Highlights
-- Fourth quarter pro forma funds from operations total $0.56 per share.
-- Fourth quarter income available to common shareholders, including a
gain on sale, increases 152% to $34.9 million, or $1.51 per diluted
share.
-- Company sells five family-style apartment properties in Washington
State for $78.5 million, deploys proceeds in acquisition of seven
industrial properties.
-- Industrial portfolio generates 75% of the total net operating income
for the fourth quarter and 72% for the year.
NEWPORT BEACH, Calif., Feb. 11 /PRNewswire/ -- Pacific Gulf Properties
Inc. (NYSE: PAG), a real estate investment trust that owns, develops and
manages industrial properties in the West, reports that for the fourth quarter
ended Dec. 31, 1998, pro forma funds from operations (assuming the conversion
of all preferred shares and all remaining subordinated debentures) totaled
$13.2 million, or $0.56 per share, an increase of 10% over the $9.2 million,
or $0.51 per share, for the same period in 1997.
Net operating income (gross rental revenues less rental operating
expenses) for the fourth quarter of 1998 was $22.0 million on gross rental
revenues of $30.2 million, compared with $14.6 million on gross rental
revenues of $20.3 million for the fourth quarter 1997. The increases were due
primarily to the acquisitions of additional properties and internal growth
generated by increasing rental revenues. Income available to common
shareholders for the fourth quarter 1998 was $34.9 million, or $1.51 per
diluted share, including a $28.9 million gain on the sale of real estate,
versus $10.2 million, or $0.60 per diluted share, for the year-ago period,
representing a 152% increase.
During the fourth quarter, the company sold a portfolio of five
family-style apartment communities in the state of Washington for $78.5
million, recognizing a net profit of $28.9 million. Executing on its business
strategy to divest the traditional multifamily portfolio and redeploy the
proceeds in the purchase of additional industrial properties targeting small
to mid-size tenants, Pacific Gulf acquired approximately 1.3 million square
feet in seven industrial properties. Immediately following the completion of
the sale, Pacific Gulf purchased these properties from The RREEF Funds for
$76.0 million.
Results for Year Ended Dec. 31, 1998
For the year ended Dec. 31, 1998, pro forma funds from operations
increased 12% per share to $51.1 million, or $2.18 per share, from $29.1
million or $1.95 per share a year ago. This increase was due primarily to the
acquisition of 18 industrial properties purchased during the year, and
continued growth in rental rates in both the industrial and multi-family
portfolios, partially offset by increased general and administrative costs.
Net operating income for the 12 months ended Dec. 31, 1998, was $82.6
million on revenues of $113.1 million, compared with $48.5 million on revenues
of $69.5 million for the 12 months ended Dec. 31, 1997. Income available to
common shareholders, including a $35.0 million net gain on the sale of real
estate, was $60.0 million, or $2.76 per diluted share, compared with $20.6
million, or $1.47 per diluted share, for 1997, an increase of 88%.
"Pacific Gulf's results for the year demonstrate the stable growth in our
key markets, the strength of our portfolio, and the validity of our strategy
to focus on the small to mid-size industrial property segment," said Glenn L.
Carpenter, chairman and chief executive officer of Pacific Gulf. "Moreover,
we are positioned to continue to generate internal growth without relying on
the acquisition of new properties. As a result, we can avoid the need to
raise equity with unfavorable terms that would, in turn, dilute shareholders.
"Over the next few years, we will continue to focus on our successful
strategy by redeploying non-core assets, such as family-style apartments, into
core assets primarily in the industrial sector," Mr. Carpenter said.
Industrial Portfolio Enjoys Strong Growth
The company's industrial portfolio generated net operating income of $16.5
million for the fourth quarter of 1998, compared with $9.2 million for the
same period in 1997, increasing 79%. For the year ended Dec. 31, 1998, the
industrial portfolio's net operating income was $59.5 million versus $28.2
million for the year ended 1997, an increase of 111%.
Pacific Gulf completed leases for 884,000 square feet at its stabilized
properties during the fourth quarter, generating an 8% increase in rental
rates over ending rates on expired leases. For the year ended Dec. 31, 1998,
the company completed leases for a total of 3.9 million square feet,
reflecting an increase of 12% in stabilized rents. In 1998, the industrial
portfolio generated 75% of the company's total net operating income for the
fourth quarter and 72% for the year, compared with 63% and 58% for 1997,
respectively, illustrating Pacific Gulf's ongoing commitment to the expansion
of its industrial portfolio by exploiting its management expertise in this
area.
Occupancy in the industrial portfolio was 95% as of Dec. 31, 1998 and Dec.
31, 1997. During 1998, Pacific Gulf added $186.7 million of industrial
product to its portfolio, which includes 18 properties encompassing
approximately 3.3 million square feet. Today the industrial portfolio totals
more than 15.5 million square feet, making Pacific Gulf a significant owner of
this property type in the West.
Multifamily Portfolio NOI Up
Same-store net operating income for the company's multifamily portfolio
was $3.7 million for the fourth quarter 1998, compared with $3.4 million for
the same period in 1997, an increase of 9%. This increase was due primarily
to an 8% increase in revenues.
For the year ended Dec. 31, 1998, same-store net operating income
increased 10% compared with the prior year due to a 7% increase in revenues.
Same-store results do not include the Washington portfolio which was sold in
the fourth quarter of 1998.
As of Dec. 31, 1998, the company's multifamily portfolio included 3,265
units, 1,438 of which make up eight rental communities dedicated to active
seniors age 55 and older. Overall occupancy for the multifamily portfolio as
of Dec. 31, 1998, was 95%, compared with 94% at Dec. 31, 1997.
Pacific Gulf Properties is a real estate investment trust that owns,
develops and manages a growing portfolio of industrial properties targeting
small to mid-size tenants in selected high-growth western markets. The
company's industrial portfolio includes 73 properties encompassing more than
15.5 million square feet of space. Pacific Gulf also maintains a smaller
multifamily portfolio that includes eight rental communities comprising almost
1,500 units designed for the burgeoning population of active seniors age 55
and older. The company is headquartered in Newport Beach, Calif.
Forward-looking statements and comments in this press release are made
pursuant to the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934. Such statements relating to, among other things,
events, conditions, prospects and financial trends that may affect the
company's future plans of operations, business strategy, growth of operations
and financial position are not guarantees of future performance and are
necessarily subject to risks and uncertainties, some of which are significant
in scope and nature, including without limitation, increased competition,
adverse economic trends, increasing interest rates and other factors.
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Dec. 31, 1998 Dec. 31, 1997
ASSETS
Real estate assets
Operating properties
Land $229,920 $185,789
Buildings 633,268 515,160
863,188 700,949
Accumulated depreciation (49,776) (39,148)
813,412 661,801
Properties under development, including land 39,926 32,107
853,338 693,908
Cash and cash equivalents 2,276 1,466
Accounts receivable 4,984 3,399
Other assets 14,529 13,698
$875,127 $712,471
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $403,845 $283,852
Accounts payable and accrued liabilities 15,828 9,009
Dividends payable 9,844 8,852
Convertible subordinated debentures 12,244 12,592
441,761 314,305
Minority partners' interest in
consolidated partnerships 17,812 9,326
Commitments and contingencies -- --
Shareholders' equity
Preferred shares, $.01 par value;
10,000,000 shares authorized; 2,763,116
Senior Cumulative Convertible Class A
shares outstanding at Dec. 31, 1998,
and Dec. 31, 1997, respectively 28 28
Preferred shares, $.01 par value; 300,000
shares authorized; Class C Junior
Participating Cumulative Preferred Stock;
no shares outstanding -- --
Common shares, $.01 par value; 100,000,000
shares authorized; 20,017,814 and 19,968,189
shares outstanding at Dec. 31, 1998 and
Dec. 31,1997, respectively 201 200
Outstanding restricted stock (1,203) (818)
Additional paid-in capital 412,093 411,187
Retained Earnings (distributions in
excess of net earnings) 4,435 (21,757)
415,554 388,840
$875,127 $712,471
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Dec. 31,
1998 1997
REVENUES
Rental income
Industrial properties $21,278 $11,560
Multifamily properties 8,942 8,757
30,220 20,317
EXPENSES
Rental property operating expenses
Industrial properties 4,767 2,348
Multifamily properties 3,461 3,333
8,228 5,681
Depreciation 5,635 3,935
Interest (including amortization of
debenture discount and financing costs
of $233 and $287, respectively) 6,793 4,716
General and administrative expenses 1,991 921
Minority partners' interest in earnings of
consolidated partnerships 291 58
22,938 15,311
INCOME BEFORE GAIN ON SALE OF REAL ESTATE 7,282 5,006
Gain on sale of real estate 28,865 5,705
NET INCOME 36,147 10,711
Less: Preferred dividend requirements 1,236 465
INCOME AVAILABLE TO COMMON SHAREHOLDERS $34,911 $10,246
Earnings per share
Basic $1.75 $0.62
Diluted $1.51 $0.60
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
1998 1997
REVENUES
Rental income
Industrial properties $76,271 $36,410
Multifamily properties 36,858 33,096
113,129 69,506
EXPENSES
Rental property operating expenses
Industrial properties 16,746 8,212
Multifamily properties 13,751 12,754
30,497 20,966
Depreciation 20,386 12,008
Interest (including amortization of
debenture discount and financing costs
of $1,129 and $827, respectively) 25,758 17,337
General and administrative expenses 5,903 3,159
Minority partners' interest in earnings
of consolidated partnerships 1,024 172
83,568 53,642
INCOME BEFORE GAIN ON SALE OF
REAL ESTATE 29,561 15,864
Gain on sale of real estate 35,292 5,594
NET INCOME 64,853 21,458
Less: Preferred dividend requirements 4,856 855
INCOME AVAILABLE TO COMMON SHAREHOLDERS $59,997 $20,603
Earnings per share
Basic $3.01 $1.51
Diluted $2.76 $1.47
FUNDS FROM OPERATIONS (a)
SUPPLEMENTAL TABLE
(in thousands, except share data)
For the Three Months Ended For the Years Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
Income Available to Common
Shareholders $34,911 $10,246 $59,997 $20,603
Gain on sale of real estate (28,865) (5,705) (35,292) (5,594)
Depreciation and amortization 5,635 3,935 20,386 12,008
Funds from Operations $11,681 $8,476 $45,091 $27,017
Weighted Average Common
Shares Outstanding (b) 19,954 16,420 19,939 13,686
Funds from Operations per
Common Share $0.59 $0.52 $ 2.26 $1.97
(a) Industry analysts generally consider funds from operations ("FFO") an
appropriate measure of performance of a real estate investment trust
("REIT"). Funds from operations present amounts available to common
shareholders and is defined as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses)
from debt restructuring and sales of property, plus depreciation and
amortization (excluding amortization of deferred financing costs and
depreciation of non real estate assets), and after adjustments for
unconsolidated partnerships and joint ventures and preferred dividend
requirements.
(b) 1997 calculations have been revised to conform to the current year
presentation, giving effect to the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 128.
PRO FORMA FUNDS FROM OPERATIONS (c)
Funds from Operations $11,681 $8,476 $45,091 $27,017
Preferred Dividend Requirements 1,236 465 4,856 855
Interest Expense on Debentures 258 255 1,041 1,100
Amortization of Debenture Discount
and Costs 30 35 130 141
Pro Forma Funds from Operations $13,205 $9,231 $51,118 $29,113
Weighted Average Common Shares
Outstanding 19,954 16,420 19,939 13,686
Additional Shares Assuming
Conversion
Other (d) 111 82 112 80
Preferred Stock 2,763 1,095 2,763 507
Debentures 660 682 660 682
Pro Forma Weighted Average
Outstanding Shares 23,488 18,279 23,474 14,955
Pro Forma Funds from Operations
per Common Share $0.56 $0.51 $2.18 $1.95
(c) Pro Forma Funds from Operations Calculations -- Assumes the conversion
of Convertible Subordinated Debentures and Preferred Stock and
excludes the conversion of limited partnership units (consistent with
the Company's previous calculation methodology).
(d) Represents non-vested restricted stock and options as converted.
SOURCE Pacific Gulf Properties Inc.
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CONTACT:
Cindy L. Smith, Investor Relations of Pacific
Gulf Properties, 949-223-5000; or General Information, Virginia
St. John-Needham, 310-442-0599, Analysts, Nan Teele,
415-986-1591, or Media, Stephen Moore, 310-442-0599, all of The
Financial Relations Board
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