Despite Net Losses, Glenborough Posts Occupancy Gains

Part of the improvement comes from the fact that the company exited several non-core markets in 2005 and the first month of 2006, selling 22 assets for $376 million. The markets it left behind are Chicago, St. Louis, Indianapolis, Minneapolis, Des Moines and Memphis.

Glenborough chief executive Andrew Batinovich says that the dispositions, combined with $217 million of acquisitions in Washington, DC, and San Francisco, the company is now fully concentrated in its core markets. Half of the company's properties are now located in Washington, DC, and Southern California, he says.

Looking ahead, Batinovich says occupancy and lease rates should rise in 2006, while its dividend drops. As part of a plan to retain cash for future growth, the company anticipates that the 2006 common stock dividend, which is subject to quarterly board approval, will be $1.10 per share annualized, down from the current annualized dividend of $1.40 per share.

Glenborough this week reports a fourth quarter net loss of $6.9 million, or $0.20 per diluted share, which compares to a net loss of $2 million, or $0.06 per share, in the fourth quarter of 2004. The net loss for all of 2005 was $12.6 million, or $0.36 per share, which compares to a 2004 net profit of $7 million, or $0.22 per share.

Glenborough says the decrease in net income available to common shareholders was primarily due to impairment charges in conjunction with its portfolio repositioning, losses on the extinguishment of debt, and charges relating to the redemption of preferred stock and the dilutive impact of the net disposition activity.

Funds from operations, meanwhile, were $25.7 million, or $0.68 per share, for the fourth quarter of 2005, which compares with a 2004 fourth quarter FFO of $12.3 million or $0.34 per share. For all of 2005, FFO was $42.3 million or $1.09 per diluted share, down from $56.1 million or $1.63 per share in 2004.

Glenborough's largest markets are Washington, DC (27% of net operating income), Southern California (19%), Northern New Jersey (12%), Boston (12%) and San Francisco (11%). Lease rollover projected in 2006 equals 8.8% of total base rent, of which approximately 40% is in the company's top two markets--Washington, DC and Southern California.