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Press release from Business Wire

Government Properties Income Trust Announces 2013 Second Quarter Results

Wednesday, July 31, 2013

Government Properties Income Trust Announces 2013 Second Quarter Results

07:00 EDT Wednesday, July 31, 2013

NEWTON, Mass. (Business Wire) -- Government Properties Income Trust (NYSE: GOV) today announced its financial results for the quarter and six months ended June 30, 2013.

Results for the Quarter Ended June 30, 2013:

Normalized funds from operations, or Normalized FFO, for the quarter ended June 30, 2013 were $29.3 million, or $0.54 per share, compared to Normalized FFO for the quarter ended June 30, 2012 of $24.4 million, or $0.52 per share.

Net income was $15.2 million, or $0.28 per share, for the quarter ended June 30, 2013 compared to $12.0 million, or $0.25 per share, for the quarter ended June 30, 2012.

The weighted average number of common shares outstanding was 54.7 million and 47.1 million 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 $59.6 million, or $1.09 per share, compared to Normalized FFO for the six months ended June 30, 2012 of $49.5 million, or $1.05 per share.

Net income was $39.9 million, or $0.73 per share, for the six months ended June 30, 2013 compared to $25.0 million, or $0.53 per share, for the six months ended June 30, 2012. Net income for the six months ended June 30, 2013 includes a net gain on sale of properties from discontinued operations of $8.2 million, or $0.15 per share.

The weighted average number of common shares outstanding was 54.7 million and 47.1 million 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, 93.4% of GOV's rentable square feet was leased, compared to 92.6% leased as of June 30, 2012, and 92.8% leased as of March 31, 2013.

GOV entered into lease renewals for 236,700 rentable square feet and new leases for 77,827 rentable square feet during the quarter ended June 30, 2013 which had weighted average rental rates that were approximately 1.4% below prior rents for the same space or, in the case of space acquired vacant, rental rates at the date of acquisition. The weighted average lease term based on square feet for leases entered into during the second quarter of 2013 was 13.4 years. Commitments for tenant improvements, leasing commission costs and concessions for leases entered into during the quarter ended June 30, 2013 totaled approximately $5.2 million, or $1.23 per square foot per year of the lease term.

Recent Investment Activities:

In July 2013, GOV entered an agreement to acquire a warehouse property located in Chester, Virginia with 228,108 rentable square feet. This property is 100% leased to the U.S. Government and occupied by the United States Army. The contract price is $12.8 million, excluding acquisition costs. This pending acquisition is subject to GOV's satisfactory completion of diligence and other customary closing conditions; accordingly, GOV can provide no assurance that it will acquire this property or that the acquisition will not be delayed or that the terms will not change.

Conference Call:

On Wednesday, July 31, 2013, at 1:00 p.m. Eastern Time, David Blackman, President and Chief Operating Officer, and Mark Kleifges, Treasurer and Chief Financial Officer, will host a conference call to discuss the second quarter 2013 results.

The conference call telephone number is (877) 531-2987. Participants calling from outside the United States and Canada should dial (612) 332-0107. No pass code is necessary to access the call from either number. 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 August 7, 2013. To hear the replay, dial (320) 365-3844. The replay pass code is 296744.

A live audio webcast of the conference call will also be available in a listen only mode on GOV's website, which is located at www.govreit.com. Participants wanting to access the webcast should visit GOV's website about five minutes before the call. The archived webcast will be available for replay on GOV's website for about one week after the call. The transcription, recording and retransmission in any way of GOV's second quarter conference call are strictly prohibited without the prior written consent of GOV.

Supplemental Data:

A copy of GOV's Second Quarter 2013 Supplemental Operating and Financial Data is available for download at GOV's website, www.govreit.com. GOV's website is not incorporated as part of this press release.

Government Properties Income Trust is a real estate investment trust, or REIT, which owns properties located throughout the United States that are majority leased to the U.S. Government and other government tenants. As of June 30, 2013, GOV owned 82 properties with approximately 10.0 million rentable square feet. GOV is headquartered in Newton, Massachusetts.

Please see the following pages for a more detailed statement of GOV's operating results and financial condition and for an explanation of GOV's calculation of FFO and Normalized FFO.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER GOV USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS, GOV IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON GOV'S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. GOV'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:

-- THIS PRESS RELEASE STATES THAT GOV HAS ENTERED AN AGREEMENT TO PURCHASE A PROPERTY. THIS TRANSACTION IS SUBJECT TO GOV'S SATISFACTORY COMPLETION OF DILIGENCE AND OTHER CUSTOMARY CLOSING CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE TRANSACTIONS. THESE CONDITIONS MAY NOT BE MET. AS A RESULT, THIS TRANSACTION MAY NOT OCCUR, MAY BE DELAYED OR ITS TERMS MAY CHANGE.

THE INFORMATION CONTAINED IN GOV'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING UNDER “RISK FACTORS” IN GOV'S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE GOV'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN ITS FORWARD LOOKING STATEMENTS. GOV'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE ON ITS WEBSITE AT WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON GOV'S FORWARD LOOKING STATEMENTS.

EXCEPT AS REQUIRED BY LAW, GOV DOES NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

 
GOVERNMENT PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME, FUNDS FROM OPERATIONS AND
NORMALIZED FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
             
Three Months Ended June 30, Six Months Ended June 30,
2013 2012 2013 2012
 
Rental income $ 57,261 $ 49,808 $ 114,939 $ 99,805
 
Expenses:
Real estate taxes 6,648 5,899 13,151 11,378
Utility expenses 3,993 3,793 7,980 7,524
Other operating expenses 10,016 9,232 19,594 17,999
Depreciation and amortization 13,972 11,995 27,668 23,905
Acquisition related costs 105 245 139 294
General and administrative   3,299   2,680   6,548   5,682
Total expenses   38,033   33,844   75,080   66,782
 
Operating income 19,228 15,964 39,859 33,023
 
Interest and other income 5 6 16 14
Interest expense (including net amortization of debt premiums and deferred financing fees of $332, $335, $663 and $659, respectively)
(4,065) (4,096) (8,212) (8,119)
Equity in earnings of an investee   79   76   155   121
Income from continuing operations before income tax expense 15,247 11,950 31,818 25,039
 
Income tax expense   (43)   (44)   (86)   (89)
Net income from continuing operations 15,204 11,906 31,732 24,950
Discontinued operations:
Income from discontinued operations - 48 30 63

Net gain on sale of properties from discontinued operations

  -   - 8,168   -
Net income $ 15,204 $ 11,954 $ 39,930 $ 25,013
 
Calculation of Funds from Operations (FFO) and Normalized FFO:(1)
Net income $ 15,204 $ 11,954 $ 39,930 $ 25,013
Plus: depreciation and amortization from continuing operations 13,972 11,995 27,668 23,905
Plus: depreciation and amortization from discontinued operations - 158 45 320
Less: net gain on sale of properties from discontinued operations   -   - (8,168)   -
FFO 29,176 24,107 59,475 49,238
Plus: acquisition related costs   105   245   139   294
Normalized FFO $ 29,281 $ 24,352 $ 59,614 $ 49,532
 
Weighted average common shares outstanding   54,669   47,098   54,657   47,075
 
Per common share:
Income from continuing operations $ 0.28 $ 0.25 $ 0.58 $ 0.53
Income from discontinued operations $ - $ - $ 0.15 $ -
Net income $ 0.28 $ 0.25 $ 0.73 $ 0.53
FFO $ 0.53 $ 0.51 $ 1.09 $ 1.05
Normalized FFO $ 0.54 $ 0.52 $ 1.09 $ 1.05
 

(1) GOV 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, excluding any gain or loss on sale of properties, as well as other adjustments currently not applicable to GOV. GOV's calculation of Normalized FFO differs from NAREIT's definition of FFO because GOV excludes acquisition related costs. GOV 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. GOV 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 GOV's operating performance between periods and between GOV and other REITs. FFO and Normalized FFO are among the factors considered by GOV's Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain GOV's status as a REIT, limitations in its revolving credit facility and term loan agreements, the availability of debt and equity capital to GOV, GOV's expectation of its future capital requirements and operating performance, and its 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 GOV's financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of GOV's needs. GOV believes that FFO and Normalized FFO may facilitate an understanding of its 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 GOV'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 GOV does.

 
GOVERNMENT PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
      June 30,
2013
    December 31,
2012

ASSETS

 
Real estate properties:
Land $ 243,584 $ 243,611
Buildings and improvements   1,283,094   1,279,343
1,526,678 1,522,954
Accumulated depreciation   (190,581)   (175,052)
1,336,097 1,347,902
 
Assets of discontinued operations - 10,278
Acquired real estate leases, net 132,233 144,401
Cash and cash equivalents 3,119 5,255
Restricted cash 1,736 1,553
Rents receivable, net 30,812 28,997
Deferred leasing costs, net 9,191 7,661
Deferred financing costs, net 4,822 5,718
Other assets, net   9,194   10,369
Total assets $ 1,527,204 $ 1,562,134
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
Unsecured revolving credit facility $ 25,000 $ 49,500
Unsecured term loan 350,000 350,000
Mortgage notes payable 91,939 93,127
Liabilities of discontinued operations - 102
Accounts payable and accrued expenses 18,927 19,106
Due to related persons 2,849 3,719
Assumed real estate lease obligations, net   17,370   19,129
Total liabilities   506,085   534,683
 
Commitments and contingencies
 
Shareholders' equity:
Common shares of beneficial interest, $.01 par value:
70,000,000 shares authorized, 54,674,118 and 54,643,888 shares issued and outstanding, respectively
547 547
Additional paid in capital 1,104,803 1,103,982
Cumulative net income 177,223 137,293
Cumulative other comprehensive income 18 99
Cumulative common distributions   (261,472)   (214,470)
Total shareholders' equity   1,021,119   1,027,451
 
Total liabilities and shareholders' equity $ 1,527,204 $ 1,562,134
 

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.

Government Properties Income Trust
Timothy A. Bonang, 617-219-1440
Vice President, Investor Relations
or
Elisabeth Olmsted, 617-219-1440
Manager, Investor Relations

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