Glenborough Realty Trust (NYSE:GLB) (NYSE:GLB.PrA) reported the
following results for the first quarter ended March 31, 2006: Q1
2006 Highlights -- Net Income Available to Common Stockholders of
$6.1 million or $0.19 per diluted common share -- Funds From
Operations of $13.2 million or $0.37 per diluted common share --
Acquired Chatham Executive Center in Northern New Jersey for $17.3
million -- In contract to purchase 3330 Cahuenga in Los Angeles for
$30.6 million -- Increased occupancy to 94.1% from 87.6% one year
ago -- Same Store NOI growth of 3.6% -- Tenant retention of 70% and
increase in effective rents from renewals of 3.8% -- Repurchased
1.8 million common shares in the first quarter at an average price
of $19.01 Andrew Batinovich, President and CEO, commented, "We are
now beginning to see the results of the focusing of the portfolio
into our core markets. We are pleased with the increases that we
are experiencing in occupancy, market rents, and same store NOI
growth. We believe that we are well positioned to benefit from the
improving conditions in our core office markets." NET INCOME (LOSS)
AVAILABLE TO COMMON STOCKHOLDERS For the first quarter, the Company
had net income available to common stockholders of $6.1 million, or
$0.19 per diluted common share, as compared with a net loss to
common stockholders of ($44.5) million or ($1.24) per share for the
first quarter of 2005. In comparing quarterly results, the change
in net income available to common stockholders was primarily
attributable to impairment charges and losses on extinguishment of
debt recognized in conjunction with the Company's portfolio
repositioning and charges related to the redemption of preferred
stock all recognized in 2005. In the first quarter of 2006 the
Company adopted FAS 123(R), Share-Based Payment, which resulted in
a cumulative effect of a change in accounting principle adjustment
of $0.3 million. Listed below are significant financial statement
items that affect comparability of net income between periods. -0-
*T For the three months ended March 31,
------------------------------------- 2006 2005 ------------------
----------------- (As restated) (Dollars in thousands, except per
Per Per share data) Amount(a) Share(a) Amount(a) Share(a)
----------------------------------------------------------------------
Gain on sale of real estate assets $ 7,026 $ 0.22 $ 17,320 $ 0.48
Provision for impairment and loss on sale of real estate assets
(561) (0.02) (58,236) (1.62) Reversal of provision for impairment
of real estate assets 715 0.02 -- -- Loss on early extinguishment
of debt -- -- (2,939) (0.08) Cumulative effect of change in
accounting principle 277 0.01 -- -- Charges associated with the
redemption of preferred stock -- -- (5,905) (0.16)
------------------------------------- Total (b) $ 7,457 $ 0.23
$(49,760) $ (1.38) ===================================== (a) - The
amounts and per share amounts shown exclude the impact of minority
interest. (b) - The totals may not total the sum of the individual
amounts and per share amounts due to rounding. *T FUNDS FROM
OPERATIONS (FFO) For the first quarter 2006, FFO was $13.2 million
or $0.37 per diluted common share. In comparison, the first quarter
2005 FFO was ($49.9) million or ($1.27) per diluted common share.
The first quarter FFO results for 2006 and 2005 included provision
for impairments and losses on sales of $0.6 million and $58.2
million, respectively, but excluded net gains from sales of real
estate of $7.0 million and $17.3 million, respectively. The table
on page 9 reconciles FFO to net income, the most directly
comparable GAAP measures. Listed below are significant financial
items that affect comparability of FFO for the periods presented.
-0- *T For the three months ended March 31,
---------------------------------------- 2006 2005
-------------------- ------------------- (As restated) (Dollars in
thousands, except Per Per per share data) Amount(a) Share(a)
Amount(a) Share(a)
----------------------------------------------------------------------
Provision for impairment and loss on sale of real estate assets $
(561)$ (0.02)$ (58,236)$ (1.49) Reversal of provision for
impairment of real estate assets 715 0.02 -- -- Loss on early
extinguishment of debt -- -- (2,939) (0.08) Charges associated with
the redemption of preferred stock -- -- (5,905) (0.15)
---------------------------------------- Total (b) $ 154 $ 0.00 $
(67,080)$ (1.71) ======================================== (a) - The
amounts and per share amounts shown exclude the impact of minority
interest. (b) - The totals may not total the sum of the individual
amounts and per share amounts due to rounding. *T PROPERTY
ACQUISITIONS Chatham Executive Center in Northern New Jersey was
acquired on March 1st for $17.3 million. The property is a
three-story multi-tenant office building with 63,346 rentable
square feet located in the Borough of Chatham, one of the most
affluent suburban communities in the New York Metropolitan area.
Chatham Executive Center is located at a full four way interchange
on State Route 24, and enjoys convenient access to Interstates 78
and 287, the Garden State Parkway and New Jersey Turnpike. A
designated rail station is located seven blocks west which provides
direct access to Midtown Manhattan with New Jersey Transit's
"Midtown Direct" train. Newark International Airport, the 6th
largest passenger airport in the world, is a 15-minute drive from
the property. Chatham was named One of the Top Ten Places to Live
in the United States by "Money Magazine" in 2005. Area amenities
include excellent shopping facilities and restaurants available
along Chatham's Main Street, and nearby in downtown Madison and
Summit, as well as at the Livingston and Short Hills Malls and
Hickory Tree Shopping Center in Chatham Township. The Mall at Short
Hills is regarded as one of the premiere malls in the United
States. The Company is under contract and expects to complete the
acquisition of 3330 Cahuenga Boulevard in Los Angeles, California
early in the second quarter of 2006 for $30.6 million. 3330
Cahuenga is a 100% leased five-story office building containing
103,782 square feet situated above a two-level subterranean parking
garage. The building's modified rectangular shaped configuration
allows for an abundance of window offices, a feature that is
preferred by many tenants. Floor sizes average approximately 21,000
square feet and are well suited for both full-floor and
multi-tenant occupancy. The property is one of the few buildings in
the area that offers tenants direct lobby and floor access from the
subterranean parking levels. The parking garage and surface parking
provides parking for 391 vehicles for an above-standard ratio of
3.8 spaces per 1,000 square feet as well as gate controlled ingress
and egress. The property is situated on a 1.73 acre site along the
Hollywood (101) Freeway with two on/off ramps within one block and
is located in the Universal City submarket of Los Angeles, in the
heart of the entertainment capital of the world. The area is home
to such major firms as Warner Bros., Disney, NBC, CBS, Universal
Studios and DreamWorks SKG. PROPERTY DISPOSITIONS During the first
quarter, Glenborough completed the strategic realignment of its
portfolio with the disposition of four properties: Thousand Oaks in
Memphis, TN; Capitol Center in Des Moines, IA; Osram in
Indianapolis, IN; and Vreeland in Florham Park, NJ for a total
consideration of $56.7 million and recognized gains on the sales of
$6.6 million and an impairment charge of $0.6 million. The proceeds
from these dispositions were used to purchase Chatham Executive
Center, repurchase common stock and pay down debt. The Company
completed a previously announced recapitalization of and reduction
in its interest in the Peninsula Marina project, which is located
in Redwood City, California during the first quarter of 2006.
Glenborough sold the majority of its interest to its joint venture
partner for approximately $54 million. As a result of this
transaction, in the first quarter the Company reversed $0.07
million of an impairment charge recognized in the fourth quarter of
2005. The Company continues to own a minority interest in the
project. PORTFOLIO PERFORMANCE Overall portfolio occupancy
increased 650 basis points from 87.6% in the first quarter of 2005
to 94.1% in 2006. For the first quarter 2006, same store office net
operating income increased by 3.6% as compared to the first quarter
of 2005. For the quarter, same store occupancy increased by 480
basis points from 88.2% to 93.0%. The Company's largest markets are
Washington, D.C. (27% of net operating income), Southern California
(21%), Northern New Jersey (13%), San Francisco (12%) and Boston
(12%). Lease rollover for the remainder of 2006 is 6.4% of total
base rent of which approximately 40% is in the Company's top two
markets - Washington, D.C. and Southern California. Additional
details on the portfolio can be found in the Company's Supplemental
Report which is available at www.glenborough.com. SHARE REPURCHASE
PROGRAM The Company repurchased 1.8 million shares of common stock
during the first quarter of 2006 at an average price of $19.01 per
share. These repurchases totaled $34.3 million. In Q4 2005 the
Company repurchased 2.5 million shares of common stock at an
average price of $18.87 per share. Since the inception of the
repurchase program, a total of 10.7 million common shares have been
repurchased at an average price of $17.55 per share for a total
cost of approximately $188 million. BALANCE SHEET AND OPERATING
RATIOS At quarter-end, Glenborough had $760.2 million of debt with
a 47% ratio of debt to total market capitalization. Fixed rate debt
comprises 84% of all debt outstanding at quarter-end. The average
interest rate on all debt is 5.75%. Secured debt comprises 84% of
all debt outstanding. DIVIDENDS On March 15th, the Board of
Directors declared a dividend of $0.35 per share of common stock
for the first quarter of 2006. This dividend was paid on April 17,
2006 to stockholders of record on April 1, 2006. Commencing in the
second quarter of 2006, the Company expects to reduce the common
stock dividend from $0.35/share to $0.275/share (annualized from
$1.40 to $1.10). Additionally, the Board of Directors declared a
dividend of $0.484375 per share on the Company's 7.75% Series A
Convertible Preferred Stock. This dividend was paid on April 17,
2006 to stockholders of record on March 29, 2006 and represented an
annualized dividend of $1.9375 per share of Preferred Stock. 2006
FFO GUIDANCE The Company previously issued 2006 FFO guidance in the
range of $1.55 to $1.65 per share. Additionally, the Company
projects second quarter 2006 FFO in the range of $0.37 to $0.39 per
diluted common share. The assumptions used in providing the annual
FFO guidance are as follows: -- Average Occupancy between 94% and
96% -- Same Store NOI Growth between 3% and 5% -- G&A Expense
between $14.0 and $15.0 million The FFO projection includes the
Company's contribution of approximately $220 million in assets to
joint ventures while maintaining a 25% interest in the new
ventures. The proceeds from the anticipated joint venture
contributions are assumed to be used to pay down $200 million of
existing debt and reduce the Company's leverage by 600 basis
points. The Company's projections do not include the effect of
property acquisitions or dispositions or any costs for debt
extinguishment, preferred stock redemptions or lease termination
fees. CONFERENCE CALL Glenborough will host a conference call to
discuss these matters on Wednesday, April 26th, 2006 at 1:30 p.m.
Eastern Time (10:30 a.m. Pacific Time). Interested parties can
listen to the call by calling 1-800-967-7135 (U.S.) or
1-719-457-2626 (International), confirmation number 7426024,
preferably 5-10 minutes before the scheduled time. In addition, a
replay of the call will be available until Sunday, April 30, 2006
at 9:00 p.m. Pacific Time at 1-888-203-1112, confirmation number
7426024. Glenborough is a REIT which is focused on owning high
quality, multi-tenant office properties concentrated in Washington
D.C., Southern California, Boston, Northern New Jersey, and
Northern California. The Company has a portfolio of 45 properties
encompassing approximately 8 million square feet as of March 31,
2006. -0- *T SUMMARY FINANCIAL DATA (unaudited; in thousands,
except per share data) QUARTER ENDED ------------------- MAR 31 06
MAR 31 05 ------------------- Net income (loss) $ 7,917 $(36,823)
Net income (loss) available to Common Stockholders 6,105 (44,540)
Funds from operations (FFO) 13,192 (49,876) Per diluted common
share Net income (loss) available to Common Stockholders $ 0.19 $
(1.24) Funds from operations (FFO) 0.37 (1.27) Dividends declared
per common share outstanding $ 0.35 $ 0.35 Payout ratios Dividend
payout ratio (FFO) 94.9% N/A Excluding Non-Routine Charges (a)
Funds from operations (FFO) $ 0.36 $ 0.44 Dividend payout ratio
(FFO) 96.0% 79.7% GLENBOROUGH REALTY TRUST Consolidated Statements
of Operations (unaudited, in thousands, except share and per share
amounts) For the Three Months Ended ------------------------- Mar
31 '06 Mar 31 '05 ------------ ------------ Operating Revenue
Rental revenue $ 43,972 $ 37,274 Fees and reimbursements, including
from related parties 888 1,095 ----------- ----------- Total
operating revenue 44,860 38,369 ----------- ----------- Operating
Expenses Property operating expenses 15,899 13,226 General and
administrative 3,982 3,285 Depreciation and amortization 13,791
12,003 Provision for impairment of real estate assets - 5,097
----------- ----------- Total operating expenses 33,672 33,611
----------- ----------- Interest and other income 500 1,030 Equity
in earnings of unconsolidated operating joint ventures 99 134
Interest expense (10,589) (8,135) Loss on early extinguishment of
debt - (561) ----------- ----------- Income (loss) before minority
interest, discontinued operations and cumulative effect of change
in accounting principle 1,198 (2,774) Minority interest (including
share of discontinued operations) (558) 3,710 -----------
----------- Income before discontinued operations and cumulative
effect of change in accounting principle 640 936 Discontinued
operations: Net operating income (32) 5,460 General and
administrative - - Depreciation and amortization (111) (3,839)
Provision for impairment of real estate assets (561) (53,139)
Reversal of provision for impairment of real estate assets 715 -
Interest expense (37) (1,183) Loss on early extinguishment of debt
- (2,378) Gain on sales of real estate assets 7,026 17,320
----------- ----------- Discontinued operations 7,000 (37,759)
----------- ----------- Income (loss) before cumulative effect of
change in accounting principle 7,640 (36,823) Cumulative effect of
change in accounting principle 277 - ----------- ----------- Net
income (loss) 7,917 (36,823) Preferred dividends (1,812) (1,812)
Dividends paid on redeemed preferred stock - (596) Premium and
write-off of original issuance costs on preferred stock redemption
- (5,309) ----------- ----------- Net income (loss) available to
Common Stockholders $ 6,105 $ (44,540) =========== =========== Net
income (loss) available to Common Stockholders per diluted common
share $ 0.19 $ (1.24) =========== =========== Diluted weighted
average shares outstanding 32,621,965 35,928,962 ===========
=========== GLENBOROUGH REALTY TRUST Reconciliation of Net Income
(Loss) to FFO (unaudited, in thousands, except share and per share
amounts) For the Three Months Ended ------------------------- Mar
31 '06 Mar 31 '05 ------------ ------------ Net income (loss) $
7,917 $ (36,823) Cumulative effect of change in accounting
principle (277) - Real estate depreciation and amortization, net of
minority interest 12,531 14,323 Preferred dividends (1,812) (1,812)
Dividends paid on redeemed preferred stock - (596) Premium and
write-off of original issuance costs on preferred stock redemption
- (5,309) Gain on sales from discontinued operations, net of
minority interest (6,438) (15,988) Adjustment to reflect FFO of
unconsolidated operating joint ventures 157 178 Adjustment to
reflect FFO of minority interest 1,114 (3,849) -----------
----------- Funds from operations available to Common Stockholders
and OP Unitholders (FFO) $ 13,192 $ (49,876) ===========
=========== FFO per diluted common share $ 0.37 $ (1.27) Diluted
weighted average common shares and OP units outstanding for
calculation of FFO 35,775,265 39,180,312 =========== ===========
GLENBOROUGH REALTY TRUST Consolidated Balance Sheets (unaudited, in
thousands, except share amounts) March 31, December 31, 2006 2005
----------- ----------- ASSETS Rental properties, gross $ 1,317,295
$ 1,296,057 Accumulated depreciation and amortization (199,221)
(186,449) ----------- ----------- Rental properties, net 1,118,074
1,109,608 Properties held for sale - 103,548 Investments in land
and development 51,292 51,750 Investments in unconsolidated
operating joint ventures 12,086 12,040 Mortgage loans receivable
11,610 11,231 Leasing and financing costs (net of accumulated
amortization of $12,729 and $17,664 as of March 31, 2006 and
December 31, 2005, respectively) 20,788 22,929 Straight-line rent
receivable 18,169 16,874 Cash and cash equivalents 1,232 3,661
Restricted cash 5,743 5,720 Accounts receivable 3,533 2,429 Other
assets 10,145 6,340 ----------- ----------- TOTAL ASSETS $
1,252,672 $ 1,346,130 =========== =========== LIABILITIES Mortgage
loans $ 637,019 $ 659,870 Unsecured bank line of credit 123,176
106,669 Accrued common and preferred stock dividends 13,048 13,610
Obligations associated with properties held for sale - 45,855 Other
liabilities 40,485 41,276 ----------- ----------- Total liabilities
813,728 867,280 ----------- ----------- MINORITY INTEREST 29,460
31,206 STOCKHOLDERS' EQUITY Common stock, $0.001 par value,
188,000,000 shares authorized, 32,102,636 and 33,710,400 shares
issued and outstanding at March 31, 2006 and December 31, 2005,
respectively 32 34 Convertible preferred stock, $0.001 par value,
12,000,000 shares authorized, $25.00 liquidation preference,
3,740,277 shares issued and outstanding at March 31, 2006 and
December 31, 2005, respectively 4 4 Additional paid-in capital
718,153 751,183 Distributions in excess of accumulated earnings
(308,705) (303,577) ----------- ----------- Total stockholders'
equity 409,484 447,644 ----------- ----------- TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 1,252,672 $ 1,346,130 ===========
=========== *T FORWARD LOOKING STATEMENTS: Certain statements in
this press release are forward-looking statements within the
meaning of federal securities laws, including, without limitation
(i) our expectation to complete the purchase of 3330 Cahuenga
Boulevard, Los Angeles, California; (ii) our projected lease
rollovers; (iii) the expectation of common stock dividend
reduction; (iv) our projection of second quarter 2006 FFO in the
range of $0.37 to $0.39 per diluted common share; and (v) our
expectation to use available cash to pay down debt and reduce
leverage. Because these forward looking statements involve risk and
uncertainty, there are important factors that could cause our
actual results to differ materially from those stated or implied in
the forward-looking statements. Those important factors include,
without limitation: -- Customary closing conditions to real estate
acquisitions, including completion of due diligence investigation
to our satisfaction; -- Glenborough's inability to lease, on a
timely basis, unoccupied space and to re-lease occupied space upon
lease expiration at the rental rates we expect; -- Changes in
market rental rates for office space negatively affect the value of
the listed assets; -- Lower than expected retention of existing
tenants; -- Our inability to reduce debt and overall leverage; --
The failure to maintain or lessen general and administrative
expenses; and -- Adverse changes in the general economy and/or real
estate conditions (including competition from other properties,
demand for new development and conditions affected by terrorist
attacks), or the failure of such conditions to improve,
particularly in the Company's core markets. Given these
uncertainties, readers are cautioned not to place undue reliance on
such statements. All forward-looking statements are based on
information available to us on the date hereof and we assume no
obligation to update or supplement any forward looking-statement.
Additional information concerning factors that could cause results
to differ can be found in our filings with the SEC including our
report on Form 10-K for the year ended December 31, 2005.
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