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CoreSite Realty Corp (NYSE:COR)
Q1 2020 Earnings Call
Apr 30, 2020, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to CoreSite Realty's First Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host Carol Jorgenson, Vice President, Investor Relations and Corporate Communications. Please go ahead.

Carole Jorgensen -- Vice President of Investor Relations and Corporate Communications

Thank you. Good morning, and welcome to CoreSite's First Quarter 2020 Earnings Conference call. I'm joined today by Paul Szurek, President and CEO; Jeff Finnin, Chief Financial Officer; and Steve Smith, Chief Revenue Officer. Before we begin, I would like to remind everyone that our remarks on today's call may include forward-looking statements as defined by federal securities laws, including statements addressing projections, plans or future expectations. These statements are subject to a number of risks and uncertainties that could cause actual results or facts to differ materially from such statements for a variety of reasons. We assume no obligation to update these forward-looking statements and can give no assurance that the expectations will be obtained. Detailed information about these risks is included in our file filings with the SEC. Also, on this conference call, we will 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 our full earnings release, which can be found on the Investor Relations pages of our website at coresite.com.

With that, I'll turn the call over to Paul.

Paul Szurek -- President and Chief Executive Officer

Good morning, and thank you for joining us. Today, I'm going to cover our first quarter highlights, and Jeff and Steve will follow with their more in-depth discussions of financial and sales matters. Our highlights for Q1 2020 include new and expansion sales of $12 million of annualized GAAP rent, a record quarter for our core non hyperscale leasing. Operating revenue of $147.4 million, which grew 6.1% year-over-year. FFO per share of $1.29, which increased $0.04 year-over-year or 3.2%. Power and cooling uptime for the quarter of 100% and completing a new computer room in NY2 and keeping our major construction projects on track while navigating COVID-related changes to local regulations. Our strong performance cannot obscure the fact that recent weeks have been challenging for all of us as due to this pandemic. I expect those listening to this call would like us to discuss the ways in which this situation affects CoreSite. First, we're fortunate to be in the data center space. Our data center campuses and related connectivity services meet essential needs of businesses, governments, healthcare and academia as they work through the challenges of this pandemic, along with their normal operations.

We also host large customer ecosystems of networks, cloud and service providers, content providers and enterprises in major metropolitan U.S. markets where capacity continues to be in high demand. Some of these cloud network and content providers are experiencing increased demand at the network edge at this time for populations who are sheltering at home and working remotely, driving online education, collaboration, data analysis, entertainment, gaming and similar use cases. Hence, it appears the economic impacts of the pandemic have so far been more constructive for CoreSite than for most companies, and we experienced a pretty smooth transition to operating in a very unusual business environment. Our work in previous years to hire and cultivate great talent, address new technology platforms and develop extensive procedures and scenario training showed its value in making us more resilient in an extreme operating environment, in which it was more important than ever to meet customer needs with great agility. In addition, our products and services made it easier for customers to operate effectively in our data centers with minimal and, in some cases, extremely rare physical visits. Customers can provision new space, power, cross-connects, OC exports, redundant paths and remote hands via our customer portal through which they can also look at their temperature, humidity and power draw.

Second, we have learned from successfully managing through the impacts of hurricanes, wildfires and other natural risks as well as from regular business continuity planning drills to proactively source supplies, evaluate and design safe operating environments, strategically and adequately staff our data centers to ensure business continuity and safely provide critical customer access. And third, we're thankful for our team and their innovation and dedication to constantly serve our customers with exceptional service, even in trying circumstances like those experienced in recent weeks. Most of these elements have been strengthening our sales performance for some time and drove the excellent performance this quarter. Turning to property development. We have sufficient capacity to turn up services quickly, which will support both existing and new customers across our markets this quarter. Our major construction is on track enabling us to presell 11% of SV8 Phase three in Santa Clara, place into service a 35,000 square foot computer room at NY two in New Jersey, and continue to pursue pre-leasing opportunities for CH2 in Chicago. It's important to note that we still rely on local jurisdictions for final inspections at permitting as they deal with their own new work rules.

That said, we still expect to deliver CH2, LA3 and SV8 in line with planned completion dates. A few other data points will hopefully round out the picture. We believe customer satisfaction is high based on the higher-than-normal volume of feedback from them and their strong expansion demand, which made up 94% of our sales for the quarter. Customers have been able to decrease their visits to our data centers by approximately 1/3 compared to precrisis levels. Sales and pipeline growth were strong. And most importantly, we kept critical access available to our customers as we focused on solutions to enable them to deploy and operate in our data centers safely and with confidence. While we cannot clearly predict all the ramifications of COVID-19 or their duration, we believe the increased demand from reliance on technology, connectivity and data in today's economy will, on balance, approximate or exceed the reduction in data center demand due to a serious economic slowdown, although that likely will depend on the depth and duration of the slowdown.

We expect to continue to provide excellent support to our customers and our communities, and we believe we will be even stronger as a company due to what we are learning and experiencing through this crisis. In closing, we believe the strength in our results this quarter reflect the adaptability and strong execution of our team, the strategic nature of our diverse network and cloud dense campuses and the interoperability we enable for a large and diverse customer ecosystem, which positions us well to benefit further from the secular tailwinds for data center space and demand for high-performance, hybrid cloud solutions.

With that, I will turn the call over to Jeff.

Jeff Finnin -- Chief Financial Officer

Thanks, Paul. Today, I will review our first quarter results and provide an update on our liquidity, leverage expectations and 2020 guidance. Looking at our financial results. For the quarter, operating revenues were $147.4 million and grew 6.1% year-over-year and 0.9% sequentially, including growth in interconnection revenue of 9.1% year-over-year and 3.1% sequentially. Our customer lease renewals included annualized GAAP rent of $17.3 million that represented a rent increase of 1.4% on a cash basis and churn of 3.3%, both in line with expectations. Commencement of new and expansion lease leases of $9.7 million of annualized GAAP rent during the quarter, and our sales backlog as of March 31 consists of $17.6 million of annualized GAAP rent for signed but not yet commenced leases or $22.3 million on a cash basis, and we expect all of the GAAP backlog to commence fairly ratably in the next three quarters. Net income was $0.48 per diluted share, a decrease of $0.06 year-over-year and $0.03 sequentially. FFO per share was $1.29, an increase of $0.04 or 3.2% year-over-year and a decrease of $0.01 sequentially or 0.8%.

Adjusted EBITDA was $78.7 million for the quarter, an increase of 5.6% year-over-year and a decrease of 0.5% sequentially. As a result of the current COVID-19 situation, we have received request from a small number of customers, which currently represent approximately 2.5% of annualized revenues, related to some level of payment deferral or relief from current obligations. We are addressing each customer request on a case-by-case basis, and most are being resolved by providing an additional period of time to make due on outstanding amounts, generally 30 to 60 days. While adjustments have been immaterial to date, we cannot predict whether these requests will increase over time. Moving to our balance sheet. Our debt to annualized adjusted EBITDA was five times at quarter end. Inclusive of the current GAAP backlog mentioned earlier, our leverage ratio is 4.7 times. Based on our current development pipeline and the related timing of capital deployment and commencements, it is likely we will temporarily trend higher than our target level of five times leverage in the first half of 2020, with the expectation of moderating leverage based on the timing of commencements related to our backlog and anticipated new sales.

We continue to focus on optimizing our balance sheet. Including reducing our cost of capital, maintaining adequate liquidity, minimizing volatility and continuing our disciplined capital investment. As part of that strategy, during the quarter, we executed $450 million in interest rate swap agreements at attractive rates, increasing our percentage of fixed rate debt at from 71% at year-end 2019 to approximately 95% at March 31. This is a departure from our historical approach of maintaining a balanced position between fixed and variable price debt. However, given the flat yield curve and rates, it allowed us to capitalize on a market opportunity and reduce our variability to near-term interest cost. In addition, in April, the company priced a 7-year $150 million unsecured private placement of notes at 3.75%. The notes are scheduled to close on May six with $100 million funding at closing and the remaining $50 million in mid-July. The financing provides the company the flexibility to repay outstanding amounts on our revolving credit facility, as well as providing additional liquidity for our future development projects.

The company's nearest debt maturity is April of 2022. While we expect the private placement to close as planned, please note that closing is still subject to customary closing conditions. We ended the quarter with about $292 million of total liquidity, bringing us to approximately $442 million of liquidity with this new financing, providing liquidity to fund well beyond our $124 million of remaining construction costs for our 2020 data center expansion plans. Turning to our guidance. At this point in the year, and based on what we have seen so far of the COVID-19 impacts and trends, we are maintaining our 2020 guidance and therefore, see no reason to depart from our normal cadence of revisiting guidance in connection with second quarter earnings. In closing, we're executing on our priorities to bring on capacity and translate it into increased sales opportunities. We continue to closely manage our operating costs with attention to the current market dynamics, while thoughtfully balancing and driving our capacity development and customer opportunities. We have plenty of liquidity. Our balance sheet is strong. We do not have any near-term debt maturities, and we believe we are well positioned for the long term.

With that, I will turn the call over to Steve.

Steven Smith -- Chief Revenue Officer

Thanks, Jeff, and hello, everyone. I'll start off reviewing our quarterly sales results and then discuss some key execution themes for the quarter. As Paul shared, we had a strong quarter of new and expansion sales. We delivered $12 million of annualized GAAP rent, primarily reflecting the strength of our core retail leasing, including $8.4 million of retail sales, our highest in three and half years as well as $3.6 million of scale leasing. This quarter's sales reflects success for many aspects, including important expansions with several strategic existing customers. Winning in key verticals with Network & Cloud providers that included two new native cloud on-ramps from Tier one providers to our platform in Chicago and Virginia. Expanding services with enterprises whose businesses absolutely need low latency for what they do, including media services, satellite and video streaming providers as well as gaming, education and collaboration companies. We also saw success in moving quickly to meet the immediate demands of a modest amount of unexpected new requirements that emerged late in the quarter as a result of COVID induced changes to business and consumer behavior. Further, we saw solid sales traction in the governmental space.

Turning to new logos. In the first quarter, we won 31 new logos. three quarters of these logos were enterprise customers. While the initial revenue contribution of these new logos was lower than past quarters, we have paid some great new strategic names that we believe will provide ongoing future opportunities, including a well-known video sharing networking service provider, a large consulting, technology and outsourcing company, providing application outsourcing and cloud services, a leading healthcare software company, offering hosted solutions and promising other accounts. As you know, winning new logos is a key tenant of our strategy and provides the seeds of future revenue growth as they expand services in our platform. Moving to pricing. Overall pricing in our markets was generally stable. We continue to see progress in Northern Virginia with strong first quarter sales and elevated pricing compared to the trailing 12 months, making it our highest contributing market for new and expansion sales in the quarter. Fundamentally, driving our first quarter results was our strong sales execution as our team continued to find new and effective ways to reach and resonate our value to new prospects and grow long-term partnerships with existing customers.

Added to and leverage the different differentiating factors of the CoreSite campus ecosystem model, including the recent additions of the DK Experian Exchange and several other cloud providers to our SDN based Open Cloud Exchange, engaged our solution architects and engineers to design creative, cost-effective solutions to solve all customers' changing needs and continue to collaborate with channel partners to extend our reach in helping enterprises evaluate, address hybrid and multi-cloud architectures for their digital journey, all of which was amplified by the excellent service delivered by our customer service and data center operations personnel. Sales execution is always top of mind and embedded in all we do. We don't often talk specifically about it as we consider the bedrock of being successful. I hope this additional insight helps you better understand how we approach it.

To drive future growth, we continue to refine our processes, develop our team and provide them the necessary tools and solutions like the ones Paul discussed earlier that allow our customers to be more successful in how they leverage technology to drive their businesses. There's no question that technology will play an increasingly important role in almost every business' success. CoreSite is committed to providing the services and support that empower enterprises to navigate their path and pace of this new normal with flexibility, speed, security and performance. We believe focus and investment in these areas will enable us to continue to execute well over the long term. We look forward to further helping customers solve their IT challenges.

With that, operator, we would now like to open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question today is coming from Jonathan Atkin from RBC Capital Markets. Your line is now live.

[Operator Instructions] Our next question today is coming from Colby Sinosoft from Cowen and Company. Your line is now live.

Michael Elias -- Cowen and Company -- Analyst

Hi,This is Michael on for Colby. Two questions, if I may? You noted in the press release that construction remains on track, assuming that local jurisdictions are timely with inspections and permits. Are you currently seeing any delays in inspections and permitting? And my second question, given the enterprise strength or the retail strength in the quarter, are you seeing any notable changes in enterprise buying patterns in recent months?

Paul Szurek -- President and Chief Executive Officer

Let me address the first, and I'll let Steve handle the second. In our major markets where we're doing ground up development, we have not yet seen any significant slowdown in permitting inspections. But everyone's going through an evolving situation. We just got to watch that as we go forward. On smaller projects, I mean, you saw the push out of our NY2 infrastructure by quarter, that did relate to permitting inspect delays, and we have a small project in Boston that's held up by permitting actually a permitting moratorium for the time being in Boston. Steve?

Steven Smith -- Chief Revenue Officer

Thanks, Paul. Michael, this is Steve. The second part of your question, I think, was regarding enterprise buying and any changes there, correct?

Michael Elias -- Cowen and Company -- Analyst

Yes, that's correct.

Steven Smith -- Chief Revenue Officer

Yes. Well, it's been interesting because I think in many cases, as I mentioned in the prepared remarks, I mean, I think the technology is even more important than ever for really any enterprise or any business out there, given the remote nature of how everyone is conducting their lives these days. So there's no question that a brighter light has been put on technology to help solve those issues. And we're clearly at a great spot to help them through that. And over the past several years, we've really worked to try to address what was already in place as far as general demand for hybrid and multi-cloud solutions in our data center and all the advantages that come to outsourcing and a data center where they can leverage our remote personnel and all of the functionality that we have in our portal and so forth, so they can really maintain and grow their IT systems without necessarily even having to show up at all. So that value has resonated well for each enterprise. It's been different. In some cases, enterprises that are a bit more paralyzed in trying to just figure out how they work through this current pandemic, some projects may be put on hold, but others have also accelerated because they've seen the need and the opportunity to move in that direction. So on balance, I would say, it's neutral to positive.

Michael Elias -- Cowen and Company -- Analyst

Thank you.

Steven Smith -- Chief Revenue Officer

Thank you.

Operator

Your next question today is coming from Frank Louthan from Raymond James. Your line is now live.

Frank Louthan -- Raymond James -- Analyst

Great. Thank you. So I appreciate keeping the guidance. Give us some thoughts on what you think about the general pace of the business is? Are you concerned on the enterprise side that some customer trends may slow? I mean, I understand, we haven't seen quick bounce from a lot of enterprise customers in the near term, but from economic weakness and so forth, what are your thoughts on being able to maintain the pace of business if and could the back half come in a little lower?

Jeff Finnin -- Chief Financial Officer

Well, let me just comment quickly on the guidance, and then Steve before in or Paul can provide just commentary in terms of just the macro level of business. But Frank, I think I would just look at it from the standpoint that it's somewhat early innings in 2020. And as you've seen in the last couple of years, we've just not modified our guidance in that first quarter and prefer to take another look at it as we get further along in the year. And that's what we plan on doing again this year. So that gives you some context in terms of the guidance. And Steve, anything?

Steven Smith -- Chief Revenue Officer

Sure. Yes, I can give you a little bit of, I guess, more visibility on where things sit today anyway. As far as overall pipeline, in which is probably the best indicator for where we, at least, see things so far. The pipeline continues to be solid, and we still see new opportunities being created, new logos that are coming into the pipeline. So we'll see how this plays out over the long term. As Jeff mentioned in his remarks, but so far, things seem to be holding up well. And I think one of the things that, in general, as you look at overall capital and trying to do more with less, technology is typically one of those areas that people tend to lean toward and trying to maximize their dollars versus other areas.

Frank Louthan -- Raymond James -- Analyst

Okay. Great. And any thoughts on any customers that are possibly pulling forward some demand from that could come in later in the year? Do you think there's any risk of that?

Steven Smith -- Chief Revenue Officer

We haven't seen necessarily any demand be pulled in per se. I think if anything, as I mentioned, I think that this is really just highlighted or reaffirmed opportunity. It's difficult, I think, in our business to have a lot of necessarily pull in as it relates to long-term leases and that sort of thing. It's not necessarily a knee-jerk reaction. So if anything, I think it just reaffirms demand that's out there. Well, there is some that has stalled a bit because they're just trying to figure out their overall current situation.

Frank Louthan -- Raymond James -- Analyst

Okay, great. Thank you.

Steven Smith -- Chief Revenue Officer

Thanks, Frank.

Jeff Finnin -- Chief Financial Officer

Thank you.

Operator

Our next question is coming from Michael Rollins from Citi. Your line is now live.

Michael Rollins -- Citi -- Analyst

Thanks. So as you're having conversations with the customers, are there certain architectures in the way they use your facilities, the way they access the cloud that are showing to be really successful in absorbing all the shifts in demand right now in the IT loads? And at the same time, are there certain architectures or ways customers have done business where you're learning that it really wasn't the right way to structure things? And then if you have observations on either of those, what does that mean for your business going forward?

Paul Szurek -- President and Chief Executive Officer

Thanks for the question, Mike. From what we've seen, there's a continuation of demand for high-performance, hybrid cloud architectures, which we specialize in. So it's not surprising that we would see a lot more of that than other things. On the second part of your question, I think all we're seeing so far is the continuation of trends that we've described in our churn forecast for several quarters, which is older business models that are not leveraging the public clouds that are not doing so in the hybrid high-performance architecture continue to see kind of a steady burn off. That's pretty much what the data shows us.

Steven Smith -- Chief Revenue Officer

And I guess the only color that I would add to that is one of the benefits that we've seen of customers that are leveraging that model in our data centers. So they'll have a hybrid environment that is deployed in our data center, but also leveraging those native cloud on-ramps, of which, as I mentioned in the prepared remarks, where we had just added two more. Those native on-ramps really enable those customers to burst to the cloud much more quickly and economically than others. So there's cost savings that go along with that as well as just speed and capacity because you're right next to the backbone.

Michael Rollins -- Citi -- Analyst

And do you have a view to quantify what percent of your revenue base today might be considered older architectures or at-risk architectures versus what you might view as strategic and ongoing?

Paul Szurek -- President and Chief Executive Officer

So I think Jeff gave a good number on that last quarter, Jeff, I believe, 5% to 6% in that category?

Jeff Finnin -- Chief Financial Officer

Yes. It was yes, as of last quarter, it was 4% to 6%. And I'd say that, that's moderated slightly, Mike, I'd probably say about 3% to 5% as we sit here today.

Michael Rollins -- Citi -- Analyst

Thank you.

Jeff Finnin -- Chief Financial Officer

You bet.

Operator

Our next question today is coming from Erik Rasmussen from Stifel. Your line is now live.

Erik Rasmussen -- Stifel -- Analyst

Yes, thank you for taking the questions. Maybe just on sort of the the churn again. You obviously have a SV7 at the end of the year and in Q1 of next year. I think the time lines, I would think, are still intact. But are you seeing now with this current environment, COVID-19, customers who may have been on the periphery or that you thought might churn now sort of taking a better look at what the requirements might be and be able to potentially carve back some of those opportunities that you thought might be lost? And then maybe within that, can you just update us on what the plan is for that space, that nine megawatts of space that's going to be coming due?

Jeff Finnin -- Chief Financial Officer

Eric, it's Jeff. Just one quick clarification just to make sure everybody is consistent in terms of the actual dates on that SV7 customer. So five megawatts of the nine will be churning out in October of this year, and then the remaining four is essentially late Q3, call it, September 30 of the following year, OK? That gives you an idea on the timeframe. In terms of your question, as it relates to, has anything really changed, as you can see from our guidance, we've not modified our guidance for churn as it relates to this year. First quarter number of 3.3% came in toward the lower end of what our range was headed into the quarter. So that was a positive. Having said that, some of that just relates to timing. And so I think when you look at 2020, we still expect it to be in that 9% to 11%. And we do expect it to recede as we head into 2020 based on our current expectations of customer renewals and and customer activity there. So I would say, to be honest, it's probably much of the same. We haven't seen a lot of changes or variances from what we or where we were about 90 days ago. I will tell you, we work hard and we're trying to get out in front of some of these. We used to see if there are any of those we can retain. But it's pretty much deployment-by-deployment specific in terms of that. And let me point it over to Steve to...

Steven Smith -- Chief Revenue Officer

I'm just going to reiterate your last point there, Jeff, which is as we work through this and really as part of our normal practice, we're always in communication with those customers as to how we might be able to retain them and adopt new models, especially given the circumstances. So as Jeff mentioned, it's still case-by-case and early days, but we continue on that effort.

Erik Rasmussen -- Stifel -- Analyst

Great. And then maybe just my follow-up. NoVa seems like it's shown some progress. Is based on sort of conversations with customers, they kind of sort of what you're seeing now and what we're hearing as the impacts of COVID-19 might be accelerating things there. Does that sort of change your outlook for that business? Because I think you sort of pivoted to more of the enterprise or a smaller footprint type deals, but does that, now with the current environment, do you see an opportunity for you guys to potentially start doing larger deals in that market?

Steven Smith -- Chief Revenue Officer

Yes. I would say that we've never pivoted. I mean our core retail and scale leasing has really been the bedrock of our business model from the beginning. And we've went after those larger or hyperscale opportunities as they made sense for the campus, how they brought value and also brought a good return for the shareholders. So that's always been in place, and that continues to be in place, and it's good to see improved results in Virginia. So we'll continue to monitor it. The pipeline is reasonable, and we'll continue to take that same approach and trying to go over those opportunities as they fit that category.

Erik Rasmussen -- Stifel -- Analyst

Thank you.

Steven Smith -- Chief Revenue Officer

Thank you.

Operator

Our next question is coming from Sami Badri from Credit Suisse. Your line is now live.

Sami Badri -- Credit Suisse -- Analyst

Hi, thank you. My question is for Jeff. Jeff, you made a comment regarding 2.5% of revenues of customers requesting deferrals. First, I just want to make sure that, that is just deferrals for payments for standard rents, and then those are deferred out for 30 to 60 days? But then more specifically, out of that 2.5%, how much of that is small and midsized businesses? How much of that is more established enterprise? I was hoping you give us some color on the mix that's going on in that 2.5%?

Jeff Finnin -- Chief Financial Officer

You bet, Sami. So you're right. As I said in my prepared remarks, we've had some conversations with customers reaching out and asking for some level of relief or deferral of payments. The 2.5% is really a percentage of our overall revenue. So keep in mind, rent, power margins and plus interconnection revenue. So that gives you an idea it's the whole picture. In terms of where we are with those? We've made good progress. As you look at the customer request, about 50% of them were resolved by basically just allowing customers to defer for 30 to 60 days. Keep in mind, a lot of those were needed as customers and companies transitions to this different work environment and they just needed to facilitate different processes in order to facilitate payments. And those were very simple. And I would say most of those, to be honest, were small and medium-sized companies. Those are the companies that probably had the biggest hurdle to get over as they transition to a work-from-home environment. And then of the remaining customer request, about 1/3 of them are still in flight. We have a couple of them that are I would classify as medium-sized businesses that we're working through. And we'll get those resolved over near time. And then about the remaining about 17% actually were denied request. Again, we got to take them on a case-by-case basis, making sure that it's valid that it's needed and that percentage was denied. So hopefully, that helps give you some color or commentary on it, Sami?

Sami Badri -- Credit Suisse -- Analyst

Yes, absolutely. And then this is more of like a hardware question in terms of what's going on in your data centers. Have you seen customers either opt into more fiber interconnectivity rather than the former copper interconnectivity? Or is there any kind of mix change going on because all of a sudden people need a lot more bandwidth, a lot more broadband? Any kind of like hardware transition you're seeing in the cross-connects? Or things are very business as usual still?

Paul Szurek -- President and Chief Executive Officer

Sami, to be honest, I think as you look at the first first quarter data, the volume increases in our cross-connect side of the business was 6.1%, and the composition of that was fairly consistent across the different products we have. The only thing that we've noted, and this occurred late in the quarter, as you can expect, as a result of the COVID-19, we did see some small acceleration as we got into March, and we've seen that in April. Time will tell in terms of whether that continues. And then we've also seen some customers where we've seen really IP pairing traffic increases as a result of just overall increase in volume with traffic. But I don't as you saw in our guidance, we maintained our guidance on interconnection revenue. Those are small and they round out kind of the interconnection product. But that's what we've seen so far to date.

Sami Badri -- Credit Suisse -- Analyst

Okay, got it. Thank you very much.

Paul Szurek -- President and Chief Executive Officer

Thank you.

Operator

Our next question is coming from Nick Del Deo from MoffettNathanson. Your line is now live.

Nick Del Deo -- MoffettNathanson -- Analyst

Thank you. You're getting close to opening the new Chicago data center. Can you talk a little bit about the discussions you're having with customers there, particularly on the scale side, since that's a new product for you in that market?

Steven Smith -- Chief Revenue Officer

Nick, it's Steve. I'll take that. As far as the pipeline and discussions with customers, we have ongoing customers and our ongoing pipeline and discussions going on with customers there to expand in that side. We've actually had some networks that have now popped that side or in the process of popping that side. As I mentioned in the prepared remarks, we now have a new native on-ramp with one of the top Tier one cloud providers. That's now part of that campus. So that really, I think, bolsters the value of that model and really validates that approach. So overall, things continue on pace, and we're continuing to build the pipe there. But overall, it's solid. It's probably the best guidance I can give you.

Nick Del Deo -- MoffettNathanson -- Analyst

Okay. That's helpful. Yes, Steve, also, in your prepared remarks, and you've talked about this in the past as well, you alluded to the need for your sales force to kind of work more closely with outside solutions providers. I'd imagine that's might be even more important in today's environment. Can you expand a bit upon the progress you've made on that front? And where things stand, where the relationship stand relative to where you want them to be?

Steven Smith -- Chief Revenue Officer

Yes. I think there's been good progress. It's been encouraging to see some of the results come through, both in terms of traditional channel partners that have given us reach into new customers that we otherwise might not have had access to. So that's part of the value of that overall ecosystem is that they have those existing relationships and providing other services that we may not or may have a harder time in reaching. So the reach is part of it, the depth is the other side of it, which is just providing a more full solution beyond colocation and the other services we have in our data center. And that also has shown some good results in how we have been partnering with enterprises to transition, first of all, evaluate transition, stand up their environment in our data center and then manage it going forward. So that entire life cycle is pretty complex in how we work with different partners to achieve that as dynamic, but we've been I would say, where we are in that continuum is just continuing to get our sales team better and better at how we engage in that process as well as refining the mix of partners that we work with to ensure that they meet the standard that we're looking for.

Nick Del Deo -- MoffettNathanson -- Analyst

Terrific, thank you, Steve.

Operator

Our next question is coming from Eric Luebchow from Wells Fargo. Your line is now live.

Eric Luebchow -- Wells Fargo -- Analyst

Thank you. Just curious, and sorry if I missed this, I joined a few minutes late. You've seen any slowdown kind of quarter-to-date or over the last one and half months on new logo acquisitions, given many of the travel restrictions that many of your customers have under way? Or is it more or less business as usual, more virtual toward relative to physical tours and just decision-making pretty much continuing on at the same pace?

Steven Smith -- Chief Revenue Officer

Yes, I'd tell you that the pipeline for new logos continues to be strong and consistent. It's probably the clearest view I can give you. So overall, things seem to be progressing well. I would say that kudos to our engineering and marketing teams for putting together ways for customers to continue their buying cycle, which, as you mentioned, part of that is virtual tours. So we worked quickly at the beginning of this pandemic to try to look through what steps customers need to look at in order to continue their IT journey, and part of that is a physical tour. So we worked very closely with those teams to develop virtual tours so that they can really see the environment they would go into with all the detail of the technical aspects and continue in that buying process. So it's still evolving, as you know. But so far, things seem to be holding well.

Eric Luebchow -- Wells Fargo -- Analyst

Okay. Great. And just one follow-up for Jeff. You mentioned that your leverage would kind of temporarily trend above five times, and I know you just issued $150 million of debt. But curious if you would consider looking at any alternative sources here, if leverage kind of stays around that five times range, particularly issue in equity or any other sources such as capital recycling or joint JVs of stabilized assets?

Jeff Finnin -- Chief Financial Officer

Yes, Eric. Obviously, those are all arrows in the quiver that could be utilized. I would just say, as you think about 2020, we've got plenty of liquidity to fully fund our business plan today and issuing equity, at least in this environment, as we look at 2020, isn't in our plans. However, having said that, we continue to watch and monitor our stock price as well as our leverage in assessing our liquidity needs. But the joint ventures, items like that are always something we watch closely to just better understand that overall cost of capital and what the best next source will be. But for 2020, I think we're in good shape to fully fund the business plan through our continued leverage, and you'll watch it slowly creep up above five and then should start to moderate as we get to the second half of the year as customers start to commence, what's in our backlog plus new sales expected.

Eric Luebchow -- Wells Fargo -- Analyst

Okay, thanks, Jeff.

Jeff Finnin -- Chief Financial Officer

You bet.

Steven Smith -- Chief Revenue Officer

Thank you.

Operator

Our next question is coming from Jordan Sadler from KeyBanc. Your line is now live.

Jordan Sadler -- KeyBanc -- Analyst

Thank you and good morning. Wanted to just see if I can get a characterization, Steve, maybe from you or from you, Paul, in terms of customer cadence, what are customers looking for in terms of their overall demand for space today as opposed to maybe during the first quarter? Are you seeing any changes that are sort of pointing to sort of a reaction to the crisis?

Steven Smith -- Chief Revenue Officer

Jordan, this is Steve. I think it really varies. And it's probably not a great answer point. I'll give you a little bit more detail. So those companies that are in this business are pretty good at it. And they know what they're looking for and how they build it out and what the process looks like. So as I mentioned in my remarks there, those that are like streaming providers, content providers, cloud companies, those kinds that have professional data center buyers, they're, in some cases, have moved up a little bit, but they're they know what they buy and what they're looking for. And I would say that, that is fairly uninterrupted if nothing just, as I mentioned, I'm just revalidated by some of the demand that they're seeing.

As far as the enterprises are concerned, I would say that's where you see more variability because some of those customers are kind of paralyzed and just trying to figure this out. While they knew this the need for more technology or being able to leverage technology in their business was a given, this has really shown a brighter light on that where they now need to figure that out in order to survive or thrive. So depending upon where they are in that maturity cycle is where you just see a lot of variability as to their ability to go from a need to actual buy. And so some of that's still being shaken out right now, but you see it across the board. Hopefully, I made it clear.

Jordan Sadler -- KeyBanc -- Analyst

Yes, it does. I think it's helpful. And I guess, I'm not sure if that's sort of answered the question entirely in terms of does the overall demand and outlook look a little stronger today than it does 90 days ago is really the quick and dirty question. That I'm really trying to understand. And I think investors are trying to capture. I would say If you got a quick one there.

Steven Smith -- Chief Revenue Officer

Yes. I would just say the overall pipeline volume continues to be consistent to strong or I would say, maybe even better. How that materializes into actual actual closed deals and, therefore, revenue? I think that's the big unknown that we we're all working through as to how this all shakes out. But so far, things appear to be positive.

Jordan Sadler -- KeyBanc -- Analyst

And then in terms of maybe supply chain, Paul, I'm curious, do you feel like you have the raw material in terms of availability of data center space necessary to sort of provide your customers with what all they might need in 2020? Or did you have you put any thought into increasing the capital spend or increasing the development in 2020?

Paul Szurek -- President and Chief Executive Officer

So for the stuff that we have in flight, Jordan, essentially, all of our OFE is already purchased at either on-site or in confirmed transit. And in terms of the parts and supplies you need that on our side to implement customers. So far, everything is in good shape. We have a very good procurement team that proactively goes out and check things and sources things. There have been one or two factory shutdowns that if they were to continue for an extended period of time, we would have to find some alternative sources, and we're already contingently provisioning those. But the vendors have confirmed us recently that they expect those factories to reopen shortly. And assuming that happens, things should be OK. So I would say, so far, everything looks fine, but it is getting a tremendous amount of constant and elevated attention from our data center operations, construction and procurement teams.

Jordan Sadler -- KeyBanc -- Analyst

But what about sort of overall availability in terms of product like relative to what you originally underwrote for this year? Like do you want to bring on more data center capacity sooner or not yet?

Paul Szurek -- President and Chief Executive Officer

I think we're in good shape. I mean we entered 2020 with our highest amount of available and near-term capacity that we've had in years, a growth capacity of 25% roughly in our top five markets. So our timing was either good or lucky, we'll take either one, but we've got adequate capacity to take on more demand, and that's what we see.

Jeff Finnin -- Chief Financial Officer

And Jordan, I'd just add that I think if you look at what's available today, we ended the quarter with just shy of about 400,000 square feet. And obviously, you can see what's coming online here near term. When you look at our commencements and overall absorption over the past several quarters, that gives us just about 1.5 to maybe 1.34, 1.75 years worth of absorption, absent any massive acceleration in terms of absorption. So something we watch closely. But I guess where we sit today, just to echo Paul's comments, I don't think we don't see a need to increased capital spend in 2020 at this point in time.

Jordan Sadler -- KeyBanc -- Analyst

That's helpful. Jeff, while I have you, I wanted to come back to the 2.5% of the total revenue. Just was there a bad debt expense or reserve take in the quarter? Can you quantify that?

Jeff Finnin -- Chief Financial Officer

Yes, you bet. Historically, our bad debt expense has been anywhere from about 10 to 20 basis points as a percentage of revenue. That was elevated a little bit this quarter uped about 45 basis points, in magnitude of overall dollars it's not significant. It was an increase of about $350,000 over our historical norm. As we went through the quarter, we took a ver measured and conservative approach to looking at our reserves just given the conversations we were having and what's going on in the macro state of the environment today. So overall bad debt expense for the quarter just here right was about $700,000. I think it's important also to maybe just provide this additional commentary. When you look at overall cash collections for the quarter, we had 99-plus percent of cash collections compared to what was billed to our customers. So overall, it looks pretty good, comparatively speaking for sure.

Jordan Sadler -- KeyBanc -- Analyst

What about April so far in terms of the cash collections?

Jeff Finnin -- Chief Financial Officer

Yes, you bet. And when you look at April, where we are to date, we're actually slightly ahead of where we were in the first quarter given the relative moment in time and how many business days we are through the month, and we're ahead of where we were a year ago at this point as well. So that trend hasn't actually hasn't moderated. We feel very good about where we are from a cash collections standpoint, and we watch it every day. So overall, knock on wood, it continues to be very strong.

Jordan Sadler -- KeyBanc -- Analyst

Thank you guys for the time.

Jeff Finnin -- Chief Financial Officer

You bet.

Steven Smith -- Chief Revenue Officer

Thank you.

Operator

[Operator Instructions] Our next question today is coming from Nate Crossett from Berenberg. Your line is now live.

Nate Crossett -- Berenberg -- Analyst

Good afternoon. A lot's been asked already, but maybe one for Jeff on cash renewals. What would it have been if you had stripped out churn in the quarter? Just trying to get a sense of normalized pricing here.

Jeff Finnin -- Chief Financial Officer

Yes. No, that's the 1.47% cash rent growth, Nate, that does not have any of the churn factored into it. So it's already stripped out when we give that percentage. So that 1.4% just really represents those customers that did renew in the quarter and that were retained by us.

Nate Crossett -- Berenberg -- Analyst

Okay. And then maybe just a question on SV9. I know you haven't given any formal dates, but when did those office tenants vacate? And when can you kind of expect that project to get started?

Paul Szurek -- President and Chief Executive Officer

So I believe we've given notice now for all the office tenants to be gone. And in fact, they probably are all gone by now, and we're still in the process of design and permitting review and environmental reviews, which probably is a little bit harder to predict right now than they normally are. I would suspect that if the demand were there in Santa Clara that we could probably start construction there in the middle or latter part of next year if we saw that or maybe even early next year.

Nate Crossett -- Berenberg -- Analyst

Thanks guys.

Paul Szurek -- President and Chief Executive Officer

Thank you.

Jeff Finnin -- Chief Financial Officer

Thanks.

Operator

Our next question is coming from David Guarino from Green Street Advisors. Your line is now live.

[Operator Instructions] Our next question is coming from Richard Choe from JPMorgan. Your line is now live.

Richard Choe -- JPMorgan -- Analyst

Great. I just wanted to ask about your kind of larger scale core retail colocation. It's really ramped up from the $2 million kind of quarter average to $4 million, now $6 million. How much of that, the 1,000, the 5,000 NRSF, how much of that is being driven by customers or focus from CoreSite?

Steven Smith -- Chief Revenue Officer

From I'm not sure I understand the question is being driven from...

Richard Choe -- JPMorgan -- Analyst

Are customers asking for more space? Or are you focused more on selling it in terms of retail colocation, the size of the deals, so to speak?

Steven Smith -- Chief Revenue Officer

Yes. Well, I mean, I guess, in general, just as far as the overall model is concerned, we do target a mix across all of our campus to get to the yield that we're looking for, for each building in the overall campus. So it is a mix of retail versus scale versus some hyperscale included in all of that. As it relates to customers and what they're buying today, the majority of our focus from a sales organization is really on out there finding new customers. That's paramount, as I mentioned in the prepared remarks, to bring in those new seeds that will hopefully grow and bear more fruit later. But that fruit that we've seen a lot of in this last quarter, in fact, representing 94% of the total sales in Q1 was from existing customers. So it's pretty easy to translate that into the scale business as well. So that's where you see a lot of the growth there. But we do see some new logos that come in, and we'll take a fair amount of that space as well.

Richard Choe -- JPMorgan -- Analyst

And then to follow-up on the earlier pricing question, it looks like cash rent on renewals has been better along with GAAP. Are we through the kind of negative comps, so to speak, for, I guess, rent growth and now we could see a kind of trend in the right direction? Or is there something ahead of us?

Jeff Finnin -- Chief Financial Officer

Yes. Rich, I'd just point you to our guidance. I think for the full year, we've said we expect it to be somewhere between 0 and 2%. Obviously, this quarter, we were happy to see the 1.4%. I think the thing to point you to is, any time you get larger customer renewals, that could tend to drive the ultimate behavior. And as we saw in this back half of last year, we had a couple of those in that were long-term customers in a couple of more markets where pricing had been a little bit compressed that led to that negative. But I think for the full year, we expect it to be 0 to 2%. And obviously, on our way to hitting that based on the first quarter results.

Richard Choe -- JPMorgan -- Analyst

Great, thank you.

Operator

Your next question is from Jordan Sadler from KeyBanc. Your line is now live.

Jordan Sadler -- KeyBanc -- Analyst

Sorry, I had a couple of quick follow-ups. So on the SV8 release, can you sort of walk us through maybe the decision to pre-lease SV8 ahead of maybe backfilling SV7, if that's sort of like a timing difference? Or what have you or sort of configuration difference? And then maybe could you characterize the rate on the SV8 lease price versus the outbound rate on SV7 for us?

Steven Smith -- Chief Revenue Officer

Yes. Jordan, this is Steve. I'll give you just some more color on the decision to pre-lease the third phase and SV8 versus SV7. One of the I think the key benefits that we're really realizing now, especially in Santa Clara as well as Virginia, for that matter, is our full campus model and the fact that we have multiple buildings, in this case, our eighth building, and now we have plans for our ninth building to provide optionality for us as to how we place customers in order to get the best mix within that building. So as we look at SV8 versus SV7 in the space that's currently under lease. And when that might roll off versus colocation opportunities in SV8, it just turned out to be a better decision to place them in eight at this point. So that'll basically leaves SV7 for larger scale, hyperscale opportunities as they present themselves.

Jordan Sadler -- KeyBanc -- Analyst

And what about rate as it compare the new pre-lease versus the outbound lease on SV7? Are they comparable?

Jeff Finnin -- Chief Financial Officer

Jordan, the only thing I'd add is just as Steve said in his prepared remarks, pricing for the quarter was consistent, slightly ahead of where we've been on the trail. We generally like not to get out a lot of specificity around customer pricing. So appreciate but I would look at overall pricing was fairly consistent with where we've been on the trail.

Jordan Sadler -- KeyBanc -- Analyst

Okay. Could you give us interconnection bookings in the quarter, by the way? My sense is that, that sounds like it was strong. Just curious if you guys saw had like a record level of bookings? Or just what the tempo was like?

Jeff Finnin -- Chief Financial Officer

Yes. I mentioned earlier, the overall increase in volume was 6.1%, and I'd say that, that's been fairly consistent with where we've been over the past couple of quarters. That's a blend of all of our products. Fiber is obviously the largest contributor to those overall increases in volumes and the increase in volume on fiber alone was right at 9%.

Jordan Sadler -- KeyBanc -- Analyst

Okay, thank you.

Jeff Finnin -- Chief Financial Officer

You bet.

Operator

Our next question is from David Guarino from Green Street Advisors. Your line is now live.

David Guarino -- Green Street Advisors -- Analyst

Okay. Sorry about that earlier, guys. A question I think for Steve, really, you mentioned in your prepared remarks that pricing was stable. And if I just kind of look at the GAAP rent per square foot on your new lease signings, right around $200 a square foot. It's pretty consistent with what we've seen in the last few quarters, in the last few years really, which I guess that just kind of surprised me given just the higher contribution from retail colo signings. So I guess my question is really, is it fair to say that there's maybe a lack of pricing power we're seeing from retail colo? Or was it maybe just like a mix issue this quarter?

Steven Smith -- Chief Revenue Officer

That's what is going to just guide you toward. I mean, the it really becomes a mix. It's a mix of between markets. So different markets are priced differently. And as you have more volume in one market versus the other, and in this case, we had good volume in Virginia, which is relative to other markets like Santa Clara, it's less expensive. That's part of the equation as well as density in that in those markets as well. So collectively, pricing was in line. But if you look at it, you really have to take those two factors in consideration as to volume each market and then the density.

David Guarino -- Green Street Advisors -- Analyst

Okay. That's fair. And then just for a clarification, when you say stable, are we referring maybe that quarter-over-quarter or year-over-year? Just kind of curious the time frame you're referring to?

Steven Smith -- Chief Revenue Officer

Year-over-year.

David Guarino -- Green Street Advisors -- Analyst

Great, that's it from me. Thanks.

Steven Smith -- Chief Revenue Officer

Thank you.

Operator

We reached the end of our question-and-answer session. Let's turn the floor back over to Paul for any further or closing comments.

Paul Szurek -- President and Chief Executive Officer

Thank you all for being on the call. I know it's a busy day for you, and I know that all of you, like everybody else in the country have had to totally redo the way that you approach your business and produce your product and appreciate the extra efforts you put in to stay on top of the industry. I'll just recap. I'm very grateful for where we are. Our business model, our strategy, our team, our mark-to-markets, our new capacity, our new products. And importantly, our adaptability have been key to us prospering and staying on track this quarter. And I think put us in a good position to stay on track for the future, and that's our goal. I would be remiss if I didn't, again, thank deeply all of my colleagues in CoreSite who really have done an amazing job in the last six, seven weeks, making rapid adjustments to these changes and executing exceptionally well. They've done a great job, and we're lucky to have them and be working with them. So thank you to everyone. I hope everyone does well and stays well and appreciate your interest in CoreSite.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Carole Jorgensen -- Vice President of Investor Relations and Corporate Communications

Paul Szurek -- President and Chief Executive Officer

Jeff Finnin -- Chief Financial Officer

Steven Smith -- Chief Revenue Officer

Michael Elias -- Cowen and Company -- Analyst

Frank Louthan -- Raymond James -- Analyst

Michael Rollins -- Citi -- Analyst

Erik Rasmussen -- Stifel -- Analyst

Sami Badri -- Credit Suisse -- Analyst

Nick Del Deo -- MoffettNathanson -- Analyst

Eric Luebchow -- Wells Fargo -- Analyst

Jordan Sadler -- KeyBanc -- Analyst

Nate Crossett -- Berenberg -- Analyst

Richard Choe -- JPMorgan -- Analyst

David Guarino -- Green Street Advisors -- Analyst

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