SOURCE: Excel Trust

Excel Trust

February 11, 2015 16:33 ET

Excel Trust Announces Fourth Quarter and Year Ended 2014 Results, Increases Dividend

SAN DIEGO, CA--(Marketwired - Feb 11, 2015) -  Excel Trust, Inc. (NYSE: EXL) announced today financial and operating results for the quarter and year ended December 31, 2014. A supplemental financial package with additional information can be found on Excel Trust's website under the Investor Relations tab.

Highlights for the Fourth Quarter 2014

  • Reported Adjusted Funds from Operations (AFFO) for the quarter of $16.5 million, or $0.27 per diluted share and for the year of $52.4 million, or $0.94 per diluted share
  • Reported Funds from Operations (FFO) for the quarter of $9.3 million or $0.15 per diluted share, which was negatively impacted by a charge for early extinguishment of debt. Without the charge for early extinguishment of debt, FFO per share would have been $14.5 million or $0.23 per diluted share for the quarter. The debt was extinguished as part of a property sale which resulted in a net gain on the transaction of $1.9 million (see disposition of Lowe's below). FFO for the year was $39.9 million, or $0.71 per diluted share. Without the charge for early extinguishment of debt, FFO per share would have been $45.1 million or $0.81 per diluted share for the year
  • Increased common stock dividend to $0.18 per share for the first quarter 2015 (previously $0.175 per share), which equates to an annualized dividend of $0.72 per share
  • Acquired $268.0 million in properties
  • Executed $59.0 million in dispositions, including the joint venture at La Costa Towne Center

Highlights for the Year Ended 2014

  • Acquired approximately $416.5 million in properties
  • Issued $250 million in 4.625% 10-year Senior Unsecured Notes with a 4.691% yield to maturity (Baa3, BBB-, BBB- for inaugural issue)
  • Issued 12.65 million shares of common stock generating net proceeds of approximately $160.5 million
  • 120 basis point increase in same store portfolio percent leased

"A year ago at this time we stated that our goal for 2014 was to narrow the gap between our company's net asset value and our stock price," commented Gary Sabin, Chairman and CEO of Excel Trust. "We outlined several steps we would take to achieve that goal, which included a continued focus on operations, strategic dispositions, and buying back shares with the proceeds when appropriate. Shareholders rewarded our strategy and we were able to raise equity to acquire over $400 million of high-quality assets around our management offices. We also issued $250 million of unsecured debt through our inaugural investment grade public bond offering. From an operational standpoint, leasing improved by 120 basis points across our same store portfolio. We are pleased with our many achievements in 2014 and look forward to carrying that momentum into the coming year."

Financial Results

Excel Trust reported Adjusted Funds From Operations (AFFO) for the fourth quarter of $16.5 million, or $0.27 per diluted share, and $52.4 million, or $0.94 per diluted share for the year. Excel Trust reported Funds from Operations (FFO) for the fourth quarter of $9.3 million or $0.15 per diluted share, which was negatively impacted by a charge for early extinguishment of debt. Without the charge for early extinguishment of debt, FFO per share would have been $14.5 million or $0.23 per diluted share for the fourth quarter. The debt was extinguished as part of a property sale which resulted in a net gain on the transaction of $1.9 million (see disposition of Lowe's below). FFO for the year was $39.9 million, or $0.71 per diluted share. Without the charge for early extinguishment of debt, FFO per share would have been $45.1 million or $0.81 per diluted share for the year. Net income attributable to the common stockholders for the fourth quarter was $0.9 million or $0.01 per diluted share, with net loss attributable to the common stockholders of $3.3 million, or $0.07 per diluted share for the year.

Non-recurring items increasing FFO for the quarter included a lease termination fee of $0.6 million. Deducted from FFO for the quarter was a one-time $5.2 million charge for the extinguishment of debt (see disposition of Lowe's below). Other deductions from FFO for the quarter included transaction costs of $1.5 million, non-cash compensation of $1.5 million, and a $0.2 million charge related to the repurchase of 150,000 shares of the Company's Series A Preferred Stock.

Excel Trust considers AFFO and FFO important supplemental measures of its operating performance and believes that they are frequently used by securities analysts, investors and other interested parties in the evaluation of real estate investment trusts (REITs), many of which present AFFO and FFO when reporting their results. A complete reconciliation containing adjustments from GAAP net income available to common shareholders to AFFO and FFO and a definition of both are included at the end of this release.

Operating Results

At the end of the fourth quarter 2014, the retail portfolio was 94.3% leased compared to 93.8% in the third quarter 2014. Anchor space was 98.9% leased compared to 98.8% in the third quarter 2014 and inline space was 85.8% leased compared to 83.9% during the third quarter 2014.

During the fourth quarter 2014, the Company signed 40 leases and renewals, totaling 230,589 square feet. The average releasing spread on comparable new leases was 12.4 %.

Same Store Net Operating Income ("SSNOI") for the fourth quarter 2014 increased 4.4%. Year-to-date, SSNOI increased 2.8 %. 

Summary of Significant Activities During Fourth Quarter 2014

On October 1, 2014, the Company acquired Downtown at the Gardens, a 339,669 square foot shopping center in Palm Beach Gardens, Florida. Major tenants include Whole Foods, Cheesecake Factory, Cobb Theaters, Urban Outfitters, and Golfsmith. Average household income in a 3 mile radius is estimated to be $107,654 (source: AGS 2014).

On October 9, 2014, the Company completed the disposition of the La Costa Towne Center (joint-venture asset) for approximately $31.6 million, excluding closing costs.

On October 16, 2014, the Company repurchased 150,000 shares of Series A preferred stock.

On October 23, 2014, the Company completed the disposition of its freestanding Lowe's property located in Shippensburg, Pennsylvania for approximately $24.4 million, excluding closing costs. The property was originally purchased for approximately $17.6 million. As a condition of closing, the Company prepaid the existing mortgage and incurred a one-time charge of $5.2 million, resulting in a net gain on the transaction of $1.9 million. The $5.2 million charge was deducted from FFO but added back for AFFO.

On November 25, 2014, the Company purchased 32,640 square feet of inline space connected to its Brandywine Crossing shopping center in Brandywine, Maryland for $11.5 million. Tenants include Advance Auto Parts, AT&T and Einstein Bros. Bagel. In a five mile radius, the population is estimated to be 61,100 and the average household income is estimated to be $100,251 (source: AGS 2014).

On December 3, 2014, the Company purchased land to develop the West Broad Marketplace in Richmond, Virginia for approximately $20.0 million. Ground leases have been signed with Wegmans and Cabela's, and several other national anchor tenants are in various stages of lease negotiation. Site work has commenced and the Company anticipates that upon completion the center will comprise approximately 400,000 square feet. In a five mile radius, the population is estimated to be 153,901 and the average household income is estimated to be $97,287 (source: AGS 2014).

On December 19, 2014, the Company purchased Riverpoint Marketplace, a 133,928 square foot shopping center in Sacramento, California, for approximately $43.8 million. The property is 97% leased and major tenants include Ikea (non-owned), Super Walmart (non-owned), Home Depot (non-owned), Ross Dress for Less, and Petco. The shopping center is well located along the I-80 freeway and draws from a large trade area as a result of its strong anchor tenants. In a five mile radius, the population is estimated to be 172,116 and the average household income is estimated to be $68,717 (source: AGS 2014).

On December 29, 2014, the Company purchased Highland Reserve Marketplace, a 191,415 square foot shopping center in Roseville, California, for approximately $52.5 million. The property is 98.5% leased and major tenants include Target (non-owned), Kohl's, Sport Chalet, PetSmart, and BevMo. The shopping center is well-situated along the dominant retail corridor and is surrounded by strong demographics. In a five mile radius, the population is estimated to be 190,320 and the average household income is estimated to be $91,004 (source: AGS 2014).

Events Subsequent to Fourth Quarter 2014

On January 29, 2015, the Company entered into a sales agreement to sell the Promenade Corporate Center office property, located in Scottsdale, Arizona. The property is comprised of two Class A office towers with a combined 256,182 square feet of gross leasable area. The sale of the property is subject to due diligence and other customary closing conditions. There can be no assurances that due diligence or other conditions will be satisfied or that the sale will close on the terms described herein, or at all.

On January 30, 2015, the Company completed the disposition of the Family Center at Orem property located in Orem, Utah for a sales price of approximately $21.5 million, excluding closing costs. The shopping center is comprised of 150,667 square feet and major tenants include Dick's Sporting Goods, Jo-Ann, Babies 'R' Us, Dollar Tree and Toys 'R' Us (non-owned).

First Quarter 2015 Dividend Declared

The Board of Directors declared a first quarter 2015 cash dividend of $0.18 per common share payable on April 15, 2015 to shareholders of record as of March 31, 2015.

The Board of Directors has also declared a dividend of $0.4375 per share on the Company's Series A Cumulative Convertible Perpetual Preferred Shares, and a dividend of $0.5078 on its Series B Cumulative Redeemable Preferred Shares. The dividend on Excel Trust's outstanding Series A and Series B Preferred Shares will be payable on April 15, 2015 to the Series A and Series B Preferred shareholders of record as of March 31, 2015.

Guidance Introduced for 2015

Excel Trust expects its AFFO per share for fiscal year 2015 to be between $0.91 and $0.99 and its FFO per share to be between $0.87 and $0.95. The Company will further discuss assumptions surrounding guidance tomorrow on the conference call.

The foregoing estimates are forward-looking and reflect management's view of current and future market conditions, including certain assumptions with respect to leasing activity, rental rates, occupancy levels, interest rates, and the amount and timing of acquisitions and development activities. Excel Trust's actual results may differ materially from these estimates.

Conference Call

Senior Management will host a conference call Thursday, February 12, 2015 at 1:00 p.m. Eastern Time.

PHONE: Conference call access information is as follows:

Dial in number: (800) 299-8538
International Dial in number: (617) 786-2902
Pass code: 34697712

INTERNET: A live webcast of the conference call will be available through Excel Trust's web site at www.exceltrust.com

REPLAY: A replay of the conference call will be made available through Excel Trust's web site at www.exceltrust.com. A replay will also be made available by phone for three days beginning at 4:00 p.m. ET on February 12, 2015. Replay access information is as follows:

Dial in number: (888) 286-8010
International Dial in number: (617) 801-6888
Pass code: 30082346

About Excel Trust

Excel Trust, Inc. is a retail focused real estate investment trust (REIT) that primarily targets community shopping centers, power shopping centers, and grocery anchored neighborhood centers. The Company has elected to be treated as a REIT for U.S. federal income tax purposes. Excel Trust trades publicly on the NYSE under the symbol "EXL". For more information on Excel Trust, please visit www.exceltrust.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, without limitation: general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants' financial condition, and competition from other developers, owners and operators of real estate); adverse economic or real estate developments in the retail industry or the markets in which the Company operates; increased interest rates and operating costs; decreased rental rates or increased vacancy rates; the Company's failure to obtain necessary outside financing on favorable terms or at all; changes in the availability of additional acquisition opportunities; the Company's inability to successfully complete real estate acquisitions or successfully operate acquired properties; the Company's failure to qualify or maintain its status as a REIT; risks associated with the Company's dependence on key personnel whose continued service is not guaranteed; and risks associated with downturns in domestic and local economies, and volatility in the securities markets. For a further list and description of such risks and uncertainties, see the reports filed by the Company with the Securities and Exchange Commission, including the Company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO)

Excel Trust considers FFO and AFFO to be important supplemental measures of its operating performance and believes they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, they provide a performance measure that, when compared year-over-year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.

Excel Trust computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT. As defined by NAREIT, FFO represents net income (loss) (computed in accordance with generally accepted accounting principles, or GAAP), excluding real estate-related depreciation and amortization, impairment charges and net gains (losses) on the disposition of assets.

Excel Trust computes AFFO by adding to FFO the non-cash compensation expense, amortization of prepaid financing costs and non-recurring transaction costs, and other one-time items, then subtracting or adding straight-line rents, amortization of above and below market leases and non-incremental capital expenditures. Excel Trust's computation of FFO and AFFO may differ from the methodology for calculating FFO and AFFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. Further, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties.

FFO and AFFO should not be considered alternatives to net income (loss) (computed in accordance with GAAP) as an indicator of Excel Trust's financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of Excel Trust's liquidity, nor are they indicative of funds available to fund Excel Trust's cash needs, including Excel Trust's ability to pay dividends or make distributions.

Summarized Financial Statements

Reported results are preliminary and not final until the filing of Excel Trust's Form 10-K for the period ended December 31, 2014 with the Securities and Exchange Commission and, therefore, remain subject to adjustment. The accompanying notes to follow in the Form 10-K are an integral part of these consolidated and combined financial statements.

         
         
Balance Sheets        
         
CONSOLIDATED BALANCE SHEETS        
(Dollars in thousands)        
         
    December 31, 2014     December 31, 2013  
ASSETS:                
                 
Property:                
  Land   $ 455,112     $ 380,366  
  Buildings     921,604       642,356  
  Site improvements     87,305       63,242  
  Tenant improvements     70,549       54,025  
  Construction in progress     8,819       7,576  
  Less accumulated depreciation     (90,543 )     (61,479 )
    Property, net     1,452,846       1,086,086  
Cash and cash equivalents     6,603       3,245  
Restricted cash     8,272       8,147  
Tenant receivables, net     5,794       5,117  
Lease intangibles, net     123,373       78,345  
Deferred rent receivable     11,479       9,226  
Other assets (1)     32,081       20,135  
Investment in unconsolidated entities     6,689       8,520  
  Total assets   $ 1,647,137     $ 1,218,821  
                 
LIABILITIES AND EQUITY:                
                 
Liabilities:                
  Mortgages payable, net   $ 192,748     $ 251,191  
  Notes payable     238,000       179,500  
  Unsecured notes     398,758       100,000  
  Accounts payable and other liabilities     34,338       21,700  
  Lease intangibles, net     42,470       28,114  
  Dividends/distributions payable     12,857       10,932  
  Total liabilities     919,171       591,437  
                 
Equity:                
  Total stockholders' equity     715,389       615,446  
  Non-controlling interests     12,577       11,938  
  Total equity     727,966       627,384  
    Total liabilities and equity   $ 1,647,137     $ 1,218,821  
                 
                 
(1) Other assets is primarily comprised of deposits, notes receivable, prepaid expenses and furniture, fixtures, and equipment  
   
   
   
Statements of Operations  
   
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share data)  
                         
    Three Months Ended December 31, 2014     Three Months Ended December 31, 2013     Year Ended December 31, 2014     Year Ended December 31, 2013  
                                 
Revenues:                                
  Rental revenue   $ 30,737     $ 24,609     $ 105,572     $ 92,294  
  Tenant recoveries     6,438       4,777       21,605       18,875  
  Other income     1,689       419       3,146       1,373  
    Total revenues     38,864       29,805       130,323       112,542  
                                 
Expenses:                                
  Maintenance and repairs     2,930       2,089       9,369       7,328  
  Real estate taxes     3,983       3,444       13,427       12,756  
  Management fees     568       440       2,101       1,772  
  Other operating expenses     1,986       1,487       6,965       6,194  
  Changes in fair value of contingent consideration     -       -       -       (1,568 )
  General and administrative     5,752       3,335       18,009       13,871  
  Depreciation and amortization     16,242       11,534       50,661       46,146  
    Total expenses     31,461       22,329       100,532       86,499  
                                 
Net operating income     7,403       7,476       29,791       26,043  
                                 
  Interest expense     (6,810 )     (5,193 )     (24,167 )     (18,944 )
  Interest income     35       58       240       204  
  Income (loss) from equity in unconsolidated entities     2,339       53       2,578       40  
  Gain on acquisition of real estate and sale of land parcel     -       -       -       -  
  Changes in fair value of financial instruments and gain on OP unit redemption     -       -       -       230  
                                 
Income (loss) from continuing operations before loss on extinguishment of debt and gain on sale of real estate assets     2,967       2,394       8,442       7,573  
  Loss on extinguishment of debt from sale of real estate asset     (5,192 )     -       (5,192 )     -  
  Gain on sale of real estate assets     5,842       -       5,842       -  
                                 
Income (loss) from continuing operations     3,617       2,394       9,092       7,573  
                                 
Income from discontinued operations before gain on sale of real estate assets     -       (18 )     -       464  
  Gain on sale of real estate assets from discontinued operations     -       81       -       12,055  
                                 
Income from discontinued operations     -       63       -       12,519  
                                 
Net income (loss)     3,617       2,457       9,092       20,092  
  Net (income) loss attributable to non-controlling interests     (113 )     (79 )     (340 )     (568 )
                                 
Net income (loss) attributable to Excel Trust, Inc.     3,504       2,378       8,752       19,524  
  Preferred stock dividends     (2,391 )     (2,744 )     (10,380 )     (10,976 )
  Cost of redemption of preferred stock     (210 )     -       (1,687 )     -  
                                 
Net income (loss) attributable to the common stockholders   $ 903     $ (366 )   $ (3,315 )   $ 8,548  
                                 
Basic and diluted net income (loss) per share   $ 0.01     $ (0.01 )   $ (0.07 )   $ 0.17  
Weighted-average common shares outstanding - basic and diluted     60,416       47,672       54,341       46,926  
                                 
The notes in the Form 10-Q or 10-K are an integral part of these condensed consolidated financial statements.  
                                 
                                 
                                 
                                 
Reconciliation of Net Income to FFO and AFFO  
   
For the Period Ended December 31, 2014  
(In thousands, except per share data)  
   
Excel Trust, Inc.'s FFO and AFFO available to common stockholders and operating partnership unitholders and a reconciliation to net income(loss) for the three months and year ended December 31, 2014 and 2013 is as follows:  
   
                         
    Three Months Ended December 31, 2014     Three Months Ended December 31, 2013     Year Ended December 31, 2014     Year Ended December 31, 2013  
                                 
Net income (loss) attributable to the common stockholders   $ 903     $ (366 )   $ (3,315 )   $ 8,548  
                                 
Add:                                
  Non-controlling interests in operating partnership     21       (7 )     (26 )     233  
  Depreciation and amortization     16,242       11,534       50,661       46,839  
Deduct:                                
  Depreciation and amortization related to joint venture     117       175       580       1,054  
  Gain on sale of real estate assets     (7,967 )     (81 )     (7,967 )     (12,055 )
Funds from operations   $ 9,316     $ 11,255     $ 39,933     $ 44,619  
                                 
Adjustments:                                
  Loss on extinguishment of debt from sale of real estate asset     5,192       -       5,192       -  
  Transaction costs     1,463       112       2,760       1,159  
  Deferred financing costs     428       448       1,808       1,748  
  Stock-based and other non-cash compensation expense     1,526       583       4,643       2,291  
  Changes in fair value of contingent consideration     -       -       -       (1,568 )
  Changes in fair value of financial instruments     -       -       -       (230 )
  Straight-line effects of lease revenue     (655 )     (764 )     (2,253 )     (3,352 )
  Amortization of above- and below-market leases     (271 )     213       (407 )     417  
  Cost of redemption of preferred stock     210       -       1,687       -  
  Non-incremental capital expenditures     (286 )     (396 )     (516 )     (973 )
  Non-cash expenses (income) - including portion of joint ventures     (392 )     (5 )     (408 )     (280 )
                                 
Adjusted funds from operations   $ 16,531     $ 11,446     $ 52,439     $ 43,831  
                                 
Weighted average common shares outstanding     60,416       47,672       54,341       46,926  
Add:                                
  OP units     1,020       1,100       1,020       1,198  
  Restricted stock     699       141       601       190  
    Weighted average common shares outstanding - diluted (FFO and AFFO)     62,135       48,913       55,962       48,314  
                                 
Funds from operations per share (diluted)   $ 0.15     $ 0.23     $ 0.71     $ 0.92  
Adjusted funds from operations per share (diluted)   $ 0.27     $ 0.23     $ 0.94     $ 0.90  
                                 
                                 
Other Information:                                
    Leasing commissions paid   $ 449     $ 382     $ 1,168     $ 1,748  
    Tenant improvements paid   $ 833     $ 1,065     $ 3,318     $ 7,548  
                                 

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