Chambers Street – Second Quarter 2015 Financial Results

Core FFO of $0.19 Per Share

Increases Portfolio Percentage Leased to 99.3%

PRINCETON, N.J.--(BUSINESS WIRE)-- 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 June 30, 2015.

Operational and Financial Highlights Second Quarter 2015

• Increased Core Funds from Operations ("Core FFO") to $0.19 per diluted share, an increase of $0.02 per share compared to the second quarter of 2014
• Total portfolio percentage leased was 99.3% as of June 30, 2015, up 90 basis points from March 31, 2015
• Executed eight leases (four industrial and four office leases) totaling 224,239 square feet
• Sold two wholly-owned properties totaling 472,500 square feet for approximately $57.3 million

Subsequent Highlights

• Entered into a definitive agreement with Gramercy Property Trust, Inc. (“Gramercy”) to merge
• Executed three office leases totaling 430,200 square feet

Financial Results for the Three Months Ended June 30, 2015

Core FFO for the second quarter of 2015 increased to $43.9 million, or $0.19 per diluted share, compared to $40.5 million, or $0.17 per diluted share, for the second quarter of 2014. Core FFO for the second quarter of 2015 increased approximately $0.01 per share or $1.8 million as compared to the first quarter of 2015. This increase was primarily the result of the recognition of the full amount of rental income associated with the Company’s 70 Hudson Street office property located in Jersey City, New Jersey, which includes an adjustment for such rental income not recognized during the first quarter of 2015.

Funds from Operations ("FFO") as defined by NAREIT for the second quarter of 2015 was $37.4 million, or $0.16 per diluted share, as compared to $40.4 million, or $0.17 per diluted share, for the second quarter of 2014. FFO for the second quarter of 2015 was impacted by $5.8 million of expenses related to the CEO search, review of strategic alternatives and potential merger with Gramercy.

Net income for the second quarter of 2015 totaled $9.7 million, or $0.04 per diluted share, as compared to net income of $5.2 million, or $0.02 per diluted share, for the second quarter of 2014. Results for the three months ended June 30, 2015 included a gain of $5.8 million from the sale of two consolidated properties.

Financial Results for the Six Months Ended June 30, 2015

Core FFO for the first six months of 2015 increased to $85.9 million, or $0.36 per diluted share, compared to $80.0 million, or $0.34 per diluted share, for the same period in 2014.

FFO for the first six months of 2015 was $75.4 million, or $0.32 per diluted share, as compared to $79.6 million, or $0.34 per diluted share, in the first half of 2014.

Net income in the first half of 2015 totaled $15.7 million, or $0.07 per diluted share, as compared to $8.5 million, or $0.03 per diluted share, in the first half of 2014. Results for the six months ended June 30, 2015 included a gain of $5.8 million from the sale of two consolidated properties.

Merger with Gramercy Property Trust, Inc.

On July 1, 2015, Chambers Street and Gramercy announced they had entered into a definitive agreement to merge. Under the terms of the merger agreement, Gramercy stockholders will receive 3.1898 shares of Chambers Street for each share of Gramercy common stock they own. Upon closing, Chambers Street shareholders will own approximately 56% and Gramercy stockholders will own approximately 44% of the combined company. The stock-for-stock transaction is expected to be tax-free to shareholders. The transaction, which is subject to approval by the Chambers Street shareholders and the Gramercy stockholders, as well as customary closing conditions, is scheduled to close in the fourth quarter of 2015.

Portfolio

As of June 30, 2015, Chambers Street owned or had majority interests in 125 properties totaling approximately 37.2 million square feet across 19 U.S. states, France, Germany, and the U.K. The portfolio was 99.3% leased at June 30, 2015, a 90 basis point increase from March 31, 2015.

Investment Activity

In May, Chambers Street completed the sale of 300 Constitution Drive, a 330,000 square foot single-tenant, industrial property located in Boston, Massachusetts, for $20.3 million. The property was sold to a subsidiary of The Boston Globe, who intends to use the property as their primary printing and distribution facility. Additionally, in June, the Company sold 225 Summit Avenue, a 142,500 square foot single-tenant office property located in Montvale, New Jersey to a subsidiary of the Memorial Sloan Kettering Cancer Center for $37.0 million.

During the quarter, Chambers Street completed a 47,000 square foot expansion for DNV GL at its 22535 Colonial Parkway office property in Houston, Texas. The Company signed a new 10-year lease for the expansion and extended the existing lease to 10 years.

Leasing Activity

During the second quarter, the Company executed eight new and renewal leases (four industrial and four office leases) totaling 224,239 square feet. This consisted of 147,780 rentable square feet of two industrial and four office renewals, and 76,459 square feet of new industrial leases on space that was not previously leased.

Subsequent to quarter end, the Company executed three office lease renewals totaling 430,200 square feet. This included an early renewal and 12-year lease extension for 200,605 square feet, an early lease renewal and extension for an additional term of 12 years and six months for 128,540 square feet, and a five-year lease renewal for 101,055 square feet.

Balance Sheet

As of June 30, 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 3.4 years.

In June, the Company paid off the $8.6 million note payable secured by Lakeside Office Center, an office property in Dallas, Texas.

Common Share Dividend

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.

The Company currently intends to maintain its regular dividend through the closing of the pending merger transaction with Gramercy.

Guidance

Due to the pending merger with Gramercy, the Company is not providing earnings guidance, and therefore will no longer maintain its previously announced full year 2015 guidance for Core FFO of $0.68 to $0.71 per share.

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 Thursday, August 6, 2015, to discuss second 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 August 20, 2015 by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international) and entering the passcode 13615038.

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 June 30, 2015, Chambers Street owned or had a majority interest in 125 properties located across 19 U.S. states, France, Germany, and the United Kingdom encompassing approximately 37.2 million rentable square feet.

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

CHAMBERS STREET PROPERTIES
Consolidated Balance Sheets
As of June 30, 2015 and December 31, 2014
($ In Thousands, Except Share Data)
		June 30,				December 31,
		2015				2014
		(unaudited)
ASSETS
Investments in Real Estate:
Land		$	618,142			$	630,840
Land Available for Expansion		24,292				23,368
Buildings and Improvements		1,646,738				1,674,955
		2,289,172				2,329,163
Less: Accumulated Depreciation and Amortization		(266,256		)		(239,973		)
Net Investments in Real Estate		2,022,916				2,089,190
Investments in Unconsolidated Entities		393,325				423,693
Cash and Cash Equivalents		94,252				40,139
Restricted Cash		17,721				14,718
Tenant and Other Receivables, Net		8,360				11,216
Deferred Rent		42,644				39,429
Deferred Leasing Costs and Intangible Assets, Net		195,836				220,490
Deferred Financing Costs, Net		7,896				9,321
Prepaid Expenses and Other Assets		17,713				21,612
Total Assets		$	2,800,663			$	2,869,808
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Secured Notes Payable, Net		$	568,077			$	610,608
Unsecured Term Loan Facilities		570,000				570,000
Unsecured Revolving Credit Facility		240,044				200,044
Accounts Payable, Accrued Expenses and Other Liabilities		68,861				76,421
Intangible Liabilities, Net		22,869				26,248
Prepaid Rent and Security Deposits		15,987				15,569
Distributions Payable		10,096				9,951
Total Liabilities		1,495,934				1,508,841
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Common Shares of Beneficial Interest, $0.01 par value, 990,000,000 shares authorized; 236,860,294 and 236,920,675 issued and outstanding as of June 30, 2015 and December 31, 2014, respectively		2,366				2,364
Additional Paid-in-Capital		2,073,701				2,071,526
Accumulated Deficit		(734,416		)		(689,654		)
Accumulated Other Comprehensive Loss		(36,922		)		(23,269		)
Total Shareholders’ Equity		1,304,729				1,360,967
Total Liabilities and Shareholders’ Equity		$	2,800,663			$	2,869,808

CHAMBERS STREET PROPERTIES
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2015 and 2014 (unaudited)
($ in Thousands, Except Share Data)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
REVENUES
Rental		$	56,759			$	52,033			$	111,105			$	103,909
Tenant Reimbursements		14,832				14,595				31,271				29,815
Other Property Income		250				—				448				1,069
Total Revenues		71,841				66,628				142,824				134,793
EXPENSES
Property Operating		8,135				8,392				17,916				17,945
Real Estate Taxes		10,574				10,465				21,356				20,266
General and Administrative		11,697				5,953				21,570				12,817
Acquisition-Related		—				—				—				290
Depreciation and Amortization		27,933				27,126				55,853				54,364
Total Expenses		58,339				51,936				116,695				105,682
Income Before Other (Expenses) Income		13,502				14,692				26,129				29,111
OTHER EXPENSES AND INCOME
Interest and Other Income		12				151				92				318
Interest Expense		(12,986		)		(13,907		)		(26,045		)		(27,968		)
Interest Expense and Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments		26				(14		)		43				12
Gain on Sale of Real Estate		5,844				—				5,844				—
Total Other Expenses		(7,104		)		(13,770		)		(20,066		)		(27,638		)
Income Before Provision for Income Taxes and Equity in Income of Unconsolidated Entities		6,398				922				6,063				1,473
Provision For Income Taxes		(387		)		(381		)		(563		)		(439		)
Equity in Income of Unconsolidated Entities		3,676				4,612				10,181				7,438
NET INCOME		$	9,687			$	5,153			$	15,681			$	8,472
Basic and Diluted Net Income Per Share		$	0.04			$	0.02			$	0.07			$	0.03
Weighted Average Common Shares Outstanding - Basic		236,900,677				237,000,613				236,922,064				236,793,334
Weighted Average Common Shares Outstanding - Diluted		236,955,835				237,000,613				236,950,577				236,793,334
Dividends Declared Per Share		$	0.128			$	0.126			$	0.256			$	0.252

CHAMBERS STREET PROPERTIES
Reconciliation of Net Income to FFO, Core FFO, and AFFO
For the Three and Six Months Ended June 30, 2015 and 2014 (unaudited)
($ in Thousands, Except Share Data)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Net Income		$	9,687			$	5,153			$	15,681			$	8,472
Adjustments:
Real Estate Depreciation and Amortization		27,794				27,010				55,574				54,141
Pro Rata Share of Real Estate Depreciation and Amortization from Unconsolidated Entities		6,503				8,238				13,142				17,009
Gain on Sale of Real Estate		(5,844		)		—				(5,844		)		—
Pro Rata Share of Gain on Sale of Real Estate from Unconsolidated Entities		(15		)		—				(2,431		)		—
Pro Rata Share of Realized Gain on Investment in CBRE Strategic Partners Asia		(762		)		—				(762		)		—
Funds from Operations		37,363				40,401				75,360				79,622
Acquisition-Related Expenses		—				—				—				290
Pro Rata Share of Loss on Early Extinguishment of Debt from Unconsolidated Entities		—				—				58				—
Strategic Planning and Severance-Related Expense		5,803				—				9,820				—
Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments		(26		)		14				(43		)		(12		)
Pro Rata Share of Unrealized Loss on Investment in CBRE Strategic Partners Asia		712				50				743				120
Core Funds from Operations		43,852				40,465				85,938				80,020
Amortization of Non-Cash Interest Expense		(447		)		(244		)		(827		)		(348		)
Pro Rata Share of Amortization of Non-Cash Interest Expense from Unconsolidated Entities		102				119				198				238
Amortization of Above and Below Market Leases		938				1,401				1,913				2,883
Pro Rata Share of Amortization of Above/Below Market Leases from Unconsolidated Entities		(46		)		(54		)		(96		)		(108		)
Amortization of Deferred Revenue Related to Tenant Improvements		(114		)		(199		)		(227		)		(475		)
Share Based Compensation		592				912				1,327				1,924
Straight-Line Rent Adjustments, Net		(1,735		)		(1,253		)		(3,403		)		(2,545		)
Pro Rata Share of Straight-Line Rent Adjustments, Net from Unconsolidated Entities		324				225				625				730
Recurring Capital Expenditures		(592		)		(3,066		)		(1,315		)		(4,917		)
Pro Rata Share of Recurring Capital Expenditures from Unconsolidated Entities		(326		)		(240		)		(1,020		)		(242		)
Adjusted Funds from Operations		$	42,548			$	38,066			$	83,113			$	77,160
Amounts Per Share (Basic and Diluted):
Net Income		$	0.04			$	0.02			$	0.07			$	0.03
Funds from Operations		$	0.16			$	0.17			$	0.32			$	0.34
Core Funds from Operations		$	0.19			$	0.17			$	0.36			$	0.34
Adjusted Funds from Operations		$	0.18			$	0.16			$	0.35			$	0.33
Weighted Average Common Shares Outstanding - Basic		236,900,677				237,000,613				236,922,064				236,793,334
Weighted Average Common Shares Outstanding - Diluted		236,955,835				237,000,613				236,950,577				236,793,334

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 company strategic planning, 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; the use of the proceeds of any offerings of securities; and our announced transaction with Gramercy Property Trust Inc. ("Gramercy"). 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, decreasing rental revenue and increasing insurance costs; 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 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 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; environmental, regulatory and/or safety requirements; our ability to obtain the required shareholder approval required to consummate the merger with Gramercy and the timing and closing of such merger, including the risks that a condition to closing would not be satisfied or that the closing of such merger will not occur; the outcome of any legal proceedings that may be instituted against us and others related to the merger with Gramercy. 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 June 30, 2015 included in the Form 10-Q to be filed on or about August 7, 2015.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150806005276/en/

Investor Relations
Chambers Street Properties
Heather Gentry, 609-806-2682
[email protected]
or
Media
Tim Gallen
[email protected]
Andrew Neilly
[email protected]
925-930-9848

Source: Chambers Street Properties

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Star Equity to acquire Harte Hanks for $5 per share in cash and stock
• XTEND positions itself for U.S. drone tariff market shift
• Allarity reports Q2 2026 results, completes stenoparib manufacturing