Glenborough (NYSE:GLB)
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Glenborough Realty Trust (NYSE:GLB)(NYSE:GLB.PRA) today
announced the results for the year ended December 31, 2005:
"2005 was a watershed year for Glenborough," commented Andrew
Batinovich, President and CEO. "We took advantage of strong capital
inflows into real estate and sold 22 assets (including 4 assets sold
in January 2006) for $376 million and exited the non-core markets of
Chicago, St. Louis, Indianapolis, Minneapolis, Des Moines and Memphis.
Through these dispositions and new acquisitions totaling $217 million
in Washington, D.C. and San Francisco, we are now concentrated in our
core markets. As a result, one half of our properties are now located
in two of the best markets in the country -- Washington, D.C. and
Southern California. We also used a portion of the proceeds of our
dispositions to repurchase almost 3 million shares of our common
stock. We begin the year with overall occupancy above 90% with
positive leasing trends that should increase average occupancy and
lease rates this year. We plan to expand our joint venture business in
2006 and complete our balance sheet enhancement by reducing leverage
some 600 basis points during the year to increase our financial
flexibility."
Now that our portfolio realignment is completed, the Company's
Board of Directors believes it is important to reset the common stock
dividend to reflect the new portfolio and provide the ability to
retain cash flow for future growth. The new dividend recognizes the
substantial increase in the quality of the property portfolio and its
higher concentration in the Company's core markets; as well as the
decrease in overall balance sheet leverage (both current and planned)
and the increased costs associated with converting much of our
floating rate loans to fixed rate borrowings over the past year. In
this regard, the Company anticipates that the 2006 common stock
dividend, which is subject to quarterly board approval, will be $1.10
per share annualized, down from the current annualized dividend of
$1.40 per share.
For the fourth quarter 2005, net loss available to common
shareholders totaled ($6.9) million, or ($0.20) per diluted share.
Comparatively, net loss available to common shareholders in the fourth
quarter of 2004 totaled ($2.0) million, or ($0.06) per diluted share.
Net loss available to common shareholders for the full year 2005
totaled ($12.6) million, or ($0.36) per share. This compares to net
income available to common shareholders for 2004 of $7.0 million, or
$0.22 per share.
In comparing quarterly and year-over-year results, the decrease in
net income available to common shareholders was primarily due to
impairment charges in conjunction with the Company's portfolio
repositioning and losses on the extinguishment of debt along with
charges relating to the redemption of preferred stock and the dilutive
impact of the net disposition activity. Listed below are significant
financial statement items that affect comparability of net income
between periods.
-0-
*T
For the three months ended
December 31,
------------------------------------
2005 2004
----------------- ------------------
(As restated)
(Dollars in thousands, except Per Per
per share data) Amount(a) Share(a)Amount(a) Share(a)
----------------------------------------------------------------------
Gain on sale of real
estate assets $ 31,771 $ 0.92 $ 1,156 $ 0.04
Provision for impairment and loss
on sale of real estate assets (35,068) (1.02) (3,752) (0.11)
Reversal of provision for
impairment of real estate
assets -- -- -- --
Loss on early extinguishment
of debt (4,739) (0.14) -- --
Cumulative effect of change in
accounting principle -- -- -- --
Charges associated with the
redemption of preferred stock -- -- (1,506) (0.05)
--------- ------- --------- -------
Total (b) $ (8,035)$ (0.23)$ (4,102)$ (0.13)
========= ======= ========= =======
For the year ended
December 31,
------------------------------------
2005 2004
----------------- -----------------
(As restated)
(Dollars in thousands, except per Per Per
share data) Amount(a)Share(a) Amount(a) Share(a)
----------------------------------------------------------------------
Gain on sale of real
estate assets $ 86,018 $ 2.42 $ 14,427 $ 0.46
Provision for impairment and
loss on sale of real estate
assets (94,313) (2.65) (3,752) (0.12)
Reversal of provision for
impairment of real estate
assets 1,331 0.04 -- --
Loss on early extinguishment
of debt (8,003) (0.23) (2,075) (0.07)
Cumulative effect of change in
accounting principle -- -- (912) (0.03)
Charges associated with the
redemption of preferred stock (5,905) (0.17) (9,479) (0.30)
-------- -------- --------- -------
Total (b) $(20,873)$ (0.59)$ (1,793)$ (0.06)
======== ======== ========= =======
(a) - The amounts and per share amounts shown exclude the impact of
minority interest.
(b) - The totals may not total the sum of the individual amounts and
per share amounts due to rounding.
*T
Funds from operations available to common shareholders (FFO) for
the fourth quarter 2005 was ($25.7) million, or ($0.68) per diluted
share. FFO for the same period in 2004 was $12.3 million or $0.34 per
share on a diluted basis. In the fourth quarter 2005, the Company
recorded a $35.1 million charge for the impairment of 4 assets as part
of the Company's portfolio repositioning, but excluded net gains from
real estate sold of $31.8 million.
FFO for 2005 totaled ($42.3) million or ($1.09) per share on a
diluted basis compared to $56.1 million or $1.63 per share on a
diluted basis for 2004. The 2005 and 2004 results included provisions
for impairments and losses on sales of $94.3 million and $3.8 million,
respectively, but excluded net gains from real estate sold of $86.0
million in 2005 and $14.4 million in 2004. The table on page 9
reconciles FFO and FFO per share to net income and net income per
share, the most directly comparable GAAP measures. Listed below are
significant financial items that affect comparability of FFO for the
periods presented.
-0-
*T
For the three months ended
December 31,
--------------------------------------
2005 2004
------------------ ------------------
(As restated)
(Dollars in thousands, except Per Per
per share data) Amount(a) Share(a) Amount(a) Share(a)
----------------------------------------------------------------------
Provision for impairment
and loss on sale of real
estate assets $ (35,068)$ (0.93)$ (3,752)$ (0.10)
Reversal of provision for
impairment of real estate
assets -- -- -- --
Loss on early extinguishment of
debt (4,739) (0.13) -- --
Charges associated with the
redemption of preferred stock -- -- (1,506) (0.04)
--------- -------- --------- --------
Total (b) $ (39,806)$ (1.06)$ (5,258)$ (0.15)
========= ======== ========= ========
For the year ended
December 31,
-------------------------------------
2005 2004
------------------ -----------------
(As restated)
(Dollars in thousands, except Per Per
per share data) Amount(a) Share(a) Amount(a) Share(a)
----------------------------------------------------------------------
Provision for impairment and loss
on sale of real estate assets $ (94,313)$ (2.43)$ (3,752)$ (0.11)
Reversal of provision for
impairment of real estate
assets 1,331 0.03 -- --
Loss on early extinguishment
of debt (8,003) (0.21) (2,075) (0.06)
Charges associated with the
redemption of preferred stock (5,905) (0.15) (9,479) (0.28)
--------- -------- --------- -------
Total (b) $(106,890)$ (2.76)$ (15,308)$ (0.44)
========= ======== ========= =======
(a) - The amounts and per share amounts shown exclude the impact of
minority interest.
(b) - The totals may not total the sum of the individual amounts and
per share amounts due to rounding.
*T
PROPERTY DISPOSITIONS
In the fourth quarter 2005, the Company sold seven properties for
total consideration of $115.4 million which resulted in a gain on sale
of approximately $31.8 million. Subsequent to quarter end, the Company
sold four assets for total consideration of $56.7 million and expects
to recognize gains on sale of approximately $7.1 million in the first
quarter 2006. During 2005, the Company sold 18 assets for total
consideration of $319.7 million and gains on sale of $86.0 million.
PROPERTY ACQUISITIONS
The Company acquired three properties in 2005 for total
consideration of approximately $217 million.
-- Metro Place II, a ten-story Class "A" multi-tenant office
building that totals 237,227 net rentable square feet and a
six-level parking garage. The Property is approximately 10
miles from downtown Washington, DC and four miles from Tysons
Corner. Metro Place II is located steps from the Dunn
Loring-Merrifield Metro station.
-- Capitol Place III, a 12-story, Class "A" office building
totaling 208,138 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.
-- 33 New Montgomery, a 20-story, Class "A" office tower located
in the San Francisco Financial District. The building,
totaling 234,012 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.
PORTFOLIO PERFORMANCE
Overall portfolio occupancy increased 300 basis points from 87.2%
at year end 2004 to 90.2% at year end 2005. As of the date of this
release, the portfolio is 92.8% occupied and 94.1% leased. For the
fourth quarter 2005, same store office net operating income increased
by 3.9% as compared to the fourth quarter of 2004. Year to date 2005,
same store office net operating income declined by 1.2% as compared to
full year 2004. For the year, same store occupancy increased by 170
basis points from 87.0% to 88.7%. The Company's largest markets are
Washington, D.C. (27% of net operating income), Southern California
(19%), Northern New Jersey (12%), Boston (12%) and San Francisco
(11%). Lease rollover projected in 2006 equals 8.8% of total base rent
of which approximately 40% is in the Company's top two markets --
Washington, D.C. and Southern California. 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
At quarter-end, Glenborough had $811.5 million of debt with a 52%
ratio of debt to total market capitalization. Fixed rate debt
comprises 87% of all debt outstanding at quarter-end. The average
interest rate on all debt is 5.70%. Secured debt comprises 87% of all
debt outstanding.
STOCK REPURCHASE
The Company repurchased 2.5 million shares of common stock in the
fourth quarter of 2005 at an average price of $18.87 per share.
Subsequent to year end 2005 and through the date of this press
release, the Company has repurchased an additional 445,400 common
shares at an average price of $19.18 per share. The repurchases in
2005 and the first quarter 2006 to date totaled $56.2 million. The
Company also redeemed 3.1 million shares of preferred stock in early
2005.
2006 FFO GUIDANCE
The Company is issuing 2006 funds from operations (FFO) guidance
in the range of $1.55 to $1.65 per share and introducing guidance for
the first quarter 2006 in the range of $0.33 to $0.35 range. The
assumptions used in providing this range are as follows:
-- Average Occupancy between 94% and 96%
-- Same Store NOI Growth between 3% and 5%
-- G&A Expense between $14 and $15 million
The FFO projection includes the Company's contribution of
approximately $220 million in assets to joint ventures while
maintaining a 25% interest in the new ventures. The proceeds from the
anticipated joint venture contributions are assumed to be used to pay
down $200 million of existing debt and reduce the Company's leverage
by 600 basis points. The FFO projection assumes the completion of the
recapitalization of a portion of the land and development portfolio as
announced in December 2005. The FFO projection does not include the
effect of property acquisitions or dispositions or any costs for debt
extinguishment or preferred stock redemption or lease termination fees
received in 2006.
DIVIDENDS
The Company expects that the first quarter 2006 common stock
dividend, which is subject to Board approval and will be declared in
mid March and paid in April, will be $0.35 per share consistent with
the fourth quarter 2005 dividend. Commencing in the second quarter of
2006, the Company expects to reduce the common stock dividend from
$0.35/share to $0.275/common share (annualized from $1.40 to $1.10).
The second quarter dividend will be paid to common shareholders of
record on July 1, 2006.
CONFERENCE CALL
Glenborough will host a conference call to discuss these matters
on Tuesday, February 7th 2006 at 1:30 p.m. Eastern Time (10:30 a.m.
Pacific Time). Interested parties can listen to the call by calling
1-800-967-7184, confirmation number 9570645 preferably 5-10 minutes
before the scheduled time. In addition, a replay of the call will be
available until Friday, February 10th 2006 at 5:00 p.m. Pacific Time
at 1-888-203-1112, confirmation number 9570645.
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 48 properties encompassing
approximately 9 million square feet as of December 31, 2005.
-0-
*T
SUMMARY FINANCIAL DATA
(unaudited; in thousands, except per share data)
QUARTER ENDED YEAR TO DATE
-------------------- --------------------
DEC 31 05 DEC 31 04 DEC 31 05 DEC 31 04
--------- ---------- --------- ----------
(As restated) (As restated)
Net income (loss) $ (5,081) $ 1,286 $ 520 $ 28,222
Net income (loss) available
to Common Stockholders (6,892) (2,032) (12,632) 6,977
Funds from operations (FFO) (25,710) 12,276 (42,277) 56,142
Per diluted common share
Net income (loss) available
to Common Stockholders $ (0.20) $ (0.06) $ (0.36) $ 0.22
Funds from operations (FFO) (0.68) 0.34 (1.09) 1.63
Dividends declared per
common share outstanding $ 0.35 $ 0.35 $ 1.40 $ 1.40
Payout ratio
Dividend payout ratio (FFO) N/A 102.9% N/A 85.9%
Excluding Non-Routine
Charges (a)
Funds from operations (FFO) $ 0.38 $ 0.48 $ 1.67 $ 2.07
Dividend payout ratio (FFO) 92.1% 72.9% 83.8% 67.6%
(a) - As more fully described in the table on page 3.
GLENBOROUGH REALTY TRUST
Consolidated Statements of Operations
(unaudited, in thousands, except share and per share amounts)
For the Three Months For the Year
Ended Ended
------------------------- -------------------------
Dec 31 '05 Dec 31 '04 Dec 31 '05 Dec 31 '04
------------ ------------ ------------ ------------
(As restated) (As restated)
Operating Revenue
Rental revenue $ 42,593 $ 33,989 $ 158,078 $ 140,207
Fees and
reimbursements,
including from
related parties 1,490 1,428 4,792 4,046
----------- ----------- ----------- -----------
Total operating
revenue 44,083 35,417 162,870 144,253
----------- ----------- ----------- -----------
Operating Expenses
Property operating
expenses 15,038 11,887 54,376 46,726
General and
administrative 4,446 2,369 15,080 11,545
Depreciation and
amortization 13,582 11,386 51,026 44,476
Provision for
impairment of real
estate assets 2,669 3,752 7,829 3,752
----------- ----------- ----------- -----------
Total operating
expenses 35,735 29,394 128,311 106,499
----------- ----------- ----------- -----------
Interest and other
income 515 561 2,614 2,597
Equity in earnings
of unconsolidated
operating joint
ventures 151 210 459 805
Interest expense (10,664) (7,707) (37,708) (29,760)
Loss on early
extinguishment of
debt (4,038) - (4,725) (2,035)
----------- ----------- ----------- -----------
Income (loss)
before minority
interest,
discontinued
operations and
cumulative effect
of change in
accounting
principle (5,688) (913) (4,801) 9,361
Minority interest
(including share
of discontinued
operations) 583 206 1,058 (672)
----------- ----------- ----------- -----------
Income (loss)
before
discontinued
operations and
cumulative effect
of change in
accounting
principle (5,105) (707) (3,743) 8,689
Discontinued
operations:
Net operating
income 1,708 6,909 16,915 31,111
General and
administrative (7) (8) (8) (40)
Depreciation and
amortization (81) (4,431) (6,978) (18,171)
Provision for
impairment of real
estate assets (32,399) - (86,484) -
Reversal of
provision for
impairment of real
estate assets - - 1,331 -
Interest expense (267) (1,633) (3,253) (6,842)
Loss on early
extinguishment of
debt (701) - (3,278) (40)
Gain on sales of
real estate assets 31,771 1,156 86,018 14,427
----------- ----------- ----------- -----------
Discontinued
operations 24 1,993 4,263 20,445
----------- ----------- ----------- -----------
Income (loss)
before cumulative
effect of change
in accounting
principle (5,081) 1,286 520 29,134
Cumulative effect
of change in
accounting
principle - - - (912)
----------- ----------- ----------- -----------
Net income (loss) (5,081) 1,286 520 28,222
Preferred dividends (1,811) (1,812) (7,247) (11,766)
Dividends paid on
redeemed preferred
stock - (1,506) (596) (3,579)
Premium and write-
off of original
issuance costs on
preferred stock
redemption - - (5,309) (5,900)
----------- ----------- ----------- -----------
Net income (loss)
available to
Common
Stockholders $ (6,892) $ (2,032) $ (12,632) $ 6,977
=========== =========== =========== ===========
Net income (loss)
available to
Common
Stockholders per
diluted common
share $ (0.20) $ (0.06) $ (0.36) $ 0.22
=========== =========== =========== ===========
Diluted weighted
average shares
outstanding 34,431,536 32,745,311 35,541,377 31,167,080
=========== =========== =========== ===========
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 Year
Ended Ended
------------------------- -------------------------
Dec 31 '05 Dec 31 '04 Dec 31 '05 Dec 31 '04
------------ ------------ ------------ ------------
(As restated) (As restated)
Net income (loss) $ (5,081) $ 1,286 $ 520 $ 28,222
Cumulative effect
of change in
accounting
principle - - - 912
Real estate
depreciation and
amortization, net
of minority
interest 12,289 14,196 52,329 55,926
Preferred dividends (1,811) (1,812) (7,247) (11,766)
Dividends paid on
redeemed preferred
stock - (1,506) (596) (3,579)
Premium and write-
off of original
issuance costs on
preferred stock
redemption - - (5,309) (5,900)
Gain on sales from
discontinued
operations, net of
minority interest (29,268) (1,073) (79,361) (13,164)
Adjustment to
reflect FFO of
unconsolidated
operating joint
ventures 178 179 713 714
Adjustment to
reflect FFO of
minority interest (2,017) 1,006 (3,326) 4,777
----------- ----------- ----------- -----------
Funds from
operations
available to
Common
Stockholders and
OP Unitholders
(FFO) $ (25,710) $ 12,276 $ (42,277) $ 56,142
=========== =========== =========== ===========
FFO per diluted
common share $ (0.68) $ 0.34 $ (1.09) $ 1.63
Diluted weighted
average common
shares and OP
units outstanding
for calculation of
FFO 37,577,817 36,199,338 38,746,147 34,447,840
=========== =========== =========== ===========
GLENBOROUGH REALTY TRUST
Consolidated Balance Sheets
(unaudited, in thousands, except share amounts)
December 31, December 31,
2005 2004
------------ ------------
(As restated)
ASSETS
Rental properties, gross $ 1,296,057 $ 1,367,310
Accumulated depreciation and amortization (186,449) (220,229)
------------ ------------
Rental properties, net 1,109,608 1,147,081
Properties held for sale 103,548 57,327
Investments in land and development 51,750 147,435
Investments in unconsolidated operating
joint ventures 12,040 12,014
Mortgage loans receivable 11,231 12,872
Leasing and financing costs
(net of accumulated amortization
of $17,664 and $19,812 as of December 31,
2005 and December 31, 2004, respectively) 22,929 22,447
Straight-line rent receivable (net of
allowances of $0 and $528 as of
December 31, 2005 and December 31,
2004, respectively) 16,874 15,764
Cash and cash equivalents 3,661 6,003
Other assets 14,489 10,202
------------ ------------
TOTAL ASSETS $ 1,346,130 $ 1,431,145
============ ============
LIABILITIES
Mortgage loans $ 659,870 $ 654,748
Unsecured bank line of credit 106,669 21,320
Accrued common and preferred
stock dividends 13,610 15,931
Obligations associated with properties
held for sale 45,855 43,300
Other liabilities 41,276 31,282
------------ ------------
Total liabilities 867,280 766,581
------------ ------------
MINORITY INTEREST 31,206 39,127
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value,
188,000,000 shares authorized,
33,710,400 and 36,033,126 shares
issued and outstanding at December 31,
2005 and December 31, 2004, respectively 34 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 December 31, 2005
and December 31, 2004, respectively 4 7
Additional paid-in capital 754,050 870,622
Deferred compensation (2,867) (4,056)
Distributions in excess of accumulated
earnings (303,577) (241,172)
------------ ------------
Total stockholders' equity 447,644 625,437
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,346,130 $ 1,431,145
============ ============
*T
FORWARD LOOKING STATEMENTS: Certain statements in this press
release are forward-looking statements within the meaning of federal
securities laws, including without limitation statements concerning
plans, objectives, goals, strategies, expectations, intentions,
projections, developments, future events, performance or products,
underlying assumptions, and other statements which are other than
statements of historical facts. In some cases, you can identify
forward-looking statements by terminology such as "may," "will,"
"should," "expects," "intends," "plans," "anticipates,"
"contemplates," "believes," "estimates," "predicts," "projects,"
"potential," "continue," and other similar terminology or the negative
of these terms. These forward-looking statements include, without
limitation:
-- Foreseeing positive leasing trends;
-- Believing that the Washington D.C. and Southern California
markets are superior to all others.
-- Anticipating a certain stock dividend amount;
-- Intending to expand joint venture opportunities;
-- Planning to reduce overall leverage;
-- Expecting consummation of property sales and acquisitions;
-- Predicting gains on property sales;
-- Estimating overall lessee rollover potential;
-- Projecting guidance on future financial results; and
-- Expecting that planned dispositions will actually consummate.
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:
-- Purchaser default risk relative to the pending transactions
referenced above;
-- 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;
-- Market changes to our core markets, especially Washington D.C.
and Southern California.
-- Changes in interest rates and market rental rates for and
occupancy of office space may negatively affect the Company's
FFO;
-- The reduction in dividends may not be adequate to fund cash
flow for future growth;
-- The inability to find suitable tenants and enter into suitable
leases;
-- Tenants' defaults could adversely affect our operations;
-- Our inability to identify and enter into suitable joint
venture investments;
-- Joint venture investments could be adversely affected by our
lack of sole decision-making authority and reliance upon a
co-venturer's financial condition.
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/A for the year ended December 31, 2004 and our quarterly
reports on Forms 10-Q for the periods ended March 31, 2005, June 30,
2005, and September 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.