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CommonWealth REIT Announces 2012 Fourth Quarter And Year End Results

Stocks in this article: CWH

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.

EXCEPT AS REQUIRED BY LAW, CWH DOES NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

           
CommonWealth REIT
Consolidated Statements of Operations, Funds from Operations and Normalized Funds from Operations
(amounts in thousands)
(unaudited)
 
Quarter Ended December 31, Year Ended December 31,
2012   2011   2012   2011  
 
Rental income $ 264,692   $ 233,528   $ 1,013,092   $ 874,232  
 
Expenses:
Operating expenses 113,421 99,342 419,681 363,464
Depreciation and amortization 66,950 56,809 245,729 206,697
General and administrative 13,738 11,711 51,697 43,682
Loss on asset impairment - (233 ) - 3,036
Acquisition related costs   646     351     5,648     10,073  
Total expenses   194,755     167,980     722,755     626,952  
 
Operating income 69,937 65,548 290,337 247,280
 
Interest and other income 384 323 1,428 1,662
Interest expense (including net amortization of debt discounts,
premiums and deferred financing fees of $653, $1,476,
$3,405 and $6,943, respectively) (53,763 ) (49,987 ) (204,244 ) (195,024 )
Loss on early extinguishment of debt - (345 ) (1,895 ) (35 )
Equity in earnings of investees 2,765 2,987 11,420 11,377
Gain on issuance of shares by an equity investee   7,246     -     7,246     11,177  
Income from continuing operations before income tax expense 26,569 18,526 104,292 76,437
Income tax expense   (1,301 )   (604 )   (3,207 )   (1,347 )
Income from continuing operations 25,268 17,922 101,085 75,090
Discontinued operations:
Loss from discontinued operations (3,906 ) (2,887 ) (14,337 ) (539 )
Loss on asset impairment from discontinued operations (168,632 ) (1,341 ) (168,632 ) (7,319 )
Net gain on sale of properties from discontinued operations   -     1,179     2,039     42,752  
Net (loss) income (147,270 ) 14,873 (79,845 ) 109,984
Net income attributable to noncontrolling interest in consolidated subsidiary   (5,514 )   -     (15,576 )   -  
Net (loss) income attributable to CommonWealth REIT (152,784 ) 14,873 (95,421 ) 109,984
Preferred distributions (11,151 ) (13,823 ) (51,552 ) (46,985 )
Excess redemption price paid over carrying value of preferred shares   -     -     (4,985 )   -  
Net (loss) income available for CommonWealth REIT common shareholders $ (163,935 ) $ 1,050   $ (151,958 ) $ 62,999  
 
 
Amounts attributable to CommonWealth REIT common shareholders:
Income from continuing operations $ 8,603 $ 4,099 $ 28,972 $ 28,105
Loss from discontinued operations (3,906 ) (2,887 ) (14,337 ) (539 )
Loss on asset impairment from discontinued operations (168,632 ) (1,341 ) (168,632 ) (7,319 )
Net gain on sale of properties from discontinued operations   -     1,179     2,039     42,752  
Net (loss) income $ (163,935 ) $ 1,050   $ (151,958 ) $ 62,999  
 
               
CommonWealth REIT
Consolidated Statements of Operations, Funds from Operations and Normalized Funds from Operations (continued)
(amounts in thousands, except per share data)
(unaudited)
 
Quarter Ended December 31, Year Ended December 31,
2012   2011   2012   2011  
Calculation of FFO: (1)
Net (loss) income attributable to CommonWealth REIT $ (152,784 ) $ 14,873 $ (95,421 ) $ 109,984
Plus: depreciation and amortization from continuing operations 66,950 56,809 245,729 206,697
Plus: depreciation and amortization from discontinued operations 3,002 2,807 12,563 16,458
Plus: loss on asset impairment from continuing operations - (233 ) - 3,036
Plus: loss on asset impairment from discontinued operations 168,632 1,341 168,632 7,319
Plus: FFO from investees 5,313 5,419 21,383 19,895
Plus: net income attributable to noncontrolling interest 5,514 - 15,576 -
Less: FFO attributable to noncontrolling interest (7,149 ) - (19,419 ) -
Less: net gain on sale of properties from discontinued operations - (1,179 ) (2,039 ) (42,752 )
Less: equity in earnings of investees   (2,765 )   (2,987 )   (11,420 )   (11,377 )
FFO attributable to CommonWealth REIT 86,713 76,850 335,584 309,260
Less: preferred distributions   (11,151 )   (13,823 )   (51,552 )   (46,985 )
FFO available for CommonWealth REIT common shareholders $ 75,562   $ 63,027   $ 284,032   $ 262,275  
 
Calculation of Normalized FFO: (1)
FFO attributable to CommonWealth REIT $ 86,713 $ 76,850 $ 335,584 $ 309,260
Plus: acquisition related costs from continuing operations 646 351 5,648 10,073
Plus: acquisition related costs from discontinued operations - (19 ) - 129
Plus: normalized FFO from investees 5,417 5,559 21,710 20,734
Plus: loss on early extinguishment of debt from continuing operations - 345 1,895 35
Less: early extinguishment of debt settled in cash - - - (232 )
Plus: average minimum rent from direct financing lease 329 329 1,316 1,097
Plus: FFO attributable to noncontrolling interest 7,149 - 19,419 -
Less: normalized FFO attributable to noncontrolling interest (7,491 ) - (20,132 ) -
Less: FFO from investees (5,313 ) (5,419 ) (21,383 ) (19,895 )
Less: interest earned from direct financing lease (333 ) (412 ) (1,452 ) (1,448 )
Less: gain on issuance of shares by an equity investee   (7,246 )   -     (7,246 )   (11,177 )
Normalized FFO attributable to CommonWealth REIT 79,871 77,584 335,359 308,576
Less: preferred distributions   (11,151 )   (13,823 )   (51,552 )   (46,985 )
Normalized FFO available for CommonWealth REIT common shareholders $ 68,720   $ 63,761   $ 283,807   $ 261,591  
 
Weighted average common shares outstanding – basic   83,804     83,722     83,750     77,428  
 
Weighted average common shares outstanding – diluted (2)   91,102     91,020     91,048     84,726  
 
Per common share:
Income from continuing operations attributable to
CommonWealth REIT common shareholders – basic and diluted $ 0.10 $ 0.05 $ 0.35 $ 0.36
(Loss) income from discontinued operations attributable to
CommonWealth REIT common shareholders – basic and diluted $ (2.06 ) $ (0.04 ) $ (2.16 ) $ 0.45
Net (loss) income available for CommonWealth REIT common
shareholders – basic and diluted $ (1.96 ) $ 0.01 $ (1.81 ) $ 0.81
FFO available for CommonWealth REIT common
shareholders – basic $ 0.90 $ 0.75 $ 3.39 $ 3.39
FFO available for CommonWealth REIT common
shareholders – diluted $ 0.90 $ 0.75 $ 3.39 $ 3.39
Normalized FFO available for CommonWealth REIT common
shareholders – basic and diluted $ 0.82 $ 0.76 $ 3.39 $ 3.38
 
 

CommonWealth REIT

Consolidated Statements of Operations, Funds from Operations and Normalized Funds from Operations (continued)

(amounts in thousands)

(unaudited)

 

(1)

CWH calculates FFO and Normalized FFO as shown above. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or NAREIT, which is net (loss) income, calculated in accordance with GAAP, plus real estate depreciation and amortization, loss on asset impairment, net (loss) income attributable to noncontrolling interest and FFO from equity investees, excluding any gain or loss on sale of properties, earnings from equity investees and FFO attributable to noncontrolling interest. CWH’s calculation of Normalized FFO differs from NAREIT's definition of FFO because it excludes acquisition related costs, gains from issuance of shares by equity investees, gain and loss on early extinguishment of debt unless settled in cash, the difference between average minimum rent and interest earned from CWH’s direct financing lease and the difference between FFO and Normalized FFO from equity investees and noncontrolling interest. CWH considers FFO and Normalized FFO to be appropriate measures of operating performance for a REIT, along with net (loss) income, net (loss) income attributable to CommonWealth REIT, net (loss) income available for CommonWealth REIT common shareholders, operating income and cash flow from operating activities. CWH believes that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO may facilitate a comparison of its operating performance between periods. FFO and Normalized FFO are among the factors considered by CWH’s Board of Trustees when determining the amount of distributions to shareholders. Other factors include, but are not limited to, requirements to maintain CWH’s status as a REIT, limitations in its credit facilities and term loan agreements and public debt covenants, the availability of debt and equity capital to CWH, CWH’s cash available for distribution, CWH’s expectation of its future capital requirements and operating performance, and CWH’s expected needs and availability of cash to pay its obligations. FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net (loss) income, net (loss) income attributable to CommonWealth REIT, net (loss) income available for CommonWealth REIT common shareholders, operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of CWH’s financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of CWH’s needs. CWH believes that FFO and Normalized FFO may facilitate an understanding of its consolidated historical operating results. These measures should be considered in conjunction with net (loss) income, net (loss) income attributable to CommonWealth REIT, net (loss) income available for CommonWealth REIT common shareholders, operating income and cash flow from operating activities as presented in CWH’s Consolidated Statements of Operations, Consolidated Statements of Comprehensive (Loss) Income and Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate FFO and Normalized FFO differently than CWH does.

 

(2)

As of December 31, 2012, CWH’s 15,180 outstanding series D preferred shares were convertible into 7,298 common shares. The effect of a conversion of CWH’s series D convertible preferred shares on income from continuing operations available for CommonWealth REIT common shareholders per share is anti-dilutive to income, FFO and Normalized FFO for most periods presented. Set forth below is the calculation of diluted net income available for common shareholders, diluted FFO available for common shareholders, diluted Normalized FFO available for common shareholders and diluted weighted average common shares outstanding.

 
       
Quarter Ended December 31, Year Ended December 31,
  2012       2011   2012       2011
 
Net (loss) income available for CommonWealth REIT common shareholders $ (163,935 ) $ 1,050 $ (151,958 ) $ 62,999
Add - Series D convertible preferred distributions 6,167 6,167 24,668 24,668
Net (loss) income available for CommonWealth REIT common                
shareholders -- diluted $ (157,768 ) $ 7,217 $ (127,290 ) $ 87,667
 
FFO available for CommonWealth REIT common shareholders $ 75,562 $ 63,027 $ 284,032 $ 262,275
Add - Series D convertible preferred distributions   6,167     6,167   24,668     24,668
FFO available for CommonWealth REIT common shareholders – diluted $ 81,729   $ 69,194 $ 308,700   $ 286,943
 
Normalized FFO available for CommonWealth REIT common shareholders $ 68,720 $ 63,761 $ 283,807 $ 261,591
Add - Series D convertible preferred distributions 6,167 6,167 24,668 24,668
Normalized FFO available for CommonWealth REIT common                
shareholders – diluted $ 74,887   $ 69,928 $ 308,475   $ 286,259
 
Weighted average common shares outstanding – basic 83,804 83,722 83,750 77,428
Effect of dilutive Series D preferred shares   7,298     7,298   7,298     7,298
Weighted average common shares outstanding – diluted   91,102     91,020   91,048     84,726
 
       
CommonWealth REIT
Consolidated Balance Sheets
(amounts in thousands, except share data)
(unaudited)
 
As of December 31,
2012 2011

ASSETS

Real estate properties:
Land $ 1,531,416 $ 1,450,154
Buildings and improvements   6,297,993   5,794,078
7,829,409 7,244,232
Accumulated depreciation   (1,007,606)   (934,170)
6,821,803 6,310,062
Properties held for sale 171,832 -
Acquired real estate leases, net 427,756 343,917
Equity investments 184,711 177,477
Cash and cash equivalents 102,219 192,763
Restricted cash 16,626 7,869
Rents receivable, net of allowance for doubtful accounts of $9,962
and $12,575, respectively 253,394 217,592
Other assets, net   211,293   197,346
Total assets $ 8,189,634 $ 7,447,026
 

LIABILITIES AND SHAREHOLDERS' EQUITY

Revolving credit facility $ 297,000 $ 100,000
SIR revolving credit facility 95,000 -
Senior unsecured debt, net 2,972,994 2,845,030
Mortgage notes payable, net 984,827 632,301
Liabilities related to properties held for sale 2,339 -
Accounts payable and accrued expenses 194,184 158,272
Assumed real estate lease obligations, net 69,304 70,179
Rent collected in advance 35,700 37,653
Security deposits 23,860 23,779
Due to related persons   12,958   11,295
Total liabilities   4,688,166   3,878,509
 
Commitments and contingencies
 
Shareholders' equity:
Shareholder's equity attributable to CommonWealth REIT:
Preferred shares of beneficial interest, $0.01 par value:
50,000,000 shares authorized;
Series C preferred shares; 7 1/8% cumulative redeemable since
February 15, 2011; zero and 6,000,000 shares issued and outstanding,
respectively, aggregate liquidation preference $150,000 - 145,015
Series D preferred shares; 6 1/2% cumulative convertible;
15,180,000 shares issued and outstanding, aggregate liquidation
preference $379,500 368,270 368,270
Series E preferred shares; 7 1/4% cumulative redeemable on or after
May 15, 2016; 11,000,000 shares issued and outstanding,
aggregate liquidation preference $275,000 265,391 265,391
Common shares of beneficial interest, $0.01 par value:
350,000,000 shares authorized; 83,804,068 and 83,721,736 shares issued
and outstanding, respectively 838 837
Additional paid in capital 3,585,400 3,614,079
Cumulative net income 2,386,900 2,482,321
Cumulative other comprehensive income (loss) 565 (4,709)
Cumulative common distributions (2,972,569) (2,826,030)
Cumulative preferred distributions   (529,367)   (476,657)
Total shareholders' equity attributable to CommonWealth REIT 3,105,428 3,568,517
Noncontrolling interest in consolidated subsidiary   396,040   -
Total shareholders' equity   3,501,468   3,568,517
Total liabilities and shareholders' equity $ 8,189,634 $ 7,447,026
 

A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the New York Stock Exchange. No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

Copyright Business Wire 2010
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