1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Under Sections 13 Or 15(d) Of
The Securities Exchange Act of 1934
For The Fiscal Year Ended: DECEMBER 31, 1997 Commission File Number: 1-12244
EXCEL REALTY TRUST, INC.
(Exact name of registrant, as specified in its charter)
MARYLAND 33-0160389
(State of incorporation) (IRS Employer Identification Number)
16955 VIA DEL CAMPO, SUITE 110, SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices)
Registrant's telephone number: (619) 485-9400
Securities Registered Pursuant To Section 12(b) Of The Act:
Title of Each Class Name of Each Exchange on which Registered
------------------- -----------------------------------------
Common Stock, $0.01 par value per share New York Stock Exchange
8 1/2% Series A Cumulative Convertible Preferred Stock New York Stock Exchange
8 5/8% Series B Cumulative Redeemable Preferred Stock New York Stock Exchange
Securities Registered Pursuant to Section 12(g) Of The Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's shares of common stock held by
non-affiliates was $722,958,629 as of March 20, 1998 based on the $32.875
closing price on the NYSE on such date.
Indicate the number of shares outstanding of each of the Registrant's class of
common stock, as of the latest practicable date:
Class Outstanding at March 20, 1998
Common Stock, $0.01 par value per share 23,163,155
Documents incorporated by reference: Portions of the Proxy Statement for the
1998 Annual Meeting of the stockholders of the Registrant to be filed
subsequently with the Commission are incorporated by reference into Part III of
this report.
2
PART I
ITEM 1. BUSINESS
General.
Excel Realty Trust, Inc. (the "Company") was formed in 1985 and reincorporated
as a Maryland corporation in 1993. The Company is a self-administered,
self-managed equity real estate investment trust ("REIT") which owns and manages
neighborhood and community shopping centers and other retail and commercial
properties primarily leased on a long-term basis to major retail companies
throughout the United States. The terms of such leases typically provide that
the tenant is responsible for costs and expenses associated with the ongoing
maintenance of the property. The majority of the single tenant property leases
also require that tenants pay for structural repairs and maintenance. At
December 31, 1997, the Company owned 148 operating properties located in 28
states as outlined in Item 2.
The Company has elected to be taxed as a REIT for federal income tax purposes
commencing with its taxable year ended December 31, 1987, and believes that,
commencing with such taxable year, it has been organized and has operated in
conformity with the requirements for qualification as a REIT under the Internal
Revenue Code of 1986, as amended. Although the Company believes that it will
continue to operate in such a manner, no assurance can be given that the Company
will continue to qualify as a REIT. In order to maintain its qualification as a
REIT, among other things, the Company must distribute at least 95% of its real
estate investment trust taxable income to its stockholders and meet certain
tests regarding the nature of its income and assets. As a REIT, the Company is
not subject to federal income tax with respect to that portion of its income
which meets certain criteria and is distributed annually to the stockholders.
Additionally, to preserve the Company's status as a REIT, ownership of the
capital stock of the Company, actually or constructively, by any single person
is limited, by the Company, to 9.8% of the total number of outstanding shares,
subject to certain exceptions.
As of March 20, 1998, the Company employed 145 persons. Its executive offices
are located at 16955 Via Del Campo, Suite 110, San Diego, California 92127 and
its telephone number is (619) 485-9400.
Properties
The Company emphasizes investments in retail properties where a substantial
portion of gross leasable area ("GLA") is subject to long-term net leases to
national or regional retail tenants. The properties consist of three primary
types: (i) multi-tenant retail properties (the "Shopping Centers"); (ii) single
tenant net leased retail properties (the "Single Tenant Properties"); and (iii)
commercial properties and office buildings (the "Commercial Properties"). At
December 31, 1997, the Company owned (i) 80 Shopping Centers which accounted for
approximately 84% of the Company's scheduled annualized base rent ("ABR") at
December 31, 1997; (ii) 64 Single Tenant Properties which accounted for
approximately 14% of the Company's ABR; and (iii) 4 Commercial Properties which
accounted for approximately 2% of the Company's ABR. These 148 properties total
approximately 14.4 million square feet of GLA, of which the Shopping Centers,
Single Tenant Properties, and Commercial Properties comprise approximately 81%,
18%, and 1%, respectively. Additionally, the Company has one property held for
sale/redevelopment related to a shopping mall in Arizona.
Strategy and Philosophy
The following is a brief discussion of the Company's current strategies and
policies concerning acquisitions, management, dispositions, investments,
finances and operations, and certain support practices. The Company may,
however, from time to time, alter or change one or more of these strategies or
its policies in these areas. There can be no assurance that the Company's
strategies will be successful.
The Company's primary objective is to acquire, own and manage a portfolio of
commercial retail properties that will provide cash for quarterly distributions
to stockholders while protecting investor capital and providing potential for
capital appreciation. The Company seeks to achieve this objective by (i)
aggressively managing its 148 existing
2
3
operating properties, (ii) continuing to acquire well-located neighborhood and
community shopping centers with tenants that have a national or regional
presence and an established credit quality, (iii) disposing of mature properties
to continually update its core property portfolio, and (iv) continuing to
maintain a strong and flexible financial position to facilitate growth.
Aggressive Management
The Company aggressively manages its properties, with an emphasis on
maintaining high occupancy rates and a strong base of nationally recognized
anchor tenants. In addition, the Company emphasizes monitoring of the physical
condition of the properties and the financial condition of the tenants. The
Company follows a schedule of regular physical maintenance with a view toward
tenant expansion, renovations and refurbishing to preserve and increase the
value of its properties. Renovations include upgrading of existing facades,
updating signage, resurfacing parking lots and improving parking lot and
exterior building lighting.
In addition to the 33 employees at the Company's San Diego, California
headquarters, the Company employs approximately 25 property management personnel
at its regional field offices in Phoenix, Arizona; Huntington Beach, California;
Sacramento, California; Orlando, Florida; Atlanta, Georgia; Lexington, Kentucky;
Raleigh, North Carolina; and Chattanooga, Tennessee. Each of the Company's field
offices is responsible for managing the leasing, property management and
maintenance of the Company's properties in its region. The Company also employs
a team of eleven people at its Salt Lake City, Utah office whose efforts are
dedicated solely to acquisitions and dispositions of the Company's properties
and has 76 other employees that work on various property sites.
Over time, the Company will seek to increase cash flow and portfolio value
primarily through contractual rent increases during the terms of its leases,
reletting of existing space at higher rents, expansion of existing properties
and the minimization of overhead and operating costs.
Acquisition of Properties
The Company intends to continue its portfolio focus on retail properties with
predictable cash flow and growth potential. The Company seeks to expand its
portfolio by acquiring well-located neighborhood and community shopping centers
and other retail properties with tenants that have a national or regional
presence and an established credit quality, and that the Company believes will
have the ability to make timely lease payments over the term of the lease. When
acquiring properties, however, primary emphasis is placed on the quality of the
location and comparable market rents as opposed to a particular tenant. The
Company intends to continue to concentrate its property acquisitions in the
southwestern, southeastern and western United States, where a majority of its
current properties are located. Management believes that such emphasis will
allow the Company to utilize its current property management and maintenance
personnel in these areas. The Company may, however, acquire properties in other
areas of the United States. Additionally, the Company intends to continue to
evaluate its property type mix and may purchase from time to time other
properties that the Company believes will meet its objectives.
Acquisitions through Partnerships. The Company may from time to time enter into
joint venture partnership arrangements with certain entities for the purchase
and management of properties. The Company may also from time to time acquire
properties from unaffiliated property owners by forming partnerships and
exchanging limited partnership units in such partnerships for the property
owners' equity in the acquired properties. Such partnership units are generally
exchangeable for shares of the Company's common stock under certain
circumstances. The Company believes that this acquisition method may permit the
Company to acquire properties at attractive prices from property owners wishing
to enter into tax deferred transactions. In 1995, Excel Realty Partners, L.P., a
Delaware limited partnership ("ERP"), was formed to facilitate these
transactions.
Joint Venture Development. The Company may from time to time finance properties
under development, provided that the developer of each such property has
previously (i) obtained all necessary entitlements allowing completion of the
property and (ii) identified principal tenant(s) who will occupy the property.
Under this financing method, the Company either purchases the undeveloped
property and leases such property back to the developer or makes a subordinated
loan to the developer. Upon completion of the project, the Company has the
option to purchase the development. The Company believes that these methods of
financing give the Company opportunities to purchase developed properties at
capitalization rates slightly above those which might otherwise be available
after completion
3
4
of development. Certain of these transactions have been and will be completed
through the Company's affiliate, ERT Development Corporation, a Delaware
corporation ("EDV").
Disposition of Properties
The Company continually analyzes each asset in its portfolio and identifies
those properties which can be sold or exchanged (to the extent consistent with
REIT qualification requirements) for optimal sales prices (or exchange values)
given prevailing market conditions and the particular characteristics of each
property. Through this strategy, the Company seeks to continually update its
core property portfolio by disposing of properties which have limited
appreciation potential and redeploy capital into newer properties or properties
where its aggressive management techniques may maximize property values. The
Company engages from time to time in like-kind property exchanges (i.e., Code
Section 1031 exchanges) which allow the Company to dispose of properties and
redeploy proceeds in a tax efficient manner.
The Company holds its properties for investment and the production of rental
income and not for sale to customers or other buyers in the ordinary course of
the Company's business. If the Company were treated as holding properties for
sale to customers in the ordinary course of its business, it would be subject to
tax equal to 100% of its gain from each property sold.
Financing Strategy
The Company intends to finance future acquisitions with the most advantageous
sources of capital available to the Company at the time, which may include the
sale of common stock, preferred stock or debt securities through public
offerings or private placements, the incurrance of additional indebtedness
through secured or unsecured borrowings, and the reinvestment of proceeds from
the disposition of assets. The Company's financing strategy is to maintain a
strong and flexible financial position by (i) maintaining a prudent level of
leverage, (ii) maintaining a large pool of unencumbered properties, (iii)
managing its variable rate exposure, (iv) amortizing existing property specific
non-recourse mortgages over the term of the anchor leases for such mortgaged
properties, and (v) maintaining a conservative distribution payout ratio.
The Company may seek variable rate financing from time to time if such financing
appears advantageous in light of then-prevailing market conditions. In such
case, the Company will consider hedging against interest rate risk through
interest rate protection agreements, interest rate swaps or other means.
Environmental Conditions
Under various federal, state and local laws, ordinances and regulations, the
Company may be considered an owner or operator of real property or may have
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, may become liable for the costs of removal or remediation of certain
hazardous substances released on or in its property or disposed of by it, as
well as certain other potential costs which could relate to hazardous or toxic
substances (including governmental fines and injuries to persons and property).
Such liability may be imposed whether or not the Company knew of, or was
responsible for, the presence of such hazardous or toxic substances. Except as
discussed below, the Company is not aware of any significant environmental
condition at any of its properties.
Soil and groundwater contamination exists at Carmen Plaza in Camarillo,
California, Cudahy Plaza in Cudahy, California, and Bristol Plaza in Santa Ana,
California. With regard to Carmen Plaza, the primary contaminants of concern are
perchloroethylene ("PCE") associated with the operations of an on-site dry
cleaner, methyl tertiary butyl ether ("MTBE") from an unknown source and
petroleum hydrocarbons associated with operations of an on-site auto repair
facility. With regard to Cudahy Plaza, the primary contaminants of concern are
PCE associated with operations of a former on-site dry cleaner and petroleum
hydrocarbons associated with operations of an existing on-site auto repair
facility. With regard to Bristol Plaza, the primary contaminants of concern are
PCE and trichloroethyleme ("TCE") associated with operations of an on-site dry
cleaner and petroleum hydrocarbons associated with operations of an on-site auto
repair facility. Environmental professionals retained by the Company estimate
that the total, cumulative cost of remediation for these properties will be
approximately $1.8 million to $5.5 million. In connection with each of these
properties, the Company has entered into a remediation and indemnity
4
5
agreement, which obligates the prior owner of the properties (including in some
cases, principals of the prior owner) to perform the remediation and to
indemnify the Company for any losses it may suffer because of the contamination
or remediation. Although there can be no assurance that the remediation
estimates of the environmental professionals are accurate or that the prior
owners will perform their obligations under the remediation and indemnity
agreements, the Company does not expect the environmental conditions at these
properties to have a material adverse effect on the Company. In addition,
groundwater contamination exists at Briggsmore Plaza in Modesto, California. The
primary contaminant of concern is gasoline associated with a former on-site
service station. The former tenant at the property is in the process of
performing the necessary remediation. Although there can be no assurance that
such remediation will be satisfactory, the Company does not expect the
environmental condition of this property to have a material adverse effect on
the Company. Finally, asbestos minerals relating to spray-applied fireproofing
materials exists at Clearwater Mall in Clearwater, Florida which was acquired by
the Company in December 1997. Environmental professionals retained by the
Company estimate that the total cumulative cost of remediation for this
property, which the Company assumed in conjunction with its purchase, will be
approximately $3.2 million.
The Company seeks to protect itself from environmental liabilities associated
with properties it acquires in a number of ways. As part of its internal due
diligence process, the Company undertakes environmental site assessments prior
to purchasing a property. The Company will normally not purchase a property in
the event these assessments reveal potential environmental liabilities. The
Company may, however, evaluate the risks and attempt to quantify the potential
costs associated with such liabilities, and then make a determination of whether
to acquire the property.
If the Company chooses to acquire the property, it will typically require the
prospective seller/tenant to agree to remediate any environmental problems and
may obtain a letter of credit or other security to provide adequate assurance to
the Company that sufficient funds will be available to complete the work, or
negotiate a purchase price reduction that considers the estimated cost of
remediation. The Company will continue to obtain environmental reports on all
properties it seeks to acquire. Moreover, to protect itself against
environmental liabilities that were not discovered during its pre-purchase
investigations as well as those that were disclosed, the Company, in the
purchase agreement and/or lease, will typically require the seller/tenant to
indemnify the Company against any and all environmental liabilities arising from
the property acquired.
No assurance can be given that the environmental studies performed at the
properties would disclose all environmental liabilities thereon, that any prior
owner thereof did not create a material environmental condition not known to the
Company or that a material environmental condition does not otherwise exist with
respect to any of its properties.
Principal Lessees
Kmart Corporation ("Kmart") is the Company's largest lessee in terms of ABR,
representing approximately 11.1% of the Company's ABR (approximately 14.4% of
GLA) at December 31, 1997. Kmart's principal business is general merchandise
retailing through a chain of discount department stores. It is one of the
world's largest retailers based on sales volume. Kmart's credit ratings as of
December 31, 1997 were Ba3 and B+ according to Moody's Investor Services Inc.
("Moody's") and Standard and Poor's Corporation ("Standard and Poor's"),
respectively. Kmart has closed a number of its stores in recent years including
five Single Tenant Properties that were leased from the Company. The Company
negotiated receipt of lease termination fees with respect to all five of these
properties, three of which were subsequently sold. The Company is currently in
the process of re-leasing or selling the other two properties. Should Kmart in
the future announce additional store closures, the Company believes that Kmart
would continue its lease payments for the term of the leases unless a lease
termination fee was negotiated, and/or that the properties could be re-leased at
rental rates which would not cause a material loss of revenue for the Company.
However, the Company cannot fully predict the effect on the Company of material
deterioration in Kmart's financial position.
Wal-Mart Stores, Inc. ("Wal-Mart") is the Company's second largest lessee in
terms of ABR, representing approximately 9.9% of the Company's ABR
(approximately 15.9% of GLA) at December 31, 1997. Wal-Mart is the nation's
largest retailer and operates approximately 2,000 discount department stores and
over 400 warehouse clubs. As of December 31, 1997, Wal-Mart had credit ratings
of AA from Standard and Poor's and Aa2 from Moody's.
5
6
Wal-Mart and Kmart are publicly traded companies and financial and other
information regarding these lessees is on file with the Securities and Exchange
Commission.
The table below sets forth information concerning the five largest lessees of
the Company and its subsidiaries in terms of ABR at December 31, 1997:
SCHEDULED
PERCENT OF PERCENT OF ABR AS A
COMPANY COMPANY TOTAL PERCENT OF
NUMBER TOTAL GLA TOTAL GLA SCHEDULED SCHEDULED COMPANY 1997
LESSEE OF LEASES UNDER LEASES UNDER LEASES ABR ABR TOTAL REVENUES
- ------ ---------- ------------ ------------ ---------- ---------- --------------
(IN THOUSANDS) (IN THOUSANDS)
Kmart 23 2,079 14.4% $ 10,981 11.1% 10.4%
Wal-Mart 24 2,299 15.9% 9,780 9.9% 9.2%
Kroger 15 577 4.0% 3,660 3.7% 3.5%
Food Lion 14 400 2.8% 2,491 2.5% 2.4%
Winn Dixie 7 327 2.3% 2,384 2.4% 2.3%
---------- ---------- ---------- ---------- ---------- ----------
83 5,682 39.4% $ 29,296 29.6% 27.8%
========== ========== ========== ========== ========== ==========
Certain leases related to the lessees in the table above have either been
subleased or assigned to such party. Nevertheless, the original lessee under the
lease remains responsible for payment of all rents and other obligations due
under such lease. An assignment of the lease would not affect the terms of the
lease. Generally, all subtenants are currently required to pay the same rent to
the lessee as the lessee is required to pay to the Company. Subleased properties
generally have been subleased for a term that is approximately the same as the
remaining term of the lease. In the event that the subtenant defaults under the
sublease and vacates the property, or in the event that the term of the sublease
expires earlier than the term of the lease, the property could remain unoccupied
until a new subtenant is located. In any event, the original lessee will remain
responsible for payment of all rents and all other obligations due under the
lease for the full remaining term of the lease.
Recent Developments
During 1997, the Company purchased 27 Shopping Centers, two Single Tenant
Properties, an out-parcel, and the remaining interest of a property owned in
Tennessee. The total cost of these properties was approximately $365.9 million.
In January 1998, the Company acquired a Shopping Center for approximately $9.5
million and two Single Tenant Properties under construction which are expected
to total $50.0 million when completed. In March 1998, an additional Shopping
center was acquired for approximately $41.0 million. The Company sold five
Single Tenant Properties for net proceeds of $11.2 million in 1997.
In January 1998, the Company issued 6,300,000 depositary shares each
representing 1/10 of a share of 8 5/8% Series B Cumulative Redeemable Preferred
Stock (the "Preferred B Shares"). The offering price was $25.00 per depositary
share with an annual dividend equal to $2.15625 per share, payable quarterly.
Net proceeds from the offering totaled approximately $152.5 million.
During 1997, the Company completed two stock offerings. In July, the Company
issued 2,500,000 shares of common stock with a market price of $28.00 per share.
The net proceeds were approximately $26.6875 per share, or $66.5 million. In
February, the Company issued 4,600,000 shares of 8 1/2% Series A Cumulative
Convertible Preferred Stock (the "Preferred A Shares"). The Preferred A Shares
have an annual distribution of $2.125 per share payable quarterly. The Preferred
A Shares are convertible by the holder at any time into shares of the Company's
common stock at a conversion price of $26.06 per share. Net proceeds totaled
approximately $111.4 million. In March 1998, 2,211,120 Preferred A Shares were
converted into 2,121,183 shares of the Company's common stock.
In October 1997, the Company issued $75,000,000 of 6.875% Senior Notes due 2004
(the "Senior Notes"). The effective interest rate on the Notes is 6.982% (6.875%
coupon with proceeds before underwriting discount of $74.6 million). Interest on
the Notes is payable semi-annually in arrears on April 15 and October 15 of each
year.
6
7
In July and August 1997, the Company received investment grade ratings of Baa3
and BBB- from Moody's and Standard & Poor's, respectively, with respect to
prospective issuances of senior unsecured debt, including the Senior Notes
issued in 1997.
In its financial statements, the Company consolidated ERP beginning April 1,
1997. ERP was previously accounted for in the Company's financial statements
under the equity method. On April 1, 1997, loans and related outstanding
interest of approximately $23.4 million from the Company to ERP were converted
into limited partnership interests in ERP.
In 1995, the Company formed EDV, of which the Company owns 100% of the
outstanding preferred shares. The investment in EDV is accounted for on the
equity method. The preferred shares receive 95% of the dividends, if any, from
EDV. EDV was formed to finance, acquire, develop, hold, and sell real estate in
the short-term for capital gains and/or receive fee income. At December 31,
1997, the Company had notes receivable outstanding to EDV of $90.1 million to
facilitate certain transactions.
In December 1997, the Company filed a registration statement with the Securities
and Exchange Commission with respect to the Company's intention to spin off
Excel Legacy Corporation ("Legacy"), a newly-formed corporation which is a
wholly-owned subsidiary of the Company (the "Spin-off"). Legacy was organized to
create and realize value by identifying and making opportunistic real estate
investments which are not restricted by REIT tax laws or influenced by the
Company's objectives of increasing cash flows and maintaining certain leverage
ratios. Prior to the Spin-off, EDV will transfer four notes receivable, a
leasehold interest in a parcel of land, an office building and a single tenant
building to the Company for a total consideration of $33.3 million. The Company
will reduce the note receivable from EDV (which was $90.1 million at December
31, 1997). The Company will contribute the above assets from EDV together with
ten single tenant properties owned by the Company with a December 31, 1997 book
value of approximately $46.2 million and a property under development with a
book value of $14.7 million to Legacy, in exchange for 23,160,757 common shares
of Legacy, assumption of debt by Legacy on the ten single tenant properties of
approximately $34.2 million, and issuance of a note payable from Legacy to the
Company in the amount of $20.6 million. The Spin-off is expected to take place
on or about March 31, 1998 through a dividend distribution to the Company's
common stockholders, of all Legacy common stock held by the Company. The
distribution will consist of one share of Legacy common stock for each share of
the Company's common stock held on the record date of March 2, 1998. Upon
completion of the Spin-off, Legacy will cease to be a wholly-owned subsidiary of
the Company and begin operating as an independent public company. The Company's
executive officers will continue to manage the Company's operations as well as
supervise the management of Legacy.
The Company is currently in the process of evaluating other potential property
acquisitions and financing alternatives. The Company intends to continue to
emphasize the acquisition of shopping centers and other retail properties under
long-term leases to creditworthy national or regional tenants.
ITEM 2. PROPERTIES
General
Rental revenue and operating expense reimbursements accounted for approximately
78.8% of the Company's total revenues for the year ended December 31, 1997. The
Company's management believes that the average base rent per square foot of the
Company's existing leases are generally lower than the prevailing market rate
base rents for new leases in the geographical regions where the Company
operates, reflecting the potential for growth as leases renew.
At December 31, 1997, the Company's operating properties consisted of 80
Shopping Centers, 64 Single Tenant Properties, and four Commercial Properties.
As set forth in the table on the following page, such properties were located in
28 states, contained approximately 14.4 million square feet of GLA and had
approximately $99.2 million of scheduled ABR as of December 31, 1997.
7
8
PERCENT OF
NUMBER OF TOTAL GLA PERCENT OF SCHEDULED SCHEDULED
STATE PROPERTIES (SQUARE FEET) TOTAL GLA ABR ABR
- ----- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS) (IN THOUSANDS)
Alabama 4 242 1.7% $ 1,360 1.4%
Arizona 12 1,108 7.7% 8,979 9.1%
Arkansas 2 105 0.7% 529 0.5%
California 14 1,736 12.0% 15,965 16.1%
Colorado 3 446 3.1% 4,637 4.7%
Florida 9 1,929 13.3% 11,925 12.0%
Georgia 11 994 6.9% 5,785 5.8%
Illinois 8 358 2.4% 2,337 2.4%
Indiana 13 490 3.4% 2,612 2.6%
Iowa 3 104 0.7% 563 0.6%
Kentucky 5 803 5.5% 4,656 4.7%
Louisiana 1 41 0.3% 229 0.2%
Michigan 3 108 0.7% 558 0.6%
Minnesota 4 88 0.6% 1,691 1.7%
Missouri 3 82 0.6% 68 0.1%
Nebraska 3 71 0.5% 439 0.4%
Nevada 1 165 1.1% 1,000 1.0%
New Jersey 1 56 0.4% 272 0.3%
North Carolina 14 1,538 10.6% 10,114 10.2%
Ohio 3 403 3.0% 2,114 2.1%
Oklahoma 1 46 0.3% 280 0.3%
Pennsylvania 5 412 2.8% 3,082 3.1%
South Carolina 5 376 2.6% 2,774 2.8%
Tennessee 10 1,207 8.4% 7,837 7.9%
Texas 7 701 4.9% 4,776 4.8%
Utah 1 588 4.1% 3,260 3.3%
Virginia 1 193 1.3% 1,139 1.1%
Wisconsin 1 59 0.4% 218 0.2%
---------- ---------- ---------- ---------- ----------
TOTALS 148 14,449 100.0% $ 99,199 100.0%
========== ========== ========== ========== ==========
The Shopping Centers
At December 31, 1997, the Company owned 80 Shopping Centers. The Shopping
Centers accounted for approximately 81% of the Company's GLA and approximately
84% of the Company's ABR at December 31, 1997. The Shopping Centers ranged in
size from approximately 15,000 to 841,000 square feet. The Company intends to
maintain its policy of acquiring shopping centers for long-term investment. The
Company maintains an aggressive leasing program to enhance the income potential
of each property. It also follows a schedule of regular physical maintenance
with a view toward tenant expansion, renovations and refurbishing to preserve
and increase the value of its properties. Renovations include upgrading of
existing facades, updating signage, resurfacing parking lots and improving
parking lot and exterior building lighting.
The majority of the Shopping Centers are anchored by one or more national or
regional retailers. The remaining space is generally subject to shorter-term net
leases to smaller tenants. A substantial portion of the Company's income from
Shopping Centers consists of rent received under long-term leases. Most of these
leases provide for payment of fixed base rentals monthly in advance and for the
payment by tenants of their pro-rata share of real estate taxes, insurance,
utilities and common area maintenance of the shopping center. In general, the
Company's Shopping Center leases require the Company to make roof and structural
repairs as needed. However, certain of the tenant leases place that
responsibility on the tenant. The Company's standard small store lease provides
for roof repairs and exterior repairs to be reimbursed by the tenant as part of
the common area maintenance.
8
9
The Single Tenant Properties
At December 31, 1997, the Company owned 64 Single Tenant Properties under
long-term net leases to national or regional tenants. The GLA of these
properties ranged in size from approximately 2,000 square feet to 126,000 square
feet. These properties accounted for approximately 14% of the Company's ABR and
18% of the Company's total GLA at December 31, 1997. With few exceptions, the
tenants are required to pay all operating expenses including roof and structural
repairs.
The Commercial Properties
At December 31, 1997, approximately 1% of the total GLA owned by the Company was
attributable to the four Commercial Properties under long-term leases to single
tenants or groups of tenants. These properties accounted for approximately 2% of
the ABR of the Company and its subsidiaries at December 31, 1997 and the GLA
ranged in size from approximately 9,100 square feet to 63,000 square feet. One
of the Commercial Properties is the 22,000 square foot office building which is
the headquarters of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than various claims
and lawsuits arising in the normal course of its business which, in the opinion
of the Company's management, are not individually or in the aggregate material
to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the NYSE under the symbol "XEL". As of
March 20, 1998 there were approximately 1,439 record holders of the Company's
common stock, plus those who hold their shares in street name. The Company has
paid regular distributions since its commencement of operations in 1987 and
intends to pay regular quarterly distributions in the future. Payment of
distributions depends upon a number of factors (including primarily the
Company's cash flow) and there can be no assurance that distributions will be
paid. The following table sets forth the high and low sales price as reported by
the NYSE composite tape and the distributions declared each calendar quarter
during 1997 and 1996 with respect to the Company's common stock:
DISTRIBUTIONS
HIGH LOW DECLARED
---- --- --------
1996:
First quarter $20.8750 $19.1250 $ 0.445
Second quarter 21.2500 18.0000 0.445
Third quarter 22.5000 19.5000 0.460
Fourth quarter 25.3750 21.5000 0.460
1997:
First quarter $25.8750 $23.0000 $ 0.460
Second quarter 27.0000 23.8750 0.460
Third quarter 31.8750 26.5000 0.500
Fourth quarter 32.7500 28.0625 0.500
9
10
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
INCOME STATEMENT DATA
Total revenue $ 105,458 $ 63,135 $ 59,390 $ 42,259 $ 23,082
Total expenses 54,681 37,562 44,861 28,355 20,250
Income before real estate
impairment and sales, minority
interest and other items 50,777 25,573 14,509 13,904 2,832
Real estate impairment and sales 523 (1,777) 3,683 (108) 399
Net income 48,962 23,796 18,192 13,796 3,231
Net income per share [b]:
Basic $ 2.06 $ 1.66 $ 1.51 $ 1.27 $ 0.55
Diluted 1.97 1.62 1.51 1.27 0.55
Distributions per share 1.92 1.81 1.32[a] 1.71 1.42
Weighted average number of shares [b]:
Basic 19,521 14,312 12,031 10,877 5,873
Diluted 20,708 14,531 12,038 10,881 5,877
BALANCE SHEET DATA
Net real estate $ 891,582 $ 457,502 $ 372,016 $ 349,255 $ 273,362
Total assets 1,076,197 558,628 428,307 375,100 290,226
Mortgages payable 243,664 157,716 123,813 201,157 113,487
Senior notes payable 75,000 -- -- -- --
Notes payable 168,894 81,032 86,984 15 6,575
Capital leases 26,850 -- -- -- --
Stockholders' equity 502,516 312,654 208,678 163,898 161,962
- ----------
[a] In April 1995, the Company adopted a policy of declaring distributions
to stockholders of record on the first day of the succeeding quarter,
instead of the last day of the current quarter. The payment date of 15
days following each quarter remained unchanged. In 1996, a distribution
of $0.445 per share was declared on January 1 and paid on January 15.
Had the Company not changed its distribution declaration date, the
distributions would have been $1.77 in 1995.
[b] The Company has adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings Per Share effective
December 31, 1997. SFAS No. 128 requires the presentation of basic and
diluted earnings per share. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS is computed giving
effect to all dilutive potential common shares that were outstanding
during the period. Dilutive potential common shares consist of the
incremental common shares issuable upon the conversion of convertible
preferred stock (using the "if converted" method), exercise of stock
options and warrants and potential conversion of ERP limited partner
units for all periods. All prior period earnings per share amounts have
been restated to comply with the SFAS No. 128.
10
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto. Historical results and percentage
relationships set forth in the Consolidated Statements of Income contained in
the Consolidated Financial Statements, including trends which might appear,
should not be taken as indicative of future operations.
Comparison of the year ended December 31, 1997 to the year ended December 31,
1996
Rental revenue and expense reimbursements increased $30.6 million, or 58% to
$83.1 million in the year ended December 31, 1997, as compared to $52.5 million
for the year ended December 31, 1996. This increase relates partially to the
consolidation of Excel Realty Partners, L.P. ("ERP") on April 1, 1997. Had ERP
been consolidated with the Company during 1996, rental revenue and expense
reimbursements would have been greater in 1996 by $7.0 million. Also, the
Company acquired 30 new properties in 1997 that accounted for $16.5 million in
revenues and in addition, acquired a shopping mall in December 1996 which
accounted for an additional $5.9 million in 1997 revenues. The remaining
increase in revenues was attributable to an increase in rents from a full year
of operations from the properties acquired in 1996, net of 1997 property sales,
and a net increase in rents from its existing properties.
Interest income increased $9.7 million, or 145% to $16.4 million in the year
ended December 31, 1997 from $6.7 million in the year ended December 31, 1996.
This increase is primarily related to additional notes receivable issued during
the year including an increase of $50.3 million related to loans made to ERT
Development Corporation ("EDV") to facilitate the development of various
development projects. Also, in the second quarter of 1997, the Company reversed
a reserve of $0.8 million related to one of its note receivables. The $0.8
million was recognized as interest income and was made due to increased leasing
activity on the collateralized property and improved market conditions.
Additionally in 1997, the Company recognized $0.7 million of loan fees from
certain developers.
Other income in 1997 of $6.0 million represented a $2.1 million or 54% increase
from other income in 1996 of $3.9 million. The increase related primarily to an
increase in EDV's operations. EDV's net income in the twelve month period ended
December 31, 1997 increased by $3.3 million over the same period in 1996. This
was offset by a $0.4 million decrease in development fees received from EDV.
Also, equity income in ERP was $1.1 million in 1996. As the Company began
consolidating ERP's accounts on April 1, 1997, equity income for the first three
months in 1997 was $0.4 million, or a decrease of $0.7 million.
Interest expense increased $4.5 million or 23% to $24.0 million in 1997 from
$19.5 million in 1996. The increase primarily relates to additional debt related
to property acquisitions and the consolidation of ERP. The outstanding mortgage
debt and capital leases were $270.5 million at December 31, 1997 compared to
$157.7 million at December 31, 1996. Additionally, the Company issued $75.0
million in Senior Notes in October 1997 and increased borrowings on its credit
facility and other notes payable to $168.9 million at December 31, 1997 compared
to $81.0 million at December 31, 1996.
Depreciation and amortization expenses increased $4.1 million or 55% in 1997
when compared with 1996. This relates primarily to the increase in buildings
from acquisitions made in 1997 and the consolidation of ERP.
Property taxes, repairs and maintenance and other property expenses totaled
$14.0 million in 1997 compared to $7.4 million in 1996. This increase primarily
relates to property acquisitions and the inclusion of properties held by ERP.
The increase of $6.6 million is consistent with the increase of expense
reimbursement revenue of $5.6 million. The percentage of these expenses
recovered in 1997 through expense reimbursement revenue increased to 73% from
62% in 1996. General and administrative expenses increased by $2.2 million in
1997 from 1996 which was a slight increase as a percentage of total revenues
from 4.5% to 4.8%.
11
12
In July 1997, the Company bought an interest rate lock related to a proposed
senior note offering. The interest rate lock was sold when the senior note
offering was postponed and a common stock offering was completed instead. The
Company recognized a $0.9 million loss on the sale. The Company later issued its
Senior Notes at 6.875% (6.982% effective rate with a discounted issue price).
The interest rate lock that was sold had guaranteed the seven year Treasury note
at 6.44%. Had the Company issued the Senior Notes in July, the interest rate
would have been 0.875% over the seven year Treasury note, or 7.315%. The $0.9
million loss is included in other items. Also included in other items was a $0.6
million currency loss related to a note receivable payable in Canadian dollars.
The Company recognized a net gain on real estate sales of $1.3 million in 1997
compared with a net loss of $0.9 million in 1996. In 1997, the Company sold five
Single Tenant Properties for net proceeds of $11.2 million. The net loss in 1996
was primarily a result of a dark building that was sold. The impairment of real
estate in 1997 and 1996 relates to one dark building which the Company wrote
down to its estimated fair value in each year, respectively.
Net income increased $25.2 million, or 106%, to $49.0 million in 1997 from $23.8
million in 1996. In the third quarter of 1997, the Company increased the
quarterly distributions per share to $0.50 from $0.46.
Comparison of the year ended December 31, 1996 to the year ended December 31,
1995
Rental revenue and expense reimbursements decreased $2.7 million, or 5% to $52.5
million in the year ended December 31, 1996, as compared to $55.2 million for
the year ended December 31, 1995. This decrease primarily relates to the sale of
an office building in December 1995 which accounted for $3.0 million of revenue
in 1995. Although property expenses decreased slightly as mentioned below,
expense reimbursements increased by $0.8 million. The primary reason for this
variance is the sale of the office building. In 1995, the office building
accounted for $1.6 million in total expenses of which only $0.2 million was
recovered in reimbursements.
Interest income increased $3.5 million, or 109% to $6.7 million in the year
ended December 31, 1996 from $3.2 in the year ended December 31, 1995. This
increase is primarily related to additional notes receivable issued during the
year. The Company's outstanding notes receivable were $83.7 million at December
31, 1996 compared with $22.9 million outstanding at December 31, 1995, an
increase of $60.8 million. Of this amount, $27.1 million related to loans made
to EDV, $11.9 million related to loans made to ERP primarily to facilitate cash
requirements for seven properties contributed to ERP in 1996, $9.5 million was
loaned to a Canadian company to facilitate the purchase and redevelopment of a
mixed-use commercial building in Toronto, Canada and $12.3 million related to
loans made to various other development companies.
Other income in 1996 of $3.9 million represented a $2.9 million increase from
other income in 1995 of $1.0 million. The increase related primarily to an
increase in fees received from EDV which totaled $2.4 million in 1996 compared
to $0.6 million in 1995. Additionally, the Company's equity in earnings from its
affiliates accounted for $1.2 million of the increase. This increase is
primarily due to ERP's activity. In 1996, seven properties were contributed to
ERP. In addition, a full year of operations was recognized on the five
properties that were contributed in the fourth quarter of 1995.
Interest expense decreased $3.0 million to $19.5 million in the year ended
December 31, 1996 from $22.5 million in 1995. The higher interest expense in
1995 related to $3.7 million of loan costs written-off compared to none in 1996.
This was primarily due to the repayment of debt related to the Company's Real
Estate Mortgage Investment Conduit (the "REMIC"). Excluding loan cost
write-offs, interest expense increased $1.1 million in 1996 which primarily
related to the increase in mortgage debt from properties purchased in 1996.
Mortgages payable outstanding at December 31, 1996 were $157.7 million compared
with $123.8 million outstanding at December 31, 1995.
Depreciation and amortization expenses increased $0.6 million or 9% in 1996 when
compared with 1995. This is due to an overall increase in the Company's
depreciable real estate, and a full year's operations on the properties
purchased in 1995. The Company's buildings at December 31, 1996 totaled $323.4
million compared to $251.0 million at December 31, 1995.
Property taxes, repairs and maintenance and other property expenses decreased
$0.6 million or 8% to $7.4 million in the year ended December 31, 1996 from $8.0
million in the year ended December 31, 1995. This decrease was
12
13
primarily the result of the sale of the office building in December 1995, as
mentioned above, which accounted for $0.7 million of other property expenses in
1995. The properties acquired during 1996 that were not previously under master
leases accounted for approximately $0.1 million of other property expenses in
1996. Master lease expenses, which were $4.7 million in the year ended December
31, 1995, decreased to $0.4 million in 1996. In 1996, the three properties under
master leases were purchased in the first quarter of 1996 and the master leases
were terminated. During 1995, eleven properties were under master leases for at
least part of the year. There were no significant changes in the other operating
expenses. General and administrative expenses decreased to approximately 4.5% of
total revenues in 1996 from 4.8% of total revenues in 1995.
The Company recognized a net loss on real estate sales of $0.9 million in 1996
compared with a net gain of $3.7 million in 1995. The loss in 1996 primarily was
the result of a dark building that was sold in 1996. The Company had received a
lease termination fee and, subsequent to termination of the lease, sold the
building. In 1995 the Company's net gain was primarily associated with the sale
of the office building. The impairment of real estate in 1996 relates to another
dark building which the Company wrote down by $0.8 million to its estimated fair
value.
Net income increased $5.6 million, or 31%, to $23.8 million in 1996 from $18.2
million in 1995. In the third quarter of 1996, the Company increased the
quarterly distributions per share to $0.46 from $0.445.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations has been the principal source of capital to fund the
Company's ongoing operations. The Company's issuance of common and preferred
shares and Senior Notes, use of the Company's credit facility and long-term
mortgage financing have been the principal sources of capital required to fund
its growth.
In order to continue to expand and develop its portfolio of properties and other
investments, the Company intends to finance future acquisitions and growth
through the most advantageous sources of capital available to the Company at the
time, which may include the sale of common stock, preferred stock or debt
securities through public offerings or private placements, the incurrence of
additional indebtedness through secured or unsecured borrowings and the
reinvestment of proceeds from the disposition of assets. In 1997, the Company
received investment grade credit ratings of Baa3 and BBB- from Moody's and
Standard and Poor's, respectively, on unsecured senior debt securities issued
from the Company's $500 million shelf registration. The Company's financing
strategy is to maintain a strong and flexible financial position by (i)
maintaining a prudent level of leverage, (ii) maintaining a large pool of
unencumbered properties, (iii) managing its variable rate exposure, (iv)
amortizing existing property specific non-recourse mortgages over the term of
the anchor leases for such mortgaged properties, and (v) maintaining a
conservative distribution payout ratio.
The Company may seek variable rate financing from time to time if such financing
appears advantageous in light of then-prevailing market conditions. In such
case, the Company will consider hedging against interest rate risk through
interest rate protection agreements, interest rate swaps or other means.
In April 1997, the Company filed with the Commission a $500 million shelf
registration statement. This registration statement was filed for the purpose of
issuing debt securities, preferred stock, depositary shares, common stock or
warrants. Currently, approximately $197.5 million is available to the Company on
this registration statement.
In January 1998, the Company issued 6,300,000 depositary shares each
representing 1/10 of a share of 8 5/8% Series B Cumulative Redeemable Preferred
Stock (the "Preferred B Shares"). The offering price was $25.00 per depositary
share with an annual dividend equal to $2.15625 per share, payable quarterly.
Net proceeds from the offering totaled approximately $152.5 million.
In 1997, the Company completed two stock offerings. In July, the Company issued
2,500,000 shares of common stock with a market price of $28.00 per share. The
net proceeds were approximately $26.6875 per share, or $66.5 million. In
January, the Company issued 4,600,000 shares of 8 1/2% Series A Cumulative
Convertible Preferred Stock (the "Preferred A Shares"). Net proceeds totaled
approximately $111.4 million. The Preferred A Shares have an annual distribution
of $2.125 per share payable quarterly. The Preferred A Shares are convertible by
the holder at any time into shares of the Company's common stock at a conversion
price of $26.06 per share. On or after February 5, 2002, the Preferred A Shares
are redeemable by the Company at $25.00 per share in either shares of
13
14
common stock or cash at the Company's election. The Preferred A Shares rank
senior to the Company's common stock and are on a parity with the Preferred B
Shares with respect to the payment of dividends and amounts payable upon
liquidation, dissolution or winding down of the Company. In March 1998,
2,211,120 Preferred A Shares were converted into 2,121,183 shares of the
Company's common stock.
In October 1997, the Company issued $75.0 million of 6.875% Senior Notes due
2004 (the " Senior Notes"). The effective interest rate on the Senior Notes is
6.982% (6.875% coupon with proceeds before underwriting discount of $74.6
million). Interest on the Notes is payable semi-annually in arrears on April 15
and October 15 of each year.
The proceeds from the Senior Notes and stock offerings were used to repay debt,
acquire properties, make loans to EDV and to third party developers to
facilitate the development of properties and for general corporate purposes.
The Company has an unsecured revolving credit facility for up to $150.0 million
from a group of seven banks (the "Credit Facility") which carries an interest
rate of LIBOR plus 1.20%. The actual amount available to the Company is
dependent on covenants such as the value of unencumbered assets and certain
ratios. The Credit Facility expires December 1999. The outstanding balance of
$148.6 million at December 31, 1997 was repaid in January 1998 with proceeds
from the Company's Preferred B Shares offering.
In 1995, the Company formed ERP to own and manage certain real estate properties
and on April 1, 1997, the Company began consolidating the accounts of ERP. At
December 31, 1997, there were 2,833,000 limited partner units outstanding of
which 1,681,000 were held by third parties. These units are due distributions
totaling $0.9 million per quarter and are redeemable for common stock of the
Company or cash, at certain dates.
In 1995, EDV was organized to finance, acquire, develop, hold and sell real
estate in the short-term for capital gains and/or receive fee income. The
Company owns 100% of the outstanding preferred shares of EDV. The preferred
shares are entitled to receive dividends equal to 95% of net income from cash
flows, if any. Cash requirements to facilitate EDV transactions have primarily
been obtained through borrowings from the Company and are expected to continue
in the future. Interest and principal payments are repaid to the Company as
excess cash is available which is primarily expected to occur when development
projects are completed and sold. The Company has guaranteed $30 million of an
$85 million construction loan related to a retail development project in
Orlando, Florida. The project is expected to be completed in August 1998.
In September 1997, the Company established $25.7 million in credit facilities to
certain developers. The total outstanding amounts on the credit facilities of
$14.0 million at December 31, 1997 carry interest at 11% to 12%, are
collateralized by real estate, and are payable on the earlier of the sale of
certain real estate or seven years. In 1997, the Company recognized $0.7 million
in loan fees related to credit facilities.
In December 1997, the Company filed a registration statement with the Securities
and Exchange Commission with respect to the Company's intention to spin off
Excel Legacy Corporation ("Legacy"), a newly-formed corporation which is a
wholly-owned subsidiary of the Company (the "Spin-off"). Legacy was organized to
create and realize value by identifying and making opportunistic real estate
investments which are not restricted by REIT tax laws or influenced by the
Company's objectives of increasing cash flows and maintaining certain leverage
ratios. Prior to the Spin-off, EDV will transfer four notes receivable, a
leasehold interest in a parcel of land, an office building and a single tenant
building to the Company for a total consideration of $33.3 million. The Company
will reduce the note receivable from EDV (which was $90.1 million at December
31, 1997). The Company will contribute the above assets from EDV together with
ten single tenant properties owned by the Company with a December 31, 1997 book
value of approximately $46.2 million and a property under development with a
book value of $14.7 million to Legacy, in exchange for 23,160,757 common shares
of Legacy, assumption of debt by Legacy on the ten single tenant properties of
approximately $34.2 million, and issuance of a note payable from Legacy to the
Company in the amount of $20.6 million. The Spin-off is expected to take place
on or about March 31, 1998 through a dividend distribution to the Company's
common stockholders, of all Legacy common stock held by the Company. The
distribution will consist of one share of Legacy common stock for each share of
the Company's common stock held on the record date of March 2, 1998. Upon
completion of the Spin-off, Legacy will cease to be a wholly-owned subsidiary of
the Company and begin operating as an independent public company. The Company's
executive officers will continue to manage the Company's operations as well as
supervise the management of Legacy.
14
15
The Company has elected to be taxed as a REIT for federal income tax purposes
and must distribute at least 95% of its taxable income to its stockholders in
order to avoid income taxes. Although the Company receives most of its rental
payments on a monthly basis, it intends to make quarterly distribution payments.
Amounts accumulated for distributions will be invested by the Company in
short-term marketable instruments including deposits at commercial banks, money
market accounts, certificates of deposit, U.S. government securities or other
liquid investments (including GNMA, FNMA, and FHLMC mortgage-backed securities)
as the Board of Directors deems appropriate.
The Company calculates funds from operations ("FFO") as net income before gain
or loss on real estate sales (net of gain or loss on sales of undepreciated
property), plus depreciation on real estate, amortization, amortized leasing
commission costs, loan costs written off, and other non-recurring items. FFO
does not represent cash flows from operations as defined by generally accepted
accounting principles, and may not be comparable to other similarly titled
measures of other REITs. The Company believes, however, that to facilitate a
clear understanding of its operating results, FFO should be examined in
conjunction with its net income as reductions for certain items are not
meaningful in evaluating income-producing real estate, which historically has
not depreciated. The following information is included to show the items
included in the Company's FFO for the past three years (in thousands except per
share amounts):
1997 1996 1995
-------- -------- --------
Net income $ 48,962 $ 23,796 $ 18,192
Depreciation:
Buildings 10,980 7,025 6,313
Tenant improvements 409 329 531
From equity investments 43 9 1
Amortization (a):
Leasing commissions 219 189 724
Organization costs and other 12 4 4
Minority interest (b) 816 -- --
Adjustment from equity investment (b) 118 -- --
Loan costs written off 664 (415) 4,453
Sale of loan rate cap 896 -- --
(Gain) loss on sale/impairment of buildings (523) 2,130 (3,683)
-------- -------- --------
Funds from operations $ 62,596 $ 33,067 $ 26,535
======== ======== ========
Other Information:
Leasing commissions paid $ 330 $ 461 $ 335
Tenant improvements paid 793 338 741
Building improvements paid 638 683 716
(a) Only amortization of organizational costs are shown as amortization expense
in the Consolidated Statements of Income. Loan cost amortization and loan costs
written-off are classified as interest expense and leasing commission
amortization is classified as part of other operating expenses in the
Consolidated Statements of Income.
(b) These amounts relate to third party ERP units and other common stock
equivalents.
ECONOMIC CONDITIONS
The majority of the Company's leases contain provisions deemed to mitigate the
adverse impact of inflation. Such provisions include clauses enabling the
Company to receive percentage rents which generally increase as prices rise,
and/or escalation clauses which are typically related to increases in the
consumer price index or similar inflation indices. In addition, the Company
believes that many of its existing lease rates are below current market levels
for comparable space and that upon renewal or re-rental such rates may be
increased to current market rates. This belief is based upon an analysis of
relevant market conditions, including a comparison of comparable market rental
rates, and upon the fact that many of such leases have been in place for a
number of years and may not contain
15
16
escalation clauses sufficient to match the increase in market rental rates over
such time. Most of the Company's leases require the tenant to pay its share of
operating expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in costs and
operating expenses resulting from inflation. In addition, the Company
periodically evaluates its exposure to interest rate fluctuations, and may enter
into interest rate protection agreements which mitigate, but do not eliminate,
the effect of changes in interest rates on its floating rate loans.
Many regions of the United States, including regions in which the Company owns
property, may experience economic recessions. Such recessions, or other adverse
changes in general or local economic conditions, could result in the inability
of some existing tenants of the Company to meet their lease obligations and
could otherwise adversely affect the Company's ability to attract or retain
tenants. The Company's shopping centers are typically anchored by discount
department stores, supermarkets and drug stores which usually offer day-to-day
necessities rather than high priced luxury items. These types of tenants, in the
experience of the Company, generally continue to maintain their volume of sales
despite a slowdown in economic conditions.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-K may be deemed to be "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results of the Company to be
materially different from historical results or from any results expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
factors include, but are not limited to, the following risks:
Economic Performance and Value of Centers Dependent on Many Factors. Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate can be affected by many factors, including
changes in the national, regional and local economic climates, local conditions
such as an oversupply of space or a reduction in demand for real estate in the
area, the attractiveness of the properties to tenants, competition from other
available space, the ability of the owner to provide adequate maintenance and
insurance and increased operating costs. In recent years, there has been a
proliferation of new retailers and a growing consumer preference for
value-oriented shopping alternatives that have, among other factors, heightened
competitive pressures. In certain areas of the country, there may also be an
oversupply of retail space. As a consequence, many companies in all sectors of
the retailing industry have encountered significant financial difficulties. A
substantial portion of the Company's income is derived from rental revenues from
retailers in neighborhood and community shopping centers. Accordingly, no
assurance can be given that the Company's financial results will not be
adversely affected by these developments in the retail industry.
Dependence on Rental Income from Real Property. Since substantially all of the
Company's income is derived from rental income from real property, the Company's
income and funds for distribution would be adversely affected if a significant
number of the Company's tenants were unable to meet their obligations to the
Company or if the Company were unable to lease a significant amount of space in
its properties on economically favorable lease terms. There can be no assurance
that any tenant whose lease expires in the future will renew such lease or that
the Company will be able to re-lease space on economically advantageous terms.
Illiquidity of Real Estate Investments. Equity real estate investments are
relatively illiquid and therefore tend to limit the ability of the Company to
vary its portfolio promptly in response to changes in economic or other
conditions. In addition, mortgage payments and, to the extent the properties are
not subject to triple net leases, certain significant expenditures such as real
estate taxes and maintenance costs, are generally not reduced when circumstances
cause a reduction in income from the investment. Should such events occur, the
Company's income and funds for distribution would be adversely affected. A
portion of the Company's properties are mortgaged to secure payment of
indebtedness, and if the Company were unable to meet its mortgage payments, a
loss could be sustained as a result of foreclosure on such properties by the
mortgagee.
Risk of Bankruptcy of Major Tenants. The bankruptcy or insolvency of a major
tenant or a number of smaller tenants may have an adverse impact on the
properties affected and on the income produced by such properties. Under
bankruptcy law, a tenant has the option of assuming (continuing) or rejecting
(terminating) any unexpired lease. If
16
17
the tenant assumes its lease with the Company, the tenant must cure all defaults
under the lease and provide the Company with adequate assurance of its future
performance under the lease. If the tenant rejects the lease, the Company's
claim for breach of the lease would (absent collateral securing the claim) be
treated as a general unsecured claim. The amount of the claim would be capped at
the amount owed for unpaid pre-petition lease payments unrelated to the
rejection, plus the greater of one years' lease payments or 15% of the remaining
lease payments payable under the lease (but not to exceed the amount of three
years' lease payments).
Environmental Risks. Under various federal, state and local laws, ordinances and
regulations, the Company may be considered an owner or operator of real property
or may have arranged for the disposal or treatment of hazardous or toxic
substances and, therefore, may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property or
disposed of by it, as well as certain other potential costs which could relate
to hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such liability may be imposed whether or not the Company
knew of, or was responsible for, the presence of such hazardous or toxic
substances.
Reliance on Major Tenants. As of December 31, 1997, the Company's two largest
tenants were Kmart Corporation and Wal-Mart Stores, Inc. whose scheduled ABR
accounted for approximately 10.4% and 9.2%, respectively, of the Company's 1997
total revenues. The financial position of the Company and its ability to make
distributions may be adversely affected by financial difficulties experienced by
either of such tenants, or any other major tenant of the Company, including a
bankruptcy, insolvency or general downturn in business of any such tenant, or in
the event any such tenant does not renew its leases as they expire.
Control by Directors and Executive Officers. As of December 31, 1997, directors
and executive officers of the Company beneficially owned approximately 12.0% of
the Company's common stock. Accordingly, such persons should continue to have
substantial influence over the Company and on the outcome of matters submitted
to the Company's stockholders for approval.
Year 2000. The Company currently uses Management Reports Inc. ("MRI") software
on a Novell local area network. The MRI software will require an upgrade to make
it year 2000 compliant, which the Company intends to install prior to December
31, 1999. The Company does not believe that additional costs associated with the
software upgrade and additional implementation and training costs will be
material to the Company's financial position or results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item appear with an Index to Financial
Statements and Schedules, starting on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting and
financial disclosure.
PART III
ITEMS 10 THROUGH 13
Incorporated by reference to the Company's Proxy Statement for its 1998 annual
meeting of stockholders to be filed subsequently hereto.
17
18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
(1) Report of Independent Accountants Page F-2
(2) Financial Statements
(i) Consolidated Balance Sheets;
December 31, 1997 and 1996 Page F-3
(ii) Consolidated Statements of Income;
Years Ended December 31, 1997, 1996 and 1995 Page F-4
(iii)Consolidated Statements of Changes In
Stockholders' Equity;
Years Ended December 31, 1997, 1996 and 1995 Page F-5
(iv) Consolidated Statements of Cash Flows;
Years Ended December 31, 1997, 1996, and 1995 Page F-6
(v) Notes to Consolidated Financial Statements Page F-7
(3) Financial Statement Schedules
(i) Schedule II; Valuation and Qualifying Accounts;
Years Ended December 31, 1997, 1996 and 1995 Page F-20
(ii) Schedule III; Real Estate and Accumulated
Depreciation; December 31, 1997 Page F-21
All other schedules are omitted since the required information
is not present or is not present in amounts sufficient to
require submission of the schedule or because the information
required is included in the consolidated financial statements
and notes thereto.
(b) Reports on Form 8-K filed during the quarter ended December 31,
1997:
A Current Report on Form 8-K was filed with the Commission on
October 3, 1997 regarding the Company's acquisition of
properties in Charleston, SC; Miami, FL; Naples, FL;
Elizabethtown, PA; and Arlington, TX (including financial
statements of the properties acquired).
A Current Report on Form 8-K was filed with the Commission on
October 15, 1997 regarding the Company's offering of 6.875%
Senior Notes due 2004.
A Current Report on Form 8-K was filed with the Commission on
December 17, 1997 regarding the Company's acquisition of a
property in Clearwater, FL (including financial statements of
the property acquired).
A Current Report on Form 8-K was filed with the Commission on
December 30, 1997 regarding the Company's acquisition of
properties in Westminster, CO and Winchester TN (including
financial statements of the properties acquired).
(c) Exhibits:
Refer to Exhibit Index as follows.
18
19
EXHIBIT INDEX
- -------------
3.1 Articles of Incorporation of Excel Realty Trust, Inc., a Maryland
corporation (the "Company"), as amended. (1)
3.2 Bylaws of the Company. (1)
4.1 Articles Supplementary classifying 4,600,000 shares of preferred stock
as 8 1/2% Series A Cumulative Convertible Preferred Stock. (2) Exhibit
4.01
4.2 Articles Supplementary classifying 630,000 shares of preferred stock as
8 5/8% Series B Cumulative Redeemable Preferred Stock. (3) Exhibit 4.02
4.3 Indenture, dated as of May 8, 1995, by and between the Company and State
Street Bank and Trust Company of California, N.A. (As successor to the
First National Bank of Boston). (4) Exhibit 4.01
4.4 First Supplemental Indenture, dated as of April 4, 1997, by and between
the Company and State Street Bank and Trust Company of California, N.A.
(5) 4.02
4.5 Second Supplemental Indenture, dated as of July 3, 1997, by and between
the Company and State Street Bank and Trust Company of California, N.A.
(6) 4.01
10.1 General Partnership Agreement of Horne & Excel Properties, a Tennessee
general partnership, dated as of October 13, 1992, by and between Horne
and Excel California (also known as the "Company"). (1) Exhibit 10.2A
10.2 General Partnership Agreement of Horne & Excel Properties (Chapman), a
Tennessee general partnership, dated as of December 30, 1992, by and
between Horne and the Company. (1) Exhibit 10.2B
10.3 Employment Contract, dated as of April 1, 1993, by and between the
Company and Gary Sabin, an individual. (1) Exhibit 10.8
10.4 Employment Contract, dated as of April 1, 1993, by and between the
Company and Richard Muir, an individual. (1) Exhibit 10.8A
10.5 Employment Contract, dated as of April 1, 1993, by and between the
Company and Graham Bullick, an individual. (1) Exhibit 10.9
10.6 Employment Contract, dated as of April 1, 1993, by and between the
Company and Ronald Sabin an individual. (1) Exhibit 10.9A
10.7 1993 Stock Option Plan of the Company. (7) Exhibit B
10.8 Form of Incentive Stock Option Agreement under the Company's 1993 Stock
Option Plan. (1) Exhibit 10.11
10.9 Form of Non-Qualified Stock Option Agreement under the Company's 1993
Stock Option Plan. (1) Exhibit 10.12
10.10 401(k) Retirement Plan of the Company. (1) Exhibit 10.13
10.11 Form of Common Stock Purchase Option, dated as of November 1, 1992 by
and between the Company and each of the seven directors thereof. (1)
Exhibit 10.27
10.12 Form of Common Stock Purchase Option, dated as of March 15, 1993, by and
between the Company and each of the seven directors thereof. (1) Exhibit
10.28
10.13 Agreement of Limited Partnership of EH Properties, L.P., ("EH
Properties"), a Delaware limited partnership, dated as of March 25,
1994, by and between the Company, as general partner, and Horne, as
limited partner. (2) Exhibit 10.37
10.14 Partnership Contribution Closing Agreement dated as of March 28, 1994,
by and between Horne, the Company, and EH Properties. (8) Exhibit 10.38
10.15 1994 Director's Stock Plan of the Company. (9) 4.1
10.16 Form of Stock Option Agreement under the 1994 Director's Stock Plan of
the Company. (9) Exhibit 4.2
19
20
10.17 Master Agreement, dated as of January 1, 1995, by and among the Company
and the limited partnerships named therein (the "Tricor Partnerships").
(8) Exhibit 10.45
10.18 Closing Memorandum, dated as of January 20, 1995, by and among the
Company and the Tricor Partnerships. (8) Exhibit 10.46
10.19 Agreement, dated as of January 20, 1995, by and among the Company and
the Tricor Partnerships. (8) Exhibit 10.47
10.20 Amended and restated agreement of limited partnership of Excel Realty
Partners, L.P., a Delaware limited partnership ("ERP"), dated as of June
25, 1997. (13)
10.21 Contribution Agreement by and between each of the partnerships named
therein and ERP. (3) Exhibit 10.32
10.22 Revolving Credit Agreement, dated as of June 12, 1997, among the
Company, BankBoston, N.A., the Other Banks Which May Become Parties to
The Agreement, and BankBoston, N.A. as agent. (12) Exhibit 10.1
10.23 Contribution Agreement dated as of June 20, 1997, among ERP, Briggsmore
Plaza Co., a California partnership, G&H Associates, a California
partnership, Montebello Plaza Co., a California partnership, and
Paradise Plaza Co., a California Partnership. (11) Exhibit 10.01
21.1 Subsidiaries of the Company. (10)
23.1 Consent of Coopers & Lybrand L.L.P. (13)
27.1 Financial data schedules. (13)
- ----------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-11, File No. 33-63160, filed with the Commission on May 21, 1993,
as amended, in which this exhibit bore the same number, unless otherwise
indicated.
(2) Incorporated by reference to the Company's report on Form 8-K dated
February 7, 1997, in which this exhibit bore the same number, unless
otherwise indicated.
(3) Incorporated by reference to the Company's report on Form 8-K dated
January 14, 1998, in which this exhibit bore the same number, unless
otherwise indicated.
(4) Incorporated by reference to the Company's Registration Statement on
Form S-3 File No. 33-59195, filed with the Commission on May 9, 1995, as
amended, in which this exhibit bore the same number, unless otherwise
indicated.
(5) Incorporated by reference to the Company's Registration Statement on
Form S-3, file No. 333-24615, filed with the Commission on April 4,
1997, as amended, in which this exhibit bore the same number, unless
otherwise indicated.
(6) Incorporated by reference to the Company's report on Form 8-K dated July
3, 1997, in which this exhibit bore the same number, unless otherwise
indicated.
(7) Incorporated by reference to the Company's Proxy Statement dated April
1, 1996 relating to the 1996 Annual Meeting of Stockholders of the
Company, in which this exhibit bore the same number, unless otherwise
indicated.
(8) Incorporated by reference from the Company's report on Form 10-K dated
March 13, 1995, in which this exhibit bore the same number, unless
otherwise indicated.
(9) Incorporated by reference to the Company's Registration Statement on
Form S-8, file No. 333-02329, filed with the Commission on April 8,
1996, in which this exhibit bore the same number, unless otherwise
indicated.
(10) Incorporated by reference from the Company's report on Form 10-K dated
March 13, 1996, as amended, in which this exhibit bore the same number,
unless otherwise indicated.
(11) Incorporated by reference from the Company's report on Form 8-K dated
July 3, 1997, as amended, in which this exhibit bore the same number,
unless otherwise indicated.
(12) Incorporated by reference to the Company's report on Form 8-K dated
September 18, 1997, in which this exhibit bore the same number, unless
otherwise indicated.
(13) Filed herewith.
20
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EXCEL REALTY TRUST, INC.
DATE: March 23, 1998 By: /s/ Gary B. Sabin
-----------------------------
GARY B. SABIN
President and Chief Executive
Officer
DATE: March 23, 1998 By: /s/ David A. Lund
-----------------------------
DAVID A. LUND
Chief Financial 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 and
in the capacities and on the dates indicated.
/s/ Gary B. Sabin March 23, 1998
- ---------------------------------- -----------------------------
GARY B. SABIN, Director, Date
President, Chief Executive Officer
and Chairman of the Board
/s/ Richard B. Muir March 23, 1998
- ---------------------------------- -----------------------------
RICHARD B. MUIR, Director Date
and Executive Vice President
/s/ Boyd A. Lindquist March 23, 1998
- ---------------------------------- -----------------------------
BOYD A. LINDQUIST, Director Date
/s/ D. Charles Marston March 23, 1998
- ---------------------------------- -----------------------------
D. CHARLES MARSTON, Director Date
/s/ Robert E. Parsons, Jr. March 23, 1998
- ---------------------------------- -----------------------------
ROBERT E. PARSONS, JR., Director Date
/s/ Bruce A. Staller March 23, 1998
- ---------------------------------- -----------------------------
BRUCE A. STALLER, Director Date
/s/ John H. Wilmot March 23, 1998
- ---------------------------------- -----------------------------
JOHN H. WILMOT, Director Date
21
22
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
----------
PAGE
----
1. CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants................................................F-2
Consolidated Balance Sheets
December 31, 1997 and 1996....................................................F-3
Consolidated Statements of Income
Years Ended December 31, 1997, 1996 and 1995..................................F-4
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1997, 1996 and 1995..................................F-5
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995..................................F-6
Notes to Consolidated Financial Statements.......................................F-7
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1997, 1996 and 1995.................................F-20
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1997............................................................F-21
F-1
23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Excel Realty Trust, Inc.
We have audited the consolidated financial statements and the financial
statement schedules of Excel Realty Trust, Inc. and subsidiaries as listed in
item 14(a) of this Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Excel
Realty Trust, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.
COOPERS & LYBRAND, L.L.P.
San Diego, California
March 13, 1998
F-2
24
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
----------
1997 1996
----------- -----------
ASSETS
Real estate:
Land $ 307,995 $ 156,060
Buildings 617,523 323,418
Accumulated depreciation (33,936) (21,976)
----------- -----------
Net real estate 891,582 457,502
Cash 18,426 5,038
Escrow and other deposits 20,814 625
Accounts receivable, less allowance for bad debts of
$1,896 and $1,608 in 1997 and 1996, respectively 4,577 2,917
Notes receivable - affiliates 90,124 57,716
Notes receivable - other 27,953 26,026
Interest receivable 12,867 2,579
Loan acquisition costs 2,993 1,775
Other assets 6,861 4,450
----------- -----------
$ 1,076,197 $ 558,628
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable $ 243,664 $ 157,716
Senior notes payable 75,000 --
Notes payable 168,894 81,032
Capital leases 26,850 --
Accounts payable and accrued liabilities 10,135 4,738
Deferred rental income 2,662 2,023
Other liabilities 4,490 465
----------- -----------
Total liabilities 531,695 245,974
----------- -----------
Minority interest in partnership 41,986 --
----------- -----------
Commitments and contingencies -- --
Stockholders' equity:
8 1/2% Series A Cumulative Convertible Preferred stock, $0.01 par value,
10,000,000 shares authorized, 4,600,000 and 0 shares issued and
outstanding in
1997 and 1996, respectively 46 --
Common stock, $.01 par value, 100,000,000 shares authorized,
20,999,634 and 18,231,089 shares issued and outstanding
in 1997 and 1996, respectively 210 182
Additional paid-in capital 507,866 324,229
Accumulated distributions in excess of net income (5,606) (11,757)
----------- -----------
Total stockholders' equity 502,516 312,654
----------- -----------
$ 1,076,197 $ 558,628
=========== ===========
The accompanying notes are an integral part of the
financial statements.
F-3
25
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------
1997 1996 1995
---------- ---------- ----------
Revenues:
Rental revenue $ 72,941 $ 47,892 $ 51,453
Expense reimbursements 10,171 4,589 3,776
Interest 16,381 6,731 3,150
Other 5,965 3,923 991
---------- ---------- ----------
Total revenue 105,458 63,135 59,370
---------- ---------- ----------
Expenses:
Interest 23,991 19,450 22,458
Depreciation and amortization 11,621 7,487 6,933
Property taxes 6,002 2,765 2,877
Repairs and maintenance 4,388 1,865 1,861
Other property expenses 3,633 2,797 3,230
Master lease -- 351 4,681
General and administrative 5,046 2,847 2,821
---------- ---------- ----------
Total expenses 54,681 37,562 44,861
---------- ---------- ----------
Income before real estate impairment and sales,
minority interest and other items 50,777 25,573 14,509
Gain (loss) on sale of real estate 1,264 (933) 3,683
Impairment of real estate (741) (844) --
Minority interest in income of partnership (816) -- --
Other items (1,522) -- --
---------- ---------- ----------
Net income $ 48,962 $ 23,796 $ 18,192
========== ========== ==========
Basic net income per share $ 2.06 $ 1.66 $ 1.51
========== ========== ==========
Diluted net income per share $ 1.97 $ 1.62 $ 1.51
========== ========== ==========
The accompanying notes are an integral part of the
financial statements.
\
F-4
26
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
----------
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DISTRIBUTIONS TOTAL
------------------------ ------------------------ PAID-IN IN EXCESS OF STOCKHOLDERS'
NUMBER AMOUNT NUMBER AMOUNT CAPITAL NET INCOME EQUITY
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at January 1, 1995 -- $ -- 10,883,570 $ 109 $ 175,702 $ (11,913) $ 163,898
Issuance of common stock -- -- 2,287,783 23 45,641 -- 45,664
Selling expenses -- -- -- -- (2,812) -- (2,812)
Net income -- -- -- -- -- 18,192 18,192
Distributions -- -- -- -- -- (16,264) (16,264)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1995 -- -- 13,171,353 132 218,531 (9,985) 208,678
Issuance of common stock -- -- 5,059,736 50 110,543 -- 110,593
Selling expenses -- -- -- -- (4,845) -- (4,845)
Net income -- -- -- -- -- 23,796 23,796
Distributions -- -- -- -- -- (25,568) (25,568)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996 -- -- 18,231,089 182 324,229 (11,757) (312,654)
Issuance of preferred stock 4,600,000 46 -- -- 114,954 -- 115,000
Issuance of common stock -- -- 2,768,545 28 75,846 -- 75,874
Selling expenses -- -- -- -- (7,163) -- (7,163)
Net income -- -- -- -- -- 48,962 48,962
Distributions -- -- -- -- -- (42,811) (42,811)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1997 4,600,000 $ 46 20,999,634 $ 210 $ 507,866 $ (5,606) $ 502,516
========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral
part of the financial statements.
F-5
27
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
----------
1997 1996 1995
--------- --------- ---------
Cash flows from operating activities:
Net income $ 48,962 $ 23,796 $ 18,192
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation 11,609 7,482 6,929
Equity in earnings of affiliates (3,792) (1,254) (93)
(Gain) loss on sale of real estate (1,264) 933 (3,683)
Amortization of loan costs and leasing commissions 1,081 1,235 1,968
Provision for bad debts 959 1,008 445
Loss on sale of interest rate lock 896 -- --
Minority interest in income of partnership 816 -- --
Impairment of real estate 741 844 --
Loan costs written off 664 -- 4,453
Change in accounts receivable (2,253) (1,642) (1,157)
Change in other assets (11,636) (2,612) (1,750)
Change in accounts payable and accrued liabilities 3,117 (1,084) 2,213
Change in other liabilities 2,653 (626) 1,378
--------- --------- ---------
Net cash provided by operating activities 52,553 28,080 28,895
--------- --------- ---------
Cash flows from investing activities:
Real estate acquisitions and building improvements (259,721) (39,731) (26,281)
Advances for notes receivable (82,022) (78,224) (36,881)
Principal payments on notes receivable 23,872 2,335 23,130
Proceeds from real estate sales 11,214 4,741 29,397
Escrow and other deposits paid (23,637) (3,595) (17,146)
Escrow and other deposits collected 3,432 17,876 4,751
Other 355 398 (5,395)
--------- --------- ---------
Net cash used in investing activities (326,507) (96,200) (28,425)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from mortgages and notes payable 363,607 71,256 105,253
Principal payments of mortgages and notes payable (209,959) (84,032) (118,516)
Issuance of preferred stock 115,000 -- --
Issuance of common stock 74,641 105,911 44,451
Distributions paid (42,811) (25,568) (20,949)
Selling and offering costs (7,163) (4,845) (2,812)
Minority interest distributions and redemptions (2,556) -- --
Loan costs paid (2,521) (129) (2,216)
Other (896) 753 --
--------- --------- ---------
Net cash provided by financing activities 287,342 63,346 5,211
--------- --------- ---------
Net increase (decrease) in cash 13,388 (4,774) 5,681
Cash at beginning of year 5,038 9,812 4,131
--------- --------- ---------
Cash at end of year $ 18,426 $ 5,038 $ 9,812
========= ========= =========
The accompanying notes are an integral part
of the financial statements.
F-6
28
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Excel Realty Trust, Inc. (the "Company") was formed in 1985 and subsequently
reincorporated as a Maryland corporation. The Company is in the business of
purchasing and operating commercial real estate The Company is operated as a
self-administered, self-managed real estate investment trust (REIT).
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and all significantly owned
partnerships. All significant intercompany accounts have been eliminated in
consolidation.
On April 1, 1997, the Company began consolidating the accounts of Excel
Realty Partners, L.P., a Delaware limited partnership ("ERP"), when the
Company converted its loans into an equity investment in ERP. Prior to April
1, 1997, the Company accounted for ERP on the equity method of accounting.
The Company uses the equity method to account for its investment in ERT
Development Corporation, a Delaware corporation ("EDV") (Note 4).
INCOME TAXES
The Company has elected to be treated as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended. Under these provisions,
the Company and its subsidiaries will not be subject to federal income tax if
95% of its real estate investment trust taxable income (before dividends paid
deduction) is distributed to shareholders and certain gross income, asset
diversification, share ownership and disclosure requirements are met.
Accordingly, no provision for federal income taxes is included in the
accompanying consolidated financial statements.
REAL ESTATE
Land, buildings and building improvements are recorded at cost. Depreciation
is computed using the straight-line method over estimated useful lives of 40
years for buildings and 2 to 40 years for building improvements. Expenditures
for maintenance and repairs are charged to expense as incurred and
significant renovations are capitalized.
The Company assesses whether there has been a permanent impairment in the
value of its real estate by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's
ability to pay rent under the terms of the lease. If a property is leased at
a significantly lower rent, the Company may recognize a permanent impairment
loss if the income stream is not sufficient to recover its investment. Such
losses have been determined as the difference between the carrying value and
the fair value of the property and are included in the Consolidated
Statements of Income.
F-7
29
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DEFERRED LEASING AND LOAN ACQUISITION COSTS
Costs incurred in obtaining tenant leases and long-term financing are
amortized to other property expense and interest expense, respectively, on
the straight-line method over the terms of the related leases or debt
agreements.
REVENUE RECOGNITION
Base rental revenue is recognized on the straight-line basis, which averages
minimum rents over the terms of the leases. Certain of the leases provide for
additional rental revenue by way of percentage rents to be paid based upon
the level of sales achieved by the lessee. These percentage rents are
recorded on the accrual basis and are included on the Consolidated Statements
of Income in rental revenue. The leases also typically provide for tenant
reimbursement of common area maintenance and other operating expenses which
are included in the accompanying Consolidated Statements of Income as expense
reimbursements.
NET INCOME PER COMMON SHARE
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings Per Share effective December 31, 1997.
SFAS No. 128 requires the presentation of basic and diluted earnings per
share. Basic EPS is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS is computed giving effect to all dilutive potential
common shares that were outstanding during the period. Dilutive potential
common shares consist of the incremental common shares issuable upon the
conversion of convertible preferred stock (using the "if converted" method),
exercise of stock options and warrants and potential conversion of ERP
limited partner units for all periods. All prior period earnings per share
amounts have been restated to comply with SFAS No. 128 (Note 9).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated financial
statements for the years ended December 31, 1996 and 1995 in order to conform
with the current period's presentation.
F-8
30
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
2. REAL ESTATE:
ACQUISITIONS
In 1997, the Company acquired 27 shopping centers located in California (12),
Florida (3), Arizona (2), Pennsylvania (2), Tennessee (2), Colorado, Georgia,
Nevada, North Carolina, South Carolina, and Texas. The Company also purchased
buildings leased to single tenants, Winn Dixie and Kmart, in Tennessee and
Florida, respectively, an out-parcel in Minnesota and the remaining interest
of a property owned in Tennessee. The total cost of these properties was
approximately $365,919,000. The Company assumed mortgage debt of $34,042,000
and capital leases of $26,850,000 in the above transactions. In January 1998,
the Company acquired a shopping center located in California for
approximately $9,500,000 and two single tenant properties under construction
located in Colorado. The cost of these two properties after construction is
expected to total approximately $50,000,000. In March 1998, the Company
acquired a shopping center located in California for approximately
$41,000,000.
In 1996, the Company acquired three shopping centers in North Carolina, two
shopping centers in Georgia, one shopping center in Arizona and a shopping
center in Utah. The total cost of the properties was $93,190,000 of which the
Company assumed $43,332,000 in mortgage debt.
SALES
In 1997, the Company sold five single tenant properties for proceeds of
$11,214,000. A net gain of $1,264,000 was recognized on the sales. The
Company sold four single-tenant properties in 1996. The net sales price of
these properties totaled $4,741,000 and the Company recognized a $933,000 net
loss.
IMPAIRMENT OF REAL ESTATE
In accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," the Company has written
down the value of dark single-tenant properties by $741,000 in 1997 and
$844,000 in 1996, to their estimated fair value based upon current market
data. Another property was written down in the second quarter of 1996 by
$1,246,000 but was reclassified as part of the net loss on sale of real
estate when it was sold in the third quarter of 1996.
REAL ESTATE HELD FOR SALE
At December 31, 1997, the Company has a property with a book value of
$14,702,000 held for sale/redevelopment in Arizona. Depreciation expense is
no longer being charged to the property and costs to hold the property until
sale are being capitalized. This property was transferred to Excel Legacy
Corporation ("Legacy") in March 1998 (Note 4).
ENVIRONMENTAL MATTERS
Soil and groundwater contamination exists at Carmen Plaza in Camarillo,
California, Cudahy Plaza in Cudahy, California, and Bristol Plaza in Santa
Ana, California. Environmental professionals retained by the Company estimate
that the total, cumulative cost of remediation for these properties will be
approximately $1.8 million to $5.5 million. In connection with each of these
properties, the Company has entered into a remediation and indemnity
agreement, which obligates the prior owner of the properties (including in
some cases, principals of the prior owner) to perform the remediation and to
indemnify the Company for any losses it may suffer because of the
contamination or remediation. Although there can be no assurance that the
remediation estimates of the
F-9
31
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
2. REAL ESTATE, CONTINUED:
environmental professionals are accurate or that the prior owners will
perform their obligations under the remediation and indemnity agreements, the
Company does not expect the environmental conditions at these properties to
have a material adverse effect on the Company.
The Company has identified asbestos minerals relating to spray-applied
fireproofing materials in Clearwater Mall in Clearwater, Florida which was
acquired by the Company in December 1997. Environmental professionals
retained by the Company estimate that the total cumulative cost of
remediation for this property will be approximately $3.2 million. The
estimated cost of this remediation, which was capitalized as part of the
acquisition price of this property, is included in other liabilities in the
Company's Consolidated Balance Sheet at December 31, 1997.
MASTER LEASE AND OPTION AGREEMENT
In 1995, the Company entered into master lease and option agreements with
respect to eleven shopping centers. Under the master leases, the Company
received all cash flow in excess of the master lease expense which included
lease payments to the lessor and interest payments from debt service. All of
the rental revenue and related operating expenses of these properties have
been included in the Company's Consolidated Statements of Income. In 1996 and
1995, the Company purchased ten of the properties under the option agreements
and terminated the master lease and purchase option on the one remaining
property. Upon purchase of these properties, the master leases were canceled.
3. NOTES RECEIVABLE:
The Company had the following notes receivable at December 31, 1997 and 1996:
1997 1996
-------- --------
(IN THOUSANDS)
Notes from EDV, interest at 14% per annum, collateralized
by EDV assets. Due on demand $ 90,124 $ 39,786
Notes from ERP, interest at 12% per annum, collateralized
by real estate. Converted to equity in April 1997 -- 17,930
Notes from development companies, monthly interest
from 10% - 14% per annum. Maturity dates vary depending
upon the completion or sale of certain properties 15,599 15,763
Note from a development company, interest at 25% compounded monthly,
payable in Canadian dollars
Due May 2003 11,235 9,504
Other 1,119 759
-------- --------
Total $118,077 $ 83,742
======== ========
Interest and principal payments from EDV are primarily received upon the
completion of development projects. Interest receivable from EDV was
$7,628,000 and $879,000 at December 31, 1997 and 1996, respectively.
F-10
32
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
3. NOTES RECEIVABLE, CONTINUED:
The Company has made loans totaling $16,050,000 Canadian dollars ($11,235,000
U.S. dollars at December 31, 1997) to a Canadian company which used the
proceeds to acquire a 50% joint venture interest in a mixed-use commercial
building known as "Atrium on Bay", and an adjacent land parcel in Toronto,
Canada. The loan is collateralized by the Canadian company's interest in the
building.
In 1997, the Company established $25,680,000 in credit facilities to certain
developers. The total outstanding amounts on the credit facilities of
$14,049,000 carry interest at 11% to 12%, are collateralized by real estate,
and are payable on the earlier of the sale of real estate or seven years. In
1997, the Company recognized $720,000 in loan fees related to the credit
facilities.
4. INVESTMENTS:
EXCEL REALTY PARTNERS, L.P.
In 1995, ERP was formed to own and manage certain real estate properties. The
Company is the sole general partner of ERP. The general partner is entitled
to receive 99% of all net income and gains before depreciation, if any, after
the limited partners receive their stipulated distributions. On April 1,
1997, loans and related interest receivable in the amount of $23,427,000 from
the Company to ERP were converted into limited partnership interests in ERP.
Upon this transaction, the Company began consolidating the accounts of ERP
which were previously accounted for on the equity method. Properties have
been contributed to ERP in exchange for limited partnership units (which may
be redeemed at stipulated prices for cash or the issuance of the Company
common shares at the Company's option) and cash. At December 31, 1997, there
were approximately 2,833,000 limited partner units outstanding of which the
Company owned approximately 1,152,000 units. Quarterly distributions
approximate $882,000 for limited partner units held by third parties.
PRO FORMA FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following Company actual and unaudited pro forma condensed consolidated
balance sheets and income statements have been presented as if the Company had
converted its notes and related interest receivable from ERP on December 31,
1996 and January 1, 1995 respectively. The unaudited pro forma condensed
consolidated financial statements are not necessarily indicative of what the
actual financial position would have been at December 31, 1996, or what actual
results of operations of the Company would have been had the transaction
actually occurred on January 1, 1996, nor do they purport to represent the
actual results of operations of the Company for future periods.
DECEMBER 31,
---------------------------
1997 1996
---------- ----------
(ACTUAL) (PRO FORMA)
Net real estate assets $ 891,582 $ 537,485
Other assets 184,615 82,839
---------- ----------
$1,076,197 $ 620,324
========== ==========
Mortgages payable and notes payable $ 514,408 $ 293,375
Other liabilities 17,287 8,396
---------- ----------
Total liabilities 531,695 301,771
Minority interest 41,986 5,899
Stockholders' equity 502,516 312,654
---------- ----------
$1,076,197 $ 620,324
========== ==========
F-11
33
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
4. INVESTMENTS, CONTINUED:
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
-------- -------- --------
STATEMENTS OF INCOME (PRO FORMA)
Rental revenues and reimbursements $ 85,914 $ 59,482 $ 55,935
Interest and other income 21,391 8,242 3,928
Interest expense (25,036) (22,256) (22,757)
Depreciation and amortization (11,957) (8,358) (7,022)
Property and other expenses (19,745) (11,906) (15,572)
Real estate sales and impairment 523 (1,777) 3,683
Minority interest in income of partnership (849) (164) (91)
Other items (1,522) -- --
-------- -------- --------
Net income $ 48,719 $ 23,263 $ 18,104
======== ======== ========
Basic net income per share $ 2.05 $ 1.63 $ 1.50
======== ======== ========
Diluted net income per share $ 1.96 $ 1.58 $ 1.50
======== ======== ========
ERT DEVELOPMENT CORPORATION
In 1995, EDV was organized to finance, acquire, develop, hold and sell real
estate in the short-term for capital gains and/or receive fee income. The
Company owns 100% of the outstanding preferred shares of EDV. The preferred
shares receive 95% of the dividends, if any. Cash requirements to facilitate
EDV's transactions have primarily been obtained through borrowings from the
Company. Summary unaudited financial information for EDV is as follows (in
thousands):
DECEMBER 31,
-----------------------
1997 1996
-------- --------
BALANCE SHEETS
Notes receivable from developers, interest at 10% to 20% $ 79,400 $ 39,000
Net real estate and other assets 25,500 2,500
-------- --------
Total assets $104,900 $ 41,500
======== ========
Notes payable to Excel Realty Trust, Inc. $ 90,100 $ 39,800
Other liabilities 11,200 1,500
-------- --------
Total liabilities 101,300 41,300
Total stockholders' equity 3,600 200
-------- --------
Total liabilities and stockholders' equity $104,900 $ 41,500
======== ========
TWELVE MONTH PERIOD INCEPTION TO
ENDED DECEMBER 31, DECEMBER 31,
1997 1996 1995
-------- -------- --------
STATEMENTS OF INCOME
Total revenues $ 16,200 $ 6,500 $ 2,900
Interest expense to Excel Realty Trust, Inc. (9,200) (2,500) (1,700)
Development and other fees paid to Excel Realty Trust, Inc. (2,000) (2,400) (300)
Other expenses (1,600) (1,700) (600)
-------- -------- --------
Net income (loss) $ 3,400 $ (100) $ 300
======== ======== ========
EDV's receivables include loans of approximately $15,100,000 made to a joint
venture partnership under a loan commitment related to a retail development
project in Florida. In 1997, the joint venture obtained a construction loan
which is expected to total approximately $85,000,000 of which $30,000,000 is
guaranteed by the Company.
F-12
34
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
4. INVESTMENTS, CONTINUED:
EXCEL LEGACY CORPORATION
In December 1997, the Company filed a registration statement with the
Securities and Exchange Commission with respect to the Company's intention to
spin off Excel Legacy Corporation ("Legacy"), a newly-formed corporation
which is a wholly-owned subsidiary of the Company (the "Spin-off"). Legacy
was organized to create and realize value by identifying and making
opportunistic real estate investments which are not restricted by REIT tax
laws or influenced by the Company's objectives of increasing cash flows and
maintaining certain leverage ratios. Prior to the Spin-off, EDV will transfer
four notes receivable, a leasehold interest in a parcel of land, an office
building and a single tenant building to the Company for a total
consideration of $33,300,000. The Company will reduce the note receivable
from EDV. The Company will contribute the above assets from EDV together with
ten single tenant properties owned by the Company with a December 31, 1997
book value of approximately $46,200,000 and a property held for
sale/redevelopment (Note 2) to Legacy, in exchange for 23,160,757 common
shares of Legacy, assumption of debt by Legacy on the ten single tenant
properties of approximately $34,200,000, and issuance of a note payable from
Legacy to the Company in the amount of $20,600,000. The Spin-off is expected
to take place on or about March 31, 1998 through a dividend distribution to
the Company's common stockholders, of all Legacy common stock held by the
Company. The distribution will consist of one share of Legacy common stock
for each share of the Company's common stock held on the record date of March
2, 1998. Upon completion of the Spin-off, Legacy will cease to be a
wholly-owned subsidiary of the Company and begin operating as an independent
public company. The Company's executive officers will continue to manage the
Company's operations as well as supervise the management of Legacy.
5. MORTGAGES PAYABLE:
The Company had the following mortgages payable at December 31, 1997 and
1996:
1997 1996
-------- --------
(IN THOUSANDS)
Mortgage notes at 4.15% to 10%, payable in installments through
2018 (monthly payments at December 31, 1997 of $2,265),
collateralized by real estate and an assignment of rents:
Insurance companies $125,377 $ 87,530
Banks 77,467 41,656
Bonds 40,820 28,530
-------- --------
Total mortgages payable $243,664 $157,716
======== ========
The principal payments required to be made on mortgages payable are as follows
(in thousands):
YEAR
1998 $ 15,292
1999 51,322
2000 23,514
2001 22,655
2002 7,405
Thereafter 123,476
--------
$243,664
========
Mortgages of $59,477,000 are fully amortizing with the final monthly payments
to be made between the years 2004 and 2018.
F-13
35
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
6. SENIOR NOTES PAYABLE:
In 1997, the Company issued $75,000,000 of 6.875% Senior Notes due 2004 (the
"Senior Notes"). The effective rate on the Senior Notes is 6.982% (6.875%
coupon with proceeds before the underwriting discount of $74,561,000).
Interest on the Notes is payable semi-annually in arrears on April 15 and
October 15 each year. Net proceeds were used to repay outstanding amounts on
the credit facility and for general corporate purposes.
7. NOTES PAYABLE:
The Company had the following notes payable at December 31, 1997 and 1996:
1997 1996
-------- --------
(IN THOUSANDS)
Unsecured credit agreement of $150,000, interest at
LIBOR + 1.20% (7.20% at December 31, 1997) $148,572 $ 67,000
Unsecured loan payable to a financial institution, interest
at 8.75% (converted to LIBOR + 1.20% in January 1998) 19,926 --
Term loan payable to a financial institution, interest at
LIBOR + 1.75%, repaid in 1997 -- 10,000
Line of credit payable to a financial institution,
repaid in 1997 -- 3,923
Other 396 109
-------- --------
Total notes payable $168,894 $ 81,032
======== ========
The Company has a revolving credit facility of up to $150,000,000 in
unsecured advances from a group of seven banks. The facility expires December
1999 and bears an interest rate based upon the credit rating of the Company.
In August 1997, the Company received prospective investment credit ratings of
Baa3 and BBB- from Moody's Investor Service and Standard and Poor's
Corporation, respectively, on future senior debt securities issued from the
Company's $500 million shelf registration. Accordingly, the interest rate on
the credit facility is 1.2% over LIBOR.
In July 1997, the Company bought an interest rate lock related to a proposed
Senior Note Offering. The interest rate lock was sold when the Senior Note
Offering was postponed until October 1997 and a Common Stock Offering was
completed instead. The Company recognized a $896,000 loss on the sale which
is included in other items on the Consolidated Statements of Income.
8. CAPITAL LEASES:
In 1997, the Company acquired a leasehold interest in three shopping centers
in California ("Master Leased Centers"). The term of the leases are
thirty-four years and the monthly lease payment is $201,000. In addition, the
Company has purchased the option to acquire fee title to the Master Leased
Centers, exercisable at various times during the terms of the respective
leases. The owner of one of the Master Leased Centers has the option to
require the Company to purchase the property after the occurrence of certain
events. There are no principal payments due on the leases until a Master
Leased Center is acquired.
F-14
36
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
9. STOCKHOLDERS' EQUITY:
EQUITY OFFERINGS
In January 1998, the Company issued 6,300,000 depositary shares each
representing 1/10 of a share of 8 5/8% Series B cumulative redeemable
preferred stock (the "Preferred B Shares"). The offering price was $25.00 per
depositary share with an annual dividend equal to $2.15625, payable
quarterly. Net proceeds from the offering totaled $152,538,000.
In July 1997, the Company issued 2,500,000 shares of common stock with a
market price of $28.00 per share for net proceeds of $26.6875 per share or
$66,719,000. In February 1997, the Company issued 4,600,000 shares of 8 1/2%
Series A Cumulative Convertible Preferred Stock at $25.00 per share (the
"Preferred A Shares") with net proceeds totaling approximately $111,400,000.
The Preferred A Shares are entitled to an annual distribution of $2.125 per
share and are convertible into common shares at a price of $26.06 per share.
On or after February 5, 2002, the Preferred A Shares are redeemable by the
Company at $25.00 per share in either shares of common stock or cash at the
Company's election. The Preferred A Shares rank senior to the Company's
common stock and are on a parity with the Preferred B Shares with respect to
the payment of dividends and amounts payable upon liquidation, dissolution or
winding down of the Company. In March 1998, 2,211,120 Preferred A Shares were
converted into 2,121,183 shares of the Company's common stock.
In June 1996, the Company issued 1,725,000 shares of common stock at $20.625
per share and in December 1996, the Company issued an additional 2,990,000
shares of common stock at $22.875 per share.
Proceeds from the above offerings were used to repay debt, acquire
properties, make loans to EDV and for general corporate purposes.
DISTRIBUTIONS
In 1997, distributions of $0.46, $0.46, $0.50, $0.50 were declared to common
stockholders for each of the four quarters, respectively. In 1996,
distributions of $0.445, $0.445, $0.46 and $0.46 were declared for each of
the four quarters, respectively. In April 1995, the Company adopted a policy
of declaring distributions to stockholders of record on the first day of the
succeeding quarter, instead of the last day of the current quarter. The
payment date of 15 days following each quarter remained unchanged. As such,
in 1995, distributions of $0.43 per share were declared on March 31 and paid
on April 15 and distributions of $0.445 per share were declared on July 1 and
October 1 and paid on July 15 and October 15, respectively. In 1997,
distributions of $0.32, $0.53, $0.53 ($2.125 per annum) were paid in April,
July, and October 1997, respectively, on the Preferred A Shares.
For the years ended December 31 1997, 1996 and 1995, approximately 0%, 9%,
and 28%, respectively, of the distributions received by shareholders were
considered to be a return of capital for tax purposes.
OPTIONS AND WARRANTS
The Company has adopted the 1993 Stock Option Plan (the "1993 Stock Plan")
for executive officers and other key employees of the Company and its
subsidiaries which was amended in 1996. In May 1994, the Company adopted the
Directors 1994 Stock Option Plan (the "1994 Stock Plan") for directors
options which was also amended in 1996.
F-15
37
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
9. STOCKHOLDERS' EQUITY, CONTINUED:
Options may be granted under the 1993 Stock Plan for a period through 2003
and under the 1994 Stock Plan through the year 2004. Options under these
plans are exercisable for 10 years from the date of grant. The exercise price
of stock options may not be less than 100% of the fair market value of the
stock on the date of grant. The aggregate number of shares issuable upon
exercise of options under the 1993 Stock Plan may not exceed 1,450,000 shares
and the aggregate number of shares issuable upon exercise of options under
the 1994 Stock Plan may not exceed 240,000 shares.
Stock option and warrant activity are summarized as follows:
WEIGHTED AVERAGE
OPTIONS/ EXERCISE PRICE
WARRANTS PER SHARE
-------- ---------
Outstanding at January 1, 1995 602,587 $19.15
Granted - 1995 148,250 $19.23
Exercised or expired - 1995 (106,453) $17.26
Granted - 1996 525,900 $21.96
Exercised - 1996 (31,332) $18.05
Granted - 1997 700,250 $30.60
Exercised or forfeited - 1997 (169,155) $19.81
------------
Outstanding December 31, 1997 1,670,047 $24.92
===========
The options and warrants expire at various dates through December 2007. Of
the options and warrants, 1,601,316 were issued to officers, directors or
affiliates of the Company. At December 31, 1997, options for 143,350 and
168,250 shares were available for granting under the 1993 Stock Plan and 1994
Stock Plan, respectively.
SFAS No. 123, Accounting for Stock-Based Compensation, requires either the
recording or disclosure of compensation cost for stock-based employee
compensation plans at fair value. The Company has adopted the disclosure-only
provisions of SFAS No. 123. Accordingly, no compensation costs have been
recognized by the Company.
Had compensation cost for the Company's two stock option plans been
recognized based on the fair value at the grant date for awards consistent
with the provisions of SFAS No. 123, the Company's net income in 1997 would
have been reduced by $1,618,000 from $48,962,000 ($2.06 per share basic, and
$1.97 per share - diluted) to $47,344,000 ($1.97 per share - basic, and $1.89
per share - diluted). In 1996 net income would have been reduced by $576,000,
from $23,796,000 ($1.66 per share - basic and $1.62 per share - diluted) to
$23,220,000 ($1.62 per share - basic and $1.58 per share - diluted) and in
1995, net income would have been reduced by $340,000, from $18,192,000 ($1.51
per share - basic and diluted) to $17,852,000 ($1.49 per share - basic and
diluted).
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997: dividend yield of 7.85%; expected
volatility of 18.22%; risk-free interest rate of 5.73% to 6.49%; and expected
lives of 4 to 5 years.
F-16
38
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
9. STOCKHOLDERS' EQUITY, CONTINUED:
DISTRIBUTION REINVESTMENT PLAN
The Company has adopted a distribution reinvestment plan (the "Plan"). Shares
purchased under the Plan will be, at the Company's discretion, either newly
issued shares of the Company, shares purchased in the open market or a
combination of the foregoing. Distributions may be invested in newly issued
shares at a 5% discount from the average closing price for the five trading
days prior to the distribution pay date or in shares purchased in the open
market without brokerage commissions or service charges.
EARNINGS PER SHARE (EPS)
In accordance with the disclosure requirements of SFAS No. 128 (Note 1), a
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (in thousands, except per share amounts).
1997 1996 1995
-------- -------- --------
BASIC EPS
NUMERATOR:
Net income $ 48,962 $ 23,796 $ 18,192
Preferred dividends (8,798) -- --
-------- -------- --------
$ 40,164 $ 23,796 $ 18,192
======== ======== ========
DENOMINATOR:
Weighted average of common shares outstanding 19,521 14,312 12,031
======== ======== ========
EARNINGS PER SHARE: $ 2.06 $ 1.66 $ 1.51
======== ======== ========
DILUTED EPS
NUMERATOR:
Net income $ 48,962 $ 23,796 $ 18,192
Preferred dividends (8,798) -- --
Adjustments for ERP third party units 601 (285) --
-------- -------- --------
Net income available to common shares $ 40,765 $ 23,511 $ 18,192
======== ======== ========
DENOMINATOR:
Weighted average of common shares outstanding 19,521 14,312 12,031
Effect of diluted securities:
Common stock options and warrants 252 44 7
ERP third party units 935 175 --
-------- -------- --------
20,708 14,531 12,038
======== ======== ========
EARNINGS PER SHARE: $ 1.97 $ 1.62 $ 1.51
======== ======== ========
10. FINANCIAL INSTRUMENTS AND CREDIT RISK:
Financial instruments which potentially subject the Company to concentrations
of risk consist principally of cash, accounts receivable and notes
receivable. The following fair value disclosure was determined by the
Company, using available market information and discounted cash flow analyses
as of December 31, 1997 and 1996. However, considerable judgement is
necessary to interpret market data and to develop the related estimates
F-17
39
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
10. FINANCIAL INSTRUMENTS AND CREDIT RISK, CONTINUED:
of fair value. Accordingly, the estimates presented are not necessarily
indicative of the amounts that the Company could realize upon disposition.
The use of different estimation methodologies may have a material effect on
the estimated fair value amounts. The Company believes that the carrying
values reflected in the Consolidated Balance Sheets at December 31, 1997 and
1996 approximates the fair values for cash, accounts receivable and payable,
notes receivable, variable-rate debt, and senior notes payable, and that the
market value of its real estate held for sale exceeds the carrying value. The
Company estimates that the fair values of its fixed-rate mortgage debt at
December 31, 1997 and 1996 is approximately $181,000,000 and $155,000,000,
respectively compared to carrying values of $170,000,000 and $153,000,000 on
the Company's books.
At December 31, 1997 the Company's largest and second largest tenant's
scheduled annual base rents ("ABR") account for approximately 10% and 9% of
the Company's total revenues, respectively. The Company's next three largest
tenant's ABR account for approximately 8% in total of the Company's revenues.
At December 31, 1997, the Company owned 148 properties located in 28 states.
There were 14 properties in California, 14 properties in North Carolina, 13
properties in Indiana, 12 properties in Arizona and 11 properties in Georgia.
Approximately 44% of the Company's ABR are derived from these five states.
11. STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE (IN THOUSANDS):
The amounts paid for interest during the years ended December 31, 1997, 1996
and 1995 were $21,334,000 $18,116,000 and $16,507,000, respectively.
In 1997, the Company acquired real estate and other assets of $116,232,000
without the use of cash by issuing $39,332,000 of ERP limited partner units,
assuming $43,385,000 of mortgages payable and $26,850,000 of capitalized
leases, retiring $3,104,000 of notes receivable and assuming $3,561,000 of
notes payable and other liabilities. On April 1, 1997, the Company began
consolidating the accounts of ERP when notes and related interest receivable
in the amount of $23,427,000 from the Company were converted into limited
partnership interests in ERP. Upon this transaction, ERP assets of
$81,600,000 (including cash of $355,000) and liabilities of $52,263,000 (net
of payables to the Company) were consolidated with the Company's accounts.
Also in 1997, the Company redeemed $1,196,000 of ERP limited partnership
units by issuing common stock.
In 1996, the Company acquired real estate and interests in partnerships of
$45,073,000 without the use of cash. The Company assumed $43,389,000 of
mortgage debt, net of other assets and liabilities, and issued $1,684,000 of
common stock. The Company also exchanged $2,947,000 in common stock to repay
mortgage debt. In 1995, the Company acquired real estate of $23,997,000
without the use of cash be assuming $22,784,000 of mortgages payable, net of
other assets and liabilities, and issued $1,213,000 of common stock.
12. MINIMUM FUTURE RENTALS:
The Company leases its shopping centers and single-tenant buildings to
tenants under noncancelable operating leases generally requiring the tenant
to pay a minimum rent adjusted by either (i) fixed increases, (ii) a
percentage of gross sales, or (iii) a CPI index. The leases generally either
(i) require the tenant to pay all expenses of operating the property such as
insurance, property taxes and structural repairs and maintenance, or (ii)
require the tenant to reimburse the Company for the tenant's share of real
estate taxes and other common area maintenance expenses.
F-18
40
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
12. MINIMUM FUTURE RENTALS, CONTINUED:
Minimum future rental revenue for the next five years for the commercial real
estate owned at December 31, 1997 and subject to noncancelable operating
leases is as follows (in thousands):
YEAR
----
1998 $ 95,562
1999 88,134
2000 81,729
2001 74,458
2002 67,358
Thereafter 588,208
13. RETIREMENT PLAN:
The Company has a 401(k) retirement plan (the "401(k) Plan") covering most of
the officers and employees of the Company. The 401(k) Plan permits
participants to contribute, until termination of employment with the Company,
up to a maximum of 15% of their compensation to the 401(k) Plan. In addition,
contributions of participants are matched by the Company in an amount equal
to 50% of the participant's contribution in Company stock (up to a maximum of
3% of such person's compensation) plus an annual discretionary contribution,
to be determined by the Board of Directors, based upon the performance of the
Company. For the years ended December 31, 1997, 1996 and 1995, the Company
incurred costs of $109,000, $77,000 and $46,000, respectively, in connection
with the 401(k) Plan.
14. NEW PRONOUNCEMENTS:
In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments in an Enterprise and Related Information and SFAS
No. 130, Comprehensive Income, which become effective in 1998. The Company
has determined that the adoption of these SFASs will not have a material
effect on the consolidated financial statements.
15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for 1997 and 1996 is as follows (in
thousands except per share amounts):
NET INCOME NET INCOME
TOTAL PER SHARE- PER SHARE-
REVENUES NET INCOME BASIC DILUTED
-------- ---------- ----- -------
1997:
First quarter $20,204 $10,310 $ 0.48 $ 0.46
Second quarter 23,461 11,191 0.47 0.46
Third quarter 27,360 12,646 0.50 0.48
Fourth quarter 34,433 14,815 0.59 0.56
1996:
First quarter $14,707 $ 5,858 $ 0.44 $ 0.44
Second quarter 15,327 4,094 0.31 0.31
Third quarter 15,906 6,899 0.46 0.45
Fourth quarter 17,195 6,945 0.43 0.41
F-19
41
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
----------
ADDITIONS DEDUCTIONS
---------- ----------
ACCOUNTS
BALANCE AT CHARGED TO RECEIVABLE BALANCE AT
BEGINNING BAD DEBT WRITTEN END OF
DESCRIPTION OF YEAR EXPENSE OFF YEAR
----------- ---------- ---------- ---------- ----------
Allowance for bad debts:
Year ended December 31, 1997 $ 1,608 $ 959 $ 671 $ 1,896
========== ========== ========== ==========
Year ended December 31, 1996 $ 726 $ 1,008 $ 126 $ 1,608
========== ========== ========== ==========
Year ended December 31, 1995 $ 318 $ 445 $ 37 $ 726
========== ========== ========== ==========
F-20
42
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO
INITIAL COST ACQUISITION
--------------------------- ----------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ------------ ---------- ------------- ---------- ------------
Sony Building
Burbank, CA $ -- $ 2,610 $ 2,610 $ -- $ --
Genetrix Building
Scottsdale, AZ -- 666 1,434 (14) --
Shopping Center
Mesa, AZ -- 2,394 3,132 (14) 258
Office Building
Stillwater, MN 354 175 525 -- 37
Kinder Care #1182
Kalamazoo, MI -- 170 397 -- --
Shopping Center
Phoenix, AZ -- 7,312 8,995 (56) 1,354
Shopping Center
Norton, VA -- 1,559 7,711 316 187
Shopping Center
Perry, GA 7,140 2,025 8,075 (9) 506
Shopping Center
Leesburg, FL -- 1,436 4,584 30 704
Shopping Center
Knoxville, TN 6,092 1,995 6,547 -- 12
Wal-Mart Building
Berlin, MI 1,624 680 1,586 -- --
Wal-Mart Building
Decateur, IN 2,416 1,011 2,359 -- --
Wal-Mart Building
Big Rapids, MI 2,340 1,052 2,455 (10) --
Wal-Mart Building
Wysomming. PA 4,710 2,118 4,942 -- --
Wal-Mart Building
Brighton, CO 2,377 1,069 2,494 -- --
Wal-Mart Building and Outparcels
Temple, TX 4,364 1,963 4,580 35 --
LIFE ON WHICH
GROSS AMOUNT AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
---------------------------------- ACCUMULATED INCOME
BUILDINGS AND TOTAL DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION LAND IMPROVEMENTS (a) (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- -------- ------------- -------- ------------ ------------ -------- --------------
Sony Building
Burbank, CA $ 2,610 $ 2,610 $ 5,220 $ 536 1988 1989-90 40 years
Genetrix Building
Scottsdale, AZ 652 1,434 2,086 252 1971 1990 40 years
Shopping Center
Mesa, AZ 2,380 3,390 5,770 694 1970 1990 40 years
Office Building
Stillwater, MN 175 562 737 95 1985 1991 40 years
Kinder Care #1182
Kalamazoo, MI 170 397 567 68 1990 1991 40 years
Shopping Center
Phoenix, AZ 7,256 10,349 17,605 1,923 1988 1991-92 40 years
Shopping Center
Norton, VA 1,875 7,898 9,773 1,051 1989 1992 40 years
Shopping Center
Perry, GA 2,016 8,581 10,597 1,088 1992 1992 40 years
Shopping Center
Leesburg, FL 1,466 5,288 6,754 921 1986 1992 40 years
Shopping Center
Knoxville, TN 1,995 6,559 8,554 514 1990 1992 40 years
Wal-Mart Building
Berlin, MI 680 1,586 2,266 200 1992 1992 40 years
Wal-Mart Building
Decateur, IN 1,011 2,359 3,370 297 1992 1992 40 years
Wal-Mart Building
Big Rapids, MI 1,042 2,455 3,497 309 1992 1992 40 years
Wal-Mart Building
Wysomming. PA 2,118 4,942 7,060 623 1992 1992 40 years
Wal-Mart Building
Brighton, CO 1,069 2,494 3,563 314 1992 1992 40 years
Wal-Mart Building and Outparcels
Temple, TX 1,998 4,580 6,578 577 1992 1992 40 years
(continued)
F-21
43
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------------------- --------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ------------ ---------- ------------- ---------- ------------
Wal-Mart Building
Wabash, IN 2,596 1,167 2,724 -- --
Mtn. Jacks #210303
Dearborn Heights, MI -- 378 1,134 73 135
Autoworks #125
Hastings, NE -- 105 332 24 45
Autoworks #138
Grand Island, NE -- 189 421 24 44
Kindercare #125
Indianapolis, IN -- 63 146 9 18
Kindercare #126
Indianapolis, IN -- 63 146 9 18
Kindercare #577
High Ridge, MO -- 60 238 13 26
Kindercare #162
Fenton, MO -- 59 235 13 25
Kindercare #128
Indianapolis, IN -- 90 211 14 25
Kindercare #134
Indianapolis, IN -- 90 211 14 25
Kindercare #132
Indianapolis, IN -- 63 146 9 18
DHG (Bellaire)
Houston, TX -- 74 110 -- --
DHG (Beechnut)
Houston, TX -- 103 155 -- --
Egghead Software
Maplewood, MN -- 172 258 -- --
United Artists
Pueblo, CO -- 247 576 37 70
Lowes Building
Terre Haute, IN 3,754 1,325 3,446 530 --
LIFE ON WHICH
GROSS AMOUNT AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
---------------------------------- ACCUMULATED INCOME
BUILDINGS AND TOTAL DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION LAND IMPROVEMENTS (a) (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- -------- ------------- -------- ------------ ------------ -------- --------------
Wal-Mart Building
Wabash, IN 1,167 2,724 3,891 343 1992 1992 40 years
Mtn. Jacks #210303
Dearborn Heights, MI 451 1,269 1,720 148 1980 1992 40 years
Autoworks #125
Hastings, NE 129 377 506 44 1988 1992 40 years
Autoworks #138
Grand Island, NE 213 465 678 54 1988 1992 40 years
Kindercare #125
Indianapolis, IN 72 164 236 19 1975 1992 40 years
Kindercare #126
Indianapolis, IN 72 164 236 19 1976 1992 40 years
Kindercare #577
High Ridge, MO 73 264 337 31 1980 1992 40 years
Kindercare #162
Fenton, MO 72 260 332 31 1977 1992 40 years
Kindercare #128
Indianapolis, IN 104 236 340 28 1976 1992 40 years
Kindercare #134
Indianapolis, IN 104 236 340 28 1976 1992 40 years
Kindercare #132
Indianapolis, IN 72 164 236 19 1976 1992 40 years
DHG (Bellaire)
Houston, TX 74 110 184 14 1985 1992 40 years
DHG (Beechnut)
Houston, TX 103 155 258 20 1985 1992 40 years
Egghead Software
Maplewood, MN 172 258 430 33 1987 1992 40 years
United Artists
Pueblo, CO 284 646 930 75 1977 1992 40 years
Lowes Building
Terre Haute, IN 1,855 3,446 5,301 391 1993 1992/1993 40 years
(continued)
F-22
44
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO
INITIAL COST ACQUISITION
------------------------- --------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ------------ ---------- ------------- ---------- ------------
Wal-Mart Building
Orland Hills, IL 6,139 2,631 6,140 -- --
Kmart Building
Albany, GA -- 1,033 1,918 (260) (482)
Kmart Building
DeSoto, TX -- 951 1,767 -- 152
Kmart Building
Omaha, NE -- 924 1,715 -- --
Kmart Building
Pine Bluff, AR -- 892 1,656 -- --
Kmart Building
Somerville, NJ -- 836 1,553 -- 4
Kmart Building
St. Charles, MD -- 936 1,738 (296) (365)
Kash & Karry Building
Brandon, FL -- 698 1,295 -- --
Kroger Building
Clearfield, PA -- 731 1,357 -- --
Kroger Building
East Albany, GA -- 639 1,186 -- --
Kroger Building
James Island, SC -- 722 1,340 -- --
Kroger Building
Missouri City, TX -- 790 1,466 -- 41
Kroger Building
Muscle Shoals, AL -- 817 1,517 -- --
Kroger Building
Ottawa, IL -- 902 1,674 -- --
Kroger Building
Scottsboro, AL -- 703 1,305 -- --
Payless Drug Building
Yuma, AZ -- 389 723 -- --
LIFE ON WHICH
GROSS AMOUNT AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
---------------------------------- ACCUMULATED INCOME
BUILDINGS AND TOTAL DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION LAND IMPROVEMENTS (a) (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- -------- ------------- -------- ------------ ------------ -------- --------------
Wal-Mart Building
Orland Hills, IL 2,631 6,140 8,771 735 1992 1993 40 years
Kmart Building
Albany, GA 773 1,436 2,209 210 1981 1993 40 years
Kmart Building
DeSoto, TX 951 1,919 2,870 252 1980 1993 40 years
Kmart Building
Omaha, NE 924 1,715 2,639 188 1981 1993 40 years
Kmart Building
Pine Bluff, AR 892 1,656 2,548 181 1981 1993 40 years
Kmart Building
Somerville, NJ 836 1,557 2,393 170 1982 1993 40 years
Kmart Building
St. Charles, MD 640 1,373 2,013 270 1981 1993 40 years
Kash & Karry Building
Brandon, FL 698 1,295 1,993 142 1982 1993 40 years
Kroger Building
Clearfield, PA 731 1,357 2,088 148 1982 1993 40 years
Kroger Building
East Albany, GA 639 1,186 1,825 130 1982 1993 40 years
Kroger Building
James Island, SC 722 1,340 2,062 147 1982 1993 40 years
Kroger Building
Missouri City, TX 790 1,507 2,297 161 1982 1993 40 years
Kroger Building
Muscle Shoals, AL 817 1,517 2,334 166 1982 1993 40 years
Kroger Building
Ottawa, IL 902 1,674 2,576 183 1982 1993 40 years
Kroger Building
Scottsboro, AL 703 1,305 2,008 143 1981 1993 40 years
Payless Drug Building
Yuma, AZ 389 723 1,112 79 1980 1993 40 years
F-23 (continued)
45
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- --------------------- ----------------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (a)
----------- ------------ -------- ------------- -------- ------------- -------- ------------- --------
Lucky Building
Phoenix, AZ -- 471 875 -- -- 471 875 1,346
Lucky Building
Coralville, IA -- 558 1,037 -- -- 558 1,037 1,595
Lucky Building
Decateur, IL -- 588 1,093 -- -- 588 1,093 1,681
Lucky Building
Dubuque, IA -- 744 1,383 -- -- 744 1,383 2,127
Lucky Building
Hobart, IA -- 617 1,145 -- -- 617 1,145 1,762
Lucky Building
Mesa, AZ -- 435 809 -- -- 435 809 1,244
Lucky Building
Michigan City, IN -- 511 948 -- -- 511 948 1,459
Lucky Building
Moline, IL -- 735 1,365 -- -- 735 1,365 2,100
Lucky Building
Peoria, IL -- 673 1,249 -- -- 673 1,249 1,922
Lucky Building
Pittsburgh, PA -- 862 1,601 -- -- 862 1,601 2,463
Lucky Building
Springfield, IL -- 582 1,081 -- -- 582 1,081 1,663
Lucky Building
Sterling, IL -- 744 1,382 -- -- 744 1,382 2,126
Kroger Building
Waterloo, IL -- 670 1,243 -- -- 670 1,243 1,913
Safeway Building
Muskogee, OK -- 906 1,683 -- -- 906 1,683 2,589
Safeway Building
Sherwood, AR -- 778 1,445 -- -- 778 1,445 2,223
Safeway Building
West Monroe, LA -- 739 1,373 -- -- 739 1,373 2,112
LIFE ON WHICH
DEPRECIATION
IN LATEST
ACCUMULATED INCOME
DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION (b) CONSTRUCTION ACQUIRED COMPUTED(3)
------------ ------------ ------------ -------- -------------
Lucky Building
Phoenix, AZ 87 1981 1993 40 years
Lucky Building
Coralville, IA 113 1981 1993 40 years
Lucky Building
Decateur, IL 119 1983 1993 40 years
Lucky Building
Dubuque, IA 150 1980 1993 40 years
Lucky Building
Hobart, IA 125 1993 1993 40 years
Lucky Building
Mesa, AZ 88 1982 1993 40 years
Lucky Building
Michigan City, IN 104 1983 1993 40 years
Lucky Building
Moline, IL 149 1981 1993 40 years
Lucky Building
Peoria, IL 137 1983 1993 40 years
Lucky Building
Pittsburgh, PA 175 1982 1993 40 years
Lucky Building
Springfield, IL 118 1982 1993 40 years
Lucky Building
Sterling, IL 151 1980 1993 40 years
Kroger Building
Waterloo, IL 136 1982 1993 40 years
Safeway Building
Muskogee, OK 184 1981 1993 40 years
Safeway Building
Sherwood, AR 158 1981 1993 40 years
Safeway Building
West Monroe, LA 150 1981 1993 40 years
F-24 (continued)
46
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- ---------------------- ----------------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (a)
----------- -------- -------- -------- -------- -------- -------- -------- --------
Rite Aid Building
East Albany, GA -- 176 328 -- -- 176 328 504
Super X Building
Muscle Shoals, AL -- 195 363 -- -- 195 363 558
Shopping Center
Elizabethtown, KY 4,996 1,888 4,981 -- 23 1,888 5,004 6,892
Shopping Center
Glasgow, KY 4,562 629 5,555 -- 24 629 5,579 6,208
Shopping Center
Deland, FL 8,284 3,469 8,125 64 224 3,533 8,349 11,882
Shopping Center
Irving, TX 3,000 1,655 3,074 -- 6 1,655 3,080 4,735
Shopping Center
Ashland, OH -- 2,689 4,994 35 182 2,724 5,176 7,900
Shopping Center
Covington, GA -- 3,188 5,921 (10) 98 3,178 6,019 9,197
K-Mart Building
Atlantic, IA -- 564 1,048 -- -- 564 1,048 1,612
Kash N' Karry Building
Homossassa Springs, FL -- 378 702 -- -- 378 702 1,080
Shopping Center
Brooksville, FL -- 1,779 3,305 124 400 1,903 3,705 5,608
Shopping Center
Celina, OH -- 1,552 2,882 155 292 1,707 3,174 4,881
Shopping Center
Albemarle, NC 2,499 984 1,827 125 260 1,109 2,087 3,196
Shopping Center
Marion, IN -- 656 1,219 53 115 709 1,334 2,043
Shopping Center
Warsaw, IN -- 568 1,056 110 204 678 1,260 1,938
Shopping Center
Terre Haute, IN 3,042 1,618 3,013 181 343 1,799 3,356 5,155
LIFE ON WHICH
DEPRECIATION
IN LATEST
ACCUMULATED INCOME
DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ ------------ -------- --------------
Rite Aid Building
East Albany, GA 36 1982 1993 40 years
Super X Building
Muscle Shoals, AL 40 1982 1993 40 years
Shopping Center
Elizabethtown, KY 625 1992 1993 40 years
Shopping Center
Glasgow, KY 685 1992 1993 40 years
Shopping Center
Deland, FL 946 1993 1993 40 years
Shopping Center
Irving, TX 331 1987 1993 40 years
Shopping Center
Ashland, OH 606 1990 1993 40 years
Shopping Center
Covington, GA 642 1991 1993 40 years
K-Mart Building
Atlantic, IA 104 1980 1994 40 years
Kash N' Karry Building
Homossassa Springs, FL 69 1982 1994 40 years
Shopping Center
Brooksville, FL 392 1987 1994 40 years
Shopping Center
Celina, OH 302 1990 1994 40 years
Shopping Center
Albemarle, NC 204 1988 1994 40 years
Shopping Center
Marion, IN 126 1989 1994 40 years
Shopping Center
Warsaw, IN 116 1989 1994 40 years
Shopping Center
Terre Haute, IN 318 1989 1994 40 years
F-25 (continued)
47
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- ---------------------- ----------------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (a)
----------- ------------ -------- ------------- -------- ------------ -------- ------------ --------
Office Building
San Diego, CA 1,834 753 1,762 -- 228 753 1,990 2,743
Shopping Center
Hilton Head, SC 4,286 2,431 4,515 -- 14 2,431 4,529 6,960
Shopping Center
Lakes Wales, FL -- 2,028 3,767 -- 17 2,028 3,784 5,812
Shopping Center
Versailles, KY 7,920 3,882 7,209 -- 171 3,882 7,380 11,262
Shopping Center
Mesa, AZ -- 1,300 2,415 -- 308 1,300 2,723 4,023
Shopping Center
London, KY 5,223 3,351 6,223 -- 18 3,351 6,241 9,592
Q Club Building
Scottsdale, AZ -- 1,822 3,385 8 14 1,830 3,399 5,229
Q Club Building
Phoenix, AZ -- 1,813 3,366 (145) (14) 1,668 3,352 5,020
Lowe's Building
Middletown, OH 4,027 2,187 4,061 -- -- 2,187 4,061 6,248
Shopping Center
Kannapolis, NC 2,147 1,035 1,924 69 133 1,104 2,057 3,161
Shopping Center
Asheboro, NC 3,156 2,109 3,917 182 345 2,291 4,262 6,553
Shopping Center
Kernersville, NC 2,552 1,096 2,036 178 15 1,274 2,051 3,325
Shopping Center
Roxboro, NC -- 1,842 3,421 -- 29 1,842 3,450 5,292
Shopping Center
Siler City, NC 5,282 2,330 4,328 -- 18 2,330 4,346 6,676
Shopping Center
Wadesboro, NC -- 2,264 4,205 -- 13 2,264 4,218 6,482
Shopping Center
Jonesville, NC 1,856 824 1,531 -- 6 824 1,537 2,361
LIFE ON WHICH
DEPRECIATION
IN LATEST
ACCUMULATED INCOME
DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ ------------ -------- -------------
Office Building
San Diego, CA 193 1988 1994 40 years
Shopping Center
Hilton Head, SC 436 1994 1994 40 years
Shopping Center
Lakes Wales, FL 343 1994 1994 40 years
Shopping Center
Versailles, KY 713 1994 1994 40 years
Shopping Center
Mesa, AZ 381 1981 1994 40 years
Shopping Center
London, KY 581 1994 1994 40 years
Q Club Building
Scottsdale, AZ 287 1994 1994 40 years
Q Club Building
Phoenix, AZ 304 1994 1994 40 years
Lowe's Building
Middletown, OH 393 1993 1994 40 years
Shopping Center
Kannapolis, NC 156 1992 1994 40 years
Shopping Center
Asheboro, NC 281 1988 1995 40 years
Shopping Center
Kernersville, NC 130 1988 1995 40 years
Shopping Center
Roxboro, NC 221 1989 1995 40 years
Shopping Center
Siler City, NC 277 1988 1995 40 years
Shopping Center
Wadesboro, NC 250 1988 1995 40 years
Shopping Center
Jonesville, NC 99 1988 1995 40 years
(continued)
F-26
48
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO
INITIAL COST ACQUISITION
--------------------- ----------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ------------ -------- ------------- -------- -------------
Shopping Center and outparcels
Kinston, NC -- 2,871 5,331 320 119
Shopping Center
Hilton Head, SC 2,448 1,157 2,149 (24) --
Shopping Center
Hendersonville, TN -- 1,325 2,461 -- 71
Shopping Center
Manchester, TN -- 807 1,499 273 529
Shopping Center
Williamsburg, NC 6,027 2,990 5,553 -- 39
Shopping Center
Atlanta, GA -- 954 1,771 -- 11
Shopping Center
Oxford, NC 5,727 2,863 5,318 -- 20
Shopping Center
Statesville, NC 9,625 5,821 10,810 1,325 945
Shopping Center
Statesboro, GA 3,305 1,694 3,145 -- 6
Shopping Center
West Valley, UT 17,587 12,222 22,699 -- 242
Shopping Center and Outparcels
Tuscon, AZ -- 5,996 9,324 (33) (39)
Shopping Center
Gadsden, AL(4) 5,629 2,519 4,682 -- --
Shopping Center
Bakersfield, CA(4) -- 6,310 11,718 -- 15
Shopping Center
Cudahy, CA(4) -- 1,936 3,602 -- 9
Shopping Center
Modesto, CA(4) 1,479 1,998 3,721 -- 9
Shopping Center
Montebello, CA(4) 9,253 8,055 14,959 -- 40
LIFE ON WHICH
GROSS AMOUNT AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
---------------------------------- ACCUMULATED INCOME
BUILDINGS AND TOTAL DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION LAND IMPROVEMENTS (a) (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- -------- -------- -------- -------- -------- -------- --------
Shopping Center and outparcels
Kinston, NC 3,191 5,450 8,641 352 1991 1995 40 years
Shopping Center
Hilton Head, SC 1,133 2,149 3,282 119 1989 1995 40 years
Shopping Center
Hendersonville, TN 1,325 2,532 3,857 146 1989 1995 40 years
Shopping Center
Manchester, TN 1,080 2,028 3,108 96 1990 1995 40 years
Shopping Center
Williamsburg, NC 2,990 5,592 8,582 282 1991 1996 40 years
Shopping Center
Atlanta, GA 954 1,782 2,736 84 1995 1996 40 years
Shopping Center
Oxford, NC 2,863 5,338 8,201 252 1991 1996 40 years
Shopping Center
Statesville, NC 7,146 11,755 18,901 532 1991 1996 40 years
Shopping Center
Statesboro, GA 1,694 3,151 4,845 115 1994 1996 40 years
Shopping Center
West Valley, UT 12,222 22,941 35,163 593 1970 1996 40 years
Shopping Center and Outparcels
Tuscon, AZ 5,963 9,285 15,248 246 1995/96 1996 40 years
Shopping Center
Gadsden, AL(4) 2,519 4,682 7,201 259 1995 1997 40 years
Shopping Center
Bakersfield, CA(4) 6,310 11,733 18,043 156 1970 1997 40 years
Shopping Center
Cudahy, CA(4) 1,936 3,611 5,547 50 1968 1997 40 years
Shopping Center
Modesto, CA(4) 1,998 3,730 5,728 51 1974 1997 40 years
Shopping Center
Montebello, CA(4) 8,055 14,999 23,054 200 1974 1997 40 years
(continued)
F-27
49
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------------ --------------------- ----------------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (a)
----------- ------------ -------- ------------- -------- ------------- -------- ------------- --------
Shopping Center
Paradise, CA(4) 2,872 1,717 3,189 -- -- 1,717 3,189 4,906
Shopping Center
Santa Ana, CA(4) -- 3,731 6,930 -- 19 3,731 6,949 10,680
Shopping Center
San Dimas, CA(4) 8,100 6,367 11,825 -- -- 6,367 11,825 18,192
Shopping Center
Cornelia, GA(4) 4,094 2,183 4,054 -- 19 2,183 4,073 6,256
Shopping Center
Dalton, GA(4) 2,337 1,261 2,341 -- 16 1,261 2,357 3,618
Shopping Center
Snellville, GA(4) 2,801 3,124 5,802 -- 123 3,124 5,925 9,049
Shopping Center
Campbellsville, KY(4) 5,497 2,950 5,479 -- 45 2,950 5,524 8,474
Office Building
Fridley, MN(4) 5,800 2,171 4,031 -- 79 2,171 4,110 6,281
Shopping Center
Winton-Salem, NC(4) 6,131 2,848 5,289 -- 9 2,848 5,298 8,146
Shopping Center
Reno, NV(4) -- 3,785 7,028 -- 8 3,785 7,036 10,821
Shopping Center
N. Charleston, SC(4) 3,905 1,826 3,390 -- -- 1,826 3,390 5,216
Shopping Center
Chattanooga, TN(4) 4,340 2,036 3,781 -- -- 2,036 3,781 5,817
Shopping Center
Kimball, TN(4) 10,379 2,494 3,940 -- 9,287 2,494 13,227 15,721
Shopping Center
Shelbyville, TN(4) -- 974 1,809 -- 26 974 1,835 2,809
Shopping Center
Tullahoma, TN(4) 9,116 4,051 7,524 -- -- 4,051 7,524 11,575
Firstar Bank Building
Burnsville, MN -- 441 818 -- -- 441 818 1,259
LIFE ON WHICH
DEPRECIATION
IN LATEST
ACCUMULATED INCOME
DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ ------------ -------- -------------
Shopping Center
Paradise, CA(4) 43 1979 1997 40 years
Shopping Center
Santa Ana, CA(4) 96 1972 1997 40 years
Shopping Center
San Dimas, CA(4) 62 1986-88 1997 40 years
Shopping Center
Cornelia, GA(4) 193 1990 1996 40 years
Shopping Center
Dalton, GA(4) 137 1990 1995 40 years
Shopping Center
Snellville, GA(4) 345 1985 1995 40 years
Shopping Center
Campbellsville, KY(4) 247 1989 1996 40 years
Office Building
Fridley, MN(4) 176 1991 1996 40 years
Shopping Center
Winton-Salem, NC(4) 138 1995 1996 40 years
Shopping Center
Reno, NV(4) 93 1974 1997 40 years
Shopping Center
N. Charleston, SC(4) 95 1996 1997 40 years
Shopping Center
Chattanooga, TN(4) 130 1995 1996 40 years
Shopping Center
Kimball, TN(4) 274 1987 1995 40 years
Shopping Center
Shelbyville, TN(4) 104 1985 1995 40 years
Shopping Center
Tullahoma, TN(4) 258 1995 1996 40 years
Firstar Bank Building
Burnsville, MN 8 1975 1997 40 years
(continued)
F-28
50
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- --------------------- ----------------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (a)
----------- ------------ -------- ------------- -------- ------------- -------- ------------- --------
Shopping Center
Camarillo, CA -- 2,538 4,719 -- -- 2,538 4,719 7,257
Shopping Center
Coachella, CA -- 515 956 -- -- 515 956 1,471
Shopping Center
Fresno, CA -- 6,511 12,092 -- -- 6,511 12,092 18,603
Shopping Center
Fresno, CA -- 3,207 5,956 -- -- 3,207 5,956 9,163
Shopping Center
Pleasanton, CA -- 7,634 14,178 -- -- 7,634 14,178 21,812
Shopping Center
Westminster, CO -- 15,336 28,481 -- -- 15,336 28,481 43,817
Shopping Center
Miami, FL -- 6,908 12,832 -- -- 6,908 12,832 19,740
Shopping Center
Naples, FL -- 4,071 7,561 -- -- 4,071 7,561 11,632
Shopping Center
Clearwater, FL -- 8,158 15,151 -- -- 8,158 15,151 23,309
Shopping Center
Thomasville, NC -- 2,004 3,732 -- -- 2,004 3,732 5,736
Shopping Center
Richland Township, PA 3,674 1,875 3,482 -- -- 1,875 3,482 5,357
Shopping Center
Elizabethtown, PA -- 4,230 7,857 -- -- 4,230 7,857 12,087
Shopping Center
James Island, SC -- 3,381 6,279 -- -- 3,381 6,279 9,660
Shopping Center
Collegedale, TN 4,966 2,266 4,208 -- -- 2,266 4,208 6,474
K-Mart Building
Brooksville, FL -- 1,795 3,334 -- -- 1,795 3,334 5,129
Shopping Center
Winchester, TN -- 3,901 7,246 -- -- 3,901 7,246 11,147
LIFE ON WHICH
DEPRECIATION
IN LATEST
ACCUMULATED INCOME
DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ ------------ -------- -------------
Shopping Center
Camarillo, CA 64 1971 1997 40 years
Shopping Center
Coachella, CA 13 1991 1997 40 years
Shopping Center
Fresno, CA 214 1993 1997 40 years
Shopping Center
Fresno, CA 105 1995 1997 40 years
Shopping Center
Pleasanton, CA 103 1995-96 1997 40 years
Shopping Center
Westminster, CO 30 1996 1997 40 years
Shopping Center
Miami, FL 67 1996 1997 40 years
Shopping Center
Naples, FL 39 1995 1997 40 years
Shopping Center
Clearwater, FL 16 1973 1997 40 years
Shopping Center
Thomasville, NC 67 1996 1997 40 years
Shopping Center
Richland Township, PA 40 1993 1997 40 years
Shopping Center
Elizabethtown, PA 41 1993-94 1997 40 years
Shopping Center
James Island, SC 33 1993-94 1997 40 years
Shopping Center
Collegedale, TN 48 1997 1997 40 years
K-Mart Building
Brooksville, FL 45 1987 1997 40 years
Shopping Center
Winchester, TN 7 1997 1997 40 years
F-29
(continued)
51
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------------------
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO
INITIAL COST ACQUISITION
----------------------- ------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ------------ --------- ------------- --------- -------------
Winn Dixie Building
Chatannooga, TN -- 739 1,373 -- --
Shopping Center
Glendale, AZ -- 3,951 7,337 -- --
Shopping Center
Mesa, AZ -- 2,445 4,542 -- --
Shopping Center
Dalton, GA -- 1,232 2,288 -- --
Shopping Center
Arlington, TX -- 9,595 17,820 -- --
Property Held for Sale/Redevelopment
Scottsdale, AZ -- 2,940 5,460 (2,940) 9,242
--------- --------- --------- --------- ---------
$ 243,664 $ 307,454 $ 590,291 $ 541 $ 27,232
========= ========= ========= ========= =========
(1)
LIFE ON WHICH
GROSS AMOUNT AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
------------------------------------- ACCUMULATED INCOME
BUILDINGS AND TOTAL DEPRECIATION DATE OF DATE STATEMENTS IS
DESCRIPTION LAND IMPROVEMENTS (a) (b) CONSTRUCTION ACQUIRED COMPUTED(3)
----------- --------- ------------- --------- ------------ ------------ --------- ------------
Winn Dixie Building
Chatannooga, TN 739 1,373 2,112 27 1995 1997 40 years
Shopping Center
Glendale, AZ 3,951 7,337 11,288 69 1989-91 1997 40 years
Shopping Center
Mesa, AZ 2,445 4,542 6,987 43 1986-97 1997 40 years
Shopping Center
Dalton, GA 1,232 2,288 3,520 45 1994 1997 40 years
Shopping Center
Arlington, TX 9,595 17,820 27,415 93 1992-93 1997 40 years
Property Held for Sale/Redevelopment
Scottsdale, AZ 0 14,702 14,702 -- 1989 1993 (2)
--------- --------- --------- ---------
$ 307,995 $ 617,523 $ 925,518 $ 33,936
========= ========= ========= =========
(1) Listing does not include debt related to capitalized leases on three ERP
properties totaling $26,850.
(2) At December 31, 1997, this property was held for sale / redevelopment.
Depreciation expense is not being charged to the property.
(3) Tenant improvements and other costs capitalized subsequent to acquisition
are depreciated over 2 - 40 years.
(4) These properties are owned by Excel Realty Partners, L.P. ("ERP") . The
Company began consolidating the accounts of ERP on April 1, 1997.
Acquisition dates are dates properties were contributed to ERP.
F-30
(continued)
52
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
----------
[a] Reconciliation of total real estate carrying value for the past three years
is as follows:
1997 1996 1995
--------- --------- ---------
Balance at beginning of year $ 479,478 $ 386,925 $ 359,459
Acquisitions 365,919 93,190 47,583
Improvements and other additions 10,800 6,206 7,473
Consolidation of ERP at April 1, 1997 80,724 -- --
Cost of property sold (10,662) (5,999) (27,590)
Impairment of real estate (741) (844)
--------- --------- ---------
Balance at end of year $ 925,518 $ 479,478 $ 386,925
========= ========= =========
Total cost for federal income tax purposes
at the end of each year $ 879,950 $ 476,266 $ 386,062
========= ========= =========
[b] Reconciliation of accumulated depreciation for the past three years is as
follows:
1997 1996 1995
-------- -------- --------
Balance at beginning of year $ 21,976 $ 14,909 $ 10,228
Depreciation expense 11,389 7,354 6,845
Consolidation of ERP at April 1, 1997 1,283 -- --
Deletions - property sold (712) (287) (1,918)
Reclass to real estate held for sale -- -- (246)
-------- -------- --------
Balance at end of year $ 33,936 $ 21,976 $ 14,909
======== ======== ========
F-31