Edgar Filing: CoreSite Realty Corp

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As filed with the Securities and Exchange Commission on June 28, 2010

Registration No. 333-166810

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

Form S-11

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

CoreSite Realty Corporation

(Exact name of registrant as specified in governing instruments)

1050 17th Street, Suite 800

Denver, CO 80265

(866) 777-2673

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Thomas M. Ray
President & Chief Executive Officer
CoreSite Realty Corporation
1050 17th Street, Suite 800
Denver, CO 80265

(866) 777-2673

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:


Raymond Y. Lin		Edward J. Schneidman
Patrick H. Shannon		John P. Berkery
Latham & Watkins LLP		Mayer Brown LLP
885 Third Avenue		1675 Broadway
New York, New York 10022		New York, New York 10019
(212) 906-1200		(212) 506-2500

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
	(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE


	Proposed
Title of Securities	Maximum Aggregate		Amount of
to be Registered	Offering Price(a)(b)		Registration Fee(c)
Common stock, $0.01 par value	$	345,000,000	$	24,599


(a)		Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933.


(b)		Including additional shares of common stock that may be purchased by the underwriters.


(c)		Of this amount, $16,399 was previously paid in connection with the initial filing of the Registration Statement on May 13, 2010.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 28, 2010

PROSPECTUS

Shares

CoreSite Realty Corporation

Common Stock

$ per share

This is our initial public offering of our common stock. We are selling shares of our common stock. We currently expect the initial public offering price to be between $ and $ per share.

We have granted the underwriters an option to purchase up to additional shares of common stock to cover over-allotments.

We intend to apply to have our common stock listed on the New York Stock Exchange under the symbol “COR.”

We intend to elect to be taxed and to operate in a manner that will allow us to qualify as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our tax year ending December 31, 2010. Shares of our common stock are subject to ownership limitations that are intended to assist us in qualifying and maintaining our qualification as a REIT, including, subject to certain exceptions, a 9.8% ownership limit. See “Description of Securities.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 17 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


	Per Share	Total

Public Offering Price	$	$
Underwriting Discount	$	$
Proceeds to CoreSite (before expenses)	$	$

The underwriters expect to deliver the shares to purchasers on or about , 2010 through the book-entry facilities of The Depository Trust Company.

Joint Book-Running Managers


Citi	BofA Merrill Lynch	RBC Capital Markets

, 2010

TABLE OF CONTENTS


	Page

Prospectus Summary		1
Summary Historical and Pro Forma Financial Data		14
Risk Factors		17
Forward-Looking Statements		36
Use of Proceeds		37
Dividend Policy		38
Capitalization		42
Dilution		43
Selected Historical and Pro Forma Financial Data		45
Management’s Discussion and Analysis of Financial Condition and Results of Operations		48
Industry Overview and Market Opportunity		66
Business and Properties		70
Management		99
Certain Relationships and Related Party Transactions		117
Policies with Respect to Certain Activities		120
Structure and Formation of Our Company		124
Description of the Partnership Agreement of CoreSite, L.P.		126
Principal Stockholders		133
Description of Securities		135
Certain Provisions of Maryland Law and of Our Charter and Bylaws		140
Shares Eligible for Future Sale		144
Federal Income Tax Considerations		146
ERISA Considerations		166
Underwriting		167
Legal Matters		173
Experts		173
Change in Independent Registered Accounting Firm		173
Where You Can Find More Information		174
Appendix A: Glossary of Terms		A-1
Appendix B: Citations		B-1
Index to Financial Statements		F-1
EX-3.1
EX-3.2
EX-10.1
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-10.12
EX-23.1
EX-99.4
EX-99.5

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front cover of this prospectus.

This prospectus contains third-party estimates and data regarding growth in the Internet and data center industries. This data was obtained from reports by and publications of Tier1 Research, LLC, Cisco Systems, Inc., Nemertes Research and Gartner, Inc. Although we have not independently verified the data and estimates contained in these reports and publications, we believe that this information is reliable. However, there can be no guarantee that the markets discussed in these reports will grow at the estimated rates or at all, and actual results may differ from the projections and estimates contained in these reports. Any failure of the markets to grow at projected rates could have an adverse impact on our business. See “Appendix B: Citations” for a complete list of these reports and publications.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. Before making your investment decision, you should read this entire prospectus and should consider, among other things, the matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited pro forma financial statements and our historical combined financial statements and related notes included elsewhere in this prospectus. Unless the context requires otherwise, references in this prospectus to “we,” “our,” “us” and “our company” refer to CoreSite Realty Corporation, a Maryland corporation, together with its consolidated subsidiaries after giving effect to the Restructuring Transactions described in this prospectus, including CoreSite, L.P., a Delaware limited partnership of which CoreSite Realty Corporation is the sole general partner and which we refer to in this prospectus as our “operating partnership” and CoreSite Services, Inc., a Delaware corporation, our taxable REIT subsidiary, or TRS. Our promoters are our President, Chief Executive Officer and Director, Thomas M. Ray and CoreSite, L.L.C. References to “pro forma revenues,” “pro forma net loss” and “pro forma funds from operations” refer to our revenues, net loss and funds from operations as described in “Summary of Historical and Pro Forma Financial Data” and the unaudited pro forma financial statements included elsewhere in this prospectus. Unless otherwise indicated, the information contained in this prospectus is as of March 31, 2010 and assumes that the transactions described under the caption “Structure and Formation of Our Company” have been consummated. For a list of certain industry terms and sources cited herein, see “Appendix A: Glossary of Terms” and “Appendix B: Citations,” respectively.

Our Company

We are an owner, developer and operator of strategically located data centers in some of the largest and fastest growing data center markets in the United States, including Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago and New York City. Our high-quality data centers feature ample and redundant power, advanced cooling and security systems and many are points of dense network interconnection. We are able to satisfy the full spectrum of our customers’ data center requirements by providing data center space ranging in size from an entire building or large dedicated suite to a cage or cabinet. We lease our space to a broad and growing customer base ranging from enterprise customers to less space-intensive, more network-centric customers. Our operational flexibility allows us to selectively lease data center space to its highest and best use depending on customer demand, regional economies and property characteristics.

As of March 31, 2010, our property portfolio included ten operating data center facilities, one data center under construction and one development site, which collectively comprise over 2.0 million net rentable square feet, or NRSF, of which approximately 1.0 million NRSF is existing data center space. These properties include 337,586 NRSF of space readily available for lease, of which 194,939 NRSF is available for lease as data center space. We expect that this redevelopment and development potential will enable us to accommodate existing and future customer demand and positions us to significantly increase our cash flows.

Our data center acquisitions have been historically funded and held through real estate funds affiliated with The Carlyle Group, or Carlyle, a global private equity firm. The first data center in our portfolio was purchased in 2000 and since then we have continued to acquire, redevelop, develop and operate these types of facilities.

Our Portfolio

The following table provides an overview of our properties as of March 31, 2010 after giving effect to the Restructuring Transactions.


					NRSF
					Operating⁽¹⁾
										Office and Light-										Redevelopment and
			Annualized		Data Center⁽²⁾					Industrial⁽³⁾					Total					Development⁽⁴⁾
	Metropolitan	Acquisition	Rent				Percent					Percent					Percent			Under						Total
Facilities	Area	Date⁽⁵⁾	($000)⁽⁶⁾		Total		Leased⁽⁷⁾			Total		Leased⁽⁷⁾			Total⁽⁸⁾		Leased⁽⁷⁾			Construction		Vacant		Total		Portfolio

One Wilshire*	Los Angeles	Aug. 2007	$	20,470		156,521		76.5	%		7,500		62.2	%		164,021		75.8	%		—		—		—		164,021
900 N. Alameda	Los Angeles	Oct. 2006		12,219		256,690		90.2			16,622		6.2			273,312		85.1			16,126		144,721		160,847		434,159
55 S. Market	San Francisco Bay	Feb. 2000		11,509		84,045		85.7			205,846		77.9			289,891		80.2			—		—		—		289,891
12100 Sunrise Valley	Northern Virginia	Dec. 2007		8,848		116,498		67.6			38,350		85.9			154,848		72.2			—		107,921		107,921		262,769
427 S. LaSalle	Chicago	Feb. 2007		6,558		129,790		74.0			45,283		100.0			175,073		80.7			—		5,309		5,309		180,382
1656 McCarthy	San Francisco Bay	Dec. 2006		6,164		71,847		84.7			—		—			71,847		84.7			—		4,829		4,829		76,676
70 Innerbelt	Boston	Apr. 2007		6,162		118,991		93.8			2,600		57.1			121,591		93.0			25,118		129,897		155,015		276,606
32 Avenue of the Americas*	New York	June 2007		3,672		48,404		68.3			—		—			48,404		68.3			—		—		—		48,404
1275 K Street*	Northern Virginia	June 2006		1,824		22,137		96.5			—		—			22,137		96.5			—		—		—		22,137
2115 NW 22nd Street	Miami	June 2006		1,301		30,176		50.3			1,641		—			31,817		47.7			—		13,447		13,447		45,264
Coronado-Stender Business Park:
Coronado-Stender Properties	San Francisco Bay	Feb. 2007		1,250		—		—			179,600		60.7			179,600		60.7			—		—		—		179,600
2901 Coronado	San Francisco Bay	Feb. 2007		—		—		—			—		—			—		—			50,000		—		50,000		50,000

Total Facilities			$	79,977		1,035,099		81.2	%		497,442		71.3	%		1,532,541		78.0	%		91,244		406,124		497,368		2,029,909


*		Indicates properties in which we hold a leasehold interest.
(1)		Represents the square feet at a building under lease as specified in existing customer lease agreements plus management’s estimate of space available for lease to customers based on engineers’ drawings and other factors, including required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas. Total NRSF at a given facility includes the total operating NRSF and total redevelopment and development NRSF, but excludes our office space at a facility and our corporate headquarters.
(2)		Represents the NRSF at an operating facility that is currently leased or readily available for lease as data center space. Both leased and available data center NRSF include a customer’s proportionate share of the required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas.
(3)		Represents the NRSF at an operating facility that is currently leased or readily available for lease as space other than data center space, which is typically space offered for office or light-industrial use.
(4)		Represents vacant space in our portfolio that requires significant capital investment in order to redevelop or develop into data center facilities. Total redevelopment and development NRSF and total operating NRSF represent the total NRSF at a given facility.
(5)		Represents the date a property was acquired by a Carlyle real estate fund or, in the case of a property under lease, the date the initial lease commenced for the property.


(6)		Represents the monthly contractual rent under existing customer leases as of March 31, 2010 multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and is shown on a gross basis; thus, under a net lease, the current year operating expenses (which may be estimates as of such date) are added to contractual net rent. The addition of operating expenses excludes electricity use attributable to customers. Total abatements for leases in effect as of March 31, 2010 for the 12 months ending March 31, 2011 were $26,929.


(7)		Includes customer leases in effect as of March 31, 2010. The percent leased is determined based on leased square feet as a proportion of total operating NRSF.


(8)		Represents the NRSF at an operating facility currently leased or readily available for lease. This excludes existing vacant space held for redevelopment or development.

Industry Overview

Data centers are highly specialized and secure buildings that house networking, storage and communications technology infrastructure, including servers, storage devices, switches, routers and fiber optic transmission equipment. These buildings are designed to provide the power, cooling and network connectivity necessary to efficiently operate this mission-critical IT equipment. This infrastructure requires an uninterruptible power supply, backup generators, cooling equipment, fire suppression systems and physical security. Data centers located at points where many communications networks converge can also function as interconnection hubs where customers are able to connect to multiple networks and exchange traffic with each other.

believe that the data center industry enjoys strong demand dynamics principally driven by the continued growth of Internet traffic, the corresponding increase in processing and storage equipment and the increased need for network interconnection capabilities. Additionally, companies are increasingly outsourcing their data center needs due to the high cost of operating and maintaining in-house data center facilities, increasing power and cooling requirements for data centers and the growing focus on business and disaster recovery planning.

We believe that sufficiently capitalized operators with space and land available for redevelopment and development, as well as a proven track record and reputation for operating high-quality data center facilities, will enjoy a significant competitive advantage and be best-positioned to accommodate market demand.

Our Competitive Strengths

We believe the following key competitive strengths position us to efficiently scale our business, capitalize on the growing demand for data center space and interconnection services, and thereby grow our cash flow.

High Quality Data Center Portfolio. As of March 31, 2010, our property portfolio included ten operating data center facilities, one data center under construction and one development site. Much of our data center portfolio has been recently constructed. Specifically, since January 1, 2006, we have redeveloped 574,368 NRSF into data center space, or approximately 55.5% of our current data center portfolio. Based upon our portfolio as of March 31, 2010 and including the completion of the 91,244 NRSF of data center space under construction at that time, 64.3% of our data center portfolio will have been built since January 1, 2006.

Expansion Capability. Our data center facilities currently have 194,939 NRSF of space readily available for lease. We also have the ability to expand our operating data center square footage by over 90%, or 943,618 NRSF, by redeveloping 447,368 NRSF of vacant space and developing 496,250 NRSF of new data centers on land that we currently own. Of this redevelopment and development space, 91,244 NRSF was under construction as of March 31, 2010, including the development of a new 50,000 NRSF data center in Santa Clara, California, which we completed during the second quarter of 2010.

Diversified Customer Base. We have a diverse, global base of over 600 customers, which we believe is a reflection of our strong reputation and proven track record, as well as our customers’ trust in our ability to house their mission-critical applications and vital communications technology. As of March 31, 2010, no one customer represented more than 5.3% of our annualized rent and our top ten customers represented 31.8% of our annualized rent. Our diverse customer base spans many industries and includes:


	•	Global Telecommunications Carriers, Internet Service Providers and Content Delivery Networks: AT&T Inc., British Telecom (BT Group Plc.), Akamai Technologies, Inc., CDNetworks Co. Ltd., Internap Network Services Corp., Limelight Networks Inc., China Netcom Group Corp., China Unicom (Hong Kong) Limited, France Telecom SA, Japan Telecom Co., Ltd., Korea Telecom Corporation, Singapore Telecom Ltd., Sprint Nextel Corporation, Tata Communications Ltd., Telmex U.S.A., L.L.C. and Verizon Communications Inc;


	•	Enterprise Companies, Financial and Educational Institutions and Government Agencies: Computer Science Corporation, Facebook, Inc., Google Inc., Microsoft Corporation, The NASDAQ OMX Group, Inc., NYSE Euronext, the Government of the District of Columbia, Macmillan Inc. and the University of Southern California; and


	•	Media and Content Providers: DreamWorks Animation SKG, Inc., NBC Universal Inc., Sony Pictures Imageworks Inc. and Warner Brothers Entertainment, Inc.

Balance Sheet Positioned to Fund Continued Growth. Following completion of this offering, we believe we will be conservatively capitalized with sufficient funds and available capacity to pursue our anticipated redevelopment and development plans. After giving effect to the Restructuring Transactions, the Financing Transactions and the use of proceeds therefrom as described more fully below, as of March 31, 2010, we would have had approximately $122.4 million of total long-term debt equal to approximately 12.1% of the undepreciated book value of our total assets. See “—The Restructuring Transactions” and “—The Financing Transactions.” In addition, we expect to have $ million of cash available on our balance sheet and the ability to borrow up to an additional $ million under a new $100.0 million revolving credit facility, subject to satisfying certain financial tests. We may also incur additional indebtedness to pursue our redevelopment and development plans, subject to the restrictive covenants under our revolving credit facility and any policy limiting the amount of indebtedness we may incur adopted by our Board of Directors. See “Policies with Respect to Certain Activities—Financing Policies.” We believe this available capital will be sufficient to fund our general corporate needs, including our near-term redevelopment and development of 234,712 NRSF of new data center space.

Business and Growth Strategies

Our business objective is to continue growing our position as a provider of strategically located data center space in North America. The key elements of our strategy are as follows:

Increase Cash Flow of Our In-Place Data Center Space. We actively manage and lease our properties to increase cash flow by:


	•	Increasing Rents. Approximately 90% of our annualized rent as of March 31, 2010 was derived from data center leases. Additionally, the occupancy rate of our data centers has remained strong with over 81% of our data center operating space under lease as of March 31, 2010 and December 31, 2009. We believe that the average rental rate for our in-place data center leases is substantially below market and that our ability to renew these leases at market rates provides us with an opportunity to increase our cash flows. We renewed approximately 75% of our data center leases that expired during the year ended December 31, 2009, while increasing rents under data center leases renewed during the year. The dollar-weighted average rental rate per NRSF of the leases for our data center space renewed during 2009 was approximately 25% greater than that of the data center leases expiring in the same facilities during the year. We also believe that many of our data center leases that are contractually scheduled to expire during 2010 are at rental rates meaningfully below current market rates. Specifically, the dollar-weighted average rental rate per NRSF of data center leases we renewed in 2009 was over 25% greater than that of the data center leases contractually scheduled to expire in the same facilities during 2010. As a result, we believe that the average rental rate for data center leases that we renew in 2010 will be significantly increased; however, we cannot assure you that we will achieve the same or comparable rate increases or renewal levels achieved in 2009.


	•	Leasing up Available Space and Power. We have the ability to increase both our revenue and our revenue per square foot by leasing additional space and power to new and existing data center customers. As of March 31, 2010, substantially all of our data center facilities offered our customers the ability to increase their square footage under lease as well as the amount of power they use per square foot. In total, our existing data center facilities have 194,939 NRSF of space available for lease. We believe this space, together with available power, enables us to generate incremental revenue within our existing data center footprint without necessitating extensive capital expenditures.

Capitalize on Embedded Expansion Opportunities. Our portfolio includes 447,368 NRSF of vacant space that can be redeveloped into data center space, of which 41,244 is currently under construction. In addition to our redevelopment space, as of March 31, 2010, our portfolio included a 15.75-acre property housing seven buildings in Santa Clara, California, which we refer to as the Coronado-Stender Business Park. The Coronado-Stender Business Park currently includes:


	•	the Coronado-Stender Properties, a 12.6 acre development site with six buildings consisting of 179,600 NRSF of office and light-industrial operating space, portions of which generate revenue under short-term leases. We believe this development site provides us with the ability to develop up to 446,250 NRSF of additional data center space in one of the fastest growing and most important data center markets in North America; and


	•	2901 Coronado, a 50,000 NRSF data center under development, which represents the first phase of our development at the Coronado-Stender Business Park. We completed a portion of 2901 Coronado in April 2010, and completed the remainder during the second quarter of 2010. During March 2010, we fully leased this space to a leading online social networking company pursuant to a six-year lease.

Upon completion of the Restructuring Transactions and the Financing Transactions as described more fully below, we believe that we will have sufficient capital to execute our redevelopment and development plans as demand dictates.

Selectively Pursue Acquisition Opportunities in New and Existing Markets. We intend to seek opportunities to acquire existing or potential data center space in key markets with abundant power and/or dense points of interconnection that will expand our customer base and broaden our geographic footprint. We will also continue to implement our “hub-and-spoke strategy” that we have successfully deployed in our three largest markets, Los Angeles and the San Francisco Bay and Northern Virginia areas. In these markets, we have extended our data center footprint by connecting our newer facilities, the spokes, to our established data centers, our hubs, which allows our customers leasing space at the spokes to leverage the significant interconnection capabilities of our hubs.

Leverage Existing Customer Relationships and Reach New Customers. Our strong customer and industry relationships, combined with our national footprint and sales force, afford us insight into the size, timing and location of customers’ planned growth. We have historically been successful in leveraging this market visibility to expand our footprint and customer base in existing and new markets. We intend to continue to strengthen our relationship with existing customers, including the pursuit of build-to-suit opportunities, and to expand and diversify our customer base by targeting growing enterprise customers and segments, such as healthcare, financial services, media and entertainment companies, and local, state and federal governments and agencies.

Summary Risk Factors

An investment in our common stock involves significant risks. You should carefully consider the matters discussed in the section “Risk Factors” beginning on page 17 prior to deciding whether to invest in our common stock. These risks include, but are not limited to, the following:


	•	Our portfolio of properties consists primarily of data centers geographically concentrated in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets may negatively impact our operating results;


	•	We have experienced significant losses and we cannot assure you that we will achieve profitability;

	•	We face significant competition and may be unable to lease vacant space, renew existing leases or release space as leases expire, which may have a material adverse effect on our business and results of operations;

	•	Our success depends on key personnel whose continued service is not guaranteed and we may not be able to retain or attract knowledgeable, experienced and qualified personnel;

	•	We are continuing to invest in our expansion efforts, but we may not have sufficient customer demand in the future to realize expected returns on these investments;

	•	Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could reduce our revenues, harm our business reputation and have a material adverse effect on our financial results;

	•	Even if we have additional space available for lease at any one of our data centers, our ability to lease this space to existing or new customers could be constrained by our access to sufficient electrical power;

	•	To fund our growth strategy and refinance our indebtedness, we depend on external sources of capital, which may not be available to us on commercially reasonable terms or at all;

	•	Our expenses may not decrease if our revenue decreases;

	•	Illiquidity of real estate investments, particularly our data centers, could significantly impede our ability to respond to adverse changes in the performance of our properties, which could harm our financial condition;

	•	While the Carlyle real estate funds and their affiliates will not control our company following the completion of this offering, they will own a majority of our operating partnership and have the right initially to nominate two directors, and their interests may differ from or conflict with the interests of our stockholders; and

	•	Failure to qualify as a REIT would have material adverse consequences to us and the value of our stock.

The Financing Transactions

Prior to the completion of this offering, we expect to assume and, in one case, refinance certain loans currently held by the entities contributing the 427 S. LaSalle property, 55 S. Market property and 12100 Sunrise Valley Drive property to our portfolio in connection with the Restructuring Transactions. We expect to obtain lender consent to assume a total of $40.0 million of debt under three loans secured by our 427 S. LaSalle property. These loans on 427 S. LaSalle mature in March 2011. We have one 12-month option to extend each of these loans to March 2012 and there are no performance tests or conditions outside of our control to exercise these extension options. We also expect to obtain lender consent to assume a $32.0 million construction loan on our 12100 Sunrise Valley Drive property due June 2013, of which $22.4 million was outstanding as of March 31, 2010. Concurrently with the completion of this offering, we expect to refinance the existing $73.0 million of debt secured by the 55 S. Market property with a new $60.0 million mortgage, which will have a term of not less than two years. We plan to repay the remaining $13.0 million of the existing loan with the proceeds from this offering. Additionally, concurrently with the completion of this offering, we will enter into a new $100.0 million revolving credit facility. We refer to these transactions, together with this offering, as the Financing Transactions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

The Restructuring Transactions

Immediately prior to the completion of the initial public offering of our common stock, we will enter into a series of transactions with the Carlyle real estate funds or their affiliates to create our new organizational

structure, which we refer to as the Restructuring Transactions. In connection with this restructuring, all of the property and non-cash assets that will be used in the operation of our company’s business will be contributed to our operating partnership. While all of these properties and assets have been operated under common management and the CoreSite brand, they have been owned by different entities affiliated with the Carlyle real estate funds since they were initially acquired or developed by the Carlyle real estate funds or their affiliates. Prior to the Restructuring Transactions, each of the properties or leasehold interests that will comprise our portfolio was held in a separate partnership or limited liability company formed by one or more of the Carlyle real estate funds or their affiliates for the purpose of acquiring, holding and operating these properties. In addition, certain of the Carlyle real estate funds formed and collectively own 100% of CoreSite, L.L.C., which manages and leases our properties and provides related services. These partnerships or limited liability companies were held by the applicable real estate fund through one or more holding companies the sole purpose of which was to hold such interest or to obtain related financing and in no case did any such entity engage in any activity other than directly or indirectly owning and operating the property being contributed to the operating partnership. In order to simplify the organizational structure of our company following our initial public offering, certain of the holding companies will be liquidated or merged prior to the contribution in connection with the Restructuring Transactions. Although our portfolio has been owned by various Carlyle real estate funds or their affiliates, all of our data centers have been managed by our management team.

In the Restructuring Transactions, the Carlyle real estate funds or their affiliates will contribute 100% of their ownership interests in the entities that, directly or indirectly, own or lease all of properties that comprise our portfolio and all the other non-cash assets used in our business, including their interest in CoreSite, L.L.C. In exchange for this contribution, our operating partnership will issue to the Carlyle real estate funds or their affiliates an aggregate of operating partnership units which, after the first anniversary of the completion of this offering, will be redeemable for cash or, at our option, exchangeable into our common stock on a one-to-one basis and have a total value of $ million based upon the midpoint of the range set forth on the cover of this prospectus. Concurrently with the completion of this offering, we will purchase from the Carlyle real estate funds and their affiliates a portion of these units, units in the aggregate, for an aggregate purchase price of $ , and we will purchase from our operating partnership an additional units for $ . This arrangement will allow the Carlyle real estate funds to receive a combination of cash and operating partnership units upon completion of our initial public offering. Following our purchase of these units, the Carlyle real estate funds or their affiliates will have an aggregate beneficial ownership interest in our operating partnership of approximately %, which, if exchanged for our common stock, would represent an approximately % interest in our common stock. In the event that the underwriters of the offering exercise their over-allotment option in full, we will purchase from the Carlyle real estate funds or their affiliates an aggregate of of these units for an aggregate purchase price of $ , and we will purchase from our operating partnership an additional units for $ .

As a result of the Restructuring Transactions, after the completion of this offering, substantially all of our assets will be held by, and our operations conducted through, CoreSite, L.P. and its subsidiaries. We intend to elect to be taxed and to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes beginning with our tax year ending December 31, 2010. Substantially all of our interconnection services will be provided by CoreSite Services, Inc., our taxable REIT subsidiary, a wholly owned subsidiary of our operating partnership. We will control CoreSite, L.P. as general partner and as the owner of approximately % of the interests in our operating partnership. Our primary asset will be our general and limited partner interests in our operating partnership.

Our Structure

The following diagram summarizes our ownership structure upon completion of this offering and the completion of the Restructuring Transactions. Our operating partnership will indirectly own 100% of the various properties depicted below.


(1)		Excludes (i) shares issuable upon exercise of the underwriters’ over-allotment option, (ii) shares available for future issuance under our 2010 Equity Incentive Plan, (iii) shares underlying outstanding options granted under our 2010 Equity Incentive Plan with a weighted average exercise price of $ per share and (iv) shares reserved for issuance with respect to operating partnership units held by limited partners expected to be outstanding subsequent to the Restructuring Transactions that may, subject to limits in the partnership agreement of our operating partnership, be redeemed for cash or, at our option, exchanged for shares of our common stock on a one-for-one basis commencing upon the first anniversary of the completion of this offering. Assuming all operating partnership units owned by the Carlyle real estate funds or their affiliates are exchanged for shares of common stock (a) our public stockholders will own % of our outstanding common stock and our company’s directors and executive officers will own % of our outstanding common stock and (b) if the underwriters exercise their over-allotment option in full, our public stockholders will own % of our outstanding common stock and our company’s directors and executive officers will own % of our outstanding common stock.


(2)		Reflects the purchase by CoreSite Realty Corporation of operating partnership units from CoreSite, L.P. and operating partnership units from the Carlyle real estate funds or their affiliates upon completion of this offering and the Restructuring Transactions.

Material Benefits to Related Parties

Upon completion of this offering and the Restructuring Transactions, the Carlyle real estate funds or their affiliates, our executive officers and members of our Board of Directors will receive material financial and other benefits, as described below. For a more detailed discussion of these benefits see “Management” and “Certain Relationships and Related Party Transactions.”

Partnership Agreement

Concurrently with the completion of this offering, we will enter into a partnership agreement with the various limited partners of our operating partnership, of which we will be the general partner. Upon completion of this offering and the Restructuring Transactions, the Carlyle real estate funds or their affiliates, will have an aggregate beneficial ownership interest in our operating partnership of approximately % which, if exchanged for our common stock, would represent an approximate % interest in our common stock. The operating partnership agreement will initially grant the Carlyle real estate funds or their affiliates that are contributing properties to our operating partnership the right to nominate two of the seven directors to our Board of Directors. Pursuant to the operating partnership agreement, the Carlyle real estate funds or their affiliates will only be entitled to nominate one director once the number of shares of common stock held by them collectively (assuming all operating partnership units are exchanged into common stock) falls below 50% and shall have no right to nominate directors below a 10% ownership threshold. See “Description of the Partnership Agreement of CoreSite, L.P.”

Employment Agreement with Thomas M. Ray

Prior to or concurrently with the completion of this offering, Thomas M. Ray, currently a managing director of The Carlyle Group and a member of our Board of Directors, will resign from his position at Carlyle and will enter into an employment agreement with us to serve exclusively as our President and Chief Executive Officer. Mr. Ray’s compensation and the salary of his executive assistant have historically been paid by an affiliate of The Carlyle Group. However, we paid an affiliate of The Carlyle Group $575,000 as partial reimbursement for related services rendered to us by Mr. Ray and his executive assistant during the year ended December 31, 2010 and have accrued $143,750 as of March 31, 2010.

Director Compensation

Upon completion of the offering, each of our directors, other than Thomas M. Ray and those directors nominated by the Carlyle real estate funds or their affiliates, will receive, as compensation for their services, shares of common stock and other cash compensation as set forth in “Management—Compensation of Directors.”

Registration Rights

The Carlyle real estate funds or their affiliates will receive registration rights with respect to shares of our common stock that may be issued to them upon the redemption of operating partnership units. See “Shares Eligible for Future Sale—Registration Rights Agreement.”

Indemnification Agreements

Effective upon completion of this offering, we will enter into an indemnification agreement with each of our executive officers and directors as described in “Management—Limitation of Liability and Indemnification.”

Tax Protection Agreements

We have agreed with each of the Carlyle real estate funds or their affiliates, which have directly or indirectly contributed their interests in the properties in our portfolio to our operating partnership, that if we directly or indirectly sell, convey, transfer or otherwise dispose of all or any portion of these interests in a

taxable transaction, we will make an interest-free loan to the contributors in an amount equal to the contributor’s tax liabilities, based on an assumed tax rate. Any such loan would be repayable out of the after-tax proceeds (based on an assumed tax rate) of any distribution from the operating partnership to, or any sale of operating partnership units (or common stock issued by us in exchange for such units) by, the recipient of such loan, and would be non-recourse to the borrower other than with respect to such proceeds. These tax protection provisions apply for a period expiring on the earlier of (i) the seventh anniversary of the completion of this offering and (ii) the date on which these contributors (or certain transferees) dispose in certain taxable transactions of 90% of the operating partnership units that were issued to them in connection with the contribution of these properties. See “Certain Relationships and Related Party Transactions—Tax Protection Agreement.”

Letters of Credit

Affiliates of The Carlyle Group caused $20.1 million of letters of credit to be issued under certain of their credit facilities to guarantee payments under mortgages, lease commitments, payments to vendors and construction redevelopment at certain properties in our portfolio. At the completion of the Financing Transactions, these letters of credit will be cancelled.

Distribution Policy and Payment of Distributions

We intend to pay regular quarterly dividends to our stockholders, beginning with a dividend for the period commencing on the completion of this offering and ending on , .

To obtain the favorable tax treatment associated with our qualification as a REIT, commencing with our taxable year ending on December 31, 2010, we will be required to distribute to our stockholders at least 90% of our net taxable income (excluding net capital gains) each year. To the extent that we distribute at least 90% but less than 100% of our net taxable income, we will be subject to tax at ordinary corporate tax rates on the retained portion. As such, commencing with our taxable year ending on December 31, 2010, we intend to distribute to our stockholders each year all or substantially all of our REIT net taxable income. We will not have any substantial REIT net taxable income prior to the closing of this offering. The actual amount, timing and frequency of distributions will be determined by our Board of Directors based upon a variety of factors deemed relevant by our directors, including our results of operations and our debt service obligations. See “Dividend Policy.”

Restrictions on Transfer

Under the partnership agreement of our operating partnership, holders of operating partnership units will not have the right to tender their units for redemption prior to the first anniversary of the completion of this offering. In addition, subject to certain exceptions, we, our executive officers and directors will agree not to sell or otherwise transfer or encumber any shares of our common stock or securities convertible or exchangeable into our common stock (including operating partnership units) owned by us or them upon completion of this offering or thereafter acquired for a period of 180 days from the date of this prospectus without the consent of Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBC Capital Markets Corporation.

Conflicts of Interest

Following completion of this offering, there will be conflicts of interest with respect to certain transactions between the holders of operating partnership units and our stockholders. In particular, the consummation of certain business combinations, the sale of any properties or a reduction of indebtedness may have different tax consequences to holders of operating partnership units as compared to holders of our common stock, which could make those transactions more or less desirable to the holders of such units. For more information regarding these conflicts of interests, see “Certain Relationships and Related Party Transactions” and “Policies with Respect to Certain Activities.”

Restrictions on Ownership of our Stock

Due to limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue Code of 1986, as amended, or the Code, our charter generally prohibits any person or entity (other than a person who or entity that has been granted an exception as described below) from actually or constructively owning more than 9.8% (by value or by number of shares, whichever is more restrictive) of our common stock or more than 9.8% (by value) of our capital stock. We refer to these restrictions as the ownership limits. Our charter permits our Board of Directors to make certain exceptions to these ownership limits, unless it would cause us to fail to qualify as a REIT. We expect that our Board of Directors will grant some or all of the Carlyle real estate funds or their affiliates exceptions from the ownership limits applicable to other holders of our common stock.

Corporate Information

We formed CoreSite Realty Corporation as a Maryland corporation on February 17, 2010, with perpetual existence. We elected to be treated as an S corporation for federal income tax purposes effective as of the date of our incorporation. We will terminate our S corporate status shortly before completion of this offering (ending the S corporation tax year) and intend to qualify as a REIT for federal income tax purposes commencing with our taxable year ending on December 31, 2010. Our corporate offices are located at 1050 17th Street, Suite 800, Denver, CO 80265. Our telephone number is (866) 777-2673. Our website is www.coresite.com. The information contained on, or accessible through, our website is not incorporated by reference into this prospectus and should not be considered a part of this prospectus.

THE OFFERING


Common stock offered by us		shares^(x)
Common stock to be outstanding after the offering		shares^(x)
Common stock and operating partnership units to be outstanding after the offering		shares and operating partnership units^(y)
Option to purchase additional shares		We have granted the underwriters an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in whole or in part, up to additional shares of our common stock from us at the public offering price less underwriting discounts and commissions to cover over-allotments.


Use of proceeds		Based on an assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover of this prospectus, we estimate that we will receive net proceeds from this offering of approximately $ million after deducting underwriting discounts and commissions and offering expenses payable by us. We estimate that we will receive aggregate net proceeds from this offering of $ million. We intend to use the proceeds from the offering (i) to repay approximately $ million of indebtedness, including related fees and expenses; (ii) to purchase operating partnership units from our operating partnership; (iii) to purchase operating partnership units from the Carlyle real estate funds or their affiliates that are contributing properties to our operating partnership and (iv) for related transaction expenses. Our operating partnership intends to use the cash received from our purchase of its operating partnership units to redevelop and develop additional data center space and for general corporate purposes. See “Use of Proceeds.”


Distribution policy		To obtain the favorable tax treatment associated with our qualification as a REIT, commencing with our taxable year ending on December 31, 2010, we will be required to distribute to our stockholders at least 90% of our net taxable income (excluding capital gains) each year. To the extent that we distribute at least 90% but less than 100% of our net taxable income, we will be subject to tax at ordinary corporate tax rates on the retained portion. As such, commencing with our taxable year ending on December 31, 2010, we intend to generally distribute to our stockholders each year on a regular quarterly basis all or substantially all of our REIT net taxable income. Any payment of cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, economic conditions and other factors deemed relevant by our Board of Directors. See “Dividend Policy.”


(x)		Excludes (i) shares issuable upon exercise of the underwriters’ over-allotment option, (ii) shares available for future issuance under our 2010 Equity Incentive Plan, (iii) shares underlying outstanding options granted under our 2010 Equity Incentive Plan with a weighted average exercise price of $ per share and (iv) shares reserved for issuance with respect to operating partnership units held by limited partners expected to be outstanding subsequent to the Restructuring Transactions that may, subject to limits in the partnership agreement of our operating partnership, be redeemed for cash or, at our option, exchanged for shares of our common stock on a one-for-one basis commencing upon the first anniversary of the completion of this offering.

(y)		Includes operating partnership units expected to be outstanding following consummation of the Restructuring Transactions.


Proposed New York Stock Exchange symbol		We intend to apply to list our common stock on the New York Stock Exchange, or NYSE, under the symbol “COR.”
Risk factors		Investing in our common stock involves certain risks. See the risk factors described under the heading “Risk Factors” beginning on page 17 of this prospectus and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth summary selected financial data on a historical basis for our accounting predecessor, or our Predecessor. Our Predecessor is comprised of the real estate activities of four of our operating properties, 1656 McCarthy, 32 Avenue of the Americas, 12100 Sunrise Valley and 70 Innerbelt, as well as the Coronado-Stender Business Park, all under common control. As part of our Restructuring Transactions, we will acquire other data center properties and buildings housing office and other space under common management, which we refer to in this prospectus as our Acquired Properties. Our Acquired Properties include our continuing real estate operations at 55 S. Market, One Wilshire, 1275 K Street, 900 N. Alameda, 427 S. LaSalle and 2115 NW 22nd Street, as well as 1050 17th Street, a property we lease for our corporate headquarters, which does not generate operating revenue. For accounting purposes, our Predecessor is considered to be the acquiring entity in the Restructuring Transactions and, accordingly, the acquisition of our Acquired Properties will be recorded at fair value. For more information regarding the Restructuring Transactions, please see “Structure and Formation of Our Company.”

The summary historical financial information as of December 31, 2009 and 2008 and for each of the years ended December 31, 2009, 2008 and 2007 has been derived from our Predecessor’s audited financial statements included elsewhere in this prospectus. The summary historical financial data as of March 31, 2010 and for each of the three months ended March 31, 2010 and 2009 has been derived from our Predecessor’s unaudited financial statements included elsewhere in this prospectus. In the opinion of the management of our company, the unaudited interim financial information included herein includes any adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth herein.

The unaudited pro forma condensed consolidated financial data for the year ended December 31, 2009 and the three months ended March 31, 2010 are presented as if the Restructuring Transactions and Financing Transactions had all occurred on March 31, 2010 for the pro forma condensed consolidated balance sheet data and as of January 1, 2009 for the pro forma condensed consolidated statement of operations data. Our pro forma condensed consolidated financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations.

You should read the following summary selected financial data in conjunction with our pro forma financial statements, our Predecessor’s historical combined financial statements and the related notes thereto, and our Acquired Properties’ historical combined financial statements and the related notes thereto, along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this prospectus.


	Three Months Ended March 31.									Year Ended December 31,
	Pro Forma									Pro Forma
	Consolidated			Historical Predecessor						Consolidated			Historical Predecessor
	2010			2010			2009			2009			2009			2008			2007
	(In thousands, except per share data)									(In thousands, except per share data)
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Statement of Operations Data
Operating revenues	$	31,541		$	9,030		$	6,015		$	114,011		$	28,831		$	15,581		$	10,349
Operating expenses:
Property operating and maintenance		10,074			3,981			3,153			37,466			13,954			11,258			4,451
Management fees to related party		—			1,058			434			—			2,244			1,523			363
Real estate taxes and insurance		1,480			447			491			5,730			1,787			2,125			1,015
Depreciation and amortization		9,357			3,158			2,447			41,330			11,193			7,966			3,528
Sales and marketing		270			2			23			2,650			135			170			60
General and administrative		5,982			84			214			22,042			1,401			1,325			267
Rent expense		4,855			697			659			19,206			2,816			2,624			509

Total operating expenses		32,018			9,427			7,421			128,424			33,530			26,991			10,193

Operating income (loss)		(477	)		(397	)		(1,406	)		(14,413	)		(4,699	)		(11,410	)		156
Other income and expense
Interest income		—			—			—			79			3			17			38
Interest expense		(1,888	)		(509	)		(595	)		(7,460	)		(2,343	)		(2,495	)		(2,123	)

Net loss		(2,365	)		(906	)		(2,001	)		(21,794	)		(7,039	)		(13,888	)		(1,929	)
Net loss attributable to redeemable noncontrolling interests in operating partnership		(1,419	)		—			—			(13,076	)		—			—			—

Net loss attributable to controlling interests	$	(946	)	$	(906	)	$	(2,001	)	$	(8,718	)	$	(7,039	)	$	(13,888	)	$	(1,929	)

Pro forma (earning/loss) per share—basic and diluted	$	—								$	—

Pro forma weighted average common shares - basic and diluted		—									—


	As of March 31,
	Pro Forma		Historical		As of December 31,
	Consolidated		Predecessor		Historical Predecessor
	2010		2010		2009		2008		2007
	(In thousands)				(In thousands)
	(Unaudited)		(Unaudited)						(Unaudited)

Balance Sheet Data
Net investments in real estate	$	622,057	$	240,047	$	218,055	$	197,493	$	151,044
Total assets		996,171		272,528		239,420		213,846		164,762
Mortgages payable		120,425		67,464		62,387		52,530		44,332
Redeemable noncontrolling interests in operating partnership		490,845		—		—		—		—
Stockholders’ and members’ equity		326,191		178,293		162,338		149,103		107,228

We consider funds from operations, or FFO, to be a supplemental measure of our performance, which should be considered along with, but not as an alternative to, net income or cash provided by operating activities as a measure of our operating performance. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) (computed in accordance with U.S. generally accepted accounting principles, or GAAP), excluding gains (or losses) from sales of property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.

Our management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.

We offer this measure because we recognize that FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. FFO is a non-GAAP measure and should not be considered a measure of liquidity, an alternative to net income, cash provided by operating activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. In addition, our calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us. Investors in our securities should not rely on these measures as a substitute for any GAAP measure, including net income (loss).

The following table is a reconciliation of our pro forma net loss to FFO:


	Three Months Ended March 31,									Year Ended December 31,
	Pro Forma									Pro Forma
	Consolidated			Historical Predecessor						Consolidated			Historical Predecessor
	2010			2010			2009			2009			2009			2008			2007
	(In thousands)									(In thousands)
	(Unaudited)									(Unaudited)

Funds from Operations
Net loss	$	(2,365	)	$	(906	)	$	(2,001	)	$	(21,794	)	$	(7,039	)	$	(13,888	)	$	(1,929	)
Real estate depreciation and amortization		9,271			3,158			2,447			40,985			11,193			7,966			3,528

FFO	$	6,906		$	2,252		$	446		$	19,191		$	4,154		$	(5,922	)	$	1,599

RISK FACTORS

Investment in our common stock involves risks. In addition to other information contained in this prospectus, you should carefully consider the following risk factors before acquiring shares of our common stock offered by this prospectus. The occurrence of any of the following risks might cause you to lose all or a part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward looking statements. Please refer to the section entitled “Forward-Looking Statements.”

Risks Related to Our Business and Operations

Our portfolio of properties consists primarily of data centers geographically concentrated in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets may negatively impact our operating results.

Our portfolio of properties consists primarily of data centers geographically concentrated in Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago, Boston, New York City and Miami. These markets comprised 40.9%, 23.7%, 13.3%, 8.2%, 7.7%, 4.6% and 1.6%, respectively, of our annualized rent as of March 31, 2010. As such, we are susceptible to local economic conditions and the supply of and demand for data center space in these markets. If there is a downturn in the economy or an oversupply of or decrease in demand for data centers in these markets, our business could be materially adversely affected to a greater extent than if we owned a real estate portfolio that was more diversified in terms of both geography and industry focus.

We have experienced significant losses and we cannot assure you that we will achieve profitability.

For fiscal years 2007, 2008 and 2009, our Predecessor on a combined basis had net losses of $1.9 million, $13.9 million and $7.0 million, respectively. Additionally, for the three months ended March 31, 2010 our Predecessor had a net loss of $0.9 million. For the last three fiscal years, the Acquired Properties on a combined basis were only profitable during the three months ended March 31, 2010 and 2009 and for the year ended December 31, 2009, with net income of $3.9 million, $1.7 million and $4.9 million, respectively, and net losses of $7.4 million and $3.7 million for years ended December 31, 2008 and 2007, respectively. On a pro forma condensed consolidated basis, our Predecessor and the Acquired Properties collectively had net losses of $21.8 million and $2.4 million for the year ended December 31, 2009 and the three months ended March 31, 2010, respectively. Our ability to achieve profitability is dependent upon a number of risks and uncertainties, many of which are beyond our control. We cannot assure you that we will be successful in executing our business strategy and become profitable and our failure to do so could have a material adverse effect on the price of our common stock and our ability to satisfy our obligations, including making payments on our indebtedness. Even if we achieve profitability, given the competitive nature of the industry in which we operate, we may not be able to sustain or increase profitability on a quarterly or annual basis.

We face significant competition and may be unable to lease vacant space, renew existing leases or re-lease space as leases expire, which may have a material adverse effect on our business and results of operations.

We compete with numerous developers, owners and operators of technology-related real estate and data centers, many of which own properties similar to ours in the same markets, including Digital Realty Trust, Inc., Dupont Fabros Technology, Inc., 365 Main Inc., Equinix, Inc., Terremark Worldwide, Inc., Savvis, Inc. and Telx Group, Inc. In addition, we may face competition from new entrants into the data center market. Some of our competitors have significant advantages over us, including greater name recognition, longer operating histories, lower operating costs, pre-existing relationships with current or potential customers, greater financial, marketing and other resources, and access to less expensive power. These advantages could allow our competitors to respond more quickly to strategic opportunities or changes in our industries or markets. If our competitors offer data center space that our existing or potential customers perceive to be superior to ours based on numerous factors, including power, security considerations, location or network connectivity, or if they offer rental rates below our or current market rates, we may lose existing or potential customers, incur costs to improve our properties or be forced reduce our rental rates. This risk is compounded by the fact that a significant percentage of our customer leases expire every year. For example, as of March 31, 2010, leases representing 19.0%, 22.6% and 27.8% of our annualized rent will expire during 2010, 2011 and 2012,

respectively. If the rental rates for our properties decrease, our existing customers do not renew their leases or we are unable to lease vacant data center space or re-lease data center space for which leases are scheduled to expire, our business and results of operations could be materially adversely affected.

Our success depends on key personnel whose continued service is not guaranteed and we may not be able to retain or attract knowledgeable, experienced and qualified personnel.

We depend on the efforts of key personnel, particularly Mr. Thomas M. Ray, our President and Chief Executive Officer, and Ms. Deedee Beckman, our Chief Financial Officer. Our reputation and relationships with existing and potential customers, industry personnel and key lenders are the direct result of a significant investment of time and effort by our key personnel to build credibility in a highly specialized industry. Many of our senior executives have extensive experience and strong reputations in the real estate and technology industries, which aid us in capitalizing on strategic opportunities and negotiating with customers. While we believe that we could find replacements for all of these key personnel, the loss of their services could diminish our business and investment opportunities and our customer, industry and lender relationships, which could have a material adverse effect on our operations.

In addition, our success depends, to a significant degree, on being able to employ and retain personnel who have the expertise required to successfully acquire, develop and operate high-quality data centers. Personnel with these skill sets are in limited supply and in great demand and competition for such expertise is intense. We cannot assure you that we will be able to hire and retain a sufficient number of qualified employees at reasonable compensation levels to support our growth and maintain the high level of quality service our customers expect, and any failure to do so could have a material adverse effect on our business.

We are continuing to invest in our expansion efforts, but we may not have sufficient customer demand in the future to realize expected returns on these investments.

As part of our growth strategy, we intend to commit substantial operational and financial resources to develop new data centers and expand existing ones. However, we typically do not require pre-leasing commitments from customers before we develop or expand a data center, and we may not have sufficient customer demand to support the new data center space when completed. A lack of customer demand for data center space or excess capacity in the data center market could impair our ability to achieve our expected rate of return on our investment, which could have a material adverse effect on our financial condition, operating results and the market price of our common stock.

Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could reduce our revenues, harm our business reputation and have a material adverse effect on our financial results.

Our business depends on providing customers with highly reliable service. We may fail to provide such service as a result of numerous factors, including:


	•	human error;

	•	power loss;

	•	improper building maintenance by our landlords in the buildings that we lease;

	•	physical or electronic security breaches;

	•	fire, earthquake, hurricane, flood and other natural disasters;

	•	water damage;

	•	war, terrorism and any related conflicts or similar events worldwide; and

	•	sabotage and vandalism.

Problems at one or more of our data centers, whether or not within our control, could result in service interruptions or equipment damage. We provide service level commitments to substantially all of our customers. As a result, service interruptions or equipment damage in our data centers could result in credits to these customers. In addition, although we have given such credits to our customers in the past, we cannot assure you that our customers will accept these credits as compensation in the future. Service interruptions and

equipment failures may also expose us to additional legal liability and damage our brand image and reputation. Significant or frequent service interruptions could cause our customers to terminate or not renew their leases. In addition, we may be unable to attract new customers if we have a reputation for significant or frequent service disruptions in our data centers.

Even if we have additional space available for lease at any one of our data centers, our ability to lease this space to existing or new customers could be constrained by our access to sufficient electrical power.

Our properties have access to a finite amount of power, which limits the extent to which we can lease additional space for use at our data centers. As current and future customers increase their power footprint in our facilities over time, the remaining available power for future customers could limit our ability to increase occupancy rates or network density within our existing facilities.

Furthermore, at certain of our data centers, our aggregate maximum contractual obligation to provide power and cooling to our customers may exceed the physical capacity at such data centers if customers were to quickly increase their demand for power and cooling. If we are not able to increase the available power and/or cooling or move the customer to another location within our data centers with sufficient power and cooling to meet such demand, we could lose the customer as well as have liability under our leases. Any such material loss of customers or material liability could adversely affect our results of operations.

To fund our growth strategy and refinance our indebtedness, we depend on external sources of capital, which may not be available to us on commercially reasonable terms or at all.

In order to maintain our qualification as a REIT, we are required under the Code to distribute at least 90% of our net taxable income annually, determined without regard to the dividends paid deduction and excluding any net capital gains. We will also be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we intend to rely on third-party sources for debt or equity financing to fund our growth strategy. In addition, we may need external sources of capital to refinance our indebtedness at maturity. We may not be able to obtain the financing on favorable terms or at all. Our access to third-party sources of capital depends, in part, on:


	•	general market conditions;

	•	the market’s perception of our growth potential;

	•	our then current debt levels;

	•	our historical and expected future earnings, cash flow and cash distributions; and

	•	the market price per share of our common stock.

In addition, our ability to access additional capital may be limited by the terms of our existing indebtedness, which restricts our incurrence of additional debt. If we cannot obtain capital when needed, we may not be able to acquire or develop properties when strategic opportunities arise or refinance our debt at maturity, which could have a material adverse effect on our business.

Our expenses may not decrease if our revenue decreases.

Most of the expenses associated with our business, such as debt service payments, real estate, personal and ad valorem taxes, insurance, utilities, employee wages and benefits and corporate expenses are relatively inflexible and do not necessarily decrease in tandem with a reduction in revenue from our business. Our expenses will also be affected by inflationary increases and certain of our costs may exceed the rate of inflation in any given period. As a result, we may not be able to fully offset our costs by higher lease rates, which could have a material adverse effect on our results of operations.

We depend on third parties to provide network connectivity within and between certain of our data centers, and any delays or disruptions in this connectivity may adversely affect our operating results and cash flow.

We depend upon carriers and other network providers to deliver network connectivity to customers within our data centers as well as the fiber network interconnection between our data centers. Our hub-and-spoke approach in particular leaves us dependent on these third parties to provide these services between our data centers. We cannot assure you that any network provider will elect to offer its services within new data centers that we develop or that once a network provider has decided to provide connectivity to or between our data centers that it will continue to do so for any period of time. A significant interruption in or loss of these services could impair our ability to attract and retain customers and have a material adverse effect on our business.

Enabling connectivity within and between our data centers requires construction and operation of a sophisticated redundant fiber network. The construction required to connect our data centers is complex and involves factors outside of our control, including the availability of construction resources. If highly reliable connectivity within and between certain of our data centers is not established, is materially delayed, is discontinued or fails, our reputation could be harmed, which could have a material adverse effect on our ability to attract new customers or retain existing ones.

Our data center infrastructure may become obsolete and we may not be able to upgrade our power and cooling systems cost-effectively or at all.

The markets for the data centers that we own and operate, as well as the industries in which our customers operate, are characterized by rapidly changing technology, evolving industry standards, frequent new product introductions and changing customer demands. Our ability to deliver technologically sophisticated power and cooling are significant factors in our customers’ decisions to rent space in our data centers. Our data center infrastructure may become obsolete due to the development of new systems to deliver power to, or eliminate heat from, the servers and other customer equipment that we house. Additionally, our data center infrastructure could become obsolete as a result of the development of new technology that requires levels of power and cooling that our facilities are not designed to provide. Our power and cooling systems are also difficult and expensive to upgrade. Accordingly, we may not be able to efficiently upgrade or change these systems to meet new demands without incurring significant costs that we may not be able to pass on to our customers. The obsolescence of our power and cooling systems would have a material adverse effect on our business. In addition, evolving customer demand could require services or infrastructure improvements that we do not provide or that would be difficult or expensive for us to provide in our current data centers, and we may be unable to adequately adapt our properties or acquire new properties that can compete successfully. We risk losing customers to our competitors if we are unable to adapt to this rapidly evolving marketplace.

Furthermore, potential future regulations that apply to industries we serve may require customers in those industries to seek specific requirements from their data centers that we are unable to provide. These may include physical security requirements applicable to the defense industry and government contractors and privacy and security regulations applicable to the financial services and health care industries. If such regulations were adopted, we could lose some customers or be unable to attract new customers in certain industries, which would have a material adverse effect on our results of operations.

Potential losses to our properties may not be covered by insurance or may exceed our policy coverage limits.

We do not carry insurance for generally uninsured losses such as loss from riots, war, terrorist attacks or acts of God. The properties in our portfolio located in California are subject to risks from earthquakes and our property in Miami is potentially subject to risks related to tropical storms, hurricanes and floods. Together, these properties represented approximately 66.2% of total annualized rent as of March 31, 2010. While we will carry earthquake, hurricane and flood insurance on our properties, the amount of our insurance coverage may not be sufficient to fully cover such losses. In addition, we may discontinue earthquake, hurricane or flood insurance on some or all of our properties in the future if the cost of premiums for any of these policies exceeds, in our judgment, the value of the coverage relative to the risk of loss.

If we experience a loss which is uninsured or which exceeds our policy coverage limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

In addition, even if damage to our properties is covered by insurance, a disruption of our business caused by a casualty event may result in the loss of business or customers. We carry a limited amount of business interruption insurance, but such insurance may not fully compensate us for the loss of business or customers due to an interruption caused by a casualty event. See “— Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could reduce our revenues, harm our business reputation and have a material adverse effect on our financial results.”

The recent disruption in the financial markets makes it more difficult to evaluate the stability and net assets or capitalization of insurance companies, and any insurer’s ability to meet its claim payment obligations. A failure of an insurance company to make payments to us upon an event of loss covered by an insurance policy could have a material adverse effect on our business and financial condition.

Furthermore, the properties in our portfolio have historically been covered under The Carlyle Group’s umbrella insurance policy which covers all of Carlyle’s real estate investments. Upon completion of this offering, we will no longer be covered by this umbrella policy. We plan to obtain similar coverage for our portfolio, but because we would no longer have the benefit of the diversification of insured risk under Carlyle’s umbrella policy for its entire real estate portfolio, we expect that our insurance premiums will be higher following the completion of this offering and the Restructuring Transactions.

A small number of customers account for a significant portion of our revenues, and the loss of any of these customers could significantly harm our business, financial condition and results of operations.

Our top ten customers accounted for approximately 31.8% of our total annualized rent as of March 31, 2010. During the second quarter of 2010, we expanded our relationship with Facebook, Inc. and expect that, as a result, this customer will represent approximately 10% of our pro forma revenues for the year ending December 31, 2010. We currently depend, and expect to continue to depend, upon a relatively small number of customers for a significant percentage of our net revenue. Some of our customers may experience a downturn in their businesses or other factors which may weaken their financial condition and result in them failing to make timely rental payments, defaulting on their leases, reducing the level of interconnection services they obtain or the amount of space they lease from us upon renewal of their leases or terminating their relationship with us. The loss of one or more of our significant customers or a customer exerting significant pricing pressure on us could also have a material adverse effect on our results of operations.

In addition, our largest customers may choose to develop new data centers or expand existing data centers of their own. In the event that any of our key customers were to do so, it could result in a loss of business to us or increase pricing pressure on us. If we lose a customer, there is no guarantee that we would be able to replace that customer at a competitive rate or at all.

Some of our largest customers may also compete with one another in various aspects of their businesses. The competitive pressures on our customers may have a negative impact on our operations. For instance, one customer could determine that it is not in that customer’s interest to house mission-critical servers in a facility operated by the same company that relies on a key competitor for a significant part of its annual revenue. Our loss of a large customer for this or any other reason could have a material adverse effect on our results of operations.

We are dependent upon third-party suppliers for power and certain other services, and we are vulnerable to service failures of our third-party suppliers and to price increases by such suppliers.

We rely on third parties to provide power to our data centers, and we cannot ensure that these third parties will deliver such power in adequate quantities or on a consistent basis. If the amount of power available to us is inadequate to support our customer requirements, we may be unable to satisfy our obligations to our customers or grow our business. In addition, our data centers are susceptible to power shortages and planned or unplanned power outages caused by these shortages. While we attempt to limit

exposure to power shortages by using backup generators and batteries, power outages may last beyond our backup and alternative power arrangements, which would harm our customers and our business. In the past, a limited number of our customers have experienced temporary losses of power. Pursuant to the terms of some of our customer leases, continuous or chronic power outages may give certain of our tenants the right to terminate their leases or cause us to incur financial obligations in connection with a power loss. In addition, any loss of services or equipment damage could reduce the confidence of our customers in our services thereby impairing our ability to attract and retain customers, which would adversely affect both our ability to generate revenues and our operating results.

In addition, we may be subject to risks and unanticipated costs associated with obtaining power from various utility companies. Municipal utilities in areas experiencing financial distress may increase rates to compensate for financial shortfalls unrelated to either the cost of production or the demand for electricity. Other utilities that serve our data centers may be dependent on, and sensitive to price increases for, a particular type of fuel, such as coal, oil or natural gas. In addition, the price of these fuels and the electricity generated from them could increase as a result of proposed legislative measures related to climate change or efforts to regulate carbon emissions. In any of these cases, increases in the cost of power at any of our data centers would put those locations at a competitive disadvantage relative to data centers served by utilities that can provide less expensive power.

We may be unable to identify and complete acquisitions and successfully operate acquired properties.

We continually evaluate the market for available properties and may acquire data centers or properties suited for data center development when opportunities exist. Our ability to acquire properties on favorable terms and successfully develop and operate them involves significant risks including, but not limited to:


	•	we may be unable to acquire a desired property because of competition from other data center companies or real estate investors with more capital;

	•	even if we are able to acquire a desired property, competition from other potential acquirors may significantly increase the purchase price of such property;

	•	we may be unable to realize the intended benefits from acquisitions or achieve anticipated operating or financial results;

	•	we may be unable to finance the acquisition on favorable terms or at all;

	•	we may underestimate the costs to make necessary improvements to acquired properties;

	•	we may be unable to quickly and efficiently integrate new acquisitions into our existing operations resulting in disruptions to our operations or the diversion of our management’s attention;

	•	acquired properties may be subject to reassessment, which may result in higher than expected tax payments;

	•	we may not be able to access sufficient power on favorable terms or at all; and

	•	market conditions may result in higher than expected vacancy rates and lower than expected rental rates.

In the past we have acquired properties that did not perform up to our expectations and there can be no assurance that this will not happen again. If we are unable to successfully acquire, redevelop, develop and operate data center properties, our ability to grow our business, compete and meet market expectations will be significantly impaired, which would have a material adverse effect on the price of our common stock.

We may be subject to unknown or contingent liabilities related to properties or businesses that we acquire for which we may have limited or no recourse against the sellers.

Assets and entities that we have acquired or may acquire in the future, including the properties contributed by the Carlyle real estate funds or their affiliates, may be subject to unknown or contingent liabilities for which we may have limited or no recourse against the sellers. Unknown or contingent liabilities might include liabilities for clean-up or remediation of environmental conditions, claims of customers, vendors or other persons dealing with the acquired entities, tax liabilities and other liabilities whether incurred in the

ordinary course of business or otherwise. In the future we may enter into transactions with limited representations and warranties or with representations and warranties that do not survive the closing of the transactions, in which event we would have no or limited recourse against the sellers of such properties. While we usually require the sellers to indemnify us with respect to breaches of representations and warranties that survive, such indemnification (including the indemnification by the Carlyle real estate funds or their affiliates) is often limited and subject to various materiality thresholds, a significant deductible or an aggregate cap on losses. As a result, there is no guarantee that we will recover any amounts with respect to losses due to breaches by the sellers of their representations and warranties. In addition, the total amount of costs and expenses that we may incur with respect to liabilities associated with acquired properties and entities may exceed our expectations, which may adversely affect our operating results and financial condition. Finally, indemnification agreements between us and the sellers typically provide that the sellers will retain certain specified liabilities relating to the assets and entities acquired by us. While the sellers are generally contractually obligated to pay all losses and other expenses relating to such retained liabilities, there can be no guarantee that such arrangements will not require us to incur losses or other expenses as well.

Our growth depends on the successful redevelopment and development of our properties and any delays or unexpected costs associated with such projects may harm our growth prospects, future operating results and financial condition.

As of March 31, 2010, we had the ability to expand our operating data center square footage by approximately 1.0 million NRSF by redeveloping 447,368 NRSF of vacant space and developing 496,250 NRSF of new data center space on land we currently own. Our growth depends upon the successful completion of the redevelopment and development of this space and similar projects in the future. Current and future redevelopment and development projects will involve substantial planning, allocation of significant company resources and certain risks, including risks related to financing, zoning, regulatory approvals, construction costs and delays. These projects will also require us to carefully select and rely on the experience of one or more general contractors and associated subcontractors during the construction process. Should a general contractor or significant subcontractor experience financial or other problems during the construction process, we could experience significant delays, increased costs to complete the project and other negative impacts to our expected returns. Site selection is also a critical factor in our expansion plans, and there may not be suitable properties available in our markets at a location that is attractive to our customers and has the necessary combination of access to multiple network providers, a significant supply of electrical power, high ceilings and the ability to sustain heavy floor loading. Furthermore, while we may prefer to locate new data centers adjacent to our existing data centers, we may be limited by the inventory and location of suitable properties.

In addition, we will be subject to risks and, potentially, unanticipated costs associated with obtaining access to a sufficient amount of power from local utilities, including the need, in some cases, to develop utility substations on our properties in order to accommodate our power needs, constraints on the amount of electricity that a particular locality’s power grid is capable of providing at any given time, and risks associated with the negotiation of long-term power contracts with utility providers. We cannot assure you that we will be able to successfully negotiate such contracts on acceptable terms or at all. Any inability to negotiate utility contracts on a timely basis or on acceptable financial terms or in volumes sufficient to supply the requisite power for our development properties would have a material negative impact on our growth and future results of operations and financial condition.

These and other risks could result in delays or increased costs or prevent the completion of our redevelopment and development projects, any of which could have a material adverse effect on our financial condition, results of operations, cash flow, the trading price of our common stock and our ability to satisfy our debt service obligations or pay dividends.

We do not own all of the buildings in which our data centers are located. Instead, we lease certain of our data center space and the ability to renew these leases could be a significant risk to our ongoing operations.

We do not own the buildings for three of our data centers and our business could be harmed if we are unable to renew the leases for these data centers at favorable terms or at all. The following table summarizes the remaining primary term and renewal rights associated with each of our leased properties:


	Current Lease		Renewal		Base Rent Increases
Property	Term Expiration		Rights		at Renewal⁽¹⁾

32 Avenue of the Americas		Apr. 2023		2 x 5 yrs	FMR
One Wilshire		July 2017		3 x 5 yrs	103% of previous monthly base rent
1275 K Street		May 2016		3 x 5 yrs	Greater of 103% of previous monthly base rent or 95% of FMR


(1)		FMR represents “fair market rent” as determined by mutual agreement between landlord and tenant, or in the case of a disagreement, mutual agreement by third party appraisers.

When the primary term of our leases expire, we have the right to extend the terms of our leases as indicated above. For two of these leases, the rent will be determined based on the fair market value of rental rates for this property and the then prevailing rental rates may be higher than rental rates under the applicable lease. To maintain the operating profitability associated with our present cost structure, we must increase revenues within existing data centers to offset the anticipated increase in lease payments at the end of the original and renewal terms. Failure to increase revenues to sufficiently offset these projected higher costs would adversely impact our operating income. Upon the end of our renewal options, we would have to renegotiate our lease terms with the landlord.

If we are not able to renew the lease at any of our data centers, the costs of relocating the equipment in such data centers and redeveloping a new location into a high-quality data center could be prohibitive. In addition, we could lose customers due to the disruptions in their operations caused by the relocation. We could also lose those customers that choose our data centers based on their locations.

Our level of indebtedness and debt service obligations could have adverse effects on our business.

As of March 31, 2010, after giving pro forma effect to the Financing Transactions, we would have had a total combined indebtedness of approximately $122.4 million, all of which would have been secured indebtedness. We also expect to have the ability to borrow up to an additional $ million under our new $100.0 million revolving credit facility, subject to satisfying certain financial tests, all of which if incurred will be secured indebtedness. The terms of the agreements governing our indebtedness are expected to limit, but not to prohibit, us from incurring additional indebtedness and we may incur a significant amount of additional indebtedness to finance future acquisitions and development activities and other corporate purposes. A substantial level of indebtedness could have adverse consequences for our business, results of operations and financial condition because it could, among other things:


	•	require us to dedicate a substantial portion of our cash flow from operations to make principal and interest payments on our indebtedness, thereby reducing our cash flow available to fund working capital, capital expenditures and other general corporate purposes, including to pay dividends on our common stock as currently contemplated or necessary to maintain our qualification as a REIT;


	•	make it more difficult for us to satisfy our financial obligations, including borrowings under our new revolving credit facility;


	•	increase our vulnerability to general adverse economic and industry conditions;

	•	expose us to increases in interest rates for our variable rate debt;

	•	limit our ability to borrow additional funds on favorable terms or at all to expand our business or ease liquidity constraints;

	•	limit our ability to refinance all or a portion of our indebtedness on or before maturity on the same or more favorable terms or at all;


	•	limit our flexibility in planning for, or reacting to, changes in our business and our industry;

	•	place us at a competitive disadvantage relative to competitors that have less indebtedness; and

	•	require us to dispose of one or more of our properties at disadvantageous prices or raise equity that may dilute the value of our common stock in order to service our indebtedness or to raise funds to pay such indebtedness at maturity.

The agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing operational flexibility and creating default risks.

The agreements governing our indebtedness contain covenants that place restrictions on us and our subsidiaries. These covenants may restrict, among other things, our and our subsidiaries’ ability to:


	•	merge, consolidate or transfer all or substantially all of our or our subsidiaries’ assets;

	•	incur additional debt or issue preferred stock;

	•	make certain investments or acquisitions;

	•	create liens on our or our subsidiaries’ assets;

	•	sell assets;

	•	make capital expenditures;

	•	pay dividends on or repurchase our capital stock;

	•	enter into transactions with affiliates;

	•	issue or sell stock of our subsidiaries; and

	•	change the nature of our business.

These covenants could impair our ability to grow our business, take advantage of attractive business opportunities or successfully compete. In addition, our new revolving credit facility will require us to maintain specified financial ratios and satisfy financial condition tests. Our ability to comply with these ratios or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants or covenants under any other agreements governing our indebtedness could result in an event of default. Cross-default provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, the lenders could elect to declare all outstanding debt under such agreements to be immediately due and payable. If we were unable to repay or refinance the accelerated debt, the lenders could proceed against any assets pledged to secure that debt, including foreclosing on or requiring the sale of our data centers, and our assets may not be sufficient to repay such debt in full.

Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in any property subject to mortgage debt.

Following the Restructuring Transactions and Financing Transactions, we expect that our 427 S. LaSalle property will be subject to $40.0 million of secured indebtedness, our 55 S. Market property will be subject to a $60.0 million mortgage loan and our 12100 Sunrise Valley Drive will be subject to a $32.0 million secured construction loan, of which $22.4 million was outstanding as of March 31, 2010. In addition, borrowings under our new revolving credit facility will be secured by a lien on certain of our properties. Incurring mortgage and other secured debt obligations increases our risk of property losses because defaults on secured indebtedness may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing any loans for which we are in default. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code. As we execute our business plan, we may assume or incur new mortgage indebtedness on our existing properties or properties that we acquire in the future. Any default under any one of our mortgage debt obligations may increase the risk of our default on our other indebtedness.

Our failure to develop and maintain a diverse customer base could harm our business and adversely affect our results of operations.

Our ability to increase occupancy rates in our data centers and grow our business is, in part, dependent upon our ability to market our data center space to a diverse customer base. A more diverse customer base in our data centers creates more networking interconnection opportunities that are valued by our customers, which we believe has generated and will continue to generate incremental revenues in the long-term. Attracting and retaining this diverse customer base will depend on many factors, including the density of interconnection, the operating reliability and security of our data centers, and our ability to market our services effectively across different customer segments. If we fail to maintain a diverse customer base, our business and results of operations may be adversely affected.

Certain of the properties in our portfolio have been owned or operated for a limited period of time, and we may not be aware of characteristics or deficiencies involving any one or all of them.

As of March 31, 2010, our portfolio of properties consisted of ten operating data center facilities, one data center under construction and one development site. Eight of the properties being contributed to our portfolio were acquired or developed by the Carlyle real estate funds or their affiliates less than four years prior to the date of this offering, including one facility, 2901 Coronado, which was completed during the second quarter of 2010. Because these properties have been in operation for a relatively short period of time, we may be unaware of characteristics of or deficiencies in such properties that could adversely affect their valuation or revenue potential and such properties may not ultimately perform up to our expectations.

We have not obtained third-party appraisals to establish the amount of operating partnership units to be issued in exchange for the properties to be contributed to our operating partnership in connection with the Restructuring Transactions and the operating partnership units issued by our operating partnership in exchange for these properties may exceed their fair market values.

The initial public offering price of our common stock will be determined in consultation with the underwriters and based on a number of factors, including our results of operations, management, estimated net income, estimated funds from operations, estimated cash available for distribution, anticipated dividend yield and growth prospects, the current market valuations, financial performance and dividend yields of publicly traded companies considered to be comparable to us and the current state of the data center industry and the economy as a whole, as well as market demand for this offering. As a result, the initial public offering price does not necessarily bear any relationship to our book value, the fair market value of our assets or the appraised value of our properties. Consequently, the operating partnership units received by the Carlyle real estate funds or their affiliates, if valued on an as exchanged basis for shares of our common stock at the per share price set forth on the cover of this prospectus, may exceed the fair market value or the appraised value of the properties contributed for such units and the aggregate value of our common stock at the initial offering price plus the aggregate amount of our debt may exceed the aggregate appraised values of our properties.

Although we have obtained preliminary appraisals of each of the Acquired Properties in connection with the preparation of our pro forma condensed consolidated financial statements included elsewhere in this prospectus, such appraisals did not cover the properties of our Predecessor, do not accurately reflect the value of our company as a whole and the assumptions, judgments and methodologies used in connection with these appraisals may be different than those used by investors in our common stock. Additionally, while the entities contributing the properties to our operating partnership in connection with the Restructuring Transactions obtained a third party opinion from an independent financial advisor regarding the fairness to each of these entities, from a financial point of view, of the allocation of the operating partnership units as among these entities to be received in consideration for the property or properties contributed by each such entity based on estimated valuations of the properties held by each fund, which valuations were obtained solely for the purpose of allocating the operating partnership units as among these entities. Further, the independent financial advisor used a variety of customary valuation methodologies and certain assumptions and judgments to determine a range of valuations of the individual properties and no related appraisal or physical inspection of the properties was conducted and no attempt was made to value the properties as a single operating company. Accordingly, the assumptions, judgments and methodologies used in connection with these valuations may also be different than those used by public shareholders in assessing

the value of our company taken as a whole. In addition, while our lenders have conducted appraisals of some of our properties in connection with determining for loan purposes whether the collateral value is sufficient to support the amount of the loans, we have not obtained or reviewed copies of such appraisals.

Our tax protection agreements could limit our ability to sell or otherwise dispose of certain properties.

We have agreed with each of the Carlyle real estate funds or their affiliates which have directly or indirectly contributed their interests in the properties in our portfolio to our operating partnership that if we directly or indirectly sell, convey, transfer or otherwise dispose of all or any portion of these interests in a taxable transaction, we will make an interest-free loan to the contributors in an amount equal to the contributor’s tax liabilities, based on an assumed tax rate. Any such loan would be repayable out of the after tax-proceeds (based on an assumed tax rate) of any distribution from the operating partnership to, or any sale of operating partnership units (or common stock issued by us in exchange for such units) by, the recipient of such loan, and would be non-recourse to the borrower other than with respect to such proceeds. These tax protection provisions apply for a period expiring on the earlier of (i) the seventh anniversary of the completion of this offering and (ii) the date on which these contributors (or certain transferees) dispose in certain taxable transactions of 90% of the operating partnership units that were issued to them in connection with the contribution of these properties. See “Certain Relationships and Related Party Transactions—Tax Protection Agreements.”

Increases in our property and other state and local taxes could adversely affect our ability to make distributions to our stockholders if they cannot be passed on to our customers.

We are subject to a variety of state and local taxes, including real and personal property taxes and sales and use taxes that may increase materially due to factors outside our control. In particular, taxes on our properties may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. We have been notified by local taxing authorities that the assessed value of certain of our properties have increased. We plan to appeal these increased assessments, but we may not be successful in our efforts. Furthermore, some of our properties may be reassessed retroactively to the date we or the Carlyle real estate funds acquired the property, which could require us to make cumulative payments for multiple years. Our leases with our customers generally do not allow us to increase their rent as a result of an increase in property or other taxes. If property or other taxes increase and we cannot pass these increases on to our customers through increased rent for new leases or upon lease renewals, our result of operations, cash flow and ability to make distributions to our stockholders would be adversely affected.

Risks Related to the Real Estate Industry

Illiquidity of real estate investments, particularly our data centers, could significantly impede our ability to respond to adverse changes in the performance of our properties, which could harm our financial condition.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to adverse changes in the real estate market or in the performance of such properties may be limited, thus harming our financial condition. The real estate market is affected by many factors that are beyond our control, including:


	•	adverse changes in national and local economic and market conditions;

	•	changes in interest rates and in the availability, cost and terms of debt financing;

	•	changes in governmental laws and regulations, fiscal policies and zoning ordinances and costs of compliance therewith;

	•	the ongoing cost of capital improvements that are not passed onto our customers, particularly in older structures;

	•	changes in operating expenses; and

	•	civil unrest, acts of war, terrorist attacks and natural disasters, including earthquakes and floods, which may result in uninsured and underinsured losses.

The risks associated with the illiquidity of real estate investments are even greater for our data center properties. Our data centers are highly specialized real estate assets containing extensive electrical and mechanical systems that are uniquely designed to house and maintain our customers’ equipment, and, as such, have little, if any, traditional office space. As a result, most of our data centers are not suited for use by customers as anything other than as data centers and major renovations and expenditures would be required in order for us to re-lease data center space for more traditional commercial or industrial uses, or for us to sell a property to a buyer for use other than as a data center.

Environmental problems are possible and can be costly.

Unidentified environmental liabilities could arise and have a material adverse effect on our financial condition and performance. Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and remediate hazardous or toxic substances or petroleum product releases at the property.

We may have to pay governmental entities or third parties for property damage and for investigation and remediation costs that they incurred in connection with any contamination at our properties without regard to whether we knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by these environmental laws may be held responsible for all of the clean-up costs incurred.

Some of our properties contain or may contain asbestos-containing building materials. Environmental laws may impose fines and penalties on building owners or operators who fail to properly manage and maintain these materials, notify and train persons who may come into contact with asbestos and undertake special precautions, and third parties may seek recovery from owners or operators for any personal injury associated with asbestos-containing building materials.

Some of our properties may also contain or develop harmful mold or suffer from other air quality issues. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our customers, employees of our customers and others if property damage or health concerns arise.

We may be adversely affected by regulations related to climate change.

Climate change regulation is a rapidly developing area. Congress is currently considering new laws relating to climate change, including potential cap-and-trade systems, carbon taxes, and other requirements relating to reduction of carbon footprints and/or greenhouse gas emissions. Other countries have enacted climate change laws and regulations, and the United States has been involved in discussions regarding international climate change treaties. The EPA, and some of the States and localities in which we operate, have also enacted climate change laws and regulations, and/or have begun regulating carbon footprints and greenhouse gas emissions. Although these laws and regulations have not had an adverse effect on our business to date, they could limit our ability to develop new facilities or result in substantial compliance costs, retrofit costs and construction costs, including capital expenditures for environmental control facilities and other new equipment. We could also face a negative impact on our reputation with the public if we violate climate change regulations.

If we do not obtain a negative declaration from the City of Santa Clara, we will be unable to proceed with our plans to develop the Coronado-Stender Properties, which would have a material adverse effect on our business and results of operations.

We are in the process of obtaining a negative declaration from the City of Santa Clara in connection with our planned development of the Coronado-Stender Properties. The declaration, if issued, would determine that the proposed development will not have a significant impact on the environment. If we are unable to obtain the negative declaration, we will only be able to develop an additional 179,600 NRSF of data center space at this property as compared to our current plans for the development of 446,250 NRSF of additional data center space.

Risks Related to Our Organizational Structure

Our Board of Directors may change our major corporate, investment and financing policies without stockholder approval and those changes may adversely affect our business.

Our Board of Directors will determine our major corporate policies, including our acquisition, investment, financing, growth, operations and distribution policies and whether to maintain our status as a REIT. In particular, we anticipate that our Board of Directors will adopt a policy of limiting the amount of indebtedness we incur. However, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our Board of Directors may alter or eliminate our current corporate policies, including our policy on borrowing at any time without stockholder approval. Accordingly, while our stockholders have the power to elect or remove directors, our stockholders will have limited direct control over changes in our policies and those changes could adversely affect our business, financial condition, results of operations, the market price of our common stock and our ability to make distributions to our stockholders.

While the Carlyle real estate funds and their affiliates will not control our company following the completion of this offering, they will own a majority of our operating partnership and have the right initially to nominate two directors, and their interests may differ from or conflict with the interests of our stockholders.

Upon completion of this offering, the Carlyle real estate funds or their affiliates will have an aggregate beneficial ownership interest in our operating partnership of approximately % which, if exchanged for our common stock, would represent an approximately % interest in our common stock. In addition, the operating partnership agreement will initially grant the Carlyle real estate funds and their affiliates the right to initially nominate two of the seven directors to our Board of Directors. See “Description of the Partnership Agreement of CoreSite, L.P.”

As a result, the Carlyle real estate funds or their affiliates will have the ability to exercise substantial influence over our company, including with respect to decisions relating to our capital structure, issuing additional shares of our common stock or other equity securities, paying dividends, incurring additional debt, making acquisitions, selling properties or other assets, merging with other companies and undertaking other extraordinary transactions. In any of these matters, the interests of the Carlyle real estate funds and their affiliates may differ from or conflict with the interests of our other stockholders. In addition, the Carlyle real estate funds or their affiliates are in the business of making investments in companies and may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are significant existing or potential customers. The Carlyle real estate funds and their affiliates may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.

Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our common stock or a change in control, which may be in the best interests of our stockholders.

Our charter and bylaws contain a number of provisions, the exercise or existence of which could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stockholders or otherwise be in their best interests, including the following:


	•	*Our Charter Contains Restrictions on the Ownership and Transfer of Our Stock*. In order to assist us in complying with the limitations on the concentration of ownership of REIT stock imposed by the Code on REITs, our charter generally prohibits any person or entity (other than a person who or entity that has been granted an exception as described below) from actually or constructively owning more than 9.8% (by value or by number of shares, whichever is more restrictive) of our common stock or more than 9.8% (by value) of our capital stock. The value and number of the outstanding shares of common stock and the value of the outstanding shares of capital stock shall be determined by the Board of Directors in good faith, which shall be conclusive for all purposes. We refer to these restrictions as the ownership limits. Our charter permits our Board of Directors to make certain exceptions to these ownership limits, unless it would cause us to fail to qualify as a REIT. We expect that our Board of Directors will grant some or all of the Carlyle real estate funds or their affiliates

exemptions from the ownership limits applicable to other holders of our common stock. Any attempt to own or transfer shares of our capital stock in excess of the ownership limits without the consent of our Board of Directors will result in the automatic transfer of the shares (and all dividends thereon) to a charitable trust. These ownership limitations may prevent a third party from acquiring control of us if our Board of Directors does not grant an exemption from the ownership limitations, even if our stockholders believe the change in control is in their best interests.


	•	Our Charter Grants Our Board of Directors the Right to Classify or Reclassify Any Unissued Shares of Capital Stock, Increase or Decrease the Authorized Number of Shares and Establish the Preference and Rights of Any Preferred Stock without Stockholder Approval. Our charter provides that the total number of shares of stock of all classes that we currently have authority to issue is , initially consisting of shares of common stock and shares of preferred stock. Our Board of Directors has the authority, without a stockholders’ vote, to classify or reclassify any unissued shares of stock, including common stock into preferred stock or vice versa, to increase or decrease the authorized number of shares of common stock and preferred stock and to establish the preferences and rights of any preferred stock or other class or series of shares to be issued. Because the Board of Directors has the power to establish the preferences and rights of additional classes or series of stock without a stockholders’ vote, our Board of Directors may give the holders of any class or series of stock preferences, powers and rights, including voting rights, senior to the rights of holders of existing stock.

See “Description of Securities” for additional information on the anti-takeover measures applicable to us.

Certain provisions of Maryland law may limit the ability of a third party to acquire control of us.

Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including:


	•	*“business combination”* provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation) or an affiliate of any interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations; and

	•	*“control share”* provisions that provide that “control shares” of our company (defined as voting shares of stock which, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares.

We have opted out of these provisions of the MGCL, in the case of the business combination provisions of the MGCL, by resolution of our Board of Directors and, in the case of the control share provisions of the MGCL, by a provision in our bylaws. However, our Board of Directors may elect to opt into these provisions if approved by our stockholders by the affirmative vote of a majority of votes cast and with the consent of the Carlyle real estate funds or their affiliates, provided that the consent of the Carlyle entities will not be required unless, in the case of the control share provisions, such provisions would apply to the Carlyle real estate funds and their affiliates, or in either case at such time they own less than 10% of our outstanding common stock (assuming all operating partnership units are exchanged into common stock).

Additionally, Title 3, Subtitle 8 of the MGCL permits our Board of Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not yet have.

Risks Related to Our Status as a REIT

Failure to qualify as a REIT would have material adverse consequences to us and the value of our stock.

We intend to elect to be taxed and to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes under the Code. However, we cannot assure you that we will qualify or will remain qualified as a REIT. If, in any taxable year, we lose our REIT status, we will face serious tax consequences that would substantially reduce our cash available for distribution to you for each of the years involved because:


	•	we would not be allowed a deduction for distributions to stockholders in computing our taxable income and we would be subject to federal income tax, including any alternative minimum tax, at regular corporate rates;

	•	we could be subject to possibly increased state and local taxes; and

	•	unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.

Our failure to qualify as a REIT could also impair our ability to expand our business and raise capital, and would materially adversely affect the value of our common stock.

We have no operating history as a REIT and our inexperience may impede our ability to successfully manage our business.

We have no operating history as a REIT. As a result, we cannot assure you that our past experience will be sufficient to successfully operate our company as a REIT. Although certain of our executive officers and directors have experience in the real estate industry, and Mr. Ray, our President and Chief Executive Officer and Ms. Beckman, our Chief Financial Officer, have previously held positions with publicly traded REITs, we cannot assure you that our past experience will be sufficient to operate a business in accordance with the Code requirements for REIT qualification or in accordance with the requirements of the SEC and the NYSE. Upon completion of this offering, we will be required to develop and implement substantial control systems and procedures in order to qualify and maintain our qualification as a REIT, satisfy our periodic and current reporting requirements under applicable SEC regulations and comply with NYSE listing standards. The implementation of these control systems and procedures could require more time, money and other resources than we currently expect. Failure to qualify and maintain our qualification as a REIT or comply with the rules and regulations of the SEC or the listing standards of the NYSE would have a material adverse effect on our company, our stock price and the cash available for distribution to our stockholders.

Failure to qualify as a domestically-controlled REIT could subject our non-U.S. stockholders to adverse federal income tax consequences.

We will be a domestically-controlled REIT if, at all times during a specified testing period, less than 50% in value of our shares is held directly or indirectly by non-U.S. stockholders. However, because our shares will be publicly traded following this offering, we cannot guarantee that we will in fact be a domestically-controlled REIT. If we fail to qualify as a domestically-controlled REIT, our non-U.S. stockholders that otherwise would not be subject to federal income tax on the gain attributable to a sale of our shares of common stock would be subject to taxation upon such a sale if either (1) the shares of common stock were not considered to be regularly traded under applicable Treasury Regulations on an established securities market, such as the NYSE, or (2) the selling non-U.S. stockholder owned, actually or constructively, more than 5% in value of the outstanding shares of common stock being sold during specified testing periods. If gain on the sale or exchange of our shares of common stock was subject to taxation for these reasons, the non-U.S. stockholder would be subject to regular U.S. income tax with respect to any gain on a net basis in a manner similar to the taxation of a taxable U.S. stockholder, subject to any applicable alternative minimum tax and special alternative minimum tax in the case of nonresident alien individuals, and corporate

non-U.S. stockholders may be subject to an additional branch profits tax, as described in “Federal Income Tax Considerations—Taxation of Non-U.S. Stockholders.”

Our cash available for distribution to stockholders may not be sufficient to pay distributions at expected levels or at all.

In order to maintain our qualification as a REIT, we are required under the Code to distribute at least 90% of our net taxable income annually to our stockholders. In any period our net taxable income may be greater than the cash flow from operations. In addition, we may become party to debt agreements that include cash management or similar provisions, pursuant to which revenues generated by properties subject to such indebtedness are immediately, or upon the occurrence of certain events, swept into an account for the benefit of the lenders under such debt agreements, which revenues would typically only become available to us after the funding of reserve accounts for, among other things, debt service, taxes, insurance and leasing commissions. If our properties do not generate sufficient cash flow, we may be required to fund distributions from working capital or borrowings under our new revolving credit facility or obtain other debt or equity financing, which may not be available, pay dividends in the form of taxable stock dividends in order to meet our distributions requirements or reduce expected distributions, any of which could have a material adverse effect on the price of our common stock.

Applicable REIT laws may restrict certain business activities.

As a REIT we are subject to various restrictions on our income, assets and activities. These include restrictions on our ability to pursue certain strategic acquisitions or business combinations and our ability to enter into other lines of business. Due to these restrictions, we anticipate that we will conduct certain business activities, such as interconnection services, in one or more taxable REIT subsidiaries. Our taxable REIT subsidiaries are taxable as regular C corporations and are subject to federal, state, local, and, if applicable, foreign taxation on their taxable income at applicable corporate income tax rates. However, we may still be limited in the business activities we can pursue.

Despite our REIT status, we remain subject to various taxes.

Notwithstanding our status as a REIT, we will be subject to certain federal, state and local taxes on our income and property. For example, we will pay tax on certain types of income that we do not distribute and will incur a 100% excise tax on transactions with our TRS that are not conducted on an arm’s length basis. Moreover, our TRS is taxable as a regular C corporation and will pay federal, state and local income tax on its net income at the applicable corporate rates.

We generally will have a carryover tax basis on our properties acquired in the Restructuring Transactions, which could reduce our depreciation deductions.

We expect that the properties that we will acquire in the Restructuring Transactions generally will have a carryover tax basis that is lower than the respective fair market values of the properties. This could result in lower depreciation deductions on these properties, thereby (i) increasing the distribution requirement imposed on us which could adversely affect our ability to satisfy the REIT distribution requirement, and (ii) decreasing the extent to which our distributions are treated as tax-free “return of capital” distributions.

If the structural components of our properties were not treated as real property for purposes of the REIT qualification requirements, we would fail to qualify as a REIT.

A significant portion of the value of our properties is attributable to structural components related to the provision of electricity, heating, ventilation and air conditioning, humidification regulation, security and fire protection, and telecommunication services. We have received a private letter ruling from the Internal Revenue Service, or the IRS, holding, among other things, that our buildings, including the structural components, constitute real property for purposes of the REIT qualification requirements. We are entitled to rely upon that private letter ruling only to the extent that we did not misstate or omit a material fact in the ruling request we submitted to the IRS and that we operate in the future in accordance with the material facts described in that request. Moreover, the IRS, in its sole discretion, may revoke the private letter ruling. If our structural components are determined not to constitute real property for purposes of the REIT qualification requirements, including as a result of our being

unable to rely upon the private letter ruling or the IRS revoking that ruling, we would fail to qualify as a REIT, which could have a material adverse effect on the value of our common stock.

Risks Related to this Offering

Increases in market interest rates may cause potential investors to seek higher dividend yields and therefore reduce demand for our common stock and result in a decline in our stock price.

One of the factors that may influence the price of our common stock is the dividend yield on our common stock (the amount of dividends as a percentage of the price of our common stock) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our common stock to expect a higher dividend yield, which we may be unable or choose not to provide. Higher interest rates would likely increase our borrowing costs and potentially decrease the cash available for distribution. Thus, higher market interest rates could cause the market price of our common stock to decline.

The requirements associated with being a public company will significantly increase our costs and require significant company resources and management attention and our failure to comply with these requirements could have a material adverse effect on our business and the market price of our common stock.

We have never operated as a public company. As a public company, we will be subject to the requirements of the Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition within specified time periods and maintain effective internal control over financial reporting and disclosure controls and procedures. The Sarbanes-Oxley Act requires, among other things, that we periodically evaluate our internal control over financial reporting and disclosure controls and procedures and furnish, on an annual basis, a report by our management on the effectiveness of our internal control over financial reporting commencing with the first fiscal year beginning after the completion of this offering. Our independent auditors will need to audit and issue a report on the effectiveness of our internal control over financial reporting as well.

As a result, we will incur significant legal, accounting and other expenses that we did not incur as a private company and our management and other personnel will need to devote a substantial amount of time to comply with these rules and regulations and establish the corporate infrastructure and controls demanded of a public company. In connection with our operation as a public company, we will be required to report our operations on a consolidated basis and, in some cases, on a property by property basis. We are in the process of implementing an internal audit function and modifying our company-wide systems and procedures in a number of areas to enable us to report on a consolidated basis as we continue the process of integrating the financial reporting of the entities we intend to acquire in connection with the Restructuring Transactions. If our finance and accounting organization is unable for any reason to respond adequately to the increased demands that will result from being a public company, the quality and timeliness of our financial reporting may suffer and we could experience deficiencies or material weaknesses in our disclosure controls and procedures or our internal control over financial reporting. If we are unable to establish effective disclosure controls and procedures and internal control over financial reporting, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a material adverse effect on our operating results and the trading price of our common stock.

The number of shares available for future sale could materially adversely affect the market price of our common stock.

We cannot predict whether future issuances of shares of our common stock or the availability of shares of our common stock for resale in the open market will decrease the market price per share of our common stock. Sales of a substantial number of shares of our common stock in the public market, either by us or by holders of operating partnership units upon exchange of such units for our common stock, or the perception that such sales might occur, could materially adversely affect the market price of the shares of our common stock. The Carlyle real estate funds or their affiliates, as holders of the operating partnership units to be issued in the

Restructuring Transactions, will have the right to require us to register with the SEC the resale of the common stock issuable, if we so elect, upon redemption of these operating partnership units. Such funds or affiliates are restricted from exercising their redemption rights prior to the first anniversary of the completion of this offering. In addition, after completion of this offering, we intend to register shares of common stock that we have reserved for issuance under our equity incentive plan, and once registered they can generally be freely sold in the public market after issuance, assuming any applicable restrictions and vesting requirements are satisfied. In addition, except as described herein, we, our directors and officers have agreed with the underwriters not to offer, sell, contract to sell, pledge or otherwise dispose of any shares of common stock or other securities convertible or exchangeable into our common stock for a period of 180 days after the date of this prospectus; however, the representatives of the underwriters may waive these lock-up provisions without notice. If any or all of these holders cause a large number of their shares to be sold in the public market, the sales could reduce the trading price of our common stock and could impede our ability to raise future capital. In addition, the exercise of the underwriters’ option to purchase up to an additional shares of our common stock or other future issuances of our common stock would be dilutive to existing stockholders.

Our earnings and cash distributions will affect the market price of shares of our common stock.

We believe that the market value of a REIT’s equity securities is based primarily upon market perception of the REIT’s growth potential and its current and potential future cash distributions, whether from operations, sales, acquisitions, development or refinancing, and is secondarily based upon the value of the underlying assets. For these reasons, shares of our common stock may trade at prices that are higher or lower than the net asset value per share. To the extent we retain operating cash flow for investment purposes, working capital reserves or other purposes rather than distributing the cash flow to stockholders, these retained funds, while increasing the value of our underlying assets, may negatively impact the market price of our common stock. Our failure to meet market expectations with regard to future earnings and cash distributions would likely adversely affect the market price of our common stock.

The market price and trading volume of our common stock may be volatile following this offering.

Even if an active trading market develops for our common stock, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above the public offering price or at all. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future.

Some of the factors that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock include:


	•	actual or anticipated variations in our quarterly operating results or dividends;

	•	changes in our funds from operations or earnings estimates;

	•	publication of research reports about us or the real estate, technology or data center industries;

	•	increases in market interest rates that may cause purchasers of our shares to demand a higher yield;

	•	changes in market valuations of similar companies;

	•	adverse market reaction to any additional debt we may incur in the future;

	•	additions or departures of key personnel;

	•	actions by institutional stockholders;

	•	speculation in the press or investment community about our company or industry or the economy in general;

	•	the occurrence of any of the other risk factors presented in this prospectus; and

	•	general market and economic conditions.

There is currently no public market for our common stock. An active trading market for our common stock may not develop following this offering and you may be unable to sell your stock at a price above the initial public offering price or at all.

There has not been any public market for our common stock prior to this offering. We have applied to have our common stock listed on the NYSE following the completion of this offering. We cannot assure you, however, that an active trading market for our common stock will develop after this offering or, if one develops, that it will be sustained. In the absence of a public market, you may be unable to liquidate an investment in our common stock. The initial public offering price of our common stock will be determined in consultation with the underwriters and based on a number of factors, including our results of operations, management, estimated net income, estimated funds from operations, estimated cash available for distribution, anticipated dividend yield and growth prospects, the current market valuations, financial performance and dividend yields of publicly traded companies considered to be comparable to us and the current state of the data center industry and the economy as a whole. The price at which shares of our common stock trade after the completion of this offering may be lower than the price at which the underwriters sell them in this offering.

If you purchase shares of common stock in this offering, you will experience immediate and significant dilution in the net tangible book value per share of our common stock.

We expect the initial public offering price of our common stock to be substantially higher than the book value per share of our outstanding common stock immediately after this offering. If you purchase our common stock in this offering, you will incur immediate dilution of approximately $ in the book value per share of common stock from the price you pay for our common stock in this offering, based on an assumed initial public offering price of $ per share, the midpoint of the range indicated on the cover of this prospectus. See “Dilution” for further discussion of how your ownership interest in us will be immediately diluted.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements that are not historical facts. You can identify forward-looking statements by their use of forward-looking words, such as “may,” “will,” “anticipates,” “expect,” “believe,” “intend,” “plan,” “should,” “seek” or comparable terms, or the negative use of those words, but the absence of these words does not necessarily mean that a statement is not forward-looking.

These forward-looking statements are made based on our expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.

Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” and elsewhere in this prospectus. These factors include, among others:


	•	general economic conditions as well as adverse economic or real estate developments in our industry resulting in decreased demand for data center space;

	•	the geographic concentration of the properties in our portfolio;

	•	non-renewal of leases by customers;

	•	inability to retain key personnel;

	•	difficulties in redeveloping, developing or identifying properties to acquire and completing acquisitions;

	•	failure of our physical infrastructure or disruption of the services necessary for the function of our properties;

	•	increased interest rates and operating costs not offset by increased revenues;

	•	our failure to successfully operate acquired properties and operations;

	•	our failure to maintain our status as a REIT; and

	•	financial market fluctuations or a lack of external financing.

Except as required by law, we do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this prospectus or to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this prospectus.

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of shares of common stock will be approximately $ million, or $ million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $ per share, the midpoint of the range set forth on the cover of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses of approximately $ million payable by us.

We intend to use the proceeds from this offering (i) to repay approximately $ million of indebtedness, including related fees and expenses; (ii) to purchase operating partnership units from our operating partnership; (iii) to purchase operating partnership units from the Carlyle real estate funds and their affiliates that are contributing properties to our operating partnership; and (iv) for related transaction expenses. Our operating partnership intends to use the cash received from our purchase of its operating partnership units to redevelop and develop additional data center space and for general corporate purposes.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would (i) increase (decrease) the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase of 1.0 million shares in the number of shares offered by us, together with a concomitant $1.00 increase in the assumed public offering price of $ per share, would increase the net proceeds to us from this offering by approximately $ million. Similarly, each decrease of 1.0 million shares in the number of shares offered by us, together with a concomitant $1.00 decrease in the assumed public offering price of $ per share, would decrease the net proceeds to us from this offering by approximately $ million. We do not expect that a change in the initial public offering price will have a material effect on our use of proceeds.

DIVIDEND POLICY

We intend to elect to be taxed and to operate in a manner that will allow us to qualify as a REIT for U.S. federal income tax purposes, commencing with our tax year ending December 31, 2010. In order to qualify as a REIT under the Code, we generally must make distributions to our stockholders each year in an amount equal to at least:


	•	90% of our REIT taxable income (which does not include the earnings of our taxable REIT subsidiary) determined without regard to the dividends paid deduction; plus

	•	90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; minus

	•	any excess non-cash income.

We intend to make regular quarterly distributions to holders of our common stock. We intend to pay an initial distribution with respect to the period commencing on the completion of this offering and ending , , based on a distribution of $ per share for a full quarter. On an annualized basis, this would be $ per share, or an annual distribution rate of approximately % based on an assumed initial public offering price of $ per share, the midpoint of the range indicated on the cover of this prospectus. We estimate that this initial annual distribution rate will represent approximately % of estimated cash available for distribution for the twelve months ending , on a pro forma basis. We have estimated our cash available for distribution to our common stockholders for the 12 months ending , based on adjustments to our pro forma as adjusted net income available to common stockholders for the 12 months ended , (giving effect to the Restructuring Transactions and the Financing Transactions), as described below. This estimate was based upon the historical operating results of our Predecessor and the Acquired Properties, as adjusted on a pro forma basis for the Restructuring Transactions and the Financing Transactions and does not take into account any additional investments and their associated cash flows, unanticipated expenditures that we may have to make or any additional debt we may incur. In estimating our cash available for distribution to holders of our common stock, we have made certain assumptions as reflected in the table and footnotes below. To the extent our initial annual distribution is in excess of 100% of our estimated cash available for distribution, we will use existing cash to fund such shortfall or possibly borrowings under our new revolving credit facility.

We intend to maintain our initial distribution rate for the 12-month period following completion of this offering unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in our estimate. Distributions made by us will be authorized by our Board of Directors out of funds legally available and therefore will be dependent upon a number of factors, including restrictions under applicable law. We believe that our estimate of cash available for distribution constitutes a reasonable basis for setting the initial distribution; however, the actual amount, timing and frequency of our distributions will be at the discretion of, and authorized by, our Board of Directors and will depend on our actual results of operations and a number of other factors, including:


	•	the timing of our investment of the net proceeds of this offering to fund redevelopment and development projects;

	•	the rent received from our lessees;

	•	our debt service requirements;

	•	capital expenditure requirements for our properties;

	•	unforeseen expenditures at our properties;

	•	our taxable income and the taxable income of our TRS;

	•	the annual distribution requirement under the REIT provisions of the Code;

	•	our operating expenses;

	•	relevant provisions of Maryland law; and


	•	other factors that our Board of Directors may deem relevant.

We may retain earnings of our TRS, and such amount of cash would not be available to satisfy the 90% distribution requirement. If our cash available for distribution to our stockholders is less than 90% of our REIT taxable income, we could be required to sell assets or borrow funds to make distributions. Dividend distributions to our stockholders will generally be taxable to our stockholders as ordinary income to the extent of our current or accumulated earnings and profits.

We cannot assure you that our estimated distributions will be made or sustained. Any distributions we pay in the future will depend upon our actual results of operations, economic conditions and other factors that could differ materially from our current expectations. Our actual results of operations will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, the ability of our customers to meet their obligations and unanticipated expenditures. If our properties do not generate sufficient cash flow, we may be required to fund distributions from (i) working capital, which could include proceeds from this offering, (ii) borrowings under our new revolving credit facility or (iii) from other debt or equity financing, which may not be available. If our properties fail to generate sufficient cash flow, we may also be forced to pay dividends in the form of taxable stock dividends in order to meet our distributions requirements or reduce expected distributions. For more information regarding risk factors that could materially adversely affect our actual results of operations and our ability to make distributions to our stockholders, see “Risk Factors,” including “Risks Related to Our Status as a REIT— Our cash available for distribution to stockholders may not be sufficient to pay distributions at expected levels or at all.”

The following table describes our pro forma income (loss) from continuing operations before non-controlling interests for the year ended December 31, 2009, and the adjustments we have made thereto in order to estimate our initial cash available for distribution for the twelve months ending March 31, 2011 (amounts in thousands except share data, per share data, square footage data and percentages):


Pro Forma loss before non-controlling interests for the 12 months ended December 31, 2009	$	(21,794	)
Less: Pro Forma loss before non-controlling interests for the three months ended March 31, 2009		(5,813	)
Add: Pro Forma loss before non-controlling interests for the three months ended March 31, 2010		(2,365	)

Pro Forma loss before non-controlling interests for the 12 months ended March 31, 2010	$	(18,346	)
Add: Pro forma real estate depreciation and amortization		39,683
Add: Net increases in contractual rental income(1)		21,155
Less: Net decreases in contractual net income due to lease expirations, assuming no renewals(2)		(11,112	)
Less: Net effect of straight line rents and fair market value adjustments to customer leases(3)		(4,519	)
Add: Net effect of straight line rent expense and fair market value adjustments for leased properties(4)		3,121
Add: Non-cash compensation expense(5)		2,079
Add: Non-cash interest expense(6)		3,138

Estimated cash flow from operating activities for the 12 months ended March 31, 2011	$	35,199
Estimated cash flows used in investing activities
Less: Contractual obligations for tenant improvement and leasing commissions(7)		(3,395	)
Less: Estimated annual provision for recurring capital expenditures(8)		(1,105	)

Total estimated cash flows used in investing activities		(4,500	)

Estimated cash flow available for distribution for the 12 months ending March 31, 2011	$	30,699
Our share of estimated cash available for distribution(9)
Non-controlling interests’ share of estimated cash available for distribution
Total estimated initial annual distribution to stockholders
Estimated initial annual distribution per share(10)
Payout ratio based on our share of estimated cash available for distributions(11)


(1)		Represents net increases from new leases, renewals and contractual rent increases from existing leases that were not in effect for the entire 12 month period ended March 31, 2010 or that will go into effect during the 12 months ending March 31, 2011 based on leases entered into through June 1, 2010.


(2)		Assumes no renewals (other than month-to-month leases) for leases that expired or will expire during the 12 months ended March 31, 2010 and ending March 31, 2011, unless a new or renewal lease had been entered into by June 1, 2010 or such customer was under a month-to-month lease as of June 1, 2010.


(3)		Represents GAAP to cash conversion of estimated rental revenues on in-place customer leases for the 12 months ended March 31, 2010.


(4)		Represents GAAP to cash conversion of estimated rental expenses on properties leased by us for the 12 months ended March 31, 2010.


(5)		Pro forma non-cash compensation expenses related to the vesting of incentive awards granted under the 2010 Equity Incentive Plan.


(6)		Pro forma non-cash amortization of financing costs and below market debt for the 12 months ending March 31, 2011.


(7)		Reflects contractual tenant improvement costs and leasing commissions for the 12 months ending March 31, 2011 based on leases in effect as of March 31, 2010 and new leases entered into through June 1, 2010. Leasing commission commitments totaling $1.5 million include costs related to the Facebook and CSC leases of $684,000 and $663,000, respectively. Tenant improvement commitments related to the General Services Administration — IRS lease agreement under which we are obligated to pay $4.3 million between 2010 and 2012. The timing of these payments are dependent on the achievement of certain defined milestones. We expect to pay $1.9 million under this contract during the twelve months ended March 31, 2011. Tenant improvement costs and leasing commissions for renewed and retenanted space at the properties in our portfolio


		incurred during the 12 months ended December 31, 2008 and 2009 and the three months ended March 31, 2010 is set forth in the following table.


							Weighted Avg
					Three Months		Jan 1,
	Year Ended December 31,				Ended		2008-
	2008		2009		March 31, 2010		31-Mar-10

Average tenant improvement costs and leasing commissions per leased square foot	$	22.58	$	14.91	$	12.71	$	17.91


(8)		For the 12 months ending March 31, 2011, the estimated costs of recurring capital expenditures (excluding costs of tenant improvements) at our properties are based on the weighted average annual capital expenditures costs of $.72 per rentable square foot in our portfolio incurred during the 12 months ended December 31, 2008 and 2009 and the three months ended March 31, 2010 multiplied by 1,532,541 rentable square feet. The following table sets forth certain information regarding capital expenditures at our properties through March 31, 2010.


							Weighted Avg
					Three Months		Jan 1,
	Year Ended December 31,				Ended		2008-
	2008		2009		March 31, 2010		31-Mar-10

Recurring capital expenditures per rentable square foot	$	0.37	$	1.07	$	0.18	$	0.72
Total rentable square feet								1,532,541

Total estimated recurring capital expenditures (in thousands)							$	1,105


(9)		Our share of estimated cash available for distribution and estimated initial annual cash distributions to our stockholders is based on an estimated % aggregate partnership interest in our operating partnership.


(10)		Based on a total of shares of our common stock to be outstanding after this offering.


(11)		Calculated by dividing our estimated initial annual distribution per share by our share of estimated cash available for distribution per share for the 12 months ending March 31, 2011.

CAPITALIZATION

The following table sets forth the historical capitalization of our Predecessor as of March 31, 2010 and our consolidated capitalization as of March 31, 2010, pro forma for the Restructuring Transactions and after giving effect to the Financing Transactions and use of the net proceeds therefrom, as set forth under “Use of Proceeds.” You should read this table in conjunction with “Use of Proceeds,” “Selected Historical and Pro Forma Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and our combined historical and pro forma financial statements and the notes thereto appearing elsewhere in this prospectus.


	March 31, 2010
	Historical Predecessor		Pro Forma Consolidated
	(In thousands)
			(unaudited)

Mortgages payable	$	67,464	$	120,425
Redeemable noncontrolling interests in operating partnership		—		490,845
Stockholders’ equity:
Preferred stock, $ par value per share, shares authorized, none issued or outstanding		—		—
Common stock, $ par value per share, shares authorized, shares issued and outstanding on a pro forma basis		—
Additional paid in capital		—		326,191
Members’ equity		178,293		—

Total stockholders’ and members’ equity		178,293		326,191

Total capitalization	$	245,757	$	937,461


(1)		The common stock outstanding as shown includes common stock to be issued in this offering and excludes (i) shares issuable upon exercise of the underwriters’ over-allotment option, (ii) additional shares available for future issuance under our 2010 Equity Incentive Plan, including shares underlying outstanding options issued under the 2010 Equity Incentive Plan, and (iii) shares reserved for issuance with respect to operating partnership units held by limited partners expected to be outstanding subsequent to the Restructuring Transactions that may, subject to limits in the partnership agreement of our operating partnership, be exchanged for cash or, at our option, exchanged for shares of our common stock on a one-for-one basis commencing upon the first anniversary of the completion of this offering.

Each $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) each of additional paid-in capital, total stockholders’/owner’s equity and total capitalization by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase of 1.0 million shares in the number of shares offered by us, together with a concomitant $1.00 increase in the assumed offering price of $ per share, would increase each of additional paid-in capital, total stockholders’/owner’s equity and total capitalization by approximately $ million. Similarly, each decrease of 1.0 million shares in the number of shares offered by us, together with a concomitant $1.00 decrease in the assumed offering price of $ per share, would decrease each of additional paid-in capital, total stockholders’/owner’s equity and total capitalization by approximately $ million. The as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

DILUTION

Purchasers of our common stock offered in this prospectus will experience an immediate and substantial dilution of the net tangible book value of our common stock from the initial public offering price. At March 31, 2010, our Predecessor had a net tangible book value of approximately $ million, or $ per share of our common stock to be held by holders of operating partnership units after this offering, assuming the exchange of operating partnership units held by the Carlyle real estate funds or their affiliates following the Restructuring Transactions for shares of our common stock on a one-for-one basis. After giving pro forma effect to the Restructuring Transactions, the Financing Transactions, including the sale of the shares of our common stock offered hereby, and the use of proceeds therefrom, the pro forma net tangible book value at , attributable to common stockholders would have been $ million, or $ per share of our common stock. This amount represents an immediate increase in net tangible book value of $ per share to holders of operating partnership units and an immediate dilution in pro forma net tangible book value of $ per share from the assumed public offering price of $ per share of our common stock to new public investors. The following table illustrates this per share dilution:


		Per share

Assumed initial public offering price		$
Net tangible book value per share of our Predecessor as of assuming the exchange of all operating partnership units held by the Carlyle real estate funds or their affiliates following the Restructuring Transactions for shares of our common stock but before the Financing Transactions as of March 31, 2010
Increase in pro forma net tangible book value per share attributable to the Restructuring Transactions, the Financing Transactions and the use of proceeds therefrom
Pro forma net tangible book value per share after giving effect to the Restructuring Transactions, the Financing Transactions and the use of proceeds therefrom (assuming the exchange of all operating partnership units outstanding immediately following the Restructuring Transactions for shares of our common stock)

Dilution in pro forma net tangible book value per share to new investors		$

Differences Between New Investors and Existing Investors in Number of Shares and Amount Paid

The table below summarizes, as of March 31, 2010, on a pro forma basis after giving effect to the Restructuring Transactions, the Financing Transactions and the use of proceeds therefrom, the differences between the number of shares of common stock received by the Carlyle real estate funds or their affiliates in the Restructuring Transactions (assuming the exchange of all operating partnership units held by the Carlyle real estate funds or their affiliates following the Restructuring Transactions for shares of our common stock) and the new investors purchasing shares in this offering, the total consideration paid and the average price per share paid by the Carlyle real estate funds or their affiliates in the Restructuring Transactions and paid in cash by the new investors purchasing shares in this offering (based on the net tangible book value attributable to Carlyle real estate funds or their affiliate receiving operating partnership units in the Restructuring Transactions). In calculating the shares to be issued in this offering, we used an assumed initial public offering price of $ per share, which is the mid-point of the price range indicated on the front cover page of this prospectus.

Shares/OP

Net Tangible Book Value of

Units Issued

Contribution/Cash(1)

Average Price

(dollars in thousands, except per share data)

Number

Percentage

Amount

Percentage

Per Share

Existing investors(2)

New investors

Total


(1)		Represents pro forma net tangible book value as of March 31, 2010 of the assets contributed to our operating partnership in the Restructuring Transactions, giving effect to the Financing Transactions and the use of proceeds therefrom, prior to deducting the estimated costs of the Restructuring Transactions and the Financing Transactions.


(2)		Includes shares of common stock, representing our initial capitalization and operating partnership units and an aggregate of shares of common stock to be issued to certain of our directors, executive officers and other employees at the completion of this offering.

If the underwriters’ option to purchase additional shares is exercised in full, the following will occur:


	•	the as adjusted number of shares of common stock held by existing stockholders will decrease to , or approximately %, of the total number of shares of our common stock outstanding after this offering; and

	•	the number of shares of common stock held by new investors will increase to , or approximately %, of the total number of shares of our common stock outstanding after this offering.

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth summary selected financial data on a historical basis for our Predecessor. Our Predecessor is comprised of the real estate activities of four of our operating properties, 1656 McCarthy, 32 Avenue of the Americas, 12100 Sunrise Valley and 70 Innerbelt, as well as the Coronado-Stender Business Park, all under common control. As part of our Restructuring Transactions, we will acquire other data center properties and buildings housing office and other space under common management, which we refer to in this prospectus as our Acquired Properties. Our Acquired Properties include the continuing real estate operations of 55 S. Market, One Wilshire, 1275 K Street, 900 N. Alameda, 427 S. LaSalle and 2115 NW 22nd Street, as well as 1050 17th Street, a property we lease as our corporate headquarters, which does not generate operating revenue. For accounting purposes, our Predecessor is considered to be the acquiring entity in the Restructuring Transactions and, accordingly, the acquisition of our Acquired Properties will be recorded at fair value. For more information regarding the Restructuring Transactions, please see “Structure and Formation of Our Company.”

The historical financial information as of December 31, 2009 and 2008 and for each of the years ended December 31, 2009, 2008 and 2007 has been derived from our Predecessor’s audited financial statements included elsewhere in this prospectus. The historical financial information as of December 31, 2007, 2006 and 2005 and for the years ended December 31, 2006 and 2005 has been derived from our Predecessor’s unaudited financial statements. The historical financial information as of March 31, 2010 and for each of the three months ended March 31, 2010 and 2009 has been derived from our Predecessor’s unaudited financial statements included elsewhere in this prospectus. In the opinion of the management of our company, the unaudited interim financial information included herein includes any adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth herein.

The unaudited pro forma condensed consolidated financial data for the year ended December 31, 2009 and the three months ended March 31, 2010 are presented as if this offering and the Restructuring Transactions and Financing Transactions had all occurred on March 31, 2010 for the pro forma condensed consolidated balance sheet data and as of January 1, 2009 for the pro forma condensed consolidated statement of operations data. Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations.

You should read the following selected financial data in conjunction with our pro forma financial statements, our Predecessor’s historical combined financial statements and the related notes thereto, and our Acquired Properties’ historical combined financial statements and the related notes thereto, along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this prospectus.


	Three Months Ended March 31,									Year Ended December 31,
	Pro Forma									Pro Forma
	Consolidated			Historical Predecessor						Consolidated			Historical Predecessor
	2010			2010			2009			2009			2009			2008			2007			2006⁽¹⁾		2005⁽¹⁾
	(In thousands except per share data)									(In thousands except per share data)
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)												(Unaudited)		(Unaudited)

Statement of Operations Data
Operating revenues	$	31,541		$	9,030		$	6,015		$	114,011		$	28,831		$	15,581		$	10,349		$	—	$	—
Operating expenses:
Property operating and maintenance		10,074			3,981			3,153			37,466			13,954			11,258			4,451			—		—
Management fees to related party		—			1,058			434			—			2,244			1,523			363			—		—
Real estate taxes and insurance		1,480			447			491			5,730			1,787			2,125			1,015			—		—
Depreciation and amortization		9,357			3,158			2,447			41,330			11,193			7,966			3,528			—		—
Sales and marketing		270			2			23			2,650			135			170			60			—		—
General and administrative		5,982			84			214			22,042			1,401			1,325			267			—		—
Rent expense		4,855			697			659			19,206			2,816			2,624			509			—		—

Total operating expenses		32,018			9,427			7,421			128,424			33,530			26,991			10,193			—		—

Operating income (loss)		(477	)		(397	)		(1,406	)		(14,413	)		(4,699	)		(11,410	)		156			—		—
Other income and expense
Interest income		—			—			—			79			3			17			38			—		—
Interest expense		(1,888	)		(509	)		(595	)		(7,460	)		(2,343	)		(2,495	)		(2,123	)		—		—

Net loss		(2,365	)		(906	)		(2,001	)		(21,794	)		(7,039	)		(13,888	)		(1,929	)		—		—
Net loss attributable to redeemable noncontrolling interests in operating partnership		(1,419	)		—			—			(13,076	)		—			—			—			—		—

Net income loss attributable to controlling interests	$	(946	)	$	(906	)	$	(2,001	)	$	(8,718	)	$	(7,039	)	$	(13,888	)	$	(1,929	)	$	—	$	—

Pro forma (earning/loss) per share—basic and diluted	$	—								$	—

Pro forma weighted average common shares - basic and undiluted		—									—


	As of March 31,				As of December 31,
	Pro Forma		Historical
	Consolidated		Predecessor		Historical Predecessor
	2010		2010		2009		2008		2007		2006⁽¹⁾		2005⁽¹⁾
	(In thousands)				(In thousands)
	(Unaudited)		(Unaudited)						(Unaudited)		(Unaudited)		(Unaudited)

Balance Sheet Data
Net investments in real estate	$	622,057	$	240,047	$	218,055	$	197,493	$	151,044	$	10,132	$	—
Total assets		996,171		272,528		239,420		213,846		164,762		10,161		—
Mortgages payable		120,425		67,464		62,387		52,530		44,332		—		—
Redeemable noncontrolling interests in operating partnership		490,845		—		—		—		—		—		—
Stockholders’ and members’ equity		326,191		178,293		162,338		149,103		107,228		10,114		—


(1)	The Predecessor acquired its first property in December 2006 and did not commence operations until 2007. Accordingly, the selected financial data does not include statement of operations data for the years ended December 31, 2006 and 2005 or balance sheet data as of December 31, 2005.

We consider FFO to be a supplemental measure of our performance which should be considered along with, but not as an alternative to, net income and cash provided by operating activities as a measure of operating performance and liquidity. We calculate FFO in accordance with the standards established by NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.

The following table is a reconciliation of our net loss to FFO:


	Three Months Ended March 31,									Year Ended December 31,
	Pro Forma									Pro Forma
	Consolidated			Historical Predecessor						Consolidated			Historical Predecessor
	2010			2010			2009			2009			2009			2008			2007
	(In thousands)									(In thousands)
	(Unaudited)									(Unaudited)

Funds from Operations
Net loss	$	(2,365	)	$	(906	)	$	(2,001	)	$	(21,794	)	$	(7,039	)	$	(13,888	)	$	(1,929	)
Real estate depreciation and amortization		9,271			3,158			2,447			40,985			11,193			7,966			3,528

FFO	$	6,906		$	2,252		$	446		$	19,191		$	4,154		$	(5,922	)	$	1,599

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our results of operations, financial condition and liquidity in conjunction with our combined financial statements and the related notes included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business and the other non-historical statements contained herein are forward-looking statements. See “Forward-Looking Statements.” You should also review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described herein or implied by such forward-looking statements. Our Predecessor is comprised of the real estate activities and holdings of a Carlyle real estate fund that will contribute properties into our portfolio. We refer to the assets we will acquire upon completion of this offering and completion of the Restructuring Transactions as the “Acquired Properties,” which are comprised of certain real estate activities and holdings of the Carlyle real estate funds or their affiliates other than our Predecessor. Since our formation as CoreSite Realty Corporation on February 17, 2010, we have not had any corporate activity other than the issuance of shares of common stock in connection with the initial capitalization of our company. Because we believe that a discussion of the historical results of CoreSite Realty Corporation would not be meaningful, we have set forth below a discussion of the historical operations of (i) our Predecessor and (ii) the Acquired Properties.

Overview

As of March 31, 2010, our property portfolio included ten operating data center facilities, one data center under construction and one development site, which collectively comprise over 2.0 million NRSF, of which approximately 1.0 million NRSF is existing data center space. These properties include 337,586 NRSF of space readily available for lease, of which 194,939 NRSF is available for lease as data center space. As of March 31, 2010, we had the ability to expand our operating data center square footage by approximately 1.0 million NRSF by redeveloping 447,368 NRSF of vacant space and developing 496,250 NRSF of new data center space on land we currently own. We expect that this redevelopment and development potential will enable us to accommodate existing and future customer demand and positions us to significantly increase our cash flows.

For the years ended December 31, 2009, 2008 and 2007, our Predecessor had net losses of $7.0 million, $13.9 million, and $1.9 million, respectively. These losses were primarily a result of year-over-year increased depreciation and amortization expense and property operating and maintenance costs during the period of lease-up to stabilization of our Predecessor’s properties. Increased interest expense from property level debt incurred to fund the acquisition and development of our Predecessor’s properties has also contributed to these historical losses. Our ability to achieve profitability is dependent upon a number of risks and uncertainties discussed in the section “Risk Factors,” many of which are beyond our control. We cannot assure you that we will be successful in executing our business strategy and become profitable following the Restructuring Transactions and, if we achieve profitability, given the competitive nature of the industry in which we operate, we may not be able to sustain profitability or grow our business at the levels we anticipate.

Acquisitions, Redevelopment and Development. The following sets forth the acquisition, redevelopment and development activities for our Predecessor and the entities contributing the Acquired Properties since January 1, 2007. We refer to each entity contributing a property as a “Contributing Entity.” All NRSF totals presented below are as of March 31, 2010.

Operating Property Acquisitions and Operating Leases


	•	*February 2007*—A Contributing Entity acquired 427 S. LaSalle, located in downtown Chicago, for $35.0 million, which comprises 175,073 NRSF of operating space and 5,309 NRSF of vacant redevelopment space.


	•	*February 2007*—Our Predecessor acquired the Coronado-Stender Business Park in Santa Clara, California for $37.8 million, which consists of 15.75 contiguous acres in Santa Clara, California. The Coronado-Stender Business Park encompasses: (i) the Coronado-Stender Properties, a development site consisting of 12.6 acres housing six buildings with 179,600 NRSF of office and light-industrial operating space and (ii) 2901 Coronado. Subject to entitlements, we believe the Coronado-Stender Properties can be developed into 446,250 NRSF of data center space in addition to the 50,000 NRSF of data center space completed during the second quarter of 2010 at 2901 Coronado. See “— Development Projects.”


	•	*April 2007*—Our Predecessor acquired 70 Innerbelt, located just outside of Boston’s central business district, for $32.5 million, which comprises 121,591 NRSF of operating space and 155,015 NRSF of vacant redevelopment space.


	•	*June 2007*—Our Predecessor entered into a lease for the seventh floor in the 32 Avenue of the Americas building in New York City. This lease accounts for 49,303 total NRSF, of which 48,404 NRSF is operating space.

	•	*August 2007*—A Contributing Entity entered into a lease for space in the One Wilshire building in Los Angeles, California. This lease accounts for 172,970 total square feet, of which 164,021 NRSF is operating space.


	•	*December 2007*—Our Predecessor acquired 12100 Sunrise Valley, located in Reston, Virginia, for $45.0 million, which comprises 154,848 NRSF of operating space and 107,921 NRSF of vacant redevelopment space.

Redevelopment History

Since the acquisition of our first property in February 2000, we have completed over 30 data center redevelopment projects. Included among these, from January 1, 2006 through March 31, 2010, we completed 28 projects totaling 574,368 NRSF, representing 55.5% of our existing data center NRSF. In addition to our completed redevelopment projects, at March 31, 2010, we were in the process of redeveloping or developing a total of 91,244 NRSF of additional data center space.

Development Projects

In March 2010, our Predecessor signed a six-year lease with a leading online social networking company for 100% of the 50,000 NRSF of high-quality data center space at 2901 Coronado, which is located within the Coronado-Stender Business Park. The development site for 2901 Coronado was acquired by our Predecessor as a component of the Coronado-Stender Business Park. Since acquiring the Coronado-Stender Business Park, as of March 31, 2010, our Predecessor had invested $34.8 million in connection with the development of 2901 Coronado and additional improvements to the Coronado-Stender Properties.

Redevelopment and Development. We identify space suitable for redevelopment and development both at the time we purchase an asset and from time to time as we own and operate an asset. We often strategically purchase properties with large vacancies or expected near-term lease roll-over and use our extensive knowledge of the property and market to determine the optimal use and customer mix. Generally, a redevelopment consists of a range of improvements to a property, including upgrades to existing data center

space by adding additional power and cooling capabilities and/or a targeted remodeling of common areas and customer spaces to make the property more attractive to certain customers. A development may involve a more comprehensive structural renovation of an existing building to significantly upgrade the character of the property, or it may involve ground-up construction of a new building to support data center operations. The redevelopment or development process generally occurs in stages and requires significant capital expenditures in many cases.

The Restructuring Transactions. Immediately prior to the completion of the initial public offering of our common stock, we will enter into a series of transactions with the Carlyle real estate funds or their affiliates to create our new organizational structure. These transactions, which we refer to as our Restructuring Transactions, are described more fully under the caption “Certain Relationships and Related Party Transactions—The Restructuring Transactions.”

As a result of the Restructuring Transactions, after the completion of this offering, substantially all of our assets will be held by, and our operations conducted through, CoreSite, L.P. and its subsidiaries. All of our interconnection services will be provided by our TRS, CoreSite Services, Inc., a wholly owned subsidiary of our operating partnership. We will control CoreSite, L.P. as general partner and as the owner of approximately % of the interests in our operating partnership. Our primary asset will be our general and limited partner interests in our operating partnership.

Revenues. Our operating revenue generally consists of base rent, power, tenant reimbursements and interconnection services. Upon completion of this offering and consummation of the Restructuring Transactions, our property portfolio will include nine owned properties and three leased properties with an aggregate of 2.0 million NRSF. As of March 31, 2010, our operating facilities were approximately 78.0% leased at an annualized rent per leased NRSF of $66.93 and lease expirations through 2010 represented 12.3% of our portfolio’s NRSF and 19.0% of our portfolio’s annualized rent. As of March 31, 2010, and based on annualized rent, our dollar-weighted average lease term was 5.2 years.

Operating Expenses. Our operating expenses generally consist of utilities, site maintenance costs (including on-site personnel and security, repairs and maintenance), real estate and personal property taxes, insurance, selling, general and administrative and rental expenses on our leased properties. With respect to property operating expenses, many of our customer leases are full service gross or modified gross, both net of electricity expense, as more fully described below. Following the completion of this offering, as a public company, we estimate our annual general and administrative expenses will increase by approximately $6.8 million initially due to increased property taxes, insurance premiums and increased legal, accounting and other expenses related to corporate governance, public reporting and compliance with the various provisions of the Sarbanes-Oxley Act of 2002, and we will not be able to pass through a significant amount of these costs to our customers.

Factors that May Influence our Results of Operations

Rental Income. Our ability to grow the amount of net rental income generated by the properties in our portfolio depends principally on our ability to maintain the historical occupancy rates of currently leased space and to lease currently available space and space that becomes available from leases that expire or are terminated. As of March 31, 2010, our operating facilities comprised approximately 75.5% of our total NRSF. Our ability to grow the rental income generated by us also depends on our ability to maintain or increase rental rates at our properties. Negative trends in one or more of these factors could adversely affect our rental income in future periods. Future economic downturns or regional downturns affecting our markets or downturns in the technology industry that impair our ability to renew or re-lease space and the ability of our customers to fulfill their lease commitments, as in the case of customer bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties.

Leasing Arrangements. Historically, many of our properties have been leased to customers on a full service gross or a modified gross basis, both net of electricity expense, and to a limited extent on a triple net lease basis. We expect to continue to do so in the future. Under a full service gross lease, the customer pays a fixed annual rent on a monthly basis, and in return we are required to pay all maintenance, repair, property taxes, insurance, and selling, general and administrative expenses. Under a modified gross lease, the customer

has a base-year expense stop, whereby the customer pays a stated amount of certain expenses as part of the rent payment, while future increases (above the base-year stop) in property operating expenses are billed to the customer based on such customer’s proportionate square footage of the property and other factors. The increased property operating expenses billed are reflected as customer reimbursements in the statements of operations. Finally, in a triple net lease, the customer is responsible for all operating expenses, property taxes and insurance. As such, the base rent payment does not include any operating expense, but rather all such expenses are billed to the customer. The full amount of the expenses for this lease type is reflected in customer reimbursements. Since a portion of our revenue consists of those expenses reimbursed to us by our customers, in any given period our revenue will be determined in part by the amount of expenses that are reimbursed by our customers.

The following table sets forth the NRSF of our portfolio leased under full service gross, modified gross and triple net leases as well as the annualized rent attributable to such leases as of March 31, 2010:


	Full Service Gross		Modified Gross		Triple Net		Total

Leased NRSF		623,474		147,295		424,185		1,194,954
% of Total		52.2%		12.3%		35.5%
Annualized Rent	$	61,284	$	4,770	$	13,923	$	79,977
% of Total		76.6%		6.0%		17.4%

Substantially all of our data center NRSF are subject to the breakered-amp or sub-metered (branch circuit monitoring) pricing models. The allocation between the two models across our data center customer base does not materially affect our ability to recover our electricity costs because we separately recover all or substantially all of our electricity costs for all of our leased data center space under either model. Under the sub-metered model, a customer pays us monthly for the power attributable to its equipment in the data center as well as for its ratable allocation of the power used to provide the cooling, lighting, security and other requirements supporting the data center, in each case, at a rate substantially equivalent to our then current cost of electricity. Under breakered-amp leases a customer pays a fixed monthly fee per committed available ampere of connected power. The extent to which this fixed monthly fee correlates to the monthly amount we pay to our utility provider for electricity at each data center facility varies depending upon the amount of power each customer utilizes each month relative to the amount of committed power purchased. Under the breakered-amp model a customer’s base rent per NRSF is generally lower than in the branch-circuit monitoring model reflecting the differing approach to electricity cost recovery between the two models. Fluctuations in our customers’ monthly utilization of power and the prices our utility providers charge us for power impact our operating revenue, expense and earnings differently depending upon the applicable power pricing model. Under breakered-amp leases, such fluctuations do not impact our operating revenue but do impact our operating expense and as such our earnings. This is because our breakered-amp customers pay for an amount of committed power regardless of the amount of power they use and we recognize the difference between monthly revenue from breakered-amp power commitments and our monthly electricity costs as income. Accordingly, in any month our breakered-amp revenue is fixed whereas our related expense (which is dependent on utilization) can fluctuate. For leases under our sub-metered model, fluctuations in our customers’ monthly utilization of power and the prices our utility providers charge us for power impact our operating revenue and operating expense similarly and as such do not materially impact our earnings. Additionally, under each model, during the initial lease-up period, we generally do not fully recover our electricity costs attributable to the power used to provide the cooling, lighting, security and other requirements supporting the data center.

Scheduled Lease Expirations. Our ability to re-lease expiring space will impact our results of operations. As of March 31, 2010, approximately 337,586 NRSF of our portfolio represented currently available space and leases representing approximately 12.3% and 17.0% of the NRSF across our portfolio were scheduled to expire during the years ending December 31, 2010 and 2011, respectively. These leases, scheduled to expire during the years ending December 31, 2010 and 2011, also represented approximately 19.0% and 22.6%, respectively, of our annualized rent as of March 31, 2010.

Acquisitions, Redevelopment and Development. Our ability to grow rental income will depend on our ability to acquire, redevelop, develop and lease data center space at favorable rates. As of March 31, 2010, we had approximately 447,368 NRSF of redevelopment space, or approximately 22.0% of the total space in our portfolio. In addition, we recently completed development on a 50,000 NRSF data center at 2901 Coronado, Santa Clara, California. In the second quarter of 2010, we entered into a lease for 100% of this space with a leading online social networking company. Our portfolio also contains six buildings on a 12.6 acre development site in Santa Clara, California, which we believe can be developed into 446,250 NRSF of data center space.

Conditions in Significant Markets. Our operating properties are located in Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago, Boston, New York City and Miami. These markets comprised 40.9%, 23.7%, 13.3%, 8.2%, 7.7%, 4.6% and 1.6%, respectively, of our annualized rent as of March 31, 2010. Positive or negative changes in conditions in these markets will impact our overall performance.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our Predecessor’s and Acquired Properties’ historical financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our actual results may differ from these estimates. We have provided a summary of our significant accounting policies in Note 2 to our Predecessor’s and Acquired Properties’ financial statements included elsewhere in this prospectus. We describe below those accounting policies that require material subjective or complex judgments and that have the most significant impact on our financial condition and results of operations. Subsequent to the completion of the Financing, these same critical accounting policies and estimates will also be used in our combined financial statements. Our management evaluates these estimates on an ongoing basis, based upon information currently available and on various assumptions management believes are reasonable as of the date of this prospectus.

Acquisition of Real Estate. We apply purchase accounting to the assets and liabilities related to all of our real estate investments acquired. Accordingly, we are required to make subjective assessments to allocate the purchase price paid to the acquired tangible assets, consisting primarily of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and lease origination costs. These allocation assessments involve significant judgment and complex calculations and have a direct impact on our results of operations.

Capitalization of Costs. We capitalize direct and indirect costs related to leasing, construction, redevelopment and development, including property taxes, insurance and financing costs relating to properties under development. We cease cost capitalization on redevelopment and development space once the space is ready for its intended use and held available for occupancy. All renovations and betterments that extend the economic useful lives of assets are capitalized.

Useful Lives of Assets. We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income. We depreciate the buildings, on average, over 39 years. Additionally we depreciate building improvements over ten years for owned properties and the remaining term of the original lease for leased properties. Leasehold improvements are depreciated over the shorter of the lease term or useful life of the asset.

Impairment of Long-Lived Assets. We review the carrying value of our properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) from an asset are less than the carrying amount of the asset. The estimation of expected future net cash flows is inherently uncertain and relies to a considerable extent on assumptions regarding

current and future economic and market conditions and the availability of capital. If, in future periods, there are changes in the estimates or assumptions incorporated into an impairment review analysis, these changes could result in an adjustment to the carrying amount of our assets. To the extent that an impairment has occurred, the excess of the carrying amount of the property over its estimated fair value would be charged to income. No such impairment losses have been recognized to date.

Revenue Recognition. Rental income is recognized on a straight-line basis over the non-cancellable term of customer leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are recorded as deferred rent receivable on our combined balance sheets. Many of our leases contain provisions under which our customers reimburse us for a portion of direct operating expenses, including power, as well as real estate taxes and insurance. Such reimbursements are recognized in the period that the expenses are recognized. We recognize the amortization of the acquired above-market and below-market leases as decreases and increases, respectively, to rental revenue over the remaining non-cancellable term of the underlying leases. If the value of below-market leases includes renewal option periods, we include such renewal periods in the amortization period utilized.

Interconnection and utility services are considered separate earnings processes that are typically provided and completed on a month-to-month basis and revenue is recognized in the period that the services are performed. Set-up charges and utility installation fees are initially deferred and recognized over the term of the arrangement or the expected period of performance unless management determines a separate earnings process exists related to an installation charge.

We must make subjective estimates as to when our revenue is earned and the collectability of our accounts receivable related to rent, deferred rent, expense reimbursements and other income. We analyze individual accounts receivable and historical bad debts, customer concentrations, customer creditworthiness and current economic trends when evaluating the adequacy of the allowance for bad debts. These estimates have a direct impact on our net income because a higher bad debt allowance would result in lower net income, and recognizing rental revenue as earned in one period versus another would result in higher or lower net income for a particular period.

Our Portfolio

The following table provides an overview of our properties as of March 31, 2010 after giving effect to the Restructuring Transactions.


						NRSF
						Operating⁽¹⁾
											Office and Light-										Redevelopment and
				Annualized		Data Center⁽²⁾					Industrial⁽³⁾					Total					Development⁽⁴⁾
	Metropolitan	Acquisition		Rent				Percent					Percent					Percent			Under						Total
Facilities	Area	Date⁽⁵⁾		($000)⁽⁶⁾		Total		Leased⁽⁷⁾			Total		Leased⁽⁷⁾			Total⁽⁸⁾		Leased⁽⁷⁾			Construction		Vacant		Total		Portfolio

Predecessor Facilities
12100 Sunrise Valley	Northern Virginia		Dec. 2007	$	8,848		116,498		67.6	%		38,350		85.9	%		154,848		72.2	%		—		107,921		107,921		262,769
1656 McCarthy	San Francisco Bay		Dec. 2006		6,164		71,847		84.7			—		—			71,847		84.7			—		4,829		4,829		76,676
70 Innerbelt	Boston		Apr. 2007		6,162		118,991		93.8			2,600		57.1			121,591		93.0			25,118		129,897		155,015		276,606
32 Avenue of the Americas*	New York		June 2007		3,672		48,404		68.3			—		—			48,404		68.3			—		—		—		48,404
Coronado-Stender Properties	San Francisco Bay		Feb. 2007		1,250		—		—			179,600		60.7			179,600		60.7			—		—		—		179,600
2901 Coronado	San Francisco Bay		Feb. 2007		—		—		—			—		—			—		—			50,000		—		50,000		50,000

Subtotal Predecessor				$	26,096		355,740		79.9	%		220,550		65.0	%		576,290		74.2	%		75,118		242,647		317,765		894,055

Acquired Facilities
One Wilshire*	Los Angeles		Aug. 2007	$	20,470		156,521		76.5	%		7,500		62.2	%		164,021		75.8	%		—		—		—		164,021
900 N. Alameda	Los Angeles		Oct. 2006		12,219		256,690		90.2			16,622		6.2			273,312		85.1			16,126		144,721		160,847		434,159
55 S. Market	San Francisco Bay		Feb. 2000		11,509		84,045		85.7			205,846		77.9			289,891		80.2			—		—		—		289,891
427 S. LaSalle	Chicago		Feb. 2007		6,558		129,790		74.0			45,283		100.0			175,073		80.7			—		5,309		5,309		180,382
1275 K Street*	Northern Virginia		June 2006		1,824		22,137		96.5			—		—			22,137		96.5			—		—		—		22,137
2115 NW 22nd Street	Miami		June 2006		1,301		30,176		50.3			1,641		—			31,817		47.7			—		13,447		13,447		45,264

Subtotal Acquired				$	53,881		679,359		81.8	%		276,892		76.3	%		956,251		80.2	%		16,126		163,477		179,603		1,135,854

Total Facilities				$	79,977		1,035,099		81.2	%		497,442		71.3	%		1,532,541		78.0	%		91,244		406,124		497,368		2,029,909


*		Indicates properties in which we hold a leasehold interest.
(1)		Represents the square feet at a building under lease as specified in existing customer lease agreements plus management’s estimate of space available for lease to customers based on engineers’ drawings and other factors, including required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas. Total NRSF at a given facility includes the total operating NRSF and total redevelopment and development NRSF, but excludes our office space at a facility and our corporate headquarters.
(2)		Represents the NRSF at an operating facility that is currently leased or readily available for lease as data center space. Both leased and available data center NRSF include a customer’s proportionate share of the required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas.
(3)		Represents the NRSF at an operating facility that is currently leased or readily available for lease as space other than data center space, which is typically space offered for office or light-industrial use.
(4)		Represents vacant space in our portfolio that requires significant capital investment in order to redevelop or develop into data center facilities. Total redevelopment and development NRSF and total operating NRSF represent the total NRSF at a given facility.
(5)		Represents the date a property was acquired by a Carlyle real estate fund or, in the case of a property under lease, the date the initial lease commenced for the property.


(6)		Represents the monthly contractual rent under existing customer leases as of March 31, 2010 multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and is shown on a gross basis; thus, under a net lease, the current year operating expenses (which may be estimates as of such date) are added to contractual net rent. The addition of operating expenses excludes electricity use attributable to customers. Total abatements for leases in effect as of March 31, 2010 for the 12 months ending March 31, 2011 were $26,929.


(7)		Includes customer leases in effect as of March 31, 2010. The percent leased is determined based on leased square feet as a proportion of total operating NRSF.


(8)		Represents the NRSF at an operating facility currently leased or readily available for lease. This excludes existing vacant space held for redevelopment or development.

Results of Operations

Since our formation on February 17, 2010 we have not had any corporate activity other than the issuance of shares of common stock in connection with the initial capitalization of our company. Because we believe that a discussion of the operating results for this limited period would not be meaningful, we have set forth below a discussion of the results of operations of our accounting predecessor, or our Predecessor, which consisted of the operations of four operating properties and one development property. Separately, we have presented a discussion of the combined results of operations of the other properties in our portfolio, or our Acquired Properties, which consisted of six operating properties and a property leased as our corporate headquarters, which does not generate operating revenue. Our Acquired Properties do not comprise a legal entity, but rather a combination of assets from certain Carlyle real estate funds, and their respective wholly owned subsidiaries, that have common management. The historical combined financial statements of our Acquired Properties contained in this prospectus represent the combination of the financial statements of those entities. We believe that the results of our Acquired Properties, when considered along with the results of our Predecessor, present a more comprehensive picture of our historical operating results than our Predecessor alone. In addition, the historical results of operations presented below should be reviewed along with the pro forma financial information contained elsewhere in this prospectus, which includes adjustments related to the effects of the Restructuring Transactions and the Financing Transactions.

Results of Operations of Our Predecessor

During the periods presented below, our Predecessor consisted of four properties operating as data centers including 1656 McCarthy, 32 Avenue of the Americas, 12100 Sunrise Valley and 70 Innerbelt, as well as the Coronado-Stender Business Park in Santa Clara, California, consisting of 2901 Coronado, a 50,000 NRSF data center under development as of March 31, 2010, and the Coronado-Stender Properties, a 12.6 acre development site that houses six buildings. Certain of the six buildings located at the Coronado-Stender Properties are under short-term lease for office or light-industrial use, which operating revenue is reflected in our Predecessor’s results of operations for the periods presented below. We completed the first phase of 2901 Coronado in April 2010, and anticipate completing the remainder by the end of the second quarter of 2010. During March 2010, we fully leased this space to a leading online social networking company pursuant to a six-year lease.

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Operating Revenue. Operating revenue for the three months ended March 31, 2010 was $9.0 million. This includes rental revenue of $6.3 million, power revenue of $2.2 million, tenant reimbursements of $0.3 million and other revenue of $0.4 million, primarily from interconnection services. This compares to revenue of $6.0 million for the three months ended March 31, 2009. The increase of $3.0 million, or 50%, was due primarily to $2.4 million of increased rental revenue due to the placement and subsequent leasing of expansion space completed in the second half of 2009 at 12100 Sunrise Valley, the continued lease up of 32 Avenue of the Americas, 1656 McCarthy and 70 Innerbelt and $0.9 million of increased power revenue related to the increased occupancy at these locations and resultant increase in power utilization.

Operating Expenses. Operating expenses for the three months ended March 31, 2010 were $9.4 million compared to $7.4 million for the three months ended March 31, 2009. The increase of $2.0 million, or 27%, was primarily due to increased depreciation and amortization expense of $0.7 million mainly resulting from the placement and subsequent leasing of expansion space completed in the second half of 2009 at 12100 Sunrise Valley and $0.8 million of increased property operating and maintenance expenses due to the continued lease up of 32 Avenue of the Americas, 1656 McCarthy and 70 Innerbelt in 2010.

Interest Expense. Interest expense, including amortization of deferred financing costs, for the three months ended March 31, 2010 was $0.5 million compared to interest expense of $0.6 million for the three months ended March 31, 2009. The decrease in interest expense was due to lower interest rates on our floating rate debt partially offset by increased debt balances.

Net Loss. Net loss for the three months ended March 31, 2010 was $0.9 million compared to a net loss of $2.0 million for the three months ended March 31, 2009. The decrease of $1.1 million was primarily due to increased operating revenue from the leasing of expansion space completed in the second half of 2009 at 12100 Sunrise Valley and the continued lease up of 32 Avenue of the Americas, 1656 McCarthy and 70 Innerbelt partially offset by increased property depreciation and amortization expense and property operating and maintenance costs.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Operating Revenue. Operating revenue for the year ended December 31, 2009 was $28.8 million. This includes rental revenue of $19.0 million, power revenue of $7.4 million, tenant reimbursements of $1.1 million and other revenue of $1.4 million, primarily from interconnection services. This compares to revenue of $15.6 million for the year ended December 31, 2008. The increase of $13.3 million, or 85%, was due primarily to $10.4 million of increased rental revenue due to a full year of operations at 32 Avenue of the Americas and 12100 Sunrise Valley which were placed into service during the third quarter of 2008 and the continued lease up of 1656 McCarthy and 70 Innerbelt and $2.4 million of increased power revenue resulting from the increased occupancy and power utilization.

Operating Expenses. Operating expenses for the year ended December 31, 2009 were $33.5 million compared to $27.0 million for the year ended December 31, 2008. The increase of $6.5 million, or 24%, was primarily due to increased depreciation and amortization expense of $3.2 million resulting from a full of year of depreciation for 32 Avenue of the Americas and 12100 Sunrise Valley which were both placed into service during the third quarter of 2008 and $2.7 million of increased property operating and maintenance expenses due to the continued lease up of properties in 2009.

Interest Expense. Interest expense, including amortization of deferred financing costs, for the year ended December 31, 2009 was $2.3 million compared to interest expense of $2.5 million for the year ended December 31, 2008. The decrease in interest expense was due to lower interest rates on floating rate debt partially offset by increased debt balances.

Net Loss. Net loss for the year ended December 31, 2009 was $7.0 million compared to a net loss of $13.9 million for the year ended December 31, 2008. The decrease of $6.9 million was primarily due to increased operating revenue from the continued lease up activities partially offset by increased property depreciation and amortization expense and property operating and maintenance costs.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Operating Revenue. Operating revenue for the year ended December 31, 2008 was $15.6 million. This includes rental revenue of $8.6 million, power revenue of $5.0 million, tenant reimbursements of $1.2 million and other revenue of $0.8 million, primarily from interconnection services. This compares to revenue of $10.3 million for the year ended December 31, 2007. The increase of $5.2 million, or 51%, was due primarily to the following: $3.5 million of increased rental revenue resulting from the commencement of operations at 32 Avenue of the Americas and 12100 Sunrise Valley during the third quarter of 2008 and a full year of operations at the remaining properties which were all acquired during 2007 and $2.0 million of increased power revenue resulting from the increased occupancy and power utilization.

Operating Expenses. Operating expenses for the year ended December 31, 2008 were $27.0 million compared to $10.2 million for the year ended December 31, 2007. The increase of $16.8 million, or 165%, was primarily due to the following: $6.8 million of increased property operating and maintenance costs due to the continued lease up of properties in 2008, increased depreciation and amortization expense of $4.4 million resulting from the placement of 32 Avenue of the Americas and 12100 Sunrise Valley into service during the third quarter of 2008 and a full of year of depreciation and amortization for the remaining properties which were all acquired and placed into service at varying times during 2007, $2.1 million of increased rent expense at 32 Avenue of the Americas resulting from a full year of rent expense compared to 2007 which included rent expense subsequent to the execution of the property lease in June, 2007, $1.2 million of increased management fees primarily due to the increase in operating revenues and leasing activities, and $1.1 million of increased real estate taxes and insurance from 32 Avenue of the Americas and 12100 Sunrise Valley which had capitalized these costs prior to the respective property’s placement into service during the third quarter of 2008.

Net Loss. Net loss for the year ended December 31, 2008 was $13.9 million compared to a net loss of $1.9 million for the year ended December 31, 2007. The increase of $12.0 million was primarily due to the increased operating expenses as previously discussed, partially offset by the placement of 32 Avenue of the Americas and 12100 Sunrise Valley into service during the third quarter of 2008 and increased operating revenue from the continued lease up activities.

Results of Operations of Our Acquired Properties

During the periods presented below, our Acquired Properties consisted of six properties operating as data centers including, 55 S. Market, One Wilshire, 1275 K Street, 900 N. Alameda, 427 S. LaSalle and 2115 NW 22nd Street, as well as 1050 17th Street, a property leased as our corporate headquarters, which does not generate operating revenue. As discussed above, our Acquired Properties commenced operations prior to 2007 with the exception of One Wilshire, concerning which we executed our lease in August 2007 and 427 S. LaSalle, which commenced operations in February 2007. The continued redevelopment and development and lease up of the properties are the primary factors that explain a significant amount of the changes in the results of operations for our Acquired Properties for the periods discussed below.

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Operating Revenue. Operating revenue for the three months ended March 31, 2010 was $26.7 million. This includes rental revenue of $13.5 million, power revenue of $5.5 million, tenant reimbursements of $0.8 million, other revenue of $2.4 million, primarily from interconnection services, and property management fees from related parties of $4.5 million. This compares to revenue of $20.8 million for the three months ended March 31, 2009. The increase of $5.9 million, or 28%, was due primarily to increased rental revenue of $0.9 million from increased occupancy and rental rates, increased power revenue of $0.9 million due to the increased occupancy and power utilization and $3.6 million of increased management fees from related parties due to increases in leasing commissions, construction management fees and property management fees.

Operating Expenses. Operating expenses for the three months ended March 31, 2010 were $21.2 million compared to $17.9 million for the three months ended March 31, 2009. The increase of $3.2 million, or 18%, was primarily due to increased depreciation and amortization expense of $0.6 million resulting from the

placement of additional space into service at 900 N. Alameda and 427 S. LaSalle during 2009, $0.9 million of increased property operating and maintenance costs due to the continued lease up of properties in 2010 and $1.3 million of increased general and administrative expense primarily due to increased employee head count.

Interest Expense. Interest expense, including amortization of deferred financing costs, for the three months ended March 31, 2010 was $1.6 million compared to interest expense of $1.2 million for the three months ended March 31, 2009. The increase in interest expense was due to an increase in the interest rate on the 900 N. Alameda loan due to the exercise of the first loan extension in the second half of 2009.

Net Income (Loss). Net income for the three months ended March 31, 2010 was $3.9 million compared to $1.7 million for the three months ended March 31, 2009. The increase of $2.2 million was primarily due to increased operating revenues of $5.9 million as previously discussed, partially offset by increased operating expenses and interest expense as discussed previously.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Operating Revenue. Operating revenue for the year ended December 31, 2009 was $88.8 million. This includes rental revenue of $51.7 million, power revenue of $19.4 million, tenant reimbursements of $3.0 million, other revenue of $9.0 million, primarily from interconnection services, and management fees from related parties of $5.6 million. This compares to revenue of $74.4 million for the year ended December 31, 2008. The increase of $14.4 million, or 19%, was due primarily to increased rental revenue of $7.7 million from increased occupancy and rental rates, increased power revenue of $2.9 million due to the increased occupancy and power utilization and $3.1 million of increased other revenue resulting from increased interconnection services above.

Operating Expenses. Operating expenses for the year ended December 31, 2009 were $78.5 million compared to $73.5 million for the year ended December 31, 2008. The increase of $5.0 million, or 7%, was primarily due to the following: increased depreciation and amortization expense of $2.6 million resulting from the placement of additional space into service at One Wilshire and the completion of additional capital improvements at 427 S. LaSalle during 2008 and $1.0 million of increased property operating and maintenance costs due to the continued lease up of properties in 2008.

Interest Expense. Interest expense, including amortization of deferred financing costs, for the year ended December 31, 2009 was $5.5 million compared to interest expense of $8.7 million for the year ended December 31, 2008. The decrease in interest expense was due to lower interest rates on floating rate debt.

Net Income (Loss). Net income for the year ended December 31, 2009 was $4.9 million compared to a net loss of $7.4 million for the year ended December 31, 2008. The increase of $12.2 million was primarily due to increased operating revenues of $14.4 million as previously discussed, a reduction in interest expense due to lower interest rates on floating rate debt, partially offset by increased operating expenses as discussed previously.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Operating Revenue. Operating revenue for the year ended December 31, 2008 was $74.4 million. This includes rental revenue of $44.0 million, power revenue of $16.5 million, tenant reimbursements of $2.5 million and other revenue of $5.9 million, primarily from interconnection services, and management fees from related parties of $5.5 million. This compares to revenue of $48.0 million for the year ended December 31, 2007. The increase of $26.4 million, or 55%, was due primarily to $15.0 million of increased rental revenue due to a full year of operations at One Wilshire and 427 S. LaSalle which were placed into service during 2007 and the continued lease up of the remaining properties, $7.8 million of increased power revenue due to the increase in lease commencements during 2008, and $2.7 million of increased other revenue from increased interconnection services provided.

Operating Expenses. Operating expenses for the year ended December 31, 2008 were $73.5 million compared to $43.9 million for the year ended December 31, 2007. The increase of $29.6 million, or 67%, was primarily due to the following: $9.2 million of increased property operating and maintenance costs due to the

continued lease up of properties in 2008 and a full year of operations at One Wilshire and 427 S. LaSalle which were placed into service during 2007, $7.7 million of increased rent expense at One Wilshire resulting from a full year of rent expense compared to 2007 which included rent expense subsequent to the execution of the property lease in August, 2007, increased general and administrative expense of $6.5 million, increased depreciation and amortization expense of $5.1 million resulting from the placement of One Wilshire and 427 S. LaSalle into service during 2007.

Interest Expense. Interest expense, including amortization of deferred financing costs, for the year ended December 31, 2008 was $8.7 million compared to interest expense of $11.9 million for the year ended December 31, 2007. The decrease in interest expense was due to lower interest rates on floating rate debt, partially offset by increased debt balances.

Net Loss. Net loss for the year ended December 31, 2008 was $7.4 million compared to a net loss of $7.0 million for the year ended December 31, 2007. The increase of $0.4 million was primarily due to increased operating expenses of $29.6 million as previously discussed, partially offset by increased operating revenues of $26.4 million and a reduction in interest expense.

Liquidity and Capital Resources

As a REIT, we are required to distribute at least 90% of our taxable income to our stockholders on an annualized basis. We intend to make, but are not contractually bound to make, regular quarterly distributions to common stockholders and unit holders in order to maintain our status as a REIT. All such distributions are at the discretion of our Board of Directors. We intend to fund these distributions with cash generated from operations and external sources of capital, if necessary. As of March 31, 2010 and as adjusted for the Financing Transactions, we would have had $125.3 million of cash and cash equivalents.

Short-term Liquidity

Our short-term liquidity requirements primarily consist of funds needed for future distributions to stockholders and holders of our operating partnership units, interest expense, operating costs including utilities, site maintenance costs, real estate and personal property taxes, insurance, rental expenses and selling, general and administrative expenses and certain recurring and non-recurring capital expenditures, including for the redevelopment and development of data center space during the next 12 months. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established for certain future payments, the net proceeds from this offering and to the extent necessary, by incurring additional indebtedness, including by drawing on our revolving credit facility. Upon completion of this offering and the Financing Transactions, we expect to have $ million of cash and cash equivalents on our balance sheet and the ability to borrow up to an additional $ million under a new $100.0 million revolving credit facility, subject to satisfying certain financial tests, which we believe will be sufficient to meet our short-term liquidity needs for the foreseeable future.

Long-term Liquidity

Our long-term liquidity requirements primarily consist of the costs to fund the development of the Coronado-Stender Properties, our 12.6 acre development site that houses six buildings in Santa Clara, California, future redevelopment or development of other space in our portfolio not currently scheduled, property acquisitions, scheduled debt maturities and recurring and non-recurring capital improvements. We expect to meet our long-term liquidity requirements primarily by incurring long-term indebtedness and drawing on our revolving credit facility. We also may raise capital in the future through the issuance of additional equity securities, subject to prevailing market conditions, and/or through the issuance of operating partnership units.

In view of our strategy to grow our portfolio over time, we do not, in general, expect to meet our long-term liquidity needs through sales of our properties. In the event that, notwithstanding this intent, we were in the future to consider sales of our properties from time to time, our ability to sell certain of our assets could be adversely affected by obligations under our tax protection agreement, the general illiquidity of real estate

assets and certain additional factors particular to our portfolio such as the specialized nature of our properties, and property use restrictions.

Pro Forma Indebtedness

As summarized in the following table, on a pro forma basis after giving effect to the Restructuring Transactions, the Financing Transactions and the repayment of certain of our existing indebtedness as set forth under the heading “Use of Proceeds,” we would have had approximately $122.4 million of aggregate combined indebtedness as of March 31, 2010. We expect that we will also have $ million of undrawn capacity under a new $100.0 million revolving credit facility. However, the availability of funds under our revolving facility will depend on, among other things, compliance with applicable restrictions and covenants set forth in the agreements governing our indebtedness and market conditions and there can be no assurance that additional credit would be available to us at acceptable terms or at all.

Interest

Principal

Annual Debt

Pro forma Mortgage debt

Rate⁽¹⁾

Amount

Service⁽²⁾

Maturity Date⁽³⁾

(in thousands)

55 S. Market

L + 3.50

60,000

2,262

November 2012

427 S. LaSalle

L + 1.95

%⁽⁴⁾

40,000

888

March 2012

12100 Sunrise Valley Drive

L + 2.75

22,435

678

June 2013

Total pro forma debt⁽⁵⁾

122,435

3,828


(1)		The effective interest rate for variable rate loans is calculated based on the 1-month LIBOR rate at March 31, 2010, which was 0.27%. Does not give effect to the interest rate hedging arrangements we intend to enter into in connection with our refinancing and assumption of the indebtedness secured by our 55 S. Market and 12100 Sunrise Valley Drive properties, respectively. See footnote 2(DD) to our pro forma condensed consolidated financial statements included elsewhere in this prospectus.


(2)		Annual debt service includes payments for interest only. The weighted average stated interest rate of our debt was LIBOR plus 2.86% on a pro forma basis as of March 31, 2010. Does not give effect to the interest rate hedging arrangements we intend to enter into in connection with our refinancing and assumption of the indebtedness secured by our 55 S. Market and 12100 Sunrise Valley Drive properties, respectively. See footnote 2(DD) to our pro forma condensed consolidated financial statements included elsewhere in this prospectus.


(3)		Maturity date represents the date on which the principal amount is due and payable, including extensions without performance tests or conditions outside our control, assuming no payment has been made in advance of the maturity date.


(4)		Represents the weighted average interest rate as of March 31, 2010 under three loans secured by 427 S. LaSalle: (i) a 0.60% spread on a $25.0 million senior note; (ii) a 4.825% spread on a $10.0 million mezzanine note; and (iii) a variable spread on a $5.0 million subordinate senior note.


(5)		Upon consummation of the Financing Transactions, we expect that we will have $9.4 million of letters of credit issued but undrawn, and no other borrowings outstanding, under our new revolving credit facility. See “—Material Terms of Our Indebtedness to be Outstanding After this Offering.”

Material Terms of Our Indebtedness to be Outstanding After this Offering

Revolving Credit Facility. We expect that the revolving credit facility will be subject to usual and customary affirmative and negative covenants.

Mortgage(s). Prior to the completion of this offering, we expect to assume and, in one case, refinance certain loans currently held by the entities contributing the 427 S. LaSalle property, 55 S. Market property and 12100 Sunrise Valley Drive property to our portfolio in connection with the Restructuring Transactions. We expect to obtain lender consent to assume a total of $40.0 million of debt under three loans secured by our 427 S. LaSalle property. These loans mature in March 2011; however, we expect to exercise the 12-month options to extend each of these loans to a maturity date of March 2012. There are no performance tests or conditions outside our control to exercise these extension options. These loans bear interest at a weighted average rate of LIBOR plus 1.95%. We also expect to obtain lender consent to assume a $32.0 million construction loan due June 2013 secured by our 12100 Sunrise Valley Drive property, of which $22.4 million was outstanding as of March 31, 2010. We believe that the outstanding balance of the construction loan will be $25.5 million upon completion of this offering. This construction loan bears interest at a rate of LIBOR plus 2.75%. Concurrently with the completion of this offering, we expect to refinance the existing $73.0 million of debt secured by our 55 S. Market property with a new $60.0 million mortgage loan, which will have a term of not less than two years. We plan to repay the remaining $13.0 million of the existing loan

with a portion of the proceeds from this offering. The existing loans bear interest at a weighted average rate of LIBOR plus 2.25%, and we expect that the refinanced loan will bear interest at a rate of LIBOR plus 3.50%. However, in connection with our refinancing and assumption of the indebtedness secured by our 55 S. Market and 12100 Sunrise Valley Drive properties, respectively, we intend to enter into interest rate hedging arrangements that would effectively swap the interest rate of these loans to a fixed rate through their respective maturity dates. These hedging arrangements would fix the interest rate on the loans on each of our 55 S. Market and 12100 Sunrise Valley Drive properties at 5.00% and 4.75%, respectively. See footnote 2(DD) to our pro forma condensed consolidated financial statements included elsewhere in this prospectus.

Commitments and Contingencies

Upon completion of the Restructuring Transactions, the Financing Transactions and repayment of certain of our existing indebtedness, on a pro forma basis, assuming these transactions occurred as of March 31, 2010, we would have had aggregate combined indebtedness totaling $122.4 million. The following table summarizes our contractual obligations as of March 31, 2010, on a pro forma basis, including the maturities and scheduled principal repayments of indebtedness and excluding other borrowings incurred subsequent to March 31, 2010:


Obligation	2010		2011		2012		2013		2014		Thereafter		Total
	(in thousands)

Operating Leases⁽¹⁾	$	11,981	$	16,356	$	16,806	$	17,228	$	17,549	$	61,682	$	141,602
Revolver		—		—		—		—		—		—		—
Mortgage(s) payable⁽²⁾		—		40,000		60,000		22,435		—		—		122,435
Other⁽³⁾		1,738		2,276		2,172		278		151		294		6,909

Total	$	13,719	$	58,632	$	78,978	$	39,941	$	17,700	$	61,976	$	270,946


(1)		Lease obligations for One Wilshire, 1275 K Street, 32 Avenue of the Americas, and 1050 17th Street.


(2)		Mortgage debt includes $60.0 million on 55 S. Market and $40.0 million on 427 S. LaSalle due in 2012, including extensions without performance tests or conditions outside our control, and $22.4 million on 12100 Sunrise Valley Drive due in 2013. The balances on 55 S. Market and 427 S. LaSalle are pro forma and assume the transactions set forth in the Financing Transactions are completed. In June 2011, we will begin amortizing the 12100 Sunrise Valley Drive loan based on a 30-year term using an interest rate equal to the greater of 150 basis points per year in excess of the then current 10-year U.S. Treasury Note, or seven percent. Additional information on these loans is available in the “Material Terms of Our Indebtedness to be Outstanding After this Offering” section.


(3)		Obligations for tenant improvement work at 55 S. Market Street, power contracts and telecommunications leases.

Off-Balance Sheet Arrangements

As of March 31, 2010, December 31, 2009 and 2008, neither our Predecessor nor the Acquired Properties had any material off-balance sheet arrangements.

Discussion of Cash Flows

Our Predecessor

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Net cash provided by operating activities was $1.7 million for the three months ended March 31, 2010, compared to cash used in operating activities of $2.2 million for the prior period. The increased cash provided by operating activities of $4.0 million was primarily due to increases in amounts due to related parties, accounts payable and accrued expenses and additional operating cash generated by the continued lease up of the properties, partially offset by the payment of leasing costs.

Net cash used in investing activities increased by $15.5 million to $16.6 million for the three months ended March 31, 2010, compared to $1.1 million for the three months ended March 31, 2009. This increase was primarily due to an increase in cash paid for capital expenditures related to redevelopment and development of data center space.

Net cash provided by financing activities increased by $16.8 million to $21.9 million for the three months ended March 31, 2010 from $5.1 million for the three months ended March 31, 2009 primarily due to an increase in capital contributions received from members of the Predecessor and proceeds from mortgages payable.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Net cash provided by operating activities was $1.4 million for the year ended December 31, 2009, compared to cash used in operating activities of $9.6 million for the prior period. The increased cash provided by operating activities of $11.1 million is primarily due to the collection of accounts receivable, the increase in accounts payable and accrued expenses and additional operating cash generated by the continued lease up of the properties.

Net cash used in investing activities decreased by $26.4 million to $27.5 million for the year ended December 31, 2009, compared to $53.8 million for the year ended December 31, 2008. This decrease was primarily due to a decrease in cash paid for capital expenditures related to redevelopment and development of data center space.

Net cash provided by financing activities decreased by $33.2 million to $30.0 million for the year ended December 31, 2009 from $63.2 million for the year ended December 31, 2008 primarily due to a decrease in capital contributions received from members of the Predecessor.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Net cash used in operating activities was $9.6 million for the year ended December 31, 2008, compared to cash provided by operations of $1.9 million for the prior period. The increase in cash used in operating activities of $11.5 million is primarily due to the repayment of accounts payable and accrued expenses and payment of leasing commissions.

Net cash used in investing activities decreased by $87.3 million to $53.8 million for the year ended December 31, 2008, from $141.1 million for the year ended December 31, 2007. This decrease was primarily due to a decrease in cash paid for acquisitions.

Net cash provided by financing activities decreased by $79.8 million to $63.2 million the year ended December 31, 2008, from $143.0 million for the year ended December 31, 2007 primarily due to a decrease in mortgage loan proceeds and capital contributions received from members of the Predecessor.

Our Acquired Properties

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Net cash provided by operating activities was $8.7 million for the three months ended March 31, 2010, compared to cash provided by operations of $6.7 million for the prior period. The increased cash provided by operating activities of $2.0 million was primarily due to increases in accounts payable, accrued expenses and prepaid rent and other liabilities, amounts due to related parties and additional operating cash generated by the continued lease up of the properties, partially offset by the payment of amounts due to related parties.

Net cash used in investing activities decreased by $0.5 million to $3.0 million for the three months ended March 31, 2010, from $3.4 million for the three months ended March 31, 2009. This decrease was primarily due to a decrease in cash paid for capital expenditures.

Net cash used in financing activities decreased by $14.9 million to $11.4 million for the three months ended March 31, 2010, compared to net cash provided by financing activities of $3.5 million for the three months ended March 31, 2009 primarily due to a decrease in proceeds from mortgages and an increase in distributions during 2010.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Net cash provided by operating activities was $26.0 million for the year ended December 31, 2009, compared to cash provided by operations of $9.3 million for the prior period. The increased cash provided by operating activities of $16.8 million is primarily due to the collection of accounts receivable and additional operating cash generated by the continued lease up of the properties.

Net cash used in investing activities decreased by $18.7 million to $9.6 million for the year ended December 31, 2009, from $28.3 million for the year ended December 31, 2008. This decrease was primarily due to a decrease in cash paid for capital expenditures.

Net cash used in financing activities was $7.5 million for the year ended December 31, 2009, compared to net cash provided by financing activities of $17.5 million for the year ended December 31, 2008 primarily due to the principal repayment of $5.2 million in 2009 and a decrease in capital contributions received from members of the Acquired properties during 2009 of $17.8 million compared to 2008.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Net cash provided by operating activities was $9.3 million for the year ended December 31, 2008, compared to cash provided by operating activities of $6.8 million for the prior period. The increased cash provided by operating activities of $2.5 million is primarily due to additional operating cash generated by the continued lease up of the properties.

Net cash used in investing activities decreased by $83.3 million to $28.3 million for the year ended December 31, 2008, from $111.6 million for the year ended December 31, 2007. This decrease was primarily due to a decrease in cash paid for acquisitions.

Net cash provided by financing activities decreased by $94.0 million to $17.5 million for the year ended December 31, 2008, from $111.5 million for the year ended December 31, 2007 primarily due to a decrease in mortgage loan proceeds and capital contributions received from members of the Acquired Properties during 2008 compared to 2007.

Related Party Transactions

The following related party transactions are based on agreements and arrangements entered into prior to our initial public offering, at which time we did not have formal procedures for approving such related party transactions. For a more detailed discussion of these transactions see “Management” and “Certain Relationships and Related Party Transactions.”

We lease 1,458 NRSF of data center space at our 12100 Sunrise Valley property to an affiliate of The Carlyle Group. The lease commenced on July 1, 2008 and expires on June 30, 2013. Rental revenue was approximately $155,300 for the year ended December 31, 2009 and $39,401 for the three months ended March 31, 2010. Additionally, we sublease space in our Denver corporate headquarters from an affiliate of The Carlyle Group. The lease commenced on April 25, 2007 and expires on October 31, 2012. Rental expense was approximately $60,300 for the year ended December 31, 2009 and $15,075 for the three months ended March 31, 2010.

Prior to or concurrently with completion of this offering, Mr. Ray, currently a managing director of The Carlyle Group and a member of our Board of Directors, will resign from his position at Carlyle and will enter into an employment agreement with us to serve exclusively as our President and Chief Executive Officer. Mr. Ray’s compensation and that of his executive assistant have historically been paid by an affiliate of The Carlyle Group. In total, we paid an affiliate of The Carlyle Group $575,000 as partial reimbursement for related services rendered to us by Mr. Ray and his executive assistant during the year ended December 31, 2010 and have accrued $143,750 as of March 31, 2010.

Affiliates of The Carlyle Group caused letters of credit to be issued by various financial institutions to guarantee lease commitments, payments to vendors and construction redevelopment at certain properties in our portfolio. Prior to or concurrently with the completion of this offering, letters of credit for four of our

properties totaling $9.4 million will be cancelled and be replaced by letters of credit, which we expect we will cause to be issued under our new revolving credit facility.

Leasing Arrangements

In connection with the Restructuring Transactions, we will assume the leases for the operating properties that we do not own (32 Avenue of the Americas, One Wilshire and 1275 K Street), as well as the lease for our corporate headquarters, the space we currently use for our corporate office space.

Policies Applicable to All Directors and Officers

We intend to adopt certain written policies that are designed to eliminate or minimize certain potential conflicts of interest, including a policy for the review, approval or ratification of related party transactions. We have also adopted a code of business conduct and ethics that prohibits our employees, officers and directors and our company from entering into transactions where there is a conflict of interest. In addition, our Board of Directors is subject to certain provisions of Maryland law, which are also designed to eliminate or minimize conflicts. See “Policies with Respect to Certain Activities.”

Inflation

Substantially all of our leases contain annual rent increases. As a result, we believe that we are largely insulated from the effects of inflation. However, any increases in the costs of redevelopment or development of our properties will generally result in a higher cost of the property, which will result in increased cash requirements to develop our properties and increased depreciation expense in future periods, and, in some circumstances, we may not be able to directly pass along the increase in these development costs to our customers in the form of higher rents.

Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.

As of March 31, 2010, we had approximately $122.4 million of pro forma consolidated indebtedness that bore interest at variable rates. $30.0 million of the $122.4 million is hedged against LIBOR interest rate increases above 6.24%. Concurrently with the completion of this offering, we intend to enter into a $100.0 million revolving credit facility, borrowings under which will bear interest at variable rates; however, we anticipate that we will not draw on this facility at closing.

If interest rates were to increase by 1%, the increase in interest expense on our pro forma variable rate debt would decrease future earnings and cash flows by approximately $1,224,355 annually. If interest rates were to decrease 1%, on a pro forma basis the decrease in interest expense on the variable rate debt would be approximately $1,224,355 annually. Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. The foregoing does not give effect to the interest rate hedging arrangements we intend to enter into in connection with our refinancing and assumption of the indebtedness secured by our 55 S. Market and 12100 Sunrise Valley Drive properties, respectively. These hedging arrangements would fix the interest rate on the loans on each of our 55 S. Market and 12100 Sunrise Valley Drive properties through their current maturities at rates not to exceed 5.00% and 4.75%, respectively. See footnote 2(DD) to our pro forma condensed consolidated financial statements included elsewhere in this prospectus.

These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board, or FASB, issued authoritative accounting guidance which established the FASB Accounting Standards Codification. The Codification is the single official source of authoritative, nongovernmental U.S. GAAP and supersedes all previously issued non-SEC accounting and reporting standards. We adopted the provisions of the authoritative accounting guidance for the interim reporting period ended September 30, 2009, the adoption of which did not have a material effect on the our company’s combined financial statements.

On January 1, 2009, we adopted an accounting standard which modifies the accounting for assets acquired and liabilities assumed in a business combination. This revised standard requires assets acquired, liabilities assumed, contractual contingencies and contingent consideration in a business combination to be recognized at fair value. Subsequent changes to the estimated fair value of contingent consideration are reflected in earnings until the contingency is settled. The revised standard requires additional disclosures about recognized and unrecognized contingencies. This standard is effective for acquisitions made after December 31, 2008. The adoption of this standard will change our company’s accounting treatment for business combinations on a prospective basis.

On January 1, 2009, we adopted authoritative guidance issued by the FASB that amended its existing standards for a parent’s noncontrolling interest in a subsidiary and the accounting for future ownership changes with respect to the subsidiary. The new standard defines a noncontrolling interest, previously called a minority interest, as the portion of equity in a subsidiary that is not attributable, directly or indirectly, to a parent. The new standard requires, among other things, that a noncontrolling interest be clearly identified, labeled and presented in the combined balance sheet as equity, but separate from the parent’s equity; that the amount of combined net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the combined statement of income; and that if a subsidiary, other than a subsidiary primarily holding real estate, is deconsolidated, the parent measures at fair value any noncontrolling equity investment that the parent retains in the former subsidiary and recognize a gain or loss in net income based on the fair value of the non-controlling equity investment. The standard was effective for our company beginning on January 1, 2009. The adoption of this standard did not have a material impact on our company’s combined financial statements.

On January 1, 2009, we adopted authoritative guidance issued by the FASB for its non-financial assets and liabilities and for its financial assets and liabilities measured at fair value on a non-recurring basis. The guidance provides a framework for measuring fair value in generally accepted accounting principles, expands disclosures about fair value measurements, and establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In April 2009, the FASB issued further clarification for determining fair value when the volume and level of activity for an asset or liability had significantly decreased and for identifying transactions that were not conducted in an orderly market. This clarification of the accounting standard is effective for interim reporting periods after June 15, 2009. We adopted this clarification of the standard for the interim reporting period ended June 30, 2009. The adoption of the provisions of this new standard did not materially impact our company’s combined financial statements.

On January 1, 2009, we adopted a new accounting standard that expands the disclosure requirements regarding an entity’s derivative instruments and hedging activities. The adoption of the provisions of this new standard did not materially impact our company’s combined financial statements.

In June 2009, the FASB issued guidance that amended the consolidation of variable-interest entities, or VIE’s. This amended guidance requires an enterprise to qualitatively assess the determination of the primary beneficiary of a VIE based on whether the entity has (i) the power to direct the activities of the VIE that most significantly impact a VIE’s economic performance and (ii) has the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. Further, the amended guidance requires ongoing reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. The new guidance was effective January 1, 2010 for our company. The adoption of this guidance did not impact our company’s financial position or results of operations.

In October 2009, the FASB issued Accounting Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The adoption of this standard is not expected to have a material impact on our company’s combined financial statements.

In January 2010, the FASB issued guidance that amends and clarifies existing guidance related to fair value measurements and disclosures. This guidance requires new disclosures for (1) transfers in and out of Level 1 and Level 2 and reasons for such transfers; and (2) the separate presentation of purchases, sales, issuances and settlement in the Level 3 reconciliation. It also clarifies guidance around disaggregation and disclosures of inputs and valuation techniques for Level 2 and Level 3 fair value measurements. This standard will be effective for our fiscal year beginning January 1, 2010, except for the new disclosures relating to Level 3 fair value measurements, which will be effective for our fiscal year beginning January 1, 2011. The adoption of this standard is not expected to have a material impact on our company’s combined financial statements.

INDUSTRY OVERVIEW AND MARKET OPPORTUNITY

Industry Overview

According to Tier1 Research, LLC, the global Internet data center market is estimated to grow from $9.2 billion in 2008 to $18.5 billion in 2012, representing a compound annual growth rate of 19%.^(a) We believe that the data center industry enjoys strong demand dynamics principally driven by the continued growth of Internet traffic, the corresponding increase in processing and storage equipment and the increased need for network interconnection capabilities. Additionally, companies are increasingly outsourcing their data center needs due to the high cost of operating and maintaining in-house data center facilities, increasing power and cooling requirements for data centers and the growing focus on business and disaster recovery planning.

Concurrently with the increasing demand for outsourced data center space, we believe that the supply of new data center facilities has been constrained by industry consolidation, underinvestment and lack of sufficient capital to develop additional space. New data center supply is estimated to grow by only 5% in 2010, whereas data center demand is expected to grow by 12% during the same period.^(b) Through 2013, global demand for multi-customer data center space is expected to outpace overall new supply by approximately 250%, resulting in utilization of data center space rising from 73% at year-end 2009 to 96% of forecasted space by 2013.^(b) Industry estimates suggest that at 70% space utilization, a data center market will begin to experience supply constraints as suitable space becomes limited.^(b) At 80% space utilization, industry sources predict that demand for data center space will greatly outpace available supply and that pricing for available space could be driven up significantly; and at 90% space utilization, available supply in a data center market is estimated to be effectively filled with the remaining space physically fragmented, held for expansion by existing customers and very expensive.^(b)

We believe this imbalance of supply and demand will continue to support a favorable pricing environment for providers of data center space. Therefore, we anticipate that sufficiently capitalized operators with space and land available for redevelopment and development, as well as a proven track record and reputation for operating high-quality data center facilities, will enjoy a significant competitive advantage and be best-positioned to accommodate market demand.

Growth in Internet Traffic. Global Internet Protocol, or IP, traffic has experienced significant growth and is expected to continue to grow exponentially. According to the Cisco Visual Networking Index, global IP traffic, including Internet, non-Internet and mobile data, is expected to quintuple from 2008 to 2013, representing a compound annual growth rate of 40%.^(c) This growth is expected to be driven by a mix of consumer and business trends including increased broadband penetration, the proliferation of wireless smart phones, rich media such as video-on-demand, real time online streaming video, social networks, online gaming, mobile broadband, cloud computing and the continued trend of enterprises outsourcing their IT and storage needs. In turn, the need for additional communications and processing equipment in the form of servers, routers, storage arrays and other infrastructure to support this growth, as well as the specialized facilities to house this infrastructure will continue to grow apace. We believe the on-going growth in the amount of content and data created, exchanged and stored will continue to drive strong demand for data center space and interconnection services.

Increasing Power and Cooling Requirements. Sufficient power availability to operate computing equipment and cooling infrastructure is one of the most significant challenges facing data centers today. As server speeds continue to increase, the power requirement and heat generated by modern servers, such as blade

servers, has more than doubled since 2000. Concurrently, increased cooling requirements for these dense servers coupled with increasing memory and storage requirements are also driving power demand. Many legacy-built corporate data centers have proven unable to accommodate these increasing power and cooling requirements. According to Nemertes Research, “at the end of 2009, 28.6% of data centers between 5,000 and 50,000 square feet had insufficient power and this figure is projected to increase to 50% by 2011.”^(d) The leading third-party wholesale and colocation data center companies can provide high-quality, reliable facilities including power redundancy and density, cooling infrastructure, security and overall efficiency.

Trend Toward Outsourcing. Data centers are frequently outside of the core competency of many companies and have become increasingly more complex and expensive to design, build and operate. Businesses are continuing to recognize that outsourcing could improve their cost structure, enhance their agility, lower their overall IT risk and allow them to focus on revenue generation. According to a Gartner research poll in December 2008, although 84% of company respondents primarily used their own data centers, 66% indicated that they expected to have at least 1,000 square feet of outsourced data center space within the next 24 months.^(e) Third-party data center providers often offer superior infrastructure, operational expertise, redundancy, service level commitments as well as greater access to a diversity of major network carriers. The trend towards outsourcing is driven by the following primary factors:


	•	Legacy Corporate Data Center Obsolescence—Data centers remain expensive to build, operate and maintain with significant upfront capital requirements. With the increasing need for higher power density, cooling infrastructure and network connectivity, companies are faced with the choice of either upgrading their existing facilities or outsourcing to a third-party data center that can provide more advanced networking technology and a more reliable and secure infrastructure. According to Tier1 Research, the average price to construct a data center is approximately $1,100 to $1,300 per raised square foot.^(f) By outsourcing their data center needs, enterprises that previously built and operated their own data centers are now able to convert high capital costs into lower operating costs.


	•	Business Continuity And Disaster Recovery—Organizations are increasingly reliant upon information and communications technology to function properly. Business continuity concerns and disaster recover planning as prudent business practices and in response to requisite regulatory compliance (i.e. Sarbanes Oxley, Health Insurance Portability and Accountability Act), have led to an increasing amount of data storage in secure, off-site facilities with redundant systems enabling businesses to access this data at any point in time, regardless of any failures in their infrastructure. Outsourced data center providers can help enterprises stay in business and meet regulatory requirements by providing superior facilities in diverse locations, with higher uptime and enhanced controls.

	•	New Technologies—The continued adoption of network-centric technologies such as cloud computing and hosted application services by enterprises are also driving outsourcing trends. These applications have significant processing and storage requirements and need adequate and redundant network connectivity and reduced latency, which is increasingly difficult for in-house data center solutions to provide.

	•	Network Choice—Data center operators are in many cases able to offer increased access to interconnection opportunities providing enterprises with the flexibility to optimize their connection partners based on their individual requirements. In addition, the ability to connect with a dense network of communications service providers, online media, video and content providers and other entities, can provide enterprises with the optimum solution for their business needs, including redundant connectivity and reduced latency.

Increased Need for Interconnectivity. Network-neutral data centers are increasingly relied upon to support global IP traffic growth, both to house the necessary equipment and infrastructure and to provide a centralized interconnection point where customers can cost-efficiently exchange traffic with each other. Data center providers with facilities housing a large number of networks where IP transit and peering between customers is a critical aspect of their business, see enhanced revenue opportunities as these customers are extremely motivated to colocate in these facilities. These types of customer requirements revolve around

superior communication, access to national and international networks and networking opportunities with other customers, including:


	•	Communications Service Providers — telecommunications carriers, wireless carriers and Internet service providers that enable the global movement of voice and data traffic;

	•	Content Providers — Internet, cable or other media providers that create, maintain or distribute content;

	•	Content Delivery Networks — providers of a network of servers delivering large amounts of data or media content; and

	•	Web Hosting Providers — providers of infrastructure for making information accessible on the Internet.

These enterprises are increasingly integrating their network-based business applications into their IT environments to drive economies of scale and to achieve greater processing capabilities at lower costs. These applications can cover a host of mission-critical business processes, such as human resource and accounting functionality, sales and customer response management tools and operational efficiency databases. These network-based applications lead to increased requirements for the breadth and depth of interconnection options that are available at interconnection and colocation facilities but more difficult to obtain and manage on an in-house basis.

Types of Data Centers

Customer requirements in the data center industry fall along a continuum from smaller colocation cabinets and cage footprints to larger, dedicated wholesale space. All data center facilities, whether serving wholesale or colocation customers, require the same underlying technical infrastructure, including robust and reliable power and HVAC systems to operate and cool the equipment in the facilities, backup power sources, fire suppression systems, physical security and Internet connectivity.

Wholesale Data Centers. Wholesale data center providers lease space in large blocks ranging from private suites up to entire buildings, with dedicated power and cooling infrastructure, under long-term leases of five to 15 years. Rental rates per square foot at wholesale data centers generally vary in accordance with the amount of electrical power requirements for such space. Key selection criteria for wholesale data center customers include the availability of low-cost electrical power, the quality of the facilities and the reputation of the data center provider. Wholesale customers typically require a minimal amount of operational support from the data center provider and include: enterprise customers who may find it more cost and time-effective to outsource their IT facility needs; colocation and managed hosting and managed services providers; and network carriers.

Carrier-Neutral Colocation. Carrier-neutral colocation data center providers sell space on the basis of individual cabinets or cages generally through one to five year leases. In addition, these providers provide interconnection services which allow customers to access network services and exchange traffic. Key colocation data center selection criteria include the quality of the facility including the power, cooling and security infrastructure, proximity to employees and company offices, network density and reputation of the data center provider. Colocation customers typically require a greater degree of operational support inside the data center, including interconnection services, full facility maintenance and additional services such as smart and remote hands and network monitoring services. Colocation customers encompass a wide range of businesses, including: Fortune 1000 enterprises; network carriers; Internet, media and content companies; content delivery networks; providers of Internet applications, such as Software-as-a-Service and cloud computing; shared, dedicated and managed hosting providers; and small and medium businesses.

Interconnection and Exchange Services

As participants in the global economy have become increasingly dependent upon networks such as the Internet to reliably and efficiently transfer data over long distances, the need has grown for an organized approach to network interconnection that can support the continued rapid growth of IP traffic. Proximity and access to global communications networks have become increasingly important selection criteria for data

center customers. Many customers not only seek space within data centers located in major metropolitan markets where global communications networks intersect, but also desire interconnection services within those data centers. Interconnection facilitates the cost efficient exchange of information between communications service providers, enterprises, online media, video and content providers and other entities either directly between two parties (cross connect) or among multiple parties (peering).

Interconnection generally provides a more cost-effective, lower latency, more rapidly deployed method of network traffic exchange than metro fiber or local loop alternatives. Parties interconnecting within a common facility can connect directly, do not require a third party to manage the interconnection once initially established and can exchange data over shorter distances with lower capital requirements. Direct connections are usually via fiber optic or Ethernet cable connected between the communications equipment of the two parties. Peering requires use of intermediate devices such as an Ethernet switch to connect one network to many other networks.

Barriers to Entry to Data Center Business

Despite the increase in demand for data center infrastructure and services, there are significant barriers to entry that we believe would make it difficult for new companies to enter this specialized market.

Significant Cost and Time to Develop Data Centers. Data center construction requires significant time, expertise and capital, which can vary by data center design and geographic location. New data center development requires significant upfront capital expenditures, which present a significant risk for a traditional real estate developer seeking to enter the data center market on a speculative basis. Additionally, financing has been difficult to obtain in the current economic climate with only larger, well-known operators having been able to secure financing to continue their growth. Finally, data center construction requires extensive planning and adherence to local regulatory requirements including permits. Total project length for data center construction, from site selection to completion, can take anywhere from 12 to 24 months.

Strong, Established Track Record with Operational and Technical Expertise. An increasing number of companies consider their application and Internet infrastructure equipment to be the “crown jewels” of their businesses. New entrants to the market may have difficulty establishing a brand name and reputation that will attract high value customers, who will entrust them with their mission-critical IT infrastructure. Most companies are less likely to enter into long-term leases with data center providers with limited track records of successfully operating large-scale facilities. We believe this represents a significant barrier to new entrants while enabling more established providers to lease up facilities more rapidly by leveraging long-standing customer relationships. Finally, due to the specialized nature of data centers, the key personnel necessary to develop and operate data centers have training that is highly sought after, which, we believe, can make it difficult for a new entrant to assemble a capable team. Some of the skill sets required include experience in commercial real estate, data center design and construction, communications and electrical and mechanical engineering.

Network Density. Communications service providers, content providers, content delivery networks, web hosting providers and other enterprises select a data center in part based on their ability to interconnect easily with a large number of other companies within the data center and large users of telecom bandwidth, creating a network effect that deters these companies from switching data centers. The most well-known and critical points of network density have required years to establish as a result of the need to build out the necessary infrastructure. We believe these points are extremely difficult for a new entrant to replicate, and in each metropolitan market there are typically only a few buildings that have the sufficient critical mass of multiple high-speed optical connections to major network carriers to be characterized as points of interconnection. These points of interconnection are critical to customers because they provide secure, direct access to the point at which traffic is exchanged, which can reduce their overall costs by eliminating local access charges, decreasing their points of failure and increasing their efficiency. The close proximity of numerous interconnection customers within a single facility generates network efficiencies that can result in cost savings and shorter time to market.

BUSINESS AND PROPERTIES

Our Company

As of March 31, 2010, our property portfolio included ten operating data center facilities, one data center under construction and one development site, which collectively comprise over 2.0 million NRSF, of which approximately 1.0 million NRSF is existing data center space. These properties include 337,586 NRSF of space readily available for lease, of which 194,939 NRSF is available for lease as data center space. As of March 31, 2010, we had the ability to expand our operating data center square footage by approximately 1.0 million NRSF by redeveloping 447,368 NRSF of vacant space and developing 496,250 NRSF of new data center space on land we currently own. We expect that this redevelopment and development potential will enable us to accommodate existing and future customer demand and positions us to significantly increase our cash flows.

Our diverse customer base consists of over 600 customers, including enterprise customers, communications service providers, media and content companies, government agencies and educational institutions. We have a high level of customer retention, which we believe is due to our high-quality facilities and the interconnection opportunities available at many of our data centers. As of March 31, 2010, our largest customer represented approximately 5.3% of our annualized rent. During the second quarter of 2010, we expanded our relationship with Facebook, Inc. and expect that this customer will represent approximately 10% of our pro forma revenues for the year ending December 31, 2010.

The first data center in our portfolio was purchased in 2000 and since then we have continued to acquire, redevelop, develop and operate these types of facilities. Our data center acquisitions have been historically funded and held through real estate funds affiliated with The Carlyle Group. Our properties are self-managed, including with respect to construction project management in connection with our redevelopment and development initiatives. While we have no present intentions to outsource a significant portion of our property and construction management functions, we may do so at any time, or from time to time, as our business plan dictates.

Our Corporate History

The first data center in our portfolio was purchased in 2000 through an investment by a real estate fund affiliated with Carlyle. Since the acquisition of that data center, we have expanded our portfolio through additional investments by various Carlyle real estate funds or their affiliates. Although our data center portfolio has been owned by these various Carlyle real estate funds or their affiliates, all of our data centers have been operated or managed by our management team since they were initially acquired or developed.

www.coresite.com. The information contained on, or accessible through, our website is not incorporated by reference into this prospectus and should not be considered a part of this prospectus.

Our Competitive Strengths

Expansion Capability. By leasing readily available data center space and expanding our operating data center space, we anticipate that we will be able to meet the growing demand from our existing and prospective customers. Our data center facilities currently have 194,939 NRSF of space readily available for lease. We also have the ability to expand our operating data center square footage by over 90%, or 943,618 NRSF, by redeveloping 447,368 NRSF of vacant space and developing 496,250 NRSF of new data centers on land that we currently own. Of this redevelopment and development space, 91,244 NRSF was under construction as of March 31, 2010, including the development of a new 50,000 NRSF data center in Santa Clara, California, which we completed during the second quarter of 2010.

Significant Network Density. Many of our data centers are points of dense network interconnection that provide our customers with valuable networking opportunities that help us retain existing customers and attract new ones. We believe that the network connectivity at these data centers provides us with a significant competitive advantage because network-dense facilities offering high levels of connectivity typically take many years to establish. To facilitate access to these networking opportunities, we provide services enabling interconnection among our data center customers including private cross connections and publicly-switched peering services. Our private cross connection services entail installing fiber, or other connection media, between two customer spaces. Our publicly-switched peering services allow our customers to exchange digitalized information with each other by connecting to our Any² Exchange^® networking switch. Currently, we actively manage over 9,000 interconnections across our portfolio.

Facilities in Key Markets. Our portfolio is concentrated in some of the largest and most important U.S. metropolitan markets. As of March 31, 2010, nearly 70% of our operating NRSF, accounting for over 90% of our annualized rent, was located in five of the six North American markets identified by Tier1 Research, LLC as markets of high data center demand.^(a) Our data centers are located in Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago, Boston, New York City and Miami. These locations offer access to the abundant power required to run and cool the facilities. Many of our facilities are also situated in close proximity to hundreds of businesses and corporations, which drives demand for our data center space and interconnection services. We expect to continue benefitting from this proximity as customers seek new, high-quality data center space in our markets.


	•	Global Telecommunications Carriers, Internet Service Providers and Content Delivery Networks: AT&T Inc., British Telecom (BT Group Plc.), Akamai Technologies, Inc., CDNetworks Co. Ltd., Internap Network Services Corp., Limelight Networks Inc., China Netcom Group Corp., China Unicom


		(Hong Kong) Limited, France Telecom SA, Japan Telecom Co., Ltd., Korea Telecom Corporation, Singapore Telecom Ltd., Sprint Nextel Corporation, Tata Communications Ltd., Telmex U.S.A., L.L.C. and Verizon Communications Inc.;


	•	Enterprise Companies, Financial and Educational Institutions and Government Agencies: Computer Science Corporation, Facebook, Inc., Google Inc., Microsoft Corporation, The NASDAQ OMX Group, Inc., NYSE Euronext, the Government of the District of Columbia, Macmillan Inc. and the University of Southern California; and


	•	Media and Content Providers: DreamWorks Animation SKG, Inc., NBC Universal Inc., Sony Pictures Imageworks Inc. and Warner Brothers Entertainment, Inc.

Experienced Management Team. Our management team has significant experience in the real estate, communications and technology industries. Notably, our Chief Executive Officer has over 22 years of experience in the acquisition, financing and operation of commercial real estate, which includes over 11 years in the data center industry and five years at publicly traded REITs. Additionally, our Chief Financial Officer has approximately 16 years of financial experience, including nearly ten years with a publicly traded REIT. Several members of our management team have also been with us for a significant tenure which, we believe, leads to operational efficiencies. Specifically, our Chief Executive Officer, Chief Financial Officer, Senior Vice President of Acquisitions, Senior Vice President of Marketing and Senior Vice President of Operations have served our company in roles of increasing importance for ten, five, eight, seven and four years, respectively. We believe our management team’s significant expertise in acquiring, redeveloping, developing and operating efficient data center properties has enabled us to offer customer-focused solutions.

Business and Growth Strategies

Our business objective is to continue growing our position as a provider of strategically located data center space in North America. The key elements of our strategy are as follows:

Increase Cash Flow of Our In-Place Data Center Space. We actively manage and lease our properties to increase cash flow by:


	•	Increasing Rents. Approximately 90% of our annualized rent as of March 31, 2010 was derived from data center leases. Additionally, the occupancy rate of our data centers has remained strong with over 81% of our data center operating space under lease as of March 31, 2010 and December 31, 2009. We believe that the average rental rate for our in-place data center leases is substantially below market and that our ability to renew these leases at market rates provides us with an opportunity to increase our cash flows. We renewed approximately 75% of our data center leases that expired during the year ended December 31, 2009, while increasing rents under data center leases renewed during the year. The dollar-weighted average rental rate per NRSF of the leases for our data center space renewed during 2009 was approximately 25% greater than that of the data center leases expiring in the same facilities


		during the year. We also believe that many of our data center leases that are contractually scheduled to expire during 2010 are at rental rates meaningfully below current market rates. Specifically, the dollar-weighted average rental rate per NRSF of data center leases we renewed in 2009 was over 25% greater than that of the data center leases contractually scheduled to expire in the same facilities during 2010. As a result, we believe that the average rental rate for data center leases that we renew in 2010 will be significantly increased; however, we cannot assure you that we will achieve the same or comparable rate increases or renewal levels achieved in 2009.


	•	Leasing up Available Space and Power. We have the ability to increase both our revenue and our revenue per square foot by leasing additional space and power to new and existing data center customers. As of March 31, 2010, substantially all of our data center facilities offered our customers the ability to increase their square footage under lease as well as the amount of power they use per square foot. In total, our existing data center facilities have 194,939 NRSF of space available for lease. We believe this space, together with available power, enables us to generate incremental revenue within our existing data center footprint without necessitating extensive capital expenditures.

Capitalize on Embedded Expansion Opportunities. Our portfolio includes 447,368 NRSF of vacant space that can be redeveloped into data center space, of which 41,244 is currently under construction. We believe that redevelopment provides attractive risk-adjusted returns because by leveraging existing in-place infrastructure and entitlements we are typically able to deliver redevelopment space at a lower cost and faster time-to-market than ground-up development. In many cases we are able to strategically deploy capital by redeveloping space in incremental phases to meet customer demand.

In addition to our redevelopment space, as of March 31, 2010, our portfolio included a 15.75-acre property housing seven buildings in Santa Clara, California. The Coronado-Stender Business Park currently includes:


	•	the Coronado-Stender Properties, a 12.6 acre development site with six buildings consisting of 179,600 NRSF of office and light-industrial operating space, portions of which generate revenue under short-term leases. We believe this development site provides us with the ability to develop up to 446,250 NRSF of additional data center space in one of the fastest growing and most important data center markets in North America; and


	•	2901 Coronado, a 50,000 NRSF data center under development, which represents the first phase of our development at the Coronado-Stender Business Park. We completed a portion of 2901 Coronado in April 2010, and completed the remainder during the second quarter of 2010. During March 2010, we fully leased this space to a leading online social networking company pursuant to a six-year lease.

The following table summarizes the near-term future redevelopment and development plans throughout our portfolio.


	Near-Term Future Redevelopment / Development
		Estimated
	Construction	Total		Redevelopment /
Facilities	Start Date⁽¹⁾	Cost ($000)		Development NRSF

One Wilshire*	—	$	—		—
55 S. Market	—		—		—
900 N. Alameda	3rd Quarter of 2011		5,500		15,858
427 S. LaSalle	2nd Quarter of 2011		21,500		27,309
1656 McCarthy	2nd Quarter of 2010		2,300		4,829
70 Innerbelt	—		—		—
12100 Sunrise Valley	1st Quarter of 2011		35,700		72,269
32 Avenue of the Americas*	—		—		—
1275 K Street*	—		—		—
2115 NW 22nd Street	4th Quarter of 2010		2,500		13,447

Coronado-Stender Business Park:
Coronado-Stender Properties	4th Quarter of 2010		95,000		101,000
2901 Coronado	—		—		—

Total Facilities:		$	162,500		234,712


*		Indicates properties in which we hold a leasehold interest.
(1)		Represents the actual or anticipated construction start date. While we have budgeted for this redevelopment and development, there can be no assurance that the redevelopment and/or development will take place as scheduled or on these terms.

Selectively Pursue Acquisition Opportunities in New and Existing Markets. We intend to seek opportunities to acquire existing or potential data center space in key markets with abundant power and/or dense points of interconnection that will expand our customer base and broaden our geographic footprint. Such acquisitions may entail subsequent redevelopment or development which, in either case, often requires significant capital expenditures. We will also continue to implement our “hub-and-spoke strategy” that we have successfully deployed in our three largest markets, Los Angeles and the San Francisco Bay and Northern Virginia areas. In these markets, we have extended our data center footprint by connecting our newer facilities, the spokes, to our established data centers, our hubs, which allows our customers leasing space at the spokes to leverage the significant interconnection capabilities of our hubs.

Our Portfolio

The following table provides an overview of our properties as of March 31, 2010 after giving effect to the Restructuring Transactions.


					NRSF
					Operating⁽¹⁾
										Office and Light-										Redevelopment and
			Annualized		Data Center⁽²⁾					Industrial⁽³⁾					Total					Development⁽⁴⁾
	Metropolitan	Acquisition	Rent				Percent					Percent					Percent			Under						Total
Facilities	Area	Date⁽⁵⁾	($000)⁽⁶⁾		Total		Leased⁽⁷⁾			Total		Leased⁽⁷⁾			Total⁽⁸⁾		Leased⁽⁷⁾			Construction		Vacant		Total		Portfolio

One Wilshire*	Los Angeles	Aug. 2007	$	20,470		156,521		76.5	%		7,500		62.2	%		164,021		75.8	%		—		—		—		164,021
900 N. Alameda	Los Angeles	Oct. 2006		12,219		256,690		90.2			16,622		6.2			273,312		85.1			16,126		144,721		160,847		434,159
55 S. Market	San Francisco Bay	Feb. 2000		11,509		84,045		85.7			205,846		77.9			289,891		80.2			—		—		—		289,891
12100 Sunrise Valley	Northern Virginia	Dec. 2007		8,848		116,498		67.6			38,350		85.9			154,848		72.2			—		107,921		107,921		262,769
427 S. LaSalle	Chicago	Feb. 2007		6,558		129,790		74.0			45,283		100.0			175,073		80.7			—		5,309		5,309		180,382
1656 McCarthy	San Francisco Bay	Dec. 2006		6,164		71,847		84.7			—		—			71,847		84.7			—		4,829		4,829		76,676
70 Innerbelt	Boston	Apr. 2007		6,162		118,991		93.8			2,600		57.1			121,591		93.0			25,118		129,897		155,015		276,606
32 Avenue of the Americas*	New York	June 2007		3,672		48,404		68.3			—		—			48,404		68.3			—		—		—		48,404
1275 K Street*	Northern Virginia	June 2006		1,824		22,137		96.5			—		—			22,137		96.5			—		—		—		22,137
2115 NW 22nd Street	Miami	June 2006		1,301		30,176		50.3			1,641		—			31,817		47.7			—		13,447		13,447		45,264

Coronado-Stender Business Park:
Coronado-Stender Properties	San Francisco Bay	Feb. 2007		1,250		—		—			179,600		60.7			179,600		60.7			—		—		—		179,600
2901 Coronado	San Francisco Bay	Feb. 2007		—		—		—			—		—			—		—			50,000		—		50,000		50,000

Total Facilities			$	79,977		1,035,099		81.2	%		497,442		71.3	%		1,532,541		78.0	%		91,244		406,124		497,368		2,029,909


*		Indicates properties in which we hold a leasehold interest.
(1)		Represents the square feet at a building under lease as specified in existing customer lease agreements plus management’s estimate of space available for lease to customers based on engineers’ drawings and other factors, including required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas. Total NRSF at a given facility includes the total operating NRSF and total redevelopment and development NRSF, but excludes our office space at a facility and our corporate headquarters.
(2)		Represents the NRSF at an operating facility that is currently leased or readily available for lease as data center space. Both leased and available data center NRSF include a customer’s proportionate share of the required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas.
(3)		Represents the NRSF at an operating facility that is currently leased or readily available for lease as space other than data center space, which is typically space offered for office or light-industrial use.
(4)		Represents vacant space in our portfolio that requires significant capital investment in order to redevelop or develop into data center facilities. Total redevelopment and development NRSF and total operating NRSF represent the total NRSF at a given facility.
(5)		Represents the date a property was acquired by a Carlyle real estate fund or, in the case of a property under lease, the date the initial lease commenced for the property.


(6)		Represents the monthly contractual rent under existing customer leases as of March 31, 2010 multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and is shown on a gross basis; thus, under a net lease, the current year operating expenses (which may be estimates as of such date) are added to contractual net rent. The addition of operating expenses excludes electricity use attributable to customers. Total abatements for leases in effect as of March 31, 2010 for the 12 months ending March 31, 2011 were $26,929.


(7)		Includes customer leases in effect as of March 31, 2010. The percent leased is determined based on leased square feet as a proportion of total operating NRSF.


(8)		Represents the NRSF at an operating facility currently leased or readily available for lease. This excludes existing vacant space held for redevelopment or development.

Customer Diversification

As of March 31, 2010, our portfolio was leased to over 600 customers, many of which are nationally recognized firms. The following table sets forth information regarding the ten largest customers in our portfolio based on annualized rent as of March 31, 2010.


													Weighted
													Average
					Percentage					Percentage			Remaining
					of Total			Annualized		of			Lease
		Number of	Total Leased		Operating			Rent		Annualized			Term in
	Customer	Locations	NRSF⁽¹⁾		NRSF⁽²⁾			($000)⁽³⁾		Rent⁽⁴⁾			Months⁽⁵⁾

1	Sprint Communications Corporation	4		104,796		6.8	%	$	4,265		5.3	%		21
2	General Services Administration-IRS*⁽⁶⁾	1		132,370		8.6			3,427		4.3			26
3	Verizon Communications	7		73,840		4.8			3,191		4.0			57
4	Facebook, Inc.⁽⁷⁾	2		24,104		1.6			2,655		3.3			25
5	Tata Communications	2		52,942		3.5			2,398		3.0			23
6	Gov’t of District of Columbia	2		22,118		1.4			2,116		2.6			40
7	Internap Network Services Corporation	5		72,054		4.7			2,108		2.6			104
8	Computer Sciences Corporation	1		18,950		1.2			1,968		2.5			83
9	Nuance Communications	1		17,156		1.1			1,756		2.2			102
10	NBC Universal	1		17,901		1.2			1,620		2.0			28

	Total/Weighted Average			536,231		34.9	%	$	25,504		31.8	%		51


*		Denotes customer using space for general office purposes.


(1)		Total leased NRSF is determined based on contractually leased square feet for leases that have commenced on or before March 31, 2010. We calculate occupancy based on factors in addition to contractually leased square feet, including required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas.


(2)		Represents the customer’s total leased square feet divided by the total operating NRSF in the portfolio which, as of March 31, 2010, consisted of 1,532,541 NRSF.


(3)