AmREIT Reports Second Quarter Results and Third Quarter Dividend
AmREIT Reports Second Quarter Results and Third Quarter Dividend
HOUSTON--(BUSINESS WIRE)-- AmREIT, Inc. (NYS: AMRE) ("AmREIT" or the "Company"), today announced financial results for the second quarter ended June 30, 2013 and dividends for the third quarter ended September 30, 2013.
Second Quarter and Year-to-Date Highlights:
Core Funds from Operations ("Core FFO") available to common stockholders for the second quarter of 2013 was $4.1 million, or $0.25 per share, compared to $3.7 million, or $0.32 per share for the comparable period in 2012. For the six months ended June 30, 2013, Core FFO was $8.4 million, or $0.52 per share, compared to $7.3 million, or $0.63 per share for the comparable six month period in 2012.
FFO available to common stockholders for the second quarter of 2013 was $4.0 million, or $0.25 per share, compared to $3.7 million, or $0.32 per share for the comparable period in 2012. For the six months ended June 30, 2013, FFO was $8.1 million, or $0.50 per share, compared to $7.3 million, or $0.63 per share for the comparable six month period in 2012. Included in FFO for the three and six months ended June 30, 2013 were $126,000 and $290,000, respectively, in acquisition costs related to the MacArthur Park joint venture with Goldman Sachs and the Fountain Oaks acquisition, which were completed in March and June of 2013, respectively.
Net income available to common stockholders for the second quarter of 2013 was $981,000, or $0.06 per share, compared to $1.4 million, or $0.12 per share, for the same period in 2012. For the six months ended June 30, 2013, net income was $9.4 million, or $0.59 per share, compared to $2.7 million, or $0.23 per share for the comparable six month period in 2012. Included in net income for the six months ended June 30, 2013 was a $7.7 million gain on sale related to the sale of AmREIT's MacArthur Park Property into the joint venture with Goldman Sachs.
FFO and Core FFO are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of FFO and Core FFO to net income is attached to this press release.
In the second quarter of 2013, same-store net operating income ("NOI") increased 2.8% over the same period in the prior year. For the six months ended June 30, 2013, same-store NOI increased 2.0% over the same period in the prior year.
Portfolio occupancy as of June 30, 2013 was 95.1%, a decrease of approximately 160 basis points as compared to portfolio occupancy of 96.7% as of December 31, 2012. The primary driver behind this decrease in occupancy is the acquisition of Fountain Oaks, which was 89% occupied as of June 30, 2013 and the vacancy at Courtyard at Post Oak, which was 30% occupied as of June 30, 2013. On a leased basis, which includes leases that have been executed but where rent has not yet commenced, the portfolio was 96.0% leased as of June 30, 2013, with anticipated rent commencement during the remainder of 2013.
During the second quarter of 2013, AmREIT signed 21 leases for 57,972 square feet of gross leasable area, including both new and renewal leases. Of these, 17 leases, or 51,500 square feet, were comparable leases. Cash leasing spreads, which is the new leasing rate per square foot compared to the expiring leasing rate per square foot, increased 7.3%. On a GAAP basis, which includes the effects of straight-line rent, leasing spreads increased 14.5%. For the six months ended June 30, 2013, AmREIT signed 37 leases for 92,513 square feet of gross leasable area, including both new and renewal leases. Of these, 30 leases, or 78,974 square feet, were comparable leases. Cash leasing spreads increased 10.7%. On a GAAP basis, leasing spreads increased 17.5%.
NOI and same store NOI are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of NOI and same store NOI to net income are attached to this press release.
AmREIT also announced today that the Company's Board of Directors has approved a regular quarterly cash dividend of $0.20 per share. The dividend will be paid on September 30, 2013 to all common stockholders of record at the close of business on September 20, 2013.
Acquisitions and Dispositions
On June 25, 2013, AmREIT completed the acquisition of Fountain Oaks Shopping Center, a 160,600 square foot Kroger-anchored shopping center in the north Buckhead submarket of Atlanta, Georgia. Average household incomes within a one-mile radius of Fountain Oaks are $96,771, and there are approximately 31,887 households within a three-mile radius of the property. Fountain Oaks was acquired for approximately $27.7 million, is unencumbered, and was funded with borrowings under AmREIT's unsecured revolving credit facility.
On March 26, 2013, AmREIT entered into a joint venture agreement with Goldman Sachs pursuant to which AmREIT contributed equity in its MacArthur Park property to a single-purpose entity in exchange for a 30% interest in the joint venture, and Goldman Sachs contributed cash for a 70% interest in the joint venture. The joint venture entity concurrently purchased the contiguous property to the north known as MacArthur Park Phase I, excluding a Target store, for approximately $25.5 million and placed mortgage financing on the combined property of $43.9 million. Upon closing the transaction, AmREIT received net cash proceeds of approximately $35.6 million, which it used to repay borrowings under its unsecured revolving credit facility. AmREIT will continue to manage and lease MacArthur Park on behalf of the joint venture and will retain a right of first offer to acquire the project in the future, after a lock-out period.
On June 21, 2013, AmREIT filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission ("SEC") registering the offer and sale, from time to time, of up to $350 million of securities, which was declared effective by the SEC on July 1, 2013.
On July 19, 2013 AmREIT completed the public underwritten offering of 3,450,000 shares of common stock, including 450,000 shares sold pursuant to the exercise of the underwriter's over-allotment option, at a public offering price of $18.25 per share. The offering generated net proceeds of approximately $60 million, after deducting the underwriting discount and estimated offering expenses. AmREIT used a portion of the net proceeds to repay borrowings under its unsecured revolving credit facility and to acquire the underlying land on our Preston Royal East property. AmREIT intends to use the remaining proceeds to fund a portion of the acquisition of Woodlake Square, which was placed under contract on July 15, 2013, from its joint venture partner and two of its advised funds, and for general corporate purposes.
"As I look back on the past twelve months, I am gratified that we have met or exceeded the objectives we set forth during our IPO, and we now turn our attention to the next chapter of our growth," said H. Kerr Taylor, Chairman and Chief Executive Officer of AmREIT. "We will continue to strive to unlock value for our stockholders. First, we remain focused on maximizing our internal growth of portfolio operations. We believe our Irreplaceable CornerTM portfolio will continue to put up strong numbers. Second, we expect to deliver steady growth in our core markets. As a local sharpshooter, we know our markets very well and believe we can grow our portfolio with discipline at a pace which will give us an advantage. Third, we anticipate a continued benefit from our Advised Fund platform as we have in the past year. Its continued growth should drive recurring fee income and acquisition opportunities in the future. And finally, we will strive to continue to deliver organic growth through incremental redevelopment at projects like Uptown Park in Houston, Texas."
AmREIT has adjusted its full year guidance to take into account the issuance of 3.45 million shares of common stock on July 19, 2013:
Projected 2013 Range
The changes to AmREIT's full year guidance are strictly a result of the equity offering. As such, the decrease in the guidance is a result of the additional 3.45 million shares outstanding, partially offset by a decrease in interest expense.
AmREIT held its 2013 Annual Meeting of Stockholders at 10:00 AM Central Daylight Time on April 18, 2013.
At the 2013 Annual Meeting of Stockholders, AmREIT's stockholders approved, among other items, two charter amendments that, when taken together, had the effect of exchanging all of AmREIT's issued and unissued shares of Class A common stock into shares of Class B common stock, on a one-for-one basis. AmREIT then renamed its Class B common stock to common stock, which are listed on the New York Stock Exchange.
On July 17, 2013, AmREIT acquired the underlying land on its Preston Royal East property for a purchase price of $15 million.
On July 15, 2013, AmREIT entered into a purchase and sale agreement with VIF II/AmREIT Woodlake, LP, a joint venture between AEW, AmREIT and two of its advised funds, to purchase the Woodlake Square Shopping Center, a grocery-anchored shopping center located in Houston, Texas, for a purchase price of $41.6 million. The retail shopping center contains approximately 161,000 square feet of gross leasable area and major tenants include Randalls, Walgreens and Jos. A. Bank. Average household incomes within a one-mile radius of Woodlake Square are $72,183, and there are 83,551 households within a three-mile radius of the property.
AmREIT will hold its quarterly conference call to discuss the results of its year to date and second quarter of 2013 on Wednesday, August 7, 2013, at 10:00 a.m. Central Daylight Time (11:00 a.m. Eastern Daylight Time). To participate in the quarterly conference call, please call 1-888-317-6016 approximately 10 minutes before the scheduled start time. The conference call will be recorded and a replay of the call will be available via webcast shortly after the call concludes.
The conference call will also be webcast live at www.amreit.com and can be accessed under the Investors tab of the Company's website. A telephonic replay of the conference call will be available for 14 days following the conference call. To access the telephonic replay of the conference call, dial 1-877-344-7529 and enter passcode 10030167.
Supplemental Financial Information
Further details regarding AmREIT's results of operations, properties, and tenants are attached to this press release and can be accessed at the Company's web site at www.amreit.com.
Non-GAAP Financial Disclosure
This press release contains certain non-GAAP financial measures that management believes are useful in evaluating an equity REIT's performance. AmREIT's definitions and calculations of non-GAAP financial measures may differ from those used by other equity REITs, and therefore may not be comparable. The non-GAAP financial measures should not be considered as an alternative to net income as an indication of our operating results, or to net cash provided by operating activities as a measure of our liquidity.
Funds From Operations (FFO)
AmREIT considers FFO to be an appropriate measure of the operating performance of an equity REIT. NAREIT defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and impairment charges on properties held for investment, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. NAREIT recommends that extraordinary items not be considered in arriving at FFO. AmREIT calculates FFO in accordance with this definition.
Most industry analysts and equity REITs, including AmREIT, consider FFO to be an appropriate supplemental non-GAAP financial measure of operating performance because, by excluding gains or losses on dispositions, impairment charges and depreciation, FFO is a helpful tool that can assist in the comparison of the operating performance of a company's real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our 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, management believes that the presentation of operating results for real estate companies that uses historical cost accounting is insufficient by itself.
Additionally, AmREIT considers Core FFO, which adjusts FFO for items that do not reflect ongoing operations, such as acquisition expenses, non-recurring intangible asset write-offs and recoveries, expensed issuance costs and gains on the sale of real estate held for resale, to be a meaningful performance measurement. The computation of FFO in accordance with NAREIT's definition includes certain items such as acquisition costs, issuance costs and gains on sale of real estate held for resale that management believes are not indicative of AmREIT's ongoing results and therefore affect the comparability of our period-over-period performance with similar REITs. Accordingly, management believes that it is helpful to investors to adjust FFO for such items. There can be no assurance that FFO or Core FFO presented by AmREIT is comparable to similarly titled measures of other REITs. FFO and Core FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.
Projected FFO and Core FFO are calculated in a method consistent with historical FFO and Core FFO, and AmREIT considers projected FFO and Core FFO to be an appropriate supplemental measure when compared with projected earnings per share. A reconciliation of the projected FFO and Core FFO to projected earnings per share is provided below:
Gain on sale - investment
Depreciation and amortization
Depreciation and amortization for non-consolidated affiliates
FFO available to stockholders
Write off of below market ground lease
Core FFO available to stockholders
Net Operating Income (NOI)
AmREIT believes that NOI is a useful measure of its operating performance. AmREIT defines NOI as operating revenues (rental income, tenant recovery income, percentage rent, excluding straight-line rental income and amortization of acquired above- and below-market rents) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line rent bad debt expense). Other REITs may use different methodologies for calculating NOI, and accordingly, AmREIT's NOI may not be comparable to other REITs.
AmREIT believes that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. AmREIT uses NOI to evaluate its performance on a property-by-property basis because NOI allows it to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on its operating results. However, NOI should only be used as a supplemental measure of its financial performance.
AmREIT believes it has one of the highest quality grocery and drugstore anchored retail portfolios in the REIT sector.AmREIT's 29 year-old established platform has localized acquisition, operation and redevelopment expertise in the most densely populated and affluent submarkets of five of the top markets in the U.S.:Houston, Dallas, San Antonio, Austin and Atlanta.Texas is one of the best performing economies in the country and 92% of AmREIT's income for the year ended December 31, 2012 was generated by its properties located in this market. AmREIT's management team has in-depth knowledge and extensive relationship advantages within its markets.AmREIT's portfolio was 95.1% occupied as of June 30, 2013, and its top five tenants include Kroger, Landry's, CVS/Pharmacy, H-E-B and Publix.AmREIT also has access to an acquisition pipeline through its Advised Funds, which include value add joint ventures with three leading institutional investors who partner with the company as local experts.AmREIT's common stock is traded on the New York Stock Exchange under the symbol "AMRE."For more information, please visitwww.amreit.com.
This press release contains forward-looking statements within the meaning of the federal securities laws, including statements related to full year 2013 Core FFO and FFO financial projections stated herein.These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases, which are predictions of or indicate future events or trends and which do not relate solely to historical matters. While forward-looking statements reflect AmREIT's good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Furthermore, AmREIT disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact AmREIT's future results, performance or transactions, see the section entitled "Risk Factors" in AmREIT's final prospectus supplement dated July 16, 2013, filed with the Securities and Exchange Commission on July 16, 2013 and other risks described in documents subsequently filed by AmREIT from time to time with the Securities and Exchange Commission.
For more information, call Chad Braun, Chief Operating Officer and Chief Financial Officer of AmREIT, at (713) 850-1400. AmREIT is online at www.amreit.com.
AmREIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
Real estate investments at cost:
Less accumulated depreciation and amortization
Acquired lease intangibles, net
Investments in Advised Funds
Net real estate investments
Cash and cash equivalents
Tenant and accounts receivable, net
Accounts receivable - related party, net
Notes receivable, net
Notes receivable - related party, net
Deferred costs, net
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other liabilities
Acquired below-market lease intangibles, net
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued
Class A common stock, $0.01 par value, 0 and 100,000,000 shares
authorized as of June 30, 2013 and December 31, 2012, 0 and 11,657,563
shares issued and outstanding as of June 30, 2013, and December 31, 2012,
Common stock, $0.01 par value, 1,000,000,000 and 900,000,000 shares
authorized as of June 30, 2013 and December 31, 2012, 16,178,037 and
16,123,288 shares issued and outstanding as of June 30, 2013, and
December 31, 2012, respectively
Capital in excess of par value
Accumulated distributions in excess of earnings
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
AmREIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Three months ended June 30,
Six months ended June 30,
Rental income from operating leases
Advisory services income - related party
General and administrative
Legal and professional
Real estate commissions
Depreciation and amortization
Impairment recovery - notes receivable
Other income (expense):
Gain on sale of real estate acquired for investment
Interest and other income
Interest and other income - related party