GLB Glenborough

Glenborough Realty Trust (NYSE:GLB) (NYSE:GLB PrA) reported the following results for the third quarter ended September 30, 2005: NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS For the third quarter of 2005, the Company had net income available to common stockholders of $26.8 million, or $0.74 per diluted common share, as compared with $0.4 million or $0.01 per share for the third quarter of 2004. The third quarter of 2005 included a $27.6 million gain on sale, or $0.77 per diluted common share, as compared with a $0.7 million gain on sale, or $0.02 per diluted common share, for the third quarter of 2004. Year-to-date 2005, the Company had a net loss available to common stockholders of ($6.0) million or ($0.17) per diluted common share as compared with net income available to common stockholders of $8.4 million or $0.27 per diluted common share for the same period in 2004. FUNDS FROM OPERATIONS (FFO) For the third quarter of 2005, FFO was $15.7 million or $0.40 per diluted common share. In comparison, the third quarter 2004 FFO was $15.5 million or $0.44 per diluted common share. Included in the third quarter of 2005 were impairment charges of approximately $1.0 million; the reversal of a prior impairment charge of approximately $1.3 million and charges of approximately $0.2 million related to losses on early extinguishment of debt. Excluding these items, FFO for the third quarter of 2005 was $15.5 million or $0.40 per diluted common share. Included in the third quarter of 2004 were charges of approximately $2.0 million, or $0.06 per diluted common share, related to losses on early extinguishment of debt. Excluding these charges, FFO for the third quarter of 2004 was $17.5 million, or $0.50 per diluted common share. Year-to-date 2005, FFO was ($16.9) million, or ($0.43) per diluted common share, as compared with $43.2 million, or $1.25 per diluted common share, for the same period in 2004. Included in 2005 are impairment charges of approximately $59.2 million, or $1.51 per diluted common share; the reversal of a prior impairment charge of approximately $1.3 million, or $0.03 per diluted common share; charges of approximately $3.3 million, or $0.08 per diluted common share, related to losses on early extinguishment of debt; and charges of approximately $5.9 million, or $0.15 per diluted common share, associated with the redemption of preferred stock. Excluding these items, FFO was $50.2 million, or $1.28 per diluted common share and does not include gains on sale of $54.2 million. Included in year-to-date 2004 FFO were charges of approximately $2.0 million, or $0.06 per diluted common share, related to losses on early extinguishment of debt and charges of approximately $8.0 million, or $0.23 per diluted common share, associated with the redemption of preferred stock. Excluding these charges, FFO was $53.2 million, or $1.54 per diluted common share. PROPERTY DISPOSITIONS In the third quarter, the Company sold four properties for a total consideration of $77.7 million and recognized gains on sale of $27.6 million. Subsequent to quarter end, the Company sold two assets for total consideration of $41.3 million. Through the date of this release, the Company has sold 13 assets for total consideration of $245 million with gains on sale of $65 million (including the two assets sold subsequent to the end of the quarter). PROPERTY ACQUISITIONS The Company acquired Capitol Place III in Washington, D.C. Capitol Place III consists of a 12-story, Class "A" office building totaling 212,779 square feet, located in Washington, D.C.'s Capitol Hill submarket. The building is three blocks from the U. S. Capitol building, one block from Union Station, and is part of Capitol Place, one of the largest projects in the District of Columbia. Capitol Place is a one million square foot mixed-use project, located on nearly an entire city block bounded by New Jersey Avenue, F Street, and First Street, N.W. The Capitol Place project is composed of four buildings - three office buildings and a full service, 264-room Washington Court Hotel-situated around a central atrium. The Company also acquired 33 New Montgomery a 20-story, Class "A" office tower located in the San Francisco Financial District. The building, totaling 241,794 rentable square feet, is located at the corner of Market and New Montgomery streets adjacent to the Montgomery Street BART Station offering exceptional access to San Francisco's multi-modal transportation system. The building is also located within two blocks of the Transbay Terminal. Additionally the property is located within 1/2 mile of Interstate 80 and Highway 101 offering access to the East Bay, Oakland and the Peninsula. Andrew Batinovich, President and CEO commented, "We are expecting another $150 million in dispositions over the next two quarters which will complete the portfolio realignment out of the mid-west which we announced earlier this year. Pricing on the dispositions has been stronger than we anticipated. The acquisition environment continues to be challenging, but we intend to redeploy the capital from our dispositions effort either into new assets in our core markets directly or through joint ventures and/or repurchasing our stock." PORTFOLIO PERFORMANCE Overall portfolio occupancy increased from 88.3% to 89.9% during the third quarter. Same store office net operating income declined by 2.4% as compared with the third quarter of 2004. The Company's largest markets are Washington, D.C. (26% of net operating income), Southern California (19%), Northern New Jersey (13%), Boston (10%) and San Francisco (9%). Additional details on the portfolio can be found in the Company's Supplemental Report which is available at www.glenborough.com. BALANCE SHEET, OPERATING RATIOS, STOCK REPURCHASE At quarter-end, Glenborough had $864.7 million of debt with a 51% ratio of debt to total market capitalization. Fixed rate debt comprises 84% of all debt outstanding at quarter-end. Subsequent to quarter end, the Company repurchased 946,600 common shares at an average price of $18.79 per share. DIVIDENDS On September 15th, the Board of Directors declared a dividend of $0.35 per share of common stock for the third quarter of 2005. This dividend was paid on October 14, 2005 to stockholders of record on October 1, 2005. Additionally, the Board of Directors declared a dividend of $0.484375 per share on the Company's 7.75% Series A Convertible Preferred Stock. This dividend was paid on October 14, 2005 to stockholders of record on September 23, 2005 and represented an annualized dividend of $1.9375 per share of Preferred Stock. CONFERENCE CALL Glenborough will host a conference call to discuss these matters on Wednesday, October 26th, 2005 at 1:30 p.m. Eastern Time (10:30 a.m. Pacific Time). Interested parties can listen to the call by calling 1-800-946-0719, confirmation number 3183740 preferably 5-10 minutes before the scheduled time. In addition, a replay of the call will be available until Friday, October 28th 2005 at 5:00 p.m. Pacific Time at 1-888-203-1112, confirmation number 3183740. Glenborough is a REIT which is focused on owning high quality, multi-tenant office properties concentrated in Washington D.C., Southern California, Northern New Jersey, Boston and Northern California. The Company has a portfolio of 55 properties encompassing approximately 10 million square feet as of September 30, 2005. -0- *T SUMMARY FINANCIAL DATA (unaudited; in thousands, except per share data) QUARTER ENDED YEAR TO DATE ------------------- -------------------- SEP 30 05 SEP 30 04 SEP 30 05 SEP 30 04 --------- --------- --------- ---------- (As restated) Net income $28,609 $3,719 $5,299 $26,293 Net income (loss) available to Common Stockholders 26,797 410 (6,041) 8,366 Funds from operations (FFO) 15,651 15,519 (16,892) 43,160 Per diluted common share Net income (loss) available to Common Stockholders $ 0.74 $ 0.01 $(0.17) $0.27 Funds from operations (FFO) 0.40 0.44 (0.43) 1.25 Dividends declared per common share outstanding $0.35 $0.35 $1.05 $1.05 Payout ratio Dividend payout ratio (FFO) 87.5% 79.5% N/A 84.0% Excluding One-Time Charges Funds from operations (FFO) $0.40 $0.50 $1.28 $1.54 Dividend payout ratio (FFO) 87.5% 70.0% 82.0% 68.2% GLENBOROUGH REALTY TRUST Consolidated Statements of Operations (unaudited, in thousands, except share and per share amounts) For the Three Months For the Nine Months Ended Ended ----------------------- ----------------------- Sep 30 '05 Sep 30 '04 Sep 30 '05 Sep 30 '04 ----------- ----------- ----------- ----------- (As restated) Operating Revenue Rental revenue $40,490 $36,512 $116,967 $107,677 Fees and reimbursements, including from related parties 849 757 3,302 2,618 ----------- ----------- ----------- ----------- Total operating revenue 41,339 37,269 120,269 110,295 ----------- ----------- ----------- ----------- Operating Expenses Property operating expenses 13,891 11,614 39,563 35,013 General and administrative 3,424 3,006 10,634 9,176 Depreciation and amortization 13,458 11,671 37,796 33,589 Provision for impairment of real estate assets 62 - 5,160 - ----------- ----------- ----------- ----------- Total operating expenses 30,835 26,291 93,153 77,778 ----------- ----------- ----------- ----------- Interest and other income 455 567 2,099 2,036 Equity in earnings of unconsolidated operating joint ventures 6 158 308 594 Interest expense (10,895) (8,330) (29,317) (24,216) Loss on early extinguishment of debt (127) (1,950) (688) (2,035) ----------- ----------- ----------- ----------- Income (loss) before minority interest, discontinued operations and cumulative effect of change in accounting principle (57) 1,423 (482) 8,896 Minority interest (including share of discontinued operations) (2,227) (29) 500 (816) ----------- ----------- ----------- ----------- Income (loss) before discontinued operations and cumulative effect of change in accounting principle (2,284) 1,394 18 8,080 Discontinued operations: Net operating income 4,107 7,056 13,950 22,916 General and administrative - (20) - (32) Depreciation and amortization (935) (4,304) (6,545) (13,241) Provision for impairment of real estate assets (946) - (54,085) - Reversal of provision for impairment of real estate assets 1,331 - 1,331 - Interest expense (216) (1,110) (1,039) (3,749) Loss on early extinguishment of debt (65) (40) (2,577) (40) Gain on sales of real estate assets 27,617 743 54,246 13,271 ----------- ----------- ----------- ----------- Discontinued operations 30,893 2,325 5,281 19,125 ----------- ----------- ----------- ----------- Income before cumulative effect of change in accounting principle 28,609 3,719 5,299 27,205 Cumulative effect of change in accounting principle - - - (912) ----------- ----------- ----------- ----------- Net income 28,609 3,719 5,299 26,293 Preferred dividends (1,812) (3,318) (5,435) (9,954) Dividends paid on redeemed preferred stock - - (596) (2,073) Premium and write-off of original issuance costs on preferred stock redemption - 9 (5,309) (5,900) ----------- ----------- ----------- ----------- Net income (loss) available to Common Stockholders $26,797 $410 $(6,041) $8,366 =========== =========== =========== =========== Net income (loss) available to Common Stockholders per diluted common share $0.74 $0.01 $(0.17) $0.27 =========== =========== =========== =========== Diluted weighted average shares outstanding 36,003,636 31,682,728 35,915,389 31,084,557 =========== =========== =========== =========== GLENBOROUGH REALTY TRUST Reconciliation of Net Income (Loss) to FFO (unaudited, in thousands, except share and per share amounts) For the Three Months For the Nine Months Ended Ended ----------------------- ----------------------- Sep 30 '05 Sep 30 '04 Sep 30 '05 Sep 30 '04 ----------- ----------- ----------- ----------- (As restated) Net income $28,609 $3,719 $5,299 $26,293 Cumulative effect of change in accounting principle - - - 912 Real estate depreciation and amortization, net of minority interest 12,993 14,254 40,040 41,729 Preferred dividends (1,812) (3,318) (5,435) (9,954) Dividends paid on redeemed preferred stock - - (596) (2,073) Premium and write-off of original issuance costs on preferred stock redemption - 9 (5,309) (5,900) Gain on sales from discontinued operations, net of minority interest (25,506) (677) (50,093) (12,091) Adjustment to reflect FFO of unconsolidated operating joint ventures 178 178 535 536 Adjustment to reflect FFO of minority interest 1,189 1,354 (1,333) 3,708 ----------- ----------- ----------- ----------- Funds from operations available to Common Stockholders and OP Unitholders (FFO) $15,651 $15,519 $(16,892) $43,160 =========== =========== =========== =========== FFO per diluted common share $0.40 $0.44 $(0.43) $1.25 =========== =========== =========== =========== Diluted weighted average common shares and OP units outstanding for calculation of FFO 39,231,083 34,937,222 39,142,775 34,441,182 =========== =========== =========== =========== GLENBOROUGH REALTY TRUST Consolidated Balance Sheets (unaudited, in thousands, except share amounts) September 30, December 31, 2005 2004 ------------- ------------ (As restated) ASSETS Rental properties, gross $1,302,182 $1,367,310 Accumulated depreciation and amortization (176,276) (220,229) ------------- ------------ Rental properties, net 1,125,906 1,147,081 Properties held for sale 118,102 57,327 Investments in land and development 135,941 147,435 Investments in unconsolidated operating joint ventures 11,889 12,014 Mortgage loans receivable 10,863 12,872 Leasing and financing costs (net of accumulated amortization of $15,977 and $17,856 as of September 30, 2005 and December 31, 2004, respectively) 25,181 24,403 Straight-line rent receivable (net of allowances of $0 and $528 as of September 30, 2005 and December 31, 2004, respectively) 15,697 15,764 Cash and cash equivalents 5,325 6,003 Other assets 21,963 10,202 ------------- ------------ TOTAL ASSETS $1,470,867 $1,433,101 ============= ============ LIABILITIES Mortgage loans $818,317 $654,748 Unsecured bank line of credit 46,355 21,320 Accrued common and preferred stock dividends 14,493 15,931 Obligations associated with properties held for sale 2,428 43,300 Other liabilities 41,276 31,282 ------------- ------------ Total liabilities 922,869 766,581 ------------- ------------ MINORITY INTEREST 34,481 39,336 STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 188,000,000 shares authorized, 36,231,166 and 36,033,126 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively 36 36 Convertible preferred stock, $0.001 par value, 12,000,000 shares authorized, $25.00 liquidation preference, 3,740,277 and 6,850,325 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively 4 7 Additional paid-in capital 800,170 870,622 Deferred compensation (3,253) (4,056) Distributions in excess of accumulated earnings (283,440) (239,425) ------------- ------------ Total stockholders' equity 513,517 627,184 ------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,470,867 $1,433,101 ============= ============ *T FORWARD LOOKING STATEMENTS: Certain statements in this press release are forward-looking statements within the meaning of federal securities laws, including Mr. Batinovich's statement that the Company expects to dispose of an additional $150 million in assets in the next two quarters and that the Company intends to continue to acquire assets in its core markets and repurchase its own stock using proceeds from dispositions. Because these forward looking statements involve risk and uncertainty, there are important factors that could cause our actual results to differ materially from those stated or implied in the forward-looking statements. Those important factors include: -- Our inability to locate suitable buyers for our listed assets who are ready, willing and able to close transactions at the sales price we anticipate; -- Increased costs of financing cause a reduction in demand for commercial properties and therefore a reduction in the market value of the assets listed for sale; -- Lower than expected retention of existing tenants negatively affects the value of the assets listed for sale; -- Changes in market rental rates for office space negatively affect the value of the assets listed for sale; -- Changes in market conditions render the repurchase of our stock imprudent; -- Our inability to locate and acquire suitable property at reasonable prices in our core markets; -- The failure of the economy to continue its expansion; -- The failure of the office market to grow with a growing economy; -- Downward changes in market rental rates for office space; and -- The effect of any future impairment charges associated with asset disposition or market conditions. Given these uncertainties, readers are cautioned not to place undue reliance on such statements. All forward-looking statements are based on information available to us on the date hereof and we assume no obligation to update or supplement any forward looking-statement. Additional information concerning factors that could cause results to differ can be found in our filings with the SEC including our report on Form 10-K for the year ended December 31, 2004 and our quarterly reports on Forms 10-Q for the periods ended March 31, 2005 and June 30, 2005. Funds from Operations, or FFO, as defined by National Association of Real Estate Investment Trusts, represents net income (loss) (including income and loss from discontinued operations) excluding minority interest and extraordinary items, adjusted for real estate related depreciation and amortization and gains from the disposal of properties. We believe that FFO is a widely used measure of the operating performance of equity REITs which provides a relevant basis for comparison among other REITs. FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor does Glenborough intend it to present, a complete picture of its financial condition and operating performance. Glenborough believes that net earnings computed under GAAP remains the primary measure of performance and that FFO is only meaningful when it is used in conjunction with net earnings computed under GAAP. Further, Glenborough believes that its consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of its financial condition and its operating performance.