Third Quarter Highlights (as compared to third quarter 1997)
-- Net income available to common shareholders increased 54%.
-- Industrial lease rental rates up 13%.
-- Same-store net operating income for the multifamily portfolio increased
7%.
-- Company records $6.4 million gain on sale of multifamily apartment
property to Port of Seattle.
NEWPORT BEACH, Calif., Nov. 4 /PRNewswire/ -- Pacific Gulf Properties Inc.
(NYSE: PAG) reported today that for the third quarter ended Sept. 30, 1998,
pro forma funds from operations (assuming the conversion of all preferred
shares and all remaining subordinated debentures) totaled $12,992,000, or
$0.55 per share. That number reflects an increase of 12% per share over the
$7,626,000, or $0.49 per share, generated for the same period a year ago, due
to both continued steady growth in rental rates in the company's industrial
portfolio and improved same-store results in its apartment portfolio. Funds
from operations is a widely used measure of REIT performance that excludes
noncash charges for the depreciation of real estate assets.
Net operating income (gross rental revenues less rental operating
expenses) for the third quarter of 1998 was $21,670,000 on revenues of
$29,792,000, versus $12,847,000 on revenues of $18,457,000 for the same period
a year ago. Income available to common shareholders and before a gain on the
sale of real estate was $6,014,000 compared with $3,904,000 reported in the
third quarter 1997, an increase of 54%. Income available to common
shareholders including the gain on sale of real estate was $12,441,000, or
$0.58 per diluted share.
The company recorded a $6.4 million gain on sale during the quarter that
was attributable to the sale of an apartment community located in Burien,
Wash., for $13.5 million. The sale to the Port of Seattle was made as part of
a Port Authority program to acquire certain properties around the airport in
order to accommodate future airport expansion. Pacific Gulf entered into an
agreement to manage the community for the Port Authority through 1999.
"This sale accomplishes part of the company's strategy to focus on
industrial properties and active senior communities that match the
characteristics of our core portfolio," said Glenn L. Carpenter, Pacific
Gulf's chairman of the board and chief executive officer. "We will continue
to look for favorable opportunities to divest properties in the traditional
multifamily segment (excluding active seniors housing). For example, we are
currently under contract for the sale of multifamily properties in Seattle and
Southern California, although the potential buyers are in the process of
completing due diligence and their deposits remain refundable. These
potential sales and other future divestitures of multifamily properties are
subject to numerous conditions and there can be no assurance that they will be
successfully consummated. In the meantime, these properties are in markets
that are currently experiencing high demand and strong rental growth, and
therefore we can be selective about the offers we consider."
For the nine months ended Sept. 30, 1998, pro forma funds from operations
increased 13% to $37,913,000, or $1.62 per share, over the $19,881,000, or
$1.44 per share, for the same nine-month period in 1997. That increase was
due to the acquisition of 28 industrial properties made over the last 12
months; steady growth in rental rates and occupancy in the company's
industrial portfolio; and improved same-store results in the multifamily
portfolio, offset somewhat by increases in general and administrative costs.
Net operating income for the first nine months was $60,640,000 on revenues
of $82,909,000, versus $33,904,000 on revenues of $49,189,000 a year ago.
Income available to common shareholders before a gain on the sale of real
estate increased 78% to $18,658,000 from $10,468,000 for the same nine-month
period in 1997. Income available to common shareholders including the gain on
sale of real estate was $25,085,000, or $1.24 per diluted share.
Industrial Portfolio
In its industrial portfolio, Pacific Gulf completed leases for 862,000
square feet at its stabilized properties during the third quarter. This
activity generated a 13% increase in effective rental rates over ending rates
on expired leases. During the first nine months, 3 million square feet were
re-leased at the company's stabilized properties, reflecting an increase of
13% in stabilized rents. Industrial properties generated 73% of the company's
net operating income for the 1998 third quarter and 71% for the first nine
months. Those numbers compare with 58% for the same quarter a year ago and
56% for the first nine months of 1997, reflecting the company's progress
toward achieving its goal of focusing on growth in its industrial portfolio.
The occupancy rate in the company's industrial portfolio was 96% as of
Sept. 30, 1998, compared with 97% as of the same date in 1997.
Multifamily Properties
Same-store net operating income in the multifamily operations increased 7%
during the third quarter of 1998 versus the same period a year ago, resulting
primarily from a 6% increase in revenues. For the first nine months of 1998,
same-store net operating income increased 10% over the same period a year ago,
due to a 7% increase in revenues.
Pacific Gulf's multifamily portfolio, comprising 4,587 units, includes
1,438 in rental communities for active seniors age 55 and older. Overall
occupancy for the multifamily portfolio at Sept. 30, 1998, was 97% compared
with 95% as of the same date in 1997. In the active senior component of that
portfolio, occupancy was 98% as of the end of the third quarter 1998, versus
95% in 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 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 share data)
Sept. 30, 1998 Dec. 31, 1997
(Unaudited)
ASSETS
Real estate assets
Operating properties
Land $217,787 $185,789
Buildings 614,474 515,160
832,261 700,949
Accumulated depreciation (52,093) (39,148)
780,168 661,801
Properties under development,
including land 34,485 32,107
814,653 693,908
Cash and cash equivalents 5,114 1,466
Accounts receivable 4,893 3,399
Other assets 15,088 13,698
$839,748 $712,471
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $395,040 $283,852
Accounts payable and
accrued liabilities 15,882 9,009
Dividends payable 9,609 8,852
Convertible subordinated
debentures 12,261 12,592
432,792 314,305
Minority partners' interest
in consolidated partnerships 17,821 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
Sept. 30, 1998, and
Dec. 31, 1997 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;
20,005,559 and 19,968,189 shares
outstanding at Sept. 30, 1998,
and Dec. 31,1997, respectively 200 200
Outstanding restricted stock (1,282) (818)
Additional paid-in capital 412,058 411,187
Distributions in excess
of net earnings (21,869) (21,757)
389,135 388,840
$839,748 $712,471
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Sept. 30,
1998 1997
REVENUES
Rental income
Industrial properties $20,334 $9,620
Multifamily properties 9,458 8,837
29,792 18,457
EXPENSES
Rental property operating expenses
Industrial properties 4,447 2,185
Multifamily properties 3,675 3,425
8,122 5,610
Depreciation 5,479 3,139
Interest (including amortization
of debenture discount and
financing costs of $217 and
$176, respectively) 7,117 4,669
General and administrative
expenses 1,563 766
Minority partners' interest
in earnings of consolidated
partnerships 290 94
22,571 14,278
INCOME BEFORE GAIN ON
SALE OF REAL ESTATE 7,221 4,179
Gain on sale of real estate 6,427 --
NET INCOME 13,648 4,179
Less: Preferred dividend
requirements 1,207 275
INCOME AVAILABLE TO
COMMON SHAREHOLDERS $12,441 $3,904
Earnings per share
Basic $0.62 $0.27
Diluted $0.58 $0.27
PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Nine Months Ended Sept. 30,
1998 1997
REVENUES
Rental income
Industrial properties $54,993 $24,850
Multifamily properties 27,916 24,339
82,909 49,189
EXPENSES
Rental property operating expenses
Industrial properties 11,979 5,864
Multifamily properties 10,290 9,421
22,269 15,285
Depreciation 14,751 8,073
Interest (including
amortization of debenture
discount and financing costs
of $896 and $619, respectively)18,965 12,621
General and administrative
expenses 3,912 2,238
Minority partners' interest
in earnings of consolidated
partnerships 733 114
60,630 38,331
INCOME BEFORE GAIN/(LOSS)
ON SALE OF REAL ESTATE 22,279 10,858
Gain (loss) on sale of
real estate 6,427 (111)
NET INCOME 28,706 10,747
Less: Preferred dividend
requirements 3,621 390
INCOME AVAILABLE TO
COMMON SHAREHOLDERS $25,085 $10,357
Earnings per share
Basic $1.26 $0.81
Diluted $1.24 $0.80
FUNDS FROM OPERATIONS (a)
SUPPLEMENTAL TABLE
(in thousands, except share data)
For the Three For the Nine
Months Ended Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
Income Available to
Common Shareholders $12,441 $3,904 $25,085 $10,357
(Gain) Loss on sale of
real estate (6,427) -- (6,427) 111
Depreciation 5,479 3,139 14,751 8,073
Funds from Operations $11,493 $7,043 $33,409 $18,541
Weighted Average Common
Shares Outstanding (b) 19,946 14,210 19,936 12,733
Funds from Operations
per Common Share $0.58 $ 0.50 $1.68 $1.46
(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 $11,493 $ 7,043 $33,409 $18,541
Preferred Dividend Requirements 1,207 275 3,621 390
Interest Expense on Debentures 259 273 783 844
Amortization of Debenture
Discount and Costs 33 35 100 106
Pro Forma Funds from Operations $12,992 $7,626 $37,913 $19,881
Weighted Average Common Shares
Outstanding 19,946 14,210 19,936 12,733
Additional Shares Assuming Conversion
Other (d) 102 112 99 110
Preferred Stock 2,763 654 2,763 308
Debentures 662 685 662 685
Pro Forma Weighted Average
Outstanding Shares 23,473 15,661 23,460 13,836
Pro Forma Funds from Operations
per Common Share $0.55 $0.49 $1.62 $1.44
(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, 949-223-5000; or Virginia St. John-Needham, General
Information, 310-442-0599, Nan Teele, 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 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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