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EX-99.2 - EX-99.2 - TIER REIT INCa10-7507_1ex99d2.htm
EX-99.1 - EX-99.1 - TIER REIT INCa10-7507_1ex99d1.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): April 1, 2010

 

Behringer Harvard REIT I, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland

 

000-51293

 

68-0509956

(State or other jurisdiction of incorporation
or organization)

 

(Commission File Number)

 

(I.R.S. Employer
Identification No.)

 

15601 Dallas Parkway, Suite 600, Addison, Texas

75001

(Address of principal executive offices)

(Zip Code)

 

(866) 655-1605

(Registrant’s telephone number, including area code)

 

None

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 7.01                                             Regulation FD.

 

On April 1, 2010, the Company will hold a conference call for financial advisors to review fourth quarter 2009 financial results and highlight portfolio performance. A copy of the script for that call, appearing as Exhibit 99.1, and a copy of the presentation materials to be used during that call, appearing as Exhibit 99.2, are furnished and not filed pursuant to Regulation FD.

 

The script and presentation materials include information about Funds from Operations (“FFO”), Modified Funds from Operations (“MFFO”) and Same Store Sales.  FFO is a supplemental non-GAAP financial measure used by the real estate industry to measure the operating performance of real estate assets.  MFFO excludes impairment charges, adjustments to fair value for derivatives not qualifying for hedge accounting and acquisition-related costs that were required to be expensed effective January 1, 2009 in connection with the adoption of FAS 141R.  Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time.  Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient.

 

Accordingly, we believe that FFO is helpful to stockholders and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which is not immediately apparent from net income.  We believe that MFFO is helpful to stockholders and our management as a measure of operating performance because it excludes charges that management considers more reflective of investing activities or non-operating valuation changes.  By providing FFO and MFFO, we present information that reflects how our management analyzes our long-term operating activities.  We believe fluctuations in MFFO are indicative of changes in operating activities and provide comparability in evaluating our performance over time and as compared to other real estate companies that may not be affected by impairments or have derivatives or acquisition activities.  The following table presents our calculation of FFO and MFFO for the years ended December 31, 2009, 2008 and 2007 (in thousands, except per share amounts):

 

 

 

2009

 

2008

 

2007

 

Net loss

 

$

(439,087

)

$

(160,652

)

$

(41,615

)

Net (income) loss attributable to noncontrolling interest

 

8,455

 

231

 

(16

)

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

Real estate depreciation and amortization from consolidated properties (1)

 

275,045

 

280,620

 

141,462

 

Real estate depreciation and amortization from unconsolidated properties (2)

 

7,116

 

15,006

 

9,071

 

Gain on sale of depreciable real estate (3)

 

 

(21,204

)

 

Noncontrolling interest share of above adjustments (4)

 

(2,116

)

(2,149

)

(379

)

Funds from operations (FFO)

 

$

(150,587

)

$

111,852

 

$

108,523

 

 

 

 

 

 

 

 

 

Impairment charges (5)

 

259,063

 

21,114

 

 

Fair value adjustments to derivatives

 

196

 

 

 

Acqusition-related costs

 

 

 

 

Noncontrolling interest share of above adjustments (6)

 

(7,072

)

(33

)

 

Modified funds from operations (MFFO)

 

$

101,600

 

$

132,933

 

$

108,523

 

 

 

 

 

 

 

 

 

Weighted average shares

 

291,739

 

240,188

 

171,544

 

MFFO per share

 

$

0.35

 

$

0.55

 

$

0.63

 

 


(1)   Reflects the depreciation and amortization of continuing operations, as well as discontinued operations.

 

(2)   This represents our share of depreciation and amortization expense of the properties which we account for under the equity method of accounting. The depreciation and amortization expense of our unconsolidated interests are reflected in our equity in earnings of investments.

 

(3)   Reflects the gain on sale of 9100 Mineral Circle (sold in February 2008), Enclave on the Lake (sold in July 2008) and 2383 Utah (sold in August 2008.)

 

(4)   Reflects an adjustment for the noncontrolling third-party partners’ proportionate share of the real estate depreciation and amortization, an adjustment for the limited partnership unit holders’ proportionate share of the real estate depreciation and amortization and gain on sale of 9100 Mineral Circle, Enclave on the Lake and 2383 Utah.

 

(5)   Reflects the asset impairment losses of continuing operations, as well as discontinued operations.

 

(6)   Reflects an adjustment for the noncontrolling third-party partners’ proportionate share of asset impairment losses and an adjustment for the limited partnership unit holders’ proportionate share of the asset impairment losses and fair value adjustments to derivatives.

 

We define net operating income (“NOI”) as rental revenue, less property operating expenses, real estate taxes and property management fees.   We believe that NOI provides a supplemental measure of our operating performance because NOI reflects the operating performance of our properties and excludes items that are not associated with management of the properties, such as general and administrative expenses, asset management fees and interest expense.  We define same store NOI as NOI less lease termination fee income and non-cash revenue items including straight-line rent adjustments and the amortization of above and below market rent.  Now that we have sufficient history with our portfolio, we view same store NOI both year over year and quarter over quarter as an important measure of the operating performance of our properties because it allows us to compare operating results of properties owned for the entirety of the current and comparable periods and therefore eliminates variations caused by acquisitions or dispositions during the periods under review.  The following table presents our calculations of same store NOI for the three months ended December 31, 2009 and 2008 and the three months ended September 30, 2009 (in thousands, except property count):

 

 

 

Three Months Ended

 

Three Months Ended

 

Same store:

 

31-Dec-09

 

31-Dec-08

 

Variance

 

31-Dec-09

 

30-Sep-09

 

Variance

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

147,698

 

$

152,505

 

$

(4,807

)

$

150,361

 

$

144,911

 

$

5,450

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Straight-line rent adjustment

 

4,708

 

6,438

 

(1,730

)

4,831

 

4,029

 

802

 

Above/below market rent & lease incentives

 

3,354

 

2,527

 

827

 

3,382

 

2,521

 

861

 

Lease termination fees

 

3,998

 

1,291

 

2,707

 

3,998

 

130

 

3,868

 

 

 

135,638

 

142,249

 

(6,611

)

138,150

 

138,231

 

(81

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Property related expenses

 

47,074

 

47,070

 

4

 

48,037

 

42,962

 

5,075

 

Bad debt expense

 

1,230

 

32

 

1,198

 

1,304

 

(200

)

1,504

 

Real estate taxes

 

17,213

 

20,439

 

(3,226

)

17,814

 

21,953

 

(4,139

)

Property management fees

 

4,504

 

4,531

 

(27

)

4,504

 

4,190

 

314

 

 

 

70,021

 

72,072

 

(2,051

)

71,659

 

68,905

 

2,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

65,617

 

$

70,177

 

$

(4,560

)

$

66,491

 

$

69,326

 

$

(2,835

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leased at period end

 

86

%

90

%

 

 

85

%

85

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Properties

 

67

 

 

 

 

 

69

 

 

 

 

 

Square Feet

 

23,040

 

 

 

 

 

23,444

 

 

 

 

 

 

The following table presents our calculations of same store NOI for the years ended December 31, 2009 and 2008 (in thousands, except property count):

 

 

 

Year Ended

 

Same store:

 

31-Dec-09

 

31-Dec-08

 

Variance

 

Revenues:

 

 

 

 

 

 

 

Rental income

 

$

544,382

 

$

582,138

 

$

(37,756

)

Less:

 

 

 

 

 

 

 

Straight-line rent adjustment

 

17,480

 

27,410

 

(9,930

)

Above/below market rent & lease incentives

 

9,437

 

11,831

 

(2,394

)

Lease termination fees

 

7,935

 

27,236

 

(19,301

)

 

 

509,530

 

515,661

 

(6,131

)

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Property related expenses

 

159,508

 

159,958

 

(450

)

Bad debt expense

 

6,102

 

1,425

 

4,677

 

Real estate taxes

 

75,816

 

75,098

 

718

 

Property management fees

 

16,459

 

16,935

 

(476

)

 

 

257,885

 

253,416

 

4,469

 

 

 

 

 

 

 

 

 

 

 

$

251,645

 

$

262,245

 

$

(10,600

)

 

 

 

 

 

 

 

 

Leased at period end

 

86

%

91

%

 

 

 

 

 

 

 

 

 

 

Consolidated Properties

 

63

 

 

 

 

 

Square Feet

 

21,278

 

 

 

 

 

 

2



 

Item 9.01.              Financial Statements and Exhibits.

 

(d)

Exhibits.

 

 

 

 

 

 

 

99.1

 

Script.

 

 

 

 

 

99.2

 

Behringer Harvard REIT I, Inc. Quarterly Update for the quarter ended December 31, 2009.

 

3



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

BEHRINGER HARVARD REIT I, INC.

 

 

 

 

 

 

Dated: April 1, 2010

By:

/s/ Michael A. Ernst

 

 

Michael A. Ernst

 

 

Chief Financial Officer

 

4



 

Exhibit Index

 

 

 

Exhibit No.

 

Description

 

 

 

99.1

 

Script.

 

 

 

99.2

 

Behringer Harvard REIT I, Inc. Quarterly Update for the quarter ended December 31, 2009.

 

5