1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
- --- OF 1934
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
- --- 1934
For the transition period from to
------------- -------------
Commission file number 1-10093
RAMCO-GERSHENSON PROPERTIES TRUST
---------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 13-6908486
- ------------- ----------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
27600 Northwestern Highway, Suite 200, Southfield, Michigan 48034
- ----------------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
248-350-9900
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of beneficial interest ($.10 par value) of the Registrant
outstanding as of June 30, 1997: 7,123,105.
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INDEX
Part I. FINANCIAL INFORMATION Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997 (unaudited) and December 31, 1996 .............. 3
Consolidated Statements of Operations (unaudited) - Three Months Ended and Six Months Ended
June 30, 1997 and 1996 .................................................................. 4
Consolidated Statement of Shareholders' Equity (unaudited) - Six Months Ended
June 30, 1997 ........................................................................... 5
Consolidated Statements of Cash Flows (unaudited) - Six Months Ended
June 30, 1997 and 1996 .................................................................. 6
Notes to Consolidated Financial Statements (unaudited) ..................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................................... 12
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ........................................ 19
Item 6. Exhibits and Reports on Form 8-K ........................................................... 19
The Company did not file any reports on Form 8-K for the quarter ended June 30, 1997.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1997 1996
----------- -------------
(unaudited)
ASSETS
Real estate, net (Note 2)............................................. $317,131 $307,752
Accounts receivable, net.............................................. 4,544 3,901
Other assets, net (Note 3)............................................ 4,338 2,389
Equity investments in unconsolidated entities (Note 6)................ 5,115 5,271
Cash and cash equivalents............................................. 2,966 3,541
-------- --------
TOTAL............................................................... $334,094 $322,854
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgages and notes payable (Note 4).................................. $156,453 $143,410
Distributions payable................................................. 4,070 4,108
Accounts payable and accrued expenses................................. 11,106 9,712
Due to related entities............................................... 1,200 1,053
-------- --------
TOTAL LIABILITIES................................................... 172,829 158,283
COMMITMENTS AND CONTINGENCIES (Note 8)..................................
MINORITY INTEREST....................................................... 42,789 44,706
SHAREHOLDERS' EQUITY.................................................... 118,476 119,865
-------- --------
TOTAL................................................................. $334,094 $322,854
======== ========
See notes to consolidated financial statements.
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RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
For The Three For The Six
Months Ended Months Ended
June 30, June 30,
1997 1996 (*) 1997 1996 (*)
------- ------- -------- -------
REVENUES
Minimum rents............................................... $ 9,032 $5,790 $ 17,916 $ 7,254
Percentage rents............................................ 416 250 782 646
Recoveries from tenants..................................... 4,202 3,012 8,596 3,497
Interest and other income................................... 281 625 456 2,541
------- ------- --------- -------
TOTAL REVENUES............................................ 13,931 9,677 27,750 13,938
------- ------- --------- -------
EXPENSES
Real estate taxes........................................... 1,512 831 3,009 1,159
Recoverable operating expenses.............................. 2,635 2,197 5,474 2,599
Depreciation and amortization............................... 1,892 1,207 3,693 1,464
Other operating............................................. 287 234 543 234
General and administrative.................................. 1,297 1,313 2,475 2,395
Interest expense............................................ 3,142 1,740 6,112 1,740
Spin-off and other expenses................................. - 6,276 - 7,934
------- ------- --------- -------
TOTAL EXPENSES............................................ 10,765 13,798 21,306 17,525
------- ------- --------- -------
OPERATING INCOME (LOSS)....................................... 3,166 (4,121) 6,444 (3,587)
LOSS FROM UNCONSOLIDATED ENTITIES (Note 6).................... 67 91 155 91
------- ------- --------- -------
INCOME (LOSS) BEFORE MINORITY INTEREST........................ 3,099 (4,212) 6,289 (3,678)
MINORITY INTEREST............................................. 848 481 1,694 481
------- ------- --------- -------
NET INCOME (LOSS)............................................. $ 2,251 $(4,693) $ 4,595 $(4,159)
======= ======= ========= =======
NET INCOME (LOSS) PER SHARE................................... $ 0.32 $ (0.66) $ 0.65 $ (0.58)
======= ======= ========= =======
WEIGHTED AVERAGE SHARES OUTSTANDING........................... 7,123 7,123 7,123 7,123
======= ======= ========= =======
See notes to consolidated financial statements.
*The 1996 historical results consist of the operations of RPS Realty Trust
prior to the Spin-off Transaction and the Ramco Acquisition which were
effective on May 1, 1996.
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RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
(Unaudited)
Shares of
Beneficial Interest Additional Cumulative Total
------------------- Paid-In Earnings/ Shareholders'
Number Amount Capital Distributions Equity
------ ------ ------- ------------- ------
BALANCE AT DECEMBER 31, 1996.......................... 7,123 $712 $149,872 ($30,719) $119,865
Cash distributions declared .......................... (5,984) (5,984)
Net income for the six months ended
June 30, 1997....................................... 4,595 4,595
----- ---- -------- -------- --------
BALANCE AT JUNE 30, 1997.............................. 7,123 $712 $149,872 ($32,108) $118,476
===== ==== ======== ======== ========
See notes to consolidated financial statements.
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RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For The Six Months
Ended June 30,
-------------------
1997 1996*
---- -----
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS).................................................. $ 4,595 $(4,159)
Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities:
Provisions for possible loan losses................................ 129
Write-off of deferred acquisition expenses......................... 2,154
Loss on disposal of REMIC's........................................ 91
Depreciation and Amortization...................................... 3,693 1,464
Loss from unconsolidated entities.................................. 155 91
Minority Interest.................................................. 1,694 481
Changes in assets and liabilities that provided (used) cash:
Interest and accounts receivable................................. (643) 5,000
Other assets..................................................... (2,127) (966)
Accounts payable and accrued expenses............................ 1,394 2,770
-------- --------
Total adjustments.................................................. 4,166 11,214
-------- --------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES.......................... 8,761 7,055
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Satisfaction of Mortgage Loans Receivable.......................... (3,417)
Amortization of REMIC's............................................ 1,100
Proceeds from REMIC's.............................................. 56,908
Real estate acquired............................................... (12,894) (1,574)
-------- --------
CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES................ (12,894) 53,017
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to shareholders................................. (5,984) (4,559)
Cash distribution to operating partnership unit holders............ (2,232)
Purchase of operating partnership units............................ (1,416)
Principal repayments on debt....................................... (926) (70,050)
Net advances from affiliated entities.............................. 147 (3,812)
Borrowings on notes payable - net.................................. 13,969 9,906
-------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES................ 3,558 (68,515)
-------- --------
NET (DECREASE) IN CASH AND EQUIVALENTS............................... (575) (8,443)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................... 3,541 11,467
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................. $ 2,966 $ 3,024
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - CASH
PAID FOR INTEREST DURING THE PERIOD................................ $ 5,608 $ 1,106
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued distributions payable...................................... $ 4,070 $ 2,738
======== ========
See notes to consolidated financial statements.
*The 1996 historical results consist of the operations of RPS Realty
Trust prior to the Spin-off Transaction and the Ramco Acquisition which were
effective on May 1, 1996.
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RAMCO-GERSHENSON PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, except per Unit amounts)
(Unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying interim financial statements and
related notes of the Company are unaudited; however, they have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting, the instructions to Form 10-Q and the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared under
generally accepted accounting principles have been condensed or omitted
pursuant to such rules. The unaudited interim financial statements should be
read in conjunction with the audited financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial statements for the interim periods have been made. The results for
interim periods are not necessarily indicative of the results for a full year.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS - In February 1997, the FASB issued
SFAS No. 128, "Earnings per Share." This statement establishes standards for
computing and presenting earnings per share ("EPS") and applies to all entities
with publicly-held common shares or potential common shares. This Statement
replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common shareholders
by the weighted-average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings. This statement is not expected to
have a material effect on the Company's reported EPS amounts. The Statement is
effective for the Company's financial statements for the year ending December
31, 1997.
MINORITY INTEREST - Minority Interest represents the Ramco Group's interest as
a limited partner in the Operating Partnership. Such interest is held in the
form of Operating Partnership Units ("Units") which are exchangeable on an
equivalent basis with the beneficial shares of the Company. During the three
month period ended June 30, 1997, the Operating Partnership redeemed 88,530
Operating Partnership Units at $16.00 per Unit. This redemption reduced the
minority interest from approximately 27% to 26.5%.
ACQUISITIONS - On May 28, 1997, the Company acquired the Madison Center,
("Madison Acquisition") a 186,094 square foot shopping center in Madison
Heights, Michigan. The center was acquired for approximately $7,400. The
acquisition has been accounted for using the purchase method of accounting. The
purchase price was allocated to the assets acquired based upon their estimated
fair market value.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1996
financial statements in order to conform with the 1997 presentation.
2. REAL ESTATE
The Company's real estate at June 30, 1997, and December 31, 1996, consists of
the following:
June 30, 1997 December 31, 1996
Land $ 42,798 $ 42,051
Buildings and Improvements 283,687 271,174
Construction-in-progress 1,263 1,629
-------- --------
Sub Total 327,748 314,854
Less: Accumulated Depreciation (10,617) (7,102)
-------- --------
Total Investment in Real Estate - net $317,131 $307,752
======== ========
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3. OTHER ASSETS
Other assets at June 30, 1997, and December 31, 1996, are as follows:
June 30, 1997 December 31, 1996
Leasing costs $2,736 $1,868
Deferred financing costs 526 471
Proposed development costs 666 205
Deferred tenant revenue 611 -
Other 286 77
------ ------
Sub Total 4,825 2,621
Less: Accumulated Amortization (487) (232)
------ ------
Total Other Assets - net $4,338 $2,389
====== ======
4. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable at June 30, 1997, consist of the following:
Fixed rate mortgages with interest rates ranging
from 7.8% to 8.75% due at various dates through 2006 $ 98,653
Floating rate mortgage at 75% of the rate of
long-term Capital A rated utility bonds due January 1, 2010 plus
supplemental interest to equal LIBOR plus 200 basis points (7.02% at
June 30, 1997) 7,000
Credit Facility, with borrowings at either LIBOR plus 175 basis points,
or the bank's base rate (8.5% at June 30, 1997), due May 1999,
maximum borrowings of $56,000 50,800
--------
$156,453
========
The mortgage notes are secured by mortgages on properties that have an
approximate net book value of $138,361 as of June 30, 1997. The Credit Facility
is secured by mortgages on various properties that have an approximate net book
value of $115,989 as of June 30, 1997.
During May and June, 1997, the Company modified its $50,000 credit facility to
provide for an increase in the borrowings available under the credit facility
to $75,000. As of June 30,1997, $56,000 of the credit facility was available
for borrowing, of which $50,800 was outstanding. The remaining $19,000
commitment was subject to one or more banks acquiring the
remaining available commitment. In July 1997, two additional banks entered
the bank group and the $75,000 credit facility was closed.
The Credit Facility contains financial covenants relating to debt to market
capitalization, minimum operating coverage ratios, and a minimum equity value.
As of June 30, 1997 the Company was in compliance with the covenant terms.
The following table presents scheduled principal payments on mortgages and
notes payable as of June 30, 1997:
Year ended December 31,
1997 (July 1 - December 31) $ 948
1998 3,799
1999 52,826
2000 2,130
2001 2,243
Thereafter 94,507
--------
Total $156,453
========
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5. LEASES
The Company is engaged in the operation of shopping center and retail
properties and leases space to tenants and certain anchors pursuant to lease
agreements. The lease agreements provide for initial terms ranging from 3 to 30
years and, in some cases, for annual rentals which are subject to upward
adjustment based on operating expense levels and sales volume.
Approximate future minimum rentals under noncancelable operating leases in
effect at June 30, 1997, assuming no new or renegotiated leases nor option
extensions on lease agreements, are as follows:
Year ended December 31,
1997 (July 1 - December 31) $ 17,266
1998 31,709
1999 28,649
2000 25,230
2001 22,449
Thereafter 172,953
--------
Total $298,256
========
6. UNCONSOLIDATED ENTITIES
Condensed financial statement information of Ramco, Kentwood and Southfield
Plaza Expansion as of June 30, 1997 and for the six months ended June 30, 1997
is presented as follows:
Southfield
Ramco Kentwood Plaza Total
----- -------- ---- ----
ASSETS
Net Real Estate Assets........................................ $ 1,912 $ 570 $ 2,482
Other Assets.................................................. $ 4,728 568 90 5,386
------- --------- -------- -----------
Total Assets................................................ $ 4,728 $ 2,480 $ 660 $ 7,868
======= ========= ======== ===========
LIABILITIES
Mortgage Notes Payable........................................ $ 11,001 $ 1,613 $ 12,614
Other Liabilities............................................. $ 1,195 249 41 1,485
------- --------- -------- -----------
Total Liabilities........................................... 1,195 11,250 1,654 14,099
------- --------- -------- -----------
OWNERS' EQUITY (DEFICIT)........................................ 3,533 (8,770) (994) (6,231)
------- --------- -------- -----------
Total Liabilities and Owners' Equity (Deficit)................ $ 4,728 $ 2,480 $ 660 $ 7,868
======= ========= ======== ===========
Company's Equity Investments in Unconsolidated Entities......... $ 3,700 $ 884 $ 531 $ 5,115
======= ========= ======== ===========
REVENUES
Management Fees............................................... $ 514 $ 514
Leasing and Development Fees.................................. 127 127
Property Revenues............................................. $ 1,080 $ 124 1,204
Other Revenues................................................ 312 312
Leasing/Development Cost Reimbursements....................... 595 - - 595
------- --------- -------- -----------
Total Revenues.............................................. 1,548 1,080 124 2,752
------- --------- -------- -----------
EXPENSES
Employee Expenses............................................. 1,998 1,998
Office and Other Expenses..................................... 618 618
Property Expenses............................................. 897 97 994
Depreciation and Amortization................................. 123 - - 123
------- --------- -------- -----------
Total Expenses.............................................. 2,739 897 97 3,733
------- --------- -------- -----------
Excess Revenues Over Expenses................................... (1,191) 183 27 (981)
Cost Reimbursement From Operating Partnership................... 1,191 - - 1,191
------- --------- -------- -----------
Income.......................................................... $ 0 $ 183 $ 27 $ 210
======= ========= ======== ===========
Company's Share of Income....................................... $ 0 $ 92 $ 13 $ 105
======= ========= ======== ===========
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The Company's share of the unconsolidated entities' income of $105 for the six
months ended June 30, 1997 was reduced by $260 which represents depreciation
and amortization adjustments arising from the Company's net basis adjustments
in the unconsolidated entities' assets. These adjustments result in a net loss
of $155 from unconsolidated entities.
7. PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated statements of operations have been
presented as if (i) the Ramco Acquisition, the Property Acquisitions, and the
spin-off of Atlantic had occurred on January 1, 1996, and (ii) the Company had
qualified as a REIT, distributed all of its taxable income and, therefore had
incurred no tax expense during the periods. In management's opinion, all
adjustments necessary to reflect the Ramco Acquisition, the Property
Acquisitions and the spin-off of Atlantic have been made. The pro forma
consolidated statements of operations are not necessarily indicative of what
the actual results of operations of the Company would have been had such
transactions actually occurred as of January 1, 1996, nor do they purport to
represent the results of the Company for future periods.
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Actual Pro forma Actual Pro forma
REVENUES
Minimum rents............................. $ 9,032 $ 8,616 $17,916 $17,112
Percentage rent........................... 416 275 782 527
Recoveries from tenants................... 4,202 4,266 8,596 8,551
Interest and other income................. 281 141 456 228
--------- -------- --------- ---------
TOTAL REVENUES............................ 13,931 13,298 27,750 26,418
EXPENSES
Real estate taxes......................... 1,512 1,416 3,009 2,868
Recoverable operating expenses............ 2,635 2,801 5,474 5,585
Depreciation and amortization............. 1,892 1,678 3,693 3,356
Other operating........................... 287 263 543 494
General and administrative................ 1,297 1,117 2,475 2,198
Interest expense.......................... 3,142 2,837 6,112 5,675
Spin-off and other expenses............... 6,276 7,934
--------- -------- --------- ---------
TOTAL EXPENSES............................ 10,765 16,388 21,306 28,110
--------- -------- --------- ---------
OPERATING INCOME (LOSS).................... 3,166 (3,090) 6,444 (1,692)
LOSS FROM UNCONSOLIDATED ENTITIES.......... 67 159 155 190
--------- -------- --------- ---------
INCOME (LOSS) BEFORE MINORITY INTEREST 3,099 (3,249) 6,289 (1,882)
MINORITY INTEREST.......................... 848 798 1,694 1,554
--------- -------- --------- ---------
NET INCOME (LOSS).......................... $ 2,251 $(4,047) $ 4,595 $(3,436)
========= ======== ========= =========
EARNINGS (LOSS) PER SHARE.................. $ 0.32 $ (0.57) $ 0.65 $ (0.48)
========= ======== ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING................. 7,123 7,123 7,123 7,123
========= ======== ========= =========
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8. COMMITMENTS AND CONTINGENCIES
Substantially all of the properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes 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.
During the third quarter of 1994, the Company held more than 25% of the value
of its gross assets in overnight Treasury Bill reverse repurchase transactions,
which the United States Internal Revenue Service (the "IRS") may view as
non-qualifying assets for the purpose of satisfying an asset qualification test
applicable to REIT's, based on a Revenue Ruling published in 1977 (the "Asset
Issue"). The Company has requested that the IRS enter into a closing agreement
with the Company so that the Asset Issue will not impact the Company's status
as a REIT. The IRS has deferred any action relating to the Asset Issue pending
further examination of the Company's 1991-1994 tax returns. Based on
developments in the law which occurred since 1977, the Company's legal counsel
has rendered an opinion that the Company's investment in Treasury Bill reverse
repurchase obligations would not adversely affect its REIT status. However,
such opinion is not binding upon the IRS. In connection with the spin-off of
Atlantic, Atlantic has assumed all tax liability arising out of the Asset Issue
and the IRS audit of the Company's 1991-1994 tax returns. In connection with
the assumption of such potential liabilities, Atlantic and the Company have
entered into a tax agreement which provides that the Company (under the
direction of its Continuing Trustees), and not Atlantic, will control, conduct
and effect the settlement of any tax claims against the Company relating to the
Asset Issue. Accordingly, Atlantic will not have any control as to the timing
of the resolution or disposition of any such claims. No assurance can be given
that the resolution or disposition of any such claim will be on terms or
conditions favorable to the Company. The Company and Atlantic also received an
opinion from legal counsel that, to the extent there is a deficiency in the
Company's taxable income arising out of the IRS examination and provided the
Company makes a deficiency dividend (i.e., declares and pays a distribution
which is permitted to relate back to the year for which each deficiency was
determined to satisfy the requirement that the REIT distribute 95 percent of
its taxable income), the classification of the Company as a REIT for the
taxable years under examination would not be affected. If notwithstanding the
above-described opinions of legal counsel, the IRS successfully challenged the
status of the Company as a REIT, its status could be adversely affected.
9. STOCK OPTION PLANS
On June 10, 1997, the Company's shareholders approved the
establishment of the Ramco-Gershenson Properties Trust 1997 Non-Employee Trustee
Stock Option Plan (the "Plan"). Under the Plan, 100,000 shares are reserved for
issuance pursuant to options to be granted to the Trustees of the Company who
are not officers or employees of the Company.
The purpose of the Plan is to provide Trustees of the Company with an
increased incentive to make contributions to the long term performance and
growth of the Company, to join the interests of the Trustees with the interests
of the Company's shareholders, and to facilitate attracting qualified
independent trustees. Options granted under the Plan allow for the purchase of
shares of the Company at the fair market value of the shares at the date of
grant. Options granted under the Plan vest and become exercisable in equal
installments on each of the first two anniversaries of the date of grant and
expire ten years after the date of grant. As of June 30, 1997 there were 14,000
options granted pursuant to the Plan.
10. SUBSEQUENT EVENTS
On July 30, 1997, the Company acquired Pelican Plaza, ("Pelican Acquisition") a
106,141 square foot community shopping center/office development in Sarasota,
Florida. The center was acquired for approximately $7,200.
In July 1997, the Company executed an interest rate protection agreement to
limit the Company's exposure to increases in interest rates on floating rate
debt. The notional amount of the agreement was $75,000. The agreement caps
the Company's interest rate on $75,000 of floating rate debt to 8.50%, through
May 1, 1999, with a floor of 7.25%.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in Thousands, except per Share and per Unit amounts)
OVERVIEW
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements of the Company, including the respective notes thereto which are
included in this Form 10-Q.
CAPITAL RESOURCES AND LIQUIDITY
The Company's mortgage debt consists of debt on certain shopping centers as
well as on two properties in which the Operating Partnership owns an interest
and are accounted for on the equity method of accounting. At June 30, 1997 the
Company's portion of mortgages attributable to properties 100% owned is
$156,453, with a weighted average interest rate of 8.29% and its pro rata share
of non-recourse mortgage debt on unconsolidated properties (accounted for on
the equity method) was $6,307 with a weighted average interest rate of 9.14%.
The mortgage debt consists of six loans secured by various properties, two
loans secured by the unconsolidated properties, and the Credit Facility which
is secured by various properties. Five of the mortgage loans amounting to
$98,653 have maturities ranging from 1998 to 2006, monthly payments which
include regularly scheduled amortization, and have fixed interest rates ranging
between 7.8% to 8.75%. One of the mortgage loans, evidenced by tax free bonds,
amounting to $7,000 secured by Oak Brook Square Shopping Center is
non-amortizing, matures in 2010, and carries a floating interest rate equal to
75% of the new issue long-term Capital A rated utility bonds, plus interest to
the lender sufficient to cause the lender's overall yield on its investment in
the bonds to be equal to 200 basis points over their applicable LIBOR rate,
(7.02% at June 30, 1997).
During May and June, 1997, the Company modified its $50,000 credit facility to
provide for an increase in the borrowings available under the credit facility to
$75,000. As of June 30, 1997, $56,000 of the credit facility was available for
borrowing, of which $50,800 was outstanding. The remaining $19,000 commitment
was subject to one or more banks acquiring the remaining available commitment.
In July 1997, two additional banks entered the bank group and the full $75,000
credit facility was closed. The Credit Facility, bears interest at 175 basis
points over LIBOR, or the bank's base rate (8.5% at June 30,1997), and matures
on May 6, 1999. The Credit Facility is secured by mortgages on various
properties and contains financial covenants relating to debt-to-market
capitalization, minimum operating coverage ratios and a minimum equity value.
The Company used proceeds from borrowings under the Credit Facility to pay for
the acquisition of Madison Center and for other capital expenditures. During
May 1997, the Company acquired the Madison Center, in Madison Heights,
Michigan, an approximately 186,000 square foot community shopping center, for
approximately $7,400.
The Company's current capital structure includes property specific mortgages,
the Credit Facility, shares of beneficial interest and a minority interest in
the Operating Partnership. At March 31, 1997 the minority interest represented
the approximately 27% ownership in the Operating Partnership held by the Ramco
Group. On April 1, 1997, the Operating Partnership redeemed 88,530 Units at
$16.00 per Unit. The redemption reduced the minority interest from
approximately 27% to approximately 26.5%. Currently, the minority interest in
the Operating Partnership represents 26.5% ownership of units of interest in the
Operating Partnership ("Units") held by the Ramco Group which may, under certain
conditions, be exchanged for approximately 2,568,143 shares of beneficial
interest.
The Units owned by the Ramco Group are subject to lock-up agreements which
provide that the Units cannot be transferred, except under certain conditions,
for a period of one year after the closing of the Ramco Acquisition
for those Units owned by holders other than the Ramco Principals, and for a
period of 30 months after the closing of the Ramco Acquisition for those Units
owned by the Ramco Principals. In addition, the Units issued to the Ramco
Group will be exchangeable for shares of the Company on a one-for-one basis.
The Company, as sole general partner of the Operating Partnership, will have
the option to exchange such Units for cash based on the current trading price
of the Shares. Assuming the exchange of all limited partnership interests in
the Operating Partnership, there would be outstanding approximately 9,691,248
shares of beneficial interest with a market value of approximately $170,808 at
June 30, 1997 (based on the closing price of $17.625 per share on June 30,
1997).
The principal uses of the Company's liquidity and capital resources are
for acquisitions, development, including expansion and renovation programs, and
debt repayment. To maintain its qualification as a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the "Code"), the
Company is required to distribute to its shareholders at least 95% of its
"Real Estate Investment Trust Taxable Income" as defined in the Code.
12
13
Variable rate debt accounted for $57,800 of outstanding debt with a weighted
average interest rate of 8.32% at June 30, 1997. Variable rate debt accounted
for approximately 36.9% of the Company's total debt and 17.7% of its total
market capitalization (debt plus market value equity).
In July 1997, the Company executed an interest rate protection agreement to
limit the Company's exposure to increases in interest rates on floating rate
debt. The notional amount of the agreement was $75,000. The agreement caps
the Company's interest rate on $75,000 of floating rate debt to 8.50%, through
May 1, 1999, with a floor of 7.25%.
In July 1997, the Company used proceeds from borrowings under the Credit
Facility to pay for the acquisition of Pelican Plaza. Pelican Plaza, a 106,141
square foot community shopping center/office development in Sarasota, Florida,
was purchased for approximately $7,200.
Based on the debt and the market value of equity described above, the Company's
debt to total market capitalization ratio was 47.8% at June 30, 1997.
The Company anticipates that the combination of the availability under the
Credit Facility, potential new borrowings relative to the acquired properties
and development properties, construction loans and potential equity offerings,
will provide adequate liquidity for the foreseeable future to fund future
acquisitions, developments, expansions, repositionings, and to continue its
currently planned capital programs and to make distributions to its
shareholders in accordance with the Code's requirements applicable to REIT's.
Although the Company believes that the combination of factors discussed above
will provide sufficient liquidity, no such assurance can be given that the
Company will have adequate liquidity to meets its needs.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO SIX MONTHS ENDED JUNE 30, 1996.
Total revenues for the six months ended June 30, 1997 increased by 99.1%, or
$13,812, to $27,750 as compared to $13,938 for the six months ended June 30,
1996. The increase was a result of a $10,662 increase in minimum rents, a $136
increase in percentage rents, a $5,099 increase in recoveries from tenants and
a $2,085 decrease in interest and other income.
Minimum rents increased 147.0%, or $10,662, to $17,916 for the six months ended
June 30, 1997 as compared to $7,254 for the six months ended June 30, 1996.
Recoveries from tenants increased 145.8%, or $5,099, to $8,596 as compared to
$3,497 for the six months ended June 30, 1996. These increases are primarily
attributable to the acquisition of the Ramco properties effective May 1, 1996,
and the acquisitions of the Taylor, Lakeland, Holcomb, and Madison shopping
centers effective August 14, 1996, November 22, 1996, December 13, 1996, and
May 28, 1997, respectively. The operating results for the six months ended
June 30, 1997 included the impact of the acquisition of the Ramco properties
and the other shopping centers for the full six months in 1997, except for
Madison, while the results for the six months ended June 30, 1996 include the
results of the Ramco properties for only two months and do not include any
impact for any of the subsequent acquisitions. In addition, two properties
which were part of the Company's portfolio during the six months ended June 30,
1996 were spun-off to Atlantic Realty Trust effective May 1, 1996.
Interest and other income decreased 82.1%, or $2,085, to $456 as compared to
$2,541 for the six months ended June 30, 1996 due primarily to the spin-off of
the Company's mortgage loan portfolio to Atlantic Realty Trust effective May 1,
1996.
Total expenses for the six months ended June 30, 1997 increased by 21.6%, or
$3,781, to $21,306 as compared to $17,525 for the six months ended June 30,
1996. The increase was due to a $4,725 increase in total recoverable expenses,
including real estate taxes and recoverable operating expenses, a $2,229
increase in depreciation and amortization, a $309 increase in other operating
expenses, a $80 increase in general and administrative expenses, a $4,372
increase in interest expense offset by $7,934 decrease in spin-off and other
expenses.
Total recoverable expenses, including real estate taxes and recoverable
operating expenses, increased by 125.7%, or $4,725, to $8,483 as compared to
$3,758 for the six months ended June 30, 1996, depreciation and amortization
increased by 152.3%, or $2,229, to $3,693 as compared to $1,464 for the six
months ended June 30, 1996, and other operating expenses for the six months
ended June 30, 1997 were $543 as compared to $234 for the six months ended June
30, 1996. General and administrative expenses increased 3.3%, or $80, to
$2,475 as compared to $2,395 for the six months ended June 30, 1996. The
increase in recoverable expenses of $4,725 and depreciation and amortization of
$2,229, are due to the acquisition of the Ramco properties and the other
property acquisitions, offset in part by the decrease related to the May 1,
1996 spin-off of two former RPS properties.
13
14
Interest expense for the six months ended June 30, 1997 was $6,112 compared to
$1,740 for the six months ended June 30, 1996 due to the effect of the debt
assumed in connection with the Ramco acquisition effective May 1, 1996, and
additional borrowings for subsequent acquisitions and development cost
reimbursements.
For the six months ended June 30, 1996, the Company incurred $7,934 of spin-off
and other expenses for which there were no corresponding expenses for the six
months ended June 30, 1997.
The loss from unconsolidated entities of $155 for the six months ended June 30,
1997 as compared to $91 for the six months ended June 30, 1996 is due to the
impact of the Ramco acquisition on May 1, 1996.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 TO THREE MONTHS ENDED JUNE 30,
1996.
Total revenues for the three months ended June 30, 1997 increased by 44%, or
$4,254, to $13,931 as compared to $9,677 for the three months ended June 30,
1996. The increase was a result of a $3,242 increase in minimum rents, a $166
increase in percentage rents, a $1,190 increase in recoveries from tenants and
a $344 decrease in interest and other income.
Minimum rents increased 56.0%, or $3,242, to $9,032 for the three months ended
June 30, 1997 as compared to $5,790 for the three months ended June 30, 1996.
Recoveries from tenants increased 39.5%, or $1,190, to $4,202 as compared to
$3,012 for the three months ended June 30, 1996. These increases are primarily
attributable to the acquisition of the Ramco properties effective May 1, 1996,
and the acquisitions of the Taylor, Lakeland, Holcomb, and Madison shopping
centers effective August 14, 1996, November 22, 1996, December 13, 1996, and
May 28, 1997, respectively. The operating results for the three months ended
June 30, 1997 included the impact of the acquisition of the Ramco properties
and the other shopping centers for the full three months in 1997, except for
Madison, while the results for the three months ended June 30, 1996 include the
results of the Ramco properties for only two months and do not include any
impact for any of the subsequent acquisitions. In addition, two properties
which were part of the Company's portfolio during the three months ended June
30, 1996 were spun-off to Atlantic Realty Trust effective May 1, 1996.
Interest and other income decreased 55.0%, or $344, to $281 as compared to $625
for the three months ended June 30, 1996 due primarily to the spin-off of the
Company's mortgage loan portfolio to Atlantic Realty Trust effective May 1,
1996.
Total expenses for the three months ended June 30, 1997 decreased by 22.0%, or
$3,033, to $10,765 as compared to $13,798 for the three months ended June 30,
1996. The increase was due to a $1,119 increase in total recoverable expenses,
including real estate taxes and recoverable operating expenses, a $685 increase
in depreciation and amortization, a $53 increase in other operating expenses, a
$16 decrease in general and administrative expenses, a $1,402 increase in
interest expense and a $6,276 decrease in spin-off and other expenses.
Total recoverable expenses, including real estate taxes and recoverable
operating expenses, increased by 37.0%, or $1,119, to $4,147 as compared to
$3,028 for the three months ended June 30, 1996, depreciation and amortization
increased by 56.8%, or $685, to $1,892 as compared to $1,207 for the three
months ended June 30, 1996, and other operating expenses for the three months
ended June 30, 1997 increased by 22.7%, or $53, to $287 as compared to $234 for
the three months ended June 30, 1996. General and administrative expenses
decreased 1.2 %, or $16, to $1,297 as compared to $1,313 for the three months
ended June 30, 1996. The increase in recoverable expenses of $1,119 and
depreciation and amortization of $685, are primarily due to the acquisition of
the Ramco properties and the other property acquisitions.
Interest expense for the three months ended June 30, 1997 was $3,142 compared
to $1,740 for the three months ended June 30, 1996 due to the effect of the
debt assumed in connection with the Ramco Acquisition effective May 1, 1996 and
additional borrowings for subsequent acquisitions and development cost
reimbursements.
14
15
For the three months ended June 30, 1996, the Company incurred $6,276 of
spin-off and other expenses for which there were no corresponding expenses for
the three months ended June 30, 1997.
The loss from unconsolidated entities of $67 for the three months ended June
30, 1997 as compared to $91 for the three months ended June 30, 1996 is due to
the impact of the Ramco Acquisition on May 1, 1996.
COMPARISON OF ACTUAL SIX MONTHS ENDED JUNE 30, 1997 TO PRO FORMA SIX MONTHS
ENDED JUNE 30, 1996.
Total revenues for the six months ended June 30, 1997 increased by 5.0% , or
$1,332, to $27,750 as compared to $26,418 for the six months ended June 30,
1996. The increase was a result of a $804 increase in minimum rents, a $255
increase in percentage rents, a $45 increase in recoveries from tenants and a
$228 increase in interest and other income, for the six months ended June 30,
1997 as compared to the six months ended June 30, 1996.
Minimum rents increased 4.7%, or $804, to $17,916 for the six months ended June
30, 1997 as compared to $17,112 for the six months ended June 30, 1996. This
increase was primarily due to the opening of the Jackson West Shopping Center
in June 1996, and the impact of new anchor tenants at the Jackson Crossing
Shopping Center, Tel-Twelve Mall and Eastridge Commons. Percentage rents
increased 48.4%, or $255, to $782 as compared to $527 for the six months ended
June 30, 1996. Recoveries from tenants increased .5%, or $45, to $8,596 as
compared to $8,551 for the six months ended June 30, 1996. The increase was
due to corresponding increases in recoverable operating and real estate tax
expense. The Company's overall recovery ratio for 1997 and 1996 remained
relatively consistent at 101.3% and 101.1%, respectively. Interest and other
income increased 100%, or $228, to $456, as compared to $228 for the six months
ended June 30, 1996. Approximately $183 of the increase was attributable to
non-recurring tenant lease obligations.
Total expenses for the six months ended June 30, 1997, decreased 24.2%, or
$6,804, to $21,306 as compared to $28,110 for the six months ended June 30,
1996. The decrease was due to a $7,934 decrease in spin-off and other
expenses, offset by a $30 increase in total recoverable expenses, including
real estate taxes and recoverable operating expenses, a $337 increase in
depreciation and amortization, a $49 increase in other operating expenses, a
$277 increase in general and administrative expenses, and a $437 increase in
interest expense.
For the six months ended June 30, 1996 the Company incurred $7,934 of spin-off
and other expenses related to the spin-off of Atlantic for which there were no
corresponding costs in 1997.
Recoverable expenses, including real estate taxes and recoverable operating
expenses, increased .4%, or $30, to $8,483 as compared to $8,453 for the six
months ended June 30, 1996 due primarily to expenses related to the Jackson
West Shopping Center which opened in June 1996. The increase was offset
primarily by an increase in recoveries from tenants.
Depreciation and amortization increased 10.0%, or $337 to $3,693 as compared to
$3,356 for the six months ended June 30, 1996 due to the Jackson West Shopping
Center opening in June 1996, the Madison acquisition, and the impact of the
various other revenue producing and capital improvement expenditures.
15
16
General and administrative expenses increased 12.6%, or $277, to $2,475 as
compared to $2,198 for the six months ended June 30, 1996. The Company's level
of general and administrative expenses is impacted by several factors,
including the cost reimbursement relationship between the Operating Partnership
and Ramco-Gershenson, Inc. (the "Manager"), the capitalization of costs
relative to leasing and development at the centers owned by the Operating
Partnership and the cost of the Company's administrative activities. The
Manager also provides third party management, leasing, brokerage and development
services to entities not controlled by the Company. These third party leasing
and development fees earned under management contracts are not necessarily
earned consistently over time since these fees are based on measurements
related to specific transactions and are dependent on the availability of space
to lease or develop at the centers. The operating expenses of the Manager
include employee expenses, such as salaries and benefits, and office and other
expenses. Some of these costs are fixed in nature. The net cost reimbursement
to be charged as general and administrative expense to the Operating
Partnership is dependent on the ability of the Manager to continue to charge
leasing, brokerage and development fees to third party entities, while
continuing to generate third party management business. It is also dependent
on the Manager's ability to control expenses, the majority of which are
employee related expenses. Some of the expenses of the Manager, those which
are directly attributable to revenues to be earned in the future, are charged
to the Operating Partnership and capitalized in order to be amortized over the
related revenue. The Company's administrative expenses include officers'
salaries and benefits, trustee fees, directors' and officers' liability
insurance, transfer agent and shareholders' relations expenses, and
professional fees including legal, audit and tax.
Following is a breakdown of the general and administrative expenses shown in
the financial statements:
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------ --------- ------ ---------
Actual Pro forma Actual Pro forma
MANAGER
Management Fees............................................. $ 249 $ 242 $ 514 $ 515
Leasing, Brokerage and Development Fees..................... 130 71 127 74
Other Revenues.............................................. 216 75 312 150
Leasing/Development Cost Reimbursements..................... 223 182 595 305
------ ------ ------ ------
Total Revenues............................................ 818 570 1,548 1,044
------ ------ ------ ------
Employee Expenses........................................... 1,056 846 1,998 1,655
Office and Other Expenses................................... 344 246 618 463
Depreciation and Amortization............................... 63 8 123 17
------ ------ ------ ------
Total Expenses............................................ 1,463 1,100 2,739 2,135
------ ------ ------ ------
Operating Partnership
Cost Reimbursement Expenses................................ 645 530 1,191 1,091
------ ------ ------ ------
OPERATING PARTNERSHIP ADMINISTRATIVE EXPENSES................. 520 508 1,080 949
------ ------ ------ ------
SHOPPING CENTER LEVEL GENERAL AND
ADMINISTRATIVE EXPENSES..................................... 132 79 204 158
------ ------ ------ ------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES..................... $1,297 $1,117 $2,475 $2,198
====== ====== ====== ======
The increase of $277 in general and administrative expenses for the six months
ended June 30, 1997 as compared to the pro forma six months ended June 30, 1996
was primarily due to a $131 increase in the operating partnership administrative
expenses and a $100 increase in the cost reimbursement to Ramco-Gershenson, Inc.
The $100 increase in the cost reimbursement to the Manager was due to increased
employee expenses due to additional headcount and the impact of annual salary
and employee benefit increases. The increase of $131 in Operating Partnership
administrative expenses was due to a higher annualized level of expenses for the
six months ended June 30, 1997 as compared to the annualized expenses based on
the six months ended June 30, 1996.
Interest expense increased 7.7%, or $437, to $6,112 as compared to
$5,675 for the six months ended June 30, 1996, due to the impact of borrowings
relative to the Jackson West Shopping Center and other improvements. At June
30, 1997 the Company's portion of mortgages attributable to properties 100%
owned is $156,453, with a weighted average interest rate of 8.29%. Variable
rate debt at June 30, 1997 which amounted to $57,800, with a weighted average
interest rate of 8.32% accounted for approximately 36.9% of the Company's total
debt. The loss from unconsolidated entities decreased by 18.4%, or $35, to
$155 for the six months ended June 30, 1997, as compared to $190 for the six
months ended June 30, 1996.
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COMPARISON OF ACTUAL THREE MONTHS ENDED JUNE 30, 1997 TO PRO FORMA THREE MONTHS
ENDED JUNE 30, 1996.
Total revenues for the three months ended June 30, 1997 increased by 4.8% or
$633 to $13,931 as compared to $13,298 for the three months ended June 30,
1996. The increase was a result of a $416 increase in minimum rents, a $141
increase in percentage rents, a $64 decrease in recoveries from tenants, and a
$140 increase in interest and other income for the three months ended
June 30, 1997 as compared to the three months ended June 30, 1996.
Minimum rents increased 4.8% or $416 to $9,032 for the three months
ended June 30, 1997 as compared to $8,616 for the three months ended June 30,
1996. This increase was primarily due to the opening of the Jackson West
Shopping Center in June 1996 and the impact of new anchor tenants at Eastridge
Commons, Troy Towne Center, Tel-Twelve Mall, and Jackson Crossing. Percentage
rents increased 51.3% or $141 to $416 as compared to $275 for the three months
ended June 30, 1996. Recoveries from tenants decreased 1.5% or $64 to $4,202
from $4,266 for the three months ended June 30, 1996. The decrease was due to
corresponding decreases in recoverable operating and real estate tax expense.
The Company's overall recovery ratio remained relatively consistent at 101.3%
and 101.2%, respectively. Interest and other income increased 99.3% or $140 to
$281 from $141 for the three months ended June 30, 1997. The increase was
primarily due to non-recurring tenant lease obligations.
Total expenses for the three months ended June 30, 1997 decreased 34.3% or
$5,623 to $10,765 from $16,388 for the three months ended June 30, 1996. The
decrease was due to a $6,276 decrease in spin-off and other expenses and a $70
decrease in total recoverable expenses, including recoverable operating and real
estate tax expense, offset by a $214 increase in depreciation and amortization,
$24 increase in other operating, a $180 increase in general and administrative
expenses, and a $305 increase in interest expense.
For the three months ended June 30, 1996 the Company incurred $6,276 of
spin-off and other expenses related to the spin-off of Atlantic for which there
were no corresponding costs in 1997.
Recoverable expenses, including recoverable operating and real estate
tax expense, decreased 1.7% or $70 to $4,147 from $4,217 for the three months
ended June 30, 1996. The decrease was offset by a decrease in recoveries from
tenants.
Depreciation and amortization increased 12.7% or $214 to $1,892 compared to
$1,678 for the three months ended June 30, 1996. The increase was primarily due
to the Jackson West Shopping Center opening in June 1996, the Madison
acquisition, and the impact of the various other revenue generating and capital
improvement expenditures.
General and administrative expenses increased 16.1% or $180 to $1,297
from $1,117 for the three months ended June 30, 1996. The increase was
primarily due to a $115 increase in the cost reimbursement to Ramco-Gershenson,
Inc. and a $53 increase in shopping center property level general and
administrative expenses. The $115 increase in the cost reimbursement was due to
increased employee expenses due to additional headcount and the impact of
annual salary and employee benefit increases. The increase of $53 at the
shopping center property level was due to a higher annualized level of expenses
for the three months ended June 30, 1997 as compared to the annualized expenses
based on the three months ended June 30, 1996.
Interest expense increased 10.7% or $305 to $3,142 as compared to $2,837 for the
three months ended June 30, 1996, due to the impact of borrowings relative to
the Jackson West Shopping Center and other revenue producing and capital
improvement expenditures.
The loss from unconsolidated entities decreased 57.9% or $92 to $67 from $159
for the three months ended June 30, 1996.
FUNDS FROM OPERATIONS
Management generally considers funds from operations ("FFO") to be one measure
of financial performance of an equity REIT. It has been presented to assist
investors in analyzing the performance of the Company and to provide a relevant
basis for comparison to other REITs.
The Company has adopted the most recent National Association of Real Estate
Investment Trusts ("NAREIT") definition of FFO, which was effective on January
1, 1996. Under the NAREIT definition, FFO represents income (loss) before
minority interest (computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructuring and sales of
property, plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures.
Therefore, FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flows from operating activities as a measure of
liquidity or of the ability to pay distributions. Furthermore, while net
income and cash generated from operating, investing and financing activities
determined in accordance with generally accepted accounting principles consider
capital expenditures which have been and will be incurred in the future, the
calculation of FFO does not.
The following FFO are presented as if the Ramco Acquisition, the Property
Acquisitions and the spin-off of Atlantic Realty Trust had occurred on January
1, 1996.
The following table illustrates the calculation of FFO for the three months and
six months ended June 30, 1997, and 1996:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Actual Pro forma Actual Pro forma
Net Income................................................... $2,251 $(4,047) $4,595 $(3,436)
Add: Depreciation and amortization........................ 1,899 1,678 3,707 3,356
Add: Minority interest in partnership..................... 848 798 1,694 1,554
Add: Non-recurring spin-off and other expenses............ - 6,276 - 7,934
------ ------- ------ -------
Funds from operations........................................ $4,998 $ 4,705 $9,996 $ 9,408
====== ======= ====== =======
Weighted average equivalent shares outstanding (1)........... 9,691 9,687 9,736 9,594
====== ======= ====== =======
Supplemental disclosure:
Straight-line rental income................................ $ 506 $ 325 $1,033 $ 677
====== ======= ====== =======
Amortization of management contracts and covenant
not to compete............................................. $ 124 $ 124 $ 248 $ 248
====== ======= ====== =======
(1) Represents the weighted average total shares outstanding, assuming the
redemption of all Operating Partnership Units for common shares.
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CAPITAL EXPENDITURES
During the six months ended June 30, 1997, the Company spent approximately
$1,086 on revenue generating capital expenditures including tenant allowances,
leasing commissions paid to third-party brokers, legal costs relative to lease
documents, and capitalized leasing and construction costs. These types of
costs generate a return through rents from tenants over the term of their
leases. Revenue enhancing capital expenditures, including expansions,
renovations or repositionings were approximately $5,185. Revenue neutral
capital expenditures, such as roof and parking lot repairs which are
anticipated to be recovered from tenants, amounted to approximately $639.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
statement establishes standards for computing and presenting earnings per share
("EPS") and applies to all entities with publicly-held common shares or
potential common shares. This Statement replaces the presentation of primary
EPS and fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing earnings
available to common shareholders by the weighted-average number of common
shares outstanding for the period. Similar to fully diluted EPS, diluted EPS
reflects the potential dilution of securities that could share in the earnings.
This statement is not expected to have a material effect on the Company's
reported EPS amounts. The Statement is effective for the Company's financial
statements for the year ending December 31, 1997.
This Form 10-Q contains forward-looking statements with respect to the
operation of certain of the Company's properties. Management of the Company
believes the expectations reflected in the forward-looking statements made in
this document are based on reasonable assumptions. Certain factors could occur
that might cause actual results to vary. These include general economic
conditions, the strength of key industries in the cities in which the Company's
properties are located, the performance of the Company's tenants at the
Company's properties and elsewhere, and other factors discussed in this report
and the Company's reports filed with the Securities and Exchange Commission.
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19
PART II - OTHER INFORMATION
For Quarter Ended June 30, 1997
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on June 10, 1997.
At the Annual Meeting, Stephen R. Blank, Herbert Liechtung and Joel Pashcow
were re-elected as trustees of the Company to serve until the 2000 Annual
Meeting of Shareholders or until their successors are elected and qualified.
The following votes were cast for or were withheld from voting with respect to
the election of each of the following persons:
VOTES
-----
AUTHORITY
NAME FOR WITHHELD
---- --- ---------
Stephen R. Blank 5,537,399 59,486
Herbert Liechtung 5,550,819 46,064
Joel M. Pashcow 5,551,481 45,402
There were no broker non-votes or abstentions in connection with the
election of the trustee at the Annual Meeting.
The following votes were cast for, against or withheld regarding the
approval of the Company's 1997 Non-Employee Trustee Stock Option Plan of the
Trust:
FOR AGAINST ABSTAIN
--- ------- -------
5,285,982 164,577 78,228
There were no broker non-votes in connection with the adoption of the
1997 Non-Employee Trustee Stock Option Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index immediately preceding the exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
RAMCO-GERSHENSON PROPERTIES TRUST
Date: August 13, 1997 By: /s/ Dennis E. Gershenson
-------------------------------
Dennis E. Gershenson
President and Trustee
(Chief Executive Officer)
Date: August 13, 1997 By: /s/ Richard J. Smith
-------------------------------
Richard J. Smith
Chief Financial Officer
(Principal Accounting Officer)
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21
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Amended and Restated Declaration of Trust of the Company, dated
October 14, 1988, incorporated by reference to Exhibits 3 and 4(a) to
the Company's Registration Statement on Form S-4, File No. 33-25272.
3.2 Amendment to Amended and Restated Declaration of Trust of the
Company, incorporated by reference to Exhibit 3(i) to the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.
3.3 Bylaws of the Company adopted December 6, 1989, incorporated by
reference to Exhibit 4.2 to the Company's Current Report on Form 8-K,
dated December 6, 1989.
3.4 Amendment to Bylaws of the Company, incorporated by reference to
Exhibit 3(ii) to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1996.
4. Rights Agreement dated as of December 6, 1989 between the Company
and American Stock Transfer & Trust Company, incorporated by reference
to Exhibit 1 to the Company's Registration Statement on Form 8-A, File
No. 1-10093, for the registration of Share Purchase Rights.
10.1 Pledge Agreement, dated as of May 10, 1996, among the Company, Dennis
Gershenson, Joel Gershenson, Bruce Gershenson, Richard Gershenson,
Michael A. Ward, Michael A. Ward U/T/A dated 2/22/77, as amended, and
the holders of interest in Ramco-Gershenson Properties, L.P., a Delaware
limited partnership, incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996.
10.2 Registration Rights Agreement, dated as of May 10, 1996, among the
Company, Dennis Gershenson, Joel Gershenson, Bruce Gershenson, Richard
Gershenson, Michael A. Ward, Michael A. Ward U/T/A dated 2/22/77, as
amended, and each of the Persons set forth on Exhibit A attached
thereto, incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.
10.3 Exchange Rights Agreement, dated as of May 10, 1996, by and among the
Company and each of the Persons whose names are set forth on Exhibit A
attached thereto, incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996.
10.4 1996 Share Option Plan of the Company, incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1996.
10.5 Letter Agreement, dated May 10, 1996, among the Persons and Entities
party to the Amended and Restated Master Agreement, dated as of December
27, 1995, as amended, incorporated by reference to Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996.
10.6 Promissory Note payable by Atlantic Realty Trust in favor of the
Company in the principal face amount of $5,500,000 due November 9, 1997,
incorporated by reference to Exhibit 10.6 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1996.
10.7 Letter Agreement, dated as of May 10, 1996, by and between Atlantic
Realty Trust ("Atlantic") and the Company concerning the assumption of
certain liabilities by Atlantic, incorporated by reference to Exhibit
10.7 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996.
10.8 Employment Agreement, dated as of May 10, 1996, between the Company
and Joel Gershenson, incorporated by reference to Exhibit 10.8 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30,1996.
10.9 Employment Agreement, dated as of May 10, 1996, between the Company
and Dennis Gershenson, incorporated by reference to Exhibit 10.9 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996.
10.10 Employment Agreement, dated as of May 10, 1996, between the Company
and Michael A. Ward, incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30,1996.
10.11 Employment Agreement, dated May 10, 1996, between the Company and
Richard Gershenson, incorporated by reference to Exhibit 10.11 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996.
10.12 Employment Agreement, dated as of May 10, 1996, between the Company
and Bruce Gershenson, incorporated by reference to Exhibit 10.12 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996.
10.13 Noncompetition Agreement, dated as of May 10, 1996, by and between
Joel Gershenson and the Company, incorporated by reference to Exhibit
10.13 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1996.
22
10.14 Noncompetition Agreement, dated as of May 10, 1996, by and between
Dennis Gershenson and the Company, incorporated by reference to Exhibit
10.14 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996.
10.15 Noncompetition Agreement, dated as of May 10, 1996, by and between
Michael A. Ward and the Company, incorporated by reference to Exhibit
10.15 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996.
10.16 Noncompetition Agreement, dated as of May 10, 1996, by and between
Richard Gershenson and the Company, incorporated by reference to Exhibit
10.16 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996.
10.17 Noncompetition Agreement, dated as of May 10, 1996, by and between
Bruce Gershenson and the Company, incorporated by reference to Exhibit
10.17 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996.
10.18 Letter Agreement, dated April 15, 1996, among the Company and Richard
Smith concerning Mr. Smith's employment by the Company, incorporated by
reference to Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1996.
10.19 Amended and Restated Master Revolving Credit Agreement dated as of
June 24, 1996 by and among Ramco-Gershenson Properties, L.P., the
Company, The First National Bank of Boston, NBD Bank, the other lending
institutions that may become a party thereto, and The First National Bank
of Boston, as Agent for the Banks, incorporated by reference to Exhibit
10.19 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
10.20 Note dated June 24, 1996 in the aggregate principal amount of
$25,000,000 made by Ramco-Gershenson Properties, L.P., in favor of The
First National Bank of Boston, incorporated by reference to Exhibit 10.20
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
10.21 Note dated June 24, 1996 in the aggregate principal amount of
$25,000,000 made by Ramco-Gershenson Properties, L.P., in favor of NBD
Bank, incorporated by reference to Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.
10.22 Loan Agreement dated May 1, 1996 by and between Ramco-Gershenson
Properties, L.P. and The Lincoln National Life Insurance Company relating
to a $77,585.524.73 loan, incorporated by reference to Exhibit 10.22 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
10.23 Note dated May 1, 1996 in the aggregate principal amount of
$77,585,524.73 made by Ramco-Gershenson Properties, L.P., in favor of The
Lincoln National Life Insurance Company, incorporated by reference to
Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.
10.24 Loan Agreement dated May 1, 1996 by and between Ramco-Gershenson
Properties, L.P. and The Lincoln National Life Insurance Company relating
to a $4,346,778.76 loan, incorporated by reference to Exhibit 10.24 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
10.25 Note dated May 1, 1996 in the aggregate principal amount of
$4,346,778.76 made by Ramco-Gershenson Properties, L.P. in favor of The
National Life Insurance Company, incorporated by reference to Exhibit
10.25 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
10.26 First Amendment to Amended and Restated Master Revolving Credit
Agreement and other Loan Documents dated as of May 22, 1997 by and among
Ramco-Gershenson Properties, L.P., the Company, the Banks that are party
thereto, and BankBoston, N.A., as agent.
10.27 Second Amendment to Amended and Restated Master Revolving Credit
Agreement and other Loan Documents dated as of June 16, 1997 by and among
Ramco-Gershenson Properties, L.P., the Company, the Banks that are party
thereto, and BankBoston, N.A., as agent.
10.28 Amended and Restated Note dated as of June 24, 1996 in the aggregate
principal amount of $55,000,000 made by Ramco-Gershenson Properties, L.P.
in favor of BankBoston, N.A.
10.29 Amended and Restated Note dated as of June 24, 1996 in the aggregate
principal amount of $10,000,000 made by Ramco-Gershenson Properties, L.P.
in favor of Bankers Trust Company.
10.30 Amended and Restated Note dated as of June 24, 1996 in the aggregate
principal amount of $10,000,000 made by Ramco-Gershenson Properties, L.P.
in favor of Michigan National Bank.
10.31 Third Amendment to Amended and Restated Master Revolving Credit
Agreement and other Loan Documents dated as of July 18, 1997 by and among
Ramco-Gershenson Properties, L.P., the Company, the Banks that are party
thereto, and BankBoston, N.A., as agent.
27.1 Financial Data Schedule.