1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO __________
Commission file number 1-12244
NEW PLAN EXCEL REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 33-0160389
(State or other Jurisdiction of (IRS Employer
Incorporation) Identification No.)
1120 Avenue of the Americas, New York, New York 10036
(Address of Principal Executive Office) (Zip Code)
212-869-3000
Registrant's Telephone Number
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares of common stock outstanding at April 30, 2001 was
87,204,765.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
Revenues:
Rental revenues $ 85,283 $ 87,717
Percentage rent 2,678 2,202
Expense reimbursements 14,305 13,219
Interest, dividend and other income 3,793 7,422
Equity participation in ERT (1,458) (5,276)
Foreign currency loss (479) (16)
--------- ---------
Total revenues 104,122 105,268
--------- ---------
Expenses:
Operating costs 21,198 22,929
Real estate and other taxes 10,121 10,789
Interest 22,726 22,573
Depreciation and amortization 16,075 15,989
Provision for doubtful accounts 2,129 754
Non-recurring charge -- 2,749
General and administrative 2,188 1,997
--------- ---------
Total expenses 74,437 77,780
--------- ---------
Income before sales of real estate and securities,
impairment of real estate and minority interest 29,685 27,488
Loss on sale of real estate and securities (25) (1)
Impairment of real estate (2,239) --
Minority interest in income of partnership (218) (238)
--------- ---------
Net income 27,203 27,249
--------- ---------
Other comprehensive income (loss):
Unrealized gains on securities for the period 171 120
Cumulative effect of change in accounting principle
(SFAS 133) on other comprehensive loss (2,214) --
Unrealized derivative losses on interest rate swap (1,792) --
--------- ---------
Comprehensive income $ 23,368 $ 27,369
========= =========
Net income available to common stock - basic $ 21,544 $ 21,590
========= =========
Net income available to common stock - diluted $ 21,762 $ 21,828
========= =========
Basic earnings per share $ 0.25 $ 0.25
========= =========
Diluted earnings per share $ 0.25 $ 0.25
========= =========
Average shares outstanding - basic 87,208 87,607
========= =========
Average shares outstanding - diluted 88,612 89,031
========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
MARCH 31, 2001 DECEMBER 31, 2000
-------------- -----------------
UNAUDITED
-----------
Real estate:
Land $ 530,600 $ 532,240
Building and improvements 2,308,764 2,310,036
Accumulated depreciation (275,758) (261,504)
----------- -----------
Net real estate 2,563,606 2,580,772
Real estate held for sale 11,706 9,104
Cash and cash equivalents 11,181 1,170
Marketable securities 1,702 1,531
Receivables:
Trade, less allowance for doubtful accounts of $13,478 and
$12,816 at March 31, 2001 and December 31, 2000, respectively 40,181 43,454
Other, net 8,010 11,620
Mortgages and notes receivable 46,872 58,553
Prepaid expenses and deferred charges 11,877 9,320
Investment in and loans to ERT Development Corporation 183,962 170,004
Other assets 9,307 8,903
----------- -----------
Total assets $ 2,888,404 $ 2,894,431
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable, including unamortized premium of $7,425 and
$7,753 at March 31, 2001 and December 31, 2000, respectively $ 326,330 $ 328,803
Notes payable, net of unamortized discount of $1,945 and $2,008
at March 31, 2001 and December 31, 2000, respectively 613,055 612,992
Credit facilities 258,750 243,750
Capital leases 29,367 29,431
Other liabilities 93,436 92,145
Tenant security deposits 7,910 7,791
----------- -----------
Total liabilities 1,328,848 1,314,912
----------- -----------
Minority interest in partnership 23,589 23,909
----------- -----------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, Series A: $.01 par value, 25,000 shares
authorized: 4,600 shares designated as 8 1/2% Series A
Cumulative Convertible Preferred 1,507 outstanding
at March 31, 2001 and December 31, 2000; Series B:
6,300 depository shares, each representing 1/10 of one share of
8 5/8% Series B Cumulative Redeemable Preferred, 630 outstanding
at March 31, 2001 and December 31, 2000; Series D: 1,500
depositary shares, each representing 1/10 of one share of Series D
Cumulative Voting Step-Up Premium Rate Preferred, 150 shares
outstanding at March 31, 2001 and December 31, 2000 23 23
Common stock, $.01 par value, 250,000 shares authorized;
87,205 and 87,320 shares issued and outstanding as of
March 31, 2001 and December 31, 2000, respectively 872 873
Additional paid-in capital 1,694,682 1,695,994
Accumulated other comprehensive (loss) income (3,281) 555
Accumulated distribution in excess of net income (156,329) (141,835)
----------- -----------
Total stockholders' equity 1,535,967 1,555,610
----------- -----------
Total liabilities and stockholders' equity $ 2,888,404 $ 2,894,431
=========== ===========
The accompanying notes are an integral part
of the consolidated financial statements.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(IN THOUSANDS)
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
Cash flows from operating activities:
Net income $ 27,203 $ 27,249
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 16,075 15,989
Amortization of premium/discount on mortgages and notes payable (264) (292)
Amortization of deferred debt and loan acquisition costs 362 --
Foreign currency loss 479 16
Provision for doubtful accounts 2,129 754
Loss on sale of properties, net 25 1
Minority interest in income of partnership 218 238
Impairment of real estate assets 2,239 --
Equity in loss/(income) of affiliate 1,458 5,276
Change in investment in and accrued interest on loans to ERT
Development Corporation (1,194) (4,100)
Changes in operating assets and liabilities, net:
Change in trade receivables 2,020 (1,436)
Change in other receivables (4,665) (5,045)
Change in other liabilities 5,276 (497)
Change in sundry assets and liabilities (2,938) (1,322)
-------- --------
Net cash provided by operating activities 48,423 36,831
-------- --------
Cash flows from investing activities:
Real estate acquisitions and building improvements (5,579) (7,836)
Proceeds from real estate sales, net 1,816 60
Advances for mortgage notes receivable, net -- (2,602)
Loans to ERT Development Corporation (3,921) (8,000)
Repayments of mortgage notes receivable 26 390
-------- --------
Net cash used in investing activities (7,658) (17,988)
-------- --------
Cash flows from financing activities:
Principal payments of mortgages and notes payable (2,209) (9,382)
Dividends paid (41,696) (41,598)
Proceeds from credit facility borrowing 39,000 42,000
Repayment of credit facility (24,000) --
Proceeds from exercise of stock options 48 6,600
Distributions paid to minority partners (536) (536)
Payments for the repurchase of common stock (1,598) (7,554)
Repayment of loans receivable for the purchase of common stock 237 --
-------- --------
Net cash used in financing activities (30,754) (10,470)
-------- --------
Net increase in cash and cash equivalents 10,011 8,373
Cash and cash equivalents at beginning of period 1,170 10,834
-------- --------
Cash and cash equivalents at end of period $ 11,181 $ 19,207
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by New Plan Excel Realty Trust, Inc. (the "Company") pursuant to the
rules of the Securities and Exchange Commission ("SEC") and, in the opinion of
the Company, include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of financial position, results of
operations and cash flows in accordance with accounting principles generally
accepted in the United States. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such SEC rules. The Company believes that the disclosures
made are adequate to make the information presented not misleading. The
consolidated statements of income for the three months ended March 31, 2001 and
2000 are not necessarily indicative of the results expected for the full year.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's latest annual
report on Form 10-K. Certain amounts have been reclassified to conform with
current presentation.
NOTE 2: ACCOUNTING CHANGE
Effective January 1, 2001, the Company adopted SFAS 133/138,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
This accounting standard requires the Company to measure derivatives, including
certain derivatives embedded in other contracts, at fair value and to recognize
them in the Consolidated Balance Sheet as an asset or liability, depending on
the Company's rights or obligations under the applicable derivative contract.
For derivatives designated as fair value hedges, the changes in the fair value
of both the derivative instrument and the hedged item are recorded in earnings.
For derivatives designated as cash flow hedges, the effective portions of
changes in fair value of the derivative are reported in other comprehensive
income ("OCI") and are subsequently reclassified into earnings when the hedged
item affects earnings. Changes in fair value of derivative instruments not
designated as hedging instruments and ineffective portions of hedges are
recognized in earnings in the current period.
The Company uses only qualifying hedges that are designated
specifically to reduce exposure to interest rate risk by locking in the expected
future cash payments on certain liabilities. This is accomplished using an
interest rate swap, which has been designated as a cash flow hedge.
The adoption of SFAS 133 as of January 1, 2001, resulted in a
cumulative transition adjustment of $2.2 million to OCI, and a corresponding
liability of the same amount. For the three months ended March 31, 2001, the
change in fair market value of the interest rate swap was $1.8 million and was
recorded in OCI.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: ERT DEVELOPMENT CORPORATION
In 1995, ERT Development Corporation ("ERT") was organized to finance,
acquire, develop, hold and sell real estate in the short-term for capital gains
and/or to receive fee income. The Company owns 100% of the outstanding preferred
shares of ERT. An officer and director of the Company owns all the common
shares. The preferred shares are entitled to receive 95% of dividends, if any.
Cash requirements to facilitate ERT's transactions have primarily been obtained
through borrowings from the Company. In 2001, ERT elected to become a "taxable
REIT subsidiary" of the Company under the tax rules applicable to REITs.
Investment in and loans to ERT by the Company are comprised of the following
(in thousands):
MARCH 31, 2001 DECEMBER 31, 2000
-------------- -----------------
Investment ($15,099) ($13,641)
Uncollateralized loans and accounts receivable 83,351 69,393
Collateralized loans receivable 86,374 85,724
Accrued interest 29,336 28,528
-------- --------
$183,962 $170,004
======== ========
Interest and principal payments from ERT to the Company are primarily
received upon the completion of development projects. Interest receivable from
ERT was $29.3 million and $28.5 million at March 31, 2001 and December 31, 2000,
respectively. Interest income recognized by the Company was $2.4 million and
$4.7 million for the three months ended March 31, 2001 and 2000, respectively.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: ERT DEVELOPMENT CORPORATION, CONTINUED
For the three months ended March 31, 2001 and 2000 the equity in the
losses of ERT recorded by the Company was ($1.5 million) and ($5.3 million),
respectively.
Summary unaudited financial information for ERT is as follows (in
thousands).
MARCH 31, 2001 DECEMBER 31, 2000
-------------- -----------------
CONDENSED BALANCE SHEETS
Mortgages, notes and interest receivable from developers, interest
at 10% to 12% $ 74,618 $ 61,339
Real estate and other assets, net of depreciation 202,707 202,153
--------- ---------
Total assets $ 277,325 $ 263,492
========= =========
Mortgages, notes and accounts payable to New Plan Excel Realty
Trust, Inc. $ 169,725 $ 155,118
Accrued interest payable to New Plan Excel Realty Trust, Inc. 29,336 28,528
Mortgages, construction and land loans 83,614 83,650
Other liabilities 9,749 9,837
--------- ---------
Total liabilities 292,424 277,133
Total stockholders' equity (15,099) (13,641)
--------- ---------
Total liabilities and stockholders' equity $ 277,325 $ 263,492
========= =========
THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
CONDENSED STATEMENTS OF INCOME
Revenues $ 6,800 $ 6,456
Interest expense to New Plan Excel Realty Trust, Inc. (2,368) (4,681)
Other expenses (5,890) (7,051)
------- -------
Net loss ($1,458) ($5,276)
======= =======
Pointe Orlando Development Company, a wholly owned subsidiary of ERT,
has a term loan which had a balance of $78.5 million at March 31, 2001, of which
$15.0 million was guaranteed by the Company. ERT also has an investment in joint
venture partnerships related to a retail development project in Frisco, Texas
(The Centre at Preston Ridge). The Centre at Preston Ridge has a construction
loan which had an outstanding balance of $52.6 million at March 31, 2001, of
which $11.0 million was guaranteed by the Company. The Centre at Preston Ridge
also has a land loan which had an outstanding balance of $18.3 million at March
31, 2001. The Company has agreed to guarantee up to $21.6 million. In addition,
the Company has guaranteed $0.4 million of the debt on an ERT retail development
project, Vail Ranch II, in Temecula, California, all of which was outstanding at
March 31, 2001.
ERT accounts for its investments in Preston Ridge and Vail Ranch II
using the equity method. For the three months ended March 31, 2001, the equity
in the losses of these investments recorded by ERT was ($13,543) and ($60,599),
respectively.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 3: ERT DEVELOPMENT CORPORATION, CONTINUED
On October 2, 2000, ERT acquired ownership of two properties, Annie
Land Plaza and New Market Shopping Center, from Wilton Partners, in exchange for
notes and interest receivable due to ERT. In connection with the acquisition,
ERT assumed mortgages on the properties in the approximate amounts of $2.4
million for Annie Land Plaza and $2.8 million for New Market Shopping Center.
The Company has guaranteed 100% of Annie Land Plaza's outstanding mortgage
balance and 25% of New Market Shopping Center's outstanding mortgage balance.
These guarantees amounted to approximately $2.4 million and $0.7 million,
respectively, at March 31, 2001.
On January 11, 2001, ERT acquired Stein Mart Center, a 112,400 square
foot shopping center located in Poway, California, from Wilton Partners, one of
its joint venture partners, in consideration for $4.9 million of notes
receivable and accrued interest due to ERT.
NOTE 4: STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE (IN THOUSANDS)
The amounts paid for interest for the three months ended March
31, 2001 and 2000 were $21,607 and $23,363, respectively. State and local income
taxes paid for the three months ended March 31, 2001 and 2000 were $81 and $76,
respectively.
NOTE 5: STOCKHOLDERS' EQUITY
EARNINGS PER SHARE (EPS)
In accordance with the disclosure requirements of SFAS No. 128, a
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (in thousands, except per share amounts):
THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
Basic EPS
- ---------
Numerator:
Net income $ 27,203 $ 27,249
Preferred dividends (5,659) (5,659)
-------- --------
Net income available to common shares - basic $ 21,544 $ 21,590
======== ========
Denominator:
Weighted average of common shares outstanding 87,208 87,607
======== ========
Earnings Per Share $ 0.25 $ 0.25
======== ========
Diluted EPS
- -----------
Numerator:
Net income $ 27,203 $ 27,249
Preferred dividends (5,659) (5,659)
Minority interest 218 238
-------- --------
Net income available to common shares - diluted $ 21,762 $ 21,828
======== ========
Denominator:
Weighted average of common shares outstanding 87,208 87,607
Effect of diluted securities:
Common stock options 169 189
Excel Realty Partners, L.P. third party units 1,235 1,235
-------- --------
88,612 89,031
======== ========
Earnings Per Share $ 0.25 $ 0.25
======== ========
Preferred A shares are anti-dilutive for earnings per share calculations
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 6: SEGMENT INFORMATION
The Company's two reportable business segments are retail and
residential properties. At March 31, 2001, the retail segment consists of 285
shopping centers (included in this amount six commercial properties and one
retail property under development) and the residential segment consists of 53
garden apartment communities. Selected financial information for each segment is
as follows (in thousands):
RETAIL RESIDENTIAL OTHER TOTAL
----------- ----------- ----------- -----------
FOR THREE MONTHS ENDED
- ----------------------
MARCH 31, 2001
- --------------
Revenue $ 83,174 $ 19,092 $ 1,856 $ 104,122
Expenses and minority interest 25,642 10,045 2,406 38,093
Interest expense 22,726 22,726
Depreciation and amortization 13,636 2,439 16,075
(Loss)/gain on sale of securities/properties (25) (25)
----------- ----------- ----------- -----------
Net income $ 43,871 $ 6,608 ($ 23,276) $ 27,203
=========== =========== =========== ===========
Real Estate Assets, net $ 2,217,636 $ 345,970 $ 2,563,606
=========== =========== ===========
FOR THREE MONTHS ENDED
- ----------------------
MARCH 31, 2000
- --------------
Revenue $ 84,551 $ 18,587 $ 2,130 $ 105,268
Expenses and minority interest 24,222 10,250 4,984 39,456
Interest expense 22,573 22,573
Depreciation and amortization 13,766 2,223 15,989
Gain/(loss) on sale of properties/securities (1) (1)
----------- ----------- ----------- -----------
Net income $ 46,563 $ 6,114 ($ 25,428) $ 27,249
=========== =========== =========== ===========
Real Estate Assets, net $ 2,288,825 $ 345,867 $ 2,634,692
=========== =========== ===========
NOTE 7: REAL ESTATE HELD FOR SALE
As of March 31, 2001, eight retail properties were classified as
"Real estate held for sale". These properties are located in seven states and
have an aggregate gross leasable area of 514,000 square feet. The estimate fair
market value of three of the properties held for sale is less than their book
value, resulting in an impairment loss of $2.2 million recorded in the quarter
ended March 31, 2001. These properties contributed $0.4 million in revenue and
$0.3 million in net income for the three months ended March 31, 2001.
NOTE 8: ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and
regulations, the Company may be considered an owner or operator of real property
or may have arranged for the disposal or treatment of hazardous or toxic
substances and, therefore, may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property or
disposed of by it, as well as certain other potential costs which could relate
to hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such liability may be imposed whether or not the Company
knew of, or was responsible for, the presence of such hazardous or toxic
substances. Except as discussed below, the Company is not aware of any
significant environmental condition at any of its properties.
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NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 8: ENVIRONMENTAL MATTERS, CONTINUED
Soil and groundwater contamination exists at certain of the Company's
properties. The primary contaminants of concern at these properties include
perchloroethylene and trichloroethelyne (associated with the operations of
on-site dry cleaners) and petroleum hydrocarbons (associated with the operations
of on-site gasoline facilities). The Company currently estimates that the total
remaining cost of remediation of environmental conditions for these properties
will be in the range of approximately $1 million to $3 million, although there
can be no assurance that this range of estimates will prove accurate. In
connection with certain of these properties, the Company has entered into
remediation and indemnity agreements, which obligate the prior owners of certain
of the properties (including in some cases, principals of the prior owners) to
perform the remediation and to indemnify the Company for any losses the Company
may suffer because of the contamination or remediation. There can be no
assurance that the remediation estimates of the Company will prove accurate or
that the prior owners will perform their obligations under these agreements,
although in certain cases funds have been set aside with respect to the
performance under these agreements. In connection with certain other properties,
the former tenants at the properties are in the process of performing the
necessary remediation, although there can be no assurance that such remediation
will be satisfactory. In connection with certain additional properties, the
Company has assumed the obligation to perform the necessary remediation in
connection with the Company's purchase of the properties. In addition to the
environmental conditions discussed above, asbestos minerals (associated with
spray applied fireproofing materials) exist at certain of the Company's
properties. The Company currently estimates that the total cost of abatement of
asbestos minerals at these properties would be approximately $3.2 million,
although there can be no assurance that this estimate will prove accurate. The
Company does not expect the environmental conditions at its properties,
considered as a whole, to have a material adverse effect on the Company.
Included in other liabilities in the Company's Consolidated Balance Sheet at
March 31, 2001 is $3.2 million related to the clean-up of certain asbestos
minerals.
NOTE 9: NON-RECURRING CHARGE
In connection with the retirement of Arnold Laubich from his
positions as President and Chief Executive Officer, the Company entered into a
retirement agreement with Mr. Laubich. The non-recurring charge shown for the
three months ended March 21, 2000 is primarily the lump sum payments provided
for in the retirement agreement.
NOTE 10: SUBSEQUENT EVENTS
In May 2001, the Company entered into a senior term facility up to
$100 million with Fleet National Bank ("FNB"), as administrative agent. The
Company immediately made a borrowing request to draw down $75 million on May 11,
2001 to pay off $75 million of debt to FNB that matures on May 11, 2001. Loans
drawn under this new facility originally are scheduled to mature in May 2002,
with the possibility of extension to November 2002, and will accrue interest at
LIBOR plus 90 basis points (based on the Company's credit rating).
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The following information should be read in conjunction with the
Company's consolidated financial statements and notes thereto as of March 31,
2001 included in this quarterly report and the Company's Annual Report on Form
10-K for the year ended December 31, 2000. This quarterly report contains
forward-looking statements. Such statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievement of the Company to be materially different from the results of
operations or plans expressed or implied from such forward-looking statements.
Cash flow from operations has been the principal source of capital to
fund the Company's ongoing operations. The Company's issuance of common and
preferred stock, use of the Company's revolving credit facilities and financing
from uncollateralized notes and mortgage debt are additional sources of capital.
In order to continue to expand and develop its portfolio of properties
and other investments, the Company intends to finance future acquisitions and
growth through the most advantageous sources of capital available to the Company
at the time, which may include excess cash flow, the sale of common stock,
preferred stock or debt securities through public offerings or private
placements, the incurrence of additional indebtedness through borrowings, and
the reinvestment of proceeds from the disposition of assets. The Company also
may enter into joint ventures with institutions to acquire portfolios of
properties. The Company's financing strategy is to maintain a strong and
flexible financial position by (i) maintaining a prudent level of leverage, (ii)
maintaining a large pool of unencumbered properties, (iii) managing its exposure
to interest rate risk represented by its floating rate debt and (iv) where
possible, amortizing existing non-recourse mortgage debt secured by specific
properties over the term of the leases with anchor tenants at such mortgaged
properties.
As of March 31, 2001, the Company had approximately $12.9 million in
cash, cash equivalents and marketable securities.
The Company has two revolving credit facilities with The Bank of New
York, each of which provides for $122.5 million in uncollateralized advances
from a group of banks. One facility ("Facility #1") expires in November 2001.
The other facility ("Facility #2") expires in November 2002. As of March 31,
2001, the Company had $61.3 million outstanding under Facility #1, which bears
interest at LIBOR plus 72.5 basis points, and $122.5 million outstanding under
Facility #2 which bears interest at LIBOR plus 67.5 basis points. The covenants
of these credit facilities include maintaining certain ratios such as
liabilities to assets of less than 50% and maintaining a minimum unencumbered
assets coverage ratio of 2 to 1. In addition, the Company has a $75 million term
loan facility with FNB, all of which was outstanding as of March 31, 2001 and is
scheduled to mature on May 11, 2001. On May 9, 2001, the Company entered into a
new $100 million term loan facility with FNB, as administrative agent. The
Company immediately made a borrowing request for $75 million under the new FNB
facility to pay off the $75 million of existing debt. Loans drawn under this new
facility originally are scheduled to mature in May 2002, with the possibility of
extension to November 2002, and will accrue interest at LIBOR plus 90 basis
points (based on the Company's credit rating). The term loan agreement prepared
in connection with the new FNB facility contains covenants substantially similar
to those included in the two credit facilities of the Company with The Bank of
New York. On October 11, 2000, the Company entered into a two-year swap
agreement with Fleet National Bank relating to $125 million of the Company's
variable rate debt. The agreement effectively fixes the annual interest rate of
this debt at a base rate of 6.67% plus applicable spreads associated with the
Company's variable rate credit facilities.
In addition to outstanding amounts on the Company's credit facilities,
debt as of March 31, 2001 consisted of $326.3 million of mortgages payable
having a weighted average interest rate of 7.6% and $613 million of notes
payable with a weighted average interest rate of 7.3%. Of this debt, $50.9
million bear variable interest rates. Additionally, the Company has $1.7 million
in marketable equity securities which are sensitive to market price changes and
notes receivable in the amount of Canadian $14.2 million (approximately U.S.
$9.0 million as of March 31, 2001) which are sensitive to currency exchange rate
fluctuations.
The Company guarantees certain indebtedness of ERT and the debt
outstanding related to these guarantees as of March 31, 2001 was $51.0 million.
This guarantee is reduced commensurately as funds are provided. ERT
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has third-party debt of $78.5 million, excluding notes payable to the Company,
having a weighted average interest rate of 8.0%. The Company provides
substantially all of the capital required to fund ERT's operations.
In November 1998, the Company filed a $1 billion shelf registration
statement relating to the issuance from time to time of debt securities,
preferred stock, depository shares, common stock, warrants and rights, in
amounts, at initial prices and on terms to be determined at the time of
offering. Under this shelf registration statement, the Company established a
program for the issuance of medium-term notes due nine months or more from date
of issue. As of March 31, 2001, an aggregate principal amount of $276 million
was available for issuance under the Company's medium-term notes program.
In October 1999, the Company commenced a program to repurchase up to $75
million of the Company's outstanding common stock from time to time through
periodic open market transactions or through privately negotiated transactions.
Through March 31, 2001, 2,100,000 shares had been repurchased and retired at an
average purchase price of $15.28 per share. Of this amount, approximately
119,000 shares were repurchased and retired in the three months ended March 31,
2001.
Other sources of funds are available to the Company. Based on
management's internal evaluation of the Company's properties, many of which are
free and clear of mortgages, the estimated value is considerably in excess of
the outstanding mortgage indebtedness. Accordingly, management believes that
potential exists for additional mortgage financing as well as unsecured
borrowing capacity from banks and other lenders.
The Company has three classes of preferred stock outstanding as of March
31, 2001: (i) 1,507,000 shares of 8 1/2% Series A Cumulative Convertible
Preferred Stock outstanding which have an annual distribution of $2.125 per
share payable quarterly; (ii) 6,300,000 depositary shares outstanding, each
representing 1/10 of a share of 8 5/8% Series B Cumulative Redeemable Preferred
Stock, with an annual distribution of $2.15625 per depositary share payable
quarterly; and (iii) 1,500,000 depositary shares outstanding, each representing
1/10 of one share of 7.8% Series D Cumulative Voting Step-Up Premium Rate
Preferred Stock, with a liquidation preference and annual distribution of $50
and $3.90 per depositary share, respectively.
The current quarterly dividend on the Company's common stock is $.4125
per share. The maintenance of this dividend will be subject to various factors,
including the discretion of the Board of Directors of the Company, the ability
to pay dividends under applicable law and the effect which the payment of
dividends may have from time to time on the maintenance by the Company of its
status as a REIT.
In the normal course of business, the Company also faces risks that are
either non-financial or non-qualitative. Such risks principally include credit
risks and legal risks and are not included in the aforementioned notes.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto. Historical results and
percentage relationships set forth in the Consolidated Statements of Income
contained in the Consolidated Financial Statements and accompanying notes,
including trends which might appear, should not be taken as indicative of future
operations.
REVENUES:
Rental revenue decreased by approximately $2.4 million due to several
factors. Between January 1, 2000 and March 31, 2001, the Company sold 14 retail
properties which accounted for revenue reductions of $1.7 million. The balance
of the change, a $0.7 million decrease, is due primarily to a decrease in lease
settlement income.
Interest, dividend and other revenue decreased approximately $3.6
million. The decrease is primarily due to a decrease in interest income earned
primarily from ERT and the Company's development projects. The decrease in
interest income from ERT is due to a decrease in the interest rate being
charged.
The change in the equity participation in ERT of $3.8 million, from a
loss of $5.3 million for the three months ended March 31, 2000 to a loss of $1.5
million for the same period in 2001, was primarily the result of the decrease in
interest expense of $2.3 million, an increase in interest income of $0.6 million
and increases in net income of $0.7 million for two operating mall properties
(The Mall at 163rd Street and Pointe Orlando).
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The Mall at 163rd Street, a property owned by ERT, had an increase in
net income of approximately $0.3 million. Rental and other revenue decreased
$0.5 million because of redevelopment activities, offset by decreased operating
expenses and bad debt expense.
Pointe Orlando, a mall in Florida, a property owned by ERT, had a
decrease in net loss of approximately $0.4 million due primarily to decreased
legal costs and a decrease in bad debt expense.
Foreign currency loss increased approximately $0.5 million due to the
decline in value of the Canadian dollar.
EXPENSES:
Total expenses decreased $3.3 million to $74.4 million for the three
months ended March 31, 2001 compared to the corresponding period last year. The
major areas of decrease were operating costs, real estate and other taxes and
non-recurring charges. These decreases were partially offset by an increase in
bad debt expense.
Operating costs decreased $1.7 million to $21.2 million for the three
months ended March 31, 2001 compared to the corresponding period last year. The
net impact of the dispositions was a decline of $0.4 million. Repairs and
maintenance costs decreased $1.2 million, advertising and promotion costs
decreased $0.5 million. The decreases were partially offset by increased utility
costs and personnel costs.
Real estate taxes decreased $0.7 million to $10.1 million for the three
months ended March 31, 2001 compared to the corresponding period last year.
Approximately $0.2 million of the decrease was due to property dispositions. The
additional $0.5 million was due to a combination of decreases in tax rates and
property valuations.
Non-recurring charges declined $2.7 million. The non-recurring charges
in 2000 were primarily payments made to certain officers in connection with
their resignation or retirement from the Company and their respective retirement
employment agreements.
Bad debt expense increased $1.4 million to $2.1 million for the three
months ended March 31, 2001 compared to the corresponding period last year. This
was primarily due to the collection of amounts previously thought to be
uncollectible for the three months ended March 31, 2000. The Company has also
recorded an allowance of $0.9 million relating to a mortgage receivable.
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FUNDS FROM OPERATIONS
The Company calculates funds from operations ("FFO") as net income
attributable to common shareholders on a diluted basis before gain or loss on
sales of real estate and securities, plus depreciation and amortization on real
estate, amortized leasing commission costs and the minority interest share of
income. Effective January 1, 2000, the Company adopted the NAREIT definition of
Funds From Operations which requires the inclusion of both recurring and
non-recurring results of operations. FFO is not a substitute for cash flows from
operations or net income as defined by generally accepted accounting principles,
and may not be comparable to other similarly titled measures of other REITs. FFO
is presented because industry analysts and the Company consider FFO to be an
appropriate supplemental measure of performance of REITs.
THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income $ 27,203 $ 27,249
Preferred dividends (5,659) (5,659)
Minority interest 218 238
-------- --------
Net income applicable to common shareholders - diluted 21,762 21,828
Loss on sale of real estate - New Plan Excel 25 1
Impairment of real estate - New Plan Excel 2,239 --
Depreciation and amortization
New Plan Excel real estate assets 16,075 15,989
ERT Development Corp. real estate assets 1,482 1,116
Preferred dividends 800 800
-------- --------
Funds from operations $ 42,383 $ 39,734
======== ========
Weighted average of common shares outstanding - diluted 90,486 90,905
======== ========
FFO per share - diluted $ 0.47 $ 0.44
======== ========
Preferred A shares have a dilutive effect for FFO calculations
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QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2001, the Company had approximately $50.9 million of
outstanding floating rate mortgages and notes payable. In addition, the Company
had $258.8 million outstanding as of March 31, 2001 in connection with floating
rate borrowings under credit facilities. The Company does not believe that the
interest rate risk represented by its floating rate debt is material as of that
date in relation to the approximately $1.2 billion of outstanding total debt of
the Company, the approximately $2.9 billion of total assets of the Company and
the approximately $2.9 billion market capitalization of the Company's common
stock as of that date.
The Company was a party to one hedging agreement with respect to its
floating rate debt as of March 31, 2001. On October 11, 2000, the Company
entered into a two-year swap agreement with Fleet National Bank relating to $125
million of the Company's variable rate debt. The agreement effectively fixes the
annual interest rate of this debt at a base rate of 6.67% plus applicable
spreads associated with the Company's variable rate credit facilities. Hedging
agreements enable the Company to convert floating rate liabilities into fixed
rate liabilities. Hedging agreements expose the Company to the risk that the
counterparties to such agreements may not perform, which could increase the
Company's exposure to rising interest rates. Generally, however, the
counterparties to hedging agreements that the Company enters into are major
financial institutions. The Company may borrow additional money with floating
interest rates in the future. Increases in interest rates, or the loss of the
benefits of existing hedging agreements or any hedging agreements that the
Company may enter into in the future, would increase the Company's interest
expense, which would adversely affect cash flow and the ability of the Company
to service its debt. Future decreases in interest rates will increase the
Company's interest expense as compared to the floating rate debt underlying the
Company's hedging agreements and could result in the Company making payments to
unwind such agreements.
If market rates of interest on the Company's variable rate debt increase
by 10% (or approximately 60 basis points), the increase in interest expense on
the Company's variable rate debt would decrease future earnings and cash flows
by approximately $1.1 million. If market rates of interest increase by 10%, the
fair value of the Company's total outstanding debt would decrease by
approximately $8.7 million. If market rates of interest on the Company's
variable rate debt decrease by 10% (or approximately 60 basis points), the
decrease in interest expense on the Company's variable rate debt would increase
future earnings and cash flows by approximately $1.1 million.
As of March 31, 2001, the Company had notes receivable in the total
amount of Canadian $14.2 million (approximately U.S. $9.0 million as of March
31, 2001). The Company does not believe that the foreign currency exchange risk
associated with these loans is material. The Company had no other material
exposure to market risk (including foreign currency exchange risk, commodity
price risk or equity price risk) as of March 31, 2001.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
*10.1 Amendment No. 3 to Term Loan Agreement, dated as of March 2,
2001, between the Company and Fleet National Bank, filed as
Exhibit 10.51 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2000.
(b) During the period covered by this report the Company filed the
following reports on Form 8-K:
Form 8-K filed on March 8, 2001 contains Item 9, Regulation FD
Disclosure. This is the filing of the Supplemental Disclosure of the
registrant for the quarter ended December 31, 2000.
---------------
* Incorporated herein by reference as indicated above.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 10, 2001
NEW PLAN EXCEL REALTY TRUST, INC.
By: /s/ Glenn J. Rufrano
--------------------
Glenn J. Rufrano
President and
Chief Executive Officer
By: /s/John B. Roche
----------------
John B. Roche
Chief Financial Officer
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EXHIBIT INDEX
NUMBER DESCRIPTION
- ------ -----------
*10.1 Amendment No. 3 to Term Loan Agreement, dated as of March 2, 2001, between the
Company and Fleet National Bank, filed as Exhibit 10.51 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.
- ---------------
* Incorporated herein by reference as indicated above.
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