Skip to content
Open Search Panel
Toggle Menu
<< Back to News
11/12/1999

Starwood Financial Announces Third Quarter Results For Trinet Subsidiary

Starwood Financial Announces Third Quarter Results For TriNet Subsidiary

NEW YORK, Nov. 12 /PRNewswire/ -- Starwood Financial Inc. (NYSE: SFI - news) announced today third quarter results for its subsidiary, TriNet Corporate Realty Trust, Inc. TriNet's third quarter results reflect its operations prior to its merger with Starwood Financial, which closed on November 4, 1999. TriNet's funds from operations (``FFO'') for the third quarter of 1999 were $1.17 per diluted common share. This represents a 30% increase over the same period a year ago and includes a significant lease termination fee that the company accepted from one of its tenants representing $0.26 per share. Excluding this fee, FFO for the third quarter of 1999 equaled $0.91 per diluted common share, a 1% per share increase over the third quarter of 1998.

  • Recent Highlights:
  • Completed $5.4 million purchase/leaseback transaction with Sybase, Inc.
  • Realized $0.8 million gain on three asset sales totaling $40.3 million

during the third quarter and $0.5 million gain on $5.0 million asset

sale in October.

  • Negotiated $7.24 million lease termination fee.
  • Signed 11 new leases, lease extensions and/or early lease renewals on 924,851 square feet of space.
  • Executed leases on four of five office buildings in Phase One of Silicon Valley development joint venture and obtained letter of intent for lease on fifth building.
  • Generated 25% increase in property management fees over third quarter 1998.

FFO and Revenues:

Funds from operations for the quarter ended September 30, 1999, increased $8.6 million to $31.0 million, or $1.17 per diluted common share, from $22.4 million, or $0.90 per diluted common share, for the same period in 1998. Total revenues increased 12% to $48.6 million for the quarter ended September 30, 1999, compared to the prior year.

Acquisition:

On September 1, 1999, TriNet acquired a 44,600 square foot office building in Concord, Mass., through a $5.4 million sale/leaseback transaction. TriNet purchased the property from, and simultaneously leased it back to, Sybase, Inc. As part of the same transaction, TriNet also executed five-year lease extensions on two other buildings that it leases to Sybase in the same office park.

Asset Sales:

TriNet realized a $0.8 million gain on three asset sales totaling $40.3 million during the third quarter and a $0.5 million gain on a $5.0 million asset sale in October. TriNet used approximately $35.9 million of the net proceeds from the asset sales to reduce the balance on its unsecured revolving credit facility and $8.8 million of the proceeds to pay down a portion of one of its mortgage loans.

On July 22, 1999, TriNet realized a $1.3 million gain on the $31.5 million sale of a Long Island office property. TriNet originally acquired the 270,000 square foot building, which is leased to Olympus America, in September of 1996 for $30 million.

On August 2, 1999, TriNet realized a $0.5 million loss on the $8.8 million sale of two industrial properties comprising 480,000 square feet in upstate New York. The two warehouses, which are leased to GATX Logistics, had been part of TriNet's portfolio at the time of its initial public offering in June of 1993.

Subsequent to the close of the third quarter, TriNet realized a $0.5 million gain on the $5.0 million sale of a research and development property located in King of Prussia, Pa. TriNet originally acquired the 118,800 square foot building, which is leased to Lockheed Martin, in June of 1996 for $4.7 million.

TriNet identified the above assets for sale in order to mitigate lease rollover risk and to optimize value that could be obtained from the assets. Year-to-date, TriNet has completed nearly $60.0 million in property sales, bringing total asset sales to $110.0 million since announcing its asset disposition program in October 1998.

New Leases:

During the third quarter of 1999, TriNet executed 11 new leases, lease extensions and/or early lease renewals on 924,851 square feet of office and industrial space. The larger leasing transactions included:

  • A 5-year lease signed by a new tenant, Shaw's Supermarkets, on a 104,723 square foot Lakeville, Mass., warehouse/distribution facility. The new lease became effective August 1, 1999.
  • A 3.5-year lease extension signed by Sears Logistics on a 398,471 square foot Columbus, Ohio, warehouse/distribution property. The new lease became effective September 1, 1999.
  • The execution of five-year lease extensions by Sybase, Inc. on two Concord, Mass., office buildings comprising 122,312 square feet. The two extended leases now expire in June 2006, at the same time as a third property leased to Sybase, which TriNet recently acquired through a sale/leaseback transaction.

Development Lease-Up:

After the close of the third quarter, TriNet's development joint venture with Menlo Equities LLC executed leases on four of the five office buildings in Phase One of its Corporate Technology Centre office park in San Jose, Calif. The joint venture has also received a signed letter of intent for a lease on the fifth building.

The five Class A office buildings, comprising 331,950 square feet, are each 100% leased or under signed letter of intent to a single tenant under long-term leases:

  • Enterprise Networking Systems will commence its eight-year lease on a 46,070 square foot building January 15, 2000.
  • Redback Networks' nine-year lease on a 96,710 square foot building begins March 1, 2000.
  • Digital Island has signed an 11-year lease commencing March 17, 2000, for 56,410 square feet of a 76,410 square foot building. In addition, Digital Island has signed a letter of intent for the remaining 20,000 square feet of the building.
  • California Department of Transportation's 6.5-year lease on a 19,550 square foot building commences November 1, 1999.
  • The joint venture has a signed letter of intent with a prospective fifth tenant for a 10-year lease on a 93,210 square foot building.

Lease Termination:

TriNet received a $7.2 million lease termination fee from the sole tenant of a 102,240 square foot research and development property located in Milpitas, Calif., in exchange for granting the tenant's request to terminate its lease effective September 1, 1999. In connection with this lease termination, TriNet wrote-off a $431,048 deferred rent receivable, which had been accrued in accordance with Statement of Financial Accounting Standards 13. Prior to this agreement, the tenant had five years remaining on its lease, but had the option to terminate the lease on September 1, 2002, for a fee of $1.0 million. The fee negotiated by TriNet represents approximately 91% of the tenant's contractual lease obligations through 2002.

The lease termination payment, which under appropriate accounting standards must be recorded in total as income in the period in which it was received, resulted in additional earnings and FFO of approximately $0.26 per diluted common share in the third quarter of 1999.

The property is now vacant, but TriNet has recently received a signed letter of intent from a potential new tenant. As required by Statement of Financial Accounting Standards 121, TriNet recognized an impairment on the property based on estimated down-time between leases, estimated costs of re-tenanting and anticipated future rents. This $3.4 million impairment reserve is a non-cash charge, which offset earnings in the third quarter, but did not affect FFO.

Property Management:

TriNet's property management subsidiary generated $535,000 in management fees during the third quarter of 1999, which represented a 25% increase over the $429,000 in fees recognized in the third quarter of 1998. This growth in management fees resulted from an increase in property management contracts and the opening of additional on-site property management offices.

Merger Transaction:

On November 3, 1999, Starwood Financial and TriNet Corporate Realty Trust, Inc. each held a special shareholders meeting to approve their proposed merger announced on June 16, 1999. After receiving shareholder approval and satisfying the other conditions to closing, Starwood Financial and TriNet closed the merger on November 4, 1999. Future quarterly financial results will reflect the combined performance of Starwood Financial and TriNet.

Company Profile:

Starwood Financial Inc. (NYSE: SFI - news) is the leading publicly-traded finance company focused exclusively on the commercial real estate industry. The company, which is taxed as a real estate investment trust, provides structured mortgage, mezzanine and lease financing through its proprietary origination, acquisition and servicing platform. The company's mission is to maximize risk-adjusted returns on equity by providing innovative and value-added financing solutions to the real estate industry.

  • (Note: Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Starwood Financial Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Starwood Financial Inc.'s expectations include completion of pending investments, continued availability to originate new investments, the availability and cost of capital for future investments, competition within the real estate industry, real estate and economic conditions, and other risks detailed from time to time in Starwood Financial Inc.'s SEC reports.)
                         TRINET CORPORATE REALTY TRUST, INC.
                               SELECTED FINANCIAL DATA
                       (In thousands, except per share amounts)
                                     (unaudited)
    
                                   Nine Months Ended          Three Months Ended
                                     September 30,               September 30,
                                   1999         1998          1999           1998
        REVENUES:
          Rent                  $116,649      $112,303      $38,076      $40,348
          Joint venture income     2,450         1,828          935          318
          Property management
           fees                    1,972         1,025          535          429
          Interest income          4,956         1,557        1,677          977
          Other income             9,043         2,132        7,419        1,234
            Total revenues       135,070       118,845       48,642       43,306
    
        Expenses:
          Property operating
           costs                   6,074         4,819        2,040        1,888
          General and
           administrative          9,010         9,644        2,703        4,289
          Interest                33,021        28,752       10,850       11,183
          Depreciation and
           amortization           21,349        20,482        7,085        7,383
          Provision for
           asset impairment        3,400            --        3,400           --
         Special charge               --         2,990           --        2,990
            Total expenses        72,854        66,687       26,078       27,733
          Income before
           minority interest,
           gain on sale and
           extraordinary items    62,216        52,158       22,564       15,573
          Minority interest         (122)          (87)         (41)         (41)
          Gain on sale of
           real estate             1,943         1,115          790           --
          Income before
           extraordinary items    64,037        53,186       23,313       15,532
          Extraordinary loss
           from early
           extinguishment
           of debt                  (665)       (1,272)        (665)          --
          Cumulative effect
           of a change in
           accounting principle   (1,810)           --           --           --
          Net income              61,562        51,914       22,648       15,532
          Preferred dividend
           requirement           (11,758)      (11,758)      (3,919)      (3,919)
          Earnings available
           to common shares:
            Basic                $49,804       $40,156      $18,729      $11,613
            Diluted              $49,892       $40,156      $18,732      $11,613
    
          Average common shares
           outstanding:
            Basic                 24,967        24,224       25,067       24,872
            Diluted               25,417        24,395       25,768       24,955
    
          Basic earnings
           available per
           common share
           before extraordinary
           items, net of
           preferred dividend
           requirement             $2.09         $1.71        $0.77        $0.47
          Extraordinary loss
           per common share        (0.10)       (0.05)        (0.02)          --
          Earnings available
           per common share        $1.99         $1.66        $0.75        $0.47
          Diluted earnings
           available per
           common share
           before extraordinary
           items, net of
           preferred dividend
           requirement             $2.06         $1.70        $0.75        $0.47
           Extraordinary loss
            per common share       (0.10)        (0.05)       (0.02)          --
           Earnings available
            per common share       $1.96         $1.65        $0.73        $0.47
    
    
                         TRINET CORPORATE REALTY TRUST, INC.
                               SELECTED FINANCIAL DATA
                       (In thousands, except per share amounts)
                                     (unaudited)
    
                                 Nine Months Ended          Three Months Ended
                                   September 30,              September 30,
                                   1999        1998          1999          1998
        FUNDS FROM OPERATIONS:
          Income before gain on
           sale of real estate
           and extraordinary
           items                $62,094       $52,071      $22,523      $15,532
          Real estate
           depreciation          20,911        20,260        6,925        7,239
          Joint venture
           depreciation           2,534         1,292          851          585
          Provision for
           asset impairment       3,400            --        3,400           --
          Special charge             --         2,990           --        2,990
          Preferred dividend
           requirement          (11,758)      (11,758)      (3,919)      (3,919)
          Total funds from
           operations:
           Basic                $77,181       $64,855      $29,780      $22,427
           Diluted              $80,424       $64,855      $31,045      $22,427
    
          Average common
           shares outstanding:
            Basic                24,967        24,224       25,067       24,872
            Diluted              26,227        24,395       26,624       24,955
    
          Funds from operations
           per common share
            Basic                 $3.09         $2.68        $1.19        $0.90
            Diluted               $3.07         $2.66        $1.17        $0.90
    
    
                                                       Nine Months    Nine Months
                                                           Ended          Ended
                                                         Sept. 30,      Sept. 30,
                                                           1999            1998
        OTHER DATA (in thousands,
         except per share amounts):
          Dividends declared per common share               1.95           1.92
          Total dividends declared on common shares       48,756         47,300
          Dividends per Series A preferred share            1.76           1.76
          Total dividends on Series A preferred shares     3,516          3,516
          Dividends per Series B preferred share            1.73           1.73
          Total dividends on Series B preferred shares     2,243          2,243
          Dividends per Series C preferred share            1.50           1.50
          Total dividends on Series C preferred shares     6,000          6,000
          Total straight-line rent adjustments             3,995          6,682
          Amortization of financing costs                  1,464          1,695
    
    
                                                         Sept. 30,      Dec. 31,
                                                           1999           1998
        BALANCE SHEET DATA (in thousands):
          Real estate (before accumulated
           depreciation) and investment
           in joint venture                            1,471,958      1,500,789
          Deferred rent receivable                        28,747         27,235
          Total assets                                 1,458,682      1,526,567
          Mortgage loans                                  73,506         84,739
          Long term debt, net of discounts               374,141        374,081
          Acquisition Facility                           138,100        188,900
          Total liabilities                              645,700        720,542
          Minority interest                                2,565          2,565
          Stockholders' equity                           810,417        803,460
    
        PROPERTY DATA:
          Total properties                                   143            145
          Total gross leasable area in sq. ft.
           (in thousands)                                 18,740         19,532
    

    SOURCE: Starwood Financial, Inc.

  • << Back to News