CommonWealth REIT (NYSE: CWH) today announced financial results
for the quarter and nine months ended September 30, 2010.
Results for the Quarter Ended September 30, 2010:
Funds from operations (FFO) available for common shareholders
for the quarter ended September 30, 2010 was $60.7 million, or
$0.93 per share basic and $0.92 per share diluted, compared to FFO
available for common shareholders for the quarter ended September
30, 2009 of $60.8 million, or $1.09 per share basic and $1.06 per
share diluted.
Net income available for common shareholders was $53.1 million
for the quarter ended September 30, 2010, compared to $59.5 million
for the same quarter last year. Net income available for common
shareholders per share, basic and diluted, (EPS) for the quarters
ended September 30, 2010 and 2009 was $0.82 and $1.06,
respectively. Net income for the quarter ended September 30, 2010
includes gains of $45.8 million, or $0.70 per share, from the sale
of properties and the issuance of shares by an equity investee. Net
income for the quarter ended September 30, 2009 includes gains of
$50.1 million, or $0.90 per share, from the sale of properties.
The weighted average number of basic and diluted common shares
outstanding totaled 65,173,412 and 72,471,577, respectively, for
the quarter ended September 30, 2010, and 55,932,430 and
63,230,594, respectively, for the quarter ended September 30,
2009.
A reconciliation of net income determined according to U.S.
generally accepted accounting principles, or GAAP, to FFO for the
quarters ended September 30, 2010 and 2009 appears later in this
press release.
Results for the Nine Months Ended September 30, 2010:
FFO available for common shareholders for the nine months ended
September 30, 2010 was $180.9 million, or $2.91 per share basic and
$2.87 per share diluted, compared to FFO available for common
shareholders for the nine months ended September 30, 2009 of $187.5
million, or $3.34 per share basic and $3.25 per share diluted.
Net income available for common shareholders was $75.1 million
for the nine months ended September 30, 2010, compared to $136.9
million for the same quarter last year. Net income available for
common shareholders per share, basic and diluted, (EPS) for the
nine months ended September 30, 2010 and 2009 was $1.21 and $2.44,
respectively. Net income for the nine months ended September 30,
2010 includes gains of $73.7 million, or $1.19 per share, from the
sale of properties and the issuance of shares by an equity
investee, partially offset by a loss of $21.5 million, or $0.35 per
share, on asset impairment. Net income for the nine months ended
September 30, 2009 includes gains of $79.2 million, or $1.41 per
share, from the sale of properties and $20.7 million, or $0.37 per
share, of gain on early extinguishment of debt.
The weighted average number of basic and diluted common shares
outstanding totaled 62,197,774 and 69,495,939, respectively, for
the nine months ended September 30, 2010, and 56,085,430 and
63,383,594, respectively, for the nine months ended September 30,
2009.
A reconciliation of net income determined according to U.S. GAAP
to FFO for the nine months ended September 30, 2010 and 2009
appears later in this press release.
Occupancy and Leasing Results (excluding properties
classified in discontinued operations):
As of September 30, 2010, 86.4% of CWH’s total square feet was
leased, compared to 86.0% as of June 30, 2010 and 88.2% as of
September 30, 2009.
CWH signed lease renewals for 1,287,000 square feet and new
leases for 733,000 square feet during the quarter ended September
30, 2010 which had weighted average rental rates that were 3% above
prior rents for the same space. Average lease terms for leases
signed during the third quarter of 2010 were 5.8 years. Commitments
for tenant improvement and leasing commission (TI/LC) costs for
leases signed during the quarter ended September 30, 2010 totaled
$13.04 per square foot on average.
Recent Investment and Sale Activities:
Since July 1, 2010, CWH has acquired 26 properties for aggregate
purchase prices of $373.9 million, excluding closing costs; CWH
also sold 13 properties for aggregate sales prices of $200.4
million, excluding closing costs:
- In July 2010, CWH closed on the
previously reported acquisition of two office properties located in
Stafford, VA with a combined 117,949 square feet. These properties
are 90% leased to ten tenants for a weighted (by rents) average
lease term of 2.8 years. The aggregate purchase price was $18.8
million, excluding closing costs.
- In August 2010, CWH closed on the
previously reported acquisition of one office property located in
Milwaukee, WI with 432,092 square feet. This property is 93% leased
to 29 tenants for a weighted (by rents) average lease term of 4.3
years. The purchase price was $80.2 million, excluding closing
costs.
- In August 2010, CWH acquired seven
properties located in Monterey, CA. These properties are 100%
leased to The Wine Group for 16.0 years. The aggregate purchase
price was $28.0 million, excluding closing costs.
- In September 2010, CWH acquired one
office property located in Greensboro, NC with 323,773 square feet.
This property is 86% leased to 21 tenants for a weighted (by rents)
average lease term of 5.0 years. The purchase price was $44.7
million, excluding closing costs.
- In October 2010, CWH closed on the
previously reported acquisition of MacarthurCook Industrial
Property Fund, an Australian property trust that owns 10 industrial
properties with approximately 1.4 million square feet. These
properties are 90% leased to 14 tenants for a weighted (by rents)
average lease term of 4.7 years. The purchase price for these
properties was approximately $83.2 million, excluding acquired
positive working capital and closing costs.
- In October 2010, CWH acquired three
office properties located in Carson, CA with a combined 190,000
square feet. These properties are 100% leased to Northrop Grumman
for 6.0 years. The aggregate purchase price was $22.7 million,
excluding closing costs.
- In October 2010, CWH acquired a two
tower office property located in Chicago, IL with 631,445 square
feet. This property is 90% leased to 33 tenants for a weighted (by
rents) average lease term of 7.3 years. The purchase price was
$96.3 million, excluding closing costs.
- In October 2010, CWH entered a purchase
and sale agreement to acquire seven office properties located in
Birmingham, AL with a combined 904,109 square feet. These
properties are 96% leased to 40 tenants for a weighted (by rents)
average lease term of 4.5 years. CWH expects to acquire these
properties during the fourth quarter of 2010; however, this
acquisition is subject to customary closing conditions and no
assurance can be given that this acquisition will be consummated in
that time period or at all.
- As previously reported, in June 2010,
CWH entered agreements with Government Properties Income Trust to
sell 15 properties majority leased to the U.S. Government with
approximately 1.9 million square feet for aggregate sales prices of
$231.0 million, excluding closing costs. In July, August and
September 2010, CWH completed this transaction when it sold 12 of
these properties with approximately 1.6 million square feet for an
aggregate sales price of $190.6 million, excluding closing costs.
Three of these properties were sold in June 2010 for $40.4
million.
- In September 2010, CWH sold one office
property located in Irondequoit (Rochester), NY with approximately
310,000 square feet for $9.8 million, excluding closing costs.
Recent Financing Activities:
- In August 2010, CWH entered a new
$750.0 million unsecured revolving credit facility that it uses for
acquisitions, working capital and general business purposes. The
new facility replaces CWH’s previous $750.0 million unsecured
revolving credit facility, which had a maturity date of August 22,
2010. The maturity date of the new facility is August 8, 2013 and
includes an option for CWH to extend the facility for one year to
August 8, 2014. The new facility also includes a feature under
which the maximum borrowing may be increased to up to $1.5 billion
in certain circumstances. Interest paid under the new facility is
set at LIBOR plus 200 basis points, subject to adjustments based on
CWH’s credit ratings.
- In August 2010, CWH prepaid $266.7
million of mortgage debt that was scheduled to mature in 2011 and
2029, and repaid, at maturity, all $30.0 million of its 8.875%
unsecured senior notes due 2010. CWH funded these payments with
borrowings under its revolving credit facility.
- In September 2010, CWH issued $250.0
million of 5.875% unsecured senior notes due 2020 in a public
offering, raising net proceeds of approximately $242.5 million. CWH
used the net proceeds from this offering to repay amounts
outstanding under its revolving credit facility.
- In September 2010, CWH issued 7.5
million common shares in a public offering, raising net proceeds of
approximately $191.7 million. CWH used the net proceeds from this
offering to repay amounts outstanding under its revolving credit
facility and for general business purposes, including property
acquisitions and debt repayments.
- In October 2010, CWH repaid, at
maturity, all $20.0 million of its 8.625% unsecured senior notes
due 2010, using cash on hand.
- In October 2010, CWH redeemed the
remaining 7.0 million shares of its 8 ¾% series B preferred shares
for $25.00 each plus accrued and unpaid distributions. CWH funded
this redemption with borrowings under its revolving credit
facility.
Conference Call:
On November 3, 2010, at 1:00 p.m. Eastern Time, Adam Portnoy,
Managing Trustee, and John Popeo, Chief Financial Officer, will
host a conference call to discuss the third quarter financial
results. Following the company’s remarks, there will be a question
and answer period.
The conference call telephone number is (800) 230-1093.
Participants calling from outside the United States and Canada
should dial (612) 332-0932. No pass code is necessary to access
either call. Participants should dial in about 15 minutes prior to
the scheduled start of the call. A replay of the conference call
will be available through 11:59 p.m. Eastern Time on Wednesday,
November 10th. To hear the replay, dial (320) 365-3844. The replay
pass code is 169585.
A live audio webcast of the conference call will also be
available in a listen only mode on CWH’s website, which is located
at www.cwhreit.com. Participants wanting to access the webcast
should visit CWH’s website about five minutes before the call. The
archived webcast will be available for replay on CWH’s website for
about one week after the call. The recording and retransmission in
any way of CWH’s third quarter conference call is strictly
prohibited without the prior written consent of CWH.
Supplemental Data:
A copy of CWH’s Third Quarter 2010 Supplemental Operating and
Financial Data is available for download at CWH’s website,
www.cwhreit.com.
CommonWealth REIT is a real estate investment trust, or REIT,
which primarily owns office and industrial properties located
throughout the United States. As of September 30, 2010, CWH owned
519 properties with 66.5 million square feet, including 17.9
million square feet of leased industrial and commercial lands in
Oahu, Hawaii. CWH is headquartered in Newton, MA.
Please see the pages attached hereto for a more detailed
statement of our operating results and financial condition and for
an explanation of our calculation of FFO. CWH’s website is not
incorporated as part of this press release.
WARNING CONCERNING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.
ALSO, WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”,
“ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS,
WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING
STATEMENTS AND THEIR IMPLICATIONS ARE BASED UPON OUR PRESENT
INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS AND
THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.
OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR
IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT WE HAVE
ENTERED INTO AGREEMENTS TO ACQUIRE CERTAIN PROPERTIES. THESE
AGREEMENTS ARE SUBJECT TO VARIOUS TERMS AND CONDITIONS TYPICAL OF
COMMERCIAL REAL ESTATE TRANSACTIONS. THESE TERMS AND CONDITIONS MAY
NOT BE MET. AS A RESULT, SOME OR ALL OF THESE TRANSACTIONS MAY NOT
OCCUR OR MAY BE DELAYED.
OTHER IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE IN OR IMPLIED BY OUR FORWARD LOOKING
STATEMENTS ARE DESCRIBED MORE FULLY UNDER “RISK FACTORS” IN OUR
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2009.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE
ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE.
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the New York
Stock Exchange. No shareholder, Trustee or officer is personally
liable for any act or obligation of the Trust.
CommonWealth REIT
Consolidated Statements of Income and
Funds from Operations
(amounts in thousands, except per share
data)
(unaudited)
Quarter EndedSeptember 30,
Nine Months EndedSeptember 30,
2010 2009 2010 2009 Rental
income $218,035 $206,032 $644,725 $634,577
Expenses: Operating expenses 93,722 87,881 271,664
265,486 Depreciation and amortization 48,520 48,042 147,869 145,787
General and administrative 10,658 9,607 30,888 28,844 Acquisition
related costs (1) 1,559 1,539 2,972 2,287
Total expenses 154,459 147,069 453,393
442,404
Operating income
63,576
58,963
191,332
192,173
Interest and other income 572 331 2,137 839
Interest expense (including amortization
of debt discounts, premiums and deferred financing fees of $1,839,
$1,574, $5,644 and $5,102, respectively)
(44,743
)
(41,786
)
(137,506
)
(129,912
)
Loss on asset impairment
—
—
(21,491
)
—
(Loss) gain on early extinguishment of debt (1,044 ) — (1,044 )
20,686 Equity in earnings of equity investments 1,999 2,957 6,643
3,818 Gain on issuance of shares by equity investee 18,390 — 34,808
— Gain on sale of properties 22,832 — 34,336 —
Income from continuing operations before income tax expense
61,582 20,465 109,215 87,604 Income tax benefit (expense) 34
(176 ) (329 ) (518 ) Income from continuing operations 61,616
20,289 108,886 87,086 Discontinued operations: (Loss) income from
discontinued operations (374 ) 1,804 (349 ) 8,684 Gain on sale of
properties 4,568 50,106 4,568 79,157
Net income 65,810 72,199 113,105 174,927 Preferred distributions
(12,667 ) (12,667 ) (38,001 ) (38,001 ) Net income available for
common shareholders $53,143 $59,532 $75,104
$136,926
Calculation of Funds from Operations, or FFO
(2): Net income $65,810 $72,199 $113,105 $174,927 Plus:
depreciation and amortization from continuing operations 48,520
48,042 147,869 145,787 Plus: depreciation and amortization from
discontinued operations 42 123 131 372 Plus: acquisition related
costs (1) 1,559 1,539 2,972 2,287 Plus: FFO from equity investments
4,223 4,615 12,647 5,785 Plus: loss on asset impairment — — 21,491
— Less: loss (gain) on early extinguishment of debt 1,044 — 1,044
(20,686 ) Less: gain on sale of properties (27,400 ) (50,106 )
(38,904 ) (79,157 ) Less: equity in earnings of equity investments
(1,999 ) (2,957 ) (6,643 ) (3,818 ) Less: gain on issuance of
shares by equity investee (18,390 ) — (34,808 ) — FFO
73,409 73,455 218,904 225,497 Less: preferred distributions (12,667
) (12,667 ) (38,001 ) (38,001 ) FFO available for common
shareholders $60,742 $60,788 $180,903 $187,496
Weighted average common shares outstanding – basic
65,173 55,932 62,198 56,085 Weighted
average common shares outstanding – diluted (3) 72,471
63,230 69,496 63,383
CommonWealth REIT
Consolidated Statements of Income and
Funds from Operations (continued)
(amounts in thousands, except per share
data)
(unaudited)
Quarter EndedSeptember 30,
Nine Months EndedSeptember 30,
2010 2009 2010 2009 Per common share: Income from continuing
operations available for common shareholders – basic and diluted
$0.75
$0.14
$1.14
$0.88
Income from discontinued operations – basic and diluted $0.06 $0.93
$0.07 $1.57 Net income available for common shareholders – basic
and diluted
$0.82
$1.06
$1.21
$2.44
FFO available for common shareholders – basic $0.93 $1.09 $2.91
$3.34 FFO available for common shareholders – diluted $0.92 $1.06
$2.87 $3.25 Common distributions paid $0.50 $0.48 $1.46
$1.44
(1) Represents costs associated with acquisitions, including
costs that are expensed pursuant to the Business Combinations Topic
of the FASB Accounting Standards CodificationTM.
(2) We compute FFO as shown in the calculation above. Our
calculation of FFO differs from the National Association of Real
Estate Investment Trusts, or NAREIT, definition because we exclude
acquisition related costs as described in Note 1 above, gains from
equity investments, gain on early extinguishment of debt, loss on
early extinguishment of debt unless settled in cash, and loss on
asset impairment. We consider FFO to be an appropriate measure of
performance for a REIT, along with net income and cash flow from
operating, investing and financing activities. We believe that FFO
provides useful information to investors because, by excluding the
effects of certain historical amounts, such as depreciation expense
and items referred to above, FFO can facilitate a comparison of
operating performance between periods and among REITs. FFO does not
represent cash generated by operating activities in accordance with
U.S. generally accepted accounting principles, or GAAP, and should
not be considered an alternative to net income or cash flow from
operating activities as a measure of financial performance or
liquidity. FFO is among the important factors considered by our
Board of Trustees when determining the amount of distributions to
shareholders. Also, some REITs may calculate FFO differently than
us.
(3) As of September 30, 2010, our 15,180 outstanding series D
preferred shares were convertible into 7,298 common shares. The
effect of a conversion of our series D convertible preferred shares
on income from continuing operations available for common
shareholders per share is anti-dilutive to income but dilutive to
FFO for the quarters and nine months ended September 30, 2010 and
2009. Set forth below is the calculation of diluted net income
available for common shareholders, diluted FFO available for common
shareholders and diluted weighted average common shares
outstanding.
Quarter EndedSeptember 30,
Nine Months EndedSeptember 30,
2010 2009 2010 2009 Net income available for
common shareholders $53,143 $59,532 $75,104 $136,926 Add - Series D
convertible preferred distributions 6,167 6,167 18,501 18,501 Net
income available for common shareholders – diluted $59,310 $65,699
$93,605 $155,427 FFO available for common shareholders
$60,742 $60,788 $180,903 $187,496 Add - Series D convertible
preferred distributions 6,167 6,167 18,501 18,501 FFO available for
common shareholders – diluted $66,909 $66,955 $199,404 $205,997
Weighted average common shares outstanding – basic 65,173
55,932 62,198 56,085 Effect of dilutive Series D preferred shares
7,298 7,298 7,298 7,298 Weighted average common shares outstanding
– diluted 72,471 63,230 69,496 63,383
CommonWealth REIT
Consolidated Balance Sheets
(amounts in thousands, except share
data)
(unaudited)
September 30, December 31, 2010 2009
ASSETS
Real estate properties: Land $1,238,611 $1,237,808 Buildings and
improvements 5,150,677 5,085,873 6,389,288 6,323,681
Accumulated depreciation (911,211 ) (884,421 ) 5,478,077 5,439,260
Properties held for sale 8,297 8,263 Acquired real estate leases,
net 179,357 166,453 Equity investments 173,721 158,822 Cash and
cash equivalents 174,723 18,204 Restricted cash 7,075 11,662 Rents
receivable, net of allowance for doubtful accounts of $12,415 and
$10,945, respectively
198,899
194,358
Other assets, net 153,626 124,299 Total assets
$6,373,775 $6,121,321
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Revolving credit facility $— $110,000 Senior unsecured debt, net
2,474,116 2,258,466 Mortgage notes payable, net 352,575 624,184
Other liabilities related to properties held for sale 11 14
Accounts payable and accrued expenses 108,792 103,608 Acquired real
estate lease obligations, net 43,513 47,348 Distributions payable —
26,863 Rent collected in advance 32,418 30,366 Security deposits
22,903 23,097 Due to affiliates 25,602 8,309 Total
liabilities 3,059,930 3,232,255 Shareholders’
equity: Preferred shares of beneficial interest, $0.01 par value:
50,000,000 shares authorized; Series B preferred shares; 8 3/4%
cumulative redeemable at par on or after September 12, 2007;
7,000,000 shares issued and outstanding, aggregate liquidation
preference $175,000
169,079
169,079
Series C preferred shares; 7 1/8% cumulative redeemable at par on
or after February 15, 2011; 6,000,000 shares issued and
outstanding, aggregate liquidation preference $150,000
145,015
145,015
Series D preferred shares; 6 1/2% cumulative convertible;
15,180,000 shares issued and outstanding, aggregate liquidation
preference $379,500
368,270
368,270
Common shares of beneficial interest, $0.01 par value: 350,000,000
shares authorized; 72,138,686 and 55,965,061 shares issued and
outstanding, respectively
721
560
Additional paid in capital 3,354,771 2,925,845 Cumulative net
income 2,350,033 2,236,928 Cumulative common distributions
(2,639,887 ) (2,576,582 ) Cumulative preferred distributions
(420,597 ) (382,596 ) Cumulative other comprehensive (loss) income
(13,560 ) 2,547 Total shareholders’ equity 3,313,845
2,889,066 Total liabilities and shareholders’ equity
$6,373,775 $6,121,321
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