Glenborough (NYSE:GLB)
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Glenborough Realty Trust (NYSE:GLB) (NYSE:GLB PrA)
reported the following results for the third quarter ended September
30, 2005:
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS For the third
quarter of 2005, the Company had net income available to common
stockholders of $26.8 million, or $0.74 per diluted common share, as
compared with $0.4 million or $0.01 per share for the third quarter of
2004. The third quarter of 2005 included a $27.6 million gain on sale,
or $0.77 per diluted common share, as compared with a $0.7 million
gain on sale, or $0.02 per diluted common share, for the third quarter
of 2004. Year-to-date 2005, the Company had a net loss available to
common stockholders of ($6.0) million or ($0.17) per diluted common
share as compared with net income available to common stockholders of
$8.4 million or $0.27 per diluted common share for the same period in
2004.
FUNDS FROM OPERATIONS (FFO) For the third quarter of 2005, FFO was
$15.7 million or $0.40 per diluted common share. In comparison, the
third quarter 2004 FFO was $15.5 million or $0.44 per diluted common
share. Included in the third quarter of 2005 were impairment charges
of approximately $1.0 million; the reversal of a prior impairment
charge of approximately $1.3 million and charges of approximately $0.2
million related to losses on early extinguishment of debt. Excluding
these items, FFO for the third quarter of 2005 was $15.5 million or
$0.40 per diluted common share. Included in the third quarter of 2004
were charges of approximately $2.0 million, or $0.06 per diluted
common share, related to losses on early extinguishment of debt.
Excluding these charges, FFO for the third quarter of 2004 was $17.5
million, or $0.50 per diluted common share.
Year-to-date 2005, FFO was ($16.9) million, or ($0.43) per diluted
common share, as compared with $43.2 million, or $1.25 per diluted
common share, for the same period in 2004. Included in 2005 are
impairment charges of approximately $59.2 million, or $1.51 per
diluted common share; the reversal of a prior impairment charge of
approximately $1.3 million, or $0.03 per diluted common share; charges
of approximately $3.3 million, or $0.08 per diluted common share,
related to losses on early extinguishment of debt; and charges of
approximately $5.9 million, or $0.15 per diluted common share,
associated with the redemption of preferred stock. Excluding these
items, FFO was $50.2 million, or $1.28 per diluted common share and
does not include gains on sale of $54.2 million. Included in
year-to-date 2004 FFO were charges of approximately $2.0 million, or
$0.06 per diluted common share, related to losses on early
extinguishment of debt and charges of approximately $8.0 million, or
$0.23 per diluted common share, associated with the redemption of
preferred stock. Excluding these charges, FFO was $53.2 million, or
$1.54 per diluted common share.
PROPERTY DISPOSITIONS
In the third quarter, the Company sold four properties for a total
consideration of $77.7 million and recognized gains on sale of $27.6
million. Subsequent to quarter end, the Company sold two assets for
total consideration of $41.3 million. Through the date of this
release, the Company has sold 13 assets for total consideration of
$245 million with gains on sale of $65 million (including the two
assets sold subsequent to the end of the quarter).
PROPERTY ACQUISITIONS
The Company acquired Capitol Place III in Washington, D.C. Capitol
Place III consists of a 12-story, Class "A" office building totaling
212,779 square feet, located in Washington, D.C.'s Capitol Hill
submarket. The building is three blocks from the U. S. Capitol
building, one block from Union Station, and is part of Capitol Place,
one of the largest projects in the District of Columbia. Capitol Place
is a one million square foot mixed-use project, located on nearly an
entire city block bounded by New Jersey Avenue, F Street, and First
Street, N.W. The Capitol Place project is composed of four buildings -
three office buildings and a full service, 264-room Washington Court
Hotel-situated around a central atrium.
The Company also acquired 33 New Montgomery a 20-story, Class "A"
office tower located in the San Francisco Financial District. The
building, totaling 241,794 rentable square feet, is located at the
corner of Market and New Montgomery streets adjacent to the Montgomery
Street BART Station offering exceptional access to San Francisco's
multi-modal transportation system. The building is also located within
two blocks of the Transbay Terminal. Additionally the property is
located within 1/2 mile of Interstate 80 and Highway 101 offering
access to the East Bay, Oakland and the Peninsula.
Andrew Batinovich, President and CEO commented, "We are expecting
another $150 million in dispositions over the next two quarters which
will complete the portfolio realignment out of the mid-west which we
announced earlier this year. Pricing on the dispositions has been
stronger than we anticipated. The acquisition environment continues to
be challenging, but we intend to redeploy the capital from our
dispositions effort either into new assets in our core markets
directly or through joint ventures and/or repurchasing our stock."
PORTFOLIO PERFORMANCE
Overall portfolio occupancy increased from 88.3% to 89.9% during
the third quarter. Same store office net operating income declined by
2.4% as compared with the third quarter of 2004. The Company's largest
markets are Washington, D.C. (26% of net operating income), Southern
California (19%), Northern New Jersey (13%), Boston (10%) and San
Francisco (9%). Additional details on the portfolio can be found in
the Company's Supplemental Report which is available at
www.glenborough.com.
BALANCE SHEET, OPERATING RATIOS, STOCK REPURCHASE
At quarter-end, Glenborough had $864.7 million of debt with a 51%
ratio of debt to total market capitalization. Fixed rate debt
comprises 84% of all debt outstanding at quarter-end. Subsequent to
quarter end, the Company repurchased 946,600 common shares at an
average price of $18.79 per share.
DIVIDENDS
On September 15th, the Board of Directors declared a dividend of
$0.35 per share of common stock for the third quarter of 2005. This
dividend was paid on October 14, 2005 to stockholders of record on
October 1, 2005. Additionally, the Board of Directors declared a
dividend of $0.484375 per share on the Company's 7.75% Series A
Convertible Preferred Stock. This dividend was paid on October 14,
2005 to stockholders of record on September 23, 2005 and represented
an annualized dividend of $1.9375 per share of Preferred Stock.
CONFERENCE CALL
Glenborough will host a conference call to discuss these matters
on Wednesday, October 26th, 2005 at 1:30 p.m. Eastern Time (10:30 a.m.
Pacific Time). Interested parties can listen to the call by calling
1-800-946-0719, confirmation number 3183740 preferably 5-10 minutes
before the scheduled time. In addition, a replay of the call will be
available until Friday, October 28th 2005 at 5:00 p.m. Pacific Time at
1-888-203-1112, confirmation number 3183740.
Glenborough is a REIT which is focused on owning high quality,
multi-tenant office properties concentrated in Washington D.C.,
Southern California, Northern New Jersey, Boston and Northern
California. The Company has a portfolio of 55 properties encompassing
approximately 10 million square feet as of September 30, 2005.
-0-
*T
SUMMARY FINANCIAL DATA
(unaudited; in thousands, except per share data)
QUARTER ENDED YEAR TO DATE
------------------- --------------------
SEP 30 05 SEP 30 04 SEP 30 05 SEP 30 04
--------- --------- --------- ----------
(As
restated)
Net income $28,609 $3,719 $5,299 $26,293
Net income (loss) available
to Common Stockholders 26,797 410 (6,041) 8,366
Funds from operations (FFO) 15,651 15,519 (16,892) 43,160
Per diluted common share
Net income (loss) available
to Common Stockholders $ 0.74 $ 0.01 $(0.17) $0.27
Funds from operations (FFO) 0.40 0.44 (0.43) 1.25
Dividends declared per common
share outstanding $0.35 $0.35 $1.05 $1.05
Payout ratio
Dividend payout ratio (FFO) 87.5% 79.5% N/A 84.0%
Excluding One-Time Charges
Funds from operations (FFO) $0.40 $0.50 $1.28 $1.54
Dividend payout ratio (FFO) 87.5% 70.0% 82.0% 68.2%
GLENBOROUGH REALTY TRUST
Consolidated Statements of Operations
(unaudited, in thousands, except share and per share amounts)
For the Three Months For the Nine Months
Ended Ended
----------------------- -----------------------
Sep 30 '05 Sep 30 '04 Sep 30 '05 Sep 30 '04
----------- ----------- ----------- -----------
(As
restated)
Operating Revenue
Rental revenue $40,490 $36,512 $116,967 $107,677
Fees and
reimbursements,
including from
related parties 849 757 3,302 2,618
----------- ----------- ----------- -----------
Total operating
revenue 41,339 37,269 120,269 110,295
----------- ----------- ----------- -----------
Operating Expenses
Property operating
expenses 13,891 11,614 39,563 35,013
General and
administrative 3,424 3,006 10,634 9,176
Depreciation and
amortization 13,458 11,671 37,796 33,589
Provision for
impairment of real
estate assets 62 - 5,160 -
----------- ----------- ----------- -----------
Total operating
expenses 30,835 26,291 93,153 77,778
----------- ----------- ----------- -----------
Interest and other
income 455 567 2,099 2,036
Equity in earnings of
unconsolidated
operating joint
ventures 6 158 308 594
Interest expense (10,895) (8,330) (29,317) (24,216)
Loss on early
extinguishment of
debt (127) (1,950) (688) (2,035)
----------- ----------- ----------- -----------
Income (loss) before
minority interest,
discontinued
operations and
cumulative effect of
change in accounting
principle (57) 1,423 (482) 8,896
Minority interest
(including share of
discontinued
operations) (2,227) (29) 500 (816)
----------- ----------- ----------- -----------
Income (loss) before
discontinued
operations and
cumulative effect of
change in accounting
principle (2,284) 1,394 18 8,080
Discontinued
operations:
Net operating income 4,107 7,056 13,950 22,916
General and
administrative - (20) - (32)
Depreciation and
amortization (935) (4,304) (6,545) (13,241)
Provision for
impairment of real
estate assets (946) - (54,085) -
Reversal of provision
for impairment of
real estate assets 1,331 - 1,331 -
Interest expense (216) (1,110) (1,039) (3,749)
Loss on early
extinguishment of
debt (65) (40) (2,577) (40)
Gain on sales of real
estate assets 27,617 743 54,246 13,271
----------- ----------- ----------- -----------
Discontinued
operations 30,893 2,325 5,281 19,125
----------- ----------- ----------- -----------
Income before
cumulative effect of
change in accounting
principle 28,609 3,719 5,299 27,205
Cumulative effect of
change in accounting
principle - - - (912)
----------- ----------- ----------- -----------
Net income 28,609 3,719 5,299 26,293
Preferred dividends (1,812) (3,318) (5,435) (9,954)
Dividends paid on
redeemed preferred
stock - - (596) (2,073)
Premium and write-off
of original issuance
costs on preferred
stock redemption - 9 (5,309) (5,900)
----------- ----------- ----------- -----------
Net income (loss)
available to Common
Stockholders $26,797 $410 $(6,041) $8,366
=========== =========== =========== ===========
Net income (loss)
available to Common
Stockholders per
diluted common share $0.74 $0.01 $(0.17) $0.27
=========== =========== =========== ===========
Diluted weighted
average shares
outstanding 36,003,636 31,682,728 35,915,389 31,084,557
=========== =========== =========== ===========
GLENBOROUGH REALTY TRUST
Reconciliation of Net Income (Loss) to FFO
(unaudited, in thousands, except share and per share amounts)
For the Three Months For the Nine Months
Ended Ended
----------------------- -----------------------
Sep 30 '05 Sep 30 '04 Sep 30 '05 Sep 30 '04
----------- ----------- ----------- -----------
(As
restated)
Net income $28,609 $3,719 $5,299 $26,293
Cumulative effect of
change in accounting
principle - - - 912
Real estate
depreciation and
amortization, net of
minority interest 12,993 14,254 40,040 41,729
Preferred dividends (1,812) (3,318) (5,435) (9,954)
Dividends paid on
redeemed preferred
stock - - (596) (2,073)
Premium and write-off
of original issuance
costs on preferred
stock redemption - 9 (5,309) (5,900)
Gain on sales from
discontinued
operations, net of
minority interest (25,506) (677) (50,093) (12,091)
Adjustment to reflect
FFO of unconsolidated
operating joint
ventures 178 178 535 536
Adjustment to reflect
FFO of minority
interest 1,189 1,354 (1,333) 3,708
----------- ----------- ----------- -----------
Funds from operations
available to Common
Stockholders and OP
Unitholders (FFO) $15,651 $15,519 $(16,892) $43,160
=========== =========== =========== ===========
FFO per diluted common
share $0.40 $0.44 $(0.43) $1.25
=========== =========== =========== ===========
Diluted weighted
average common shares
and OP units
outstanding for
calculation of FFO 39,231,083 34,937,222 39,142,775 34,441,182
=========== =========== =========== ===========
GLENBOROUGH REALTY TRUST
Consolidated Balance Sheets
(unaudited, in thousands, except share amounts)
September 30, December 31,
2005 2004
------------- ------------
(As
restated)
ASSETS
Rental properties, gross $1,302,182 $1,367,310
Accumulated depreciation and amortization (176,276) (220,229)
------------- ------------
Rental properties, net 1,125,906 1,147,081
Properties held for sale 118,102 57,327
Investments in land and development 135,941 147,435
Investments in unconsolidated operating
joint ventures 11,889 12,014
Mortgage loans receivable 10,863 12,872
Leasing and financing costs (net of
accumulated amortization of $15,977 and
$17,856 as of September 30, 2005 and
December 31, 2004, respectively) 25,181 24,403
Straight-line rent receivable (net of
allowances of $0 and $528 as of September
30, 2005 and December 31, 2004,
respectively) 15,697 15,764
Cash and cash equivalents 5,325 6,003
Other assets 21,963 10,202
------------- ------------
TOTAL ASSETS $1,470,867 $1,433,101
============= ============
LIABILITIES
Mortgage loans $818,317 $654,748
Unsecured bank line of credit 46,355 21,320
Accrued common and preferred stock
dividends 14,493 15,931
Obligations associated with properties held
for sale 2,428 43,300
Other liabilities 41,276 31,282
------------- ------------
Total liabilities 922,869 766,581
------------- ------------
MINORITY INTEREST 34,481 39,336
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 188,000,000
shares authorized, 36,231,166 and
36,033,126 shares issued and outstanding
at September 30, 2005 and December 31,
2004, respectively 36 36
Convertible preferred stock, $0.001 par
value, 12,000,000 shares authorized,
$25.00 liquidation preference, 3,740,277
and 6,850,325 shares issued and
outstanding at September 30, 2005 and
December 31, 2004, respectively 4 7
Additional paid-in capital 800,170 870,622
Deferred compensation (3,253) (4,056)
Distributions in excess of accumulated
earnings (283,440) (239,425)
------------- ------------
Total stockholders' equity 513,517 627,184
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,470,867 $1,433,101
============= ============
*T
FORWARD LOOKING STATEMENTS: Certain statements in this press
release are forward-looking statements within the meaning of federal
securities laws, including Mr. Batinovich's statement that the Company
expects to dispose of an additional $150 million in assets in the next
two quarters and that the Company intends to continue to acquire
assets in its core markets and repurchase its own stock using proceeds
from dispositions. Because these forward looking statements involve
risk and uncertainty, there are important factors that could cause our
actual results to differ materially from those stated or implied in
the forward-looking statements. Those important factors include:
-- Our inability to locate suitable buyers for our listed assets
who are ready, willing and able to close transactions at the
sales price we anticipate;
-- Increased costs of financing cause a reduction in demand for
commercial properties and therefore a reduction in the market
value of the assets listed for sale;
-- Lower than expected retention of existing tenants negatively
affects the value of the assets listed for sale;
-- Changes in market rental rates for office space negatively
affect the value of the assets listed for sale;
-- Changes in market conditions render the repurchase of our
stock imprudent;
-- Our inability to locate and acquire suitable property at
reasonable prices in our core markets;
-- The failure of the economy to continue its expansion;
-- The failure of the office market to grow with a growing
economy;
-- Downward changes in market rental rates for office space; and
-- The effect of any future impairment charges associated with
asset disposition or market conditions.
Given these uncertainties, readers are cautioned not to place
undue reliance on such statements. All forward-looking statements are
based on information available to us on the date hereof and we assume
no obligation to update or supplement any forward looking-statement.
Additional information concerning factors that could cause results to
differ can be found in our filings with the SEC including our report
on Form 10-K for the year ended December 31, 2004 and our quarterly
reports on Forms 10-Q for the periods ended March 31, 2005 and June
30, 2005.
Funds from Operations, or FFO, as defined by National Association
of Real Estate Investment Trusts, represents net income (loss)
(including income and loss from discontinued operations) excluding
minority interest and extraordinary items, adjusted for real estate
related depreciation and amortization and gains from the disposal of
properties. We believe that FFO is a widely used measure of the
operating performance of equity REITs which provides a relevant basis
for comparison among other REITs. FFO is not meant to represent a
comprehensive system of financial reporting and does not present, nor
does Glenborough intend it to present, a complete picture of its
financial condition and operating performance. Glenborough believes
that net earnings computed under GAAP remains the primary measure of
performance and that FFO is only meaningful when it is used in
conjunction with net earnings computed under GAAP. Further,
Glenborough believes that its consolidated financial statements,
prepared in accordance with GAAP, provide the most meaningful picture
of its financial condition and its operating performance.