Prime Group Realty Trust Reports Third Quarter 2005 Results.CHICAGO Chicago, city, United StatesChicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. -- Prime Group Realty realty n. a short form of "real estate." (See: real estate) REALTY. An abstract of real, as distinguished from personalty. Realty relates to lands and tenements, rents or other hereditaments. Vide Real Property. Trust (NYSE NYSE See: New York Stock Exchange :PGEPRB) (the "Company") announced its results today for the quarter ended September September: see month. 30, 2005. Net loss available to common shareholders, after the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of $2.25 million to the preferred shareholders, was $0.1 million or $0.34 per share for the third quarter of 2005, as compared to a net loss of $5.1 million or $0.22 per share reported for the third quarter of 2004. 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 ") available to common shareholders was $0.12 per share for the third quarter of 2005 as compared to $0.14 per share for the third quarter of 2004. Revenue for the third quarter was $23.7 million, a decrease of $0.6 million from third quarter 2004 revenue of $24.3 million, principally due to the amortization of the above-market and below-market lease values resulting from the acquisition of the Company on July July: see month. 1, 2005 by an affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. of The Lightstone Group (the "Acquisition"). The $5.0 million decrease in net loss was principally the result of the allocation of gains and losses to our parent company, via minority interest, as a result of our recent Acquisition. The results of our operations, before minority interest, were affected by: --a $4.7 million increase in depreciation and amortization primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of our tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. as the result of the Acquisition; --a $2.0 million increase in property operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. primarily due to increased real estate taxes and repairs and maintenance; and --a $0.7 million increase in the non-cash allocation of losses from investments in unconsolidated joint ventures which are primarily attributable to increased depreciation and amortization related to the revaluation of assets as a result of the Acquisition. Partially offset by: --a $1.3 million decrease in strategic alternative costs primarily due to the completion of the Acquisition; and --a $1.1 million decrease in general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. as a result of lower salaries and benefits expense and legal costs. The decrease in FFO results are principally due to the reasons discussed above for the change in GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). loss, with the exception of (i) real estate depreciation and amortization and (ii) the gain on sale of real estate, both of which are excluded from expense when computing computing - computer FFO. In addition, for the purposes of computing FFO available to common shareholders per share, after the allocation of $2.25 million to the preferred shareholders, the Company included outstanding common shares and common units in its operating partnership in arriving at the weighted average shares of beneficial interest. FFO is a non-GAAP financial measure. The Company believes that net income (loss) is the most directly comparable GAAP financial measure to FFO and has included a reconciliation of this measure to GAAP net income (loss) with this press release. About the Company Owned by the Lightstone Group, headquartered in Lakewood Lakewood. 1 City (1990 pop. 73,557), Los Angeles co., S Calif., a residential and industrial suburb of Long Beach; inc. 1954. Nearby are extensive aerospace, high-technology, and electronic industries. 2 City (1990 pop. , New Jersey, Prime Group Realty Trust 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). ) that owns, manages, leases, develops, and redevelops office and industrial real estate, primarily in metropolitan Chicago. The Company owns 11 office properties containing an aggregate of 4.6 million net rentable square feet, one industrial property comprised of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 120,000 square feet, three joint venture interests in office properties totaling 2.8 million net rentable square feet, and approximately 6.3 acres of land suitable for new construction. To learn more, visit the company website at http://www.pgrt.com . Founded in 1988, the Lightstone Group is ranked among the 25 largest real estate companies in the industry with a diversified diversified (di·verˑ·s portfolio of more than 20,000 residential units as well as office, industrial and retail properties totaling approximately 27 million square feet of space in 28 states and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. . The Lightstone Group and its affiliates employ more than 1,000 professionals and maintain regional offices in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). , Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. , Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). and California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . The Lightstone Group has acquired in excess of $2 billion in real estate over approximately the past 20 months. The press release contains certain 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. 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 that reflect management's current views with respect to future events and financial performance. The words, "believes," "expects," "anticipates," "estimates," and similar words or expressions are generally intended to identify forward- looking statements. Actual results may differ materially from those expected because of various risks and uncertainties, including, but not limited to, changes in general economic conditions, adverse changes in real estate markets as well as other risks and uncertainties included from time to time in the Company's filings with the Securities and Exchange Commission.
Prime Group Realty Trust
Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30
2005 2004
----------------------
Revenue:
Rental $ 13,055 $ 14,098
Tenant reimbursements 8,873 8,474
Other property revenues 946 933
Services Company revenue 814 817
----------------------
Total revenue 23,688 24,322
Expenses:
Property operations 6,809 6,157
Real estate taxes 5,682 4,309
Depreciation and amortization 9,540 4,834
General and administrative 1,383 2,507
Services Company operations 474 909
Severance costs 187 337
Strategic alternative costs - 1,316
----------------------
Total expenses 24,075 20,369
Operating (loss) income (387) 3,953
Interest and other income 755 539
Loss from investments in unconsolidated
joint ventures (2,762) (3,449)
Interest:
Expense (6,529) (6,418)
Amortization of deferred financing costs - (443)
Accretion of mortgage notes payable 481 -
----------------------
Loss from continuing operations before minority
interests (8,442) (5,818)
Minority interests 10,599 985
----------------------
Income (loss) from continuing operations 2,157 (4,833)
Discontinued operations, net of minority
interests of $(1,402) and $(261) in 2005 and
2004, respectively 12 2,001
----------------------
Income (loss) before loss on sales of real
estate 2,169 (2,832)
Loss on sales of real estate, net of minority
interests of $32 and $2 in 2005 and 2004,
respectively (1) (17)
----------------------
Net income (loss) 2,168 (2,849)
Net income allocated to preferred shareholders (2,250) (2,250)
----------------------
Net loss available to common shareholders $ (82) $ (5,099)
======================
Basic and diluted earnings available to common
shares per weighted-average common share:
Loss from continuing operations $ (0.39) $ (0.30)
Discontinued operations, net of minority
interests 0.05 0.08
Loss on sales of real estate, net of minority
interests - -
----------------------
Net loss available per weighted-average
common share of beneficial interest -basic
and diluted $ (0.34) $ (0.22)
======================
Prime Group Realty Trust
Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(Unaudited)
Nine Months Ended
September 30
2005 2004
----------------------
Revenue:
Rental $ 39,731 $ 41,332
Tenant reimbursements 26,453 27,204
Other property revenues 2,875 2,747
Services Company revenue 2,807 2,952
----------------------
Total revenue 71,866 74,235
Expenses:
Property operations 19,578 18,746
Real estate taxes 16,819 15,823
Depreciation and amortization 19,459 14,367
General and administrative 6,150 7,725
Services Company operations 2,943 2,944
Severance costs 363 337
Strategic alternative costs 10,288 1,316
----------------------
Total expenses 75,600 61,258
Operating (loss) income (3,734) 12,977
Interest and other income 2,080 1,542
Loss from investments in unconsolidated
joint ventures (8,786) (11,297)
Interest:
Expense (18,571) (19,140)
Amortization of deferred financing costs (1,267) (1,202)
Accretion of mortgage notes payable 481 -
----------------------
Loss from continuing operations before minority
interests (29,797) (17,120)
Minority interests 13,572 2,731
----------------------
Loss from continuing operations (16,225) (14,389)
Discontinued operations, net of minority
interests of $(68) and $(218) in 2005 and 2004,
respectively (10,251) 1,674
----------------------
Loss before gain (loss) on sales of real estate (26,476) (12,715)
Gain (loss) on sales of real estate, net of
minority interests of $(1,148) and $11 in 2005
and 2004, respectively 9,073 (96)
----------------------
Net loss (17,403) (12,811)
Net income allocated to preferred shareholders (6,750) (6,750)
----------------------
Net loss available to common shareholders $ (24,153) $ (19,561)
======================
Basic and diluted earnings available to common
shares per weighted-average common share:
Loss from continuing operations $ (1.45) $ (0.89)
Discontinued operations, net of minority
interests (0.65) 0.06
Gain (loss) on sales of real estate, net of
minority interests 0.57 -
----------------------
Net loss available per weighted-average
common share of beneficial interest -basic
and diluted $ (1.53) $ (0.83)
======================
The following table represents the unaudited GAAP Reconciliation of
Net Loss to Funds from Operations for the three and nine months ended
September 30, 2005 and 2004 (in thousands, except share and per share
amounts):
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
--------------------------------------------
Net income (loss) (1) $ 2,168 $ (2,849) $ (17,403) $ (12,811)
Adjustments to reconcile
to Funds from Operations
available to common
shareholders:
Real estate depreciation
and amortization (2) 8,998 4,511 18,265 13,377
Amortization of costs
for leases assumed 56 72 194 216
Joint venture
adjustments 3,526 4,487 12,618 13,365
Loss (gain) on sale of
operating property, net
of minority interests 1 15 (9,073) 85
Adjustment for
discontinued operations:
Real estate
depreciation and
amortization (3) - 519 833 5,308
Loss (gain) on sale
(included in discontinued
operations) 3 3 (706) (53)
Minority interests 1,402 261 68 218
Minority interests (10,599) (985) (13,572) (2,731)
--------------------------------------------
Funds from Operations (1) 5,555 6,034 (8,776) 16,974
Income allocated to
preferred shareholders (2,250) (2,250) (6,750) (6,750)
--------------------------------------------
Funds from Operations
available to
common shareholders $ 3,305 $ 3,784 $ (15,526) $ 10,224
============================================
FFO available to common
share/unit holders
per share/unit of
beneficial interest:
Basic and Diluted $ 0.12 $ 0.14 $ (0.58) $ 0.38
============================================
Weighted average
shares/units of
beneficial interest:
Common shares 236 23,672 15,851 23,671
Nonvested employee
stock grants - 9 4 7
Operating Partnership
units 26,488 3,076 10,880 3,076
--------------------------------------------
Basic 26,724 26,757 26,735 26,754
============================================
Common shares 236 23,672 15,851 23,671
Nonvested employee
stock grants - 9 4 7
Employee stock options - 8 19 12
Operating Partnership
units 26,488 3,076 10,880 3,076
--------------------------------------------
Diluted 26,724 26,765 26,754 26,766
============================================
(1) Funds from Operations is a non-GAAP financial measure. Funds from
Operations ("FFO") is defined as net income (loss), computed in
accordance with generally accepted accounting principles ("GAAP")
plus real estate depreciation and amortization, excluding gains
(or losses) from sales of operating properties, and after
comparable adjustments for unconsolidated joint ventures and
discontinued operations. FFO includes results from discontinued
operations, including revenues, property operations expense, real
estate taxes expense and interest expense. We compute FFO in
accordance with standards established by the National Association
of Real Estate Investment Trusts ("NAREIT"), which may not be
comparable to FFO reported by other REITs that do not define the
term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than us. We
utilize FFO as a performance measure. We believe that FFO provides
useful information to investors regarding our performance as FFO
provides investors with additional means of comparing our
operating performance with the operating performance of our
competitors. FFO is not representative of cash flow from
operations, is not indicative that cash flows are adequate to fund
all cash needs, and should not be considered as an alternative to
cash flows as a measure of liquidity. We believe that net income
(loss) is the most directly comparable GAAP financial measure to
FFO.
(2) Depreciation and amortization expense for the three months and
nine months ended September 30, 2005 increased $4.5 million and
$4.9 million, respectively, due to the increase in the value of
real estate assets as a result of purchase accounting related to
the Acquisition.
(3) The real estate depreciation and amortization for discontinued
operations for the nine months ended September 30, 2005 relates to
our 208 South LaSalle Street property held for sale. The real
estate depreciation and amortization for discontinued operations
for the three and nine months ended September 30, 2004 relates to
the 208 South LaSalle Street property held for sale, the 33 West
Monroe Street property that was sold April 16, 2004 and the
industrial portfolio sold in October and November 2004.
In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," net income and gain/(loss) on sales of
real estate for properties sold are reflected in the consolidated
statements of operations as "Discontinued Operations" for all periods
presented.
Prime Group Realty Trust
Consolidated Balance Sheets
(dollars in thousands, except share and per share amounts)
(Unaudited)
September 30 December 31
Assets 2005 2004
----------------------------
Real estate:
Land $ 93,719 $ 111,770
Building and improvements 334,497 443,066
Tenant improvements 37,923 54,325
Furniture, fixtures and equipment 520 9,898
----------------------------
466,659 619,059
Accumulated depreciation (5,460) (94,252)
----------------------------
461,199 524,807
In-place lease value, net 29,644 -
Above/below-market lease value, net 26,240 -
Property under development 1,501 1,588
----------------------------
518,584 526,395
Properties held for sale 52,088 67,133
Investments in unconsolidated entities 116,693 26,088
Cash and cash equivalents 16,269 71,731
Receivables, net of allowance for
doubtful accounts of $1,032 and $1,985
at September 30, 2005 and December 31,
2004, respectively:
Tenant 1,606 593
Deferred rent 896 16,809
Other 1,261 2,161
Restricted cash escrows 45,343 40,232
Deferred costs, net 10,483 13,441
Other 2,329 2,780
----------------------------
Total assets $ 765,552 $ 767,363
============================
Liabilities and Shareholders' Equity
Mortgage notes payable $ 398,715 $ 384,855
Mortgage notes payable related to
properties held for sale 46,248 42,590
Liabilities related to properties held
for sale 7,889 6,188
Accrued interest payable 1,597 1,324
Accrued real estate taxes 27,579 22,458
Accrued tenant improvement allowances 10,203 4,266
Accounts payable and accrued expenses 5,778 8,695
Liabilities for leases assumed 7,679 9,957
Deficit investment in unconsolidated
entity - 4,087
Dividends payable - 2,250
Other 7,374 16,115
----------------------------
Total liabilities 513,062 502,785
Minority interests:
Operating Partnership 152,813 19,154
Shareholders' equity:
Preferred Shares, $0.01 par value;
30,000,000 shares authorized:
Series B - Cumulative Redeemable
Preferred Shares, 4,000,000 shares
designated, issued and outstanding 40 40
Common Shares, $0.01 par value;
100,000,000 shares authorized; 236,483
and 23,671,996 shares issued and
outstanding at September 30, 2005 and
December 31, 2004, respectively 2 236
Additional paid-in capital 259,455 381,293
Accumulated other comprehensive income
(loss) 10 (468)
Distributions in excess of earnings (159,830) (135,677)
----------------------------
Total shareholders' equity 99,677 245,424
----------------------------
Total liabilities and shareholders'
equity $ 765,552 $ 767,363
----------------------------
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