JENKINTOWN, Pa., Oct. 28 /PRNewswire-FirstCall/ -- American Financial Realty Trust (AFR) , report... American Financial Realty

JENKINTOWN, Pa., Oct. 28 /PRNewswire-FirstCall/ -- American Financial Realty Trust (AFR) , reported revenues for the quarter were $146.6 million, an increase of 10.0% over second quarter 2005 revenues and an increase of 80.7% over revenues of $81.1 million reported in the third quarter of 2004. Revenues for the nine months ended September 30, 2005 increased 89.0% to $405.5 million from the comparable period in 2004.

The Company reported third quarter adjusted funds from operations ("AFFO") of $33.3 million (including gains on sales of assets), representing an increase of $2.8 million or 9.2% from the $30.5 million reported during the second quarter of 2005 and an increase of 10.4% from $30.2 million reported in the third quarter of 2004. AFFO for the period was derived primarily from core real estate operations, as property net operating income increased $6.2 million or 9.2% between the second and third quarters of 2005. Gains on sales of real property of $1.7 million further contributed to AFFO performance in the third quarter of 2005.

For the nine months ended September 30, 2005 AFFO was $93.5 million, an increase of 6.1% over the $88.1 million reported for the corresponding period in 2004.

Highlights -- Acquisitions and Leasing: Acquired 31 properties totaling approximately 1,012,000 rentable square feet for a net purchase price of approximately $322.2 million. New leasing totaled over 395,000 square feet, including one lease of a 150,000 square foot operations center previously among the Company's top ten vacancies. -- Relationship Building: Introduced a new Community Banking Program through a strategic alliance with Bank Property Advisors, LLC ("BPA"), a Chicago-based company, to enhance AFR's bank branch holdings and leasing to community banks. -- Dispositions: Disposed of 14 non-core properties aggregating approximately 165,000 square feet for net proceeds of $9.1 million and a net gain of approximately $1.7 million. -- Balance Sheet Initiatives: Renewed and increased by $100 million an existing Secured Line of Credit ("LOC") agreement with Deutsche Bank AG, Cayman Islands Branch providing a total borrowing limit of $400 million.

The Company reported adjusted funds from operations ("AFFO")(1) of $33.3 million in the third quarter of 2005. For the three months ended September 30, 2005 the Company's weighted average diluted common shares and Operating Partnership units outstanding totaled 131.3 million.

The Company reported a net loss of $25.4 million, or $(0.20) per share for the third quarter of 2005, compared with a net loss of $10.0 million or $(0.09) per share reported in the third quarter of 2004 and a net loss of $25.2 million or $(0.21) in second quarter 2005. Year to date September 30, 2005 the net loss is $72.7 million or $(0.62) per share. The Company's net losses are largely attributable to non-cash depreciation and amortization charges from continuing operations, which totaled $48.2 million in the third quarter of 2005.

Funds from operations ("FFO")(2), including gains on sales of assets, was $18.9 million, or $0.14 per share, an increase of $6.1 million over the second quarter of 2005, when FFO was $12.9 million or $0.10 per share and an increase of $1.9 million or 11.2% from $17.0 million reported in the third quarter of 2004. Excluding gains, FFO, computed in accordance with the definition of the National Association of Real Estate Investment Trusts ("NAREIT FFO")(3), was $17.2 million.

EBITDA grew by 19.4% over the second quarter of 2005 and by more than 63% over the same period in 2004. The improvement over second quarter ($10.6 million) was due primarily to higher property net operating income ($6.2 million) and lower costs ($4.5 million) associated with severance costs recognized in the second quarter of 2005. The operating margin (EBITDA divided by total revenues) for the period was 44.5%. On an unadjusted cash basis, the operating margin was 47.3% for the third quarter of 2005.

MG&A expenses were generally flat on a dollar basis as compared to the second quarter 2005, and were up marginally, $0.3 million over third quarter 2004 on a dollar basis. As a percentage of total revenues, MG&A declined from 6.3% of total revenues in the second quarter to 5.8% in the third quarter, an improvement of 8.6% on a relative basis. As a percentage of revenues over the comparable quarter in 2004, MG&A declined from 10.1% to 5.8% in the third quarter, an improvement of 42.6% on a relative basis.

AFR declared a quarterly dividend for shareholders of beneficial interest of $0.27 per share for the third quarter of 2005. The dividend was paid on October 17, 2005 to shareholders of record on October 3, 2005. At the same time, the Company's Operating Partnership paid a distribution of $0.27 per unit to Operating Partnership unit holders.

During the quarter, the Company disposed of 14 properties, including two leaseholds, aggregating approximately 165,000 square feet, including approximately 95,000 square feet of vacant or soon to become vacant space. Thirteen of the properties had an aggregate net property operating loss, of approximately $0.4 million year to date. The remaining property, a 13,000 square foot branch location, was sold opportunistically to a developer for a gain of approximately $1.0 million. Net proceeds resulting from these dispositions were $9.1 million, generating a net gain of approximately $1.7 million, net of impairments.

Year to date, 79 properties and 6 leasehold interests have been sold, aggregating approximately 1.5 million square feet, 1.0 million of which was vacant or soon to become vacant space. These dispositions have generated net proceeds of approximately $66.7 million, eliminating year to date property operating loss of $1.5 million from future periods.

"We have made progress in repositioning and disposing our non-core assets. We anticipate disposing of two repositioned assets for a total gain of $6 million that due to conditions outside our control did not close in the third quarter. These assets demonstrate that our ability to create value in our portfolio will make a sufficient contribution to achieving the anticipated gains of approximately $8.5 to $12 million for the fourth quarter" said Glenn Blumenthal, executive vice president and chief operating officer. He added, "These repositioned assets provide a meaningful source of recyclable capital."

Reporting on a "same store" basis (those properties owned as of December 31, 2003), the portfolio occupancy increased by 1.1%, to 91% at September 30, 2005. The improvement in same store occupancy was derived from the lease up of 313,000 square feet of new tenancy. Over the next twelve months, taking into consideration free rent, concessions and construction build out, this leasing is expected to contribute $1.5 million in net operating income. New leasing activity included a 150,000 square foot lease for the Miami Lakes Operation Center, which had previously been reported among the Company's top ten vacancies.

In the third quarter of 2005, same store property net operating income declined $1.3 million compared to the second quarter of 2005 principally due to scheduled and early lease terminations. Revenue on the new leasing activity should begin to be reflected in fourth quarter property net operating income and ramp up over the succeeding three quarters.

Total net property operating income increased $6.2 million when compared to the second quarter of 2005, as a result of new acquisitions completed in the third quarter and the normalization of acquisitions completed in the second quarter. Total portfolio occupancy decreased by 0.4%, to 87.3% at September 30, 2005, primarily due to the return of scheduled short-term space occupied by bank tenants since the recent acquisitions of those properties. This vacancy creates opportunities for increased revenue from new leasing. Approximately 66,000 square feet of the new leasing activity occurred in portfolios purchased from Bank of America and Wachovia one year ago.

Mr. Blumenthal stated, "The success this quarter in leasing the Miami Lakes property demonstrates our ongoing focus on our property portfolio and core operations. The execution of this lease serves a dual purpose: it increases occupancy and highlights the attention we are applying to our top ten vacancies such as Harborside."

The following table provides portfolio statistics on the AFR portfolio as of September 30, 2005, with comparisons to the portfolio as of June 30, 2005. The portfolio statistics include 100% of the two properties (State Street Financial Center and 123 South Broad Street) owned by the Company in joint ventures. Similarly, these joint ventures are reported on a consolidated basis for GAAP accounting purposes.

The Company executed a renewal agreement of its existing Secured Line of Credit ("LOC"), with Deutsche Bank AG, Cayman Islands Branch, satisfying a significant refinancing requirement for 2006. This renewal was completed eleven months early under the same basic terms of the original LOC. The credit facility has been extended through October 2008 and increased by $100 million to a total borrowing limit of $400 million. In addition, the LOC was specifically structured to provide a financing mechanism for AFR's Formulated Price Contract program.

As of September 30, 2005, the Company had total indebtedness of approximately $3.1 billion, with a weighted average remaining term of 12.0 years and a weighted average interest rate (including amortized hedging costs) of 5.60%.

As of September 30, 2005, the Company had a ratio of total debt to enterprise value (debt and equity market capitalization) of approximately 62.6%, and a ratio of debt to total real estate investments and real estate intangibles (at cost) of approximately 70.0%.

"The early renewal of our acquisition credit line, (11 months earlier than the original LOC expiration) and its specific formula for financing our FPC acquisitions signifies our current focus on eliminating in advance, our 2006 refinancing obligations while at the same time enhancing our operations capabilities," said Dave Nettina, chief financial officer and chief real estate officer. "As we review our strategic plan for 2006, we will be turning our attention to other high amortizing debt for refinancing, in order to extend the term of this debt, while locking in historically low interest rates, enhancing the generation of free cash flow," added Mr. Nettina.

American Financial has a policy to update guidance only in the event that it may be affected by a material change. The Company projects, after taking into account the additional shares issued in May 2005, its shares and units outstanding on a full year weighted average basis should approximate 125.6 million shares. In consideration of this, the Company anticipates its full year AFFO results for 2005 to fall within the lower end of the same per share equivalent range as originally provided. Guidance for 2006 will be provided on or before November 15th.

Management will conduct a conference call and audio webcast at 1:00 p.m. ET on October 28, 2005 to review the Company's quarterly results. The conference call dial-in number is 303-262-2142. The audio webcast will be available to the public, on a listen-only basis, via the Investor Relations section of the Company's website at http://www.afrt.com/ .

A replay of the conference call will be available through November 4, 2005 by dialing 303-590-3000, passcode 11041733. An online archive of the webcast will be available through November 27, 2005 by accessing the Company's website at http://www.afrt.com/ .

American Financial publishes supplemental quarterly financial and operating data, which can be found under the Investor Relations section of the company's website at http://www.afrt.com/ . These materials are also available via e-mail by calling 312-640-6770.

The Company believes that FFO is helpful to investors as a measure of the Company's performance as an equity REIT because it provides investors with an understanding of the Company's operating performance and profitability. The Company includes gains and losses from property sales in its definition of FFO because it believes that strategic disposition of properties is a significant component of the Company's business model, and that gains and losses from dispositions demonstrate (in part) the Company's execution of its business model. FFO is a non-GAAP financial measure commonly used in the REIT industry, and therefore this measure may be useful in comparing the Company's performance with that of other REITs. However, the Company's definition of FFO differs from NAREIT FFO (which is also disclosed by the Company) and investors should take definitional differences into account when comparing FFO reported by other REITs (including particularly those REITs that exclude gains and losses from property sales in their definition of FFO). Additionally, FFO and FFO per share should be evaluated along with GAAP net income and net income per share (the most directly comparable GAAP measures) in evaluating the performance of equity REITs.

The Company believes that AFFO is helpful to investors as a measure of its liquidity position, because, along with cash flows from operating activities, this measure provides investors with an understanding of its ability to pay dividends. In addition, because this measure is commonly used in the REIT industry, the Company's use of AFFO may assist investors in comparing the Company's liquidity position with that of other REITs. The Company's definition of AFFO differs from that of other equity REITs and investors should take definitional differences into account when comparing AFFO reported by other REITs (including particularly those REITs that exclude gains and losses from property sales in their definition of AFFO).

American Financial Realty Trust is a self-administered, self-managed real estate investment trust that acquires properties from, and leases properties to, regulated financial institutions. The Company owns and manages its assets primarily under long-term triple net and bond net leases with banks. The Company is led by chief executive officer Nicholas S. Schorsch and non- executive chairman Lewis S. Ranieri. The Company is traded on the New York Stock Exchange under the ticker symbol AFR.

Certain statements in this press release constitute forward-looking statements within the meaning of the federal securities laws. You can identify these statements by our use of the words "expects," "anticipates," "estimates," "intends," "believes" and similar expressions that do not relate to historical information. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks and uncertainties which are, in some cases, beyond the Company's control and could materially affect actual results, performance or achievements. These risks and uncertainties include the risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, and include, without limitation, changes in general economic conditions and the extent of any tenant bankruptcies and insolvencies; the Company's ability to maintain and increase occupancy; the Company's ability to timely lease or re- lease space at anticipated net effective rents; the cost and availability of debt and equity financing; and the Company's ability to acquire and dispose of certain of its assets from time to time on acceptable terms. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

The attached financial statements and data are presented to supplement the Company's audited and unaudited regulatory filings and should be read in conjunction with those filings. The unaudited financial data presented herein is provided from the perspective of timeliness to assist readers of quarterly and annual financial filings. This financial data was prepared prior to the Company's auditors completing their SAS 100 review. As such, data otherwise contained in future regulatory filings covering this same time period may differ from the data presented herein. The Company does not accept responsibility for highlighting these changes in its subsequent filings.

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