-----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, PRDfq3I4QFhDdr1zu0LG3+bfM6Wu6H2kqnutyAYc0mUCNSHPwmZBseuKJPORLZAS DxQthNFJCOW8CbN2dAFy7w== 0000950123-99-010144.txt : 19991115 0000950123-99-010144.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950123-99-010144 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW PLAN EXCEL REALTY TRUST INC CENTRAL INDEX KEY: 0000798288 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330160389 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12244 FILM NUMBER: 99751167 BUSINESS ADDRESS: STREET 1: 1120 AVENUE OF THE AMERICAS 12TH FL CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2128693000 MAIL ADDRESS: STREET 1: 1120 AVENUE OF THE AMERICAS STREET 2: 12TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: EXCEL REALTY TRUST INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EXCEL REALTY ADVISORS INC DATE OF NAME CHANGE: 19900514 FORMER COMPANY: FORMER CONFORMED NAME: INVESTORS REALTY TRUST INC DATE OF NAME CHANGE: 19890612 10-Q 1 NEW PLAN EXCEL REALTY TRUST, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 1-12244 NEW PLAN EXCEL REALTY TRUST, INC. (Exact name of registrant as specified in its charter) MARYLAND 33-0160389 (State or other Jurisdiction of (IRS Employer Incorporation) Identification No.) 1120 Avenue of the Americas, New York, New York 10036 (Address of Principal Executive Office) (Zip Code) 212-869-3000 Registrant's Telephone Number 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of common stock outstanding at November 3, 1999 was 88,513,896. 2 NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 1999 1998 ---- ---- ---- ---- Revenues: Rental income and related revenues $ 102,657 $ 67,196 $ 310,374 $ 192,689 Interest, dividend and other income 5,510 874 18,380 2,893 --------- --------- --------- --------- Total revenues 108,167 68,070 328,754 195,582 --------- --------- --------- --------- Expenses: Operating costs 23,305 15,443 67,340 46,236 Real estate and other taxes 9,683 6,197 28,735 17,985 Interest 20,895 10,601 59,252 29,765 Depreciation and amortization 15,523 8,839 46,921 24,907 Provision for doubtful accounts 1,717 1,498 5,020 3,643 Non-recurring charge 58 -- 8,487 -- General and administrative 2,290 738 6,041 2,156 --------- --------- --------- --------- Total expenses 73,471 43,316 221,796 124,692 --------- --------- --------- --------- Income before real estate sales and minority interest 34,696 24,754 106,958 70,890 Gain on sale of real estate and securities 191 40 191 58 Minority interest in income of partnership (199) -- (1,004) -- Net income 34,688 24,794 106,145 70,948 Other comprehensive income (loss) Unrealized loss on securities for the period (168) (103) (167) (315) --------- --------- --------- --------- Comprehensive income $ 34,520 $ 24,691 $ 105,978 $ 70,633 ========= ========= ========= ========= Net income available to common stock - basic $ 29,029 $ 23,331 $ 89,025 $ 66,560 ========= ========= ========= ========= Net income available to common stock - diluted $ 29,228 $ 23,331 $ 90,029 $ 66,560 ========= ========= ========= ========= Basic earnings per common share $ 0.33 $ 0.38 $ 1.00 $ 1.11 ========= ========= ========= ========= Diluted earnings per common share $ 0.32 $ 0.38 $ 0.99 $ 1.10 ========= ========= ========= ========= Average shares outstanding - basic 88,718 60,720 88,779 59,934 ========= ========= ========= ========= Average shares outstanding - diluted 90,105 61,029 90,781 60,365 ========= ========= ========= =========
The accompanying notes are an integral part of the condensed consolidated financial statements. -2- 3 NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER 30, 1999 DECEMBER 31, 1998 UNAUDITED --------- ASSETS Real estate: Land $ 545,504 $ 545,400 Building and improvements 2,289,595 2,280,069 Accumulated depreciation (198,089) (158,021) ----------- ----------- Net real estate 2,637,010 2,667,448 Real estate held for sale 37,872 -- Cash and cash equivalents 30,232 13,951 Marketable securities 1,535 1,700 Receivables: Trade, less allowance for doubtful accounts of $14,878 and $11,636 at September 30, 1999 and December 31, 1998, respectively 26,901 23,422 Other 17,560 12,155 Mortgages and notes receivable 58,361 50,065 Prepaid expenses and deferred charges 12,162 6,181 Investment in and loans to ERT Development Corporation 124,682 113,779 Other assets 7,960 7,867 ----------- ----------- $ 2,954,275 $ 2,896,568 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Mortgages payable, including unamortized premium of $10,316 and $12,345 at September 30, 1999 and December 31, 1998, respectively $ 354,640 $ 388,185 Notes payable, net of unamortized discount of $2,330 and $1,141 at September 30, 1999 and December 31, 1998, respectively 613,670 489,235 Credit facilities 197,827 200,500 Capital leases 27,351 27,351 Other liabilities 95,019 45,909 Tenant security deposits 7,466 7,141 ----------- ----------- Total liabilities 1,295,973 1,158,321 ----------- ----------- Minority interest in partnership 27,804 40,651 ----------- ----------- Commitments and contingencies -- -- Stockholders' equity: Preferred stock, Series A: $.01 par value, 25,000 shares authorized: 4,600 shares designated as 8 1/2% Series A Cumulative Convertible Preferred, 1,507 and 2,033 shares outstanding at September 30, 1999 and December 31, 1998, respectively; Series B: 6,300 depository shares, each representing 1/10 of one share of 8 5/8% Series B Cumulative Redeemable Preferred, 630 shares outstanding at September 30, 1999 and December 31, 1998, respectively; Series D: 1,500 depositary shares, each representing 1/10 of one share of Series D Cumulative Voting Step-Up Premium Rate Preferred, 150 shares outstanding at September 30, 1999 and December 31, 1998 24 29 Common stock, $.01 par value, 250,000 shares authorized; 88,784 and 88,384 shares issued and outstanding as of September 30, 1999 and December 31, 1998, respectively 888 884 Additional paid-in capital 1,728,579 1,735,207 Accumulated other comprehensive income 559 726 Accumulated distribution in excess of net income (99,552) (39,250) ----------- ----------- Total stockholders' equity 1,630,498 1,697,596 ----------- ----------- $ 2,954,275 $ 2,896,568 =========== ===========
The accompanying notes are an integral part of the condensed consolidated financial statements. -3- 4 NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 ---- ---- Cash flows from operating activities: Net income $ 106,145 $ 70,948 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 46,921 24,907 Amortization of premium/discount on mortgages and notes payable (3,218) -- Foreign currency gain (493) -- Provision for doubtful accounts 5,020 2,322 Gain on sale of securities and property, net (191) (58) Minority interest in income of partnership 1,004 -- Equity in income of ERT Development Corporation (459) -- Change in investment in and accrued interest on loans to ERT Development Corporation (6,017) -- Changes in operating assets and liabilities, net: Change in cash due to merger -- 4,847 Change in trade and notes receivable (8,499) (4,090) Change in other receivables (5,191) 367 Change in other liabilities 7,269 10,587 Change in sundry assets and liabilities (8,006) (2,211) --------- --------- Net cash provided by operating activities 134,285 107,619 --------- --------- Cash flows from investing activities: Real estate acquisitions and building improvements (44,912) (96,868) Advances for mortgage notes receivable, net (8,758) -- Loans to ERT Development Corporation (4,426) -- Repayments of mortgage notes receivable 655 8,842 Sales of marketable securities 84 48 Purchases of marketable securities -- (1) Purchase of minority interest (20,000) -- Sale of property 7,168 329 --------- --------- Net cash used in investing activities (70,189) (87,650) --------- --------- Cash flows from financing activities: Proceeds from issuing notes 175,000 60,000 Principal payments of mortgages and notes payable (86,248) (12,485) Dividends paid (124,605) (92,819) Proceeds from dividend reinvestment plan 16,856 18,271 Repayment of credit facility (173,810) -- Proceeds from credit facility 171,137 -- Proceeds from exercise of stock options 1,334 2,217 Distributions paid to minority partners (2,665) -- Payments for the repurchase of common stock (24,814) -- --------- --------- Net cash used in financing activities (47,815) (24,816) --------- --------- Net increase (decrease) in cash and cash equivalents 16,281 (4,847) Cash and cash equivalents at beginning of year 13,951 17,089 --------- --------- Cash and cash equivalents at end of year $ 30,232 $ 12,242 ========= =========
The accompanying notes are an integral part of the condensed consolidated financial statements. -4- 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A: FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules of the Securities and Exchange Commission ("SEC") and, in the opinion of the Company, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows in accordance with generally accepted accounting principles. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules. The Company believes that the disclosures made are adequate to make the information presented not misleading. The results of operations for the three and nine months ended September 30, 1999 are not necessarily indicative of the results expected for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-K/A for the year ended December 31, 1998. Excel Realty Trust, Inc. ("Excel") was formed in 1985 and subsequently reincorporated as a Maryland corporation. New Plan Realty Trust (the "Trust") was organized in 1972 as a Massachusetts business trust. On September 28, 1998, Excel and the Trust consummated a merger (the "Merger") pursuant to an Agreement and Plan of Merger dated as of May 14, 1998, as amended as of August 7, 1998 (the "Merger Agreement"). As discussed more fully in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1998, the Merger was accounted for as a purchase by the Trust of the assets and liabilities of Excel using the purchase method of accounting. Therefore, financial statements and related disclosures herein for periods prior to September 28, 1998 are that of the Trust. Immediately following the Merger, the Company and the Trust adopted a fiscal year end of December 31. The Trust's fiscal year end prior to the Merger was July 31 and accordingly, comparative information reported in this Form 10-Q for 1998 represents information not previously reported by the Trust for the three-month and nine-month periods ended September 30, 1998. The results of operations and cash flows for the nine months ended September 30, 1998 have been derived by aggregating the estimated results of operations and cash flows for the month ended January 31, 1998 to the corresponding amounts reported for the three months ended April 30 and July 31, 1998, and the two months ended September 30, 1998. The results of operations for the three months ended September 30, 1998 have been derived by aggregating the estimated results for the month ended July 31, 1998 to the reported results of operations for the two months ended September 30, 1998. Certain amounts on the Balance Sheet as of December 31, 1998 have been reclassified to conform to the current period's presentation. Other receivables includes amounts formerly classified in stockholders' equity of $2 million as loans receivable for purchase of shares of beneficial interest. Investment in and loans to ERT Development Corporation was classified formerly as other assets and mortgages and loans receivable. NOTE B: RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts, and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value as issued. SFAS No. 133 is effective January 1, 2000; however, SFAS 137, "Deferral of the Effective Date of SFAS 133", extends the effective date for the Company to January 2001. The Company does not anticipate that the adoption of SFAS 133 will have a material impact on its financial statements. NOTE C: INTERNAL SOFTWARE COSTS Any costs associated with modifying computer software for Year 2000 compliance are expensed as incurred. -5- 6 NOTE D: STATEMENT OF CASH FLOWS - SUPPLEMENTAL Disclosure In the nine months ended September 30, 1999 and 1998, the Company acquired properties in part by assuming mortgages payable of $5.4 million and $56.7 million, respectively. In addition, in connection with the purchase of a certain property in April 1999, the seller was issued partnership units in Excel Realty Partners, L.P. valued at $770,000. Moreover, in connection with the purchase of partnership units in Excel Realty Partners, L.P. in August 1999, $8.0 million in excess of minority interest has been included in real estate. The amounts paid for interest for the nine months ended September 30, 1999 and 1998 were $61.8 million and $25.3 million, respectively. State and local income taxes paid for the nine months ended September 30, 1999 and 1998 were $288,000 and $49,000, respectively. NOTE E: STOCKHOLDERS' EQUITY Earnings Per Share (EPS) In accordance with the disclosure requirements of SFAS No. 128, a reconciliation of the numerator and denominator of basic and diluted EPS is provided as follows (in thousands, except per share amounts):
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, Basic EPS 1999 1998 1999 1998 ---- ---- ---- ---- Numerator: Net income $ 34,688 $ 24,794 $ 106,145 $ 70,948 Preferred dividends (5,659) (1,463) (17,120) (4,388) --------- --------- --------- --------- Net income available to common stock $ 29,029 $ 23,331 $ 89,025 $ 66,560 ========= ========= ========= ========= Denominator: Weighted average number of shares of common stock outstanding 88,718 60,720 88,779 59,934 ========= ========= ========= ========= Earnings Per Share $ 0.33 $ 0.38 $ 1.00 $ 1.11 ========= ========= ========= ========= Diluted EPS Numerator: Net income $ 34,688 $ 24,794 $ 106,145 $ 70,948 Preferred dividends (5,659) (1,463) (17,120) (4,388) Minority interest 199 -- 1,004 -- --------- --------- --------- --------- Net income available to $ 29,228 $ 23,331 $ 90,029 $ 66,560 common stock ======= ======= ======= ======= Denominator: Weighted average number of shares of common stock outstanding 88,718 60,720 88,779 59,934 Common stock options and warrants 21 262 73 415 Excel Realty Partners, L.P. third party units 1,366 47 1,929 16 --------- --------- --------- --------- 90,105 61,029 90,781 60,365 ========= ========= ========= ========= Earnings Per Share $ 0.32 $ 0.38 $ 0.99 $ 1.10 ========= ========= ========= =========
At September 30, 1999, there were 1,507,000 shares of 8 1/2% Series A Cumulative Convertible Preferred stock outstanding which are not included in the calculation of earnings per share because the results are anti-dilutive. -6- 7 NOTE F: SEGMENT INFORMATION The Company's two reportable business segments are retail and residential properties. At September 30, 1999, the retail segment consisted of 302 shopping centers (included in this amount are eight commercial and miscellaneous properties) and the residential segment consisted of 55 garden apartment communities. Selected financial information for each segment is as follows (in thousands):
RETAIL RESIDENTIAL OTHER TOTAL ------ ----------- ----- ----- FOR THREE MONTHS ENDED SEPTEMBER 30, 1999 Revenue $ 83,234 $ 19,423 $ 5,510 $ 108,167 Operating expenses and minority interest 23,647 11,058 2,547 37,252 Interest expense 20,895 20,895 Depreciation and amortization 13,378 2,145 15,523 Gain on sale of securities/properties 191 191 ----------- ----------- ----------- ----------- Net income $ 46,209 $ 6,220 ($ 17,741) $ 34,688 =========== =========== =========== =========== Real Estate Assets, net $ 2,292,207 $ 344,803 $ 2,637,010 =========== =========== =========== Real Estate held for sale $ 24,354 $ 13,518 $ 37,872 =========== =========== =========== FOR THREE MONTHS ENDED SEPTEMBER 30, 1998 Revenue $ 47,336 $ 19,860 $ 874 $ 68,070 Operating expenses 13,383 9,755 738 23,876 Interest expense 10,601 10,601 Depreciation and amortization 6,813 2,026 8,839 Gain on sale of securities/properties 40 40 ----------- ----------- ----------- ----------- Net income $ 27,140 $ 8,079 ($ 10,425) $ 24,794 =========== =========== =========== =========== Real Estate Assets, net $ 2,309,253 $ 349,935 $ 2,659,188 =========== =========== =========== FOR NINE MONTHS ENDED SEPTEMBER 30, 1999 Revenue $ 252,173 $ 58,201 $ 18,380 $ 328,754 Operating expenses and minority interest 69,240 31,855 15,532 116,627 Interest expense 59,252 59,252 Depreciation and amortization 40,381 6,540 46,921 Gain on sale of securities/properties 191 191 ----------- ----------- ----------- ----------- Net income $ 142,552 $ 19,806 ($ 56,213) $ 106,145 =========== =========== =========== =========== Real Estate Assets, net $ 2,292,207 $ 344,803 $ 2,637,010 =========== =========== =========== Zeal Estate held for sale $ 24,354 $ 13,518 $ 37,872 =========== =========== =========== FOR NINE MONTHS ENDED SEPTEMBER 30, 1998 Revenue $ 137,736 $ 54,953 $ 2,893 $ 195,582 Operating expenses 38,814 29,050 2,156 70,020 Interest expense 29,765 29,765 Depreciation and amortization 18,998 5,909 24,907 Gain on sale of securities/properties 58 58 ----------- ----------- ----------- ----------- Net income $ 79,924 $ 19,994 ($ 28,970) $ 70,948 =========== =========== =========== =========== Real Estate Assets, net $ 2,309,253 $ 349,935 $ 2,659,188 =========== =========== ===========
-7- 8 NOTE G: INVESTMENT IN AND LOANS TO ERT DEVELOPMENT CORPORATION The Company has made certain loan guarantees related to development projects in which ERT Development Corporation ("ERT") has an equity interest. The Company owns 100% of the preferred stock of ERT (equal to 95% of the economic interest in ERT). An ERT joint venture project in Florida has a construction loan expected to total $93.5 million. The Company has guaranteed $30 million of this loan. The Company has also guaranteed up to $68 million of a construction loan on an ERT development project in Texas. ERT DEVELOPMENT CORPORATION SUMMARY FINANCIAL INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (IN THOUSANDS)
Total revenues $15,344 Interest expense to New Plan Excel Realty Trust, Inc. 10,831 Other expenses 4,213 ------- Net income $300 =======
NOTE H: ENVIRONMENTAL MATTERS Under various federal, state and local laws, ordinances and regulations, the Company may be considered an owner or operator of real property or may have arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property or disposed of by it, as well as certain other potential costs which could relate to hazardous or toxic substances (including governmental fines and injuries to persons and property). Such liability may be imposed whether or not the Company knew of, or was responsible for, the presence of such hazardous or toxic substances. Except as discussed below, the Company is not aware of any significant environmental condition at any of its properties. Soil and groundwater contamination exists at certain of the Company's properties. The Company currently estimates that the total cost of remediation of environmental conditions at these properties will be in the range of approximately $2.8 million to $6.5 million. In connection with certain of these properties, the Company has entered into remediation and indemnity agreements, which obligate the prior owners of the properties (including, in some cases, principals of the prior owners) to perform the remediation and to indemnify the Company for any losses the Company may suffer because of the contamination or remediation. Although there can be no assurance that the remediation estimates of the Company will prove accurate or that the prior owners will perform their obligations under the remediation and indemnity agreements, the Company does not expect the environmental conditions at these properties to have a material adverse effect on the Company. The Company has also identified asbestos minerals relating to spray-applied fireproofing materials at certain properties. Included in other liabilities in the Company's Consolidated Balance Sheets at September 30, 1999 is $3.2 million related to the clean-up of these asbestos minerals. NOTE I: NON-RECURRING CHARGE In April 1999, seven executives, all formerly of Excel Realty Trust, Inc., resigned. These resignations occurred under the terms of Resignation and Release Agreements between the executives and New Plan Excel Realty Trust, Inc. They provided for payment by the Company of severance benefits, the cancellation of certain "in the money" vested stock options in exchange for the payment of the value of the stock options and the repurchase of Company stock owned by these executives. As of September 30, 1999, $8.5 million had been recorded as a non-recurring charge. This charge comprises $1.7 million in severance payments, $6.0 million in stock compensation expense and $0.8 million of other costs. -8- 9 NOTE J: REAL ESTATE HELD FOR SALE At the beginning of the third quarter, five properties were classified as "Real estate held for sale". The assets to be disposed of consist of two residential properties located in Kentucky having a total of 580 units and three retail properties located in Pennsylvania and Tennessee with a total gross leasable area of 510,000 square feet. The two residential properties are currently under contract and the sale is expected to be completed by December 31, 1999. Of the retail properties for sale, one transaction was completed in November 1999 and two are in the negotiation stages. These assets are being disposed of as part of the Company's policy of redeployment of capital into assets with perceived higher growth rates. In the aggregate, these assets contributed $5.3 million and $1.7 million in revenue and $2.2 million and $0.9 million in net income for the nine months and three months ended September 30, 1999, respectively. NOTE K: SUBSEQUENT EVENTS In October 1999, the Company announced that its Board of Directors had authorized the repurchase of up to $75 million of the Company's outstanding common stock from time to time through periodic open market transactions or through privately negotiated transactions. Purchases will be funded primarily through the proceeds from asset sales. -9- 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the Company's condensed consolidated financial statements and notes thereto as of September 30, 1999 included in this quarterly report and the Company's Annual Report on Form 10-K/A for the year ended December 31, 1998. This quarterly report contains forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievement of the Company to be materially different from the results of operations or plan expressed or implied by such forward-looking statements. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations has been the principal source of capital to fund the Company's ongoing operations. The Company's issuance of common and preferred stock, use of the Company's revolving credit facilities and financing from unsecured notes and mortgage debt have been the principal sources of capital required to fund its growth. In order to continue to expand and develop its portfolio of properties and other investments, the Company intends to finance future acquisitions and growth through the most advantageous sources of capital available to the Company at the time. This may include the sale of common stock, preferred stock or debt securities through public offerings or private placements, incurring additional indebtedness through secured or unsecured borrowings, and the reinvestment of proceeds from the disposition of assets. The Company's financing strategy is to maintain a strong and flexible financial position by (i) maintaining a prudent level of leverage, (ii) maintaining a large pool of unencumbered properties, (iii) managing its exposure to interest rate risk represented by its floating rate debt, (iv) where possible, amortizing existing non-recourse mortgage debt secured by specific properties over the term of the leases with anchor tenants at such mortgaged properties, and (v) maintaining a conservative distribution payout ratio. As of September 30, 1999, the Company had approximately $31.8 million in available cash, cash equivalents and marketable securities. Debt as of September 30, 1999 consisted of $354.6 million of mortgages payable and $811.5 million of notes payable. Included in the outstanding notes payable is $197.8 million outstanding on the Company's three unsecured credit facilities. One facility is for $250 million through December 1999, with an interest rate of LIBOR plus 1.2%, of which $137.8 million was outstanding at September 30, 1999. The covenants of this credit facility include maintaining certain ratios such as liabilities to assets of less than 50% and maintaining a minimum interest coverage ratio of 2 to 1. The Company also has an unsecured revolving credit facility of $50 million through November 1999, all of which was outstanding at September 30, 1999, and a $10 million term loan due July 2000, all of which was outstanding at September 30, 1999. These credit facilities contain covenants that are similar to the covenants contained in the Company's $250 million credit facility. The Company currently is negotiating the terms of a new $245 million credit facility. This new credit facility, which the Company expects to be in place by the end of November 1999, will replace the three existing credit facilities. In November 1998, the Company filed a $1 billion shelf registration statement. This registration statement was filed for the purpose of issuing debt securities, preferred stock, depository shares, common stock, warrants or rights. On February 3, 1999, the Company established under this shelf registration statement a program for the sale of up to $500 million aggregate principal amount of medium-term notes due nine months or more from date of issue. In July 1999, the Company issued $175 million aggregate principal amount of notes under its medium-term notes program in two series. The Company issued $150 million with a 10-year maturity and a coupon of 7.4% and $25 million of another series with a 30-year maturity and a coupon of 7.5%. The net proceeds of -10- 11 these issuances were used to reduce the outstanding balance on one of the Company's unsecured credit facilities. On September 10, 1999, following the internal merger transaction described below, the Company re-established its medium-term notes program in the aggregate principal amount of $325 million. On August 5, 1999, the Company consummated an internal merger transaction pursuant to which substantially all of the assets and liabilities of the Trust were merged up into the Company and thereby became direct assets and liabilities of the Company. In connection with this transaction, all of the Trust's outstanding publicly issued debt (i.e., debt issued under the Trust's Indenture dated as of March 29, 1995) was assumed by the Company. In addition, as a result of the merger transaction, the existing guarantees by the Trust of certain of the Company's outstanding publicly issued debt (i.e., debt issued under the Company's Indenture dated as of February 3, 1999) were terminated in accordance with the terms of the Indenture. Other sources of funds are available to the Company. Based on management's internal valuation of the Company's properties, many of which are free and clear of mortgages, the estimated value is considerably in excess of the outstanding mortgage indebtedness. Accordingly, management believes that potential exists for additional mortgage financing as well as unsecured borrowing capacity from banks and other lenders. The Company had three classes of preferred stock outstanding as of September 30, 1999: (i) 1,507,000 shares of 8 1/2% Series A Cumulative Convertible Preferred Stock which have an annual distribution of $2.125 per share payable quarterly; (ii) 6,300,000 depositary shares, each representing 1/10 of a share of 8 5/8% Series B Cumulative Redeemable Preferred Stock, with an annual distribution of $2.15625 per depositary share payable quarterly; and (iii) 1,500,000 depositary shares, each representing 1/10 of one share of 7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred Stock, with a liquidation preference and annual distribution of $50 and $3.90 per depositary share, respectively. The current quarterly dividend on the Company's common stock is $.4075 share (equivalent to $1.63 per share on an annualized basis). The Company anticipates that the quarterly dividend will increase at least $.0025 per share per quarter (which quarterly increases amount to $.01 per share on an annualized basis and effectively increase the annualized dividend rate by $.04 per share for each share held over a 12-month period) until the annualized quarterly dividend on the Company's common stock is at least $1.67 per share. The maintenance of this dividend policy will be subject to various factors, including the discretion of the Board of Directors of the Company, the ability to pay dividends under applicable law and the effect which the payment of dividends may have from time to time on the maintenance by the Company of its status as a REIT. In the normal course of business, the Company also faces risks that are either non-financial or non-qualitative. Such risks principally include credit risks and legal risks and are not included in the aforementioned notes, but are described in "Item 1. Business -- Risk Factors" in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1998. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts, and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value as issued. SFAS No. 133 is effective January 1, 2000; however, SFAS 137, "Deferral of the Effective Date of SFAS 133", extends the effective date for the Company to January 2001. The Company does not anticipate that the adoption of SFAS 133 will have a material effect on its financial statements. RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 -11- 12 The results of operations reflected in the Condensed Consolidated Statements of Income and Comprehensive Income include post-Merger results for the three months and nine months ended September 30, 1999 and pre-Merger results of the Trust for the three months and nine months ended September 30, 1998. The following includes pro forma financial information presented as if the Merger had been consummated on January 1, 1998 in order to make the comparison of these periods more informative. Except as stated otherwise, the discussions below relate to comparison of actual results for the three-month and nine-month periods ended September 30, 1999 to pro forma results for the three-month and nine-month periods ended September 30, 1998. The pro forma information is not necessarily indicative of what results would have been had the Merger actually occurred on January 1, 1998. The results of operations and cash flows for the nine months ended September 30, 1998 have been derived by aggregating the estimated results of operations and cash flows for the month ended January 31, 1998 to the corresponding amounts reported for the three months ended April 30 and July 31, 1998, and the two months ended September 30, 1998. The results of operations for the three months ended September 30, 1998 have been derived by aggregating the estimated results for the month ended July 31, 1998 to the reported results of operations for the two months ended September 30, 1998. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
THREE MONTHS ENDED SEPTEMBER 30, 1999 1998 1998 (ACTUAL) (PRO FORMA) (ACTUAL) -------- ----------- -------- (In thousands, except per share amounts) Revenues: Retail $ 83,234 $ 83,351 $ 47,336 Residential 19,423 19,539 19,860 Interest, dividend and other 5,510 5,873 874 --------- --------- --------- Total revenues 108,167 108,763 68,070 Expenses: Operating costs 23,305 19,808 15,443 Real estate and other taxes 9,683 9,346 6,197 Interest 20,895 19,278 10,601 Depreciation and amortization 15,523 15,308 8,839 Provision for doubtful accounts 1,717 1,590 1,498 Non-recurring charges 58 -- -- General and administrative 2,290 3,349 738 --------- --------- --------- Total expenses 73,471 68,679 43,316 Gain on sale of real estate/securities 191 58 40 Minority interest (199) (414) -- --------- --------- --------- Net income $ 34,688 $ 39,728 $ 24,794 ========= ========= ========= Net income per common share: Basic $ 0.33 $ 0.38 $ 0.38 ========= ========= ========= Diluted $ 0.32 $ 0.38 $ 0.38 ========= ========= =========
The Company acquired 18 retail properties between July 1, 1998 and September 30, 1999, which increased revenue $0.7 million in the current quarter. In addition, revenue in the current quarter decreased $0.5 million as a result of the sale of two properties and decreased $1.75 million from a downward adjustment of common area maintenance revenue relating to certain properties. The remaining retail revenue change was an increase of $1.4 million, or 1.7%. Between July 1, 1998 and September 30, 1999, three residential properties were acquired, which contributed $0.6 million in increased revenue in the current quarter. The remaining residential revenue change was a decrease of $0.7 million, or 3.7%. Property acquisitions resulted in $1.5 million of the $4.8 million increase in total expenses, including a $0.8 million increase in operating costs, $0.5 million in additional depreciation, and $0.2 million in additional real estate and other taxes. The $1.6 million increase in interest expense was the result of increased borrowing primarily in connection with the purchase by the Company of Excel Realty Partners, L.P. partnership units -12- 13 and higher interest rates. General and administrative expenses decreased $1.0 million. This was due primarily to cost decreases related to staff reduction in the closing of the Company's San Diego office which were partially offset by a non-recurring $0.8 million increase in professional fees related to a terminated acquisition of another company. The remaining $2.7 million increase in operating costs is principally due to increases in professional costs, turnover expense, material and supplies, contract services and promotional expenses in the current quarter. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 1998 (ACTUAL) (PRO FORMA) (ACTUAL) -------- ----------- -------- (In thousands, except per share amounts) Revenues: Retail $ 252,173 $ 236,641 $ 137,736 Residential 58,201 55,753 54,953 Interest, dividend and other 18,380 16,306 2,893 --------- --------- --------- Total revenues 328,754 308,700 195,582 Expenses: Operating costs 67,340 59,113 46,236 Real estate and other taxes 28,735 27,079 17,985 Interest 59,252 52,012 29,765 Depreciation and amortization 46,921 43,356 24,907 Provision for doubtful accounts 5,020 4,562 3,643 Non-recurring charge 8,487 -- -- General and administrative 6,041 6,117 2,156 --------- --------- --------- Total expenses 221,796 192,239 124,692 Gain on sale of real estate/securities 191 370 58 Minority interest (1,004) (1,226) --------- --------- --------- Net income $ 106,145 $ 115,605 $ 70,948 ========= ========= ========= Net income per common share: Basic $ 1.00 $ 1.12 $ 1.11 ========= ========= ========= Diluted $ 0.99 $ 1.10 $ 1.10 ========= ========= =========
The Company acquired 35 properties between January 1, 1998 and September 30, 1999, including 30 retail and five residential properties. The retail acquisitions produced revenue of $15.2 million in the current period. In addition, revenue in the current period was reduced $0.5 million because of the sale of two properties in July 1999 and was reduced $1.75 million from a downward adjustment of common area maintenance revenue relating to certain properties. The remaining retail revenue change was an increase of $2.6 million, or 1.1%. The residential acquisitions produced revenue income of $3.7 million in the current period. The remaining residential revenue change was a decrease of $1.3 million, or 2.3%. The increase in interest, dividend and other income was principally due to a $0.5 million improvement in the Company's equity participation in ERT. Of this increase, $1.8 million is associated with lease termination fees received on a property held by ERT. This was offset by ERT's participation in joint venture losses caused by the excess of interest carrying costs over net operating income on a property that is just emerging from the development stage. In addition, there was a foreign currency gain of $0.5 million in the nine months ended September 30, 1999 compared to a foreign currency loss of $1.0 million in the nine months ended September 30, 1998. Property acquisitions resulted in $13.0 million of the $29.6 million increase in total expenses, including a $4.9 million increase in operating costs, $3.8 million in additional depreciation, $1.5 million in additional real estate and taxes, and $2.8 million in interest expense. The remaining $3.3 million increase in operating costs is principally attributable to increases in snow removal, utilities and contract services in the current year. The remaining $4.4 million increase in interest expense was primarily the result of increased -13- 14 borrowing in connection with property acquisitions, severance costs and common stock repurchases resulting from the resignation of seven executives, all formally of Excel Realty Trust, Inc. and the purchase by the Company of Excel Realty Partners, L.P. partnership units. The decrease of $0.1 million in general and administrative costs relates primarily to staff reductions in the closing of the Company's San Diego office which was partially offset by a non-recurring increase in professional fees of approximately $0.8 million related to a terminated acquisition of another company. The $8.5 million non-recurring charge is a result of payments of $1.7 million in severance payments, $6.0 million in stock compensation expense and $0.8 million of other costs related to the resignation of the aforementioned seven executives in April 1999. FUNDS FROM OPERATIONS The Company calculates funds from operations ("FFO") as net income attributable to common shares on a diluted basis before gain or loss on sales of real estate and securities, plus depreciation and amortization on real estate and amortized leasing commission costs, and other non-recurring items. FFO is not a substitute for cash flows from operations or net income as defined by generally accepted accounting principles, should not be considered as a measure of liquidity or an indication of performance and may not be comparable to other similarly titled measures of other REITs. FFO is presented because industry analysts and the Company consider FFO to be an appropriate supplemental measure of performance of REITs.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net income $ 34,688 $ 24,794 $ 106,145 $ 70,948 Preferred dividends (5,659) (1,463) (17,120) (4,388) Minority interest 199 -- 1,004 -- --------- --------- --------- --------- Net income attributable to common shares - diluted 29,228 23,331 90,029 66,560 Gain on sale of real estate and securities (191) (40) (191) (58) Depreciation and amortization 17,014 8,839 48,403 24,907 Non-recurring charge 58 -- 8,487 -- --------- --------- --------- --------- Funds from operations $ 46,109 $ 32,130 $ 146,728 $ 91,409 ========= ========= ========= ========= Weighted average of common shares outstanding - diluted 90,105 61,029 90,781 60,365 ========= ========= ========= ========= FFO per share - diluted $ 0.51 $ 0.53 $ 1.62 $ 1.51 ========= ========= ========= =========
COMMITMENTS AND CONTINGENCIES Loan Commitments The Company has made certain loan guarantees related to development projects in which ERT has an equity interest. The Company owns 100% of the preferred stock of ERT (equal to 95% of the economic interest in ERT). An ERT joint venture project in Florida has a construction loan expected to total $100 million. The Company has guaranteed $30 million of this loan. The Company has also guaranteed up to $68 million of a construction loan on an ERT development project in Texas. Environmental Matters Under various federal, state and local laws, ordinances and regulations, the Company may be considered an owner or operator of real property or may have arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property or disposed of by it, as well as certain other potential -14- 15 costs which could relate to hazardous or toxic substances (including governmental fines and injuries to persons and property). Such liability may be imposed whether or not the Company knew of, or was responsible for, the presence of such hazardous or toxic substances. Except as discussed below, the Company is not aware of any significant environmental condition at any of its properties. Soil and groundwater contamination exists at certain of the Company's properties. The Company currently estimates that the total cost of remediation of environmental conditions at these properties will be approximately in the range of $2.8 million to $6.5 million. In connection with certain of these properties, the Company has entered into remediation and indemnity agreements, which obligate the prior owners of the properties (including, in some cases, principals of the prior owners) to perform the remediation and to indemnify the Company for any losses the Company may suffer because of the contamination or remediation. Although there can be no assurance that the remediation estimates of the Company will prove accurate or that the prior owners will perform their obligations under the remediation and indemnity agreements, the Company does not expect the environmental conditions at these properties to have a material adverse effect on the Company. The Company has also identified asbestos minerals relating to spray-applied fireproofing materials at certain properties. Included in other liabilities in the Company's Consolidated Balance Sheets at September 30, 1999 is $3.2 million related to the clean-up of these asbestos minerals. YEAR 2000 COMPLIANCE Year 2000 Compliance Readiness The Company's centralized corporate business and technical information systems have been assessed as to Year 2000 compliance and functionality. Year 2000 compliance issues with respect to the Company's internal business and technical information systems were remediated as of June 30, 1998. See "Year 2000 Compliance Detail" below. In addition, the Company has completed the identification and review of major computer hardware and software suppliers and has verified the Year 2000 preparedness of these suppliers. Year 2000 Compliance Detail The Company addressed the Year 2000 issue with respect to the following: (i) the Company's information technology and operating systems, including its billing, accounting and financial reporting systems; (ii) the Company's non-information technology systems, including building access, parking lot light and energy management, equipment and other infrastructure systems that may contain or use computer systems or embedded micro controller technology; and (iii) certain systems of the Company's major suppliers and material service providers (insofar as such systems relate to the Company's business activities such as payroll, health services and alarm systems). As described below, the Company's Year 2000 review involves (a) an assessment of the Year 2000 problems that may affect the Company, (b) the development of remedies to address the problems discovered in the assessment phase to the extent practical or feasible, (c) the testing of such remedies and (d) the preparation of contingency plans to deal with worst case scenarios. Assessment Phase As part of the internal assessment phase, the Company has attempted to substantially identify all the major components of the systems described above. In determining the extent to which such systems are vulnerable to the Year 2000 issue, the Company has evaluated internally developed and/or purchased software applications and property operational control systems (e.g., heating ventilation and air conditioning (HVAC), lighting timers, alarms, fire, sewage and access). In addition, in October 1998, the Company began sending letters to or making inquiries of certain of its major suppliers and service providers, requesting them to provide the Company with assurance of existing or anticipated Year 2000 compliance by their systems insofar as the systems relate to their activities with the Company. The Company completed its distribution of these inquiries by May 31, 1999. The Company requested that all responses to the inquires be returned no later than June 30, 1999. As of September 30, 1999, 75% responded directly and the remaining 25% consisted of utility companies, municipalities and other governmental bodies. -15- 16 Remediation and Testing Phase Based upon the assessment and remediation efforts to date, the Company has completed, tested and put on line the Year 2000 compliance modification in all the internally developed software for its accounting and property management applications. The Company's computer terminals or personal computers are Year 2000 compliant in all material respects in their hardware or task capability. The Company has replaced all non-compliant PC terminals in mission critical stations. A conservative, "worst case" scenario is included in the cost estimate. The versions of the purchased software that the Company uses for spread sheet analysis, database applications, word processing systems and its apartment rent collection system have been tested and are Year 2000 compliant. The outsourced payroll service and the integrated internal input system are compliant. The servers used in our internet access communication and data collection networks are Year 2000 compliant. Home office and all operations field office phone systems, except the Salt Lake City office, are Year 2000 compliant. The Salt Lake City office will be upgraded by December 15, 1999. Based on the expanded needs of the Company, replacement of the home office phone system (including the voicemail system) is scheduled to occur by November 15, 1999. Phone systems at the apartment communities are assessed as Year 2000 compliant. Most of the Company's shopping centers are "open air" type and are simple and very limited in terms of technology. Field systems for shopping center HVAC, sprinkler and lighting are more than 96% reviewed and Year 2000 compliant for those systems supplied by the Company (some are supplied by tenants). The systems not supplied by the Company, the number of which is small, are being reviewed and are not projected to have a material impact. All of the 55 apartment communities have had reviews completed and are Year 2000 compliant. Costs Related to the Year 2000 Issue The total historical or anticipated remaining costs for the Year 2000 remediation are estimated to be immaterial to the Company's financial condition. The costs to date have been expensed as incurred and consist of immaterial internal staff costs and other expenses such as telephone and mailing costs. The Company currently estimates that to have all systems Year 2000 compliant will require certain additional expenditures. At this time, the expenditures are expected to range from a total of $100,000 to a "worst case" of $260,000. Risks and Contingency Plans Considering the substantial progress made to date, the Company does not anticipate delays in finalizing internal Year 2000 remediation within remaining time schedules. However, third parties having a material relationship with the Company (e.g., utilities, financial institutions, major tenants, suppliers, governmental agencies and municipalities) may be a potential risk based on their individual Year 2000 preparedness which may not be within the Company's reasonable control. The failure of critical third parties' computer software programs and operating systems to achieve Year 2000 compliance may result in system malfunctions or failures. Such an occurrence would potentially affect the ability of the third party to operate its business and thereby raise adequate revenue to meet its contractual obligations to the Company or provide services to the Company. In that event, the Company may not receive revenue or services that it had otherwise expected to receive pursuant to existing leases and contracts. The failure of critical third parties to achieve Year 2000 compliance may have a material adverse impact on the Company's business, operating results and financial condition. The Company is continuing the process of identifying and reviewing the Year 2000 preparedness of third parties. As the results of that review develop, the Company will determine what course of action and contingencies, if any, can be made. Although the Company's Year 2000 efforts are intended to minimize the adverse effects of the Year 2000 issue on the Company's business, operating results and financial condition, the actual effects of the issue and the success or failure of the Company's efforts cannot be known until the year 2000. At this point, the Company believes that the most likely external sources of a material adverse impact on the Company's business, operating results and financial condition as a result of Year 2000 issues are utilities (i.e., electricity, natural gas, telephone service and water) furnished by third parties to the Company and a wide universe of other customers, none of which are readily available from alternate sources. The reasonably likely worst case scenario that could affect the Company's business, operating results and financial condition would be a widespread prolonged power failure affecting a substantial number of the geographic regions in which the Company's properties are located. In the event of such a widespread prolonged -16- 17 power failure, a significant number of tenants may not be able to operate their stores and, as a result, their ability to pay rent could be substantially impaired. The Company is not aware of an economically feasible contingency plan which could be implemented to prevent such a power failure from having a material adverse effect on the Company's business, operating results and financial condition. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of September 30, 1999, the Company had approximately $839.6 million of outstanding floating rate mortgages and notes payable. In addition, the Company had $197.8 million outstanding as of September 30, 1999 in connection with floating rate borrowings under its credit facilities. The Company does not believe that the interest rate risk represented by its floating rate debt is material as of that date in relation to the approximately $1.2 billion of outstanding total debt of the Company, the approximately $3.0 billion of total assets of the Company and the approximately $3.0 billion market capitalization of the Company's common stock as of that date. The Company was not a party to any hedging agreements with respect to its floating rate debt as of September 30, 1999. In the event of a significant increase in interest rates, the Company would consider entering into hedging agreements with respect to all or a portion of its floating rate debt. Although hedging agreements would enable the Company to convert floating rate liabilities into fixed rate liabilities, such agreements would expose the Company to the risk that the counterparties to such agreements may not perform, which could increase the Company's exposure to rising interest rates. Generally, however, the counterparties to hedging agreements that the Company would enter into would be major financial institutions. The Company may borrow additional money with floating interest rates in the future. Increases in interest rates, or the loss of the benefits of any hedging agreements that the Company may enter into in the future, would increase the Company's interest expense, which would adversely affect cash flow and the ability of the Company to service its debt. If the Company enters into any hedging agreements in the future, decreases in interest rates thereafter would increase the Company's interest expense as compared to the underlying floating rate debt and could result in the Company making payments to unwind such agreements. As of September 30, 1999, the Company had notes receivable in the total amount of Canadian $16 million (approximately U.S. $10.9 million as of September 30, 1999). The Company does not believe that the foreign currency exchange risk associated with these loans is material. The Company had no other material exposure to market risk (including foreign currency exchange risk, commodity price risk or equity price risk) as of September 30, 1999. -17- 18 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: *Exhibit 10.1 - Senior Securities Indenture, dated as of March 29, 1995, between New Plan Realty Trust and The First National Bank of Boston, as Trustee, filed as Exhibit 4.2 to Registration Statement No. 33-60045 of New Plan Realty Trust Exhibit 10.2 - First Supplemental Indenture, dated as of August 5, 1999, by and among New Plan Realty Trust, New Plan Excel Realty Trust, Inc. and State Street Bank and Trust Company Exhibit 10.3 - First Amendment to Amended and Restated Agreement of Limited Partnership of Excel Realty Partners, L.P., dated as of August 20, 1999, by and among New Plan DRP Trust, New Plan Excel Realty Trust, Inc. and the current and future partners in the partnership Exhibit 12.1 - Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements Exhibit 27 - Financial Data Schedule (included only in EDGAR filing) ------------------------ *Incorporated herein by reference as above indicated. (b) During the period covered by this report, the Company filed the following report on Form 8-K: Form 8-K filed September 13, 1999 relating to the filing of certain exhibits to the Company's Registration Statement on Form S-3 (No. 333-67511) in connection with the re-establishment of the Company's medium-term notes program. -18- 19 SIGNATURE Pursuant to the requirements 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. Dated November 12, 1999 NEW PLAN EXCEL REALTY TRUST, INC. By:/s/Michael I. Brown ----------------------------- Michael I. Brown Controller and Chief Accounting Officer By:/s/James M. Steuterman ----------------------------- James M. Steuterman Chief Operating Officer and Executive Vice President -19- 20 EXHIBIT INDEX Number Description *10.1 Senior Securities Indenture, dated as of March 29, 1995, between New Plan Realty Trust and The First National Bank of Boston, as Trustee, filed as Exhibit 4.2 to Registration Statement No. 33-60045 of New Plan Realty Trust 10.2 First Supplemental Indenture, dated as of August 5, 1999, by and among New Plan Realty Trust, New Plan Excel Realty Trust, Inc. and State Street Bank and Trust Company 10.3 First Amendment to Amended and Restated Agreement of Limited Partnership of Excel Realty Partners, L.P., dated as of August 20, 1999, by and among New Plan DRP Trust, New Plan Excel Realty Trust, Inc. and the current and future partners in the partnership 12.1 Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements 27 Financial Data Schedule (included only in EDGAR filing) - ---------------------- *Incorporated herein by reference as above indicated. -20- EX-10.2 2 FIRST SUPPLEMENTAL INDENTURE 1 Exhibit 10.2 FIRST SUPPLEMENTAL INDENTURE DATED AS OF AUGUST 5, 1999 AMONG NEW PLAN REALTY TRUST, NEW PLAN EXCEL REALTY TRUST, INC. AND STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE SENIOR DEBT SECURITIES 2 FIRST SUPPLEMENTAL INDENTURE THIS FIRST SUPPLEMENTAL INDENTURE is entered into as of August 5, 1999 by and among New Plan Realty Trust, a Massachusetts business trust ("NPRT" or, before the Merger Date, the "Company"), as original issuer, New Plan Excel Realty Trust, Inc., a Maryland corporation ("NPXL" or, beginning on the Merger Date, the "Company"), and State Street Bank and Trust Company, a Massachusetts trust company, as trustee (the "Trustee"). WHEREAS, NPRT and The First National Bank of Boston ("FNBB") entered into that certain Indenture dated as of March 29, 1995 (the "Original Indenture"), relating to the Company's senior debt securities; WHEREAS, the Trustee has succeeded to all or substantially all of the corporate trust business of FNBB and thereby is the successor of FNBB under the Original Indenture; WHEREAS, since September 28, 1998, NPRT has been a wholly owned subsidiary of the NPXL; WHEREAS, (i) NPRT intends to file a Certificate of Amendment of Amended and Restated Declaration of Trust (the "Declaration of Trust Amendments") to provide that the assets and liabilities of NPRT will be held in two "subtrusts," one of which will hold real estate assets (and attendant liabilities) located in Pennsylvania, Missouri, Illinois and South Carolina (the "Business Subtrust"), and the other of which will hold all of the other assets and liabilities of NPRT, including NPRT's obligations under the Original Indenture (the "Merger Subtrust"), and (ii) immediately following the effectiveness of the Declaration of Trust Amendments, the Merger Subtrust will merge with and into NPXL, with NPXL being the surviving entity (the "Merger," and the effective time and date of the Merger being referred to herein as the "Merger Date"); WHEREAS, effective as of the Merger Date, NPXL will assume the due and punctual payment of the principal of (and premium, if any) and any interest (including all Additional Amounts, if any, payable pursuant to Section 1011 of the Indenture) on all of the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed by the Company; 3 WHEREAS, pursuant to Section 901(1) of the Indenture, NPRT, NPXL and the Trustee may enter into this First Supplemental Indenture without the consent of any Holders; WHEREAS, the execution and delivery of this First Supplemental Indenture has been duly authorized by all necessary corporate or trust action, as applicable, on the part of NPRT, NPXL and the Trustee; NOW, THEREFORE, NPRT, NPXL and the Trustee agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. For purposes of this First Supplemental Indenture: (a) "Indenture" means the Original Indenture, as amended by this First Supplemental Indenture, and as otherwise supplemented or amended from time to time by one or more indentures supplemental thereto or hereto entered into pursuant to the applicable provisions of the Indenture. (b) Capitalized terms not expressly defined in this First Supplemental Indenture shall have the meanings ascribed to them in the Original Indenture. ARTICLE II ASSUMPTION AND DISCHARGE Section 2.01. Assumption by NPXL; Discharge of NPRT. Effective as of the Merger Date, (i) NPXL hereby assumes the due and punctual payment of the principal of (and premium, if any) and any interest (including all Additional Amounts, if any, payable pursuant to Section 1011 of the Indenture) on all of the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed by the Company, and (ii) with regard to the Indenture, NPXL shall succeed to and be substituted for NPRT, with the same effect as if NPXL had been named in the Indenture as the party of the first part, and NPRT thereupon shall be relieved of any further liability, obligation or covenant under the Indenture or upon the Securities and coupons. Following the execution and delivery of this First Supplemental Indenture, the parties hereto agree that all references to the "Company" in the Indenture and the Securities shall be deemed references to NPXL. 2 4 Section 2.02. Trustee's Acceptance. The Trustee hereby accepts this First Supplemental Indenture and agrees to perform the same under the terms and conditions set forth in the Indenture. ARTICLE III MISCELLANEOUS Section 3.01. Relation to Original Indenture. This First Supplemental Indenture supplements the Original Indenture and shall be a part and subject to all the terms thereof. Except as supplemented hereby, the Original Indenture and the Securities issued thereunder shall continue in full force and effect. Section 3.02. Concerning the Trustee. The Trustee shall not be responsible for any recital herein (other than the second and seventh recitals as they appear and as they apply to the Trustee) as such recitals shall be taken as statements of the Company, or the validity of the execution by the Company of this First Supplemental Indenture. The Trustee makes no representations as to the validity or sufficiency of this First Supplemental Indenture. Section 3.03. Effect of Headings. The Article and Section headings herein are for convenience of reference only and shall not affect the construction hereof. Section 3.04. Counterparts. This First Supplemental Indenture may be executed in counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. Section 3.05. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). Section 3.06. Notices. Effective as of the Merger Date, the addresses for notices set forth in the Original Indenture shall be amended, without further action, to read as follows: (a) if to the Company: New Plan Excel Realty Trust, Inc. 1120 Avenue of the Americas New York, New York 10036 Attn: General Counsel 3 5 (b) if to the Trustee: State Street Bank and Trust Company Corporate Trust Department 225 Franklin Street Boston, Massachusetts 02110 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. NEW PLAN EXCEL REALTY TRUST, INC. By: /s/ DEAN BERNSTEIN ---------------------------------- Name: Dean Bernstein Title: Senior Vice President [SEAL] Attest: /s/ STEVEN F. SIEGEL - -------------------- Title: Secretary STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/ DONALD E. SMITH ---------------------------------- Name: Donald E. Smith Title: Vice President [SEAL] Attest: - --------------------------------- Title: Vice President 4 EX-10.3 3 1ST AMENDMENT TO A/R AGREEMENT OF LIMITED PARTNER. 1 Exhibit 10.3 FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF EXCEL REALTY PARTNERS, L.P. THIS FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF EXCEL REALTY PARTNERS, L.P., dated as of August 20, 1999 ("AMENDMENT"), is entered into by and among New Plan DRP Trust, a Maryland real estate investment trust, as the "GENERAL PARTNER", New Plan Excel Realty Trust, Inc., a Maryland corporation ("NPXL") and the Persons whose names are set forth on Exhibit A as attached hereto, as the Limited Partners, together with any other Persons who become Partners in the Partnership as provided herein. WHEREAS, Excel Realty Partners, L.P. (the "PARTNERSHIP") was formed pursuant to that certain Agreement of Limited Partnership of Excel Realty Partners, L.P., dated as of April 24, 1995, as amended by that certain First Amendment to the Agreement of Limited Partnership of Excel Realty Partners, L.P., dated as of December 31, 1995 and further amended in its entirety by that certain Amended and Restated Agreement of Limited Partnership dated as of June 25, 1997 (the "PARTNERSHIP AGREEMENT"); and WHEREAS, by an Assignment of General Partnership Interest of even date herewith ("ASSIGNMENT"), NPXL, as successor by merger to Excel Realty Trust, Inc., has assigned NPXL's entire general partnership interest in the Partnership to General Partner, and by an Acceptance of even date herewith ("ACCEPTANCE"), General Partner has agreed to become the successor general partner of the Partnership; and WHEREAS, the requisite number of Limited Partners have consented to the Assignment, the Acceptance and the consequent substitution of General Partner in the place of NPXL as the general partner of the Partnership, conditioned upon, and in consideration of NPXL's and General Partner's execution and delivery of this Amendment concurrently with the consummation of the Assignment transaction; and WHEREAS, the Partnership has obtained the required consent from all other persons and/or entities (as applicable, pursuant to other contractual obligations of the Partnership) to the Assignment, the Acceptance and the consequent substitution of General Partner in the place of NPXL as the general partner of the Partnership; and WHEREAS, the parties now wish to amend the Partnership Agreement in certain respects. A-1 2 NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereby agree that the Partnership Agreement is amended as follows: 1. Capitalized terms used herein as defined terms and not otherwise defined herein shall have the meanings ascribed to them in the Partnership Agreement. 2. The definition of "ADJUSTMENT FACTOR" in the Partnership Agreement is hereby amended by replacing the phrase "the General Partner" with the word "NPXL" each time it appears in paragraphs (a), (b) and (c) of said definition. 3. The definition of "GENERAL PARTNER" in the Partnership Agreement is hereby amended to read as follows: "'GENERAL PARTNER' means New Plan DRP Trust, a Maryland real estate investment trust, and its successors and assigns, as the general partner of the Partnership in their capacities as general partner of the Partnership." 4. The definition of "REIT SHARE" in the Partnership Agreement is hereby amended to read as follows: "'REIT SHARE' means a share of the common stock, par value $.01 per share of New Plan Excel Realty Trust, Inc., a Maryland corporation ("NPXL")." 5. The definition of "REIT SHARES AMOUNT" in the Partnership Agreement is hereby amended by replacing the phrase "the General Partner" with the word "NPXL" each time it appears in said definition. 6. The last sentence of Section 5.1 of the Partnership Agreement is hereby amended to read as follows: "The General Partner shall take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with NPXL's qualification as a REIT, to cause the Partnership to distribute sufficient amounts to enable NPXL to pay shareholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the Code and Regulations (the "REIT REQUIREMENTS") and (b) avoid any federal income or excise tax liability of the General Partner and NPXL." 7. Section 7.3C(5) of the Partnership Agreement is hereby amended to read as follows: A-2 3 "(5) to reflect such changes as are reasonably necessary for NPXL to maintain its status as a REIT or to satisfy the REIT Requirements; and" 8. For purposes of Article 11 of the Partnership Agreement, the definition of "TRANSFER" in the Partnership Agreement is hereby amended to include, without limiting the generality of the definition set forth in the Partnership Agreement, any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), Pledge, encumbrance, hypothecation, mortgage, exchange, transfer or other disposition or act of alienation, whether voluntary or involuntary or by operation of law of any equity interests or securities in General Partner, of any nature or character whatsoever (including, but not limited to, rights of any nature or character, to purchase and/or convert into equity interests or securities of General Partner). 9. Section 11.6D(c) is hereby amended to read as follows: "(c) in the event that such Transfer would cause NPXL to cease to comply with the REIT Requirements;" 10. Section 7.12 is hereby added to the Partnership Agreement to read as follows: "SECTION 7.12 CONTINUING OBLIGATIONS OF NPXL A. Notwithstanding the Assignment or Section 11.2 of the Partnership Agreement to the contrary, NPXL unconditionally and irrevocably agrees to be jointly and severally obligated (along with General Partner) to satisfy the "General Partner Obligations" as defined in Exhibit "B" attached hereto and hereby incorporated herein (the "GENERAL PARTNER OBLIGATIONS"). The obligations of NPXL hereunder are in addition to, and independent of, the obligations of General Partner. A separate action or actions may be brought and prosecuted against NPXL whether an action is brought against General Partner or whether General Partner is joined in any such action or actions. NPXL further agrees that it may be joined in any action against General Partner in connection with the General Partner Obligations and recovery may be had against NPXL in any such action. The Partners acknowledge that NPXL's obligations under this Section 7.12 are primary obligations and not that of a guarantor or surety. B. NPXL hereby covenants that if any Qualifying Party tenders Partnership Units for Redemption pursuant to the Partnership Agreement and their respective Partner Schedules, and if the General Partner of the Partnership, elects pursuant to Section 8.6B of the Partnership Agreement and the provisions of the respective Partner Schedules, to acquire some or all of the Tendered Units in exchange for REIT Shares, then (i) NPXL will cause such REIT Shares to be issued as required to accomplish the Redemption, and (ii) to the extent the Qualifying Party has been granted registration rights with respect to any REIT Shares issued pursuant to Section 8.6B of the Partnership Agreement, such registration rights shall continue to apply, without modification." A-3 4 IN WITNESS WHEREOF, the General Partner, NPXL and the Limited Partners have adopted this Agreement as of the date first written above by the affirmative vote of the General Partner and a Majority in Interest of the Limited Partners, and the General Partner and NPXL A-4 5 have executed this Agreement as of the date first written above. GENERAL PARTNER: NEW PLAN DRP TRUST By: /s/ STEVEN SIEGEL Its: SENIOR VICE PRESIDENT "NPXL" NEW PLAN EXCEL REALTY TRUST, INC. By: /s/ STEVEN SIEGEL Its: SENIOR VICE PRESIDENT A-5 6 EXHIBIT "B" GENERAL PARTNER OBLIGATIONS For purposes of this Amendment, the "General Partner Obligations" shall mean, without limitation unless expressly provided herein to the contrary, all of General Partner's obligations as a general partner of the Partnership, including but not limited to those obligations under the Partnership Agreement, other legal and/or equitable obligations of general partners under applicable law, contractual obligations of the Partnership, and other legal and equitable obligations of the Partnership. The purpose of Section 7.12 of the Partnership Agreement and the General Partner Obligations is to give the Limited Partners exactly the same legal rights and remedies against NPXL after the Assignment transaction as the Limited Partners had prior to the Assignment transaction. Without limiting the foregoing standard and scope of the General Partner Obligations, the following are examples of obligations that are included within the definition of "General Partner Obligations": (i) General Partner's obligations as a general partner of the Partnership whether resulting from the Partnership Agreement, the related Partner Schedules or other legal or equitable state or federal obligations of general partners (e.g. fiduciary obligations); (ii) General Partner's obligations as a general partner of the Partnership relating to the Partnership's obligations under: (1) applicable state or federal law (legal or equitable); (2) the underlying retail leases and related agreements (which have been assumed or executed by the Partnership) regarding the retail projects owned, or ground leased, by the Partnership ("PROJECTS"), and, if applicable, the related ground leases; (3) the underlying debt of the Projects (which have been assumed by the Partnership to the extent the same is recourse); and (4) the various contracts and agreements relating to the Projects (which have been assumed or executed by the Partnership). B-1 EX-12.1 4 RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS The ratio of earnings to fixed charges and preferred stock dividend requirements for the nine-month period ended September 30, 1999 was: 2.2:1 For purposes of computing these ratios, earnings have been calculated by adding fixed charges (excluding capitalized interest) to income before extraordinary items. Fixed charges consist of interest costs, whether expensed or capitalized, preferred stock dividend requirements, the interest component of rental expense, if any, and amortization of debt discounts and issue costs, whether expensed or capitalized. CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS NINE MONTHS ENDED SEPTEMBER 30, 1999 (DOLLAR AMOUNTS IN THOUSANDS)
EARNINGS: Net income $106,145 Interest expense (including amortization debt discount / premium and debt issuing costs) 59,252 Amortization of capitalized interest 78 Other adjustments 293 -------- $165,768 ======== FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS: Interest expense (including amortization of debt discount / premium and debt issuing costs) $59,252 Interest capitalized during the period -- Preferred stock dividends 17,120 Other adjustments 293 -------- $76,665 ======== RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS 2.2:1
-21- EX-27 5 FIANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 SEP-30-1999 30,232 1,535 26,901 14,878 0 0 2,872,971 198,089 2,954,275 0 1,166,137 0 24 888 (98,993) 2,954,275 0 328,753 0 157,525 1,004 5,020 59,252 106,143 0 106,143 0 0 0 106,143 1.00 .99
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