UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number 1-12560
JP REALTY, INC.
---------------
(Exact name of registrant as specified in its charter)
MARYLAND 87-0515088
-------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
35 CENTURY PARK-WAY
SALT LAKE CITY, UTAH 84115 (801) 486-3911
--------------------------- --------------
(Address of principal executive offices, (Registrant's telephone number,
including zip code) including area code)
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 No
[X]
16,219,290 shares of Common Stock were outstanding as of May 11, 2000
JP REALTY, INC.
FORM 10-Q
INDEX
-----
PART I: FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheet as of March 31, 2000
and December 31, 1999 4
Condensed Consolidated Statement of Operations for the Three Months
Ended March 31, 2000 and 1999 5
Condensed Consolidated Statement of Cash Flows
for the Three Months Ended March 31, 2000 and 1999 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II: OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
2
Certain matters discussed under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Quantitative and
Qualitative Disclosures About Market Risk" and elsewhere in this Quarterly
Report on Form 10-Q and the information incorporated by reference herein may
constitute forward-looking statements for purposes of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
and achievements of JP Realty, Inc. to be materially different from future
results, performance or achievements expressed or implied by such forward-
looking statements.
PART I
ITEM 1. FINANCIAL STATEMENTS
--------------------
The information furnished in the accompanying financial statements listed
in the index on page 2 of this Quarterly Report on Form 10-Q reflects only
normal recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the aforementioned financial statements for the
interim periods.
The aforementioned financial statements should be read in conjunction with
the notes to the financial statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations and the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, including the
financial statements and notes thereto.
3
JP REALTY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(UNAUDITED)
---------
MARCH 31, DECEMBER 31,
2000 1999
----------------- ----------------
ASSETS
Real Estate Assets, Including Assets Under Development
of $21,551 and $18,389 $ 884,548 $ 876,388
Less: Accumulated Depreciation (140,798) (135,027)
----------------- ----------------
Net Real Estate Assets 743,750 741,361
Cash 5,332 7,767
Restricted Cash 4,290 3,149
Other Assets 21,993 23,949
----------------- ----------------
$ 775,365 $ 776,226
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings $ 444,911 $ 438,241
Accounts Payable and Accrued Expenses 14,388 16,716
Distributions Payable 9,511 --
Other Liabilities 878 847
----------------- ----------------
469,688 455,804
----------------- ----------------
Minority Interest
Preferred Unitholders 104,571 104,571
Common Unitholders 29,470 30,200
Consolidated Partnerships 1,733 2,006
----------------- ----------------
135,774 136,777
----------------- ----------------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
8.75% Series A Cumulative Redeemable Preferred Stock,
$.0001 par value, liquidation preference $25.00 per share,
510,000 shares authorized, none issued or outstanding -- --
8.95% Series B Cumulative Redeemable Preferred Stock,
$.0001 par value, liquidation preference $25.00 per share,
3,800,000 shares authorized, none issued or outstanding -- --
Series A Junior Participating Preferred Stock, $.0001 per
3,060,000 shares authorized, none issued or outstanding -- --
Common Stock, $.0001 par value, 117,430,000 shares authorized,
16,019,290 shares and 16,625,665 shares issued and
outstanding at March 31, 2000 and December 31, 1999, respectively 2 2
Price Group Stock, $.0001 par value, 200,000 shares
authorized, issued and outstanding -- --
Excess Stock, 75,000,000 shares authorized, none issued
or outstanding -- --
Additional Paid-in Capital 208,501 219,132
Accumulated Distributions in Excess of Net Income (38,600) (35,489)
----------------- ----------------
169,903 183,645
----------------- ----------------
$ 775,365 $ 776,226
================= ================
See accompanying notes to consolidated financial statements.
4
JP REALTY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2000 1999
------------ ------------
Revenues
Minimum Rents $ 24,817 $ 24,954
Percentage and Overage Rents 437 424
Recoveries from Tenants 7,449 6,768
Interest 152 123
Other 44 142
------------ ------------
32,899 32,411
------------ ------------
Expenses
Operating and Maintenance 5,627 5,446
Real Estate Taxes and Insurance 3,676 3,308
General and Administrative 1,619 1,794
Depreciation 6,358 5,247
Amortization of Deferred Financing Costs 408 423
Amortization of Deferred Leasing Costs 172 168
Interest 7,449 7,359
------------ ------------
25,309 23,745
------------ ------------
7,590 8,666
Minority Interest in (Loss) Income of Consolidated Partnerships 243 (988)
Gain on Sale of Real Estate 243 --
------------ ------------
Income Before Minority Interest of the Operating Partnership Unitholders 8,076 7,678
Minority Interest of the Operating Partnership Preferred Unitholders (2,405) --
Minority Interest of the Operating Partnership Common Unitholders (1,016) (1,319)
------------ ------------
Net Income $ 4,655 $ 6,359
============ ============
Basic Earnings Per Share $ 0.28 $ 0.36
============ ============
Diluted Earnings Per Share $ 0.28 $ 0.36
============ ============
Basic Weighted Average Number of Shares of Common Stock 16,537 17,641
Add: Dilutive Effect of Stock Options 1 37
------------ ------------
Diluted Weighted Average Number of Shares of Common Stock 16,538 17,678
============ ============
See accompanying notes to consolidated financial statements.
5
JP REALTY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
For the Three Months Ended March 31,
-----------------------------------------
2000 1999
---------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 18,394 $ 13,218
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Real Estate Assets, Developed or Acquired,
Net of Accounts Payable (13,456) (9,719)
Proceeds from the Sale of Real Estate 292 --
Increase in Restricted Cash (1,141) (679)
---------------- ---------------
Net Cash Used in Investing Activities (14,305) (10,398)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Borrowings 7,000 10,427
Repayment of Borrowings (330) (11,153)
Distributions to Preferred Unitholders (2,405) --
Distributions to Minority Interests (30) (16)
Deferred Financing Costs (127) (130)
Repurchase of Common Stock (10,632) --
---------------- ---------------
Net Cash Used in Financing Activities (6,524) (872)
---------------- ---------------
Net (Decrease) Increase in Cash (2,435) 1,948
Cash, Beginning of Period 7,767 5,123
---------------- ---------------
Cash, End of Period $ 5,332 $ 7,071
================ ===============
See accompanying notes to consolidated financial statements.
6
JP REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BUSINESS SUMMARY AND SIGNIFICANT ACCOUNTING POLICIES
JP Realty, Inc. (the "Company") is primarily engaged in the business of
owning, leasing, managing, operating, developing and redeveloping regional
malls, community centers and other commercial properties. The tenant base
includes primarily national, regional and local retail companies.
Consequently, the Company's credit risk is concentrated in the retail industry.
The Company's properties are owned and controlled by the Company through its
82% general partner interest in Price Development Company, Limited Partnership
(the "Operating Partnership"). As calculated, the Company's percentage of
general partner interest in the Operating Partnership was based on the number
of outstanding common units of limited partner interest (excluding outstanding
preferred units of limited partner interest) on March 31, 2000.
The interim financial data for the three-months ended March 31, 2000 and
1999, is unaudited; however, in the opinion of the Company, the interim
financial data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. Certain amounts in the 1999 financial statements have been
reclassified to conform to the 2000 presentation.
On January 1, 2000, the Company stopped accruing revenues for Percentage
and Overage Rents based upon recent accounting guidance issued by the
Securities and Exchange Commission in Staff Accounting Bulletin No. 101
"Revenue Recognition". Prior to the issuance of the Staff Accounting Bulletin
No. 101 "Revenue Recognition," the Company recognized percentage and overage
rents revenue monthly on an accrual basis based on estimated annual amounts.
Under the new guidance percentage and overage rents revenue is recognized in
the interim periods in which the specified target that triggers the contingent
rental income is achieved.
As a result of adopting the Staff Accounting Bulletin No. 101 "Revenue
Recognition," percentage and overage rents revenue and total revenues decreased
$578 during the three months ended March 31, 1999, which will be recognized in
the fourth quarter. In addition, if the change in revenue recognition
described above had not been made, the net income for the three months ended
March 31, 1999 would have been $6,837 or $0.39 per basic and diluted earnings
per share.
2. BORROWINGS
MARCH 31,
2000
--------------
Notes, unsecured; interest at 7.29%, maturing 2005 to 2008 $ 100,000
Credit facility, unsecured; weighted average interest at 6.95% during 2000, due in 2000 98,000
Mortgage payable, secured by real estate; interest at 6.68%, due in 2008 83,207
Notes, secured by real estate; interest at 6.37%, due in 2001 61,223
Construction loan, secured by real estate; interest at 7.50% as of March 31, 2000,
due in 2001 43,792
Construction loan, secured by real estate; interest at 7.63% as of March 31, 2000,
due in 2001 41,600
Mortgage payable, secured by real estate; interest at 8.5%, due in 2000 12,074
Other notes payable, secured by real estate; interest ranging from 7.0% to 9.99%,
maturing 2000 to 2095 5,015
--------------
$ 444,911
==============
On October 16, 1997, the Operating Partnership obtained a $150,000 three-
year unsecured credit facility (the "Credit Facility") from a syndicate of
banks. On December 18, 1997, the amount was increased to $200,000. The Credit
Facility has a three-year term and bears interest, at the option of the
Operating Partnership, at one, or a combination, of (i) the higher of the
federal funds rate plus 50 basis points or the prime rate, or (ii) LIBOR plus a
spread of 70 to 130 basis points. The LIBOR spread is determined by the
Operating Partnership's credit rating and/or leverage ratio. The Credit
Facility also includes a competitive bid option in the amount of $100,000 which
will allow the Operating Partnership to solicit bids for borrowings from
7
JP REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. BORROWINGS (CONTINUED)
the bank syndicate. The Credit Facility is used for general corporate purposes
including stock repurchase, development, working capital, repayment of
indebtedness and/or amortization payments. The facility contains restrictive
covenants, including limitations on the amount of secured and unsecured debt,
and requires the Operating Partnership to maintain certain financial ratios. At
March 31, 2000, the Operating Partnership was in compliance with all these
covenants. The Credit Facility is due October 2000, at which time the Operating
Partnership intends to renew or refinance the Credit Facility.
The $100,000 notes have an interest rate of 7.29% payable semi annually
on March 11th and September 11th of each year. The Operating Partnership had
entered into an interest rate protection agreement in anticipation of issuing
these notes and received $270 as a result of terminating this agreement making
the effective rate of interest on these notes 7.24%.
3. PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma summary financial information for the
three months ended March 31, 2000 and 1999, is presented as if the 1999
issuances of Series A and Series B preferred units by the Operating Partnership
(Note 4) had been consummated as of January 1, 1999.
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------------
2000 1999
--------------- -----------------
Total Revenues $ 32,899 $ 32,411
Net Income $ 4,655 $ 5,645
Basic Earnings Per Share $ 0.28 $ 0.32
Diluted Earnings Per Share $ 0.28 $ 0.32
The pro forma financial information summarized above is presented for
information purposes only and may not be indicative of what actual results of
operations would have been had the issuances of Series A and Series B preferred
units been completed as of the beginning of the periods presented, nor does it
purport to represent the results of operations for future periods.
4. MINORITY INTEREST
PREFERRED COMMON CONSOLIDATED
UNITHOLDERS UNITHOLDERS PARTNERSHIPS TOTAL
----------- ----------- ------------ ----------
Minority Interest at December 31, 1999 $ 104,571 $ 30,200 $ 2,006 $ 136,777
Minority Interest Common Units Converted -- (1) -- (1)
Minority Interest Income 2,405 1,016 (243) 3,178
Distributions Paid (2,405) -- (30) (2,435)
Distributions Accrued -- (1,745) -- (1,745)
----------- ----------- ----------- ---------
Minority Interest at March 31, 2000 $ 104,571 $ 29,470 $ 1,733 $ 135,774
=========== =========== =========== =========
On April 23, 1999, the Operating Partnership issued 510,000 Series A
8.75% cumulative redeemable preferred units ("Series A Preferred Units") in a
private placement. Each Series A Preferred Unit represents a unit of limited
partner interest with a liquidation value of twenty-five dollars per unit. The
Operating Partnership used the net proceeds of approximately $12,345 for the
partial repayment of borrowings outstanding under the Credit Facility. On July
28, 1999, the Operating Partnership also issued 3,800,000 Series B 8.95%
cumulative redeemable preferred units ("Series B Preferred Units") in a private
placement. Each Series B Preferred Unit represents a unit of limited partner
interest with a liquidation value of twenty-five
8
JP REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. MINORITY INTEREST (CONTINUED)
dollars per unit. The Company used the proceeds of approximately $92,226 to
repay $90,000 borrowings outstanding under the Credit Facility and increase
operating cash. Quarterly dividends to the holders of the Series A and Series
B Preferred Units are due on the last day of each March, June, September
and December. For the period ending March 31, 2000, distributions for the
Series A and Series B Preferred Units were approximately $279 and $2,126,
respectively.
5. SHAREHOLDERS' EQUITY
The following table summarizes changes in stockholders' equity since
December 31, 1999:
ACCUMULATED
DISTRIBUTIONS
ADDITIONAL IN EXCESS
PAID-IN OF
SHARES* STOCK CAPITAL NET INCOME TOTAL
---------- ------- ---------- ----------- ----------
Stockholders' Equity at December 31, 1999 16,825,665 $ 2 $ 219,132 $ (35,489) $ 183,645
Issued Shares of Common Stock -
Operating Partnership Units Converted 125 -- 1 -- 1
Net Income for the Period -- -- -- 4,655 4,655
Repurchase of Common Stock (606,500) -- (10,632) -- (10,632)
Distributions Accrued -- -- -- (7,766) (7,766)
---------- ------- ---------- ----------- -----------
Stockholders' Equity at March 31, 2000 16,219,290 $ 2 $ 208,501 $ (38,600) $ 169,903
========== ======= ========== =========== ===========
* Includes Common Stock and 200,000 outstanding shares of Price Group Stock
In October 1999, the Board of Trustees authorized the Company to repurchase
up to $25,000 of the Company's Common Stock through open market purchases and
private transactions. Through December 31, 1999, the Company had repurchased
856,600 shares of Common Stock for a total cost of approximately $14,366.
During the quarter ended March 31, 2000, 606,500 additional shares of stock
were purchased for $10,632. All shares which have been repurchased have been
retired.
6. SEGMENT INFORMATION
In 1998, the Company adopted SFAS No. 131, " Disclosures about Segments of
an Enterprise and Related Information." The following information presents the
Company's three reportable segments - 1) regional malls, 2) community centers
and 3) commercial properties in conformity with SFAS No. 131.
The accounting policies of the segments are the same as those described in
the "Summary of Significant Accounting Policies" in the Company's Annual Report
on Form 10-K for the year ended December 31, 1999. Segment data includes total
revenues and property net operating income (revenues less operating and
maintenance expense, real estate taxes and insurance expense and advertising
and promotion expense ("Property NOI")). The Company evaluates the performance
of its segments and allocates resources to them based on Property NOI.
The regional mall segment consists of 18 regional malls in eight states
containing approximately 10,291,000 square feet of total gross leasable area
("GLA") and which range in size from approximately 296,000 to 1,171,000 square
feet of total GLA.
The community center segment consists of 25 properties in seven states
containing approximately 3,362,000 square feet of total GLA and one
freestanding retail property containing approximately 2,000 square feet of GLA.
9
JP REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. SEGMENT INFORMATION (CONTINUED)
The commercial properties include six mixed-use commercial/business
properties with 38 commercial buildings containing approximately 1,354,000
square feet of GLA which are located primarily in the Salt Lake City, Utah area
where the Company's headquarters is located.
The table below presents information about the Company's reportable
segments for the quarters ending March 31:
REGIONAL COMMUNITY COMMERCIAL
MALLS CENTERS PROPERTIES OTHER TOTAL
---------- ------------ ----------- --------- ----------
2000
- ----
Total Revenues $ 26,258 $ 4,554 $ 1,898 $ 189 $ 32,899
Property Operating Expenses (1) (7,749) (1,125) (425) (4) (9,303)
---------- ------------ ---------- -------- ---------
Property NOI (2) 18,509 3,429 1,473 185 23,596
Unallocated Expenses (3) -- -- -- (16,006) (16,006)
Unallocated Minority Interest (4) -- -- -- (3,178) (3,178)
Unallocated Other (5) -- -- -- 243 243
Consolidated Net Income -- -- -- -- 4,655
Additions to Real Estate Assets 8,277 389 145 -- 8,811
Total Assets (6) 644,478 83,808 30,636 16,443 775,365
1999
- ----
Total Revenues $ 24,103 $ 6,360 $ 1,724 $ 224 $ 32,411
Property Operating Expenses (1) (7,350) (1,000) (404) -- (8,754)
---------- ------------ ----------- --------- ---------
Property NOI (2) 16,753 5,360 1,320 224 23,657
Unallocated Expenses (3) -- -- -- (14,991) (14,991)
Unallocated Minority Interest (4) -- -- -- (2,307) (2,307)
Consolidated Net Income -- -- -- -- 6,359
Additions to Real Estate Assets 6,592 2,625 469 26 9,712
Total Assets (6) 607,695 81,993 31,152 16,904 737,744
- ---------------------
(1) Property operating expenses consist of operating, maintenance, real estate
taxes and insurance expenses as listed in the condensed consolidated
statement of operations.
(2) Total revenues minus property operating expenses.
(3) Unallocated expenses consist of general and administrative, depreciation,
amortization of deferred financing costs, amortization of deferred leasing
costs and interest as listed in the condensed consolidated statement of
operations.
(4) Unallocated minority interest includes minority interest in income of
consolidated partnerships and minority interest of the Operating
Partnership preferred and common unitholders as listed in the condensed
consolidated statement of operations.
(5) Unallocated other includes gain on sales of real estate as listed in the
consolidated statement of operations.
(6) Unallocated other total assets include cash, corporate offices,
miscellaneous real estate and deferred financing costs.
7. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Unitholders of Operating Partnership elected to convert 125 and 200
common units of limited partner interest having a recorded value of $1 and
$2, respectively, into shares of common stock during the three months ended
March 31, 2000 and 1999, respectively.
MARCH 31, MARCH 31,
2000 1999
--------------- ---------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
The following non-cash transactions occurred:
Distributions Accrued For Stockholders not Paid $ 7,766 $ 8,184
Distributions Accrued For Unitholders not Paid $ 1,745 $ 1,710
10
JP REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. SUBSEQUENT EVENT
On May 1, 2000, the Operating Partnership issued 320,000 Series C 8.75%
cumulative redeemable preferred units (the "Series C Preferred Units"), with
a liquidation value of twenty-five dollars per unit, in exchange for a gross
contribution of $8,000. The Operating Partnership used the proceeds, less
applicable transaction costs and expenses, to pay down the borrowings under
the Credit Facility. The Series C Preferred Units, which may be redeemed by
the Operating Partnership on or after May 1, 2005, have no stated maturity or
mandatory redemption and are not convertible into any other securities of the
Operating Partnership. The Series C Preferred Units are exchangeable at the
option of the preferred unitholder at a rate of one Series C Preferred Unit
for one share of the Company's Series C 8.75% cumulative redeemable preferred
stock beginning May 1, 2010, or earlier under certain circumstances.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
OVERVIEW
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes there to
appearing elsewhere herein.
The Company is a fully integrated, self-administered and self-managed
REIT primarily engaged in the ownership, leasing, management, operation,
development, redevelopment and acquisition of retail properties in Utah,
Idaho, Colorado, Arizona, Nevada, New Mexico and Wyoming (the "Intermountain
Region"), as well as in Oregon, Washington and California. The Company's
existing portfolio consists of 50 properties, including 18 enclosed regional
malls, 25 community centers, one freestanding retail property and six mixed-
use commercial properties.
The Company completed its initial public offering on January 21, 1994,
and conducts all of its business operations through, and held as of March 31,
2000 an 82% controlling general partner interest in, Price Development
Company, Limited Partnership (the "Operating Partnership").
The Company's operations in 2000 were positively impacted by the
October 20, 1999 opening of the Mall at Sierra Vista, the November 11, 1999
opening of a sixteen screen Cinemark Theater at Provo Towne Center, the
expansion at Boise Towne Plaza as well as its other development activities.
Development activities added a combined 473,700 square feet of total gross
leasable area ("GLA") to the retail portfolio (46,500 in June 1999, 6,000 in
September 1999, 335,000 in October 1999, 74,000 in November 1999 and 12,200
in December 1999).
REVENUE RECOGNITION
On January 1, 2000, the Company stopped accruing revenues for
Percentage and Overage Rents based upon recent accounting guidance issued by
the Securities and Exchange Commission in Staff Accounting Bulletin No. 101
"Revenue Recognition." Prior to the issuance of the Staff Accounting
Bulletin No. 101 "Revenue Recognition," the Company recognized percentage and
overage rents revenue monthly on an accrual basis based on estimated annual
amounts. Under the new guidance percentage and overage rents revenue is
recognized in the interim periods in which the specified target that triggers
the contingent rental income is achieved.
As a result of adopting the Staff Accounting Bulletin No. 101 "Revenue
Recognition," percentage and overage rents revenue and total revenues
decreased $578 during the three months ended March 31, 1999, which will be
recognized in the fourth quarter. In addition, if the change in revenue
recognition described above had not been made, the net income for the three
months ended March 31, 1999 would have been $6,837 or $0.39 per basic and
diluted earnings per share.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED
MARCH 31, 1999 (DOLLARS IN THOUSANDS)
Total revenues for the three months ended March 31, 2000 increased $488
or 2% to $32,899 as compared to $32,411 in 1999. Minimum rents decreased
$137 or 1% to $24,817 as compared to $24,954 in 1999. The decrease is a
result of a one-time, non-cash lease termination settlement of $1,957 which
occurred in 1999. Excluding the $1,957 one-time, non-cash transaction in
1999, minimum rents increased $1,820 or 8%. Additionally, percentage and
overage rents increased $13 or 3% to $437 as compared to $424 in 1999.
The October 20, 1999 opening of the Mall at Sierra Vista, the November
11, 1999 opening of the Cinemark Theater at Provo Towne Centre and the
expansion of Boise Towne Plaza contributed $855 to the minimum rent increase.
Minimum rents for the remaining property portfolio increased $965 in 2000 as
compared to 1999.
Revenues recognized from straight-line rents were $397 in 2000 as
compared to $280 in 1999.
Recoveries from tenants increased $681 or 10% to $7,449 as compared to
$6,768 in 1999. Property operating expenses, including operating and
maintenance, real estate taxes and insurance increased $181 or 3% and $368 or
11% respectively. The opening of the Mall at Sierra Vista, the Cinemark
Theater at Provo Towne Centre and the expansion of Boise Towne Plaza
contributed $238 to recoveries from tenants, $238 to property operating
expenses, including operating and maintenance, and $155
13
to real estate taxes and insurance. Recoveries from tenants as a percentage of
property operating expenses were 80% in 2000 compared to 77% in 1999.
Depreciation and amortization increased $1,100 or 19% to $6,938 as
compared to $5,838 in 1999. This increase is primarily due to the opening of
the Mall at Sierra Vista and the increases in newly developed GLA.
Interest expense increased $90 or 1% to $7,449 as compared to $7,359 in
1999. This increase resulted from higher interest rates on lower borrowings
and a decrease in capitalized interest due to completed GLA. Interest
capitalized on projects under development was $380 in 2000 as compared to
$505 in 1999.
The Operating Partnership completed two preferred unit transactions in
the second and third quarters of 1999 which resulted in net proceeds of
approximately $104,571. The Company used approximately $102,300 to reduce
borrowings. The reduction of net income for the quarter ended March 31, 2000
associated with issuing the preferred units was $411.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of its liquidity and capital resources
have historically been for distributions, property acquisitions, development,
expansion and renovation programs and debt repayment. To maintain its
qualification as a REIT under the Internal Revenue Code of 1986, as amended
(the "Code"), the Company is required to distribute to its stockholders at
least 95% of its "Real Estate Investment Trust Taxable Income," as defined in
the Code. During the quarter ended March 31, 2000, the Company declared a
dividend of $.48 per share payable April 18, 2000 to the stockholders of
record as of April 6, 2000.
The Company's principal source of liquidity is its cash flow from
operations generated from its real estate investments. As of March 31, 2000,
the Company's cash and restricted cash amounted to approximately $9.6
million. In addition to its cash and restricted cash, unused capacity under
its Credit Facility totaled $92.5 million at March 31, 2000.
The Company expects to meet its short-term cash requirements, including
distributions and recurring capital expenditures related to maintenance and
improvement of existing properties, through undistributed funds from
operations, cash balances and advances under the Credit Facility.
The Company's principal long-term liquidity requirements will be the
repayment of principal on its outstanding secured and unsecured indebtedness.
At March 31, 2000, the Company's total outstanding indebtedness was
approximately $444.9 million. Such indebtedness included: (i) the
outstanding balance on the $200 million Credit Facility which equaled $98
million at March 31, 2000 and is due October 2000; (ii) the $12.1 million
8.5% note secured by real estate, which requires a balloon payment of
approximately $11.9 million in October 2000; (iii) the $61.2 million 6.37%
notes secured by real estate which mature in January 2001; (iv) the Provo
Towne Centre construction loan of approximately $43.8 million which is due in
July 2001; (v) the Spokane Valley Mall construction loan of $41.6 million
which is due in August 2001; (vi) the $100 million senior notes principal
payable of $25 million a year beginning March 2005; and (vii) the $83.2
million 6.68% first mortgage, which requires a balloon payment of
approximately $73.0 million in September 2008.
On April 23, 1999, the Operating Partnership issued 510,000 Series A
8.75% preferred units ("Series A Preferred Units") in a private placement.
Each Series A Preferred Unit represents a limited partner interest with a
liquidation value of twenty-five dollars per unit. The Operating Partnership
used the net proceeds of approximately $12.3 million for the partial
repayment of borrowings outstanding under the Credit Facility. On July 28,
1999, the Operating Partnership also issued 3,800,000 Series B 8.95%
preferred units ("Series B Preferred Units") in a private placement. Each
Series B Preferred Unit represents a limited partnership interest with a
liquidation value of twenty-five dollars per unit. The Company used the
proceeds of approximately $92.2 million to repay $90 million in borrowings
outstanding under the Credit Facility and increase operating cash. On May 1,
2000, the Operating Partnership issued 320,000 Series C 8.75% preferred units
("Series C Preferred Units") in a private placement. Each Series C Preferred
Unit represents a limited partner interest with a liquidation value of
twenty-five dollars per unit. The Company used the gross proceeds of $8
million to pay transaction costs and for the partial repayment of borrowings
outstanding under the Credit Facility. Quarterly distributions of
approximately $278,900, $2,125,600 and $175,000 are due to the holders of the
Series A, Series B and Series C Preferred Units, respectively, on the last
day of each March, June, September and December.
Additional long-term capital needs of the Company relate to the
expansion of NorthTown Mall, an enclosed regional mall in Spokane,
Washington, through its consolidated partnership Price Spokane, Limited
Partnership. The project is expected
13
to be completed in the third quarter of 2000 and will add approximately 100,000
square feet of GLA. At March 31, 2000, the Operating Partnership had expended
an aggregate of approximately $14.0 million for expansion costs and anticipates
expending an additional $6.3 million to complete the project, which will be
funded by the Credit Facility. The Company is currently involved in smaller
expansion and renovation projects at several of its properties, which will also
be financed by the Credit Facility.
The Company is also contemplating the expansion and renovation of
several of its existing properties and additional development projects and
acquisitions as a means to expand its portfolio. The Company does not expect
to generate sufficient funds from operations to meet such long-term needs and
intends to finance these costs primarily through advances under the Credit
Facility together with equity and debt offerings and individual property
financing. The availability of such financing will influence the Company's
decision to proceed with, and the pace of, its development and acquisition
activities.
On September 2, 1997 the Company and the Operating Partnership filed a
shelf registration statement on Form S-3 with the Securities and Exchange
Commission for the purpose of registering common stock, preferred stock,
depositary shares, common stock warrants, debt securities and guarantees.
This registration statement, when combined with the Company's unused portion
of its previous shelf registration, would allow for up to $400 million of
securities to be offered by the Company and the Operating Partnership. On
March 11, 1998, pursuant to this registration statement, the Operating
Partnership issued $100 million of ten-year senior unsecured notes bearing
annual interest at a rate of 7.29%. The Operating Partnership had entered
into an interest rate protection agreement in anticipation of issuing these
notes and received $270 as a result of terminating this agreement making the
effective rate of interest on these notes 7.24%. Interest payments are due
semi annually on March 11th and September 11th of each year. Principal
payments of $25 million are due annually beginning March 2005. The proceeds
were used to partially repay outstanding borrowings under the Credit
Facility. At March 31, 2000, the Company and the Operating Partnership had
an aggregate of $300 million in registered securities available under its
effective shelf registration statement.
The Company intends to fund its distribution, development, expansion,
renovation, acquisition and debt repayment activities from its Credit
Facility as well as other debt and equity financings, including public
financings. The Company's ratio of debt-to-total market capitalization was
approximately 49% at March 31, 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company's exposure to market risk is limited to the impact of
fluctuations in the general level of interest rates on its current and future
fixed and variable rate debt obligations. Even though its philosophy is to
maintain a fairly low tolerance to interest rate fluctuation risk, the
Company is still vulnerable, however, to significant fluctuations in interest
rates on its variable rate debt, on any future repricing or refinancing of
its fixed rate debt and on future debt.
The Company uses long-term and medium-term debt as a source of capital.
At March 31, 2000, the Company had approximately $261,519,000 of outstanding
fixed rate debt, consisting of $100,000,000 unsecured senior notes and
$161,519,000 in mortgages and notes secured by real estate. The various
fixed rate debt instruments mature starting in the year 2000 through 2095.
The weighted average rate of interest on the fixed rate debt was
approximately 7.0% for the period ended March 31, 2000. When debt
instruments of this type mature, the Company typically refinances such debt
at the then-existing market interest rates which may be more or less than the
interest rates on the maturing debt. In addition, the Company may attempt to
reduce interest rate risk associated with a forecasted issuance of new fixed
rate debt by entering into interest rate protection agreements. The Company
has approximately $12,120,000 in fixed rate debt maturing in 2000.
The Company's Credit Facility and existing construction loans have
variable interest rates and any fluctuation in interest rates could increase
or decrease the Company's interest expense. At March 31, 2000, the Company
had approximately $183,392,000 in outstanding variable rate debt. The
weighted average rate of interest on the variable interest rate debt was
approximately 7.3% for the period ended March 31, 2000. If the interest rate
for the Company's variable rate debt increased or decreased by 1% during
2000, the Company's interest rate expense on its outstanding variable rate
debt would increase or decrease, as the case may be, by approximately
$1,834,000.
Due to the uncertainty of fluctuations in interest rates and the specific
actions that might be taken by the Company to mitigate the impact of such
fluctuations and their possible effects, the foregoing sensitivity analysis
assumes no changes in the Company's financial structure.
14
PART II
ITEM 1. LEGAL PROCEEDINGS
-----------------
The Company is not aware of any pending or threatened litigation at this
time that will have a material adverse effect on the Company or any of its
properties.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
-----------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) EXHIBITS
15
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Amended and Restated Articles of Incorporation the Company (3(a))*
3.2 Amended and Restated Bylaws of the Company (3(b))**
3.3 Articles Supplementary of the Company relating to the 8.75 Series A Cumulative
Redeemable Preferred Stock***
3.4 Articles Supplementary of the Company relating to the 8.95% Series B Cumulative
Redeemable Preferred Stock***
3.5 Articles Supplementary of the Company relating to the election to be subject to
Title 3, Subtitle 8 of the Maryland General Corporation Law****
3.6 Articles Supplementary of the Company relating to the Series A Junior Preferred
Stock****
3.7 Amendment to the Bylaws of the Company****
4.1 Specimen of Common Stock Certificate (4)*
10.1 Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership***
10.2 Agreement of Limited Partnership of Price Financing Partnership, L.P. (10(b))*
10.3 Loan Agreements related to Mortgage Debt and related documents (10(c))*
i) Deed of Trust, Mortgage, Security Agreement and Assignment of Leases and Rents
of Price Financing Partnership, L.P.
ii) Intentionally Omitted
iii) Indenture between Price Capital Corp. and a Trustee
iv) Limited Guarantee Agreement (Guarantee of Collection) for outside investors
v) Limited Guarantee Agreement (Guarantee of Collection) for Price Group Investors
vi) Cash Collateral Account Security, Pledge and Assignment Agreement among Price
Financing Partnership, L.P., Price Capital Corp. and Continental Bank N.A.
vii) Note Issuance Agency Agreement between Price Capital Corp. and Price Financing
Partnership, L.P.
viii) Management and Leasing Agreement among Price Financing Partnership, L.P. and
Price Development Company, Limited Partnership
ix) Assignment of Management and Leasing Agreement of Price Financing Partnership,
L.P.
10.4 Employment and Non-Competition Agreement between the Company and John Price
(10(d))*
10.5 Indemnification Agreement for Directors and Officers (10(f))*
10.6 Registration Rights Agreement among the Company and the Limited Partners of
Price Development Company, Limited Partnership (10(g))*
10.7 Amendment No. 1 to Registration Rights Agreement, dated August 1, 1995, among
the Company and the Limited Partners of Price Development Company, Limited
Partnership*****
10.8 Exchange Agreement among the Company and the Limited Partners of Price
Development Company, Limited Partnership (10(h))*
10.9 1993 Stock Option Plan (10(i))*
10.10 Amendment to Ground lease between Price Development Company and Alvin Malstrom
as Trustee and C.F. Malstrom, dated December 31, 1985. (Ground lease for Plaza
9400) (10(j))*
10.11 Lease Agreement between The Corporation of the President of the Church of Jesus
Christ of Latter Day Saints and Price-James and Assumptions, dated September 24,
1979. (Ground lease for Anaheim Plaza) (10(k))*
10.12 Indenture of Lease between Ambrose and Zelda Motta and Cordova Village, dated
July 26, 1974, and Amendments and Transfers thereto. (Ground lease for Fort
Union Plaza) (10(l))*
10.13 Lease Agreement between Advance Management Corporation and Price Rentals, Inc.
and dated August 1, 1975 and Amendments thereto. (Ground lease for Price
Fremont) (10(m))*
10.14 Ground lease between Aldo Rossi and Price Development Company, dated June 1,
1989, and related documents. (Ground lease for Halsey Crossing) (10(n))*
EXHIBIT
NUMBER DESCRIPTION
- -------
10.15 Loan Agreements related to 1995 Credit Facility*****
i) Credit Agreement, dated March 8, 1995, between Price Development Company, Limited Partnership
and Lexington Mortgage Company
ii) Note dated March 8, 1995
iii) Guaranty of Payment dated March 8, 1995 between the Company and Lexington Mortgage Company
iv) Cash Collateral Account Security, Pledge and Assignment Agreement dated March 8, 1995 between
Price Development Company, Limited Partnership, Bank One, Utah, N.A. and Lexington Mortgage
Company
v) Amended and Restated Credit Agreement dated June 29, 1995 between Price Development Company,
Limited Partnership, Merrill Lynch Mortgage Capital, Inc. and Capital Market Assurance
Corporation
vi) Amendment to Cash collateral Account, Security, Pledge and Assignment Agreement dated June
29, 1995
vii) Reaffirmation of Guaranty dated June 29, 1995
10.16 First Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership***
10.17 Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership***
10.18 Third Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership******
10.19 Rights Agreement between the Company and ChaseMellon Shareholder Services, LLC, as Rights
Agent****
10.20 Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership*******
10.21 Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership
27.1 Financial Data Schedule
---------------
* Documents were previously filed with the Company's Registration Statement on Form S-11, File No. 33-68844,
under the exhibit numbered in parenthetical, and are incorporated herein by reference.
** Document was previously filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1998 and is incorporated herein by reference.
*** Documents were previously filed with the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999 and are incorporated herein by reference.
**** Documents were previously filed with the Company's current report on Form 8-K, dated August 13, 1999, and are
incorporated herein by reference.
***** Documents were previously filed with the Company's Annual Report on Form 10-K for the year ended December 31,
1995 and are incorporated herein by reference.
****** Document was previously filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1999 and are incorporated herein by reference.
******* Document was previously filed with the Company's Annual Report on Form 10-K for the year ended December 31,
1999 and is incorporated herein by reference.
(b) CURRENT REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JP REALTY, INC.
(Registrant)
May 12, 2000 /s/ G. Rex Frazier
- ------------------------------------- ---------------------------------------
(Date) G. Rex Frazier
PRESIDENT, CHIEF OPERATING OFFICER,
AND DIRECTOR
May 12, 2000 /s/ M. Scott Collins
- ------------------------------------- ---------------------------------------
(Date) M. Scott Collins
VICE PRESIDENT--CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL
& ACCOUNTING OFFICER)
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Amended and Restated Articles of Incorporation the Company (3(a))*
3.2 Amended and Restated Bylaws of the Company (3(b))**
3.3 Articles Supplementary of the Company relating to the 8.75 Series A Cumulative
Redeemable Preferred Stock***
3.4 Articles Supplementary of the Company relating to the 8.95% Series B Cumulative
Redeemable Preferred Stock***
3.5 Articles Supplementary of the Company relating to the election to be subject to
Title 3, Subtitle 8 of the Maryland General Corporation Law****
3.6 Articles Supplementary of the Company relating to the Series A Junior Preferred
Stock****
3.7 Amendment to the Bylaws of the Company****
4.1 Specimen of Common Stock Certificate (4)*
10.1 Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership***
10.2 Agreement of Limited Partnership of Price Financing Partnership, L.P. (10(b))*
10.3 Loan Agreements related to Mortgage Debt and related documents (10(c))*
i) Deed of Trust, Mortgage, Security Agreement and Assignment of Leases and Rents
of Price Financing Partnership, L.P.
ii) Intentionally Omitted
iii) Indenture between Price Capital Corp. and a Trustee
iv) Limited Guarantee Agreement (Guarantee of Collection) for outside investors
v) Limited Guarantee Agreement (Guarantee of Collection) for Price Group Investors
vi) Cash Collateral Account Security, Pledge and Assignment Agreement among Price
Financing Partnership, L.P., Price Capital Corp. and Continental Bank N.A.
vii) Note Issuance Agency Agreement between Price Capital Corp. and Price Financing
Partnership, L.P.
viii) Management and Leasing Agreement among Price Financing Partnership, L.P. and
Price Development Company, Limited Partnership
ix) Assignment of Management and Leasing Agreement of Price Financing Partnership,
L.P.
10.4 Employment and Non-Competition Agreement between the Company and John Price
(10(d))*
10.5 Indemnification Agreement for Directors and Officers (10(f))*
10.6 Registration Rights Agreement among the Company and the Limited Partners of
Price Development Company, Limited Partnership (10(g))*
10.7 Amendment No. 1 to Registration Rights Agreement, dated August 1, 1995, among
the Company and the Limited Partners of Price Development Company, Limited
Partnership*****
10.8 Exchange Agreement among the Company and the Limited Partners of Price
Development Company, Limited Partnership (10(h))*
10.9 1993 Stock Option Plan (10(i))*
10.10 Amendment to Ground lease between Price Development Company and Alvin Malstrom
as Trustee and C.F. Malstrom, dated December 31, 1985. (Ground lease for Plaza
9400) (10(j))*
10.11 Lease Agreement between The Corporation of the President of the Church of Jesus
Christ of Latter Day Saints and Price-James and Assumptions, dated September 24,
1979. (Ground lease for Anaheim Plaza) (10(k))*
10.12 Indenture of Lease between Ambrose and Zelda Motta and Cordova Village, dated
July 26, 1974, and Amendments and Transfers thereto. (Ground lease for Fort
Union Plaza) (10(l))*
10.13 Lease Agreement between Advance Management Corporation and Price Rentals, Inc.
and dated August 1, 1975 and Amendments thereto. (Ground lease for Price
Fremont) (10(m))*
10.14 Ground lease between Aldo Rossi and Price Development Company, dated June 1,
1989, and related documents. (Ground lease for Halsey Crossing) (10(n))*
EXHIBIT
NUMBER DESCRIPTION
- -------
10.15 Loan Agreements related to 1995 Credit Facility*****
i) Credit Agreement, dated March 8, 1995, between Price Development Company, Limited Partnership
and Lexington Mortgage Company
ii) Note dated March 8, 1995
iii) Guaranty of Payment dated March 8, 1995 between the Company and Lexington Mortgage Company
iv) Cash Collateral Account Security, Pledge and Assignment Agreement dated March 8, 1995 between
Price Development Company, Limited Partnership, Bank One, Utah, N.A. and Lexington Mortgage
Company
v) Amended and Restated Credit Agreement dated June 29, 1995 between Price Development Company,
Limited Partnership, Merrill Lynch Mortgage Capital, Inc. and Capital Market Assurance
Corporation
vi) Amendment to Cash collateral Account, Security, Pledge and Assignment Agreement dated June
29, 1995
vii) Reaffirmation of Guaranty dated June 29, 1995
10.16 First Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership***
10.17 Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership***
10.18 Third Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership******
10.19 Rights Agreement between the Company and ChaseMellon Shareholder Services, LLC, as Rights
Agent****
10.20 Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership*******
10.21 Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership
27.1 Financial Data Schedule
---------------
* Documents were previously filed with the Company's Registration Statement on Form S-11, File No. 33-68844,
under the exhibit numbered in parenthetical, and are incorporated herein by reference.
** Document was previously filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1998 and is incorporated herein by reference.
*** Documents were previously filed with the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999 and are incorporated herein by reference.
**** Documents were previously filed with the Company's current report on Form 8-K, dated August 13, 1999, and are
incorporated herein by reference.
***** Documents were previously filed with the Company's Annual Report on Form 10-K for the year ended December 31,
1995 and are incorporated herein by reference.
****** Document was previously filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1999 and are incorporated herein by reference.
******* Document was previously filed with the Company's Annual Report on Form 10-K for the year ended December 31,
1999 and is incorporated herein by reference.
(b) CURRENT REPORTS ON FORM 8-K
None