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Chelsea Property Group, Inc. (ticker: CPG, exchange: New York Stock Exchange) News Release - 4-Nov-2003
Chelsea Property Group Reports 44% Increase in Third Quarter Funds from Operations; FFO Per Share Up 25% to $0.89
ROSELAND, N.J.--(BUSINESS WIRE)--Nov. 4, 2003--Chelsea Property Group, Inc. (NYSE: CPG) today reported its operating results for the third quarter ended September 30, 2003.
Third quarter funds from operations (FFO) before minority interest rose 44% to $47.0 million from $32.7 million in the third quarter of 2002. Diluted FFO per share rose 25% to $0.89 from $0.71. FFO attributable to real estate operations rose 31% to $47.7 million from $36.5 million, or 14% on a per share basis, to $0.90 from $0.79. Rental revenues from wholly-owned properties rose 36% to $70.6 million from $51.9 million, and total revenues from wholly-owned properties rose 31% to $92.6 million from $70.9 million. Third quarter income available to common shareholders rose 3% to $25.0 million from $24.2 million; diluted earnings per share declined 10% to $0.55 from $0.61, primarily due to a $10.9 million non-recurring gain on sale of an investment recognized in the third quarter of 2002.
FFO from unconsolidated investments increased to $4.3 million from $2.9 million as a result of the opening of Las Vegas Premium Outlets (a 50%-owned joint venture project) and higher income from Chelsea Japan, offset by the Company's purchase and consolidation of a partner's 51% interest in four joint venture properties in August 2002. The 2003 third-quarter loss attributable to Chelsea Interactive was $0.7 million, compared to $3.8 million in the year-earlier period. Third quarter earnings before interest, depreciation and amortization (EBITDA) rose 34% to $68.7 million from $51.4 million.
Factors driving positive revenue, FFO and earnings comparisons included internal rent growth; higher percentage rents; the acquisitions since June 30, 2002 of partners' interests or properties encompassing 3.1 million square feet of gross leasable area (GLA), including Belz Factory Outlet World - Las Vegas (now known as Las Vegas Outlet Center) in August 2003; the opening of Sano Premium Outlets, near Tokyo, Japan, in March 2003; the opening of the second phase of Gotemba Premium Outlets in July 2003; and the opening of Las Vegas Premium Outlets in August 2003.
For the nine months ended September 30, FFO rose 41% to $128.2 million from $91.0 million; diluted FFO per share rose 24% to $2.48 from $2.00; FFO attributable to real estate operations rose 29% to $130.6 million from $101.3 million, or 14% to $2.53 per share from $2.22 per share; rental revenues from wholly-owned properties rose 42% to $198.9 million from $140.2 million; total revenues from wholly-owned properties rose 38% to $263.5 million from $191.3 million; FFO from unconsolidated investments decreased to $9.5 million from $12.5 million; the loss attributable to Chelsea Interactive decreased to $2.4 million from $10.3 million; EBITDA rose 35% to $190.1 million from $140.6 million; net income available to common shareholders rose 38% to $68.1 million from $49.5 million; and diluted earnings per share rose 22% to $1.54 from $1.26.
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 6% for the third quarter and 2% for the year to date compared to the corresponding 2002 periods. GLA in service at September 30, 2003, including joint venture projects, totaled 16.1 million square feet, up 3.6 million square feet from a year earlier. The U.S. Premium Outlet center portfolio remained 98% leased at quarter-end.
During the third quarter, the Company added a net 1.2 million square feet of GLA to its portfolio, including the expansion of Gotemba Premium Outlets (170,000 square feet); the acquisition of Belz Factory Outlet World - Las Vegas (477,000 square feet); and the opening of Las Vegas Premium Outlets (435,000 square feet). Additionally, at the end of the quarter, the following projects were under construction: Chicago Premium Outlets, a new 438,000 square-foot center, scheduled to open in late spring 2004; the 124,000 square-foot third phase of Albertville Premium Outlets, scheduled to be fully open by the spring of 2004; the 185,000 square-foot first phase of Tosu Premium Outlets, near Fukuoka, Japan, scheduled to open in March 2004; and the 230,000 square-foot first phase of Punta Norte Premium Outlets, in Mexico City, scheduled to open in late 2004. Las Vegas Premium Outlets and Chicago Premium Outlets are 50/50 joint ventures with Simon Property Group, Inc. (NYSE: SPG); Gotemba, Sano and Tosu Premium Outlets are 40%-owned by Chelsea through Chelsea Japan Co., Ltd.; and Punta Norte Premium Outlets is a 50/50 joint venture with Sordo Madaleno y Asociados and affiliates.
David Bloom, Chairman and Chief Executive Officer, said, "Strong third quarter results were driven by internal growth as well as acquisitions, expansions and new projects completed during the quarter and preceding year. We are very pleased with healthy same-space sales comparisons for the quarter. As we approach the end of 2003, the portfolio continues to perform very well, and recent property additions plus a strong development pipeline should continue to drive growth."
Based on the current outlook, management expects that 2003 FFO per share will be at the higher end of its $3.45 to $3.50 guidance for the year. This 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 third quarter conference call with investors and analysts will be held tomorrow, Wednesday, November 5, 2003 at 2:00 p.m. eastern time. The call may be accessed by dialing 800-299-7635 (U.S. callers) or 617-786-2901 (international callers) and referencing reservation No. 23089250. A replay of the call will be available through November 12, 2003 by dialing 888-286-8010 (U.S. callers) or 617-801-6888 (international callers) and referencing reservation No. 90236656. 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 61 Premium Outlet(R) and other retail shopping centers - containing 16.1 million square feet of GLA - in 31 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; Las Vegas Premium Outlets, in Las Vegas, Nevada; 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 - Three Months Nine Months
Unaudited Ended Ended
September 30, September 30,
(In thousands, except 2003 2002 2003 2002
per share data) -------- -------- --------- ---------
Revenues:
Base rent (a) $63,850 $46,490 $183,086 $127,349
Percentage rent 6,705 5,368 15,831 12,836
Expense reimbursements 20,108 16,048 59,388 42,975
Other income 1,919 2,980 5,197 8,171
-------- -------- --------- ---------
Total revenues 92,582 70,886 263,502 191,331
Expenses:
Operating and maintenance 24,664 19,203 71,779 52,987
Depreciation and amortization 18,056 15,002 52,880 42,097
General and administrative 2,560 1,557 7,229 4,995
Other 1,324 985 4,353 3,092
-------- -------- --------- ---------
Total expenses 46,604 36,747 136,241 103,171
Income before unconsolidated
investments, interest expense,
minority interest and
discontinued operations 45,978 34,139 127,261 88,160
Income from unconsolidated
investments 3,125 2,032 7,071 8,784
Loss from Chelsea Interactive (677) (3,790) (2,419) (10,266)
Interest expense (17,743) (13,098) (50,930) (33,691)
Gain on sale of unconsolidated
investment - 10,911 - 10,911
-------- -------- --------- ---------
Income from continuing operations
before minority interest 30,683 30,194 80,983 63,898
Minority interest attributed to
continuing operations (5,599) (5,420) (15,473) (12,491)
-------- -------- --------- ---------
Income from continuing
operations 25,084 24,774 65,510 51,407
Income and gain from discontinued
operations, net of minority
interest 756 284 5,116 699
-------- -------- --------- ---------
Net income $25,840 $25,058 $70,626 $52,106
Preferred dividends (834) (835) (2,502) (2,588)
-------- -------- --------- ---------
Net income - common
shareholders $25,006 $24,223 $68,124 $49,518
Net income per common share
(diluted) (b) $0.55 $0.61 $1.54 $1.26
Funds from operations (FFO) (c) $47,021 $32,660 $128,156 $90,989
FFO per common share -
real estate $0.90 $0.79 $2.53 $2.22
Chelsea Interactive loss per
common share (0.01) (0.08) (0.05) (0.22)
-------- -------- --------- ---------
FFO per common share (diluted) $0.89 $0.71 $2.48 $2.00
Dividends per common share $0.535 $0.485 $1.605 $1.375
----------------------------------------------------------------------
(a) Base rent includes straight-line rent of $1,888 and $993 the third
quarter of 2003 and 2002, respectively, and $5,485, and $2,441 for the
nine months ended September 30, 2003 and 2002, respectively.
(b) Basic earnings per share were $0.58 and $0.64 in the third quarter
of 2003 and 2002, respectively, and $1.61 and $1.31 for the nine
months ended September 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 Nine Months
Ended Ended
September 30, September 30,
(Amounts in thousands) 2003 2002 2003 2002
-------- -------- --------- --------
Net income - common shareholders $25,006 $24,223 $68,124 $49,518
Add:
Depreciation and amortization -
wholly-owned 18,080 15,045 52,981 42,229
Depreciation and amortization -
joint ventures 1,177 871 2,470 3,673
Amortization of deferred financing
costs and depreciation of
non-real estate assets (600) (573) (1,783) (1,741)
Gain on sale of discontinued
operations (776) - (4,784) -
Gain on sale of unconsolidated
investment - (10,911) - (10,911)
Preferred unit distributions (1,462) (1,462) (4,386) (4,386)
Minority interest 5,596 5,467 15,534 12,607
-------- -------- --------- --------
FFO $47,021 $32,660 $128,156 $90,989
Ownership interests:
REIT common shares 45,282 39,610 44,197 39,253
Partnership units held by minority
interest 7,389 6,273 7,464 6,285
-------- -------- --------- --------
Weighted average shares/units
outstanding 52,671 45,883 51,661 45,538
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 Nine Months
Ended Ended
September 30, September 30,
(Amounts in thousands) 2003 2002 2003 2002
----- -------- --------- -----
Net income $25,840 $25,058 $70,626 $52,106
Interest expense - wholly-owned 17,743 13,098 50,930 33,691
Interest expense - joint ventures 268 146 601 413
Depreciation and amortization
expense - wholly-owned 18,080 15,045 52,981 42,229
Depreciation and amortization
expense - joint ventures and
Chelsea Interactive 1,177 3,067 2,470 9,437
Income tax - joint ventures 774 386 1,718 1,058
Gain on sale of discontinued
operations (776) - (4,784) -
Gain on sale of unconsolidated
investment - (10,911) - (10,911)
Minority interest 5,596 5,467 15,534 12,607
-------- -------- --------- ---------
EBITDA $68,702 $51,356 $190,076 $140,630
======== ======== ========= =========
SELECTED BALANCE SHEET DATA - Unaudited September 30, December 31,
(In thousands, except center data) 2003 2002
------------ ------------
Real estate assets, before depreciation $2,078,132 $1,837,174
Cash and cash equivalents 29,355 22,551
Total assets 1,953,556 1,703,030
Total liabilities 1,298,297 1,107,756
Minority interest 137,907 139,443
Stockholders' equity 517,352 455,831
Shares and units outstanding at period-end 50,864 49,047
DEBT DATA:
Unsecured bank debt 183,035 103,035
Mortgage debt 387,786 306,455
Unsecured notes due 2005 - 2013 621,694 621,330
Interest coverage ratio - trailing 12 months 3.8x 4.1x
OPERATING DATA: (sq ft in thousands)
Gross leasable area at period end 16,139 14,386
Gross leasable area at period end -
Premium Outlets 10,309 8,395
Weighted average GLA during period 14,962 12,758
Weighted average GLA during period -
Premium Outlets 9,818 8,352
Lease-up at period-end - Domestic
Premium Outlets 98% 99%
Number of centers 61 58
Number of states and foreign countries 32 31
CONTACT: Chelsea Property Group, Inc.
Leslie T. Chao or Michael J. Clarke, 973-228-6111
SOURCE: Chelsea Property Group, Inc.
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