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| FUR > SEC Filings for FUR > Form 8-K on 7-Aug-2012 | All Recent SEC Filings |
7-Aug-2012
Other Events
The following information sets forth certain recent developments and the financial and operating results for Winthrop Realty Trust (the "Company") for the second quarter ended June 30, 2012. All per share amounts are on a diluted basis.
Financial Results
Three Months Ended June 30, 2012
Net income applicable to common shares for the quarter ended June 30, 2012 was $571,000, or $0.02 per common share as compared with net income per common share of $3.7 million or $0.11 per common share for the quarter ended June 30, 2011. The decrease in per common share amounts is directly attributable to the effect of the full second quarter dividend payable on the Series D preferred shares issued in March 2012. The $77.7 million in proceeds from the offering along with capital recycled from certain liquidated investments have been invested or committed to investments but the expected positive impact to earnings from such investments will not begin to be recognized until the third quarter. In addition, as a value investor some of the Company's more recent investments, such as the Southern California portfolio loan, have returns that are less weighted to a current coupon, but have a return that will be recognized through a liquidation event at the end of the investment life.
For the quarter ended June 30, 2012, the Company reported Funds from Operations ("FFO") applicable to common shares of $8.1 million, or $0.24 per common share as compared with FFO of $12.3 million, or $0.38 per common share for the second quarter of 2011.
Six Months Ended June 30, 2012
Net income applicable to common shares for the six months ended June 30, 2012 was $7.9 million or $0.24 per common share as compared with net income of $10.8 million or $0.36 per common share for the same period ended June 30, 2011. The reasons for the decrease in per common share amounts are the same as reported above for the decline in the three month operating results.
FFO for the six months ended June 30, 2012 was $22.1 million or $0.67 per common share as compared with FFO of $24.3 million, or $0.81 per common share for the six months ended June 30, 2011.
2012 Second Quarter Activity
Acquisitions and Loan Originations
· Acquired a $44.5 million first mortgage loan secured by a 326,000 square foot commercial building located in Ft. Lauderdale, Florida, known as the Broward Financial Center, for $42.8 million. The Company subsequently received a payment of approximately $12.8 million, reducing the outstanding principal balance to $30.0 million. The Company modified the loan to waive the late charge, extend the term of the loan to October 15, 2012, increase the interest rate to 9.836% and provide for an exit fee. The property contains 47,000 square feet of retail and 279,000 square feet of office space and is 74.4% leased.
· Acquired from its joint venture partner, Marc Realty, its 20% non-controlling interest in the entity which owns the property located at One East Erie in Chicago, Illinois for $5.85 million. The property contains 126,000 square feet of retail and office space consisting of the first six floors in a mixed use building together with 208 parking spaces. The Company now owns 100% of the property.
· Originated a $9.0 million mezzanine loan collateralized by 100% of the member interests in the owner of the 104,000 square foot, 12-story building located at 127 West 25th Street in Manhattan, New York. The loan bears interest at a rate equal to the greater of 14% per annum or LIBOR plus 10%, requires payment of principal and interest and matures April 30, 2015. In connection with the loan origination, the Company received a 1% origination fee of $90,000 and commitment fees totaling $591,500.
· Originated a $2.25 million first mortgage loan which bears interest at 12% per annum and matures on April 5, 2014, with one, one-year extension right. Payments are interest only payable monthly with a balloon payment due at maturity. The loan is collateralized by a 45,655 square foot, two-story multi-tenant office building located at 4545 East Shea Boulevard in Phoenix, Arizona.
· Entered into an agreement to acquire a 284 unit multi-family property for $17.5 million. The property, Lake Brandt Apartments, is located in Greensboro, North Carolina and is presently 94% occupied. In connection with this acquisition, it is expected that the Company will assume the existing $13.6 million non-recourse mortgage loan which bears interest at 6.22% per annum, matures on August 1, 2016 and requires payments of interest only. The closing is expected to occur in September or October 2012. There can be no assurance that the Company will complete the transaction as described.
· Contributed an additional $5.5 million to the Company's Vintage Housing Holdings LLC ("VHH") equity investment platform. In connection with the transaction, VHH acquired a general partner interest and development fees relating to a residential development project referred to as Vintage at Urban Center, a tax credit apartment community in Lynwood, Washington with a proposed village development of 395 multi-family rental units and 4,000 square feet of retail space.
Dispositions and Loan Asset Repayments
· Sold the Company's non-Westinghouse portion of the Churchill, Pennsylvania operating property for $914,000. The Company provided a financing commitment to the buyer of $675,000. At closing, the Company provided $324,000 of financing to cover buyers expenses and taxes due. An additional $175,000 will be advanced on each of August 20, 2012 and November 20, 2012 directly to the taxing authority to cover taxes due on the sold parcel. The loan is interest only, at LIBOR +3.75% and matures June 1, 2015.
· Sold to Marc Realty, the Company's equity interest in 30 North Michigan for $10.3 million, of which $6.55 million was financed by the Company with a secured promissory note which bears interest at 10% per annum and requires payments of interest only and matures May 31, 2015. The note was fully satisfied on August 3, 2012.
· Sold to Marc Realty, all of the Company's equity interest in 2720 River Road, 2000-2060 Algonquin Road and Ridgebrook equity investments for an aggregate of $2.1 million.
· Received payment of approximately $19.6 million resulting in an annualized return of 47.8% that satisfied the Company's 160 Spear mortgage and mezzanine loans.
· Received repayment of approximately $20.0 million resulting in an annualized return of 15.8% that satisfied the Company's Magazine multi-family mezzanine loan.
Subsequent to Quarter End
· Obtained a $13.5 million first mortgage loan secured by the recently acquired 320 Unit Class A multi-family property in Memphis, Tennessee, known as Waterford Place. The loan bears interest at 3% annually, and requires monthly payments of principal and interest and matures on August 1, 2014, subject to two, one-year extensions.
· The Company and Marc Realty each contributed approximately $3.5 million to pay off the existing first mortgage loan collateralized by their joint venture investment in the property located at 223 West Jackson in Chicago, Illinois.
· On August 6, 2012, an entity ("10 Metrotech") in which the Company holds a
one-third interest, acquired for $32,500,000 the senior participation in the
loan secured by the property located at 625 Fulton Avenue, Brooklyn, New York.
10 Metrotech previously acquired the $21,000,000 junior participation for a
nominal amount. As a result, 10 Metrotech now holds the entire mortgage loan.
Following consummation of the acquisition, 10 Metrotech entered into a
forbearance agreement with the borrower pursuant to which, among other things,
(i) the interest rate on the loan was increased to 9%, (ii) the principal
amount of the loan was reset to $40,000,000 and (iii) 10 Metrotech agreed to
forbear from foreclosing on the property pursuant to current maturity default
for two years, subject to any further defaults by the borrower.
Financial Results
Financial results for the three and six months ended June 30, 2012 and 2011 are
as follows (in thousands except per share amounts):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2012 2011 2012 2011
(Unaudited) (Unaudited)
Revenue
Rents and reimbursements $ 13,257 $ 11,234 $ 25,797 $ 22,220
Interest, dividends and discount accretion 5,778 5,094 11,296 14,766
19,035 16,328 37,093 36,986
Expenses
Property operating 3,779 3,987 8,331 8,032
Real estate taxes 1,017 1,087 2,271 2,342
Depreciation and amortization 4,479 3,312 8,198 6,793
Interest 3,512 3,963 7,301 8,576
General and administrative 3,264 2,758 6,295 5,282
State and local taxes 143 48 149 77
16,194 15,155 32,545 31,102
Other income (loss)
Earnings from preferred equity investments - 158 - 241
Equity in income of equity investments 586 2,875 1,010 1,520
Realized gain on sale of securities carried at
fair value 15 7 41 131
Unrealized (loss) gain on securities carried at
fair value (791 ) (723 ) 4,141 163
Unrealized (loss) gain on loan securities carried
at fair value (88 ) 34 76 2,847
Gain on sale of equity investment 232 - 232 -
Interest income 90 443 192 536
44 2,794 5,692 5,438
Income from continuing operations 2,885 3,967 10,240 11,322
Discontinued operations
Income (loss) from discontinued operations - 90 (3 ) 137
Consolidated net income 2,885 4,057 10,237 11,459
(Income) loss attributable to non-controlling
interests 473 (329 ) 1,374 (533 )
Net income attributable to Winthrop Realty Trust 3,358 3,728 11,611 10,926
Income attributable to non-controlling redeemable
preferred interest - (58 ) - (117 )
Income attributable to Series D Preferred Shares (2,787 ) - (3,712 ) -
Net income attributable to Common Shares $ 571 $ 3,670 $ 7,899 $ 10,809
Per Common Share Data - Basic
Income from continuing operations $ 0.02 $ 0.11 $ 0.24 $ 0.36
Income from discontinued operations - - - -
Net income attributable to Winthrop Realty Trust $ 0.02 $ 0.11 $ 0.24 $ 0.36
Per Common Share Data - Diluted
Income from continuing operations $ 0.02 $ 0.11 $ 0.24 $ 0.36
Income from discontinued operations - - - -
Net income attributable to Winthrop Realty Trust $ 0.02 $ 0.11 $ 0.24 $ 0.36
Basic Weighted-Average Common Shares 33,064 32,573 33,058 29,841
Diluted Weighted-Average Common Shares 33,064 32,574 33,058 29,842
Comprehensive income
Consolidated net income $ 2,885 $ 4,057 $ 10,237 $ 11,459
Change in unrealized gain (loss) on interest rate
derivative (25 ) - (57 ) 63
Comprehensive income $ 2,860 $ 4,057 $ 10,180 $ 11,522
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Funds From Operations:
The following presents a reconciliation of net income to funds from operations
for the three and six months ended June 30, 2012 and 2011 (in thousands, except
per share amounts):
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2012 2011 2012 2011
(Unaudited) (Unaudited)
Net income attributable to
Winthrop
Realty Trust $ 3,358 $ 3,728 $ 11,611 $ 10,926
Real estate depreciation 2,747 2,086 5,261 4,204
Amortization of capitalized
leasing costs 1,732 1,226 2,937 2,591
Real estate depreciation and
amortization
of unconsolidated interests 3,992 2,376 7,654 4,639
Gain on sale of equity
investments (232 ) - (232 ) -
Impairment loss on equity
investments - 3,800 - 3,800
Less: Non-controlling interest
share of real
estate depreciation and
amortization (713 ) (789 ) (1,445 ) (1,581 )
Funds from operations 10,884 12,427 25,786 24,579
Series C Preferred Share
dividends - (58 ) - (117 )
Series D Preferred Share
dividends (2,787 ) - (3,712 ) -
Allocations of earnings to
Series B-1
Preferred Shares - (11 ) - (78 )
Allocations of earnings to
Series C
Preferred Shares - (39 ) - (92 )
FFO applicable to Common
Shares-Basic $ 8,097 $ 12,319 $ 22,074 $ 24,292
Weighted-average Common Shares 33,064 32,573 33,058 29,841
FFO Per Common Share-Basic $ 0.24 $ 0.38 $ 0.67 $ 0.81
Diluted
Funds from operations (per
above) $ 10,884 $ 12,427 $ 25,786 $ 24,579
Series C Preferred Share
dividends - (58 ) - (117 )
Series D Preferred Share
dividends (2,787 ) - (3,712 ) -
Allocation of earnings to Series
B-1
Preferred Shares - (11 ) - (78 )
Allocation of earning to Series
C
Preferred Shares - (39 ) - (92 )
FFO applicable to Common Shares $ 8,097 $ 12,319 $ 22,074 $ 24,292
Weighted-average Common Shares 33,064 32,573 33,058 29,841
Stock options - 1 - 1
Series B-1 Preferred Shares - - - -
Series C Preferred Shares - - - -
Diluted weighted-average Common
Shares 33,064 32,574 33,058 29,842
FFO Per Common Share - Diluted $ 0.24 $ 0.38 $ 0.67 $ 0.81
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The Company has adopted the revised definition of Funds from Operations ("FFO"), adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). The Company's management considers FFO to be an appropriate measure of performance of a REIT. The Company calculates FFO by adjusting net income (loss) (computed in accordance with GAAP, including non-recurring items), for gains (or losses) from sales of properties, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and ventures and impairments. The Company's management believes that in order to facilitate a clear understanding of the Company's historical operating results, FFO should be considered in conjunction with net income as presented in the consolidated financial statements included elsewhere herein. The Company's management considers FFO to be a useful measure for reviewing its comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or as compared to different companies.
The Company's calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO is not a GAAP financial measure and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of the Company's performance calculated and presented in accordance with GAAP, as an indication of the Company's performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of the Company's ability to pay dividends. The Company believes that to further understand the Company's performance, FFO should be compared with the Company reported net income and considered in addition to cash flows in accordance with GAAP, as presented in the Company's consolidated financial statements.
Based on the October 31, 2011 and January 6, 2012 updated guidance on reporting FFO, the Company has excluded impairment losses on depreciable real estate as well as other-than-temporary impairment on equity method joint ventures in the calculations of FFO and have restated prior period calculations to be consistent with this presentation. The other-than-temporary impairments have been excluded as they relate to decreases in the fair value of depreciable real estate held by the investee.
Consolidated Balance Sheets:
(in thousands, except share data)
June 30, December 31,
2012 2011
(Unaudited) (Unaudited)
ASSETS
Investments in real estate, at cost
Land $ 39,575 $ 36,495
Buildings and improvements 350,243 327,337
389,818 363,832
Less: accumulated depreciation (49,818 ) (44,556 )
Investments in real estate, net 340,000 319,276
Cash and cash equivalents 43,959 40,952
Restricted cash held in escrows 10,678 3,914
Loans receivable, net 123,872 114,333
Accounts receivable, net of allowances
of $397 and
$639, respectively 19,261 16,140
Securities carried at fair value 34,079 28,856
Loan securities carried at fair value 5,385 5,309
Preferred equity investments 5,500 5,520
Equity investments 146,221 162,142
Lease intangibles, net 34,678 36,305
Deferred financing costs, net 1,081 1,180
Assets held for sale 6 6
TOTAL ASSETS $ 764,720 $ 733,933
LIABILITIES
Mortgage loans payable $ 229,891 $ 230,940
Non-recourse secured financings 29,150 29,150
Revolving line of credit - 40,000
Accounts payable and accrued
liabilities 16,696 16,174
Dividends payable 5,373 5,369
Deferred income 1,010 502
Below market lease intangibles, net 2,602 2,962
TOTAL LIABILITIES 284,722 325,097
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