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Exhibit 99.1

 

GRAPHIC

 

FOR IMMEDIATE RELEASE

 

Contacts:

Timothy A. Bonang, Vice President, Investor Relations, or

Carlynn Finn, Senior Manager, Investor Relations

(617) 796-8320

 

Select Income REIT Announces 2013 Second Quarter Results

 


 

Newton, MA (August 1, 2013): Select Income REIT (NYSE: SIR) today announced financial results for the quarter and six months ended June 30, 2013.  SIR completed its initial public offering, or IPO, on March 12, 2012.  Prior to completing its IPO, SIR and its properties were wholly owned by CommonWealth REIT (NYSE: CWH); accordingly, SIR’s historical results of operations for the six months ended June 30, 2013 are not comparable to results for the six months ended June 30, 2012.

 

Results for the Quarter Ended June 30, 2013:

 

Normalized funds from operations, or Normalized FFO, for the quarter ended June 30, 2013 were $30.2 million, or $0.77 per share, compared to Normalized FFO for the quarter ended June 30, 2012 of $19.0 million, or $0.61 per share.

 

Net income was $22.8 million, or $0.58 per share, for the quarter ended June 30, 2013, compared to $15.3 million, or $0.49 per share, for the same quarter last year.

 

SIR’s weighted average number of common shares outstanding was 39,287,977 and 31,200,000 for the quarters ended June 30, 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 June 30, 2013 and 2012 appears later in this press release.

 

Results for the Six Months Ended June 30, 2013:

 

Normalized FFO for the six months ended June 30, 2013 were $60.1 million, or $1.53 per share, compared to Normalized FFO for the six months ended June 30, 2012 of $39.5 million, or $1.78 per share.

 

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.

 



 

Net income was $45.4 million, or $1.16 per share, for the six months ended June 30, 2013, compared to $33.0 million, or $1.49 per share, for the six months ended June 30, 2012.

 

SIR’s weighted average number of common shares outstanding was 39,285,299 and 22,202,000 for the six months ended June 30, 2013 and 2012, respectively.

 

A reconciliation of net income, determined according to GAAP, to FFO and Normalized FFO for the six months ended June 30, 2013 and 2012 appears later in this press release.

 

Occupancy and Leasing Results:

 

As of June 30, 2013, 95.5% of SIR’s total rentable square feet was leased, compared to 95.6% leased as of June 30, 2012, and 95.8% leased as of March 31, 2013.

 

SIR entered into new leases for approximately 51,000 square feet and lease renewals for approximately 1,000 square feet during the quarter ended June 30, 2013, which had combined weighted average rental rates that were approximately 38.0% above prior rents for the same leasable space.  The weighted average lease term for leases entered into during the second quarter of 2013 was 16.0 years.  Commitments for tenant improvements, leasing commission costs and concessions for leases entered into during the quarter ended June 30, 2013 totaled approximately $437,000, or approximately $0.53 per square foot per year of the weighted average lease term.  All leasing activity during the quarter ended June 30, 2013 occurred at SIR’s properties located in Hawaii.

 

During the quarter ended June 30, 2013, SIR also executed two rent resets at properties located in Hawaii for approximately 69,000 square feet of land at combined weighted average reset rates that were approximately 57.0% higher than prior rates.

 

Investment Activities:

 

In July 2013, SIR acquired a single tenant, net leased office property located in Richmond, VA with 310,950 square feet.  This property is 100% leased to MeadWestvaco Corporation for 10.0 years. The purchase price was $143.6 million, excluding closing costs.

 

Financing Activities:

 

In July 2013, SIR sold 10,500,000 common shares in a public offering at a price of $28.25 per share for net proceeds of approximately $283.7 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 acquisition described above.

 

2



 

Conference Call:

 

On Thursday August 1, 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 second quarter 2013 financial results.

 

The conference call telephone number is (800) 553-0358.  Participants calling from outside the United States and Canada should dial (612) 332-0802.  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 Thursday, August 8, 2013.  To hear the replay, dial (800) 475-6701 or, if calling from outside the United States, dial (320) 365-3844.  The replay pass code is 296761.

 

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 second quarter conference call are strictly prohibited without the prior written consent of SIR.

 

Supplemental Data:

 

A copy of SIR’s Second Quarter 2013 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 June 30, 2013, SIR owned 272 properties with a total of approximately 25.4 million square feet located in 19 states, including 229 properties with approximately 17.8 million square feet which are primarily leasable industrial and commercial lands 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.

 

3



 

Select Income REIT

Condensed Consolidated Statements of Income

(amounts in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental income

 

$

38,706

 

$

23,754

 

$

76,164

 

$

47,828

 

Tenant reimbursements and other income

 

7,240

 

4,166

 

13,642

 

7,679

 

Total revenues

 

45,946

 

27,920

 

89,806

 

55,507

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Real estate taxes

 

5,159

 

3,677

 

9,785

 

7,318

 

Other operating expenses

 

3,852

 

2,023

 

7,100

 

3,800

 

Depreciation and amortization

 

7,295

 

3,021

 

13,960

 

5,794

 

Acquisition related costs

 

156

 

675

 

689

 

675

 

General and administrative

 

2,957

 

1,634

 

5,676

 

3,038

 

Total expenses

 

19,419

 

11,030

 

37,210

 

20,625

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

26,527

 

16,890

 

52,596

 

34,882

 

 

 

 

 

 

 

 

 

 

 

Interest expense (including amortization of debt premiums and deferred financing fees of $385, $258, $721 and $311, respectively)

 

(3,779

)

(1,632

)

(7,252

)

(1,969

)

Equity in earnings of an investee

 

79

 

74

 

155

 

74

 

Income before income tax expense

 

22,827

 

15,332

 

45,499

 

32,987

 

Income tax expense

 

(40

)

 

(80

)

 

Net income

 

22,787

 

15,332

 

45,419

 

32,987

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

39,288

 

31,200

 

39,285

 

22,202

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

$

0.58

 

$

0.49

 

$

1.16

 

$

1.49

 

 

4



 

Select Income REIT

Funds from Operations and Normalized Funds from Operations(1)

(amounts in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

22,787

 

$

15,332

 

$

45,419

 

$

32,987

 

Plus: depreciation and amortization

 

7,295

 

3,021

 

13,960

 

5,794

 

FFO

 

30,082

 

18,353

 

59,379

 

38,781

 

Plus: acquisition costs

 

156

 

675

 

689

 

675

 

Normalized FFO

 

$

30,238

 

$

19,028

 

$

60,068

 

$

39,456

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

39,288

 

31,200

 

39,285

 

22,202

 

 

 

 

 

 

 

 

 

 

 

Per common share

 

 

 

 

 

 

 

 

 

FFO

 

$

0.77

 

0.59

 

$

1.51

 

1.75

 

Normalized FFO

 

$

0.77

 

0.61

 

$

1.53

 

1.78

 

 


(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 SIR. 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 and between SIR and other REITs. 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 Condensed Consolidated Statements of Income and Comprehensive Income and Condensed Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate FFO and Normalized FFO differently than SIR does.

 

5



 

Select Income REIT

Condensed Consolidated Balance Sheets

(amounts in thousands, except share data)

(unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS

 

 

 

 

 

Real estate properties:

 

 

 

 

 

Land

 

$

691,796

 

$

675,092

 

Buildings and improvements

 

754,985

 

620,686

 

 

 

1,446,781

 

1,295,778

 

Accumulated depreciation

 

(56,023

)

(46,697

)

 

 

1,390,758

 

1,249,081

 

 

 

 

 

 

 

Acquired real estate leases, net

 

98,440

 

95,248

 

Cash and cash equivalents

 

12,286

 

20,373

 

Restricted cash

 

42

 

42

 

Rents receivable, net of allowance for doubtful accounts of $690 and $644, respectively

 

45,919

 

38,885

 

Deferred leasing costs, net

 

5,589

 

4,816

 

Deferred financing costs, net

 

5,791

 

5,517

 

Due from related persons

 

141

 

585

 

Other assets

 

21,807

 

16,105

 

Total assets

 

$

1,580,773

 

$

1,430,652

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Revolving credit facility

 

$

235,000

 

$

95,000

 

Term loan

 

350,000

 

350,000

 

Mortgage notes payable

 

27,471

 

27,778

 

Accounts payable and accrued expenses

 

19,346

 

19,703

 

Assumed real estate lease obligations, net

 

19,771

 

20,434

 

Rents collected in advance

 

5,762

 

6,518

 

Security deposits

 

9,635

 

9,335

 

Due to related persons

 

1,864

 

1,701

 

Total liabilities

 

668,849

 

530,469

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common shares of beneficial interest, $0.01 par value: 75,000,000 and 50,000,000 shares authorized, respectively, 39,292,592 and 39,282,592 shares issued and outstanding, respectively

 

393

 

393

 

Additional paid in capital

 

877,108

 

876,920

 

Cumulative net income

 

96,668

 

51,251

 

Cumulative other comprehensive income

 

(56

)

25

 

Cumulative common distributions

 

(62,189

)

(28,406

)

Total shareholders’ equity

 

911,924

 

900,183

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,580,773

 

$

1,430,652

 

 

(END)

 

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