HRPT Properties Trust Q1 2010 Earnings Call Transcript

HRPT Properties Trust Q1 2010 Earnings Call Transcript
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HRPT Properties Trust (HRP)

Q1 2010 Earnings Call

May 6, 2010 1:00 pm ET

Executives

Timothy A. Bonang – Vice President Investor Relations

Adam D. Portnoy – Managing Trustee

John C. Popeo – Chief Financial Officer, Treasurer & Secretary

Analysts

John Guinee – Stifel Nicolaus & Company

Michael Aryan – Sun Life Financial

Presentation

Operator

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Previous Statements by HRP
» HRPT Properties Q4 2009 Earnings Call Transcript
» HRPT Properties Trust Q3 2009 Earnings Call Transcript
» HRPT Properties Trust Q2 2009 Earnings Call Transcript

Welcome to the HRPT Properties Trust first quarter 2010 financial results conference call. This call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the Vice President of Investor Relations Tim Bonang.

Timothy A. Bonang

Joining me on today’s call are Adam Portnoy, Managing Trustee and John Popeo, Chief Financial Officer. The agenda for today’s call includes a presentation by management followed by a question and answer session. I would also note that the recording and retransmission of today’s conference call is strictly prohibited without prior written consent of HRP. Before we begin today’s call I would like to reiterate our Safe Harbor statement.

Today’s conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws. These forward-looking statements are based on HRP’s present beliefs and expectations as of today, May 6, 2010. The company undertakes no obligation to revise or publically release the results of any revisions to the forward-looking statements made in today’s conference call other than through filings with the Securities & Exchange Commission or SEC regarding this reporting period.

In addition, this call may contain non-GAAP numbers including funds from operations or FFO. A reconciliation of FFO to net income as well as components to calculate AFFO, CAD or FAD are available on our supplemental package found in the investor relations section of the company’s website. Actual results may differ materially from those projected in any forward-looking statements.

Additional information concerning factors that could cause those differences is contained in our Form 10Q which we expect to file shortly with the SEC and in our Q1 supplemental operating and financial data found on our website at

www.HRPREIT.com

. Investors are cautioned not to place undue reliance on any forward-looking statements.

Now, I would like to turn the call over to Adam Portnoy.

Adam D. Portnoy

For the first quarter of 2010 we are reporting fully diluted FFO of $0.26 per share compared to $0.27 per share during the same period last year. As many of you know, in March 2010 we issued 34.5 million common shares raising net proceeds of approximately $240 million. We used the proceeds from this offering to repay debt and fund acquisitions. This was our first trip to the equity markets in over two years and as a reminder, we did not issue equity in early 2009 when many of our peers completed extremely dilutive equity offerings.

As we discussed during our meetings with investors during the March equity offering, we believe that it is currently a great time to be purchasing property at good valuations. With this in mind, since the end of March we have acquired two properties and we have entered agreements to purchase 12 additional properties for an aggregate purchase price of $192.5 million.

In April 2010 we acquired a Class A office property located in Denver Colorado with 248,000 square feet. This property is a recently constructed build to suit for ReMax realty as its corporate headquarters. ReMax sold us the property and then entered an 18 year lease term for 100% of the property. The purchase price was $75 million and the going in cap rate was 10.5%.

In April 2010 we also acquired an office property located in Colorado Springs Colorado for 77,000 square feet. This property is 100% leased to two tenants with weighted average lease terms of approximately 4.7 years. The purchase price was $10.8 million and the going in cap rate was 11.6%.

In May 2010, HRP entered a purchase and sale agreement to acquire two office properties located in Carson California with approximately 212,000 square feet. The properties are 100% leased to Northrop Grumman for approximately six years. The contracted purchase price is $27.9 million and we expect to close on this acquisition in the second quarter. Of course, this acquisition is subject to closing conditions and no assurance can be given that this acquisition will occur.

In May, we also announced an agreement to acquire MacarthurCook Industrial Property Fund for $79.2 million. This fund is an Australian listed property trust that trades on the Australian Security Exchange under the symbol MIF. If we’re successful in closing this transaction MIF would become a wholly owned subsidiary of HRP that would initially own 10 industrial properties with approximately 1.4 million square feet.

Although the possible investment in MIF would be modest compared to our total property investments of over $6.6 billion, we believe that this investment may create a platform for additional acquisitions of Australian commercial real estate. We also believe that Australian properties and the Australian economy generally are well positioned by geography and natural resources to benefit from the economic growth in the Asia Pacific region in the future. We expect this acquisition may close by the end of 2010. However, this acquisition is conditioned upon approval of MIF’s unit holders and other conditions and as a result this acquisition may not close.

Moving to our operations for the quarter, we had two million square feet expire and we signed leases for 1.5 million square feet. 72% of our first quarter leasing activity were renewals and 28% were new leases. Leasing activity this quarter resulted in a 2% roll up in rents and $11.20 per square foot in capital commitment. The average lease term was 6.4 years and the average capital commitment per lease year was $1.76.

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