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8-K - FORM 8-K - EQUITY ONE, INC. | g27814e8vk.htm |
EX-99.2 - EX-99.2 - EQUITY ONE, INC. | g27814exv99w2.htm |
Exhibit 99.1
Equity One, Inc. 1600 NE Miami Gardens Drive North Miami Beach, FL 33179 305-947-1664 |
For additional information: Mark Langer, EVP and Chief Financial Officer |
FOR IMMEDIATE RELEASE:
Equity One Reports Second Quarter 2011 Operating Results
North Miami Beach, FL, August 3, 2011 Equity One, Inc. (NYSE:EQY), an owner, developer and
operator of shopping centers, announced today its financial results for the three months ended June
30, 2011.
During the second quarter, the company:
| Reported Funds From Operations (FFO) of $0.28 per diluted share | ||
| Reported recurring FFO of $0.29 per diluted share, excluding impairment charges, transaction costs and other one-time gains and losses | ||
| Reported an increase in same property net operating income of 2.8% as compared to second quarter 2010 | ||
| Reported core occupancy of 90.2%, unchanged on a same property basis from March 31, 2011 | ||
| Generated $115.7 million in net proceeds from the underwritten public offering and concurrent private placement of 6.0 million shares of common stock | ||
| Formed a joint venture with the New York Common Retirement Fund | ||
| Acquired a fee interest in a retail condominium located at 161 West 16th Street in Manhattan comprising 56,870 square feet for $55.0 million | ||
| Recognized a gain of $3.6 million pertaining to the sale of an outparcel to a joint venture | ||
| Executed contracts or letters of intent aggregating $116.2 million (on a pro-rata basis) with respect to the sale of four non-retail assets that were acquired in the Capital and Counties transaction |
We are very pleased with our strong growth in earnings driven by improving fundamentals and the
accretive impact of our recent acquisitions said Jeff Olson, Chief Executive Officer of Equity
One. We are proud of the progress we have made in upgrading and diversifying the quality of our portfolio through
strategic acquisitions and dispositions.
Financial Highlights
In the second quarter 2011, the company generated FFO of $33.8 million, or $0.28 per diluted share,
as compared to FFO for the same period in 2010 of $23.1 million, or $0.25 per diluted share. The
second quarter 2011 FFO results include $0.03 per diluted share in transaction costs related to
acquisitions, dispositions and joint ventures, $0.01 per diluted share in non-cash impairment charges and $0.03
in gains related to the sale of outparcels. The second quarter 2010 FFO results include transaction
costs of $0.03 per diluted share and $0.02 per diluted share in gains from land sales and the sale
of securities.
For the six months ended June 30, 2011, the company generated FFO of $117.7 million, or $0.99 per
diluted share, as compared to FFO for the same period in 2010 of $43.9 million, or $0.49 per
diluted share. The year to date results for 2011 include a gain on bargain purchase of $0.45 per
diluted share resulting from the Capital & Counties acquisition, $0.03 per diluted share in gains
related to the sale of outparcels, $0.01 per diluted share in non-cash impairment charges and $0.05
per diluted share in transaction costs related to Capital & Counties and other acquisitions and dispositions.
Excluding these items, FFO for the six month period would have been $0.57 per diluted share. The
2010 FFO results for the six months include transaction costs of $0.05 per diluted share primarily
related to Capital & Counties and DIM and $0.03 per diluted share in gains from land sales and the
sale of securities.
Net income attributable to Equity One was $7.4 million and earnings per diluted share was $0.07 for
the quarter ended June 30, 2011 as compared to net income of $6.2 million, or $0.07 per diluted
share, for second quarter 2010. For the six month period ended June 30, 2011, net income
attributable to Equity One was $65.9 million and earnings per diluted share was $0.59 as compared
to net income of $11.7 million, or $0.13 per diluted share, for the six month period 2010. The
increase in net income for the three and six months ended June 30, 2011 as compared to the
respective periods in 2010 is primarily attributable to those factors affecting FFO as discussed
above.
Operating Highlights
As of June 30, 2011, occupancy for the companys consolidated core portfolio was 90.2% as compared
to 90.3% at March 31, 2011. The decrease in occupancy was primarily due to the previously announced
sale of two properties to the New York Common Retirement Fund (NYCRF). On a same property basis, occupancy
remained unchanged at 90.2% compared to March 31, 2011 and was down 10 basis points compared to June 30, 2010.
Same property net operating income increased 2.8% for the second quarter of 2011 compared to the
second quarter of 2010. This growth was primarily attributable to contractual rent increases,
higher recoveries and lower bad debt expense.
During the second quarter of 2011, the company executed 55 new leases in its core portfolio
totaling 154,460 square feet at an average rental rate of $16.93 per square foot, representing a
5.6% decrease from prior rents on a same space, cash basis. Also during the second quarter, the
company renewed 132 leases in its core portfolio for 415,729 square feet for an average rental rate
decline of 2.8% to $16.90 per square foot on a same space, cash basis.
Acquisition and Disposition Activity
During the second quarter, the company formed a joint venture with the NYCRF to acquire high-quality, grocery-anchored centers throughout the United States. The joint
venture is 70% owned by NYCRF and 30% owned by the company. The joint venture acquired two shopping
centers from the company for a purchase price of $39.4 million.
In addition, during the second quarter, the company acquired a fee interest in a retail condominium
located at 161 West 16th Street in Manhattan for $55.0 million. The property, which is
unencumbered, consists of 56,870 square feet and Loehmanns occupies the entire space.
The company recognized a gain of $3.6 million pertaining to the sale of an outparcel to a joint venture.
During the quarter, the company recorded impairment charges of $1.4 million primarily related to
the planned disposition of certain assets in secondary markets.
Subsequent to quarter end, the company closed on the previously announced acquisition of Ralphs
Circle Center, a 59,837 square foot shopping center located in Long Beach, California for
approximately $15.0 million. The company also acquired a $45.0 million mezzanine loan on a
portfolio of seven California shopping centers owned by a subsidiary of Centro Properties Group.
The loan matures on July 9, 2013, subject to the borrowers ability to extend for three additional
one-year periods, and currently bears interest at a minimum rate of 9.21% per annum. Additionally,
the company executed contracts or letters of intent aggregating $116.2 million (on a pro-rata
basis) with respect to the sale of four non-retail assets that were acquired in the Capital and
Counties transaction. The expected sales value reflects an approximate capitalization
rate of 5.6%.
Development and Redevelopment Activities
At June 30, 2011, the company had approximately $200.0 million of active development and
redevelopment projects underway. The estimated remaining cost to complete these projects is
approximately $152.7 million. On April 4, 2011, the company broke ground on The Gallery at Westbury
Plaza, a 330,000 square foot retail center located on Old Country Road in the heart of Nassau
County, New York. Leases have now been executed with leading retailers including Trader Joes, Saks
OFF 5TH, Nordstrom Rack, and The Container Store.
Page 2 of 7
Investing and Financing Activities
In May 2011, the company completed an underwritten public offering and concurrent private placement
of 6.0 million shares of its common stock, resulting in approximately $115.7 million in net
proceeds to the company.
During the quarter, the company repaid $50.0 million of borrowings under its line of credit with
proceeds from the common stock offering. The company also repaid one mortgage totaling $6.7 million
with an interest rate of 9.19%.
Balance Sheet Highlights
At June 30, 2011, the companys total market capitalization (including debt and equity) was $3.7
billion, comprising 124.3 million shares of common stock outstanding (on a fully diluted basis)
valued at $2.3 billion and $1.4 billion of net debt (excluding any debt premium/discount and net of
cash). The companys ratio of net debt to total market capitalization was 37.6%. In addition, the
company had approximately $17.2 million of cash on hand at June 30, 2011 and $63.5 million drawn on
its revolving credit facilities.
FFO and Earnings Guidance
The company is increasing its guidance to reflect the actual results recorded to date and the
expectations for the remainder of the year. The company expects 2011 recurring FFO to be $1.11 to
$1.15 per diluted share when excluding bargain purchase gains, land sale gains, impairment charges,
transaction costs and other non-recurring income or charges (including any such amounts recorded
through the second quarter). This compares to our previous FFO guidance of $1.06 to $1.14 per
diluted share when excluding transaction costs and gains on outparcels.
During the remainder of the year, the company will remain focused on the fundamental performance of
its core portfolio while continuing its efforts to sell the majority of non-core assets acquired
in the Capital & Counties portfolio. The company is exploring capital recycling opportunities in
an effort to dispose of assets in secondary markets with the goal of redeploying proceeds into high
quality assets located in target markets.
Second Quarter 2011 Dividend Declared
On August 2, 2011, the companys Board of Directors declared a cash dividend of $0.22 per share of
its common stock for the quarter ending September 30, 2011, payable on September 30, 2011 to
stockholders of record on September 15, 2011.
ACCOUNTING AND OTHER DISCLOSURES
We believe FFO (combined with the primary GAAP presentations) is a useful, supplemental measure of
our operating performance that is a recognized metric used extensively by the real estate industry,
particularly REITs. The National Association of Real Estate Investment Trusts (NAREIT) stated in
its April 2002 White Paper on Funds from Operations, Historical cost accounting for real estate
assets 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, many
industry investors have considered presentations of operating results for real estate companies
that use historical cost accounting to be insufficient by themselves.
FFO, as defined by NAREIT, is net income (computed in accordance with GAAP), excluding gains (or
losses) from sales of depreciable property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. NAREIT states further that
adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds
from operations on the same basis. We believe that financial analysts, investors and stockholders
are better served by the presentation of comparable period operating results generated from our FFO
measure. Our method of calculating FFO may be different from methods used by other REITs and,
accordingly, may not be comparable to such other REITs.
FFO is presented to assist investors in analyzing our operating performance. FFO (i) does not
represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to
fund all cash flow needs, including
the ability to make distributions, (iii) is not an alternative to cash flow as a measure of
liquidity, and (iv) should not be considered as an alternative to net income (which is determined
in accordance with GAAP) for purposes of evaluating our operating performance. We believe net
income is the most directly comparable GAAP measure to FFO.
Page 3 of 7
CONFERENCE CALL/WEB CAST INFORMATION
Equity One will host a conference call on Thursday, August 4, 2011 at 9:00 a.m. Eastern Time to
review the 2011 second quarter earnings and operating results. Stockholders, analysts and other
interested parties can access the earnings call by dialing (866) 713-8395 (U.S./Canada) or (617)
597-5309 (international) using pass code 27818164. The call will also be web cast and can be
accessed in a listen-only mode on Equity Ones web site at www.equityone.net.
A replay of the conference call will be available on Equity Ones web site for future review.
Interested parties may also access the telephone replay by dialing (888) 286-8010 (U.S./Canada) or
(617) 801-6888 (international) using pass code 17000468 through August 11, 2011.
FOR ADDITIONAL INFORMATION
For a copy of the companys second quarter supplemental information package, please access the
Investors section of Equity Ones web site at www.equityone.net. To be included in the companys
e-mail distributions for press releases and other company notices, please send e-mail addresses to
Investor Relations at investorrelations@equityone.net.
ABOUT EQUITY ONE, INC.
As of June 30, 2011, Equity One owned or had interests in 199 properties, consisting of 176
shopping centers comprising approximately 20.7 million square feet, ten projects in
development/redevelopment, eight non-retail properties, and five parcels of land. Additionally,
Equity One had joint venture interests in sixteen shopping centers, three office buildings and one
apartment building totaling approximately 3.2 million square feet.
FORWARD LOOKING STATEMENTS
Certain matters discussed by Equity One in this press release constitute forward-looking statements
within the meaning of the federal securities laws. Although Equity One believes that the
expectations reflected in such forward-looking statements is based upon reasonable assumptions, it
can give no assurance that these expectations will be achieved. Factors that could cause actual
results to differ materially from current expectations include changes in macro-economic conditions
and the demand for retail space in the states in which Equity One owns properties; the continuing
financial success of Equity Ones current and prospective tenants; continuing supply constraints in
its geographic markets; the availability of properties or portfolios for acquisition; the success
of its efforts to lease up vacant space; the effects of natural, man-made, and other disasters; the
ability of Equity One to successfully complete the acquisitions, and integrate the operations and
systems of companies and properties it desires to acquire; and other risks, which are described in
Equity Ones filings with the Securities and Exchange Commission.
Page 4 of 7
EQUITY ONE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2011 (unaudited)
and December 31, 2010
(In thousands, except share amounts)
Condensed Consolidated Balance Sheets
June 30, 2011 (unaudited)
and December 31, 2010
(In thousands, except share amounts)
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Properties: |
||||||||
Income producing |
$ | 3,159,282 | $ | 2,643,871 | ||||
Less: accumulated depreciation |
(317,785 | ) | (288,613 | ) | ||||
Income producing properties, net |
2,841,497 | 2,355,258 | ||||||
Construction in progress and land held for development |
76,509 | 74,870 | ||||||
Properties held for sale |
37,217 | | ||||||
Properties, net |
2,955,223 | 2,430,128 | ||||||
Cash and cash equivalents |
17,176 | 38,333 | ||||||
Accounts and other receivables, net |
12,564 | 15,181 | ||||||
Investments in and advances to unconsolidated joint ventures |
121,183 | 59,736 | ||||||
Goodwill |
10,645 | 10,790 | ||||||
Other assets |
179,641 | 127,696 | ||||||
TOTAL ASSETS |
$ | 3,296,432 | $ | 2,681,864 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Liabilities: |
||||||||
Notes payable: |
||||||||
Mortgage notes payable |
$ | 658,273 | $ | 533,660 | ||||
Unsecured senior notes payable |
691,136 | 691,136 | ||||||
Unsecured revolving credit facilities |
63,500 | | ||||||
1,412,909 | 1,224,796 | |||||||
Unamortized discount on notes payable, net |
(16,592 | ) | (21,923 | ) | ||||
Total notes payable |
1,396,317 | 1,202,873 | ||||||
Other liabilities: |
||||||||
Accounts payable and accrued expenses |
38,669 | 32,885 | ||||||
Tenant security deposits |
9,791 | 8,907 | ||||||
Deferred tax liabilities, net |
45,354 | 46,523 | ||||||
Other liabilities |
122,987 | 96,971 | ||||||
Total liabilities |
1,613,118 | 1,388,159 | ||||||
Redeemable noncontrolling interests |
3,851 | 3,864 | ||||||
Commitments and contingencies |
| | ||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value 10,000 shares
authorized but unissued |
| | ||||||
Common stock, $0.01 par value 150,000 shares authorized,
112,523 and 102,327 shares issued and outstanding at June
30, 2011 and December 31, 2010, respectively |
1,125 | 1,023 | ||||||
Additional paid-in capital |
1,584,418 | 1,391,762 | ||||||
Distributions in excess of earnings |
(88,131 | ) | (105,309 | ) | ||||
Accumulated other comprehensive loss |
(1,443 | ) | (1,569 | ) | ||||
Total stockholders equity of Equity One, Inc. |
1,495,969 | 1,285,907 | ||||||
Noncontrolling interests |
183,494 | 3,934 | ||||||
Total stockholders equity |
1,679,463 | 1,289,841 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 3,296,432 | $ | 2,681,864 | ||||
Page 5 of 7
EQUITY ONE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the three and six months ended June 30, 2011 and 2010
(unaudited)
(In thousands, except per share data)
Condensed Consolidated Statements of Income
For the three and six months ended June 30, 2011 and 2010
(unaudited)
(In thousands, except per share data)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
REVENUE: |
||||||||||||||||
Minimum rent |
$ | 67,364 | $ | 54,732 | $ | 132,735 | $ | 108,428 | ||||||||
Expense recoveries |
19,586 | 15,761 | 37,967 | 30,600 | ||||||||||||
Percentage rent |
660 | 313 | 2,126 | 1,358 | ||||||||||||
Management and leasing services |
641 | 399 | 1,107 | 772 | ||||||||||||
Total revenue |
88,251 | 71,205 | 173,935 | 141,158 | ||||||||||||
COSTS AND EXPENSES: |
||||||||||||||||
Property operating |
24,702 | 20,152 | 49,190 | 39,912 | ||||||||||||
Rental property depreciation and amortization |
24,351 | 16,755 | 46,786 | 33,043 | ||||||||||||
General and administrative |
13,335 | 11,741 | 25,312 | 21,828 | ||||||||||||
Total costs and expenses |
62,388 | 48,648 | 121,288 | 94,783 | ||||||||||||
INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND
DISCONTINUED OPERATIONS |
25,863 | 22,557 | 52,647 | 46,375 | ||||||||||||
OTHER INCOME AND EXPENSE: |
||||||||||||||||
Investment income |
969 | 489 | 1,662 | 648 | ||||||||||||
Equity in income (loss) in unconsolidated joint ventures |
177 | (42 | ) | 811 | (82 | ) | ||||||||||
Other income |
41 | 103 | 170 | 156 | ||||||||||||
Interest expense |
(21,246 | ) | (19,335 | ) | (42,532 | ) | (39,243 | ) | ||||||||
Amortization of deferred financing fees |
(562 | ) | (454 | ) | (1,105 | ) | (900 | ) | ||||||||
Gain on bargain purchase |
| | 53,467 | | ||||||||||||
Gain on sale of real estate |
4,606 | 440 | 4,606 | 440 | ||||||||||||
Gain on extinguishment of debt |
213 | 63 | 255 | 63 | ||||||||||||
Other expense |
(145 | ) | | (145 | ) | | ||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND
DISCONTINUED OPERATIONS |
9,916 | 3,821 | 69,836 | 7,457 | ||||||||||||
Income tax benefit of taxable REIT subsidiaries |
553 | 926 | 1,118 | 1,994 | ||||||||||||
INCOME FROM CONTINUING OPERATIONS |
10,469 | 4,747 | 70,954 | 9,451 | ||||||||||||
DISCONTINUED OPERATIONS: |
||||||||||||||||
Operations of income producing properties sold or held for sale |
390 | 24 | 774 | 115 | ||||||||||||
(Loss) gain on disposal of income producing properties |
(13 | ) | 1,458 | (13 | ) | 1,458 | ||||||||||
Impairment loss on income producing properties held for sale |
(1,277 | ) | | (1,277 | ) | | ||||||||||
(LOSS) INCOME FROM DISCONTINUED OPERATIONS |
(900 | ) | 1,482 | (516 | ) | 1,573 | ||||||||||
NET INCOME |
9,569 | 6,229 | 70,438 | 11,024 | ||||||||||||
Net (income) loss attributable to noncontrolling interests |
(2,135 | ) | 10 | (4,517 | ) | 647 | ||||||||||
NET INCOME ATTRIBUTABLE TO EQUITY ONE, INC. |
$ | 7,434 | $ | 6,239 | $ | 65,921 | $ | 11,671 | ||||||||
EARNINGS PER COMMON SHARE BASIC: |
||||||||||||||||
Continuing operations |
$ | 0.07 | $ | 0.05 | $ | 0.61 | $ | 0.11 | ||||||||
Discontinued operations |
(0.01 | ) | 0.02 | | 0.02 | |||||||||||
$ | 0.07 | $ | 0.07 | $ | 0.61 | $ | 0.13 | |||||||||
Number of Shares Used in Computing Basic Earnings per Share |
108,942 | 92,141 | 107,605 | 89,939 | ||||||||||||
EARNINGS PER COMMON SHARE DILUTED: |
||||||||||||||||
Continuing operations |
$ | 0.07 | $ | 0.05 | $ | 0.59 | $ | 0.11 | ||||||||
Discontinued operations |
(0.01 | ) | 0.02 | | 0.02 | |||||||||||
$ | 0.07 | $ | 0.07 | $ | 0.59 | $ | 0.13 | |||||||||
Number of Shares Used in Computing Diluted Earnings per
Share |
109,112 | 92,255 | 118,875 | 90,198 |
Page 6 of 7
Equity One, Inc. and Subsidiaries
Reconciliation of Net Income Attributable to Equity One to Funds from Operations
The following table reflects the reconciliation of FFO to net income attributable to Equity One,
the most directly comparable GAAP measure, for the periods presented:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Net income attributable to Equity One, Inc. |
$ | 7,434 | $ | 6,239 | $ | 65,921 | $ | 11,671 | ||||||||
Adjustments: |
||||||||||||||||
Rental property depreciation and amortization,
including discontinued operations, net of
noncontrolling interest |
24,289 | 16,564 | 46,671 | 31,661 | ||||||||||||
Net adjustment for unvested shares and
noncontrolling interest (1) |
2,108 | | 4,523 | | ||||||||||||
Pro rata share of real estate depreciation
from unconsolidated joint ventures |
901 | 298 | 1,483 | 607 | ||||||||||||
(Gain) / loss on disposal of depreciable assets |
(930 | ) | | (930 | ) | | ||||||||||
Funds from operations |
$ | 33,802 | $ | 23,101 | $ | 117,668 | $ | 43,939 | ||||||||
(1) Includes net effect of: (a) distributions paid with respect to unvested shares held by a noncontrolling interest; and (b) an adjustment to compensate for the rounding of the individual calculations. |
Funds from operations is a non-GAAP financial measure. We believe that FFO, as defined by NAREIT,
is a widely used and appropriate supplemental measure of operating performance for REITs, and that
it provides a relevant basis for comparison among REITs.
Reconciliation of Net Income Attributable to Equity One to Funds from Operations
The following table reflects the reconciliation of FFO to net income attributable to Equity One,
the most directly comparable GAAP measure, for the periods presented:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Net income attributable to Equity One, Inc. |
$ | 0.07 | $ | 0.07 | $ | 0.59 | $ | 0.13 | ||||||||
Adjustments: |
||||||||||||||||
Rental property depreciation and amortization,
including discontinued operations, net of
noncontrolling interest |
0.20 | 0.18 | 0.39 | 0.35 | ||||||||||||
Net adjustment for unvested shares and
noncontrolling interest (1) |
0.01 | | 0.01 | | ||||||||||||
Pro rata share of real estate depreciation from
unconsolidated joint ventures |
0.01 | | 0.01 | 0.01 | ||||||||||||
(Gain) / loss on disposal of depreciable assets |
(0.01 | ) | | (0.01 | ) | | ||||||||||
Funds from operations per diluted share(2) |
$ | 0.28 | $ | 0.25 | $ | 0.99 | $ | 0.49 | ||||||||
(1) Includes net effect of: (a) distributions paid with respect to unvested shares held by a noncontrolling interest; and (b) an adjustment to compensate for the rounding of the individual calculations. |
(2) The weighted average diluted shares for the three months ended June 30, 2011 used in the above FFO calculations are higher than the GAAP diluted weighted average shares by the 11.4 million units held by LIH which are convertible into the companys common stock. These convertible units are not included in the diluted weighted average share count for GAAP purposes because their inclusion would be antidilutive, but are included in the above calculation as their effect is dilutive for purposes of calculating FFO. |
Page 7 of 7