Capital Automotive Reports First Quarter Results
biz.yahoo.com
Tuesday April 26, 8:15 am ET
- * 19% Revenue Increase* 23% Increase in Diluted Net Income Available to Common Shareholders* 28% Increase in Diluted Funds From Operations ("FFO") Available to Common Shareholders* Transacted Nearly $50 Million of Real Estate Investments
MCLEAN, Va., April 26 /PRNewswire-FirstCall/ -- Capital Automotive REIT, the nation's leading specialty finance company for automotive retail real estate, today announced financial results for the first quarter ended March 31, 2005.
Total revenues were $56.7 million for the quarter, a 19% increase from revenues of $47.5 million in the first quarter of 2004.
Net income available to common shareholders on a diluted basis for the quarter increased 23% to $20.5 million as compared to $16.7 million for the same quarter last year. Net income on a diluted per share basis decreased 2% to $0.47 per share from $0.48 per share for the same quarter last year. Included in net income available to common shareholders on a diluted basis for the quarter ended March 31, 2004 were lease termination fees and a combined gain totaling $2.0 million, or $0.06 per diluted share, related to the sale of six auto retail locations. Included in net income available to common shareholders on a diluted basis for the quarter ended March 31, 2005 were a lease termination fee and a combined gain totaling $163,000, or less than $0.005 per diluted share, as further described below.
Funds From Operations (FFO) available to common shareholders on a diluted basis for the quarter increased 28% to $36.1 million as compared to $28.1 million for the same quarter last year. FFO on a diluted per share basis was $0.66 per share, consistent with the same quarter last year. Included in FFO for the quarter ended March 31, 2004 were lease termination fees totaling $1.2 million, or $0.03 per diluted share, related to the first quarter 2004 sales as noted above. Included in FFO for the quarter ended March 31, 2005 was a lease termination fee totaling $93,000, or less than $0.01 per diluted share, as further described below. A complete reconciliation of FFO and FFO per share to net income and net income per share, which are, respectively, the most directly comparable GAAP measures, is included in this release.
As previously announced, the Company's Board of Trustees declared a cash dividend of $0.4380 per share for the first quarter. The dividend is payable on May 20, 2005 to shareholders of record as of May 10, 2005. The first quarter dividend is the 29th consecutive increase in the quarterly dividend and represents an annualized rate of $1.752 per share and a 5.3% yield based on Friday's closing stock price. The Company's dividend payout ratio for the first quarter of 2005 was approximately 66% of basic FFO available to common shareholders. The Company reaffirms its 2005 annual dividend guidance of $1.80 per share.
The Company's Board of Trustees also declared a dividend for the period commencing February 1, 2005 and ending on April 30, 2005 of $0.46875 per Series A Cumulative Redeemable Preferred Share and a dividend for the same period of $0.50 per Series B Cumulative Redeemable Preferred Share. The preferred dividends will be paid on May 16, 2005 to shareholders of record as of May 2, 2005. The dividends represent annualized rates of $1.875 per Series A preferred share and a yield of 7.4% and $2.00 per Series B preferred share and a yield of 7.6%, in each case based on Friday's closing preferred stock prices.
Real Estate Investments
During the first quarter, the Company increased its net real estate investments by approximately $36 million (consisting of $48 million in real estate investments, $12 million in property and mortgage dispositions and repayments of mortgage notes receivable and construction advances). These investments were located in eight states, including two auto retail properties, facility improvements, advances on one mortgage note receivable and construction advances. These transactions were completed with six existing tenants, the majority of which are public or private Top 100 dealer groups. The first quarter real estate investments contain five automotive franchises and have a weighted average initial lease term of approximately 17.7 years, with multiple renewal options exercisable at the option of the tenants. The investments were funded with cash on hand and the issuance of new long-term debt as further described below.
Commenting on today's news, Thomas D. Eckert, President and Chief Executive Officer, stated, "We are pleased with our first quarter operating results and remain very optimistic about 2005. Our pipeline of transactions continues to grow and we see nothing in the near term that would prevent us from achieving our annual guidance. We continue to deliver best of class service to our clients and strengthen our relationships with the top retailers in the industry as witnessed by the significant level of repeat transactions with existing customers. Our portfolio is performing extremely well and continues to get stronger with opportunistic asset sales and solid dealer financial performance."
Real Estate Dispositions
The Company sells properties from time to time, generally when a tenant has indicated that a particular location no longer meets their operational needs. During the first quarter, the Company sold one auto retail location and a mortgage note receivable for approximately $6.4 million in proceeds, net of commissions and other costs, and recognized approximately $100,000 of a previously deferred gain. The earnings generated from the real estate disposition, including the lease termination fee, and the gain related to the sale of the mortgage note receivable have been reported as discontinued operations.
Portfolio Highlights
As of March 31, 2005, Capital Automotive's portfolio was 100% occupied. On a quarterly basis, the Company performs a credit review of virtually all tenants in its portfolio. The Company's rent coverage ratio, which is one of the primary metrics the Company uses to define the stability of its tenants' cash flow, remains high. As of December 31, 2004, the weighted average operating cash flow of the Company's tenants exceeded 3.5 times the amount of their rental payments. At the end of the first quarter, the Company held lease security deposits and letters of credit totaling approximately $15.4 million. As of March 31, 2005, the Company had accumulated depreciation of $154 million representing 6.9% of its real estate asset portfolio. The weighted average remaining lease term of the portfolio is 11.7 years as of March 31, 2005 and the earliest meaningful lease expirations do not occur until 2008.
Financing Highlights
The Company completed the following transactions during the first quarter:
* On January 27, 2005, as previously announced, the Company repaid $73.0
million of secured variable rate debt that had been formerly swapped
to fixed rate debt, bearing interest at 7.5%. The Company terminated
the swap on this debt during December 2004 in anticipation of a first
quarter payoff. The secured debt repaid had a spread over LIBOR of 175
basis points with a remaining maturity of 8.6 years. The debt was
repaid with borrowings on the Company's unsecured credit facility
(currently priced at a spread over LIBOR of 95 basis points);
* On February 24, 2005, as previously announced, Capital Automotive
L.P., the Company's operating partnership (the "Partnership") sold
$100 million aggregate principal amount of its senior notes in a
private offering to institutional "accredited investors" within the
meaning of Regulation D under the Securities Act of 1933. The notes
bear interest at a fixed rate of 5.46% per annum and mature on
February 24, 2015. Net proceeds were used to repay borrowings on its
unsecured credit facility. In addition, as part of the offering, on
March 30, 2005, the Partnership sold an additional $75 million
aggregate principal balance to the same institutional accredited
investors. The Company has guaranteed the notes. A portion of the net
proceeds were used to repay borrowings outstanding on the Company's
unsecured credit facility and to fund acquisitions. The remainder of
the net proceeds will be used to fund future real estate investments
and for general corporate purposes; and
* On March 24, 2005, the Company repaid $8.5 million of secured variable
rate debt. The secured debt repaid had a spread over LIBOR of 225
basis points with a remaining maturity of 9.6 years. The debt was
repaid with borrowings on the Company's unsecured credit facility,
which was subsequently repaid with the proceeds received from the
private placement transaction noted above.
As of March 31, 2005, the Company's real estate investments before accumulated depreciation totaled nearly $2.3 billion. Total long-term mortgage and unsecured debt was $1.11 billion and there were no draws outstanding under the Company's credit facility. The Company's debt to assets (total assets plus accumulated depreciation) ratio was approximately 47% and debt to total market capitalization ratio was approximately 37% as of March 31, 2005. As of March 31, 2005, the Company's mortgage and unsecured debt (excluding borrowings on its credit facility) had a weighted average remaining term of 9.8 years. The Company's earliest significant long-term debt maturity is not until 2009.
The Company uses a disciplined approach of matching the term and interest rate nature (fixed or variable rate) of its long-term debt to its leases. The Company uses this process, which it refers to as "match-funding," to substantially lock in its investment spreads during the initial lease term. As of March 31, 2005, the ratio of the remaining weighted average term of the Company's debt to the remaining weighted average initial term of its leases was 82% match-funded. As of March 31, 2005, the Company's total outstanding fixed rate debt equaled approximately 47% of its total real estate investments subject to fixed rate leases. The weighted average remaining term of its fixed rate leases was 12.1 years and the weighted average remaining term of its outstanding fixed rate debt was 10.3 years. As a result, the Company's fixed rate leases and fixed rate debt were 85% match-funded. The Company's total outstanding variable rate debt equaled approximately 62% of its total real estate investments subject to variable rate leases. The weighted average remaining term of its variable rate leases was 11.3 years and the weighted average remaining term of its outstanding variable rate debt was 8.3 years. As a result, variable rate leases and debt were 73% match-funded.
Earnings and Dividend Guidance
The Company is reaffirming its 2005 FFO guidance range of $2.72 to $2.74 per diluted share and its net income guidance range of $1.94 to $1.96 per diluted share. The Company's 2005 guidance assumes net real estate investments during 2005 totaling approximately $200 million and assumes LIBOR rises from 2.6% to 3.8% during 2005. Because of the nature of the Company's variable rate lease program, if LIBOR falls below 2.6% or rises above 3.8% during the year, the Company's results should either fall within or exceed the guidance range. In addition, the Company expects to pay its shareholders an annual dividend of $1.80 per share for 2005, an increase of 5.9% over 2004.
David S. Kay, Senior Vice President, Chief Financial Officer and Treasurer added, "As a new investment grade issuer, we achieved excellent execution on our debut unsecured note transaction during the first quarter. We continue to reduce our cost of debt and improve our balance sheet and operating flexibility. We believe our credit statistics continue to strengthen and that our capital structure positions us well to achieve our goals." |
