AmREIT : Reports Third Quarter Results and Declares December 2014 Dividend

AmREIT, Inc. (NYSE:AMRE) (“AmREIT” or the “Company”) today announced financial results for the third quarter ended September 30, 2014 and declared dividends for the fourth quarter ending December 31, 2014.

Third Quarter and Year To Date Highlights:

Financial Results

• Core Funds from Operations ("Core FFO") available to common stockholders for the third quarter of 2014 was $5.0 million, or $0.26 per share, compared to $4.5 million, or $0.24 per share, for the comparable period in 2013. For the nine months ended September 30, 2014, Core FFO was $14.2 million, or $0.72 per share, compared to $12.9 million, or $0.76 per share, for the comparable period in 2013. Weighted average shares outstanding for the three and nine months ended September 30, 2014, were 19.69 and 19.67 million, respectively, compared to 18.92 and 17.08 million, respectively, for the same period in 2013.
• FFO available to common stockholders for the third quarter of 2014 was $4.4 million, or $0.22 per share, compared to $4.8 million, or $0.26 per share, for the comparable period in 2013. For the nine months ended September 30, 2014, FFO was $13.4 million, or $0.68 per share, compared to $13.0 million or $0.76 per share for the comparable nine month period in 2013. Included in FFO for the three and nine months ended September 30, 2014 was $102,000 and $326,000, respectively of acquisition costs related to the acquisitions of the Lantern Lane and Tuxedo Festival shopping centers and our acquisition of town house units within the Inverness Townhomes. Included in FFO for the three months ended September 30, 2013 was $171,000 of acquisitions costs related to the acquisition of the Woodlake Square shopping center. Included in FFO for the nine months ended September 30, 2013 was $297,000 of acquisition costs related to the acquisitions of the Fountain Oaks and Woodlake Square shopping centers as well as $164,000 of acquisition costs related to the MacArthur Park joint venture with Goldman Sachs.
• Net income available to common stockholders for the third quarter of 2014 was $882,000, or $0.04 per share, compared to $1.3 million, or $0.06 per share, for the same period in 2013. For the nine months ended September 30, 2014, net income was $3.2 million, or $0.15 per share, compared to $10.6 million, or $0.62 per share for the comparable nine month period in 2013. Included in net income for the nine months ended September 30, 2013 was a $7.7 million gain related to the sale of MacArthur Park and Pads into the joint venture with Goldman Sachs.

FFO and Core FFO are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of FFO and Core FFO to net income are attached to this press release.

Portfolio Results

• During the third quarter of 2013, AmREIT began the process of terminating leases or relocating tenants occupying a portion of its Uptown Park property known as the “Baker Site,” and its Courtyard at Post Oak property at Post Oak and San Felipe in Houston, in order to prepare those sites for vertical re-development. In the third quarter of 2014, excluding redevelopment properties (Uptown Park and Courtyard on Post Oak), same-store net operating income (“NOI”) increased 3.9% over the same period in the prior year. For the nine months ended September 30, 2014, same-store NOI increased 3.5% over the same period in the prior year. Including those two redevelopment properties, same-store NOI increased 1.6% over the same three month period in the prior year and increased 1.3% over the same nine month period in the prior year. While the Company’s same-store NOI growth rate in the short term has been negatively affected by redevelopments, AmREIT believes that the re-development of these sites will provide longer term same-store NOI growth.
• Portfolio occupancy as of September 30, 2014, was 94.5%, which was up 0.30% when compared to portfolio occupancy of 94.2% as of December 31, 2013. On a leased basis, which includes leases that have been executed but where rent has not yet commenced, the portfolio was 95.4% leased as of September 30, 2014, as compared to 94.8% as of December 31, 2013. The Company anticipates rent commencement on these signed leases over the next 90 days.
• During the third quarter of 2014, AmREIT signed 21 leases for 36,223 square feet of GLA, including both new and renewal leases. Of these, 14 leases for 17,482 square feet were renewals or replacements of expiring leases that were deemed to be comparable leases. Cash leasing spreads, which is the new leasing rate per square foot compared to the expiring leasing rate per square foot on comparable leases, increased 16.1%. On a GAAP basis, which includes the effects of straight-line rent, leasing spreads increased 22.1%.
• For the nine months ended September 30, 2014, AmREIT signed 67 leases for 181,186 square feet of GLA, including both new and renewal leases. Of these, 51 leases for 113,530 square feet were renewals or replacements of expiring leases that were deemed to be comparable leases. Cash leasing spreads, which is the new leasing rate per square foot compared to the expiring leasing rate per square foot on comparable leases, increased 15.4%. On a GAAP basis, which includes the effects of straight-line rent, leasing spreads increased 21.9%.

NOI and same-store NOI are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of NOI and same-store NOI to net income are attached to this press release.

Acquisitions

• On June 24, 2014, AmREIT acquired Lantern Lane Shopping Center, an 81,567 square foot Fresh Market and CVS/Pharmacy anchored shopping center in the Memorial Villages submarket of Houston, Texas from one of its affiliates, AmREIT Monthly Income & Growth Fund III, Ltd. Average household incomes within a one-mile radius of Lantern Lane are over $163,000, and there are approximately 62,000 households and over 95,800 daytime employees within a three-mile radius of the property. Lantern Lane was acquired for approximately $22.7 million, is unencumbered, and was funded with cash on hand and borrowings under AmREIT’s unsecured revolving credit facility.
• On August 22, 2014, AmREIT acquired the Tuxedo Festival shopping center for $27.9 million. Tuxedo Festival is located at the corner of Roswell Road and Piedmont Road in Atlanta, Georgia and has 54,310 square feet of GLA on approximately 4 acres of land. Tuxedo Festival was acquired with a combination of cash on hand and borrowings of $20.9 million under AmREIT’s unsecured revolving credit facility. Average household incomes within a one-mile radius of Tuxedo Festival are over $137,000 and there are approximately 48,000 households and over 109,000 daytime employment within a three-mile radius of the property.

Redevelopment Initiatives

• Uptown Park – The Palazzi – We are pursuing a residential development project on the 1.118 acres at the northwest portion of the Uptown Park property. We are calling this project The Palazzi at Uptown Park, with an expected 16-story, 238-unit luxury multi-family rental building over ground-level retail space and structured parking. We have returned to the original vision of developing a lower profile residential project by expanding the building’s footprint. This increased footprint will allow for over 14,000 square feet of ground-level retail space, giving the north end of Uptown Park a more prominent presence that is essential to long-term value creation in projects of this kind. Total project costs are estimated to be approximately $134 million (including allocated land cost) and construction is anticipated to begin in the second half of 2015. A rendering of our master plan and The Palazzi at Uptown Park can be found in our corporate presentation.
• 1670 Post Oak - In August 2014, AmREIT and Lynd Development executed an omnibus agreement that provides for a Lynd-controlled venture to develop a 40-story, 350-unit high-rise multi-family project over ground-floor retail with structured parking. AmREIT is anticipated to retain ownership of the 1.58 acres at the northwest corner of Post Oak and San Felipe, known as The Courtyard at Post Oak, and ground lease the site to the anticipated venture. AmREIT will own a condominium interest in the retail and the supporting parking. Lynd and AmREIT will jointly own the multi-family portion of the project in percentages to be determined based on the financing structure. The terms of the ground lease have been negotiated, and we expect it to be finalized by the end of this year. Total project costs are estimated to be approximately $146 million (excluding land cost) and construction could begin within the next 12 months.
• 800 Post Oak – AmREIT currently owns a 20.3% ownership interest in the Inverness Townhomes which we acquired in the second quarter of 2014. During the third quarter, AmREIT entered into a joint venture agreement with Trammell Crow Company which provides for the joint venture to purchase the entire Inverness Townhome site and to develop approximately 591,000 square feet of office space and 19,000 square feet of retail space with structured parking. The site is approximately 2.9 acres and is located at the northwest corner of Post Oak Blvd and Uptown Park Blvd. AmREIT and Trammel Crow Company will each be 5% co-developer members and Principal Financial Group will be a 90% Investor Member. Total project costs are estimated to be in excess of $280 million. The joint venture anticipates closing on the land during the first quarter of 2015 and construction could begin within the next 12-15 months.
• The Tower at Uptown Park - We are in exclusive negotiations with a four-star hotel flag and a hotel development partner for a mixed use development project at the southeast corner of Uptown Park, located at the corner of Loop 610 and Post Oak Blvd. The current development plan contemplates a 37-story mixed-use project including a 310-room hotel, 236–unit luxury multi-family rental project over 18,000 square feet of retail space and structured parking. Total project costs are estimated to be approximately $200 million. The project is anticipated to be developed on a ground lease (underlying fee owned by AmREIT) which will have a 99-year term with periodic rent escalations. AmREIT will own the retail and will have an estimated 9.5% equity interest in the vertical improvements. Construction could begin within the next 12-15 months.
• Fountain Oaks Kroger Expansion - In February 2014, AmREIT was informed by Kroger, Inc. that Kroger had approved a 30,000 square foot expansion of its existing store at AmREIT’s Fountain Oaks property. On June 30, 2014, the City of Sandy Springs indicated that the anticipated Kroger expansion would be permitted. Kroger intends to expand the existing 60,000 square foot store by approximately 30,000 square feet to 90,000 square feet with a contribution from AmREIT of $6.7 million. AmREIT will receive an 8.25% return on the incremental capital and will receive a new 20-year lease with Kroger. Construction is expected to begin within the next 12 months.

Advised Funds Activity

• AmREIT Monthly Income & Growth Fund IV, Ltd. (MIG IV) has entered into a development partnership with The Dinerstein Group to develop a 374 unit luxury high rise multifamily rental project consisting of 22 stories of residential over a 5 story parking garage. Estimated costs are $101 million and the project is anticipated to commence construction in late 2014 or early 2015. MIG IV has a 24.402% limited partner interest in the development joint venture.

Dividends

• AmREIT also announced today that the Company's Board of Directors has approved a regular quarterly cash dividend of $0.20 per share. The dividend will be paid on December 31, 2014 to all common stockholders of record at the close of business on December 19, 2014.

Pending Sale to EDENS

On October 31, 2014, AmREIT announced that it has entered into a definitive agreement with Edens Investment Trust (“EDENS”) under which EDENS will acquire AmREIT for $26.55 per share in cash. The transaction is subject to approval by AmREIT stockholders, regulatory approval, and customary closing conditions, and is expected to close in the first quarter of 2015.

“This transaction is the culmination of a robust process consistent with the exploration of strategic alternatives we announced in July, and represents a successful outcome for our public stockholders who will receive full and immediate value for their shares,” said Kerr Taylor, Chairman and Chief Executive Officer.

2014 Full Year Guidance

AmREIT is not providing earnings guidance for the fourth quarter or full year 2014 nor is it hosting a conference call to discuss its third quarter results.

Supplemental Financial Information

Further details regarding AmREIT’s results of operations, properties, and tenants are attached to this press release and can be accessed at the Company’s website at www.amreit.com.

Non-GAAP Financial Disclosure

This press release contains certain non-GAAP financial measures that management believes are useful in evaluating an equity REIT's performance. AmREIT's definitions and calculations of non-GAAP financial measures may differ from those used by other equity REITs, and therefore may not be comparable. The non-GAAP financial measures should not be considered as an alternative to net income as an indication of our operating results, or to net cash provided by operating activities as a measure of our liquidity.

Funds From Operations (FFO)

AmREIT considers FFO to be an appropriate measure of the operating performance of an equity REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) determined in accordance with GAAP, excluding gains or losses from sales of property and impairment charges on properties held for investment, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. NAREIT recommends that extraordinary items not be considered in arriving at FFO. AmREIT calculates FFO in accordance with this definition.

Most industry analysts and equity REITs, including AmREIT, consider FFO to be an appropriate supplemental non-GAAP financial measure of operating performance because, by excluding gains or losses from sales of property and impairment charges on properties held for investment and by excluding real estate related depreciation and amortization, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself.

Additionally, AmREIT considers Core FFO, which adjusts FFO for items that do not reflect ongoing operations, such as acquisition expenses, non-recurring intangible asset write-offs and recoveries, expenses recognized for the exploration of strategic alternatives, expensed issuance costs and gains on the sale of real estate held for resale, to be a meaningful performance measurement. The computation of FFO in accordance with NAREIT’s definition includes certain items such as acquisition costs, issuance costs, non-recurring asset write-offs and recoveries and gains on sale of real estate held for resale that management believes are not indicative of AmREIT’s ongoing results and therefore affect the comparability of our period-over-period performance with the performances of similar REITs. Accordingly, management believes that it is helpful to investors to adjust FFO for such items. There can be no assurance that FFO or Core FFO presented by AmREIT is comparable to similarly titled measures of other REITs. FFO and Core FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.

Net Operating Income (NOI)

AmREIT believes that NOI is a useful measure of its operating performance. AmREIT defines NOI as operating revenues (rental income, tenant recovery income, percentage rent, excluding straight-line rental income and amortization of acquired above- and below-market rents) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line rent bad debt expense). Other REITs may use different methodologies for calculating NOI, and accordingly, AmREIT’s NOI may not be comparable to other REITs.

AmREIT believes that reporting NOI provides an operating perspective not immediately apparent from GAAP operating income, GAAP net income, FFO or Core FFO. AmREIT uses NOI to evaluate its performance on a property-by-property basis because NOI allows it to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on its operating results. However, NOI should only be used as a supplemental measure of AmREIT’s financial performance.

About AmREIT

AmREIT, The Irreplaceable Corner™ Company, is an equity real estate investment trust that specializes in the acquisition, operation, redevelopment, and vertical densification of retail and mixed-use properties located in highly affluent, urban submarkets. The company’s existing properties are strategically concentrated in five of the top metropolitan markets in the southern U.S.: Houston, Dallas, San Antonio, Austin and Atlanta. The company is internally-advised and fully integrated with significant local market experience and relationships. AmREIT's portfolio was 95.4% leased as of September 30, 2014, and its top five tenants include Kroger, CVS/Pharmacy, Landry's, H-E-B, and Safeway. AmREIT also has preferential access to a substantial acquisition pipeline through its value-add joint ventures, which often include major institutional investors who partner with the company as local experts. For more information, please visit www.amreit.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including statements related to redevelopment projects and NOI growth. These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases, which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Many factors may materially affect the actual results, including demand for our properties, changes in rental and occupancy rates, changes in property operating costs, interest rate fluctuations, changes in plans and timing related to potential development projects and the anticipated costs and potential revenues associated therewith, and changes in local and general economic conditions. While forward-looking statements reflect AmREIT’s good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Furthermore, AmREIT disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact AmREIT’s future results, performance or transactions, see the section entitled "Risk Factors" in AmREIT’s Annual Report on Form 10-K for the year ended December 31, 2013, and other risks described in documents subsequently filed by AmREIT from time to time with the Securities and Exchange Commission.

Additional Information and Where to Find It

This communication is being made in respect of the proposed merger transaction involving AmREIT and EDENS. In connection with the transaction, AmREIT will file a proxy statement with the SEC. Stockholders are urged to read the proxy statement carefully and in its entirety when it becomes available because it will contain important information about the proposed transaction. The final proxy statement will be mailed to AmREIT stockholders. In addition, the proxy statement and other documents will be available free of charge at the SEC’s Internet Web site, www.sec.gov. When available, the proxy statement and other pertinent documents also may be obtained for free at AmREIT’s Web site, www.amreit.com, or by contacting Chad C. Braun, Chief Operating Officer and Chief Financial Officer of AmREIT, telephone (713) 850-1400.

AmREIT and its directors and officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect to the proposed transactions. Information regarding AmREIT’s directors and executive officers is detailed in its proxy statements and annual reports on Form 10-K and quarterly reports on Form 10-Q, previously filed with the SEC, and the proxy statement relating to the proposed transactions, when it becomes available.

Investor Contact

For more information, call Chad Braun, Chief Operating Officer and Chief Financial Officer of AmREIT, at (713) 850-1400. AmREIT is online at www.amreit.com.

Redevelopment Table:

There is no guaranty that we will ultimately complete any or all of these opportunities, that the expected return on investment or projected costs will be the amounts shown or that stabilization will occur as anticipated. Such amounts and dates represent management's best estimate, which is based on current information and may change over time.