SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 3
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
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 001-13499
EQUITY ONE, INC.
Exact name of Registrant as specified in its charter
MARYLAND 52-1794271
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1696 N.E. MIAMI GARDENS DRIVE
NORTH MIAMI BEACH, FL 33179
(Address of principal executive office)
Registrant's telephone number: (305) 947-1664
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of July 25, 2001, the aggregate market value of the voting stock of
the Registrant held by non-affiliates of the Registrant was approximately
$50,971,102.03.
As of July 25, 2001, the number of outstanding shares of Common Stock
par value $.01 per share of the Registrant was 13,011,901.
EQUITY ONE, INC.
TABLE OF CONTENTS
PAGE
----
PART I
ITEM 1. BUSINESS................................................................................. 3
ITEM 2. PROPERTIES............................................................................... 7
ITEM 3. LEGAL PROCEEDINGS........................................................................ 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................... 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................... 20
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)....... 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................... 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................. 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..... 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....................................... 28
ITEM 11. EXECUTIVE COMPENSATION................................................................... 28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................... 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................... 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K......................... 29
2
PART I
ITEM 1. BUSINESS
GENERAL
Equity One, Inc. and subsidiaries (collectively the "Company") is a
self-administered, self-managed real estate investment trust ("REIT") that
principally acquires, renovates, develops and manages community and neighborhood
shopping centers anchored by national and regional supermarket chains
("Supermarket Centers"). As of December 31, 2000 the Company's portfolio
consisted of 31 properties and included 23 Supermarket Centers, 3
drugstore-anchored centers, 2 mixed-use office and retail properties, 1 storage
facility, 1 apartment building and 1 restaurant property (collectively, the
"Existing Properties"). The Existing Properties are located primarily in
metropolitan areas of Florida, contain an aggregate of 3.2 million square feet
of gross leasable area ("GLA") and were 95% occupied as of December 31, 2000.
The Company also owns 14 parcels aggregating approximately 37.3 acres
of land adjacent to certain of the Existing Properties and a 4.05 acre vacant
parcel located in Southwest Miami-Dade County, Florida, ("Coral Way N.E.")
substantially all of which are intended for retail development. The Company has
options exercisable prior to May 2003 to purchase (1) an approximately 8.5 acre
vacant parcel of land across the street from Coral Way N.E. in Southwest
Miami-Dade County, Florida ("Coral Way S.E.") which is commercially zoned and
has received county site plan approval for the development of up to a 100,000
square foot Supermarket Center, and (2) a 6.2 acre vacant parcel adjacent to one
of the Existing Properties.
National and regional supermarkets ("Supermarket Anchor Tenants"), such
as Albertson's, Kash 'n Karry, Publix and Winn-Dixie, anchor the Company's
Supermarket Centers. Additional tenants who occupy 10,000 square feet or more in
a single location and who attract tenants and shoppers to the Company's
Supermarket Centers ("Other Anchor Tenants") include national retailers such as
AMC Theatre, Best Buy, Eckerd, Home Depot Expo, Kmart and Walgreens. Non-anchor
tenants of the Supermarket Centers ("Non-anchor Tenants") include national and
regional businesses, such as Bank of America, Blockbuster Video, Boat US Marine,
Burger King, Chili's, General Nutrition Center, Little Caesars, McDonalds,
Perkins, Rainbow Shops and Radio Shack. The Company believes that Supermarket
Anchor Tenants and Other Anchor Tenants ("Supermarket and Other Anchor Tenants")
offering daily necessity items generate regular consumer traffic and enhance the
performance and stability of its properties. As of December 31, 2000, the
Company's Supermarket Anchor Tenants, Other Anchor Tenants and Non-anchor
Tenants contributed 23.9%, 16.4% and 59.7%, respectively, of the Company's
aggregate annualized minimum rents, and accounted for approximately 32.3%, 25.8%
and 41.9%, respectively, of the Company's aggregate leased GLA.
At December 31, 2000, the Company was engaged as the property manager
for eleven properties in Florida, consisting of seven Supermarket Centers, two
drugstore-anchored centers and two other retail centers. Additionally, the
Company was engaged as the asset manager for sixteen properties in Texas and one
property in Florida, consisting primarily of Supermarket Centers,
drugstore-anchored centers and other retail or mixed-use properties.
RECENT DEVELOPMENTS
On January 28, 2001, Sun Star Theatres commenced operations at the
Company's Lake Mary Shopping Center located in Lake Mary, Florida. Sun Star
Theatres replaced General Cinema, which ceased operations on September 28, 2000
and terminated their lease on December 5, 2000, at which time it paid the
Company $1.53 million in termination fees. Contemporaneous with the receipt of
this termination fee, the Company made a $1.45 million partial pay-down of the
mortgage financing that is secured by the Lake Mary Shopping Center.
On January 31, 2001, the Company closed on the $2.9 million acquisition
of a retail property consisting of a vacant 75,000 square foot former Mervyns
department store on a parcel of land totaling 10 acres, located adjacent to the
Pompano Fashion Mall in Pompano Beach, Florida ("Pompano"). The Company has
entered into an agreement with Lowe's Cos. ("Lowe's") for a 10-year ground lease
of the property. In conjunction with the lease agreement, the Company has
granted Lowe's an option to purchase the property, which Lowe's may exercise any
time between November 1, 2002 and February 1, 2003.
3
On March 8, 2001 the Company closed on a $4.7 million mortgage
financing secured by Forest Village Shopping Center, a Supermarket Center
located in Tallahassee, Florida. The net proceeds of the financing were used by
the Company to repay a portion of the balance outstanding under its existing
Credit Agreement.
At the end of March 2001, the Company completed the addition of
approximately 24,000 square feet to the Shops at Skylake, a Supermarket Center
located in North Miami Beach, Florida. The new space is fully leased to two
tenants who are expected to occupy their spaces in the second quarter of 2001.
BUSINESS AND GROWTH STRATEGIES
The Company was organized in June 1992 under the laws of the State of
Maryland to acquire Supermarket Centers in high growth, densely populated areas
throughout the Southeast capable of generating stable cash flows and maintaining
long-term value. The Company selects properties for acquisition or development
which have or are suitable for Supermarket and Other Anchor Tenants, and which
are adaptable over time for expansion, renovation and redevelopment. In order to
take advantage of property management operating efficiencies and present
attractive leasing opportunities to tenants who seek multiple locations in an
area, the Company also targets properties within close proximity to the Existing
Properties. All properties must be well located and have high visibility, open
air designs, ease of entry and exit and ample parking. The Company acquires
Supermarket Centers that are substantially fully leased (i.e., existing tenants
occupy 85% or more of GLA), appropriately tenanted and well maintained
("Performing Supermarket Centers"), as well as Supermarket Centers, which meet
the Company's turnaround criteria ("Underperforming Supermarket Centers"). In
acquiring Performing Supermarket Centers, the Company requires attractive and
sustainable rates of return, while in acquiring Underperforming Supermarket
Centers the Company seeks opportunities to increase revenues primarily through
renovation and re-tenanting.
The Company believes that its management team possesses the experience
and expertise necessary to identify, acquire, renovate, develop and manage
additional Supermarket Centers. The Company's senior executives and managers
average more than 20 years of real estate experience and have acquired and
managed all of the Existing Properties. The Company believes it has cultivated
strong relationships with Supermarket and Other Anchor Tenants, which, in
combination with its in-depth knowledge of the Company's primary markets, have
contributed substantially to the Company's success in identifying, acquiring and
operating its properties.
Since its formation, the Company has experienced sustained growth in
its real estate portfolio, revenues and net income. From December 31, 1994 to
December 31, 2000, the Company increased total real estate assets and GLA to
$243.1 million and 3.2 million square feet, respectively, from $28.5 million and
600,000 square feet, respectively. For the year ended December 31, 2000, total
revenues and net income increased to $34.4 million and $11.3 million,
respectively, from $2.1 million and $49,000, respectively, for the year ended
December 31, 1994.
The Company intends to maximize total return to stockholders by
increasing cash flow per share and maximizing the value of its real estate
portfolio. The Company believes it can achieve this objective primarily through
the acquisition, renovation, development and management of Supermarket Centers
and other properties that meet the Company's investment criteria. The Company
believes it has certain competitive advantages which enhance its ability to
capitalize on acquisition opportunities, including its: (i) significant local
market experience and expertise; (ii) long standing relationships with real
estate brokers, tenants and institutional and other real estate owners in its
current target markets; (iii) streamlined acquisition process; (iv) access to
capital; and (v) ability to offer cash and tax advantaged structures to sellers.
The Company intends to maintain significant flexibility with respect to
the form of its acquisition transactions, using cash available from operations
or lines of credit for a seller who seeks immediate liquidity, as well as
tax-advantaged partnership structures to attract a tax-motivated seller. Such
structures may include entering into a joint venture or other type of
co-ownership with a seller, whether in the form of a limited partnership or
limited liability company, with the Company acquiring a controlling interest in
such venture. The Company may offer the seller an interest in the venture that
is convertible or exchangeable for shares of common stock or otherwise allow the
seller to have an equity interest in the Company. If consistent with the
Company's objectives, the Company will consider the acquisition of interests in,
or the purchase of other REITs or similar entities.
4
The Company's principal business and growth strategies are as follows:
ACQUISITION OF PERFORMING SUPERMARKET CENTERS. The Company intends to
acquire Performing Supermarket Centers that offer attractive and sustainable
rates of return in areas throughout the Southeast having demographic
characteristics similar to those of its present markets. Acquisitions of
Performing Supermarket Centers in 2000 included Mariners Crossing Shopping
Center in Spring Hill, Florida ("Mariners Crossing") and The Shoppes of North
Port in North Port, Florida ("Shoppes of North Port").
The Company targets Performing Supermarket Centers which are adaptable
to expansion, renovation and redevelopment, and in order to maximize property
management efficiencies, present attractive leasing opportunities to tenants who
seek multiple locations in one geographic area. The Company will seek
Supermarket Centers which offer daily necessities and value-oriented merchandise
and have high visibility, open-air designs, ease of entry and exit and ample
parking. Given the Company's relationship with certain anchor tenants,
particularly Supermarket Anchor Tenants, and its operational expertise, the
Company anticipates that it will be able to enhance the performance of
properties it acquires. When entering new markets, the Company considers its
ability to increase and concentrate holdings in order to achieve economies of
scale.
The Company has developed an integrated methodology for sourcing and
completing acquisitions and believes it has favorable access to potential
acquisition opportunities by virtue of its relationships with brokers, tenants,
financial institutions, development agencies, contractors, and others involved
in the real estate market. The Company conducts its review procedures with the
full participation of the Company's senior officers, which, combined with the
Company's access to capital and knowledge of existing markets, allows the
Company to make expedited determinations and consummate transactions quickly.
When evaluating potential acquisitions and development projects, the
Company considers factors such as (i) economic, demographic, and regulatory and
zoning conditions in the property's local and regional market; (ii) the
location, construction quality, and design of the property; (iii) the current
and projected cash flow of the property and the potential to increase cash flow;
(iv) Supermarket and Other Anchor Tenants and other tenants gross sales per
square foot measured against industry standards; (v) the potential for capital
appreciation of the property; (vi) the terms of tenant leases, including the
relationship between the property's current rents and market rents and the
ability to increase rents upon lease rollover; (vii) the occupancy and demand by
tenants for properties of a similar type in the market area; (viii) the
potential to complete a strategic renovation, expansion, or re-tenanting of the
property; (ix) the property's current expense structure and the potential to
increase operating margins; (x) the ability of the Company to subsequently sell
or refinance the property; and (xi) competition from comparable retail
properties in the market area.
ACQUISITION OF UNDERPERFORMING SUPERMARKET CENTERS. The Company intends
to acquire Underperforming Supermarket Centers that meet the Company's
turnaround criteria, which include having the potential to increase revenues and
operating cash flows through renovation and re-tenanting. Underperforming
Supermarket Centers are typically undercapitalized, poorly managed and/or poorly
maintained and may require significant capital improvements. The Company also
requires attractive location and market demographics, favorable purchase terms,
and the willingness of Supermarket and Other Anchor Tenants to commit to lease
space. The Company believes that its market knowledge, strong relationships with
Supermarket and Other Anchor Tenants and its capabilities in renovation and
redevelopment, are particularly integral to its ability to acquire and
reposition Underperforming Supermarket Centers.
When evaluating such acquisitions, the Company considers factors
similar to those applied in the acquisition of Performing Supermarket Centers,
and will complete acquisitions only after the completion of a thorough due
diligence process, including an in-depth study of the reasons for the centers
failure to perform, the community demographics, the costs of renovation or
redevelopment, and the willingness of acceptable Supermarket and Other Anchor
Tenants and other tenants to commit to the site. The Company believes that its
competitive advantage is enhanced by its ability to conduct an efficient due
diligence investigation and its ability to commit to and fund acquisitions that
are flexibly structured so as to meet each seller's requirements with respect to
receiving cash or tax deferred benefits. Furthermore, the Company's
relationships with Supermarket and Other Anchor Tenants who are familiar with
the Company's commitment to quality construction, maintenance and operations
will aid it in obtaining pre-leasing expressions of interest before the
Company's decision to acquire the property is made.
5
In addition, the acquisition of Underperforming Supermarket Centers
frequently provides the Company with an opportunity to buy adjacent undeveloped
land whose value is depressed by its proximity to the Underperforming
Supermarket Center. The value of the undeveloped land can then be enhanced by
the Company's rehabilitation program. In 2000, the Company did not acquire any
Underperforming Supermarket Centers.
DEVELOPMENT AND REDEVELOPMENT OF SUPERMARKET CENTERS. Although the
Company previously has concentrated on the acquisition of existing Supermarket
Centers, the Company believes that, as a result of changing market conditions,
development and redevelopment activities will provide significant growth
opportunities in the future. The Company intends to develop and redevelop
Supermarket Centers, whose successful completion will enable the Company to
increase revenues and operating cash flows. In 2000, the Company's development
and redevelopment activities included: (i) the 55,781 square foot addition to
the Shops at Skylake, a previously developed Supermarket Center in North Miami
Beach, Florida; (ii) the 69,726 square foot development of Forest Village
Shopping Center, a new Supermarket Center in Tallahassee, Florida; (iii) the
10,795 square foot addition to Point Royale Shopping Center, a Supermarket
Center in Miami, Florida; (iv) the 15,050 square foot addition to Lake Mary
Shopping Center, a Supermarket Center in Lake Mary, Florida; and (v) the 8,700
square foot development of Losco Corners, a Supermarket Center anchored by a
third-party owned Supermarket Anchor Tenant in Jacksonville, Florida.
In connection with its development and redevelopment of Supermarket
Centers, the Company may purchase or acquire options on parcels of land that are
likely to be subject to increased development in its target markets. As of
December 31, 2000, the Company owned approximately 37.3 acres of land adjacent
to certain of the Existing Properties, substantially all of which is intended
for retail development, as well as the 4.05 acre Coral Way N.E. land parcel
which the Company expects to develop as a drugstore-anchored center. The Company
also has an option to purchase Coral Way S.E., an approximately 8.5 acre vacant
land parcel (located across the street from Coral Way N.E). which has received
site plan approval for the development of up to a 100,000 square foot
Supermarket Center.
INCREASING REVENUES AND INCREASING OPERATING MARGINS. The Company will
continue to seek to improve the financial performance of its portfolio by
increasing revenues (through increased occupancy and/or rental rates),
maintaining high tenant lease renewal rates, replacing certain existing tenants
with more creditworthy tenants, and aggressively managing operating expenses.
Most of the Company's lease agreements provide for percentage rents, indexed
rent increases (based on CPI or other criteria) and/or fixed rent increases. The
Company believes that substantially all of its properties are in desirable
locations that are experiencing rising rents, low vacancy rates, and increased
demand. This allows the Company to renew leases, or relet space under expired
leases at favorable rents. In 2000, the Company renewed or replaced 72 expiring
leases totaling 140,162 square feet at a weighted average rental rate of $11.00
per square foot, an average increase of 5.8% versus the prior weighted average
rental rate, and leased 82 vacant spaces totaling 262,396 square feet at a
weighted average rental rate of $12.03 per square foot.
OTHER ACQUISITIONS. The Company may from time to time acquire or
develop on a highly selective basis, other types of income-producing commercial
properties which present superior opportunities for return on investment in
markets in which the Company has significant expertise.
BUSINESS COMBINATIONS. The Company will consider and pursue business
combinations with other publicly or privately held real estate companies whose
assets and operating properties are consistent with those of the Company, if the
Company believes such business combination is likely to increase the Company's
revenues and operating cash flows. The Company has entered into a series of
agreements with Centrefund Realty (U.S.) Corporation ("CEFUS"), a subsidiary of
Centrefund Realty Corporation, a Canadian real estate corporation, whereby the
Company has been providing CEFUS with a package of asset and property management
services in return for certain fees. CEFUS and the Company have also agreed to
explore the possibility of effecting a business combination of their respective
operations. At the present time, negotiations are in progress, but no definitive
agreement has been reached and one may not be reached. The majority shareholder
of the Company, Gazit-Globe (1982) Ltd., is also the majority shareholder of
Centrefund Realty Corporation.
6
ITEM 2. PROPERTIES
The Company maintains its principal executive and management office at
1696 Northeast Miami Gardens Drive; North Miami Beach, Florida in the Shops at
Skylake.
At December 31, 2000, the Company's Existing Properties, consisted
primarily of Supermarket Centers, and contained an aggregate of 3.2 million
square feet of GLA. The Company believes that the location and quality of the
Existing Properties will enable the Company to develop and retain an attractive
and diverse tenant base. As of December 31, 2000, the Existing Properties
(excluding Mandarin Mini-storage and Montclair Apartments) were 94.6% leased to
a total of 607 tenants.
The following table provides a brief description of each of the
Company's Existing Properties:
AVERAGE
NET MINIMUM
OPERATING RENT PER
GLA INCOME FOR LEASED PERCENT
(SQ. FT.) NUMBER THE YEAR SQ. FT. LEASED
AT OF ENDED AT AT
DATE DEC. 31, TENANTS DEC. 31, DEC. 31, DEC. 31,
PROPERTY ACQUIRED 2000 (1) 2000 2000 2000 CERTAIN TENANTS (2)
-------- -------- --------- ------- ---------- --------- --------- -------------------
SUPERMARKET AND DRUGSTORE ANCHORED CENTERS
NORTH FLORIDA
- -------------
Atlantic Village June 100,559 25 $897,032 $ 9.81 95.0% Publix, Jo-Ann Fabrics,
Atlantic Beach 1995 Dollar Tree
Beauclerc Village May 67,927 12 $395,212 $ 6.47 95.4% Big Lots, Walgreens*
Jacksonville 1998
Commonwealth February 81,467 16 $518,262 $ 8.16 96.4% Winn-Dixie,
Jacksonville 1994 Rent-A-Center, Pizza Hut
Forest Village January 69,726 16 $295,962 $ 9.83 88.5% Publix, Video Warehouse,
Tallahassee 1999 Waffle House
Fort Caroline January 74,546 13 $434,004 $ 7.14 92.7% Winn-Dixie, Eckerd*
Jacksonville 1994 (Bealls Outlet), McDonalds
Losco Corners May 8,700 7 $ 37,714 $18.96 63.2% Winn-Dixie (3)
Jacksonville 1999
Mandarin Landing December 141,565 37 $903,726 $ 8.63 97.0% Publix, Office Depot,
Jacksonville 1999 Eckerd, Aqua Zoo
Monument Point January 75,128 15 $451,610 $ 6.44 100.0% Winn-Dixie, Eckerd
Jacksonville 1997
Oak Hill December 78,492 19 $331,874 $ 6.31 81.9% Publix, Walgreens* (Bonus
Jacksonville 1995 Dollar)
CENTRAL FLORIDA
- ---------------
Eustis Square October 126,791 28 $704,139 $ 6.67 93.1% Publix, Walgreens*
Eustis 1993 (Bealls Outlet), Bealls
Forest Edge December 68,631 12 $394,346 $ 6.97 100.0% Winn-Dixie, Auto Zone,
Orlando 1996 Rent-A-Center
7
AVERAGE
NET MINIMUM
OPERATING RENT PER
GLA INCOME FOR LEASED PERCENT
(SQ. FT.) NUMBER THE YEAR SQ. FT. LEASED
AT OF ENDED AT AT
DATE DEC. 31, TENANTS DEC. 31, DEC. 31, DEC. 31,
PROPERTY ACQUIRED 2000 (1) 2000 2000 2000 CERTAIN TENANTS (2)
-------- -------- --------- ------- ---------- --------- --------- -------------------
CENTRAL FLORIDA (CONTINUED)
- ---------------
Lake Mary Center November 303,500 61 $3,893,254(4) $11.04 85.4%(5) Albertson's, Kmart, Bank
Lake Mary 1995 of America, Chili's,
Burger King (5)
Park Promenade January 125,818 28 $1,013,726 $9.11 100.0% Publix, Orange County
Orlando 1999 Library
Walden Woods January 74,336 10 $462,261 $6.57 100.0% Winn-Dixie*, Walgreens
Plant City 1999
FLORIDA WEST COAST
- ------------------
East Bay Plaza July 85,426 23 $438,594 $7.56 81.5% Albertson's (3),
Largo 1993 Scottys*, Hollywood
Video, Boat US
Mariners Crossing September 85,507 15 $140,153 $7.89 100.0% Kash 'n Karry, Movie
Spring Hill 2000 Gallery, Dollar General
Shoppes of North Port December 84,705 22 $58,983 $9.21 97.4% Publix, Bealls Outlet
North Port 2000
Summerlin Square June 109,156 27 $966,035 $10.23 94.1% Winn-Dixie, Eckerd, West,
Fort Myers 1998 Marine, Mobil, Perkins
SOUTH FLORIDA
- -------------
Bird Ludlum August 192,282 49 $2,485,915 $13.52 98.1% Winn-Dixie, Eckerd, Boat
Miami 1994 US, McDonalds, Bank of
America, Blockbuster
Lantana Village January 173,110 26 $992,470 $6.29 97.9% Winn-Dixie, Kmart, Burger
Lantana 1998 King, Dennys
Pine Island August 254,907 48 $2,117,501 $8.98 100.0% Publix, Home Depot Expo,
Davie 1999 Rite Aid* (Bealls
Outlet), Radio Shack,
First Union
Plaza del Rey August 50,146 21 $518,972 $12.56 96.4% Navarro Pharmacy,
Miami 1991 Rent-A-Center, Discount
Auto
Point Royale July 209,863 28 $994,916 $6.27 98.6% Winn-Dixie, Best Buy,
Miami 1995 Eckerd, Dollar Tree
Ridge Plaza August 155,204 28 $1,078,975 $8.49 94.0% AMC Theatre, Kabooms,
Davie 1999 Republic Security Bank,
Uncle Funny's, Round Up
Shops at Skylake August 150,702 38 $1,546,645 $14.56 96.4% Publix, Radio Shack,
North Miami 1997 First Union, Blockbuster,
Beach (6) McDonalds
8
AVERAGE
NET MINIMUM
OPERATING RENT PER
GLA INCOME FOR LEASED PERCENT
(SQ. FT.) NUMBER THE YEAR SQ. FT. LEASED
AT OF ENDED AT AT
DATE DEC. 31, TENANTS DEC. 31, DEC. 31, DEC. 31,
PROPERTY ACQUIRED 2000 (1) 2000 2000 2000 CERTAIN TENANTS (2)
-------- -------- --------- ------- ---------- --------- --------- -------------------
SOUTH FLORIDA (CONTINUED)
- -------------
West Lakes Plaza November 100,747 27 $945,654 $10.45 100.0% Winn-Dixie, Navarro
Miami 1996 Pharmacy, Rent-A-Center,
GNC
TOTAL/WEIGHTED AVERAGE
SUPERMARKET AND DRUGSTORE ANCHORED --------- --- ----------- ------ -----
CENTERS 3,048,941 651 $23,017,935 $9.06 95.1%
========= === =========== ====== =====
OTHER COMMERCIAL PROPERTIES
Diana Building February 18,707 5 $179,206 $14.14 100.0% Dax Bar & Grill,
West Palm Beach 1995 Jester.com
Equity One Office April 28,780 11 $255,902 $16.29 75.7% Gambro
Building 1992
Miami Beach
Mandarin Mini-storage May 52,880 534 $186,831 N/A 91.6% N/A
Jacksonville 1994
Montclair Apartments August 9,375 20 $66,916 N/A 100.0% N/A
Miami Beach 1998
Restaurant Property April 10,000 1 $38,396 N/A 0.0% N/A
Miami Beach 1998
--------- --- ----------- ------ -----
TOTAL/WEIGHTED AVERAGE 119,742 571 $727,251 $15.30 82.1%(7)
OTHER COMMERCIAL PROPERTIES ========= === =========== ====== =====
--------- ----- ----------- ------ -----
TOTAL/WEIGHTED AVERAGE 3,168,683 1,222 $23,745,186 $9.15 94.6%(7)
ALL PROPERTIES ========= ===== =========== ====== =====
- -------------------
(1) Number of Tenants includes both leased and vacant units.
(2) Certain Tenants include Supermarket Anchor Tenants, Other Anchor
Tenants and certain Non-anchor Tenants.
(3) This tenant is on an adjacent or contiguous, separately owned parcel
and does not pay rent or any expense recoveries to the Company.
(4) Lake Mary's Net Operating Income includes $1.07 million of lease
termination fees.
(5) Does not include Sun Star Theatres, which commenced operations on
January 28, 2001. Including their 35,712 square foot lease would
increase Lake Mary's occupancy to 97.2%
(6) Skylake Mall was originally acquired in August 1997. It has been
completely redeveloped and renamed the Shops at Skylake. The 94,921
square foot phase one opened July 1999, and the 55,781 square foot
phase two opened July 2000. An additional 24,000 square feet, not
included above, is substantially complete and is leased to two tenants
who are scheduled for occupancy in the second quarter of 2001.
(7) Weighted average minimum rent per leased sq. ft. and weighted average
percent leased have been calculated excluding Mandarin Mini-storage and
Montclair Apartments.
* Indicates a tenant who has closed their store and ceased to operate at
the property, but continues to pay rent under the terms of its lease.
The sub-tenant, if any, is shown in ( ).
9
The following table provides information regarding (1) developable land
parcels owned by the Company adjacent to the Existing Properties, (2) land owned
by the Company and held for redevelopment/development, and (3) land parcels
which the Company has an option to acquire:
NUMBER OF DEVELOPABLE CURRENT
PROPERTY LOCATION ACREAGE PARCELS SQUARE FEET ZONING
- --------------------------------------------- ------------------- --------- ---------- ------------ -----------
LAND PARCELS ADJACENT TO EXISTING PROPERTIES
Adjacent to Commonwealth................... Jacksonville, FL 0.50 1 6,000 Retail
Adjacent to Equity One Office Building..... Miami-Beach, FL 0.80 3 70,000 Office
Adjacent to Forest Village................. Tallahassee, FL 13.40 1 120,000 Retail
Adjacent to Fort Caroline.................. Jacksonville, FL 0.50 1 2,000 Retail
Adjacent to Lake Mary (1).................. Lake Mary, FL 4.00 1 45,000 Retail
Adjacent to Lantana Village................ Lantana, FL 1.25 2 8,000 Retail
Adjacent to Mandarin Landing............... Jacksonville, FL 1.00 1 3,000 Retail
Adjacent to Shops at Skylake (2)........... N. Miami Beach, FL 6.00 1 105,000 Retail
Adjacent to Oak Hill....................... Jacksonville, FL 0.25 1 10,000 Retail
Adjacent to Summerlin Square............... Fort Myers, FL 9.58 2 106,000 Retail
----- -- -------
TOTAL--LAND ADJACENT TO EXISTING PROPERTIES................ 37.28 14 475,000
REDEVELOPMENT/DEVELOPMENT PROPERTIES (3)
Coral Way N.E.............................. Miami-Dade, FL 4.05 1 30,000 Retail
----- -- -------
TOTAL--REDEVELOPMENT/ DEVELOPMENT PROPERTIES............... 4.05 1 30,000
OPTION PROPERTIES
Coral Way S.E.............................. Miami-Dade, FL 8.50 1 100,000 Retail
Adjacent to Bird Ludlum.................... Miami, FL 6.20 1 25 units Residential
----- -- -------
TOTAL--OPTION PROPERTIES................................... 14.70 2 100,000
----- -- -------
TOTAL........................................................... 56.03 17 605,000
===== == =======
- --------------------------------------------------------------------------------
(1) The 45,000 square foot addition is currently under development with an
expected completion at year-end 2001.
(2) Does not include the land attributable to a 24,000 square foot
addition, which is substantially complete.
(3) Does not include the ten-acre Pompano parcel. See "Recent
Developments".
MAJOR TENANTS
The following table sets forth as of December 31, 2000, the leased GLA
of the Existing Properties (excluding Mandarin Mini-storage and Montclair
Apartments) leased to Supermarket Anchor Tenants, Other Anchor Tenants and
Non-anchor Tenants:
SUPERMARKET ANCHOR OTHER ANCHOR NON-ANCHOR
TENANTS TENANTS TENANTS TOTAL
------------------ ------------ ---------- ---------
Leased GLA (sq. ft.) 948,002 758,936 1,232,413 2,939,351
Percentage of Total Leased GLA 32.3% 25.8% 41.9% 100.0%
The following table sets forth as of December 31, 2000, the annual
minimum rent of the Existing Properties (excluding Mandarin Mini-storage and
Montclair Apartments) attributable to Supermarket Anchor Tenants, Other Anchor
Tenants and Non-anchor Tenants:
SUPERMARKET ANCHOR OTHER ANCHOR NON-ANCHOR
TENANTS TENANTS TENANTS TOTAL
------------------ ------------ ---------- ---------
Annual Minimum Rent ("AMR")......... $6,433,256 $4,415,860 $16,042,656 $26,891,772
Percentage of Total AMR.... 23.9% 16.4% 59.7% 100.0%
10
The following table sets forth as of December 31, 2000, information
regarding leases with the Company's ten largest tenants:
PERCENT OF
ANNUALIZED AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF MINIMUM RENT AT ANNUALIZED MINIMUM RENT
TENANT LEASES (SQUARE FEET) TOTAL GLA EXPIRATION MINIMUM RENT PER SQUARE FOOT
Winn-Dixie.......... 10 450,919 14.5% $ 2,844,985 10.6% $ 6.31
Publix.............. 9 385,629 12.4% 2,698,676 10.0% 7.00
Kmart............... 2 171,289 5.5% 814,754 3.0% 4.76
Albertson's......... 1 63,139 2.0% 568,251 2.1% 9.00
Eckerd.............. 6 59,424 1.9% 480,886 1.8% 8.09
AMC Theatre......... 1 27,000 0.9% 378,000 1.4% 14.00
Best Buy............ 1 91,472 2.9% 365,888 1.4% 4.00
Walgreens........... 4 46,193 1.5% 361,082 1.3% 7.82
Home Depot Expo..... 1 86,156 2.8% 323,085 1.2% 3.75
Kash 'n Karry....... 1 48,315 1.6% 321,344 1.2% 6.65
---------- --------- ---- ----------- ---- ------
TOTAL/AVERAGE....... 36 1,429,536 46.0% $ 9,156,951 34.0% $ 6.41
========== ========= ==== ==========- ==== ======
LEASE EXPIRATIONS
The following table sets forth the anticipated expirations of the
Company's tenant leases as of December 31, 2000 (excluding renewal options,
Mandarin Mini-storage and Montclair Apartments) for each year from 2001 through
2010 and thereafter:
ANNUALIZED PERCENT OF
MINIMUM RENT AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF AT EXPIRATION ANNUALIZED MINIMUM RENT
YEAR LEASES (1) (SQUARE FEET) TOTAL GLA (2) MINIMUM RENT PER SQUARE FOOT
---- ---------- ------------- --------- ------------- ------------ ---------------
Month to Month...... 10 54,122 1.7% $ 393,636 1.4% $ 7.27
2001................ 113 248,148 8.0% 2,795,030 10.0% 11.26
2002................ 107 252,566 8.1% 2,777,236 10.0% 11.00
2003................ 124 248,256 8.0% 3,359,416 12.0% 13.53
2004................ 76 282,034 9.1% 2,889,045 10.4% 10.24
2005................ 86 328,982 10.6% 3,372,974 12.1% 10.25
2006................ 20 159,129 5.1% 1,313,462 4.7% 8.25
2007................ 15 204,939 6.6% 2,043,255 7.3% 9.97
2008................ 11 131,652 4.2% 1,258,667 4.5% 9.56
2009................ 6 68,870 2.2% 922,391 3.3% 13.39
2010................ 8 124,650 4.0% 797,384 2.9% 6.40
Thereafter.......... 24 836,003 26.9% 5,986,961 21.5% 7.16
--- --------- ----- ----------- ----- ------
SUB-TOTAL/AVERAGE... 600 2,939,351 94.6% $27,909,457 100.0% $ 9.50
Vacant.............. 61 167,077 5.4% 0 0.0% 0.00
--- --------- ----- ----------- ----- ------
TOTAL/AVERAGE....... 661 3,106,428 100.0% $27,909,457 100.0% $ 8.98
=== ========= ===== =========== ===== ======
(1) Includes 4 tenants who do not use any square feet but pay rent under
various usage agreements. Excludes 7 tenants who do not use any square
feet and do not pay rent, but make certain other payments (i.e. common
area maintenance or real estate tax recoveries).
(2) Includes the rent from 4 tenants who do not use any square feet but pay
rent under various usage agreements.
11
Historically, the Company has not incurred substantial costs associated
with tenant improvements relating to lease expirations or renewals.
Additionally, because most leasing activities are performed in-house, the
Company has not historically incurred substantial costs associated with leasing
commissions. No assurance can be given that such expenses will not increase in
the future.
ADDITIONAL INFORMATION CONCERNING THE EXISTING PROPERTIES
As of December 31, 2000, three of the Existing Properties, Bird Ludlum,
Lake Mary, and the Shops at Skylake had either a book value equal to or greater
than 10% of the Company's total assets, or gross revenues which accounted for
more than 10% of the Company's aggregate gross revenues.
BIRD LUDLUM. Bird Ludlum is a 192,282 square foot Supermarket Center
occupied by 49 tenants, located at the intersection of Bird Road and Ludlum Road
approximately one mile east of the Palmetto Expressway, in Miami, Florida. A
nearby traffic report on Bird Road was counted at 64,000 cars per day. Bird
Ludlum is located in a densely populated trade area of Miami with a population
of over 152,122 within a three-mile radius, and a median household income of
$53,180 per year. This property includes five out-parcel buildings, and has
attracted a full range of national and regional tenants including Winn-Dixie,
Eckerd, Blockbuster, Radio Shack and Little Caesars. Out parcel buildings are
occupied by Vision Works, McDonalds, Dairy Queen, Jiffy Lube and Bank of
America.
In 1996, the Company purchased 7.4 acres of vacant land adjacent to
Bird Ludlum for $1.1 million. During early 1997, the Company utilized
approximately 1.2 acres of this land to build a parking lot for 150 automobiles.
The remaining 6.2 acres of vacant land was transferred to a partnership
controlled by affiliates of the Company, which granted the Company an option
exercisable through May 2003 to acquire the land at a cost of $1.0 million.
Winn-Dixie, the only tenant that occupies more than 10% of the GLA at
Bird Ludlum, occupies 44,400 square feet of GLA under a lease that expires
December 31, 2007, with five five-year renewal options. The annual minimum rent
payable by Winn-Dixie under this lease is $399,600. For the years ended June 30,
1998, 1999 and 2000 Winn-Dixie reported sales of $24.8 million $26.6 million and
$26.2 million, respectively.
The following table sets forth a schedule of lease expirations and
other information concerning leases at Bird Ludlum, assuming none of the tenants
exercise renewal options:
PERCENT OF
ANNUALIZED AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF MINIMUM RENT ANNUALIZED MINIMUM RENT
YEAR LEASES (SQUARE FEET) TOTAL GLA AT EXPIRATION MINIMUM RENT PER SQUARE FOOT
- -------------------- --------- ------------- ---------- ------------- ------------ ---------------
Month to Month...... 2 13,811 7.2% $ 154,075 5.9% $ 11.16
2001................ 12 21,094 11.0% 313,886 12.1% 14.88
2002................ 8 21,805 11.3% 304,659 11.7% 13.97
2003................ 12 37,106 19.3% 545,610 20.9% 14.70
2004................ 3 4,766 2.5% 74,841 2.9% 15.70
2005................ 2 4,500 2.3% 81,396 3.1% 18.09
2006................ 1 2,000 1.0% 27,012 1.0% 13.51
2007................ 4 63,952 33.3% 754,714 29.0% 11.80
2008................ 4 19,648 10.2% 349,363 13.4% 17.78
2009................ 0 0 0.0% 0 0.0% 0.00
2010................ 0 0 0.0% 0 0.0% 0.00
Thereafter.......... 0 0 0.0% 0 0.0% 0.00
SUB-TOTAL/AVERAGE... 48 188,682 98.1% $ 2,605,556 100.0% $13.81
Vacant.............. 1 3,600 1.9% 0 0.0% 0.00
-------- ------- ----- ----------- ------------- ------------
TOTAL/AVERAGE....... 49 192,282 100.0% $ 2,605,556 100.0% $13.55
======== ======= ===== =========== ============= ============
The average annual rental income per square foot of GLA at Bird Ludlum
for the years ended December 31, 1998, 1999 and 2000 was $17.72, $17.30 and
$18.04, respectively.
12
At the time of its acquisition by the Company, Bird Ludlum was 96.0%
leased. For each of the years ended December 31, 1998, 1999 and 2000, the
percentage of Bird Ludlum that was leased was 97.2%, 97.2% and 98.1%,
respectively.
LAKE MARY. Lake Mary is a 303,500 square foot Supermarket Center
situated on a 47 acre parcel located at the southeast corner of Lake Mary
Boulevard and Lake Emma Road in Lake Mary, Florida, in the Orlando metropolitan
area. The shopping center is located in an area with a population of 55,685
people within a three-mile radius and a median household income of $47,140 per
year. Lake Mary was originally constructed during 1987 and 1988 and was
partially renovated in 1990. In July 2000, the Company completed a 15,050 square
foot addition to the property. The Company expects to begin construction shortly
on a 45,000 square foot addition on 4.0 acres of vacant land at an estimated
cost of $3.0 million with completion scheduled for early 2002. Lake Mary has 61
tenants, and has attracted a full range of national and regional tenants
including Kmart, Albertson's, Sun Star Theatres, Chili's, Burger King, Einstein
Bros. Bagels, Carvel Ice Cream, Radio Shack and H&R Block.
Three tenants, Kmart, Albertson's and Sun Star Theatres (as of January
28, 2001), each occupy in excess of 10% of the GLA at Lake Mary. Kmart occupies
86,479 square feet of GLA under a lease that expires August 31, 2013. The annual
minimum rent is $497,254. For the years ended August 31, 1998, 1999 and 2000,
Kmart reported sales of $11.9 million, $13.7 million and $14.2 million,
respectively. Albertson's occupies 63,139 square feet of GLA under a lease that
expires June 30, 2012, with four five-year renewal options. The annual minimum
rent under the Albertson's lease is $568,251, increasing to $599,820 in June
2002 and $631,390 in June 2007. For the years ended May 31, 1998, 1999 and 2000,
Albertson's reported sales of $29.5 million, $33.3 million and $33.3 million,
respectively. On January 28, 2001, Sun Star Theatres occupied 35,712 square feet
under a lease that expires February 28, 2006, with two five-year renewal
options. Sun Star Theatres space was previously occupied by General Cinema,
which filed for bankruptcy protection and terminated its lease in the fourth
quarter of 2000, in connection with which General Cinema paid the Company $1.53
million in termination fees.
The following table sets forth a schedule of lease expirations and
other information concerning leases at Lake Mary, assuming none of the tenants
exercise renewal options:
PERCENT OF
ANNUALIZED AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF MINIMUM RENT ANNUALIZED MINIMUM RENT
YEAR LEASES (SQUARE FEET) TOTAL GLA AT EXPIRATION MINIMUM RENT PER SQUARE FOOT
- -------------------- --------- ------------- ---------- ------------- ------------ ---------------
Month to Month...... 0 0 0.0% $ 0 0.0% $ 0.00
2001................ 13 24,834 8.2% 357,378 12.0% 14.39
2002................ 14 29,556 9.7% 449,576 15.1% 15.21
2003................ 12 15,832 5.2% 251,035 8.4% 15.86
2004................ 2 2,750 0.9% 35,817 1.2% 13.02
2005................ 6 16,640 5.5% 294,125 9.9% 17.68
2006................ 2 4,700 1.5% 82,256 2.8% 17.50
2007................ 2 5,309 1.8% 170,162 5.7% 32.05
2008................ 1 3,900 1.3% 118,536 4.0% 30.39
2009................ 0 0 0.0% 0 0.0% 0.00
2010................ 1 5,999 2.0% 90,000 3.0% 15.00
Thereafter.......... 2 149,618 49.3% 1,128,644 37.9% 7.54
SUB-TOTAL/AVERAGE... 55 259,138 85.4% $ 2,977,529 100.0% $11.49
Vacant.............. 6 44,362 14.6% 0 0.0% 0.00
-------- -------- ----- ----------- ----- ------
TOTAL/AVERAGE....... 61 303,500 100.0% $ 2,977,529 100.0% $ 9.81
======== ======== ===== =========== ===== ======
The average rental income per square foot of GLA at Lake Mary for the
years ended December 31, 1998, 1999 and 2000 was $13.19, $13.25 and $16.25,
respectively. The 2000 figure includes $1.07 million of lease termination fees.
At the time of its acquisition, Lake Mary was 97.0% leased. For the
years ended December 31, 1998, 1999
13
and 2000, the percentage of Lake Mary that was leased was 99.4%, 99.2% and
85.4%, respectively. With the signing of the Sun Star Theatre lease on January
28, 2001, Lake Mary's occupancy increased to 97.2%.
SHOPS AT SKYLAKE. The Shops at Skylake is a 150,702 square foot
Supermarket Center occupied by 38 tenants. The property is located on Miami
Gardens Drive just east of Interstate 95 in North Miami Beach, Miami-Dade
County, Florida. The traffic count on Miami Gardens Drive, just east of the
center, averages approximately 37,500 vehicles per day. The center is located in
an area with a population of over 158,695 people within a three-mile radius
having a median household income of $43,064 per year. The 94,921 square foot
phase one of this complete redevelopment project opened in July 1999 with a
51,420 square foot Publix supermarket. The 55,781 square foot phase two opened
in July 2000 and an additional 24,000 square feet (not included is the 150,702
square foot total) is substantially complete and scheduled for occupancy in the
second quarter of 2001. The out parcel buildings are occupied by Blockbuster,
Radio Shack, McDonalds, First Union, Skylake Family Medical Center and a Citgo
gas station. In addition to the completed improvements, there are approximately
6.0 acres of developable land which can accommodate the construction of an
additional 105,000 square feet of space at an estimated cost of $7.3 million.
One tenant, Publix, occupies in excess of 10% of the GLA at the Shops
at Skylake. Publix opened in July 1999 and occupies 51,420 square feet. The
Publix lease expires July 31, 2019 and has six five-year renewal options. The
annual minimum rent under the Publix lease is $642,750. For the years ended
December 31, 1999 and 2000, Publix reported sales of $16.9 million and $38.9
million, respectively.
The following table sets forth a schedule of lease expirations and
other information concerning leases at the Shops at Skylake, assuming none of
the tenants exercise renewal options:
PERCENT OF
ANNUALIZED AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF MINIMUM RENT ANNUALIZED MINIMUM RENT
YEAR LEASES (SQUARE FEET) TOTAL GLA AT EXPIRATION MINIMUM RENT PER SQUARE FOOT
- -------------------- ----------- -------------- ------------ --------------- ---------------- ----------------
Month to Month...... 0 0 0.0% $ 0 0.0% $ 0.00
2001................ 0 0 0.0% 0 0.0% 0.00
2002................ 1 1,600 1.0% 29,866 1.3% 18.67
2003................ 9 20,300 13.5% 303,947 13.7% 14.97
2004................ 10 21,025 14.0% 350,301 15.7% 16.66
2005................ 10 36,381 24.1% 568,154 25.5% 15.62
2006................ 1 4,800 3.2% 98,400 4.4% 20.50
2007................ 0 0 0.0% 0 0.0% 0.00
2008................ 0 0 0.0% 0 0.0% 0.00
2009................ 0 0 0.0% 0 0.0% 0.00
2010................ 0 0 0.0% 0 0.0% 0.00
Thereafter.......... 4 61,246 40.6% 876,806 39.4% 14.32
SUB-TOTAL/AVERAGE... 35 145,352 96.4% $2,227,474 100.0% $15.32
Vacant.............. 3 5,350 3.6% 0 0.0% 0.00
------- ------- ----- ---------- ----- ------
TOTAL/AVERAGE....... 38 150,702 100.0% $2,227,474 100.0% $14.78
======= ======= ===== ========== ===== ======
The average rental income per square foot of GLA at the Shops at
Skylake for the years ended December 31, 1999 and 2000 was $7.29 (using 94,921
square feet) and $14.17 (using 150,702 square feet), respectively.
The Shops at Skylake was 100.0% leased at the completion of phase one
in July 1999, and 93.0% leased upon the completion of phase two in July 2000.
For the years ended December 31, 1999 and 2000, the percentage of the Shops at
Skylake that was leased was 97.0% and 96.4%, respectively.
Additional information is presented below about each of the Company's
other Existing Properties and the other property acquired subsequent to December
31, 2000:
14
ATLANTIC VILLAGE. Atlantic Village is a 100,559 square foot Supermarket
Center occupied by 25 tenants located in Atlantic Beach, Florida (in the
Jacksonville metropolitan area). Atlantic Village is situated on 14.0 acres and
is anchored by Publix. For the year ended December 31, 2000, Publix reported
sales of $24.9 million.
BEAUCLERC VILLAGE. Beauclerc Village is a 67,927 square foot drugstore
anchored shopping center occupied by 12 tenants located in Jacksonville,
Florida. Beauclerc Village is situated on 6.0 acres and is anchored by Big Lots.
For the year ended December 31, 2000, Walgreens reported sales of $224,987.
Walgreens closed their store in February 2000, but continues to pay rent under
the terms of its lease which expires June 30, 2001.
COMMONWEALTH. Commonwealth is an 81,467 square foot Supermarket Center
occupied by 16 tenants located in Jacksonville, Florida. Commonwealth is
situated on 12.8 acres and is anchored by Winn-Dixie. For the year ended June
30, 2000, Winn-Dixie reported sales of $13.4 million.
DIANA BUILDING. The Diana building is an 18,707 square foot mixed-use
(office/retail) property occupied by 5 tenants located in West Palm Beach,
Florida. This property was purchased in 1995 and has been completely redeveloped
by the Company.
EAST BAY. East Bay is an 85,426 square foot Supermarket Center occupied
by 23 tenants located in Largo, Florida (in the Tampa metropolitan area). East
Bay is situated on 10.3 acres and is anchored by Albertson's and Hollywood
Video. The Albertson's store is located on property contiguous to the Company's
property, and is not owned by the Company.
EQUITY ONE OFFICE BUILDING. The Equity One Office Building is a 28,780
square foot mixed-use (office/retail) property occupied by 11 tenants located in
Miami Beach, Florida. The property is comprised of four parcels, which in the
aggregate total 1.2 acres. Purchased in 1992, this property was substantially
redeveloped by the Company. The property is adjacent to the Miami Beach City
Hall and proximate to the Miami Beach Convention Center. The Company exercised
an option to purchase 0.5 acres of land adjacent to the Equity One Office
Building (included above) and purchased the Montclair Apartment property across
the street to complete the land assemblage for future redevelopment.
EUSTIS SQUARE. Eustis Square is a 126,791 square foot Supermarket
Center occupied by 28 tenants located in Eustis, Florida. Eustis Square is
situated on 13.5 acres and is anchored by Publix, Bealls Department Store and
Bealls Outlet (under a sublet from a closed Walgreens). For the year ended
December 31, 2000, Publix reported sales of $11.1 million.
FOREST EDGE. Forest Edge is a 68,631 square foot Supermarket Center
occupied by 12 tenants located in Orlando, Florida. Forest Edge is situated on
8.2 acres and is anchored by Winn-Dixie and AutoZone. For the year ended June
30, 2000, Winn-Dixie reported sales of $10.0 million.
FOREST VILLAGE. Forest Village is a 69,726 square foot Supermarket
Center occupied by 16 tenants located in Tallahassee, Florida. Forest Village is
situated on 28.85 acres and is anchored by Publix and Video Warehouse. For the
year ended December 31, 2000 (comprising six months of operations) Publix
reported sales of $11.3 million. The property includes 13.4 acres of vacant land
which can accommodate up to 100,000 square feet of additional retail space at an
estimated cost of $7.0 million.
FORT CAROLINE. Fort Caroline is a 74,546 square foot Supermarket Center
occupied by 13 tenants located in Jacksonville, Florida. Fort Caroline is
situated on 9.6 acres and is anchored by Winn-Dixie and Bealls Outlet (under a
sublet from a closed Eckerd). For the year ended June 30, 2000, Winn-Dixie
reported sales of $12.4 million.
LANTANA VILLAGE. Lantana Village is a 173,110 square foot Supermarket
Center occupied by 26 tenants located in Lantana, Florida. Lantana Village is
situated on 8.5 acres and is anchored by Kmart and Winn-Dixie. For the year
ended June 30, 2000, Winn-Dixie reported sales of $14.9 million.
LOSCO CORNERS. Losco Corners was completed in 2000. Losco Corners is an
8,700 square foot retail center adjacent to a previously standing, third-party
owned Winn Dixie located in Jacksonville, Florida. Losco Corners is situated on
0.6 acres and is occupied by 7 tenants.
15
MANDARIN LANDING. Mandarin Landing is a 141,565 square foot Supermarket
Center occupied by 37 tenants located in Jacksonville, Florida. Mandarin Landing
is situated on 17.1 acres and is anchored by Publix, Office Depot and Eckerd.
For the year ended December 31, 2000, Publix reported sales of $14.5 million.
MANDARIN MINI-STORAGE. Mandarin Mini-storage is a 52,880 square foot
mini-storage facility containing 534 storage rental bays located in
Jacksonville, Florida. The property is situated on 2.8 acres directly behind the
Mandarin Landing Supermarket Center.
MARINERS CROSSING. Mariners Crossing Shopping Center was acquired in
September of 2000. Mariners Crossing is an 85,507 square foot Supermarket Center
occupied by 15 tenants located in Spring Hill, in Hernando County, Florida.
Mariners Crossing is situated on 10.8 acres and is anchored by Kash 'n Karry.
Contemporaneous with the Company's acquisition of the property, Kash 'n Karry
completed an expansion of its supermarket from 29,000 to 48,315 square feet in
connection with which it signed a new twenty-year lease. For the year ended
December 31, 2000, Kash 'n Karry reported sales of $8.8 million.
MONTCLAIR APARTMENTS. Montclair Apartments is a twenty-unit apartment
complex located in Miami Beach, Florida across the street from the Equity One
Office Building that is part of an assemblage of land being held for the
redevelopment of a new office tower and parking garage.
MONUMENT POINTE. Monument Pointe is a 75,128 square foot Supermarket
Center occupied by 15 tenants located in Jacksonville, Florida. Monument Pointe
is situated on 7.3 acres and is anchored by Winn-Dixie and Eckerd. For the year
ended June 30, 2000, Winn-Dixie reported sales of $15.5 million.
OAK HILL. Oak Hill is a 78,492 square foot Supermarket Center occupied
by 19 tenants located in Jacksonville, Florida. Oak Hill is situated on 11.7
acres and is anchored by Publix and Bonus Dollar (under a sublet from a closed
Walgreens). For the year ended December 31, 2000, Publix reported sales of $14.4
million.
PARK PROMENADE. Park Promenade is a 125,818 square foot Supermarket
Center occupied by 28 tenants located in Orlando, Florida. Park Promenade is
situated on 12.0 acres and is anchored by Publix, Kmart and the Orange County
Library. For year ended December 31, 2000, Publix reported sales of $18.9
million. The Kmart store is located on property contiguous to the Company's
property, and is not owned by the Company.
PINE ISLAND. Pine Island Plaza is a 254,907 square foot Supermarket
Center occupied by 48 tenants located in Davie, Florida. Pine Island is situated
on 24.5 acres and is anchored by Publix, Home Depot Expo and Bealls Outlet
(under sublet from a closed Rite Aid). For the year ended December 31, 2000
Publix reported sales of $34.1 million.
PLAZA DEL REY. Plaza Del Rey is a 50,146 square foot shopping center
occupied by 21 tenants located in Miami-Dade County, Florida. Plaza Del Rey is
situated on 4.6 acres and is anchored by Navarro's drug store. For the year
ended December 31, 2000, Navarro's reported sales of $10.7 million.
POINTE ROYALE. Pointe Royale is a 209,863 square foot Supermarket
Center occupied by 28 tenants located in Cutler Ridge, Miami-Dade County,
Florida. Pointe Royale is situated on 14.5 acres and is anchored by Best Buy and
Winn-Dixie. For the year ended June 30, 2000, Winn-Dixie reported sales of $15.1
million. In July 2000, the Company completed the redevelopment of a vacant
office building situated on the property into an additional 10,795 square feet
of retail space included in the total above.
POMPANO. Pompano was acquired on January 31, 2001. Pompano is a vacant
75,000 square foot former Mervyns department store on a parcel of land totaling
10 acres, located adjacent to the Pompano Fashion Mall in Pompano Beach,
Florida. The Company has entered into an agreement with Lowe's for a 10-year
ground lease of the property, subject to Lowe's right to terminate the ground
lease prior to April 1, 2001. In conjunction with the lease agreement, the
Company has granted Lowe's an option to purchase the property, which may be
exercised any time between November 1, 2002 and February 1, 2003.
RESTAURANT PROPERTY. The restaurant property is a vacant 10,000 square
foot building situated on 2.1 acres located in Miami Beach, Florida.
16
RIDGE PLAZA. Ridge Plaza is a 155,204 square foot
entertainment-oriented shopping center adjacent to Pine Island Plaza occupied by
28 tenants located in Davie, Florida. Ridge Plaza is situated on 16.3 acres and
is anchored by AMC Theatre and Kabooms. For the year ended June 30, 2000, AMC
Theatre reported sales of $1.05 million.
SHOPPES OF NORTH PORT. The Shoppes of North Port was acquired in
December of 2000. North Port is an 84,705 square foot Supermarket Center
occupied by 22 tenants and is located in North Port, Sarasota County, Florida.
North Port is situated on 10.2 acres and is anchored by Publix and Bealls
Outlet. For the year ended December 31, 2000 Publix reported sales of $24.9
million.
SUMMERLIN SQUARE. Summerlin Square is a 109,156 square foot Supermarket
Center occupied by 27 tenants located in Fort Myers, Florida. Summerlin Square
is situated on 13.0 acres and is anchored by Winn-Dixie and Eckerd. For the year
ended June 30, 2000, Winn-Dixie reported sales of $12.0 million.
WALDEN WOODS. Walden Woods is a 74,336 square foot Supermarket Center
occupied by 10 tenants located in Plant City, Florida. Walden Woods is situated
on 6.0 acres and is anchored by Winn-Dixie and Walgreens. For the year ended
December 31, 2000, Winn-Dixie reported sales of $6.6 million. Winn Dixie closed
their store in June 2000, but continues to pay rent under the terms of its lease
which expires November 30, 2008.
WEST LAKES. West Lakes is a 100,747 square foot Supermarket Center
occupied by 27 tenants located in Kendall Lakes, Miami-Dade County, Florida.
West Lakes is situated on 8.8 acres and is anchored by Winn-Dixie and Navarro
Pharmacy. For the year ended June 30, 2000, Winn-Dixie reported sales of $12.8
million.
PROPERTY MANAGEMENT, LEASING AND RELATED SERVICE BUSINESS
The Company's property management, leasing activities and operating and
administrative functions including construction, data processing, finance and
accounting are administered or coordinated by Company personnel. On-site
functions such as maintenance, landscaping, sweeping, plumbing and electrical
are subcontracted at each location, with the cost of these functions passed on
to the tenants to the extent permitted by the underlying leases. Personnel from
the Company's corporate headquarters conduct regular inspections of each
property and maintain frequent contact with major tenants.
The Company maintains an active leasing and maintenance program that,
combined with the quality and locations of the properties, has made the Existing
Properties attractive to tenants. The Company intends to continue to hold the
Existing Properties for long-term investment and, accordingly, places a strong
emphasis on quality construction and an on-going program of regular maintenance.
The Existing Properties have been designed to require minimal ongoing capital
expenditures.
The Company's management information systems provide operating data
necessary to make informed business decisions on a timely basis. These systems
allow instant access to vacancies, lease data, tenants sales history, cash flow
budgets and forecasts to enable the Company to maximize cash flow from
operations and closely monitor corporate expenses.
In addition to managing the Existing Properties, the Company provides
management and leasing services to certain properties that are owned by third
parties. These services are provided pursuant to contracts that are of varying
lengths of time and which generally provide for management fees of up to 5.0% of
monthly base rent property receipts, leasing commissions of $1 to $3 per square
foot and various other fees. The management contracts are typically cancelable
upon 30 days notice or upon the occurrence of certain events, including the sale
of the property. During the years ended December 31, 1998, 1999 and 2000, the
Company earned management fees of $144,196, $263,205, and $635,430,
respectively, in connection with its management of third-party owned properties.
COMPETITION
There are numerous commercial developers, real estate companies,
including REITs such as Regency Realty Corporation, Weingarten Realty Investors
and IRT Property Company, and other owners of real estate in the areas in which
the Company's properties are located that compete with the Company in seeking
land for development, properties for acquisition, financing and tenants. Many of
such competitors have substantially greater resources than the Company. All of
the Company's Existing Properties are located in developed areas that include
17
other Supermarket Centers and other retail properties. The number of retail
properties in a particular area could materially adversely affect the Company's
ability to lease vacant space and maintain the rents charged at the Existing
Properties.
REGULATIONS AND INSURANCE
REGULATIONS. Retail properties are subject to various laws, ordinances
and regulations. The Company believes that each of the Existing Properties
maintains all required material operating permits and approvals.
INSURANCE. Under their leases, the Company's tenants are generally
responsible for providing adequate insurance on the property they lease. The
Company believes that its properties are covered by adequate fire, flood and
property insurance, all provided by reputable companies. However, certain of the
Company's properties are not covered by disaster insurance with respect to
certain hazards (such as hurricanes) for which coverage is not available or
available only at rates which, in the opinion of the Company, are not
economically justifiable.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and
regulations, including, without limitation, CERCLA, Chapter 403 of the Florida
Statutes, the Florida Dry Cleaning Contamination Clean-Up Act and the Miami-Dade
County (Florida) Pollution Protection Ordinance, an owner or operator of real
estate may be required to investigate and clean up hazardous or toxic substances
or petroleum product releases at such property and may be held liable to a
governmental entity or to third parties for property damage and for
investigation and clean-up costs incurred by such parties in connection with
contamination. Many such laws, including CERCLA, typically impose such liability
without regard for whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances and the liability under such laws
has been interpreted to be joint and several unless divisible with a reasonable
basis for allocation of responsibility. The cost of investigation, remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to properly remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Some environmental laws
create a lien on a contaminated site in favor of the government for damages and
costs it incurs in connection with the contamination. The owner of a
contaminated site also may be subject to common law claims by third parties
based on damages and costs resulting from environmental contamination emanating
from such site. In connection with the (direct or indirect) ownership,
operation, management and development of real properties, the Company is
generally considered an owner or operator of such properties or as having
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and injuries to
persons and property.
Certain federal, state and local laws, regulations and ordinances also
govern the removal, encapsulation or disturbance of asbestos-containing
materials ("ACM's") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws may
impose liability for release of ACM's and may permit third parties to seek
recovery from owners or operators of such properties for personal injury
associated with ACM's. Some of the environmental site assessments conducted at
the Existing Properties to date indicate that a number of the Existing
Properties contain ACM's. The Company is not aware, however, of any ACM's at the
properties that are friable or in otherwise poor condition.
The Company believes that the environmental studies conducted to date
have not revealed any significant environmental liability that would have a
material adverse effect on the Company's financial condition, results of
operations, liquidity and funds from operations (the "FFO"); however, no
assurance can be given that environmental studies obtained by the Company reveal
all environmental liabilities, that any prior owner of land or a property owned
or acquired by the Company did not create any material environmental condition
not known to the Company, or that a material environmental condition does not
otherwise exist (or may not exist in the future). Tenants at the Company's
properties include plant-on-premises dry cleaners, gasoline service stations and
tire centers, photo development firms and other retailers which use hazardous
substances in their businesses. Although leases with such tenants contain
provisions intended to minimize environmental risks and to shift the financial
risks to the tenants, there is no assurance that the Company will not incur
liability in this regard.
18
A limited monitoring program with respect to groundwater testing has
been implemented at Plaza Del Rey based on questions raised by environmental
studies conducted at the time of purchase. Groundwater impacts have also been
detected at Atlantic Village, which is located in an area where a former
municipal landfill was operated. Buried refuse consistent with known landfill
parameters has been identified by the Company's consultants on the Atlantic
Village site. While the Company does not regard these sites as significant
environmental risks, if a material environmental condition does in fact exist
(or exists in the future) at these or other properties, it could have a
significant adverse impact upon the Company's financial condition, results of
operations, liquidity and FFO. No assurance can be given that the environmental
studies that were performed at the properties would disclose all environmental
liabilities thereon, that any prior owner thereof did not create a material
environmental condition not known to the Company or that a material
environmental condition does not otherwise exist as to any of the properties.
As noted, tenants at the shopping centers include plant-on-premises dry
cleaners. As a result of prior environmental site assessments, low levels of
perchloroethylene have been detected in soils at the Company's Commonwealth,
Fort Caroline and Eustis Square properties. The Company understands that the
owners of these cleaners are applying to participate in the state-funded dry
cleaners program. In connection with the Company's acquisition of Skylake, a
Phase two Environmental Site Assessment dated July 15, 1997 has revealed the
existence of perchloroethylene at levels above regulatory limits caused by a dry
cleaning business operated on the premises. The Company has learned that the
site is included in the Florida Dry Cleaners State Program, and as a condition
to the Company's purchase of the property, the seller agreed to pay all
remediation costs, which environmental consultants have estimated to be
approximately $250,000. The seller placed $500,000 into an escrow account at
closing to pay for the remediation costs. Based on the remediation cost
estimates, guarantees by the seller to pay for the clean-up and the
establishment of the escrow account, the Company has concluded that Skylake does
not pose a material environmental liability.
EMPLOYEES
At December 31, 2000, the Company had 45 full-time employees. The
Company's employees are not represented by a collective bargaining group, and
the Company considers its relations with its employees to be good.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Company's properties are subject to any
material litigation. Furthermore, to the Company's knowledge, except as
described above with respect to environmental matters, there is no litigation
threatened against the Company or any of its properties, other than routine
litigation and administrative proceedings arising in the ordinary course of
business, which collectively are not expected to have a material adverse effect
on the business, financial condition, results of operations or cash flows of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
MARKET INFORMATION AND DIVIDENDS
The Company's Common Stock began trading on the New York Stock Exchange
("NYSE") on May 18, 1998, under the symbol "EQY". On February 7, 2001, the
Company had 200 stockholders of record representing 1,692 beneficial owners. The
following table sets forth for the periods indicated the high and low sales
prices as reported by the NYSE and the distributions declared by the Company:
DISTRIBUTIONS
HIGH LOW DECLARED
-------- ------- -------------
First Quarter, 1999....................................... $ 9.6875 $8.6250 $ 0.25
Second Quarter, 1999...................................... 11.0000 8.5625 0.25
Third Quarter, 1999....................................... 12.1250 9.7500 0.26
Fourth Quarter, 1999...................................... 10.6250 9.5000 0.26
First Quarter, 2000....................................... 10.7500 9.1875 0.26
Second Quarter, 2000...................................... 10.0000 9.0000 0.26
Third Quarter, 2000....................................... 10.6875 9.5000 0.26
Fourth Quarter, 2000...................................... 10.6250 9.3750 0.32
Dividends paid during 2000 and 1999 totaled $13.2 million and $11.2
million, respectively. Included in the $0.32 distribution for the fourth quarter
of 2000 was a special distribution of $0.06 attributable to the $1.53 million
termination fee received by the Company on account of General Cinema's
termination of its lease at Lake Mary. Future declaration of dividends will be
made by the Company at the discretion of the Board of Directors and will depend
upon the earnings of the Company, its financial condition and such other factors
as the Board of Directors deem relevant. In order to qualify for the beneficial
tax treatment accorded to real estate investment trusts under the Internal
Revenue Code of 1986, as amended (the "Code"), the Company is currently required
to make distributions to holders of its shares in an amount at least equal to
90% of the Company's "real estate investment trust taxable income," as defined
in Section 857 of the Code.
SALE OF UNREGISTERED SECURITIES
On November 17, 2000, the Company sold one million unregistered shares
of the Company's common stock to Alony Hetz Properties & Investments Ltd.
("Alony Hetz") at a price of $10.875 per share, resulting in net proceeds to the
Company of $10.875 million. The shares were issued to Alony Hetz pursuant to
exemptions from the registration requirements of the Securities Act of 1933
provided by Section 4(2) and Regulation D thereof. We exercised reasonable care
to assure that Alony Hetz did not purchase these shares with a view to their
distribution.
During 2000, we issued options to one officer to purchase 175,000
shares of our common stock at a price of $9.90 per share, and options to one
employee to purchase 50,000 shares of our common stock at a price of $10.00 per
share. These issuances were exempt from registration pursuant to the exemption
provided by Section 4(2) of the Securities Act of 1933.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
The summary consolidated financial data and balance sheet data set
forth below have been derived from the consolidated financial statements of the
Company, including the consolidated financial statements for the years ended
December 31, 1998, 1999 and 2000 contained elsewhere herein. The consolidated
financial statements as of and for the years ended December 31, 1996, 1997,
1998, 1999 and 2000 have been audited by Deloitte & Touche LLP, independent
auditors. The data set forth below should be read in conjunction with the
consolidated financial statements and related notes, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
20
YEAR ENDED DECEMBER 31,
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
STATEMENT OF OPERATIONS DATA:
Total revenues............................ $34,442 $30,977 $25,626 $20,545 $16,714
------- ------- ------- ------- -------
Operating expenses........................ 9,184 7,082 5,965 5,245 4,370
Depreciation and amortization............. 4,217 3,502 2,881 2,392 2,067
Interest expense.......................... 7,411 5,086 5,014 5,681 5,380
Put option expense........................ -- -- 1,320 -- --
General and administrative expenses....... 2,361 1,622 1,381 1,029 977
Minority interest in earnings of consolidated
subsidiary................................ -- 96 -- -- --
------- ------- ------- ------- -------
Total expenses............................ 23,173 17,388 16,561 14,347 12,794
------- ------- ------- ------- -------
Net income................................ $11,269 $13,589 $9,065 $6,198 $3,920
======= ======= ======= ======= =======
Basic earnings per share (1).............. $0.97 $1.26 $1.01 $0.96 $0.79
Diluted earnings per share (1)............ $0.95 $1.26 $1.00 $0.87 $0.69
BALANCE SHEET DATA:
Total rental properties, before accumulated
depreciation.............................. $243,062 $216,588 $148,087 $126,441 $106,706
Total assets.............................. 239,042 212,497 152,955 126,903 111,822
Mortgage notes payable.................... 121,675 97,752 67,145 71,004 66,831
Total liabilities......................... 134,788 121,068 71,737 73,323 68,727
Shareholders equity....................... 104,254 91,429 81,218 53,580 43,095
OTHER DATA:
EBITDA to interest coverage ratio (2)..... 3.1 3.6 3.1 2.5 2.1
Funds from operations (3)................. $15,542 $13,354 $10,598 $8,576 $5,957
Cash flows from:
Operating activities.................. 13,611 20,169 3,697 8,843 6,680
Investing activities.................. (19,201) (62,239) (23,824) (6,173) (18,277)
Financing activities.................. 5,485 40,903 19,123 (2,023) 12,778
GLA (thousand square feet) (at end of period) 3,169 2,836 2,078 2,004 1,807
Occupancy (at end of period).............. 95% 95% 95% 93% 91%
- -------------------------------------------------------------------------------
(1) Calculated in accordance with SFAS No. 128.
(2) EBITDA to interest coverage ratio is the ratio of earnings before
interest, taxes, depreciation and amortization ("EBITDA") to interest
expense including the amortization of deferred financing costs. The 1999
ratio excludes a $3,814 gain on the sale of real estate from EBITDA,
while the 1998 ratio excludes a $2,632 gain on the sale of real estate
and the $1,320 put option expense from EBITDA. EBITDA is not intended to
represent cash flow from operations and should not be considered as an
alternative to operating or net income computed in accordance with GAAP,
as an indicator of the Company's operating performance, as an
alternative to cash flows from operating activities (calculated in
accordance with GAAP) or as a measure of liquidity. The Company believes
that EBITDA is a fairly standard measure in our industry, commonly
reported and widely used by analysts and investors as a measure of
profitability for companies with significant depreciation, amortization
and non-cash expenditures. Similarly, the EBITDA to interest coverage
ratio is commonly used along with cash flows from operating activities
(calculated in accordance with GAAP) as a measure of a company's ability
to pay its current interest obligation. However, not all companies
calculate EBITDA using the same methods; therefore, the EBITDA figures
set forth above may not be comparable to EBITDA reported by other
companies.
(3) The Company defines funds from operations ("FFO") consistent with the
NAREIT definition as net income before gains (losses) on the sale of
real estate, extraordinary items and minority interest (as well as
expenses associated with minority interests), plus real estate
depreciation and amortization of capitalized leasing costs. Management
believes that FFO should be considered along with, but not as an
alternative to, net income as defined by generally accepted accounting
principles ("GAAP") as a measure of the Company's operating performance.
FFO does not represent cash generated from operating activities in
accordance with GAAP and is not necessarily indicative of funds
available to fund the Company's cash needs. The Company's calculation of
FFO may not be comparable to similarly titled measures reported by other
companies.
YEAR ENDED DECEMBER 31,
2000 1999* 1998* 1997* 1996*
-------- -------- ------- ------- -------
Net income..................... $ 11,269 $ 13,589 $ 9,065 $ 6,198 $ 3,920
Real estate depreciation and 4,253 3,483 2,845 2,378 2,037
amortization...................
Minority interest.............. -- 96 -- -- --
Interest on convertible 20 -- -- -- --
partnership units..............
Gain on sale of real estate.... -- (3,814) (2,632) -- --
Non-recurring extraordinary items -- -- 1,320 -- --
-------- -------- ------- ------- -------
FFO............................ $ 15,542 $13,354 $10,598 $ 8,576 $ 5,957
======== ======== ======= ======= =======
- ----------------------------------
* Restated to conform to NAREITs current FFO definition.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with "Selected Consolidated Financial Data" and the Company's consolidated
financial statements and the notes thereto, appearing elsewhere herein.
Certain statements made herein may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. For additional information, see "Forward-Looking
Statements", below.
The Company receives income primarily from rental revenue (including
expense recoveries from tenants) from the Existing Properties. As a result of
the Company's acquisition and redevelopment programs, the financial data shows
increases in total revenue from year to year, largely attributable to the
acquisitions of properties placed into operation during the year, and the
benefit of a full period of rental and other revenues for properties acquired or
placed into operation in the current or preceding year.
The following table sets forth for the years ended December 31, 2000,
1999 and 1998, respectively, information regarding the nature and composition of
the Company's revenues and expenses expressed as a percentage of the Company's
total revenues which are set forth in the consolidated financial statements
included elsewhere herein. For purposes of the following table, "Aggregate
minimum rental revenue" is the fixed base rental amount in effect throughout the
relevant periods. "Percentage rent" represents additional rent paid by tenants
based upon the achievement of certain specified levels of gross sales.
"Recoveries from tenants" are the tenants' share of real estate taxes, insurance
and common area maintenance expenses. The information set forth below presents
an analysis of certain trends relating to the components of the Company's
revenues and expenses:
YEAR ENDED DECEMBER 31,
2000 1999 1998
--------- ---------- ---------
Aggregate minimum rental revenue.......................... 77.85% 68.01% 68.25%
Percentage rent........................................... 0.92 0.55 0.45
Expense recoveries from tenants........................... 18.27 16.56 16.97
Gain on sale of real estate............................... -- 12.31 10.27
Other income.............................................. 2.96 2.57 4.06
----------- ----------- ------------
Total Revenues............................................ 100.00% 100.00% 100.00%
Operating expenses........................................ 26.67% 22.86% 23.28%
Depreciation and amortization............................. 12.24 11.30 11.24
Interest.................................................. 21.52 16.42 19.57
General and administrative expenses....................... 6.85 5.24 5.39
Put option expense........................................ -- -- 5.15
Minority interest in earnings of consolidated subsidiary.. -- 0.31 --
----------- ----------- ------------
Total costs and expenses.................................. 67.28% 56.13% 64.63%
----------- ----------- ------------
Net income................................................ 32.72% 43.87% 35.37%
=========== =========== ============
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Total revenues increased by approximately $3.4 million, or 11.2%, to
$34.4 million in 2000 from $31.0 million in 1999. This increase was primarily
the result of new revenues generated from the full year operation of four
properties that were acquired in 1999, which increased revenues by approximately
$4.5 million and from current year acquisitions of Mariners Crossing (September
2000) and Shoppes of North Port (December 2000) and the completion of two
development projects, phase one of Forest Village (April 2000) and phase two of
the Shops at Skylake (July 2000) which increased revenues by approximately $1.7
million. Additional sources of increased
22
revenue were a $1.1 million termination fee at Lake Mary, an increase in third
party management fees of $372,000, an increase in investment income of $42,000
and the remaining increase relating to the Company's existing properties of
$783,000. The revenue increase was offset by the loss of $1.2 million in rental
revenue relating to the sale of Four Corners (December 1999) and the $3.8
million gain from the sale of Four Corners reported in 1999.
Operating expenses increased by approximately $2.1 million, or 29.7% to
$9.2 million in 2000 from $7.1 million in 1999. The 2000 acquisitions and
completion of development projects discussed above resulted in operating
expenses increasing by approximately $371,000, and the 1999 acquisitions
discussed above resulted in a $1.7 million increase in operating expenses which
was offset by a reduction of $290,000 of operating expenses relating to the sale
of Four Corners. The remaining increase in operating expenses is attributable to
the existing properties.
Depreciation and amortization increased by approximately $715,000 or
20.4%, to $4.2 million in 2000 from $3.5 million in 1999 primarily as a result
of an increase in depreciable assets resulting from the Company's acquisitions
and completion of development projects discussed above.
Interest expense increased by approximately $2.3 million, or 45.7%, to
$7.4 million in 2000 from $5.1 million in 1999. The increase was primarily due
to the following factors: (i) mortgage interest increased by approximately $2.1
million primarily due to a net increase in mortgage loans during 2000 of $23.9
million relating to the acquisition of new properties, the completion of phase
one and phase two of the Shops at Skylake, and the September 1999 assumption of
the Pine Island mortgage of $26.3 million offset by mortgage amortization and
certain mortgage repayments, (ii) an increase in interest payable with respect
to the Company's line of credit of approximately $598,000, and (iii) an increase
of $373,000 to a total of approximately $2.2 million in capitalized interest
attributable to development projects which reduced interest expense.
General and administrative expenses increased by approximately
$739,000, or 45.6%, to $2.4 million in 2000 from $1.6 million in 1999. The
increase was primarily the result of managing the Company's growth, as
compensation costs increased by $748,000, director fees increased by $78,000 and
all other general administrative costs increased by $52,000, while professional
fees declined by $139,000. During 2000, direct costs (primarily payroll) of the
development department totaling $896,000 were capitalized, compared to $431,000
for the same period in 1999.
As a result of the foregoing, net income decreased by $2.3 million, or
17.1%, to $11.3 million in 2000 from $13.6 million in 1999, and FFO increased by
$2.1 million, or 16.4%, to $15.5 million in 2000 from $13.4 million in 1999.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Total revenues increased by approximately $5.4 million, or 20.9%, to
$31.0 million in 1999 from $25.6 million in 1998. This increase was primarily
the result of new revenues generated from acquisitions, a development property
completed and generating revenues and the gain on the sale of one of the
Company's properties. During 1999, the Company acquired the following
properties: Walden Woods (January 1999), Park Promenade (January 1999), Kmart
lease at Lantana Village (April 1999), Pine Island Plaza (August 1999), Ridge
Plaza (August 1999) and Mandarin Landing (December 1999). These acquisitions
contributed to the Company's increased revenues by approximately $3.8 million.
During 1998, the Company acquired the following properties that resulted in a
net increase in 1999 revenues of approximately $828,000: Summerlin Square (May
1998), a restaurant property (May 1998), Beauclerc Village (June 1998) and
Montclair Apartments (August 1998). The completion of phase one at the Shops at
Skylake in July 1999 contributed approximately $532,000 to the increase in
revenues. Finally, the gain on the December 1999 sale of Four Corners Shopping
Center of approximately $3.8 million exceeded the 1998 gain on the sale of
Parker Towne Center by approximately $1.2 million, but Parker Towne Center
provided approximately $782,000 of rental revenue in 1998 that was not provided
in 1999 resulting in a net increase of approximately $400,000.
Operating expenses increased by approximately $1.1 million, or 18.7%,
to $7.1 million in 1999 from $6.0 million in 1998. This increase was primarily
the result of new operating expenses generated from acquisitions and a
development property completed and generating operating expenses. The 1999
acquisitions discussed above resulted in operating expenses increasing by
approximately $1.0 million, and the 1998 acquisitions discussed above resulted
23
in a $182,000 increase in operating expenses which was offset by a reduction of
approximately $159,000 of operating expense relating to the sale of Parker Towne
Center. The remaining increase can be attributed to an increase in the operating
expenses of the Company's management subsidiary and a small decrease in the
operating expenses of existing properties.
Depreciation and amortization increased by approximately $621,000, or
21.6%, to $3.5 million in 1999 from $2.9 million in 1998 primarily as a result
of an increase in depreciable assets resulting from the Company's acquisitions
discussed above.
Interest expense increased by approximately $72,000, or 1.4%, to $5.1
million in 1999 from $5.0 million in 1998. The increase was primarily due to the
following factors: (i) a net increase of approximately $30.6 million in mortgage
notes that resulted in an increase in interest expense of approximately $1.0
million, (ii) an increase in interest payable with respect to the Company's line
of credit of approximately $431,000, (iii) an increase of $1.2 million to a
total of approximately $1.8 million in capitalized interest attributable to
development projects which reduced interest expense and (iv) a decline in the
interest expense on existing mortgage notes of approximately $161,000.
General and administrative expenses increased by approximately
$242,000, or 17.5%, to $1.6 million in 1999 from $1.4 million in 1998. The
increase was primarily the result of managing the Company's growth and of
absorbing the costs of operating as public company, as compensation costs
increased by $132,000 and printing and promotion increased by $145,000.
As a result of the foregoing, net income increased by $4.5 million, or
49.9%, to $13.6 million in 1999 from $9.1 million in 1998, and FFO increased by
$2.8 million, or 26.0%, to $13.4 million in 1999 from $10.6 million in 1998.
CASH FLOW
The net cash provided by operations of approximately $13.6 million for
the year ended December 31, 2000 included: (i) net income of $11.3 million, (ii)
adjustment for non-cash items of $4.8 million, and (iii) a net increase in
operating assets and liabilities of $2.4 million of which $4.3 million was an
escrow established in connection with the permanent financing of the Shops at
Skylake, compared to net cash provided by operations of approximately $20.2
million for the year ended December 31, 1999, which included (i) net income of
$13.6 million, (ii) adjustment for non-cash items reducing cash flow by $47,000,
and (iii) a decrease in operating assets and liabilities of $6.6 million of
which $6.8 million was related to the release of an escrow established in
connection with the sale of one of the Company's properties.
Net cash used in investing activities of approximately $19.2 million
for the year ended December 31, 2000 included: (i) the acquisition of two
Supermarket Centers for $12.8 million, (ii) funds expensed on five development
projects for $4.5 million, and (iii) additions to building improvements for $1.9
million, compared to cash used in investing activities of approximately $62.2
million for the year ended December 31, 1999 which included: (i) the acquisition
of five supermarket shopping centers, the acquisition of the Kmart lease and
building located at the Company's Lantana Village Shopping Center and completion
of phase one of the Shops at Skylake for a total of $62.0 million, (ii) the
purchase of undeveloped land for $3.6 million, (iii) construction and
development costs relating to phase two of the Shops at Skylake and phase one of
Forest Village for $4.2 million, and (iv) additions to building improvements for
$116,000, offset by $7.7 million for proceeds from the sale of Four Corners in
1999.
Net cash provided by financing activities of $5.5 million for the year
ended December 31, 2000 included (i) mortgage note payoffs of $2.5 million and
principal payments on mortgage notes of $4.3 million, (ii) borrowings under new
mortgage notes of $26.4 million, (iii) net reduction on the Credit Agreement and
other floating rate facilities of $15.2 million, (iv) cash dividends paid to
common stock shareholders of $13.2 million, (v) proceeds from the issuance of
stock under the Company's Dividend Reinvestment and Stock Purchase Plan of $3.5
million, (vi) the other stock issuances of $11.2 million which included $10.9
million from the sale of one million shares at a price of $10.875 per share to
Alony Hetz, and (vii) other miscellaneous uses of $336,000, compared to net cash
provided by financing activities of approximately $40.9 million for the year
ended December 31, 1999, which included: (i) a mortgage note payoff of $1.2
million and principal payments on mortgage notes of $2.3 million, (ii)
borrowings under new mortgage notes of $31.2 million, (iii) net borrowings under
the Credit Agreement of $18.9
24
million, (iv) cash dividends paid to common stock shareholders of $11.2 million,
(v) proceeds from the exercise of C-Warrants to purchase common stock of $8.2
million, (vi) payment to a former shareholder of $2.1 million upon the exercise
of his put options, and (vii) other miscellaneous uses of $661,000.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the principal sources of funding for the Company's
operations, including the renovation, expansion, development and acquisition of
the Existing Properties have been operating cash flows, the issuance of equity
securities and mortgage loans. The Company's principal demands for liquidity are
maintenance, repair and tenant improvements relating to the Existing Properties;
acquisitions and development activities; debt service and repayment obligations;
and distributions to its stockholders.
As of December 31, 2000, the Company had total mortgage indebtedness of
$121.7 million, all of which was fixed rate mortgage indebtedness bearing
interest at a weighted average annualized rate of 7.48% and collateralized by 20
of the Existing Properties.
The Company secured a $35.0 million credit agreement with City National
Bank of Florida on February 4, 1999 (the "Credit Agreement"). The Credit
Agreement accrues interest at 225 basis points over the thirty-day LIBOR rate,
payable monthly, adjusted every six months and matures February 4, 2002.
Advances under the Credit Agreement will be used to fund property acquisitions,
development activities and other Company activities. On October 16, 2000, the
limitation on advances under the Credit Agreement was set at approximately $20.6
million, with future increases conditioned on the posting of additional
collateral. As of December 31, 2000 the Credit Agreement was secured by
mortgages on a portion of the Shops at Skylake, and on East Bay Plaza, Beauclerc
Village, Mandarin Landing, Mandarin Mini-storage, Equity One Office Building and
Montclair Apartments. As of March 16, 2001, the outstanding balance under the
Credit Agreement had been reduced to $336,677 from $4.2 million as of December
31, 2000. In addition to the outstanding balance, the Credit Agreement has also
been used to provide a $1.0 million letter of credit in connection with the Pine
Island/Ridge Plaza financing and to support $0.4 million in escrows for property
taxes on the properties comprising the collateral. As of December 31, 2000, the
percentage of the total real estate cost of the Company's Existing Properties
that were encumbered by debt was 49.8%. None of the existing mortgages are
subject to cross default provisions of mortgages on other properties nor are any
cross-collateralized.
The terms of the Credit Agreement allow the lender to cease funding
and/or accelerate the maturity date if neither Mr. Katzman nor Mr. Valero
remains as the executives in control of the Company. The Credit Agreement also
limits the amount that can be borrowed for the purchase of vacant land and
contains other customary conditions and covenants, including, among other
things, the payment of commitment fees and the required delivery of various
title, insurance, zoning and environmental assurances on the secured properties,
and a prohibition on secondary financing on any of the secured properties.
On September 1, 2000, the Company announced that it had suspended its
Dividend Reinvestment and Stock Purchase Plan (the "Plan") in anticipation of
its future cash requirements. While it was operating in 2000, the Plan allowed
the Company's shareholders to reinvest all or a portion of their cash dividends
in additional shares of the Company's common stock and to purchase shares of the
Company's common stock.
On November 17, 2000, the Company closed the sale of one million shares
of the Company's common stock to Alony Hetz at a price of $10.875 per share. As
stipulated in the subscription agreement between Alony Hetz and the Company,
Alony Hetz is obligated to purchase and the Company is obligated to sell an
additional 925,000 shares on or before August 17, 2001 at a price of $10.875 per
share (the "Additional Alony Hetz Shares").
Development of the second phase of Forest Village, totaling
approximately 100,000 square feet has not commenced, but is anticipated to be
completed by 2003 at an estimated cost of $7.0 million. Development of phase
three of the Shops at Skylake, totaling approximately 105,000 square feet has
not commenced, but is anticipated to be completed by 2003 at an estimated cost
of $7.3 million. The Company expects to fund the costs of these development
projects from cash flow from operations, proceeds from the sale of the
Additional Alony Hetz Shares, borrowings under the Credit Agreement and other
sources of cash, including obtaining permanent debt on certain unencumbered
existing properties. Upon stabilization, the Company expects these developments
to have a positive effect on cash generated by operating activities and FFO.
25
The Company believes, based on currently proposed plans and assumptions
relating to its operations, that the Company's existing financial arrangements,
together with cash flows from operations, will be sufficient to satisfy its cash
requirements for a period of at least 12 months. In the event that the Company's
plans change, its assumptions change or prove to be inaccurate or cash flow from
operations or amounts available under existing financing arrangements prove to
be insufficient to fund the Company's expansion and development efforts, the
Company would be required to seek additional sources of financing. There can be
no assurance that any additional financing will be available to the Company on
acceptable terms, or at all. If adequate funds are not available, the Company's
business operations could be materially adversely affected.
During the year ended December 31, 2000, the Company declared quarterly
cash dividends of $0.26, $0.26, $0.26 and $0.32 per outstanding share of common
stock which were paid to shareholders of record on March 31, 2000, June 30,
2000, September 29, 2000 and December 29, 2000, respectively.
MORTGAGE INDEBTEDNESS
The following table sets forth certain information regarding mortgage
indebtedness of the Company related to the Existing Properties as of December
31, 2000 (dollars in thousands):
INTEREST PROJECTED INTEREST BALANCE DUE AT
RATE AMOUNT PAYMENTS FOR 2001 MATURITY DATE MATURITY
---------- --------- ------------------ ------------- --------------
NORTH FLORIDA
Atlantic Village........... 6.850% $ 4,738 $ 320 November 2018 $ 0
Commonwealth............... 7.000 3,062 211 February 2008 2,216
Fort Caroline.............. 9.350 2,174 200 March 2009 1,280
Oak Hill................... 7.625 2,183 164 January 2006 1,713
CENTRAL FLORIDA
Eustis Square.............. 9.000 4,716 415 July 2002 4,345
Forest Edge................ 6.900 1,745 117 October 2002 1,567
Lake Mary.................. 7.850 10,273 787 December 2010 2,419
Park Promenade............. 8.100 6,462 529 February 2010 5,834
Walden Woods............... 7.875 2,681 208 August 2006 2,071
FLORIDA WEST COAST
Mariners Crossing.......... 7.080 3,507 250 March 2008 3,154
Shoppes of North Port...... 6.650 4,363 288 September 2010 3,301
Summerlin Square........... 6.750 4,624 305 February 2014 0
SOUTH FLORIDA
Bird Ludlum................ 7.680 11,860 894 February 2015 0
Lantana.................... 6.950 4,082 280 February 2005 3,498
Pine Island/Ridge Plaza.... 6.910 25,881 1,804 July 2008 23,104
Plaza Del Rey.............. 8.125 2,521 199 September 2011 0
Point Royale............... 7.950 5,171 404 July 2010 2,502
Shops at Skylake........... 7.650 16,276 1,237 August 1, 2010 13,124
West Lakes................. 7.875 5,356 415 June 2016 130
TOTAL/WEIGHTED AVERAGE..... ----------- ------------- --------------- ---------------
7.480% $121,675 $9,027 $70,258
=========== ============= =============== ===============
The Company's mortgage indebtedness outstanding at December 31, 2000
will require balloon principal payments of approximately $5.9 million, $3.5
million, $3.8 million, $28.5 million, $1.3 million, $27.2 million and $130,000
in 2002, 2005, 2006, 2008, 2009, 2010, and 2016 respectively, in addition to
ongoing amortization payments throughout the terms of the mortgages. The Company
may not have sufficient funds on hand to repay these balloon amounts at
maturity. Therefore, the Company expects to refinance this indebtedness either
through additional mortgage financing secured by individual properties or groups
of properties, by unsecured private or public debt offerings or by additional
equity offerings.
26
In addition to the aforementioned mortgage indebtedness, the Company
had borrowed $4.2 million under the Credit Agreement as of December 31, 2000.
The outstanding balance had been reduced to $336,677 as of March 16, 2001.
INFLATION AND RECESSION CONSIDERATIONS
Most of the Company's leases contain provisions designed to partially
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rents based on a tenants gross sales
above predetermined levels, which sales generally increase as prices rise, or
escalation clauses which are typically related to increases in the Consumer
Price Index or similar inflation indices. Most of the Company's leases require
the tenant to pay its share of operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
The Company's financial results are affected by general economic
conditions in the markets in which its properties are located. An economic
recession, or other adverse changes in general or local economic conditions
could result in the inability of some existing tenants of the Company to meet
their lease obligations and could otherwise adversely affect the Company's
ability to attract or retain tenants. Supermarket and Other Anchor Tenants and
drugstore tenants that offer day-to-day necessities rather than luxury items
anchor the Existing Properties. These types of tenants, in the experience of the
Company, generally maintain more consistent sales performance during periods of
adverse economic conditions.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Such forward-looking statements include
statements regarding the intent, belief or current expectations of the Company
and its management and involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following: maintaining REIT status,
general economic and business conditions, which will, among other things, affect
the demand for retail space or retail goods, availability and creditworthiness
of prospective tenants, lease rents and the terms and availability of financing;
adverse changes in the real estate markets including, among other things,
competition with other companies; risks of real estate markets including,
development and acquisition; governmental actions and initiatives; and
environment/safety requirements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary market risk to which the Company has exposure is interest
rate risk. Changes in interest rates can affect the Company's net income and
cash flows. As changes in market conditions occur, interest rates can either
increase or decrease, and interest expense from the variable component of the
Company's debt balances will move in the same direction. With respect to its
investment portfolio, changes in interest rates generally do not affect the
Company's interest income as its investments are predominantly in equity
securities. With respect to its mortgage notes payable, changes in interest
rates generally do not affect the Company's interest expense as its mortgage
notes payable are predominantly at a fixed-rate, for extended terms, and would
be unaffected by any sudden change in interest rates. The Company's possible
risk is from increases in long-term real estate mortgage rates that may occur
over a decade or more, as this may decrease the overall value of real estate.
Because the Company has the intent to hold its existing mortgages to maturity
(or until the sale of the Property), there is believed to be no interest rate
market risk on the Company's results of operations or its working capital
position. The Company estimates the fair value of its long term, fixed rate
mortgage loans generally using discounted cash flow analysis based on current
borrowing rates for similar types of debt. At December 31, 2000, the fair value
of the mortgage loans was estimated to be $124.2 million compared to a carrying
value amount of $121.7 million.
If the weighted average interest rate on the Company's fixed rate debt
were 100 basis points higher or lower, the fair market value would be $117.7
million and $131.2 million, respectively.
27
If the weighted average interest rate on the Company's variable rate
debt were 100 basis points higher or lower, annual interest expense would be
increased or decreased by approximately $42,000, based on the Company's
variable rate debt balance on December 31, 2000.
The Company's objective in managing its exposure to interest rate
changes is to limit the impact of interest rate changes on earnings and cash
flows. The Company may use a variety of financial instruments to reduce its
interest rate risk, including interest rate swap agreements whereby the Company
exchanges its variable interest costs on a defined amount of principal for
another party's obligation to pay fixed interest on the same amount of
principal, or interest rate caps, which will set a ceiling on the maximum
variable interest rate the Company will incur on the amount of debt subject to
the cap and for the time period specified in the interest rate cap. At the
present time, the Company has not executed or entered into any such financial
instruments and has no material market risk sensitive instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation
S-X are included in this Annual Report on Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
Certain information required by Part III is omitted from this report
since the Company plans to file with the Securities and Exchange Commission a
definitive proxy statement for its 2001 Annual Meeting of Stockholders (the
"Proxy Statement") no later than 120 days after the end of the fiscal year
covered by this Form 10-K, and certain information included therein is
incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the Company's definitive proxy statement
to be filed within 120 days after the end of the Registrants fiscal year,
covered by this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Company's definitive proxy statement
to be filed within 120 days after the end of the Registrants fiscal year,
covered by this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Company's definitive proxy statement
to be filed within 120 days after the end of the Registrants fiscal year,
covered by this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Company's definitive proxy statement
to be filed within 120 days after the end of the Registrants fiscal year,
covered by this Form 10-K.
28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following consolidated financial information is included
as a separate section of this Form 10-K:
1. Financial Statements:
PAGE
----
Independent Auditors Report........................................... F-1
Balance Sheets........................................................ F-2
Statements of Operations.............................................. F-4
Statements of Stockholders Equity..................................... F-6
Statements of Cash Flows.............................................. F-7
Notes to Financial Statements......................................... F-9
2. Report of Deloitte & Touche LLP, Independent Auditors................. S-1
Schedule III - Real Estate Investments and Accumulated Depreciation... S-2
Schedules I, II, IV and V are not required to be filed.
3. Exhibits:
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Articles of Amendment and Restatement of the Company. (Exhibit 3.1; Amendment No. 5) (1)
3.2 Amended and Restated Bylaws of the Company. (Exhibit 3.2; Amendment No. 5) (1)
10.1 Form of Indemnification Agreement. (Exhibit 10.1; Amendment No. 2) (1)
10.2 Employment Agreement, dated as of January 1, 1996 by and between the Company and Chaim Katzman.
(Exhibit 10.2; Amendment No. 2) (1)
10.3 Employment Agreement, dated as of January 1, 1996 by and between the Company and Doron Valero.
(Exhibit 10.3; Amendment No. 2) (1)
10.4 1995 Stock Option Plan, as amended. (2)
10.5 Registration Rights Agreement, dated as of January 1, 1996 by and among the Company, Chaim
Katzman, Gazit Holdings, Inc., Dan Overseas Ltd., Globe Reit Investments, Ltd., Eli Makavy,
Doron Valero and David Wulkan, as amended. (Exhibit 10.6, Amendment No. 3)
10.6 Stock Pledge Agreement, dated June 17, 1996, by and between Chaim Katzman and the Company.
(Exhibit 10.7; Amendment No. 2) (1)
10.7 Promissory Note, in the amount of $1,128,750 from Chaim Katzman payable to the Company.
(Exhibit 10.8; Amendment No. 3) (1)
10.8 Stock Pledge Agreement, dated December 30, 1996, by and between the Company and Doron Valero.
(Exhibit 10.9; Amendment No. 2) (1)
10.9 Promissory Note, in the amount of $396,000 from Doron Valero payable to the Company. (Exhibit
10.10; Amendment No. 3) (1)
10.10 Use Agreement, regarding use of facilities, by and between Gazit (1995), Inc. and the Company,
dated January 1, 1996. (1)
10.11 Master Credit Agreement, dated February 4, 1999, by and between the Company and City National
Bank of Florida. (Exhibit 10.33) (3)
10.12 Agreement for Purchase and Sale, dated June 8, 1999 between the Company and Pine Island
Commons, Ltd. (Exhibit 10.35)(4)
10.13 2000 Executive Incentive Plan. (5)
10.14 First Amended Employment Agreement dated April 6, 2000 between Howard Sipzner and the Company. (6)
21.1 List of Subsidiaries of Registrant. (6)
23.1 Consent of Deloitte & Touche LLP, Certified Public Accountants. (6)
29
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
last quarter of the period covered by this report.
- --------------------------------------------------------------------------------
(1) Previously filed with the Company's Registration Statement on Form S-11
(Registration No. 333-3397) and incorporated herein by reference.
(2) Previously filed with the Company's Schedule 14A for the Annual Meeting
of the Stockholders held on June 30, 1999, and incorporated herein by
reference.
(3) Previously filed with the Company's Form 10-Q for the quarterly period
ended March 31, 1999, and incorporated herein by reference.
(4) Previously filed with the Company's Form 8-K dated August 26, 1999, and
incorporated herein by reference.
(5) Previously filed with the Company's Schedule 14A for the Annual Meeting
of the Stockholders held on June 23, 2000, and incorporated herein by
reference.
(6) Previously filed with the Company's Form 10-K405/A filed on April 20,
2001, and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EQUITY ONE, INC.
Date: July 26, 2001 BY: /s/ CHAIM KATZMAN
--------------------------
Chaim Katzman
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities, and on the dates indicated.
SIGNATURE TITLE DATE
- ---------------------- ------------------------------------- ----
/s/ CHAIM KATZMAN Chairman of the Board and July 26, 2001
- ------------------------------- Chief Executive Officer
Chaim Katzman (Principal Executive Officer)
/s/ DORON VALERO President, Chief Operating Officer July 26, 2001
- ------------------------------- and Director
Doron Valero
/s/ HOWARD M. SIPZNER Treasurer and Chief Financial Officer July 26, 2001
- ------------------------------- (Principal Financial Officer)
Howard M. Sipzner
/s/ NOAM BEN OZER Director July 26, 2001
- -------------------------------
Noam Ben Ozer
/s/ DR. SHAIY PILPEL Director July 26, 2001
- -------------------------------
Dr. Shaiy Pilpel
/s/ ROBERT COONEY Director July 26, 2001
- -------------------------------
Robert Cooney
/s/ RONALD CHASE Director July 26, 2001
- -------------------------------
Ronald Chase
/s/ DORI SEGAL Director July 26, 2001
- -------------------------------
Dori Segal
/s/ NATHAN HETZ Director July 26, 2001
- -------------------------------
Nathan Hetz
/s/ PETER LINNEMAN Director July 26, 2001
- -------------------------------
Peter Linneman
30
EQUITY ONE, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,
2000 1999 AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME,
STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 2000, 1999 AND 1998 AND
INDEPENDENT AUDITORS' REPORT
EQUITY ONE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
----
INDEPENDENT AUDITORS' REPORT F-1
Consolidated balance sheets, as of December 31, 2000
and 1999, and the related consolidated statements
of operations, comprehensive income, stockholders' equity and cash flows for
the years ended December 31, 2000, 1999 and 1998:
Consolidated Balance Sheets F-2 - F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Comprehensive Income F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7 - F-8
Notes to the Consolidated Financial Statements F-9 - F-24
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Equity One, Inc.:
We have audited the accompanying consolidated balance sheets of Equity One, Inc.
and subsidiaries (the "Company") as of December 31, 2000 and 1999, and the
related consolidated statements of operations, comprehensive income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2000
and 1999 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
February 21, 2001
F-1
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999 (IN THOUSANDS EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
2000 1999
--------- ---------
ASSETS
RENTAL PROPERTY (Notes 1, 4):
Land, buildings, and equipment $ 216,698 $ 186,154
Building improvements 8,228 6,311
Land held for development 11,008 15,401
Construction in progress 7,128 8,722
--------- ---------
Total rental property 243,062 216,588
Less: accumulated depreciation (15,836) (11,669)
--------- ---------
Rental property, net 227,226 204,919
CASH AND CASH EQUIVALENTS (Note 1) 322 427
RESTRICTED CASH (Note 1) 4,273 --
SECURITIES AVAILABLE FOR SALE (Notes 1, 2) 1,403 1,218
ACCOUNTS AND OTHER RECEIVABLES (net of allowance for doubtful
accounts of $228 and $176 for 2000 and 1999, respectively) (Note 3) 2,234 2,209
DUE FROM RELATED PARTIES (Note 12) 47 33
DEPOSITS (Note 1) 822 707
PREPAID AND OTHER ASSETS 667 567
DEFERRED EXPENSES (net of accumulated amortization of
$938 and $429 for 2000 and 1999, respectively) (Note 1) 1,404 1,723
GOODWILL (net of accumulated amortization of $348 and
$298 for 2000 and 1999, respectively) (Note 1) 644 694
--------- ---------
TOTAL $ 239,042 $ 212,497
========= =========
F-2
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999 (In Thousands Except Share Data)
- --------------------------------------------------------------------------------
2000 1999
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 2,857 $ 1,330
Deferred rental income 662 248
Credit agreement (Note 5) 4,243 19,475
Mortgage notes payable (Notes 1, 5) 121,675 97,752
Tenants' security deposits 1,476 1,274
Minority interest in equity of consolidated subsidiary (Note 1) 3,875 989
--------- ---------
Total liabilities 134,788 121,068
--------- ---------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 9)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value - 5,000,000 shares authorized
but unissued (Note 6)
Common stock, $0.01 par value - 40,000,000 shares authorized, 12,785,645 and
11,299,222 shares issued and outstanding for
2000 and 1999, respectively (Note 6) 128 113
Additional paid-in capital 105,368 89,990
Retained earnings 423 2,390
Accumulated other comprehensive income (311) (519)
Unamortized restricted stock compensation and notes receivable (1,354) (545)
--------- ---------
Total stockholders' equity 104,254 91,429
--------- ---------
TOTAL $ 239,042 $ 212,497
========= =========
(Concluded)
See accompanying notes to the consolidated financial statements.
F-3
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND
1998 (In Thousands Except Per Share Amounts)
- --------------------------------------------------------------------------------
2000 1999 1998
-------- -------- --------
RENTAL INCOME (Notes 1, 9) $ 33,424 $ 26,559 $ 22,454
-------- -------- --------
MANAGEMENT FEES 635 263 144
-------- -------- --------
INVESTMENT REVENUE:
Interest 230 98 162
Dividends 153 243 234
-------- -------- --------
Total investment revenue 383 341 396
-------- -------- --------
Total revenues 34,442 27,163 22,994
-------- -------- --------
COSTS AND EXPENSES:
Operating expenses (Note 10) 9,184 7,082 5,965
Depreciation (Notes 1, 4) 4,167 3,452 2,831
Interest (Note 5) 7,411 5,086 5,014
Put option expense (Note 6) -- -- 1,320
General and administrative expenses (Notes 11, 12) 2,361 1,622 1,381
Amortization expense - goodwill 50 50 50
-------- -------- --------
Total costs and expenses 23,173 17,292 16,561
-------- -------- --------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE AND MINORITY
INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARY 11,269 9,871 6,433
GAIN ON SALE OF REAL ESTATE -- 3,814 2,632
MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARY -- (96) --
-------- -------- --------
NET INCOME $ 11,269 $ 13,589 $ 9,065
======== ======== ========
EARNINGS PER SHARE (Notes 1, 8):
BASIC EARNINGS PER SHARE $ 0.97 $ 1.26 $ 1.01
======== ======== ========
NUMBER OF SHARES USED IN COMPUTING
BASIC EARNINGS PER SHARE 11,651 10,805 8,979
======== ======== ========
DILUTED EARNINGS PER SHARE $ 0.95 $ 1.26 $ 1.00
======== ======== ========
NUMBER OF SHARES USED IN COMPUTING
DILUTED EARNINGS PER SHARE 11,886 10,901 9,074
======== ======== ========
See accompanying notes to the consolidated financial statements.
F-4
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
- -------------------------------------------------------------------------------
2000 1999 1998
-------- -------- --------
NET INCOME $ 11,269 $ 13,589 $ 9,065
-------- -------- --------
OTHER COMPREHENSIVE INCOME -
Net unrealized holding gain (loss) on securities
available for sale 208 (421) (98)
Total 208 (421) (98)
COMPREHENSIVE INCOME $ 11,477 $ 13,168 $ 8,967
======== ======== ========
See accompanying notes to the consolidated financial statements.
F-5
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------
UNAMORTIZED
RESTRICTED
ACCUMULATED STOCK TOTAL
ADDITIONAL OTHER COMPENSATION STOCK-
COMMON PAID-IN RETAINED COMPREHENSIVE AND NOTES HOLDERS'
STOCK CAPITAL EARNINGS INCOME RECEIVABLE EQUITY
--------- ---------- ---------- ------------- ------------ ---------
BALANCE,
DECEMBER 31, 1997 $ 69 $ 55,036 $ -- $ -- $ (1,525) $ 53,580
Issuance of common stock 33 34,088 34,121
Stock issuance costs (1,087) (1,087)
Put option liability (Note 6) (807) (807)
Property and notes receivable
distributed (4,758) 1,525 (3,233)
Net income 9,065 9,065
Dividends paid (8,973) (8,973)
Distribution to stockholders -
exercise of land purchase
options (Note 4) (1,258) (92) (1,350)
Net unrealized holding loss on
securities available for sale (98) (98)
--------- --------- --------- --------- --------- ---------
BALANCE,
DECEMBER 31, 1998 102 81,214 -- (98) -- 81,218
Issuance of common stock 11 8,737 8,748
Notes receivable from issuance
of common stock (545) (545)
Stock issuance cost 39 39
Net income 13,589 13,589
Dividends paid (11,199) (11,199)
Net unrealized holding loss on
securities available for sale (421) (421)
--------- --------- --------- --------- --------- ---------
BALANCE,
DECEMBER 31, 1999 113 89,990 2,390 (519) (545) 91,429
Issuance of common stock 15 15,530 (809) 14,736
Stock issuance cost (152) (152)
Net income 11,269 11,269
Dividends paid (13,236) (13,236)
Net unrealized holding gain on
securities available for sale 208 208
--------- --------- --------- --------- --------- ---------
BALANCE,
DECEMBER 31, 2000 $ 128 $ 105,368 $ 423 $ (311) $ (1,354) $ 104,254
========= ========= ========= ========= ========= =========
See accompanying notes to the consolidated financial statements.
F-6
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (In Thousands)
- --------------------------------------------------------------------------------
2000 1999 1998
-------- -------- --------
OPERATING ACTIVITIES:
Net income $ 11,269 $ 13,589 $ 9,065
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 4,726 3,607 3,072
Provision for losses on accounts receivable 52 64 84
Gain on sale of real estate -- (3,814) (2,632)
Put option expense -- -- 1,320
Minority interest in earnings of consolidated subsidiary -- 96 --
Changes in assets and liabilities:
Restricted cash (4,273) 6,780 (6,780)
Accounts and other receivables (77) (1,072) (357)
Deposits (115) (178) 114
Prepaid and other assets (100) 104 (261)
Accounts payable and accrued expenses 1,527 452 19
Deferred rental income 414 96 (122)
Tenants' security deposits 202 439 166
Due from related party (14) 6 9
-------- -------- --------
Net cash provided by operating activities 13,611 20,169 3,697
-------- -------- --------
INVESTING ACTIVITIES:
Addition to rental property (19,224) (69,949) (29,574)
Sale of rental property -- 7,716 6,740
Purchases of securities (44) (4,733) (1,715)
Sales and prepayments of securities 67 4,727 29
Change in deposits for acquisition of rental property -- -- 696
-------- -------- --------
Net cash used in investing activities (19,201) (62,239) (23,824)
-------- -------- --------
FINANCING ACTIVITIES:
Repayments of mortgage notes payable (6,813) (3,462) (16,559)
Borrowings under mortgage notes payable 26,366 31,234 12,700
Borrowings under note payable (15,232) 18,915 560
Deferred financing expenses (190) (628) (513)
Stock subscription and issuance 14,736 8,203 34,121
Stock issuance costs (152) 39 (863)
Cash dividends paid to stockholders (13,236) (11,199) (8,973)
Distribution to stockholders -- -- (1,350)
Payment of put option -- (2,127) --
Change in minority interest 6 (72) --
-------- -------- --------
Net cash provided by financing activities 5,485 40,903 19,123
-------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (105) (1,167) (1,004)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 427 1,594 2,598
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 322 $ 427 $ 1,594
======== ======== ========
(Continued)
F-7
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (In Thousands)
- -------------------------------------------------------------------------------
2000 1999 1998
------- ------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest, net of amount capitalized $ 7,080 $ 4,780 $ 4,769
======= ======= =======
SUPPLEMENTAL SCHEDULE OF CASH AND
NONCASH INVESTING AND FINANCING ACTIVITIES:
Change in unrealized holding (loss) gain on securities available for sale $ 208 $ (421) $ (98)
======= ======= =======
Issuance of restricted stock $ 1,208
=======
Common stock issued for notes receivable $ 545
=====
Put option liability charged to stockholders' equity $ 807
=======
Property and notes receivable distributed to stockholders $ 4,758
=======
Acquisition of rental property $ 7,250 $ 3,800
Change in minority interest 2,880 965
------- -------
Assumption of mortgage note payable $ 4,370 $ 2,835
======= =======
(Concluded)
See accompanying notes to the consolidated financial statements.
F-8
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - Equity One, Inc. (the "Company") was incorporated in Maryland on
June 15, 1992, as a wholly-owned subsidiary of Gazit Holdings, Inc., a
wholly-owned subsidiary of Gazit, Inc. During 1996, as a result of a
merger, Gazit Holdings, Inc. transferred all of its stock ownership to
Gazit (1995), Inc. ("Gazit"), a wholly-owned subsidiary of Gazit, Inc.
(see Note 6). Since 1993, additional shares of stock were issued to both
affiliated and unaffiliated entities. As of December 31, 2000 (and
pursuant to a transfer of interests between Gazit, Inc. and Gazit-Globe
(1982) Ltd. ("Globe") whereby Gazit became a wholly-owned subsidiary of
Globe), Globe's holdings (directly and indirectly) in the Company
approximated 63.9%. The Company was formed for the purpose of holding
various real estate subsidiaries located in the United States of America
("U.S." or "United States").
The Company completed its Initial Public Offering ("IPO") on May 19, 1998
of 4,700,000 common shares, $0.01 par value per share. Of the shares sold
in the offering, 3,330,398 shares, generating net proceeds of
approximately $33,500, were sold by the Company and 1,369,602 shares were
sold by a stockholder of the Company. All of the common shares were sold
at $11.00 per share.
The Company currently owns and operates thirty-one properties in Florida.
Winn-Dixie Stores Inc. and Publix Supermarkets, Inc. rent approximately
14.5% and 12.4% of the total rentable square footage, respectively.
BASIS OF CONSOLIDATION - The consolidated financial statements include the
accounts of Equity One, Inc. and its wholly-owned subsidiaries. All
subsidiaries hereinafter are referred to as "the consolidated companies."
All intercompany transactions have been eliminated.
MINORITY INTEREST - On January 1, 1999, a wholly-owned subsidiary of the
Company, Equity One (Walden Woods) Inc., entered into a limited
partnership as a general partner. An income producing shopping center
("Walden Woods Village") was contributed by its owners (the "Minority
Partners") and the Company contributed 93,656 shares of common stock to
the limited partnership at an agreed-upon price of $10.30 per share. Based
on this per share price and the net value of property contributed by the
Minority Partners, each of the partners received 93,656 limited
partnership units. The Company and the Minority Partners have entered into
a Redemption Agreement whereby the Minority Partners can request that the
Company purchase either their limited partnership units or any shares of
common stock which they have received in exchange for their limited
partnership units at a price of $10.30 per unit or per share no earlier
than two years nor later than fifteen years after the exchange date of
January 1, 1999. As a result of the Redemption Agreement, the minority
interest has been presented as a liability. In addition, under the terms
of the limited partnership agreement, the Minority Partners do not have an
interest in the common stock of the Company except to the extent of
dividends declared on such common stock. Accordingly, a preference in
earnings has been allocated to the Minority Partners to the extent of the
dividends declared.
On December 5, 2000, a wholly-owned subsidiary of the Company, Equity One
(North Port), Inc., entered into a limited partnership (the "Shoppes of
North Port, Ltd.") as a general partner. An income
F-9
producing shopping center ("Shoppes of North Port") was contributed by its
owners (the "North Port Minority Partners") and the Company contributed an
income producing property to a limited liability company wholly owned by
the Shoppes of North Port, Ltd. Both the North Port Minority Partners and
the general partner were issued partnership operating units ("OPU") based
on the net value of the properties contributed. The North Port Minority
Partners received 261,850 OPU which can be redeemed for the Company's
common stock on a one-for-one basis or cash at an agreed upon price of
$11.00 per share no earlier than December 10, 2001, nor later than three
and one half years thereafter. As a result of the Redemption Agreement,
the minority interest has been presented as a liability in the
accompanying consolidated balance sheet. The North Port Minority Partners
are to receive a preferred quarterly distribution equal to a 9.0% annual
return on their initial capital contribution. The amount is reflected as
interest expense in the consolidated financial statements.
The shares of the Company held by the consolidated limited partnership are
not considered outstanding in the consolidated financial statements.
CASH AND CASH EQUIVALENTS - For purposes of the statements of cash flows,
the Company considers cash and investments with an initial maturity of
three months or less to be cash equivalents.
RESTRICTED CASH - The Skylake loan agreement dated July 6, 2000 in the
amount of $16.4 million required a rental achievement holdback of $6.5
million. During 2000, $2.2 million was released leaving a balance at
December 31, 2000 of $4.3 million. Based on executed leases to date, it is
anticipated that $2.6 million will be released April 2001 and the
remaining balance released in the third quarter of 2001.
INVESTMENT SECURITIES - As of December 31, 2000 and 1999, all of the
Company's securities are classified as securities available for sale and
are carried at fair value. Unrealized gains and losses are reported as a
separate component of stockholders' equity in accumulated other
comprehensive income until realized.
DEPOSITS - Deposits are comprised of funds held by various institutions
for future payments of taxes and insurance, utility and other service
deposits and deposits for acquisition of rental property.
RENTAL PROPERTY - Rental property is stated at cost. Major renewals and
betterments are capitalized. Maintenance, repairs and minor renewals are
charged to operating expense as incurred. Depreciation is provided for
using the straight-line method over the estimated useful lives of the
assets which range from 5 to 40 years, except for building improvements
related to leasehold improvements which are depreciated over the lesser of
the assets' estimated useful lives or the terms of the related leases.
LAND HELD FOR DEVELOPMENT - Land held for development is stated at cost.
Interest, real estate taxes and other costs directly related to the
properties and projects under development are capitalized until the
property is ready for its intended use. Similar costs related to
properties not under development are expensed as incurred.
LONG-LIVED ASSETS - The Company's long-lived assets, such as property,
land held for development, certain identifiable intangibles, and goodwill
related to those assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amounts of an asset may not be recoverable. The Company periodically
assesses the recoverability of the long-lived assets based on its
expectations of future profitability and undiscounted cash flow of the
related operations. These factors, along with management's plans with
respect to the operations, are considered in assessing the recoverability
of long-lived assets. If the Company determines, based on such measures,
that the carrying amount is impaired, the long-lived assets will be
written down to its recoverable value
F-10
with a corresponding charge to earnings. During the periods presented, no
such impairment was incurred.
DEFERRED EXPENSES - Deferred expenses consist of loan origination and
other fees directly related to rental property financing with third
parties. The fees are being amortized using the straight-line method over
the term of the notes, ranging from 3 to 20 years.
GOODWILL - Goodwill arising from the excess of cost over fair value of net
assets acquired in the acquisition of Global Realty and Management, Inc.
is amortized on a straight-line basis over a period of 20 years.
Amortization expense amounted to $50 for each of the years ended December
31, 2000, 1999 and 1998.
RENTAL INCOME - Rental income is comprised of minimum rent, expense
reimbursements and contingent rents. Contingent rents are generally
received from tenants based on their gross sales. Rental income is accrued
as earned. When rental payments due under leases vary from a straight-line
basis because of free rent periods or stepped increases, income is
recognized on a straight-line basis in accordance with generally accepted
accounting principles. Expense reimbursements consists of recoveries from
tenants for taxes, insurance and other property operating expenses.
Expense reimbursements are recognized in the period in which the
applicable costs are incurred. Contingent rents which consist of rental
income based on a tenant's revenues exceeding certain thresholds is
accrued when a tenant reports revenues exceeding the established
thresholds. For the years ended December 31, 2000, 1999 and 1998,
contingent rents recognized by the Company were approximately $317, $169
and $127, respectively.
MANAGEMENT FEES - Management fees consist of fees earned in connection
with certain third-party leasing activities and with asset and property
management agreements between Centrefund Raelty (U.S.) Corporation and
Equity One Realty & Management Inc., our wholly owned subsidiary. Under
the asset and property management agreements between Centrefund Realty
(U.S.) Corporation and Equity One Realty & Management Inc., the management
fees are based on a fixed percentage of either the net book value of the
properties under asset management or of the revenues collected from
tenants in properties under property management. Management fees are
recognized when earned.
INCOME TAXES - There is no provision for income tax expense as a result of
the Company changing to real estate investment trust ("REIT") status
effective January 1, 1995. The Company is not taxed on its taxable
operating income if it distributes such income to stockholders in
conformity with the requirements of the Internal Revenue Code and meets
certain other requirements. Company management is of the opinion that they
are complying with the requirements of REIT status; and hence starting
from January 1, 1995, the Company is a REIT for income tax purposes. The
Company intends to continue to meet such requirements and distribute any
of its future taxable operating income in conformity with such
requirements. Distributed capital gains on sales of real estate are not
subject to tax; however, undistributed capital gains are taxed as capital
gain.
SEGMENT INFORMATION - The Company operates in one reportable segment as an
owner and operator of commercial rental properties. Rental operations are
provided to tenants through the Company's properties located in Florida.
Each of these properties provides management with monthly financial
statements. All of the properties have been aggregated into one reporting
segment due to their similar tenant and operating characteristics.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets
F-11
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. The effective date of this statement,
as amended by SFAS No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES - DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT NO.
133 - AN AMENDMENT OF FASB STATEMENT NO. 133, is for fiscal years
beginning after June 15, 2000. SFAS No. 133 requires the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, a change in
the fair value of the derivative will either be offset against the change
in the fair value of the hedged asset, liability or firm commitment
through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. The Company adopted SFAS No. 133 on
January 1, 2001. The adoption of SFAS No. 133 had no effect on the
Company's results of operations or financial position.
In December 1999, the Securities and Exchange Commission published STAFF
ACCOUNTING BULLETIN ("SAB") NO. 101 which summarizes its views in applying
generally accepted accounting principles to revenue recognition in the
financial statements. The adoption of SAB No. 101 did not have a material
impact on the Company's consolidated financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values of
financial instruments have been determined by the Company using available
market information and appropriate valuation methods. Considerable
judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methods may have a material effect on the estimated fair value
amounts. The Company has used the following market assumptions and/or
estimation methods:
CASH AND CASH EQUIVALENTS - The carrying amounts reported in the
consolidated balance sheets are reasonable estimates of fair value.
INVESTMENT SECURITIES - Fair values are based on quoted market
prices, dealer quotes, and independent pricing services. The
carrying value approximates fair value due to the nature of the
investments.
MORTGAGE NOTES PAYABLE - The estimated fair value at December 31,
2000 and 1999 was $124,154 and $94,339, respectively, calculated
based on the net present value of payments over the term of the
notes using estimated market rates for similar notes payable.
RECLASSIFICATION - Certain prior year amounts have been reclassified to
conform with the 2000 financial presentation.
F-12
2. SECURITIES AVAILABLE FOR SALE
Composition in the consolidated balance sheets:
2000 1999
------ ------
Equity securities $1,403 $1,218
====== ======
As of December 31, 2000 and 1999, gross unrealized gains were $208 and $0,
respectively, and gross unrealized losses were $0 and $421, respectively.
For the years ended December 31, 2000, 1999 and 1998, the Company had
gross securities sales of $67, $4,710 and $0, resulting in gross realized
gains of $0, $0 and $0, and gross realized losses of $0, $0 and $0,
respectively.
3. ACCOUNTS AND OTHER RECEIVABLES
Composition in the consolidated balance sheets:
2000 1999
------- -------
Tenants $ 2,020 $ 2,278
Accrued interest and dividends receivable - institutions 35 48
Employee loans and advances 64 59
Accrued asset management fee 343 --
Allowance for doubtful accounts (228) (176)
------- -------
Total $ 2,234 $ 2,209
======= =======
F-13
4. RENTAL PROPERTY
Composition in the consolidated balance sheets:
LAND LAND,
HELD BUILDINGS CONSTRUCTION
FOR AND BUILDING IN
COST DEVELOPMENT EQUIPMENT IMPROVEMENTS PROGRESS TOTAL
Balance at beginning of year $ 15,401 $ 186,154 $ 6,311 $ 8,722 $ 216,588
Additions in the reporting year 207 30,544 1,917 13,667 46,335
Dispositions in reporting year (4,600) (15,261) (19,861)
--------- --------- --------- --------- ---------
Balance at end of year 11,008 216,698 8,228 7,128 243,062
--------- --------- --------- --------- ---------
ACCUMULATED DEPRECIATION
Balance at beginning of year 10,564 1,105 11,669
Depreciation for the year 3,591 576 4,167
Reduction of depreciation
Balance at end of year 14,155 1,681 15,836
--------- --------- --------- --------- ---------
Undepreciated balance
as of December 31, 2000 $ 11,008 $ 202,543 $ 6,547 $ 7,128 $ 227,226
========= ========= ========= ========= =========
Undepreciated balance
as of December 31, 1999 $ 15,401 $ 175,590 $ 5,206 $ 8,722 $ 204,919
========= ========= ========= ========= =========
Certain of the Company's rental property serves as collateral to recourse
mortgage notes payable totaling $121,675 and $97,752 as of December 31,
2000 and 1999, respectively (see Note 5).
Assets are depreciated on a straight-line basis, based on the following
annual percentages:
Buildings 2.50% - 3.33%
Building/leasehold improvements 2.50% - 20.00%
Equipment 14.00% - 20.00%
F-14
5. NOTES PAYABLE
Composition in the consolidated balance sheets:
2000 1999
------- -------
LONG-TERM MORTGAGES PAYABLE
Mortgage payable, 6.85%, payable in monthly
installments of $38 including interest, unpaid
balance due November 1, 2018,
collateralized by rental property.
(Financed through an Insurance Company) $ 4,738 $ 4,869
Mortgage payable, 7.68%, through February 15, 2015
payable in monthly installments of $115 including
interest, unpaid balance due February 15,
2015, collateralized by rental property.
(Financed through an Insurance Company) 11,860 12,306
Mortgage payable, 7.00%, payable in monthly
installments of $26 including interest,
unpaid balance due March 15, 2008,
collateralized by rental property.
(Financed through an Insurance Company) 3,062 3,152
Mortgage payable, 9%, payable in monthly
installments of $55 including interest,
unpaid balance due July 1, 2002,
collateralized by rental property.
(Financed through an Insurance Company) 4,716 4,938
Mortgage payable, 6.90%, payable in monthly
installments of $19 including interest,
unpaid balance due October 1, 2002,
collateralized by rental property.
(Financed through an Insurance Company) 1,745 1,837
Mortgage payable, 9.35%, payable in monthly
installments of $23 including interest,
unpaid balance due March 1, 2009,
collateralized by rental property.
(Financed through an Insurance Company) 2,174 2,244
Mortgage payable, 7.85%, payable in monthly
installments of $111 including interest,
unpaid balance due December 1, 2010,
collateralized by rental property.
(Financed through an Insurance Company) 10,273 12,118
Mortgage payable, 6.95%, payable in monthly
installments of $34 including interest, unpaid
balance due February 15, 2005,
collateralized by rental property.
(Financed through an Insurance Company) 4,082 4,201
F-15
2000 1999
------- -------
LONG-TERM MORTGAGES PAYABLE
Mortgage payable, 7.08%, payable in monthly
installments of $24 including interest, unpaid
balance due March 1, 2008,
collateralized by rental property.
(Financed through a financial service institution) $ 3,507 $ --
Mortgage payable, 6.65%, payable in monthly
installments of $31 including interest,
unpaid balance due September 1, 2010,
collateralized by rental property. 4,363 --
(Financed through an Insurance Company)
Mortgage payable, 7.625%, payable in monthly
installments of $20 including interest,
unpaid balance due January 1, 2006,
collateralized by rental property.
(Financed through an Insurance Company) 2,183 2,257
Mortgage payable, 8.10%, payable in monthly
installments of $48 including interest,
unpaid balance due February 20, 2010,
collateralized by rental property.
(Financed through an Insurance Company) 6,462 --
Mortgage payable, 6.91%, payable in monthly
installments of $175, including interest, unpaid
balance due July 1, 2008, collateralized
by rental property. (Financed through a
financial service institution) 25,881 26,149
Mortgage payable, 8.125%, payable in monthly
installments of $29 including interest,
unpaid balance due August 31, 2011,
collateralized by rental property.
(Financed through an Insurance Company) 2,521 2,662
Mortgage payable, 7.95%, payable in monthly
installments of $50 including interest,
unpaid balance due July 15, 2010,
collateralized by rental property.
(Financed through an Insurance Company) 5,171 5,352
Mortgage payable, 7.65%, payable in monthly
installments of $122 including interest,
unpaid balance due August 1, 2010,
collateralized by rental property.
(Financed through a Pension Plan Company) 16,276 --
F-16
2000 1999
------- -------
LONG-TERM MORTGAGES PAYABLE
Mortgage payable, 6.75%, payable in monthly
installments of $4, including interest, unpaid
balance due January 1, 2014, collateralized
by rental property. (Financed through an
Insurance Company) $ 4,624 $ 4,835
Mortgage payable, 7.88%, payable in monthly
installments of $25, including interest, unpaid
balance due August 1, 2006, collateralized
by rental property. (Financed through an
Insurance Company) 2,681 2,764
Mortgage payable, 7.875%, through July 1, 2006,
payable in monthly installments of $50 including interest,
at which time the lender will adjust the rate of interest
equal to the sum of Moody's "A" corporate bond
index daily rate plus .375%, rounded to the next
highest one-eighth percentage rate. The unpaid
balance is due June 30, 2016, collateralized
by rental property.
(Financed through an Insurance Company) 5,356 5,524
Mortgage payable, 10.06%, payable in monthly
installments of $26 including interest,
unpaid balance due June 1, 2001,
collateralized by rental property.
(Financed through an Insurance Company) -- 2,544
--------- --------
Total $ 121,675 $ 97,752
========= ========
Master Revolving Credit Agreement
Credit agreement, 225 basis points over LIBOR (8.87% at
December 31, 2000), interest payable monthly, commitment
of $20,641 and $22,050 as of December 31, 2000 and 1999,
respectively, unpaid balance due February 4, 2002,
collateralized by rental property. $ 4,243 $ 19,475
========= ========
Principal maturities of the mortgage notes payable as of December 31, 2000
are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
2001 $ 3,430
2002 9,450
2003 3,591
2004 3,865
2005 7,518
Thereafter 93,821
----------
Total $ 121,675
==========
F-17
Interest costs incurred under the notes payable were $9,449 and $6,789 of
which $2,181 and $1,808 were capitalized in the years ended December 31,
2000 and 1999, respectively.
6. STOCKHOLDERS' EQUITY
As of December 31, 2000 and 1999, the Company has authority to issue
45,000,000 shares, of which 5,000,000 are shares of preferred stock.
During 1998, the Company has granted a stockholder an option to put
293,430 shares of common stock issuable upon exercise of Series C warrants
to the Company at a price of $15.50 per share or to put the Series C
warrants to the Company at a price of $7.25 per warrant, which equals the
put option price of $15.50 per warrant less the Series C warrant exercise
price of $8.25 per warrant. For the year ended December 31, 1998, the
Company recognized $1,320 as a current period expense and $807 as a
reduction of paid-in capital related to the Company's IPO. In December
1999, the shareholder exercised 293,430 C warrants at $7.25 per warrant
and put the associated shares back to the Company at a price of $15.50 per
share.
During 2000, the Company issued 114,529 shares of restricted stock to its
employees and directors. These shares vest pro rata over various terms
ranging from 13.5 months to 3 years. During 1999, the Company issued 7,500
shares of restricted stock to an employee that vests pro rata over 4
years. Dividends are paid on all restricted stock.
On November 17, 2000, the Company closed the sale of one million shares of
the Company's common stock to Alony Hetz Properties & Investments, Ltd.
("Alony Hetz") at a price of $10.875 per share. As stipulated in the
subscription agreement between Alony Hetz and the Company, Alony Hetz is
obligated to purchase and the Company is obligated to sell an additional
925,000 shares on or before August 17, 2001 at a price of $10.875 per
share. In addition, the Company has issued Alony Hetz warrants that are
exercisable for 1,025,000 shares of common stock at an exercise price of
$10.875. Warrants for 375,000 and 650,000 shares of common stock are
exercisable through December 31, 2001 and December 31, 2002, respectively.
During 2000, the Company paid cash dividends of $.26, $.26, $.26 and $.32
per share on March 31, June 30, September 29 and December 29,
respectively. Gross dividends paid were $13,236 for the year ended
December 31, 2000.
During 1999, the Company paid cash dividends of $.25, $.25, $.26 and $.26
per share on March 30, June 30, September 30 and December 30,
respectively. Gross dividends paid were $11,199 for the year ended
December 31, 1999.
During 1998, the Company paid cash dividends of $.25, $.13, $.12, $.25 and
$.25 per share on March 24, May 18, June 29, October 6 and December 23,
respectively, to all stockholders of record on those dates. Gross
dividends paid were $8,973 for the year ended December 31, 1998.
During 1999, two officers exercised stock options for promissory notes
totaling $545. These notes are full resource promissory notes bearing
interest at 6.35% and are collateralized by the stock issued upon exercise
of the stock options. Interest is payable quarterly and principal is due
December 30, 2002. The notes have been reflected in the consolidated
financial statements as a reduction of stockholders' equity.
F-18
7. STOCK-BASED COMPENSATION
On October 23, 1996, the Company adopted the Equity One, Inc. 1995 Stock
Option Plan (the "Plan"), which was amended December 10, 1998 and is
described below. The Company applies the intrinsic value method in
accounting for the Plan. The purpose of the Plan is to further the growth
of the Company, by offering an incentive to directors, officers and other
key employees of the Company, and to increase the interest of these
employees in the Company, through additional ownership of its common
stock. The effective date of the Plan is January 1, 1996. The maximum
number of shares of common stock as to which options may be granted to
this Plan is 1,000,000 shares, which shall be reduced each year by the
required or discretionary grant of options. The term of each option shall
be determined by the Stock Option Committee of the Company (the
"Committee"), but in no event shall be longer than ten years from the date
of the grant. The vesting of the options shall be determined by the
Committee, in its sole and absolute discretion, at the date of grant of
the option.
During 1996, the Company issued 450,000 options under the Plan to two
officers and two non-employee members of the Board of the Company at an
exercise price of $12.375 per share, fair market value on the date of
grant as determined by an independent valuation, which shall vest over a
four-year period, 112,500 shares each year, commencing on January 1, 1997,
and on the first day of each year, until all options vest. The per share
option price is subject to a downward adjustment to the extent that
dividends declared and paid by the Company in each year subsequent to 1995
exceed dividends declared and paid by the Company in the year ended
December 31, 1995. During 1998, 100,000 of these options were forfeited.
On December 10, 1998, the Plan was amended (the "Amendment") for the two
officers by adjusting the option exercise price to $10.00 per share,
increasing their original number of options from 350,000 shares to 503,331
shares and eliminating the downward adjustment.
During 1997, the Company issued 146,000 options under the Plan to certain
employees, at an exercise price of $12.375 per share, fair market value on
the date of grant as determined by an independent valuation, which shall
vest over a period of three to four years, commencing on January 1, 1998,
and on the first day of each year, until all options vest.
During 1998, 160,000 options were forfeited, including the 100,000 options
discussed above. The Amendment reduced the exercise price from $12.375 to
$10.00 per share on 46,000 options in addition to those discussed above.
During 1999, the Company issued 50,000 options under the Plan to an
employee at an exercise price of $10.4375 per share.
During 2000, the Company issued 175,000 options under the Plan to an
officer at an exercise price of $9.90 per share and 50,000 options under
the Plan to an employee at an exercise price of $10.00 per share.
On June 23, 2000, the Company, with shareholder approval, adopted the
Equity One 2000 Executive Incentive Compensation Plan (the "2000 Plan").
The terms of the 2000 Plan provide for grants of stock options, stock
appreciation rights ("SARs"), restricted stock, deferred stock, other
stock-related awards and performance or annual incentive awards that may
be settled in cash, stock or other property (collectively "Awards"). The
persons eligible to receive Awards under the 2000 Plan are the officers,
directors, employees and independent contractors of the Company and its
subsidiaries.
Under the 2000 Plan, the total number of shares of Common Stock that may
be subject to the granting of Awards under the 2000 Plan at any time
during the term of the 2000 Plan shall be equal to
F-19
1,000,000 shares, plus the number of shares with respect to which options
previously granted under the 1995 Stock Option Plan terminate without
being exercised, and the number of shares that are surrendered in payment
of any Awards or any tax withholding requirements.
The Company applies Accounting Principles Board Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES, and related interpretations in measuring
stock-based compensation, including options. Accordingly, no compensation
expense has been recognized for options granted under the Plan. Had
compensation expense been determined based upon the fair value at the
grant date for awards under the Plan consistent with SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net income and
earnings per share on a pro forma basis, using an independent valuation,
would have been:
2000 1999 1998
-------- -------- -------
Net income As reported $ 11,269 $ 13,589 $ 9,065
Pro forma - basic $ 10,534 $ 13,062 $ 9,033
Pro forma - diluted $ 10,554 $ 13,157 $ --
Basic earnings per share As reported $ 0.97 $ 1.26 $ 1.01
Pro forma $$ 0.90 $ 1.21 $ 1.01
Diluted earnings per share As reported $ 0.95 $ 1.26 $ 1.00
Pro forma $ 0.89 $ 1.21 $ 1.00
In accordance with SFAS No. 123, the following is a summary of the
Company's stock option activity for the years ended December 31, 2000, 1999 and
1998:
2000 1999 1998
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
STOCK EXERCISE STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-------- ----------- -------- ----------- -------- -----------
Outstanding, beginning of year 737,331 $ 10.448 777,331 $ 10.407 644,000 $ 11.840
Granted 332,000 9.947 58,000 10.378 293,331 11.040
Forfeited (116,000) 12.047 (50,000) 11.825 (160,000) 12.375
Exercised -- -- (48,000) 8.250 -- --
-------- ----------- -------- ----------- -------- -----------
Outstanding, end of year 953,331 $ 10.079 737,331 $ 10.448 777,331 $ 10.407
======== =========== ======== =========== ======== ===========
Exercisable, end of year 716,331 $ 10.076 446,999 $ 10.213 327,416 $ 9.852
======== =========== ======== =========== ======== ===========
Weighted average fair value
of options granted
during the year $ 0.920 $ 1.358 $ 0.920
=========== =========== ===========
F-20
The following table summarizes information about outstanding stock options
as of December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
- -------------------- ---------------- -------------------- ----------------- ---------------- -----------------
$ 9.900 175,000 8.7 $ 9.900 43,750 $ 9.900
$ 10.000 698,331 5.7 $ 10.000 637,581 $ 10.000
$ 10.438 50,000 8.7 $ 10.438 12,500 $ 10.438
$ 12.375 30,000 6.0 $ 12.375 22,500 $ 12.375
The fair value of each option grant was estimated on the grant date using
the Black-Scholes option-pricing model with the following assumptions for
the years ended December 31, 2000, 1999 and 1998:
2000 1999 1998
------------------- ------------------ ------------------
Dividend yield 10.60% 10.25% 7.42% - 8.71%
Risk-free interest rate 5.25% - 6.00% 6.42% - 6.51% 4.53% - 5.65%
Expected option life (years) 7 5 3
Expected volatility 17.70% 23.00% 0% - 32.23%
8. EARNINGS PER SHARE
In accordance with SFAS No. 128, the following is a reconciliation of the
numerators and denominators of the basic and diluted per-share
computations for income for the years ended December 31, 2000, 1999 and
1998:
FOR THE YEAR ENDED DECEMBER 31, 2000
-------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-------------------------------------------------
NET INCOME $11,269
=======
BASIC EPS
Income available to common stockholders $11,269 11,651,126 $ 0.97
======= ---------- ======
EFFECT OF DILUTIVE SECURITIES
Walden Woods Village, Ltd. 93,656
Employee restricted stock 121,561
Convertible partnership units 20 19,317
------- ----------
20 234,534
------- ----------
DILUTED EPS
Income available to common
stockholders + assumed conversions $11,289 11,885,660 $ 0.95
======= ========== ======
F-21
FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-----------------------------------------------------------
NET INCOME $ 13,589
========
BASIC EPS
Income available to common stockholders $ 13,589 10,804,574 $ 1.26
======== ---------- ======
EFFECT OF DILUTIVE SECURITIES
Walden Woods Village, Ltd. 95 93,656
Employee restricted stock -- 3,123
-------- ----------
95 96,779
-------- ----------
DILUTED EPS
Income available to common
stockholders + assumed conversions $ 13,684 10,901,353 $ 1.26
======== ========== ======
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-----------------------------------------------------------
NET INCOME $ 9,065
=======
BASIC EPS
Income available to common stockholders $ 9,065 8,979,364 $ 1.01
======= --------- ======
EFFECT OF DILUTIVE SECURITIES
Series C Warrants 90,793
Stock Options 4,304
--------
95,097
DILUTED EPS
Income available
to common stockholders + assumed conversions $ 9,065 9,074,461 $ 1.00
======= ========= ======
F-22
9. FUTURE MINIMUM RENTAL INCOME, COMMITMENTS AND CONTINGENT LIABILITIES
Future minimum rental income under noncancelable operating leases
approximates the following as of December 31, 2000:
YEAR ENDING
DECEMBER 31, AMOUNT
2001 $ 25,341
2002 22,893
2003 20,200
2004 17,265
2005 14,124
Thereafter 73,394
---------
Total $ 173,217
=========
During 1996, the Company pledged a letter of credit for $1.5 million as
additional security on the Lake Mary property. As of December 31, 2000,
the balance of this letter of credit was $500,000.
On August 26, 1999, the Company pledged a letter of credit for
approximately $1.5 million as additional security for the financing
secured by the Pine Island and Ridge Plaza properties. As of December 31,
2000, the balance of this letter of credit has been reduced to
approximately $1.0 million.
On July 10, 2000, the Company pledged a letter of credit for $580,520,
relating to construction of tenant improvements at one of its properties.
This letter of credit was released on January 10, 2001.
The Company is subject to litigation in the normal course of business,
none of which, in the opinion of management, will have a material adverse
effect on the financial condition or results of operations of the Company.
10. OPERATING EXPENSES
Composition in the consolidated statements of operations:
2000 1999 1998
------ ------ ------
Commissions $ 251 $ 252 $ 308
Payroll 901 602 467
Insurance expense 554 519 464
Real estate property tax 3,423 2,913 2,425
Repairs and maintenance 2,065 1,533 1,205
Utilities 582 522 508
Other 1,408 741 588
------ ------ ------
Total $9,184 $7,082 $5,965
====== ====== ======
F-23
11. GENERAL AND ADMINISTRATIVE EXPENSES
Composition in the consolidated statements of operations:
2000 1999 1998
------ ------ ------
Office expenses $ 275 $ 130 $ 86
Professional fees 221 314 323
Management fees 91 13 93
Payroll 1,434 796 628
Other 340 369 251
------ ------ ------
Total $2,361 $1,622 $1,381
====== ====== ======
12. RELATED PARTY TRANSACTIONS
The Company provided an affiliated entity, Gazit (1995), Inc., with office
space, office services and certain management and consulting services for
which the Company receives a management fee. For the years ended December
31, 2000, 1999 and 1998, such fees totaled $40, $10 and $10, respectively,
and are included as an offset in general and administrative expenses in
the accompanying consolidated statements of operations.
As of December 31, 2000, 1999 and 1998, balances due from related parties
are non-interest bearing with no specified due dates.
For the years ended December 31, 2000, 1999 and 1998, the Company had made
compensation payments to significant stockholders, Chaim Katzman,
President and Doron Valero, Vice President, $521 and $412 in 2000,
respectively, $361 and $289 in 1999, respectively, and $269 and $302 in
1998, respectively.
13. QUARTERLY FINANCIAL DATA (unaudited)
2000 1999
------------------------------------------ -----------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
---------- --------- --------- -------- --------- -------- --------- ---------
Revenues $8,104 $7,991 $8,415 $9,932 $6,095 $6,328 $7,112 $11,442
Earnings before
minority interest and
gain on sale 2,647 2,812 2,777 3,033 2,223 2,378 2,648 2,622
Minority interest 24 25 24 (73) 23 24 24 25
Gain on sale -- -- -- -- -- -- -- 3,814
------ ------ ------ ------ ------ ------ ------ ------
Net earnings $2,623 $2,787 $2,753 $3,106 $2,200 $2,354 $2,624 $6,411
====== ====== ====== ====== ====== ====== ====== ======
Per share:
Basic $0.23 $0.24 $0.24 $0.26 $0.21 $0.22 $0.24 $0.57
====== ====== ====== ====== ====== ====== ====== ======
Diluted $0.23 $0.24 $0.23 $0.25 $0.21 $0.22 $0.24 $0.56
====== ====== ====== ====== ====== ====== ====== ======
* * * * * *
F-24
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders of Equity One, Inc.
We have audited the consolidated financial statements of Equity One, Inc., and
subsidiaries (the "Company") as of December 31, 2000 and 1999, and for each of
the three years in the period ended December 31, 2000, and have issued our
report thereon dated February 21, 2001, such report is included elsewhere in
this Form 10-K. Our audits also included the consolidated financial statement
schedule of the Company, listed in Item 14. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Deloitte & Touche, LLP
February 21, 2001
Miami, Florida
S-1
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
INITIAL COST
TO COMPANY
------------------
BUILDING CAPITALIZED
& SUBSEQUENT TO
ENCUM- IMPROVE- ACCUSITION OR
PROPERTY LOCATION BRANCES LAND MENTS IMPROVEMENTS
- -------------------- --------------- -------- ------- -------- -------------
INCOME PRODUCING PROPERTIES
NORTH FLORIDA
Atlantic Village
Shopping Center Atlantic Beach $ 4,738 $ 1,190 $ 4,760 $ 937
Beauclerc Village
Shopping Center(1) Jacksonville 0 560 2,242 322
Commonwealth Shopping
Center Jacksonville 3,062 730 2,920 1,416
Forest Village
Shopping Center (2) Tallahassee 0 725 0 4,507
Fort Caroline
Trading Post Jacksonville 2,174 738 2,432 544
Losco Shopping
Center Jacksonville 0 221 0 592
Mandarin Landing
Shopping Center(1) Jacksonville 0 4,443 4,747 1,206
Mandarin
Mini-storage(1) Jacksonville 0 362 1,448 24
Monument Point
Shopping Center Jacksonville 0 1,336 2,330 87
Oak Hill Village
Shopping Center Jacksonville 2,183 690 2,760 39
CENTRAL FLORIDA
Eustis Square
Shopping Center Eustis 4,716 1,450 5,799 77
Forest Edge
Shopping Center Orlando 1,745 1,250 1,850 32
Lake Mary
Shopping Center Lake Mary 10,273 5,578 13,878 2,068
Park Promenade
Shopping Center Orlando 6,462 2,810 6,444 388
Walden Woods
Shopping Center Plant City 2,681 950 2,850 9
FLORIDA WEST COAST
East Bay Plaza
Shopping Center(1) Largo 0 314 1,296 557
Mariners Crossing
Shopping Center Spring Hill 3,507 1,110 4,447 0
Shoppes of North
Port North Port 4,363 1,452 5,807 0
Summerlin Square
Shopping Center Fort Myers 4,624 1,043 7,989 97
SOUTH FLORIDA
Bird Ludlum
Shopping Center Miami 11,860 4,080 16,318 112
Diana Building W. Palm Beach 0 123 493 944
Equity One Office
Building (1) Miami Beach 0 229 423 776
Lantana Village
Shopping Center Lantana 4,082 1,350 5,400 2,712
Montclair
Apartments(1) Miami 0 199 801 2
Pine Island/Ridge
Plaza Shopping Davie 25,881 12,462 20,309 491
Center
Plaza Del Rey
Shopping Center Miami 2,521 740 2,961 147
Point Royale
Shopping Center Miami 5,171 3,161 5,005 1,739
Restaurant Property Miami 0 250 1,000 148
Shops at Skylake N. Miami 16,276 4,873 0 15,929
Beach
West Lakes Plaza
Shopping Center Miami 5,356 2,141 5,789 244
-------- ------- -------- -------
TOTAL INCOME PRODUCING PROPERTIES $121,675 $56,560 $132,498 $36,146
======== ======= ======== =======
GROSS AMOUNTS AT WHICH
CARRIED AT CLOSE OF
--------------------------
DEPRE-
IMPROVE- ACCUMULATED DATE CIABLE
PROPERTY LAND MENTS TOTAL DEPRECIATION ACQUIRED LIFE
- -------------------- ----- -------- ------- ------------ --------------- --------
INCOME PRODUCING PROPERTIES
NORTH FLORIDA
Atlantic Village
Shopping Center $ 1,190 $ 5,697 $ 6,887 $ 847 June 30, 1995 40
Beauclerc Village
Shopping Center(1) 651 2,473 3,124 164 May 15, 1998 40
Commonwealth Shopping
Center 730 4,336 5,066 690 February 28, 1994 40
Forest Village
Shopping Center (2) 877 4,355 5,232 40 January 28, 1999 40
Fort Caroline
Trading Post 738 2,976 3,714 503 January 24, 1994 40
Losco Shopping
Center 224 589 813 4 May 17, 1999 40
Mandarin Landing
Shopping Center(1) 4,443 5,953 10,396 145 December 10, 1999 40
Mandarin
Mini-storage(1) 362 1,472 1,834 246 May 10, 1994 40
Monument Point
Shopping Center 1,336 2,417 3,753 247 January 31, 1997 40
Oak Hill Village
Shopping Center 690 2,799 3,489 363 December 7, 1995 40
CENTRAL FLORIDA
Eustis Square
Shopping Center 1,463 5,863 7,326 1,418 October 22, 1993 40
Forest Edge
Shopping Center 1,250 1,882 3,132 188 December 31, 1996 40
Lake Mary
Shopping Center 5,898 15,626 21,524 1,831 November 9, 1995 40
Park Promenade
Shopping Center 2,810 6,832 9,642 341 January 31, 1999 40
Walden Woods
Shopping Center 950 2,859 3,809 144 January 1, 1999 40
FLORIDA WEST COAST
East Bay Plaza
Shopping Center(1) 325 1,842 2,167 660 July 27, 1993 30
Mariners Crossing
Shopping Center 1,110 4,447 5,557 34 September 12, 2000 40
Shoppes of North
Port 1,452 5,807 7,259 10 December 5, 2000 40
Summerlin Square
Shopping Center 1,043 8,086 9,129 536 June 10, 1998 40
SOUTH FLORIDA
Bird Ludlum
Shopping Center 4,088 16,422 20,510 2,691 August 11, 1994 40
Diana Building 123 1,437 1,560 170 February 15, 1995 40
Equity One Office
Building (1) 229 1,199 1,428 217 April 10, 1992 40
Lantana Village
Shopping Center 1,350 8,112 9,462 532 January 6, 1998 40
Montclair
Apartments(1) 199 803 1,002 47 August 31, 1998 40
Pine Island/Ridge
Plaza Shopping 12,462 20,800 33,262 734 August 26, 1999 40
Center
Plaza Del Rey
Shopping Center 740 3,108 3,848 1,041 August 22, 1991 40
Point Royale
Shopping Center 3,720 6,185 9,905 745 July 27, 1995 40
Restaurant Property 250 1,148 1,398 97 April 30, 1998 40
Shops at Skylake 8,564 12,238 20,802 321 August 19, 1997 40
West Lakes Plaza
Shopping Center 2,141 6,033 8,174 672 November 6, 1996 40
------- -------- -------- -------
TOTAL INCOME PRODUCING
PROPERTIES $61,408 $163,796 $225,204 $15,678
======= ======== ======== =======
S-2
SCHEDULE III (CONTINUED)
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
INITIAL COST
TO COMPANY
------------------
BUILDING CAPITALIZED
& SUBSEQUENT TO
ENCUM- IMPROVE- ACCUSITION OR
PROPERTY LOCATION BRANCES LAND MENTS IMPROVEMENTS
- ---------------------- ---------- -------- ------- --------- -----------------
LAND HELD FOR/UNDER DEVELOPMENT
Coral Way Miami 0 988 0 148
Forest Village
Shopping Center Tallahassee 0 1,576 0 1,310
Equity One
Office Building (1) Miami Beach 0 350 0 161
Lake Mary
Shopping Center Lake Mary See above 1,194 0 9
Losco Shopping Center Jacksonville 0 29 0 76
Shoppes at Skylake (3) Miami 0 5,936 0 4,405
Summerlin Square
Shopping Center Fort Myers See above 913 0 85
-------- ------- -------- -------
TOTAL LAND HELD FOR/UNDER
DEVELOPMENT $ 0 $10,986 $ 0 $ 6,194
======== ======= ======== =======
Credit Agreement 4,243 0 0 0
-------- ------- -------- -------
TOTAL $125,918 $67,546 $132,498 $42,340
======== ======= ======== =======
GROSS AMOUNTS AT WHICH
CARRIED AT CLOSE OF PERIOD
---------------------------
DEPRE-
IMPROVE- ACCUMULATED DATE CIABLE
PROPERTY LAND MENTS TOTAL DEPRECIATION ACQUIRED LIFE
- ---------------------- ------ -------- --------- ------------ --------------- -------
LAND HELD FOR/UNDER DEVELOPMENT
Coral Way 1,136 0 1,136 0 July 23, 1999
Forest Village
Shopping Center 2,886 0 2,886 0 January 28, 1999
Equity One
Office Building (1) 511 0 511 0 December 9, 1998
Lake Mary
Shopping Center 1,203 0 1,203 0 November 9, 1995
Losco Shopping Center 105 0 105 0 May 17, 1999
Shoppes at Skylake (3) 10,341 0 10,341 0 August 19, 1997
Summerlin Square
Shopping Center 998 0 998 0 June 10, 1998
------- -------- -------- -------
TOTAL LAND HELD FOR/UNDER
DEVELOPMENT $17,180 $ 0 $17,180 $ 0
======= ======== ======== =======
Credit Agreement 0 0 0 0
------- -------- -------- -------
TOTAL $78,588 $163,796 $242,384 $15,678
======= ======== ======== =======
(1) This property serves as collateral for the Credit Agreement.
(2) This property was financed on March 8, 2001 in the amount of $4.7
million. See Recent Developments.
(3) The portion of this property not securing the mortgage financing
serves as collateral for the Credit Agreement.
S-3
SCHEDULE III (CONTINUED)
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
2000 1999 1998
----------------------- ---------------------- ------------------
RECONCILIATION OF INCOME PRODUCING PROPERTY
Beginning balance $192,298 $140,764 $123,447
Acquisitions 30,498 55,015 20,834
Improvements 1,454 7,843 4,411
Dispositions 0 (11,324) (7,928)
----------------------- ---------------------- ------------------
Ending balance $224,250 $192,298 $140,764
======================= ====================== ==================
RECONCILIATION OF ACCUMULATED DEPRECIATION FOR INCOME
PRODUCING PROPERTY
Beginning balance $11,582 $9,410 $7,144
Depreciation expense 4,096 3,420 2,824
Dispositions 0 (1,248) (558)
----------------------- ---------------------- ------------------
Ending balance $15,678 $11,582 $9,410
======================= ====================== ==================
RECONCILIATION OF LAND HELD FOR/UNDER DEVELOPMENT
Beginning balance $24,123 $7,177 $1,788
Net additions (dispositions) (5,987) 16,946 5,389
----------------------- ---------------------- ------------------
Ending balance $18,136 $24,123 $7,177
======================= ====================== ==================
S-4