Capital Automotive Exceeds Earnings Guidance for the First Quarter, 16% AFFO Per Share Growth
MCLEAN, Va., April 24 -- 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, 2002.
The Company reported record first quarter revenues, net income and adjusted funds from operations (funds from operations excluding straight-lined rents) (``AFFO''). Total revenues were $32.5 million for the quarter, a 16% increase from revenues of $28.1 million in the first quarter of 2001. Net income for the quarter increased 59% to $10.9 million as compared to $6.8 million in the same quarter last year. Net income on a diluted per share basis increased 26% to $0.39 per share from $0.31 per share in the same quarter last year. AFFO for the quarter increased 36% to $18.6 million as compared to $13.7 million for the same quarter last year. AFFO on a diluted per share basis increased 16% to $0.52 per share from $0.45 per share for the same quarter last year.
As previously announced, the Company's Board of Trustees declared a cash dividend of $0.3935 per share for the first quarter. The dividend is payable on May 21, 2002 to shareholders of record as of May 10, 2002. The first quarter dividend is the 17th consecutive increase in the quarterly dividend and represents an annualized rate of $1.574 per share and a 6.4% yield based on Monday's closing stock price. The Company reaffirms its 2002 annual dividend guidance of $1.60 per share, of which 15% is estimated to be a return of capital which is not taxed as ordinary income to its shareholders.
Acquisitions Recap
As previously announced on April 2, 2002, the Company completed approximately $87 million of property acquisitions during the first quarter of 2002. The first quarter acquisitions included 14 properties and several facility improvements and construction fundings, all of which are leased to existing tenants. These properties contain 25 automotive franchises and are located in Colorado, Florida, Indiana, Michigan, New Jersey, Nevada, North Carolina, Ohio, Tennessee and Texas. The Company funded the acquisitions with the issuance of $19 million in operating partnership units (at a price of $21.86 per unit), $48.6 million of ten year long-term variable rate debt with General Motors Acceptance Corporation and the remainder with funds drawn down on the Company's short-term credit facilities. The leases have been structured using the Company's variable rate lease program and have an average initial lease term of 15.7 years, with multiple renewal options.
Commenting on today's news, Thomas D. Eckert, President and Chief Executive Officer, stated, ``Our first quarter results reflect the success of our long-term strategy of prudently investing our capital with the nation's top automotive retailers as well as our ability to creatively structure debt transactions. The credit quality of our portfolio continues to perform at a high level, as evidenced by the solid operating performance of the public auto retailers, who have repeatedly exceeded Wall Street's expectations and are a good proxy for our large private tenants. We continue to see many accretive acquisition opportunities and are bullish about the performance of our Company for 2002 and beyond.''
Financing Highlights
As previously announced on April 4, 2002, Capital Automotive has closed a $60 million unsecured revolving credit facility, for which Comerica Bank is the syndication agent. Other financial institutions participating include Bank of America, N.A., Bank One, N.A., Branch Banking and Trust Company (BB&T) and Toyota Motor Credit Corporation. The facility provides for a three-year term with interest equal to the 30-day LIBOR rate plus 200 basis points and requires the repayment of borrowings within 180 days. The facility replaces the Company's existing $50 million secured revolving credit facility.
During the quarter, the Company converted the leases on approximately $71.2 million of property for its largest tenant from variable rate to fixed rate. The Company entered into interest rate swaps to fix the interest rate on approximately $58.3 million of variable rate debt that is secured primarily by such properties. Fixing the underlying debt simultaneously with the lease conversion continues the Company's strategy of minimizing interest rate risk by substantially match-funding the Company's leases with debt in order to lock in the Company's investment spread over the initial lease term. Other terms of the leases, including lease escalators, remained unchanged.
The Company's debt to assets (total assets plus accumulated depreciation) ratio was approximately 57% as of March 31, 2002, which falls within the Company's current policy of limiting debt to approximately 65% of assets. Of the debt outstanding at March 31, 2002, approximately 81% (including $81.2 million of variable rate debt that will become fixed rate debt effective November 1, 2002, under an existing interest rate swap agreement) is substantially match-funded, non-recourse debt. Virtually all of the Company's long-term debt is secured financing which has a weighted average remaining term of 10.3 years, which approximates the remaining weighted average lease term of 11.8 years. The Company's earliest significant long-term debt maturity is not until 2011.
As of March 31, 2002, approximately $321 million, or 24% of the Company's total real estate portfolio, was leased to tenants utilizing variable rate leases. Under these leases, rental income attributable to the leases is variable, with monthly base rent calculated based on a spread over an applicable index, generally LIBOR. The majority of these lease agreements contain minimum cap rates and fixed rate conversion features. As of March 31, 2002, approximately $313 million of the Company's total debt was variable rate debt (excluding $81.2 million of variable rate debt that will become fixed rate debt effective November 1, 2002, under an existing interest rate swap agreement). Management believes the existing mix of variable rate leases and variable rate debt improves the Company's balance sheet flexibility, while continuing the Company's policy of minimizing interest rate risk.
David S. Kay, Senior Vice President and Chief Financial Officer added, ``Based on our first quarter results, we are for the second time raising our earnings guidance for 2002. Our new AFFO per diluted share guidance for 2002 is $2.03, up from our previous guidance of $2.01. This brings our expected AFFO per diluted share growth for the year ended December 31, 2002 to more than 9 percent, significantly higher than the projected REIT industry's growth rate as published by analysts. The new 2002 estimate is based on an acquisition range of $150 to $175 million, of which approximately half has been completed. For 2003, we remain comfortable with our AFFO previous guidance of $2.12 to $2.14 per diluted share. Given the long-term nature of our leases, the high credit quality of our tenants and our philosophy of match funding our leases with long term debt, we believe our earnings visibility is very good.''
About Capital Automotive
Capital Automotive, headquartered in McLean, Virginia, is a self- administered, self-managed real estate investment trust that acquires real property and improvements used by operators of multi-site, multi-franchised automotive dealerships and related businesses. Additional information on Capital Automotive is available on the Company's Web site at http://www.capitalautomotive.com .
As of March 31, 2002, the Company had invested more than $1.3 billion in 274 properties, consisting of 383 automotive franchises in 28 states. Approximately 77% of the Company's total real estate investments are located in the top 50 metropolitan areas in the U.S. in terms of population. The properties are leased under long-term, triple-net leases with a weighted average initial lease term of 14 years. The Company's first significant lease expirations do not occur until 2008.
Certain matters discussed within this press release are forward-looking
statements within the meaning of the federal securities laws.
Although the
Company believes that the expectations reflected in the forward-looking
statements are based upon reasonable assumptions, the Company's future
operations will depend on a number of factors that may differ, some
materially, from the Company's assumptions.
These factors, which could cause
the Company's actual results to differ materially from those set forth in the
forward-looking statements, include risks that our tenants will not pay rent,
risks that our growth will be limited if we cannot obtain additional capital;
risks of financing, such as our ability to consummate planned and additional
financings on terms which are acceptable to us and our ability to meet
existing financial covenants; risks that planned and additional acquisitions
may not be consummated; risks that our operating costs will be higher than
expected; risks related to the automotive industry, such as the ability of our
tenants to compete effectively in the automotive retail industry and the
ability of our tenants to perform their lease obligations as a result of
changes in any manufacturer's production, inventory, marketing or other
practices; environmental and other risks associated with the acquisition and
leasing of automotive properties; risks related to our status as a REIT for
federal income tax purposes, such as the existence of complex regulations
relating to our status as a REIT, the effect of future changes in REIT
requirements as a result of new legislation and the adverse consequences of
the failure to qualify as a REIT; and those risks detailed from time to time
in the Company's SEC reports, including its annual report on Form 10-K and its
quarterly reports on Form 10-Q.
The Company makes no promise to update any of
the forward-looking statements, or to publicly release the results if the
Company revises any of them.
CAPITAL AUTOMOTIVE REIT
UNAUDITED SUPPLEMENTAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
Statements of Operations: 2002 2001
Revenue:
Rental $32,343 $27,999
Interest and other 129 61
Total revenue 32,472 28,060
Expenses:
Depreciation and amortization 5,959 5,035
General and administrative 2,123 1,719
Interest 10,260 11,874
Total expenses 18,342 18,628
Net income before minority interest 14,130 9,432
Minority interest (3,276) (2,624)
Net income $10,854 $6,808
Basic earnings per share $0.41 $0.32
Diluted earnings per share $0.39 $0.31
Weighted average number of common
shares - basic 26,547 21,485
Weighted average number of common
shares - diluted 27,834 21,862
Funds From Operations (FFO):
Net income before minority interest $14,130 $9,432
Adjustments:
Add: Real estate depreciation and
amortization 5,943 5,016
Less: Gain on sale of assets - -
FFO (A) $20,073 $14,448
Basic FFO per share $0.58 $0.48
Diluted FFO per share $0.56 $0.48
Adjusted Funds From Operations (AFFO):
FFO $20,073 $14,448
Less: straight-lined rents (1,475) (779)
AFFO (B) $18,598 $13,669
Basic AFFO per share $0.54 $0.46
Diluted AFFO per share $0.52 $0.45
Weighted average number of common
shares and units - basic 34,582 29,946
Weighted average number of common
shares and units - diluted 35,869 30,323
(A) FFO is calculated using the revised definition from NAREIT's October
1999 White Paper, which includes straight-lined rents. FFO is a
widely used measure of performance and liquidity of an equity REIT
that excludes charges for depreciation and amortization of real estate
and gains on sales of properties. FFO was developed in order to
recognize that income-producing real estate historically has not
depreciated on the basis determined under generally accepted
accounting principles, or GAAP. Though FFO is not a measure used in
GAAP, we consider FFO a meaningful, additional measure of operating
performance because it primarily excludes the assumption that the
value of the real estate assets diminishes predictably over time, and
because industry analysts have accepted it as a performance measure.
(B) AFFO is calculated as FFO less straight-lined rents.
March 31, December 31,
2002 2001
Selected Balance Sheet Data (unaudited)
(in thousands)
Real estate before accumulated
depreciation $1,316,827 $1,229,694
Cash and cash equivalents 16,631 9,490
Total assets 1,290,941 1,199,700
Mortgage debt 682,906 637,656
Borrowings under credit facilities 87,686 63,508
Total other liabilities 19,526 21,630
Minority Interest 124,882 110,885
Total shareholders' equity 375,941 366,021
Total shares outstanding 26,719 26,428
Total shares and units outstanding 35,594 34,435
March 31, December 31,
Selected Portfolio Data (unaudited) 2002 2001
Properties 274 260
States 28 27
Land acres 1,901 1,799
Square footage of buildings (in millions) 10.7 9.9
Weighted average initial lease term (in years) 14.0 13.9
Franchises 383 365
CONTACT: David S. Kay, Senior Vice President and Chief Financial Officer of Capital Automotive REIT, +1-703-394-1302.