HTG Heritage Property Investment

Heritage Property Investment Trust, Inc. Announces Results for Fourth Quarter And Year Ended December 31, 2003 BOSTON, Feb. 10 /PRNewswire-FirstCall/ -- Heritage Property Investment Trust, Inc. ("Heritage" or the "Company"), today reported results of its operations for the fourth quarter ended December 31, 2003. Financial highlights for the three months and year ended December 31, 2003 include: -- Funds from Operations (FFO), a widely accepted measure of REIT performance, increased 16.5%to $31.2 million, or $0.72 per diluted share for the three-month period ended December 31, 2003, as compared to $26.8 million or $0.64 per diluted share for the three-month period ended December 31, 2002. FFO totaled $116.4 million, or $2.74 per diluted share for the year ended December 31, 2003. -- Net income attributable to common shareholders increased 12.2% to $10.2 million, or $0.24 per diluted share for the three-month period ended December 31, 2003, as compared to $9.1 million or $0.22 per diluted share for the three-month period ended December 31, 2002. Net income attributable to common shareholders totaled $40.7 million, or $0.96 per diluted share for the year ended December 31, 2003. --Revenue from rentals and recoveries increased 10.1% to $78.7 million for the three-month period ended December 31, 2003, as compared to $71.6 million for the three-month period ended December 31, 2002. Revenue from rentals and recoveriesincreased 8.9% to $300.7 million for the year ended December 31, 2003 from $276.2 million for the year ended December 31, 2002. Significant events and transactions of the fourth quarter and year ended December 31, 2003 include: -- The Company completed the acquisition of a portfolio of eight properties from the Trademark Property Company. These eight properties are located primarily in the Dallas/Ft. Worth and Houston areas and comprise 1.2 million aggregate square feet of Company-owned gross leaseable area. Five of these properties, all of which were unencumbered, were acquired in October 2003 for $96 million, and funded through a $60 million bridge loan with a primary term of 120 days and borrowings under the Company's line of credit. The remaining three properties were acquired in November 2003 for $67 million, and funded through the assumption of $41 million of mortgage debt and borrowings under the Company's line of credit. -- For the year ended December 31, 2003, including the Trademark acquisition, the Company completed the acquisition of eleven properties aggregating 2.1 million square feet of gross leasable area, of which 1.7 million square feet is Company-owned. The aggregate investment for the eleven properties is $224.2 million and was funded through borrowings under the Company's line of credit, the assumption of mortgage debt, and the bridge loan noted above. -- For the yearended December 31, 2003 the Company completed the disposition of ten single tenant properties and one shopping center property. The net proceeds from the dispositions was $15.5 million, resulting in a gain of $2.7 million. The proceedswere used to partially repay the Company's line of credit. -- The Company completed a secondary public offering of its common stock in December 2003 and sold a total of 3,932,736 shares, including the Underwriters' over-allotment of 432,736 shares, at a net price of $28.27 per share. The net proceeds of $111 million were used to repay indebtedness, including the $60 million bridge loan incurred in connection with the Trademark acquisition described above. -- Fitchinitiated coverage on the Company with an investment grade credit rating of BBB- with a stable outlook in December 2003. This rating adds to the rating of BBB- from Standard & Poors and Baa3 from Moody's. -- The Company declared a fourth quarter cash dividend on its common stock of $0.525 per share, which was paid on January 15, 2004. For the year ended December 31, 2003, the Company declared and paid aggregate cash dividends on its common stock of $2.10 per share. Significant events and transactions subsequent to year-end include: -- The Company entered into an agreement to acquire Long Meadow Commons, a 119,000 square foot grocer-anchored community shopping center located in Mundelein, Illinois (a northern Chicago suburb) for approximately $18 million. The property, which is 96% leased, is anchored by Dominick's Finer Foods (a subsidiary of Safeway). The acquisition is expected to be completed in the first quarter of 2004 and is subject to customary closing conditions. The Company anticipates that it will fund the acquisition through borrowings under its line of credit. -- On January 22, 2004, the Company called for the redemption of all 8.875% Series B Cumulative Redeemable Perpetual Preferred Units of Bradley Operating Limited Partnership, one of its subsidiary operating partnerships. Heritage will redeem all 2,000,000 of the outstanding Series B Preferred Units on February 23, 2004 at a redemption price of $25.00 per unit, plus approximately $0.3266 of accrued and unpaid distributions, for an aggregate redemption price of approximately $25.3266 per unit. Payment of the redemption price will be made through LaSalle Bank, as redemption agent. Commenting on activity during the quarter and the year, Heritage's Chairman, President and Chief Executive Officer, Thomas C. Prendergast said, "Despite several high profile bankruptcies during the past 24 months, we have delivered solid operating results which met our expectations. During 2003, we strengthened and geographically diversified our existing portfolio through the completion of over $200 million in acquisitions, including the entry into the Southwest region. We also strengthened our balance sheet by raising over $100 million in equity." Mr. Prendergast added, "As we look ahead to 2004, we remain committed to achieving consistent long-term performance and are focused on continually improving the operating performance and leasing of our core portfolio." COMPARABLE RESULTS The Company completed its initial public offering ("IPO") on April 29, 2002. In connection with the IPO, 18,080,556 shares of common stock, including shares issued upon the partial exercise of the underwriters' over- allotment option, were sold to the public. In addition, 20,341,767 shares of Series A preferred stock previously outstanding, which shares were required to be excluded from historical diluted per share earnings calculations, automatically converted to shares of common stock on a one-for-one basis. As a result of these changes in the Company's capital structure due to the IPO, certain comparisons with prior period results for the year ended December 31, 2002 have generally been eliminated because such results and comparisons would not be meaningful. OPERATING RESULTS Same Property Operating Results With respect to the properties owned and operated by the Company for the three months and year ended December 31, 2003 and 2002, same property net operating income was as follows: Same Property Operating Data (in thousands) Three Months Ended Year Ended December 31, December 31, 2003 2002 2003 2002 Real estate revenue $72,074 $71,312 $264,029 $261,834 Operating expenses (21,102) (21,497) (79,866) (76,466) Net Operating Income 50,972 49,815 2.3% 184,163 185,368 (0.7)% Less: Lease termination income (2,533) (65) (2,100) (534) Add: Lease termination expense - - 500 - Net Operating Income, as adjusted $48,439 $49,750 (2.6)% $182,563 $184,834 (1.2)% Leasing Activity During the fourth quarter of 2003, the Company executed 129 leases (new and renewed), for 535,000 square feet, and achieved a 3.3% increase over prior rents on a cash basis. For the year ended December 31, 2003, the Company executed 630 leases (new and renewed), for 2.9 million square feet, and achieved a 5.2% increase over prior rents on a cash basis. At December 31, 2003, the Company's total portfolio was 92.0% leased as compared to 93.2% leased at December 31, 2002. The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the three-month and year ended December 31, 2003. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made. BOARD OF DIRECTOR CHANGES Heritage alsoannounced today that its Board of Directors elected Michael J. Joyce to join the Board effective in June 2004, following his retirement as an active partner from the public accounting firm, Deloitte & Touche LLP. Mr. Joyce is currently the New England Managing Partner of Deloitte. Mr. Joyce joined the predecessor firm of Deloitte in 1967 and became an accounting and auditing partner in 1975. Upon joining the Board, Mr. Joyce will serve on the Audit Committee and be designated as the Board's "audit committee financial expert." "We are pleased to have added a professional with Mike's track record in public accounting as well as general public company management," stated Mr. Prendergast. "We look forward to Mike's insight and his contribution to the Board and the Audit Committee." Mr. Joyce's election follows two recent changes to the Board. Paul V. Walsh, a director since March 2002, retired as of December 31, 2003. Robert M. Falzon, a director since September 2000, also stepped down at the end of last year. "I would like to thank Paul and Rob for their outstanding contributions to the Board and wish them continued success," noted Mr. Prendergast. CORPORATE GOVERNANCE INITIATIVES Heritage also announced a series of corporate governance initiatives, which included the (i) creation of a Corporate Governance Committee, (ii) the approval of a new Code of Ethics for Financial Professionals, Whistleblower Policy and Corporate Governance Guidelines, (iii) the establishment of the position ofLead Director and appointment of independent director Robert J. Watson to serve in that role, (iv) the adoption of new charters for the Audit, Compensation, Nominating and Corporate Governance Committees, and (v) the creation of a new in-house corporate counsel position with responsibilities that include corporate governance and compliance, and the hiring of Stephen H. Faberman, formerly a corporate partner at Bingham McCutchen LLP, Boston, Massachusetts, to fill that position. The new Corporate Governance Guidelines require, among other things, that the Audit, Compensation, Nominating and Corporate Governance Committees be comprised of solely independent directors, that regular meetings of the independent directors be held and that the Board and the Committees conduct annual evaluations. "Our implementation of these initiatives, which we consider to be industry best practices, shows our strong commitment to corporate governance and full accountability to our stockholders," said Mr. Prendergast. Heritage's Corporate Governance Guidelines, Committee Charters and Code of Ethics for Financial Professionals will be posted shortly in the Investor Relations section of Heritage's website at http://www.heritagerealty.com/. 4th QUARTER CONFERENCE CALL Heritage will host a conference call on Wednesday, February 11, 2004, at 10:00 a.m., ET, to discuss the Company's fourth quarter results. Stockholders, analysts and other interested parties may participate in this conference call by dialing 800-218-8862 or 303-262-2211 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 February 18, 2004 by accessing the Company's website at http://www.heritagerealty.com/ or by dialing 800-405-2236 or 303-590-3000, pass-code 565934. 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 acquires, owns, manages, leases and redevelops primarily grocer-anchored neighborhood and community shopping centers in the Eastern and Midwestern United States. As of December 31, 2003, the Company had a portfolio consisting principally of 162 shopping centers, located in 29 states and totaling approximately 32.7 million square feet of total gross leasable area, of which 27.5 million square feet is company-owned gross leasable area. The Company's shopping center portfolio was approximately 92.0% leased as of December 31, 2003. Heritage is headquartered in Boston Massachusetts and has an additional 16 regional offices located in the Eastern and Midwestern United States. In February 2004, Heritage will move its headquarters from 535 Boylston St., Boston to 131 Dartmouth St., Boston, a new office building owned by the joint venture that we entered into with our largest stockholder. A copy of Heritage's fourth quarter 2003 "Supplemental Operating and Financial Data" will beavailable 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 Street Boston, MA 02116 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 andare 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, changes in economic, business, competitive market, leasing andregulatory 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. Heritage Property Investment Trust, Inc. Consolidated Balance Sheets December 31, 2003 and December 31, 2002 (Unaudited and in thousands of dollars, except per-share data) December 31, December 31, 2003 2002 Assets Real estate investments, net $2,166,975 $2,008,504 Cash and cash equivalents 5,488 1,491 Accounts receivable, net of allowance for doubtful accounts of $8,770 in 2003 and $6,389 in 2002 25,514 22,836 Prepaids and other assets 13,477 11,162 Deferred financing and leasing costs 16,014 15,564 Total assets $2,227,468 $2,059,557 Liabilities and Shareholders' Equity Liabilities: Mortgage loans payable $632,965 $569,663 Unsecured notes payable 201,490 201,490 Line of credit facility 243,000 234,000 Accrued expenses and other liabilities 82,008 68,275 Accrued distributions 24,438 21,968 Total liabilities 1,183,901 1,095,396 Series B Preferred Units 50,000 50,000 Series C Preferred Units 25,000 25,000 Exchangeable limited partnership units 7,670 8,128 Other minority interest 2,425 2,425 Total minority interests 85,095 85,553 Shareholders' equity: Common stock, $.001 par value; 200,000,000 shares authorized; 46,208,574 and 41,504,208 shares issued and outstanding at December 31, 2003 and December 31, 2002, respectively 46 42 Additional paid-in capital 1,136,516 1,006,416 Cumulative distributions in excess of net income (176,267) (126,803) Unearned compensation (1,823) (1,047) Total shareholders' equity 958,472 878,608 Total liabilities and shareholders' equity $2,227,468 $2,059,557 Heritage Property Investment Trust, Inc. Consolidated Statements of Operations Three Months ended December 31, 2003and 2002 (Unaudited and in thousands of dollars, except per-share data) Three Months Ended December 31, 2003 2002 Revenue: Rentals and recoveries $78,745 $71,551 Interest and other 24 24 Total revenue 78,769 71,575 Expenses: Property operating expenses 11,492 10,270 Real estate taxes 11,276 11,252 Depreciation and amortization 21,192 17,888 Interest 18,070 16,595 General and administrative 4,812 5,150 Total expenses 66,842 61,155 Income before net allocation to minority interests 11,927 10,420 Income allocated to exchangeable limited partnership units (87) (106) Income allocated to Series B & C Preferred Units (1,664) (1,664) Income before discontinued operations 10,176 8,650 Discontinued operations: Operating income from discontinued operations - 416 Income from discontinued operations - 416 Net income attributable to common shareholders $10,176 $9,066 Basic per-share data: Income before discontinued operations $0.24 $0.21 Income from discontinued operations - 0.01 Income attributable to common shareholders $0.24 $0.22 Weighted average common shares outstanding 42,654 41,504 Diluted per-share data: Income before discontinued operations $0.24 $0.21 Income from discontinued operations - 0.01 Income attributable to common shareholders $0.24 $0.22 Weighted average common and common equivalent shares outstanding 43,044 41,531 Heritage Property Investment Trust, Inc. Consolidated Statements of Operations Year ended December 31, 2003 and 2002 (Unaudited and in thousands of dollars, except per-share data) Year Ended December 31, 2003 2002 Revenue: Rentals and recoveries $300,678 $276,173 Interest and other 320 88 Total revenue 300,998 276,261 Expenses: Property operating expenses 44,038 38,937 Real estate taxes 43,676 40,723 Depreciation and amortization 78,964 70,023 Interest 69,415 72,312 General and administrative 20,965 23,351 Loss on prepayment of debt - 6,749 Total expenses 257,058 252,095 Income before net gain 43,940 24,166 Net gain on sale of real estate investments - 2,924 Net derivative loss - (7,766) Income before allocation to minority interests 43,940 19,324 Income allocated to exchangeable limited partnership units (257) (216) Income allocated to Series B & C Preferred Units (6,656) (6,656) Income before discontinued operations 37,027 12,452 Discontinued operations: Operating income from discontinued operations 1,023 1,607 Gain on sales of discontinued operations 2,683 384 Income from discontinued operations 3,706 1,991 Net income 40,733 14,443 Preferred stock distributions - (14,302) Accretion of redeemable equity - (328) Net income (loss) attributable to common shareholders $40,733 ($187) Basic per-share data: Income (loss) before discontinued operations $0.88 ($0.07) Income from discontinued operations 0.09 0.06 Income (loss) attributable to common shareholders $0.97 ($0.01) Weighted average common shares outstanding 41,963 30,257 Diluted per-share data: Income (loss) before discontinued operations $0.87 ($0.07) Income from discontinued operations 0.09 0.06 Income (loss) attributable to common shareholders $0.96 ($0.01) Weighted average common and common equivalent shares outstanding 42,536 30,286 Heritage Property Investment Trust, Inc. Calculation of Funds from Operations (in thousands of dollars, except per share data) For the Three Months Ended For the Year Ended December 31, December 31, 2003 2002 2003 2002(1) BASIC FUNDS FROM OPERATIONS: Net income $10,176 $9,066 $40,733 $14,443 Add (deduct): Depreciation and amortization (real estate- related) 21,032 17,715 78,347 69,498 Net gains on sales of real estate - - (2,683) (3,308) Preferred stock distributions - - - (14,302) Accretion of redeemable equity - - - (328) Basic Funds from Operations attributable to common shareholders $31,208 $26,781 $116,397 $66,003 DILUTED FUNDS FROM OPERATIONS: Basic Funds from Operations attributable to common shareholders $31,208 $26,781 $116,397 $66,003 Add: Assume conversion of Preferred Stock 14,630 Income allocated to exchangeable limited partnership units 87 106 257 216 Diluted Funds from Operations attributable to common shareholders $31,295 $26,887 $116,654 $80,849 Weighted average shares outstanding - basic 42,654 41,504 41,963 30,257 Add: Assumed conversion of Preferred Stock - - - 6,603 Weighted average exchangeable limited partnership units 340 340 340 223 Stock options 362 - 211 - Effect of dilutive stock-based compensation 28 27 22 29 Weighted average shares outstanding - diluted 43,384 41,871 42,536 37,112 Diluted Funds from Operations Per Share $0.72 $0.64 $2.74 $2.18 (1) Funds from operations for the year ended December 31, 2002 have been restated to exclude the $6.7 million loss on prepayment of debt, which was previously reported as an extraordinary item, from the calculation pursuant to the adoption of FASB No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, in 2003. The White Paper on Funds from Operations("FFO") approved by NAREIT in March 1995, and revised in November 1999, defines FFO as net income (loss), computed in accordance with generally accepted accounting principles, excluding gains (or losses) from extraordinary items and sales of properties, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. The Company believes that FFO is helpful as a measure of the performanceof a REIT because, along with cash flow from operating activities, financing activities and investing activities, it provides an indication of our ability to incur and service debt, to make capital expenditures and to fund other cash needs. The Company computes FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to net income, financial performance or to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay distributions. 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 Analyst Info, Claire Koeneman, +1-312-640-6745, or General Info, Joe Calabrese, +1-212-445-8434, both of Financial Relations Board Web site: http://www.heritagerealty.com/

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