HOUSTON--(BUSINESS WIRE)--AmREIT, Inc. (NYSE: AMRE) (“AmREIT” or the “Company”) today announced financial results for the second quarter ended June 30, 2014 and declared dividends for the third quarter ending September 30, 2014.
First Quarter and Year To Date Highlights:
Financial Results
- Core Funds from Operations ("Core FFO") available to common stockholders for the second quarter of 2014 was $4.6 million, or $0.24 per share, compared to $4.1 million, or $0.25 per share, for the comparable period in 2013. For the six months ended June 30, 2014, Core FFO was $9.2 million, or $0.47 per share, compared to $8.4 million, or $0.52 per share, for the comparable period in 2013. Weighted average shares outstanding for the three and six months ended June 30, 2014, were 19.68 and 19.66 million, respectively, compared to 16.17 and 16.15 million, respectively, for the same period in 2013.
- FFO available to common stockholders for the second quarter of 2014 was $4.4 million, or $0.22 per share, compared to $4.0 million, or $0.25 per share, for the comparable period in 2013. For the six months ended June 30, 2014, FFO was $9.0 million, or $0.46 per share, compared to $8.1 million or $0.50 per share for the comparable six month period in 2013. Included in FFO for the three and six months ended June 30, 2014 was $224,000 of acquisition costs related to the acquisitions of Lantern Lane Shopping Center and our acquisition of town house units within the Inverness Townhomes. Included in FFO for the three and six months ended June 30, 2013 was $126,000 of acquisitions costs related to the acquisition of Fountain Oaks Shopping Center and $164,000 of acquisition costs related to the MacArthur Park joint venture with Goldman Sachs.
- Net income available to common stockholders for the second quarter of 2014 was $1.1 million, or $0.05 per share, compared to $981,000, or $0.06 per share, for the same period in 2013. For the six months ended June 30, 2014, net income was $2.3 million, or $0.11 per share, compared to $9.4 million, or $0.59 per share for the comparable six month period in 2013. Included in net income for the six months ended June 30, 2013 was a $7.7 million gain related to the sale of MacArthur Park and Pads into the joint venture with Goldman Sachs.
FFO and Core FFO are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of FFO and Core FFO to net income are attached to this press release.
Portfolio Results
- During the third quarter of 2013, AmREIT began the process of terminating leases or relocating tenants occupying a portion of its Uptown Park property known as the “Baker Site”, and its Courtyard at Post Oak property at Post Oak and San Felipe in Houston, in order to prepare those sites for vertical re-development. In the second quarter of 2014, excluding redevelopment properties (Uptown Park and Courtyard on Post Oak), same-store net operating income (“NOI”) increased 2.7% over the same period in the prior year. For the six months ended June 30, 2014, same-store NOI increased 2.9% over the same period in the prior year. Including those two redevelopment properties, same-store NOI decreased 0.4% over the same three month period in the prior year and increased 0.9% over the same six month period in the prior year. While the Company’s same-store NOI growth rate in the short term has been negatively affected by redevelopments, AmREIT believes that the re-development of these sites will provide longer term same-store NOI growth.
- Portfolio occupancy as of June 30, 2014, was 93.8%, which was down 0.40% when compared to portfolio occupancy of 94.2% as of December 31, 2013. The Company has initiated vacancies at Courtyard on Post Oak and at the Uptown Park – Baker Site in preparation for their anticipated redevelopments. Excluding these re-developments, portfolio occupancy was 94.6% as of June 30, 2014, compared to 95.1% as of December 31, 2013. On a leased basis, which includes leases that have been executed but where rent has not yet commenced, the portfolio was 95.2% leased as of June 30, 2014, as compared to 94.8% as of December 31, 2013. The Company anticipates rent commencement on these signed leases over the next 90 days.
- During the second quarter of 2014, AmREIT signed 22 leases for 70,313 square feet of GLA, including both new and renewal leases. Of these, 19 leases for 46,619 square feet were renewals or replacements of expiring leases that were deemed to be comparable leases. Cash leasing spreads, which is the new leasing rate per square foot compared to the expiring leasing rate per square foot on comparable leases, increased 18.6%. On a GAAP basis, which includes the effects of straight-line rent, leasing spreads increased 27.2%.
- For the six months ended June 30, 2014, AmREIT signed 46 leases for 144,963 square feet of GLA, including both new and renewal leases. Of these, 37 leases for 96,048 square feet were renewals or replacements of expiring leases that were deemed to be comparable leases. Cash leasing spreads, which is the new leasing rate per square foot compared to the expiring leasing rate per square foot on comparable leases, increased 15.2%. On a GAAP basis, which includes the effects of straight-line rent, leasing spreads increased 21.8%.
NOI and same-store NOI are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of NOI and same-store NOI to net income are attached to this press release.
Acquisitions
- On June 24, 2014, AmREIT acquired Lantern Lane Shopping Center, an 81,567 square foot Fresh Market and CVS/Pharmacy anchored shopping center in the Memorial Villages submarket of Houston, Texas from one of its affiliates, AmREIT Monthly Income & Growth Fund III, Ltd. Average household incomes within a one-mile radius of Lantern Lane are over $163,000, and there are approximately 62,000 households and over 95,800 daytime employment within a three-mile radius of the property. Lantern Lane was acquired for approximately $22.7 million, is unencumbered, and was funded with cash on hand and borrowings under AmREIT’s unsecured revolving credit facility.
- On July 3, 2014, AmREIT entered into a contract to acquire Tuxedo Festival, a 54,310 square foot shopping center located at Roswell and Piedmont in the prestigious Buckhead submarket of Atlanta, Georgia. Average household incomes within a one-mile radius of Tuxedo Festival are over $137,000 and there are approximately 48,000 households and over 109,000 daytime employment within a three-mile radius of the property. Tuxedo Festival is scheduled to close during the third quarter for approximately $27.9 million.
Redevelopment Initiatives
- On July 25, 2014, the Omnibus Agreement with Crimson Real Estate Advisors, LP with respect to 1.12 acres on the northwest portion of the Uptown Park property, known as the “Baker Site” expired and was terminated. When we successfully negotiated with Champps to release to us the development rights of their parking lot contiguous to the Baker Site, we were able to return to our original vision of developing a lower profile residential project by expanding the building’s footprint. While we no longer expect to enter into a ground lease with respect to the Baker site, we believe this more appropriately sized project, which we are calling The Palazzi at Uptown Park, will be the finest for-rent multifamily project of its type in our market. We now will be able to increase the size of the retail square footage, making the north end of Uptown Park a more prominent place-making experience that is essential to long term value creation in projects of this kind. The project is anticipated to include approximately 200 residential units and approximately 40,000 square feet of retail. Total project costs are estimated to be approximately $80 million and construction is anticipated to begin in 2015. A rendering of our master plan and The Palazzi at Uptown Park can be found in our corporate presentation.
- AmREIT has entered into a letter of intent with a regional multi-family developer to develop a 40-story, 356-unit residential tower with two stories of retail with respect to 1.58 acres at the northwest corner of Post Oak and San Felipe, known as The Courtyard at Post Oak. AmREIT is currently negotiating a joint venture with the developer as co-sponsors whereby we will seek an institutional equity partner. AmREIT will retain ownership of the 1.58 acres and ground lease the site to the anticipated venture. Total project costs are estimated be approximately $142 million and construction could begin within the next 12 months.
- During the quarter, AmREIT acquired a 20.3% ownership interest in the Inverness Townhomes. Subsequent to the quarter, AmREIT has entered into a letter of intent with Trammell Crow Company to form a Limited Liability Company (“LLC”) to purchase the entire Inverness Townhome site and to form a venture for the development of approximately 560,000 square feet of office space and 16,000 square feet of retail space. The site is approximately 2.9 acres and is located at the northwest corner of Post Oak Blvd and Uptown Park Blvd. It is anticipated that AmREIT will be a 5% co-developer member, Trammell Crow Company will be a 5% co-developer member and an institutional investor will be a 90% Investor Member. Total project costs are estimated to be in excess of $225 million. Construction could begin within the next 12-15 months.
- We are in exclusive negotiations with a four-star hotel flag and a hotel development partner for a mixed use development project at the southeast corner of Uptown Park, located at the corner of Loop 610 and Post Oak Blvd. The anticipated development could include 243 hotel rooms, 234 residential units and up to 20,000 square feet of ground floor retail. Total project costs are estimated to be approximately $204 million. Construction could begin within the next 18 months.
- In February 2014, AmREIT was informed by Kroger, Inc. that Kroger had approved a 30,000 square foot expansion of its store at AmREIT’s Fountain Oaks property. On June 30, 2014, the City of Sandy Springs indicated that the anticipated Kroger expansion would be permitted. Kroger intends to expand the existing 60,000 square foot store by approximately 30,000 square feet to 90,000 square feet with a contribution from AmREIT of $6.7 million. AmREIT will receive an 8.25% return on the incremental capital and will receive a new 20-year lease with Kroger. Construction is expected to begin within the next 12 months.
Advised Funds Activity
- AmREIT Monthly Income & Growth Fund IV, Ltd. has negotiated a development partnership with The Dinerstein Group to develop a planned 378 unit multifamily project consisting of 16 stories of residential over a 5 story parking garage. Estimated costs are $101 million and the project is anticipated to commence construction in 2015.
Dividends
- AmREIT also announced today that the Company's Board of Directors has approved a regular quarterly cash dividend of $0.20 per share. The dividend will be paid on September 30, 2014 to all common stockholders of record at the close of business on September 19, 2014.
“We are pleased with our second quarter results, which demonstrate the success of our proven strategy to acquire, redevelop, and operate high-quality commercial properties in premier locations in the most desirable growth markets in the country,” said Kerr Taylor, Chairman and Chief Executive Officer of AmREIT. “While we are changing our approach to the Baker Site, I am very excited about the direction we are headed and the potential for significant value that our local sharpshooter team can create for stockholders as we develop the multi-family and retail project at The Palazzi at Uptown Park. Our team is also executing effectively on the numerous opportunities in our portfolio to drive occupancy levels and leverage our strong balance sheet to expand the business.”
2014 Full Year Guidance
- Full year and quarterly 2014 Core FFO and FFO guidance per share remains as follows:
Projected 2014 Range | ||||
High | Low | |||
3Q2014 | 0.26 | 0.25 | ||
4Q2014 | 0.34 | 0.33 | ||
Full Year Core FFO | $1.06 | $1.02 | ||
3Q2014 | 0.24 | 0.23 | ||
4Q2014 | 0.33 | 0.32 | ||
Full Year FFO | $1.02 | $0.98 |
In arriving at the above unchanged full year guidance, we have made adjustments to eliminate the ground lease income from The Baker Site at Uptown Park in the fourth quarter, have increased development fees by $300,000 in conjunction with our development activities at Cambridge and Holcombe in the Advised Funds and have accelerated our acquisition assumptions due to the anticipated earlier acquisition of Tuxedo Festival. Additionally, full year and quarterly 2014 FFO guidance do not reflect any expenses that may be incurred in connection with the evaluation of strategic alternatives, which would have no impact on our Core FFO.
Conference Call
AmREIT will hold its quarterly conference call to discuss the results of its second quarter and year to date 2014 on Wednesday, July 30, 2014, at 10:00 a.m. Central Standard Time (11:00 a.m. Eastern Standard Time). To participate in the quarterly conference call, please call 1-877-504-2267 approximately 10 minutes before the scheduled start time. The conference call will be recorded and a replay of the call will be available via webcast shortly after the call concludes.
The conference call will also be webcast live at www.amreit.com and can be accessed under the Investors tab of the Company's website. A telephonic replay of the conference call will be available for 14 days following the conference call. To access the telephonic replay of the conference call, dial 1-877-344-7529 and enter passcode 10048772.
Supplemental Financial Information
Further details regarding AmREIT’s results of operations, properties, and tenants are attached to this press release and can be accessed at the Company’s website at www.amreit.com.
Non-GAAP Financial Disclosure
This press release contains certain non-GAAP financial measures that management believes are useful in evaluating an equity REIT's performance. AmREIT's definitions and calculations of non-GAAP financial measures may differ from those used by other equity REITs, and therefore may not be comparable. The non-GAAP financial measures should not be considered as an alternative to net income as an indication of our operating results, or to net cash provided by operating activities as a measure of our liquidity.
Funds From Operations (FFO)
AmREIT considers FFO to be an appropriate measure of the operating performance of an equity REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) determined in accordance with GAAP, excluding gains or losses from sales of property and impairment charges on properties held for investment, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. NAREIT recommends that extraordinary items not be considered in arriving at FFO. AmREIT calculates FFO in accordance with this definition.
Most industry analysts and equity REITs, including AmREIT, consider FFO to be an appropriate supplemental non-GAAP financial measure of operating performance because, by excluding gains or losses from sales of property and impairment charges on properties held for investment and by excluding real estate related depreciation and amortization, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself.
Additionally, AmREIT considers Core FFO, which adjusts FFO for items that do not reflect ongoing operations, such as acquisition expenses, non-recurring intangible asset write-offs and recoveries, expensed issuance costs and gains on the sale of real estate held for resale, to be a meaningful performance measurement. The computation of FFO in accordance with NAREIT’s definition includes certain items such as acquisition costs, issuance costs, non-recurring asset write-offs and recoveries and gains on sale of real estate held for resale that management believes are not indicative of AmREIT’s ongoing results and therefore affect the comparability of our period-over-period performance with the performances of similar REITs. Accordingly, management believes that it is helpful to investors to adjust FFO for such items. There can be no assurance that FFO or Core FFO presented by AmREIT is comparable to similarly titled measures of other REITs. FFO and Core FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.
Projected FFO and Core FFO are calculated in a method consistent with historical FFO and Core FFO, and AmREIT considers projected FFO and Core FFO to be an appropriate supplemental measure when compared with projected earnings per share. A reconciliation of the projected FFO and Core FFO to projected earnings per share is provided below:
Projected 2014 Range |
||||
High | Low | |||
Net income |
$ 0.58 |
$ 0.54 |
||
Gain on sale – investment | (0.20) | (0.20) | ||
Depreciation and amortization | 0.56 | 0.56 | ||
Depreciation and amortization for non-consolidated affiliates | 0.08 | 0.08 | ||
FFO available to stockholders | $ 1.02 | $ 0.98 | ||
Acquisition costs | 0.04 | 0.04 | ||
Core FFO available to stockholders | $1.06 | $1.02 |
The above projected 2014 range for Core FFO and FFO guidance does not reflect any expenses that may be incurred in connection with the evaluation of strategic alternatives.
Net Operating Income (NOI)
AmREIT believes that NOI is a useful measure of its operating performance. AmREIT defines NOI as operating revenues (rental income, tenant recovery income, percentage rent, excluding straight-line rental income and amortization of acquired above- and below-market rents) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line rent bad debt expense). Other REITs may use different methodologies for calculating NOI, and accordingly, AmREIT’s NOI may not be comparable to other REITs.
AmREIT believes that reporting NOI provides an operating perspective not immediately apparent from GAAP operating income, GAAP net income, FFO or Core FFO. AmREIT uses NOI to evaluate its performance on a property-by-property basis because NOI allows it to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on its operating results. However, NOI should only be used as a supplemental measure of AmREIT’s financial performance.
About AmREIT
AmREIT, The Irreplaceable Corner™ Company, is an equity real estate investment trust that specializes in the acquisition, operation, redevelopment, and vertical densification of retail and mixed-use properties located in highly affluent, urban submarkets. The company’s existing properties are strategically concentrated in five of the top metropolitan markets in the southern U.S.: Houston, Dallas, San Antonio, Austin and Atlanta. The company is internally-advised and fully integrated with significant local market experience and relationships. AmREIT's portfolio was 95.2% leased as of June 30, 2014, and its top five tenants include Kroger, Landry's, CVS/Pharmacy, H-E-B, and Safeway. AmREIT also has preferential access to a substantial acquisition pipeline through its value-add joint ventures, which often include major institutional investors who partner with the company as local experts. For more information, please visit www.amreit.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws, including statements related to full year 2014 Core FFO and FFO financial projections , redevelopment projects and NOI growth. These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases, which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Many factors may materially affect the actual results, including demand for our properties, changes in rental and occupancy rates, changes in property operating costs, interest rate fluctuations, changes in plans and timing related to potential development projects and the anticipated costs and potential revenues associated therewith, and changes in local and general economic conditions. While forward-looking statements reflect AmREIT’s good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Furthermore, AmREIT disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact AmREIT’s future results, performance or transactions, see the section entitled "Risk Factors" in AmREIT’s Annual Report on Form 10-K for the year ended December 31, 2013, and other risks described in documents subsequently filed by AmREIT from time to time with the Securities and Exchange Commission.
Investor Contact
For more information, call Chad Braun, Chief Operating Officer and Chief Financial Officer of AmREIT, at (713) 850-1400. AmREIT is online at www.amreit.com.
AmREIT, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands except share data) | ||||||||
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Real estate investments at cost: | ||||||||
Land | $ | 195,086 | $ | 181,749 | ||||
Buildings | 238,288 | 224,472 | ||||||
Tenant improvements | 15,910 | 14,992 | ||||||
449,284 | 421,213 | |||||||
Less accumulated depreciation and amortization | (40,881 | ) | (37,356 | ) | ||||
408,403 | 383,857 | |||||||
Acquired lease intangibles, net | 16,160 | 15,849 | ||||||
Investments in Advised Funds | 15,534 | 15,689 | ||||||
Net real estate investments | 440,097 | 415,395 | ||||||
Cash and cash equivalents | 4,884 | 14,297 | ||||||
Tenant and accounts receivable, net | 5,505 | 6,467 | ||||||
Accounts receivable - related party, net | 1,057 | 693 | ||||||
Notes receivable, net | 353 | 4,333 | ||||||
Notes receivable - related party, net | 744 | 689 | ||||||
Deferred costs, net | 3,754 | 3,214 | ||||||
Other assets | 3,158 | 1,493 | ||||||
TOTAL ASSETS | $ | 459,552 | $ | 446,581 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities: | ||||||||
Notes payable | $ | 219,286 | $ | 199,851 | ||||
Accounts payable and other liabilities | 8,955 | 11,582 | ||||||
Acquired below-market lease intangibles, net | 8,897 | 7,881 | ||||||
TOTAL LIABILITIES | 237,138 | 219,314 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued | - | - | ||||||
Common stock, $0.01 par value, 1,000,000,000 shares authorized as of June 30, 2014 and December 31, 2013, 19,685,084 and 19,628,037 shares issued and outstanding as of June 30, 2014 and December 31, 2013. |
197 | 196 | ||||||
Capital in excess of par value | 307,138 | 306,423 | ||||||
Accumulated distributions in excess of earnings | (84,921 | ) | (79,352 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY | 222,414 | 227,267 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 459,552 | $ | 446,581 |
AmREIT, INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(in thousands except per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three months ended June 30, |
Six months ended June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income from operating leases | $ | 11,672 | $ | 9,863 | 23,567 | 20,899 | ||||||||||
Advisory services income - related party | 869 | 872 | 1,615 | 1,715 | ||||||||||||
Real estate fee income | - | - | 100 | - | ||||||||||||
Total revenues | 12,541 | 10,735 | 25,282 | 22,614 | ||||||||||||
Expenses: | ||||||||||||||||
General and administrative | 2,005 | 2,069 | 4,113 | 4,030 | ||||||||||||
Property expense | 3,459 | 2,660 | 7,188 | 5,843 | ||||||||||||
Legal and professional | 315 | 258 | 695 | 506 | ||||||||||||
Real estate commissions | 74 | 52 | 129 | 104 | ||||||||||||
Acquisition costs | 224 | 126 | 224 | 126 | ||||||||||||
Depreciation and amortization | 3,090 | 2,732 | 6,216 | 6,025 | ||||||||||||
Total expenses | 9,167 | 7,897 | 18,565 | 16,634 | ||||||||||||
Operating income | 3,374 | 2,838 | 6,717 | 5,980 | ||||||||||||
Other income (expense): | ||||||||||||||||
Gain on sale of real estate acquired for investment | - | - | - | 7,696 | ||||||||||||
Interest and other income | 59 | 154 | 170 | 267 | ||||||||||||
Interest and other income - related party | 12 | 53 | 22 | 109 | ||||||||||||
Income from Advised Funds | 181 | 192 | 368 | 44 | ||||||||||||
State income tax expense |
(12 | ) | (17 | ) | (24 | ) | (15 | ) | ||||||||
Interest expense | (2,484 | ) | (2,267 | ) | (4,951 | ) | (4,760 | ) | ||||||||
Income from continuing operations | 1,130 | 953 | 2,302 | 9,321 | ||||||||||||
Income from discontinued operations | - | 28 | - | 56 | ||||||||||||
Net income | $ | 1,130 | $ | 981 | $ | 2,302 | $ | 9,377 | ||||||||
Net income per share of common stock - basic and diluted | ||||||||||||||||
Income from continuing operations | $ | 0.05 | $ | 0.06 | $ | 0.11 | $ | 0.59 | ||||||||
Income from discontinued operations | - | - | - | - | ||||||||||||
Net income per share | $ | 0.05 | $ | 0.06 | $ | 0.11 | $ | 0.59 | ||||||||
Weighted average shares of common stock used to compute net income per share, basic and diluted |
19,104 | 15,609 | 19,092 | 15,600 | ||||||||||||
Distributions per share of common stock | $ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.40 |
Summary of Operating Results (in thousands except per share data): |
||||||||||||||||
|
||||||||||||||||
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
Funds from operations ("FFO") | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income | $ | 1,130 | $ | 981 | $ | 2,302 | $ | 9,377 | ||||||||
Add: | ||||||||||||||||
Depreciation of real estate assets - from
operations |
3,082 | 2,718 | 6,199 | 5,998 | ||||||||||||
Depreciation of real estate assets - from
discontinued operations |
- | 6 | - | 12 | ||||||||||||
Depreciation of real estate assets for
nonconsolidated affiliates |
343 | 292 | 611 | 445 | ||||||||||||
Less: | ||||||||||||||||
Gain on sale of real estate acquired for
investment |
- | - | - | (7,696 | ) | |||||||||||
Gain on sale of asset by investment in JV | (145 | ) | - | (145 | ) | - | ||||||||||
Total FFO available to stockholders | $ | 4,410 | $ | 3,997 | $ | 8,967 | $ | 8,136 | ||||||||
Total FFO per share | $ | 0.22 | $ | 0.25 | $ | 0.46 | $ | 0.50 | ||||||||
Core funds from operations ("Core FFO") | ||||||||||||||||
Total FFO available to stockholders | $ | 4,410 | $ | 3,997 | $ | 8,967 | $ | 8,136 | ||||||||
Add: | ||||||||||||||||
Acquisition costs | 224 | 126 | 224 | 126 | ||||||||||||
Acquisition costs of nonconsolidated affiliates | - | - | - | 164 | ||||||||||||
Total Core FFO available to stockholders | $ | 4,634 | $ | 4,123 | $ | 9,191 | $ | 8,426 | ||||||||
Total Core FFO per share | $ | 0.24 | $ | 0.25 | $ | 0.47 | $ | 0.52 | ||||||||
Dividends | ||||||||||||||||
Regular common dividends per share | $ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.40 | ||||||||
Payout ratio - Core FFO | 83.3 | % | 80.0 | % | 85.1 | % | 76.9 | % |
_____________
(1) | Weighted average shares outstanding reflects the weighted average of all shares of common stock outstanding during the period including our non-vested shares. Weighted average shares of common stock outstanding used to compute net income per share under GAAP pursuant to the “two class method” includes only vested shares of common stock. Our reconciliation of weighted average shares used to compute net income per share, basic and diluted, on our consolidated statements of operations to weighted average shares used to compute our FFO per share metrics above is as follows: |
Three months ended June 30, | Six months ended June 30, | ||||||||
2014 | 2013 | 2014 | 2013 | ||||||
Weighted average shares used to compute net | |||||||||
income per share, basic and diluted | 19,104 | 15,609 | 19,092 | 15,600 | |||||
Weighted average shares of restricted common | |||||||||
stock outstanding | 574 | 563 | 567 | 552 | |||||
Weighted average shares outstanding | 19,678 | 16,172 | 19,659 | 16,152 | |||||
Same Store Property Analysis (in thousands except for number of properties, percentages and per share data):
Three months ended June 30, | |||||||||||||||||||
2014 | 2013 | Change $ | Change% | ||||||||||||||||
Same store properties (28 properties) | |||||||||||||||||||
Rental income (1) | $ | 5,673 | $ |
5,536 |
$ |
137 |
2.5 |
% | |||||||||||
Recovery income (1) | 1,899 |
1,720 |
179 |
10.4 |
% | ||||||||||||||
Percentage rent (1) | 16 | 11 | 5 | 45.5 | % | ||||||||||||||
Less: | |||||||||||||||||||
Property expenses | 2,093 | 1,917 | (176 | ) | (9.2 | ) | % | ||||||||||||
Same store NOI, excluding redevelopment
properties |
5,495 | 5,350 | 145 | 2.7 | % | ||||||||||||||
Same store occupancy, excluding redevelopment | |||||||||||||||||||
properties, at end of period(2) | 96.9 | % | 96.3 | % | n/a | 0.6 | % | ||||||||||||
Redevelopment properties (2 properties) | |||||||||||||||||||
Rental income (1) | 2,108 | 2,184 | (76 | ) | (3.5 | ) | % | ||||||||||||
Less: | |||||||||||||||||||
Property expenses | 810 | 714 | (96 | ) | (13.4 | ) | % | ||||||||||||
Redevelopment properties NOI | 1,298 | 1,470 | (172 | ) | (11.7 | ) | % | ||||||||||||
Same Store NOI, including redevelopment
properties(2) |
6,793 | 6,820 | (27 | ) | (0.4 | ) | % | ||||||||||||
Redevelopment properties occupancy at end of period | 87.3 | % | 89.8 | % | n/a | (2.5 | ) | % | |||||||||||
Non-same store properties (3 properties) | |||||||||||||||||||
Rental income (1) | 1,703 | 210 | 1,493 | 711.0 | % | ||||||||||||||
Less: | |||||||||||||||||||
Property expenses | 561 | 88 | (473 | ) | (537.5 | ) | % | ||||||||||||
Non-same store net operating income | 1,142 | 122 | 1,020 | 836.1 | % | ||||||||||||||
Total net operating income | 7,935 | 6,942 | 993 | 14.3 | % | ||||||||||||||
Other revenues | 1,396 | 1,477 | (81 | ) | (5.5 | ) | % | ||||||||||||
Less other expenses | 8,201 | 7,466 | (735 | ) | (9.8 | ) | % | ||||||||||||
Income (loss) from continuing operations | 1,130 | 953 | 177 | 18.6 | % | ||||||||||||||
Income from discontinued operations | - | 28 | (28 | ) | (100.0 | ) | % | ||||||||||||
Net income | $ | 1,130 | $ | 981 | $ | 149 | 15.2 | % |
_____________
(1) | Rental income from operating leases on the consolidated statements of operations is comprised of rental income, recovery income and percentage rent from same store properties, rental income and recovery income from non-same store properties and amortization of straight-line rents and above/below market rents. For the three months ended June 30, 2014 and 2013, rental income from operating leases was $11,672 and $9,863, respectively. | |
(2) | For a definition and reconciliation of NOI and a statement disclosing the reasons why our management believes that presentation of NOI provides useful information to investors and, to the extent material, any additional purposes for which our management uses NOI, see “Net Operating Income” below. | |
Same Store Property Analysis (in thousands except for number of properties, percentages and per share data): |
|||||||||||||||||||
Six months ended June 30, | |||||||||||||||||||
2014 | 2013 | Change $ |
Change % |
||||||||||||||||
Same store properties (28 properties) | |||||||||||||||||||
Rental income (1) | $ | 11,330 | $ |
11,082 |
$ |
248 |
2.2 |
% | |||||||||||
Recovery income (1) | 3,956 |
3,538 |
418 |
11.8 |
% | ||||||||||||||
Percentage rent (1) | 53 | 46 | 7 | 15.2 | % | ||||||||||||||
Less: | |||||||||||||||||||
Property expenses | 4,298 |
3,932 |
(366 |
) |
(9.3 |
) | % | ||||||||||||
Same store NOI, excluding redevelopment
properties |
11,041 | 10,734 | 307 | 2.9 | % | ||||||||||||||
Same store occupancy, excluding redevelopment | |||||||||||||||||||
properties, at end of period(2) | 96.9 | % | 96.3 | % | n/a | 0.6 | % | ||||||||||||
Redevelopment properties (2 properties) | |||||||||||||||||||
Rental income (1) | 4,282 | 4,358 | (76 | ) | (1.7 | ) | % | ||||||||||||
Less: | |||||||||||||||||||
Property expenses | 1,648 | 1,544 | (104 | ) | (6.7 | ) | % | ||||||||||||
Redevelopment properties NOI | 2,634 | 2,814 | (180 | ) | (6.4 | ) | % | ||||||||||||
Same Store NOI, including redevelopment
properties(2) |
13,675 | 13,548 | 127 | 0.9 | % | ||||||||||||||
Redevelopment properties occupancy at end of period | 87.3 | % | 89.8 | % | n/a | (2.5 | ) | % | |||||||||||
Non-same store properties (4 properties) | |||||||||||||||||||
Rental income (1) | 3,369 | 1,410 | 1,959 | 138.9 | % | ||||||||||||||
Less: | |||||||||||||||||||
Property expenses | 1,239 | 413 | (826 | ) | (200.0 | ) | % | ||||||||||||
Non-same store net operating income | 2,130 | 997 | 1,133 | 113.6 | % | ||||||||||||||
Total net operating income | 15,805 | 14,545 | 1,260 | 8.7 | % | ||||||||||||||
Other revenues | 2,852 | 10,301 | (7,449 | ) | (72.3 | ) | % | ||||||||||||
Less other expenses | 16,355 | 15,525 | (830 | ) | (5.3 | ) | % | ||||||||||||
Income (loss) from continuing operations | 2,302 | 9,321 | (7,019 | ) | (75.3 | ) | % | ||||||||||||
Income from discontinued operations | - | 56 | (56 | ) | (100.0 | ) | % | ||||||||||||
Net income | $ | 2,302 | $ | 9,377 | $ | (7,075 | ) | (75.5 | ) | % |
_____________
(1) | Rental income from operating leases on the consolidated statements of operations is comprised of rental income, recovery income and percentage rent from same store properties, rental income and recovery income from non-same store properties and amortization of straight-line rents and above/below market rents. For the six months ended June 30, 2014 and 2013, rental income from operating leases was $23,567 and $20,899, respectively. | |
(2) | For a definition and reconciliation of NOI and a statement disclosing the reasons why our management believes that presentation of NOI provides useful information to investors and, to the extent material, any additional purposes for which our management uses NOI, see “Net Operating Income” below. |
Summary of Capital Expenditures (in thousands): |
|||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Non-maintenance capital expenditures: | |||||||||||||
Tenant improvements - new leases | $ | 11 | $ | 3 | $ | 67 | $ | 80 | |||||
Tenant improvements - renewals | 150 | 164 | 773 | 414 | |||||||||
Leasing commissions | 266 | 206 | 440 | 329 | |||||||||
Development, redevelopment and expansion | 293 | 830 | 514 | 856 | |||||||||
Total non-maintenance capital expenditures | 720 | 1,203 | 1,794 | 1,679 | |||||||||
Maintenance capital expenditures | - | - | 41 | - | |||||||||
Total capital expenditures | $ | 720 | $ | 1,203 | $ | 1,835 | $ | 1,679 |
Rental Income from Operating Leases (in thousands): |
||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Base minimum rent | $ | 8,246 | $ | 7,005 | $ | 16,435 | $ | 14,878 | ||||
Straight-line rent adjustments | 79 | 98 | 168 | 253 | ||||||||
Amortization of above/below market rent | 111 | 108 | 323 | 216 | ||||||||
Percentage rent | 7 | 15 | 37 | 49 | ||||||||
Lease termination income | 85 | - | 85 | - | ||||||||
Recovery income | 3,144 | 2,637 | 6,519 | 5,503 | ||||||||
Rental income from operating leases | $ | 11,672 | $ | 9,863 | $ | 23,567 | $ | 20,899 |
Advisory Services Income – Related Party (in thousands): |
|||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Leasing commission income | $ | 238 | $ | 138 | $ | 344 | $ | 280 | |||||
Brokerage commission income | - | 33 | - | 33 | |||||||||
Property management fee income | 417 | 433 | 830 | 797 | |||||||||
Development fee income | 5 | 36 | 11 | 157 | |||||||||
Asset management fee income | 191 | 156 | 383 | 311 | |||||||||
Construction management fee income | 18 | 76 | 47 | 137 | |||||||||
Advisory services income - related party | $ | 869 | $ | 872 | $ | 1,615 | $ | 1,715 | |||||
Interest and other income - related party | $ | 12 | $ | 53 | $ | 22 | $ | 109 | |||||
Reimbursements of administrative costs | $ | 230 | $ | 211 | $ | 452 | $ | 403 |
Capitalization Data (in thousands, except per share and percent data): |
|||||||||
June 30, 2014 | December 31, 2013 | ||||||||
Equity capitalization - | |||||||||
Common shares outstanding | 19,685 | 19,628 | |||||||
NYSE closing price(1) | $ | 18.30 | $ | 16.80 | |||||
Total equity capitalization | $ | 360,236 | $ | 329,750 | |||||
Debt capitalization - | |||||||||
Variable rate line of credit | $ | 20,500 | $ | - | |||||
Fixed rate mortgage loans | 198,633 | 199,851 | |||||||
Total debt capitalization(2) | $ | 219,133 | $ | 199,851 | |||||
Total capitalization | $ | 579,369 | $ | 529,601 | |||||
Debt statistics - | |||||||||
Total debt to total capitalization | 37.8 | % | 37.7 | % | |||||
Ratio of EBITDA to combined fixed charges(3) | 2.51 | 3.03 |
(4) |
||||||
Total debt to EBITDA(3) | 7.03 |
(5) |
5.49 |
(6) |
_____________
(1) | Represents the last reported price per share of our common stock on the New York Stock Exchange on the applicable date. | |
(2) | Total debt capitalization above is $153 less than total debt as reported in our consolidated balance sheets as of June 30, 2014, due to the premium recorded on above-market debt assumed in conjunction with certain of our property acquisitions. | |
(3) | Fixed charges consist of interest expense and scheduled principal payments on borrowed funds (including capitalized interest, but excluding amortization of debt premium). For the purpose of calculating the ratio of EBITDA to combined fixed charges, both EBITDA and fixed charges are calculated for the six months ended June 30, 2014 and December 31, 2013. For the purpose of calculating total debt to EBITDA as of June 30, 2014 and December 31, 2013, EBITDA is calculated for the twelve month periods ended June 30, 2014 and December 31, 2013, respectively. | |
(4) | EBITDA for the twelve months ended December 31, 2013 includes gains of $10.8 million on the sale of real estate. Excluding these gains, the ratio of EBITDA to combined fixed charges is 2.47. | |
(5) | EBITDA for the twelve months ended June 30, 2014 includes gains of $3.1 million on the sale of real estate. Excluding these gains, the ratio of total debt to EBITDA is 7.80. | |
(6) | EBITDA for the twelve months ended December 31, 2013 includes gains of $10.8 million on the sale of real estate. Excluding these gains, the ratio of total debt to EBITDA is 7.19. |
Reconciliation of net income to EBITDA (in thousands): |
||||||||||||
Six months ended | Twelve months ended | |||||||||||
June 30, 2014 | December 31, 2013 | June 30, 2014 | December 31, 2013 | |||||||||
Net income | $ | 2,302 | $ | 5,442 | $ | 7,744 | $ | 14,819 | ||||
Interest expense | 4,951 | 4,843 | 9,794 | 9,603 | ||||||||
State income taxes | 24 | 15 | 39 | 30 | ||||||||
Depreciation and amortization | 6,216 | 5,920 | 12,136 | 11,945 | ||||||||
Adjustments for Advised Funds | 1,085 | 388 | 1,473 | 2,203 | ||||||||
EBITDA | $ | 14,578 | $ | 16,608 | $ | 31,186 | $ | 38,600 |
Outstanding Debt and Terms: |
|||||||||||||||||
AmREIT Debt Information (in thousands) |
|||||||||||||||||
Description |
Amount |
Interest Rate |
Annual Debt |
Maturity |
% of total |
Weighted |
|||||||||||
Property Mortgages: | |||||||||||||||||
500 Lamar | $ | 1,487 | 6.00 | % | $ | 89 | 2/1/2015 | ||||||||||
Uptown Park | 49,000 | 5.37 | % | 2,631 | 6/1/2015 | ||||||||||||
2015 Maturities | 50,487 | 23.04 | % | 5.39 | % | ||||||||||||
Plaza in the Park | 23,102 | 3.45 | % | 797 | 1/1/2016 | ||||||||||||
Market at Lake Houston | 15,675 | 5.75 | % | 901 | 1/1/2016 | ||||||||||||
Cinco Ranch | 9,688 | 3.45 | % | 334 | 1/1/2016 | ||||||||||||
Southbank - Riverwalk | 20,000 | 5.91 | % | 1,182 | 6/1/2016 | ||||||||||||
2016 Maturities | 68,465 | 31.24 | % | 4.70 | % | ||||||||||||
Bakery Square | 1,368 | 8.00 | % | 109 | 2/10/2017 | ||||||||||||
2017 Maturities | 1,368 | 0.62 | % | 8.00 | % | ||||||||||||
Alpharetta Commons | 11,908 | 4.54 | % | 541 | 8/1/2018 | ||||||||||||
2018 Maturities | 11,908 | 5.43 | % | 4.54 | % | ||||||||||||
Preston Royal Northwest | 22,727 | 3.21 | % | 730 | 1/1/2020 | ||||||||||||
2020 Maturities | 22,727 | 10.37 | % | 3.21 | % | ||||||||||||
Brookwood Village | 7,119 | 5.40 | % | 384 | 2/10/2022 | ||||||||||||
Uptown Plaza - Dallas | 13,559 | 4.25 | % | 576 | 8/10/2022 | ||||||||||||
2022 Maturities | 20,678 | 9.44 | % | 4.65 | % | ||||||||||||
Woodlake Square | 23,000 | 4.30 | % | 989 | 10/1/2023 | ||||||||||||
2023 Maturities | 23,000 | 10.50 | % | 4.30 | % | ||||||||||||
Corporate debt: | |||||||||||||||||
$75.0 million Facility | 20,500 |
|
2.21 |
%(1) |
$ | 263 |
(1) |
8/1/2015 | 9.36 | % |
|
||||||
Total Maturities | $ | 219,133 |
(2) |
|
|||||||||||||
Fixed-rate debt: | |||||||||||||||||
Weighted average fixed rate | 4.66 | % | |||||||||||||||
Weighted average years to maturity | 4.1 |
____________
(1) | The $75.0 million Facility bears interest at LIBOR plus a margin of 205 basis points to 275 basis points, depending on our leverage, and carries a fee equal to 0.35% of the unused portion of the total amount available under the facility. Annual debt service assumes the amount outstanding and interest rates as of June 30, 2014, remain constant. | |
(2) | Total maturities above are $153 less than total debt as reported in our consolidated balance sheets as of June 30, 2014, due to the premium recorded on above-market debt assumed in conjunction with certain of our property acquisitions. |
Interest Expense Detail (in thousands): |
||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Fixed-rate debt interest expense | $ | 2,334 | $ | 2,105 | $ | 4,657 | $ | 4,271 | ||||||||
Variable-rate debt interest expense | 8 | 25 | 8 | 243 | ||||||||||||
$75 million Facility unused fee | 66 | 67 | 133 | 104 | ||||||||||||
Amortization of deferred loan costs | 102 | 98 | 205 | 200 | ||||||||||||
Amortization of above market debt | (26 | ) | (28 | ) | (52 | ) | (58 | ) | ||||||||
Total interest expense | $ | 2,484 | $ | 2,267 | $ | 4,951 | $ | 4,760 | ||||||||
Wholly-Owned Property and Tenant Information as of June 30, 2014: |
||||||||||||||||
Property | Year Built / Renovated | GLA | Percent Occupied(1) | Percent Leased(2) | ABR(3) |
ABR per |
Average Net |
Key Tenants | ||||||||
Houston, TX |
||||||||||||||||
Uptown Park | 1999/2005 | 169,112 | 91.9 | % | 91.9 | % | $ | 5,630,801 | $ | 36.22 | $ | 36.87 | The Tasting Room, McCormick & Schmicks (owned by Landry's) | |||
Plaza in the Park | 1999/2009 | 144,054 | 100.0 | % | 100.0 | % | 2,896,419 | 20.11 | 20.12 | Kroger | ||||||
Woodlake Square | 1970/2011 | 156,888 | 92.6 | % | 100.0 | % | 2,476,095 | 17.05 | 17.73 | Randalls, Walgreens, Jos. A. Bank, Five Guys | ||||||
The Market at Lake Houston | 2000 | 101,799 | 100.0 | % | 100.0 | % | 1,625,451 | 15.97 | 16.00 | H-E-B, Five Guys | ||||||
Cinco Ranch | 2001 | 97,297 | 94.0 | % | 98.6 | % | 1,210,326 | 13.23 | 14.07 | Kroger | ||||||
Lantern Lane | 1962 | 81,567 | 100.0 | % | 100.0 | % | 1,680,609 | 20.60 | 20.60 | Fresh Market | ||||||
Uptown Plaza - Houston | 2002 | 28,000 | 94.3 | % | 94.3 | % | 1,256,546 | 47.60 | 47.32 | CVS/pharmacy, The Grotto (owned by Landry's) | ||||||
Bakery Square | 1996 | 34,614 | 97.0 | % | 97.0 | % | 954,636 | 28.44 | 28.50 | Walgreens, Boston Market | ||||||
Woodlands Plaza | 1997/2003 | 19,517 | 100.0 | % | 100.0 | % | 553,971 | 28.38 | 28.71 | FedEx Office, Freebirds World Burrito | ||||||
Terrace Shops | 2000 | 16,395 | 100.0 | % | 100.0 | % | 487,838 | 29.76 | 30.78 | Starbucks | ||||||
The Container Store(6) | 2011 | 25,083 | 100.0 | % | 100.0 | % | 425,323 | 16.96 | 17.86 | The Container Store | ||||||
Sugar Land Plaza |
1998/2001 | 16,750 | 100.0 | % | 100.0 | % | 408,188 | 24.37 | 23.45 | Memorial Hermann | ||||||
CVS/Pharmacy(7) | 2003 | 13,824 | 100.0 | % | 100.0 | % | 327,167 | 23.67 | 23.67 | CVS/pharmacy | ||||||
The Courtyard on Post Oak | 1994 | 13,597 | 29.4 | % | 29.4 | % | 260,845 | 65.26 | 58.06 | Verizon | ||||||
T.G.I. Friday's(6) | 1982 | 8,500 | 100.0 | % | 100.0 | % | 215,000 | 25.29 | 25.90 | T.G.I. Friday's | ||||||
Golden Corral(6)(8) | 1992 | 12,000 | 100.0 | % | 100.0 | % | 210,450 | 17.54 | 17.54 | Golden Corral | ||||||
Golden Corral(6)(8) | 1993 | 12,000 | 100.0 | % | 100.0 | % | 208,941 | 17.41 | 17.41 | Golden Corral | ||||||
Jared The Galleria of Jewelry(7) |
2012 | 6,057 | 100.0 | % | 100.0 | % | 180,000 | 29.72 | 34.48 |
Jared The Galleria of Jewelry |
||||||
Landry's Seafood(7) | 1995 | 13,497 | 100.0 | % | 100.0 | % | 155,677 | 11.53 | 12.18 | Landry's Seafood | ||||||
Bank of America(7) | 1994 | 4,251 | 100.0 | % | 100.0 | % | 129,275 | 30.41 | 28.78 | Bank of America | ||||||
Macaroni Grill(6) | 1994 | 7,825 | 100.0 | % | 100.0 | % | 96,000 | 12.27 | 12.82 | Macaroni Grill | ||||||
T.G.I. Friday's(7) | 1994 | 6,543 | 100.0 | % | 100.0 | % | 96,000 | 14.67 | 15.43 | T.G.I. Friday's | ||||||
Houston Subtotal/Weighted Average | 989,170 | 95.6 | % | 97.5 | % | $ | 21,485,557 | $ | 22.72 | $ | 21.28 | |||||
Dallas, TX |
||||||||||||||||
Preston Royal East | 1956 | 107,914 | 87.2 | % | 91.8 | % | $ | 2,484,319 | $ | 26.40 | $ | 27.18 | Bank of America, Starbucks, FedEx Office | |||
Preston Royal West | 1959 | 122,564 | 98.4 | % | 98.4 | % | 2,662,820 | 22.07 | 22.63 | Tom Thumb, Barnes & Noble, Spec's | ||||||
Uptown Plaza - Dallas | 2006 | 33,840 | 89.0 | % | 89.0 | % | 1,279,235 | 42.49 | 46.74 | Morton's (owned by Landry's), Wells Fargo | ||||||
Dallas Subtotal/Weighted Average | 264,318 | 92.6 | % | 94.5 | % | $ | 6,426,373 | $ | 26.25 | $ | 27.34 | |||||
Atlanta, GA |
||||||||||||||||
Fountain Oaks | 1988 | 160,598 | 79.3 | % | 79.3 | % | $ | 1,753,126 | $ | 13.77 | $ | 13.86 | Kroger | |||
Alpharetta Commons | 1997 | 94,544 | 98.7 | % | 98.7 | % | 1,351,509 | 14.48 | 14.49 | Publix | ||||||
Brookwood Village | 1941/2000 | 28,774 | 90.0 | % | 90.0 | % | 704,354 | 27.18 | 27.22 | CVS/pharmacy, Subway | ||||||
Smokey Bones(7) | 1998 | 6,867 | 100.0 | % | 100.0 | % | 106,787 | 15.55 | 15.55 | Smokey Bones | ||||||
Atlanta Subtotal/Weighted Average | 290,783 | 87.2 | % | 87.2 | % | $ | 3,915,776 | $ | 15.45 | $ | 15.50 | |||||
Other |
||||||||||||||||
Southbank | 1995 | 46,673 | 100.0 | % | 100.0 | % | $ | 1,787,848 | $ | 38.31 | $ | 38.35 | Hard Rock Café | |||
500 Lamar | 1998 | 12,795 | 100.0 | % | 100.0 | % | 429,856 | 33.60 | 31.35 | Title Nine Sports | ||||||
T.G.I. Friday's(7)(8) | 2003 | 6,802 | 100.0 | % | 100.0 | % | 163,304 | 24.01 | 23.44 | T.G.I. Friday's | ||||||
Citibank(7) | 2005 | 4,439 | 100.0 | % | 100.0 | % | 160,000 | 36.04 | 36.04 | Citibank | ||||||
Other Subtotal/Weighted Average | 70,709 | 100.0 | % | 100.0 | % | $ | 2,541,008 | $ | 35.94 | $ | 35.50 | |||||
Portfolio Total/Weighted Average(9) | 1,614,980 | 93.8 | % | 95.2 | % | $ | 34,368,714 | $ | 22.69 | $ | 21.96 |
_______________
(1) | Percent occupied is calculated as (i) GLA under commenced leases as of June 30, 2014, divided by (ii) total GLA, expressed as a percentage. | |
(2) | Percent leased is calculated as (i) GLA under signed leases as of June 30, 2014, divided by (ii) total GLA, expressed as a percentage. | |
(3) | ABR is calculated by multiplying (i) monthly base rent as of June 30, 2014, for leases that had commenced as of such date, by (ii) 12. | |
(4) | ABR per leased square foot is calculated by dividing (i) ABR, by (ii) GLA under commenced leases as of June 30, 2014. | |
(5) | Average net effective ABR per leased square foot represents (i) the contractual base rent for commenced leases as of June 30, 2014, calculated on a straight line basis to amortize free rent periods, abatements and contractual rent increases, but without subtracting tenant improvement allowances and leasing commissions, divided by (ii) GLA under commenced leases as of June 30, 2014. | |
(6) | These leases represent single-tenant fee simple properties in which we own the land and the building, and the tenant is responsible for all expenses relating to the property. The weighted average remaining term of our fee simple leases is 6.8 years. | |
(7) | These leases represent single-tenant ground leases in which we own and lease the land to the tenant. The tenant owns the building during the term of the lease and is responsible for all expenses relating to the property. Upon expiration or termination of the lease, ownership of the building will revert to us as owner of the land. The weighted average remaining term of our ground leases is 3.6 years. | |
(8) | The tenants at these properties have rights of first refusal to purchase the property. | |
(9) | Percent occupied, excluding our redevelopment properties of Uptown Park and The Courtyard on Post Oak, was 94.6% as of June 30, 2014. |
Redevelopment Table:
There is no guaranty that we will ultimately complete any or all of these opportunities, that the expected return on investment or projected costs will be the amounts shown or that stabilization will occur as anticipated. Such amounts and dates represent management's best estimate, which is based on current information and may change over time.
Revised |
|
|
|
|
|
||||||||||||||||||
Property | Location |
Current |
Owned GLA | Non-Owned GLA | Opportunity |
Redevelopment / |
Expected ROI |
AmREIT Projected |
Costs to Date |
Anticipated |
Anticipated |
||||||||||||
Uptown Park - Baker Site |
Houston, TX | 12,200 | 272,550 |
N/A |
We anticipate developing an approximate 200-unit multi-family tower with approximately 40,000 square feet of ground floor retail |
R | 7 - 10% |
$75 - 85 million |
$0.6 million |
2017 |
2019 |
||||||||||||
Uptown Park - Southeast Corner | Houston, TX | - | 20,000 | 581,000 | We anticipate executing a ground lease with a co-developer who will own the residential and hospitality improvements above our retail that will be owned in a condominium interest | D |
11 - 13% |
$15 - 20 million | $ - | 2017 | 2018 | ||||||||||||
The Courtyard | Houston, TX | 13,597 | 18,200 | 356,000 | We anticipate executing a ground lease with a co-developer who will own the residential improvements above our retail that will be owned in a condominium interest | R |
19 - 21% |
$8 - 10 million |
$0.1 million | 2017 | 2018 | ||||||||||||
Inverness Townhomes | Houston, TX | - | 16,560 | 560,000 |
We anticipate co-developing a mixed use project with office and retail. We plan to master lease the retail portion of the project from the venture for 50 years |
D |
12 - 14% |
$7 - 8 million |
$ - | 2017 | 2018 | ||||||||||||
Fountain Oaks - Kroger Box | Atlanta, GA | 160,598 | 190,598 | N/A |
Kroger lease option allows expansion of space from 58,000 square feet of GLA to 88,000 square feet of GLA along with a fresh 20-year term |
R | 8.25% |
$6.5 - 7.5 million |
$ - | 2015 | 2015 | ||||||||||||
Woodlake Square Pad Sites | Houston, TX | 7,000 | 11,500 | N/A | Development of a retail pad and redevelopment of an existing outparcel building | D/R | 6 - 10% | $1 - 1.5 million | $0.1 million | 2014 | 2014 | ||||||||||||
|
|||||||||||||||||||||||
Total |
193,395 | 529,408 | 1,497,000 | 10% |
[5] |
$112.5 - 132.0 million |
$0.8 million |
___________
[1] | Redevelopment represents significant construction and refurbishment at operating properties. Development represents initial construction, primarily from unimproved land. | |
[2] | Expected ROI (return on investment) for redevelopment projects generally reflects only the deal specific cash, unleveraged incremental property net operating income (NOI) generated by the redevelopment and is calculated as incremental NOI divided by incremental cost. Incremental property NOI is the NOI generated by the redevelopment after deducting rent being paid or management's estimate of rent to be paid for the redevelopment space and any other space taken out of service to accommodate the redevelopment. | |
For development projects, expected return on investment reflects the deal specific cash, unleveraged property NOI generated by the development and is calculated as NOI divided by cost. | ||
Expected return on investment for development and redevelopment projects does not include peripheral impacts, such as the impact on future lease rollovers at the property or the impact on the long-term value of the property. | ||
[3] | Amounts include construction costs, anticipated tenant improvements and lease-up costs, including anticipated commissions that will be borne by the Company. | |
[4] | Stabilization is reached when the property achieves targeted occupancy, typically 95%. | |
[5] | Represents the weighted average expected return on investment for all properties. | |
Summary of Top 25 Tenants: |
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Year to Date Base Rent | |||||||||||||||
Year to Date | as a Percentage of | Tenant |
Percentage of |
||||||||||||
Rank | Tenant Name | Base Rent | Portfolio Base Rent | GLA |
Total GLA |
||||||||||
1 | Kroger | $ 1,061,919 | 6.39% | 203,724 | 12.61% | ||||||||||
2 | Landry's | 625,893 | 3.77% | 38,819 | 2.40% | ||||||||||
3 | CVS/pharmacy | 611,119 | 3.68% | 37,485 | 2.32% | ||||||||||
4 | H-E-B | 554,868 | 3.34% | 80,641 | 4.99% | ||||||||||
5 | Safeway | 453,354 | 2.73% | 89,809 | 5.56% | ||||||||||
6 | Publix | 390,468 | 2.35% | 65,146 | 4.03% | ||||||||||
7 | Walgreens | 315,310 | 1.90% | 30,240 | 1.87% | ||||||||||
8 | Bank of America | 256,559 | 1.54% | 8,129 | 0.50% | ||||||||||
9 | Hard Rock Cafe | 248,412 | 1.50% | 15,752 | 0.98% | ||||||||||
10 | Barnes & Noble | 243,750 | 1.47% | 26,147 | 1.62% | ||||||||||
11 |
T.G.I. Friday's |
235,376 | 1.42% | 6,802 | 0.42% | ||||||||||
12 | The Container Store | 223,994 | 1.35% | 25,019 | 1.55% | ||||||||||
13 | Champps Americana | 209,696 | 1.26% | 11,384 | 0.70% | ||||||||||
14 | Golden Corral | 208,867 | 1.26% | 24,000 | 1.49% | ||||||||||
15 | Paesanos | 203,292 | 1.22% | 8,017 | 0.50% | ||||||||||
16 | Tasting Room | 194,531 | 1.17% | 8,966 | 0.56% | ||||||||||
17 | The County Line | 185,873 | 1.12% | 10,614 | 0.66% | ||||||||||
18 | Dougherty's Pharmacy | 167,544 | 1.01% | 12,093 | 0.75% | ||||||||||
19 | Spec's Family Partners, Ltd. | 144,284 | 0.87% | 9,918 | 0.61% | ||||||||||
20 | Verizon Wireless | 134,250 | 0.81% | 5,513 | 0.34% | ||||||||||
21 | River Oaks Imaging & Diagnostic, L.P. | 128,754 | 0.78% | 10,750 | 0.67% | ||||||||||
22 | Howl At The Moon Saloon | 126,726 | 0.76% | 7,055 | 0.44% | ||||||||||
23 | Potbelly | 125,660 | 0.76% | 5,458 | 0.34% | ||||||||||
24 | Buca Di Beppo | 124,896 | 0.75% | 7,573 | 0.47% | ||||||||||
25 | Chico's FAS, Inc | 118,954 | 0.72% | 6,670 | 0.41% | ||||||||||
Retail Leasing Summary for Comparable Leases(1): |
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For the three months ended | For the six months ended | ||||||||||||||||||||||||||||||||||||||
June 30, | June 30, | For the year ended December 31, | |||||||||||||||||||||||||||||||||||||
Expirations | 2014 | 2013 | 2014 | 2013 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||
Number of leases | 22 | 19 | 43 | 31 | 50 | 44 | 53 | ||||||||||||||||||||||||||||||||
GLA | 70,062 | 54,171 | 126,106 | 78,080 | 133,796 | 180,245 | 187,605 | ||||||||||||||||||||||||||||||||
New Leases(1) | |||||||||||||||||||||||||||||||||||||||
Number of leases | 5 | 2 | 9 | 6 | 10 | 5 | 7 | ||||||||||||||||||||||||||||||||
GLA | 11,821 | 3,410 | 19,211 | 11,877 | 19,419 | 12,997 | 14,231 | ||||||||||||||||||||||||||||||||
Expiring ABR per square foot | $ | 28.01 | $ | 27.25 | $ | 29.99 | $ | 24.67 | $ | 25.67 | $ | 27.22 | $ | 28.36 | |||||||||||||||||||||||||
Weighted average annual TIs per square foot - expiring | $ | 0.19 | $ | 2.76 | $ | 0.30 | $ | 1.17 | $ | 1.35 | $ | - | $ | 0.68 | |||||||||||||||||||||||||
New ABR per square foot | $ | 42.49 | $ | 28.47 | $ | 41.73 | $ | 31.99 | $ | 31.65 | $ | 34.84 | $ | 30.85 | |||||||||||||||||||||||||
Weighted average annual TIs per square foot - new | $ | 4.08 | $ | 1.17 | $ | 3.72 | $ | 2.10 | $ | 1.88 | $ | 3.09 | $ | 1.60 | |||||||||||||||||||||||||
% Change (Cash) | 51.7 | % | 4.5 | % | 39.1 | % | 29.7 | % | 23.3 | % | 28.0 | % | 8.8 | % | |||||||||||||||||||||||||
Renewals(2) | |||||||||||||||||||||||||||||||||||||||
Number of leases | 14 | 15 | 28 | 24 | 36 | 30 | 38 | ||||||||||||||||||||||||||||||||
GLA | 34,798 | 48,090 | 76,837 | 67,097 | 94,572 | 115,501 | 143,324 | ||||||||||||||||||||||||||||||||
Expiring ABR per square foot | $ | 30.22 | $ | 23.26 | $ | 26.45 | $ | 24.45 | $ | 26.27 | $ | 23.91 | $ | 24.92 | |||||||||||||||||||||||||
New ABR per square foot | $ | 32.69 | $ | 25.01 | $ | 28.68 | $ | 26.23 | $ | 28.40 | $ | 25.27 | $ | 25.74 | |||||||||||||||||||||||||
% Change (Cash) | 8.2 | % | 7.5 | % | 8.4 | % | 7.3 | % | 8.1 | % | 5.7 | % | 3.3 | % | |||||||||||||||||||||||||
Combined | |||||||||||||||||||||||||||||||||||||||
Number of leases | 19 | 17 | 37 | 30 | 46 | 35 | 45 | ||||||||||||||||||||||||||||||||
GLA | 46,619 | 51,500 | 96,048 | 78,974 | 113,991 | 128,498 | 157,555 | ||||||||||||||||||||||||||||||||
Expiring ABR per square foot | $ | 29.66 | $ | 23.52 | $ | 27.16 | $ | 24.48 | $ | 26.17 | $ | 24.24 | $ | 25.23 | |||||||||||||||||||||||||
New ABR per square foot | $ | 35.17 | $ | 25.24 | $ | 31.29 | $ | 27.09 | $ | 28.94 | $ | 26.24 | $ | 26.20 | |||||||||||||||||||||||||
% Change (Cash) | 18.6 | % | 7.3 | % | 15.2 | % | 10.5 | % | 10.6 | % | 8.2 | % | 3.8 | % |
___________
(1) | Comparable leases are defined as renewals or new leases for a space that was not vacant for more than 12 consecutive months prior to lease signing. | |
(2) | Represents existing tenants that, upon expiration of their leases, enter into new leases for the same space. |
Lease Expiration Table: |
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Anchor Tenants (>20,000 square feet) | Shop Space Tenants (≤20,000 square feet) | Total | ||||||||||||||||||||||||
Year |
Expiring |
Tenant |
% of GLA |
ABR Per |
Expiring |
% of GLA |
ABR Per |
Expiring |
% of GLA |
ABR Per |
||||||||||||||||
Vacant | - | - | $ | - | 100,174 | 9.1 | % | $ | - | 100,174 | 6.2 | % | $ | - | ||||||||||||
2014 | - | - | - | 72,653 | 6.6 | % | 27.35 | 72,653 | 4.5 | % | 27.35 | |||||||||||||||
2015 | 26,147 | Barnes & Noble | 5.1 | % | 18.64 | 147,742 | 13.4 | % | 29.59 | 173,889 | 10.8 | % | 27.95 | |||||||||||||
2016 | - | - | - | 161,072 | 14.6 | % | 28.74 | 161,072 | 10.0 | % | 28.74 | |||||||||||||||
2017 | 145,787 | H-E-B, Publix | 28.5 | % | 12.97 | 94,194 | 8.5 | % | 28.00 | 239,981 | 14.9 | % | 18.87 | |||||||||||||
2018 | - | - | - | 145,899 | 13.2 | % | 26.36 | 145,899 | 9.0 | % | 26.36 | |||||||||||||||
2019 | - | - | - | 94,871 | 8.6 | % | 27.26 | 94,871 | 5.9 | % | 27.26 | |||||||||||||||
2020 | - | - | - | 48,518 | 4.4 | % | 29.91 | 48,518 | 3.0 | % | 29.91 | |||||||||||||||
2021 | 81,217 | Kroger | 15.9 | % | 12.83 | 28,945 | 2.6 | % | 28.63 | 110,162 | 6.8 | % | 16.98 | |||||||||||||
2022 | 25,083 | The Container Store | 4.9 | % | 16.96 | 61,440 | 5.6 | % | 28.33 | 86,523 | 5.4 | % | 25.03 | |||||||||||||
2023 | 122,507 | Kroger | 24.0 | % | 8.83 | 32,677 | 3.0 | % | 35.56 | 155,184 | 9.6 | % | 14.46 | |||||||||||||
2024 + | 110,459 | Safeway | 21.6 | % | 10.06 | 115,595 | 10.4 | % | 26.72 | 226,054 | 13.9 | % | 18.58 | |||||||||||||
Total / Weighted Avg | 511,200 | 11.81 | 1,103,780 | 28.23 | 1,614,980 | 22.69 |
_____________
(1) | ABR per square foot is calculated by multiplying (i) the monthly base rent as of June 30, 2014, for leases expiring during the applicable period by (ii) 12 and then dividing the result by GLA for such leases. |
Lease Distribution Table: |
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GLA Range |
Number of |
Percentage of |
Total GLA |
Total |
Percent |
Percentage of |
ABR(1) |
Percentage of |
ABR Per |
||||||||||||||
2,500 or less | 210 | 60.2 | % | 326,807 | 291,363 | 89.2 | % | 19.2 | % | $ | 8,606,877 | 25.0 | % | 29.54 | |||||||||
2,501 - 5,000 | 77 | 22.1 | % | 295,103 | 269,304 | 91.3 | % | 17.8 | % | 7,873,462 | 22.9 | % | 29.24 | ||||||||||
5,001 - 10,000 | 38 | 10.9 | % | 288,453 | 265,833 | 92.2 | % | 17.5 | % | 7,483,693 | 21.8 | % | 28.15 | ||||||||||
10,001 - 20,000 | 14 | 4.0 | % | 193,417 | 177,106 | 91.6 | % | 11.7 | % | 4,365,947 | 12.7 | % | 24.65 | ||||||||||
greater than 20,000 | 10 | 2.8 | % | 511,200 | 511,200 | 100.0 | % | 33.8 | % | 6,038,735 | 17.6 | % | 11.81 | ||||||||||
Total portfolio | 349 | 100.0 | % | 1,614,980 | 1,514,806 | 93.8 | % | 100.0 | % | $ | 34,368,714 | 100.0 | % | 22.69 |
_____________
(1) | ABR is calculated by multiplying (i) the monthly base rent as of June 30, 2014, for leases in the applicable GLA range that had commenced as of such date by (ii) 12. | |
(2) | ABR per leased square foot is calculated by dividing (i) ABR for leases in the applicable GLA range by (ii) total leased GLA for leases in the applicable GLA range. | |
Significant Investments Table (in thousands, except percent and GLA data):
Of our Investments in Advised Funds, only our investments in MacArthur Park and Shadow Creek Ranch (which represent 54.9% and 35.1%, respectively of our Investments in Advised Funds balance as of June 30, 2014, comprise greater than 10% of the balance. The table below presents the NOI, debt and property data for these two investments.
MacArthur Park |
Shadow Creek |
||||||||
Year acquired | 2013 | 2009 | |||||||
Percent owned | 30.0 | % | 10.0 | % | |||||
For the three months ended June 30, 2014: | |||||||||
Revenues | $ | 1,867 | $ | 2,705 | |||||
Expenses | 636 | 875 | |||||||
NOI | $ | 1,231 | $ | 1,830 | |||||
For the six months ended June 30, 2014: | |||||||||
Revenues | $ | 3,778 | $ | 5,265 | |||||
Expenses | 1,253 | 1,626 | |||||||
NOI | $ | 2,525 | $ | 3,639 | |||||
As of June 30, 2014: | |||||||||
Real estate at cost | $ | 82,790 | $ | 113,279 | |||||
Mortgage obligation | $ | 43,900 | $ | 61,996 | |||||
Debt maturity | 04/01/2023 | 03/01/2015 | |||||||
GLA | 406,102 | 613,109 | |||||||
Percent occupied | 86.3 | % | 97.7 | % | |||||
Grocery anchor | Kroger | H.E.B. | |||||||
Other principal tenants | Michael's | Academy | |||||||
TJ Maxx | Burlington Coat Factory | ||||||||
Ulta | Hobby Lobby | ||||||||
Office Depot | Ashley Furniture | ||||||||
Reconciliation of income from Advised Funds to NOI from Advised Funds (in thousands): |
|||
Six months ended |
|||
Income from Advised Funds | $ | 368 | |
Depreciation of real estate assets | 611 | ||
Gain on sale of assets by JV | (145 | ) | |
FFO from Advised Funds | 834 | ||
Acquisition costs | - | ||
Core FFO from Advised Funds | 834 | ||
Interest expense | 474 | ||
Other GAAP and non-recurring adjustments | (72 | ) | |
NOI from Advised Funds | $ | 1,236 |
Definitions | ||
ABR | Annualized base rent. | |
Advised Funds | Collectively, our varying minority ownership interests in four high net worth investment funds, one institutional joint venture with Goldman Sachs, one institutional joint venture with J.P. Morgan Investment Management and one joint venture with two of our high net worth investment funds, MIG III and MIG IV. | |
Core FFO | FFO in accordance with NAREIT’s definition, adjusted to exclude items that management believes do not reflect our ongoing operations, such as acquisition expenses, non-recurring asset write-offs and recoveries, expensed issuance costs and gains on the sale of real estate held for resale. Management believes that such items therefore affect the comparability of our period-over-period performance with similar REITs. | |
EBITDA | Earnings before interest, income taxes, depreciation and amortization. Management believes that EBITDA is an appropriate supplemental measure of operating performance to net income. We define EBITDA as GAAP net income, plus interest expense, state or federal income taxes and depreciation and amortization. Management believes that EBITDA provides useful information to the investment community about our operating performance when compared to other REITs since EBITDA is generally recognized as a standard measure. However, EBITDA should not be viewed as a measure of our overall financial performance since it does not reflect depreciation and amortization, interest expense, provision for income taxes, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties. Other REITs may use different methodologies for calculating EBITDA and, accordingly, our EBITDA may not be comparable to other REITs. | |
FFO | Funds from operations, as defined by NAREIT, which includes net income (loss) computed in accordance with GAAP, excluding gains, losses or impairments on properties held for investment, plus real estate related depreciation and amortization, and after adjustments for similar items recorded by our Advised Funds. | |
GLA | Gross leasable area. | |
NAREIT | National Association of Real Estate Investment Trusts. | |
NOI | Net operating income, defined as operating revenues (rental income, tenant recovery income, percentage rent, excluding straight-line rental income and amortization of acquired above- and below-market rents) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line rent bad debt expense). Below for a reconciliation of net income to NOI: |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Net income |
$ | 1,130 | $ | 981 | $ | 2,302 | $ | 9,377 | |||||||||||||||||
Adjustments to add/(deduct): |
|||||||||||||||||||||||||
Amortization of straight-line rents and above/below-market rents(1) |
(190 | ) | (206 | ) | (491 | ) | (469 | ) | |||||||||||||||||
Advisory services income - related party | (868 | ) | (872 | ) | (1,615 | ) | (1,715 | ) | |||||||||||||||||
Real estate fee income | - | - | (100 | ) | - | ||||||||||||||||||||
Gain on sale of real estate acquired for | |||||||||||||||||||||||||
investment | - | - | - | (7,696 | ) | ||||||||||||||||||||
Lease termination income | (84 | ) | - | (84 | ) | - | |||||||||||||||||||
Interest and other income | (61 | ) | (154 | ) | (172 | ) | (268 | ) | |||||||||||||||||
Interest and other income - related party | (12 | ) | (53 | ) | (22 | ) | (109 | ) | |||||||||||||||||
Straight-line rent bad debt recoveries(2) |
(4 | ) | (55 | ) | 3 | (41 | ) | ||||||||||||||||||
General and administrative | 2,005 | 2,069 | 4,113 | 4,030 | |||||||||||||||||||||
Legal and professional | 316 | 258 | 695 | 506 | |||||||||||||||||||||
Real estate commissions | 74 | 52 | 129 | 104 | |||||||||||||||||||||
Acquisition costs | 224 | 126 | 224 | 126 | |||||||||||||||||||||
Depreciation and amortization | 3,090 | 2,732 | 6,216 | 6,025 | |||||||||||||||||||||
Loss (income) from Advised Funds | (181 | ) | (192 | ) | (368 | ) | (44 | ) | |||||||||||||||||
State income tax expense (benefit) | 12 | 17 | 24 | 15 | |||||||||||||||||||||
Interest expense | 2,484 | 2,267 | 4,951 | 4,760 | |||||||||||||||||||||
Income from discontinued operations | - | (28 | ) | - | (56 | ) | |||||||||||||||||||
Net operating income |
$ | 7,935 | $ | 6,942 | $ | 15,805 | $ | 14,545 | |||||||||||||||||
_____________
(1) | Included in rental income from operating leases as presented on our consolidated statements of operations. | |
(2) | Included in property expense on our consolidated statements of operations. |