Keystone Property Trust Announces First Quarter 2004 Results WEST
CONSHOHOCKEN, Pa., April 20 /PRNewswire-FirstCall/ -- Keystone
Property Trust today announced its financial results for the first
quarter ended March 31, 2004. For the three month period ended
March 31, 2004, the Company reported Funds From Operations ("FFO")
of $14.4 million, or $0.40 per diluted share, as compared to $10.2
million, or $0.33 per diluted share for the same quarter in 2003,
representing a 41.2% increase in aggregate FFO and a 21.2% increase
in FFO per diluted share. For the three month period ended March
31, 2004, net income allocated to common shareholders was $3.2
million, or $0.11 per diluted share, as compared to $5.6 million,
or $0.26 per diluted share for the period ended March 31, 2003,
representing a 42.9% decrease in aggregate net income and a 57.7%
decrease in earnings per share. Excluding gains from property sales
and provisions for asset impairments, earnings per share for the
three month period ended March 31, 2004 was $0.12 per diluted
share, a 14.3% decrease from $0.14 per diluted share for the same
quarter in 2003. Highlights * Acquired $38.5 million of industrial
properties totaling approximately 735,000 square feet ("SF") in the
Greater Miami market. * Disposed of three industrial properties
totaling 275,140 SF for approximately $14.2 million. * Broke ground
on a 266,000 SF distribution facility in Allentown, Pennsylvania
that is 80% leased to KIA Motors America, Inc. ("KIA"). * Increased
portfolio occupancy to 92.4% at quarter-end compared to 92.1% at
year-end 2003. * Leased approximately 2.4 million SF including
approximately 496,000 SF of renewals and 1.9 million SF of new
leases, resulting in tenant retention of 51.9%. * Rental rates in
the Company's portfolio for the first quarter increased 7.2% and
7.5% on a Cash and GAAP basis, respectively. * Signed leases at two
inventory development projects in New Jersey including a 781,000 SF
lease for the balance of Phase I and Phase II at Keystone Cranbury
East and a 127,000 SF lease at Keystone Greenville Yards. As of the
end of the quarter, the Company had signed leases for 68% of its
inventory development. * Same-store net operating income decreased
3.3% and 3.8% on a Cash and GAAP basis, respectively. * Raised $55
million from the issuance of 2.2 million Series E Cumulative
Redeemable Preferred Shares (NYSE:KTRPrE) at a liquidation value of
$25 per share and a coupon of 7.375%. * Exchanged approximately 4.0
million common shares for Series C and D Convertible Preferred
Operating Partnership ("OP") Units and Common OP Units. * Declared
a dividend of $0.33 per Common Share, $0.5703125 per Series D
Cumulative Redeemable Preferred Stock (NYSE:KTRPrD) and $0.2355903
per share of the Series E Cumulative Redeemable Preferred Stock.
Jeffrey E. Kelter, President and CEO of Keystone, commenting on the
Company's first quarter results, stated, "I am pleased with our
results for the quarter, which exceeded expectations. But even
beyond the headline numbers, we are generating increasingly
compelling results. By concentrating on one asset class in a
closely defined geography, we are finding investment opportunities
that a less focused strategy simply cannot deliver. The two
transactions totaling nearly $40 million that we completed in Miami
during the quarter illustrate our ability to immediately establish
a presence, deploy our infrastructure and uncover unique
opportunities that create value. I am encouraged by the fact that
during the quarter, we signed 1.2 million SF of leases within our
2.1 million SF of inventory development and continued to see a
modest but steady improvement in demand across the board. The
strength we have seen in New Jersey and Indianapolis, particularly
related to our speculative development, has offset weaker results
in Central Pennsylvania. In the aggregate, we are on track to meet
guidance issued earlier in the year. As industrial real estate
market conditions improve, it is also increasingly evident to us
that we are targeting the right niche - modern big- box
distribution facilities. In our markets, this asset class is
garnering the new demand and as capital spending works its way back
into the corporate lexicon we expect that newer, larger, more
flexible facilities will distinguish themselves further."
Investment Activity During the quarter, the Company acquired a
three building facility consisting of 189,567 SF in Miami, FL for
approximately $12.5 million. In addition, the Company acquired a
545,000 SF industrial distribution center in Miramar, FL for
approximately $26.0 million. With these acquisitions, the Company
now owns approximately 2.5 million SF in the Greater Miami region.
In February 2004, the Company sold a 20,000 SF facility at 260
Feaster Road in Rocky Creek Park in Greenville, South Carolina for
$575,000. In addition, the Company sold 6402 Corporate Drive, a
162,608 SF industrial building, in Indianapolis, Indiana for
approximately $5.1 million. In March 2004, the Company sold 121
Fieldcrest Avenue, a 92,532 SF building, in Edison, New Jersey for
$8.5 million. On the development front in Central New Jersey,
Keystone continued construction of Phase II (500,000 SF) of the
Cranbury East Project at Exit 8A. During the quarter, 781,000 SF of
Cranbury East was leased to Williams-Sonoma, Inc., bringing the
project to 100% leased. The total investment in Phase II is
projected to be approximately $24 million. Also in Central New
Jersey, Keystone continued construction on a 772,000 SF
distribution center for Home Depot USA, Inc. The initial term of
the lease will be for 12 years and occupancy is scheduled for the
fourth quarter of 2004. The total investment is projected to be
approximately $40 million. In Northern New Jersey, Keystone leased
approximately 127,000 SF of Building I (70%) at Keystone Greenville
Yards to Bed, Bath & Beyond during the quarter. Building II,
totaling approximately 341,000 SF, is scheduled for completion
during the second quarter. Keystone's total investment in the
Greenville Yards project will be approximately $33 million.
Keystone began construction of a parts distribution and training
center for KIA Motors in the Company's Westpark Business Center in
Allentown, Pennsylvania. KIA will lease 211,535 SF out of a total
of 265,535 SF to be built. Occupancy is scheduled for the end of
the year. The total investment in this project is expected to be
approximately $9 million. Operating Results/Leasing Activity In the
quarter, leasing activity totaled almost 2.4 million SF consisting
of 1.9 million SF of new leases and approximately 496,000 SF of
renewals, which resulted in tenant retention for the quarter of
51.9%. Rents for the quarter increased 7.2% on a Cash basis and
7.5% on a GAAP basis. For the three months ended March 31, 2004,
consolidated same-store net operating income decreased 3.3% and
3.8% on a Cash and GAAP basis, respectively. Economic occupancy on
a GAAP basis for the consolidated same- store portfolio was 90.1%,
a 330 basis point decrease from 93.4% at March 31, 2003.
Supplemental Earnings Measure The Company's uses as its primary
supplemental performance measure FFO, which is a commonly used
supplemental performance measure for REITs. NAREIT's definition of
FFO, which excludes the impact of gains and losses from asset
sales, was modified in October 2003 to include the impact of
impairment charges in the computation of FFO as a result of
guidance from the Securities and Exchange Commission ("SEC").
Subsequent to this modification, the Company continued to report
FFO in accordance with the NAREIT definition. At the end of the
quarter ended March 31, 2004, the Company received guidance from
its independent auditor that Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS No. 144"), is currently being interpreted
such that losses from asset sales should always be accounted for as
impairment charges and that losses from asset sales will no longer
occur as a result of this recent interpretation of SFAS No. 144.
Although NAREIT has not yet issued guidance on this interpretation,
under the current NAREIT definition gains on sales of assets would
be excluded from FFO but impairment charges (formerly losses on
sales of assets) would be a deduction and reduce FFO. During the
quarter, the Company incurred a $3.2 million loss on the sale of
its 6402 Corporate Drive property and an aggregate $3.0 million
gain on the sales of its 121 Fieldcrest Avenue and 260 Feaster Road
properties. The Company believes it is necessary to eliminate gains
and losses from asset sales, including losses reported as
impairment charges, from its FFO calculation in order to provide
the clearest measure of normalized operations and will continue to
report FFO on this basis. For informational purposes, the Company
has also provided a calculation of FFO excluding impairment charges
in the attached financial summary. Conference Call The Company will
hold a conference call tomorrow, April 21, 2004, at 11:00 a.m.
Eastern Time. The toll-free call-in number is 1-800-289-0528,
confirmation code 614413. Callers are encouraged to dial-in five to
ten minutes prior to the start time to ensure that they participate
from the beginning of the call. A replay of the conference call
will be available starting at 2:00 p.m. tomorrow through May 5,
2004 until midnight Eastern Time. The telephone number for the
replay is 1-719-457-0820, confirmation code 614413. Additional
information about Keystone's quarterly results can be found in the
supplemental information package, which is posted to the Company's
website in the Financial Reports section under Investor Relations.
Interested followers are encouraged to join a webcast of the call
which can be accessed through the Company website at
http://www.keystoneproperty.com/ under Investor Relations.
Followers unable to participate in the live webcast can access the
archive on the website under Investor Relations. During the
conference call, the Company may discuss non-GAAP financial
measures as defined by SEC Regulation G. In addition, the Company
has used non-GAAP financial measures in this press release. A
reconciliation of non- GAAP financial measures and the comparable
GAAP financial measures can be found in the release or the
Company's quarterly supplemental package. Keystone Property Trust,
with headquarters in West Conshohocken, Pennsylvania, is a fully
integrated real estate investment trust with a current portfolio of
143 properties, including properties under development, aggregating
over 34 million SF in the Eastern United States. For more
information, contact Aleathia M. Hoster at (212) 527-9900, send
email to or visit the Company website at
http://www.keystoneproperty.com/. This press release may contain
statements which constitute forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding the intent, belief or current
expectations of the Company, its trustees, or its officers with
respect to the future operating performance of the Company and the
result and the effect of legal proceedings. Investors are cautioned
that any such forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward
looking statements as a result of various factors. Important
factors that could cause such differences are described in the
Company's periodic filings with the Securities and Exchange
Commission, including the Company's Form 10-K and quarterly reports
on Form 10-Q. Financial Summary for the Quarter and Three Months
Ended March 31, 2004 and 2003 (in thousands, except for shares,
ratios, and per share data) For the three months ended March 31,
2004 2003 REVENUE: Rents $22,130 $16,179 Reimbursement revenue and
other income 4,395 3,104 Total revenue 26,525 19,283 OPERATING
EXPENSES: Property operating expenses 2,399 1,155 Real estate taxes
3,158 1,873 General and administrative 3,176 2,501 Depreciation and
amortization 7,082 4,412 Total operating expenses 15,815 9,941
Income before equity in income from equity method investments,
gains (losses) on sales of assets, interest expense, distributions
to preferred unitholders, minority interest of unitholders in
Operating Partnership, and discontinued operations 10,710 9,342
Equity in income from equity method investments 1,698 1,233 Gains
on sales of assets - 3,221 Interest expense 5,983 4,257 Income
before distributions to preferred unitholders, minority interest of
unitholders in Operating Partnership, and discontinued operations
6,425 9,539 Distributions to preferred unitholders (502) (1,268)
Minority interest of unitholders in Operating Partnership (556)
(1,475) Income from continuing operations 5,367 6,796 Discontinued
operations: Income (loss) from discontinued operations 38 (167)
Gain on disposition of discontinued operations 2,972 - Provision
for asset impairment (3,222) - Minority interest 29 37 (183) (130)
NET INCOME 5,184 6,666 NET INCOME ALLOCATED TO PREFERRED
SHAREHOLDERS (1,937) (1,061) NET INCOME ALLOCATED TO COMMON
SHAREHOLDERS $3,247 $5,605 EARNINGS PER COMMON SHARE - BASIC:
Income from continuing operations $0.12 $0.27 Discontinued
operations (0.01) (0.01) Income per Common Share - Basic $0.11
$0.26 WEIGHTED AVERAGE COMMON SHARES - BASIC 28,003,709 21,457,794
EARNINGS PER COMMON SHARE - DILUTED: Income from continuing
operations $0.12 $0.27 Discontinued operations (0.01) (0.01) Income
per Common Share - Diluted $0.11 $0.26 WEIGHTED AVERAGE COMMON
SHARES - DILUTED 33,292,919 27,193,122 As of: March 31, December
31, 2004 2003 BALANCE SHEET DATA: Real estate investments, before
accumulated depreciation $1,063,875 $1,023,719 Total assets
1,060,958 1,023,315 Total debt 528,695 533,717 Total liabilities
37,139 31,842 Minority interest in Operating Partnership 51,429
35,715 Convertible preferred units 5,279 52,892 Stockholders'
equity 438,416 369,149 Financial Summary for the Quarter and Three
Months Ended March 31, 2004 and 2003 (in thousands, except for
shares, ratios, and per share data) FUNDS FROM OPERATIONS (1): For
the three months ended March 31, 2004 2003 Net Income Allocated to
Common Shareholders $3,247 $5,605 Income Allocated to Preferred
Shareholders 1,937 1,061 Redeemable Preferred Stock Dividends
(1,754) (695) Lease Termination Income 2,000 - Minority Interest of
Unitholders in Operating Partnership- includes Discontinued
Operations 527 1,476 Distributions to Preferred Unitholders 502
1,268 Provision for Asset Impairment 3,222 - Gains from Sales of
Assets (2,972) (3,221) Depreciation and Amortization Related to
Real Estate 7,171 4,412 Depreciation and Amortization Related to
Joint Ventures 483 324 Funds From Operations $14,363 $10,230
Diluted FFO Per Share $0.40 $0.33 Funds From Operations $14,363
$10,230 Provision for Asset Impairment (3,222) - Funds From
Operations, Excluding Add Back of Asset Impairment Charges $11,141
$10,230 Diluted FFO Per Share, Excluding Add Back of Asset
Impairment Charges $0.31 $0.33 Diluted Weighted Average Shares and
Units (2) 35,950,408 31,429,890 Dividend Paid Per Common Share
$0.330 $0.325 FFO Dividend Payout Ratio 82.5% 98.5% (1) The Company
uses Funds from Operations ("FFO") as a non-GAAP performance
measure in addition to net income determined in accordance with
GAAP. FFO is a widely used measurement by investors for evaluating
the operating performance of an equity REIT. Management believes
the use of FFO as a performance measure allows investors and
management to compare the Company's results to the results of other
REITs. However, the Company's FFO may not necessarily be comparable
to similarly titled measures of operating performance for other
REITs. Management believes that FFO is a useful disclosure as a
non-GAAP performance measure as historical cost accounting for real
estate assets, as required in accordance with GAAP, implicitly
assumes that the value of real estate assets diminishes predictably
over time as reflected through depreciation and amortization
expenses. The Company believes that the value of real estate assets
does not diminish predictably over time, as is assumed in GAAP
accounting, and instead fluctuates due to market and other
conditions. Accordingly, the Company believes FFO provides
investors with useful supplemental information about the Company's
operating performance because it excludes real estate depreciation
and amortization expense, gains and losses and impairment charges
from the sale of depreciated real estate assets. However, FFO does
not represent cash generated from operating activities in
accordance with GAAP and it also does not consider the costs
associated with capital expenditures related to the Company's real
estate assets. Also it is not necessarily indicative of cash
available to fund cash needs and should not be considered as an
alternative to net income (as determined in accordance with GAAP)
as an indicator of the Company's operating performance or as an
alternative to cash flow from operating activities (as determined
in accordance with GAAP) as a measure of liquidity. For the quarter
ended March 31, 2004, the computation of FFO includes $2 million of
lease termination income that was reported as a purchase price
adjustment. NAREIT defines FFO as net income (loss) computed in
accordance with GAAP, excluding gains (or losses) from sales of
property, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. NAREIT's
definition excludes an add back to net income in order to compute
FFO for impairment charges, however, management believes that
impairment charges are not implicitly different from losses from
sales of assets and accordingly presents FFO both with and without
impairment charges in order to present both calculations.
Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect FFO on the same basis. Since 2000, NAREIT has
clarified the definition of FFO to include non-recurring events
(except for those that are defined as "extraordinary items" or
cumulative effects of accounting changes under GAAP) and the
results of discontinued operations. The Company has presented FFO
on a consistent basis for all periods presented. (2) Diluted
weighted average shares for 2004 and 2003, as shown above, include
convertible preferred shares and all common and preferred units in
the Operating Partnership, each on an as-converted basis.
DATASOURCE: Keystone Property Trust CONTACT: Aleathia M. Hoster of
Keystone Property Trust, +1-212-527-9900; or Michael Beckerman,
+1-908-781-6420, or , for Keystone Property Trust Web site:
http://www.keystoneproperty.com/
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