Exhibit 99.1
AMREIT NARROWS 2005 GUIDANCE, RECAPS 2005 REAL ESTATE ACTIVITY AND ANNOUNCES
2006 ANNUAL GUIDANCE
HOUSTON, Feb. 28 /PRNewswire-FirstCall/ -- AmREIT (Amex: AMY), a Houston-
based real estate development and operating company, reaffirms and narrows 2005
guidance and announces 2006 guidance estimates and assumptions.
2005 Recap:
AmREIT reaffirms and narrows its previously reported 2005 guidance from
$0.68 to $0.72 per class A common share to $0.68 to $0.70 per class A common
share. AmREIT will report its 2005 year end and fourth quarter financial results
on March 15, 2006, followed by an earnings webcast on March 16, 2006 at 10:00
A.M. Central Time. A link to the webcast is available on the Company's website
at http://www.amreit.com . During the year, AmREIT acquired three multi-tenant
centers valued at approximately $111 million: Uptown Park in Houston, Texas; The
Southbank in San Antonio, Texas; and the MacArthur Pad Sites in Dallas, Texas.
To fund these acquisitions, the Company raised approximately $109 million in
public and private equity.
2006 Estimates and Assumptions:
AmREIT announces 2006 annual FFO estimates of $0.71 to $0.77 per class A
share and FFO estimates for the first quarter of 2006 of $0.02 to $0.05 per
class A share. A reconciliation of income (loss) to FFO is included in the
financial tables accompanying this press release.
AmREIT's business model, and therefore its FFO and financial results are
broken down into three distinct businesses. First and foremost, as a real estate
development and operating company we construct, develop, acquire, dispose of,
broker, lease and manage properties every day for a variety of constituents.
Second, we have a portfolio of Irreplaceable Corners(TM), which provides a
steady stream of rental income. Finally, we have an asset advisory group that
has historically raised private capital for our merchant development partnership
funds. These three segments collectively contribute to our overall financial
growth and earnings. Our portfolio generates predictable quarterly revenue
streams while our development and asset advisory groups have potential for
higher returns and growth, but are more volatile and less predictable from
quarter to quarter. We anticipate that, as we increase activity within our
development and advisory groups over the next year to two years, quarter to
quarter earnings and results will be volatile. This quarter to quarter
volatility should smooth out as our portfolio equity and our equity under
management in our asset advisory group reach a critical mass of around $300
million and $250 million, respectively.
"There will be times, as is the case for the first quarter, where our
transactional activities are light and the G&A from our development and asset
advisory groups creates a loss for these groups, and reduces our quarterly FFO,"
said Chad Braun, AmREIT's chief financial officer. "This has been our history
over the past three years as a public company, and each year we have
successfully met our annual FFO goals. Our primary goal is growing shareholder
value, primarily through per share NAV growth as well as to generate strong
year-over-year FFO growth. We have built a model that can accomplish these goals
and we will continue to focus on growing our annual FFO and per share value for
our investors."
Following is a discussion on the assumptions management made when
forecasting each segment's contribution to our projected 2006 earnings and FFO
guidance.
Real Estate Development and Operating Group
Our real estate development and operating group provides an array of
services to our portfolio of properties and tenants, to our asset advisory group
as well as to third parties, generating fees and profits throughout the changing
real estate cycles. This group, due to the timing of our projects, creates
quarterly volatility in earnings. We expect total FFO contribution from this
group in 2006, of $0.13 to $0.15 per share, contributing approximately 18
percent of estimated FFO for the year. This FFO contribution is based on the
following estimates and assumptions:
* Development revenues of approximately $1.9 million for the year. We
currently have six development projects underway through our asset
advisory group representing over 700,000 square feet, estimated to
generate approximately $650,000 in fees over the first six months. We
anticipate five additional projects to commence during the first half of
the year in our asset advisory group or for third parties, representing
over 800,000 square feet, that are expected to generate fees during the
second half of 2006 of approximately $1.2 million;
* Our construction management and general contracting business is
anticipated to generate $14.2 million in revenue during 2006, with a
corresponding $12.6 million in direct project costs. We expect these
activities to ramp up throughout the year and will be primarily
dependent on the timing of development projects in our asset advisory
group;
* Property management fees of approximately $360,000 during 2006. These
fees are expected to be relatively stable with a recurring income of
approximately $30,000 to $40,000 per month;
* Merchant development profits are anticipated to be $2.1 million for the
year. These anticipated profits are based on the Company selling
developed properties or properties that were acquired with the intent to
sale. We are estimating selling approximately six single tenant
properties and one multi-tenant property during the year. The timing of
these transactions could have a material impact on our quarter to
quarter results;
* Real estate commissions, including leasing, brokerage, acquisition fees
and other real estate service fee income are estimated to be
approximately $3.7 million for the year, net of commission expense.
These fees are transaction oriented and may fall into different quarters
than originally anticipated. We expect this activity to build
considerably throughout the year, with the majority taking place in the
second half of the year;
* Income from joint ventures and other income is anticipated to be
approximately $700,000 for the year. Of this, approximately $600,000 is
transaction oriented and will depend on the timing of those
transactions. The remaining $100,000 is recurring and is expected to be
earned ratably throughout the year; and
* Total revenues for this segment of approximately $23 million are further
offset by our general and administrative expense, which is expected to
be approximately $6.2 million for the year, or 30 percent of total G&A.
Based on the way that incentives are earned and based on hires projected
throughout the year, the run rate is expected to grow seasonally from an
anticipated $450,000 per month during the first quarter to an estimated
$580,000 per month in the fourth quarter. In the future, we believe that
we will be able to continue to grow revenues at a faster pace than we
will grow our expenses.
Portfolio of Irreplaceable Corners
Our portfolio of irreplaceable corners consists of an institutional grade
portfolio, comprised of primarily premier retail frontage properties located on
"Main and Main" intersections in high traffic, highly populated affluent areas.
Because of their location and exposure as central gathering places, we believe
these centers will provide a steady rental income stream with increasing rents
and high occupancy rates. We expect FFO contribution in 2006 from our portfolio
to be $0.56 to $0.59 per share, contributing to approximately 80 percent of
total estimated FFO. This FFO contribution is based on the following estimates
and assumptions:
* Rental and earned income from properties is anticipated to be $24.6
million for the year, net of a vacancy allowance, representing
approximately 10 percent same store net operating income (NOI) growth
including lease up of vacancies at Uptown Park;
* Recovery income is estimated to be $6.2 million, with a corresponding
property expense of $6.5 million, resulting in $300,000 in leakage due
to vacancy, non-reimbursable expenses and collection loss;
* Given the low cap rate and interest rate environment, we anticipate
increasing owned assets by about $42 million or 12 percent during 2006,
including a scheduled multi-tenant acquisition during the second quarter
and a projected multi-tenant acquisition during the third quarter. These
acquisitions have been factored into the rental income above;
* The total revenues from this segment of approximately $30.8 million are
further offset by our general and administrative expense, which is
expected to be approximately $9.9 million for the year or 50 percent of
total company G&A. Based on the way that incentives are earned and based
on hires projected throughout the year, the run rate is expected to grow
seasonally from an anticipated $690,000 per month during the first
quarter to an estimated $945,000 per month in the fourth quarter.
Asset Advisory Group
For 20-years we have been raising private capital for our real estate
investment funds and building relationships in the financial planning community,
earning fees and sharing in profits from those activities. In 1996 we sponsored
our first actively managed fund raising $1.8 million, followed soon after in
1998 by our second actively managed fund which brought in $2.8 million. Demand
for this business has continued to increase allowing us to raise $25 million
with our fifth and most recently completed fund. Our first and second funds have
substantially come full circle, with partnership returns of approximately 12
percent and 37 percent, respectively. This business has grown to $60 million
under management as of the end of 2005 and is estimated to grow to over $250
million under management over the next couple years. The value of this business
to AmREIT is a combination of the recurring asset management fees as well as the
potential for back-end profit participation as the general partner of these
funds. The asset management fees are a source of recurring monthly income. The
back-end profits are not reflected on our balance sheet and will only be
recognized as and if the profits are earned -- representing an opportunity for
significant earnings growth as these partnerships begin liquidating in 2008 and
then every year or two thereafter. We also use this back-end participation as a
compensation tool and grant an economic interest in these general partner
profits to top management. This helps align our interests with those of our
investors as well as retains and motivates our top management. We expect FFO
contribution in 2006 from the asset advisory group to be $0.02 to $0.03 per
share, contributing approximately 2 percent of total estimated FFO. As our other
actively managed funds enter liquidation as indicated above, we anticipate FFO
contribution from this group to increase significantly. FFO contribution for
this group is based on the following estimates and assumptions:
* Commission income related to our partnership funds of approximately $9.2
million, which is offset by third party commission expense of $6.4
million;
* Recurring asset management fees of approximately $930,000 for 2006,
increasing from an estimated $55,000 per month in the first quarter to
$105,000 during the fourth quarter;
* Back-end interest of $300,000 to $400,000 related to the partial
liquidation of the final asset in AmREIT Opportunity Fund, the Company's
second actively managed fund; and
* The total revenues from this segment of approximately $10.5 million are
further offset by our general and administrative expense, which is
expected to be approximately $3.7 million for the year, or 19 percent of
total company G&A. Based on the way that incentives are earned and based
on hires projected throughout the year, the run rate is expected to grow
seasonally from an anticipated $230,000 per month during the first
quarter to an estimated $310,000 per month in the fourth quarter.
AmREIT will continue to pay its dividends to its class A shareholders on a
monthly basis. Our dividend policy calls for us to evaluate dividends based on
our annual FFO and annual FFO growth. Therefore, we may actually over distribute
FFO in any given quarter or month, but it is our policy not to over distribute
on an annual basis. Our goal is to have our dividend covered by the portfolio,
or the recurring portion of our income. Our projected 2006 FFO contribution from
the portfolio is estimated at $0.56 to $0.59 per share, which is 1.12 to 1.18
times the current dividend rate of $0.50 per share. As we execute upon our plan,
we will continue to evaluate our current dividend policy and will increase
dividends only as we believe we can support such an increase by growth in FFO.
"For over 20 years we have striven to build a business model that, at its
heart, is a value-creation development company," said Kerr Taylor, AmREIT's
chief executive officer. "Through this core expertise we plan in 2006 to expand
our merchant development activities, selectively grow our portfolio of
Irreplaceable Corner shopping centers and substantially increase our advisory
group business. Our goal remains to become a 'best of class' value-builder for
shareholders as we continue to grow NAV per share and FFO per share over the
long-term."
AmREIT updates earnings guidance on a quarterly basis and will update its
annual guidance as well as give guidance for the upcoming quarter.
About AmREIT
AmREIT (Amex: AMY) is a steadily growing real estate company that has
delivered results to our investors for 21 years. Our mission is to establish a
real estate business that can realize growth in income in any market cycle -- a
company with strong earnings power from multiple sources. This mission has led
us into three distinct businesses. First, as a real estate development and
operating company, we construct, develop, acquire, dispose of, broker, lease and
manage properties for our shareholders as well as for our asset advisory group
and third parties. Second, we have an asset advisory group which raises private
capital for and generates fees from our merchant development partnership funds.
And third, we own a REIT portfolio of "Irreplaceable Corners(TM)" -- premier
retail frontage properties in high- traffic, highly populated areas -- which are
held for long-term value and provide a steady stream of rental income. As of
December 31, 2005, AmREIT has over 700,000 square feet of shopping centers in
various stages of development for our advisory group and an additional 800,000
square feet under construction for third parties or in the pipeline. Since
listing on the AMEX in July 2002, our REIT portfolio of assets has grown from
$32 million to $315 million, and equity within our asset advisory group has
grown from $15 million to $60 million.
In addition to historical information, this press release contains
forward-looking statements under the federal securities law. These statements
are based on current expectations, estimates and projections about the industry
and markets in which AmREIT operates, management's beliefs and assumptions made
by management. Past performance is not indicative of future returns.
Forward-looking statements are not guarantees of future performance and involve
certain risks and uncertainties, which are difficult to predict.
This press release does not constitute an offer to sell, or the solicitation
of an offer to buy any public or private securities from the company. The
purchase of any securities may only be made pursuant to a prospectus.
For more information, call Debbie Lucas, Vice President Investor Relations &
Corporate Communications of AmREIT, at (713) 850-1400, or Chad Braun, Chief
Financial Officer of AmREIT, 713-850-1400. AmREIT is online at
http://www.amreit.com .
Non-GAAP Financial Disclosure
This press release contains certain non-GAAP financial measures that
management believes are useful in evaluating an equity REIT's performance.
AmREIT's definitions and calculations of non-GAAP financial measures may differ
from those used by other equity REIT's, and therefore may not be comparable. The
non-GAAP financial measures should not be considered as an alternative to net
income as an indication of our operating results, or to net cash provided by
operating activities as a measure of our liquidity.
AmREIT considers FFO to be an appropriate measure of the operating
performance of an equity REIT. The National Association of Real Estate
Investment Trusts ("NAREIT") defines FFO as net income computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains or
losses from sales of property, plus real estate depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures. AmREIT
calculates its base FFO in accordance with this definition. The Company
considers FFO to be an appropriate supplemental measure of operating performance
because, by excluding gains or losses on dispositions and excluding
depreciation, FFO is a helpful tool that can assist in the comparison of the
operating performance of a company's real estate between periods, or as compared
to different companies. FFO is not defined by GAAP and should not be considered
as an alternative to net income as an indication of our operating performance or
to net cash provided by operating activities as a measure of our liquidity. FFO
as disclosed by other REITs may not be comparable to AmREIT's calculation.
Projected FFO is calculated in a method consistent with historical FFO, and
AmREIT considers projected FFO to be an appropriate supplemental measure when
compared with projected EPS. A reconciliation of the projected FFO to projected
EPS per share is provided below:
Projected 2006 Range
--------------------
High Low
-------- --------
Net loss available to class A shareholders $ (0.41) $ (0.45)
Depreciation and amortization 1.18 1.16
Less gain on sale of real estate --- ---
FFO available to class A shareholders $ 0.77 $ 0.71
FOR INFORMATION CONTACT:
Debbie Lucas ( dlucas@amreit.com )
AmREIT, (713) 850-1400
SOURCE AmREIT
-0- 02/28/2006
/CONTACT: Debbie Lucas of AmREIT, +1-713-850-1400, or dlucas@amreit.com /
/Web site: http://www.amreit.com /
(AMY)