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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, 2004 |
OR |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________ |
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| Commission file number 001-13499 |
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EQUITY ONE, INC. |
| (Exact name of Registrant as specified in its charter) |
Maryland | | 52-1794271 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
1696 N.E. Miami Gardens Drive, North Miami Beach, FL | 33179 |
| (Address of principal executive office) | (Zip code) |
Registrant’s telephone number, including area code: (305) 947-1664 |
| Securities registered pursuant to Section 12(b) of the Act: |
| Common Stock, $0.01 Par Value | | New York Stock Exchange |
| (Title of each class) | | (Name of exchange on which registered) |
None |
| Securities registered pursuant to Section 12(g) of the Act: |
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 Noo
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
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x Noo
As of June 30, 2004, the aggregate market value of the Common Stock held by non-affiliates of the Registrant was $633,548,023.80 based upon the last reported sale price of $18.08 per share on the New York Stock Exchange on such date.
As of March 5, 2005, the number of outstanding shares of Common Stock, par value $.01 per share, of the Registrant was 73,786,187.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Registrant’s definitive Proxy Statement for the 2005 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.
EQUITY ONE, INC.
| | | Part I | |
| Item 1. | | Business | 4 |
| Item 2. | | Properties | 16 |
| Item 3. | | Legal Proceedings | 32 |
| Item 4. | | Submission of Matters to a Vote of Security Holders | 32 |
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| | | Part II | |
| Item5. | | Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 33 |
| Item 6. | | Selected Financial Data | 34 |
| Item7. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 36 |
| Item 7A. | | Quantitative and Qualitative Disclosures about Market Risk | 56 |
| Item 8. | | Financial Statements and Supplementary Data | 58 |
| Item9. | | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 58 |
| Item 9A. | | Controls and Procedures | 58 |
| Item 9B. | | Other information | 58 |
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| | | Part III | |
| Item10. | | Directors and Executive Officers of the Registrant | 59 |
| Item 11. | | Executive Compensation | 59 |
| Item 12. | | Security Ownership of Certain Beneficial Owners and Management | 59 |
| Item13. | | Certain Relationships and Related Transactions | 59 |
| Item 14. | | Principal Accountant Fees and Services | 59 |
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| | | | |
| | | Part IV | |
| Item15. | | Exhibits and Financial Statement Schedules | 60 |
| | | Signatures | 64 |
| | | | |
FORWARD-LOOKING INFORMATION
Certain matters discussed in this Form 10-K and the information incorporated by reference herein contain “forward-looking statements” for purposes on Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations and are not guarantees of future performance.
All statements other than statements of historical facts are forward-looking statements, and can be identified by the use of forward-looking terminology such as “may,” “will,” “might,” “would,” “expect,” “anticipate,” “estimate,” “would,” “could,” “should,” “believe,” “intend,” “project,” “forecast,” “target,” “plan,” or “continue” or the negative of these words or other variations or comparable terminology, are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Because these statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. We caution you not to place undue reliance on those statements, which speak only as of the date of this report.
Among the factors that could cause actual results to differ materially are:
general economic conditions, and the effect of these conditions on rental rates in the markets where our shopping centers are located;
risks that tenants will not remain in occupancy or pay rent;
interest rate levels and the availability of financing;
potential environmental liability and other risks associated with the ownership, development and acquisition of shopping center properties;
greater than anticipated construction or operating costs;
inflationary and other general economic trends;
the effects of hurricanes and other natural disasters;
management’s ability to successfully combine and integrate the properties and operations of separate companies that we have acquired in the past or may acquire in the future; and
other risks detailed from time to time in the reports filed by us with the Securities and Exchange Commission.
Except for ongoing obligations to disclose material information as required by the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
PART I
The Company
We are a real estate investment trust, or REIT, that principally acquires, renovates, develops and manages neighborhood and community shopping centers located predominantly in high growth markets in the southern United States and in the Boston, Massachusetts metropolitan area. Our shopping centers are primarily anchored by supermarkets or other necessity-oriented retailers such as drug stores or discount retail stores.
Our property portfolio, as of December 31, 2004, consisted of 188 properties, comprising 133 supermarket-anchored shopping centers, eight drug store-anchored shopping centers, 40 other retail-anchored shopping centers, four development parcels and three commercial properties, as well as a non-controlling interest in one unconsolidated joint venture that owns a parcel of land. These properties are located in 12 states in the southern United States and in the Boston metropolitan area and contain an aggregate of 19.9 million square feet of gross leasable area, or GLA. Our portfolio includes shopping centers anchored by national and regional supermarkets such as Albertsons, Food Lion, H.E.B., Kash N’ Karry, Kroger, Publix, Randall’s, Shaw’s and Winn-Dixie and other national retailers such as Bed Bath & Beyond, Best Buy, Blockbuster, CVS/pharmacy, Eckerd, Home Depot, Kmart, Lowe’s, Walgreens and Wal-Mart.
We were organized as a Maryland corporation in 1992, completed our initial public offering in May 1998, and have elected to be taxed as a REIT since 1995. We maintain our principal executive and management office at 1696 N.E. Miami Gardens Drive, North Miami Beach, Florida 33179 in the Shops at Skylake.
In this annual report, unless stated otherwise or unless the content requires otherwise, references to “we,” “us” or “our” mean Equity One, Inc. and our consolidated subsidiaries.
Strategy and Philosophy
Our business strategy has been and will continue to be to maximize long-term stockholder value by generating sustainable cash flow growth and increasing the long-term value of our real estate assets. To that end, we now own and manage a portfolio of 189 properties including 180 neighborhood and community shopping centers. In order to achieve our objectives in the future, we intend to:
maximize the value of our existing shopping centers by leasing and re-leasing those properties to credit worthy tenants, at higher rental rates and by renovating and redeveloping those properties to make them more attractive to such tenants;
acquire and develop additional neighborhood and community shopping centers in high growth, high density metropolitan areas that are primarily anchored by supermarkets or other necessity-oriented retailers;
sell or dispose of properties that do not meet our investment criteria, asset type or geographic focus;
consider alternative strategies and other lines of business that complement our existing business, leverage our strengths and expertise or utilize our existing portfolio of properties; and
capitalize on our substantial asset base to effectively access capital to fund our growth.
Asset Management Strategy
Enhancing Portfolio Performance. We believe that the property operating income provided by our existing assets is a stable, predictable source of cash flow from which to fund a portion of our capital needs, including the development and acquisition of new projects, redevelopment of existing projects and the payment of dividends to our stockholders. Our assets generally have experienced stable, moderate growth in standard measures of real estate operating performance. We believe these results are attributable to our ability to attract tenants, actively manage and promote our assets to tenants and maintain the high standards and physical appearance of our assets while maintaining competitive tenant occupancy costs. We also believe that we have developed strong, mutually beneficial relationships with credit worthy tenants, particularly our anchor tenants, by consistently meeting or exceeding their expectations and demands. Over the years, this strategy has allowed us to leverage our relationships with existing tenants to lease and re-lease our properties and therefore maintain or improve the financial performance of our existing properties or of properties that we acquire.
Dispositions. Generally, we hold our properties for investment and for the production of rental income. Over time, when our assets no longer meet our investment criteria, or when sales provide the opportunity for significant gains, we may attempt to sell or otherwise dispose of those assets.
Redevelopment of Existing Centers. We are in the process of renovating or redeveloping a number of under-performing assets in order to make them more attractive for leasing or re-leasing to creditworthy tenants.
Growth Strategy
We intend to grow our business by acquiring additional neighborhood and community shopping centers through individual or portfolio property acquisitions, by acquiring privately-held or publicly-traded REITs and real estate companies, by developing new retail properties and by forming joint ventures with third parties to both acquire and develop new properties. We are currently focused on properties located in the southern and eastern regions of the United States
Acquisitions. We generally select properties for acquisition which have or are suitable for supermarket or other anchor tenants that offer daily necessities and value-oriented merchandise. The properties must be well-located, typically in high growth, high-density metropolitan areas, and have high visibility, open air designs, ease of entry and exit and ample parking. Although we focus primarily on well-performing, supermarket-anchored properties with strong cash flows, we also acquire under-performing assets, which are adaptable over time for expansion, renovation or redevelopment. When evaluating potential acquisitions, whether well-performing or under-performing, we consider factors such as:
the location, construction quality, design and visibility of the property;
economic, demographic, regulatory and zoning conditions in the property’s local and regional market;
the tenants’ gross sales per square foot measured against industry standards, and the rent payable by the tenants;
competition from comparable retail properties in the market area and the possibility of future competition;
the current and projected cash flow of the property and the potential to increase that cash flow;
the potential to complete a strategic renovation, expansion or re-tenanting of the property;
the property’s current expense structure and the potential to increase operating margins; and
- the potential for capital appreciation of the property.
When evaluating acquisitions of portfolios of properties, REITs or companies that own real estate, we review the component properties against the criteria described above, as well as opportunities for synergies and cost savings on a combined basis, the degree of geographic fit with our existing markets or opportunities to expand geographically into new desirable markets, and the extent of non-core assets included in the acquisition. For instance, in October 2004, we acquired a six-property portfolio in the metropolitan Boston, Massachusetts area which permitted us to expand both our geographic market as well as our tenant diversity.
Developments. Over the next several years, we intend to complete several new development projects, depending on market conditions and capital availability. We employ what we consider to be a disciplined approach to the development process. Our in-house development and construction departments are experienced and are responsible for all aspects of development, including market research, site selection, predevelopment work, construction and tenant coordination. We maintain asset management control through the entire development process, including frequent internal reviews of costs and leasing status.
The following factors allow us to mitigate the risks associated with development:
Site Selection: Our development projects are typically located in metropolitan areas that have strong demographic features, such as being densely populated, having higher than average household income or having projected future growth. In addition, we typically select sites within our target markets that are well situated near transportation arteries.
Pre-Leasing: We typically do not initiate construction of our development projects until we have secured a leasing commitment from an anchor tenant.
Financing:We typically fund development costs from operating cash flow and our revolving credit facility. This provides us the flexibility to control the pace of development without delays due to outside financing needs.
Joint Ventures. In order to meet our stated objective to grow our business by acquiring and developing additional neighborhood and community shopping centers, we may from time to time enter into joint ventures with land owners and developers. In many of these transactions, we will fund the costs of acquiring and/or developing the properties and we will retain operational control of the venture. For example, in February 2005, we entered into a joint venture that acquired a 155 acre development parcel in Pasco County, Florida. We have a 60 percent controlling interest in the venture and expect to receive an eight percent preferred return on our capital investment. We currently expect that upon completion, the project will include office, retail and residential uses.
We intend to further grow and expand our business by using cash flows from operations, by drawing on our existing credit facilities, or if appropriate market conditions exist, by accessing the capital markets to issue equity, debt or a combination thereof. In addition, as we have in the past, we intend to utilize tax-advantaged structures to acquire properties from sellers who wish to defer capital gains. Such structures may include entering into a joint venture or other type of co-ownership with a seller, in which we would acquire a controlling interest. We may offer the seller an interest in the venture that is convertible or exchangeable for shares of our common stock or otherwise allow the seller to have an equity interest in our company.
Financing Strategy. Our financing strategy is to maintain a strong and flexible financial position by limiting our debt to a prudent level and minimizing our variable interest rate exposure. We intend to finance future growth with the most advantageous source of capital available to us at the time of an acquisition. These sources may include selling common stock, preferred stock, debt securities, depository shares or warrants through public offerings or private placements, utilizing availability under our unsecured revolving credit facilities or incurring additional indebtedness through secured or unsecured borrowings either at the parent level or through mortgages with recourse limited to specific properties.
2004 Overview of Significant Business Strategies
The implementation of our business strategy in 2004 produced the following results and activities:
An increase in the occupancy rate in our core shopping center portfolio to 94.9% from 91.6% at December 31, 2003;
Achievement of a 3.8% increase in same property net operating income, or NOI, excluding termination fees, and an overall NOI margin of 73.7%;
An increase in the rental rate by 4.5% to $13.96 per square foot on 362 lease renewals aggregating 797,000 square feet; and
The execution of 418 new leases totaling 1.6 million square feet at an average rental rate of $10.53 per square foot.
Dispositions. During 2004, we sold 14 income producing properties for aggregate consideration of approximately $82.6 million encompassing approximately 2.0 million square feet of gross leasable area as these properties no longer met our investment criteria. We also sold a property held by a joint venture.
Redevelopment of Existing Centers. We reconfigured, redeveloped and re-leased previously vacant anchor and other space at our Bandera Festival Center where we had a vacant Kmart store, Centre Pointe where we had a vacant Winn-Dixie store, Oakbrook Square where we had a vacant Jacobson store, Copperfield where we had a vacant Gerland’s store and Walden Woods where we had a vacant Winn-Dixie store. In addition, we added an out parcel at Oakbrook Square.
Also, during 2004 we reconfigured and redeveloped our Salerno Village shopping center to accommodate a new and expanded Winn-Dixie supermarket and our Crossroads Square center by adding a Lowe’s home improvement, a new CVS Pharmacy and refurbished the remainder of the center. In addition, we reconfigured a portion of our Ambassador Row Courtyard property and added an out parcel.
Acquisitions. During 2004, we acquired 17 properties and three land parcels for aggregate consideration of approximately $317.0 million encompassing approximately 1.8 million square feet of gross leasable area. These properties included 16 supermarket-anchored shopping centers.
Developments. We completed the development of CVS Plaza, a 29,000 square foot drug store anchored center, located across the street from our Plaza Alegre center and are currently completing the lease up of the local space. We also added a 45,000 square foot LA Fitness Sports Club to our Skylake Shopping Center where we are also adding 29,000 square feet of office and retail space. In addition, we started the development of a supermarket anchored center in Homestead, Florida.
New Markets.In October 2004, we acquired a six-property portfolio in the metropolitan Boston, Massachusetts area, thereby expanding our geographic diversity.
Other investments.As of December 31, 2004, we owned approximately 1.6 million shares of Cedar Shopping Centers, Inc. common stock, representing approximately 8.3% of Cedar’s total outstanding shares of common stock, and 220,000 shares, representing a 9.4% stake, of Cedar’s 8.875% Series A Cumulative Redeemable Preferred Stock. As of February 23, 2005, we had increased our ownership of Cedar’s common stock to approximately 1.9 million shares, representing 9.8% of Cedar’s total outstanding shares of common stock. Cedar is a self-managed REIT engaged in the ownership, development and management of community and neighborhood shopping centers anchored by supermarkets, drug stores and other retailers, with a geographic concentration in Pennsylvania and certain neighboring states. We are holding both the common and preferred stock for investment purposes.
Unsecured Senior Note Offering. During March of 2004, we raised $200 million in an offering of unsecured senior notes. The unsecured senior notes have a stated interest rate of 3.875% and mature in April of 2009. We swapped $100 million of these notes to a floating interest rate based on the 6-month LIBOR in arrears plus 0.4375%.
Competitive Strengths
We believe that we distinguish ourselves from other owners and operators of community and neighborhood shopping centers in a number of ways, including:
Shopping Centers Anchored by Supermarkets or Necessity-Oriented Retailers. As of December 31, 2004, shopping centers anchored by supermarkets or other necessity retailers such as drug stores or discount retail stores accounted for over 99% of our total annualized minimum rent. We believe that supermarkets and other necessity-oriented retailers are more resistant to economic downturns by the nature of their businesses and generate frequent consumer traffic through our shopping centers. This traffic enhances the quality, appeal and longevity of our shopping centers and benefits our other tenants.
Attractive Locations in High-Growth Areas. Our portfolio of properties is concentrated in high-density areas that are experiencing high population growth such as Florida, Texas and Georgia. As of December 31, 2004, these states constitute 46.7%, 15.1% and 13.9% of our retail property gross leasable area, respectively. The strong demographics of these and our other markets provide our properties with a growing supply of shoppers and increasing demand for the goods and services of our tenants.
Diverse Tenant Base.As of December 31, 2004, no single tenant represented more than 10.0% of our annualized minimum rent and only Publix, at 8.3%, represented more than 5% of such rent. As of December 31, 2004, we had over 3,300 leases with tenants, including national and regional supermarket chains, drug stores, discount retail stores, other nationally or regionally known stores, a variety of other regional and local retailers and a number of local service providers such as doctors, dentists, hair salons, restaurants and others. We believe that this diversity of tenants enables us to generate more stable cash flows over time and limits our exposure to the financial conditions of any particular tenant.
Seasoned Management Team. Our senior executives and managers average more than 20 years of experience in the acquisition, management, leasing, finance, development and construction of real estate or retail properties. In particular, we believe that our in-depth market knowledge and the long-term tenant relationships developed by our senior management team provide us with a key competitive advantage.
Property Acquisition Strengths.We believe we have certain competitive advantages which enhance our ability to capitalize on acquisition opportunities, including our long standing relationships with bankers, brokers, tenants and institutional and other real estate owners in our current target markets; our access to capital; our ability to offer cash and tax advantaged structures to sellers; and our demonstrated ability to conduct a rapid, efficient and effective due diligence investigation of the property, portfolio or company.
Strong Relationship with Tenants. We believe we have cultivated strong relationships with supermarket and other anchor tenants, which, in combination with our in-depth knowledge of our primary markets, have contributed substantially to our success in identifying, acquiring and operating our properties.
Risk Factors
You should carefully consider the risks described below. The trading price of any of our securities could decline due to any of these risks.
We are dependent upon certain key tenants and adverse developments in the business of these tenants could have a negative impact on our financial condition.
We own shopping centers which are supported by “anchor” tenants which, due to size, reputation or other factors, are particularly responsible for drawing other tenants and shoppers to our centers. For instance, Publix is our largest tenant and accounts for approximately 2.2 million square feet, or 11.1%, of our gross leasable area.
At any time, an anchor tenant or other tenant may experience a downturn in its business that may weaken its financial condition. As a result, tenants may delay lease commencement, fail to make rental payments when due or declare bankruptcy. We are subject to the risk that these tenants may be unable to make their lease payments or may decline to extend a lease upon its expiration. Any tenant bankruptcies, leasing delays or failures to make rental payments when due could result in the termination of the tenant’s lease and material losses to our business and harm to our operating results. For example, on February 22, 2005, Winn-Dixie Stores, Inc., an anchor tenant at 16 of our shopping centers occupying 730,000 square feet of gross leasable area and accounting for approximately $5 million in annualized minimum rent centers and terminate those leases, it would adversely affect our operating results, including funds from operations, and cash flows. In addition, we own approximately $15 million of principal of Winn-Dixie's senior notes bearing interest at 8.875%. Following Winn-Dixie bankruptcy, there is no guarantee that we will receive any additional interest payments or any principal payment at maturity.
In addition to the loss of rental payments, a lease termination by an anchor tenant or a failure by that anchor tenant to occupy the premises could result in lease terminations or reductions in rent by other tenants in the same shopping center leases of which permit cancellation or rent reduction if an anchor tenant’s lease is terminated. Vacated anchor tenant space also tends to adversely affect the entire shopping center because of the loss of the departed anchor tenant’s power to draw customers to the center. We cannot provide any assurance that we will be able to quickly re-lease vacant space on favorable terms, if at all. Any of these developments could adversely affect our financial condition or results of operations.
Our growth may be impeded if we are not successful in identifying suitable acquisitions or investments that meet our investment criteria.
Our business strategy is to make future acquisitions of or investments in additional real estate assets or other companies that own real estate. Integral to this strategy will be our ability to expand in the future by identifying suitable acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategy. We may not be successful in identifying suitable real estate assets or other businesses that meet our acquisition criteria or completing acquisitions or investments on satisfactory terms. Failures in identifying or completing acquisitions could reduce the number of acquisitions we are able to make and may slow our growth, which could in turn harm our future stock price.
We have substantial debt obligations which may reduce our operating performance and put us at a competitive disadvantage.
We have outstanding debt and other liabilities in the aggregate amount of approximately $999 million. Many of our loan facilities require scheduled principal and balloon payments. In addition, we may incur additional indebtedness in the future. As a result, we are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, the risk that interest rates may increase on variable-rate debt and the risk that indebtedness on our properties cannot be refinanced at maturity or that the terms of such refinancing will not be as favorable as the terms of such indebtedness.
If our internally generated cash is inadequate to repay our indebtedness upon maturity, then we will be required to repay debt through refinancing or equity offerings. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of our properties potentially upon disadvantageous terms, which might result in losses and might adversely affect our cash available for distribution. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancing, our interest expense would increase, without a corresponding increase in our rental rates, which would adversely affect our results of operations. Further, if one of our properties is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, or if we are in default under the related mortgage or deed of trust, such property could be transferred to the mortgagee, or the mortgagee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of income and asset value. Foreclosure could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements under the Internal Revenue Code.
Future acquisitions of or investments in real estate assets or other companies that own real estate may not yield the returns expected, may result in disruptions to our business, may strain management resources and may result in stockholder dilution.
Our acquisition and investment strategy and our market selection process may not ultimately be successful and may not provide positive returns on our investment. If we acquire a business, we will be required to integrate the operations, personnel and accounting and information systems of the acquired business and train, retain and motivate any key personnel from the acquired business. In addition, acquisitions of or investments in companies may cause disruptions in our operations and divert management’s attention away from day-to-day operations, which could impair our relationships with our current tenants and employees. The issuance of equity securities in connection with any acquisition or investment could be substantially dilutive to our stockholders
We will face increasing competition for the acquisition of real estate assets, which may impede our ability to make future acquisitions or may increase the cost of these acquisitions.
We compete with many other entities engaged in real estate investment activities for acquisitions of community and neighborhood shopping centers, including institutional pension funds, other REITs and other owner-operators of shopping centers. These competitors may drive up the price we must pay for real estate assets or other real estate companies we seek to acquire or may succeed in acquiring those companies or assets themselves. In addition, potential acquisition targets may find competitors to be more attractive suitors because they may have greater resources, may be willing to pay more or may have a more compatible operating philosophy. In particular, larger REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase. Such competition may reduce the number of suitable properties and increase the bargaining position of the owners of those properties. This will result in increased demand for these assets, and, therefore, increased prices paid for them. If we must pay higher prices for properties, our profitability will be reduced, and our stockholders may experience a lower return on their investment.
Geographic concentration of our properties will make our business vulnerable to economic downturns in Florida.
Approximately 46.7% of our gross leasable area is located in Florida. As a result, economic and real estate conditions in Florida will significantly affect our revenues and the value of our properties. Business layoffs or downsizing, industry slowdowns, changing demographics the harmful effects of natural disasters and other similar factors may adversely affect the economic climate in Florida. Any resulting oversupply or reduced demand for retail properties in Florida would adversely affect our operating performance and limit our ability to make distributions to stockholders.
Our investments in development and redevelopment projects may not yield anticipated returns, which would harm our operating results and reduce the amount of funds available for distributions to stockholders.
An important component of our growth strategy is the redevelopment of properties within our portfolio. In addition, we intend to develop new shopping centers at other locations and pursue other development and redevelopment activities as opportunities arise; however, we may not be able to do so successfully. Expansion, renovation and development projects entail considerable risks as a result of the significant amount of capital expenditures associated with them as well as the necessity of various governmental and other approvals, the potential for construction and other delays and other factors, many of which are outside of our control. As a result, we may not be able to timely complete these redevelopment and development projects in accordance with our expectations. In addition, occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable, or development, construction and lease-up activities may not be completed on schedule, resulting in decreased operating income.
While our policies with respect to expansion, renovation and development activities are intended to limit some of the risks otherwise associated with such activities, such as initiating construction only after securing commitments from anchor tenants, we will nevertheless be subject to risks that construction costs of a property, due to factors such as cost overruns, design changes and timing delays arising from a lack of availability of materials and labor, weather conditions and other factors outside of our control, may exceed original estimates, possibly making the associated investment uneconomical. Any substantial unanticipated delays or expenses could adversely affect the investment returns from these redevelopment projects and harm our operating results.
We may experience difficulties and additional costs associated with renting unleased space and space to be vacated in future years.
Our goal is to improve the performance of our properties by re-leasing vacated space. Historically, we have succeeded in leasing our properties, including increasing our core shopping center occupancy rate from 91.6% at year-end 2003 to 94.9% at year-end 2004. However, we may not be able to maintain the growth in our overall occupancy. Our ability to continue to lease or re-lease vacant space in these or other properties will be affected by many factors, including our propertylocations, current market conditions and covenants found in certain leases restricting the use of other space at our properties. For instance, in some cases, our tenantleases contain provisions giving the tenant the exclusive right to sell particular types of merchandise or provide specific types of services within the particular retail center, or limit the ability of other tenants to sell that merchandise or provide those services. When re-leasing space after a vacancy, these provisions may limit the number and types of prospective tenants for the vacant space. The failure to lease or to re-lease on satisfactory terms could harm our operating results.
If we are able to re-lease vacated space, there is no assurance that rental rates will be equal to or in excess of current rental rates. In addition, we may incur substantial costs in obtaining new tenants, including brokerage commission fees paid by us in connection with new leases or lease renewals, and the cost of making leasehold improvements.
Changes in interest rates could adversely affect the market price of our securities.
The market price of our common stock is affected by the annual distribution rate on the shares of our common stock. Increasing market interest rates may lead prospective purchasers of our common stock and other securities to seek alternative investments that offer a higher annual yield which would likely adversely affect the market price of our common stock and other securities. In addition, we have exposure to variable interest rates on balances under our $340 million revolving credit facility with Wells Fargo and in connection with an interest rate swap in which we have swapped $100 million of notional principal to a floating interest rate based on the 6 month LIBOR in arrears plus 0.4375%. As interest rates rise, more of our funds from operations will be required to service these obligations. Finally, increases in interest rates may have the effect of depressing the market value of retail properties such as ours, including the value of those properties securing our indebtedness.
We may be subjected to liability for environmental contamination which might have a material adverse impact on our financial condition and results of operations.
As an owner and operator of real estate and real estate-related facilities, we may be liable for the costs of removal or remediation of hazardous or toxic substances present at, on, under, in or released from our properties, as well as for governmental fines and damages for injuries to persons and property. We may be liable without regard to whether we knew of, or were responsible for, the environmental contamination and with respect to properties previously owned by companies we have acquired, whether the contamination occurred before or after the acquisition. We have several properties in our portfolio that will require or are currently undergoing varying levels of environmental remediation. Although we have environmental insurance policies covering all of our properties, there is no assurance that these policies will cover any or all of the potential losses or damages from environmental contamination; therefore, any liability, fine or damage could directly impact our financial results.
Our financial covenants may restrict our operating or acquisition activities, which may harm our financial condition and operating results.
Our unsecured revolving credit facility with Wells Fargo, our senior unsecured notes payable and much of our existing mortgage indebtedness contain customary covenants and conditions, including, among others, compliance with various financial ratios and restrictions upon the incurrence of additional indebtedness and liens on our properties. Furthermore, the terms of some of this indebtedness will restrict our ability to consummate transactions that result in a change of control or to otherwise issue equity or debt securities. The existing mortgages also contain customary negative covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. If we were to breach covenants in these debt agreements, the lender could declare a default and require us to repay the debt immediately. If we fail to make such repayment in a timely manner, the lender may be entitled to take possession of any property securing the loan.
Certain of our indebtedness may currently be in default as a result of prior issuances of our common stock or prior acquisitions which may serve as a basis for our lenders to accelerate amounts due under the related mortgages or demand payments or fees.
Certain of the mortgages on our properties contain prohibitions on transfers of ownership interests in the mortgagor or its parent without the prior written consent of the lenders, which provisions may have been violated by previous transactions completed by us, including the merger with IRT. A violation could serve as a basis for the lenders to accelerate amounts due under the related mortgages, demand payments or assess fees or penalties.
The outstanding amounts under the mortgages on the affected properties covered by such restrictions on transfer totaled approximately $169 million as of December 31, 2004. In the event that the holders declare defaults under the mortgage documents, we could be required to prepay the remaining mortgages from existing resources, refinancing of such mortgages, borrowings under our other lines of credit or other sources of financing. The repayment of these mortgages could have an adverse impact on the operations and affect our ability to make distributions to stockholders.
Our Chairman and Chief Executive Officer and his affiliates own approximately41% of our common stock and exercise significant control over our company and may delay, defer or prevent us from taking actions that would be beneficial to our other stockholders.
Chaim Katzman, our Chairman and Chief Executive Officer and our largest stockholder, and his affiliates own approximately 41% of the outstanding shares of our common stock and, as a result of a stockholders' agreement with other of our stockholders, have voting power of almost 50% of our outstanding shares with respect to the election of directors. Accordingly, Mr. Katzman is able to exercise significant control over the outcome of substantially all matters required to be submitted to our stockholders for approval, including decisions relating to the election of our board of directors and the determination of our day-to-day corporate and management policies. In addition, Mr. Katzman is able to exercise significant control over the outcome of any proposed merger or consolidation of our company which, under our charter, the affirmative vote of the holders of a majority of the outstanding shares of our common stock in such instances. Mr. Katzman’s ownership interest in our company may discourage third parties from seeking to acquire control of our company which may adversely affect the market price of our common stock.
Several of our controlling stockholders have pledged their shares of our stock as collateral under bank loans, foreclosure and disposition of which could have a negative impact on our stock price.
Several of our affiliated stockholders that beneficially own a significant interest in our company, including Gazit-Globe, Ltd. and related entities, have pledged a substantial portion of our stock that they own to secure loans made to them by commercial banks.
If a stockholder defaults on any of its obligations under these pledge agreements or the related loan documents, these banks may have the right to sell the pledged shares in one or more public or private sales that could cause our stock price to decline. Many of the occurrences that could result in a foreclosure of the pledged shares are out of our control and are unrelated to our operations. Some of the occurrences that may constitute such an event of default include:
the stockholder’s failure to make a payment of principal or interest when due;
the occurrence of another default that would entitle any of the stockholder’s other creditors to accelerate payment of any debts and obligations owed to them by the stockholder;
if the bank, in its absolute discretion, deems that a change has occurred in the condition of the stockholder to which the bank has not given its prior written consent; and
if, in the opinion of the bank, the value of the pledged shares shall be reduced or is likely to be reduced (for example, the price of our common stock declines).
In addition, because so many shares are pledged to secure loans, the occurrence of an event of default could result in a sale of pledged shares that would trigger a change of control of our company, even when such a change may not be in the best interests of our stockholders.
Our organizational documents contain provisions which may discourage the takeover of our company, may make removal of our management more difficult and may depress our stock price.
Our organizational documents contain provisions that may have an anti-takeover effect and inhibit a change in our management. For instance, our charter contains ownership limits and restrictions on transferability of shares of our capital stock in order to protect our status as a REIT. These provisions prevent any one stockholder from owning, actually or constructively, more than 9.9% of the value or number of outstanding shares of our capital stock without our prior consent. In addition, our charter and bylaws contain other provisions that may have the effect of delaying, deferring or preventing a change of control or the removal of existing management and, as a result, could prevent our stockholders from receiving a premium for their shares of common stock above the prevailing market prices. These provisions include the ability to issue preferred stock, advance notice requirements for stockholder proposals, the absence of cumulative voting rights and provisions relating to the removal of incumbent directors. Finally, Maryland law also contains several statutes that restrict mergers and other business combinations with an interested stockholder or that may otherwise have the effect of preventing or delaying a change of control.
We may experience adverse consequences in the event we fail to qualify as a REIT.
Although we believe that we have operated so as to qualify as a REIT under the Internal Revenue Code since our REIT election in 1995, no assurance can be given that we have qualified or will remain qualified as a REIT. In addition, no assurance can be given that legislation, new regulations, administrative interpretations or court decisions will not significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 90% of our gross income in any year must be derived from qualifying sources and we must make distributions to stockholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. We intend to make distributions to our stockholders to comply with the distribution provisions of the Internal Revenue Code. Although we anticipate that our cash flows from operating activities will be sufficient to enable us to pay our operating expenses and meet distribution requirements, no assurance can be given in this regard.
If we were to fail to qualify as a REIT in any taxable year, we would be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate income tax rates, and we would not be allowed a deduction in computing our taxable income for amounts distributed to our stockholders. Moreover, unless entitled to relief under certain statutory provisions, we also would be ineligible for qualification as a REIT for the four taxable years following the year during which qualification was lost. Such disqualification would reduce our net earnings available for investment or distribution to our stockholders due to our additional tax liability for the years involved.
Loss of Key Personnel Could Harm Our Business.
Our ability to successfully execute our acquisition and growth strategy depends to a significant degree upon the continued contributions of Chaim Katzman, our Chairman of the Board and Chief Executive Officer, Doron Valero, our President and Chief Operating Officer, and Howard Sipzner, our Executive Vice President and Chief Financial Officer. Pursuant to our employment agreements with Mr. Katzman, he is only required to devote so much of his business time, attention, skill and efforts as shall be required for the faithful performance of his duties. Moreover, there is no guarantee that Mr. Katzman, Mr. Valero or Mr. Sipzner will remain employed with us. While we have employment agreements with these executives, we cannot guarantee that we will be able to retain their services. The loss of the services of Messrs. Katzman, Valero and Sipzner could have a material adverse effect on our results of operations.
There are numerous commercial developers, real estate companies, REITs and other owners of real estate in the areas in which our properties are located that compete with us in seeking land for development, properties for acquisition, financing and tenants. Many of such competitors have substantially greater resources than we have. All of our existing properties are located in developed areas that include other shopping centers and other retail properties. The number of retail properties in a particular area could materially adversely affect our ability to lease vacant space and maintain the rents charged at our existing properties.
We believe that the principal competitive factors in attracting tenants in our market areas are location, price, anchor tenants and maintenance of properties. We also believe that our competitive advantages include the favorable locations of our properties, our ability to provide a retailer with multiple locations with anchor tenants and the practice of continuous maintenance and renovation of our properties.
Regulation
Retail properties are subject to various laws, ordinances and regulations. We believe that each of our existing properties maintains all required material operating permits and approvals.
Americans with Disabilities Act.Our properties are subject to the Americans with Disabilities Act of 1990. Under this act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities. The act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We believe that our properties are in substantial compliance with the requirements under the American with Disabilities Act and have no reason to believe that these requirements or the enforcement of these requirements will have a materially adverse impact on our business.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, we may be liable for the cost to remove or remediate certain hazardous or toxic substances at our shopping centers. These laws often impose liability without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. The cost of required remediation and our liability for remediation could exceed the value of the property and/or our aggregate assets. The presence of such substances, or the failure to properly remediate such substances, may adversely affect our ability to sell or rent the property or borrow using the property as collateral. We have several properties that will require or are currently undergoing varying levels of environmental remediation. In some cases, contamination has migrated or is expected to migrate into the groundwater beneath our properties from adjacent properties, such as service stations. In other cases, contamination has
resulted from on-site uses by current or former owners or tenants, such as gas stations or dry cleaners, which have released pollutants such as gasoline or dry-cleaning solvents into the soil or groundwater. We believe that, based on environmental studies conducted to date, none of these environmental problems is likely to have a material adverse effect on our financial condition. However, no assurances can be given that environmental studies obtained by us reveal all environmental liabilities, that any prior owner of land or a property owned or acquired by us did not create any material environmental condition not known to us, or that a material environmental condition does not otherwise exist, or may not exist in the future.
Employees
At December 31, 2004, we had 235 full-time employees. Our employees are not represented by any collective bargaining group, and we consider our relations with our employees to be good.
Available Information
The internet address of our website iswww.equityone.net. You can obtain on our website, free of charge, a copy of our annual report on Form 10-K, our quarterly reports on Form 10-Q, our Supplemental Information Packages, our current reports on Form 8-K, and any amendments to those or other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file or furnish such reports or amendments with the SEC. Also available on our website, free of charge, are copies of our Corporate Governance Guidelines, Code of Conduct and Ethics and the charters for each of the committees of our Board of Directors - the Audit Committee, the Corporate Governance and Nominating Committee and the Compensation Committee. Any amendments or waivers to our Code of Business Conduct and Ethics will be disclosed on our website within four business days following the date of the amendment or waiver. Copies are also available free of charge by contacting our Investor Relations Department at:
Equity One, Inc.
1696 N.E. Miami Gardens Drive,
North Miami Beach, Florida 33179
Attn: Investor Relations Department
(305) 947-1664
You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549, or you may obtain information by calling the SEC at 1-800-SEC-0300. The SEC maintains an internet address athttp://www.sec.gov that contains reports, proxy statements and information statements, and other information which you may obtain free of charge.
Our portfolio consists primarily of shopping centers anchored by supermarket and other necessity-oriented retailers and at December 31, 2004 contains an aggregate of approximately 19.9 million square feet of gross leasable area or GLA. Other than our leasehold interests in our McAlpin Square shopping center located in Savannah, Georgia, Plaza Acadienne shopping center located in Eunice, Louisiana, Shelby Plaza shopping center located in Shelby, North Carolina, Park Northern shopping center located Phoenix, Arizona and El Novillo located in Miami, Florida, all of our other properties are owned in fee simple. In addition, some of our properties are subject to mortgages as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Mortgage Indebtedness.” The following table provides a brief description of our properties as of December 31, 2004:
Property | Year Acquired | GLA(Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec. 31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | |
| | | | | | | |
ALABAMA (2 properties) | | | | | | |
| | | | | | | | |
Madison Centre Madison | 2003 | 64,837 | 13 | $ 629,306 | $ 9.71 | 100.0% | Publix, Rite Aid |
| | | | | | | | |
West Gate Plaza Mobile | 2003 | 64,378 | 9 | 435,856 | 6.99 | 96.9% | Winn Dixie, Rite Aid |
| | | | | | | | |
Subtotal Alabama Properties (2 properties) | 129,215 | 22 | 1,065,162 | 8.37 | 98.5% | |
| | | | | | | | |
| | | | | | | | |
ARIZONA (2 properties) | | | | | | |
| | | | | | | | |
Big Curve Yuma | 2001 | 126,402 | 33 | 1,176,556 | 9.76 | 95.3% | Albertsons(4), Miller’s Outpost |
| | | | | | | | |
Park Northern Phoenix | 2001 | 126,852 | 25 | 804,115 | 6.62 | 95.8% | Safeway, Bealls, Chuck E Cheese, Life Skills Center |
| | | | | | | | |
Subtotal Arizona Properties (2 properties) | 253,254 | 58 | 1,980,671 | 8.18 | 95.6% | |
| | | | | | | | |
| | | | | | | | |
FLORIDA (75 properties) | | | | | | |
| | | | | | | |
North Florida (13 properties) | | | | | | |
| | | | | | | | |
Atlantic Village Atlantic Beach | 1995 | 100,559 | 26 | 987,161 | 10.24 | 95.9% | Publix, Jo-Ann Fabrics |
| | | | | | | | |
Beauclerc Village Jacksonville | 1998 | 70,429 | 11 | 475,452 | 7.76 | 86.9% | Big Lots, Goodwill, Bealls Outlet |
| | | | | | | | |
Commonwealth Jacksonville | 1994 | 81,467 | 16 | 650,196 | 8.35 | 95.6% | Winn-Dixie/Save Rite |
| | | | | | | | |
Forest Village Tallahassee | 2000 | 71,526 | 17 | 703,187 | 10.47 | 93.9% | Publix |
| | | | | | | | |
Fort Caroline Jacksonville | 1994 | 74,546 | 13 | 445,446 | 7.41 | 80.7% | Winn-Dixie |
| | | | | | | | |
Mandarin Landing Jacksonville | 1999 | 141,565 | 37 | 1,288,783 | 9.94 | 91.6% | Publix, Office Depot |
| | | | | | | | |
Medical & Merchants Jacksonville | 2004 | 152,761 | 19 | 1,737,704 | 11.84 | 96.1% | Publix, Memorial Health Group, Blockbuster |
| | | | | | | | |
Middle Beach Jacksonville | 2003 | 69,277 | 9 | 656,338 | 9.47 | 100.0% | Publix, Movie Gallery |
| | | | | | | | |
Monument Point Jacksonville | 1997 | 75,128 | 12 | 504,318 | 6.71 | 100.0% | Winn-Dixie, CVS Pharmacy |
| | | | | | | | |
Oak Hill Jacksonville | 1995 | 78,492 | 19 | 550,003 | 7.01 | 100.0% | Publix, Walgreens* |
| | | | | | | | |
Parkmore Plaza Milton | 2003 | 159,067 | 13 | 696,530 | 4.47 | 97.9% | Wal-Mart* (Bealls), Big Lots |
| | | | | | | | |
Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec. 31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Pensacola Plaza Pensacola | 1986 | 56,098 | 3 | $ 218,988 | $ 4.27 | 91.4% | FoodWorld |
| | | | | | | | |
South Beach Regional Jacksonville Beach | 2003 | 289,964 | 51 | 2,506,393 | 9.24 | 93.6% | Food Lion, Home Depot, Stein Mart, Bealls |
| | | | | | | | |
Central Florida (10 properties) | | | | | |
| | | | | | | | |
Alafaya Commons Orlando | 2003 | 123,133 | 29 | 1,430,680 | 11.82 | 98.3% | Publix, Blockbuster |
| | | | | | | | |
Conway Crossing Orlando | 2003 | 76,321 | 18 | 891,873 | 11.69 | 100.0% | Publix |
| | | | | | | | |
Shoppes of Eastwood Orlando | 2002 | 69,037 | 13 | 783,337 | 11.35 | 100.0% | Publix |
| | | | | | | | |
Hunters Creek Orlando | 2003 | 68,032 | 9 | 738,780 | 10.86 | 100.0% | Winn-Dixie |
| | | | | | | | |
Kirkman Shoppes Orlando | 2001 | 88,820 | 30 | 1,407,447 | 16.08 | 98.6% | CVS Pharmacy |
| | | | | | | | |
Lake Mary Orlando | 1988 | 342,384 | 87 | 3,700,511 | 11.18 | 96.6% | Albertsons, Kmart, Lifestyle Fitness, Sun Star Theatres |
| | | | | | | | |
Park Promenade Orlando | 1999 | 125,818 | 26 | 1,097,491 | 8.91 | 97.9% | Publix, Orange County Library, Blockbuster, Goodwill |
| | | | | | | | |
Town & Country Kissimmee | 2003 | 72,043 | 13 | 457,800 | 6.61 | 96.1% | Albertsons |
| | | | | | | | |
Unigold Winter Park | 2003 | 117,527 | 25 | 1,254,663 | 10.68 | 100.0% | Winn-Dixie, Blockbuster |
| | | | | | | | |
Walden Woods Park City | 2003 | 75,874 | 13 | 521,490 | 6.87 | 100.0% | Walgreens, Dollar Tree, Aaron Rents, Dollar General |
| | | | | | | | |
Florida West Coast (18 properties) | | | | | | |
| | | | | | | | |
Bay Pointe Plaza St. Petersburg | 2003 | 103,986 | 24 | 870,351 | 9.35 | 89.5% | Publix, CVS Pharmacy* (Bealls Outlet), West Marine |
| | | | | | | | |
Carrollwood Tampa | 2003 | 94,203 | 36 | 929,272 | 11.23 | 87.8% | Publix, CVS Pharmacy |
| | | | | | | | |
Charlotte Square Port Charlotte | 2003 | 96,188 | 27 | 701,764 | 7.78 | 93.8% | Publix, Pet Supermarket |
| | | | | | | | |
Chelsea Place New Port Richey | 2003 | 81,144 | 18 | 900,926 | 11.10 | 100.0% | Publix, CVS Pharmacy |
| | | | | | | | |
Property |
Year Acquired |
GLA (Sq. Ft.) | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec. 31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Lake St. Charles Tampa | 2001 | 57,015 | 8 | $ 561,145 | $ 9.84 | 100.0% | Kash N’ Karry |
| | | | | | | | |
Lutz Lake Lutz | 2003 | 64,985 | 15 | 896,840 | 13.80 | 100.0% | Publix |
| | | | | | | | |
Marco Town Center Marco Island | 2001 | 109,830 | 45 | 1,765,744 | 16.68 | 96.4% | Publix, West Marine |
| | | | | | | | |
Mariners Crossing Spring Hill | 2001 | 85,507 | 16 | 678,688 | 8.26 | 96.1% | Kash N’ Karry |
| | | | | | | | |
North River Village** Ellenton | 2003 | 177,128 | 16 | 1,292,196 | 7.30 | 100.0% | Publix, Kmart, Walgreens*, (Dollar Tree), Bealls Outlet |
| | | | | | | | |
Pavillion Naples | 2004 | 167,745 | 42 | 2,134,358 | 13.96 | 91.2% | Publix, Pavillion 6 Theatre, Anthony’s |
| | | | | | | | |
Regency Crossing Port Richey | 2003 | 85,864 | 25 | 787,753 | 10.52 | 87.2% | Publix |
| | | | | | | | |
Ross Plaza Tampa | 2001 | 85,359 | 20 | 859,609 | 10.38 | 97.0% | Ross Dress for Less |
| | | | | | | | |
Seven Hills Spring Hill | 2003 | 64,590 | 12 | 632,082 | 9.79 | 100.0% | Publix |
| | | | | | | | |
Shoppes of North Port North Port | 2000 | 84,705 | 22 | 839,070 | 9.91 | 100.0% | Publix, Bealls Outlet |
| | | | | | | | |
Skipper Palms Tampa | 2001 | 88,000 | 17 | 699,349 | 8.55 | 92.2% | Winn-Dixie |
| | | | | | | | |
Summerlin Square Fort Myers | 1998 | 109,156 | 28 | 982,784 | 9.97 | 90.3% | Winn-Dixie, CVS Pharmacy, West Marine |
| | | | | | | | |
Venice Plaza Venice | 2003 | 157,940 | 16 | 689,870 | 5.50 | 79.4% | Kash N Karry, TJ Maxx, Blockbuster |
| | | | | | | | |
Venice Shopping Center Venice | 2004 | 111,934 | 15 | 517,961 | 5.06 | 91.4% | Publix, Beall’s Outlet, Dollar Tree, Wachovia Bank |
| | | | | | | | |
Florida Treasure Coast (8 properties) | | | | | |
| | | | | | | |
Bluff Square Jupiter | 2001 | 132,395 | 48 | 1,569,698 | 12.08 | 98.2% | Publix, Walgreens |
| | | | | | | | |
| Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Cashmere Corners Port St. Lucie | 2001 | 89,234 | 18 | $ 724,851 | $ 8.12 | 100.0% | Albertsons |
| | | | | | | | |
Jonathan’s Landing Jupiter | 2001 | 26,820 | 12 | 499,995 | 18.64 | 100.0% | Albertsons(4), Blockbuster |
| | | | | | | | |
New Smyrna Beach Regional New Smyrna Beach | 2003 | 118,451 | 34 | 1,160,260 | 10.09 | 97.1% | Publix, Walgreens* (Bealls Outlet), Bealls Home Outlet |
| | | | | | | | |
Old King Commons Palm Coast | 2003 | 84,759 | 19 | 680,832 | 8.03 | 100.0% | Wal-Mart*(Beall’s Outlet) |
| | | | | | | | |
Ryanwood Vero Beach | 2001 | 114,925 | 32 | 1,111,934 | 9.75 | 99.2% | Publix, Bealls Outlet, Books-A-Million |
| | | | | | | | |
Salerno Village Stuart | 2002 | 79,903 | 21 | 750,145 | 10.30 | 91.2% | Winn Dixie, CVS Pharmacy |
| | | | | | | | |
Treasure Coast Vero Beach | 2003 | 133,781 | 25 | 1,096,018 | 8.67 | 94.5% | Winn Dixie, TJ Maxx |
| | | | | | | | |
South Florida/Atlantic Coast (26 properties) | | | | |
| | | | | | | | |
Bird Ludlum Miami | 1994 | 192,282 | 46 | 2,811,355 | 15.12 | 96.7% | Winn-Dixie, CVS Pharmacy, Blockbuster, Goodwill |
| | | | | | | | |
Boca Village Boca Raton | 2001 | 93,428 | 22 | 1,443,814 | 15.45 | 100.0% | Publix, CVS Pharmacy |
| | | | | | | | |
Boynton Plaza Boynton Beach | 2001 | 99,324 | 29 | 1,097,800 | 11.05 | 100.0% | Publix, CVS Pharmacy, Hollywood Video |
| | | | | | | | |
Countryside Shops Cooper City | 2003 | 179,561 | 46 | 2,286,979 | 12.74 | 100.0% | Publix, CVS Pharmacy, Stein Mart |
| | | | | | | | |
Crossroads Square Pembroke Pines | 2001 | 270,206 | 27 | 2,049,051 | 7.76 | 97.7% | Lowe’s, CVS Pharmacy, Goodyear |
| | | | | | | | |
El Novillo Miami Beach | 2001 | 10,000 | 1 | 154,891 | 15.49 | 100.0% | Jumbo Buffet |
| | | | | | | | |
Greenwood Palm Springs | 2003 | 132,325 | 36 | 1,457,795 | 12.01 | 91.7% | Publix, Bealls, World Savings Bank |
| | | | | | | | |
Lago Mar Miami | 2003 | 82,613 | 21 | 983,986 | 12.24 | 97.3% | Publix, Blockbuster |
| | | | | | | | |
Lantana Village Lantana | 1998 | 181,780 | 27 | 1,212,107 | 6.90 | 96.7% | Winn-Dixie, Kmart, Rite Aid* (Dollar Store), Hollywood Video |
| | | | | | | | |
Meadows Miami | 2002 | 75,524 | 20 | 933,600 | 12.36 | 100.0% | Publix |
| | | | | | | | |
Oakbrook Square Palm Beach Gardens, FL | 2004 | 212,074 | 30 | 2,561,097 | 13.39 | 90.2% | Publix, CVS Pharmacy, Homegoods, Stein Mart |
| | | | | | | | |
Pine Island Davie | 1999 | 254,907 | 47 | 2,565,392 | 10.06 | 100.0% | Publix, Home Depot Expo, Bealls Outlet |
| | | | | | | | |
| Property |
Year Acquired | GLA (Sq. Ft.) | Number of Tenants (1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Pine Ridge Square Coral Springs | 2003 | 117,399 | 35 | $ 1,551,653 | $ 13.42 | 98.5% | Fresh Market, Bed Bath & Beyond, Off Main Furniture, Blockbuster |
| | | | | | | | |
Plaza Alegre Miami | 2003 | 91,611 | 21 | 1,289,833 | 14.66 | 96.1% | Publix, Goodwill, Blockbuster |
| | | | | | | | |
Point Royale Miami | 1995 | 209,863 | 25 | 1,303,036 | 6.58 | 94.3% | Winn-Dixie, Best Buy, CVS Pharmacy* (Anna’s Linens) |
| | | | | | | | |
Prosperity Center Palm Beach Gardens | 2001 | 122,106 | 9 | 1,899,706 | 15.56 | 100.0% | Office Depot, Barnes & Noble, Bed Bath & Beyond, Carmine’s, TJ Maxx |
| | | | | | | | |
Ridge Plaza Davie | 1999 | 155,204 | 29 | 1,436,526 | 9.38 | 98.7% | AMC Theatre, Kabooms, Wachovia* (United Collection), Uncle Funny’s, Round Up |
| | | | | | | | |
Riverside Square Coral Springs | 2003 | 107,941 | 36 | 1,430,126 | 13.64 | 97.1% | Publix, Tuesday Morning |
| | | | | | | | |
Sawgrass Promenade Deerfield Beach | 2001 | 107,092 | 29 | 1,056,918 | 10.83 | 91.1% | Publix, Walgreens, Blockbuster |
| | | | | | | | |
Sheridan Plaza Hollywood | 2003 | 455,843 | 66 | 5,538,914 | 14.02 | 86.7% | Publix, Ross Dress For Less, Bed Bath & Beyond, Office Depot, AMC Theater, CVS Pharmacy, Blockbuster |
| | | | | | | | |
Shoppes of Ibis West Palm Beach | 2002 | 79,420 | 18 | 1,009,077 | 12.71 | 100.0% | Publix |
| | | | | | | | |
Shoppes of Silverlakes Pembroke Pines | 2003 | 126,788 | 40 | 2,088,700 | 16.63 | 99.1% | Publix, Blockbuster |
| | | | | | | | |
Shops at Skylake North Miami Beach | 1997 | 219,199 | 47 | 3,436,021 | 15.75 | 99.5% | Publix, Goodwill, LA Fitness, Blockbuster |
| | | | | | | | |
Tamarac Town Square Tamarac | 2003 | 127,635 | 39 | 1,190,819 | 10.69 | 87.3% | Publix |
| | | | | | | | |
West Lakes Plaza Miami | 1996 | 100,747 | 27 | 1,115,111 | 11.07 | 100.0% | Winn-Dixie, Navarro Pharmacy |
| | | | | | | | |
Westport Plaza Davie | 2004 | 36,212 | 5 | 606,257 | 16.74 | 100.0% | Publix, Blockbuster |
| | | | | | | |
Subtotal Florida Properties (75 properties) | 9,026,499 | 1,898 | 92,548,627 | 10.75 | 95.5% | |
| | | | | | | | |
| | | | | | | | |
GEORGIA (23 properties) | | | | | | |
| | | | | | | | |
Atlanta Area (18 properties) | | | | | | |
| | | | | | | | |
BridgeMill Canton | 2004 | 89,102 | 30 | 1,236,146 | 14.91 | 93.0% | Publix |
| | | | | | | | |
| Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Butler Creek Acworth | 2003 | 95,597 | 19 | $ 997,302 | $ 10.76 | 97.0% | Kroger |
| | | | | | | | |
Chastain Square Atlanta | 2003 | 91,637 | 28 | 1,435,174 | 16.23 | 96.5% | Publix |
| | | | | | | | |
Commerce Crossing Commerce | 2003 | 100,668 | 10 | 391,633 | 4.09 | 95.0% | Ingles, Wal-Mart* |
| | | | | | | | |
Douglas Commons Douglasville | 2003 | 97,027 | 18 | 952,040 | 9.96 | 98.6% | Kroger |
| | | | | | | | |
Fairview Oaks Ellenwood | 2003 | 77,052 | 13 | 868,611 | 11.27 | 100.0% | Kroger, Blockbuster |
| | | | | | | | |
Grassland Crossing Alpharetta | 2003 | 90,906 | 14 | 977,523 | 11.53 | 93.3% | Kroger |
| | | | | | | | |
Hamilton Ridge Buford | 2003 | 89,496 | 21 | 1,114,761 | 12.92 | 96.4% | Kroger |
| | | | | | | | |
Mableton Crossing Mableton | 2003 | 86,819 | 16 | 848,278 | 10.23 | 95.5% | Kroger |
| | | | | | | | |
MaclandPointe Marietta | 2003 | 79,699 | 17 | 777,743 | 9.76 | 100.0% | Publix |
| | | | | | | | |
Market Place Norcross | 2003 | 77,706 | 23 | 704,642 | 9.45 | 96.0% | Peachtree Cinema |
| | | | | | | | |
Paulding Commons Dallas | 2003 | 192,391 | 31 | 1,527,759 | 8.08 | 98.3% | Kroger, Kmart |
| | | | | | | | |
Powers Ferry Plaza Marietta | 2003 | 86,473 | 25 | 805,528 | 10.66 | 87.4% | Micro Center |
| | | | | | | | |
Presidential Markets Snellville | 2003 | 396,408 | 35 | 3,906,192 | 9.95 | 99.0% | Publix, Bed Bath & Beyond, GAP, TJ Maxx, Shoe Carnival, Borders, Ross Dress for Less, Marshalls, Carmike Cinema, Office Depot |
| | | | | | | | |
Shops of Huntcrest Lawrenceville | 2003 | 97,040 | 26 | 1,281,768 | 13.42 | 98.5% | Publix |
| | | | | | | | |
Wesley Chapel Crossing Decatur | 2003 | 170,792 | 25 | 1,082,828 | 6.55 | 96.8% | Ingels, Wal-Mart*, CVS Pharmacy |
| | | | | | | | |
West Towne Square Rome | 2003 | 89,596 | 18 | 458,085 | 5.77 | 88.6% | Big Lots, Eckerd* |
| | | | | | | | |
Williamsburg @ Dunwoody Dunwoody | 2003 | 44,928 | 27 | 788,899 | 17.56 | 100.0% | |
| | | | | | | | |
Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Central Georgia (3 Properties) | | | | | | |
| | | | | | | | |
Daniel Village Augusta | 2003 | 171,932 | 39 | $1,303,273 | $ 7.90 | 95.9% | Bi-Lo, Eckerd*, St. Joseph Home Health Care |
| | | | | | | | |
Spalding Village Griffin | 2003 | 235,318 | 28 | 1,095,659 | 7.72 | 60.3% | Kroger, JC Penney, Blockbuster |
| | | | | | | | |
Walton Plaza Augusta | 2003 | 43,460 | 8 | 414,611 | 9.54 | 100.0% | Harris Teeter* (Omni Fitness) |
| | | | | | | | |
South Georgia (2 properties) | | | | | | |
| | | | | | | | |
Colony Square Fitzgerald | 2003 | 50,000 | 8 | 270,460 | 6.47 | 83.6% | Food Lion |
| | | | | | | | |
McAlpin Square Savannah | 2003 | 176,807 | 27 | 1,215,528 | 7.39 | 93.0% | Kroger, US Post Office, Big Lots, In Fashion Menswear Outlet |
| | | | | | | | |
Subtotal Georgia Properties (23 properties) | 2,730,854 | 506 | 24,454,443 | 9.63 | 93.0% | |
| | | | | | | | |
KENTUCKY (1 property) | | | | | | |
| | | | | | | | |
Scottsville Square Bowling Green | 2003 | 38,450 | 12 | 106,563 | 6.66 | 41.6% | Hancock Fabrics, Zap Zone |
| | | | | | | | |
Subtotal Kentucky Properties (1 property) | 38,450 | 12 | 106,563 | 6.66 | 41.6% | |
| | | | | | | | |
LOUISIANA (14 properties) | | | | | | |
| | | | | | | | |
Ambassador Row Lafayette | 2003 | 193,978 | 25 | 1,488,958 | 7.99 | 96.1% | Hobby Lobby*, Conn’s Appliances, Big Lots, Chuck E. Cheese |
| | | | | | | | |
Ambassador Row Courtyard Lafayette, LA | 2003 | 146,697 | 24 | 1,280,700 | 9.33 | 93.5% | Marshalls, Bed Bath & Beyond, Hancock Fabrics, Tuesday Morning |
| | | | | | | | |
Bluebonnet Village Baton Rouge | 2003 | 90,215 | 20 | 719,656 | 8.10 | 98.4% | Matherne’s |
| | | | | | | | |
The Boulevard Lafayette | 2003 | 68,012 | 15 | 474,894 | 7.21 | 96.8% | Piccadilly, Harbor Freight Tools |
| | | | | | | | |
Country Club Plaza Slidell | 2003 | 64,686 | 11 | 358,364 | 5.86 | 94.6% | Winn-Dixie, Dollar General |
| | | | | | | | |
The Crossing Slidell | 2003 | 113,989 | 15 | 626,634 | 5.65 | 97.4% | Save A Center, A-1 Home Appliance, Piccadilly |
| | | | | | | | |
Elmwood Oaks Hanahan | 2003 | 133,995 | 9 | 1,241,383 | 9.97 | 92.9% | Wal-Mart* (Academy Sports, Dollar Tree), Advance Auto* (Goodwill) |
| | | | | | | | |
Grand Marche (ground lease) Lafayette | 2003 | 200,585 | 1 | 27,500 | 0.14 | 100.0% | Academy Sports, JoAnn Fabrics |
| | | | | | | | |
Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Plaza Acadienne Eunice | 2003 | 105,419 | 8 | $ 356,565 | $ 3.52 | 96.2% | Super 1 Store, Fred’s, Howard Brothers* |
| | | | | | | | |
Sherwood South Baton Rouge | 2003 | 77,107 | 10 | 463,239 | 6.15 | 97.7% | Piggly Wiggly*, Burke’s Outlet, Harbor Freight Tools, Blockbuster |
| | | | | | | | |
Siegen Village Baton Rouge | 2003 | 170,416 | 20 | 1,435,854 | 8.43 | 100.0% | Office Depot, Big Lots, Dollar Tree, Stage, Party City |
| | | | | | | | |
Tarpon Heights Galliano | 2003 | 56,605 | 10 | 247,551 | 4.75 | 92.0% | CVS Pharmacy, Stage, Dollar General |
| | | | | | | | |
Village at Northshore Slidell | 2003 | 144,638 | 13 | 1,231,110 | 8.50 | 100.0% | Marshalls, Dollar Tree, Kirschman’s, Bed Bath & Beyond, Office Depot |
| | | | | | | | |
Wal-Mart Mathews | 2003 | 54,223 | 1 | 157,500 | 2.90 | 100.0% | Wal-Mart |
| | | | | | | | |
Subtotal Louisiana Properties (14 properties) | 1,620,565 | 182 | 10,108,908 | 6.42 | 97.1% | |
| | | | | | | | |
MASSACHUSETTS (6 properties) | | | | | | |
| | | | | | | | |
Cambridge Star Market Cambridge | 2004 | 66,108 | 1 | 1,580,298 | 23.90 | 100.0% | Star Market |
| | | | | | | | |
Medford Shaw’s Supermarket Medford | 2004 | 60,356 | 1 | 1,289,593 | 21.37 | 100.0% | Shaw’s |
| | | | | | | | |
Plymouth Shaw’s Supermarket Plymouth | 2004 | 59,726 | 1 | 943,312 | 15.79 | 100.0% | Shaw’s |
| | | | | | | | |
Quincy Star Market Quincy | 2004 | 100,741 | 1 | 1,554,592 | 15.43 | 100.0% | Star Market |
| | | | | | | | |
Swampscott Swampscott | 2004 | 35,907 | 1 | 754,047 | 21.00 | 100.0% | Whole Foods |
| | | | | | | | |
West Roxbury Shaw’s Plaza West Roxbury | 2004 | 68,141 | 7 | 1,403,232 | 21.06 | 97.8% | Shaw’s |
| | | | | | | | |
| | | | | | | | |
Subtotal Massachusetts Properties (6 properties) | 390,979 | 12 | 7,525,074 | 19.32 | 99.6% | |
| | | | | | | | |
MISSISSIPPI (1 property) | | | | | | |
| | | | | | | | |
Shipyard Plaza Pascagoula | 2003 | 66,857 | 7 | 385,404 | 5.76 | 100.0% | Rite Aid, Big Lots |
| | | | | | | | |
Subtotal Mississippi Properties (1 property) | 66,857 | 7 | 385,404 | 5.76 | 100.0% | |
| | | | | | | | |
| Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
NORTH CAROLINA (12 properties) | | | | | | |
| | | | | | | | |
Centre Pointe Plaza Asheville | 2003 | 163,642 | 23 | $ 839,263 | $ 5.36 | 95.7% | Wal-Mart*, (Belk’s, Goody’s), Dollar Tree |
| | | | | | | | |
Chestnut Square Brevard | 2003 | 39,640 | 7 | 212,120 | 6.38 | 83.9% | Food Lion*, Eckerd*, (Dollar General) |
| | | | | | | | |
Galleria Wrightsville Beach | 2003 | 92,114 | 38 | 839,275 | 9.57 | 95.2% | Harris Teeter, Eckerd |
| | | | | | | | |
Parkwest Crossing Durham | 2003 | 85,602 | 17 | 877,228 | 10.25 | 100.0% | Food Lion |
| | | | | | | | |
Plaza North Hendersonville | 2003 | 47,240 | 9 | 326,263 | 7.09 | 97.5% | Bi-Lo*, CVS Pharmacy |
| | | | | | | | |
Providence Square Charlotte | 2003 | 85,930 | 25 | 605,954 | 8.22 | 85.8% | Harris Teeter*, Eckerd |
| | | | | | | | |
Riverview Shopping Center Durham | 2003 | 127,498 | 12 | 860,544 | 7.36 | 91.8% | Kroger, Upchurch Drugs, Blockbuster |
| | | | | | | | |
Salisbury Marketplace Salisbury | 2003 | 79,732 | 20 | 746,684 | 9.97 | 93.9% | Food Lion |
| | | | | | | | |
Shelby Plaza Shelby | 2003 | 103,200 | 8 | 324,589 | 3.15 | 100.0% | Big Lots, Aaron Rents*, (Hancock Fabrics) |
| | | | | | | | |
Stanley Market Place Stanley | 2003 | 40,400 | 3 | 221,082 | 5.47 | 100.0% | Winn-Dixie, Family Dollar |
| | | | | | | | |
Thomasville Commons Thomasville | 2003 | 148,754 | 13 | 890,838 | 5.99 | 100.0% | Ingles, Kmart, CVS Pharmacy |
| | | | | | | | |
Willowdale Shopping Center Durham | 2003 | 121,376 | 28 | 1,323,098 | 11.49 | 94.9% | Harris Teeter, Carmike Cinemas, Eckerd* (Family Dollar) |
| | | | | | | | |
Subtotal North Carolina Properties (12 properties) | 1,135,128 | 203 | 8,066,938 | 7.45 | 95.3% | |
| | | | | | | | |
| | | | | | | | |
SOUTH CAROLINA (8 properties) | | | | | | |
| | | | | | | | |
Belfair Towne Village Bluffton | 2003 | 125,389 | 29 | 1,757,746 | 14.02 | 100.0% | Kroger, Blockbuster |
| | | | | | | | |
Lancaster Plaza Lancaster | 2003 | 77,400 | 4 | 102,000 | 1.44 | 91.5% | Bi-Lo |
| | | | | | | | |
Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Lancaster Shopping Center Lancaster | 2003 | 29,047 | 2 | $ 30,012 | $ 6.00 | 17.2% | |
| | | | | | | | |
North Village Center Durham | 2003 | 60,356 | 14 | 483,327 | 8.28 | 96.8% | Bi-Lo, Dollar General, Gold’s Gym |
| | | | | | | | |
Sparkleberry Columbia | 2004 | 339,051 | 25 | 3,722,411 | 11.16 | 98.4% | Kroger, Kohl’s, Ross Dress for Less, Circuit City, Bed Bath & Beyond |
| | | | | | | | |
Spring Valley Columbia | 2003 | 75,415 | 17 | 655,011 | 9.07 | 95.8% | Bi-Lo, Eckerd |
| | | | | | | | |
Windy Hill North Myrtle Beach | 2004 | 64,465 | 2 | 354,199 | 5.49 | 100.0% | Rose’s Store, Family Dollar Store |
| | | | | | | | |
Woodruff Greenville | 2003 | 68,055 | 10 | 673,760 | 10.03 | 98.7% | Publix, Blockbuster |
| | | | | | | | |
Subtotal South Carolina Properties (8 properties) | 839,178 | 103 | 7,778,466 | 9.76 | 95.0% | |
| | | | | | | | |
| | | | | | | | |
TENNESSEE (1 property) | | | | | | |
| | | | | | | | |
Smyrna Village Smyrna | 2003 | 83,334 | 12 | 636,713 | 8.20 | 93.1% | Kroger |
| | | | | | | | |
Subtotal Tennessee properties (1 property) | 83,334 | 12 | 636,713 | 8.20 | 93.1% | |
| | | | | | | | |
| | | | | | | | |
TEXAS (32 properties) | | | | | | |
| | | | | | | | |
Houston (17 properties) | | | | | | |
| | | | | | | | |
Barker Cypress Houston | 2001 | 66,945 | 17 | 797,079 | 12.56 | 94.8% | H.E.B. |
| | | | | | | | |
Beechcrest Houston | 2001 | 90,647 | 15 | 800,223 | 8.83 | 100.0% | Randall’s* (Viet Ho), Walgreens* |
| | | | | | | | |
Benchmark Crossing Houston | 2001 | 58,384 | 5 | 731,694 | 12.53 | 100.0% | Bally’s Fitness |
| | | | | | | | |
Bissonnet Houston | 2001 | 15,542 | 8 | 187,047 | 16.35 | 73.6% | Kroger (4),Blockbuster |
| | | | | | | | |
Colony Plaza Sugarland | 2001 | 26,513 | 15 | 493,241 | 18.60 | 100.0% | (Velocity Sports) |
| | | | | | | | |
Copperfield Houston | 2004 | 133,984 | 33 | 1,553,208 | 12.15 | 95.4% | JoAnn Fabrics, Dollar Tree, 24 Hour Fitness |
| | | | | | | | |
Forestwood Houston | 2002 | 88,760 | 16 | 1,003,291 | 11.30 | 100.0% | Kroger, Blockbuster |
| | | | | | | | |
| Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Grogan’s Mill The Woodlands | 2001 | 118,493 | 26 | $1,405,611 | $ 12.18 | 97.4% | Randall’s* (99¢ Store), Petco, Blockbuster |
| | | | | | | | |
Hedwig Houston | 2001 | 69,504 | 13 | 822,266 | 15.01 | 78.8% | Ross Dress For Less |
| | | | | | | | |
Highland Square Sugarland | 2001 | 64,171 | 28 | 1,031,374 | 17.12 | 93.9% | |
| | | | | | | | |
Market at First Colony Houston | 2001 | 107,301 | 35 | 1,704,860 | 16.19 | 98.1% | Kroger, TJ Maxx, CVS Pharmacy |
| | | | | | | | |
Mason Park Katy | 2001 | 160,047 | 39 | 1,436,050 | 12.19 | 73.6% | Kroger, Walgreens* (Eloise Collectibles), Palais Royal, Petco |
| | | | | | | | |
Mission Bend Houston | 2001 | 131,575 | 27 | 1,060,605 | 8.83 | 91.3% | Randall’s, Remarkable Furniture |
| | | | | | | | |
Spring ShadowsHouston | 2001 | 106,995 | 18 | 990,549 | 9.64 | 96.1% | H.E.B. |
| | | | | | | | |
Steeplechase Jersey Village | 2001 | 105,152 | 25 | 1,143,051 | 11.22 | 96.9% | Randall’s |
| | | | | | | | |
Wal-Mart Stores, Inc. Marble Falls | 2003 | 53,571 | 1 | 175,350 | 3.27 | 100.0% | Wal-Mart* (Sutherland Lumber) |
| | | | | | | | |
Westgate Houston | 2004 | 298,354 | 25 | 3,504,429 | 11.75 | 100.0% | H.E.B., Kohl’s, Oshman’s Sporting Goods, Office Max, Pier One Imports |
| | | | | | | | |
Dallas (12 properties) | | | | | | |
| | | | | | | | |
Creekside Arlington | 2004 | 101,016 | 17 | 1,126,724 | 12.04 | 100.0% | Kroger, Hollywood Video |
| | | | | | | | |
DeSoto Shopping Center Desoto | 2004 | 69,090 | 5 | 658,180 | 9.53 | 100.0% | Tom Thumb, Blockbuster |
| | | | | | | | |
Green Oaks Arlington | 2001 | 65,091 | 34 | 584,268 | 10.99 | 81.7% | Kroger |
| | | | | | | | |
Melbourne Plaza(5) Hurst | 2001 | 47,517 | 18 | 487,676 | 11.51 | 89.2% | |
| | | | | | | | |
Minyard’s Garland | 2001 | 65,295 | 2 | 399,648 | 6.12 | 100.0% | Minyards/Sack N Save |
| | | | | | | | |
Parkwood Plano | 2001 | 81,590 | 20 | 1,049,134 | 13.22 | 97.2% | Albertsons, Planet Pizza |
| | | | | | | | |
Richwood Richardson | 2001 | 54,871 | 27 | 685,926 | 12.53 | 99.8% | Albertsons(4) , Blockbuster |
| | | | | | | | |
Rosemeade Park Carrolton | 2001 | 51,231 | 18 | 299,512 | 13.07 | 44.7% | Blockbuster |
| | | | | | | | |
Southlake Village Southlake | 2004 | 118,092 | 22 | 1,426,340 | 12.74 | 94.8% | Kroger |
| | | | | | | | |
| Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Sterling Plaza Irving | 2001 | 65,765 | 16 | $ 906,281 | $ 14.25 | 96.7% | Bank One, Irving City Library, 99 Cent Only Store |
| | | | | | | | |
Townsend Desoto | 2001 | 146,953 | 38 | 1,073,088 | 8.81 | 82.9% | Albertsons(4), Bealls, Victory Gym, Dollar General |
| | | | | | | | |
Village by the Park Arlington | 2001 | 44,523 | 10 | 624,492 | 16.25 | 86.3% | Petco, Movie Trading |
| | | | | | | | |
San Antonio (3 properties) | | | | | | |
| | | | | | | | |
Bandera Festival San Antonio, TX | 2001 | 195,438 | 38 | 1,453,567 | 8.12 | 91.5% | Bealls, Big Lots, Burke’s Outlet, Dollar Tree, FWL Furniture |
| | | | | | | | |
Blanco Village San Antonio | 2002 | 108,325 | 16 | 1,704,543 | 15.74 | 100.0% | H.E.B. |
| | | | | | | | |
Wurzbach San Antonio | 2001 | 59,771 | 3 | 181,617 | 3.04 | 100.0% | Albertsons* |
| | | | | | | |
Subtotal Texas Properties (32 properties) | 2,970,506 | 630 | 31,590,924 | 11.41 | 93.2% | |
| | | | | | | | |
| | | | | | | | |
VIRGINIA (2 properties) | | | | | | |
| | | | | | | | |
Smyth Valley Crossing Marion | 2003 | 126,841 | 14 | 747,810 | 5.90 | 100.0% | Ingles, Wal-Mart |
| | | | | | | | |
Waterlick Plaza Lynchburg | 2003 | 98,694 | 24 | 746,405 | 7.96 | 95.1% | Kroger, CVS Pharmacy, Dollar Tree |
| | | | | | | | |
Subtotal Virginia Properties (2 properties) | 225,535 | 38 | 1,494,215 | 6.77 | 97.8% | |
| | | | | | | | |
Total/Weighted Average Core Shopping Center Portfolio (179 properties) | 19,510,354 | 3,683 | 187,742,108 | 10.14 | 94.9% | |
| |
| | | | | | | |
DEVELOPMENTS AND REDEVELOPMENTS (6) | | | | | | |
| | | | | | | | |
CVS Plaza(5) Miami, FL | 2004 | 29,204 | 9 | 344,280 | 16.08 | 73.3% | CVS Pharmacy |
| | | | | | | | |
Eustis Square Eustis, FL | 1993 | 126,791 | 27 | 563,736 | 5.73 | 77.6% | Save-a-Lot, Accent Marketing Services, Fred’s |
| | | | | | | | |
Homestead Gas Station Homestead, FL | 2004 | 2,136 | 1 | 41,352 | 19.36 | 100.0% | |
| | | | | | | | |
Shops atSt. Lucie(6) Port St. Lucie, FL | Develop-ment | 4.0 acres | — | N/A | N/A | — | |
| | | | | | | | |
Waterstone(7) Homestead, FL | Develop-ment | 12.0 acres | — | N/A | N/A | — | |
| | | | | | | | |
| Property | Year Acquired | GLA (Sq. Ft.) at Dec. 31, 2004 | Number of Tenants(1) | Annualized Minimum Rent as of December 31, 2004(2) | Average Minimum Rent Per Leased Sq. Ft. at Dec. 31, 2004 | Percent Leased at Dec.31, 2004 | Anchor Stores and Certain Tenants(3) |
| | | | | | | | |
Westridge McDonough, GA | 2005 Dev. | 13.5 acres | — | N/A | — | — | |
| | | | | | | | |
Total Developments & Redevelopments (6) | 158,131 | 37 | 949,368 | 7.79 | 77.1% | |
| | | | | | | | |
Total Retail Properties (185 properties) | 19,668,485 | 3,720 | 188,691,476 | $10.12 | 94.8% | |
| | | | | | | |
| | | | | | | |
Other Properties (3) | | | | | | |
| | | | | | | | |
4101 South I-85 Industrial Charlotte, NC | 2003 | 188,513 | 9 | 413,743 | — | 81.7% | |
| | | | | | | | |
Pinhook Office Building Layayette, LA | 2003 | 4,406 | 2 | 19,648 | — | 49.5% | |
| | | | | | | | |
Mandarin Mini storage(9) Jacksonville, FL | 1994 | 52,880 | 534 | N/A | — | 97.0% | |
| | | | | | | | |
Grand Total(188 properties) | 19,914,284 | 4,265 | $189,124,857 | — | 94.6% | |
| | | | | | | | |
| (1) | Number of tenants includes both occupied and vacant units. |
| (2) | Calculated by annualizing the tenant’s monthly base rent payment at December 31, 2004, excluding expense reimbursements, percentage rent payments and other charges. |
| (3) | Includes supermarket tenants and certain other tenants, as well as, occupants that are on an adjacent or contiguous, separately owned parcel and do not pay any rent or expense recoveries. |
| (4) | This tenant is on adjacent or contiguous, separately owned parcel. |
| (5) | We are completing the lease up of the local space. |
| (6) | This development property located in Port St. Lucie, Florida is a 4.0 acre site located adjacent to our Cashmere retail center. |
| (7) | This development property is a 12.0 acre site located 25 miles south of Miami, Florida. We are developing a supermarket-anchored shopping center which we expect to complete in 2005. |
| (8) | This development property is a 13.5 acre site located in Georgia and we expect to develop a supermarket-anchored center in 2006. |
| (9) | There are 534 storage spaces available at this property. |
* Indicates a tenant that has closed its store and ceased to operate at the property, but continues to pay rent under the terms of its lease. The sub-tenant, if any, is shown in parentheses.
** This property was sold in January 2005.
Most of our leases provide for the monthly payment in advance of fixed minimum rentals, the tenants’ pro rata share of ad valorem taxes, insurance (including fire and extended coverage, rent insurance and liability insurance) and common area maintenance for the property. They may also provide for the payment of additional rentals based on a percentage of the tenants’ sales. Utilities are generally paid directly by tenants except where common metering exists with respect to a property. In this case, we make the payments for the utilities and are reimbursed by the tenants on a monthly basis. Generally, our leases prohibit the tenant from assigning or subletting its space. They also require the tenant to use its space for the purpose designated in its lease agreement and to operate its business on a continuous basis. Some of the lease agreements with major tenants contain modifications of these basic provisions in view of the financial condition, stability or desirability of those tenants. Where a tenant is granted the right to assign its space, the lease agreement generally provides that the original lessee will remain liable for the payment of the lease obligations under that lease agreement.
The following table sets forth as of December 31, 2004 the gross leasable area, or GLA of existing properties leased to tenants in our retail properties:
| | | | Supermarket Anchor Tenants | | | Other Anchor Tenants | | | Non-anchor Tenants | | | Total | |
| Leased GLA (sq. ft.) | | | 5,731,856 | | | 6,172,105 | | | 6,736,107 | | | 18,640,068 | |
| Percentage of Total Leased GLA | | | 30.8 | % | | 33.1 | % | | 36.1 | % | | 100.0 | % |
The following table sets forth as of December 31, 2004 the annual minimum rent at expiration attributable to tenants our retail properties:
| | | Supermarket Anchor Tenants | | | Other Anchor Tenants | | | Non-anchor Tenants | | | Total | |
| Annual Minimum Rent (“AMR”) | | $ | 49,736,175 | | $ | 41,625,823 | | $ | 105,722,544 | | $ | 197,084,542 | |
| Percentage of Total AMR | | | 25.2 | % | | 21.1 | % | | 53.7 | % | | 100.0 | % |
The following table sets forth as of December 31, 2004 information regarding leases with the ten largest tenants in our retail properties:
Tenant | | Number of Leases | | GLA (square feet) | | Percent of Total GLA | | Annualized Minimum Rent at December 31, 2004 | | Percent of Aggregate Annualized Minimum Rent | | Average Annual Minimum Rent per Square Foot |
| | | | | | | | | | | | | |
| Publix | | 49 | | 2,183,532 | | 11.1% | | $ 15,722,674 | | 8.3% | | $ 7.20 |
| Kroger | | 17 | | 962,697 | | 4.9% | | 7,998,271 | | 4.2% | | 8.31 |
| Albertsons/Shaw’s | | 9 | | 570,286 | | 2.9% | | 7,567,853 | | 4.0% | | 13.27 |
| Winn-Dixie | | 16 | | 730,442 | | 3.7% | | 5,059,331 | | 2.7% | | 6.93 |
| Wal-Mart | | 9 | | 646,682 | | 3.3% | | 2,940,519 | | 1.6% | | 4.55 |
| H.E. Butt Grocery | | 4 | | 256,262 | | 1.3% | | 2,775,355 | | 1.5% | | 10.83 |
| Blockbuster | | 29 | | 170,092 | | 0.9% | | 2,673,625 | | 1.4% | | 15.72 |
| CVS Pharmacy | | 23 | | 235,345 | | 1.2% | | 2,348,791 | | 1.2% | | 9.98 |
| Kmart | | 5 | | 438,458 | | 2.2% | | 2,289,616 | | 1.2% | | 5.22 |
| Bed Bath & Beyond | | 7 | | 227,689 | | 1.2% | | 2,192,531 | | 1.2% | | 9.63 |
| | | | | | | | | | | | | |
| Total top ten tenants | | 168 | | 6,421,485 | | 32.6% | | $ 51,568,566 | | 27.3% | | $ 8.03 |
| | | | | | | | | | | | | |
Lease Expirations
The following tables set forth as of December 31, 2004 the anticipated expirations of tenant leases our retail properties for each year from 2005 through 2014 and thereafter:
All Tenants | | | | | | | | | | | | |
Year | | Number of Leases | | GLA (square feet) | | Percent of Total GLA | | Annualized Minimum Rent at Expiration | | Percent of Aggregate Annualized Minimum Rent at Expiration | | Average Annual Minimum Rent per Square Foot at Expiration |
| | | | | | | | | | | | | |
| M-T-M | | 127 | | 380,432 | | 1.9% | | $ 3,463,399 | | 1.8% | | $ 9.10 |
| 2005 | | 691 | | 1,938,316 | | 9.9% | | 22,730,802 | | 11.5% | | 11.73 |
| 2006 | | 680 | | 2,075,952 | | 10.6% | | 25,662,979 | | 13.0% | | 12.36 |
| 2007 | | 669 | | 2,167,412 | | 11.0% | | 26,518,888 | | 13.5% | | 12.24 |
| 2008 | | 403 | | 1,589,331 | | 8.1% | | 18,978,322 | | 9.6% | | 11.94 |
| 2009 | | 361 | | 1,927,224 | | 9.8% | | 19,720,921 | | 10.0% | | 10.23 |
| 2010 | | 101 | | 746,460 | | 3.8% | | 7,683,332 | | 3.9% | | 10.29 |
| 2011 | | 44 | | 907,595 | | 4.6% | | 7,098,986 | | 3.6% | | 7.82 |
| 2012 | | 42 | | 791,701 | | 4.0% | | 7,190,214 | | 3.6% | | 9.08 |
| 2013 | | 34 | | 664,694 | | 3.4% | | 6,160,217 | | 3.1% | | 9.27 |
| 2014 | | 35 | | 769,089 | | 3.9% | | 6,443,268 | | 3.3% | | 8.38 |
| Thereafter | | 150 | | 4,681,862 | | 23.8% | | 45,433,214 | | 23.1% | | 9.70 |
| | | | | | | | | | | | | |
Sub-total/Average | | 3,337 | | 18,640,068 | | 94.8% | | 197,084,542 | | 100.0% | | 10.57 |
| | | | | | | | | | | | | |
| Vacant | | 383 | | 1,028,417 | | 5.2% | | N/A | | N/A | | N/A |
| | | | | | | | | | | | | |
Total/Average | | 3,720 | | 19,668,485 | | 100.0% | | $197,084,542 | | 100.0% | | $ 10.02 |
| | | | | | | | | | | | | |
Anchor Tenants (10,000 sq. ft. or greater) | | | | | | |
Year | | Number of Leases | | GLA (square feet) | | Percent of Total GLA | | Annualized Minimum Rent at Expiration | | Percent of Aggregate Annualized Minimum Rent at Expiration | | Average Annual Minimum Rent per Square Foot at Expiration |
| | | | | | | | | | | | | |
| M-T-M | | 6 | | 141,085 | | 1.1% | | $ 573,314 | | 0.6% | | $ 4.06 |
| 2005 | | 26 | | 553,843 | | 4.5% | | 2,773,580 | | 3.0% | | 5.01 |
| 2006 | | 29 | | 720,839 | | 5.9% | | 4,492,384 | | 4.9% | | 6.23 |
| 2007 | | 33 | | 833,921 | | 6.8% | | 5,664,629 | | 6.2% | | 6.79 |
| 2008 | | 28 | | 723,738 | | 5.9% | | 4,595,611 | | 5.0% | | 6.35 |
| 2009 | | 38 | | 1,167,037 | | 9.5% | | 7,099,310 | | 7.8% | | 6.08 |
| 2010 | | 23 | | 536,441 | | 4.4% | | 4,113,636 | | 4.5% | | 7.67 |
| 2011 | | 20 | | 831,311 | | 6.8% | | 5,385,087 | | 5.9% | | 6.48 |
| 2012 | | 19 | | 702,701 | | 5.7% | | 5,167,199 | | 5.7% | | 7.35 |
| 2013 | | 15 | | 589,538 | | 4.8% | | 4,590,453 | | 5.0% | | 7.79 |
| 2014 | | 15 | | 684,976 | | 5.6% | | 4,689,677 | | 5.1% | | 6.85 |
| Thereafter | | 92 | | 4,418,531 | | 36.0% | | 42,217,118 | | 46.2% | | 9.55 |
| | | | | | | | | | | | | |
Sub-total/Average | | 344 | | 11,903,961 | | 97.0% | | 91,361,998 | | 100.0% | | 7.67 |
| | | | | | | | | | | | | |
| Vacant | | 14 | | 367,940 | | 3.0% | | N/A | | N/A | | N/A |
| | | | | | | | | | | | | |
Total/Average | | 358 | | 12,271,901 | | 100.0% | | $ 91,361,998 | | 100.0% | | $ 7.44 |
| | | | | | | | | | | | | |
Local Tenants (less than 10,000 sq. ft.) | | | | | | | | |
Year | | Number of Leases | | GLA (square feet) | | Percent of Total GLA | | Annualized Minimum Rent at Expiration | | Percent of Aggregate Annualized Minimum Rent at Expiration | | Average Annual Minimum Rent per Square Foot at Expiration |
| | | | | | | | | | | | | |
| M-T-M | | 121 | | 239,347 | | 3.2% | | $ 2,890,085 | | 2.7% | | $ 12.07 |
| 2005 | | 665 | | 1,384,473 | | 18.7% | | 19,957,222 | | 18.9% | | 14.42 |
| 2006 | | 651 | | 1,355,113 | | 18.3% | | 21,170,595 | | 20.0% | | 15.62 |
| 2007 | | 636 | | 1,333,491 | | 18.0% | | 20,854,259 | | 19.7% | | 15.64 |
| 2008 | | 375 | | 865,593 | | 11.7% | | 14,382,711 | | 13.6% | | 16.62 |
| 2009 | | 323 | | 760,187 | | 10.3% | | 12,621,611 | | 11.9% | | 16.60 |
| 2010 | | 78 | | 210,019 | | 2.8% | | 3,569,696 | | 3.4% | | 17.00 |
| 2011 | | 24 | | 76,284 | | 1.0% | | 1,713,899 | | 1.6% | | 22.47 |
| 2012 | | 23 | | 89,000 | | 1.2% | | 2,023,015 | | 1.9% | | 22.73 |
| 2013 | | 19 | | 75,156 | | 1.0% | | 1,569,764 | | 1.5% | | 20.89 |
| 2014 | | 20 | | 84,113 | | 1.1% | | 1,753,591 | | 1.7% | | 20.85 |
| Thereafter | | 58 | | 263,331 | | 3.6% | | 3,216,096 | | 3.0% | | 12.21 |
| | | | | | | | | | | | | |
Sub-total/Average | | 2,993 | | 6,736,107 | | 91.1% | | 105,722,544 | | 100.0% | | 15.69 |
| | | | | | | | | | | | | |
| Vacant | | 369 | | 660,477 | | 8.9% | | N/A | | N/A | | N/A |
| | | | | | | | | | | | | |
Total/Average | | 3,362 | | 7,396,584 | | 100.0% | | $105,722,544 | | 100.0% | | $ 14.29 |
| | | | | | | | | | | | | |
We may incur substantial expenditures in connection with the re-leasing of our retail space, principally in the form of tenant improvements and leasing commissions. The amounts of these expenditures can vary significantly, depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the terms of the leases. We also incur expenditures for certain recurring capital expenses.
Insurance
Our tenants are generally responsible under their leases for providing adequate insurance on the spaces they lease. We believe that our properties are covered by adequate fire, flood and property insurance, and where necessary hurricane and windstorm coverages all provided by reputable companies. However, certain of our properties are not covered by disaster insurance with respect to certain hazards (such as hurricanes) for which coverage is not available or available only at rates, which in our opinion, are not economically justifiable.
Unconsolidated Joint Venture Investment
As of December 31, 2004, we owned a non-controlling interest in one unconsolidated joint venturewhich owns a parcel of land that is held for future development or sale.
Neither we nor our properties are subject to any litigation which we believe will have a material adverse affect on our business financial conditional or results of operations or cash flows. Furthermore, to the best of our knowledge, except as described above with respect to environmental matters, there is no litigation threatened against us or any of our properties, other than routine litigation and administrative proceedings arising in the ordinary course of business, which collectively are not expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
No matters were submitted for stockholder vote during the fourth quarter of 2004.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Dividends
Our common stock began trading on the New York Stock Exchange, or NYSE, on May 18, 1998, under the symbol “EQY.” On March 10, 2005, we had approximately 2,000 stockholders of record representing approximately 15,000 beneficial owners. The following table sets forth for the periods indicated the high and low sales closing prices as reported by the NYSE and the distributions declared by us:
| | | High | | | Low | | | Distributions Declared | |
| | | | | | | | | | | |
| First Quarter, 2004 | | $ | 19.65 | | $ | 17.05 | | $ | 0.28 | |
| Second Quarter, 2004 | | $ | 19.25 | | $ | 15.78 | | $ | 0.28 | |
| Third Quarter, 2004 | | $ | 19.99 | | $ | 17.95 | | $ | 0.28 | |
| Fourth Quarter, 2004 | | $ | 23.83 | | $ | 20.08 | | $ | 0.29 | |
| | | | | | | | | | | |
| | | | High | | | Low | | | Distributions Declared | |
| | | | | | | | | | | |
| First Quarter, 2003 | | $ | 15.30 | | $ | 12.92 | | $ | 0.27 | |
| Second Quarter, 2003 | | $ | 17.26 | | $ | 15.32 | | $ | 0.27 | |
| Third Quarter, 2003 | | $ | 17.82 | | $ | 16.43 | | $ | 0.28 | |
| Fourth Quarter, 2003 | | $ | 17.50 | | $ | 16.40 | | $ | 0.28 | |
| | | | | | | | | | | |
Dividends paid during 2004 and 2003 totaled $80.9 million and $70.7 million, respectively. Future declarations of dividends will be made by us at the discretion of our board of directors and will depend upon our earnings, financial condition and such other factors as our board of directors deems relevant. In order to qualify for the beneficial tax treatment accorded to real estate investment trusts under the Internal Revenue Code of 1986, or the Code, we are currently required to make distributions to holders of our shares in an amount equal to at least 90% of our “real estate investment trust taxable income,” as defined in Section 857 of the Code.
| | | Year Ended December 31, | |
| | | | | | | | | | | | | | | | |
| | 2004 | | | 2003 | | | 2002 | | | 2001 | | | 2000 | |
| | | (in thousands other than per share, percentage and ratio data) | |
| | | | | | | | | | | | | | | | |
Statement of Operations Data:(1) | | | | | | | | | | | | | | | |
| Total rental income | $ | 229,857 | | $ | 180,295 | | $ | 93,569 | | $ | 74,454 | | $ | 44,701 | |
| | | | | | | | | | | | | | | | |
| Property operating expenses | | 60,402 | | | 51,728 | | | 28,849 | | | 23,267 | | | 12,676 | |
| Rental property depreciation and amortization | | 35,910 | | | 26,411 | | | 12,563 | | | 10,356 | | | 5,814 | |
| Litigation settlement | | - | | | - | | | 2,067 | | | - | | | - | |
| General and administrative expenses | | 16,601 | | | 11,046 | | | 6,648 | | | 3,553 | | | 2,559 | |
| Total operating expenses | | 112,913 | | | 89,185 | | | 50,127 | | | 37,176 | | | 21,049 | |
| Interest expense | | (46,413 | ) | | (36,814 | ) | | (20,889 | ) | | (20,417 | ) | | (12,216 | ) |
| Amortization of deferred financing fees | | (1,370 | ) | | (992 | ) | | (759 | ) | | (1,080 | ) | | (242 | ) |
| Other income, net | | 2,883 | | | 1,263 | | | 4,235 | | | 1,669 | | | 793 | |
| Minority interest | | (576 | ) | | (803 | ) | | (101 | ) | | (1,627 | ) | | (603 | ) |
| Income from continuing operations | $ | 71,468 | | $ | 53,764 | | $ | 25,928 | | $ | 15,823 | | $ | 11,384 | |
| Net income | $ | 97,804 | | $ | 63,647 | | $ | 39,934 | | $ | 18,721 | | $ | 12,555 | |
| | | | | | | | | | | | | | | | |
| Basic earnings per share: | | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 1.01 | | $ | 0.90 | | $ | 0.79 | | $ | 0.70 | | $ | 0.80 | |
| Net income | $ | 1.39 | | $ | 1.06 | | $ | 1.22 | | $ | 0.83 | | $ | 0.88 | |
| Diluted earnings per share: | | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 1.00 | | $ | 0.89 | | $ | 0.78 | | $ | 0.70 | | $ | 0.79 | |
| Net income | $ | 1.37 | | $ | 1.05 | | $ | 1.20 | | $ | 0.83 | | $ | 0.87 | |
| | | | | | | | | | | | | | | | |
Balance Sheet Data: | | | | | | | | | | | | | | | |
| Total rental properties, net of accumulated depreciation | $ | 1,873,687 | | $ | 1,617,299 | | $ | 678,431 | | $ | 627,687 | | $ | 483,699 | |
| | | | | | | | | | | | | | | | |
| Total assets | | 1,992,292 | | | 1,677,386 | | | 730,069 | | | 668,536 | | | 542,817 | |
| Mortgage notes payable | | 495,056 | | | 459,103 | | | 332,143 | | | 345,047 | | | 280,396 | |
| | | | | | | | | | | | | | | | |
| Total liabilities | | 1,059,507 | | | 834,162 | | | 375,969 | | | 386,400 | | | 317,392 | |
| | | | | | | | | | | | | | | | |
| Minority interest | | 1,397 | | | 12,672 | | | 3,869 | | | 3,869 | | | 37,762 | |
| Shareholders’ equity | | 931,388 | | | 830,552 | | | 350,231 | | | 278,267 | | | 187,663 | |
| | | | | | | | | | | | | | | | |
| Other Data: | | | | | | | | | | | | | | | |
Funds from operations(2) | $ | 113,471 | | $ | 89,870 | | $ | 45,487 | | $ | 29,848 | | $ | 19,266 | |
| Cash flows from: | | | | | | | | | | | | | | | |
| Operating activities | | 113,110 | | | 78,262 | | | 45,613 | | | 28,214 | | | 20,293 | |
| Investing activities | | (244,851 | ) | | (326,160 | ) | | (51,439 | ) | | (42,435 | ) | | (11,679 | ) |
| Financing activities | | 135,897 | | | 245,920 | | | 7,864 | | | 12,780 | | | (6,694 | ) |
| | | | | | | | | | | | | | | | |
| GLA (square feet) at end of period | | 19,914 | | | 19,883 | | | 8,530 | | | 8,637 | | | 3,169 | |
| Occupancy of core shopping center portfolio at end of period | | 95% | | | 90% | | | 89% | | | 86% | | | 95% | |
| | | | | | | | | | | | | | | | |
| Dividends per share | $ | 1.13 | | $ | 1.10 | | $ | 1.08 | | $ | 1.06 | | $ | 1.10 | |
| | | | | | | | | | | | | | | (continued | ) |
—————————————
| (1) | Reclassified to reflect the reporting of discontinued operations. |
| (2) | We believe Funds From Operations (“FFO”) (combined with the primary GAAP presentations) is a useful supplemental measure of our operating performance that is a recognized metric used extensively by the real estate industry, in particular, REITs. Accounting for real estate assets using historical cost accounting under accounting principles generally accepted in the United States of America (“GAAP”) assumes that the value of real estate diminishes predictably over time. The National Association of Real Estate Investment Trusts (“NAREIT”) stated in its April 2002 White Paper on Funds from Operations “since real estate values…have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” |
FFO, as defined by NAREIT, is “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.” We believe that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from our FFO measure. Our method of calculating FFO may be different from methods used by other REITs and accordingly, may not be comparable to such other REITs.
FFO is presented to assist investors in analyzing our performance. FFO (i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs and liquidity, including the ability to make distributions, and (iii) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance. We believe net income is the most directly comparable GAAP measure to FFO.
The following table illustrates the calculation of funds from operations for each of the five years in the period ended December 31, 2004 (in thousands):
| | | Year Ended December 31, |
| | | | | | | | | | | | | | | | | |
| | | | 2004 | | | 2003 | | | 2002 | | | 2001 | | | 2000 | |
| | | | | | | | | | | | | | | | | |
Net income | | $ | 97,804 | | $ | 63,647 | | $ | 39,934 | | $ | 18,721 | | $ | 12,555 | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Rental property depreciation and amortization, including discontinued operations | | | 37,023 | | | 28,007 | | | 13,810 | | | 11,665 | | | 6,534 | |
| (Gain) loss on disposal of income producing properties | | | (22,176 | ) | | (3,083 | ) | | (9,264 | ) | | 609 | | | 63 | |
| Minority interest | | | 623 | | | 803 | | | 101 | | | 99 | | | - | |
| Other Items: | | | | | | | | | | | | | | | | |
| Interest on convertible partnership units | | | - | | | 43 | | | 259 | | | 259 | | | 20 | |
| Deferred income tax (benefit) expense | | | - | | | - | | | - | | | (374 | ) | | 1,071 | |
| Minority interest in CEFUS share of FFO adjustments | | | - | | | - | | | - | | | (1,369 | ) | | (1,010 | ) |
| Pro-rata share of real estate depreciation from joint ventures | | | 197 | | | 453 | | | 647 | | | 238 | | | 33 | |
| | | | | | | | | | | | | | | | |
Funds from operations | | $ | 113,471 | | $ | 89,870 | | $ | 45,487 | | $ | 29,848 | | $ | 19,266 | |
| | | | | | | | | | | | | | | | | |
The following table reflects the reconciliation of FFO per diluted share to earnings per diluted share, the most directly comparable GAAP measure, for the periods presented:
| | | Year Ended December 31, |
| | | | | | | | | | | | | | | | | |
| | | | 2004 | | | 2003 | | | 2002 | | | 2001 | | | 2000 | |
| | | | | | | | | | | | | | | | | |
| Earnings per diluted share* | | $ | 1.37 | | $ | 1.05 | | $ | 1.20 | | $ | 0.83 | | $ | 0.87 | |
| Adjustments: | | | | | �� | | | | | | | | | | | |
| Rental property depreciation and amortization, including discontinued operations | | | 0.52 | | | 0.45 | | | 0.41 | | | 0.52 | | | 0.45 | |
| (Gain) loss on disposal of income producing properties | | | (0.31 | ) | | (0.05 | ) | | (0.27 | ) | | 0.03 | | | 0.01 | |
| Other items: | | | | | | | | | | | | | | | | |
| Deferred income tax (benefit) expense | | | - | | | - | | | - | | | (0.02 | ) | | 0.07 | |
| Minority interest in CEFUS share of FFO adjustments | | | - | | | - | | | - | | | (0.06 | ) | | (0.07 | ) |
| Pro-rata share of real estate depreciation from joint ventures | | | - | | | 0.01 | | | 0.02 | | | 0.01 | | | - | |
| | | | | | | | | | | | | | | | | |
Funds from operations per diluted share | | $ | 1.58 | | $ | 1.46 | | $ | 1.36 | | $ | 1.31 | | $ | 1.33 | |
| | | | | | | | | | | | | | | | | |
*Earnings per diluted share reflect the add-back of interest on convertible partnership units and the minority interest(s) in earnings of consolidated subsidiaries which are convertible to shares of our common stock.
Overview
The following should be read in conjunction with our consolidated financial statements, including the notes thereto, which are included elsewhere in this annual report.
General.We operate as a real estate investment trust, or REIT, that principally acquires, renovates, develops and manages community and neighborhood shopping centers located predominantly in high growth markets in the southern United States and in the Boston, Massachusetts metropolitan area. Our shopping centers are primarily anchored by supermarkets or other necessity-oriented retailers such as drug stores or discount retail stores. As of December 31, 2004, our portfolio consisted of 188 properties, comprising 133 supermarket-anchored shopping centers, eight drug store-anchored shopping centers, 40 other retail-anchored shopping centers, four retail development parcels, and three commercial properties, as well as a non-controlling interest in one unconsolidated joint venture that owns a parcel of land.
We believe we distinguish ourselves by owning and operating shopping centers anchored by supermarkets or necessity-oriented retailers in high density areas that are experiencing higher than average population growth or that provide particularly strong barriers to additional competition. Our goal is to own and operate properties containing dominant supermarket operators and a diverse tenant mix. We believe that these characteristics combine to reduce the vulnerability of our properties to economic downturns, enhance consumer traffic through our properties and generate more stable cash flows over time. We derive substantially all of our revenue from tenants under existing leases at our properties.
Our business is generally dependent on the performance of the economy in the areas in which we own properties and the cost of financing available to fund our growth. Changes in the economic environment tend to have a direct effect on our tenants’ businesses and, therefore, their ability to continue to pay us rent. In 2004, the overall U.S. economy demonstrated sustained economic growth. This growth, as well as the prevailing low interest rate environment, contributed to the growth in our cash flows and allowed us to increase the occupancy rates at our centers during the year. During the later part of 2004, however, the federal reserve raised interest rates and has continued to do so in early 2005. We expect further increases in 2005 which will make our cost of capital higher.
2004 Overview. In 2004, we followed a disciplined approach and took advantage of the improving economic environment in our markets. We focused on acquiring shopping centers in high growth, high density metropolitan areas of the United States, developing and redeveloping centers in these areas and selling properties that no longer met our investment criteria. During 2004, we expanded our geographic diversity beyond the southern United States where we have operated historically by acquiring six retail properties in the Boston, Massachusetts metropolitan area. Our property acquisitions during 2004 were financed using our revolving lines of credit, proceeds from the sale of properties, issuances of equity and public debt and assumed mortgages. In the event we consummate future acquisitions, we anticipate using similar financing sources. However, there can be no assurances that these sources will be available to us in the future at reasonable terms or at all.
The highlights of our 2004 activity include:
We acquired 17 properties and three land parcels for aggregate consideration of approximately $317 million.
We sold 14 properties for aggregate consideration of approximately $82.6 million, and also sold a property held by a joint venture.
We completed the development of a drug store anchored shopping center containing 29,000 square feet of gross leasable area and added 46,000 square feet to an existing center, started development of a supermarket anchored center and have over 19 developments and redevelopments in various stages of work.
During March of 2004, we raised $200 million in an offering of unsecured senior notes. The unsecured senior notes have a stated interest rate of 3.875% and mature in April of 2009. We swapped $100 million of these notes to a floating rate of 6-month LIBOR in arrears plus 0.4375%.
We expanded our geographic diversity into the Boston, Massachusetts metropolitan area by acquiring six supermarket anchored centers, that aggregate 390,979 square feet of gross leaseable area for an aggregate consideration of approximately $120.0 million.
We increased the base rental rate by 4.5% on 362 lease renewals aggregating 797,000 square feet to $13.96 per square foot. We executed 418 new leases totaling 1.6 million square feet at an average rate of $10.53 per square foot and increased our occupancy rate to 94.9% in the core shopping center portfolio.
Business Uncertainties. Our long-term operating cash flow is dependent on the continued occupancy of our properties, the rents that we are able to charge to our tenants and the ability of these tenants to make their rental payments. The main long-term threat to our business is our dependence on the viability of our anchor and other tenants. General economic downturns and competition from national and regional supercenters, such as Wal-Mart and Target or other discount retailers, may have an increasingly adverse impact on the business of our tenants by taking customers or reducing operating margins. For example, on February 22, 2005, Winn-Dixie Stores, Inc., an anchor tenant at 16 of our shopping centers occupying 730,000 square feet of gross leasable area and accounting for approximately $5 million in annualized minimum rent, filed for bankruptcy protection. Although Winn-Dixie has not yet rejected any of its leases at our centers, if it elects to close some or all its stores at these centers and terminate those leases, it would adversely affect our operating results, including funds from operations.
We believe, however, that these risks are mitigated by concentrating on high-density, urban areas, leasing to the dominant supermarket operators in the markets in which we own properties and maintaining a diverse tenant mix. Other than Winn-Dixie, we are not currently aware of any pending tenant bankruptcies that are likely to materially affect our rental revenues.
In addition, although we have enjoyed a low interest rate environment in recent years, the increase in interest rates over the last six months has had, and anticipated future increases in the coming months will have an adverse effect on the cost of our future borrowings, including borrowings under our revolving credit facilities, which are based on variable interest rates, and the $100 million of our senior notes that we have swapped to a variable rate. As interest rates rise, the interest we incur on these loans will increase.
Notwithstanding these business uncertainties, we are optimistic that we are well positioned to take advantage of the sustained growth of the economy and that the growth in rents and occupancy will mitigate increases in operating or financing costs.
Short-Term Liquidity Needs.As of December 31, 2004, we had $5.1 million in cash and $25.8 million available to be drawn under our revolving credit facilities. Our cash flow from operations was $113.1 million for the year ended December 31, 2004.
Our short-term liquidity requirements consist primarily of funds necessary to pay for operating and other expenses directly associated with our portfolio of properties, general and administrative expenses (including payroll and related costs), interest expense and scheduled principal payments on our outstanding debt, capital expenditures incurred to facilitate the leasing of space (e.g., tenant improvements and leasing commissions), development and redevelopment activities, quarterly dividends paid to our common stockholders and distributions made to holders of operating partnership units.
Historically, we have satisfied these requirements principally through cash generated from operations. We believe that cash generated from operations and borrowings under our unsecured revolving credit facilities will be sufficient to meet our short-term liquidity requirements; however, there are risks inherent in our business, including those risks described in Item 1 - “Business-Risk Factors,” that may have a material adverse effect on our cash flow, and therefore, on our ability to meet these requirements.
Certain of our mortgage loans involving an aggregate principal balance of approximately $168.6 million contain prohibitions on transfers of ownership which may have been violated by our previous issuances of common stock or in connection with past acquisitions and may be violated by transactions involving the Company’s capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. To date, no lender has notified us that it intends to accelerate its mortgage. In the event that the mortgage holders declare defaults under the mortgage documents, we will, if required, prepay the remaining mortgage from existing resources, refinancing of such mortgages, borrowings under our other lines of credit or other sources of financing. Based on discussions with various lenders, current credit market conditions and other factors, we believe that the mortgages will not be accelerated. Accordingly, we believe that the violations of these prohibitions will not have a material adverse impact on our results of operations or financial condition.
Our current development plans include development and redevelopment projects, the aggregate cost of which (including costs incurred in prior years on these projects) is expected to be approximately $66.7 million and of which $25.0 million remains unfunded based on our current plans. We intend to fund these costs from our unsecured revolving credit facilities and cash generated from operations. We are likely to initiate other projects over the course of 2005 which have an undetermined cost.
We may incur significant expenditures in connection with the re-leasing of our retail space, principally in the form of tenant improvements and leasing commissions. The amounts of these expenditures can vary significantly, depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the life of the leases. We also incur expenditures for certain recurring capital expenses. We expect to pay for re-leasing and recurring capital expenditures out of cash from operations.
As a REIT, we are required to distribute at least 90% of our taxable income to our stockholders on an annual basis. Therefore, as a general matter, it is unlikely that we will be able to retain any substantial cash balances that could be used to meet our liquidity needs. Instead, these needs must be met with cash generated from current operations and external sources of capital.
During 2004, we paid $80.9 million of dividends on our common stock or $1.13 per share. The maintenance of these dividends is subject to various factors, including the discretion of our board of directors, our ability to pay dividends under Maryland law, the availability of cash to make the necessary dividend payments and the effect of REIT distribution requirements.
Long-Term Liquidity Needs.Our long-term liquidity requirements consist primarily of funds necessary to pay for the principal amount of our long-term debt as it matures, significant non-recurring capital expenditures that need to be made periodically at our properties, development and redevelopment projects that we undertake at our properties and the costs associated with acquisitions of properties or other companies. Historically, we have satisfied these requirements principally through what we believe to be the most advantageous source of capital available at the time, which has included the incurrence of new debt through borrowings under credit facilities and the issuance of debt securities, sales of common stock, capital raised through the disposition of assets, and joint venture transactions. We believe that these sources of capital will continue to be available in the future to fund our long-term capital needs; however, there are risks inherent in our business, including those risks described in Item 1 - “Business-Risk Factors,” that may have a material adverse effect on our ability to access these capital sources.
Our ability to incur additional unsecured debt is dependent upon a number of factors, including our degree of leverage, the value of our unencumbered assets, our credit rating and borrowing restrictions imposed by existing lenders. Currently, we have investment grade credit ratings for our unsecured senior debt from two major rating agencies - Standard & Poor’s and Moody’s Investors Service. A downgrade in outlook or rating by a rating agency can occur at any time if the agency perceives an adverse change in our financial condition, results of operations or ability to service debt. If such a downgrade occurs, it would increase the interest rates currently payable under our existing credit facilities and certain of our debt securities, would likely increase the costs associated with obtaining future financing, and adversely affect our ability to obtain future financing. The indentures under which our publicly traded debt securities are issued also contain certain restrictions on our ability to incur debt and other financial covenants.
The following table sets forth certain information regarding future contractual obligations, excluding interest, as of December 31, 2004 (in thousands):
| | Payments due by period |
| | | | | | | | | | | | | | | | | |
Contractual Obligations | | | Total | | | Less than 1 year | | | 1-3 years | | | 3-5 years | | | More than 5 years | |
| | | | | | | | | | | | | | | | | |
| Mortgage notes payable: | | | | | | | | | | | | | | | | |
| Scheduled amortization | | $ | 130,944 | | $ | 10,809 | | $ | 22,321 | | $ | 22,516 | | $ | 75,298 | |
| Balloon payments | | | 364,112 | | | 30,079 | | | 27,622 | | | 64,436 | | | 241,975 | |
| Total mortgage obligations | | | 495,056 | | | 40,888 | | | 49,943 | | | 86,952 | | | 317,273 | |
| | | | | | | | | | | | | | | | | |
| Unsecured revolving credit facilities | | | 147,000 | | | - | | | 147,000 | | | - | | | - | |
| Unsecured senior notes | | | 350,000 | | | - | | | 125,000 | | | 200,000 | | | 25,000 | |
| Capital leases | | | - | | | - | | | - | | | - | | | - | |
| Operating leases | | | 179 | | | 125 | | | 54 | | | - | | | - | |
| Development and redevelopment | | | 25,000 | | | 25,000 | | | - | | | - | | | - | |
| | | | | | | | | | | | | | | | | |
| Total contractual obligations | | $ | 1,017,235 | | $ | 66,013 | | $ | 321,997 | | $ | 286,952 | | $ | 342,273 | |
| | | | | | | | | | | | | | | | | |
The following table sets forth certain information regarding future interest obligations on outstanding debt as of December 31, 2004 (in thousands):
| | | Payments due by Period |
| | | | | | | | | | | | | | | | | |
Interest Obligations | | | Total | | | Less than 1 year | | | 1-3 years | | | 3-5 years | | | More than 5 years | |
| | | | | | | | | | | | | | | | | |
| Mortgage notes | | $ | 209,219 | | $ | 35,430 | | $ | 90,251 | | $ | 56,020 | | $ | 27,518 | |
Unsecured senior notes(1) | | | 66,273 | | | 19,033 | | | 38,937 | | | 8,140 | | | 163 | |
Unsecured revolving credit facilities(2) | | | 4,628 | | | 4,114 | | | 514 | | | - | | | - | |
| | | | | | | | | | | | | | | | | |
| Total interest obligations | | $ | 280,120 | | $ | 58,577 | | $ | 129,702 | | $ | 64,160 | | $ | 27,681 | |
| | | | | | | | | | | | | | | | | |
| (1) | $100 million of the outstanding balance has been swapped to a floating interest rate based on the 6 month LIBOR in arrears, plus 0.4375%. The contractual and interest obligation for the unsecured senior notes do not reflect this interest rate swap. |
| (2) | Interest on the unsecured revolving credit facility is variable; these amounts assume the weighted average interest rate remains the same as the rate at December 31, 2004 of 2.8%. |
We have entered into employment contracts with several of our key executives. These contracts provide for base pay, bonuses based on our results of operations, options and restricted stock grants and reimbursement of other various expenses.
Off Balance Sheet Arrangements
We have an off balance sheet joint venture and other unconsolidated arrangements with varying structures. As of December 31, 2004, our off balance sheet arrangements were as follows:
Letters of credit totaling $1.4 million have been provided as security for certain performance requirements; and
We have committed to fund $25.0million, based on current plans and estimates, in order to complete pending development and redevelopment projects. These obligations, comprised principally of construction contracts, are generally due as the work is performed and are expected to be financed by our available credit facilities.
- The unconsolidated joint venture owns a parcel of land that is held for future development or sale. We are obligated to fund 50% of any working capital that is required (as determined jointly by us and our joint venture partner). The current obligations are a nominal amount to pay property taxes and other carrying costs. The joint venture currently has no outstanding debt obligations or contractual commitments and we have not guaranteed any obligations or retained any contingent interest in any assets.
We expect to fund these obligations from working capital and availability under our revolving credit facilities.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations provides additional information related to our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. On an ongoing basis, management evaluates and if necessary, adjusts its estimates and judgments, including those related to real estate and development assets, revenue recognition in conjunction with providing development, leasing and management services and equity in earnings of unconsolidated joint ventures. Management believes that the following critical accounting policies affect its more significant judgments and estimates used in the preparation of our consolidated financial statements.
Real Estate Properties and Development Assets.We capitalize acquisition and construction costs, property taxes, interest and other miscellaneous costs that are directly identifiable with a project, from pre-acquisition until the time that construction is complete and the development is ready for its intended use, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 67 and SFAS No. 34. We allocate the capitalized project costs to the various components of the project based on the components’ relative fair values. Our cost allocation method requires the use of management estimates regarding the fair market value of each project component. Management bases its estimates on current market appraisals, comparable sales, existing sale and purchase contracts, replacement cost, historical experience, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the fair market values of real estate assets. Actual results may differ from these estimates and anticipated returns on a project, as well as the gain or loss on disposition of the individual project components, could vary significantly from estimated amounts.
Management reviews long-lived assets used in operations for impairment when there is an event or change in circumstances that indicates that the carrying amount of the asset may not be recoverable and the future undiscounted cash flows expected to be generated by the asset are less than its carrying amount. If such asset is considered to be impaired, we record impairment losses and reduce the carrying amount of the impaired asset to an amount that reflects the fair value of the asset at the time impairment is evident. Our impairment review process relies on management’s judgment regarding the indicators of impairment, the remaining life of the asset used to generate the asset’s undiscounted cash flows, and the fair value of the asset at a particular point in time. Management uses historical experience, current market appraisals and various other assumptions to form the basis for making judgments about the impairment of real estate assets. Under different assumptions or conditions, the asset impairment analysis may yield a different outcome, which would alter the ultimate return on our assets, as well as the gain or loss on the eventual disposition of the asset.
Business Combinations.We are actively pursuing acquisition opportunities and will not be successful in all cases; costs incurred related to these acquisition opportunities are expensed when it is probable that we will not be successful in the acquisition. The results of operations of any acquired property are included in our financial statements as of the date of its acquisition.
We allocate the purchase price of acquired companies and properties to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Fair value is defined as the amount at which that asset could be bought or sold in a current transaction between willing parties (other than in a forced or liquidation sale). In order to allocate the purchase price of acquired companies and properties to the tangible and intangible assets acquired, we identify and estimate the fair value of the land, buildings and improvements, review the leases to determine the existence of, and estimate the fair value of, any contractual or other legal rights and investigates the existence of, and estimate the fair value of, any other identifiable intangibles. Such valuations require management to make significant estimates and assumptions, especially with respect to intangibles.
The cost approach is used as the primary method to estimate the fair value of the buildings, improvements and other assets. The cost approach is based upon the current costs to develop the particular asset in that geographic location, less an allowance for physical and functional depreciation. The assigned value for buildings and improvements is based on an as if vacant basis. The market value approach is used as the primary method to estimate the fair value of the land. The determination of the fair value of contractual intangibles is based on the costs incurred to originate a lease, including commissions and legal costs, excluding any new leases negotiated in connection with the purchase of a property. In-place lease values are based on management’s evaluation of the specific characteristics of each lease and our overall relationship with each tenant. Among the factors considered in the allocation of these values include the nature of the existing relationship with the tenant, the tenant’s credit quality, the expectation of lease renewals, the estimated carrying costs of the property during a hypothetical expected lease-up period, current market conditions and costs to execute similar leases. Estimated carrying costs include real estate taxes, insurance, other property operating costs and estimates of lost rentals at market rates during the hypothetical expected lease-up periods, given the specific market conditions. Above-market, below-market and in-place lease values are determined based on the present value (using a discount rate reflecting the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the leases negotiated and in-place at the time of acquisition and (ii) management’s estimate of fair market lease rates for the property or equivalent property, measured over a period equal to the remaining non-cancelable term of the lease. The value of contractual intangibles is amortized over the remaining term of each lease. Other than as discussed above, we have determined that our real estate properties do not have any other significant identifiable intangibles.
Critical estimates in valuing certain of the intangibles and the assumptions of what marketplace participants would use in making estimates of fair value include, but are not limited to: future expected cash flows, estimated carrying costs, estimated origination costs, lease up periods and tenant risk attributes, as well as assumptions about the period of time the acquired lease will continue to be used in our portfolio and discount rates used in these calculations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Assumptions may not always reflect unanticipated events and changes in circumstances may occur. In making such estimates, management uses a number of sources, including appraisals or other market data, as well as, information obtained in its pre-acquisition due diligence and marketing and leasing activities.
Goodwill.We are required to perform annual impairment tests of our goodwill and intangible assets and more frequently in certain circumstances. Goodwill is no longer amortized. The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each reporting unit and comparing those estimated fair values with the carrying values, which include the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires us to allocate the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value.
The key assumptions we made to determine the fair value of our reporting units (each property is considered a reporting unit under SFAS No. 142) included (a) net operating income; (b) cash flows; and (c) the estimated fair value, which was based on our experience in evaluating acquisitions and market conditions. A variance in the net operating income or discount rate could have had a significant impact on the amount of the goodwill impairment charge recorded.
Management cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill that totaled $14.0 million at December 31, 2004. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our tenants, or a material negative change in our relationships with significant tenants.
Revenue Recognition.As lessor, we retain substantially all the risks and benefits of property ownership and account for our leases as operating leases. Rental income is recognized over the lease term on a straight-line basis. Revenue from percentage rent is recognized when tenants’ reported sales have reached certain levels specified in the respective leases. Recoveries from tenants for real estate taxes and other operating expenses are recognized as revenue in the period when the applicable costs are incurred. Termination fees are recognized when a tenant’s lease is terminated.
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required rent payments. The computation of this allowance is based on the tenants’ payment history and current credit quality. If our estimate of collectibility differs from the cash received the timing and amount of our reported revenue could be impacted.
Investments in Unconsolidated Joint Ventures. We do not consider ourselves to be in control of joint ventures when major business decisions require the approval of at least one other managing equity owner. Accordingly, we account for the one joint venture in which we do not retain unilateral control under the equity method.
We calculate the equity in income or loss earned from our unconsolidated joint ventures based on each equity owners’ economic ownership, which is estimated based on anticipated stabilized cash flows as they would be allocated to each equity owner based on how cash flow is distributed. Generally, under the terms of the respective joint venture agreements, net ordinary cash flow is distributed to each equity owner in accordance with such owner’s equity ownership percentages.
Results of Operations
Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments and redevelopments. A large portion of the change in our statement of operations line items is related to these changes in our property portfolio. The activity of the former IRT Property Company is included in our operating results commencing on February 12, 2003, the date we completed our merger with IRT.
We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties. These revenues include fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants’ revenues, in each case as provided in the particular leases.
Our primary cash expenses consist of our property operating expenses, which include real estate taxes, repairs and maintenance, management expenses, insurance, utilities and other expenses, general and administrative expenses, which include payroll, office expenses, professional fees and other administrative expenses, and interest expense, primarily on mortgage debt, unsecured senior debt and revolving credit facilities indebtedness. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes and interest, incurred in respect of property under development or redevelopment until the property is ready for its intended use.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003.
The following summarizes items from our audited consolidated statements of operations that we think are important in understanding our results of operations and/or those items which have significantly changed in 2004 compared to 2003 (in thousands):
| | | For the year ended December 31, |
| | | | 2004 | | | 2003 | | | Change | |
| | | | | | | | | | | |
| Total rental revenue | | $ | 229,857 | | $ | 180,295 | | | 27.5 | % |
| Property operating expenses | | $ | 60,402 | | $ | 51,728 | | | 16.8 | % |
| Rental property depreciation and amortization | | $ | 35,910 | | $ | 26,411 | | | 36.0 | % |
| General and administrative expenses | | $ | 16,601 | | $ | 11,046 | | | 50.3 | % |
| Interest expense | | $ | | | $ | | | | | % |
| | | | | | | | | | | |
Total rental revenue increased by $49.6 million, or 27.5%, to $229.9 million in 2004 from $180.3 million in 2003. The following factors accounted for this difference:
| · | Properties acquired during 2004 increased rental revenue by approximately $15.9 million; |
| · | The full year 2004 benefited from properties acquired during 2003 which increased rental revenue by approximately $18.3 million; |
| · | The acquisition of IRT increased rental revenue by approximately $11.4 million; |
| · | The completion of development and redevelopment properties increased rental revenue by $2.4 million; and |
| · | Same property rental revenue increased by $1.5 million in 2004 due to higher occupancy at the centers and increases in rental rates. |
Property operating expenses increased by $8.7 million, or 16.8%, to $60.4 million for 2004 from $51.7 million in 2003. The following factors accounted for this difference:
| · | Properties acquired during 2004 increased operating expenses by approximately $3.6 million; |
| · | Properties acquired during 2003 increased the full year 2004 operating expenses by $3.4 million; |
| · | The acquisition of IRT increased operating expenses by approximately $1.3 million; |
| · | The completion of development and redevelopment properties increased operating expenses by $594,000; and |
| · | Same property operating expenses decreased by $165,000 as a result of lower property maintenance expenses. |
Rental property depreciation and amortization increased by $9.5 million, or 36.0%, to $35.9 million for 2004 from $26.4 million in 2003. The following factors accounted for this difference:
| · | Properties acquired during 2004 increased depreciation and amortization by $2.9 million; |
| · | Properties acquired during 2003 increased full year 2004 depreciation and amortization expense by $2.3 million; |
| · | The acquisition of IRT increased depreciation and amortization expense by approximately $2.8 million; |
| · | Completion of development and redevelopment properties increased depreciation and amortization by $1.2 million; and |
| · | Same property depreciation and amortization increased by $276,000 related to leasing and tenant improvement amortization. |
General and administrative expenses increased by $5.6 million, or 50.3%, to $16.6 million for 2004 from $11.0 million in 2003. Compensation and employer related expenses increased by $3.3 million, including $2.4 million of deferred compensation expense associated with the issuance of restricted stock that vests over time and $700,000 of compensation and related expenses due to an increase of staffing. The 2004 general and administrative expenses also included an increase in professional fees of $860,000 related to the compliance with the Sarbanes-Oxley Act of 2002 and a write off of $1.1 million of pre-acquisition due diligence costs related to a corporate transaction that did not materialize
Interest expense increased by $9.6 million, or 26.1%, to $46.4 million for 2004 from $36.8 million in 2003. This difference was primarily due to:
| · | An increase of $5.9 million attributable to the $200 million unsecured senior notes issued in March 2004; |
| · | Interest incurred on the assumption of debt related to the acquisition of properties during 2004 increased interest by $1.8 million; |
| · | Properties acquired during 2003, including the acquisition of IRT, increased interest expense by $2.9 million due to assumption of mortgage loans; |
| · | Interest incurred on same properties decreased by $508,000 due to the repayment of certain existing mortgage notes; |
| · | Interest on the revolving credit facilities decreased by $109,000 due to repayment of outstanding balances received from the proceeds upon the issuance of the senior notes and decreased borrowing activities; and |
| · | Capitalized interest decreased due to the completion of development and redevelopment activities which increased interest expense by $618,000. |
We sold 14 properties including one property held by a joint venture, and have one property held for sale at December 31, 2004. The $4.3 million operating results of these properties are reflected as income from rental properties sold or held for sale. The sales of the properties produced gains of $22.2 million for 2004. The 2003 discontinued operations of $6.8 million reflect a reclassification of operations for properties sold during 2003 and 2004. We recognized gains of $3.1 million in 2003 related to the sales of properties during 2003.
During 2004, the limited partners of IRT Partners LP elected to convert their partnership interest for our common stock. This conversion resulted in a decrease in the minority interest.
As a result of the foregoing, net income increased by $34.2 million, or 53.7%, to $97.8 million for 2004 from $63.6 million in 2003.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002.
The following summarizes items from our audited condensed consolidated statements of operations that we think are important in understanding our operations and/or those items which significantly changed in 2003 compared to 2002 (in thousands):
| | | For the year ended December 31, |
| | | | 2003 | | | 2002 | | | % Change | |
| | | | | | | | | | | |
| Total rental revenue | | $ | 180,295 | | $ | 93,569 | | | 92.7 | % |
| Property operating expenses | | $ | 51,728 | | $ | 28,849 | | | 79.3 | % |
| Rental property depreciation and amortization | | $ | 26,411 | | $ | 12,563 | | | 110.2 | % |
| General and administrative expenses | | $ | | | $ | 6,648 | | | 66.2 | % |
| Interest expense | | $ | 36,814 | | $ | 20,889 | | | 76.2 | % |
| | | | | | | | | | | |
Total rental revenue increased by $86.7 million, or 92.7%, to $180.3 million in 2003 from $93.6 million in 2002. The following factors accounted for this difference:
| · | The acquisition of IRT increased rental revenue by approximately $71.9 million; |
| · | Properties acquired during 2003 increased rental revenue by approximately $6.9 million; |
| · | Properties acquired during 2002 increased rental revenue by approximately $2.9 million; |
| · | Same property rental revenue increased by approximately $3.0 million; and |
| · | The completion of development and redevelopment properties increased rental revenue by approximately $2.0 million. |
Property operating expenses increased by $22.9 million, or 79.3%, to $51.7 million for 2003 from $28.8 million in 2002. The following factors accounted for this difference:
| · | The acquisition of IRT increased property operating expenses by approximately $13.9 million and property management expenses by $3.9 million as a result of managing a larger portfolio of properties; |
| · | Properties acquired during 2003 increased operating expenses by approximately $2.1 million; |
| · | Properties acquired during 2002 increased operating expenses by approximately $1.7 million; |
| · | Same property operating expenses increased by approximately $754,000; and |
| · | The completion of development and redevelopment properties increased operating expenses by $494,000. |
Rental property depreciation and amortization increased by $13.8 million, or 110.2%, to $26.4 million for 2003 from $12.6 million in 2002. The following factors accounted for this difference:
| · | The acquisition of IRT increased depreciation and amortization by approximately $10.0 million; |
| · | Properties acquired during 2003 increased depreciation and amortization by approximately $1.4 million; |
| · | Properties acquired during 2002 increased depreciation and amortization by approximately $1.7 million; |
| · | Same property depreciation and amortization increased by $100,000 related to leasing and tenant improvement amortization; and |
| · | The completion of development and redevelopment properties increased depreciation and amortization by $535,000. |
General and administrative expenses increased by $4.4 million, or 66.2%, to $11.0 million for 2003 from $6.6 million in 2002. Compensation and employer related expenses increased by $3.5 million and other general office expenses increased by $918,000. These expense increases were due to the increase in staffing resulting from the IRT acquisition.
Interest expense increased by $15.9 million, or 76.2%, to $36.8 million for 2003 from $20.9 million in 2002. This difference was primarily due to:
| · | An increase in interest expense of $14.6 million as a result of the assumption of mortgage loans and senior notes in the acquisition of IRT; |
| · | An increase of $822,000 attributable to the debt related to the acquisition of properties during 2003; and |
| · | An increase in revolving credit facility interest of $1.9 million primarily related to the acquisition of IRT. |
These increases in interest expense were partially offset by the repayment of nine loans which reduced interest by $806,000 and an increase in capitalized interest related to development activity, which reduced interest expense by $1.4 million.
During 2003, we settled certain mortgage notes at a discount and recognized a loss on the extinguishment of debt of $623,000.
Minority interest increased by $702,000 related to the interests that were assumed as part of the acquisition of IRT.
As a result of the foregoing, net income increased by $23.7 million, or 59.4%, to $63.6 million for 2003 from $39.9 million in 2002.
Liquidity and Capital Resources
We anticipate that cash flows from operating activities will continue to provide adequate capital for dividend payments in accordance with the IRS’ REIT requirements and our operating needs. Depending on capital market conditions, we anticipate using cash on hand, borrowings under our existing unsecured revolving credit facilities, assumptions of mortgages issuance of unsecured public debt and equity as well as other similar financing to provide the necessary capital to meet our needs.
Cash Flows.Net cash provided by operations of $113.1 million for the year ended December 31, 2004 included: (i) net income of $97.8 million, (ii) adjustments for non-cash and gain on sale items which increased cash flow by $12.9 million, and (iii) a net change in operating liabilities over operating assets of $2.4 million, compared to net cash provided by operations of $78.3 million for the year ended December 31, 2003, which included: (i) net income of $63.6 million, (ii) adjustments for non-cash and gain on sale items which increased cash flow by $24.8 million, and (iii) an increase in net operating assets over operating liabilities of $10.1 million.
Net cash used in investing activities of $244.8 million for the year ended December 31, 2004 included: the acquisition of (i) three parcels of land held for future development, and seventeen shopping centers for $255.4 million, (ii) construction, development and other capital improvements of $34.0 million, (iii) increased leasing costs of $6.6 million, (iv) the purchase of securities held for investment of $36.4 million, offset by (a) proceeds from the sale of properties of $72.6 million, (b) distributions from joint ventures of $3.1 million, (c) proceeds from payments of notes receivable of $6.1 million, and (e) proceeds from the sale of securities held for investment of $5.8 million. These amounts should be compared to net cash used in investing activities of $326.2 million for the year ended December 31, 2003 which included: (i) the acquisition of one parcel of land held for future development, an out parcel and ten shopping centers for $156.9 million, (ii) construction, development and other capital improvements of $28.8 million, (iii) the acquisition of IRT for $187.6 million, net of cash received, and (iv) increased leasing costs of $4.5 million, offset by (a) proceeds from the sale of six properties and two joint venture interests of $31.7 million, (b) proceeds from funds escrowed in connection with the sale of properties to utilize tax deferred exchanges of $12.9 million, (c) proceeds from re-payments of notes receivable of $5.1 million, and (d) proceeds from other sources of $1.9 million.
Net cash provided by financing activities of $135.9 million for the year ended December 31, 2004 included: (i) net proceeds from the issuance of senior notes of $199.8 million, (ii) net proceeds from the issuance of common stock of $58.3 million, and (iii) proceeds from the repayment of notes receivable of $3.5 million, offset by (a) the repayment of eight mortgage notes aggregating $15.9 million and monthly principal payments on mortgage notes of $9.8 million, (b) cash dividends paid to common stockholders of $80.9 million, (c) repayments under revolving credit facilities of $15.0 million, (d) an increase in deferred financing costs of $3.1 million related to the issuance of senior notes, and (e) miscellaneous uses of $1.0 million. These amounts should be compared to net cash provided by financing activities of $245.9 million for the year ended December 31, 2003 which included: (i) net borrowings on revolving credit facilities of $139.0 million, less the pay down of $8.0 million on the credit facility assumed in the IRT merger, (ii) net proceeds from the issuance of common stock of $247.5 million, and (iii) proceeds from the repayment of notes receivable of $3.5 million, offset by (a) the repayment of ten mortgage notes aggregating $55.4 million and monthly principal payments on mortgage notes of $8.2 million, (b) cash dividends paid to common stockholders of $70.7 million, and (c) other miscellaneous uses of $1.8 million.
Debt. The following is a summary of our borrowings consisting of mortgage notes payable, unsecured senior notes payable and unsecured revolving credit facilities (in thousands):
| | December 31, |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
Mortgage Notes Payable | | | | | | | |
| Fixed rate mortgage loans | | $ | 495,056 | | $ | 459,103 | |
| Unamortized net premium on mortgage notes payable | | | 12,721 | | | 11,779 | |
| | | | | | | | |
Total | | $ | 507,777 | | $ | 470,882 | |
| | | | | | | | |
The weighted average interest rate at December 31, 2004 and 2003 was 7.26% and 7.45%, respectively, excluding the effects of the net premium adjustment.
Each of the existing mortgage loans is secured by a mortgage on one or more of our properties. Certain of the mortgage loans involving an aggregate principal balance of approximately $168.6 million contain prohibitions on transfers of ownership which may have been violated by our previous issuances of common stock or in connection with past acquisitions and may be violated by transactions involving our capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. To date, no lender has notified us that it intends to accelerate its mortgage. In the event that the mortgage holders declare defaults under the mortgage documents, we will, if required, prepay the remaining mortgage from existing resources, refinancing of such mortgages, borrowings under our other lines of credit or other sources of financing. Based on discussions with various lenders, current credit market conditions and other factors, we believe that the mortgages will not be accelerated. Accordingly, we believe that the violations of these prohibitions will not have a material adverse impact on our results of operations or financial condition.
| | December 31, |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
Unsecured Senior Notes Payable | | | | | | | |
| | | | | | | | |
| 7.77% Senior Notes, due 4/1/06 | | $ | 50,000 | | $ | 50,000 | |
| 7.25% Senior Notes, due 8/15/07 | | | 75,000 | | | 75,000 | |
| 3.875% Senior Notes, due 4/15/09 | | | 200,000 | | | - | |
| 7.84% Senior Notes, due 1/23/12 | | | 25,000 | | | 25,000 | |
| Fair value of interest rate swap | | | (2,739 | ) | | - | |
| Unamortized net premium on unsecured senior notes payable | | | 8,882 | | | 12,439 | |
| | | | | | | | |
Total | | $ | 356,143 | | $ | 162,439 | |
| | | | | | | | |
We swapped $100 million of the $200 million notes to a floating interest rate based on the 6-month LIBOR in arrears plus 0.4375%. The weighted average interest rate at December 31, 2004 and 2003 was 5.12% and 7.55%, respectively, excluding the effects of the interest rate swap and net premium adjustment.
The indentures under which the notes were issued have several covenants which limit our ability to incur debt; require us to maintain unencumbered asset ratios and limit our ability to consolidate, sell, lease, or convey substantially all of our assets to, or merge with any other entity. These notes have also been guaranteed by most of our subsidiaries. The interest rate on the 7.77% senior notes is subject to a 50 basis point increase if we do not maintain an investment grade debt rating. Currently our unsecured senior debt is rated investment grade by Moody's at Baa3 and Standard & Poor's at BBB-, both with a stable outlook.
| | | December 31, |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
Unsecured Revolving Credit Facilities | | | | | | | |
| | | | | | | | |
| Wells Fargo | | $ | 147,000 | | $ | 162,000 | |
| City National Bank | | | - | | | - | |
| | | | | | | | |
Total | | $ | 147,000 | | $ | 162,000 | |
| | | | | | | | |
We have entered into a $340 million unsecured revolving credit facility with a syndicate of banks for which Wells Fargo Bank, National Association is the sole lead arranger and administrative agent. This facility bears interest at our option at (i) LIBOR plus 0.65% to 1.35%, depending on the credit ratings of our senior unsecured long term notes, or (ii) at the greater of (x) Wells Fargo’s prime rate and (y) the Federal Funds Rate plus 0.5%. The facility is guaranteed by most of our subsidiaries. Based on our current rating, the LIBOR spread is 1.0%. The facility also includes a competitive bid option which allows us to conduct auctions among the participating banks for borrowings in an amount not to exceed $170 million, a $35 million swing line facility for short term borrowing and a $20 million letter of credit commitment and may, at our request, be increased up to a total commitment of $400 million. The facility expires February 12, 2006 with a one-year extension option. In addition, the facility contains customary covenants, including financial covenants regarding debt levels, total liabilities, interest coverage, EBITDA coverage ratios, unencumbered properties and permitted investments. The facility also prohibits stockholder distributions in excess of 95% of funds from operations calculated at the end of each fiscal quarter for the four fiscal quarters then ending. Notwithstanding this limitation, we can make stockholder distributions to avoid income taxes on asset sales. If a default under the facility exists, our ability to pay dividends would be limited to the amount necessary to maintain the Company’s status as a REIT unless the default is a payment default or bankruptcy event in which case we would be prohibited from paying any dividends. The weighted average interest rate as of December 31, 2004 and 2003 was 2.80% and 2.06%, respectively.
We also have a $5.0 million unsecured credit facility with City National Bank of Florida, of which there was no outstanding balance as of December 31, 2004 and 2003. This facility also provides collateral for $1.3 million in outstanding letters of credit.
As of December 31, 2004, the availability under the various credit facilities was approximately $25.8 million, net of outstanding balances and letters of credit.
At December 31, 2004, our fully diluted market capitalization totaled $2.75 billion, comprising 74.3 million shares of common stock and $986.9 million of net debt (excluding any unamortized fair market premium/discount and net of cash). Our ratio of net debt to total market capitalization was 35.9%, and our ratio of net debt to gross real estate cost and securities investments was 49.2%.
Our debt level could subject us to various risks, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, and the risk that the resulting reduced financial flexibility could inhibit our ability to develop or improve our rental properties, withstand downturns in our rental income or take advantage of business opportunities. In addition, because we currently anticipate that only a small portion of the principal of our indebtedness will be repaid prior to maturity, it is expected that it will be necessary to refinance the majority of our debt. Accordingly, there is a risk that such indebtedness will not be able to be refinanced or that the terms of any refinancing will not be as favorable as the terms of our current indebtedness.
The following table sets forth certain information regarding our indebtedness as of December 31, 2004 (dollars in thousands):
Property | | Balance at December 31, 2004 | | Interest Rate(1) | | Maturity Date | | Balance Due at Maturity | |
| | | | | | | | | | |
Fixed Rate Mortgage Debt | | | | | | | | | |
| | | | | | | | | | |
| Lantana Village | | $ 3,512 | | 6.950% | | 03/15/05 | | $ 3,498 | |
| Woodruff | | 2,969 | | 7.580% | | 05/10/05 | | 2,913 | |
| Elmwood Oaks | | 7,500 | | 8.375% | | 06/01/05 | | 7,500 | |
| Benchmark Crossing | | 3,226 | | 9.250% | | 08/01/05 | | 3,170 | |
| Sterling Plaza | | 3,874 | | 8.750% | | 09/01/05 | | 3,794 | |
| Townsend Square | | 4,768 | | 8.500% | | 10/01/05 | | 4,703 | |
| Green Oaks | | 2,937 | | 8.375% | | 11/01/05 | | 2,861 | |
| Melbourne Plaza | | 1,698 | | 8.375% | | 11/01/05 | | 1,654 | |
| Walden Woods | | 2,272 | | 7.875% | | 08/01/06 | | 2,071 | |
| Big Curve | | 5,310 | | 9.190% | | 10/01/06 | | 5,059 | |
| Highland Square | | 3,951 | | 8.870% | | 12/01/06 | | 3,743 | |
| Park Northern | | 2,182 | | 8.370% | | 12/01/06 | | 1,963 | |
| Crossroads Square | | 12,324 | | 8.440% | | 12/01/06 | | 11,922 | |
| Rosemeade | | 3,109 | | 8.295% | | 12/01/07 | | 2,864 | |
| Colony Square | | 2,976 | | 7.540% | | 01/01/08 | | 2,834 | |
| Parkwood | | 6,110 | | 7.280% | | 01/01/08 | | 5,805 | |
| Richwood | | 3,147 | | 7.280% | | 01/01/08 | | 2,990 | |
| Commonwealth | | 2,636 | | 7.000% | | 02/15/08 | | 2,217 | |
| Mariners Crossing | | 3,332 | | 7.080% | | 03/01/08 | | 3,154 | |
| Pine Island/Ridge Plaza | | 24,582 | | 6.910% | | 07/01/08 | | 23,104 | |
| Forestwood | | 7,128 | | 5.070% | | 01/01/09 | | 6,406 | |
| Shoppes of North Port | | 4,008 | | 6.650% | | 02/08/09 | | 3,526 | |
| Prosperity Centre | | 6,022 | | 7.875% | | 03/01/09 | | 4,137 | |
| Shoppes of Ibis | | 5,687 | | 6.730% | | 09/01/09 | | 4,680 | |
| Tamarac Town Square | | 6,122 | | 9.190% | | 10/01/09 | | 5,583 | |
| Park Promenade | | 6,241 | | 8.100% | | 02/01/10 | | 5,833 | |
| Skipper Palms | | 3,526 | | 8.625% | | 03/01/10 | | 3,318 | |
| Jonathan’s Landing | | 2,868 | | 8.050% | | 05/01/10 | | 2,639 | |
| Bluff’s Square | | 10,005 | | 8.740% | | 06/01/10 | | 9,401 | |
| Kirkman Shoppes | | 9,448 | | 8.740% | | 06/01/10 | | 8,878 | |
| Ross Plaza | | 6,589 | | 8.740% | | 06/01/10 | | 6,192 | |
| Boynton Plaza | | 7,423 | | 8.030% | | 07/01/10 | | 6,902 | |
| Pointe Royale | | 4,284 | | 7.950% | | 07/15/10 | | 2,502 | |
| Westgate | | 29,625 | | 4.880% | | 07/31/10 | | 26,702 | |
| Shops at Skylake | | 14,266 | | 7.650% | | 08/01/10 | | 11,644 | |
| | | | | | | | | | |
| Property | | Balance at December 31, 2004 | | Interest Rate(1) | | Maturity Date | | Balance Due at Maturity | |
| | | | | | | | | | |
| Parkwest Crossing | | $ 4,684 | | 8.100% | | 09/01/10 | | $ 4,352 | |
| Spalding Village | | 10,231 | | 8.190% | | 09/01/10 | | 7,932 | |
| Minyards | | 2,473 | | 8.320% | | 11/01/10 | | 2,175 | |
| Charlotte Square | | 3,550 | | 9.190% | | 02/01/11 | | 2,992 | |
| Forest Village | | 4,441 | | 7.270% | | 04/01/11 | | 4,044 | |
| Boca Village | | 8,211 | | 7.200% | | 05/01/11 | | 7,466 | |
| MacLand Pointe | | 5,798 | | 7.250% | | 05/01/11 | | 5,267 | |
| Pine Ridge Square | | 7,273 | | 7.020% | | 05/01/11 | | 6,579 | |
| Sawgrass Promenade | | 8,211 | | 7.200% | | 05/01/11 | | 7,466 | |
| Presidential Markets | | 27,159 | | 7.650% | | 06/01/11 | | 24,863 | |
| Lake Mary | | 24,282 | | 7.250% | | 11/01/11 | | 21,973 | |
| Lake St. Charles | | 3,833 | | 7.130% | | 11/01/11 | | 3,461 | |
| Belfair Towne Village | | 11,197 | | 7.320% | | 12/01/11 | | 9,322 | |
| Marco Town Center | | 8,578 | | 6.700% | | 01/01/12 | | 7,150 | |
| Riverside Square | | 7,589 | | 9.190% | | 03/01/12 | | 6,458 | |
| Sparkleberry Square | | 6,655 | | 6.170% | | 11/30/12 | | 5,374 | |
| Cashmere | | 5,141 | | 5.880% | | 11/01/12 | | 4,084 | |
| Eastwood | | 6,126 | | 5.880% | | 11/01/12 | | 4,866 | |
| Meadows | | 6,438 | | 5.870% | | 11/01/12 | | 5,113 | |
| Lutz Lake | | 7,500 | | 6.280% | | 12/01/12 | | 7,012 | |
| Summerlin Square | | 3,622 | | 6.750% | | 02/01/14 | | - | |
| Bird Ludlum | | 9,690 | | 7.680% | | 02/15/15 | | - | |
| Treasure Coast | | 4,532 | | 8.000% | | 04/01/15 | | - | |
| Shoppes of Silverlakes | | 2,627 | | 7.750% | | 07/01/15 | | - | |
| Medford | | 5,512 | | 8.690% | | 02/01/16 | | - | |
| Swampscott | | 2,395 | | 8.690% | | 02/01/16 | | - | |
| Plymouth | | 4,029 | | 8.690% | | 02/01/16 | | - | |
| Grassland Crossing | | 5,827 | | 7.870% | | 12/01/16 | | 2,601 | |
| Mableton Crossing | | 4,062 | | 6.850% | | 08/15/18 | | 1,869 | |
| Sparkleberry Square | | 7,918 | | 6.750% | | 06/30/20 | | - | |
| BridgeMill | | 9,395 | | 7.940% | | 05/05/21 | | 3,761 | |
| Westport Plaza | | 4,876 | | 7.490% | | 08/24/23 | | 1,340 | |
| Chastain Square | | 3,821 | | 6.500% | | 02/28/24 | | - | |
| Daniel Village | | 4,177 | | 6.500% | | 02/28/24 | | - | |
| Douglas Commons | | 4,976 | | 6.500% | | 02/28/24 | | - | |
| Fairview Oaks | | 4,710 | | 6.500% | | 02/28/24 | | - | |
| Madison Centre | | 3,821 | | 6.500% | | 02/28/24 | | - | |
| Paulding Commons | | 6,487 | | 6.500% | | 02/28/24 | | - | |
| Siegen Village | | 4,221 | | 6.500% | | 02/28/24 | | - | |
| Wesley Chapel Crossing | | 3,331 | | 6.500% | | 02/28/24 | | - | |
| | | | | | | | | | |
Total Fixed Rate Mortgage Debt (75 loans) | | 495,056 | | 7.26% | | 5.81 years | | $ 363,682 | |
| | | | | (wtd.-avg. interest rate) | | (wtd.-avg. maturity) | | | |
| | | | | | | | | | |
Fixed Rate Unsecured Senior Notes Payable | | | | | | | | | |
| | | | | | | | | | |
| 7.77% senior notes | | 50,000 | | 7.77% | | 04/01/06 | | $ 50,000 | |
| 7.25% senior notes | | 75,000 | | 7.25% | | 08/15/07 | | 75,000 | |
| 3.875% senior notes (2) | | 200,000 | | 3.875% | | 04/15/09 | | 200,000 | |
| 7.84% senior notes | | 25,000 | | 7.84% | | 01/23/12 | | 25,000 | |
| | | | | | | | | | |
Total Fixed Rate Unsecured Senior Notes Payable | | 350,000 | | 5.124 % | | 3.74 years | | $ 350,000 | |
| | | | | (wtd.-avg. interest rate) | | (wtd.-avg. maturity) | | | |
| | | | | | | | | | |
Unsecured Variable Rate Revolving Credit Facilities | | | | | | | | | |
| | | | | | | | | | |
| Wells Fargo | | 147,000 | | 2.80% | | 02/12/06 | | $147,000 | |
| City National Bank | | - | | LIBOR + 1% | | 11/11/2005 | | - | |
| | | | | | | | | | |
Total Unsecured Variable Rate Revolving Credit Facilities | | 147,000 | | | | | | $ 147,000 | |
| | | | | | | | | | |
Total Debt | | $ 992,056 | | | | | | | |
| | | | | | | | | | |
———————————-
| (1) | The rate in effect on December 31, 2004. |
| (2) | $100 million of the outstanding balance has been swapped to a floating interest rate based on the 6 month LIBOR in arrears, plus 0.4375%. The indicated rate and weighted average rate for the unsecured senior notes do not reflect this interest rate swap. |
Our mortgage and outstanding revolving credit facilities indebtedness outstanding at December 31, 2004 will require approximate balloon and scheduled principal payments as follows (in thousands):
| | | Secured Debt | Unsecured Debt | | | |
Year Due | | | Scheduled Amortization | | | Balloon Payments | | | Revolving Credit Facilities | | | Senior Notes | | | Total | |
| | | | | | | | | | | | | | | | | |
| 2005 | | $ | 10,809 | | $ | 30,079 | | $ | - | | $ | - | | $ | 40,888 | |
| 2006 | | | 11,069 | | | 24,758 | | | 147,000 | | | 50,000 | | | 232,827 | |
| 2007 | | | 11,252 | | | 2,864 | | | - | | | 75,000 | | | 89,116 | |
| 2008 | | | 11,391 | | | 40,104 | | | - | | | - | | | 51,495 | |
| 2009 | | | 11,125 | | | 24,332 | | | - | | | 200,000 | | | 235,457 | |
| 2010 | | | 10,224 | | | 98,471 | | | - | | | - | | | 108,695 | |
| 2011 | | | 8,489 | | | 93,433 | | | - | | | - | | | 101,922 | |
| 2012 | | | 7,324 | | | 40,056 | | | - | | | 25,000 | | | 72,380 | |
| 2013 | | | 7,020 | | | - | | | - | | | - | | | 7,020 | |
| 2014 | | | 7,110 | | | 10,015 | | | - | | | - | | | 17,125 | |
| Thereafter | | | 35,131 | | | - | | | - | | | - | | | 35,131 | |
| | | | | | | | | | | | | | | | | |
| Total | | $ | 130,944 | | $ | 364,112 | | $ | 147,000 | | $ | 350,000 | | $ | 992,056 | |
We may not have sufficient funds on hand to repay these balloon amounts at maturity. Therefore, we expect to refinance this indebtedness either through additional mortgage financing secured by individual properties or groups of properties, by unsecured private or public debt offerings or by additional equity offerings. Our results of operations could be affected if the cost of new debt is greater or lesser thanthe cost of the meeting debt. If new financing is not available, we could be required to sell assets and our business would be adversely affected.
Development Activity. As of December 31, 2004, we had over 19 development and redevelopment projects underway or in the planning stage totaling approximately $66.7 million of asset value and requiring approximately $25.0 million to complete based on current plans and estimates. The more significant of these include:
| · | CVS Plaza in Miami, Florida where we are completing the lease up of the local space at a new 29,204 square foot drug store-anchored shopping center that we built across the street from our recently completed Publix supermarket-anchored Plaza Alegre shopping center; |
| · | Shops at Skylake in North Miami Beach, Florida, where we are in the process of adding 29,000 square feet of retail and office space; |
| · | Centre Pointe Plaza in Smithfield, North Carolina and Eustis Square in Eustis, Florida where we have reconfigured and redeveloped previously vacant anchor and other space and are completing the associated lease-up; and |
| · | The development of two supermarket-anchored shopping centers, one in Homestead, Florida and the other in McDonough, Georgia, both on parcels of land we currently own. |
These developments and redevelopments are scheduled for completion between early 2005 and the end of 2006.
Shelf Registration. We have filed universal shelf registration statements with the Securities and Exchange Commission, which will permit us, from time to time, to offer and sell various types of securities, including common stock, preferred stock, debt securities, depositary shares and warrants. The registration statements provide us additional flexibility in accessing capital markets to fund future growth and for general corporate purposes. We now have approximately $503 million of availability under our existing shelf registration statements.
Equity.For the year ended December 31, 2004, we issued 620,468 shares of our common stock pursuant to the exercise of stock options at prices ranging from $9.24 to $16.22 per share. We also issued 2.7 million shares of common stock at prices ranging from $16.83 to $23.67 per share pursuant to our Divided Reinvestment and Stock Purchase Plan. As of December 31, 2004, we have 7.0 million shares remaining for sale under our Dividend Reinvestment and Stock Purchase Plan.
Future Capital Requirements. We believe, based on currently proposed plans and assumptions relating to our operations, that our existing financial arrangements, together with cash generated from our operations, will be sufficient to satisfy our cash requirements for a period of at least twelve months. In the event that our plans change, our assumptions change or prove to be inaccurate or cash flows from operations or amounts available under existing financing arrangements prove to be insufficient to fund our expansion and development efforts or to the extent we discover suitable acquisition targets the purchase price of which exceeds our existing liquidity, we would be required to seek additional sources of financing. There can be no assurance that any additional financing will be available on acceptable terms or at all, and any future equity financing could be dilutive to existing stockholders. If adequate funds are not available, our business operations could be materially adversely affected.
Distributions. We believe that we currently qualify, and intend to continue to qualify in the future, as a REIT under the Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to stockholders. As distributions have exceeded taxable income, no provision for federal income taxes has been made. While we intend to continue to pay dividends to our stockholders, we also will reserve such amounts of cash flow as we consider necessary for the proper maintenance and improvement of our real estate and other corporate purposes while still maintaining our qualification as a REIT. Our cash distributions for the year ended December 31, 2004 were $80.9 million.
In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This statement establishes standards for the classification and measurement of financial instruments that possess characteristics similar to both liability and equity instruments. SFAS No. 150 also addresses the classification of certain financial instruments that include an obligation to issue equity shares. On October 29, 2003, the FASB voted to defer, for an indefinite period, the application of the guidance in FASB Statement No. 150,Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. We have adopted certain provisions of SFAS No. 150 which did not have a material impact on our financial position or results of operations. We are still evaluating the potential impact of the provisions of SFAS 150 that have been deferred to future periods.
In December 2004, the FASB issued SFAS No. 123 (revised 2004),Share-Based Payment, which is a revision of SFAS 123,Accounting for Stock-Based Compensation. Generally, the approach in SFAS 123 (R) is similar to the approach described in SFAS 123. However, SFAS 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The new standard will be effective for public entities (excluding small business issuers) in the first interim or annual reporting period beginning after June 15, 2005, irrespective of the entity’s fiscal year. Early adoption is permitted in periods in which financial statements have not yet been issued. SFAS 123 (R) allows for two transition alternatives for public companies: (a) modified-prospective transition or (b) modified-retrospective transition. Under the modified-prospective transition method, companies are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. Measurement and attribution of compensation cost for awards that were granted prior to, but not vested as of the date SFAS 123 (R) is adopted would be based on the same estimate of the grant-date fair value and the same attribution method used previously under SFAS 123 (either for financial statement recognition or pro forma disclosure purposes). Prior periods are not restated. For periods prior to adoption, the financial statements are unchanged (and the pro forma disclosures previously required by SFAS 123 continue to be required under the new Standard to the extent those amounts differ from those in the income statement). For periods subsequent to adoption, the impact of this transition method generally is the same as if the modified-retrospective method were applied. Accordingly, pro forma disclosure will not be necessary for periods after the adoption of the new Standard. Under the modified-retrospective transition method, companies are allowed to restate prior periods by recognizing compensation cost in the amounts previously reported in the pro forma footnote disclosure under the provisions of SFAS 123. New awards and unvested awards would be accounted for in the same manner as the modified-prospective method. Because of the mid-year effective date, companies are permitted to apply the modified-retrospective transition alternative either (a) to all periods presented or (b) to the start of the fiscal year in which SFAS 123 (R) is adopted. We are currently evaluating the different alternatives. Had we adopted SFAS 123 in 2004, our diluted earnings per share would have been $0.01 lower.
In December of 2004, the FASB issued Statement 153,Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,Accounting for Nonmonetary Transactions. The guidance in APB Opinion No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. Statement 153 amends Opinion 29 by eliminating the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement shall be applied prospectively and is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. This pronouncement is prospective and has no effect on the Company’s financial position or results of operations as of December 31, 2004.
Environmental Matters
We are subject to numerous environmental laws and regulations. The operation of dry cleaning facilities at our shopping centers is the principal environmental concern. We require that the tenants who operate these facilities do so in material compliance with current laws and regulations and we have established procedures to monitor their operations. Additionally, we use all legal means to cause tenants to remove dry cleaning plants from our shopping centers. Where available, we have applied and been accepted into state sponsored environmental programs. Several properties in our portfolio will require or are currently undergoing varying levels of environmental remediation. However, we have environmental insurance policies covering all of our properties. We believe that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity or operations.
Inflation and Recession Considerations
Most of our leases contain provisions designed to partially mitigate the adverse impact of inflation. Most of our leases require the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. A small number of our leases also include clauses enabling us to receive percentage rents based on a tenant’s gross sales above predetermined levels, which sales generally increase as prices rise, or escalation clauses which are typically related to increases in the Consumer Price Index or similar inflation indices.
Our financial results are affected by general economic conditions in the markets in which our properties are located. An economic recession, or other adverse changes in general or local economic conditions, could result in the inability of some of our existing tenants to meet their lease obligations and could otherwise adversely affect our ability to attract or retain tenants. Supermarkets, drugstores and other anchor tenants that offer day-to-day necessities rather than luxury items anchor our existing properties. These types of tenants, in our experience, generally maintain more consistent sales performance during periods of adverse economic conditions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Interest Rate Risk
The primary market risk to which we have exposure is interest rate risk. Changes in interest rates can affect our net income and cash flows. As changes in market conditions occur and interest rates increase or decrease, interest expense on the variable component of our debt will move in the same direction. We intend to utilize variable rate indebtedness available under our unsecured revolving credit facilities in order to initially fund future acquisitions, development costs and for other operating needs. With respect to our fixed rate mortgage notes and fixed rate senior unsecured notes, changes in interest rates generally do not affect our interest expense as these notes are predominantly at fixed rates for extended terms. Because we intend to hold our existing fixed rate obligations either to maturity or until the sale of the associated property, these fixed rate obligations do not pose an interest rate risk to our results of operations or our working capital position, except upon the refinancing of these obligations. Another possible risk is from increases in long-term interest rates that may occur over a period of several years, as this may decrease the overall value of our real estate.
As of December 31, 2004, we had approximately $247.0 million of outstanding floating rate debt, including $100 million of fixed rate borrowings that we have converted to floating rate borrowings through the use of hedging agreements. We do not believe that the interest rate risk represented by our floating rate debt is material as of December 31, 2004, in relation to our $992.1 million of outstanding debt, our $1.9 billion of total assets and the $2.7 billion total market capitalization as of that date.
If interest rates on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $2.47 million. If interest rates on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $2.47 million. This assumes that the amount outstanding under our variable rate debt remains at approximately $247.0 million (including the $100 million of fixed rate debt converted to floating rate debt through the use of hedging agreements), the balance as of December 31, 2004.
The fair value of our fixed rate debt is $782.8 million, which includes the mortgage notes and fixed rate portion of the senior unsecured notes payable (excluding the unamortized premium/discount). If interest rates increase by 1%, the fair value of our total fixed rate debt would decrease by approximately $78.2 million. If interest rates decrease by 1%, the fair value of our total outstanding fixed rate debt would decrease by approximately $720,000. This assumes that our total outstanding fixed rate debt remains at $745.1 million, the balance as of December 31, 2004.
Hedging Activities
To manage, or hedge, our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative instruments for speculative purposes. We require that the hedges or derivative financial instruments be effective in managing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential to qualify for hedge accounting. Hedges that meet these hedging criteria are formally designated as such at the inception of the contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, resulting in some ineffectiveness, the change in the fair value of the derivative instrument will be included in earnings. Additionally, any derivative instrument used for risk management that becomes ineffective is marked-to-market each period.
The Company is exposed to credit risk, in the event of non-performance by the counter-parties to the hedge agreements. The Company believes that it mitigates its credit risk by entering into these agreements with major financial institutions. Net interest differentials to be paid or received under a swap contract and/or collar agreement are included in interest expense as incurred or earned.
During 2004, the Company entered into a $100 million notional principal variable rate interest swap with an estimated fair value of $2.7 million at December 31, 2004. This swap converted fixed rate debt to variable rate based on the 6 month LIBOR in arrears plus 0.4375%, and matures April 15, 2009.
The estimated fair value of the derivative financial instrument has been determined, using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value.
As of December 31, 2004, we had no material exposure to any other market risks (including foreign currency exchange risk, commodity price risk or equity price risk).
For purposes of the Securities and Exchange Commission's market risk disclosure requirements, we have estimated the fair value of our financial instruments at December 31, 2004. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2004. Although management is not aware of any factors that would significantly affect the estimated fair value amounts as of December 31, 2004, future estimates of fair value and the amounts which may be paid or realized in the future may differ significantly from amounts presented.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation S-X are included in this Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(d) under the Securities Exchange Act of 1934, as amended, as of December 31, 2004, the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the December 31, 2004 that our disclosure controls and procedures were effective at the reasonable assurance level such that the information relating to us and our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (SEC) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There has been no changes made during the quarter ended December 31, 2004 to the Company’s internal controls over financial reporting that have materially affected or is reasonably likely to materially affect controls.
Management’s report on its assessment of the effectiveness of the Company’s internal control over financial reporting as of the end of 2004 is incorporated by reference to such report included in this Form 10-K on page F-1.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Equity Compensation Plan Information
The following table sets forth information regarding securities authorized for issuance under equity compensation plans as of December 31,2004.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| | (a) | (b) | (c) |
Equity compensation plans approved by security holders(1) | 1,481,330 | $14.52 | 2,822,064 |
| Equity compensation plans not approved by security holders | - | - | - |
| Total | 1,481,330 | $14.52 | 2,822,064 |
| (1) | Includes information related to our 1995 Stock Option Plan, 2000 Executive Incentive Compensation Plan, 1989 IRT Stock Option Plan and 1998 IRT Long-Term Incentive Plan. |
The other information required by this item is incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.
ITEM 13. CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end our fiscal year covered by this Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required and the audit committee’s pre-approval policies regarding the engagement of the principal accountants are incorporated by reference from our definitive proxy statement to be filed within 120 days after the end our fiscal year covered by this Form 10-K.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following consolidated financial information is included as a separate section of this Form 10-K:
| | 1. Financial Statements: | |
| | | Page |
| | | |
| | Management Report on Internal Control Over Financial Reporting | F-1 |
| | Report of Independent Registered Public Accounting Firm | F-2 |
| | Report of Independent Registered Public Accounting Firm on Financial Reporting | F-4 |
| | Consolidated Balance Sheets as of December 31, 2004 and 2003 | F-5 |
| | Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002 | F-6 - F-7 |
| | Consolidated Statements of Comprehensive Incomefor the years ended December 31, 2004, 2003 and 2002 | F-8 |
| | Consolidated Statements of Stockholders’ Equityfor the years ended December 31, 2004, 2003 and 2002 | F-9 |
| | Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 | F-10 - F-11 |
| | Notes to the Consolidated Financial Statements | F-12 - F-36 |
| | | |
| 2. Financial statement schedules required to be filed | |
| | Schedule III - Real Estate Investments and Accumulated Depreciation | F-37 |
| | Schedules I, II, IV and V are not required to be filed. | |
| | | |
(b) Exhibits: The following exhibits are filed as part of, or incorporated by reference into, this annual report.
EXHIBIT NO. | DESCRIPTION |
| | |
| 3.1 | Composite Charter of the Company (Exhibit 3.1) (1) |
| 3.2 | Amended and Restated Bylaws of the Company (Exhibit 3.2) (2) |
| 4.1 | Indenture dated November 9, 1995 between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4(c)) (3) |
| 4.2 | Supplemental Indenture No. 1, dated March 26, 1996, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4) (4) |
| 4.3 | Supplemental Indenture No. 2, dated August 15, 1997, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4) (5) |
| 4.4 | Supplemental Indenture No. 3, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.1) (6) |
| 4.5 | Supplemental Indenture No. 4, dated November 1, 1999, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.1) (7) |
| 4.6 | Supplemental Indenture No. 5, dated February 12, 2003, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (8) |
| 4.6 | Supplemental Indenture No. 6, dated April 23, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2) (9) |
| 4.7 | Indenture, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.2) (6) |
| 4.8 | Supplemental Indenture No. 1, dated September 9, 1998, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.3) (6) |
| 4.9 | Supplemental Indenture No. 2, dated November 1, 1999, between the Company, as successor-by-merger to IRT Property Company, and SunTrust Bank, as Trustee (Exhibit 4.5) (7) |
| 4.10 | Supplemental Indenture No. 3, dated February 12, 2003, between the Company and SunTrust Bank, as Trustee (Exhibit 4.2) (8) |
| 4.11 | Supplemental Indenture No. 4, dated March 26, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (10) |
| 4.12 | Supplemental Indenture No. 5, dated April 23, 2004, between the Company and SunTrust Bank, as Trustee (Exhibit 4.1) (9) |
| 10.1 | Form of Indemnification Agreement |
| 10.2 | 1995 Stock Option Plan, as amended (11)* |
| 10.3 | Amended and Restated 2000 Executive Incentive Plan (Annex A) (12)* |
| 10.4 | Form of Stock Option Agreement for stock options awarded under the Amended and Restated 2000 Executive Incentive Plan (Exhibit 10.3) (21)* |
| 10.5 | Form of Restricted Stock Agreement for restricted stock awarded under the Amended and Restated 2000 Executive Incentive Plan (Exhibit 10.4) (21)* |
| 10.6 | IRT 1989 Stock Option Plan, assumed by the Company (13)* |
| 10.7 | IRT 1998 Long-Term Incentive Plan, assumed by the Company (14)* |
| 10.8 | 2004 Employee Stock Purchase Plan (Annex B) (12)* |
| 10.9 | Registration Rights Agreement, dated as of January 1, 1996 by and among the Company, Chaim Katzman, Gazit Holdings, Inc., Dan Overseas Ltd., Globe Reit Investments, Ltd., Eli Makavy, Doron Valero and David Wulkan, as amended. (Exhibit 10.6, Amendment No. 3) (15) |
| 10.10 | Stock Exchange Agreement dated May 18, 2001 among the Company, First Capital Realty Inc. and First Capital America Holding Corp (16) |
| | |
| 10.11 | Use Agreement, regarding use of facilities, by and between Gazit (1995), Inc. and the Company, dated January 1, 1996. (Exhibit 10.15, Amendment No. 1) (15) |
| 10.12 | Subscription Agreement, dated October 4, 2000, made by Alony Hetz Properties & Investments, Ltd. (Exhibit 10.13) (17) |
| 10.13 | Stockholders Agreement, dated October 4, 2000, among the Company, Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (Exhibit 10.14) (17) |
| EXHIBIT NO. | DESCRIPTION |
| | |
| 10.14 | First Amendment to Stockholders Agreement, dated December 19, 2001, among the Company Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (Exhibit 10.15) (17) |
| 10.15 | Second Amendment to Stockholders Agreement, dated October 28, 2002, among the Company Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (18) |
| 10.16 | Third Amendment to Stockholders Agreement, dated May 23, 2003, among the Company Alony Hetz Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc. (9) |
| 10.17 | Amended and Restated Employment Agreement dated effective as of January 1, 2002 between the Company and Chaim Katzman (Exhibit 10.1) (1)* |
| 10.18 | First Amendment to Amended and Restated Employment Agreement, dated September 1, 2003, with Chaim Katzman (Exhibit 10.1) (19)* |
| 10.19 | Amended and Restated Employment Agreement dated effective as of January 1, 2002 between the Company and Doron Valero (Exhibit 10.2) (1)* |
| 10.20 | First Amendment to Amended and Restated Employment Agreement, dated September 1, 2003, with Doron Valero (Exhibit 10.2) (19)* |
| 10.21 | Second Amended and Restated Employment Agreement, dated September 1, 2003, between the Company and Howard M. Sipzner (Exhibit 10.1) (20)* |
| 10.22 | Employment Letter, dated March 11, 2003, by and between Alan Merkur and the Company (Exhibit 10.5) (21)* |
| 10.23 | Employment Letter, dated March 24, 2003, by and between Arthur L. Gallagher and the Company (Exhibit 10.6) (21)* |
| 10.24 | Registration Rights Agreement, dated October 28, 2002, between the Company and certain Purchasers (Exhibit 99.3) (22) |
| 10.25 | Credit Agreement, dated February 7, 2003, among the Company, each of the financial institutions initially a signatory thereto; Commerzbank AG New York and Grand Cayman Branches, Keybank National Association and Southtrust Bank, as Documentary Agents; and Wells Fargo Bank, National Association, as Sole Lead Arranger and Administration Agent (Exhibit 10.1) (10) |
| 10.25 | Amendment No. 1 to Credit Agreement, dated as of March 18, 2004, among Equity One, Inc., Wells Fargo Bank, National Association, in its capacity as contractual representative of the lenders named therein (Exhibit 10.1) (23) |
| 10.26 | Amendment No. 2 to Credit Agreement, dated as of July 19, 2004, among Equity One, Inc., Wells Fargo Bank, National Association, in its capacity as contractual representative of the lenders named therein (Exhibit 10.1) (24) |
| 10.27 | Clarification Agreement and Protocol, dated as of January 1, 2004, among Equity One, Inc. and Gazit-Globe (1982), Ltd. (Exhibit 10.2) (23) |
| 12.1 | Ratios of Earnings to Fixed Charges |
| 21.1 | List of Subsidiaries of the Registrant |
| 23.1 | Consent of Deloitte & Touche LLP |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002 |
*Identifies employee agreements, management contracts, compensatory plans or other arrangements.
| (1) | Previously filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended June 30, 2002, and incorporated by reference herein. |
| (2) | Previously filed as an exhibit to our Annual Report on Form 10-K for the period ended December 31, 2003, and incorporated by reference herein. |
| (3) | Previously filed by IRT Property Company as an exhibit to IRT’s Annual Report on Form 10-K for the period ending December 31, 1995, and incorporated by reference herein. |
| (4) | Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on March 26, 1996, and incorporated by reference herein. |
| (5) | Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on August 13, 1997, and incorporated by reference herein. |
| (6) | Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on September 15, 1998, and incorporated by reference herein. |
| (7) | Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on November 12, 1999, and incorporated by reference herein. |
| (8) | Previously filed as an exhibit to our Current Report on Form 8-K filed on February 20, 2003, and incorporated by reference herein. |
| (9) | Previously filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended March 31, 2004, and incorporated by reference herein. |
| (10) | Previously filed as an exhibit to our Current Report on Form 8-K filed on March 31, 2004, and incorporated by reference herein. |
| (11) | Previously filed with our definitive Proxy Statement for the Annual Meeting of Stockholders held on June 30, 1999, and incorporated herein by reference. |
| (12) | Previously filed with our definitive Proxy Statement for the Annual Meeting of Stockholders held on May 21, 2004, and incorporated herein by reference. |
| (13) | Previously filed by IRT Property Company as an exhibit to IRT’s Current Report on Form 8-K filed on March 22, 1989, and incorporated herein by reference. |
| (14) | Previously filed by IRT Property Company with IRT’s definitive Proxy Statement for the Annual Meeting of Stockholders held on May 22, 1998, and incorporated herein by reference. |
| (15) | Previously filed with our Registration Statement on Form S-11, as amended (Registration No. 333-3397), and incorporated herein by reference. |
| (16) | Previously filed as Appendix A to our definitive Proxy Statement for the Special Meeting of Stockholders held on September 6, 2001 and incorporated herein by reference. |
| (17) | Previously filed with our Annual Report Form 10-K/A filed on March 18, 2002, and incorporated herein by reference. |
| (18) | Previously filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended September 30, 2002, and incorporated by reference herein. |
| (19) | Previously filed with our Quarterly Report on Form 10-Q for the period ended September 30, 2003, and incorporated by reference herein. |
| (20) | Previously filed with our Current Report on Form 8-K filed on January 6, 2004, and incorporated by reference herein. |
| (21) | Previously filed with our Current Report on Form 8-K filed on February 18, 2005, and incorporated by reference herein. |
| (22) | Previously filed as Exhibit 2.1 to our Current Report on Form 8-K filed on October 30, 2002, and incorporated by reference herein. |
| (23) | Previously filed as an exhibit to our Current Report on Form 8-K filed on March 16, 2004, and incorporated by reference herein. |
| (24) | Previously filed as an exhibit to our Current Report on Form 8-K filed on July 26, 2004, and incorporated by reference herein. |
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.
| Date: March16, 2005 | EQUITY ONE, INC. |
| | |
| | By: /s/ Chaim Katzman Chaim Katzman |
| | Chairman of the Board and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities, and on the dates indicated.
SIGNATURE | TITLE | DATE |
| | |
/s/Chaim Katzman | Chairman of the Board and | March 16, 2005 |
| Chaim Katzman | Chief Executive Officer | |
| | (Principal Executive Officer) | |
| | | |
/s/ Doron Valero | President, Chief Operating Officer | March 16, 2005 |
| Doron Valero | and Director | |
| | | |
/s/ Howard M. Sipzner Howard M. Sipzner | Executive Vice President and Chief Financial Officer | March 16, 2005 |
| | (Principal Accounting and Financial Officer) | |
| | | |
| /s/ Noam Ben Ozer | Director | March 16, 2005 |
| Noam Ben Ozer | | |
| | | |
/s/ Robert L. Cooney | Director | March 16, 2005 |
| Robert L. Cooney | | |
| | | |
/s/ Patrick L. Flinn | Director | March 16, 2005 |
| Patrick L. Flinn | | |
| | | |
/s/ Nathan Hetz | Director | March 16, 2005 |
| Nathan Hetz | | |
| | | |
/s/ Peter Linneman | Director | March 16, 2005 |
| Peter Linneman | | |
| | | |
/s/ Shaiy Pilpel | Director | March 16, 2005 |
| Dr. Shaiy Pilpel | | |
| | | |
/s/ Dori Segal | Director | March 16, 2005 |
| Dori Segal | | |
| | | |
EQUITY ONE, INC. AND SUBSIDIARIES |
| |
TABLE OF CONTENTS |
| |
| |
| | Page |
| | |
| Management Report on Internal Control Over Financial Reporting | F-1 |
| | |
| Report of Independent Registered Public Accounting Firm | F-2 |
| | |
| Report of Independent Registered Public Accounting Firm | F-4 |
| | |
| Consolidated Balance Sheets as of December 31, 2004 and 2003 | F-5 |
| | |
| Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002 | F-6- F-7 |
| | |
| Consolidated Statements of Comprehensive Income for the years ended December 31, 2004, 2003 and 2002 | F-8 |
| | |
| Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2003 and 2002 | F-9 |
| | |
| Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 | F-10- F-11 |
| | |
| Notes to the Consolidated Financial Statements | F-12- F-36 |
| | |
Management Report on Internal Control Over Financial Reporting
The management of Equity One, Inc. and subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting, which requires the use of certain estimates and judgments, and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Reasonable assurance is based on the premise that the cost of internal controls should not exceed the benefits derived. Reasonable assurance includes the understanding that there is a remote likelihood that material misstatements will not be prevented or detected in a timely manner. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. In making this assessment, the Company’s management used the criteria set forth by the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded that, as of December 31, 2004, the Company’s internal control over financial reporting is effective.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s independent registered public accounting firm has issued an attestation report on our assessment of the Company’s internal control over financial reporting. This report appears on the following page of this Annual Report.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Equity One, Inc.
North Miami Beach, Florida
We have audited management’s assessment, included in the accompanying Managements Report on Internal Control over Financial Reporting, that Equity One, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2004 of the Company and our report dated March 11, 2005 expressed an unqualified opinion on those financial statements and the financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
March 11, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Equity One, Inc.
North Miami Beach, Florida
We have audited the accompanying consolidated balance sheets of Equity One, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
March 11, 2005
EQUITY ONE, INC. ANDSUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
(In thousands, except per share amounts)
| | | | 2004 | | | 2003 | |
ASSETS | | | | | | | |
| | | | | | | | |
| PROPERTIES: | | | | | | | |
| Income producing | | $ | 1,915,216 | | $ | 1,594,579 | |
| Less: accumulated depreciation | | | (95,934 | ) | | (66,406 | ) |
| Income producing property, net | | | 1,819,282 | | | 1,528,173 | |
| | | | | | | | |
| Construction in progress and land held for development | | | 41,759 | | | 74,686 | |
| Property held for sale | | | 12,646 | | | 14,440 | |
| | | | | | | | |
| Properties, net | | | 1,873,687 | | | 1,617,299 | |
| | | | | | | | |
| CASH AND CASH EQUIVALENTS | | | 5,122 | | | 966 | |
| | | | | | | | |
| ACCOUNTS AND OTHER RECEIVABLES, NET | | | 15,699 | | | 13,492 | |
| | | | | | | | |
| SECURITIES | | | 35,756 | | | - | |
| | | | | | | | |
| INVESTMENTS IN AND ADVANCES TO JOINT VENTURES | | | 273 | | | 2,861 | |
| | | | | | | | |
| GOODWILL | | | 14,020 | | | 14,014 | |
| | | | | | | | |
| OTHER ASSETS | | | 47,735 | | | 28,754 | |
| | | | | | | | |
| TOTAL | | $ | 1,992,292 | | $ | 1,677,386 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
| | | | | | | | |
| LIABILITIES: | | | | | | | |
| | | | | | | | |
| NOTES PAYABLE | | | | | | | |
| Mortgage notes payable | | $ | 495,056 | | $ | 459,103 | |
| Unsecured revolving credit facilities | | | 147,000 | | | 162,000 | |
| Unsecured senior notes payable | | | 347,261 | | | 150,000 | |
| | | | 989,317 | | | 771,103 | |
| | | | | | | | |
| Unamortized premium/discount on notes payable | | | 21,603 | | | 24,218 | |
| | | | | | | | |
| Total notes payable | | | 1,010,920 | | | 795,321 | |
| | | | | | | | |
| OTHER LIABILITIES | | | | | | | |
| Accounts payable and accrued expenses | | | 32,857 | | | 25,211 | |
| Tenant security deposits | | | 8,559 | | | 7,706 | |
| Other liabilities | | | 7,171 | | | 5,924 | |
| | | | | | | | |
| Total liabilities | | | 1,059,507 | | | 834,162 | |
| | | | | | | | |
| MINORITY INTEREST | | | 1,397 | | | 12,672 | |
| | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | |
| | | | | | | | |
| STOCKHOLDERS’ EQUITY: | | | | | | | |
| Preferred stock, $0.01 par value - 10,000 shares authorized but unissued | | | - | | | - | |
| Common stock, $0.01 par value - 100,000 shares authorized, 73,597 and 69,353 shares issued and outstanding for 2004 and 2003, respectively | | | 736 | | | 694 | |
| Additional paid-in capital | | | 920,616 | | | 843,678 | |
| Retained earnings | | | 17,481 | | | - | |
| Accumulated other comprehensive income (loss) | | | 4,633 | | | (122 | ) |
| Unamortized restricted stock compensation | | | (11,928 | ) | | (10,091 | ) |
| Notes receivable from issuance of common stock | | | (150 | ) | | (3,607 | ) |
| | | | | | | | |
| Total stockholders’ equity | | | 931,388 | | | 830,552 | |
| | | | | | | | |
| TOTAL | | $ | 1,992,292 | | $ | 1,677,386 | |
| | | | | | | | |
| See accompanying notes to the consolidated financial statements. | | | | | | | |
| | | | | | | | |
EQUITY ONE, INC. ANDSUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except per share amounts)
| | 2004 | | 2003 | | 2002 | |
| RENTAL REVENUE: | | | | | | |
| Minimum rents | $ 175,588 | | $ 137,284 | | $ 68,705 | |
| Expense recoveries | 48,789 | | 39,908 | | 21,548 | |
| Termination fees | 3,536 | | 1,363 | | 1,911 | |
| Percentage rent payments | 1,944 | | 1,740 | | 1,405 | |
| | | | | | | |
| Total rental revenue | 229,857 | | 180,295 | | 93,569 | |
| | | | | | | |
| EXPENSES: | | | | | | |
| Property operating expenses | 60,402 | | 51,728 | | 28,848 | |
| Rental property depreciation and amortization | 35,910 | | 26,411 | | 12,563 | |
| Litigation settlement | - | | - | | 2,067 | |
| General and administrative expenses | 16,601 | | 11,046 | | 6,649 | |
| | | | | | | |
| Total costs and expenses | 112,913 | | 89,185 | | 50,127 | |
| | | | | | | |
| INCOME BEFORE OTHER INCOME AND EXPENSE, MINORITY INTEREST AND DISCONTINUED OPERATIONS | 116,944 | | 91,110 | | 43,442 | |
| | | | | | | |
| OTHER INCOME AND EXPENSE: | | | | | | |
| Interest expense | (46,413 | ) | (36,814 | ) | (20,889 | ) |
| Amortization of deferred financing fees | (1,370 | ) | (992 | ) | (759 | ) |
| Investment income | 2,346 | | 1,089 | | 1,632 | |
| Other income | 537 | | 687 | | 1,083 | |
| (Loss) gain on extinguishment of debt | - | | (513 | ) | 1,520 | |
| | | | | | | |
| INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS | 72,044 | | 54,567 | | 26,029 | |
| MINORITY INTEREST | (576 | ) | (803 | ) | (101 | ) |
| | | | | | | |
| INCOME FROM CONTINUING OPERATIONS | 71,468 | | 53,764 | | 25,928 | |
| | | | | | | |
| DISCONTINUED OPERATIONS: | | | | | | |
| Income from rental properties sold or held for sale | 4,273 | | 6,800 | | 4,742 | |
| Gain on disposal of income producing properties | 22,176 | | 3,083 | | 9,264 | |
| Minority interest | (113 | ) | - | | - | |
| | | | | | | |
| Total income from discontinued operations | 26,336 | | 9,883 | | 14,006 | |
| | | | | | | |
| NET INCOME | $ 97,804 | | $ 63,647 | | $ 39,934 | |
| | | | | | | |
| | | | | | (continued | ) |
| | | | | | | |
EQUITY ONE, INC. ANDSUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except per share amounts)
| | | 2004 | | | 2003 | | | 2002 | |
| | | | | | | | | | |
| EARNINGS PER SHARE: | | | | | | | | | |
| | | | | | | | | | |
| BASIC EARNINGS PER SHARE | | | | | | | | | |
| Income from continuing operations | $ | 1.01 | | $ | 0.90 | | $ | 0.79 | |
| Income from discontinued operations | | 0.38 | | | 0.16 | | | 0.43 | |
| | | | | | | | | | |
| Total basic earnings per share | $ | 1.39 | | $ | 1.06 | | $ | 1.22 | |
| | | | | | | | | | |
NUMBER OF SHARES USED IN COMPUTING BASIC EARNINGS PER SHARE | | 70,447 | | | 59,998 | | | 32,662 | |
| | | | | | | | | | |
| DILUTED EARNINGS PER SHARE | | | | | | | | | |
| Income from continuing operations | $ | 1.00 | | $ | 0.89 | | $ | 0.78 | |
| Income from discontinued operations | | 0.37 | | | 0.16 | | | 0.42 | |
| | | | | | | | | | |
| Total diluted earnings per share | $ | 1.37 | | $ | 1.05 | | $ | 1.20 | |
| | | | | | | | | | |
NUMBER OF SHARES USED IN COMPUTING DILUTED EARNINGS PER SHARE | | 72,036 | | | 61,665 | | | 33,443 | |
| | | | | | | | | | |
| | | | | | | | | (Concludedd | ) |
| | | | | | | | | | |
| See accompanying notes to the consolidated financial statements. | | | | | | | | | |
EQUITY ONE, INC. ANDSUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except per share amounts)
| | | | 2004 | | | 2003 | | | 2002 | |
| | | | | | | | | | | |
| NET INCOME | | $ | 97,804 | | $ | 63,647 | | $ | 39,934 | |
| | | | | | | | | | | |
| OTHER COMPREHENSIVE INCOME (LOSS): | | | | | | | | | | |
| Net unrealized holding gain (loss) on securities available for sale | | | 4,633 | | | 46 | | | (12 | ) |
| Change in fair value of cash flow hedges | | | 122 | | | (122 | ) | | - | |
| | | | | | | | | | | |
| COMPREHENSIVE INCOME | | $ | 102,559 | | $ | 63,571 | | $ | 39,922 | |
| | | | | | | | | | | |
| See accompanying notes to the consolidated financial statements. | | | | | | | | | | |
EQUITY ONE, INC. ANDSUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except per share amounts)
| | | | Common Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income/ (Loss) | | | Unamortized Restricted Stock Compensation | | | Notes Receivable from the Issuance of Common Stock | | | Total Stockholders’ Equity | |
| | | | | | | | | | | | | | | | | | | | | | | |
BALANCE, JANUARY 1, 2002 | | $ | 288 | | $ | 283,619 | | $ | 1,808 | | $ | (34 | ) | $ | (1,836 | ) | $ | (5,578 | ) | $ | 278,267 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock | | | 57 | | | 73,359 | | | - | | | - | | | (2,539 | ) | | (1,534 | ) | | 69,343 | |
| Stock issuance cost | | | - | | | (1,528 | ) | | - | | | - | | | - | | | - | | | (1,528 | ) |
| Net income | | | - | | | - | | | 39,934 | | | - | | | - | | | - | | | 39,934 | |
| Dividends paid | | | - | | | - | | | (35,773 | ) | | - | | | - | | | - | | | (35,773 | ) |
| Net unrealized holding loss on securities available for sale | | | - | | | - | | | - | | | (12 | ) | | - | | | - | | | (12 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
BALANCE, DECEMBER 31, 2002 | | | 345 | | | 355,450 | | | 5,969 | | | (46 | ) | | (4,375 | ) | | (7,112 | ) | | 350,231 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock: | | | | | | | | | | | | | | | | | | | | | | |
| IRT transaction | | | 175 | | | 231,562 | | | - | | | - | | | - | | | - | | | 231,737 | |
| Other issuances | | | 174 | | | 259,445 | | | - | | | - | | | (5,716 | ) | | 3,505 | | | 257,408 | |
| Stock issuance cost | | | - | | | (1,718 | ) | | - | | | - | | | - | | | - | | | (1,718 | ) |
| Net income | | | - | | | - | | | 63,647 | | | - | | | - | | | - | | | 63,647 | |
| Dividends paid | | | - | | | (1,061 | ) | | (69,616 | ) | | - | | | - | | | - | | | (70,677 | ) |
| Change in fair value of cash flow hedges | | | - | | | - | | | - | | | (122 | ) | | - | | | - | | | (122 | ) |
| Net unrealized holding gain on securities available for sale | | | - | | | - | | | - | | | 46 | | | - | | | - | | | 46 | |
| | | | | | | | | | | | | | | | | | | | | | | |
BALANCE, DECEMBER 31, 2003 | | | 694 | | | 843,678 | | | - | | | (122 | ) | | (10,091 | ) | | (3,607 | ) | | 830,552 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock | | | 42 | | | 77,853 | | | - | | | - | | | (1,837 | ) | | - | | | 76,058 | |
| Stock issuance cost | | | - | | | (334 | ) | | - | | | - | | | - | | | - | | | (334 | ) |
| Repayments of notes receivable from issuance of common stock | | | - | | | - | | | - | | | - | | | - | | | 3,457 | | | 3,457 | |
| Net income | | | - | | | - | | | 97,804 | | | - | | | - | | | - | | | 97,804 | |
| Dividends paid | | | - | | | (581 | ) | | (80,323 | ) | | - | | | - | | | - | | | (80,904 | ) |
| Changes in fair value of cash flow hedges | | | - | | | - | | | - | | | 122 | | | - | | | - | | | 122 | |
| Net unrealized holding gain on securities available for sale | | | - | | | - | | | - | | | 4,633 | | | - | | | - | | | 4,633 | |
| | | | | | | | | | | | | | | | | | | | | | | |
BALANCE, DECEMBER 31, 2004 | | $ | 736 | | $ | 920,616 | | $ | 17,481 | | $ | 4,633 | | $ | (11,928 | ) | $ | (150 | ) | $ | 931,388 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| See accompanying notes to the consolidated financial statements. | | | | | | | | | | | | |
EQUITY ONE, INC. ANDSUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except per share amounts)
| | | 2004 | | | 2003 | | | 2002 | |
| OPERATING ACTIVITIES: | | | | | | | | | |
| Net income | $ | 97,804 | | $ | 63,647 | | $ | 39,934 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | |
| Straight line rent adjustment | | (3,835 | ) | | (1,974 | ) | | (636 | ) |
| Provision for losses on accounts receivable | | 199 | | | 582 | | | 524 | |
| Amortization of premium on notes payable | | (4,958 | ) | | (3,584 | ) | | - | |
| Amortization of deferred financing fees | | 1,370 | | | 992 | | | 759 | |
| Amortization of deferred financing fees included in discontinued operations | | 89 | | | 119 | | | 125 | |
| Rental property depreciation and amortization | | 35,910 | | | 26,411 | | | 12,563 | |
| Depreciation and amortization included in discontinued operations | | 1,113 | | | 1,596 | | | 1,247 | |
| Amortization of restricted stock | | 5,163 | | | 2,833 | | | 1,579 | |
| Gain on disposal of real estate | | (22,334 | ) | | (3,083 | ) | | (9,264 | ) |
| Gain on sale of securities | | (593 | ) | | (9 | ) | | (14 | ) |
| Loss (gain) on debt extinguishment | | - | | | 623 | | | (1,520 | ) |
| Equity in loss (income) of joint ventures | | 46 | | | (500 | ) | | (549 | ) |
| Minority interest in earnings of consolidated subsidiary | | 689 | | | 803 | | | 101 | |
| Changes in assets and liabilities: | | | | | | | | | |
| Accounts and other receivables | | (2,406 | ) | | (5,080 | ) | | (3,152 | ) |
| Other assets | | (2,147 | ) | | (2,969 | ) | | 173 | |
| Accounts payable and accrued expenses | | 4,900 | | | (5,378 | ) | | 2,548 | |
| Tenant security deposits | | 853 | | | 1,038 | | | 252 | |
| Other liabilities | | 1,247 | | | 2,195 | | | 943 | |
| | | | | | | | | | |
| Net cash provided by operating activities | | 113,110 | | | 78,262 | | | 45,613 | |
| | | | | | | | | | |
| INVESTING ACTIVITIES: | | | | | | | | | |
| Additions to and purchases of rental property | | (263,640 | ) | | (151,630 | ) | | (65,581 | ) |
| Payment for construction in progress and land held for development | | (25,771 | ) | | (34,063 | ) | | (13,876 | ) |
| Proceeds from disposal of rental properties | | 72,568 | | | 25,013 | | | 27,195 | |
| Decrease (increase) in cash held in escrow | | - | | | 12,897 | | | (4,218 | ) |
| Proceeds from sales of joint venture interest | | - | | | 2,230 | | | - | |
| Distributions received from joint ventures | | 3,119 | | | 5,424 | | | 871 | |
| Increase in deferred leasing expenses | | (6,668 | ) | | (4,455 | ) | | (1,660 | ) |
| Proceeds from repayments of notes receivable | | 6,090 | | | 5,074 | | | 5,068 | |
| Proceeds from sale of securities | | 5,814 | | | 976 | | | 762 | |
| Cash used to purchase securities | | (36,363 | ) | | - | | | - | |
| Cash used in the purchase of IRT | | - | | | (189,382 | ) | | - | |
| Cash acquired in acquisitions | | - | | | 1,756 | | | - | |
| | | | | | | | | | |
| Net cash used in investing activities | | (244,851 | ) | | (326,160 | ) | | (51,439 | ) |
| | | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | | |
| Repayments of mortgage notes payable | | (25,721 | ) | | (63,586 | ) | | (43,156 | ) |
| Borrowings under mortgage notes payable | | - | | | - | | | 25,850 | |
| Net (repayments) borrowings under revolving credit facilities | | (15,000 | ) | | 131,000 | | | (4,409 | ) |
| Increase in deferred financing expenses | | (3,126 | ) | | (888 | ) | | (1,058 | ) |
| Proceeds from stock subscription and issuance of common stock | | 58,304 | | | 249,205 | | | 67,982 | |
| Proceeds from senior debt offering | | 199,750 | | | - | | | - | |
| Stock issuance costs | | (334 | ) | | (1,718 | ) | | (1,471 | ) |
| Repayment of notes receivable from issuance of common stock | | 3,457 | | | 3,505 | | | - | |
| Cash dividends paid to stockholders | | (80,904 | ) | | (70,677 | ) | | (35,773 | ) |
| Distributions to minority interest | | (529 | ) | | (921 | ) | | (101 | ) |
| | | | | | | | | | |
| Net cash provided by financing activities | | 135,897 | | | 245,920 | | | 7,864 | |
| | | | | | | | | (continued | ) |
EQUITY ONE, INC. ANDSUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except per share amounts)
| | | 2004 | | | 2003 | | | 2002 | |
| | | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $ | 4,156 | | $ | (1,978 | ) | $ | 2,038 | |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | | 966 | | | 2,944 | | | 906 | |
| CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 5,122 | | $ | 966 | | $ | 2,944 | |
| | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
| Cash paid for interest, net of amount capitalized | $ | 50,155 | | $ | 36,703 | | $ | 22,772 | |
| | | | | | | | | | |
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | | | | |
| Change in unrealized holding gain (loss) on securities | $ | 4,633 | | $ | 46 | | $ | (12 | ) |
| Change in fair value of hedges | $ | 122 | | $ | (122 | ) | | | |
| Conversion of operating partnership units | $ | 14,108 | | $ | 2,880 | | | | |
| Issuance of restricted stock | $ | 5,624 | | $ | 7,534 | | $ | 3,900 | |
| Common stock issued for notes receivable | | | | | | | $ | 1,534 | |
| Note receivable from sale of property | $ | 9,355 | | | | | $ | 3,900 | |
| | | | | | | | | | |
| The Company acquired and assumed mortgages on some of the rental property acquisitions: | | | | | | | | | |
| Fair value of rental property | $ | 148,416 | | $ | 101,692 | | $ | 9,300 | |
| Assumption of mortgage notes payable | | (61,674 | ) | | (54,369 | ) | | (6,097 | ) |
| Fair value adjustment of mortgage notes payable | | (2,697 | ) | | (6,029 | ) | | - | |
| Cash paid for rental property | $ | 84,045 | | $ | 41,294 | | $ | 3,203 | |
| | | | | | | | | | |
| The Company issued senior unsecured notes: | | | | | | | | | |
| Face value of notes | $ | 200,000 | | | | | | | |
| Discount | | (250 | ) | | | | | | |
| Cash received | $ | 199,750 | | | | | | | |
| | | | | | | | | | |
| The Company acquired all of the outstanding common stock of IRT for $763,047, including transaction costs: | | | | | | | | | |
| Fair value of assets acquired, including goodwill | | | | $ | 763,047 | | | | |
| Assumption of liabilities, unsecured senior notes and mortgage notes payable | | | | | (319,598 | ) | | | |
| Fair value adjustment of unsecured senior notes and mortgage notes payable | | | | | (22,330 | ) | | | |
| Common stock issued | | | | | (231,737 | ) | | | |
| Cash paid for IRT acquisition, including transaction costs | | | | $ | 189,382 | | | | |
| | | | | | | | | | |
| | | | | | | | | (Concluded | ) |
| See accompanying notes to the consolidated financial statements. | | | | | | |
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except per share amounts)
1. Organization and Basis of Presentation
Organization
Equity One, Inc. operates as a self-managed real estate investment trust (“REIT”) that principally acquires, renovates, develops and manages community and neighborhood shopping centers located predominantly in high growth markets in the southern United States and in the metropolitan Boston, Massachusetts area. These shopping centers are primarily anchored by supermarkets or other necessity-oriented retailers such as drugstores or discount retail stores.
Basis of Presentation
The consolidated financial statements include the accounts of Equity One, Inc. and its wholly-owned subsidiaries and those partnerships where the Company has financial and operating control. Equity One, Inc. and its subsidiaries are hereinafter referred to as “the consolidated companies” or the “Company.” The Company has a 50% investment in one joint venture which no individual party controls and, accordingly, uses the equity method of accounting for this joint venture.
All significant intercompany transactions and balances have been eliminated in consolidation.
Portfolio
As of December 31, 2004, the Company owned a total of 188 properties, encompassing 133 supermarket-anchored shopping centers, eight drug store-anchored shopping centers, 40 other retail-anchored shopping centers, four retail development parcels and three commercial properties, as well as a non-controlling interest in one unconsolidated joint venture.
2. Summary of Significant Accounting Policies
Properties
Income producing property is stated at cost and includes all costs related to acquisition, development and construction, including tenant improvements, interest incurred during development, costs of predevelopment and certain direct and indirect costs of development. Costs incurred during the predevelopment stage are capitalized once management has identified a site, determined that the project is feasible and it is probable that the Company is able to proceed with the project. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations and improvements, which improve or extend the useful life of assets, are capitalized.
The Company is actively pursuing acquisition opportunities and will not be successful in all cases; costs incurred related to these acquisition opportunities are expensed when it is probable that the Company will not be successful in the acquisition.
Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, as follows:
| Land improvements | 40 years |
| Buildings | 30-40 years |
| Building improvements | 5-40 years |
| Tenant improvements | Over the term of the related lease, which approximates the economic useful life |
| Equipment | 5-7 years |
Business Combinations
The results of operations of any acquired property are included in the Company’s financial statements as of the date of its acquisition.
The Company allocates the purchase price of acquired companies and properties to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Fair value is defined as the amount at which that asset could be bought or sold in a current transaction between willing parties (other than in a forced or liquidation sale). In order to allocate the purchase price of acquired companies and properties to the tangible and intangible assets acquired, the Company identifies and estimates the fair value of the land, buildings and improvements, reviews the leases to determine the existence of, and estimates the fair value of, any contractual or other legal rights and investigates the existence of, and estimates the fair value of, any other identifiable intangible assets. Such valuations require management to make significant estimates and assumptions, especially with respect to intangibles.
The cost approach is used as the primary method to estimate the fair value of the buildings, improvements and other assets. The cost approach is based upon the current costs to develop the particular asset in that geographic location, less an allowance for physical and functional depreciation. The assigned value for buildings and improvements is based on an as if vacant basis. The market value approach is used as the primary method to estimate the fair value of the land. The determination of the fair value of contractual intangibles is based on the costs incurred to originate a lease, including commissions and legal costs, excluding any new leases negotiated in connection with the purchase of a property. In-place lease values are based on management’s evaluation of the specific characteristics of each lease and the Company’s overall relationship with each tenant. Among the factors considered in the allocation of these values include the nature of the existing relationship with the tenant, the tenant’s credit quality, the expectation of lease renewals, the estimated carrying costs of the property during a hypothetical expected lease-up period, current market conditions and costs to execute similar leases. Estimated carrying costs include real estate taxes, insurance, other property operating costs and estimates of lost rentals at market rates during the hypothetical expected lease-up periods, given the specific market conditions. Above-market and below-market lease values are determined based on the present value (using a discount rate reflecting the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the leases negotiated and in-place at the time of acquisition and (ii) management’s estimate of fair market lease rates for the property or equivalent property, measured over a period equal to the remaining non-cancelable term of the lease. The value of contractual intangibles is amortized over the remaining term of each lease. Other than as discussed above, the Company has determined that its real estate properties do not have any other significant identifiable intangibles.
Critical estimates in valuing certain of the intangibles and the assumptions of what marketplace participants would use in making estimates of fair value include, but are not limited to: future expected cash flows, estimated carrying costs, estimated origination costs, lease up periods and tenant risk attributes, as well as assumptions about the period of time the acquired lease will continue to be used in the Company’s portfolio and discount rates used in these calculations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Assumptions may not always reflect unanticipated events and changes in circumstances may occur. In making such estimates, management uses a number of sources, including appraisals, third party cost segregation studies or other market data, as well as, information obtained in its pre-acquisition due diligence and marketing and leasing activities.
In the event that a tenant terminates its lease, the unamortized portion of each related intangible would be expensed.
Intangibles associated with property acquisitions are included in other assets in the Company’s consolidated balance sheet.
Construction in progress and land held for development
Land held for development is stated at cost.Costs incurred during the predevelopment stage are capitalized once management has identified a site, determined that the project is feasible and it is probable that the Company is able to proceed with the project. Properties undergoing significant renovations and improvements are considered under development. The Company estimates the cost of a property undergoing renovations as a basis for determining eligible costs. Interest, real estate taxes and other costs directly related to the properties and projects under development are capitalized until the property is ready for its intended use. Similar costs related to properties not under development are expensed as incurred. In addition, the Company writes off costs related to predevelopment projects when it determines that it will no longer pursue the project.
Total interest expense capitalized to construction in progress and land held for development was $3,204, $3,822 and $2,375 for the years ended December 31, 2004, 2003 and 2002, respectively.
Long-lived assets
Long-lived assets, such as property, land held for development, and certain identifiable intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that it is probable that the sum of expected undiscounted cash flows of the related operations are less than historical net cost basis. These factors, along with plans with respect to the operations, are considered in assessing the recoverability of long-lived assets. If the Company determines that the carrying amount is impaired, the long-lived assets are written down to their fair value with a corresponding charge to earnings. During the periods presented, no such impairment was incurred.
Cash and cash equivalents
The Company considers highly liquid investments with an initial maturity of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable include amounts billed to tenants and accrued expense recoveries due from tenants. Management evaluates the collectibility of these receivables and adjusts the allowance for doubtful accounts to reflect amounts estimated to be uncollectible. The allowance for doubtful accounts was $1,400 and $1,201 at December 31, 2004 and 2003, respectively.
Securities
The Company’s investments consist primarily of equity investments and debt securities. The Company’s equity investments are recorded at fair value based on current market prices and are classified as available-for-sale. Changes in the fair value of the equity investments are included in accumulated other comprehensive income (loss). The Company’s debt securities are recorded at cost and are classified as held-to-maturity, with the related discount/premium amortized over the life of the investment using the effective interest method.
As of December 31, 2004, the Company had $29,297 in equity securities classified as available-for-sale, and $6,459 of debt securities, net of discount, classified as held-to-maturity. The debt securities have a stated interest rate of 8.875% and mature in April of 2008.
Deferred Costs and Intangibles
Deferred costs and intangibles included in other assets consist of loan origination fees, leasing costs and the value of intangible assets when a property was acquired. Loan and other fees directly related to rental property financing with third parties are amortized over the term of the loan which approximates the effective interest method. Direct salaries, third party fees and other costs incurred by the Company to originate a lease are capitalized and are being amortized using the straight-line method over the term of the related leases. Intangible assets consist of in-place lease values, tenant origination costs and above/below market rents that were acquired in connection with the acquisition of the properties and are being amortized using the straight-line method over the terms of the related lease.
Deposits
Deposits included in other assets are composed of funds held by various institutions for future payments of property taxes, insurance and improvements, utility and other service deposits.
Goodwill
Goodwill has been recorded to reflect the excess of cost over the fair value of net assets acquired in various business acquisitions. The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142 on January 1, 2002 and no longer amortizes goodwill.
The Company is required to perform annual impairment tests of its goodwill and intangible assets, or more frequently in certain circumstances. The Company has elected to test for goodwill impairment in November of each year. The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each reporting unit and comparing those estimated fair values with the carrying values, which include the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the Company to allocate the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying amount. During the periods presented, no impairment of goodwill was incurred.
The key assumptions management employs to determine the fair value of the Company’s reporting units (each property is considered a reporting unit) include (a) net operating income; (b) cash flows; and (c) an estimation of the fair value of each reporting unit, which was based on the Company’s experience in evaluating acquisitions and market conditions. A variance in the net operating income or discount rate could have a significant impact on the amount of any goodwill impairment charge recorded.
Management cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill that totaled $14,020 at December 31, 2004. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on the Company’s tenant base, or a material negative change in its relationships with significant tenants.
During 2004, $539 of goodwill is included in the determination of the gain on disposal of income producing properties due to the disposition of certain properties.
Minority interest
On January 1, 1999, Equity One (Walden Woods) Inc., a wholly-owned subsidiary of the Company, entered into a limited partnership as a general partner. An income producing shopping center (“Walden Woods Village”) was contributed by its owners (the “Minority Partners”), and the Company contributed 93.656 shares of the Company’s common stock (the “Walden Woods Shares”) to the limited partnership at an agreed-upon price of $10.30 per share. Based on this per share price and the net value of property contributed by the Minority Partners, each of the partners received 93.656 limited partnership units. The Company has entered into a Redemption Agreement with the Minority Partners whereby the Minority Partners can request that the Company purchase either their limited partnership units or any shares of common stock which they received in exchange for their partnership units at a price of $10.30 per unit or per share no earlier than two years nor later than fifteen years after the exchange date of January 1, 1999. As a result of the Redemption Agreement, the Company has consolidated the accounts of the partnership with the Company’s financial data. In addition, under the terms of the limited partnership agreement, the Minority Partners do not have an interest in the Walden Woods Shares except to the extent of dividends. Accordingly, a preference in earnings has been allocated to the Minority Partners to the extent of the dividends declared. The Walden Woods Shares are not considered outstanding in the consolidated financial statements and are excluded from the share count in the calculation of primary earnings per share.
On December 5, 2000, a wholly owned subsidiary of the Company, Equity One (North Port) Inc., entered into a limited partnership (the “Shoppes of North Port, Ltd.”) as a general partner. The North Port minority partners had the right to redeem their partnership units (“OPUs”) for the Company’s common stock on a one-for-one basis or for cash at an agreed upon price of $11.00 per share no earlier than December 10, 2001, nor later than three and one half years thereafter. During July 2003, North Port Minority Partners redeemed their OPUs in exchange for 261.850 shares of the Company’s common stock. North Port is now a wholly owned subsidiary of the Company.
The Company is the general partner of IRT Partners L.P. (“LP”) and maintains an indirect partnership interest through its wholly-owned subsidiary, IRT Management Company. LP was formed in order to enhance the acquisition opportunities of the Company through a downREIT structure. This structure offers potential sellers of properties the ability to make a tax-deferred sale of their real estate properties in exchange for limited partnership units (“OP Units”) of LP. During September 2004, the outstanding OP Units were redeemed in exchange for 734.266 shares of the Company’s common stock. LP is now a wholly owned subsidiary of the Company.
The Company also has a controlling general partnership interest (75% interest) in Venice Plaza and records a minority interest for the limited partners’ share of equity.
Notes receivable from issuance of common stock
As a result of certain provisions of the Sarbanes-Oxley Act of 2002, the Company is generally prohibited from making loans to directors and executive officers. Prior to the adoption of the Sarbanes-Oxley Act of 2002, the Company had loaned $7,112 to various executives in connection with their exercise of options to purchase shares of the Company’s common stock of which $6,962 has been repaid. The remaining note bears interest only, payable quarterly, at the rate of 5% per annum and the principal is due in June 2007. In accordance with the provisions of the Sarbanes-Oxley Act of 2002, there have been no material modifications to the terms of the outstanding loan granted to executives.
Revenue Recognition
Rental income comprises minimum rents, expense reimbursements, termination fees and percentage rent payments. Minimum rents are recognized over the lease term on a straight-line basis. Expense reimbursements are recognized in the period that the applicable costs are incurred. The Company accounts for these leases as operating leases as the Company has retained substantially all risks and benefits of property ownership. Percentage rent is recognized when the tenant’s reported sales have reached certain levels specified in the respective lease. Termination fees are recognized upon the termination of a tenant’s lease.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required rent payments. The computation of this allowance is based on the tenants’ payment history and current credit quality.
Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS reflects the potential dilution that could occur from shares issuable under stock-based compensation plans, which would include the exercise of stock options, and the conversion of the operating partnership units held by minority limited partners.
Other Income
Other income includes fees earned in connection with certain third-party leasing activities and other third-party management activities. Management and third party leasing fees are recognized when earned.
Income Taxes
The Company elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code (“Code”), commencing with its taxable year ended December 31, 1995. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its REIT taxable income to its stockholders. Also, at least 90% of the Company’s gross income in any year must be derived from qualifying sources. The difference between net income available to common shareholders for financial reporting purposes and taxable income before dividend deductions relates primarily to temporary differences, principally real estate depreciation and amortization. It is management’s current intention to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, any taxable income of the Company’s consolidated subchapter C-Corporation, taxable REIT subsidiary (“TRS”), is subject to federal and state income taxes.
The Company has certain corporate tax attributes carried over from previous mergers (for example, net operating losses, alternative minimum tax credit carry-forwards, etc.). Net operating losses available to the Company are estimated to be approximately $12,027, but their utilization is limited subject to the provisions of the Code Sections 381 and 382. Code Section 1374 imposes a tax on the net built-in gain of C-Corporation assets that become assets of a REIT (i.e. the Company) in a carryover-basis transaction. The estimated net built-in gain at the date of acquisition is approximately $38,390. In lieu of the tax imposed on the transferor C-Corporation, the Company is subject to a Ten-Year Rule, which defers and eliminates recognition of the built-in gain tax liability if the assets subject to the tax are not disposed of within ten years from the date of the acquisition. In addition to the Ten-Year Rule, the Company has the ability to utilize like-kind exchanges, carry-over C-Corporation tax attributes, and other tax planning strategies to mitigate the potential recognition of built-in gain tax.
Stock Option and Other Equity-Based Plans
The Company has stock-based employee compensation plans, which are described more fully in Note 13 to the consolidated financial statements. The Company applies APB 25,Accounting for Stock Issued to Employees in accounting for its plans. Accordingly, the Company does not recognize compensation cost for stock options when the option exercise price equals or exceeds the market value on the date of the grant. No stock-based employee compensation cost for stock options is reflected in net income, as all options under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The Company records compensation expense related to its restricted stock plan. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 “Accounting for Stock-Based Compensation,” to stock-based employee compensation (in thousands, except per share data).
| | | | | Years Ended December 31, |
| | | | | | | | | | | | | | |
| | | | | | | 2004 | | | 2003 | | | 2002 | |
| | | | | | | | | | | | | | |
| Net Income | | | As reported | | $ | 97,804 | | $ | 63,647 | | $ | 39,934 | |
| | | | | | | | | | | | | | |
| Add: | | | Stock based employee compensation expense included in reported net income | | | 5,163 | | | 2,833 | | | 1,579 | |
| | | | | | | | | | | | | | |
| Deduct: | | | Total stock based employee compensation expense determined under fair value based method for all awards | | | (5,926 | ) | | (3,729 | ) | | (2,322 | ) |
| | | | | | | | | | | | | | |
| | | | Pro forma | | $ | 97,041 | | $ | 62,751 | | $ | 39,191 | |
| | | | | | | | | | | | | | |
| Basic earnings per share | | | As reported | | $ | 1.39 | | $ | 1.06 | | $ | 1.22 | |
| | | | | | | | | | | | | | |
| | | | Pro forma | | $ | 1.38 | | $ | 1.05 | | $ | 1.20 | |
| | | | | | | | | | | | | | |
| Diluted earnings per share | | | As reported | | $ | 1.37 | | $ | 1.05 | | $ | 1.20 | |
| | | | | | | | | | | | | | |
| | | | Pro forma | | $ | 1.36 | | $ | 1.03 | | $ | 1.18 | |
| | | | | | | | | | | | | | |
Segment information
The Company’s properties are community and neighborhood shopping centers located predominantly in high growth markets in the southern United States and the Boston metropolitan area. Each of the Company’s centers are separate operating segments which have been aggregated and reported as one reportable segment because they have characteristics so similar that they are expected to have essentially the same future prospects. The economic characteristics include similar returns, occupancy and tenants and each is located near a metropolitan area with similar economic demographics and site characteristics.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
New accounting pronouncements
In May 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This statement establishes standards for the classification and measurement of financial instruments that possess characteristics similar to both liability and equity instruments. SFAS No. 150 also addresses the classification of certain financial instruments that include an obligation to issue equity shares. On October 29, 2003, the FASB voted to defer, for an indefinite period, the application of the guidance in SFAS No. 150. The Company has adopted certain provisions of SFAS No. 150 which did not have a material impact on the Company’s financial condition or results of operations. The Company is still evaluating the potential effect of the provisions of SFAS No. 150 that have been deferred to future periods.
In December 2004, the FASB issued SFAS No. 123 (revised 2004),Share-Based Payment, which is a revision of SFAS 123,Accounting for Stock-Based Compensation. Generally, the approach in SFAS 123 (R) is similar to the approach described in SFAS 123. However, SFAS 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The new standard will be effective for public entities (excluding small business issuers) in the first interim or annual reporting period beginning after June 15, 2005, irrespective of the entity’s fiscal year. Early adoption is permitted in periods in which financial statements have not yet been issued. SFAS 123 (R) allows for two transition alternatives for public companies: (a) modified-prospective transition or (b) modified-retrospective transition. Under the modified-prospective transition method, companies are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. Measurement and attribution of compensation cost for awards that were granted prior to, but not vested as of the date SFAS 123 (R) is adopted would be based on the same estimate of the grant-date fair value and the same attribution method used previously under SFAS 123 (either for financial statement recognition or pro forma disclosure purposes). Prior periods are not restated. For periods prior to adoption, the financial statements are unchanged (and the pro forma disclosures previously required by SFAS 123 continue to be required under the new Standard to the extent those amounts differ from those in the income statement). For periods subsequent to adoption, the impact of this transition method generally is the same as if the modified-retrospective method were applied. Accordingly, pro forma disclosure will not be necessary for periods after the adoption of the new standard. Under the modified-retrospective transition method, companies are allowed to restate prior periods by recognizing compensation cost in the amounts previously reported in the pro forma footnote disclosure under the provisions of SFAS 123. New awards and unvested awards would be accounted for in the same manner as the modified-prospective method. Because of the mid-year effective date, companies are permitted to apply the modified-retrospective transition alternative either (a) to all periods presented or (b) to the start of the fiscal year in which SFAS 123 (R) is adopted. The Company is currently evaluating the different alternatives. Had the Company adopted SFAS 123 in 2004, the diluted earnings per share would have been $0.01 lower.
In December of 2004, the FASB issued Statement 153,Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,Accounting for Nonmonetary Transactions. The guidance in APB Opinion No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. Statement 153 amends Opinion 29 by eliminating the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement shall be applied prospectively and is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. This pronouncement is prospective and has no effect on the Company’s financial position or results of operations as of December 31, 2004.
Fair value of financial instruments
The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methods. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amounts. The Company has used the following market assumptions and/or estimation methods:
Cash and Cash Equivalents and Accounts and Other Receivables. The carrying amounts reported in the balance sheets for these financial instruments approximate fair value because of their short maturities.
Notes Receivable. The fair value is estimated by using the current interest rates at which similar loans would be made. The carrying amounts reported in the balance sheets approximate fair value.
Debt Securities. The fair value estimated at December 31, 2004 was $6,700, based on the closing market prices of the securities.
Mortgage Notes Payable. The fair value estimated at December 31, 2004 and 2003 was $531,200 and $505,148, respectively, calculated based on the net present value of payments over the term of the loans using estimated market rates for similar mortgage loans and remaining terms.
Unsecured Revolving Credit Facilities. The fair value was estimated by using the current rates at which similar loans would be made and remaining terms. The carrying amounts reported in the balance sheets approximate fair value.
Unsecured Senior Notes Payable. The fair value estimated at December 31, 2004 and 2003 was $351,584 and $165,700, respectively, calculated based on the net present value of payments over the term of the loan using estimated market rates for similar notes and remaining terms.
Reclassifications
Certain prior year operating amounts have been reclassified to reflect the reporting of discontinued operations.
3. Properties
| Composition in the consolidated balance sheets: | | December 31, |
| | | | | | | | |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
| Land and land improvements | | $ | 793,508 | | $ | 654,654 | |
| Building and building improvements | | | 1,097,150 | | | 924,097 | |
| Tenant improvements | | | 24,558 | | | 15,828 | |
| | | | 1,915,216 | | | 1,594,579 | |
| Less: accumulated depreciation | | | (95,934 | ) | | (66,406 | ) |
| Income producing property, net | | $ | 1,819,282 | | $ | 1,528,173 | |
| | | | | | | | |
The following table reflects a series of individual properties that were acquired during 2004:
Property | Location | Month Purchased | Square Feet/ Acres | Purchase Price |
| | | | | |
| Bluebonnet Out Parcel | Baton Rouge, LA | February | 0.9 acres | $ 500 |
| Pavilion Shopping Center | Naples, FL | February | 167,745 | 24,200 |
| Southlake Village | Southlake, TX | March | 118,092 | 17,475 |
| Creekside Plaza | Arlington, TX | March | 101,016 | 14,025 |
| Sparkleberry Square | Columbia, SC | March | 339,051 | 45,150 |
| Venice Shopping Center | Venice, FL | March | 111,934 | 6,447 |
| Windy Hill | N. Myrtle Beach, SC | April | 64,465 | 2,895 |
| Hamilton Out Parcel | Buford, GA | April | 0.64 acres | 425 |
| Medical & Merchants | Jacksonville, FL | May | 152,761 | 21,980 |
| Westgate Marketplace | Houston, TX | June | 298,354 | 47,100 |
| Boston portfolio (6 properties) | Boston, MA | October | 390,979 | 119,750 |
| Homestead Gas Station | Homestead, FL | November | 0.66 acres | 1,150 |
| DeSoto Shopping Center | DeSoto, TX | November | 69,090 | 8,180 |
| Westport Plaza | Davie, FL | December | 36,212 | 7,200 |
| Devaney Parcel | West Roxbury, MA | December | 0.33 acres | 475 |
| | | | | |
| | | | | $ 316,952 |
| | | | | |
No equity interests were issued or issuable in connection with the above purchases and no contingent payments, options or commitments are provided for in the agreements. No goodwill was recorded in conjunction with any of the individual property acquisitions.
The Company’s allocation of the purchase price for the acquisitions consummated during 2004 is preliminary and is subject to change. The Company is in the process of obtaining additional market data related to the fair value of the land, real property and in-place leases. Management does not believe that any adjustment would have a material effect on the Company’s financial position or results of operations.
The amounts assigned to intangibles consisting of in-place leases, lease origination costs and above/below market leases is $5,390, $4,029 and $4,939, respectively. The weighted average amortization period is 11.5 years.
Pro Forma Financial Information
The following unaudited supplemental pro forma operating data is presented for the years ended December 31, 2004 and 2003 as if the acquisition of the individual properties mentioned above occured on January 1, 2003. The operating results of the acquired properties are included in the results of operations of the Company from the date of purchase. The pro forma financial information is presented for information purposes only and may not be indicative of what actual results of operations would have been had the acquisitions occurred as indicated nor does it purport to represent the results of the operations for future periods:
| | | | 2004 | | | 2003 | |
| | | | | | | | |
| Pro forma rental income | | $ | 242,130 | | $ | 205,325 | |
| Pro forma income from continuing operations | | $ | 73,131 | | $ | 58,342 | |
| Pro forma net income | | $ | 99,580 | | $ | 68,225 | |
| | | | | | | | |
| Pro forma earnings per share: | | | | | | | |
| Basic earnings per share: | | | | | | | |
| Income from continuing operations | | $ | 1.03 | | $ | 0.98 | |
| | | | | | | | |
| Diluted earnings per share: | | | | | | | |
| Income from continuing operations | | $ | 1.02 | | $ | 0.97 | |
4. Accounts and Other Receivables
| Composition in the consolidated balance sheets: | December 31, | |
| | | | | |
| | 2004 | | 2003 | |
| | | | | |
| Tenants | $ 15,6788 | | $ 13,9211 | |
| Other | 1,4211 | | 7722 | |
| Allowance for doubtful accounts | (1,4000 | ) | (1,2011 | ) |
| Total accounts and other receivables | $ 15,6999 | | $ 13,4922 | |
| | | | | |
5. Investments in Joint Ventures
A summary of the Company’s investments in joint ventures at December 31, 2004 and 2003 is as follows (all investments in unconsolidated entities are accounted for under the equity method):
Entity | | | Location | | | Ownership | | | December 31, 2004 | | | December 31, 2003 | |
| | | | | | | | | | | | | | |
| PG Partners* | | | Palm Beach Gardens, FL | | | 50.0 | % | $ | - | | $ | 2,633 | |
| Parcel F, LLC | | | Palm Beach Gardens, FL | | | 50.0 | % | | 273 | | | 228 | |
| | | | | | | | | | | | | | |
| Investments in joint ventures | | | | $ | 273 | | $ | 2,861 | |
| | | | | | | | | | | | | | |
*The joint venture sold its property during 2004.
A summary of the unaudited balance sheets for the joint ventures being reported on the equity method of accounting is as follows:
Condensed Balance Sheet | | | As of December 31, 2004 | | | As of December 31,2003 | |
| | | | | | | | |
| Assets: | | | | | | | |
| Rental properties, net | | $ | - | | $ | 15,735 | |
| Land held for development | | | 1,073 | | | 953 | |
| Cash and cash equivalents | | | - | | | - | |
| Other assets | | | - | | | 457 | |
| Total | | $ | 1,073 | | $ | 17,145 | |
| | | | | | | | |
| Liabilities and Ventures’ Equity: | | | | | | | |
| Mortgage notes | | $ | - | | $ | 12,878 | |
| Other liabilities | | | - | | | 90 | |
| Ventures’ equity | | | 1,073 | | | 4,177 | |
| Total | | $ | 1,073 | | $ | 17,145 | |
| | | | | | | | |
The Company’s investments in joint ventures, as reported on its consolidated balance sheets as of December 31, 2004, differ from its proportionate share of the joint ventures’ underlying net assets due to approximately $260 of basis differentials.
summary of the unaudited statements of operations for the joint ventures being reported on the equity method of accounting is as follows:
| | | Year Ended December 31, |
| | | | | | | | | | | |
Condensed Statements of Operations | | | 2004 | | | 2003 | | | 2002 | |
| | | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Rental revenues | | $ | 2,024 | | $ | 5,313 | | $ | 7,176 | |
| Other revenues | | | 2 | | | 8 | | | 12 | |
| Total revenues | | | 2,026 | | | 5,321 | | | 7,188 | |
| | | | | | | | | | | |
| Expenses: | | | | | | | | | | |
| Operating expenses | | | 620 | | | 1,228 | | | 1,742 | |
| Interest expense | | | 970 | | | 2,058 | | | 2,932 | |
| Depreciation | | | 459 | | | 905 | | | 1,291 | |
| Other expense | | | 69 | | | 130 | | | 125 | |
| Total expense | | | 2,118 | | | 4,321 | | | 6,090 | |
| Net (loss) income | | $ | (92 | ) | $ | 1,000 | | $ | 1,098 | |
| The Company’s equity in (loss) income of joint ventures reported in | | $ | (46 | ) | $ | 500 | | $ | 549 | |
| | | | | | | | | | | |
| Continuing operations | | $ | - | | $ | - | | $ | - | |
| Discontinued operations | | $ | (46 | ) | $ | 500 | | $ | 549 | |
| | | | | | | | | | | |
Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.
6. Other Assets
| Composition in the consolidated balance sheets: | | December 31, |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
| Notes receivable, bearing interest at 8.0% through 10.0% per annum, maturing from March 2006 through November 2010 | | $ | 6,315 | | $ | 3,050 | |
| Deposits and escrow impounds | | | 12,759 | | | 10,885 | |
| Deferred financing fees, net | | | 4,633 | | | 3,130 | |
| Leasing commissions and intangibles, net | | | 13,794 | | | 5,551 | |
| Furniture and equipment, net | | | 3,174 | | | 2,974 | |
| Prepaid and other assets | | | 7,060 | | | 3,164 | |
| | | | | | | | |
| Total other assets | | $ | 47,735 | | $ | 28,754 | |
| | | | | | | | |
All amounts assigned to intangible assets are subject to amortization. For the year ended December 31, 2004, the amortization expense for the intangible assets was $317. The amortization expense for the next five years for the recorded intangible assets is approximately $497, $437, $397, $344 and $307, respectively.
7. Notes Payable
The following is a summary of the Company’s borrowings, consisting of mortgage notes payable, unsecured senior notes payable and unsecured revolving credit facilities:
| | December 31, |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
Mortgage Notes Payable | | | | | | | |
| Fixed rate mortgage loans | | $ | 495,056 | | $ | 459,103 | |
| Unamortized net premium on mortgage notes payable | | | 12,721 | | | 11,779 | |
| | | | | | | | |
Total | | $ | 507,777 | | $ | 470,882 | |
| | | | | | | | |
The weighted average interest rate of the mortgage notes payable at December 31, 2004 and 2003 was 7.26% and 7.45%, respectively, excluding the effects of the net premium adjustment.
Each of the existing mortgage loans is secured by a mortgage on one or more of the Company’s properties. Certain of the mortgage loans involving an aggregate principal balance of approximately $168,588 contain prohibitions on transfers of ownership which may have been violated by the Company’s previous issuances of common stock or in connection with past acquisitions and may be violated by transactions involving the Company’s capital stock in the future. If a violation were established, it could serve as a basis for a lender to accelerate amounts due under the affected mortgage. To date, no lender has notified the Company that it intends to accelerate its mortgage. In the event that the mortgage holders declare defaults under the mortgage documents, The Company, if required, repay the remaining mortgage from existing resources, refinancing of such mortgages, borrowings under its revolving lines of credit or other sources of financing. Based on discussions with various lenders, current credit market conditions and other factors, the Company believes that the mortgages will not be accelerated. Accordingly, the Company believes that the violations of these prohibitions will not have a material adverse impact on the Company’s results of operations or financial condition.
| | | December 31, |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
Unsecured Senior Notes Payable | | | | | | | |
| | | | | | | | |
| 7.77% Senior Notes, due 4/1/06 | | $ | 50,000 | | $ | 50,000 | |
| 7.25% Senior Notes, due 8/15/07 | | | 75,000 | | | 75,000 | |
| 3.875% Senior Notes, due 4/15/09 | | | 200,000 | | | - | |
| 7.84% Senior Notes, due 1/23/12 | | | 25,000 | | | 25,000 | |
| Fair value of interest rate swap | | | (2,739 | ) | | - | |
| Unamortized net premium on unsecured senior notes payable | | | 8,882 | | | 12,439 | |
| | | | | | | | |
Total | | $ | 356,143 | | $ | 162,439 | |
| | | | | | | | |
We swapped $100,000 of the $200,000 senior notes to a floating interest rate based on the 6-month LIBOR in arrears plus 0.4375%. The weighted average interest rate of the unsecured senior notes at December 31, 2004 and 2003 was 5.12% and 7.55%, respectively, excluding the effects of the interest rate swap and the net premium adjustment.
The indentures under which the notes were issued have several covenants which limit the Company’s ability to incur debt; require the Company to maintain unencumbered asset ratios and limit the Company’s ability to consolidate, sell, lease, or convey substantially all of its assets to, or merge with any other entity. These notes have also been guaranteed by most of the Company’s subsidiaries including IRT Partners L.P. The interest rate on the 7.77% senior notes is subject to a 50 basis point increase if the Company does not maintain an investment grade debt rating.
| | | December 31, |
| | | | 2004 | | | 2003 | |
| | | | | | | | |
Unsecured Revolving Credit Facilities | | | | | | | |
| | | | | | | | |
| Wells Fargo | | $ | 147,000 | | $ | 162,000 | |
| City National Bank | | | - | | | - | |
| | | | | | | | |
Total | | $ | 147,000 | | $ | 162,000 | |
| | | | | | | | |
The Company entered into a $340,000 unsecured revolving credit facility with a syndicate of banks for which Wells Fargo Bank, National Association is the sole lead arranger and administrative agent. This facility bears interest at the Company’s option at (i) LIBOR plus 0.65% to 1.35%, depending on the credit ratings of the Company’s senior unsecured long term notes or (ii) at the greater of (x) Wells Fargo’s prime rate and (y) the Federal Funds Rate plus 0.5%. The facility is guaranteed by most of the Company’s subsidiaries. Based on the Company’s current rating, the LIBOR spread is 1.0%. The facility also includes a competitive bid option which allows the Company to conduct auctions among the participating banks for borrowings in an amount not to exceed $170,000, a $35,000 swing line facility for short term borrowings, a $20,000 letter of credit commitment and may, at the request of the Company, be increased up to a total commitment of $400,000. The facility expires February 12, 2006 with a one-year extension option. In addition, the facility contains customary covenants, including financial covenants regarding debt levels, total liabilities, interest coverage, EBITDA coverage ratios, unencumbered properties and permitted investments. The facility also prohibits stockholder distributions in excess of 95% of funds from operations calculated at the end of each fiscal quarter for the four fiscal quarters then ending. Notwithstanding this limitation, the Company can make stockholder distributions to avoid income taxes on asset sales. If a default under the facility exists, the Company’s ability to pay dividends would be limited to the amount necessary to maintain the Company’s status as a REIT unless the default is a payment default or bankruptcy event in which case the Company would be prohibited from paying any dividends. The weighted average interest rate as of December 31, 2004 and 2003 was 2.80% and 2.06%, respectively.
The Company also has a $5,000 unsecured credit facility with City National Bank of Florida, of which there was no outstanding balance as of December 31, 2004. This facility also provides collateral for $1,339 in outstanding letters of credit.
As of December 31, 2004, the availability under the various credit facilities was approximately $25,798, net of outstanding balances and letters of credit.
Principal maturities (including scheduled amortization payments) of the notes payable as of December 31, 2004 are as follows:
Year ending December 31, | | Amount | |
| | | | |
| 2005 | | $ 40,888 | |
| 2006 | | 232,827 | |
| 2007 | | 89,116 | |
| 2008 | | 51,495 | |
| 2009 | | 235,457 | |
| Thereafter | | 342,273 | |
| Total | | $992,056 | |
| | | | |
Interest costs incurred, excluding amortization of discount/premium, were $55,291, $45,593 and $25,004 in the years ended December 31, 2004, 2003 and 2002, respectively, of which $3,204, $3,822 and $2,375 were capitalized in the years ended December 31, 2004, 2003 and 2002, respectively.
| 8. | Financial Instruments - Derivatives and Hedging |
To manage, or hedge, the exposure to interest rate risk, the Company follows established risk management policies and procedures, including the use of a variety of derivative financial instruments. The Company does not enter into derivative instruments for speculative purposes. The Company requires that the hedges or derivative financial instruments be effective in managing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential to qualify for hedge accounting. Hedges that meet these hedging criteria are formally designated as such at the inception of the contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, resulting in some ineffectiveness, the change in the fair value of the derivative instrument will be included in earnings. Additionally, any derivative instrument used for risk management that becomes ineffective is marked-to-market each period.
The Company is exposed to credit risk, in the event of non-performance by the counter-parties to the hedge agreements. The Company believes that it mitigates its credit risk by entering into these agreements with major financial institutions. Net interest differentials to be paid or received under a swap contract and/or collar agreement are included in interest expense as incurred or earned.
During 2004, the Company entered into a $100,000 notional principal variable rate interest swap with an estimated fair value of $2,739 as of December 31, 2004. This swap converted fixed rate debt to variable rate based on the 6 month LIBOR in arrears plus 0.4375%, and matures April 15, 2009.
The estimated fair value of the Company’s derivative financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value.
9. Consolidating Financial Information
As of December 31, 2004, most of the Company’s subsidiaries have guaranteed the Company’s indebtedness under the unsecured senior debt. The guarantees are joint and several and full and unconditional.
Condensed Balance Sheet | | | Equity One, Inc. | | | Guarantors Combined Subsidiaries | | | Non Guarantors | | | Eliminating Entries | | | Consolidated Equity One | |
As of December 31, 2004 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| ASSETS | | | | | | | | | | | | | | | | |
| Properties, net | | $ | 490,627 | | $ | 789,082 | | $ | 593,978 | | $ | - | | $ | 1,873,687 | |
| Investment in affiliates | | | 435,752 | | | - | | | - | | | (435,752 | ) | | - | |
| Other assets | | | 73,945 | | | 23,955 | | | 20,705 | | | - | | | 118,605 | |
| | | | | | | | | | | | | | | | | |
| Total | | $ | 1,000,324 | | $ | 813,037 | | $ | 614,683 | | $ | (435,752 | ) | $ | 1,992,292 | |
| | | | | | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Mortgage notes payable | | $ | 71,591 | | $ | 187,681 | | $ | 235,784 | | $ | - | | $ | 495,056 | |
| Unsecured revolving credit facilities | | | 147,000 | | | - | | | - | | | - | | | 147,000 | |
| Unsecured senior notes, net | | | 347,261 | | | - | | | - | | | - | | | 347,261 | |
Unamortized premium on notes payable | | | 9,546 | | | 9,408 | | | 2,649 | | | - | | | 21,603 | |
| | | | | | | | | | | | | | | | | |
| Other liabilities | | | 20,526 | | | 18,027 | | | 10,034 | | | - | | | 48,587 | |
| Total liabilities | | | 595,240 | | | 215,116 | | | 248,467 | | | | | | 1,059,507 | |
| | | | | | | | | | | | | | | | | |
| MINORITY INTEREST | | | - | | | - | | | - | | | 1,397 | | | 1,397 | |
| | | | | | | | | | | | | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | |
| Total stockholders’ equity | | | 404,400 | | | 597,921 | | | 366,216 | | | (437,149 | ) | | 931,388 | |
| | | | | | | | | | | | | | | | | |
| Total | | $ | 1,000,324 | | $ | 813,037 | | $ | 614,683 | | $ | (435,752 | ) | $ | 1,992,292 | |
| | | | | | | | | | | | | | | | | |
| | | | | | Guarantors | | | | | | | | | |
Condensed Balance Sheet | | | Equity One, Inc. | | | Combined Subsidiaries | | | IRT Partners, LP | | | Non Guarantors | | | Eliminating Entries | | | Consolidated Equity One | |
As of December 31, 2003 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| ASSETS | | | | | | | | | | | | | | | | | | | |
| Properties, net | | $ | 526,136 | | $ | 561,455 | | $ | 187,132 | | $ | 342,576 | | $ | - | | $ | 1,617,299 | |
| Investment in affiliates | | | 435,752 | | | - | | | - | | | - | | | (435,752 | ) | | - | |
| Other assets | | | 22,865 | | | 21,926 | | | 2,940 | | | 12,356 | | | - | | | 60,087 | |
| | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 984,753 | | $ | 583,381 | | $ | 190,072 | | $ | 354,932 | | $ | (435,752 | ) | $ | 1,677,386 | |
| | | | | | | | | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | | | | | | | | |
| Mortgage notes payable | | $ | 74,726 | | $ | 171,230 | | $ | 34,400 | | $ | 178,747 | | $ | - | | $ | 459,103 | |
| Unsecured revolving credit facilities | | | 162,000 | | | - | | | - | | | - | | | - | | | 162,000 | |
| Unsecured senior notes, net | | | 150,000 | | | - | | | - | | | - | | | - | | | 150,000 | |
| Unamortized premium on notes payable | | | 13,505 | | | 5,950 | | | 4,661 | | | 102 | | | - | | | 24,218 | |
| Other liabilities | | | 13,000 | | | 15,522 | | | 1,780 | | | 8,539 | | | - | | | 38,841 | |
| | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 413,231 | | | 192,702 | | | 40,841 | | | 187,388 | | | - | | | 834,162 | |
| | | | | | | | | | | | | | | | | | | | |
| MINORITY INTEREST | | | - | | | - | | | - | | | - | | | 12,672 | | | 12,672 | |
| | | | | | | | | | | | | | | | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | |
| Total stockholders’ equity | | | 571,522 | | | 390,679 | | | 149,231 | | | 167,544 | | | (448,424 | ) | | 830,552 | |
| | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 984,753 | | $ | 583,381 | | $ | 190,072 | | $ | 354,932 | | $ | (435,752 | ) | $ | 1,677,386 | |
| | | | | | | | | | | | | | | | | | | | |
Condensed Statement of Operations | | | Equity One Inc. | | | Guarantors Combined Subsidiaries | | | Non Guarantors | | | Consolidated Equity One | |
For the Year Ended December 31, 2004 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| RENTAL REVENUE: | | | | | | | | | | | | | |
| Minimum rents | | $ | 48,475 | | $ | 80,437 | | $ | 46,676 | | $ | 175,588 | |
| Expense recoveries | | | 11,450 | | | 23,890 | | | 13,449 | | | 48,789 | |
| Termination fees | | | 217 | | | 375 | | | 2,944 | | | 3,536 | |
| Percentage rent payments | | | 375 | | | 820 | | | 749 | | | 1,944 | |
| | | | | | | | | | | | | | |
| Total rental revenue | | | 60,517 | | | 105,522 | | | 63,818 | | | 229,857 | |
| COSTS AND EXPENSES: | | | | | | | | | | | | | |
| Property operating expenses | | | 15,206 | | | 27,621 | | | 17,575 | | | 60,402 | |
| Rental property depreciation and amortization | | | 9,698 | | | 16,698 | | | 9,514 | | | 35,910 | |
| General and administrative expenses | | | 16,097 | | | 504 | | | - | | | 16,601 | |
| | | | | | | | | | | | | | |
| Total costs and expenses | | | 41,001 | | | 44,823 | | | 27,089 | | | 112,913 | |
| | | | | | | | | | | | | | |
| INCOME BEFORE OTHER INCOME AND EXPENSE AND DISCONTINUED OPERATIONS | | | 19,516 | | | 60,699 | | | 36,729 | | | 116,944 | |
| | | | | | | | | | | | | | |
| OTHER INCOME AND EXPENSE: | | | | | | | | | | | | | |
| Interest expense | | | (17,719 | ) | | (13,040 | ) | | (15,654 | ) | | (46,413 | ) |
| Amortization of deferred financing fees | | | (1,035 | ) | | (151 | ) | | (184 | ) | | (1,370 | ) |
| Investment income | | | 2,028 | | | 298 | | | 20 | | | 2,346 | |
| Other income (expense) | | | 157 | | | 362 | | | 18 | | | 537 | |
| | | | | | | | | | | | | | |
| Minority interest | | | - | | | (510 | ) | | (66 | ) | | (576 | ) |
| | | | | | | | | | | | | | |
| INCOME FROM CONTINUING OPERATIONS | | | 2,947 | | | 47,658 | | | 20,863 | | | 71,468 | |
| | | | | | | | | | | | | | |
| DISCONTINUED OPERATIONS | | | | | | | | | | | | | |
| Income from rental properties sold or held for sale | | | 2,654 | | | 1,233 | | | 386 | | | 4,273 | |
| Gain on disposal of income producing properties | | | 3,840 | | | 10,101 | | | 8,235 | | | 22,176 | |
| Minority interest | | | - | | | (113 | ) | | - | | | (113 | ) |
| | | | | | | | | | | | | | |
| Total income from discontinued operations | | | 6,494 | | | 11,221 | | | 8,621 | | | 26,336 | |
| | | | | | | | | | | | | | |
| NET INCOME | | $ | 9,441 | | $ | 58,879 | | $ | 29,484 | | $ | 97,804 | |
| | | | | | | | | | | | | | |
| | | | | | Guarantors | | | | | | |
Condensed Statement of Operations | | | Equity One Inc. | | | Combined Subsidiaries | | | IRT Partners, LP | | | Non Guarantors | | | Consolidated Equity One | |
For the Year Ended December 31, 2003 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| RENTAL REVENUE: | | | | | | | | | | | | | | | | |
| Minimum rents | | $ | 41,442 | | $ | 47,548 | | $ | 15,455 | | $ | 32,839 | | $ | 137,284 | |
| Expense recoveries | | | 10,026 | | | 14,091 | | | 4,647 | | | 11,144 | | | 39,908 | |
| Termination fees | | | 187 | | | 401 | | | 27 | | | 748 | | | 1,363 | |
| Percentage rent payments | | | 536 | | | 381 | | | 295 | | | 528 | | | 1,740 | |
| | | | | | | | | | | | | | | | | |
| Total rental revenue | | | 52,191 | | | 62,421 | | | 20,424 | | | 45,259 | | | 180,295 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| COSTS AND EXPENSES: | | | | | | | | | | | | | | | | |
| Property operating expenses | | | 14,791 | | | 15,502 | | | 6,295 | | | 15,140 | | | 51,728 | |
| Rental property depreciation and amortization | | | 7,496 | | | 10,087 | | | 2,672 | | | 6,156 | | | 26,411 | |
| General and administrative expenses | | | 11,030 | | | - | | | 16 | | | - | | | 11,046 | |
| | | | | | | | | | | | | | | | | |
| Total costs and expenses | | | 33,317 | | | 25,589 | | | 8,983 | | | 21,296 | | | 89,185 | |
| | | | | | | | | | | | | | | | | |
| INCOME BEFORE OTHER INCOME AND EXPENSE AND DISCONTINUED OPERATIONS | | | 18,874 | | | 36,832 | | | 11,441 | | | 23,963 | | | 91,110 | |
| | | | | | | | | | | | | | | | | |
| OTHER INCOME AND EXPENSE: | | | | | | | | | | | | | | | | |
| Interest expense | | | (12,080 | ) | | (8,461 | ) | | (2,161 | ) | | (14,112 | ) | | (36,814 | ) |
| Amortization of deferred financing fees | | | (603 | ) | | (195 | ) | | (1 | ) | | (193 | ) | | (992 | ) |
| Investment income | | | 386 | | | 611 | | | 72 | | | 20 | | | 1,089 | |
| Other income (expense) | | | 912 | | | (285 | ) | | - | | | 60 | | | 687 | |
| Loss on extinguishment of debt | | | - | | | (513 | ) | | - | | | - | | | (513 | ) |
| Minority interest | | | (139 | ) | | 36 | | | (570 | ) | | (130 | ) | | (803 | ) |
| | | | | | | | | | | | | | | | | |
| INCOME FROM CONTINUING OPERATIONS | | | 7,350 | | | 28,025 | | | 8,781 | | | 9,608 | | | 53,764 | |
| | | | | | | | | | | | | | | | | |
| DISCONTINUED OPERATIONS | | | | | | | | | | | | | | | | |
| Income from operations of sold properties | | | 3,105 | | | 2,045 | | | 839 | | | 811 | | | 6,800 | |
| Gain on disposal of income producing properties | | | - | | | 2,613 | | | - | | | 470 | | | 3,083 | |
| | | | | | | | | | | | | | | | | |
| Total income from discontinued operations | | | 3,105 | | | 4,658 | | | 839 | | | 1,281 | | | 9,883 | |
| | | | | | | | | | | | | | | | | |
| NET INCOME | | $ | 10,455 | | $ | 32,683 | | $ | 9,620 | | $ | 10,889 | | $ | 63,647 | |
| | | | | | | | | | | | | | | | | |
10. Debt Extinguishment
During 2003, the Company prepaid four mortgages and incurred a loss of $623 on the early extinguishment of debt. During 2002, the Company settled an outstanding mortgage note payable at less than face value and recognized a gain of $1,520 on an early extinguishment of debt. The Company has adopted SFAS No. 145,Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, and is reporting gains and losses on extinguishment of debt as part of ordinary income as they no longer meet the criteria for extraordinary gain (loss) accounting treatment.
11. Dispositions
The Company has adopted SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, effective January 1, 2002, and has included the operations of properties sold and held for sale, as well as the gain on sale of sold properties identified for sale on or after January 1, 2002, as discontinued operations for all periods presented.
The following table reflects properties that were sold during 2004:
Property | | | Location | | | Month Sold | | | Square Feet/ Acres | | | Gross Sales Price | | | Gain (Loss) On Sale | |
| | | | | | | | | | | | | | | | | |
2004 Dispositions | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Southwest Walgreens | | | Phoenix, AZ | | | February | | | 93,402 | | $ | 6,650 | | $ | 2,060 | |
| Watson Central | | | Warner Robbins, GA | | | June | | | 227,747 | | | 6,000 | | | (483 | ) |
| Plaza Del Rey | | | Miami, FL | | | July | | | 50,146 | | | 9,000 | | | 6,197 | |
| Forrest Gallery | | | Tullahoma, TN | | | July | | | 214,450 | | | 10,500 | | | 1,560 | |
| Epsilon | | | West Palm Beach, FL | | | August | | | 18,707 | | | 2,650 | | | 1,176 | |
| Millervillage | | | Baton Rouge, LA | | | September | | | 94,559 | | | 2,700 | | | 1,130 | |
| Plymouth Park (4 properties) | | | Irving, TX | | | September | | | 728,566 | | | 24,000 | | | 2,142 | |
| East Bay Plaza | | | Largo, FL | | | October | | | 85,426 | | | 5,600 | | | 4,037 | |
| Losco Corners | | | Jacksonville, FL | | | October | | | 8,700 | | | 1,650 | | | 571 | |
| Gulf Gate Plaza | | | Naples, FL | | | October | | | 204,551 | | | 10,000 | | | 2,370 | |
| City Centre (JV) | | | Palm Beach Gardens, FL | | | November | | | N/A | | | N/A | | | 578 | |
| Pinhook Plaza | | | Layfayette, LA | | | December | | | 194,725 | | | 3,805 | | | 838 | |
| | | | | | | |
Sale of income producing properties | | 82,555 | | | 22,176 | |
| | | | | | | | | | | | | | | | | |
| Miramar Outparcel | | | Miramar, FL | | | August | | | 2.0 acres | | | 1,500 | | | 158 | |
| | | | | | | | | | | | | | | | | |
Total for 2004 | $ | 84,055 | | $ | 22,334 | |
| | | | | | | |
As of December 31, 2004, one retail property was classified as property held for sale. This property has an aggregate gross leasable area of 177 square feet and an aggregate net book value of $12,646. This property was sold in January 2005.
The summary selected operating results for properties disposed of or designated as held for sale after December 31, 2001 are as follows:
| | For the Year Ended December 31, |
| | | | 2004 | | | 2003 | | | 2002 | |
Rental Revenue | | $ | 9,230 | | $ | 13,616 | | $ | 10,253 | |
| | | | | | | | | | | |
Expenses | | | | | | | | | | |
| Property operating expenses | | | 2,993 | | | 4,118 | | | 3,144 | |
| Rental property depreciation and amortization | | | 1,113 | | | 1,596 | | | 1,247 | |
| Interest expense | | | 716 | | | 1,372 | | | 1,479 | |
| Amortization of deferred financing fees | | | 89 | | | 119 | | | 125 | |
| Other | | | 46 | | | (389 | ) | | (484 | ) |
| | | | | | | | | | | |
| Income from properties sold or held for sale | | $ | 4,273 | | $ | 6,800 | | $ | 4,742 | |
| | | | | | | | | | | |
12. Stockholders’ Equity and Earnings Per Share
The following table reflects the change in number of shares of common stock outstanding for the year ended December 31, 2004:
| | Common Stock | | Options Exercised | | Total | |
| | | | | | | |
| Board of Directors | 12 | * | 18 | | 30 | |
| Officers | 184 | * | 386 | | 570 | |
| Employees | 19 | * | 217 | | 236 | |
| Exercise of OP units | 734 | | - | | 734 | |
| Dividend Reinvestment and Stock Purchase Plan | 2,674 | | - | | 2,674 | |
| Total | 3,623 | | 621 | | 4,244 | |
| | | | | | | |
* Reflects shares of “restricted stock” which are subject to forfeiture and vest over a period of one to four years.
The following table reports dividends paid for the twelve months ended December 31, 2004 and 2003:
2004 | | 2003 | |
| | | | | | | | | | | | | | | | | |
Date | | | Per Share | | | Amount | | | Date | | | Per Share | | | Amount | |
| | | | | | | | | | | | | | | | | |
| March 31 | | $ | 0.28 | | $ | 19,630 | | | March 31 | | $ | 0.27 | | $ | 16,130 | |
| June 30 | | $ | 0.28 | | | 19,725 | | | June 30 | | $ | 0.27 | | | 17,084 | |
| September 30 | | $ | 0.28 | | | 20,272 | | | September 30 | | $ | 0.28 | | | 18,159 | |
| December 31 | | $ | 0.29 | | | 21,277 | | | December 31 | | $ | 0.28 | | | 19,304 | |
| | | | | | | | | | | | | | | | | |
| Total | | | | | $ | 80,904 | | | Total | | | | | $ | 70,677 | |
| | | | | | | | | | | | | | | | | |
The following is a reconciliation of the amounts of net income and shares of common stock used in calculating basic and diluted per-share income (“EPS”) for the years ended December 31, 2004, 2003 and 2002:
| | | For the Year Ended December 31, 2004 |
| | | | | | |
| | | | Income (Numerator) | | | Shares (Denominator) | | | Per Share Amount | |
Net Income | | $ | 97,804 | | | | | | | |
| | | | | | | | | | | |
Basic EPS | | | | | | | | | | |
| Income attributable to common stockholders | | $ | 97,804 | | | 70,447 | | $ | 1.39 | |
| | | | | | | | | | | |
Effect of Dilutive Securities | | | | | | | | | | |
| Walden Woods Village, Ltd. | | | 106 | | | 94 | | | | |
| Unvested restricted stock | | | - | | | 611 | | | | |
| Convertible partnership units | | | 517 | | | 520 | | | | |
| Stock options | | | - | | | 364 | | | | |
| | | | | | | | | | | |
| | | | 623 | | | 1,589 | | | | |
Diluted EPS | | | | | | | | | | |
| Income attributable to common stockholdersassuming conversions | | $ | 98,427 | | | 72,036 | | $ | 1.37 | |
| | | | | | | | | | | |
All options outstanding at December 31, 2004 were included in the computation of diluted EPS.
| | For the Year Ended December 31, 2003 |
| | | | | | |
| | | | Income (Numerator) | | | Shares (Denominator) | | | Per Share Amount | |
Net Income | | $ | 63,647 | | | | | | | |
| | | | | | | | | | | |
Basic EPS | | | | | | | | | | |
| Income attributable to common stockholders | | $ | 63,647 | | | 59,998 | | $ | 1.06 | |
| | | | | | | | | | | |
Effect of Dilutive Securities | | | | | | | | | | |
| Walden Woods Village, Ltd. | | | 103 | | | 94 | | | | |
| Unvested restricted stock | | | - | | | 612 | | | | |
| Convertible partnership units | | | 700 | | | 648 | | | | |
| Stock options | | | - | | | 313 | | | | |
| | | | | | | | | | | |
| | | | 803 | | | 1,667 | | | | |
Diluted EPS | | | | | | | | | | |
| Income attributable to common stockholdersassuming conversions | | $ | 64,450 | | | 61,665 | | $ | 1.05 | |
| | | | | | | | | | | |
Options to purchase 350 shares of common stock at $16.22 per share were outstanding at December 31, 2003 but were not included in the computation of diluted EPS because the option price was greater than the average market price of common shares.
| | | For the Year Ended December 31, 2002 |
| | | | | | |
| | | Income (Numerator) | | | Shares (Denominator) | | | Per Share Amount | |
| | | | | | | | | | | |
Net Income | | $ | 39,934 | | | | | | | |
| | | | | | | | | | | |
Basic EPS | | | | | | | | | | |
| Income attributable to common stockholders | | $ | 39,934 | | | 32,662 | | $ | 1.22 | |
| | | | | | | | | | | |
Effect of Dilutive Securities | | | | | | | | | | |
| Walden Woods Village, Ltd. | | | 101 | | | 94 | | | | |
| Unvested restricted stock | | | - | | | 298 | | | | |
| Convertible partnership units | | | 259 | | | 262 | | | | |
| Stock options | | | - | | | 127 | | | | |
| | | | | | | | | | | |
| | | | 360 | | | 781 | | | | |
Diluted EPS | | | | | | | | | | |
| Income attributable to common stockholdersassuming conversions | | $ | 40,294 | | | 33,443 | | $ | 1.20 | |
| | | | | | | | | | | |
All options outstanding at December 31, 2002 were included in the computation of diluted EPS.
13. Benefit Plans
Stock-Based Compensation
On October 23, 1996, the Company adopted the Equity One, Inc. 1995 Stock Option Plan (the “Plan”), which was amended December 10, 1998. The purpose of the Plan is to further the growth of the Company by offering incentives to directors, officers and other key employees of the Company, and to increase the interest of these directors, officers and employees in the Company through additional ownership of its common stock. The effective date of the Plan was January 1, 1996. The maximum number of shares of common stock as to which options may be granted under this Plan is 1,000 shares, which is reduced each year by the required or discretionary grant of options. The term of each option is determined by the Compensation Committee of the Company (the “Committee”), but in no event can be longer than ten years from the date of the grant. The vesting of the options is determined by the Committee, in its sole and absolute discretion, at the date of grant of the option.
On June 23, 2000, the Company, with shareholder approval, adopted the Equity One 2000 Executive Incentive Compensation Plan (the “2000 Plan”). The terms of the 2000 Plan provide for grants of stock options, stock appreciation rights (“SARs”), restricted stock, deferred stock, other stock-related awards and performance or annual incentive awards that may be settled in cash, stock or other property. The persons eligible to receive an award under the 2000 Plan are the officers, directors, employees and independent contractors of the Company and its subsidiaries. Following an amendment to the 2000 Plan, approved by our stockholders on July 28, 2004, the total number of shares of common stock that may be issuable under the 2000 Plan is 5,500,000 shares, plus (i) the number of shares with respect to which options previously granted under the 2000 Plan terminate without being exercised, and (ii) the number of shares that are surrendered in payment of the exercise price for any awards or any tax withholding requirements. In addition to increasing the available shares, the July 2004 amendment expanded the list of business criteria that our compensation committee may use in granting performance awards and annual incentive awards under the 2000 Plan intended to qualify for the exclusions from the limitations of Section 162(m) of the Internal Revenue Code and modified the definition of a “change of control” to include, in addition to other instances, following approval by stockholders of any reorganization, merger or consolidation or other transaction or series of transactions if persons who were stockholders immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power of the reorganized, merger or consolidated company’s then outstanding voting securities (previously the threshold was 26%). The 2000 Plan will terminate on the earlier of the day before the tenth anniversary of the stockholders’ approval of the 2000 Plan or the date on which all shares reserved for issuance under the 2000 Plan have been issued.
The following is a summary of the Company’s stock option activity for the years ended December 31, 2004, 2003 and 2002:
| | | 2004 | 2003 | 2002 |
| | | | | |
| | | | Stock Options | | | Weighted Average Exercise Price | | | Stock Options | | | Weighted Average Exercise Price | | | Stock Options | | | Weighted Average Exercise Price | |
Outstanding at thebeginning of year | | | 1,701 | | $ | 13.22 | | | 960 | | $ | 11.78 | | | 625 | | $ | 10.12 | |
| Granted | | | 400 | | | 17.17 | | | 860 | | | 14.44 | | | 509 | | | 13.25 | |
| IRT options* | | | - | | | - | | | 827 | | | 11.17 | | | - | | | - | |
| Forfeited | | | - | | | - | | | (51 | ) | | - | | | - | | | - | |
| Exercised | | | (620 | ) | | 12.64 | | | (895 | ) | | 10.96 | | | (174 | ) | | 10.15 | |
| Outstanding at theend of year | | | 1,481 | | $ | 14.52 | | | 1,701 | | | 13.22 | | | 960 | | $ | 11.78 | |
| Exercisable,end of year | | | 1,091 | | $ | 13.57 | | | 708 | | | 12.09 | | | 541 | | $ | 11.78 | |
| Weighted average fair value of options granted during the year | | | | | $ | 1.45 | | | | | $ | 1.24 | | | | | $ | 1.69 | |
| | | | | | | | | | | | | | | | | | | | |
*Converted to Company options upon merger with IRT.
The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions for the years ended December 31, 2004, 2003 and 2002:
| | | 2004 | | 2003 | | 2002 | |
| | | | | | | | |
| Dividend Yield | | 6.5% | | 6.5% - 7.0% | | 7.9% | |
| Risk-free interest rate | | 4.3% | | 1.2% - 4.3% | | 4.3% | |
| Expected option life (years) | | 10 | | 1-10 | | 10 | |
| Expected volatility | | 16.0% | | 16.5% - 25.0% | | 24.0% | |
| | | | | | | | |
The following table summarizes information about outstanding stock options as of December 31, 2004:
Options Outstanding | | Options Exercisable | |
Exercise Price | | Number Outstanding | | Weighted Average Remaining Contractual Life (in years) | | Number Exercisable | |
| | | | | | | | |
| $ 9.00 - 9.99 | | 2 | | 5.7 | | 2 | |
| $10.00 - 10.99 | | 129 | | 4.6 | | 129 | |
| $11.00 - 11.99 | | 20 | | 6.0 | | 20 | |
| $12.00 - 12.99 | | 1 | | 2.4 | | 1 | |
| $13.00 - 13.99 | | 656 | | 7.8 | | 656 | |
| $14.00 - 14.99 | | 10 | | 8.5 | | 10 | |
| $16.22 | | 263 | | 8.0 | | 263 | |
| $17.17 | | 400 | | 9.0 | | 10 | |
| | | | | | | | |
| | | 1,481 | | | | 1,091 | |
| | | | | | | | |
Restricted Stock Grants
The Company grants restricted stock to its officers, directors, and other employees. Vesting periods for the restricted stock are determined by the Company’s Compensation Committee. As of December 31, 2004, the Company had 693 shares of non-vested restricted stock grants outstanding. The vesting of the 693 shares is as follows:
Year Ending December 31, | | Number of Shares |
| | | |
| 2005 | | 324 |
| 2006 | | 288 |
| 2007 | | 77 |
| 2008 | | 4 |
| | | |
| Total | | 693 |
| | | |
401(k) Plan
The Company has a 401(k) defined contribution plan (the “401(k) Plan”) covering substantially all of the officers and employees of the Company which permits participants to defer compensation up to the maximum amount permitted by law. The Company matches 75% of each employee’s contribution up to a maximum of 4.5% of the employee's annual compensation. Employees contributions vest immediately while the Company’s matching contributions vest over three years. The Company’s contributions to the 401(k) Plan for the year ended December 31, 2004, 2003 and 2002 (inception) were $253, $177 and $67, respectively. The 401(k) Plan invests the Company’s matching contributions by purchasing publicly traded shares of the Company’s common stock.
2004 Employee Stock Purchase Plan
Under the 2004 Employee Stock Purchase Plan (the “Purchase Plan”) (implemented in October 2004), Equity One employees, including directors of Equity One who are employees, are eligible to participate in quarterly plan offerings in which payroll deductions may be used to purchase shares of Common Stock. The purchase price per share will be 90% of the average closing price per share of common stock on the NYSE on the five (5) trading days that immediately precede the date of purchase (the “Exercise date”), provided, however, that in no event shall the exercise price per share of common stock on the exercise date of an offering period be less than the lower 85% of (i) the market price on the first day of the offering period or (ii) the market price on the Exercise Date.
14. Future Minimum Rental Income, Commitments and Contingent Liabilities
Future minimum rental income under noncancelable operating leases approximates the following as of December 31, 2004:
Year Ending December 31, | | Amount | |
| | | | |
| 2005 | | $ 169,202 | |
| 2006 | | 145,194 | |
| 2007 | | 122,669 | |
| 2008 | | 100,769 | |
| 2009 | | 82,684 | |
| Thereafter | | 395,912 | |
| | | | |
| Total | | $1,016,430 | |
| | | | |
As of December 31, 2004 and 2003, the Company has pledged letters of credit for $1,394and $1,433, respectively, as additional security for financing.
The Company is subject to litigation in the normal course of business, none of which as of December 31, 2004 in the opinion of management will have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.
15. Related Party Transactions
As of December 31, 2004 and 2003, the Company had outstanding loans to various executives in connection with their exercises of options to purchase shares of the Company’s common stock. The remaining note bears interest only, payable quarterly, at the rate of 5% per annum and is due June 2007. Investment income earned on the loans was $55, $255 and $337 for the years ended December 31, 2004, 2003 and 2002, respectively.
| 16. | Quarterly Financial Data (unaudited) |
| | | First Quarter(1) | | | | | | Third Quarter(1) | | | Fourth Quarter(1) | | | Total(2) | |
2004: | | | | | | | | | | | | | | | | |
| Total revenues | | $ | 52,517 | | $ | 55,769 | | $ | 57,822 | | $ | 63,749 | | $ | 229,857 | |
| Incomefrom continuing operations | | $ | 16,913 | | $ | 16,768 | | $ | 18,290 | | $ | 19,497 | | $ | 71,468 | |
| Net income | | $ | 20,239 | | $ | 18,535 | | $ | 30,701 | | $ | 28,329 | | $ | 97,804 | |
| | | | | | | | | | | | | | | | | |
| Basic per share data | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.24 | | $ | 0.25 | | $ | 0.25 | | $ | 0.27 | | $ | 1.01 | |
| Net Income | | $ | 0.29 | | $ | 0.28 | | $ | 0.43 | | $ | 0.39 | | $ | 1.39 | |
| | | | | | | | | | | | | | | | | |
| Diluted per share data | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.24 | | $ | 0.24 | | $ | 0.25 | | $ | 0.27 | | $ | 1.00 | |
| Net income | | $ | 0.29 | | $ | 0.26 | | $ | 0.43 | | $ | 0.39 | | $ | 1.37 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
2003: | | | | | | | | | | | | | | | | |
| Total revenues | | $ | 35,318 | | $ | 45,713 | | $ | 47,683 | | $ | 51,581 | | $ | 180,295 | |
| Income from continuing operations | | $ | 10,534 | | $ | 13,082 | | $ | 14,326 | | $ | 15,822 | | $ | 53,764 | |
| Net income | | $ | 12,344 | | $ | 16,352 | | $ | 17,249 | | $ | 17,702 | | $ | 63,647 | |
| | | | | | | | | | | | | | | | | |
| Basic per share data | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.18 | | $ | 0.22 | | $ | 0.23 | | $ | 0.26 | | $ | 0.89 | |
| Net Income | | $ | 0.22 | | $ | 0.27 | | $ | 0.28 | | $ | 0.29 | | $ | 1.06 | |
| Diluted per share data | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.18 | | $ | 0.21 | | $ | 0.24 | | $ | 0.26 | | $ | 0.89 | |
| Net income | | $ | 0.22 | | $ | 0.26 | | $ | 0.28 | | $ | 0.29 | | $ | 1.05 | |
| | | | | | | | | | | | | | | | | |
—————————
| (1) | Reclassified to reflect the reporting of discontinued operations. |
| (2) | The sum of quarterly earnings per share amounts may differ from annual earnings per share. |
* * * * *
Equity One, Inc.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2004
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | �� | | | | | | | | | | | GROSS AMOUNTS AT WHICH | | | | | | | | | | | |
| | | | | | | | | Initial cost to Company | | | | Carried at Close of Period | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
Income Producing Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ALABAMA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Madison Centre | | | Madison | | $ | 3,821 | | $ | 1,424 | | $ | 5,187 | | $ | 31 | | $ | 1,424 | | $ | 5,218 | | $ | 6,642 | | | ($366 | ) | | February 12, 2003 | | | 40 | |
| West Gate Plaza | | | Mobile | | | - | | | 1,288 | | | 3,162 | | | - | | | 1,288 | | | 3,162 | | | 4,450 | | | (148 | ) | | February 12, 2003 | | | 40 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ARIZONA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Big Curve | | | Yuma | | | 5,310 | | | 2,403 | | | 7,206 | | | 55 | | | 2,426 | | | 7,238 | | | 9,664 | | | (603 | ) | | September 21, 2001 | | | 40 | |
| Park Northern | | | Phoenix | | | 2,182 | | | 1,058 | | | 3,176 | | | 430 | | | 1,068 | | | 3,596 | | | 4,664 | | | (344 | ) | | August 15, 2000 | | | 40 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
FLORIDA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North Florida | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Atlantic Village | | | Atlantic Beach | | | - | | | 1,190 | | | 4,760 | | | 1,005 | | | 1,190 | | | 5,765 | | | 6,955 | | | (1,697 | ) | | June 30, 1995 | | | 40 | |
| Beauclerc Village | | | Jacksonville | | | - | | | 560 | | | 2,242 | | | 842 | | | 651 | | | 2,993 | | | 3,644 | | | (669 | ) | | May 15, 1998 | | | 40 | |
| Commonwealth | | | Jacksonville | | | 2,636 | | | 730 | | | 2,920 | | | 1,458 | | | 730 | | | 4,378 | | | 5,108 | | | (1,277 | ) | | February 28, 1994 | | | 40 | |
| Forest Village | | | Tallahassee | | | 4,441 | | | 725 | | | | | | 6,374 | | | 3,222 | | | 3,877 | | | 7,099 | | | (591 | ) | | January 28, 1999 | | | 40 | |
| Ft. Caroline | | | Jacksonville | | | - | | | 738 | | | 2,432 | | | 93 | | | 738 | | | 2,525 | | | 3,263 | | | (822 | ) | | January 24, 1994 | | | 40 | |
| Mandarin Mini | | | Jacksonville | | | - | | | 362 | | | 1,148 | | | 318 | | | 362 | | | 1,466 | | | 1,828 | | | (389 | ) | | May 10, 1994 | | | 40 | |
| Mandarin Landing | | | Jacksonville | | | - | | | 4,443 | | | 4,747 | | | 1,344 | | | 4,443 | | | 6,091 | | | 10,534 | | | (1,108 | ) | | December 10, 1999 | | | 40 | |
| Medical & Merchants | | | Jacksonville | | | - | | | 7,649 | | | 13,962 | | | 116 | | | 7,685 | | | 14,042 | | | 21,727 | | | (207 | ) | | May 27, 2004 | | | 40 | |
| Middle Beach Shopping Center | | | Panama City Beach | | | - | | | 2,159 | | | 5,542 | | | 52 | | | 2,195 | | | 5,558 | | | 7,753 | | | (155 | ) | | December 23, 2003 | | | 40 | |
| Monument Point | | | Jacksonville | | | - | | | 1,336 | | | 2,330 | | | 124 | | | 1,336 | | | 2,454 | | | 3,790 | | | (510 | ) | | January 31, 1997 | | | 40 | |
| Oak Hill | | | Jacksonville | | | - | | | 690 | | | 2,760 | | | 140 | | | 690 | | | 2,900 | | | 3,590 | | | (696 | ) | | December 7, 1995 | | | 40 | |
| Parkmore Plaza | | | Milton | | | - | | | 3,181 | | | 3,002 | | | 30 | | | 3,181 | | | 3,032 | | | 6,213 | | | (219 | ) | | February 12, 2003 | | | 40 | |
| Pensacola Plaza | | | Pensacola | | | - | | | 1,122 | | | 990 | | | 24 | | | 1,122 | | | 1,014 | | | 2,136 | | | (70 | ) | | February 12, 2003 | | | 40 | |
| South Beach | | | Jacksonville Beach | | | - | | | 5,799 | | | 23,102 | | | 90 | | | 9,545 | | | 19,446 | | | 28,991 | | | (1,005 | ) | | February 12, 2003 | | | 40 | |
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Central Florida | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Alafaya Commons | | | Orlando | | | - | | | 6,742 | | | 9,677 | | | 40 | | | 5,758 | | | 10,701 | | | 16,459 | | | (493 | ) | | February 12, 2003 | | | 40 | |
| Conway Crossing | | | Orlando | | | - | | | 4,423 | | | 5,818 | | | 30 | | | 2,615 | | | 7,656 | | | 10,271 | | | (327 | ) | | February 12, 2003 | | | 40 | |
| Shoppes of Eastwood | | | Orlando | | | 6,126 | | | 1,680 | | | 6,976 | | | 64 | | | 1,688 | | | 7,032 | | | 8,720 | | | (453 | ) | | June 28, 2002 | | | 40 | |
| Walden Woods | | | Plant City | | | 2,272 | | | 950 | | | 550 | | | 3,181 | | | 550 | | | 4,131 | | | 4,681 | | | (699 | ) | | January 1, 1999 | | | 40 | |
| Eustis Square | | | Eustis | | | - | | | 1,450 | | | 4,515 | | | 1,979 | | | 1,463 | | | 6,481 | | | 7,944 | | | (2,282 | ) | | October 22, 1993 | | | 40 | |
| Hunters Creek | | | Orlando | | | - | | | 2,035 | | | 5,445 | | | 15 | | | 1,562 | | | 5,933 | | | 7,495 | | | (195 | ) | | September 23, 2003 | | | 40 | |
| Kirkman Shoppes | | | Orlando | | | 9,448 | | | 3,237 | | | 9,714 | | | 99 | | | 3,222 | | | 9,828 | | | 13,050 | | | (1,301 | ) | | August 15, 2000 | | | 33 | |
| Lake Mary | | | Orlando | | | 24,282 | | | 5,578 | | | 13,878 | | | 6,181 | | | 7,092 | | | 18,545 | | | 25,637 | | | (3,790 | ) | | November 9, 1995 | | | 40 | |
| Park Promenade | | | Orlando | | | 6,241 | | | 2,810 | | | 6,444 | | | 490 | | | 2,810 | | | 6,934 | | | 9,744 | | | (1,171 | ) | | January 31, 1999 | | | 40 | |
| Town & Country | | | Kissimmee | | | - | | | 1,426 | | | 4,397 | | | 15 | | | 1,282 | | | 4,556 | | | 5,838 | | | (212 | ) | | February 12, 2003 | | | 40 | |
| Unigold | | | Winter Park | | | - | | | 2,181 | | | 8,195 | | | 1,605 | | | 4,304 | | | 7,677 | | | 11,981 | | | (377 | ) | | February 12, 2003 | | | 40 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | GROSS AMOUNTS ATWHICH | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | | Carried at Close of Period | | | | | | | | | | |
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| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
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Florida West Coast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bay Pointe Plaza | | | St. Petersburg | | | - | | | 2,733 | | | 7,810 | | | 36 | | | 4,655 | | | 5,924 | | | 10,579 | | | (328 | ) | | February 12, 2003 | | | 40 | |
| Carrollwood | | | Tampa | | | - | | | 1,873 | | | 7,322 | | | 435 | | | 2,756 | | | 6,874 | | | 9,630 | | | (338 | ) | | February 12, 2003 | | | 40 | |
| Charlotte Square | | | Port Charlotte | | | 3,550 | | | 1,924 | | | 6,644 | | | 63 | | | 4,155 | | | 4,476 | | | 8,631 | | | (265 | ) | | February 12, 2003 | | | 40 | |
| Chelsea Place | | | New Port Richey | | | - | | | 3,708 | | | 6,491 | | | 7 | | | 2,591 | | | 7,615 | | | 10,206 | | | (333 | ) | | February 12, 2003 | | | 40 | |
| Lake St. Charles | | | Tampa | | | 3,833 | | | 1,256 | | | 3,768 | | | 12 | | | 1,268 | | | 3,768 | | | 5,036 | | | (309 | ) | | September 21, 2001 | | | 40 | |
| Lutz Lake | | | Lutz | | | 7,500 | | | 4,742 | | | 5,199 | | | 32 | | | 3,644 | | | 6,329 | | | 9,973 | | | (294 | ) | | February 12, 2003 | | | 40 | |
| Marco Town Center | | | Marco Island | | | 8,578 | | | 3,872 | | | 11,966 | | | 568 | | | 3,872 | | | 12,534 | | | 16,406 | | | (1,466 | ) | | August 15, 2000 | | | 37 | |
| Mariners Crossing | | | Spring Hill | | | 3,332 | | | 1,110 | | | 4,447 | | | 29 | | | 1,110 | | | 4,476 | | | 5,586 | | | (491 | ) | | September 12, 2000 | | | 40 | |
| Pavilion | | | Naples | | | - | | | 12,716 | | | 11,299 | | | 26 | | | 12,650 | | | 11,391 | | | 24,041 | | | (263 | ) | | February 4, 2004 | | | 40 | |
| Regency Crossing | | | Port Richey | | | - | | | 1,752 | | | 6,754 | | | 8 | | | 1,982 | | | 6,532 | | | 8,514 | | | (312 | ) | | February 12, 2003 | | | 40 | |
| Ross Plaza | | | Tampa | | | 6,589 | | | 2,115 | | | 6,346 | | | 74 | | | 2,115 | | | 6,420 | | | 8,535 | | | (848 | ) | | August 15, 2000 | | | 33 | |
| Seven Hills | | | Spring Hill | | | - | | | 1,556 | | | 5,167 | | | 3 | | | 2,167 | | | 4,559 | | | 6,726 | | | (227 | ) | | February 12, 2003 | | | 40 | |
| Shoppes of North Port | | | North Port | | | 4,008 | | | 1,452 | | | 5,807 | | | 54 | | | 1,452 | | | 5,861 | | | 7,313 | | | (596 | ) | | December 5, 2000 | | | 40 | |
| Skipper Palms | | | Tampa | | | 3,526 | | | 1,302 | | | 3,940 | | | 20 | | | 1,315 | | | 3,947 | | | 5,262 | | | (345 | ) | | September 21, 2001 | | | 40 | |
| Summerlin Square | | | Fort Myers | | | 3,622 | | | 1,043 | | | 7,989 | | | 1,327 | | | 2,187 | | | 8,172 | | | 10,359 | | | (1,375 | ) | | June 10, 1998 | | | 40 | |
| Venice Shopping Center | | | Venice | | | - | | | 3,836 | | | 2,562 | | | 38 | | | 3,857 | | | 2,579 | | | 6,436 | | | (54 | ) | | March 31, 2004 | | | | |
| Venice Plaza | | | Venice | | | - | | | 3,120 | | | 450 | | | 1,049 | | | 2,189 | | | 2,430 | | | 4,619 | | | (251 | ) | | February 12, 2003 | | | 40 | |
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Florida Treasure Coast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bluffs Square | | | Jupiter | | | 10,005 | | | 3,232 | | | 9,917 | | | 276 | | | 3,232 | | | 10,193 | | | 13,425 | | | (1,390 | ) | | August 15, 2000 | | | 33 | |
| Cashmere Corners | | | Port St. Lucie | | | 5,141 | | | 1,436 | | | 5,530 | | | 136 | | | 1,435 | | | 5,667 | | | 7,102 | | | (547 | ) | | August 15, 2000 | | | 40 | |
| Jonathan's Landing | | | Jupiter | | | 2,868 | | | 1,145 | | | 3,442 | | | 1 | | | 1,146 | | | 3,442 | | | 4,588 | | | (399 | ) | | August 15, 2000 | | | 37 | |
| New Smyrna Beach | | | New Smyrna Beach | | | - | | | 2,598 | | | 9,532 | | | 36 | | | 3,217 | | | 8,949 | | | 12,166 | | | (442 | ) | | February 12, 2003 | | | 40 | |
| Old King Commons | | | Palm Coast | | | - | | | 1,695 | | | 5,005 | | | 17 | | | 1,420 | | | 5,297 | | | 6,717 | | | (252 | ) | | February 12, 2003 | | | 40 | |
| Ryanwood | | | Vero Beach | | | - | | | 2,281 | | | 6,880 | | | 47 | | | 2,281 | | | 6,927 | | | 9,208 | | | (561 | ) | | August 15, 2000 | | | 40 | |
| Salerno Village | | | Stuart | | | - | | | 807 | | | | | | 7,025 | | | 2,125 | | | 5,707 | | | 7,832 | | | (124 | ) | | May 6, 2002 | | | 40 | |
| Treasure Coast | | | Vero Beach | | | 4,532 | | | 2,676 | | | 8,444 | | | 65 | | | 1,359 | | | 9,826 | | | 11,185 | | | (430 | ) | | February 12, 2003 | | | 40 | |
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South Florida / Atlantic Coast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bird Ludlum | | | Miami | | | 9,690 | | | 4,080 | | | 16,318 | | | 673 | | | 4,088 | | | 16,983 | | | 21,071 | | | (4,450 | ) | | August 11, 1994 | | | 40 | |
| Boca Village | | | Boca Raton | | | 8,211 | | | 3,385 | | | 10,174 | | | 247 | | | 3,385 | | | 10,421 | | | 13,806 | | | (1,224 | ) | | August 15, 2000 | | | 37 | |
| Boynton Plaza | | | Boynton Beach | | | 7,423 | | | 2,943 | | | 9,100 | | | 251 | | | 2,943 | | | 9,351 | | | 12,294 | | | (1,240 | ) | | August 15, 2000 | | | 33 | |
| Countryside Shops | | | Cooper City | | | - | | | 13,963 | | | 13,853 | | | 50 | | | 11,343 | | | 16,523 | | | 27,866 | | | (728 | ) | | February 12, 2003 | | | 40 | |
| Crossroads Square | | | Ft. Lauderdale | | | 12,324 | | | 6,674 | | | 4,405 | | | 8,046 | | | 8,492 | | | 10,633 | | | 19,125 | | | (567 | ) | | August 15, 2000 | | | 40 | |
| CVS Plaza | | | Miami | | | - | | | 727 | | | 3,090 | | | 1 | | | 727 | | | 3,091 | | | 3,818 | | | (40 | ) | | July 23, 1999 | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | Carried at Close of Period | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
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| El Novillo | | | Miami Beach | | | - | | | 250 | | | 1,000 | | | 151 | | | 250 | | | 1,151 | | | 1,401 | | | (314 | ) | | April 30, 1998 | | | 40 | |
| Greenwood | | | Palm Springs | | | - | | | 6,646 | | | 10,295 | | | 34 | | | 4,117 | | | 12,858 | | | 16,975 | | | (552 | ) | | February 12, 2003 | | | 40 | |
| Homestead Gas Station | | | Homestead | | | - | | | 1,157 | | | - | | | - | | | 1,157 | | | - | | | 1,157 | | | - | | | | | | | |
| Lago Mar | | | Miami | | | - | | | 5,020 | | | 6,609 | | | 206 | | | 4,216 | | | 7,619 | | | 11,835 | | | (336 | ) | | February 12, 2003 | | | 40 | |
| Lantana Village | | | Lantana | | | 3,511 | | | 1,350 | | | 7,978 | | | 833 | | | 1,350 | | | 8,811 | | | 10,161 | | | (1,374 | ) | | January 6, 1998 | | | 40 | |
| Meadows | | | Miami | | | 6,438 | | | 2,303 | | | 6,670 | | | 92 | | | 2,304 | | | 6,761 | | | 9,065 | | | (469 | ) | | May 23, 2002 | | | 40 | |
| Oakbrook | | | Palm Beach Gardens | | | - | | | 4,915 | | | 8,718 | | | 12,588 | | | 7,706 | | | 18,515 | | | 26,221 | | | (1,284 | ) | | August 15, 2000 | | | 40 | |
| Pine Island | | | Davie | | | 24,582 | | | 8,557 | | | 12,860 | | | 236 | | | 8,557 | | | 13,096 | | | 21,653 | | | (1,867 | ) | | August 26, 1999 | | | 40 | |
| Pine Ridge Square | | | Coral Springs | | | 7,273 | | | 9,006 | | | 9,850 | | | 75 | | | 6,619 | | | 12,312 | | | 18,931 | | | (548 | ) | | February 12, 2003 | | | 40 | |
| Plaza Alegre | | | Miami | | | - | | | 1,550 | | | 9,191 | | | 803 | | | 2,000 | | | 9,544 | | | 11,544 | | | (661 | ) | | February 26, 2002 | | | 40 | |
| Point Royale | | | Miami | | | 4,284 | | | 3,720 | | | 5,005 | | | 1,211 | | | 3,720 | | | 6,216 | | | 9,936 | | | (1,436 | ) | | July 27, 1995 | | | 40 | |
| Prosperity Centre | | | Palm Beach Gardens | | | 6,022 | | | 4,597 | | | 13,838 | | | 70 | | | 4,597 | | | 13,908 | | | 18,505 | | | (1,660 | ) | | August 15, 2000 | | | 40 | |
| Ridge Plaza | | | Davie | | | - | | | 3,905 | | | 7,450 | | | 654 | | | 3,905 | | | 8,104 | | | 12,009 | | | (1,239 | ) | | August 15, 2000 | | | 40 | |
| Riverside Square | | | Coral Springs | | | 7,589 | | | 7,202 | | | 8,260 | | | 117 | | | 6,423 | | | 9,156 | | | 15,579 | | | (422 | ) | | February 12, 2003 | | | 40 | |
| Sawgrass Promenade | | | Deerfield Beach | | | 8,211 | | | 3,280 | | | 9,351 | | | 242 | | | 3,280 | | | 9,593 | | | 12,873 | | | (1,378 | ) | | August 15, 2000 | | | 40 | |
| Sheridan | | | Hollywood | | | - | | | 39,408 | | | 36,241 | | | 81 | | | 38,888 | | | 36,842 | | | 75,730 | | | (1,397 | ) | | July 14, 2003 | | | 40 | |
| Shoppes of Ibis | | | West Palm Beach | | | 5,687 | | | 3,001 | | | 6,299 | | | 25 | | | 3,002 | | | 6,323 | | | 9,325 | | | (405 | ) | | July 10, 2002 | | | 40 | |
| Shops at Skylake | | | North Miami Beach | | | 14,266 | | | 7,630 | | | | | | 26,537 | | | 13,192 | | | 20,975 | | | 34,167 | | | (2,077 | ) | | August 19, 1997 | | | 40 | |
| Shoppes of Silverlakes | | | Pembroke Pines | | | 2,627 | | | 12,072 | | | 10,131 | | | 36 | | | 10,306 | | | 11,933 | | | 22,239 | | | (527 | ) | | February 12, 2003 | | | 40 | |
| Tamarac Town Square | | | Tamarac | | | 6,122 | | | 2,504 | | | 7,874 | | | 126 | | | 4,742 | | | 5,762 | | | 10,504 | | | (318 | ) | | February 12, 2003 | | | 40 | |
| West Lakes Plaza | | | Miami | | | - | | | 2,141 | | | 5,789 | | | 409 | | | 2,141 | | | 6,198 | | | 8,339 | | | (1,356 | ) | | November 6, 1996 | | | 40 | |
| Westport Plaza | | | Davie | | | 4,876 | | | 3,595 | | | 3,446 | | | 0 | | | 3,595 | | | 3,446 | | | 7,041 | | | (9 | ) | | December 17, 2004 | | | | |
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GEORGIA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Atlanta | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BridgeMill | | | Canton | | | 9,395 | | | 9,185 | | | 6,310 | | | 10 | | | 8,593 | | | 6,912 | | | 15,505 | | | (250 | ) | | November 13, 2003 | | | 40 | |
| Butler Creek | | | Acworth | | | - | | | 4,520 | | | 7,648 | | | 32 | | | 2,810 | | | 9,390 | | | 12,200 | | | (489 | ) | | July 15, 2003 | | | 40 | |
| Chastain Square | | | Atlanta | | | 3,821 | | | 10,053 | | | 6,573 | | | 92 | | | 10,689 | | | 6,029 | | | 16,718 | | | (311 | ) | | February 12, 2003 | | | 40 | |
| Commerce Crossing | | | Commerce | | | - | | | 2,013 | | | 1,301 | | | 27 | | | 2,013 | | | 1,328 | | | 3,341 | | | (65 | ) | | February 12, 2003 | | | 40 | |
| Douglas Commons | | | Douglasville | | | 4,976 | | | 3,506 | | | 7,797 | | | 93 | | | 3,681 | | | 7,715 | | | 11,396 | | | (387 | ) | | February 12, 2003 | | | 40 | |
| Fairview Oaks | | | Ellenwood | | | 4,710 | | | 3,526 | | | 6,187 | | | 1 | | | 1,929 | | | 7,785 | | | 9,714 | | | (335 | ) | | February 12, 2003 | | | 40 | |
| Grassland Crossing | | | Alpharetta | | | 5,827 | | | 4,227 | | | 7,885 | | | 82 | | | 3,656 | | | 8,538 | | | 12,194 | | | (385 | ) | | February 12, 2003 | | | 40 | |
| Hamilton Ridge | | | Buford | | | - | | | 6,530 | | | 7,167 | | | 46 | | | 5,148 | | | 8,595 | | | 13,743 | | | (283 | ) | | December 18, 2003 | | | 40 | |
| Mableton Crossing | | | Mableton | | | 4,062 | | | 2,789 | | | 6,945 | | | 2 | | | 3,331 | | | 6,405 | | | 9,736 | | | (313 | ) | | February 12, 2003 | | | 40 | |
| Macland Pointe | | | Marietta | | | 5,798 | | | 1,900 | | | 6,388 | | | 56 | | | 3,462 | | | 4,882 | | | 8,344 | | | (269 | ) | | February 12, 2003 | | | 40 | |
| Market Place | | | Norcross | | | - | | | 1,474 | | | 2,410 | | | 1,943 | | | 1,667 | | | 4,160 | | | 5,827 | | | (219 | ) | | February 12, 2003 | | | 40 | |
| Paulding Commons | | | Dallas | | | 6,487 | | | 3,848 | | | 11,985 | | | 48 | | | 3,848 | | | 12,033 | | | 15,881 | | | (576 | ) | | February 12, 2003 | | | 40 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | GROSS AMOUNTS ATWHICH | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | | Carried at Close of Period | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
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| Powers Ferry Plaza | | | Marietta | | | - | | | 1,815 | | | 6,648 | | | 500 | | | 3,236 | | | 5,727 | | | 8,963 | | | (372 | ) | | February 12, 2003 | | | 40 | |
| Presidential Markets | | | Snellville | | | 27,159 | | | 20,608 | | | 29,931 | | | 17 | | | 21,761 | | | 28,795 | | | 50,556 | | | (1,307 | ) | | February 12, 2003 | | | 40 | |
| Shops of Huntcrest | | | Lawrenceville | | | - | | | 5,473 | | | 7,813 | | | 301 | | | 5,706 | | | 7,881 | | | 13,587 | | | (426 | ) | | February 12, 2003 | | | 40 | |
| Wesley Chapel Crossing | | | Decatur | | | 3,332 | | | 3,416 | | | 7,527 | | | 1 | | | 6,632 | | | 4,312 | | | 10,944 | | | (271 | ) | | February 12, 2003 | | | 40 | |
| West Towne Square | | | Rome | | | - | | | 1,792 | | | 1,853 | | | 55 | | | 1,792 | | | 1,908 | | | 3,700 | | | (141 | ) | | February 12, 2003 | | | 40 | |
| Williamsburg @ Dunwoody | | | Dunwoody | | | - | | | 4,600 | | | 3,615 | | | 456 | | | 4,347 | | | 4,324 | | | 8,671 | | | (193 | ) | | February 12, 2003 | | | 40 | |
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Central Georgia | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Daniel Village | | | Augusta | | | 4,177 | | | 3,439 | | | 8,352 | | | 102 | | | 3,439 | | | 8,454 | | | 11,893 | | | (412 | ) | | February 12, 2003 | | | 40 | |
| Spalding Village | | | Griffin | | | 10,231 | | | 4,706 | | | 1,700 | | | 91 | | | 2,977 | | | 3,520 | | | 6,497 | | | (192 | ) | | February 12, 2003 | | | 40 | |
| Walton Plaza | | | Augusta | | | - | | | 869 | | | 2,827 | | | 23 | | | 869 | | | 2,850 | | | 3,719 | | | (139 | ) | | February 12, 2003 | | | 40 | |
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South Georgia | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Colony Square | | | Fitzgerald | | | - | | | 1,000 | | | 1,085 | | | 18 | | | 1,000 | | | 1,103 | | | 2,103 | | | (58 | ) | | February 12, 2003 | | | 40 | |
| McAlphin Square | | | Savannah | | | - | | | 3,536 | | | 6,963 | | | 122 | | | 3,536 | | | 7,085 | | | 10,621 | | | (361 | ) | | February 12, 2003 | | | 40 | |
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KENTUCKY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Scottsville Square | | | Bowling Green | | | - | | | 769 | | | 996 | | | 28 | | | 770 | | | 1,023 | | | 1,793 | | | (51 | ) | | February 12, 2003 | | | 40 | |
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LOUISIANA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ambassador Row | | | Lafayette | | | - | | | 3,880 | | | 10,570 | | | 76 | | | 3,880 | | | 10,646 | | | 14,526 | | | (505 | ) | | February 12, 2003 | | | 40 | |
| Ambassador Row Courtyard | | | Lafayette | | | - | | | 3,110 | | | 9,208 | | | 47 | | | 2,310 | | | 10,055 | | | 12,365 | | | (479 | ) | | February 12, 2003 | | | 40 | |
| Bluebonnet Village | | | Baton Rouge | | | - | | | 1,404 | | | 4,281 | | | 187 | | | 1,940 | | | 3,932 | | | 5,872 | | | (213 | ) | | February 12, 2003 | | | 40 | |
| The Boulevard | | | Lafayette | | | - | | | 1,360 | | | 1,675 | | | 304 | | | 1,360 | | | 1,979 | | | 3,339 | | | (101 | ) | | February 12, 2003 | | | 40 | |
| Country Club Plaza | | | Slidell | | | - | | | 1,294 | | | 2,060 | | | 73 | | | 1,294 | | | 2,133 | | | 3,427 | | | (112 | ) | | February 12, 2003 | | | 40 | |
| The Crossing | | | Slidell | | | - | | | 2,280 | | | 3,650 | | | 58 | | | 1,591 | | | 4,397 | | | 5,988 | | | (205 | ) | | February 12, 2003 | | | 40 | |
| Elmwood Oaks | | | Harahan | | | 7,500 | | | 2,606 | | | 10,079 | | | 127 | | | 4,088 | | | 8,724 | | | 12,812 | | | (455 | ) | | February 12, 2003 | | | 40 | |
| Grand Marche | | | Lafayette | | | - | | | 304 | | | - | | | - | | | 304 | | | - | | | 304 | | | - | | | February 12, 2003 | | | 40 | |
| Pinhook Plaza | | | Lafayette | | | - | | | 34 | | | 22 | | | - | | | 34 | | | 22 | | | 56 | | | (2 | ) | | February 12, 2003 | | | 40 | |
| Plaza Acadienne | | | Eunice | | | - | | | 2,108 | | | 168 | | | 26 | | | 2,108 | | | 194 | | | 2,302 | | | (15 | ) | | February 12, 2003 | | | 40 | |
| Sherwood South | | | Baton Rouge | | | - | | | 1,543 | | | 2,412 | | | 33 | | | 918 | | | 3,070 | | | 3,988 | | | (129 | ) | | February 12, 2003 | | | 40 | |
| Siegen Village | | | Baton Rouge | | | 4,221 | | | 3,492 | | | 3,794 | | | 7,437 | | | 4,329 | | | 10,394 | | | 14,723 | | | (832 | ) | | February 12, 2003 | | | 40 | |
| Tarpon Heights | | | Galliano | | | - | | | 1,132 | | | 33 | | | 1,140 | | | 1,133 | | | 1,172 | | | 2,305 | | | (147 | ) | | February 12, 2003 | | | 40 | |
| Village at Northshore | | | Slidell | | | - | | | 2,893 | | | 7,897 | | | 1 | | | 1,034 | | | 9,757 | | | 10,791 | | | (410 | ) | | February 12, 2003 | | | 40 | |
| Wal-Mart Stores, Inc. | | | Mathews | | | - | | | 2,688 | | | - | | | - | | | 2,688 | | | - | | | 2,688 | | | - | | | February 12, 2003 | | | 40 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | GROSS AMOUNTS AT WHICH | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | | Carried at Close of Period | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
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MASSACHUSETTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Star's @ Cambridge | | | Boston | | | - | | | 11,356 | | | 13,853 | | | - | | | 11,356 | | | 13,853 | | | 25,209 | | | (104 | ) | | October 7, 2004 | | | 40 | |
| Shaw's @ Medford | | | Boston | | | 5,512 | | | 7,862 | | | 11,389 | | | - | | | 7,862 | | | 11,389 | | | 19,251 | | | (85 | ) | | October 7, 2004 | | | 40 | |
| Shaw's @ Plymouth | | | Boston | | | 4,029 | | | 4,916 | | | 12,198 | | | - | | | 4,916 | | | 12,198 | | | 17,114 | | | (91 | ) | | October 7, 2004 | | | 40 | |
| Star's @ Qunicy | | | Boston | | | - | | | 6,121 | | | 18,444 | | | - | | | 6,121 | | | 18,444 | | | 24,565 | | | (140 | ) | | October 7, 2004 | | | 40 | |
| Whole Foods @ Swampscott | | | Boston | | | 2,395 | | | 5,135 | | | 6,538 | | | - | | | 5,135 | | | 6,538 | | | 11,673 | | | (49 | ) | | October 7, 2004 | | | 40 | |
| Shaw's @ West Roxbury | | | Boston | | | - | | | 8,757 | | | 13,588 | | | - | | | 8,757 | | | 13,588 | | | 22,345 | | | (104 | ) | | October 7, 2004 | | | 40 | |
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MISSISSIPPI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shipyard Plaza | | | Pascagoula | | | - | | | 1,337 | | | 1,653 | | | - | | | 1,337 | | | 1,653 | | | 2,990 | | | (78 | ) | | February 12, 2003 | | | 40 | |
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NORTH CAROLINA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Centre Pointe Plaza | | | Smithfield | | | - | | | 3,273 | | | 1,633 | | | 1,128 | | | 1,622 | | | 4,412 | | | 6,034 | | | (207 | ) | | February 12, 2003 | | | 40 | |
| Chestnut Square | | | Brevard | | | - | | | 793 | | | 1,326 | | | 8 | | | 517 | | | 1,610 | | | 2,127 | | | (70 | ) | | February 12, 2003 | | | 40 | |
| The Galleria | | | Wrightsville Beach | | | - | | | 1,847 | | | 3,875 | | | 388 | | | 1,493 | | | 4,617 | | | 6,110 | | | (202 | ) | | February 12, 2003 | | | 40 | |
| Parkwest Crossing | | | Durham | | | 4,684 | | | 1,712 | | | 6,727 | | | 199 | | | 1,788 | | | 6,850 | | | 8,638 | | | (326 | ) | | February 12, 2003 | | | 40 | |
| Plaza North | | | Hendersonville | | | - | | | 945 | | | 1,887 | | | 33 | | | 758 | | | 2,107 | | | 2,865 | | | (97 | ) | | February 12, 2003 | | | 40 | |
| Providence Square | | | Charlotte | | | - | | | 1,719 | | | 2,575 | | | 16 | | | 1,112 | | | 3,198 | | | 4,310 | | | (141 | ) | | February 12, 2003 | | | 40 | |
| Riverview Shopping Center | | | Durham | | | - | | | 2,644 | | | 4,745 | | | 283 | | | 2,202 | | | 5,470 | | | 7,672 | | | (249 | ) | | February 12, 2003 | | | 40 | |
| Salisbury Marketplace | | | Salisbury | | | - | | | 1,652 | | | 6,395 | | | 427 | | | 3,118 | | | 5,356 | | | 8,474 | | | (274 | ) | | February 12, 2003 | | | 40 | |
| Shelby Plaza | | | Shelby | | | - | | | 2,061 | | | 338 | | | 40 | | | 868 | | | 1,571 | | | 2,439 | | | (47 | ) | | February 12, 2003 | | | 40 | |
| Stanley Market Place | | | Stanley | | | - | | | 808 | | | 669 | | | 72 | | | 396 | | | 1,153 | | | 1,549 | | | (44 | ) | | February 12, 2003 | | | 40 | |
| 4101 South I-85 Industrial | | | Charlotte | | | - | | | 2,127 | | | 950 | | | 76 | | | 1,619 | | | 1,534 | | | 3,153 | | | (72 | ) | | February 12, 2003 | | | 40 | |
| Thomasville Commons | | | Thomasville | | | - | | | 2,975 | | | 4,567 | | | 39 | | | 1,212 | | | 6,369 | | | 7,581 | | | (271 | ) | | February 12, 2003 | | | 40 | |
| Willowdale Shopping Center | | | Durham | | | - | | | 2,416 | | | 6,499 | | | 318 | | | 2,073 | | | 7,160 | | | 9,233 | | | (408 | ) | | February 12, 2003 | | | 40 | |
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SOUTH CAROLINA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Belfair Towne Village | | | Bluffton | | | 11,197 | | | 9,909 | | | 10,036 | | | 115 | | | 9,854 | | | 10,206 | | | 20,060 | | | (357 | ) | | December 22, 2003 | | | 40 | |
| Woodruff | | | Greenville | | | 2,969 | | | 2,689 | | | 5,448 | | | 100 | | | 2,420 | | | 5,817 | | | 8,237 | | | (198 | ) | | December 23, 2003 | | | 40 | |
| Lancaster Plaza | | | Lancaster | | | - | | | 317 | | | 153 | | | - | | | 317 | | | 153 | | | 470 | | | (11 | ) | | February 12, 2003 | | | 40 | |
| Lancaster Shopping Center | | | Lancaster | | | - | | | 48 | | | 32 | | | - | | | 48 | | | 32 | | | 80 | | | (8 | ) | | February 12, 2003 | | | 40 | |
| North Village Center | | | Durham | | | - | | | 1,207 | | | 3,235 | | | 1,213 | | | 2,860 | | | 2,795 | | | 5,655 | | | (273 | ) | | February 12, 2003 | | | 40 | |
| Sparkleberry Square | | | Columbia | | | 14,573 | | | 11,774 | | | 32,979 | | | 131 | | | 11,774 | | | 33,110 | | | 44,884 | | | (620 | ) | | March 31, 2004 | | | 40 | |
| Spring Valley | | | Columbia | | | - | | | 1,508 | | | 5,050 | | | 59 | | | 1,098 | | | 5,519 | | | 6,617 | | | (256 | ) | | February 12, 2003 | | | 40 | |
| Windy Hill | | | North Myrtle Beach | | | - | | | 830 | | | 1,906 | | | 18 | | | 833 | | | 1,921 | | | 2,754 | | | (36 | ) | | April 8, 2004 | | | 40 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | GROSS AMOUNTS AT WHICH | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | | Carried at Close of Period | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
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TENNESSEE | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Smyrna Village | | | Smyrna | | | - | | | 1,667 | | | 4,694 | | | 217 | | | 1,503 | | | 5,075 | | | 6,578 | | | (242 | ) | | February 12, 2003 | | | 40 | |
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TEXAS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Houston | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Barker Cypress | | | Houston | | | - | | | 1,676 | | | 5,029 | | | 326 | | | 1,676 | | | 5,355 | | | 7,031 | | | (539 | ) | | August 15, 2000 | | | 40 | |
| Beechcrest | | | Houston | | | - | | | 1,408 | | | 4,291 | | | 21 | | | 1,408 | | | 4,312 | | | 5,720 | | | (513 | ) | | August 15, 2000 | | | 37 | |
| Benchmark Crossing | | | Houston | | | 3,226 | | | 1,459 | | | 4,377 | | | 14 | | | 1,473 | | | 4,377 | | | 5,850 | | | (359 | ) | | September 21, 2001 | | | 40 | |
| Bissonnet | | | Houston | | | - | | | 445 | | | 1,335 | | | 5 | | | 450 | | | 1,335 | | | 1,785 | | | (110 | ) | | September 21, 2001 | | | 40 | |
| Colony Plaza | | | Sugarland | | | 2,976 | | | 970 | | | 2,909 | | | 25 | | | 979 | | | 2,925 | | | 3,904 | | | (241 | ) | | September 21, 2001 | | | 40 | |
| Copperfield | | | Houston | | | - | | | 2,689 | | | 2,605 | | | 2,767 | | | 2,689 | | | 5,372 | | | 8,061 | | | (543 | ) | | August 15, 2000 | | | 34 | |
| Forestwood | | | Houston | | | 7,128 | | | 2,659 | | | 7,678 | | | 22 | | | 2,680 | | | 7,679 | | | 10,359 | | | (393 | ) | | December 6, 2002 | | | 40 | |
| Grogan's Mill | | | The Woodlands | | | - | | | 3,117 | | | 9,373 | | | 36 | | | 3,117 | | | 9,409 | | | 12,526 | | | (1,097 | ) | | August 15, 2000 | | | 37 | |
| Hedwig | | | Houston | | | - | | | 1,892 | | | 5,625 | | | 43 | | | 1,893 | | | 5,667 | | | 7,560 | | | (467 | ) | | September 21, 2001 | | | 40 | |
| Highland Square | | | Sugarland | | | 3,951 | | | 1,923 | | | 5,768 | | | 101 | | | 1,941 | | | 5,851 | | | 7,792 | | | (504 | ) | | September 21, 2001 | | | 40 | |
| Market at First Colony | | | Sugarland | | | - | | | 3,292 | | | 9,906 | | | 145 | | | 3,323 | | | 10,020 | | | 13,343 | | | (880 | ) | | September 21, 2001 | | | 40 | |
| Mason Park | | | Katy | | | - | | | 2,524 | | | 7,578 | | | 108 | | | 2,548 | | | 7,662 | | | 10,210 | | | (655 | ) | | September 21, 2001 | | | 40 | |
| Mission Bend | | | Houston | | | - | | | 2,514 | | | 7,854 | | | 278 | | | 2,514 | | | 8,132 | | | 10,646 | | | (1,009 | ) | | August 15, 2000 | | | 37 | |
| Spring Shadows | | | Houston | | | - | | | 1,206 | | | 3,617 | | | 4,422 | | | 2,533 | | | 6,712 | | | 9,245 | | | (613 | ) | | August 15, 2000 | | | 40 | |
| Steeplechase | | | Jersey Village | | | - | | | 2,666 | | | 8,021 | | | 152 | | | 2,666 | | | 8,173 | | | 10,839 | | | (987 | ) | | August 15, 2000 | | | 37 | |
| Wal-Mart Stores, Inc. | | | Marble Falls | | | - | | | 1,951 | | | - | | | - | | | 1,951 | | | - | | | 1,951 | | | - | | | February 12, 2003 | | | 40 | |
| Westgate | | | Houston | | | 29,625 | | | 12,611 | | | 32,151 | | | 97 | | | 12,708 | | | 32,151 | | | 44,859 | | | (470 | ) | | June 1, 2004 | | | | |
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Dallas | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Creekside Plaza | | | Arlington | | | - | | | 6,828 | | | 6,106 | | | 355 | | | 7,328 | | | 5,961 | | | 13,289 | | | (128 | ) | | March 24, 2004 | | | 40 | |
| DeSoto Shopping Center | | | DeSoto | | | - | | | 3,130 | | | 4,978 | | | 9 | | | 3,139 | | | 4,978 | | | 8,117 | | | (21 | ) | | November 12, 2004 | | | | |
| Green Oaks | | | Arlington | | | 2,937 | | | 1,045 | | | 3,134 | | | 39 | | | 1,054 | | | 3,164 | | | 4,218 | | | (276 | ) | | September 21, 2001 | | | 40 | |
| Melbourne Plaza | | | Hurst | | | 1,698 | | | 932 | | | 2,796 | | | 50 | | | 941 | | | 2,837 | | | 3,778 | | | (249 | ) | | September 21, 2001 | | | 40 | |
| Minyards | | | Garland | | | 2,474 | | | 885 | | | 2,665 | | | - | | | 885 | | | 2,665 | | | 3,550 | | | (301 | ) | | August 15, 2000 | | | 38 | |
| Parkwood | | | Plano | | | 6,110 | | | 2,222 | | | 6,668 | | | 90 | | | 2,286 | | | 6,694 | | | 8,980 | | | (565 | ) | | September 21, 2001 | | | 40 | |
| Richwood | | | Richardson | | | 3,147 | | | 1,170 | | | 3,512 | | | 85 | | | 1,208 | | | 3,559 | | | 4,767 | | | (304 | ) | | September 21, 2001 | | | 40 | |
| Rosemeade | | | Carrollton | | | 3,109 | | | 1,175 | | | 3,525 | | | 32 | | | 1,197 | | | 3,535 | | | 4,732 | | | (294 | ) | | September 21, 2001 | | | 40 | |
| Sterling Plaza | | | Irving | | | 3,873 | | | 1,834 | | | 5,504 | | | 216 | | | 1,834 | | | 5,720 | | | 7,554 | | | (671 | ) | | August 15, 2000 | | | 37 | |
| Townsend Square | | | Desoto | | | 4,768 | | | 2,247 | | | 6,793 | | | 37 | | | 2,247 | | | 6,830 | | | 9,077 | | | (797 | ) | | August 15, 2000 | | | 37 | |
| Village by the Park | | | Arlngton | | | - | | | 1,671 | | | 5,066 | | | 200 | | | 1,671 | | | 5,266 | | | 6,937 | | | (672 | ) | | August 15, 2000 | | | 36 | |
| Village Center | | | Southlake | | | - | | | 6,882 | | | 10,400 | | | 30 | | | 6,912 | | | 10,400 | | | 17,312 | | | (217 | ) | | March 24, 2004 | | | 40 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | GROSS AMOUNTS AT WHICH | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | | Carried at Close of Period | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
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San Antonio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bandera Festival | | | San Antonio | | | - | | | 2,629 | | | 3,111 | | | 6,773 | | | 2,708 | | | 9,805 | | | 12,513 | | | (877 | ) | | September 21, 2001 | | | 40 | |
| Blanco Village | | | San Antonio | | | - | | | 5,723 | | | 10,559 | | | - | | | 5,723 | | | 10,559 | | | 16,282 | | | (702 | ) | | May 10, 2002 | | | 40 | |
| Wurzbach | | | San Antonio | | | - | | | 389 | | | 1,226 | | | - | | | 389 | | | 1,226 | | | 1,615 | | | (137 | ) | | August 15, 2000 | | | 40 | |
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VIRGINA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Smyth Valley Crossing | | | Marion | | | - | | | 2,537 | | | 3,890 | | | 2 | | | 2,537 | | | 3,892 | | | 6,429 | | | (183 | ) | | February 12, 2003 | | | 40 | |
| Waterlick Plaza | | | Lynchburg | | | - | | | 1,974 | | | 3,796 | | | 1,037 | | | 1,974 | | | 4,833 | | | 6,807 | | | (243 | ) | | February 12, 2003 | | | 40 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corporate | | | | | | - | | | - | | | - | | | 2,663 | | | - | | | 2,663 | | | 2,663 | | | (1,153 | ) | | various | | | | |
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Total Income Producing Properties | | | | | | 495,056 | | | 625,332 | | | 1,159,766 | | | 130,118 | | | 634,321 | | | 1,280,895 | | | 1,915,216 | | | (95,934 | ) | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Land held for/under development | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ALABAMA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| West Gate Plaza | | | Mobile | | | | | | - | | | - | | | 7 | | | - | | | 7 | | | 7 | | | | | | February 12, 2003 | | | | |
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FLORIDA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
North Florida | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forest Village | | | Tallahassee | | | | | | 1,600 | | | 99 | | | | | | 1,600 | | | 99 | | | 1,699 | | | | | | January 28, 1999 | | | | |
| Fort Caroline | | | Jacksonville | | | | | | 200 | | | 368 | | | | | | 200 | | | 368 | | | 568 | | | | | | January 24, 1994 | | | | |
| Medical & Merchants | | | Jacksonville | | | | | | 276 | | | 14 | | | | | | 276 | | | 14 | | | 290 | | | | | | May 27, 2004 | | | | |
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Central Florida | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Walden Woods | | | Plant City | | | | | | | | | | | | 522 | | | - | | | 522 | | | 522 | | | | | | January 1, 1999 | | | | |
| Eustis Square | | | Eustis | | | | | | | | | | | | 1 | | | - | | | 1 | | | 1 | | | | | | October 22, 1993 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Florida West Coast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Lake St. Charles Outparcel | | | Tampa | | | | | | 206 | | | | | | 12 | | | 206 | | | 12 | | | 218 | | | | | | September 21, 2001 | | | | |
| Mariners Crossing | | | Spring Hill | | | | | | 401 | | | | | | 105 | | | 401 | | | 105 | | | 506 | | | | | | September 12, 2000 | | | | |
| Seven Hills | | | Spring Hills | | | | | | | | | | | | 4 | | | | | | 4 | | | 4 | | | | | | February 12, 2003 | | | | |
| Venice Plaza | | | Venice | | | | | | | | | | | | 525 | | | - | | | 525 | | | 525 | | | | | | February 12, 2003 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | GROSS AMOUNTS AT WHICH | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | | Carried at Close of Period | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvements | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Florida Treasure Coast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cashmere Corners | | | Port St. Lucie | | | | | | | | | 386 | | | 103 | | | - | | | 489 | | | 489 | | | | | | August 15, 2000 | | | | |
| CashmereDev 2 | | | Port St. Lucie | | | | | | | | | 790 | | | 453 | | | - | | | 1,243 | | | 1,243 | | | | | | August 15, 2000 | | | | |
| Salerno Village | | | Stuart | | | | | | | | | 807 | | | 141 | | | - | | | 948 | | | 948 | | | | | | May 6, 2002 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
South Florida / Atlantic Coast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Coral Way /Drug Store | | | Miami | | | | | | | | | 988 | | | 757 | | | - | | | 1,745 | | | 1,745 | | | | | | July 23, 1999 | | | | |
| Crossroads Square | | | Ft. Lauderdale | | | | | | | | | | | | 7 | | | - | | | 7 | | | 7 | | | | | | September 21, 2001 | | | | |
| Homestead | | | Homestead | | | | | | | | | 1,811 | | | 4,047 | | | - | | | 5,858 | | | 5,858 | | | | | | April 10, 1992 | | | | |
| Oakbrook | | | Palm Beach Gardens | | | | | | | | | 200 | | | 604 | | | - | | | 804 | | | 804 | | | | | | August 15, 2000 | | | | |
| Prosperity Centre | | | Palm Beach Gardens | | | | | | | | | | | | 85 | | | - | | | 85 | | | 85 | | | | | | August 15, 2000 | | | | |
| Sawgrass | | | Deerfield Beach | | | | | | 500 | | | - | | | 31 | | | 500 | | | 31 | | | 531 | | | | | | August 15, 2000 | | | | |
| Shops at Skylake | | | North Miami Beach | | | | | | | | | 3,179 | | | 4,306 | | | - | | | 7,485 | | | 7,485 | | | | | | August 19, 1997 | | | | |
| Westport | | | Davie | | | | | | 571 | | | - | | | 0 | | | 571 | | | | | | 571 | | | | | | December 17, 2004 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Atlanta | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Hamilton Ridge | | | Buford | | | | | | | | | | | | 444 | | | 427 | | | 17 | | | 444 | | | | | | December 18, 2003 | | | | |
| Wesley Chapel | | | Atlanta | | | | | | | | | | | | 1 | | | | | | 1 | | | 1 | | | | | | February 12, 2003 | | | | |
| VW Mall | | | McDonough | | | | | | | | | | | | 2,073 | | | - | | | 2,073 | | | 2,073 | | | | | | February 12, 2003 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
GEORGIA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Central Georgia | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Spalding Village | | | Griffin | | | | | | | | | | | | 2,956 | | | - | | | 2,956 | | | 2,956 | | | | | | February 12, 2003 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LOUISIANA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ambassador Row Courtyard | | | Lafayette | | | | | | | | | | | | 1,385 | | | - | | | 1,385 | | | 1,385 | | | | | | February 12, 2003 | | | | |
| Bluebonnet Village | | | Baton Rouge | | | | | | 909 | | | | | | 58 | | | 909 | | | 58 | | | 967 | | | | | | February 12, 2003 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MASSACHUSETTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shaw's @ West Roxbury | | | Boston | | | | | | 480 | | | | | | - | | | 480 | | | - | | | 480 | | | | | | October 7, 2004 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NORTH CAROLINA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Centre Pointe Plaza | | | Smithfield | | | | | | | | | | | | 1,088 | | | - | | | 1,088 | | | 1,088 | | | | | | February 12, 2003 | | | | |
| Chestnut Square | | | Brevard | | | | | | | | | | | | 177 | | | 177 | | | - | | | 177 | | | | | | February 12, 2003 | | | | |
| | | | | | | | | | | | | | | | | | | | | | - | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | GROSS AMOUNTS AT WHICH | | | | | | | | | | |
| | | | | | | | | | Initial cost to Company | | | | | | Carried at Close of Period | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | | Location | | | Encum-brances | | | Land | | | Building & Improvement | | | Capitalized Subsequent to Acquisition or Improvement | | | Land | | | Improvements | | | Total | | | Accumulated Depreciation | | | Date Acquired | | | Depreciable Life | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SOUTH CAROLINA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Belfair Towne Village | | | Bluffton | | | | | | 1,301 | | | | | | 81 | | | 1,301 | | | 81 | | | 1,382 | | | | | | December 22, 2003 | | | | |
| Lancaster Shopping Center | | | | | | | | | | | | 327 | | | 24 | | | | | | 351 | | | 351 | | | | | | February 12, 2003 | | | | |
| Windy Hill | | | North Myrtle Beach | | | | | | 155 | | | | | | 6 | | | 155 | | | 6 | | | 161 | | | | | | April 8, 2004 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TEXAS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Houston | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bissonnet | | | Houston | | | | | | 103 | | | | | | 9 | | | 103 | | | 9 | | | 112 | | | | | | September 21, 2001 | | | | |
| Copperfield | | | Houston | | | | | | | | | 1,089 | | | - | | | - | | | 1,089 | | | 1,089 | | | | | | August 15, 2000 | | | | |
| Texas CP Land, LP | | | Sugarland | | | | | | 206 | | | | | | 52 | | | 215 | | | 43 | | | 258 | | | | | | September 21, 2001 | | | | |
| Westgate | | | Houston | | | | | | 700 | | | | | | 11 | | | 700 | | | 11 | | | 711 | | | | | | June 1, 2004 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dallas | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Creekside Plaza | | | Arlington | | | | | | 600 | | | | | | 12 | | | 600 | | | 12 | | | 612 | | | | | | March 24, 2004 | | | | |
| - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
San Antonio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bandera Festival | | | San Antonio | | | | | | | | | | | | 296 | | | - | | | 296 | | | 296 | | | | | | September 21, 2001 | | | | |
| Blanco Village | | | San Antonio | | | | | | | | | 2,614 | | | 471 | | | - | | | 3,085 | | | 3,085 | | | | | | May 10, 2002 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corporate | | | | | | | | | | | | - | | | 25 | | | - | | | 25 | | | 25 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Land held for/under development | | | | | | | | | 8,208 | | | 12,679 | | | 20,872 | | | 8,821 | | | 32,938 | | | 41,759 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property Held for Sale | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North River Village Center | | | Ellenton | | | - | | | 3,543 | | | 9,551 | | | - | | | 3,543 | | | 9,551 | | | 13,094 | | | (448 | ) | | February 12, 2003 | | | 40 | |
Total Property Held for Sale | | | | | | | | | 3,543 | | | 9,551 | | | - | | | 3,543 | | | 9,551 | | | 13,094 | | | (448 | ) | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Grand Total | | | | | $ | 495,056 | | $ | 637,083 | | $ | 1,181,996 | | $ | 150,990 | | $ | 646,685 | | $ | 1,323,384 | | $ | 1,970,069 | | | ($96,382 | ) | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
INDEX TO EXHIBITS
EXHIBIT NO. | DESCRIPTION |
| | |
| 12.1 | Ratio of Earnings to Fixed Charges |
| 10.1 | Form of Indemnification Agreement |
| 21.1 | List of Subsidiaries of the Registrant |
| 23.1 | Consent of Deloitte & Touche LLP |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002 |
