Keystone Prop (NYSE:KTR)
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Keystone Property Trust Announces First Quarter 2004 Results
WEST CONSHOHOCKEN, Pa., April 20 /PRNewswire-FirstCall/ -- Keystone Property
Trust today announced its financial results for the first quarter ended March
31, 2004.
For the three month period ended March 31, 2004, the Company reported Funds
From Operations ("FFO") of $14.4 million, or $0.40 per diluted share, as
compared to $10.2 million, or $0.33 per diluted share for the same quarter in
2003, representing a 41.2% increase in aggregate FFO and a 21.2% increase in
FFO per diluted share.
For the three month period ended March 31, 2004, net income allocated to common
shareholders was $3.2 million, or $0.11 per diluted share, as compared to $5.6
million, or $0.26 per diluted share for the period ended March 31, 2003,
representing a 42.9% decrease in aggregate net income and a 57.7% decrease in
earnings per share.
Excluding gains from property sales and provisions for asset impairments,
earnings per share for the three month period ended March 31, 2004 was $0.12
per diluted share, a 14.3% decrease from $0.14 per diluted share for the same
quarter in 2003.
Highlights
* Acquired $38.5 million of industrial properties totaling approximately
735,000 square feet ("SF") in the Greater Miami market.
* Disposed of three industrial properties totaling 275,140 SF for
approximately $14.2 million.
* Broke ground on a 266,000 SF distribution facility in Allentown,
Pennsylvania that is 80% leased to KIA Motors America, Inc. ("KIA").
* Increased portfolio occupancy to 92.4% at quarter-end compared to 92.1%
at year-end 2003.
* Leased approximately 2.4 million SF including approximately 496,000 SF
of renewals and 1.9 million SF of new leases, resulting in tenant
retention of 51.9%.
* Rental rates in the Company's portfolio for the first quarter increased
7.2% and 7.5% on a Cash and GAAP basis, respectively.
* Signed leases at two inventory development projects in New Jersey
including a 781,000 SF lease for the balance of Phase I and Phase II at
Keystone Cranbury East and a 127,000 SF lease at Keystone Greenville
Yards. As of the end of the quarter, the Company had signed leases for
68% of its inventory development.
* Same-store net operating income decreased 3.3% and 3.8% on a Cash and
GAAP basis, respectively.
* Raised $55 million from the issuance of 2.2 million Series E Cumulative
Redeemable Preferred Shares (NYSE:KTRPrE) at a liquidation value of
$25 per share and a coupon of 7.375%.
* Exchanged approximately 4.0 million common shares for Series C and D
Convertible Preferred Operating Partnership ("OP") Units and Common OP
Units.
* Declared a dividend of $0.33 per Common Share, $0.5703125 per Series D
Cumulative Redeemable Preferred Stock (NYSE:KTRPrD) and $0.2355903 per
share of the Series E Cumulative Redeemable Preferred Stock.
Jeffrey E. Kelter, President and CEO of Keystone, commenting on the Company's
first quarter results, stated, "I am pleased with our results for the quarter,
which exceeded expectations. But even beyond the headline numbers, we are
generating increasingly compelling results. By concentrating on one asset
class in a closely defined geography, we are finding investment opportunities
that a less focused strategy simply cannot deliver. The two transactions
totaling nearly $40 million that we completed in Miami during the quarter
illustrate our ability to immediately establish a presence, deploy our
infrastructure and uncover unique opportunities that create value.
I am encouraged by the fact that during the quarter, we signed 1.2 million SF
of leases within our 2.1 million SF of inventory development and continued to
see a modest but steady improvement in demand across the board. The strength
we have seen in New Jersey and Indianapolis, particularly related to our
speculative development, has offset weaker results in Central Pennsylvania. In
the aggregate, we are on track to meet guidance issued earlier in the year.
As industrial real estate market conditions improve, it is also increasingly
evident to us that we are targeting the right niche - modern big- box
distribution facilities. In our markets, this asset class is garnering the new
demand and as capital spending works its way back into the corporate lexicon we
expect that newer, larger, more flexible facilities will distinguish themselves
further."
Investment Activity
During the quarter, the Company acquired a three building facility consisting
of 189,567 SF in Miami, FL for approximately $12.5 million. In addition, the
Company acquired a 545,000 SF industrial distribution center in Miramar, FL for
approximately $26.0 million. With these acquisitions, the Company now owns
approximately 2.5 million SF in the Greater Miami region.
In February 2004, the Company sold a 20,000 SF facility at 260 Feaster Road in
Rocky Creek Park in Greenville, South Carolina for $575,000. In addition, the
Company sold 6402 Corporate Drive, a 162,608 SF industrial building, in
Indianapolis, Indiana for approximately $5.1 million. In March 2004, the
Company sold 121 Fieldcrest Avenue, a 92,532 SF building, in Edison, New Jersey
for $8.5 million.
On the development front in Central New Jersey, Keystone continued construction
of Phase II (500,000 SF) of the Cranbury East Project at Exit 8A. During the
quarter, 781,000 SF of Cranbury East was leased to Williams-Sonoma, Inc.,
bringing the project to 100% leased. The total investment in Phase II is
projected to be approximately $24 million.
Also in Central New Jersey, Keystone continued construction on a 772,000 SF
distribution center for Home Depot USA, Inc. The initial term of the lease
will be for 12 years and occupancy is scheduled for the fourth quarter of 2004.
The total investment is projected to be approximately $40 million.
In Northern New Jersey, Keystone leased approximately 127,000 SF of Building I
(70%) at Keystone Greenville Yards to Bed, Bath & Beyond during the quarter.
Building II, totaling approximately 341,000 SF, is scheduled for completion
during the second quarter. Keystone's total investment in the Greenville Yards
project will be approximately $33 million.
Keystone began construction of a parts distribution and training center for KIA
Motors in the Company's Westpark Business Center in Allentown, Pennsylvania.
KIA will lease 211,535 SF out of a total of 265,535 SF to be built. Occupancy
is scheduled for the end of the year. The total investment in this project is
expected to be approximately $9 million.
Operating Results/Leasing Activity
In the quarter, leasing activity totaled almost 2.4 million SF consisting of
1.9 million SF of new leases and approximately 496,000 SF of renewals, which
resulted in tenant retention for the quarter of 51.9%. Rents for the quarter
increased 7.2% on a Cash basis and 7.5% on a GAAP basis.
For the three months ended March 31, 2004, consolidated same-store net
operating income decreased 3.3% and 3.8% on a Cash and GAAP basis,
respectively. Economic occupancy on a GAAP basis for the consolidated same-
store portfolio was 90.1%, a 330 basis point decrease from 93.4% at March 31,
2003.
Supplemental Earnings Measure
The Company's uses as its primary supplemental performance measure FFO, which
is a commonly used supplemental performance measure for REITs. NAREIT's
definition of FFO, which excludes the impact of gains and losses from asset
sales, was modified in October 2003 to include the impact of impairment charges
in the computation of FFO as a result of guidance from the Securities and
Exchange Commission ("SEC"). Subsequent to this modification, the Company
continued to report FFO in accordance with the NAREIT definition.
At the end of the quarter ended March 31, 2004, the Company received guidance
from its independent auditor that Statement of Financial Accounting Standard
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS No. 144"), is currently being interpreted such that losses from asset
sales should always be accounted for as impairment charges and that losses from
asset sales will no longer occur as a result of this recent interpretation of
SFAS No. 144. Although NAREIT has not yet issued guidance on this
interpretation, under the current NAREIT definition gains on sales of assets
would be excluded from FFO but impairment charges (formerly losses on sales of
assets) would be a deduction and reduce FFO.
During the quarter, the Company incurred a $3.2 million loss on the sale of its
6402 Corporate Drive property and an aggregate $3.0 million gain on the sales
of its 121 Fieldcrest Avenue and 260 Feaster Road properties. The Company
believes it is necessary to eliminate gains and losses from asset sales,
including losses reported as impairment charges, from its FFO calculation in
order to provide the clearest measure of normalized operations and will
continue to report FFO on this basis. For informational purposes, the Company
has also provided a calculation of FFO excluding impairment charges in the
attached financial summary.
Conference Call
The Company will hold a conference call tomorrow, April 21, 2004, at 11:00 a.m.
Eastern Time. The toll-free call-in number is 1-800-289-0528, confirmation
code 614413. Callers are encouraged to dial-in five to ten minutes prior to
the start time to ensure that they participate from the beginning of the call.
A replay of the conference call will be available starting at 2:00 p.m.
tomorrow through May 5, 2004 until midnight Eastern Time. The telephone number
for the replay is 1-719-457-0820, confirmation code 614413. Additional
information about Keystone's quarterly results can be found in the supplemental
information package, which is posted to the Company's website in the Financial
Reports section under Investor Relations.
Interested followers are encouraged to join a webcast of the call which can be
accessed through the Company website at http://www.keystoneproperty.com/ under
Investor Relations. Followers unable to participate in the live webcast can
access the archive on the website under Investor Relations.
During the conference call, the Company may discuss non-GAAP financial measures
as defined by SEC Regulation G. In addition, the Company has used non-GAAP
financial measures in this press release. A reconciliation of non- GAAP
financial measures and the comparable GAAP financial measures can be found in
the release or the Company's quarterly supplemental package.
Keystone Property Trust, with headquarters in West Conshohocken, Pennsylvania,
is a fully integrated real estate investment trust with a current portfolio of
143 properties, including properties under development, aggregating over 34
million SF in the Eastern United States. For more information, contact
Aleathia M. Hoster at (212) 527-9900, send email to or visit the Company
website at http://www.keystoneproperty.com/.
This press release may contain statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding the intent, belief or current
expectations of the Company, its trustees, or its officers with respect to the
future operating performance of the Company and the result and the effect of
legal proceedings. Investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those in the
forward looking statements as a result of various factors. Important factors
that could cause such differences are described in the Company's periodic
filings with the Securities and Exchange Commission, including the Company's
Form 10-K and quarterly reports on Form 10-Q.
Financial Summary for the Quarter and Three Months
Ended March 31, 2004 and 2003
(in thousands, except for shares, ratios, and per share data)
For the three months ended March 31,
2004 2003
REVENUE:
Rents $22,130 $16,179
Reimbursement revenue and other income 4,395 3,104
Total revenue 26,525 19,283
OPERATING EXPENSES:
Property operating expenses 2,399 1,155
Real estate taxes 3,158 1,873
General and administrative 3,176 2,501
Depreciation and amortization 7,082 4,412
Total operating expenses 15,815 9,941
Income before equity in income from equity
method investments, gains (losses) on sales
of assets, interest expense, distributions to
preferred unitholders, minority interest of
unitholders in Operating
Partnership, and discontinued operations 10,710 9,342
Equity in income from equity method investments 1,698 1,233
Gains on sales of assets - 3,221
Interest expense 5,983 4,257
Income before distributions to preferred
unitholders, minority interest of unitholders
in Operating Partnership, and discontinued
operations 6,425 9,539
Distributions to preferred unitholders (502) (1,268)
Minority interest of unitholders in
Operating Partnership (556) (1,475)
Income from continuing operations 5,367 6,796
Discontinued operations:
Income (loss) from discontinued operations 38 (167)
Gain on disposition of
discontinued operations 2,972 -
Provision for asset impairment (3,222) -
Minority interest 29 37
(183) (130)
NET INCOME 5,184 6,666
NET INCOME ALLOCATED TO PREFERRED
SHAREHOLDERS (1,937) (1,061)
NET INCOME ALLOCATED TO COMMON
SHAREHOLDERS $3,247 $5,605
EARNINGS PER COMMON SHARE - BASIC:
Income from continuing operations $0.12 $0.27
Discontinued operations (0.01) (0.01)
Income per Common Share - Basic $0.11 $0.26
WEIGHTED AVERAGE COMMON SHARES -
BASIC 28,003,709 21,457,794
EARNINGS PER COMMON SHARE - DILUTED:
Income from continuing operations $0.12 $0.27
Discontinued operations (0.01) (0.01)
Income per Common Share -
Diluted $0.11 $0.26
WEIGHTED AVERAGE COMMON SHARES -
DILUTED 33,292,919 27,193,122
As of:
March 31, December 31,
2004 2003
BALANCE SHEET DATA:
Real estate investments, before
accumulated depreciation $1,063,875 $1,023,719
Total assets 1,060,958 1,023,315
Total debt 528,695 533,717
Total liabilities 37,139 31,842
Minority interest in Operating Partnership 51,429 35,715
Convertible preferred units 5,279 52,892
Stockholders' equity 438,416 369,149
Financial Summary for the Quarter and Three Months
Ended March 31, 2004 and 2003
(in thousands, except for shares, ratios, and per share data)
FUNDS FROM OPERATIONS (1): For the three months ended
March 31,
2004 2003
Net Income Allocated to Common
Shareholders $3,247 $5,605
Income Allocated to Preferred Shareholders 1,937 1,061
Redeemable Preferred Stock Dividends (1,754) (695)
Lease Termination Income 2,000 -
Minority Interest of Unitholders
in Operating Partnership-
includes Discontinued Operations 527 1,476
Distributions to Preferred Unitholders 502 1,268
Provision for Asset Impairment 3,222 -
Gains from Sales of Assets (2,972) (3,221)
Depreciation and Amortization
Related to Real Estate 7,171 4,412
Depreciation and Amortization
Related to Joint Ventures 483 324
Funds From Operations $14,363 $10,230
Diluted FFO Per Share $0.40 $0.33
Funds From Operations $14,363 $10,230
Provision for Asset Impairment (3,222) -
Funds From Operations, Excluding Add
Back of Asset Impairment Charges $11,141 $10,230
Diluted FFO Per Share, Excluding Add
Back of Asset Impairment Charges $0.31 $0.33
Diluted Weighted Average Shares and
Units (2) 35,950,408 31,429,890
Dividend Paid Per Common Share $0.330 $0.325
FFO Dividend Payout Ratio 82.5% 98.5%
(1) The Company uses Funds from Operations ("FFO") as a non-GAAP
performance measure in addition to net income determined in accordance
with GAAP. FFO is a widely used measurement by investors for
evaluating the operating performance of an equity REIT. Management
believes the use of FFO as a performance measure allows investors and
management to compare the Company's results to the results of other
REITs. However, the Company's FFO may not necessarily be comparable
to similarly titled measures of operating performance for other REITs.
Management believes that FFO is a useful disclosure as a non-GAAP
performance measure as historical cost accounting for real estate
assets, as required in accordance with GAAP, implicitly assumes that
the value of real estate assets diminishes predictably over time as
reflected through depreciation and amortization expenses. The Company
believes that the value of real estate assets does not diminish
predictably over time, as is assumed in GAAP accounting, and instead
fluctuates due to market and other conditions. Accordingly, the
Company believes FFO provides investors with useful supplemental
information about the Company's operating performance because it
excludes real estate depreciation and amortization expense, gains and
losses and impairment charges from the sale of depreciated real estate
assets. However, FFO does not represent cash generated from operating
activities in accordance with GAAP and it also does not consider the
costs associated with capital expenditures related to the Company's
real estate assets. Also it is not necessarily indicative of cash
available to fund cash needs and should not be considered as an
alternative to net income (as determined in accordance with GAAP) as
an indicator of the Company's operating performance or as an
alternative to cash flow from operating activities (as determined in
accordance with GAAP) as a measure of liquidity.
For the quarter ended March 31, 2004, the computation of FFO includes
$2 million of lease termination income that was reported as a purchase
price adjustment.
NAREIT defines FFO as net income (loss) computed in accordance with
GAAP, excluding gains (or losses) from sales of property, plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. NAREIT's definition
excludes an add back to net income in order to compute FFO for
impairment charges, however, management believes that impairment
charges are not implicitly different from losses from sales of assets
and accordingly presents FFO both with and without impairment charges
in order to present both calculations. Adjustments for
unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis. Since 2000, NAREIT has clarified the
definition of FFO to include non-recurring events (except for those
that are defined as "extraordinary items" or cumulative effects of
accounting changes under GAAP) and the results of discontinued
operations. The Company has presented FFO on a consistent basis for
all periods presented.
(2) Diluted weighted average shares for 2004 and 2003, as shown above,
include convertible preferred shares and all common and preferred
units in the Operating Partnership, each on an as-converted basis.
DATASOURCE: Keystone Property Trust
CONTACT: Aleathia M. Hoster of Keystone Property Trust, +1-212-527-9900;
or Michael Beckerman, +1-908-781-6420, or , for
Keystone Property Trust
Web site: http://www.keystoneproperty.com/