NORTH MIAMI BEACH, Fla.--(BUSINESS WIRE)--Equity One, Inc. (NYSE:EQY), an owner, developer, and operator of shopping centers, announced today its financial results for the three and six months ended June 30, 2014.
Highlights of the quarter and recent activity include:
- Generated Recurring Funds From Operations of $0.32 per diluted share for the quarter, a 3% increase as compared to the second quarter of 2013, and $0.67 per diluted share for the six months ended June 30, 2014, a 6% increase as compared to the same period of 2013
- Generated Funds From Operations of $0.32 per diluted share for the quarter, a 14% increase as compared to the second quarter of 2013, and $0.67 per diluted share for the six months ended June 30, 2014, a 12% increase as compared to the same period of 2013
- Increased same property net operating income (NOI) by 2.6% as compared to the second quarter of 2013, and by 2.5% as compared to the six months ended June 30, 2013
- Consolidated shopping center occupancy increased to 94.2%, up 30 basis points as compared to March 31, 2014, and up 270 basis points as compared to June 30, 2013
- Same property occupancy increased 10 basis points to 94.2% as compared to March 31, 2014, and increased 40 basis points to 94.1% as compared to June 30, 2013
- Executed 125 new leases, renewals, and options during the quarter totaling 610,770 square feet at an average rent spread of 5.0% on a same space basis
- Increased average base rents to $16.68 per square foot at June 30, 2014, up 1.9% as compared to March 31, 2014, and up 8.7% as compared to June 30, 2013
- Year-to-date through this release, sold thirteen non-core assets for $106.9 million, including four assets for $32.3 million during the second quarter and five assets for $48.3 million subsequent to June 30, 2014, and have eight additional non-core assets under contract for $35.3 million
- Updated 2014 Recurring FFO guidance to a new range of $1.25 to $1.28 per diluted share, which compares to previous guidance of $1.23 to $1.28 per diluted share
“I am pleased we were able to deliver solid results during my first quarter as chief executive officer, including stronger than expected FFO growth, improved operating fundamentals, an accelerated pace of non-core dispositions and an increase in earnings guidance,” said David Lukes, CEO. “I am truly excited about our leadership team, the quality and redevelopment potential of our properties and our strategy for long term growth.”
Financial Highlights
Recurring FFO was $41.4 million, or $0.32 per diluted share, for the second quarter of 2014, as compared to $39.7 million, or $0.31 per diluted share, for the second quarter of 2013, representing a 3% increase on a per share basis. Recurring FFO was $86.8 million, or $0.67 per diluted share for the six months ended June 30, 2014, as compared to $80.6 million, or $0.63 per diluted share for the same period of 2013, representing a 6% increase on a per share basis. Recurring FFO for the six months ended June 30, 2014 included a $4.2 million net termination benefit related to the Loehmann’s lease at 101 7th Avenue and a $1.1 million reversal of bad debt expense associated with the settlement of historical real estate taxes with two tenants. In the second quarter of 2014, the company generated FFO of $41.4 million, or $0.32 per diluted share, as compared to $36.8 million, or $0.28 per diluted share for the second quarter of 2013, representing a 14% increase on a per share basis. FFO was $86.2 million, or $0.67 per diluted share for the six months ended June 30, 2014, as compared to $76.7 million, or $0.60 per diluted share for the same period of 2013, representing a 12% increase on a per share basis.
Net loss attributable to Equity One was $2.4 million, or $0.02 per diluted share, for the quarter ended June 30, 2014, as compared to net income attributable to Equity One of $33.6 million, or $0.28 per diluted share, for the second quarter of 2013. Net income attributable to Equity One was $23.9 million, or $0.20 per diluted share, for the six months ended June 30, 2014, as compared to $58.2 million, or $0.49 per diluted share, for the same period of 2013. The results for the three and six months ended June 30, 2014 included $13.9 million of impairment losses, net of tax, as compared to $2.7 million of impairment losses, net of tax, for the three and six months ended June 30, 2013. Net income attributable to Equity One for the six months ended June 30, 2014 included $5.8 million related to the company’s pro rata share of the gain on the sale of a joint venture property and the recognition of a $2.2 million gain due to the remeasurement of its existing equity investment in Talega Village Center upon the purchase of its joint venture partners’ interests. The results for the three and six months ended June 30, 2013 included $24.9 million and $36.1 million, respectively, of gains on the sale of income producing non-core properties and land, net of tax. A reconciliation of net (loss) income attributable to Equity One to FFO and the reconciling components of FFO to Recurring FFO are provided in the tables accompanying this press release.
Operating Highlights
Same property NOI increased 2.6% for the second quarter of 2014 as compared to the second quarter of 2013. Same property NOI increased 2.5% for the six months ended June 30, 2014, as compared to the same period of 2013. A reconciliation of same property NOI to (loss) income from continuing operations before tax and discontinued operations is provided in the tables accompanying this press release. As of June 30, 2014, occupancy for the company’s consolidated shopping center portfolio was 94.2%, up 30 basis points as compared to March 31, 2014, and up 270 basis points as compared to June 30, 2013. On a same property basis, occupancy increased 10 basis points to 94.2% as compared to March 31, 2014, and increased 40 basis points to 94.1% as compared to June 30, 2013. Same- property occupancy for shop space increased 80 basis points to 84.8% as compared to March 31, 2014, and increased 180 basis points to 84.5% as compared to June 30, 2013.
During the second quarter of 2014, the company executed 125 new leases, renewals, and options totaling 610,770 square feet, including 108 same space leases totaling 488,682 square feet. On a same space cash basis, average rents for these leases increased by 5.0%. On a same space basis, 23 new leases were executed in the second quarter of 2014 comprising 53,142 square feet at an average rental rate of $20.09 per square foot, representing a 10.8% increase from prior cash rents. Additionally, the company renewed 85 leases on a same space basis, totaling 435,540 square feet at an average rental rate of $14.22 per square foot, representing a 4.1% increase from prior cash rents. For the six months ended June 30, 2014, the company executed 248 new leases, renewals, and options totaling 1.3 million square feet, including 213 same space leases totaling 1.1 million square feet at an average rental rate of $16.44 per square foot, representing a 2.7% increase from prior cash rents. Excluding the new anchor lease executed during the first quarter of 2014 at Park Promenade, same space cash leasing spreads for the six months ended June 30, 2014 averaged 5.3% for all new leases, renewals and options, and 9.9% for new leases.
Development and Redevelopment Activities
As of June 30, 2014, the company had approximately $139.4 million of active development and redevelopment projects underway of which $69.4 million remained to be funded.
At Serramonte, the new 83,000 square foot Dick’s Sporting Goods store had a successful grand opening in April 2014 becoming the mall’s fourth anchor. At 101 7th Avenue, the former Loehmann’s space is being prepared for a new Barneys flagship store at an expected cost of $12.5 million. The company expects to deliver the space to Barneys by the first quarter of 2015 so that Barneys may commence its build-out. The company commenced demolition work at Alafaya Commons in Orlando, Florida, where the former grocery space is being redeveloped to accommodate a 63,000 square foot Academy Sports store at an estimated cost of $7.5 million. Academy Sports is expected to open for business in the first quarter of 2015.
Construction activity at Broadway Plaza, a development site in the Bronx, New York, is progressing as planned. The initial phase of the project, consisting of 115,000 square feet, is expected to open during the fourth quarter of 2014, and the second phase of the project, consisting of an additional 33,000 square feet, is expected to open in the second quarter of 2015. The four anchors for the initial phase of the project have all signed leases, including The Sports Authority, TJ Maxx, Aldi’s, and Party City, representing 72% of the space in the initial phase, including the entire second retail level. The total budgeted cost of the entire project is approximately $66.5 million of which $22.6 million remained to be funded as of June 30, 2014, $12.3 million of which related to the 115,000 square foot initial phase, and $10.3 million of which related to the 33,000 square foot second phase.
The company has six additional properties under active redevelopment at an expected cost of $52.9 million, of which $28.6 million remained to be funded as of June 30, 2014. These projects include design improvements, expansions and new anchor re-tenanting with retailers such as L.A. Fitness, Walgreens, Ulta Beauty, UFC Gym, Publix, CVS Pharmacy, The Fresh Market, and Ross. The company is actively working on future redevelopment opportunities that include projects to consolidate shop space, to upgrade the tenant mix of certain centers by replacing underperforming anchor tenants and to expand certain centers by adding new outparcels.
Disposition Activity
During the second quarter of 2014, the company closed on the sale of four non-core assets totaling approximately 337,000 square feet of gross leasable area (GLA) for $32.3 million. Since June 30, 2014 and through the date of this release, the company has closed on the sale of five additional non-core assets totaling approximately 494,000 square feet of GLA for $48.3 million, and has contracts to sell eight additional non-core assets totaling approximately 559,000 square feet of GLA for $35.3 million.
Year-to-date through this release, the total value of non-core assets sold and under contract is $142.3 million, representing a weighted average capitalization rate (excluding a property sold via short-sale for $5.4 million) of approximately 7.7%. The company continues to explore opportunities to dispose of additional non-core assets located in secondary markets as part of its capital recycling initiatives.
Balance Sheet Highlights
At June 30, 2014, the company’s total market capitalization (including debt and equity) was $4.6 billion, comprising 129.9 million shares of common stock outstanding (on a fully diluted basis) valued at approximately $3.1 billion and approximately $1.5 billion of debt (excluding any debt premium/discount). The company’s ratio of net debt (net of cash) to total market capitalization was 31.8%. At June 30, 2014, the company had approximately $62.9 million of cash and cash equivalents on hand (including cash in escrow and restricted cash) and $133.0 million drawn on its revolving credit facilities. Subsequent to June 30, 2014, cash released from escrow and proceeds from non-core asset dispositions were applied to the company’s revolving credit facilities and as of the date of this release $55.0 million remained drawn thereunder.
FFO and Earnings Guidance
The company updated its 2014 Recurring FFO guidance to a new range of $1.25 to $1.28 per diluted share, which compares to previous guidance of $1.23 to $1.28 per diluted share. Recurring FFO excludes one-time costs pertaining to the company’s reorganization, debt extinguishment gains/losses, impairment charges, severance costs, transaction costs, gains/losses on disposal of assets, and certain other income or charges. The 2014 guidance is based on the following key assumptions:
- Increase in same property NOI of 2.5% to 3.25%
- Increase in same property occupancy of approximately 100 basis points
- Core acquisitions of zero to $100 million in the second half of 2014
- Joint venture acquisitions of zero to $100 million in the second half of 2014
- Non-core dispositions of $150 million to $175 million, including the 2014 sales activity announced in this release
The following table provides a reconciliation of the range of estimated net income attributable to Equity One per diluted share to estimated FFO and Recurring FFO per diluted share for the full year 2014:
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For the year ended December 31, 2014 (1) |
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| Low | High | |||
| Estimated net income attributable to Equity One | $ 0.37 | $ 0.38 | ||
| Adjustments: | ||||
| Net adjustment for rounding and shares issuable to Liberty International Holdings, Ltd. (LIH) | (0.03) | (0.03) | ||
| Rental property depreciation and amortization including pro rata share of joint ventures |
0.79 |
0.80 |
||
| Gains on disposal of depreciable assets including pro rata share of joint ventures | (0.09) | (0.09) | ||
| Impairments of depreciable real estate | 0.11 | 0.11 | ||
| Earnings allocated to a noncontrolling interest (2) | 0.08 | 0.08 | ||
| Estimated FFO | 1.23 | 1.25 | ||
| Transaction costs, gain on debt extinguishment and other | 0.02 | 0.03 | ||
| Estimated Recurring FFO | $ 1.25 | $ 1.28 | ||
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(1) Does not include possible future gains or losses or the impact on operating results from other unplanned future property acquisitions or unplanned dispositions, other possible capital markets activity or possible future impairment or severance charges. |
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(2) Includes effect of distributions paid with respect to unissued shares held by a noncontrolling interest which are already included for purposes of calculating net income attributable to Equity One per diluted share. |
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ACCOUNTING AND OTHER DISCLOSURES
The company believes FFO (combined with the primary GAAP presentations) is a useful, supplemental measure of its operating performance that is a recognized metric used extensively by the real estate industry, particularly REITs. The National Association of Real Estate Investment Trusts (“NAREIT”) stated in its April 2002 White Paper on Funds from Operations, “Historical cost accounting for real estate assets 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, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.”
FFO, as defined by NAREIT, is “net (loss) income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.” NAREIT states further that “adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.” The company makes certain adjustments to FFO, which it refers to as Recurring FFO, to account for items it does not believe are representative of ongoing operating results, including transaction costs associated with acquisition and disposition activity, severance costs and gains (or losses) on the extinguishment of debt. The company also believes that Recurring FFO is a useful, supplemental measure of its core operating performance that facilitates comparability of historical financial periods. The company believes that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from its FFO and Recurring FFO measures. The company’s method of calculating FFO and Recurring FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
The company uses NOI, which is a non-GAAP financial measure, internally as a performance measure and believes NOI provides useful information to investors regarding the company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis. In this release, the company has provided NOI information on a same-property basis. Information provided on a same-property basis includes the results of properties that the company consolidated, owned and operated for the entirety of both periods being compared except for properties for which significant development, redevelopment or expansion occurred during either of the periods being compared.
FFO, Recurring FFO and same-property NOI are presented to assist investors in analyzing the company’s operating performance. Neither FFO, Recurring FFO nor same-property NOI (i) represents cash flow from operations as defined by GAAP, (ii) is indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is an alternative to cash flow as a measure of liquidity, or (iv) should be considered as an alternative to net (loss) income (which is determined in accordance with GAAP) for purposes of evaluating the company’s operating performance. The company believes net (loss) income attributable to Equity One is the most directly comparable GAAP financial measure to FFO and Recurring FFO while (loss) income from continuing operations before tax and discontinued operations is the most directly comparable GAAP financial measure to NOI. Reconciliations of these measures to their respective comparable GAAP measures have been provided in the tables accompanying this press release.
On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued an update (ASU 2014-08) regarding the criteria for reporting discontinued operations which is effective prospectively beginning in 2015. As permitted, the company has elected to early adopt the updated standard. Therefore, beginning January 1, 2014, prospective activity related to individual properties sold or held for sale will no longer be included as discontinued operations on the consolidated statements of operations. The adoption and implementation of this ASU resulted in the operations of certain current period dispositions being classified within continuing operations in our condensed consolidated statements of operations, but did not have an impact on our financial position or cash flows.
CONFERENCE CALL/WEB CAST INFORMATION
Equity One will host a conference call on Thursday, July 31, 2014 at 9:00 a.m. Eastern Time to review its 2014 second quarter earnings and operating results. Stockholders, analysts and other interested parties can access the earnings call by dialing (888) 317-6003 (U.S.), (866) 284-3684 (Canada) or (412) 317-6061 (international) using pass code 3734983. The call will also be web cast and can be accessed in a listen-only mode on Equity One’s web site at www.equityone.net.
A replay of the conference call will be available on Equity One’s web site for future review. Interested parties may also access the telephone replay by dialing (877) 344-7529 (U.S.), (855) 669-9658 (Canada) or (412) 317-0088 (international) using pass code 10047826 through August 22, 2014.
FOR ADDITIONAL INFORMATION
For a copy of the company’s second quarter supplemental information package, please access the “Investors” section of Equity One’s web site at www.equityone.net under “About Us”. To be included in the company’s e-mail distributions for press releases and other company notices, please send e-mail addresses to Investor Relations at investorrelations@equityone.net.
ABOUT EQUITY ONE, INC.
As of June 30, 2014, our consolidated shopping center portfolio comprised 135 properties, including 113 retail properties and six non-retail properties totaling approximately 14.6 million square feet of gross leasable area, or GLA, 11 development or redevelopment properties with approximately 1.8 million square feet of GLA upon completion, and five land parcels. As of June 30, 2014, our consolidated shopping center occupancy was 94.2% and included national, regional and local tenants. Additionally, we had joint venture interests in 18 retail properties and two office buildings totaling approximately 3.2 million square feet of GLA.
FORWARD LOOKING STATEMENTS
Certain matters discussed by Equity One in this press release constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “might,” “would,” “expect,” “anticipate,” “estimate,” “could,” “should,” “believe,” “intend,” “project,” “forecast,” “target,” “plan,” or “continue” or the negative of these words or other variations or comparable terminology. Although Equity One believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that these expectations will be achieved. Factors that could cause actual results to differ materially from current expectations include volatility in the capital markets and changes in borrowing rates; changes in macro-economic conditions and the demand for retail space in the states in which Equity One owns properties; the continuing financial success of Equity One’s current and prospective tenants; the risks that Equity One may not be able to proceed with or obtain necessary approvals for development or redevelopment projects or that it may take more time to complete such projects or incur costs greater than anticipated; the availability of properties for acquisition; the timing, extent and ultimate proceeds realized from asset dispositions; the extent to which continuing supply constraints occur in geographic markets where Equity One owns properties; the success of its efforts to lease up vacant space; changes in key personnel; the effects of natural and other disasters; the ability of Equity One to successfully integrate the operations and systems of acquired companies and properties; changes in Equity One’s credit ratings; and other risks, which are described in Equity One’s filings with the Securities and Exchange Commission.
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EQUITY ONE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets June 30, 2014 and December 31, 2013 (Unaudited) (In thousands, except share par value amounts) |
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| June 30, 2014 | December 31, 2013 | |||||||
| ASSETS | ||||||||
| Properties: | ||||||||
| Income producing | $ | 3,097,700 | $ | 3,153,131 | ||||
| Less: accumulated depreciation | (359,658 | ) | (354,166 | ) | ||||
| Income producing properties, net | 2,738,042 | 2,798,965 | ||||||
| Construction in progress and land held for development | 169,916 | 104,464 | ||||||
| Properties held for sale | 53,162 | 13,404 | ||||||
| Properties, net | 2,961,120 | 2,916,833 | ||||||
| Cash and cash equivalents | 29,316 | 25,583 | ||||||
| Cash held in escrow and restricted cash | 33,616 | 10,912 | ||||||
| Accounts and other receivables, net | 13,709 | 12,872 | ||||||
| Investments in and advances to unconsolidated joint ventures | 82,310 | 91,772 | ||||||
| Loans receivable, net | - | 60,711 | ||||||
| Goodwill | 6,180 | 6,377 | ||||||
| Other assets | 227,314 | 229,599 | ||||||
| TOTAL ASSETS | $ | 3,353,565 | $ | 3,354,659 | ||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | ||||||||
| Liabilities: | ||||||||
| Notes payable: | ||||||||
| Mortgage notes payable | $ | 408,554 | $ | 430,155 | ||||
| Unsecured senior notes payable | 731,136 | 731,136 | ||||||
| Term loan | 250,000 | 250,000 | ||||||
| Unsecured revolving credit facilities | 133,000 | 91,000 | ||||||
| 1,522,690 | 1,502,291 | |||||||
| Unamortized premium on notes payable, net | 4,607 | 6,118 | ||||||
| Total notes payable | 1,527,297 | 1,508,409 | ||||||
| Other liabilities: | ||||||||
| Accounts payable and accrued expenses | 51,107 | 44,227 | ||||||
| Tenant security deposits | 8,602 | 8,928 | ||||||
| Deferred tax liability | 12,382 | 11,764 | ||||||
| Other liabilities | 175,144 | 177,383 | ||||||
| Liabilities associated with properties held for sale | 281 | 33 | ||||||
| Total liabilities | 1,774,813 | 1,750,744 | ||||||
| Redeemable noncontrolling interests | 989 | 989 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value – 10,000 shares authorized but unissued | - | - | ||||||
| Common stock, $0.01 par value – 150,000 shares authorized, 117,997 and 117,647 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | 1,180 | 1,176 | ||||||
| Additional paid-in capital | 1,700,834 | 1,693,873 | ||||||
| Distributions in excess of earnings | (330,834 | ) | (302,410 | ) | ||||
| Accumulated other comprehensive (loss) income | (672 | ) | 2,544 | |||||
| Total stockholders’ equity of Equity One, Inc. | 1,370,508 | 1,395,183 | ||||||
| Noncontrolling interests | 207,255 | 207,743 | ||||||
| Total equity | 1,577,763 | 1,602,926 | ||||||
| TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | $ | 3,353,565 | $ | 3,354,659 | ||||
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EQUITY ONE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2014 and 2013 (In thousands, except per share data) |
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Three Months Ended
June 30, |
Six Months Ended
June 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| REVENUE: | ||||||||||||||||
| Minimum rent | $ | 66,295 | $ | 60,949 | $ | 136,546 | $ | 121,336 | ||||||||
| Expense recoveries | 19,631 | 19,675 | 39,391 | 38,266 | ||||||||||||
| Percentage rent | 933 | 628 | 3,114 | 2,665 | ||||||||||||
| Management and leasing services | 584 | 484 | 1,213 | 898 | ||||||||||||
| Total revenue | 87,443 | 81,736 | 180,264 | 163,165 | ||||||||||||
| COSTS AND EXPENSES: | ||||||||||||||||
| Property operating | 22,613 | 22,241 | 44,399 | 43,897 | ||||||||||||
| Depreciation and amortization | 27,666 | 22,797 | 53,933 | 44,530 | ||||||||||||
| General and administrative | 8,872 | 9,673 | 19,786 | 18,567 | ||||||||||||
| Total costs and expenses | 59,151 | 54,711 | 118,118 | 106,994 | ||||||||||||
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INCOME BEFORE OTHER INCOME AND EXPENSE, TAX AND DISCONTINUED
OPERATIONS |
28,292 | 27,025 | 62,146 | 56,171 | ||||||||||||
| OTHER INCOME AND EXPENSE: | ||||||||||||||||
| Investment income | 28 | 2,209 | 199 | 4,413 | ||||||||||||
| Equity in income of unconsolidated joint ventures | 1,268 | 615 | 9,529 | 1,050 | ||||||||||||
| Other income | 5 | 162 | 2,846 | 162 | ||||||||||||
| Interest expense | (16,086 | ) | (16,701 | ) | (32,986 | ) | (33,937 | ) | ||||||||
| Amortization of deferred financing fees | (601 | ) | (603 | ) | (1,200 | ) | (1,209 | ) | ||||||||
| Gain on extinguishment of debt | - | 107 | 1,074 | 107 | ||||||||||||
| Impairment loss | (13,892 | ) | (2,662 | ) | (13,892 | ) | (2,662 | ) | ||||||||
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(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND
DISCONTINUED OPERATIONS |
(986 | ) | 10,152 | 27,716 | 24,095 | |||||||||||
| Income tax provision of taxable REIT subsidiaries | (79 | ) | (7 | ) | (612 | ) | (21 | ) | ||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS | (1,065 | ) | 10,145 | 27,104 | 24,074 | |||||||||||
| DISCONTINUED OPERATIONS: | ||||||||||||||||
| Operations of income producing properties | 167 | 1,276 | (65 | ) | 3,523 | |||||||||||
| (Loss) gain on disposal of income producing properties | (144 | ) | 25,663 | 3,152 | 36,859 | |||||||||||
| Impairment loss | - | (128 | ) | - | (128 | ) | ||||||||||
| Income tax provision of taxable REIT subsidiaries | - | (779 | ) | - | (860 | ) | ||||||||||
| INCOME FROM DISCONTINUED OPERATIONS | 23 | 26,032 | 3,087 | 39,394 | ||||||||||||
| Gain on sale of operating properties | 1,141 | - | 883 | - | ||||||||||||
| NET INCOME | 99 | 36,177 | 31,074 | 63,468 | ||||||||||||
| Net income attributable to noncontrolling interests – continuing operations | (2,511 | ) | (2,511 | ) | (7,212 | ) | (5,204 | ) | ||||||||
| Net loss (income) attributable to noncontrolling interests – discontinued operations | 1 | (28 | ) | 3 | (33 | ) | ||||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO EQUITY ONE, INC. | $ | (2,411 | ) | $ | 33,638 | $ | 23,865 | $ | 58,231 | |||||||
| (LOSS) EARNINGS PER COMMON SHARE – BASIC: | ||||||||||||||||
| Continuing operations | $ | (0.02 | ) | $ | 0.06 | $ | 0.17 | $ | 0.16 | |||||||
| Discontinued operations | - | 0.22 | 0.03 | 0.33 | ||||||||||||
| $ | (0.02 | ) | $ | 0.28 | $ | 0.20 | $ | 0.49 | ||||||||
| Number of Shares Used in Computing Basic (Loss) Earnings per Share | 117,813 | 117,385 | 117,744 | 117,209 | ||||||||||||
| (LOSS) EARNINGS PER COMMON SHARE – DILUTED: | ||||||||||||||||
| Continuing operations | $ | (0.02 | ) | $ | 0.06 | $ | 0.17 | $ | 0.16 | |||||||
| Discontinued operations | - | 0.22 | 0.03 | 0.33 | ||||||||||||
| $ | (0.02 | ) | $ | 0.28 | $ | 0.20 | $ | 0.49 | ||||||||
| Number of Shares Used in Computing Diluted (Loss) Earnings per Share | 117,813 | 117,749 | 117,981 | 117,535 | ||||||||||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.22 | $ | 0.22 | $ | 0.44 | $ | 0.44 | ||||||||
EQUITY ONE, INC. AND SUBSIDIARIES
Reconciliation of Net (Loss) Income Attributable to Equity One to FFO and to Recurring FFO
The following table reflects the reconciliation of FFO and Recurring FFO to net (loss) income attributable to Equity One, Inc. the most directly comparable GAAP measure, for the periods presented.
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Three months ended
June 30, |
Six months ended
June 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (In thousands) | ||||||||||||||||
| Net (loss) income attributable to Equity One, Inc. | $ | (2,411 | ) | $ 33,638 | $ | 23,865 | $ | 58,231 | ||||||||
| Adjustments: | ||||||||||||||||
| Rental property depreciation and amortization, net of noncontrolling interest (1) | 27,385 | 23,768 | 53,320 | 46,756 | ||||||||||||
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Pro rata share of real estate depreciation and amortization from
unconsolidated
joint ventures |
1,070 | 1,076 | 2,121 | 2,161 | ||||||||||||
| Gain on disposal of depreciable assets, net of tax (1) | (997 | ) | (24,430 | ) | (4,005 | ) | (35,626 | ) | ||||||||
| Pro rata share of gains on disposal of depreciable assets from unconsolidated joint ventures, net of noncontrolling interest (2) | - | - | (8,007 | ) | - | |||||||||||
| Impairments of depreciable real estate, net of tax (1) | 13,892 | 215 | 13,892 | 215 | ||||||||||||
| Funds From Operations | 38,939 | 34,267 | 81,186 | 71,737 | ||||||||||||
| Earnings allocated to noncontrolling interest (3) | 2,499 | 2,499 | 4,998 | 4,998 | ||||||||||||
| Funds From Operations Available to Diluted Common Shareholders | 41,438 | 36,766 | 86,184 | 76,735 | ||||||||||||
| Transaction costs associated with acquisition and disposition activity, net of tax (1) | 215 | 960 | 1,655 | 1,264 | ||||||||||||
| Impairment of land held for development | - | 2,520 | - | 2,520 | ||||||||||||
| Reorganization adjustments (4) | (247 | ) | - | (247 | ) | - | ||||||||||
| (Gain) loss on debt extinguishment, net of tax (1) | - | (107 | ) | (742 | ) | 575 | ||||||||||
| Gain on land and outparcel sales, net of noncontrolling interests (1) | - | (461 | ) | (30 | ) | (461 | ) | |||||||||
| Recurring Funds From Operations Available to Diluted Common Shareholders | $ | 41,406 | $ 39,678 | $ | 86,820 | $ | 80,633 | |||||||||
(1) Includes amounts classified as discontinued operations.
(2) Includes the remeasurement of the fair value of the company’s equity interest in Talega Village Center JV, LLC, the owner of Talega Village Center, of $2.2 million, net of the related noncontrolling interest, for the six months ended June 30, 2014.
(3) Represents earnings allocated to unissued shares held by LIH, which have been excluded for purposes of calculating earnings per diluted share for all periods presented. FFO and Recurring FFO calculations include earnings allocated to LIH and the respective weighted average share totals include the LIH shares outstanding as their inclusion is dilutive.
(4) Includes the effect of severance, signing bonus payments and other costs associated with the reorganization announcement made on June 30, 2014, net of the reversal of non-cash stock-based compensation expense recognized in prior periods associated with stock awards previously granted to our former CEO.
Funds from Operations and Recurring FFO are non-GAAP financial measures. The company believes that FFO, as defined by NAREIT, is a widely used and appropriate supplemental measure of operating performance for REITs, and that it provides a relevant basis for comparison among REITs. The company believes that Recurring FFO provides additional comparability between historical financial periods. See “Accounting and Other Disclosures” above.
Reconciliation of Net (Loss) Income Attributable to Equity One to FFO and Recurring FFO per Diluted Share
The following table reflects the reconciliation of FFO per diluted share and Recurring FFO per diluted share to (loss) earnings per diluted share attributable to Equity One, Inc. the most directly comparable GAAP measure, for the periods presented.
|
Three months ended
June 30, |
Six months ended
June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (Loss) earnings per diluted share attributable to Equity One, Inc. | $ | (0.02 | ) | $ 0.28 | $ | 0.20 | $ | 0.49 | ||||||||
| Adjustments: | ||||||||||||||||
| Rental property depreciation and amortization, net of noncontrolling interest | 0.21 | 0.18 | 0.41 | 0.36 | ||||||||||||
| Earnings allocated to noncontrolling interest (1) | 0.02 | 0.02 | 0.04 | 0.04 | ||||||||||||
| Net adjustment for rounding and earnings attributable to unvested shares (2) | - | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||
|
Pro rata share of real estate depreciation and amortization from
unconsolidated
joint ventures |
0.01 | 0.01 | 0.02 | 0.02 | ||||||||||||
| Gain on disposal of depreciable assets, net of tax | (0.01 | ) | (0.19 | ) | (0.03 | ) | (0.28 | ) | ||||||||
| Pro rata share of gains on disposal of depreciable assets from unconsolidated joint ventures, net of noncontrolling interest | - | - | (0.06 | ) | - | |||||||||||
| Impairments of depreciable real estate, net of tax | 0.11 | - | 0.11 | - | ||||||||||||
| Funds From Operations per Diluted Common Share | $ | 0.32 | $ 0.28 | $ | 0.67 | $ | 0.60 | |||||||||
| Funds From Operations per Diluted Share | $ | 0.32 | $ 0.28 | $ | 0.67 | $ | 0.60 | |||||||||
| Transaction costs associated with acquisition and disposition activity, net of tax | - | 0.01 | 0.01 | 0.01 | ||||||||||||
| Impairment of land held for development | - | 0.02 | - | 0.02 | ||||||||||||
| Gain on debt extinguishment, net of tax | - | - | (0.01 | ) | - | |||||||||||
| Recurring Funds From Operations per Diluted Common Share | $ | 0.32 | $ 0.31 | $ | 0.67 | $ | 0.63 | |||||||||
| Weighted average diluted shares (in thousands) (3) | 129,441 | 129,107 | 129,338 | 128,893 | ||||||||||||
(1) Represents earnings allocated to unissued shares held by LIH, which have been excluded for purposes of calculating earnings per diluted share for all periods presented. FFO and Recurring FFO calculations include earnings allocated to LIH and the respective weighted average share totals include the LIH shares outstanding as their inclusion is dilutive.
(2) Represents an adjustment to compensate for earnings allocated to unvested shares and shares issuable to LIH and for the rounding of the individual calculations.
(3) Weighted average diluted shares used to calculate FFO per share and Recurring FFO per share for all the periods presented are higher than the GAAP diluted weighted average shares as a result of the dilutive impact of the 11.4 million joint venture units held by LIH which are convertible into the company’s common stock, and also as a result of employee stock options. These convertible units are not included in the diluted weighted average share count for GAAP purposes because their inclusion is anti-dilutive.
EQUITY ONE, INC. AND SUBSIDIARIES
Reconciliation of Same-Property NOI to (Loss) Income from Continuing Operations Before Tax and Discontinued Operations
The following table reflects the reconciliation of same-property NOI to (loss) income from continuing operations before tax and discontinued operations, the most directly comparable GAAP measure, for the periods presented.
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||
| Same-property net operating income | $ | 47,219 | $ | 46,012 | $ | 95,263 | $ | 92,951 | |||||||
| Adjustments (1) | 202 | 423 | 1,659 | (20 | ) | ||||||||||
| Same-property net operating income before adjustments | 47,421 | 46,435 | 96,922 | 92,931 | |||||||||||
| Non same-property net operating income | 9,320 | 6,559 | 18,822 | 13,118 | |||||||||||
| Net operating income | 56,741 | 52,994 | 115,744 | 106,049 | |||||||||||
| Add: | |||||||||||||||
| Straight line rent adjustment | 1,076 | 211 | 1,738 | 722 | |||||||||||
| Accretion of below market lease intangibles, net | 3,675 | 3,211 | 11,656 | 6,411 | |||||||||||
| Management and leasing services | 584 | 484 | 1,213 | 898 | |||||||||||
| Elimination of intersegment expenses | 2,754 | 2,595 | 5,514 | 5,188 | |||||||||||
| Investment income | 28 | 2,209 | 199 | 4,413 | |||||||||||
| Equity in income of unconsolidated joint ventures | 1,268 | 615 | 9,529 | 1,050 | |||||||||||
| Gain on extinguishment of debt | - | 107 | 1,074 | 107 | |||||||||||
| Other income | 5 | 162 | 2,846 | 162 | |||||||||||
| Less: | |||||||||||||||
| Depreciation and amortization | 27,666 | 22,797 | 53,933 | 44,530 | |||||||||||
| General and administrative | 8,872 | 9,673 | 19,786 | 18,567 | |||||||||||
| Interest expense | 16,086 | 16,701 | 32,986 | 33,937 | |||||||||||
| Amortization of deferred financing fees | 601 | 603 | 1,200 | 1,209 | |||||||||||
| Impairment loss | 13,892 | 2,662 | 13,892 | 2,662 | |||||||||||
| (Loss) income from continuing operations before tax and discontinued operations | $ | (986 | ) | $ | 10,152 | $ | 27,716 | $ | 24,095 | ||||||
(1) Includes adjustments for items that affect the comparability of the same-property results. Such adjustments include: common area maintenance costs and real estate taxes related to a prior period, revenue and expenses associated with outparcels sold, settlement of tenant disputes, lease termination costs, or other similar matters that affect comparability.
Same-property NOI is a non-GAAP financial measure. The company believes that same-property NOI is a widely used and appropriate supplemental measure of operating performance for REITs, and that it provides a relevant basis for comparison among REITs. See “Accounting and Other Disclosures” above.
