Colonial Properties Trust Sells Metropolitan Midtown for $94 Million

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Colonial Properties Trust Sells Metropolitan Midtown for $94 Million

Adjusts Reported Fourth Quarter 2012 Earnings for Subsequent Jury Verdict

BIRMINGHAM, Ala.--(BUSINESS WIRE)-- Colonial Properties Trust (NYS: CLP) , today announced the sale of Metropolitan Midtown, its mixed-use project located in Charlotte, North Carolina, for $94.4 million in cash. Colonial Properties Trust (the Company) also announced it has adjusted its previously announced results for the fourth quarter and year ended December 31, 2012, due to a jury verdict in the previously disclosed Colonial Grand at Traditions litigation in the Circuit Court of Baldwin County, Alabama.


Metropolitan Midtown Disposition

Opened in 2008, Metropolitan Midtown comprises 170,000 square feet of office space and 172,000 square feet of retail space, and was 93.5 percent occupied at December 31, 2012. The sales proceeds will be used to fund the multifamily development pipeline and improve the Company's balance sheet. With the closing of Metropolitan Midtown, the Company's goal of having at least 90 percent of its total net operating income generated from its multifamily properties has been achieved.

Colonial Grand at Traditions Litigation

As previously reported, in December 2010, SM Traditions Associates, LLC, a member in TA Colonial Traditions, LLC, the joint venture entity, filed claims against Colonial Realty Limited Partnership, Colonial Properties Trust, Colonial Properties Services, Inc. and Colonial Construction Services, LLC (collectively, the Company) relating to the Company's oversight and involvement in the development and construction of the Colonial Grand at Traditions, a multifamily apartment community, including breach of management and development agreements, material misrepresentations, fraudulent concealment and breach of fiduciary duties. Also, as previously reported, the Company purchased the note, evidencing the construction loan made to TA Traditions, LLC.

On February 1, 2013, a Baldwin County, Alabama jury awarded SM Traditions Associates, LLC $6.7 million in compensatory damages and $6.0 million in punitive damages for a total of $12.7 million. The jury also returned verdicts in favor of SM Traditions Associates, LLC and TA Colonial Traditions, LLC with respect to the Company's counter-claims.

The Company believes the verdicts should be vacated or a new trial ordered, and intends to pursue all available post-trial remedies. However, the Company cannot give any assurance as to the outcome of these efforts.

As a result of the jury verdict, the Company has recorded an increase to its loss contingency reserve of $12.7 million in the fourth quarter of 2012, which is reflected in Impairment and Other Losses. The Company has adjusted its net income available to common shareholders and earnings per share (EPS) and Funds from Operations Available to Common Shareholders and Unitholders (FFO) and FFO per share for the quarter and year ended December 31,2012, which was previously reported by the Company on January 24, 2013. The Company's adjusted financial statements for the quarter and year ended December 31, 2012 are attached to this press release.

After giving effect to the increase in contingency reserves resulting from the jury verdict, the Company's revised reported net income available to common shareholders and EPS for the fourth quarter 2012 is $4.2 million and $0.05 per diluted share, respectively (revised from $16.0 million or $0.18 per diluted share). For the year ended December 31, 2012, the Company's revised reported net income available to common shareholders and EPS is $8.2 million and $0.09 per diluted share, respectively (revised from $19.9 million or $0.22 per diluted share).

The revised reported FFO, a widely accepted measure of REIT performance, for the fourth quarter 2012 is $5.4 million or $0.06 per diluted share (revised from $18.1 million or $0.19 per diluted share). The revised reported FFO for the year ended December 31, 2012 is $92.5 million or $0.98 per diluted share (revised from $105.1 million or $1.11 per diluted share).

The jury verdict and revised reported results do not impact any of the Company's covenants under its credit facilities.

A reconciliation of net income/loss available to common shareholders to FFO is included in the financial tables accompanying this press release.

The Company has filed a Form 8-K/A with the Securities and Exchange Commission that contains the Company's adjusted financial statements for the quarter and year ended December 31, 2012, which is also attached to this press release. A copy of this Form 8-K/A and a revised Supplemental Financial Highlights for the quarter and year ended December 31, 2012 can also be found on the Company's website at www.colonialprop.com.

Colonial Properties Trust is a real estate investment trust (REIT) that creates value for its shareholders through a multifamily portfolio and the management and development of select commercial assets in the Sunbelt region of the United States. As of December 31, 2012, the Company owned, had partial ownership in or managed 34,497 apartment units and 2.5 million square feet of commercial space. Headquartered in Birmingham, Alabama, Colonial Properties is listed on the New York Stock Exchange under the symbol CLP and is included in the S&P SmallCap 600 Index. For more information, please visit the Company's website at www.colonialprop.com.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures in this press release. The non-GAAP financial measures include FFO. The definition of this non-GAAP financial measure is summarized below. The Company believes that this measure is helpful to investors in measuring financial performance and comparing such performance to other REITs.

FFO, as defined by the National Association of Real Estate Investment Trusts (NAREIT), means income (loss) before non-controlling interest (determined in accordance with GAAP), excluding gains (losses) from sales of depreciated property and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized measure in the Company's industry and is presented to assist investors in analyzing the Company's performance. The Company believes that FFO is useful to investors because it provides an additional indicator of the Company's financial and operating performance. This is because, by excluding the effect of real estate depreciation and amortization, gains (or losses) from sales of properties and impairment write-downs of depreciable real estate (all of which are based on historical costs which may be of limited relevance in evaluating current performance), FFO can facilitate comparison of operating performance among equity REITs. FFO is a widely recognized measure in the Company's industry.

The Company believes that the line on its consolidated statements of income entitled "net income available to common shareholders" is the most directly comparable GAAP measure to FFO.

Historical cost accounting for real estate assets 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, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes that the use of FFO, combined with the required primary GAAP presentations, is fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. In addition to company management evaluating the operating performance of its reportable segments based on FFO results, management uses FFO and FFO per share, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to key employees.

The Company's method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO should not be considered (1) as an alternative to net income (determined in accordance with GAAP), (2) as an indicator of financial performance, (3) as cash flow from operating activities (determined in accordance with GAAP) or (4) as a measure of liquidity, nor is it indicative of sufficient cash flow to fund all of the Company's needs, including the Company's ability to make distributions.

Safe Harbor Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, including statements regarding pending litigation matters, operating performance outlook and other business fundamentals may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance, achievements or transactions to be materially different from the results, performance, achievements or transactions expressed or implied by the forward looking statements. Factors that impact such forward looking statements include, among others, changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits (including the European sovereign debt crisis), high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties; exposure, as a multifamily focused REIT, to risks inherent in investments in a single industry; ability to obtain financing on favorable rates, if at all; performance of affiliates or companies in which we have made investments; changes in operating costs; higher than expected construction costs; uncertainties associated with the timing and amount of real estate disposition and the resulting gains/losses associated with such dispositions; legislative or regulatory decisions; the Company's ability to continue to maintain our status as a REIT for federal income tax purposes; price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on availability of financing; the effect of any rating agency action on the cost and availability of new debt financings; level and volatility of interest rates or capital market conditions; effect of any terrorist activity or other heightened geopolitical crisis; or other factors affecting the real estate industry generally.

Except as otherwise required by the federal securities laws, the Company assumes no responsibility to update the information in this press release.

The Company refers you to the documents filed by the Company from time to time with the Securities and Exchange Commission, specifically the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, as may be updated or supplemented in the Company's Form 10-Q filings, which discuss these and other factors that could adversely affect the Company's results.

   
COLONIAL PROPERTIES TRUST
Financial Statements
Fourth Quarter 2012
    
BALANCE SHEET     
 
($ in 000s)As ofAs of

 

12/31/201212/31/2011
ASSETS

Real Estate Assets

Operating Properties$3,489,324$3,445,455
Undeveloped Land & Construction in Progress 296,153  306,826 
Total Real Estate, before Depreciation3,785,4773,752,281
 
Less: Accumulated Depreciation(804,964)(731,894)
Real Estate Assets Held for Sale, net 93,450  10,543 
 
Net Real Estate Assets3,073,9633,030,930
 
Cash and Equivalents11,6746,452
Restricted Cash38,12843,489
Accounts Receivable, net23,97726,762
Notes Receivable42,39943,787
Prepaid Expenses19,46019,912
Deferred Debt and Lease Costs23,93822,408
Investment in Unconsolidated Subsidiaries7,77712,303
Other Assets 44,892  52,562 
 
Total Assets$3,286,208 $3,258,605 
 
LIABILITIES
Unsecured Credit Facility$188,631$184,000
Notes and Mortgages Payable 1,643,361  1,575,727 
Total Debt1,831,9921,759,727
 
Accounts Payable53,54550,266
Accrued Interest10,20911,923
Accrued Expenses41,65215,731
Investment in Unconsolidated Subsidiaries-31,577
Other Liabilities 36,751  25,208 
Total Liabilities 1,974,149  1,894,432 
 
Redeemable Common Units162,056159,582
 
EQUITY
Limited Partner's Noncontrolling Interest695728
 
Cumulative Earnings1,276,1181,267,958
Cumulative Distributions(1,926,167)(1,862,838)
Common Equity, including Additional Paid-in Capital1,974,5321,965,812
Treasury Shares, at Cost(150,163)(150,163)
Accumulated Other Comprehensive Loss (25,012) (16,906)
Total Equity, including Noncontrolling Interest 1,150,003  1,204,591 
 
Total Liabilities and Equity$3,286,208 $3,258,605 
   
SHARES & UNITS OUTSTANDING, END OF PERIOD     
 
(shares and units in 000s)As ofAs of
12/31/201212/31/2011
Basic
Shares88,21287,474
Operating Partnership Units (OP Units) 7,153  7,169 
Total Shares & OP Units95,36594,643
           
COLONIAL PROPERTIES TRUST
Financial Statements
Fourth Quarter 2012
      
   
CONSOLIDATED STATEMENTS OF OPERATIONS          
 
($ in 000s, except per share data)Three Months EndedTwelve Months Ended
 12/31/2012  12/31/2011  12/31/2012  12/31/2011 

Revenue

Minimum Rent$83,061$75,964$320,489$287,667
Tenant Recoveries2,2522,4309,5749,329
Other Property Related Revenue16,07612,82957,76948,346
Other Non-Property Related Revenue 1,622  2,097  5,712  8,047 
Total Revenues103,01193,320393,544353,389
 

Operating Expenses

Operating Expenses:
Property Operating Expenses27,76624,950107,65798,108
Taxes, Licenses and Insurance 11,740  10,410  44,413  40,039 
Total Property Operating Expenses39,50635,360152,070138,147
 
Property Management Expense3,7732,18712,8589,185
General and Administrative Expense5,5074,84422,61520,439
Management Fee and Other Expenses1,0922,3866,2988,067
Restructuring Charges1,8481531,848153

Investment and Development Expenses (1)

6533441,2851,781
Depreciation32,25929,085120,993113,475
Amortization1,4251,8046,1227,446

Impairment and Other Losses (2)

 21,321  3,392  26,013  5,736 
Total Operating Expenses 107,384  79,555  350,102  304,429 
Income from Operations(4,373)13,76543,44248,960
 

Other Income (Expense)

Interest Expense(22,718)(22,991)(92,085)(86,573)
Debt Cost Amortization(1,412)(1,252)(5,697)(4,767)
Interest Income4932762,5691,521
Income from Partially-Owned Investments10,35818,58831,862
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