1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) SEPTEMBER 28, 1998
NEW PLAN REALTY TRUST
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 001-08459 13-1995781
(State or other (Commission File Number) (IRS Employer
Jurisdiction of Identification Number)
incorporation)
1120 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 869-3000
(Address, including zip code,
and telephone number, including area code,
of registrant's principal executive offices)
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This Current Report on Form 8-K is filed by New Plan Realty Trust, a
Massachusetts business trust ("New Plan"), in connection with the matters
described herein.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 28, 1998, Excel Realty Trust, Inc. ("Excel") and New Plan
consummated a previously-announced merger pursuant to an Agreement and Plan of
Merger dated May 14, 1998, as amended as of August 7, 1998 (the "Merger
Agreement"), whereby ERT Merger Sub, Inc., a wholly-owned subsidiary of Excel,
was merged with and into New Plan with New Plan surviving as a wholly-owned
subsidiary of Excel (the "Merger"). The Merger was approved by the stockholders
of Excel and the shareholders of New Plan at special meetings held on September
25, 1998. In connection with the consummation of the Merger, Excel changed its
name to "New Plan Excel Realty Trust, Inc." ("New Plan Excel").
As provided in the Merger Agreement, Excel paid a 20% stock dividend
prior to the Merger. Upon consummation of the Merger, each share of beneficial
interest, no par value, of New Plan was converted into one share of common
stock, par value $.01 per share, of New Plan Excel ("New Plan Excel Common
Stock"), and each 7.8% Series A Cumulative Step-Up Premium Rate Preferred Share,
par value $1.00 per share, of New Plan was converted into one share of 7.8%
Series D Cumulative Voting Step-Up Premium Rate Preferred Stock, par value $.01
per share, of New Plan Excel ("New Plan Excel Series D Preferred Stock"). New
Plan Excel issued an aggregate of approximately 60,000,000 shares of New Plan
Excel Common Stock and 150,000 shares of New Plan Excel Series D Preferred Stock
(represented by 1,500,000 depositary shares, each of which represents a
one-tenth fractional interest in a share of New Plan Excel Series D Preferred
Stock) to New Plan's shareholders in the Merger. The New Plan Excel Common Stock
is listed for trading on the New York Stock Exchange under the symbol "NXL."
As further provided in the Merger Agreement, the Board of Directors of
New Plan Excel and New Plan consists of the six members of Excel's Board and the
nine members of the New Plan's Board. The senior management of New Plan Excel
and New Plan is as follows:
William Newman Chairman of the Board
Arnold Laubich Chief Executive Officer
Gary B. Sabin President and Chairman of Investment Committee
James M. Steuterman Executive Vice President and Co-Chief Operating Officer
Richard B. Muir Executive Vice President and Co-Chief Operating Officer
David A. Lund Chief Financial Officer
Prior to the consummation of the Merger, New Plan was a
self-administered and self-managed equity real estate investment trust which, as
of April 30, 1998, owned fee or leasehold interests in 132 shopping centers
containing an aggregate of approximately 18.9 million square feet of gross
leasable area ("GLA"), six factory outlet centers containing an aggregate of
approximately 1.8 million square feet of GLA and 52 apartment communities
containing approximately 12,400 units.
A copy of the Merger Agreement and its related exhibits and schedules
is incorporated by reference in Exhibit 2.1 and is incorporated herein by
reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a)(b) Financial Statements of Business Acquired and Pro Forma
Financial Information
The financial statements and pro forma financial information is filed
herewith as follows:
New Plan Realty Trust Consolidated Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets as of July 31, 1998 and 1997
Consolidated Statements of Income for the years ended
July 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders Equity
for years ended July 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
July 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
New Plan Excel Realty Trust, Inc. Unaudited Pro Forma Operating
and Financial Information
Pro Forma Consolidated Condensed Balance Sheets - Unaudited
Pro Forma Consolidated Condensed Statements of Income -
Unaudited for the year ended July 31, 1998 Pro Forma
Consolidated Condensed Statements of Income -
Unaudited for the year ended July 31, 1997 Notes and
Management's Assumptions to Pro Forma Condensed
Financial Information
(c) Exhibits
2.1 Agreement and Plan of Merger, dated May 14, 1998, as
amended as of August 7, 1998, among Excel Realty
Trust, Inc., ERT Merger Sub, Inc. and New Plan Realty
Trust (incorporated by reference to Exhibit 2.1 to
the Registrant's Registration Statement on Form S-4
(No. 333-61131) filed with the Securities and
Exchange Commission on August 11, 1998).
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Press Release, dated September 25, 1998, announcing
stockholder approval of the Merger and the payment of
a 20% stock dividend to holders of Excel common
stock.
99.2 Press Release, dated September 28, 1998, announcing
the consummation of the Merger.
ITEM 8. CHANGE IN FISCAL YEAR
By unanimous written consent dated as of September 28, 1998, the Board
of Directors of New Plan Excel adopted a fiscal year end of December 31,
beginning with a short fiscal year ending on December 31, 1998. Because New
Plan, the accounting acquiror, had a fiscal year ending July 31, a transaction
report for the period from August 1, 1998 through September 30, 1998 will be
filed on Form 10-Q.
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NEW PLAN REALTY TRUST
CONSOLIDATED
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders
of New Plan Realty Trust:
We have audited the accompanying consolidated balance sheets of New Plan Realty
Trust and Subsidiaries as of July 31, 1998 and 1997 and the related consolidated
statements of income, change in shareholders' equity and cash flows for each of
the three years in the period ended July 31, 1998. These financial statements
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 New
Plan Realty Trust and Subsidiaries as of July 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended July 31, 1998 in conformity with generally
accepted accounting principles.
/S/ PRICEWATERHOUSE COOPERS LLP
PricewaterhouseCoopers LLP
New York, New York
September 9, 1998,
except for Note Q
for which the date
is September 28, 1998
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NEW PLAN REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1998 AND 1997
(In Thousands)
1998 1997
---------- ----------
ASSETS:
Real estate, at cost
Land $ 272,176 $ 232,502
Buildings and improvements 1,180,562 1,045,273
---------- ----------
1,452,738 1,277,775
Less accumulated depreciation and amortization 136,978 105,866
---------- ----------
1,315,760 1,171,909
Cash and cash equivalents 26,284 42,781
Marketable securities 1,787 2,034
Mortgages and notes receivable 13,878 23,107
Receivables
Trade and notes, net of allowance for doubtful accounts (1998 - $7,926;
1997 - $5,581) 14,025 12,035
Other 1,376 1,464
Prepaid expenses and deferred charges 7,823 5,000
Other assets 3,592 2,814
---------- ----------
TOTAL ASSETS $1,384,525 $1,261,144
========== ==========
See Notes to Consolidated Financial Statements.
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NEW PLAN REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1998 AND 1997
(In Thousands)
1998 1997
---------- ----------
LIABILITIES:
Mortgages payable $ 114,099 $ 65,573
Notes payable, net of unamortized discount
(1998 - $1,211; 1997 - $1,366) 462,789 412,634
Other liabilities 37,520 33,359
Tenants' security deposits 5,590 4,623
---------- ----------
TOTAL LIABILITIES 619,998 516,189
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred shares
Par value $1.00, unlimited authorization; issued and outstanding (1998 and
1997 - Series A 150,000 Cumulative Preferred Shares), $75,000
redemption value 72,775 72,775
Shares of beneficial interest
Without par value, unlimited authorization;
issued and outstanding (1998 - 59,874;
1997 - 58,934) 759,853 738,011
Less: loans receivable for purchase of
shares of beneficial interest 2,306 2,814
Add: unrealized gain on securities reported
at fair value 813 1,057
---------- ----------
831,135 809,029
Less distributions in excess of net income 66,608 64,074
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 764,527 744,955
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER' EQUITY $1,384,525 $1,261,144
========== ==========
See Notes to Consolidated Financial Statements.
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NEW PLAN REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996
(In Thousands Except For Per Share Amounts)
1998 1997 1996
--------- --------- ---------
Revenues:
Rental income and related revenues $ 246,309 $ 202,093 $ 162,821
Interest and dividend income 3,950 4,728 4,785
--------- --------- ---------
Total revenues 250,259 206,821 167,606
--------- --------- ---------
Operating expenses:
Operating costs 61,417 52,584 39,531
Real estate and other taxes 22,850 18,449 15,788
Interest expense 36,815 28,256 17,561
Depreciation and amortization 31,622 25,006 20,004
Provision for doubtful accounts 4,171 3,283 1,984
--------- --------- ---------
Total operating expenses 156,875 127,578 94,868
--------- --------- ---------
93,384 79,243 72,738
Administrative expenses 2,770 2,203 2,616
--------- --------- ---------
Income Before (Loss)/Gain on
Sale of Properties and Securities: 90,614 77,040 70,122
(Loss)/gain on sale of properties and securities, net (41) (3) 399
--------- --------- ---------
Net Income 90,573 77,037 70,521
Preferred Dividend required (5,850) (461) --
--------- --------- ---------
Net Income applicable to Shares of Beneficial
Interest $ 84,723 $ 76,576 $ 70,521
========= ========= =========
Net Income Per Share of Beneficial Interest
Basic $ 1.43 $ 1.31 $ 1.25
Diluted $ 1.42 $ 1.30 $ 1.25
Cash Distribution Per Share of Beneficial Interest $ 1.475 $ 1.435 $ 1.395
Weighted Average Shares of Beneficial Interest Outstanding
Basic 59,365 58,461 56,484
Diluted 59,774 58,735 56,642
See Notes to Consolidated Financial Statements.
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NEW PLAN REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended July 31, 1998, 1997 and 1996
Preferred Shares Shares of Beneficial Interest Notes Receivable
---------------------- ---------------------------- ----------------
Issued Amount Issued Amount
------ ------ ------ ------
Balance July 31, 1995 53,262 $622,562 $(3,370)
Net income
Dividends paid
Dividend reinvestment 738 15,126
Exercise of stock options 9 165
Repayment of loans 286
Increase during year
Issuance of preferred shares 4,060 81,227
-------- --------- ------- -------- --------
Balance July 31, 1996 58,069 719,080 (3,084)
Net income
Dividends paid
Dividend reinvestment 750 16,475
Exercise of stock options 115 2,456
Repayment of loans 270
Increase during year
Issuance of preferred shares 150 72,775
-------- --------- ------- -------- --------
Balance July 31, 1997 150 72,775 58,934 738,011 (2,814)
Net income
Dividends paid
Dividend reinvestment 765 18,197
Exercise of stock options 175 3,645
Repayment of loans 508
Decrease during year
-------- --------- ------- -------- --------
Balance July 31, 1998 150 $72,775 59,874 $759,853 $(2,306)
======= ======= ====== ======== ========
Cumulative
Unrealized Distributions in Total
Gains on Excess of Net Shareholders'
Securities Income Equity
---------- ---------------- --------------
Balance July 31, 1995 $ 182 $(48,845) $570,529
Net income 70,521 70,521
Dividends paid (78,962) (78,962)
Dividend reinvestment 15,126
Exercise of stock options 165
Repayment of loans 286
Increase during year 461 461
Issuance of preferred shares 81,227
-------- --------------- -----------
Balance July 31, 1996 643 (57,286) 659,353
Net income 77,037 77,037
Dividends paid (83,825) (83,825)
Dividend reinvestment 16,475
Exercise of stock options 2,456
Repayment of loans 270
Increase during year 414 414
Issuance of preferred shares 72,775
-------- --------------- -----------
Balance July 31, 1997 1,057 (64,074) 744,955
Net income 90,573 90,573
Dividends paid (93,107) (93,107)
Dividend reinvestment 18,197
Exercise of stock options 3,645
Repayment of loans 508
Decrease during year (244) (244)
-------- --------------- -----------
Balance July 31, 1998 $ 813 $(66,608) $764,527
====== ========== ========
See Notes to Consolidated Financial Statements
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NEW PLAN REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996
(In Thousands)
1998 1997 1996
--------- --------- ---------
OPERATING ACTIVITIES
Net Income $ 90,573 $ 77,037 $ 70,521
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 31,622 25,006 20,004
Loss/(Gain) on sale of properties, net 67 10 (540)
(Gain)/Loss on sale of securities, net (26) (7) 141
Changes in operating assets and liabilities, net:
Change in trade and notes receivable (4,335) (2,054) (5,776)
Change in other receivables 88 (355) 13
Change in allowance for doubtful accounts 2,345 1,604 1,054
Change in other liabilities 4,161 3,475 8,239
Change in net sundry assets and liabilities (2,988) 605 (250)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 121,507 105,321 93,406
--------- --------- ---------
INVESTING ACTIVITIES
Sales of marketable securities 29 484 4,274
Purchases of marketable securities (1) (2) __
Net proceeds from the sale of properties (67) 3,862 3,474
Purchases and improvement of properties (123,036) (282,607) (186,008)
Repayment of mortgage notes receivable, net 9,229 491 821
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (113,846) (277,772) (177,439)
--------- --------- ---------
See Notes to Consolidated Financial Statements
(Continued on next page)
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NEW PLAN REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996
(CONTINUED FROM PREVIOUS PAGE)
(In Thousands)
1998 1997 1996
--------- --------- ---------
FINANCING ACTIVITIES
Distributions to shareholders of shares (93,107) (83,825) (78,962)
Issuance of preferred shares
pursuant to a public offering,
net of offering costs -- 72,775 --
Issuance of shares of beneficial interest
pursuant to dividend reinvestment plan 18,197 16,475 15,126
Issuance of shares of beneficial interest
pursuant to public offering, net of
loans receivable and offering costs -- 81,228
Issuance of shares of beneficial interest
upon exercise of stock options 3,645 2,456 164
Proceeds from short-term borrowing -- 12,000 19,500
Repayment of short-term borrowing -- (31,500) --
Proceeds from sale of notes 50,000 223,144 10,000
Principal payments on mortgages (3,401) (862) (10,898)
Repayment of loans receivable for the
purchase of shares of beneficial interest 508 269 286
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES (24,158) 210,932 36,444
--------- --------- ---------
(DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS (16,497) 38,481 (47,589)
Cash and cash equivalents at beginning of year 42,781 4,300 51,889
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 26,284 $ 42,781 $ 4,300
========= ========= =========
See Notes to Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Income Taxes: New Plan Realty Trust was organized July
31, 1972 as a Massachusetts Business Trust. New Plan Realty Trust and
subsidiaries (the "Trust") have elected to be taxed as a Real Estate Investment
Trust ("REIT") under the applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"). Accordingly, the Trust does not pay Federal
income tax on income as long as income distributed to shareholders is at least
equal to 95% of real estate investment trust taxable income and pays no Federal
income tax on capital gains distributed to shareholders. The Trust may be
subject to tax by certain states that do not recognize the REIT. Provision for
such taxes has been included in real estate and other taxes.
Basis of Consolidation: The consolidated financial statements include
the accounts of New Plan Realty Trust and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated. Certain
prior period amounts have been reclassified to conform to the current year
presentation.
Real Estate: Real estate is carried at cost less accumulated
depreciation and amortization. For financial reporting purposes, depreciation is
calculated on the straight-line method based on the estimated useful lives of
the assets ranging from 5 to 40 years. Amortization of leasehold improvements is
calculated on a straight-line basis over the shorter of the life of the lease or
the estimated useful life of the asset. If there is an event or a change in
circumstances that indicates that the basis of the Trust's property may not be
recoverable the Trust's policy is to assess any impairment in value by making a
comparison of the current and projected operating cash flows (excluding interest
and income taxes) of the property over its remaining useful life, on an
undiscounted basis, to the carrying amount of the property. Such carrying
amounts would be adjusted, if necessary, to reflect an impairment in the value
of the property.
The Trust records sales when, among other criteria, the parties are
bound by the terms of a contract, all consideration has been exchanged and all
conditions precedent to closing have been performed. These conditions are
usually met at the time of closing. The cost and related accumulated
depreciation of assets sold are removed from the respective accounts and any
gain or loss is recognized in income.
New Accounting Standards: During 1998, the Trust adopted the provisions
of SFAS 128 and SFAS 129. SFAS 129 had no impact on the financial statements.
Pursuant to SFAS 128, the Trust restated all per share data to conform with the
provisions of that pronouncement (See Note I).
During fiscal 1998, the Financial Accounting Standards Board issued (a)
No. 130 "Reporting Comprehensive Income" ("SFAS 130"), which is effective for
fiscal years beginning after December 15, 1997, (b) No. 131 "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131"), which is
effective for fiscal years beginning after December 15, 1997, (c) No 132
"Employees Disclosure About Pensions and Other Postretirement Benefits" ("SFAS
132") which is effective for fiscal years beginning after December 15, 1997 and
(d) No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which is effective for fiscal years beginning after June 15, 1999.
Management believes that the implementation of SFAS 130, 131, 132 and 133 will
not have a material impact on the Trust's financial statements.
In addition, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5") and Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"), which are effective for fiscal years
beginning after December 15, 1998. Further, the Emerging Issues Task Force of
the Financial Accounting Standards Board released Issue No. 97-11, "Accounting
for Internal Costs Relating to Real Estate Property Acquisitions" ("EITF 97-11")
and Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial
Periods" ("EITF 98-9").
SOP 98-5 requires that certain costs incurred in conjunction with
start-up activities be expensed. SOP 98-1 provides guidance on whether the costs
of computer software developed or obtained for internal use should be
capitalized or expensed. EITF 97-11 requires that the internal pre-acquisition
costs of identifying and acquiring operating property be expensed as incurred.
EITF 98-9 requires that contingent revenue not be accrued until a future
specified sales target is achieved.
Management believes that, when adopted, SOP 98-5 and SOP 98-1 will not
have a significant impact on the Trust's financial statements. EITF 97-11 and
98-9 were adopted during fiscal year 1998 and did not have a material impact on
the Trust's financial statements.
Cash Equivalents: Cash equivalents consist of short-term, highly liquid
debt instruments with original maturities of three months or less. Items
classified as cash equivalents include insured bank certificates of deposit and
commercial paper. At times cash balances at a limited number of banks may exceed
insurable amounts. The Trust believes it mitigates its risk by investing in or
through major financial institutions. Recoverability of investments is dependent
upon the performance of the issuer.
Revenue Recognition: Lease agreements between the Trust and retail
tenants generally provide for additional rentals based on such factors as
percentage of tenants' sales in excess of specified volumes, increases in real
estate taxes, increases in Consumer Price Indices and common area maintenance
charges. These additional rentals are generally included in income when reported
to the Trust or when billed to tenants.
The Trust recognizes rental income from leases with scheduled rent
increases on a straight-line basis over the lease term. Deferred rent
receivable, included in trade and notes receivable, represents the difference
between the straight-line rent and amounts currently due.
Concentration of Credit Risk: No tenant or single property accounts for
more than 5% of the Trust's revenues.
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, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates. The most significant
assumptions and estimates relate to depreciable lives, valuation of real estate
and the recoverability of mortgage notes and trade accounts receivable.
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Internal Software Costs: Any costs associated with modifying computer
software for the year 2000 are expensed as incurred. Management does not believe
future costs to be incurred will be material.
NOTE B - MARKETABLE SECURITIES
The Trust has classified all investments in equity securities as
available-for-sale. All investments are recorded at current market value with an
offsetting adjustment to shareholders' equity (Amounts in Thousands).
July 31, 1998 1997
- -------- ------ ------
Amortized cost/cost basis $ 974 $ 977
Unrealized holdings gains 813 1,057
------ ------
Fair value $1,787 $2,034
====== ======
The net decrease in unrealized holding gains that has been included as
a separate component of shareholders' equity is $244 for 1998. The weighted
average method is used to determine realized gain or loss on securities sold.
The market value of marketable securities is based on quoted market prices as of
July 31, 1998 and 1997.
NOTE C - MORTGAGES & NOTES RECEIVABLE
Mortgages and Notes Receivable are collateralized principally by real
property and consist of the following (Amounts in Thousands):
July 31, 1998 1997
------- -------
10% purchase money first mortgage, due August 31, 1998 $ 5,180 $ 5,180
9.38% purchase money first mortgage, due July 30, 1999 4,205 4,205
9.375% purchase money first mortgage, due July 27, 2002 -- 10,350
12% leasehold mortgage, due May 1, 2008 864 890
11.5% note, due April 30, 2004 212 237
8.75% purchase money first mortgage, due July 23, 1998 -- 795
9% purchase money first mortgage, due July 23, 2000 645 --
7.2% purchase money first mortgage, due May 9, 2001 750 750
8.75% purchase money first mortgage, due July 23, 2001 700 700
10% leasehold mortgage, due May 31, 2008 1,322 --
------- -------
$13,878 $23,107
======= =======
NOTE D - OTHER RECEIVABLES (Amounts in Thousands)
July 31, 1998 1997
- -------- ------- -------
Interest and dividends $ 266 $ 599
Notes receivable 46 338
Due from officers, trustees and employees (1) 655 497
Miscellaneous receivables 409 30
------- -------
$ 1,376 $ 1,464
======= =======
(1) Amounts, which are interest bearing, are either due on demand or have
scheduled maturities.
NOTE E - MORTGAGES AND CREDIT FACILITY
Mortgages are collateralized by real property with aggregate
carrying amounts of approximately $269.7 million before accumulated depreciation
and amortization. As of July 31, 1998, mortgages payable bear interest at rates
ranging from 3.79% to 10.75%, having a weighted average rate of 7.795% per annum
and mature from 1998 to 2008.
Scheduled principal payments during each of the next five fiscal
years and thereafter are approximately as follows (Amounts in Thousands):
Year Ending July 31, Amount
- -------------------- ------
1999 $ 4,240
2000 30,873
2001 9,562
2002 21,707
2003 18,470
Thereafter 29,247
--------
Total $114,099
========
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The Trust has an unsecured revolving credit facility which provides for
up to $50 million of debt through November, 1998. At July 31, 1998 there were no
amounts outstanding under this facility. At the time of borrowing, the Trust can
choose from three interest rate options. There are restrictive covenants that
place a ceiling on total indebtedness of the lesser of 65% of tangible net worth
or $350,000,000, a ceiling on mortgage indebtedness of $105,000,000, a minimum
interest coverage ratio of 2.5 to 1 and a minimum tangible net worth of
$400,000,000.
The Trust has outstanding approximately $40,000 of letters of credit as
of July 31, 1998.
Interest costs capitalized for the years ended July 31, 1998, 1997, and
1996 were approximately $12,000, $868,000, and $203,000, respectively.
NOTE F - NOTES PAYABLE
Notes Payable consists of the following (Amounts in Thousands):
Description Face Amount Due Date 1998 1997
- ----------- ----------- -------- ---- ----
7.75% Senior notes,
effective interest rate 7.95%,
net of unamortized discount:
1998 - $1,019; 1997 - $1,132 $100,000 4/6/2005 $ 98,981 $ 98,868
6.80% Senior unsecured notes,
effective interest rate 6.87%,
net of unamortized
discount:
1998 - $192; 1997 - $234 81,000 5/15/2002 80,808 80,766
7.97% unsecured notes 10,000 8/14/2026 10,000 10,000
Variable rate unsecured notes 49,000 8/3/1999 49,000 49,000
Variable rate unsecured notes 10,000 8/3/1998 10,000 10,000
5.95% unsecured notes 49,000 11/2/2026 49,000 49,000
7.65% unsecured notes 25,000 11/2/2026 25,000 25,000
7.68% unsecured notes 20,000 11/2/2026 20,000 20,000
Variable rate unsecured notes 40,000 5/15/2000 40,000 40,000
7.35% unsecured notes 30,000 6/15/2007 30,000 30,000
6.9% unsecured notes 50,000 2/15/2028 50,000 --
-------- --------
Total $462,789 $412,634
======== ========
The Notes are uncollateralized and subordinate to mortgages payable and
rank equally with debt under the revolving credit facility. Where applicable,
the discount is being amortized over the life of the respective Notes using the
effective interest method. Interest is payable semi-annually or quarterly and
the principal is due at maturity. Among other restrictive covenants, there is a
restrictive covenant that limits the amount of total indebtedness to 65% of
total assets. For the year ended July 31, 1998, $387,000 of amortized discount
and issuing costs were included in interest expense.
NOTE G - OTHER LIABILITIES (Amounts in Thousands)
July 31, 1998 1997
- -------- ----- ----
Accounts payable $ 3,362 $ 2,096
Taxes payable 10,523 9,289
Interest payable on notes 9,712 7,779
Amounts due seller of property 1,952 1,467
Professional and personnel costs 1,239 1,666
Accrued construction costs 4,789 4,872
Acquisition costs 1,120 1,884
Other 3,715 2,969
Deferred rent expense and rent received in advance 1,108 1,337
------- -------
$37,520 $33,359
======= =======
NOTE H - SHAREHOLDERS' EQUITY
The Series A Cumulative Preferred Shares are redeemable at the option
of the Trust on or after June 15, 2007 at the liquidation preference of $500 a
share. The preferred shares pay dividends quarterly at the rate of 7.8% of the
liquidation preference per annum through September 15, 2012 and at the rate of
9.8% of the liquidation preference per annum thereafter. In connection with the
issuance of the Series A Cumulative Preferred Shares, 1,500,000 depositary
shares, each representing a 1/10 fractional interest in a share of cumulative
preferred, were sold to the public.
14
The Trust has the following stock option plans (the "Plans") pursuant
to which the Trust has granted (and in one instance, may continue to grant)
options to purchase Shares of Beneficial Interest of the Trust (the "Shares") to
officers, trustees and certain key employees of the Trust: (i) the 1985
Incentive Stock Option Plan (the "1985 Plan"), (ii) the March 1991 Stock Option
Plan (the "March 1991 Plan"), (iii) the Non-Qualified Stock Option Plan (the
"Non-Qualified Plan"), (iv) the 1991 Stock Option Plan (the "1991 Plan") and (v)
the 1997 Stock Option Plan (the "1997 Plan"). The exercise price of a Share
pursuant to each of the Plans is or was required (as the case may be) to be no
less than the fair market value of a Share on the date of grant. Under the 1985
Plan and the 1991 and 1997 Plans (with the exception of certain option grants of
10,000 Shares or more, as discussed below) and the Non-Qualified Plan, options
are exercisable 20% per year commencing one year from the date of grant. In the
case of certain option grants of 10,000 Shares or more under the 1991 Plan, such
option grants are exercisable 10% after the first anniversary of the date of
grant, 25% after the second anniversary of the date of grant, 45% after the
third anniversary of the date of grant, 70% after the fourth anniversary of the
date of grant and 100% after the fifth anniversary of the date of grant. In the
case of the March 1991 Plan, 30% of the options granted are exercisable on the
third anniversary of the date of grant and, thereafter, an additional 10% of the
granted options are exercisable on a yearly basis. Future option grants can be
made only under the 1991 and 1997 Plans.
The following table shows the activity and balances for each stock option plan
during the fiscal years indicated.
Non- March
1985 Qualified 1991 1991 1997
Options Plan Plan Plan Plan Plan
- ------- ---- ---- ---- ---- ----
Outstanding July 31, 1995 351,600 5,000 1,300,000 422,250
Exercised (5,000) -- -- (4,000)
Canceled (800) -- -- (20,500)
Granted 3,200 -- -- 31,300
---------- ---------- ---------- ----------
Outstanding July 31, 1996 349,000 5,000 1,300,000 429,050
Exercised (72,700) -- -- (42,100)
Canceled -- -- -- (26,800)
Granted -- -- -- 571,750
---------- ---------- ---------- ----------
Outstanding July 31, 1997 276,300 5,000 1,300,000 931,900
Exercised (96,515) -- -- (78,300)
Canceled (26,085) -- -- (85,350) (101,250)
Granted -- -- 41,500 1,408,750
---------- ---------- ---------- ---------- ---------
Outstanding July 31, 1998 153,700 5,000 1,300,000 809,750 1,307,500
========== ========== ========== ========== =========
Options exercisable at July 31, 1998
- ------------------------------------
Average outstanding option
price, which was the market
price of the shares on
the dates of grant $ 22.43 $ 21.88 $ 18.88 $ 21.86 $ 24.13
Average price of options
exercised during 1998 $ 20.60 -- -- $ 21.16 --
The Trust has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Accordingly, no compensation expense has been
recognized for the options described above which were granted on or after August
1, 1995. Had compensation cost for these options been determined based on the
fair value on the grant date consistent with the provisions of SFAS 123, the
Trust's net earnings and earnings per share of beneficial interest would have
been changed to the pro forma amounts shown below.
These pro forma adjustments to net income and net income per common
share assume fair values of each option grant estimated using the Black-Scholes
option pricing formula. The more significant assumptions underlying the
determination of such fair values for options granted during 1998, 1997 and 1996
include: (i) weighted average risk-free interest rates of 5.87%, 6.66% and 6.4%,
respectively; (ii) weighted average expected option lives of 6.5 years, 6.3
years and 6.3 years, respectively; (iii) an expected volatility of 18.25%, 19.3%
and 15.79%, respectively, and (iv) an expected dividend yield of 6.14%, 6.12%
and 6.12%, respectively. The per share weighted average fair value at the dates
of grant for options awarded during 1998, 1997 and 1996 was $2.78, $3.10 and
$2.83, respectively.
Net Income Per Share of Beneficial Interest
Net Income -------------------------------------------
(in thousands) Basic Diluted
Year ended July 31, 1998 $ 83,904 $1.41 $1.41
Year ended July 31, 1997 76,465 1.31 1.30
Year ended July 31, 1996 70,510 1.25 1.25
The Trust has a Dividend Reinvestment and Share Purchase Plan (the
"Plan") whereby shareholders may invest cash distributions and make optional
cash payments to purchase Shares of the Trust without payment of any brokerage
commission or service charge. The price per share of the additional shares to be
purchased with invested cash distributions is the midpoint between the day's
high and low sales prices on the New York Stock Exchange, less 5%.
15
The Trust has made loans to officers, trustees and employees primarily
for the purpose of purchasing its Shares. These loans are demand and term notes
bearing interest at rates ranging from 5% to 9.75%. Interest is payable
quarterly.
NOTE I - NET INCOME PER SHARE OF BENEFICIAL INTEREST
On January 31, 1998 the Trust adopted Financial Accounting Standard No.
128 "Earnings Per Share". All per share data has been restated to conform to the
provisions of FAS 128.
The following table sets forth the computation of average shares
outstanding and basic earnings and diluted earnings per share (Amounts in
Thousands, Except Per Share Amounts):
Year Ended July 31,
1998 1997 1996
-------- -------- --------
Numerators
- ----------
Net Income $ 90,573 $ 77,037 $ 70,521
Less preferred stock dividend requirement (5,850) (461) --
-------- -------- --------
Net income available to shares of beneficial
interest $ 84,723 $ 76,576 $ 70,521
======== ======== ========
Denominators
- ------------
Weighted average shares outstanding for
Basic EPS 59,365 58,461 56,484
Effects of Dilutive Securities - Options 409 274 158
-------- -------- --------
Adjusted Weighted Average Shares
Outstanding - For Diluted EPS 59,774 58,735 56,642
======== ======== ========
Basic EPS $ 1.43 $ 1.31 $ 1.25
Diluted EPS $ 1.42 $ 1.30 $ 1.25
NOTE J - LEASE AGREEMENTS
The Trust has entered into leases, as lessee, in connection with ground
leases for shopping centers which it operates, an office building which it
sublets and administrative office space for the Trust. These leases are
accounted for as operating leases. The minimum annual rental commitments during
the next five fiscal years and thereafter are approximately as follows (Amounts
in Thousands):
Year Ending July 31, Amount
- -------------------- ------
1999 $ 1,093
2000 1,074
2001 1,070
2002 1,109
2003 1,140
Thereafter 19,237
-------
Total $24,723
=======
For the years ended July 31, 1998 and 1996, the lease for office space
included contingent rentals for real estate tax escalations and operating
expense in the amount of $10,000 and $100,000, respectively. There were no
contingent rentals for the year ended July 31, 1997. In addition, ground leases
provide for fixed rent escalations and renewal options.
NOTE K - RENTAL INCOME UNDER OPERATING LEASES
Minimum future rentals to be received during the next five fiscal years
and thereafter with initial or remaining noncancellable lease terms in excess of
one year are approximately as follows (Amounts in Thousands):
Year Ending July 31, Amount
- -------------------- ------
1999 $128,162
2000 111,972
2001 94,189
2002 80,958
2003 67,270
Thereafter 372,028
--------
Total $854,579
========
The above table assumes that all leases which expire are not renewed,
therefore neither renewal rentals nor rentals from replacement tenants are
included.
Minimum future rentals do not include contingent rentals, which may be
received under certain leases on the basis of percentage of reported tenants'
sales volume accounted for under EITF 98-9 (See Summary of Significant
Accounting Policies), increases in Consumer Price Indices, common area
maintenance charges and real estate tax reimbursements. Contingent rentals
included in income for the years ended July 31, 1998, 1997 and 1996 amounted to
approximately $34,421,000, $28,933,000 and $26,173,000, respectively.
16
NOTE L - PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The Trust acquired 14 shopping centers and five apartment complexes
during the year ended July 31, 1998. The aggregate acquisition cost of these
properties included existing mortgages and $105 million in cash. In addition,
the Trust completed the merger with Excel Realty Trust during September, 1998
(See Note Q). The pro forma financial information for the years ended July 31,
1998 and 1997 shown below is based on the historical statements of the Trust
after giving effect to the aforementioned acquisition of 19 properties and the
merger with Excel Realty Trust as if such acquisitions took place on August 1,
1997 and 1996, respectively.
The purchase price allocations related to the Excel merger are
preliminary and are subject to adjustment based on the results of the various
appraisals and analyses of fair values.
The pro forma financial information is presented for informational
purposes only and may not be indicative of results that would have actually
occurred had the acquisitions taken place at the dates indicated or of what may
occur in the future. (Amounts in Thousands, Except Per Share Data)
Year Ended July 31, 1998 1997
- ------------------- ---- ----
Pro forma total revenues $ 411,737 $ 392,259
Pro forma net income $ 153,857 $ 141,692
Pro forma net income per share
of beneficial interest
Basic $ 1.52 $ 1.41
Diluted $ 1.49 $ 1.38
NOTE M - QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Amounts in Thousands,
Except Per Share Data)
Earnings Per Share
Net ----------------------
Year Ended July 31, Revenue Income Basic Diluted
1998
- ----
First $59,507 $21,537 $ .34 $ .34
Second 61,845 22,525 .36 .35
Third 63,481 22,899 .36 .36
Fourth 65,426 23,612 .37 .37
1997
- ----
First $47,783 $19,076 $ .33 $ .33
Second 51,147 19,092 .33 .32
Third 52,066 19,088 .32 .32
Fourth 55,825 19,781 .33 .33
NOTE N - SUPPLEMENTAL CASH FLOW INFORMATION
The Trust entered into the following non-cash investing and financing
activities (Amounts in Thousands):
Year Ended July 31, 1998 1997
- ------------------- ---- ----
Mortgages payable assumed in the acquisition of properties $51,900 $17,500
Mortgages receivable in connection with the sale of properties $ -- $ 700
State and local income taxes paid for the year ended July 31, 1998 and
1997 were $156,000 and $872,000, respectively. Interest paid for the years ended
July 31, 1998 and 1997 was $34,876,000 and $24,642,000, respectively.
NOTE O - RETIREMENT SAVINGS PLAN
The Trust has a Retirement Savings Plan (the "Savings Plan").
Participants in the Savings Plan may elect to contribute a portion of their
earnings to the Savings Plan and the Trust may, at the discretion of the Board
of Trustees, make a voluntary contribution to the Savings Plan. For the years
ended July 31, 1998, 1997 and 1996, the Trust's expense for the Savings Plan was
$317,000, $250,000 and $228,000, respectively.
17
NOTE P - FINANCIAL INSTRUMENTS
The estimated fair values of the Trust's financial instruments are as
follows (Amounts in Thousands):
At July 31, 1998 1997
- ----------- ---- ----
Corre-
Carrying Fair Carrying Fair sponding
Amounts Value Amounts Value Footnote
------- ----- ------- ----- --------
Assets:
Cash and cash equivalents $ 26,284 $ 26,284 $ 42,781 $ 42,781 A
Marketable securities 1,787 1,787 2,034 2,034 B
Mortgages and notes receivable 13,875 14,100 23,107 24,200 C
Other receivables 1,376 1,376 1,464 1,464 D
Liabilities:
Mortgages payable 114,099 115,700 65,573 67,500 E
Notes payable 462,789 501,800 412,634 429,200 F
Other liabilities 37,520 37,520 35,359 35,359 G
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable:
Cash and cash equivalents and other receivables and payables: The
carrying amount approximates fair value because of the short maturity of those
instruments.
Marketable securities: Fair value is based on quoted market prices.
Mortgages and Notes receivable: The fair value is estimated based on
discounting the future cash flows at a year-end risk adjusted lending rate that
the Trust would utilize for loans of similar risk and duration.
Mortgages payable and Notes payable: The fair value is estimated based
on discounting future cash flows at a year-end adjusted borrowing rate which
reflects the risks associated with mortgages and notes of similar risk and
duration.
NOTE Q - SUBSEQUENT EVENTS
Subsequent to July 31, 1998 the Trust purchased an apartment complex
containing 278 units and a single tenant retail property containing
approximately 34,000 gross leasable square feet. The properties are located in
North Carolina and Pennsylvania. The aggregate purchase price for such
properties was approximately $14.2 million.
On August 11, 1998 the Trustees declared a cash distribution to
shareholders of record of the shares of beneficial interest as of September 1,
1998 in the amount of $.375 per share (approximately $22.5 million) payable on
September 11, 1998.
On August 11, 1998 the Trustees declared a cash distribution to
shareholders of record of the Series A Cumulative Preferred Shares as of
September 1, 1998 in the amount of $9.75 per share ($.975 per depositary share,
approximately $1.5 million) payable on September 15, 1998.
On September 25, 1998, New Plan Realty Trust, a Massachusetts business
trust (the "Trust"), Excel Realty Trust, Inc., a Maryland corporation ("Excel"),
and ERT Merger Sub, Inc., a Maryland corporation and a wholly-owned subsidiary
of Excel ("Sub"), voted to accept an Agreement and Plan of Merger dated as of
May 14, 1998 providing for the merger of the Sub with and into the Trust and the
Trust surviving as a wholly-owned subsidiary of Excel. Subsequently Excel
declared a 20% stock dividend and then issued one share of Excel for each of the
Trust's outstanding shares of beneficial interest. After the merger, the
combined company, which was renamed New Plan Excel Realty Trust, Inc. ("New Plan
Excel"), has approximately 93 million common shares outstanding. Holders of the
Trust's shares upon consummation of the merger hold approximately 65% of the
outstanding common stock of New Plan Excel. The Board of Directors of New Plan
Excel consists of the nine (9) current members of the Trust's Board and six (6)
members currently on Excel's Board. The dividend policy of New Plan Excel for
the first year following the merger is $1.60 per share with anticipated minimum
increases of $0.0025 per share per quarter until the current quarterly dividend
(expressed as an annual rate) is $1.67 per share.
Holders of the Trust's Series A Cumulative Step Up Premium Rate
Preferred Shares received an equal amount of Excel's Series D Cumulative Voting
Step Up Premium Rate Preferred Stock ("Excel Series D Preferred Stock") with
substantially identical terms, except that holders of the Excel Series D
Preferred Stock will have the right to vote with the holders of the common stock
of New Plan Excel on all matters and for two additional directors of New Plan
Excel if the distributions on the Excel Series D Preferred Stock are in arrears
for six or more quarterly periods. In addition, an application will be made to
list the Excel Series D Preferred Stock on the New York Stock Exchange.
The merger will, for financial accounting purposes, be accounted for as
an acquisition of Excel by New Plan using the purchase method of accounting. The
transaction was completed on September 28, 1998.
18
NEW PLAN EXCEL REALTY TRUST INC.
UNAUDITED PRO FORMA
OPERATING AND FINANCIAL INFORMATION
The following tables set forth summary consolidated pro forma operating
and financial information of New Plan Excel Realty Trust, Inc. for the year
ended July 31, 1998 as if the merger of New Plan and Excel and each respective
entity's property acquisitions during its current fiscal year had occurred on
July 31, 1998 for balance sheet data and August 1, 1997 for income statement
data. Information with respect to Excel is as of June 30, 1998 for balance sheet
data and for the year ended June 30, 1998 for income statement data. The pro
forma data included herein may not be indicative of the actual results or
financial position had the merger of New Plan and Excel and the property
acquisitions occurred on the dates indicated.
The merger of New Plan and Excel has been accounted for as an
acquisition of Excel by New Plan using the purchase method of accounting. The
pro forma adjustments related to the merger are based on preliminary estimates
of value. Actual adjustments will be based on the results of various appraisals
and analyses of fair values.
19
NEW PLAN EXCEL REALTY TRUST, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS - UNAUDITED
(In Thousands)
New Plan Excel
Historical Historical Pro Forma
July 31, June 30, Combined Pro Forma
1998 (2A) 1998 (2A) Adjustments Totals
--------- --------- ----------- ------
ASSETS
Real estate, net $ 1,315,760 $ 902,133 $ 289,873(2B) $ 2,507,766
Cash 26,284 63,472 (12,200)(2C) 77,556
Accounts receivable, net 15,401 2,974 -- 18,375
Notes receivable - affiliates -- 66,616 -- 66,616
Notes receivable - other 13,878 30,975 -- 44,853
Other assets 13,202 21,153 10,556(2D) 44,911
----------- ----------- ----------- -----------
Total assets $ 1,384,525 $ 1,087,323 $ 288,229 $ 2,760,077
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages and other notes payable $ 576,888 $ 380,761 $ 9,083(2E) $ 966,732
Capital leases -- 27,229 -- 27,229
Accounts payable, accrued expenses and other
liabilities 43,110 18,755 -- 61,865
----------- ----------- ----------- -----------
Total liabilities 619,998 426,745 9,083 1,055,826
----------- ----------- ----------- -----------
Minority interest in partnership -- 41,249 -- 41,249
----------- ----------- ----------- -----------
Stockholders' Equity:
Preferred stock 72,775 28 (72,774)(2F) 29
Beneficial interests 759,853 -- (759,853)(2F) --
Common stock -- 234 646(2F) 880
Additional paid-in capital -- 661,260 1,068,934(2F) 1,730,194
Accumulated distributions in excess of net
income (66,608) (42,193) 42,193(2F) (66,608)
Loans receivable - purchase of shares (2,306) -- -- (2,306)
Unrealized gain on securities 813 -- -- 813
----------- ----------- ----------- -----------
Total stockholders' equity 764,527 619,329 279,146 1,663,002
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,384,525 $ 1,087,323 $ 288,229 $ 2,760,077
=========== =========== =========== ===========
The accompanying notes and management's assumptions are an integral part of this
statement.
20
NEW PLAN EXCEL REALTY TRUST, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME - UNAUDITED
FOR THE YEAR ENDED JULY 31, 1998
(In Thousands, Except Per Share Amounts)
New Plan
New Plan Property Excel
Historical Acquisitions Historical Excel Property
Year Ended Aug. 1, 1997 Year Ended Acquisitions
July 31, 1998 to July 31, New Plan June 30, July 1, 1997 to
(3A) 1998 Pro Forma 1998 (3A) June 30, 1998
---- ---- ----- --------- -------------
Revenues:
Rental $246,309 $ 12,894 $259,203 $113,069 $ 19,075
Interest and other 3,950 (266) 3,684 22,231 36
-------- --------- -------- -------- --------
Total revenue 250,259 12,628 262,887 135,300 19,111
-------- -------- -------- -------- --------
Expenses:
Property expenses 88,438 4,507 92,945 22,265 4,185
Interest 36,815 5,999 42,814 29,042 3,196
Depreciation and
amortization 31,622 1,749 33,371 15,111 2,215
General and administrative 2,770 -- 2,770 6,313 488
-------- -------- -------- -------- --------
Total expenses 159,645 12,255 171,900 72,731 10,084
-------- -------- -------- -------- --------
Income before real estate
sales, minority interest
and other 90,614 373 90,987 62,569 9,027
Minority interest -- -- -- (1,558) --
Gains on sales of securities
and other (41) -- (41) (2,229) --
Gain (loss) on sale of real
estate -- -- -- 516 --
-------- -------- -------- -------- --------
Net income $ 90,573 $ 373 $ 90,946 $ 59,298 $ 9,027
======== ======== ======== ======== ========
Net income applicable to common shares
Basic $84,723 $ 85,096 $ 44,673
Diluted $84,723 $ 85,096 $ 46,231
Basic net income per common
share $ 1.43 $ 1.43 $ 2.06
======= ======== ========
Diluted net income per common
share $ 1.42 $ 1.42 $ 1.95
======= ======== ========
Merger
Excel Legacy Excel Pro Forma Combined Pro
Spin-off (3K) Pro Forma Adjustments Forma Results
------------- --------- ----------- -------------
Revenues:
Rental $ (3,703) $128,441 $ 243(3B) $ 387,887
Interest and other (2,101) 20,166 -- 23,850
--------- -------- -------- ---------
Total revenue (5,804) 148,607 243 411,737
--------- -------- -------- ---------
Expenses:
Property expenses -- 26,450 259(3C) 119,654
Interest (2,016) 30,222 (2,502)(3D) 70,534
Depreciation and
amortization (652) 16,674 7,495 (3E) 57,540
General and administrative (1,154) 5,647 310(3F) 8,727
---------- -------- -------- ---------
Total expenses (3,822) 78,993 5,562 256,455
---------- -------- -------- ---------
Income before real estate
sales, minority interest
and other (1,982) 69,614 (5,319) 155,282
Minority interest -- (1,558) -- (1,558)
Gains on sales of securities
and other -- (2,229) -- (2,270)
Gain (loss) on sale of real
estate -- 516 -- 516
--------- -------- -------- ---------
Net income $ (1,982) $ 66,343 $ (5,319) $ 151,970
========== ======== ========= =========
Net income applicable to common shares
Basic $ 51,718 $ 131,495
Diluted $ 53,276 $ 133,053
Basic net income per common
share $ 2.21 $ 1.50
======== =========
Diluted net income per common
share $ 2.09 $ 1.47
======== =========
21
NEW PLAN EXCEL REALTY TRUST, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME - UNAUDITED
FOR THE YEAR ENDED JULY 31, 1998
(In Thousands, Except Per Share Amounts)
(CONTINUED)
New Plan
New Plan Property Excel Property
Historical Acquisitions Excel Acquisitions
Year Ended Aug. 1, 1997 Historical July 1, 1997
July 31, 1998 to July 31, New Plan Year Ended to June 30,
(3A) 1998 Pro Forma June 30, 1998 1998
------------- ------------ --------- ------------- --------------
Historical basic weighted average
number of common shares
outstanding 59,365 21,657
Historical diluted weighted average
number of common shares
outstanding 59,774 23,703
Pro forma basic weighted average
number of common shares
outstanding 59,365 1,775(3G)
Pro forma diluted weighted average
number of common shares
outstanding 59,774 1,775(3G)
Excel Excel Merger
Legacy Pro Pro Forma Combined Pro
Spin-off Forma Adjustments Forma Results
-------- ----- ----------- -------------
Historical basic weighted average
number of common shares
outstanding
Historical diluted weighted average
number of common shares
outstanding
Pro forma basic weighted average
number of common shares
outstanding 23,432 87,483
Pro forma diluted weighted average
number of common shares
outstanding 25,478 90,348
The accompanying notes and management's assumptions are an integral
part of this statement.
22
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION - UNAUDITED
(In thousands, except per share amounts)
1. Summary of Accounting Treatment:
The exchange of New Plan Shares of Beneficial Interest for Excel Common
Stock in connection with the Merger is being accounted for as a reverse merger
for financial reporting purposes as if New Plan has acquired Excel. As such, the
assets and liabilities of Excel have been adjusted to fair value in connection
with the application of purchase accounting.
2. Adjustments to Pro Forma Consolidated Condensed Balance Sheets
(A) Certain reclassifications have been made to the historical balance
sheets of New Plan and Excel in order to conform to the desired pro forma
combined condensed balance sheet presentation.
(B) Represents adjustments to record the Merger in accordance with the
purchase method of accounting based upon an assumed purchase price of Excel
stock of $905,175. The purchase price was calculated assuming a market value of
New Plan Shares of Beneficial Interest of $24.20 per share times the outstanding
shares of Excel Common Stock of 28,118,668 after the 20% stock dividend to the
current holders of Excel Common Stock. In addition, the Excel Preferred A Stock
of 2,126,380 shares has been valued at $28.75 per share and the Excel Preferred
B Stock of 630,000 shares has been valued at $24.90 per 1/10 of a share. All
share prices were determined by taking the average of the closing stock prices
10 days before and after the announced merger date of May 14, 1998. The total
purchase price is as follows:
Shares Total
Security Outstanding Value Per Share Consideration
- -------- ----------- --------------- -------------
Common Stock 28,118,668 $ 24.20 $ 680,472
Series A preferred stock 2,126,380 $ 28.75 61,133
Series B preferred stock
to depositary shares 630,000 $ 24.90 156,870
----------
Total consideration 898,475
Merger and the Other Transaction
costs (see below) 6,700
----------
Total purchase price $905,175
==========
Estimated fees and expenses related to the Merger are as follows:
Advisory fees $ 7,200
Accounting and legal 2,000
Other costs 3,000
-------
Total 12,200
Less Excel expenses 5,500
-------
New Plan transaction costs $ 6,700
=======
23
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL INFORMATION - UNAUDITED (Continued)
(In thousands, except per share amounts)
The adjustment to reflect investment in real estate:
Purchase price (see above) $ 905,175
Less historical book value of Excel equity (619,329)
Transaction costs to be paid by Excel and expensed thereby
reducing the historical book value of Excel 5,500
Adjustments to reflect certain assets and liabilities of Excel at fair value:
Other assets (see Note (D)) $ (10,556)
Mortgages and other notes payable (see Note (E)) 9,083
---------
(1,473)
Adjustment required to reflect investment in real estate, net $ 289,873
=========
(C) To reflect the decrease in cash due to the estimated Merger costs $ (12,200)
=========
(D) Adjustments to other assets:
To eliminate Excel's asset related to the straight-lining of rent
related to leases $ (2,427)
To eliminate Excel's asset of deferred financing costs (2,912)
To eliminate Excel's asset of deferred leasing costs (1,083)
To eliminate Excel's assets of organizational costs and goodwill (37)
To adjust Excel's historical cost in ERT Development Corporation to
estimated fair market value of $17,257 17,015
---------
$ 10,556
=========
(E) To record a premium required to adjust mortgages and other notes payable to
fair value using estimated market rates ranging from 6.75% to 7.5% on
an instrument by instrument basis $ 9,083
=========
(F) To adjust stockholders' equity to reflect the issuance of Excel's common
stock to owners of New Plan's shares of beneficial interest as follows:
Cumulative
Additional Distributions
Preferred Beneficial Common Paid-in in Excess of
Stock Interests Stock Capital Net Income
----- --------- ----- ------- ----------
Exchange of New Plan Shares of
Beneficial Interest for Excel
Common Stock $ -- $ (759,853) $ 599 $ 759,254 $ --
Exchange of New Plan Preferred
Stock for Excel Preferred Stock (72,774) -- -- 72,774 --
Excel's historical Stockholders'
equity (28) -- (234) (661,260) 42,193
Value of Excel acquisition 28 -- 281 898,166 --
----------- ----------- ----------- ----------- -----------
$ (72,774) $ (759,853) $ 646 $ 1,068,934 $ 42,193
=========== =========== =========== =========== ===========
The historical cost of the other assets, including all accounts and
notes receivable, and liabilities of Excel are estimated to be their fair market
value.
24
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL INFORMATION - UNAUDITED (Continued)
(In thousands, except per share amounts)
3. Adjustments To Pro Forma Consolidated Condensed Statements of Income
(A) Certain reclassifications have been made to the historical
statements of income of New Plan and Excel in order to conform to the desired
pro forma combined condensed statements of income presentation. The Consolidated
Condensed Statements of Income include pro forma adjustments for real estate
acquisitions that both companies have made within the past twelve months. The
cash used to acquire real estate by New Plan has been assumed to come from
available cash in savings and from new debt issues. The new debt issued by New
Plan was assumed to have an average interest rate of 6.8%. Depreciation expense
on the New Plan acquisitions was based on an estimated useful life of 40 years,
using the straight line method and allocating the cost between land and building
at 20% and 80%, respectively. The cash used to acquire real estate by Excel has
been assumed to come from approximately $223 million in equity offerings and the
issuance of $39 million in debt.
The following adjustments have been made to convert the operations of
Excel, which has reported operations on a calendar year basis, to a year ended
June 30, 1998 (this approximates the July 31 year end of New Plan).
Add:
Six Months Less:
Year Ended, Ended Six Months Ended Year Ended
Dec. 31, 1997 June 30, 1998 June 30, 1997 June 30, 1998
------------- ------------- ------------- -------------
Revenues: $ 83,112 $ 63,486 $ 33,529 $ 113,069
Rental revenue 22,346 10,021 10,136 22,231
--------- --------- --------- ---------
Interest and other 105,458 73,507 43,665 135,300
--------- --------- --------- ---------
Total revenue
Expenses:
Property expenses 14,023 13,689 5,447 22,265
Interest 23,991 14,886 9,835 29,042
Depreciation and amortization 11,621 8,248 4,758 15,111
General and administrative 5,046 3,614 2,347 6,313
--------- --------- --------- ---------
Total expenses 54,681 40,437 22,387 72,731
--------- --------- --------- ---------
Income before real estate sales,
minority interest and other 50,777 33,070 21,278 62,569
Minority interest (816) (812) (70) (1,558)
Real estate gains on sale/impairments 523 286 293 516
Other (1,522) (707) -- (2,229)
--------- --------- --------- ---------
Net income $ 48,962 $ 31,837 $ 21,501 $ 59,298
========= ========= ========= =========
Basic net income per share $ 2.06 $ 0.98 $ 0.95 $ 2.06
========= ========= ========= =========
Diluted net income per share $ 1.97 $ 0.93 $ 0.93 $ 1.95
========= ========= ========= =========
25
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL INFORMATION - UNAUDITED (Continued)
(In thousands, except per share amounts)
(B) To recognize revenue from straight-lining rent related to Excel's leases
which will be reset in connection with the
Merger $ 243
(C) To reflect the decrease in amortization of Excel's deferred
leasing costs $ (259)
(D) To reflect the following adjustments to interest expense:
(1) To recognize the elimination of amortization of
deferred loan costs $ (763)
(2) To reflect the amortization of the premium required to adjust Excel's
mortgages and other notes payable to
fair value (1,739)
--------
Total adjustment $ (2,502)
========
(E) To reflect the increase in depreciation as a result of recording Excel's
real estate assets at fair value versus historical cost, utilizing an
estimated useful life of 40 years and allocating the cost between land and
buildings at 20% and 80%, respectively
Pro forma depreciation $ 23,840
Excel's historical depreciation (14,782)
Pro forma depreciation on property acquisitions (2,215)
Pro forma depreciation from Legacy spin-off 652
--------
Total adjustment $ 7,495
========
(F) To reflect the increase in general and administrative costs mainly due to
increased salary costs under new contractual
agreements $ 310
(G) To increase the weighted average shares outstanding for Excel for the
issuance of common stock and common stock equivalents for the purchase of
real estate by Excel. These shares have been accounted for on a pro forma
basis to be outstanding during the entire period presented
Basic 1,775
Diluted 1,775
(H) The pro forma weighted average number of common shares outstanding for the
periods are computed based on the historical weighted average shares
outstanding of New Plan and 1.2 times the pro forma weighted average shares
outstanding of Excel after giving effect to the issuance of common stock
equivalents for the purchase of real estate as noted in item (G) above
(I) Includes pro forma effects of the acquisition of real estate properties by
New Plan
(J) Reflects the decrease in net income applicable to common shares due to the
assumed issuance of Excel preferred securities on July 1, 1997
(K) In March 1998, Excel spun off 100% of the shares of Excel Legacy Corporation
to its shareholders. This entry reflects the effect of this transaction as
if it had occurred July 1, 1997
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 13, 1998 NEW PLAN REALTY TRUST
By: /S/ STEVEN F. SIEGEL
--------------------------------
Name: Steven F. Siegel
--------------------------------
Title: Senior Vice President and
General Counsel
--------------------------------
27
EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated May 14, 1998, as amended
as of August 7, 1998, among Excel Realty Trust, Inc., ERT
Merger Sub, Inc. and New Plan Realty Trust (incorporated by
reference to Exhibit 2.1 to the Registrant's Registration
Statement on Form S-4 (No. 333-61131) filed with the
Securities and Exchange Commission on August 11, 1998).
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Press Release, dated September 25, 1998, announcing
stockholder approval of the Merger and the payment of a 20%
stock dividend to holders of Excel common stock.
99.2 Press Release, dated September 28, 1998, announcing the
consummation of the Merger.