Colonial Properties Trust Reports Results for Second Quarter 2013
Colonial Properties Trust Reports Results for Second Quarter 2013
For the second quarter 2013, the company reported net income available to common shareholders (EPS) of $16.1 million, or $0.18 per diluted share, compared with net income available to common shareholders of $16.4 million, or $0.19 per diluted share, for the same period in 2012. For the six months ended June 30, 2013, the company reported net income available to common shareholders of $21.7 million, or $0.24 per diluted share, compared with net income available to common shareholders of $10.4 million, or $0.12 per diluted share, for the same period in 2012. The increase in the six months ended June 30, 2013, is primarily attributable to gains recognized from the sale of properties, improving rental rates resulting in an increase in multifamily same-property net operating income (NOI) and income derived from the acquisition and development of multifamily apartment communities, offset by properties sold since January 1, 2012.
Funds from Operations Available to Common Shareholders and Unitholders (FFO), a widely accepted measure of REIT performance, for the second quarter 2013 was $29.1 million, or $0.31 per diluted share, compared with $29.9 million, or $0.32 per diluted share, for the same period in 2012. FFO for the six months ended June 30, 2013, totaled $60.9 million, or $0.64 per diluted share, compared with $58.0 million, or $0.61 per diluted share, for the same period in 2012. The decrease in the second quarter 2013 FFO is primarily a result of properties sold since January 1, 2012, $1.2 million in transaction costs related to the proposed merger transaction with Mid-America Apartment Communities, Inc. (NYS: MAA) recorded during the second quarter of 2012, and charges related to the settlement of certain litigation, offset by a 4.4 percent increase in multifamily same-property net operating income (NOI) from improving rental rates and the income derived from the acquisition and development of multifamily apartment communities.
A reconciliation of net income/loss available to common shareholders to FFO, and a reconciliation of NOI to income/loss from continuing operations, as well as definitions and statements of purpose are included in the financial tables accompanying this press release.
Thomas H. Lowder, Chairman and Chief Executive Officer, noted, "We are pleased with the solid performance of our multifamily portfolio and the continued execution of our commercial dispositions. Since announcing the merger agreement with MAA in early June, we have been working diligently with MAA toward the successful integration of our two companies and the completion of the merger."
Highlights for the Second Quarter 2013
- Multifamily same-property NOI increased 4.4 percent compared with second quarter 2012
- Multifamily same-property revenue increased 4.3 percent compared with second quarter 2012
- Ended the quarter with multifamily same-property physical occupancy of 94.9 percent
- Acquired the 252-unit Colonial Reserve at Frisco Bridges in Dallas, Texas for $36.2 million
- Sold Three Ravinia, a Class A office building, for a total sales price of $144 million
- Completed the disposition of three apartment communities totaling 856 units for an aggregate sales price of $78.3 million
- Completed the sale of the four remaining condominium units at Metropolitan Midtown and reduced for-sale residential land inventory
- Announced definitive merger agreement MAA
Multifamily Operating Performance
Multifamily same-property NOI for the second quarter 2013 increased 4.4 percent compared with the second quarter 2012 for the 30,938 apartment homes included in the consolidated same-property results. Multifamily same-property revenues increased 4.3 percent and expenses increased 4.1 percent compared with the second quarter 2012. The increase in revenues was primarily due to an improvement in renewal lease rates and a consistently high occupancy level. The increase in expenses is primarily due to an increase in property taxes, as well as an increase in insurance expense, as a result of lower insurance claims in the second quarter 2012.
Sequentially, multifamily same-property NOI for the second quarter 2013 increased 0.4 percent compared with the first quarter 2013, with revenues increasing 0.9 percent and expenses increasing 1.8 percent compared with the prior quarter.
Construction continued during the quarter on four wholly-owned apartment communities: Colonial Grand at Ayrsley Phase II, a $9.1 million development with 81 units in Charlotte, North Carolina; Colonial Reserve at South End, a $59.3 million development with 353 units in Charlotte, North Carolina, Colonial Grand at Lake Mary III, a $16.1 million development with 132 units in Orlando, Florida and Colonial Grand at Randal Lakes, a $57.0 million development with 462 units in Orlando, Florida.
Multifamily Asset Recycling
During the quarter, the company sold Colonial Reserve at West Franklin, a 49 year old, 332-unit apartment community located in Richmond, Virginia, for $23.8 million and Colonial Village at Pinnacle Ridge, a 65 year old, 166-unit apartment community in Asheville, North Carolina, for a total sales price of $13.4 million. The proceeds from these sales were used to fund the acquisition of Colonial Reserve at Frisco Bridges, as discussed below.
In May 2013, the company purchased the 252-unit Colonial Reserve at Frisco Bridges (formerly Ablon at Frisco Bridges) located in Dallas, Texas, for $36.2 million. The multifamily apartment community is a new mid-rise development that was completed earlier this year and is currently in lease-up.
Commercial and Non-Core Asset Dispositions
In May 2013, the company sold Three Ravinia, an 814,000-square-foot Class A office building for a total sales price of $144.3 million. The property was unencumbered and sales proceeds were used to repay a portion of the outstanding balance on the company's unsecured credit facility.
During May 2013, the company completed the sale of the four remaining condominium units at its Metropolitan Midtown mixed-use development located in Charlotte, North Carolina for an aggregate sales price of $2.5 million. The proceeds from the sale of these final four remaining units were used to pay down a portion of the outstanding balance on the company's unsecured credit facility. As a result of the sale of the remaining units, the company recognized an impairment of $0.8 million, or $0.01 per diluted share, in the second quarter of 2013.
In May 2013, a joint venture in which the company owns a 40 percent interest sold its Regents Park II for-sale residential land located in Atlanta, Georgia for a total sales price of $6.2 million. The company received cash proceeds of $2.3 million from the transaction. The proceeds received by the company from the sale were used to pay down a portion of the outstanding balance on the company's unsecured credit facility.
In June 2013, a joint venture in which the company owns a 20 percent interest sold Colonial Grand at Huntcliff, a 358-unit apartment community in Atlanta, Georgia, for a total sales price of $41.1 million. The company received cash proceeds of $3.1 million in cash and is no longer responsible for $4.9 million of associated joint venture mortgage debt, which represented the company's pro-rata share of such debt. The cash proceeds received by the company from the sale were used to pay down a portion of the outstanding balance on the company's unsecured credit facility.
On April 15, 2013, the company's outstanding 6.15 percent senior note matured, which the company satisfied with an aggregate payment of $102.6 million ($99.5 million of principal and $3.1 million of accrued interest) using borrowings under the company's unsecured credit facility.
Mira Vista at James Island Litigation Settlement
As previously disclosed, the company along with multiple other parties, was named in 2010 as defendants in lawsuits with respect to condominium units at Mira Vista at James Island in Charleston, South Carolina. Mira Vista was acquired by certain of the company's subsidiaries after the units were constructed and operated as a multifamily rental project, until all of the 230 units were converted to condominiums and subsequently sold.
In May 2013, the company reached an agreement with the plaintiffs to settle the Mira Vista litigation for a total payment of $3.3 million. As a result of the settlement agreement, the company recorded an increase to its loss contingency reserve of $1.6 million, or $0.02 per diluted share, in the second quarter 2013.
Quarterly Dividend on Common Shares
On July 8, 2013, the Board of Trustees declared a quarterly cash dividend on the company's common shares for the third quarter 2013 of $0.21 per common share. The dividend was payable July 31, 2013, to shareholders of record as of July 19, 2013, representing an ex-dividend date of July 17, 2013.
Given the company's announcement on June 3, 2013 that it had entered into an agreement and plan of merger with MAA, the company is not providing an outlook for the remainder of 2013 or updating or affirming its previously issued guidance range for the full-year 2013 for EPS and FFO per share.
For additional details regarding the company's disposition and investment activities, see the company's Supplemental Financial Highlights available on the company's website at www.colonialprop.com.
Conference Call and Supplemental Materials
The company will hold its quarterly conference call Thursday, August 1, 2013, at 1:30 p.m. Central Time. The call will include a review of the company's second quarter performance.
To participate, please dial 1-866-952-1907 and reference the ID: COLONIALQ2. As with previous calls, a replay will be available for seven days by dialing 1-800-677-7320. Access to the live call and a replay will also be available through the company's website at www.colonialprop.com under "Investors: Press Releases: Event Calendar."
Colonial Properties Trust produces a supplemental information package that provides detailed information regarding operating performance, investing activities and the company's overall financial position. For a copy of Colonial Properties' detailed Supplemental Financial Highlights, please visit the company's website at www.colonialprop.com under the "Investors: Financial Information and Filings: Quarterly Supplemental Information" tab, or contact Jerry Brewer in Investor Relations at 1-800-645-3917.
Colonial Properties Trust is a multifamily focused real estate investment trust (REIT) that is engaged in the ownership, development, acquisition and management of quality real estate properties in the Sunbelt region of the United States. As of June 30, 2013, the company owns interests in 115 apartment properties containing 34,577 apartment homes and 1.2 million square feet of commercial space. Headquartered in Birmingham, Alabama, Colonial Properties Trust 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 and NOI. The definitions of these non-GAAP financial measures are summarized below. The company believes that these measures are helpful to investors in measuring financial performance and comparing such performance to other REITs.
Funds from Operations — 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.
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.
Property Net Operating Income - The company uses property NOI, including same-property NOI, as an operating measure. NOI is defined as total property revenues, including unconsolidated partnerships and joint ventures, less total property operating expenses (such items as repairs and maintenance, payroll, utilities, property taxes, insurance and advertising). The company believes that in order to facilitate a clear understanding of its operating results, NOI should be examined in conjunction with (loss) income from continuing operations as presented in the company's consolidated financial statements. The company also believes that NOI is an important supplemental measure of operating performance for a REIT's operating real estate because it provides a measure of the core operations, rather than factoring in depreciation and amortization, financing costs and general and administrative expenses. This measure is particularly useful, in the opinion of the company, in evaluating the performance of geographic operations, same-property groupings and individual properties. Additionally, the company believes that NOI is a widely accepted measure of comparative operating performance in the real estate investment community. The company believes that the line on its consolidated statements of income entitled "(loss) income from continuing operations" is the most directly comparable GAAP measure to NOI. In addition to company management evaluating the operating performance of its reportable segments based on NOI results, management uses NOI, 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 and NOI may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO and NOI 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: Estimates of future earnings are, by definition, and certain other statements in this press release, including statements regarding future dispositions and developments, development costs, 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 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. Other factors or risks that could cause our actual results to differ materially from the results we anticipate also include: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with MAA; (2) the inability to complete the proposed merger due to the failure to obtain the required shareholder approvals for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger; (3) risks related to disruption of management's attention from the company's ongoing business operations due to the proposed merger transaction; and (4) the effect of the announcement of the proposed merger on the company's relationships with its customers, tenants, operating results and business 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, 2012, 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|
|Second Quarter 2013|
|($ in 000s)||As of||As of|
Real Estate Assets
|Undeveloped Land & Construction in Progress||289,645||296,153|
|Total Real Estate, before Depreciation||3,732,810||3,785,477|
|Less: Accumulated Depreciation||(843,435||)||(804,964||)|
|Real Estate Assets Held for Sale, net||41,279||93,450|
|Net Real Estate Assets||2,930,654||3,073,963|
|Cash and Equivalents||20,944||11,674|
|Accounts Receivable, net||24,760||23,977|
|Deferred Debt and Lease Costs||16,253||23,938|
|Investment in Unconsolidated Subsidiaries||4,379||7,777|
|Unsecured Credit Facility||$||105,000||$||188,631|
|Notes and Mortgages Payable||1,542,326||1,643,361|
|Redeemable Common Units||179,576||162,056|
|Limited Partner's Noncontrolling Interest||182||695|
|Common Equity, including Additional Paid-in Capital||1,966,139||1,974,532|
|Treasury Shares, at Cost||(150,163||)||(150,163||)|
|Accumulated Other Comprehensive Loss||(14,093||)||(25,012||)|
|Total Equity, including Noncontrolling Interest||1,136,535||1,150,003|
|Total Liabilities and Equity||$||3,082,994||$||3,286,208|
|SHARES & UNITS OUTSTANDING, END OF PERIOD|
|(shares and units in 000s)||As of||As of|
|Operating Partnership Units (OP Units)||7,152||7,153|
|Total Shares & OP Units||95,896||95,365|
|COLONIAL PROPERTIES TRUST|
Second Quarter 2013
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|($ in 000s, except per share data)||Three Months Ended||Six Months Ended|
|Other Property Related Revenue||19,028||13,350||35,130||25,885|
|Other Non-Property Related Revenue||126||1,471||304||2,815|
|Property Operating Expense||27,156||24,641||53,208||48,626|
|Taxes, Licenses and Insurance||12,563||10,138||24,938||20,305|
|Total Property Operating Expenses||39,719||34,779||78,146||68,931|
|Property Management Expense||4,895||3,001||9,311||5,847|
|General and Administrative Expense||4,518||5,446||9,306||11,213|
|Management Fee and Other Expenses||21||1,769||272||3,814|
Investment and Development Expenses(1)
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