EX-99.1 2 a12-26173_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

GRAPHIC

 

FOR IMMEDIATE RELEASE

 

Contacts:

Timothy A. Bonang, Vice President, Investor Relations, or

Carlynn Finn, Senior Manager, Investor Relations

(617) 796-8222

www.cwhreit.com

 

 

CommonWealth REIT Announces 2012 Third Quarter Results

 

 

 

 

 

 

 

Newton, MA (November 7, 2012): CommonWealth REIT (NYSE: CWH) today announced financial results for the quarter and nine months ended September 30, 2012.

 

Results for the Quarter Ended September 30, 2012:

 

Normalized funds from operations, or Normalized FFO, available for CommonWealth REIT common shareholders for the quarter ended September 30, 2012 was $69.3 million, or $0.83 per share basic and diluted, compared to Normalized FFO available for CommonWealth REIT common shareholders for the quarter ended September 30, 2011 of $70.0 million, or $0.86 per share basic and diluted.

 

Net (loss) income available for CommonWealth REIT common shareholders was ($122,000) for the quarter ended September 30, 2012, compared to $14.7 million for the same quarter last year.  Net (loss) income available for CommonWealth REIT common shareholders per share, basic and diluted (EPS), for the quarters ended September 30, 2012 and 2011 was $0.00 and $0.18, respectively.  Net income for the quarter ended September 30, 2012 includes a gain of $1.7 million, or $0.02 per share, on the sale of properties.  Net income for the quarter ended September 30, 2011 includes gains of $7.0 million, or $0.09 per share, on the sale of properties and $11.2 million, or $0.14 per share, from the issuance of shares by an equity investee, partially offset by a loss on asset impairment of $9.2 million, or $0.11 per share.

 

The weighted average number of basic and diluted common shares outstanding was 83,745,315 and 91,043,480, respectively, for the quarter ended September 30, 2012, and 81,535,596 and 88,833,761, respectively, for the quarter ended September 30, 2011.

 

A reconciliation of net income attributable to CommonWealth REIT, determined according to U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, available for CommonWealth REIT common shareholders and Normalized FFO available for CommonWealth REIT common shareholders for the quarters ended September 30, 2012 and 2011 appears below in this press release.

 

A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the New York Stock Exchange.  No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

 


 

Results for the Nine Months Ended September 30, 2012:

 

Normalized FFO available for CommonWealth REIT common shareholders for the nine months ended September 30, 2012 was $215.1 million, or $2.57 per share basic and diluted, compared to Normalized FFO available for CommonWealth REIT common shareholders for the nine months ended September 30, 2011 of $197.8 million, or $2.63 per share basic and $2.62 per share diluted.

 

Net income available for CommonWealth REIT common shareholders was $12.0 million for the nine months ended September 30, 2012, compared to $61.9 million for the same period last year.  Net income available for CommonWealth REIT common shareholders per share, basic and diluted (EPS), for the nine months ended September 30, 2012 and 2011 was $0.14 and $0.82, respectively.  Net income for the nine months ended September 30, 2012 includes gains of $2.0 million, or $0.02 per share, on the sale of properties.  Net income for the nine months ended September 30, 2011 includes gains of $41.6 million, or $0.55 per share, from the sale of properties and $11.2 million, or $0.15 per share, from the issuance of shares by an equity investee, partially offset by a loss on asset impairment of $9.2 million, or $0.12 per share.

 

The weighted average number of basic and diluted common shares outstanding was 83,731,371 and 91,029,536, respectively, for the nine months ended September 30, 2012, and 75,307,315 and 82,605,480, respectively, for the nine months ended September 30, 2011.

 

A reconciliation of net income attributable to CommonWealth REIT determined according to GAAP to FFO available for CommonWealth REIT common shareholders and Normalized FFO available for CommonWealth REIT common shareholders for the nine months ended September 30, 2012 and 2011 appears below in this press release.

 

Occupancy and Leasing Results:

 

As of September 30, 2012, 84.5% of CWH’s total square feet was leased, compared to 84.1% as of September 30, 2011.

 

CWH entered into lease renewals for 942,000 square feet and new leases for 385,000 square feet during the quarter ended September 30, 2012 which had weighted average rental rates that were 2% below prior rents for the same space.  Average lease terms for leases entered into during the third quarter of 2012 were 6.0 years.  Commitments for tenant improvements, leasing commission costs and concessions for leases entered during the quarter ended September 30, 2012 totaled $2.13 per square foot per year of lease term on average.

 

Recent Acquisition and Sales Activities:

 

Since the announcement of 2012 second quarter results on August 8, 2012, CWH (excluding Select Income REIT, or SIR) has acquired three previously disclosed central business district, or CBD, office properties with a combined 1.4 million square feet for an aggregate purchase price of $255.5 million, including the assumption of $156.3 million of mortgage debt and excluding closing costs.  These three CBD office properties are located in Columbia, SC and Indianapolis, IN.

 

In addition, since August 8, 2012, CWH (excluding SIR) has sold one vacant suburban office property with approximately 209,000 square feet located in Foxborough, MA for $9.9 million, excluding closing costs.

 

2


 

Recent Financing Activities:

 

In July 2012, CWH issued $175.0 million of 5.75% unsecured senior notes due in 2042, raising net proceeds of $169.0 million.  CWH used the net proceeds from these notes to redeem in August 2012 all 6,000,000 shares of its 7 1/8% series C preferred stock for par plus accrued and unpaid distributions (approximately $150.0 million), and used any excess proceeds to partially fund the acquisitions listed above.

 

Also in July 2012, CWH prepaid at par all $191.0 million of its 6.50% unsecured senior notes due in 2013, using cash on hand and borrowings under its revolving credit facility.

 

Presentation:

 

Unless otherwise noted, the amounts reported above are on a consolidated basis and, as such, include the results of CWH’s consolidated subsidiary, SIR, including the effect of SIR’s minority interests since March 2012, when SIR became a separate publicly traded company.

 

SIR is itself a public company having common shares registered under the Securities Exchange Act of 1934, as amended.  For further information about SIR and its subsidiaries, please see SIR’s periodic reports and other filings with the Securities and Exchange Commission, or SEC, which are available at the SEC’s website at www.sec.gov.  References in this press release to SIR’s filings with the SEC are included to identify the source of SIR information only, and the information in SIR’s filings with the SEC is not incorporated by reference into this press release.

 

Conference Call:

 

Later today, at 10:00 a.m. Eastern Time, Adam Portnoy, President and Managing Trustee, and John Popeo, Chief Financial Officer, will host a conference call to discuss the financial results for the quarter ended September 30, 2012.

 

The conference call telephone number is (800) 288-8961.  Participants calling from outside the United States and Canada should dial (612) 332-0335.  No pass code is necessary to access either call.  Participants should dial in about 15 minutes prior to the scheduled start of the call.  A replay of the conference call will be available through 11:59 p.m. Eastern Time on Wednesday, November 14, 2012.  To hear the replay, dial (320) 365-3844.  The replay pass code is 260119.

 

A live audio webcast of the conference call will also be available in a listen only mode on CWH’s website, which is located at www.cwhreit.com.  Participants wanting to access the webcast should visit CWH’s website about five minutes before the call.  The archived webcast will be available for replay on CWH’s website for about one week after the call.

 

The recording and retransmission in any way of CWH’s third quarter conference call is strictly prohibited without the prior written consent of CWH.

 

3


 

Supplemental Data:

 

A copy of CWH’s Third Quarter 2012 Supplemental Operating and Financial Data is available for download at CWH’s website, www.cwhreit.com.  CWH’s website is not incorporated as part of this press release.

 

CommonWealth REIT is a real estate investment trust which primarily owns office properties located throughout the United States.  CWH is headquartered in Newton, MA.

 

Please see the pages attached hereto for a more detailed statement of our operating results and financial condition and for an explanation of our calculation of FFO and Normalized FFO.

 

4


 

CommonWealth REIT

Condensed Consolidated Statements of Income, Funds from Operations and Normalized Funds from Operations

(amounts in thousands)

(unaudited)

 

 

 

Quarter Ended September 30,

 

Nine Months Ended September 30,

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

Rental income

 

$

261,661

 

$

241,785

 

$

768,281

 

$

670,396

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Operating expenses

 

112,577

 

104,683

 

324,760

 

285,703

Depreciation and amortization

 

63,437

 

56,389

 

188,340

 

159,072

General and administrative

 

14,592

 

11,692

 

40,266

 

34,275

Loss on asset impairment

 

-

 

9,247

 

-

 

9,247

Acquisition related costs

 

1,066

 

4,805

 

5,002

 

9,722

Total expenses

 

191,672

 

186,816

 

558,368

 

498,019

 

 

 

 

 

 

 

 

 

Operating income

 

69,989

 

54,969

 

209,913

 

172,377

 

 

 

 

 

 

 

 

 

Interest and other income

 

399

 

320

 

1,100

 

1,395

Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $1,001, $1,515, $2,752 and $5,467, respectively)

 

(51,138)

 

(49,423)

 

(150,481)

 

(145,037)

(Loss) gain on early extinguishment of debt

 

(220)

 

310

 

(1,895)

 

310

Equity in earnings of investees

 

2,868

 

2,768

 

8,655

 

8,390

Gain on issuance of shares by an equity investee

 

-

 

11,177

 

-

 

11,177

Income from continuing operations before income tax expense

 

21,898

 

20,121

 

67,292

 

48,612

Income tax expense

 

(1,322)

 

(307)

 

(1,906)

 

(743)

Income from continuing operations

 

20,576

 

19,814

 

65,386

 

47,869

Discontinued operations:

 

 

 

 

 

 

 

 

Income from discontinued operations

 

-

 

1,720

 

-

 

5,669

Net gain on sale of properties from discontinued operations

 

-

 

7,001

 

-

 

41,573

Income before gain on sale of properties

 

20,576

 

28,535

 

65,386

 

95,111

Gain on sale of properties

 

1,689

 

-

 

2,039

 

-

Net income

 

22,265

 

28,535

 

67,425

 

95,111

Net income attributable to noncontrolling interest

 

(4,647)

 

-

 

(10,062)

 

-

Net income attributable to CommonWealth REIT

 

17,618

 

28,535

 

57,363

 

95,111

Preferred distributions

 

(12,755)

 

(13,823)

 

(40,401)

 

(33,162)

Excess redemption price paid over carrying value of preferred shares

 

(4,985)

 

-

 

(4,985)

 

-

Net (loss) income available for CommonWealth REIT common shareholders

 

$

(122)

 

$

14,712

 

$

11,977

 

$

61,949

 

 

 

 

 

 

 

 

 

Amounts attributable to CommonWealth REIT common shareholders:

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(122)

 

$

5,991

 

$

11,977

 

$

14,707

Income from discontinued operations

 

-

 

1,720

 

-

 

5,669

Net gain on sale of properties from discontinued operations

 

-

 

7,001

 

-

 

41,573

Net (loss) income

 

$

(122)

 

$

14,712

 

$

11,977

 

$

61,949

 

5


 

CommonWealth REIT

Condensed Consolidated Statements of Income, Funds from Operations and Normalized Funds from Operations (continued)

(amounts in thousands, except per share data)

(unaudited)

 

 

 

Quarter Ended September 30,

 

Nine Months Ended September 30,

 

 

2012

 

2011

 

2012

 

2011

Calculation of FFO:(1)

 

 

 

 

 

 

 

 

Net income attributable to CommonWealth REIT

 

$

17,618

 

$

28,535

 

$

57,363

 

$

95,111

Plus:

depreciation and amortization from continuing operations

 

63,437

 

56,389

 

188,340

 

159,072

Plus:

depreciation and amortization from discontinued operations

 

-

 

1,336

 

-

 

4,467

Plus:

loss on asset impairment from continuing operations

 

-

 

9,247

 

-

 

9,247

Plus:

FFO from investees

 

5,472

 

4,918

 

16,070

 

14,476

Plus:

net income attributable to noncontrolling interest

 

4,647

 

-

 

10,062

 

-

Less:

FFO attributable to noncontrolling interest

 

(5,796)

 

-

 

(12,270)

 

-

Less:

gain on sale of properties

 

(1,689)

 

-

 

(2,039)

 

-

Less:

net gain on sale of properties from discontinued operations

 

-

 

(7,001)

 

-

 

(41,573)

Less:

equity in earnings of investees

 

(2,868)

 

(2,768)

 

(8,655)

 

(8,390)

FFO attributable to CommonWealth REIT

 

80,821

 

90,656

 

248,871

 

232,410

Less:

preferred distributions

 

(12,755)

 

(13,823)

 

(40,401)

 

(33,162)

FFO available for CommonWealth REIT common shareholders

 

$

68,066

 

$

76,833

 

$

208,470

 

$

199,248

 

 

 

 

 

 

 

 

 

Calculation of Normalized FFO:(1)

 

 

 

 

 

 

 

 

FFO attributable to CommonWealth REIT

 

$

80,821

 

$

90,656

 

$

248,871

 

$

232,410

Plus:

acquisition related costs from continuing operations

 

1,066

 

4,805

 

5,002

 

9,722

Plus:

acquisition related costs from discontinued operations

 

-

 

5

 

-

 

148

Plus:

normalized FFO from investees

 

5,633

 

5,142

 

16,293

 

15,175

Plus:

loss (gain) on early extinguishment of debt from continuing operations

 

220

 

(310)

 

1,895

 

(310)

Less:

early extinguishment of debt settled in cash

 

-

 

(232)

 

-

 

(232)

Plus:

average minimum rent from direct financing lease

 

329

 

329

 

987

 

768

Plus: 

FFO attributable to noncontrolling interest

 

5,796

 

-

 

12,270

 

-

Less:  

normalized FFO attributable to noncontrolling interest

 

(5,968)

 

-

 

(12,641)

 

-

Less:

FFO from investees

 

(5,472)

 

(4,918)

 

(16,070)

 

(14,476)

Less:

interest earned from direct financing lease

 

(353)

 

(432)

 

(1,119)

 

(1,036)

Less:

gain on issuance of shares by an equity investee

 

-

 

(11,177)

 

-

 

(11,177)

Normalized FFO attributable to CommonWealth REIT

 

82,072

 

83,868

 

255,488

 

230,992

Less:

preferred distributions

 

(12,755)

 

(13,823)

 

(40,401)

 

(33,162)

Normalized FFO available for CommonWealth REIT common shareholders

 

$

69,317

 

$

70,045

 

$

215,087

 

$

197,830

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

83,745

 

81,536

 

83,731

 

75,307

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – diluted(2)

 

91,043

 

88,834

 

91,029

 

82,605

 

 

 

 

 

 

 

 

 

Per common share:

 

 

 

 

 

 

 

 

(Loss) income from continuing operations attributable to CommonWealth REIT common shareholders – basic and diluted

 

$

-

 

$

0.07

 

$

0.14

 

$

0.20

Income from discontinued operations attributable to CommonWealth REIT common shareholders – basic and diluted

 

$

-

 

$

0.11

 

$

-

 

$

0.63

Net (loss) income available for CommonWealth REIT common shareholders – basic and diluted

 

$

-

 

$

0.18

 

$

0.14

 

$

0.82

FFO available for CommonWealth REIT common shareholders – basic

 

$

0.81

 

$

0.94

 

$

2.49

 

$

2.65

FFO available for CommonWealth REIT common shareholders – diluted

 

$

0.81

 

$

0.93

 

$

2.49

 

$

2.64

Normalized FFO available for CommonWealth REIT common shareholders – basic

 

$

0.83

 

$

0.86

 

$

2.57

 

$

2.63

Normalized FFO available for CommonWealth REIT common shareholders – diluted

 

$

0.83

 

$

0.86

 

$

2.57

 

$

2.62

 

6


 

CommonWealth REIT

Condensed Consolidated Statements of Income, Funds from Operations and Normalized Funds from Operations (continued)

(amounts in thousands)

(unaudited)

 

(1)     CWH calculates FFO and Normalized FFO as shown above.  FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or NAREIT, which is net income, calculated in accordance with GAAP, plus real estate depreciation and amortization, loss on asset impairment, net income attributable to noncontrolling interest and FFO from equity investees, less gain or loss on sale of properties, earnings from equity investees and FFO attributable to noncontrolling interest.  CWH’s calculation of Normalized FFO differs from NAREIT’s definition of FFO because it excludes acquisition related costs, gains from issuance of shares by equity investees, gain and loss on early extinguishment of debt unless settled in cash, the difference between average minimum rent and interest earned from CWH’s direct financing lease and the difference between FFO and Normalized FFO from equity investees and noncontrolling interest.  CWH considers FFO and Normalized FFO to be appropriate measures of performance for a REIT, along with net income, net income attributable to CommonWealth REIT, net income available for CommonWealth REIT common shareholders, operating income and cash flow from operating, investing and financing activities. CWH believes that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO can facilitate a comparison of our operating performance between periods.  FFO and Normalized FFO are among the factors considered by CWH’s Board of Trustees when determining the amount of distributions to shareholders.  Other factors include, but are not limited to, requirements to maintain CWH’s status as a REIT, limitations in its credit facilities, term loan agreements and public debt covenants, the availability of debt and equity capital to CWH, CWH’s cash available for distribution, CWH’s expectation of its future capital requirements and operating performance and CWH’s expected needs and availability of cash to pay its obligations.  FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income, net income attributable to CommonWealth REIT, net income available for CommonWealth REIT common shareholders, operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of CWH’s financial performance or liquidity, nor are FFO and Normalized FFO necessarily indicative of sufficient cash flow to fund all of CWH’s needs.  CWH believes FFO and Normalized FFO may facilitate an understanding of its consolidated historical operating results.  These measures should be considered in conjunction with net income, net income attributable to CommonWealth REIT, net income available for CommonWealth REIT common shareholders, operating income, and cash flow from operating activities as presented in CWH’s Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows.  Other REITs and real estate companies may calculate FFO and Normalized FFO differently than CWH.

 

(2)   As of September 30, 2012, CWH’s 15,180 outstanding series D preferred shares were convertible into 7,298 common shares.  The effect of a conversion of CWH’s series D convertible preferred shares on income from continuing operations available for CommonWealth REIT common shareholders per share is anti-dilutive to income, but dilutive to FFO and Normalized FFO for most periods presented.  Set forth below is the calculation of diluted net income available for common shareholders, diluted FFO available for common shareholders, diluted Normalized FFO available for common shareholders and diluted weighted average common shares outstanding.

 

 

 

Quarter Ended September 30,

 

Nine Months Ended September 30,

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

Net (loss) income available for CommonWealth REIT common shareholders

 

$

(122)

 

$

14,712

 

$

11,977

 

$

61,949

Add - Series D convertible preferred distributions

 

6,167

 

6,167

 

18,501

 

18,501

Net income available for CommonWealth REIT common shareholders – diluted

 

$

6,045

 

$

20,879

 

$

30,478

 

$

80,450

 

 

 

 

 

 

 

 

 

FFO available for CommonWealth REIT common shareholders

 

$

68,066

 

$

76,833

 

$

208,470

 

$

199,248

Add - Series D convertible preferred distributions

 

6,167

 

6,167

 

18,501

 

18,501

FFO available for CommonWealth REIT common shareholders – diluted

 

$

74,233

 

$

83,000

 

$

226,971

 

$

217,749

 

 

 

 

 

 

 

 

 

Normalized FFO available for CommonWealth REIT common shareholders

 

$

69,317

 

$

70,045

 

$

215,087

 

$

197,830

Add - Series D convertible preferred distributions

 

6,167

 

6,167

 

18,501

 

18,501

Normalized FFO available for CommonWealth REIT common shareholders – diluted

 

 

 

 

 

 

 

 

$

75,484

$

76,212

$

233,588

$

216,331

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

83,745

 

81,536

 

83,731

 

75,307

Effect of dilutive Series D preferred shares

 

7,298

 

7,298

 

7,298

 

7,298

Weighted average common shares outstanding – diluted

 

91,043

 

88,834

 

91,029

 

82,605

 

7


 

CommonWealth REIT

Condensed Consolidated Balance Sheets

(amounts in thousands, except share data)

(unaudited)

 

 

 

As of September 30,

 

As of December 31,

 

 

2012

 

2011

ASSETS

 

 

 

 

Real estate properties:

 

 

 

 

Land

 

$

1,531,466

 

$

1,450,154

Buildings and improvements

 

6,331,605

 

5,794,078

 

 

7,863,071

 

7,244,232

Accumulated depreciation

 

(1,045,477)

 

(934,170)

 

 

6,817,594

 

6,310,062

Acquired real estate leases, net

 

371,929

 

343,917

Equity investments

 

178,996

 

177,477

Cash and cash equivalents

 

72,680

 

192,763

Restricted cash

 

13,631

 

7,869

Rents receivable, net of allowance for doubtful accounts of $11,798 and $12,575, respectively

 

246,313

 

217,592

Other assets, net

 

245,812

 

197,346

Total assets

 

$

7,946,955

 

$

7,447,026

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Revolving credit facility

 

$

160,000

 

$

100,000

SIR revolving credit facility

 

92,000

 

-

Senior unsecured debt, net

 

3,029,652

 

2,845,030

Mortgage notes payable, net

 

869,384

 

632,301

Accounts payable and accrued expenses

 

143,192

 

158,272

Assumed real estate lease obligations, net

 

70,587

 

70,179

Rent collected in advance

 

25,883

 

37,653

Security deposits

 

24,191

 

23,779

Due to related persons

 

31,942

 

11,295

Total liabilities

 

4,446,831

 

3,878,509

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Shareholder’s equity attributable to CommonWealth REIT:

 

 

 

 

Preferred shares of beneficial interest, $0.01 par value:

 

 

 

 

50,000,000 shares authorized;

 

 

 

 

Series C preferred shares; 7 1/8% cumulative redeemable since February 15, 2011; zero and 6,000,000 shares issued and outstanding, respectively, aggregate liquidation preference $150,000

 

-

 

145,015

Series D preferred shares; 6 1/2% cumulative convertible; 15,180,000 shares issued and outstanding, aggregate liquidation preference $379,500

 

368,270

 

368,270

Series E preferred shares; 7 1/4% cumulative redeemable on or after May 15, 2016; 11,000,000 shares issued and outstanding, aggregate liquidation preference $275,000

 

265,391

 

265,391

Common shares of beneficial interest, $0.01 par value:

 

 

 

 

350,000,000 shares authorized; 83,804,068 and 83,721,736 shares issued and outstanding, respectively

 

838

 

837

Additional paid in capital

 

3,585,964

 

3,614,079

Cumulative net income

 

2,539,684

 

2,482,321

Cumulative other comprehensive loss

 

(1,044)

 

(4,709)

Cumulative common distributions

 

(2,951,618)

 

(2,826,030)

Cumulative preferred distributions

 

(518,215)

 

(476,657)

Total shareholders’ equity attributable to CommonWealth REIT

 

3,289,270

 

3,568,517

Noncontrolling interest

 

210,854

 

-

Total shareholders’ equity

 

3,500,124

 

3,568,517

Total liabilities and shareholders’ equity

 

$

7,946,955

 

$

7,447,026

 

(END)

 

8