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Glimcher Realty Trust (NYSE: GRT) today announced financial results for the third quarter ended September 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 certainly pleased with the steady progress made during the quarter as we continue to transform the company,” stated Michael P. Glimcher, Chairman of the Board and CEO. “Whether it’s enhancing our balance sheet, strengthening our existing portfolio or pursuing strategic investments, we are laying a solid foundation for future growth that we believe will ultimately deliver value to our shareholders.”
Net loss to common shareholders during the third quarter of 2012 was $10.4 million, or $0.07 per share, as compared to a net loss to common shareholders of $4.7 million, or $0.04 per share, in the third quarter of 2011. Funds From Operations (“FFO”) during the third quarter of 2012 was $20.5 million, or $0.14 per share, compared to $16.1 million, or $0.15 per share, in the third quarter of 2011. Adjusted FFO for the third quarter of 2012 was $23.9 million, or $0.17 per share. Adjusted FFO for the third quarter of 2012 excludes the $3.4 million non-cash write-off of issuance costs related to the redemption of preferred shares during the quarter.
Third Quarter Earnings Highlights
Total revenues were $87.3 million in the third quarter of 2012, compared to total revenues of $66.8 million in the third quarter of 2011. The $20.5 million increase in total revenues resulted primarily from $19.7 million of revenue from properties acquired since September 2011 as well as revenue growth of $1.8 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 located in Malibu, California. We also acquired the remaining 80% indirect ownership interest in Pearlridge Center in Honolulu, Hawaii (“Pearlridge”) during the second quarter of 2012.
Net loss to common shareholders was $10.4 million in the third quarter of 2012, compared to a net loss to common shareholders of $4.7 million in the third quarter of 2011. The decrease in net income was primarily due to the Company’s recognition of a $3.4 million non-cash write-off of issuance costs related to the redemption of preferred shares.
Net operating income (“NOI”) for comparable mall properties, including the pro-rata share of the malls held through joint ventures, increased 0.2% when comparing the three months ended September 30, 2012 to the three months ended September 30, 2011.
Average store rents for the Core Malls were $34.73 per square foot (“psf”) as of September 30, 2012, a 3.9% improvement from $33.43 psf as of September 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 material joint venture properties.
Re-leasing spreads for the Core Malls increased by 9% for the non-anchor leases signed during the third quarter of 2012, with base rents averaging $35.15 psf. Re-leasing spreads represent the percentage change in base rent for permanent leases signed, both new 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 increased 40 basis points to 94.7% at September 30, 2012 compared to 94.3% at September 30, 2011.
Average store sales in the Core Malls increased 8.3% to $429 psf for the twelve months ended September 30, 2012, compared to $396 psf for the twelve months ended September 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 September 30, 2012, compared to the three months ended September 30, 2011 increased by 4.8% and increased 5.6% for the twelve months ending September 30, 2012 when compared to the same period in 2011. Comparable sales compare only those stores with sales in each respective period ended September 30, 2012 and September 30, 2011.
Occupancy costs for the twelve months ended September 30, 2012 were 11.0% of tenant sales for Core Mall stores. Occupancy costs include the tenants’ minimum rent and amounts the tenants pay toward operating costs and real estate taxes.
Scottsdale Quarter ® ended the third quarter of 2012 with a total occupancy of 88% for the first two phases of the project, comprised of retail at 83% and office at 97%. When including signed leases not yet open, leases out for signature, and outstanding letters of intent, over 93% of the gross leasable area for the first two phases has been addressed.
Update on Liquidity and Capital Resources
Debt-to-total-market capitalization at September 30, 2012 (including the Company’s pro-rata share of joint venture debt) was 47.1%, based on a common share closing price of $10.57, 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 87.4% of the Company’s consolidated total outstanding borrowings at September 30, 2012, compared to 85.0% at December 31, 2011.
The Company sold 1.2 million common shares, at a weighted average price of $10.48 per share, under its at-the-market (“ATM”) equity offering program during the three months ended September 30, 2012, generating net proceeds of $12.0 million. The proceeds generated from the ATM program were used to repay a portion of the outstanding balance under the Company’s corporate credit facility. As of September 30, 2012, the Company has approximately $40.8 million available for issuance under the ATM program.
The Company completed a $100 million preferred equity offering in July 2012. The new Series H Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series H Shares”) will pay a 7.5% dividend per annum. In September, the Company used the proceeds from the Series H Shares to redeem all of the outstanding 8.75% Series F Preferred Shares for $60 million and 1.2 million of the Company’s 8.125% Series G Preferred Shares for $30 million. In connection with the redemption, the Company recorded a non-cash write-off of approximately $3.4 million of previously incurred issuance costs.
In August 2012, the Company closed on an $82 million, 10-year mortgage on Dayton Mall in Dayton, Ohio. The loan bears interest of 4.57% per annum. Proceeds were used to repay the existing $50 million term loan on Dayton Mall, with the remaining $32 million in excess proceeds being used to reduce outstanding balances under the Company’s credit facility.
In September 2012, a joint venture that owns WestShore Plaza in Tampa, Florida, closed on a $122.5 million loan. The loan bears interest at an initial rate of 3.65% and has a term of up to five years when considering extension options.
In October 2012, the Company closed on a $38 million loan on One Nineteen. The interest rate is 4.25% per annum and the loan has a term of over 14 years based on a call date of February 1, 2027. The loan’s maturity is coterminous with the financing on Town Center Plaza. Proceeds from the loan were used to repay a portion of the outstanding balance under the Company’s credit facility.
As of the date of this release, the Company updated estimated diluted net loss and FFO per share to reflect the non-cash write-off of approximately $3.4 million of previously incurred issuance costs related to the preferred shares that were redeemed during the third quarter of 2012 and incremental depreciation expense related primarily to the Company’s 2012 acquisitions. Estimated diluted net loss per share was updated to be in the range of $(0.05) to $(0.02) for the year ending December 31, 2012, and updated guidance for diluted FFO per share to be in the range of $0.57 to $0.60 for the year ending December 31, 2012. Other key assumptions detailed in previously issued guidance generally remain the same. Additionally, the guidance does not reflect any other property dispositions, acquisitions or material capital raising events that might occur during the remainder of the year.