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

DENVER–(BUSINESS WIRE)–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.

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.

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.

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.

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.

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.

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:
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

Reconciliations of Net Income to FFO
(in thousands, except per share data)
			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

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 the National Association of Real Estate
Investment Trusts (“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.

Reconciliations of Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA:
(in thousands)
			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

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.

Contacts

CoreSite
Jeff Finnin, +1 303-222-7276
Chief Financial
Officer
InvestorRelations@CoreSite.com