HTG Heritage Property Investment

Reports 6% Growth in FFO Per Share BOSTON, Aug. 2 /PRNewswire-FirstCall/ -- Heritage Property Investment Trust, Inc. (NYSE:HTG) ("Heritage" or the "Company"), today reported results of its operations for the three and six months ended June 30, 2005. Highlights included: Financial Results: * Funds from Operations (FFO) of $33.7 million for the quarter and $67.5 million for the first half of 2005 * Diluted FFO per share of $0.70 for the quarter and $1.41 for the first half of 2005 * Net income of $9.1 million for the quarter and $19.1 million for the first half of 2005 * Same property net operating income growth (excluding termination fee income) of 4.8% for the quarter and 4.7% for the first half of 2005 * Paid $0.525 per common share regular quarterly dividend on July 15, 2005 Operating Highlights: * Acquired (during and immediately following quarter-end) two additional shopping centers located in Dallas, Texas and Simpsonville, South Carolina * Entered into purchase and sale agreements and completed due diligence for the acquisition of two additional shopping centers-a group of assets located in Manchester, Connecticut and a center located in Old Bridge Township, New Jersey * Achieved 9% increase over prior rents within our shopping center portfolio "We are extremely pleased by our second quarter financial results," stated Thomas C. Prendergast, Chairman, President and Chief Executive Officer. "We continue to see strong same store operating performance within our core portfolio as a result of our leasing and capital recycling efforts. We were also pleased by our investment activity to date as we have the opportunity to add four excellent properties to our portfolio. These acquisitions show our continued commitment to acquiring properties in attractive locations with solid national tenant line-ups. In addition, by acquiring properties within our existing markets, we are able to take advantage of operating synergies within our portfolio. The addition of these high quality properties clearly reflects our success in finding portfolio-improving acquisitions even in such a competitive environment." Mr. Prendergast further added, "While we will continue to pursue attractive acquisitions as a means of growing our portfolio, we remain committed to our capital recycling program. We expect to dispose of several non-core assets during the second half of the year. Our capital recycling program is important to improving the internal growth of our existing portfolio. In addition, we are continuing to explore capital raising joint venture opportunities involving an initial contribution of certain of our existing core assets and the funding of future shopping center acquisitions. Such a joint venture will help us to increase our sources of capital and our ability to pursue high quality acquisitions thus driving future earnings growth. Overall, as a result of our efforts during the first half of the year, we remain optimistic about our prospects for the remainder of 2005." Financial Results For the three months ended June 30, 2005, FFO, a widely accepted measure of REIT performance, increased 9% to $33.7 million, or $0.70 per diluted share, as compared to $30.9 million, or $0.66 per diluted share for the same period in 2004. For the six months ended June 30, 2005, FFO increased 7.3% to $67.5 million, or $1.41 per diluted share, as compared to $63.0 million, or $1.34 per diluted share for the six months ended June 30, 2004. FFO represents a non-generally accepted accounting principle (GAAP) financial measure. A table reconciling FFO to net income, the GAAP measure that the Company believes to be most directly comparable, is presented within the consolidated financial statements included in this release. Net income attributable to common shareholders decreased to $9.1 million, or $0.19 per diluted share, for the three months ended June 30, 2005, as compared to $12.2 million, or $0.26 per diluted share, for the same period in 2004. Net income attributable to common shareholders decreased to $19.1 million, or $0.40 per diluted share, for the six months ended June 30, 2005, as compared to $23.1 million, or $0.49 per diluted share for the same period in 2004. Net income attributable to common shareholders for the three and six months ended June 30, 2004 includes a gain on sale of discontinued operations of $3.0 million reflecting the Company's sale of an office building in April 2004. All per share amounts are stated on a diluted basis. The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the three and six months ended June 30, 2005. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made. PORTFOLIO OVERVIEW General As of June 30, 2005, Heritage had a shopping center portfolio of 164 properties, located in 29 states and totaling approximately 33.7 million square feet of total gross leasable area, of which 28.0 million square feet is company-owned gross leasable area. Leasing Activity During the second quarter of 2005, the Company executed 147 leases (new and renewed), for 492,000 square feet in the Company's shopping center portfolio. In doing so, the Company achieved a 8.7% increase over prior rents on a cash basis from $12.03 per square foot to $13.07 per square foot. For the first six months of 2005, the Company has signed 299 leases (new and renewed), for 1.1 million square feet in the Company's shopping center portfolio. In doing so, the Company achieved a 7.8% increase over prior rents on a cash basis from $11.70 per square foot to $12.61 per square foot. At June 30, 2005, the percentage of the Company's portfolio leased was 92.5%, an increase of 0.7% from June 30, 2004. At March 31, 2005, the Company's portfolio was 93.0% leased. Same Property Operating Results With respect to the properties owned and operated by the Company for the three months and six months ended June 30, 2005 and June 30, 2004, same property net operating income increased as follows: Same Property Operating Data (in thousands) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Real estate revenue $81,103 $78,577 $165,052 $158,937 Operating expenses (22,678) (22,561) (48,296) (47,177) Net Operating Income 58,425 56,016 4.3% 116,756 111,760 4.5% Less: Lease termination income (1) (285) (365) (581) Net Operating Income, as adjusted $58,424 $55,731 4.8% $116,391 $111,179 4.7% A table reconciling same property net operating income to net income, the GAAP measure that the Company believes to be most directly comparable, is presented within the consolidated financial statements included in this release. INVESTMENT ACTIVITY Completed and Pending Acquisitions Skillman Abrams Acquisition, Dallas, Texas In April 2005, through its joint venture with Intercontinental Real Estate Investment Fund III, LLC, a $350 million pooled fund sponsored and managed by Intercontinental Real Estate Corporation, Heritage acquired Skillman Abrams Shopping Center, a 133,000 square foot shopping center located in a busy retail corridor of Dallas, Texas, the ninth largest Metropolitan Statistical Area ("MSA") in the United States. Skillman Abrams was acquired by the joint venture for a total purchase price of approximately $19 million, including assumed mortgage debt. Skillman Abrams is anchored by Tom Thumb, the second leading grocer in the marketplace, which leases approximately 78,000 square feet at the center. The center is 97% leased and contains an attractive mix of national and regional tenants. Fairview Corners, Simpsonville, South Carolina On July 1, 2005, Heritage completed the acquisition of Fairview Corners, a 131,000 square foot shopping center located in Simpsonville, South Carolina in the Greenville Spartanburg MSA. The purchase price for Fairview Corners was approximately $23 million. The center was unencumbered and Heritage funded the purchase price with borrowings under its unsecured line of credit. Fairview Corners, a newly developed shopping center, contains an excellent tenant roster and is approximately 96% leased. The property's anchor and major tenants include national retailers Ross Dress For Less, TJ Maxx and Pier 1 Imports. In addition, a 120,000 square foot Super Target shadow anchors the center. Fairview Corners is located on a busy retail corridor in close proximity to other national retailers Wal-Mart Super Center, Lowe's Home Improvement and Kohl's. The demographics within a five-mile radius of the center include a population of approximately 50,000 and average household income of approximately $63,000, revealing a growing area. Williamson Square, Franklin, Tennessee On August 2, 2005, Heritage completed the acquisition of the 40% minority partnership interest in Williamson Square Shopping Center, located in Franklin, Tennessee, held by Heritage's joint venture limited partner. As a result, Heritage owns 100% of the partnership interests in Williamson Square. The purchase price, which was based on a formula set forth in the partnership agreement, was $2.9 million. Heritage funded the purchase price with borrowings under its unsecured line of credit. Heritage also repaid upon maturity the previously outstanding mortgage indebtedness encumbering Williamson Square. As a result, Williamson Square is now unencumbered. Williamson Square is a 340,000 square foot shopping center anchored by Kroger Supermarket, the number one supermarket in the trade area, as well as by Hobby Lobby, USA Baby and Hancock Fabrics. Crossroads at Buckland Hills, Manchester, Connecticut Heritage also entered into a purchase and sale agreement and completed due diligence to acquire a group of assets known as "Crossroads at Buckland Hills" located in an eastern suburb of Hartford, Connecticut. The purchase price for Crossroads was not disclosed pending completion of the transaction. Heritage expects to fund the acquisition with a combination of assumed mortgage indebtedness, borrowings under its unsecured line of credit and the issuance of operating partnership units in Bradley Operating Limited Partnership, one of its subsidiary operating partnerships. Crossroads consists of six separate parcels and 342,000 square feet. The centers include a "who's who" of impressive national tenants such as Best Buy (shadow anchor), Sports Authority, Borders Books, Office Max, Bed Bath & Beyond, Pier 1 Imports, A.C. Moore, Petco, Tweeter and Babies 'R Us. Overall, the centers are over 96% leased. The demographics within five miles of the centers are excellent, including a population of over 127,000 people and household income of over $67,000. Old Bridge Gateway Shopping Center, Parlin, Old Bridge Township, New Jersey Heritage also entered into a purchase and sale agreement and completed due diligence to acquire a shopping center known as "Old Bridge Gateway Shopping Center" located in Parlin, Old Bridge Township, New Jersey. The purchase price was not disclosed pending completion of the transaction. Old Bridge Gateway is unencumbered and Heritage expects to fund the acquisition with borrowings under its unsecured line of credit. Old Bridge Gateway is a 236,000 square foot shopping center located within close proximity to busy Route 9 in Middlesex County, New Jersey. The center is 95% leased and includes anchors and major tenants Marshalls, Modell's Sporting Goods, Petco, Bayshore Fitness and Wellness, Sleepy's and R&S Strauss. In addition, Home Depot and Wal-Mart border the property. The demographics are strong and include a population of approximately 200,000 and average household income of approximately $71,000 within a five-mile radius. DIVIDEND PAYMENT On July 15, 2005, the Company paid its regular quarterly dividend of $0.525 per common share to shareholders of record on June 30, 2005. 2005 Earnings Guidance Heritage today increased the low end of its projected guidance range for 2005 FFO per diluted common share to $2.78 from $2.77 and reconfirmed the upper end of its guidance range of $2.83 per share. A reconciliation of management's projections from earnings per diluted common share to FFO per diluted common share is included in this release. 2nd QUARTER CONFERENCE CALL Members of Heritage's senior management will host a conference call on Wednesday, August 3, 2005, at 10:00 a.m., ET, to discuss the Company's second quarter results. Stockholders, analysts and other interested parties may participate in this conference call by dialing 800-218-0530 or 303-262-2211 at least five minutes before the scheduled start time. Investors can also access the call via the Internet at the Company's website, http://www.heritagerealty.com/. To listen to a live broadcast, access this site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software. A replay of the conference call will be available after the call through August 10, 2005 by accessing the Company's website at http://www.heritagerealty.com/ or by dialing 800-405-2236 or 303-590-3000, pass-code 11033770. ABOUT HERITAGE PROPERTY INVESTMENT TRUST, INC. Heritage is a fully integrated, self-administered and self-managed REIT traded on the New York Stock Exchange under the symbol "HTG". Heritage is one of the largest owners and operators of neighborhood and community shopping centers in the United States. Heritage focuses on grocer-anchored shopping centers with multiple anchors. Heritage is headquartered in Boston Massachusetts and has an additional 16 regional offices located in the Eastern, Midwestern and Southwestern United States. For more information about Heritage, please refer to Heritage's website, http://www.heritagerealty.com/. A copy of Heritage's second quarter 2005 "Supplemental Operating and Financial Data" is available on the Investor Relations section of the Company's website at http://www.heritagerealty.com/. These materials are also available by written request to: Investor Relations Heritage Property Investment Trust, Inc. 131 Dartmouth St. Boston, MA 02116 SAFE HARBOR LANGUAGE Some of the statements contained in this press release constitute forward- looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements reflect the Company's current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results. The factors that could cause actual results to differ materially from current expectations include risks detailed from time to time in filings with the Securities and Exchange Commission. The forward-looking statements contained herein represent the Company's judgment as of the date of this release, and the Company cautions readers not to place undue reliance on such statements. Heritage Property Investment Trust, Inc. Consolidated Balance Sheets June 30, 2005 and December 31, 2004 (Unaudited and in thousands of dollars) June 30, December 31, 2005 2004 Assets Real estate investments, net $2,196,192 $2,222,638 Cash and cash equivalents 1,598 6,720 Accounts receivable, net of allowance for doubtful accounts of $9,818 in 2005 and $9,583 in 2004 48,710 41,148 Prepaids and other assets 25,907 24,488 Investments in unconsolidated joint ventures 5,411 3,406 Deferred financing and leasing costs 50,643 54,150 Total assets $2,328,461 $2,352,550 Liabilities and Shareholders' Equity Liabilities: Mortgage loans payable $628,487 $649,040 Unsecured notes payable 449,864 449,763 Line of credit facility 232,000 196,000 Accrued expenses and other liabilities 81,307 95,989 Accrued distributions 25,095 24,915 Total liabilities 1,416,753 1,415,707 Exchangeable limited partnership units 12,123 13,110 Other minority interest 2,425 2,425 Total minority interests 14,548 15,535 Shareholders' equity: Common stock, $.001 par value; 200,000,000 shares authorized; 47,302,857 and 46,934,285 shares issued and outstanding at June 30, 2005 and December 31, 2004, respectively 47 47 Additional paid-in capital 1,164,960 1,154,360 Cumulative distributions in excess of net income (260,377) (229,818) Unearned compensation (7,072) (2,775) Other comprehensive loss (398) (506) Total shareholders' equity 897,160 921,308 Total liabilities and shareholders' equity $2,328,461 $2,352,550 Heritage Property Investment Trust, Inc. Consolidated Statements of OperationsThree Months ended June 30, 2005 and 2004 (Unaudited and in thousands, except per-share data) Three Months Ended June 30, 2005 2004 Revenue: Rentals and recoveries $85,443 $79,088 Interest, other, and joint venture fee income 254 67 Total revenue 85,697 79,155 Expenses: Property operating expenses 11,383 10,271 Real estate taxes 12,565 12,398 Depreciation and amortization 24,722 21,760 Interest 20,851 19,415 General and administrative 7,042 5,664 Total expenses 76,563 69,508 Income before gain on sale of marketable securities 9,134 9,647 Gain on sale of marketable securities 8 -- Income before equity in income from unconsolidated joint ventures and allocation to minority interests 9,142 9,647 Equity in income from unconsolidated joint ventures 54 -- Income allocated to exchangeable limited partnership units (71) (78) Income allocated to Series C Preferred Units -- (555) Income before discontinued operations 9,125 9,014 Discontinued operations: Operating income from discontinued operations -- 205 Gains on sales of discontinued operations -- 2,988 Income from discontinued operations -- 3,193 Net income attributable to common shareholders $9,125 $12,207 Basic per-share data: Income before discontinued operations $0.19 $0.19 Income from discontinued operations -- 0.07 Income attributable to common shareholders $0.19 $0.26 Weighted average common shares outstanding 47,262 46,726 Diluted per-share data: Income before discontinued operations $0.19 $0.19 Income from discontinued operations -- 0.07 Income attributable to common shareholders $0.19 $0.26 Weighted average common and common equivalent shares outstanding 48,293 46,885 Heritage Property Investment Trust, Inc. Consolidated Statements of Operations Six Months ended June 30, 2005 and 2004 (Unaudited and in thousands, except per-share data) Six Months Ended June 30, 2005 2004 Revenue: Rentals and recoveries $173,402 $159,689 Interest, other, and joint venture fee income 357 271 Total revenue 173,759 159,960 Expenses: Property operating expenses 25,743 23,011 Real estate taxes 24,879 24,274 Depreciation and amortization 48,699 43,124 Interest 41,743 37,030 General and administrative 13,603 10,947 Total expenses 154,667 138,386 Income before gain on sale of marketable securities 19,092 21,574 Gain on sale of marketable securities 8 -- Income before equity in income from unconsolidated joint ventures and allocation to minority interests 19,100 21,574 Equity in income from unconsolidated joint ventures 159 -- Income allocated to exchangeable limited partnership units (179) (143) Income allocated to Series B & C Preferred Units -- (1,763) Income before discontinued operations 19,080 19,668 Discontinued Operations: Operating income from discontinued operations -- 437 Gains on sales of discontinued operations -- 2,988 Income from discontinued operations -- 3,425 Net income attributable to common shareholders $19,080 $23,093 Basic per-share data: Income before discontinued operations $0.40 $0.42 Income from discontinued operations -- 0.08 Income attributable to common shareholders $0.40 $0.50 Weighted average common shares outstanding 47,151 46,551 Diluted per-share data: Income before discontinued operations $0.40 $0.42 Income from discontinued operations -- 0.07 Income attributable to common shareholders $0.40 $0.49 Weighted average common and common equivalent shares outstanding 48,130 47,169 Heritage Property Investment Trust, Inc. Calculation of Funds from Operations (in thousands of dollars) Three months ended June 30, 2005 2004 Net income $9,125 $12,207 Add (deduct): Depreciation and amortization (real-estate related) Continuing operations 24,546 21,585 Discontinued operations -- 107 Pro rata share of unconsolidated joint venture 55 -- Gains on sales of real estate investments -- (2,988) Funds from Operations $33,726 $30,911 Six months ended June 30, 2005 2004 Net income $19,080 $23,093 Add (deduct): Depreciation and amortization (real-estate related) Continuing operations 48,346 42,670 Discontinued operations -- 213 Pro rata share of unconsolidated joint venture 63 -- Gains on sales of real estate investments -- (2,988) Funds from Operations $67,489 $62,988 We calculate Funds from Operations in accordance with the best practices described in the April 2001 National Policy Bulletin of the National Association of Real Estate Investment Trusts, referred to as NAREIT, and NAREIT's 1995 White Paper on Funds from Operations. The White Paper defines Funds From Operations as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Given the nature of our business as a real estate owner and operator, we believe that FFO is helpful to investors as a starting point in measuring our operational performance because it excludes various items included in net income that do not relate to, or are not indicative of, our operating performance, such as gains (or losses) from sales of real estate investments and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. However, FFO (i) should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance, (ii) is not an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and (iii) is not indicative of funds available to fund our cash needs, including our ability to make distributions. Our computation of FFO may differ from the methodology utilized by other equity REITs to calculate FFO and, therefore, may not be comparable to other REITs. Heritage Property Investment Trust, Inc. Reconciliation of Net Operating Income (in thousands of dollars) Three months ended June 30, 2005 2004 Net operating income -- same property portfolio $58,425 $56,016 Net operating income -- acquisitions/ partial dispositions 3,070 403 Net operating income -- total portfolio 61,495 56,419 Add: Interest, other, and joint venture fee income 254 67 Income from discontinued operations -- 3,193 Gain on sale of marketable securities 8 -- Equity in income from unconsolidated joint ventures 54 -- Deduct: Depreciation and amortization 24,722 21,760 Interest 20,851 19,415 General and administrative 7,042 5,664 Income allocated to exchangeable limited partnership units 71 78 Income allocated to Series B and C Preferred Units -- 555 Net income attributable to common shareholders $9,125 $12,207 Six months ended June 30, 2005 2004 Net operating income -- same property portfolio $116,756 $111,760 Net operating income -- acquisitions 6,024 644 Net operating income -- total portfolio 122,780 112,404 Add: Interest, other, and joint venture fee income 357 271 Income from discontinued operations -- 3,425 Gain on sale of marketable securities 8 -- Equity in income from unconsolidated joint ventures 159 -- Deduct: Depreciation and amortization 48,699 43,124 Interest 41,743 37,030 General and administrative 13,603 10,947 Income allocated to exchangeable limited partnership units 179 143 Income allocated to Series B and C Preferred Units -- 1,763 Net income attributable to common shareholders $19,080 $23,093 Net operating income, or "NOI," is a non-GAAP financial measure equal to net income available to common shareholders (the most directly comparable GAAP financial measure), plus accretion of redeemable equity, preferred stock distributions, minority interest in Bradley Operating Limited Partnership, net derivative losses (gains), losses (gains) on investments in securities, losses from prepayment of debt, general and administrative expense, depreciation and amortization, and interest expense, less income from discontinued operations, gains (losses) on sales of real estate investments and equipment and interest and other income. We use NOI internally, and believe NOI provides useful information to investors, as a performance measure in evaluating the operating performance of our real estate assets. This is because NOI reflects only those income and expense items that are incurred at the property level and excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. Our presentation of NOI may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to obtain a clear understanding of our operating results, NOI should be examined in conjunction with net income as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions. Projected Range Full Year 2005 Low High Projected diluted net income per share $0.78 $0.81 Projected depreciation and amortization (real estate related) 2.00 2.02 Net gains on sales of real estate investments -- -- Projected FFO per diluted share $2.78 $2.83 The foregoing estimates reflect management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and earnings impact of the events referenced in this release. These estimates may be subject to fluctuations as a result of several factors, including changes in the recognition of depreciation and amortization expense and any gains or losses associated with disposition activity. The Company is not able to assess at this time the potential impact of these factors. By definition, FFO does not include real estate-related depreciation and amortization or gains or losses associated with disposition activities. There can be no assurance that the Company's actual results will not differ materially from the estimates set forth above. DATASOURCE: Heritage Property Investment Trust, Inc. CONTACT: Patrick O'Sullivan, Vice President, Finance and Accounting of Heritage Property Investment Trust, Inc., +1-617-247-2200, ; or Analysts: Claire Koeneman, +1-312-640-6745, or General: Joe Calabrese, +1-212-827-3772, both of Financial Relations Board for Heritage Property Investment Trust, Inc. Web site: http://www.heritagerealty.com/

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