Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-12002
ACADIA REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland 23-2715194
(State of incorporation) (I.R.S. employer identification no.)
20 Soundview Marketplace
Port Washington, NY 11050 (516)767-8830
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, $.001 par value
(Title of Class)
New York Stock Exchange
(Name of exchange on which registered)
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 Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X 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 voting common equity stock held by
non-affiliates of the Registrant was approximately $137.4 million based on the
closing price on the New York Stock Exchange for such stock on March 22, 2000
(the Company has no non-voting common equity).
The number of shares of the Registrant's Common Shares of Beneficial Interest
outstanding was 25,261,715 on March 22, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Definitive proxy statement for the Annual Meeting of Shareholders
presently scheduled to be held May 16, 2000, to be filed pursuant to Regulation
14A.
TABLE OF CONTENTS
Form 10-K Report
Item No. Page
- -------- PART I ----
1. Business 3
2. Properties 8
3. Legal Proceedings 15
4. Submission of Matters to a Vote
of Security Holders 15
PART II
5. Market for the Registrant's Common Equity and
Related Shareholder Matters 16
6. Selected Financial Data 17
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
7A. Quantitative and Qualitative Disclosures about
Market Risk 26
8. Financial Statements and Supplementary Data 26
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 26
PART III
10. Directors and Executive Officers of the Registrant 27
11. Executive Compensation 27
12. Security Ownership of Certain Beneficial Owners and Management 27
13. Certain Relationships and Related Transactions 27
PART IV
14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 27
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions, which will, among other things, affect
demand for rental space, the availability and creditworthiness of prospective
tenants, lease rents and the availability of financing; adverse changes in the
Company's real estate markets, including, among other things, competition with
other companies; risks of real estate development and acquisition; governmental
actions and initiatives; and environmental/safety requirements.
PART I
ITEM 1. BUSINESS
GENERAL
Acadia Realty Trust (the "Company"), formerly Mark Centers Trust, was
formed on March 4, 1993 as a Maryland Real Estate Investment Trust ("REIT"). The
Company is a fully integrated, self-managed and self-administered equity REIT
focused primarily on the ownership, acquisition, redevelopment and management of
neighborhood and community shopping centers, and multi-family properties. The
Company operates fifty-eight properties, which it owns or has an ownership
interest in, consisting of forty-seven neighborhood and community shopping
centers, three enclosed malls, two mixed use properties (a retail/office center
and a retail/residential property), five multi-family properties and one
redevelopment property which are all located in the Eastern and Midwestern
regions of the United States. The retail/office mixed use property is currently
held for sale.
All of the Company's assets are held by, and all of its operations are
conducted through, Acadia Realty Limited Partnership, a Delaware limited
partnership (the "Operating Partnership"), previously Mark Centers Limited
Partnership, and its majority owned subsidiaries. As of December 31, 1999, the
Company controlled 71% of the Operating Partnership as the sole general partner.
On August 12, 1998 the Company completed the transactions contemplated
by the Contribution and Share Purchase Agreement dated April 15, 1998 (the "RDC
Transaction"). In connection with the RDC Transaction, the Operating Partnership
acquired (i) fee title or all, or substantially all, of the ownership interests
in twelve shopping centers, five multi-family properties and one redevelopment
property, (ii) a 49% interest in one shopping center, (iii) certain third party
management contracts, and (iv) certain promissory notes from real estate
investment partnerships and related entities, which are not under common
control, in which RD Capital, Inc. ("RDC") serves as general partner or in
another similar management capacity, for approximately 11.1 million Operating
Partnership Units ("OP Units") and approximately 2.0 million common shares of
beneficial interest ("Common Shares") valued at $97.2 million. In addition, the
Company assumed mortgage debt aggregating $154.2 million and incurred other
capitalized transaction costs of $5.8 million resulting in an aggregate purchase
price of $257.2 million. Pursuant to the terms of the RDC Transaction, the
recipients of the OP Units and Common Shares were restricted, subject to certain
limited exceptions, from selling or otherwise transferring such OP Units or
Common Shares prior to the first anniversary of the closing of the RDC
Transaction. As part of the RDC Transaction, the Company issued approximately
13.3 million Common Shares to three real estate investment limited partnerships
(collectively "RDC Funds"), in which affiliates of RDC serve as general partner,
in exchange for $100.0 million. As a result of the RDC Transaction, the RDC
Funds owned 63% of the Common Shares in the Company. Each of the RDC Funds
appointed each of its partners as such RDC Funds' proxy with respect to the
Common Shares to which such partner would be entitled upon a dissolution of such
RDC Fund and a distribution of such Common Shares among the partners. Other real
estate investment partnerships and related entities in which RDC or its
affiliates serve as general partner or in another similar management capacity,
owned 93% of the minority interest in the Operating Partnership as limited
partners. Collectively, after giving effect to the conversion of their OP Units,
which are generally exchangeable for Common Shares on a one-for-one basis, these
entities and the RDC Funds beneficially owned 72% of the Common Shares as of the
closing of the RDC Transaction. The Operating Partnership is also obligated to
issue additional OP Units valued at $2.8 million upon the completion of certain
improvements and the commencement of rental payments from a designated tenant at
one of the properties acquired in the RDC Transaction.
In March 2000, the RDC Funds, in accordance with their respective
partnership agreements (the "RDC Fund Partnership Agreements"), distributed to
their respective limited partners the Common Shares which had been issued to the
RDC Funds in connection with the RDC Transaction. Pursuant to a registration and
lock-up agreement, dated as of the date of the RDC Transaction (the
"Registration Agreement"), in March 2000, the Company filed a registration
statement with the Securities and Exchange Commission to permit the resale of
such Common Shares, which registration statement was declared effective in March
2000. Pursuant to the RDC Fund Partnership Agreements and the Registration
Agreement, such limited partners had agreed to certain restrictions on the sale
of such Common Shares by such limited partners (the "Original Lock-Up
Provisions"). In March 2000, such limited partners agreed, subject to certain
conditions, to extend the term of the Original Lock-Up Provisions until December
28, 2000.
Concurrent with the closing of the RDC Transaction, the Company
appointed Ross Dworman and Kenneth F. Bernstein, the Chief Executive Officer and
Chief Operating Officer, respectively, of RDC, as the Chairman and Chief
Executive Officer, and President, respectively, of the Company. Messrs. Dworman
and Bernstein, together with two designees of RDC, were appointed to the Board
of Trustees. Following the completion of the RDC Transaction, the Company
changed its name from Mark Centers Trust to Acadia Realty Trust and the name of
the Operating Partnership was changed from Mark Centers Limited Partnership to
Acadia Realty Limited Partnership.
BUSINESS OBJECTIVES AND OPERATING STRATEGY
The Company's primary business objective is to acquire and manage
commercial retail properties that will provide cash for distributions to
shareholders while also creating potential for capital appreciation to enhance
investor returns. The Company's acquisition program focuses on acquiring
sub-performing neighborhood and community shopping centers that are well-located
and creating significant value through retenanting, timely capital improvements
and property redevelopment. In considering acquisitions, the Company focuses on
quality shopping centers located in the Northeast, Mid-Atlantic, Southeast and
Midwest regions. The Company considers both single assets and portfolios in its
acquisition program. In conjunction with evaluating potential portfolio
acquisitions, the Company also regularly engages in discussions with public and
private entities regarding business combinations as well. Furthermore, the
Company may, from time to time, consider acquiring multi-family apartment
complexes as well as engaging in joint ventures related to property acquisition
and development.
The Company typically holds its properties for long-term investment. As
such, it continuously reviews the existing portfolio and implements programs to
renovate and modernize targeted centers to enhance the property's market
position. This in turn strengthens the competitive position of the leasing
program to attract and retain quality tenants, increasing cash flow and
consequently property value. Upon evaluating the portfolio, the Company also
periodically identifies certain properties for disposition and redeploys the
capital to existing centers or acquisitions with greater potential for capital
appreciation.
Operating functions such as leasing, property management, construction,
finance and legal (collectively the "Operating Departments") are provided by
Company personnel, providing for fully integrated property management and
development. The Operating Departments' involvement in acquisitions is an
essential component to the acquisition program. By incorporating the Operating
Departments in the acquisition process, acquisitions are appropriately priced
giving effect to each asset's specific risks and returns. Also, because of the
Operating Departments' involvement with, and corresponding understanding of, the
acquisition process, transition time is minimized and management can immediately
execute an asset's strategic plan. All operating activities are supported by a
management information system which was substantially upgraded in 1999 and
provides management with the operating data necessary to make informed operating
decisions on a timely basis. The Company also designed and implemented a web
site in 1999 providing the investment community and prospective tenants with
detailed financial and portfolio information.
PROPERTY ACQUISITIONS
The requirements that acquisitions be accretive based on the Company's
long-term cost of capital as well as increase overall portfolio quality and
value are core to the Company's acquisition program. When the blended cost of
equity and debt increase, it is important to reduce acquisition activity to
align the level of investment activity with capital flows. Due to a difficult
capital market environment experienced throughout the REIT industry during 1999,
the Company made the strategic decision to limit its acquisition program. As a
result of what the Company considers this common sense approach, it believes it
will be better positioned to take advantage of favorable acquisition
opportunities in the event the capital markets improve. Consistent with this
disciplined approach, the Company limited its acquisition activity during 1999
to three opportunistic investments as follows:
On November 16, 1999, the Company acquired 100% of the partnership
interests of the limited partnership which owns the Pacesetter Park Shopping
Center, a 96,000 square foot community shopping center located in Rockland
County, New York. The aggregate purchase price of $7.4 million consisted of the
assumption of $4.6 million in first mortgage debt and the issuance of $2.2
million in preferred Operating Partnership units with the balance funded from
working capital.
On May 5, 1999, the Company acquired the sole general partner's
interest in the limited partnership owning the Gateway Mall (formerly the Mall
189), a 122,000 square foot shopping center located in Burlington, Vermont, for
$6.5 million. The interest, which is senior to the interests of the limited
partners, was acquired out of bankruptcy by restructuring and assuming the
mortgage debt of $6.2 million. The balance of the purchase was funded from
working capital. The Gateway Mall is in its early stages of redevelopment with
anticipated completion in late 2001. The property is a partially enclosed mall
that will be reconfigured into a conventional strip center format.
On February 24, 1999, the Company acquired the Mad River Station, a
154,000 square foot shopping center located in Dayton, Ohio for $11.5 million.
The Company assumed $7.7 million in mortgage debt and funded the remaining
purchase from working capital.
PROPERTY DEVELOPMENT
In 1999, the Company completed the redevelopment of a 39,700 square
foot building located in Greenwich, Connecticut, which consists of 17,000 square
feet of retail space and 21 apartments (approximately 15,000 square feet).
During June 1999, Restoration Hardware, the lead anchor for the center occupying
12,300 square feet of the retail space, commenced paying rent. The remaining
retail space has been leased as well with occupancy anticipated during the
second quarter of 2000. All twenty-one residential units are leased as of
December 31, 1999. Costs incurred on this project, including the initial
acquisition cost, totaled $17.5 million.
During 1999, the Company also completed the following property development and
expansions:
- - The completion of a 10-screen theater at the Wesmark Plaza in Sumter,
South Carolina.
- - The expansion of a 42,000 square foot Waldbaum's (A&P) Supermarket to
65,000 square feet including a new parking lot and exterior facade at the
Town Line Plaza in Rocky Hill, Connecticut.
- - The installation of Walmart and Circuit City in approximately 121,000 and
33,000 square feet, respectively, as well as an 11,600 square foot
expansion of Stern's Department Store in the Ledgewood Mall in Ledgewood,
New Jersey. The installation of these tenants in addition to PharMor
leasing 47,300 square feet resulted in a 94% occupancy level at the
property as of December 31, 1999.
The Company also received municipal approval in 1999 to renovate and
expand by approximately 30,000 square feet the 125,000 square foot Elmwood Park
Shopping Center. As part of the redevelopment, the Company is planning to
construct a 48,000 square foot free-standing A&P supermarket, replacing a 28,000
square foot in-line Grand Union supermarket at a significantly higher rent per
square foot. The Company expects redevelopment costs of approximately $9.1
million to complete this project in 2002. In conjunction with the A&P
supermarket rent commencement, the Operating Partnership is also obligated to
issue OP Units equal to $2.8 million as previously discussed in the RDC
Transaction.
LEASING ACTIVITY
During 1999, the Company replaced several weak or formerly vacated
anchor tenants with stronger retailers at various centers in connection with
management's goal of repositioning and reanchoring of the portfolio. Anchor
replacements included the following:
- - Kmart replaced a former Caldors at the Crossroads Shopping Center
(joint venture property), in White Plains, New York.
- - A lease was executed with Ames Department Stores for 76,000 square feet,
replacing a former Bradless at the New Louden Center in Latham, New York.
Rent is anticipated to commence during the second quarter of 2000.
- - A lease was executed with Homegoods, Inc. (a TJX company) for 37,000 square
feet, replacing a majority of the 43,000 square feet formerly occupied by
Burlington Coat at the Bloomfield Town Square in Bloomfield, Michigan. Rent
is expected to commence during the third quarter of 2000.
- - A former BiLo grocery store (Penn Traffic Company) occupying 59,100 square
feet was replaced by a Redner's Market at the Pittston Plaza and commenced
paying rent during June 1999.
- - Acme (Albertson's) currently occupying 44,824 square feet at the
Marketplace at Absecon in Absecon, New Jersey, replaced a Super Fresh
supermarket and commenced paying rent during September 1999.
The Company also recaptured two anchor spaces during 1999 as part of
the Company's reanchoring activities. The first lease was acquired during August
1999 for 60,400 square feet from Montgomery Ward. This lease, which was for
space located at the Northside Mall in Dothan, Alabama, was acquired for $57,000
and provided for minimum rent of $1.24 per square foot. The second, which was
acquired from Caldor's for $400,000, was for 85,800 square feet located at the
Methuen Shopping Center in Methuen, Massachusetts, and provided for minimum rent
of $2.20 per square foot. Although recapturing these lease resulted in an
interim loss in revenues and a decline in overall portfolio occupancy,
management anticipates these properties will be reanchored with stronger tenants
at market rents, which are currently greater than the former rent on both of
these spaces.
DISPOSITION OF PROPERTIES
In connection with the Company's ongoing program of evaluating its
property portfolio and optimizing the portfolio for both cash flow and future
capital appreciation, the Company sold two non-core assets during 1999. The
Searstown Mall was sold on February 1, 1999 for a sale price of $3.3 million and
the Auburn Plaza on March 29, 1999 for $3.5 million.
FINANCING STRATEGY
The Company intends to continue to finance acquisitions and property
redevelopment with sources of capital determined by management to be the most
appropriate based on, among other factors, availability, pricing and other
commercial and financial terms. The sources of capital may include bank and
other institutional borrowing, the issuance of equity and/or debt securities and
the sale of properties. In 1999, the Company established the specific goal of
enhancing the flexibility within its mortgage debt structure to better position
itself to take advantage of favorable opportunities for portfolio and strategic
transactions. This enhanced flexibility is currently being accomplished
primarily through the use of variable rate debt and fixed rate debt with low
prepayment penalties. Management believes it was largely successful in the
pursuit of this goal while at the same time maintaining a debt service coverage
ratio (including interest expense and principal amortization) of 1.94x for 1999.
See Item 7A for a discussion on the Company's market risk exposure related to
its mortgage debt.
FINANCIAL INFORMATION ABOUT MARKET SEGMENTS
The Company has two reportable segments: retail properties and
multi-family properties. The accounting policies of the segments are the same as
those described in the notes to the consolidated financial statements appearing
in Item 8 of this Annual Report on Form 10-K. The Company evaluates property
performance primarily based on net operating income before depreciation,
amortization and certain non-recurring items. The reportable segments are
managed separately due to the differing nature of the leases and property
operations associated with retail versus residential tenants. The Company does
not have any foreign operations. See the consolidated financial statements and
notes thereto included in Item 8 of this Annual Report on Form 10-K for certain
information on industry segments as required by Item 1.
CORPORATE HEADQUARTERS AND EMPLOYEES
The Company's executive offices are located at 20 Soundview
Marketplace, Port Washington, New York 11050, and its telephone number is (516)
767-8830. The Company has an internet Web address at www.acadiarealty.com. The
Company has 168 employees of which 48 are located at the executive offices, 6 at
the New York City corporate office, 13 at the Pennsylvania regional office and
the remaining property management personnel are located on-site at the Company's
properties.
COMPETITION
There are numerous shopping facilities that compete with the Company's
properties in attracting retailers to lease space. In addition, there are
numerous commercial developers and real estate companies that compete with the
Company in seeking land for development, properties for acquisition and tenants
for their properties. Also, retailers at the Company's properties face
increasing competition from outlet malls, discount shopping clubs, internet
commerce, direct mail and telemarketing.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS - ENVIRONMENTAL MATTERS
Under various Federal, state and local laws, ordinances and regulations
relating to the protection of the environment, a current or previous owner or
operator of real estate may be liable for the cost of removal or remediation of
certain hazardous or toxic substances disposed, stored, generated, released,
manufactured or discharged from, on, at, under, or in a property. The Company
believes that it is in compliance in all material respects with all Federal,
state and local ordinances and regulations regarding hazardous or toxic
substances.
Upon conducting environmental site inspections in connection with
obtaining the Morgan Stanley Mortgage Capital ("Morgan Stanley") financing
during October 1996, certain environmental contamination was identified at the
Troy Plaza in Troy, New York. The Company has entered into a voluntary remedial
agreement with the State of New York for the remediation of the property.
Environmental consultants have completed the remediation operations at the site
and are performing a post-remediation sampling and analysis program. Upon the
issuance of a final report to the State of New York, the Company will have
satisfied all conditions to the voluntary remedial agreement. As of December 31,
1999, Morgan Stanley holds $250,000 in escrow to be released upon the Company
receiving final approval from the State of New York. Management is not aware of
any other environmental liability that they believe would have a material
adverse impact on the Company's financial position or results of operations.
Management is unaware of any instances in which it would incur significant
environmental costs if any or all properties were sold, disposed of or
abandoned.
RETAIL ENVIRONMENT
Seasonality
The retail environment is seasonal in nature, particularly in the
fourth calendar quarter when retail sales are typically at their highest levels.
As such, contingent rents based on tenants achieving certain sales targets are
generally higher in the fourth quarter when such targets are typically met.
Tenant Bankruptcies
Since January of 1999, certain tenants experienced financial
difficulties and several have filed for bankruptcy protection under Chapter 11
of the United States Bankruptcy laws ("Chapter 11"). Following are the
significant bankruptcies to have occurred since then:
On March 1, 1999, the Penn Traffic Company ("Penn Traffic") filed for
protection under Chapter 11. Penn Traffic, which operates grocery stores under
the names "Bi-Lo Foods" and "P&C Foods", is a tenant at seven locations in the
Company's portfolio comprising approximately 308,000 square feet. Rental
revenues (including expense reimbursements) from Penn Traffic for the years
ended December 31, 1999 and 1998 totaled $1.0 million and $2.4 million,
respectively. Two of these leases were assigned to other supermarket operators,
two of the leases were assumed by Penn Traffic, two leases were rejected and the
tenant did not renew one lease following its expiration on April 30, 1999.
During 1999, the Company received $460,000 in settlement of claims filed related
to the Chapter 11 proceedings for Penn Traffic which has since reorganized and
emerged from bankruptcy.
On March 23, 1999, Factory Card Outlet filed for protection under
Chapter 11. This retailer is a tenant at two locations in the Company's
portfolio comprising approximately 19,000 square feet. Rental revenues from
these two locations totaled $283,000 and $202,000 for the years ended December
31, 1999 and 1998, respectively. The tenant has neither affirmed nor rejected
the leases at either of the locations.
On March 10, 2000, Eagle Supermarkets filed for protection under
Chapter 11. This grocery is a tenant at one location in the Company's portfolio
comprising approximately 52,000 square feet. Rental revenues from this tenant
were $327,000 and $86,000 for the years ended December 31, 1999 and 1998,
respectively. The tenant has neither affirmed nor rejected the lease.
In addition to the above bankruptcies, in August 1999, old America
Stores, L.P. ceased operations and proceeded to undergo an orderly liquidation
of assets for the benefit of its creditors. This tenant previously occupied
stores in two locations, Martintown Plaza (18,000 square feet) and Wesmark Plaza
(30,000 square feet). Rental revenues from these two locations totalled $216,000
and $132,000 for the years ended December 31, 1999 and 1998, respectively. A
settlement has been agreed to pursuant to which the Company shall receive
approximately $45,000.
TAX STATUS - QUALIFICATION AS REAL ESTATE INVESTMENT TRUST
The Company has and currently transacts its affairs so as to qualify as,
and has elected to be treated as, a real estate investment trust under sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code").
Under the Code, a real estate investment trust that meets applicable
requirements is not subject to Federal income tax to the extent that it
distributes at least 95% of its REIT taxable income to its shareholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
Federal income tax on its taxable income.
ITEM 2. PROPERTIES
SHOPPING CENTER PROPERTIES
As of December 31, 1999, the Company owned and operated 53 shopping
centers (including one property which is under redevelopment, two mixed-use
centers and a shopping center in which the Company owns a 49% interest) totaling
approximately 9.1 million square feet of gross leasable area ("GLA"). The
Company's shopping centers, which are located in 16 states, are generally
well-established, anchored community and neighborhood shopping centers. The
shopping centers are diverse in size, ranging from approximately 45,000 to
516,000 square feet with an average size of 172,000 square feet. The Company's
portfolio was approximately 89% occupied at December 31, 1999. The Company's
shopping centers are typically anchored by a national or regional discount
department store and/or a supermarket or drugstore.
The Company had 737 leases (including the mixed-use and joint venture
properties) as of December 31, 1999 of which approximately 45% were with
national or regional tenants. A substantial portion of the income from the
properties consists of rent received under long term leases. Most of these
leases provide for the payment of fixed minimum rent monthly in advance and for
the payment by tenants of a pro-rata share of the real estate taxes, insurance,
utilities and common area maintenance of the shopping centers. Minimum rents and
expense reimbursements accounted for approximately 94% of the Company's total
revenues for the year ended December 31, 1999.
As of December 31, 1999, approximately 56% of the Company's existing
leases also provided for the payment of percentage rents either in addition to
or in place of minimum rents. These arrangements generally provide for payment
to the Company of a certain percentage of a tenant's gross sales in excess of a
stipulated annual amount. Percentage rents accounted for approximately 3% of the
total 1999 revenues of the Company.
Six of the Company's shopping center properties are subject to
long-term ground leases in which a third party owns and has leased the
underlying land to the Company. The Company pays rent for the use of the land
and is responsible for all costs and expenses associated with the building and
improvements.
No individual property contributed in excess of 10% of the Company's
total revenues for the years ended December 31, 1999 and 1998. For the year
ended December 31, 1997, greater than 10% of the Company's total rents were
derived from leases at the Northwood Centre, a mixed-use (retail/office)
property (See "Major Tenants" in Item 2).
The following sets forth more specific information with respect to each
of the Company's shopping centers, mixed-use and joint venture properties at
December 31, 1999:
Year Occupancy (1) Anchor Tenants (2)
Shopping Center Constructed(C) Ownership % Current Lease Expiration
Property Location Acquired(A) Interest GLA 12/31/99 Lease Option Expiration
- ------------------------------------------------------------------------------------------------------------------------------------
NEW ENGLAND REGION
Connecticut
239 Greenwich Avenue Greenwich 1998 (A) Fee 16,834 (3) 79% Restoration Hardware 2015/2020
Town Line Plaza Rocky Hill 1998 (A) Fee 205,752 (4) 93% Super Food Market (A&P) 2017/2052
Massachusetts
Methuen Shopping Center Methuen 1998 (A) Fee 134,494 32%(5) DeMoulas Market 2000/2015
Crescent Plaza Brockton 1984 (A) Fee (6) 216,095 100% Bradlees 2009/2027
Shaw's 2012/2042
Rhode Island
Walnut Hill Plaza Woonsocket 1998 (A) Fee 267,721 97% Sears 2003/2033
Shaw's 2013/2043
Vermont
The Gateway
Shopping Center Burlington 1999 (A) Fee 117,394 (7) 62% Grand Union 2005/2010
NEW YORK REGION
New Jersey
Berlin Shopping Center Berlin 1994 (A) Fee 187,296 88% Kmart 2005/2049
Acme 2005/2015
Elmwood Park Plaza Elmwood Park 1998 (A) Fee 124,144 (8) 86% Grand Union 2001/none
Ledgewood Mall Ledgewood 1983 (A) Fee 516,682 94% The Sports' Authority 2007/2037
Stern's 2005/2030
Walmart 2019/2049
Circuit City 2020/2040
Manahawkin Village
Shopping Center Manahawkin 1993 (A) Fee 175,261 100% Kmart 2019/2069
Hoyt's Cinema 2018/2038
Marketplace of Absecon Absecon 1998 (A) Fee 91,699 96% Acme 2015/2055
New York
Branch Shopping Center Village of the 1998 (A) LI (9) 125,812 99% Grand Union 2013/2028
Branch Pergament 2004/2019
New Loudon Center Latham 1982 (A) Fee 251,743 51%(10) Price Chopper 2015/2035
Marshalls 2004/2009
Troy Plaza Troy 1982 (A) Fee 128,479 100% Ames 2001/2016
Price Chopper 2004/2014
Smithtown Shopping
Center Smithtown 1998 (A) Fee 87,155 90% Daffy's 2008/2028
Walgreens 2021/none
Soundview Marketplace Port Washington 1998 (A) LI/Fee (9) 180,620 92% King Kullen 2007/2022
Clearview Cinema Group 2010/2030
(subsidiary of Cablevision)
Pacesetter Park
Shopping Center Ramapo 1999 (A) Fee 95,559 82% Grand Union 2020/2040
Year Occupancy (1) Anchor Tenants (2)
Shopping Center Constructed(C) Ownership % Current Lease Expiration
Property Location Acquired(A) Interest GLA 12/31/99 Lease Option Expiration
- ------------------------------------------------------------------------------------------------------------------------------------
MID-ATLANTIC REGION
Pennsylvania
25th Street Shopping
Center Easton 1993 (A) Fee 131,477 91% CVS 2005/2010
Petco 2009/2018
Ames Plaza Shamokin 1966(C) Fee 98,210 68% Ames 2003/2013
Atrium Mall Abington 1998(A) Fee 178,434 78% SuperFresh (A&P) 2009/2039 (11)
Circuit City 2009/2029 (11)
TJ Maxx 2004/2014
Birney Mall Moosic 1968 (C) Fee 193,899 100% Kmart 2004/2049
Consolidated Stores 2003/2008
Blackman Plaza Wilkes-Barre 1968 (C) Fee 117,456 99% Kmart 2004/2044
Bradford Towne Centre Towanda 1993 (C) Fee 257,319 92% Kmart 2019/2069
P&C Foods 2014/2024
Circle Plaza Shamokin Dam 1978 (C) Fee 92,171 100% Kmart 2004/2049
Dunmore Plaza Dunmore 1975 (A) Fee (12) 45,380 96% Price Chopper 2000/2020
Eckerd Drug 2004/2019
East End Centre Wilkes-Barre 1986 (C) Fee 308,427 100% Ames 2007/2037
PharMor 2003/2017
Price Chopper 2008/2028
Green Ridge Plaza Scranton 1986 (C) Fee 197,622 67% Ames 2007/2037
Kingston Plaza Kingston 1982 (C) Fee 64,824 100% Price Chopper 2006/2026
Dollar General 2001/2007
Luzerne Street Shopping
Center Scranton 1983 (A) Fee 57,715 100% Price Chopper 2004/2024
Eckerd Drug 2004/2019
Mark Plaza Edwardsville 1968 (C) LI(9) 216,220 94% Kmart 2004/2049
Redner's Markets 2018/2028
Monroe Plaza Stroudsberg 1964 (C) Fee 130,569 100% Ames 2001/2019
Shoprite 2005/2023
Eckerd Drug 2002/2012
Mountainville Shopping
Center Allentown 1983 (A) Fee 114,801 96% Acme 2004/2028
True Value Hardware 2002/2010
Eckerd Drug 2004/2019
Pittston Plaza Pittston 1994 (C) Fee 79,568 100% Redner's Markets 2018/2028
Eckerd Drug 2004 (13)
Plaza 15 Lewisburg 1995 (A) Fee 113,530 98% Weis Market 2001/2021
Ames 2001/2021
Plaza 422 Lebanon 1972 (C) Fee 154,791 88% Ames 2001/2021
Giant Food 2004 (14)
Route 6 Mall Honesdale 1994 (C) Fee 175,482 97% Kmart 2020/2070
Shillington Plaza Reading 1994 (A) Fee 150,742 100% Kmart 2004/2049
Weis Market 2001/2019
Tioga West Tunkhannock 1965 (C) Fee 122,338 100% BiLo 2014/2024
Ames 2000/2015
Eckerd Drug 2000/2010
Fashion Bug 2009/2021
Union Plaza New Castle 1996 (C) Fee 217,992 100% Sears 2011/2031
Ames 2017/2026
Peebles 2018/2027
Valmont Plaza West Hazleton 1985 (A) Fee 200,164 79% Ames 2007/2027
Virginia
Kings Fairgrounds Danville 1992 (A) LI(9) 118,535 100% Schewel Furniture 2001/2011
The Tractor Co. 2008/2023
CVS 2002/2012 (13)
Year Occupancy (1) Anchor Tenants (2)
Shopping Center Constructed(C) Ownership % Current Lease Expiration
Property Location Acquired(A) Interest GLA 12/31/99 Lease Option Expiration
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTHEAST REGION
Alabama
Midway Plaza Opelika 1984 (A) Fee 207,538 71% Office Depot 2007/2022
Carmike Cinema 2005/2015
Beall's Outlet Stores 2001/none
Northside Mall Dothan 1986 (A) Fee (9) 382,299 65%(15) Wal-Mart 2004/2029
Florida
New Smyrna Beach New Smyrna
Shopping Center Beach 1983 (A) Fee 100,430 96% DeMarsh Theater 2005/2015
Hardbodies Family Fitness
Georgia 2008/none
Cloud Springs Plaza Fort Oglethorpe 1985 (A) Fee 113,367 96% Food Lion 2011/2031
Consolidated Stores 2000/2005
Badcock Furniture 2000/2010
South Carolina
Martintown Plaza North Augusta 1985 (A) LI (9) 133,892 89% Belk's Store 2004/2024
Office Depot 2008/2018
Wesmark Plaza Sumter 1986 (A) Fee 215,198 87% Staples 2005/2015
Theater Management 2009/2019
Goody's 2005/2015
MIDWEST REGION
Illinois
Hobson West Plaza Naperville 1998 (A) Fee 99,950 92% Eagle Foods 2007/2032 (16)
Indiana
Merrillville Plaza Hobart 1998 (A) Fee 235,420 94% JC Penney 2008/2018
Office Max 2008/2028
TJ Maxx 2004/2009
Michigan
Bloomfield Town Square Bloomfield Hills 1998 (A) Fee 213,903 92% Burlington Coat 2009/2014 (17)
Drug Emporium 2000/2020
TJ Maxx 2003/2013
Office Max 2010/2025
Ohio
Mad River Station
Shopping Center Dayton 1999 (A) Fee 153,968 94% Office Depot 2000/2010
Babies `R' Us 2005/2020
MIXED-USE PROPERTY
Florida
Northwood Centre Tallahassee 1985 (A) Fee 500,012 (18) 96% FL Dept of HRS 2004
FL Dept of Business and
Professional
Regulation 2006
PROPERTY HELD IN JOINT-VENTURE (19)
New York
Crossroads Shopping
Center Greenburgh 1998 JV 310,897 99% Kmart 2012/2037
Waldbaum's (A&P) 2007/2032
---------- ----
Total 9,127,280 89%
========== ====
Notes:
(1) Does not include space leased but not yet occupied by the tenant.
(2) Tenant GLA comprises at least 10% of GLA for the center.
(3) This represents the GLA related to the retail portion of this mixed-use
property. The property also has 21 apartments (approximately 15,000
square feet). The remaining retail space has been leased but is not yet
occupied as of December 31, 1999.
(4) Includes a 92,500 square foot non-owned Walmart (formerly Caldors).
(5) The Company recaptured a lease with Caldors for 85,800 square feet in
October 1999. The lease provided for minimum rent of $2.20 per square
foot, which is below the prevailing market rate for rents.
(6) During the term of the lease, Bradlees has the right of first refusal
in the event that the Company sells all or a portion of the Crescent
Plaza giving it the right to purchase on the same terms as a bona fide
offer from a third party.
(7) The Company purchased this property in May 1999. The property is a
partially enclosed mall that will be reconfigured into a conventional
strip center format.
(8) The Company has signed a lease with A&P to construct a 48,000
free-standing building at this site.
(9) The Company is a ground lessee under long-term ground leases.
(10) Does not include 76,000 square feet leased, but not yet occupied, by
Ames Department Stores as of December 31, 1999.
(11) The Company is currently redeveloping this property. This tenant
continues to pay rent but is currently not operating in their space.
(12) The Company holds a fee interest in a portion of the Dunmore Plaza and
an equitable interest in the land on the remaining portion. An
industrial development authority holds the fee for this remaining
portion and the equitable interest in the building on such remaining
portion is held by an unrelated entity. The Company receives and
accounts for most of its income from this property as percentage rent.
(13) Includes space leased for which rent is being paid but which is not
presently occupied.
(14) This space is currently being sub-leased to a non-grocery store tenant.
(15) The Company recaptured a lease with Montgomery Wards for 60,400 square
feet in August 1999. The lease provided for minimum rent of $1.24 per
square foot, which is below the prevailing market rate for rents.
(16) The tenant is currently operating under Chapter 11 of the United States
Bankruptcy laws and has neither affirmed nor rejected the lease.
(17) Subsequent to December 31, 1999, the Company recaptured the lease for
43,200 square feet with Burlington Coat and signed a lease with
Homegoods, Inc. (a TJX company) for approximately 37,000 square feet of
this space.
(18) This property was held for sale as of December 31, 1999. On December
15, 1999, the Company received a Notice of Exercise of Right to
Terminate Lease from the Florida Department of Health for an aggregate
59,150 square feet representing $827,000 of rents.
(19) The Company has a 49% investment in this property.
MAJOR TENANTS
No individual retail tenant accounted for more than 6.8% of
minimum rents for the year ended December 31, 1999 or 11.1% of total leased GLA
as of December 31, 1999. The following table sets forth certain information for
the 25 largest retail tenants based upon minimum rents in place as of December
31, 1999 (GLA and rent in thousands):
Percentage of Total
Represented by Retail Tenant
----------------------------
Number of
Retail Stores in Total Annualized Base Total Annualized Base
Tenant Portfolio GLA Rent (1) Portfolio GLA (2) Rent (2)
------ --------- ----- --------------- ------------- --------------
Kmart 9 924 $ 3,432 11.1% 6.8%
Ames (3) 10 739 2,211 8.9% 4.4%
Price Chopper 6 267 1,559 3.2% 3.1%
Grand Union 4 175 1,365 2.1% 2.7%
A&P (Waldbaum's, Superfresh) (4) 2 110 1,338 1.3% 2.7%
Eckerd Drug (5) 16 179 1,331 2.2% 2.6%
Walmart 2 233 1,117 2.8% 2.2%
Shaw's 2 103 1,015 1.2% 2.0%
Acme (Albertson's) 3 109 948 1.3% 1.9%
Circuit City (4) 2 66 890 0.8% 1.8%
Redner's Supermarket 2 112 837 1.3% 1.7%
T.J. Maxx 5 130 825 1.6% 1.6%
PharMor 2 90 797 1.1% 1.6%
Sears 2 160 703 1.9% 1.4%
Penn Traffic (BiLo, P&C Foods) 2 86 636 1.0% 1.3%
Sterns (Federated) 1 62 618 0.7% 1.2%
CVS 6 63 599 0.8% 1.2%
JC Penney 2 73 547 0.9% 1.1%
Clearview Cinemas (6) 1 25 518 0.3% 1.0%
Payless Shoe Source 12 41 513 0.5% 1.0%
Blockbuster Video 4 23 495 0.3% 1.0%
Office Depot 3 84 443 1.0% 0.9%
Walgreens 2 19 420 0.3% 0.8%
Marshalls 2 53 417 0.6% 0.8%
King Kullen Grocery 1 41 414 0.5% 0.8%
--- ----- ------- ----- -----
Total 103 3,967 $23,988 47.7% 47.6%
=== ===== ======= ===== =====
(1) Base rents do not include percentage rents, additional rents for
property expense reimbursements, or contractual rent escalations due
after December 31, 1999.
(2) Total GLA and annualized base rent for the Company's retail properties,
excluding mixed-use and joint venture properties.
(3) Does not include leased space at the New Loudon Center for which rent
payment has not yet commenced.
(4) The Company is currently redeveloping the Atrium Mall. The A&P
Supermarket and Circuit City at this center are currently paying rent,
but have ceased operating at this location.
(5) Subsidiary of JC Penney.
(6) Subsidiary of Cablevision.
In 1999, approximately 5.9% of the Company's total revenue was derived
from current leases of office space and specialized computer facilities with
four agencies of the State of Florida at the Northwood Centre in Tallahassee,
Florida; the Florida Department of Children and Families (3.2%), the Florida
Department of Business Professional Regulation (1.8%), the Florida Department of
Health and Rehabilitative Services (0.7%) and the Florida Department of Revenue
(0.2%). During 1998, the State of Florida renewed leases for approximately
59,000 and 123,000 square feet with lease terms of five and seven years,
respectively. Leases with these Florida agencies contain customary conditions,
required under Florida law, permitting state agency tenants to cancel their
leases upon six months' notice in the event that state-owned office facilities
in the same county become available. These leases do not provide for early
termination penalties. There are currently state-owned facilities available in
the county and the State of Florida periodically reassesses its options with
respect to such leases including those of the Company. On December 15, 1999, the
Company received a Notice of Exercise of Right to Terminate Lease from the
Florida Department of Health and Rehabilitative Services for approximately
59,000 square feet representing $827,000 of rents. The Company would be further
adversely affected in the event that the State of Florida exercises its right to
cancel the lease for any other space it currently leases. This property is
currently held for sale by the Company.
LEASE EXPIRATIONS
The following table shows scheduled lease expirations for retail
tenants in place as of December 31, 1999, assuming that none of the tenants
exercise renewal options. The table does not include leases related to the
Company's mixed-use and joint venture properties (GLA and rent in thousands):
Percentage of Total
Represented by Expiring Leases
------------------------------
Number of GLA of Expiring Annualized Base Annualized Base
December 31, Leases Expiring Leases Rent(1) Leased GLA Rent
------------ --------------- --------------- --------------- ---------- --------------
2000 157 660 4,901 9% 10%
2001 100 744 3,958 10% 5%
2002 83 382 3,480 5% 9%
2003 73 502 3,914 7% 8%
2004 78 1,330 6,463 18% 13%
2005 45 617 4,351 8% 9%
2006 16 147 1,149 2% 2%
2007 20 551 3,025 8% 6%
2008 28 349 3,126 5% 6%
2009 27 525 3,413 7% 7%
Thereafter 35 1,540 12,591 21% 25%
--- ----- ------- ---- ----
Total 662 7,347 $50,371 100% 100%
=== ===== ======= ==== ====
(1) Base rents do not include percentage rents, additional rents for
property expense reimbursements, nor contractual rent escalations due
after December 31, 1999. The table does not include activity related to
the Company's mixed-use or joint venture properties
GEOGRAPHIC CONCENTRATIONS
The following table summarizes the Company's retail properties
(including mixed-use and joint venture properties) by region as of December 31,
1999 (GLA and rent in thousands):
Percentage of Total
Represented by Region
Annualized Base -----------------------
Annualized Base Rent per Leased Annualized Base
Region GLA Occupied % Rent(1) Square Foot GLA Rent
------ --- -------- ------- ----------- --- ----
New England 941 83% $ 5,143 $ 6.56 10% 8%
New York Region 1,964 88% 18,210 10.56 22% 30%
Mid-Atlantic 3,538 93% 16,866 5.15 39% 27%
Southeast 1,153 79% 3,883 4.28 12% 6%
Midwest 703 93% 6,268 9.57 8% 10%
----- ----- -------- ------ ---- ----
8,299 89% 50,371 6.86 91% 81%
Mixed-Use Property 517 95% 7,089 14.42 6% 11%
Joint Venture Property 311 99% 4,889 15.89 3% 8%
----- ----- -------- ------ ---- ----
Total 9,127 89% $ 62,349 $ 7.65 100% 100%
===== ===== ======== ====== ==== ====
(1) Base rents do not include percentage rents, additional rents for
property expense reimbursements, nor contractual rent escalations due
after December 31, 1999.
MULTI-FAMILY PROPERTIES
The Company owns five multi-family properties located in the
Mid-Atlantic and Midwest regions. The properties average 455 units and as of
December 31, 1999, had an average occupancy rate of 92%. The following sets
forth more specific information with respect to each of the Company's
multi-family properties at December 31, 1999:
Multi-family Ownership % Occupied
Property Location Year Acquired Interest Units 12/31/99
- ---------------------------------------------------------------------------------------------------------------------
Maryland
Glen Oaks Apartments Greenbelt 1998 Fee 463 98%
Marley Run Apartments Pasadena 1998 Fee 336 94%
Missouri
Gate House, Holiday House, Tiger Village Columbia 1998 Fee 592 97%
Colony Apartments Columbia 1998 Fee 282 98%
North Carolina
Village Apartments Winston Salem 1998 Fee 600 77%
----- ---
Totals 2,273 92%
===== ===
ITEM 3 LEGAL PROCEEDINGS
On November 20, 1995, Jack Wertheimer, a former President of the
Company, filed a complaint against the Company, its Trustees, including Mr.
Slomowitz, and the Company's former in-house General Counsel and former Chief
Financial Officer in the United States District Court for the Middle District of
Pennsylvania. The complaint, which was filed in connection with the termination
of Mr. Wertheimer's employment, included many of the allegations raised in a
state court proceeding commenced by Mr. Wertheimer in November 1994. The Federal
court complaint also included a civil RICO action in which Mr. Wertheimer
alleged that the Board of Trustees of the Company conspired with Mr. Slomowitz
to terminate Mr. Wertheimer's employment as part of Mr. Slomowitz's breach of
his duty of good faith and fair dealing. Further, Mr. Wertheimer alleged that
the above defendants engaged in securities fraud in connection with the initial
public offering and that Mr. Slomowitz defrauded or overcharged the Company in
corporate transactions. The Federal complaint sought treble damages under RICO,
as well as damages arising from Mr. Wertheimer's alleged termination of
employment, invasion of privacy, intentional infliction of emotional distress,
fraud and misrepresentation.
On December 31, 1998, the Company and Mr. Wertheimer settled this litigation and
entered into an agreement whereby the Company paid Mr. Wertheimer $1.0 million
on December 31, 1998 and agreed to pay him (i)$900,000 on April 1, 1999, which
was paid on such date, and (ii) five annual payments of $200,000 commencing
January 10, 2000, the first of which was paid on such date. Pursuant to this
agreement, the Company has obtained a standby letter of credit to collateralize
these future payments.
The Company is involved in other various matters of litigation arising in the
normal course of business. While the Company is unable to predict with certainty
the amounts involved, the Company's management and counsel are of the opinion
that, when such litigation is resolved, the Company's resulting liability, if
any, will not have a significant effect on the Company's consolidated financial
position.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1999.
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) Market Information
The following table shows, for the period indicated, the high and low
sales price for the Common Shares as reported on the New York Stock Exchange
(the "NYSE"), and cash dividends paid during the two years ended December 31,
1999 and 1998.
Dividend
Quarter Ended High Low Per Share
------------- ---- --- ---------
1999
March 31, 1999 5 1/2 5 $ 0.12
June 30, 1999 5 3/4 4 15/16 0.12
September 30, 1999 5 5/8 5 0.12
December 31, 1999 5 3/16 4 1/2 0.12
1998
March 31, 1998 9 3/16 8 3/4 $ --
June 30, 1998 8 7/8 7 7/16 --
September 30, 1998 7 5/8 5 3/16 --
December 31, 1998 6 1/4 4 15/16 --
At March 22, 2000, there were 213 holders of record of the Company's Common
Shares.
(b) Dividends
The Company has determined that 41% of the total dividends distributed
to shareholders in 1999 represented ordinary income, while the remaining 59%
represented return of capital. The Company's cash flow is affected by a number
of factors, including the revenues received from rental properties, the
operating expenses of the Company, the interest expense on its borrowings, the
ability of lessees to meet their obligations to the Company and unanticipated
capital expenditures. Future dividends paid by the Company will be at the
discretion of the Trustees and will depend on the actual cash flows of the
Company, its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code and such other factors as the
Trustees deem relevant.
ITEM 6 SELECTED FINANCIAL DATA
The following table sets forth, on a historical basis, selected financial
data for the Company. This information should be read in conjunction with the
audited consolidated financial statements of the Company and Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing elsewhere in this Annual Report on Form 10-K.
Years ended December 31,
----------------------------------------------------------------------------------
1999 1998(1) 1997 1996 1995
----------------------------------------------------------------------------------
OPERATING DATA:
Revenues $ 92,709 $ 59,771 $ 44,498 $ 43,796 $ 43,332
-----------------------------------------------------------------------------------
Operating expenses 38,483 28,485 17,055 17,868 16,374
Interest and other financing expense 23,314 18,302 15,444 12,733 10,598
Depreciation and amortization 19,887 15,795 13,768 13,398 11,820
-----------------------------------------------------------------------------------
Total 81,684 62,582 46,267 43,999 38,792
-----------------------------------------------------------------------------------
11,025 (2,811) (1,769) (203) 4,540
Non-recurring charges (2) - (2,249) - - -
Equity in earnings of unconsolidated
partnerships 584 256 - - -
Adjustment of carrying value of property
held for sale - (11,560) - (392) -
-----------------------------------------------------------------------------------
Income (loss) before (loss) gain on sale,
extraordinary items and minority interest 11,609 (16,364) (1,769) (595) 4,540
(Loss) gain on sale of property (1,284) (175) (12) 21 93
Extraordinary items - loss on early
extinguishment of debt - (707) -- (190) --
Minority interest (3,130) 3,348 217 40 (833)
-----------------------------------------------------------------------------------
Net income (loss) $ 7,195 $(13,898) $ (1,564) $ (724) $ 3,800
===================================================================================
Net income (loss) per Common Share
- basic and diluted $ 0.28 $ (0.91) $ (0.18) $ (0.08) $ 0.44
===================================================================================
Weighted average number of Common
Shares outstanding
- basic 25,708,787 15,205,962 8,551,930 8,546,553 8,540,631
===================================================================================
- diluted (3) 25,708,787 15,205,962 8,551,930 8,546,553 8,563,466
===================================================================================
Funds from Operations (4) $ 31,160 $ 15,073 $ 11,003 $ 12,536 $ 15,388
===================================================================================
Funds from Operations per share (5) $ 0.85 $ 0.74 $ 1.08 $ 1.23 $ 1.51
===================================================================================
BALANCE SHEET DATA:
Real estate before accumulated
depreciation $ 569,521 $ 551,249 $ 311,688 $ 307,411 $ 291,157
Total assets 570,803 528,512 254,500 258,517 249,515
Total mortgage indebtedness 326,651 277,561 183,943 172,823 151,828
Minority interest - Operating
Partnership 74,462 79,344 9,244 10,752 13,228
Total equity 152,487 154,591 48,800 56,806 69,779
Notes:
(1) Activity for the year ended December 31, 1998 includes the operations
of the properties acquired in the RDC Transaction from August 12, 1998
through December 31, 1998.
(2) Non-recurring charges represent expenses incurred related to the RDC
Transaction including payments made to certain officers and key
employees pursuant to change in control provisions of employment
contracts, severance paid to Mr. Slomowitz, retention bonuses for
certain employees and transaction-related consulting and professional
fees.
(3) For 1999 through 1996, the weighted average number of shares
outstanding on a diluted basis is not presented as the inclusion of
additional shares is anti-dilutive.
(4) The Company, along with most industry analysts, consider funds from
operations ("FFO") as defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as an appropriate supplemental
measure of operating performance. However, FFO does not represent cash
generated from operations as defined by generally accepted accounting
principles and is not indicative of cash available to fund cash needs.
It should not be considered as an alternative to net income for the
purpose of evaluating the Company's performance or to cash flows as a
measure of liquidity. Generally, NAREIT defines FFO as net income
(loss) before gains (losses) on sales of property, non-recurring
charges and extraordinary items, adjusted for certain non-cash charges,
primarily depreciation and amortization of capitalized leasing costs.
FFO for the 1998 through 1995 has been restated to include
straight-line rent.
(5) Includes weighted average OP Units as follows: 1999 - 10,883,184; 1998
- 5,252,815; 1997 and 1996 - 1,623,000; 1995 - 1,621,937; 1994 -
1,621,000.
ITEM 7 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements of the Company (including the related notes thereto)
appearing elsewhere in this Annual Report. Certain statements contained in this
report constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, which
will, among other things, affect demand for rental space, the availability and
creditworthiness of prospective tenants, lease rents and the availability of
financing; adverse changes in the Company's real estate markets, including,
among other things, competition with other companies; risks of real estate
development and acquisition; governmental actions and initiatives; and
environmental/safety requirements.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1999 ("1999") to the year ended
December 31, 1998 ("1998")
The following comparison references the effect of the properties acquired on
August 12, 1998 as a result of the RDC Transaction (the "RDC Properties").
Total revenues increased $32.9 million, or 55%, to $92.7 million for 1999
compared to $59.8 million for 1998.
Minimum rents increased $26.1 million, or 56%, to $73.0 million for 1999
compared to $46.9 million for 1998. $21.4 million, or 82%, of the increase was
attributable to the RDC Properties. $1.4 million, or 5%, of the increase was
attributable to amounts received as a result of two settlements. The first
settlement was related to the liability of a tenant-assigner of a lease to a
former tenant who had filed for bankruptcy protection under Chapter 11 of the
United States Bankruptcy laws ("Chapter 11") and the second was with respect to
certain claims related to the Chapter 11 proceedings for the Penn Traffic
Company. The remaining increase was primarily due to two property acquisitions,
a redevelopment project placed in service subsequent to 1998, and anchor
replacements at the Ledgewood Mall.
Percentage rents increased $343,000, or 13%, to $3.0 million for 1999 compared
to $2.7 million for 1998. This increase was primarily attributable to the RDC
Properties and the impact from the Company's adopting the Emerging Issue Task
Force ("EITF") Issue No. 98-9 "Accounting for Contingent Rent in Interim
Financial Periods" as of April 1, 1998 (subsequently codified with Staff
Accounting Bulletin No. 101 "Revenue Recognition").
Expense reimbursements increased $5.1 million, or 59%, for 1999, of which $3.8
million resulted from the RDC Properties. The remaining increase was primarily
attributable to anchor replacements at the Ledgewood Mall and an increase in
expense recoveries resulting from increased contract services, primarily snow
removal, as a result of the comparatively mild winter season in 1998.
Other income increased $1.4 million, of which $625,000 resulted from the RDC
Properties and $442,000 was due to management fees which were earned under four
contracts acquired in the RDC Transaction. The remaining increase was
attributable to additional interest income resulting from a higher balance of
interest earning assets in 1999.
Total operating expenses increased $11.9 million, or 26%, to $58.4 million for
1999, from $46.5 million for 1998.
Property operating expenses increased $7.4 million, or 52%, to $21.6 million for
1999 compared to $14.2 million for 1998. $6.4 million, or 86% of the increase,
was attributable to the RDC Properties. The remaining increase was due to
additional staffing in the leasing and property management departments following
the RDC Transaction and an increase in contract services, primarily snow
removal, as a result of the comparatively mild winter season in 1998. This
increase was partially offset against a decrease in estimated claims related to
the Company's property-related liability insurance policies.
Real estate taxes increased $3.0 million, or 40%, from $7.5 million for 1998 to
$10.5 million for 1999. This increase was primarily attributable to the RDC
Properties.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1999 ("1999") to the year ended
December 31, 1998 ("1998"), continued
Depreciation and amortization increased $4.1 million, or 26%, for 1999 primarily
attributable to the RDC Properties. This increase was partially offset by the
effect from the sale of two properties during the first quarter of 1999 and the
sale of a property in December 1998.
General and administrative expense increased $1.9 million, or 44%, from $4.4
million for 1998 to $6.3 million for 1999, which was primarily attributable to
additional staffing and administration costs following the RDC Transaction.
See the following comparison of 1998 to 1997 for a discussion of non-recurring
charges, settlement of litigation, adjustment of carrying value of property held
for sale and extraordinary item - loss on extinguishment of debt for 1998.
Interest expense of $23.3 million for 1999 increased $5.0 million, or 27%, from
$18.3 million for 1998. This increase was primarily attributable to the mortgage
debt associated with the RDC Properties partially offset by the paydown of
certain existing debt with the proceeds from the RDC Transaction. Contributing
further to this increase was an additional $49.1 million of outstanding debt as
of December 31, 1999 as a result of new borrowings made subsequent to 1998.
Comparison of the year ended December 31, 1998 ("1998") to the year ended
December 31, 1997 ("1997")
Total revenues increased $15.3 million, or 34%, to $59.8 million in 1998
compared to $44.5 million in 1997.
Minimum rents increased $13.2 million, or 39%, to $46.9 million for 1998
compared to $33.7 million for 1997. $12.6 million, or 95% of this increase was
attributable to the RDC Properties. The remaining increase was primarily a
result of increases at the Mark Plaza and Ledgewood Mall.
Percentage rents decreased $532,000, or 17%, to $2.7 million for 1998 compared
to $3.2 million for 1997 primarily as a result of the impact from the Company
adopting the Emerging Issue Task Force ("EITF") Issue No. 98-9 "Accounting for
Contingent Rent in Interim Financial Periods" as of April 1, 1998 (Subsequently
codified by the Securities and Exchange Commission Staff Accounting Bulletin No.
101 "Revenue Recognition").
Expense reimbursements of $8.6 million for 1998, which represent the
pass-through of certain property expenses to the tenants, increased $2.0
million, or 31%, from $6.6 million for 1997 of which $2.1 million of the
increase was a result of the RDC Properties.
Other income increased $511,000, or 50%, to $1.5 million for 1998 compared to
$1.0 million for 1997. $240,000 of this increase was attributable to third party
management fees earned related to certain management contracts acquired in
connection with the RDC Transaction. The remaining increase was primarily
attributable to the RDC Properties and an increase in interest earning assets in
1998.
Total 1998 operating expenses increased $15.7 million, or 51%, to $46.5 million
compared to $30.8 million in 1997.
Property operating expenses increased $5.2 million, or 57%, to $14.2 million for
1998 from $9.0 million for 1997. $4.1 million, or 79% of this increase was
attributable to the RDC Properties. The remaining increase was primarily due to
(i) the recording of reserves of $250,000 against unbilled rents receivable
("straight-line rent") for certain leases with Penn Traffic, which filed for
Chapter 11 protection under bankruptcy law in March of 1999, (ii) an increase in
estimated claims of $450,000 related to the Company's property liability
insurance policies offset by (iii) the reversal of a $245,000 reserve for
environmental remediation costs for the Cloud Springs Plaza in 1997 following
notification from the Georgia Department of Natural Resources that contamination
exceeding a reportable quantity had not occurred.
Real estate taxes increased $1.8 million, or 32%, to $7.5 million for 1998 from
$5.7 million for 1997 of which $1.7 million of the increase was due to the RDC
Properties.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1998 ("1998") to the year ended
December 31, 1997 ("1997"), continued
Depreciation and amortization increased $2.0 million, or 15%, to $15.8 million
for 1998 from $13.8 million for 1997 of which $1.9 million of the increase was
attributable to the RDC Properties.
General and administrative expense increased $2.0 million, or 88%, to $4.4
million for 1998 from $2.4 million for 1997 which was primarily attributable to
additional staffing and administrative costs following the RDC Transaction.
Non-recurring charges of $2.2 million in 1998 were related primarily to payments
made to certain officers and key employees pursuant to change in control
provisions of employment contracts, severance paid to the Former Principal
Shareholder, retention bonuses for certain employees and RDC Transaction-related
consulting and professional fees.
Settlement of litigation of $2.4 million in 1998 resulted from the agreement
between the Company and its former President whereby the Company paid $1.0
million in 1998 and recorded a liability of $1.4 million based on future
contractual payments to be made commencing April 1999 through January 2004.
Equity in earnings of unconsolidated partnerships in 1998 are a result of the
49% interest in the Crossroads Shopping Center acquired by the Company in the
RDC Transaction.
The adjustment of carrying value of property held for sale represents a 1998
non-cash charge of $11.6 million to write-down three properties to their
estimated net realizable value pursuant to a disposition plan. One of these
properties was sold in 1998 for which an additional loss of $175,000 was
recognized. A second property was sold in February 1999 and the Company has
entered into a contract in March 1999 to sell the third property.
Interest expense increased $2.9 million, or 19%, to $18.3 million in 1998,
compared to $15.4 million in 1997 of which $2.8 of the increase was attributable
to the RDC Properties.
The $707,000 extraordinary loss is a result of the write-off of deferred
financing fees as a result of the repayment of the related mortgage debt.
RESULTS OF OPERATIONS, continued
Funds from Operations
The Company, along with most industry analysts, consider funds from
operations("FFO") as defined by the National Association of Real Estate
Investment Trusts ("NAREIT") as an appropriate supplemental measure of operating
performance. However, FFO does not represent cash generated from operations as
defined by generally accepted accounting principles and is not indicative of
cash available to fund cash needs. It should not be considered as an alternative
to net income for the purpose of evaluating the Company's performance or to cash
flows as a measure of liquidity.
Generally, NAREIT defines FFO as net income (loss) before gains (losses) on
sales of property, non-recurring charges and extraordinary items, adjusted for
certain non-cash charges, primarily depreciation and amortization of capitalized
leasing costs. The reconciliation of net income to FFO for the years ended
December 31, 1999, 1998 and 1997 is as follows:
Reconciliation of Net Income (Loss) to Funds from Operations (a)
For the Years Ended December 31,
1999 1998 1997
------- --------- ---------
Net income (loss) $ 7,195 $(13,898) $ (1,564)
Depreciation of real estate and amortization of leasing
costs:
Wholly owned and consolidated partnerships 18,949 14,925 12,993
Unconsolidated partnerships 626 231 --
Non-recurring RDC transaction charges (b) -- 2,249 --
Settlement of Litigation -- 2,358 --
Income (loss) attributable to minority interest (c) 3,106 (3,348) (217)
Loss on sale of property 1,284 175 12
Adjustment of carrying value of property held for
sale -- 11,560 --
Other adjustments -- 114 (221)
Extraordinary item - loss on extinguishment of debt -- 707 --
------- -------- -------
Funds from operations $31,160 $ 15,073 $11,003
======= ======== =======
Funds from operations per share (d) $ 0. 85 $ 0.74 $ 1. 08
======= ======== =======
Notes:
(a) FFO for the years ended December 31, 1998 and 1997 have been restated
to include straight-line rents (net of write-offs) of $353 and $176,
respectively.
(b) The Company acquired substantially all of the interests of RD Capital
on August 12, 1998.
(c) Does not include a distribution of $24 paid to Preferred OP
Unitholders for the year ended December 31, 1999.
(d) FFO per share is computed based on the weighted average number of
Common Shares outstanding for the years ended December 31, 1999, 1998
and 1997 of 25,708,787,15,205,962 and 8,551,930, respectively. It also
assumes full conversion of a weighted average 10,833,184, 5,252,815
and 1,623,000 OP Units into Common Shares for the years ended December
31, 1999, 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Financing and Debt
At December 31, 1999, mortgage notes payable aggregated $326.7 million and were
collateralized by 49 properties and related tenant leases. Interest on the
Company's mortgage indebtedness ranged from 7.5% to 9.6% with maturities that
ranged from April 2000 to March 2022. Of the total outstanding debt, $254.1
million, or 78%, was carried at fixed interest rates with a weighted average of
8.4% and $72.6 million, or 22%, was carried at variable rates with a weighted
average of 8.0%. Of the total outstanding debt, $136.1 million will become due
by 2001, with scheduled maturities of $94.9 million at a weighted average
interest rate of 8.5% in 2000 and $41.2 million with a weighted average interest
rate of 7.8% in 2001. As the Company does not anticipate having sufficient cash
on hand to repay such indebtedness, it will need to refinance this indebtedness
or select other alternatives based on market conditions at that time.
The following summarizes the financing and refinancing transactions since
December 31, 1998:
On February 8, 2000, the Company closed on a revolving credit facility with a
bank, which provides for the borrowing of up to $7.4 million. The facility,
which is secured by one of the Company's properties, matures in March 2003 and
requires the monthly payment of interest at the rate of LIBOR plus 150 basis
points (the rate increases by an additional 25 basis points if the amount
outstanding under the facility exceeds 50% of the value of the collateral). The
monthly repayment of principal amortized over 25 years is required only if the
Company draws the full amount available under the facility. The Company has
currently not drawn any amounts under this facility.
On January 31, 2000, the Company paid down $23.1 million of outstanding debt
with a life insurance company from working capital.
On December 16, 1999, the Company closed on a $13.8 million bank loan. The
variable-rate debt, which is secured one of the Company's properties, matures in
January 2005, bears interest at LIBOR plus 165 basis points and requires the
fixed monthly payment of principal of $10,000. The interest rate is to be
lowered by 20 basis points upon stabilization of the property and certain debt
service coverage ratios.
On November 22, 1999, the Company closed on a fixed-rate facility with a bank,
which provides for the borrowing of up to $10.0 million. The loan, which is
secured by one of the Company's properties, matures in December 2002 and
requires the monthly payment of interest at 7.75% and principal amortized over
25 years. As of December 31, 1999, the Company had borrowed $5.0 million under
this facility, with the remaining $5.0 million available to be drawn in up to
three traunches. The proceeds from this borrowing were used primarily to retire
maturing debt with another lender of $4.4 million, which was secured by another
of the Company's properties.
On November 16, 1999, the Company assumed $4.6 million in first mortgage debt in
connection with the acquisition of all of the partnership interests of the
limited partnership which owns the Pacesetter Park Shopping Center. The bank
loan, which matures March 2003, bears interest at 8.18% and requires the monthly
payment of principal and interest amortized over 20 years.
During 1999, the Company closed on two variable-rate financings with an
insurance company which are secured by two of the Company's properties. On
September 21, 1999, the Company closed on a $10.0 million loan which matures in
October 2002 and on July 7, 1999, a $14.0 million loan which matures in August
2002. Both loans require monthly payments of interest at a rate of LIBOR plus
205 basis points adjusted on a quarterly basis and principal amortized over 25
years. The Company has also purchased interest rate cap agreements for both
loans, which cap LIBOR at 6.50%. Approximately $8.6 million of the proceeds were
used to retire existing debt with the same lender.
On May 5, 1999, the Company assumed $6.2 million in mortgage debt in connection
with the acquisition of the general partner's interest in Mall 189. The debt,
which matures September 1, 2002, bears interest at a fixed-rate of 7.5% and
requires the payment of interest only through May 4, 2001. Thereafter, and
through the maturity date, the loan bears interest at a fixed-rate of 9.875% and
requires total monthly payments of $55,000 representing interest and principal.
The debt can be prepaid commencing May 4, 2002, without any prepayment fees.
On March 23, 1999, the Company closed on a $7.0 million facility with a bank
that is secured by one of the Company's properties. As of December 31, 1999, the
Company had $4.0 million outstanding under this facility which matures March 15,
2002, bears interest at LIBOR plus 175 basis and requires the payment of
principal amortized over a 25 year period. The Company also obtained two
irrevocable letters of credit totaling $3.0 million. The first, in the amount of
$2.0 million, is related to the acquisition of the Mall 189 as required pursuant
to the bankruptcy reorganization plan of the seller of the property. The letter
of credit is expected to be reduced in $500,000 increments as redevelopment of
the property progresses. In addition, a letter of credit for $1.0 million was
obtained related to the settlement of certain litigation in 1998 with a former
president of the Company, which is expected to be reduced in $200,000 increments
as certain obligations are met.
LIQUIDITY AND CAPITAL RESOURCES, continued
Financing and Debt, continued
On February 24, 1999, the Company assumed $7.7 million in mortgage debt in
connection with the acquisition of the Mad River Station shopping center. The
debt, which matures May 23, 2005, bears interest at a fixed-rate of 9.6% and
requires the payment of principal amortized over 25 years. The debt can be
prepaid commencing May 23, 2000 with certain prepayment fees and after May 23,
2002 without any such fees.
Property Acquisitions, Development and Expansion
The Company's acquisition program focuses on acquiring sub-performing
neighborhood and community shopping centers that are well-located and creating
significant value through retenanting and property redevelopment.
On November 16, 1999, the Company acquired 100% of the partnership interests of
the limited partnership which owns the Pacesetter Park Shopping Center, a 96,000
square foot community shopping center located in Rockland County, New York. The
aggregate purchase price of $7.4 million consisted of the assumption of $4.6
million in first mortgage debt and the issuance of $2.2 million in preferred
Operating Partnership units with the balance funded from working capital.
On May 5, 1999, the Company acquired the sole general partner's interest in the
limited partnership owning the Gateway Mall (formerly the Mall 189), a 122,000
square foot shopping center located in Burlington, Vermont, for $6.5 million.
The interest, which is senior to the interests of the limited partners, was
acquired out of bankruptcy by restructuring and assuming the mortgage debt of
$6.2 million. The balance of the purchase was funded from working capital. The
Gateway Mall is in its early stages of redevelopment with anticipated completion
in 2001. The property is a partially enclosed mall that will be reconfigured
into a conventional strip center format.
On February 24, 1999, the Company acquired the Mad River Station, a 154,000
square foot shopping center located in Dayton, Ohio for $11.5 million. The
Company assumed $7.7 million in mortgage debt and funded the remaining purchase
from working capital.
The Company completed the redevelopment of a 39,700 square foot building located
in Greenwich, Connecticut, which consists of 17,000 square feet of retail space
and 21 apartments (approximately 15,000 square feet). During June 1999,
Restoration Hardware, the lead anchor for the center occupying 12,300 square
feet of the retail space, commenced paying rent. The remaining retail space has
been leased as well with occupancy anticipated during the second quarter of
2000. All twenty-one residential units are leased as of December 31, 1999 Costs
incurred on this project totalled $17.5 million.
The Company has received municipal approval to renovate and expand by
approximately 30,000 square feet the 125,000 square foot Elmwood Park Shopping
Center. As part of the redevelopment, the Company is planning to construct a
48,000 square foot free-standing A&P supermarket, to replace a 28,000 square
foot in-line Grand Union supermarket at a significantly higher rent per square
foot. The Company expects redevelopment costs of approximately $9.1 million to
complete this project in 2002. In conjunction with the A&P supermarket rent
commencment, the Operating Partnership is also obligated to issue OP Units equal
to $2.75 million as discussed in Note 2 to the Consolidated Financial
Statements. Additionally, the Company currently estimates that for the remaining
portfolio, capital outlays of approximately $3.5 million will be required for
tenant improvements, related renovations and other property improvements related
to executed leases.
Share Repurchase Plan
Through March 13, 2000, the Company had repurchased 815,600 shares at a total
cost of $4.2 million under a Share repurchase program. The program, which allows
for the repurchase of up to $10.0 million of the Company's outstanding Common
Shares on the open market, may be discontinued or extended at any time and there
is no assurance that the Company will purchase the full amount authorized.
LIQUIDITY AND CAPITAL RESOURCES, continued
Liquidity Sources
Sources of capital for funding property development, property expansion and
renovation, repurchase of common stock and future property acquisitions are
expected to be obtained from cash on hand, additional debt financings, sales of
existing properties and additional equity offerings. The Company also has nine
properties that are currently unencumbered and therefore available as potential
collateral for future borrowings. The Company anticipates that cash flow from
operating activities will continue to provide adequate capital for all debt
service payments, recurring capital expenditures and REIT distribution
requirements.
HISTORICAL CASH FLOW
The following discussion of historical cash flow compares the Company's cash
flow for the year ended December 31, 1999 ("1999") with the Company's cash flow
for the year ended December 31, 1998 ("1998").
Net cash provided by operating activities increased from $7.5 million for 1998
to $25.9 million for 1999. This variance was primarily attributable to an
increase in operating income before non-cash expenses in 1999 partially offset
by changes in operating assets and liabilities.
Investing activities used $19.9 million during 1999, representing a $4.9 million
decrease from $24.8 million of cash used during 1998. This variance was the
result of an increase in net sales proceeds of $3.9 million received in 1999
versus 1998 and an increase of $1.5 million related to an investment in an
unconsolidated subsidiary partnership in 1999, offset by a $500,000 increase in
expenditures for real estate acquisitions, development and tenant installation
in 1999.
Net cash provided by financing activities of $14.2 million for 1999 decreased
$17.1 million compared to $31.3 million provided in 1998. The decrease resulted
primarily from $95.9 million of net proceeds from the issuance of Common Shares
in 1998, dividends and distributions of $13.3 million being paid in 1999 and
$2.0 of additional cash used in 1999 for the repurchase of common shares. This
was partially offset by additional cash of $65.9 million used in 1998 for the
repayment of debt and a $28.3 million increase in cash provided by additional
borrowings.
INFLATION
The Company's long-term leases contain provisions designed to mitigate the
adverse impact of inflation on the Company's net income. Such provisions include
clauses enabling the Company to receive percentage rents based on tenants' gross
sales, which generally increase as prices rise, and/or, in certain cases,
escalation clauses, which generally increase rental rates during the terms of
the leases. Such escalation clauses are often related to increases in the
consumer price index or similar inflation indexes. In addition, many of the
Company's leases are for terms of less than ten years, which permits the Company
to seek to increase rents upon re-rental at market rates if rents are below the
then existing market rates. Most of the Company's leases require the tenants to
pay their share of operating expenses, including common area maintenance, real
estate taxes, insurance and utilities, thereby reducing the Company's exposure
to increases in costs and operating expenses resulting from inflation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (the "Statement"). In June 1999, the FASB issued Statement No. 137,
which deferred the effective date of Statement No. 133 requiring it to be
adopted for all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company expects to adopt the Statement effective January 1, 2001. The
Statement will require the Company to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. If a derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of the derivative will either be offset against
the change in fair value of the hedged asset, liability, or firm commitment
through earnings, or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company does not
anticipate that the adoption of this Statement will have a significant effect on
its results of operations or financial position.
IMPACT OF YEAR 2000
The year 2000 ("Y2K") problem refers to computer applications using only the
last two digits to refer to a year rather than all four digits. As a result,
these applications could fail or create erroneous results if they recognize "00"
as the year 1900 rather than year 2000. In prior years, the Company discussed
the nature and progress of its plans to become Y2K ready. In late 1999, the
Company completed its remediation and testing of systems. As a result of those
planning and implementation efforts, the Company experienced no significant
disruptions in mission critical information technology and non-information
technology systems and believes those systems successfully responded to the Y2K
date change. The Company expended approximately $200,000 during 1999 in
connection with remediating its systems. The Company is not aware of any
material problems resulting from Y2K issues, either with its products, its
internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the year 2000 to ensure that any latent Y2K
matters that may arise are addressed promptly.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is to changes in interest rates
related to the Company's mortgage debt. See the consolidated financial
statements and notes thereto included in this Annual Report for certain
quantitative details related to the Company's mortgage debt.
Currently, the Company manages its exposure to fluctuations in interest rates
primarily through the use of fixed-rate debt. As of December 31, 1999, the
Company had total mortgage debt of $326.7 million of which $254.1 million, or
78%, is fixed-rate and $72.6 million, or 22%, is variable-rate based upon either
LIBOR or the lender's commercial paper rate, plus certain spreads. $24.0 million
of notional variable-rate principal is hedged through the use of LIBOR rate caps
as of December 31, 1999. The Company may seek additional variable-rate financing
if and when pricing and other commercial and financial terms warrant. As such,
the Company would consider hedging against the interest rate risk related to
such additional variable-rate debt through interest rate swaps and protection
agreements, or other means.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in items
14(a)(1) and 14(a)(2) hereof are incorporated herein by reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on May 16, 2000, to be filed pursuant to Regulation 14A.
ITEM 11 EXECUTIVE COMPENSATION
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on May 16, 2000, to be filed pursuant to Regulation 14A.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on May 16, 2000, to be filed pursuant to Regulation 14A.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This item is incorporated by reference from the definitive proxy
statement for the Annual Meeting of Shareholders presently scheduled to be held
on May 16, 2000, to be filed pursuant to Regulation 14A.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AMD REPORTS ON FORM 8-K
(a) 1. Financial Statements - Form 10-K
The following consolidated financial Report Page
information is included as a separate
section of this annual report on
Form 10-K
ACADIA REALTY TRUST
INDEX OF FINANCIAL STATEMENTS
Report of Independent Auditors F-2
Consolidated Balance Sheets as of
December 31, 1999 and 1998 F-3
Consolidated Statements of Operations
for the years ended December 31, 1999,
1998 and 1997 F-4
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1999,
1998 and 1997 F-5
Consolidated Statements of Cash Flows for
the years ended December 31, 1999, 1998
and 1997 F-6
Notes to Consolidated Financial Statements F-8
2. Financial Statement Schedule
Schedule III - Real Estate and
Accumulated Depreciation F-28
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.
3. Exhibits
Exhibit No.
3.1(a) Declaration of Trust Incorporated by reference
of the Company, as to the copy thereof filed as
amended an exhibit to the Company's
Form 10-K filed for the fiscal
Year ended December 31, 1994
3.1(b) Fourth Amendment to Incorporated by reference to
Declaration of Trust the copy thereof filed as an
Exhibit to Company's Form
10-Q filed for the quarter
ended September 30, 1998
3.2 By-Laws of the Company Incorporated by reference
to the copy thereof filed as
an exhibit to the Company's
Form S-11 (File No.33-60008)
("Form S-11")
10.1(a) Agreement of Limited Incorporated by reference to
Partnership of the the copy thereof filed as an
Operating Partnership exhibit to Amendment No. 3 to
the Company's Form S-11
10.1(b) First, Second Incorporated by reference to
and Third Amendments to the copy thereof filed as an
the Agreement of Limited exhibit to the Company's Form
Partnership of the 10-K filed for the fiscal
Operating Partnership year ended December 31, 1998
10.1(c) Certificate of Designation of
Series A Preferred Operating
Partnership Units of Limited
Partnership Interest of Acadia
Realty Limited Partnership Filed herewith
10.2 Loan Agreement Incorporated by reference to
between the Company the copy thereof filed as
and Metropolitan exhibit to Amendment No. 3
Life Insurance to the Company's Form S-11
Company
*10.6(a) 1999 Share Option Plan Incorporated by reference to
the copy thereof filed as an
exhibit to the Company's
Form S-8 filed September 28, 1999
10.14 Form of Registration Incorporated by reference
Rights Agreement to the copy thereof filed as
an exhibit to Amendment No. 4
to the Company's Form S-11
10.18 Form of Loan Agreement Incorporated by reference
together with Form of to the copy thereof filed as
First Mortgage and an exhibit to the Company's
Security Agreement Form 10-K filed for the fiscal
between the Company and year ended December 31, 1995
John Hancock Mutual Life
Insurance Company dated
March 15, 1995
10.22(a) Indenture of Mortgage, Incorporated by reference to
Deed of Trust, Security the copy thereof filed as an
Agreement, Financing exhibit to the Company's Form
Statement, Fixture 10-Q filed for the quarter
Filing and Assignment ended September 30, 1996
of Leases, Rents and
Security Deposits
between the Company
and Morgan Stanley
Mortgage Capital, Inc.
10.22(b) Mortgage Note between Incorporated by reference to
the Company and Morgan the copy thereof filed as an
Stanley Mortgage exhibit to the Company's Form
Capital, Inc. 10-Q for the quarter
ended September 30, 1996
10.22(c) First Amendment to the Incorporated by reference to
Indenture of Mortgage, the copy thereof filed as an
Deed of Trust, Security exhibit to the Company's Form
Agreement, Financing 10-Q filed for the quarter
Statement, Fixture ended September 30, 1998
Filing and Assignment
of Lease, Rents and
Security Deposits
Between the Company and
GMAC Commercial
Mortgage Corporation
10.24(a) Open-End Mortgage, Incorporated by reference
Security Agreement, to the copy thereof filed as
Future Filing, Financing an exhibit to the Company's
Statement and Assignment Form 10-K filed for the fiscal
of Leases and Rents year ended December 31, 1996
between the Company
and Anchor National Life
Insurance Company
10.24(b) Promissory Note between Incorporated by reference
the Company and Anchor to the copy thereof filed as
National Life Insurance an exhibit to the Company's
Company Form 10-K filed for the fiscal
year ended December 31, 1996
10.26(a) Loan Agreement dated Incorporated by reference
March 4, 1997 by and to the copy thereof filed a
between Mark Northwood an exhibit to the Company's
Associates, Limited Form 10-K filed for the fiscal
Partnership, a Florida year ended December 31, 1996
limited partnership,
and Nomura Asset
Capital Corporation
10.26(b) Promissory Note dated Incorporated by reference
March 4, 1997 between to the copy thereof filed
Mark Northwood as an exhibit to the Company's
Associates, Limited Form 10-K filed for the fiscal
Partnership, a Florida year ended December 31, 1996
limited partnership,
and Nomura Asset Capital
Corporation
10.26(c) Leasehold Mortgage, Incorporated by reference
Assignment of Rents, to the copy thereof filed
Security Agreement and as an exhibit to the Company's
Fixture Filing by Mark Form 10-K filed for the fiscal
Northwood Associates, year ended December 31, 1996
Limited Partnership, a
Florida limited partnership,
to Nomura Asset Capital
Corporation dated March
4, 1997
10.30 Contribution and Share Incorporated by reference to
Purchase Agreement the copy thereof filed as an
with RD Capital, Inc. exhibit to the Company's
Form 8-K filed on April 20, 1998
10.31 Severance and Incorporated by reference to
Consulting Agreement the copy thereof filed as an
For Marvin L. Slomowitz exhibit to the Company's
Form 10-K filed for the fiscal
year ended December 31, 1998
10.32 Settlement agreement Incorporated by reference to
between the Company the copy thereof filed as an
and Jack Wertheimer exhibit to the Company's
Form 8-K filed on January 5, 1999
10.33 Employment agreement Incorporated by reference to
between the Company the copy thereof filed as an
and Ross Dworman exhibit to the Company's
Form 10-K filed for the fiscal
year ended December 31, 1998
10.34 Employment agreement Incorporated by reference to
between the Company the copy thereof filed as an
and Kenneth F. Bernstein exhibit to the Company's
Form 10-K filed for the fiscal
year ended December 31, 1998
10.36 Secured Promissory Note between
RD Absecon Associates, L.P. and
Fleet Bank, N.A. dated February 8,
2000 Filed herewith
10.37 Mortgage Note between RD Branch
Associates, L.P. and North
Fork Bank dated November 22, 1999 Filed herewith
10.38 Promissory Note between 239
Greenwich Associates, L.P. and First
Union National Bank dated
December 16, 1999 Filed herewith
10.39 Note and Mortgage Assumption
Agreement between Acadia Mad River
Property LLC and Lasalle National Bank
for the benefit of Certificateholders
of American Southwest Financial Securities
Corporation, Commercial Mortgage Pass-
Through Certificates, Series 1195-C1
Dated February 24, 1999 Filed herewith
10.40 Mortgage Note Modification Agreement
Between Heathcote Associates and
Huntoon Hastings Capital Corp. dated
May 5, 1999 Filed herewith
10.41 Promissory Note between Merrillville
Realty, L.P. and Sun America Life Insurance
Company dated July 7, 1999 Filed herewith
10.42 Mortgage and Note Modification
Agreement between Pacesetter/Ramapo
Associates and M&T Real Estate, Inc. Filed herewith
10.43 Secured Promissory Note between
Acadia Town Line, LLC and Fleet
Bank, N.A. dated March 23, 1999 Filed herewith
10.44 Promissory Note between RD Village
Associates Limited Partnership and
Sun America Life Insurance Company
Dated September 21, 1999 Filed herewith
21 List of Subsidiaries Filed herewith
of Acadia Realty Trust
23 Consent of Independent Filed herewith
Auditors to Form S-3
and Form S-8
27 Financial Data Schedule Filed herewith
(EDGAR filing only)
* Constitutes a compensatory plan or
arrangement required to be filed
as an exhibit to this Form.
(b) Reports on Form 8-K filed during the quarter ended
December 31, 1999 - The Company did not file any report
on Form 8-K during the quarter ended December 31, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
ACADIA REALTY TRUST
(Registrant)
By: /s/ Ross Dworman
----------------------------
Chairman and
Chief Executive Officer
Dated: March 27, 2000
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.
Signature Title Date
- --------- ----- ----
/s/Ross Dworman Chairman, March 27, 2000
- --------------------------- Chief Executive
(Ross Dworman) Officer and Trustee
(Principal Executive
Officer)
/s/Kenneth F.Bernstein President and March 27, 2000
- --------------------------- Trustee
(Kenneth F.Bernstein)
/s/Perry S. Kamerman Senior Vice President March 27, 2000
- --------------------------- of Finance (Principal
(Perry S. Kamerman) Financial and Accounting
Officer)
/s/Martin L. Edelman Trustee March 27, 2000
- ---------------------------
(Martin L. Edelman, Esq.)
/s/Gregory A. White Trustee March 27, 2000
- ---------------------------
(Gregory A. white)
/s/Marvin J. Levine Trustee March 27, 2000
- ---------------------------
(Marvin J. Levine, Esq)
/s/Lawrence J. Longua Trustee March 27, 2000
- ---------------------------
(Lawrence J. Longua)
EXHIBIT INDEX
The following is an index to all exhibits filed with the Annual Report
on Form 10-K other than those incorporated by reference herein:
Exhibit
Number Description Page
- ------- ----------- ----
10.1(c) Certificate of Designation of 34
Series A Preferred Operating
Partnership Units of Limited
Partnership Interest of Acadia
Realty Limited Partnership
10.36 Secured Promissory Note between 44
RD Absecon Associates, L.P. and
Fleet Bank, N.A. dated February 8,
2000
10.37 Mortgage Note between RD Branch 66
Associates, L.P. and North
Fork Bank dated November 22, 1999
10.38 Promissory Note between 239
Greenwich Associates, L.P. and First
Union National Bank dated
December 16, 1999
10.39 Note and Mortgage Assumption 84
Agreement between Acadia Mad River
Property LLC and Lasalle National Bank
for the benefit of Certificateholders
of American Southwest Financial Securities
Corporation, Commercial Mortgage Pass-
Through Certificates, Series 1195-C1
Dated February 24, 1999
10.40 Mortgage Note Modification Agreement 100
Between Heathcote Associates and
Huntoon Hastings Capital Corp. dated
May 5, 1999
10.41 Promissory Note between Merrillville 107
Realty, L.P. and Sun America Life Insurance
Company dated July 7, 1999
10.42 Mortgage and Note Modification 120
Agreement between Pacesetter/Ramapo
Associates and M&T Real Estate, Inc.
10.43 Secured Promissory Note between 130
Acadia Town Line, LLC and Fleet
Bank, N.A. dated March 23, 1999
10.44 Promissory Note between RD Village 149
Associates Limited Partnership and
Sun America Life Insurance Company
Dated September 21, 1999
21 List of Subsidiaries
of Acadia Realty Trust
23 Consent of Independent
Auditors to Form S-3
and Form S-8
27 Financial Data Schedule
(EDGAR filing only)
ACADIA REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
ACADIA REALTY TRUST
Report of Independent Auditors F-2
Consolidated Balance Sheets as of
December 31, 1999 and 1998 F-3
Consolidated Statements of Operations
for the years ended December 31, 1999,
1998 and 1997 F-4
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1999, 1998,
and 1997 F-5
Consolidated Statements of Cash Flows for
the years ended December 31, 1999, 1998
and 1997 F-6
Notes to Consolidated Financial Statements F-8
Schedule III - Real Estate and Accumulated
Depreciation F-28
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of
Acadia Realty Trust
We have audited the accompanying consolidated balance sheets of Acadia Realty
Trust (a Maryland Trust) and subsidiaries (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and the
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Acadia Realty
Trust and subsidiaries as of December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ ERNST & YOUNG LLP
New York, New York
February 25, 2000
F-2
Part I. Financial Information
Item 1. Financial Statements
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
December 31,
1999 1998
---- ----
ASSETS
Real estate
Land $ 81,956 $ 76,136
Buildings and improvements 477,573 452,300
Properties under development 9,992 22,813
-------- --------
569,521 551,249
Less: accumulated depreciation 90,932 87,202
-------- --------
Net real estate 478,589 464,047
Property held for sale 13,227 7,073
Cash and cash equivalents 35,340 15,183
Cash in escrow 9,707 12,650
Investments in unconsolidated
partnerships 7,463 7,516
Rents receivable, net 8,865 6,006
Prepaid expenses 2,952 2,797
Due from related parties 19 --
Deferred charges, net 12,374 11,461
Other assets 2,267 1,779
-------- --------
$570,803 $528,512
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $326,651 $277,561
Accounts payable and accrued expenses 6,385 10,673
Due to related parties -- 176
Dividends and distributions payable 4,371 --
Other liabilities 4,224 3,817
-------- --------
Total liabilities 341,631 292,227
-------- --------
Minority interest in Operating
Partnership 74,462 79,344
Minority interests in majority
owned partnerships 2,223 2,350
-------- --------
Total minority interests 76,685 81,694
-------- --------
Shareholders' equity:
Common shares, $.001 par value,
authorized 100,000,000 shares,
issued and outstanding 25,724,315
and 25,419,215 shares, respectively 26 25
Additional paid-in capital 168,641 170,746
Deficit (16,180) (16,180)
-------- --------
Total shareholders' equity 152,487 154,591
-------- --------
$570,803 $528,512
======== ========
See accompanying notes
F-3
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year ended December 31,
1999 1998 1997
---- ---- ----
Revenues
Minimum rent $73,021 $ 46,940 $ 33,669
Percentage rents 2,994 2,651 3,183
Expense reimbursements 13,786 8,655 6,632
Other 2,908 1,525 1,014
------- -------- --------
Total revenues 92,709 59,771 44,498
------- -------- --------
Operating Expenses
Property operating 21,606 14,182 9,013
Real estate taxes 10,540 7,536 5,691
Depreciation and amortization 19,887 15,795 13,768
General and administrative 6,337 4,409 2,351
Non-recurring charges -- 2,249 --
Settlement of litigation -- 2,358 --
------- -------- --------
Total operating expenses 58,370 46,529 30,823
------- -------- --------
Operating income 34,339 13,242 13,675
Equity in earnings of
unconsolidated partnerships 584 256 --
Loss on sale of property (1,284) (175) (12)
Adjustment of carrying
value of property held
for sale -- (11,560) --
Interest expense (23,314) (18,302) (15,444)
------- -------- --------
Income (loss) before
extraordinary item and
minority interest 10,325 (16,539) (1,781)
Extraordinary item -
loss on early
extinguishment of debt -- (707) --
Minority interest in Operating
Partnership (3,130) 3,348 217
------- -------- --------
Net income (loss) $ 7,195 $(13,898) $ (1,564)
======= ======== ========
Net income (loss) per Common Share:
Income (loss) before
extraordinary item $ .28 $ (.86) $ (.18)
Extraordinary item -- (.05) --
------- -------- --------
Net income (loss) per
Common Share $ .28 $ (.91) $ (.18)
======= ======== ========
See accompanying notes
F-4
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share amounts)
Common Shares Total
------------- Additional Retained Shareholders'
Shares Amount Paid-in Capital Deficit Equity
-------------------------------------------------------------------------------
Balance, December 31, 1996 8,548,817 $ 9 $ 57,521 $ (724) $ 56,806
Issuance of shares pursuant to the
Company's restricted share plan 5,360 - 52 - 52
Adjustment to minority interest - - - 6 6
Distributions paid to limited
partners of the Operating
Partnership - - (1,285) - (1,285)
Dividends paid in excess of
accumulated earnings ($0.76 per share) - - (6,500) - (6,500)
Loss before minority interest - - - (1,781) (1,781)
Minority interest's equity - - 1,285 217 1,502
---------- --- -------- -------- --------
Balance, December 31, 1997 8,554,177 9 51,073 (2,282) 48,800
Issuance of shares pursuant to the
Company's restricted share plan 3,800 - 29 - 29
Conversion of 800,000 OP Units
by limited partner of the Operating
Partnership 800,000 1 4,367 - 4,368
Issuance of 13,333,333 Common
Shares in connection with the RDC
Transaction, net of issuance costs 13,333,333 13 95,909 - 95,922
Issuance of 1,989,048 Common Shares in
connection with the RDC Transaction 1,989,048 1 13,965 - 13,966
Conversion of 738,857 OP Units by
limited partners of the Operating
Partnership in connection with the
RDC Transaction 738,857 1 5,403 - 5,404
Loss before minority interest - - - (17,246) (17,246)
Minority interest's equity - - - 3,348 3,348
---------- --- -------- -------- --------
Balance, December 31, 1998 25,419,215 25 170,746 (16,180) 154,591
Conversion of 700,000 OP Units
by limited partner of the Operating
Partnership 700,000 1 5,012 - 5,013
Dividends declared ($.48 per
Common Share) - - (5,133) (7,195) (12,328)
Repurchase of Common Shares (394,900) - (1,984) - (1,984)
Income before minority interest - - - 10,325 10,325
Minority interest's equity - - - (3,130) (3,130)
---------- --- -------- -------- --------
Balance, December 31, 1999 25,724,315 $ 26 $168,641 $(16,180) $152,487
========== === ======== ======== ========
F-5
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share amounts)
Year ended December 31,
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 7,195 $(13,898) $ (1,564)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 19,887 15,795 13,768
Extraordinary item - loss on early extinguishment of debt -- 707 --
Minority interest in Operating Partnership 3,130 (3,348) (217)
Equity in income of unconsolidated partnerships (584) (256) --
Provision for bad debts 1,404 1,275 833
Loss on sale of property 1,284 175 12
Adjustment to carrying value of property held for sale -- 11,560 --
Other -- 29 52
Changes in assets and liabilities:
Funding of escrows, net 2,943 (4,744) (4,303)
Rents receivable (4,263) (2,495) (679)
Prepaid expenses (155) (1,556) 180
Due to/from related parties (195) 163 26
Other assets (879) (975) (290)
Accounts payable and accrued expenses (4,288) 3,120 1,233
Other liabilities 407 1,907 (117)
------ -------- --------
Net cash provided by operating activities 25,886 7,459 8,934
------ -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and improvements (25,091) (23,253) (10,558)
Net proceeds from sale of property 6,128 2,193 1,288
Investments in unconsolidated partnerships -- (861) --
Distributions from unconsolidated partnerships 637 -- --
Payment of deferred leasing costs (1,604) (2,901) (1,205)
------- -------- --------
Net cash used in investing activities (19,930) (24,822) (10,475)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Shares -- 95,923 --
Principal payments on mortgages (17,598) (80,493) (14,835)
Proceeds received on mortgage notes 48,168 19,877 25,955
Payment of note payable to shareholder -- (3,050) --
Payment of deferred financing and other costs (1,091) (967) (757)
Dividends paid (9,239) -- (9,577)
Distributions to minority interests in Operating Partnership (3,929) (31) (1,870)
Distributions to minority interest in majority owned partnerships (127) -- --
Repurchase of Common Shares (1,983) -- --
------- -------- --------
Net cash provided by (used in) financing activities 14,201 31,259 (1,084)
------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20,157 13,896 (2,625)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 15,183 1,287 3,912
------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $35,340 $ 15,183 $ 1,287
======= ======== ========
See accompanying notes
F-6
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share amounts)
Year ended December 31,
1999 1998 1997
---- ---- ----
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for interest, net of amounts
capitalized of $1,299, $857, and $569, respectively $23,793 $ 17,650 $ 15,502
======= ========= ========
Supplemental Disclosures of Non-Cash
Investing and Financing Activities:
Acquisition of real estate by assumption of debt $18,521
========
Acquisition of real estate by issuance of Preferred
Operating Partnership Units $ 2,212
========
The following activity was recorded in connection with
the RDC Transaction (Note 2).
Real estate and investment in
partnerships acquired $(253,801)
Mortgage notes payable assumed 154,234
Operating partnership units issued 83,250
Common Shares issued 13,967
Minority interests in
acquired properties 2,350
---------
Net Cash $ --
=========
See accompanying notes
F-7
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies
Acadia Realty Trust (the "Company"), formerly known as Mark Centers Trust, is a
fully integrated and self-managed real estate investment trust ("REIT") focused
primarily on the ownership, acquisition, redevelopment and management of
neighborhood and community shopping centers, and multi-family properties.
All of the Company's assets are held by, and all of its operations are conducted
through, Acadia Realty Limited Partnership (the "Operating Partnership"),
formerly known as Mark Centers Limited Partnership, and its majority owned
subsidiaries. As of December 31, 1999, the Company controlled 71% of the
Operating Partnership as the sole general partner.
As of December 31, 1999, the Company operated fifty-eight properties, which it
owned or had an ownership interest in, consisting of forty-seven neighborhood
and community shopping centers, three enclosed malls, two mixed use properties
(a retail/office center and a retail/residential property), five multi-family
properties and one redevelopment property located in the Eastern and Midwestern
regions of the United States. The retail/office mixed use property was held for
sale as of December 31, 1999.
Principles of Consolidation
The consolidated financial statements include the consolidated accounts of the
Company and its majority owned subsidiaries, including the Operating
Partnership. Non-controlling investments in partnerships are accounted for under
the equity method of accounting as the Company exercises significant influence.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Properties
Real estate assets are stated at cost less accumulated depreciation. Such
carrying amounts are adjusted, if necessary, to reflect any impairment in the
value of the assets. Expenditures for acquisition, development construction and
improvement of properties, as well as significant renovations are capitalized.
Interest costs are capitalized until construction is substantially complete.
Depreciation is computed on the straight-line method over estimated useful lives
of thirty to forty years for buildings and the shorter of the useful life or
lease term for improvements, furniture, fixtures and equipment. Expenditures for
maintenance and repairs are charged to operations as incurred. Property held for
sale is reflected at the lower of the carrying amount or net realizable value.
Deferred Costs
Fees and costs incurred in the successful negotiation of leases have been
deferred and are being amortized on a straight-line basis over the terms of the
respective leases. Fees and costs incurred in connection with obtaining
financing have been deferred and are being amortized over the term of the
related debt obligation.
F-8
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies, continued
Revenue Recognition
Leases with tenants are accounted for as operating leases. Minimum rents are
recognized on a straight-line basis over the term of the respective leases. As
of December 31, 1999 and 1998, unbilled rents receivable relating to
straight-lining of rents were $3,057 and $2,163, respectively.
Percentage rents are recognized in the period when the specified target, or in
the case of percentage rent, the tenant sales breakpoint, is met.
Reimbursements from tenants for real estate taxes, insurance and other property
operating expenses are recognized as revenue in the period the expenses are
incurred.
An allowance for doubtful accounts has been provided against certain tenant
accounts receivable which are estimated to be uncollectible. Rents receivable at
December 31, 1999 and 1998 are shown net of an allowance for doubtful accounts
of $1,588 and $1,854, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash and cash equivalents.
Cash in Escrow
Cash in escrow consists principally of cash held for real estate taxes, property
maintenance, insurance, lease renewals, environmental remediation, and minimum
occupancy and property operating income requirements at specific properties as
required by certain loan agreements. The balance as of December 31, 1998 also
included amounts funded for certain legal settlement amounts (note 17).
Non-Recurring Charges
In connection with the RDC Transaction (note 2), the Company incurred
non-recurring costs of $2,249 related primarily to payments made to certain
officers and key employees pursuant to change in control provisions of
employment contracts, severance paid to the Former Principal Shareholder (note
8), retention bonuses for certain employees and transaction-related consulting
and professional fees.
Income Taxes
The Company has made an election to be taxed, and believes it qualifies as a
real estate investment trust ("REIT") under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended. A REIT will generally not be subject
to federal income taxation on that portion of its income that qualifies as REIT
taxable income to the extent that it distributes at least 95% of its taxable
income to its shareholders and complies with certain other requirements.
Accordingly, no provision has been made for federal income taxes for the Company
in the accompanying consolidated financial statements. The Company is subject to
state income or franchise taxes in certain states in which some of its
properties are located. These state taxes, which in total are not significant,
are included in general and administrative expenses in the accompanying
consolidated financial statements.
F-9
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies, continued
Earnings Per Common Share
For the years ended December 31, 1999, 1998 and 1997, basic earnings per share
was determined by dividing the net applicable income or loss to common
shareholders for the year by the weighted average number of common shares of
beneficial interest ("Common Shares") outstanding during each year consistent
with the Financial Accounting Standards Board Statement No. 128. The weighted
average number of shares outstanding for the years ended December 31, 1999, 1998
and 1997 were 25,708,787, 15,205,962 and 8,551,930, respectively.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue Common Shares were exercised or converted
into Common Shares or resulted in the issuance of Common Shares that then shared
in the earnings of the Company. For the years ended December 31, 1999, 1998 and
1997 no additional shares were reflected as the impact would be anti-dilutive in
such years.
Share Repurchase Plan
As of December 31, 1999, the Company had repurchased 394,900 Common Shares at a
total cost of $1,984 under a share repurchase plan which allows for the
repurchase of up to $10,000 of the Company's outstanding Common Shares. The
repurchased shares are reflected as a reduction of par value and additional
paid-in capital.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (the "Statement"). In June 1999, the FASB issued Statement No. 137,
which deferred the effective date of Statement No. 133 requiring it to be
adopted for all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company expects to adopt the Statement effective January 1, 2001. The
Statement will require the Company to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. If a derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of the derivative will either be offset against
the change in fair value of the hedged asset, liability, or firm commitment
through earnings, or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company does not
anticipate that the adoption of this Statement will have a significant effect on
its results of operations or financial position.
Reclassifications
Certain 1998 and 1997 amounts were reclassified to conform with the 1999
presentation.
F-10
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
2. Acquisition and Disposition of Properties and Related Transactions
1999 Acquisitions and Dispositions
On November 16, 1999, the Company acquired 100% of the partnership interests of
the limited partnership which owns the Pacesetter Park Shopping Center, a 96,000
square foot community shopping center located in Rockland County, New York. The
aggregate purchase price of $7,400 consisted of the assumption of $4,637 in
first mortgage debt and the issuance of $2,212 in preferred Operating
Partnership units with the balance funded from working capital.
On May 5, 1999, the Company acquired the sole general partner's interest in the
limited partnership owning the Gateway Mall (formerly the Mall 189), a 122,000
square foot shopping center located in Burlington, Vermont, for $6,547. The
interest was acquired out of bankruptcy by restructuring and assuming the
mortgage debt of $6,222. The balance of the purchase was funded from working
capital. The center, which is a partially enclosed mall, is being redeveloped
into a conventional strip center format.
On February 24, 1999, the Company acquired the Mad River Station, a 154,000
square foot shopping center located in Dayton, Ohio for $11,500. The Company
assumed $7,661 in mortgage debt and funded the remaining purchase from working
capital.
Pursuant to its continuing plan to dispose of certain under-performing
properties, the Company sold two properties during 1999, the Searstown Mall on
February 1, 1999 for a sale price of $3,300 and the Auburn Plaza on March 29,
1999 for $3,500.
1998 Acquisitions and Dispositions
On August 12, 1998 the Company completed the transactions contemplated by the
Contribution and Share Purchase Agreement dated April 15, 1998 (the "RDC
Transaction") involving affiliates of RD Capital, Inc. ("RDC"). In connection
with the RDC Transaction, the Operating Partnership acquired (i) fee title to or
all, or substantially all, of the ownership interests in twelve shopping
centers, five multi-family properties and one redevelopment property, (ii) a 49%
interest in one shopping center, (iii) certain third party management contracts,
and (iv) certain promissory notes from real estate investment partnerships and
related entities, which are not under common control, in which RDC serves as
general partner or in another similar management capacity, for approximately
11.1 million Operating Partnership units ("OP Units") and approximately 2.0
million Common Shares valued at $97,217. In addition, the Company assumed
mortgage debt aggregating $154,234 and incurred other capitalized transaction
costs of $5,757 resulting in an aggregate purchase price of $257,208. As part of
the RDC Transaction, the Company also issued approximately 13.3 million Common
Shares to three real estate investment limited partnerships (collectively "RDC
Funds"), in which affiliates of RDC serve as general partner, in exchange for
$100,000.
F-11
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
2. Acquisition and Disposition of Properties and Related Transactions, continued
1998 Acquisitions and Dispositions, continued
The Company accounted for the RDC Transaction as (i) a purchase of properties
and other related assets in exchange for OP Units and Common Shares and the
assumption of certain mortgage debt and other liabilities using the purchase
method of accounting and (ii) an issuance of Common Shares for cash.
Accordingly, the accompanying 1998 consolidated financial statements include the
operations of the properties acquired in the RDC Transaction from August 12,
1998 through December 31, 1998 (note 20).
The Operating Partnership is also obligated to issue additional OP Units valued
at $2,750 upon the completion of certain improvements and the commencement of
rental payments from a designated tenant at one of the properties acquired in
the RDC Transaction.
Following the completion of the RDC Transaction, the Company changed its name
from Mark Centers Trust to Acadia Realty Trust and the name of the Operating
Partnership was changed from Mark Centers Limited Partnership to Acadia Realty
Limited Partnership. Management also adopted a plan to dispose of three
under-performing properties following the RDC Transaction. As a result, the
Company recorded a non-cash charge of $11,560 to write-down these properties to
their estimated net realizable value as the anticipated sales proceeds (net of
selling costs) were expected to be insufficient to recover the associated
carrying values. On December 30, 1998, the Company completed the sale of the
Normandale Mall for $2,350. The remaining two properties (the Searstown Mall and
Auburn Plaza) were sold in 1999.
F-12
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
3. Segment Reporting
The Company has two reportable segments: retail properties and multi-family
properties. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates property performance primarily based on net operating income before
depreciation, amortization and certain nonrecurring items. The reportable
segments are managed separately due to the differing nature of the leases and
property operations associated with the retail versus residential tenants. All
the multi-family units were acquired in 1998 as part of the RDC Transaction. The
following table sets forth certain segment information for the Company as of and
for the years ended December 31, 1999, 1998 and 1997 (does not include
unconsolidated partnerships):
1999
----
Retail Multi-Family All
Properties Properties Other Total
---------- ------------ ----- --------
Revenues $ 75,823 $ 14,915 $ 1,971 $ 92,709
Property operating expenses and
real estate taxes 26,190 5,956 -- 32,146
Net property income before depreciation,
amortization and certain nonrecurring items 49,633 8,959 1,971 60,563
Depreciation and amortization 17,817 1,829 241 19,887
Interest expense 19,199 4,115 23,314
Real estate at cost 487,376 82,145 -- 569,521
Total assets 477,977 85,363 7,463 570,803
Gross leasable area (multi-family - 2,273 units) 8,817 2,039 -- 10,856
Expenditures for real estate and improvements 23,912 1,179 -- 25,091
Revenues
Total revenues for reportable segments $ 93,766
Elimination of intersegment management fee income (1,057)
--------
Total consolidated revenues $ 92,709
========
Property operating expenses and real estate taxes
Total property operating expenses and real estate
taxes for reportable segments $ 33,203
Elimination of intersegment management fee expense (1,057)
--------
Total consolidated expense $ 32,146
========
Reconciliation to income before extraordinary
item and minority interest
Net property income before depreciation,
amortization and certain nonrecurring items $ 60,563
Depreciation and amortization (19,887)
General and administrative (6,337)
Equity in earnings of unconsolidated
partnerships 584
Loss on sale of property (1,284)
Interest expense (23,314)
--------
Income before minority interest $ 10,325
========
F-13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
3. Segment Reporting, continued
1998
----
Retail Multi-Family All
Properties Properties Other Total
---------- ------------ ----- --------
Revenues $ 53,507 $ 5,644 $ 620 $ 59,771
Property operating expenses and
real estate taxes 19,573 2,145 -- 21,718
Net property income before depreciation,
amortization and certain nonrecurring items 33,934 3,499 620 38,053
Depreciation and amortization 14,963 629 203 15,795
Interest expense 16,685 1,606 11 18,302
Real estate at cost 470,438 80,811 -- 551,249
Total assets 439,280 81,716 7,516 528,512
Gross leasable area (multi-family - 2,273 units) 8,931 2,039 -- 10,970
Expenditures for real estate and improvements 22,844 409 -- 23,253
Revenues
Total revenues for reportable segments $ 60,204
Elimination of intersegment ground rent and
management fee income (433)
--------
Total consolidated revenues $ 59,771
========
Property operating expenses and real estate taxes
Total property operating expenses and real estate
taxes for reportable segments $ 22,151
Elimination of intersegment ground rent and
management fee expense (433)
--------
Total consolidated expense $ 21,718
========
Reconciliation to loss before extraordinary
item and minority interest
Net property income before depreciation,
amortization and certain nonrecurring items $ 38,053
Depreciation and amortization (15,795)
General and administrative (4,409)
Non-recurring charges (2,249)
Settlement of litigation (2,358)
Equity in earnings of unconsolidated
partnerships 256
Loss on sale of property (175)
Adjustment of carrying value of property
held for sale (11,560)
Interest expense (18,302)
--------
Loss before extraordinary item and
minority interest $(16,539)
========
F-14
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
3. Segment Reporting, continued
1997
----
Retail Multi-Family All
Properties Properties Other Total
---------- ------------ ----- --------
Revenues $ 44,238 $ -- $ 260 $ 44,498
Property operating expenses and
real estate taxes 14,704 -- -- 14,704
Net property income before depreciation,
amortization and certain nonrecurring items 29,534 -- 260 29,794
Depreciation and amortization 13,560 -- 208 13,768
Interest expense 15,435 -- 9 15,444
Real estate at cost 311,688 -- -- 311,688
Total assets 254,500 -- -- 254,500
Gross leasable area (multi-family - 2,273 units) 7,265 -- -- 7,265
Expenditures for real estate and improvements 10,558 -- -- 10,558
Revenues
Total revenues for reportable segments $ 44,931
Elimination of intersegment ground rent and
management fee income (433)
--------
Total consolidated revenues $ 44,498
========
Property operating expenses and real estate taxes Total property operating
expenses and real estate
taxes for reportable segments $ 15,137
Elimination of intersegment ground rent and
management fee expense (433)
--------
Total consolidated expense $ 14,704
========
Reconciliation to loss before extraordinary
item and minority interest
Net property income before depreciation,
amortization and certain nonrecurring items $ 29,794
Depreciation and amortization (13,768)
General and administrative (2,351)
Loss on sale of property (12)
Interest expense (15,444)
--------
Loss before minority interest $ (1,781)
========
F-15
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
4. Investment in Partnerships
In connection with the RDC Transaction, the Company acquired a 49% interest in
each of the Crossroads Joint Venture and Crossroads II Joint Venture
(collectively the "Crossroads") which collectively own a 311,000 square foot
shopping center in Greenburgh, New York. The Company accounts for its investment
in Crossroads using the equity method. Summary financial information of the
Crossroads and the Company's investment in and share of income from Crossroads
follows:
December 31, December 31,
1999 1998
---- ----
Balance Sheet
Assets:
Rental property, net $ 8,801 $ 9,161
Other assets 5,204 4,308
------- -------
Total assets $14,005 $13,469
======= =======
Liabilities and partners' equity
Mortgage note payable $35,105 $35,526
Other liabilities 777 502
Partners' equity (21,877) (22,559)
------- -------
Total liabilities and partners'
equity $14,005 $13,469
======= =======
Company's investment in
partnerships $ 7,463 $ 7,516
======= =======
Statement of Operations
Total revenue $ 7,003 $ 2,680
Operating and other expenses 1,910 643
Interest expense 2,568 1,022
Depreciation and amortization 534 192
------- -------
Net income $ 1,991 $ 823
======= =======
Company's share of net income $ 976 $ 403
Amortization of excess investment
(See below) 392 147
------- -------
Income from Partnerships $ 584 $ 256
======= =======
The unamortized excess of the Company's investment over its share of the net
equity in Crossroads at the date of acquisition was $19,580. The portion of this
excess attributable to buildings and improvements is being amortized over the
life of the related property.
F-16
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
5. Deferred Charges
Deferred charges consist of the following as of December 31, 1999 and 1998:
1999 1998
---- ----
Deferred financing costs $ 7,563 $ 6,624
Deferred leasing and other costs 12,279 10,882
------- -------
19,842 17,506
Accumulated amortization (7,468) (6,045)
------- -------
$12,374 $11,461
======= =======
6. Mortgage Loans
At December 31, 1999, mortgage notes payable aggregated $326,651 and were
collateralized by 49 properties and related tenant leases. Interest rates ranged
from 7.50% to 9.60%. Mortgage payments are due in monthly installments of
principal and/or interest and mature on various dates through 2022. Certain
loans are cross-collateralized and cross-defaulted as part of a group of
properties. The loan agreements contain customary representations, covenants and
events of default. Certain loan agreements require the Company to comply with
certain affirmative and negative covenants, including the maintenance of certain
debt service coverage and leverage ratios.
On December 16, 1999, the Company closed on a $13,750 bank loan. The
variable-rate debt, which is secured one of the Company's properties, matures in
January 2005, bears interest at LIBOR plus 165 basis points and requires the
fixed monthly payment of principal of $10. The interest rate is to be lowered by
20 basis points upon stabilization of the property and certain debt service
coverage ratios.
On November 22, 1999, the Company closed on a fixed-rate facility with a bank,
which provides for the borrowing of up to $10,000. The loan, which is secured by
one of the Company's properties, matures in December 2002 and requires the
monthly payment of interest at 7.75% and principal amortized over 25 years. As
of December 31, 1999, the Company had borrowed $5,000 under this facility, with
the remaining $5,000 available to be drawn down in up to three traunches. The
proceeds from this borrowing were used primarily to retire maturing debt with
another lender of $4,372, which was secured by another of the Company's
properties.
On November 16, 1999, the Company assumed $4,637 in first mortgage debt in
connection with the acquisition of all of the partnership interests of the
limited partnership which owns the Pacesetter Park Shopping Center. The loan,
which matures March 2003, bears interest at 8.18% and requires the monthly
payment of principal and interest amortized over 20 years.
During 1999, the Company closed on two variable-rate financings with an
insurance company, which are secured by two of the Company's properties. On
September 21, 1999, the Company closed on a $10,000 loan which matures in
October 2002 and on July 7, 1999, a $14,000 loan which matures in August 2002.
Both loans require monthly payments of interest at a rate of LIBOR plus 205
basis points adjusted on a quarterly basis and principal amortized over 25
years. The Company has also purchased interest rate cap agreements for both
loans, which cap LIBOR at 6.50%. The costs of the cap agreements have been
capitalized and are being amortized as an adjustment to interest expense over
the terms of the loans. Approximately $8,555 of the proceeds were used to retire
existing debt with the same lender.
F-17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
6. Mortgage Loans, continued
On May 5, 1999, the Company assumed $6,222 in mortgage debt in connection with
the acquisition of the general partner's interest in Mall 189. The debt, which
matures September 1, 2002, bears interest at a fixed-rate of 7.5% and requires
the payment of interest only through May 4, 2001. Thereafter, and through the
maturity date, the loan bears interest at a fixed-rate of 9.875% and requires
total monthly payments of $55 representing interest and principal. The debt can
be prepaid commencing May 4, 2002, without any prepayment fees.
On March 23, 1999, the Company closed on a $7,000 facility with a bank that is
secured by one of the company's properties. As of December 31, 1999, the Company
had $4,000 outstanding under this facility which matures March 15, 2002, bears
interest at LIBOR plus 175 basis and requires the payment of principal amortized
over a 25 year period. The Company also obtained two irrevocable letters of
credit totaling $3,000. Related to the acquisition of the Mall 189 (note 2), a
letter of credit for $2,000 is required pursuant to the bankruptcy
reorganization plan of the seller of the property. The letter of credit is
expected to be reduced in $500 increments as redevelopment of the property
progresses. In addition, a letter of credit for $1,000 was obtained related to
the settlement of certain litigation in 1998 with the former President (note
17), which is expected to be reduced in $200 increments as certain obligations
are met.
On February 24, 1999, the Company assumed $7,661 in mortgage debt in connection
with the acquisition of the Mad River Station Shopping Center. The debt, which
matures May 23, 2005, bears interest at a fixed-rate of 9.6% and requires the
payment of principal amortized over 25 years. The debt can be prepaid commencing
May 23, 2000 with certain prepayment fees and after May 23, 2002 without any
such fees.
The following table summarizes the Company's mortgage indebtedness as of
December 31, 1999 and 1998:
December 31, December 31, Interest
1999 1998 Rate
------------ ------------ --------
Mortgage notes payable - variable-rate
General Electric Capital Corp. $ 7,126 $ 6,989 8.52% (Commercial paper rate +2.75%)
Fleet Bank, N.A. 3,966 -- 7.91% (LIBOR + 1.75%)
Fleet Bank, N.A. 9,326 8,268 7.94% (LIBOR + 1.78%)
Sun America Life Insurance Company 13,931 -- 8.26% (LIBOR + 2.05%)
Sun America Life Insurance Company 9,979 -- 8.13% (LIBOR + 2.05%)
KBC Bank 14,508 14,760 7.73% (LIBOR + 1.25%)
First Union National Bank 13,750 -- 7.81% (LIBOR + 1.65%)
-------- --------
Total variable-rate debt 72,586 30,017
-------- --------
Mortgage notes payable - fixed rate
Sun America Life Insurance Company -- 8,717 --
The Manufacturers Life Insurance Company (USA) -- 4,372 --
John Hancock Mutual Life Insurance Company 53,878 54,445 9.11%
Metropolitan Life Insurance Company 41,000 41,000 7.75%
Sun America Life Insurance Company 42,143 43,832 7.75%
Huntoon Hastings Capital Corp. 6,222 -- 7.50%
North Fork Bank 5,000 -- 7.75%
M&T Real Estate Inc. 4,628 -- 8.18%
Anchor National Life Insurance Company 3,866 3,950 7.93%
Lehman Brothers Holdings, Inc. 17,973 18,140 8.32%
Mellon Mortgage Company 7,566 -- 9.60%
Northern Life Insurance Company 3,173 3,409 7.70%
Bankers Security Life 2,189 2,351 7.70%
Morgan Stanley Mortgage Capital 44,092 44,729 8.84%
Nomura Asset Capital Corporation 22,335 22,599 9.02%
-------- --------
Total fixed-rate debt 254,065 247,544
-------- --------
$326,651 $277,561
======== ========
F-18
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
6. Mortgage Loans, continued
Properties Payment
Maturity Encumbered Terms
-------- ---------- -------
Mortgage notes payable - variable-rate
General Electric Capital Corp. 01/01/02 (1) (20)
Fleet Bank, N.A. 03/15/02 (2) (20)
Fleet Bank, N.A. 05/31/02 (3) (20)
Sun America Life Insurance Company 08/01/02 (4) (20)
Sun America Life Insurance Company 10/01/02 (5) (20)
KBC Bank 12/31/02 (6) (20)
First Union National Bank 01/01/05 (7) (20)
Total variable-rate debt
Mortgage notes payable - fixed rate
Sun America Life Insurance Company -- - --
The Manufacturers Life Insurance Company (USA) -- - --
John Hancock Mutual Life Insurance Company 04/01/00 (8) $455(20)
Metropolitan Life Insurance Company 06/01/00 (9) (21)
Sun America Life Insurance Company 01/01/01 (10) $346(20)
Huntoon Hastings Capital Corp. 09/01/02 (11) (22)
North Fork Bank 12/01/02 (12) $38(20)
M&T Real Estate Inc. 03/01/03 (13) $41(20)
Anchor National Life Insurance Company 01/01/04 (14) $33(20)
Lehman Brothers Holdings, Inc. 03/01/04 (15) $139(20)
Mellon Mortgage Company 05/23/05 (16) $70(20)
Northern Life Insurance Company 12/01/08 (17) $41(20)
Bankers Security Life 12/01/08 (17) $28(20)
Morgan Stanley Mortgage Capital 11/01/21 (18) $380(20)
Nomura Asset Capital Corporation 03/11/22 (19) $193(20)
Total fixed-rate debt
Notes:
(1) Soundview Marketplace (9) Valmont Plaza (18) Midway Plaza
Luzerne Street Plaza Northside Mall
(2) Town Line Plaza Green Ridge Plaza New Smyrna Beach
Crescent Plaza Cloud Springs Plaza
(3) Smithtown Shopping Center East End Centre Troy Plaza
Martintown Plaza
(4) Merrillville Plaza (10) Bloomfield Town Square Kings Fairgrounds
Atrium Mall Shillington Plaza
(5) Village Apartments Walnut Hill Shopping Center Dunmore Plaza
GHT Apartments Kingston Plaza
(6) Marley Run Apartments Colony Apartments Twenty Fifth Street Shopping Center
Circle Plaza
(7) 239 Greenwich Avenue (11) Gateway Mall Mountainville Plaza
Birney Plaza
(8) New Loudon Centre (12) The Branch Shopping Center Monroe Plaza
Ledgewood Mall Ames Plaza
Plaza 422 (13) Pacesetter Park Shopping Plaza 15
Berlin Shopping Center
Route 6 Mall (14) Pittston Plaza (19) Northwood Centre
Tioga West
Bradford Towne Centre (15) Glen Oaks Apartments (20) Monthly principal and interest
(16) Mad River Station Shopping (21) Interest only monthly
Center
(17) Manahawkin Shopping Center (22) Interest only until 5/01;
principal and interest thereafter
F-19
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
6. Mortgage Loans, continued
The scheduled principal repayments of all mortgage indebtedness as of December
31, 1999 are as follows:
2000 $ 98,726
2001 44,431
2002 70,592
2003 6,717
2004 22,892
Thereafter 83,293
--------
$326,651
========
7. Minority Interests
Minority interest represents the limited partners' interest of 10,484,143 and
11,184,143 Common Operating Partnership ("Common OP") Units in the Operating
Partnership at December 31, 1999 and 1998, respectively, and 2,212 units of
Preferred Limited Partnership Interests designated as Series A Preferred Units
("Preferred OP Units") issued November 16, 1999 in connection with the
acquisition of all the partnership interests of the limited partnership which
owns the Pacesetter Park Shopping Center (note 2).
The Preferred OP Units, which have a stated value of $1 each, are entitled to a
quarterly preferred distribution of the greater of (i) $22.50 (9% annually) per
Preferred OP Unit or (ii) the quarterly distribution attributable to a Preferred
OP Unit if such unit were converted into a Common OP Unit. The Preferred OP
Units are currently convertible into Common OP Units based on the stated value
divided by $7.50. After the seventh anniversary following their issuance, either
the Company or the holders can call for the conversion of the Preferred OP Units
at the lesser of $7.50 or the market price of the Common Shares as of the
conversion date. The Preferred OP Units are subject to a twelve-month lock-up
period whereby they cannot be sold, assigned or otherwise transferred.
Minority interests at December 31, 1999 and 1998 also include an aggregate
amount of $2,223 and $2,350, respectively, representing interests held by third
parties in four of the properties acquired in the RDC Transaction in which the
Company has a majority ownership position.
8. Related Party Transactions
During 1998, the Company entered into the following transactions with Mr.
Slomowitz, a former trustee and former principal shareholder, in connection with
the RDC Transaction: (i) repaid a $3,030 note related to the Company's 1996
purchase of the Union Plaza, (ii) paid $600 in severance pay, (iii) paid $100 on
the closing of the RDC Transaction and agreed to pay $100 on each of the
following two anniversary dates of the closing of the RDC Transaction for his
agreement not to compete with the Company and for certain consulting services,
(iv) granted ten year options to purchase 300,000 Common Shares at an exercise
price of $9.00 per Common Share, (v) cancelled formerly issued options to
purchase 200,000 Common Shares at $12.00 per Common Share and (vi) agreed to pay
a brokerage commission of 2% of the sales price of nine designated properties
currently comprising a portion of the Company's portfolio, provided such
commissions would not exceed $600 in the aggregate.
On December 30, 1999, the Company and Mr. Slomowitz terminated certain of the
obligations described above which were incurred in connection with the RDC
Transaction. The principal terms included cancellation of the lease for the
Company's prior headquarters in a building owned by Mr. Slomowitz. Rent expenses
for this office space was $119, $112 and $104 for the years ended December 31,
1999, 1998 and 1997, respectively. The Company paid Mr. Slomowitz the sum of
$329 in connection with the lease cancellation. Additionally, Mr. Slomowitz
terminated his options to acquire 301,000 common shares and waived the final
$100 installment payment due August, 2000. The Company agreed to indemnify Mr.
Slomowitz with respect to certain contingent liabilities. Mr. Slomowitz retains
the right to continue to guarantee Company debt up to $55,000.
F-20
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
8. Related Party Transactions, continued
Mr. Slomowitz also removed all restrictions on the sale of any properties which
he had originally contributed to the Company, waived his claims for present and
future brokerage commissions and agreed to absorb up to $1,250 of tax
liabilities resulting in event of the sale thereof. Mr. Slomowitz also resigned
from the Company's Board of Trustees effective December 8, 1999.
On July 16, 1999, and April 9, 1999, Mr. Slomowitz converted 600,000 and 100,000
Common OP Units, respectively, into Common Shares.
In connection with the RDC Transaction, the Company acquired certain property
management contracts for three properties in which certain current shareholders
of the Company or their affiliates have ownership interests. Management fees
earned by the Company under these contracts are at rates ranging from 3% and
3.5% of collections. Such fees aggregated $639 and $225 for the years ended
December 31, 1999 and 1998, respectively. Management fees earned under
management contracts on properties owned by Mr. Slomowitz aggregated $8 and $19
for the years ended December 31, 1998 and 1997, respectively.
On June 1, 1998, the Company purchased for $1,372 the building and other
improvements constituting the Blackman Plaza from Blackman Plaza Partners in
which Mr. Slomowitz is the sole general partner (owning a one percent economic
interest). The Company was already the owner of the land. Payment for the
building and other improvements was made with the proceeds from a financing with
CS First Boston (this debt was subsequently retired following the RDC
Transaction) and the application of ground rent in arrears totaling $496 due the
Company.
9. Tenant Leases
Space in the shopping centers and other retail properties is leased to various
tenants under operating leases which usually grant tenants renewal options and
generally provide for additional rents based on certain operating expenses as
well as tenants' sales volume.
Minimum future rentals to be received under non-cancelable leases for shopping
centers and other retail properties as of December 31, 1999 are summarized as
follows:
2000 $ 50,409
2001 46,942
2002 42,902
2003 39,725
2004 34,682
Thereafter 210,408
--------
$425,068
========
Minimum future rentals above include a total of $2,176 for two tenants (with
five leases), which have filed for bankruptcy protection. None of these leases
have been rejected nor affirmed.
During the years ended December 31, 1999 and 1998, no single tenant collectively
accounted for more than 10% of the Company's total revenues. During the year
ended December 31, 1997, rental income representing 10% or more of total
revenues was earned from various governmental agencies of the State of Florida.
Leases with these Florida agencies contain customary conditions, required under
Florida Law, permitting state agency tenants to cancel their leases upon six
months' notice in the event that state-owned facilities in the same county
become available. As such, minimum rents from these Florida agencies are not
included in the above table of minimum future rentals. Rentals earned under
these leases during the year ended December 31, 1997 were $4,890. On December
15, 1999, the Company received a Notice of Exercise of Right to Terminate Lease
from the Florida Department of Health for an aggregate 59,150 square feet
representing $827 of rents.
F-21
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
10. Lease Obligations
The Company leases land at six of its shopping centers, which are accounted for
as operating leases and generally provide the Company with renewal options. The
leases terminate during the years 2016 to 2066. Four of these leases provide the
Company with options to renew for additional terms aggregating from 20 to 44
years. The Company leases space for its New York City corporate office for a
term expiring in 2002. Future minimum rental payments required for leases having
remaining non-cancelable lease terms in excess of one year are as follows:
2000 $ 714
2001 714
2002 668
2003 642
2004 642
Thereafter 21,406
-------
$24,786
=======
11. Share Incentive Plan
During 1999, the Company adopted the 1999 Share Incentive Plan (the "1999 Plan")
which replaced both the 1994 Share Option Plan and the 1994 Non-Employee
Trustees' Share Option Plan. The 1999 Plan authorizes the issuance of options
equal to up to 8% of the Common Shares outstanding from time to time on a fully
diluted basis. However, not more than 4,000,000 of the Common Shares in the
aggregate may be issued pursuant to the exercise of options and no participant
may receive more than 5,000,000 Common Shares during the term of the 1999 Plan.
Options are granted by the Share Option Plan Committee (the "Committee"), which
currently consists of two non-employee Trustees, and will not have an exercise
price less than 100% of the fair market value of the Common shares and a term of
greater than 10 years at the grant date. Vesting of options is at the discretion
of the Committee with the exception of options granted to non-employee Trustees,
which vest in five equal annual installments beginning on the date of grant.
Pursuant to the 1999 Plan, non-employee Trustees receive an automatic grant of
1,000 options following each Annual Meeting of Shareholders. As of December 31,
1999, the Company has issued 2,066,600 options to officers and employees, which
are for ten-year terms and vest in three equal annual installments beginning on
the grant date. In addition, 5000 options have been issued to non-employee
Trustees. 1,000 of these options were subsequently cancelled as further
described in note 8.
The 1999 Plan also provides for the granting of Share Appreciation Rights,
Restricted Shares and Performance Units/Shares. Share Appreciation Rights
provide for the participant to receive, upon exercise, cash and/or Common
Shares, at the discretion of the committee, equal to in value to the excess of
the option exercise price over the fair market value of the Common Shares at the
exercise date. The Committee will determine the award and restrictions placed on
Restricted Shares, including the dividends thereon and the term of such
restrictions. The Committee also determines the award and vesting of Performance
Units and Performance Shares based on the attainment of specified performance
objectives of the Company within a specified performance period. As of December
31, 1999, the Company issued 2,000 Restricted Shares, which vest equally over
three years, to an employee. No awards of Share Appreciation Rights or
Performance Units/Shares were granted for the year ended December 31, 1999.
F-22
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
11. Share Incentive Plan, continued
The Company accounts for stock-based compensation pursuant to Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and related interpretations. Under APB 25, no compensation expense
has been recognized in the accompanying financial statements related to the
issuance of stock options because the exercise price of the Company's employee
stock options equaled or exceeded the market price of the underlying stock on
the date of grant. The alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), has not been elected by the Company.
Accordingly, pro forma information regarding net income and earnings per share
as required by SFAS 123 has been determined as if the Company had accounted for
its employee stock options under the fair value method. The fair value for these
options was estimated at the date of the grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
Year ended December 31,
1999 1998 1997
---- ---- ----
Risk-free interest rate 6.4% 5.2% 6.3%
Dividend Yield 9.5% 9.4% 9.0%
Expected Life 8.6 years 9.7 Years 4.0 Years
Expected volatility 32.4% 37.7% 13.7%
For purposes of pro forma disclosure, the estimated fair value of the options
are amortized to expense over the options vesting period. For the year ended
December 31, 1999, pro forma net income is $6,573, or $0.26 per Share. For the
years ended December 31, 1998 and 1997, the Company has elected not to present
proforma information because the impact on the reported net loss per Share is
immaterial.
Changes in the number of shares under all option arrangements are summarized as
follows:
Year ended December 31,
1999 1998 1997
---- ---- ----
Outstanding at beginning
of period 300,000 329,500 217,000
Granted 2,071,600 305,000 152,500
Option price per share
granted $4.89-$7.50 $8.88-$9.00 $10.13-$11.19
Cancelled 300,000 334,500 40,000
Exercisable at end
of period 1,368,733 300,000 181,100
Exercised -- -- --
Expired -- -- --
Outstanding at end
of period 2,071,600 300,000 329,500
Option prices per
share outstanding $4.89-$7.50 $9.00 $10.13-$12.75
As of December 31, 1999 the outstanding options had a weighted average remaining
contractual life of approximately 8.6 years.
F-23
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
12. Restricted Share Plan
The Company had established a restricted share plan, which originally granted to
employees 47,722 restricted Common Shares. The granted restricted shares were
scheduled to vest and be issued 20% per year over a five year period, which
began June 1, 1994. All such shares other than those which had been forfeited
prior to vesting were issued as of December 31, 1998. Each plan participant was
entitled to receive additional compensation on a quarterly basis equal to the
dividend declared on their respective restricted shares granted under the plan
until such plan participants' restricted shares were vested. For the years ended
December 31, 1998 and 1997, total compensation expense related to such
restricted shares vested in such periods amounted to $29 and $76, respectively.
13. Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under which the Company
currently matches 50% of a plan participant's contribution up to 6% of the
employee's annual salary. A plan participant may contribute up to a maximum of
15% of their compensation but not in excess of $10 for the year ended December
31, 1999. The Company contributed $93, $77 and $67 for the years ended December
31, 1999, 1998 and 1997, respectively.
14. Dividends and Distributions Payable
On December 13,1999, the Company declared a cash dividend for the quarter ended
December 31, 1999 of $0.12 per Common Share. The dividend was paid on January
15, 2000 to shareholders of record as of December 31, 1999. A distribution of
$0.12 per Common OP Unit was paid to Common OP Unit holders as well. A
distribution of $10.52 per Preferred OP Unit ($22.50 per annum pro-rated due to
their November 1999 issuance) for the quarter ended December 31, 1999 was
declared December 13, 1999 and paid to Preferred OP Unit holders on January 15,
2000.
The Company has determined that the cash distributed to the shareholders is
characterized as follows for federal income tax purposes:
1999 1998 1997
---- ---- ----
Ordinary income 41% n/a 34%
Return of capital 59% n/a 66%
---- --- ----
100% n/a 100%
==== === ====
15. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 "Disclosures About Fair
Value of Financial Instruments", requires disclosure on the fair value of
financial instruments. Certain of the Company's assets and liabilities are
considered financial instruments. Fair value estimates, methods and assumptions
are set forth below.
Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued
Expenses The carrying amount of these assets and liabilities approximates fair
value due to the short-term nature of such accounts.
Mortgage Notes Payable
As of December 31, 1999 and 1998, the Company has determined the estimated fair
value of its mortgage notes payable are approximately $327,690 and $292,854,
respectively, by discounting future cash payments utilizing a discount rate
equivalent to the rate at which similar mortgage notes payable would be
originated under conditions then existing.
F-24
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
16. Summary of Quarterly Financial Information (unaudited)
The separate results of operations of the Company for the years ended December
31, 1999 and 1998 are as follows:
March 31, June 30, September 30, December 31, Total for
1999 1999 1999 1999 Year
-------- -------- ------------- ------------ ---------
Revenue $22,251 $21,904 $24,428 $24,126 $92,709
=====================================================================
Income before minority interest $ 1,141 $ 1,886 $ 4,362 $ 2,936 $10,325
=====================================================================
Net income $ 765 $ 1,289 $ 3,083 $ 2,058 $ 7,195
=====================================================================
Net income per share - basic and diluted $ 0.03 $ 0.05 $ 0.12 $ 0.08 $ 0.28
=====================================================================
Cash dividends declared per share $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.48
=====================================================================
Weighted average shares outstanding - basic
and diluted 25,419,215 25,510,424 25,988,860 25,908,199 25,708,787
=====================================================================
March 31, June 30, September 30, December 31, Total for
1998 1998 1998 1998 Year
--------- -------- ------------- ------------ ---------
Revenue $10,951 $10,749 $16,150 $21,921 $59,771
=====================================================================
Loss before extraordinary item and minority interest ($621) ($1,568) ($12,920) ($1,430) ($16,539)
=====================================================================
Net loss ($533) ($1,561) ($10,800) ($1,004) ($13,898)
=====================================================================
Net loss per share - basic and diluted
Loss before extraordinary item ($0.06) ($0.15) ($0.58) ($0.04) ($0.86)
=====================================================================
Net loss ($0.06) ($0.18) ($0.60) ($0.04) ($0.91)
=====================================================================
Cash dividends declared per share $0.00 $0.00 $0.00 $0.00 $0.00
=====================================================================
Weighted average shares outstanding - basic
and diluted 8,544,177 8,555,346 18,078,215 25,419,215 15,205,962
=====================================================================
F-25
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
17. Legal Proceedings
On November 20, 1995, Jack Wertheimer, a former President of the Company, filed
a complaint against the Company, its Trustees, including Mr. Slomowitz, and the
Company's former in-house General Counsel and former Chief Financial Officer in
the United States District Court for the Middle District of Pennsylvania. The
complaint, which was filed in connection with the termination of Mr.
Wertheimer's employment, included many of the allegations raised in a state
court proceeding commenced by Mr. Wertheimer in November 1994. The Federal court
complaint also included a civil RICO action in which Mr. Wertheimer alleged that
the Board of Trustees of the Company conspired with Mr. Slomowitz to terminate
Mr. Wertheimer's employment as part of the Mr. Slomowitz's breach of his duty of
good faith and fair dealing. Further, Mr. Wertheimer alleged that the above
defendants engaged in securities fraud in connection with the initial public
offering and that Mr. Slomowitz defrauded or overcharged the Company in
corporate transactions. The Federal complaint sought treble damages under RICO,
as well as damages arising from Mr. Wertheimer's alleged termination of
employment, invasion of privacy, intentional infliction of emotional distress,
fraud and misrepresentation.
On December 31, 1998, the Company and Mr. Wertheimer settled this litigation and
entered into an agreement whereby the Company paid Mr. Wertheimer $1,000 on
December 31, 1998 and agreed to pay him (i)$900 on April 1, 1999 and (ii) five
annual payments of $200 commencing January 10, 2000. Pursuant to this agreement,
the Company has obtained a standby letter of credit to collateralize these
future payments (note 6).
The Company is involved in other various matters of litigation arising in the
normal course of business. While the Company is unable to predict with certainty
the amounts involved, the Company's management and counsel are of the opinion
that, when such litigation is resolved, the Company's resulting liability, if
any, will not have a significant effect on the Company's consolidated financial
position.
18. Contingencies
Upon conducting environmental site inspections in connection with obtaining the
Morgan Stanley Mortgage Capital ("Morgan Stanley") financing during October
1996, certain environmental contamination was identified at the Troy Plaza in
Troy, New York. The Company has entered into a voluntary remedial agreement with
the State of New York for the remediation of the property. Environmental
consultants have completed the remediation operations at the site and are
performing a post-remediation sampling and analysis program. Upon the issuance
of a final report to the State of New York, the Company will have satisfied all
conditions to the voluntary remedial agreement. As of December 31, 1999, Morgan
Stanley holds $250 in escrow to be released upon the Company receiving final
approval from the State of New York.
Management is not aware of any other environmental liability that they believe
would have a material adverse impact on the Company's financial position or
results of operations. Management is unaware of any instances in which it would
incur significant environmental costs if any or all properties were sold,
disposed of or abandoned.
F-26
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
19. Extraordinary Item - Loss on Early Extinguishment of Debt
The consolidated statement of operations for the year ended December 31, 1998
includes the write-off of $707 in net deferred financing fees as a result of the
repayment of the related mortgage debts.
20. Pro Forma Information
The following unaudited pro forma condensed consolidated information for the
years ended December 31, 1998 and 1997 is presented as if the RDC Transaction
had occurred on January 1, 1997.
1998 1997
---- ----
Revenue $84,053 $82,220
======= =======
(Loss) income before
extraordinary item $(5,886) $ 5,170
======= =======
Net (loss) income $(6,067) $ 4,731
======= =======
Net (loss) income per share-
basic and diluted $ (0.24) $ 0.19
======= =======
Weighted average number of
Common Shares outstanding 24,677,928 24,676,558
========== ==========
Weighted average number of
Common Shares outstanding-
assuming dilution 24,677,928 24,680,356
========== ==========
21. Subsequent Events
On January 31, 2000, the Company paid down $23,090 of outstanding debt with a
life insurance company from working capital.
On February 8, 2000, the Company closed on a revolving credit facility with a
bank, which provides for the borrowing of up to $7,400. The facility, which is
secured by one of the Company's properties, matures in March 2003 and requires
the monthly payment of interest at the rate of LIBOR plus 150 basis points (the
rate increases by an additional 25 basis points if the amount outstanding under
the facility exceeds 50% of the value of the collateral). The monthly repayment
of principal amortized over 25 years is required only if the Company draws the
full amount available under the facility. The Company has currently not drawn
any amounts under this facility.
F-27
ACADIA REALTY TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
Costs capitalized
Buildings & Subsequent Buildings &
Description Encumbrances Land Improvements to Acquisition Land Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Shopping Centers
Circle Plaza (1) $ - $ 3,435 $ 13 $ 2 $ 3,446
Shamokin Dam, PA
Martintown Plaza (1) - 4,625 1,620 - 6,245
North Augusta, SC
Midway Plaza (1) 196 1,647 3,081 196 4,728
Opelika, AL
Northside Mall (1) 1,604 7,080 2,213 1,604 9,293
Dothan, AL
New Smyrna Beach (1) 246 2,219 3,963 246 6,182
New Smyrna Beach FL
Wesmark Plaza - 380 3,419 3,794 370 7,223
Sumter, SC
King's Fairground (1) - 1,426 242 - 1,668
Danville, VA
Cloud Springs Plaza (1) 159 2,712 1,177 159 3,889
Ft Ogelthorpe, GA
Crescent Plaza 12,000 1,147 7,425 481 1,147 7,906
Brockton, MA
New Louden Centre (2) 505 4,161 9,623 505 13,784
Latham, NY
Ledgewood Mall (2) 619 5,434 30,937 619 36,371
Ledgewood, NJ
Troy Plaza (1) 479 1,976 950 479 2,926
Troy, NY
Birney Plaza (1) 210 2,979 803 210 3,782
Moosic, PA
Dunmore Plaza (1) 100 506 137 100 643
Dunmore, PA
Mark Plaza - - 4,268 3,881 - 8,149
Edwardsville, PA
Kingston Plaza (1) 305 1,745 463 284 2,229
Kingston, PA
Luzerne Street Plaza 2,000 35 315 1,208 35 1,523
Scranton, PA
Blackman Plaza - 120 - 1,383 120 1,383
Wilkes- Barre, PA
East End Centre 14,200 1,086 8,661 3,493 1,086 12,154
Wilkes-Barre, PA
Greenridge Plaza 6,700 1,335 6,314 695 1,335 7,009
Scranton, PA
Plaza 15 (1) 171 81 1,481 171 1,562
Lewisburg, PA
Date of
Accumulated Acquisition (a)
Total Depreciation Construction (c)
------------------------------------------------
Shopping Centers
Circle Plaza $ 3,448 $ 1,380 1978(c)
Shamokin Dam, PA
Martintown Plaza 6,245 2,475 1985(a)
North Augusta, SC
Midway Plaza 4,924 2,138 1984(a)
Opelika, AL
Northside Mall 10,897 4,133 1986(a)
Dothan, AL
New Smyrna Beach 6,428 2,835 1983(a)
New Smyrna Beach FL
Wesmark Plaza 7,593 2,478 1986(a)
Sumter, SC
King's Fairground 1,668 479 1992(a)
Danville, VA
Cloud Springs Plaza 4,048 1,634 1985(a)
Ft Ogelthorpe, GA
Crescent Plaza 9,053 2,969 1984(a)
Brockton, MA
New Louden Centre 14,289 4,315 1982(a)
Latham, NY
Ledgewood Mall 36,990 14,285 1983(a)
Ledgewood, NJ
Troy Plaza 3,405 1,554 1982(a)
Troy, NY
Birney Plaza 3,992 3,260 1968(c)
Moosic, PA
Dunmore Plaza 743 304 1975(a)
Dunmore, PA
Mark Plaza 8,149 3,817 1968(c)
Edwardsville, PA
Kingston Plaza 2,513 1,264 1982(c)
Kingston, PA
Luzerne Street Plaza 1,558 809 1983(a)
Scranton, PA
Blackman Plaza 1,503 72 1968(c)
Wilkes- Barre, PA
East End Centre 13,240 5,308 1986(c)
Wilkes-Barre, PA
Greenridge Plaza 8,344 2,921 1986(c)
Scranton, PA
Plaza 15 1,733 507 1976(c)
Lewisburg, PA
ACADIA REALTY TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
Costs capitalized
Buildings & Subsequent Buildings &
Description Encumbrances Land Improvements to Acquisition Land Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Shopping Centers (cont.)
Plaza 422 (2) 190 3,004 414 190 3,418
Lebanon, PA
Tioga West (2) 48 1,238 3,144 48 4,382
Tunkhannock,PA
Mountainville Plaza (1) 420 2,390 486 420 2,876
Allentown, PA
Monroe Plaza (1) 70 2,083 147 150 2,150
Stroudsburg, PA
Ames Plaza (1) 57 1,958 182 57 2,140
Shamokin, PA
Route 6 Mall (2) - - 12,696 1,664 11,032
Honesdale , PA
Pittston Mall 3,866 1,500 - 5,956 1,521 5,935
Pittston , PA
Valmont Plaza 6,100 522 5,591 1,029 522 6,620
West Hazelton , PA
Manahawkin 5,362 2,400 9,396 4,837 3,105 13,528
Stafford Township, NJ
Twenty Fifth Street (1) 2,280 9,276 196 2,280 9,472
Easton, PA
Berlin Shopping Centre (2) 1,331 5,351 205 1,331 5,556
Berlin, NJ
Shillington Plaza (1) 809 3,268 32 809 3,300
Reading, PA
Union Plaza - - - 20,241 5,426 14,815
New Castle, PA
Bradford Towne Centre (2) - - 16,100 817 15,283
Towanda, PA
Atrium Mall 10,360 2,772 11,088 22 2,772 11,110
Abington, PA
Bloomfield Town Square 10,332 3,443 13,774 - 3,443 13,774
Bloomfield Hills, MI
Walnut Hill Plaza 9,286 3,122 12,488 392 3,122 12,880
Woonsocket, RI
Elmwood Park Plaza - 3,248 12,992 211 3,248 13,203
Elmwood Park, NJ
Merrillville Plaza 13,931 4,288 17,152 565 4,288 17,717
Hobart, IN
Soundview Marketplace 7,126 2,428 9,711 1,180 2,428 10,891
Port Washington, NY
Marketplace of Absecon - 2,573 10,294 488 2,577 10,778
Absecon, NJ
Date of
Accumulated Acquisition (a)
Total Depreciation Construction (c)
------------------------------------------------
Shopping Centers (cont.)
Plaza 422 3,608 2,062 1972(c)
Lebanon, PA
Tioga West 4,430 2,029 1965(c)
Tunkhannock,PA
Mountainville Plaza 3,296 1,543 1983(a)
Allentown, PA
Monroe Plaza 2,300 1,054 1964(c)
Stroudsburg, PA
Ames Plaza 2,197 1,688 1966(c)
Shamokin, PA
Route 6 Mall 12,696 1,978 1995(c)
Honesdale , PA
Pittston Mall 7,456 867 1995(c)
Pittston , PA
Valmont Plaza 7,142 2,992 1985(a)
West Hazelton , PA
Manahawkin 16,633 1,763 1993(a)
Stafford Township, NJ
Twenty Fifth Street 11,752 2,000 1993(a)
Easton, PA
Berlin Shopping Centre 6,887 1,107 1994(a)
Berlin, NJ
Shillington Plaza 4,109 586 1994(a)
Reading, PA
Union Plaza 20,241 1,493 1996(c)
New Castle, PA
Bradford Towne Centre 16,100 2,931 1994(c)
Towanda, PA
Atrium Mall 13,882 383 1998(a)
Abington, PA
Bloomfield Town Square 17,217 473 1998(a)
Bloomfield Hills, MI
Walnut Hill Plaza 16,002 539 1998(a)
Woonsocket, RI
Elmwood Park Plaza 16,451 447 1998(a)
Elmwood Park, NJ
Merrillville Plaza 22,005 638 1998(a)
Hobart, IN
Soundview Marketplace 13,319 378 1998(a)
Port Washington, NY
Marketplace of Absecon 13,355 378 1998(a)
Absecon, NJ
ACADIA REALTY TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
Costs capitalized
Buildings & Subsequent Buildings &
Description Encumbrances Land Improvements to Acquisition Land Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Shopping Centers (cont.)
Hobson West Plaza - 1,793 7,172 243 1,793 7,415
Naperville, IL
Smithtown Shopping Center 9,326 3,229 12,917 933 3,229 13,849
Smithtown, NY
Town Line Plaza 3,966 878 3,510 6,315 908 9,795
Rocky Hill, CT
Branch Shopping Center 5,000 3,156 12,545 - 3,156 12,545
Village of the Branch, NY
The Caldor Shopping Center - 956 3,826 - 956 3,826
Methuen, MA
Gateway Mall 6,222 1,273 - - 1,273 -
Burlington, VT
Mad River Station 7,566 2,350 9,404 2,350 9,404
Dayton, OH
Pacesetter Park Shopping
Center 4,628 1,475 5,899 7 1,475 5,906
Ramapo, NY
239 Greenwich 13,750 1,817 15,846 - 1,817 15,846
Greenwich, CT
Residential Properties
Gate House, Holiday House, 8,275 2,312 9,247 578 2,312 9,825
Tiger Village
Columbia, MO
Village Apartments 9,979 3,429 13,716 311 3,429 14,028
Winston Salem, NC
Glen Oaks Apartments 17,973 5,045 20,180 359 5,045 20,538
Greenbelt, MD
Colony Apartments 3,890 1,118 4,470 147 1,118 4,617
Columbia, MO
Marley Run Apartments 14,508 4,209 16,835 188 4,209 17,023
Baltimore, MD
Properties under - - - 9,992 - 9,992
development (5)
--------- ------------------------------------------------------------------------------
$ 326,651(6) $ 73,238 $ 337,049 $ 159,234 $ 81,956 487,565
========= ==============================================================================
Date of
Accumulated Acquisition (a)
Total Depreciation Construction (c)
------------------------------------------------
Shopping Centers (cont.)
Hobson West Plaza 9,208 279 1998(a)
Naperville, IL
Smithtown Shopping Center 17,078 579 1998(a)
Smithtown, NY
Town Line Plaza 10,703 515 1998(a)
Rocky Hill, CT
Branch Shopping Center 15,701 432 1998(a)
Village of the Branch, NY
The Caldor Shopping Center 4,782 132 1998(a)
Methuen, MA
Gateway Mall 1,273 - 1999(a)
Burlington, VT
Mad River Station 11,753 196 1999(a)
Dayton, OH
Pacesetter Park Shopping
Center 7,381 12 1999(a)
Ramapo, NY
239 Greenwich 17,663 135 1999(c)
Greenwich, CT
Residential Properties
Gate House, Holiday House, 12,137 367 1998(a)
Tiger Village
Columbia, MO
Village Apartments 17,457 522 1998(a)
Winston Salem, NC
Glen Oaks Apartments 25,583 731 1998(a)
Greenbelt, MD
Colony Apartments 5,735 169 1998(a)
Columbia, MO
Marley Run Apartments 21,232 601 1998(a)
Baltimore, MD
Properties under 9,992 -
development (5)
-----------------------
$ 569,521 $ 90,932
=======================
Acadia Realty Trust
Notes To Schedule 3
December 31, 1999
1. These seventeen properties serve as collateral for the financing with Morgan
Stanley (Note 6).
2. These seven properties serve as collateral for the financing with John
Hancock Life Insurance (Note 6).
3. Depreciation and investments in buildings and improvements reflected in the
statements of operations is calculated over the estimated useful life of the
assets as follows:
Buildings 30 to 40 years
Improvements Shorter of lease term or useful life
4. The aggregate gross cost of property included above for Federal income tax
purposes was $537,459 as of December 31, 1999.
5. Properties under development includes approximately $5,504 for the Gateway
Mall property.
6. Total encumbrances includes $22,335 for Northwood Centre property which is
separately disclosed as Property held for sale in the balance sheet.
7.(a) Reconciliation of Real Estate Properties:
The following table reconciles the real estate properties from January 1, 1997
to December 31, 1999:
for the year ended December 31,
1999 1998 1997
---- ---- ----
Balance at beginning of period $ 551,249 $ 311,688 $ 307,411
Acquisitions and adjustments related to development
options and establishment of note payable to the
former Principal Shareholder - - -
Other improvements 19,728 16,647 7,480
Properties acquired 25,905 254,164 -
Adjustment of carrying value of property held for sale - (11,560) -
Property held for sale (27,301) (11,991) -
Fully depreciated assets written off (60) (3,350) (998)
Sale of property - (4,349) (2,205)
------------------------------------------
Balance at end of period $ 569,521 $ 551,249 $ 311,688
==========================================
(b) Reconciliation of accumulated Depreciation:
The following table reconciles accumulated depreciation from January 1, 1997
to December 31, 1999:
for the year ended December 31,
1999 1998 1997
---- ---- ----
Balance at beginning of period $ 87,202 $ 83,326 $ 72,956
Sale of property - (2,035) (905)
Property held for sale (14,074) (4,918) -
Fully depreciated assets written off (60) (3,350) (998)
Depreciation related to real estate 17,864 14,179 12,273
-----------------------------------------
Balance at end of period $ 90,932 $ 87,202 $ 83,326
=========================================