CommonWealth REIT (NYSE: CWH) today announced financial results
for the quarter ended March 31, 2013.
Results for the Quarter Ended March 31, 2013:
Normalized funds from operations, or Normalized FFO, available
for CommonWealth REIT common shareholders for the quarter ended
March 31, 2013 was $73.8 million, or $0.78 per share basic and
diluted, compared to Normalized FFO available for CommonWealth REIT
common shareholders for the quarter ended March 31, 2012 of $76.0
million, or $0.91 per share basic and $0.90 per share diluted.
Net income available for CommonWealth REIT common shareholders
was $14.5 million for the quarter ended March 31, 2013, compared to
$9.9 million for the same quarter last year. Net income available
for CommonWealth REIT common shareholders per share, basic and
diluted (EPS), for the quarters ended March 31, 2013 and 2012 was
$0.15 and $0.12, respectively. Net income for the quarter ended
March 31, 2013 includes gains of $66.3 million, or $0.70 per share,
from the sale of an equity investment and $2.9 million, or $0.03
per share, from the sale of properties, partially offset by losses
of $60.0 million, or $0.64 per share, from the early extinguishment
of debt and $3.9 million, or $0.04 per share, from asset
impairment.
The weighted average number of basic and diluted common shares
outstanding was 94,154,068 and 101,452,233, respectively, for the
quarter ended March 31, 2013, and 83,721,736 and 91,019,901,
respectively, for the quarter ended March 31, 2012.
A reconciliation of net income attributable to CommonWealth
REIT, determined according to U.S. generally accepted accounting
principles, or GAAP, to funds from operations, or FFO, available
for CommonWealth REIT common shareholders and Normalized FFO
available for CommonWealth REIT common shareholders for the
quarters ended March 31, 2013 and 2012 appears later in this press
release.
Occupancy and Leasing Results:
As of March 31, 2013, 90.0% of CWH’s total square feet from
continuing operations was leased, compared to 90.0% as of December
31, 2012 and 90.1% as of March 31, 2012.
CWH entered into lease renewals for 1,175,000 square feet and
new leases for 511,000 square feet during the quarter ended March
31, 2013, which had weighted average cash rental rates that were
1.2% below prior rents for the same leasable space. The weighted
average lease term based on square feet for leases entered into
during the first quarter of 2013 was 5.9 years. Commitments for
tenant improvements, leasing commission costs and concessions for
leases entered into during the quarter ended March 31, 2013 totaled
approximately $20.0 million, or $2.01 per square foot per year of
the lease term.
Recent Acquisitions and Sales Activities:
Since the announcement of 2012 fourth quarter results on
February 25, 2013, CWH has not acquired or entered into any
agreements to purchase properties (excluding transactions by Select
Income REIT, or SIR, CWH’s majority owned consolidated
subsidiary).
As previously disclosed, during the quarter ended March 31,
2013, CWH sold 18 properties with a combined 1,060,026 square feet
for a total of $10.3 million, excluding closing costs. In addition,
CWH received eminent domain taking proceeds of $1.8 million (before
closing costs) for a land parcel adjacent to one of its central
business district office buildings located in Boston, MA. As of
March 31, 2013, 76 properties with a combined 5,613,825 square feet
located throughout the United States were listed for sale with
third party brokers and classified as held for sale. In April 2013,
CWH sold one of these properties with 618,000 square feet for a
total of $830,000, excluding closing costs. As of today, CWH has
five of the remaining 75 properties with a combined 1,222,642
square feet under agreement to sell for a total of $39.5 million,
excluding closing costs. CWH expects to sell these five properties
and the remaining 70 properties listed for sale during 2013;
however, no assurance can be given that any of the properties will
be sold in that time period or at all.
In March 2013, CWH sold all 9,950,000 common shares that it
owned of Government Properties Income Trust in a public offering
for $25.20 per common share, raising gross proceeds of $250.7
million (approximately $239.6 million after deducting underwriters’
discounts and commissions and estimated expenses). CWH used the net
proceeds from this offering to repay amounts outstanding under its
revolving credit facility, which amounts were borrowed to fund, in
part, the purchase of the senior notes that were tendered in the
tender offer described below.
Recent Financing Activities:
In March 2013, CWH issued 34,500,000 common shares in a public
offering for $19.00 per common share, raising gross proceeds of
$655.5 million (approximately $627.1 million after deducting
underwriters’ discounts and commissions and estimated expenses).
CWH used the net proceeds from this offering to repay indebtedness,
including amounts borrowed under its revolving credit facility to
fund, in part, the purchase of its senior notes that were tendered
in the tender offer described below.
Also in March 2013, CWH purchased for cash a total of $670.3
million of the outstanding principal amount of the following senior
notes pursuant to a tender offer: $145.6 million of 5.75% senior
notes due February 15, 2014, $152.6 million of 6.40% senior notes
due February 15, 2015, $111.2 million of 5.75% senior notes due
November 1, 2015 and $260.9 million of 6.25% senior notes due
August 15, 2016.
Presentation:
Unless otherwise noted, the amounts reported above are on a
consolidated basis and, as such, include the results of CWH’s
consolidated subsidiary, SIR, including the effect of SIR’s
minority interests. For further information about SIR and its
subsidiaries, please see SIR’s periodic reports and other filings
with the Securities and Exchange Commission, or the SEC, which are
available at the SEC’s website at www.sec.gov. References in this
press release to SIR’s filings with the SEC are included to
identify the source of SIR information only, and the information in
SIR’s filings with the SEC is not incorporated by reference into
this press release.
Conference Call:
Later today, at 1:00 p.m. Eastern Time, Adam Portnoy, President
and Managing Trustee, and John Popeo, Chief Financial Officer, will
host a conference call to discuss the financial results for the
quarter ended March 31, 2013.
The conference call telephone number is (800) 230-1951.
Participants calling from outside the United States and Canada
should dial (612) 332-0342. 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, May
15, 2013. To hear the replay, dial (320) 365-3844. The replay pass
code is 290598.
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 transcription, recording and retransmission in any way of
CWH’s first quarter conference call is strictly prohibited without
the prior written consent of CWH.
Supplemental Data:
A copy of CWH’s First Quarter 2013 Supplemental Operating and
Financial Data is available for download at CWH’s website,
www.cwhreit.com. CWH’s website is not incorporated as part of this
press release.
CommonWealth REIT is a real estate investment trust which
primarily owns office properties located throughout the United
States. CWH is headquartered in Newton, MA.
Please see the pages attached hereto for a more detailed
statement of CWH’s operating results and financial condition and
for an explanation of CWH’s calculation of FFO and Normalized FFO
and a reconciliation of net income attributable to CommonWealth
REIT to those amounts.
WARNING CONCERNING FORWARD LOOKING
STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO,
WHENEVER CWH USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”,
“INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, CWH IS MAKING
FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE
BASED UPON CWH’S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT
FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT
OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN
OR IMPLIED BY THESE FORWARD LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT CWH HAS
ENTERED INTO AGREEMENTS TO SELL PROPERTIES. THESE TRANSACTIONS ARE
SUBJECT TO VARIOUS TERMS AND CONDITIONS TYPICAL OF COMMERCIAL REAL
ESTATE TRANSACTIONS. THE TERMS AND CONDITIONS MAY NOT BE MET. AS A
RESULT, THESE TRANSACTIONS MAY NOT OCCUR OR MAY BE DELAYED OR THE
TERMS MAY CHANGE, AND
- THIS PRESS RELEASE STATES THAT CWH
INTENDS TO SELL IN 2013 THE REMAINING PROPERTIES NOT ALREADY SOLD
THAT ARE CLASSIFIED AS HELD FOR SALE AS OF MARCH 31, 2013. HOWEVER,
CWH MAY BE UNABLE TO SELL SOME OR ALL OF THESE PROPERTIES IN 2013
OR EVER.
THE INFORMATION CONTAINED IN CWH’S FILINGS WITH THE SEC,
INCLUDING UNDER THE CAPTION "RISK FACTORS" IN CWH’S PERIODIC
REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT
FACTORS THAT COULD CAUSE DIFFERENCES FROM CWH’S FORWARD LOOKING
STATEMENTS. CWH’S FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC’S
WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, CWH DOES NOT INTEND TO UPDATE OR
CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
CommonWealth REIT Condensed
Consolidated Statements of Operations, Funds from Operations
and Normalized Funds from Operations (amounts in
thousands) (unaudited) Quarter Ended March 31,
2013 2012 Rental income $ 275,048 $
243,378 Expenses: Operating expenses 109,659 97,236
Depreciation and amortization 66,523 58,019 General and
administrative 17,266 11,536 Acquisition related costs 628
2,502 Total expenses 194,076
169,293 Operating income 80,972 74,085
Interest and other income 458 285 Interest expense (including net
amortization of debt discounts, premiums and deferred financing
fees of $629 and $746, respectively) (52,344 ) (49,106 ) Loss on
early extinguishment of debt (60,027 ) (67 ) Equity in earnings of
investees 4,262 2,958 Gain on sale of equity investment
66,293 - Income from continuing operations
before income tax expense 39,614 28,155 Income tax expense
(988 ) (492 ) Income from continuing operations 38,626
27,663 Discontinued operations: Loss from discontinued operations
(1,912 ) (3,089 ) Loss on asset impairment from discontinued
operations (3,946 ) - Gain on sale of properties from discontinued
operations 1,260 - Income before gain
on sale of properties 34,028 24,574 Gain on sale of properties
1,596 - Net income 35,624 24,574 Net
income attributable to noncontrolling interest in consolidated
subsidiary (9,957 ) (894 ) Net income attributable to
CommonWealth REIT 25,667 23,680 Preferred distributions
(11,151 ) (13,823 ) Net income available for CommonWealth
REIT common shareholders $ 14,516 $ 9,857
Amounts attributable to CommonWealth REIT common
shareholders: Income from continuing operations $ 19,114 $ 12,946
Loss from discontinued operations (1,912 ) (3,089 ) Loss on asset
impairment from discontinued operations (3,946 ) - Gain on sale of
properties from discontinued operations 1,260
- Net income $ 14,516 $ 9,857
CommonWealth REIT
Condensed Consolidated Statements of Operations, Funds from
Operations and Normalized Funds from Operations
(continued) (amounts in thousands, except per share
data) (unaudited) Quarter Ended March 31, 2013
2012 Calculation of FFO:(1) Net income attributable
to CommonWealth REIT $ 25,667 $ 23,680 Plus: depreciation and
amortization from continuing operations 66,523 58,019 Plus:
depreciation and amortization from discontinued operations - 3,332
Plus: loss on asset impairment from discontinued operations 3,946 -
Plus: FFO from investees 4,742 5,356 Plus: net income attributable
to noncontrolling interest 9,957 894 Less: FFO attributable to
noncontrolling interest (12,889 ) (1,062 ) Less: gain on sale of
properties (1,596 ) - Less: gain on sale of properties from
discontinued operations (1,260 ) - Less: equity in earnings of
investees (4,262 ) (2,958 ) FFO attributable to
CommonWealth REIT 90,828 87,261 Less: preferred distributions
(11,151 ) (13,823 ) FFO available for CommonWealth
REIT common shareholders $ 79,677 $ 73,438
Calculation of Normalized FFO:(1) FFO attributable to CommonWealth
REIT $ 90,828 $ 87,261 Plus: acquisition related costs from
continuing operations 628 2,502 Plus: normalized FFO from investees
4,747 5,367 Plus: loss on early extinguishment of debt from
continuing operations 60,027 67 Plus: average minimum rent from
direct financing lease 329 329 Plus: FFO attributable to
noncontrolling interest 12,889 1,062 Less: normalized FFO
attributable to noncontrolling interest (13,123 ) (1,062 ) Less:
FFO from investees (4,742 ) (5,356 ) Less: interest earned from
direct financing lease (313 ) (393 ) Less: gain on sale of equity
investment (66,293 ) - Normalized FFO
attributable to CommonWealth REIT 84,977 89,777 Less: preferred
distributions (11,151 ) (13,823 ) Normalized FFO
available for CommonWealth REIT common shareholders $ 73,826
$ 75,954 Weighted average common shares outstanding –
basic 94,154 83,722 Weighted
average common shares outstanding – diluted(2) 101,452
91,020 Per common share: Income from
continuing operations attributable to CommonWealth REIT common
shareholders – basic and diluted $ 0.20 $ 0.15 Loss from
discontinued operations attributable to CommonWealth REIT common
shareholders – basic and diluted $ (0.05 ) $ (0.04 ) Net income
available for CommonWealth REIT common shareholders – basic and
diluted $ 0.15 $ 0.12 FFO available for CommonWealth REIT common
shareholders – basic $ 0.85 $ 0.88 FFO available for CommonWealth
REIT common shareholders – diluted $ 0.85 $ 0.87 Normalized FFO
available for CommonWealth REIT common shareholders – basic $ 0.78
$ 0.91 Normalized FFO available for CommonWealth REIT common
shareholders – diluted $ 0.78 $ 0.90
CommonWealth REITCondensed
Consolidated Statements of Operations, Funds from Operations
andNormalized Funds from Operations
(continued)(amounts in thousands)(unaudited)
(1) CWH calculates FFO and Normalized FFO as shown above. FFO is
calculated on the basis defined by The National Association of Real
Estate Investment Trusts, or NAREIT, which is net income,
calculated in accordance with GAAP, plus real estate depreciation
and amortization, loss on asset impairment, net income attributable
to noncontrolling interest and FFO from equity investees, excluding
any gain or loss on sale of properties, earnings from equity
investees and FFO attributable to noncontrolling interest. CWH’s
calculation of Normalized FFO differs from NAREIT's definition of
FFO because CWH excludes acquisition related costs, gain from sale
of equity investment, loss on early extinguishment of debt, the
difference between average minimum rent and interest earned from
CWH’s direct financing lease and the difference between FFO and
Normalized FFO from equity investees and noncontrolling interest.
CWH considers FFO and Normalized FFO to be appropriate measures of
operating performance for a REIT, along with net income, net income
attributable to CommonWealth REIT, net income available for
CommonWealth REIT common shareholders, operating income and cash
flow from operating activities. CWH believes that FFO and
Normalized FFO provide useful information to investors because by
excluding the effects of certain historical amounts, such as
depreciation expense, FFO and Normalized FFO may facilitate a
comparison of CWH’s operating performance between periods and
between CWH and other REITs. FFO and Normalized FFO are among the
factors considered by CWH’s Board of Trustees when determining the
amount of distributions to CWH’s shareholders. Other factors
include, but are not limited to, requirements to maintain CWH’s
status as a REIT, limitations in CWH’s revolving credit facilities
and term loan agreements and public debt covenants, the
availability of debt and equity capital to CWH, CWH’s cash
available for distribution, CWH’s expectation of its future capital
requirements and operating performance, and CWH’s expected needs
and availability of cash to pay its obligations. FFO and Normalized
FFO do not represent cash generated by operating activities in
accordance with GAAP and should not be considered as alternatives
to net income, net income attributable to CommonWealth REIT, net
income available for CommonWealth REIT common shareholders,
operating income or cash flow from operating activities, determined
in accordance with GAAP, or as indicators of CWH’s financial
performance or liquidity, nor are these measures necessarily
indicative of sufficient cash flow to fund all of CWH’s needs. CWH
believes that FFO and Normalized FFO may facilitate an
understanding of its consolidated historical operating results.
These measures should be considered in conjunction with net income,
net income attributable to CommonWealth REIT, net income available
for CommonWealth REIT common shareholders, operating income and
cash flow from operating activities as presented in CWH’s Condensed
Consolidated Statements of Operations, Condensed Consolidated
Statements of Comprehensive Income and Condensed Consolidated
Statements of Cash Flows. Other REITs and real estate companies may
calculate FFO and Normalized FFO differently than CWH does.
(2) As of March 31, 2013, CWH’s 15,180 outstanding series D
preferred shares were convertible into 7,298 common shares. The
effect of a conversion of CWH’s series D convertible preferred
shares on income from continuing operations available for
CommonWealth REIT common shareholders per share is anti-dilutive to
income, but dilutive to FFO and Normalized FFO for most periods
presented. Set forth below is the calculation of diluted net income
available for common shareholders, diluted FFO available for common
shareholders, diluted Normalized FFO available for common
shareholders and diluted weighted average common shares
outstanding.
Quarter Ended March 31, 2013
2012 Net income available for CommonWealth
REIT common shareholders $ 14,516 $ 9,857 Add - Series D
convertible preferred distributions 6,167 6,167 Net
income available for CommonWealth REIT common shareholders –
diluted $ 20,683 $ 16,024 FFO available for CommonWealth
REIT common shareholders $ 79,677 $ 73,438 Add - Series D
convertible preferred distributions 6,167 6,167 FFO
available for CommonWealth REIT common shareholders – diluted $
85,844 $ 79,605 Normalized FFO available for CommonWealth
REIT common shareholders $ 73,826 $ 75,954 Add - Series D
convertible preferred distributions 6,167 6,167 Normalized FFO
available for CommonWealth REIT common
shareholders – diluted $ 79,993 $ 82,121 Weighted average
common shares outstanding – basic 94,154 83,722 Effect of dilutive
Series D preferred shares 7,298 7,298 Weighted
average common shares outstanding – diluted 101,452
91,020
CommonWealth REIT Condensed Consolidated Balance
Sheets (amounts in thousands, except share data)
(unaudited) March 31,2013 December 31,2012
ASSETS
Real estate properties: Land $ 1,548,225 $ 1,531,416 Buildings and
improvements 6,441,544 6,297,993
7,989,769 7,829,409 Accumulated depreciation (1,047,697 )
(1,007,606 ) 6,942,072 6,821,803 Properties held for sale
159,501 171,832 Acquired real estate leases, net 416,763 427,756
Equity investments 11,394 184,711 Cash and cash equivalents 48,692
102,219 Restricted cash 14,723 16,626 Rents receivable, net of
allowance for doubtful accounts of $9,962 267,733 253,394 Other
assets, net 221,790 211,293 Total
assets $ 8,082,668 $ 8,189,634
LIABILITIES AND
SHAREHOLDERS' EQUITY
Revolving credit facility $ 135,000 $ 297,000 SIR revolving credit
facility 238,000 95,000 Senior unsecured debt, net 2,304,229
2,972,994 Mortgage notes payable, net 980,985 984,827 Liabilities
related to properties held for sale 1,994 2,339 Accounts payable
and accrued expenses 155,993 194,184 Assumed real estate lease
obligations, net 66,576 69,304 Rent collected in advance 34,703
35,700 Security deposits 23,822 23,860 Due to related persons
14,636 12,958 Total liabilities
3,955,938 4,688,166 Shareholders'
equity: Shareholder's equity attributable to CommonWealth REIT:
Preferred shares of beneficial interest, $0.01 par value:
50,000,000 shares authorized; 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 Series E
preferred shares; 7 1/4% cumulative redeemable on or after May 15,
2016; 11,000,000 shares issued and outstanding, aggregate
liquidation preference $275,000 265,391 265,391 Common shares of
beneficial interest, $0.01 par value: 350,000,000 shares
authorized; 118,304,068 and 83,804,068 shares issued and
outstanding, respectively 1,183 838 Additional paid in capital
4,212,082 3,585,400 Cumulative net income 2,412,567 2,386,900
Cumulative other comprehensive income 2,577 565 Cumulative common
distributions (2,993,520 ) (2,972,569 ) Cumulative preferred
distributions (540,518 ) (529,367 ) Total
shareholders' equity attributable to CommonWealth REIT 3,728,032
3,105,428 Noncontrolling interest in consolidated subsidiary
398,698 396,040 Total shareholders' equity
4,126,730 3,501,468 Total liabilities
and shareholders' equity $ 8,082,668 $ 8,189,634
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.
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