-----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, IVPuwRqaWGnf1e03cq3oMuyAtBLo4iLYtzauQtWGw+6XOoSqe8iul9N3gk5XK9lO NFevnMKz2GapvRG9e9A5kw== 0000950144-00-004043.txt : 20000331 0000950144-00-004043.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950144-00-004043 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRT PROPERTY CO CENTRAL INDEX KEY: 0000311099 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 581366611 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-07859 FILM NUMBER: 584396 BUSINESS ADDRESS: STREET 1: 200 GALLERIA PKWY STE 1400 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7709554406 MAIL ADDRESS: STREET 1: 200 GALLERIA PKWY STREET 2: STE 1400 CITY: ATLANTA STATE: GA ZIP: 30339 10-K405 1 IRT PROPERTY COMPANY 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [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 For the Transition Period From to ------- -------- Commission File Number 1-7859 ----------------------------- IRT PROPERTY COMPANY -------------------- (Exact name of registrant as specified in its charter) Georgia 58-1366611 (State of other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 200 Galleria Parkway, Suite 1400 Atlanta, Georgia 30339 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(770) 955-4406 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of each class Name of each exchange on which registered Shares of Common Stock New York Stock Exchange $1 Par Value
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] The aggregate market value of the common stock of the registrant held by nonaffiliates of the registrant at March 17, 2000 was $254,241,935. 32,030,480 shares of Common Stock, $1 Par Value, were outstanding at March 17, 2000. DOCUMENTS INCORPORATED BY REFERENCE The information called for by Part III (Items 10, 11, 12 and 13) is incorporated by reference to the registrant's definitive proxy statement for the 2000 Annual Meeting of Shareholders of the Company to be filed pursuant to Regulation 14A. 2 CERTAIN MATTERS DISCUSSED IN THIS REPORT CONTAIN FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION, TAX CONSIDERATIONS, COMPETITIVE CONDITIONS, REGULATION, DISTRIBUTIONS TO SHAREHOLDERS, DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND LIQUIDITY OF THE COMPANY AND CERTAIN OTHER MATTERS. READERS OF THIS REPORT SHOULD BE AWARE THAT THERE ARE VARIOUS FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS MADE IN THIS REPORT, WHICH INCLUDE, WITHOUT LIMITATION, CHANGES IN TAX LAWS OR REGULATIONS; VACANCIES AND LEASE RENEWALS; TENANT CLOSINGS; THE FINANCIAL CONDITION (INCLUDING POSSIBLE MERGERS OR BANKRUPTCIES) OF TENANTS; COMPETITION; CHANGES IN NATIONAL AND LOCAL ECONOMIC CONDITIONS AND POSSIBLE ENVIRONMENTAL LIABILITIES AND THOSE FACTORS DISCUSSED IN THIS REPORT UNDER THE SECTION ENTITLED "RISK FACTORS." 2 3 PART I ITEM 1 Business General Development of Business. IRT Property Company ("IRT"), founded in 1969 and a Georgia corporation since 1979, is an owner, operator, developer and redeveloper of neighborhood and community shopping centers located primarily in the southeastern United States and usually anchored by necessity-oriented retailers such as supermarkets, drug stores and/or discount variety stores. IRT is a self-administered and self-managed equity real estate investment trust ("REIT") with acquisition, development, redevelopment, financing, property management and leasing capabilities. IRT has elected since inception to be treated as a REIT under the Internal Revenue Code (the "Code"). IRT intends to continue such election, although it is not required to do so. For the special provisions applicable to REITs, reference is made to Sections 856-860 of the Code, as amended. IRT has three wholly-owned subsidiaries (collectively, the "Company"). VW Mall, Inc. ("VWM") was formed in July 1994. VWM is not currently engaged in any activities but may do so in the future. IRT Alabama, Inc. ("IRTAL") was formed in August 1997. Upon its formation, IRTAL purchased Madison Centre in Madison, Alabama and has no other significant operations beyond this property. IRT Management Company ("IRTMC") was formed in 1990. IRTMC currently holds 91.9% of the operating units of IRT Partners L.P. (see description below). The Company also has affiliations with three other subsidiaries that are not wholly-owned. IRT Capital Corporation ("IRTCC"), a taxable subsidiary of the Company, was formed under the laws of Georgia in 1996. IRTCC has the ability to develop properties, buy and sell properties, provide equity to developers and perform third-party management, leasing and brokerage functions. The Company holds 96% of the non-voting common stock and 1% of the voting common stock of IRTCC. The remaining voting common stock is currently held by a former member of the Board of Directors and an executive officer of the Company. IRTCC, which is accounted for by the Company under the equity method, is taxed as a regular corporation and not as a REIT. IRT Partners, L.P. ("LP"), a Georgia limited partnership, was formed in 1998 to enhance the Company's acquisition opportunities by offering potential sellers the ability to engage in tax-deferred sales in exchange for Operating Partnership Units ("OP Units") of LP which are redeemable for shares of the Company's common stock. IRT serves as general partner of LP and made an initial contribution of 20 shopping centers and related assets and cash to LP in exchange for OP Units and partnership interests. Subsequent to the formation of LP, the Company has contributed cash to acquire four shopping centers, and LP has divested three shopping centers. As a result, IRT and IRTMC own approximately 92.9% of LP, which is included in the Company's consolidated financial statements. LP currently has several unaffiliated limited partners resulting from the acquisition of three Florida properties by LP in August 1998. The unaffiliated limited partners have the option to require LP to redeem their OP Units at any time, in which event LP has the option to purchase the OP 3 4 Units for cash or convert them into one share of the Company's common stock for each OP Unit. In connection with the Company's formation of LP and its proposed operations, LP has guaranteed the Company's bank indebtedness and its senior indebtedness. IRT Capital Corporation II ("IRTCCII"), a taxable subsidiary of the Company, was formed under the laws of Georgia in 1999. IRTCCII has the ability to develop properties, buy and sell properties, provide equity to developers and perform third-party management, leasing and brokerage functions. The Company holds 96% of the non-voting common stock and 1% of the voting common stock of IRTCCII. The remaining voting common stock is currently held by an executive officer and a director of the Company. IRTCCII, which is accounted for by the Company under the equity method, is taxed as a regular corporation and not as a REIT. IRTCCII currently is in the process of developing two shopping centers in Florida. In connection with the Company's formation of IRTCCII and its proposed operations, IRTCCII has guaranteed the Company's bank indebtedness and its senior indebtedness. Financial Information and Description of Business. The Company's fundamental business is the ownership of real estate investments which consist principally of equity investments in income-producing properties, with primary emphasis on neighborhood and community shopping centers in the southeastern United States. The Company's investment portfolio also includes one industrial property, three investments which are accounted for as direct financing leases and two mortgage loans. In addition, the Company has authority to make other types of equity and mortgage investments in real estate. For a description of the Company's individual investments and of material developments during 1999 regarding these investments and the Company as a whole, reference is made to Items 2 and 7 hereof. Readers are also urged to review the Company's Annual Report to Shareholders for the year ended December 31, 1999. In making new real estate investments, the Company intends to continue to place primary emphasis on obtaining equity interests in well-located income-producing properties with attractive yields and potential for increases in income and capital appreciation. The Company focuses on neighborhood and community shopping centers, primarily in the southeastern United States; however, the Company will consider acquisitions in other regions. The Company also, from time to time, considers the disposition or exchange of existing investments in order to improve its investment portfolio or increase its funds from operations. Existing investments are continuously reviewed by Company management, and appropriate programs to renovate and modernize properties are designed and implemented in order to improve leasing arrangements, thereby increasing funds from operations and property values. The Company's investment and portfolio management philosophy is designed to implement its overall objective of maximizing funds from operations and distributions to shareholders. The Company directly provides property management and leasing services for all of its operating properties. Self-management enables the Company to emphasize and more closely control leasing and property management. Internal property management also provides the Company opportunities for operating efficiencies by enabling it to acquire additional properties without proportionate increases in property management expenses. The Company's property management program is staffed by property management and leasing professionals located in offices in Atlanta, GA; Charlotte, NC; Orlando, FL; Ft. Lauderdale, FL and New Orleans, LA. In 1999 the Company initiated a development program through IRTCCII with the acquisition 4 5 of two parcels of land in Florida. The Company has commenced the development of these properties and continues to search for other development opportunities. The Company maintains a conservative approach toward development and a philosophy similar to its investment and portfolio management philosophy. The results of the Company's operations depend upon the performance of its existing investment portfolio, the availability of suitable opportunities for new investments, the yields then available on such new investments and the Company's cost of capital. Yields will vary with the type of investment involved, the condition of the financial and real estate markets, the nature and geographic location of the investment, competition and other factors. The performance of a real estate investment company is strongly influenced by the cycles of the real estate industry. As financial intermediaries providing equity funds for real estate projects, real estate investment companies are generally subject to the same market and economic forces as other real estate investors. Competitive Conditions. In seeking new investment opportunities, the Company competes with other real estate investors, including pension funds, foreign investors, real estate partnerships, other REITs, such as Weingarten Realty Investors and Regency Realty Corporation, and other domestic real estate companies. On properties presently owned by the Company or in which it has investments, the Company and its tenants and borrowers compete with other owners of like properties, such as Regency Realty Corporation and JDN Realty Corporation, for tenants and/or customers depending on the nature of the investment. Management believes that the Company is well positioned to compete effectively for new investments and tenants. For any borrowed funds that may be used in new investment activity, the Company would be in competition with other borrowers seeking both secured and unsecured borrowings in the banking, real estate lending and public debt markets. Regulation. The Company is subject to federal, state and local environmental regulations regarding the ownership, development and operation of real property. The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state laws subject the owner of real property to claims or liability for the costs of removal or remediation of hazardous substances that are disposed of on real property in amounts that require removal or remediation. Liability under CERCLA and applicable state superfund laws can be imposed on the owner of real property or the operator of a facility without regard to fault or even knowledge of the disposal of hazardous substances. The failure to undertake remediation where it is necessary may adversely affect the owner's ability to sell real estate or borrow money using such real estate as collateral. In addition to claims for cleanup costs, the presence of hazardous substances on a property could result in claims by private parties for personal injury or property damage. The Company has obtained independent Phase I environmental site assessments (which generally do not include environmental sampling, monitoring or laboratory analysis) for property acquisitions beginning in 1989, and otherwise as required by its lenders. Except as otherwise disclosed and based upon information presently available to the Company, the Company has no reason to believe that any environmental contamination has occurred nor any violation of any 5 6 applicable environmental law, statute, regulation or ordinance exists that would have a material adverse effect on the Company's financial position. The Company presently carries limited insurance coverage for the types of environmental risks described herein. For the years commencing January 1, 2000, the Company has acquired environmental and pollution legal liability insurance coverage to mitigate the associated risks. Employees. The Company presently employs fifty-nine people located in five locations in the southeast United States. RISK FACTORS Set forth below are the risks that management believes are material to investors in the Company's common stock ("Shares") or limited Operating Partnership Units of IRT Partners L.P. ("OP Units"), which are redeemable on a one-for-one basis for Shares or their cash equivalent. We refer to the Shares and the OP Units together as our "Securities," and the investors who own Shares or OP Units as our "Security Holders." Owning and Operating Retail Real Estate Entails Certain Risks That Could Adversely Affect Our Performance. Dependence on the Retail Industry. Our properties consist predominately of community and neighborhood shopping centers. The market for retail space may be adversely affected by consolidation of retailers, the relatively weak financial condition of certain retailers and overbuilding in certain markets. Market rents and our performance could be adversely affected. Internet Sales. Retail sales over the Internet have been increasing rapidly. The success of electronic commerce businesses in attracting customers of our tenants could adversely affect our tenants and other companies, and thus the demand for retail space. A reduction in the demand for retail space could adversely affect our performance. Financial Condition of Tenants. If any of our anchor tenants or a sufficient number of key tenants were unable to make their scheduled rental payments, due to poor financial condition, we could experience a materially adverse effect on our financial condition. Bankruptcy of Tenants. A financially troubled tenant could seek the protection of the bankruptcy laws, which might result in rejection and termination of the tenant's lease. Whether or not a financially troubled tenant seeks the protection of the bankruptcy laws, we could experience delays and incur significant costs and delays in enforcing our rights against a financially troubled tenant that does not pay its rent when due. In October 1999, Jitney Jungle Stores of America ("Jitney Jungle") filed for reorganization under Chapter 11 of the United States Bankruptcy Code. At the time of the filing, the Company had leases with Jitney Jungle at ten store locations. Jitney Jungle has 6 7 disavowed three of the leases, one of which the Company has since re-leased to a national tenant. In the event that Jitney Jungle, seeking protection under the bankruptcy laws, rejects or terminates any of its leases, such rejection or termination could affect the Company's performance. The timing and effects of the Jitney Jungle bankruptcy proceedings on the Company are uncertain, but the Company is participating in these proceedings and is evaluating its alternatives with respect to each of its leases with Jitney Jungle. Vacancies and Lease Renewals. Our anchor tenants' leases generally have terms of up to 20 years, often with one or more renewal options. We may not be able to find a replacement tenant at the end or nonrenewal of a lease. The space may remain vacant or may be re-leased at terms that vary materially with the original terms. Tenant Closings. Certain leases permit the tenant to close its operations at the leased location. Although the tenant would still be responsible for its rental obligations, any rents based on the sales of that tenant could be lost. Such a closure could adversely affect customer traffic as well as the other tenants at a shopping center. Rental rates and occupancy may also be affected adversely at such a center. Real Estate Investments Are Illiquid. Real estate investments generally cannot be sold quickly. We may not be able to alter our portfolio promptly in response to economic or other conditions. Real Estate Industry Risks May Affect Our Performance. Concentration in the Southeast. Most of our real estate portfolio is located in the southeastern United States. This region has experienced rapid growth in recent years. Our business could be adversely affected generally by changes in the region's growth and economic condition, or specifically in the local markets for retail space. Uncertainty of Meeting Acquisition Objectives. We continually seek additional shopping centers and portfolios of shopping centers. We seek purchases with attractive initial yields and/or which may enhance our revenues and funds from operations through renovation, development, expansion and re-leasing programs. We also evaluate mergers and acquisitions with companies engaged in businesses similar to ours. We incur certain costs to evaluate possible transactions. We may not complete such transactions and certain costs are not recoverable in the event the transactions are not consummated. Also, there can be no assurance we will be able to meet our acquisition goals at any given time. Uncertainty of Acquired Property Performance. We cannot assure that any acquisition will increase our revenues or funds from operations or result in a certain yield. Competition. We compete with numerous other real estate companies. Other retail properties within our markets compete with us for tenants. The location and number of competitive retail properties could affect the Company's occupancy levels and rental increases. Development Competition. Other real estate companies compete with us for development, redevelopment and acquisition opportunities. Such competitors may be willing and able to pay more for such opportunities than we would. This may increase the prices sought by sellers of these properties. 7 8 Environmental Problems Are Possible and Could Be Costly. Possible Environmental Liabilities. An owner or operator of real estate may be liable for the costs of removal of the releases of certain hazardous or toxic substances. The presence of hazardous or toxic substances on or near our properties, or the failure to properly clean them up, may adversely affect our ability to sell or rent the property or to use such property as collateral for our borrowings. Corrective costs could adversely affect our financial condition and performance. Lack of Environmental Analyses. The Company has obtained independent Phase I environmental site assessments (which generally do not include environmental sampling, monitoring or laboratory analysis) for property acquisitions beginning in 1989, and otherwise as required by its lenders. Except as otherwise disclosed and based upon information presently available to the Company, the Company has no reason to believe that any environmental contamination has occurred nor any violation of any applicable environmental law, statute, regulation or ordinance exists that would have a materially adverse effect on the Company's financial position. The Company presently carries limited insurance coverage for the types of environmental risks described herein. For the years commencing January 1, 2000, the Company has acquired environmental and pollution legal liability insurance coverage to mitigate the associated risks. However, there is no assurance that this insurance will be adequate to protect the Company against unforeseen liabilities, which could adversely affect the Company's performance. Presence of Dry Cleaning Solvents. A number of Company properties include facilities leased to dry cleaners. At some of these properties, dry cleaning solvents have been discovered in soil and or groundwater. In each such instance either the amount detected was below reportable limits or the state regulatory authority has informed the Company that no further enforcement action would be taken. In Florida, the state regulatory authority has admitted the affected Company property into the state-sponsored fund responsible for the clean up of dry cleaning spills. Neither the admission of a property into the Florida fund nor the assurances of the relevant state regulatory authority ensures that the Company will not incur costs associated with corrective action. American Disabilities Act. Compliance with the Americans with Disabilities Act and Other Laws. Our properties must comply with the federal Americans with Disabilities Act of 1990 (the "ADA"). This law requires that disabled persons must be able to enter and use public properties like our shopping centers. The ADA, or other federal, state and local laws may require us to modify our properties and may limit renovations. If we fail to obey such laws, we may pay fines or damages. Some Potential Losses Are Not Covered by Insurance. We carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our properties. We believe this insurance coverage is reasonably adequate. Certain types of losses, such as lease and other contract claims generally are not insured. Should an uninsured loss or a loss in excess of insured limits occur, we could lose some or all of our investment in a property, and the anticipated future revenue from the property could be adversely affected. 8 9 Notwithstanding any such loss, we would still owe mortgage debt or other financial obligations related to the property. Our Performance Is Subject to Risks Associated with Debt Financing. At December 31, 1999, we had $290 million in long-term debt. On December 31, 1999, our debt-to-total market capitalization ratio was 53% without conversion of the subordinated debentures or the OP Units and 49% assuming conversion of the subordinated debentures and the OP Units. Of our long-term debt, 42% is secured by mortgages on our properties. We must pay our debts on time. We cannot pay dividends to our Security Holders unless our debt has been paid when due. Security Holders May Be Adversely Affected by the Dilution of Common Stock. The Company may issue additional Shares or OP Units without Security Holder approval. Additionally, each OP Unit may be redeemed by the holder for one share of common stock or, at our option, the cash value of one share of common stock. Such actions may dilute a Shareholder's interest in the Company. Our Liquidity Is Subject to the Restrictions on Sales of Certain Properties. We have agreements that limit our sale of certain properties acquired by LP for up to 10 years. We may enter into similar agreements with future sellers of properties to LP. These agreements may prevent sales of properties that could be advantageous to our Security Holders. The Ability to Effect Changes in Control of the Company May Be Limited. Certain provisions of the law, our charter documents and Company policies may have the effect of delaying or preventing a change in control of the Company or other transaction that could, if consummated, provide investors with a premium over the then-prevailing market price of the Company's securities. These provisions include the Shareholders Rights Plan and the ownership limit described below. Also, any future series of preferred stock may have certain voting provisions that could delay or prevent a change of control or other transaction that might involve a premium price or otherwise be of benefit to other equity interests in the Company. For a description of the Company's Shareholders Rights Plan, see the Company's report on Form 8-K dated August 21, 1998. The Company Is Subject to Ownership Limits and Certain Adverse Effects of Failing to Qualify as a Reit. Concentration of Ownership of the Company Is Limited. In order to qualify as a REIT under the Code we must satisfy various tests related to the sources and amounts of our income, the nature of our assets and our stock ownership. For example, not more than 50% in value of the outstanding shares of the Company may be owned, directly or indirectly, by five or fewer individuals. Our charter authorizes our directors to take such action as may be required to preserve our qualification as a REIT including placing limits on the ownership of our securities. These limits may have the ancillary effect of delaying, deferring or preventing a change in control of the Company. 9 10 REIT Investment Limitations. We must hold certain types of real estate and other investments. This may limit our ability to diversify our assets outside of real estate. Adverse Effects of Failing to Qualify as a REIT. If the Company fails to qualify as a REIT under the Code, it will be subject to income taxes on its taxable income. The Company also may be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This would reduce the net earnings of the Company available for investment or distribution to Security Holders because of the additional tax liability for the year(s) involved. In addition, distributions to our Security Holders would no longer be required, which would likely substantially reduce, or even eliminate, any dividends paid by the Company to its shareholders. 10 11 ITEM 2 (In thousands, except for square footage) Properties The following tables and notes thereto describe the properties in which the Company had investments at December 31, 1999, as well as the mortgage indebtedness to which the Company's investments were subject. Reference is made to Note 3 to the consolidated financial statements included as a part of this report for information on minimum base rentals on noncancellable operating leases for the next five years and thereafter. I. EQUITY INVESTMENTS (LAND AND BUILDINGS) The Company had a fee or leasehold interest in land and improvements thereon as follows:
Percent Date Leased Year Description Acquired Area 12/31/99 Completed ----------- -------- ---- -------- --------- SHOPPING CENTERS Abbeville Plaza 4/86 59,525 sq. ft. 19% 1970 Abbeville, SC Alafaya Commons 11/96 120,586 sq. ft. 90% 1987 Orlando, FL Ambassador Row 12/94 193,982 sq. ft. 98% 1980 & Lafayette, LA 1991 Ambassador Row Courtyards 12/94 155,483 sq. ft. 61% 1986 & Lafayette, LA 1991 Asheville Plaza (3) 4/86 49,800 sq. ft. 100% 1967 Asheville, NC Bay Pointe Plaza (3) 12/98 97,390 sq. ft. 93% 1984 St. Petersburg, FL Bluebonnet Village 12/94 90,215 sq. ft. 99% 1983 Baton Rouge, LA The Boulevard 12/94 68,012 sq. ft. 54% 1976 & Lafayette, LA 1994 Carolina Place 5/89 36,560 sq. ft. 100% 1989 Hartsville, SC Centre Point Plaza (3) 12/92 & 163,642 sq. ft. 100% 1989 & Smithfield, NC 12/93 1993 Chadwick Square (3) 1/92 31,700 sq. ft. 100% 1985 Hendersonville, NC Charlotte Square (3) 8/98 96,188 sq. ft. 95% 1980 Port Charlotte, FL Chastain Square 12/97 74,315 sq. ft. 96% 1981 Atlanta, GA
11 12 I. EQUITY INVESTMENTS (LAND AND BUILDINGS) continued
Percent Date Leased Year Description Acquired Area 12/31/99 Completed ----------- -------- ---- -------- --------- Chelsea Place 7/93 81,144 sq. ft. 100% 1992 New Port Richey, FL Chester Plaza 4/86 & 71,443 sq. ft. 66% 1967 & Chester, SC 2/92 1992 Chestnut Square (3) 1/92 39,640 sq. ft. 100% 1985 Brevard, NC Colony Square 2/88 50,000 sq. ft. 100% 1987 Fitzgerald, GA Commerce Crossing 12/92 100,668 sq. ft. 100% 1988 Commerce, GA Country Club Plaza 12/94 64,686 sq. ft. 86% 1982 Slidell, LA Countryside Shops 6/94 173,161 sq. ft. 97% 1986, 1988 Cooper City, FL & 1991 The Crossing 12/94 113,989 sq. ft. 100% 1988 & Slidell, LA 1993 Daniel Village 3/98 164,549 sq. ft. 91% 1954 & Augusta, GA 1997 Delchamps Plaza 4/88 66,857 sq. ft. 100% 1987 Pascagoula, MS Douglas Commons 8/92 97,027 sq. ft. 99% 1988 Douglasville, GA Eden Centre (3) 11/94 56,355 sq. ft. 100% 1991 Eden, NC Elmwood Oaks 1/92 130,284 sq. ft. 100% 1989 Harahan, LA Fairview Oaks 6/97 77,052 sq. ft. 100% 1997 Ellenwood, GA Forest Hills Centre (3) 8/90 74,180 sq. ft. 86% 1990 Wilson, NC Forrest Gallery (3) 12/92 214,450 sq. ft. 98% 1987 Tullahoma, TN Ft. Walton Beach Plaza 7/86 48,248 sq. ft. 11% 1986 Fort Walton Beach, FL The Galleria (3) 8/86 & 92,344 sq. ft. 92% 1986, 1990 Wrightsville Beach, NC 12/87 & 1996 Grassland Crossing 2/97 90,906 sq. ft. 100% 1996 Alpharetta, GA
12 13 I. EQUITY INVESTMENTS (LAND AND BUILDINGS) continued
Percent Date Leased Year Description Acquired Area 12/31/99 Completed ----------- -------- ---- -------- --------- Greenwood 7/97 134,132 sq. ft. 86% 1982 & Palm Springs, FL 1994 Gulf Gate Plaza 6/79 174,566 sq. ft. 79% 1969 & Naples, FL 1974 Heritage Walk 6/93 159,362 sq. ft. 100% 1991 & Milledgeville, GA 1992 Hoffner Plaza 6/79 6,000 sq. ft. 67% 1972 Orlando, FL Lancaster Plaza 4/86 77,400 sq. ft. 91% 1971 Lancaster, SC Lancaster Shopping Center 8/86 & 29,047 sq. ft. 89% 1963 & Lancaster, SC 12/87 1987 Lawrence Commons (3) 8/92 52,295 sq. ft. 98% 1987 Lawrenceburg, TN Lexington Shopping Center 6/88 & 36,535 sq. ft. 100% 1981 & Lexington, VA 6/89 1989 Mableton Crossing 6/98 86,819 sq. ft. 99% 1997 Mableton, GA Macland Pointe 1/93 79,699 sq. ft. 97% 1992 & Marietta, GA 1993 Madison Centre 8/97 64,837 sq. ft. 94% 1997 Madison, AL Market Place 4/97 73,686 sq. ft. 96% 1976 Norcross, GA McAlpin Square (2) 12/97 176,807 sq. ft. 87% 1979 Savannah, GA Millervillage 12/94 94,559 sq. ft. 93% 1983 & Baton Rouge, LA 1992 New Smyrna Beach Regional 8/92 118,451 sq. ft. 100% 1987 New Smyrna Beach, FL North River Village Center 12/92 & 177,128 sq. ft. 100% 1988 & Ellenton, FL 12/93 1993 North Village Center (1) 8/86 60,356 sq. ft. 65% 1984 North Myrtle Beach, SC Old Kings Commons 5/88 84,759 sq. ft. 100% 1988 Palm Coast, FL Palm Gardens 6/79 49,890 sq. ft. 17% 1970 Largo, FL
13 14 I. EQUITY INVESTMENTS (LAND AND BUILDINGS) continued
Percent Date Leased Year Description Acquired Area 12/31/99 Completed ----------- -------- ---- -------- --------- Parkmore Plaza 12/92 159,067 sq. ft. 99% 1986 & Milton, FL 1992 Paulding Commons 8/92 192,391 sq. ft. 100% 1991 Dallas, GA Pensacola Plaza 7/86 56,098 sq. ft. 100% 1985 Pensacola, FL Pinhook Plaza 12/94 192,501 sq. ft. 75% 1979 & Lafayette, LA 1992 Plaza Acadienne (2) 12/94 105,419 sq. ft. 100% 1980 Eunice, LA Plaza North (3) 8/92 47,240 sq. ft. 100% 1986 Hendersonville, NC Powers Ferry Plaza 5/97 83,101 sq. ft. 83% 1979 & Marietta, GA 1983 Providence Square (3) 12/71 85,930 sq. ft. 89% 1973 Charlotte, NC Riverside Square (3) 8/98 103,241 sq. ft. 98% 1987 Coral Springs, FL Riverview Shopping Center (3) 3/72 130,058 sq. ft. 88% 1973 & Durham, NC 1994 Salisbury Marketplace (3) 8/96 76,970 sq. ft. 93% 1987 Salisbury, NC Scottsville Square 8/92 38,450 sq. ft. 83% 1986 Bowling Green, KY Seven Hills 7/93 64,590 sq. ft. 99% 1991 Spring Hill, FL Shelby Plaza (2) (3) 4/86 103,000 sq. ft. 87% 1972 Shelby, NC Sherwood South 12/94 75,607 sq. ft. 98% 1972, 1988 Baton Rouge,LA & 1992 Shoppes at Lago Mar (3) 2/99 82,613 sq. ft. 100% 1995 Miami, FL Shoppes of Silverlakes 11/97 126,638 sq. ft. 93% 1995 & Pembroke Pines, FL 1996 Siegen Village 12/94 174,578 sq. ft. 100% 1988 & Baton Rouge, LA 1996 Smyrna Village (3) 8/92 83,334 sq. ft. 100% 1992 Smyrna, TN Smyth Valley Crossing 12/92 126,841 sq. ft. 98% 1989 Marion, VA South Beach Regional 8/92 289,319 sq. ft. 96% 1990 & Jacksonville Beach, FL 1991
14 15 I. EQUITY INVESTMENTS (LAND AND BUILDINGS) continued
Percent Date Leased Year Description Acquired Area 12/31/99 Completed ----------- -------- ---- -------- --------- Spalding Village 8/92 235,318 sq. ft. 100% 1989 Griffin, GA Spring Valley 3/98 75,415 sq. ft. 100% 1988 & Columbia, SC 1997 Stadium Plaza 8/92 70,475 sq. ft. 100% 1988 Phenix City, AL Stanley Market Place (3) 1/92 40,364 sq. ft. 100% 1980 & Stanley, NC 1991 Tamarac Town Square (3) 8/98 123,385 sq. ft. 93% 1982 Tamarac, FL Tarpon Heights 1/95 56,605 sq. ft. 100% 1982 Galliano, LA Thomasville Commons 8/92 148,754 sq. ft. 100% 1991 Thomasville, NC Town & Country 1/98 71,283 sq. ft. 100% 1993 Kissimmee, FL Treasure Coast (3) 8/98 133,781 sq. ft. 99% 1970 & Vero Beach, FL 1995 Venice Plaza (1) 6/79 155,987 sq. ft. 63% 1971 & Venice, FL 1979 Village At Northshore 12/94 144,373 sq. ft. 100% 1988 & Slidell, LA 1993 Walton Plaza 8/98 43,460 sq. ft. 94% 1991 Augusta, GA Waterlick Plaza 10/89 98,694 sq. ft. 72% 1973 & Lynchburg, VA 1988 Watson Central 12/92 & 227,747 sq. ft. 98% 1989 & Warner Robins, GA 10/93 1993 Wesley Chapel Crossing 12/92 170,792 sq. ft. 100% 1989 Decatur, GA West Gate Plaza 6/74 & 64,378 sq. ft. 99% 1974 & Mobile, AL 1/85 1995 West Towne Square 3/90 89,596 sq. ft. 94% 1988 Rome, GA Westgate Square 6/94 104,853 sq. ft. 96% 1984 & Sunrise, FL 1988 Williamsburg At Dunwoody (3) 3/99 44,928 sq. ft. 100% 1988 Dunwoody, GA
15 16 I. EQUITY INVESTMENTS (LAND AND BUILDINGS) continued
Percent Date Leased Year Description Acquired Area 12/31/99 Completed - ----------------------------------------------------------------------------------------- Willowdaile Shopping Center (3) 8/86 & 120,815 sq. ft. 92% 1986 Durham, NC 12/87 ----------------- Shopping Center Totals 9,398,698 sq. ft. ================= Industrial Properties Industrial Buildings 6/79 188,513 sq. ft. 82% 1956 & Charlotte, NC 1963 ================= Total Equity Investments In Land And Buildings 9,587,211 sq. ft. =================
NOTES: (1) The Company owns a 49.5% interest in the property of North Village Center and is entitled to 54.5% of the financial performance of the property. The Company also owns a 75% interest in Venice Plaza Shopping Center. These investments are consolidated for reporting purposes and minority interests are recorded. (2) Subject to ground leases expiring in 2002 for Shelby Plaza, 2005 for McAlpin Square and 2008 for Plaza Acadienne, with renewal options to extend the terms to 2017, 2033 and 2035, respectively. The Company has options to purchase the land at Shelby Plaza and McAlpin Square. (3) Ownership through IRT Partners, L.P. 16 17 II. EQUITY INVESTMENTS (DIRECT FINANCING LEASES) The Company also had a fee interest in land and improvements thereon in the following properties occupied by tenants under leases which are treated as direct financing leases.
Percent Date Leased Year Description Acquired Area 12/31/99 Completed - -------------------------------------------------------------------------------------------- OFFICE The Old Phoenix National Bank (1) 12/84 73,074 sq. ft. 100% Various Medina County, OH =============== SHOPPING CENTERS Wal-Mart Stores, Inc. (2) 6/85 54,223 sq. ft. 100% 1985 Mathews, LA Wal-Mart Stores, Inc. (2) 7/85 53,571 sq. ft. 100% 1985 Marble Falls, TX --------------- TOTAL SHOPPING CENTERS 107,794 sq. ft. =============== TOTAL DIRECT FINANCING LEASES 180,868 sq. ft. ===============
Notes: (1) This investment represents ten banking facilities leased to The Old Phoenix National Bank. The leases expire March 2013 with no purchase or renewal options. (2) These two retail facilities are leased to Wal-Mart Stores, Inc. The leases expire January 2011, with five 5-year renewal options. There are no purchase options. No percentage rental was received during the fiscal year ended December 31, 1999. 17 18 III. EQUITY INVESTMENTS (LAND PURCHASE-LEASEBACKS) The Company owned land under the following properties, all of which are net leased back to lessees on terms summarized below. The improvements on such properties are owned by others but will revert to the Company at the end of the lease terms unless the purchase options of the lessees, as referred to below, are exercised.
Land Lease Date Area Year Expiration Description Acquired in Acres Improvements Completed Date - ------------------------------------------------------------------------------------------------------ OFFICE Lawrence County Shopping Center 5/71 13.62 135,605 sq. ft. 1971 2069 (1) Sybene, OH Grand Marche Shopping Center 9/72 11.38 200,585 sq. ft. 1969 2012 Lafayette, LA ------------------------------ TOTAL LAND PURCHASE-LEASEBACKS 25.00 336,190 sq. ft. ==============================
NOTE: (1) The lessee has a repurchase option exercisable at a specified price (in each case higher than the costs to the Company of its investment) which increases annually by a fixed amount. IV. MORTGAGE LOAN INVESTMENTS The Company had mortgage loans receivable on the following properties: (In thousands, except area and units)
Security ------------------------- Principal Stated Type of Land Area Outstanding Maturity Interest Location Loan in Acres Improvements 12/31/99 Date Rate - ----------------------------------------------------------------------------------------------------------------------------- Mill Creek Club Condominiums 1st Mortgage -- 4 units $ 22 2006- 8.63%- Nashville, TN Participation 2007 (1) 12.38% Cypress Chase "A" Condominiums 1st Mortgage 2.00 recreational 70 May 2009 10.00% Lauderdale Lakes, FL ------ ------- TOTAL MORTGAGE LOAN INVESTMENTS 2.00 $ 92 ====== =======
NOTE: (1) Principal outstanding at December 31, 1999 represents the Company's 46.2% participation in the total loan outstanding. 18 19 V. MORTGAGE INDEBTEDNESS Indebtedness of the Company secured by its investments (not including mortgage debt owed by lessees of its land purchase-leaseback investments) was as follows: (In thousands)
Principal Balance Annual Investment 12/31/99 Maturity Date Interest Rate Constant Payment - ------------------------------------------------------------------------------------------------------------------------------ Macland Pointe $ 3,528 2/1/00 (8) 7.7500% 363 Marietta, GA Thomasville Commons 5,360 6/1/02 (1) 9.6250% 583 Thomasville, NC Town & Country 2,142 12/1/02 (1) 7.6500% 214 Kissimmee, FL Elmwood Oaks 7,500 6/1/05 8.3750% 628 (2) Harahan, LA North Village Center 2,227 (3) 3/15/09 8.1250% 343 North Myrtle Beach, SC Tamarac Town Square (6), (7) 6,477 10/1/09 (1) 9.1875% 651 Tamarac, FL Spalding Village 11,377 9/1/10 (1) 8.1940% 989 (4) Griffin, GA Charlotte Square (6), (7) 3,820 2/1/11 (1) 9.1875% 394 Port Charlotte, FL Riverside Square (6), (7) 8,030 3/1/12 (1) 9.1875% 808 Coral Springs, FL Village at Northshore 5,068 7/1/13 (5) 9.0000% 648 Slidell, LA Treasure Coast (7) 5,697 4/1/15 8.0000% 646 Vero Beach, FL Shoppes of Silverlakes 3,292 7/1/15 7.7500% 364 Pembroke Pines, FL Grassland Crossing 6,504 12/1/16 (1) 7.8650% 623 Alpharetta, GA Mableton Crossing 4,477 8/15/18 (1) 6.8500% 308 Mableton, GA Shoppes at Lago Mar (7) 5,655 4/21/21 7.5000% 532 Miami, FL Douglas Commons 5,531 2/28/24 6.5000% 454 Douglasville, GA Paulding Commons 7,210 2/28/24 6.5000% 591 Dallas, GA Wesley Chapel Crossing 3,704 2/28/24 6.5000% 304 Decatur, GA Fairview Oaks 5,235 2/28/24 6.5000% 429 Ellenwood, GA Madison Centre 4,247 2/28/24 6.5000% 348 Madison, AL Chastain Square 4,247 2/28/24 6.5000% 348 Atlanta, GA Daniel Village 4,642 2/28/24 6.5000% 381 Augusta, GA Siegen Village 4,692 2/28/24 6.5000% 385 Baton Rouge, LA ------------- --------- 120,662 Interest Premium (6) 1,502 ------------- TOTAL MORTGAGE INDEBTEDNESS $ 122,164 $ 11,334 ============= =========
Notes: (1) Balloon payment at maturity. (2) Interest only. Entire principal due at maturity. (3) Although the Company is a partner or joint venturer in this investment, 100% of the mortgage note payable is recorded for financial reporting purposes. (4) Interest only through 9/1/00; then principal and interest of $1,158 annually for the final 10 years. (5) Callable anytime after 7/30/03. (6) For financial reporting purposes, mortgage indebtedness is valued assuming current interest rates at date of acquisition. (7) Ownership through IRT Partners, L.P. (8) Balance paid through balloon payment at maturity on February 1, 2000. 19 20 VI. SHOPPING CENTER ACQUISITIONS (in thousands, except square footage)
Total Date Initial Cash Mortgage Principal Acquired Property Name City, State Area Cost Paid Assumed Tenants - ---------------------------------------------------------------------------------------------------------------------------------- 2/26/99 Shoppes At Lago Mar Miami, FL 82,613 sq. ft. $ 9,916 $ 4,174 $ 5,742 Publix Blockbuster 3/15/99 Williamsburg At Dunwoody Atlanta, GA 44,928 sq. ft. 5,602 5,602 -- ----------------------------------------------------------- TOTAL ACQUISITIONS 127,541 sq. ft. $ 15,518 $ 9,776 $ 5,742 ===========================================================
VII. SHOPPING CENTER DISPOSITIONS (in thousands, except square footage)
Date Sales Cash Financial Property Principal Sold Property Name City, State Area Price Proceeds Gain Type Tenants - ---------------------------------------------------------------------------------------------------------------------------------- 6/1/99 Litchfield Landing North Litchfield, SC 42,201 sq. ft. $ 3,190 $ 3,129 $1,191 Shopping Center Harris Teeter, Eckerd 6/1/99 First Street Station Albemarle, NC 52,230 sq. ft. 3,137 3,038 320 Shopping Center Harris Teeter, Eckerd 6/1/99 Taylorsville Shopping Center Taylorsville, NC 48,537 sq. ft. 2,571 2,430 609 Shopping Center Harris Teeter 6/1/99 University Center Greenville, SC 56,180 sq. ft. 3,462 3,399 202 Shopping Center Harris Teeter, Eckerd Other 417 413 161 ----------------------------------------- TOTAL DISPOSITIONS 199,148 sq. ft. $12,777 $ 12,409 $2,483 =========================================
(In thousands, except square footage) Investment in Joint Ventures During 1997, IRTCC entered into a co-development agreement for the development of a Kroger anchored shopping center in Decatur, Georgia. The project was being developed in two phases totaling approximately 140,000 square feet, not including two out-parcels, at a total anticipated cost of approximately $14,100. The venture could have required the Company to purchase the shopping center upon the completion of Phase I at cost or upon the completion of Phase II at the greater of cost or a 10.75% capitalization rate. On December 31, 1999, the Company relinquished its option to purchase the shopping center to the co-developer for $969. 20 21 Mortgage Indebtedness During 1999, the Company repaid at maturity a $3,333 mortgage bearing interest at 9.875% and repaid at maturity a $625 purchase-money mortgage bearing interest at 9%. In February 1999, the Company obtained a 25 year fully-amortizing $40,000 loan secured by first mortgages on eight properties bearing interest at 6.5%. Also, upon the acquisition of the Shoppes at Lago Mar shopping center, the Company assumed a $5,742 mortgage bearing interest at 7.65%. 21 22 ITEM 3 Legal Proceedings There are no material pending legal proceedings of which the Company is aware involving the Company, its subsidiaries or its properties. ITEM 4 Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of the Company's shareholders during the fourth quarter of the Company's fiscal year ended December 31, 1999. 22 23 PART II ITEM 5 Market for the Registrant's Common Equity and Related Security Holder Matters a) The following table shows the high and low sale prices for the Company's common stock, as reported on the New York Stock Exchange for the periods indicated.
High Low ------ ------- 1999 ---- First Quarter $10.00 $ 8.69 Second Quarter 10.00 8.81 Third Quarter 9.88 9.00 Fourth Quarter 9.25 7.31 1998 ---- First Quarter $12.31 $11.25 Second Quarter 12.06 10.19 Third Quarter 11.50 8.38 Fourth Quarter 10.50 8.81
b) Approximate number of Equity Security Holders.
Approximate Number of Record Title of Class Holders at March 17, 2000 -------------- ---------------------------- Shares of Common Stock $1 Par Value 3,000 -----
23 24 c) IRT Property Company paid quarterly cash dividends per share of Common Stock during the years 1999 and 1998 as follows:
Cash Dividends Paid ------------------- 1999 ---- First Quarter $.230 Second Quarter .230 Third Quarter .235 Fourth Quarter .235 1998 ---- First Quarter $.225 Second Quarter .230 Third Quarter .230 Fourth Quarter .230
IRT has paid 88 consecutive quarterly dividends. The current annualized dividend rate is $0.94. The Company does not foresee any restrictions upon its ability to continue its dividend payment policy of distributing at least the 95% of its otherwise taxable ordinary income required for qualification as a REIT. 24 25 ITEM 6 Selected Consolidated Financial Data (In thousands, except per share amounts) The following table sets forth selected consolidated financial data for the Company and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report.
As of or for the Years Ended 1999 1998 1997 1996 1995 - --------------------------------------- --------- --------- --------- --------- --------- Gross revenues $ 85,391 $ 79,870 $ 67,118 $ 60,233 $ 60,196 ========= ========= ========= ========= ========= Earnings from operations $ 26,688 $ 24,691 $ 22,216 $ 15,602 $ 15,550 Minority interest of unitholders in operating partnership (683) (262) -- -- -- Gain on sales of properties 2,483 1,213 3,897 1,232 173 --------- --------- --------- --------- --------- Earnings before extraordinary items 28,488 25,642 26,113 16,834 15,723 Extraordinary items: Loss on extinguishment of debt (157) (57) -- (16) (137) --------- --------- --------- --------- --------- Net earnings $ 28,331 $ 25,585 $ 26,113 $ 16,818 $ 15,586 ========= ========= ========= ========= ========= Per share (basic and diluted): Earnings before extraordinary items $ 0.86 $ 0.78 $ 0.82 $ 0.65 $ 0.61 Extraordinary items -- -- -- -- -- --------- --------- --------- --------- --------- Net earnings $ 0.86 $ 0.78 $ 0.82 $ 0.65 $ 0.61 ========= ========= ========= ========= ========= Dividends paid $ 0.93 $ 0.915 $ 0.90 $ 0.90 $ 0.885 ========= ========= ========= ========= ========= Federal income tax status of dividends paid to shareholders: Ordinary income $ 0.787 $ 0.787 $ 0.730 $ 0.470 $ 0.635 Capital gain 0.143 0.054 0.080 -- -- Return of capital -- 0.074 0.090 0.430 0.250 --------- --------- --------- --------- --------- $ 0.930 $ 0.915 $ 0.900 $ 0.900 $ 0.885 ========= ========= ========= ========= ========= Weighted average shares outstanding: Basic 33,119 32,940 31,868 25,750 25,590 ========= ========= ========= ========= ========= Diluted 33,904 33,305 31,921 25,755 25,595 ========= ========= ========= ========= ========= Total assets $ 565,896 $ 562,259 $ 498,153 $ 437,695 $ 427,398 ========= ========= ========= ========= ========= Indebtedness: Mortgage notes payable $ 122,164 $ 82,215 $ 59,558 $ 84,001 $ 99,188 7.30% convertible subordinated debentures 23,275 23,275 28,453 84,905 84,905 Senior notes 124,654 124,595 124,536 49,929 -- Indebtedness to banks 20,400 51,500 14,400 15,000 36,000 --------- --------- --------- --------- --------- $ 290,493 $ 281,585 $ 226,947 $ 233,835 $ 220,093 ========= ========= ========= ========= ========= Shareholders' equity $ 256,203 $ 262,773 $ 259,676 $ 193,355 $ 198,630 ========= ========= ========= ========= ========= Other data: Funds from operations(1) $ 40,377 $ 38,118 $ 34,079 $ 26,389 $ 26,406 Assuming conversion of 7.30% debentures:(1) Funds from operations(1) $ 43,037 $ 40,324 $ 36,543 $ 32,953 $ 32,983 Weighted average shares outstanding 35,973 35,463 34,766 33,302 33,162 Net cash flows from (used in) -- Operating activities $ 41,452 $ 36,785 $ 34,792 $ 27,751 $ 25,947 Investing activities (8,551) (39,586) (60,273) (15,660) (7,769) Financing activities (32,731) 2,870 22,582 (8,933) (20,003)
(1) The Company defines funds from operations, consistent with the NAREIT definition, as net income before gains (losses) on the sales of properties and extraordinary items plus depreciation and amortization of capitalized leasing costs. Conversion of the 7.30% subordinated debentures is dilutive and therefore assumed for all years presented. Conversion of the OP Units is dilutive and therefore assumed for 1999 and 1998. Management believes funds from operations should be considered along with, but not as an alternative to, net income as defined by generally accepted accounting principles as a measure of the Company's operating performance. Funds from operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund operating needs. See Item 7. 25 26 ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands, except per share amounts) Material Changes in Financial Condition. During the fiscal year ended December 31, 1999, the Company: - obtained a $40,000, 6.5% fixed rate, 25 year fully-amortizing loan secured by first mortgages on eight properties, and - obtained cash proceeds of approximately $12,409 upon the sales of properties and recognized a gain of approximately $2,483 for financial reporting purposes. During the fiscal year ended December 31, 1999, the Company utilized funds of: - approximately $31,100 to pay down its unsecured revolving term loan, - approximately $30,908 to pay dividends on the Company's outstanding common stock, - approximately $15,518 for the acquisition of two shopping center investments, consisting of cash of approximately $9,776 and mortgage debt of approximately $5,742 secured by one of the centers, - approximately $3,776 to repurchase 492,575 shares of the Company's common stock, - approximately $1,191 for costs related to acquiring the new credit facility and obtaining the $40,000 mortgage, - approximately $7,251 for a loan to IRT Capital Corporation II ("IRTCCII"), consisting of approximately $3,800 for the acquisition of 23 acres of undeveloped land in Miramar, Florida, approximately $2,600 for the acquisition of a shopping center and 9 acres of undeveloped land in Pasco County, Florida, and approximately $851 to fund land development costs, and - $3,333 to repay at maturity a 9.875% mortgage and $625 to repay at maturity a 9% purchase-money mortgage. During the fiscal year ended December 31, 1998, the Company: - obtained cash proceeds of approximately $5,783 from the sale of an investment and the condemnation of a small strip of land, 26 27 - obtained net cash proceeds of approximately $4,400 from the financing of the Mableton Crossing shopping center, a 1998 acquisition, and - borrowed $37,100 under its unsecured revolving term loan. During the fiscal year ended December 31, 1998, the Company utilized funds of: - approximately $77,280 for the acquisition of nine shopping center investments, consisting of cash of approximately $36,610, mortgage debt of approximately $31,208 secured by six of the centers and OP Units valued at approximately $9,462, - approximately $28,417 to pay dividends on the Company's outstanding common stock, - $3,525 to prepay two mortgage notes payable bearing interest at 9.875%, - $2,175 to prepay a 10.25% mortgage, - $544 to prepay an 8.25% mortgage, - $2,224 to repay at maturity an 11% mortgage (discounted to 9.75% for financial reporting purposes), and - $625 to make a scheduled principal payment under a 9% purchase-money mortgage. Additionally, in 1998, $5,178 of the Company's 7.3% convertible subordinated debentures were converted into 460,263 shares of common stock at $11.25 per share. Material Changes in Results of Operations. During the fiscal year ended December 31, 1999, rental income from the Company's portfolio of shopping center investments: - increased approximately $1,147 for the core portfolio, - increased approximately $7,115 due to the acquisition of nine shopping centers in 1998 and two in 1999, - decreased approximately $994 due to the sales of an investment in 1998 and five investments in 1999 and the foreclosure of a mortgage held by the Company in 1998, and - decreased approximately $2,435 due to the redevelopment of six centers. During the fiscal year ended December 31, 1998, rental income from the Company's portfolio of shopping center investments: - increased approximately $736 for the core portfolio, 27 28 - increased approximately $10,213 due to the acquisition of nine shopping centers in each of 1998 and 1997, - decreased approximately $1,198 due to the sales of one investment in 1998 and two investments in 1997, and - included approximately $2,092 of income upon the termination of two anchor tenants' leases. Percentage rentals received from shopping center investments, excluding percentage rentals received from the two Wal-Mart investments classified as direct financing leases, totaled approximately $1,018, $776 and $649 during the fiscal years ended December 31, 1999, 1998 and 1997, respectively. Percentage rental income is recorded upon collection based on the tenants' lease years. Interest income during the fiscal year ended December 31, 1999, increased approximately $18 due primarily to the interest charged on development loans. Interest income during the fiscal year ended December 31, 1998 decreased primarily due to decreases of approximately $110 on short-term money market investments, $628 on two mortgages under which the borrowers defaulted and the Company acquired title to the properties and $251 on a mortgage that was paid in full in 1997. Other income increased approximately $969 due to the Company's relinquishment of an option to purchase Old Decatur Square. During the fiscal year ended December 31, 1999, operating expenses related to the Company's portfolio of real estate investments: - increased approximately $228 for the core portfolio, - increased approximately $1,893 due to the acquisition of two shopping centers in 1999 and nine in 1998, - decreased approximately $305 due to the sale of foreclosed apartments in 1998, and - decreased approximately $135 due to the redevelopment of six properties. During the fiscal year ended December 31, 1998, operating expenses related to the Company's portfolio of real estate investments: - increased approximately $850 for the core portfolio, - increased approximately $2,835 due to the acquisition of nine shopping centers in each of 1998 and 1997, - increased approximately $344 due to the acquisition of the two properties obtained through foreclosure subsequent to default under the respective mortgage loans, and 28 29 - decreased by approximately $527 due to the sales of one investment in 1998 and two investments in 1997. During the fiscal year ended December 31, 1999, interest expense on mortgages decreased approximately $454 primarily due to two mortgages being repaid in 1999 and five in 1998 and increased approximately $4,208 due to: - the assumption of a $2,232 mortgage bearing interest at 7.65% upon the acquisition of Town & Country shopping center in January 1998, - the assumption of three mortgages aggregating approximately $20,083, bearing interest at 9.1875%, upon the acquisition of Charlotte Square, Riverside Square and Tamarac Square in August 1998 (these mortgages were discounted to the then current market rate of 8% for financial reporting purposes), - the assumption of a $5,937 mortgage bearing interest at 8% upon the acquisition of Treasure Coast shopping center in August 1998, - the placement of a $4,500 mortgage, bearing interest at 6.85%, on Mableton Crossing in August 1998 (Mableton was acquired without debt in June 1998), - the assumption of a $5,742 mortgage bearing interest at 8% upon the acquisition of Lago Mar shopping center in February 1999, and - the procurement, in February 1999, of a 25 year fully-amortizing $40,000 loan, secured by first mortgages on eight properties, bearing fixed interest at 6.5%. During the fiscal year ended December 31, 1998, interest expense on mortgages decreased approximately $522 due to the repayment of an aggregate of $43,768 of mortgage debt bearing interest at an average rate of 8.44% and the subsequent assumption of an aggregate of $44,297 of mortgage debt bearing interest at an average rate of 7.85% during 1998 and 1997. Interest expense in 1998 increased due to the issuance in August 1997 of $75,000 of 7.25% senior notes due August 2007. This increase was offset by a decrease due to the conversion of $5,178 of 7.3% debentures during the first quarter of 1998 and $1,653 during 1997. Interest expense on bank indebtedness decreased approximately $1,122 for the fiscal year ended December 31, 1999. The Company had average borrowings of approximately $21,959, $35,211 and $14,165 at effective interest rates of 6.75%, 6.87% and 7.09%, under its variable rate bank credit facility during the fiscal years ended December 31, 1999, 1998 and 1997, respectively. In addition, the Company incurred commitment fees of approximately $201, $160 and $212 in 1999, 1998 and 1997, respectively. During 1999, average interest rates on bank indebtedness decreased 0.12%. The net increase in depreciation expense in 1999 was primarily due to the 11 shopping center investments acquired during 1999 and 1998, partially offset by the five investments sold during 1999 and 1998. 29 30 The net decrease in general and administrative expense of approximately $1,223 for the fiscal year ended December 31, 1999 was primarily due to: - capitalization of approximately $230 of compensation and overhead costs associated with development activity, - capitalization of $430 of incremental compensation and other personnel costs associated with leasing activity, and - merger expenses of approximately $373 which were incurred in 1998 and did not result in a merger. The increase in general and administrative expense in 1998 was primarily due to increased employment-related costs which included the implementation of the Incentive Compensation Plan. General and administrative expense for 1998 also included approximately $373 in merger-related expenses for a merger that was not consummated. Year 2000 Readiness Disclosure. The Company successfully completed its transition to Year 2000 readiness with no impact to the Company's results of operations or financial condition other than $20 to update the voice mail and phone systems. In addition the Company is not aware of any significant counter parties which were negatively impacted by their lack of Year 2000 readiness. Due to the nature of Year 2000 issues, the Company realizes that additional information may come to light at any time after December 31, 1999; and the Company, therefore, intends to continue to monitor significant counterparties in the future in the event that circumstances change. Overall, even in the event of Year 2000 related failures at all major tenants, the Company believes that it can receive its rent payments via alternative methods of payment. However, no assurance may be given that potential Year 2000 problems at those companies with which the Company does business will not occur, and if these occur, consequences to the Company will not be material. Except for the voice mail and phone systems, most of the Company's technology systems were certified as Year 2000 compliant, and the cost of addressing the Year 2000 issues was less than the estimated amount of $30. The Company designates each of the statements made by it herein as a Year 2000 Readiness Disclosure. Such statements are made pursuant to the Year 2000 Information and Readiness Disclosure Act. Funds from Operations. The Company defines funds from operations, consistent with the National Association of Real Estate Investment Trusts ("NAREIT") definition, as net earnings on real estate investments less gains (losses) on sale of properties and extraordinary items plus depreciation and amortization of capitalized leasing costs. Interest and amortization of issuance costs related to convertible subordinated debentures and minority interest expenses are added back to funds from operations when assumed conversion of the debentures and OP Units is dilutive. The conversion of the debentures is dilutive and therefore assumed for the fiscal years ended December 31, 1999, 1998 and 1997. The conversion of OP Units is dilutive and assumed for the fiscal years ended December 31, 1999 and 1998. Management believes funds from operations should be considered along with, but not as an alternative to, net income as defined 30 31 by generally accepted accounting principles as a measure of the Company's operating performance. Funds from operations do not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. The following data is presented with respect to the calculation of funds from operations under the NAREIT definition for 1999, 1998 and 1997:
Year Ended December 31, -------------------------------------- 1999 1998 1997 -------- -------- -------- Net earnings $ 28,331 $ 25,585 $ 26,113 Gain on sales of properties (2,483) (1,213) (3,897) Depreciation* 13,708 12,833 11,453 Amortization of capitalized leasing fees* 504 350 288 Amortization of capitalized leasing income 160 133 122 Loss on extinguishment of debt 157 57 -- Nonrecurring merger expenses -- 373 -- -------- -------- -------- Funds From Operations 40,377 38,118 34,079 Interest on convertible debentures 1,699 1,745 2,325 Amortization of convertible debenture costs 100 104 139 Amounts attributable to minority interests 861 357 -- -------- -------- -------- Fully Diluted Funds From Operations $ 43,037 $ 40,324 $ 36,543 ======== ======== ======== Per Share: Fully Diluted Funds From Operations $ 1.20 $ 1.14 $ 1.05 ======== ======== ======== Applicable weighted average shares 35,973 35,463 34,766 ======== ======== ========
* Net of amounts attributable to minority interests 31 32 Liquidity and Capital Resources. In 1999 and 1998, the Company's dividends, mortgage amortization payments and capital improvements were funded primarily by funds from operations and also through supplemental funding from available cash investments, bank borrowings and other sources. The Company believes that dividends, mortgage amortization payments and necessary capital improvements will continue to be funded primarily by funds from operations. Other planned activities, including property acquisitions, new developments, certain capital improvement programs and debt repayments are expected to be funded to the extent necessary by bank borrowings, mortgage financing, periodic sales or exchanges of existing properties, the issuance of OP Units and public or private offerings of stock or debt. For a description of the Company's mortgage debt, reference is made to Note 7 to the consolidated financial statements included as a part of this report. For a description of commitments and contingencies, reference is made to Note 17 to the consolidated financial statements included as a part of this report. For additional information on the convertible subordinated debentures and the outstanding senior notes, reference is made to Notes 8 and 9, respectively, to the consolidated financial statements. In May 1998, the Company filed a shelf registration statement covering up to $300,000 of common stock, preferred stock, depositary shares and warrants. The Company intends to use the net proceeds of any offerings under such shelf registration for general corporate purposes, which may include, without limitation, repayment of maturing obligations, redemption of outstanding indebtedness or other securities, financing future acquisitions and for working capital. As of December 31, 1999, there had been no issuances of securities in connection with such shelf registration statement. On December 15, 1995, the Company entered into a $100,000 unsecured revolving term loan which, with extensions, was scheduled to mature on January 4, 2001. On November 1, 1999, the Company repaid the balance and cancelled this loan and entered into a new $100,000 unsecured revolving term loan led by a different financial institution and further backed by a syndicate of four other financial institutions. This new credit facility is scheduled to mature on November 1, 2002. Not later than November 1 of each year commencing in 2000, the Company may request to extend the maturity date for an additional 12-month period beyond the existing maturity date. The interest rate is, at the option of the Company, either prime, fluctuating daily, or LIBOR plus the "Applicable Margin" (currently 1.15%), which is subject to adjustment based upon the rating of the senior unsecured long-term debt obligations of the Company. The Company may borrow, repay and/or reborrow under this loan at any time. In addition, the Company secured a $5,000 unsecured swingline, bearing interest at LIBOR plus the Applicable Margin, scheduled to mature on October 31, 2000. As of December 31, 1999 and 1998, the borrowings under the Company's credit facilities totaled $20,400 and $51,500, respectively. For additional information on this revolving term loan, reference is made to Note 10 to the consolidated financial statements. In connection with the Company's formation of IRT Partners, L.P. ("LP") and IRT Capital Corporation II ("IRTCCII") and their proposed operations, both entities guarantee the Company's indebtedness under the Company's existing unsecured revolving term loan. In October 1999, Jitney Jungle Stores of America ("Jitney Jungle") filed for reorganization under Chapter 11 of the United States Bankruptcy Code. At the time of filing, 32 33 the Company had leases with Jitney Jungle at ten store locations. Jitney Jungle has disavowed three of these leases, one of which the Company has since re-leased to a national tenant. While the Company currently has $118 in outstanding billings related to these three leases, all of which is reserved against, the timing and effects of the Jitney Jungle bankruptcy proceedings on the Company are uncertain. The Company is participating in those proceedings and is evaluating its alternatives with respect to these and the remaining leases in light of the reorganization. Prior to July 1998, the Company's Dividend Reinvestment Plan allowed shareholders to elect to reinvest all or a portion of their distributions in newly issued shares of common stock of the Company at 95% of the market price of the shares. This plan was amended to eliminate the discount. During 1998 and 1997, the Company received net proceeds under this plan of $1,740 and $2,864, respectively, and received no proceeds in 1999. Inflationary and Economic Factors. The effects of inflation upon the Company's results of operations and investment portfolio are varied. From the standpoint of revenues, inflation has the dual effect of both increasing the tenant revenues upon which percentage rentals are based and allowing increased fixed rentals as rental rates rise generally to reflect higher construction costs on new properties. This positive effect is partially offset by increasing operating expenses, but usually not to the extent of the increases in revenues. Environmental Factors. Certain of the Company's properties have environmental concerns that have been or are being addressed. The Company maintains limited insurance coverage for this type of environmental risk. For the years commencing January 1, 2000, the Company has acquired environmental and pollution legal liability insurance coverage to attempt to mitigate the associated risks. Although no assurance can be given that Company properties will not be affected adversely in the future by environmental problems, the Company presently believes that there are no environmental matters that are reasonably likely to have a material adverse effect on the Company's financial position. See "Regulation." Recent Accounting Pronouncements. In 1998 the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 established standards for reporting and disclosing comprehensive income (defined as revenues, expenses, gains and losses that under generally accepted accounting principles are not included in net income) and its components. The Company had no items of other comprehensive income in 1999, 1998 or 1997. In 1998 the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its senior management group. 33 34 The Company owns and operates retail shopping centers in ten states in the southeast. Such shopping centers generate rental and other revenue through the leasing of shop spaces to a diverse base of tenants. The Company evaluates the performance of each of its shopping centers on an individual basis. However, because each of the shopping centers have similar economic characteristics and tenants, the shopping centers have been aggregated into one reportable segment. In June 1998 SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued establishing accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair market value. The statement, as amended in June 1999 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133," is effective for the Company on January 1, 2000. SFAS No. 133 requires that changes in the derivative's fair market value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company has never used derivative instruments or hedging activities. 34 35 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk. The Company's exposure to market risk for changes in interest rates relates primarily to its credit facility. The Company has no involvement with derivative financial, hedging or similar instruments. The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates or market conditions, including estimated fair values for the Company's interest rate sensitive liabilities as of December 31, 1999. As the table incorporates only those exposures that exist as of December 31, 1999, it does not consider exposures which could arise after that date. Moreover, because there were no firm commitments to sell the obligations at fair value as of December 31, 1999, the information presented has limited predictive value. As a result, the Company's ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during a future period and prevailing interest rates.
Expected Maturity/Principal Repayment Nominal* ----------------------------------------------------------- Total Fair Interest Rate 2000 2001 2002 2003 2004 Thereafter Balance Value ----------------------------------------------------------------------------------------------- Interest-Sensitive Liabilities: Lines of Credit Facilities 7.31% $ -- $ -- $20,400 $ -- $ -- $ -- $ 20,400 $ 20,400 7.3% Convertible Subordinated Debentures - fixed rate 7.30% -- -- -- 23,275 -- -- 23,275 22,751 7.25% Senior Notes - fixed rate 7.25% -- -- -- -- -- 75,000 75,000 71,743 7.45% Senior Notes - fixed rate 7.45% -- 50,000 -- -- -- -- 50,000 49,647 Mortgage Notes Payable 7.42% 5,555 2,366 9,654 2,600 2,807 97,680 120,662 117,000
* Average rates as of December 31, 1999 35 36 ITEM 8. Financial Statements and Supplementary Data IRT PROPERTY COMPANY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Report of Independent Public Accountants 37 Consolidated Balance Sheets: December 31, 1999 and 1998 38 Consolidated Statements of Earnings: For the Years Ended December 31, 1999, 1998 and 1997 39 Consolidated Statements of Changes in Shareholders' Equity: For the Years Ended December 31, 1999, 1998 and 1997 40 Consolidated Statements of Cash Flows: For the Years Ended December 31, 1999, 1998 and 1997 41 Notes to Consolidated Financial Statements: December 31, 1999, 1998 and 1997 42 SCHEDULES III Real Estate and Accumulated Depreciation 58 IV Mortgage Loans on Real Estate 68
36 37 Report of Independent Public Accountants To IRT Property Company: We have audited the accompanying consolidated balance sheets of IRT PROPERTY COMPANY (a Georgia corporation) and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, changes in shareholders' equity and cash flows for each of the three years ended December 31, 1999. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IRT Property Company and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to consolidated financial statements are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Atlanta, Georgia February 11, 2000 37 38 Item 1. Financial Statements. IRT PROPERTY COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1999 and 1998 (In thousands, except share and per share amounts)
1999 1998 --------- --------- ASSETS Real estate investments: Rental properties $ 630,005 $ 622,117 Accumulated depreciation (86,170) (74,943) --------- --------- Net rental properties 543,835 547,174 Equity investment in and advances to unconsolidated affiliates 7,251 -- Net investment in direct financing leases 4,412 4,572 Mortgage loans, net 92 1,097 --------- --------- Net real estate investments 555,590 552,843 Cash and cash equivalents 514 344 Prepaid expenses and other assets 9,792 9,072 --------- --------- Total assets $ 565,896 $ 562,259 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage notes payable, net $ 122,164 $ 82,215 7.3% convertible subordinated debentures, net 23,275 23,275 Senior notes, net 124,654 124,595 Indebtedness to banks 20,400 51,500 Accrued interest 3,612 3,612 Accrued expenses and other liabilities 8,196 7,204 --------- --------- Total liabilities 302,301 292,401 --------- --------- Commitments and contingencies (Note 17) Minority interest payable 7,392 7,085 Shareholders' equity: Common stock, $1 par value, 150,000,000 shares authorized; 33,234,206 shares issued in 1999 and 33,251,763 shares issued in 1998 33,234 33,252 Preferred stock, $1 par value, authorized 10,000,000 shares; none issued -- -- Additional paid-in capital 272,448 272,975 Deferred compensation/stock loans (1,808) (2,386) Treasury stock, at cost, 516,527 shares in 1999 and 0 shares in 1998 (4,026) -- Cumulative distributions in excess of net earnings (43,645) (41,068) --------- --------- Total shareholders' equity 256,203 262,773 --------- --------- Total liabilities and shareholders' equity $ 565,896 $ 562,259 ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. 38 39 IRT PROPERTY COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS For the Years Ended December 31, 1999, 1998 and 1997 (In thousands, except per share amounts)
1999 1998 1997 -------- -------- ------- REVENUES: Income from rental properties $ 83,481 $ 78,937 $65,216 Interest income 381 363 1,330 Interest on direct financing leases 560 570 572 Other income 969 -- -- -------- -------- ------- Total revenues 85,391 79,870 67,118 -------- -------- ------- EXPENSES: Operating expenses of rental properties 19,458 17,944 14,076 Interest expense 21,488 19,272 15,587 Depreciation 13,869 12,925 11,453 Amortization of debt costs 460 437 423 General and administrative 3,432 4,655 3,363 -------- -------- ------- Total expenses 58,707 55,233 44,902 -------- -------- ------- Equity in earnings of unconsolidated affiliates 4 54 -- -------- -------- ------- Earnings before minority interest, gain on sales of properties and extraordinary item 26,688 24,691 22,216 Minority interest of unitholders in operating partnership (683) (262) -- Gain on sales of properties 2,483 1,213 3,897 -------- -------- ------- Earnings before extraordinary item 28,488 25,642 26,113 EXTRAORDINARY ITEM: Loss on extinguishment of debt (157) (57) -- -------- -------- ------- Net earnings $ 28,331 $ 25,585 $26,113 ======== ======== ======= PER SHARE: (Note 11) Earnings before extraordinary item - basic $ 0.86 $ 0.78 $ 0.82 Extraordinary item - basic -- -- -- -------- -------- ------- Net earnings - basic $ 0.86 $ 0.78 $ 0.82 ======== ======== ======= Earnings before extraordinary item - diluted $ 0.86 $ 0.78 $ 0.82 Extraordinary item - diluted -- -- -- -------- -------- ------- Net earnings - diluted $ 0.86 $ 0.78 $ 0.82 ======== ======== ======= WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 33,119 32,940 31,868 ======== ======== ======= Diluted 33,904 33,305 31,921 ======== ======== =======
The accompanying notes are an integral part of these consolidated statements. 39 40 IRT PROPERTY COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the Years Ended December 31, 1999, 1998 and 1997 (In thousands, except per share amounts)
Total Shares Additional Common Treasury Common Paid-In Treasury Stock Stock Stock Capital Stock - --------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1996 25,807 -- $ 25,807 $ 201,274 $ -- Net earnings -- -- -- -- -- Dividends declared - $.90 per share -- -- -- -- -- Issuance of shares under Dividend Reinvestment Plan, net 260 -- 260 2,604 -- Conversion of debentures, net 147 -- 147 1,463 -- Exercise of options, net 17 -- 17 88 -- Issuance of common stock, net 4,654 -- 4,654 44,881 -- Issuance of shares for the repurchase of convertible debentures, net 1,500 -- 1,500 13,477 -- ------ ---- -------- --------- ------- Balance at December 31, 1997 32,385 -- 32,385 263,787 -- Net earnings -- -- -- -- -- Dividends declared - $.915 per share -- -- -- -- -- Issuance of shares under Dividend Reinvestment Plan, net 164 -- 164 1,576 -- Conversion of debentures, net 460 -- 460 4,596 -- Exercise of options, net 3 -- 3 17 -- Issuance of restricted stock to employees 120 -- 120 1,130 -- Amortization of deferred compensation -- -- -- -- -- Issuance of shares subject to employee loans 120 -- 120 1,130 -- Adjustments to minority interest of unitholders in operating partnership for issuance of additional units -- -- -- 739 -- ------ ---- -------- --------- ------- Balance at December 31, 1998 33,252 -- 33,252 272,975 -- Net earnings -- -- -- -- -- Dividends declared - $.93 per share -- -- -- -- -- Exercise of options, net 4 -- 4 33 -- Amortization of deferred compensation -- -- -- -- -- Forfeiture of restricted stock (22) -- (22) (203) -- Adjustment to minority interest of unitholders in operating partnership for issuance of additional units -- -- -- (357) -- Acquisition of treasury stock -- (517) -- -- (4,026) ------ ---- -------- --------- ------- Balance at December 31, 1999 33,234 (517) $ 33,234 $ 272,448 $(4,026) ====== ==== ======== ========= ======= Cumulative Deferred Distributions Total Compensation/ in Excess of Shareholders' Stock Loans Net Earnings Equity - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 1996 $ -- $(33,726) $ 193,355 Net earnings -- 26,113 26,113 Dividends declared - $.90 per share -- (28,883) (28,883) Issuance of shares under Dividend Reinvestment Plan, net -- -- 2,864 Conversion of debentures, net -- -- 1,610 Exercise of options, net -- -- 105 Issuance of common stock, net -- -- 49,535 Issuance of shares for the repurchase of convertible debentures, net -- -- 14,977 -------- -------- --------- Balance at December 31, 1997 -- (36,496) 259,676 Net earnings -- 25,585 25,585 Dividends declared - $.915 per share -- (30,157) (30,157) Issuance of shares under Dividend Reinvestment Plan, net -- -- 1,740 Conversion of debentures, net -- -- 5,056 Exercise of options, net -- -- 20 Issuance of restricted stock to employees (1,250) -- -- Amortization of deferred compensation 114 -- 114 Issuance of shares subject to employee loans (1,250) -- -- Adjustments to minority interest of unitholders -- -- -- in operating partnership for issuance of additional units -- -- 739 -------- -------- --------- Balance at December 31, 1998 (2,386) (41,068) 262,773 Net earnings -- 28,331 28,331 Dividends declared - $.93 per share -- (30,908) (30,908) Exercise of options, net -- -- 37 Amortization of deferred compensation 103 -- 103 Forfeiture of restricted stock 225 -- -- Adjustment to minority interest of unitholders in operating partnership for issuance of additional units -- -- (357) Acquisition of treasury stock 250 -- (3,776) -------- -------- --------- Balance at December 31, 1999 $ (1,808) $(43,645) $ 256,203 ======== ======== =========
The accompanying notes are an integral part of these consolidated statements. 40 41 IRT PROPERTY COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Years Ended December 31, 1999, 1998 and 1997 (In thousands)
1999 1998 1997 ---- ---- ---- Cash flows from operating activities: Net earnings $ 28,331 $ 25,585 $ 26,113 Adjustments to reconcile earnings to net cash from operating activities: Depreciation 13,869 12,925 11,453 Gain on sales of properties (2,483) (1,213) (3,897) Minority interest of unitholders in partnership (50) 262 -- Amortization of deferred compensation 103 114 -- Amortization of debt costs and discounts 519 496 455 Amortization of capitalized leasing income 160 133 122 Extraordinary loss - extinguishment of debt 157 57 -- Changes in assets and liabilities: (Decrease) increase in accrued interest on debentures and senior notes -- (143) 482 Increase in interest receivable, prepaid expenses and other assets (146) (1,170) (478) Increase (decrease) in accrued expenses and other liabilities 992 (318) 542 -------- -------- -------- Net cash flows from operating activities 41,452 36,728 34,792 -------- -------- -------- Cash flows used in investing activities: Proceeds from sales of properties, net 12,409 5,783 6,077 Nonoperating distributions from unconsolidated joint venture -- 356 -- Investment in unconsolidated affiliates (7,251) -- -- Additions to real estate investments, net (14,714) (45,749) (70,211) Collections of mortgage loans, net 1,005 24 3,861 -------- -------- -------- Net cash flows used in investing activities (8,551) (39,586) (60,273) -------- -------- -------- Cash flows (used in) from financing activities: Cash dividends, net (30,908) (28,417) (26,019) Purchase of treasury stock (3,776) -- -- Exercise of stock options 37 20 105 Principal amortization of mortgage notes payable (1,835) (1,084) (1,146) Repayment of mortgage notes payable (3,958) (9,093) (34,840) Payment of deferred financing costs (1,191) -- -- Proceeds from mortgage notes payable 40,000 4,401 -- (Decrease) increase in bank indebtedness (31,100) 37,100 (600) Issuance of common stock, net -- -- 49,534 Issuance of senior notes, net -- -- 73,817 Repurchase of 7.3% convertible subordinated debentures, net -- -- (38,269) -------- -------- -------- Net cash flows (used in) from financing activities (32,731) 2,927 22,582 -------- -------- -------- Net increase (decrease) in cash and cash equivalents 170 69 (2,899) Cash and cash equivalents at beginning of period 344 275 3,174 -------- -------- -------- Cash and cash equivalents at end of period $ 514 $ 344 $ 275 ======== ======== ======== Supplemental disclosures of cash flow information: Total cash paid during period for interest $ 21,344 $ 19,008 $ 15,518 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. 41 42 IRT PROPERTY COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 and 1997 (Dollars in thousands, except per share amounts) (Unaudited with respect to square footage) 1. ORGANIZATION AND NATURE OF OPERATIONS: IRT Property Company ("IRT"), founded in 1969, is a self-administered and self-managed equity real estate investment trust ("REIT") which invests primarily in neighborhood and community shopping centers which are located in the southeastern United States and are anchored by necessity-oriented retailers such as supermarkets, drug stores and/or discount variety stores. No single retailer accounts for more than 7.7% of IRT's gross revenues. In 1999 IRT Capital Corporation II ("IRTCCII"), a taxable subsidiary of IRT, was formed under the laws of Georgia. This taxable subsidiary has the ability to develop properties, buy and sell properties, provide equity to developers and perform third-party management, leasing and brokerage. IRT holds 96% of the nonvoting common stock and 1% of the voting common stock of IRTCCII. The remaining voting common stock is currently held by a member of the board of directors of IRT and an executive officer of IRT. IRTCCII is accounted for as an investment under the equity method in the accompanying consolidated financial statements. IRTCCII is taxed as a regular corporation and not as a REIT. In 1998 IRT Partners L.P. ("LP"), a Georgia limited partnership, was formed to enhance the acquisition opportunities of IRT by offering potential sellers the ability to engage in tax-deferred sales in exchange for Operating Partnership Units ("OP Units") of LP which are redeemable for shares of IRT common stock. IRT serves as general partner of LP and initially contributed 20 of its shopping centers and related assets and cash to LP in exchange for OP Units and partnership interests. Since the formation of LP, IRT has contributed cash to acquire four shopping centers, and LP has disposed of three shopping centers. As a result, IRT and one of its wholly owned subsidiaries own approximately 92.9% of LP at December 31, 1999. The accounts of LP are included in the accompanying consolidated financial statements. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Consolidation The accompanying consolidated financial statements include the accounts of IRT and its wholly-owned subsidiaries and majority-owned and controlled subsidiaries and partnership (collectively, the "Company"). Investments in 42 43 unconsolidated affiliates over which the Company does not exercise control are accounted for by the equity method. Intercompany transactions and balances have been eliminated in consolidation. Income Recognition The Company employs a policy of suspending the accrual of income on any investments where interest or rental payments are delinquent 60 days or more. Percentage rental income is recorded upon collection. Depreciation The Company provides depreciation on buildings and other improvements on the straight-line basis over their estimated useful lives. Such lives range from 16 to 40 years for buildings and six years for improvements. Maintenance and repairs are charged to expense as incurred, while significant improvements are capitalized. Use of Estimates The preparation of 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. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Earnings Per Share Earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding consistent with the guidelines of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." See Note 11 for the required disclosures. Reclassification of Prior Year Amounts Certain items in the consolidated financial statements have been reclassified to conform with the 1999 presentation. Recent Accounting Pronouncements In 1998 the Company adopted SFAS No. 130, "Reporting Comprehensive Income." This statement established standards for reporting and disclosing 43 44 comprehensive income (defined as revenues, expenses, gains and losses that under generally accepted accounting principles are not included in net income) and its components. The Company had no items of other comprehensive income in 1999 or 1998. In 1998 the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its senior management group. The Company owns and operates retail shopping centers in ten states in the southeastern United States. Such shopping centers generate rental and other revenue through the leasing of shop spaces to a diverse base of tenants. The Company evaluates the performance of each of its shopping centers on an individual basis. However, as each of the shopping centers possesses similar economic characteristics and tenants, the shopping centers have been aggregated into one reportable segment. In June 1998 SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued establishing accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. This statement, as amended in June 1999 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," is effective for the Company on January 1, 2000. The Company has never used derivative instruments or hedging activities. Income Taxes The Company has in past years elected to qualify, and intends to continue such election, to be taxed as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). In general terms, under such Code provisions a trust or corporation which, in any taxable year, meets certain requirements and distributes to its shareholders at least 95% of its taxable income will not be subject to federal income tax. Additionally, certain subsidiaries of IRT, formed to provide management and other services to third and related parties, are taxed based on reportable income. The tax attributes of these entities are immaterial to the accompanying consolidated financial statements. 44 45 3. RENTAL PROPERTIES: Rental properties are comprised of the following:
December 31, ------------ 1999 1998 ------- ------- Land covered by purchase- leaseback agreements $ 686 $ 928 Land related to buildings and improvements 146,919 143,648 Buildings and improvements 482,400 477,541 -------- -------- Total rental properties $630,005 $622,117 ======== ========
Upon expiration of the leases for land covered by purchase-leaseback agreements, all improvements on the land will become the property of the Company. The lessees of these properties have the option, subject to certain conditions, to repurchase the land. Such option prices are for amounts greater than the Company's carrying value of the related land. Future minimum base rentals on noncancellable operating leases for the Company's shopping center, industrial and land purchase-leaseback investments at December 31, 1999 are as follows:
Year Amount ---- ------ 2000 $ 65,902 2001 58,379 2002 49,885 2003 42,132 2004 37,906 Thereafter 227,661 ------- Total $481,865 =======
45 46 SHOPPING CENTER ACQUISITIONS
Date Square Total Initial Mortgage Acquired Property Name City, State Footage Cost Cash Paid Assumed - ---------------------------------------------------------------------------------------------------------------- 2/26/99 Shoppes at Lago Mar Kendall, FL 82,613 $ 9,916 $ 4,174 $5,742 3/15/99 Williamsburg at Dunwoody Dunwoody, GA 44,928 5,602 5,602 -- ------- ------- ------ ------ 127,541 $15,518 $ 9,776 $5,742 ======= ======= ====== ======
SHOPPING CENTER DISPOSITIONS
Date Square Sales Cash Sold Property Name City, State Footage Price Proceeds Gain - ---------------------------------------------------------------------------------------------------------------- 6/1/99 Litchfield Landing Pawley's Island, SC 42,201 $ 3,190 $ 3,129 $1,191 6/1/99 First Street Station Albemarle, NC 52,230 3,137 3,038 320 6/1/99 Taylorsville Taylorsville, NC 48,537 2,571 2,430 609 6/1/99 University Center Greenville, NC 56,180 3,462 3,399 201 Other 417 413 162 ------- ------- ------- ------ 199,148 $12,777 $12,409 $2,483 ======= ======= ======= ======
4. NET INVESTMENT IN DIRECT FINANCING LEASES: At December 31, 1999, two retail facilities are leased to Wal-Mart Stores, Inc. at a total annual rental of $333 plus percentage rentals of 1% of gross sales in excess of the tenants' actual sales for its fiscal year ended January 31, 1990. Rental income from these leases totaled $399, $400 and $381 in 1999, 1998 and 1997, respectively. The Company acquired ten branch bank buildings in a 1984 merger. These facilities are leased to The Old Phoenix National Bank at a total annual rental of $313. Of the total rental income on direct financing leases, $160, $133 and $122 were recorded as amortization of capitalized leasing income in 1999, 1998 and 1997, respectively. The Company is to receive minimum lease payments of $646 per year during 2000 through 2004 and a total of $4,607 thereafter through the remaining lease terms. 46 47 5. DEVELOPMENT AND CO-DEVELOPMENT: IRTCCII currently is in the process of developing two shopping centers in Florida for which IRT has committed to loan up to $13,000. The loan, bearing interest at 2% over the rates paid by IRT on its variable debt, matures in June 2001. In 1999 the Company was engaged in a project to develop Old Decatur Square jointly with a partner. On December 31, 1999, the Company agreed to relinquish its option to acquire this property to the co-developer for $969 which is included in other income in the accompanying consolidated statements of earnings. The Company no longer maintains an interest in this co-development. 6. MORTGAGE LOANS: The Company's investments in mortgage loans, all of which are secured by real estate investments, are summarized by type of loan at December 31, 1999 and 1998, as follows:
1999 1998 ------------------------------- -------------------------- Number Amount Number Amount of Loans Outstanding of Loans Outstanding ------------ -------------- --------- ------------- First mortgage 1 $ 108 1 $ 114 Mortgage participation 1 21 1 23 Second mortgage -- -- 2 1,000 ----- ------ ------ ------- 2 129 4 1,137 Less: Interest discounts and negative goodwill -- (37) -- (40) ----- ------ ------ ------- Mortgage loans, net 2 $ 92 4 $ 1,097 ===== ====== ====== =======
During the fourth quarter of 1997, the borrower under the Spanish Quarter Apartments wrap-around mortgage loan defaulted under the terms of the mortgage, and on February 18, 1998, the Company obtained title to the property through foreclosure. On August 14, 1998, the Company sold Spanish Quarter Apartments for approximately $5,100. The Company received net cash proceeds from the sale of approximately $4,806 and recognized a gain, net of deferred income tax, of approximately $469 for financial reporting purposes. On August 1, 1998, the borrower under the Walton Plaza first mortgage defaulted under the terms of the mortgage and on August 31, 1998, the Company obtained title to Walton Plaza through a deed in lieu of foreclosure. 47 48 Annual principal payments applicable to mortgage loan investments in the next five years and thereafter are as follows:
Year Amount ---- ------ 2000 $ 8 2001 9 2002 10 2003 11 2004 11 Thereafter 43 ------ $ 92 ======
Based on current rates at which similar loans would be made, the estimated fair value of mortgage loans was approximately $148 and $1,160 at December 31, 1999 and 1998, respectively. 7. MORTGAGE NOTES PAYABLE: Mortgage notes payable are collateralized by various real estate investments having a net carrying value of approximately $190,128 at December 31, 1999. These notes have stated interest rates ranging from 6.50% to 9.625% and are due in monthly installments with maturity dates ranging from 2000 to 2024. On February 25, 1999, the Company entered into a $40,000 loan secured by first mortgages on eight properties. This loan is a 25-year fully amortizing loan that bears interest at a fixed rate of 6.5%. During 1999, the Company repaid at maturity a $625 purchase-money mortgage bearing interest at 9% and made a scheduled balloon payment at maturity of $3,333 on a mortgage bearing interest at 9.875%. 48 49 Future principal amortization and balloon payments applicable to mortgage notes payable at December 31, 1999 are as follows:
Principal Balloon Year Amortization Payments Total - ---- ------------ --------- ------- 2000 $ 2,034 $ 3,521 $ 5,555 2001 2,366 -- 2,366 2002 2,499 7,155 9,654 2003 2,600 -- 2,600 2004 2,807 -- 2,807 Thereafter 62,745 34,935 97,680 ------- -------- -------- 75,051 45,611 120,662 Interest premium 1,502 -------- $122,164 ========
Based on the borrowing rates currently available to the Company for mortgages with similar terms and maturities, the estimated fair value of mortgage notes payable was approximately $117,000 and $88,622 at December 31, 1999 and 1998, respectively. 8. CONVERTIBLE SUBORDINATED DEBENTURES: Effective August 31, 1993, the Company issued $86,250 of 7.3% convertible subordinated debentures due August 15, 2003, $23,275 of which are outstanding as of December 31, 1999. Interest on the debentures is payable semiannually on February 15 and August 15. The debentures are convertible at any time prior to maturity into common stock of the Company at $11.25 per share, subject to adjustment in certain events. The Company has the option to redeem the debentures at par. Costs associated with the issuance of the debentures were approximately $3,701 and are being amortized over the life of the debentures. During 1997, $1,653 of these debentures were converted into 146,921 shares of common stock. During 1998, $5,178 of these debentures were converted into 460,263 shares of common stock. No debentures were converted during 1999. Based upon the conversion price, 2,068,889 authorized but unissued common shares have been reserved for possible issuance if the $23,275 debentures outstanding at December 31, 1999 are converted. Based on the closing market price at year-end, the estimated fair value of the debentures was approximately $22,751 and $22,286 at December 31, 1999 and 1998, respectively. 49 50 9. SENIOR NOTES: On March 26, 1996, the Company issued $50,000 of 7.45% senior notes due April 1, 2001. These senior notes were issued at a discount of $84 which is being amortized over the life of the notes for financial reporting purposes. Net proceeds from the issuance totaled approximately $49,394. Interest on the 7.45% senior notes is payable semiannually on April 1 and October 1. Costs associated with the issuance of these senior notes totaled approximately $522 and are being amortized over the life of the notes. On August 15, 1997, the Company issued $75,000 of 7.25% senior notes due August 15, 2007. These senior notes were issued at a discount of $426 which is being amortized over the life of the notes for financial reporting purposes. Net proceeds from the issuance totaled $73,817. Interest on the 7.25% senior notes is payable semiannually on February 15 and August 15. Costs associated with the issuance of these senior notes totaled approximately $757 and are being amortized over the life of the notes. 10. INDEBTEDNESS TO BANKS: On November 1, 1999, the Company obtained a $100,000 unsecured revolving loan facility ("Revolving Loan") which is scheduled to mature on November 1, 2002. This loan replaces the Company's previous credit facility which was canceled concurrent to the procurement of the new term loan. In conjunction with the cancellation of the previous credit facility, the Company recognized $157 of extraordinary loss for the write-off of the related unamortized loan costs. In addition, the Company secured a $5,000 swing line credit facility with terms similar to those of the Revolving Loan with a scheduled maturity date of October 31, 2000. The Company may request to extend the maturity date for an additional twelve-month period beyond the existing maturity date. Under the Revolving Loan, the Company may elect to pay interest at either the lender's prime, adjusted daily, or the London Interbank Offered Rates ("LIBOR"), plus the "Applicable Margin" based upon the rating of the senior unsecured debt obligations of the Company. The Applicable Margin ranges from .95% to 1.4%. The Applicable Margin based on the Company's current rating is 1.15%. At December 31, 1999, the weighted average interest rate was 7.62%. The terms of the Revolving Loan require the Company to pay an annual facility fee equal to 0.2% of the total commitment and include certain restrictive covenants which require compliance with certain financial ratios and measurements. At December 31, 1999, the Company was in compliance with these covenants. LP and IRTCCII guarantee the Company's indebtedness on the Revolving 50 51 Loan. The following data is presented with respect to the Revolving Loan and swing line agreements in 1999 and 1998:
1999 1998 ---- ---- Available balance at year-end $84,600 $48,500 Average borrowing for the period 21,959 35,211 Maximum amount outstanding during the period 51,500 52,000 Average interest rate for the period 6.75 % 6.87 % Interest rate at year-end 7.62 % 6.69 %
The Company incurred commitment fees of approximately $201, $160 and $212 for the years ended December 31, 1999, 1998 and 1997, respectively 11. EARNINGS PER SHARE: Basic earnings per share were computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the year. The effects of the conversion of the 7.3% subordinated debentures and the exercise of certain stock options, using the treasury stock method, have been excluded from the calculation of dilutive earnings per share, as they are antidilutive for all periods presented.
Shares Per Share Income (in thousands) Amount ------------- -------------- ---------- For the fiscal year ended December 31, 1999 - --------------------------------------------------------- Basic net earnings available to shareholders $28,331 33,119 $ 0.86 Minority interest of unitholders in operating partnership 683 785 ======== ------- ------ Diluted net earnings available to shareholders $29,014 33,904 $ 0.86 ======= ====== ======== For the fiscal year ended December 31, 1998 - --------------------------------------------------------- Basic net earnings available to shareholders $25,585 32,940 $ 0.78 Options outstanding -- 23 ======== Minority interest of unitholders in operating partnership 262 340 Restricted stock -- 2 ------- ------ Diluted net earnings available to shareholders $25,847 33,305 $ 0.78 ======= ====== ======== For the fiscal year ended December 31, 1997 - --------------------------------------------------------- Basic net earnings available to shareholders $26,113 31,868 $ 0.82 Options outstanding -- 53 ======== ------- ------ Diluted net earnings available to shareholders $26,113 31,921 $ 0.82 ======= ====== ========
51 52 12. CASH DISTRIBUTIONS AND DIVIDEND REINVESTMENT PLAN: The taxability of per share distributions paid to shareholders during the years ended December 31, 1999, 1998 and 1997 was as follows:
1999 1998 1997 ------- ------- ------- Ordinary income $ 0.787 $ 0.787 $ 0.730 Capital gains 0.143 0.054 0.080 Return of capital -- 0.074 0.090 ------- ------ ----- $ 0.930 $ 0.915 $ 0.900 ======= ====== =====
In addition, the 5% discount received upon purchase of shares under the Dividend Reinvestment Plan (the "DRIP") for 1998 and 1997 is taxable as ordinary income to the participant. The DRIP allowed shareholders to elect to reinvest all or a portion of their distributions in newly issued shares of common stock of the Company at 95% of the market price of the shares. The DRIP was amended in July 1998 to eliminate the discount. During 1998 and 1997, the Company received net proceeds under the DRIP of $1,740 and $2,864, respectively. The Company did not receive any proceeds under the DRIP in 1999. 13. STOCK OPTIONS: Effective May 8, 1989, the Company adopted and its shareholders approved the 1989 Stock Option Plan (the "1989 Plan"). The 1989 Plan includes provisions for a) the granting of both Incentive Stock Options ("ISOs") (as defined in Section 422A of the Code) and nonqualified options to officers and employees and b) the automatic granting of nonqualified options for 1,250 shares to each non-employee director upon the election and each annual re-election of each non-employee director. Under the terms of the 1989 Plan, the option price shall be no less than the fair market value of the optioned shares at the date of grant. The options are automatically vested and expire after ten years. Effective June 18, 1998, the Company adopted and its shareholders approved the 1998 Long-Term Incentive Plan (the "1998 Plan"). The 1998 Plan includes provisions for the granting of ISOs, nonqualified options, stock appreciation rights, performance shares, restricted stock, dividend equivalents and other stock-based awards. Under the terms of the 1998 Plan, the option exercise price shall be no less than the fair market value of the optioned shares at the date of the grant. The options are automatically vested and expire after ten years. The Company accounts for these plans under APB 25, under which no compensation cost has been recognized. Had compensation cost for these plans 52 53 been determined consistent with SFAS 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
1999 1998 ------- ------- Net earnings: As reported $28,331 $25,846 Pro forma $28,231 $25,412 EPS (basic and diluted): As reported $ 0.86 $ 0.78 Pro forma $ 0.85 $ 0.77
Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The weighted average fair value of options granted is $0.62 and $1.10 for 1999 and 1998, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1999 and 1998, respectively: risk-free interest rates of 4.74% and 5.48%; expected dividend yields of 9.50% and 7.87%; expected lives of five years; expected volatility of 21%. 53 54 Details of the stock option activity during 1999, 1998, and 1997 are as follows:
Number of Shares --------------------------------- Option Price Employees Directors Per Share --------------- ------------- ---------------- Options outstanding at December 31, 1996 397,193 61,250 $7.63 - $15.10 Granted, 1997 90,000 -- $11.38 Granted, 1997 -- 5,000 $11.63 Exercised, 1997 (44,200) $9.25 - $10.75 Exercised, 1997 -- (6,250) $9.50 - $10.25 Expired unexercised, 1997 (60,000) -- $9.25 - $15.10 ------- ------- Options outstanding at December 31, 1997 382,993 60,000 $7.63 - $14.90 Granted, 1998 150,300 -- $11.69 - $11.81 Granted, 1998 -- 7,500 $10.44 Exercised, 1998 (4,750) -- $ 9.25 Expired unexercised, 1998 (42,575) -- $9.25 - $12.60 ------- ------ Options outstanding at December 31, 1998 485,968 67,500 $7.63 - $14.90 Granted, 1999 156,400 -- $9.69 Granted, 1999 -- 5,000 $9.38 Exercised, 1999 (4,000) -- $9.25 Expired unexercised, 1999 (130,500) (10,000) $9.25 - $14.90 ------- ------- Options outstanding at December 31, 1999 507,868 62,500 $7.63 - $13.38 ======= =======
54 55 The following table summarizes information about stock options outstanding and exercisable at December 31, 1999:
Number Weighted Average Weighted Range of Outstanding Remaining Average Exercise Prices And Exercisable Contractual Life Exercise Price ------------------------- ---------------------- -------------------------- ----------------------------- $ 7.63 - $9.75 271,768 7.26 years $ 9.55 $10.00 - $11.38 144,000 5.50 years $10.76 $11.63 - $13.38 154,600 6.22 years $11.92 ------------------------- ---------------------- ------------------------- ----------------------------- $ 7.63 - $13.38 570,368 6.53 years $10.50 ========================= ====================== ========================= =============================
14. DEFERRED COMPENSATION AND STOCK LOANS: On June 18, 1998, 119,760 restricted shares of common stock (the "Restricted Shares") were granted and 119,760 shares (the "Loan Shares") were issued pursuant to recourse loans due June 18, 2008 made to certain Company officers as incentives for future services. The Restricted Shares and the Loan Shares were valued at the closing price of the Company's common stock on June 18, 1998 of $10.437. 15. EMPLOYEE RETIREMENT BENEFITS: Under the Company's 401(k) Plan, employees who have completed one year of service and are at least 18 years of age are eligible for participation in the Plan. Employees may elect to make contributions to the Plan, and the Company matches 100% of such contributions up to 6% of the individual participant's compensation, based on the length of service. The Company contributed approximately $159, $145 and $131 to the 401(k) Plan in 1999, 1998 and 1997, respectively. 16. SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES: Significant noncash transactions for the years ended December 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997 -------- ------- ------ Mortgages assumed in purchase of rental properties $ 5,742 $28,334 $ -- Adjustment for minority interest ownership of LP (357) 739 -- OP Units issued in exchange for initial capital contributions -- 75,484 --
55 56 OP Units issued in connection with the acquisition of rental properties -- 7,741 -- Property acquired through foreclosure -- 7,635 -- Issuance of stock subject to employee loans -- 1,250 -- Issuance of employee restricted stock -- 1,250 -- Issuance of common stock in exchange for redemption of debentures -- -- 16,575 Conversion of debentures into common stock -- 5,178 1,653
17. COMMITMENTS AND CONTINGENCIES: The Company has entered into Change In Control Employment agreements with certain key executives. Under each agreement in the event employment is terminated following a "Change In Control," the Company is committed to pay certain benefits, including the payment of each employee's base salary through the expiration of each agreement. Certain of the Company's properties have environmental concerns that have been or are being addressed. The Company maintains limited insurance coverage for this type of environmental risk. Although no assurance can be given that Company properties will not be affected adversely in the future by environmental problems, the Company presently believes that there are no environmental matters that are reasonably likely to have a material adverse effect on the Company's financial position. 18. SUBSEQUENT EVENTS: On January 14, 2000, the Company sold Palm Gardens shopping center, located in Largo, Florida, for approximately $1,389 in cash. The Company entered into a co-development agreement in January 2000. Under this agreement, the Company will fund, through loans to the co-developer, monies to acquire land adjacent to an existing shopping center and to develop such land. The Company has committed up to $3,650 for this co-development. 19. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF AUDITOR'S REPORT: On February 18, 2000, the Company sold Westgate Square shopping center, located in Sunrise, Florida, for approximately $10,271 in cash. 56 57 20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED): The following is a summary of the unaudited quarterly financial information for the fiscal years ended December 31, 1999 and 1998.
1999 ------------------------------------------------------ First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- --------- Revenues $ 21,043 $ 21,478 $ 20,772 $ 22,098 ======== ======== ======== ======== Earnings before minority interest, gain on sales of properties and extraordinary item $ 6,661 $ 6,445 $ 6,315 $ 7,267 Minority interest - OP unitholders (170) (254) (147) (112) Gain on sales of properties -- 2,483 -- -- -------- -------- -------- -------- Earnings before extraordinary item 6,491 8,674 6,168 7,155 Extraordinary item - loss on extinguishment of debt -- -- -- (157) -------- -------- -------- -------- Net earnings $ 6,491 $ 8,674 $ 6,168 $ 6,998 ======== ======== ======== ======== Per share: Basic $ 0.20 $ 0.26 $ 0.19 $ 0.21 ======== ======== ======== ======== Diluted $ 0.20 $ 0.26 $ 0.19 $ 0.21 ======== ======== ======== ======== 1998 ------------------------------------------------------ First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- --------- Revenues $ 18,527 $ 19,907 $ 20,817 $ 20,619 ======== ======== ======== ======== Earnings before minority interest, gain on sales of properties and extraordinary item $ 6,056 $ 5,633 $ 6,919 $ 6,083 Minority interest - OP unitholders -- -- (105) (157) Gain on sales of properties -- 744 469 -- -------- -------- -------- -------- Earnings before extraordinary item 6,056 6,377 7,283 5,926 Extraordinary item - loss on extinguishment of debt -- -- (57) -- -------- -------- -------- -------- Net earnings $ 6,056 $ 6,377 $ 7,226 $ 5,926 ======== ======== ======== ======== Per share: Basic $ 0.19 $ 0.19 $ 0.22 $ 0.18 ======== ======== ======== ======== Diluted $ 0.19 $ 0.19 $ 0.22 $ 0.18 ======== ======== ======== ========
57 58 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ----------- ------------- ------- --------- --------- --------- Abbeville Plaza Abbeville, SC Land $ -- $ 48 $ -- $ 48 $ -- 21 April, 1986 1970 Buildings 458 56 514 384 Alafaya Commons Orlando, FL Land -- 5,526 -- 5,526 -- 40 November, 1996 1987 Buildings 4,724 102 4,826 373 Ambassador Row Lafayette, LA Land -- 2,452 -- 2,452 -- 40 December, 1994 1980 & Buildings 7,244 472 7,716 1,048 1991 Ambassador Row Courtyards Lafayette, LA Land -- 2,899 -- 2,899 -- 40 December, 1994 1986 & Buildings 8,698 269 8,967 1,170 1991 Asheville Plaza(1) Asheville, NC Land -- 53 15 68 -- 30 April, 1986 1967 Buildings 336 2 338 155 Bay Pointe Plaza(1) St. Petersburg, FL Land -- 3,250 -- 3,250 -- 40 December, 1998 1998 Buildings 3,138 -- 3,138 85 Bluebonnet Village Baton Rouge, LA Land -- 2,540 (5) 2,535 -- 40 December, 1994 1983 Buildings 5,510 116 5,626 728 The Boulevard Lafayette, LA Land -- 948 -- 948 -- 40 December, 1994 1976 & Buildings 2,845 51 2,896 373 1994 Carolina Place Hartsville, SC Land -- 345 -- 345 -- 40 May, 1989 1989 Buildings 2,006 4 2,010 530 Centre Pointe Plaza(1) Smithfield, NC Land -- 984 12 996 -- 40 December, 1992& 1989 & Buildings 8,003 286 8,289 1,501 December, 1993 1993 Chadwick Square(1) Hendersonville, NC Land -- 277 -- 277 -- 40 January, 1992 1985 Buildings 1,180 99 1,279 253 Charlotte Square(1) Port Charlotte, FL Land 4,130 2,114 -- 2,114 -- 40 August, 1998 1998 Buildings 3,892 117 4,009 138
58 59 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ----------- ------------- ---------- -------- -------- --------- Chastain Square Atlanta, GA Land $4,247 $ 1,689 -- $ 1,689 $ -- 40 December, 1997 1981 Buildings 5,069 28 5,097 261 Chelsea Place New Port Richey, FL Land -- 1,388 -- 1,388 -- 40 July, 1993 1992 Buildings 5,550 56 5,606 899 Chester Plaza Chester, SC Land -- 69 143 212 -- 16 April, 1986 & 1967 & Buildings 414 1,675 2,089 891 February, 1992 1992 Chestnut Square(1) Brevard, NC Land -- 296 -- 296 -- 40 January, 1992 1985 Buildings 1,113 96 1,209 235 Colony Square Fitzgerald, GA Land -- 273 -- 273 -- 40 February, 1988 1987 Buildings 2,456 254 2,710 930 Commerce Crossing Commerce, GA Land -- 380 1 381 -- 40 December, 1992 1988 Buildings 4,090 57 4,147 730 Country Club Plaza Slidell, LA Land -- 1,069 -- 1,069 -- 40 January, 1995 1982 Buildings 3,010 157 3,167 444 Countryside Shops Cooper City, FL Land -- 5,652 -- 5,652 -- 40 June, 1994 1986, 1988 Buildings 10,977 186 11,163 1,589 & 1991 The Crossing Slidell, LA Land -- 1,282 -- 1,282 -- 40 December, 1994 1988 & Buildings 3,214 109 3,323 465 1993 Daniel Village Augusta, GA Land 4,642 2,633 -- 2,633 -- 40 March, 1998 1998 Buildings 9,612 88 9,700 435 Delchamps Plaza Pascagoula, MS Land -- 359 -- 359 -- 40 April, 1988 1987 Buildings 4,130 109 4,239 1,252 Douglas Commons Douglasville, GA Land 5,531 2,543 3 2,546 -- 40 August, 1992 1998 Buildings 5,958 169 6,127 1,198
59 60 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ----------- ------------- ------------ ---------- --------- ---------- Eden Centre(1) Eden, NC Land $ -- $ 626 $ -- 626 $ -- 40 November, 1994 1991 Buildings 2,901 23 2,924 378 Elmwood Oaks Harahan, LA Land 7,500 4,559 -- 4,559 -- 40 January, 1992 1989 Buildings 6,560 91 6,651 1,342 Fairview Oaks Ellenwood, GA Land 5,235 714 -- 714 -- 40 June, 1997 1997 Buildings 6,396 3 6,399 406 Forest Hills Centre(1) Wilson, NC Land -- 870 (9) 861 -- 40 August, 1990 1990 & Buildings 4,121 626 4,747 1,039 1995 Forrest Gallery(1) Tullahoma, TN Land -- 2,137 11 2,148 -- 40 December, 1992 1987 Buildings 9,978 676 10,654 1,999 Ft. Walton Beach Plaza Ft. Walton Beach, FL Land -- 788 -- 788 -- 30 July, 1986 1986 Buildings 1,860 29 1,889 856 The Galleria(1) Wrightsville Beach, NC Land -- 1,070 -- 1,070 -- 40 August, 1986 1986, 1990 Buildings 6,139 1,318 7,457 2,182 & December, 1987 &1996 Grassland Crossing Alpharetta, GA Land 6,504 1,075 -- 1,075 -- 40 February, 1997 1996 Buildings 8,832 233 9,065 681 Greenwood Palm Springs, FL Land -- 4,129 -- 4,129 -- 40 July, 1997 1982 & Buildings 8,954 170 9,124 561 1994 Gulf Gate Plaza Naples, FL Land -- 278 -- 278 -- 28 June, 1979 1969 & Buildings 1,858 2,421 4,279 3,116 1974 Heritage Walk Milledgeville, GA Land -- 810 -- 810 -- 40 June, 1993 1991 & Buildings 7,944 34 7,978 1,312 1992
60 61 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ----------- ------------- ------------ ---------- --------- ---------- Hoffner Plaza Orlando, FL Land $ -- $ 337 $ 78 $ 415 $ -- 28 June, 1979 1972 Buildings 147 20 167 141 Lancaster Plaza Lancaster, SC Land -- 121 -- 121 -- 30 April, 1986 1971 Buildings 744 572 1,316 666 Lancaster Shopping Center Lancaster, SC Land -- 338 -- 338 -- 30 August, 1986 & 1963 & Buildings 1,228 77 1,305 523 December, 1987 1987 Lawrence Commons(1) Lawrenceburg, TN Land -- 816 -- 816 -- 40 August, 1992 1987 Buildings 2,729 62 2,791 535 Lexington Shopping Center Lexington, VA Land -- 312 -- 312 -- 30 June, 1988 & 1981 & Buildings 1,639 650 2,289 870 June, 1989 1989 Mableton Crossing Mableton, GA Land 4,477 2,781 -- 2,781 -- 40 June, 1998 1998 Buildings 5,389 5 5,394 206 Macland Pointe Marietta, GA Land 3,528 1,252 (12) 1,240 -- 40 January, 1993 1992 & Buildings 4,317 598 4,915 863 1993 Madison Centre Madison, AL Land 4,247 2,772 -- 2,772 -- 40 August, 1997 1997 Buildings 3,046 -- 3,046 181 Market Place Norcross, GA Land -- 3,820 -- 3,820 -- 40 April, 1997 1976 Buildings 3,254 366 3,620 237 McAlpin Square Savannah, GA Land -- -- -- -- -- 40 December, 1997 1979 Buildings 6,152 251 6,403 309 Millervillage Baton Rouge, LA Land -- 1,927 -- 1,927 -- 40 December, 1994 1983 & Buildings 5,662 129 5,791 762 1992
61 62 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ----------- ------------- ------------ ---------- --------- ---------- New Smyrna Beach Regional New Smyrna Beach, FL Land $ -- $ 3,704 $ 7 $ 3,711 $ -- 40 August, 1992 1987 Buildings 6,401 383 6,784 1,417 North River Village Ellenton, FL Land -- 2,949 -- 2,949 -- 40 December, 1992 & 1988 & Buildings 7,161 106 7,267 1,214 December, 1993 1993 North Village Center North Myrtle Beach, SC Land 2,227 483 -- 483 -- 37 August, 1986 1984 Buildings 2,785 10 2,795 891 Old Kings Commons Palm Coast, FL Land -- 1,491 -- 1,491 -- 40 May, 1988 1988 Buildings 4,474 197 4,671 1,437 Palm Gardens Largo, FL Land -- 98 -- 98 -- 26 June, 1979 970 & Buildings 658 1,123 1,781 1,267 1993 Parkmore Plaza Milton, FL Land -- 1,799 8 1,807 -- 40 December, 1992 1986 & Buildings 6,454 138 6,592 1,192 1992 Paulding Commons Dallas, GA Land 7,210 2,312 3 2,315 -- 40 August, 1992 1991 Buildings 10,607 207 10,814 2,030 Pensacola Plaza Pensacola, FL Land -- 131 -- 131 -- 30 July, 1986 1985 Buildings 2,392 168 2,560 1,204 Pinhook Plaza Lafayette, LA Land -- 2,768 -- 2,768 -- 40 December, 1994 1979 & Buildings 8,304 228 8,532 1,082 1992 Plaza Acadienne Eunice, LA Land -- -- -- -- -- 40 December, 1994 1980 Buildings 2,918 99 3,017 394 Plaza North(1) Hendersonville, NC Land -- 658 -- 658 -- 40 August, 1992 1986 Buildings 1,796 50 1,846 338 Powers Ferry Plaza Marietta, GA Land -- 1,725 (9) 1,716 -- 40 May, 1997 1979& Buildings 5,785 467 6,252 346 1983
62 63 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ------------- ------------- ------------ ---------- -------------- ---------- Providence Square(1) Charlotte, NC Land $ -- $ 450 $ -- $ 450 $ -- 35 December, 1971 1973 Buildings 1,896 2,266 4,162 3,140 Riverside Square(1) Coral Springs, FL Land 8,725 5,893 -- 5,893 -- 40 August, 1998 1998 Buildings 7,131 161 7,292 253 Riverview Shopping Center(1) Durham, NC Land -- 400 -- 400 -- 35 March, 1972 1973 & Buildings 1,823 4,617 6,440 2,619 1994 Salisbury Marketplace(1) Salisbury, NC Land -- 734 -- 734 -- 40 August, 1996 1987 Buildings 3,878 57 3,935 330 Scottsville Square Bowling Green, KY Land -- 653 1 654 -- 20 August, 1992 1986 Buildings 1,782 158 1,940 542 Seven Hills Spring Hill, FL Land -- 1,903 -- 1,903 -- 40 July, 1993 1991 Buildings 2,977 35 3,012 503 Shelby Plaza(1) Shelby, NC Land -- -- -- -- -- 21 April, 1986 1972 Buildings 937 745 1,682 832 Sherwood South Baton Rouge, LA Land -- 496 -- 496 -- 40 December, 1994 1972, 1988 Buildings 1,489 290 1,779 248 & 1992 Shoppes at Lago Mar Miami, FL Land 5,655 3,170 -- 3,170 -- 40 February, 1999 1995 Buildings 6,746 -- 6,746 138 Shoppes of Silverlakes Pembroke Pines, FL Land 3,292 4,043 -- 4,043 -- 40 November, 1997 1995 & Buildings 12,826 72 12,898 681 1996 Siegen Village Baton Rouge, LA Land 4,692 2,375 (325) 2,050 -- 40 December, 1994 1988 & Buildings 6,952 441 7,393 751 1996 Smyrna Village(1) Smyrna, TN Land -- 968 21 989 -- 40 August, 1992 1992 Buildings 4,744 181 4,925 920
63 64 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ------------- ------------- ------------ --------- -------- --------- Smyth Valley Crossing Marion, VA Land $ -- $ 1,693 $ 7 $ 1,700 $ -- 40 December, 1992 1989 Buildings 5,231 182 5,413 1,009 South Beach Regional Jacksonville Beach, FL Land -- 3,958 20 3,978 -- 40 August, 1992 1990 & Buildings 17,130 1,038 18,168 3,519 1991 Spalding Village Griffin, GA Land 11,377 2,814 3 2,817 -- 40 August, 1992 1989 Buildings 12,470 221 12,691 2,401 Spring Valley Columbia, SC Land -- 1,382 -- 1,382 -- 40 March, 1998 1998 Buildings 4,722 -- 4,722 216 Stadium Plaza Phenix City, AL Land -- 1,829 2 1,831 -- 40 August, 1992 1988 Buildings 2,614 89 2,703 504 Stanley Market Place(1) Stanley, NC Land -- 198 -- 198 -- 35 January, 1992 1980 & Buildings 1,603 66 1,669 339 1991 Tamarac Town Square(1) Tamarac, FL Land 6,974 4,637 -- 4,637 -- 40 August, 1998 1998 Buildings 6,015 118 6,133 213 Tarpon Heights Galliano, LA Land -- 706 -- 706 -- 40 January, 1995 1982 Buildings 2,117 15 2,132 270 Thomasville Commons Thomasville, NC Land 5,360 963 -- 963 -- 40 August, 1992 1991 Buildings 6,183 96 6,279 1,185 Town & Country Kissimmee, FL Land 2,142 1,065 -- 1,065 -- 40 January, 1998 1998 Buildings 3,200 23 3,223 160 Treasure Coast(1) Vero Beach, FL Land 5,697 2,471 -- 2,471 -- 40 May, 1998 1998 Buildings 8,622 215 8,837 303
64 65 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ------------- ------------- ------------ --------- -------- --------- Venice Plaza Venice, FL Land $ -- $ 333 $ -- $ 333 $ -- 27 June, 1979 1971 & Buildings 1,973 1,194 3,167 1,980 1979 Village At Northshore Slidell, LA Land 5,068 2,066 -- 2,066 -- 40 December, 1994 1988 & Buildings 6,197 76 6,273 802 1993 Walton Plaza Augusta, GA Land -- 598 -- 598 -- 40 August 1998 1991 Buildings 2,561 2 2,563 171 Waterlick Plaza Lynchburg, VA Land -- 1,071 -- 1,071 -- 40 October, 1989 1973 & Buildings 5,091 221 5,312 1,422 1988 Watson Central Warner Robins, GA Land -- 1,646 12 1,658 -- 40 December, 1992 & 1989 & Buildings 11,317 181 11,498 1,992 October, 1993 1993 Wesley Chapel Crossing Decatur, GA Land 3,704 3,829 9 3,838 -- 40 December, 1992 1989 Buildings 7,032 252 7,284 1,271 West Gate Plaza Mobile, AL Land -- 475 -- 475 -- 25 June, 1974 & 1974 & Buildings 3,782 593 4,375 1,355 January, 1985 1995 West Towne Square Rome, GA Land -- 325 -- 325 -- 40 March, 1990 1988 Buildings 5,581 154 5,735 1,457 Westgate Square Sunrise, FL Land -- 2,229 -- 2,229 -- 40 June, 1994 1984 & Buildings 6,850 400 7,250 1,039 1988 Williamsburg At Dunwoody(1) Dunwoody, GA Land -- 1,638 -- 1,638 -- 40 March 1999 1983 Buildings 3,964 26 3,990 78 Willowdaile Shopping CENTER (1) Durham, NC Land -- 937 (70) 867 -- 40 August, 1986 & 1986 Buildings 7,352 653 8,005 2,515 December, 1987 Industrial Buildings Charlotte, NC - Industrial Land -- 143 183 326 -- 14 June, 1979 1956 & Buildings 2,170 1,304 3,474 2,968 1963
65 66 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands, except useful lives)
Estimated Costs Gross Amount Accumulated Useful Initial Capitalized at Which Depreciation Life of Cost to Subsequent to Carried at at Close Buildings Date Year Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed ----------- ------------ ------- ----------- ------------- ------------ --------- --------------- --------- Lawrence County Shopping Center Sybene, OH Land $ -- $ 436 $ -- $ 436 $ -- May, 1971 1971 Grand Marche Shopping Center Lafayette, LA Land -- 250 -- 250 -- September, 1972 1969 -------- -------- ------- -------- ------- $122,164 $597,666 $32,339 $630,005 $86,170 ======== ======== ======= ======== =======
(1) Ownership through IRT Partners L.P. 66 67 IRT PROPERTY COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1999 (In thousands) NOTE: Real estate activity is summarized as follows:
1999 1998 1997 ---- ---- ---- RENTAL PROPERTIES: Cost - Balance at beginning of year $ 622,117 $ 537,160 $ 463,393 Acquisitions and improvements 20,456 90,036 81,755 Retirements -- -- (663) Reduction in carrying value -- -- -- --------- --------- --------- 642,573 627,196 544,485 Cost of properties sold (12,568) (5,079) (7,325) --------- --------- --------- Balance at end of year $ 630,005 $ 622,117 $ 537,160 ========= ========= ========= Accumulated depreciation - Balance at beginning of year $ 74,943 $ 62,527 $ 56,882 Depreciation 13,869 12,925 11,453 Retirements -- -- (663) --------- --------- --------- 88,812 75,452 67,672 Accumulated depreciation related to rental properties sold (2,642) (509) (5,145) --------- --------- --------- Balance at end of year $ 86,170 $ 74,943 $ 62,527 ========= ========= =========
67 68 IRT PROPERTY COMPANY SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE December 31, 1999 (In thousands)
Face Amount Final Periodic and Carrying Type of Type of Interest Maturity Payment Amount of Location of Property Loan Property Rate Date Terms Mortgages - -------------------- ---- -------- ---- ---- ----- --------- (See Note) (See Note) Lauderdale Lakes, FL First Mortgage Condominiums 10.00% May, 2009 (1) $ 108 Nashville, TN First Mortgage Condominiums 8.63% - 2006-2007 (1) 21 Participation 12.38% ------ 129 Less interest discounts and negative goodwill (37) ------ $ 92 ======
Note: (1) Monthly payments include principal and interest. Mortgage loan activity is summarized as follows:
Year Ended December 31, ----------------------------------- 1999 1998 1997 ---- ---- ---- Balance at beginning of year $ 1,097 $ 9,321 $ 13,183 New mortgage loans 365 -- -- Amortization of interest discounts and negative goodwill 4 160 41 Collections of principal (1,374) (8,384) (3,903) ------- ------- -------- Balance at end of year $ 92 $ 1,097 $ 9,321 ======= ======= ========
68 69 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 69 70 PART III The information called for by Part III (Items 10, 11, 12, and 13) is incorporated herein by reference to the Company's definitive proxy statement for the Company's 2000 Annual Meeting of Shareholders of the Company, to be filed pursuant to Regulation 14A, pursuant to General Instruction G(3) to the Report on Form 10-K. 70 71 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Financial Statements and Schedules. Included in Part II of this Report are the following: Report of Independent Public Accountants Consolidated Balance Sheets at December 31, 1999 and 1998 Consolidated Statements of Earnings for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements Schedule III - Real Estate and Accumulated Depreciation Schedule IV - Mortgage Loans on Real Estate EXHIBITS 3.1 The Company's Amended and Restated Articles of Incorporation were filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, which is incorporated by reference herein. 3.2 The Company's By-Laws, as amended, were filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, which is incorporated by reference herein. 3.2.1 Amendments to By-laws of IRT Property Company filed as an exhibit to the Company's report on Form 8-K dated August 21, 1998, which is incorporated by reference herein. 4.1 The Indenture dated August 15, 1993 between the Company and Trust Company Bank, as Trustee, relating to the 7.3% Convertible Subordinated Debentures due August 15, 2003 was filed as an exhibit to the Company's Form 10-K for the year 71 72 ended December 31, 1993, which is incorporated by reference herein. 4.2 The form of 7.3% Convertible Subordinated Debenture was included in 4.1 above. 4.3 The Indentures dated as of November 9, 1995 between the Company and SunTrust Bank, Atlanta, as Trustee, relating to Senior Debt Securities and Subordinated Debt Securities were filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1995, which is incorporated by reference herein. 4.4 First Supplemental Indenture dated as of March 26, 1996 between IRT Property Company and SunTrust Bank, Atlanta was filed as an exhibit to the Company's Form 8-K dated March 26, 1996, which is incorporated by reference herein. 4.5 Supplemental Indenture No. 2, dated August 15, 1997, between IRT Property Company and SunTrust Bank, Atlanta was filed as an exhibit to the Company's Form 8-K dated August 15, 1997, which is incorporated by reference herein. 4.6 Supplemental Indenture No. 3, dated September 9, 1998, between IRT Property Company and SunTrust Bank, Atlanta was filed as an exhibit to the Company's Form 8-K dated September 15, 1998, which is incorporated by reference herein. 4.7 IRT Property Company Stock Certificate Legend Regarding Shareholder Rights Agreement which was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, which is incorporated by reference herein. 4.8 Supplemental Indenture No. 2, dated as of November 1, 1999, among IRT Property Company, an issuer, IRT Capital Corporation II, IRT Management Company, IRT Alabama, Inc., and IRT Partners L.P., as guarantors, and SunTrust Bank, Atlanta, as trustee (Registration Statement No. 333-48571), incorporated by reference to Exhibit No. 4.5 of the Company's report on Form 8-K dated November 12, 1999. 4.9 Supplemental Indenture No. 4, dated as of November 1, 1999, among IRT Property Company, an issuer, IRT Capital Corporation II, IRT Management Company, IRT Alabama, Inc., and IRT Partners L.P., as guarantors, and SunTrust Bank, Atlanta, as trustee (Registration Statement No. 333-48571), incorporated by reference to Exhibit No. 4.7 of the Company's report on Form 8-K dated November 12, 1999. 10.1 The Company's 1989 Stock Option Plan was filed as an exhibit to the Company's Form 8-K dated March 22, 1989, which is incorporated by reference herein. 10.2 Amendment No. 1 to the Company's 1989 Stock Option Plan was filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1993, which is incorporated by reference herein. 10.3 The Company's Key Employee Stock Option Plan was filed as an exhibit to the Company's Registration Statement on Form S-2 (No. 2-88716) dated January 4, 72 73 1984, which is incorporated by reference herein. 10.4 IRT Property Company Long-Term Incentive Plan was filed in the Company's Definitive Proxy Statement dated May 22, 1998, which is incorporated by reference herein. 10.5 The Company's Deferred Compensation Plan for Outside Directors dated December 22, 1995 was filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1995, which is incorporated by reference herein. 10.6 Amended and Restated Employment Agreement between the Company and Thomas H. McAuley dated as of November 11, 1997 was filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1997, which is incorporated by reference herein. 10.7 Change in Control Employment Agreement between the Company and W. Benjamin Jones III dated as of November 11, 1997 was filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1997, which is incorporated by reference herein. 10.8 Change in Control Employment Agreement between the Company and Robert E. Mitzel dated as of November 11, 1997 was filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1997, which is incorporated by reference herein. 10.9 Agreement of Limited Partnership of IRT Partners L.P., and Amendment No. 1 was filed as an exhibit to the Company's report on Form 8-K dated September 15, 1998, which is incorporated by reference herein. 10.10 Loan Agreement dated February 25, 1999 between IRT Property Company, IRT Alabama, Inc. and General Electric Capital Assurance Company which was filed as an exhibit to the Company's Form 10-K for the year ended December 31, 1998. 10.11 Secured Promissory Note from W. Benjamin Jones III to IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.12 Pledge Agreement by and between W. Benjamin Jones III and IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.13 Restricted Stock Award Agreement by and between W. Benjamin Jones III and IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.14 Secured Promissory Note from Robert E. Mitzel to IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 73 74 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.15 Pledge Agreement by and between Robert E. Mitzel and IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.16 Restricted Stock Award Agreement by and between Robert E. Mitzel and IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.17 Secured Promissory Note from Thomas H. McAuley to IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.18 Pledge Agreement by and between Thomas H. McAuley and IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.19 Restricted Stock Award Agreement by and between Thomas H. McAuley and IRT Property Company dated June 18, 1998 was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, which is incorporated by reference herein. 10.20 $100,000,000 Credit Agreement dated as of November 1, 1999, among the Company, Wachovia Bank, N.A., First Union National Bank, Wachovia Securities, Inc., AmSouth Bank, SouthTrust Bank, N.A., and SunTrust Bank, Atlanta incorporated by reference to Exhibit No. 10.12 of the Company's report on Form 8-K dated November 12, 1999. 10.21 $5,000,000 Revolving Loan Credit Agreement dated as of November 1, 1999, among the Company and Wachovia Bank, N.A., incorporated by reference to Exhibit No. 10.13 of the Company's report on Form 8-K dated November 12, 1999. 10.22 Change in Control Agreement between the Company and James G. Levy dated as of August 1, 1999 which was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, which is incorporated by reference herein. 10.23 Change in Control Agreement between the Company and Daniel F. Lovett dated August 1, 1999 which was filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, which is incorporated by reference herein. 10.24 First Amendment to the Restricted Stock Award Agreement and Pledge Agreement and Secured Promissory Note between Thomas H. McAuley and IRT Property Company dated December 17, 1999. 10.25 First Amendment to the Restricted Stock Award Agreement and Pledge Agreement and Secured Promissory Note between W. Benjamin Jones III and IRT Property Company dated December 17, 1999. 10.26 First Amendment to the Restricted Stock Award Ageement and Pledge Agreement and Secured Promissory Note between Robert E. Mitzel and IRT Property Company dated December 17, 1999. 10.27 Restricted Stock Award Agreement between James G. Levy and IRT Property Company dated January 7, 2000. 10.28 Restricted Stock Award Agreement between Kip R. Marshall and IRT Property Company dated January 7, 2000. 10.29 Restricted Stock Award Agreement between Daniel F. Lovett and IRT Property Company dated January 7, 2000. 10.30 Restricted Stock Award Agreement between E. Thornton Anderson and IRT Property Company dated January 7, 2000. 10.31 Change in Control Agreement between E. Thornton Anderson and IRT Property Company dated January 1, 2000. 11. Computation of Per Share Earnings. 21. Company Subsidiaries. 23. Consent of Arthur Andersen LLP to the incorporation of their report included in this 74 75 Form 10-K in the Company's previously filed Registration Statements File Nos. 33-65604, 33-66780, 33-59938, 33-64628, 33-64741, 33-63523, 333-62435, and 333-38847. 27. Financial Data Schedule (for SEC use only) 99. Audited Financial statements of IRT Partners L.P. as of and for the period from inception (July 15, 1998) through December 31, 1999. REPORTS ON FORM 8-K. (i.) A current report on Form 8-K was filed with the commission on November 12, 1999, in connection with the following items: - $100,000,000 Credit Agreement dated as of November 1, 1999, among the Company, Wachovia Bank, N.A., First Union National Bank, Wachovia Securities, Inc., AmSouth Bank, SouthTrust Bank, N.A., and SunTrust Bank, Atlanta. - $5,000,000 Revolving Loan Credit Agreement dated as of November 1, 1999, among the Company and Wachovia Bank, N.A. - Supplemental Indenture No. 2, dated as of November 1, 1999, among IRT Property Company, an issuer, IRT Capital Corporation II, IRT Management Company, IRT Alabama, Inc., and IRT Partners L.P., as guarantors, and SunTrust Bank, Atlanta, as trustee (Registration Statement No. 333-48571). - Supplemental Indenture No. 4, dated as of November 1, 1999, among IRT Property Company, an issuer, IRT Capital Corporation II, IRT Management Company, IRT Alabama, Inc., and IRT Partners L.P., as guarantors, and SunTrust Bank, Atlanta, as trustee (Registration Statement No. 333-48571). (ii.) A current report on Form 8-K was filed with the commission on November 23, 1999, in connection with the announcement of the approval by the Company's Board of Directors of a stock repurchase plan of up to $25 million of the Company's common stock. 75 76 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. March 29, 2000 IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley -------------------------------------- Thomas H. McAuley President, Chief Executive Officer, Chairman of the Board & Director 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. /s/ Thomas H. McAuley President, Chief March 29, 2000 - ------------------------ Executive Officer, Thomas H. McAuley Chairman of the Board & Director /s/ James G. Levy Senior Vice- March 29, 2000 - ------------------------ President & Chief James G. Levy Accounting Officer /s/ Patrick L. Flinn Director March 29, 2000 - ------------------------ Patrick L. Flinn /s/ Homer B. Gibbs, Jr. Director March 29, 2000 - ------------------------ Homer B. Gibbs, Jr. /s/ Samuel W. Kendrick Director March 29, 2000 - ------------------------ Samuel W. Kendrick /s/ Bruce A. Morrice Director March 29, 2000 - ------------------------ Bruce A. Morrice
76 EX-10.24 2 FIRST AMEND. TO THE RESTRICTED STOCK AWARD AGREE. 1 EXHIBIT 10.24 PERSONAL AND CONFIDENTIAL IRT PROPERTY COMPANY FIRST AMENDMENT TO THE RESTRICTED STOCK AWARD AGREEMENT AND PLEDGE AGREEMENT AND SECURED PROMISSORY NOTE The Restricted Stock Award Agreement (the "Award Agreement"), the Secured Promissory Note (the "Note"), and the Pledge Agreement (the "Pledge Agreement"), each dated June 18, 1998, by and among IRT Property Company (the "Company") and Thomas H. McAuley (the "Executive"), are each hereby amended as follows: A. THE AWARD AGREEMENT The Award Agreement is hereby amended by adding the following Paragraphs 7 and 8: " 7. VESTING ON CHANGE OF CONTROL. Notwithstanding any other provisions of this Agreement, upon the occurrence of a Change of Control, all of the shares of Restricted Stock granted to the Executive under the Award Agreement shall be vested immediately. 8. CERTAIN DEFINITIONS. (a) Affiliated Company shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) Change of Control shall mean: (i) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all outstanding voting securities of the Company entitled to vote generally in the election of directors and all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Voting Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection 8(b)(i), the following acquisitions shall not constitute a Change of Control: (r) any acquisition by a Person who was on November 1, 1997 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (s) any acquisition by the Company, provided no 2 Change in Control has previously occurred or would result therefrom under subsections 8(b)(ii) and 8(b)(iii) of this Agreement, (t) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company, or (u) any acquisition by any Person pursuant to a transaction which complies with clauses (x), (y) and (z) of subsection (iii) of this Section 8(b); or (ii) Individuals who, as of November 1, 1997, constituted the Board (the "Incumbent Board"), cease for any reason to constitute at least a majority of the entire Board; provided, however, that any individual becoming a director subsequent to November 1, 1997 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (x) all or substantially all of the Persons who were the beneficial owners, respectively, of the outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the combined voting power of the then outstanding shares of Company Common Stock and/or the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (y) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to -2- 3 the Business Combination, and (z) at least a majority of the members of the board of directors or other governing body (including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (d) Person shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)." B. THE NOTE The following is hereby inserted as the penultimate paragraph on page 3 of the Note: " Upon the occurrence of a Change of Control as defined in the Award Agreement, as amended, the entire principal amount of the Note and all accrued and unpaid interest thereunder shall be forgiven and such Note shall be deemed paid in full without the necessity of any payment from the Borrower." C. THE PLEDGE AGREEMENT Section 12 of the Pledge Agreement is hereby amended to read in its entirety as follows: "Section 12. Termination. Upon payment in full of the Note, or upon a Change of Control as defined in the Award Agreement as amended, this Agreement shall terminate. Upon termination of this Agreement in accordance with its terms, the Secured Party agrees to take such actions as the Pledgor may reasonably request (a) to return the Collateral to the Pledgor, and (b) to evidence the termination of this Agreement." The foregoing amendments are entered into in consideration of the continued service by Executive to the Company, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged. -3- 4 The Executive and the Company, intending to be legally bound, have executed or caused this Agreement to be executed by the undersigned thereunto duly authorized officer, to be effective as of December 17, 1999. IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley ---------------------- Its President and CEO /s/ Thomas H. McAuley --------------------- Executive: Thomas H. McAuley ----------------- -4- EX-10.25 3 FIRST AMEND. TO THE RESTRICTED STOCK AWARD 1 EXHIBIT 10.25 PERSONAL AND CONFIDENTIAL IRT PROPERTY COMPANY FIRST AMENDMENT TO THE RESTRICTED STOCK AWARD AGREEMENT AND PLEDGE AGREEMENT AND SECURED PROMISSORY NOTE The Restricted Stock Award Agreement (the "Award Agreement"), the Secured Promissory Note (the "Note"), and the Pledge Agreement (the "Pledge Agreement"), each dated June 18, 1998, by and among IRT Property Company (the "Company") and W. Benjamin Jones, III (the "Executive"), are each hereby amended as follows: A. THE AWARD AGREEMENT The Award Agreement is hereby amended by adding the following Paragraphs 7 and 8: " 7. VESTING ON CHANGE OF CONTROL. Notwithstanding any other provisions of this Agreement, upon the occurrence of a Change of Control, all of the shares of Restricted Stock granted to the Executive under the Award Agreement shall be vested immediately. 8. CERTAIN DEFINITIONS. (a) Affiliated Company shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) Change of Control shall mean: (1) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all the then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all then outstanding voting securities of the Company entitled to vote generally in the election of directors and/or all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Company Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who was on November 1, 1997 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition by the 2 Company, provided no Change in Control has previously occurred or would result therefrom under subsections 8(b)(2) and 8(b)(3) of this Agreement, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 8(b); or (2) Individuals who, as of November 1, 1997, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 1, 1997 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to the Business -2- 3 Combination, and (iii) at least a majority of the members of the board of directors or other governing body, including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (d) Person shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act." B. THE NOTE The following is hereby inserted as the penultimate paragraph on page 3 of the Note: " Upon the occurrence of a Change of Control as defined in the Award Agreement, as amended, the entire principal amount of the Note and all accrued and unpaid interest thereunder shall be forgiven and such Note shall be deemed paid in full without the necessity of any payment from the Borrower." C. THE PLEDGE AGREEMENT Section 12 of the Pledge Agreement is hereby amended to read in its entirety as follows: "Section 12. Termination. Upon payment in full of the Note, or upon a Change of Control as defined in the Award Agreement as amended, this Agreement shall terminate. Upon termination of this Agreement in accordance with its terms, the Secured Party agrees to take such actions as the Pledgor may reasonably request (a) to return the Collateral to the Pledgor, and (b) to evidence the termination of this Agreement." The foregoing amendments are entered into in consideration of the continued service by Executive to the Company, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged. -3- 4 The Executive and the Company, intending to be legally bound, have executed or caused this Agreement to be executed by the undersigned thereunto duly authorized officer, to be effective as of December 17, 1999. IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley ----------------------- Its President and CEO /s/ W. Benjamin Jones, III -------------------------- Executive: W. Benjamin Jones, III ---------------------- -4- EX-10.26 4 FIRST AMEND. TO THE RESTRICT. STOCK AWARD & PLEDGE 1 EXHIBIT 10.26 PERSONAL AND CONFIDENTIAL IRT PROPERTY COMPANY FIRST AMENDMENT TO THE RESTRICTED STOCK AWARD AGREEMENT AND PLEDGE AGREEMENT AND SECURED PROMISSORY NOTE The Restricted Stock Award Agreement (the "Award Agreement"), the Secured Promissory Note (the "Note"), and the Pledge Agreement (the "Pledge Agreement"), each dated June 18, 1998, by and among IRT Property Company (the "Company") and Robert E. Mitzel (the "Executive"), are each hereby amended as follows: A. THE AWARD AGREEMENT The Award Agreement is hereby amended by adding the following Paragraphs 7 and 8: " 7. VESTING ON CHANGE OF CONTROL. Notwithstanding any other provisions of this Agreement, upon the occurrence of a Change of Control, all of the shares of Restricted Stock granted to the Executive under the Award Agreement shall be vested immediately. 8. CERTAIN DEFINITIONS. (a) Affiliated Company shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) Change of Control shall mean: (1) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all the then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all then outstanding voting securities of the Company entitled to vote generally in the election of directors and/or all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Company Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who was on November 1, 1997 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition by the Company, provided no Change in Control has previously occurred or would result 2 therefrom under subsections 8(b)(2) and 8(b)(3) of this Agreement, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 8(b); or (2) Individuals who, as of November 1, 1997, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 1, 1997 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors -2- 3 or other governing body, including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (d) Person shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act." B. THE NOTE The following is hereby inserted as the penultimate paragraph on page 3 of the Note: " Upon the occurrence of a Change of Control as defined in the Award Agreement, as amended, the entire principal amount of the Note and all accrued and unpaid interest thereunder shall be forgiven and such Note shall be deemed paid in full without the necessity of any payment from the Borrower." C. THE PLEDGE AGREEMENT Section 12 of the Pledge Agreement is hereby amended to read in its entirety as follows: "Section 12. Termination. Upon payment in full of the Note, or upon a Change of Control as defined in the Award Agreement as amended, this Agreement shall terminate. Upon termination of this Agreement in accordance with its terms, the Secured Party agrees to take such actions as the Pledgor may reasonably request (a) to return the Collateral to the Pledgor, and (b) to evidence the termination of this Agreement." The foregoing amendments are entered into in consideration of the continued service by Executive to the Company, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged. -3- 4 The Executive and the Company, intending to be legally bound, have executed or caused this Agreement to be executed by the undersigned thereunto duly authorized officer, to be effective as of December 17, 1999. IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley ---------------------- Its President and CEO /s/ Robert E. Mitzel -------------------- Executive: Robert E. Mitzel ---------------- -4- EX-10.27 5 RESTRICTED STOCK AWARD AGREEMENT 1 EXHIBIT 10.27 PERSONAL AND CONFIDENTIAL IRT PROPERTY COMPANY RESTRICTED STOCK AWARD AGREEMENT IRT Property Company (the "Company") hereby grants to James G. Levy (the "Executive") 8,333 shares of the Company's $1.00 par value common stock ("Common Stock") set forth herein ("Restricted Stock") pursuant to the IRT Property Company 1998 Long Term Incentive Plan, and the Executive hereby accepts such grant upon such terms and conditions. Capitalized terms used but not defined herein shall have the meanings specified in the Plan. RESTRICTED STOCK GRANT Number of shares of Restricted Stock granted: 8,333 Date of Grant: December 17, 1999 Vesting Date(s) of Restricted Stock: 926 (Shares of Restricted Stock granted hereby shall vest on January 31 of each year commencing 2000, with the balance vesting on January 31, 2008)
Restrictions applicable to Restricted Stock: (a) The Executive must remain in the continuous employ of the Company or a Subsidiary of the Company until the respective vesting dates shown above (the "Restricted Period"). For example, if on January 31, 2000 the Executive has since the grant date been in the continuous employ of the Company or an affiliate that is consolidated with the Company in the Company's consolidated financial statements, 926 shares will vest and no longer be subject to forfeiture. The foregoing notwithstanding, all shares of Restricted Stock shall immediately vest upon the death or Disability of the Executive, as provided in Section 7 hereof, or upon any action of the Board of Directors or the Compensation Committee to vest such shares earlier than the scheduled vesting date. For purposes hereof, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) The shares of Common Stock will be issued in the name of the Executive as Restricted Stock and the certificates representing such shares will be held by the Company during the Restricted Period until vested. 2 (c) The Executive, as beneficial owner of the Restricted Shares, shall have full voting and dividend rights with respect to the Restricted Shares during the Restricted Period. (d) Certificates representing shares of Restricted Stock shall bear the following legend: THE SHARES ARE SUBJECT TO A RESTRICTED STOCK AWARD AGREEMENT DATED AS OF JANUARY 7, 2000 (THE "AWARD AGREEMENT"), AND NO SHARES OR ANY RIGHTS OR INTERESTS THEREIN MAY BE SOLD, TRANSFERRED OR DISPOSED OF EXCEPT IN ACCORDANCE WITH THE AWARD AGREEMENT. ******************************************************************************* The following additional terms shall apply to this Restricted Stock Agreement: 1. TAX WITHHOLDING. Prior to the delivery of any certificate or certificates for shares acquired upon the vesting of Restricted Stock hereunder, the Executive must satisfy federal, state and local withholding tax obligations by either (a) delivering to the Company shares of Common Stock, or (b) directing the Company to withhold certain of such shares, or (c) remitting to the Company a sufficient amount of cash to satisfy the withholding requirements. No election to satisfy withholding under (a) or (b) shall be effective unless approved by the Board of Directors of the Company, in its sole discretion. If withholding is to be satisfied under either (a) or (b), the Common Stock used for payment shall have a fair market value (as determined by the Board) on the date of delivery or withholding, which shall be the date the withholding tax is determined, equal to the amount of the taxes to be withheld. Any election by the Executive to satisfy withholding under (a) or (b) must be made in writing, signed by the Executive and delivered by the Executive prior to the date the amount of the withholding tax is determined, and shall be irrevocable. The portion of any withholding tax represented by a fractional share must be paid in cash. 2. PAYMENT OF WITHHOLDING OBLIGATIONS. Prior to the delivery of stock certificates to the Executive pursuant to vesting of shares of Restricted Stock, the Executive shall deliver to the Company his check and/or a stock certificate registered in the name of the Executive duly assigned to the Company (with the assignment guaranteed by a bank, trust company, member firm of the New York Stock Exchange ("NYSE") or other participant in a Signature Guarantee Medallion Program), or directions for withholding of shares (as applicable) which the Board of Directors has permitted the Executive to transfer for satisfying federal and state withholding tax obligations. 3. TRANSFERABILITY. None of the shares of Restricted Stock granted hereby or any interest therein are transferable or assignable prior to vesting. Until vesting, neither the shares nor any interest therein may be sold, pledged or transferred in any manner, nor -2- 3 will any assignee or transferee thereof be recognized as an owner by the Company for any purpose. 4. DELIVERY OF SHARES. Certificates representing the shares of Common Stock shall be delivered as soon as practicable after vesting of the shares of Restricted Stock, but such delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of the NYSE, and requirements under any other law or regulation applicable to the issuance or transfer of such shares. 5. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of any successor of the Company, in accordance with the terms of this Restricted Stock Award Agreement. 6. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 7. VESTING ON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, all of the shares of Restricted Stock granted under this Agreement shall vest immediately. 8. CERTAIN DEFINITIONS. (a) Affiliate Company shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) Change of Control shall mean: (1) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all then outstanding securities of the Company entitled to vote generally in the election of directors and all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Company Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who was on July 1, 1999 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition by the Company, provided no Change of Control has previously occurred or would result therefrom under subsections 8(b)(2) and 8(b)(3) of this Agreement, (iii) any acquisition by any employee benefit plan (or related -3- 4 trust) sponsored or maintained by the Company or any Affiliated Company, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection 8(b)(3); or (2) Individuals who, as of July 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to July 1, 1999 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors or other governing body (including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. -4- 5 (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (d) Person shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. IN WITNESS WHEREOF, the Company has caused this Restricted Stock Award Agreement to be executed and delivered as of the date shown below by the undersigned officer thereunto duly authorized. IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley --------------------- Name: Thomas H. McAuley Dated as of: January 7, 2000 As of the day and year first above written, I hereby accept the above Restricted Stock grant in accordance with and subject to the terms and conditions set forth above, and pledge all such Restricted Stock to the Company, and I agree that any shares of Common Stock, together with all substitutions and replacements therefore received by me hereunder will not be sold or otherwise disposed of by me except in a manner in compliance with applicable securities laws. I agree to notify the Company at lease five business days in advance of any proposed sale or other disposition of any such shares following the vesting thereof and as permitted by the Pledge Agreement. /s/ James G. Levy ---------------------------- Executive: James G. Levy Date: January 7, 2000 -5- EX-10.28 6 RESTRICTED STOCK AWARD AGREEMENT 1 EXHIBIT 10.28 PERSONAL AND CONFIDENTIAL IRT PROPERTY COMPANY RESTRICTED STOCK AWARD AGREEMENT IRT Property Company (the "Company") hereby grants to Kip R. Marshall (the "Executive") 5,556 shares of the Company's $1.00 par value common stock ("Common Stock") set forth herein ("Restricted Stock") pursuant to the IRT Property Company 1998 Long Term Incentive Plan, and the Executive hereby accepts such grant upon such terms and conditions. Capitalized terms used but not defined herein shall have the meanings specified in the Plan. RESTRICTED STOCK GRANT Number of shares of Restricted Stock granted: 5,556 Date of Grant: December 17, 1999 Vesting Date(s) of Restricted Stock: 618 (Shares of Restricted Stock granted hereby shall vest on January 31 of each year commencing 2000, with the balance vesting on January 31, 2008)
Restrictions applicable to Restricted Stock: (a) The Executive must remain in the continuous employ of the Company or a Subsidiary of the Company until the respective vesting dates shown above (the "Restricted Period"). For example, if on January 31, 2000 the Executive has since the grant date been in the continuous employ of the Company or an affiliate that is consolidated with the Company in the Company's consolidated financial statements, 618 shares will vest and no longer be subject to forfeiture. The foregoing notwithstanding, all shares of Restricted Stock shall immediately vest upon the death or Disability of the Executive, as provided in Section 7 hereof, or upon any action of the Board of Directors or the Compensation Committee to vest such shares earlier than the scheduled vesting date. For purposes hereof, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) The shares of Common Stock will be issued in the name of the Executive as Restricted Stock and the certificates representing such shares will be held by the Company during the Restricted Period until vested. 2 (c) The Executive, as beneficial owner of the Restricted Shares, shall have full voting and dividend rights with respect to the Restricted Shares during the Restricted Period. (d) Certificates representing shares of Restricted Stock shall bear the following legend: THE SHARES ARE SUBJECT TO A RESTRICTED STOCK AWARD AGREEMENT DATED AS OF JANUARY 7, 2000 (THE "AWARD AGREEMENT"), AND NO SHARES OR ANY RIGHTS OR INTERESTS THEREIN MAY BE SOLD, TRANSFERRED OR DISPOSED OF EXCEPT IN ACCORDANCE WITH THE AWARD AGREEMENT. ******************************************************************************* The following additional terms shall apply to this Restricted Stock Agreement: 1. TAX WITHHOLDING. Prior to the delivery of any certificate or certificates for shares acquired upon the vesting of Restricted Stock hereunder, the Executive must satisfy federal, state and local withholding tax obligations by either (a) delivering to the Company shares of Common Stock, or (b) directing the Company to withhold certain of such shares, or (c) remitting to the Company a sufficient amount of cash to satisfy the withholding requirements. No election to satisfy withholding under (a) or (b) shall be effective unless approved by the Board of Directors of the Company, in its sole discretion. If withholding is to be satisfied under either (a) or (b), the Common Stock used for payment shall have a fair market value (as determined by the Board) on the date of delivery or withholding, which shall be the date the withholding tax is determined, equal to the amount of the taxes to be withheld. Any election by the Executive to satisfy withholding under (a) or (b) must be made in writing, signed by the Executive and delivered by the Executive prior to the date the amount of the withholding tax is determined, and shall be irrevocable. The portion of any withholding tax represented by a fractional share must be paid in cash. 2. PAYMENT OF WITHHOLDING OBLIGATIONS. Prior to the delivery of stock certificates to the Executive pursuant to vesting of shares of Restricted Stock, the Executive shall deliver to the Company his check and/or a stock certificate registered in the name of the Executive duly assigned to the Company (with the assignment guaranteed by a bank, trust company, member firm of the New York Stock Exchange ("NYSE") or other participant in a Signature Guarantee Medallion Program), or directions for withholding of shares (as applicable) which the Board of Directors has permitted the Executive to transfer for satisfying federal and state withholding tax obligations. 3. TRANSFERABILITY. None of the shares of Restricted Stock granted hereby or any interest therein are transferable or assignable prior to vesting. Until vesting, neither the shares nor any interest therein may be sold, pledged or transferred in any manner, nor -2- 3 will any assignee or transferee thereof be recognized as an owner by the Company for any purpose. 4. DELIVERY OF SHARES. Certificates representing the shares of Common Stock shall be delivered as soon as practicable after vesting of the shares of Restricted Stock, but such delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of the NYSE, and requirements under any other law or regulation applicable to the issuance or transfer of such shares. 5. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of any successor of the Company, in accordance with the terms of this Restricted Stock Award Agreement. 6. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 7. VESTING ON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, all of the shares of Restricted Stock granted under this Agreement shall vest immediately. 8. CERTAIN DEFINITIONS. (a) Affiliate Company shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) Change of Control shall mean: (1) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all then outstanding securities of the Company entitled to vote generally in the election of directors and all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Company Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who was on July 1, 1999 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition by the Company, provided no Change of Control has previously occurred or would result therefrom under subsections 8(b)(2) and 8(b)(3) of this Agreement, (iii) any acquisition by any employee benefit plan (or related -3- 4 trust) sponsored or maintained by the Company or any Affiliated Company, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection 8(b)(3); or (2) Individuals who, as of July 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to July 1, 1999 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors or other governing body (including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. -4- 5 (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (d) Person shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. IN WITNESS WHEREOF, the Company has caused this Restricted Stock Award Agreement to be executed and delivered as of the date shown below by the undersigned officer thereunto duly authorized. IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley ---------------------- Name: Thomas H. McAuley Dated as of: January 7, 2000 As of the day and year first above written, I hereby accept the above Restricted Stock grant in accordance with and subject to the terms and conditions set forth above, and pledge all such Restricted Stock to the Company, and I agree that any shares of Common Stock, together with all substitutions and replacements therefore received by me hereunder will not be sold or otherwise disposed of by me except in a manner in compliance with applicable securities laws. I agree to notify the Company at lease five business days in advance of any proposed sale or other disposition of any such shares following the vesting thereof and as permitted by the Pledge Agreement. /s/ Kip R. Marshall ------------------------------- Executive: Kip R. Marshall Date: January 7, 2000 -5- EX-10.29 7 RESTRICTED STOCK AWARD AGREEMENT 1 EXHIBIT 10.29 PERSONAL AND CONFIDENTIAL IRT PROPERTY COMPANY RESTRICTED STOCK AWARD AGREEMENT IRT Property Company (the "Company") hereby grants to Daniel F. Lovett (the "Executive") 5,556 shares of the Company's $1.00 par value common stock ("Common Stock") set forth herein ("Restricted Stock") pursuant to the IRT Property Company 1998 Long Term Incentive Plan, and the Executive hereby accepts such grant upon such terms and conditions. Capitalized terms used but not defined herein shall have the meanings specified in the Plan. RESTRICTED STOCK GRANT Number of shares of Restricted Stock granted: 5,556 Date of Grant: December 17, 1999 Vesting Date(s) of Restricted Stock: 618 (Shares of Restricted Stock granted hereby shall vest on January 31 of each year commencing 2000, with the balance vesting on January 31, 2008)
Restrictions applicable to Restricted Stock: (a) The Executive must remain in the continuous employ of the Company or a Subsidiary of the Company until the respective vesting dates shown above (the "Restricted Period"). For example, if on January 31, 2000 the Executive has since the grant date been in the continuous employ of the Company or an affiliate that is consolidated with the Company in the Company's consolidated financial statements, 618 shares will vest and no longer be subject to forfeiture. The foregoing notwithstanding, all shares of Restricted Stock shall immediately vest upon the death or Disability of the Executive, as provided in Section 7 hereof, or upon any action of the Board of Directors or the Compensation Committee to vest such shares earlier than the scheduled vesting date. For purposes hereof, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) The shares of Common Stock will be issued in the name of the Executive as Restricted Stock and the certificates representing such shares will be held by the Company during the Restricted Period until vested. 2 (c) The Executive, as beneficial owner of the Restricted Shares, shall have full voting and dividend rights with respect to the Restricted Shares during the Restricted Period. (d) Certificates representing shares of Restricted Stock shall bear the following legend: THE SHARES ARE SUBJECT TO A RESTRICTED STOCK AWARD AGREEMENT DATED AS OF JANUARY 7, 2000 (THE "AWARD AGREEMENT"), AND NO SHARES OR ANY RIGHTS OR INTERESTS THEREIN MAY BE SOLD, TRANSFERRED OR DISPOSED OF EXCEPT IN ACCORDANCE WITH THE AWARD AGREEMENT. ******************************************************************************* The following additional terms shall apply to this Restricted Stock Agreement: 1. TAX WITHHOLDING. Prior to the delivery of any certificate or certificates for shares acquired upon the vesting of Restricted Stock hereunder, the Executive must satisfy federal, state and local withholding tax obligations by either (a) delivering to the Company shares of Common Stock, or (b) directing the Company to withhold certain of such shares, or (c) remitting to the Company a sufficient amount of cash to satisfy the withholding requirements. No election to satisfy withholding under (a) or (b) shall be effective unless approved by the Board of Directors of the Company, in its sole discretion. If withholding is to be satisfied under either (a) or (b), the Common Stock used for payment shall have a fair market value (as determined by the Board) on the date of delivery or withholding, which shall be the date the withholding tax is determined, equal to the amount of the taxes to be withheld. Any election by the Executive to satisfy withholding under (a) or (b) must be made in writing, signed by the Executive and delivered by the Executive prior to the date the amount of the withholding tax is determined, and shall be irrevocable. The portion of any withholding tax represented by a fractional share must be paid in cash. 2. PAYMENT OF WITHHOLDING OBLIGATIONS. Prior to the delivery of stock certificates to the Executive pursuant to vesting of shares of Restricted Stock, the Executive shall deliver to the Company his check and/or a stock certificate registered in the name of the Executive duly assigned to the Company (with the assignment guaranteed by a bank, trust company, member firm of the New York Stock Exchange ("NYSE") or other participant in a Signature Guarantee Medallion Program), or directions for withholding of shares (as applicable) which the Board of Directors has permitted the Executive to transfer for satisfying federal and state withholding tax obligations. 3. TRANSFERABILITY. None of the shares of Restricted Stock granted hereby or any interest therein are transferable or assignable prior to vesting. Until vesting, neither the shares nor any interest therein may be sold, pledged or transferred in any manner, nor -2- 3 will any assignee or transferee thereof be recognized as an owner by the Company for any purpose. 4. DELIVERY OF SHARES. Certificates representing the shares of Common Stock shall be delivered as soon as practicable after vesting of the shares of Restricted Stock, but such delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of the NYSE, and requirements under any other law or regulation applicable to the issuance or transfer of such shares. 5. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of any successor of the Company, in accordance with the terms of this Restricted Stock Award Agreement. 6. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 7. VESTING ON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, all of the shares of Restricted Stock granted under this Agreement shall vest immediately. 8. CERTAIN DEFINITIONS. (a) Affiliate Company shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) Change of Control shall mean: (1) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all then outstanding securities of the Company entitled to vote generally in the election of directors and all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Company Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who was on July 1, 1999 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition by the Company, provided no Change of Control has previously occurred or would result therefrom under subsections 8(b)(2) and 8(b)(3) of this Agreement, (iii) any acquisition by any employee benefit plan (or related -3- 4 trust) sponsored or maintained by the Company or any Affiliated Company, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection 8(b)(3); or (2) Individuals who, as of July 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to July 1, 1999 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors or other governing body (including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. -4- 5 (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (d) Person shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. IN WITNESS WHEREOF, the Company has caused this Restricted Stock Award Agreement to be executed and delivered as of the date shown below by the undersigned officer thereunto duly authorized. IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley ---------------------- Name: Thomas H. McAuley Date as of: January 7, 2000 As of the day and year first above written, I hereby accept the above Restricted Stock grant in accordance with and subject to the terms and conditions set forth above, and pledge all such Restricted Stock to the Company, and I agree that any shares of Common Stock, together with all substitutions and replacements therefore received by me hereunder will not be sold or otherwise disposed of by me except in a manner in compliance with applicable securities laws. I agree to notify the Company at lease five business days in advance of any proposed sale or other disposition of any such shares following the vesting thereof and as permitted by the Pledge Agreement. /s/ Daniel F. Lovett --------------------------- Executive: Daniel F. Lovett ---------------- Date: January 7, 2000 -5- EX-10.30 8 RESTRICTED STOCK AWARD AGREEMENT 1 EXHIBIT 10.30 PERSONAL AND CONFIDENTIAL IRT PROPERTY COMPANY RESTRICTED STOCK AWARD AGREEMENT IRT Property Company (the "Company") hereby grants to E. Thornton Anderson (the "Executive") 5,556 shares of the Company's $1.00 par value common stock ("Common Stock") set forth herein ("Restricted Stock") pursuant to the IRT Property Company 1998 Long Term Incentive Plan, and the Executive hereby accepts such grant upon such terms and conditions. Capitalized terms used but not defined herein shall have the meanings specified in the Plan. RESTRICTED STOCK GRANT Number of shares of Restricted Stock granted: 5,556 Date of Grant: December 17, 1999 Vesting Date(s) of Restricted Stock: 618 (Shares of Restricted Stock granted hereby shall vest on January 31 of each year commencing 2000, with the balance vesting on January 31, 2008)
Restrictions applicable to Restricted Stock: (a) The Executive must remain in the continuous employ of the Company or a Subsidiary of the Company until the respective vesting dates shown above (the "Restricted Period"). For example, if on January 31, 2000 the Executive has since the grant date been in the continuous employ of the Company or an affiliate that is consolidated with the Company in the Company's consolidated financial statements, 618 shares will vest and no longer be subject to forfeiture. The foregoing notwithstanding, all shares of Restricted Stock shall immediately vest upon the death or Disability of the Executive, as provided in Section 7 hereof, or upon any action of the Board of Directors or the Compensation Committee to vest such shares earlier than the scheduled vesting date. For purposes hereof, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) The shares of Common Stock will be issued in the name of the Executive as Restricted Stock and the certificates representing such shares will be held by the Company during the Restricted Period until vested. 2 (c) The Executive, as beneficial owner of the Restricted Shares, shall have full voting and dividend rights with respect to the Restricted Shares during the Restricted Period. (d) Certificates representing shares of Restricted Stock shall bear the following legend: THE SHARES ARE SUBJECT TO A RESTRICTED STOCK AWARD AGREEMENT DATED AS OF JANUARY 7, 2000 (THE "AWARD AGREEMENT"), AND NO SHARES OR ANY RIGHTS OR INTERESTS THEREIN MAY BE SOLD, TRANSFERRED OR DISPOSED OF EXCEPT IN ACCORDANCE WITH THE AWARD AGREEMENT. ******************************************************************************* The following additional terms shall apply to this Restricted Stock Agreement: 1. TAX WITHHOLDING. Prior to the delivery of any certificate or certificates for shares acquired upon the vesting of Restricted Stock hereunder, the Executive must satisfy federal, state and local withholding tax obligations by either (a) delivering to the Company shares of Common Stock, or (b) directing the Company to withhold certain of such shares, or (c) remitting to the Company a sufficient amount of cash to satisfy the withholding requirements. No election to satisfy withholding under (a) or (b) shall be effective unless approved by the Board of Directors of the Company, in its sole discretion. If withholding is to be satisfied under either (a) or (b), the Common Stock used for payment shall have a fair market value (as determined by the Board) on the date of delivery or withholding, which shall be the date the withholding tax is determined, equal to the amount of the taxes to be withheld. Any election by the Executive to satisfy withholding under (a) or (b) must be made in writing, signed by the Executive and delivered by the Executive prior to the date the amount of the withholding tax is determined, and shall be irrevocable. The portion of any withholding tax represented by a fractional share must be paid in cash. 2. PAYMENT OF WITHHOLDING OBLIGATIONS. Prior to the delivery of stock certificates to the Executive pursuant to vesting of shares of Restricted Stock, the Executive shall deliver to the Company his check and/or a stock certificate registered in the name of the Executive duly assigned to the Company (with the assignment guaranteed by a bank, trust company, member firm of the New York Stock Exchange ("NYSE") or other participant in a Signature Guarantee Medallion Program), or directions for withholding of shares (as applicable) which the Board of Directors has permitted the Executive to transfer for satisfying federal and state withholding tax obligations. 3. TRANSFERABILITY. None of the shares of Restricted Stock granted hereby or any interest therein are transferable or assignable prior to vesting. Until vesting, neither the shares nor any interest therein may be sold, pledged or transferred in any manner, nor -2- 3 will any assignee or transferee thereof be recognized as an owner by the Company for any purpose. 4. DELIVERY OF SHARES. Certificates representing the shares of Common Stock shall be delivered as soon as practicable after vesting of the shares of Restricted Stock, but such delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply if deemed advisable by the Company, with registration requirements under the 1933 Act, listing requirements under the rules of the NYSE, and requirements under any other law or regulation applicable to the issuance or transfer of such shares. 5. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of any successor of the Company, in accordance with the terms of this Restricted Stock Award Agreement. 6. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 7. VESTING ON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, all of the shares of Restricted Stock granted under this Agreement shall vest immediately. 8. CERTAIN DEFINITIONS. (a) Affiliate Company shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) Change of Control shall mean: (1) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all then outstanding securities of the Company entitled to vote generally in the election of directors and all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Company Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who was on July 1, 1999 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition by the Company, provided no Change of Control has previously occurred or would result therefrom under subsections 8(b)(2) and 8(b)(3) of this Agreement, (iii) any acquisition by any employee benefit plan (or related -3- 4 trust) sponsored or maintained by the Company or any Affiliated Company, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection 8(b)(3); or (2) Individuals who, as of July 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to July 1, 1999 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors or other governing body (including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. -4- 5 (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (d) Person shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. IN WITNESS WHEREOF, the Company has caused this Restricted Stock Award Agreement to be executed and delivered as of the date shown below by the undersigned officer thereunto duly authorized. IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley ----------------------------- Name: Thomas H. McAuley Date as of: January 7, 2000 As of the day and year first above written, I hereby accept the above Restricted Stock grant in accordance with and subject to the terms and conditions set forth above, and pledge all such Restricted Stock to the Company, and I agree that any shares of Common Stock, together with all substitutions and replacements therefore received by me hereunder will not be sold or otherwise disposed of by me except in a manner in compliance with applicable securities laws. I agree to notify the Company at lease five business days in advance of any proposed sale or other disposition of any such shares following the vesting thereof and as permitted by the Pledge Agreement. /s/ E. Thornton Anderson ------------------------ Executive: E. Thornton Anderson Date: January 7, 2000 -5- EX-10.31 9 CHANGE IN CONTROL AGREEMENT 1 EXHIBIT 10.31 CHANGE IN CONTROL EMPLOYMENT AGREEMENT THIS AGREEMENT is by and between IRT Property Company, a Georgia corporation (herein, together with any successor or assigns to its business and/or assets, and any person or entity that assumes and agrees to perform this Agreement by operation of law or otherwise, the "Company") and E. Thornton Anderson (the "Executive"), dated as of the 1st day of January, 2000. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations and entities. Therefore, in order to accomplish these objectives, the Board has authorized and caused the Company to enter into this Agreement. In consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by each party hereto, the parties, intending to be legally bound, agree as follows: 1. Certain Definitions. (a) "Affiliated Companies" shall mean any corporation, partnership, limited liability company, trust and/or other entity controlled by, controlling or under common control with, the Company. Unless the context clearly requires otherwise, as used herein, the Company shall include all its Affiliated Companies. (b) "Change of Control Period" shall mean the period of three years ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall hereinafter be referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date. (c) "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. 2 (d) "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section l(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission ("SEC") thereunder. (f) "Person" shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. 2. Change of Control. For the purposes of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any Person of beneficial ownership (within the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of the combined voting power of (x) all then outstanding shares of Company common stock ("Outstanding Company Common Stock") and (y) all then outstanding securities of the Company entitled to vote generally in the election of directors and all outstanding securities and/or rights to acquire (whether by conversion, exchange or otherwise) voting securities of the Company entitled to vote generally in the election of directors (collectively with the Outstanding Company Common Stock, the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who was on July 1, 1999 the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition by the Company, provided no Change in Control has previously occurred or would result therefrom under subsections 2(b) and 2(c) of this Agreement, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of July 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to July 1, 1999 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest - 2 - 3 with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation, a sale, liquidation or partial liquidation, or other disposition of all or substantially all (e.g., 50% or more) of the assets of the Company in one or a series of transactions, and/or any combination of the foregoing (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act) the Company or all or substantially all (e.g., 50% or more) of the Company's assets either directly or through one or more subsidiaries, partnerships, limited liability companies, trusts and/or other entities or Persons) in substantially the same proportions as their beneficial ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or entity resulting from such Business Combination) beneficially owns (within the meaning of SEC Rule 13d-3 under the Exchange Act), directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation or entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors or other governing body (including trustees and/or general partners) of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ as provided in Section 4 hereof, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting relationships), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date, and - 3 - 4 (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location not more than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote full attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to spend reasonable time not inconsistent with his responsibilities to the Company to (A) serve on corporate, civic or charitable boards or committees, (B) engage in other business activities that do not represent a conflict of interest with his duties to the Company, and (C) manage personal investments, so long as such activities do not interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to 12 times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its Affiliated Companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed not later than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus, excluding any payments of cash in lieu of pension (the "Annual Bonus"), in cash at least equal to the Executive's highest annual bonus for the last two full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. - 4 - 5 (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time during the one-year period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its Affiliated Companies. (iv) Welfare Benefit Plans. During the Employment Period (and after termination of employment, except where prohibited by law or the applicable plan, or the generally applicable practices, policies and programs of the Company and its Affiliated Companies and their respective successors and assigns), the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under such welfare benefit plans, practices, policies and programs (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company, its Affiliated Companies and their respective successors and assigns, but in no event shall such plans, practices, policies and programs provide the Executive and his or her family, as applicable, with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive and his or her family, as applicable, at any time during the one year period immediately preceding the Effective Date or, if more favorable to the Executive and his or her family, as applicable, those provided generally at any time after the Effective Date to other peer executives (and their families) of the Company and its Affiliated Companies or their successors. In the event that the Executive's and his or her family's participation in any such plan, program or other benefit provided under the generally applicable practices, policies and programs of the Company and its Affiliated Companies and their respective successors and assigns are prohibited, the Company and its Affiliated Companies and their respective successors and assigns shall provide the Executive and his or her family, without further cost or expense to the Executive and his or her family members, benefits similar to those which the Executive and his or her family would otherwise have been entitled to receive under such plans, programs, practices and policies as if the Executive's employment had not ceased. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its Affiliated Companies in effect for the Executive at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company, the Affiliated Companies, and their respective successors and assigns. - 5 - 6 (vi) Fringe Benefits. During the Employment Period (but not after termination of employment, except as required by this Agreement, law and/or the applicable plan, practices, policies and programs of the Company and its Affiliated Companies and their respective successors and assigns), the Executive shall be entitled to fringe benefits in accordance with the most favorable of such plans, practices, programs and policies in effect for the Executive at any time during the one year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the Disability of the Executive has occurred during the Employment Period, it may give to the Executive written notice in accordance with Section 13(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company and/or its Affiliated Companies (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a - 6 - 7 resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment or proposed assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting relationships), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or any Affiliated Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company and its Affiliated Companies to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company and such Affiliated Companies promptly after receipt of notice thereof given by the Executive; (iii) the Company or any Affiliated Company requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company or any Affiliated Company's business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company or any Affiliated Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company or any Affiliated Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of Good Reason made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the period beginning on the Effective Date and ending 30 days following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes hereunder. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific - 7 - 8 termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company and/or any Affiliated Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company and/or any Affiliated Company notifies the Executive of such termination, and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company and/or any Affiliated Company shall terminate the Executive's employment other than for Cause or Disability, or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts, or if elected by the Executive, the following aggregate amounts shall be paid in cash to the Executive in equal monthly installments over the one year following termination of employment: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the average of the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the two most recently completed fiscal years during the Employment Period, if any (such amount being referred to as the "Most Recent Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); - 8 - 9 B. the amount equal to the sum of (x) one (1) times the Executive's Annual Base Salary, and (y) one (1) times the Most Recent Annual Bonus; and (ii) for one year after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company and its Affiliated Companies, shall continue to provide benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the last day of such period; (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its Affiliated Companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable provided by the Company and Affiliated Companies to the estates and beneficiaries of peer executives of the Company. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable such benefits provided by the Company and its Affiliated Companies to other peer executives and their families, provided the provision of such - 9 - 10 benefits are permissible under law, and the plans and programs of the Company and its Affiliated Companies. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights; Disputes; etc. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its Affiliated Companies and entities and for which the Executive may qualify, nor, subject to Section 13(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its Affiliated Companies and entities. Amounts or benefits which are vested or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement with, the Company or any of its Affiliated Companies at or subsequent to the Date of Termination, shall be payable in accordance with such plan, policy, practice, program, contract or agreement, except as explicitly modified by this Agreement. In the event that the Company terminates or seeks to terminate this Agreement or the employment of the Executive hereunder and/or disputes its obligation to pay or fails or refuses to pay or provide timely to the Executive any portion of the amounts or benefits due to the Executive pursuant to this Agreement and the Executive prevails without regard to amount, the Company shall pay or reimburse to the Executive all costs incurred by him in such dispute or collection effort, including reasonable attorneys' fees and expenses (whether or not suit is filed) and costs of litigation. 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. The Executive shall not be required to mitigate the amount of any payment or benefit provided herein by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided herein be reduced by any compensation earned by the Executive as a result of employment by another employer or by retirement or disability benefits after the date of termination of employment or otherwise. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus - 10 - 11 in each case interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. Limitation of Benefits. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of the Executive (whether payable or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would, if paid, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then the Payment shall be reduced to the extent necessary to avoid the imposition of the Excise Tax. The Executive may select the Payments to be limited or reduced. (b) All determinations required to be made under this Section 9, including whether an Excise Tax would otherwise be imposed and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen L.L.P. or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that a Payment is due to be made, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments hereunder will have been unnecessarily limited by this Section 9 ("Underpayment"), consistent with the calculations required to be made hereunder. The Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 10. No Contract of Employment. Nothing in this Agreement shall be construed as a contract or guaranty of employment between the Executive and the Company, or as a right of the Executive to continue to be employed by the Company. 11. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its Affiliated Companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its Affiliated Companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal - 11 - 12 process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 11 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. Executive agrees that, for a period of one (1) year after termination, he will not solicit or hire any Company employees for any business that is in direct competition with any Company property. - 12 - 13 12. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's heirs, legatees, and personal and legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company, the Affiliated Companies and their respective successors and assigns. (c) The Company will require any successor (whether direct or indirect, as a result of a Business Combination, or otherwise) to all or substantially all (e.g. 50% or more) of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 13. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without reference to conflicts of laws principles. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than-by a written agreement executed by the parties hereto or their respective successors and legal representatives. As used herein, the plural shall include the singular and vice versa, any reference to gender shall include the other genders, and the term "include" and any derivation thereof shall be without limitation by virtue of enumeration thereof or otherwise. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, or by reliable overnight courier service addressed as follows: If to the Executive: E. Thornton Anderson ------------------------ ------------------------ If to the Company: IRT Property Company 200 Galleria Parkway, Suite 1400 Atlanta, Georgia 30339 Attention: President - 13 - 14 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject however to subsections 1(b) and 1(d) hereof, prior to a Change-in-Control, the Executive or the Company may terminate the Executive's employment or this Agreement at any time prior to the Effective Date with or without cause for any reason or for no reason at all, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. [Signatures on following page] - 14 - 15 IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused this Agreement to be executed in its name on its behalf by its undersigned officer thereunto, duly authorized, all as of the day and year first above written. EXECUTIVE: /s/ E. Thornton Anderson ------------------------------------ E. Thornton Anderson COMPANY: IRT PROPERTY COMPANY By: /s/ Thomas H. McAuley --------------------------------- Thomas H. McAuley President - 15 - EX-11 10 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11
Computation of Per Share Earnings 1999 1998 1997 ----------- ----------- ----------- Basic: Net earnings $28,331,000 $25,584,693 $26,112,680 =========== =========== =========== Net earnings available to common shareholders $28,331,000 $25,584,693 $26,112,680 =========== =========== =========== Average common shares outstanding 33,119,312 32,940,399 31,867,743 =========== =========== =========== Basic earnings per share $ 0.86 $ 0.78 $ 0.82 =========== =========== =========== Diluted: Net earnings $28,331,000 $25,584,693 $26,112,680 Minority interest - OP Unitholders 683,509 261,764 -- ----------- ----------- ----------- $29,014,509 $25,846,457 $26,112,680 =========== =========== =========== Net earnings available to common shareholders $29,014,509 $25,846,457 $26,112,680 =========== =========== =========== Dilutive stock options 248 22,607 53,469 Dilutive stock loans -- 1,806 -- Dilutive OP Units 784,480 339,776 -- Average common shares outstanding 33,119,312 32,940,399 31,867,743 ----------- ----------- ----------- Average diluted common shares outstanding 33,904,040 33,304,588 31,921,212 =========== =========== =========== Diluted earnings per share $ 0.86 $ 0.78 $ 0.82 =========== =========== ===========
EX-21 11 COMPANY SUBSIDIARIES 1 EXHIBIT 21 Company Subsidiaries
Jurisdiction of Year Name Organization Incorporated ---- ------------ ------------ IRT Management Company Georgia 1990 VW Mall, Inc. Georgia 1994 IRT Capital Corporation Georgia 1996 IRT Alabama, Inc. Alabama 1997 IRT Partners L.P. Georgia 1998 IRT Capital Corporation II Georgia 1999
All are wholly-owned subsidiaries of the Company except IRT Capital Corporation ("IRTCC"), IRT Partners L.P. and IRT Capital Corporation II ("IRTCCII"). The Company owns 96% of the non-voting common stock and 1% of the voting stock of each of IRTCC and IRTCCII. The Company and IRT Management Company, collectively, own 92.9% of IRT Partners, L.P. EX-23 12 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference of our reports dated February 11, 2000 and to all references to our firm, included in this Form 10-K, into the Company's previously filed Registration Statement Files Nos. 33-63523, 33-64628, 33-59938, 33-64741, 33-66780, 33-65604, 333-62435 and 333-38847. ARTHUR ANDERSEN LLP Atlanta, Georgia March 29, 2000 EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF IRT PROPERTY COMPANY AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 1 514 0 2 0 0 9,791 630,005 (86,170) 565,896 11,808 290,493 0 0 33,234 222,969 565,896 0 85,391 19,458 0 3,432 0 21,948 28,488 0 28,488 0 (157) 0 28,331 0.86 0.86
EX-99 14 AUDITED FINANCIAL STATEMENTS 1 EXHIBIT 99 Financial Statements of IRT Partners L.P. for the year ended December 31, 1999 and the period from inception (July 15, 1998) to December 31, 1998 Report of Independent Public Accountants To IRT Partners L.P.: We have audited the accompanying balance sheets of IRT Partners L.P. (a Georgia limited partnership) as of December 31, 1999 and 1998, and the related statements of earnings, changes in partners' capital, and cash flows for the year ended December 31, 1999 and the period from inception (July 15, 1998) to December 31, 1998. 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 in accordance with auditing standards generally accepted in the United States. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IRT Partners L.P., as of December 31, 1999 and 1998, and the results of its operations and its cash flows for the year ended December 31, 1999 and the period from inception (July 15, 1998) to December 31, 1998, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Atlanta, Georgia February 11, 2000 2 IRT PARTNERS L.P. BALANCE SHEETS December 31, 1999 and 1998 (In thousands, except unit data)
1999 1998 --------- --------- ASSETS Rental properties $ 147,123 $ 139,936 Accumulated depreciation (20,518) (19,099) --------- --------- Net rental properties 126,605 120,837 Cash and cash equivalents 359 1,103 Advances to affiliate, net 8,923 -- Prepaid expenses and other assets 1,947 1,269 --------- --------- Total assets $ 137,834 $ 123,209 ========= ========= LIABILITIES & PARTNERS' CAPITAL Liabilities: Mortgage notes payable, net $ 31,181 $ 25,963 Advances from affiliate, net -- 33 Accrued expenses and other liabilities 2,545 1,660 --------- --------- Total liabilities 33,726 27,656 --------- --------- Limited partners' capital interest (815,852 OP Units at December 31, 1999 and 779,385 OP Units at December 31, 1998) at redemption value 6,374 7,794 Commitments and contingencies (Note 5) Partners' capital General partner (114,613 OP Units at December 31, 1999 and 103,982 OP Units at December 31, 1998) 1,041 955 Limited partner (10,530,883 OP Units at December 31, 1999 and 9,514,844 OP Units at December 31, 1998) 96,693 86,804 --------- --------- Total partners' capital 97,734 87,759 --------- --------- Total liabilities and partners' capital $ 137,834 $ 123,209 ========= =========
The accompanying notes are an integral part of these balance sheets. 3 IRT PARTNERS L.P. STATEMENTS OF EARNINGS For the Year Ended December 31, 1999 and the Period from Inception (July 15, 1998) to December 31, 1998 (In thousands)
1999 1998 ------- ------ Revenues: Income from rental properties $19,802 $7,187 Interest income from affiliate 324 -- ------- ------ Total revenues 20,126 7,187 ------- ------ Expenses: Operating expenses of rental properties 4,909 1,794 Interest on mortgages 2,418 836 Depreciation 3,350 1,281 General and administrative 788 1 ------- ------ Total expenses 11,465 3,912 ------- ------ Income before gain on sales of properties 8,661 3,275 Gain on sales of properties 1,130 -- ------- ------ Net earnings $ 9,791 $3,275 ======= ======
The accompanying notes are an integral part of these statements. 4 IRT PARTNERS L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the Year Ended December 31, 1999 and the Period From Inception (July 15, 1998) through December 31, 1998 (In thousands)
Limited Total Partners' General Limited Partners' Capital Partner Partner Capital Interest ------- ------- -------- --------- Opening balance $ -- $ -- $ -- $ -- Initial capital contributions 832 74,652 75,484 -- Issuance of units for acquisitions of rental properties -- -- -- 7,741 Cash contributions for acquisitions of rental properties 113 11,182 11,295 -- Issuance of units for cash 7 675 682 53 Distributions (30) (2,715) (2,745) (232) Net earnings 33 2,980 3,013 262 Adjustment to reflect limited partners' capital interest at redemption value -- 30 30 (30) ------- -------- -------- ------- Balance, December 31, 1998 955 86,804 87,759 7,794 Cash contributions for acquisitions of rental properties 92 9,169 9,261 -- Distributions (104) (9,660) (9,764) (733) Net earnings 98 9,010 9,108 683 Adjustment to reflect limited partners' capital interest at redemption value -- 1,370 1,370 (1,370) ------- -------- -------- ------- Balance, December 31, 1999 $ 1,041 $ 96,693 $ 97,734 $ 6,374 ======= ======== ======== =======
The accompanying notes are an integral part of these statements. 5 IRT Partners L.P. STATEMENTS OF CASH FLOWS For the Year Ended December 31, 1999 and the Period from Inception (July 15, 1998) to December 31, 1998 (In thousands)
1999 1998 -------- -------- Cash flows from operating activities: Net earnings $ 9,791 $ 3,275 Adjustments to reconcile earnings to net cash from operating activities: Depreciation 3,350 1,281 Gain on sales of properties (1,130) -- Changes in assets and liabilities: (Increase) decrease in prepaid expenses and other assets (678) 116 Increase (decrease) in accrued expenses and other liabilities 885 (544) -------- -------- Net cash flows from operating activities 12,218 4,128 -------- -------- Cash flows used in investing activities: Proceeds from sales of properties, net 8,867 -- Additions to real estate investments, net (11,113) (11,973) -------- -------- Net cash flows used in investing activities (2,246) (11,973) -------- -------- Cash flows (used in) from financing activities: Distributions paid, net (10,497) (2,242) Net advances (to) from affiliate (8,956) 33 Principal amortization of mortgage notes payable (524) (138) Issuance of units for cash 9,261 11,295 -------- -------- Net cash flows (used in) from financing activities (10,716) 8,948 -------- -------- Net (decrease) increase in cash and cash equivalents (744) 1,103 Cash and cash equivalents at beginning of period 1,103 -- -------- -------- Cash and cash equivalents at end of period $ 359 $ 1,103 ======== ======== Supplemental disclosures of cash flow information: Total cash paid for interest $ 2,386 $ 663 ======== ========
The accompanying notes are an integral part of these statements. 6 IRT PARTNERS L.P. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 (Dollars in thousands) (Unaudited with respect to square footage) 1. ORGANIZATION AND NATURE OF OPERATIONS: IRT Partners L.P. ("LP"), a Georgia limited partnership formed July 15, 1998, is the entity through which IRT Property Company (the "Company"), a self-administered and self-managed real estate investment trust ("REIT"), conducts a portion of its business and owns (either directly or through subsidiaries) a portion of its assets. The Company is the sole general partner of LP and maintains an indirect partnership interest through its wholly-owned subsidiary, IRT Management Company. The Company initially contributed 20 shopping centers, related assets and cash to LP in exchange for 8,486,217 limited partnership units ("OP Units"). The Company was issued additional OP Units in exchange for cash contributions to fund further acquisition activity. Since the formation of LP, the Company has contributed cash to acquire four shopping centers, and LP has divested three shopping centers. At December 31, 1999, the Company owns approximately 92.9% of LP. LP was formed by the Company in order to enhance the Company's acquisition opportunities by offering potential sellers the ability to engage in tax deferred sales of properties in exchange for OP Units. In August 1998, certain unaffiliated persons contributed their interests in three Florida shopping centers in exchange for a total of 815,852 OP Units. LP is obligated to redeem each OP Unit held by a person other than the Company, at the request of the holder, for cash equal to the fair market value of a share of the Company's common stock at the time of such redemption, provided that the Company may elect to acquire any such OP Unit presented for redemption for one common share or cash. Such limited partnership interest held by persons unaffiliated with the Company is reflected as "Limited Partners' Capital Interest" in the accompanying balance sheets at the cash redemption amount on the balance sheet dates. Federal income tax laws require the Company, as a REIT, to distribute 95% of its ordinary taxable income. LP makes quarterly distributions to holders of OP Units to enable the Company to satisfy this requirement. At December 31, 1999, LP owns 24 neighborhood and community shopping centers located in Florida, Tennessee, Georgia and North Carolina. The shopping centers are anchored by necessity-oriented retailers such as supermarkets, drug stores and/or discount variety stores. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Income Recognition LP follows the policy of suspending the accrual of income on any investments where interest or rental payments are delinquent 60 days or more. Percentage rental income is recorded upon collection. Depreciation LP records depreciation on buildings and other improvements on the straight-line basis over their estimated useful lives. Such lives range from 16 to 40 years for buildings and are six years for improvements. Maintenance and repairs are charged to expense as incurred, while significant improvements are capitalized. 7 Use of Estimates The preparation of 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. Cash Equivalents LP considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Recent Accounting Pronouncements In 1998 LP adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 established standards for reporting and disclosing comprehensive income (defined as revenues, expenses, gains and losses that under generally accepted accounting principles are not included in net income) and its components. At December 31, 1999 and 1998, LP had no items of other comprehensive income. In 1998 LP adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. LP's chief operating decision maker is its senior management group. LP owns and operates retail shopping centers in four states in the southeast. Such shopping centers generate rental and other revenue through the leasing of shop spaces to a diverse base of tenants. LP evaluates the performance of each of its shopping centers on an individual basis. However, as each of the shopping centers has similar economic characteristics and tenants, the shopping centers have been aggregated into one reportable segment. In June 1998 SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued establishing accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair market value. SFAS No. 133 requires that changes in the derivative's fair market value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133, as amended in June 1999 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," is effective for fiscal years beginning after June 15, 2000. The Company has never used derivative instruments or hedging activities. Income Taxes No federal or state income taxes are reflected in the accompanying financial statements since LP is a partnership and its partners are required to include their respective share of profits and losses in their income tax returns. 8 3. RENTAL PROPERTIES: Rental properties are comprised of the following at December 31, 1999 and 1998:
1999 1998 ----------- ---------- Land related to buildings and improvements $ 34,628 $ 30,761 Buildings and improvements 112,495 109,175 ----------- ---------- $ 147,123 $ 139,936 =========== ===========
Future minimum base rentals on noncancellable operating leases for LP's shopping center investments at December 31, 1999 are as follows:
Year Amount ---- ------ 2000 $ 15,812 2001 13,574 2002 11,495 2003 9,448 2004 8,490 Thereafter 37,405 ----------- $ 96,224 ===========
Shopping center acquisitions
Date Square Total Cash Mortgage Acquired Property Name City, State Footage Cost Paid Assumed -------- ------------- ----------- ------- -------- -------- --------- 2/26/99 The Shoppes at Lago Mar Miami, FL 82,613 $ 9,916 $ 4,174 $ 5,742 3/15/99 Williamsburg at Dunwoody Dunwoody, GA 44,928 5,602 5,602 -- -------- -------- -------- --------- 127,541 $ 15,518 $ 9,776 $ 5,742 ======== ======== ======== ========= =========================================================================================================
Shopping center dispositions
Date Square Sales Cash Sold Property Name City, State Footage Price Proceeds Gain -------- ------------- ----------- ------- -------- -------- --------- 6/01/99 First Street Station Albemarle, NC 52,230 $ 3,137 $ 3,038 $ 320 6/01/99 Taylorsville Taylorsville, NC 48,537 2,571 2,430 609 6/01/99 University Center Greenville, NC 56,180 3,462 3,399 201 ------- ------- -------- -------- 156,947 $ 9,170 $ 8,867 $1,130 ======== ======= ======= ======
9 4. MORTGAGE NOTES PAYABLE: Mortgage notes payable are collateralized by various real estate investments having a net carrying value of approximately $50,259 at December 31, 1999. These notes have stated interest rates ranging from 7.50% to 9.1875% and are due in monthly installments with maturity dates ranging from 2009 to 2021. Future principal amortization and balloon payments applicable to mortgage notes payable at December 31, 1999 are as follows:
Principal Balloon Year Amortization Payments Total ---- ------------ -------- ----- 2000 $ 485 $ -- $ 485 2001 527 -- 527 2002 573 -- 573 2003 623 -- 623 2004 676 -- 676 Thereafter 11,763 15,032 26,795 ------- ------- --------- 14,647 15,032 29,679 Interest Premium 1,502 --------- $ 31,181 =========
Based on the borrowing rates currently available to LP for mortgages with similar terms and maturities, the estimated fair value of mortgage notes payable was approximately $30,920 at December 31, 1999. 5. RELATED PARTY TRANSACTIONS In 1999, LP advanced IRT Property Company (the "Parent") approximately $8,923. The advances represent cash generated by LP that has been subsequently advanced to the Parent. During the year, LP earned approximately $324 in interest generated from these borrowings, which bear interest, calculated on a monthly basis, at the three-month treasury bill rate. 6. COMMITMENTS AND CONTINGENCIES: LP has guaranteed the bank indebtedness and senior indebtedness of the Company. LP is not aware of any environmental problems on the properties owned. While LP has not obtained Phase One environmental surveys on those properties owned by LP and located in North Carolina, and the fact that phase one environmental surveys which have been obtained provide no assurance that properties will not be adversely affected in the future by environmental problems, LP presently believes that there are no environmental matters that are reasonably likely to have a material adverse effect on LP's financial position. -----END PRIVACY-ENHANCED MESSAGE-----