Chelsea Property Group Reports 23% Increase in Second Quarter Funds from Operations; FFO Per Share Up 19% to $0.96.ROSELAND, N.J. -- Chelsea Chelsea, city, United States Chelsea, city (1990 pop. 28,710), Suffolk co., E Mass., an industrial suburb of Boston; settled 1624, inc. as a town 1739, as a city 1857. It has made printed goods, rubber, plastics, electrical machinery, shoes, and paint. Property Group, Inc. (NYSE NYSE See: New York Stock Exchange : CPG CPG central pattern generators. ) today reported its operating results for the second quarter ended June June: see month. 30, 2004. Second quarter funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. (FFO FFO See: Funds from operations ) before minority interest rose 23% to $51.2 million from $41.7 million in the second quarter of 2003 and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. FFO per share rose 19% to $0.96 from $0.81, respectively. Second quarter net income available to common shareholders rose to $27.5 million, or $0.60 per diluted share, from $24.7 million, or $0.56 per diluted share, in the year-earlier period. Second quarter rental revenues from wholly-owned assets rose 13% to $72.6 million from $64.4 million, and total revenues from wholly-owned assets rose 12% to $96.8 million from $86.6 million, respectively. FFO from unconsolidated investments rose to $7.2 million from $3.2 million, primarily due to the openings in 2004 of Tosu Premium Outlets (40%-owned) and Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. Premium Outlets (50%-owned) and in 2003 of Sano Premium Outlets and Phase II of Gotemba Premium Outlets (40%-owned) and Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. Premium Outlets (50%-owned). Second quarter earnings before interest, depreciation and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) rose 21% to $74.9 million from $62.1 million. For the six months ended June 30, FFO rose 21% to $98.2 million from $81.1 million; diluted FFO per share rose 16% to $1.85 from $1.59. Six-month net income available to common shareholders rose to $51.7 million, or $1.13 per diluted share, from $43.1 million or $0.99 per diluted share, in the year-earlier period. Rental revenues from wholly-owned assets rose 12% to $143.1 million from $127.7 million; total revenues from wholly-owned assets rose 12% to $189.9 million from $169.9 million. FFO from unconsolidated investments rose to $13.9 million from $5.2 million and EBITDA rose 19% to $144.7 million from $121.4 million. Second quarter revenue and earnings comparisons were positively impacted by the acquisitions in 2003 of The Crossings Factory Stores (June) and Belz Factory Outlet World - Las Vegas (August); the abovementioned a·bove·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. openings at Tosu (March 2004), Gotemba (July 2003) and Las Vegas Premium Outlets (August 2003); internal rent growth; higher percentage rents; and the wind-down of Chelsea Interactive. Gross leasable area Gross leasable area (GLA) in the retail development industry is a term applied to shopping malls, lifestyle centers, outlet malls and other retail centers to indicate the amount of floor space available to be rented. (GLA) in operation, including joint venture projects, totaled 16.6 million square feet at June 30, 2004, compared to 14.9 million square feet a year earlier. The U.S. Premium Outlet portfolio, comprising 11.4 million square feet of GLA, was 98% leased at the end of the quarter. Same-space sales (weighted average sales per square foot reported in space open for the full duration of both comparison periods) at the Company's U.S. Premium Outlet centers were up 9% for the second quarter of 2004 and 12% for the year to date. During 2003, sales in Chelsea's U.S. Premium Outlet portfolio averaged an industry-leading $399 per square foot. Chicago Premium Outlets, a new 438,000 square-foot, single-phase center located in Aurora, Illinois Aurora is the largest city in Kane County, Illinois. The city also lies within DuPage, Will and Kendall counties. As reported in the 2000 U.S. census, the city was home to 142,990 people, while the city's estimated 2006 population is 170,617. , opened at the end of May 2004; the 187,000 square-foot first phase of Tosu Premium Outlets, Chelsea Japan's fourth project, opened near Fukuoka, Japan, in March 2004; and the 51,000 square-foot second phase of Sano Premium Outlets opened last Friday, July 23, 2004. More than 850,000 square feet of new Premium Outlet space is scheduled for completion during the next 18 months, including the first phase of Punta Norte Premium Outlets, in Mexico City Mexico City Spanish Ciudad de México City (pop., 2000: city, 8,605,239; 2003 metro. area est., 18,660,000), capital of Mexico. Located at an elevation of 7,350 ft (2,240 m), it is officially coterminous with the Federal District, which occupies 571 sq mi (230,000 square feet in late 2004); the first phase of Toki Premium Outlets, near Nagoya, Japan (175,000 square feet in the spring of 2005); the first phase of Seattle Premium Outlets, a new center located in Tulalip, Washington (380,000 square feet in the summer of 2005); and the third phase of Rinku Premium Outlets (70,000 square feet in December 2004). Tosu, Sano, Rinku and Toki Premium Outlets are 40%-owned, and Chicago and Punta Norte Premium Outlets are 50%-owned by Chelsea. On June 21, 2004, Chelsea announced that it had signed a definitive merger agreement whereby Simon Property Group Simon Property Group, Inc. (NYSE: SPG), also known as SIMON, an S&P 500 company headquartered in Indianapolis, Indiana, is the largest developer of shopping malls in the United States. Simon Property Group, Inc. , Inc. (NYSE: SPG SPG - System Program Generator. A compiler-writing language. ["A System Program Generator", D. Morris et al, Computer J 13(3) (1970)]. ) will acquire all of the outstanding common stock and operating partnership units of Chelsea in a transaction valued at approximately $3.5 billion. Simon will also assume Chelsea's existing indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , which totaled approximately $1.3 billion as of June 30, 2004. Further details regarding the transaction are available in Chelsea's filings with the Securities and Exchange Commission. David Bloom David Bloom (May 22, 1963 – April 6, 2003) was an NBC journalist (co-anchor of Weekend Today and reporter) until his sudden death in 2003 at the age of 39. Early life , Chairman and Chief Executive Officer, said, "Second quarter results again reflect broad contributions from acquisitions, new development and internal growth. The 9% same-space sales gain especially stood out, continuing the very strong uptrend uptrend A series of price increases in a security or in the general market. Some investors believe a security tends to take on a certain inertia; as a result, these investors search for stock in an uptrend, thinking that it will probably continue to move in that began in the second half of last year. Also during the quarter, Chicago Premium Outlets, our most recent joint venture with Simon Property Group, is off to an extremely strong start. While it is still early, we believe it will prove to be the dominant center in its market in the long run." Commenting on the pending merger with Simon Property Group, Mr. Bloom bloom 1. the general appearance of the surface. In carcass meat it is the glistening, transparent effect and the gentle pink color that gives a good bloom to the carcass. It is the result of proper tissue hydration coupled with the correct proportions of fat, connective tissue and added, "I would like to express my personal thanks to our shareholders and friends for their tremendous support in our decision to be acquired by Simon. While this transaction will end a wonderful chapter in the Chelsea story, we believe that our stockholders have been well served in our ten years as a public company, that we will contribute significantly to Simon's business in the future, and that we will continue our leadership in the outlet industry." Chelsea Property Group, Inc. is a fully integrated, self-administered and self-managed real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ) with interests in 60 Premium Outlet(R) and other shopping centers shopping center, a concentration of retail, service, and entertainment enterprises designed to serve the surrounding region. The modern shopping center differs from its antecedents—bazaars and marketplaces—in that the shops are usually amalgamated into - containing 16.7 million square feet of GLA - in 31 states and Japan. The Company's leading properties include Woodbury Common Premium Outlets Woodbury Common Premium Outlets, is an outlet center located in Central Valley, New York. The center is part of the Chelsea Premium Outlets group and takes its name from the town in which it is located. , near New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. ; Orlando Premium Outlets, in Orlando, Florida The city of Orlando is a major city in central Florida and is the county seat of Orange County, Florida. According to the 2000 census, the city population was 185,951. A 2006 U.S. ; Wrentham Village Premium Outlets, near Boston; Desert Hills Premium Outlets, near Palm Springs, California Palm Springs is a famed Riverside County, California desert resort city, approximately 110 miles (177 km) east of Los Angeles and 140 miles (225 km) northeast of San Diego. As of the 2000 census, the city population was 42,807. ; and Gotemba Premium Outlets, near Tokyo. Please see www.cpgi.com for more information. Statements in this news release that are not strictly historical are "forward-looking" statements under the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Although Chelsea Property Group believes that the expectations reflected in such statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. . Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. involve known and unknown risks that may cause actual results to differ materially from expected results. Risk factors include, without limitation, the receipt of regulatory entitlements for and completion of development projects, in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. or abroad; the availability and cost of capital and foreign currency; credit risk; the Company's ability to lease its properties; retail, real estate and economic conditions; risks inherent to being a partner in joint ventures; risks inherent to developing and marketing a technology based business; competition; and other risks detailed from time to time in Chelsea Property Group's reports to the Securities and Exchange Commission. The Company accepts no responsibility for updating forward-looking statements.
CHELSEA PROPERTY GROUP, INC.
STATEMENT OF OPERATIONS - Unaudited Three Months Six Months
(In thousands, except per share Ended Ended
data) June 30, June 30,
2004 2003 2004 2003
----------------------------------
Revenues:
Base rent (a) $66,892 $59,461 $132,536 $118,620
Percentage rent 5,708 4,915 10,514 9,036
Expense reimbursements 21,741 20,434 42,470 38,987
Other income 2,420 1,799 4,343 3,248
----------------------------------
Total revenues 96,761 86,609 189,863 169,891
Expenses:
Operating and maintenance 25,738 24,097 50,839 46,618
Depreciation and amortization 17,938 17,124 35,754 34,407
General and administrative 4,131 2,468 7,721 4,670
Other 647 2,444 3,083 4,639
----------------------------------
Total expenses 48,454 46,133 97,397 90,334
Income before unconsolidated
investments,
interest expense, minority
interest and
discontinued operations 48,307 40,476 92,466 79,557
Income from unconsolidated
investments 5,305 2,495 10,347 3,946
Interest expense (19,287)(16,694) (37,937) (33,469)
----------------------------------
Income from continuing operations
before
minority interest 34,325 26,277 64,876 50,034
Minority interest attributed to
continuing operations (5,955) (5,069) (11,464) (9,834)
----------------------------------
Income from continuing operations 28,370 21,208 53,412 40,200
Income and gain from discontinued
operations,
net of minority interest - 4,331 - 4,586
----------------------------------
Net income 28,370 25,539 53,412 44,786
Preferred dividends (834) (834) (1,668) (1,668)
----------------------------------
Net income - common shareholders $27,536 $24,705 $51,744 $43,118
Net income per common share
(diluted)(b) $0.60 $0.56 $1.13 $0.99
Funds from operations (FFO) (c) $51,161 $41,742 $98,216 $81,135
FFO per common share (diluted) $0.96 $0.81 $1.85 $1.59
Dividends per common share $0.60 $0.535 $1.20 $1.07
(a) Base rent includes straight-line rent of $1,702 and $1,837 in
the second quarter of 2004 and 2003, respectively, and $3,066
and $3,597 for the six months ended June 30, 2004 and 2003,
respectively.
(b) Basic earnings per share were $0.62 and $0.59 in the second
quarter of 2004 and 2003, respectively, and $1.18 and $1.03 for
the six months ended June 30, 2004 and 2003, respectively.
(c) FFO per common share is defined as income before minority
interest, gain or loss on sale of assets and depreciation and
amortization, reduced by amortization of deferred financing costs,
depreciation of non-real estate assets, and preferred
dividends.
CHELSEA PROPERTY GROUP, INC. CALCULATION OF FFO - Unaudited Management believes that FFO should be considered in conjunction with net income, as presented in the statement of operations See Income statement. , to facilitate a clearer understanding of the operating results of the Company. Management considers FFO to be a key measure of its operating performance that is not specifically defined by accounting principles generally accepted in the Untied States ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). The Company believes that FFO is helpful to investors because it is a widely recognized measure of the performance of equity REITs Equity REIT A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT. and provides a relevant basis for comparison among REITs. Management of the Company also uses FFO internally to measure the operating performance of the Company's portfolio.
Three Months Six Months
Ended Ended
June 30, June 30,
(Amounts in thousands): 2004 2003 2004 2003
--------------------------------
Net income $28,370 $25,539 $53,412 $44,786
Plus: Limited partners' interest in
the Operating Partnership, net of
preferred distribution of the
Operating Partnership 4,493 3,665 8,540 7,014
Preferred dividend (834) (834) (1,668) (1,668)
Depreciation and amortization-
wholly-owned 17,938 17,269 35,754 34,901
Depreciation and amortization-joint
ventures 1,879 694 3,543 1,293
Amortization of deferred financing
costs and depreciation of non-
rental real estate assets (685) (583) (1,365) (1,183)
Net gain on sale or write down of
assets - (4,008) - (4,008)
--------------------------------
FFO available to common shareholders $51,161 $41,742 $98,216 $81,135
================================
CALCULATION OF EBITDA - Unaudited Management believes that earnings before interest, depreciation and amortization ("EBITDA") should be considered in conjunction with net income, as presented in the statement of operations to facilitate a clearer understanding of the operating results of the Company. The Company believes that EBITDA is helpful to investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities and investing activities, it provides investors with an indication of the ability of the Company to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. and service debt, to make capital expenditures and to fund other cash needs.
Three Months Six Months
Ended Ended
June 30, June 30,
(Amounts in thousands): 2004 2003 2004 2003
----------------------------------
Net income $28,370 $25,539 $53,412 $44,786
Interest expense - wholly-owned 19,287 16,553 37,937 33,187
Interest expense - joint ventures 351 189 658 333
Depreciation and amortization -
wholly-owned 17,938 17,269 35,754 34,901
Depreciation and amortization -
joint ventures 1,879 694 3,543 1,293
Income tax - joint ventures 1,084 724 1,972 944
Gain on sale of discontinued
operations - (4,008) - (4,008)
Minority interest 5,955 5,127 11,464 9,938
----------------------------------
EBITDA $74,864 $62,087 $144,740 $121,374
==================================
CHELSEA PROPERTY GROUP, INC.
SELECTED BALANCE SHEET DATA - Unaudited June 30, December 31,
(In thousands, except center data) 2004 2003
----------------------
Real estate assets, before depreciation $2,100,179 $2,072,783
Cash and cash equivalents 18,046 18,476
Total assets 1,996,505 1,970,414
Total liabilities 1,323,635 1,304,880
Minority interest 143,004 144,688
Stockholders' equity 529,866 520,846
Shares and units outstanding at period-end 51,356 50,948
DEBT DATA:
Unsecured bank debt 161,045 204,035
Mortgage debt 320,323 385,634
Unsecured notes due 2005 - 2013 721,583 621,803
Interest coverage ratio - trailing 12 months 3.9x 3.8x
OPERATING DATA: (sq ft in thousands)
Gross leasable area at period end 16,600 16,127
Gross leasable area at period end - Premium
Outlets 12,377 10,603
Weighted average GLA during period 16,306 15,249
Weighted average GLA during period - Premium
Outlets 11,963 10,239
Lease-up at period-end - Domestic Premium
Outlets 98% 99%
Number of centers 60 60
Number of states and foreign countries 32 32
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