Welcome to the CoreSite Realty Corporation Fourth Quarter 2014 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Derek McCandless. Thank you, Mr. McCandless. You may begin.

Thank you. Hello everyone and welcome to our fourth quarter 2014 conference call. I'm joined here today by Tom Ray, our President and CEO and Jeff Finnin, our Chief Financial Officer. As we begin our call, I would like to remind everyone that our remarks on today's call may include forward-looking statements within the meaning of applicable securities laws, including statements regarding projections, plans or future expectations. These forward-looking statements reflect current views and expectations, which are based on currently available information and management's judgment. We assume no obligation to update these forward-looking statements and we can give no assurance that the expectations will be attained. Actual results may differ materially from those described in the forward-looking statements and may be affected by a variety of risks and uncertainties, including those set forth in our SEC filings. Also, on this conference call, we refer to certain non-GAAP financial measures, such as funds from operations. Reconciliations of these non-GAAP financial measures are available in the supplemental information that is part of the full earnings release, which can be accessed on the Investor Relations pages of our website at CoreSite.com. Now I will turn the call over to Tom.

Good morning and welcome to our fourth quarter earnings call. We're pleased to report continued execution of our business plan in Q4, delivering solid growth and finishing out 2014 as a strong year for our company. During the year, we worked to make our Organization leaner, more efficient and more productive and we believe that our work is reflect in our financial and operating results. Our financial results for 2014 reflect solid growth over 2013, with increases in revenue, adjusted EBITDA and FFO of 16%, 20% and 20% respectively, all excluding the impact of non-recurring items from the first half of the year. We believe that in Q4, our momentum continued to accelerate, with our Q4 results compared to Q4 of the prior year reflecting stronger growth than our year-on-year results. Specifically, Q4 2014 over Q4 2013 results reflect growth of 18% in revenue, 28% in adjusted EBITDA and 25% in FFO. We achieved this strong top-line growth while simultaneously working to make our organization simpler and more efficient. Reflecting that work, G&A as a percent of revenue decreased by 140 basis points in calendar 2014 over 2013 and correspondingly, G&A as a percent of adjusted EBITDA and FFO declined by 400 and 500 basis points respectively. We believe that we accomplished stronger growth with lower relative expense by simplifying our internal structure, streamlining decision-making and enhancing clarity among our employees. A key component of our work in 2014 to simplify and increase clarity across our organization was to specifically address our sales and marketing functions. To that end, we view fixed and mobile networks, cloud and IT service providers and the enterprise as the three legs of the stool that support differentiated value in the data center. Early in 2014, we simplified our sales structure to organize our teams…

Thanks, Tom and hello, everyone. I will begin my remarks today by reviewing our Q4 financial results. Second, I will update you on our development activity. Third, I will provide an update regarding our capital investments and our balance sheet and liquidity capacity and fourth, I will introduce our guidance for the year. Turning to our financial performance in the fourth quarter, data center revenues were $70.6 million, a 3.1% increase on a sequential basis and an 18.9% increase over the prior-year quarter. Our Q4 data center revenue consisted of $59.1 million in rental and power revenue from data center space, up 3.7% sequentially and 19% year-over-year; $9.5 million from interconnection revenue, an increase of 4% sequentially and 21.2% year-over-year; and $2 million from tenant reimbursement and other revenues. Office and light-industrial revenue was $$1.9 million. Consistent with our performance in the first three quarters of 2014, we continued to drive solid growth in our same-store MRR per Cab E. During the fourth quarter, same-store turnkey MRR increased 7.1% year-over-year, while same-store data center occupancy increased 710 basis points to 81.7% year-over-year. Q4 lease commencements represented $4.9 million of annualized GAAP rent, comprised of approximately 34,000 square feet at an annualized GAAP rate of $145 per square foot. Renewals in the fourth quarter totaled approximately 44,000 square feet at an annualized GAAP rental rate of $153 per square foot and represented mark-to-market growth of 2.6% and 5.2% on a cash and GAAP basis, respectively. For the full year, cash rent growth of 2.9% was in line with our guidance range. Churn in the fourth quarter was 1.4%, bringing the full-year rate to 5.6% or 1.4% on average per quarter, which is also in line with our guidance range. Our backlog of projected annualized GAAP rent from signed but not yet…

[Operator Instructions]. Our first question comes from the line of Dave Rodgers with Robert W. Baird. Please go ahead with your question.

Tom, maybe talk a little bit about the higher churn that Jeff mentioned here toward the end of the call. It sounds like it's pretty localized or specific, so wondering if there's a particular market or specific asset that's going to drive some of that churn and what the outcome you expect there is?

Sure, Dave. There are really three specific items that we're thinking about as we guide to a little higher level of churn. First and we'd note we expect that to be happening in the first half of the year. Those three items are and the first item may occur at any time during the year, but we're hopeful that we can accelerate the backfill of some of the remaining space from the building at SB3, where we had formerly had one large customer and then we backfilled some of that. If we're able to accelerate the backfill of the rest, you will see an acceleration of the churn of that former single-tenant customer. The timing of that and the likelihood is uncertain, but we've built that into our model and the timing is equally uncertain, but we thought it prudent to say this might come about during the year. For that to happen, we would also have an offsetting backfill, so it shouldn't impact cash flow as to that piece of churn. The other two components are customer and customer-specific, one of our larger content customers has just changed part of their data center architecture to needing lower power. So we're working through refitting them in our portfolio where it is appropriate to do so, but we expect to see some contraction from that customer in a couple of locations. They're widely distributed. This change is not happening to all deployments all the way across our company, but we do expect some to come from that and we expect that to really take place more in the beginning of the year and then be worked through. The third dynamic in the churn guidance is we have a larger enterprise customer that acquired some businesses and assets in 2014, a component of which had fee-owned data centers in the stuff that they acquired. So they're going to move one component out of one of our LA buildings over to a fee-owned building that they just picked up that has a lot of spare capacity. So I don't think anybody should interpret our churn guidance as something endemically different about our business model or about the stickiness of the customers. These are, in general terms not the performance-sensitive, not the smaller stuff with high cross-connects. These are specific things and sometimes the ball bounces that way and we expect it to bounce that way in the first half of the year.

Maybe a follow-up to that with regard to the leasing spread guidance for the year and where you expect rents to be. Looks like this year of expirations is a fairly high number for the expiration schedule for you in terms of dollars per foot or pricing, but can you talk about the guidance of up 2% to 5% maybe being a little bit more cautious than we've actually seen? Is some of this churn related to this pricing or is this just where market conditions are and are you seeing more pricing pressure in the market?

That mark-to-market, number one, is distinct from churn, so to the extent somebody churns out, releasing that does not go into the market-market calc for us. That calc is only an in-place lease that renews. Secondly, the mark-to-market is on rent only. As we've been saying for a while now we're really working to increase the profitability of our business and returns on capital through product mix and so there are times when an in-place customer is rolling where we might move the needle more in mark-to-market we might get more uplift in the non-rent components of the product mix. So I would just say, Jeff leads that activity, he has done a great job in looking through what will happen. We feel good about the forecast for rental mark-to-market and we're going to try to improve on that in other areas, but as to leases that stay in place and renew, I would expect the improvements in other areas to be on the margin.

Thank you. Our next question comes from the line of Stephen Douglas with Merrill Lynch. Please go ahead with your question.

I guess two questions if I could. First, specifically on the wholesale customer at VA2, maybe for you Jeff, can you just provide a little bit more color in terms of how that ramp occurs, specifically on the power side? And then second question, maybe for Tom, just interested in your thoughts on the proposed Telecity Interxion deal both from a strategic standpoint and maybe as it relates to the existing cross-selling agreements you have there? Thanks.

Overall, that customer ends up deploying into our VA2 data center in the second quarter of 2015. As you can expect with some of our larger wholesale deals, many of those deals, especially to the extent they are at the size in which this one is, they will ramp in over that over a period of time. For this particular customer, you can expect that to ramp in over about a two-year period of time.

We're under a tight [inaudible] under that lease and we're not really able to give any information regarding the economics or give any information that would support backing into them. So for anybody out there, if that's one of your two questions, you might want to pick a different one. And Telecity and InterXion, it's consolidation among the three leading folks in Europe is to be expected and it makes a lot of sense. The consolidation in terms of just strategic platform will be good for both companies involved. We know that, that deal isn't done and other dynamics may be at play, but that - consolidation among the leading guys in Europe is healthy for Europe and for the industry. As to what that points toward elsewhere, my guess is in the immediate term, maybe not much. When two big companies merge, there is a lot of work to be done there. My guess is that, that deal is going to take its time to get completed and digested and that will be it for Europe. Our view of M&A in the states has not changed from the past several calls that we've addressed it.

Thank you. Our next question comes from the line of Jordan Sadler with KeyBanc. Please go ahead with your question.

First, just curious if you could address market rent expectations. I see that the first priority here is lease-up and it ties in well with, as you have discussed before, filling in around some of the hard work you've done over the last year in putting the anchor tenants in New York and here in Virginia. Just maybe curious just about market rents and the trends you are seeing and then what the impact might be of just the type of leasing that you're doing?

Sure. Again, for our business, it's important to think about market rents but also, again, product mix. So with regard to market rents, for the same leasing opportunity with the same customer in 2015 as in 2014, we expect some further strengthening. I don't think it will be dramatic, but you will see some further strengthening, probably in most marks other than New York, New Jersey. We don't expect New York, New Jersey to go down, but nor do we expect it to strengthen meaningfully, but perhaps in Virginia, in the Bay Area even more likely, you will see some strengthening. LA will probably have that same 3% growth that's it's been in LA for quite some time. So for the same lease and the same requirement, that's our view of market rents. That said, what we're really focused on accomplishing in 2015, as we said, is to increase the volume of smaller transactions and importantly, increase - to take it from other industries, the ARPU of each square foot or each kilowatt that we sell. So as you said, Jordan, that dovetails into what we've already executed on in the east. We brought in some anchors. We really want to start driving ROI. That dovetails into being limited on the capacity in the Bay Area and frankly in LA, that's pretty much all we've been doing for quite some time, are those smaller and mid-sized transactions. With that orientation, with the eastern region, Virginia and New York with anchor leases in there, with limited inventory in the Bay Area, I would be surprised if we sold as much square footage volume in 2015 as we done 2014. But I would say, we're very focused on working to maintain the rate of earnings growth of the company. You can see, just the math of our industry, a 20% increase in ARPU can point toward a 40% increase in adjusted EBITDA per unit of capital deployed. So we're very focused on that relationship and we'll work hard during the year to take advantage of where we stand and our ability to increase ROI. I hope that's helpful.

It is. As a follow-up and this is implicit in some of your comments in that you look to maintain the growth, is that while you may sign less square footage this year, it's safe to assume that your optimism and the comments surrounding the momentum into 2015 and that the revenue signed or the rent signed in 2015 could potentially meet or exceed what you did in 2014?

I wouldn't say that. Frankly, that would surprise me if that happened, but the rate of growth of earnings - distributable cash flow and adjusted EBITDA, we're going to work hard to continue to drive that - but our objective, you will see in our objective for the year is to continue to drive that with fewer square feet and kilowatts sold and that will speak to likely a lower growth in rent, that's not to be unexpected. Don't it expect to be dramatic, but the fundamental message is, it would be natural for folks to look at CoreSite's year this year and say, they got sales running again, Q4 finished out really strongly in TKD sales, are we going to see a 5% or 10% growth rate on that in terms of rents sold and top-line revenue and we're saying no. We could, but I would be very surprised.

What was the nature of the accelerating momentum comment then? What is that focused on? Is that EBITDA and cash flow and distributable--?

Exactly. It's the bottom line. And again, our--

That's all we care about.

Yes. And especially related to how many capital dollars we consume to drive it. We're very focused on that relationship.

Thank you. Our next question comes from the line of Jonathan Schildkraut with Evercore. Please go ahead with your question.

I thought the chart, Jeff that you provided on the breakdown of revenue from different customer verticals was interesting and I was wondering if you could give us a little perspective on that, because it's a new chart and maybe a year-over-year. Which verticals was the growth really coming from and will we see a notable change in the percent of revenue driven from those particular groups? In particular, I would love to get an update on your progress in building incremental on-ramps to some of the cloud service provider platforms? Thanks.

On page 17 in the supplementals, which you are referring to and historically we have provided the breakout on a vertical basis, simply based on the number of customers we've had. So as we continued to receive questions, we thought this would be helpful in terms of the rent associated with each of the verticals. In terms of where has it changed as compared to 12 months ago, really where it has increased and I wouldn't say it's enormous, but where it has increased is really the work around networks and cloud. What that's driven by is again the sales execution during the year in terms of that being our two best verticals for the year, as Tom indicated in his prepared comments and so that's really where you saw some of the increase year-over-year.

On the forward, you might see 2015 revenue, new-build revenue sold to the cloud and the content, go down a little bit from where it was in 2014 and some of the other areas go up. I would say I wouldn't expect network and mobility to change a ton. It could be that other - that the share of other enterprise gets a little bit larger relative to cloud and that really circles back to some of the larger deals we did in 2014. Sometimes the cloud and the content verticals take down bigger slugs of space. So if you're - if your leasing orientation for a coming year is to decelerate around that, you might see a deceleration in booked revenue in those two verticals. I hope that helps.

It certainly does. If I can ask a second question, just in terms of looking at the cash flow statement and the guidance for 2015, the guidance is better than we anticipated on the EBITDA side and FFO side and at the same time, capital is coming in a little bit lower. So we see a pathway here that the company will generate positive free cash flow. It's the first time, based on our model and while dividends are still going to be a drag on cash, as we think about the company's need for incremental financing, given this important inflection in the year is there any incremental commentary you can give us? Thanks.

Yes. Jonathan, first and foremost as you look at our guidance and what we've laid out from a capital expenditure standpoint, given the liquidity we have and the capacity in our revolver, we've clearly got the liquidity to fund the business plan for the year. Having said that, we continue to look at the market and where rates are and the pricing of our instruments that we have in place and to see whether or not we can provide any incremental value by modifying those. As we look out into 2015, similar to what we've done in previous years, we would probably look to term out some portion of our debt. The only question is associated with how much and what type of instrument to use. As you know, we like to maintain as much flexibility in our capital structure as possible and obviously, that weighs in terms of what that decision ultimately would be. The timing of it obviously is uncertain at this point, but it's something we're watching closely and ultimately working internally and with our Board to figure out exactly what that next step looks like.

Jon, I also want to circle back. I half-answered your first question and I want to ensure clarity to the extent I can around our view of leasing and sales in 2016, among the verticals. I said, the revenue sold into the cloud into the content may decline as a percent to total new revenue sold in the year, but again, that is because of the very small number of larger deals. Our focus and the part that I didn't answer as you asked about on ramps and our activity around that area - our focus is to increase the number of new leases signed in - certainly in the cloud vertical and perhaps also in the content vertical. That's really focused on these on ramps. We have attractive penetration among one of the leading public cloud providers. We have very attractive penetration among private clouds stood up through SIs and MSPs that are in a hybrid architecture with the public cloud. We're later in the game as you're very well aware with a couple of the other larger or what we expect to be larger public cloud providers. Some of those providers are later in the game, as well, but we're optimistic that in the year ahead, we'll start to see movement around those, while we also further our relationship and the on ramps with the leading group we're with right now. So we're very focused on driving not only the switch component of getting onto the cloud, but also the higher-value cashing component. We're just not super focused on trying to do longer-term storage. So I hope that color helps to give insight into how we're thinking about what we're trying to get done.

Thank you. Our next question comes from the line of Jonathan Atkin with RBC Capital Markets. Please go ahead with your question.

So coming back to Tom's earlier comments about square feet sold, kilowatts sold, was interested is it competitive factors in the markets where you operate or just the contour of overall demand that led to you make those observations? And then was interested also in the occupancy analysis and maybe your new disclosure addresses some of this, but it looks like percentage occupancy in Chicago and New York has decreased. I just want to be clear of the reasons for that? Thanks.

The first question Jon, are you saying, hey, Tom, you've said probably leased fewer square feet in kilowatts maybe this year than last year and more color around that? Is that the question?

Yes.

It's not because of market dynamics. Again, I would expect rents to increase in most of the markets in which we compete. It's really because of how we're focused on running our business this year. Really that's no different than it has been for many years on the trail. We just hope that folks remember, 1 year, 1.5 years ago we said, we'll probably add a couple of large wholesale deals into the mix because on an IRR basis we think that's smart math on new big developments. Really what's underpinning my comments about the forward is we've accomplished that, so now we don't plan on - and those deals were done at lower ARPU and lower ROI than what I think of as our more day in and day out core business. So we're going to work hard this year to do less of those and more of the more profitable core business. But we see the market opportunity mainly getting better and as you have hopefully known from us for a long time, with regard to wholesale, we really hit the wholesale market for two reasons. One is IRR math around new developments and the other is spot market, opportunistic pricing. If we see significant spikes, we'll go hit that spot market, but the core of what we work to accomplish day in and day out is this higher value, higher ARPU component and we just expect that to be a greater portion of the sales in 2015.

Jonathan, on your questions about Chicago and New York, when you look at Chicago quarter-over-quarter, the occupancy percentage actually has increased slightly. What you might be referring to in terms of occupied square feet actually came down. The reason for that, we had a customer that exited a part of a floor there in our data center and that floor has now been put into redevelopment. So you see that on the construction under development tables back on page 20 in our supplemental. So that space is being redeveloped and we'll put it back into our operating portfolio as soon as it gets completed. In terms of New York, we had a customer move out and that impacted our occupancy negatively for the quarter. Obviously, we're working to backfill that particular space at this point in time.

I would say in New York, the move-out was about 2700 feet, between 2000 and 3000 feet at NY1. What we've seen during this year at NY1 is more and more transaction and more of the stuff we really want moving into that. In a year to trade out one 2000- to 3000 foot requirement and put in eight, 10, 15 more valuable ones, we like that trade, but that's what happened in New York, is we had to move out of a larger requirement.

And then on the lease expirations, you had the schedule for 2015 through 2017. Does anything jump out? Is it a lot of smaller leases or are there any years in which you're more indexed towards major or larger expirations occurring?

Jonathan, obviously we gave some color around 2015 and that is obviously the area that we went into some granularity around. The only other thing you can think about is when you look out into 2016, you do have that customer at SB3 that ultimately will leave the premises there at SB3 and that is the space that has been backfilled, at least one-half of it at this point in time and we're working to solve for the rest of it. Keep that in mind, as you look through. That may drive the churn up, but keep in mind, as Tom mentioned, a large part of that has already been backfilled from a cash standpoint.

And then finally, the metered tower mix growing this year in terms of new business, is that just a reflection of the VA2 situation and therefore it would be weighted more towards 2Q, 3Q, 4Q or are there other dynamics going on?

It's really three locations and a small number of deals. It all points to, in 2014 we did a handful of larger deals more than we usually do, so there's the large lease at VA2, the anchor lease, there's also the collection of mid-sized but metered leases at NY2 and then there's a larger backfill inside SB3. So you have a fair amount of metered activity among that group. The backfill in SB3 isn't - it's a metered deal replacing a metered deal, but on the east coast, in NY2 and VA2, just a significantly greater proportion of metered deals than is our norm in a typical year. You'll see that power come in the income statement this year, so you will see that dynamic. We expect to do a greater proportion of breakered deals or of smaller deals this year, new signings and we expect to see that come back into the income statement beginning in 2016. Hopefully that helps.

Thank you. Our next question comes from the line of Emmanuel Korchman with Citigroup. Please go ahead with your question.

Jeff, in your prepared remarks, you mentioned continuing to focus on simplifying the sales and marketing platform and that contributing to a lower expense run-rate there. Could you elaborate on what you mean by simplifying? Is it less heads? Is it a more a focused ask of each person working within that platform? Is it different incentives, depending on what type of leases they're doing?

Emmanuel, I will give you some color around that and Tom can add to it, as well. But in general it is making sure that our productivity is increasing and productivity increasing goes to the standpoint, a little bit about what Tom comment on his comments around is streamlining, decision-making and making sure that we're as efficient and effective as possible there. The only thing I would had is that, as you saw, as a percentage of revenue come down a little bit in the quarter, we do expect it to go up a little bit as we've been adding some heads and we just didn't get them added in the fourth quarter, but they've come on here early in Q1 of this year. So expect that to come up around 5% to 5.5%, is what we guided to.

We had positions [inaudible] and we did eliminate a few positions in 2014 really just to reduce the extent to which people were bumping into each other and to create a leaner operating environment and quicker decision-making. We're just fundamentally pleased that some pretty minor adjustments around those things has helped contribute to significantly greater sales. It's just communication, making communication simpler.

Tom, in the past you have talked about how built out that organization is from a revenue production standpoint versus an expense load perspective, is the easiest way to think about it. Where would you say that is right now?

We're pretty close to equilibrium, Emmanuel. Any given month, you might have more churn among quota-bearing positions. I don't think we've had that in the last month or two but it will oscillate over the coming year, but where we stand right now is pretty close to equilibrium. I would say that our view of compensation to the sales team and our view of measuring productivity among that team is a deeper view now than it was a year ago. A year ago, that view really stopped at the ARPU or the GAAP rent line and now we're really focused on exactly what we described a few minutes ago and that is the distributable profit to the investor related to sales force activity. So we're measuring that relationship and we're defining productivity based on that metric and we believe that we can continue to get better.

Maybe another one for Jeff, it looks like some space came out of your office and light-industrial pool, but it doesn't look like that's had a major hit on rent, in 2014 nor in your guidance. How should we think about maybe what's going on in that bucket in 2015 and also do you plan to - you gave a new expiration schedule here for the office and light-industrial space, do you plan to renew those as they come due or are those all going to roll back into the development pool?

At least in terms of what happened in the quarter, Emmanuel, we had a particular customer that was leasing one of our light-industrial buildings out on our Santa Clara campus and that customer's lease came to an end about midway through the fourth quarter. So at this point in time, that particular light-industrial building is vacant. It's similar to what we had to do when we ultimately ended up building SV5 which was to make sure that our customers are out of there so at some point we can tear down the building and get it ready for future development. That's what happened in the quarter. That's really what happened in terms of the OLI life of the space for the quarter. In terms of going forward, the important thing is when you look at ultimately the remaining square feet that exists inside that office portfolio, you will see that the lion's share of that is office portfolio at SV1. That particular space is leased on a long-term basis to a governmental entity and so that's not going to change at any point in the near-term. So give that some thought in terms of as you guys look at the office. Hopefully that helps.

As Jeff said, as to that OLI building, the light-industrial building on the Santa Clara campus, we don't expect to attempt to re-lease that. It's available to be repurposed into a data center and the timing and the certainty of that is a discussion point, not decided, but we don't expect, within our guidance and within 2015, to rush out to market and try and backfill that with an industrial tenant.

Thank you. Our next question comes from the line of Colby Synesael with Cowen and Company. Please go ahead with your question.

Two questions, if I may. It seems like from an industry perspective there is an increasing focus on customers going to metered pricing as opposed to breakered. While I recognize that the company is going to focus more on smaller deals in 2015 versus 2014, can you just give us some color on where you think the line is in the sand these days in terms of customers who are still comfortable going to breakered power versus metered and maybe how that's been changing over time? And then the second question, as relates to 2016, which I recognize is obviously still a long ways out, but considering the planning process that's required to put new space on-line, how can we think about some things that might not be coming in guidance whether it's potential land purchases, M&A, you just talked about, for example, potentially reformatting some of your office space. How are you guys thinking about that right now, whether it's based on specific cities where you think you will need space or just more broadly how you are thinking about how you solve for that? Thanks.

As to the latter, you look at the four priorities that we laid out for our capital and we just expect to honor that sequencing. So in markets where we have sold successfully and we could generate attractive returns on capital, if we're out or about to be out, those are the areas where we're discussing how to approach that. Is it a new building, how else do we think about those? We're not going to talk about exactly what we may or may not do until we've made decisions, but the guiding principles are firmly established in the four categories of capital priority and then you match that against our property table and say, where have they been successful and where do they seem to not have a lot left? And then we rank these different priorities and make decisions, but we can't point to any specifics until we make decisions. We haven't done that yet. What was the first question?

Metered versus breakered.

Metered versus breakered, at a high level, the industry seems to have settled in reasonably well around 130 kilowatts and smaller, tend to have a much greater percentage of non-metered pricing models or power pricing models. And then you have that 130 to 250 where there's a lot of hybrid models. There are draw-cap models, other pricing models that are hybrids between metered and breakered and that hybrid model sometimes reaches up close to 500 kilowatts. Above 500 kilowatts, it is predominantly a traditionally metered market. So one of the things for us is to - we hope we have studied very carefully the hybrid models and the kinds of customers and the kinds of customer deployments where it might be more attractive for us to sell under a hybrid model versus the kinds of customers and deployments where it's unattractive to us to sell into a hybrid model. So we just - it's all mathematics and we just try to have good statistical data, analyze it and then be thoughtful about our go-to-market approach around those things. But that's how we see it. We see 130 and below pretty much breakered, 130 to 250, hybrid and above 500, almost always metered.

Thank you. Our next question comes from the line of Barry McCarver with Stephens. Please go ahead with your question.

You got most of them already covered. Back on the discussion around M&A, you talked about that internationally, but what about consolidation here in the U.S. some. We still have a pretty good number of mid and large providers with some unique footprints. Your thoughts on what we could see here this year or next?

Over the very long haul, consolidation among providers is probably a healthy thing and maybe a natural outcome over a long period of time, but you also have different social dynamics going on and different multiples. It's very hard to determine what's going to happen among publics over the next year or two, that story might take longer to play out. Who knows? There are private assets that I think will come to market and you will see different among the publics going after those private assets. But even there, that the publics now have a pretty good view of what fits for them and there's, at least for us, we think there's a fairly logical outcome among some of the private assets and where those end up has more to do with the timing than anything else.

Okay. And then, Tom, you said in your prepared remarks that without that large wholesale customer in the quarter, average rental rates would have been above the previous 12 month average?

Yes.

Can you give us an idea - can you give a little more color about exactly how much higher?

I can't. We really want to but if we get specific then that leads to back solving into the VA lease and we're just prohibited from doing that.

Thank you. Our next question comes from the line of Matthew Heinz with Stifel. Please go ahead with your question.

I was just hoping to get back to your commentary around the composition of cloud and content bookings in the current year and your focus on signing a higher number of smaller-sized deals. Was just hoping to get some detail around the application or workload type you be targeting as compared to last couple of years and is that really more of a function of some demand shift you're seeing or is that something that's more strategic on your end?

It's really what we're trying to get done. And it's the timing of when some of the other - what we think will be larger public clouds. Some of those organizations are going to be coming to market with more on-ramps and as such more caching in 2015 than the market saw in 2014. So we would like to grab our share of that and we think that will be greater than it was last year. So as to the larger, longer-term storage component of those companies' architectures, we did more of that in 2014 than we expect to 2015.

And then just a follow-up. I was wondering if you could give us a sense of how your same-store MRR per cab breaks down by its component, maybe in terms of the base co-lo rents versus the newer fiber connectivity and then the legacy copper connectivity?

The best place to take it is right off the income statement. You've got data center revenues and you've got interconnection revenues.

That's representative of what it is, Matt. When you look at, overall, when you look at the growth associated with the dollars year-over-year, I can tell that you roughly 75% of that growth is coming from our increase in power revenue and increase in interconnect business. In terms of the individual components, it's consistent with what you see on the income statement.

To that, we've seen nice growth in MRR per cab over the last couple of years. Getting back to what we communicated about a greater proportion of metered power coming into the income statement in 2015 than the historical norm, you will see that MRR per cab growth slow down or - I don't know if it will flat-line for a Q. It is going to slow down, because of this metered dynamic and because of these larger deals with lower rent. You will see that moderate in 2015 and if we execute what we plan to execute in terms of new sales in 2015, we would expect to move that up at a faster rate beginning next year.

Right, I was getting at the flattish nature of the MRR this quarter on a sequential basis. We've seen a trend of pretty steady quarter-over-quarter increases in that number and I was just wondering if - obviously the power dynamics have a lot to do with that, but I was wondering if there's anything else you are seeing in terms of conversions. I didn't notice that you gave us the fiber volume numbers this quarter in the prepared comments. Did I miss that?

I thought we did. If we failed to, we'll certainly update those next quarter. There is no - the trend around fiber growth has been favorable.

It's been consistent with what we saw in the previous quarters as well, Matt.

Thank you. Our next question comes from the line of Tayo Okusanya with Jefferies. Please go ahead with your question.

Most of my questions have been answered. Gentlemen, in light of what happened at DFT this quarter and the unpleasant surprise of a tenant basically now not paying rent, just wanted to ask questions about your overall tenant roster, whether there was anyone on your watch list, where over the next six to 12 months, you do have some concern about that company's viability, that maybe we should know about sooner than later?

Not really. To the extent we have any views around that, it's reflected in the churn guidance and in the churn discussion around those three dynamics. We've got an enterprise in LA. We've got maybe the opportunity at some point during the year in SB3 and then you have a content person re-architecting to some extent, that's it. I just look at this dynamic as real estate 101. Look, there are times when just credit tenancies are fortresses in terms of churn. There are times when heavily, heavily multi-tenanted buildings with a good diverse rent roll are steadier. I'm not suggesting one business model is better than the other. I'm just saying those are both ways of managing disruption and our business model speaks to lots of customers, lots of leases, heavily, heavily multi-tenanted and that's another way of managing churn and disruption. So to the extent we think there's any out there, we've disclosed it on this call.

And then again, while I know on a near-term basis you guys are definitely focused on the markets you are already in and expanding those assets, I'm just curious with many of your other peers operating in, quote unquote, Tier 2 market, how attractive you find some of those Tier 2 marks whether a little bit, not at all?

Tayo, I would just fit into it those four priorities and that would be in bucket number four.

Thank you. Our next question comes from John Bejjani with Green Street Advisors. Please go ahead with your question.

Most of my questions have been answered but just wanted to ask about G&A. In your guidance you've got a growing 10% year-over-year. Can you just offer some color as to what is driving the increase?

Yes, large top-line growth. G&A is growing much more slowly than revenue and much more slowly than profit, but our business is still growing rapidly and you are going to see some G&A growth. The math says the G&A is getting more and more efficient every year, but as long as we keep growing, you will probably continue to see some growth in G&A. Our job is just to make that growth at a lower rate.

Yes, I just figured most of the - as you guys grow, a lot of this would be at the sales and marketing level as opposed to corporate level, so just hence my question?

Just in general, John, as Tom mentioned, continuing to grow some level of G&A at a much slower pace than what the top line is growing at is obviously something we continue to watch and it's really just necessitated on incremental individuals we need to support the office and to make sure we're supporting the go-to-mark platform, that's really what's driving that. They're not enormous increases in headcount, but there are obviously some amount in order to make sure that we're giving them the support they need as they go out and execute.

Ladies and gentlemen, there are no further questions at this time. I would like to turn the floor back over to Thomas Ray for closing remarks.

Thank you. Well, we want to say thanks to the investment community and to our Board and for everybody for helping make 2014 a great year and giving us optimism for running a better business, doing more with an investor's dollar of capital in 2015 than we did in 2014 and continuing to grow. More than anything, I want to also say thanks to the employees at CoreSite. People have worked incredibly hard. We've been through a lot of change and we've just gotten better and better and that's because of the heart and soul and hard work of the people, so thank you there as well. We're all going to continue to work hard to serve our investors. Thanks a lot.