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CoreSite Q3 2021: Funds from operations down on previous quarter

Total operating revenues for the full year are now projected to reach $645-$653 million, versus $606.8 million in 2020, a potential 7% year-on-year growth.

By João Marques Lima

Founder and Editor, The Tech Capital

8 Mins

October 29, 2021 | 1:00 AM BST

US real estate investment trust (REIT) CoreSite Realty Corporation (NYSE:COR) has reported its financial results for the third quarter of 2021 with figures beating Wall Street expectations.

The company posted funds from operations (FFO) of $67.47 million for the three months ended September 30, 2021, a figure down from Q2’s $69.27 million. FFO per common share and OP unit diluted was $1.39, down from $1.48 when compared to the previous quarter.

However, the Denver-based operator’s FFO performance beat analysts’ expectations which pointed to $1.37 per share, according to an analyst survey carried by Zacks Investment Research.

For the nine months ended September 30, 2021, funds from operations were at $207.38 million, up on the same period the year before which registered $191.92 million.

Real estate businesses use FFO as a measurement of operating performance. The figure adds depreciation, amortisation, and losses on sales of assets to earnings and then subtracts any gains on sales of assets and any interest income making it a key number in any real estate firms’ performance.



Elsewhere, operating revenues increased 6.4% year over year and 1.1% sequentially to $163.9 million.

This helped the REIT deliver net income of $0.50 per common diluted share, consistent year over year and a decrease of $0.09 sequentially, and an adjusted EBITDA of $85.7 million, an increase of 5.2% year over year and a decrease of 2.0% sequentially.

Enterprise market value currently stands at $8.56 billion and a net principal debt to enterprise value of 20.8%.

Paul Szurek, CoreSite’s President and Chief Executive Officer, said: “Our excellent team continues to build on and strengthen the diverse customer ecosystems in each of our eight markets and our connectivity products to facilitate digital transformation.”

Leases remain stable

During the quarter, CoreSite commenced 122 new and expansion leases for 29,308 net rentable square feet (NRSF) signing new and expansion leases of $7.2 million in annualized GAAP rent, and including a large scale lease for $1.7 million of annualized GAAP rent at SV7 on October 7th, representing total leasing activity of $8.9 million of annualized GAAP rent.

Including the $1.7 million of annualized GAAP rent for the scale lease signed on October 7th, CoreSite had annualised GAAP backlog of $9.9 million, or $17.2 million on a cash basis, for leases signed but not yet commenced.



The difference between GAAP and cash backlog is primarily driven by a handful of scale leases with power ramps during the early portion of their lease terms.

The difference between GAAP and cash backlog is primarily driven by a handful of scale leases with power ramps during the early portion of their lease terms.

Most of the company’s annualised rents come from the enterprise layer (41.1%), followed by cloud clients (34.9%) and network operators (24%). This respectively compares to 42.2%, 33.8% and 24% in 2020.

Geographically, the San Francisco Bay are amounts to the largest share of leases in 2021 at 31.4%, compared to 32.7% in 2020. This is followed by Los Angeles (2021: 29.3%/2022: 29.2%), Northern Virginia (19.2%/18.5%), New York (7.6%/7.2%), Chicago (5.3%/5.3%), Boston (4.7%/4.8%), Denver (2%/1.8%), and Miami (0.5%/0.5%).



Steve Smith, CoreSite’s Chief Revenue Officer, said: “We are encouraged by our continuing strong attraction of retail and small-scale leases, which are fundamental to our go-to-market strategy.

“We are focused on continual generation of profitable organic growth, attracting high-quality new logos, and creating incremental value to our customers and shareholders through the lease-up of our available capacity within our portfolio.”

Including the $1.7 million of annualized GAAP rent for the scale lease signed on October 7th, CoreSite had annualised GAAP backlog of $9.9 million, or $17.2 million on a cash basis, for leases signed but not yet commenced.

Portfolio Expansion

CoreSite has continued to expand its portfolio during Q3 2021, with capital expenditure (CAPEX) driven into data centre expansion amounting to $28.74 million. The value is slightly up on the previous quarter ($28.71 million).

Data centre expansion CAPEX include new data centre construction, development projects adding capacity to existing data centres and other revenue generating investments. Data centre expansion also includes investment of Deferred Expansion Capital.



Total CAPEX which also includes non-recurring investments such as upgrades to existing data centre or office space, tenant improvements and recurring CAPEX, was $36.66 million, a fraction less compared to 2Q21 at $36.95 million.

CoreSite has at the end of Q3 available power capacity of around 30MW across its portfolio, with roughly 10MW under construction and a further 46MW developable capacity.

New openings are set to come in Q4 2021 with the launch of a 6MW extension to the company’s Los Angeles LA3 data centre, and in Q1 2022 as 4MW are scheduled to come online at NY2 in New York.



2021 guidance

CoreSite updated its 2021 guidance related to total capital expenditures to its new guidance range of $140 million to $150 million from its previous range of $185 million to $225 million.

Total operating revenues for the full year are now projected to reach $645-$653 million, versus $606.8 million in 2020, a potential 7% year-on-year growth.

Net income is also set to grow at a 4.6% rate, from $94.6 million last year, to around $99 million by December 31, 2021.

Total CAPEX is set to considerably drop to $140-$150 million, compared to 2020’s $221.2 million.


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João Marques Lima

Founder and Editor, The Tech Capital

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