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JACKSONVILLE, FL-Flagler Development Co., one of the state’s largest real estate developers, reports gross second-quarter rental properties’ operating profit increased 1.6% to $10 million compared to $2.1 million in the 2002 period.

However, the real estate development arm of railroad operator Florida East Coast Industries took a hit in both the rental and services column, and in rental properties’ operating profit.

Flagler reported $16.4 million versus $17.1 million in the same 2002 period for rental services revenue. Rental properties’ operating profit was $3.3 million versus $6 million in second quarter 2002.

The revenue decrease was due largely to $1.8 million of net lease termination fees Flagler received in second quarter 2002 but not in second quarter 2003, says Robert W. Anestis, Florida East Coast’s chairman, president and CEO.

“Occupancy levels improved for the third quarter in a row as a result of recent acquisitions and successful leasing efforts, though leasing activity and renewal rates reflect a slow market,” Anestis says.

Flagler’s occupancy rates at existing properties increased to 87% compared to 86% in second quarter 2002 and first quarter 2003. Surplus land sales generated $10.2 million in the second quarter. The biggest deal was the $5.6 million, 228-acre sale on a 564-acre site in St. Lucie County to Wal-Mart Stores Inc. The price equates to $24,561 per acre of 56 cents per sf.

Anestis says the company expects full-year 2003 property sales to total between $70 million and $90 million. Before the second quarter ended, Flagler sold its 50% stake in three 98,000-sf office buildings in South Florida’s Beacon Pointe Office Park to its partner, Duke Realty Corp. of Indianapolis, for $22.3 million.

The CEO is revising Flagler’s 2003 rental and services revenue to range between $64 million and $66 million. Rental properties’ operating profit is projected between $14 million and $16 million for the full year. And rental properties’ operating profit before depreciation and amortization is expected to come in between $39 million and $41 million.

At the end of the second quarter, Flagler had eight projects totaling 994,000 sf in various stages of development. Build-to-suit projects totaled 290,000 sf. Property under sale contract on June 30 totaled $87.2 million. Additional properties listed for sale totaled $35.8 million.

The company’s cash position remains strong, showing $103.5 million versus $83.9 million on the balance sheet in second quarter 2002.

Flagler owns, develops, leases and manages seven million sf of commercial and industrial space. The firm has 403,000 sf under construction. Flagler owns 938 acres of entitled land and 4,900 acres of additional Florida properties.

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