XNYS:COR CoreSite Realty Corp Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2012.

 

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from                      to                     .

 

Commission file number: 001-34877

 

CoreSite Realty Corporation

(Exact name of registrant as specified in its charter)

 

Maryland

(State or other jurisdiction

of incorporation or organization)

 

27-1925611

(I.R.S. Employer

Identification No.)

 

 

 

1050 17th Street, Suite 800
Denver, CO

(Address of principal executive offices)

 

80265

(Zip Code)

 

(866) 777-2673

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The number of shares of common stock outstanding at July 25, 2012 was 21,126,390

 

 

 



Table of Contents

 

CORESITE REALTY CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2012

TABLE OF CONTENTS

 

 

 

PAGE

 

 

NO.

 

 

 

PART I. FINANCIAL INFORMATION

 

3

 

 

 

ITEM 1. Financial Statements

 

3

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011

 

3

 

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011, (unaudited)

 

4

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2012 and 2011(unaudited)

 

5

 

 

 

Condensed Consolidated Statement of Equity for the six months ended June 30, 2012 (unaudited)

 

6

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)

 

7

 

 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

 

ITEM 4. Controls and Procedures

 

32

 

 

 

PART II. OTHER INFORMATION

 

32

 

 

 

ITEM 1. Legal Proceedings

 

32

 

 

 

ITEM 1A. Risk Factors

 

33

 

 

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

33

 

 

 

ITEM 3. Defaults Upon Senior Securities

 

33

 

 

 

ITEM 4. Mine Safety Disclosures

 

33

 

 

 

ITEM 5. Other Information

 

33

 

 

 

ITEM 6. Exhibits

 

33

 

 

 

Signatures

 

35

 

 

 

Exhibit 31.1

 

 

Exhibit 31.2

 

 

Exhibit 32.1

 

 

Exhibit 32.2

 

 

EX-101 INSTANCE DOCUMENT

 

 

EX-101 SCHEMA DOCUMENT

 

 

EX-101 CALCULATION LINKBASE DOCUMENT

 

 

EX-101 LABELS LINKBASE DOCUMENT

 

 

EX-101 PRESENTATION LINKBASE DOCUMENT

 

 

EX-101 DEFINITION LINKBASE DOCUMENT

 

 

 

2



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CORESITE REALTY CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands except share data)

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

ASSETS

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

Land

 

$

84,738

 

$

84,738

 

Building and building improvements

 

569,901

 

499,717

 

Leasehold improvements

 

83,534

 

81,057

 

 

 

738,173

 

665,512

 

Less: Accumulated depreciation and amortization

 

(83,205

)

(64,428

)

Net investment in operating properties

 

654,968

 

601,084

 

Construction in progress

 

32,474

 

73,084

 

Net investments in real estate

 

687,442

 

674,168

 

Cash and cash equivalents

 

5,526

 

6,628

 

Restricted cash

 

8,678

 

9,291

 

Accounts and other receivables, net of allowance for doubtful accounts of $357 and $465 as of June 30, 2012, and December 31, 2011, respectively

 

8,230

 

6,562

 

Lease intangibles, net of accumulated amortization of $35,965 and $33,711 as of June 30, 2012, and December 31, 2011, respectively

 

28,253

 

36,643

 

Goodwill

 

41,191

 

41,191

 

Other assets

 

37,730

 

33,743

 

Total assets

 

$

817,050

 

$

808,226

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Liabilities:

 

 

 

 

 

Revolving credit facility

 

$

54,750

 

$

5,000

 

Mortgage loans payable

 

91,699

 

116,864

 

Accounts payable and accrued expenses

 

36,547

 

38,822

 

Deferred rent payable

 

4,027

 

3,535

 

Acquired below-market lease contracts, net of accumulated amortization of $11,259 and $9,267 as of June 30, 2012, and December 31, 2011, respectively

 

10,120

 

11,872

 

Prepaid rent and other liabilities

 

9,844

 

11,946

 

Total liabilities

 

206,987

 

188,039

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01, 100,000,000 shares authorized and 21,126,589 and 20,747,794 shares issued and outstanding at June 30, 2012, and December 31, 2011, respectively

 

205

 

204

 

Additional paid-in capital

 

259,503

 

256,183

 

Accumulated other comprehensive income (loss)

 

(26

)

(34

)

Accumulated deficit

 

(29,643

)

(23,545

)

Total stockholders’ equity

 

230,039

 

232,808

 

Noncontrolling interests

 

380,024

 

387,379

 

Total equity

 

610,063

 

620,187

 

Total liabilities and equity

 

$

817,050

 

$

808,226

 

 

See accompanying notes to condensed consolidated financial statements.

 

3



Table of Contents

 

CORESITE REALTY CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands except share and per share data)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Operating revenues:

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

30,464

 

$

26,707

 

$

59,957

 

$

51,917

 

Power revenue

 

12,910

 

10,760

 

25,240

 

20,541

 

Tenant reimbursement

 

1,394

 

1,425

 

2,690

 

3,145

 

Other revenue

 

5,868

 

3,592

 

10,033

 

6,847

 

Total operating revenues

 

50,636

 

42,484

 

97,920

 

82,450

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

15,274

 

13,830

 

29,669

 

25,853

 

Real estate taxes and insurance

 

2,132

 

2,149

 

4,146

 

4,892

 

Depreciation and amortization

 

15,947

 

17,660

 

31,408

 

37,133

 

Sales and marketing

 

2,581

 

1,433

 

4,710

 

2,810

 

General and administrative

 

6,036

 

5,602

 

12,388

 

11,219

 

Transaction costs

 

161

 

683

 

283

 

683

 

Rent

 

4,691

 

4,600

 

9,268

 

9,147

 

Total operating expenses

 

46,822

 

45,957

 

91,872

 

91,737

 

Operating income (loss)

 

3,814

 

(3,473

)

6,048

 

(9,287

)

Gain on early extinguishment of debt

 

 

949

 

 

949

 

Interest income

 

5

 

40

 

7

 

106

 

Interest expense

 

(1,309

)

(1,269

)

(2,327

)

(3,521

)

Income (loss) before income taxes

 

2,510

 

(3,753

)

3,728

 

(11,753

)

Income tax (expense) benefit

 

(662

)

165

 

(537

)

249

 

Net income (loss)

 

$

1,848

 

$

(3,588

)

$

3,191

 

$

(11,504

)

Net income (loss) attributable to noncontrolling interests

 

1,022

 

(2,058

)

1,765

 

(6,602

)

Net income (loss) attributable to common shares

 

$

826

 

$

(1,530

)

$

1,426

 

$

(4,902

)

Net income (loss) per share attributable to common shares:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

$

(0.08

)

$

0.07

 

$

(0.25

)

Diluted

 

$

0.04

 

$

(0.08

)

$

0.07

 

$

(0.25

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

20,532,930

 

19,473,219

 

20,494,402

 

19,465,970

 

Diluted

 

20,914,686

 

19,473,219

 

20,801,050

 

19,465,970

 

 

See accompanying notes to condensed consolidated financial statements.

 

4



Table of Contents

 

CORESITE REALTY CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited and in thousands)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net income (loss)

 

$

1,848

 

$

(3,588

)

$

3,191

 

$

(11,504

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Unrealized loss on derivative contracts

 

(2

)

(264

)

(71

)

(328

)

Reclassification of other comprehensive income to interest expense

 

48

 

45

 

89

 

82

 

Comprehensive income (loss)

 

1,894

 

(3,807

)

3,209

 

(11,750

)

Comprehensive income (loss) attributable to noncontrolling interests

 

1,047

 

(2,183

)

1,775

 

(6,743

)

Comprehensive income (loss) attributable to common shares

 

$

847

 

$

(1,624

)

$

1,434

 

$

(5,007

)

 

See accompanying notes to condensed consolidated financial statements.

 

5



Table of Contents

 

CORESITE REALTY CORPORATION

 

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited and in thousands except share data)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

Total

 

 

 

 

 

 

 

Common Shares

 

Paid-in

 

Accumulated

 

Comprehensive

 

Stockholders’

 

Noncontrolling

 

Total

 

 

 

Number

 

Amount

 

Capital

 

Deficit

 

Income (Loss)

 

Equity

 

Interests

 

Equity

 

Balance at January 1, 2012

 

20,747,794

 

$

204

 

$

256,183

 

$

(23,545

)

$

(34

)

$

232,808

 

$

387,379

 

$

620,187

 

Issuance of restricted stock awards, net of forfeitures

 

328,961

 

 

 

 

 

 

 

 

Exercise of stock options

 

49,834

 

 

795

 

 

 

795

 

 

795

 

Amortization of deferred compensation

 

 

1

 

2,525

 

 

 

2,526

 

 

2,526

 

Dividends and distributions

 

 

 

 

(7,524

)

 

(7,524

)

(9,130

)

(16,654

)

Net income

 

 

 

 

1,426

 

 

1,426

 

1,765

 

3,191

 

Change in fair value on derivative contracts

 

 

 

 

 

(32

)

(32

)

(39

)

(71

)

Reclassification of other comprehensive loss to interest expense

 

 

 

 

 

40

 

40

 

49

 

89

 

Balance at June 30, 2012

 

21,126,589

 

$

205

 

$

259,503

 

$

(29,643

)

$

(26

)

$

230,039

 

$

380,024

 

$

610,063

 

 

See accompanying notes to condensed consolidated financial statements.

 

6



Table of Contents

 

CORESITE REALTY CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income (loss)

 

$

3,191

 

$

(11,504

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

31,408

 

37,133

 

Amortization of above/below market leases

 

(797

)

(764

)

Amortization of deferred financing costs

 

872

 

826

 

Gain on early extinguishment of debt

 

 

(949

)

Amortization of share-based compensation

 

2,526

 

1,386

 

Amortization of discount to fair market value of acquired loan

 

 

687

 

Bad debt expense

 

36

 

124

 

Changes in operating assets and liabilities:

 

 

 

 

 

Restricted cash

 

460

 

(547

)

Accounts and other receivables

 

(1,478

)

(1,187

)

Due to and due from related parties

 

 

2

 

Deferred rent receivable

 

(2,477

)

(2,268

)

Deferred leasing costs

 

(2,544

)

(3,040

)

Other assets

 

(1,656

)

779

 

Accounts payable and accrued expenses

 

(246

)

10,038

 

Prepaid rent and other liabilities

 

(1,989

)

1,818

 

Deferred rent payable

 

492

 

721

 

Net cash provided by operating activities

 

27,798

 

33,255

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Real estate improvements

 

(35,217

)

(61,612

)

Acquisition of Comfluent, net of cash received

 

(2,581

)

 

Changes in reserves for capital improvements

 

153

 

(606

)

Net cash used in investing activities

 

(37,645

)

(62,218

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Offering costs

 

 

(17

)

Proceeds from exercise of stock options

 

795

 

 

Proceeds from revolving credit facility, net

 

49,750

 

 

Repayments of mortgage loans payable

 

(25,165

)

(14,044

)

Payments of loan fees and costs

 

(106

)

(14

)

Dividends and distributions

 

(16,529

)

(11,884

)

Net cash provided by (used in) financing activities

 

8,745

 

(25,959

)

Net change in cash and cash equivalents

 

(1,102

)

(54,922

)

Cash and cash equivalents, beginning of period

 

6,628

 

86,246

 

Cash and cash equivalents, end of period

 

$

5,526

 

$

31,324

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

Cash paid for interest

 

$

2,974

 

$

2,109

 

NON-CASH INVESTING AND FINANCING ACTIVITY

 

 

 

 

 

Construction costs payable capitalized to real estate

 

$

6,380

 

$

7,926

 

Accrual of dividends and distributions

 

$

8,580

 

$

5,996

 

 

See accompanying notes to condensed consolidated financial statements.

 

7



Table of Contents

 

CORESITE REALTY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(unaudited)

 

1. Organization and Description of Business

 

CoreSite Realty Corporation, through its controlling interest in CoreSite, L.P. (the “Operating Partnership”) and the subsidiaries of the Operating Partnership (collectively, the “Company,” “we,” or “our”), is a fully integrated, self-administered, and self-managed real estate investment trust (“REIT”). The Company was organized in the state of Maryland on February 17, 2010, completed its initial public offering of common stock (the “IPO”) on September 28, 2010, and is the sole general partner of the Operating Partnership.

 

We are engaged in the business of owning, acquiring, constructing and managing technology-related real estate and as of June 30, 2012, our property portfolio included 14 operating data center facilities and one development site located in some of the largest and fastest growing data center markets in the United States, including Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago, Boston, New York City, Miami and Denver.

 

2. Summary of Significant Accounting Policies

 

Principles of Consolidation and Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and in compliance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the expected results for the year ending December 31, 2012. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011. Intercompany balances and transactions have been eliminated.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates, including those related to assessing the carrying values of our real estate properties, accrued liabilities, performance-based equity compensation plans, and qualification as a REIT based on estimates of historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could vary under different assumptions or conditions.

 

Investments in Real Estate

 

Real estate investments are carried at cost less accumulated depreciation and amortization. The cost of real estate includes the purchase price of the property and leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized. During the development of the properties, the capitalization of costs, which include interest, real estate taxes and other direct and indirect costs, begins upon commencement of development efforts and ceases when the property is ready for its intended use. Interest is capitalized during the period of development based upon applying the weighted-average borrowing rate to the actual development costs expended. Capitalized interest costs were $0.5 million and $0.3 million for the three months ended June 30, 2012 and 2011, respectively, and $1.2 million and $0.4 million for the six months ended June 30, 2012 and 2011, respectively.

 

Depreciation and amortization are calculated using the straight-line method over the following useful lives of the assets:

 

Buildings

 

27 to 40 years

Building improvements

 

1 to 15 years

Leasehold improvements

 

The shorter of the lease term or useful life of the asset

 

Depreciation expense was $9.9 million and $7.8 million for the three months ended June 30, 2012, and 2011, respectively, and $19.3 million and $16.4 million for the six months ended June 30, 2012, and 2011, respectively.

 

8



Table of Contents

 

Acquisition of Investment in Real Estate

 

Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired. The fair value of the real estate acquired is allocated to the acquired tangible assets, consisting primarily of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, value of in-place leases and the value of customer relationships.

 

The fair value of the land and building of an acquired property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and building based on management’s determination of the fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases.

 

The fair value of intangibles related to in-place leases includes the value of lease intangibles for above-market and below-market leases, lease origination costs, and customer relationships, determined on a lease-by-lease basis. Above-market and below-market leases are valued based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below-market fixed rate renewal periods. Lease origination costs include estimates of costs avoided associated with leasing the property, including tenant allowances and improvements and leasing commissions. Customer relationship intangibles relate to the additional revenue opportunities expected to be generated through interconnection services and utility services to be provided to the in-place lease tenants. During the three and six months ended June 30, 2012, the Company recorded a net of $2.7 million in intangible assets and liabilities due to the acquisition of Comfluent, a Denver, Colorado based data center operator, consisting of two leased locations, 910 15th Street Denver, Colorado and 639 E. 18th Avenue Denver, Colorado.

 

The capitalized values for above and below-market lease intangibles, lease origination costs, and customer relationships are amortized over the term of the underlying leases or the expected customer relationship. Amortization related to above-market and below-market leases where the Company is the lessor is recorded as either an increase to or a reduction of rental income, amortization related to above-market and below-market leases where the Company is the lessee is recorded as either an increase to or a reduction of rent expense and amortization for lease origination costs and customer relationships are recorded as amortization expense. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are written off. The carrying value of intangible assets is reviewed for impairment in connection with its respective asset group whenever events or changes in circumstances indicate that the asset group may not be recoverable. An impairment loss is recognized if the carrying amount of the asset group is not recoverable and its carrying amount exceeds its estimated fair value.

 

The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. As of June 30, 2012, and December 31, 2011 we had approximately $41.2 million of goodwill. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include all non-restricted cash held in financial institutions and other non-restricted highly liquid short-term investments with original maturities at acquisition of three months or less.

 

Restricted Cash

 

The Company is required to maintain certain minimum cash balances in escrow by loan agreements to cover various building improvements. The Company is legally restricted by these agreements from using this cash other than for the purposes specified therein.

 

Deferred Costs

 

Deferred leasing costs include commissions and other direct and incremental costs incurred to obtain new customer leases, which are capitalized and amortized over the terms of the related leases using the straight-line method. If a lease terminates prior to the expiration of its initial term, any unamortized costs related to the lease are written off to amortization expense.

 

Deferred financing costs include costs incurred in connection with obtaining debt and extending existing debt. These financing costs are capitalized and amortized on a straight-line basis, which approximates the effective-interest method, over the term of the loan and are included as a component of interest expense.

 

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Impairment of Long-Lived Assets

 

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) are less than the carrying amount of the assets. The estimation of expected future net cash flows is inherently uncertain and relies, to a considerable extent, on assumptions regarding current and future economics and market conditions and the availability of capital. If, in future periods, there are changes in the estimates or assumptions incorporated into the impairment review analysis, the changes could result in an adjustment to the carrying amount of the assets. To the extent that an impairment has occurred, the excess of the carrying amount of long-lived assets over its estimated fair value would be charged to income. For the three and six months ended June 30, 2012, and 2011, no impairment was recognized.

 

Derivative Instruments and Hedging Activities

 

We reflect all derivative instruments at fair value as either assets or liabilities on the condensed consolidated balance sheets. For those derivative instruments that are designated, and qualify, as hedging instruments, we record the effective portion of the gain or loss on the hedge instruments as a component of accumulated other comprehensive income (loss). Any ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. For derivatives that do not meet the criteria for hedge accounting, changes in fair value are immediately recognized in earnings.

 

Revenue Recognition

 

All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the non-cancellable term of the agreements. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rent receivable. If a lease terminates prior to its stated expiration, the deferred rent receivable relating to that lease is written off to rental revenue.

 

When arrangements include both lease and nonlease elements, the revenues associated with separate elements are allocated based on their relative fair values. The revenue associated with each element is then recognized as earned. Interconnection, utility and power services are considered as separate earnings processes that are provided and completed on a month-to-month basis and revenue is recognized in the period in which the services are performed. Utility and power services are included in power revenue in the accompanying statements of operations. Interconnection services are included in other revenue in the accompanying statements of operations. Set-up charges and utility installation fees are initially deferred and recognized over the term of the arrangement as other revenue or the expected period of performance unless management determines a separate earnings process exists related to an installation charge.

 

Tenant reimbursements for real estate taxes, common area maintenance, and other recoverable costs are recognized in the period in which the expenses are incurred.

 

Above-market and below-market lease intangibles that were acquired are amortized on a straight-line basis as decreases and increases, respectively, to rental revenue over the remaining non-cancellable term of the underlying leases. For the three months ended June 30, 2012, and 2011, the net effect of amortization of acquired above-market and below-market leases resulted in an increase to rental income of $0.4 million and $0.4 million, respectively.  For the six months ended June 30, 2012, and 2011, the net effect of amortization of acquired above-market and below-market leases resulted in an increase to rental income of $0.8 million and $0.8 million, respectively. Balances, net of accumulated amortization, at June 30, 2012, and December 31, 2011, are as follows (in thousands):

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

Lease contracts above-market value

 

$

8,279

 

$

8,668

 

Accumulated amortization

 

(5,042

)

(4,253

)

Lease contracts above-market value, net

 

$

3,237

 

$

4,415

 

 

 

 

 

 

 

Lease contracts below-market value

 

$

21,379

 

$

21,139

 

Accumulated amortization

 

(11,259

)

(9,267

)

Lease contracts below-market value, net

 

$

10,120

 

$

11,872

 

 

A provision for uncollectible accounts is recorded if a receivable balance relating to contractual rent, rent recorded on a straight-line basis, or tenant reimbursements is considered by management to be uncollectible. At June 30, 2012, and December 31, 2011, the allowance for doubtful accounts totaled $0.4 million and $0.5 million, respectively.

 

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Table of Contents

 

Share-Based Compensation

 

We account for share-based compensation using the fair value method of accounting. The estimated fair value of the stock options granted by us is being amortized on a straight-line basis over the vesting period of the stock options. The fair value of restricted share-based and Operating Partnership unit compensation is based on the market value of our common stock on the date of the grant and is amortized on a straight-line basis over the vesting period.

 

Asset Retirement Obligations

 

We record accruals for estimated retirement obligations. The asset retirement obligations relate primarily to the removal of asbestos and contaminated soil during development or redevelopment of the properties as well as the estimated equipment removal costs upon termination of a certain lease under which the Company is the lessee. At June 30, 2012, and December 31, 2011, the amount included in other liabilities on the condensed consolidated balance sheets was approximately $1.8 million and $1.9 million, respectively.

 

Income Taxes

 

We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2010. To qualify as a REIT, we are required to distribute at least 90% of our taxable income to our stockholders and meet various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we qualify for taxation as a REIT, we are generally not subject to corporate level federal income tax on the earnings distributed currently to our stockholders. If we fail to qualify as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax.

 

To maintain REIT status, we will distribute a minimum of 90% of our taxable income. However, it is our policy and intent, subject to change, to distribute 100% of our taxable income and therefore no provision is required in the accompanying financial statements for federal income taxes with regards to activities of the REIT and its subsidiary pass-through entities. Any taxable income prior to the completion of the IPO is the responsibility of the Company’s prior member. The allocable share of income is included in the income tax returns of the members. The Company is subject to the statutory requirements of the locations in which it conducts business. State and local income taxes are accrued as deemed required in the best judgment of management based on analysis and interpretation of respective tax laws.

 

We have elected to treat one of our subsidiaries as a taxable REIT subsidiary (“TRS”). Certain activities that we undertake must be conducted by a TRS, such as services for our tenants that would otherwise be impermissible for us to perform and holding assets that we cannot hold directly. A TRS is subject to corporate level federal and state income taxes. Relative deferred tax assets and liabilities arising from temporary differences in financial reporting versus tax reporting are also established as determined by management.

 

Deferred income taxes are recognized in certain taxable entities. Deferred income tax is generally a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes), the utilization of tax net operating losses generated in prior years that previously had been recognized as deferred income tax assets and the reversal of any previously recorded deferred income tax liabilities. A valuation allowance for deferred income tax assets is provided if we believe all or some portion of the deferred income tax asset may not be realized. Any increase or decrease in the valuation allowance resulting from a change in circumstances that causes a change in the estimated realizability of the related deferred income tax asset is included in deferred tax expense. As of June 30, 2012, the deferred income taxes were not material.

 

We currently have no liabilities for uncertain tax positions. The earliest tax year for which we are subject to examination is 2010. Prior to their contribution to our Operating Partnership, our subsidiaries were treated as pass-through entities for tax purposes and the earliest year for which our subsidiaries are subject to examination is 2008.

 

Concentration of Credit Risks

 

The Company’s cash and cash equivalents are maintained in various financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to any significant credit risk in this area. The Company has no off-balance-sheet concentrations of credit risk, such as foreign exchange contracts, option contracts, or foreign currency hedging arrangements.

 

For the three months ended June 30, 2012, and 2011, and the six months ended June 30, 2012, and 2011, one customer accounted for 8.3%, 11.7%, 9.3%, and 11.9%, respectively, of total operating revenues.

 

Segment Information

 

The Company manages its business as one reportable segment consisting of investments in data centers located in the United States. Although the Company provides services in several markets, these operations have been aggregated into one reportable segment based on the similar economic characteristics amongst all markets, including the nature of the services provided and the type of customers purchasing these services.

 

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Recent Accounting Pronouncements

 

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The Company adopted the provisions of this standard effective January 1, 2012, by presenting a separate Condensed Consolidated Statement of Comprehensive Income.

 

3. Investment in Real Estate

 

In April 2012, the Company acquired a leasehold interest in two additional locations, 910 15th Street Denver, Colorado and 639 E. 18th Avenue Denver, Colorado, through the acquisition of Comfluent, a Denver, Colorado based data center operator. The following is a summary of the properties owned and leased at June 30, 2012 (in thousands):

 

Property Name

 

Location

 

Acquisition
Date

 

Land

 

Buildings and
Improvements

 

Leasehold
Improvements

 

Construction
in Progress

 

Total Cost

 

1656 McCarthy

 

Milpitas, CA

 

12/6/2006

 

$

5,086

 

$

22,015

 

$

 

$

269

 

$

27,370

 

2901 Coronado

 

Santa Clara, CA

 

2/2/2007

 

3,972

 

45,126

 

 

12

 

49,110

 

2972 Stender

 

Santa Clara, CA

 

2/2/2007

 

4,442

 

40,829

 

 

20,709

 

65,980

 

Coronado-Stender Properties

 

Santa Clara, CA

 

2/2/2007

 

11,486

 

12,039

 

 

235

 

23,760

 

70 Innerbelt

 

Somerville, MA

 

4/11/2007

 

6,100

 

67,968

 

 

1,050

 

75,118

 

32 Avenue of the Americas

 

New York, NY

 

6/30/2007

 

 

 

30,982

 

3

 

30,985

 

12100 Sunrise Valley

 

Reston, VA

 

12/28/2007

 

12,100

 

100,663

 

 

790

 

113,553

 

One Wilshire

 

Los Angeles, CA

 

9/28/2010

 

 

 

46,690

 

2,567

 

49,257

 

900 N. Alameda

 

Los Angeles, CA

 

9/28/2010

 

28,467

 

106,771

 

 

1,073

 

136,311

 

55 S. Market

 

San Jose, CA

 

9/28/2010

 

6,863

 

99,668

 

 

3,036

 

109,567

 

427 S. LaSalle

 

Chicago, IL

 

9/28/2010

 

5,493

 

65,212

 

 

2,197

 

72,902

 

1275 K Street

 

Washington, DC

 

9/28/2010

 

 

 

5,821

 

457

 

6,278

 

2115 NW 22nd Street

 

Miami, FL

 

9/28/2010

 

729

 

9,610

 

 

68

 

10,407

 

910 15th Street

 

Denver, CO

 

4/19/2012

 

 

 

37

 

7

 

44

 

639 E. 18th Avenue

 

Denver, CO

 

4/19/2012

 

 

 

4

 

1

 

5

 

Total

 

 

 

 

 

$

84,738

 

$

569,901

 

$

83,534

 

$

32,474

 

$

770,647

 

 

4. Other Assets

 

Our other assets consisted of the following, net of amortization and depreciation, if applicable, as of June 30, 2012, and December 31, 2011 (in thousands):

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

Deferred leasing costs

 

$

12,570

 

$

11,601

 

Deferred rent receivable

 

13,527

 

11,051

 

Deferred financing costs

 

2,854

 

3,607

 

Leasehold interests in corporate headquarters

 

3,076

 

2,719

 

Other

 

5,703

 

4,765

 

Total

 

$

37,730

 

$

33,743

 

 

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Table of Contents

 

5. Debt

 

A summary of outstanding indebtedness as of June 30, 2012, and December 31, 2011 is as follows (in thousands):

 

 

 

Interest Rate

 

Maturity
Date

 

June 30,
2012

 

December 31,
2011

 

Senior secured credit facility

 

(1)

 

December 15, 2014

 

$

54,750

 

$

5,000

 

427 S. LaSalle - Senior mortgage loan

 

LIBOR plus 0.60% (0.85% at December 31, 2011)

 

N/A

 

 

25,000

 

55 S. Market

 

LIBOR plus 3.50% (3.74% and 3.75% at June 30, 2012 and December 31, 2011)(2)

 

October 9, 2012

(3)

60,000

 

60,000

 

12100 Sunrise Valley

 

LIBOR plus 2.75% (2.99% and 3.00% at June 30, 2012 and December 31, 2011)(2)

 

June 1, 2013

 

31,699

 

31,864

 

Total principal outstanding

 

 

 

 

 

$

146,449

 

$

121,864

 

 


(1) At the Company’s election, borrowings under the credit facility bear interest at a rate per annum equal to either (i) LIBOR plus 225 basis points to 300 basis points, or (ii) a base rate plus 125 basis points to 200 basis points, depending on our leverage ratio. As of June 30, 2012, the weighted average interest rate on outstanding borrowings under the senior secured credit facility was 2.49%.

(2) In October 2010, we entered into an interest rate swap agreement with respect to the indebtedness on 55 S. Market and an interest rate cap agreement with respect to the indebtedness on 12100 Sunrise Valley, each as a cash flow hedge for interest incurred on these LIBOR based loans.

(3) The mortgage contains a two-year extension option subject to our Company meeting certain financial and other customary conditions and the payment of an extension fee equal to 60 basis points.

 

Senior Secured Credit Facility

 

On December 15, 2011, our Operating Partnership and certain subsidiary co-borrowers entered into an amended and restated senior secured revolving credit facility (the “Amended Credit Agreement”) with a group of lenders for which KeyBank National Association acts as the administrative agent. The Amended Credit Agreement amended our Operating Partnership’s then-existing senior secured revolving credit facility, dated September 28, 2010 (the “Prior Facility”), and is unconditionally guaranteed on a senior unsecured basis by us. Our Operating Partnership acts as the parent borrower, and our subsidiaries that own 1656 McCarthy, 70 Innerbelt, 2901 Coronado and 900 N. Alameda are co-borrowers under the Amended Credit Agreement, with borrowings under the facility secured by a lien on these properties on a senior secured basis. In addition, the obligations of each of our Operating Partnership and the co-borrowers under the Amended Credit Agreement are joint and several.

 

On February 7, 2012, we repaid the senior mortgage loan of $25.0 million secured by the 427 S. LaSalle property and subsequently added the subsidiary that owns 427 S. LaSalle as a co-borrower under the Amended Credit Agreement, with borrowings under the facility secured by a lien on such real estate property on a senior secured basis.

 

The Amended Credit Agreement increased the commitment from the Prior Facility of $110.0 million to $225.0 million, and extended the initial maturity date of the Prior Facility from September 28, 2013, to December 15, 2014, with a one-time extension option, which, if exercised, would extend the maturity date to December 15, 2015. An exercise of the extension option is subject to the payment of an extension fee equal to 25 basis points of the total commitment under the Amended Credit Agreement at initial maturity and certain other customary conditions. The Amended Credit Agreement also contains an accordion feature to allow our Operating Partnership to increase the total commitment by $175.0 million, to $400.0 million, under specified circumstances. As of June 30, 2012, and December 31, 2011, $54.8 million and $5.0 million, respectively, was outstanding under the facility.

 

Under the Amended Credit Agreement, our Operating Partnership may elect to have borrowings bear interest at a rate per annum equal to (i) LIBOR plus 225 basis points to 300 basis points, or (ii) a base rate plus 125 basis points to 200 basis points, each depending on our Operating Partnership’s leverage ratio.

 

The total amount available for borrowings under the Amended Credit Agreement will be subject to the lesser of a percentage of the appraised value of our Operating Partnership’s properties that form the designated borrowing base properties of the facility, a minimum borrowing base debt service coverage ratio and a minimum borrowing base debt yield. As of June 30, 2012, $139.1 million was available for us to borrow under the facility.

 

Our ability to borrow under the Amended Credit Agreement is subject to ongoing compliance with a number of financial covenants and other customary restrictive covenants, including:

 

· a maximum leverage ratio (defined as consolidated total indebtedness to total gross asset value) of 60%;

 

· a minimum fixed charge coverage ratio (defined as adjusted consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.75 to 1.0;

 

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· a maximum unhedged variable rate debt ratio (defined as unhedged variable rate indebtedness to gross asset value) of 30%;

 

· a maximum recourse debt ratio (defined as recourse indebtedness other than indebtedness under the revolving credit facility to gross asset value) of 30%; and

 

· a minimum tangible net worth equal to at least $468.8 million plus 80% of the net proceeds of any additional equity issuances.

 

As of June 30, 2012, we were in compliance with the covenants under our Amended Credit Agreement.

 

Financing costs of $2.3 million and $1.8 million, which were incurred in connection with the execution of the Prior Facility and the Amended Credit Agreement, respectively, have been capitalized and are included in deferred financing costs. Amortization of these deferred financing costs for the three months ended June 30, 2012, and 2011 totaled $0.3 million and $0.2 million, respectively, and for the six months ended June 30, 2012 and 2011 totaled $0.5 million and $0.4 million, respectively, and have been included in interest expense.

 

55 S. Market

 

As of June 30, 2012, the 55 S. Market property had a $60.0 million mortgage loan, which matures on October 9, 2012. The mortgage payable contains a two-year extension option provided we meet certain financial and other customary conditions and subject to the payment of an extension fee equal to 60 basis points. The Company has the ability and intent to extend the mortgage loan. The loan bears interest at LIBOR plus 350 basis points and requires the payment of interest only until maturity. The mortgage requires ongoing compliance by us with various covenants including liquidity and net operating income covenants. As of June 30, 2012, we were in compliance with the covenants.

 

On October 7, 2010, we entered into a $60.0 million interest rate swap agreement to protect against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows relating to interest payments on the $60.0 million 55 S. Market mortgage. The interest rate swap matures on October 9, 2012, and effectively fixes the interest rate at 4.01%.

 

12100 Sunrise Valley

 

As of June 30, 2012, the 12100 Sunrise Valley property had a mortgage loan payable of $31.7 million. The loan is secured by the 12100 Sunrise Valley property and required payments of interest only until the “amortization commencement date” on July 1, 2011. The loan matures on June 1, 2013 and we may exercise the remaining one-year extension option provided we meet certain financial and other customary conditions and subject to the payment of an extension fee equal to 50 basis points. The mortgage loan payable contains certain financial and nonfinancial covenants. As of June 30, 2012, we were in compliance with the covenants.

 

On October 8, 2010, we purchased an interest rate cap to hedge $25.0 million of the indebtedness secured by our 12100 Sunrise Valley property. The interest rate cap matures on October 1, 2012, and hedges against LIBOR interest rate increases above 2.0%.

 

427 S. LaSalle

 

On February 7, 2012, we repaid the $25.0 million senior mortgage loan on the 427 S. LaSalle property.

 

Debt Maturities

 

The following table summarizes our debt maturities as of June 30, 2012 (in thousands):

 

Year Ending December 31, 

 

 

 

Remainder of 2012(1)

 

$

60,155

 

2013

 

31,544

 

2014

 

54,750

 

Total

 

$

146,449

 

 


(1) The 55 S. Market mortgage, which is scheduled to mature on October 9, 2012, contains a two-year extension option subject to the Company meeting certain financial and other customary conditions and the payment of an extension fee equal to 60 basis points.

 

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Table of Contents

 

6. Derivatives and Hedging Activities

 

Risk Management Objective of Using Derivatives

 

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

 

Cash Flow Hedges of Interest Rate Risk

 

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

 

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The amount recorded in accumulated other comprehensive income (loss) is not considered material for any period. Such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The amount reclassified to interest expense on the condensed consolidated statements of operations was less than $0.1 million for the three and six months ended June 30, 2012 and 2011. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2012, and 2011, the Company did not record any amount in earnings related to derivatives due to hedge ineffectiveness.

 

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During 2012, the Company estimates that $0.1 million will be reclassified as an increase to interest expense.

 

As of June 30, 2012, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

 

Cash Flow Hedge Derivative Summary

 

 

 

Number of
Instruments

 

Notional

 

 

 

 

 

(in thousands)

 

Derivative type

 

 

 

 

 

Interest rate swap

 

1

 

$

60,000

 

Interest rate cap

 

1

 

25,000

 

Total

 

2

 

$

85,000

 

 

All derivatives are recognized at fair value in our condensed consolidated balance sheets in other assets and other liabilities, as applicable. We do not net our derivative position by counterparty for purposes of balance sheet presentation and disclosure. The Company had less than $0.1 million accrued in other liabilities in our condensed consolidated balance sheet relating to these outstanding derivatives at June 30, 2012, and December 31, 2011.

 

Credit-Risk-Related Contingent Features

 

The Company has agreements with each of its derivative counterparties that each contain a provision whereas if the Company defaults on any of its indebtedness, including default when repayment of the indebtedness has not been accelerated by the lender, the Company could also be declared in default on its derivative obligations. Such a default may require the Company to settle any outstanding derivatives at their then current fair value. As of June 30, 2012, the derivative instruments with fair values in a net liability position were not material and the Company has not posted any cash collateral related to these agreements.

 

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Table of Contents

 

7. Noncontrolling Interests — Operating Partnership

 

Noncontrolling interests represent the limited partnership interests in the Operating Partnership held by individuals and entities other than CoreSite Realty Corporation. Since September 28, 2011, the current holders of Operating Partnership units have been eligible to have the Operating Partnership units redeemed for cash or, at our option, exchangeable into our common stock on a one-for-one basis. We have evaluated whether we control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement of the Operating Partnership units. Based on the results of this analysis, we concluded that the Operating Partnership units met the criteria to be classified within equity at June 30, 2012.

 

The following table shows the ownership interest in the Operating Partnership as of June 30, 2012 and December 31, 2011:

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 

Number of Units

 

Percentage of Total

 

Number of Units

 

Percentage of Total

 

The Company

 

20,523,954

 

44.7

%

20,404,743

 

44.6

%

Noncontrolling interests consist of:

 

 

 

 

 

 

 

 

 

Common units held by third parties

 

25,275,390

 

55.1

%

25,275,390

 

55.2

%

Incentive units held by employees

 

71,182

 

0.2

%

69,692

 

0.2

%

Total

 

45,870,526

 

100.0

%

45,749,825

 

100.0

%

 

For each share of common stock issued, the Operating Partnership issues an equivalent Operating Partnership unit to the Company. During the six months ended June 30, 2012, the Company issued 119,211 shares of common stock related to employee compensation arrangements and therefore an equivalent number of Operating Partnership units were issued. Additionally, during the six months ended June 30, 2012, 1,490 Operating Partnership units were issued to employees upon their vesting in the incentive unit awards.

 

The redemption value of the noncontrolling interests at June 30, 2012, was $654.4 million based on the closing price of the Company’s stock of $25.82 on June 29, 2012, the last trading day of the quarter.

 

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Table of Contents

 

8. Stockholders’ Equity

 

On March 13, 2012, we declared a regular cash dividend for the first quarter of 2012 of $0.18 per common share payable to stockholders of record as of March 30, 2012. In addition, holders of Operating Partnership units also received a distribution of $0.18 per unit. The dividend and distribution were paid on April 16, 2012.

 

On June 15, 2012, we declared a regular cash dividend for the second quarter of 2012 of $0.18 per common share payable to stockholders of record as of June 29, 2012. In addition, holders of Operating Partnership units also received a distribution of $0.18 per unit. The dividend and distribution were paid on July 16, 2012.

 

9. Equity Incentive Plan

 

In connection with our IPO, the Company’s Board of Directors adopted the 2010 Equity Incentive Plan (the “2010 Plan”). The 2010 Plan is administered by the Board of Directors, or the plan administrator. Awards issuable under the 2010 Plan include common stock, stock options, restricted stock, stock appreciation rights, dividend equivalents and other incentive awards. We have reserved a total of 3,000,000 shares of our common stock for issuance pursuant to the 2010 Plan, which may be adjusted for changes in our capitalization and certain corporate transactions. To the extent that an award expires, terminates or lapses, or an award is settled in cash without the delivery of shares of common stock to the participant, then any unexercised shares subject to the award will be available for future grant or sale under the 2010 Plan. Shares of restricted stock which are forfeited or repurchased by us pursuant to the 2010 Plan may again be optioned, granted or awarded under the 2010 Plan. The payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2010 Plan.

 

As of June 30, 2012, 992,698 shares of our common stock remained available for issuance pursuant to the 2010 Plan.

 

Stock Options

 

Stock option awards are granted with an exercise price equal to the closing market price of the Company’s common stock at the date of grant. The fair value of each option granted under the 2010 Plan is estimated on the date of the grant using the Black-Scholes option-pricing model. For the six months ended June 30, 2012, options to purchase 227,121 shares of common stock were granted. The fair values are being expensed on a straight-line basis over the vesting periods.

 

The following table sets forth the stock option activity under the 2010 Plan for the six months ended June 30, 2012:

 

 

 

Number of
Shares Subject
to Option

 

Weighted
Average
Exercise Price

 

Options outstanding, December 31, 2011

 

998,051

 

$

15.63

 

Granted

 

227,121

 

23.57

 

Forfeited

 

(81,206

)

16.38

 

Exercised

 

(49,834

)

15.96

 

Options outstanding, June 30, 2012

 

1,094,132

 

$

17.93

 

 

The following table sets forth the number of shares subject to option that are unvested as of June 30, 2012, and the fair value of these options at the grant date:

 

 

 

Number of
Shares Subject
to Option

 

Weighted
Average Fair
Value at Grant
Date

 

Unvested balance, December 31, 2011

 

867,109

 

$

4.92

 

Granted

 

227,121

 

7.77

 

Forfeited

 

(81,206

)

5.16

 

Vested

 

(131,241

)

5.11

 

Unvested balance, June 30, 2012

 

881,783

 

$

5.60

 

 

As of June 30, 2012, total unearned compensation on options was approximately $4.0 million, and the weighted-average vesting period was 2.9 years.

 

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Restricted Awards

 

During the six months ended June 30, 2012, the Company granted 360,202 shares of restricted stock. Additionally, the Company granted 6,812 restricted stock units, or RSUs. The principal difference between these instruments is that RSUs are not outstanding shares of the Company’s common stock and do not have any of the rights or privileges thereof, including voting rights. On the applicable vesting date, the holder of an RSU becomes entitled to one share of common stock for each RSU. The restricted awards are amortized on a straight-line basis to expense over the vesting period. The following table sets forth the number of unvested restricted awards and the weighted average fair value of these awards at the date of grant:

 

 

 

Restricted
Awards

 

Weighted
Average Fair
Value at Grant
Date

 

Unvested balance, December 31, 2011

 

343,231

 

$

15.35

 

Granted

 

367,014

 

24.38

 

Forfeited

 

(31,241

)

17.03

 

Vested

 

(76,189

)

16.60

 

Unvested balance, June 30, 2012

 

602,815

 

$

20.60

 

 

As of June 30, 2012, total unearned compensation on restricted awards was approximately $10.4 million, and the weighted-average vesting period was 3.0 years.

 

Operating Partnership Units

 

In connection with the Company’s IPO, we granted 25,883 Operating Partnership units, which had a grant date fair value of $15.98 per unit or $0.4 million in total. The Operating Partnership units are amortized on a straight-line basis to expense over the vesting period. As of June 30, 2012, 10,117 Operating Partnership units have vested and 14,275 Operating Partnership units were unvested. As of June 30, 2012, total unearned compensation on Operating Partnership units was approximately $0.2 million, and the weighted-average vesting period was 1.3 years.

 

10. Earnings Per Share

 

The following is a summary of basic and diluted income (loss) per share (in thousands, except share and per share amounts):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net income (loss) attributable to common shares

 

$

826

 

$

(1,530

)

$

1,426

 

$

(4,902

)

Weighted average common shares outstanding - basic

 

20,532,930

 

19,473,219

 

20,494,402

 

19,465,970

 

Potentially dilutive common shares:

 

 

 

 

 

 

 

 

 

Stock options

 

216,736

 

 

176,905

 

 

Unvested restricted awards

 

165,020

 

 

129,743

 

 

Weighted average common shares outstanding - diluted

 

20,914,686

 

19,473,219

 

20,801,050

 

19,465,970

 

Net income (loss) per share attributable to common shares

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

$

(0.08

)

$

0.07

 

$

(0.25

)

Diluted

 

$

0.04

 

$

(0.08

)

$

0.07

 

$

(0.25

)

 

We have excluded the following potentially dilutive securities in the calculations above as their effect would have been antidilutive:

 

 

 

Three Months Ended March 31,

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Stock options

 

877,394

 

994,820

 

917,225

 

994,820

 

Restricted awards

 

437,795

 

396,653

 

473,072

 

396,653

 

 

 

1,315,189

 

1,391,473

 

1,390,297

 

1,391,473

 

 

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Table of Contents

 

11. Estimated Fair Value of Financial Instruments

 

Authoritative guidance issued by the Financial Accounting Standards Board (FASB) establishes a hierarchy of valuation techniques based on the observability of inputs utilized in measuring assets and liabilities at fair values. This hierarchy establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy under the authoritative guidance are as follows:

 

Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities.

 

Level 2 — Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and market-corroborated inputs which are derived principally from or corroborated by observable market data.

 

Level 3 — Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

 

Our financial instruments consist of cash and cash equivalents, restricted cash, accounts and other receivables, interest rate caps, interest rate swaps, senior secured credit facility, mortgage loans payable, interest payable and accounts payable. The carrying values of cash and cash equivalents, restricted cash, accounts and other receivables, interest payable and accounts payable approximate fair values due to the short-term nature of these accounts. The interest rate caps and interest rate swap are carried at fair value.

 

The combined balance of our mortgage loans payable was $91.7 million and $116.9 million as of June 30, 2012, and December 31, 2011, respectively, with a fair value of $91.1 million and $116.1 million, respectively, based on Level 3 inputs from the fair value hierarchy. The carrying value of the senior secured credit facility approximated fair value at June 30, 2012, based on Level 3 inputs from the fair value hierarchy. The fair values of mortgage notes payable and the senior secured credit facility are based on the Company’s assumptions of interest rates and terms available incorporating the Company’s credit risk.

 

Derivative financial instruments

 

Currently, the Company uses interest rate derivative instruments to manage interest rate risk. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, to comply with the provisions of FASB Accounting Standards Codification (ASC) 820, credit valuation adjustments, which consider the impact of any credit risk to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.

 

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2012, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivative portfolios. As a result, the Company classifies its derivative valuations in Level 2 of the fair value hierarchy.

 

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2012, and December 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall.

 

 

 

Recurring Fair Value Measurements

 

 

 

Quoted Prices in Active
Markets for Identical Assets 
and Liabilities
(Level 1)

 

Significant Other
Observable Inputs
(Level 2)

 

Significant Unobservable
Inputs
(Level 3)

 

Total Fair Value

 

 

 

As of June
30, 2012

 

December 31,
2011

 

As of June
30, 2012

 

December 31,
2011

 

As of June
30, 2012

 

December 31,
2011

 

As of June
30, 2012

 

December 31,
2011

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Financial Instruments

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Financial Instruments

 

$

 

$

 

$

44

 

$

50

 

$

 

$

 

$

44

 

$

50

 

 

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Table of Contents

 

12. Related Party Transactions

 

We lease 1,515 net rentable square feet of space at our 12100 Sunrise Valley property to an affiliate of The Carlyle Group. The lease commenced on July 1, 2008, and expires on June 30, 2013. Rental revenue was less than $0.1 million for the three and six months ended June 30, 2012 and 2011, respectively.

 

13. Commitments and Contingencies

 

As of June 30, 2012, the Company currently leases the data center space under noncancelable operating lease agreements at 32 Avenue of the Americas, One Wilshire, 1275 K Street, 910 15th Street, and 639 E. 18th Avenue, and the Company leases its headquarters located in Denver, Colorado under a noncancelable operating lease agreement. The lease agreements provide for base rental rate increases at defined intervals during the term of the leases. In addition, the Company has negotiated rent abatement periods to better match the phased build-out of the data center space. The Company accounts for such abatements and increasing base rentals using the straight-line method over the noncancelable term of the lease. The difference between the straight-line expense and the cash payment is recorded as deferred rent payable.

 

Additionally, the Company has commitments related to telecommunications capacity used to connect data centers located within the same market or geographical area and power usage.

 

The following table summarizes our contractual obligations as of June 30, 2012 (in thousands):

 

 

 

Remainder of

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligation

 

2012

 

2013

 

2014

 

2015

 

2016

 

Thereafter

 

Total

 

Operating leases

 

$

8,811

 

$

17,893

 

$

18,117

 

$

17,789

 

$

17,521

 

$

27,022

 

$

107,153

 

Credit Facility

 

 

 

54,750

 

 

 

 

54,750

 

Mortgages payable

 

60,155

 

31,544

 

 

 

 

 

91,699

 

Construction Contracts

 

13,309

 

 

 

 

 

 

13,309

 

Other (1)

 

3,395

 

3,962

 

284

 

167

 

142

 

887

 

8,837

 

Total

 

$

85,670

 

$

53,399

 

$

73,151

 

$

17,956

 

$

17,663

 

$

27,909

 

$

275,748

 

 


(1) Obligations for tenant improvement work at 55 S. Market Street, power contracts, telecommunications leases and insurance premiums.

 

Rent expense for the three months ended June 30, 2012, and 2011 was $4.7 million and $4.6 million, respectively, and for the six months ended June 30, 2012, and 2011 rent expense was $9.3 million and $9.2 million, respectively.

 

Our properties require periodic investments of capital for general capital improvements and for tenant related capital expenditures. Additionally, the Company enters into various construction contracts with third parties for the development and redevelopment of our properties. At June 30, 2012, we had open commitments related to construction contracts of approximately $13.3 million.

 

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. Management believes that the resolution of such matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

 

As previously disclosed, the Company is involved in litigation in Colorado District Court in Denver with Ari Brumer, the former general counsel of its affiliate, CoreSite, LLC, arising out of the termination of Mr. Brumer’s employment. The allegations made by Mr. Brumer in his complaint against the Company, certain of our affiliates, and certain affiliates of The Carlyle Group also have been previously reported, as have been the counterclaims asserted against Mr. Brumer by the Company and certain of our affiliates. The case remains in the discovery stage and various discovery matters require resolution by the court. As previously disclosed, the case initially was set for a nine-day trial to commence on October 1, 2012.  The parties now have agreed to set the case for a ten-day trial to commence on June 17, 2013. We intend to vigorously defend the case and pursue our counterclaims against Mr. Brumer. Based on the information currently available, the Company continues to believe that this litigation will not have a material adverse effect on its business, financial position or liquidity.

 

One of our former customers, Add2Net, Inc., brought an action against us in April 2009 before the American Arbitration Association in California asserting claims of breach of contract, unfair business practices, negligent misrepresentation and fraudulent inducement. Add2Net alleged that it suffered damages of approximately $3.5 million, consisting of license and service fees paid to us, loss of business income and equipment damage, and sought attorney’s fees and punitive damages. We counterclaimed for breach of contract and bad faith dealing. On April 6, 2012, we agreed to pay Add2Net $1.5 million to settle the action in its entirety and recorded the expense in general and administrative expense for the six months ended June 30, 2012.

 

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Table of Contents

 

ITEM 2.                             MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (this “Quarterly Report”), together with other statements and information publicly disseminated by our company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions.

 

In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain certain forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma” 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. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: (i) the geographic concentration of our data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; (ii) fluctuations in interest rates and increased operating costs; (iii) difficulties in identifying properties to acquire and completing acquisitions; (iv) the significant competition in our industry and an inability to lease vacant space, renew existing leases or release space as leases expire; (v) lack of sufficient customer demand to realize expected returns on our investments to expand our property portfolio; (vi) decreased revenue from costs and disruptions associated with any failure of our physical infrastructure or services; (vii) our ability to lease available space to existing or new customers; (viii) our failure to obtain necessary outside financing; (ix) our failure to qualify or maintain our status as a REIT; (x) financial market fluctuations; (xi) changes in real estate and zoning laws and increases in real property tax rates; (xii) delays or disruptions in third-party network connectivity; (xiii) service failures or price increases by third party power suppliers; (xiv) inability to renew net leases on the data center properties we lease; and (xv) other factors affecting the real estate industry generally.

 

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim 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. The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this Quarterly Report. Additional information concerning these and other risks and uncertainties is contained in our other periodic filings with the United States Securities and Exchange Commission, or SEC, pursuant to the Exchange Act. We discussed a number of material risks in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2011. Those risks continue to be relevant to our performance and financial condition. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

 

Overview

 

Unless the context requires otherwise, references in this Quarterly Report to “we,” “our,” “us” and “our company” refer to CoreSite Realty Corporation, a Maryland corporation, together with its consolidated subsidiaries, including CoreSite, L.P., a Delaware limited partnership of which CoreSite Realty Corporation is the sole general partner and which we refer to in this Quarterly Report as our “Operating Partnership” and CoreSite Services, Inc., a Delaware corporation, our taxable REIT subsidiary, or “TRS”.

 

We formed CoreSite Realty Corporation as a Maryland corporation on February 17, 2010. We completed our IPO of common stock on September 28, 2010 and through our controlling interest in our Operating Partnership, we are engaged in the business of ownership, acquisition, construction and management of strategically located data centers in some of the largest and fastest growing data center markets in the United States, including Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago, Boston, New York City, Miami and Denver. Our high-quality data centers feature ample and redundant power, advanced cooling and security systems and many are points of dense network interconnection. We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2010.

 

Our Portfolio

 

As of June 30, 2012, our property portfolio included 14 operating data center facilities and one development site, which collectively comprise over 2.0 million net rentable square feet of space (“NRSF”), of which approximately 1.2 million NRSF is existing data center space. These properties include 399,226 NRSF of space readily available for lease, of which 304,033 NRSF is available for lease as data center space. Including the space currently under construction or in preconstruction at June 30, 2012, and including currently operating space targeted for future redevelopment, we own land and buildings sufficient to develop or redevelop 810,036 square feet of data center space, comprised of (1) 70,841 NRSF of data center space currently under construction, (2) 393,945 NRSF of office and industrial space currently available for redevelopment, and (3) 345,250 NRSF of new data center space that can be developed on land that we currently own at our Coronado-Stender Business Park. We expect that this redevelopment and development potential

 

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Table of Contents

 

plus any potential expansion into new markets will enable us to accommodate existing and future customer demand and position us to significantly increase our cash flows. We intend to pursue redevelopment and development projects and expansion into new markets when we believe those opportunities support the additional supply in those markets.

 

The following table provides an overview of our new and expansion data center leasing activity (in NRSF):

 

 

 

Three Months Ended:

 

 

 

June 30,
2012

 

March 31,
2012

 

December
31, 2011

 

September 30,
2011

 

New and expansion leases signed but not yet commenced at beginning of period

 

32,436

 

25,571

 

28,974

 

39,079

 

New and expansion leases signed during the period

 

26,290

 

37,563

 

35,461

 

28,553

 

New and expansion leases signed during the period which have commenced

 

(8,157

)

(15,195

)

(22,824

)

(12,485

)

New and expansion leases signed in previous periods which commenced during period

 

(9,024

)

(15,503

)

(16,040

)

(26,173

)

Total leases signed but not yet commenced at end of period

 

41,545

 

32,436

 

25,571

 

28,974

 

 

The following table provides an overview of our properties as of June 30, 2012:

 

 

 

 

 

 

 

NRSF

 

 

 

 

 

 

 

Operating(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data Center(2)

 

Office and Light-
Industrial(
3)

 

Total

 

Redevelopment and Development(4)

 

 

 

Market/Facilities

 

Acquisition
Date(
5)

 

Annualized
Rent ($000)(
6)

 

Total

 

Percent
Leased(
7)

 

Total

 

Percent
Leased(
7)

 

Total(8)

 

Percent
Leased(
7)

 

Under
Construction(9)

 

Vacant

 

Total

 

Total
Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Wilshire*

 

Aug. 2007

 

$

22,879

 

157,588

 

69.7

%

7,500

 

48.4

%

165,088

 

68.7

%

 

 

 

165,088

 

900 N. Alameda

 

Oct. 2006

 

11,414

 

156,366

 

76.9

 

8,360

 

28.4

 

164,726

 

74.4

 

 

269,433

 

269,433

 

434,159

 

Los Angeles Total

 

 

 

34,293

 

313,954

 

73.3

 

15,860

 

37.8

 

329,814

 

71.6

 

 

269,433

 

269,433

 

599,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco Bay

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55 S. Market

 

Feb. 2000

 

11,125

 

84,045

 

90.1

 

206,255

 

81.4

 

290,300

 

83.9

 

 

 

 

290,300

 

2901 Coronado

 

Feb. 2007

 

9,357

 

50,000

 

100.0

 

 

 

50,000

 

100.0

 

 

 

 

50,000

 

1656 McCarthy

 

Dec. 2006

 

5,179

 

76,676

 

58.8

 

 

 

76,676

 

58.8

 

 

 

 

76,676

 

Coronado-Stender Properties(10)

 

Feb. 2007

 

1,040

 

 

 

115,560

 

82.5

 

115,560

 

82.5

 

 

13,640

 

13,640

 

129,200

 

2972 Stender(11)

 

Feb. 2007

 

4,059

 

49,964

 

40.6

 

436

 

74.8

 

50,400

 

40.9

 

50,600

 

 

50,600

 

101,000

 

San Francisco Bay Total

 

 

 

30,760

 

260,685

 

73.3

 

322,251

 

81.8

 

582,936

 

78.0

 

50,600

 

13,640

 

64,240

 

647,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Northern Virginia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12100 Sunrise Valley

 

Dec. 2007

 

19,392

 

201,719

 

69.0

 

61,050

 

73.5

 

262,769

 

70.0

 

 

 

 

262,769

 

1275 K Street*

 

June 2006

 

1,834

 

22,137

 

72.0

 

 

 

22,137

 

72.0

 

 

 

 

22,137

 

Northern Virginia Total

 

 

 

21,226

 

223,856

 

69.3

 

61,050

 

73.5

 

284,906

 

70.2

 

 

 

 

284,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boston

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70 Innerbelt

 

Apr. 2007

 

9,303

 

148,795

 

90.3

 

13,063

 

39.3

 

161,858

 

86.2

 

 

111,313

 

111,313

 

273,171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

427 S. LaSalle

 

Feb. 2007

 

8,559

 

158,167

 

77.0

 

4,946

 

56.9

 

163,113

 

76.4

 

20,241

 

 

20,241

 

183,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York