

 

$

73,483

 

Real estate depreciation and amortization

 

 

34,928

 

 

34,245

 

 

30,727

 

 

101,605

 

 

92,635

 

FFO

 

$

59,948

 

$

61,524

 

$

55,015

 

$

182,470

 

$

166,118

 

Preferred stock dividends

 

 

 —

 

 

 —

 

 

(2,084)

 

 

 —

 

 

(6,253)

 

FFO available to common shareholders and OP unit holders

 

$

59,948

 

$

61,524

 

$

52,931

 

$

182,470

 

$

159,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

35,721

 

 

34,220

 

 

34,114

 

 

34,694

 

 

34,034

 

Weighted average OP units outstanding - diluted

 

 

12,378

 

 

13,829

 

 

13,838

 

 

13,342

 

 

13,846

 

Total weighted average shares and units outstanding - diluted

 

 

48,099

 

 

48,049

 

 

47,952

 

 

48,036

 

 

47,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

1.25

 

$

1.28

 

$

1.10

 

$

3.80

 

$

3.34

 

 

 

 

 

Reconciliation of FFO to AFFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

  

September 30,

 

June 30,

 

September 30,

  

September 30,

  

September 30,

 

 

  

2018

 

2018

 

2017

  

2018

  

2017

 

FFO available to common shareholders and unit holders

 

$

59,948

 

$

61,524

 

$

52,931

 

$

182,470

 

$

159,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

637

 

 

553

 

 

445

 

 

1,756

 

 

1,231

 

Non-cash compensation

 

 

3,052

 

 

3,186

 

 

2,374

 

 

8,864

 

 

6,545

 

Non-real estate depreciation

 

 

1,336

 

 

1,313

 

 

1,350

 

 

3,993

 

 

3,987

 

Straight-line rent adjustment

 

 

61

 

 

(1,614)

 

 

(777)

 

 

(3,003)

 

 

(3,734)

 

Amortization of above and below market leases

 

 

(155)

 

 

(164)

 

 

(177)

 

 

(494)

 

 

(428)

 

Recurring capital expenditures(1)

 

 

(3,332)

 

 

(3,651)

 

 

(3,219)

 

 

(10,155)

 

 

(12,776)

 

Tenant improvements

 

 

(1,422)

 

 

(1,456)

 

 

(1,252)

 

 

(4,315)

 

 

(5,298)

 

Capitalized leasing costs

 

 

(2,425)

 

 

(2,914)

 

 

(3,339)

 

 

(7,594)

 

 

(9,257)

 

AFFO available to common shareholders and OP unit holders

 

$

57,700

 

$

56,777

 

$

48,336

 

$

171,522

 

$

140,135

 

 

(1) Recurring capital expenditures include $0.2 million and $0.3 million for the three months ended June 30, 2018, and September 30, 2017, respectively, and include $1.4 million and $3.3 million for the nine months ended September 30, 2018, and 2017, respectively, of recurring capital expenditures associated with replacing our chiller plant at LA2 which has generated a significant return on investment.

 

 

 

Reconciliation of Net Income to EBITDAre(1) and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

  

September 30,

 

June 30,

 

September 30,

  

September 30,

  

September 30,

 

 

  

2018

 

2018

 

2017

  

2018

  

2017

 

Net income

 

$

25,020

 

$

27,279

 

$

24,288

 

$

80,865

 

$

73,483

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

9,433

 

 

8,907

 

 

6,447

 

 

26,078

 

 

17,512

 

Income taxes

 

 

20

 

 

(83)

 

 

64

 

 

(30)

 

 

150

 

Depreciation and amortization

 

 

36,264

 

 

35,558

 

 

32,077

 

 

105,598

 

 

96,622

 

EBITDAre

 

$

70,737

 

$

71,661

 

$

62,876

 

$

212,511

 

$

187,767

 

Non-cash compensation

 

 

3,052

 

 

3,186

 

 

2,374

 

 

8,864

 

 

6,545

 

Transaction costs / litigation

 

 

 3

 

 

26

 

 

 —

 

 

168

 

 

139

 

Adjusted EBITDA

 

$

73,792

 

$

74,873

 

$

65,250

 

$

221,543

 

$

194,451

 

 

(1) We have adopted the Nareit definition of EBITDAre, see the appendix for additional information.

 

 

 

 

Tember

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

12

 

 

Operating Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data Center Operating NRSF

 

 

 

 

 

 

 

 

 

Annualized

 

Stabilized

 

Pre-Stabilized

 

Total

 

 

 

Held for

 

 

 

 

 

Rent

 

 

 

Percent

 

 

 

Percent

 

 

 

Percent

 

NRSF Under

 

Development

 

 

 

Market / Facilities

  

($000)(1)

  

Total

  

Occupied(2)

  

Total

  

Occupied(2)

  

Total

  

Occupied(2)

  

Construction

  

NRSF

  

Total NRSF

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco Bay

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SV1

 

$

6,363

 

85,932

 

85.1

% 

 —

 

 —

% 

85,932

 

85.1

% 

 —

 

 —

 

85,932

 

SV2

 

 

8,162

 

76,676

 

91.0

 

 —

 

 —

 

76,676

 

91.0

 

 —

 

 —

 

76,676

 

Santa Clara campus

 

 

75,524

 

615,500

 

98.4

 

 —

 

 —

 

615,500

 

98.4

 

58,000

 

117,000

 

790,500

 

San Francisco Bay Total

 

 

90,049

 

778,108

 

96.2

 

 —

 

 —

 

778,108

 

96.2

 

58,000

 

117,000

 

953,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Wilshire campus

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LA1*

 

 

30,660

 

145,776

 

95.1

 

 —

 

 —

 

145,776

 

95.1

 

 —

 

27,590

 

173,366

 

LA2

 

 

42,439

 

356,774

 

90.7

 

39,925

 

 —

 

396,699

 

81.6

 

28,191

 

 —

 

424,890

 

LA3

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

180,000

 

180,000

 

LA4*

 

 

1,549

 

21,850

 

84.0

 

 —

 

 —

 

21,850

 

84.0

 

 —

 

 —

 

21,850

 

Los Angeles Total(3)

 

 

74,648

 

524,400

 

91.7

 

39,925

 

 —

 

564,325

 

85.2

 

28,191

 

207,590

 

800,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Northern Virginia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VA1

 

 

28,077

 

198,632

 

87.9

 

3,087

 

 —

 

201,719

 

86.6

 

 —

 

 —

 

201,719

 

VA2

 

 

20,134

 

188,446

 

93.7

 

 —

 

 —

 

188,446

 

93.7

 

 —

 

 —

 

188,446

 

VA3

 

 

1,041

 

52,758

 

100.0

 

26,413

 

0.4

 

79,171

 

66.8

 

 —

 

 —

 

79,171

 

DC1*

 

 

3,139

 

22,137

 

75.2

 

 —

 

 —

 

22,137

 

75.2

 

 —

 

 —

 

22,137

 

DC2*

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

24,563

 

 —

 

24,563

 

Reston Campus Expansion(4)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

49,837

 

811,138

 

860,975

 

Northern Virginia Total

 

 

52,391

 

461,973

 

91.1

 

29,500

 

0.4

 

491,473

 

85.6

 

74,400

 

811,138

 

1,377,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NY1*

 

 

5,909

 

48,404

 

81.5

 

 —

 

 —

 

48,404

 

81.5

 

 —

 

 —

 

48,404

 

NY2

 

 

14,237

 

101,742

 

86.8

 

18,121

 

 —

 

119,863

 

73.7

 

 —

 

116,388

 

236,251

 

New York Total

 

 

20,146

 

150,146

 

85.1

 

18,121

 

 —

 

168,267

 

75.9

 

 —

 

116,388

 

284,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CH1

 

 

19,201

 

178,407

 

89.9

 

 —

 

 —

 

178,407

 

89.9

 

 —

 

 —

 

178,407

 

CH2

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

175,000

 

175,000

 

Chicago Total

 

 

19,201

 

178,407

 

89.9

 

 —

 

 —

 

178,407

 

89.9

 

 —

 

175,000

 

353,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boston

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BO1

 

 

19,129

 

180,057

 

97.1

 

13,735

 

16.9

 

193,792

 

91.4

 

 —

 

59,884

 

253,676

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denver

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DE1*

 

 

3,877

 

9,813

 

98.1

 

19,971

 

27.6

 

29,784

 

50.9

 

 —

 

 —

 

29,784

 

DE2*

 

 

469

 

5,140

 

95.1

 

 —

 

 —

 

5,140

 

95.1

 

 —

 

 —

 

5,140

 

Denver Total

 

 

4,346

 

14,953

 

97.1

 

19,971

 

27.6

 

34,924

 

57.4

 

 —

 

 —

 

34,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miami

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MI1

 

 

1,063

 

30,176

 

47.7

 

 —

 

 —

 

30,176

 

47.7

 

 —

 

13,154

 

43,330

 

Total Data Center Facilities

 

$

280,973

 

2,318,220

 

92.4

% 

121,252

 

6.6

% 

2,439,472

 

88.1

% 

160,591

 

1,500,154

 

4,100,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Office & Light-Industrial

 

 

8,219

 

361,575

 

77.9

 

 —

 

 —

 

361,575

 

77.9

 

 —

 

 —

 

361,575

 

Reston Office & Light-Industrial(4)

 

 

1,951

 

136,421

 

100.0

 

 —

 

 —

 

136,421

 

100.0

 

 —

 

(136,421)

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Portfolio

 

$

291,143

 

2,816,216

 

90.9

% 

121,252

 

6.6

% 

2,937,468

 

87.4

% 

160,591

 

1,363,733

 

4,461,792

 

 

* Indicates properties in which we hold a leasehold interest.

(1)

On a gross basis, our total portfolio annualized rent was approximately $297.3 million as of September 30, 2018, which includes $6.2 million in operating expense reimbursements under modified gross and triple-net leases.

(2)

Includes customer leases that have commenced as of September 30, 2018. If all leases signed during the current and prior periods had commenced, the percent occupied would have been as follows:

 

 

 

 

 

 

 

 

 

Percent Leased

    

Stabilized

    

Pre-Stabilized

    

Total

 

Total Data Center Facilities

 

93.4

%  

16.7

%  

89.5

%

Total Portfolio

 

92.2

%  

16.7

%  

89.1

%

 

(3)

On April 20, 2018, we acquired U.S. Colo, a carrier-neutral, network-dense colocation provider, located in Los Angeles, California, for a purchase price of $6.3 million, net of previously accrued legal expense. In connection with the U.S. Colo acquisition, we assumed a leasehold interest of 6,723 NRSF at our existing LA1 facility, which is included as part of the total NRSF at our LA1 operating property. We also assumed a leasehold interest of 21,850 NRSF at a nearby colocation data center facility, which we refer to as LA4. In addition, on June 30, 2018, we expanded our leasehold interest at our LA1 facility by leasing an additional 17,238 NRSF, which we plan to develop into turn-key data center space, and which is currently held for development.

(4)

Included with our Reston Campus Expansion held for development space is 136,421 NRSF which is currently operating as office and light-industrial space.

 

See Appendix for definitions.

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

13

 

 

Leasing Statistics

 

Data Center Leasing Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

 

 

GAAP

 

 

 

 

 

 

 

 

 

Leasing

 

Number

 

Annualized

 

Total

 

Annualized

 

Rental

 

Cash

 

GAAP

 

 

 

Activity

 

of

 

Rent

 

Leased

 

Rent per

 

Churn

 

Rent

 

Rent

 

 

  

Period

  

Leases(1)

  

($000)

  

NRSF

  

Leased NRSF

  

Rate

  

Growth

  

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New / expansion leases commenced

 

YTD 2018

 
401

 

$

28,584

(2)  

152,150

 

$

180

(2)  

 

 

 

 

 

 

 

 

Q3 2018

 
127

 

 

5,869

 

36,576

 

 

160

 

 

 

 

 

 

 

 

 

Q2 2018

 
145

 

 

6,531

 

33,938

 

 

192

 

 

 

 

 

 

 

 

 

Q1 2018

 
129

 

 

16,184

(2)  

81,636

 

 

184

(2)  

 

 

 

 

 

 

 

 

Q4 2017

 
126

 

 

8,219

 

52,221

 

 

157

 

 

 

 

 

 

 

 

 

Q3 2017

 
122

 

 

8,855

 

21,617

 

 

410

(3)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New / expansion leases signed

 

YTD 2018

 
399

 

$

23,476

(2)

125,991

 

$

196

(2)

 

 

 

 

 

 

 

 

Q3 2018

 
120

 

 

6,057

 

31,330

 

 

193

 

 

 

 

 

 

 

 

 

Q2 2018

 
143

 

 

10,352

(2)

65,037

 

 

178

(2)

 

 

 

 

 

 

 

 

Q1 2018

 
136

 

 

7,067

 

29,624

 

 

239

 

 

 

 

 

 

 

 

 

Q4 2017

 
128

 

 

7,219

 

41,521

 

 

174

 

 

 

 

 

 

 

 

 

Q3 2017

 
103

 

 

10,099

 

40,842

 

 

247

(3)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Renewal leases signed

 

YTD 2018

 
831

 

$

54,048

 

344,944

 

$

157

 

5.7

%  

3.9

%  

7.7

%

 

 

Q3 2018

 
300

 

 

16,192

 

97,682

 

 

166

 

2.5

 

3.2

 

5.8

 

 

 

Q2 2018 (4)

 
288

 

 

17,643

 

128,386

 

 

137

 

1.3

 

2.6

 

5.4

 

 

 

Q1 2018

 
243

 

 

20,213

 

118,876

 

 

170

 

1.9

 

5.6

 

11.5

 

 

 

Q4 2017

 
241

 

 

11,156

 

78,577

 

 

142

 

0.5

 

3.5

 

6.2

 

 

 

Q3 2017

 
280

 

 

14,370

 

80,818

 

 

178

 

1.4

 

5.5

 

10.9

 

 

(1)

Number of leases represents each agreement with a customer; a lease agreement could include multiple spaces and a customer could have multiple leases.

(2)

During Q2 2017, we signed a customer lease that commenced in Q1 2018, which included contractual payments to reserve dedicated expansion space. The contractual reservation payments were included within GAAP annualized rent, but were excluded in calculating the GAAP annualized rent per leased NRSF rate. During Q2 2018, the customer exercised its option to expand into the reserved expansion space. The Q2 2018 GAAP annualized rent signed includes only the incremental contractual payments; however, the rent per leased NRSF rate includes the entire GAAP annualized rent amount.

(3)

During Q3 2017, we signed and commenced a highly dense capacity expansion at our Santa Clara campus.

(4)

The previously reported results have been modified to correct  a customer renewal at LA1 which occurred during the third quarter of 2018, but was originally reported during the second quarter of 2018.

 

New / Expansion Leases Signed by Deployment Size by Period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Q3 2018

    

Q2 2018

    

Q1 2018

    

Q4 2017

    

Q3 2017

    

GAAP Annualized Rent ($000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core Retail Colocation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

< 1,000 NRSF

 

$

2,971

 

$

3,912

 

$

2,657

 

$

3,521

 

$

2,180

 

1,000 - 5,000 NRSF

 

 

2,117

 

 

1,825

 

 

1,829

 

 

2,053

 

 

2,001

 

Total Core Retail Colocation

 

$

5,088

 

$

5,737

 

$

4,486

 

$

5,574

 

$

4,181

 

Scale Colocation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

> 5,000 NRSF

 

 

969

 

 

4,615

 

 

2,581

 

 

1,645

 

 

5,918

 

Total GAAP Annualized Rent

 

$

6,057

 

$

10,352

 

$

7,067

 

$

7,219

 

$

10,099

 

 

 

 

 

MRR per Cabinet Equivalent Billed (TKD Same-Store)

Picture 5

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

14

 

 

Leasing Statistics

 

Lease Distribution (total portfolio, including total data center and office and light-industrial “OLI”)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Percentage

 

 

 

 

Percentage

 

 

 

Number

 

Percentage

 

Operating

 

of Total

 

Annualized

 

of Total

 

 

 

of

 

of All

 

NRSF of

 

Operating

 

Rent

 

Annualized

 

NRSF Under Lease

    

Leases

    

Leases

    

Leases

    

NRSF

    

($000)

    

Rent

 

Unoccupied data center

  

 —

  

 —

%  

290,059

  

9.9

%  

$

 —

  

 —

%

Unoccupied OLI

 

 —

 

 —

 

79,896

 

2.7

 

 

 —

 

 —

 

Data center NRSF:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000 or less

  

2,327

  

91.6

 

798,809

  

27.2

 

 

136,978

  

47.1

 

5,001 - 10,000

  

36

  

1.5

 

237,452

  

8.1

 

 

34,987

  

12.0

 

10,001 - 25,000

  

24

  

0.9

 

373,608

  

12.8

 

 

49,688

  

17.1

 

Greater than 25,000

  

 6

  

0.2

 

250,458

  

8.5

 

 

42,322

  

14.5

 

Powered shell

 

16

  

0.6

 

489,086

  

16.6

 

 

16,998

  

5.8

 

OLI

 

132

  

5.2

 

418,100

  

14.2

 

 

10,170

  

3.5

 

Portfolio Total

  

2,541

  

100.0

%  

2,937,468

  

100.0

%  

$

291,143

  

100.0

%

 

 

Lease Expirations (total portfolio, including total data center and office and light-industrial “OLI”)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Annualized

 

 

 

Number

 

Operating

 

Percentage

 

 

 

 

Percentage

 

Annualized

 

Annualized

 

Rent Per

 

 

 

of

 

NRSF of

 

of Total

 

Annualized

 

of Total

 

Rent Per

 

Rent at

 

Leased

 

 

 

Leases

 

Expiring

 

Operating

 

Rent

 

Annualized

 

Leased

 

Expiration

 

NRSF at

 

Year of Lease Expiration

    

Expiring(1)

    

Leases

    

NRSF

    

($000)

    

Rent

    

NRSF

    

($000)(2)

    

Expiration

 

Unoccupied data center

 

 —

 

290,059

 
9.9

% 

$

 —

 

 —

% 

$

 —

 

$

 —

 

$

 —

 

Unoccupied OLI

 

 —

 

79,896

 
2.7

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

2018

 
327

 
168,429

 
5.7

 

 
32,499

 
11.1

 

 
193

 

 
32,300

 

 
192

 

2019

 
1,338

 
609,786

 
20.8

 

 
87,926

 
30.2

 

 
144

 

 
88,949

 

 
146

 

2020

 
327

 
316,881

 
10.8

 

 
50,856

 
17.5

 

 
160

 

 
52,580

 

 
166

 

2021

 
255

 
197,274

 
6.7

 

 
28,524

 
9.8

 

 
145

 

 
31,261

 

 
158

 

2022

 
88

 
216,180

 
7.4

 

 
26,064

 
9.0

 

 
121

 

 
28,759

 

 
133

 

2023 - Thereafter

 
74

 
640,863

 
21.8

 

 
55,104

 
18.9

 

 
86

 

 
71,421

 

 
111

 

OLI (3)

 
132

 
418,100

 
14.2

 

 
10,170

 
3.5

 

 
24

 

 
10,769

 

 
26

 

Portfolio Total / Weighted Average

 

2,541

 
2,937,468

 
100.0

% 

$

291,143

 
100.0

% 

$
113

 

$
316,039

 

$
123

 

 

(1)

Includes leases that upon expiration will automatically be renewed, primarily on a year-to-year basis. Number of leases represents each agreement with a customer; a lease agreement could include multiple spaces and a customer could have multiple leases.

(2)

Represents the final monthly contractual rent under existing customer leases as of September 30, 2018, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes operating expense reimbursements, power revenue and interconnection revenue. Leases expiring during 2018 include annualized rent of $15.0 million associated with lease terms currently on a month-to-month basis.

(3)

The office and light-industrial leases are scheduled to expire as follows:

 

 

 

 

 

 

 

 

 

NRSF of

 

Annualized

 

 

 

Expiring

 

Rent

 

Year

  

Leases

  

($000)

 

2018

 

22,129

 

$

415

 

2019

 

35,211

 

 

979

 

2020

 

69,708

 

 

1,309

 

2021

 

39,062

 

 

1,237

 

2022

 

69,578

 

 

1,222

 

2023 - Thereafter

 

182,412

 

 

5,007

 

Total OLI

 

418,100

 

$

10,170

 

 

 

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

15

 

 

 

Geographic and Vertical Diversification

 

 

Geographical Diversification

 

 

 

 

 

 

 

Picture 3

 

 

 

Percentage  of Total Data

 

Metropolitan Market

  

Center Annualized Rent

 

San Francisco Bay

 
32.0

%

 

Los Angeles

 
26.6

 

 

Northern Virginia

 
18.6

 

 

New York

 
7.2

 

 

Chicago

 
6.8

 

 

Boston

 
6.8

 

 

Denver

 
1.6

 

 

Miami

 
0.4

 

 

Total

 
100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vertical Diversification

 

 

 

 

 

 

 

 

Picture 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Percentage  of Total Data

 

Vertical

  

Center Annualized Rent

 

Enterprise

 
49.4

%

 

Cloud

 
26.7

 

 

Network

 
23.9

 

 

Total

 
100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

16

 

 

 

10 Largest Customers

 

 

10 Largest Customers (total portfolio, including data center and office and light-industrial “OLI”)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Percentage

 

 

 

Percentage

 

Average

 

 

 

 

 

Number

 

Total

 

of Total

 

Annualized

 

of Total

 

Remaining

 

 

 

 

 

of

 

Occupied

 

Operating

 

Rent

 

Annualized

 

Lease Term in

 

 

CoreSite Vertical

Customer Industry

    

Locations

    

NRSF

    

NRSF(1)

    

($000)

    

Rent(2)

    

Months(3)

 

1

Enterprise

Travel / Hospitality

 

3

  

90,335

  

3.1

% 

$

18,622

  

6.4

% 

24

 

2

Cloud

Public Cloud

 

6

  

92,655

  

3.1

 

 

18,032

  

6.2

 

89

 

3

Cloud

Public Cloud

 

11

  

296,099

  

10.1

 

 

17,164

  

5.9

 

62

 

4

Cloud

Public Cloud

 

3

  

119,155

  

4.0

 

 

12,174

  

4.2

 

55

 

5

Enterprise

SI & MSP

 

3

  

63,508

  

2.2

 

 

8,917

  

3.1

 

15

 

6

Enterprise

Digital Content

 

6

 

89,781

 

3.1

 

 

8,627

 

3.0

 

41

 

7

Enterprise

SI & MSP

 

2

  

23,153

  

0.8

 

 

5,648

  

1.9

 

14

 

8

Network

Global Carrier

 

6

  

28,865

  

1.0

 

 

5,406

  

1.8

 

 8

 

9

Enterprise

Software

 

1

  

30,453

  

1.0

 

 

4,466

  

1.5

 

 1

 

10

Enterprise

Colocation / Reseller

 

4

  

35,451

  

1.2

 

 

4,413

  

1.5

 

15

 

 

Total / Weighted Average

 

  

 

  

869,455

  

29.6

% 

$

103,469

  

35.5

% 

43

 

 

(1)

Represents the customer’s total occupied square feet divided by the total operating NRSF in the portfolio as of September 30, 2018.

(2)

Represents the customer’s total annualized rent divided by the total annualized rent in the portfolio as of September 30, 2018.

(3)

Weighted average based on percentage of total annualized rent expiring calculated as of September 30, 2018.

 

 

 

 

 

 

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

17

 

 

Capital Expenditures and Completed

Pre-Stabilized Projects

(in thousands, except NRSF and cost per NRSF data)

 

Capital Expenditures and Repairs and Maintenance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

 

  

2018

  

2018

  

2018

  

2017

  

2017

 

Data center expansion(1)

 

$

60,276

 

$

59,726

 

$

44,977

 

$

45,518

 

$

46,282

 

Non-recurring investments(2)

 

 

1,737

 

 

1,710

 

 

1,577

 

 

2,679

 

 

2,960

 

Tenant improvements

 

 

1,422

 

 

1,456

 

 

1,437

 

 

1,466

 

 

1,252

 

Recurring capital expenditures(3)

 

 

3,332

 

 

3,651

 

 

3,172

 

 

10,949

 

 

3,219

 

Total capital expenditures

 

$

66,767

 

$

66,543

 

$

51,163

 

$

60,612

 

$

53,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repairs and maintenance expense(4)

 

$

3,853

 

$

4,037

 

$

3,158

 

$

3,682

 

$

4,476

 

 

(1)

Data center expansion capital expenditures include new data center construction, development projects adding capacity to existing data centers and other revenue generating investments. Data center expansion also includes investment of Deferred Expansion Capital. During the three months ended September 30, 2017, we incurred $12.2 million to acquire a two acre land parcel adjacent to our existing Santa Clara campus, which we refer to as SV8. During the three months ended March 31, 2018, we incurred $4.5 million to acquire a two acre land parcel located in Chicago, Illinois, which we refer to as CH2. During the three months ended June 30, 2018 we incurred $6.3 million, net of previously accrued legal expense, to acquire U.S. Colo, a carrier-neutral, network-dense colocation provider, located in Los Angeles, CA.

(2)

Non-recurring investments include upgrades to existing data center or office space and company-wide improvements that are ancillary to revenue generation such as internal system development and system-wide security upgrades, which have a future economic benefit.

(3)

Recurring capital expenditures include required equipment upgrades within our operating portfolio, which have a future economic benefit. During the three months ended June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017, we incurred $0.2 million, $1.2 million, $8.6 million, and $0.3 million, respectively, or $13.3 million in aggregate, associated with replacing our chiller plants at LA2 which has generated a significant return on investment.

(4)

Repairs and maintenance expense is classified within property operating and maintenance expense in the consolidated statements of operations. These expenditures represent recurring maintenance contracts and repairs to operating equipment necessary to maintain current operations.

 

 

 

Completed Pre-Stabilized Projects

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metropolitan

 

 

 

 

 

 

 

 

Cost Per

 

Percent

 

Percent

 

Projects / Facilities

  

Market

  

Completion

  

NRSF

  

Cost(1)

  

NRSF

  

Leased(2)

 

Occupied

 

DE1

 

Denver

 

Q3 2017

 

4,341

 

$

6,206

 

$

1,430

 

72.7

% 

72.7

% 

BO1

 

Boston

 

Q4 2017

 

13,735

 

 

7,000

 

 

510

 

62.3

 

16.9

 

VA1

 

Northern Virginia

 

Q4 2017

 

3,087

 

 

1,263

 

 

409

 

 —

 

 —

 

LA2

 

Los Angeles

 

Q1 2018

 

39,925

 

 

12,122

 

 

304

 

11.7

 

 —

 

VA3 Phase 1A

 

Northern Virginia

 

Q1 2018

 

26,413

 

 

24,289

 

 

920

 

2.4

 

0.4

 

DE1

 

Denver

 

Q2 2018

 

15,630

 

 

7,581

 

 

485

 

20.3

 

15.1

 

NY2

 

New York

 

Q2 2018

 

18,121

 

 

13,407

 

 

740

 

 —

 

 —

 

Total completed pre-stabilized

 

 

 

 

 

121,252

 

$

71,868

 

$

593

 

16.7

% 

6.6

%

 

(1)

Cost includes capital expenditures related to the specific project / phase and, for NY2 and VA3 Phase 1A, also includes allocations of capital expenditures related to land and building shell that were incurred  at the beginning of the overall project.

(2)

Includes customer leases that have been signed as of September 30, 2018, but have not commenced. The percent leased is determined based on leased NRSF as a proportion of total pre-stabilized NRSF.

 

 

30, 2018

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

18

 

 

Development Summary

(in thousands, except NRSF)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under Construction(1)

 

 

Held for Development(1)

 

 

 

 

 

 

Costs

 

 

 

 

Estimated

 

 

Estimated

 

 

 

Incurred to-

 

Estimated

 

Percent

 

 

 

 

 

 

Power

Projects/Facilities

 

Completion

 

NRSF

 

Date

 

Total

 

Leased

  

 

NRSF

 

Total Cost

 

(Megawatts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data center expansion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BO1

 

—

 

 —

 

$

 —

 

$

 —

 

 —

%

 

59,884

 

$

32,200

 

4.5

DC2

 

Q4 2018

 

24,563

 

 

16,730

 

 

22,000

 

 —

 

 

 —

 

 

—

 

 —

LA1(2) 

 

—

 

 —

 

 

 —

 

 

 —

 

 —

 

 

27,590

 

 

11,250

 

2.0

LA2

 

Q2 2019

 

28,191

 

 

433

 

 

21,000

 

100.0

 

 

 —

 

 

—

 

 —

MI1

 

—

 

 —

 

 

 —

 

 

 —

 

 —

 

 

13,154

 

 

7,500

 

1.0

NY2 Phase 3-4

 

—

 

 —

 

 

 —

 

 

 —

 

 —

 

 

69,177

 

 

51,000

 

7.0

NY2 Phase 5

 

—

 

 —

 

 

 —

 

 

 —

 

 —

 

 

47,211

 

 

35,000

 

5.0

Total

 

 

 

52,754

 

$

17,163

 

$

43,000

 

53.4

%

 

217,016

 

$

136,950

 

19.5

Deferred expansion capital

 

 —

 

 

1,541

 

 

1,800

 

 —

 

 

 —

 

 

30,000 - 40,000

 

 —

Total data center expansion

 

52,754

 

$

18,704

 

$

44,800

 

53.4

%

 

217,016

 

$

166,950 - 176,950

 

19.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CH2

 

—

 

 —

 

$

 —

 

$

 —

 

 —

%

 

175,000

 

$

190,000 - 210,000

 

18.0

LA3

 

—

 

 —

 

 

 —

 

 

 —

 

 —

 

 

180,000

 

 

190,000 - 210,000

 

18.0

SV8

 

Q3 2019

 

58,000

 

 

25,267

 

 

127,000

 

 —

 

 

117,000

 

 

60,000 - 80,000

 

12.0

VA3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Phase 1B & C(3)

 

Q1 2019

 

49,837

 

 

56,735

 

 

110,000

 

 —

 

 

49,837

 

 

25,000 - 35,000

 

6.0

    Future Phases(4)

 

—

 

 —

 

 

 —

 

 

 —

 

 —

 

 

761,301

 

 

770,000 - 850,000

 

98.0

Total new development

 

107,837

 

$

82,002

 

$

237,000

 

 —

%

 

1,283,138

 

$

1,235,000 - 1,385,000

 

152.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total development(5)

 

160,591

 

$

100,706

 

$

281,800

 

17.6

%

 

1,500,154

 

$

1,401,950 - 1,561,950

 

171.5

 

 

 

(1)

These estimates are based on our current construction plans and expectations regarding entitlements. These estimates are subject to change based on current economic conditions, final zoning approvals, and the supply and demand dynamics of the market. The estimated NRSF for new development projects is based on the entire building size and NRSF placed into service may change depending on the final construction and utilization of the built space.

(2)

On June 30, 2018, we executed an amendment to our LA1 lease to extend the term and, among other things, expand our premises by an additional 17,238 NRSF. The 17,238 NRSF is currently held for development and we plan to develop into turn-key data center space.

(3)

As part of VA3 Phase 1B, we will build the shell of an 80,000 NRSF, 12 megawatt building, and a 77,000 NRSF centralized infrastructure building which will serve the entire VA3 property. Upon completion of VA3 Phase 1B, we will deliver 6 megawatts and 49,837 TKD NRSF. The centralized infrastructure building represents approximately $24 million of the estimated Phase 1B cost. The full construction of the 12 megawatt TKD building (Phase 1B and Phase 1C) will cost approximately $1,405 per NRSF, of which 6 megawatts is planned to be delivered with Phase 1C.

(4)

During Q3 2018, our entitlement application for the Reston Campus Expansion was approved, which allows us to build an additional 287,000 NRSF. In total the Reston Campus Expansion project is estimated to deliver approximately 890,000 NRSF of incremental data center capacity (of which 26,413 NRSF was placed into service in Q1 2018 and 49,837 NRSF is under construction) across multiple phases and as existing light-industrial / flex office leases expire and customers vacate. These estimates are subject to change based on current economic conditions and the supply and demand dynamics of the market.

(5)

In addition to new development and incremental capacity in existing core and shell buildings, we have land adjacent to our NY2 facility, in the form of an existing parking lot. By utilizing this land, we believe we can build approximately 100,000 NRSF of data center capacity in Secaucus, New Jersey, upon receipt of necessary entitlements.

 

 

 

30, 2018

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

19

 

 

Market Capitalization and Debt Summary

(in thousands, except per share data)

 

Market Capitalization

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares or

 

Market Price /

 

 

 

 

 

 

Equivalents

 

Liquidation Value as of

 

Market Value

 

 

    

Outstanding

    

September 30, 2018

    

Equivalents

 

Common shares

 

36,698

 

$

111.14

 

$

4,078,662

 

Operating partnership units

 

11,579

 

 

111.14

 

 

1,286,921

 

Total equity

 

 

 

 

 

 

 

5,365,583

 

Total principal debt outstanding

 

 

 

 

 

 

 

1,079,500

 

Total enterprise value

 

 

 

 

 

 

$

6,445,083

 

 

 

 

 

 

 

 

 

 

 

Net principal debt to enterprise value

 

 

 

 

 

 

 
16.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Summary(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of:

 

 

 

 

 

Maturity

 

September 30,

 

December 31,

 

Instrument

  

Rate

  

Date(2)

  

2018

  

2017

 

Revolving credit facility (3)

 

3.71

%  

4/19/2022

 

$

154,500

 

$

169,500

 

2020 Senior unsecured term loan (4)

 

3.24

 

6/24/2020

 

 

150,000

 

 

150,000

 

2021 Senior unsecured term loan (3)

 

3.66

 

2/2/2021

 

 

100,000

 

 

100,000

 

2022 Senior unsecured term loan (4)

 

3.47

 

4/19/2022

 

 

200,000

 

 

200,000

 

2023 Senior unsecured term loan (4)

 

3.89

 

4/19/2023

 

 

150,000

 

 

 —

 

2023 Senior unsecured notes

 

4.19

 

6/15/2023

 

 

150,000

 

 

150,000

 

2024 Senior unsecured notes

 

3.91

 

4/20/2024

 

 

175,000

 

 

175,000

 

Total principal debt outstanding

 

 

 

 

 

 

1,079,500

 

 

944,500

 

Unamortized deferred financing costs

 

 

 

 

 

 

(6,021)

 

 

(4,930)

 

Total debt

 

 

 

 

 

$

1,073,479

 

$

939,570

 

Weighted average interest rate

 

3.72

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Floating rate vs. fixed rate debt

 

 

 

 

 

 

49% / 51%

 

 

52% / 48%

 

 

(1)

See the filed Form 10-K and 10-Q for information on specific debt instruments.

(2)

In accordance with the amended credit agreement, the maturity date of the revolving credit facility is April 2022, with a one-time extension option, which, if exercised, would extend the maturity date to April 2023.

(3)

The revolving credit facility and 2021 senior unsecured term loan interest rates are based on 1-month LIBOR at September 30, 2018, plus applicable spread. 

(4)

The interest rates for the 2020, 2022, and 2023 senior unsecured term loans include the impact of interest rate swaps associated with a portion of the outstanding 1-month LIBOR variable rate debt.

 

 

 

 

 

Debt Maturities 

 

Picture 4

 

 

Ber 30

Quarter Ended September, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

20

 

 

Interest Summary and Debt Covenants

(in thousands)

 

Interest Expense Components

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

  

September 30,

  

June 30,

  

September 30,

  

September 30,

  

September 30,

 

 

  

2018

  

2018

  

2017

  

2018

  

2017

 

Interest expense and fees

 

$

10,143

 

$

9,439

 

$

6,840

 

$

27,857

 

$

18,511

 

Amortization of deferred financing costs

 

 

637

 

 

553

 

 

445

 

 

1,756

 

 

1,231

 

Capitalized interest

 

 

(1,347)

 

 

(1,085)

 

 

(838)

 

 

(3,535)

 

 

(2,230)

 

Total interest expense

 

$

9,433

 

$

8,907

 

$

6,447

 

$

26,078

 

$

17,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent capitalized

 

 

12.5

%  

 

10.9

%  

 

11.5

%  

 

11.9

%  

 

11.3

%

 

 

Debt Covenants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving Credit Facility and Senior Unsecured Term Loans and Notes

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

 

Required Compliance

   

2018

 

2018

 

2018 (1)

 

 

2017

 

 

2017

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed charge coverage ratio(2)

 

Greater than 1.50x

 

 

7.4

x

 

7.9

x

 

8.6

x

 

 

6.5

x

 

7.4

x

Total indebtedness to gross asset value

 

Less than 60%

 

 

24.8

% 

 

24.3

% 

 

26.8

% 

 

 

26.7

% 

 

23.8

% 

Secured debt to gross asset value

 

Less than 40%

 

 

 —

% 

 

 —

% 

 

 —

% 

 

 

 —

% 

 

 —

% 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facility availability

 

 

 

$

450,000

 

$

450,000

 

$

450,000

 

 

$

350,000

 

$

350,000

 

Borrowings outstanding

 

 

 

 

(154,500)

 

 

(111,964)

 

 

(66,500)

 

 

 

(169,500)

 

 

(19,000)

 

Outstanding letters of credit

 

 

 

 

(4,879)

 

 

(4,879)

 

 

(4,879)

 

 

 

(4,879)

 

 

(3,480)

 

Current availability

 

 

 

$

290,621

 

$

333,157

 

$

378,621

 

 

$

175,621

 

$

327,520

 

 

 

(1)

During April 2018, we amended our credit agreement which increased our revolving credit facility availability by $100 million and we entered into a new five-year $150 million senior unsecured term loan maturing in April 2023, which was used to pay down a portion of the current revolving facility balance. The revolving credit facility availability, borrowings outstanding, and current availability as of March 31, 2018, have been adjusted to reflect these subsequent debt financing transactions.

(2)

During April 2018, we amended our credit agreement which reduced the required compliance on our fixed charge coverage ratio to greater than 1.50x for our revolving credit facility and senior unsecured term loans. During June 2018, we amended our senior unsecured note agreements to incorporate the same changes made within our credit agreement. Prior to these amendments, the required compliance on our fixed charge coverage ratio was greater than 1.70x for our revolving credit facility and senior unsecured term loans and notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ber 30

Quarter Ended September, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

21

 

 

Components of Net Asset Value (NAV)

(in thousands)

 

 

Cash Net Operating Income

 

 

 

 

 

 

 

 

Reconciliation of Net Operating Income (NOI)

  

Q3 2018

  

Annualized

Operating Income

 

$

34,473

 

$

137,892

Adjustments:

 

 

 

 

 

 

Depreciation and amortization

 

 

36,264

 

 

145,056

General and administrative (includes litigation expenses)

 

 

10,074

 

 

40,296

Net Operating Income

 

$

80,811

 

$

323,244

 

 

 

 

 

 

 

Cash Net Operating Income (Cash NOI)

 

 

 

 

 

 

Net Operating Income

 

$

80,811

 

$

323,244

Adjustments:

 

 

 

 

 

 

Straight-line rent

 

 

61

 

 

244

Amortization of above and below-market leases

 

 

(155)

 

 

(620)

Cash NOI

 

$

80,717

 

$

322,868

 

 

 

 

 

 

 

Cash NOI with backlog (89.1% leased)(1)

 

$

83,263

 

$

333,052

Cash stabilized NOI (93% leased)

 

$

86,908

 

$

347,632

 

 

 

Development Projects

 

 

 

 

 

 

 

 

 

Data Center Projects Under Construction

 

 

 

 

 

 

TKD construction in progress(2)

  

$

99,165

  

  

 

Remaining spend(2)

 

 

180,835

 

 

 

Total

 

$

280,000

 

 

 

 

 

 

 

 

 

 

Targeted annual yields

 

 

  12 - 16

%

 

 

Annualized pro forma NOI range

 

$

33,600 - 44,800

 

 

 

 

 

 

 

 

 

 

Deferred Expansion Capital in progress

 

$

1,541

 

 

 

Remaining spend(3)

 

 

259

 

 

 

Total

 

$

1,800

 

 

 

 

 

 

Other Assets and Liabilities

 

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

Remaining construction in progress(4)

  

$

99,070

 

  

 

Cash and cash equivalents

 

 

5,306

 

 

 

Accounts and other receivables

 

 

24,458

 

 

 

Other tangible assets

 

 

32,584

 

 

 

Total other assets

 

$

161,418

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Principal debt

 

$

1,079,500

 

 

 

Accounts payable, accrued expenses and other liabilities

 

 

121,898

 

 

 

Accrued dividends and distributions

 

 

51,840

 

 

 

Total liabilities

 

$

1,253,238

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and units - diluted

 

 

48,099

 

 

 

 

 

(1)

Cash NOI with backlog is adjusted to include one quarter of the cash backlog as of September 30, 2018, less any leasing of currently occupied NRSF and data center projects under development.

(2)

Does not include spend associated with leasing commissions. See page 19 for further breakdown of data center projects under construction.

(3)

Does not include spend associated with future Deferred Expansion Capital.

(4)

Represents the book value of in-progress capital projects, including land and shell building, of future data center expansion, non-recurring investments, tenant improvements and recurring capital expenditures.

 

 

 

ep

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

22

 

 

2018 Guidance

(in thousands, except per share data)

The annual guidance provided below represents forward-looking projections, which are based on current economic conditions, internal assumptions about our existing customer base and the supply and demand dynamics of the markets in which we operate. Please refer to the press release for additional information on forward-looking statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected per share and OP unit information:

  

 

 

 

2018

 

 

 

 

 

 

 

 

Implied

 

 

  

Low

  

High

  

Mid

  

  

2017

  

Growth(1)

 

Net income attributable to common shares

 

$

2.12

 

$

2.20

 

$

2.16

 

 

$

1.84

 

17.4

%

Real estate depreciation and amortization

 

 

2.88

 

 

2.88

 

 

2.88

 

 

 

2.59

 

 

 

Original issuance costs associated with redeemed preferred stock

 

 

 —

 

 

 —

 

 

 —

 

 

 

0.09

 

 

 

FFO, as adjusted

 

$

5.00

 

$

5.08

 

$

5.04

 

 

$

4.52

 

11.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected operating results:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenues

 

$

537,000

 

$

547,000

 

$

542,000

 

 

$

481,821

 

12.5

%

General and administrative expenses

 

 

38,000

 

 

40,000

 

 

39,000

 

 

 

37,548

 

3.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

102,124

 

$

105,978

 

$

104,051

 

 

 

100,491

 

3.5

%

Depreciation and amortization

 

 

143,985

 

 

143,985

 

 

143,985

 

 

 

129,251

 

11.4

%

Other adjustments(2)

 

 

46,891

 

 

48,037

 

 

47,464

 

 

 

33,464

 

41.8

%

Adjusted EBITDA

 

$

293,000

 

$

298,000

 

$

295,500

 

 

 

263,206

 

12.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guidance drivers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual rental churn rate

 

 

6.0

%  

 

8.0

%  

 

7.0

%  

 

 

5.5

%  

 

 

Cash rent growth on data center renewals

 

 

3.0

%  

 

5.0

%  

 

4.0

%  

 

 

3.4

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data center expansion

 

$

258,000

 

$

273,000

 

$

265,500

 

 

$

144,410

 

 

 

Non-recurring investments

 

 

7,500

 

 

12,500

 

 

10,000

 

 

 

11,664

 

 

 

Tenant improvements

 

 

2,000

 

 

7,000

 

 

4,500

 

 

 

6,764

 

 

 

Recurring capital expenditures

 

 

12,500

 

 

17,500

 

 

15,000

 

 

 

23,725

 

 

 

Total capital expenditures

 

$

280,000

 

$

310,000

 

$

295,000

 

 

$

186,563

 

 

 

 

(1)

Implied growth is based on the midpoint of 2018 guidance.

(2)

Refer to the appendix for the adjustments made to net income to calculate adjusted EBITDA.

The following assumptions are included in CoreSite’s 2018 guidance:

1.

Interconnection revenue growth – CoreSite expects the 2018 growth rate to be between 11% and 14%, correlating to interconnection revenue in the range of $69 - $71 million.

2.

Adjusted EBITDA margin – CoreSite’s guidance for adjusted EBITDA implies adjusted EBITDA margin of approximately 54.5% based on the midpoint of guidance, and revenue flow-through to adjusted EBITDA of approximately 54%.

3.

New accounting standards – CoreSite’s 2018 guidance of FFO per share reflects the company’s adoption of two new accounting standards – revenue recognition and lease accounting, which are cumulatively expected to reduce FFO per share by approximately $0.06, inclusive of the impact from accelerated straight-line rent expense.

4.

GAAP backlog – CoreSite’s projected annualized GAAP rent from signed but not yet commenced leases was $10.2 million as of September 30, 2018. CoreSite expects approximately 35% of the GAAP backlog to commence during the fourth quarter of 2018, with the remainder expected to commence during the first half of 2019.

5.

Capitalized interest – CoreSite expects the percentage of interest capitalized in 2018 to be in the range of 12% - 18%, slightly elevated compared to the 2017 level based on CoreSite’s expectations regarding its development pipeline.

6.

Commencements – CoreSite expects lease commencements of approximately $33 - $35 million in annualized GAAP rent in 2018.

The following assumptions are being provided as part of CoreSite’s preliminary 2019 outlook:

1.

Churn – CoreSite expects elevated churn in the first half of 2019 in the range of 2.0% - 2.5% in each quarter before returning to more normal levels.

2.

Cash rent growth – CoreSite expects 2019 cash rent growth on renewals to be in the range of 2.0% - 4.0%.

3.

Capital expenditures – CoreSite anticipates total capital expenditures in 2019 to be $400 - $450 million, depending upon the timing of final permits and approvals related to our development projects.

4.

Capital markets – CoreSite anticipates accessing the debt markets during 2019 for $350 - $400 million to primarily term out the anticipated balance on its revolving credit facility.

 

 

 

 

 

 

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

23

 

 

 

Appendix

Definitions

This document includes certain non-GAAP financial measures that management believes are helpful in understanding our business, as further described below. Our definition and calculation of non-GAAP financial measures may differ from those of other Real Estate Investment Trusts (“REITs”) and therefore may not be comparable. The non-GAAP measures should not be considered an alternative to net income as an indicator of our performance and should be considered only a supplement to net income, cash flows from operating, investing or financing activities as measures of profitability and/or liquidity, computed in accordance with GAAP.

Adjusted Funds From Operations “AFFO” is a non-GAAP measure that is used as a supplemental
operating measure specifically for comparing year over year ability to fund dividend distribution from operating activities.  We use AFFO as a basis to address our ability to fund our dividend payments. AFFO is calculated by adding to or subtracting from FFO:

1.

Plus: Amortization of deferred financing costs

2.

Plus: Non-cash compensation

3.

Plus: Non-real estate depreciation

4.

Plus: Impairment charges

5.

Plus: Below market debt amortization

6.

Plus: Original issuance costs associated with redeemed preferred stock

7.

Plus/Less: Net straight line rent adjustments (lessor revenue and lessee expense)

8.

Plus/Less: Net amortization of above and below market leases

9.

Less: Recurring capital expenditures

10.

Less: Tenant improvements

11.

Less: Capitalized leasing costs

Capitalized leasing costs consist of commissions payable to third parties, including brokers, leasing agents, referral agents, and internal sales commissions payable to employees. Capitalized leasing costs are accrued and deducted from AFFO generally in the period the lease is executed. Leasing costs are generally paid a) to third party brokers and internal sales employees 50% at customer lease signing and 50% at lease commencement and b) to referral and leasing agents monthly over the lease term as and to the extent we receive payment from the end customer.

AFFO is not intended to represent cash flow from operations for the period, and is only intended to provide an additional measure of performance by adjusting for the effect of certain items noted above included in FFO. Other REITs widely report AFFO, however, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs.

Annualized Rent

Monthly contractual rent under existing commenced customer leases as of quarter-end, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement.

 

eptember

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

24

 

 

Appendix

Data Center Leasing Metrics

·

Rental Churn Rate – represents data center leases which are not renewed or are terminated during the period. Rental churn is calculated based on the annualized rent of data center expired leases terminated in the period, compared with total data center annualized rent at the beginning of the period.

·

Cash and GAAP Rent Growth – represents the increase in rental rates on renewed data center leases signed during the period, as compared with the previous rental rates for the same space. Cash and GAAP rent growth are calculated based on annualized rent from the renewed data center lease compared to annualized rent from the expired data center lease.

Data Center Net Rentable Square Feet (“NRSF”)

Both occupied and available data center NRSF includes a factor based on management’s estimate of space to account for a customer’s proportionate share of required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas, which may be updated on a periodic basis to reflect the most current build-out of our properties.

Deferred Expansion Capital

As we construct data center capacity, we work to optimize both the amount of the capital we deploy on power and cooling infrastructure and the timing of that capital deployment; as such, we generally construct our power and cooling infrastructure supporting our data center NRSF based on our estimate of customer utilization. This practice can result in our investment at a later time in Deferred Expansion Capital. We define Deferred Expansion Capital as our estimate of the incremental capital we may invest in the future to add power or cooling infrastructure to support existing or anticipated future customer utilization of NRSF within our operating data centers. From time to time, we may revise our estimate of Deferred Expansion Capital as well as the potential time period during which we may invest it. See the Data Center Projects Under Construction and Held for Development tables for more detail.

Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA 

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. We calculate adjusted EBITDA by adding our 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 our ability to incur and service debt. In addition, we consider EBITDAre and adjusted EBITDA to be appropriate supplemental measures of our 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 our business, their utilization as a cash flow measurement is limited.

 

eptember

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

25

 

 

Appendix

Funds From Operations (“FFO”) is a supplemental measure of our 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. We calculate 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 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. FFO attributable to common shares and units represents FFO less preferred stock dividends declared during the period.

Our 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.

We offer this measure because we recognize that investors use FFO as a basis to compare our operating performance with that of other REITs. However, the utility of FFO as a measure of our performance is limited because FFO excludes depreciation and amortization and captures neither the changes in the value of our 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 our properties, all of which have real economic effect and could materially impact our 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 our cash needs, including our ability to pay dividends or make distributions. In addition, our 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 us. Investors in our securities should not rely on these measures as a substitute for any GAAP measure, including net income.

GAAP Annualized Rent

Represents the monthly average contractual rent as stated on customer contracts, multiplied by 12. This amount is inclusive of any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement.

Monthly Recurring Revenue per Cabinet Equivalent Billed

Represents the turn-key monthly recurring colocation revenue (“MRR”) per cabinet equivalent billed. We define MRR as recurring contractual revenue under existing commenced customer leases.  MRR per cabinet equivalent is calculated as (current quarter MRR/3) divided by ((quarter-end cabinet equivalents billed plus prior quarter-end cabinet equivalents billed)/2). Cabinet equivalents are calculated as cage-usable square feet (turn-key leased NRSF/NRSF factor) divided by 25. 

 

eptember

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

26

 

 

Appendix

Net Operating Income (“NOI”) and Cash NOI – NOI, and cash NOI are supplemental measures for the operating performance of the company’s portfolio. NOI is operating revenues less operating expenses adjusted for items such as depreciation and amortization, general and administrative expenses, transaction costs from unsuccessful deals and business combinations and litigation expenses. Cash NOI is NOI less straight-line rents and above and below market rent amortization.

NRSF Held for Development

Represents incremental data center capacity that may be constructed in existing facilities that requires significant capital investment in order to develop new data center facilities. The data represents management's best estimate of incremental costs based on estimated NRSF and power design and are subject to market conditions and build-out specifications and may vary.

NRSF Under Construction

Represents NRSF for which substantial activities are ongoing to prepare the property for its intended use following development. The NRSF reflects management’s estimate of engineering drawings and required support space and is subject to change based on final demising of space. TKD estimated development costs include two components: 1) general construction to ready the NRSF as data center space and 2) power, cooling and other infrastructure to provide the designed amount of power capacity for the project. Following development completion, incremental capital, referred to as Deferred Expansion Capital, may be invested to support existing or anticipated future customer utilization of NRSF within our operating data centers.

Turn-Key Same-Store

Includes turn-key data center space that was leased or available to be leased to our colocation customers as of December 31, 2016, at each of our properties, and excludes powered shell data center space, office and light-industrial space and space for which development was completed and became available to be leased after December 31, 2016. The turn-key same-store space as of December 31, 2016, is 1,742,985 NRSF.  We track same-store on a computer room basis within each data center facility. 

Stabilized and Pre-Stabilized NRSF

Data center projects and facilities that recently have been developed and are in the initial lease-up phase are classified as pre-stabilized NRSF until they reach 85% occupancy or have been in service for 24 months. Pre-stabilized projects and facilities become stabilized operating properties at the earlier of achievement of 85% occupancy or 24 months after development completion and are included in the stabilized operating NRSF.

 

eptember

Quarter Ended September 30, 2018

 

Overview

Financial
Statements

Operating
Portfolio

Development

Capital
Structure

Components
of NAV

Guidance

Appendix

27