FOR IMMEDIATE RELEASE:
Equity One Reports Fourth Quarter and Full Year 2006 Operating Results and Provides 2007 FFO and Earnings Guidance
NORTH MIAMI BEACH, FL; February 20, 2007 -- Equity One, Inc. (NYSE:EQY), an owner, developer, and operator of shopping centers announced today its financial results for the three and twelve month periods ended December 31, 2006.
Financial Highlights
Funds From Operations (FFO) for the fourth quarter of 2006 was $20.0 million, or $0.27 per diluted share, compared to $28.9 million and $0.38 per diluted share for 2005. The fourth quarter of 2006 included severance payments, write-offs of abandoned transactions, and management transition costs of approximately $6.4 million, or $0.09 per diluted share.
For the year ended December 31, 2006, FFO was $110.3 million, or $1.48 per diluted share, compared to $124.8 million and $1.67 per diluted share for 2005. The full year 2006 included severance payments, write-offs of abandoned transactions, and management transition costs of approximately $8.4 million, or $0.11 per diluted share.
Net income for the fourth quarter of 2006 was $29.1 million, or $0.40 per diluted share, compared to $17.8 million and $0.24 per diluted share for 2005. Net income for the year ended December 31, 2006 was $177.0 million or $2.38 per diluted share, compared to $92.7 million and $1.24 per diluted share for 2005.
Operating Highlights
For the three months ended December 31, 2006, Equity One generated same-property net operating income (NOI) growth of 2.9%. For the year ended December 31, 2006, Equity One generated same-property NOI growth of 3.0%. At December 31, 2006, the company’s core operating portfolio was 95.0% occupied.
During the fourth quarter, the company executed 84 new leases totaling 204,567 square feet at an average rental rate of $14.10 per square foot and representing a 14.7% increase over prior rents on a same-space cash basis. Also during the fourth quarter, the company renewed 133 leases for 359,563 square feet for an average rental rate increase of 8.7% to $14.73 per square foot on a cash basis.
Investment and Financing Activities
During the fourth quarter, Equity One acquired five shopping centers and two parcels of land for $72.6 million. The company sold its 20% interest in a joint venture that owned a portfolio of 29 shopping centers in Texas for net proceeds of approximately $18.5 million. The company recognized a gain of $20.4 million on the sale.
In October, the company repurchased 180,900 shares of its common stock for $4.4 million, or an average price of $24.13 per share. In December, the company also sold its investment in Winn-Dixie bonds and recognized a gain of $598,000.
Subsequent to year end, the company has acquired one shopping center in Miami, FL and one outparcel adjacent to an owned center in Orlando, FL for an aggregate purchase price of $50.6 million. Also subsequent to year end, the company sold an office building in Lafayette, LA for a gross sale price of $350,000 and recognized a gain of $275,000.
During 2006, the company completed and leased $45.4 million of development projects with an incremental NOI yield on cost of approximately 9.2%. At December 31, 2006, the company had approximately $73 million of development and approximately $45 million of redevelopment projects underway. The estimated cost to complete these projects was approximately $59 million.
Balance Sheet Highlights
At December 31, 2006, our total market capitalization equaled $3.0 billion, comprising 73.6 million shares of common stock (on a diluted basis) valued at $2.0 billion, and $1.0 billion of net debt (excluding any unamortized fair market premium/discount and net of cash). Our ratio of net debt to total market capitalization was 35.0% and our ratio of net debt to gross real estate and securities investments was 50.2%. On a trailing four quarter basis, the company’s interest coverage ratio was 3.0 times.
FFO and Earnings Guidance
The company is providing 2007 FFO and earnings guidance excluding gains on land sales. Although land sales are expected to be a recurring part of its development business, management does not believe it is prudent to offer predictions of the timing and amounts of such transactions.
FFO per diluted share is expected to be $1.33 to $1.40 for the year ending December 31, 2007, and net income per diluted share is expected to be $0.71 to $0.78. The following table provides the reconciliation of the range of estimated net income available to common stockholders per diluted share to estimated FFO per diluted share.
| | | Low | | High | |
| Estimated net income per diluted share | | $ | 0.71 | | $ | 0.78 | |
| Adjustments: | | | | | | | |
| Rental property depreciation and amortization | | | 0.62 | | | 0.62 | |
| Minority interest | | | 0.00 | | | 0.00 | |
| Estimated Funds From Operations (FFO) per diluted share | | $ | 1.33 | | $ | 1.40 | |
The company’s 2007 guidance estimates are based upon its internal budgeting process and management’s view of market conditions in the retail real estate business. Assumptions underlying the company’s 2007 guidance include:
| | · | Same-property NOI growth of 3-4%. |
| | · | No net acquisition activity. The company anticipates disposing of $150 million in property during 2007 and re-investing the proceeds in acquisitions, developments, and redevelopments. |
| | · | The receipt of an annual dividend on the company’s investment in DIM Vastgoed, N.V. |
| | · | A stable retail and interest rate environment for the remainder of the year. |
| | · | General and administrative expenses of approximately $20-22 million. |
While Equity One is discontinuing providing FFO and earnings guidance on a quarter-by-quarter basis, it expects FFO to be higher in the first quarter of 2007 than in the subsequent three quarters of 2007 due to an expected first quarter accrual of approximately $5.9 million for an anticipated annual dividend on the company’s investment in shares of DIM Vastgoed, N.V. and due to the recognition of a disproportionate amount of percentage rent revenue in the first quarter.
Commenting on 2006 and the outlook for 2007, CEO Jeff Olson said: “Equity One has been through many changes over a short period of time. We have assembled a great team. We can now put the transition behind us and execute our long-term plan of creating value for our shareholders.”
ACCOUNTING AND OTHER DISCLOSURES
We believe Funds from Operations (“FFO”) (combined with the primary GAAP presentations) is a useful, supplemental measure of our operating performance that is a recognized metric used extensively by the real estate industry, particularly REITs. The National Association of Real Estate Investment Trusts (“NAREIT”) stated in its April 2002 White Paper on Funds from Operations, “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 have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.”
FFO, as defined by NAREIT, is “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.” NAREIT states further that “adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.” We believe that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from our FFO measure. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
FFO is presented to assist investors in analyzing our operating performance. FFO (i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is not an alternative to cash flow as a measure of liquidity, and (iv) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance. We believe net income is the most directly comparable GAAP measure to FFO.
CONFERENCE CALL/WEB CAST INFORMATION
We will host a conference call on Wednesday, February 21, 2007, at 8:30 a.m. EST to review the 2006 fourth quarter and year-end earnings and operating results. Stockholders, analysts and other interested parties can access the earnings call by dialing 866-800-8651 (U.S./Canada) or 617-614-2704 (international) using pass code 24993407. The call will also be web cast and can be accessed in a listen-only mode at Equity One’s web site at www.equityone.net.
If you are unable to participate during the call, a replay will be available on Equity One’s web site for future review. You may also access the replay by dialing 888-286-8010 (U.S./Canada) or 617-801-6888 (international) using pass code 64759941 through February 28, 2007.
FOR ADDITIONAL INFORMATION
For a copy of our fourth quarter supplemental information package, please access the “Financial Reports” section in our web site at www.equityone.net. To be included in our e-mail distributions for press releases and other company notices, please send your e-mail address to Feryal Akin at fakin@equityone.net.
ABOUT EQUITY ONE, INC.
As of December 31, 2006, the Company owns or has interests in 179 properties, consisting of 166 shopping centers comprising approximately 17.9 million square feet, six development parcels and seven non-retail properties.
FORWARD LOOKING STATEMENTS
Certain matters discussed by Equity One in this press release constitute forward-looking statements within the meaning of the federal securities laws. Although Equity One believes that the expectations reflected in such forward-looking statements is based upon reasonable assumptions, it can give no assurance that these expectations will be achieved. Factors that could cause actual results to differ materially from current expectations include changes in macro-economic conditions and the demand for retail space in Florida, Georgia, Massachusetts and the other states in which Equity One owns properties; the continuing financial success of Equity One’s current and prospective tenants; continuing supply constraints in its geographic markets; the availability of properties for acquisition; the success of its efforts to lease up vacant space; the effects of natural and other disasters; the ability of Equity One successfully to integrate the operations and systems of acquired companies and properties; and other risks, which are described in Equity One’s filings with the Securities and Exchange Commission.
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 and 2005
(In thousands, except per share amounts)
| | | 2006 | | 2005 | |
ASSETS | | | | | |
| | | | | | |
| PROPERTIES: | | | | | |
| Income producing | | $ | 1,896,843 | | $ | 1,661,243 | |
| Less: accumulated depreciation | | | (144,825 | ) | | (111,031 | ) |
| Income producing property, net | | | 1,752,018 | | | 1,550,212 | |
| Construction in progress and land held for development | | | 113,340 | | | 64,202 | |
| Property held for sale | | | 20,353 | | | 282,091 | |
| Properties, net | | | 1,885,711 | | | 1,896,505 | |
| CASH AND CASH EQUIVALENTS | | | - | | | 102 | |
| CASH HELD IN ESCROW | | | 1,547 | | | - | |
| ACCOUNTS AND OTHER RECEIVABLES, NET | | | 18,967 | | | 17,600 | |
| SECURITIES | | | 75,102 | | | 67,588 | |
| GOODWILL | | | 13,092 | | | 12,013 | |
| OTHER ASSETS | | | 57,430 | | | 58,225 | |
| TOTAL | | $ | 2,051,849 | | $ | 2,052,033 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
| LIABILITIES: | | | | | | | |
| NOTES PAYABLE | | | | | | | |
| Mortgage notes payable | | $ | 391,647 | | $ | 392,480 | |
| Mortgage notes payable related to property held for sale | | | - | | | 54,445 | |
| Unsecured revolving credit facilities | | | 76,500 | | | 93,165 | |
| Unsecured senior notes payable | | | 591,187 | | | 465,404 | |
| | | | 1,059,334 | | | 1,005,494 | |
| Unamortized premium/discount on notes payable | | | 10,322 | | | 15,830 | |
| Total notes payable | | | 1,069,656 | | | 1,021,324 | |
| OTHER LIABILITIES | | | | | | | |
| Accounts payable and accrued expenses | | | 36,565 | | | 40,161 | |
| Tenant security deposits | | | 9,622 | | | 9,561 | |
| Other liabilities | | | 9,339 | | | 6,833 | |
| Total liabilities | | | 1,125,182 | | | 1,077,879 | |
| MINORITY INTEREST | | | 989 | | | 1,425 | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | |
| STOCKHOLDERS’ EQUITY: | | | | | | | |
| Preferred stock, $0.01 par value - 10,000 shares authorized but unissued | | | - | | | - | |
| Common stock, $0.01 par value - 100,000 shares authorized, 72,756 and 75,409 shares issued and outstanding for 2006 and 2005, respectively | | | 728 | | | 754 | |
| Additional paid-in capital | | | 895,247 | | | 955,378 | |
| Retained earnings | | | 37,201 | | | 22,950 | |
| Accumulated other comprehensive (loss) income | | | (7,498 | ) | | 3,404 | |
| Unamortized restricted stock compensation | | | - | | | (9,692 | ) |
| Notes receivable from issuance of common stock | | | - | | | (65 | ) |
| Total stockholders’ equity | | | 925,678 | | | 972,729 | |
| TOTAL | | $ | 2,051,849 | | $ | 2,052,033 | |
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| | | For the Three Months Ended | | For the Twelve Months Ended | |
| | | Dec 31, 2006 | | Dec 31, 2005 | | Dec 31, 2006 | | Dec 31, 2005 | |
| REVENUE: | | | | | | | | | |
| Minimum rents | | $ | 47,245 | | $ | 40,453 | | $ | 176,474 | | $ | 159,017 | |
| Expense recoveries | | | 14,063 | | | 12,854 | | | 51,076 | | | 44,251 | |
| Termination fees | | | 541 | | | 913 | | | 1,741 | | | 4,776 | |
| Percentage rent | | | 297 | | | 175 | | | 2,063 | | | 1,717 | |
| Management and leasing services | | | 726 | | | 173 | | | 2,067 | | | 498 | |
| Total revenue | | | 62,872 | | | 54,568 | | | 233,421 | | | 210,259 | |
| COSTS AND EXPENSES: | | | | | | | | | | | | | |
| Property operating | | | 18,012 | | | 16,049 | | | 65,102 | | | 55,703 | |
| Services | | | 49 | | | - | | | 1,861 | | | 229 | |
| Lease termination | | | 688 | | | 91 | | | 1002 | | | - | |
| Rental property depreciation and amortization | | | 10,634 | | | 9,000 | | | 42,012 | | | 34,994 | |
| General and administrative | | | 11,023 | | | 4,339 | | | 26,895 | | | 17,281 | |
| Total costs and expenses | | | 40,406 | | | 29,479 | | | 136,872 | | | 108,207 | |
| INCOME BEFORE OTHER INCOME AND EXPENSES, MINORITY INTEREST, GAIN ON SALE OF REAL ESTATE AND DISCONTINUED OPERATIONS | | | 22,466 | | | 25,089 | | | 96,549 | | | 102,052 | |
| OTHER INCOME AND (EXPENSES): | | | | | | | | | | | | | |
| Interest expense | | | (14,312 | ) | | (12,022 | ) | | (54,458 | ) | | (47,795 | ) |
| Amortization of deferred financing fees | | | (389 | ) | | (376 | ) | | (1,490 | ) | | (1,454 | ) |
| Investment income | | | 892 | | | 424 | | | 7,487 | | | 7,941 | |
| Gain on the sale of real estate | | | 900 | | | - | | | 6,937 | | | - | |
| Equity in income of unconsolidated joint ventures | | | - | | | - | | | 1,650 | | | - | |
| Gain on extinguishment of debt | | | - | | | - | | | 165 | | | - | |
| Other income | | | - | | | - | | | 389 | | | - | |
| INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS | | | 9,557 | | | 13,115 | | | 57,229 | | | 60,744 | |
| MINORITY INTEREST | | | (28 | ) | | (44 | ) | | (206 | ) | | (188 | ) |
| INCOME FROM CONTINUING OPERATIONS | | | 9,529 | | | 13,071 | | | 57,023 | | | 60,556 | |
| DISCONTINUED OPERATIONS: | | | | | | | | | | | | | |
| Operations of income-producing properties sold or held for sale | | | (250 | ) | | 4,696 | | | 4,764 | | | 20,725 | |
| Gain on disposal of income-producing properties | | | 19,844 | | | - | | | 115,168 | | | 11,460 | |
| Income from discontinued operations | | | 19,594 | | | 4,696 | | | 119,932 | | | 32,185 | |
| NET INCOME | | $ | 29,123 | | $ | 17,767 | | $ | 176,955 | | $ | 92,741 | |
| | | | | | | | | | | | | | |
| BASIC EARNINGS PER SHARE | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.13 | | $ | 0.18 | | $ | 0.77 | | $ | 0.82 | |
| Income from discontinued operations | | | 0.27 | | | 0.06 | | | 1.63 | | | 0.44 | |
| Total basic earnings per share | | $ | 0.40 | | $ | 0.24 | | $ | 2.40 | | $ | 1.26 | |
| Number of shares used in computing basic earnings per share earnings per share | | | 72,579 | | | 74,574 | | | 73,598 | | | 73,840 | |
| | | | | | | | | | | | | | |
| DILUTED EARNINGS PER SHARE | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.13 | | $ | 0.18 | | $ | 0.77 | | $ | 0.81 | |
| Income from discontinued operations | | | 0.27 | | | 0.06 | | | 1.61 | | | 0.43 | |
| Total diluted earnings per share | | $ | 0.40 | | $ | 0.24 | | $ | 2.38 | | $ | 1.24 | |
| Number of shares used in computing diluted earnings per share | | | 73,471 | | | 75,501 | | | 74,324 | | | 74,790 | |
EQUITY ONE, INC. AND SUBSIDIARIES
Reconciliation of Net Income to Funds from Operations
Funds from Operations is a non-GAAP financial measure. We believe that FFO, as defined by NAREIT, is a widely used and appropriate supplemental measure of operating performance for REITs, and that it provides a relevant basis for comparison among REITs.
The following table reflects the reconciliation of FFO to net income, the most directly comparable GAAP measure, for the periods presented:
| | | For the three months ended December 31, | | For the year ended December 31, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
| Net income | | $ | 29,123 | | $ | 17,767 | | $ | 176,955 | | $ | 92,741 | |
| Adjustments | | | | | | | | | | | | | |
| Rental property depreciation and amortization | | | 10,630 | | | 11,137 | | | 44,791 | | | 43,445 | |
| Gain on sale of depreciable real estate | | | (19,844 | ) | | - | | | (112,995 | ) | | (11,460 | ) |
| Pro rata share of real estate depreciation from unconsolidated joint venture | | | 110 | | | - | | | 1,354 | | | - | |
| Minority interest | | | 28 | | | 28 | | | 206 | | | 110 | |
| Funds from operations | | $ | 20,047 | | $ | 28,932 | | $ | 110,311 | | $ | 124,836 | |
Reconciliation of Earnings per Diluted Share to Funds from Operations per Diluted Share
The following table reflects the reconciliation of FFO per diluted share to earnings per diluted share, the most directly comparable GAAP measure, for the periods presented:
| | | For the three months ended December 31, | | For the year ended December 31, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
| Earnings per diluted share * | | $ | 0.40 | | $ | 0.24 | | $ | 2.38 | | $ | $1.24 | |
| Adjustments | | | | | | | | | | | | | |
| Rental property depreciation and amortization | | | 0.14 | | | 0.14 | | | 0.60 | | | 0.58 | |
| Gain on sale of depreciable real estate | | | (0.27 | ) | | - | | | (1.52 | ) | | (0.15 | ) |
| Pro rata share of real estate depreciation from unconsolidated joint venture | | | - | | | - | | | 0.02 | | | - | |
| Funds from operations | | $ | 0.27 | | $ | 0.38 | | $ | 1.48 | | $ | 1.67 | |
* | Earnings per diluted share reflect the add-back of minority interest(s) which are convertible to shares of our common stock. |
7
