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Newkirk Realty Trust, Inc. Announces Third Quarter Financial and Operating Results
BOSTON, Oct. 27 /PRNewswire-FirstCall/ -- Newkirk Realty Trust, Inc. (NYSE: NKT) , the general partner of The Newkirk Master Limited Partnership (the "Operating Partnership"), reported today its results for the quarter ended September 30, 2006. Financial Highlights
* Declared a $0.40 per share dividend during the quarter.
* Reported AFFO of $31.7 million or $1.63 per share for the nine months
ended September 30, 2006.
* Reported earnings of $19.8 million or $1.02 per share for the three
months ended September 30, 2006 and $34.4 million or $1.78 per share for
the nine months ended September 30, 2006.
Property Acquisitions and Investments
During the quarter ended September 30, 2006, the Operating Partnership acquired interests in two properties for an aggregate purchase price of approximately $40.4 million comprising approximately 906,000 square feet. These transactions, as previously announced, are summarized as follows: * On September 21, 2006, we acquired a 202,000 square foot cold storage
warehouse facility located in McDonough, Georgia, a suburb of Atlanta,
for a purchase price of $24,000,000. The property is currently net
leased through October 31, 2012 to Atlas Cold Storage, a Canadian based
company that provides temperature controlled storage, transportation and
third party logistic and management services to food processors,
distributors and retailers of frozen and chilled foods. Rent during the
lease term is $1,800,000 through October 31, 2006; $1,900,000 from
November 1, 2006 through October 31, 2007; $2,000,000 from November 1,
2007 through October 31, 2008; and $2,100,000 annually from November 1,
2008 through October 31, 2012.
* On September 28, 2006, we acquired a 744,000 square foot warehouse
facility located in Columbus, Ohio for a purchase price of $16,355,000.
The property is currently net leased to ODW Logistics Inc., a national
warehousing and distribution center operating company. The current
lease term is through June 30, 2018 with the tenant's option for one
additional term the length of which shall be either five, six, seven,
eight, nine or ten years. Rent during the current term is $1,347,000.
If renewed, rent during the extended term will be at fair market value.
Leasing Activity
* As of September 30, 2006, our properties were 97% leased.
* From July 1, 2006 through October 11, 2006:
- we entered into a modification of the lease with respect to a 390,000
square foot office building leased to Cummins Inc., located in
Columbus, Indiana. The modification extends the lease term for an
additional ten years beyond the current three years remaining. Annual
rental income from the property will be increased by 9.5% effective
August 2006, with further increases of 5% every three years. In
connection with this, we provided the tenant with an $11,500,000
tenant improvement allowance on August 1, 2006.
- we entered into a lease extension with Federal Express Corporation for
its 521,000 square foot office property located in Memphis, Tennessee
which provides for an extension of the lease term to June 2019.
- we entered into a lease renewal with Walgreen's for its 356,000 square
foot facility located in Windsor, Wisconsin which provides for an
extension of the lease term to February 2012.
- we also entered a lease renewal with Entergy Gulf States for 125,000
square feet (with a tenant option for an additional 25,000 square
feet) at its 426,000 square foot Beaumont, Texas property.
- excluding the transactions discussed above, two tenants representing
six properties containing 172,000 square feet exercised their renewal
option.
Debt Placements and Acquisitions
As previously reported, we entered into a joint venture with a subsidiary of Winthrop Realty Trust to originate and acquire loans secured directly or indirectly by real estate. The joint venture made the following investments during the quarter ended September 30, 2006: First Mortgage Loans:
* a $19,000,000 floating rate first mortgage note secured by The Heart of
Palm Beach Hotel in Palm Beach, Florida. The two-year loan bears an
interest rate of LIBOR plus 2.40% and is subject to three, one-year
extensions.
B-Notes/Junior Participations in First Mortgage Loans:
* a $20,900,000 junior participation in a first mortgage loan secured by
The James Hotel in Chicago, Illinois, a 297 room full service hotel.
The underlying loan is scheduled to mature on June 9, 2008 with the
ability to extend for one, three-year term. The participation interest
held by the joint venture bears interest at LIBOR plus 2.35%.
Mezzanine Loans:
* a $19,052,187 fully amortizing mezzanine note secured by the ownership
interests in the entities owning fee title to the Computer Associates
headquarters, a 778,367 square foot office building located in Islandia,
New York and 100% leased to Computer Associates. The loan bears an
interest of 8.530% and matures on August 15, 2016.
* a $1,900,000 mezzanine note secured by the ownership interest in the
entities owning fee title to 99 Founder's Plaza, a 148,000 square foot
class-B office building in East Hartford, Connecticut and 100% leased to
Bank of America. The mezzanine note bears a fixed interest rate of 12%
and matures in September 2016.
Preferred Equity:
* a $30,000,000 participation in a preferred membership interest in an
entity which indirectly holds an ownership interest in the owner of a
907,142 square foot office building located at 450 Lexington Avenue, New
York, New York. The participation entitles the joint venture to a
preferred return of 8.5% and is required to be redeemed prior to August
24, 2007.
Remics/Bonds:
* $32,496,476 in credit mortgage backed securities and collateral debt
obligations as follows:
Rating
Security Class Face Value Margin/ Moody's/S&P/
at Date of Coupon Fitch(1)
Acquisition
G-Force Class J $11,000,000 5.60% NR/BBB-/-
LBFRC 2006-LLFA Class L $10,000,000 LIBOR +1.70% NR/BBB-/BBB-
MSC 2006-XLF Class M $7,745,207 LIBOR +1.65% NR/BBB-/-
Fortress Rake
Bond (MF) 1 FRT1 $2,051,269 LIBOR +0.95% -/NR/-
Fortress Rake
Bond (MF) 2 FRT2 $1,700,000 LIBOR +1.05% -/NR/-
(1) Rating at date of purchase
Financings
The Operating Partnership entered into the following debt financings during the quarter ended September 30, 2006: * On July 20, 2006, we obtained first mortgage loans from an unaffiliated
third party with respect to our Rochester, New York; Statesville, North
Carolina; and Rockford, Illinois properties. The loans, which had an
initial aggregate principal amount of $39,800,000, are cross-
collateralized and cross-defaulted. The loans bear interest at 6.21%,
require monthly payments of interest only for 24 months and then require
monthly payments of principal and interest in the aggregate of
approximately $244,000. The loans are scheduled to mature on August 1,
2016 at which time the outstanding principal balance is expected to be
$35,438,000. We received net proceeds from these loans, after
satisfying closing costs, of approximately $39,260,000.
* On August 31, 2006, we obtained a $17,000,000 first mortgage loan from
an unaffiliated third party lender, which is secured by our property
located in Glenwillow, Ohio. The loan bears interest at 6.13%, requires
monthly payments of interest only for the first two years of the loan
term and thereafter principal (based on a 30-year amortization schedule)
and interest for the balance of the term. The loan is scheduled to
mature on September 6, 2016 at which time the outstanding principal
balance is expected to be approximately $14,988,000.
Property Sales
* On July 13, 2006, we sold 50 retail properties for a gross purchase
price of $160,000,000. The sold properties were originally leased to
Albertson's, Inc., contain an aggregate of approximately 2,300,000
square feet and had current lease terms expiring over the next 4.5
years. After closing costs, we received net proceeds of approximately
$159,000,000, $22,000,000 of which was used to pay down our debt
facility. The balance of the net proceeds were deposited with a
Qualified Intermediary for use in 1031 tax free exchanges including
$49,000,000 which was used for reverse 1031 exchanges in connection with
the previously acquired property located in Rochester, New York leased
to The Frontier Corporation and the Glenwillow, Ohio property leased to
Royal Appliance. We have identified properties to complete the 1031 tax
free exchange, including the properties acquired on September 21, 2006
and September 28, 2006 which are leased to Atlas Cold Storage and ODW
Logistics, Inc., respectively. We recognized a gain for financial
reporting purposes during the quarter as a result of this transaction of
approximately $62,300,000.
* On September 30, 2006, we sold our Toledo, Ohio property currently
leased to Owens-Illinois for a purchase price of $33,000,000, $1,000,000
in cash plus assumption of the $32,000,000 of outstanding debt
encumbering the property. The purchaser, an unaffiliated third party,
RVI Group, is the residual value insurer with respect to the property.
Owens-Illinois had advised us that it would be vacating the property at
the expiration of its lease term, September 30, 2006. We recognized a
gain for financial reporting purposes of approximately $951,000 during
the quarter as a result of this transaction.
* In June 2005, we entered into an agreement with Honeywell International,
Inc., the tenant of four office buildings owned by us in Morris
Township, New Jersey to restructure the lease on the properties. Under
the restructuring, the tenant waived its right to exercise its economic
discontinuance option, and we granted the tenant an option to purchase
the properties in 2007 for $41,900,000. On October 11, 2006, Honeywell
International, Inc. exercised its option to purchase the properties in
2007.
The results of operations for these properties are classified as discontinued operations in the accompanying consolidated statements of operations. Proposed Merger On July 23, 2006, we announced together with Lexington Corporate Properties Trust that we have entered into a definitive merger agreement to create Lexington Realty Trust, the leading real estate investment trust focused on single tenant properties. The merger, which has been approved by Lexington's Board of Trustees and our Board of Directors, as well as by Special Committees of each Board, will create a combined company that will own interests in more than 350 properties located across 44 states with a presence in the nation's highest growth markets. The merger is subject to (i) approval by a majority of our voting shares which vote is scheduled to take place at a November 20, 2006 meeting of stockholders; (ii) the approval of shareholders of Lexington and (iii) the approval of the holders of units of limited partnership in the Operating Partnership to the amendment of the Operating Partnership's limited partnership agreement at a meeting to be held on November 20, 2006. If approved, it is expected that the merger will be consummated on or before December 29, 2006. Execution of Our Business Strategy Management of Lease Rollover At the time of our initial public offering in November 2005, the Company's portfolio included leases representing approximately 14,000,000 square feet that were scheduled to expire by the end of 2009. Since that time, we have renewed, restructured and/or leased an aggregate of 3,732,000 square feet of space. In addition, we have sold or agreed to sell approximately 4,165,000 square feet of space. As a result, we have successfully addressed during the nine months since the IPO, through leasing and sales activity, 7,897,000 square feet or 56% of the 14,000,000 square feet of space. Portfolio Growth Through Acquisitions In the same period, we have acquired 1,825,000 square feet of industrial space for approximately $71,400,000, office properties containing 994,000 square feet for approximately $108,100,000, and our joint venture has acquired or committed to acquire $304,900,000 of debt assets, our share of which is $152,450,000. Together these investments represent portfolio acquisitions of more than $331,950,000 since our initial public offering. Additional Information and Supplemental Data: Newkirk Realty Trust, Inc. was formed in 2005 as a real estate investment trust and on November 7, 2005 became the general partner of, and acquired a 30.1% interest in, The Newkirk Master Limited Partnership. At October 27, 2006, Newkirk Master Limited Partnerships primary assets were its interests in 167 real properties. Almost all of the properties are leased to one or more tenants pursuant to net leases. Newkirk Realty Trust is listed on the New York Stock Exchange (ticker symbol "NKT") and has executive offices in Jericho, New York and Boston, Massachusetts. NEWKIRK REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
Revenue:
Rental income $48,695 $147,721
Interest income 4,393 11,371
Management fees 64 188
Total revenue 53,152 159,280
Expenses:
Interest 14,600 40,619
Depreciation 7,997 23,556
Compensation expense for
exclusivity rights 833 2,500
Merger costs 2,726 2,726
General and administrative 2,248 7,264
Operating 1,832 4,811
Amortization 1,808 4,612
Ground rent 603 1,750
State and local taxes 180 1,361
Minority interest expense of
partially-owned entities 5,292 15,948
Total expenses 38,119 105,147
Income from continuing operations
before other income (expense) 15,033 54,133
Other income (expense):
Equity in (loss) income from
investments in limited partnerships
and joint ventures (198) 1,511
Gain on sale of securities - 88
Minority interest (10,858) (40,457)
Income from continuing operations 3,977 15,275
Discontinued operations:
Income before minority interest 1,858 13,230
Gain from disposal of real estate 63,234 63,234
Minority interest (49,253) (57,297)
Income from discontinued operations 15,839 19,167
Net income $19,816 $34,442
Comprehensive income:
Net income $19,816 $34,442
Unrealized gain on real estate
securities available for sale
arising during this period 868 810
Reclassification adjustment for gains
on real estate securities available
for sale included in net income - (38)
Unrealized (loss) gain on interest
rate derivative (5,660) 1,040
Minority interest in other
comprehensive income 3,351 (1,266)
Comprehensive income $18,375 $34,988
Per share data:
Income from continuing operations $0.20 $0.79
Income from discontinued operations 0.82 0.99
Net income applicable to Common
Stock $1.02 $1.78
Weighted average Common Stock 19,375 19,375
Newkirk Realty Trust, Inc.
Consolidated Statement of Adjusted Funds from Operations
(in thousands, except per share amounts)
Nine Months Ended
September 30, 2006
(unaudited)
Income per Consolidated Statement of
Operations $34,442 (1)
Real estate depreciation 10,348
Real estate depreciation of unconsolidated interests 201
Amortization of capitalized leasing costs 1,211
Gain from disposal of real estate (15,289)
Funds from operations 30,913
Add: Compensation expense incurred for exclusivity rights 752
Adjusted funds from operations $31,665
Adjusted funds from operations per share $1.63
Dividends declared per common share $1.20
(1) Includes operations from (i) our Albertson's portfolio which was sold
in July 2006; (ii) our office property located in Toledo, Ohio which
was sold in September 2006 and (iii) our four office properties leased
to Honeywell International, Inc. which will be sold in 2007.
Funds from operations for the quarter ended September 30, 2006 were $8.1 million as compared to $11.2 million for the quarter ended June 30, 2006. This decline in FFO was attributable, in part, to the sale of the Albertson's portfolio, the restructuring and extension of the lease for the property in Memphis, Tennessee leased to Federal Express Corporation and merger costs incurred in connection with the proposed merger with Lexington Corporate Properties Trust. Information About Funds From Operations We compute funds from operations ("FFO") as shown in the calculation above. Funds from operations is a non-GAAP financial measure which represents "funds from operations" as defined by NAREIT. NAREIT defines funds from operations as net income, computed in accordance with generally accepted accounting principles or GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. We have also reported our adjusted FFO ("AFFO") as adjusted for the non-cash charge incurred in connection with the issuance of shares to Winthrop Realty Trust in exchange for the contribution of certain exclusivity rights with respect to net-lease business opportunities offered to or generated by senior management. We consider AFFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. AFFO can also facilitate a comparison of current operating performance among REITs. AFFO does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity. NEWKIRK REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
September 30,
2006 December 31,
(Unaudited) 2005
ASSETS
Real estate investments:
Land $55,314 $36,593
Land estates 45,902 43,997
Buildings and improvements 1,343,089 1,407,602
Total real estate investments 1,444,305 1,488,192
Less accumulated depreciation and
amortization (465,793) (544,200)
Real estate investments, net 978,512 943,992
Real estate held for sale, net of accumulated
depreciation and amortization of $71,245
and $44,522 50,360 41,685
Cash and cash equivalents 133,859 174,816
Restricted cash 63,972 25,233
Real estate securities available for sale 17,369 5,194
Receivables (including $822 and $6,078 from
related parties) 25,477 58,727
Deferred rental income receivable 36,280 21,246
Loans receivable 14,406 16,058
Equity investments in limited partnerships 9,011 13,846
Equity investment in joint venture 47,931 -
Deferred costs, net of accumulated amortization
of $25,877 and $17,677 11,615 8,771
Lease intangibles, net 34,673 7,657
Other assets (including $1,463 and $1,304
from related parties) 25,847 27,314
Other assets of discontinued operations 3,109 545
Total Assets $1,452,421 $1,345,084
LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable (including
$16,233 and $15,536 to a related party) $271,273 $166,195
Note payable 549,074 593,463
Contract right mortgage notes payable 11,949 11,128
Accrued interest payable (including
$197 and $378 to a related party) 5,307 7,514
Accounts payable and accrued expenses 5,079 4,763
Below market lease intangibles, net 12,466 893
Dividend payable 7,750 5,231
Other liabilities 8,497 4,834
Liabilities of discontinued operations 150 40,491
Total Liabilities 871,545 834,512
Commitments and contingencies
Minority interests 393,097 334,531
Stockholders' equity:
Preferred stock; $.01 par value;
100,000,000 shares authorized;
1 issued and outstanding - -
Common stock; $.01 par value;
400,000,000 shares authorized;
19,375,000 issued and outstanding 194 194
Additional paid-in capital 179,871 179,871
Accumulated dividends in excess of
net income 7,310 (3,882)
Accumulated other comprehensive income (loss) 404 (142)
Total Stockholders' Equity 187,779 176,041
Total Liabilities, Minority
Interests and Stockholders' Equity $1,452,421 $1,345,084
Further details regarding the Company's results of operations, properties and tenants are available in the Company's Form 10-K for the year ended December 31, 2005 which will be filed with the Securities and Exchange Commission and will be available for download at the Company's website http://www.newkirkreit.com/ at the Securities and Exchange Commission website http://www.sec.gov/. Certain statements contained in this press release that are forward- looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. Further information about these matters and the risks generally with respect to the Company can be found in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. Website: http://www.newkirkreit.com/ |
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