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.
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.
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.
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.
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.
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.
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.
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.
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.
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.