UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 organization) (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 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
17,618,387 Shares of Common Stock were outstanding as of August 13, 1998
1
JP REALTY, INC.
FORM 10-Q
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheet as of June 30, 1998
and December 31, 1997 4
Consolidated Statement of Operations for the
Six Months Ended June 30, 1998 and 1997 5
Consolidated Statement of Operations for the
Three Months Ended June 30, 1998 and 1997 6
Condensed Consolidated Statement of Cash Flows
for the Six Months Ended June 30, 1998 and 1997 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 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 16
2
PART I
ITEM 1. FINANCIAL STATEMENTS
The information furnished in the accompanying financial statements listed
in the index on page 2 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 aforementioned financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Company's quarterly report on Form 10-Q for the three months ended March
31, 1998 and the annual report on From 10-K for the year ended December 31,
1997, including the financial statements and notes thereto.
3
JP REALTY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
ASSETS
Real Estate Assets, Including Assets Under
Development of $55,104 and $33,665 $ 652,610 $ 619,371
Less: Accumulated Depreciation (105,804) (98,404)
Net Real Estate Assets 546,806 520,967
Cash 2,503 5,603
Restricted Cash 2,357 2,465
Other Assets 16,972 16,649
---------- ----------
$ 568,638 $ 545,684
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings $ 297,103 $ 283,390
Accounts Payable and Accrued Expenses 22,048 18,840
Distributions Payable 9,565 --
Other Liabilities 637 617
329,353 302,847
--------- ---------
Minority Interest 34,130 34,851
--------- ---------
Commitments and Contingencies
Shareholders' Equity
Common Stock, $.0001 par value, 124,800,000 shares
authorized, 17,118,387 shares and 17,389,827 shares
issued and outstanding at June 30, 1998 and
December 31, 1997, respectively 2 2
Price Group Stock, $.0001 par value, 200,000 shares
authorized, issued and outstanding -- --
Excess Stock, 75,000,000 shares authorized -- --
Additional Paid-in Capital 232,650 232,135
Accumulated Distributions in Excess of Net Income (27,497) (24,151)
---------- -----------
205,155 207,986
---------- -----------
$ 568,638 $ 545,684
========== ===========
See accompanying notes to financial statements.
4
JP REALTY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1998 1997
----------- ----------
Revenues:
Minimum Rents $ 36,077 $ 26,448
Percentage and Overage Rents 1,185 1,992
Recoveries from Tenants 10,133 8,053
Interest 194 317
Other 197 182
---------- ---------
47,786 36,992
---------- ---------
Expenses:
Operating and Maintenance 7,838 5,544
Real Estate Taxes and Insurance 5,297 3,932
General and Administrative 3,000 2,568
Depreciation 7,564 5,289
Amortization of Deferred Financing Costs 744 486
Amortization of Deferred Leasing Costs 342 316
Interest 7,796 3,166
---------- ---------
32,581 21,301
---------- ---------
15,205 15,691
Minority Interest in Income of Consolidated Partnerships (137) (146)
Gain on Sale of Real Estate -- 339
---------- ---------
Income Before Minority Interest of
Operating Partnership Unitholders 15,068 15,884
Minority Interest of Operating Partnership Unitholders (2,594) (2,702)
---------- ----------
Net Income $ 12,474 $ 13,182
========== ===========
Basic Net Income Per Share $ .71 $ .76
========== ===========
Diluted Net Income Per Share $ .70 $ .75
========== ===========
PRO FORMA DATA:
Pro Forma Net Income $ 11,588 $ 11,627
========== ===========
Pro Forma Basic Earnings Per Share $ .66 $ .67
========== ===========
Pro Forma Diluted Earnings Per Share $ .65 $ .66
========== ===========
Basic Weighted Average Number of Common Shares 17,615 17,351
Add: Diluted Effect of Stock Options 128 173
---------- -----------
Diluted Weighted Average Number of Common Shares 17,743 17,524
========== ==========
See accompanying notes to financial statements.
5
JP REALTY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS ENDED JUNE 30,
---------------------------------
1998 1997
----------- ----------
Revenues:
Minimum Rents $ 18,166 $ 13,241
Percentage and Overage Rents 115 989
Recoveries from Tenants 4,793 4,175
Interest 105 98
Other 104 114
---------- ---------
23,283 18,617
---------- ---------
Expenses:
Operating and Maintenance 3,672 2,809
Real Estate Taxes and Insurance 2,657 2,026
General and Administrative 1,426 1,132
Depreciation 3,918 2,647
Amortization of Deferred Financing Costs 485 232
Amortization of Deferred Leasing Costs 175 145
Interest 3,838 1,490
16,171 10,481
---------- ---------
7,112 8,136
---------- ---------
Minority Interest in Income of Consolidated Partnerships (68) (75)
Gain on Sale of Real Estate -- 339
Income Before Minority Interest of
Operating Partnership Unitholders 7,044 8,400
Minority Interest of Operating Partnership Unitholders (1,212) (1,432)
---------- ---------
Net Income $ 5,832 $ 6,968
========== =========
Basic Net Income Per Share $ .33 $ .40
========== =========
Diluted Net Income Per Share $ .33 $ .39
========== =========
PRO FORMA DATA:
Pro Forma Net Income $ 5,832 $ 6,244
========== =========
Pro Forma Basic Earnings Per Share $ .33 $ .36
========== =========
Pro Forma Diluted Earnings Per Share $ .33 $ .35
========== =========
Basic Weighted Average Number of Common Shares 17,618 17,586
Add: Diluted Effect of Stock Options 124 169
---------- ---------
Diluted Weighted Average Number of Common Shares 17,742 17,755
========== =========
See accompanying notes to financial statements.
6
JP REALTY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1998 1997
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 30,917 $ 22,382
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Real Estate Assets, Developed or Acquired,
Net of Accounts Payable (37,151) (70,246)
Decrease in Restricted Cash 108 309
---------- ----------
Net Cash Used in Investing Activities (37,043) (69,937)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Borrowings 112,977 72,487
Repayments of Borrowings (99,264) (55,962)
Net Proceeds from Sale of Common Stock -- 38,632
Proceeds from Minority Interest -- 1,000
Proceeds from Stock Option Exercise 507 145
Distributions Paid to Minority Interest and Unitholders (1,796) (1,682)
Distributions Paid to Shareholders (7,910) (7,632)
Deferred Financing Costs (1,488) (406)
----------- ----------
Net Cash Provided by Financing Activities 3,026 46,582
----------- ----------
Net Decrease in Cash (3,100) (973)
Cash, Beginning of Period 5,603 1,750
----------- ----------
Cash, End of Period $ 2,503 $ 777
=========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
The following non-cash transactions occurred:
Distributions Accrued For Shareholders not Paid $ 7,910 $ 7,633
Distributions Accrued For Unitholders not Paid $ 1,655 $ --
Purchase of the Remaining 70% Interest in Silver Lake Mall:
72,000 Operating Partnership Units Issued 1,863
30% Equity Investment Consolidated (1,555)
Debt Assumed 24,755
----------
Total $ 25,063
==========
See accompanying notes to financial statements.
7
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 malls,
community centers and other commercial properties. The tenant base includes
primarily national retail chains 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 83% general
partner interest in Price Development Company, Limited Partnership (the
"Operating Partnership").
Earnings per share for all periods presented has been restated to reflect
the adoption of Statement of Financial Accounting Standards No. 128, Earnings
Per Share ("SFAS 128"). SFAS 128 requires companies to present basic earnings
per share, and if applicable, diluted earnings per share, instead of primary
and fully diluted earnings per share. Basic earnings per share excludes
dilution and is computed by dividing net earnings available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution that
could occur if options to purchase common stock were exercised.
2. CHANGE IN REVENUE RECOGNITION POLICY
Effective April 1, 1998 the Company has prospectively adopted the
provisions of Issue No. 98-9 ("EITF 98-9") Accounting For Contingent Rent in
Interim Financial Periods, which was issued on May 21, 1998 by the Financial
Accounting Standards Board Emerging Issues Task Force, which significantly
changes the Company's recognition of percentage and overage revenue in interim
periods. Prior to the adoption of EITF 98-9, the Company recognized percentage
and overage rents revenue monthly on an accrual basis based on estimated annual
amounts. Under the provisions of EITF 98-9 percentage and overage rents
revenue is recognized in the interim periods in which the specified target that
triggers the contingent rental income is achieved.
Under its implementation guidelines, the Emerging Issues Task Force
("EITF") provides for and the Company has chosen prospective adoption of this
EITF consensus position in the quarter in which the consensus is reached.
As a result of adopting EITF 98-9, percentage and overage rents revenue
and total revenues decreased $1,124 during the three and six months ended June
30, 1998 from the amounts that would have been reported if the change described
above had not been made. In addition, if the change in revenue recognition
described above had not been made, the net income for the three and six month
periods ended June 30, 1998 would have been $6,761 ($.38 diluted net income per
share) and $13,404 ($.76 diluted net income per share), respectively.
Pro forma net income, pro forma basic net income per share and pro forma
diluted net income per share for the three and six months ended June 30, 1998
and 1997, assuming the Company had always followed the provisions of EITF 98-9
are presented on the respective consolidated statements of operations. Further
discussion, including additional pro forma effects of the new accounting
policy, is included in Management's Discussions and Analysis of Financial
Condition and Results of Operations.
8
JP REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. BORROWINGS
On March 11, 1998 the Operating Partnership issued $100,000 in ten year
senior notes bearing annual interest at a rate of 7.29% with interest payments
due semi annually. Principle payments of $25,000 are due annually beginning
March 2005. The Operating Partnership had entered into an interest rate
protection agreement in anticipation of issuing these notes and received $270
as a result of this agreement making the effective rate of interest on these
notes at 7.24%. Proceeds from the notes were used to partially repay
outstanding borrowings under the Operating Partnership's $200,000 unsecured
credit facility.
On March 16, 1998 the Operating Partnership entered into a $10,000
unsecured credit facility. The credit facility will be used for general
business and cash management purposes.
On July 30, 1996, Spokane Mall Development Company, a consolidated
partnership, of which the Operating Partnership is the General Partner, entered
into a $50,000 construction facility. The construction facility will be used
to fund the development and construction of the Spokane Valley Mall in Spokane,
Washington. The construction loan has a 3 year term with an optional 2 year
extension and is collateralized by the Spokane Valley Mall and guaranteed by
the Operating Partnership. As of June 30, 1998, borrowings on the loan were
$44,948.
The Operating Partnership borrowed $9,000 on April 21, 1998 and $11,000
on July 20, 1998 from its $200,000 unsecured credit facility to fund
construction projects.
4. PRO FORMA FINANCIAL INFORMATION
The following unaudited proforma summary financial information for the
six months ended June 30, 1998 and 1997, is presented as if the acquisitions of
Silver Lake Mall, Visalia Mall, Salem Center and the additional common stock
offering on January 22, 1997, had been consummated as of January 1, 1997.
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1998 1997
----------- ----------
Total Revenues $ 47,786 $ 42,479
Net Income 12,474 13,469
Basic Net Income Per Share $ .71 $ .77
Diluted Net Income Per Share $ .70 $ .76
The proforma financial information summarized above is presented for
information purposes only and may not be indicative of what actual results of
operations would have been had the acquisitions and offering been completed as
of the beginning of the periods presented, nor does it purport to represent the
results of operations for future periods.
9
JP REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. SHAREHOLDERS' EQUITY
The following table summarizes changes in shareholders' equity since
December 31, 1997:
Accumulated
Additional Dividends in
Common Paid-in Excess of
Shares* Stock Capital Net Income Total
----------- ------- ---------- ---------- --------
Shareholders' Equity at December 31, 1997 17,589,827 2 232,135 (24,151) 207,986
Stock Option Compensation -- -- 7 -- 7
Issued Shares Common Stock -
Stock Options Exercised 28,435 -- 507 -- 507
Operating Partnership Units Converted 125 -- 1 -- 1
Net Income for the Period -- -- -- 12,474 12,474
Dividends Paid -- -- -- (7,910) (7,910)
Dividends Accrued -- -- -- (7,910) (7,910)
----------- ------- ---------- ---------- --------
Shareholders' Equity at June 30, 1998 17,618,387 $ 2 $ 232,650 $ (27,497) $ 205,155
=========== ======= ========== ========== =========
* Includes Price Group Stock
6. SUBSEQUENT EVENT
On August 6, 1998, the Company, through a consolidated partnership,
purchased NorthTown Mall located in Spokane, Washington. The Mall has
approximately 952,000 square feet of gross leasable area ("GLA") and is
anchored by The Bon Marche, Sears, JC Penney, Mervyns and Emporium.
The $128,000 NorthTown Mall acquisition was financed utilizing the
assumption of a 10 year $84,500 first mortgage provided by Morgan Stanley
Mortgage Capital, Inc. with the balance of the purchase price being drawn from
the Operating Partnership's credit facilities. The current going forward yield
to the Company based on the $128,000 acquisition price, will be approximately
9%. The interest rate on the first mortgage is 6.68%.
10
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company completed its initial public offering on January 21, 1994,
and conducts all of its business operations through its 83% controlling general
partner interest, in Price Development Company, Limited Partnership (the
"Operating Partnership").
The Company is a fully integrated, self administered and self-managed
REIT primarily engaged in the ownership, leasing, management, operation,
development, redevelopment and acquisition of retail properties in the
Intermountain Region, as well as in Oregon, Washington and California. The
Company's existing portfolio consists of 48 properties, including 15 enclosed
regional malls, 25 community centers, two freestanding retail properties and
six mixed-use commercial properties. The Company's financial condition and
results of operations were positively impacted by the Operating Partnership's
December 1997 acquisition of Salem Center and the June 1997 acquisitions of the
Silver Lake Mall and Visalia Mall, as well as its development activities which
added a combined 840,000 square feet of gross leasable area ("GLA") to the
retail portfolio from August 1997 through November 1997. The Company also
completed an additional public offering in January 1997, raising approximately
$40.7 million in gross proceeds through the sale of 1,500,000 shares of its
common stock.
CHANGE IN REVENUE RECOGNITION POLICY
As described in Note 2 to the financial statements, the Company has
adopted EITF 98-9 ("EITF 98-9") Accounting For Contingent Rent in Interim
Financial Periods, effective April 1, 1998, which significantly changes the
Company's recognition of percentage and overage rents revenue in interim
periods. Prior to the adoption of EITF 98-9, the Company recognized percentage
and overage rents revenue monthly on an accrual basis based on estimated annual
amounts. As a result of the change, percentage and overage rents revenue is
recognized in interim periods when the specified target that triggers the
contingent rental income is achieved.
Under its implementation guidelines, the EITF provides for, and the
Company has chosen, prospective adoption of this EITF consensus position in the
quarter in which the consensus is reached. As a result, the Company's reported
revenues and net income will be reduced in the second and third quarter of 1998
by approximately $.05 and $.04 earnings per diluted share, respectively,
increased in the fourth quarter of 1998 by approximately $.09 earnings per
diluted share (thus having no material impact on the 1998 calendar year period)
and reduced in the first quarter of 1999 compared to the first quarter of 1998
by approximately $.05 earnings per diluted share. In Company leases containing
percentage and overage rent targets, the majority of such targets are triggered
during the fourth quarter of each year. Therefore revenues and net income will
hereinafter be reduced in the first, second and third quarters of each year and
increased in the fourth quarter as compared to results reported prior to the
implementation of EITF 98-9. Over the course of a full calendar year there
will be no material impact, just a shift in earnings to later in the year.
PRO FORMA PRESENTATION
Set forth below are pro forma data which assume that the Company's
accounting for percentage and overage rents revenue had always conformed to the
provisions of EITF 98-9.
PRESENTATION OF PRO FORMA DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
Total Revenues $ 23,283 $ 17,743 $ 46,716 $ 35,115
Net Income 5,832 6,244 11,588 11,627
Basic Net Income Per Share .33 .36 .66 .67
Diluted Net Income Per Share .33 .35 .65 .66
11
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
Total revenues for the six months ended June 30, 1998 increased $10,794
or 29% to $47,786 as compared to $36,992 in 1997. This increase is primarily
attributable to a $9,629 or 36% increase in minimum rents to $36,077 as
compared to $26,448 in 1997. Additionally, percentage and overage rents
decreased $807 or 41% to $1,185 as compared to $1,992 in 1997. The decrease in
percentage and overage rents is the result of implementing the new accounting
guidance from the EITF No. 98-9 (See Note 2 to financial statements).
The June 1997 acquisitions of Silver Lake Mall and Visalia Mall as well
as the December 1997 acquisition of Salem Center, contributed $5,393 to the
minimum rent increase and $138 to percentage and overage rents. Revenues from
completed development activities contributed $3,020 to the increase in minimum
rents. The additional $1,216 increase in minimum rents was the result of
increases experienced for the balance of the property portfolio.
Recoveries from tenants increased $2,080 or 26% to $10,133 as compared to
$8,053 in 1997. Property operating expenses, including operating and
maintenance, and real estate taxes and insurance increased $2,294 or 41% and
$1,365 or 35% respectively. The acquisition of Silver Lake Mall, Visalia Mall
and Salem Center contributed $1,694 to recoveries from tenants, $2,095 to
property operating expenses, including operating and maintenance, and $695 to
real estate taxes and insurance. Recoveries from tenants as percentage of
property operating expenses were 77% compared to 85% in 1997.
Depreciation and amortization increased $2,559 or 42% to $8,650 as
compared to $6,091 in 1997. This increase is primarily due to the 1997
acquisitions and the increase in newly developed GLA.
Interest expense increased $4,630 or 146% to $7,796 as compared to
$3,166 in 1997. This increase resulted from additional borrowings used to
acquire Silver Lake Mall, Visalia Mall, Salem Center and newly constructed GLA.
Interest capitalized on projects under construction were $1,980 in 1998 and
$1,771 in 1997.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THREE MONTHS ENDED JUNE 30,
1997 (DOLLARS IN THOUSANDS)
Total revenues for the three months ended June 30, 1998 increased $4,666
or 25% to $23,283 as compared to $18,617 in 1997. This increase is
attributable to a $4,925 or 37% increase in minimum rents to $18,166 as
compared to $13,241 in 1997. Additionally percentage and overage rents
decreased $874 or 88% to $115 as compared to $989 in 1997. The decrease in
percentage and overage rents is the result of implementing the new accounting
guidance from the EITF No. 98-9 (See Note 2 to financial statements).
The June 1997 acquisitions of Silver Lake Mall and Visalia Mall as well
as the December 1997 acquisition of Salem Center, contributed $2,632 to the
minimum rent increase. Revenues from completed development activities
contributed $1,546 to the minimum rent increase. Revenues from completed
development activities contributed $1,546 to the increase in minimum rents.
The additional $747 increase in minimum rents was the result of increases
experienced for the balance of the property portfolio.
Recoveries from tenants increased $618 or 15% to $4,793 as compared to
$4,175 in 1997. Property operating expenses, including operating and
maintenance, and real estate taxes and insurance increased $863 or 31% and $631
or 31% respectively. The acquisition of Silver Lake Mall, Visalia Mall and
Salem Center contributed $910 to recoveries from tenants, $907 to property
operating expenses, including operating and maintenance, and $346 real estate
taxes and insurance. Recoveries from tenants as percentage of property
operating expenses were 76% compared to 86% in 1997.
Depreciation and amortization increased $1,554 or 51% to $4,578 as
compared to $3,024 in 1997. This increase is primarily due to the 1997
acquisitions and the increase in newly developed GLA.
Interest expense increased $2,348 or 158% to $3,838 as compared to $1,490
in 1997. This increase resulted from additional borrowings used to acquire
Silver Lake Mall, Visalia Mall, Salem Center and newly constructed GLA.
Interest capitalized on projects under development were $1,107 in 1998 and $927
in 1997.
12
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of its liquidity and capital resources have
historically been for distributions, property acquisitions, property
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 shareholders at
least 95% of its "Real Estate Investment Trust Taxable Income", as defined in
the Code. During the quarter ended June 30, 1998 the Company declared a
distribution of $.45 per share payable July 21, 1998 to the shareholders of
record as of July 2, 1998.
The Company's principal source of liquidity is its cash flow from
operations generated from its real estate investments. As of June 30, 1998,
the Company's cash and restricted cash amounted to approximately $4.9 million.
In addition to its cash and restricted cash, unused capacity under its credit
facilities totaled $171 million.
The Company expects to meet its short-term cash requirements, including
recurring capital expenditures related to maintenance and improvement of
existing properties, through undistributed funds from operations, cash balances
and advances under the credit facilities. Exclusive of construction and
development activities, capital expenditures (both revenue and non-revenue
enhancing) for the existing properties are budgeted in 1998 to be approximately
$5 million.
The Company's principal long-term liquidity requirements will be the
repayment of principal on the $95 million mortgage debt, which matures in 2001
and requires principal payments in an amount necessary to reduce the debt to
$83.1 million as of January 21, 2000, the repayment of the $100 million senior
notes principle payable at $25 million a year starting in March 2005, and the
retirement of outstanding balances under the credit facilities.
An additional long-term capital need of the Company is the construction
of the regional mall in Spokane, Washington, through its consolidated
partnership, Spokane Mall Development Company Limited Partnership. On July 30,
1996, this consolidated partnership entered into a $50 million construction
facility to meet its development and construction needs regarding the Spokane
project. The mall opened August 13, 1997, and contains approximately 689,000
square feet of total GLA. Continued payments for initial tenant construction
allowances and completion of construction will increase borrowings on the loan.
The Company estimates the total cost of this project will be approximately $67
million. The difference between the estimated cost of the project and amount
of the construction facility is comprised of costs incurred to date for the
purchase of land and payment of fees and other development costs. As of June
30, 1998, borrowings on the loan were approximately $44.9 million.
The Operating Partnership is continuing the development of Provo Towne
Centre, an enclosed regional mall in Provo, Utah through its consolidated
partnership Provo Mall Development Company, Ltd. This property will also
represent a future long-term capital need for the Company, the total cost of
the project is estimated to be approximately $71 million. The Company expects
to fund this project through advances under its credit facilities in
combination with construction financing.
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 facilities
together with equity and debt offerings and individual property financing.
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 guaranties. 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
the Operating Partnership under its shelf registration, 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 this agreement making the effective rate of interest on these notes at
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.
The Company intends to incur additional borrowings in the future in a
manner consistent with its policy of maintaining a ratio of debt-to-total
market capitalization of less than 50%. The Company's ratio of debt-to-total
market capitalization was approximately 37% at June 30, 1998.
These statements contained in this Quarterly Report of Form 10-Q that are
not purely historical fact are forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the Company's
expectations, budgets, estimates, and contemplations. All forward looking
statements included in this document are based on information available to the
Company on the date hereof, and the actual results could differ materially from
those in such forward looking statements. Certain factors that might cause
such differences include those relating to changes in economic climate, local
conditions, law and regulations, the relative illiquidity of real property
investments, the potential bankruptcy of tenants and the development or
expansion of properties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An Annual Meeting of Stockholders was held on April 29, 1998 in Salt Lake
City, Utah. At the Annual Meeting, the stockholders voted to elect seven
directors to serve on the Company's Board of Directors until the 1999
Annual Meeting of Stockholders and to ratify the appointment of Price
Waterhouse LLP as the Company's independent auditors for the fiscal year
ending December 31, 1998.
The following votes were cast by the stockholders of the Company with
respect to the election of directors named in the Proxy statement:
SHARES
VOTED SHARES
FOR WITHHELD
---------- ---------
Mr. John Price 15,481,807 335,007
Mr. G. Rex Frazier 15,482,872 333,942
Mr. Warren P. King 15,483,352 333,462
Mr. James A. Anderson 15,482,772 334,042
Mr. Sam W. Souvall 15,474,975 341,839
In addition, Messrs. Albert Sussman and Allen P. Martindale were
unanimously elected to serve as directors by the holder of the Company's
200,000 shares of Price Group Stock.
The following votes were cast by the stockholders with respect to
the resolution to ratify the Board of Director's appointment of Price
Waterhouse LLP as the Company's independent auditors for the fiscal year
ending December 31, 1998.
SHARES SHARES
VOTED VOTED SHARES
FOR AGAINST ABSTAINED
---------- -------- ---------
15,759,804 18,205 38,805
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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))**
4.1 Specimen of Common Stock Certificate (4)*
10.1 Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership (10(a))*
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(g))*
10.9 1993 Stock Option Plan (10(i))*
10.10 Amendment to Groundlease between Price Development Company and Alvin
Malstrom as Trustee and C.F. Malstrom, dated December 31, 1985.
(Groundlease for Plaza 9400) (10(j))*
10.11 Lease Agreement between The Corporation of the President of the Church of
Jesus Christ of Latter Day Saints and Price-James and Assumptions, dated
September 24, 1979. (Groundlease for Anaheim Plaza) (10(k))*
10.12 Indenture of Lease between Ambrose and Zelda Motta and Cordova Village,
dated July 26, 1974, and Amendments and Transfers thereto. (Groundlease
for Fort Union Plaza) (10(l))*
10.13 Lease Agreement between Advance Management Corporation and Price Rentals,
Inc. and dated August 1, 1975 and Amendments thereto. (Groundlease for
Price Fremont) (10(m))*
10.14 Groundlease between Aldo Rossi and Price Development Company, Dated June
1, 1989, and related documents. (Groundlease for Halsey Crossing)
(10(n))*
16
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
(b)Current Reports on Form 8-K
None
- --------------------
* Documents were previously filed with the Registration Statement on Form S-
11, File No. 33-68844, under the exhibit numbered in parenthetical, and are
incorporated herein by reference.
** Documents were previously filed with the Company's first quarter 1997 10-Q
and are incorporated herein by reference.
***Documents were previously filed with the Company's Annual Report of Form 10-
K for the year ended December 31, 1995 and are incorporated herein by
reference.
17
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)
AUGUST 13, 1998 /s/ G. Rex Frazier
- ---------------------------- -----------------------------
(Date) G. Rex Frazier
PRESIDENT, CHIEF OPERATING OFFICER,
AND DIRECTOR
AUGUST 13, 1998 /S/ M. Scott Collins
- --------------------------- ------------------------------
(Date) M. Scott Collins
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND TREASURER (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)