HTG Heritage Property Investment

Heritage Property Investment Trust, Inc. Announces Results for First Quarter Ended March 31, 2004 BOSTON, May 4 /PRNewswire-FirstCall/ -- Heritage Property Investment Trust, Inc. ("Heritage" or the "Company"), today reported results of its operations for the first quarter ended March 31, 2004. Financial highlights, significant events and transactions completed during the quarter include: -- Funds from Operations (FFO), a widely accepted measure of REIT performance, increased 9.2% to $32.1 million, as compared to $29.4 million for the same period in 2003. On a diluted per share basis, FFO decreased to $0.69 per diluted share, as compared to $0.70 per diluted share for the first quarter of 2003. -- Net income attributable to common shareholders decreased $0.3 million to $10.9 million, or $0.23 per diluted share, as compared to $11.2 million, or $0.27 per diluted share, for the same period in 2003. -- Revenue from rentals and recoveries increased 8.2% to $81.3 million, as compared to $75.1 million for the three-month period ended March 31, 2003. -- The Company executed 171 leases (new and renewed), for 776,000 square feet, and achieved an 8.2% increase over prior rents on a cash basis. -- The Company redeemed all outstanding 8.875% Series B Cumulative Redeemable Perpetual Preferred Units of Bradley Operating Limited Partnership. -- The Company completed its first debt offering and sold $200 million principal amount of unsecured 5.125% notes due April 15, 2014. -- Subsequent to March 31, 2004, the Company completed its first shopping center acquisition in 2004, Long Meadow Commons, a 119,000 square foot grocer-anchored community shopping center located in Mundelein, Illinois. -- The Company declared a cash dividend on its common stock of $0.525 per share payable on April 15, 2004. "As we entered 2004, we set three primary objectives for our business -- improving the performance of our core portfolio, pursuing external growth through opportunistic acquisitions, and strengthening our balance sheet. We continue to aggressively work towards re-leasing space recovered from high profile bankrupt tenants and in conjunction with our tenant-focused operating strategy, anticipate improvement in our core portfolio in the latter part of 2004 and 2005," stated Heritage's Chairman, President and Chief Executive Officer, Thomas Prendergast. Mr. Prendergast further noted, "At the same time, we are actively pursuing a number of attractive acquisition and joint venture opportunities which, when combined with our recently completed Long Meadow acquisition, makes us confident that we will achieve our 2004 net acquisition target of $125 million." The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the quarter ended March 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 March 31, 2004, Heritage had a shopping center portfolio of 162 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. Our diluted FFO and net income per share reflect the Company's equity offering in December 2003 in which it issued an additional approximately 3.9 million shares. Leasing Activity During the first quarter of 2004, the Company executed 171 leases (new and renewed), for 776,000 square feet. In doing so, the Company achieved an 8.2% increase over prior rents on a cash basis from $10.08 per square foot to $10.90 per square foot. By comparison, during the first quarter of 2003, the Company executed 126 leases (new and renewed), for 549,000 square feet. During the first quarter of 2003, the Company achieved a 5.3% increase over prior rents on a cash basis from $9.08 per square foot to $9.56 per square foot. At March 31, 2004, the Company's portfolio was 91.2% leased as compared to 92.0% leased at December 31, 2003 and 93.1% leased at March 31, 2003. Our occupancy numbers reflect the return of space previously leased to bankrupt tenants. Same Property Operating Results With respect to the properties owned and operated by the Company for the three months ended March 31, 2004 and 2003, same property net operating income decreased slightly as follows: Three Months Ended March 31, 2004 2003 Real estate revenue $73,478 $72,967 Operating expenses (22,509) (21,948) Net Operating Income 50,969 51,019 (0.1)% Less: Lease termination income (296) (74) Net Operating Income, as adjusted $50,673 $50,945 (0.5)% INVESTMENT ACTIVITY In keeping with the Company's external growth strategy, on April 30, 2004, the Company completed the acquisition of Long Meadow Commons, a 119,000 square foot grocer-anchored community shopping center located in Mundelein, Illinois (a northern Chicago suburb) for a purchase price of approximately $18 million. The property, which is 96% leased, is anchored by Dominick's Finer Foods (a subsidiary of Safeway). The Company funded this acquisition through the assumption of mortgage debt and borrowings under its line of credit. The Company continues its on-going process of reviewing its assets to ensure that they fit with its long-term ownership criteria and disposing non-core assets. As a result, on April 20, 2004, the Company completed the disposition of the Fortune office building, a 59,000 square foot property located in Hartsdale, New York for $7.7 million, resulting in a net gain of approximately $3.0 million. CAPITAL MARKETS ACTIVITY On March 29, 2004, the Company completed the offering of $200 million principal amount of unsecured 5.125% notes due April 15, 2014. The sale of these notes was completed on April 1, 2004. The notes were priced to yield 5.236% at a spread of 135 basis points over the comparable U.S. Treasury note. The net proceeds from the offering were used to reduce the outstanding balance on our 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 5.32%. In connection with the sale of these notes, the three rating agencies, Moody's, Standard & Poor's and Fitch affirmed their current investment grade ratings and stable outlook for the Company. On March 8, 2004, in anticipation of the Company's note offering, the Company entered into forward starting interest rate swaps with a total notional amount of approximately $192.5 million. The purpose of these forward swaps was to mitigate the risk of changes in interest rates prior to the pricing of our offering. These forward swaps terminated upon pricing of the offering and we received a payment of $1.185 million in connection with the termination of these swaps. Amounts received upon termination of the swaps will be amortized as a reduction to interest expense as scheduled interest payments are made on the Company's notes. On February 23, 2004, the Company redeemed all outstanding 8.875% Series B Preferred Units of Bradley Operating Limited Partnership for an aggregate redemption price of approximately $50 million. There were no unamortized issuance costs associated with these units, therefore, the Company did not incur a charge. Mr. Prendergast noted, "I am very pleased with the significant progress that we have made in strengthening our balance sheet during the past several months through the combination of our December 2003 equity offering, our February 2004 redemption of the Bradley Preferred Units, and our March 2004 bond offering. These accomplishments have given us greater financial flexibility and positioned us for future growth." 1st QUARTER CONFERENCE CALL Members of Heritage's senior management will host a conference call on Wednesday, May 5, 2004, at 10:00 a.m., ET, to discuss the Company's first quarter results. Stockholders, analysts and other interested parties may participate in this conference call by dialing 800-218-8862 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 May 12, 2004 by accessing the Company's website at http://www.heritagerealty.com/ or by dialing 800-405-2236 or 303-590-3000, pass-code 576173. 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 March 31, 2004, Heritage had a shopping center portfolio of 162 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. Heritage's shopping center portfolio was approximately 91.2% leased as of March 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 first 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 March 31, 2004 and December 31, 2003 (Unaudited and in thousands of dollars) March 31, December 31, 2004 2003 Assets Real estate investments, net $2,141,615 $2,157,232 Cash and cash equivalents 10,260 5,464 Accounts receivable, net of allowance for doubtful accounts of $9,394 in 2004 and $8,770 in 2003 29,193 25,514 Prepaids and other assets 14,707 13,608 Deferred financing and leasing costs 26,280 25,757 Total assets $2,222,055 $2,227,575 Liabilities and Shareholders' Equity Liabilities: Mortgage loans payable $625,398 $632,965 Unsecured notes payable 201,490 201,490 Line of credit facility 305,000 243,000 Accrued expenses and other liabilities 77,959 82,115 Accrued distributions 24,709 24,438 Total liabilities 1,234,556 1,184,008 Series B Preferred Units - 50,000 Series C Preferred Units 25,000 25,000 Exchangeable limited partnership units 7,556 7,670 Other minority interest 2,425 2,425 Total minority interests 34,981 85,095 Shareholders' equity: Common stock, $.001 par value; 200,000,000 shares authorized; 46,724,344 and 46,208,574 shares issued and outstanding at March 31, 2004 and December 31, 2003, respectively 47 46 Additional paid-in capital 1,148,088 1,136,516 Cumulative distributions in excess of net income (189,907) (176,267) Other comprehensive income 1,185 - Unearned compensation (6,895) (1,823) Total shareholders' equity 952,518 958,472 Total liabilities and shareholders' equity $2,222,055 $2,227,575 Heritage Property Investment Trust, Inc. Consolidated Statements of Operations Three Months ended March 31, 2004 and 2003 (Unaudited and in thousands, except per-share data) Three Months Ended March 31, 2004 2003 Revenue: Rentals and recoveries $81,311 $75,141 Interest and other 204 29 Total revenue 81,515 75,170 Expenses: Property operating expenses 13,012 12,003 Real estate taxes 11,975 10,434 Depreciation and amortization 21,470 19,121 Interest 17,615 16,877 General and administrative 5,282 5,003 Total expenses 69,354 63,438 Income before allocation to minority interests 12,161 11,732 Income allocated to exchangeable limited partnership units (65) (20) Income allocated to Series B & C Preferred Units (1,208) (1,664) Income before discontinued operations 10,888 10,048 Discontinued operations: Operating income from discontinued operations - 363 Gains on sales of discontinued operations - 809 Income from discontinued operations - 1,172 Net income attributable to common shareholders $10,888 $11,220 Basic per-share data: Income before discontinued operations $0.23 $0.24 Income from discontinued operations - 0.03 Income attributable to common shareholders $0.23 $0.27 Weighted average common shares outstanding 46,377 41,593 Diluted per-share data: Income before discontinued operations $0.23 $0.24 Income from discontinued operations - 0.03 Income attributable to common shareholders $0.23 $0.27 Weighted average common and common equivalent shares outstanding 46,841 41,933 Heritage Property Investment Trust, Inc. Calculation of Funds from Operations (in thousands of dollars) Three Months Ended March 31, 2004 2003 Net income $10,888 $11,220 Add (deduct): Depreciation and amortization (real estate-related) 21,191 18,976 Net gains on sales of real estate investments and discontinued operations - (809) Funds from Operations $32,079 $29,387 The White Paper on Funds from Operations approved by NAREIT in March 1995, and revised in November 1999, defines Funds from Operations 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 Funds from Operations is helpful as a measure of the performance of 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 Funds from Operations in accordance with standards established by NAREIT, which may not be comparable to Funds from Operations 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. Funds from Operations 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 cash 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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