Winthrop Realty Trust Announces Results for Fourth Quarter and Full Year 2008 and Declares Regular Quarterly Cash Dividend
BOSTON, March 5-- Winthrop Realty Trust (NYSE: FUR - News) announced today financial and operations results for the fourth quarter and full year ended December 31, 2008. All per share amounts are on a diluted basis and have been restated to reflect the effect of the reverse stock split for all periods presented.
2008 Fourth Quarter Highlights and Recent Events - Appointed Carolyn Tiffany as the Company's President, effective January 1, 2009. Ms. Tiffany previously served as the Company's Chief Operating Officer from January 1, 2004 through January 31, 2007. In addition, Ms. Tiffany and Bradley E. Scher became members of the Company's Board of Trustees in February 2009.
- Increased cash, cash equivalents and restricted cash to $73.6 million at December 31, 2008 from $42.6 million at the end of 2007 and held marketable securities with a value of $36.7 million at December 31, 2008.
- As of December 31, 2008, reduced overall debt inclusive of the Company's Series B-1 Preferred Shares by approximately 27%, or $110.5 million, to $299.9 million.
- Extended and modified its existing line of credit with KeyBank National Association. Under the revised terms, the line of credit was extended for two years, now expiring December 16, 2010, subject to one, single-year extension right, and provides for a maximum initial borrowing at any one time of up to $35 million, subject to increase up to $75 million.
- Accepted a proposal by the Company's external advisor to reduce the base management fee by an estimated $2.5 million for 2009 by eliminating the asset based fee calculation and quantifying a new base equity amount effective as of January 1, 2009 based on a price of $11.00 per common share outstanding and $25.00 per Series B-1 Preferred Share outstanding.
- Through February 2009, repurchased a total of 1,941,105 of its Series B-1 Preferred Shares having a redemption value of $48.5 million for a gross price of approximately $35.7 million, a 26.5% blended discount. Currently, 1,496,000 of the Company's Series B-1 Preferred Shares remain outstanding.
- Declared a regular quarterly cash dividend for the fourth quarter of 2008 of $0.325 per common share and a special dividend of $0.05 per common share, both of which were paid on January 15, 2009.
- Implemented a one-for-five reverse split of the Company's common shares of beneficial interest which took effect after the close of the market on November 28, 2008 with the first post-split trading day December 1, 2008. Winthrop's Series B-1 Preferred Shares were proportionately reduced to reflect the reverse split and the conversion price increased to $22.50 from $4.50 per Series B-1 Preferred Share.
Fourth Quarter 2008 Financial Results Net loss applicable to common shares for the quarter ended December 31, 2008 was $52.7 million, or $3.34 per share loss, compared with a net loss of $24.4 million, or $1.84 per share loss, for the quarter ended December 31, 2007. This decrease in earnings for the comparable periods was due primarily to $39.7 million of non-cash charges for asset impairments and loan loss reserves recognized by Lex-Win Concord, our debt platform joint venture, that resulted in an equity loss recognized by the Company of $16.3 million for the fourth quarter 2008 coupled with a further $36.5 million other-than-temporary impairment to the carrying value of the Company's investment in Lex-Win Concord. The Company also recognized other-than-temporary impairments of $5.5 million on its mezzanine loan on a three building suburban office complex and on its Lansing, Michigan property in the Marc Realty portfolio, each of which is treated as a separate investment for financial purposes, and a $2.1 million impairment on its Andover, Massachusetts property. For the quarter ended December 31, 2008, the Company reported negative Funds from Operations (FFO) of $51.2 million, or $3.25 negative FFO per share, compared with a negative FFO of $20.7 million, or $1.56 negative FFO per share, for the quarter ended December 31, 2007. Adjusting FFO for certain items that affect comparability which are listed in the table below, FFO for the quarter ended December 31, 2008 was $6.4 million or $0.41 per share, compared with FFO of $0.9 million, or $0.07 per share for the quarter ended December 31, 2007.
Quarter Ended December 31,
(Amounts in thousands) 2008 2007
(unaudited) (unaudited)
FFO applicable to common shares (1) $(51,209) $(20,694)
Per Share $(3.25) $(1.56)
Items that affect comparability (income) expense:
Non-cash asset write-downs:
Property impairment $2,100 $-
Loan loss reserves 1,179 -
Available for sale securities impairment - 18,218
Preferred equity impairment 5,512 -
Impairment of equity investment in Concord 36,543 -
Loan loss and impairments from
partially owned entity - Concord 19,832 5,514
Net gain on sale of securities 449 (2,202)
Net gain on sale of preferred equity (245) -
Net (gain) loss on extinguishment of debt (6,284) 49
Net gain on extinguishment from partially
owned entity - Concord (1,453) -
Total items that affect comparability $57,633 $21,579
Per share $3.66 $1.63
FFO as adjusted for comparability $6,424 $885
Per Share $0.41 $0.07
(1) See page 7 for a reconciliation of net income to FFO for the quarters
ended December 31, 2008 and 2007.
Year Ended December 31, 2008 Financial Results Net Loss applicable to common shares for the year ended December 31, 2008 was $68.2 million or $4.59 per share loss as compared with net income of $2.5 million or $0.19 per share for the year ended December 31, 2007. Net income was negatively impacted by a number of non-cash items, the majority of which are related to (1) the impairments and loan loss reserves recognized by Lex-Win Concord during the year ended December 31, 2008 which resulted in a loss of $60.4 million, $30.2 million of which represents the Company's 50% share in such loss, (2) the aforementioned further other-than-temporary impairment of $36.5 million on the Company's investment in Lex-Win Concord, (3) other-than-temporary impairments of $7.5 million to the Company's preferred equity investment in the four aforementioned Marc Realty properties, and (4) the aforementioned $2.1 million impairment on its Andover, Massachusetts property. Negative FFO for the year ended December 31, 2008 was $57.7 million, or $3.88 negative FFO per share, compared with FFO of $14.5 million, or $1.10 per share for December 31, 2007. Adjusting FFO for certain items that affect comparability which are listed in the table below, FFO for the years ended December 31, 2008 and 2007 was $25.0 million or $1.68 per share and $21.3 million or $1.62 per share, respectively.
Year Ended December 31,
(Amounts in thousands) 2008 2007
(unaudited) (unaudited)
FFO applicable to common shares (1) $(57,667) $14,514
Per Share $(3.88) $1.10
Items that affect comparability (income) expense:
Non-cash asset write-downs:
Property impairment $2,100 $-
Loan loss reserves 1,179 1,266
Available for sale securities impairment 207 18,218
Preferred equity impairment 7,512 -
Impairment of equity investment in Concord 36,543 -
Loan loss and impairments from
partially owned entity - Concord 52,443 5,514
Net gain on sale of securities (2,058) (12,184)
Net gain on sale of preferred equity (1,160) (6,355)
Net (gain) loss on extinguishment of debt (6,284) 369
Net gain on extinguishment from
partially owned entity - Concord (7,802) -
Total items that affect comparability $82,680 $6,828
Per share $5.56 $0.39
FFO as adjusted for comparability $25,013 $21,342
Per Share $1.68 $1.62
(1) See page 7 for a reconciliation of net income to FFO for the years
ended December 31, 2008 and 2007.
Michael L. Ashner, Winthrop Realty Trust's Chairman and Chief Executive Officer, commented, "With approximately $100 million cash, cash equivalents, publicly traded equity and debt securities and an untapped line of credit of $35 million, as compared to less than $37.5 million of long-term recourse debt, we believe that we have one of the strongest balance sheets among publicly traded REITS. This strength both well protects the company and positions it to take advantage of the opportunities that will arise in the current harsh economic environment." First Quarter 2009 Dividend Declaration The Company's Board of Trustees is announcing that it has declared a dividend for the first quarter of 2009 of $0.25 per share payable on April 15, 2009 to common shareholders of record on March 31, 2009. Since December 2005, the Company has paid regular dividends to its shareholders. In paying dividends Winthrop has always sought to have its dividends track cash flow from operations, both recurring and nonrecurring. As a result, while the Company intends to continue paying dividends each quarter, future dividend declarations will be at the discretion of its Board of Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements, the distribution requirements for REITs under the Internal Revenue Code and such other factors as its Board of Trustees deem relevant. Subject to the foregoing, Winthrop expects to continue distributing its current cash flow after reserving normal and customary amounts thereby allowing it to maintain necessary capital. Toward that end, the Board of Trustees elected to reduce the Company's dividend to $0.25 per share for the first quarter of 2009, which represents a reduction from $0.325 per share for the first quarter of 2008. This represents the Company's existing budgeted recurring cash flow generated by assets currently owned and excludes any potential cash flow from its investment in Concord, as well as potential future cash flow generated from the investment of the substantial cash and cash equivalents on hand. The Company expects to continue applying these standards with respect to its dividends on a quarterly basis which could cause the dividends to increase or decrease depending on actual cash flow. Conference Call Information The Company will host a conference call to discuss its fourth quarter and year end 2008 results today, Thursday, March 5, 2009 at 2:00 pm Eastern Time. Interested parties may access the live call by dialing (877) 407-9205 or (201) 689-8054, or via the Internet at www.winthropreit.com within the News and Events section.
A replay of the call will be available through April 5, 2009 by dialing (877) 660-6853; account #286, confirmation #306215. An online replay will also be available through April 5, 2009. About Winthrop Realty Trust Winthrop Realty Trust is a real estate investment trust (REIT) that owns, manages and lends to real estate and related investments, both directly and through joint ventures. Winthrop Realty Trust is listed on the New York Stock Exchange and trades under the symbol "FUR." The Company has executive offices in Boston, Massachusetts and Jericho, New York. For more information please visit www.winthropreit.com .
Forward-Looking Statements "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. The statements in this release state the Company's and management's hopes, intentions, beliefs, expectations or projections of the future and are forward-looking statements for which the Company claims the protections of the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act of 1995. It is important to note that future events and the Company's actual results could differ materially from those described in or contemplated by such forward-looking statements. Factors that could cause actual results to differ materially from current expectations include, but are not limited to, (i) general economic conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or general downturn in their business, (iii) local real estate conditions, (iv) increases in interest rates, (v) increases in operating costs and real estate taxes, (vi) changes in accessibility of debt and equity capital markets and (vii) defaults by borrowers on loans. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission, copies of which may be obtained from the Company or the Securities and Exchange Commission. The Company refers you to the documents filed by the Company from time to time with the Securities and Exchange Commission, specifically the section titled "Risk Factors" in the Company's most recent Annual Report on Form 10-K, as may be updated or supplemented in the Company's Form 10-Q filings, which discuss these and other factors that could adversely affect the Company's results. Condensed Financial Results Financial results for the three months and year ended December 31, 2008 and 2007 are as follows (in thousands except per share amounts):
Three Months Ended Years Ended
December 31, December 31,
2008 2007 2008 2007
(unaudited) (unaudited) (unaudited)
Revenue
Rents and
reimbursements $10,809 $9,769 $43,342 $40,485
Interest and dividends 1,186 492 2,448 10,829
11,995 10,261 45,790 51,314
Expenses
Property operating 1,890 1,956 7,407 5,851
Real estate taxes 369 773 2,549 2,139
Depreciation and
amortization 3,029 3,875 12,094 12,688
Interest 5,168 9,535 22,278 31,477
Impairment loss on
investments in real
estate 2,100 - 2,100 -
Impairment loss on
available for sale
securities - 18,218 207 18,218
Provision for loss
on loan receivable 1,179 - 1,179 1,266
State and local taxes 95 (68) 330 417
General and
administrative 1,768 2,482 6,887 8,342
15,598 36,771 55,031 80,398
Other income (loss)
Earnings (loss) from
preferred equity
investments (4,163) 1,395 (1,645) 11,836
Equity in (loss)
earnings of equity
investments (53,112) (2,556) (69,310) 3,647
Gain (loss) on sale
of available for
sale securities (449) 205 1,580 10,187
Gain on sale of
mortgage-backed
securities - - 454 -
Unrealized gain on
available for sale
securities 24 - 24 -
Gain on sale of
other assets - 1,997 24 1,997
Gain (loss) on early
extinguishment of debt 6,284 (49) 6,284 (369)
Interest income 245 491 1,670 3,149
Other income 499 700 499 700
(50,672) 2,183 (60,420) 31,147
Income (loss) from
continuing
operations before
minority interest (54,275) (24,327) (69,661) 2,063
Minority interest 219 76 483 578
Income (loss) from
continuing operations (54,494) (24,403) (70,144) 1,485
Discontinued operations
Income from discontinued
operations 27 37 161 996
Gain on sale of real
estate 1,807 - 1,807 -
Income from discontinued
operations 1,834 37 1,968 996
Net income (loss)
applicable to
common shares $(52,660) $(24,366) $(68,176) $2,481
Per Common Share
Data - Basic:
Income (loss) from
continuing operations $(3.46) $(1.84) $(4.72) $0.11
Income from discontinued
operations 0.12 - 0.13 0.08
Net income (loss) $(3.34) $(1.84) $(4.59) $0.19
Per Common Share
Data - Diluted:
Income (loss) from
continuing operations $(3.46) $(1.84) $(4.72) $0.11
Income from discontinued
operations 0.12 - 0.13 0.08
Net income (loss) $( 3.34) $(1.84) $(4.59) $0.19
Basic Weighted-Average
Common Shares 15,747 13,252 14,866 13,165
Diluted Weighted-Average
Common Shares 15,747 13,252 14,866 13,178
Funds From Operations: The following presents a reconciliation of net income to funds from operations for the three months and year ended December 31, 2008 and 2007 (in thousands, except per share amounts):
For the Three Months For the Year
Ended Ended
December 31, December 31,
2008 2007 2008 2007
(unaudited)(unaudited) (unaudited)(unaudited)
Net income (loss) $(52,660) $(24,366) $(68,176) $2,481
Real estate depreciation 1,709 1,657 6,715 6,281
Amortization of capitalized
leasing costs 1,262 2,154 5,160 6,156
Real estate depreciation and
amortization of
unconsolidated interests 1,109 656 3,699 2,599
Less: Minority interest
share of depreciation and
amortization (822) (795) (3,258) (3,003)
Gain on sale of real estate (1,807) - (1,807) -
Funds from operations
applicable to common shares $(51,209) $(20,694) $(57,667) $14,514
Weighted-average Common
Shares 15,747 13,252 14,866 13,165
Stock options - - - 13
Diluted weighted-average
Common Shares 15,747 13,252 14,866 13,178
Funds from operations per
share - diluted $(3.25) $(1.56) $(3.88) $1.10
FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as net income or loss determined in accordance with Generally Accepted Accounting Principles ("GAAP"), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO and FFO per diluted share are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs. FFO and FFO per diluted share should be evaluated along with GAAP net income and income per diluted share (the most directly comparable GAAP measures), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of equity REITs. Management believes that FFO and FFO per diluted share are helpful to investors as supplemental performance measures because these measures exclude the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, these non-GAAP measures can facilitate comparisons of operating performance between periods and among other equity REITs. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as disclosed in the Company's Consolidated Statements of Cash Flows. FFO should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. In addition to FFO, the Company also discloses FFO before certain items that affect comparability. Although this non-GAAP measure clearly differs from NAREIT's definition of FFO, the Company believes it provides a meaningful presentation of operating performance. A reconciliation of net income to FFO is provided above. In addition, a reconciliation of FFO to FFO before certain items that affect comparability is provided on page 2 and 3 of this press release.
Consolidated Balance Sheets:
(in thousands, except share data)
December 31,
2008 2007
(unaudited)
ASSETS
Investments in real estate, at cost
Land $21,344 $21,325
Buildings and improvements 246,362 244,965
Less: accumulated depreciation (25,901) (19,214)
Investments in real estate, net 241,805 247,076
Cash and cash equivalents 59,238 36,654
Restricted cash held in escrows 14,353 5,978
Mortgage-backed securities available
for sale pledged under repurchase agreements - 78,141
Loans receivable, net of reserve of
$2,445 and $1,266, respectively 22,876 12,496
Accounts receivable, net of reserve of
$225 and $163, respectively 14,028 20,835
Available for sale securities 36,700 51,804
Preferred equity investment 50,624 74,573
Equity investments 92,202 179,475
Lease intangibles, net 25,929 31,964
Deferred financing costs, net 3,218 5,309
Assets of discontinued operations - 1,112
Deposit 17,081 -
Other assets 40 30
TOTAL ASSETS $578,094 $745,447
LIABILITIES
Mortgage loans payable $229,737 $236,925
Repurchase agreements - 75,175
Series B-1 Cumulative Convertible
Redeemable Preferred Shares, $25 per
share liquidation preference;
2,413,105 and 3,930,657 shares
authorized and outstanding at December
31, 2008 and 2007, respectively 60,328 98,266
Note payable 9,800 -
Accounts payable and accrued liabilities 8,596 12,046
Dividends payable 5,934 16,242
Deferred income 795 -
Below market lease intangibles, net 3,696 5,021
TOTAL LIABILITIES 318,886 443,675
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 10,958 9,978
SHAREHOLDERS' EQUITY
Common shares, $1 par, unlimited shares
authorized; 15,824,495 and 13,258,367
issued and 15,754,495 and 13,258,367
outstanding in 2008 and 2007,
respectively
15,824 66,292
Additional paid-in capital 461,816 358,145
Treasury stock, 70,000 shares, at cost (930) -
Accumulated distributions in excess of
net income (213,284) (124,553)
Accumulated other comprehensive loss (15,176) (8,090)
Total Shareholders' Equity 248,250 291,794
TOTAL LIABILITIES, MINORITY INTEREST &
SHAREHOLDERS' EQUITY $578,094 $745,447
Further details regarding the Company's results of operations, properties, joint ventures and tenants are available in the Company's Form 10-K for the year ended December 31, 2008 which will be filed with the Securities and Exchange Commission and will be available for download at the Company's website www.winthropreit.com or at the Securities and Exchange Commission website www.sec.gov.
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