Pan Pacific Retail Properties, Inc. (NYSE:PNP), the largest
neighborhood shopping center real estate investment trust (REIT)
focused exclusively on the West Coast, today announced results for
the first quarter ended March 31, 2006. All per share amounts are
on a diluted basis. -- 6.1% increase in total Funds From Operations
(FFO) to $40.5 million vs. 1Q'05(1) -- 5.4% increase in FFO per
share to $0.98 vs. 1Q'05(1) -- Net income of $24.3 million --
Earnings per share of $0.60 -- 97.1% portfolio occupancy rate at
March 31, 2006 -- 199 leases executed, totaling 655,792 square feet
-- 20.5% increase in base rent on same-store new and renewed leases
vs. 1Q'05 -- 3.1% increase in same-property net operating income
vs. 1Q'05 -- $10.1 million grocery-anchored shopping center
acquisition -- 27.0% debt to total market capitalization(2) ratio
at March 31, 2006 -- 3.2 to 1.0 interest coverage ratio -- Credit
rating upgraded to Baa1 by Moody's Investors Services -- 65.2% FFO
payout ratio(1) -- 8.5% increase in quarterly common dividend to
$0.64 per share vs. $0.59 (1) See the end of this press release for
a reconciliation of generally accepted accounting principles net
income to FFO. (2) Based on the market closing price of Pan
Pacific's common stock on March 31, 2006, assuming the conversion
of operating subsidiary units to common stock, and total debt
outstanding. Stuart A. Tanz, President and Chief Executive Officer
of Pan Pacific, stated, "Our portfolio continues to excel. First
quarter occupancy reached a new six-year high of 97.1% as our
leasing team executed a record number of leases and achieved a
20.5% increase, on average, in same-store re-leasing base rent.
Additionally, we are continuing to focus on furthering our market
presence in key West Coast metropolitan regions through our
acquisition and disposition activities. With respect to our balance
sheet, in light of our prudent financial ratios and strong, ongoing
performance, we were recently awarded a rating upgrade by Moody's."
Tanz further commented, "Having completed a solid first quarter, we
are on track to meet our previously stated objectives for 2006."
FINANCIAL RESULTS For the three months ended March 31, 2006, total
Funds from Operations (FFO) increased 6.1% to $40.5 million,
compared with FFO for the three months ended March 31, 2005 of
$38.2 million. On a per share basis, FFO increased 5.4% to $0.98
for the three months ended March 31, 2006, compared to $0.93 for
the three months ended March 31, 2005. A reconciliation of
generally accepted accounting principles (GAAP) net income to FFO
is provided at the end of this press release. For the three months
ended March 31, 2006, total revenue increased 7.3% to $79.4 million
as compared to total revenue of $73.9 million for the three months
ended March 31, 2005. For the three months ended March 31, 2006,
net income was $24.3 million or $0.60 per share, compared with net
income of $24.0 million or $0.59 per share for the three months
ended March 31, 2005. At March 31, 2006, the Company's total market
capitalization was approximately $4.0 billion (based on the market
closing price of Pan Pacific's common stock on March 31, 2006,
assuming the conversion of operating subsidiary units to common
stock, and total debt outstanding). At March 31, 2006, the Company
had approximately $1.1 billion in debt outstanding, equating to a
debt-to-total market capitalization ratio of 27.0%. The Company's
debt was comprised of: $654.0 million of fixed-rate, senior
unsecured notes with a weighted average interest rate of 6.3%, and
a weighted average maturity of 6.1 years; $351.7 million of
fixed-rate, mortgage debt with a weighted average interest rate of
7.3%, and a weighted average maturity of 3.8 years; $73.5 million
of floating-rate debt outstanding under the Company's unsecured
line of credit, which had a weighted average interest rate of 5.4%
at March 31, 2006; and $6.0 million of floating-rate,
property-level bonds bearing interest at a rate of 3.1% as of March
31, 2006. For the quarter ended March 31, 2006, the Company's
interest coverage ratio was 3.2 to 1.0 (calculated as income from
continuing and discontinued operations, excluding gain on sale,
plus depreciation, amortization and interest expense, divided by
interest expense). Dividend Increase On February 8, 2006, the Board
of Directors declared a quarterly dividend of $0.64 per share,
representing an 8.5% increase from $0.59 per share. The dividend
was paid March 15, 2006 to stockholders of record on February 24,
2006. The increased quarterly dividend equates to $2.56 per share
on an annualized basis. Since its initial public offering in 1997,
the Company has increased its dividend each year for a total
increase of approximately 76.6%, equating to an average dividend
increase of approximately 8.5% per year. OPERATING RESULTS Leasing
Activity At March 31, 2006, the Company's portfolio was 97.1%
leased to 3,485 tenants. For the three months ended March 31, 2006,
the Company executed 199 leases (new and renewed) for 655,792
square feet of gross leasable area, and achieved a 20.5% increase
over prior rents on a same-store basis. Same Property Operating
Results With respect to the properties owned and operated by the
Company for the entirety of both the three months ended March 31,
2006 and 2005, same property net operating income increased 3.1%.
-0- *T Same Property Operating Data (In thousands) Three Months
Ended March 31, ----------------- 2006 2005 -------- -------- Total
revenue $76,906 $74,725 Operating expenses 19,435 18,978 --------
-------- Operating income $57,471 $55,747 3.1% ======== ========
==== *T INVESTMENT ACTIVITY On February 1, 2006, the Company
acquired for $10.1 million Harbor Towne Center, a 70,104 square
foot grocery-anchored shopping center in Oak Harbor, Washington,
north of Seattle. Harbor Towne Center is currently 100% leased and
is anchored by Saar's Market. The property was financed through a
combination of borrowings under the Company's $300 million
unsecured line of credit and cash flow from operations. CAPITAL
MARKETS ACTIVITY In March 2006, Moody's Investors Services upgraded
the Company's senior unsecured debt rating to Baa1 with a stable
outlook from a rating of Baa2 with a positive outlook. 2006
EARNINGS GUIDANCE The Company reaffirmed its previously disclosed
2006, full-year FFO guidance range of $3.97 to $4.01 per diluted
share. (1) This guidance is based on current expectations and is
forward-looking. -0- *T Q2 '06 Year 2006 --------------
-------------- Expected earnings per diluted share $0.69 - $0.72
$2.89 - $2.93 Add: expected depreciation and amortization $0.26
$1.04 Add: expected operating subsidiary minority interests $0.01
$0.04 Expected FFO per diluted share $0.96 - $0.99 $3.97 - $4.01
(1) Based on an estimated 41,300,000 and 41,300,000 shares
outstanding, respectively. *T 1ST QUARTER 2006 CONFERENCE CALL On
Thursday, April 27, 2006, at 12:00 noon Eastern Time, the Company
will be hosting a conference call to discuss its first quarter
results for 2006. The Company's remarks will be followed by a
question and answer period, which will be limited to questions from
analysts. Interested parties may participate in this conference
call by dialing (877) 407-9210. A taped replay of the call will be
available through May 27, 2006 at (877) 660-6853, pass code 286,
confirmation 196074. A live web cast (listen-only mode) of the
conference call will be available at www.pprp.com via a link to
www.vcall.com. An online replay will also be available through May
27, 2006. ABOUT PAN PACIFIC RETAIL PROPERTIES Pan Pacific Retail
Properties, Inc. is an equity real estate investment trust (REIT)
traded on the New York Stock Exchange under the symbol PNP. The
Company is the largest neighborhood shopping center REIT focused
exclusively on the West Coast. Pan Pacific's portfolio currently
totals 139 properties, encompassing approximately 22.7 million
square feet of retail space. The portfolio is principally
diversified across five distinct regions in the Western United
States: Northern California, Southern California, Washington,
Oregon and Nevada. Pan Pacific specializes in the acquisition,
ownership and management of community and neighborhood shopping
centers for everyday essentials. The Company's strategy is aimed at
generating long-term stable cash flow through maintaining a diverse
portfolio and tenant base, balanced with consistent growth through
implementing its acquisition and property management programs. Pan
Pacific is headquartered in Vista (San Diego), California, and has
regional offices located in Sacramento, California; Kent,
Washington; Portland, Oregon; and Las Vegas, Nevada. Additional
information on Pan Pacific is available on the Company's web site
at www.pprp.com. (Note: Certain matters discussed within this press
release, including, without limitation, our earnings guidance, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 which reflect management's
current views with respect to future events and financial
performance. Forward-looking statements are subject to risks and
uncertainties. Factors that could cause actual results to differ
materially from expectations include market valuations of our
stock, financial performance and operations of our shopping
centers, real estate market conditions, execution of shopping
center development programs, successful completion of renovations,
completion of pending acquisitions and dispositions, including the
completion of customary due diligence and closing conditions, the
Company's ability to successfully integrate acquired assets,
changes in the availability of additional acquisition and
disposition opportunities, changes in local or national economic
conditions, changes in tax laws, acts of terrorism or war and other
risks detailed from time to time in reports filed with the
Securities and Exchange Commission including the Company's Annual
Report on Form 10-K for the year ended December 31, 2005.) -0- *T
Consolidated Balance Sheets (In thousands) March December 31, 31,
2006 2005 ------------ ----------- (unaudited) ASSETS: Properties,
at cost: Land $572,660 $574,048 Buildings and improvements
1,589,070 1,581,489 Tenant improvements 67,874 66,702 ------------
----------- 2,229,604 2,222,239 Less accumulated depreciation and
amortization (252,376) (240,086) ------------ ----------- 1,977,228
1,982,153 Investments in unconsolidated entity 1,357 1,379 Cash and
cash equivalents 5,357 5,859 Accounts receivable (net of allowance
for doubtful accounts of $1,829 and $2,121, respectively) 7,896
10,813 Accrued rent receivable (net of allowance for doubtful
accounts of $3,148 and $3,283, respectively) 28,618 28,699 Notes
receivable 3,671 3,046 Deferred lease commissions (net of
accumulated amortization of $10,754 and $9,769, respectively)
16,072 15,526 Prepaid expenses 22,856 21,585 Other assets 28,734
29,704 ------------ ----------- $2,091,789 $2,098,764 ============
=========== LIABILITIES AND STOCKHOLDERS' EQUITY: Notes payable
$357,749 $390,132 Line of credit payable 73,500 44,500 Senior notes
653,965 653,908 Accounts payable, accrued expenses and other
liabilities 44,302 43,387 ------------ ----------- 1,129,516
1,131,927 Minority interests 24,985 28,794 ------------ -----------
Commitments and contingencies Stockholders' equity: Preferred stock
par value $.01 per share, 30,000,000 authorized shares, no shares
issued and outstanding at March 31, 2006 and December 31, 2005,
respectively - - Common stock par value $.01 per share, 100,000,000
authorized shares, 40,706,888 and 40,701,053 shares issued and
outstanding, net of 1,190,999 treasury shares, at March 31, 2006
and December 31, 2005, respectively 408 407 Additional paid in
capital 961,527 960,444 Accumulated deficit (24,647) (22,808)
------------ ----------- 937,288 (938,043) ------------ -----------
$2,091,789 $2,098,764 ============ =========== Consolidated
Statements of Income (unaudited) (In thousands, except share data)
Three Months Ended March 31, ------------------- 2006 2005
---------- -------- REVENUE: Base rent $61,418 $57,531 Percentage
rent 1,195 872 Recoveries from tenants 16,741 15,542 ----------
-------- 79,354 73,945 ---------- -------- EXPENSES: Property
operating 10,804 10,247 Property taxes 6,749 6,370 Depreciation and
amortization 15,980 13,675 General and administrative 3,608 4,068
---------- -------- 37,141 34,360 ---------- -------- OPERATING
INCOME 42,213 39,585 ---------- -------- OTHER INCOME (EXPENSE):
Interest expense (18,188) (16,632) Income from unconsolidated
entity 80 154 Other income 836 1,238 Other expense (252) (252)
---------- -------- (17,524) (15,492) ---------- -------- INCOME
BEFORE MINORITY INTERESTS 24,689 24,093 Minority interests (614)
(618) ---------- -------- INCOME FROM CONTINUING OPERATIONS 24,075
23,475 Discontinued operations 180 519 ---------- -------- NET
INCOME $24,255 $23,994 ========== ======== Basic earnings per
share: Income from continuing operations $0.60 $0.58 Discontinued
operations $- $0.01 Net income $0.60 $0.59 Diluted earnings per
share: Income from continuing operations $0.60 $0.58 Discontinued
operations $- $0.01 Net income $0.60 $0.59 Calculation of Funds
from Operations (unaudited) (In thousands, except share data) Three
Months Ended March 31, ----------------------- 2006 2005(a)
----------- ----------- FUNDS FROM OPERATIONS: Net Income $24,255
$23,994 Plus depreciation and amortization expense 15,980 13,845
Plus depreciation of unconsolidated entity 62 84 Less corporate
FF&E depreciation (included above) (125) (84) Less depreciation
of minority interests (67) (66) Plus operating subsidiary minority
interests 367 383 ----------- ----------- Funds From Operations
$40,472 $38,156 =========== =========== Funds From Operations Per
Share $0.98 $0.93 Diluted Weighted Average Shares Outstanding
41,248,365 41,204,366 (a) For comparative purposes, amounts shown
are as originally reported. The impact of revising the amounts for
Statement of Financial Accounting Standards No. 144 has been
excluded here so that the periods can be compared without the
effect of reclassifying operating results for assets sold in
subsequent periods. Revised financial results, if applicable, can
be found in the Company's most current Form 10-Q and Form 10-K for
2005 filed with the Securities and Exchange Commission. The White
Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts
("NAREIT") in April 2002 (the "White Paper") defines Funds from
Operations as net income (computed in accordance with accounting
principles generally accepted in the United States of America,
"GAAP"), excluding gains (or losses) on sales of property, plus
depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. We believe that
Funds from Operations (FFO) is an important supplemental measure of
operating performance for a real estate investment trust. Because
the historical cost accounting convention used for real estate
assets requires straight-line depreciation (except on land), such
accounting presentation implies that the value of real estate
assets diminishes predictably over time. Since real estate values
instead have historically risen and fallen with market conditions,
presentations of operating results for a real estate investment
trust that uses historical cost accounting for depreciation could
be less informative. The term FFO was designed by the real estate
investment trust industry to address this issue. We compute Funds
from Operations in accordance with standards established by the
White Paper. Our computation of Funds from Operations may, however,
differ from the methodology for calculating Funds from Operations
used by other equity REITs and, therefore, may not be comparable to
these other REITs. FFO does not represent cash generated from
operating activities in accordance with GAAP, is not necessarily
indicative of cash available to fund cash needs and should not be
considered as an alternative to net income. FFO, as defined by us,
may not be comparable to similarly entitled items reported by other
real estate investment trusts that do not define it exactly as the
NAREIT definition. *T
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