Pan Pacific Retail Properties Reports Strong 2nd Quarter Results; 9% Increase in Funds From Operations Per Share to $0.73

Business Wire, August 1, 2002

Business Editors

SAN DIEGO--(BUSINESS WIRE)--Aug. 1, 2002

Raises FFO Guidance for 2002 and Affirms FFO Guidance for 2003

Pan Pacific Retail Properties Inc. (NYSE:PNP), the largest neighborhood shopping center real estate investment trust (REIT) on the West Coast, today announced results for the second quarter ended June 30, 2002.

All per share amounts are on a diluted basis.

The company also announced that it is raising its guidance for 2002 funds from operations (FFO) per share growth to a range of 8.5% to 9.0% from its previous guidance of 8.0% established by the company in August 2001. The company also affirmed guidance for 2003 FFO per share growth of approximately 7%.

Highlights

-- 11.5% increase in total FFO to $25.0 million vs. 2Q '01

-- 9.0% increase in FFO per share to $0.73 vs. 2Q '01

-- 15.9% increase in total funds available for distribution (FAD) to $21.8 million vs. 2Q '01

-- 12.5% increase in FAD per share to $0.63 vs. 2Q '01

-- 96.9% portfolio occupancy rate as of June 30th

-- 145 leases executed, totaling 441,796 square feet, a record leasing activity

-- 13.0% increase in base rent on same store new and renewed leases

-- $107.7 million in grocery-anchored shopping center acquisitions year-to-date

-- $13.9 million in non-core dispositions year-to-date

-- 37.9% debt to total market capitalization ratio as of June 30th

-- $55 million, five-year 5.75% senior, investment-grade notes issued

-- 3.2 to 1.0 interest coverage ratio

-- $0.475 per share quarterly dividend paid (65% FFO payout ratio)

"Our business and long-term growth prospects remain sound, as evidenced by our strong performance in the second quarter," stated Stuart A. Tanz, president and chief executive officer of Pan Pacific. "We continue to maintain our portfolio occupancy at approximately 97%, which represents the 20th consecutive quarter at or above 96% occupied. We continue to lease space at a record pace and achieve solid rent increases. During the second quarter, we achieved a 13% increase on same-store re-leasing rental rates, our 20th consecutive quarter of achieving same-store rental rate increases at or above 10%. While we are delivering solid operating results with our core portfolio, we are enhancing the quality of our asset base through ongoing acquisition and disposition programs. Year to date, we have acquired $107.7 million of quality grocery-anchored shopping centers and have sold $13.9 million of non-strategic properties. As we continue to grow our portfolio, we are conservatively managing this growth by maintaining a solid balance sheet and straightforward capital structure. As such, we are well positioned to continue to achieve our stated growth objectives for the remainder of this year and into 2003."

FINANCIAL RESULTS

For the quarter ended June 30, 2002 total Funds from Operations (FFO) increased 11.5% to $25.0 million, compared with FFO of $22.4 million for the quarter ended June 30, 2001. On a per share basis, FFO increased 9.0% to $0.73 for the quarter ended June 30, 2002 compared to $0.67 for the quarter ended June 30, 2001.

Net income was $17.0 million, or $0.51 per share, for the quarter ended June 30, 2002 compared with net income of $16.4 million, or $0.52 per share, for the quarter ended June 30, 2001. Total revenue increased 6.7% to $49.1 million for the quarter ended June 30, 2002 compared with total revenue of $46.0 million for the quarter ended June 30, 2001.

For the quarter ended June 30, 2002 total Funds Available for Distributions (FAD) increased 15.9% to $21.8 million, compared with FAD of $18.8 million for the quarter ended June 30, 2001. On a per share basis, FAD increased 12.5% to $0.63 per share compared with FAD of $0.56 for the quarter ended June 30, 2001. For the quarter, the company distributed

a dividend of $0.475 per share representing an FFO payout ratio of 65.5% and an FAD payout ratio of 75.0%.

At June 30, 2002 total market capitalization was approximately $1.9 billion. The company had $717.7 million in debt outstanding, equating to a debt-to-total market capitalization ratio of 37.9%. The company's debt was comprised of: $226.2 million in fixed-rate, long-term mortgage debt with a weighted average interest rate of 7.7%, and a weighted average maturity of 5.4 years; $328.6 million in senior unsecured notes with a fixed, weighted average interest rate of 7.4%, and a weighted average maturity of 6.6 years. For the quarter ended June 30, 2002 the company's interest coverage ratio was 3.2 to 1.

OPERATING RESULTS

Leasing Activity

At June 30, 2002, the company's portfolio was 96.9% leased to 2,467 tenants. During the quarter the company achieved record leasing activity, executing 145 leases (new and renewed), for 441,796 square feet, and achieving a 13.0% straight-line increase over prior rents, on a same-store basis.

Same Property Operating Results

With respect to the properties owned and operated by the company for both the three months ended June 30, 2002 and 2001, same property net operating income increased 2.5%.