ORLANDO, Fla., Aug. 8 /PRNewswire-FirstCall/ -- Trustreet
Properties, Inc. (NYSE:TSY), the largest real estate investment
trust ("REIT") focused primarily on the restaurant industry,
announces operating results for the second quarter and six months
ended June 30, 2006. Highlights -- The Company reported revenues of
$54.7 million for the quarter ended June 30, 2006, a 9.0% increase
over $50.2 million reported in the quarter ended June 30, 2005. --
In the second quarter of 2006 and 2005, the Company reported funds
from operations ("FFO") available to common shareholders, after
adding back the principal component of capital leases, of $21.3
million, or $0.32 cents per diluted share compared to $20.0
million, or $0.35 cents per diluted share. -- For the six months
ended June 30, 2006 and 2005, the Company reported FFO available to
common shareholders, after adding back the principal component of
capital leases, of $40.8 million, or $0.61 cents per diluted share
compared to $26.5 million, or $0.52 cents per diluted share. -- For
the quarter ended June 30, 2006, adjusted funds from operations
("AFFO") was $23.5 million, compared to $21.7 million for the
quarter ended June 30, 2005. -- The Company acquired 104 properties
in the second quarter representing a total investment of $90.7
million. Through June 30, 2006, the Company has acquired $165.0
million in new acquisitions. -- In the second quarter, the taxable
REIT subsidiary ("TRS") sold 43 properties generating $74.2 million
in sales proceeds producing a pre-tax gain of $8.8 million. Through
June 30, 2006, the TRS has sold $114.9 million producing a pre-tax
gain of $13.3 million. -- The Company owned 2,015 properties in the
core REIT portfolio of which 97.8 percent were leased based on
carrying value as of June 30, 2006. Since June 2005, the Company
has added $319 million to its core REIT portfolio. -- The Company
declared monthly common dividends per share of $0.11 cents
throughout the second quarter. Second Quarter Results and Portfolio
Highlights For the quarter ended June 30, 2006, the Company
reported funds from operations of $19.7 million, or $0.29 cents per
share computed in accordance with the definition of the National
Association of Real Estate Investment Trusts ("NAREIT"). FFO
generated by the core REIT portfolio represented approximately 88
percent of gross FFO. NAREIT FFO does not include cash received
from tenants that is treated as the principal component of a
capital lease. Unlike many REITs that are in the Company's peer
group, the Company has a meaningful number of capital leases. FFO
and the principal component of capital leases total $21.3 million,
or $0.32 cents per share for the quarter. For the quarter ended
June 30, 2006, adjusted funds from operations ("AFFO") was $23.5
million. The Company believes that AFFO is useful as a measure of
its cash available for distribution. Given the variation in the
definition of AFFO in the REIT industry, investors should take
these differences into account when comparing AFFO against other
REITs. Typically, this metric will exceed the Company's FFO because
of the level of deferred financing cost amortization, the principal
component of capital leases, non- real estate depreciation,
non-cash real estate impairment charges and loan provisions. The
Company acquired 104 properties for $90.7 million during the second
quarter. The Company designated 43 of the second quarter
acquisitions as long- term investments resulting in improved tenant
and geographic diversity and a stronger outlook for net income from
continuing operations within the core REIT portfolio. The remaining
61 properties were designated as held-for-sale inventory to be sold
through Trustreet's investment property sales platform. For the six
months ended June 30, 2006, we purchased $165 million in net lease
properties. In addition to the $17.2 million in transactions closed
through the end of July 2006, the Company currently has signed
commitments to acquire a further $110 million, the substantial
majority of which is expected to close over the next six months. In
the second quarter, the Company sold 43 properties generating $74.2
million in sales proceeds from its investment property sales
platform producing a pre-tax gain of $8.8 million. For the six
months ended June 30, 2006, the Company sold $114.9 million through
its investment property sales platform. At June 30, 2006, we held
142 properties for sale to investors through our IPS program with
an investment of $174.6 million. These results are required to be
recorded as discontinued operations under GAAP. In addition, the
Company held for sale an additional 44 properties in their
development pipeline comprising an investment of $46.9 million. As
of June 30, 2006, the Company owned 2,015 properties held in the
core REIT portfolio of which 97.8 percent were leased based on
carrying value. The weighted average remaining lease term of the
Company's real estate investment portfolio was approximately 10.2
years, with more than 81 percent of the Company's lease expirations
occurring after 2011. The Company has recycled capital or paid down
debt through sales of $37.6 million in the core REIT generating a
pre-tax gain of $8.1 million. The Company's portfolio is broadly
diversified with more than 175 concepts and more than 500 tenants
in 49 states. No single tenant represented more than 6.8 percent of
contractual rents. Of the 65 vacant properties with a carrying
value of approximately $40.9 million, 12 are either under contract
for sale or have a lease or sales contract out for signature, and
another five are currently being redeveloped after having been
pre-leased. On August 4, 2006, the Company's Board approved the
move from a monthly dividend to a quarterly dividend payout policy
beginning in the fourth quarter of 2006. The change will result in
cost savings and enable the Company to more effectively evaluate
the future quarterly dividend level. The fourth quarter dividend
will be declared in mid-November with a payout occurring before the
end of the year. "I am pleased with the performance of our core
real estate portfolio exhibited by the historic low vacancy rate,
the improving credit metrics of our tenants and the great progress
that has been made in renewing expiring leases. On the TRS side of
our business, sales velocity in our investment property sales
platform increased nicely in the second quarter, reflecting the
additional resources we have devoted to this business. However, we
continue to face some cap rate compression, which impacted our gain
percentages," states Curtis B. McWilliams, President and Chief
Executive Officer of Trustreet Properties, Inc. "Looking ahead, I
firmly believe we will continue to see increased monetization of
all or significant portions of real estate held by restaurant
companies. We continue to explore ways to ensure that we have
sufficient capital to take advantage of these opportunities," added
Mr. McWilliams. About Trustreet Trustreet Properties, Inc.
(pronounced "trust - street") is the largest self-advised
restaurant real estate investment trust (REIT) in the United
States. Trustreet, traded on the NYSE under the ticker symbol TSY,
provides a complete range of financial, real estate and advisory
services to operators of national and regional restaurant chains.
For more information, visit http://www.trustreet.com/. Conference
Call Management will hold a conference call on Tuesday, August 8,
2006 at 10:00 a.m. EDT to review the Company's quarterly results.
The call can be accessed on the Company's website at
http://www.trustreet.com/ and by direct dial-in at 888-413-5357.
Reference conference identification number 934600. For those unable
to listen to the live broadcast, a replay will also be available on
the Company's web site for 30 days. Statements in this press
release that are not strictly historical are "forward-looking"
statements. Forward-looking statements involve known and unknown
risks, which may cause the Company's actual future results to
differ materially from expected results. These risks include, among
others, general economic conditions, local real estate conditions,
changes in interest rates, increases in operating costs, the
availability of capital, and the profitability of the Company's
taxable subsidiary. Additional information concerning these and
other factors that could cause actual results to differ materially
from those forward-looking statements is contained from time to
time in the Company's SEC filings. Copies of each filing may be
obtained from the Company or the SEC. Consequently, such
forward-looking statements should be regarded solely as reflections
of the Company's current operating plans and estimates. Actual
operating results may differ materially from what is expressed or
forecast in this press release. The Company undertakes no
obligation to publicly release the results of any revisions to
these forward- looking statements that may be made to reflect
events or circumstances after the date these statements were made.
"Funds From Operations" (FFO) is a measure of performance that
Trustreet computes in accordance with the "White Paper" definition
of FFO adopted by the Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT"). According
to this definition, and as used herein by Trustreet, FFO means net
income (loss) allocable to common stockholders (computed in
accordance with GAAP), plus real estate related depreciation and
amortization excluding gains (or losses) from sales of property
held for investment and after adjustments allocable to minority
interests or joint ventures. NAREIT created FFO as a supplemental
performance measure to exclude historical cost depreciation, among
other items, from GAAP net income (loss) allocable to common
stockholders. Trustreet uses FFO as a supplemental measure to
conduct and evaluate its business because there are certain
limitations associated with using GAAP net income by itself as the
primary measure of operating performance. Historical cost
accounting for real estate assets in accordance with GAAP
implicitly assumes that the value of real estate assets diminishes
predictably over time. Since real estate values instead have
historically risen or fallen with market conditions, Trustreet
believes that the presentation of operating results for real estate
companies that use historical cost accounting is insufficient by
itself. In addition, Trustreet believes that the use of FFO has
made comparisons of those results more meaningful and has enabled
the evaluation of its operating performance compared to other REITs
that use the NAREIT definition in order to make more informed
business decisions based on industry trends or conditions. FFO
should not be considered as an alternative to net income (loss)
allocable to common stockholders as the primary indicator of
Trustreet's operating performance or as an alternative to cash flow
as a measure of liquidity. While Trustreet adheres to the NAREIT
definition of FFO in making its calculations, this method of
calculating FFO may not be comparable to the methods used by other
REITs and, accordingly, may be different from similarly titled
measures reported by other companies. The Company believes that
Adjusted Funds from Operations is helpful to investors as a measure
of its ability to pay dividends. While the measure is used commonly
in the REIT industry, definitions of AFFO vary and investors should
take definitional differences into account when comparing AFFO
reported by other REITs. The Company calculates AFFO by subtracting
from or adding to FFO (i) amortization of the principal portion of
capital leases, (ii) straight-lining of rents, (iii) non-real
estate depreciation and amortization, (iv) amortization of deferred
loan costs and (v) non-cash real estate impairment charges or loan
reserves. TRUSTREET PROPERTIES, INC. Condensed CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED) (In thousands except for per share
data) Quarter ended Six months ended June 30, June 30, 2006 2005
2006 2005 Revenues: Rental income from operating leases $46,656
$38,296 $93,768 $60,728 Earned income from capital leases 3,048
3,170 6,107 5,830 Interest income from mortgage, equipment and
other notes receivables 1,961 6,554 3,945 12,835 Investment and
interest income 339 448 610 993 Other income 2,735 1,686 6,319
2,882 54,739 50,154 110,749 83,268 Expenses: General operating and
administrative 7,259 10,041 15,068 20,987 Interest expense 25,412
24,868 50,416 41,759 Property expenses, state and other taxes 2,278
1,947 5,680 3,098 Depreciation and amortization 9,757 8,487 20,171
13,436 Impairment provisions on assets 950 125 1,637 140 45,656
45,468 92,972 79,420 Income from continuing operations before
minority interest and equity in earnings of unconsolidated joint
ventures 9,083 4,686 17,777 3,848 Minority interest (140) (734)
(372) (1,549) Equity in earnings/(loss) of unconsolidated joint
ventures (25) 32 11 62 Income from continuing operations 8,918
3,984 17,416 2,361 Income from discontinued operations, after
income taxes 12,930 14,142 21,729 19,215 Gain/(loss) on sale of
assets (136) 23 523 23 Net income 21,712 18,149 39,668 21,599
Dividends to preferred stockholders (7,176) (7,176) (14,352)
(10,099) Net income allocable to common stockholders $14,536
$10,973 $25,316 $11,500 Basic and diluted net income per share:
Income/(loss) from continuing operations allocable to common
stockholders $0.03 $(0.05) $0.06 $(0.15) Income from discontinued
operations 0.19 0.24 0.32 0.38 Basic and diluted net income per
share $0.22 $0.19 $0.38 $0.23 Weighted average number of shares of
common stock outstanding Basic 67,278 57,908 67,260 50,922 Diluted
67,280 57,908 67,278 50,922 TRUSTREET PROPERTIES, INC. DISCONTINUED
OPERATIONS BY SEGMENT (UNAUDITED) Quarter ended June 30, (in
millions) 2006 2005 Real Specialty Real Specialty Estate Finance
Estate Finance Segment Segment Segment Segment Sale of real estate
$31.6 $74.2 $13.2 $70.8 Cost of real estate sold 26.5 65.4 12.4
59.4 Gain on sale of real estate 5.1 8.8 0.8 11.4 Rental income 0.5
3.2 2.1 1.5 Interest expense - (2.2) - (1.3) Other property expense
and impairment provisions (0.3) (0.2) (0.4) (0.4) Net earnings from
retail discontinued operations before tax - - - 0.3 Net other
income 0.2 0.8 1.7 0.1 Earnings from discontinued operations before
tax 5.3 9.6 2.5 11.5 Income tax benefit/ (provision) - (2.0) - 0.2
Income from discontinued operations, after income taxes $5.3 $7.6
$2.5 $11.7 Six months ended June 30, (in millions) 2006 2005 Real
Specialty Real Specialty Estate Finance Estate Finance Segment
Segment Segment Segment Sale of real estate $45.7 $114.9 $13.5
$127.8 Cost of real estate sold 37.6 101.6 12.6 106.7 Gain on sale
of real estate 8.1 13.3 0.9 21.1 Rental income 1.6 6.3 3.4 3.4
Interest expense - (4.2) - (2.1) Other property expense and
impairment provisions (0.8) - (1.1) (0.8) Net earnings from retail
discontinued operations before tax - - - 0.9 Net other income 0.8
2.1 2.3 1.4 Earnings from discontinued operations before tax 8.9
15.4 3.2 22.5 Income tax provision - (2.6) - (6.4) Income from
discontinued operations, after income taxes $8.9 $12.8 $3.2 $16.1
TRUSTREET PROPERTIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (In thousands) June 30, December 31, 2006 2005 ASSETS
Real estate investment properties $1,757,151 $1,726,493 Net
investment in capital leases 144,825 147,995 Real estate held for
sale 221,366 242,777 Mortgage, equipment and other notes
receivable, net of allowance of $3,286 and $5,706, respectively
84,115 88,239 Cash and cash equivalents 15,987 20,459 Restricted
cash 37,524 32,465 Receivables, less allowance for doubtful
accounts of $2,764 and $2,394, respectively 9,523 7,665 Accrued
rental income 40,148 34,295 Intangible lease costs, net of
accumulated amortization of $15,082 and $9,628, respectively 75,538
77,716 Goodwill 235,895 235,895 Other assets 70,475 69,481 Total
assets $2,692,547 $2,683,480 LIABILITIES AND STOCKHOLDERS' EQUITY
Revolver $101,500 $55,000 Notes payable 576,887 579,002 Mortgage
warehouse facilities 145,163 122,722 Bonds payable 705,735 742,201
Below market lease liability, net of accumulated amortization of
$5,914 and $3,772, respectively 29,754 31,649 Due to related
parties 354 232 Other payables 49,584 56,097 Minority interests
4,230 4,077 Stockholders' equity 1,079,340 1,092,500 Total
liabilities and stockholders' equity $2,692,547 $2,683,480
TRUSTREET PROPERTIES, INC. RECONCILIATION OF NAREIT FFO AND AFFO
(UNAUDITED) (In thousands except for per share data) Quarter ended
Six months ended June 30, June 30, 2006 2005 2006 2005 Funds From
Operations (NAREIT defined): Net income $21,712 $18,149 $39,668
$21,599 Less: Dividends on preferred stock (7,176) (7,176) (14,352)
(10,099) Net income allocable to common stockholders 14,536 10,973
25,316 11,500 FFO adjustments: Real estate depreciation and
amortization 8,913 8,454 18,967 13,539 Gain on sale of real estate
(3,786) (828) (6,740) (828) NAREIT FFO $19,663 $18,599 $37,543
$24,211 NAREIT FFO per share $0.29 $0.32 $0.56 $0.48 Principal
component of capital leases $1,646 $1,442 $3,226 $2,337 FFO and the
principal component of capital leases $21,309 $20,041 $40,769
$26,548 FFO and the principal component of capital leases per share
$0.32 $0.35 $0.61 $0.52 Straight-line rent $(2,563) $(2,231)
$(5,838) $(3,416) Non-real estate depreciation and amortization
1,326 803 1,932 1,187 Deferred loan cost amortization 2,472 2,748
4,843 4,716 Asset impairment/ provisions 973 308 1,759 500 ADJUSTED
FFO $23,517 $21,669 $43,465 $29,535 LEASE EXPIRATIONS Lease
Expirations (based on annualized base rent as of June 30, 2006) #
of % of # of % of Properties Total Properties Total 2006 28 1.3%
2012 82 4.5% 2007 79 2.9% 2013 75 4.2% 2008 80 2.6% 2014 145 8.3%
2009 94 3.8% 2015 93 5.6% 2010 103 4.7% 2016 191 9.3% 2011 74 3.5%
Thereafter (or Vacant) 971 49.3% DIVERSIFICATION Top 10 Tenants
(based on annualized base rent as of June 30, 2006) Tenant % of
Rent 1 Jack in the Box, Inc. 6.8% 2 Golden Corral Corporation 6.1%
3 IHOP Properties, Inc. 4.0% 4 Captain D's, LLC 3.7% 5 Sybra Inc.
3.4% 6 S&A Properties Corp. 3.0% 7 Texas Taco Cabana, LP 2.1% 8
El Chico Restaurants, Inc. 1.9% 9 The Restaurant Company 1.8% 10
Vicorp Restaurants, Inc. 1.6% Top 10 Concepts (based on annualized
base rent as of June 30, 2006) Concept % of Rent 1 Wendy's* 8.5% 2
Burger King 7.1% 3 Golden Corral 7.0% 4 Jack in the Box 6.7% 5
Arby's 6.2% 6 International House of Pancakes 4.2% 7 Captain D's
3.9% 8 Pizza Hut 2.9% 9 Bennigan's 2.9% 10 Denny's 2.6% * Includes
contingent rent for units with leases where rent is based solely on
actual store sales, generally without a minimum threshold. Top 10
States (based on annualized base rent as of June 30, 2006) State %
of Rent State % of Rent 1 Texas 19.5% 6 California 3.7% 2 Florida
10.4% 7 North Carolina 3.5% 3 Georgia 5.8% 8 Ohio 3.3% 4 Tennessee
4.0% 9 Missouri 2.8% 5 Illinois 3.8% 10 South Carolina 2.5% OTHER
PORTFOLIO STATISTICS 6/30/06 3/31/06 12/31/05 Rent to Sales Quick
Service 8.0% 8.5% 8.2% Casual Dining 7.5% 7.7% 7.8% Fixed Charge
Coverage 1.67x 1.69x 1.66x Notes: 1. The Company looks for
rent-to-sales ratios to be under 10% for quick service restaurants
and under 14% for casual dining restaurants. Of the portfolio's
1,053 quick service restaurants reporting sales, the aggregate rent
as a percentage of aggregate sales was 8.0% based on the most
recent tenant sales information provided. Of the portfolio's 412
casual and family dining restaurants reporting sales, the aggregate
rent as a percentage of aggregate sales was 7.5%. 2. The Company's
initial underwriting criteria requires that tenants have a fixed
charge coverage ratio ("FCCR") of at least 1.25x, generally based
on historical financial information adjusted to include the
proposed sale/leaseback financing. Based on the most recent tenant
financial information obtained, approximately 77% of the units (as
measured by rent) that report have a tenant-level FCCR of at least
1.25x, with a weighted average tenant-level FCCR of 1.87x. The
weighted average tenant-level FCCR for all reporting units is
1.67x, with 74% (as measured by rent) of the total REIT reporting
financial statements. In those cases where the tenant-level FCCR is
below 1.25x, we may find store-level FCCRs that exceed 1.25x. A
strong store level FCCR often mitigates any negative impact of a
weaker tenant-level FCCR. EBITDA (UNAUDITED) (in thousands) Quarter
ended Six months ended June 30, June 30, 2006 2005 2006 2005 Net
income $21,712 $18,149 $39,668 $21,599 Interest expense 27,600
26,021 54,631 43,835 Income tax expense 1,964 (186) 2,571 6,408
Depreciation and amortization 9,886 9,270 20,485 14,743 EBITDA
61,162 53,254 117,355 86,585 Impairment provisions on assets 973
234 1,759 425 Principal component of capital leases 1,646 1,442
3,225 2,337 Straight line rent (2,550) (2,231) (5,815) (3,417)
Amortization of above/below market leases 344 (27) 414 (40)
Adjusted EBITDA $61,575 $52,672 $116,938 $85,890 Dividends to
preferred stockholders $7,176 $7,176 $14,352 $10,099
EBITDA/interest expense + preferred dividends 1.76x 1.60x 1.70x
1.61x Adjusted EBITDA/interest expense + preferred dividends 1.77x
1.59x 1.70x 1.59x Note: EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) is a non-GAAP measure that, as
calculated by the Company, represents net income plus (i) interest
expense, (ii) income tax expense and (iii) depreciation and
amortization. Adjusted EBITDA represents EBITDA plus (i) impairment
provisions on assets, (ii) principal component of capital leases,
(iii) amortization of above/below market leases, (iv) loss on
termination of cash flow hedges less (v) straight line rent. EBITDA
and Adjusted EBITDA are presented, because we believe that they
provide useful information to investors regarding our ability to
service debt and the preferred dividend obligation. EBITDA and
Adjusted EBITDA should not be considered alternative measures of
operating results or cash flow from operations as determined in
accordance with GAAP. SEGMENT FFO RECONCILIATION (UNAUDITED) (in
thousands except for per share data) Quarter ended June 30, 2006
Real Specialty Estate Finance Segment Segment Other Consolidated
Net income/(Loss) $18,873 $2,863 $(24) $21,712 Less: Dividends on
preferred stock* (6,459) (717) - (7,176) Net income allocable to
common stockholders 12,414 2,146 (24) 14,536 FFO adjustments: Real
Estate related depreciation & amortization 8,757 156 - 8,913
Gain on sale of property (3,786) - - (3,786) NAREIT FFO $17,385
$2,302 $ (24) $19,663 NAREIT FFO per share $ 0.26 $ 0.03 - $ 0.29
Principal component of capital leases $ 1,586 $60 - $1,646 FFO and
the principal component of capital leases $ 18,971 $2,362 $ (24)
$21,309 FFO and the principal component of capital leases per share
$ 0.28 $ 0.04 - $ 0.32 Straight-line rent $(2,364) $(199) -
$(2,563) Non-real estate related depreciation and amortization 401
925 - 1,326 Deferred loan cost amortization 2,195 277 - 2,472 Asset
impairments / provisions 973 - - 973 Adjusted FFO $20,176 $3,365
$(24) $ 23,517 Quarter ended June 30, 2005 Real Specialty Estate
Finance Segment Segment Other Consolidated Net income/(Loss)
$13,829 $4,427 $(107) $18,149 Less: Dividends on preferred stock*
(6,459) (717) - (7,176) Net income allocable to common stockholders
7,370 3,710 (107) 10,973 FFO adjustments: Real Estate related
depreciation & amortization 8,514 (60) - 8,454 Gain on sale of
property (828) - - (828) NAREIT FFO $15,056 $3,650 $(107) $18,599
NAREIT FFO per share $ 0.26 $ 0.06 - $ 0.32 Principal component of
capital leases $1,442 - - $1,442 FFO and the principal component of
capital leases $16,498 $3,650 $(107) $20,041 FFO and the principal
component of capital leases per share $ 0.29 $ 0.06 - $ 0.35
Straight-line rent $(2,209) $(22) - $(2,231) Non-real estate
related depreciation and amortization 242 561 - 803 Deferred loan
cost amortization 2,431 317 - 2,748 Asset impairments / provisions
234 74 - 308 Adjusted FFO $17,196 $4,580 $(107) $21,669 *
Represents internal allocation of 90% to the real estate segment
and 10% to the specialty finance segment. DATASOURCE: Trustreet
Properties, Inc. CONTACT: Liz Kohlmyer, Director of Communications
for Trustreet Properties, Inc., +1-407-540-2221 Web site:
http://www.trustreet.com/
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