TCT Town & Country Trust

The Town and Country Trust Announces Fourth Quarter and Full Year 2004 Results BALTIMORE, Feb. 24 /PRNewswire-FirstCall/ -- The Town and Country Trust (NYSE:TCT), a multifamily real estate investment trust, today reported results for the fourth quarter and year ended December 31, 2004. All per share results are reported on a fully diluted basis. For the fourth quarter, the Company reported net income of $1.7 million, or $0.10 per share, compared to net income of $32.2 million, or $2.04 per share, for the fourth quarter of 2003. Net income for the full year ended December 31, 2004 was $1.8 million, or $0.10 per share, compared to $78.8 million, or $4.90 per share for 2003. The significant decline in net income from the fourth quarter and full year 2003 is the result of the inclusion in 2003 of gains on property sales of $38.7 million (before minority interest of $5.4 million) and $80.1 million (before minority interest of $11.0 million), respectively. Funds From Operations ("FFO") for the fourth quarter of 2004 was $7.7 million, or $0.39 per share, compared to $4.8 million, or $0.26 per share, for the fourth quarter last year. FFO for the full year 2004 was $30.4 million, or $1.53 per share, compared to $33.0 million, or $1.75 per share for last year. Diluted FFO per share for 2003 has been restated to give effect to the assumed conversion of convertible debt in accordance with the adoption of Emerging Issues Task Force Issue 04-08 in the fourth quarter of 2004. Net income and FFO were adversely affected by impairment charges aggregating $1.7 million in the first half of 2004 and $4.0 million in the fourth quarter 2003 relating to the Company's sale of two Charlotte, North Carolina apartment communities in 2004. Net income and FFO for 2004 were also adversely affected by fourth quarter separation charges of $1.5 million related to the departure of two senior executive officers and by third quarter expenses aggregating $573,000 related to hurricane damage sustained in Florida. Net income for the year was negatively impacted by a depreciation charge of $6.5 million ($0.33 per share) related to the change in estimated useful lives of certain assets. The Company computes FFO in a manner consistent with the definition adopted by NAREIT (The National Association of Real Estate Investment Trusts) and considers FFO to be its primary supplemental performance measure. A reconciliation of FFO to net income is included in the accompanying Financial Highlights table. Same Store Results For both the quarterly and full year comparison, 12,332 apartments in 35 communities (94% of total apartments owned at December 31, 2004) were classified as "same store", i.e., owned throughout both years. For the fourth quarter of 2004, same store net operating income increased by 8.4% over the comparable quarter of the prior year. Same store rental revenues for the quarter grew by 5.1%, principally as a result of increases in rental rates of 4.4% (net of concessions), offset in part by a decline in occupancy to 92.4% from 93.8% in the fourth quarter of 2003. Fourth quarter 2004 occupancy statistics were adversely affected by a significant number of apartment homes not available for rent as a result of the redevelopment of a 692-unit community. Excluding this property, same store occupancy was 93.2% compared to 93.9% last year. On a sequential quarterly basis, same store occupancy decreased by 60 basis points from the third quarter 2004. During the fourth quarter, same store operating expenses increased by 0.7%, compared to last year. In the full year comparison, same store net operating income and revenues increased by 3.2% and 2.7%, respectively. This is primarily attributable to increases in rental rates of 3.3% (net of concessions), offset in part by a decline in occupancy to 92.5% from 93.6% in 2003. Excluding the property under redevelopment referred to above, same store occupancy was 93.1% compared to 93.7% last year. Same store operating expenses grew by $1,011,000, or 2.1%, of which $573,000 relates to hurricane damage sustained in Florida during 2004. Capital Market Activities Over the past 17 months, the Company has raised additional capital on two separate occasions. In August 2003, the Company sold $74.75 million of 5.375% Convertible Senior Notes and, in February 2004, the Company issued 1.4 million common shares in a private sale at $24.80 per share. Proceeds from both transactions were used, on an interim basis, primarily to repay floating rate debt. These funds are intended to provide long-term liquidity for portfolio improvement and expansion. To date, however, the Company has been unable to find suitable investment opportunities in its preferred markets at acceptable pricing as the investment climate for multifamily properties remains extremely competitive. While the extent and timing of additional property acquisitions are unknown, when this capital is fully invested in real estate, it is expected to provide returns that are significantly higher than our current floating rate interest costs. Interest expense on the Convertible Senior Notes for the year, including amortization of financing costs, was $2,447,000 greater than in 2003. Additional information regarding the Company's financial position and results, including selected market operating data, appear in the accompanying tables. The Town and Country Trust is a multifamily real estate investment trust that owns and operates 38 apartment communities with 13,065 apartment homes in the Mid-Atlantic states and Florida. Additional information regarding The Town and Country Trust can be found on the Trust's web site at http://www.tctrust.com/ . With the exception of historical information, the matters herein contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Securities Litigation Reform Act of 1995. Management cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied. Examples of such factors that could result in such differences include but are not limited to: interest rate fluctuations; competition for tenants; changes in the Trust's capacity to acquire additional apartment properties and any changes in the Trust's financial condition or operating results due to an acquisition of additional apartment properties; local economic and business conditions, including without limitation, conditions which may affect public securities markets generally, the real estate investment trust industry, or the markets in which the Trust's apartment properties are located, and other factors referred to in the Trust's periodic and other reports filed with the Securities and Exchange Commission. The Town and Country Trust Financial Highlights (In thousands, except per share data - unaudited) Three Months Year Ended December 31, Ended December 31, 2004 2003 Change 2004 2003 Change Revenues: Gross rental income $34,121 $32,103 6.3% $131,710 $121,133 8.7% Less: Vacancy and credit loss 2,664 2,209 20.6% 10,327 8,414 22.7% Net rental income 31,457 29,894 5.2% 121,383 112,719 7.7% Other rental revenue 1,488 1,384 7.5% 5,592 5,298 5.5% Total rental revenues 32,945 31,278 5.3% 126,975 118,017 7.6% Operating expenses: Real estate taxes and insurance 3,224 3,365 -4.2% 13,230 12,647 4.6% Utilities 1,831 1,745 4.9% 7,463 7,181 3.9% Repairs and maintenance 3,669 3,653 0.4% 15,877 14,664 8.3% Marketing and advertising 1,287 1,131 13.8% 4,880 4,172 17.0% Management expense 1,803 1,704 5.8% 6,765 6,619 2.2% Other 1,565 1,650 -5.2% 5,495 5,387 2.0% Total operating expenses 13,379 13,248 1.0% 53,710 50,670 6.0% Net operating income (NOI) (c) 19,566 18,030 8.5% 73,265 67,347 8.8% Real estate depreciation and amortization 5,820 5,836 -0.3% 28,859 20,675 39.6% Interest expense 8,397 8,075 4.0% 32,969 28,785 14.5% General and administrative expenses 1,446 1,207 19.8% 5,866 4,744 23.7% Separation expense 1,533 - 1,533 - Other depreciation and amortization 418 184 1,224 712 Income before discontinued operations and minority interests (a) 1,952 2,728 2,814 12,431 Income allocated to minority interest from continuing operations (247) (375) (364) (1,681) Minority interest distribution in excess of earnings(b) - - - 576 Income from continuing operations 1,705 2,353 2,450 11,326 Discontinued Operations: (Loss) income from discontinued operations (23) (112) 918 2,054 Gain on sales of properties - 38,718 - 80,081 Impairment of assets held for disposition - (4,000) (1,672) (4,000) Loss (income) allocated to minority interest from discontinued operations 3 (4,761) 100 (10,693) (Loss) income from discontinued operations (20) 29,845 (654) 67,442 Net income $1,685 $32,198 $1,796 $78,768 Basic earnings per share: Income from continuing operations $0.10 $0.15 $0.15 $0.72 Income (loss) from discontinued operations - 1.93 (0.04) 4.27 Net income $0.10 $2.08 $0.11 $4.99 Diluted earnings per share: Income from continuing operations $0.10 $0.15 $0.14 $0.70 Income (loss) from discontinued operations - 1.89 (0.04) 4.20 Net income $0.10 $2.04 $0.10 $4.90 Weighted average common shares outstanding- basic 17,068 15,463 16,896 15,773 Dilutive effect of outstanding options and restricted shares 302 335 278 298 Weighted average common shares outstanding-diluted 17,370 15,798 17,174 16,071 Dividends declared per share $0.43 $0.43 $1.72 $1.72 Funds from operations(c): Net income $1,685 $32,198 $1,796 $78,768 Income allocated to minority interest 244 5,136 264 11,798 Gain on involuntary conversion - - (558) (621) Gain on sales of properties - (38,718) - (80,081) Real estate depreciation (d) 5,820 6,135 28,859 23,175 Funds from operations $7,749 $4,751 63.1% $30,361 $33,039 -8.1% Funds from operations per share: Basic $0.40 $0.27 $1.57 $1.81 Diluted (f) $0.39 $0.26 48.5% $1.53 $1.75 -12.9% See accompanying Notes to Supplemental Information The Town and Country Trust Same Store Market Operating Data Three Months Ended Three Months September Year Ended December 31, 30, Ended December 31, 2004 2003 Change 2004 2004 2003 Change Property Operating Income ($000's) Rental revenue $30,009 $28,549 5.1% $29,149 $115,710 $112,660 2.7% Operating expenses 12,339 12,253 0.7% 13,043 49,581 48,570 2.1% Same Store net operating income (NOI) $17,670 $16,296 8.4% $16,106 $66,129 $64,090 3.2% Reconciliation of Same Store NOI to Continuing NOI Same Store net operating income (NOI) $17,670 $16,296 $16,106 $66,129 $64,090 2003 Acquisitions rental revenue 2,936 2,729 2,813 11,265 5,357 2003 Acquisitions operating expenses (1,040) (995) (1,052) (4,129) (2,100) Net operating income(NOI) $19,566 $18,030 $17,867 $73,265 $67,347 Rental Revenue ($000's) Baltimore $10,282 $9,897 3.9% $10,070 $39,881 $38,847 2.7% Metropolitan Washington,DC Northern Virginia 5,725 5,477 4.5% 5,687 22,357 21,682 3.1% Maryland Suburbs 3,417 3,254 5.0% 3,301 13,337 12,811 4.1% Pennsylvania 4,177 3,948 5.8% 3,870 15,606 15,547 0.4% Orlando, Florida 2,050 1,918 6.9% 1,994 7,903 7,572 4.4% Sarasota/Bradenton, Florida 1,824 1,688 8.1% 1,770 7,019 6,637 5.8% Newark, Delaware 1,337 1,186 12.7% 1,285 4,887 4,866 0.4% Palm Beach Gardens, Florida 1,197 1,181 1.4% 1,172 4,720 4,698 0.5% Total $30,009 $28,549 5.1% $29,149 $115,710 $112,660 2.7% Average Monthly Rent (net of concessions) Baltimore 791 748 5.7% 782 770 734 4.9% Metropolitan Washington, DC Northern Virginia 1,102 1,039 6.1% 1,076 1,070 1,036 3.3% Maryland Suburbs 944 917 2.9% 948 938 908 3.3% Pennsylvania 661 647 2.2% 652 654 638 2.5% Orlando, Florida 738 717 2.9% 725 724 715 1.3% Sarasota/Bradenton, Florida 772 748 3.2% 762 760 744 2.2% Newark, Delaware 917 889 3.1% 913 888 881 0.8% Palm Beach Gardens, Florida 907 902 0.6% 897 900 901 -0.1% Total $835 $800 4.4% $824 $817 $791 3.3% Occupancy Baltimore 90.1% 93.4% -3.3% 91.0% 91.1% 93.2% -2.1% Metropolitan Washington, DC Northern Virginia 92.8% 95.1% -2.3% 95.5% 94.0% 94.4% -0.4% Maryland Suburbs 91.3% 93.2% -1.9% 92.6% 92.6% 92.9% -0.3% Pennsylvania 92.2% 94.3% -2.1% 91.8% 91.1% 94.4% -3.3% Orlando, Florida 95.7% 93.0% 2.7% 95.4% 94.5% 91.7% 2.8% Sarasota/Bradenton, Florida 97.2% 93.5% 3.7% 95.5% 95.6% 93.2% 2.4% Newark, Delaware 96.6% 91.3% 5.3% 95.7% 93.1% 94.1% -1.0% Palm Beach Gardens, Florida 96.3% 94.3% 2.0% 93.9% 94.7% 94.3% 0.4% Total 92.4% 93.8% -1.4% 93.0% 92.5% 93.6% -1.1% Community Information Communities Apartment Homes 2004 2003 2004 2003 % of Same Acqui- Same Acqui- Total Store sition Total Store sition Total Portfolio Baltimore 10 2 12 4,592 405 4,997 38.2% Metropolitan Washington, DC Northern Virginia 5 1 6 1,823 328 2,151 16.5% Maryland Suburbs 4 4 1,236 1,236 9.5% Pennsylvania 7 7 2,073 2,073 15.9% Orlando, Florida 3 3 930 930 7.1% Sarasota/Bradenton, Florida 3 3 742 742 5.7% Newark, Delaware 2 2 488 488 3.7% Palm Beach Gardens, Florida 1 1 448 448 3.4% Total 35 3 38 12,332 733 13,065 100.0% The Town and Country Trust Summary Balance Sheets (In thousands, unaudited) December 31, 2004 2003 Assets: Realestate, at cost $815,318 $809,135 Accumulated depreciation (271,984) (273,383) Netreal estate assets 543,334 535,752 Real estate and other assets held for disposition - 32,561 Other assets 18,750 20,677 Total Assets $562,084 $588,990 Liabilities and shareholders' equity: Mortgage debt $415,132 $427,318 5.375% Convertible Senior Notes due 2023 74,750 74,750 Notes Payable 2,000 - Mortgage debt and other liabilities held for disposition - 23,734 Other liabilities 16,893 16,270 Minority interest 6,592 7,556 Shareholders' equity 46,717 39,362 Total liabilities and shareholders' equity $562,084 $588,990 Capitalization December 31, 2004 (In thousands, except per share data) % of Total % of Capital- Interest Debt: Amount Debt ization Rate Maturity Secured Fixed Rate: Fannie Mae (e) $340,000 69.2% 6.64% April, 2008 Freddie Mac 33,175 6.7% 6.81% April, 2009 Freddie Mac 17,450 3.5% 7.85% Nov., 2009 Freddie Mac 24,507 5.0% 4.15% April, 2007 Total Secured Fixed Rate Debt 415,132 84.4% 39.8% 6.55% Unsecured: 5.375% Convertible Senior Aug., Notes due 2023 74,750 15.2% 5.38% 2023 Unsecured credit facility 2,000 0.4% 3.62% Total Unsecured debt 76,750 15.6% 7.4% 5.33% Total Debt $491,882 100.0% 47.2% 6.36% Equity: Common shares outstanding 17,479 OP units 2,467 Total shares and OP units outstanding 19,946 Common share price at December 31, 2004 $27.63 Total equity capitalization, at market $551,111 52.8% Total market capitalization (debt and equity) $1,042,993 100.0% See accompanying Notes to Supplemental Information The Town and Country Trust Notes to Supplemental Information (unaudited) (a) Minority interests represent certain limited partnership interests, equivalent to 2,467,000 shares. (b) In 2003, represents the reallocation of income previously allocated to minority interest in 2002 as required under U.S. generally accepted accounting principles that had been necessary to keep the minority interest balance as reported in the Company's Balance Sheet from falling below zero. (c) Funds from operations ("FFO") is computed as income (computed in accordance with U.S. generally accepted accounting principles ("U.S. GAAP")) excluding gains and losses from sales and involuntary conversions of operating properties, plus real estate depreciation. This computation of FFO is consistent with the formal definition promulgated by the National Association of Real Estate Investment Trusts (NAREIT). The reconciliation of FFO to Net income, the most directly comparable financial measure calculated in accordance with U.S. GAAP, is included in the Financial Highlights. Management generally considers FFO to be a useful measure for reviewing the comparative operating performance of the Trust between periods or as compared to other companies, without giving effect to real estate depreciation and amortization, which assumes that the value of real estate diminishes predictably over time and which can vary among owners of similar assets based upon historical cost and useful life estimates. The Company uses net operating income (NOI) to measure the operating results of its communities and to compare the operating performance of single assets or groups of assets. The Company defines NOI as property rental income less property operating expenses and does not include depreciation and amortization, interest expense, general and administrative expenses, separation expense, discontinued operations, or gains/losses on sales of properties. Accordingly, this performance measure is not intended as a replacement for net income determined in accordance with U.S. generally accepted accounting principles. NOI is widely used by management and investors in the real estate industry in connection with the valuation of income-producing real estate and as a supplemental measure of operating performance. NOI measures presented by the Company may not be comparable to other similarly titled measures of other companies. A reconciliation of NOI to Net Income is included in the Financial Highlights. FFO and NOI should not be considered alternatives to net income as a measure of performance nor do they represent cash generated from operating activities in accordance with U.S. GAAP and, therefore, they should not be considered indicative of cash available to fund cash needs. (d) Includes real estate depreciation on discontinued operations, which is through the date of classification as held for disposition. (e) The information shown for this debt gives effect to two interest rate swap agreements in the aggregate notional amount of $40 million, which have the effect of fixing the interest rate on this amount of debt at approximately 4.67% through April 2007. (f) Diluted FFO per share for the year ended December 31, 2003 has been restated as a result of the 4th quarter 2004 adoption of Emerging Issues Task Force Issue 04-08, "The Effect of Contingently Convertible Instruments on Diluted Earnings per Share". DATASOURCE: The Town and Country Trust CONTACT: Thomas L. Brodie, President and COO, +1-212-407-2161; or Alan W. Lasker, Sr. Vice President and CFO, +1-212-407-2151, both of The Town and Country Trust; or Investors, Joseph Calabrese, +1-212-827-3772, for The Town and Country Trust Web site: http://www.tctrust.com/

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