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Chelsea Property Group, Inc. (ticker: CPG, exchange: New York Stock Exchange) News Release - 11-Aug-2003
Chelsea Property Group Reports 37% Increase in Second Quarter Funds from Operations; FFO Per Share Up 21% to $0.81
ROSELAND, N.J., Aug 11, 2003 (BUSINESS WIRE) -- Chelsea Property
Group, Inc. (NYSE: CPG) today reported its operating results for the
second quarter ended June 30, 2003.
Second quarter funds from operations (FFO) before minority
interest rose 37% to $41.7 million from $30.4 million in the second
quarter of 2002. Diluted FFO per share rose 21% to $0.81 from $0.67.
FFO attributable to real estate operations rose 25% to $42.6 million
from $34.2 million, or 11% on a per share basis, to $0.83 from $0.75.
Rental revenues from wholly-owned properties rose 37% to $65.0 million
from $47.6 million, and total revenues from wholly-owned properties
rose 35% to $87.4 million from $64.8 million. Second quarter income
available to common shareholders rose 84% to $24.7 million from $13.4
million, and diluted earnings per share rose 65% to $0.56 from $0.34.
FFO from unconsolidated investments declined to $3.2 million from
$4.1 million as a result of the Company's purchase and consolidation
of a partner's 51% interest in four joint venture properties in August
2002, partially offset by higher income from Chelsea Japan. The loss
attributable to Chelsea Interactive was $0.9 million, compared to $3.8
million in the year-earlier period. Second quarter earnings before
interest, depreciation and amortization (EBITDA) rose 33% to $62.1
million from $46.8 million.
Factors driving positive quarterly revenue, FFO and earnings
comparisons included internal rent growth; the acquisitions after
April 1, 2002 of partners' interests or properties covering 3.9
million square feet of gross leasable area (GLA); the opening of Sano
Premium Outlets in March 2003; and the completion since March 31, 2002
of three small expansions totaling 55,000 square feet. Also during the
quarter, the Company realized a gain of $4.7 million (not included in
FFO or EBITDA) in connection with the sale of its property in St.
Helena, California.
For the six months ended June 30, FFO rose 39% to $81.1 million
from $58.3 million; diluted FFO per share rose 23% to $1.59 from
$1.29; FFO attributable to real estate operations rose 28% to $82.9
million from $64.8 million, or 13% to $1.62 per share from $1.43 per
share; rental revenues from wholly-owned properties rose 45% to $128.9
million from $89.1 million; total revenues from wholly-owned
properties rose 41% to $171.5 million from $121.3 million; FFO from
unconsolidated investments decreased to $5.2 million from $9.6
million; the loss attributable to Chelsea Interactive decreased to
$1.7 million from $6.5 million; EBITDA rose 36% to $121.4 million from
$89.3 million; net income available to common shareholders rose 70% to
$43.1 million from $25.3 million; and diluted earnings per share rose
52% to $0.99 from $0.65.
Same-space sales (weighted average sales per square foot reported
in space open for the full duration of both comparison periods) at the
Company's U.S. Premium Outlet centers were up 4% for the second
quarter of 2003 and 1% for the year to date compared to the
corresponding periods in 2002. GLA in service at June 30, 2003,
including joint venture projects, totaled 14.9 million square feet, up
2.2 million square feet from a year earlier. The U.S. Premium Outlet
center portfolio remained 98% leased at quarter-end.
Year to date through August 1, the Company has added approximately
two million square feet of GLA to its portfolio, including the
acquisitions of The Crossings Factory Stores (June) and Belz Factory
Outlet World - Las Vegas (August); the expansion of Gotemba Premium
Outlets (July); and the openings of Sano Premium Outlets (March) and
Las Vegas Premium Outlets (August). Chicago Premium Outlets, a new
438,000 square-foot center, is under construction and scheduled to
open in late spring of 2004. Las Vegas Premium Outlets and Chicago
Premium Outlets are 50/50 joint ventures with Simon Property Group,
Inc. (NYSE: SPG); Chelsea has a 40% ownership interest in the Sano and
Gotemba centers through its investment in Chelsea Japan Co., Ltd.
David Bloom, Chairman and Chief Executive Officer, said, "Strong
results for the quarter again reflect broad-based gains from internal
growth, acquisitions, expansions and new projects. In addition, we are
very pleased with healthy same-space sales comparisons for the period.
In spite of very poor weather during the first half of the year -
including record-setting rainfall on the east coast in the month of
June - second quarter sales were up significantly and we are now in
positive territory for the year to date.
"Since the end of the second quarter, we have opened the Gotemba
Premium Outlets expansion, opened Las Vegas Premium Outlets, acquired
Belz Factory Outlet World - Las Vegas, continued construction of
Chicago Premium Outlets, and started construction of Tosu Premium
Outlets, a new center near Fukuoka, Japan. These new operating assets
and development projects should drive further significant growth
beginning in the third quarter and into 2004 and 2005 as space comes
on line.
"In June, we raised $50 million in an offering of 1.2 million new
common shares, and two weeks ago, Standard & Poor's upgraded our
senior debt rating to BBB and our preferred stock rating to BBB-. We
remain very well positioned financially to capitalize on new
development and acquisition opportunities," Mr. Bloom added.
Based on the current outlook, management expects FFO per share for
2003 to be in the range of $3.45 to $3.50, compared to previous
guidance of $3.40. This increased guidance assumes, among other
things, that the Company's core portfolio, new development projects
and acquisitions perform as expected, and that there are no
unanticipated changes in world economic and market conditions that
might affect the Company's business.
Chelsea's second quarter conference call with investors and
analysts will be held tomorrow, Tuesday, August 12, 2003 at 11:00 a.m.
eastern time. The call may be accessed by dialing 800-901-5226 (U.S.
callers) or 617-786-4513 (international callers) and referencing
reservation No. 25407818. A replay of the call will be available
through August 19, 2003 by dialing 888-286-8010 (U.S. callers) or
617-801-6888 (international callers) and referencing reservation No.
80259963. The call will also be available in listen-only mode at the
Company's website, www.cpgi.com; a link to the call will be located in
the "Investor Information" section, and a replay will be available for
45 days.
Chelsea Property Group, Inc. is a fully integrated,
self-administered and self-managed real estate investment trust (REIT)
that wholly or partially owns 62 Premium Outlet(R) and other retail
shopping centers - containing 16.3 million square feet of GLA - in 32
states and Japan. The company's leading properties include Woodbury
Common Premium Outlets, near New York City; Wrentham Village Premium
Outlets, near Boston; Orlando Premium Outlets, in Orlando, Florida;
Desert Hills Premium Outlets, near Palm Springs, California; and
Gotemba Premium Outlets, near Tokyo, Japan. Please see www.cpgi.com
for more information.
Statements in this news release that are not strictly historical
are "forward-looking" statements under the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Although Chelsea
Property Group believes that the expectations reflected in such
statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. Forward-looking
statements involve known and unknown risks that may cause actual
results to differ materially from expected results. Risk factors
include, without limitation, the receipt of regulatory entitlements
for and completion of development projects, in the United States or
abroad; the availability and cost of capital and foreign currency;
credit risk; the Company's ability to lease its properties; retail,
real estate and economic conditions; risks inherent to being a partner
in joint ventures; risks inherent to developing and marketing a
technology based business; competition; and other risks detailed from
time to time in Chelsea Property Group's reports to the Securities and
Exchange Commission. The Company accepts no responsibility for
updating forward-looking statements.
CHELSEA PROPERTY GROUP, INC.
STATEMENT OF OPERATIONS - Unaudited
(In thousands, except per
share data) Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
Revenues:
Base rent (a) $ 60,001 $ 43,181 $119,751 $ 81,571
Percentage rent 4,993 4,465 9,178 7,519
Expense reimbursements 20,596 14,485 39,328 27,019
Other income 1,816 2,711 3,291 5,214
-------- -------- -------- --------
Total revenues 87,406 64,842 171,548 121,323
Expenses:
Operating and maintenance 24,516 18,135 47,440 34,283
Depreciation and amortization 17,258 14,222 34,872 27,139
General and administrative 2,468 1,921 4,669 3,438
Other 1,632 1,085 3,068 2,191
-------- -------- -------- --------
Total expenses 45,874 35,363 90,049 67,051
Income before unconsolidated
investments, interest expense,
minority interest and
discontinued operations 41,532 29,479 81,499 54,272
Income from unconsolidated
investments 2,495 2,982 3,946 6,752
Loss from Chelsea Interactive (905) (3,776) (1,742) (6,476)
Interest expense (16,553) (10,843) (33,187) (20,593)
-------- -------- -------- --------
Income from continuing
operations before
minority interest 26,569 17,842 50,516 33,955
Minority interest attributed to
continuing operations (5,114) (3,671) (9,908) (7,107)
-------- -------- -------- --------
Income from continuing
operations 21,455 14,171 40,608 26,848
Income and gain from
discontinued operations,
net of minority interest 4,084 86 4,178 200
-------- -------- -------- --------
Net income 25,539 14,257 44,786 27,048
Preferred dividends (834) (849) (1,668) (1,753)
-------- -------- -------- --------
Net income - common
shareholders $ 24,705 $ 13,408 $ 43,118 $ 25,295
Net income per common share
(diluted) (b) $ 0.56 $ 0.34 $ 0.99 $ 0.65
Funds from operations (FFO)(c) $ 41,742 $ 30,417 $ 81,135 $ 58,329
FFO per common share - real
estate $ 0.83 $ 0.75 $ 1.62 $ 1.43
Chelsea Interactive loss per
common share (0.02) (0.08) (0.03) (0.14)
-------- -------- -------- --------
FFO per common share (diluted) $ 0.81 $ 0.67 $ 1.59 $ 1.29
Dividends per common share $ 0.535 $ 0.485 $ 1.07 $ 0.89
--------- --------- --------- --------
(a) Base rent includes straight-line rent of $1,837 and $926 the
second quarter of 2003 and 2002, respectively, and $3,597, and $1,448
for the six months ended June 30, 2003 and 2002, respectively.
(b) Basic earnings per share were $0.59 and $0.35 in the second
quarter of 2003 and 2002, respectively, and $1.03 and $0.67 for the
six months ended June 30, 2003 and 2002, respectively.
(c) FFO per common share is defined as income before minority
interest, gain or loss on sale or writedown of assets and depreciation
and amortization, reduced by amortization of deferred financing costs,
depreciation of non-real estate assets, and preferred dividends.
CALCULATION OF FFO - Unaudited
Management believes that FFO should be considered in conjunction with
net income, as presented in the statement of operations, to facilitate
a clearer understanding of the operating results of the Company. The
Company believes that FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flow from
operating activities, financing activities and investing activities,
it provides investors with an indication of the ability of the Company
to incur and service debt, to make capital expenditures and to fund
other cash needs.
Three Months Ended Six Months Ended
June 30, June 30,
(Amounts in thousands) 2003 2002 2003 2002
------- ------- -------- -------
Net income - common shareholders $24,705 $13,408 $ 43,118 $25,295
Add:
Depreciation and amortization -
wholly-owned 17,269 14,243 34,901 27,184
Depreciation and amortization -
joint ventures 694 1,159 1,293 2,802
Amortization of deferred financing
costs and depreciation of
non-real estate assets (583) (616) (1,183) (1,168)
Gain on sale of discontinued
operations (4,008) - (4,008) -
Preferred unit distributions (1,462) (1,462) (2,924) (2,924)
Minority interest 5,127 3,685 9,938 7,140
------- ------- -------- -------
FFO $41,742 $30,417 $ 81,135 $58,329
Ownership interests:
REIT common shares 43,997 39,375 43,655 39,076
Partnership units held by minority
interest 7,442 6,281 7,501 6,290
------- ------- -------- -------
Weighted average shares/units
outstanding 51,439 45,656 51,156 45,366
------- ------- -------- -------
CALCULATION OF EBITDA - Unaudited
Management believes that earnings before interest, depreciation and
amortization ("EBITDA") should be considered in conjunction with
net income, as presented in the statement of operations to facilitate
a clearer understanding of the operating results of the Company. The
Company believes that EBITDA is helpful to investors as a measure of
the performance of an equity REIT because, along with cash flow from
operating activities, financing activities and investing activities,
it provides investors with an indication of the ability of the Company
to incur and service debt, to make capital expenditures and to fund
other cash needs.
Three Months Ended Six Months Ended
June 30, June 30,
(Amounts in thousands) 2003 2002 2003 2002
------- ------- -------- -------
Net income $25,539 $14,257 $ 44,786 $27,048
Interest expense - wholly-owned 16,553 10,843 33,187 20,593
Interest expense - joint ventures 189 139 333 267
Depreciation and amortization
expense - wholly-owned 17,269 14,243 34,901 27,184
Depreciation and amortization
expense - joint ventures
and Chelsea Interactive 694 3,219 1,293 6,370
Income tax - joint ventures 724 413 944 672
Gain on sale of discontinued
operations (4,008) - (4,008) -
Minority interest 5,127 3,685 9,938 7,140
------- ------- -------- -------
EBITDA $62,087 $46,799 $121,374 $89,274
======= ======= ======== =======
----------------------------------------------------------------------
SELECTED BALANCE SHEET DATA - Unaudited June 30, December 31,
(In thousands, except center data) 2003 2002
---------- ------------
Real estate assets, before depreciation $1,960,569 $1,837,174
Cash and cash equivalents 21,306 22,551
Total assets 1,816,615 1,703,030
Total liabilities 1,169,974 1,107,756
Minority interest 137,974 139,443
Stockholders' equity 508,667 455,831
Shares and units outstanding at period-end 50,516 49,047
DEBT DATA:
Unsecured bank debt 83,035 103,035
Mortgage debt 363,348 306,455
Unsecured notes due 2005 - 2013 621,584 621,330
Interest coverage ratio - trailing 12 months 3.8x 4.1x
OPERATING DATA: (sq ft in thousands)
Gross leasable area at period end 14,911 14,386
Gross leasable area at period end - Premium
Outlets 9,320 8,395
Weighted average GLA during period 14,505 12,758
Weighted average GLA during period - Premium
Outlets 9,258 8,352
Lease-up at period-end - Domestic Premium
Outlets 98% 99%
Number of centers 59 58
Number of states and foreign countries 32 31
SOURCE: Chelsea Property Group, Inc.
Chelsea Property Group
Leslie T. Chao / Michael J. Clarke, 973-228-6111
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