HTG Heritage Property Investment

Heritage Property Investment Trust, Inc. Reports Results for Fourth Quarter and 2004 Full Year and Confirms 2005 Guidance Announces Fourth Quarter Results Ahead of Consensus, Including 6% Same Store NOI Growth and 93.3% Portfolio Occupancy BOSTON, Feb. 22 /PRNewswire-FirstCall/ Heritage Property Investment Trust, Inc. (NYSE:HTG) ("Heritage" or the "Company"), today reported results of operations for the quarter and year ended December 31, 2004. Highlights included: Financial Highlights: -- Diluted FFO per share of $0.69 for the quarter and $2.73 for the year -- Net income of $11.0 million, or $0.23 per diluted share, for the quarter and $44.7 million, or $0.95 per diluted share, for the year -- Same property net operating income growth (excluding lease termination fee income and lease buyout expense) of approximately 6.0% for the quarter and 2.4% for the year -- Annual dividend of $2.10 per share paid in 2004 Operating Highlights: -- Portfolio occupancy increased 120 basis points during the quarter and 130 basis points for the year to 93.3% -- Acquired two shopping centers during the quarter, totaling approximately 383,000 square feet, in Memphis, Tennessee and Burlington, Massachusetts, both Top 50 MSAs -- Sold two shopping centers and one shopping center parcel as part of its capital recycling program and recognized $1 million of gain from these sales -- Signed 170 leases (new and renewed) during the quarter, for 749,000 square feet, and achieved a 4.9% increase over prior rents on a cash basis "Our tireless commitment to the execution of our 2004 business plan resulted in our strong financial and operational results for the quarter and the year," stated Thomas C. Prendergast, Chairman, President and Chief Executive Officer. "We are extremely pleased to have exceeded expectations for 2004, despite the competitive acquisition environment that resulted in our slower than expected acquisition activity. This demonstrates that we excelled in maximizing the performance of our core portfolio. We expect to enhance our growth in 2005 by increasing our acquisition and development joint venture activity, which will provide solid and stable returns for years to come." Financial Results For the three months ended December 31, 2004, Funds from Operations (FFO), a widely accepted measure of REIT performance was $33.0 million, or $0.69 per share, as compared to $31.2 million, or $0.72 per share, for the same period in 2003. Net income attributable to common shareholders was $11.0 million for the three months ended December 31, 2004, or $0.23 per share, as compared to $10.2 million, $0.24 per share for the same period in 2003. For the year ended December 31, 2004, FFO was $128.9 million, or $2.73 per share, as compared to $116.4 million, or $2.74 per share, in 2003. Net income attributable to common shareholders was $44.7 million, or $0.95 per share, for the year ended December 31, 2004 as compared to $40.7 million, or $0.96 per share, in 2003. All per share amounts are stated on a diluted basis. The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the three months and year ended December 31, 2004. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made. PORTFOLIO OVERVIEW General As of December 31, 2004, Heritage had a shopping center portfolio of 164 properties, located in 29 states and totaling approximately 33.7 million square feet of total gross leasable area, of which 28.0 million square feet is company-owned gross leasable area. Leasing Activity During the fourth quarter of 2004, the Company executed 170 leases (new and renewed), for 749,000 square feet. The Company achieved a 4.9% increase over prior rents on a cash basis from $11.12 per square foot to $11.66 per square foot. For the full year 2004, the Company signed 684 leases (new and renewed), for 3.1 million square feet. The Company achieved a 6.0% increase over prior rents on a cash basis from $10.38 per square foot to $11.00 per square foot. The percentage of the Company's portfolio leased at December 31, 2004 increased 1.2% to 93.3% from 92.1% leased at September 30, 2004. As a result of the Company's successful leasing efforts and capital recycling during the year, the Company has increased its portfolio occupancy 1.3% over its December 31, 2003 level. Same Property Operating Results With respect to the properties owned and operated by the Company for the three months and year ended December 31, 2004 and 2003, same property net operating income increased as follows: Same Property Operating Data (in thousands) Three Months Ended Year Ended December 31, December 31, 2004 2003 2004 2003 Real estate revenue $76,990 $74,614 $293,115 $288,545 Operating expenses (21,928) (21,441) (85,084) (84,470) Net Operating Income 55,062 53,173 3.6 % 208,031 204,075 1.9 % Less: Lease termination income (1,408) (2,538) (2,125) (3,472) Add: Lease buyout expense -- -- -- 500 Net Operating Income, as adjusted $53,654 $50,635 6.0 % $205,906 $201,103 2.4 % "By building on our positive leasing momentum during the first nine months of this year, our fourth quarter leasing results greatly exceeded expectations," stated Robert G. Prendergast, Senior Vice President and Chief Operating Officer. "This was the result of our flexibility in our leasing approach, our efforts to improve our operating margin and our focus on developing, improving and leveraging our relationships with our anchor and other key tenants. Through our continued commitment to these operating principles, we remain optimistic that we can achieve solid results in occupancy, rental rates and same store operating performance in 2005." INVESTMENT ACTIVITY Fourth Quarter Acquisitions Burlington Square, Burlington, Massachusetts In early December 2004, Heritage acquired Burlington Square, an 86,000 square foot shopping center located in Burlington, Massachusetts. The center is approximately 83% leased and its major tenants include Staples, Eastern Mountain Sports and Tower Records. The purchase price for Burlington Square was $26 million, which the Company funded through a combination of borrowings under its unsecured line of credit, the assumption of mortgage indebtedness and the issuance of common units of limited partnership interests in one of its subsidiary operating partnerships. The Market of Wolf Creek, Memphis, Tennessee In late December 2004, Heritage acquired The Market of Wolf Creek, a 470,000 square foot shopping center located in Memphis, Tennessee. Heritage acquired approximately 300,000 square feet of the 470,000 square foot center, which includes approximately 170,000 square feet of additional shadow space owned by Target and other retailers. Wolfcreek is approximately 87% leased and its major tenants include Best Buy, Sports Authority, Office Depot and Walgreen's. The purchase price for Wolf Creek was $44 million, with $2.5 million subject to satisfaction of future conditions. The Company funded the purchase price through a combination of borrowings under its unsecured line of credit and the assumption of mortgage indebtedness. Overall, during 2004, including the acquisitions described above, the Company acquired four shopping centers, totaling approximately 950,000 square feet of Company-owned gross leasable area for approximately $150 million. "Although our external growth was limited by the extremely competitive acquisition environment in 2004, we are very pleased with the four new shopping centers we acquired this year," stated Mr. Thomas Prendergast. "These new centers will enhance the quality of our portfolio for the long-term benefit of our stockholders. Favorable market conditions did allow us to accelerate our capital recycling program this past year as we sold five properties not meeting our long-term investment strategy. We expect further capital recycling opportunities in 2005." Fourth Quarter Dispositions Garden Plaza, Franklin, Wisconsin In early December, Heritage completed the sale of Garden Plaza, an 80,000 square foot shopping center located in Franklin, Wisconsin. The sale price was approximately $5.0 million resulting in a gain of approximately $0.6 million. The proceeds from the sale were used to partially pay down the Company's unsecured line of credit. Madison Plaza, Madison, Wisconsin In late December, Heritage completed the sale of a portion of its Madison Plaza located in Madison, Wisconsin. The Company sold approximately 75,000 square feet of the center to the City of Madison and retained the balance of the center, or approximately 54,000 square feet. The space sold was formerly occupied principally by Flemings. The sale price was approximately $3.5 million, which approximated the carrying value of the parcel sold. The proceeds from the sale were used to partially pay down the Company's unsecured line of credit. Camelot Shopping Center, Louisville, Kentucky On October 1, 2004, the Company completed the disposition of Camelot Shopping Center, a 151,000 shopping center located in Louisville, Kentucky. The property was sold at a sale price of $7.4 million resulting in a gain of $0.3 million. The proceeds from the sale were used to partially pay down the Company's unsecured line of credit. During 2004, including the dispositions described above, the Company sold one office building, two shopping centers and two shopping center parcels for approximately $30 million. CAPITAL MARKETS ACTIVITY On October 15, 2004, the Company completed the offering and sale of $150 million principal amount of unsecured 4.50% notes due October 15, 2009. The notes were priced to yield 4.521% at a spread of 118 basis points over the comparable U.S. Treasury note. The net proceeds from the offering were used to reduce the outstanding balance on our unsecured line of credit. Including all offering expenses and the settlement of the forward swaps described below, the all-in effective interest rate of the unsecured notes is 5.03%. On November 15, 2004, we repaid upon maturity all $100 million aggregate principal amount of 7% Notes due 2004 of Bradley OP, which were issued in November 1997. We funded this repayment through borrowings under our unsecured line of credit. In February 2005, we obtained a commitment from Wachovia Bank to arrange to refinance our existing $350 million unsecured line of credit. Wachovia has committed $50 million to this new line of credit in its role as administrative agent. We expect to complete this transaction during the first quarter of 2005. DIVIDEND PAYMENT On January 15, 2005, the Company paid its regular quarterly dividend of $0.525 per common share to shareholders of record on December 31, 2004. For 2004, the Company paid regular dividends of $2.10 per share. 2005 Earnings Guidance Management confirmed its projected range for FFO of $2.77 to $2.83, per diluted common share for the year ended December 31, 2005. A reconciliation of management's projections from earnings per diluted common share to FFO per diluted common share is included in this release. CONFERENCE CALL Members of Heritage's senior management will host a conference call on Wednesday, February 23, 2005, at 10:00 a.m., ET, to discuss the Company's fourth quarter and full year results. Stockholders, analysts and other interested parties may participate in this conference call by dialing 800-218-0204 or 303-262- 2075 at least five minutes before the scheduled start time. Investors can also access the call via the Internet at the Company's website, http://www.heritagerealty.com/ . To listen to a live broadcast, access this site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software. A replay of the conference call will be available after the call through March 2, 2005 by accessing the Company's website at http://www.heritagerealty.com/ or by dialing 800-405-2236 or 303-590-3000, pass-code 11021264. ABOUT HERITAGE PROPERTY INVESTMENT TRUST, INC. Heritage is a fully integrated, self-administered and self-managed REIT traded on the New York Stock Exchange under the symbol "HTG". Heritage is one of the largest owners and operators of neighborhood and community shopping centers in the United States. Heritage focuses on grocer-anchored shopping centers with multiple anchors. As of December 31, 2004, Heritage had a shopping center portfolio of 164 centers, located in 29 states and totaling approximately 33.7 million square feet of total gross leasable area, of which 28.0 million square feet is company-owned gross leasable area. Heritage's shopping center portfolio was approximately 93.3% leased as of December 31, 2004. Heritage is headquartered in Boston, Massachusetts and has an additional 16 regional offices located in the Eastern, Midwestern and Southwestern United States. Some of the statements contained in this press release constitute forward-looking statements. 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. The forward-looking statements reflect the Company's current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company's control and which could materially affect actual results. The factors that could cause actual results to differ materially from current expectations include financial performance and operations of the Company's shopping centers, including the Company's tenants, real estate conditions, current and future bankruptcies of the Company's tenants, execution of shopping center redevelopment programs, the Company's ability to finance the Company's operations, successful completion of renovations, completion of pending acquisitions, the availability of additional acquisitions, execution of joint venture opportunities, changes in economic, business, competitive market, leasing and regulatory conditions, acts of terrorism or war and other risks detailed from time to time in filings with the Securities and Exchange Commission. The forward-looking statements contained herein represent the Company's judgment as of the date of this release, and the Company cautions readers not to place undue reliance on such statements. A copy of Heritage's fourth quarter 2004 "Supplemental Operating and Financial Data" will be available on the Investor Relations section of the Company's website at http://www.heritagerealty.com/ . These materials are also available by written request to: Investor Relations Heritage Property Investment Trust, Inc. 131 Dartmouth St. Boston, MA 02116 HERITAGE PROPERTY INVESTMENT TRUST, INC. Consolidated Balance Sheets December 31, 2004 and 2003 (Unaudited and in thousands of dollars) December 31, December 31, 2004 2003 Assets Real estate investments, net $2,222,638 $2,157,232 Cash and cash equivalents 6,720 5,464 Accounts receivable, net of allowance for doubtful accounts of $9,583 in 2004 and $8,770 in 2003 41,148 25,514 Prepaids and other assets 24,488 13,608 Investment in joint venture 3,406 -- Deferred financing and leasing costs 54,150 25,757 Total assets $2,352,550 $2,227,575 Liabilities and Shareholders' Equity Liabilities: Mortgage loans payable $649,040 $632,965 Unsecured notes payable 449,763 201,490 Line of credit facility 196,000 243,000 Accrued expenses and other liabilities 95,989 82,115 Accrued distributions 24,915 24,438 Total liabilities 1,415,707 1,184,008 Series B Preferred Units - 50,000 Series C Preferred Units - 25,000 Exchangeable limited partnership units 13,110 7,670 Other minority interest 2,425 2,425 Total minority interests 15,535 85,095 Shareholders' equity: Common stock, $.001 par value; 200,000,000 shares authorized; 46,934,285 and 46,208,574 shares issued and outstanding at December 31, 2004 and December 31, 2003, respectively 47 46 Additional paid-in capital 1,154,360 1,136,516 Cumulative distributions in excess of net income (229,818) (176,267) Other comprehensive loss (506) -- Unearned compensation (2,775) (1,823) Total shareholders' equity 921,308 958,472 Total liabilities and shareholders' equity $2,352,550 $2,227,575 HERITAGE PROPERTY INVESTMENT TRUST, INC. Consolidated Statements of Operations Year ended December 31, 2004 and 2003 (Unaudited and in thousands, except per-share data) Year Ended December 31, 2004 2003 Revenue: Rentals and recoveries $325,947 $297,666 Interest and other 1,079 495 Total revenue 327,026 298,161 Expenses: Property operating expenses 45,954 43,102 Real estate taxes 48,973 43,322 Depreciation and amortization 88,678 78,548 Interest 77,269 69,415 General and administrative 24,214 20,965 Total expenses 285,088 255,352 Income before gain on sales of real estate and marketable securities 41,938 42,809 Gain of sale of marketable securities 529 - Gain on sale of real estate investments 28 - Income before allocation to minority interests 42,495 42,809 Income allocated to exchangeable limited partnership units (265) (257) Income allocated to Series B & C Preferred Units (2,176) (6,656) Income before discontinued operations 40,054 35,896 Discontinued operations: Operating income from discontinued operations 696 2,154 Gains on sales of discontinued operations 3,958 2,683 Income from discontinued operations 4,654 4,837 Net income attributable to common shareholders $44,708 $40,733 Basic per-share data: Income before discontinued operations $0.86 $0.86 Income from discontinued operations 0.10 0.11 Income attributable to common shareholders $0.96 $0.97 Weighted average common shares outstanding 46,686 41,963 Diluted per-share data: Income before discontinued operations $0.85 $0.85 Income from discontinued operations 0.10 0.11 Income attributable to common shareholders $0.95 $0.96 Weighted average common and common equivalent shares outstanding 47,393 42,536 HERITAGE PROPERTY INVESTMENT TRUST, INC. Consolidated Statements of Operations Three Months ended December 31, 2004 and 2003 (Unaudited and in thousands, except per-share data) Three Months Ended December 31, 2004 2003 Revenue: Rentals and recoveries $84,173 $78,040 Interest and other 514 39 Total revenue 84,687 78,079 Expenses: Property operating expenses 12,158 11,285 Real estate taxes 12,043 11,195 Depreciation and amortization 23,137 21,087 Interest 20,114 18,070 General and administrative 7,223 4,812 Total expenses 74,675 66,449 Income before gain on sale of real estate 10,012 11,630 Gain on sale of real estate investment 3 - Income before allocation to minority interests 10,015 11,630 Income allocated to exchangeable limited partnership units (74) (87) Income allocated to Series B & C Preferred Units - (1,664) Income before discontinued operations 9,941 9,879 Discontinued operations: Operating income from discontinued operations 61 297 Gains on sales of discontinued operations 970 - Income from discontinued operations 1,031 297 Net income attributable to common shareholders $10,972 $10,176 Basic per-share data: Income before discontinued operations $0.21 $0.24 Income from discontinued operations 0.02 - Income attributable to common shareholders $0.23 $0.24 Weighted average common shares outstanding 46,888 42,654 Diluted per-share data: Income before discontinued operations $0.21 $0.24 Income from discontinued operations 0.02 - Income attributable to common shareholders $0.23 $0.24 Weighted average common and common equivalent shares outstanding 47,793 43,044 Heritage Property Investment Trust, Inc. Calculation of Funds from Operations (in thousands of dollars) Year ended December 31, 2004 2003 Net income $44,708 $40,733 Add (deduct): Depreciation and amortization (real-estate related): Continuing operations 87,869 77,931 Discontinued operations 314 416 Pro rata share of unconsolidated joint venture 13 - Gains on sales of real estate investments (3,986) (2,683) Funds from Operations $128,918 $116,397 Three months ended December 31, 2004 2003 Net income $10,972 $10,176 Add (deduct): Depreciation and amortization (real-estate related) Continuing operations 22,959 20,927 Discontinued operations 36 105 Pro rata share of unconsolidated joint venture 11 - Net gains on sales of real estate investments (973) - Funds from Operations $33,005 $31,208 We calculate Funds from Operations in accordance with the best practices described in the April 2001 National Policy Bulletin of the National Association of Real Estate Investment Trusts, referred to as NAREIT, and NAREIT's 1995 White Paper on Funds from Operations. The White Paper defines Funds From Operations as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Given the nature of our business as a real estate owner and operator, we believe that FFO is helpful to investors as a starting point in measuring our operational performance because it excludes various items included in net income that do not relate to, or are not indicative of, our operating performance, such as gains (or losses) from sales of real estate investments and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. However, FFO (i) should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance, (ii) is not an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and (iii) is not indicative of funds available to fund our cash needs, including our ability to make distributions. Our computation of FFO may differ from the methodology utilized by other equity REITs to calculate FFO and, therefore, may not be comparable to other REITs. Heritage Property Investment Trust, Inc. Reconciliation of Net Operating Income (in thousands of dollars) Years ended December 31, 2004 2003 Net operating income - same property portfolio $208,031 $204,075 Net operating income - acquisitions 22,989 7,167 Net operating income - total portfolio 231,020 211,242 Add: Interest and other 1,079 495 Gain on sale of marketable securities 529 - Gains on sales of real estate investments 28 - Income from discontinued operations 696 2,154 Gains on sales of discontinued operations 3,958 2,683 Deduct: Depreciation and amortization 88,678 78,548 Interest 77,269 69,415 General and administrative 24,214 20,965 Income allocated to exchangeable limited partnership units 265 257 Income allocated to Series B and C Preferred Units 2,176 6,656 Net income attributable to common shareholders $44,708 $40,733 Three months ended December 31, 2004 2003 Net operating income - same property portfolio $55,062 $53,173 Net operating income - acquisitions 4,910 2,387 Net operating income - total portfolio 59,972 55,560 Add: Interest and other 514 39 Gains on sales of real estate investments 3 - Income from discontinued operations 61 297 Gains on sales of discontinued operations 970 - Deduct: Depreciation and amortization 23,137 21,087 Interest 20,114 18,070 General and administrative 7,223 4,812 Income allocated to exchangeable limited partnership units 74 87 Income allocated to Series B and C Preferred Units - 1,664 Net income attributable to common shareholders $10,972 $10,176 Net operating income, or "NOI," is a non-GAAP financial measure equal to net income available to common shareholders (the most directly comparable GAAP financial measure), plus accretion of redeemable equity, preferred stock distributions, minority interest in Bradley Operating Limited Partnership, net derivative losses (gains), losses (gains) on investments in securities, losses from prepayment of debt, general and administrative expense, depreciation and amortization, and interest expense, less income from discontinued operations, gains (losses) on sales of real estate investments and equipment and interest and other income. We use NOI internally, and believe NOI provides useful information to investors, as a performance measure in evaluating the operating performance of our real estate assets. This is because NOI reflects only those income and expense items that are incurred at the property level and excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. Our presentation of NOI may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to obtain a clear understanding of our operating results, NOI should be examined in conjunction with net income as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions. Heritage Property Investment Trust, Inc. Reconciliation of Projected Diluted Net Income Per Common Share to Projected Funds From Operations Per Common Share Projected Range Full Year 2005 Low High Projected diluted net income per share $0.87 $0.92 Projected depreciation and amortization (real estate related) 1.90 1.91 Net gains on sales of real estate investments -- -- Projected FFO per diluted share $2.77 $2.83 The foregoing estimates reflect management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and earnings impact of the events referenced in this release. These estimates may be subject to fluctuations as a result of several factors, including changes in the recognition of depreciation and amortization expense and any gains or losses associated with disposition activity. The Company is not able to assess at this time the potential impact of these factors. By definition, FFO does not include real estate-related depreciation and amortization or gains or losses associated with disposition activities. There can be no assurance that the Company's actual results will not differ materially from the estimates set forth above. DATASOURCE: Heritage Property Investment Trust, Inc. CONTACT: Patrick O'Sullivan, Vice President, Finance and Accounting, of Heritage Property Investment Trust, Inc., +1-617-247-2200, or ; or Claire Koeneman, Analyst Info, +1-312-640-6745, or Joe Calabrese, General Info +1-212-827-3772, both of Financial Relations Board Web site: http://www.heritagerealty.com/

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