Chambers Street – First Quarter 2015 Financial Results

Core FFO of $0.18 Per Share--6.4% Increase Over Prior Year First Quarter

Maintaining Full Year 2015 Earnings Guidance

Increases Portfolio Percentage Leased to 98.4%

PRINCETON, N.J.--()--Chambers Street Properties (NYSE:CSG) ("Chambers Street" or the "Company"), a real estate investment trust focused on acquiring, owning and operating net leased industrial and office properties, today reported its financial results for the three-month period ended March 31, 2015.

"I am pleased to report that our first quarter Core FFO increased 6.4% year-over-year to $0.18 per share, driven by our accretive acquisitions and strong leasing volume over the past year," commented Martin A. Reid, Interim President and Chief Executive Officer, and Chief Financial Officer, of Chambers Street Properties. "We remain focused on our leasing efforts and we continue to review acquisition and disposition opportunities that are consistent with our long-term portfolio strategy of purchasing U.S. industrial assets, while recycling capital out of select office assets.”

Operational and Financial Highlights First Quarter 2015

  • Increased Core Funds from Operations ("Core FFO") to $0.18 per diluted share, an improvement of $0.01 per share compared to the first quarter of 2014
  • Total portfolio percentage leased was 98.4% as of March 31, 2015, up 10 basis points from December 31, 2014
  • Executed six leases, totaling 251,697 square feet
  • Acquired $1.7 million of undeveloped land
  • Sold $16.4 million multi-tenant office property

Financial Results for the Three Months Ended March 31, 2015

Core FFO for the first quarter of 2015 increased to $42.1 million, or $0.18 per diluted share, compared to $39.6 million, or $0.17 per diluted share, for the first quarter of 2014.

Funds from Operations ("FFO") as defined by NAREIT for the first quarter of 2015 was $38.0 million, or $0.16 per diluted share, as compared to $39.2 million, or $0.17 per diluted share, for the first quarter of 2014. FFO for the first quarter of 2015 was impacted by a $4.0 million severance expense related to the retirement of the Company's former Chief Executive Officer.

Net income for the first quarter of 2015 totaled $6.0 million, or $0.03 per diluted share, as compared to net income of $3.3 million, or $0.01 per diluted share, for the first quarter of 2014. Results for the three months ended March 31, 2015 included a gain for the sale of one unconsolidated multi-tenant office property of $2.4 million at the Company's pro-rata share.

Portfolio

As of March 31, 2015, Chambers Street owned or had majority interests in 127 properties totaling approximately 37.6 million square feet across 19 U.S. states, France, Germany, and the U.K. The portfolio was 98.4% leased at March 31, 2015, a 10 basis point increase from December 31, 2014.

Investment Activity

The Company acquired an 11.8 acre undeveloped land in Goodyear, Arizona for approximately $1.7 million in February 2015.

As previously announced, in January, the Company completed the sale of Regency Creek I, a 122,087 square foot multi-tenant, Duke Realty joint venture office property located in Cary, North Carolina, for $16.4 million (at the Company's 80% pro rata share).

Leasing Activity

During the first quarter, the Company executed 6 new and renewal leases totaling 251,697 square feet. This consisted of 99,577 rentable square feet of new leases for previously leased space, 139,417 rentable square feet of renewals, and 12,703 square feet of new leases on space that was not previously leased.

Balance Sheet

As of March 31, 2015, the Company had total debt outstanding of approximately $1.5 billion, including its pro rata share of unconsolidated entities. The Company's debt had a weighted average interest rate of 3.7%, and an average remaining term to maturity of 3.6 years.

In February, the Company paid off the $23.8 million note payable secured by One Wayside Road, an office property in Boston, Massachusetts.

In connection with the sale of Regency Creek I, the buyer assumed an $8.6 million note payable in January (at the Company's 80% pro rata share).

Common Share Dividend

As previously announced on October 30, 2014, the Company increased its monthly distribution to $0.0425 per common share for each of the months of January, February and March 2015.

On April 28, 2015, the Board of Trustees approved a monthly distribution of $0.0425 per common share for each of the months of July, August and September of 2015. The July dividend will be paid on August 10, 2015 to all shareholders of record on July 31, 2015, the August dividend will be paid on September 9, 2015 to all shareholders of record on August 31, 2015, and the September dividend will be paid on October 8, 2015 to all shareholders of record on September 30, 2015.

2015 Guidance

The Company is maintaining its full year 2015 guidance for Core FFO of $0.68 to $0.71 per share based on management’s expectations as of the date of this release. The guidance presented does not include the effects of unannounced property acquisitions, dispositions or capital transaction activity completed subsequent to March 31, 2015.

Supplemental Information

The Company released supplemental information, available at www.ChambersStreet.com under the Investors Relations section, with additional detail, including a description of non-GAAP financial measures and reconciliation to GAAP measures.

Investor Conference Webcast and Conference Call

The Company will host a webcast and conference call at 8:30 a.m. Eastern Time on Tuesday, May 5, 2015, to discuss first quarter results. The number to call is 1-877-407-9039 (domestic) or 1-201-689-8470 (international). The live webcast will be available at www.ChambersStreet.com under the Investor Relations section. A replay of the conference call will be available through May 19, 2015 by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international) and entering the passcode 13605565.

About Chambers Street Properties (NYSE: CSG)

Chambers Street is a real estate investment trust focused on acquiring, owning and operating net leased industrial and office properties, leased to creditworthy tenants. As of March 31, 2015, Chambers Street owned or had a majority interest in 127 properties located across 19 U.S. states, France, Germany, and the United Kingdom encompassing approximately 37.6 million rentable square feet.

For additional information, please visit: www.ChambersStreet.com.

       

CHAMBERS STREET PROPERTIES

Consolidated Balance Sheets

As of March 31, 2015 and December 31, 2014

($ In Thousands, Except Share Data)

 
March 31, December 31,
2015 2014
(unaudited)
ASSETS
Investments in Real Estate:
Land $ 630,783 $ 630,840
Land Available for Expansion 24,992 23,368
Buildings and Improvements 1,685,019   1,674,955  
2,340,794 2,329,163
Less: Accumulated Depreciation and Amortization (257,510 ) (239,973 )
Net Investments in Real Estate 2,083,284 2,089,190
Investments in Unconsolidated Entities 394,738 423,693
Cash and Cash Equivalents 44,658 40,139
Restricted Cash 15,186 14,718
Tenant and Other Receivables, Net 11,676 11,216
Deferred Rent 41,071 39,429
Deferred Leasing Costs and Intangible Assets, Net 208,614 220,490
Deferred Financing Costs, Net 8,555 9,321
Prepaid Expenses and Other Assets 19,385   21,612  
Total Assets $ 2,827,167   $ 2,869,808  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Secured Notes Payable, Net $ 581,706 $ 610,608
Unsecured Term Loan Facilities 570,000 570,000
Unsecured Revolving Credit Facility 235,044 200,044
Accounts Payable, Accrued Expenses and Other Liabilities 74,786 76,421
Intangible Liabilities, Net 25,067 26,248
Prepaid Rent and Security Deposits 16,939 15,569
Distributions Payable 10,075   9,951  
Total Liabilities 1,513,617 1,508,841
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS’ EQUITY
 
Common Shares of Beneficial Interest, $0.01 par value, 990,000,000 shares authorized; 236,861,496 and 236,920,675 issued and outstanding as of March 31, 2015 and December 31, 2014, respectively 2,366 2,364
Additional Paid-in-Capital 2,073,109 2,071,526
Accumulated Deficit (713,877 ) (689,654 )
Accumulated Other Comprehensive Loss (48,048 ) (23,269 )
Total Shareholders’ Equity 1,313,550   1,360,967  
Total Liabilities and Shareholders’ Equity $ 2,827,167   $ 2,869,808  
 
   

CHAMBERS STREET PROPERTIES

Consolidated Statements of Operations

For the Three Months Ended March 31, 2015 and 2014 (unaudited)

($ in Thousands, Except Share Data)

 
Three Months Ended
March 31,
2015     2014
REVENUES
Rental $ 54,346 $ 51,876
Tenant Reimbursements 16,439 15,220
Other Property Income 198   1,069  
Total Revenues 70,983   68,165  
 
EXPENSES
Property Operating 9,781 9,553
Real Estate Taxes 10,782 9,801
General and Administrative 9,873 6,864
Acquisition-Related 290
Depreciation and Amortization 27,920   27,238  
Total Expenses 58,356   53,746  
Income Before Other (Expenses) Income 12,627 14,419
 
OTHER EXPENSES AND INCOME
Interest and Other Income 80 167
Interest Expense (13,059 ) (14,061 )
Interest Expense and Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments 17   26  
Total Other (Expenses) (12,962 ) (13,868 )
 
(Loss) Income Before Provision for Income Taxes and Equity in Income of Unconsolidated Entities (335 ) 551
Provision For Income Taxes (176 ) (58 )
Equity in Income of Unconsolidated Entities 6,505   2,826  
 
NET INCOME 5,994 3,319
 
Basic and Diluted Net Income Per Share $ 0.03   $ 0.01  
 
Weighted Average Common Shares Outstanding - Basic 236,940,134   236,583,752  
 
Weighted Average Common Shares Outstanding - Diluted 236,963,354   $ 236,583,752  
Dividends Declared Per Share $ 0.128 $ 0.126
 
   

CHAMBERS STREET PROPERTIES

Reconciliation of Net Income to FFO, Core FFO, and AFFO

For the Three Months Ended March 31, 2015 and 2014 (unaudited)

($ in Thousands, Except Share Data)

 
Three Months Ended
March 31,
2015     2014
Net Income $ 5,994 $ 3,319
Adjustments:
Real Estate Depreciation and Amortization 27,780 27,132
Pro Rata Share of Real Estate Depreciation and Amortization from Unconsolidated Entities 6,639 8,770
Pro Rata Share of Gain on Sale of Real Estate from Unconsolidated Entities (2,416 )  
Funds from Operations 37,997 39,221
Acquisition-Related Expenses 290
Pro Rata Share of Loss on Early Extinguishment of Debt from Unconsolidated Entities 58
Severance-Related Expense 4,017
Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments (17 ) (26 )
Pro Rata Share of Unrealized Loss on Investment in CBRE Strategic Partners Asia 31   69  
Core Funds from Operations 42,086 39,554
 
Amortization of Non-Cash Interest Expense (380 ) (104 )
Pro Rata Share of Amortization of Non-Cash Interest Expense from Unconsolidated Entities 96 118
Amortization of Above and Below Market Leases 975 1,482
Pro Rata Share of Amortization of Above/Below Market Leases from Unconsolidated Entities (50 ) (54 )
Amortization of Deferred Revenue Related to Tenant Improvements (113 ) (276 )
Share Based Compensation 735 1,012
Straight-Line Rent Adjustments, Net (1,668 ) (1,291 )
Pro Rata Share of Straight-Line Rent Adjustments, Net from Unconsolidated Entities 301 506
Recurring Capital Expenditures (723 ) (1,852 )
Pro Rata Share of Recurring Capital Expenditures from Unconsolidated Entities (694 ) (121 )
Adjusted Funds from Operations $ 40,565   $ 38,974  
Amounts Per Share (Basic and Diluted):
Net Income $ 0.03 $ 0.01
Funds from Operations $ 0.16 $ 0.17
Core Funds from Operations $ 0.18 $ 0.17
Adjusted Funds from Operations $ 0.17 $ 0.16
Weighted Average Common Shares Outstanding - Basic 236,940,134 236,583,752
Weighted Average Common Shares Outstanding - Diluted 236,963,354 236,583,752
 

Non-GAAP Supplemental Financial Measures:

Funds from Operations

The National Association of Real Estate Investment Trusts, or NAREIT, created Funds from Operations, or FFO, as a non-GAAP supplemental measure of REIT operating performance, which is designed to reflect the impact on operations from trends in occupancy rates, rental rates and operating costs. The most directly comparable GAAP measure to FFO is net income. FFO is used commonly in the real estate industry because historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors consider presentations of operating results for REITs that use historical cost accounting to be insufficient.

We compute FFO in accordance with standards established by NAREIT. The revised NAREIT White Paper on FFO defines FFO as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, impairment charges and gains and losses from sales of depreciable operating property, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures.

Core Funds from Operations

We believe that Core FFO is a useful measure of management’s decision-making process and appropriately presents our results of operations on a comparative basis. The items listed below are excluded from NAREIT-defined FFO because they are subject to significant fluctuations from period to period that cause both positive and negative effects on our results of operations, often in inconsistent and unpredictable directions.

- Acquisition-related expenses: Acquisition-related expenses are primarily the result of the volume of our acquisitions completed during each period, and therefore we believe such acquisition costs are not reflective of our operating results during each period.

- Loss on early extinguishment of debt: Losses on early extinguishment of debt incurred in the current year are primarily a result of secured mortgage loan repayments typically associated with the sales of the underlying properties. In 2013, the losses represent the write-off of deferred financing costs associated with the refinancing of an unsecured term loan. We believe these events are non-recurring in nature and do not accurately reflect our financial performance.

- Net change in fair value of non-qualifying derivative financial instruments and unrealized gains or losses on our investment in unconsolidated entities: Unrealized gains or losses that we have recognized during a given period are based primarily upon changes in the estimated fair market value of certain of our investments due to changes in market conditions and do not necessarily reflect the operating performance of these properties during the corresponding period.

- Other non-recurring expenses: Other non-recurring expenses such as severance-related costs and costs related to the process of listing our common shares on the New York Stock Exchange and our modified “Dutch Auction” tender offer are not reflective of our operating results during each period.

We believe that Core FFO is useful to investors as a supplemental measure of operating performance because adjusting FFO to exclude acquisition costs, unrealized gains and/or losses or other non-recurring expenses provides investors a view of the performance of our portfolio over time, including if we cease to acquire properties on a frequent and regular basis and allows for a comparison of the performance of our portfolio with other REITs that are not currently engaging in acquisitions. We also believe that Core FFO may provide investors with a useful indication of our future performance, and of the sustainability of our current distribution policy. However, because Core FFO excludes acquisition costs, unrealized gains or losses and/or other non-recurring expenses which are important components in an analysis of our historical performance, such supplemental measure should not be construed as a historical performance measure and may not be as useful a measure for estimating the value of our common shares.

Adjusted Funds from Operations

We calculate Adjusted Funds From Operations, or AFFO, as Core FFO exclusive of the net effects of (i) amortization associated with deferred financings costs; (ii) amortization of above- and below-market lease intangibles; (iii) amortization of premium/discounts on notes payable; (iv) amortization of deferred revenue related to tenant improvements and lease inducements; (v) non-cash share-based compensation expense; (vi) straight-line rental revenue; and (vii) recurring capital expenditures.

Not all REITs calculate FFO, Core FFO or AFFO (or an equivalent measure), in the same manner and therefore comparisons with other REITs may not be meaningful. None of these measures present, nor do we intend for them to present, a complete picture of our financial condition and/or operating performance. We believe that net income, as computed under GAAP, appropriately remains the primary measure of our performance and that FFO, Core FFO and AFFO, when considered in conjunction with net income, improves the investing public’s understanding of the operating results of REITs and makes comparisons of REIT operating results more meaningful.

Forward-Looking Statements

This press release may contain various “forward-looking statements.” You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “would,” “could,” “should,” “seeks,” “approximately,” “intends,” “plans,” “projects,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Statements regarding the following subjects may be impacted by a number of risks and uncertainties, such as: our business strategy; our ability to obtain future financing arrangements; estimates relating to our future distributions; our understanding of our competition; market trends; projected capital expenditures; the impact of technology on our assets, operations and business; and the use of the proceeds of any offerings of securities. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our common shares, along with the following factors that could cause actual results to vary from our forward-looking statements, such as: general volatility of the securities markets in which we participate; national, regional and local economic climates; changes in supply and demand for office and industrial properties; adverse changes in the real estate markets, including increasing vacancy, increasing competition and decreasing rental revenue; availability and credit worthiness of prospective tenants; our ability to maintain rental rates and maximize occupancy; our ability to identify and secure acquisitions; our ability to successfully manage growth and/or operate acquired properties; our pace of acquisitions and/or dispositions of properties; risks related to development projects (including construction delay, cost overruns or our inability to obtain necessary permits); payment of distributions from sources other than cash flows and operating activities; receiving and maintaining corporate debt ratings and changes in the general interest rate environment; availability of capital (debt and equity); our ability to refinance existing indebtedness or incur additional indebtedness; our ability to comply with our debt covenants; unanticipated increases in financing and other costs, including a rise in interest rates; the actual outcome of the resolution of any conflict; material adverse actions or omissions by any of our joint venture partners; our ability to operate as a self-managed company; availability of and ability to retain our executive officers and other qualified personnel; future terrorist attacks or epidemics in the United States or abroad; the ability of our operating partnership to continue to qualify as a partnership for U.S. federal income tax purposes; our ability to continue to qualify as a REIT for U.S. federal income tax purposes; foreign currency fluctuations; changes to accounting principles, policies and guidelines applicable to REITs; legislative or regulatory changes adversely affecting REITs and the real estate business; and environmental, regulatory and/or safety requirements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and other of our documents that are on file with or furnished to the SEC. Any forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements.

Credit ratings may not reflect the potential impact of risks relating to the structure or trading of our shares and are provided solely for informational purposes. Credit ratings are not recommendations to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. We do not undertake any obligation to maintain the ratings or to advise of any change in ratings. Each agency’s rating should be evaluated independently of any other agency’s rating. An explanation of the significance of the ratings may be obtained from each of the rating agencies.

The foregoing discussion related to our consolidated financial statements should be read in conjunction with the financial statements for the period ended March 31, 2015 included in the Form 10-Q to be filed on or about May 8, 2015.

Contacts

Investor Relations
Chambers Street Properties
Heather Gentry, 609-806-2682
Heather.Gentry@CSPREIT.com
or
Media
Tim Gallen
Tim@Gallen.com
or
Andrew Neilly
Andrew@Gallen.com
925-930-9848

Contacts

Investor Relations
Chambers Street Properties
Heather Gentry, 609-806-2682
Heather.Gentry@CSPREIT.com
or
Media
Tim Gallen
Tim@Gallen.com
or
Andrew Neilly
Andrew@Gallen.com
925-930-9848