Equity One, Inc.1600 NE Miami Gardens Drive North Miami Beach, FL 33179305-947-1664 | | For additional information: Greg Andrews, EVP and Chief Financial Officer |
FOR IMMEDIATE RELEASE:
Equity One Reports First Quarter 2008 Operating Results
NORTH MIAMI BEACH, FL; April 29, 2008 -- Equity One, Inc. (NYSE:EQY), an owner, developer, and operator of shopping centers announced today its financial results for the three months ended March 31, 2008.
Financial Highlights
Funds From Operations (FFO) for the first quarter was $32.7 million, or $0.44 per diluted share, compared to $29.7 million and $0.40 per diluted share for the same period in 2007.
Net income for the quarter was $20.9 million, or $0.28 per diluted share, compared to $20.0 million and $0.27 per diluted share for the same period in 2007.
Operating Highlights
For the three months ended March 31, 2008, Equity One generated same-property net operating income growth of 1.3%. At March 31, 2008, the company’s core operating portfolio was 92.7% occupied.
During the first quarter, the company executed 37 new leases totaling 99,836 square feet at an average rental rate of $16.75 per square foot, representing an 18.2% increase over prior rents on a same-space cash basis. Also during the first quarter, the company renewed 106 leases for 228,511 square feet for an average rental rate increase of 8.1% to $16.14 per square foot on a cash basis. In addition, the company renewed 39 leases for 202,044 square feet subject to tenant renewal option for an average rental rate increase of 5.1% to $11.60 per square foot on a cash basis.
Development and Redevelopment Activities
During the first quarter, the company completed one development project with total project costs of $4.8 million. At March 31, 2008, the company had approximately $58.6 million of development projects and approximately $17.4 million of redevelopment projects underway. The estimated remaining cost to complete these projects was approximately $43.8 million.
New Joint Ventures
During the quarter, the company formed a joint venture with Global Retail Investors, LLC, an entity formed by an affiliate of First Washington Realty, Inc. and the State of California Public Employees’ Retirement System (“GRI”), to invest in shopping centers throughout the U.S. The joint venture is 90% owned by GRI and 10% owned by Equity One. Equity One manages and leases properties acquired by the joint venture. During the quarter, the joint venture acquired a Class-A grocery-anchored shopping center in Miami, FL for approximately $37.0 million. Subsequent to quarter end, the company agreed to contribute seven properties valued at approximately $197.4 million to the joint venture.
Also subsequent to quarter end, the company entered into a joint venture with DRA Advisors to invest in value-added acquisition opportunities. The joint venture has two shopping centers and one office property located in Florida under contract for approximately $50.0 million. The joint venture is 80% owned by DRA Advisors and 20% owned by Equity One. Equity One will manage and lease properties acquired by the joint venture.
Balance Sheet Highlights
During the quarter, the company repurchased $27.9 million of outstanding unsecured bonds at an average 10.5% discount to par value, which represents a 7.6% yield to maturity. As a result of the repurchases, the company recognized a gain of $2.4 million, or $0.03 per diluted share, in earnings and FFO.
At March 31, 2008, the company’s total market capitalization equaled $2.9 billion, comprising 73.5 million shares of common stock (on a diluted basis) valued at $1.8 billion, and $1.1 billion of net debt (excluding any unamortized fair market premium/discount and net of cash). Its ratio of net debt to total market capitalization was 39.1% and its ratio of net debt to gross real estate and securities investments was 51.6%. On a trailing four quarter basis, the company’s interest coverage ratio was 2.6 times.
FFO and Earnings Guidance
The company is reiterating its 2008 FFO and earnings guidance excluding gains on land sales.
FFO per diluted share is expected to be $1.40 to $1.45 for the year ending December 31, 2008, and net income per diluted share is expected to be $0.79 to $0.82. 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 (1) | | $ | 0.79 | | | $ | 0.82 | |
| Adjustments: | | | | | | | | |
Rental property depreciation and amortization (2) | | | 0.61 | | | | 0.63 | |
| Minority interest | | | 0.00 | | | | 0.00 | |
Estimated Funds From Operations (FFO) per diluted share (1) | | $ | 1.40 | | | $ | 1.45 | |
(1) Excluding gains on land sales
(2) Including pro-rata share of joint venture depreciation and amortization.
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, April 30, 2008, at 9:00 a.m. EST to review the 2008 first quarter earnings and operating results. Stockholders, analysts and other interested parties can access the earnings call by dialing 888-713-4215 (U.S./Canada) or 617-213-4867 (international) using pass code 39090802. 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 13045279 through May 7, 2008.
FOR ADDITIONAL INFORMATION
For a copy of our first 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 March 31, 2008, the Company owns or has interests in 169 properties, consisting of 153 shopping centers comprising approximately 17.1 million square feet, six projects in development, six non-retail properties, and four parcels of land.
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 the 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
Condensed Consolidated Balance Sheets
March 31, 2008 and December 31, 2007
(In thousands, except per share data)
(Unaudited)
| | | March 31, | | | December 31, | |
| | | 2008 | | | 2007 | |
| ASSETS | | | | | | |
| Properties: | | | | | | |
| Income producing | | $ | 1,871,311 | | | $ | 2,047,993 | |
| Less: accumulated depreciation | | | (172,359 | ) | | | (172,651 | ) |
| Income-producing property, net | | | 1,698,952 | | | | 1,875,342 | |
| Construction in progress and land held for development | | | 77,619 | | | | 81,574 | |
| Properties held for sale | | | 179,881 | | | | 323 | |
| Properties, net | | | 1,956,452 | | | | 1,957,239 | |
| | | | | | | | | |
| Cash and cash equivalents | | | - | | | | 1,313 | |
| Cash held in escrow | | | 8,234 | | | | 54,460 | |
| Accounts and other receivables, net | | | 13,567 | | | | 14,148 | |
| Securities | | | 61,582 | | | | 72,299 | |
| Goodwill | | | 12,385 | | | | 12,496 | |
| Other assets | | | 63,036 | | | | 62,429 | |
| TOTAL ASSETS | | $ | 2,115,256 | | | $ | 2,174,384 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Liabilities: | | | | | | | | |
| Notes Payable | | | | | | | | |
| Mortgage notes payable | | $ | 350,146 | | | $ | 397,112 | |
| Mortgage notes payable related to properties held for sale | | | 46,440 | | | | - | |
| Unsecured revolving credit facilities | | | 24,500 | | | | 37,000 | |
| Unsecured senior notes payable | | | 718,721 | | | | 744,685 | |
| | | | 1,139,807 | | | | 1,178,797 | |
| Unamortized premium/discount on notes payable | | | 7,363 | | | | 10,042 | |
| Total notes payable | | | 1,147,170 | | | | 1,188,839 | |
| Other liabilities | | | | | | | | |
| Accounts payable and accrued expenses | | | 26,092 | | | | 30,499 | |
| Tenant security deposits | | | 9,486 | | | | 9,685 | |
| Other liabilities | | | 25,355 | | | | 28,440 | |
| Total liabilities | | | 1,208,103 | | | | 1,257,463 | |
| Minority interests | | | 989 | | | | 989 | |
| 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 73,361 and 73,300 shares issued and outstanding as of March 31, 2008 and December 31, 2007, respectively | | | 734 | | | | 733 | |
| Additional paid-in capital | | | 908,041 | | | | 906,174 | |
| Retained earnings | | | 16,650 | | | | 17,987 | |
| Accumulated other comprehensive loss | | | (19,261 | ) | | | (8,962 | ) |
| Total stockholders’ equity | | | 906,164 | | | | 915,932 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 2,115,256 | | | $ | 2,174,384 | |
EQUITY ONE, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Operations
For the three months ended March 31, 2008 and 2007
(In thousands, except per share data)
(Unaudited)
| | | Three months ended | |
| | | March 31, | |
| | | 2008 | | | 2007 | |
| REVENUE: | | | | | | |
| Minimum rent | | $ | 48,040 | | | $ | 46,423 | |
| Expense recoveries | | | 13,699 | | | | 12,950 | |
| Percentage rent | | | 1,449 | | | | 1,260 | |
| Management and leasing services | | | 183 | | | | 837 | |
| Total revenue | | | 63,371 | | | | 61,470 | |
| COSTS AND EXPENSES: | | | | | | | | |
| Property operating | | | 16,162 | | | | 14,889 | |
| Rental property depreciation and amortization | | | 11,796 | | | | 10,957 | |
| General and administrative | | | 6,802 | | | | 9,804 | |
| Total costs and expenses | | | 34,760 | | | | 35,650 | |
| | | | | | | | | |
| INCOME BEFORE OTHER INCOME AND EXPENSE, MINORITY INTEREST AND DISCONTINUED OPERATIONS | | | 28,611 | | | | 25,820 | |
| | | | | | | | | |
| OTHER INCOME AND EXPENSE: | | | | | | | | |
| Investment income | | | 6,190 | | | | 6,207 | |
| Other income | | | 43 | | | | 182 | |
| Interest expense | | | (15,982 | ) | | | (15,641 | ) |
| Amortization of deferred financing fees | | | (429 | ) | | | (387 | ) |
| Gain (loss) on sale of real estate | | | (42 | ) | | | 1,067 | |
| Gain on extinguishment of debt | | | 2,380 | | | | - | |
| INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS | | | 20,771 | | | | 17,248 | |
| Minority Interest | | | (28 | ) | | | (28 | ) |
| | | | | | | | | |
| INCOME FROM CONTINUING OPERATIONS | | | 20,743 | | | | 17,220 | |
| | | | | | | | | |
| DISCONTINUED OPERATIONS: | | | | | | | | |
| Operations of income-producing properties sold or held for sale | | | 111 | | | | 1,067 | |
| Gain on disposal of income-producing properties | | | - | | | | 1,732 | |
| Income from discontinued operations | | | 111 | | | | 2,799 | |
| NET INCOME | | $ | 20,854 | | | $ | 20,019 | |
| | | | | | | | | |
| EARNINGS PER COMMON SHARE - BASIC: | | | | | | | | |
| Continuing operations | | $ | 0.28 | | | $ | 0.23 | |
| Discontinued operations | | | - | | | | 0.04 | |
| | | $ | 0.28 | | | $ | 0.27 | |
| Number of Shares Used in Computing Basic Earnings per Share | | | 73,324 | | | | 72,974 | |
| | | | | | | | | |
| EARNINGS PER COMMON SHARE – DILUTED: | | | | | | | | |
| Continuing operations | | $ | 0.28 | | | $ | 0.23 | |
| Discontinued operations | | | - | | | | 0.04 | |
| | | $ | 0.28 | | | $ | 0.27 | |
| Number of Shares Used in Computing Diluted Earning per Share | | | 73,499 | | | | 73,990 | |
EQUITY ONE, INC. AND SUBSIDIARIES
Reconciliation of Net Income to Funds from Operations
Reconciliation of Earnings per Diluted Share to Funds from Operations per Diluted Share
The following table reflects the reconciliation of FFO to net income, the most directly comparable GAAP measure, for the periods presented:
| | | Three Month Ended | |
| | | March 31, | |
| | | 2008 | | | 2007 | |
| | | (In thousands) | |
| | | | | | | |
| Net income | | $ | 20,854 | | | $ | 20,019 | |
| Adjustments: | | | | | | | | |
| Rental property depreciation and amortization, including discontinue operations | | | 11,796 | | | | 11,373 | |
| Gain on disposal of depreciable real estate | | | - | | | | (1,732 | ) |
| Minority interest | | | 28 | | | | 28 | |
| Funds from operations | | $ | 32,678 | | | $ | 29,688 | |
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 per diluted share to earnings per diluted share, the most directly comparable GAAP measure, for the periods presented:
| | | Three Month Ended | |
| | | March 31, | |
| | | 2008 | | | 2007 | |
| | | | | | | |
Earnings per diluted share * | | $ | 0.28 | | | $ | 0.27 | |
| Adjustments: | | | | | | | | |
| Rental property depreciation and amortization, including discontinue operations | | | 0.16 | | | | 0.15 | |
| Gain on disposal of depreciable real estate | | | - | | | | (0.02 | ) |
| Minority interest | | | - | | | | - | |
| Funds from operations per diluted share | | $ | 0.44 | | | $ | 0.40 | |
*Earnings per diluted share reflect the add-back of minority interest(s) which are convertible to shares of our common stock.
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