SOURCE: Excel Trust, Inc.

Excel Trust, Inc.

October 29, 2014 16:34 ET

Excel Trust Announces Results for the Quarter Ended September 30, 2014, Declares Dividend

SAN DIEGO, CA--(Marketwired - Oct 29, 2014) - Excel Trust, Inc. (NYSE: EXL) (the "Company") announced today financial and operating results for the quarter ended September 30, 2014. A supplemental financial package with additional information can be found on Excel Trust's website under the Investor Relations tab.

Highlights for the Third Quarter 2014

  • Reported Adjusted Funds from Operations (AFFO) for the quarter of approximately $12.1 million, or $0.19 per diluted share
  • Reported Funds from Operations (FFO) for the quarter of approximately $8.5 million or $0.14 per diluted share
  • Retired 669,025 shares of Series A convertible preferred stock (resulted in a one-time $1.5 million reduction to FFO; reduced annual preferred dividend payments by an estimated $1.2 million)
  • Declared a fourth quarter 2014 dividend of $0.175 per share of common stock, which equates to an annualized dividend rate of $0.70 per share
  • Acquired Utah portfolio for approximately $148 million (net)
  • In advanced negotiations on ~$150 million in properties targeted for disposition

Highlights Subsequent to Quarter Close

  • Acquired ~340,000 square foot shopping center in Florida
  • Disposed of La Costa Towne Center (JV) in San Diego, CA for approximately $31.6 million
  • Disposed of Lowe's in Shippensburg, PA for approximately $24.4 million

"We continue to make progress on the objectives we outlined at the beginning of the year," stated Gary Sabin, Chairman and CEO. "We upgraded our portfolio by acquiring well located, dominant shopping centers in Utah and Florida. We improved our balance sheet and our future earnings potential by retiring a portion of our convertible preferred shares. We exited our joint-venture project in San Diego for a profit and moved forward in marketing our dispositions. We believe these activities further enhance our company as we strive to create long-term value for our shareholders."

Financial Results

Excel Trust reported Adjusted Funds From Operations (AFFO) for the third quarter of 2014 of $12.1 million, or $0.19 per diluted share and Funds From Operations (FFO) for the third quarter of $8.5 million or $0.14 per diluted share. Net loss attributable to the common stockholders for the third quarter was $2.8 million, or $0.05 per diluted share. This compares to AFFO of $11.7 million, or $0.24 per diluted share, FFO of $11.0 million or $0.22 per diluted share and net income attributable to the common stockholders of $10.7 million, or $0.22 per diluted share in the three-month period ended September 30, 2013.

Excel Trust reported AFFO for the nine months ended September 30, 2014 of $35.9 million or $0.67 per diluted share and FFO of $30.6 million or $0.57 per diluted share. Net loss attributable to the common stockholders for the nine months ended September 30, 2014 was $4.2 million or $0.09 per diluted share. This compares to AFFO of $32.4 million, or $0.67 per diluted share, FFO of $33.4 million or $0.69 per diluted share and a net gain attributable to the common stockholders of $8.9 million or $0.18 per diluted share in the nine month period ended September 30, 2013. 

Deducted from FFO for the quarter ended September 30, 2014 was a one-time charge of approximately $1.5 million related to the Company's retirement of convertible preferred shares. Also deducted from FFO were transaction costs related to acquisitions which totaled approximately $820,000 for the quarter. For the nine months ended September 30, 2014 transaction costs totaled approximately $1,297,000.

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 the 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 third quarter 2014, the retail portfolio was 93.8% leased compared to 94.0% in the second quarter 2014. Anchor space was 98.8% leased compared to 99.1% in the second quarter 2014 and inline space was 83.9% leased compared to 84.5% in the second quarter 2014.

During the third quarter 2014, the Company signed 36 retail leases and renewals, totaling 178,752 square feet. The average releasing spread on comparable new leases was 5.9%.

Same Property Net Operating Income increased 3.0% over the same quarter of the prior year.

Summary of Significant Activities During Third Quarter 2014

On September 26, 2014, the Company acquired three shopping centers in the Salt Lake City area for approximately $223 million. Properties included in the transaction were, The Family Center at Fort Union, The Family Center at Orem and The Family Center at Taylorsville. As a part of the transaction, Excel Trust assigned purchase rights for The Family Center at Taylorsville to a third party for approximately $75 million, leaving the Company with approximately $148 million in net acquisitions, and 839,216 square feet of GLA. Major tenants include, Walmart, Smith's Food (Kroger), Ross Dress for Less, Dick's Sporting Goods, Bed Bath & Beyond, Gordmans, Ulta, DSW, Office Max, Dollar Tree, etc.

During the quarter, the Company repurchased 669,025 shares of Series A preferred stock. The repurchased shares of Series A preferred stock were subsequently retired resulting in a one-time charge of approximately $1.5 million.

Significant Activities Subsequent to Third Quarter 2014

On October 1, 2014, the Company acquired Downtown at the Gardens, a 339,669 square foot shopping center in Palm Beach Gardens, FL. 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, PA for approximately $24.4 million, excluding closing costs.

Fourth Quarter 2014 Dividends Declared

The Board of Directors declared a fourth quarter cash dividend of $0.175 per common share payable on January 15, 2015 to shareholders of record as of December 31, 2014.

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 January 15, 2015 to shareholders of record as of December 31, 2014.

Revised 2014 Guidance

Excel Trust is revising its previously announced guidance primarily to account for charges related to the retirement of Series A convertible preferred stock and transaction fees related to the Florida acquisition. The Company expects its AFFO per share for fiscal year 2014 to be between $0.90 and $0.95 and its FFO per share to be between $0.76 and $0.81. The Company will further discuss assumptions surrounding guidance tomorrow on the conference call.

Conference Call

In conjunction with Excel Trust's results, you are invited to listen to its conference call on Thursday, October 30, 2014 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 available by phone for three days beginning at 4:00 p.m. ET on October 30, 2014. 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 REIT that primarily targets community and power centers, grocery anchored neighborhood centers and freestanding retail properties. 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, Inc., 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 and after adjustments for unconsolidated partnerships and joint ventures. 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-Q or 10-K with the Securities and Exchange Commission and, therefore, remain subject to adjustment. The accompanying notes to follow in the Form 10-Q or 10-K are an integral part of these consolidated financial statements.

         
CONSOLIDATED BALANCE SHEETS  
(Dollars in thousands)  
         
    September 30, 2014     December 31, 2013  
ASSETS:                
                 
Property:                
  Land   $ 409,013     $ 380,366  
  Buildings     754,860       642,356  
  Site improvements     69,137       63,242  
  Tenant improvements     62,454       54,025  
  Construction in progress     26,697       7,576  
  Less accumulated depreciation     (83,008 )     (61,479 )
    Property, net     1,239,153       1,086,086  
Cash and cash equivalents     6,143       3,245  
Restricted cash     7,707       8,147  
Tenant receivables, net     4,404       5,117  
Lease intangibles, net     81,796       78,345  
Deferred rent receivable     10,824       9,226  
Other assets (1)     36,022       20,135  
Real estate held for sale, net of accumulated amortization     -       -  
Investment in unconsolidated entities     8,378       8,520  
  Total assets   $ 1,394,427     $ 1,218,821  
                 
LIABILITIES AND EQUITY:                
                 
Liabilities:                
  Mortgages payable, net   $ 160,837     $ 251,191  
  Notes payable     56,000       179,500  
  Unsecured notes     348,725       100,000  
  Accounts payable and other liabilities     40,821       21,700  
  Lease intangibles, net     36,260       28,114  
  Dividends/distributions payable     12,918       10,932  
  Total liabilities     655,561       591,437  
                 
Equity:                
  Total stockholders' equity     727,094       615,446  
  Non-controlling interests     11,772       11,938  
  Total equity     738,866       627,384  
    Total liabilities and equity   $ 1,394,427     $ 1,218,821  
                 
(1) Other assets is primarily comprised of deposits, notes receivable, prepaid expenses and furniture, fixtures, and equipment
   
   
   
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share data and dividends per share)  
                       
    Three Months Ended September 30, 2014     Three Months Ended September 30, 2013     Nine Months Ended September 30, 2014   Nine Months Ended September 30, 2013  
                             
Revenues:                            
  Rental revenue   $ 24,750     $ 23,556     $ 74,836   $ 67,685  
  Tenant recoveries     5,057       5,022     15,168     14,099  
  Other income     427       353     1,457     954  
    Total revenues     30,234       28,931     91,461     82,738  
                             
Expenses:                            
  Maintenance and repairs     2,030       1,821     6,439     5,239  
  Real estate taxes     3,148       3,354     9,443     9,312  
  Management fees     496       698     1,533     1,331  
  Other operating expenses     1,632       1,845     4,978     4,707  
  Changes in fair value of contingent consideration     -       (10 )   -     (1,568 )
  General and administrative     4,289       3,399     12,263     10,536  
  Depreciation and amortization     11,212       11,637     34,419     34,613  
    Total expenses     22,807       22,744     69,075     64,170  
                             
Net operating income     7,427       6,187     22,386     18,568  
                             
  Interest expense     (6,387 )     (4,728 )   (17,357)     (13,751 )
  Interest income     103       49     206     146  
  Income (loss) from equity in unconsolidated entities     75       12     240     (13 )
  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  
                             
Net income (loss) from continuing operations     1,218       1,520     5,475     5,180  
                             
Income from discontinued operations before gain on sale of real estate assets     -       345     -     481  
  Gain on sale of real estate assets     -       11,974     -     11,974  
                             
Income from discontinued operations     -       12,319     -     12,455  
Net income (loss)     1,218       13,839     5,475     17,635  
  Net (income) loss attributable to non-controlling interests     (70 )     (356 )   (227)     (489 )
                             
Net income (loss) attributable to Excel Trust, Inc.     1,148       13,483     5,248     17,146  
  Preferred stock dividends     (2,501 )     (2,744 )   (7,989)     (8,232 )
  Cost of redemption of preferred stock     (1,477 )     -     (1,477)     -  
                             
Net income (loss) attributable to the common stockholders   $ (2,830 )   $ 10,739     $ (4,218)   $ 8,914  
                             
Basic and diluted net income (loss) per share   $ (0.05 )   $ 0.22     $ (0.09)   $ 0.18  
Weighted-average common shares outstanding - basic and diluted     60,389       47,497     52,293     46,674  
                             
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  
                         
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 and nine months ended September 30, 2014 and 2013 is as follows:  
               
    Three Months Ended September 30, 2014     Three Months Ended September 30, 2013     Nine Months Ended September 30, 2014     Nine Months Ended September 30, 2013  
                                 
Net income (loss) attributable to the common stockholders   $ (2,830 )   $ 10,739     $ (4,218 )   $ 8,914  
                                 
Add:                                
  Non-controlling interests in operating partnership     (21 )     279       (47 )     240  
  Depreciation and amortization     11,212       11,766       34,419       35,306  
Deduct:                                
  Depreciation and amortization related to joint venture     137       214       463       879  
Funds from operations   $ 8,498     $ 11,024     $ 30,617     $ 33,365  
                                 
Adjustments:                                
  Transaction costs     820       600       1,297       1,046  
  Deferred financing costs     457       387       1,380       1,300  
  Stock-based and other non-cash compensation expense     1,153       583       3,117       1,713  
  Changes in fair value of contingent consideration     -       (10 )     -       (1,568 )
  Changes in fair value of financial instruments     -       -       -       (230 )
  Straight-line effects of lease revenue     (482 )     (664 )     (1,599 )     (2,588 )
  Amortization of above- and below-market leases     225       (14 )     (136 )     204  
  Cost of redemption of preferred stock     1,477       -       1,477       -  
  Non-incremental capital expenditures     (51 )     (227 )     (230 )     (577 )
  Non-cash expenses (income) related to joint venture     1       6       (16 )     (275 )
                                 
Adjusted funds from operations   $ 12,098     $ 11,685     $ 35,907     $ 32,390  
                                 
Weighted average common shares outstanding     60,389       47,497       52,293       46,674  
Add:                                
  OP units     1,020       1,225       1,020       1,230  
  Restricted stock     -       172       -       206  
  Contingent consideration related to business combinations     -       -               -  
  LTIP restricted stock     -       -       -       -  
  Weighted average common shares outstanding - diluted (FFO and AFFO)     61,409       48,894       53,313       48,110  
                                 
Funds from operations per share (diluted)   $ 0.14     $ 0.22     $ 0.57     $ 0.69  
Adjusted funds from operations per share (diluted)   $ 0.19     $ 0.24     $ 0.67     $ 0.67  
                                 
                                 
Other Information:                                
  Leasing commissions paid   $ 231     $ 396     $ 719     $ 1,366  
  Tenant improvements paid   $ 457     $ 3,391     $ 2,485     $ 6,483  
                                   
                                   

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