-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G4DcK9ify2jO7dStDofr22Gu6h0rh/bgTlhjLcMnQKWRVyXcOJQj2q+6JVrHzNiU 95HcTkJn3hEm24W7OtbgfQ== 0001045334-00-000002.txt : 20000327 0001045334-00-000002.hdr.sgml : 20000327 ACCESSION NUMBER: 0001045334-00-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE DEVELOPMENT CO LP CENTRAL INDEX KEY: 0001045334 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 870516235 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-34835-01 FILM NUMBER: 577672 BUSINESS ADDRESS: STREET 1: 35 CENTURY PKWY CITY: SALT LAKE CITY STATE: UT ZIP: 84115 BUSINESS PHONE: 8014863911 MAIL ADDRESS: STREET 1: 35 CENTURY PARK WAY STREET 2: 35 CENTURY PARK WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84115 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _________ to __________ Commission file number 333-34835-01 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP (Exact name of Registrant as specified in its organizational documents)
MARYLAND 87-0516235 --------------------- -------------- (State of organization) (I.R.S. Employer Identification No.) 35 CENTURY PARK-WAY SALT LAKE CITY, UTAH 84115 (801) 486-3911 -------------------------- ------------- (Address of principal executive offices, including zip code) (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] DOCUMENTS INCORPORATED BY REFERENCE Portions of JP Realty Inc.'s proxy statement for its 2000 Annual Meeting of Stockholders scheduled to be held on May 3, 2000 are incorporated by reference into Part III of this Annual Report on Form 10-K. Certain matters discussed under the captions "Business and Properties", "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Quantitative and Qualitative Disclosures About Market Risk" and elsewhere in this Annual Report on Form 10-K and the information incorporated by reference herein may constitute forward-looking statements and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance and achievements of Price Development Company, Limited Partnership to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES GENERAL JP Realty, Inc., a Maryland Corporation (together with its subsidiaries, the "Company"), is the sole general partner of Price Development Company, Limited Partnership, a Maryland Limited Partnership (the "Operating Partnership"). The Company is a fully integrated, self-administered and self- managed real estate investment trust ("REIT") primarily engaged in the business of owning, leasing, managing, operating, developing, redeveloping and acquiring regional malls, community centers and other commercial and retail properties in Utah, Idaho, Colorado, Arizona, Nevada, New Mexico and Wyoming (the "Intermountain Region"), as well as in Oregon, Washington and California (together with the Intermountain region, the "Western States"). The Company was formed on September 8, 1993 to continue and expand the business, commenced in 1957, of certain companies (the "Predecessor Companies") affiliated with John Price, Chairman of the Board and Chief Executive Officer of the Company. The Company conducts all of its business operations through, and as of December 31, 1999 held an 82.2% controlling general partner interest in, the Operating Partnership. As of December 31, 1999, the Operating Partnership, on behalf of the Company, held a portfolio consisting of 51 properties (the "Properties" or "Property"), including 18 enclosed regional malls, 25 community centers and two free-standing retail Properties located in ten states and six mixed-use commercial Properties located primarily in the Salt Lake City, Utah metropolitan area. Since 1976, the Company and the Predecessor Companies have been responsible for developing more retail malls in the region covered by Utah, Idaho, Colorado, Nevada, New Mexico and Wyoming than any other developer having constructed, developed or redeveloped 12 malls in this region (as well as four other malls in Arizona, Oregon and Washington). Based on total gross leasable area (Company-owned leasable area plus any tenant-owned leasable area within the Company's Properties ("Total GLA")), the Company owns and operates the largest retail property portfolio in each of the states of Utah, Idaho and Wyoming, and is one of the leading owners and operators of retail shopping center properties throughout the Intermountain Region. As of December 31, 1999, the Company's retail portfolio contained an aggregate of 13,658,418 square feet of Total GLA and its commercial portfolio contained an aggregate of 1,353,576 square feet of gross leasable area (Company-owned leasable area within the Company's Properties ("GLA")). Based on Total GLA, the Company's retail Properties were approximately 94% leased as of December 31, 1999 and, based on GLA, its commercial Properties were approximately 93% leased as of that date. Segment information for the three years ended December 31, 1999, 1998 and 1997 is included in the financial statements attached to this Annual Report on Form 10-K on pages F-16 and F-17. The Company's strategy is to expand its dominant market position in the Intermountain Region, and to continue to achieve cash flow growth and enhance the value of the Properties by increasing their rental income and net operating income over time. The Company expects to achieve rental income and net operating income growth through re-leasing available space at higher rent levels and selectively renovating, expanding and redeveloping the Properties. In order to expand its market position, the Company expects to concentrate its acquisition and other development activities in the Western States. On April 23, 1999, the Operating Partnership issued 510,000 Series A 8.75% cumulative redeemable preferred units of limited partner interest (the "Series A Preferred Units") in a private placement. Each Series A Preferred Unit has a liquidation value of twenty-five dollars per unit. The Operating Partnership used the net proceeds of approximately $12.3 million for the partial repayment of borrowings outstanding under the Operating Partnership's $200 million unsecured credit facility. The Series A Preferred Units, which may be redeemed by the Operating Partnership on or after April 23, 2004, have no stated maturity or mandatory redemption and are not convertible into any other securities of the Operating Partnership. The Series A Preferred Units are exchangeable at the option of the preferred unitholder at a rate of one Series A Preferred Unit for one share of the Company's Series A 8.75% cumulative redeemable preferred stock beginning April 23, 2009 or earlier under certain circumstances. 2 On July 28, 1999, the Operating Partnership issued 3,800,000 Series B 8.95% cumulative redeemable preferred units of limited partner interest (the "Series B Preferred Units") in a private placement. Each Series B Preferred Unit has a liquidation value of twenty-five dollars per unit. The Operating Partnership used the net proceeds of approximately $92 million to repay $90 million in borrowings outstanding under the Operating Partnership's $200 million unsecured credit facility and increase operating cash. The Series B Preferred Units, which may be redeemed by the Operating Partnership on or after July 28, 2004, have no stated maturity or mandatory redemption and are not convertible into any other securities of the Operating Partnership. The Series B Preferred Units are exchangeable at the option of the preferred unitholder at a rate of one Series B Preferred Unit for one share of the Company's Series B 8.95% cumulative redeemable preferred stock beginning July 28, 2009 or earlier under certain circumstances. In October 1999, the Board of Trustees authorized the Company to repurchase up to $25,000,000 of the Company's Common Stock through open market purchases and private transactions. Through March 7, 2000, the Company had repurchased approximately 1,337,000 shares of Common Stock for a total cost of approximately $22,758,000. In connection with the Company's repurchase of its Common Stock the Operating Partnership has repurchased an equivalent number of Units from the Company for approximately $22,758,000. In connection with the Company's repurchase of its Common Stock the Operating Parnterhsip has repurchased an equivalent number of Units from the Company for approximately $22,758,000. On July 21, 1999, the Operating Partnership borrowed $33,777,000 from the $200 million unsecured credit facility to reduce the notes secured by real estate, bearing interest at a fixed 6.37% per annum, from $95,000,000 to $61,223,000. This transaction unencumbered four regional mall Properties. On October 20, 1999, the Company held a grand opening of its newly developed regional mall in Sierra Vista, Arizona. The Mall at Sierra Vista is anchored by Dillard's, Sears and Cinemark Theaters and added approximately 335,000 square feet of additional Total GLA to the Company's existing portfolio. The Operating Partnership developed Provo Towne Centre, an enclosed regional mall in Provo, Utah. The mall held its grand opening on October 28, 1998 and added approximately 723,000 square feet of Total GLA as of December 31, 1998. Provo Towne Centre is anchored by Dillard's, JCPenney, Sears and Cinemark Theaters and includes space for more than 80 mall shops. On November 11, 1999, the mall held a grand opening for its sixteen screen Cinemark Theater which added approximately 74,000 square feet of additional GLA. The Operating Partnership, through its consolidated partnership Price Spokane, Limited Partnership, has initiated the expansion of NorthTown Mall, an enclosed regional mall in Spokane, Washington. The project will be funded by the Company's $200 million unsecured credit facility and is expected to be completed in the third quarter of 2000 which will add approximately 100,000 square feet of additional GLA to the Company's existing portfolio. Each of the Company's regional malls is the premier and dominant mall and, in some cases, the only mall within its trade area and is generally considered to be the financial, economic and social center for a given geographic area. The trade areas surrounding the Company's malls have a drawing radius, depending on the mall, ranging from five to over 150 miles. The malls have attracted as anchor tenants some of the leading national and regional retail companies such as JCPenney, Nordstrom, Wal-Mart, The Bon March, Sears, Dillard's, Mervyn's and ZCMI. The 18 regional malls in the portfolio contain an aggregate of approximately 10,291,000 square feet of Total GLA and range in size from approximately 296,000 to 1,171,000 square feet of Total GLA. The community center portfolio consists of 25 Properties in seven states containing approximately 3,362,000 square feet of Total GLA. The two free-standing retail Properties contain a total of approximately 5,000 square feet of GLA. The commercial portfolio, which includes 38 commercial buildings containing approximately 1,354,000 square feet of GLA, is primarily located in the Salt Lake City, Utah area where the Company's headquarters are located. 3 PROPERTIES The following tables set forth certain information relating to the Properties, all of which (except as otherwise indicated) are 100% owned by the Operating Partnership. The Company believes that all such Properties are adequately covered by insurance.
RETAIL PROPERTIES OCCUPANCY AS OF 12/31/99 ------------------- FREE BASED STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER- PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS - ----------------- -------- ----- --------- --------- --------- ---------- ---------- --------- ----- ------------ ------ --------- REGIONAL MALLS UTAH - ---- Cache Valley Mall Logan RM 30,120 98,132 182,889 311,141 308,641 2,500 94.6% 94.5% 82.8% Fee JCPenney, ZCMI, Lamonts, C-A-L Ranch Cottonwood Mall Holladay RM 53,300 322,091 379,508 754,899 754,899 -- 91.0% 91.0% 78.8% Fee/ JCPenney, (7) GL(8) ZCMI Provo Towne Provo RM 9,564 231,552 556,145 797,261 456,632 340,629 96.0% 93.1% 86.4% Fee JCPenney, Centre (7) (9) Dillard's Cinemark Theaters, Sears Red Cliffs Mall St. RM 17,425 90,926 277,057 385,408 271,137 114,271 98.6% 98.1% 94.2% Fee JCPenney, George (10) Sears, ZCMI, Wal- Mart IDAHO - ------ Boise Towne Square (7) Boise RM 84,418 392,035 694,463 1,170,916 589,279 581,637 98.6% 97.2% 95.8% Fee/ JCPenney, (11) GL Dillard's (12) Sears, The Bon March Mervyn's Grand Teton Mall Idaho RM 29,089 172,624 323,925 525,638 520,018 5,620 95.3% 95.2% 85.7% Fee JCPenney, Falls Sears, ZCMI, The Bon March Pine Ridge Mall Pocatello RM 25,818 148,908 437,987 612,713 501,213 111,500 97.5% 96.9% 89.5% Fee/ JCPenney, (13) GL ZCMI, (14) The Bon March Sears, ShopKo Silver Lake Mall Coeur RM 20,090 97,266 217,493 334,849 327,913 6,936 97.1% 97.1% 90.1% Fee JCPenney, (7) d'Alene Sears, Emporium, Lamonts WASHINGTON - ----------- NorthTown Mall Spokane RM -- 412,255 541,209 953,464 711,072 242,392 93.9% 91.8% 85.9% Fee JCPenney, (7) (15) Sears, Mervyn's, The Bon March Emporium Spokane Valley Spokane RM 78,480 273,776 371,731 723,987 469,290 254,697 93.3% 89.7% 82.3% Fee JCPenney, Mall (7) (16) Sears, The Bon March
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RETAIL PROPERTIES (continued) OCCUPANCY AS OF 12/31/99 ------------------- FREE BASED STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER- PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS - ----------------- -------- ----- --------- --------- --------- ---------- ---------- --------- ----- ------------ ------ --------- REGIONAL MALLS (continued) Three Rivers Mall Kelso RM 246,890 126,687 188,076 561,653 379,772 181,881 95.6% 93.4% 80.3% Fee JCPenney, (7) (17) Sears, The Bon March Emporium Oregon - ------ Salem Center Salem RM 45,000 167,037 438,000 650,037 212,037 438,000 94.3% 82.5% 77.7% Fee/ JCPenney, (18) GL Nordstrom (19) Meier & Frank, Mervyn's WYOMING - ---------- Eastridge Mall Casper RM 17,500 264,371 289,796 571,667 495,784 75,883 91.7% 90.5% 82.1% Fee JCPenney, (20) Target, The Bon March Sears White Mountain Rock RM 26,025 105,992 208,452 340,469 340,469 -- 78.1% 78.1% 76.5% Fee JCPenney, Mall Springs Herber- gers Wal-Mart NEW MEXICO - ----------- Animas Valley Farming- RM 33,000 221,946 271,155 526,101 466,763 59,338 88.9% 87.5% 73.8% Fee JCPenney Mall ton (21) Sears, Dillard's Beall's, North Plains Mall (7) Clovis RM 19,076 81,416 195,431 295,923 292,803 3,120 63.9% 63.6% 86.7% Fee JCPenney, (22) Sears, Beall's, Mall at Sierra Vista Sierra Vista RM -- 103,386 231,918 335,304 138,812 196,492 94.3% 86.2% 81.4% Fee Dillards, (9) Cinemark Theaters, Sears CALIFORNIA - ----------- Visalia Mall Visalia RM 8,510 174,229 257,000 439,739 439,739 -- 97.8% 97.8% 94.3% Fee JCPenney, --------- --------- --------- ---------- ---------- --------- ----- ----- ----- Gotts- Subtotal chalk's Regional Malls 744,305 3,484,629 6,062,235 10,291,169 7,676,273 2,614,896 93.5% 91.2% 84.9% --------- --------- --------- ---------- ---------- --------- ----- ----- -----
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RETAIL PROPERTIES (continued) OCCUPANCY AS OF 12/31/99 ------------------- FREE BASED STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER- PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS - ----------------- -------- ----- --------- --------- --------- ---------- ---------- --------- ----- ------------ ------ --------- COMMUNITY CENTERS AND FREE-STANDING RETAIL PROPERTIES UTAH - ----- Cottonwood Square Salt CC -- 35,467 41,612 77,079 77,079 -- 87.2% 87.2% 72.1% Fee/ Albert- Lake GL sons City Fort Union Plaza Salt CC 32,968 -- -- 32,968 32,968 -- 65.1% 65.1% -- GL None Lake City Gateway Crossing Bountiful CC 35,982 65,853 174,669 276,504 146,466 130,038 82.6% 67.1% 100.0% Fee ShopKo, (22) (13) TJ Maxx Nephi Bank Nephi FR 3,590 -- -- 3,590 3,590 -- 100.0% 100.0% -- Fee None North Temple Salt CC -- 10,085 72,376 82,461 10,085 72,376 100.0% 100.0% 100.0% Fee Albert- Shops Lake (23) sons, City Rite-Aid Orem Plaza- Center Street Orem CC 15,491 18,814 62,420 96,725 91,125 5,600 97.0% 96.8% 84.6% Fee Savers, Showbiz Pizza Orem Plaza- State Street Orem CC 16,595 19,057 59,055 94,707 27,102 67,605 100.0% 100.0% 100.0% Fee Rite-Aid (24) Plaza 9400 Sandy CC 34,510 55,445 136,745 226,700 226,700 -- 100.0% 100.0% 100.0% GL Albert- sons, Fred Meyer Red Cliffs Plaza St. CC 20,023 -- 46,608 66,631 57,304 9,327 100.0% 100.0% -- Fee America's George Best Furniture Warehouse River Pointe West CC 18,522 56,120 135,707 210,349 56,120 154,229 99.2% 97.1% 97.1% Fee Albert- Plaza Jordan (25) sons, ShopKo Riverside Plaza Provo CC 10,050 11,384 156,454 177,888 174,888 3,000 99.0% 99.0% 84.8% Fee Macey's, Rite-Aid, Mac Frugals University Orem CC 33,401 38,544 128,091 200,036 199,136 900 97.0% 97.0% 84.7% Fee Burlington Crossing Coat (26), Office Max (27), CompUSA IDAHO - ----- Alameda Plaza Pocatello CC 19,049 27,346 143,946 190,341 190,341 -- 100.0% 100.0% 100.0% Fee Albert- sons, Fred Meyer Baskin Robbins Idaho FR 1,814 -- -- 1,814 1,814 -- 100.0% 100.0% -- Fee None 17th Street Falls Boise Plaza Boise CC -- -- 108,464 108,464 108,464 -- 100.0% 100.0% -- PI Burlington (28) Coat (26), Albertsons Boise Towne Boise CC 6,000 12,000 91,534 109,534 109,534 -- 100.0% 100.0% -- Fee Circuit Plaza City, Linens' n Things, Old Navy Twin Falls Twin CC -- 37,680 -- 37,680 37,680 -- 100.0% 100.0% -- Fee None(29) Crossing Falls Yellowstone Idaho CC 18,419 36,923 166,733 222,075 220,275 1,800 84.6% 84.5% 55.8% PI Albert- Square Falls (30) sons, Fred Meyer (31)
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RETAIL PROPERTIES (continued) OCCUPANCY AS OF 12/31/99 ------------------- FREE BASED STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER- PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS - ----------------- -------- ----- --------- --------- --------- ---------- ---------- --------- ----- ------ ----- ------ --------- COMMUNITY CENTERS AND FREE-STANDING RETAIL PROPERTIES OREGON - ------ Bailey Hills Eugene CC 12,000 11,895 155,000 178,895 11,895 167,000 100.0% 100.0% 100.0% Fee Safeway, Plaza (32) ShopKo Division Crossing Portland CC 2,589 24,091 67,960 94,640 92,051 2,589 95.0% 94.9% 80.5% Fee Thirtfway, Rite-Aid Halsey Crossing Gresham CC 7,267 39,342 52,764 99,373 99,373 -- 93.6% 93.6% 83.8% GL Safeway NEVADA - ------- Fremont Plaza Las CC 6,542 19,648 77,348 103,538 103,538 -- 100.0% 100.0% 100.0% GL Smith's Vegas Food & Drug, Sav-On Drug Plaza 800 Sparks CC 5,985 21,821 139,607 167,413 167,413 -- 100.0% 100.0% 100.0% GL Albert- sons, ShopKo COLORADO - --------- Austin Bluffs Colorado CC 9,447 35,859 71,543 116,849 78,902 37,947 100.0% 100.0% 100.0% Fee Albert- Plaza Springs (33) sons, Longs Drug ARIZONA - ------- Fry's Shopping Glendale CC 8,564 38,781 71,919 119,264 119,264 -- 100.0% 100.0% 100.0% Fee Fry's Plaza Foods Woodlands Village Flagstaff CC 4,020 43,380 146,898 194,298 91,858 102,440 98.9% 97.7% 95.1% Fee Bashas', (10) Wal-Mart CALIFORNIA - ---------- Anaheim Plaza Anaheim CC 10,000 -- 67,433 77,433 77,433 -- 12.9% 12.9% -- PI (22) (34) --------- --------- --------- ---------- ---------- --------- ----- ----- ----- Subtotal Community Centers 332,828 659,535 2,374,886 3,367,249 2,612,398 754,851 94.2% 92.5% 92.2% --------- --------- --------- ---------- ---------- --------- ----- ----- ----- Total Retail Properties 1,077,133 4,144,164 8,437,121 13,658,418 10,288,671 3,369,747 93.6% 91.6% 86.0% ========= ========= ========= ========== ========== ========= ===== ===== =====
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RETAIL PROPERTIES (CONTINUED) (1) Property type definitions are as follows: Regional Mall--RM, Community Centers--CC, Free-standing Retail Properties--FR. (2) Freestanding stores means leasable buildings or other structures located on a property which are not physically attached to a mall or community center. (3) Tenant shops means non-anchor retail stores located in a mall or community center. (4) Represents Operating Partnership-owned leasable area and tenant-owned leasable area within the Properties. (5) Represents Operating Partnership-owned leasable area within the Properties. (6) Ownership type definitions are as follows: Fee, Ground lease-GL and Partnership Interest-PI. (7) Secured Property as of December 31, 1999. (8) The Operating Partnership owns a ground lease on one-half acre. (9) Tenant-owned space at this Property includes Dillard's and Sears. (10) Tenant-owned space at this Property includes Wal-Mart. (11) Tenant-owned space at this Property includes Dillard's, JCPenney, Sears and Mervyn's. (12) The Operating Partnership owns a ground lease on two acres. (13) Tenant owned space at this Property includes ShopKo. (14) The Operating Partnership owns two ground leases on 7.3 acres and 1.2 acres. (15) Tenant-owned space at this Property includes Sears and Mervyn's. (16) Tenant-owned space at this Property includes Sears and The Bon March (17) Tenant-owned space at this Property includes Target and Top Foods. (18) Tenant-owned space at this Property includes JCPenney, Mervyn's, Nordstrom and Meier & Frank. (19) The Operating Partnership owns 2.35 acres in fee and also owns seven ground leases on 1.58 acres. (20) Tenant-owned space at this Property includes Target. (21) Tenant-owned space at this Property includes property owned by a third party that is vacant. (22) Anchor space is vacant as of December 31, 1999. (23) Tenant-owned space at this Property includes Albertsons and Rite Aid. (24) Tenant-owned space at this Property includes Rite Aid. (25) Tenant-owned space at this Property includes Albertsons and ShopKo. (26) The Operating Partnership's lease is with Fred Meyer which subleases the Property space to Burlington Coat. (27) The Operating Partnership's lease is with Fred Meyer which subleases the space to Burlington Coat. 33.6% of the space represented by the Burlington Coat sublease is further subleased to Office Max. (28) The Operating Partnership's ownership represents a 73.3% partnership interest in the current fee holder of the Property. (29) The Operating Partnership's lease subleases the Property to several other retailers. (30) The Operating Partnership's ownership represents a 83.5% partnership interest in the current fee holder of the Property. (31) Fred Meyer is paying rent but not occupying the space. The lease ends in November 2002. (32) Tenant-owned space at this Property includes Safeway and ShopKo. (33) Tenant-owned space at this Property includes Longs Drugs. (34) The Operating Partnership's ownership interest represents a 50% partnership interest in the current ground lease holder of the Property. 8
COMMERCIAL PROPERTIES OCCUPANCY PROPERTY GLA BASED ON OWNERSHIP PROPERTY LOCATION TYPE (1) (SQ. FT.) GLA TYPE - ----------------------------------------- ------------------- --------- ------------- ---------------- ------------- UTAH - ---- Price Business Center-Pioneer Square Salt Lake City BP 497,892 89.9% Fee Price Business Center-South Main Salt Lake City BP 112,963 94.0% Fee Price Business Center-Timesquare Salt Lake City BP 289,423 90.3% Fee Sears-Eastbay Provo CP 48,880 100.0% Fee Price Business Center-Commerce Park West Valley City BP 393,360 100.0% Fee IDAHO Boise - ----- Boise/FSB Plaza CP 11,058 38.6% Fee ------------- ---------------- 1,353,576 93.2% ============= ================
- ------------------- (1) Property type definitions are as follows: Business Park--BP, Commercial Property--CP. SIGNIFICANT PROPERTIES Boise Towne Square contributed approximately 10% of the Company's total rental revenue (i.e. minimum rents plus percentage rents ("Rental Revenue")) for the year ended December 31, 1999. Additionally, NorthTown Mall comprised in excess of 10% of the book value of Company assets and total Rental Revenue for the year ended December 31, 1999. Certain additional information relating to these Properties is set forth below. BOISE TOWNE SQUARE Boise Towne Square is centrally located in Boise, Idaho adjacent to the main thoroughfare of the city. Boise Towne Square was opened by the Predecessor Companies in October of 1988. Boise Towne Square is the dominant regional mall in its trade area, with several community centers as its major competition. The Company completed in August 1998, a 294,804 square foot expansion of Boise Towne Square. The project added 186,500 square feet of Total GLA for Dillard's, approximately 44,900 square feet of GLA for the expansion of The Bon March and approximately 63,400 square feet of GLA for additional shops. The Company leases approximately two acres of land which are utilized for perimeter parking and landscaping from Union Pacific Railroad Company on a year-to-year basis from December 1 to November 30 at a current rental rate of $25,000 per year. Boise Towne Square is part of the collateral of the notes secured by real estate, bearing interest at a fixed 6.37% per annum, and the Company believes it is adequately insured. Depreciation and amortization are taken utilizing the straight-line method over a period of 10 - 40 years with a net book basis of approximately $47,833,000, $44,720,000 and $31,301,000 at December 31, 1999, 1998 and 1997, respectively. It is the Company's policy to renovate, expand and upgrade as warranted by market conditions. As of December 31, 1999, 1998 and 1997, Boise Towne Square was 99%, 98% and 98% leased, respectively, with an average annual rent from shop tenants per square foot of $22.77, $22.26 and $19.93 for the years ended on those respective dates. Three department stores, JCPenney, Dillard's and the Bon March, are the only tenants which occupy 10% or more of Total GLA at this Property. JCPenney and Dillard's own their own land and buildings and are subject to a Construction, Operation and Reciprocal Easement Agreement that expires in 2078, while The Bon March's lease is for a term of 20 years, expiring in 2008, with two 20-year extension options. 9 Boise Towne Square's leases will expire on the following schedule:
AVERAGE PERCENTAGE OF GLA ANNUALIZED REPRESENTED BY EXPIRING LEASES ------------------------------ ANNUALIZED BASE RENT PER ASSUMING NO ASSUMING FULL NUMBER APPROXIMATE BASE RENT SQ. FT. UNDER EXERCISE OF EXERCISE OF LEASE EXPIRATION OF LEASES GLA UNDER EXPIRING RENEWAL RENEWAL YEAR ENDING DECEMBER 31, (1) EXPIRING SQUARE FEET EXPIRING LEASES OPTIONS OPTIONS - --------------------------- --------- ----------- ----------- ------------- -------------- -------------- 2000 23 42,092 $ 909,038 $ 21.60 7.14% 5.92% 2001 10 23,145 437,824 18.92 3.93% 3.82% 2002 11 17,315 287,968 16.63 2.94% 1.83% 2003 18 29,353 670,747 22.85 4.98% 4.49% 2004 12 39,078 690,975 17.68 6.63% 3.73% 2005 4 12,251 208,843 17.05 2.08% 2.08% 2006 7 19,541 362,979 18.58 3.32% 2.29% 2007 4 9,249 227,900 24.64 1.57% 1.57% 2008 22 214,328 2,089,711 9.75 36.37% 5.72% 2009 and thereafter 41 119,812 2,926,947 24.43 20.33% 16.50% --------- ----------- -------------- ------------ Total 152 526,164 89.29% 47.95% ========= =========== ============== ============
- -------------------------- (1) Table excludes tenants paying percentage rents in lieu of minimum rents. 10 NORTHTOWN MALL On August 6, 1998, the Company purchased NorthTown Mall, a two-level 949,880 square foot regional mall, located in Spokane, Washington. NorthTown Mall is Spokane's largest mall with competition coming from the Company's Spokane Valley Mall as well as one other mall and several community centers. As of December 31, 1999 and 1998, the mall was 94% and 91% leased, respectively, with an average annual rent from shop tenants per square foot of $29.47 for the year ended December 31, 1999. Two department stores, JCPenney and Sears, are the only tenants which occupy 10% or more of Total GLA at this Property. Sears owns its own land and buildings and is subject to a Construction, Operation and Reciprocal Easement Agreement that expires in 2040, while JCPenney's lease is for a term of 20 years, expiring in 2011 with six five-year extension options. NorthTown Mall is financed in part by a first mortgage. The balance at December 31, 1999 and 1998 on the first mortgage was $83,382,000 and $84,277,000, respectively. Depreciation and amortization are taken utilizing the straight-line method over a period of 10 - 40 years with a net book basis of approximately $135,183,000 and $126,126,000, at December 31, 1999 and 1998, respectively. The Company is currently constructing a 100,000 square feet expansion at NorthTown Mall, which is expected to be completed in the third quarter of 2000. It is the Company's policy to renovate, expand and upgrade as warranted by market conditions. NorthTown Mall's leases will expire on the following schedule:
AVERAGE PERCENTAGE OF GLA ANNUALIZED REPRESENTED BY EXPIRING LEASES ------------------------------ ANNUALIZED BASE RENT PER ASSUMING NO ASSUMING FULL NUMBER APPROXIMATE BASE RENT SQ. FT. UNDER EXERCISE OF EXERCISE OF LEASE EXPIRATION OF LEASES GLA UNDER EXPIRING RENEWAL RENEWAL YEAR ENDING DECEMBER 31, (1) EXPIRING SQUARE FEET EXPIRING LEASES OPTIONS OPTIONS - --------------------------- --------- ----------- ----------- ------------- -------------- ------------- 2000 10 16,132 $ 395,674 $ 24.53 2.27% 2.27% 2001 22 25,496 819,833 32.16 3.59% 3.48% 2002 27 80,294 1,575,141 19.62 11.29% 10.99% 2003 14 21,006 608,234 28.96 2.95% 2.95% 2004 14 32,339 756,357 23.39 4.55% 4.55% 2005 10 19,956 609,476 30.54 2.81% 2.81% 2006 10 22,283 691,066 31.01 3.13% 3.13% 2007 11 28,246 825,772 29.24 3.97% 3.97% 2008 2 3,957 97,500 24.64 .56% .56% 2009 and thereafter 16 354,930 2,786,740 7.85 49.91% 7.23% --------- ----------- -------------- ------------- Total 136 604,639 85.03% 41.94% ========= =========== ============== =============
- ------------------------- (1) Table excludes tenants paying percentage rents in lieu of minimum rents. 11 THE OPERATING PARTNERSHIP'S LARGEST TENANTS Large stores (over 20,000 square feet per store) occupy 61.53% of the Total GLA of the Company's regional malls and community centers. The Company's largest tenants include JCPenney, Sears, The Bon March, Dillard's, ZCMI, Wal-Mart, Mervyns, Meier & Frank, The Emporium, Gottschalk's, ShopKo, Albertsons, Fred Meyer and Burlington Coat. No tenant represented more than 4.37% of the Company's total Rental Revenues for the year ended December 31, 1999. ANCHORS Regional malls and community centers usually contain one or more large retail companies known as "anchors." Anchors, which include traditional department stores, general merchandise stores, large fashion specialty stores, value oriented specialty stores and discount stores, usually inventory a broad range of products that appeal to many shoppers. Anchors either own their own stores (and sufficient parking) or lease their stores from the owner of the mall or center. Although the rent and other charges paid by anchors are usually much less (on a per square foot basis) than the rent and other charges paid by other tenants, their presence typically attracts many shoppers and enhances the value of a mall or community center. Anchor tenants in the regional malls include: JCPenney, Sears, The Bon March, Dillard's, ZCMI, Mervyn's, Wal-Mart, Meier & Frank, The Emporium, Gottschalk's, ShopKo, Cinemark Theaters, Lamonts, Target and Nordstrom. Anchors in the regional malls occupy 58.9% of Total GLA of the regional malls. The following table summarizes the Total GLA owned and leased as of December 31, 1999 by these anchors:
COMPANY- COMPANY- OWNED NUMBER OF OWNED ANCHOR ANCHOR SPACES ANCHOR SQUARE ANCHOR-OWNED TOTAL GLA PERCENT AS % OF ANCHOR STORES FEET SQUARE FEET SQUARE FEET TOTAL GLA REVENUE (1) - -------------------------- ---------- -------------- ---------------- --------------- ---------------- -------------- JCPenney 17 1,205,146 243,591 1,448,737 9.65% 4.37% Sears 13 546,847 611,001 1,157,848 7.71% 2.10% The Bon March 7 499,927 120,420 620,347 4.13% 2.94% Dillard's 4 72,212 493,863 566,075 3.77% * ZCMI 5 562,754 -- 562,754 3.75% 1.64% Mervyn's 3 -- 241,560 241,560 1.61% -- Wal-Mart 2 86,944 114,271 201,215 1.34% * Meier & Frank 1 -- 183,500 183,500 1.22% -- The Emporium 3 153,003 -- 153,003 1.02% * Gottschalk's 1 150,000 -- 150,000 1.00% * ShopKo 1 -- 111,500 111,500 .74% -- Cinemark Theaters 2 109,416 -- 109,416 .73% * Lamonts 2 80,953 -- 80,953 .54% * Target 1 -- 75,883 75,883 .51% -- Nordstrom 1 -- 72,000 72,000 .48% --
- -------------------------- * Less than 1% (1) Revenue defined as minimum rents plus percentage rents 12 Anchor tenants occupying the greatest amount of Total GLA in the Company's community centers are ShopKo, Albertsons, Fred Meyer, Burlington Coat, Rite Aid, Safeway, Wal-Mart and Macey's. Anchors in the community centers occupy approximately 70.5% of Total GLA of the community centers. The following table summarizes the Total GLA owned and leased as of December 31, 1999 by these anchors:
COMPANY- ANCHOR- ANCHOR OWNED NUMBER COMPANY- OWNED TOTAL GLA PERCENT ANCHOR SPACES OF ANCHOR OWNED SQUARE SQUARE FEET TOATL AS % OF ANCHOR STORES SQUARE FEET FEET ANCHOR SPACES GLA REVENUE - -------------------------------- --------- -------------- ---------- --------------- --------- --------------- ShopKo 4 104,000 297,140 401,140 2.67% * Albertsons 9 269,098 82,663 351,761 2.34% * Fred Meyer 3 309,944 -- 309,944 2.06% * Burlington Coat (2) 2 174,248 -- 174,248 1.16% * Rite Aid 4 70,583 52,080 122,663 0.82% * Safeway 2 52,764 53,000 105,764 0.70% * Wal-Mart 1 -- 102,440 102,440 0.68% -- Macey's 1 59,350 -- 59,350 0.40% *
- -------------------------- * Less than 1%. (1) Revenue defined as minimum rents plus percentage rents. (2) Sublease from Fred Meyer, Inc. MAJOR TENANTS Non-anchor tenants owned by major national retail chains lease a considerable amount of space in the Company's retail Properties. Such retail chains include: Venator Group (Footlocker, Lady Footlocker, Kids Footlocker, Northern Reflections, Afterthoughts, Champs and San Francisco Music Box), Limited Group (Lane Bryant, Lerner, Limited Express, Victoria's Secret, Bath & Body Works, Structure and Ambercrombie & Fitch), The Buckle, Eddie Bauer, Zales Corporation, Gymboree, Lenscrafters, Disney, Fred Meyer Jewelers, Millers Outpost, Waldenbooks, B. Dalton Bookseller, Barnes & Noble, Gap Stores Inc. (Gap, Gap Kids, Baby Gap, Gap Body, Old Navy and Banana Republic), General Mills (Olive Garden and Red Lobster), Deb Shops, Regis, Maurices, Famous Footwear, Pearle Vision, Radio Shack, Kay-Bee Toys, Claire's Boutique, Schubach Jewelers, Helzberg, Ben Bridge, Camelot Music, Musicland (Sam Goody, Musicland and Sun Coast Pictures), Sole Outdoors, Finish Line, Foot Action, Ann Taylor, Natural Wonders, Hallmark, American Greetings, Contempo Casuals, Payless Shoesource, Ritz Camera, Motherhood Maternity, GNC, Wet Seal, Brookstone, Vista Optical and Couch House. LEASES Most of the Company's leases are long-term leases that contain fixed base rents and step-ups in rent typically occurring every three to five years. These leases generally pass through to the tenant such tenant's share of common area charges, including insurance costs and real estate taxes. Generally, all of the regional mall leases and certain of the community center leases include roof and structure repair costs in common area charges. The Company's leases also generally provide for additional rents based on a percentage of tenant sales. For the years ended December 31, 1999, 1998 and 1997, such percentage and overage rents accounted for approximately 4.8%, 5.4%, and 6.1%, respectively, of total Rental Revenue from the Properties owned by the Company during such periods. 13 The following table sets forth information relating to the Rental Revenue from the Properties for the periods indicated:
YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------------------------- PROPERTY TYPE 1999 1998 1997 1996 1995 - ------------------------------ ------------- -------------- --------------- --------------- ---------------- (Dollars in thousands) Regional Malls $ 79,218 $ 62,673 $ 44,005 $ 36,286 $ 29,299 Community Centers and Free-Standing Retail Properties 16,999 14,718 13,192 13,591 12,173 Commercial Properties 6,518 6,548 6,323 6,631 5,633 ------------- -------------- --------------- --------------- ---------------- Total $ 102,735 $ 83,939 $ 63,520 $ 56,508 $ 47,105 ============= ============== =============== =============== ================
VACANT SPACE Approximately 961,000 square feet or 6.4% of Total GLA was vacant as of December 31, 1999. Of this vacant space, approximately 673,000 square feet was in the regional mall portfolio (21.6% of which is anchor and 78.4% of which is mall shop space), 196,000 square feet was in the community center portfolio and 92,000 square feet was in the commercial portfolio. The following tables set forth information relating to lease expirations for retail stores in the regional malls and community centers as well as commercial property leases in effect as of December 31, 1999 over the ten-year period commencing January 1, 2000 and thereafter for large stores (over 20,000 square feet) and small stores (20,000 square feet or less) at the retail Properties and for all leases at the commercial Properties. Unless otherwise indicated, all information set forth below assumes that none of the tenants exercise renewal options and excludes leases that had not commenced as of December 31, 1999. 14
REGIONAL MALLS Lease Expirations for Retail Store Leases (over 20,000 square feet) AVERAGE ANNUALIZED ANNUALIZED BASE BASE RENT PER SQUARE LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER YEAR ENDING LEASES GLA IN EXPIRING EXPIRING DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1) - ----------------------------------- -------------- --------------- ------------- ------------------ 2000 -- -- $ -- $ -- 2001 4 212,118 616,346 2.91 2002 4 189,375 817,984 4.32 2003 3 106,613 330,302 3.10 2004 4 328,748 768,601 2.34 2005 1 33,421 111,605 3.34 2006 2 147,560 440,236 2.98 2007 1 50,061 222,992 4.45 2008 4 385,466 1,661,205 4.31 2009 and thereafter 25 2,042,558 10,663,310 5.22 -------------- --------------- Total 48 3,495,920 ============== ===============
REGIONAL MALLS Lease Expirations for Retail Store Leases (20,000 square feet or less) AVERAGE ANNUALIZED ANNUALIZED BASE BASE RENT PER SQUARE LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER YEAR ENDING LEASES GLA IN EXPIRING EXPIRING DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1) - ----------------------------------- -------------- --------------- ------------- ------------------ 2000 148 249,818 $ 4,243,572 $ 16.99 2001 132 247,427 4,002,370 16.18 2002 144 291,890 4,969,568 17.03 2003 106 217,477 3,858,692 17.74 2004 114 277,294 4,843,109 17.47 2005 71 160,806 3,539,309 22.01 2006 65 154,460 3,527,866 22.84 2007 94 218,649 5,193,045 23.75 2008 113 295,855 6,086,232 20.57 2009 and thereafter 186 634,582 12,234,121 19.28 -------------- --------------- Total 1,173 2,748,258 ============== ===============
- ------------------------ (1) Excludes tenants paying percentage rents in lieu of minimum rents. 15
COMMUNITY CENTERS Lease Expirations for Retail Store Leases (over 20,000 square feet) AVERAGE ANNUALIZED BASE ANNUALIZED BASE RENT PER SQUARE LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER YEAR ENDING LEASES GLA IN EXPIRING EXPIRING DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1) - ----------------------------------- -------------- --------------- ------------- ------------------ 2000 1 40,320 $ 162,288 $ 4.03 2001 4 323,260 749,011 2.32 2002 2 133,861 343,645 2.57 2003 6 246,867 751,486 3.04 2004 1 25,525 37,956 1.49 2005 1 43,118 70,246 1.63 2006 1 37,680 122,460 3.25 2007 2 90,960 120,000 1.32 2008 1 41,612 139,761 3.36 2009 and thereafter 14 502,475 3,828,481 7.62 -------------- --------------- Total 33 1,485,678 ============== ===============
COMMUNITY CENTERS Lease Expirations for Retail Store Leases (20,000 square feet or less) AVERAGE ANNUALIZED ANNUALIZED BASE BASE RENT PER SQUARE LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER YEAR ENDING LEASES GLA IN EXPIRING EXPIRING DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1) - ----------------------------------- -------------- --------------- ------------- ------------------ 2000 44 97,753 $ 1,074,260 $ 10.99 2001 55 130,036 1,309,274 10.07 2002 40 111,434 1,016,478 9.12 2003 25 94,923 1,094,947 11.54 2004 34 92,479 1,243,582 13.45 2005 5 21,826 250,308 11.47 2006 8 36,235 464,925 12.83 2007 3 9,363 115,143 12.30 2008 3 7,352 127,727 17.37 2009 and thereafter 14 83,521 1,231,307 14.74 -------------- --------------- Total 231 684,922 ============== ===============
- -------------------------- (1) Excludes tenants paying percentage rents in lieu of minimum rents. 16
LEASE EXPIRATIONS FOR COMMERCIAL PROPERTIES AVERAGE ANNUALIZED ANNUALIZED BASE BASE RENT PER SQUARE LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER YEAR ENDING LEASES GLA IN EXPIRING EXPIRING DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1) - ----------------------------------- -------------- --------------- ------------- ------------------ 2000 15 439,934 $ 2,272,404 $ 5.17 2001 7 56,215 354,027 6.30 2002 9 163,585 1,173,975 7.18 2003 6 171,275 723,061 4.22 2004 11 224,746 1,318,004 5.86 2005 -- -- -- -- 2006 -- -- -- -- 2007 -- -- -- -- 2008 -- -- -- -- 2009 and thereafter 1 72,133 375,638 5.21 -------------- --------------- Total 49 1,127,888 ============== ===============
- --------------------- (1) Excludes tenants paying percentage rents in lieu of minimum rents. As leases expire, the Company currently expects to be able to increase Rental Revenue by re-leasing the underlying space (either to a new tenant or to an existing tenant) at rental rates that are at or higher than the existing rates. OPERATIONS AND MANAGEMENT The Company performs all property management functions for the Properties. At December 31, 1999, the Company had 353 full-time employees devoted exclusively to property management. Each of the regional malls has on- site management and maintenance personnel as well as a marketing staff to assist the mall tenants in promoting and advertising their products. Overall supervision of mall operations, headed by a Director of Enclosed Malls, is conducted in a centralized fashion in order to take advantage of economies of scale and to deliver a uniform presentation of all management functions. The Company's internal property management information system enables it to quickly determine tenant status, tenant gross sales, insurance, and other critical information in order to effectively manage the affairs of its real property portfolio. The data collected regarding percentage sales allows the Company to predict sales, to retain tenants and enhance mall stability. The Leasing/Development Department is responsible for maintaining relationships with tenants that afford the Company opportunities for new development and expansion. The Company conducts an active program of leasing, within the common area space of its malls and community centers, kiosks and other promotional displays on a seasonal basis. In addition to increased customer traffic, this approach generates additional revenue for the Company. The Company's property management efforts will continue to be directed toward improving the attractiveness and appeal of its retail Properties and providing a pleasant shopping environment in order to increase overall tenant sales and rents. The Company strives to meet the needs of its tenants in the areas of promotion, marketing and ongoing management of its Properties and seeks to bring together a sufficient critical mass of complementary upscale and brand-name tenants. As part of its Property management efforts, the Company monitors tenant mix, store size, sales results and store locations, and works closely with tenants to improve the overall performance of their stores. The Company seeks to anticipate trends in the retailing industry and introduce new retail names and concepts into its retail Properties in response to these trends. The Company maintains its malls and community centers to very high standards and believes that the aesthetics, ambiance and cleanliness of these Properties contribute to repeat visits by customers. 17 DEVELOPMENTS Since 1976, the Company and the Predecessor Companies have been responsible for developing more retail malls in the region covered by Utah, Idaho, Colorado, Nevada, New Mexico and Wyoming than any other developer, having constructed, developed or redeveloped 12 malls in this region (as well as four other malls in Arizona, Oregon and Washington). The Company maintains the in-house capability to bring a project from concept to completion. The Leasing/Development Department had a total of 30 full-time employees at December 31, 1999, including directors of Leasing, Development, Tenant Coordination and Design/Drafting. The Operating Partnership developed the Mall at Sierra Vista, an enclosed regional mall in Sierra Vista, Arizona. The mall held its grand opening on October 20, 1999 and added approximately 335,000 square feet of Total GLA to the Company's existing portfolio. The Mall at Sierra Vista is anchored by Dillard's, Sears and Cinemark Theaters and includes space for approximately 48 mall shops. The Operating Partnership developed Provo Towne Centre, an enclosed regional mall in Provo, Utah. The mall held its grand opening on October 28, 1998 and added approximately 723,000 square feet of Total GLA to the Company's existing portfolio as of December 31, 1998. Provo Towne Centre is anchored by Dillard's, JCPenney, Sears and Cinemark Theaters and includes space for more than 80 mall shops. On November 11, 1999, the mall held a grand opening for its sixteen screen Cinemark Theater which added approximately 74,000 square feet of additional GLA. During 1999, the Operating Partnership developed an additional building at Halsey Crossing, a community center in Gresham, Oregon, and added approximately 16,300 square feet of GLA to this community center. During 1999, the Company also added approximately 18,000 square feet of GLA at Boise Towne Plaza in Boise, Idaho, approximately 12,500 square feet of GLA at Spokane Valley Mall in Spokane, Washington and approximately 34,200 square feet of Total GLA for Guesthouse Inn at Three Rivers Mall in Kelso, Washington. The Operating Partnership, through its consolidated partnership Price Spokane, Limited Partnership, has initiated the expansion of NorthTown Mall, an enclosed regional mall in Spokane, Washington. The project will be funded by the Company's $200 million unsecured credit facility and is expected to be completed in the third quarter of 2000 which will add approximately 100,000 square feet of additional GLA. Additionally, the Company is currently contemplating the expansion and renovation of several other of its Properties as well as other developments and acquisitions. Further, the Properties contain approximately 108 acres of vacant land suitable for additional retail expansion projects. Likewise, the Properties include additional improved land ready for development of approximately 273,100 square feet of free- standing retail space. The Company will seek to expand these and other Properties in its retail portfolio, as well as newly acquired properties, depending on tenant demand and market conditions. THIRD-PARTY PROPERTY MANAGEMENT The Company provides third-party property management for two office buildings, one located in Salt Lake City, Utah, and one in Park City, Utah, five commercial buildings located in Albuquerque, New Mexico, Creve Coeur, Missouri, Dallas, Texas, Escondido, California, Houston, Texas and Silver Lake Plaza, a community center, located in Coeur d'Alene, Idaho. In addition to these arrangements, the Company plans to pursue other property management opportunities. Because property management facilitates an understanding of a property's value and potential for cash flow growth, the Company believes that, in addition to generating property management fees, third-party property management arrangements can be a source of future acquisitions for the Company. For example, the Company was the property manager for Eastridge Mall and Silver Lake Mall prior to their acquisitions by the Company. EMPLOYEES The Operating Partnership, which is managed by the Company as sole general partner, does not have any employees. The Company had approximately 440 full-time employees and approximately 160 part-time employees at December 31, 1999. The Company believes its relationship with its employees is very good. None of the Company's employees are unionized. 18 ITEM 3. LEGAL PROCEEDINGS The Operating Partnership is not aware of any pending or threatened litigation at this time that will have a materially adverse effect on the Company, the Operating Partnership or any of the Properties or its development parcels. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the limited partners of the Operating Partnership during the fourth quarter period covered by this report. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS At December 31, 1999, there was no established public trading market for the Operating Partnership's common units of limited partner interest ("OP Units"), Series A Preferred Units or Series B Preferred Units. As of March 22, 2000, there were 61 holders of OP Units, 1 holder of Series A Preferred Units and 2 holders of Series B Preferred Units. The following table sets forth the distributions declared per OP Unit for each of the quarters presented:
Distributions Declared Per OP Unit -------------- YEAR ENDED 12/31/98 First Quarter $ .450 Second Quarter .450 Third Quarter .450 Fourth Quarter .465 YEAR ENDED 12/31/99 First Quarter $ .465 Second Quarter .465 Third Quarter .465 Fourth Quarter .480
During 1999 and 1998, the Operating Partnership recorded regular quarterly distributions to common unitholders totaling $39,615,000 and $38,609,000, respectively, or $1.875 and $1.815 per OP Unit, respectively. On behalf of the Operating Partnership, the Board of Directors of the Company has declared a quarterly distribution, payable to holders of OP Units of record as of April 6, 2000, of $.48 per OP Unit which is an amount equivalent to an annual distribution of $1.92 per OP Unit. Future distributions will be determined by the Board of Directors of the Company, the general partner of the Operating Partnership, and will be dependent upon cash available for distribution, financial position and cash requirements of the Company and the Operating Partnership. The Operating Partnership makes quarterly distributions to the Series A and Series B preferred unitholders on the last day of each March, June, September and December. For the year ended December 31, 1999, distributions for the Series A Preferred Units and Series B Preferred Units were $768,000 and $3,661,000, respectively. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial and other data for the Operating Partnership for the years ended December 31, 1999, 1998, 1997, 1996 and 1995. The historical financial information for all the periods have been derived from the audited historical consolidated financial statements. 19 The following selected financial information should be read in conjunction with all of the financial statements included elsewhere herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations." SELECTED FINANCIAL DATA (Dollars in thousands except per share amounts)
1999 1998 1997 1996 1995 ------------ ------------ ------------- ------------ -------------- Revenues $ 133,565 $ 109,069 $ 82,973 $ 72,949 $ 60,950 ------------ ------------ ------------- ------------ -------------- Expenses Operating Expenses before Interest, Depreciation and Amortization 43,620 36,088 27,434 24,405 20,389 Interest 27,769 20,501 9,066 7,776 6,623 Depreciation and Amortization 25,798 19,543 13,410 11,979 11,528 ------------ ------------ ------------- ------------ -------------- Total 97,187 76,132 49,910 44,160 38,540 ------------ ------------ ------------- ------------ -------------- 36,378 32,937 33,063 28,789 22,410 Minority Interest in Income of Consolidated Partnerships (482) (421) (394) (389) (421) Equity in Net Loss of Partnership -- -- -- -- (184) Interest Gain on Sales of Real Estate -- 1,096 339 94 918 ------------ ------------ ------------- ------------ -------------- Income Before Extraordinary Item 35,896 33,612 33,008 28,494 22,723 Extraordinary Item - Loss on Early Extinguishment of Debt (985) -- (162) -- -- ------------ ------------ ------------- ------------ -------------- Net Income 34,911 33,612 32,846 28,494 22,723 Preferred Unit Distribution (4,429) -- -- -- -- ------------ ------------ ------------- ------------ -------------- Net Income Available to Common $ 30,482 $ 33,612 $ 32,846 $ 28,494 $ 22,723 ============ ============ ============= ============ ============== Unitholders Basic Earnings Per OP Unit (1): Income Before Extraordinary Item $ 1.48 $ 1.58 $ 1.57 $ 1.45 $ 1.26 Extraordinary Item (0.04) -- (0.01) -- -- ------------ ------------ ------------- ------------ -------------- Net Income $ 1.44 $ 1.58 $ 1.56 $ 1.45 $ 1.26 ============ ============ ============= ============ ============== Diluted Earnings Per OP Unit (1): Income Before Extraordinary Item $ 1.48 $ 1.57 $ 1.55 $ 1.44 $ 1.26 Extraordinary Item (0.05) -- (0.01) -- -- ------------ ------------ ------------- ------------ -------------- Net Income $ 1.43 $ 1.57 $ 1.54 $ 1.44 $ 1.26 ============ ============ ============= ============ ============== Distributions per OP Unit $ 1.875 $ 1.815 $ 1.755 $ 1.695 $ 1.635 ============ ============ ============= ============ ==============
BALANCE SHEET DATA Real Estate, before Accumulated Depreciation $ 876,388 $ 815,756 $ 619,371 $ 453,241 $ 388,205 Total Assets 776,226 733,155 545,684 381,360 327,061 Borrowings 438,241 472,990 283,390 162,375 106,406 Partners' Capital General Partner 182,951 204,384 207,581 172,286 175,604 Preferred Limited Partner 104,571 -- -- -- -- Common Limited Partner 30,471 32,537 33,426 32,380 34,138 OTHER DATA Funds From Operations (2) 53,880 50,397 45,028 39,195 32,139 Net Operating Income 89,945 72,981 55,539 48,544 40,561
20
NUMBER OF PROPERTIES/TOTAL GLA AT DECEMBER 31, 1999 1998 1997 1996 1995 ------------- ------------ ------------ ------------ ------------- Number of Properties at Year-End 51 50 48 44 43 ============= ============ ============ ============ ============= Total GLA in Square Feet at Year-End: Malls 10,291,000 9,810,000 7,745,000 5,553,000 5,020,000 Community Centers and Free-Standing Retail Properties 3,367,000 3,191,000 3,164,000 3,091,000 3,091,000 Commercial Properties 1,354,000 1,354,000 1,418,000 1,418,000 1,394,000 ------------- ------------ ------------ ------------ ------------- Total 15,012,000 14,355,000 12,327,000 10,062,000 9,505,000 ============= ============ ============ ============ =============
- ------------------------- (1) Basic Earnings Per OP Unit based on 21,238,000, 21,298,000, 21,119,000, 19,668,000 and 18,037,000 weighted average number of OP Units outstanding for the years ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively. Diluted Earnings Per OP Unit based on 21,267,000, 21,401,000, 21,285,000, 19,753,000 and 18,103,000 weighted diluted average number of OP Units outstanding for years ended December 31, 1999, 1998, 1997, 1996, and 1995, respectively. (2) The Company, the general partner of the Operating Partnership, considers funds from operations to be an appropriate measure of the performance of an equity REIT. Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as "net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." While the Company believes that FFO is the most relevant and widely used measure of its operating performance, it does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indication of the Company's or the Operating Partnership's operating performance or as an alternative to cash flow as a measure of liquidity. The Company's presentation of FFO, however, may not be comparable to other similarly titled measures used by other equity REITs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." 21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read in conjunction with "Selected Financial Data" and the consolidated financial statements of the Operating Partnership and the notes thereto appearing elsewhere herein. The Company is a fully integrated, self-administered and self-managed REIT primarily engaged in the ownership, leasing, management, operation, development, redevelopment and acquisition of retail properties in the Intermountain Region, as well as in Oregon, Washington and California. The Company conducts all of its business operations through, and held an 82.2% controlling general partner interest in, the Operating Partnership as of December 31, 1999. The Company's general partner interest of the Operating Partnership was calculated using the outstanding OP Units and excludes any outstanding Series A or Series B Preferred Units. The Operating Partnership's existing portfolio consists of 51 Properties, in three operating segments, including 18 enclosed regional malls, 25 community centers together and two free-standing retail Properties and six mixed-use commercial Properties. The Operating Partnership's financial condition as of December 31, 1999 and 1998 and results of operations before depreciation for the years then ended were positively impacted by the October 20, 1999 opening of the Mall at Sierra Vista, the October 28, 1998 opening of Provo Towne Centre, the August 6, 1998 acquisition of NorthTown Mall, the December 30, 1997 acquisition of Salem Center, the June 1997 acquisitions of Silver Lake Mall and Visalia Mall and the August 13, 1997 opening of Spokane Valley Mall. The Operating Partnership's acquisition and development activities added a combined 4,757,000 square feet of Total GLA to the retail portfolio during 1999, 1998 and 1997. RESULTS OF OPERATIONS COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998 For the year ended December 31, 1999, income before extraordinary item and minority interest of unitholders in the Operating Partnership increased $2,284,000 or 7% when compared to the year ended December 31, 1998. The improvement in operations was primarily attributable to the following factors: an increase in minimum rents of $18,381,000; an increase in percentage and overage rents of $415,000; and an increase in recoveries from tenants of $5,693,000. These increases were offset by an increase in operating expenses of $7,320,000, an increase in general and administrative expense of $212,000, an increase in interest expense of $7,268,000 and an increase in depreciation and amortization of $6,255,000. For the year ended December 31, 1999, funds from operations increased $3,483,000 or 7% as compared to 1998, primarily as a result of acquisitions and developments as discussed herein. Total revenues for the year ended December 31, 1999 increased $24,496,000 or 22% to $133,565,000 as compared to $109,069,000 in 1998. This increase is primarily attributable to a $18,381,000 or 23% increase in minimum rents to $97,829,000 compared to $79,448,000 in 1998. Percentage and overage rents increased $415,000 or 9% to $4,906,000, as compared to $4,491,000 in 1998. Additionally, recoveries from tenants increased $5,693,000 or 24% to $29,471,000 as compared to $23,778,000 in 1998. Recoveries from tenants as a percentage of operating expenses were 80% in both 1999 and 1998. The October 1999 opening at the Mall at Sierra Vista, the August 1998 acquisition of NorthTown Mall, the August 1998 expansion of Boise Towne Square, the October 1998 opening of Provo Towne Centre and the October 1998 addition of Sears to Red Cliffs Mall and Sears Tire and Battery to Red Cliff Plaza contributed $12,296,000 to the minimum rent increase, $355,000 to the percentage and overage rents increase and $3,833,000 of the increase in recoveries from tenants. Minimum rents increased $1,957,000 from a non-cash transaction in which a consolidated partnership of the Operating Partnership received a building in exchange for cancellation of a long-term ground lease. The remaining $4,128,000 increase in minimum rents was the result of increases experienced for the balance of the Operating Partnership's portfolio of Properties. Revenues recognized from straight-line rents were $1,273,000 in 1999 as compared to $931,000 in 1998. Property operating expenses, including operating and maintenance expense, and real estate taxes and insurance expense increased $4,819,000 or 27% and $2,501,000 or 21%, respectively, for the year ended December 31, 1999, as compared to 1998. These increases were attributable mainly to the opening of the Mall at Sierra Vista, the acquisition of NorthTown Mall, the opening 22 of Provo Towne Centre and the expansion of Boise Towne Square. These Properties contributed $3,708,000 to operating and maintenance expense and $1,565,000 to taxes and insurance. General and administrative expenses increased $212,000 or 3% to $6,618,000 in 1999 as compared to $6,406,000 in 1998. The increase is primarily related to increased costs associated with the growth of the Company due to the acquisition of NorthTown Mall and the openings of developed Properties. Interest expense increased $7,268,000 or 35% to $27,769,000 in 1999 as compared to $20,501,000 in 1998. This increase is the result of additional interest on new borrowings for newly added GLA, the acquisition of NorthTown Mall and a decrease in capitalized interest due to completed GLA and was partially offset by the reduction of borrowings outstanding, funded by the sale of the Series A Preferred Units and the Series B Preferred Units by the Operating Partnership. Interest capitalized on projects under development was $2,404,000 in 1999 as compared to $3,754,000 in 1998. Depreciation expense increased $6,208,000 or 36% to $23,514,000 as compared to $17,306,000 in 1998. This increase was primarily due to the acquisition of NorthTown Mall, changes in asset lives on certain tenant improvements as a result of early lease terminations and increased GLA. COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997 For the year ended December 31, 1998, income before extraordinary item and minority interest of unitholders in the Operating Partnership increased $604,000 or 2% when compared to the year ended December 31, 1997. The improvement in operations was primarily attributable to the following factors: an increase in minimum rents of $19,824,000; an increase in percentage and overage rents of $595,000; an increase in recoveries from tenants of $5,579,000; and an increase in other revenues of $240,000. These increases were offset by an increase in operating expenses of $7,695,000, an increase in general and administrative expense of $959,000, an increase in interest expense of $11,435,000 and an increase in depreciation and amortization of $6,133,000. For the year ended December 31, 1998, funds from operations increased $5,369,000 or 12% as compared to 1997 primarily as a result of acquisitions and developments as discussed herein. Total revenues for the year ended December 31, 1998 increased $26,096,000 or 31% to $109,069,000 as compared to $82,973,000 in 1997. This increase is primarily attributable to a $19,824,000 or 33% increase in minimum rents to $79,448,000 in 1998 as compared to $59,624,000 in 1997. Percentage and overage rents increased $595,000 or 15% to $4,491,000 in 1998 as compared to $3,896,000 in 1997. Additionally, recoveries from tenants increased $5,579,000 or 31% to $23,778,000 in 1998 as compared to $18,199,000 in 1997 and other income increased $240,000. Recoveries from tenants as a percentage of operating expenses were 80% in 1998 as compared to 83% in 1997. The June 1997 acquisitions of Silver Lake Mall and Visalia Mall, the August 13, 1997 opening of Spokane Valley Mall, the December 30, 1997 acquisition of Salem Center, the August 6, 1998 acquisition of NorthTown Mall and the October 28, 1998 opening of Provo Towne Centre contributed $15,371,000 to the minimum rent increase, $887,000 to the percentage and overage rents increase and $4,971,000 of the increase in recoveries from tenants. The November 1997 opening of Boise Towne Plaza contributed $1,100,000 to the minimum rent increase and $139,000 to the increase in recoveries from tenants. Commercial property revenues increased $950,000 to $8,299,000 in 1998 as compared to $7,349,000 in 1997. The increase in commercial properties revenue was primarily due to new tenant leases with higher tenant recoveries offset somewhat by decreased occupancy levels. Revenues recognized from straight-line rents were $931,000 in 1998 as compared to $505,000 in 1997. Property operating expenses, including operating and maintenance expense, and real estate taxes and insurance expense increased $4,601,000 or 34% and $3,094,000 or 36%, respectively, for the year ended December 31, 1998 as compared to 1997. These increases were attributable to the acquisitions of NorthTown Mall, Salem Center, Silver Lake Mall and Visalia Mall and the opening of Spokane Valley Mall, Boise Towne Plaza and Provo Towne Centre. These Properties contributed $4,570,000 to operating and maintenance expense and $2,487,000 to taxes and insurance. General and administrative expenses increased $959,000 or 18% to $6,406,000 in 1998 as compared to $5,447,000 in 1997. The increase is primarily related to increased costs associated with the growth of the Company due to the acquisitions of NorthTown Mall, Salem Center, Silver Lake Mall and Visalia Mall and the opening of Spokane Valley Mall, Boise Towne Plaza and Provo Towne Centre. 23 Interest expense increased $11,435,000 or 126% to $20,501,000 in 1998 as compared to $9,066,000 in 1997. This increase is the result of additional interest on new borrowings to acquire NorthTown Mall, Salem Center, Silver Lake Mall and Visalia Mall and on borrowings related to Spokane Valley Mall and Provo Towne Centre. Interest capitalized on projects under development was $3,754,000 in 1998 as compared to $3,509,000 in 1997. Depreciation expense increased $5,504,000 or 47% to $17,306,000 in 1998 as compared to $11,802,000 in 1997. This increase was primarily due to the acquisition of NorthTown Mall, Salem Center, Silver Lake Mall and Visalia Mall, the opening of Spokane Valley Mall, Boise Towne Plaza and Provo Towne Centre and tenant allowances given on existing GLA. LIQUIDITY AND CAPITAL RESOURCES The Operating Partnership's principal uses of its liquidity and capital resources have historically been for distributions, property acquisitions, development, expansion and renovation programs and debt repayment. The Operating Partnership declared quarterly distributions aggregating $1.875 per OP Unit in 1999. Future distributions will be determined based on actual results of operations and cash available for distribution. The Operating Partnership's principal source of liquidity is the cash flow from operations generated from its real estate investments. As of December 31, 1999, the Operating Partnership's cash and restricted cash amounted to approximately $10.9 million. In addition to its cash and restricted cash, unused capacity under its $200 million unsecured credit facility totaled $99.5 million at year end. The Operating Partnership generally intends to distribute approximately 70% to 80% of its funds from operations with the remaining amounts to be held for capital expenditures and additional growth. The Operating Partnership expects to meet its other short-term cash requirements, including recurring capital expenditures related to maintenance and improvements of existing Properties, through undistributed funds from operations, cash balances and advances under the credit facility. The Operating Partnership prepares an annual capital expenditure and maintenance budget for each Property which includes provisions for all necessary recurring capital improvements. The Operating Partnership believes that its undistributed funds from operations will provide the necessary funding for these requirements. The Operating Partnership believes that these funds will be sufficient to cover (i) tenant finish costs associated with the renewal or replacement of current tenant leases as existing leases expire and (ii) capital expenditures which will not be reimbursed by tenants. During 1999, the Operating Partnership had capital expenditures, totaling approximately $64,869,000. This amount consists of $56,801,000 in revenue enhancing construction and development, $4,793,000 in revenue enhancing tenant allowances, $1,782,000 in non-revenue enhancing tenant allowances and $658,000 in other non-revenue enhancing capital expenditures. The Operating Partnership also paid $835,000 in leasing commissions to outside parties. Of this amount, $125,000 was considered revenue enhancing and $710,000 was considered non- revenue enhancing. Exclusive of construction and development, capital expenditures (both revenue and non-revenue enhancing) for the existing Properties are budgeted in 2000 to be approximately $7.8 million. The Operating Partnership's principal long-term liquidity requirements will be the repayment of principal on its outstanding secured and unsecured indebtedness. At December 31, 1999, the Operating Partnership's total outstanding indebtedness was approximately $438.2 million. Such indebtedness included: (i) the outstanding balance on the $200 million unsecured credit facility which equaled approximately $91 million at December 31, 1999 and is due October 2000; (ii) the $12.2 million 8.5% note secured by real estate, which requires a balloon payment of approximately $11.9 million in October 2000; (iii) the $61.2 million 6.37% notes secured by real estate which mature in January 2001; (iv) the Provo Towne Centre construction loan of approximately $43.8 million which is due in July 2001; (v) the Spokane Valley Mall construction loan of approximately $41.6 million which is due in August 2001; (vi) the $100 million senior notes principal payable at $25 million a year beginning March 2005; and (vii) the $83.4 million 6.68% first mortgage, which requires a balloon payment of approximately $73.0 million in September 2008. The Operating Partnership is also contemplating the expansion and renovation of several of its existing Properties and additional development projects and acquisitions as a means to expand its portfolio. The Operating Partnership does not expect to generate sufficient funds from operations to meet such long-term needs and intends to finance these amounts primarily through advances under the $200 million unsecured credit facility, together with equity and debt offerings and individual property financings. The availability of such financing will influence the Operating Partnership's decision to proceed with, and the pace of its development and acquisition activities. 24 On April 23, 1999, the Operating Partnership issued 510,000 Series A Preferred Units in a private placement. Each Series A Preferred Unit represents a limited partner interest with a liquidation value of twenty-five dollars per unit. The Operating Partnership used the net proceeds of approximately $12.3 million for the partial repayment of borrowings outstanding under the $200 million unsecured credit facility. On July 28, 1999, the Operating Partnership also issued 3,800,000 Series B 8.95% Preferred Units in a private placement. Each Series B Preferred Unit represents a limited partnership interest with a liquidation value of twenty-five dollars per unit. The Company used the proceeds of approximately $92 million to repay $90 million in borrowings outstanding under the $200 million unsecured credit facility and increase operating cash. Quarterly distributions to the holders of the Series A and Series B Preferred Units are due on the last day of each March, June, September and December. On September 2, 1997, the Company and the Operating Partnership filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission for the purpose of registering common stock, preferred stock, depositary shares, common stock warrants, debt securities and guarantees. This registration statement, when combined with the Company's unused portion of its previous shelf registration, allowed for up to an aggregate of $400 million of securities to be offered by the Company and the Operating Partnership. On March 11, 1998, the Operating Partnership under this registration statement, issued $100 million of ten-year senior unsecured notes bearing annual interest at a rate of 7.29%. The Operating Partnership had entered into an interest rate protection agreement in anticipation of issuing these notes and received $270,000 as a result of terminating this agreement, making the effective rate of interest on these notes at 7.24%. Interest payments are due semi annually on March 11 and September 11 of each year. Principal payments of $25 million are due annually beginning March 2005. The proceeds were used to partially repay outstanding borrowings under the $200 million unsecured credit facility. At December 31, 1999, the Company and the Operating Partnership had an aggregate of $300 million in registered securities available under its effective shelf registration statement. The Operating Partnership intends to fund its distribution, development, expansion, renovation, acquisition and debt repayment activities from its $200 million unsecured credit facility as well as other debt and equity financings, including public financings. The Operating Partnership's ratio of debt-to- total market capitalization was approximately 50% as of December 31, 1999. The Company believes that to facilitate a clear understanding of the Operating Partnership's consolidated historical operating results, the Operating Partnership's net income should be examined in conjunction with funds from operations. The Company considers funds from operations to be an appropriate measure of the performance of an equity REIT. Funds from operations ("FFO") is defined by NAREIT as "net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." While the Company believes that FFO is the most relevant and widely used measure of its operating performance, it does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indication of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. The Company's presentation of FFO, however, may not be comparable to other similarly titled measures used by other equity REITs. The Operating Partnership's calculation of FFO is as follows:
YEARS ENDED DECEMBER 31, ------------------------------------ 1999 1998 -------------- ------------- (DOLLARS IN THOUSANDS) Income Before Minority Interest, Gain on Sales of Real Estate and Extraordinary Item $ 36,378 $ 32,937 Add: Depreciation of Buildings & Improvements 23,395 17,072 Add: Amortization of Deferred Leasing Costs 632 665 Less: Minority Interest of the Preferred Unitholders (4,429) -- Less: Minority Interest in Income of Consolidated Partnerships (349) (277) Less: Minority Interest in Depreciation (769) -- Less: Income from One-Time, Lease Termination Settlement Net of Minority Interest of $979 (978) -- ------------- ------------- Funds From Operations $ 53,880 $ 50,397 ============= =============
25 YEAR 2000 ISSUES In the past, many computer software programs were written using two digits rather than four to define the applicable year. As a result, date- sensitive computer software may recognize a date using "00" as the year 1900 rather than the year 2000. This is generally referred to as the Year 2000 ("Y2K") issue. If this situation were to occur, the potential exists for computer system failures or miscalculations by computer programs, which could disrupt the Operating Partnership's operations. The Operating Partnership developed a comprehensive strategy for updating its systems for Y2K compliance. The Operating Partnership's information technology ("IT") systems include software and hardware purchased from outside vendors, as well as in-house developed software. The Operating Partnership is confident that vendor developed software and hardware has been made Y2K compliant through installing and compliance testing vendor provided Y2K updates. In-house developed software has been identified, assessed and tested. As of the date of this report, the Operating Partnership has not experienced any significant failures in its IT system as a result of the date change to the year 2000. The Operating Partnership believes that the identification of its non-IT systems which may be impacted by the Y2K problem, including those relating to property management (e.g. alarm systems and HVAC systems) has been completed, and that modifications, validation and implementation are complete. The Operating Partnership did not experience any problems in this area when the year changed to 2000 and we do not anticipate any future problems. As of December 31, 1999, the Operating Partnership has spent an aggregate of approximately $131,000 to address the Y2K issue. Costs included incremental salary and fringe benefits for personnel, hardware and software costs and consulting and travel expenses associated with addressing Y2K issues. These costs were expensed as incurred or, in the case of equipment or software replacement, were capitalized and depreciated over the expected useful life. The Operating Partnership believes additional costs related to the Y2K issues will not be material. The pervasiveness of the Y2K issue makes it likely that previously unidentified issues will require remediation during the normal course of business. In such a case, the Operating Partnership anticipates that transactions could be processed manually while IT and other systems are repaired or updated and that such interruptions would have a minor effect on the Operating Partnership's operations. INFLATION Inflation has remained relatively low during the past three years and has had minimal impact on the operating performance of the Properties. Nonetheless, substantially all of the retail tenants' leases contain provisions designed to protect the Operating Partnership from the impact of inflation. Such provisions include clauses enabling the Operating Partnership to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rents during the terms of the leases. In addition, many of the leases are for terms less than ten years, which may enable the Operating Partnership to replace existing leases with new leases at higher base and/or percentage rents if rents of the existing leases are below then-existing market rates. Substantially all of the leases, other than those for anchors, require the tenants to pay a proportionate share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Operating Partnership's exposure to increases in costs and operating expenses resulting from inflation. However, inflation may have a negative impact on some of the Operating Partnership's other operating items. Interest and general and administrative expenses may be adversely affected by inflation as these specified costs could increase at a rate higher than rents. Also, for tenant leases with specified rent increases, inflation may have a negative effect as the specified rent increases in these leases could be lower than the increase in the inflation rate at any given time. OTHER MATTERS The Operating Partnership has reviewed all recently issued, but not yet adopted accounting standards in order to determine their effects, if any, on the results of operations or financial position of the Operating Partnership. Based on that review, the Operating Partnership believes that none of these pronouncements will have a significant effect on current or future results of operations or financial position. 26 The statements contained in this Annual Report on Form 10-K that are not purely historical fact are forward looking statements including statements regarding the Operating Partnership's expectations, budgets, estimates, contemplations and Y2K compliance. All forward looking statements included in this document are based on information available to the Operating Partnership on the date hereof, and the Operating Partnership assumes no obligation to update any such forward looking statements. It is important to note that the Operating Partnership's actual results could differ materially from those in such forward looking statements. Certain factors that might cause such differences include those relating to changes in economic climate, local conditions, law and regulations, the relative illiquidity of real property investments, the potential bankruptcy of tenants and the development, redevelopment or expansion of Properties and unexpected developments surrounding the Y2K issues. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Operating Partnership's exposure to market risk is limited to fluctuations in the general level of interest rates on its current and future fixed and variable rate debt obligations. Even though its philosophy is to maintain a fairly low tolerance to interest rate fluctuation risk, the Operating Partnership is still vulnerable, however, to significant fluctuations in interest rates on its variable rate debt, on any future repricing or refinancing of its fixed rate debt and on future debt. The Operating Partnership uses long-term and medium-term debt as a source of capital. At December 31, 1999, the Operating Partnership had approximately $261,849,000 in outstanding fixed rate debt, consisting of $100,000,000 unsecured senior notes and $161,849,000 in mortgages and notes secured by real estate. The various fixed rate debt instruments mature starting in the year 2000 through 2095. The weighted average rate of interest on the fixed rate debt was approximately 7.0% for the year ended December 31, 1999. When debt instruments of this type mature, the Operating Partnership typically refinances such debt at the then-existing market interest rates which may be more or less than the interest rates on the maturing debt. In addition, the Operating Partnership may attempt to reduce interest rate risk associated with a forecasted issuance of new fixed rate debt by entering into interest rate protection agreements. The Operating Partnership has approximately $12,211,000 in fixed rate debt maturing in 2000. The Operating Partnership's credit facility and existing construction loans have variable interest rates and any fluctuation in interest rates could increase or decrease the Operating Partnership's interest expense. At December 31, 1999, the Operating Partnership had approximately $176,392,000 in outstanding variable rate debt. The weighted average rate of interest on the variable interest rate debt was approximately 6.8% for the year ended December 31, 1999. If the interest rate for the Operating Partnership's variable rate debt increased or decreased by 1% during 2000, the Operating Partnership's interest rate expense on its outstanding variable rate debt would increase or decrease, as the case may be, by approximately $1,764,000. Due to the uncertainty of fluctuations in interest rates and the specific actions that might be taken by the Operating Partnership to mitigate the impact of such fluctuations and their possible effects, the foregoing sensitivity analysis assumes no changes in the Operating Partnership's financial structure. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data are listed in the Index to Financial Statements and Financial Statement Schedules appearing on Page F-1 of this Form 10-K. 27 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. During the two most recent fiscal years, the Operating Partnership has not experienced any changes in or disagreements with its independent auditors. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Operating Partnership does not have any directors or executive officers. The Company, as the sole general partner of the Operating Partnership, controls the day-to-day operations of the Operating Partnership. Information regarding (i) the Company's Directors appears under the appropriate caption in the Company's proxy statement for its 2000 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A and (ii) the Company's Executive Officers appears in Item 4A of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The Operating Partnership does not have any equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 and, therefore, is not required to provide the information requested by Item 405 of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION The Operating Partnership does not have any directors or executive officers. The Company, as the sole general partner of the Operating Partnership, controls the day-to-day operations of the Operating Partnership. Information regarding executive compensation of the Company's Executive Officers appears under the appropriate caption in the Company's proxy statement for its 2000 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Operating Partnership does not have any voting securities or any directors or executive officers and, therefore, is not required to provide the information requested by Item 403 of Regulation S-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Operating Partnership does not have any voting securities or any directors or executive officers and, therefore, is not required to provide the information requested by Item 404 of Regulation S-K. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) and (2) Financial Statements and Financial Statements Schedules See Index to Financial Statements and Financial Statement Schedules appearing on page F-1 of this Form 10-K (b)Reports on Form 8-K None (c) Exhibits 28 EXHIBIT INDEX DESCRIPTION -----------
EXHIBIT PAGE NUMBER NUMBER - ------ ------ 4.1 Form of Debt Security (4.6)* 4.2 Indenture, dated March 11, 1998, by and between the Operating Partnership and The Chase Manhattan Bank as trustee (4.8)* 4.3 First Supplemental Indenture, dated March 11, 1998, by and between the Operating Partnership and The Chase Manhattan Bank as Trustee (4.9)* 10.1 Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership** 10.2 Agreement of Limited Partnership of Price Financing Partnership, L.P. (10(b))*** 10.3 Loan Agreements related to Mortgage Debt and related documents (10(c))*** i) Deed of Trust, Mortgage, Security Agreement and Assignment of Leases and Rents of Price Financing Partnership, L.P. ii) Intentionally Omitted iii) Indenture between Price Capital Corp. and a Trustee iv) Limited Guarantee Agreement (Guarantee of Collection) for outside investors v) Limited Guarantee Agreement (Guarantee of Collection) for Price Group Investors vi) Cash Collateral Account Security, Pledge and Assignment Agreement among Price Financing Partnership, L.P., Price Capital Corp. and Continental Bank N.A. vii) Note Issuance Agency Agreement between Price Capital Corp. and Price Financing Partnership, L.P. viii) Management and Leasing Agreement among Price Financing Partnership, L.P. and Price Development Company, Limited Partnership ix) Assignment of Management and Leasing Agreement of Price Financing Partnership, L.P. 10.6 Registration Rights Agreement among the Company and the Limited Partners of Price Development Company, Limited Partnership (10(g))*** 10.7 Amendment No. 1 to Registration Rights Agreement, dated August 1, 1995, among the Company and the Limited Partners of Price Development Company, Limited Partnership*** 10.8 Exchange Agreement among the Company and the Limited Partners of Price Development Company, Limited Partnership (10(h))*** 10.10 Amendment to Groundlease between Price Development Company and Alvin Malstrom as Trustee and C.F. Malstrom, dated December 31, 1985. (Groundlease for Plaza 9400) (10(j))*** 10.11 Lease Agreement between The Corporation of the President of the Church of Jesus Christ of Latter Day Saints and Price-James and Assumptions, dated September 24, 1979. (Groundlease for Anaheim Plaza) (10(k))*** 10.12 Indenture of Lease between Ambrose and Zelda Motta and Cordova Village, dated July 26, 1974, and Amendments and Transfers thereto. (Groundlease for Fort Union Plaza) (10(l))*** 10.13 Lease Agreement between Advance Management Corporation and Price Rentals, Inc. and dated August 1, 1975 and Amendments thereto. (Groundlease for Price Fremont) (10(m))*** 10.14 Groundlease between Aldo Rossi and Price Development Company, dated June 1, 1989, and related documents. (Groundlease for Halsey Crossing) (10(n))*** 10.15 First Amendment to Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership** 10.16 Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership** 10.17 Third Amendment to Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership**** 10.18 Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership 23. Consent of Independent Accountants 27. Financial Data Schedule
- --------------------------- * Documents were previously filed with the Operating Partnership's Current Report on Form 8-K dated March 12, 1998, under the exhibit numbered in the parenthetical, and are incorporated herein by reference. ** Documents were previously filed with the Operating Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and are incorporated herein by reference. *** Documents were previously filed with the Company's Registration Statement on Form S-11, File No. 33-68844, under the exhibit numbered in the parenthetical, and are incorporated herein by reference. ****Documents were previously filed with the Operating Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and are incorporated herein by reference. 29 ITEM 14A.SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE EXCHANGE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE EXCHANGE ACT No annual report to security holders or any proxy statement, form of proxy or other proxy soliciting material will be sent by the Registrant to security holders. 30 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP By: JP Realty, Inc., as a General Partner By: /s/ John Price -------------------------- John Price Date: March 24, 2000 Chairman of the Board of Directors and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE /s/ John Price - --------------------------- Chairman of the Board of Directors, March 24, 2000 John Price Chief Executive Officer, Director (Principal Executive Officer) of JP Realty, Inc. a General Partner /s/ G. Rex Frazier - --------------------------- President and Chief Operating Officer, March 24, 2000 G. Rex Frazier Director of JP Realty, Inc., a General Partner /s/ M. Scott Collins - --------------------------- Vice President-Chief Financial Officer March 24, 2000 M. Scott Collins and Treasurer (Principal Financial and Accounting Officer) of JP Realty, Inc., a General Partner /s/ Warren P. King - --------------------------- Director of JP Realty, Inc., a General March 24, 2000 Warren P. King Partner /s/ Sam W. Souvall - --------------------------- Director of JP Realty, Inc., a General March 24, 2000 Sam W. Souvall Partner
EXHIBIT INDEX DESCRIPTION -----------
EXHIBIT PAGE NUMBER NUMBER - ------ ------ 4.1 Form of Debt Security (4.6)* 4.2 Indenture, dated March 11, 1998, by and between the Operating Partnership and The Chase Manhattan Bank as trustee (4.8)* 4.3 First Supplemental Indenture, dated March 11, 1998, by and between the Operating Partnership and The Chase Manhattan Bank as Trustee (4.9)* 10.1 Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership** 10.2 Agreement of Limited Partnership of Price Financing Partnership, L.P. (10(b))*** 10.3 Loan Agreements related to Mortgage Debt and related documents (10(c))*** i) Deed of Trust, Mortgage, Security Agreement and Assignment of Leases and Rents of Price Financing Partnership, L.P. ii) Intentionally Omitted iii) Indenture between Price Capital Corp. and a Trustee iv) Limited Guarantee Agreement (Guarantee of Collection) for outside investors v) Limited Guarantee Agreement (Guarantee of Collection) for Price Group Investors vi) Cash Collateral Account Security, Pledge and Assignment Agreement among Price Financing Partnership, L.P., Price Capital Corp. and Continental Bank N.A. vii) Note Issuance Agency Agreement between Price Capital Corp. and Price Financing Partnership, L.P. viii) Management and Leasing Agreement among Price Financing Partnership, L.P. and Price Development Company, Limited Partnership ix) Assignment of Management and Leasing Agreement of Price Financing Partnership, L.P. 10.6 Registration Rights Agreement among the Company and the Limited Partners of Price Development Company, Limited Partnership (10(g))*** 10.7 Amendment No. 1 to Registration Rights Agreement, dated August 1, 1995, among the Company and the Limited Partners of Price Development Company, Limited Partnership*** 10.8 Exchange Agreement among the Company and the Limited Partners of Price Development Company, Limited Partnership (10(h))*** 10.10 Amendment to Groundlease between Price Development Company and Alvin Malstrom as Trustee and C.F. Malstrom, dated December 31, 1985. (Groundlease for Plaza 9400) (10(j))*** 10.11 Lease Agreement between The Corporation of the President of the Church of Jesus Christ of Latter Day Saints and Price-James and Assumptions, dated September 24, 1979. (Groundlease for Anaheim Plaza) (10(k))*** 10.12 Indenture of Lease between Ambrose and Zelda Motta and Cordova Village, dated July 26, 1974, and Amendments and Transfers thereto. (Groundlease for Fort Union Plaza) (10(l))*** 10.13 Lease Agreement between Advance Management Corporation and Price Rentals, Inc. and dated August 1, 1975 and Amendments thereto. (Groundlease for Price Fremont) (10(m))*** 10.14 Groundlease between Aldo Rossi and Price Development Company, dated June 1, 1989, and related documents. (Groundlease for Halsey Crossing) (10(n))*** 10.15 First Amendment to Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership** 10.16 Second Amendment to Second Amended and restated Agreement of Limited Partnership of Price Development Company, Limited Partnership** 10.17 Third Amendment to Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership**** 10.18 Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of Price Development Company, Limited Partnership 23. Consent of Independent Accountants 27. Financial Data Schedule
* Documents were previously filed with the Operating Partnership's Current Report on Form 8-K dated March 12, 1998, under the exhibit numbered in the parenthetical, and are incorporated herein by reference. **Documents were previously filed with the Operating Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and are incorporated herein by reference. *** Documents were previously filed with the Company's Registration Statement on Form S-11, File No. 33-68844, under the exhibit numbered in the parenthetical, and are incorporated herein by reference. **** Documents were previously filed with the Operating Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and are incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP PAGE Report of Independent Accountants F-2 Consolidated Balance Sheet as of December 31, 1999 and 1998 F-3 Consolidated Statement of Operations for the years ended December 31, 1999, 1998 and 1997 F-4 Consolidated Statement of Partners' Capital F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1999, 1998 and 1997 F-6 Notes to Consolidated Financial Statements F-7 Schedule II - Valuation and Qualifying Accounts F-20 Schedule III - Real Estate and Accumulated Depreciation F-21
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Price Development Company, Limited Partnership In our opinion, the consolidated financial statements and schedules listed in the accompanying index, present fairly, in all material respects, the financial position of Price Development Company, Limited Partnership and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /S/ PricewaterhouseCoopers LLP - --------------------------------- PricewaterhouseCoopers LLP Salt Lake City, Utah February 2, 2000 F-2 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 31, 1999 1998 --------------- -------------- ASSETS Real Estate Assets Land $ 105,959 $ 102,921 Buildings 752,040 684,762 --------------- -------------- 857,999 787,683 Less: Accumulated Depreciation (135,027) (114,136) --------------- -------------- Operating Real Estate Assets 722,972 673,547 Real Estate Under Development 18,389 28,073 --------------- -------------- Net Real Estate Assets 741,361 701,620 Cash 7,767 5,123 Restricted Cash 3,149 3,605 Accounts Receivable, Net 10,368 9,713 Deferred Charges, Net 7,526 8,570 Other Assets 6,055 4,524 --------------- -------------- $ 776,226 $ 733,155 =============== ============== LIABILITIES AND PARTNERS' CAPITAL Borrowings $ 438,241 $ 472,990 Accounts Payable and Accrued Expenses 16,716 20,411 Other Liabilities 847 798 --------------- ------------- 455,804 494,199 --------------- ------------- Minority Interest 2,429 2,035 --------------- ------------- Commitments and Contingencies PARTNERS' CAPITAL General Partner 182,951 204,384 Preferred Limited Partners 104,571 -- Common Limited Partners 30,471 32,537 --------------- -------------- 317,993 236,921 --------------- -------------- $ 776,226 $ 733,155 =============== ==============
See accompanying notes to consolidated financial statements. F-3 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS - EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1999 1998 1997 --------------- -------------- --------------- REVENUES Minimum Rents $ 97,829 $ 79,448 $ 59,624 Percentage and Overage Rents 4,906 4,491 3,896 Recoveries from Tenants 29,471 23,778 18,199 Interest 637 404 546 Other 722 948 708 --------------- -------------- --------------- 133,565 109,069 82,973 --------------- -------------- --------------- EXPENSES Operating and Maintenance 22,142 17,366 12,990 Real Estate Taxes and Insurance 14,141 11,640 8,546 Advertising and Promotions 719 676 451 General and Administrative 6,618 6,406 5,447 Depreciation 23,514 17,306 11,802 Amortization of Deferred Financing Costs 1,652 1,572 969 Amortization of Deferred Leasing Costs 632 665 639 Interest 27,769 20,501 9,066 --------------- -------------- --------------- 97,187 76,132 49,910 --------------- -------------- --------------- 36,378 32,937 33,063 Minority Interest Income of Consolidated Partnerships (482) (421) (394) Gain on Sales of Real Estate -- 1,096 339 --------------- -------------- --------------- Income Before Extraordinary Item 35,896 33,612 33,008 Extraordinary Item - Loss on Early Extinguishment of Debt (985) -- (162) --------------- -------------- --------------- Net Income 34,911 33,612 32,846 Preferred Unit Distribution (4,429) -- -- --------------- -------------- --------------- Net Income Available to Common Unitholders $ 30,482 $ 33,612 $ 32,846 =============== ============== =============== Basic Earnings Per Partnership Common Unit: Income Before Extraordinary Item $ 1.48 $ 1.58 $ 1.57 Extraordinary Item (0.04) -- (0.01) --------------- -------------- --------------- Net Income $ 1.44 $ 1.58 $ 1.56 =============== ============== =============== Diluted Earnings Per Partnership Common Unit: Income Before Extraordinary Item $ 1.48 $ 1.57 $ 1.55 Extraordinary Item (0.05) -- (0.01) --------------- -------------- --------------- Net Income $ 1.43 $ 1.57 $ 1.54 =============== ============== ===============
See accompanying notes to consolidated financial statements. F-4 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DOLLARS IN THOUSANDS)
PREFERRED COMMON GENERAL LIMITED LIMITED PARTNER PARTNERS PARTNERS Total ----------- ----------- ----------- ---------- Partners' Capital at December 31, 1996 $ 172,286 $ -- $ 32,380 $ 204,666 Units Issued for Proceeds from Sale of Common Stock 38,632 -- -- 38,632 Units Issued Upon Exercise of Stock Options 220 -- -- 220 Conversion of Limited Partners' Interests 40 -- (40) -- Units Issued for Acquisition -- -- 1,863 1,863 Common Unit Distributions (30,797) -- (6,423) (37,220) Net Income 27,200 -- 5,646 32,846 ----------- ----------- ----------- ---------- Partners' Capital at December 31, 1997 207,581 -- 33,426 241,007 Units Issued Upon Exercise of Common Stock 911 -- -- 911 Conversion of Limited Partners' Interest 3 -- (3) -- Common Unit Distributions (31,916) -- (6,693) (38,609) Net Income 27,805 -- 5,807 33,612 ----------- ----------- ----------- ---------- Partners' Capital at December 31, 1998 204,384 -- 32,537 236,921 Conversion of Limited Partners' Interest 437 -- (437) -- Preferred Units Issued -- 104,571 -- 104,571 Common Unit Distributions (32,719) -- (6,896) (39,615) Net Income 25,215 4,429 5,267 34,911 Preferred Unit Distributions -- (4,429) -- (4,429) Repurchase of Common Units (14,366) -- -- (14,366) ----------- ----------- ----------- ---------- Partners Capital at December 31, 1999 $ 182,951 $ 104,571 $ 30,471 $ 317,993 =========== =========== =========== ==========
See accompanying notes to consolidated financial statements. F-5 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31 ------------------------------------------------------------ 1999 1998 1997 ------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 34,911 $ 33,612 $ 32,846 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Extraordinary Item 985 -- 162 Depreciation 23,514 17,306 11,802 Amortization 2,284 2,237 1,608 Minority Interest in Income of Consolidated Partnerships 482 421 394 Gain on Sales of Real Estate -- (1,096) (339) Real Estate Received due to Lease Termination (1,957) -- -- Increase in Accounts Receivable, Net (698) (4,112) (2,261) Increase in Deferred Charges (926) (927) (1,290) (Decrease) Increase in Accounts Payable and Accrued Expenses (6,647) 3,739 3,368 Increase in Other Assets (1,793) (1,129) (1,917) ------------- -------------- -------------- Net Cash Provided by Operating Activities 50,155 50,051 44,373 ------------- -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Real Estate Assets, Developed or Acquired (57,993) (200,022) (137,560) Proceeds from Sales of Real Estate -- 1,289 469 Decrease (Increase) in Restricted Cash 456 (1,140) (93) ------------- -------------- -------------- Net Cash Used in Investing Activities (57,537) (199,873) (137,184) ------------- -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Borrowings 125,842 289,384 219,088 Penalty Paid on Early Retirement of Debt (527) -- -- Repayment of Borrowings (160,591) (99,784) (123,320) Deferred Financing Costs (771) (2,344) (1,503) Net Proceeds from Sale of Partnership Common Units -- 923 38,865 Proceeds from Issuance of Preferred Units 104,571 -- -- Distributions to Preferred Unitholders (4,429) -- -- Capital Contribution by Minority Partner -- -- 1,000 Distributions Paid to Partners (39,615) (38,609) (37,220) Distributions Paid to Minority Interest (88) (228) (246) Repurchase of Common Units (14,366) -- -- ------------- -------------- -------------- Net Cash Provided by Financing Activities 10,026 149,342 96,664 ------------- -------------- -------------- Net Increase (Decrease) in Cash 2,644 (480) 3,853 Cash, Beginning of Period 5,123 5,603 1,750 ------------- -------------- -------------- Cash, End of Period $ 7,767 $ 5,123 $ 5,603 ============= ============== ==============
See accompanying notes to consolidated financial statements. F-6 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 1. BUSINESS AND BASIS OF PRESENTATION BUSINESS Price Development Company, Limited Partnership (the "Operating Partnership"), a Maryland Limited Partnership, is primarily engaged in the business of owning, leasing, managing, operating, developing and redeveloping regional malls, community centers and other commercial properties. The Operating Partnership's general partner, JP Realty, Inc. (the "Company"), a Maryland Corporation, is a real estate investment trust ("REIT") as defined by the Internal Revenue Code and owns an interest in and conducts its business activities through the Operating Partnership. The Company owned an 82.2 and 82.7 percent general partnership interest in the Operating Partnership at December 31, 1999 and 1998, respectively. The Operating Partnership owns a portfolio of 51 properties ("Properties" or "Property") consisting of 18 enclosed regional malls, 25 community centers, two free-standing retail Properties and six mixed-use commercial Properties located in the Western United States. The tenant base includes primarily national, regional and local retailers; as such, the Company's credit risk is concentrated in the retail industry. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of the Operating Partnership and all controlled affiliates. The effect of all significant intercompany balances and transactions have been eliminated in the consolidated presentation. Certain amounts in the 1998 and 1997 financial statements have been reclassified to conform with the 1999 presentation. The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REAL ESTATE ASSETS Real estate assets are stated at cost less accumulated depreciation. At each balance sheet date, the Operating Partnership reviews recorded book values of real estate assets for possible impairment based upon expectations of future nondiscounted cash flows (excluding interest) from each property. There have been no impairments as of December 31, 1999. Costs directly related to the acquisition and development of real estate assets, including overhead costs directly attributable to property development, are capitalized. Interest and real estate taxes incurred during the development and construction periods are also capitalized. Depreciation is computed on a straight-line basis generally over 40 years for buildings and four to ten years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the life of the related lease. Expenditures for maintenance and repairs are charged to operations as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives. REVENUE RECOGNITION Certain minimum rents are recognized monthly based upon amounts which are currently due from tenants, when such amounts are not materially different than recognizing the fixed cash flow over the initial term of the lease using the straight-line method. All other minimum rents are recognized using the straight-line method. F-7 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (CONTINUED) On April 1, 1998, the Company stopped accruing revenues for percentage and overage rents based upon the adoption of Emerging Issues Task Force Issue 98-9. On January 1, 1999, the Company started accruing these revenues again on a straight-line basis and continued to do so through December 31, 1999. Beginning January 1, 2000, the Company will stop accruing revenues for Percentage and Overage Rents based upon recent accounting guidance issued by Staff Accounting Bulletin No. 101 "Revenue Recognition". The cumulative effect of adopting this new guidance will not be material to the first quarter of 2000. An allowance for doubtful accounts has been provided against the portion of tenant accounts receivable which is estimated to be uncollectible. Tenant accounts receivable in the accompanying consolidated balance sheet are shown net of allowance for doubtful accounts of $1,217 and $741 as of December 31, 1999 and 1998, respectively. RESTRICTED CASH Restricted cash is held under terms of loan agreements to be used for certain capital expenditures, property tax payments and funds held in reserve by a trustee for principal and interest. DEFERRED CHARGES Deferred charges consist principally of financing fees and leasing commissions paid to third parties. These costs are amortized on a straight- line basis, which amounts, for deferred financing fees, approximate those amortized using the effective interest method, over the terms of the respective agreements. Deferred charges in the accompanying consolidated balance sheet are shown net of accumulated amortization of $8,335 and $6,981 as of December 31, 1999 and 1998, respectively. INCOME TAXES Income taxes have not been provided in the accompanying financial statements as the tax effects of the Operating Partnership's operations accrue directly to the partners. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement will be effective for the Operating Partnership beginning January 1, 2001. The Operating Partnership did not hold any derivative instruments at December 31, 1999. 3. ACQUISITION AND DEVELOPMENTS (GLA AMOUNT UNAUDITED) ACQUISITION On August 6, 1998, the Company, through a consolidated partnership of which the Operating Partnership owns 99% and is a limited partner and a wholly owned subsidiary owns 1% and is the general partner, bought NorthTown Mall, located in Spokane, Washington for $128,000. The acquisition was financed utilizing a first mortgage of $84,500 and $43,500 of borrowings on the Operating Partnership's unsecured credit facility. The Operating Partnership issued a letter of credit to the first mortgage holder in the amount of $9,500 to guarantee the completion of additional property development work. F-8 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 3. ACQUISITION AND DEVELOPMENTS (GLA AMOUNTS UNAUDITED) (CONTINUED) DEVELOPMENTS The Operating Partnership, through its consolidated partnership Price Spokane, Limited Partnership, has initiated the expansion of NorthTown Mall, an enclosed regional mall in Spokane, Washington. The project is expected to be completed in the third quarter of 2000 and will add approximately 100,000 square feet of gross leasable area (Company-owned leasable area within the Company's properties ("GLA")). At December 31, 1999, the Operating Partnership had expended approximately $10,828 for expansion costs and anticipates expending an additional $9,408 to complete the project. The Operating Partnership developed the Mall at Sierra Vista, an enclosed regional mall in Sierra Vista, Arizona. The mall held its grand opening on October 20, 1999 and added approximately 335,000 square feet of total gross leasable area (Company-owned leasable area plus any tenant-owned leasable area within the Company's properties ("Total GLA")). At December 31, 1999, the Operating Partnership had cumulative expenditures of $17,728 for development costs and had leased approximately 94% of the mall. The Operating Partnership developed Provo Towne Centre, an enclosed regional mall in Provo, Utah through its consolidated partnership Provo Mall Development Company, LTD. The mall held it's grand opening on October 28, 1998 and added approximately 723,000 square feet of Total GLA as of December 31, 1998. On November 11, 1999, Provo Towne Centre held a grand opening for its newly developed sixteen-screen Cinemark Theater which added approximately 74,000 square feet of additional GLA. At December 31, 1999, the Operating Partnership had cumulative expenditures of approximately $76,896 for development costs and had leased approximately 96% of the mall. During 1999, the Operating Partnership developed an additional building at Halsey Crossing, a community center in Gresham, Oregon. During 1999 the Operating Partnership had expended approximately $790 for development costs and added approximately 16,300 square feet of GLA to the community center. In August 1998, the Company completed an expansion at Boise Towne Square in Boise, Idaho adding 294,804 square feet of Total GLA. Dillard's was added as a new anchor with approximately 186,500 square feet of Total GLA, The Bon March expanded its space by 44,900 square feet of GLA and approximately 63,400 square feet of additional shop GLA was added. The Company has added Sears as a fourth anchor tenant at Red Cliffs Mall in St. George, Utah. The Sears store opened in October 1998 and added approximately 70,400 square feet of GLA to Red Cliffs Mall and a Sears Tire and Battery shop added approximately 9,600 square feet of GLA at Red Cliffs Plaza. The first phase of construction at Boise Towne Plaza in Boise, Idaho opened in November 1997, adding 76,414 square feet of retail space. The Company added approximately 15,000 square feet of GLA at Boise Towne Plaza in March 1998. During 1999, approximately 18,000 square feet of GLA was developed at Boise Towne Plaza. At December 31, 1999, Total GLA for the plaza was approximately 109,500 square feet. The Operating Partnership, through its consolidated partnership Spokane Mall Development Company, Limited Partnership, completed the development of Spokane Valley Mall located in Spokane, Washington and held a grand opening on August 13, 1997. Additional activities included the development of two freestanding pads during 1999 and two freestanding pads during 1998, which included a Sears Tire and Battery Shop, a Pier 1 Imports, an Outback Steakhouse and a Red Robin. The partnership had cumulative expenditures of approximately $65,886 for the mall. At December 31, 1999, the mall contained approximately 724,000 square feet of Total GLA and was approximately 93% leased. F-9 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 4. BORROWINGS
DECEMBER 31, ----------------------------------------- 1999 1998 ------------- ------------- Notes, unsecured; interest at 7.29%, maturing 2005 to 2008 $ 100,000 $ 100,000 Credit Facility, unsecured; weighted average interest at 6.10% during 1999 and 6.43% during 1998, due in 2000 91,000 100,800 Mortgage payable, secured by real estate; interest at 6.68%, due in 2008 83,382 84,277 Notes, secured by real estate; interest at 6.37%, due in 2001 61,223 95,000 Construction loan, secured by real estate; interest at 7.63% and 7.08% as of December 31, 1999 and 1998, respectively, due in 2001 43,792 27,550 Construction loan, secured by real estate; interest at 7.69% and 6.81% as of December 31, 1999 and 1998, respectively, due in 2001 41,600 47,505 Mortgage payable, secured by real estate; interest at 8.5%, due in 2000 12,165 12,510 Other notes payable, secured by real estate; interest ranging from 7.0% to 9.99%, maturing 2000 to 2095 5,079 5,348 ------------- ------------ $ 438,241 $ 472,990 ============= ============
CREDIT FACILITY On October 16, 1997, the Operating Partnership obtained a $150,000 three-year unsecured credit facility (the "Credit Facility") from a group of banks. On December 18, 1997, the amount was increased to $200,000. The facility has a three-year term and bears interest, at the option of the Operating Partnership, at one, or a combination, of (i) the higher of the federal funds rate plus 50 basis points or the prime rate, or (ii) LIBOR plus a spread of 70 to 130 basis points. The LIBOR spread is determined by the Operating Partnership's credit rating and/or leverage ratio. The Credit Facility also includes a competitive bid option in the amount of $100,000 which will allow the Operating Partnership to solicit bids for borrowings from the bank group. The facility is used for general corporate purposes including stock repurchase, development, working capital, repayment of indebtedness and/or amortization payments. The facility contains restrictive covenants including limitations on the amount of secured and unsecured debt, and requires the Operating Partnership to maintain certain financial ratios. At December 31, 1999, the Operating Partnership was in compliance with all these covenants. The Credit Facility is due October 2000, at which time the Operating Partnership will renew or refinance the loan. The Operating Partnership paid commitment fees on the Credit Facility totaling $506 and $514 in 1999 and 1998, respectively. On November 7, 1997, the Operating Partnership borrowed $85,000 from the Credit Facility and utilized the proceeds to retire and cancel previously existing credit facilities and to pay for development activities. Deferred financing costs related to the canceled credit facilities were written-off resulting in an extraordinary loss of $162. On December 29, 1997, the Operating Partnership borrowed an additional $42,000 to pay for the acquisition of Salem Center and for development activities. On August 6, 1998, the Operating Partnership borrowed $43,500 from its Credit Facility as part of the purchase of NorthTown Mall (Note 3). In August 1998, the Operating Partnership issued a $9,500 letter of credit backed by the Credit Facility to the NorthTown Mall first mortgage holder to guarantee the completion of additional property development work. The Company does not expect any material losses to result from the letter of credit and management is therefore of the opinion that the fair value of this instrument at December 31, 1999 is zero. During 1999, proceeds from the sale of cumulative redeemable preferred units of the Operating Partnership were used to pay down the amount outstanding on the Credit Facility (Note 5). The Operating Partnership borrowed an additional $57,993 for development activities during 1999. At December 31, 1999 and 1998, the Credit Facility had a balance of $91,000 and $100,800, respectively. NOTES On March 11, 1998, the Operating Partnership under its shelf registration, issued $100,000 of ten year senior unsecured notes bearing interest at a fixed 7.29% per annum. The Operating Partnership had entered into an interest rate protection agreement in anticipation of issuing these notes and received $270 as a result of terminating this agreement, making the effective fixed rate of interest on these notes 7.24% per annum. Interest payments are due semi- annually on March 11 and September 11 of each year. Principal payments of $25,000 are due annually beginning March 2005. The proceeds were used to partially repay outstanding borrowings under the Credit Facility. F-10 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 4. BORROWINGS (CONTINUED) On January 21, 1994, a subsidiary of the Operating Partnership issued $95,000 in secured notes bearing interest at a fixed 6.37% per annum. On July 21, 1999, the Operating Partnership borrowed $33,777 from the Credit Facility to reduce the notes to $61,223. The transaction unencumbered four regional mall Properties. The write-off of deferred financing costs related to the reduction of the notes plus direct expenses, including a prepayment penalty, make up the extraordinary loss of $985. The notes require quarterly interest payments and are due on January 21, 2001. The subsidiary has an option to extend the notes to January 21, 2003. CONSTRUCTION LOANS On September 4, 1998, Provo Mall Development Company, LTD., a consolidated partnership of which the Operating Partnership is the general partner, entered into a $50,000 construction loan facility. The proceeds from the construction loan facility have been used to fund the development and construction of Provo Towne Centre in Provo, Utah. The construction loan facility, which matures on July 1, 2001, with an optional two-year extension, is collateralized by Provo Towne Centre and guaranteed by the Operating Partnership. The loan bears interest at a variable rate indexed to the LIBOR rate. At December 31, 1999 and 1998, the loan had a balance of $43,792 and $27,550, respectively. On July 30, 1996, Spokane Mall Development Company Limited Partnership, a consolidated partnership of which the Operating Partnership is the general partner, entered into a $50,000 construction loan facility. The proceeds from this construction loan facility have been used to fund the development and construction of the Spokane Valley Mall in Spokane, Washington. The construction loan facility is collateralized by the Spokane Valley Mall and guaranteed by the Operating Partnership. On July 30, 1999, the Operating Partnership borrowed $5,905 from the Credit Facility to reduce the principal outstanding on the construction loan and exercised the option to extend the construction loan to August 2001. The fee to extend the loan was $154. The loan bears interest at a variable interest rate indexed to the LIBOR rate. At December 31, 1999 and 1998, the loan had a balance of $41,600 and $47,505, respectively. MORTGAGES PAYABLE On August 6, 1998, the Company and Operating Partnership, through a consolidated partnership, acquired NorthTown Mall. The partnership obtained a new first mortgage in the amount of $84,500. The loan has a ten year term, 6.68% fixed rate, and a thirty-year amortization payoff schedule with a balloon payment of approximately $73,000. At December 31, 1999 and 1998, the loan had a balance of $83,382 and $84,277, respectively. In June 1997, the Operating Partnership assumed a mortgage note of $24,755 as part of the acquisition of Silver Lake Mall and retired portions of the debt principally using borrowings under a credit facility. The assumed debt bears interest at a fixed 8.5% per annum and has a maturity date of October 1, 2000 when a balloon payment of approximately $11,887 is due. At December 31, 1999 and 1998, the loan had a balance of $12,165 and $12,510, respectively. Schedule of Maturities of Borrowings
The following summarizes the scheduled maturities of borrowings at December 31, 1999: Total ------------- Year - ---- 2000 $ 104,115 2001 149,200 2002 1,078 2003 1,426 2004 1,187 Thereafter 181,235 ------------- $ 438,241 =============
F-11 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 5. CAPITAL TRANSACTIONS The limited partners of the Operating Partnership have an option to convert their Operating Partnership Common Units ("OP Units") into shares of the Company's Common Stock. The Operating Partnership will issue an equivalent number of OP Units to the Company as general partnership interests. In 1999 and 1998, respectively, 41,718 and 285 OP Units were converted into shares. In October 1999, the Board of Trustee authorized the Company to repurchase up to $25,000 of the Company's Common Stock through open market purchases and private transactions. Through December 31, 1999, the Company had repurchased approximately 857,000 shares of Common Stock for a total cost of approximately $14,366. As of February 2, 2000, approximately 190,000 additional shares of stock were purchased for $3,170. The Operating Partnership purchased an equivalent number of OP Units from the Company. In April 1999, the Operating Partnership issued 510,000 Series A 8.75% cumulative redeemable preferred units (the "Series A Preferred Units") in exchange for a gross contribution of $12,750. Each Series A Preferred Unit represents a limited partnership interest with a liquidation value of twenty- five dollars per unit. The Operating Partnership used the proceeds, less applicable transaction costs of $405, for the repayment of borrowings outstanding under the Credit Facility. The Series A Preferred Units, which may be redeemed by the Operating Partnership on or after April 23, 2004, have no stated maturity or mandatory redemption and are not convertible into any other securities of the Operating Partnership. The Series A Preferred Units are exchangeable at the option of the preferred unitholder at a rate of one Series A Preferred Unit for one share of the Company's Series A 8.75% cumulative redeemable preferred stock beginning April 23, 2009, or earlier under certain circumstances. On July 28, 1999, the Operating Partnership issued 3.8 million Series B 8.95% cumulative redeemable preferred units (the "Series B Preferred Units") in exchange for a gross contribution of $95,000. Each Series B Preferred Unit represents a limited partnership interest with a liquidation value of twenty- five dollars per unit. The Operating Partnership used the proceeds, less applicable transaction costs of $2,774, to repay $90,000 in borrowings under the Credit Facility and increase operating cash. The Series B Preferred Units, which may be redeemed by the Operating Partnership on or after July 28, 2004, have no stated maturity or mandatory redemption and are not convertible into any other securities of the Operating Partnership. The Series B Preferred Units are exchangeable at the option of the preferred unitholder at a rate of one Series B Preferred Unit for one share of the Company's Series B 8.95% cumulative redeemable preferred stock beginning July 28, 2009, or earlier under certain circumstances. The Operating Partnership makes quarterly distributions to the Series A and Series B Preferred unitholders on the last day of each March, June, September and December. For the year ending 1999, distributions for the Series A and Series B Preferred Units were $768 and $3,661, respectively. 6. RENTAL INCOME Substantially all real estate held for investment is leased to retail and commercial tenants. These operating leases generally range from 1 to 25 years and provide for minimum monthly rents, and in certain instances percentage rents based on the tenants' sales, and generally require the tenants to pay property taxes, insurance and maintenance charges. All non-cancelable leases, assuming no new or renegotiated leases or option extensions, in effect at December 31, 1999 provide for the following minimum future rental income:
Year Total - ---- ------------ 2000 $ 83,240 2001 76,351 2002 69,296 2003 62,277 2004 55,205 Thereafter 302,358 ------------ $ 648,727 ============
F-12 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 7. COMMITMENTS AND CONTINGENCIES Future minimum rental payments under the terms of all non-cancelable operating leases under which the Operating Partnership is the lessee, principally for ground leases, are as follows:
Year Total - ---- ---------- 2000 $ 986 2001 998 2002 1,012 2003 968 2004 938 Thereafter 25,453 ----------- $ 30,355 ===========
The Operating Partnership recorded rental expenses of $983, $971 and $550 for 1999, 1998 and 1997, respectively. The Operating Partnership is a defendant in certain litigation relating to its business activities. Management does not believe that the resolution of these matters will have a materially adverse effect upon the financial position, results of operations or cash flows of the Operating Partnership. 8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION During 1999, Price James, a consolidated partnership of the Operating Partnership, received a building appraised at $2,000 in exchange for accounts receivable of $43 and $1,957 for termination of a long-term ground lease, which amount was recorded in minimum rents. During 1999, 1998 and 1997, non-cash investing and financing transactions included an increase in accounts payable of $4,645, $1,693 and $3,861, respectively, related to building and development activities, the assumption of debt related to the acquisition of Salem Center totaling $494 in December 1997, the assumption of debt related to the acquisition of Silver Lake Mall totaling $24,755 in June 1997, and the write-off of capitalized tenant allowances of $2,313, $657 and $406, respectively. In addition, the holders of Operating Partnership units elected to convert 41,718, 285 and 4,000 Operating Partnership Common Units, having a recorded value of $437, $3 and $40, into Common Stock in 1999, 1998 and 1997, respectively. Interest paid (net of capitalized amounts of $2,404, $3,754 and $3,509 for 1999, 1998 and 1997) aggregated $28,553, $17,763 and $8,276 for 1999, 1998 and 1997, respectively. Purchase of the remaining 70% interest in Silver Lake Mall, Ltd. in June 1997 was comprised of:
72,000 Operating Partnership Units issued $ 1,863 Book value of 30% equity investment in Silver Lake Mall, Ltd. (1,555) Debt assumed 24,755 ------------- $ 25,063 =============
F-13 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 9. RELATED PARTY TRANSACTIONS The Operating Partnership buys computer services from Alta Computer Services, Inc. ("Alta"). Alta is majority owned by three directors of the Company. The Operating Partnership paid $192, $175, and $200 in 1999, 1998 and 1997, respectively, for such services. The Operating Partnership has entered into a management agreement under which the Operating Partnership performs certain accounting and management functions on behalf of a company, whose majority owner is the Chairman of the Board of Directors of the Company. Management fees collected by the Operating Partnership under this agreement totaled $72 for each of the three years ended December 31, 1999. The Company provided third-party management services for certain properties owned directly or indirectly by the Chairman of the Board of Directors of the Company as follows: (i) an office building in Salt Lake City, Utah, the owner of which paid the Company a management fee of $113, $115 and $105 in 1999, 1998 and 1997, respectively (Fairfax, a company which is wholly- owned by the Chairman of the Board, is a general partner of the owner of this building), (ii) a commercial building in Salt Lake City, Utah, the owner of which paid the Company a management fee of $2 in 1997 (the Chairman of the Board was the general partner of the owner of this building), and (iii) a commercial building in Albuquerque, New Mexico, the owner of which paid the Company a management fee of $6 and $5 in 1999 and 1998, respectively (the Chairman of the Board is the general partner owner of the building). 10. STOCK INCENTIVE PLAN On October 26, 1993, the Company adopted the 1993 Stock Option Plan which authorizes the discretionary grant by the Executive Compensation Committee of options intended to qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code to key employees of the Company and the discretionary grant of nonqualified stock options to key employees, directors and consultants of the Company. The maximum number of shares of Common Stock subject to option under the Company's Plan is 1,100,000. The proceeds received by the Company upon exercise of options are contributed to the Operating Partnership in exchange for the issuance of an equivalent number of Operating Partnership Units. No stock options may be granted after ten years from the date of adoption and options must be granted at a price generally not less than the fair market value of the Company's Common Stock at the date of grant. These options vest over a period of not more than five years. A summary of the Company's 1993 Stock Option Plan activity is set forth below:
1999 1998 1997 -------------------------- -------------------------- ------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE SHARES OF EXERCISE SHARES OF EXERCISE SHARES OF EXERCISE STOCK PRICE STOCK PRICE STOCK PRICE ---------- ----------- ----------- ----------- ----------- ------------ Outstanding at beginning of year 631,000 $ 18.06 553,000 $ 18.07 558,000 $ 17.99 Granted 60,000 18.31 165,000 25.21 7,000 25.38 Exercised -- -- (51,000) 17.92 (12,000) 18.64 Forfeited (4,000) 22.43 (36,000) 22.49 -- -- ---------- ----------- ----------- ----------- ----------- ------------ Outstanding at end of year 687,000* $ 19.55 631,000 $ 21.37 553,000 $ 18.07 ========== =========== =========== =========== =========== ============ Exercisable at end of year 494,000 $ 18.41 360,000 $ 18.06 277,000 $ 17.87 ========== =========== =========== =========== =========== ============
- -------------------- * The weighted average remaining contractual life of options outstanding as of December 31, 1999 was 4 years. The range of option prices was $17.50 to $25.38 per share. F-14 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 10. STOCK INCENTIVE PLAN (CONTINUED) The Company has applied Accounting Principles Board Opinion 25 in accounting for its plan. Accordingly, no compensation costs have been recognized. Had the Operating Partnership's compensation costs for the Company's plan been determined based on the fair value at the grant date in accordance with the method required by SFAS No. 123, "Accounting for Stock-Based Compensation", the Operating Partnership's net income and net income per share would have been reduced to the proforma amounts as follows:
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------- 1999 1998 1997 Net income ------------ ------------- ------------- As reported $ 30,482 $ 33,612 $ 32,846 Proforma $ 30,411 $ 33,477 $ 32,800 Basic net income per share As reported $ 1.44 $ 1.58 $ 1.56 Proforma $ 1.44 $ 1.57 $ 1.55 Diluted net income per share As reported $ 1.43 $ 1.57 $ 1.54 Proforma $ 1.43 $ 1.56 $ 1.54
The fair value of each option grant was estimated on the date of grant using the Black-Scholes options pricing model using the following assumptions:
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------- 1999 1998 1997 -------------- --------------- -------------- Risk free interest rate 4.79% 5.51% 6.67% Dividend yield 11.09% 7.14% 7.00% Expected life 4 years 5 years 9 years Expected volatility 16.40% 17.00% 16.50% Weighted average per share fair value of options granted during the year $ 0.55 $ 2.08 $ 2.53
11. EMPLOYEE BENEFIT PLAN The Company has a 401(k) profit sharing plan which permits participating employees to defer up to a maximum of 15% of their compensation up to the maximum allowed by the Internal Revenue Code. The Company matches 50% of the qualified employees' contributions up to a maximum of $1 per employee each year. Employees working a minimum of 1,000 hours per year who have completed at least one year of service and attained the age of 21 are qualified to participate in the plan. The employees' contributions are immediately vested. Additionally, the Company annually contributes 3% of base salary to the plan for each qualified employee. Contributions from the Company vest based upon employees' years of service beginning at 20% per year after one year of service. The Company's contributions to the plan in 1999, 1998 and 1997, which are reflected as an expense of the Operating Partnership, were $333, $279 and $225, respectively. F-15 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 12. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of estimated fair value were determined by management using available market information. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying value of cash, accounts receivable and accounts payable at December 31, 1999 and 1998 are reasonable estimates of their fair values because of the short maturity of these financial instruments. Borrowings with an aggregate carrying value of $438,241 and $472,990 have an estimated aggregate fair value of $422,295 and $472,690 at December 31, 1999 and 1998, respectively. Estimated fair value is based on interest rates currently available to the Operating Partnership for issuance of borrowings with similar terms and remaining maturities. 13. EARNINGS PER OPERATING PARTNERSHIP COMMON UNIT The following table provides a reconciliation of both income before extraordinary items and the number of OP Units used in the computations of basic earnings per OP Unit, which utilizes the weighted average number of OP Units outstanding without regard to potentially dilutive OP Units and diluted earnings per OP Unit, which includes all such OP Units. Effect has been given to the Company's stock option plan (Note 10) since proceeds received by the Company upon exercise of options are contributed to the Operating Partnership in exchange for the issuance of an equivalent number of OP Units.
For the Year Ended December 31, ---------------------------------------------------------- 1999 1998 1997 --------------- --------------- ---------------- Income (Numerator) Before Extraordinary Item $ 31,467 $ 33,612 $ 33,008 =============== =============== ================ OP Units (Denominator) Basic-average common units outstanding 21,238,000 21,298,000 21,119,000 Add: Dilutive effect of stock options 29,000 103,000 166,000 --------------- --------------- ---------------- Diluted OP Units 21,267,000 21,401,000 21,285,000 =============== =============== ================ Per-Unit Amounts - Income Before Extraordinary Item Basic $ 1.48 $ 1.58 $ 1.57 =============== =============== ================ Diluted $ 1.48 $ 1.57 $ 1.55 =============== =============== ================
Options to purchase 687,000, 631,000 and 553,000 shares of Common Stock were outstanding at December 31, 1999, 1998 and 1997, respectively (Note 10), a portion of which has been reflected above using the treasury stock method. 14. SEGMENT INFORMATION (GLA AMOUNTS UNAUDITED) In 1998, the Operating Partnership adopted SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information." The information presents the Operating Partnership's three reportable segments: 1) regional malls, 2) community centers and 3) commercial properties in conformity with SFAS No. 131. The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies." Segment data includes total revenues and property net operating income (revenues less operating and maintenance expense, real estate taxes and insurance expense and advertising and promotions expense ("Property NOI")). The Operating Partnership evaluates the performance of its segments and allocates resources to them based on Property NOI. The regional mall segment consists of 18 regional malls in eight states containing approximately 10,291,000 square feet of Total GLA and which range in size from approximately 296,000 to 1,171,000 square feet of Total GLA. F-16 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 14. SEGMENT INFORMATION (GLA AMOUNTS UNAUDITED) (CONTINUED) The community center segment consists of 25 Properties in seven states containing approximately 3,362,000 square feet of Total GLA and two freestanding retail Properties containing approximately 5,000 square feet of GLA. The commercial Properties include six mixed-use commercial/business Properties with 38 commercial buildings containing approximately 1,354,000 square feet of GLA which are located primarily in the Salt Lake City, Utah area where the Company's headquarters is located. The table below presents information about the Operating Partnership's reportable segments for the years ending December 31:
REGIONAL COMMUNITY COMMERCIAL MALLS CENTERS PROPERTIES OTHER TOTAL ----------- ----------- ----------- ----------- ---------- 1999 - ---- Total Revenues $ 104,205 $ 20,297 $ 7,555 $ 1,508 $ 133,565 Property Operating Expenses (1) (30,620) (4,568) (1,814) -- (37,002) ----------- ----------- ----------- ----------- ---------- Property NOI (2) 73,585 15,729 5,741 1,508 96,563 Unallocated Expenses (3) -- -- -- (60,185) (60,185) Unallocated Minority Interest (4) -- -- -- (482) (482) Unallocated Other (5) -- -- -- (985) (985) Consolidated Net Income -- -- -- -- 34,911 Additions to Real Estate Assets 55,593 6,094 1,133 125 62,945 Total Assets (6) 641,871 84,329 30,837 19,189 776,226 1998 - ---- Total Revenues 82,622 17,849 8,299 299 109,069 Property Operating Expenses (1) (23,895) (4,144) (1,643) -- (29,682) ----------- ----------- ----------- ----------- ---------- Property NOI (2) 58,727 13,705 6,656 299 79,387 Unallocated Expenses (3) -- -- -- (46,450) (46,450) Unallocated Minority Interest (4) -- -- -- (421) (421) Unallocated Other (5) -- -- -- 1,096 1,096 Consolidated Net Income -- -- -- -- 33,612 Additions to Real Estate Assets 190,942 845 597 5,470 197,854 Total Assets(6) 604,937 80,307 30,899 17,012 733,155 1997 - ---- Total Revenues 58,069 16,649 7,349 906 82,973 Property Operating Expenses (1) (16,175) (4,053) (1,759) -- (21,987) ----------- ----------- ----------- ----------- ---------- Property NOI (2) 41,894 12,596 5,590 906 60,986 Unallocated Expenses (3) -- -- -- (27,923) (27,923) Unallocated Minority Interest (4) -- -- -- (394) (394) Unallocated Other (5) -- -- -- 177 177 Consolidated Net Income -- -- -- -- 32,846 Additions to Real Estate Assets 154,331 11,246 907 -- 166,484 Total Assets (6) 423,800 80,274 31,909 9,701 545,684
- ----------------- (1) Property operating expenses consist of operating, maintenance, real estate taxes, insurance, advertising and promotion expenses as listed in the consolidated statement of operations. (2) Total revenues minus property operating expenses. (3) Unallocated expenses consist of general and administrative, depreciation, amortization of deferred financing costs, amortization of deferred leasing costs and interest as listed in the consolidated statement of operations. (4) Unallocated minority interest includes minority interest in income of consolidated partnerships. (5) Unallocated other includes gain on sale of real estate and extraordinary loss on extinguishment of debt as listed in the consolidated statement of operations. (6) Unallocated other total assets include cash, corporate offices, miscellaneous real estate and deferred financing costs. F-17 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS) 15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Financial information for each of the quarters in 1999 and 1998 are as follows:
FIRST SECOND THIRD FOURTH TOTAL ----------- ----------- ----------- ----------- ----------- YEAR ENDED 1999 - --------------- Total Revenues $ 32,989 $ 31,738 $ 32,398 $ 36,440 $ 133,565 Income Before Extraordinary Item and Minority Interest 9,244 7,011 9,049 11,074 36,378 Net Income 8,221 6,896 6,465 8,900 30,482 Basic Earnings Per OP Unit 0.39 0.32 0.30 0.42 1.44** Diluted Earnings Per OP Unit 0.38 0.32 0.30 0.42 1.43** Distributions Declared Per OP Unit 0.465 0.465 0.465 0.480 1.875*** YEAR ENDED 1998 - --------------- Total Revenues $ 24,503 $ 24,407* $ 27,958* $ 32,201* $ 109,069 Income Before Minority Interest 8,093 8,236 7,834 8,774 32,937 Net Income 7,991 8,142 7,963 9,516 33,612 Basic Earnings Per OP Unit 0.38 0.38 0.37 0.45 1.58** Diluted Earnings Per OP Unit 0.37 0.38 0.37 0.46 1.57** Distributions Declared Per OP Unit 0.450 0.450 0.450 0.465 1.815***
- ------------------------------ * 1998 percentage and overage rents have been restated to reflect the Company's accrual of these revenues on the straight line basis as allowed by the Emerging Issues Task Force in late 1998. As a result of the restatement, percentage and overage rents were adjusted for the second, third and fourth quarters of 1998 by $1,124, $912 and ($2,036), respectively. (Note 2) ** The sum of quarterly earnings per share may differ from yearly totals due to rounding and the fluxuation of weighted average units on a quarterly basis. *** Of which $.433 and $.308 represents a non-taxable return of capital for 1999 and 1998, respectively. 16. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following unaudited proforma summary financial information for 1999 and 1998, is presented as if the 1998 acquisition of NorthTown Mall and the 1999 issuances of Series A and Series B preferred units had been consummated as of January 1, 1998.
1999 1998 ------------- -------------- Revenues $ 133,565 $ 117,384 Income Before Extraordinary Item $ 29,787 $ 30,021 Net Income $ 28,802 $ 30,021 Basic Earnings Per OP Unit Income Before Extraordinary Item $ 1.40 $ 1.41 Net Income $ 1.36 $ 1.41 Diluted Earnings Per OP Unit Income Before Extraordinary Item $ 1.40 $ 1.40 Net Income $ 1.35 $ 1.40
The proforma financial information summarized above is presented for information purposes only and may not be indicative of what actual results of operations would have been had the 1998 acquisition of NorthTown Mall and the 1999 issuances of Series A and Series B preferred units been completed as of the beginning of the periods presented, nor does it purport to represent the results of operations for future periods. F-18 SCHEDULE II PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (DOLLARS IN THOUSANDS)
BALANCE AT BEGINNING CHARGED TO BALANCE AT OF YEAR EXPENSE DEDUCTIONS END OF YEAR ------------- ----------- ------------ ----------- Year ended December 31, 1999 Allowance for uncollectible accounts $ 741 $ 1,479 $ 1,003 $ 1,217 Year ended December 31, 1998 Allowance for uncollectible accounts $ 570 $ 537 $ 366 $ 741 Year ended December 31, 1997 Allowance for uncollectible accounts $ 489 $ 346 $ 265 $ 570
F-19 SCHEDULE III PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION (DOLLARS IN THOUSANDS)
GROSS AMOUNT AT WHICH INITIAL COSTS CAPITALIZED CARRIED AT CLOSE OF PERIOD DEPREC- --------------------- SUBSEQUENT ------------------------------ IABLE RELATED BUILDING & TO BLDG. & ACCUMULATED DATE OF DATE LIVES DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION(1) LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED YEARS - ----------- ------------ -------- ------------ ------------- -------- ------------ -------- ------------ ------------ -------- ----- REGIONAL MALLS Animas Valley Mall, Farmington, NM $ -- $ 3,902 $ 24,059 $ 1,730 $ 3,902 $ 25,789 $ 29,691 $ 2,893 -- 1995 40 Boise Towne Square, Boise, ID 29,248 9,218 -- 53,633 9,218 53,633 62,851 15,317 1987-88 1985-86 5-40 Cache Valley Mall, Logan, UT -- 909 -- 8,949 909 8,949 9,858 4,758 1975-76 1973-76 10-40 Cottonwood Mall, Holladay, UT 17,884 7,514 20,776 31,820 7,514 52,596 60,110 21,429 1981-87 1980 4-40 Eastridge Mall, Casper, WY -- 4,300 19,896 6,332 4,300 26,228 30,528 2,716 -- 1995 40 Grand Teton Mall, Idaho Falls, ID -- 5,802 28,614 4,367 7,743 31,040 38,783 2,865 -- 1996 40 Mall at Sierra Vista, Sierra Vista, AZ -- 1,660 16,068 -- 1,660 16,068 17,728 66 1998-99 1998 40 North Plains Mall, Clovis, NM 4,928 2,664 -- 13,015 2,664 13,015 15,679 3,990 1984-85 1979-84 10-40 NorthTown Mall, Spokane, WA 83,382 6,902 120,458 11,220 6,902 131,678 138,580 4,263 1997-98 1997 40 Pine Ridge Mall, Pocatello, ID -- 1,883 -- 21,934 1,883 21,934 23,817 8,990 1979-81 1979 10-40 Provo Towne Centre, Provo, UT 46,792 13,829 41,820 21,247 9,360 67,536 76,896 2,249 1997-98 1997 40 Red Cliffs Mall, St. George, UT -- 903 -- 13,846 903 13,846 14,749 3,619 1989-90 1989 3-40 Salem Center, Salem, OR -- 1,704 30,504 937 1,704 31,441 33,145 1,586 -- 1997 40 Silver Lake Mall, Coeur d'Alene, ID 12,165 4,055 21,379 444 4,055 21,823 25,878 1,435 -- 1997 40 Spokane Valley Mall, Spokane, WA 41,600 6,645 34,341 24,900 6,745 59,141 65,886 4,552 1990-97 1990 40 Three Rivers Mall, Kelso, WA 9,163 1,977 -- 20,680 1,977 20,680 22,657 6,170 1986-87 1984 10-40 Visalia Mall, Visalia, CA -- 6,146 31,812 1,323 6,146 33,135 39,281 2,223 -- 1997 40 White Mountain Mall, Rock Springs, WY -- 1,120 -- 15,550 1,120 15,550 16,670 6,642 1977-78 1977 40 COMMUNITY CENTERS Alameda Plaza, Pocatello, ID -- 500 -- 3,365 500 3,365 3,865 2,007 1973 1973 40 Anaheim Plaza, Anaheim, CA -- -- -- 2,053 -- 2,053 2,053 87 1980-81 1979 40 Austin Bluffs Plaza, Colorado Springs, CO -- 1,488 -- 1,923 1,488 1,923 3,411 682 1985 1979 3-40 Bailey Hills Plaza, Eugene, OR -- 157 -- 297 157 297 454 61 1988-89 1988 40 Baskin Robbins 17th St., Idaho Falls, ID -- 9 67 7 9 74 83 23 -- 1988 40 Boise Plaza, Boise, ID -- 322 -- 1,529 322 1,529 1,851 976 1970-71 1970 40 Boise Towne Plaza, Boise, ID -- 3,316 4,243 2,646 3,316 6,889 10,205 535 1996-97 1994 40 Cottonwood Square, Salt Lake City, UT -- 1,926 3,535 43 1,926 3,578 5,504 358 -- 1995 40 Division Crossing, Portland, OR -- 2,429 -- 4,495 2,429 4,495 6,924 1,053 1990-91 1990 20-40 Fort Union Plaza, Salt Lake City UT -- 21 -- 1,623 21 1,623 1,644 698 1979-84 -- 40 Fremont Plaza, Las Vegas, NV -- -- -- 2,317 -- 2,317 2,317 1,247 1976-80 -- 40 Fry's Shopping Plaza, Glendale, AZ -- 353 -- 4,625 1,254 3,724 4,978 1,710 1980-81 1980 40 Gateway Crossing, Bountiful, UT -- 3,644 -- 8,516 3,644 8,516 12,160 1,504 1990-92 1990 40
F-20 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION (DOLLARS IN THOUSANDS)
GROSS AMOUNT AT WHICH INITIAL COSTS CAPITALIZED CARRIED AT CLOSE OF PERIOD DEPREC- --------------------- SUBSEQUENT ------------------------------ IABLE RELATED BUILDING & TO BLDG. & ACCUMULATED DATE OF DATE LIVES DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION(1) LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED YEARS - ----------- ------------ -------- ------------ ------------- -------- ------------ -------- ------------ ------------ -------- ----- COMMUNITY CENTERS (CONTINUED) Halsey Crossing, Gresham, OR -- -- -- 3,173 -- 3,173 3,173 655 1989-91 -- 4-40 Nephi Bank, Nephi, UT -- 17 183 -- 17 183 200 149 -- 1976 -- North Temple Shops, Salt Lake City, UT -- 60 -- 177 60 177 237 96 1970 1970 40 Orem Plaza Center Street, Orem, UT -- 371 330 1,111 344 1,468 1,812 718 1976-87 1973 10-40 Orem Plaza State Street, Orem, UT -- 126 -- 697 126 697 823 391 1975 1973 29-40 Plaza 800, Sparks, NV -- 33 2,969 42 33 3,011 3,044 1,830 1974 -- 40 Plaza 9400, Sandy, UT -- -- -- 4,570 -- 4,570 4,570 2,181 1976-84 -- 10-40 Red Cliffs Plaza, St. George, UT -- -- 2,403 215 -- 2,618 2,618 315 1994-95 1994-95 40 River Pointe Plaza, West Jordan UT -- 1,130 -- 2,710 1,130 2,710 3,840 855 1987-88 1986-87 5-40 Riverside Plaza, Provo, UT -- 427 1,886 4,327 427 6,213 6,640 1,746 1978-81 1977 40 Twin Falls Crossing, Twin Falls, ID -- 125 -- 776 125 776 901 445 1976 1975 40 University Crossing, Orem, UT -- 230 -- 5,027 230 5,027 5,257 1,960 1971-92 1971 40 Woodlands Village, Flagstaff, AZ -- 2,068 5,329 236 2,068 5,565 7,633 752 -- 1994 40 Yellowstone Square, Idaho Falls, ID -- 355 -- 4,527 355 4,527 4,882 2,791 1972-77 1972 40 COMMERCIAL PROPERTIES First Security Place, Boise, ID -- 300 -- 3,253 300 3,253 3,553 1,652 1978-80 1978 10-40 Price Business Center - Commerce Park, West Valley City, UT -- 415 2,109 8,803 1,147 10,180 11,327 1,864 1980 1973-95 40 Price Business Center- Pioneer Square, Salt Lake City, UT -- 658 -- 10,061 651 10,068 10,719 3,559 1974-92 1973 3-40 Price Business Center- South Main, Salt Lake City, UT -- 317 -- 2,127 295 2,149 2,444 1,116 1967-82 1966-81 3-40 Price Business Center- Timesquare, Salt Lake City, UT -- 581 -- 9,948 546 9,983 10,529 4,217 1974-80 1972-80 5-40 Sears- Eastbay, Provo, UT 1,591 275 -- 2,079 275 2,079 2,354 561 1989-90 1989 40 OTHER REAL ESTATE Miscel- laneous Real Estate -- 1,164 17 10,415 4,059 7,537 11,596 470 -- 1980-98 40 ------------ -------- ------------ ------------ --------- ---------- ---------- ----------- TOTAL $ 246,753 $103,950 $ 412,798 $ 359,640 $ 105,959 $ 770,429 $ 876,388 $ 135,027 ============ ======== ============ ============ ========= ========== ========== ===========
- --------------------------- (1) Included are development costs subsequent to acquisition or opening of property. F-21 PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION (DOLLARS IN THOUSANDS) A summary of activity for real estate investments and accumulated depreciation is as follows:
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1999 1998 1997 --------------- --------------- -------------- Real Estate Investments Balance at Beginning of Year $ 815,756 $ 619,371 $ 453,241 Acquisitions -- 128,000 96,615 Improvements 62,945 69,854 69,921 Disposition of Property (2,313) (1,469) (406) --------------- --------------- --------------- Balance at End of Year $ 876,388 $ 815,756 $ 619,371 =============== =============== =============== Accumulated Depreciation Balance at Beginning of Year $ 114,136 $ 98,404 $ 87,318 Depreciation 23,204 17,072 11,492 Depreciation of Disposed Property (2,313) (1,340) (406) --------------- --------------- -------------- Balance at End of Year $ 135,027 $ 114,136 $ 98,404 =============== =============== ==============
F-22 EX-10.18 2 EXHIBIT 10.18 FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP The undersigned, being the sole general partner of Price Development Company, Limited Partnership (the "Partnership"), a limited partnership formed under the Maryland Revised Uniform Limited Partnership Act and pursuant to the terms of that certain Second Amended and Restated Agreement of Limited Partnership, dated July 15, 1999 (the "Partnership Agreement"), does hereby amend the Partnership Agreement as follows: 1. EXHIBIT OF PARTNERS AND PARTNERSHIP INTERESTS. EXHIBIT A to the Partnership Agreement is hereby deleted in its entirety and replaced by EXHIBIT A hereto which identifies, as December 31, 1999, each Partner of the Partnership, the number of Partnership Units held by such Partner and such Partner's respective Percentage Interest in the Partnership. 2. RATIFICATION. Except as expressly modified by this Fourth Amendment, all of the provisions of the Partnership Agreement are affirmed and ratified and remain in full force and effect. Capitalized terms used but not defined in this Fourth Amendment shall have the same meanings that are ascribed to them in the Partnership Agreement. Dated: March 10, 2000 ----------------- JP Realty, Inc., as General Partner By: /s/ G. Rex Frazier ----------------------- Name: G. Rex Frazier Title: President EXHIBIT A PARTNERS AND PARTNERSHIP INTERESTS
Partnership Percentage Name of Partner Units Interest - ---------------------------------------- --------------------- ---------------------- GENERAL PARTNER JP Realty, Inc. 35 Century Park-Way Salt Lake City, Utah 84115 16,825,665 82.229410% LIMITED PARTNERS Boise Mall Investment Company, Ltd. 824,411 4.02901% Brown, Mike 125 0.00061% Bybee, Terry 320 0.00156% Cache Valley Mall Partnership, Ltd. 328,813 1.60696% Chandler, Harry 100 0.00049% Clauson, Pat 100 0.00049% Cloward, Burke 35,460 0.17330% Cordano, Alan 765 0.00374% Cordano, James 1,531 0.00748% Curtis, Greg 24 0.00012% Curtis, Vardell 125 0.00061% East Ridge Partnership 100 0.00049% Enslow, Mike 320 0.00156% Fairfax Holding, LLC 786,226 3.84240% Frank, Alan 5,486 0.02681% Frazier, G. Rex 3,680 0.01798% Frei, Michael 6,817 0.03332% Gillette, Jerry 100 0.00049% Hall Investment Company 10,204 0.04987% Hansen, Kenneth 5,102 0.02493% JCP Realty, Inc. 350,460 1.71275% KFC Advertising 5,487 0.02682% Kelley, Chad 125 0.00061% Kelley, Paul 25 0.00012% King American Hospital, Ltd. 63,424 0.30996% King Provo, Ltd. 64,872 0.31704% King, Warren P. 6,244 0.03052% Mendenhall, Paul K. 214 0.00105% Mulkey, Tom 100 0.00049% North Plains Development Company, Ltd. 19,033 0.09302% North Plains Land Company, Ltd. 1,758 0.00859% Olson, Carl 1,894 0.00926% Orton, Byron 125 0.00061% Peterson, Martin G. 692 0.00338% Pine Ridge Development Company, Ltd. 77,641 0.37944% Pine Ridge Land Company, Ltd. 5,176 0.02530% Price, John 200 0.00098% Price, Steven 350 0.00171%
Partnership Percentage Name of Partner Units Interest - ---------------------------------------- --------------------- ---------------------- Price 800 Company, Ltd. 156,615 0.76540% Price Commerce, Ltd. 63,423 0.30996% Price East Bay, Ltd. 37,157 0.18159% Price Eugene Bailey Company, Ltd. 17,497 0.08551% Price Fremont Company, Ltd. 166,315 0.81281% Price Glendale Company, Ltd. 3,935 0.01923% Price Orem Investment Company, Ltd. 66,747 0.32620% Price Plaza 800 Company, Ltd. 12,199 0.05962% Price Riverside Company, Ltd. 10,983 0.05368% Price Rock Springs Company, Ltd. 11,100 0.05425% Price Taywin Company, Ltd. 106,381 0.51990% Priet, Nettie 100 0.00049% Red Cliff Mall Investment Company 167,379 0.81801% Roebbelen Engineering 72,000 0.35187% Souvall, Sam 23,371 0.11422% Taycor Ltd. 35,462 0.17331% Tech Park II Company, Ltd. 4,929 0.02409% Timothy, Jodi 150 0.00073% Vise, Phil 160 0.00078% Watcott, Keith 35,460 0.17330% Watkins, Gary 5,102 0.02493% Wilcher, Abe 5,306 0.02593% Wilcher, Lena 10,000 0.04887% YSP 16,787 0.08204% -------------------- ---------------------- Total 20,461,852 100.00000% -------------------- ---------------------- SSB Tax Advantaged Exchange Fund I, LLC 510,000 100.00000%{1} -------------------- ---------------------- Belcrest Realty Corporation 2,575,000 73.02632%{2} Belair Real Estate Corporation 1,255,000 26.97368%{2} -------------------- ---------------------- 3,800,000 100.00000% -------------------- ----------------------
- -------------------------- 1. Represents all of the Series A Preferred Units issued by the Partnership. 2. Represents a percentage of the Series B Preferred Units issued by the Partnership. EX-23 3 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (No. 333-34835 and No. 333-34835-01) of Price Development Company, Limited Partnership of our report dated February 2, 2000, on our audits of the consolidated financial statements and financial statement schedules of Price Development Company, Limited Partnership as of December 31, 1999 and 1998, and for the years ended December 31, 1999, 1998 and 1997, which report is included in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP - ------------------------------- PricewaterhouseCoopers LLP Salt Lake City, Utah March 24, 2000 EX-27 4
5 THE SCHEDULE CATAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR YEAR YEAR DEC-31-1999 DEC-31-1998 DEC-31-1997 DEC-31-1999 DEC-31-1998 DEC-31-1997 $7,767 $5,123 0 0 0 0 11,585 10,454 0 (1,217) (741) 0 0 0 0 0 0 0 0 0 0 0 0 0 776,226 733,155 0 0 0 0 0 0 0 0 0 0 104,571 0 0 213,422 236,921 0 0 0 0 776,226 733,155 0 0 0 0 133,565 109,069 82,973 0 0 0 0 0 0 69,418 55,631 40,844 0 0 0 27,769 20,501 9,066 0 0 0 0 0 0 0 0 0 0 0 0 (801) 0 (133) 0 0 0 25,347 27,950 27,321 $1.44 $1.59 $1.56 $1.44 $1.58 $1.55 The financial statements reflect an unclassified balance sheet due to the nature of the Company's industry - Real Estate. The Company utilizes a condensed balance sheet format for 10-K reporting. Amounts are included in Other Assets. Amount is comprised of $97,187 of expenses less interest expense of $27,769 reflected elsewhere in this Financial Data Schedule. Amount is comprised of $76,132 of expenses less interest expense of $20,501 reflected elsewhere in this Financial Data Schedule. Amount is comprised of $49,910 of expenses less interest expense of $9,066 reflected elsewhere in this Financial Data Schedule.
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