10. Stockholders’ Equity

At December 31, 2018, 120 million shares were authorized to be issued by the Company, of which 100 million shares represent common stock and 20 million represent preferred stock. The Board may, without stockholder approval, classify or reclassify any unissued shares of stock 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 of series of shares to be issued.

Common Stock

At December 31, 2018, we had 36.7 million shares of common stock issued and outstanding. Since our IPO, we have issued common stock under our 2010 Plan (as defined in Note 12, Equity Incentive Award Plan), in which certain of our employees and outside directors participate to provide compensation in the form of common stock. Under the 2010 Plan, we received proceeds from the exercise of stock options of $0.3 million, $4.8 million, and $1.3 million for the years ended December 31, 2018, 2017, and 2016, respectively. Also, we issued shares of common stock as restricted stock award and performance stock award grants, net of forfeitures, and option exercises, net of settlements, in the amount of 206,808, 329,033 and 239,068 during the years ended December 31, 2018, 2017, and 2016, respectively. See Note 12, Equity Incentive Award Plan, for additional information on our 2010 Plan.

During the years ended December 31, 2018, 2017, and 2016, 11,068, 15,011 and 7,000 common Operating Partnership units held by other third parties were redeemed for shares of our common stock, respectively. During the years ended December 31, 2018, and 2016, 2,250,000, and 3,000,000 common Operating Partnership units held by the Carlyle Group and other third parties were redeemed for shares of our common stock in connection with the offer and sale of 2,250,000, and 3,000,000 shares of our common stock, respectively. See Note 11, Noncontrolling Interests – Operating Partnership, for additional information.

Preferred Stock

On December 12, 2017, the Company redeemed an aggregate of 4,600,000 shares of its 7.25% Series A Cumulative Redeemable Preferred Stock, or the Series A Preferred Stock, for $25.00 per share, plus all accrued and unpaid dividends in an amount equal to $0.292014 per share, for a total payment of $25.292014 per share, or $116.3 million in aggregate. The excess of the redemption price over the carrying value of the Series A Preferred Stock of approximately $4.3 million relates to the original issuance costs and was recorded as a reduction to net income attributable to common shares. The Series A Preferred Stock were originally issued on December 12, 2012, for net proceeds of $110.6 million. Dividends were cumulative on the Series A Preferred Stock from the date of original issuance in the amount of $1.8125 per share each year, which was equivalent to 7.25% of the $25.00 liquidation preference per share. Dividends on the Series A Preferred Stock were payable quarterly in arrears.

Dividends

In 2018, 2017, and 2016, we paid all our dividends in cash. The following summarizes the taxability of our common and preferred stock dividends per share for the years then ended:


	Year Ended December 31,
Record Date	2018		2017		2016
Common Stock:
Ordinary income(1)	$	3.09	$	2.13	$	2.36
Qualified dividend		—		—		—
Capital gains		—		—		—
Return of capital		0.93		0.91		—
Total dividend (2)	$	4.02	$	3.04	$	2.36

Preferred Stock:
Ordinary income	$	—	$	1.36	$	1.81
Qualified dividend		—		—		—
Capital gains		—		—		—
Total dividend (3)	$	—	$	1.36	$	1.81

(1)

All 2018 ordinary dividends are eligible for the 20% deduction generally allowable to non-corporate shareholders under Internal Revenue Code Section 199A. Shareholders are encouraged to consult with their tax advisors regarding their specific treatment of CoreSite distributions.

(2)

A $1.10 per share or unit distribution was paid in January, all of which will apply to tax year 2019. A $0.98 per share or unit distribution was paid in January 2018, all of which will apply to tax year 2018. Of the $2.36 taxable dividend in 2016, $0.80 was paid in January 2017, of which $0.44 applied to tax year 2017.

(3)

All outstanding shares and dividends of the 7.25% Series A Cumulative Redeemable Preferred Stock were redeemed at $25.292014 per share at December 12, 2017. Of the $1.81 taxable dividend in 2016, $0.45 was paid in January 2017.

In order to comply with the REIT requirements of the Code, we are generally required to make common stock distributions (other than capital gain distributions) to our stockholders at least equal to (i) the sum of (a) 90% of our “REIT taxable income” computed without regard to the dividends paid deduction and net capital gains and (b) 90% of the net taxable income (after tax), if any, from foreclosure property, minus (ii) certain excess non‑cash income. Our common stock dividend policy is to distribute, at a minimum, a percentage of our cash flow to ensure we will meet the distribution requirements of the Code, while allowing us to retain cash to meet other needs, such as capital improvements and other investment activities. Any subsequent increases and/or anticipated increases are correlated to increases in our growth of cash flow.

Common stock dividends are characterized for federal income tax purposes as ordinary income, qualified dividend, capital gains, non‑taxable return of capital or a combination of the four. Common stock dividends that exceed our current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend and generally reduce the stockholder’s basis in the common stock. To the extent that a dividend exceeds both current and accumulated earnings and profits and the stockholder’s basis in the common stock, it will generally be treated as a gain from the sale or exchange of that stockholder’s common stock. At the beginning of each year, we notify our stockholders of the taxability of the common stock dividends paid during the preceding year. Following passage of the Tax Cuts and Jobs Act in late 2017, beginning with tax year 2018 REIT, ordinary dividends are eligible for a 20% deduction generally allowable to non-corporate shareholders.

Pursuant to the terms of our preferred stock, we were restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock had been paid and sufficient funds had been set aside for dividends that had been declared for the relevant dividend period with respect to the preferred stock. On December 12, 2017, we redeemed our preferred stock in its entirety.

Our federal tax return for the year ended December 31, 2018, has not been filed. The taxability information presented for our dividends paid in 2018 is based upon management’s estimates.