| ROSELAND, N.J.--(BUSINESS WIRE)--July 28, 2004--Chelsea Property
Group, Inc. (NYSE: CPG) today reported its operating results for the
second quarter ended June 30, 2004.
Second quarter funds from operations (FFO) before minority
interest rose 23% to $51.2 million from $41.7 million in the second
quarter of 2003 and diluted FFO per share rose 19% to $0.96 from
$0.81, respectively. Second quarter net income available to common
shareholders rose to $27.5 million, or $0.60 per diluted share, from
$24.7 million, or $0.56 per diluted share, in the year-earlier period.
Second quarter rental revenues from wholly-owned assets rose 13%
to $72.6 million from $64.4 million, and total revenues from
wholly-owned assets rose 12% to $96.8 million from $86.6 million,
respectively. FFO from unconsolidated investments rose to $7.2 million
from $3.2 million, primarily due to the openings in 2004 of Tosu
Premium Outlets (40%-owned) and Chicago Premium Outlets (50%-owned)
and in 2003 of Sano Premium Outlets and Phase II of Gotemba Premium
Outlets (40%-owned) and Las Vegas Premium Outlets (50%-owned). Second
quarter earnings before interest, depreciation and amortization
(EBITDA) rose 21% to $74.9 million from $62.1 million.
For the six months ended June 30, FFO rose 21% to $98.2 million
from $81.1 million; diluted FFO per share rose 16% to $1.85 from
$1.59. Six-month net income available to common shareholders rose to
$51.7 million, or $1.13 per diluted share, from $43.1 million or $0.99
per diluted share, in the year-earlier period. Rental revenues from
wholly-owned assets rose 12% to $143.1 million from $127.7 million;
total revenues from wholly-owned assets rose 12% to $189.9 million
from $169.9 million. FFO from unconsolidated investments rose to $13.9
million from $5.2 million and EBITDA rose 19% to $144.7 million from
$121.4 million.
Second quarter revenue and earnings comparisons were positively
impacted by the acquisitions in 2003 of The Crossings Factory Stores
(June) and Belz Factory Outlet World - Las Vegas (August); the
abovementioned openings at Tosu (March 2004), Gotemba (July 2003) and
Las Vegas Premium Outlets (August 2003); internal rent growth; higher
percentage rents; and the wind-down of Chelsea Interactive.
Gross leasable area (GLA) in operation, including joint venture
projects, totaled 16.6 million square feet at June 30, 2004, compared
to 14.9 million square feet a year earlier. The U.S. Premium Outlet
portfolio, comprising 11.4 million square feet of GLA, was 98% leased
at the end of the quarter.
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 9% for the second
quarter of 2004 and 12% for the year to date. During 2003, sales in
Chelsea's U.S. Premium Outlet portfolio averaged an industry-leading
$399 per square foot.
Chicago Premium Outlets, a new 438,000 square-foot, single-phase
center located in Aurora, Illinois, opened at the end of May 2004; the
187,000 square-foot first phase of Tosu Premium Outlets, Chelsea
Japan's fourth project, opened near Fukuoka, Japan, in March 2004; and
the 51,000 square-foot second phase of Sano Premium Outlets opened
last Friday, July 23, 2004. More than 850,000 square feet of new
Premium Outlet space is scheduled for completion during the next 18
months, including the first phase of Punta Norte Premium Outlets, in
Mexico City (230,000 square feet in late 2004); the first phase of
Toki Premium Outlets, near Nagoya, Japan (175,000 square feet in the
spring of 2005); the first phase of Seattle Premium Outlets, a new
center located in Tulalip, Washington (380,000 square feet in the
summer of 2005); and the third phase of Rinku Premium Outlets (70,000
square feet in December 2004). Tosu, Sano, Rinku and Toki Premium
Outlets are 40%-owned, and Chicago and Punta Norte Premium Outlets are
50%-owned by Chelsea.
On June 21, 2004, Chelsea announced that it had signed a
definitive merger agreement whereby Simon Property Group, Inc. (NYSE:
SPG) will acquire all of the outstanding common stock and operating
partnership units of Chelsea in a transaction valued at approximately
$3.5 billion. Simon will also assume Chelsea's existing indebtedness
and preferred stock, which totaled approximately $1.3 billion as of
June 30, 2004. Further details regarding the transaction are available
in Chelsea's filings with the Securities and Exchange Commission.
David Bloom, Chairman and Chief Executive Officer, said, "Second
quarter results again reflect broad contributions from acquisitions,
new development and internal growth. The 9% same-space sales gain
especially stood out, continuing the very strong uptrend that began in
the second half of last year. Also during the quarter, Chicago Premium
Outlets, our most recent joint venture with Simon Property Group, is
off to an extremely strong start. While it is still early, we believe
it will prove to be the dominant center in its market in the long
run."
Commenting on the pending merger with Simon Property Group, Mr.
Bloom added, "I would like to express my personal thanks to our
shareholders and friends for their tremendous support in our decision
to be acquired by Simon. While this transaction will end a wonderful
chapter in the Chelsea story, we believe that our stockholders have
been well served in our ten years as a public company, that we will
contribute significantly to Simon's business in the future, and that
we will continue our leadership in the outlet industry."
Chelsea Property Group, Inc. is a fully integrated,
self-administered and self-managed real estate investment trust (REIT)
with interests in 60 Premium Outlet(R) and other shopping centers -
containing 16.7 million square feet of GLA - in 31 states and Japan.
The Company's leading properties include Woodbury Common Premium
Outlets, near New York City; Orlando Premium Outlets, in Orlando,
Florida; Wrentham Village Premium Outlets, near Boston; Desert Hills
Premium Outlets, near Palm Springs, California; and Gotemba Premium
Outlets, near Tokyo. 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 Three Months Six Months
(In thousands, except per share Ended Ended
data) June 30, June 30,
2004 2003 2004 2003
----------------------------------
Revenues:
Base rent (a) $66,892 $59,461 $132,536 $118,620
Percentage rent 5,708 4,915 10,514 9,036
Expense reimbursements 21,741 20,434 42,470 38,987
Other income 2,420 1,799 4,343 3,248
----------------------------------
Total revenues 96,761 86,609 189,863 169,891
Expenses:
Operating and maintenance 25,738 24,097 50,839 46,618
Depreciation and amortization 17,938 17,124 35,754 34,407
General and administrative 4,131 2,468 7,721 4,670
Other 647 2,444 3,083 4,639
----------------------------------
Total expenses 48,454 46,133 97,397 90,334
Income before unconsolidated
investments,
interest expense, minority
interest and
discontinued operations 48,307 40,476 92,466 79,557
Income from unconsolidated
investments 5,305 2,495 10,347 3,946
Interest expense (19,287)(16,694) (37,937) (33,469)
----------------------------------
Income from continuing operations
before
minority interest 34,325 26,277 64,876 50,034
Minority interest attributed to
continuing operations (5,955) (5,069) (11,464) (9,834)
----------------------------------
Income from continuing operations 28,370 21,208 53,412 40,200
Income and gain from discontinued
operations,
net of minority interest - 4,331 - 4,586
----------------------------------
Net income 28,370 25,539 53,412 44,786
Preferred dividends (834) (834) (1,668) (1,668)
----------------------------------
Net income - common shareholders $27,536 $24,705 $51,744 $43,118
Net income per common share
(diluted)(b) $0.60 $0.56 $1.13 $0.99
Funds from operations (FFO) (c) $51,161 $41,742 $98,216 $81,135
FFO per common share (diluted) $0.96 $0.81 $1.85 $1.59
Dividends per common share $0.60 $0.535 $1.20 $1.07
(a) Base rent includes straight-line rent of $1,702 and $1,837 in
the second quarter of 2004 and 2003, respectively, and $3,066
and $3,597 for the six months ended June 30, 2004 and 2003,
respectively.
(b) Basic earnings per share were $0.62 and $0.59 in the second
quarter of 2004 and 2003, respectively, and $1.18 and $1.03 for
the six months ended June 30, 2004 and 2003, respectively.
(c) FFO per common share is defined as income before minority
interest, gain or loss on sale of assets and depreciation and
amortization, reduced by amortization of deferred financing costs,
depreciation of non-real estate assets, and preferred
dividends.
CHELSEA PROPERTY GROUP, INC.
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. Management considers FFO to be a key measure of its operating
performance that is not specifically defined by accounting principles
generally accepted in the Untied States ("GAAP"). The Company believes
that FFO is helpful to investors because it is a widely recognized
measure of the performance of equity REITs and provides a relevant
basis for comparison among REITs. Management of the Company also uses
FFO internally to measure the operating performance of the Company's
portfolio.
Three Months Six Months
Ended Ended
June 30, June 30,
(Amounts in thousands): 2004 2003 2004 2003
--------------------------------
Net income $28,370 $25,539 $53,412 $44,786
Plus: Limited partners' interest in
the Operating Partnership, net of
preferred distribution of the
Operating Partnership 4,493 3,665 8,540 7,014
Preferred dividend (834) (834) (1,668) (1,668)
Depreciation and amortization-
wholly-owned 17,938 17,269 35,754 34,901
Depreciation and amortization-joint
ventures 1,879 694 3,543 1,293
Amortization of deferred financing
costs and depreciation of non-
rental real estate assets (685) (583) (1,365) (1,183)
Net gain on sale or write down of
assets - (4,008) - (4,008)
--------------------------------
FFO available to common shareholders $51,161 $41,742 $98,216 $81,135
================================
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 Six Months
Ended Ended
June 30, June 30,
(Amounts in thousands): 2004 2003 2004 2003
----------------------------------
Net income $28,370 $25,539 $53,412 $44,786
Interest expense - wholly-owned 19,287 16,553 37,937 33,187
Interest expense - joint ventures 351 189 658 333
Depreciation and amortization -
wholly-owned 17,938 17,269 35,754 34,901
Depreciation and amortization -
joint ventures 1,879 694 3,543 1,293
Income tax - joint ventures 1,084 724 1,972 944
Gain on sale of discontinued
operations - (4,008) - (4,008)
Minority interest 5,955 5,127 11,464 9,938
----------------------------------
EBITDA $74,864 $62,087 $144,740 $121,374
==================================
CHELSEA PROPERTY GROUP, INC.
SELECTED BALANCE SHEET DATA - Unaudited June 30, December 31,
(In thousands, except center data) 2004 2003
----------------------
Real estate assets, before depreciation $2,100,179 $2,072,783
Cash and cash equivalents 18,046 18,476
Total assets 1,996,505 1,970,414
Total liabilities 1,323,635 1,304,880
Minority interest 143,004 144,688
Stockholders' equity 529,866 520,846
Shares and units outstanding at period-end 51,356 50,948
DEBT DATA:
Unsecured bank debt 161,045 204,035
Mortgage debt 320,323 385,634
Unsecured notes due 2005 - 2013 721,583 621,803
Interest coverage ratio - trailing 12 months 3.9x 3.8x
OPERATING DATA: (sq ft in thousands)
Gross leasable area at period end 16,600 16,127
Gross leasable area at period end - Premium
Outlets 12,377 10,603
Weighted average GLA during period 16,306 15,249
Weighted average GLA during period - Premium
Outlets 11,963 10,239
Lease-up at period-end - Domestic Premium
Outlets 98% 99%
Number of centers 60 60
Number of states and foreign countries 32 32
CONTACT: Chelsea Property Group, Inc.
Leslie T. Chao
Michael J. Clarke
973-228-6111
SOURCE: Chelsea Property Group, Inc.
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