Prime Realty (NYSE:PGE)
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Prime Group Realty Trust (NYSE:PGE) (the "Company")
announced its results today for the quarter ended March 31, 2005. Net
income available to common shareholders was $2.3 million or $0.10 per
share for the first quarter of 2005, as compared to a net loss of $7.3
million or $0.31 per share reported for the first quarter of 2004.
Funds From Operations ("FFO") available to common shareholders for the
first quarter of 2005 totaled $0.07 per share, as compared to $0.13
per share for the first quarter of 2004.
Revenue for the first quarter was $28.5 million, a decrease of
$1.0 million from first quarter 2004 revenue of $29.5 million. The
decrease was principally due to a lease termination fee of $0.3
million received in 2004, a decrease of $0.3 million due to lower
occupancy, and a reduction in the Company's Services Company revenues
of $0.2 million.
The $9.6 million, or $0.41 per share, improvement in the net
income (loss) was principally a result of:
-- Additional gain on sale related to the Bank One Center Joint
Venture of $8.7 million, or $0.37 per share, net of minority
interest, as a result of a $9.8 million distribution received
from the joint venture in January 2005 due to the Company
meeting a leasing earnout target under the joint venture
agreement,
-- A net loss of $1.8 million, or $0.08 per share, in first
quarter 2004 from the operations of the Company's former 33
West Monroe Street property, which was sold in April 2004,
-- A $0.8 million, or $0.03 per share, improvement in the
Company's share of the 77 West Wacker Drive joint venture
results, and
-- A reduction in first quarter 2005 interest expense and
deferred financing fee amortization of $0.5 million, or $0.02
per share, principally related to the retirement of debt with
proceeds from properties sold in 2004.
These were partially offset by:
-- An increase in the non-cash allocation of accounting losses of
$0.4 million, or $0.02 per share, for the Company's share of
the Bank One Center joint venture operations, and
-- An increase in strategic alternative costs of $1.9 million, or
$0.08 per share.
The decrease in FFO is principally due to the reasons discussed
above for the change in GAAP loss, with the exception of real estate
depreciation and amortization, which is excluded from expense when
computing FFO as well as the exclusion of the gain on sale of real
estate. In addition, for the purposes of computing FFO available to
common shareholders per share, the Company included outstanding common
shares and common units in its operating partnership in arriving at
weighted average shares of beneficial interest. FFO is a non-GAAP
financial measure. The Company believes that net income (loss) is the
most directly comparable GAAP financial measure to FFO and has
included a reconciliation of this measure to GAAP net income (loss)
with this press release.
With respect to the Company's leasing activity, Jeffrey A.
Patterson, the Company's President and CEO commented, "We are pleased
with our leasing volume, particularly if you include leases signed
after quarter-end, totaling 597,694 rentable square feet. This
included 25,140 rentable square feet of new leases, 82,203 rentable
square feet of lease expansions and 57,351 rentable square feet of
lease renewals and extensions which commenced during the first
quarter. During the quarter, we also executed 34,730 rentable square
feet of new leases and 29,483 rentable square feet of renewals and
expansions, which commence in the second quarter of 2005 or beyond.
Portfolio occupancy (including joint venture properties) decreased to
83.2% as of March 31st versus 83.3% at the end of the fourth quarter
of 2004. However, occupancy is up for the first three months of 2005
from the 82.0% occupancy level at the end of the first quarter of
2004. During this period, the Chicago CBD and Suburban office market
overall vacancy factor (including sublease space) increased from 20.5%
to 20.6% according to CB Richard Ellis. Subsequent to the end of the
quarter, we entered into an additional 368,787 rentable square feet of
new leases, renewals and expansions, including our recently announced
294,175 rentable square foot lease at Bank One Center with Seyfarth
Shaw, LLP, a leading national law firm. This brings the leased
percentage for our total portfolio, including joint ventures, from
83.2% to 87.9%".
Continental Towers Refinanced
On May 5, 2005, the Company refinanced its Continental Towers
property with a first mortgage loan in the principal amount of $75.0
million from SunAmerica Life Insurance Company. Proceeds of the loan
were utilized to repay the existing first mortgage loan encumbering
the property in the amount of $65.6 million, including accrued
interest, pay closing costs and expenses and for general corporate
purposes. The loan matures on May 1, 2008 and bears interest at 30-day
LIBOR plus 1.75%. The previous loan had a fixed interest rate of 7.22%
per year. Payments of interest only are due monthly and there is no
required principal amortization. The Company entered into an
environmental indemnity agreement and intercreditor agreement for the
benefit of the lender. Simultaneously with the closing, the Company
purchased an interest rate protection agreement capping LIBOR at 6.5%,
which results in a maximum interest rate of 8.25%.
The loan can be repaid at any time provided there is a 1.0%
prepayment fee through October 31, 2005, a 0.50% prepayment fee from
November 1, 2005 through April 30, 2007 and no prepayment fee
thereafter. The Company has two one-year extension options for the
loan at then current market rates and upon the payment of a 0.25%
extension fee, provided, among other things, the property is meeting
at least a 1.35 debt service coverage ratio. The Company has the right
to convert the loan to a seven-year fixed rate loan at any time during
the term subject to the lender's underwriting requirements and then
market loan terms.
Conference Call Information
Prime Group Realty Trust has scheduled an investor conference call
for Tuesday, May 10, 2005 at 9:00 a.m. (CT) to discuss the Company's
results for the quarter ended March 31, 2005. Investors and interested
parties may listen to the call via a live webcast accessible on the
Company's web site at www.pgrt.com. To listen, please register and
download audio software on the site at least fifteen minutes prior to
the start of the call. The webcast will be archived on the site until
May 17, 2005.
To participate via teleconference, please call 877-294-9745 at
least five minutes prior to the beginning of the call. If you are
calling from outside North America, please call 706-679-7562. A replay
of the call will be available through May 17, 2005 by calling
800-642-1687 or 706-645-9291 and entering the Conference ID #5959397
with your telephone keypad.
In addition to the information provided in this press release, the
Company publishes a quarterly "Supplemental Financial and Operating
Statistics" package. The supplemental information package and the
information contained in this press release can be found on the
Company's web site under "Investor Information," and as part of a
current report on Form 8-K furnished to the Securities and Exchange
Commission.
About the Company
Prime Group Realty Trust is a fully integrated, self-administered,
and self-managed real estate investment trust (REIT) that owns,
manages, leases, develops, and redevelops primarily office real
estate, in metropolitan Chicago. The Company owns 11 office properties
containing an aggregate of approximately 4.6 million net rentable
square feet, one industrial property comprised of approximately
120,000 net rentable square feet, three joint venture interests in
office properties totaling 2.8 million net rentable square feet, and
approximately 6.3 acres of land suitable for new construction.
This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995 that reflect management's current views with respect to future
events and financial performance. The words "will be", "believes",
"expects", "anticipates" "estimates" and similar words or expressions
are generally intended to identify forward-looking statements. Actual
results may differ materially from those expected because of various
risks and uncertainties, including, but not limited to, changes in
general economic conditions, adverse changes in real estate markets as
well as other risks and uncertainties included from time to time in
the Company's filings with the Securities and Exchange Commission.
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Prime Group Realty Trust
Consolidated Statements of Operations
(dollars in thousands, except per share data)
(Unaudited)
Three Months ended
March 31
2005 2004
--------------------------
Revenue:
Rental $ 15,991 $ 16,314
Tenant reimbursements 10,543 11,029
Other property revenues 932 891
Services Company revenue 1,022 1,270
--------------------------
Total revenue 28,488 29,504
Expenses:
Property operations 7,828 7,744
Real estate taxes 6,351 6,231
Depreciation and amortization 5,574 5,440
General and administrative 2,424 2,479
Services Company expenses 775 1,266
Severance costs 176 -
Strategic alternative costs 1,934 -
--------------------------
Total expenses 25,062 23,160
Operating income 3,426 6,344
Loss from investments in unconsolidated
joint ventures (3,057) (3,288)
Other income 578 655
Interest:
Expense (6,771) (7,210)
Amortization of deferred financing costs (256) (363)
--------------------------
Loss from continuing operations before
minority interests (6,080) (3,862)
Minority interests 958 644
--------------------------
Loss from continuing operations (5,122) (3,218)
Discontinued operations, net of minority
interests of $(123) and $233 in 2005 and
2004, respectively 947 (1,764)
--------------------------
Loss before gain (loss) on sales of real
estate (4,175) (4,982)
Gain (loss) on sales of real estate, net of
minority interests of $(1,138) and $2 in
2005 and 2004, respectively 8,758 (18)
--------------------------
Net income (loss) 4,583 (5,000)
Net income allocated to preferred
shareholders (2,250) (2,250)
--------------------------
Net income (loss) available to common
shareholders $ 2,333 $ (7,250)
==========================
Basic and diluted earnings available to
common shares per weighted-average common
share:
Loss from continuing operations $ (0.31) $ (0.23)
Discontinued operations, net of minority
interests 0.04 (0.08)
Gain (loss) on sales of real estate, net of
minority interests 0.37 -
--------------------------
Net income (loss) available per weighted-
average common share of beneficial
interest -basic and diluted $ 0.10 $ (0.31)
==========================
Prime Group Realty Trust
GAAP Reconciliation of Net(Loss) Income to Funds From Operations(FFO)
Available to Common Share/Unit Holders
(Unaudited)
Three Months Ended
March 31
2005 2004
--------------------------
(in thousands)
Net income (loss) $ 4,583 $ (5,000)
Adjustments to reconcile to Funds from
Operations available to common
shareholders:
Real estate depreciation and
amortization 5,244 5,108
Amortization of costs for leases
assumed 69 72
Joint venture adjustments 4,480 4,388
(Gain) loss on sale of operating property,
net of minority interests (8,758) 18
Adjustment for discontinued operations:
Real estate depreciation and amortization - 2,079
Gain on sale (included in discontinued
operations) (709) -
Minority interests 123 (233)
Minority interests (958) (644)
--------------------------
Funds From Operations 4,074 5,788
Income allocated to preferred shareholders (2,250) (2,250)
--------------------------
Funds from Operations available to common
shareholders (1) $ 1,824 $ 3,538
==========================
FFO available to common share/unit holders
per share/unit of beneficial interest:
Basic and Diluted $ 0.07 $ 0.13
==========================
Weighted average shares/units of beneficial
interest:
Common shares 23,675 23,671
Nonvested employee stock grants 6 9
Operating Partnership units 3,076 3,076
--------------------------
Basic 26,757 26,756
==========================
Common shares 23,675 23,671
Nonvested employee stock grants 6 -
Employee stock options 26 20
Operating Partnership units 3,076 3,076
--------------------------
Diluted 26,783 26,767
==========================
(1) Funds from Operations is a non-GAAP financial measure. Funds from
Operations ("FFO") is defined as net income (loss), computed in
accordance with generally accepted accounting principles ("GAAP")
plus real estate depreciation and amortization, excluding gains
(or losses) from sales of operating properties, and after
comparable adjustments for unconsolidated joint ventures and
discontinued operations. FFO includes results from discontinued
operations, including revenues, property operations expense, real
estate taxes expense and interest expense. We compute FFO in
accordance with standards established by the National Association
of Real Estate Investment Trusts ("NAREIT"), which may not be
comparable to FFO reported by other REITs that do not define the
term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than us. We
utilize FFO as a performance measure. We believe that FFO provides
useful information to investors regarding our performance as FFO
provides investors with additional means of comparing our
operating performance with the operating performance of our
competitors. FFO is not representative of cash flow from
operations, is not indicative that cash flows are adequate to fund
all cash needs, and should not be considered as an alternative to
cash flows as a measure of liquidity. We believe that net income
(loss) is the most directly comparable GAAP financial measure to
FFO.
Prime Group Realty Trust
Consolidated Balance Sheets
(dollars in thousands, except share data)
(Unaudited)
Assets March 31 December 31
2005 2004
--------------------------
Real estate, at cost:
Land $ 124,100 $ 124,100
Building and improvements 495,688 494,742
Tenant improvements 65,750 62,452
Furniture, fixtures and equipment 9,966 9,927
--------------------------
695,504 691,221
Accumulated depreciation (112,493) (107,440)
--------------------------
583,011 583,781
Property held for development 1,588 1,588
--------------------------
584,599 585,369
Properties held for sale - 591
Investments in unconsolidated joint ventures 22,607 26,088
Cash and cash equivalents 75,469 71,731
Receivables, net of allowance of $1,887 and
$1,985 at March 31, 2005 and December 31,
2004, respectively:
Tenant 1,966 641
Deferred rent 18,722 18,934
Other 1,419 2,190
Restricted cash escrows 36,279 42,774
Deferred costs, net 16,751 16,255
Other 1,915 2,790
--------------------------
Total assets $ 759,727 $ 767,363
==========================
Liabilities and Shareholders' Equity
Mortgage notes payable $ 426,433 $ 427,445
Accrued interest payable 1,544 1,508
Accrued real estate taxes 20,744 25,861
Accrued tenant improvement allowances 6,428 4,884
Accounts payable and accrued expenses 7,767 9,184
Liabilities for leases assumed 9,301 9,957
Deficit investment in unconsolidated joint
venture 3,962 4,087
Dividends payable 2,250 2,250
Other 14,052 17,609
--------------------------
Total liabilities 492,481 502,785
Minority interests:
Operating Partnership 19,457 19,154
Shareholders' equity:
Preferred Shares, $0.01 par value;
30,000,000 shares authorized:
Series B - Cumulative Redeemable
Preferred Shares, 4,000,000 shares
designated, issued and outstanding 40 40
Common Shares, $0.01 par value; 100,000,000
shares authorized; 23,675,121 and
23,671,996 shares issued and outstanding
at March 31, 2005 and December 31, 2004,
respectively 236 236
Additional paid-in capital 381,293 381,293
Accumulated other comprehensive loss (436) (468)
Distributions in excess of earnings (133,344) (135,677)
--------------------------
Total shareholders' equity 247,789 245,424
--------------------------
Total liabilities and shareholders' equity $ 759,727 $ 767,363
==========================
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