CoreSite Earnings Preview

By David Gross

CoreSite has its first earnings call as a public company today, a few things to look out for:

• Employee Productivity - While incorporated as a REIT, CoreSite did an un-REIT like $600k per employee in 2009, which is about what Equinix did, and about 75% lower than Digital Realty and DuPont Fabros.   Part of this is because of size, and also because the company needs more ops staffing to accommodate its Any2 exchanges, including hiring for an Ops Support Center.   At this point, investors cannot realistically apply REIT-like metrics such as NOI and cap rates to CoreSite like they can to DLR and DFT, because CoreSite has been structured like a REIT that's operating as an interconnection company.  

 

• Media Clients and Los Angeles-  The company's customers include NBC Universal and Akamai, and in addition to its leasehold at One Wilshire, it has over a quarter million square feet at 900 North Alameda Street, making Los Angeles its largest market, with over 40% of its space.   CoreSite is giving Equinix major problems in LA, especially with Equinix building away from the downtown carrier hotels, and trying to get everyone to come out to its centers next to LAX.

• Performance of the non-Data Center Assets - About a third of the company's portfolio is office and light industrial space.    Much of this comes from the over 200,000 square feet of office space in the MAE West building it owns at 55 South Market in San Jose, which is a 15 story property whose largest tenant is the I.R.S..