Equity One Reports Second Quarter 2007 Operating Results

Equity One, Inc. (NYSE:EQY), an owner, developer, and operator of shopping centers, announced today its financial results for the three month period ended June 30, 2007. Financial Highlights Funds From Operations (FFO) for the second quarter was $25.2 million, or $0.34 per diluted share, compared to $30.8 million and $0.41 per diluted share for the same period in 2006. FFO for the six months ended June 30, 2007 was $54.9 million, or $0.74 per diluted share, compared to $64.7 million and $0.86 per diluted share for the same period in 2006. FFO for the second quarter of 2007 includes $0.5 million, or $0.01 per diluted share, of gains on land sales compared to $6.9 million, or $0.09 per diluted share, for the same period in 2006. FFO for six months ended June 30, 2007 includes $1.6 million, or $0.02 per diluted share, of gains on land sales compared to $7.3 million, or $0.10 per diluted share, for the same period in 2006. Net income for the quarter was $12.9 million, or $0.17 per diluted share, compared to $111.3 million and $1.49 per diluted share for the same period in 2006. Net income for the six months ended June 30, 2007 was $32.9 million, or $0.44 per diluted share, compared to $133.7 million and $1.77 per diluted share for the same period in 2006. Net income in the three months and six months ended June 30, 2006 included gains on sales of $92.7 million related to the company’s sale of its Texas shopping centers. In the quarter, the company reclassified approximately $2.0 million of year-to-date accounting and property management expenses from property operating expense to general and administrative expense. Prior-period expenses have been similarly reclassified. The reclassification had no impact on FFO or net income. Operating Highlights For the three months ended June 30, 2007, Equity One’s operating shopping center portfolio generated same-property net operating income (NOI) growth excluding redevelopment of 4.6%. At June 30, 2007, the company’s operating shopping center portfolio was 93.9% occupied. During the second quarter, the company executed 47 new leases totaling 181,449 square feet. Leases with a new tenant replacing a prior tenant accounted for 40 of these leases and 165,315 square feet. On average, rents on these new leases are 25.6% higher than prior rents on a GAAP basis and 17.9% higher than prior rents on a cash basis. Also during the second quarter, the company renewed 80 leases for 186,631 square feet. On average, rents on renewal leases are 28.6% higher than prior rents on a GAAP basis and 17.1% higher than prior rents on a cash basis. GAAP requires that rental revenue received pursuant to operating leases be recognized on a straight-line basis. Investment Activities During the second quarter, Equity One acquired one shopping center in Miami, Florida and one outparcel in Jacksonville, Florida for an aggregate $6.3 million. The company sold one outparcel in Huntsville, Alabama and one outparcel in Atlanta, Georgia for an aggregate $1.9 million, resulting in pre-tax gains of $0.5 million. Both outparcels are located at development properties. At June 30, 2007, the company had three developments at a gross cost of $56.8 million and five redevelopments at a gross cost of $32.9 million underway. The estimated cost to complete these projects was approximately $47.2 million. As of the end of the quarter, the company also owned two parcels of land held for future development. Balance Sheet Highlights At June 30, 2007, the company’s total market capitalization was approximately $3.05 billion, comprising 74.0 million shares of common stock (on a diluted basis) valued at $1.89 billion and net debt (excluding any unamortized fair market premium/discount and net of cash) of $1.16 billion. The company’s ratio of net debt to total market capitalization was 38.1% and its ratio of net debt to gross real estate and securities investments was 51.9%. During the quarter, the company sold $150 million of 10-year unsecured fixed-rate notes in a private placement. The notes carry an interest rate of 6.00%. Net proceeds of $148.9 million were used to repay outstanding indebtedness under the company’s unsecured revolving credit facility and for general corporate purposes. Subsequent to the end of the quarter, the company paid off the $6 million balance outstanding under its $275 million unsecured line of credit at June 30, 2007 and currently has no amounts outstanding under the line. The company has a remaining authorization to repurchase up to $31 million of common stock. No stock was repurchased during the quarter or subsequent to the end of the quarter. New Chief Investment Officer Effective July 27, 2007, the company hired Tom McDonough as Executive Vice President and Chief Investment Officer. Mr. McDonough, who will manage the company’s development and acquisition activities, will work from a new regional office in Irvine, California. Prior to joining Equity One, Mr. McDonough was a partner in Kahl & Goveia, a real estate development firm based in Laguna Beach, California. From 2000 to 2006, he was Senior Vice President at Regency Centers, most recently serving as its Director of Acquisitions and Dispositions. From 1997 to 2000, he was Senior Vice President at Pacific Retail Trust, which merged with Regency Centers in 2000. From 1984 to 1996, Mr. McDonough was a Partner with Trammell Crow. Mr. McDonough is a graduate of Stanford University and Harvard Business School. FFO and Earnings Guidance The company is updating its 2007 FFO and earnings guidance. Excluding gains on land sales, FFO per diluted share for the year ending December 31, 2007 is expected to be $1.34 to $1.39, and net income per diluted share is expected to be $0.74 to $0.78. The following table provides the reconciliation of the range of estimated net income available to common stockholders per diluted share to estimated FFO per diluted share. Low High Estimated net income per diluted share $ 0.74 $ 0.78 Adjustments: Rental property depreciation and amortization 0.62 0.63 Minority interest 0.00 0.00 Gains on sales of depreciable real estate   (0.02 )   (0.02 ) Estimated Funds From Operations (FFO) per diluted share $ 1.34   $ 1.39   Accounting and Other Disclosures We believe Funds from Operations ("FFO”) (combined with the primary GAAP presentations) is a useful, supplemental measure of our operating performance that is a recognized metric used extensively by the real estate industry, particularly REITs. The National Association of Real Estate Investment Trusts ("NAREIT”) stated in its April 2002 White Paper on Funds from Operations, "Historical cost accounting for real estate assets 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 investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” FFO, as defined by NAREIT, is "net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.” NAREIT states further that "adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.” We believe that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from our FFO measure. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO is presented to assist investors in analyzing our operating performance. FFO (i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is not an alternative to cash flow as a measure of liquidity, and (iv) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance. We believe net income is the most directly comparable GAAP measure to FFO. Conference Call/Web Cast Information We will host a conference call on Wednesday, August 8, 2007, at 10:00 a.m. EDT to review the second quarter 2007 earnings and operating results. Stockholders, analysts and other interested parties can access the earnings call by dialing 800-322-5044 (U.S./Canada) or 617-614-4927 (international) using pass code 82622116. The call will also be web cast and can be accessed in a listen-only mode at Equity One’s web site at www.equityone.net. If you are unable to participate during the call, a replay will be available on Equity One’s web site for future review. You may also access the replay by dialing 888-286-8010 (U.S./Canada) or 617-801-6888 (international) using pass code 65173386 through August 15, 2007. For Additional Information For a copy of our first quarter supplemental information package, please access the "Financial Reports” section in our web site at www.equityone.net. To be included in our e-mail distributions for press releases and other company notices, please send your e-mail address to Feryal Akin at fakin@equityone.net. About Equity One, Inc. As of June 30, 2007, the Company owns or has interests in 180 properties, consisting of 164 shopping centers comprising approximately 18.1 million square feet, seven projects in development or redevelopment, three parcels of land, and six non-retail properties. Forward Looking Statements Certain matters discussed by Equity One in this press release constitute forward-looking statements within the meaning of the federal securities laws. Although Equity One believes that the expectations reflected in such forward-looking statements is based upon reasonable assumptions, it can give no assurance that these expectations will be achieved. Factors that could cause actual results to differ materially from current expectations include changes in macro-economic conditions and the demand for retail space in Florida, Georgia, Massachusetts and the other states in which Equity One owns properties; the continuing financial success of Equity One’s current and prospective tenants; continuing supply constraints in its geographic markets; the availability of properties for acquisition; the success of its efforts to lease up vacant space; the effects of natural and other disasters; the ability of Equity One successfully to integrate the operations and systems of acquired companies and properties; and other risks, which are described in Equity One’s filings with the Securities and Exchange Commission. EQUITY ONE, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets June 30, 2007 and December 31, 2006 (In thousands, except per share data) (Unaudited)         June 30, December 31,   2007     2006   ASSETS Properties: Income producing $ 2,068,895 $ 1,896,843 Less: accumulated depreciation   (160,426 )   (144,825 ) Income-producing property, net 1,908,469 1,752,018 Construction in progress and land held for development 77,273 113,340 Properties held for sale   12,649     20,353   Properties, net 1,998,391 1,885,711 Cash and cash equivalents - - Cash held in escrow 142 1,547 Accounts and other receivables, net 13,577 18,967 Securities 78,199 75,102 Goodwill 13,031 13,092 Other assets   78,136     75,356   TOTAL ASSETS $ 2,181,476   $ 2,069,775   LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Notes Payable Mortgage notes payable $ 414,242 $ 391,647 Unsecured revolving credit facilities 6,000 76,500 Unsecured senior notes payable   741,370     591,187   1,161,612 1,059,334 Unamortized premium/discount on notes payable   11,147     10,322   Total notes payable 1,172,759 1,069,656 Other liabilities Accounts payable and accrued expenses 42,593 36,565 Tenant security deposits 10,074 9,622 Other liabilities   28,917     27,265   Total liabilities   1,254,343     1,143,108   Minority interests   989     989   Commitments and contingencies Stockholders’ equity: Preferred stock, $0.01 par value – 10,000 shares authorized but unissued - - Common stock, $0.01 par value – 100,000 shares authorized 73,114 and 72,756 shares issued and outstanding as of June 30, 2007 and December 31, 2006, respectively 731 728 Additional paid-in capital 902,855 895,247 Retained earnings 25,807 37,201 Accumulated other comprehensive loss   (3,249 )   (7,498 ) Total stockholders’ equity   926,144     925,678   TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,181,476   $ 2,069,775     See accompanying notes to condensed consolidated financial statements. EQUITY ONE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2007 and 2006 (In thousands, except per share data) (Unaudited)   Three months ended Six months ended June 30 June 30   2007     2006     2007     2006   REVENUE: Minimum rent $ 49,525 $ 43,651 $ 97,424 $ 85,400 Expense recoveries 14,589 12,769 27,994 24,845 Percentage rent 377 189 1,637 1,463 Management and leasing services   149     441     986     596   Total revenue   64,640     57,050     128,041     112,304   COSTS AND EXPENSES: Property operating 15,515 14,725 32,169 30,025 Management and leasing services 180 486 926 563 Rental property depreciation and amortization 11,990 10,690 23,282 20,536 General and administrative   6,855     6,281     14,620     10,897   Total costs and expenses   34,540     32,182     70,997     62,021   INCOME BEFORE OTHER INCOME AND EXPENSE, MINORITY INTEREST AND DISCONTINUED OPERATIONS   30,100 24,868 57,044 50,283   OTHER INCOME AND EXPENSE: Investment income 551 1,113 6,758 5,765 Equity in income of unconsolidated joint ventures - 1,650 - 1,650 Other income 46 39 240 389 Interest expense (17,223 ) (12,945 ) (32,980 ) (26,917 ) Amortization of deferred financing fees (424 ) (373 ) (812 ) (718 ) Gain on sale of real estate 518 5,284 1,585 5,598 Loss on sale of fixed assets (283 ) - (283 ) - Loss on extinguishment of debt   -     -     -     (292 ) OPERATIONS 13,285 19,636 31,552 35,758 Minority Interest   (28 )   (122 )   (56 )   (150 ) INCOME FROM CONTINUING OPERATIONS   13,257     19,514     31,496     35,608     DISCONTINUED OPERATIONS: Operations of income-producing properties sold or held for sale (389 ) (874 ) (329 ) 4,905 Gain on disposal of income-producing properties   -     92,707     1,720     93,199   Income / (loss) from discontinued operations   (389 )   91,833     1,391     98,104   NET INCOME $ 12,868   $ 111,347   $ 32,887   $ 133,712     EARNINGS PER COMMON SHARE - BASIC: Continuing operations $ 0.19 $ 0.26 $ 0.43 $ 0.48 Discontinued operations   (0.01 )   1.24     0.02     1.31   $ 0.18   $ 1.50   $ 0.45   $ 1.79   Number of Shares Used in Computing Basic Earnings per Share 73,101 74,359 73,038 74,753   EARNINGS PER COMMON SHARE – DILUTED: Continuing operations $ 0.18 $ 0.26 $ 0.42 $ 0.47 Discontinued operations   (0.01 )   1.23     0.02     1.30   $ 0.17   $ 1.49   $ 0.44   $ 1.77   Number of Shares Used in Computing Diluted Earning per Share 74,128 75,071 74,056 75,488 EQUITY ONE, INC. AND SUBSIDIARIES Reconciliation of Net Income to Funds from Operations (FFO) Funds from Operations is a non-GAAP financial measure. We believe that FFO, as defined by NAREIT, is a widely used and appropriate supplemental measure of operating performance for REITs. The following table illustrates the calculation of FFO for the three and six months periods ended June 30, 2007 and 2006:       Three Months Ended June 30,     Six Months Ended June 30,     2007     2006     2007     2006   (In thousands) (In thousands) Net income $ 12,868 $ 111,347 $ 32,887 $ 133,712 Adjustments: Rental property depreciation and amortization, including discontinued operations 12,010 11,493 23,383 23,532 Gain on disposal of depreciable real estate - (92,707 ) (1,720 ) (93,199 ) Loss on disposal of fixed assets 283 - 283 - Pro rata share of real estate depreciation from unconsolidated joint venture - 508 - 508 Minority interest   28     122     56     150   Funds from operations $ 25,189   $ 30,763   $ 54,889   $ 64,703   The following table reflects the reconciliation of FFO per diluted share to earnings per diluted share, the most directly comparable GAAP measure, for the periods presented:       Three Months Ended June 30,     Six Months Ended June 30,     2007     2006     2007     2006   Earnings per diluted share (1) $ 0.17 $ 1.49 $ 0.44 $ 1.77 Adjustments: Rental property depreciation and amortization, including discontinued operations 0.17 0.15 0.32 0.31 Gain on disposal of depreciable real estate - (1.24 ) (.02 ) (1.23 ) Loss on disposal of fixed assets - - - - Pro rata share of real estate depreciation from unconsolidated joint venture   -     .01     -   .01   Funds from operations per diluted share $ 0.34   $ 0.41   $ 0. 74 $ 0.86     (1) Earnings per diluted share reflect the add-back of the minority interest(s) which are convertible to shares of our common stock.