-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nd/jnZ8bIGDkfURZQGFCMXqoIiGlLr4pqfegR1i1cC/epwq3jYytaPaDoemivfXA OF1s+tHGhnyzp2gPaHhjrA== 0001032462-06-000058.txt : 20061107 0001032462-06-000058.hdr.sgml : 20061107 20061107093032 ACCESSION NUMBER: 0001032462-06-000058 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060930 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061107 DATE AS OF CHANGE: 20061107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRUSTREET PROPERTIES INC CENTRAL INDEX KEY: 0001032462 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752687420 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13089 FILM NUMBER: 061192214 BUSINESS ADDRESS: STREET 1: 450 SOUTH ORANGE AVENUE CITY: ORLANDO STATE: FL ZIP: 32801 BUSINESS PHONE: 4075402000 MAIL ADDRESS: STREET 1: 450 SOUTH ORANGE AVENUE CITY: ORLANDO STATE: FL ZIP: 32801 FORMER COMPANY: FORMER CONFORMED NAME: U S RESTAURANT PROPERTIES INC DATE OF NAME CHANGE: 19970206 8-K 1 body_8k.htm TRUSTREET PROPERTIES, INC. FORM 8-K 11-07-2006 Trustreet Properties, Inc. Form 8-K 11-07-2006


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 8-K
 

 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 7, 2006

 
Trustreet Properties, Inc.
(Exact name of registrant as specified in its charter)

 
Maryland
1-13089
75-2687420
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)

450 South Orange Avenue
Orlando, Florida
32801
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code (407) 540-2000

(Former name or former address, if changed since last report.)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02. Results of Operations and Financial Condition

The following information, including the exhibit attached hereto, is being furnished to the Securities and Exchange Commission under Item 2.02 - Results of Operations and Financial Condition and shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The information, including the exhibit attached hereto, shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent expressly provided by specific reference in such a filing.

On November 7, 2006, Trustreet Properties, Inc. issued a press release to report its financial results for the quarter ended September 30, 2006. The release is furnished as Exhibit 99.1 hereto.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Press Release dated November 7, 2006, of Trustreet Properties, Inc.





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 7, 2006
TRUSTREET PROPERTIES, INC.
 
 
By:
/s/ STEVEN D. SHACKELFORD
 
 
Steven D. Shackelford
 
 
Chief Financial Officer



EXHIBIT INDEX
 
     
Exhibit No. 
 
Description
     
99.1
 
Press Release dated November 7, 2006, of Trustreet Properties, Inc.
     
 

EX-99.1 2 ex99_1.htm EXHIBIT 99.1 Exhibit 99.1 Exhibit 99.1


 
For information contact:
Liz Kohlmyer
Director of Communications
(407) 540-2221


               ;                                          NYSE: TSY


TRUSTREET PROPERTIES, INC. ANNOUNCES THIRD QUARTER RESULTS

 

ORLANDO, FL - November 7, 2006 - Trustreet Properties, Inc. (NYSE: TSY) announces operating results for the quarter and nine months ended September 30, 2006. Trustreet is the largest real estate investment trust focused primarily on the restaurant industry.

Highlights

 
·
The Company reported revenues of $54.9 million for the quarter ended September 30, 2006, a 6.6 percent increase over $51.5 million reported in the quarter ended September 30, 2005.

 
·
In the third quarter of 2006 and 2005, the Company reported funds from operations (“FFO”) available to common shareholders, after adding back the principal amortization on capital leases, of $20.0 million, or $0.30 cents per diluted share compared to $18.5 million or $0.32 cents per diluted share, respectively.

 
·
For the nine months ended September 30 2006 and 2005, the Company reported funds from operations (“FFO”) available to common shareholders, after adding back the principal amortization on capital leases, of $60.7 million, or $0.90 cents per diluted share compared to $45.1 million or $0.85 cents per diluted share, respectively.

 
·
For the quarter ended September 30, 2006, adjusted funds from operations (“AFFO”) was $22.2 million, compared to $20.8 million for the quarter ended September 30, 2005.
 
 
·
The Company acquired 57 properties in the third quarter representing a total investment of $68 million. Through September 30, 2006, the Company has acquired $233 million in properties.

 
·
In the third quarter, the taxable REIT subsidiary (“TRS”) sold 54 properties generating $75.6 million in sales proceeds producing a pre-tax gain of $8.9 million. Through September 30, 2006, the TRS has sold $190.5 million producing a pre-tax gain of $22.3 million

 
·
The Company owned 2,021 properties in the core REIT portfolio of which 98 percent were leased based on carrying value as of September 30, 2006.
 
 
·
The Company paid monthly common dividends per share of $0.11 cents throughout the third quarter.


Third Quarter Results and Portfolio Highlights

For the quarter ended September 30, 2006, the Company reported funds from operations of $18.4 million, or $0.27 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 86 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 $20.0 million, or $0.30 cents per share for the quarter ended September 30, 2006.

For the quarter ended September 30, 2006, adjusted funds from operations (“AFFO”) was $22.2 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 57 properties for $68 million during the third quarter. The Company designated 16 of the third 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 41 properties were designated as held-for-sale inventory to be sold through Trustreet’s investment property sales platform. For the nine months ended September 30, 2006, we purchased $233 million in net lease properties. In addition to the $18.2 million in transactions closed through the end of October 2006, the Company currently has signed commitments to acquire a further $174.3 million, the substantial majority of which is expected to close over the next six months.

In the third quarter, the Company sold 54 properties generating $75.6 million in sales proceeds from its investment property sales platform producing a pre-tax gain of $8.9 million. For the nine months ended September 30, 2006, the Company sold $190.5 million through its investment property sales platform. At September 30, 2006, we held 121 properties for sale to investors through our IPS program with an investment of $150 million. These results are required to be recorded as discontinued operations under GAAP. In addition, the Company held for sale an additional 50 properties in their development pipeline comprising an investment of $46 million.

As of September 30, 2006, the Company owned 2,021 properties held in the core REIT portfolio of which 98 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 based on annualized base rent. During the nine months ended September 30, 2006, the Company has recycled capital or paid down debt through sales of $43.8 million in the core REIT generating a pre-tax gain of $8.6 million.
 
The Company’s portfolio is broadly diversified with more than 170 concepts and more than 500 tenants in 49 states. No single tenant represented more than 7 percent of contractual rents. Of the 62 vacant properties with a carrying value of approximately $39.9 million as of September 30, 12 are either sold, under contract for sale or have a lease or sales contract out for signature, and another four are currently being redeveloped.

In accordance with the terms of the merger agreement with GE Capital Solutions, the Board of Directors declared a dividend of $0.33 per share on Trustreet’s Common Stock for the quarter ending December 31, 2006. The dividend will be payable December 26, 2006 to shareholders of record on November 20, 2006.

“We are pleased with the steady execution of our platform,” states Curtis B. McWilliams, President and Chief Executive Officer of Trustreet Properties, Inc. “As we look ahead, the merger with GE Capital Solutions will allow us to continue to provide our unmatched platform of services while gaining GE Capital Solutions’ superior debt and other financial products. It truly is a merger of industry leaders that will enable the combined company to deliver the highest level of performance, expertise, scale and efficiency that would not otherwise be possible.”

 
About Trustreet
 
Trustreet Properties, Inc. is the largest self-administered 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 www.trustreet.com.
 
 
Conference Call
 
Management will hold a conference call on Tuesday, November 7, 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 www.trustreet.com and by direct dial-in at (866) 244-4515. Reference conference identification number 981532. 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 excluding 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
September 30,
 
Nine months ended
 September 30,
 
   
2006
 
2005
 
2006
 
2005
 
                   
Revenues:
                 
                   
Rental income from operating leases
 
$
47,102
 
$
41,614
 
$
141,061
 
$
102,411
 
Earned income from capital leases
   
2,964
   
2,999
   
8,981
   
8,738
 
Interest income from mortgage, equipment and other notes
receivables
   
1,831
   
3,025
   
5,776
   
15,860
 
Investment and interest income
   
789
   
704
   
1,399
   
1,697
 
Other income
   
2,176
   
3,198
   
8,520
   
5,931
 
     
54,862
   
51,540
   
165,737
   
134,637
 
Expenses:
                         
General operating and administrative
   
7,026
   
7,358
   
22,094
   
28,345
 
Interest expense
   
25,806
   
24,213
   
76,222
   
65,972
 
Property expenses, state and other taxes
   
2,481
   
2,206
   
8,090
   
5,262
 
Depreciation and amortization
   
9,480
   
8,311
   
29,585
   
21,716
 
Loss on termination of cash flow hedge
   
   
8,558
   
   
8,558
 
Impairment provisions on assets
   
1,002
   
1,250
   
2,636
   
1,391
 
     
45,795
   
51,896
   
138,627
   
131,244
 
Income/(loss) from continuing operations before minority interest and equity in earnings of unconsolidated joint ventures
   
9,067
   
(356
)
 
27,110
   
3,393
 
                           
Minority interest
   
(113
)
 
(78
)
 
(485
)
 
(1,627
)
                           
Equity in earnings of unconsolidated joint ventures
   
51
   
28
   
62
   
90
 
                           
Income/(loss) from continuing operations
   
9,005
   
(406
)
 
26,687
   
1,856
 
                           
Income from discontinued operations, after income taxes
   
8,013
   
9,650
   
29,475
   
28,964
 
                           
Gain on sale of assets
   
223
   
9,620
   
747
   
9,643
 
                           
Net income
   
17,241
   
18,864
   
56,909
   
40,463
 
Dividends to preferred stockholders
   
(7,176
)
 
(7,176
)
 
(21,528
)
 
(17,275
)
Net income allocable to common stockholders
 
$
10,065
 
$
11,688
 
$
35,381
 
$
23,188
 
                           
Basic and diluted net income per share:
                         
Income/(loss) from continuing operations allocable to
common stockholders
 
$
0.03
 
$
0.03
 
$
0.09
 
$
(0.11
)
Income from discontinued operations
   
0.12
   
0.17
   
0.44
   
0.55
 
                           
Basic and diluted net income per share
 
$
0.15
 
$
0.20
 
$
0.53
 
$
0.44
 
                           
Weighted average number of shares of common stock
outstanding
                         
Basic
   
67,285
   
57,846
   
67,269
   
53,204
 
Diluted
   
67,291
   
57,857
   
67,305
   
53,204
 

 
 

 

TRUSTREET PROPERTIES, INC.
DISCONTINUED OPERATIONS BY SEGMENT
(UNAUDITED)

   
Quarter ended September 30,
(in millions)
 
   
2006
 
2005
 
   
Real Estate
Segment
 
Specialty Finance
Segment
 
Real Estate
Segment
 
Specialty Finance
Segment
 
                           
Sale of real estate
 
$
6.7
 
$
75.6
 
$
19.5
 
$
52.6
 
Cost of real estate sold
   
6.2
   
66.7
   
16.6
   
45.5
 
Gain on sale of real estate
   
0.5
   
8.9
   
2.9
   
7.1
 
                           
Rental income
   
0.4
   
3.2
   
1.8
   
2.5
 
Interest expense
   
   
(2.3
)
 
   
(1.7
)
Other property expense and
    impairment provisions
   
(0.4
)
 
(0.1
)
 
(1.5
)
 
(0.1
)
Net earnings from retail
    discontinued operations before tax
   
   
   
   
 
Net other income
   
   
0.8
   
0.3
   
0.7
 
                           
Earnings from discontinued
    operations before tax
   
0.5
   
9.7
   
3.2
   
7.8
 
                           
Income tax provision
   
   
(2.2
)
 
   
(1.3
)
                           
Income from discontinued
operations, after income taxes
 
$
0.5
 
$
7.5
 
$
3.2
 
$
6.5
 




TRUSTREET PROPERTIES, INC.
DISCONTINUED OPERATIONS BY SEGMENT (cont.)
(UNAUDITED)



   
Nine months ended September 30,
(in millions)
 
   
2006
 
2005
 
   
Real Estate
Segment
 
Specialty Finance
Segment
 
Real Estate
Segment
 
Specialty Finance
Segment
 
                   
Sale of real estate
 
$
52.4
 
$
190.5
 
$
33.0
 
$
180.3
 
Cost of real estate sold
   
43.8
   
168.2
   
29.2
   
152.0
 
Gain on sale of real estate
   
8.6
   
22.3
   
3.8
   
28.3
 
                           
Rental income
   
1.9
   
9.5
   
5.2
   
5.9
 
Interest expense
   
   
(6.6
)
 
   
(3.8
)
Other property expense and
    impairment provisions
   
(1.4
)
 
   
(2.5
)
 
(1.0
)
Net earnings from retail
    discontinued operations before tax
   
   
   
   
0.9
 
Net other income
   
0.5
   
2.9
   
2.7
   
2.0
 
                           
Earnings from discontinued
    operations before tax
   
9.1
   
25.2
   
6.5
   
30.3
 
                           
Income tax provision
   
   
(4.8
)
 
   
(7.8
)
                           
Income from discontinued
operations, after income taxes
 
$
9.1
 
$
20.4
 
$
6.5
 
$
22.5
 













TRUSTREET PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)



   
September 30,
2006
 
 December 31,
 2005
     
ASSETS
              
                
Real estate investment properties
 
$
1,757,007
 
$
1,718,387
       
Net investment in capital leases
   
148,332
   
147,184
       
Real estate held for sale
   
209,541
   
252,019
       
Mortgage, equipment and other notes receivable, net of allowance
of $3,103 and $5,706, respectively
   
82,703
   
88,239
       
Cash and cash equivalents
   
9,610
   
20,459
       
Restricted cash
   
10,647
   
32,465
       
Receivables, less allowance for doubtful accounts
of $3,076 and $2,394, respectively
   
8,521
   
7,665
       
Accrued rental income
   
42,264
   
34,312
       
Intangible lease costs, net of accumulated amortization of $17,596
and $9,579, respectively
   
72,631
   
77,437
       
Goodwill
   
235,895
   
235,895
       
Other assets
   
66,395
   
69,481
       
Total assets
 
$
2,643,546
 
$
2,683,543
       
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
                   
                     
Revolver
 
$
134,000
 
$
55,000
       
Notes payable
   
576,845
   
579,002
       
Mortgage warehouse facilities
   
239,703
   
122,722
       
Bonds payable
   
551,002
   
742,201
       
Below market lease liability, net of accumulated amortization of
$6,947 and $3,772, respectively
   
28,740
   
31,712
       
Due to related parties
   
299
   
232
       
Other payables
   
37,545
   
56,097
       
Minority interests
   
4,215
   
4,077
       
Stockholders’ equity
   
1,071,197
   
1,092,500
   
 
 
Total liabilities and stockholders’ equity
 
$
2,643,546
 
$
2,683,543
       



                             TRUSTREET PROPERTIES, INC.
RECONCILIATION OF NAREIT FFO AND AFFO
(UNAUDITED)
(In thousands except for per share data)



 
   
Quarter ended September 30,
 
Nine months ended September 30,
 
   
2006
 
2005
 
2006
 
2005
 
Funds From Operations
(NAREIT defined):
                 
                   
Net income
 
$
17,241
 
$
18,864
 
$
56,909
 
$
40,463
 
Less: Dividends on preferred stock
   
(7,176
)
 
(7,176
)
 
(21,528
)
 
(17,275
)
 
Net income allocable to common
    stockholders
   
10,065
   
11,688
   
35,381
   
23,188
 
 
FFO adjustments:
Real estate depreciation and
    amortization
   
9,021
   
8,072
   
27,988
   
21,598
 
Gain on sale of real estate
   
(734
)
 
(2,884
)
 
(7,474
)
 
(3,712
)
 
NAREIT FFO
 
$
18,352
 
$
16,876
 
$
55,895
 
$
41,074
 
NAREIT FFO per share
 
$
0.27
 
$
0.29
 
$
0.83
 
$
0.77
 
                           
Principal component of capital leases
   
1,613
   
1,669
   
4,838
   
4,006
 
 
FFO and the principal component
    of capital leases
 
$
19,965
 
$
18,545
 
$
60,733
 
$
45,080
 
FFO and the principal component of
    capital leases per share
 
$
0.30
 
$
0.32
 
$
0.90
 
$
0.85
 
 
Straight-line rent
   
(2,238
)
 
(2,175
)
 
(8,076
)
 
(5,591
)
Non-real estate depreciation and
    amortization
Deferred loan cost amortization
Asset impairment/provisions
   
850
2,526
1,116
   
383
2,723
1,299
   
2,783
7,369
2,875
   
1,571
7,439
1,798
 
 
ADJUSTED FFO
 
$
22,219
 
$
20,775
 
$
65,684
 
$
50,297
 
                           








LEASE EXPIRATIONS


(based on annualized base rent as of September 30, 2006)

 
# of Properties
% of Total
   
# of Properties
% of Total
2006
22
0.8%
 
2012
84
4.6%
2007
74
2.5%
 
2013
75
4.1%
2008
80
2.6%
 
2014
145
8.3%
2009
101
3.9%
 
2015
94
5.6%
2010
103
4.7%
 
2016
195
9.3%
2011
82
3.8%
 
Thereafter (or Vacant)
966
49.8%




DIVERSIFICATION


Top 10 Tenants                                                   Top 10 Concepts
(based on annualized base rent as of September 30, 2006)*                                              (based on annualized base rent as of September 30, 2006)*

 
Tenant
% of Rent
   
Concept
% of Rent
1
Jack in the Box, Inc.
6.7%
 
1
Wendy’s*
8.2%
2
Golden Corral Corporation
5.9%
 
2
Burger King
7.2%
3
IHOP Properties, Inc.
4.0%
 
3
Golden Corral
6.9%
4
Captain D’s, LLC
3.6%
 
4
Jack in the Box
6.5%
5
Sybra Inc.
3.3%
 
5
Arby’s
6.2%
6
S&A Properties Corp.
3.0%
 
6
International House of Pancakes
4.1%
7
Texas Taco Cabana, LP
2.1%
 
7
Captain D’s
3.8%
8
Perkins and Marie Callender’s, Inc.
2.0%
 
8
Pizza Hut
3.0%
9
El Chico Restaurants, Inc.
1.9%
 
9
Bennigan’s
2.9%
10
Vicorp Restaurants, Inc.
1.5%
 
10
Perkins
2.6%

* Includes contingent rent for units with leases where rent is based solely on actual store sales, generally without a minimum threshold.











DIVERSIFICATION (cont.)



Top 10 States
(based on annualized base rent as of September 30, 2006)*

 
State
% of Rent
   
State
% of Rent
1
Texas
19.0%
 
6
California
3.7%
2
Florida
10.4%
 
7
North Carolina
3.5%
3
Georgia
5.8%
 
8
Ohio
3.3%
4
Tennessee
4.1%
 
9
Missouri
2.9%
5
Illinois
3.8%
 
10
Michigan
2.7%
 
* Includes contingent rent for units with leases where rent is based solely on actual store sales, generally without a minimum threshold.


OTHER PORTFOLIO STATISTICS
 
 
9/30/06
6/30/06
3/31/06
12/31/05
Rent to Sales
 
 
 
 
     Quick Service
7.9%
8.0%
8.5%
8.2%
     Casual Dining
7.5%
7.5%
7.7%
7.8%
 
 
 
 
 
Fixed Charge Coverage
1.68x
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 1,046 quick service restaurants reporting sales, the aggregate rent as a percentage of aggregate sales was 7.9% based on the most recent tenant sales information provided. Of the portfolio’s 402 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 71% 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 1.96x.  The weighted average tenant-level FCCR for all reporting units is 1.68x, with 75% (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 September 30,
 
Nine months ended September 30,
 
2006
 
2005
 
2006
 
2005


Net income
$ 17,241
 
$ 18,864
 
$ 56,909
 
$ 40,463
Interest expense
28,147
 
25,895
 
82,778
 
69,730
Income tax expense
2,189
 
1,348
 
4,760
 
7,756
Depreciation and amortization
9,620
 
8,475
 
30,104
 
23,218
EBITDA
$ 57,197
 
$ 54,582
 
$ 174,551
 
$ 141,167
               
Impairment provisions on assets
1,116
 
1,299
 
2,875
 
1,798
Principal component of capital leases
1,613
 
1,669
 
4,838
 
4,006
Loss on termination of cash flow hedge
-
 
8,558
 
-
 
8,558
Amortization of above/below market
    leases
 
251
 
 
409
 
 
666
 
 
371
Straight line rent
(2,238)
 
(2,175)
 
(8,076)
 
(5,591)
Adjusted EBITDA
$ 57,939
 
$ 64,342
 
$ 174,854
 
$ 150,309
               
Dividends to preferred stockholders
$ 7,176
 
$ 7,176
 
$ 21,528
 
$ 17,275
               
EBITDA/interest expense + preferred
    dividends
 
1.62x
 
 
1.65x
 
 
1.67x
 
 
1.62x
Adjusted EBITDA/interest expense +
    preferred dividends
 
1.64x
 
 
1.92x
 
 
1.68x
 
 
1.73x

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)
Quarter ended September 30, 2006
 
Quarter ended September 30, 2005
 
(in thousands except for per share data)
Real
Specialty
     
Real
Specialty
     
   
Estate
Finance
     
Estate
Finance
     
   
Segment
Segment
Other
Consolidated
 
Segment
Segment
Other
Consolidated
 
Net income/(Loss)
$ 14,034
$ 3,251
$ (44)
$ 17,241
 
$ 16,685
$ 2,189
$ (10)
$ 18,864
 
Less: Dividends on preferred stock*
(6,459)
(717)
-
(7,176)
 
(6,459)
(717)
-
(7,176)
 
Net income allocable to common stockholders
7,575
2,534
(44)
10,065
 
10,226
1,472
(10)
11,688
 
                       
FFO adjustments:
                   
Real Estate related depreciation & amortization
8,933
88
-
9,021
 
8,001
71
-
8,072
 
Gain on sale of property
(734)
-
-
(734)
 
(2,884)
-
-
(2,884)
 
                       
NAREIT FFO
$ 15,774
$ 2,622
$ (44)
$ 18,352
 
$ 15,343
$ 1,543
$ (10)
$ 16,876
 
NAREIT FFO per share
$ 0.23
$ 0.04
-
$ 0.27
 
$ 0.27
$ 0.02
-
$ 0.29
 
                       
Principal component of capital leases
1,601
12
-
1,613
 
1,669
-
-
1,669
 
                       
FFO and the principal component of capital leases
$ 17,375
$ 2,634
$ (44)
$ 19,965
 
$ 17,012
$ 1,543
$ (10)
$ 18,545
 
FFO and the principal component of capital leases per share
$ 0.26
$ 0.04
-
$ 0.30
 
$ 0.29
$ 0.03
-
$ 0.32
 
                       
Straight-line rent
(2,159)
(79)
-
(2,238)
 
(2,136)
(39)
-
(2,175)
 
Non-real estate related depreciation and amortization
353
497
-
850
 
(23)
406
-
383
 
Deferred loan cost amortization
2,186
340
-
2,526
 
2,459
264
-
2,723
 
Asset impairments / provisions
1,024
92
-
1,116
 
1,299
-
-
1,299
 
                       
Adjusted FFO
$ 18,779
$ 3,484
$ (44)
$ 22,219
 
$ 18,611
$ 2,174
$ (10)
$ 20,775
 

* Represents internal allocation of 90% to the real estate segment and 10% to the specialty finance segment.
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