Inland Real Estate Corporation Reports Financial Results for Second Quarter 2008

2008-08-05 07:30:00

Inland Real Estate Corporation Reports Financial Results for Second Quarter 2008

OAK BROOK, Ill.–(EMWNews)–Inland Real Estate Corporation (NYSE: IRC) today announced financial and

operational results for the second quarter ended June 30, 2008.

Quarter and Recent Highlights

  • Funds from Operations (FFO) of $23.8 million or $0.36 per share (basic

    and diluted) for second quarter 2008, representing increases of 3.8

    percent and 2.9 percent, respectively, over second quarter 2007

  • Second quarter total revenue increased 4.6 percent to $47.7 million

    and joint venture fee income increased 201.7 percent to $1.4 million,

    year-over-year

  • Same store net operating income up 3.2 percent and 1.3 percent for the

    three and six-month periods, respectively

  • Total of 68 leases executed for rental of 334,195 aggregate square

    feet; second quarter average base rents for new and renewal leases up

    14.9 percent and 12.6 percent, respectively, over expiring rates

  • Five properties, four Bank of America office buildings and University

    of Phoenix building acquired through the asset management joint

    venture with Inland Real Estate Exchange Corporation (IREX)

Financial Results

The Company reported that FFO, a widely accepted measure of performance

for real estate investment trusts (REITs), for the three months ended

June 30, 2008, was $23.8 million, an increase of 3.8 percent or

approximately $0.9 million, compared to $23.0 million for the three

months ended June 30, 2007. On a per share basis, FFO was $0.36 (basic

and diluted) for the three months ended June 30, 2008, an increase of

$0.01 or 2.9 percent compared to the three months ended June 30, 2007.

The increases in FFO and FFO per share for the quarter were primarily

due to a deferred partnership gain of $3.2 million recognized upon

repayment of the related mortgage receivable. Also contributing was an

increase in fee income related to the IREX joint venture, greater gains

on the sale of certain investment securities compared to the second

quarter 2007, plus an increase in same store net operating income. These

gains were partially offset by the recording of a non-cash charge of

$2.5 million related to a decline in value of certain investment

securities which were determined to be other than temporary during the

period, and to a $0.7 million impairment recorded to adjust the book

value of a consolidated property currently under contract for sale.

The Company reported that net income was $10.0 million for the three

months ended June 30, 2008, a decrease of 6.8 percent compared to net

income of $10.7 million for the three months ended June 30, 2007. On a

per share basis, net income was $0.15 per share (basic and diluted) for

the three months ended June 30, 2008, a decrease of 6.3 percent compared

to $0.16 per share (basic and diluted) for the three months ended June

30, 2007. Second quarter net income and net income per share decreased

primarily due to the aforementioned items as well as greater

depreciation expense, primarily resulting from the write-off of tenant

improvements related to vacancies.

FFO decreased $0.4 million or 0.9 percent to $46.7 million for the six

months ended June 30, 2008. On a per share basis, FFO decreased by 1.4

percent or $0.01 to $0.71 from $0.72 for the same year ago period.

Net income was $20.4 million for the six months ended June 30, 2008, a

decrease of $2.0 million or 8.9 percent compared to net income of $22.4

million for the six months ended June 30, 2007. Net income per share was

$0.31 (basic and diluted) for the six months ended June 30, 2008, a

decrease of $0.03 or 8.8 percent from the prior year period.

The decreases in FFO and FFO per share and net income and net income per

share for the six-month period are primarily due to the aforementioned

items and greater gains from sales of vacant land parcels through our

unconsolidated joint ventures in the prior year same period.

A reconciliation of FFO to net income and FFO per share to net income

per share is provided at the end of this release.

I am pleased to report FFO growth of 3.8

percent for the quarter, notwithstanding a difficult market environment

that has impacted certain near term operations,

said Mark Zalatoris, Inland Real Estate Corporations

president and chief executive officer. We

enjoyed successful leasing results, due to the in-demand locations of

our properties, which resulted in an increase of more than 3 percent in

same store net operating income this quarter. As well, our joint venture

initiatives generated $2.4 million in fee income in the first half of

the fiscal year, an increase of more than 116 percent over the same

period last year. Mr. Zalatoris added, We

believe a resilient platform of well-located value and necessity-based

retail assets in stable Midwest markets, combined with controlled growth

initiatives, will sustain and benefit the Company over the long term.

Portfolio Performance

For the quarter, total revenues increased $2.1 million or 4.6 percent to

$47.7 million from $45.6 million in the second quarter 2007. Total

revenues for the six months ended June 30, 2008, increased $4.4 million

or 4.8 percent to $97.8 million from $93.3 million in the same period

prior year. The increases in revenues for the three and six-month

periods ended June 30, 2008, were primarily the result of increased fee

income from unconsolidated joint ventures and increased tenant recovery

income due to a larger amount of recoverable expense compared to the

same periods prior year.

The Company evaluates its overall portfolio by analyzing the operating

performance of properties that have been owned and operated for the same

three and six month periods during each year. A total of 126 of the

Companys investment properties satisfied this

criterion during these periods and are referred to as same

store properties. Same store net operating

income (excluding the impact of straight-line and intangible lease rent)

for the quarter was $31.5 million, an increase of $1.0 million or 3.2

percent compared to $30.5 million in the second quarter 2007. For the

six months ended June 30, 2008, same store net operating income

increased $0.8 million or 1.3 percent to $61.8 million from $61.0

million in the same period prior year. The three and six month increases

in same store net operating income were primarily due to lease

termination income of approximately $1.1 million recorded during the

quarter, as well as ongoing leasing gains and a decrease in

non-reimbursable tenant-related expenses from the comparable periods

prior year. These items were partially offset by the impact on revenue

of certain previously disclosed big-box vacancies. Adjusted for the

impact of lease termination income in the quarter, same store net

operating income would have been essentially flat compared to the same

periods prior year.

As of June 30, 2008, financial occupancy for the Companys

same store portfolio was 93.1 percent, compared to 94.3 percent as of

March 31, 2008, and 93.9 percent as of June 30, 2007.

Leasing

The Company reported consistently strong leasing activity across its

portfolio during the quarter. For the three months ended June 30, 2008,

the Company executed a total of 68 leases aggregating 334,195 square

feet of gross leasable area (GLA). This included 15 new leases

comprising 99,857 square feet with an average rental rate of $10.17 per

square foot, representing a 14.9 percent increase over the average

expiring rate. The 50 renewal leases comprise 230,200 square feet with

an average rental rate of $12.90 per square foot, representing a 12.6

percent increase over the average expiring rate. The 3 non-comparable

leases, consisting of new, previously unleased space, comprise 4,138

square feet with an average base rent of $24.17. As of June 30, 2008,

the Companys total portfolio was 93.6

percent leased, compared to 95.2 percent leased as of March 31, 2008,

and 95.7 percent leased as of June 30, 2007. Financial occupancy for the

entire portfolio was 93.6 percent as of June 30, 2008, compared to 94.8

percent as of March 31, 2008, and 94.8 percent as of June 30, 2007. The

decrease in leased and financial occupancy can be attributed in most

part to the vacancies created by the Wickes Furniture bankruptcy.

EBITDA, Balance Sheet, Market Value and Liquidity

Earnings before interest, taxes, depreciation and amortization (EBITDA)

was $36.8 million for the quarter, a decrease of 1.4 percent compared to

$37.3 million for the second quarter 2007. For the six-month period

ended June 30, 2008, EBITDA was $73.3 million, a decrease of 1.1 percent

from $74.2 million in the prior year same period. A definition and

reconciliation of EBITDA to income from continuing operations is

provided at the end of this news release.

EBITDA coverage of interest expense was 2.8 times for the three months

ended June 30, 2008, compared to 2.7 times reported in the prior quarter

and the 2.6 times reported for the second quarter 2007. The Company has

provided EBITDA and related non-GAAP coverage ratios as supplemental

disclosure because the Company believes such disclosure provides useful

information regarding its ability to service and incur debt.

As of June 30, 2008, the Company had an equity market capitalization of

approximately $952.4 million and $1.0 billion of total debt outstanding

(including the pro-rata share of debt in unconsolidated joint ventures)

for a total market capitalization of approximately $2.0 billion and a

debt-to-total market capitalization of 51.7 percent. Including the

convertible notes, 82.8 percent of this debt was fixed at a weighted

average interest rate of 5.06 percent.

During the quarter the Company renewed its three-year $150.0 million

unsecured line of credit, and negotiated an increase to $155.0 million,

with an expanded lending group comprised of KeyBank, Wachovia, Bank of

America, Wells Fargo and Bank of Montreal. As of June 30 2008, the

Company had $85.0 million outstanding on its unsecured line of credit,

with up to $70.0 million available. The Company uses this for

acquisitions, capital improvements, tenant improvements, leasing costs

and working capital.

Acquisitions

During the quarter the Company acquired through its joint venture with

IREX an 18,018 square-foot, single-tenant office property in

Merrillville, IN, for $5.6 million. The office building is currently

leased to the University of Phoenix, Inc., a wholly-owned subsidiary of

the Apollo Group, Inc.

Subsequent to the end of the quarter, the Company contributed

approximately $60.8 million in cash to the IREX joint venture to acquire

four office buildings in sale-leaseback transactions from Bank of

America, N.A., for an aggregate purchase price of $152.6 million,

including approximately $90.0 million of mortgage debt. The buildings in

Pennsylvania, Nevada, Maryland and New Mexico comprise a total of

approximately 840,000 square feet of space and are 100 percent leased by

Bank of America.

Dispositions

The Company sold Wilson Plaza, an 11,160 square foot neighborhood

shopping center in Batavia, IL, for approximately $1.7 million during

the quarter. Proceeds from this disposition were used to pay down debt

and for general corporate purposes.

Joint Venture Activity

During the quarter the Company contributed to its joint venture with

IREX, Fox Run Square, a 143,512 square foot neighborhood shopping center

in Naperville, IL, anchored by Dominicks

Finer Foods and Ace Hardware that was acquired in January 2008. In

addition, in July the Company closed the sales of three office

properties acquired in sale-leaseback transactions with AT&T Services

and the Greenfield Commons shopping center to 1031 exchange investors.

As of mid-July, all properties acquired through the IREX joint venture

in 2007 have been sold. The Company has recovered, through sales to 1031

exchange investors, the capital originally invested to acquire the

properties and has recycled that capital into additional IREX joint

venture acquisitions.

During the quarter the Company sold for $2.4 million 4.7 acres of land

at the North Aurora Towne Centre development in North Aurora, IL, to

Ashley Furniture for the development of a 50,000 square foot furniture

store. Subsequent to the end of the quarter, the Company sold for $1.2

million 1.2 acres of land at the Orchard Crossing development in Ft.

Wayne, IN, to Arbys for construction of a

3,500 square foot restaurant.

Dividends

In May, June and July 2008, the Company paid monthly cash dividends to

stockholders of $0.08167 per common share. The Company currently pays

annual dividends at the rate of $0.98 per share. The July dividend is

the 153rd consecutive monthly dividend paid by Inland Real Estate

Corporation to stockholders.

Guidance

The Company reiterates original guidance that FFO per common share

(basic and diluted) for fiscal year 2008 will be in the range of $1.46

to $1.49.

Conference Call/Webcast

The Company will host a management conference call to discuss its

financial results on Tuesday, August 5, 2008 at 2:00 p.m. CT (3:00 p.m.

ET). Hosting the conference call for the Company will be Mark Zalatoris,

President and Chief Executive Officer; Brett Brown, Chief Financial

Officer, and Scott Carr, President of Property Management. The live

conference call can be accessed by dialing 1-800-860-2442 or

1-412-858-4600 for international callers. The conference call also will

be available via live webcast on the Companys

website at www.inlandrealestate.com.

The conference call will be recorded and available for replay beginning

at 4:00 p.m. CT (5:00 p.m. ET) on August 5, 2008, until 8:00 a.m. CT

(9:00 a.m. ET) on August 13, 2008. Interested parties can access the

replay of the conference call by dialing 1-877-344-7529 or

1-412-317-0088 for international callers, and entering the replay

passcode 421300#. An online playback of the webcast will be archived for

at least 60 days in the investor relations section of the Companys

website.

About Inland Real Estate Corporation

Inland Real Estate Corporation is a self-administered and self-managed

publicly traded real estate investment trust (REIT) that currently owns

interests in 146 neighborhood, community, power, and lifestyle retail

centers and single tenant properties located primarily in the Midwestern

United States, with aggregate leasable space of more than 14 million

square feet. Additional information on Inland Real Estate Corporation,

including a copy of the Companys

supplemental financial information for the three and six months ended

June 30, 2008, is available at www.inlandrealestate.com.

This press release contains forward-looking statements. Forward-looking

statements are statements that are not historical, including statements

regarding managements intentions, beliefs,

expectations, representations, plans or predictions of the future, and

are typically identified by such words as believe,

expect, anticipate,

intend, estimate,

may, will,

should and could.

The Company intends that such forward-looking statements be subject

to the safe harbors created by Section 27A of the Securities Act of 1933

and Section 21E of the Securities Exchange Act of 1934. There are

numerous risks and uncertainties that could cause actual results to

differ materially from those set forth in the forward-looking statements.

Please refer to the documents filed by Inland Real Estate Corporation

with the SEC, specifically the Companys

Annual Report on Form 10-K for the year ended December 31, 2007, for a

more complete discussion of these risks and uncertainties. Inland

Real Estate Corporation disclaims any intention or obligation to update

or revise any forward-looking statements whether as a result of new

information, future events or otherwise.

INLAND REAL ESTATE CORPORATION

Consolidated Balance Sheets

June 30, 2008 and December 31, 2007

(In thousands except per share data)

 

June 30, 2008
(unaudited)

December 31, 2007

Assets:

 

Investment properties:

Land

$

349,974

347,804

Construction in progress

2,913

1,573

Building and improvements

936,895

 

970,231

 

 

1,289,782

1,319,608

Less accumulated depreciation

263,001

 

250,433

 

 

Net investment properties

1,026,781

1,069,175

 

Cash and cash equivalents

16,706

18,378

Investment in securities

17,397

18,074

Accounts and mortgage receivable

49,486

63,986

Investment in and advances to unconsolidated joint ventures

97,833

103,952

Acquired lease intangibles, net

22,560

27,409

Deferred costs, net

9,632

9,592

Other assets

9,317

 

10,753

 

 

Total assets

$

1,249,712

 

1,321,319

 

 

Liabilities:

 

Accounts payable and accrued expenses

$

34,146

35,590

Acquired below market lease intangibles, net

3,201

3,429

Distributions payable

5,394

5,363

Mortgages payable

562,830

606,680

Line of credit

85,000

100,000

Convertible notes

180,000

180,000

Other liabilities

17,982

 

24,404

 

 

Total liabilities

888,553

 

955,466

 

 

Commitments and contingencies

 

Minority interest

2,337

 

2,494

 

 

Stockholders’ Equity:

 

Preferred stock, $0.01 par value, 6,000 Shares authorized; none

issued and no change
outstanding at June 30, 2008 and December

31, 2007

Common stock, $0.01 par value, 500,000 Shares authorized; 66,047 and

65,669
Shares issued and outstanding at June 30, 2008 and

December 31 2007, respectively

661

657

Additional paid-in capital (net of offering costs of $58,816)

620,959

615,298

Accumulated distributions in excess of net income

(260,150

)

(248,262

)

Accumulated other comprehensive loss

(2,648

)

(4,334

)

 

Total stockholders’ equity

358,822

 

363,359

 

 

Total liabilities and stockholders’ equity

$

1,249,712

 

1,321,319

 

INLAND REAL ESTATE CORPORATION

Consolidated Statements of Operations

For the three and six months ended June 30, 2008 and 2007

(unaudited)

(In thousands except per share data)

 

 

 

Three months
ended
June 30, 2008

Three months
ended
June 30, 2007

Six months
ended
June 30, 2008

Six months
ended
June 30, 2007

Revenues:

Rental income

$

32,430

33,354

65,562

64,989

Tenant recoveries

12,355

10,657

27,789

25,385

Other property income

1,495

1,118

1,985

1,839

Fee income from unconsolidated joint ventures

1,433

 

475

 

2,449

 

1,131

 

Total revenues

47,713

 

45,604

 

97,785

 

93,344

 

 

Expenses:

Property operating expenses

6,051

4,962

15,225

12,865

Real estate tax expense

8,225

7,841

16,625

15,942

Depreciation and amortization

11,866

10,950

22,678

20,919

Provision for asset impairment

666

666

General and administrative expenses

3,538

 

3,040

 

6,591

 

6,364

 

Total expenses

30,346

 

26,793

 

Inland Real Estate Corporation (Investors/Analysts):
Dawn Benchelt,

Investor Relations Director
(630) 218-7364
benchelt@inlandrealestate.com
or
Inland

Communications, Inc. (Media):
Matthew Tramel, Media Relations

Director
(630) 218-8000 x4896
tramel@inlandgroup.com

free cash grants, free grant money, free money, cash grants, scholarships, business grants, foundation grants, government grants, debt grants, consolidation, college tuition, financial aid, medical grants, personal grants, medical bills, unsecured loans, no interest loans, financing, loans, capital, non profit organizations

Major Newsire & Press Release Distribution with Basic Starting at only $19 and Complete OTCBB / Financial Distribution only $89

Get Unlimited Organic Website Traffic to your Website 
TheNFG.com now offers Organic Lead Generation & Traffic Solutions





























Leave a Reply

Your email address will not be published. Required fields are marked *

*