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Glimcher Realty Trust (NYSE: GRT) today announced financial results for the second quarter ended June 30, 2012. A description and reconciliation of non-GAAP financial measures to GAAP financial measures is contained in a later section of this press release. References to per share amounts are based on diluted common shares.
“We are excited to have closed on three acquisitions during the second quarter demonstrating our ability to find and execute deals that are in line with our strategy of adding quality assets to the Company’s current real estate portfolio,” stated Michael P. Glimcher, Chairman of the Board and CEO. “Additionally, we are pleased to see the Company’s leasing momentum remain strong with double digit releasing spreads during the quarter and over 25% increase in leasing volume for the year.”
Net income to common shareholders during the second quarter of 2012 was $15.5 million, or $0.11 per share, as compared to a net loss to common shareholders of $22.4 million, or $0.22 per share, in the second quarter of 2011. Funds From Operations (“FFO”) during the second quarter of 2012 was $16.6 million, or $0.12 per share, compared to $5.1 million, or $0.05 per share, in the second quarter of 2011. Adjusted FFO for the second quarter of 2012 was $19.8 million, or $0.14 per share, compared to adjusted FFO of $14.8 million, or $0.14 per share, for the second quarter of 2011. Adjusted FFO for the second quarter of 2012 excludes the $3.2 million non-cash write-off of pre-development costs. Adjusted FFO for the second quarter of 2011 excluded the $9.0 million impairment charge on non-depreciable real estate and $0.7 million of costs related to early debt extinguishments.
Second Quarter Earnings Highlights
Total revenues were $77.1 million in the second quarter of 2012, compared to total revenues of $64.7 million in the second quarter of 2011. The $12.4 million increase in total revenues resulted primarily from $11.0 million of revenue from properties acquired since June 2011 and revenue growth of $1.0 million from Scottsdale Quarter ®, an open-air center in Scottsdale, Arizona. The acquired properties were Town Center Plaza and One Nineteen, each located in Leawood, Kansas, and Malibu Lumber Yard in Malibu, California. We also acquired the remaining 80% indirect ownership interest in Pearlridge Center in Honolulu, Hawaii (“Pearlridge”) during the second quarter.
Net income to common shareholders was $15.5 million in the second quarter of 2012, compared to a net loss to common shareholders of $22.4 million in the second quarter of 2011. The increase in net income was primarily due to the Company’s recognition of a $25.1 million gain on the re-measurement of its 20% equity investment in Pearlridge and $15.3 million less in impairment charges than in the three months ended June 30, 2011. These favorable variances were partially offset by the non-cash write-off of $3.2 million of pre-development costs associated with a retail development opportunity in the Panama City Beach, Florida area during the second quarter of 2012.
Net operating income (“NOI”) for comparable mall properties, including the pro-rata share of the malls held through joint ventures was nearly flat when comparing the three months ended June 30, 2012 to the three months ended June 30, 2011. NOI growth for the six months ended June 30, 2012 was 0.5%.
Average store rents for the Core Malls were $34.77 per square foot (“psf”) at June 30, 2012, a 4.3% improvement from $33.33 psf at June 30, 2011. Average in-line store rents include in-line permanent retail stores that are less than 10,000 square feet. Core Malls include all of the Company’s open-air centers, mall properties, and outlet properties, including both wholly-owned and joint venture properties.
Re-leasing spreads for the Core Malls increased by 11% for the non-anchor leases signed during the second quarter of 2012, with base rents averaging $40.15 psf. Re-leasing spreads represent the percentage change in base rent for permanent leases signed, both new leases and renewals, to the base rent for comparative tenants for those leases where the space was occupied in the previous twenty-four months.
Total occupancy for Core Malls was 93.6% at both June 30, 2012 and June 30, 2011.
Average store sales in the Core Malls increased 10.4% to $434 psf for the twelve months ended June 30, 2012, compared to $393 psf for the twelve months ended June 30, 2011. Average store sales represent retail sales for mall stores of 10,000 square feet of gross leasable area or less that reported sales in the most recent twelve month period.
Comparable store sales for the Company’s Core Malls during the three months ended June 30, 2012, compared to the three months ended June 30, 2011, increased by 4.1%, and increased 5.7% for the twelve months ending June 30, 2012 when compared to the same period in 2011. Comparable sales compare only those stores with sales in each respective period ended June 30, 2012 and June 30, 2011.
Occupancy costs for the twelve months ended June 30, 2012 were 10.9% of tenant sales for Core Mall stores. Occupancy costs include the tenants’ minimum rent and costs the tenants pay toward operating costs and real estate taxes.
Scottsdale Quarter ® ended the second quarter of 2012 with total occupancy of 84% for the first two phases of the project, comprised of retail at 81% and office at 92%. When including signed leases not yet open, leases out for signature, and outstanding letters of intent, nearly 93% of the gross leasable area for the first two phases have been addressed. The stabilized yield for the first two phases, as well as the timing of the yields, is consistent with the Company’s previously announced guidance.
Update on Liquidity and Capital Resources
Debt-to-total-market capitalization at June 30, 2012 (including the Company’s pro-rata share of joint venture debt) was 47.9%, based on a common share closing price of $10.22, as compared to 50.6% at December 31, 2011, based on a common share closing price of $9.20. Debt with fixed interest rates represented approximately 85.9% of the Company’s consolidated total outstanding borrowings at June 30, 2012, compared to 85.0% at December 31, 2011.
The Company did not sell any common shares under its at-the-market (“ATM”) equity offering program during the three months ended June 30, 2012. As of June 30, 2012, the Company has approximately $53.2 million available for issuance under the ATM program.
In May 2012, the Company closed on the purchase of the 80% indirect ownership interest in Pearlridge from affiliates of Blackstone Real Estate Partners VI (“Blackstone”). The purchase price for this ownership interest was approximately $289.4 million, which includes Blackstone’s pro-rata share of the $175 million mortgage debt currently encumbering the property, resulting in a cash purchase price for Blackstone’s interest of approximately $149.4 million. The Company funded the acquisition with a portion of the proceeds from the secondary public offering completed in the first quarter of 2012.
In May 2012, the Company purchased One Nineteen, an outdoor retail center located in Leawood, Kansas, for $67.5 million. One Nineteen is adjacent to the Company’s Town Center Plaza in Leawood and will add approximately 164,000 square feet of leasable retail space to the company’s real estate portfolio. The acquisition was funded with proceeds from the secondary offering completed in the first quarter of 2012. The Company anticipates securing long-term financing on the property over the next several months.
In June 2012, the Company completed its acquisition of the ground leasehold interest and improvements that comprise Malibu Lumber Yard, an outdoor retail center located in Malibu, California, for $35.5 million. The Company used funds available from the Company’s corporate credit facility to fund the acquisition.
As of the date of this release, the Company updated estimated diluted net income per share to reflect the gain on the re-measurement of equity investment that was recognized in the second quarter in the range of $0.12 to $0.17 for the year ending December 31, 2012, and maintains previously issued guidance for diluted FFO per share in the range of $0.59 to $0.64 for the year ending December 31, 2012. The guidance does reflect the acquisitions of One Nineteen and Malibu Lumber Yard as well as the impact of the $3.2 million of pre-development costs written off during the second quarter. Other key assumptions detailed in previously issued guidance remain the same. Additionally, the guidance does not reflect any other property dispositions, acquisitions or material capital raises during the remainder of the year.