Current Report

 

Exhibit 99.1

 

 

 

FOR IMMEDIATE RELEASE		Contacts:
		Timothy A. Bonang, Vice President, Investor Relations
		Elisabeth Heiss, Manager, Investor Relations
		(617) 219-1410

 

Government Properties Income Trust Announces Results for the Periods

 

Ended June 30, 2010

 

 

Newton, MA (August 3, 2010): Government Properties Income Trust (NYSE: GOV) today announced its financial results for the quarter and six months ended June 30, 2010.  GOV completed its initial public offering, or IPO, on June 8, 2009.  Prior to completing its IPO, GOV and its properties were wholly owned by CommonWeath REIT (NYSE: CWH), accordingly, GOV’s historical results of operations in 2009 are not comparable to results for the 2010 periods.

 

Results for the quarter ended June 30, 2010:

 

Funds from operations (FFO) were $14.2 million for the quarter ended June 30, 2010, compared to $9.7 million for the same quarter last year.  FFO per share for the quarter ended June 30, 2010 was $0.45, compared to $0.78 for the same quarter last year.

 

Net income available for common shareholders for the quarter ended June 30, 2010 was $7.7 million, or $0.25 per share, compared to $5.9 million, or $0.47 per share for the quarter ended June 30, 2009.

 

GOV’s weighted average number of common shares outstanding were 31,260,553 and 12,384,066 for the quarters ended June 30, 2010 and 2009, respectively.  Prior to completion of its IPO on June 8, 2009, GOV did not have any publicly traded, outstanding common shares.  If the IPO had been completed on April 1, 2009, GOV’s weighted average common shares outstanding for the quarter ended June 30, 2009 would have been 21,450,000.

 

A reconciliation of net income determined according to U.S. generally accepted accounting principles, or GAAP, to FFO for the quarter ended June 30, 2010 and 2009 appears later in this press release.

 

 

 

A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the New York Stock Exchange.

 

No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

 

 

Results for the six months ended June 30, 2010:

 

Funds from operations (FFO) were $26.7 million, or $0.89 per share, for the six months ended June 30, 2010, compared to $21.7 million, or $2.53 per share, for the same period last year.

 

Net income available for common shareholders for the six months ended June 30, 2010 was $14.6 million, or $0.48 per share, compared to $14.3 million, or $1.67 per share for the six months ended June 30, 2009.

 

The weighted average number of common shares outstanding were 30,178,353 and 8,590,055 for the six months ended June 30, 2010 and 2009, respectively.  If the IPO had been completed on January 1, 2009, GOV’s weighted average common shares outstanding for the six months ended June 30, 2009 would have been 21,450,000.

 

A reconciliation of net income determined according to GAAP to FFO for the six months ended June 30, 2010 and 2009 appears later in this press release.

 

Recent Investment Activities:

 

Since April 1, 2010, GOV has acquired or has entered purchase and sale agreements to acquire 20 properties for an aggregate purchase price of $367 million, excluding acquisition costs, as follows:

 

·       In April 2010, GOV closed on the previously disclosed acquisition of an office property located in Burlington, VT with 26,609 rentable square feet.   This property is 100% leased to the U.S. Government and occupied by the Office of Security and Integrity.  The purchase price was $9.7 million, excluding acquisition costs.

 

·       Also in April 2010, GOV closed a previously disclosed acquisition of an office property located in Detroit, MI with 55,966 rentable square feet.  This property is 100% leased to the U.S. Government and occupied by the U.S. Citizenship and Immigration Service.  The purchase price was $21.3 million, excluding acquisition costs.

 

·       In May 2010, GOV closed on the previously disclosed acquisition of an office property located in Malden, MA with 125,521 rentable square feet.  The property is fully leased to the Commonwealth of Massachusetts and occupied as the headquarters for the Massachusetts Department of Education.  The purchase price was $40.5 million, excluding acquisition costs.

 

2

 

·       In June 2010, GOV entered a series of agreements with CommonWealth REIT to acquire 15 properties with approximately 1.9 million rentable square feet for an aggregate purchase price of $231 million, excluding acquisition costs.  These properties are majority leased to the U.S. Government and are occupied by various federal government agencies.  In June and July 2010, GOV acquired eight of these properties with approximately 747,658 rentable square feet for an aggregate purchase price of $88.7 million, excluding acquisition costs.  The remaining seven properties with 1,124,206 rentable square feet are subject to purchase and sale agreements for an aggregate purchase price of $142.3 million, excluding acquisition costs.  These remaining acquisitions are expected to close in phases prior to March 31, 2011 and are subject to various contractual contingencies typical of large commercial property transactions; accordingly, GOV can provide no assurances that it will acquire these properties.

 

·       In July 2010, GOV entered into a purchase and sale agreement to acquire an office property located in Trenton, NJ with 266,995 rentable square feet.  This property is 96% leased to 15 tenants.  The State of New Jersey leases 65% of the property which is occupied by the New Jersey Department of the Treasury.  The U.S. Government also leases 10% of the property which is occupied by the Department of Justice and the Internal Revenue Service.  The purchase price is $45 million, excluding acquisition costs.  This pending acquisition is subject to GOV’s satisfactory completion of diligence and other customary conditions; accordingly, GOV can provide no assurances that it will acquire this property.

 

·       Also in July 2010, GOV entered a second purchase and sale agreement to acquire an office property located in Eagan, MN with 252,172 rentable square feet.   GOV’s purchase of this property is subject to entering a lease agreement with the U.S. Government for 100% occupancy by the Department of Veterans Affairs.  The purchase price is $19.5 million, excluding acquisition costs and any building improvements associated with the lease agreement.  This pending acquisition is subject to GOV’s satisfactory completion of diligence, reaching agreement on a lease with the U.S. Government and other conditions; accordingly, GOV can provide no assurances that it will acquire this property.

 

Conference Call:

 

On Tuesday, August 3, 2010, at 1:00 p.m. Eastern Time, Adam Portnoy, President and Managing Trustee, and David Blackman, Treasurer and Chief Financial Officer, will host a conference call to discuss the second quarter 2010 results.

 

The conference call telephone number is (888) 791-4321.  Participants calling from outside the United States and Canada should dial (913) 312-0950.  No pass code is necessary to

 

3

 

access the call from either number.  Participants should dial in about 15 minutes prior to the scheduled start of the call.  A replay of the conference call will be available through 4:00 p.m. Eastern Time on Wednesday, August 10th.  To hear the replay, dial (719) 457-0820.  The replay pass code is 2195043.

 

A live audio webcast of the conference call will also be available in a listen only mode on GOV’s website, which is located at www.govreit.com.  Participants wanting to access the webcast should visit the company’s web site about five minutes before the call.  The archived webcast will be available for replay on GOV’s web site for about one week after the call.

 

Supplemental Data:

 

A copy of GOV’s Second Quarter 2010 Supplemental Operating and Financial Data is available for download at GOV’s web site, www.govreit.com.

 

Government Properties Income Trust is a real estate investment trust, or REIT, which owns properties located throughout the United States which are majority leased to the U.S. Government and several state government tenants.  As of June 30, 2010, GOV owned 41 properties with 4.9 million square feet.  GOV is headquartered in Newton, Massachusetts.

 

Please see the following pages for a more detailed statement of our operating results and financial condition.

 

4

 

Government Properties Income Trust

 

Condensed Consolidated Statements of Income and Funds from Operations

 

(amounts in thousands, except per share data)

 

(unaudited)

 

		Three Months Ended June 30,						Six Months ended June 30,
		2010			2009			2010			2009
Rental income		$	25,940		$	19,405		$	49,295		$	38,648
Expenses
Real estate taxes		2,764			2,113			5,332			4,219
Utility expenses		1,733			1,523			3,410			3,044
Other operating expenses		3,963			2,912			7,520			5,711
Depreciation and amortization		5,401			3,797			10,281			7,361
Acquisition costs (1)		1,011			—			1,855			—
General and administrative		1,623			873			3,076			1,613
Total expenses		16,495			11,218			31,474			21,948
Operating income		9,445			8,187			17,821			16,700
Interest and other income (expense), net		(7		)	42			16			44
Interest expense (including net amortization of debt premiums and deferred financing fees of $624, $427, $1,156 and $427, respectively)		(1,678		)	(2,360		)	(3,209		)	(2,360		)
Income before income tax expense		7,760			5,869			14,628			14,384
Income tax expense		(25		)	—			(42		)	—
Net income		$	7,735		$	5,869		$	14,586		$	14,384
Calculation of FFO (2):
Net income		$	7,735		$	5,869		$	14,586		$	14,384
Plus: depreciation and amortization		5,401			3,797			10,281			7,361
Plus: acquisition costs		1,011			—			1,855			—
FFO		$	14,147		$	9,666		$	26,722		$	21,745
Weighted average common shares outstanding (3)		31,261			12,384			30,178			8,590
Per common share(3):
Net income		$	0.25		$	0.47		$	0.48		$	1.67
FFO		$	0.45		$	0.78		$	0.89		$	2.53

---

(1)   Represents the closing costs associated with acquisitions that are expensed in accordance with GAAP.

 

(2)   We compute FFO as shown in the calculations above.  Our calculations of FFO differ from the National Association of Real Estate Investment Trusts, or NAREIT, definition because we exclude acquisition costs (see Note 1) from the determination of FFO.  We consider FFO to be an appropriate measure of performance for a REIT, along with net income and cash flow from operating, investing and financing activities.  We believe that FFO provides useful information to investors because by excluding the effects of certain historical amounts, such as acquisition costs and depreciation expense, FFO can facilitate a comparison of operating performance between historical periods and among REITs.  FFO does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity.  FFO is one important factor considered by our Board of Trustees in determining the amount of distributions to shareholders.  Other important factors include, but are not limited to, requirements to maintain our status as a REIT, limitations in our revolving credit facility, the availability of debt and equity capital to us and our expectations of future capital requirements and operating performance.  Also, other REITs may calculate FFO differently than us.

 

(3)   Prior to completion of its IPO on June 8, 2009, GOV did not have any publicly traded, outstanding common shares.  If the IPO had been completed on January 1, 2009, GOV’s weighted average common shares outstanding for the quarter and six months ended June 30, 2009 would have been 21,450.

 

5

 

Government Properties Income Trust

 

Condensed Consolidated Balance Sheets

 

(amounts in thousands, except share data)

 

(unaudited)

 

		June 30,			December 31,
		2010			2009
ASSETS
Real estate properties:
Land		$	85,909		$	74,009
Buildings and improvements		653,731			502,748
		739,640			576,757
Accumulated depreciation		(121,566		)	(113,027		)
		618,074			463,730
Acquired real estate leases, net		39,212			15,310
Cash and cash equivalents		1,023			1,478
Restricted cash		1,000			—
Rents receivable		14,860			13,544
Deferred leasing costs, net		1,161			1,330
Deferred financing costs, net		4,996			5,204
Due from affiliates		336			103
Other assets, net		5,616			14,114
Total assets		$	686,278		$	514,813
LIABILITIES AND SHAREHOLDERS’ EQUITY
Mortgage notes payable		$	35,944		$	—
Secured revolving credit facility		82,000			144,375
Accounts payable and accrued expenses		8,116			13,985
Due to affiliates		1,063			837
Acquired real estate lease obligations, net		5,775			3,566
		132,898			162,763
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $.01 par value:
31,263,850 and 21,481,350 shares issued and outstanding in 2010 and 2009, respectively		313			215
Additional paid in capital		556,776			357,627
Cumulative net income		28,127			13,541
Cumulative common dividends		(31,836		)	(19,333		)
Total shareholders’ equity		553,380			352,050
Total liabilities and shareholders’ equity		$	686,278		$	514,813

 

6

 

WARNING CONCERNING FORWARD LOOKING STATEMENTS

 

THIS PRESS RELEASE CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.  WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS.  THESE FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.  OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.  FOR EXAMPLE, THIS PRESS RELEASE STATES THAT WE HAVE ENTERED AGREEMENTS TO PURCHASE SEVERAL PROPERTIES.  OUR OBLIGATIONS TO COMPLETE THESE CURRENTLY PENDING ACQUISITIONS ARE SUBJECT TO VARIOUS CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE ACQUISITIONS.  AS A RESULT OF ANY FAILURE OF THESE CONDITIONS, WE MAY NOT ACQUIRE THESE PROPERTIES.

 

OTHER IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN OUR FORWARD LOOKING STATEMENTS ARE DESCRIBED MORE FULLY UNDER “RISK FACTORS” IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009.

 

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.

 

EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

 

(END)

 

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Exhibit 99.2

 

 

 

 

GOVERNMENT PROPERTIES

INCOME TRUST

 

Second Quarter 2010

 

Supplemental Operating and Financial Data

 

 

 

 

All amounts in this report are unaudited.

 

 

TABLE OF CONTENTS

 

 

		Page
CORPORATE INFORMATION
Company Profile		5
Investor Information		6
Research Coverage		7
FINANCIAL INFORMATION
Key Financial Data		9
Consolidated Balance Sheets		10
Consolidated Statements of Income		11
Consolidated Statements of Cash Flows		12
Calculation of EBITDA		13
Calculation and Reconciliation of Property Net Operating Income (NOI)		14
Calculation of Funds from Operations (FFO)		15
Same Property Results		16
Debt Summary		17
Debt Maturity Schedule		18
Leverage Ratios and Coverage Ratios		19
Tenant Improvements, Leasing Costs and Capital Improvements		20
2010 Acquisitions Information		21
PROPERTY AND LEASING INFORMATION
Property Schedule		23
Tenant List		24
Occupancy and Leasing Summary		25
Lease Expiration Schedule		26

 

 

WARNING REGARDING

FORWARD LOOKING STATEMENTS

 

THIS SUPPLEMENTAL OPERATING AND FINANCIAL DATA CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.  WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS.  THESE FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.  FORWARD LOOKING STATEMENTS IN THIS REPORT RELATE TO VARIOUS ASPECTS OF OUR BUSINESS, INCLUDING:

 

·                   OUR ABILITY TO PAY DISTRIBUTIONS IN THE FUTURE AND THE EXPECTED AMOUNTS THEREOF,

 

·                   OUR ACQUISITION AND SALE OF PROPERTIES,

 

·                   THE CREDIT QUALITY OF OUR TENANTS,

 

·                   THE LIKELIHOOD THAT OUR TENANTS WILL PAY RENT, RENEW LEASES, SIGN NEW LEASES OR BE AFFECTED BY CYCLICAL ECONOMIC CONDITIONS,

 

·                   OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR DEBT,

 

·                   OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS,

 

·                   THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR SECURED REVOLVING CREDIT FACILITY,

 

·                   OUR ABILITY TO COMPETE FOR ACQUISITIONS AND TENANCIES EFFECTIVELY,

 

·                   OUR TAX STATUS AS A REAL ESTATE INVESTMENT TRUST, OR REIT,

 

·                   OUR ABILITY TO RAISE EQUITY OR DEBT CAPITAL,

 

·                   OUR EXPECTATION THAT WE WILL BENEFIT FINANCIALLY BY PARTICIPATING IN AIC WITH OUR MANAGER, REIT MANAGEMENT & RESEARCH LLC, OR RMR, AND COMPANIES TO WHICH RMR PROVIDES MANAGEMENT SERVICES, AND

 

·                   OTHER MATTERS.

 

OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.  FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, FUNDS FROM OPERATIONS, CASH AVAILABLE FOR DISTRIBUTION, CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED TO:

 

·                   THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS,

 

·                   COMPETITION WITHIN THE REAL ESTATE INDUSTRY,

 

·                ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR MANAGING TRUSTEES, CWH, AND RMR AND THEIR AFFILIATES,  

 

·                COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES, TAX LAWS AND SIMILAR MATTERS, AND

 

·                LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST FOR U.S. FEDERAL INCOME TAX PURPOSES.

 

 

FOR EXAMPLE:

 

·                IF THE AVAILABILITY OF DEBT CAPITAL BECOMES RESTRICTED, WE MAY BE UNABLE TO REFINANCE OR REPAY OUR DEBT OBLIGATIONS WHEN THEY BECOME DUE OR TO REFINANCE ON TERMS WHICH ARE AS FAVORABLE AS WE NOW HAVE,

 

·                CONTINGENCIES IN OUR ACQUISITIONS MAY CAUSE THESE TRANSACTIONS NOT TO OCCUR OR TO BE DELAYED,

 

·                OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS DEPENDS UPON A NUMBER OF FACTORS, INCLUDING OUR FUTURE EARNINGS. WE MAY BE UNABLE TO MAINTAIN OUR CURRENT RATE OF DISTRIBUTIONS AND FUTURE DISTRIBUTIONS MAY BE SUSPENDED OR PAID AT A LESSER RATE THAN THE DISTRIBUTIONS WE NOW PAY,

 

·                OUR ABILITY TO GROW OUR BUSINESS AND INCREASE OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR ABILITY TO BUY PROPERTIES AND LEASE THEM FOR RENTS, LESS PROPERTY OPERATING EXPENSES, WHICH EXCEED OUR CAPITAL COSTS. WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING OR LEASE TERMS FOR NEW PROPERTIES,

 

·                   RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE, AND

 

·                OUR PARTICIPATION IN AIC INVOLVES POTENTIAL FINANCIAL RISKS AND REWARDS TYPICAL OF ANY START UP BUSINESS VENTURE AS WELL AS OTHER FINANCIAL RISKS AND REWARDS SPECIFIC TO INSURANCE COMPANIES. ACCORDINGLY, OUR EXPECTED FINANCIAL BENEFITS FROM OUR INITIAL OR FUTURE INVESTMENTS IN AIC MAY BE DELAYED OR MAY NOT OCCUR.

 

THESE RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH ARE BEYOND OUR CONTROL, SUCH AS GOVERNMENT TENANTS’ NEEDS FOR LEASED SPACE, OR CHANGES IN THE CAPITAL MARKETS OR THE ECONOMY GENERALLY.

 

THE INFORMATION CONTAINED ELSEWERE IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009, OR OUR ANNUAL REPORT, AND SUBSEQUENT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IDENTIFIES OTHER FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS.  ALSO, OTHER FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN OUR FORWARD LOOKING STATEMENTS ARE DESCRIBED MORE FULLY UNDER "RISK FACTORS" IN OUR ANNUAL REPORT.

 

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.

 

EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

 

 

 

CORPORATE INFORMATION

 

 

 

Government Properties Income Trust

Supplemental Operating and Financial Data

June 30, 2010

 

COMPANY PROFILE

 

The Company:

 

Government Properties Income Trust, or GOV, we or us, is a real estate investment trust, or REIT, which owns buildings majority leased to government tenants located throughout the United States. The majority of our properties are commercial office buildings. As of June 30, 2010, we owned 41 properties with approximately 4.9 million square feet. Thirty four properties are primarily leased to the U.S. Government and seven are leased to the state governments of California, Maryland, Massachusetts, Minnesota and South Carolina. GOV was formed in February 2009 and became a public company on June 8, 2009. We are included in the Russell 2000® stock index and the MSCI US REIT index.  

 

Strategy:

 

Our primary business strategy is to maintain our properties, seek to renew our leases as they expire, selectively acquire additional properties that are majority leased to government tenants and to pay distributions to shareholders. As current leases expire, we will attempt to renew our leases with our existing tenants or enter into leases with new tenants, in both circumstances at rents which are equal to or greater than the rents we now receive. Our ability to renew leases with our existing tenants or to enter into new leases with new tenants and the rents we are able to charge will be dependent in large part upon market conditions which are generally beyond our control. Although we sometimes may sell properties, we generally consider ourselves to be a long term investor and are more interested in the long term earnings potential of our properties than selling properties for short term gains. We currently do not have any investments in off balance sheet entities.

 

Management:

 

GOV is managed by Reit Management & Research LLC, or RMR. RMR is a real estate management company which was founded in 1986 to manage public investments in real estate. As of June 30, 2010, RMR managed one of the largest portfolios of publicly owned real estate in the North America, including 1,370 properties, located in 45 states, Washington, DC, Puerto Rico and Ontario, Canada. RMR has more than 600 employees in its headquarters and regional offices located throughout the country. In addition to managing GOV, RMR also manages CommonWealth REIT, or CWH, a publicly traded REIT that owns office and industrial properties, Hospitality Properties Trust, or HPT, a publicly traded REIT that owns hotels and travel centers, and Senior Housing Properties Trust, or SNH, a publicly traded REIT that primarily owns senior living and healthcare properties. RMR also provides management services to Five Star Quality Care, Inc., a healthcare services company which is a tenant of SNH, and to Travel Centers of America, LLC, an operator of travel centers which is a tenant of HPT. An affiliate of RMR, RMR Advisors, Inc., is the investment manager of publicly offered mutual funds, which principally invest in securities of unaffiliated real estate companies. The public companies managed by RMR and its affiliates had combined total gross assets of over $17.5 billion as of June 30, 2010. We believe that being managed by RMR is a competitive advantage for GOV because RMR provides us with a depth and quality of management and experience which may be unequaled in the real estate industry. We also believe RMR provides management services to GOV at costs that are lower than we otherwise would have to pay for similar quality services.

 

Corporate Headquarters:

 

400 Centre Street
Newton, MA 02458
(t)  (617) 219-1440
(f)  (617) 796-8267

Stock Exchange Listing:

 

New York Stock Exchange

 

Trading Symbols:

 

Common Shares — GOV

 

Portfolio Data (as of 6/30/10):

 

Total properties		41
Total sq. ft. (000s)		4,905
Percent leased		99.7	%

 

5

 

Government Properties Income Trust

Supplemental Operating and Financial Data

June 30, 2010

 

INVESTOR INFORMATION

 

Board of Trustees

 

Barry M. Portnoy		Adam D. Portnoy
Managing Trustee		Managing Trustee
John L. Harrington		Jeffrey P. Somers
Independent Trustee		Independent Trustee
Barbara D. Gilmore
Independent Trustee

 

 

Senior Management

 

 

 

Contact Information

 

Investor Relations Government Properties Income Trust 400 Centre Street Newton, MA 02458 (t) (617) 219-1410 (f) (617) 796-8267 (e-mail) info@govreit.com (website) www.govreit.com

Inquiries Financial inquiries should be directed to David M. Blackman, Treasurer and Chief Financial Officer, at (617) 219-1440 or dblackman@govreit.com.   Investor and media inquiries should be directed to Timothy A. Bonang, Vice President, Investor Relations, at (617) 796-8222 or tbonang@govreit.com, or Elisabeth Heiss, Manager, Investor Relations, at (617) 796-8222 or eheiss@govreit.com.

 

6

 

Government Properties Income Trust

Supplemental Operating and Financial Data

June 30, 2010

 

RESEARCH COVERAGE

 

Equity Research Coverage

 

Banc of America Merrill Lynch Research		Jefferies & Company, Inc.
James Feldman		Omotayo Okusanya
(212) 449-6255		(212) 336-7076
RBC Capital Markets		Wells Fargo Securities
David Rodgers		Brendan Maiorana
(440) 715-2647		(443) 263-6516

 

 

GOV is followed by the analysts listed above.  Please note that any opinions, estimates or forecasts regarding GOV’s performance made by these analysts do not represent opinions, forecasts or predictions of GOV or its management.  GOV does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts.

 

7

 

FINANCIAL INFORMATION

 

 

 

Government Properties Income Trust

Supplemental Operating and Financial Data

June 30, 2010

 

KEY FINANCIAL DATA (1)

(amounts in thousands, except per share data)

 

		As of and For the Three Months Ended
		6/30/2010			3/31/2010			12/31/2009			9/30/2009			6/30/2009
Shares Outstanding:
Common shares outstanding (at end of period)		31,264			31,256			21,481			21,481			21,450
Weighted average common shares outstanding (2)		31,261			29,084			21,481			21,455			12,384
Common Share Data:
Price at end of period		$	25.52		$	26.01		$	22.98		$	24.01		$	20.53
High during period		$	28.40		$	26.01		$	25.50		$	24.35		$	20.53
Low during period		$	23.95		$	21.64		$	21.79		$	18.76		$	17.76
Selected Balance Sheet Data:
Total assets		$	686,278		$	606,549		$	514,813		$	438,867		$	412,023
Total liabilities		$	132,898		$	48,385		$	162,763		$	72,895		$	52,420
Gross book value of real estate assets (3)		$	779,215		$	666,931		$	594,320		$	521,273		$	502,696
Total debt / gross book value of real estate (3)		15.1		%	5.4		%	24.3		%	12.5		%	8.7		%
Book Capitalization:
Total debt		$	117,944		$	36,126		$	144,375		$	65,375		$	43,875
Plus: total stockholders’ equity		553,380			558,164			352,050			365,972			359,603
Total book capitalization		$	671,324		$	594,290		$	496,425		$	431,347		$	403,478
Total debt / total book capitalization		17.6		%	6.1		%	29.1		%	15.2		%	10.9		%
Market Capitalization:
Total debt (book value)		$	117,944		$	36,126		$	144,375		$	65,375		$	43,875
Plus: market value of common shares (at end of period)		797,857			812,969			493,633			515,759			440,369
Total market capitalization		$	915,801		$	849,095		$	638,008		$	581,134		$	484,244
Total debt / total market capitalization		12.9		%	4.3		%	22.6		%	11.2		%	9.1		%
Selected Income Statement Data:
Rental income		$	25,940		$	23,355		$	20,654		$	19,656		$	19,405
EBITDA (4)		$	14,839		$	13,279		$	11,122		$	11,485		$	12,026
Property net operating income (NOI) (5)		$	17,480		$	15,553		$	13,243		$	12,937		$	12,857
NOI margin (6)		67.4		%	66.6		%	64.1		%	65.8		%	66.3		%
Net income		$	7,735		$	6,851		$	5,415		$	6,185		$	5,869
Funds from operations (FFO) (7)		$	14,147		$	12,575		$	10,223		$	10,220		$	9,666
Per Share Data (2):
Net income		$	0.25		$	0.24		$	0.25		$	0.29		$	0.47
FFO (7)		$	0.45		$	0.43		$	0.48		$	0.48		$	0.78
Coverage Ratios:
EBITDA (4)   / interest expense		8.8		x	8.7		x	6.5		x	7.8		x	5.1		x

---

(1)          GOV became a public company on June 8, 2009.

(2)          GOV was formed in February 2009 and completed its initial public offering, or IPO, of common shares in June 2009.  We have no outstanding share equivalents, such as units, convertible debt or stock options.  Prior to completion of its IPO on June 8, 2009, GOV did not have any publicly traded outstanding common shares. If the IPO had been completed on January 1, 2009, GOV’s weighted average common shares outstanding for the quarter and six months ended June 30, 2009 would have been 21,450,000.

(3)          Gross book value of real estate assets is real estate properties, at cost, including purchase price allocations less impairment writedowns, if any.

(4)          See page 13 for calculation of EBITDA.

(5)          Property net operating income, or NOI, is defined as rental income from real estate less property operating expenses; see page 14 for calculation of NOI and reconciliation of NOI to net income.  

(6)          NOI margin is defined as NOI as a percentage of rental income.

(7)          See page 15 for calculation of funds from operations, or FFO, and FFO per share.

 

9

 

 

Government Properties Income Trust

Supplemental Operating and Financial Data

June 30, 2010

 

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

 

		As of			As of
		6/30/2010			12/31/2009
ASSETS
Real estate properties:
Land		$	85,909		$	74,009
Buildings and improvements		653,731			502,748
		739,640			576,757
Accumulated depreciation		(121,566		)	(113,027		)
		618,074			463,730
Acquired real estate leases, net		39,212			15,310
Cash and cash equivalents		1,023			1,478
Restricted cash		1,000			—
Rents receivable		14,860			13,544
Deferred leasing costs, net		1,161			1,330
Deferred financing costs, net		4,996			5,204
Due from affiliates		336			103
Other assets, net		5,616			14,114
Total assets		$	686,278		$	514,813
LIABILITIES AND SHAREHOLDERS’ EQUITY
Mortgage notes payable		$	35,944		$	—
Secured revolving credit facility		82,000			144,375
Accounts payable and accrued expenses		8,116			13,985
Due to affiliates		1,063			837
Acquired real estate lease obligations, net		5,775			3,566
Total liabilities		132,898			162,763
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value: 31,263,850 and 21,481,350 shares issued and outstanding, respectively		313			215
Additional paid in capital		556,776			357,627
Cumulative net income		28,127			13,541
Cumulative common distributions		(31,836		)	(19,333		)
Total shareholders’ equity		553,380			352,050
Total liabilities and shareholders’ equity		$	686,278		$	514,813

 

10

 

Government Properties Income Trust

Supplemental Operating and Financial Data

June 30, 2010

 

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

 

 

		For the Three Months Ended						For the Six Months Ended
		6/30/2010			6/30/2009			6/30/2010			6/30/2009
Rental income (1)		$	25,940		$	19,405		$	49,295		$	38,648
Expenses:
Real estate taxes		2,764			2,113			5,332			4,219
Utility expenses		1,733			1,523			3,410			3,044
Other operating expenses		3,963			2,912			7,520			5,711
Depreciation and amortization		5,401			3,797			10,281			7,361
Acquisition costs		1,011			—			1,855			—
General and administrative		1,623			873			3,076			1,613
Total expenses		16,495			11,218			31,474			21,948
Operating income		9,445			8,187			17,821			16,700
Interest and other income (expense), net		(7		)	42			16			44
Interest expense (including net amortization of debt premiums and deferred financing fees of $624, $427, $1,156 and $427, respectively)		(1,678		)	(2,360		)	(3,209		)	(2,360		)
Income before income tax expense		7,760			5,869			14,628			14,384
Income tax expense		(25		)	—			(42		)	—
Net income		$	7,735		$	5,869		$	14,586		$	14,384
Weighted average common shares outstanding (2)		31,261			12,384			30,178			8,590
Earnings per common share (2):
Net income		$	0.25		$	0.47		$	0.48		$	1.67
Additional Data:
General and administrative expenses / rental income		6.26		%	4.50		%	6.24		%	4.17		%
General and administrative expenses / total assets (at end of period)		0.24		%	0.21		%	0.45		%	0.39		%
Non cash straight line rent adjustments (1)		$	(59	)	$	(109	)	$	(124	)	$	(225	)
Lease value amortization (1)		$	14		$	85		$	48		$	170
Lease termination fees included in rental income		$	57		$	—		$	57		$	—
Capitalized interest expense		$	—		$	—		$	—		$	—

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(1)           We report rental income on a straight line basis over the terms of the respective leases; accordingly, rental income includes non-cash straight line rent adjustments.  Rental income also includes non-cash amortization of intangible lease assets and liabilities.  

(2)           Prior to completion of its IPO on June 8, 2009, GOV did not have any publicly traded outstanding common shares. If the IPO had been completed on January 1, 2009, GOV’s weighted average common shares outstanding for the quarter and six months ended June 30, 2009 would have been 21,450.  

 

11

 

Government Properties Income Trust

Supplemental Operating and Financial Data

June 30, 2010

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

 

 

		For the Six Months Ended
		6/30/2010			6/30/2009
Cash flows from operating activities:
Net income		$	14,586		$	14,384
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		11,389			7,617
Share based compensation expense		217			—
Equity in loss of equity investment		52			—
Change in assets and liabilities:
(Increase) decrease in restricted cash		(1,000		)	1,334
(Increase) decrease in deferred leasing costs		(47		)	—
(Increase) decrease in rents receivable		(1,316		)	(326		)
(Increase) decrease in due from affiliates		(233		)	—
(Increase) decrease in other assets		8,490			(196		)
Increase (decrease) in accounts payable and accrued expenses		2,744			(1,072		)
Increase (decrease) in due to affiliates		226			(1,343		)
Cash provided by operating activities		35,108			20,398
Cash flows from investing activities:
Real estate acquisitions and improvements		(149,817		)	(1,176		)
Investment in Affiliates Insurance Company		(44		)	—
Cash used in investing activities		(149,861		)	(1,176		)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		199,030			209,389
Repayment of mortgage loans		(242		)	(134		)
Borrowings on secured revolving credit facility		104,000			272,000
Payments on secured revolving credit facility		(166,375		)	(228,125		)
Financing fees		(1,019		)	(6,235		)
Distributions to common shareholders		(21,096		)	—
Equity distributions		—			(265,763		)
Cash provided by (used in) financing activities		114,298			(18,868		)
(Decrease) increase in cash and cash equivalents		(455		)	354
Cash and cash equivalents at beginning of period		1,478			97
Cash and cash equivalents at end of period		$	1,023		$	451
Supplemental cash flow information:
Interest paid		$	1,870		$	1,932
Non-cash operating activities
Equity distributions		$	—		$	8,047
Non-cash investing activities
Assumption of mortgage debt in connection with real estate acquisitions		$	(35,196	)	$	—
Non-cash financing activities
Mortgage debt assumed		$	35,196		$	—
Costs of establishing credit facility		—			650
Costs for issuance of common shares		—			3,813

 

12