CoreSite Reports Strong Q3 Results, Ups Guidance

Citing supply and demand dynamics in the US data center market, CoreSite has increased its earnings guidance for the year.

The company executed about 150 new and expansion data center leases in the third quarter, representing about $9 million in annual rent. It also commenced leases that were previously closed during the quarter, which it expects to bring in another $9 million in revenue annually.

CoreSite is building a massive new data center in Silicon Valley and expanding capacity in existing buildings in Northern Virginia, Los Angeles, Chicago, and Boston.

The company raised its 2015 guidance from the old range of $2.75 to $2.83 in Funds from Operations to the new range of $2.82 to $2.86. FFO is a financial metric publicly traded real estate investment trusts use in place of Earnings per Share to express how their performance affects the value of their stock.

CoreSite reported total revenue of nearly $87 million for the last quarter – up 23 percent year over year.

With data centers in eight US markets, including the top-tier Silicon Valley, New York, Norther Virginia, and Chicago markets, CoreSite’s model combines wholesale data center space with retail colocation and interconnection. It is a model close to what its major rival Digital Realty Trust is now pursuing following the completion of its $1.9 billion acquisition of Telx.

To make sure the interconnection ecosystem within its data centers remains attractive, CoreSite is doubling down on growing the variety of customers that exchange network traffic in its facilities.

“We continued to execute upon our strategic priorities, including increasing transaction count; enhancing the network and cloud density of our portfolio; and diversifying our customer base with a record number of new logos in the quarter,” CoreSite CEO Tom Ray said in a statement.

While interconnection is important everywhere, Silicon Valley, New York, and Northern Virginia play especially important roles as network connectivity hubs on the global internet map. Connectivity drives a lot of demand for data center capacity in those markets.

During the third quarter, CoreSite kicked off construction of its seventh Silicon Valley data center. The 230,000-square-foot “powered shell” will include 80,000 square feet of turn-key data center capacity.

A powered shell in data center lingo means a building with access to power and some basic electrical infrastructure that tenants can fit out to their requirements on their own. Turn-key is just that – fully built-out data center space, ready for customers to roll in racks and IT gear.

CoreSite is adding about 100,000 square feet at one of its Northern Virginia data centers, expecting to complete one expansion phase before the end of this year and a second one in the first quarter of 2016.

Its expansion activities in Los Angeles, Chicago, and Boston are more modest, ranging from 12,000 square feet in Chicago to 14,000 square feet in Boston.