Reports 6% Growth in FFO Per Share BOSTON, Aug. 2
/PRNewswire-FirstCall/ -- Heritage Property Investment Trust, Inc.
(NYSE:HTG) ("Heritage" or the "Company"), today reported results of
its operations for the three and six months ended June 30, 2005.
Highlights included: Financial Results: * Funds from Operations
(FFO) of $33.7 million for the quarter and $67.5 million for the
first half of 2005 * Diluted FFO per share of $0.70 for the quarter
and $1.41 for the first half of 2005 * Net income of $9.1 million
for the quarter and $19.1 million for the first half of 2005 * Same
property net operating income growth (excluding termination fee
income) of 4.8% for the quarter and 4.7% for the first half of 2005
* Paid $0.525 per common share regular quarterly dividend on July
15, 2005 Operating Highlights: * Acquired (during and immediately
following quarter-end) two additional shopping centers located in
Dallas, Texas and Simpsonville, South Carolina * Entered into
purchase and sale agreements and completed due diligence for the
acquisition of two additional shopping centers-a group of assets
located in Manchester, Connecticut and a center located in Old
Bridge Township, New Jersey * Achieved 9% increase over prior rents
within our shopping center portfolio "We are extremely pleased by
our second quarter financial results," stated Thomas C.
Prendergast, Chairman, President and Chief Executive Officer. "We
continue to see strong same store operating performance within our
core portfolio as a result of our leasing and capital recycling
efforts. We were also pleased by our investment activity to date as
we have the opportunity to add four excellent properties to our
portfolio. These acquisitions show our continued commitment to
acquiring properties in attractive locations with solid national
tenant line-ups. In addition, by acquiring properties within our
existing markets, we are able to take advantage of operating
synergies within our portfolio. The addition of these high quality
properties clearly reflects our success in finding
portfolio-improving acquisitions even in such a competitive
environment." Mr. Prendergast further added, "While we will
continue to pursue attractive acquisitions as a means of growing
our portfolio, we remain committed to our capital recycling
program. We expect to dispose of several non-core assets during the
second half of the year. Our capital recycling program is important
to improving the internal growth of our existing portfolio. In
addition, we are continuing to explore capital raising joint
venture opportunities involving an initial contribution of certain
of our existing core assets and the funding of future shopping
center acquisitions. Such a joint venture will help us to increase
our sources of capital and our ability to pursue high quality
acquisitions thus driving future earnings growth. Overall, as a
result of our efforts during the first half of the year, we remain
optimistic about our prospects for the remainder of 2005."
Financial Results For the three months ended June 30, 2005, FFO, a
widely accepted measure of REIT performance, increased 9% to $33.7
million, or $0.70 per diluted share, as compared to $30.9 million,
or $0.66 per diluted share for the same period in 2004. For the six
months ended June 30, 2005, FFO increased 7.3% to $67.5 million, or
$1.41 per diluted share, as compared to $63.0 million, or $1.34 per
diluted share for the six months ended June 30, 2004. FFO
represents a non-generally accepted accounting principle (GAAP)
financial measure. A table reconciling FFO to net income, the GAAP
measure that the Company believes to be most directly comparable,
is presented within the consolidated financial statements included
in this release. Net income attributable to common shareholders
decreased to $9.1 million, or $0.19 per diluted share, for the
three months ended June 30, 2005, as compared to $12.2 million, or
$0.26 per diluted share, for the same period in 2004. Net income
attributable to common shareholders decreased to $19.1 million, or
$0.40 per diluted share, for the six months ended June 30, 2005, as
compared to $23.1 million, or $0.49 per diluted share for the same
period in 2004. Net income attributable to common shareholders for
the three and six months ended June 30, 2004 includes a gain on
sale of discontinued operations of $3.0 million reflecting the
Company's sale of an office building in April 2004. All per share
amounts are stated on a diluted basis. The reported results are
unaudited and there can be no assurance that the results will not
vary from the final information for the three and six months ended
June 30, 2005. In the opinion of management, all adjustments
considered necessary for a fair presentation of these reported
results have been made. PORTFOLIO OVERVIEW General As of June 30,
2005, Heritage had a shopping center portfolio of 164 properties,
located in 29 states and totaling approximately 33.7 million square
feet of total gross leasable area, of which 28.0 million square
feet is company-owned gross leasable area. Leasing Activity During
the second quarter of 2005, the Company executed 147 leases (new
and renewed), for 492,000 square feet in the Company's shopping
center portfolio. In doing so, the Company achieved a 8.7% increase
over prior rents on a cash basis from $12.03 per square foot to
$13.07 per square foot. For the first six months of 2005, the
Company has signed 299 leases (new and renewed), for 1.1 million
square feet in the Company's shopping center portfolio. In doing
so, the Company achieved a 7.8% increase over prior rents on a cash
basis from $11.70 per square foot to $12.61 per square foot. At
June 30, 2005, the percentage of the Company's portfolio leased was
92.5%, an increase of 0.7% from June 30, 2004. At March 31, 2005,
the Company's portfolio was 93.0% leased. Same Property Operating
Results With respect to the properties owned and operated by the
Company for the three months and six months ended June 30, 2005 and
June 30, 2004, same property net operating income increased as
follows: Same Property Operating Data (in thousands) Three Months
Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Real
estate revenue $81,103 $78,577 $165,052 $158,937 Operating expenses
(22,678) (22,561) (48,296) (47,177) Net Operating Income 58,425
56,016 4.3% 116,756 111,760 4.5% Less: Lease termination income (1)
(285) (365) (581) Net Operating Income, as adjusted $58,424 $55,731
4.8% $116,391 $111,179 4.7% A table reconciling same property net
operating income to net income, the GAAP measure that the Company
believes to be most directly comparable, is presented within the
consolidated financial statements included in this release.
INVESTMENT ACTIVITY Completed and Pending Acquisitions Skillman
Abrams Acquisition, Dallas, Texas In April 2005, through its joint
venture with Intercontinental Real Estate Investment Fund III, LLC,
a $350 million pooled fund sponsored and managed by
Intercontinental Real Estate Corporation, Heritage acquired
Skillman Abrams Shopping Center, a 133,000 square foot shopping
center located in a busy retail corridor of Dallas, Texas, the
ninth largest Metropolitan Statistical Area ("MSA") in the United
States. Skillman Abrams was acquired by the joint venture for a
total purchase price of approximately $19 million, including
assumed mortgage debt. Skillman Abrams is anchored by Tom Thumb,
the second leading grocer in the marketplace, which leases
approximately 78,000 square feet at the center. The center is 97%
leased and contains an attractive mix of national and regional
tenants. Fairview Corners, Simpsonville, South Carolina On July 1,
2005, Heritage completed the acquisition of Fairview Corners, a
131,000 square foot shopping center located in Simpsonville, South
Carolina in the Greenville Spartanburg MSA. The purchase price for
Fairview Corners was approximately $23 million. The center was
unencumbered and Heritage funded the purchase price with borrowings
under its unsecured line of credit. Fairview Corners, a newly
developed shopping center, contains an excellent tenant roster and
is approximately 96% leased. The property's anchor and major
tenants include national retailers Ross Dress For Less, TJ Maxx and
Pier 1 Imports. In addition, a 120,000 square foot Super Target
shadow anchors the center. Fairview Corners is located on a busy
retail corridor in close proximity to other national retailers
Wal-Mart Super Center, Lowe's Home Improvement and Kohl's. The
demographics within a five-mile radius of the center include a
population of approximately 50,000 and average household income of
approximately $63,000, revealing a growing area. Williamson Square,
Franklin, Tennessee On August 2, 2005, Heritage completed the
acquisition of the 40% minority partnership interest in Williamson
Square Shopping Center, located in Franklin, Tennessee, held by
Heritage's joint venture limited partner. As a result, Heritage
owns 100% of the partnership interests in Williamson Square. The
purchase price, which was based on a formula set forth in the
partnership agreement, was $2.9 million. Heritage funded the
purchase price with borrowings under its unsecured line of credit.
Heritage also repaid upon maturity the previously outstanding
mortgage indebtedness encumbering Williamson Square. As a result,
Williamson Square is now unencumbered. Williamson Square is a
340,000 square foot shopping center anchored by Kroger Supermarket,
the number one supermarket in the trade area, as well as by Hobby
Lobby, USA Baby and Hancock Fabrics. Crossroads at Buckland Hills,
Manchester, Connecticut Heritage also entered into a purchase and
sale agreement and completed due diligence to acquire a group of
assets known as "Crossroads at Buckland Hills" located in an
eastern suburb of Hartford, Connecticut. The purchase price for
Crossroads was not disclosed pending completion of the transaction.
Heritage expects to fund the acquisition with a combination of
assumed mortgage indebtedness, borrowings under its unsecured line
of credit and the issuance of operating partnership units in
Bradley Operating Limited Partnership, one of its subsidiary
operating partnerships. Crossroads consists of six separate parcels
and 342,000 square feet. The centers include a "who's who" of
impressive national tenants such as Best Buy (shadow anchor),
Sports Authority, Borders Books, Office Max, Bed Bath & Beyond,
Pier 1 Imports, A.C. Moore, Petco, Tweeter and Babies 'R Us.
Overall, the centers are over 96% leased. The demographics within
five miles of the centers are excellent, including a population of
over 127,000 people and household income of over $67,000. Old
Bridge Gateway Shopping Center, Parlin, Old Bridge Township, New
Jersey Heritage also entered into a purchase and sale agreement and
completed due diligence to acquire a shopping center known as "Old
Bridge Gateway Shopping Center" located in Parlin, Old Bridge
Township, New Jersey. The purchase price was not disclosed pending
completion of the transaction. Old Bridge Gateway is unencumbered
and Heritage expects to fund the acquisition with borrowings under
its unsecured line of credit. Old Bridge Gateway is a 236,000
square foot shopping center located within close proximity to busy
Route 9 in Middlesex County, New Jersey. The center is 95% leased
and includes anchors and major tenants Marshalls, Modell's Sporting
Goods, Petco, Bayshore Fitness and Wellness, Sleepy's and R&S
Strauss. In addition, Home Depot and Wal-Mart border the property.
The demographics are strong and include a population of
approximately 200,000 and average household income of approximately
$71,000 within a five-mile radius. DIVIDEND PAYMENT On July 15,
2005, the Company paid its regular quarterly dividend of $0.525 per
common share to shareholders of record on June 30, 2005. 2005
Earnings Guidance Heritage today increased the low end of its
projected guidance range for 2005 FFO per diluted common share to
$2.78 from $2.77 and reconfirmed the upper end of its guidance
range of $2.83 per share. A reconciliation of management's
projections from earnings per diluted common share to FFO per
diluted common share is included in this release. 2nd QUARTER
CONFERENCE CALL Members of Heritage's senior management will host a
conference call on Wednesday, August 3, 2005, at 10:00 a.m., ET, to
discuss the Company's second quarter results. Stockholders,
analysts and other interested parties may participate in this
conference call by dialing 800-218-0530 or 303-262-2211 at least
five minutes before the scheduled start time. Investors can also
access the call via the Internet at the Company's website,
http://www.heritagerealty.com/. To listen to a live broadcast,
access this site at least 15 minutes prior to the scheduled start
time in order to register, download, and install any necessary
audio software. A replay of the conference call will be available
after the call through August 10, 2005 by accessing the Company's
website at http://www.heritagerealty.com/ or by dialing
800-405-2236 or 303-590-3000, pass-code 11033770. ABOUT HERITAGE
PROPERTY INVESTMENT TRUST, INC. Heritage is a fully integrated,
self-administered and self-managed REIT traded on the New York
Stock Exchange under the symbol "HTG". Heritage is one of the
largest owners and operators of neighborhood and community shopping
centers in the United States. Heritage focuses on grocer-anchored
shopping centers with multiple anchors. Heritage is headquartered
in Boston Massachusetts and has an additional 16 regional offices
located in the Eastern, Midwestern and Southwestern United States.
For more information about Heritage, please refer to Heritage's
website, http://www.heritagerealty.com/. A copy of Heritage's
second quarter 2005 "Supplemental Operating and Financial Data" is
available on the Investor Relations section of the Company's
website at http://www.heritagerealty.com/. These materials are also
available by written request to: Investor Relations Heritage
Property Investment Trust, Inc. 131 Dartmouth St. Boston, MA 02116
SAFE HARBOR LANGUAGE Some of the statements contained in this press
release constitute forward- looking statements. Forward-looking
statements relate to expectations, beliefs, projections, future
plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. The
forward-looking statements reflect the Company's current views
about future events and are subject to risks, uncertainties,
assumptions and changes in circumstances that may cause the
Company's actual results to differ significantly from those
expressed in any forward-looking statement. You should not rely on
forward-looking statements since they involve known and unknown
risks, uncertainties and other factors that are, in some cases,
beyond the Company's control and which could materially affect
actual results. The factors that could cause actual results to
differ materially from current expectations include risks detailed
from time to time in filings with the Securities and Exchange
Commission. The forward-looking statements contained herein
represent the Company's judgment as of the date of this release,
and the Company cautions readers not to place undue reliance on
such statements. Heritage Property Investment Trust, Inc.
Consolidated Balance Sheets June 30, 2005 and December 31, 2004
(Unaudited and in thousands of dollars) June 30, December 31, 2005
2004 Assets Real estate investments, net $2,196,192 $2,222,638 Cash
and cash equivalents 1,598 6,720 Accounts receivable, net of
allowance for doubtful accounts of $9,818 in 2005 and $9,583 in
2004 48,710 41,148 Prepaids and other assets 25,907 24,488
Investments in unconsolidated joint ventures 5,411 3,406 Deferred
financing and leasing costs 50,643 54,150 Total assets $2,328,461
$2,352,550 Liabilities and Shareholders' Equity Liabilities:
Mortgage loans payable $628,487 $649,040 Unsecured notes payable
449,864 449,763 Line of credit facility 232,000 196,000 Accrued
expenses and other liabilities 81,307 95,989 Accrued distributions
25,095 24,915 Total liabilities 1,416,753 1,415,707 Exchangeable
limited partnership units 12,123 13,110 Other minority interest
2,425 2,425 Total minority interests 14,548 15,535 Shareholders'
equity: Common stock, $.001 par value; 200,000,000 shares
authorized; 47,302,857 and 46,934,285 shares issued and outstanding
at June 30, 2005 and December 31, 2004, respectively 47 47
Additional paid-in capital 1,164,960 1,154,360 Cumulative
distributions in excess of net income (260,377) (229,818) Unearned
compensation (7,072) (2,775) Other comprehensive loss (398) (506)
Total shareholders' equity 897,160 921,308 Total liabilities and
shareholders' equity $2,328,461 $2,352,550 Heritage Property
Investment Trust, Inc. Consolidated Statements of OperationsThree
Months ended June 30, 2005 and 2004 (Unaudited and in thousands,
except per-share data) Three Months Ended June 30, 2005 2004
Revenue: Rentals and recoveries $85,443 $79,088 Interest, other,
and joint venture fee income 254 67 Total revenue 85,697 79,155
Expenses: Property operating expenses 11,383 10,271 Real estate
taxes 12,565 12,398 Depreciation and amortization 24,722 21,760
Interest 20,851 19,415 General and administrative 7,042 5,664 Total
expenses 76,563 69,508 Income before gain on sale of marketable
securities 9,134 9,647 Gain on sale of marketable securities 8 --
Income before equity in income from unconsolidated joint ventures
and allocation to minority interests 9,142 9,647 Equity in income
from unconsolidated joint ventures 54 -- Income allocated to
exchangeable limited partnership units (71) (78) Income allocated
to Series C Preferred Units -- (555) Income before discontinued
operations 9,125 9,014 Discontinued operations: Operating income
from discontinued operations -- 205 Gains on sales of discontinued
operations -- 2,988 Income from discontinued operations -- 3,193
Net income attributable to common shareholders $9,125 $12,207 Basic
per-share data: Income before discontinued operations $0.19 $0.19
Income from discontinued operations -- 0.07 Income attributable to
common shareholders $0.19 $0.26 Weighted average common shares
outstanding 47,262 46,726 Diluted per-share data: Income before
discontinued operations $0.19 $0.19 Income from discontinued
operations -- 0.07 Income attributable to common shareholders $0.19
$0.26 Weighted average common and common equivalent shares
outstanding 48,293 46,885 Heritage Property Investment Trust, Inc.
Consolidated Statements of Operations Six Months ended June 30,
2005 and 2004 (Unaudited and in thousands, except per-share data)
Six Months Ended June 30, 2005 2004 Revenue: Rentals and recoveries
$173,402 $159,689 Interest, other, and joint venture fee income 357
271 Total revenue 173,759 159,960 Expenses: Property operating
expenses 25,743 23,011 Real estate taxes 24,879 24,274 Depreciation
and amortization 48,699 43,124 Interest 41,743 37,030 General and
administrative 13,603 10,947 Total expenses 154,667 138,386 Income
before gain on sale of marketable securities 19,092 21,574 Gain on
sale of marketable securities 8 -- Income before equity in income
from unconsolidated joint ventures and allocation to minority
interests 19,100 21,574 Equity in income from unconsolidated joint
ventures 159 -- Income allocated to exchangeable limited
partnership units (179) (143) Income allocated to Series B & C
Preferred Units -- (1,763) Income before discontinued operations
19,080 19,668 Discontinued Operations: Operating income from
discontinued operations -- 437 Gains on sales of discontinued
operations -- 2,988 Income from discontinued operations -- 3,425
Net income attributable to common shareholders $19,080 $23,093
Basic per-share data: Income before discontinued operations $0.40
$0.42 Income from discontinued operations -- 0.08 Income
attributable to common shareholders $0.40 $0.50 Weighted average
common shares outstanding 47,151 46,551 Diluted per-share data:
Income before discontinued operations $0.40 $0.42 Income from
discontinued operations -- 0.07 Income attributable to common
shareholders $0.40 $0.49 Weighted average common and common
equivalent shares outstanding 48,130 47,169 Heritage Property
Investment Trust, Inc. Calculation of Funds from Operations (in
thousands of dollars) Three months ended June 30, 2005 2004 Net
income $9,125 $12,207 Add (deduct): Depreciation and amortization
(real-estate related) Continuing operations 24,546 21,585
Discontinued operations -- 107 Pro rata share of unconsolidated
joint venture 55 -- Gains on sales of real estate investments --
(2,988) Funds from Operations $33,726 $30,911 Six months ended June
30, 2005 2004 Net income $19,080 $23,093 Add (deduct): Depreciation
and amortization (real-estate related) Continuing operations 48,346
42,670 Discontinued operations -- 213 Pro rata share of
unconsolidated joint venture 63 -- Gains on sales of real estate
investments -- (2,988) Funds from Operations $67,489 $62,988 We
calculate Funds from Operations in accordance with the best
practices described in the April 2001 National Policy Bulletin of
the National Association of Real Estate Investment Trusts, referred
to as NAREIT, and NAREIT's 1995 White Paper on Funds from
Operations. The White Paper defines Funds From Operations as net
income (loss) (computed in accordance with GAAP), excluding gains
(or losses) from extraordinary items and sales of property, plus
real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures.
Given the nature of our business as a real estate owner and
operator, we believe that FFO is helpful to investors as a starting
point in measuring our operational performance because it excludes
various items included in net income that do not relate to, or are
not indicative of, our operating performance, such as gains (or
losses) from sales of real estate investments and depreciation and
amortization, which can make periodic and peer analyses of
operating performance more difficult. However, FFO (i) should not
be considered as an alternative to net income (determined in
accordance with GAAP) as an indicator of our financial performance,
(ii) is not an alternative to cash flow from operating activities
(determined in accordance with GAAP) as a measure of our liquidity,
and (iii) is not indicative of funds available to fund our cash
needs, including our ability to make distributions. Our computation
of FFO may differ from the methodology utilized by other equity
REITs to calculate FFO and, therefore, may not be comparable to
other REITs. Heritage Property Investment Trust, Inc.
Reconciliation of Net Operating Income (in thousands of dollars)
Three months ended June 30, 2005 2004 Net operating income -- same
property portfolio $58,425 $56,016 Net operating income --
acquisitions/ partial dispositions 3,070 403 Net operating income
-- total portfolio 61,495 56,419 Add: Interest, other, and joint
venture fee income 254 67 Income from discontinued operations --
3,193 Gain on sale of marketable securities 8 -- Equity in income
from unconsolidated joint ventures 54 -- Deduct: Depreciation and
amortization 24,722 21,760 Interest 20,851 19,415 General and
administrative 7,042 5,664 Income allocated to exchangeable limited
partnership units 71 78 Income allocated to Series B and C
Preferred Units -- 555 Net income attributable to common
shareholders $9,125 $12,207 Six months ended June 30, 2005 2004 Net
operating income -- same property portfolio $116,756 $111,760 Net
operating income -- acquisitions 6,024 644 Net operating income --
total portfolio 122,780 112,404 Add: Interest, other, and joint
venture fee income 357 271 Income from discontinued operations --
3,425 Gain on sale of marketable securities 8 -- Equity in income
from unconsolidated joint ventures 159 -- Deduct: Depreciation and
amortization 48,699 43,124 Interest 41,743 37,030 General and
administrative 13,603 10,947 Income allocated to exchangeable
limited partnership units 179 143 Income allocated to Series B and
C Preferred Units -- 1,763 Net income attributable to common
shareholders $19,080 $23,093 Net operating income, or "NOI," is a
non-GAAP financial measure equal to net income available to common
shareholders (the most directly comparable GAAP financial measure),
plus accretion of redeemable equity, preferred stock distributions,
minority interest in Bradley Operating Limited Partnership, net
derivative losses (gains), losses (gains) on investments in
securities, losses from prepayment of debt, general and
administrative expense, depreciation and amortization, and interest
expense, less income from discontinued operations, gains (losses)
on sales of real estate investments and equipment and interest and
other income. We use NOI internally, and believe NOI provides
useful information to investors, as a performance measure in
evaluating the operating performance of our real estate assets.
This is because NOI reflects only those income and expense items
that are incurred at the property level and excludes certain
components from net income in order to provide results that are
more closely related to a property's results of operations. Our
presentation of NOI may not be comparable to NOI reported by other
REITs that define NOI differently. We believe that in order to
obtain a clear understanding of our operating results, NOI should
be examined in conjunction with net income as presented in our
consolidated financial statements. NOI should not be considered as
an alternative to net income as an indication of our performance or
to cash flows as a measure of liquidity or ability to make
distributions. Projected Range Full Year 2005 Low High Projected
diluted net income per share $0.78 $0.81 Projected depreciation and
amortization (real estate related) 2.00 2.02 Net gains on sales of
real estate investments -- -- Projected FFO per diluted share $2.78
$2.83 The foregoing estimates reflect management's view of current
and future market conditions, including assumptions with respect to
rental rates, occupancy levels and earnings impact of the events
referenced in this release. These estimates may be subject to
fluctuations as a result of several factors, including changes in
the recognition of depreciation and amortization expense and any
gains or losses associated with disposition activity. The Company
is not able to assess at this time the potential impact of these
factors. By definition, FFO does not include real estate-related
depreciation and amortization or gains or losses associated with
disposition activities. There can be no assurance that the
Company's actual results will not differ materially from the
estimates set forth above. DATASOURCE: Heritage Property Investment
Trust, Inc. CONTACT: Patrick O'Sullivan, Vice President, Finance
and Accounting of Heritage Property Investment Trust, Inc.,
+1-617-247-2200, ; or Analysts: Claire Koeneman, +1-312-640-6745,
or General: Joe Calabrese, +1-212-827-3772, both of Financial
Relations Board for Heritage Property Investment Trust, Inc. Web
site: http://www.heritagerealty.com/
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