CommonWealth REIT Announces 2012 Fourth Quarter And Year End Results

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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