WASHINGTON, April 29 /PRNewswire-FirstCall/ -- CarrAmerica Realty
Corporation (NYSE: CRE) today reported first quarter 2004 diluted earnings per
share of $0.21 on net income of $15.2 million, compared to diluted earnings
per share of $0.23 on net income of $19.0 million for the first quarter of
2003.
(Logo: http://www.newscom.com/cgi-bin/prnh/19990820/CRELOGO )
For the first quarter of 2004, diluted funds from operations available to
common shareholders (Diluted FFO) were $48.4 million or $0.81 per share
compared to $48.4 million or $0.84 per share for the first quarter of 2003.
As a result of a clarification of an accounting standard by the Securities &
Exchange Commission (SEC), Diluted FFO is now reduced by original issuance
costs associated with the redemption of preferred stock. Excluding the impact
of preferred stock redemptions, Diluted FFO per share for the first quarter of
2003 would have been $0.87. There were no preferred redemptions in the first
quarter of 2004.
Portfolio Report
CarrAmerica President and COO, Philip L. Hawkins, said, "As the national
economy continues to gain momentum, demand for commercial real estate is
slowly increasing with accompanying decreasing vacancy rates and stabilization
of rents in most of our markets."
Occupancy for stabilized properties was 87.4% at March 31, 2004, down from
87.8% at December 31, 2003 and down from 90.4% at March 31, 2003. Same store
property operating income for the first quarter of 2004 decreased 8.7% on a
GAAP basis over the same period in 2003. Adjusting for termination fees, same
store property operating income for the first quarter of 2004 decreased by
7.2%. The average occupancy rate for same store properties was 87.2% in the
first quarter of 2004 as compared to 91.3% for first quarter 2003.
For the first quarter, rental rates decreased 15% on average on the leases
executed during the quarter. Despite continued soft demand, CarrAmerica
leased 641,000 square feet in the first quarter including an 83,000 square
foot lease with Avaya in Seattle and a 34,392 square foot lease with
Peoplesoft in Dallas.
Acquisitions
There were no new building acquisitions completed during the first quarter
of 2004. Subsequent to the end of the first quarter, we entered into a
contract to purchase a 206,000 square foot Class A building in downtown
Washington, D.C. for $84.0 million in cash. The acquisition is expected to
close in the third quarter subject to due diligence and other customary
contingencies and closing conditions, and is expected to have a year-one GAAP
return of approximately 7.6%. The building is currently 99% leased. The
building has one law firm as its primary tenant whose lease expires in 2013.
Dispositions
During the first quarter, CarrAmerica closed on the sale of its Tower of
the Hills property in Austin, Texas for net proceeds of approximately $10.5
million. The Company recorded an impairment loss in the fourth quarter of
2003 of $3.0 million associated with this sale.
In the fourth quarter of 2003, the Company also announced plans to market
its Atlanta, Georgia and Portland, Oregon office portfolios for sale. The
Company began marketing the properties in the first quarter of 2004. A buyer
for the Atlanta properties has been selected. We are currently negotiating a
purchase and sale agreement with the prospective buyer, which we expect will
contain customary contingencies and closing conditions. The pricing of the
proposed sale is consistent with previous guidance levels and we anticipate
that the sale will be consummated in the third or fourth quarter of 2004. The
Portland portfolio is still in the marketing process.
Development Update
CarrAmerica owns a 30% interest in a 476,000 square foot office
development, Terrell Place, in Washington, D.C. The total cost of this
project, which was substantially completed in the fourth quarter of 2003, is
expected to be $159.0 million, of which $135.1 million had been invested as of
March 31, 2004. CarrAmerica's share of the total project costs for this
development is expected to be approximately $47.7 million, of which $40.5
million had been expended as of March 31, 2004. This project is currently
54.1% leased or committed, including a 243,791 square foot lease with the law
firm of Venable LLP. The stabilized year-one GAAP return on CarrAmerica's
invested capital (exclusive of fees) is expected to be approximately 10.5%.
Construction commenced in the first quarter of 2004 on The Atlantic
Building, a 290,000 square foot office and retail project in Washington, D.C.
for which CarrAmerica is providing development management and leasing and
property management services as well as $21.9 million in mezzanine financing.
The project is 41% leased to the law firm of Alston & Bird LLP.
CarrAmerica also commenced construction on a build-to-suit, 124,000 square
foot office building in Irving, Texas expected to cost approximately $15.9
million, which will be owned by a joint venture in which we own a 35%
interest. This building is 100% leased to Washington Mutual, Inc. with an
expected stabilized year-one GAAP return of 8.9%.
Corporate Restructuring
In December 2003, CarrAmerica's Board of Directors approved a plan to
restructure the manner in which we hold our assets, by converting to what is
commonly referred to as an umbrella partnership REIT, or UPREIT structure. To
effect the UPREIT restructuring, we formed a new wholly-owned partnership,
CarrAmerica Realty Operating Partnership, L.P. (OP), to which CarrAmerica
Realty Corporation expects to contribute substantially all of its assets in
exchange for units of common and preferred partnership interest in the OP and
the assumption by the OP of substantially all of CarrAmerica Realty
Corporation's liabilities, including the assumption of the obligations under
our unsecured credit facility and our senior unsecured notes. We are
currently seeking, and the UPREIT restructuring is subject to, the necessary
consents from our lenders, joint venture partners and others to undertake the
UPREIT restructuring. There can be no assurance that such consents will be
obtained or that the UPREIT restructuring will be consummated.
After the UPREIT restructuring, substantially all of our business will be
conducted through the OP and our primary asset will be our interest in the OP.
We undertook the UPREIT restructuring to enable us to better compete with
other office REITs, many of which are structured as UPREITs, for the
acquisition of properties from tax-motivated sellers. As an UPREIT, we
anticipate that the OP will be able to issue units of limited partnership
interest in the OP to tax-motivated sellers who contribute properties to the
OP, thereby enabling those sellers to realize certain tax benefits that would
be unavailable if we purchased properties directly for cash. We have not
currently identified and we are not currently pursuing any material
acquisitions that would be structured as OP contributions or merger
opportunities.
Capital Markets Transactions
In the first quarter, the Company issued $225.0 million principal amount
of senior unsecured notes that bear interest at 3.625% and mature April 1,
2009. In conjunction with the issuance of these notes, the Company entered
into a $100.0 million interest rate swap agreement whereby we receive interest
at a fixed rate of 3.625% and pay interest at a variable rate of six month
LIBOR in arrears plus 0.2675%. In addition, in the first quarter, the Company
repaid $17.7 million in secured indebtedness.
CarrAmerica Earnings Estimates
On Friday, April 30, CarrAmerica management will discuss earnings guidance
for 2004. Based on management's view of current market conditions and certain
assumptions with regard to rental rates and other projections, an expected
range of diluted earnings per share of $0.53 - $0.73 and Diluted FFO per share
of $3.00 - $3.20 for 2004 will be discussed. Second quarter 2004 diluted
earnings per share and Diluted FFO per share are projected to be $0.14 - $0.18
and $0.74 - $0.78, respectively. Projections for the second quarter and full
year 2004 exclude any potential gains, losses or asset impairments associated
with property dispositions currently contemplated or otherwise. The
projections for 2004 are based in part on the following assumptions:
2004
Average Office Portfolio Occupancy 87% - 89%
Real Estate Service Revenue $20 - $23 million
General and Administrative Expense $39 - $41 million
The 2004 estimate assumes that any proceeds from property dispositions
will be reinvested during 2004. By definition, Diluted FFO excludes gains or
losses on the disposition of properties.
Impact of Clarification of Accounting Standard
In the third quarter of 2003, the SEC issued a clarification of Emerging
Issues Task Force Topic D-42 which provides that in calculating earnings per
share (and therefore Diluted FFO per share), net earnings available to common
shareholders (or Diluted FFO) must be reduced by the original issuance costs
associated with redeemed or repurchased preferred stock. Our first quarter
2003 results have been previously restated to reflect the retroactive
application of this clarification.
CarrAmerica Announces First Quarter Dividend
The Board of Directors of CarrAmerica today declared a first quarter
dividend for its common stock of $0.50 per share. The dividend will be
payable to shareholders of record as of the close of business May 18, 2004.
CarrAmerica's common stock will begin trading ex-dividend on May 14, 2004 and
the dividend will be paid on June 1, 2004.
The company also declared a dividend on its Series E preferred stock. The
Series E Cumulative Redeemable preferred stock dividend is $.46875 per share.
The Series E preferred stock dividends are payable to shareholders of record
as of the close of business on May 18, 2004. The preferred stock will begin
trading ex-dividend on May 14, 2004 and the dividends will be paid on June 1,
2004.
Corporate Governance
The shareholders of CarrAmerica today approved the election of seven
directors. The shareholders did not approve a shareholder proposal requesting
term limits for directors.
Today's Annual meeting was the last for retiring Board Member and founder,
Oliver T. Carr, Jr., who has served on the Board since the company's public
launch in 1993. The Company and its employees extend their gratitude for the
extraordinary leadership and vision shared by Mr. Carr over the past 42 years
and wish him continued success in his other business ventures.
CarrAmerica First Quarter Webcast and Conference Call
CarrAmerica will conduct a conference call to discuss 2004 first quarter
results on Friday, April 30, 2004 at 12:00 noon, ET. A live webcast of the
call will be available through a link at CarrAmerica's web site,
http://www.carramerica.com. The phone number for the conference call is
1-800-818-5264 for U.S. participants and 1-913-981-4910 for international
participants. The call is open to all interested persons. A taped replay of
the conference call can be accessed from 3:00 PM on April 30, 2004 until
midnight May 6, 2004, by dialing 1-888-203-1112 for U.S. callers and
1-719-457-0820 for international callers, passcode 510864. A copy of
supplemental material on the company's first quarter operations is available
on the company's web site, http://www.carramerica.com, or by request from:
Stephen Walsh
CarrAmerica Realty Corporation
1850 K Street, NW, Suite 500
Washington, D.C. 20006
(Telephone) 202-729-1764
E-mail: stephen.walsh@carramerica.com
CarrAmerica owns, develops and operates office properties in 13 markets
throughout the United States. The company has become one of America's leading
office workplace companies by meeting the rapidly changing needs of its
customers with superior service, a large portfolio of quality office
properties and extraordinary development capabilities. Currently, CarrAmerica
and its affiliates own, directly or through joint ventures, interests in a
portfolio of 295 operating office properties. CarrAmerica's markets include
Atlanta, Austin, Chicago, Dallas, Denver, Los Angeles, Orange County,
Portland, Salt Lake City, San Diego, San Francisco Bay Area, Seattle and
metropolitan Washington, D.C. For additional information on CarrAmerica,
including space availability, visit our web site at http://www.carramerica.com.
Estimates of Diluted FFO and earnings per share, and certain other
statements in this release and the accompanying summary financial information,
including statements regarding management's expectations about, among other
things, operating performance and financial condition, may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance, dividends, achievements or
transactions of the company and its affiliates or industry results to be
materially different from any future results, performance, achievements or
transactions expressed or implied by such forward-looking statements. Such
factors include, among others, the following: national and local economic,
business and real estate conditions that will, among other things, affect
demand for office properties and our ability to lease vacant space at
favorable rental rates, our ability to obtain debt or equity financing if and
when needed on favorable terms, or at all, possible delays or the inability to
consummate, or higher than expected costs associated with, our proposed UPREIT
conversion, possible charges or payments resulting from our guarantee of
certain leases of HQ Global Workplaces, Inc., the impact of future
acquisitions or dispositions not currently contemplated or expected, the
ability of the general economy to recover timely from the current economic
downturn, availability and creditworthiness of tenants, the availability of
financing for both tenants and the company, adverse changes in the real estate
markets including, among other things, competition with other companies, risks
of real estate acquisition and development (including the failure of pending
acquisitions or dispositions to close in a timely manner, on current terms, or
at all, and pending developments to be completed on time and within budget),
actions, strategies and performance of affiliates that the company may not
control or companies in which the company has made investments, our ability to
maintain our status as a REIT for federal income tax purposes, governmental
actions and initiatives, the ability to obtain insurance at a reasonable cost
and environmental/safety requirements. For a further discussion of these and
other factors that could impact the company's future results, performance,
achievements or transactions, see the documents filed by the company from time
to time with the Securities and Exchange Commission, and in particular the
section titled, "The Company - Risk Factors" in the company's Annual Report on
Form 10-K.
CARRAMERICA REALTY CORPORATION
Consolidated Balance Sheets
March 31, December 31,
(In thousands) 2004 2003
(Unaudited)
Assets
Rental property
Land $ 690,262 $ 690,410
Buildings 1,975,762 1,974,347
Tenant improvements 430,636 420,533
Furniture, fixtures and equipment 49,846 48,216
3,146,506 3,133,506
Less: Accumulated depreciation (722,159) (692,901)
Net rental property 2,424,347 2,440,605
Land held for future development
or sale 41,356 41,284
Assets related to properties
held for sale - 10,626
Cash and cash equivalents 5,756 4,299
Restricted deposits 3,082 2,549
Accounts and notes receivable, net 18,980 17,829
Investments in unconsolidated
entities 138,337 137,604
Accrued straight-line rents 86,800 84,552
Tenant leasing costs, net 50,250 51,547
Prepaid expenses and other
assets, net 47,662 45,123
$ 2,816,570 $ 2,836,018
Liabilities and Stockholders' Equity
Liabilities:
Mortgages and notes payable, net $ 1,704,377 $ 1,727,648
Accounts payable and accrued
expenses 88,224 95,586
Rent received in advance and
security deposits 30,166 34,757
1,822,767 1,857,991
Minority interest 65,459 70,456
Stockholders' equity:
Preferred stock 201,250 201,250
Common stock 543 529
Additional paid in capital 1,012,560 976,644
Cumulative dividends in excess
of net income (286,009) (270,852)
928,344 907,571
Commitments and contingencies
$ 2,816,570 $ 2,836,018
CARRAMERICA REALTY CORPORATION
Consolidated Statements of Operations
Three Months Ended
March 31,
(In thousands, except per share
amounts) 2004 2003
(Unaudited)
Revenues:
Rental income (1):
Minimum base rent $ 104,042 $ 103,691
Recoveries from tenants 13,439 16,052
Parking and other tenant charges 4,105 5,988
Total rental revenue 121,586 125,731
Real estate service revenue 5,466 5,555
Total operating revenues 127,052 131,286
Operating expenses:
Property expenses:
Operating expenses 31,198 31,680
Real estate taxes 11,465 11,818
General and administrative 10,272 10,286
Depreciation and amortization 33,446 31,251
Total operating expenses 86,381 85,035
Real estate operating income 40,671 46,251
Other (expense) income:
Interest expense (26,341) (25,873)
Other income 694 98
Equity in earnings of
unconsolidated entities 1,998 1,327
Total other expense (23,649) (24,448)
Income from continuing
operations before income taxes,
minority interest and loss on
sale of properties 17,022 21,803
Income taxes (122) (252)
Minority interest (2,026) (3,076)
Loss on sale of properties (10) (277)
Income from continuing
operations 14,864 18,198
Discontinued operations - Net
operations of sold property 300 773
Discontinued operations - Gain on
sale of properties 66 -
Net income 15,230 18,971
Less: Dividends on preferred
and restricted stock and
issuance costs of redeemed
preferred stock (3,940) (7,042)
Net income available to
common shareholders $ 11,290 $ 11,929
Basic net income per share:
Continuing operations $ 0.20 $ 0.22
Discontinued operations 0.01 0.01
Net income $ 0.21 $ 0.23
Diluted net income per share:
Continuing operations $ 0.20 $ 0.22
Discontinued operations 0.01 0.01
Net income $ 0.21 $ 0.23
NOTE: (1) Rental income includes $2,236 and $2,153 of accrued straight
line rents for the three months period ended March 31, 2004 and
2003, respectively.
CARRAMERICA REALTY CORPORATION
Consolidated Statements of Cash Flow
Three Months Ended
(Unaudited and in thousands) March 31,
2004 2003
Cash flow from operating activities:
Net income $ 15,230 $ 18,971
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 33,446 32,010
Minority interest 2,026 3,076
Equity in earnings of
unconsolidated entities (1,998) (1,327)
Loss sale of properties 10 277
Gain on sale of discontinued
operations (66) -
Gain on sale of residential
property (225) -
Provision for uncollectible
accounts 80 1,871
Stock based compensation 905 1,171
Other 1,497 (188)
Change in assets and liabilities:
Decrease in accounts receivable 705 2,650
Increase in accrued straight-line
rents (2,236) (2,153)
Additions to tenant leasing costs (2,276) (2,704)
Increase in prepaid expenses and
other assets (1,213) (1,174)
Decrease in accounts payable and
accrued expenses (8,083) (16,915)
(Decrease) increase in rent
received in advance and security
deposits (4,471) 1,599
Total adjustments 18,101 18,193
Net cash provided by operating
activities 33,331 37,164
Cash flows from investing activities:
Acquisition and development of
rental property (1,592) (2,645)
Additions to tenant improvements (10,040) (5,327)
Additions to land held for
development or sale (72) (520)
Additions to construction in
progress (1,704) (3,777)
Issuance of notes receivable (2,081) (654)
Distributions from unconsolidated
entities 1,383 835
Investments in unconsolidated
entities (178) (544)
Acquisition of minority interest (1,079) (220)
Decrease in restricted deposits (533) 2,545
Proceeds from sale of residential
property 2,060 -
Proceeds from sales of properties 10,512 162
Net cash used by investing
activities (3,324) (10,145)
Cash flows from financing activities:
Repurchase of common stock - (7,858)
Repurchase of preferred stock - (53,953)
Exercises of stock options 31,589 1,381
Proceeds from the issuance of
unsecured notes 222,892 -
Net (repayments) borrowings on
unsecured credit facility (228,000) 96,000
Net repayments of mortgages payable (21,785) (28,045)
Dividends and distributions to
minority interests (33,246) (34,474)
Net cash used by financing
activities (28,550) (26,949)
Increase in unrestricted cash
and cash equivalents 1,457 70
Cash and cash equivalents, beginning
of the period 4,299 5,238
Cash and cash equivalents, end of the
period $ 5,756 $ 5,308
Supplemental disclosure of cash flow
information:
Cash paid for interest (net of
capitalized interest of $176 and
$424 for the three months ended March
31, 2004 and 2003, respectively) $ 38,763 $ 37,926
Income tax refunds, net $ (23) $ (59)
CARRAMERICA REALTY CORPORATION
Funds From Operations
Funds from operations ("FFO") and funds available for distribution ("FAD")
are used as measures of operating performance for real estate companies. We
provide FFO and FAD as a supplement to net income calculated in accordance
with accounting principles generally accepted in the United States of America
("GAAP"). Although FFO and FAD are widely used measures of operating
performance for equity REITs, they do not represent net income calculated in
accordance with GAAP. As such, they should not be considered an alternative to
net income as an indication of our operating performance. In addition, FFO or
FAD does not represent cash generated from operating activities in accordance
with GAAP, nor do they represent cash available to pay distributions and
should not be considered as an alternative to cash flow from operating
activities, determined in accordance with GAAP, as a measure of our liquidity,
nor is it indicative of funds available to fund our cash needs, including our
ability to make cash distributions. The National Association of Real Estate
Investment Trusts (NAREIT) defines FFO as net income (computed in accordance
GAAP), excluding gains (losses) on sales of property, plus depreciation and
amortization of assets uniquely significant to the real estate industry and
after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are calculated
to reflect FFO on the same basis.
We believe that FFO and FAD are helpful to investors as a measure of our
performance because they exclude various items included in net income that do
not relate to or are not indicative of our operating performance, such as
gains and losses on sales of real estate and real estate related depreciation
and amortization, which can make periodic analyses of operating performance
more difficult to compare. FAD deducts various capital items and non-cash
revenue from diluted FFO available to common shareholders. Our management
believes, however that FFO and FAD, by excluding such items, which can vary
among owners of identical assets in similar condition based on historical cost
accounting and useful life estimates, can help compare the operating
performance of a company's real estate between periods or as compared to
different companies. Our FFO or FAD may not be comparable to FFO or FAD
reported by other REITs. These REITs may not define FFO in accordance with
the current NAREIT definition or may interpret the current NAREIT definition
differently than us. They may include or exclude items which we include or
exclude from FAD.
(Unaudited and in thousands) Three Months Ended
March 31,
2004 2003
Net income $ 15,230 $ 18,971
Adjustments: Minority interest 2,026 3,076
FFO allocable to the
minority Unitholders (3,558) (4,505)
Depreciation and amortization
- REIT properties 31,756 29,982
Depreciation and amortization
- Equity properties 3,481 2,938
Depreciation and amortization
- Discontinued operations - 423
Minority interests' (non
Unitholders) share of
depreciation, amortization
and net income (273) (280)
(Gain) loss on sale of
properties (56) 277
FFO as defined by NAREIT(1) 48,606 50,882
Less: Preferred dividends, dividends
on unvested restricted stock
and preferred stock redemption
premium(2) (3,799) (7,005)
FFO attributable to common shareholders 44,807 43,877
FFO allocable to the minority Unitholders 3,558 4,505
Diluted FFO available to common shareholders(3) $ 48,365 $ 48,382
Less: Lease commissions (2,276) (2,704)
Tenant improvements (10,040) (5,327)
Building capital additions (1,408) (2,253)
Straight line rent (2,236) (2,153)
Funds available for distribution to
common shareholders(4) $ 32,405 $ 35,945
(1)FFO as defined by NAREIT, as amended by NAREIT during the third
quarter of 2003, includes land and building impairments.
(2)On July 31, 2003, the SEC issued a clarification of EITF Topic D-42
which requires us to subtract original issuance costs associated with
redeemed preferred securities from net incomeavailable to common
shareholders (and therefore, FFO available to common shareholders).
This clarification is required to be applied retroactively. These
amounts include $1,699 for the three months ended March. 31, 2003 of
original preferred stock issuance costs associated with redemptions.
(3)Diluted funds from operations is computed as FFO attributable to
common shareholders adjusted to reflect all operating partnership
units as if they were converted to common shares for any period in
which they are not antidilutive.
(4)Adjustments to arrive at FAD do not include amounts associated with
properties in unconsolidated entities.
CARRAMERICA REALTY CORPORATION
Funds From Operations (con't)
(Unaudited and in thousands, except
per share amounts) Three Months Ended
March 31,
2004 2003
Diluted net income per common share $ 0.21 $ 0.23
Add: Depreciation and amortization 0.59 0.57
Loss on sale of properties - -
Minority interest adjustment (0.03) (0.03)
Adjustment for share difference 0.04 0.07
Diluted funds from operations
available to common shareholders $ 0.81 $ 0.84
Diluted funds from operations
available to common shareholders,
excluding
Preferred stock issuance costs - 0.03
$ 0.81 $ 0.87
Diluted net income per common share,
excluding
Preferred stock issuance costs - 0.03
$ 0.21 $ 0.26
Weighted average common shares
outstanding:
Diluted net income 53,794 51,936
Diluted funds from operations 59,355 57,600
CARRAMERICA REALTY CORPORATION
Funds From Operations (con't)
(Unaudited and in thousands,
except per share amounts) Projected Projected
Three Months Twelve Months
Ended Ended
June 30, 2004 December 31, 2004
Projected diluted net income
per common share $ 0.14 - 0.18 $ 0.53 - 0.73
Add: Projected depreciation
and amortization 0.58 2.35
Projected minority interest 0.03 0.12
Projected adjustment for
share difference (0.01) 0.00
Projected diluted funds from
operations per common share $ 0.74 - 0.78 $ 3.00 - 3.20
Projected weighted average common
shares outstanding:
Projected diluted net income 54,400 60,000
Projected diluted funds
from operations 60,000 60,000
SOURCE CarrAmerica Realty Corporation
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Related links:
http://www.carramerica.com
Photo Notes:
NewsCom:
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PRN Photo Desk, 888-776-6555 or 212-782-2840
CONTACT:
Media: Karen Widmayer, +1-202-729-1789,
karen.widmayer@carramerica.com, or Analysts: Stephen Walsh,
+1-202-729-1764, stephen.walsh@carramerica.com, both of
CarrAmerica Realty Corporation
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