Contact:
Liz Kohlmyer
Communications Manager
(407) 540-2221
NYSE: TSY
TRUSTREET PROPERTIES, INC. ANNOUNCES SECOND
QUARTER RESULTS
RESTAURANT PROPERTY ACQUISITIONS EXCEED $150 MILLION
ORLANDO, FL, August 9, 2005 - Trustreet Properties, Inc. (NYSE: TSY) today
announced operating results for the quarter and six months ended June 30, 2005.
The Company's second quarter financial statements reflect the financial results
of the merged company for the period April 1, 2005 to June 30, 2005.
Highlights
o In the second quarter of 2005, the Company reported net income
available to common shareholders of $11.0 million, or $0.19 cents per
share. Funds from operations ("FFO") available to common shareholders
were $18.6 million, or $0.32 cents per share. The results for the
period represented the first full quarter reflecting the February 25,
2005 merger of CNL Restaurant Properties, Inc. ("CNLRP"), U.S.
Restaurant Properties, Inc. ("USRP"), and eighteen CNL Income Funds
(the "Income Funds"). Generally accepted accounting principles ("GAAP")
require that the financial statements include the historical financial
results of only CNLRP for the quarter and six months ended June 30,
2004.
o During the second quarter, the Company acquired 76 properties for
$152.9 million. The Company designated 23 of the properties as
long-term investments within the core REIT portfolio and 53 of the
properties as held-for-sale to be sold through a taxable subsidiary.
Approximately $140 million of the acquisition total related to a
transaction with The Restaurant Company, whose properties include
Perkins Restaurants and Bakery outlets. That transaction was the single
largest sale-leaseback financing in the Company history. Through June
30, the Company has acquired $190.3 million in new acquisitions. In
addition, the Company has signed commitments to acquire a further
$174.4 million of restaurant properties, the majority of which is
expected to close by year-end.
o In the second quarter, the Company sold 33 properties under its
investment property sales platform for a total price of $70.8 million
producing a net gain to the Company, before minority interest, of $11.4
million, or a return of 19.2% based on the Company's acquisition cost.
o At June 30, 2005, the Company owns 1,768 properties held in the core
REIT portfolio of which 94.11% was occupied. The weighted average
remaining lease term of the Company's real estate investment portfolio
was approximately 10.7 years, with more than 71% of the Company's lease
expirations occurring after 2011. The Company's portfolio is broadly
diversified on a concept, tenant and geographic basis. Of the 104
vacant properties, 40 are either under contract for sale or have a
lease or sales contract out for signature.
o In April, the Company finalized its merger financing with the
successful execution of a $175.0 million revolving credit facility that
bears interest at LIBOR plus 2.25% per annum. The initial maturity date
of the revolver is April 2008, with an available one-year extension. In
addition, the Company closed on a $175.0 million five-year term loan
with a syndicate of lenders that bears interest at LIBOR plus 2.00%.
o The Company entered into an interest rate swap agreement for $175.0
million fixing the term loan at 4.20%.
o The Company declared monthly common dividends per share of $0.33 cents
for the second quarter.
o The Company's $700.0 million shelf registration was declared effective
in Jule.
2005 Second Quarter Results
For the quarter ended June 30, 2005, the Company reported funds from operations
of $18.6 million, or $0.32 cents per diluted share computed in accordance with
the definition of the National Association of Real Estate Investment Trusts
("NAREIT"). FFO generated by the core real estate operations represented
approximately 83% of total FFO before allocation of the preferred dividend.
For the quarter ended June 30, 2005, adjusted funds from operations ("AFFO") was
$21.7. The Company believes that AFFO is a useful metric as a measure of its
cash available for distribution. Given the variation in the definition of AFFO
in the REIT industry, investors should take these differences into account when
comparing AFFO against other REITs. Typically, this metric will exceed FFO
because of the level of deferred financing cost amortization, capital lease
amortization and non-real estate depreciation and non-cash real estate
impairment charges and loan provisions.
In July, the Company sold $194.0 million of mortgage loans generating a net gain
on the transaction of $2.4 million. The proceeds from the sale were used to pay
off outstanding debt financing the mortgage loans of $158 million. The remaining
approximate $35 million in cash was used to pay down the revolving credit
facility.
"We are pleased with the progress we made in the second quarter as evidenced by
the level of restaurant property acquisitions, the strong pipeline of
commitments we expect to close in the second half of the year and our steady
execution on our investment property sales platform," said Curtis B. McWilliams,
president and chief executive officer. "Our focus continues to be improving the
productivity of our core portfolio and initiating high-quality net lease
investments in the restaurant industry. We are also focused on strengthening our
balance sheet, as was evidenced by the sale of a more than 65% of our on-balance
sheet loan portfolio during the quarter. Further work continues on the
successful integration of the acquired properties and additional synergies
should occur as we move into 2006," added Mr. McWilliams.
About Trustreet
Trustreet Properties, Inc. (pronounced "trust - street") is the largest
self-advised restaurant real estate investment trust (REIT) in the United
States. Trustreet, traded on the NYSE under the ticker symbol TSY, provides a
complete range of financial, real estate and advisory services to operators of
national and regional restaurant chains. With $2.6 billion in assets, Trustreet
manages financial interests in approximately 2,800 properties in 49 states. For
more information, visit www.trustreet.com.
Conference Call
Management will hold a conference call on Tuesday, August 9, 2005 at 10:00 a.m.
EDT to review the Company's quarterly results. The call can be accessed on the
Company's website at www.trustreeet.com and by direct dial-in at 866-804-3547.
For those unable to listen to the live broadcast, a replay will also be
available on the Company's web site.
###
Statements in this press release that are not strictly historical are
"forward-looking" statements. Forward-looking statements involve known and
unknown risks, which may cause the Company's actual future results to differ
materially from expected results. These risks include, among others, general
economic conditions, local real estate conditions, changes in interest rates,
increases in operating costs, the availability of capital, and the profitability
of the Company's taxable subsidiary. Additional information concerning these and
other factors that could cause actual results to differ materially from those
forward-looking statements is contained from time to time in the Company's SEC
filings. Copies of each filing may be obtained from the Company or the SEC.
Consequently, such forward-looking statements should be regarded solely as
reflections of the Company's current operating plans and estimates. Actual
operating results may differ materially from what is expressed or forecast in
this press release. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date these statements were made.
"Funds From Operations" (FFO) is a measure of performance that Trustreet
computes in accordance with the "White Paper" definition of FFO adopted by the
Board of Governors of the National Association of Real Estate Investment Trusts
("NAREIT"). According to this definition, and as used herein by Trustreet, FFO
means net income (loss) allocable to common stockholders (computed in accordance
with GAAP), plus real estate related depreciation and amortization excluding
gains (or losses) from sales of property held for investment and excluding
adjustments allocable to minority interests or joint ventures. NAREIT created
FFO as a supplemental performance measure to exclude historical cost
depreciation, among other items, from GAAP net income (loss) allocable to common
stockholders. Trustreet uses FFO as a supplemental measure to conduct and
evaluate its business because there are certain limitations associated with
using GAAP net income by itself as the primary measure of operating performance.
Historical cost accounting for real estate assets in accordance with GAAP
implicitly assumes that the value of real estate assets diminishes predictably
over time. Since real estate values instead have historically risen or fallen
with market conditions, Trustreet believes that the presentation of operating
results for real estate companies that use historical cost accounting is
insufficient by itself. In addition, Trustreet believes that the use of FFO has
made comparisons of those results more meaningful and has enabled the evaluation
of its operating performance compared to other REITs that use the NAREIT
definition in order to make more informed business decisions based on industry
trends or conditions. FFO should not be considered as an alternative to net
income (loss) allocable to common stockholders as the primary indicator of
Trustreet's operating performance or as an alternative to cash flow as a measure
of liquidity. While Trustreet adheres to the NAREIT definition of FFO in making
its calculations, this method of calculating FFO may not be comparable to the
methods used by other REITs and, accordingly, may be different from similarly
titled measures reported by other companies.
The Company believes that Adjusted Funds from Operations is helpful to investors
as a measure of its liquidity position as the measure provides investors with an
understanding of its ability to pay dividends. While the measure is used
commonly in the REIT industry, definitions of AFFO vary and investors should
take definitional differences into account when comparing AFFO reported by other
REITs. The Company calculates AFFO by subtracting from or adding to FFO (i)
non-real estate related depreciation and amortization, (ii) straight-lining of
rents, (iii) amortization of deferred financing costs, (iv)principal portion on
capital leases and (v) non-cash real estate impairment charges or loan reserves.
TRUSTREET PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands except for per share data)
<s> <c>
Quarter ended Six months ended
June 30, June 30,
2005 2004 2005 2004
------------- ------------- --------------- -------------
Revenues:
Rental income from operating leases $ 39,523 $ 14,158 $ 62,927 $ 28,513
Earned income from direct financing leases 3,281 2,539 6,017 5,090
Interest income from mortgage, equipment and
other notes receivables 6,554 6,674 12,835 13,327
Investment and interest income 448 979 993 2,170
Other income 1,595 1,146 2,658 2,505
------------- ------------- --------------- -------------
51,401 25,496 85,430 51,605
------------- ------------- --------------- -------------
Expenses:
General operating and administrative 9,992 6,659 20,933 12,959
Interest expense 24,868 11,994 41,759 23,824
Property expenses, state and other taxes 2,083 201 3,286 337
Depreciation and amortization 8,999 2,932 14,228 5,727
Loss on termination of cash flow hedge -- 585 -- 940
Recovery of loss on loans (468 ) -- (453 ) --
Impairments and provisions on assets 271 503 277 1,050
------------- ------------- --------------- -------------
45,745 22,874 80,030 44,837
------------- ------------- --------------- -------------
Income from continuing operations before minority
interest, equity in earnings of unconsolidated joint
ventures and gain on sale of assets 5,656 2,622 5,400 6,768
Minority interest (734 ) (1,296 ) (1,549 ) (1,957 )
Equity in earnings of unconsolidated joint ventures 32 31 62 65
Gain on sale of assets 23 -- 23 6
------------- ------------- --------------- -------------
Income from continuing operations 4,977 1,357 3,936 4,882
Income from discontinued operations, after income taxes 13,172 7,863 17,663 15,187
------------- ------------- --------------- -------------
Net income 18,149 9,220 21,599 20,069
Dividends to preferred stockholders (7,176 ) -- (10,099 ) --
------------- ------------- --------------- -------------
Net income allocable to common stockholders $ 10,973 $ 9,220 $ 11,500 $ 20,069
============= ============= =============== =============
Basic and diluted net income per share:
- ---------------------------------------
Income/(loss) from continuing operations allocable to
common stockholders $ (0.04 ) $ 0.04 $ (0.12 ) $ 0.14
Income from discontinued operations 0.23 0.22 0.35 0.43
------------- ------------- --------------- -------------
Basic and diluted net income per share $ 0.19 $ 0.26 $ 0.23 $ 0.57
============= ============= =============== =============
Weighted average number of shares of common stock
outstanding:
Basic 57,908 35,032 50,922 35,032
============= ============= =============== =============
Diluted 57,908 35,032 50,922 35,032
============= ============= =============== =============
TRUSTREET PROPERTIES, INC.
DISCONTINUED OPERATIONS BY SEGMENT
UNAUDITED
(in thousands)
<s> <c>
Quarter Ended June 30,
(in thousands)
----------------- ------------------ ------------------ -------------------
2005 2005 2004 2004
----------------- ------------------ ------------------ -------------------
Real Estate Specialty Finance Real Estate Specialty Finance
----------------- ------------------ ------------------ -------------------
Sale of real estate $ 3,197 $ 70,838 $ 8,038 $ 67,528
Cost of real estate sold 12,369 59,434 7,718 58,859
----------------- ------------------ ------------------ -------------------
Gain on sale of real estate 828 11,404 320 8,669
Net other income (expense) 472 30 (292) 1,425
----------------- ------------------ ------------------ -------------------
Earnings from real estate
discontinued operations
before tax 1,300 11,434 28 10,094
Retail operations revenue -- 15,215 3,739 --
Retail cost of sales -- 14,963 3,999 --
----------------- ------------------ ------------------ -------------------
Earnings (loss) from retail
discontinued operations
before tax -- 252 (260) --
Income tax (benefit) provision -- (186) -- 1,999
----------------- ------------------ ------------------ -------------------
Income (loss) from discontinued
operations, after income taxes $ 1,300 $ 1,872 $ (232) $ 8,095
================= ================== ================== ===================
TRUSTREET PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
<s> <c>
June 30, December 31,
2005 2004
--------------- ----------------
ASSETS
Real estate investment properties $ 1,576,216 $ 535,163
Net investment in direct financing leases 157,182 98,068
Real estate and other assets held for sale 195,841 147,619
Mortgage, equipment and other notes receivable, net of
allowance of $7,281 and $7,261, respectively 292,106 290,140
Other investments 15,997 16,495
Cash and cash equivalents 28,287 22,744
Restricted cash 14,521 7,402
Receivables, less allowance for doubtful accounts
of $2,997 and $2,136, respectively 6,603 7,391
Accrued rental income 31,984 28,392
Goodwill 224,278 56,260
Other assets 128,687 33,975
------------------ ---------------
Total assets $ 2,671,702 $ 1,243,649
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolver $ 134,000 $ 21,000
Notes payable 585,302 162,810
Mortgage warehouse facilities 103,004 101,394
Subordinated note payable -- 21,875
Bonds payable 790,048 405,421
Due to related parties 658 37,172
Other payables 98,407 33,736
Minority interests, including redeemable partnership
interest in 2004 4,835 6,819
Stockholders' equity 955,448 453,422
-------------------- ---------------
Total liabilities and stockholders' equity $ 2,671,702 $ 1,243,649
==================== ===============
TRUSTREET PROPERTIES, INC.
LEASE EXPIRATIONS
<s> <c>
Lease Expirations
(based on annual base rent as of June 30, 2005)
# of Properties % of Total # of Properties % of Total
--------------- ---------- --------------- ----------
2005 34 2.0% 2011 72 4.1%
2006 43 1.9% 2012 80 4.7%
2007 58 3.1% 2013 79 5.3%
2008 50 1.9% 2014 161 9.7%
2009 63 3.2% 2015 78 5.3%
2010 78 4.0% Thereafter 1,012 54.8%
DIVERSIFICATION
Top 20 Tenants
(based on annual base rent as of June 30, 2005)
Tenant % of Rent Tenant % of Rent
------ --------- ------ ---------
1 Jack in the Box, Inc. and
Jack in the Box Eastern Division L.P. 8% 11 Shoney's, Inc. 2%
2 Golden Corral Corporation 7% 12 Vicorp Restaurants, Inc. 2%
3 IHOP Properties, Inc. 4% 13 Flagstar Enterprises, Inc. 1%
4 S&A Properties Corp. 4% 14 Davco Restaurants, Inc. 1%
5 Captain D's, LLC 4% 15 Denny's, Inc. 1%
6 Sybra Inc. 3% 16 Boston Market Corp. 1%
7 The Restaurant Company 2% 17 Checkers Drive-In Restaurants, Inc. 1%
8 Texas Taco Cabana, LP 2% 18 Burger King Corporation 1%
9 Carrols Corporation 2% 19 Texas Roadhouse Holdings, LLC 1%
10 El Chico Restaurants Inc. 2% 20 Spaghetti Warehouse Restaurants, Inc. 1%
Top 20 Concepts
(based on annual base rent as of June 30, 2005)
Concept % of Rent Concept % of Rent
------- --------- ------- ---------
1 Golden Corral 8% 11 Applebee's 3%
2 Burger King 8% 12 Taco Cabana 3%
3 Jack in the Box 7% 13 Hardee's 2%
4 Arby's 5% 14 El Chico 2%
5 International House of Pancakes 5% 15 Shoney's 2%
6 Bennigan's 4% 16 Ruby Tuesday 2%
7 Captain D's 4% 17 T.G.I. Friday's 2%
8 Wendy's 3% 18 Steak & Ale 2%
9 Denny's 3% 19 Bakers Square 2%
10 Perkins 3% 20 Pizza Hut 1%
Top 10 States
(based on annual base rent as of June 30, 2005)
State % of Rent State % of Rent
----- --------- ----- ---------
1 Texas 21% 6 Tennessee 4%
2 Florida 11% 7 Ohio 4%
3 Georgia 5% 8 Missouri 3%
4 Illinois 4% 9 Arizona 3%
5 California 4% 10 Alabama 2%
TRUSTREET PROPERTIES, INC.
RECONCILIATION OF NAREIT FFO AND AFFO
(UNAUDITED)
(In thousands)
Quarter Ending
June 30,
2005
-------------------
Funds From Operations (NAREIT defined):
Net income $ 18,149
Less: Dividends on preferred stock (7,176)
-------------------
Net income allocable to common stockholders 10,973
FFO adjustments:
Real Estate Depreciation and amortization 6,469
Gain/Loss on Sale of Real Estate (828)
-------------------
NAREIT FFO $ 18,599
===================
NAREIT FFO per share $ 0.32
- ---------------------------------------------------------------------------------------
Adjusted Funds from Operations (TSY defined):
NAREIT FFO $ 18,599
AFFO adjustments:
Straight-Line Rent (2,231)
Principal portion of Capital Leases 1,442
Non-Real Estate Depreciation 803
Deferred Loan Cost Amortization 2,748
Asset Impairment/Provisions 308
-------------------
ADJUSTED FFO $ 21,669
===================