Normalized FFO of $0.62 Per Share for the
First Quarter Increased 6.9% Year over Year
Same Property Cash Basis NOI for the First
Quarter Increased by 2.4% Year over Year
Same Property Occupancy was 95.1% at First
Quarter End, Up 30 Basis Points Year Over Year
Government Properties Income Trust (NYSE: GOV) today announced
its financial results for the quarter ended March 31, 2016.
David Blackman, President and Chief Operating Officer of GOV,
made the following statement:
“Government Properties Income Trust delivered solid results in
the first quarter of 2016. Average rents for new and renewal leases
increased 12.4% when compared to previous rents for over 500,000
square feet of executed leases during the quarter. Occupancy also
improved on both a sequential and year over year basis, and same
property cash basis NOI grew 2.4% year over year. These factors and
the successful results of our investment in Select Income REIT
(NYSE: SIR) all contributed to a strong 6.9% increase in Normalized
FFO per share from the first quarter of 2015.”
Results for the Quarter Ended March 31, 2016:
Normalized funds from operations, or Normalized FFO, for the
quarter ended March 31, 2016 were $44.4 million, or $0.62 per
diluted share, compared to Normalized FFO for the quarter ended
March 31, 2015 of $40.8 million, or $0.58 per diluted share.
Net income determined in accordance with U.S. generally accepted
accounting principles, or GAAP, was $17.4 million, or $0.24 per
diluted share, for the quarter ended March 31, 2016, compared to a
net loss of $33.4 million, or $0.47 per diluted share, for the
quarter ended March 31, 2015. The net loss for the quarter ended
March 31, 2015 included a non-cash loss of $40.8 million, or $0.58
per diluted share, relating to the issuance of shares by SIR. The
weighted average number of diluted common shares outstanding was
71.0 million for the quarter ended March 31, 2016, and 70.3 million
for the quarter ended March 31, 2015.
Reconciliations of net income (loss) determined in accordance
with GAAP, to funds from operations, or FFO, and Normalized FFO for
the quarters ended March 31, 2016 and 2015 appear later in this
press release.
Leasing, Occupancy and Same Property Results:
During the quarter ended March 31, 2016, GOV entered into new
and renewal leases for 522,962 rentable square feet, including a
25,579 square foot expansion to be constructed at an existing
property, at weighted (by rentable square feet) average rental
rates that were 12.4% above prior rents for the same space. The
weighted average (by rentable square feet) lease term for leases
entered into during the quarter ended March 31, 2016 was 11.6
years. Leasing capital commitments for new and renewal leases
entered into during the quarter ended March 31, 2016 were $20.5
million, or $3.38 per square foot, per lease year.
As of March 31, 2016, 94.9% of GOV’s rentable square feet at
properties classified as continuing operations was leased. This
compares with 94.5% as of December 31, 2015 and 94.8% as of March
31, 2015. Occupancy for properties owned continuously since January
1, 2015, excluding properties classified as discontinued
operations, or same properties, was 95.1% as of March 31, 2016,
which compares with 94.5% as of December 31, 2015 and 94.8% as of
March 31, 2015. Same properties cash basis net operating income, or
Cash Basis NOI, increased 2.4% for the quarter ended March 31, 2016
compared to the same period in 2015.
Reconciliations of net income (loss) determined in accordance
with GAAP to net operating income, or NOI, and to Cash Basis NOI
for the quarters ended March 31, 2016 and 2015 appear later in this
press release.
Recent Acquisition and Disposition Activities:
As previously disclosed, in January 2016, GOV acquired an office
property (one building) located in Sacramento, CA with 337,811
rentable square feet for a purchase price of $79.2 million,
excluding acquisition related costs. The property was majority
leased to the State of California for a remaining lease term of 7.0
years on the date of acquisition.
In March 2016, GOV entered into an agreement to sell an office
property (one building) located in Savannah, GA with 35,228
rentable square feet and a net book value of $3.1 million at March
31, 2016. The contract sales price is $4.5 million, excluding
closing costs. This sale is subject to conditions and is currently
expected to occur during the third quarter of 2016.
Also, in March 2016, GOV entered into an agreement to sell an
office property (one building) located in Falls Church, VA with
164,746 rentable square feet and a net book value of $12.3 million
at March 31, 2016. The contract sales price is $14.8 million,
excluding closing costs. This sale is subject to conditions,
including the purchaser obtaining certain zoning entitlements, and
is currently expected to occur during the first quarter of
2017.
Financing Activities:
As previously disclosed, in February 2016, GOV repaid, at par, a
$23.5 million mortgage note requiring annual interest at 6.21%
which was secured by an office property (one building) located in
Landover, MD.
In March 2016, GOV repaid, at par, an $83.0 million mortgage
note requiring annual interest at 5.55% which was secured by one
office property (two buildings) located in Reston, VA.
Conference Call:
On Thursday, April 28, 2016, at 11:00 a.m. Eastern Time,
President and Chief Operating Officer, David Blackman, and Chief
Financial Officer and Treasurer, Mark Kleifges, will host a
conference call to discuss GOV’s first quarter 2016 results.
The conference call telephone number is (877) 328-1172.
Participants calling from outside the United States and Canada
should dial (412) 317-5418. 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 Thursday, May 5, 2016. To hear the replay, dial (412) 317-0088.
The replay pass code is 10083968. A live audio webcast of the
conference call will also be available in a listen only mode on
GOV’s website, 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 following the call for about one week. The
transcription, recording and retransmission in any way of GOV’s
first quarter conference call are strictly prohibited without the
prior written consent of GOV.
Supplemental Data:
A copy of GOV’s First Quarter 2016 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 managed by the operating subsidiary of The RMR
Group Inc. (NASDAQ: RMR), an alternative asset management company
that is headquartered in Newton, Massachusetts.
Please see the pages attached to this news release for a
more detailed statement of GOV’s operating results and financial
condition and for an explanation of GOV’s calculation of FFO,
Normalized FFO, NOI and Cash Basis NOI.
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”, “MAY” 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. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE CONTAINED IN OR IMPLIED BY GOV’S FORWARD LOOKING STATEMENTS
AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
- MR. BLACKMAN, GOV’S PRESIDENT AND CHIEF
OPERATING OFFICER, HAS MADE STATEMENTS IN THIS PRESS RELEASE
REGARDING GOV’S QUARTERLY LEASING ACTIVITY, INCLUDING LEASE
EXECUTIONS, OCCUPANCY, CASH BASIS NOI AND NORMALIZED FFO. THERE CAN
BE NO ASSURANCE THAT THE POSITIVE LEASING ACTIVITY, CASH BASIS NOI
AND NORMALIZED FFO MR. BLACKMAN REFERENCES WILL CONTINUE OR THAT
SUCH RESULTS WILL NOT DECLINE IN FUTURE PERIODS.
- GOV HAS ENTERED INTO AGREEMENTS TO SELL
TWO PROPERTIES. THESE TRANSACTIONS ARE SUBJECT TO CONDITIONS. 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, OR SEC, 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 OR IMPLIED BY GOV’S FORWARD LOOKING
STATEMENTS. GOV’S FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC’S
WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON 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
Condensed Consolidated Statements of
Income (Loss)
(amounts in thousands, except per share
data)
(unaudited)
Three Months Ended March 31, 2016
2015 Rental income $ 63,611 $
62,659 Expenses: Real estate taxes 7,653 7,410
Utility expenses 4,174 4,571 Other operating expenses 12,911 12,210
Depreciation and amortization 18,324 17,215 Acquisition related
costs 152 6 General and administrative 3,526
4,004 Total expenses 46,740 45,416
Operating income 16,871 17,243 Interest income 6 12
Interest expense (including net
amortization of debt premium and discounts and debt issuance costs
of $471 and $332, respectively)
(9,364 ) (9,302 ) Gain on early extinguishment of debt 104 — Loss
on issuance of shares by Select Income REIT —
(40,771 )
Income (loss) from continuing operations
before income taxes and equity in earnings (losses) of
investees
7,617 (32,818 ) Income tax expense (15 ) (30 ) Equity in earnings
(losses) of investees 9,934 (316 ) Income
(loss) from continuing operations 17,536 (33,164 ) Loss from
discontinued operations (149 ) (206 ) Net income
(loss) $ 17,387 $ (33,370 ) Weighted average
common shares outstanding (basic and diluted) 71,031
70,266 Per common share amounts (basic and
diluted): Income (loss) from continuing operations $ 0.25 $ (0.47 )
Income (loss) from discontinued operations $ — $ — Net income
(loss) $ 0.24 $ (0.47 )
Government Properties Income
Trust
Funds from Operations and Normalized
Funds from Operations(1)
(amounts in thousands, except per share
data)
(unaudited)
Three Months Ended March
31, 2016 2015 Calculation of Funds
from Operations (FFO) and Normalized FFO: Net income (loss) $
17,387 $ (33,370 ) Plus: depreciation and amortization 18,324
17,215 Plus: FFO attributable to SIR investment 18,458 8,894 Plus
(Less): equity in (earnings) losses of SIR (9,857 )
388 FFO 44,312 (6,873 ) Plus: acquisition related costs 152
6 Plus: loss on issuance of shares by SIR — 40,771 Plus: normalized
FFO attributable to SIR investment 18,475 15,779 Less: FFO
attributable to SIR investment (18,458 ) (8,894 ) Less: gain on
early extinguishment of debt (104 ) —
Normalized FFO $ 44,377 $ 40,789 Weighted
average common shares outstanding (basic and diluted) 71,031
70,266 Per common share amounts (basic
and diluted): FFO $ 0.62 $ (0.10 ) Normalized FFO $ 0.62 $ 0.58
(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 (loss),
calculated in accordance with GAAP, plus real estate depreciation
and amortization and the difference between FFO attributable to an
equity investment and equity in earnings (losses) of an equity
investee but excluding impairment charges on real estate assets,
carrying value adjustments of real estate assets held for sale, 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
includes the difference between FFO and Normalized FFO attributable
to GOV’s equity investment in SIR, GOV includes business management
incentive fees, if any, only in the fourth quarter versus the
quarter when they are recognized as expense in accordance with GAAP
and GOV excludes acquisition related costs, gains or losses on
early extinguishment of debt and losses on issuance of shares by
SIR. GOV considers FFO and Normalized FFO to be appropriate
measures of operating performance for a REIT, along with net income
(loss), 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
qualification for taxation as a REIT, limitations in GOV’s credit
agreement and public debt covenants, the availability to GOV of
debt and equity capital, GOV's expectation of its future capital
requirements and operating performance, GOV’s receipt of
distributions from SIR and GOV’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
(loss), 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 (loss), operating income and cash flow from operating
activities as presented in GOV's Condensed Consolidated Statements
of Comprehensive Income (Loss) and Condensed 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
Calculation and Reconciliation of
Property Net Operating Income (NOI) and Cash Basis
NOI(1)
(amounts in thousands)
(unaudited)
Three Months Ended March 31, 2016
2015 Calculation of Consolidated NOI and
Consolidated Cash Basis NOI(2): Rental income $
63,611 $ 62,659 Operating expenses (24,738 ) (24,191
) Consolidated property net operating income (NOI) 38,873 38,468
Non-cash straight line rent adjustments included in rental income
(3) (149 ) (663 )
Lease value amortization included in
rental income (3)
307 278 Non-cash amortization included in other operating expenses
(4) (121 ) — Consolidated cash basis NOI $
38,910 $ 38,083
Reconciliation of
Consolidated NOI and Consolidated Cash Basis NOI to Net Income
(Loss): Consolidated cash basis NOI $ 38,910 $ 38,083 Non-cash
straight line rent adjustments included in rental income (3) 149
663
Lease value amortization included in
rental income (3)
(307 ) (278 ) Non-cash amortization included in other operating
expenses (4) 121 — Consolidated NOI
38,873 38,468 Depreciation and amortization (18,324 ) (17,215 )
Acquisition related costs (152 ) (6 ) General and administrative
(3,526 ) (4,004 ) Operating income 16,871 17,243
Interest income 6 12 Interest expense (9,364 ) (9,302 ) Gain on
early extinguishment of debt 104 — Loss on issuance of shares by
SIR — (40,771 ) Income tax expense (15 ) (30 ) Equity in earnings
(losses) of investees 9,934 (316 ) Income
(loss) from continuing operations 17,536 (33,164 ) Loss from
discontinued operations (149 ) (206 ) Net income
(loss) $ 17,387 $ (33,370 )
Reconciliation
of Consolidated NOI to Same Property NOI(5):
Rental income $ 63,611 $ 62,659 Operating expenses (24,738 )
(24,191 ) Consolidated property NOI 38,873 38,468 Less: NOI
of properties not included in same property results (960 )
(979 ) Same property NOI $ 37,913 $ 37,489
Calculation of Same Property Cash Basis
NOI(5): Same Property NOI $ 37,913 $ 37,489
Plus: Lease value amortization included in
rental income (3)
294 278 Less: Non-cash straight line rent adjustments included in
rental income (3) (102 ) (663 ) Non-cash amortization included in
other operating expenses (4) (121 ) — Same
property cash basis NOI $ 37,984 $ 37,104
(1) GOV calculates NOI and Cash Basis NOI as shown above. The
calculations of NOI and Cash Basis NOI exclude certain components
of net income (loss) in order to provide results that are more
closely related to GOV’s property level results of operations. GOV
defines NOI as income from its rental of real estate less its
property operating expenses. NOI excludes amortization of
capitalized tenant improvement costs and leasing commissions. GOV
defines Cash Basis NOI as NOI excluding non-cash straight line rent
adjustments, lease value amortization and non-cash amortization
included in other operating expenses. GOV considers NOI and Cash
Basis NOI to be appropriate supplemental measures to net income
(loss) because they may help both investors and management to
understand the operations of GOV’s properties. GOV uses NOI and
Cash Basis NOI to evaluate individual and company wide property
level performance, and GOV believes that NOI and Cash Basis NOI
provide useful information to investors regarding GOV’s results of
operations because they reflect only those income and expense items
that are generated and incurred at the property level and may
facilitate comparisons of GOV’s operating performance between
periods and with other REITs. NOI and Cash Basis NOI do not
represent cash generated by operating activities in accordance with
GAAP and should not be considered as alternatives to net income
(loss), operating income or cash flow from operating activities
determined in accordance with GAAP or as indicators of our
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 (loss), operating income and cash flow from operating
activities as presented in GOV’s Condensed Consolidated Statements
of Comprehensive Income (Loss) and Condensed Consolidated
Statements of Cash Flows. Other REITs and real estate companies may
calculate NOI and Cash Basis NOI differently than GOV does.
(2) Excludes one property (one building) classified as
discontinued operations.
(3) GOV reports rental income on a straight line basis over the
terms of the respective leases; as a result, rental income includes
non-cash straight line rent adjustments. Rental income also
includes expense reimbursements, tax escalations, parking revenues,
service income and other fixed and variable charges paid to GOV by
its tenants, as well as the net effect of non-cash amortization of
intangible lease assets and liabilities.
(4) GOV recorded a liability for the amount by which the
estimated fair value for accounting purposes exceeded the price GOV
paid for its investment in RMR common stock in June 2015. A portion
of this liability is being amortized on a straight line basis
through December 31, 2035 as a reduction to property management
fees, which are included in other operating expenses.
(5) For the three months ended March 31, 2016, based on
properties GOV owned as of March 31, 2016, and which it owned
continuously since January 1, 2015, excluding one property (one
building) classified as discontinued operations.
Government Properties Income
Trust
Condensed Consolidated Balance
Sheets
(amounts in thousands, except share
data)
(unaudited)
March 31, December 31, 2016
2015 ASSETS Real estate properties: Land $
257,716 $ 253,058 Buildings and improvements 1,509,921
1,443,074
Total real estate properties, gross
1,767,637 1,696,132 Accumulated depreciation (265,843 )
(255,879 )
Total real estate properties, net
1,501,794 1,440,253 Equity investment in Select Income REIT
493,259 491,369 Assets of discontinued operations 12,502 12,468
Assets of property held for sale 3,098 3,098 Acquired real estate
leases, net 123,300 118,267 Cash and cash equivalents 15,698 8,785
Restricted cash 713 1,022 Rents receivable, net 46,617 45,269
Deferred leasing costs, net 17,909 14,299 Other assets, net
44,505 33,680 Total assets $ 2,259,395
$ 2,168,510 LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility $ 311,000 $ 117,000 Unsecured
term loans, net 546,660 546,490 Senior unsecured notes, net 346,095
345,809 Mortgage notes payable, net 29,053 136,299 Liabilities of
discontinued operations 75 54 Liabilities of property held for sale
32 43 Accounts payable and other liabilities 48,979 50,543 Due to
related persons 4,380 2,886 Assumed real estate lease obligations,
net 12,224 12,735 Total liabilities
1,298,498 1,211,859 Commitments
and contingencies Shareholders’ equity:
Common shares of beneficial interest, $.01
par value: 100,000,000 shares authorized, 71,126,308 shares issued
and outstanding
711 711 Additional paid in capital 1,472,510 1,472,482 Cumulative
net income 55,873 38,486 Cumulative other comprehensive income
(loss) 2,548 (14,867 ) Cumulative common distributions
(570,745 ) (540,161 ) Total shareholders’ equity
960,897 956,651 Total liabilities and
shareholders’ equity $ 2,259,395 $ 2,168,510
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160428005492/en/
Government Properties Income TrustChristopher Ranjitkar,
617-219-1410Director Investor Relations
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