Great Lakes REIT Reports $0.26 EPS and $0.55 FFO Per Share for First Quarter 2002.Business Editors OAK BROOK, Ill.--(BUSINESS WIRE)--May 3, 2002 Great Lakes Great Lakes, group of five freshwater lakes, central North America, creating a natural border between the United States and Canada and forming the largest body of freshwater in the world, with a combined surface area of c.95,000 sq mi (246,050 sq km). REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). First Quarter Highlights - Net Income of $4.3 million, or $0.26 per common share - Funds From Operations (FFO) of $9.0 million, or $0.55 per common share - EBITDA of $13.8 million - Average occupancy of 87% for the first quarter of 2002 - Lease rates increased 21% on spaces that were renewed or re-leased in 2002 - Quarterly cash dividend of $0.40 per common share, paid April 2, 2002 Great Lakes REIT (NYSE NYSE See: New York Stock Exchange : GL), a real estate investment trust which holds a portfolio of Midwestern Mid·west or Middle West A region of the north-central United States around the Great Lakes and the upper Mississippi Valley. It is generally considered to include Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, Kansas, and office properties, today announced first quarter 2002 net income of $4.3 million, or $0.26 per common share, and 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 ) of $9.0 million, or $0.55 per common share. This compares to net income of $0.30 per common share and FFO of $0.56 per common share for the first quarter of 2001. The Company's 38 properties had average occupancy of 87% for the first quarter of 2002. "Our operating results in 2002 reflect the impact of declining occupancies in our markets and portfolio. We are pleased that, as occupancies decreased from 92% in April 2001 to 85% in April of 2002, FFO per share only decreased slightly," commented Dick May, Great Lakes REIT's Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "The past year has created leasing challenges for many office property REITs, including the Company, and a key focus in the current year will be maintaining occupancies at desirable levels. We have already renewed or re-leased 531,000 square feet of our 2002 rollover A graphic element in an application or on a Web page that changes its color or shape when the pointer is moved (rolled) over it. See JavaScript rollover. See also n-key rollover. exposure and expect to end 2002 with occupancy levels at approximately 83%." "Despite a weak leasing environment, we have been successful in increasing rents on lease renewals because many of our expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. leases were at rates well below the market," noted Mr. May. "As a result, we anticipate net rent increases on renewals or re-lets averaging around 10% in 2002. Based on current market conditions, we are estimating 2002 FFO per common share in the range of $2.13 to $2.18, and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. in the range of $1.05 to $1.29. We further expect to maintain our $1.60 per share dividend in 2002." "We remain confident in the fundamental long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strength of our Midwestern office markets and anticipate a return to growth in the future as the business climate improves," continued Mr. May. "In addition, we expect portfolio occupancy to return to more normalized levels during the next three years, which would produce significant FFO gains. Occupancy levels for the Company's portfolio have averaged 93% over the last five years, considerably above the current 85% level and the projected year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. level of 83%. We estimate that every one percent change in annual occupancy would produce a $0.05 change to FFO per share and earnings per share." Portfolio Performance Total revenues increased by 4.1% to $26.0 million in the first quarter of 2002 from $25.0 million in last year's first quarter. 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 decreased slightly to $13.8 million in the first quarter of 2002 as compared to $13.9 million for the first quarter of 2001. Same store sales Same Store Sales A statistic used in retail industry analysis. It compares sales of stores that have been open for a year or more. Notes: This statistic allows investors to determine what portion of new sales has come from sales growth and what portion from the opening of decreased 8.7% (cash basis) for the three months ended March 31, 2002, as compared to the first quarter of 2001 due primarily to the 5% decline in occupancy quarter over quarter. Balance Sheet, Market Value and Liquidity At March 31, 2002, the Company's total debt and equity market capitalization Equity Market Capitalization A measure of the total market value of an equity market. The measure is calculated by taking the market capitalization of all companies in the equity market and adding them together to arrive at the capitalization for the market as a whole. was $579.5 million. Debt to total market capitalization Total Market Capitalization The total market value of all of a firm's outstanding securities. was 45.1%, based on equity market capitalization of $318.3 million. EBITDA coverage of interest expense was 3.7 times for the quarter ended March 31, 2002 and EBITDA coverage of interest and preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) was 3.0 times for the same period. The Company had $261.2 million of total debt outstanding at March 31, 2002. Approximately 77% of this amount was fixed with an average interest rate of 6.31%. Great Lakes REIT currently has $107.3 million outstanding and $42.7 million available under the terms of its unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. credit facility that the Company uses for acquisitions, development activities and for working capital. The Company has $11 million of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. maturing in early 2003 and anticipates refinancing Refinancing An extension and/or increase in amount of existing debt. this maturity later in 2002 or early 2003. Dividends and Funds Available for Distribution (FAD FAD - ["FAD, A Simple and Powerful Database Language", F. Bancilon et al, Proc 13th Intl Conf on VLDB, Brighton, England, Sep 1987]. ) On April 2, 2002, the Company paid a regular quarterly cash dividend of $0.40 per common share to owners of record as of March 22, 2002. The Company will commence paying its dividend on a monthly basis in the third quarter of 2002. The FFO payout ratio Payout Ratio The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share. Notes: The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend. for the first quarter was 73.7%. Funds Available for Distribution (FAD) totaled $7.3 million for the three months ended March 31, 2002, or $0.44 per common share. The Company expects FAD of $1.76 to $1.80 per common share in 2002. Outlook Leasing Activity Update The Company has renewed or re-leased 531,000 square feet of its 1,266,000 square feet of rollover exposure for 2002, at net rents averaging 21% higher than rents on the expiring leases. Although current market rents are down approximately 5-10% from 2001 peak levels and still declining, Great Lakes REIT has been able to increase rents on lease renewals because many of the Company's expiring leases are at rates well below market rates. These below market rents were in place when the Company originally acquired many of its properties and were a primary reason for their acquisition. For year 2002, Great Lakes REIT anticipates net rent increases on renewals or re-leasing averaging around 10%, including the renewals and re-lets accomplished to date. Leasing Outlook For the first quarter of 2002, there was leased space contraction Relativistic effect of apparent contraction of coordinates of moving reference frame in the direction of motion when seen from non moving reference frame. Results mathematically from Lorentz transformations. Also known as Lorentz contraction. in the Company's markets. This contraction contraction, in physics contraction, in physics: see expansion. contraction, in grammar contraction, in writing: see abbreviation. contraction - reduction , along with new property deliveries, has led to vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. increases in the Company's markets. The Company anticipates a difficult leasing environment throughout 2002; however, the Company anticipates improvement in its markets by the first quarter of 2003. Great Lakes REIT's primary operations focus is re-leasing the approximately 667,000 square feet of uncommitted leases expiring during the balance of 2002. For the six months ended March 31, 2002, Great Lakes REIT averaged 30,000 square feet of new leasing activity per month. Based on current projections, the Company expects to lease an average of 31,000 square feet per month during 2002, roughly matching the 2001 and first quarter 2002 monthly averages. Based on this pace of leasing, the Company expects that its occupancy levels will decline to approximately 83% by December December: see month. 31, 2002. Tenant Credit Issues Legion legion, large unit of the Roman army. It came into prominence c.400 B.C. It originally consisted of 3,000 to 4,000 men drawn into eight ranks: the first six ranks, called hoplites, were heavily armed, while the last two, called velites, were only lightly armed. Insurance Company, which leases 58,000 square feet of space at Milwaukee Milwaukee (mĭlwŏk`ē), city (1990 pop. 628,088), seat of Milwaukee co., SE Wis., at the point where the Milwaukee, Menominee, and Kinnickinnic rivers enter Lake Michigan; inc. 1846. Center, was placed in rehabilitation rehabilitation: see physical therapy. by the Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York Department of Insurance. The first step in the rehabilitation process is a financial evaluation of Legion Insurance by the Pennsylvania Department of Insurance. The two possible outcomes of the process are a plan of rehabilitation for Legion Insurance Company or an orderly orderly /or·der·ly/ (or´der-le) an attendant in a hospital who works under the direction of a nurse. or·der·ly n. An attendant in a hospital. liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of Legion Insurance Company. This process will take some time for the Pennsylvania Department to evaluate. Based on currently available information, the Company believes it is more likely than not that Legion will fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. all terms of its lease. Legion Insurance Company is current on all its rental payments to date. Great Lakes REIT currently has several tenants that are in default under their leases for failure to make rent payments. In addition, several other tenants that are not currently in default are experiencing financial difficulties which may lead to lease defaults. The Company's current expectation is that the possible negative effect on earnings and FFO in 2002 of additional tenant defaults is in the range of $.01 to $0.03 per share. Acquisitions and Dispositions On January January: see month. 30, 2002, the Company acquired Two Riverwood Place, a 99,000 square foot three story office building located in Pewaukee, Wisconsin Pewaukee is a city in Waukesha County, Wisconsin, United States. The population was 11,783 at the 2000 census. The city was incorporated from what was formerly the Town of Pewaukee. for a purchase price of $8.3 million. The Company expects that its total investment in this property will be approximately $11.5 million. This property, which was completed in June June: see month. 2001, is 70% leased. On April 22, 2002, the Company sold its property located at 160 Hansen Han·sen , Gerhard Henrik Armauer 1746-1845. Norwegian physician and bacteriologist who discovered (1869) the leprosy bacillus. Court, Wood Dale, Illinois Wood Dale is a city in DuPage County, Illinois, United States. The population was 13,535 at the 2000 census. Geography Wood Dale is located at (41.963062, -87.978347)GR1. , for a contract price of $2.3 million. The gain on sale from this property will be approximately $1.1 million or $0.06 per share and will be reflected in the Company's earnings for the second quarter of 2002. The Company has targeted other non-core assets for disposition in 2002 but there can be no assurance that further dispositions will be completed in 2002. The Company has identified certain additional acquisition opportunities that are not incorporated in its earnings estimates for 2002. Management's current expectation is that the possible positive effect on earnings of such additional acquisitions is in the range of $.03 to $.07 per common share. The Company's historic performance suggests that its best acquisitions have been made during economic downturns. Great Lakes REIT is a fully integrated, self-administered and self-managed real estate investment trust with a current portfolio of 38 properties totaling 5.5 million square feet of office space in suburban areas of 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. , Milwaukee, Detroit Detroit, city, United States Detroit (dĭtroit`), city (1990 pop. 1,027,974), seat of Wayne co., SE Mich., on the Detroit River and between lakes St. Clair and Erie; inc. as a city 1815. , Columbus, Minneapolis, Denver and Cincinnati. A copy of the Company's supplemental financial information for the quarter ended March 31, 2002, is available on the Company's web site under the Investor section at www.greatlakesreit.com. This press release contains 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. that involve numerous risks and uncertainties. Statements in this document regarding the Company's expectations for rental rate increases, leasing velocity and other expectations regarding leasing activity, occupancy rates Noun 1. occupancy rate - the percentage of all rental units (as in hotels) are occupied or rented at a given time pct, per centum, percent, percentage - a proportion in relation to a whole (which is usually the amount per hundred) , acquisition and disposition volume and opportunities, FFO, FAD, common share dividends and payout ratios, future growth prospects, the anticipated effect of tenant defaults and anticipated market and other economic conditions are forward-looking within the meaning 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. Such forward-looking statements are based on what the Company believes to be reasonable assumptions and management's current expectations; however, actual results may vary from those implied by such forward-looking statements. Key factors that may cause actual results to differ from projected results include changes in: interest rates, the local and/or national economy, the pace of office space development and sub-lease availability, tenant office space demand, the financial position of the Company's tenants, including changes that may lead to increases in tenant defaults, actual tenant default rates compared to anticipated default rates; and other risks inherent in the real estate business. For more information, refer to Great Lakes REIT's filings with the Securities and Exchange Commission.
Financial Tables to Follow
Great Lakes REIT
Consolidated Statements of Income (unaudited)
(In thousands, except per share data)
Three months ended March 31,
----------------------------
2002 2001
---- ----
Revenues:
Rental $19,713 $19,046
Reimbursements 5,487 5,075
Parking 133 95
Telecommunications 73 136
Tenant service 66 80
Interest 341 387
Other 198 162
----------------------------
Total revenues 26,011 24,981
----------------------------
Expenses:
Real estate taxes 4,286 3,826
Other property operating 6,804 6,015
General and administrative 1,109 1,287
Interest 3,760 3,506
Depreciation and amortization 4,857 4,451
----------------------------
Total expenses 20,816 19,086
----------------------------
Income before allocation to
minority interests 5,195 5,895
Minority interests 13 14
----------------------------
Net income 5,182 5,881
Income allocated to preferred
shareholders 914 914
----------------------------
Net income applicable to
common shares 4,268 4,967
============================
Earnings per common share - basic $0.26 $0.30
============================
Weighted average common shares
outstanding - basic 16,368 16,573
============================
Diluted earnings per common share $0.26 $0.30
============================
Weighted average common shares
outstanding - diluted 16,472 16,713
============================
Comprehensive income:
Net income $5,182 $5,881
Change in fair value of interest
rate swaps 299 -
----------------------------
Total comprehensive income $5,481 $5,881
============================
Great Lakes REIT
Consolidated Balance Sheets (unaudited)
(In thousands, except per share data) March 31, December 31,
--------------------------
2002 2001
---- ----
Assets
Properties:
Land $65,602 $64,736
Buildings and improvements 467,422 457,849
--------------------------
533,024 522,585
Less accumulated depreciation 60,220 56,839
--------------------------
472,804 465,746
Cash and cash equivalents 3,890 2,896
Real estate tax escrows 210 225
Rents receivable 6,520 6,661
Deferred financing and leasing costs,
net of accumulated amortization 6,811 6,674
Goodwill, net of accumulated
amortization 1,061 1,061
Other assets 3,837 3,229
--------------------------
Total assets $495,133 $486,492
==========================
Liabilities and shareholders' equity:
Bank loan payable $107,250 $102,250
Mortgage loans payable 149,965 150,868
Bonds payable 3,960 3,960
Accounts payable and accrued
liabilities 10,997 2,960
Accrued real estate taxes 10,821 12,710
Prepaid rent 2,451 3,539
Security deposits 1,649 1,629
--------------------------
Total liabilities 287,093 277,916
--------------------------
Minority interests 663 682
--------------------------
Preferred shares of beneficial interest 37,500 37,500
($0.01 par value, 10,000 shares
authorized; 1,500 9 3/4% Series A
Cumulative Redeemable shares,
with a $25.00 per share
Liquidation Preference, issued
and outstanding in 2001 and 2000)
Common shares of beneficial interest 183 183
($0.01 par value, 60,000 shares
authorized; 18,309 and 18,275 shares
issued in 2002 and 2001, respectively)
Paid-in-capital 235,430 235,371
Retained earnings (deficit) (18,274) (15,927)
Employee share loans (18,677) (20,083)
Deferred compensation (2,259) (2,325)
Accumulated other comprehensive income 798 499
Treasury shares, at cost (1,772 shares
in 2002, and 1,543 shares in 2001) (27,324) (27,324)
--------------------------
Total shareholders' equity 207,377 207,894
--------------------------
Total liabilities and
shareholders' equity $495,133 $486,492
==========================
Great Lakes REIT
Funds From Operations and Funds Available for Distribution (unaudited)
(In thousands, except per share data)
Three months ended
Funds From Operations: 03/31/2002 03/31/2001
----------------------------
Net income applicable
to common shares $4,268 $4,967
Adjustments:
Real estate depreciation 4,697 4,299
Minority interest 13 14
----------------------------
Funds from operations $8,978 $9,280
============================
Diluted funds from operations
per share $0.55 $0.56
============================
Weighted average common shares
outstanding - diluted 16,472 16,713
============================
Funds Available for Distribution:
Funds from operations $8,978 $9,280
Adjustments:
Straight-line rents (37) -
Other depreciation and amortization 226 227
Capital expenditures (1,882) (1,786)
----------------------------
Funds available for distribution $7,285 $7,722
============================
Weighted average common shares
outstanding - diluted 16,472 16,713
============================
Diluted funds available for
distribution per share $0.44 $0.46
============================
|
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion