WASHINGTON, May 1 /PRNewswire-FirstCall/ -- CarrAmerica Realty
Corporation (NYSE: CRE) today reported first quarter 2006 diluted earnings
per share of $0.23 on net income of $17.5 million, compared to diluted
earnings per share of $1.54 on net income of $95.0 million for the first
quarter of 2005. First quarter 2005 net income included gains from the
disposition of real estate of $88.1 million ($1.46 per diluted share)
compared to gains from the disposition of properties in the first quarter
of 2006 of $17.6 million ($0.30 per diluted share).
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For the first quarter of 2006, diluted funds from operations available
to common shareholders (Diluted FFO) were $35.9 million or $0.61 per share
compared to $41.4 million or $0.69 per share for the first quarter of 2005.
The gains associated with the disposition of real estate had no impact on
reported Diluted FFO or Diluted FFO per share.
Included in our operating results for the first quarter of 2006 are
$1.7 million of transaction costs for the merger transaction described
below.
Proposed Merger with an Affiliate of The Blackstone Group
On March 5, 2006, CarrAmerica, along with its subsidiaries, CarrAmerica
Realty Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"), Carr Realty Holdings, L.P., a Delaware limited
partnership ("CRH"), and CarrAmerica Realty, L.P., a Delaware limited
partnership ("CAR"), entered into an Agreement and Plan of Merger with
certain affiliates of The Blackstone Group ("Blackstone") pursuant to which
two of the affiliates of Blackstone will merge with and into CRH and CAR,
respectively, and CarrAmerica will merge with and into another affiliate of
Blackstone. In the CarrAmerica merger, holders of CarrAmerica's common
stock (other than CarrAmerica, its subsidiaries and the Blackstone
affiliate with which CarrAmerica would merge) will receive $44.75 in cash,
without interest, for each share of common stock issued and outstanding
immediately prior to the effective time of the merger, and holders of
CarrAmerica's 7.5% Series E cumulative redeemable preferred stock will
receive one share of 7.5% Series E cumulative redeemable preferred stock of
the surviving corporation of the CarrAmerica merger on substantially the
same terms as CarrAmerica's existing Series E preferred stock, for each
share of Series E preferred stock issued and outstanding immediately prior
to the effective time of the merger. As promptly as practicable following
the merger effective time, the surviving corporation will be liquidated
into Nantucket Parent LLC, a Blackstone affiliate. In the liquidation,
shares of the surviving corporation's Series E preferred stock will be
canceled and the holders thereof will receive a cash distribution from the
surviving corporation of $25.00 per share plus any accrued and unpaid
dividends.
In addition, in connection with the mergers of CRH and CAR, limited
partners of those partnerships will receive $44.75 in cash, without
interest, for each unit of partnership interest that they own in CRH or
CAR, or in lieu of such cash consideration, limited partners that satisfy
certain criteria may elect to receive newly issued 6% Class A preferred
units in the applicable surviving partnership on a one-for-one basis.
The consummation of the mergers is subject to customary closing
conditions including, among other things, the approval of the CarrAmerica
merger by the affirmative vote of holders of at least two-thirds of
CarrAmerica's outstanding common stock. The closing of the mergers is not
subject to a financing condition.
Portfolio Report
Occupancy for consolidated stabilized properties was 90.5% at March 31,
2006, up from 89.4% at December 31, 2005 and up from 88.6% at March 31,
2005. Same store property operating income for the first quarter of 2006
decreased 2.7% on a GAAP basis over the same period in 2005 due primarily
to higher property operating expenses. The average occupancy rate for same
store properties was 89.8% in the first quarter, compared to 87.7% for the
first quarter 2005.
For the first quarter, rental rates decreased 5.0% on average on the
leases executed during the quarter compared to expiring leases. The Company
leased 648,000 square feet of office space in the first quarter of 2006.
Acquisitions
In the first quarter of 2006, CarrAmerica acquired 7000 West Lantana,
comprised of two office buildings totaling 133,817 square feet in Austin,
Texas, for $22.3 million. The property is 100% leased and is expected to
provide a year one GAAP yield of 8.8%.
Also in the first quarter, CarrAmerica closed on the acquisition of the
Casey Family Building, a 77,759-square-foot office building, and adjacent
land parcels expected to support the additional development of
approximately 600,000 square feet of office and retail space in Seattle,
Washington, for $52.0 million.
The Casey Family building, which was acquired for $22.0 million, is
100% leased, and is expected to provide a year one GAAP and stabilized GAAP
return of approximately 7.6%. The development of the adjacent land parcels
is expected to occur over a three to five year period, and to provide a
stabilized GAAP return approximately 100-200 basis points higher than that
of the Casey Family Building.
Also in the first quarter, CarrAmerica closed on the acquisition of
3553 North First Street in San Jose, California, an 85,585-square-foot
office building, for $10.3 million. The property is expected to provide a
year one GAAP return of approximately 2.2%, and a stabilized GAAP return of
approximately 9.3%. These expected returns reflect a four-month leaseback
to NetIQ and CarrAmerica's estimates as to the leasing of the building
thereafter.
In early April, a joint venture in which CarrAmerica is a 20% partner
acquired Sherry Lane Place, a 286,426 square foot, 20-story, Class A office
tower in the Preston Center submarket of Dallas, Texas for $62.5 million.
CarrAmerica expects to receive a year one unleveraged GAAP return on its
investment of 7.1%.
Dispositions
In the first quarter of 2006, CarrAmerica sold a 258,058 square foot
building in Reston, Virginia for $51.9 million and recognized a gain of
approximately $17.5 million. The building was approximately 17% leased at
the time of sale.
Development
During the first quarter, CarrAmerica commenced construction of a
79,000 square foot office building in Salt Lake City. Total project costs
are expected to be $11.8 million and the project is expected to produce a
year one stabilized GAAP return of 9.3%.
Also during the first quarter, CarrAmerica commenced construction on a
40,000 square foot office building in San Diego, California. Total project
costs are expected to be $14.5 million and a year one GAAP return of 9.3%.
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 19, 2006.
CarrAmerica's common stock will begin trading ex-dividend on May 17, 2006
and the dividend will be paid on May 31, 2006. 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 19, 2006. The preferred stock will begin trading
ex-dividend on May 17, 2006 and the dividends will be paid on May 31, 2006.
Under the terms of the merger agreement, pending the merger, CarrAmerica
may not declare or pay any additional common stock dividends in the future
without the prior written approval of Nantucket Parent LLC, an affiliate of
The Blackstone Group.
Solely for purposes of satisfying U.S. federal income tax withholding
obligations under section 1.1445-8 of the federal income tax regulations
with respect to payments to certain affected non-U.S. stockholders, the
Company will characterize a portion of each of the first quarter dividends
described above paid to certain affected non-U.S. stockholders as a capital
gain dividend to reflect the taxable composition of its aggregate dividend
payment to stockholders in 2005.
Accordingly, the Company will characterize as a capital gain dividend
$0.357016 per share of the dividend for its common stock and $0.334702 per
share of the dividend for its Series E preferred stock. This
characterization is relevant only for purposes of withholding on payments
to certain affected foreign stockholders and has no effects on U.S.
stockholders.
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 is not providing earnings guidance for the second quarter
nor is it hosting a conference call to discuss its first quarter results
due to its proposed merger with and into an affiliate of The Blackstone
Group.
Additional Information About the Merger and Where to Find It
This communication is being made in respect of the proposed merger
transaction involving CarrAmerica and affiliates of The Blackstone Group.
In connection with the transaction, CarrAmerica will file a definitive
proxy statement with the SEC. Stockholders are urged to read the definitive
proxy statement carefully and in its entirety when it becomes available
because it will contain important information about the proposed
transaction.
The final proxy statement will be mailed to CarrAmerica stockholders.
In addition, the proxy statement and other documents will be available free
of charge at the SEC's Internet Web site, http://www.sec.gov. When
available, the definitive proxy statement and other pertinent documents
also may be obtained for free at CarrAmerica's Web site,
http://www.carramerica.com, or by contacting Stephen Walsh, Senior Vice
President, CarrAmerica, telephone (202) 729-1764.
CarrAmerica and its directors and officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies in respect to the proposed transactions.
Information regarding CarrAmerica's directors and executive officers is
detailed in its proxy statements and annual reports on Form 10-K,
previously filed with the SEC, and the definitive proxy statement relating
to the proposed transactions, when it becomes available.
About CarrAmerica
CarrAmerica owns, develops and operates office properties in 12 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 287 operating office properties, totaling
approximately 26.4 million square feet. CarrAmerica's markets include
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, including management's expectations about,
among other things, operating performance and financial conditions, 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: the satisfaction of the conditions to consummate the proposed
mergers with affiliates of The Blackstone Group, including the receipt of
the required stockholder approval; the actual terms of certain financings
that will be obtained for the proposed mergers; the occurrence of any
event, change or other circumstances that could give rise to the
termination of the merger agreement; the outcome of the legal proceedings
that have been instituted against CarrAmerica following the announcement of
the proposed mergers; the failure of the proposed mergers to close for any
other reason; the amount of the costs, fees, expenses and charges related
to the proposed mergers; the substantial indebtedness following
consummation of the proposed mergers; national and local economic, business
and real estate conditions that will, among other things, affect demand for
office space, the extent, strength and duration of any economic recovery,
including the effect on demand for office space and the creation of new
office development, availability and creditworthiness of tenants, the level
of lease rents, and the availability of financing for both tenants and us;
adverse changes in real estate markets, including, among other things, the
extent of tenant bankruptcies, financial difficulties and defaults, the
extent of future demand for office space in our core markets and barriers
to entry into markets which we may seek to enter in the future, the extent
of the decreases in rental rates, our ability to identify and consummate
attractive acquisitions on favorable terms, our ability to consummate any
planned dispositions in a timely manner on acceptable terms, and changes in
operating costs, including real estate taxes, utilities, insurance and
security costs; actions, strategies and performance of affiliates that we
may not control or companies in which we have made investments; ability to
obtain insurance at a reasonable cost; ability to maintain our status as a
REIT for federal and state income tax purposes; ability to raise capital;
effect of any terrorist activity or other heightened geopolitical crisis;
governmental actions and initiatives; 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 or Form
10-K for the fiscal year ended December 31, 2005.
CARRAMERICA REALTY CORPORATION
Consolidated Balance Sheets
March 31, December 31,
(In thousands) 2006 2005
Assets
Rental property:
Land $779,377 $761,901
Buildings 2,079,634 2,041,465
Tenant improvements 489,414 469,633
Furniture, fixtures and equipment 51,861 49,007
3,400,286 3,322,006
Less: Accumulated depreciation (787,217) (755,647)
Net rental property 2,613,069 2,566,359
Land held for future development or sale 56,183 40,141
Construction in progress 19,188 3,681
Assets held for sale - 33,840
Cash and cash equivalents - 15,811
Restricted deposits 2,717 4,472
Accounts and notes receivable, net 59,862 61,358
Investments in unconsolidated entities 128,869 130,384
Accrued straight-line rents 95,223 88,162
Tenant leasing costs, net 64,164 60,922
Intangible assets, net 129,562 124,554
Prepaid expenses and other assets 19,993 22,488
$3,188,830 $3,152,172
Liabilities and Stockholders' Equity
Liabilities:
Mortgages and notes payable, net $1,929,895 $1,875,706
Accounts payable and accrued
expenses 97,751 110,953
Rent received in advance and
security deposits 38,967 32,534
2,066,613 2,019,193
Minority interest 58,692 58,470
Stockholders' equity:
Preferred stock 201,250 201,250
Common stock 590 587
Additional paid-in capital 1,157,741 1,153,045
Cumulative dividends in excess of
net income (296,431) (280,708)
Accumulated other comprehensive
income 375 335
1,063,525 1,074,509
Commitments and contingencies
$3,188,830 $3,152,172
CARRAMERICA REALTY CORPORATION
Consolidated Statements of Operations
Three Months Ended
March 31,
(In thousands, except per share amounts) 2006 2005
(Unaudited)
Revenues:
Rental income (1):
Minimum base rent $98,248 $96,922
Recoveries from tenants 15,910 14,739
Parking and other tenant charges 3,122 3,580
Total rental revenue 117,280 115,241
Real estate service revenue 5,864 5,573
Total operating revenues 123,144 120,814
Operating expenses:
Property expenses:
Operating expenses 31,585 29,189
Real estate taxes 10,639 10,685
General and administrative 12,690 10,749
Depreciation and amortization 37,101 32,517
Total operating expenses 92,015 83,140
Real estate operating income 31,129 37,674
Other (expense) income:
Interest expense (30,669) (29,199)
Equity in earnings of
unconsolidated entities 1,132 1,070
Interest and other income 1,877 1,450
Net other expense (27,660) (26,679)
Income from continuing
operations before income taxes,
minority interest, impairment
losses on real estates and
gain on sale of properties 3,469 10,995
Income taxes (546) (172)
Minority interest (3,019) (1,791)
Gain on sale of properties 17,584 88,094
Income from continuing operations 17,488 97,126
Discontinued operations - Net
operations of sold properties - (2,084)
Net income 17,488 95,042
Less: Dividends on preferred
and restricted stock (4,069) (4,031)
Net income available to common
shareholders $13,419 $91,011
Basic net income per share:
Continuing operations $0.23 $1.71
Discontinued operations - (0.04)
Net income $0.23 $1.67
Diluted net income per share:
Continuing operations $0.23 $1.58
Discontinued operations - (0.04)
Net income $0.23 $1.54
NOTE: (1) Rental income includes $7,104 and $2,487 of accrued straight
line rents for the three months ended Mar. 31, 2006 and 2005,
respectively.
CARRAMERICA REALTY CORPORATION
Consolidated Statements of Cash Flow
Three Months Ended
(In thousands) March 31,
2006 2005
Cash flow from operating activities:
Net income $17,488 $95,042
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 37,101 34,961
Minority interest 3,019 1,791
Equity in earnings of
unconsolidated entities (1,132) (1,070)
Operating distributions from
unconsolidated entities 2,322 825
Gain on sale of properties (17,584) (88,094)
Impairment losses on real estate - 4,000
Lease intangibles amortization 3,168 2,009
Amortization of deferred
financing costs 1,070 1,003
Provision for (recovery of)
uncollectible accounts 195 (69)
Stock based compensation 1,804 1,305
Other (542) 622
Change in assets and liabilities:
Decrease in accounts receivable 3,884 5,214
Increase in accrued straight-line
rents (6,943) (3,015)
Additions to tenant leasing costs (4,901) (4,271)
Increase in intangible assets (6,788) -
Increase in prepaid expenses and
other assets (276) (2,666)
Decrease in accounts payable and
accrued expenses (16,540) (24,781)
Increase (decrease) in rent
received in advance and security
deposits 6,004 (5,878)
Total adjustments 3,861 (78,114)
Net cash provided by operating
activities 21,349 16,928
Cash flows from investing activities:
Rental property additions (3,963) (1,859)
Additions to tenant improvements (15,445) (6,063)
Additions to construction in
progress (1,440) (134)
Rental property and land
acquisitions (77,200) -
Issuance of notes receivable (2,860) (6,540)
Payments on notes receivable 395 419
Distributions from unconsolidated
entities 15,475 945
Investments in unconsolidated
entities (14,947) (3,119)
Acquisition of minority interest (157) (3,831)
Decrease (increase) in restricted
deposits 1,896 (655)
Proceeds from sale of residential
property - 930
Proceeds from sales of properties 51,336 191,940
Net cash (used in) provided by
investing activities (46,910) 172,033
Cash flows from financing activities:
Exercises of stock options 3,067 2,129
Repayment of unsecured notes - (100,000)
Net borrowings on unsecured credit
facility 44,000 93,000
Net repayments of mortgages and
notes payable (1,478) (1,497)
Dividends and distributions to
minority interests (35,839) (34,092)
Net cash provided by (used in)
financing activities 9,750 (40,460)
(Decrease) increase in cash and
cash equivalents (15,811) 148,501
Cash and cash equivalents, beginning
of the period 15,811 4,735
Cash and cash equivalents, end of the
period $- $153,236
Supplemental disclosure of cash flow
information:
Cash paid for interest (net of
capitalized interest of $651
for the three months ended March
31, 2006) $35,680 $40,376
Income tax payments $4,824 $184
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 are they 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, except
per share amounts) Three Months Ended
March 31,
2006 2005
Net income $17,488 $95,042
Adjustments: Minority interest 3,019 1,791
FFO allocable to the
minority Unitholders (3,194) (3,357)
Depreciation and
amortization -
Consolidated properties 35,334 30,708
Depreciation and
amortization -
Unconsolidated properties 4,415 3,576
Depreciation and
amortization - Discontinued
operations - 2,444
Amortization - Allowances
for tenant owned
improvements 811 -
Minority interests' (non
Unitholders) share of
depreciation, amortization
and net income (285) (285)
(Gain) loss on sale of
properties (17,584) (88,094)
FFO as defined by NAREIT 40,004 41,825
Less: Preferred dividends and
dividends on unvested
restricted stock (4,069) (3,780)
FFO attributable to common shareholders 35,935 38,045
FFO allocable to the minority
Unitholders - 3,357
Diluted FFO available to common
shareholders(1) $35,935 $41,402
Less: Lease commissions (4,908) (4,271)
Tenant improvements, lease
incentives and allowances
for tenant owned
improvements (25,193) (6,063)
Building capital additions (3,954) (1,848)
Lease intangible
amortization(3) 2,081 2,009
Impairment losses - 4,000
Straight line rent (7,104) (2,487)
FFO allocable to the
minority Unitholders 3,194 -
Funds available for distribution to
common shareholders(2) $51 $32,742
Diluted net income per common share $0.23 $1.54
Add: Depreciation and amortization 0.68 0.58
Gain on sale of properties (0.30) (1.46)
Minority interest adjustment - 0.03
Adjustment for share difference - -
Diluted funds from operations
available to common shareholders $0.61 $0.69
Weighted average common shares
outstanding:
Diluted net income 58,958 60,239
Diluted funds from operations 58,958 60,239
(1) 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.
(2) Adjustments to arrive at FAD do not include amounts associated with
properties in unconsolidated entities.
(3) Amortization associated with above/below market leases and lease
incentives.
SOURCE CarrAmerica Realty Corporation
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Related links:
http://www.carramerica.com/
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/19990820/CRELOGO
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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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