EXHIBIT 99.1
Contact: Janie Maddox
Post Properties, Inc.
(404) 846-5056
POST PROPERTIES ANNOUNCES SECOND QUARTER EARNINGS
Investor/Analyst Conference Call Scheduled for August 3, 2004 at 10:00 a.m. EDT
ATLANTA, August 2, 2004 - Post Properties, Inc. (NYSE: PPS) announced today net
income available to common shareholders of $99.2 million for the second quarter
of 2004, compared to net income available to common shareholders of $24.8
million for the second quarter of 2003. On a diluted per share basis, net income
available to common shareholders was $2.49 for the second quarter of 2004,
compared to net income available to common shareholders of $0.66 for the second
quarter of 2003.
For the six months ended June 30, 2004, net income available to common
shareholders was $98.3 million, compared to $1.4 million for the six months
ended June 30, 2003. On a diluted per share basis, net income available to
common shareholders was $2.48 for the first six months of 2004, compared to
$0.04 for the same period of 2003.
The Company uses the National Association of Real Estate Investment Trusts
("NAREIT") definition of Funds from Operations ("FFO") as an operating measure
of the Company's financial performance. In October 2003, NAREIT clarified the
definition of FFO to include impairment losses. As such, prior period
presentations of FFO have been restated to conform with the revised NAREIT
definition of FFO. A reconciliation of FFO to GAAP net income is included in the
financial data (Table 1) accompanying this press release.
FFO for the second quarter of 2004 totaled $14.7 million, or $0.35 per diluted
share, compared to $14.7 million, or $0.35 per diluted share, for the second
quarter of 2003. Excluding the net non-cash loss on early extinguishment of
indebtedness associated with property sales and a non-cash asset impairment
charge, FFO for the second quarter of 2004 was $19.5 million, or $0.46 per
diluted share. Excluding severance and proxy contest charges, FFO for the second
quarter of 2003 was $21.7 million, or $0.52 per diluted share.
For the six months ended June 30, 2004, FFO totaled $32.5 million, or $0.76 per
diluted share, compared to $3.4 million, or $0.08 per diluted share, for the six
months ended June 30, 2003. Excluding a net non-cash loss on early
extinguishment of indebtedness, a non-cash asset impairment charge and non-cash
preferred stock redemption costs, FFO for the six months ended June 30, 2004 was
$39.0 million, or $0.92 per diluted share. Excluding severance, proxy and asset
impairment charges, FFO for the six months ended June 30, 2003 was $44.3
million, or $1.05 per diluted share.
Total revenues from continuing operations were $76.7 million for the second
quarter of 2004, compared to $73.8 million for the second quarter of 2003. For
the six months ended June 30, 2004, total revenues from continuing operations
were $152.2 million, compared to $146.7 million in 2003.
Said David P. Stockert, Post's CEO and President, "As expected, second quarter
results point to the turnaround in apartment market conditions. Same store
revenue for the quarter increased sequentially as well as on a year-over-year
basis, marking what we believe is the beginning of an upward trend in our core
business."
MATURE COMMUNITY DATA
For the second quarter of 2004, average economic occupancy at the Company's 57
mature (same store) communities, containing 21,954 apartment units, was 93.6%,
compared to 91.5% for the second quarter of 2003. For the six months ended June
30, 2004, average economic occupancy for these mature communities was 93.2%,
compared to 90.9% for the same period in 2003.
Total revenues for the mature communities increased 1.0% during the second
quarter of 2004, compared to the second quarter of 2003, and operating expenses
increased 3.9%, resulting in a 0.7% decline in same store net operating income
(NOI), or $0.3 million. For the six months ended June 30, 2004, total revenues
for the mature communities increased 0.3% compared to the same period in 2003,
while operating expenses increased 4.8%, resulting in a 2.4% decline in same
store NOI, or $1.9 million.
On a sequential basis, total revenues for the mature communities increased 0.9%
and operating expenses increased 1.2%, resulting in an increase in same store
NOI of 0.7%, or $0.3 million during the second quarter of 2004, compared to the
first quarter of 2004. For the second quarter of 2004, average economic
occupancy was 93.6% compared to 92.8% for the first quarter of 2004.
Same store NOI is a supplemental non-GAAP financial measure. A reconciliation of
same store NOI to the comparable GAAP financial measure is included in the
financial data (Table 2) accompanying this press release. Same store NOI by
geographic market is also included in the financial data (Table 3) accompanying
this press release.
ASSET ACQUISITIONS, DISPOSITIONS AND CAPITAL REINVESTMENT ACTIVITY
In June 2004, the Company acquired a 499-unit apartment community located in
suburban Washington, D.C. for approximately $85.8 million, including an
approximately $2.3 million adjustment for the assumption of above-market
mortgage indebtedness and closing costs. Additionally, the Company plans to
spend up to $2 million to improve the community. The assumed mortgage note
payable was valued at approximately $50 million yielding an effective interest
rate of approximately 4.7%. The mortgage note requires monthly principal and
interest payments and matures in 2007.
During the second quarter of 2004, the Company completed the sale of seven
apartment communities containing 3,482 units, realizing net proceeds of
approximately $219.0 million, including the assumption by the buyer of five of
the properties of approximately $104 million of tax-exempt bond financing. Five
of the communities were located in Atlanta, Georgia, one community was located
in Dallas, Texas and one community was located in Orlando, Florida. The Company
realized GAAP accounting gains on these sales of approximately $112.1 million
and economic gains (before accumulated depreciation and write-downs for asset
impairment charges) of approximately $46.2 million. A reconciliation of GAAP
accounting gains on property sales to economic gains on property sales is
included in the financial data (Table 5) accompanying this press release. In
connection with the assumption of the bond indebtedness and the termination of
related interest rate cap agreements, the Company also recorded a non-cash loss
on the early extinguishment of indebtedness of approximately $4.1 million during
the second quarter of 2004.
The Company expects to use a portion of the proceeds from asset sales to redeem
its 8.0% Series D cumulative redeemable preferred units totaling $70 million on
September 3, 2004, and to repay its 6.69% Medium Term Notes totaling $10
million, which mature on September 22, 2004.
Said Thomas D. Senkbeil, EVP and Chief Investment Officer, "The asset sales and
acquisitions we completed in the second quarter improved the quality,
consistency, average age and geographic mix of the portfolio, while harvesting
significant value. We've reduced our market concentration in Atlanta, while
building critical mass in the greater Washington, D.C.
market, all consistent with our strategic plan."
FINANCING ACTIVITY
In April 2004, the Company renewed and extended its $20 million unsecured line
of credit with Wachovia Bank of Georgia, N.A. (the "Cash Management Line"). The
pricing, maturity and terms, including debt covenants, of the Cash Management
Line are generally consistent with the Company's $350 million, three-year
unsecured revolving line of credit facility that was provided by a syndicate of
nine banks led by Wachovia and that closed in January 2004. At June 30, 2004,
the Company had no outstanding balances under its combined $370 million credit
facilities and had available cash and cash equivalents of $55.3 million.
Total debt as a percentage of undepreciated real estate assets (adjusted for
joint venture partner's share of debt) decreased from 45.2% at June 30, 2003 to
43.6% at June 30, 2004. Total debt and preferred equity as a percentage of
undepreciated assets (adjusted for joint venture partner's share of debt) also
decreased from 53.2% at June 30, 2003 to 50.1% at June 30, 2004. Variable rate
debt as a percentage of total debt decreased from 20.4% at June 30, 2003 to
10.2% at June 30, 2004. A computation of debt ratios and reconciliation of the
ratios to the appropriate GAAP measures in the Company's financial statements is
included in the financial data (Table 4) accompanying this press release.
Said Christopher J. Papa, EVP and CFO, "We are very pleased with the current
strength of our balance sheet. We've reduced overall leverage, lessened our
exposure to rising short term interest rates and created substantial capacity
for new investment."
OUTLOOK
The estimates presented below are forward-looking and are based on current
apartment market and general economic conditions and other risks outlined below.
Management believes that the Company's net income available to common
shareholders per diluted share for the third quarter of 2004 will be in a range
of $0.28 to $0.29. Management is currently assuming the closing of the sale of
one apartment community in the third quarter of 2004. There can be no assurance,
however, that this forecasted sale will close. Management believes that the
Company's FFO per share for the third quarter of 2004 will be in a range of
$0.36 to $0.37, or $0.42 to $0.43, excluding non-cash charges for the write-off
of unamortized deferred loan costs and interest rate hedge costs related to
tax-exempt debt assumed in connection with the asset sale described above and
for preferred unit redemption costs. Management's estimates of per share FFO for
the third quarter of 2004, excluding the charges discussed herein, are based on
the following assumptions: modestly higher same store NOI, due primarily to
modestly higher operating revenues; full quarter NOI from the one community
acquired in June 2004; offset by the dilution from the sale of seven apartment
communities in the second quarter of 2004 and the forecasted sale of one
apartment community during the third quarter of 2004; increased short-term
interest rates; and continued higher than normal general and administrative
costs primarily relating to increased legal expenses relating to shareholder
litigation and other matters.
Management believes that the Company's net loss attributable to common
shareholders per diluted share for the fourth quarter of 2004 will be in a range
of $0.06 to $0.04. Management believes that the Company's FFO per share for the
fourth quarter of 2004 will be in a range of $0.44 to $0.46. The estimates of
per share FFO for the fourth quarter are based on the following assumptions:
same store NOI comparable to or moderately higher than in the third quarter;
lower preferred unit distribution requirements resulting from the expected
preferred unit redemption in the third quarter of 2004; increased short-term
interest rates; and modestly lower general and administrative costs, comparable
to the third quarter, primarily relating to lower legal expenses associated with
shareholder litigation and other matters.
A reconciliation of projected net income per diluted share to projected FFO per
diluted share for the third and fourth quarters of 2004 is included in the
financial data (Table 6) accompanying this press release.
SUPPLEMENTAL FINANCIAL DATA
The Company also produces Supplemental Financial Data that includes detailed
information regarding the Company's operating results and balance sheet. This
Supplemental Financial Data is considered an integral part of this earnings
release and is available on the Company's website. The Company's earnings
release and the Supplemental Financial Data are available through the Company's
web site at
"http://www.postproperties.com/posthome.nsf/ExtList/2004-2QFinancials".
The ability to access the attachments on the Company's web site requires the
Adobe Acrobat 4.0 Reader, which may be downloaded at
http://www.adobe.com/products/acrobat/readstep.html.
NON-GAAP FINANCIAL MEASURES AND OTHER DEFINED TERMS
The Company uses certain non-GAAP financial measures and other defined terms in
this press release and in its Supplemental Financial Data available on the
Company's website. The non-GAAP financial measures include FFO, Adjusted Funds
from Operations ("AFFO"), net operating income, same store capital expenditures,
FFO and AFFO excluding certain accounting charges, certain debt statistics and
ratios and economic gains on property sales. The definitions of these non-GAAP
financial measures are summarized below and on page 19 of the Supplemental
Financial Data. The Company believes that these measures are helpful to
investors in measuring financial performance and/or liquidity and comparing such
performance and/or liquidity to other REITS.
FUNDS FROM OPERATIONS - The Company uses FFO as an operating measure. The
Company uses the NAREIT definition of FFO. FFO is defined by NAREIT to mean net
income (loss) available to common shareholders determined in accordance with
GAAP, excluding gains (or losses) from extraordinary items and sales of
property, plus depreciation and amortization of real estate assets, and after
adjustment for unconsolidated partnerships and joint ventures all determined on
a consistent basis in accordance with GAAP. In October 2003, NAREIT issued
additional guidance modifying the definition of FFO. The first modification
revised the treatment of asset impairment losses and impairment losses incurred
to write-down assets to their fair value at the date assets are classified as
held for sale, to include such losses in FFO. Previously, such losses were
excluded from FFO consistent with the treatment of gains and losses on property
sales. The second modification clarified the treatment of original issue costs
and premiums paid on preferred stock redemptions to deduct such costs and
premiums in determining FFO available to common shareholders. This modification
was consistent with the recently clarified treatment of these costs under GAAP.
The Company adopted the modifications to the definition of FFO effective with
its reported results for the third quarter of 2003. Prior period presentations
of FFO have been restated to conform with the revised definition of FFO. FFO
presented in the Company's press release and Supplemental Financial Data is not
necessarily comparable to FFO presented by other real estate companies because
not all real estate companies use the same definition. The Company's FFO is
comparable to the FFO of real estate companies that use the current NAREIT
definition.
Accounting for real estate assets using historical cost accounting under GAAP
assumes that the value of real estate assets diminishes predictably over time.
NAREIT stated in its April 2002 White Paper on Funds from Operations that "since
real estate asset values 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." As a result, the concept of FFO was created by
NAREIT for the REIT industry to provide an alternate measure. Since the Company
agrees with the concept of FFO and appreciates the reasons surrounding its
creation, the Company believes that FFO is an important supplemental measure of
operating performance. In addition, since most equity REITs provide FFO
information to the investment community, the Company believes that FFO is a
useful supplemental measure for comparing the Company's results to those of
other equity REITs. The Company believes that the line on its consolidated
statement of operations entitled "net income available to common shareholders"
is the most directly comparable GAAP measure to FFO.
ADJUSTED FUNDS FROM OPERATIONS - The Company also uses adjusted funds from
operations ("AFFO") as an operating measure. AFFO is defined as FFO less
operating capital expenditures. The Company believes that AFFO is an important
supplemental measure of operating performance for an equity REIT because it
provides investors with an indication of the REIT's ability to fund its
operating capital expenditures through earnings. In addition, since most equity
REITs provide AFFO information to the investment community, the Company believes
that AFFO is a useful supplemental measure for comparing the Company to other
equity REITs. The Company believes that the line on its consolidated statement
of operations entitled "net income available to common shareholders" is the most
directly comparable GAAP measure to AFFO.
PROPERTY NET OPERATING INCOME - The Company uses property NOI, including same
store NOI and same store NOI by market, as an operating measure. NOI is defined
as rental and other revenues from real estate operations less total property and
maintenance expenses from real estate operations (exclusive of depreciation and
amortization). The Company believes that NOI is an important supplemental
measure of operating performance for a REIT's operating real estate because it
provides a measure of the core operations, rather than factoring in depreciation
and amortization, financing costs and general and administrative expenses
generally incurred at the corporate level. This measure is particularly useful,
in the opinion of the Company, in evaluating the performance of geographic
operations, same store groupings and individual properties. Additionally, the
Company believes that NOI, as defined, is a widely accepted measure of
comparative operating performance in the real estate investment community. The
Company believes that the line on its consolidated statement of operations
entitled "net income" is the most directly comparable GAAP measure to NOI.
SAME STORE CAPITAL EXPENDITURES - The Company uses same store recurring and
non-recurring capital expenditures as cash flow measures. Same store recurring
and non-recurring capital expenditures are supplemental non-GAAP financial
measures. The Company believes that same store recurring and non-recurring
capital expenditures are important indicators of the costs incurred by the
Company in maintaining its same store communities on an ongoing basis. The
corresponding GAAP measures include information with respect to the Company's
other operating segments consisting of communities stabilized in the prior year,
lease-up communities, sold properties and commercial properties in addition to
same store information. Therefore, the Company believes that the Company's
presentation of same store recurring and non-recurring capital expenditures is
necessary to demonstrate same store replacement costs over time. The Company
believes that the most directly comparable GAAP measure to same store recurring
and non-recurring capital expenditures are the lines on the Company's
consolidated statements of cash flows entitled "recurring capital expenditures"
and "non-recurring capital expenditures."
FFO AND AFFO EXCLUDING CERTAIN CHARGES - The Company uses FFO and AFFO excluding
certain preferred stock redemption costs, severance, proxy, loss on early
extinguishment of debt and impairment charges as operating measures. The Company
reports FFO and AFFO excluding certain charges as alternative financial measures
of core operating performance. The Company believes FFO and AFFO before certain
charges are informative measures for comparing operating performance between
periods and for comparing operating performance to other companies that have not
incurred such charges. The Company further believes that charges of the nature
incurred in 2004 and 2003 are not necessarily repetitive in nature and that it
is therefore meaningful to compare operating performance using alternative,
non-GAAP measures. In addition, the Company believes the investment and analyst
communities desire to understand the meaningful components of the Company's
performance and that these non-GAAP measures assist in providing such
supplemental measures. The Company believes that the most directly comparable
GAAP financial measures to FFO and AFFO, excluding certain charges, is the line
on the Company's consolidated statements of operations entitled "net income
available to common shareholders."
DEBT STATISTICS AND DEBT RATIOS - The Company uses a number of debt statistics
and ratios as supplemental measures of liquidity. The numerator and/or the
denominator of certain of these statistics and/or ratios include non-GAAP
financial measures that have been reconciled to the most directly comparable
GAAP financial measure. These debt statistics and ratios include: (1) an
interest coverage ratio; (2) a fixed charge coverage ratio; (3) total debt as a
percentage of undepreciated real estate assets (adjusted for joint venture
partner's share of debt); (4) total debt plus preferred equity as a percentage
of undepreciated real estate assets (adjusted for joint venture partner's share
of debt); (5) a ratio of consolidated debt to total assets; (6) a ratio of
secured debt to total assets; (7) a ratio of total unencumbered assets to
unsecured debt; and (8) a ratio of consolidated income available to debt service
to annual debt service charge. A number of these debt statistics and ratios are
derived from covenants found in the Company's debt agreements, including, among
others, the Company's senior unsecured notes. In addition, the Company presents
these measures because the degree of leverage could affect the Company's ability
to obtain additional financing for working capital, capital expenditures,
acquisitions, development or other general corporate purposes. The Company uses
these measures internally as an indicator of liquidity and the Company believes
that these measures are also utilized by the investment and analyst communities
to better understand the Company's liquidity.
ECONOMIC GAINS ON PROPERTY SALES - The Company uses economic gains on property
sales as a supplemental measure of operating performance. Economic gains on
property sales are defined as gains on property sales in accordance with GAAP,
before accumulated depreciation and any prior period write-downs for asset
impairment charges on such assets. The Company believes economic gains on
property sales is an important supplemental measure to gains on property sales
in accordance with GAAP because it assists investors and analysts in
understanding the relationship between the cash proceeds from the sale of an
asset and the cash invested in that asset. The Company believes the line on its
consolidated statement of operations entitled "gains on property sales -
discontinued operations" is the most directly comparable GAAP measure to
economic gains on property sales.
AVERAGE ECONOMIC OCCUPANCY - The Company uses average economic occupancy as a
statistical measure of operating performance. The Company defines average
economic occupancy as gross potential rent less vacancy losses, model expenses
and bad debt expenses divided by gross potential rent for the period, expressed
as a percentage.
CONFERENCE CALL INFORMATION
The Company will hold its quarterly conference call on Tuesday, August 3, 2004,
at 10 a.m. EDT. The telephone numbers are 1-800-818-5264 for domestic calls and
913-981-4910 for international callers. The access code is 512928. The
conference call will be open to the public and can be listened to live on Post's
web site at www.postproperties.com under Corporate Information/Investor Info.
The replay will begin at 1:00 p.m. EDT on August 3, and will be available until
Monday, August 9, 2004, at 11:59 p.m. EDT. The telephone numbers for the replay
are 1-888-203-1112 for domestic callers and 719-457-0820 for international
callers. The access code for the replay is 512928. A replay of the call also
will be available through Thursday, September 30, 2004, on Post's web site. The
financial and statistical information that will be discussed on the call is
contained in this press release and the Supplemental Financial Data. Both
documents will be available on the Company's website at
"http://www.postproperties.com/posthome.nsf/ExtList/2004-2QFinancials" prior to
the quarterly conference call.
Post Properties, founded more than 30 years ago, is one of the largest
developers and operators of upscale multifamily communities in the United
States. The Company's mission is delivering superior satisfaction and value to
its residents, associates, and investors. Operating as a real estate investment
trust (REIT), the Company focuses on developing and managing Post(R) branded
resort-style garden apartments and high-density urban apartments with a vision
of being the first choice in quality multifamily living. Post is headquartered
in Atlanta, Georgia, and has operations in 10 markets across the country.
Nationwide, Post Properties owns approximately 24,700 apartment homes in 65
communities, including 666 apartment homes held in three unconsolidated joint
ventures.
FORWARD LOOKING STATEMENT:
Certain statements made in this press release and other written or oral
statements made by or on behalf of the Company, may constitute "forward-looking
statements" within the meaning of the federal securities laws. Statements
regarding future events and developments and the Company's future performance,
as well as management's expectations, beliefs, plans, estimates or projections
relating to the future, are forward-looking statements within the meaning of
these laws. Examples of such statements in this press release include the
Company's projected net income per diluted share and projected FFO per diluted
share for the third and fourth quarters of 2004. All forward-looking statements
are subject to certain risks and uncertainties that could cause actual events to
differ materially from those projected. Management believes that these
forward-looking statements are reasonable; however, you should not place undue
reliance on such statements. These statements are based on current expectations
and speak only as of the date of such statements. The Company undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of future events, new information or otherwise.
The following are some of the factors that could cause the Company's actual
results to differ materially from the expected results described in the
Company's forward-looking statements: future local and national economic
conditions, including changes in job growth, interest rates, the availability of
financing and other factors; demand
for apartments in the Company's markets and the effect on occupancy and rental
rates; the impact of competition on the Company's business, including
competition for tenants and development locations; the Company's ability to
obtain financing or self-fund the development or acquisition of additional
apartment communities; the uncertainties associated with the Company's current
and planned future real estate development, including actual costs exceeding the
Company's budgets or development periods exceeding expectations; uncertainties
associated with the timing and amount of asset sales and the resulting
gains/losses associated with such asset sales; conditions affecting ownership of
residential real estate and general conditions in the multi-family residential
real estate market; the effects of changes in accounting policies and other
regulatory matters detailed in the Company's filings with the Securities and
Exchange Commission and uncertainties of litigation; and the Company's ability
to continue to qualify as a real estate investment trust under the Internal
Revenue Code. Other important risk factors regarding the Company are included
under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for
the year ended December 31, 2003 and may be discussed in subsequent filings with
the SEC. The risk factors discussed in such Form 10-K under the caption "Risk
Factors" are specifically incorporated by reference into this press release.
FINANCIAL HIGHLIGHTS
(Unaudited; in thousands, except per share and unit amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
OPERATING DATA
Revenues from continuing operations ........................ $ 76,735 $ 73,750 $ 152,235 $ 146,732
Net income available to common shareholders ................ $ 99,201 $ 24,827 $ 98,296 $ 1,377
Funds from operations available to common
shareholders and unitholders (Table 1) ................... $ 14,736 $ 14,690 $ 32,502 $ 3,435
Funds from operations available to common
shareholders and unitholders, excluding certain
charges (Table 1) ........................................ $ 19,490 $ 21,716 $ 38,972 $ 44,290
Weighted average shares outstanding - diluted .............. 39,807 37,467 39,595 37,362
Weighted average shares and units outstanding -
diluted .................................................. 42,478 42,074 42,469 42,058
PER COMMON SHARE DATA - DILUTED
Net income available to common shareholders ................ $ 2.49 $ 0.66 $ 2.48 $ 0.04
Funds from operations available to common
shareholders and unitholders (Table 1)(1) ................ $ 0.35 $ 0.35 $ 0.76 $ 0.08
Funds from operations available to common
shareholders and unitholders, excluding certain
charges (Table 1)(1) ..................................... $ 0.46 $ 0.52 $ 0.92 $ 1.05
Dividends declared ......................................... $ 0.45 $ 0.45 $ 0.90 $ 0.90
(1) Funds from operations per share for the three and six months ended
June 30, 2004 were computed using weighted average shares and units
outstanding, including the impact of dilutive securities totaling 46
and 51 shares, respectively. Such dilutive securities were
antidilutive to all income per share computations in 2004.
TABLE 1
RECONCILIATION OF NET INCOME AVAILABLE TO COMMON SHAREHOLDERS TO
FUNDS FROM OPERATIONS AVAILABLE TO COMMON SHAREHOLDERS AND UNITHOLDERS
(Unaudited; in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net income available to common shareholders .............. $ 99,201 $ 24,827 $ 98,296 $ 1,377
Minority interest of common unitholders - continuing
operations ............................................. (246) (164) (719) (2,778)
Minority interest in discontinued operations ............. 7,455 3,247 7,856 2,847
Gains on property sales - discontinued operations ........ (112,112) (26,630) (113,739) (33,504)
Gains on property sales - unconsolidated entities ........ -- (8,395) -- (8,395)
Depreciation on wholly-owned real estate assets, net ..... 20,107 21,366 40,145 42,984
Depreciation on real estate assets held in
unconsolidated entities ................................ 331 439 663 904
----------- ----------- ----------- -----------
Funds from operations available to common shareholders ... 14,736 14,690 32,502 3,435
and unitholders (1)(2)
Redemption costs on preferred stock ...................... -- -- 1,716 --
Severance charges ........................................ -- 1,795 -- 21,506
Proxy contest and related costs .......................... -- 5,231 -- 5,231
Asset impairment charges ................................. 626 -- 626 14,118
Loss on early extinguishment of indebtedness
associated with asset sales (3) ........................ 4,128 -- 4,128 --
=========== =========== =========== ===========
Funds from operations available to common shareholders
and unitholders, excluding certain charges.............. $ 19,490 $ 21,716 $ 38,972 $ 44,290
=========== =========== =========== ===========
Weighted average shares and units outstanding -
diluted (4)............................................. 42,524 42,074 42,520 42,058
=========== =========== =========== ===========
Funds from operations - per diluted share and unit (4) ... $ 0.35 $ 0.35 $ 0.76 $ 0.08
=========== =========== =========== ===========
Funds from operations, excluding certain charges - per
diluted share and unit (4) ............................. $ 0.46 $ 0.52 $ 0.92 $ 1.05
=========== =========== =========== ===========
(1) In October 2003, the National Association of Real Estate Investment
Trusts ("NAREIT") issued additional guidance modifying the definition
of funds from operations ("FFO"). The first modification revised the
treatment of asset impairment losses and impairment losses incurred to
write-down assets to their fair value at the date assets are
classified as held for sale, to include such losses in FFO. Previously
such losses were excluded from FFO, consistent with the treatment of
gains on property sales. The second modification clarified the
treatment of original issue costs and premiums paid on preferred stock
redemptions to deduct such costs and premiums in determining FFO
available to common shareholders. This modification was consistent
with the recently clarified treatment of these costs under GAAP. The
Company adopted the modifications to the definition of FFO effective
with its reported results for the third quarter of 2003. Prior period
presentations of FFO have been restated to conform with the revised
NAREIT definition of FFO. FFO is a supplemental non-GAAP financial
measure used by real estate investment trusts to measure and compare
operating performance.
(2) For the six months ended June 30, 2003, FFO available to common
shareholders has been restated from the prior year presentation to
reflect a reduction of $14,118 for impairment losses on real estate
assets resulting from the NAREIT modification of the definition of
FFO.
(3) Includes the write-off of unamortized deferred costs of $3,187
relating to tax-exempt indebtedness assumed in connection with the
sale of five properties in June 2004, plus a loss of $941 relating to
terminated interest rate cap agreements that were used as cash flow
hedges of the assumed debt.
(4) Funds from operations per share for the three and six months ended
June 30, 2004 were computed using weighted average shares and units
outstanding, including the impact of dilutive securities totaling 46
and 51 shares, respectively. Such dilutive securities were
antidilutive to all income per share computations in 2004.
TABLE 2
RECONCILIATION OF SAME STORE NET OPERATING INCOME (NOI) TO GAAP NET INCOME
(In thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------- --------------------------
JUNE 30, JUNE 30, MARCH 31, JUNE 30, JUNE 30,
2004 2003 2004 2004 2003
----------- ----------- ----------- ----------- -----------
Total same store NOI ............................. $ 39,699 $ 39,986 $ 39,435 $ 79,134 $ 81,049
Property NOI from other operating
segments ....................................... 3,603 1,520 2,772 6,374 2,065
----------- ----------- ----------- ----------- -----------
Consolidated property NOI ........................ 43,302 41,506 42,207 85,508 83,114
Add (subtract):
Other revenues ................................ 45 147 76 122 277
Interest income ............................... 213 251 180 392 485
Minority interest in consolidated
property partnerships ........................ 303 349 272 575 682
Depreciation .................................. (21,177) (20,253) (21,186) (42,363) (40,542)
Interest expense .............................. (16,726) (16,250) (16,281) (33,007) (31,879)
Amortization of deferred financing
costs ........................................ (1,092) (968) (1,116) (2,208) (1,756)
General and administrative .................... (5,477) (3,342) (4,642) (10,119) (6,967)
Development costs and other expenses .......... (381) -- (535) (916) (567)
Proxy contest and related costs ............... -- (5,231) -- -- (5,231)
Severance charges ............................. -- (1,795) -- -- (21,506)
Equity in income of unconsolidated
entities ..................................... 207 8,103 216 422 7,710
Minority interest of preferred
unitholders .................................. (1,400) (1,400) (1,400) (2,800) (2,800)
Minority interest of common
unitholders .................................. 246 164 473 719 2,778
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing ................. (1,937) 1,281 (1,736) (3,675) (16,202)
operations
Income from discontinued operations ........... 103,047 26,408 5,147 108,194 23,304
----------- ----------- ----------- ----------- -----------
Net income ....................................... $ 101,110 $ 27,689 $ 3,411 $ 104,519 $ 7,102
=========== =========== =========== =========== ===========
TABLE 3
SAME STORE NET OPERATING INCOME (NOI) SUMMARY BY MARKET
(In thousands)
THREE MONTHS ENDED
--------------------------------------------- 2Q '04 VS 2Q '04 VS
JUNE 30, JUNE 30, MARCH 31, 2Q '03 1Q '04
2004 2003 2004 % CHANGE % CHANGE
------------ ------------ ------------ ------------ ------------
Rental and other revenues
Atlanta ............................. $ 33,386 $ 33,011 $ 32,887 1.1% 1.5%
Dallas .............................. 12,481 12,519 12,481 (0.3)% -
Tampa ............................... 4,517 4,431 4,558 1.9% (0.9)%
Washington, DC ...................... 5,444 5,234 5,364 4.0% 1.5%
Charlotte ........................... 3,226 3,067 3,151 5.2% 2.4%
Other ............................... 6,220 6,341 6,268 (1.9)% (0.8)%
------------ ------------ ------------
Total rental and other revenues ... 65,274 64,603 64,709 1.0% 0.9%
------------ ------------ ------------
Property operating and maintenance
expenses (exclusive of depreciation
and amortization)
Atlanta ............................. 12,480 12,194 12,352 2.3% 1.0%
Dallas .............................. 5,788 5,312 5,429 9.0% 6.6%
Tampa ............................... 1,806 1,801 1,990 0.3% (9.2)%
Washington, DC ...................... 1,760 1,647 1,807 6.9% (2.6)%
Charlotte ........................... 1,022 1,089 1,035 (6.2)% (1.3)%
Other ............................... 2,719 2,574 2,661 5.6% 2.2%
------------ ------------ ------------
Total ............................. 25,575 24,617 25,274 3.9% 1.2%
------------ ------------ ------------
Net operating income
Atlanta ............................. 20,906 20,817 20,535 0.4% 1.8%
Dallas .............................. 6,693 7,207 7,052 (7.1)% (5.1)%
Tampa ............................... 2,711 2,630 2,568 3.1% 5.6%
Washington, DC ...................... 3,684 3,587 3,557 2.7% 3.6%
Charlotte ........................... 2,204 1,978 2,116 11.4% 4.2%
Other ............................... 3,501 3,767 3,607 (7.1)% (2.9)%
------------ ------------ ------------
Total same store NOI .............. $ 39,699 $ 39,986 $ 39,435 (0.7)% 0.7%
============ ============ ============
SIX MONTHS ENDED
JUNE 30,
---------------------------
2004 2003 % CHANGE
------------ ------------ ------------
Rental and other revenues
Atlanta ............................. $ 66,273 $ 66,478 (0.3)%
Dallas .............................. 24,963 24,922 0.2%
Tampa ............................... 9,075 8,846 2.6%
Washington, DC ...................... 10,809 10,401 3.9%
Charlotte ........................... 6,376 6,080 4.9%
Other ............................... 12,487 12,820 (2.6)%
------------ ------------
Total rental and other revenues ... 129,983 129,547 0.3%
------------ ------------
Property operating and maintenance
expenses (exclusive of depreciation
and amortization)
Atlanta ............................. 24,831 23,763 4.5%
Dallas .............................. 11,217 10,549 6.3%
Tampa ............................... 3,796 3,588 5.8%
Washington, DC ...................... 3,567 3,366 6.0%
Charlotte ........................... 2,057 2,134 (3.6)%
Other ............................... 5,381 5,098 5.6%
------------ ------------
Total ............................. 50,849 48,498 4.8%
------------ ------------
Net operating income
Atlanta ............................. 41,442 42,715 (3.0)%
Dallas .............................. 13,746 14,373 (4.4)%
Tampa ............................... 5,279 5,258 0.4%
Washington, DC ...................... 7,242 7,035 2.9%
Charlotte ........................... 4,319 3,946 9.5%
Other ............................... 7,106 7,722 (8.0)%
------------ ------------
Total same store NOI .............. $ 79,134 $ 81,049 (2.4)%
============ ============ ============
TABLE 4
COMPUTATION OF DEBT RATIOS
(In thousands)
AS OF JUNE 30,
--------------------------------
2004 2003
-------------- --------------
Total real estate assets per balance sheet ................................ $ 2,013,500 $ 2,164,206
Plus:
Company share of real estate assets held in unconsolidated entities ....... 44,013 45,124
Company share of accumulated depreciation - assets held in
unconsolidated entities ................................................. 2,732 1,407
Accumulated depreciation per balance sheet ................................ 474,016 470,307
Accumulated depreciation on assets held for sale .......................... 7,836 --
-------------- --------------
Total undepreciated real estate assets (A) ................................ $ 2,542,097 $ 2,681,044
============== ==============
Total debt per balance sheet .............................................. $ 1,080,327 $ 1,259,926
Plus:
Company share of debt held in unconsolidated entities ..................... 29,266 5,917
Less:
Joint venture partner's share of construction debt to the Company ......... -- (54,051)
-------------- --------------
Total debt (adjusted for joint venture partner's share of debt) (B) ....... $ 1,109,593 $ 1,211,792
============== ==============
Total debt as a % of undepreciated real estate assets (adjusted for
joint venture partner's share of debt) (B/A) ............................ 43.6% 45.2%
============== ==============
Total debt per balance sheet .............................................. $ 1,080,327 $ 1,259,926
Plus:
Company share of debt held in unconsolidated entities ..................... 29,266 5,917
Preferred shares at liquidation value ..................................... 95,000 145,000
Preferred units at liquidation value ...................................... 70,000 70,000
Less:
Joint venture partner's share of construction debt to the Company ......... -- (54,051)
-------------- --------------
Total debt and preferred equity (adjusted for joint venture partner's
share of debt) (C) ...................................................... $ 1,274,593 $ 1,426,792
============== ==============
Total debt and preferred equity as a % of undepreciated assets
(adjusted for joint venture partner's share of debt) (C/A) .............. 50.1% 53.2%
============== ==============
TABLE 5
RECONCILIATION OF GAINS ON PROPERTY SALES TO ECONOMIC GAINS ON PROPERTY SALES
THREE MONTHS ENDED
JUNE 30, 2004
-------------------
Gains on property sales ............................. $ 112,112
Less:
Accumulated depreciation on properties sold ...... (61,980)
Previously recorded asset impairment charges on
properties sold ................................. (3,970)
-----------------
Economic gains on property sales .................... $ 46,162
=================
TABLE 6
RECONCILIATION OF FORECASTED NET INCOME (LOSS) PER COMMON SHARE TO
FORECASTED FUNDS FROM OPERATIONS PER COMMON SHARE
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2004 DECEMBER 31, 2004
-------------------------------- --------------------------------
LOW RANGE HIGH RANGE LOW RANGE HIGH RANGE
-------------- -------------- -------------- --------------
Forecasted net income (loss), per share ............. $ 0.28 $ 0.29 $ (0.06) $ (0.04)
-------------- -------------- -------------- --------------
Forecasted gains on property sales, per share ....... (0.42) (0.42) -- --
Forecasted real estate depreciation, per share ...... 0.50 0.50 0.50 0.50
-------------- -------------- -------------- --------------
Forecasted funds from operations, per share ......... 0.36 0.37 0.44 0.46
Forecasted write-off of unamortized deferred loan
costs and interest rate hedge costs related to debt
assumed in connection with forecasted sales, per
share ............................................. 0.02 0.02 -- --
Forecasted preferred unit redemption costs, per share 0.04 0.04 -- --
-------------- -------------- -------------- --------------
Forecasted funds from operations, excluding write-off
of unamortized loan and interest rate hedge costs
and preferred unit redemption costs, per share .... $ 0.42 $ 0.43 $ 0.44 $ 0.46
============== ============== ============== ==============