TCT Town & Country Trust

The Town and Country Trust Announces Third Quarter Results BALTIMORE, Nov. 8 /PRNewswire-FirstCall/ -- The Town and Country Trust (NYSE:TCT), a multifamily real estate investment trust, today reported results for the third quarter and nine months ended September 30, 2004. All per share results are reported on a fully diluted basis. For the third quarter, the Company reported net income of $1.7 million, or $0.10 per share, compared to net income of $40.1 million, or $2.52 per share, for the third quarter of 2003. Net income for the third quarter last year includes gains on property sales of $41.4 million, before minority interest of $5.6 million. Funds From Operations ("FFO") for the third quarter of 2004 was $8.0 million, or $0.40 per share, compared to $9.0 million, or $0.49 per share, for the third quarter last year. FFO for the 2004 nine-month period was $22.6 million, or $1.15 per share, compared to $28.3 million, or $1.52 per share for the nine-month period last year. Results for the third quarter of 2004 include expenses aggregating $573,000, or $0.03 per share, relating to damage sustained in Florida during the 2004 hurricane season. Net income and FFO for the 2004 nine-month period were adversely affected by impairment charges aggregating $1.7 million relating to the sale during the year of the Company's two Charlotte, North Carolina, apartment communities. The Company computes FFO in a manner consistent with the definition adopted by NAREIT (The National Association of Real Estate Investment Trusts) and it 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 In the quarterly comparison, 12,332 apartments in 35 communities (94% of total apartment owned at September 30, 2004) were classified as "same store", i.e., owned and held for investment throughout both years. For the third quarter, same store net operating income declined by 2.6%. Same store rental revenues for the quarter grew by 2.2%. This is primarily attributable to increases in rental rates of 4.0% (net of concessions), offset in part by a decline in occupancy to 93.0% from 94.5% in the third quarter of 2003. Third quarter occupancy statistics were adversely affected by a 692-unit community under redevelopment. Excluding this property, same store occupancy was 93.8% compared to 94.7% last year. On a sequential quarterly basis, same store occupancy increased by 30 basis points from the second quarter 2004. During the third quarter, same store operating expenses increased by 8.8%, compared to last year, with 4.8% of the increase resulting from the aforementioned hurricane damage. Capital Market Activities Over the past 15 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 January 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 capital 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 interest costs. Consequently, these financing transactions had a dilutive effect on third quarter 2004 results. Interest expense on the Convertible Senior Notes for the quarter, including amortization of financing costs, was $405,000 greater than the third quarter of 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 Nine Months Ended September 30, Ended September 30, 2004 2003 Change 2004 2003 Change Revenues: Gross rental income $33,011 $30,572 8.0% $97,589 $89,029 9.6% Less: Vacancy and credit loss 2,491 1,808 37.8% 7,663 6,205 23.5% Net rental income 30,520 28,764 6.1% 89,926 82,824 8.6% Other rental revenue 1,442 1,344 7.3% 4,104 3,914 4.9% Total rental revenues 31,962 30,108 6.2% 94,030 86,738 8.4% Operating expenses: Real estate taxes and insurance 3,252 3,129 3.9% 10,006 9,282 7.8% Utilities 1,701 1,609 5.7% 5,632 5,436 3.6% Repairs and maintenance 4,806 4,001 20.1% 12,208 11,012 10.9% Marketing and advertising 1,285 1,042 23.3% 3,593 3,041 18.2% Management expense 1,634 1,605 1.8% 4,962 4,915 1.0% Other 1,417 1,352 4.8% 3,930 3,735 5.2% Total operating expenses 14,095 12,738 10.7% 40,331 37,421 7.8% Net operating income (NOI) (c) 17,867 17,370 2.9% 53,699 49,317 8.9% Real estate depreciation and amortization 6,002 5,200 15.4% 23,039 14,839 55.3% Interest expense 8,266 7,390 11.9% 24,572 20,708 18.7% General and administrative expenses 1,341 1,241 8.1% 4,420 3,539 24.9% Other depreciation and amortization 258 174 806 528 Income before discontinued operations and minority interests(a) 2,000 3,365 862 9,703 Income allocated to minority interest from continuing operations (253) (459) (117) (1,306) Minority interest distribution in excess of earnings(b) -- 1,551 -- 576 Income from continuing operations 1,747 4,457 745 8,973 Discontinued Operations: (Loss) income from discontinued operations (4) (70) 941 2,166 Gain on sales of properties -- 41,363 -- 41,363 Impairment of assets held for disposition -- -- (1,672) -- (Income) loss allocated to minority interest from discontinued operations -- (5,633) 97 (5,932) (Loss) income from discontinued operations (4) 35,660 (634) 37,597 Net income $1,743 $40.177 $111 $46,570 Basic earnings per share: Income from continuing operations $0.10 $0.29 $0.05 $0.57 Income (loss) from discontinued operations -- 2.28 (0.04) 2.37 Net income $0.10 $2.57 $0.01 $2.94 Diluted earnings per share: Income from continuing operations $0.10 $0.28 $0.05 $0.55 Income (loss) from discontinued operations -- 2.24 (0.04) 2.33 Net income $0.10 $2.52 $0.01 $2.88 Weighted average common shares outstanding-basic 17,022 15,614 16,838 15,864 Dilutive effect of outstanding options and restricted shares 292 319 295 281 Weighted average common shares outstanding-diluted 17,314 15,933 17,133 16,145 Dividends declared per share $0.43 $0.43 $1.29 $1.29 Funds from operations(c): Net income $1,743 $40,117 $111 $46,570 Income allocated to minority interest 253 4,541 20 6,662 Gain on involuntary conversion -- -- (558) (621) Gain on sales of properties -- (41,363) -- (41,363) Real estate depreciation(d) 6,002 5,746 23,039 17,040 Funds from operations $7,998 $9,041 -11.5% $22,612 $28,288 -20.1% Funds from operations per share: Basic $0.41 $0.50 $1.17 $1.54 Diluted $0.40 $0.49 -17.7% $1.15 $1.52 -24.1% See accompanying Notes to Supplemental Information The Town and Country Trust Same Store Market Operating Data Three Months Three Months Ended Ended September 30, June 30, 2004 2003 Change 2004 Property Operating Income ($000's) Rental revenue $29,149 $28,531 2.2% $28,534 Operating expenses 13,043 11,992 8.8% 12,109 Same Store net operating income (NOI) $16,106 $16,539 -2.6% $16,425 Reconciliation of Same Store NOI to Continuing NOI Same Store net operating income (NOI) $16,106 $16,539 $16,425 2003 Acquisitions rental revenue 2,813 1,577 2,762 2003 Acquisitions operating expenses (1,052) (746) (1,038) Net operating income (NOI) $17,867 $17,370 $18,149 Rental Revenue ($000's) Baltimore $10,070 $9,889 1.8% $9,856 Metropolitan Washington, DC Northern Virginia 5,687 5,487 3.6% 5,547 Maryland Suburbs 3,301 3,275 0.8% 3,382 Pennsylvania 3,870 3,936 -1.7% 3,780 Orlando, Florida 1,994 1,928 3.4% 1,938 Sarasota/Bradenton, Florida 1,770 1,621 9.2% 1,722 Newark, Delaware 1,285 1,235 4.0% 1,137 Palm Beach Gardens, Florida 1,172 1,160 1.0% 1,172 Total $29,149 $28,531 2.2% $28,534 Average Monthly Rent (net of concessions) Baltimore 782 738 6.0% 760 Metropolitan Washington, DC Northern Virginia 1,076 1,027 4.8% 1,055 Maryland Suburbs 948 906 4.6% 930 Pennsylvania 652 642 1.6% 653 Orlando, Florida 725 717 1.1% 714 Sarasota/Bradenton, Florida 762 738 3.3% 755 Newark, Delaware 913 889 2.7% 844 Palm Beach Gardens, Florida 897 902 -0.6% 898 Total $824 $792 4.0% $807 Occupancy Baltimore 91.0% 94.1% -3.1% 91.5% Metropolitan Washington, DC Northern Virginia 95.5% 96.2% -0.7% 94.5% Maryland Suburbs 92.6% 94.7% -2.1% 94.5% Pennsylvania 91.8% 95.1% -3.3% 90.1% Orlando, Florida 95.4% 92.8% 2.6% 93.8% Sarasota/Bradenton, Florida 95.5% 92.8% 2.7% 94.6% Newark, Delaware 95.7% 94.7% 1.0% 92.0% Palm Beach Gardens, Florida 93.9% 93.0% 0.9% 93.3% Total 93.0% 94.5% -1.5% 92.7% Nine Months Ended September 30, 2004 2003 Change Property Operating Income ($000's) Rental revenue $85,700 $84,110 1.9% Operating expenses 37,243 36,316 2.6% Same Store net operating income (NOI) $48,457 $47,794 1.4% Reconciliation of Same Store NOI to Continuing NOI Same Store net operating income (NOI) $48,457 $47,794 2003 Acquisitions rental revenue 8,330 2,628 2003 Acquisitions operating expenses (3,088) (1,105) Net operating income (NOI) $53,699 $49,317 Rental Revenue ($000's) Baltimore $29,597 $28,951 2.2% Metropolitan Washington, DC Northern Virginia 16,632 16,205 2.6% Maryland Suburbs 9,920 9,556 3.8% Pennsylvania 11,429 11,599 -1.5% Orlando, Florida 5,853 5,653 3.5% Sarasota/Bradenton, Florida 5,195 4,949 5.0% Newark, Delaware 3,551 3,680 -3.5% Palm Beach Gardens, Florida 3,523 3,517 0.2% Total $85,700 $84,110 1.9% Average Monthly Rent (net of concessions) Baltimore 763 729 4.7% Metropolitan Washington, DC Northern Virginia 1,059 1,035 2.3% Maryland Suburbs 936 905 3.4% Pennsylvania 651 635 2.5% Orlando, Florida 719 715 0.6% Sarasota/Bradenton, Florida 756 743 1.7% Newark, Delaware 879 878 0.1% Palm Beach Gardens, Florida 897 900 -0.3% Total $811 $788 2.9% Occupancy Baltimore 91.4% 93.1% -1.7% Metropolitan Washington, DC Northern Virginia 94.4% 94.1% 0.3% Maryland Suburbs 93.0% 92.8% 0.2% Pennsylvania 90.7% 94.4% -3.7% Orlando, Florida 94.0% 91.2% 2.8% Sarasota/Bradenton, Florida 95.1% 93.1% 2.0% Newark, Delaware 91.9% 95.1% -3.2% Palm Beach Gardens, Florida 94.2% 94.3% -0.1% Total 92.6% 93.5% -0.9% Community Information Communities Apartment Homes % of 2004 2003 2004 2003 Total Same Acquis- Same Acquis- Port- Market: Store itions Total Store itions Total folio 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) September 30, December 31, 2004 2003 Assets: Real estate, at cost $838,970 $814,766 Accumulated depreciation (299,422) (276,603) Net real estate assets 539,548 538,163 Real estate and other assets held for disposition -- 32,561 Other assets 24,007 18,266 Total Assets $563,555 $588,990 Liabilities and shareholders' equity: Mortgage debt $415,301 $427,318 5.375% Convertible Senior Notes due 2023 74,750 74,750 Mortgage debt and other liabilities held for disposition -- 23,734 Other liabilities 15,899 16,270 Minority interest 7,141 7,556 Shareholders' equity 50,464 39,362 Total liabilities and shareholders' equity $563,555 $588,990 Capitalization September 30, 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 69.3% 6.64% April, 2008 Freddie Mac 33,175 6.8% 6.81% April, 2009 Freddie Mac 17,506 3.6% 7.85% Nov., 2009 Freddie Mac 24,620 5.0% 4.15% April, 2007 Total Secured Fixed Rate Debt 415,301 84.7% 41.7% 6.55% Unsecured: 5.375% Convertible Senior Notes due 2023 74,750 15.3% 5.38% Aug., 2023 Total Unsecured debt 74,750 15.3% 7.5% 5.38% Total Debt $490,051 100.0% 49.2% 6.37% Equity: Common shares outstanding 17,431 OP units 2,467 Total shares and OP units outstanding 19,898 Common share price at September 30, 2004 $25.45 Total equity capitalization, at market $506,380 50.8% Total market capitalization (debt and equity) $996,431 100.0% 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 additional allocation of income required under generally accepted accounting principles 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 accounting principles generally accepted in the United States) ("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 Income, the most directly comparable financial measure calculated in accordance with 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, 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 ("GAAP"). 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 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 4.74% through April 2007. DATASOURCE: The Town and Country Trust CONTACT: James Dolphin, Executive Vice President, +1-410-539-7600, or Alan W. Lasker, Sr. Vice President and CFO, +1-212-407-2151, both of The Town and Country Trust; or Joseph Calabrese of Financial Relations Board, +1-212-827-3772, for The Town and Country Trust Web site: http://www.tctrust.com/

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