COLE REAL ESTATE INVESTMENTS INC 
By PHOENIX, Aug. 5, 2013 /PRNewswire/ -- Cole Real Estate Investments, Inc. (NYSE: COLE), a market-leading net lease REIT, today announced record financial results for the second quarter ended June 30, 2013.
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Second Quarter 2013 Consolidated Highlights
-- NYSE Listing - Shares began trading on the NYSE on June 20, 2013 and
received early inclusion in the MSCI U.S. REIT Index (RMS/RMZ) on July
3, 2013
-- Record Operating Results - Reported consolidated revenue of $250.3
million and net income of $29.1 million, a 91% and 26% year-over-year
increase from the second quarter of 2012, respectively
-- Record AFFO - Reported consolidated AFFO of $0.23 per diluted share, a
44% year-over-year increase from the second quarter of 2012, which
includes $0.03 per diluted share from the private capital management
segment
-- Accretive Acquisitions - $266 million was acquired in the second quarter
2013 with a weighted average annual lease yield of 7.7% and $1.3 billion
of assets were acquired over the past four quarters with a weighted
average annual lease yield of 7.8%
-- Robust Private Capital Flows - $508 million of capital was raised on
behalf of our managed REITs in the second quarter 2013 and also achieved
a record-breaking month of $509 million of capital raised during July
-- Increased Guidance - 10% increase in second half AFFO guidance to the
new range of $0.42 to $0.47 per diluted share
-- Increased Dividends - Increased the annual distribution rate to $0.72
from $0.70 per share effective with the August dividend payable
September 3, 2013, which represents an 11% increase over the past two
quarters
-- Tender Offer - Commenced a modified "Dutch auction" tender offer to
purchase $250 million of shares currently scheduled to expire on August
8, 2013
-- Share Repurchase Program - Authorized to repurchase up to $250 million
of shares in the open market starting on the 11th business day following
completion of the tender offer
Real Estate Investment Segment Highlights
-- Revenue and net income of $167.6 million and $19.9 million, respectively
-- AFFO of $0.20 per diluted share, an increase of 25% over the second
quarter of 2012
-- Normalized EBITDA of $139.3 million, an increase of 27% over the second
quarter of 2012
-- Acquired six properties with a weighted average annual lease yield of
7.7% and generated an 18% net gain on five properties sold at a weighted
average annual lease yield of 7.5%
-- Increased the unsecured credit facility to $1.4 billion from $858
million, extended the term of the revolving loans to June 2017 and the
term loan to June 2018 and decreased the weighted average interest rate
to 2.9% from 3.0%
-- Total portfolio occupancy of 99.1%, investment grade tenancy of 55%, and
a weighted average remaining lease term of 12.2 years as of June 30,
2013
Private Capital Management Segment Highlights
-- Revenue and net income of $82.6 million and $9.2 million, respectively
-- AFFO of $0.03 per diluted share and Normalized EBITDA of $15.1 million
-- Structured $1.1 billion of real estate acquisitions and $422 million of
real estate financing on behalf of the managed REITs in the second
quarter 2013
-- Merger between Cole Credit Property Trust II, Inc. ("CCPT II") and
Spirit Realty Capital, Inc. (NYSE Ticker: SRC) completed on July 17,
2013
-- Cole Corporate Income Trust, Inc. ("CCIT") announced the close of its
offering on September 30, 2013 and CCIT's Board of Directors has
determined to begin the evaluation of potential strategies to provide
CCIT stockholders with liquidity
CEO Commentary
Marc Nemer, chief executive officer of Cole Real Estate Investments, stated, "We are pleased to report such positive financial performance in our first earnings release as a NYSE-listed company. We experienced record operating results in both our real estate portfolio and private capital management business representing a 44% year-over-year increase in AFFO per diluted share. Reflective of our proven ability to acquire accretive assets, we purchased $1.3 billion of properties over the past four quarters with a weighted average annual lease yield of 7.8%. Additionally, we are very pleased with the continued success of our private capital management business, Cole Capital(TM), which contributed over $15.0 million in Normalized EBITDA during the second quarter and has raised in excess of $1.0 billion of capital year-to-date through July 31, 2013 on behalf of our managed REITs."
Nemer continued, "Given such strong operating fundamentals, I'm also pleased to report that we have increased our 2013 second half AFFO guidance by 10% and have announced an additional increase in our annual distribution rate, which represents an 11% increase over the past two quarters. Further, our Board has authorized the repurchase up to $250 million of shares in the open market."
Nemer concluded, "We are one of the largest publicly-traded REITs in the net-lease sector and we believe we are well positioned to generate continued growth and returns for our shareholders. Our portfolio remains highly diversified by industry, tenancy and geography with portfolio occupancy of 99%, 55% investment grade tenancy and a 12.2-year weighted average remaining lease term."
Second Quarter 2013 Financial Results
Revenue
Consolidated revenue for the quarter ended June 30, 2013 increased 91% to $250.3 million, as compared to $131.4 million for the same quarter in 2012. This increase was due to an increase in revenue from the Real Estate Investment segment and the inclusion of revenue from the Private Capital Management segment, which was acquired on April 5, 2013.
Revenue for the Real Estate Investment segment for the quarter ended June 30, 2013 increased 28% to $167.6 million, as compared to $131.4 million for the same quarter in 2012. This increase was primarily due to a $1.0 billion increase in the average gross real estate assets net of gross intangible lease liabilities we owned, for the three months ended June 30, 2013, compared to the three months ended June 30, 2012. In addition, "same store" base rental revenue increased by 1.1% as compared to the year-ago quarter. Revenue for the Private Capital Management segment for the quarter ended June 30, 2013 was $82.6 million before reallowed fees and commissions.
Normalized EBITDA
Consolidated Normalized EBITDA increased 40% to $154.3 million for the quarter ended June 30, 2013, compared to $110.0 million for the same quarter in 2012. Normalized EBITDA for the Real Estate Investment segment increased 27% to $139.3 million for the quarter ended June 30, 2013, compared to $110.0 million for the year-ago quarter. Normalized EBITDA for the Private Capital Management segment was $15.0 million for the quarter ended June 30, 2013.
Net Income
Net income increased 26% to $29.1 million for the quarter ended June 30, 2013, compared to $23.1 million for the same quarter in 2012.
FFO and FFO per diluted share
Funds from Operations (FFO) for the quarter ended June 30, 2013, increased 17% to $76.2 million, or $0.16 per diluted share, as compared to $65.0 million, or $0.14 per diluted share, for the same quarter in 2012.
AFFO and AFFO per diluted share
Adjusted Funds from Operations (AFFO) for the quarter ended June 30, 2013, increased 44% to $110.8 million, or $0.23 per diluted share, as compared to $76.8 million, or $0.16 per diluted share, for the same quarter in 2012. AFFO for the Real Estate Investment segment increased 25% to $95.7 million, or $0.20 per diluted share for the quarter ended June 30, 2013, compared to $76.8 million, or $0.16 per diluted share, for the year-ago quarter. AFFO for the Private Capital Management segment was $15.1 million, or $0.03 per diluted share, for the quarter ended June 30, 2013.
Balance Sheet
As of June 30, 2013, Cole had total assets of $7.9 billion, unrestricted cash and cash equivalents of $167.5 million, total debt of $3.5 billion and $566.2 million available for borrowing under its senior unsecured credit facility. The leverage ratio of total debt to gross real estate and related assets was 47% and net debt, which represents total debt less cash, to annualized Normalized EBITDA was 5.4x.
During the second quarter, the Company increased the size of its senior unsecured credit facility to $1.4 billion from $858 million, extended the term of the revolving loans to June 2017 and the term loan to June 2018, while also decreasing the weighted average interest rate to 2.9% from 3.0%.
Tender Offer
On June 20, 2013, Cole commenced a modified "Dutch auction" tender offer to purchase for cash up to $250 million of shares of common stock on the terms and subject to the conditions described in its Offer to Purchase of that date. The tender offer and withdrawal rights will expire at 5:00 p.m. Eastern on August 8, 2013.
Increased Distributions
On August 2, 2013, Cole's Board of Directors increased the amounts of the previously declared monthly dividends for August and September to $0.06 per share, representing an increase in the annual distribution rate to $0.72 from $0.70 per share. As previously announced, these dividends will be paid to stockholders of record as of August 30 and September 30, 2013, respectively, and the payments dates will be September 3 and October 1, 2013, respectively. The Board also declared a monthly dividend in the amount of $0.06 per share for the month of October 2013, which will be payable on November 1, 2013 to stockholders of record as of October 31, 2013.
Increased Second Half 2013 Guidance
The Company increased its guidance for the second half, as follows:
-- Total revenue guidance increased by 18% to the range of $557 million to
$585 million and is comprised of:
-- Real Estate Investment segment revenue in the range of $327 million
to $335 million
-- Private Capital Management segment revenue (on a gross basis before
reallowed fees and commissions) in the range of $230 million to $250
million
-- Normalized EBITDA guidance increased by 11% to the range of $297 million
to $324 million
-- AFFO per diluted share guidance increased by 10% to the range of $0.42
to $0.47
Business Segment Descriptions
Real Estate Investment
As of June 30, 2013, the Company owned 1,014 properties in 48 states with 44.0 million rentable square feet, including properties owned through Consolidated Joint Ventures. Property types owned include single and multi-tenant retail, single tenant office and single tenant industrial. The Company also owned 21 CMBS bonds and three notes receivable and had interests in 12 properties with 2.3 million rentable square feet of commercial and retail space through Unconsolidated Joint Ventures. Total gross asset value of the portfolio was $7.5 billion.
During the second quarter of 2013, the Company acquired six properties for an aggregate purchase price of $266 million, which included one property acquired through a joint venture arrangement.
Also during the second quarter, the Company sold five properties for an aggregate sale price of $31.5 million, recognizing a $4.9 million gain on sale during the second quarter of 2013.
Private Capital Management
As of June 30, 2013, the Company through subsidiaries, collectively known as Cole Capital((TM)), was the advisor to five publicly registered, non-listed REITs ("managed REITs"), for which it provides capital raising, acquisition, financing, leasing, asset management and shareholder services. As of June 30, 2013 the managed REITs, including CCPT II, owned 1,096 properties, with 37.0 million rentable square feet of single and multi-tenant retail and commercial space, representing $6.5 billion in gross real estate assets. Of the managed REIT properties, CCPT II owned 747 properties with 21.1 million square feet, representing $3.5 billion in gross real estate assets. On July 17, 2013, the merger of CCPT II and Spirit Realty Capital, Inc. was completed.
Webcast Info
Cole Real Estate Investments, Inc. will host a conference call and webcast to review second quarter 2013 results today, Monday, August 5, 2013, at 10:00 a.m. Pacific/1:00 p.m. Eastern. To participate in the live broadcast of the call, please visit the Investor Relations section of the Company's website at www.colereit.com. A transcript of the broadcast will be available within 48 hours and an online archive of the broadcast will be posted on Cole's website at www.colereit.com approximately two hours after the live call ends.
Supplemental Information
The Company's supplemental financial information for the second quarter ended June 30, 2013, and the Company's Form 10-Q report for the same period, were filed on August 5, 2013 and are available on the Company's website at www.colereit.com.
About Cole Real Estate Investments, Inc.
Cole Real Estate Investments, Inc. (NYSE: COLE) is an industry-leading net-lease REIT that acquires and manages real estate assets leased long-term to a high-quality, diversified tenant base. Since 1979, Cole has leveraged its deep relationships, efficiencies of scale and rigorous operational processes to acquire and actively manage retail, office and industrial properties. As of June 30, 2013, Cole Real Estate Investments had total assets of $7.9 billion, which included 1,014 properties representing approximately 44.0 million square feet of commercial real estate in 48 states. Cole's private capital management business, Cole Capital(TM), is a leading sponsor of non-listed REITs. According to industry reports of Robert A. Stanger & Co., Cole is the only non-listed REIT sponsor to rank in the top three for annual capital raised each of the past five years.
Forward-Looking Statements
Certain statements in this press release may be considered forward-looking statements that reflect the current views of Cole Real Estate Investments and Cole's management with respect to future events. Forward-looking statements about Cole's plans, strategies and prospects are based on current information, estimates and projections; they are subject to risks and uncertainties, as well as known and unknown risks, including those included in Cole's reports filed with the SEC, which could cause actual results to differ materially from those projected or anticipated. Forward-looking statements are not intended to be a guarantee of any event, action, result, outcome or performance in future periods. Cole does not intend or assume any obligation to update any forward-looking statements, and the reader is cautioned not to place undue reliance on them.
Non-GAAP Financial Measures
FFO and AFFO
Funds From Operations ("FFO") is a non-GAAP financial performance measure defined by the National Association of Real Estate Investment Trusts ("NAREIT") and widely recognized by investors and analysts as one measure of operating performance of a real estate company. The FFO calculation excludes items such as real estate depreciation and amortization, gains and losses on the sale of depreciable real estate and impairments of depreciable real estate. Depreciation and amortization as applied in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, it is management's view, and the Company believes the view of many industry investors and analysts, that the presentation of operating results for real estate companies by using the historical cost accounting method alone is insufficient. In addition, FFO excludes gains and losses from the sale of depreciable real estate and impairment charges on depreciable real estate, which the company believes provides management and investors with a helpful additional measure of the performance of its real estate portfolio, as it allows for comparisons, year to year, that reflect the impact on operations from trends in items such as occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. Cole computes FFO in accordance with NAREIT's definition.
In addition to FFO, the company uses Adjusted Funds From Operations ("AFFO") as a non-GAAP supplemental financial performance measure to evaluate the operating performance of its real estate portfolio. AFFO, as defined by the Company, excludes from FFO merger, acquisition, and listing related costs, amortization and write off of deferred financing costs, straight-line rent adjustments, above and below market lease intangibles amortization, realized loss on derivatives and debt prepayment fees, gain on sale of marketable securities, other amortization or accretion, other gains, adjustments for discontinued operations and our proportionate share of adjustments for unconsolidated joint ventures, all of which are required to be expensed or recorded as additions to revenue or other income in accordance with GAAP. In evaluating the performance of Cole's portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments' revenues and expenses. Management believes that excluding the items noted above from AFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of the Company's portfolio over time, including after the Company ceases to acquire properties on a frequent and regular basis. AFFO also allows for a comparison of the performance of Cole's portfolio with other REITs that are not currently engaging in acquisitions and mergers, as well as a comparison of its performance with that of other REITs, as AFFO, or an equivalent measure, is routinely reported by REITs, and management believes often used by analysts and investors for comparison purposes.
For all of these reasons, we believe FFO and AFFO, in addition to net income and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which Cole's management evaluates the performance of its real estate portfolio over time. However, not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net income or to cash flows from operating activities, and are not intended to be used as a liquidity measure indicative of cash flow available to fund the Company's cash needs.
EBITDA and Normalized EBITDA
Normalized EBITDA as disclosed represents EBITDA, or earnings before interest, taxes, depreciation and amortization, modified to include other adjustments to GAAP net income for merger, acquisition, and listing related expenses which are considered non-recurring and gain/losses in real estate and derivatives which are not considered fundamental attributes of our business plans and do not affect our overall long-term operating performance. We exclude these items from Normalized EBITDA as they are not the primary drivers in our decision making process. In addition, our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short term fluctuations in net income but have no impact on cash flows. We believe that Normalized EBITDA is a useful supplemental measure to investors and analysts for assessing the performance of our business segments, although it does not represent net income that is computed in accordance with GAAP. Therefore, Normalized EBITDA should not be considered as an alternative to net income or as an indicator of our financial performance. We use Normalized EBITDA as one measure of our operating performance when we formulate corporate goals and evaluate the effectiveness of our strategies. Normalized EBITDA may not be comparable to similarly titled measures of other companies.
Investment Grade Tenancy
Investment grade tenancy includes credit ratings based on annualized rental revenue from tenants with credit ratings of BBB- or higher. Tenant credit rating may reflect the credit rating of the parent company or a guarantor. Credit ratings exclude unconsolidated joint ventures, CMBS, and Secured notes receivable. 42% of Cole's annual rent is derived from tenants rated investment grade and another 13% from tenants with an implied rating of investment grade. Moody's Credit Edge was used to determine implied credit rating for public non-rated tenants. Moody's KMV was used to determine implied credit rating for private non-rated tenants. Implied credit rating data is as of July 29, 2013.
Important Notice
This press release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities of the Company. The tender offer is made only pursuant to the Offer to Purchase, Letter of Transmittal and related materials that the Company distributed to its stockholders and filed with the SEC, as they may be amended from time to time. The full details of the tender offer, including complete instructions on how to tender shares of Common Stock, are included in such materials. Stockholders are urged to carefully read the Offer to Purchase, the Letter of Transmittal and other related materials as they may be amended from time to time because they contain important information, including the terms and conditions of the tender offer.
Stockholders may obtain free copies of the Offer to Purchase, the Letter of Transmittal and other related materials that the Company files with the SEC at the SEC's website at http://www.sec.gov or by calling D.F. King & Co., Inc., the information agent for the Tender Offer, at (800) 659-6590 (Toll Free) or (212) 269-5550 (Collect). Questions and requests for assistance by retail stockholders may be directed to D.F. King & Co., Inc. at the numbers above. As described in the Offer to Purchase, questions and requests for assistance by institutional stockholders may be directed to the dealer managers for the Tender Offer, Goldman, Sachs & Co. or Lazard Freres & Co. LLC. In addition, copies of documents filed by the Company with the SEC will be available free of charge by directing a request to Cole Real Estate Investments, Inc., 2325 East Camelback Road, Suite 1100, Phoenix, Arizona 85016, Attention: Investor Relations.
COLE REAL ESTATE INVESTMENTS, INC.
(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 30, 2013 December 31, 2012
------------- -----------------
ASSETS
Investment in real estate assets:
Land $1,525,353 $1,488,525
Buildings and
improvements, less
accumulated
depreciation of
$249,446 and
$187,448,
respectively 4,365,738 4,218,182
Acquired intangible
lease assets, less
accumulated
amortization of
$160,308 and
$121,894,
respectively 853,137 859,985
------- -------
Total investment in
real estate assets,
net 6,744,228 6,566,692
Investment in notes
receivable, net 90,464 90,358
Investment in
marketable securities 10,499 51,103
Investment in
marketable securities
pledged as collateral 257,518 266,098
Investment in
unconsolidated
entities 94,932 96,785
------ ------
Total investment in
real estate and
related assets, net 7,197,641 7,071,036
Assets related to real
estate held for sale,
net - 23,153
Cash and cash
equivalents 167,474 192,504
Restricted cash 25,502 18,444
Rents and tenant
receivables, less
allowance for
doubtful accounts of
$440 and $337,
respectively 97,956 79,569
Intangible assets,
prepaid expenses and
other assets, net 104,332 11,790
Deferred financing
costs, less
accumulated
amortization of
$16,248 and $23,105,
respectively 61,835 57,229
Goodwill 229,102 -
Leasehold improvements
and property and
equipment, net 21,295 -
Due from affiliates 8,036 -
Total assets $7,913,173 $7,453,725
========== ==========
LIABILITIES AND EQUITY
Notes payable and
other borrowings $3,501,428 $3,292,048
Accounts payable and
accrued expenses 58,115 42,756
Due to affiliates - 4,525
Acquired below market
lease intangibles,
less accumulated
amortization of
$21,303 and $16,389,
respectively 114,934 113,607
Distributions payable 28,501 26,399
Contingent
consideration 211,143 5,341
Derivative
liabilities, deferred
rent and other
liabilities 52,968 51,639
Total liabilities 3,967,089 3,536,315
--------- ---------
Commitments and contingencies
Redeemable common
stock - 234,578
--- -------
EQUITY:
Preferred stock, $0.01
par value; 10,000,000
shares authorized,
none issued and
outstanding - -
Common stock, $0.01
par value;
990,000,000 shares
authorized,
489,808,175 and
479,547,099 shares
issued and
outstanding,
respectively 4,898 4,795
Capital in excess of
par value 4,416,151 4,068,015
Accumulated
distributions in
excess of earnings (510,539) (416,886)
Accumulated other
comprehensive income 18,856 23,101
------ ------
Total stockholders'
equity 3,929,366 3,679,025
Noncontrolling
interests 16,718 3,807
------ -----
Total equity 3,946,084 3,682,832
--------- ---------
Total liabilities and
equity $7,913,173 $7,453,725
========== ==========
COLE REAL ESTATE INVESTMENTS, INC.
(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2013 2012 2013 2012
---- ---- ---- ----
Revenues:
Real estate investment
revenue $159,812 $124,910 $312,089 $234,066
Interest income on
real estate related
investments 7,837 6,452 15,785 10,241
Investment program
management revenue 82,643 - 82,643 -
Total revenue 250,292 131,362 410,517 244,307
------- ------- ------- -------
Expenses:
Reallowed fees and
commissions 38,962 - 38,962 -
General and
administrative
expenses 41,436 4,652 45,467 8,676
Merger related stock-
based compensation
expense 10,278 - 10,278 -
Property operating
expenses 17,507 11,543 33,129 21,298
Property and asset
management expenses 1,393 10,988 15,302 21,043
Merger and acquisition
related expenses 11,810 17,438 27,423 32,819
Depreciation and
amortization 56,393 38,269 104,110 71,540
Total operating
expenses 177,779 82,890 274,671 155,376
------- ------ ------- -------
Operating income 72,513 48,472 135,846 88,931
------ ------ ------- ------
Other income (expense):
Equity in income of
unconsolidated
entities 972 552 2,281 886
Other (expense) income (774) 675 (851) 3,992
Interest expense (48,938) (30,141) (88,007) (57,312)
------- ------- ------- -------
Total other expense (48,740) (28,914) (86,577) (52,434)
------- ------- ------- -------
Income from continuing
operations before
income taxes 23,773 19,558 49,269 36,497
Benefit from income
taxes 235 - 235 -
Income from continuing
operations 24,008 19,558 49,504 36,497
------ ------ ------ ------
Discontinued operations:
Income from
discontinued
operations 195 3,532 838 7,762
Gain on sale of real
estate assets 4,931 - 19,007 14,781
----- --- ------ ------
Total income from
discontinued
operations 5,126 3,532 19,845 22,543
----- ----- ------ ------
Net income 29,134 23,090 69,349 59,040
Net income (loss)
allocated to
noncontrolling
interests 111 (133) 215 (120)
--- ---- --- ----
Net income
attributable to the
Company $29,023 $23,223 $69,134 $59,160
======= ======= ======= =======
Basic earnings per share:
Income from continuing
operations $0.05 $0.04 $0.10 $0.08
Income from
discontinued
operations $0.01 $0.01 $0.04 $0.05
Net income
attributable to the
Company $0.06 $0.05 $0.14 $0.13
Diluted earnings per share:
Income from continuing
operations $0.05 $0.04 $0.10 $0.08
Income from
discontinued
operations $0.01 $0.01 $0.04 $0.05
Net income
attributable to the
Company $0.06 $0.05 $0.14 $0.13
Weighted average number of common shares outstanding:
Basic 487,915,368 473,159,051 484,396,906 470,033,648
Diluted 491,510,128 473,159,051 486,194,286 470,033,648
Distributions declared
per common share
issued $0.17 $0.16 $0.33 $0.31
Segment Reporting
The Company operates under two business segments -Real Estate Investment and Private Capital Management. The following table presents a summary of the financial results for each business
segment (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
---- ---- ---- ----
Real Estate Investment
Rental and other
property income $144,756 $114,317 $283,334 $214,359
Tenant reimbursement
income 15,056 10,593 28,755 19,707
Interest income on
notes receivable 1,936 1,476 3,859 2,848
Interest income on
marketable securities 5,901 4,976 11,926 7,393
Total real estate
investment revenue 167,649 131,362 327,874 244,307
------- ------- ------- -------
General and
administrative
expenses 12,757 4,652 16,788 8,676
Merger related stock-
based compensation
expense 10,278 - 10,278 -
Property operating
expenses 17,507 11,543 33,129 21,298
Property and asset
management expenses 1,393 10,988 15,302 21,043
Merger and acquisition
related expenses 11,810 17,438 27,423 32,819
Depreciation and
amortization 50,335 38,269 98,052 71,540
Total operating
expenses 104,080 82,890 200,972 155,376
------- ------ ------- -------
Total other expense (1) (48,747) (28,914) (86,584) (52,434)
Income from continuing
operations 14,822 19,558 40,318 36,497
Income from
discontinued
operations 5,126 3,532 19,845 22,543
Net income $19,948 $23,090 $60,163 $59,040
======= ======= ======= =======
Private Capital Management
Dealer manager fees,
selling commissions
and offering
reimbursements $51,818 $ - $51,818 $ -
Transaction service
fees 21,509 - 21,509 -
Management fees and
reimbursements 9,316 - 9,316 -
Total private capital
management revenue 82,643 - 82,643 -
------ --- ------ ---
Reallowed fees and
commissions 38,962 - 38,962 -
General and
administrative
expenses 28,679 - 28,679 -
Depreciation and
amortization 6,058 - 6,058 -
Total operating
expenses 73,699 - 73,699 -
------ --- ------ ---
Total other income 7 - 7 -
Benefit from income
taxes (2) 235 - 235 -
Net income $9,186 $ - $9,186 $ -
====== ============== ====== ============================
Total Company
Total revenue $250,292 $131,362 $410,517 $244,307
Total operating
expenses 177,779 82,890 274,671 155,376
Total other expense,
net (48,740) (28,914) (86,577) (52,434)
Benefit from income
taxes 235 - 235 -
--- --- --- ---
Income from continuing
operations 24,008 19,558 49,504 36,497
Income from
discontinued
operations 5,126 3,532 19,845 22,543
Net income $29,134 $23,090 $69,349 $59,040
======= ======= ======= =======
(1) Primarily consists of interest expense.
(2) While most of the business activities of the Company's Private Capital Management segment are conducted through a subsidiary of the Company that is a taxable REIT subsidiary ("TRS"),
revenues and expenses recorded in the TRS for tax purposes are not the same as those included in the Private Capital Management segment in accordance with GAAP. In future periods, we expect
to recognize an income tax expense, not a benefit from income taxes.
Total Assets as of
------------------
June 30, 2013 December 31, 2012
------------- -----------------
Real estate investment $7,546,129 $7,453,725
Private capital management 367,044 -
Total company $7,913,173 $7,453,725
========== ==========
Reconciliation of GAAP Net Income to Normalized EBITDA
The calculations of EBITDA and Normalized EBITDA, and reconciliation to net income, which is the most directly comparable GAAP financial measure, are presented in the table below (in thousands):
Three Months Ended June 30, 2013 Three Months Ended June 30, 2012
-------------------------------- --------------------------------
Total Real Estate Investment Private Capital Management Total Real Estate Investment Private Capital Management
----- ---------------------- -------------------------- ----- ---------------------- --------------------------
Net income attributable to
the Company $29,023 $19,837 $9,186 $23,223 $23,223 $ -
Adjustments:
Interest expense 48,938 48,938 - 28,846 28,846 -
Depreciation and
amortization 56,463 50,405 6,058 41,294 41,294 -
Benefit from income taxes (235) - (235) - - -
Proportionate share of
adjustments for
unconsolidated joint
ventures 111 111 - (133) (133) -
EBITDA 134,300 119,291 15,009 93,230 93,230 -
------- ------- ------ ------ ------ ---
Management adjustments:
Gain on sale of real
estate assets (4,931) (4,931) - (664) (664) -
Merger and acquisition
related expenses 11,810 11,810 - 17,438 17,438 -
Merger related stock-
based compensation
expenses 10,278 10,278 - - - -
Listing and tender offer
expenses 2,854 2,854 - - - -
Total adjustments 20,011 20,011 - 16,774 16,774 -
------ ------ --- ------ ------ ---
Normalized EBITDA $154,311 $139,302 $15,009 $110,004 $110,004 $ -
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Reconciliation of GAAP Net Income to Funds From Operations and Adjusted Funds From Operations
The calculations of funds from operations (FFO) and adjusted funds from operations (AFFO), and reconciliation to net income, which is the most directly comparable GAAP financial measure, are presented in the tables below (in thousands, except share and per share
amounts):
Three Months Ended
------------------
June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
------------- -------------- ----------------- ------------------ -------------
Total Company
Net income
attributable to the
company $29,023 $40,111 $125,611 $18,567 $23,223
Depreciation and
amortization of real
property 50,405 47,835 45,516 44,380 41,294
Depreciation and
amortization of real
estate assets in
unconsolidated joint
ventures 1,733 1,860 2,162 1,549 1,138
Net gain on sale and
condemnation of real
estate assets (4,931) (13,953) (93,676) - (664)
FFO - Total Company 76,230 75,853 79,613 64,496 64,991
Merger and acquisition
related expenses 11,810 15,613 17,460 13,612 17,438
Merger related stock-
based compensation
expense 10,278 - - - -
Listing and tender
offering expenses 2,854 - - - -
Amortization of
deferred financing
costs 3,958 3,753 5,477 3,859 3,379
Straight-line rent
adjustments (8,881) (9,688) (8,942) (8,937) (8,209)
Above/below market
lease intangibles
amortization, net 731 888 834 535 801
Loss on derivatives
and extinguishment of
debt 7,782 - 3,514 9,263 -
Loss (gain) on the
sale of marketable
securities 1,331 - (12,455) - -
Other amortization
(accretion), net (1) 4,547 (1,375) (1,524) (1,403) (1,190)
Proportionate share of
adjustments for
unconsolidated joint
ventures 121 30 (567) (888) (409)
AFFO -Total Company
(2) $110,761 $85,074 $83,410 $80,537 $76,801
======== ======= ======= ======= =======
FFO per common share,
basic $0.16 $0.16 $0.17 $0.14 $0.14
FFO per common share,
diluted $0.16 $0.16 $0.17 $0.14 $0.14
AFFO per common share,
basic $0.23 $0.18 $0.17 $0.17 $0.16
AFFO per common share,
diluted $0.23 $0.18 $0.17 $0.17 $0.16
Dividends paid
(including DRIP) $83,791 $76,894 $77,246 $77,705 $76,419
Weighted average
shares outstanding,
basic 487,915,368 480,819,849 478,762,187 476,353,149 473,159,051
Weighted average
shares outstanding,
diluted 491,510,128 480,819,849 478,762,187 476,353,149 473,159,051
Reconciliation of GAAP Net Income to Funds From Operations and Adjusted Funds From Operations (Continued)
Three Months Ended
------------------
June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012
------------- -------------- ----------------- ------------------ -------------
Real Estate Investment Segment
Net income
attributable to the
company $19,837 $40,111 $125,611 $18,567 $23,223
Depreciation and
amortization of real
property 50,405 47,835 45,516 44,380 41,294
Depreciation and
amortization of real
estate assets in
unconsolidated joint
ventures 1,733 1,860 2,162 1,549 1,138
Net gain on sale and
condemnation of real
estate assets (4,931) (13,953) (93,676) - (664)
FFO -Real Estate
Investment Segment 67,044 75,853 79,613 64,496 64,991
Merger and acquisition
related expenses 11,810 15,613 17,460 13,612 17,438
Merger related stock-
based compensation
expense 10,278 - - - -
Listing and tender
offering expenses 2,854 - - - -
Amortization of
deferred financing
costs 3,958 3,753 5,477 3,859 3,379
Straight-line rent
adjustments (8,881) (9,688) (8,942) (8,937) (8,209)
Above/below market
lease intangibles
amortization, net 731 888 834 535 801
Loss on derivatives
and extinguishment of
debt 7,782 - 3,514 9,263 -
Loss (gain) on the
sale of marketable
securities 1,331 - (12,455) - -
Other accretion, net (1,365) (1,375) (1,524) (1,403) (1,190)
Proportionate share of
adjustments for
unconsolidated joint
ventures 121 30 (567) (888) (409)
AFFO -Real Estate
Investment Segment
(2) $95,663 $85,074 $83,410 $80,537 $76,801
======= ======= ======= ======= =======
Private Capital Management Segment
Net income
attributable to the
company $9,186 $ - $ - $ - $ -
Other amortization,
net 5,912 - - - -
AFFO -Private Capital
Management Segment
(2) $15,098 $ - $ - $ - $ -
======= ===================== ============================ ============================= ===================
(1) Primarily consists of CMBS accretion and amortization of intangible assets.
(2) During the three months ended June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012, the Company capitalized expenses incurred related to the ongoing maintenance of the properties, including tenant improvements and leasing
commissions, of $983,000, $1.3 million, $1.4 million, $2.1 million and $2.8 million, respectively.
SOURCE Cole Real Estate Investments, Inc.
