AmREIT Reports Second Quarter Results and Third Quarter Dividend

Business Wire

HOUSTON--(BUSINESS WIRE)--

AmREIT, Inc. (AMRE) (“AmREIT” or the “Company”), today announced financial results for the second quarter ended June 30, 2013 and dividends for the third quarter ended September 30, 2013.

Second Quarter and Year-to-Date Highlights:

Financial Results

  • Core Funds from Operations ("Core FFO") available to common stockholders for the second quarter of 2013 was $4.1 million, or $0.25 per share, compared to $3.7 million, or $0.32 per share for the comparable period in 2012. For the six months ended June 30, 2013, Core FFO was $8.4 million, or $0.52 per share, compared to $7.3 million, or $0.63 per share for the comparable six month period in 2012.
  • FFO available to common stockholders for the second quarter of 2013 was $4.0 million, or $0.25 per share, compared to $3.7 million, or $0.32 per share for the comparable period in 2012. For the six months ended June 30, 2013, FFO was $8.1 million, or $0.50 per share, compared to $7.3 million, or $0.63 per share for the comparable six month period in 2012. Included in FFO for the three and six months ended June 30, 2013 were $126,000 and $290,000, respectively, in acquisition costs related to the MacArthur Park joint venture with Goldman Sachs and the Fountain Oaks acquisition, which were completed in March and June of 2013, respectively.
  • Net income available to common stockholders for the second quarter of 2013 was $981,000, or $0.06 per share, compared to $1.4 million, or $0.12 per share, for the same period in 2012. For the six months ended June 30, 2013, net income was $9.4 million, or $0.59 per share, compared to $2.7 million, or $0.23 per share for the comparable six month period in 2012. Included in net income for the six months ended June 30, 2013 was a $7.7 million gain on sale related to the sale of AmREIT's MacArthur Park Property into the joint venture with Goldman Sachs.

FFO and Core FFO are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of FFO and Core FFO to net income is attached to this press release.

Portfolio Results

  • In the second quarter of 2013, same-store net operating income (“NOI”) increased 2.8% over the same period in the prior year. For the six months ended June 30, 2013, same-store NOI increased 2.0% over the same period in the prior year.
  • Portfolio occupancy as of June 30, 2013 was 95.1%, a decrease of approximately 160 basis points as compared to portfolio occupancy of 96.7% as of December 31, 2012. The primary driver behind this decrease in occupancy is the acquisition of Fountain Oaks, which was 89% occupied as of June 30, 2013 and the vacancy at Courtyard at Post Oak, which was 30% occupied as of June 30, 2013. On a leased basis, which includes leases that have been executed but where rent has not yet commenced, the portfolio was 96.0% leased as of June 30, 2013, with anticipated rent commencement during the remainder of 2013.
  • During the second quarter of 2013, AmREIT signed 21 leases for 57,972 square feet of gross leasable area, including both new and renewal leases. Of these, 17 leases, or 51,500 square feet, were comparable leases. Cash leasing spreads, which is the new leasing rate per square foot compared to the expiring leasing rate per square foot, increased 7.3%. On a GAAP basis, which includes the effects of straight-line rent, leasing spreads increased 14.5%. For the six months ended June 30, 2013, AmREIT signed 37 leases for 92,513 square feet of gross leasable area, including both new and renewal leases. Of these, 30 leases, or 78,974 square feet, were comparable leases. Cash leasing spreads increased 10.7%. On a GAAP basis, leasing spreads increased 17.5%.

NOI and same store NOI are non-GAAP supplemental earnings measures that AmREIT considers meaningful in measuring its operating performance. Further explanation and a reconciliation of NOI and same store NOI to net income are attached to this press release.

Dividends

  • AmREIT also announced today that the Company's Board of Directors has approved a regular quarterly cash dividend of $0.20 per share. The dividend will be paid on September 30, 2013 to all common stockholders of record at the close of business on September 20, 2013.

Acquisitions and Dispositions

  • On June 25, 2013, AmREIT completed the acquisition of Fountain Oaks Shopping Center, a 160,600 square foot Kroger-anchored shopping center in the north Buckhead submarket of Atlanta, Georgia. Average household incomes within a one-mile radius of Fountain Oaks are $96,771, and there are approximately 31,887 households within a three-mile radius of the property. Fountain Oaks was acquired for approximately $27.7 million, is unencumbered, and was funded with borrowings under AmREIT’s unsecured revolving credit facility.
  • On March 26, 2013, AmREIT entered into a joint venture agreement with Goldman Sachs pursuant to which AmREIT contributed equity in its MacArthur Park property to a single-purpose entity in exchange for a 30% interest in the joint venture, and Goldman Sachs contributed cash for a 70% interest in the joint venture. The joint venture entity concurrently purchased the contiguous property to the north known as MacArthur Park Phase I, excluding a Target store, for approximately $25.5 million and placed mortgage financing on the combined property of $43.9 million. Upon closing the transaction, AmREIT received net cash proceeds of approximately $35.6 million, which it used to repay borrowings under its unsecured revolving credit facility. AmREIT will continue to manage and lease MacArthur Park on behalf of the joint venture and will retain a right of first offer to acquire the project in the future, after a lock-out period.

Equity Offering

  • On June 21, 2013, AmREIT filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission ("SEC") registering the offer and sale, from time to time, of up to $350 million of securities, which was declared effective by the SEC on July 1, 2013.
  • On July 19, 2013 AmREIT completed the public underwritten offering of 3,450,000 shares of common stock, including 450,000 shares sold pursuant to the exercise of the underwriter's over-allotment option, at a public offering price of $18.25 per share. The offering generated net proceeds of approximately $60 million, after deducting the underwriting discount and estimated offering expenses. AmREIT used a portion of the net proceeds to repay borrowings under its unsecured revolving credit facility and to acquire the underlying land on our Preston Royal East property. AmREIT intends to use the remaining proceeds to fund a portion of the acquisition of Woodlake Square, which was placed under contract on July 15, 2013, from its joint venture partner and two of its advised funds, and for general corporate purposes.

"As I look back on the past twelve months, I am gratified that we have met or exceeded the objectives we set forth during our IPO, and we now turn our attention to the next chapter of our growth," said H. Kerr Taylor, Chairman and Chief Executive Officer of AmREIT. "We will continue to strive to unlock value for our stockholders. First, we remain focused on maximizing our internal growth of portfolio operations. We believe our Irreplaceable CornerTM portfolio will continue to put up strong numbers. Second, we expect to deliver steady growth in our core markets. As a local sharpshooter, we know our markets very well and believe we can grow our portfolio with discipline at a pace which will give us an advantage. Third, we anticipate a continued benefit from our Advised Fund platform as we have in the past year. Its continued growth should drive recurring fee income and acquisition opportunities in the future. And finally, we will strive to continue to deliver organic growth through incremental redevelopment at projects like Uptown Park in Houston, Texas."

Guidance

  • AmREIT has adjusted its full year guidance to take into account the issuance of 3.45 million shares of common stock on July 19, 2013:
              Projected 2013 Range        
              High   Low        
Core FFO             $1.03   $0.98        
FFO             $0.96   $0.91        

The changes to AmREIT's full year guidance are strictly a result of the equity offering. As such, the decrease in the guidance is a result of the additional 3.45 million shares outstanding, partially offset by a decrease in interest expense.

Other Activities

  • AmREIT held its 2013 Annual Meeting of Stockholders at 10:00 AM Central Daylight Time on April 18, 2013.
  • At the 2013 Annual Meeting of Stockholders, AmREIT's stockholders approved, among other items, two charter amendments that, when taken together, had the effect of exchanging all of AmREIT's issued and unissued shares of Class A common stock into shares of Class B common stock, on a one-for-one basis. AmREIT then renamed its Class B common stock to common stock, which are listed on the New York Stock Exchange.

Subsequent Events

  • On July 17, 2013, AmREIT acquired the underlying land on its Preston Royal East property for a purchase price of $15 million.
  • On July 15, 2013, AmREIT entered into a purchase and sale agreement with VIF II/AmREIT Woodlake, LP, a joint venture between AEW, AmREIT and two of its advised funds, to purchase the Woodlake Square Shopping Center, a grocery-anchored shopping center located in Houston, Texas, for a purchase price of $41.6 million. The retail shopping center contains approximately 161,000 square feet of gross leasable area and major tenants include Randalls, Walgreens and Jos. A. Bank. Average household incomes within a one-mile radius of Woodlake Square are $72,183, and there are 83,551 households within a three-mile radius of the property.

Conference Call

AmREIT will hold its quarterly conference call to discuss the results of its year to date and second quarter of 2013 on Wednesday, August 7, 2013, at 10:00 a.m. Central Daylight Time (11:00 a.m. Eastern Daylight Time). To participate in the quarterly conference call, please call 1-888-317-6016 approximately 10 minutes before the scheduled start time. The conference call will be recorded and a replay of the call will be available via webcast shortly after the call concludes.

The conference call will also be webcast live at www.amreit.com and can be accessed under the Investors tab of the Company's website. A telephonic replay of the conference call will be available for 14 days following the conference call. To access the telephonic replay of the conference call, dial 1-877-344-7529 and enter passcode 10030167.

Supplemental Financial Information

Further details regarding AmREIT’s results of operations, properties, and tenants are attached to this press release and can be accessed at the Company’s web site at www.amreit.com.

Non-GAAP Financial Disclosure

This press release contains certain non-GAAP financial measures that management believes are useful in evaluating an equity REIT's performance. AmREIT's definitions and calculations of non-GAAP financial measures may differ from those used by other equity REITs, and therefore may not be comparable. The non-GAAP financial measures should not be considered as an alternative to net income as an indication of our operating results, or to net cash provided by operating activities as a measure of our liquidity.

Funds From Operations (FFO)

AmREIT considers FFO to be an appropriate measure of the operating performance of an equity REIT. NAREIT defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and impairment charges on properties held for investment, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. NAREIT recommends that extraordinary items not be considered in arriving at FFO. AmREIT calculates FFO in accordance with this definition.

Most industry analysts and equity REITs, including AmREIT, consider FFO to be an appropriate supplemental non-GAAP financial measure of operating performance because, by excluding gains or losses on dispositions, impairment charges and depreciation, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance. 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, management believes that the presentation of operating results for real estate companies that uses historical cost accounting is insufficient by itself.

Additionally, AmREIT considers Core FFO, which adjusts FFO for items that do not reflect ongoing operations, such as acquisition expenses, non-recurring intangible asset write-offs and recoveries, expensed issuance costs and gains on the sale of real estate held for resale, to be a meaningful performance measurement. The computation of FFO in accordance with NAREIT’s definition includes certain items such as acquisition costs, issuance costs and gains on sale of real estate held for resale that management believes are not indicative of AmREIT’s ongoing results and therefore affect the comparability of our period-over-period performance with similar REITs. Accordingly, management believes that it is helpful to investors to adjust FFO for such items. There can be no assurance that FFO or Core FFO presented by AmREIT is comparable to similarly titled measures of other REITs. FFO and Core FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.

Projected FFO and Core FFO are calculated in a method consistent with historical FFO and Core FFO, and AmREIT considers projected FFO and Core FFO to be an appropriate supplemental measure when compared with projected earnings per share. A reconciliation of the projected FFO and Core FFO to projected earnings per share is provided below:

 

Updated
Projected 2013 Range

High

 

Low

Net income

$

0.74

$

0.69

Gain on sale - investment (0.43 ) (0.43 )
Depreciation and amortization 0.61 0.61
Depreciation and amortization for non-consolidated affiliates   0.04     0.04  
FFO available to stockholders $ 0.96   $ 0.91  
Acquisition costs 0.06 0.06
Write off of below market ground lease   0.01     0.01  
Core FFO available to stockholders $ 1.03   $ 0.98  
 

Net Operating Income (NOI)

AmREIT believes that NOI is a useful measure of its operating performance. AmREIT defines NOI as operating revenues (rental income, tenant recovery income, percentage rent, excluding straight-line rental income and amortization of acquired above- and below-market rents) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line rent bad debt expense). Other REITs may use different methodologies for calculating NOI, and accordingly, AmREIT’s NOI may not be comparable to other REITs.

AmREIT believes that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. AmREIT uses NOI to evaluate its performance on a property-by-property basis because NOI allows it to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on its operating results. However, NOI should only be used as a supplemental measure of its financial performance.

About AmREIT

AmREIT believes it has one of the highest quality grocery and drugstore anchored retail portfolios in the REIT sector. AmREIT's 29 year-old established platform has localized acquisition, operation and redevelopment expertise in the most densely populated and affluent submarkets of five of the top markets in the U.S.: Houston, Dallas, San Antonio, Austin and Atlanta. Texas is one of the best performing economies in the country and 92% of AmREIT's income for the year ended December 31, 2012 was generated by its properties located in this market. AmREIT’s management team has in-depth knowledge and extensive relationship advantages within its markets. AmREIT's portfolio was 95.1% occupied as of June 30, 2013, and its top five tenants include Kroger, Landry's, CVS/Pharmacy, H-E-B and Publix. AmREIT also has access to an acquisition pipeline through its Advised Funds, which include value add joint ventures with three leading institutional investors who partner with the company as local experts. AmREIT's common stock is traded on the New York Stock Exchange under the symbol “AMRE.” For more information, please visit www.amreit.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including statements related to full year 2013 Core FFO and FFO financial projections stated herein. These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. 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. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases, which are predictions of or indicate future events or trends and which do not relate solely to historical matters. While forward-looking statements reflect AmREIT’s good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Furthermore, AmREIT disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact AmREIT’s future results, performance or transactions, see the section entitled "Risk Factors" in AmREIT’s final prospectus supplement dated July 16, 2013, filed with the Securities and Exchange Commission on July 16, 2013 and other risks described in documents subsequently filed by AmREIT from time to time with the Securities and Exchange Commission.

Investor Contact

For more information, call Chad Braun, Chief Operating Officer and Chief Financial Officer of AmREIT, at (713) 850-1400. AmREIT is online at www.amreit.com.

   
AmREIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
 
June 30, December 31,
2013 2012
(unaudited)
ASSETS
Real estate investments at cost:
Land $ 144,627 $ 147,460
Buildings 208,973 222,679
Tenant improvements   14,025     17,386  
367,625 387,525
Less accumulated depreciation and amortization   (34,202 )   (39,820 )
333,423 347,705
 
Acquired lease intangibles, net 14,494 15,976
Investments in Advised Funds   16,867     7,953  
Net real estate investments 364,784 371,634
 
Cash and cash equivalents 1,400 2,992
Tenant and accounts receivable, net 5,047 5,566
Accounts receivable - related party, net 1,076 821
Notes receivable, net 4,226 2,731
Notes receivable - related party, net 7,294 6,748
Deferred costs, net 3,146 3,696
Other assets   2,553     3,206  
TOTAL ASSETS $ 389,526   $ 397,394  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ 208,486 $ 218,579
Accounts payable and other liabilities 7,697 9,593
Acquired below-market lease intangibles, net   4,115     3,507  
TOTAL LIABILITIES 220,298 231,679
 
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued - -
Class A common stock, $0.01 par value, 0 and 100,000,000 shares

authorized as of June 30, 2013 and December 31, 2012, 0 and 11,657,563

shares issued and outstanding as of June 30, 2013, and December 31, 2012,

respectively

- 117
Common stock, $0.01 par value, 1,000,000,000 and 900,000,000 shares

authorized as of June 30, 2013 and December 31, 2012, 16,178,037 and

16,123,288 shares issued and outstanding as of June 30, 2013, and

December 31, 2012, respectively

162 45
Capital in excess of par value 246,009 245,403
Accumulated distributions in excess of earnings   (76,943 )   (79,850 )
TOTAL STOCKHOLDERS' EQUITY   169,228     165,715  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 389,526   $ 397,394  
 
   
AmREIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(unaudited)
   
 
Three months ended June 30, Six months ended June 30,
2013 2012 2013 2012
 
Revenues:
Rental income from operating leases $ 9,912 $ 8,976 $ 20,986 $ 17,905
Advisory services income - related party   872     885     1,715     2,016  
Total revenues 10,784 9,861 22,701 19,921
 
Expenses:
General and administrative 2,070 1,568 4,031 3,063
Property expense 2,671 2,244 5,854 4,506
Legal and professional 261 229 513 450
Real estate commissions 52 53 104 139
Acquisition costs 126 - 126 -
Depreciation and amortization 2,738 2,120 6,037 4,347
Impairment recovery - notes receivable   -     (229 )   -     (229 )
Total expenses   7,918     5,985     16,665     12,276  
 
Operating income 2,866 3,876 6,036 7,645
 
Other income (expense):
Gain on sale of real estate acquired for investment - - 7,696 -
Interest and other income 154 135 267 237
Interest and other income - related party 53 85 109 157
Income (loss) from Advised Funds 192 (66 ) 44 (102 )
State income tax expense (benefit) (17 ) 11 (15 ) (5 )
Interest expense   (2,267 )   (2,595 )   (4,760 )   (5,229 )
 
Net income $ 981   $ 1,446   $ 9,377   $ 2,703  
 
Net income per share of common stock - basic and diluted $ 0.06   $ 0.12   $ 0.59   $ 0.23  
 

Weighted average shares of common stock used to compute net income per share, basic and diluted

  15,609     11,420     15,600     11,406  
 
Distributions per share of common stock $ 0.20   $ 0.20   $ 0.40   $ 0.40  
 
     

Summary of Operating Results (in thousands except per share data):

 
Three months ended June 30, Six months ended June 30, Three months ended March 31,
Funds from operations ("FFO") 2013   2012 2013   2012 2013   2012
Net income $ 981 $ 1,446 $ 9,377 $ 2,703 $ 8,396 $ 1,257
Add:
Depreciation of real estate assets - from

operations

2,724 2,106 6,010 4,319 3,286 2,213
Depreciation of real estate assets for

nonconsolidated affiliates

292 156 445 313 153 157
Less:
Gain on sale of real estate acquired for

investment

- - (7,696 ) - (7,696 ) -
           
Total FFO available to stockholders $ 3,997   $ 3,708   $ 8,136   $ 7,335   $ 4,139   $ 3,627  
 
Total FFO per share $ 0.25   $ 0.32   $ 0.50   $ 0.63   $ 0.26   $ 0.31  
 
Core funds from operations ("Core FFO")
Total FFO available to stockholders $ 3,997 $ 3,708 $ 8,136 $ 7,335 $ 4,139 $ 3,627
Add:
Acquisition costs 126 - 126 - - -
Acquisition costs for nonconsolidated affiliates - - 164 - 164 -
           
Total Core FFO available to stockholders $ 4,123   $ 3,708   $ 8,426   $ 7,335   $ 4,303   $ 3,627  
 
Total Core FFO per share $ 0.25   $ 0.32   $ 0.52   $ 0.63   $ 0.27   $ 0.31  
 
Adjusted funds from operations ("AFFO")
Total Core FFO available to stockholders $ 4,123 $ 3,708 $ 8,426 $ 7,335 $ 4,303 $ 3,627
Add:
Depreciation of non-real estate assets 14 14 27 28 13 14
Amortization of deferred financing costs 98 96 200 190 102 94
Stock-based compensation 352 143 619 287 267 144
Less:
Straight-line rent and above/below market rent (206 ) (88 ) (469 ) (177 ) (263 ) (89 )
Bad debt recoveries related to straight-line rent (55 ) (22 ) (51 ) (97 ) - (75 )
Amortization of above-market debt (29 ) (31 ) (58 ) (62 ) (29 ) (31 )
Impairment recoveries - notes receivable - (229 ) - (229 ) - -
Maintenance capital expenditures - (30 ) - (30 ) - -
           
Total AFFO available to stockholders $ 4,297   $ 3,561   $ 8,694   $ 7,245   $ 4,397   $ 3,684  
 
Total AFFO per share $ 0.27   $ 0.31   $ 0.54   $ 0.62   $ 0.27   $ 0.32  
 
Weighted average shares outstanding(1)   16,172     11,653     16,152     11,630     16,132     11,607  
 
Dividends
Regular common dividends per share $ 0.20 $ 0.20 $ 0.40 $ 0.40 $ 0.20 $ 0.20
Payout ratio - Core FFO 80.0 % 62.5 % 76.9 % 63.5 % 74.1 % 64.5 %

_____________

(1) Weighted average shares outstanding reflects the weighted average of all shares of common stock outstanding during the period including our non-vested shares. Weighted average shares of common stock outstanding used to compute net income per share under GAAP pursuant to the “two class method” includes only vested shares of common stock. Our reconciliation of weighted average shares used to compute net income per share, basic and diluted, on our consolidated statements of operations to weighted average shares used to compute FFO per share above is as follows:
      Three months ended June 30,       Six months ended June 30,
2013   2012 2013   2012
Weighted average shares used to compute net

income per share, basic and diluted

15,609 11,420 15,600 11,397

Weighted average shares of restricted common

stock outstanding

563 233 552 233
Weighted average shares used to compute

FFO per share

16,172 11,653 16,152 11,630
     

Same Store Property Analysis (in thousands except for number of properties, percentages and per share data):

 
Three months ended June 30,
2013   2012 Change $

Change %

Same store properties (27 properties)
Rental income (1) $ 5,735 $ 5,766 $ (31 ) (0.5 ) %
Recovery income (1) 2,067 1,873 194 10.4 %
Percentage rent (1) 15 - 15 *
Less:
Property expenses   1,955     1,938     (17 ) (0.9 ) %

Same store net operating income

  5,862     5,701     161   2.8 %
 
Same store occupancy at end of period(2) 96.3 % 98.3 % n/a (2.0 ) %
 
Non-same store properties (5 properties)
Rental income (1) 1,319 936 383 40.9 %
Recovery income (1) 570 313 257 82.1 %
Less:
Property expenses   771     329     (442 ) (134.3 ) %
Non-same store net operating income   1,118     920     198   21.5 %
Total net operating income 6,980 6,621 359 5.4 %
 
Total occupancy at end of period(2) 95.1 % 95.8 % n/a (0.7 ) %
 
Other revenues: 1,285 1,193 92 7.7 %
 
Less other expenses:   7,284     6,368     (916 ) (14.4 ) %
 
Net income $ 981   $ 1,446   $ (465 ) (32.2 ) %

_____________

(1) Rental income from operating leases on the consolidated statements of operations is comprised of rental income, recovery income and percentage rent from same store properties, rental income and recovery income from non-same store properties and amortization of straight-line rents and above/below market rents. For the three months ended June 30, 2013 and 2012, rental income from operating leases was $9,912 and $8,976, respectively.
(2) Percent occupied is calculated as (i) GLA under commenced leases as of June 30, 2013 or 2012, divided by (ii) total GLA as of such dates, expressed as a percentage.
* Percentage change not shown as there is no prior year amount, or such amount is immaterial, and the percentage change is not meaningful.

 

   

Same Store Property Analysis, continued (in thousands except for number of properties, percentages and per share data):

 
Six months ended June 30,
2013   2012 Change $

Change %

Same store properties (27 properties)
Rental income (1) $ 11,474 $ 11,496 $ (22 ) (0.2 ) %
Recovery income (1) 4,141 3,693 448 12.1 %
Percentage rent (1) 29 32 (3 ) (9.4 ) %
Less:
Property expenses   4,093     3,902     (191 ) (4.9 ) %
Same store net operating income   11,551     11,319     232   2.0 %
 
Same store occupancy at end of period(2) 96.3 % 98.3 % n/a (2.0 ) %
 
Non-same store properties (5 properties)
Rental income (1) 3,491 1,879 1,612 85.8 %
Recovery income (1) 1,362 628 734 116.9 %
Percentage rent (1) 20 - 20 *
Less:
Property expenses   1,812     701     (1,111 ) (158.5 ) %
Non-same store net operating income   3,061     1,806     1,255   69.5 %
Total net operating income 14,612 13,125 1,487 11.3 %
 
Total occupancy at end of period(2) 95.1 % 95.8 % n/a (0.7 ) %
 
Other revenues: 10,256 2,587 7,669 *
 
Less other expenses:   15,491     13,009     (2,482 ) (19.1 ) %
 
Net income $ 9,377   $ 2,703   $ 6,674   *

_____________

(1) Rental income from operating leases on the consolidated statements of operations is comprised of rental income, recovery income and percentage rent from same store properties, rental income and recovery income from non-same store properties and amortization of straight-line rents and above/below market rents. For the six months ended June 30, 2013 and 2012, rental income from operating leases was $20,986 and $17,905, respectively.
(2) Percent occupied is calculated as (i) GLA under commenced leases as of June 30, 2013 or 2012, divided by (ii) total GLA as of such dates, expressed as a percentage.
* Percentage change not shown as there is no prior year amount, or such amount is immaterial, and the percentage change is not meaningful.
   

Summary of Capital Expenditures (in thousands):

 
Three months ended June 30, Six months ended June 30,
2013   2012 2013   2012
Non-maintenance capital expenditures:
Tenant improvements and leasing commissions $ 373 $ 1,354 $ 823 $ 2,151
Development, redevelopment and expansion   830   73   856   405
Total non-maintenance capital expenditures

 

1,203

 

1,427

 

1,679

 

2,556
 
Maintenance capital expenditures   -   30   -   30
Total capital expenditures $ 1,203 $ 1,457 $ 1,679 $ 2,586
 
   

Rental Income from Operating Leases (in thousands):

 
Three months ended June 30, Six months ended June 30,
2013   2012 2013   2012
Base minimum rent $ 7,054 $ 6,702 $ 14,965 $ 13,375
Straight-line rent adjustments 98 40 253 75
Amortization of above/below market rent 108 48 216 102
Percentage rent 15 - 49 32
Recovery income   2,637   2,186   5,503   4,321
Rental income from operating leases $ 9,912 $ 8,976 $ 20,986 $ 17,905
 
   

Advisory Services Income – Related Party (in thousands):

 
Three months ended June 30, Six months ended June 30,
2013   2012 2013   2012
Leasing commission income $ 138 $ 101 $ 280 $ 316
Brokerage commission income 33 36 33 291
Property management fee income 433 299 797 607
Development fee income 36 238 157 378
Asset management fee income 156 156 311 311
Construction management fee income   76   55   137   113
Advisory services income - related party $ 872 $ 885 $ 1,715 $ 2,016
 
Interest and other income - related party $ 53 $ 85 $ 109 $ 157
 
Reimbursements of administrative costs $ 211 $ 199 $ 403 $ 410
 
   

Capitalization Data (in thousands, except per share and percent data):

 
June 30, 2013 December 31, 2012
Equity capitalization -
Common shares outstanding 16,178 16,123
NYSE closing price(1) $ 19.34   $ 17.15  
Total equity capitalization $ 312,883   $ 276,509  
 
Debt capitalization -
Variable rate line of credit $ 30,800 $ 33,500
Fixed rate mortgage loans 177,686 185,079
Variable rate mortgage loans   -     -  
Total debt capitalization $ 208,486   $ 218,579  
 
Total capitalization $ 521,369   $ 495,088  
 
Debt statistics -
Total debt to total capitalization 40.0 % 44.1 %
Ratio of EBITDA to combined fixed charges(2) 3.75

(3)

2.22

_____________

(1) Represents the last reported price per share of our common stock on the New York Stock Exchange on the applicable date.
(2) Fixed charges consist of interest expense and scheduled principal payments on borrowed funds (including capitalized interest, but excluding amortization of debt premium). Both EBITDA and fixed charges are calculated for the six months ended June 30, 2013, and December 31, 2012.
(3) EBITDA includes a gain of $7.7 million on the sale of real estate held for investment. Excluding this gain, the ratio of EBITDA to combined fixed charges is 2.32.

Outstanding Debt and Terms:

           
AmREIT
Debt Information
(in thousands)
 
Description  

Amount
Outstanding
6/30/13

  Interest Rate  

Annual Debt
Service

 

Maturity
Date

  % of total  

Weighted
average rate
maturing

Property Mortgages:
 
500 Lamar $ 1,584 6.00 % $ 95 2/1/2015
Uptown Park   49,000 5.37 % 2,631 6/1/2015
2015 Maturities 50,584 24.29 % 5.39 %
 
Plaza in the Park 23,250 3.45 % 802 1/1/2016
Market at Lake Houston 15,675 5.75 % 901 1/1/2016
Cinco Ranch 9,750 3.45 % 336 1/1/2016
Southbank - Riverwalk   20,000 5.91 % 1,182 6/1/2016
2016 Maturities 68,675 32.98 % 4.69 %
 
Bakery Square   1,811 8.00 % 145 2/10/2017
2017 Maturities 1,811 0.87 % 8.00 %
 
Alpharetta Commons   12,126 4.54 % 551 8/1/2018
2018 Maturities 12,126 5.82 % 4.54 % ...
 
Preston Royal Northwest   23,205 3.21 % 745 1/1/2020
2020 Maturities 23,205 11.14 % 3.21 %
 
Brookwood Village 7,221 5.40 % 390 2/10/2022
Uptown Plaza - Dallas   13,804 4.25 % 587 8/10/2022
2022 Maturities 21,025 10.10 % 4.64 %
 
Corporate debt:
 
$75.0 million Facility(1) 30,800 ((1 )) $ 848 8/1/2015 14.79 % ((1 ))
 
Total Maturities(2) $ 208,226
 
Fixed-rate debt:
Weighted average fixed rate 4.71 %
Weighted average years to maturity 3.9

___________

(1) The $75.0 million Facility bears interest at LIBOR plus a margin of 205 basis points to 275 basis points, depending on our leverage, and carries a fee equal to 0.35% of the unused portion of the total amount available under the facility. Annual debt service assumes the amount outstanding and interest rates as of June 30, 2013, remain constant.
(2) Total maturities above are $260 less than total debt as reported in our consolidated balance sheets as of June 30, 2013, due to the premium recorded on above-market debt assumed in conjunction with certain of our property acquisitions.
   

Interest Expense Detail (in thousands):

 
Three months ended June 30, Six months ended June 30,
2013   2012 2013   2012
Fixed-rate debt interest expense $ 2,105 $ 2,317 $ 4,271 $ 4,648
Variable-rate debt interest expense 25 213 243 453
$75 million Facility unused fee 67 - 104 -
Amortization of deferred loan costs 98 96 200 190
Amortization of above market debt   (28 )   (31 )   (58 )   (62 )
Total interest expense $ 2,267   $ 2,595   $ 4,760   $ 5,229  
 
                 

Wholly-Owned Property and Tenant Information:

 
Property  

Property
Location

 

Year Built /
Renovated

  GLA  

Percent
Occupied(1)

 

Percent
Leased(2)

 

Annualized Base
Rent(3)

 

Annualized
Base Rent per
Leased Square
Foot(4)

 

Average Net
Effective
Annualized
Base Rent per
Leased Square
Foot(5)

  Key Tenants
Neighborhood and Community Shopping Centers
Uptown Park Houston, TX 1999/2005 169,112 94.6% 96.0% $ 5,579,458 $ 34.87 $ 35.46 Champps, McCormick & Schmicks (owned by Landry's)
Plaza in the Park Houston, TX 1999/2009 144,054 97.4% 97.4% 2,768,226 19.74 19.63 Kroger
Preston Royal East Dallas, TX 1956 107,914 91.8% 93.7% 2,516,420 25.40 27.49 Bank of America, Starbucks, FedEx Office
Preston Royal West Dallas, TX 1959 122,564 96.2% 96.2% 2,380,265 20.19 22.75 Tom Thumb, Barnes & Noble, Spec's
Fountain Oaks Atlanta, GA 1988 160,598 88.7% 88.7% 1,902,889 13.36 13.59 Kroger
Southbank San Antonio, TX 1995 46,673 98.2% 98.2% 1,701,675 37.14 38.95 Hard Rock Café
The Market at Lake Houston Houston, TX 2000 101,799 100.0% 100.0% 1,621,043 15.92 16.00 H-E-B, Five Guys
Uptown Plaza - Dallas Dallas, TX 2006 33,840 100.0% 100.0% 1,457,345 43.07 43.66 Morton's (owned by Landry's), Wells Fargo
Alpharetta Commons Atlanta, GA 1997 94,544 98.7% 98.7% 1,336,478 14.32 14.59 Publix
Cinco Ranch Houston, TX 2001 97,297 100.0% 100.0% 1,323,664 13.60 13.68 Kroger
Uptown Plaza - Houston Houston, TX 2002 28,000 100.0% 100.0% 1,315,746 46.99 46.10 CVS/pharmacy, The Grotto (owned by Landry's)
Bakery Square Houston, TX 1996 34,614 94.3% 100.0% 917,961 28.13 28.19 Walgreens, Boston Market
Brookwood Village Atlanta, GA 1941/2000 28,774 87.9% 87.9% 652,164 25.77 26.43 CVS/pharmacy, Subway
Courtyard on Post Oak Houston, TX 1994 13,597 29.5% 29.5% 260,845 65.00 61.41 Verizon
Woodlands Plaza Houston, TX 1997/2003 20,018 73.8% 97.9% 364,578 24.68 24.75 FedEx Office, Freebirds World Burrito
Terrace Shops Houston, TX 2000 16,395 91.3% 100.0% 456,682 30.50 31.34 Starbucks
Sugarland Plaza Houston, TX 1998/2001 16,750 100.0% 100.0% 408,188 24.37 23.45 Memorial Hermann
500 Lamar Austin, TX 1998 12,795   100.0%   100.0%   412,083   32.21   32.53 Title Nine Sports
Neighborhood and Community Shopping Centers Subtotal/Weighted Average

1,249,338

94.5% 95.5% $ 27,375,710 $ 23.18 $ 23.81
 
Single Tenant (Ground Leases)(6)
CVS/Pharmacy Houston, TX 2003 13,824 100.0% 100.0% $ 327,167 $ 23.67 $ 23.67 CVS/pharmacy
Jared The Galleria of Jewelery Houston, TX 2012 6,057 100.0% 100.0% 180,000 29.72 34.48 Jared The Galleria of Jewelery
Citibank San Antonio, TX 2005 4,439 100.0% 100.0% 160,000 36.04 36.04 Citibank
Landry's Seafood Houston, TX 1995 13,497 100.0% 100.0% 155,677 11.53 12.18 Landry's Seafood
T.G.I. Friday's(7) Hanover, MD 2003 6,802 100.0% 100.0% 148,458 21.83 23.44 T.G.I. Friday's
Bank of America Houston, TX 1994 4,251 100.0% 100.0% 129,275 30.41 28.78 Bank of America
Macaroni Grill Houston, TX 1994 7,825 100.0% 100.0% 96,000 12.27 12.05 Macaroni Grill
T.G.I. Friday's Houston, TX 1994 6,543 100.0% 100.0% 96,000 14.67 14.41 T.G.I. Friday's
Smokey Bones Atlanta, GA 1998 6,867   100.0%   100.0%   94,922   13.82   13.82 Smokey Bones
Single Tenant (Ground Leases) Subtotal/Weighted Average 70,105 100.0% 100.0% $ 1,387,499 $ 19.79 $ 20.34
 
Single Tenant (Fee Simple)(8)
The Container Store Houston, TX 2011 25,083 100.0% 100.0% $ 425,323 $ 16.96 $ 17.86 The Container Store
T.G.I. Friday's Houston, TX 1982 8,500 100.0% 100.0% 215,000 25.29 25.90 T.G.I. Friday's
Golden Corral(7) Houston, TX 1992 12,000 100.0% 100.0% 210,450 17.54 17.54 Golden Corral
Golden Corral(7) Houston, TX 1993 12,000 100.0% 100.0% 240,282 20.02 19.79 Golden Corral
Sunbelt Rentals Champaign, IL 2007 12,000   100.0%   100.0%   140,000   11.67   12.72 Sunbelt Rentals
Single Tenant (Fee Simple) Subtotal/Weighted Average 69,583 100.0% 100.0% $ 1,231,055 $ 17.69 $ 18.23
 
Portfolio Total/Weighted Average

1,389,026

  95.1%   96.0%   $ 29,994,265   $ 22.71   $ 23.33

_____________

(1) Percent occupied is calculated as (i) GLA under commenced leases as of June 30, 2013, divided by (ii) total GLA, expressed as a percentage.
(2) Percent leased is calculated as (i) GLA under signed leases as of June 30, 2013, divided by (ii) total GLA, expressed as a percentage.
(3) Annualized base rent is calculated by multiplying (i) monthly base rent as of June 30, 2013, for leases that had commenced as of such date, by (ii) 12.
(4) Annualized base rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) GLA under commenced leases as of June 30, 2013.
(5) Average net effective annualized base rent per leased square foot represents (i) the contractual base rent for commenced leases as of June 30, 2013, calculated on a straight line basis to amortize free rent periods, abatements and contractual rent increases, but without subtracting tenant improvement allowances and leasing commissions, divided by (ii) GLA under commenced leases as of June 30, 2013.
(6) For single-tenant ground leases, we own and lease the land to the tenant. The tenant owns the building during the term of the lease and is responsible for all expenses relating to the property. Upon expiration or termination of the lease, ownership of the building will revert to us as owner of the land. The weighted average remaining term of our ground leases is 7.5 years.
(7) The tenants at these properties have rights of first refusal to purchase the property.
(8) For single-tenant fee simple properties, we own the land and the building, and the tenant is responsible for all expenses relating to the property. The weighted average remaining term of our fee simple leases is 7.9 years.
         

Summary of Top 25 Tenants:

 
Rank   Tenant Name  

Year to Date
Base Rent

 

Year to Date Annualized
Base Rent as a
Percentage of Portfolio
Annualized Base Rent

  Tenant GLA  

Percentage
of Total
GLA

1 Kroger $ 927,376 6.18 % 207,963 14.97 %
2 Landry's Seafood House 625,894 4.17 % 38,819 2.79 %
3 CVS/pharmacy 611,119 4.07 % 37,485 2.70 %
4 H-E-B 554,868 3.70 % 80,641 5.81 %
5 Publix 390,468 2.60 % 65,146 4.69 %
6 Barnes and Noble 258,932 1.73 % 22,453 1.62 %
7 Bank of America 257,790 1.72 % 8,129 0.59 %
8 Hard Rock Café 248,412 1.66 % 15,752 1.13 %
9 Tom Thumb 240,641 1.60 % 29,779 2.14 %
10 TGI Friday's 236,941 1.58 % 6,802 0.49 %
11 The Container Store 223,994 1.49 % 25,019 1.80 %
12 Golden Corral 223,942 1.49 % 24,000 1.73 %
13 Champps Americana 211,168 1.41 % 11,384 0.82 %
14 Paesanos 203,292 1.36 % 8,017 0.58 %
15 The County Line 180,893 1.21 % 4,614 0.33 %
16 Dougherty's Pharmacy 167,544 1.12 % 12,093 0.87 %
17 Verizon 151,724 1.01 % 5,513 0.40 %
18 The Tasting Room 150,678 1.00 % 2,000 0.14 %
19 Walgreens 149,310 1.00 % 15,120 1.09 %
20 Spec's 145,189 0.97 % 9,918 0.71 %
21 River Oaks Imaging and Diagnostics 134,250 0.90 % 10,750 0.77 %
22 Howl at the Moon 128,754 0.86 % 7,055 0.51 %
23 Potbelly 125,660 0.84 % 5,458 0.39 %
24 Buca Di Beppo 124,896 0.83 % 7,573 0.55 %
25 M. Penner 117,399 0.78 % 6,500 0.47 %
 
               

Retail Leasing Summary for Comparable Leases(1):

 

For the three months
ended June 30,

For the six months
ended June 30,

For the year ended December 31,

Expirations

2013

 

2012

2013

 

2012

2012

 

2011

 

2010

2009

2008

Number of leases 19 11 31 17 44 53 50 34 22
GLA 54,171 38,635 78,080 65,833 180,245 187,605 224,578 110,693 75,601
New Leases(1)
Number of leases

2

1

6

2 5 7 11 8 4
GLA

3,410

3,001

11,877

5,413 12,997 14,231 17,737 15,471 7,328
Expiring annualized base rent per square foot $

27.25

$ 34.00 $

24.67

$ 29.10 $ 27.22 $ 28.36 $ 31.07 $ 28.31 $ 23.52
New annualized base rent per square foot $

28.47

$ 42.50 $

31.99

$ 34.26 $ 34.84 $ 30.85 $ 31.44 $ 29.64 $ 21.70
% Change (Cash)

4.5

% 25.0 %

29.7

% 17.7 % 28.0 % 8.8 % 1.2 % 4.7 % -7.7 %
Renewals(2)
Number of leases 15 8 24 13 30 38 39 24 13
GLA 48,090 34,076 67,097 58,520 115,501 143,324 140,236 86,462 22,464
Expiring annualized base rent per square foot $ 23.26 $ 20.43 $ 24.45 $ 20.64 $ 23.91 $ 24.92 $ 26.12 $ 25.62 $ 27.05
New annualized base rent per square foot $ 25.01 $ 22.96 $ 26.23 $ 22.30 $ 25.27 $ 25.74 $ 27.32 $ 26.85 $ 31.53
% Change (Cash) 7.5 % 12.4 % 7.3 % 8.1 % 5.7 % 3.3 % 4.6 % 4.8 % 16.6 %
Combined
Number of leases

17

9

30

15 35 45 50 32 17
GLA

51,500

37,077

78,974

63,933 128,498 157,555 157,973 101,933 29,792
Expiring annualized base rent per square foot $

23.52

$ 21.53 $

24.48

$ 21.35 $ 24.24 $ 25.23 $ 26.68 $ 26.03 $ 26.18
New annualized base rent per square foot $

25.24

$ 24.54 $

27.09

$ 23.31 $ 26.24 $ 26.20 $ 27.78 $ 27.27 $ 29.11
% Change (Cash)

7.3

% 14.0 %

10.7

% 9.2 % 8.2 % 3.8 % 4.1 % 4.8 % 11.2 %

___________

(1) Comparable leases are defined as renewals or new leases for a space that was not vacant for more than 12 consecutive months prior to lease signing.
(2) Represents existing tenants that, upon expiration of their leases, enter into new leases for the same space.
           

Lease Expiration Table:

 
Year

Number of
Expiring
Leases

GLA of
Expiring
Leases

Percent of
Total GLA
Expiring

ABR of Expiring
Leases(1)

Percent of
Total ABR
Expiring

ABR Per
Square Foot(2)

Vacant - 68,299 4.9 % $ - - $ -
2013 22 64,955 4.7 % 1,451,937 4.8 % 22.35
2014 55 126,239 9.1 % 3,447,899 11.5 % 27.31
2015 51 156,770 11.3 % 4,424,336 14.7 % 28.22
2016 53 152,223 11.0 % 4,336,711 14.5 % 28.49
2017 36 233,193 16.8 % 4,357,145 14.5 % 18.68
2018 31 165,753 11.9 % 3,230,045 10.8 % 19.49
2019 10 38,953 2.8 % 966,461 3.2 % 24.81
2020 7 30,183 2.2 % 932,552 3.1 % 30.90
2021 7 103,485 7.4 % 1,696,194 5.7 % 16.39
2022 10 68,153 4.9 % 1,559,198 5.2 % 22.88
2023 + 13   180,820   13.0 %   3,591,787   12.0 % 19.86
Total / Weighted Avg 295   1,389,026   $ 29,994,265   $ 22.71

_____________

(1) ABR for expiring leases is calculated by multiplying (i) the monthly base rent as of June 30, 2013, for leases expiring during the applicable period by (ii) 12.
(2) ABR per square foot is calculated by dividing (i) ABR for leases expiring during the applicable period by (ii) GLA for leases expiring during the applicable period.
                 

Lease Distribution Table:

 
GLA Range

Number of
Expiring
Leases

Percentage
of Leases

Total GLA

Total
Occupied
GLA

Percent
Occupied

Percentage
of Occupied
GLA

Annualized
Base Rent(1)

Percentage
of ABR

ABR Per
Occupied
Square Foot(2)

 
2,500 or less 177 60.0 % 293,752 253,093 86.2 % 19.2 % $ 7,314,036 24.4 % 28.90

2,501 - 5,000

62 21.0 % 232,136 218,122 94.0 % 16.5 % 6,485,209 21.6 % 29.73
5,001 - 10,000 34 11.5 % 254,205 240,579 94.6 % 18.2 % 6,828,614 22.8 % 28.38
10,000 - 20,000 14 4.8 % 178,413 178,413 100.0 % 13.5 % 4,152,978 13.8 % 23.28
greater than 20,000 8

 

2.7 %   430,520 430,520 100.0 % 32.6 %     5,213,428   17.4 %   12.11
Total portfolio 295 100.0 % 1,389,026 1,320,727 95.1 % 100.0 % $ 29,994,265 100.0 % 22.71

_____________

(1) Annualized base rent is calculated by multiplying (i) the monthly base rent as of June 30, 2013, for leases in the applicable GLA range that had commenced as of such date by (ii) 12.
(2) ABR per leased square foot is calculated by dividing (i) ABR for leases in the applicable GLA range by (ii) total leased GLA for leases in the applicable GLA range.
 

Significant Investments Table (in thousands except percent and GLA data):

Of our Investments in Advised Funds, only our investments in MacArthur Park and Shadow Creek Ranch (which represent 53.4% and 33.3%, respectively of our Investments in Advised Funds balance as of June 30, 2013) comprise greater than 10% of the balance. The table below presents the NOI, debt and property data for these two investments (in thousands except for GLA).

     

MacArthur
Park

 

Shadow Creek
Ranch

Year acquired 2013 2009
Percent owned 30.0% 10.0%
 
For the three months ended June 30, 2013:
 
Revenues $ 1,807 $ 2,528
Expenses   579     763  
NOI $ 1,228 $ 1,765
 
For the six months ended June 30, 2013:
 
Revenues $ 1,907

(1)

$ 5,022
Expenses   581  

(1)

  1,497  
NOI $ 1,326

(1)

$ 3,525
 
As of June 30, 2013:
 
Real estate at cost $ 81,171 $ 106,772
Mortgage obligation $ 43,900 $ 62,953
Debt maturity 04/01/2023 03/01/2015
 
GLA 406,102 613,109
Percent occupied 84.4 % 97.8 %
Grocery anchor Kroger H.E.B.
Other principal tenants Michael's Academy
TJ Maxx Burlington Coat Factory
Ulta Hobby Lobby
Office Depot Ashley Furniture

_____________

(1) MacArthur Park, which was a wholly-owned AmREIT property, was contributed to a joint venture with Goldman Sachs on March 26, 2013. The table above excludes revenues, expenses and NOI of $1.1 million, $308,000, and $770,000, respectively, related to MacArthur Park for the 2013 period prior to contribution to the joint venture. Such amounts are included in our Statement of Operations and NOI reconciliation included herein.

 

Definitions

             
ABR Annualized base rent.
 
Adjusted FFO

Core FFO (as defined below) adjusted to exclude non-cash income and expenses that are included in the NAREIT definition of FFO (defined below). There can be no assurance that AFFO presented by AmREIT is comparable to similarly titled measures of other REITs. AFFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.

 
Advised Funds

Collectively, our varying minority ownership interests in four high net worth investment funds, one institutional joint venture with Goldman Sachs, one institutional joint venture with J.P. Morgan Investment Management, one institutional joint venture with AEW Capital and one joint venture with two of our high net worth investment funds, MIG III and MIG IV.

 
Core FFO

FFO in accordance with NAREIT’s definition, adjusted to exclude items that management believes do not reflect our ongoing operations, such as acquisition expenses, non-recurring asset write-offs and recoveries, expensed issuance costs and gains on the sale of real estate held for resale. Management believes that such items therefore affect the comparability of our period-over-period performance with similar REITs.

 
EBITDA

Earnings before interest, income taxes, depreciation and amortization. Management believes that EBITDA is an appropriate supplemental measure of operating performance to net income. We define EBITDA as GAAP net income, plus interest expense, state or federal income taxes and depreciation and amortization. Management believes that EBITDA provides useful information to the investment community about our operating performance when compared to other REITs since EBITDA is generally recognized as a standard measure. However, EBITDA should not be viewed as a measure of our overall financial performance since it does not reflect depreciation and amortization, interest expense, provision for income taxes, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties. Other REITs may use different methodologies for calculating EBITDA and, accordingly, our EBITDA may not be comparable to other REITs. Below is a reconciliation of net income to EBITDA:

 
 

Six months ended

June 30,

 

December 31,

2013

2012

Net income $ 9,377 $ 1,757
Interest expense 4,760 5,022
State income taxes 15 30
Depreciation and amortization 6,037 4,537
EBITDA $ 20,189 $ 11,346
 
 
FFO

Funds from operations, as defined by NAREIT, which includes net income(loss) computed in accordance with GAAP, excluding gains, losses or impairments on properties held for investment, plus real estate related depreciation and amortization, and after adjustments for similar items recorded by our Advised Funds.

 
GLA Gross leasable area.
 
NAREIT

National Association of Real Estate Investment Trusts.

 
NOI

Net operating income, defined as operating revenues (rental income, tenant recovery income, percentage rent, excluding straight-line rental income and amortization of acquired above- and below-market rents) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line rent bad debt expense). Below for a reconciliation of net income to NOI:

           
Three months ended June 30, Six months ended June 30,
2013   2012 2013   2012
 
Net income $ 981 $ 1,446 $ 9,377 $ 2,703
Adjustments to add/(deduct):
Amortization of straight-line rents and

above/below-market rents(1)

(206 ) (88 ) (469 ) (177 )
Advisory services income - related party (872 ) (885 ) (1,715 ) (2,016 )
Gain on sale of real estate acquired for

investment

- - (7,696 ) -
Interest and other income (154 ) (135 ) (267 ) (237 )
Interest and other income - related party (53 ) (85 ) (109 ) (157 )
Straight-line rent bad debt recoveries(2) (55 ) (23 ) (51 ) (97 )
General and administrative 2,070 1,568 4,031 3,063
Legal and professional 261 229 513 450
Real estate commissions 52 53 104 139
Acquisition costs 126 - 126 -
Depreciation and amortization 2,738 2,120 6,037 4,347
Impairment recovery - notes receivable - (229 ) - (229 )
Loss (income) from Advised Funds (192 ) 66 (44 ) 102
State income tax expense (benefit) 17 (11 ) 15 5
Interest expense   2,267     2,595     4,760     5,229  
Net operating income $ 6,980   $ 6,621   $ 14,612   $ 13,125  

_____________

(1) Included in rental income from operating leases as presented on our consolidated statements of operations.
(2) Included in property expense on our consolidated statements of operations.

Contact:
AmREIT
Chad C. Braun, 713-850-1400
cbraun@amreit.com

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