Government Properties Income Trust (NYSE: GOV) today announced
its financial results for the quarter and year ended December 31,
2013.
Results for the Quarter Ended December 31, 2013:
Normalized funds from operations, or Normalized FFO, for the
quarter ended December 31, 2013 were $28.2 million, or $0.52 per
share, compared to Normalized FFO for the quarter ended December
31, 2012 of $28.1 million, or $0.53 per share.
Net income was $12.7 million, or $0.23 per share, for the
quarter ended December 31, 2013, compared to $13.2 million, or
$0.25 per share, for the quarter ended December 31, 2012.
The weighted average number of common shares outstanding was
54.7 million and 53.2 million for the quarters ended December 31,
2013 and 2012, respectively.
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, 2013 and 2012 appears later in this press release.
Results for the Year Ended December 31, 2013:
Normalized FFO for the year ended December 31, 2013 were $115.8
million, or $2.12 per share, compared to Normalized FFO for the
year ended December 31, 2012 of $103.2 million, or $2.12 per
share.
Net income was $54.6 million, or $1.00 per share, for the year
ended December 31, 2013, compared to $50.0 million, or $1.03 per
share, for the year ended December 31, 2012. Net income for the
year ended December 31, 2013 includes a net gain on sale of
properties from discontinued operations of $8.2 million, or $0.15
per share, and a loss on asset impairment from discontinued
operations of $10.1 million, or $0.19 per share.
The weighted average number of common shares outstanding was
54.7 million and 48.6 million for the years ended December 31, 2013
and 2012, respectively.
A reconciliation of net income determined according to GAAP to
FFO and Normalized FFO for the years ended December 31, 2013 and
2012 appears later in this press release.
Occupancy and Leasing Results:
As of December 31, 2013, 94.8% of GOV’s rentable square feet
from continuing operations was leased, compared to 93.6% as of
December 31, 2012, and 94.6% as of September 30, 2013.
GOV entered into new and renewal leases of 126,130 rentable
square feet for government tenants during the quarter ended
December 31, 2013 which had: weighted average rental rates 2.5%
above prior rents for the same space, or in the case of space
acquired vacant, market rental rates for similar space in the
building at the date of acquisition; a weighted (by square feet)
average lease term of 3.4 years; and tenant leasing costs and
concession commitments that totaled approximately $594,000, or
$1.37 per square foot per year of lease term.
GOV also entered into new and renewal leases of 133,132 rentable
square feet for non-government tenants during the quarter ended
December 31, 2013 which had: weighted average rental rates 23.3%
below prior rents for the same space, or in the case of space
acquired vacant, market rental rates for similar space in the
building at the date of acquisition; a weighted (by square feet)
average lease term of 11.1 years; and tenant leasing costs and
concession commitments that totaled approximately $8.8 million, or
$5.91 per square foot per year of lease term.
Recent Acquisition and Sales Activities:
Since October 1, 2013, GOV has acquired or has entered into
agreements to acquire five properties consisting of nine buildings
for an aggregate purchase price of $201.8 million, including the
assumption of $97.6 million of mortgage debt and excluding
acquisition costs, as follows:
- In October 2013, GOV acquired a
previously disclosed office property located in Rancho Cordova, CA
with 93,807 rentable square feet. This property is 100% leased to
the State of California and occupied by the Department of Consumer
Affairs for a weighted (by square feet) average remaining lease
term of 13.7 years. The purchase price was $21.2 million, excluding
acquisition costs.
- In November 2013, GOV acquired a
previously disclosed office property consisting of four buildings
located in Fairfax, VA with 170,940 rentable square feet. This
property is 100% leased to eight tenants, of which 51% is leased to
the Commonwealth of Virginia and occupied by Northern Virginia
Community College. The weighted (by square feet) average remaining
lease term for the property was 4.9 years. The purchase price was
$31.5 million, excluding acquisition costs.
- In December 2013, GOV acquired a
previously disclosed office property located in Montgomery, AL with
49,370 rentable square feet. This property is 100% leased to the
U.S. Government and occupied by the Social Security Administration
for a weighted (by square feet) average remaining lease term of
15.5 years. The purchase price was $16.0 million, excluding
acquisition costs.
- In November 2013, GOV entered an
agreement to acquire an office property located in Fairfax, VA with
83,130 rentable square feet. This property is 100% leased to the
U.S. Government. The contract purchase price is $19.8 million,
including the assumption of $14.6 million of mortgage debt and
excluding acquisition costs.
- In December 2013, GOV entered an
agreement to acquire an office property consisting of two buildings
located in Reston, VA with 406,388 rentable square feet. This
property is 100% leased to the U.S. Government. The contract
purchase price is $113.3 million, including the assumption of $83.0
million of mortgage debt and excluding acquisition costs.
GOV is currently marketing for sale three office properties
located in Phoenix, AZ, San Diego, CA, and Falls Church, VA with an
aggregate of 356,163 rentable square feet which are included in
discontinued operations and classified as held for sale as of
December 31, 2013. The aggregate net book value of these properties
totaled $25.6 million at December 31, 2013. In January 2014, GOV
entered an agreement to sell the property located in Phoenix, AZ
with a net book value of $2.3 million at December 31, 2013, for
$5.0 million, excluding closing costs. In February 2014, GOV
entered an agreement to sell the property located in Falls Church,
VA with a net book value of $12.3 million at December 31, 2013, for
$15.8 million, excluding closing costs.
Conference Call:
On Tuesday, February 18, 2014, at 1:00 p.m. Eastern Time,
David Blackman, President and Chief Operating Officer, and Mark
Kleifges, Treasurer and Chief Financial Officer, will host a
conference call to discuss the 2013 fourth quarter and year end
results.
The conference call telephone number is (877) 531-2986.
Participants calling from outside the United States and Canada
should dial (612) 332-7516. No pass code is necessary to access the
call from either number. 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 Tuesday, February 25, 2014. To hear the replay, dial (320)
365-3844. The replay pass code is 318030.
A live audio webcast of the conference call will also be
available in a listen only mode on GOV’s website, which is located
at www.govreit.com. Participants wanting to access the webcast
should visit GOV’s website about five minutes before the call. The
archived webcast will be available for replay on GOV’s website for
about one week after the call. The transcription, recording and
retransmission in any way of GOV’s fourth quarter conference call
are strictly prohibited without the prior written consent of
GOV.
Supplemental Data:
A copy of GOV’s Fourth Quarter 2013 Supplemental Operating and
Financial Data is available for download at GOV’s website,
www.govreit.com. GOV’s website is not incorporated as part of
this press release.
GOV is a real estate investment trust, or REIT, which primarily
owns properties located throughout the United States that are
majority leased to the U.S. Government and other government
tenants. GOV is headquartered in Newton, Massachusetts.
Please see the following pages for a more detailed
statement of GOV’s operating results and financial condition and
for an explanation of GOV’s calculation of FFO and Normalized
FFO.
WARNING CONCERNING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO,
WHENEVER GOV USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”,
“INTEND”, “PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS, GOV IS MAKING
FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE
BASED UPON GOV’S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT
FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND
MAY NOT OCCUR. GOV’S ACTUAL RESULTS MAY DIFFER 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 GOV
ENTERED AGREEMENTS TO PURCHASE TWO PROPERTIES. THESE TRANSACTIONS
ARE SUBJECT TO CLOSING CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE
TRANSACTIONS AND LENDER APPROVAL OF GOV’S ASSUMPTION OF MORTGAGE
DEBT. THESE CONDITIONS MAY NOT BE MET. AS A RESULT, THESE
TRANSACTIONS MAY NOT OCCUR, MAY BE DELAYED OR THEIR TERMS MAY
CHANGE.
- THIS PRESS RELEASE STATES THAT GOV HAS
THREE PROPERTIES CLASSIFIED AS HELD FOR SALE AS OF DECEMBER 31,
2013 AND THAT THE AGGREGATE NET BOOK VALUE OF THESE PROPERTIES
TOTALED $25.6 MILLION. AN IMPLICATION OF THOSE STATEMENTS MAY BE
THAT GOV WILL SELL THOSE PROPERTIES FOR AT LEAST $25.6 MILLION.
HOWEVER, GOV MAY NOT BE ABLE TO SELL ANY OF THOSE PROPERTIES OR MAY
SELL THE PROPERTIES AT AMOUNTS THAT ARE LESS THAN THEIR CURRENT
CARRYING VALUES.
- THIS PRESS RELEASE STATES THAT GOV HAS
ENTERED AGREEMENTS TO SELL TWO OF THE PROPERTIES CLASSIFIED AS HELD
FOR SALE. 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, MAY BE DELAYED OR THEIR TERMS MAY
CHANGE.
THE INFORMATION CONTAINED IN GOV’S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION, INCLUDING UNDER “RISK FACTORS” IN GOV’S
PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER
IMPORTANT FACTORS THAT COULD CAUSE GOV’S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN ITS FORWARD LOOKING STATEMENTS. GOV’S
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE
ON ITS WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON GOV’S FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, GOV DOES NOT INTEND TO UPDATE OR
CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
GOVERNMENT PROPERTIES INCOME TRUST CONSOLIDATED
STATEMENTS OF INCOME, FUNDS FROM OPERATIONS AND NORMALIZED
FUNDS FROM OPERATIONS (amounts in thousands, except per
share data) (unaudited)
Three Months Ended December 31, Year Ended December
31, 2013 2012 2013
2012 Rental income $ 58,271 $ 54,629
$ 226,910 $ 203,700 Expenses: Real
estate taxes 6,650 5,965 25,710 22,485 Utility expenses 4,052 3,732
17,116 15,767 Other operating expenses 11,845 10,407 41,134 37,074
Depreciation and amortization 14,739 13,428 55,699 49,070
Acquisition related costs 738 557 2,439 1,614 General and
administrative 3,361 2,853
12,710 11,924 Total expenses 41,385
36,942 154,808 137,934
Operating income 16,886 17,687 72,102 65,766
Interest and other income 17 8 37 29
Interest expense (including net
amortization of debt premiums and deferred financing fees of $338,
$334, $1,340 and $1,332, respectively)
(4,443
)
(4,243
)
(16,831
)
(16,892
)
Income from continuing operations before
income tax expense and equity in earnings of an investee
12,460
13,452
55,308
48,903
Income tax expense (83 ) (40 ) (133 ) (159 ) Equity in earnings of
an investee 115 80 334
316 Net income from continuing operations 12,492
13,492 55,509 49,060 Income (loss) from discontinued operations
232 (301 ) (889 ) 900 Net
income $ 12,724 $ 13,191 $ 54,620 $ 49,960
Calculation of Funds from Operations (FFO) and
Normalized FFO:(1) Net income $ 12,724 $ 13,191 $ 54,620 $ 49,960
Plus: depreciation and amortization from continuing operations
14,739 13,428 55,699 49,070 Plus: depreciation and amortization
from discontinued operations - 457 1,025 2,096 Plus: loss on asset
impairment from discontinued operations - 494 10,142 494 Less: net
gain on sale of properties from discontinued operations -
- (8,168 ) - FFO 27,463 27,570
113,318 101,620 Plus: acquisition related costs 738
557 2,439 1,614
Normalized FFO $ 28,201 $ 28,127 $ 115,757 $
103,234 Weighted average common shares outstanding
54,722 53,176 54,680
48,617 Per common share: Income from
continuing operations $ 0.23 $ 0.25 $ 1.02 $ 1.01 Income (loss)
from discontinued operations $ - $ (0.01 ) $ (0.02 ) $ 0.02 Net
income $ 0.23 $ 0.25 $ 1.00 $ 1.03 FFO $ 0.50 $ 0.52 $ 2.07 $ 2.09
Normalized FFO $ 0.52 $ 0.53 $ 2.12 $ 2.12
(1) GOV 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, excluding loss on impairment of real estate
assets and any gain or loss on sale of properties, as well as
certain other adjustments currently not applicable to GOV. GOV’s
calculation of Normalized FFO differs from NAREIT’s definition of
FFO because GOV excludes acquisition related costs. GOV 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. GOV 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 GOV’s operating performance between periods and with
other REITs. FFO and Normalized FFO are among the factors
considered by GOV’s Board of Trustees when determining the amount
of distributions to its shareholders. Other factors include, but
are not limited to, requirements to maintain GOV’s status as a
REIT, limitations in its revolving credit facility and term loan
agreements, the availability of debt and equity capital to GOV,
GOV’s expectation of its future capital requirements and operating
performance, and its 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 GOV’s financial
performance or liquidity, nor are these measures necessarily
indicative of sufficient cash flow to fund all of GOV’s needs.
These measures should be considered in conjunction with net income,
operating income and cash flow from operating activities as
presented in GOV’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 GOV does.
GOVERNMENT PROPERTIES INCOME TRUST CONSOLIDATED
BALANCE SHEETS (amounts in thousands, except share data)
(unaudited) December 31,
December 31, 2013 2012
ASSETS
Real estate properties: Land $ 243,686 $ 234,395 Buildings
and improvements 1,324,876 1,233,468
1,568,562 1,467,863 Accumulated depreciation (187,635 )
(156,661 ) 1,380,927 1,311,202 Assets of discontinued
operations 25,997 47,142 Acquired real estate leases, net 142,266
144,402 Cash and cash equivalents 7,663 5,255 Restricted cash 1,689
1,553 Rents receivable, net 33,350 28,882 Deferred leasing costs,
net 11,618 7,620 Deferred financing costs, net 3,911 5,718 Other
assets, net 25,031 10,360 Total assets
$ 1,632,452 $ 1,562,134
LIABILITIES AND
SHAREHOLDERS' EQUITY
Unsecured revolving credit facility $ 157,000 $ 49,500
Unsecured term loan 350,000 350,000 Mortgage notes payable 90,727
93,127 Liabilities of discontinued operations 276 298 Accounts
payable and accrued expenses 23,216 18,910 Due to related persons
2,474 3,719 Assumed real estate lease obligations, net
19,084 19,129 Total liabilities 642,777
534,683 Commitments and contingencies
Shareholders' equity: Common shares of beneficial interest, $.01
par value:
70,000,000 shares authorized, 54,722,018
and 54,643,888 shares issued and outstanding, respectively
547 547 Additional paid in capital 1,105,679 1,103,982 Cumulative
net income 191,913 137,293 Cumulative other comprehensive income 49
99 Cumulative common distributions (308,513 )
(214,470 ) Total shareholders' equity 989,675
1,027,451 Total liabilities and shareholders' equity
$ 1,632,452 $ 1,562,134
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.
Government Properties Income TrustTimothy A. Bonang,
617-219-1440Vice President, Investor RelationsorJason Fredette,
617-219-1440Director, Investor Relationswww.govreit.com
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