Second Quarter Highlights
-- Leased 1.4 million square feet in industrial portfolio, generating 17%
increase in same-store rents
-- Acquired 910,000 square feet of industrial space for $56 million
-- Announced two new industrial development projects encompassing more
than 320,000 square feet of space
-- Strong economic growth in Western markets drives continued demand for
small to mid-size industrial space
NEWPORT BEACH, Calif., Aug. 5 /PRNewswire/ -- Pacific Gulf Properties Inc.
(NYSE: PAG) today reported that for the second quarter ended June 30, 1998,
pro forma funds from operations (assuming the conversion of all preferred
shares and all remaining subordinated debentures) totaled $12,818,000, or
$0.55 per share. That number reflects an increase of 15% per share over the
$6,490,000, or $0.48 per share, generated a year ago which is due primarily to
strong increases in same-store rents. Funds from operations is a widely used
measure of a REIT's performance that excludes noncash charges for the
depreciation of real-estate assets.
For the six months ended June 30, pro forma funds from operations
increased 12% to $24,921,000, or $1.06 per share, over the $12,256,000, or
$0.95 per share, for the year-ago first half. That increase was due both to
strong growth in same-store rents and to acquisitions made in 1997 and the
first half of 1998.
Net operating income, or gross rental income less rental operating
expenses, for the second quarter of 1998 was $20,673,000 on revenues of
$27,799,000, versus $10,978,000 on revenues of $15,919,000 for the year-ago
period. Income available to common shareholders was $6,436,000, or $0.32 per
diluted share, compared with $3,371,000, or $0.26 per diluted share, reported
in the second quarter of 1997.
Net operating income for the first six months was $38,970,000 on revenues
of $53,117,000, versus $21,057,000 on revenues of $30,732,000 a year ago.
Income available to common shareholders increased to $12,644,000, or $0.63 per
share, from $6,453,000, or $0.52 per share, a year ago.
"These strong results reflect both the solid growth in same-store rents
we're seeing due to the high demand in our markets and the impact of the 37
acquisitions we've made over the past 12 months," Glenn Carpenter, Pacific
Gulf chairman and chief executive officer, said. "Our key West Coast markets
-- particularly Southern California -- continue to experience strong growth,
and therefore we are optimistic about our continued FFO growth."
Industrial Portfolio
In its industrial portfolio, Pacific Gulf completed leases for 1.4 million
square feet at its stabilized properties during the second quarter. This
activity generated a 17% increase in effective rental rates over ending rates
on expired leases. Industrial properties generated 71% of the company's total
net operating income for the 1998 second quarter and 70% for the first half.
For the first half, 2.2 million square feet were re-leased at the Company's
stabilized properties, reflecting a 14% increase in stabilized rents.
As of June 30, the occupancy rate in the company's industrial portfolio
was 95% in 1998 compared with 97% in 1997.
Multifamily Properties
Same-store net operating income in the multifamily operations increased
12% during the second quarter versus the same period a year ago, resulting
primarily from a 7% increase in revenues. For the first half of 1998,
same-store net operating income increased 10% versus the year-ago first half
due again to a 7% increase in revenues.
Pacific Gulf's multifamily portfolio comprising 4,821 units includes 1,438
in rental communities for active seniors age 55 and older. Overall occupancy
for the multifamily portfolio at June 30 was 96% in 1998 compared with 95% in
1997.
Acquisition and Development
A number of acquisitions have complemented the company's internal growth
during the year. In the first six months of 1998, Pacific Gulf acquired 2
million square feet of industrial space in 11 properties for a total
investment of $110 million. In addition, the company commenced development on
two new industrial projects comprising 320,000 square feet, bringing the total
under development to more than 855,000 square feet.
"In order to take advantage of the opportunities we see in the market,
Pacific Gulf is pursuing a three-pronged strategy of acquisition,
rehabilitation and development," Mr. Carpenter said. "In the industrial
sector we are acquiring properties that offer the immediate opportunity for
lease-up or that will benefit from value-added rehabilitation to suit our
small to mid-size target tenants. The third part of our strategy for the
industrial portfolio is to selectively develop properties, as the strong
California economy is encouraging the growth of small businesses -- which are
our prime tenants. Because California's economic recovery lagged much of the
country, we're still seeing high demand for small to mid-size industrial space
and limited supply.
"Given the opportunity we see in the industrial segment and our experience
in that market, Pacific Gulf plans to de-emphasize its focus on traditional
multifamily properties," Mr. Carpenter said. "However, we will continue to
pursue opportunities in the active senior segment because we view this as a
high-potential market. For example, The Fountains -- a senior community we
completed in March -- is currently 100% leased and occupied. And today,
occupancy rates in our active senior properties average 97%. Given the strong
demand and attractive yields, we intend to aggressively expand this portion of
the portfolio. In fact, Pacific Gulf is currently in negotiations for three
parcels of land in Southern California for the development of approximately
500 new active senior units, which should begin before the end of 1998."
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 67 properties encompassing more than
14 million square feet of space. Pacific Gulf also maintains a smaller
multifamily portfolio that includes eight rental communities comprising 1,438
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 per share data)
June 30, 1998 Dec. 31, 1997
(Unaudited)
ASSETS
Real estate assets
Operating properties
Land $216,342 $185,789
Buildings 608,640 515,160
824,982 700,949
Accumulated depreciation (48,230) (39,148)
776,752 661,801
Properties under development, including
land 38,184 32,107
814,936 693,908
Cash and cash equivalents 4,831 1,466
Accounts receivable 4,037 3,399
Other assets 14,991 13,698
$838,795 $712,471
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $400,731 $283,852
Accounts payable and accrued liabilities 12,924 9,009
Dividends payable 9,606 8,852
Convertible subordinated debentures 12,360 12,592
435,621 314,305
Minority partners' interest in
consolidated partnerships 18,313 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 June 30,
1998, and December 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; 19,998,911 and
19,968,189 shares outstanding as of
June 30, 1998, and December 31, 1997,
respectively 200 200
Outstanding restricted stock (720) (818)
Additional paid-in capital 411,261 411,187
Distributions in excess of earnings (25,908) (21,757)
384,861 388,840
$838,795 $712,471
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
1998 1997
REVENUES
Rental income
Industrial properties $18,352 $7,998
Multifamily properties 9,447 7,921
27,799 15,919
EXPENSES
Rental property operating expenses
Industrial properties 3,749 1,863
Multifamily properties 3,377 3,078
7,126 4,941
Depreciation 4,882 2,578
Interest (including amortization of
debenture discount and financing costs
of $458 and $221, respectively) 6,573 3,999
General and administrative expenses 1,238 784
Minority partners' interest in earnings
of consolidated partnerships 337 20
20,156 12,322
INCOME BEFORE LOSS ON SALE OF REAL ESTATE 7,643 3,597
Loss on sale of real estate -- 111
NET INCOME 7,643 3,486
Less: Preferred dividend requirements 1,207 115
INCOME AVAILABLE TO COMMON SHAREHOLDERS $6,436 $3,371
Earnings per share
Basic $0.32 $0.27
Diluted $0.32 $0.26
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Six Months Ended June 30,
1998 1997
REVENUES
Rental income
Industrial properties $34,659 $15,230
Multifamily properties 18,458 15,502
53,117 30,732
EXPENSES
Rental property operating expenses
Industrial properties 7,532 3,679
Multifamily properties 6,615 5,996
14,147 9,675
Depreciation 9,272 4,934
Interest (including amortization of
debenture discount and financing costs
of $679 and $443, respectively) 11,848 7,952
General and administrative expenses 2,349 1,472
Minority partners' interest in earnings
of consolidated partnerships 443 20
38,059 24,053
INCOME BEFORE LOSS ON SALE OF REAL ESTATE 15,058 6,679
Loss on sale of real estate -- 111
NET INCOME 15,058 6,568
Less: Preferred dividend requirements 2,414 115
INCOME AVAILABLE TO COMMON SHAREHOLDERS $12,644 $6,453
Earnings per share
Basic $0.63 $0.54
Diluted $0.63 $0.52
FUNDS FROM OPERATIONS (a)
SUPPLEMENTAL TABLE
(in thousands, except share data)
For the Three For the Six
Months Ended Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
Income Available to
Common Shareholders $6,436 $3,371 $12,644 $6,453
Loss on sale of real estate -- 111 -- 111
Depreciation 4,882 2,578 9,272 4,934
Funds from Operations $11,318 $6,060 $21,916 $11,498
Weighted Average
Common Shares Outstanding (b) 19,941 12,525 19,935 11,981
Funds from Operations
per Common Share $.57 $.48 $1.10 $.96
(a) Industry analysts generally consider funds from operations ("FFO") an
appropriate measure of performance of a real estate investment trust
("REIT"). Funds from operations represent 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 $11,318 $6,060 $21,916 $11,498
Preferred Dividend Requirements 1,207 115 2,414 115
Interest Expense on Debentures 260 281 524 572
Amortization of Debenture
Discount and Costs 33 34 67 71
Pro forma Funds from Operations $12,818 $6,490 $24,921 $12,256
Weighted Average Common
Shares Outstanding 19,941 12,525 19,935 11,981
Additional Shares Assuming
Conversion
Other (d) 104 109 101 109
Preferred Stock 2,763 264 2,763 133
Debentures 668 704 668 704
Pro forma Weighted Average
Outstanding Shares 23,476 13,602 23,467 12,927
Pro forma Funds from Operations
per Common Share $.55 $.48 $1.06 $.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:
Donald G. Herrman, chief financial officer of
Pacific Gulf Properties, 949-223-5000; or Virginia St. John
Needham, General Information, 310-442-0599, Stephanie Mishra,
Analyst Contact, 415-986-1591, or Jill Modabber, Media Contact,
310-442-0599, all of The Financial Relations Board
NOTE TO EDITORS: For further information on Pacific Gulf
Properties free of charge via facsimile, dial 1-800-PRO-INFO and
enter "PAG." For Company News on Call from PR Newswire, visit
http://www.prnewswire.com. Other supplemental data is available
upon request
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