September 25, 2010, 2:10 pm

COR - CoreSite Realty Corp

COR - Coresite Realty Corp

COR - CoreSite Realty Corp plans on offering 19.4 million shares(assuming over-allotments) at a range of $15-$17. Citi, BofA Merrill Lynch and RBC are leading the deal, KeyBanc and Credit Suisse co-managing. Post-ipo, COR will have 48.4 total shares outstanding for a market cap of $774 million on a pricing of $16. Bulk of ipo proceeds will go to insiders, specifically Carlyle Group.

DBD Investors will own 60% of COR post-ipo. DBD is controlled by private equity firm Carlyle.

From the prospectus:

'We are an owner, developer and operator 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 and New York City.'

Data center REIT. As a REIT, COR will distribute to shareholders quarterly essentially all after tax income.

11 operating data centers with one under construction and one development site. 1 million active net rentable square feet, with another one million under construction or development. Of the one million, 19% is currently available for lease as data center space.

Over 600 customers with top ten customers accounting for 37% of annualized rent. Customers include AT&T, British Telecom, Microsoft, Google, Facebook and China Unicom.

Sector - Data centers are highly specialized and secure buildings that house networking, storage and communications technology infrastructure, including servers, storage devices, switches, routers and fiber optic transmission equipment. The shift has been to outsource data center needs to operators such as COR.

CEO Thomas Ray has 22 years of experience with 11 years of data center experience including 5 with REIT's.

75% renewal rate in 2009.

68% of data center space location in California.

Growth plans - Continue to convert available space into data center space. Increase rates on expiring rental contracts. Pursue acquisitions.


Pretty good looking balance sheet here with $125 million in debt and $75 million in cash. Most of the cash will be used to expand data center space, so the $125 million in debt here will remain on the books.

Distributions - COR plans to initially pay a quarterly dividend of $0.13. At an annualized $0.52, COR would yield 3.25% on a pricing of $16. COR is set-up well to expand the dividend over time as new data center space comes online. Once concern here however is that currently only approximately 81% of current available data center space is occupied.

Competition - COR's closest comparables are DLR and DFT. DLR currently yields 3.4%, while DFT yields 1.8% annually.

Conclusion - Pretty solid looking REIT here. Good balance sheet which should allow for growth and dividend appreciation. Appears to be coming fairly valued with competition. I would expect COR to end up yielding a bit more than forecasts.