Select Income REIT Announces 2012 Fourth Quarter and Year End Results Business Wire NEWTON, Mass. -- February 22, 2013 Select Income REIT (NYSE: SIR) today announced financial results for the quarter and year ended December 31, 2012. SIR was formed on December 19, 2011 as a wholly owned subsidiary of CommonWealth REIT (NYSE: CWH), and SIR sold approximately 29.5% of its common shares in an initial public offering, or IPO, on March 12, 2012. Accordingly, SIR’s historical results of operations for the 2011 periods are not comparable to results reported for the current periods; similarly, SIR’s historical results for the years ended December 31, 2011 and 2012 are not comparable to the results which may be expected in future periods. Results for the Quarter Ended December 31, 2012: Normalized funds from operations, or Normalized FFO, for the quarter ended December 31, 2012 were $23.6 million, compared to Normalized FFO for the quarter ended December 31, 2011 of $20.1 million. Normalized FFO per share for the quarter ended December 31, 2012 were $0.71 per share. Net income was $17.2 million for the quarter ended December 31, 2012, compared to $17.2 million for the same quarter last year. Net income per share for the quarter ended December 31, 2012 was $0.52 per share. The weighted average number of common shares outstanding was 33,070,092 for the quarter ended December 31, 2012. For the quarter ended December 31, 2011, SIR had only a nominal number of shares outstanding. A reconciliation of net income determined according to U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, and Normalized FFO for the quarters ended December 31, 2012 and 2011 appears later in this press release. Results for the Year Ended December 31, 2012: Normalized FFO for the year ended December 31, 2012 were $83.2 million, compared to Normalized FFO for the year ended December 31, 2011 of $80.1 million. Normalized FFO per share for the year ended December 31, 2012 were $3.07 per share. Net income was $65.9 million for the year ended December 31, 2012, compared to $68.9 million for the year ended December 31, 2011. Net income per share for the year ended December 31, 2012 was $2.43 per share. The weighted average number of common shares outstanding was 27,121,991 for the year ended December 31, 2012. For the year ended December 31, 2011, SIR had only a nominal number of shares outstanding. A reconciliation of net income, determined according to GAAP, to FFO and Normalized FFO for the years ended December 31, 2012 and 2011 appears later in this press release. Occupancy and Leasing Results: As of December 31, 2012, 95.3% of SIR’s total rentable square feet was leased, compared to 95.3% leased as of December 31, 2011, and 94.9% leased as of September 30, 2012. SIR entered lease renewals for 375,000 square feet and new leases for 59,000 square feet during the quarter ended December 31, 2012 which had weighted average rental rates that were 35.2% above prior rents for the same square feet. The weighted average lease term for leases entered during the fourth quarter of 2012 was 9.6 years. Commitments for tenant improvement, leasing commission costs and concessions for leases entered during the quarter ended December 31, 2012 totaled approximately $323,000, or approximately $0.08 per square foot per year of the weighted average lease term. All renewal and new leasing activity during the quarter ended December 31, 2012 occurred at SIR’s properties located in Hawaii. During the quarter ended December 31, 2012, SIR also executed ten rent resets at properties located in Hawaii for approximately 365,000 square feet of land at combined weighted average reset rates that were approximately 59.4% higher than prior rates. Investment Activities: Since October 1, 2012, SIR has acquired 9 properties with a combined 1,238,809 square feet for an aggregate purchase price of $282.4 million, excluding closing costs, which are described below. *In November 2012, SIR acquired a single tenant, net leased office property located in Sunnyvale, CA with 96,415 square feet. The purchase price was $28.1 million, excluding closing costs. *Also in November 2012, SIR acquired a net leased industrial property located in Honolulu, HI with 49,452 square feet. The purchase price was $6.3 million, excluding closing costs. *Also in November 2012, SIR acquired three single tenant, net leased office properties located in Sterling, VA with a combined 337,228 square feet. The aggregate purchase price was $85.6 million, excluding closing costs. *In December 2012, SIR acquired a single tenant, net leased office property located in Ann Arbor, MI with 82,003 square feet. The purchase price was $16.9 million, excluding closing costs. *Also in December 2012, SIR acquired a single tenant, net leased office property located in Columbia, MD with 119,912 square feet. The purchase price was $40.5 million, excluding closing costs. *In January 2013, SIR acquired two single tenant, net leased office properties located in Addison, TX with a combined 553,799 square feet. The aggregate purchase price was $105.0 million, excluding closing costs. In January 2013, SIR entered agreements to acquire three properties with a combined 225,211 square feet for an aggregate purchase price of $53.3 million, excluding closing costs, which are described below. *In January 2013, SIR entered an agreement to acquire two single tenant, net leased office properties located in Provo, UT with a combined 125,225 square feet. The aggregate purchase price is $34.7 million, excluding closing costs. This acquisition is subject to SIR's satisfactory completion of diligence and other customary closing conditions; accordingly, SIR can provide no assurance that it will acquire these properties for the stated aggregate purchase price or at all. *Also in January 2013, SIR entered an agreement to acquire a single tenant, net leased office property located in San Antonio, TX with 99,986 square feet. The purchase price is $18.6 million, excluding closing costs. This acquisition is subject to SIR's satisfactory completion of diligence and other customary closing conditions; accordingly, SIR can provide no assurance that it will acquire this property for the stated purchase price or at all. Financing Activities: Since October 1, 2012, SIR has completed the following financing activities: On December 11, 2012, SIR sold 8,050,000 common shares, including 1,050,000 common shares sold when the underwriters exercised in full their option to purchase additional shares, in a public offering at a price of $24.00 per share and raised net proceeds of approximately $182.8 million. The net proceeds from this offering were used to partially repay amounts outstanding under SIR’s revolving credit facility and for general business activities, including the acquisitions described above. In February 2013, SIR increased the available borrowing amount under its revolving credit facility from $500.0 million to $750.0 million. All other terms and conditions of the revolving credit facility remain unchanged. Conference Call: On Friday, February 22, 2013, at 1:00 p.m. Eastern Time, David Blackman, President and Chief Operating Officer, and John Popeo, Treasurer and Chief Financial Officer, will host a conference call to discuss the fourth quarter and year end 2012 financial results. The conference call telephone number is (800) 553-0288. Participants calling from outside the United States and Canada should dial (612) 332-0530. No pass code is necessary to access either call. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on Friday, March 1, 2013. To hear the replay, dial (320) 365-3844. The replay pass code is 279894. A live audio webcast of the conference call will also be available in a listen only mode on SIR’s website, which is located at www.sirreit.com. Participants wanting to access the webcast should visit SIR’s website about five minutes before the call. The archived webcast will be available for replay on SIR’s website for about one week after the call. The transcription, recording and retransmission in any way of SIR’s fourth quarter conference call is strictly prohibited without the prior written consent of SIR. Supplemental Data: A copy of SIR’s Fourth Quarter 2012 Supplemental Operating and Financial Data is available for download at SIR’s website, www.sirreit.com. SIR’s website is not incorporated as part of this press release. Select Income REIT is a real estate investment trust, or REIT, which owns properties that are primarily net leased to single tenants. As of December 31, 2012, SIR owned 267 properties with a total of approximately 24.6 million square feet located in 19 states, including 229 properties with approximately 17.8 million square feet which are primarily leasable industrial and commercial land located on the island of Oahu, HI. SIR is headquartered in Newton, MA. Please see the pages attached hereto for a more detailed statement of SIR’s operating results and financial condition and for an explanation of SIR’s calculation of FFO and Normalized FFO. 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. Select Income REIT Condensed Consolidated Statements of Income (amounts in thousands, except per share data) (unaudited) Three Months Ended December Year Ended December 31, 31, 2012 2011 2012 2011 Revenues: Rental income $ 31,287 $ 22,588 $ 105,559 $ 91,775 Tenant reimbursements 5,118 4,104 17,231 16,847 and other income Total revenues 36,405 26,692 122,790 108,622 Expenses: Real estate 4,157 3,646 15,370 14,709 taxes Other operating 2,811 1,716 8,426 8,237 expenses Depreciation and 5,178 2,844 14,860 11,205 amortization Acquisition 1,212 - 2,470 - related costs General and 2,539 1,240 8,203 5,528 administrative Total expenses 15,897 9,446 49,329 39,679 Operating 20,508 17,246 73,461 68,943 income Interest expense (including amortization of deferred financing fees of $382, $0, (3,129 ) - (7,565 ) - $1,050 and $0, respectively) Equity in earnings of an 80 - 269 - investee Income before income tax 17,459 17,246 66,165 68,943 expense Income tax (290 ) - (290 ) - expense Net income 17,169 17,246 65,875 68,943 Weighted average common 33,070 - 27,122 - shares outstanding Net income per $ 0.52 $ - $ 2.43 $ - common share Select Income REIT Funds from Operations and Normalized Funds from Operations((1)) (amounts in thousands, except per share data) (unaudited) Three Months Ended Year Ended December December 31, 31, 2012 2011 2012 2011 Net income $ 17,169 $ 17,246 $ 65,875 $ 68,943 Plus:depreciation 5,178 2,844 14,860 11,205 and amortization FFO 22,347 20,090 80,735 80,148 Plus:acquisition 1,212 - 2,470 - costs Normalized FFO $ 23,559 $ 20,090 $ 83,205 $ 80,148 Weighted average common shares 33,070 - 27,122 - outstanding Per common share FFO $ 0.68 $ 2.98 Normalized FFO $ 0.71 $ 3.07 ^(1) SIR 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 income, calculated in accordance with GAAP, plus real estate depreciation and amortization, as well as other adjustments currently not applicable to us. SIR’s calculation of Normalized FFO differs from NAREIT’s definition of FFO because SIR excludes acquisition related costs. SIR considers FFO and Normalized FFO to be appropriate measures of operating performance for a REIT, along with net income, operating income and cash flow from operating activities. SIR 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 SIR’s Board of Trustees when determining the amount of distributions to SIR’s shareholders. Other factors include, but are not limited to, requirements to maintain SIR’s status as a REIT, limitations in SIR’s revolving credit facility and term loan agreements, the availability of debt and equity capital to SIR, SIR’s expectation of its future capital requirements and operating performance, and SIR’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 income, operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of SIR’s financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of SIR’s needs. SIR believes that FFO and Normalized FFO may facilitate an understanding of SIR’s consolidated historical operating results. These measures should be considered in conjunction with net income, operating income and cash flow from operating activities as presented in SIR’s Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate FFO and Normalized FFO differently than SIR does. Select Income REIT Condensed Consolidated Balance Sheets (amounts in thousands, except share data) (unaudited) December 31, December 31, 2012 2011 ASSETS Real estate properties: Land $ 675,092 $ 614,702 Buildings and improvements 620,686 292,634 1,295,778 907,336 Accumulated depreciation (46,697 ) (36,240 ) 1,249,081 871,096 Acquired real estate leases, net 95,248 44,333 Cash and cash equivalents 20,373 - Restricted cash 42 - Rents receivable, net of allowance for doubtful accounts of $644 and $4,067, 38,885 35,024 respectively Deferred leasing costs, net 4,816 3,418 Deferred financing costs, net 5,517 - Due from related persons 585 - Other assets 16,105 661 Total assets $ 1,430,652 $ 954,532 LIABILITIES AND SHAREHOLDERS' EQUITY Revolving credit facility $ 95,000 $ - Term loan 350,000 - Mortgage notes payable 27,778 - Accounts payable and accrued expenses 19,703 14,217 Assumed real estate lease obligations, 20,434 21,005 net Rents collected in advance 6,518 6,229 Security deposits 9,335 8,281 Due to related persons 1,701 - Total liabilities 530,469 49,732 Commitments and contingencies Shareholders' equity: Common shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized, 39,282,592 and 1,000 shares issued and outstanding, 393 - respectively Additional paid in capital 876,920 - Cumulative net income 51,251 - Cumulative other comprehensive income 25 - Cumulative common distributions (28,406 ) - Ownership interest - 904,800 Total shareholders' equity 900,183 904,800 Total liabilities and shareholders' $ 1,430,652 $ 954,532 equity WARNING CONCERNING FORWARD LOOKING STATEMENTS THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORMACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAYNOT OCCUR. ACTUAL RESULTS MAYDIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE: *THIS PRESS RELEASE STATES THAT WE HAVE ENTERED AGREEMENTS TO PURCHASE PROPERTIES. THESE TRANSACTIONS ARE SUBJECT TO VARIOUS TERMS AND CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE TRANSACTIONS. THESE TERMS AND CONDITIONS MAY NOT BE MET. AS A RESULT, THESE TRANSACTIONS MAY NOT OCCUR OR MAY BE DELAYED. THE INFORMATION CONTAINED IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING UNDER “RISK FACTORS” IN OUR PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE ON ITS WEBSITE AT WWW.SEC.GOV. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. Contact: Select Income REIT Timothy A. Bonang, 617-796-8320 Vice President, Investor Relations or Carlynn Finn, 617-796-8320 Senior Manager, Investor Relations
Select Income REIT Announces 2012 Fourth Quarter and Year End Results
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