SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 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, including area code: (305) 947-1664
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 8, 2002, the aggregate market value of the voting stock of
the Registrant held by non-affiliates of the Registrant was approximately
$77,014,605.
As of March 8, 2002, the number of outstanding shares of Common Stock
par value $.01 per share of the Registrant was 29,485,843.
Certain sections of the Registrant's definitive Proxy Statement for the
2002 Annual Meeting of Stockholders are incorporated by reference in Part III of
this Annual Report on Form 10-K to the extent stated herein.
EQUITY ONE, INC.
TABLE OF CONTENTS
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PAGE
PART I
Item 1. Business..........................................................................................4
Item 2. Properties........................................................................................9
Item 3. Legal Proceedings................................................................................17
Item 4. Submission of Matters to a Vote of Security Holders..............................................17
PART II
Item 5. Market For Registrant's Common Equity and Related Matters........................................18
Item 6. Selected Consolidated Financial Data.............................................................19
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............21
Item 7a. Quantitative and Qualitative Disclosures about Market Risk.......................................30
Item 8. Financial Statements and Supplementary Data......................................................30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............30
PART III
Item 10. Directors and Executive Officers of the Registrant...............................................31
Item 11. Executive Compensation...........................................................................31
Item 12. Security Ownership of Certain Beneficial Owners and Management...................................31
Item 13. Certain Relationships and Related Transactions...................................................31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K.................................32
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in this
Annual Report on Form 10-K may contain forward-looking statements within the
meaning of Section 21E of the Securities and Exchange Act of 1934, as amended,
or Exchange Act, and as such may involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or
achievements to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements.
Forward-looking statements, which are based on certain assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend" or "project" or the negative thereof or other variations
thereon or comparable terminology.
You should also pay particular attention to those factors discussed
herein under the heading "Business - Risk Factors." You should not rely on the
information contained in any forward-looking statements, and you should not
expect us to update any forward-looking statements.
3
PART I
ITEM 1. BUSINESS
GENERAL
We are a self-administered, self-managed real estate investment trust,
or REIT, that principally acquires, renovates, develops and manages community
and neighborhood shopping centers. Our shopping centers are primarily anchored
by supermarkets or other necessity-oriented retailers such as drug stores or
discount retail stores. As of December 31, 2001, our portfolio consisted of 85
properties, comprising 55 supermarket-anchored shopping centers, six drug
store-anchored shopping centers, 18 other retail-anchored shopping centers, five
commercial properties and one drug store-anchored development, as well as
non-controlling interests in three unconsolidated joint ventures that own
commercial properties. Our existing properties are located primarily in
metropolitan areas of Florida and Texas, contain an aggregate of 8.6 million
square feet of gross leasable area, and were 86.1% occupied based on gross
leasable area as of December 31, 2001.
We were established as a Maryland corporation in 1992 and completed our
initial public offering in May 1998. In addition, we have been operating as a
REIT since 1995. Until 2001, we primarily owned and operated neighborhood and
community shopping centers located in Florida. However, during 2001, through two
strategic acquisitions, we increased our property portfolio in Florida and
expanded our property ownership into metropolitan areas located in Texas,
Arizona and Tennessee.
In September 2001, we acquired Centrefund Realty (U.S.) Corporation, or
CEFUS, a wholly-owned subsidiary of one of our affiliates, First Capital Realty
Inc., an Ontario corporation whose shares are traded on the Toronto Stock
Exchange (TSE:FCR). As a result of this transaction, we acquired 28 shopping
centers and interests in five joint ventures, two of which have been sold. These
properties contained an aggregate of approximately 3.2 million square feet of
gross leasable area.
In addition, in September 2001, we acquired United Investors Realty
Trust, or UIRT, a publicly traded Texas real estate investment trust whose
shares were listed on the Nasdaq National Market. As a result of this
transaction, we acquired 22 shopping centers and an interest in one joint
venture, which has been sold. These properties contained an aggregate of
approximately 2.0 million square feet of gross leasable area.
As a result of the CEFUS and UIRT acquisitions, we were able to nearly
triple the size of our property portfolio consistent with our business strategy
and investment criteria, and, at the same time, centralize management functions,
reduce our combined personnel and achieve other cost-savings measures. Our
resulting portfolio includes shopping centers primarily in Florida and Texas
which are anchored by national and regional supermarkets such as Albertsons,
Kash N' Karry, Kroger, Publix, Randalls and Winn-Dixie or other national
retailers such as Bed Bath & Beyond, Best Buy, Blockbuster, Eckerd, Home Depot
Design Expo, Kmart and Walgreens.
RECENT DEVELOPMENTS
On January 18, 2002 we completed a private placement of 688,000 shares
of our common stock to a limited number of accredited investors. In connection
with the private placement, we sold an aggregate of 344,000 shares of our common
stock at a price of $12.80 per share to unaffiliated investors and 344,000
shares of our common stock at price of $13.05 per share to investors that are
affiliates of ours. The aggregate proceeds of $8.9 million from the private
placement were raised for general corporate purposes. Contemporaneously with the
closing of the private placement, we repaid the existing $8.0 million mortgage
loan secured by our Copperfield shopping center.
On January 23, 2002, we filed a universal shelf registration statement
with the Securities and Exchange Commission that was declared effective on
February 8, 2002. This registration statement will permit us, from time to time,
to offer and sell various types of securities, including common stock, preferred
stock, debt securities, depositary shares and warrants, up to a value of $250
million. The registration statement provides us additional flexibility in
accessing capital markets to fund future growth and for general corporate
purposes.
In February 2002, we completed the sale of our Equity One office
building in Miami Beach, Florida to the City of Miami Beach for a purchase price
of approximately $6.1 million. We expect to realize a gain on the sale of this
property of approximately $4.3 million. In connection with the sale, we also
received $450,000 as a settlement for pending litigation against the City of
Miami Beach.
4
In February 2002, we completed the separate acquisitions of Wickham
Eckerd, a freestanding drug store located in Melbourne, Florida, for a purchase
price of $2.4 million, and of Leesburg Eckerd, a freestanding drug store located
in Leesburg, Florida, for a purchase price of $3.8 million. The acquisition of
these two properties, together with our previous acquisitions of our Ryanwood
and Barker Cypress shopping centers, enables us to defer recognition of the
capital gain realized by CEFUS on the sale of the Harbour Financial Center in
August 2001 pursuant to Section 1031 of the Internal Revenue Code.
On February 27, 2002, we entered into a variable-rate revolving credit
facility with Wells Fargo under which we may borrow up to $29.4 million.
Borrowings under the facility will bear interest at LIBOR plus a margin ranging
from 1.15% to 1.50% based on our overall leverage. The entire principal amount
is due February 26, 2005. Contemporaneously with the closing of the Wells Fargo
facility, we borrowed $17.0 million to repay existing mortgage loans on our
Oakbrook and Mandarin Landing shopping centers, both of which were assigned,
along with three other assets, as collateral for the Wells Fargo facility. In
addition, we reduced the availability under our existing, credit facility with
City National Bank of Florida from $17.8 million to $10.8 million.
On February 25, 2002, we exercised an option to purchase all of the
outstanding shares of common stock of a company owned by several of our
affiliates, the sole asset of which is an 8.5 acre parcel of land located at the
southeast corner of S.W. 147th Avenue and Coral Way in Miami, Florida. In
connection with the exercise of our option, we paid an exercise price of $2.0
million. Because of the affiliated nature of this transaction, our board
received an independent appraisal of the parcel prior authorizing us to exercise
our option. We intend to spend an additional $8.0 million over the next 12
months to develop an 84,000 square foot shopping center on this parcel, which
will be anchored by a 44,000 square foot Publix supermarket.
On February 25, 2002, we exercised an option to purchase all of the
outstanding shares of common stock of a company owned by several of our
affiliates, the sole asset of which is a 6.2-acre property, which is adjacent to
our Bird Ludlam shopping center in Miami, Florida. In connection with the
exercise of our option, we paid an exercise price of $1.0 million. Subsequent to
our purchase of this property, on February 26, 2002, we sold the property for
$400,000 in cash and an 8% interest-only note in the amount of $1.4 million due
on February 26, 2003. In connection with this sale, we expect to realize a gain
in the amount of $800,000.
On February 28, 2002, we sold Benbrook, a retail center located in
Benbrook, Texas, for a net purchase price of $2.6 million. We expect to realize
a gain on the sale of this property of approximately $1.1 million.
BUSINESS AND GROWTH STRATEGIES
Our business strategy has been and will continue to be to maximize
long-term shareholder value by generating sustainable cash flow growth and
increasing the long-term value of our real estate assets. To that end, we now
own and manage a portfolio of 79 community and neighborhood shopping centers
primarily anchored by supermarkets or other necessity-oriented retailers such as
drug stores or discount retail stores. In order to achieve our objectives in the
future, we intend to:
o maximize the value of our existing shopping centers by leasing
and re-leasing those properties at higher rental rates to
creditworthy tenants and renovating and developing those
properties to make them more attractive to such tenants;
o acquire additional neighborhood and community shopping centers
in high growth, high density metropolitan areas that are
primarily anchored by supermarkets or other necessity-oriented
retailers;
o sell or dispose of properties that do not meet our investment
criteria, asset type or geographic focus; and
o capitalize on our substantial asset base to effectively access
capital to fund our growth.
ENHANCING PORTFOLIO PERFORMANCE. We seek to maximize the value of our
existing shopping centers by leasing and re-leasing those properties at higher
rental rates to creditworthy tenants. These efforts improve the financial
performance of our shopping center portfolio. We believe that we have developed
strong, mutually beneficial relationships with creditworthy tenants,
particularly our anchor tenants, by consistently meeting or exceeding the
expectations and demands of those tenants. Over the years, this strategy has
allowed us to leverage our relationship with existing tenants to lease and
re-lease our properties and therefore maintain or improve the
5
financial performance of our existing properties or properties we acquire.
Moreover, we intend to renovate or develop a number of under-performing assets
that we acquired as a result of the CEFUS and UIRT transactions in order to make
them more attractive for leasing or re-leasing to creditworthy tenants.
ACQUISITION AND DEVELOPMENT OF SHOPPING CENTERS. As we seek to grow our
business, we intend to acquire additional neighborhood and community shopping
centers through individual property acquisitions, development of new properties,
property portfolio purchases and acquisitions of other REITs and real estate
companies, both privately-held and publicly-traded.
We select properties for acquisition or development, which have or are
suitable for supermarket or other anchor tenants that offer daily necessities
and value-oriented merchandise. The properties must be well located, typically
in high growth, high-density metropolitan areas, and have high visibility, open
air designs, ease of entry and exit and ample parking. Although we focus
primarily on well-performing, supermarket-anchored properties with strong cash
flows, we also acquire under-performing assets, which are adaptable over time
for expansion, renovation or redevelopment. When evaluating potential
acquisitions, whether well-performing or under-performing, and development
projects, we consider factors such as:
o the location, construction quality, design and visibility of the
property;
o economic, demographic, and regulatory and zoning conditions in the
property's local and regional market;
o tenants' gross sales per square foot measured against industry
standards;
o competition from comparable retail properties in the market area and
the possibility of future competition;
o the current and projected cash flow of the property and the potential
to increase cash flow;
o 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;
o the occupancy and demand by tenants for properties of a similar type in
the market area;
o the potential to complete a strategic renovation, expansion, or
re-tenanting of the property;
o the property's current expense structure and the potential to increase
operating margins;
o the potential for capital appreciation of the property; and
o the ability to subsequently sell or refinance the property.
When evaluating expansion, renovation and development possibilities, we
often do not initiate construction until we have secured commitments from anchor
tenants. In addition, when evaluating acquisitions of portfolios of properties,
REITs or other real estate businesses, we review the component properties
against the criteria described above, as well as opportunities for synergies and
cost savings on a combined basis, geographic fit with our existing markets and
the extent of non-core assets included in the acquisition.
In 2001, we acquired 50 new properties as a result of the CEFUS and
UIRT transactions as well as two individual shopping centers. In addition, we
commenced and completed additions of 40,000 and 24,000 square feet at our Lake
Mary and Sky Lake shopping centers.
We currently are focused on properties located in the southeast and
southwest regions of the United States. In addition, in making new real estate
investments, we intend to continue to place primary emphasis on obtaining 100%
equity interests in well-located, income-producing properties with attractive
yields and potential for increases in income and capital appreciation.
SELLING CERTAIN ASSETS. Over time, when assets we acquire no longer
meet our investment criteria, or when assets provide the opportunity for
significant gains, we may attempt to sell or otherwise dispose of those assets.
6
For instance, we acquired several properties as a result of the UIRT and CEFUS
acquisitions, which were not located in high growth, metropolitan areas or
otherwise were not consistent with our investment criteria outlined above. We
have already sold several of these properties and may attempt to sell others in
the future. Since December 1, 2000, we have sold five properties for aggregate
gross proceeds of approximately $40.4 million.
USING OUR CAPITAL TO EXPAND OUR BUSINESS. We intend to further grow and
expand our business by using cash available from operations or from lines of
credit or, if appropriate market conditions exist, by accessing the capital
markets by means of our recently filed universal shelf registration statement to
issue equity, debt or a combination thereof. In addition, as we have in the
past, we intend to utilize tax-advantaged structures to acquire properties from
sellers who wish to defer capital gains. 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, in which we would
acquire a controlling interest. We 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 our company.
COMPETITIVE STRENGTHS
We believe that we distinguish ourselves from other owners and
operators of community and neighborhood shopping centers in a number of ways,
including:
o SHOPPING CENTERS ANCHORED BY SUPERMARKETS OR NECESSITY-ORIENTED
RETAILERS. For the year ended December 31, 2001, shopping centers
anchored by supermarkets or other necessity retailers such as drug
stores or discount retail stores accounted for approximately 98.5% of
our total net operating income. As of March 1, 2002, these types of
shopping centers represented approximately 98.9% of our gross leasable
area, with supermarket-anchored centers representing 70.4%. We believe
that supermarket and other necessity-oriented retailers are resistant
to economic downturns by the nature of their business and generate
continuous consumer traffic through our shopping centers. This traffic
enhances the quality, appeal and longevity of our shopping centers and
benefits our other tenants.
o ATTRACTIVE LOCATIONS IN HIGH-GROWTH AREAS. Our portfolio of properties
is concentrated in high-density areas that are experiencing high
population growth such as Florida and Texas. As of March 1, 2002, these
states constitute 60.9% and 33.9% of our gross leasable area. The
strong demographics of these markets provide our properties with a
growing supply of shoppers and increased demand for the goods and
services of our tenants.
o DIVERSE TENANT BASE. No single tenant currently represents more than
10% of our annualized minimum rent and only one tenant, Publix,
represents more than 5% of such revenue. As of December 31, 2001,
Publix represented 5.5% of our annualized minimum rent. As of December
31, 2001, we had 1,615 leases with our tenants, including national and
regional supermarket chains, drug stores, discount retail stores, other
nationally or regionally known stores, a variety of other regional and
local retailers and a number of local service providers such as
doctors, dentists, hair salons, restaurants and others. We believe that
this diversity of tenants will enable us to generate more stable cash
flows over time and limits our exposure to the financial conditions of
any particular tenant.
o SEASONED MANAGEMENT TEAM. Our senior executives and managers average
more than 20 years of experience in the acquisition, management,
leasing, redevelopment and construction of real estate or retail
properties and many have been with us since our inception. In
particular, we believe that our in-depth market knowledge and long-term
tenant relationships developed by our senior management provide us with
a key competitive advantage.
o PROPERTY ACQUISITION STRENGTHS. We believe we have certain competitive
advantages which enhance our ability to capitalize on acquisition
opportunities, including our long standing relationships with real
estate bankers and brokers, tenants and institutional and other real
estate owners in our current target markets; our access to capital; our
ability to offer cash and tax advantaged structures to sellers; and our
demonstrated ability to conduct a rapid, efficient and effective due
diligence investigation of the property, portfolio or company. In 2001,
we acquired 52 new properties primarily through our acquisitions of
CEFUS and UIRT.
7
o STRONG RELATIONSHIP WITH TENANTS. We believe we have cultivated strong
relationships with supermarket and other anchor tenants, which, in
combination with our in-depth knowledge of our primary markets, have
contributed substantially to our success in identifying, acquiring and
operating our properties.
FINANCING STRATEGY
Our financing strategy is to maintain a strong and flexible financial
position by limiting our debt to a prudent level and minimizing our variable
interest rate exposure. We intend to finance future growth with the most
advantageous source of capital available to us at the time of an acquisition.
These sources may include selling common stock, preferred stock, debt
securities, depository shares or warrants through public offerings or private
placements, or incurring additional indebtedness through secured or unsecured
borrowings either at the parent level or through mortgages with recourse limited
to specific properties.
RISK FACTORS
We are subject to certain business risks arising in connection with
owning real estate which include, among others:
o the bankruptcy or insolvency of, or a downturn in the business of, any
of our major tenants could reduce cash flow;
o the possibility that tenants will not renew their leases as they expire
or renew at lower rental rates could reduce cash flow;
o vacated anchor space will affect the entire shopping center because of
reduced customer flow;
o poor market conditions in the areas where we own shopping centers could
create increased vacancy and reduce demand for tenant space;
o unfavorable economic conditions could also result in the inability of
tenants in certain retail sectors to meet their lease obligations and
otherwise adversely affect our ability to attract and retain desirable
tenants;
o our rapid growth could place strains on our management and resources;
o we may not be successful in identifying suitable properties or
companies for acquisition that meet our criteria which may impede our
growth;
o risks relating to leverage, including uncertainty that we will be able
to refinance our indebtedness, and the risks of higher interest rates;
o unsuccessful development activities would result in the expenditure of
capital and no corresponding increase in cash flow;
o our inability to satisfy our cash requirements for operations and the
possibility that we may be required to borrow funds to meet
distribution requirements in order to maintain our qualification as a
REIT;
o potential liability for unknown or future environmental matters and
costs of compliance with the Americans with Disabilities Act;
o limitations in our charter and bylaws and under Maryland law may have
the effect of delaying or preventing a change of control of our
company; and
o our dependency on the contributions of our senior executives and
corporate management team, and the loss of those services could have a
material adverse effect on our business.
If any of these risks are realized, then they could have an adverse
effect on our business, prospects or our ability to pay dividends in the future.
8
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
our properties are located that compete with us in seeking land for development,
properties for acquisition, financing and tenants. Many of such competitors have
substantially greater resources than we have. All of our existing properties are
located in developed areas that include other shopping centers and other retail
properties. The number of retail properties in a particular area could
materially adversely affect our ability to lease vacant space and maintain the
rents charged at our existing properties.
REGULATIONS
REGULATIONS. Retail properties are subject to various laws, ordinances
and regulations. We believe that each of our existing properties maintains all
required material operating permits and approvals.
AMERICANS WITH DISABILITIES ACT. Our properties are subject to the
Americans with Disabilities Act of 1990. Under the Disabilities Act, all places
of public accommodation are required to comply with federal requirements related
to access and use by disabled persons. The Disabilities Act has separate
compliance requirements for "public accommodations" and "commercial facilities"
that generally require that buildings and services, including restaurants and
retail stores, be made accessible and available to people with disabilities. The
Disabilities Act's requirements could require removal of access barriers and
could result in the imposition of injunctive relief, monetary penalties or, in
some cases, an award of damages. We believe that our properties are in
substantial compliance with the requirements under the Disabilities Act and have
no reason to believe that these requirements or the enforcement of these
requirements will have a materially adverse impact on our business.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and
regulations, we may be liable for the cost to remove or remediate certain
hazardous or toxic substances at our shopping centers. These laws often impose
liability without regard to whether we knew of, or were responsible for, the
presence of the hazardous or toxic substances. The cost of required remediation
and our liability for remediation could exceed the value of the property and/or
our aggregate assets. The presence of such substances, or the failure to
properly remediate such substances, may adversely affect our ability to sell or
rent the property or borrow using the property as collateral. We have several
properties that will require or are currently undergoing varying levels of
environmental remediation. We have no reason to believe that these remediations
will have a material financial effect on us due to our financial statement
reserves and insurance programs designed to mitigate the cost of remediation, as
well as various state-regulated programs that shift the responsibility and cost
to the state.
EMPLOYEES
At December 31, 2001, we had 79 full-time employees. Our employees are
not represented by any collective bargaining group, and we consider our
relations with our employees to be good.
ITEM 2. PROPERTIES
We maintain our principal executive and management office at 1696 N.E.
Miami Gardens Drive, North Miami Beach, Florida in the Shops at Skylake. As of
December 31, 2001, our portfolio consisted primarily of shopping centers
anchored by supermarket and other necessity-oriented retailers and contained an
aggregate of approximately 8.6 million square feet of gross leasable area. Other
than our leasehold interests in our Green Oaks, Parkwood and Richwood shopping
centers, each of which is located in Dallas, Texas, all of our other properties
are owned in fee simple. In addition, some of our properties are subject to
mortgages as described under "Management's Discussion and Analysis of Financial
9
Condition and Results of Operations - Mortgage Indebtedness." The following
table provides a brief description of each of our properties as of December 31,
2001:
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
SUPERMARKET AND OTHER NECESSITY-ORIENTED RETAILER ANCHORED CENTERS
FLORIDA (43 PROPERTIES)
NORTH FLORIDA (9 PROPERTIES)
Atlantic Village June 100,559 25 $973,466 $10.06 96.2% Publix, Jo-Ann
ATLANTIC BEACH 1995 Fabrics, Dollar Tree
Beauclerc May 71,127 12 $221,316 $6.33 49.2% Big Lots, Walgreens*
Village 1998
JACKSONVILLE
Commonwealth February 81,467 16 $620,673 $8.00 95.2% Winn-Dixie,
JACKSONVILLE 1994 Rent-A-Center, Pizza
Hut
Forest Village April 71,526 17 $681,434 $10.21 93.3% Publix, Video
TALLAHASSEE 2000 Warehouse, Waffle
House
Fort Caroline January 74,546 14 $523,424 $7.29 96.3% Winn-Dixie, Eckerd*
JACKSONVILLE 1994 (Bealls Outlet),
McDonald's
Losco Corners May 8,700 7 $106,972 $19.46 63.2% Winn-Dixie (5)
JACKSONVILLE 2000
Mandarin Landing December 141,565 37 $1,216,888 $8.85 97.1% Publix, Office
JACKSONVILLE 1999 Depot, Eckerd, Aqua
Zoo
Monument Point January 75,128 13 $490,576 $6.53 100.0% Winn-Dixie, Eckerd
JACKSONVILLE 1997
Oak Hill December 78,492 19 $538,533 $6.86 100.0% Publix, Walgreens*
JACKSONVILLE 1995 (Bonus Dollar)
CENTRAL FLORIDA (6 PROPERTIES)
Eustis Square October 126,791 27 $740,643 $6.68 87.4% Publix, Walgreens*
EUSTIS 1993 (Bealls Outlet),
Bealls Department
Store
Forest Edge December 68,631 12 $487,284 $7.10 100.0% Winn-Dixie, Auto
ORLANDO 1996 Zone, Rent-A-Center
Kirkman Shoppes September 88,820 32 $1,548,387 $17.43 100.0% Eckerd
ORLANDO 2001
Lake Mary December 339,084 69 $3,446,132 $10.60 95.9% Albertsons, Kmart,
ORLANDO 1988 Sun Star Theatres,
Euro Fitness
Park Promenade January 125,818 27 $1,169,076 $9.29 100.0% Publix, Blockbuster
ORLANDO 1999 Orange County Library
Walden Woods January 75,336 11 $490,009 $6.59 98.7% Winn-Dixie*,
PLANT CITY 1999 Walgreens
10
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
FLORIDA WEST COAST (8 PROPERTIES)
East Bay Plaza July 85,426 22 $467,699 $9.49 57.7% Albertsons (5), Family
LARGO 1993 Dollar, Hollywood Video
Lake St. September 57,015 8 $539,625 $9.46 100.0% Kash N' Karry
Charles 2001
TAMPA
Marco Town September 109,574 45 $1,497,255 $16.41 83.4% Publix
Center 2001
MARCO ISLAND
Mariners September 85,507 15 $621,791 $8.03 90.6% Kash N' Karry
Crossing 2001
SPRING HILL
Ross Plaza September 85,903 20 $708,554 $8.70 94.8% Walgreens, Ross
TAMPA 2001 Dress for Less
Shoppes of December 84,705 22 $800,168 $9.50 100.0% Publix, Bealls Outlet
North Port 2000
NORTH PORT
Skipper Palms September 86,503 17 $734,799 $8.49 100.0% Winn-Dixie
TAMPA 2001
Summerlin June 109,156 28 $1,053,100 $10.49 91.9% Winn-Dixie, Eckerd
Square 1998
FORT MYERS
SOUTH FLORIDA (20 PROPERTIES)
Bird Ludlum August 192,282 50 $2,665,909 $13.86 100.0% Winn-Dixie, Eckerd,
MIAMI 1994 Vision Works,
Blockbuster
Bluff Square September 132,395 51 $1,444,202 $11.11 98.2% Publix, Walgreens
JUPITER 2001
Boca Village September 94,111 24 $1,276,683 $13.66 99.3% Publix, Eckerd
BOCA RATON 2001
Boynton Plaza September 99,324 30 $875,810 $9.92 88.9% Publix, Eckerd
BOYNTON BEACH 2001
Cashmere Corners September 89,234 18 $668,002 $7.67 97.6% Albertsons,
PORT ST. LUCIE 2001 Blockbuster
Jonathan's Landing September 26,820 12 $467,809 $17.44 100.0% Winn-Dixie, Kmart
JUPITER 2001
Lantana Village January 176,110 26 $1,106,674 $6.32 99.4% Blockbuster,
LANTANA 1998 Albertsons (5)
Oakbrook September 225,073 35 $1,714,194 $8.84 86.2% Publix, Eckerd,
PALM BEACH GARDENS 2001 Roly's Bistro,
Jacobson Department
Store, Inc.
Pine Island August 254,907 48 $2,320,694 $9.13 99.7% Publix, Home Depot
DAVIE 1999 Design Expo, Rite Aid*
(Bealls Outlet)
11
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Plaza Del Rey August 50,146 21 $608,630 $12.84 94.5% Navarro Pharmacy
MIAMI 1991
Point Royale July 209,863 26 $1,271,004 $6.40 94.6% Winn-Dixie, Best
MIAMI 1995 Buy, Eckerd
Pompano January 80,697 1 $540,000 $6.69 100.0% Lowe's
POMPANO BEACH 2001
Prosperity Center September 122,106 9 $1,795,043 $14.70 100.0% Office Depot, Barnes
PALM BEACH GARDENS 2001 & Noble, Bed Bath &
Beyond, Carmine's,
TJ Maxx
Ridge Plaza August 155,204 29 $1,312,764 $8.75 96.7% AMC Theatre,
DAVIE 1999 Kabooms, Republic
Security Bank, Uncle
Funnys, Round Up
Ryanwood November 114,925 33 $984,548 $8.95 95.7% Publix, Bealls
VERO BEACH 2001 Outlet,
Books-A-Million
Sawgrass Promenade September 107,092 29 $1,197,243 $11.28 99.1% Publix, Blockbuster,
DEERFIELD BEACH 2001 Walgreens
Shops at Skylake August 174,199 47 $2,553,315 $15.17 96.6% Publix, Goodwill,
NORTH MIAMI 1997 Radio Shack, First
BEACH Union, Blockbuster
University Mall September 326,307 45 $642,148 $10.20 19.3% Eckerd
FT. LAUDERDALE 2001
West Lakes Plaza November 100,747 27 $1,065,814 $10.58 100.0% Winn-Dixie, Navarro
MIAMI 1996 Pharmacy
Westburry September 33,706 21 $542,477 $16.09 100.0% Pizza Hut, Dairy
MIAMI 2001 Queen
TEXAS (32 PROPERTIES)
HOUSTON (15 PROPERTIES)
Albertsons September 15,542 8 $230,865 $14.85 100.0% Albertsons (5),
Bissonnet 2001 Blockbuster, Dollar
HOUSTON Tree
Albertsons September 36,611 16 $526,039 $16.33 88.0% Albertsons (5), Dollar
Spring Shadows 2001 Tree, Hallmark
HOUSTON
Barker Cypress December 61,720 10 $589,685 $11.69 81.7% H.E. Butt Grocery
HOUSTON 2001
Beechcrest September 90,797 15 $793,105 $8.89 98.3% Randalls* (Viet Ho),
HOUSTON 2001 Walgreens*
Benchmark September 58,384 5 $708,125 $12.13 100.0% Bally's Fitness, IHOP
Crossing 2001
HOUSTON
Colony Plaza September 26,530 15 $430,467 $18.61 87.2% Starbucks, GNC
HOUSTON 2001
12
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Copperfield September 160,695 36 $915,799 $11.77 48.4% JoAnn Fabrics
HOUSTON 2001
Grogan's Mill September 118,398 28 $1,380,290 $11.75 99.2% Randall, Petco
HOUSTON 2001
Hedwig September 69,504 13 $943,878 $13.58 100.0% Warehouse Music, Ross
HOUSTON 2001 Dress For Less
Highland Square September 64,171 27 $1,016,282 $15.88 99.7% Radio Shack, Smoothie
HOUSTON 2001 King
Market at First September 107,301 36 $1,562,942 $15.28 95.3% Kroger (5), TJ Maxx,
Colony 2001 Eckerd
HOUSTON
Mason Park September 160,047 39 $1,446,717 $12.05 75.0% Kroger (5), Palais
HOUSTON 2001 Royal, Petco,
Walgreens* (Eloise
Collectibles)
Mission Bend September 129,675 26 $1,077,346 $9.04 91.9% Randalls, Factory 2 U
HOUSTON 2001 Stores, Inc.
Steeplechase September 104,002 26 $1,145,250 $11.19 98.4% Randalls
HOUSTON 2001
Woodforest September 12,741 4 $205,180 $16.10 100.0% Hollywood Video
HOUSTON 2001
DALLAS (15 PROPERTIES)
Benbrook(6) September 247,422 25 $495,512 $3.04 65.9% Sutherland Lumber,
FORT WORTH 2001 JoAnn Fabrics
Green Oaks September 65,091 32 $524,320 $11.41 70.6% Kroger (5)
DALLAS 2001
Melbourne Plaza September 47,517 18 $455,126 $11.06 86.6% Souper Salad, Family
DALLAS 2001 Christian
Minyard's September 58,695 1 $375,648 $6.40 100.0% Minyard's
GARLAND 2001
Northwest September 33,366 17 $314,241 $10.85 86.8% Blockbuster
Crossing 2001
DALLAS
Parkwood September 81,590 20 $962,061 $13.38 88.1% Albertsons (5), Planet
DALLAS 2001 Pizza, Hollywood
Video, Starbucks
Plymouth East September 56,435 10 $235,742 $4.18 100.0% Kroger
DALLAS 2001
Plymouth North September 444,221 59 $1,645,057 $7.18 51.6% Blockbuster, Dollar
DALLAS 2001 General, Thrift of
America, US Postal
Service
Plymouth South September 49,102 7 $285,080 $6.77 85.8% Betcha Bingo
DALLAS 2001
Plymouth West September 178,810 16 $687,601 $4.33 88.8% Tok Won Kim, Bargain
DALLAS 2001 City
13
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Richwood September 54,872 28 $746,117 $16.32 83.3% Albertsons (5),
DALLAS 2001 Blockbuster
Rosemeade Park September 49,554 19 $572,423 $13.49 85.6% Kroger (5),
DALLAS 2001 Blockbuster, Allure
Health and Spa
Sterling Plaza September 65,205 16 $890,762 $14.13 96.7% Bank One, Warehouse
DALLAS 2001 Entertainment
Townsend September 140,436 39 $1,084,501 $9.14 84.5% Albertsons (5), Stage
DESOTO 2001 Store, Victory Gym,
Tutor Time
Village Park September 44,387 12 $420,797 $16.23 58.4% Petco, Leather Direct
DALLAS 2001
SAN ANTONIO (2 PROPERTIES)
Bandera Festival September 189,438 31 $1,297,264 $8.69 78.8% Eckerd*, Blockbuster,
SAN ANTONIO 2001 Kmart
Wurzbach September 59,771 3 $170,729 $2.86 100.0% Albertsons
SAN ANTONIO 2001
ARIZONA (3 PROPERTIES)
Big Curve September 126,402 32 $1,180,903 $9.54 97.9% Albertsons (5),
YUMA 2001 Walgreens, Miller's
Outpost
Park Northern September 126,852 27 $719,934 $6.43 88.3% Safeway, Bealls,
PHOENIX 2001 Showbiz Pizza
Southwest September 78,398 17 $576,820 $7.36 100.0% Food City, Walgreens
Walgreens 2001
PHOENIX
TENNESSEE (1 PROPERTY)
McMinn Plaza September 107,200 9 $560,307 $7.18 72.8% Ingles
ATHENS 2001
- ---------------------------- --------- ----- ----------- ------ -------
TOTAL/WEIGHTED AVERAGE 8,517,509 1,839 $71,903,682 $9.80 86.1%
SUPERMARKET AND ========= ===== =========== ====== =======
NECESSITY-ORIENTED RETAILER
ANCHORED CENTERS (79
PROPERTIES)
OTHER COMMERCIAL PROPERTIES
- ---------------------------
El Novillo September 10,000 1 $136,704 $13.67 100.0% Jumbo Buffet
MIAMI BEACH 2001
Epsilon September 18,707 5 $275,656 $14.74 100.0% Fat Tuesdays
WEST PALM BEACH 2001
EQY Building(7) September 28,780 15 $376,734 $16.00 81.8%
MIAMI BEACH 2001
14
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Mandarin May 52,880 534 N/A N/A 98.7%
Mini-storage 1994
JACKSONVILLE
Montclair August 9,375 20 N/A N/A 100.0%
Apartments 1998
MIAMI BEACH
Coral Way N.E. July -- -- N/A N/A -- (4.05 acres)
Land(8) 1999
MIAMI
- ---------------------------- --------- ----- ----------- ------ -------
TOTAL/WEIGHTED AVERAGE 8,637,251 2,414 $72,692,776 $9.84 86.1%
(85 PROPERTIES) (9) ========= ===== =========== ====== =======
- --------------------
(1) For purposes of this table, all properties formerly owned by CEFUS or UIRT
are deemed to have been acquired by us at the time we acquired CEFUS and
UIRT.
(2) Number of tenants includes both leased and vacant units.
(3) Calculated by annualizing the tenant's monthly rent payment at December 31,
2001, excluding expense reimbursements, percentage rent payments and other
charges.
(4) Includes all tenants who occupy more than 10,000 square feet, as well as
any supermarket tenants which are on an adjacent or contiguous, separately
owned parcel and do not pay any rent or expense recoveries to us.
(5) This tenant is on an adjacent or contiguous, separately owned parcel and
does not pay rent or any expense recoveries to us.
(6) Our Benbrook property was sold on February 28, 2002. See "Business--Recent
Developments."
(7) The Equity One Building was sold on February 1, 2002. See "Business--Recent
Developments."
(8) Future development property, located at the northeast corner of S.W. 147th
Avenue and Coral Way in Miami-Dade County, Florida.
(9) Weighted average minimum rent per leased square foot and weighted average
percent leased have been calculated excluding Mandarin Mini-storage,
Montclair Apartments and Coral Way N.E. land.
* Indicates a tenant that has closed its 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 parentheses.
MAJOR TENANTS
The following table sets forth as of December 31, 2001, the gross
leasable area ("GLA") of our 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.) 1,860,342 2,217,672 3,309,144 7,387,158
Percentage of Total Leased GLA 25.2% 30.0% 44.8% 100.0%
15
The following table sets forth as of December 31, 2001, the annual
minimum rent of our 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") $11,325,398 $14,539,452 $46,827,926 $72,692,776
Percentage of Total AMR 15.6% 20.0% 64.4% 100.0%
The following table sets forth as of December 31, 2001 information
regarding leases with our ten largest and all other remaining tenants:
ANNUALIZED PERCENT OF
MINIMUM RENT AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF AT DECEMBER ANNUALIZED MINIMUM RENT
TENANT LEASES (SQUARE FEET) TOTAL GLA 31, 2001 MINIMUM RENT PER SQUARE FOOT
- ----------------------- ---------- ------------- ---------- ------------ ------------ ---------------
Publix 16 647,634 7.6% $ 4,004,304 5.5% $ 6.18
Winn-Dixie 11 503,931 5.9% 3,191,701 4.4% 6.33
Randalls 4 199,223 2.3% 1,431,823 2.0% 7.19
Kmart 3 257,768 3.0% 1,268,768 1.7% 4.92
Eckerd 13 130,979 1.5% 1,063,720 1.4% 8.12
Walgreens 10 154,996 1.8% 1,031,839 1.4% 6.66
Blockbuster 11 63,116 0.7% 989,016 1.4% 15.67
Albertsons 4 177,544 2.1% 868,251 1.2% 4.89
Kash N' Karry 2 94,610 1.1% 726,425 1.0% 7.68
Bed, Bath & Beyond 1 37,525 0.4% 562,875 0.8% 15.00
------ --------- ----- ------------ ------ ------
SUBTOTAL/AVERAGE 75 2,267,326 26.4% 15,138,722 20.8% 6.68
Remaining Tenants 1,540 5,119,832 59.7% 57,554,054 79.2% 11.24
------ --------- ----- ------------ ------ ------
TOTAL/AVERAGE 1,615 7,387,158 86.1% $ 72,692,776 100.0% $ 9.84
====== ========= ===== ============ ====== ======
LEASE EXPIRATIONS
The following table sets forth the anticipated expirations of our
tenant leases as of December 31, 2001 (excluding renewal options of Mandarin
Mini-storage and Montclair Apartments) for each year from 2002 through 2011 and
thereafter:
PERCENT OF
ANNUALIZED AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF MINIMUM RENT ANNUALIZED MINIMUM RENT PER
YEAR LEASES (SQUARE FEET) TOTAL GLA AT EXPIRATION MINIMUM RENT SQUARE FOOT
- ----------------------- ---------- ------------ ----------- ------------ ------------- -----------------
2002 316 716,612 8.4% $ 9,380,328 12.4% $ 13.09
2003 335 1,081,683 12.6% 10,855,309 14.3% 10.04
2004 335 964,056 11.2% 10,917,544 14.4% 11.32
2005 226 872,899 10.2% 8,806,262 11.6% 10.09
2006 183 854,401 10.0% 9,330,902 12.3% 10.92
2007 47 430,491 5.0% 4,108,437 5.4% 9.54
2008 33 268,914 3.1% 3,651,016 4.8% 13.58
2009 25 126,614 1.5% 2,013,378 2.7% 15.90
2010 46 265,674 3.1% 2,804,655 3.7% 10.56
2011 21 393,061 4.6% 2,893,753 3.8% 7.36
Thereafter 48 1,412,753 16.4% 11,159,987 14.6% 7.90
------- --------- ------ ------------ ------- -------
SUB-TOTAL/AVERAGE 1,615 7,387,158 86.1% 75,921,571 100.0% 10.28
Vacant 245 1,187,838 13.9% -- 0.0% 0.00
------- --------- ------ ------------ ------- -------
TOTAL/AVERAGE 1,860 8,574,996 100.0% $75,921,571 100.0% $ 8.85
======= ========= ====== ============ ======= =======
16
Historically, we have not incurred substantial costs associated with
tenant improvements relating to lease expirations or renewals. Additionally,
because most leasing activities are performed in-house, we have not historically
incurred substantial costs associated with leasing commissions. No assurance can
be given that such expenses will not increase in the future.
INSURANCE
Our tenants are generally responsible under their leases for providing
adequate insurance on the property they lease. We believe that our properties
are covered by adequate fire, flood and property insurance, all provided by
reputable companies. However, certain of our 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 our
opinion, are not economically justifiable.
JOINT VENTURE INVESTMENTS
As of December 31, 2001, we owned non-controlling interests in three
unconsolidated joint ventures, as follows:
o We own a 50.1% interest in the joint venture which owns Park
Place, a retail shopping center located in Plano, Texas that
was 100% occupied as of December 31, 2001. We plan to develop
two parcels adjacent to property at a cost of $2.6 million
with the target completion date of December 2003. The
property is encumbered by a floating-rate loan with a balance
of $14.0 million as of December 31, 2001 that matures in April
2002 and is guaranteed by CEFUS, our wholly-owned subsidiary.
Discussions are currently underway for replacement financing
on comparable terms.
o We own a 50% interest in the joint venture which owns City
Centre, an office/rental center located in Palm Beach Gardens,
Florida that was 95% occupied as of December 31, 2001. The
property includes a parcel of land targeted for future office
development. It is encumbered by an 8.54% fixed-rate mortgage
loan with a balance of $13.1 million as of December 31, 2001
that matures in April 2010.
o We own a 50% interest in the joint venture which owns Oaks
Square, a retail center located in Gainesville, Florida that
was 100% occupied as of December 31, 2001. The property is
encumbered by a 7.63% fixed-rate mortgage loan with a balance
of $16.8 million as of December 31, 2001 that matures in
December 2010.
ITEM 3. LEGAL PROCEEDINGS
Neither our properties nor we are subject to any material litigation.
Furthermore, to the best of our knowledge, except as described above with
respect to environmental matters, there is no litigation threatened against us
or any of our 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 our business, financial
condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for stockholder vote during the fourth
quarter of 2001.
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
MARKET INFORMATION AND DIVIDENDS
Our common stock began trading on the New York Stock Exchange, or NYSE,
on May 18, 1998, under the symbol "EQY." On March 6, 2002, we had 389
stockholders of record representing 4,269 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 us:
DISTRIBUTIONS
HIGH LOW DECLARED
--------- --------- -------------
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
First Quarter, 2001 $ 11.0000 $ 9.7000 $ 0.26
Second Quarter, 2001 12.5300 10.0100 0.26
Third Quarter, 2001 11.9800 10.6400 0.27
Fourth Quarter, 2001 14.1000 11.5200 0.27
Dividends paid during 2001 and 2000 totaled $18.6 million and $13.2
million, respectively. Included in the $0.32 distribution for the fourth quarter
of 2000 was a special distribution of $0.06 attributable to the $1.5 million
termination fee we received in connection with General Cinema's termination of
its lease at Lake Mary. Future declarations of dividends will be made by us at
the discretion of our board of directors and will depend upon our earnings,
financial condition and such other factors as our board of directors deems
relevant. In order to qualify for the beneficial tax treatment accorded to real
estate investment trusts under the Internal Revenue Code of 1986, or the Code,
we are currently required to make distributions to holders of our shares in an
amount at least equal to 90% of our "real estate investment trust taxable
income," as defined in Section 857 of the Code.
SALE OF UNREGISTERED SECURITIES
On August 17, 2001, we sold 1.3 million unregistered shares of our
common stock to Alony Hetz Properties & Investments Ltd. at a price of $10.875
per share, resulting in net proceeds of $14.1 million. On September 17, 2001, we
sold 650,000 unregistered shares of our common stock to Alony Hetz Properties &
Investments Ltd.at a price of $10.875 per share, resulting in net proceeds of
$7.1 million.
On September 18, 2001 we issued an aggregate of 503,331 unregistered
shares of our common stock to two of our officers in connection with their
exercises of previously granted options to purchase 503,331 shares of our common
stock at a price of $10.00 per share. We received notes totaling $5.0 million in
payment of the full exercise price of these options. The notes bear interest at
5% per annum and mature on September 30, 2006. Each of the officers has pledged
his shares received upon exercise as security for his obligations under his
note.
On September 20, 2001, we exchanged 10.5 million unregistered shares of
our common stock with affiliates of First Capital Realty Inc. in return for all
of the shares of common stock in CEFUS.
During 2001, we issued 145,900 unregistered shares of our common stock
to our employees and directors in consideration of services rendered to our
company by them.
Each of these issuances was exempt from registration pursuant to the
exemption provided by Section 4(2) of the Securities Act of 1933. In each case
we exercised reasonable care to insure that the purchasers did not acquire these
shares with a view to their distribution.
18
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated operating data and balance sheet data set
forth below have been derived from our consolidated financial statements,
including the consolidated financial statements for the years ended December 31,
2001, 2000 and 1999 contained elsewhere herein. The consolidated financial
statements as of and for the years ended December 31, 2001, 2000 and 1999 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 in this annual report.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- -------- -------
(in thousands other than per share, percentage and ratio data)
STATEMENT OF OPERATIONS DATA:
Total revenues (1)........................... $ 82,987 $ 49,621 $ 27,163 $ 22,994 $ 20,545
========= ========= ========= ======== ========
Property operating expenses.................. 24,936 13,661 7,082 5,965 5,245
Rental property depreciation and
amortization............................... 11,114 6,284 3,502 2,881 2,392
Interest expense and amortization of
deferred financing fees.................... 22,243 12,807 5,086 5,014 5,681
Put option expense........................... -- -- -- 1,320 --
General and administrative expenses.......... 3,553 2,559 1,622 1,381 1,029
--------- --------- --------- -------- --------
Total expenses............................... 61,846 35,311 17,292 16,561 14,347
========= ========= ========= ======== ========
Net income................................... $ 18,721 $ 12,555 $ 13,589 $ 9,065 $ 6,198
========= ========= ========= ======== ========
Basic earnings per share .................... $ 0.83 $ 0.88 $ 1.26 $ 1.01 $ 0.96
Diluted earnings per share .................. 0.83 0.87 1.26 1.00 0.87
BALANCE SHEET DATA:
Total rental properties, after accumulated
depreciation............................. $ 627,687 $ 483,699 $ 204,919 $138,623 $119,250
Total assets................................. 668,536 542,817 212,497 152,955 126,903
Mortgage notes payable....................... 345,047 280,396 97,752 67,145 71,004
Total liabilities............................ 390,269 321,267 121,068 71,737 73,323
Minority interest in CEFUS................... -- 33,887 -- -- --
Shareholders' equity......................... 278,267 187,663 91,429 81,218 53,580
OTHER DATA:
EBITDA to interest coverage ratio (2)........ 2.5 2.6 3.6 3.1 2.5
Funds from operations (3).................... $ 30,931 $ 19,044 $ 13,354 $ 10,598 $ 8,576
Cash flows from:.............................
Operating activities..................... 32,804 15,506 20,169 3,697 8,843
Investing activities..................... (44,298) (11,165) (62,239) (23,824) (6,173)
Financing activities..................... 10,053 (2,421) 40,903 19,123 (2,023)
GLA (square feet) (at end of period)......... 8,637 3,169 2,836 2,078 2,004
Occupancy (at end of period)................. 86% 95% 95% 95% 93%
Dividends per share.......................... $ 1.06 $ 1.10 $ 1.02 $ 1.00 $ 0.95
- --------------------------
(1) Excludes real estate sales.
(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 2001 ratio
excludes a $609 loss on the sale of real estate from EBITDA, the 2000 ratio
excludes a $63 loss on the sale of real estate from EBITDA, the 1999 ratio
excludes a $3,800 gain on the
19
sale of real estate from EBITDA, and the 1998 ratio excludes a $2,600 gain
on the sale of real estate and the $1,300 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 our operating performance, as an
alternative to cash flows from operating activities (calculated in
accordance with GAAP) or as a measure of liquidity. We believe 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) We define 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. We believe that FFO should be considered along
with, but not as an alternative to, net income as defined by GAAP as a
measure of our operating performance. Our calculation of FFO may not be
comparable to similarly titled measures reported by other companies. FFO
does not represent cash generated from operating activities in accordance
with GAAP and is not necessarily indicative of funds available to fund our
needs. Our calculation of FFO may not be comparable to similarly titled
measures reported by other companies. We calculate FFO as follows:
YEAR ENDED DECEMBER 31,
2001 2000 1999* 1998* 1997*
-------- -------- ------- ------- -------
(in thousands)
Net income........................ $ 18,721 $ 12,555 $ 13,589 $ 9,065 $ 6,198
Depreciation and amortization..... 11,202 6,312 3,483 2,845 2,378
Depreciation attributable to
joint ventures.................. 238 33 -- -- --
Extraordinary item - prepayment
penalty......................... 1,546 -- -- -- --
Deferred income tax (benefit)
expense......................... (374) 1,071 -- -- --
Put option expense................ -- -- -- 1,320 --
Minority interest in consolidated
subsidiary...................... 99 -- 96 -- --
Interest on convertible
partnership units............... 259 20 -- -- --
Loss (gain) on sale of real estate 609 63 (3,814) (2,632) --
Minority interest in CEFUS share
of FFO adjustments.............. (1,369) (1,010) -- -- --
-------- -------- ------- ------- -------
FFO............................... $ 30,931 $ 19,044 $13,354 $10,598 $ 8,576
======== ======== ======= ======= =======
----------------------------
* Restated to conform to NAREIT's current FFO definition.
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, WHICH ARE INCLUDED ELSEWHERE
IN THIS ANNUAL REPORT.
We are a self-administered, self-managed real estate investment trust,
or REIT, that principally acquires, renovates, develops and manages community
and neighborhood shopping centers primarily anchored by supermarkets or other
necessity-oriented retailers such as drug stores or discount retail stores. As
of December 31, 2001, our portfolio consisted of 85 properties, contained an
aggregate of 8.6 million square feet of gross leasable area, and was 86.1%
occupied based on gross leasable area.
In September 2001, we made two strategic acquisitions which nearly
tripled the size of our property portfolio. On September 20, 2001, we acquired
Centrefund Realty (U.S.) Corporation, or CEFUS, a wholly-owned subsidiary of one
of our affiliates, First Capital Realty Inc., an Ontario corporation whose
shares are traded on the Toronto Stock Exchange (TSE:FCR). As a result of this
transaction, we acquired 28 shopping centers and other retail properties which
contained an aggregate of approximately 3.2 million square feet of gross
leasable area and assumed additional indebtedness in the amount of approximately
$157.0 million. Because of the beneficial ownership of approximately 68% of
First Capital's common stock by Gazit-Globe (1982), Ltd., our majority
beneficial stockholder, the acquisition of CEFUS has been accounted for on a
push-down basis and partially in a manner similar to a pooling of interests. The
"push-down" component of the accounting treatment incorporates Gazit-Globe
(1982) Ltd.'s fair market valuation of the CEFUS assets and liabilities on
August 18, 2000. Our results for the period between August 18, 2000, the day
that Gazit-Globe acquired its beneficial interest in First Capital, and
September 19, 2001 have been restated to consolidate our operations with those
of CEFUS subject to a 31.93% minority interest in CEFUS. Our results from
September 20, 2001, the day we acquired CEFUS, eliminate this minority interest.
For a more complete discussion of this accounting treatment and the specific
impact it has had on our results of operations, see Note 1 to our consolidated
financial statements included elsewhere in this annual report.
On September 21, 2001, we completed our acquisition of United Investors
Realty Trust, or UIRT, a Texas real estate investment trust. As a result of this
transaction, we acquired 22 shopping centers which contained an aggregate of
approximately 2.0 million square feet of gross leasable area and assumed
additional indebtedness in the aggregate amount of approximately $80.0 million.
The acquisition of UIRT was accounted for using the purchase method of
accounting and the results of UIRT are included in our consolidated financial
statements from the date we acquired it.
Our real estate portfolio has grown substantially during 2001 as a
result of these acquisitions. We intend to continue to expand our business by
acquiring and developing additional neighborhood and community shopping centers
in the near future primarily through a combination of individual property
acquisitions, development of new properties, property portfolio purchases and
acquisitions of other REITs and real estate companies.
RESULTS OF OPERATIONS
We derive substantially all of our revenues from rents received from
tenants under existing leases on each of our properties. These revenues include
fixed rents, recoveries of expenses that we have incurred and which we pass
through to the individual tenants and percentage rents that are based on
specified percentages of tenants' revenues, in each case as provided in the
particular leases.
Our primary cash expenses consist of our property operating expenses,
which include real estate taxes, repairs and maintenance, payroll, insurance,
utilities and other expenses, general and administrative expenses, which include
payroll, office expenses, professional fees and other administrative expenses,
and interest expense, primarily on mortgage indebtedness. In addition, we incur
substantial non-cash charges for depreciation and amortization on our
properties. We also capitalize certain expenses, such as taxes and interest,
incurred in respect of property under development or redevelopment until the
property is ready for its intended use.
21
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
Total revenues increased by $33.4 million, or 67.2%, to $83.0 million
for the year ended December 31, 2001 from $49.6 million for the year ended
December 31, 2000. This increase was primarily due to an increase in revenues of
$22.5 million resulting from the consolidation of the results of CEFUS for the
entire year of 2001 compared to the period from August 18, 2000 to December 31,
2000 for the prior year and an additional $6.3 million of revenues from the
acquisition of UIRT in September 2001. In addition, revenues increased by $2.5
million for the year ended December 31, 2001 compared to 2000 as a result of our
acquisition of two shopping centers and the completion of development projects
in 2001 and the latter part of 2000. Same property revenues increased by $1.2
million, or 3.7%, to $33.8 million for the year ended December 31, 2001 from
$32.6 million for the year ended December 31, 2000 as a result of higher rental
rates and the completion of additions to some of our properties. Finally,
investment revenue increased by $345,000 and management fees, consisting
primarily of real estate services provided to third parties, increased by
$567,000 for the year ended December 31, 2001 compared to the year ended
December 31, 2000.
Property operating expenses increased by $11.3 million, or 82.5%, to
$24.9 million for the year ended December 31, 2001 from $13.7 million for the
year ended December 31, 2000. The increase in property operating expenses was
primarily the result of $6.8 million of increased operating expenses from the
consolidation of CEFUS for the entire year 2001 compared to the shorter period
in 2000 and $2.0 million of operating expenses for UIRT from its acquisition
date. In addition, property operating expenses increased by $401,000 for the
year ended December 31, 2001 compared to the year ended December 31, 2000 as a
result of our acquisition of two shopping centers and the completion of
development projects in 2001 and the latter part of 2000. Same property
operating expenses increased by $459,000, or 5.2%, to $9.3 million for the year
ended December 31, 2001 from $8.9 million for the year ended December 31, 2000
as a result of higher operating costs and the completion of additions to some of
our properties. Finally, property management expenses increased by $1.6 million
for the year ended December 31, 2001 compared to the year ended December 31,
2000 as a result of managing a substantially larger portfolio of properties, of
which $1.1 million was due to an increase in employee salaries and benefits.
Rental property depreciation and amortization expense increased by $4.8
million, or 76.9%, to $11.1 million for the year ended December 31, 2001, from
$6.3 million for the year ended December 31, 2000. The increase resulted
primarily from depreciation and amortization expenses attributable to CEFUS and
UIRT in the amounts of $3.4 million and $731,000, respectively, and $683,000
attributable to our acquisition of new properties and completion of new
development projects.
Interest and amortizatiion of deferred financing fees increased by $9.4
million, or 73.7%, to $22.2 million for the year ended December 31, 2001 from
$12.8 million for the year ended December 31, 2000. The increase in interest
expense was primarily due to interest of $7.0 million and $1.4 million on
indebtedness assumed in connection with the acquisitions of CEFUS and UIRT,
respectively. In addition, interest expense increased for the year ended
December 31, 2001 as compared to the year ended December 31, 2000 as a result of
increased mortgage interest of $1.3 million from the assumption of two loans,
the closing of two new loans and interest on convertible partnership units of
$218,000, and decreased capitalized interest expense of $79,000. These increased
interest expenses were partially offset by a reduction of $644,000 due to
decreased borrowing under our credit facility with City National Bank of
Florida.
General and administrative expenses increased by $994,000, or 38.8%, to
$3.6 million for the year ended December 31, 2001 from $2.6 million for the year
ended December 31, 2000. The increase was primarily the product of our growth.
Included in these expenses, compensation expenses increased by $245,000,
directors' fees increased by $136,000, professional fees increased by $134,000,
general and administrative costs increased by $76,000 related to inclusion of
CEFUS for a full twelve months, and all other costs increased $303,000.
Minority interest in CEFUS increased by $1.0 million to $1.6 million
for the year ended December 31, 2001 from $603,000 for the year ended December
31, 2000. This increase was a result of the consolidation of CEFUS for the
period from January 1 to September 19, 2001, subject to a minority interest as
described above, compared to the shorter period in 2000. In addition, we
recorded extraordinary item expense of $1.5 million for the year ended December
31, 2001 as a result of the payment of a prepayment penalty in connection with
the prepayment of a loan secured by one of our properties. The increase in
equity in income of unconsolidated subsidiaries of $489,000 for the year ended
December 31, 2001 relates primarily to our interest in the three joint ventures
acquired in the CEFUS acquisition and is attributable to the inclusion of
CEFUS's results for the full year in 2001, as well as commencement of operations
at these properties upon completion of development.
22
As a result of the foregoing, net income increased by $6.2 million, or
49.1%, to $18.7 for the year ended December 31, 2001 compared to $12.6 million
for the year ended December 31, 2000.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Total revenues increased by $22.5 million, or 82.7%, to $49.6 million
for the year ended December 31, 2000 from $27.2 million for the year ended
December 31, 1999. This increase in revenue was primarily due to an increase in
rental revenues of $14.3 million resulting from the consolidation of the
operations of CEFUS for the period from August 18 to December 31, 2000. In
addition, revenues increased by $6.0 million for the year ended December 31,
2000 compared to the year ended December 31, 1999 as a result of our acquisition
of six properties and the completion of certain development projects. Same
property revenues, including a termination fee of $1.1 million, increased by
$2.0 million, or 8.3%, to $26.2 million for the year ended December 31, 2000
from $24.2 million for the year ended December 31, 1999 as a result of higher
rental rates and completion of additions to some of our properties. Finally,
investment revenue increased by $1.2 million, most of which can be attributed to
the acquisition of CEFUS, and management fees increased by $100,000 for the year
ended December 31, 2000 compared to the year ended December 31, 1999. These
increases were partially offset by a reduction of rental revenue in the amount
of $1.2 million due to the sale of one of our properties during 2000.
Property operating expenses increased by $6.6 million, or 92.9%, to
$13.7 million for the year ended December 31, 2000 from $7.1 million for the
year ended December 31, 1999. The increase in property operating expenses was
primarily the result of $4.5 million of increased operating expenses resulting
from the acquisition of CEFUS for the period from August 18 to December 31,
2000. In addition, property operating expenses increased by $1.4 million for the
year ended December 31, 2000 as compared to the year ended December 31, 1999 as
a result of our acquisition of six properties and the completion of certain
development projects. Same property operating expenses increased by $990,000, or
15.5%, to $7.4 million for the year ended December 31, 2000 from $6.4 million
for the year ended December 31, 1999 as a result of higher operating costs and
completion of additions to some of our properties, partially offset by a
reduction in operating expenses of $290,000 due to sale of one of our properties
during 2000.
Rental property depreciation and amortization expense increased by $2.8
million, or 79.4%, to $6.3 million for the year ended December 31, 2000, from
$3.5 million for the year ended December 31, 1999. The increase resulted
primarily from depreciation and amortization expenses attributable to the
acquisition of CEFUS in the amount of $2.1 million and our acquisition of new
properties and completion of new development projects in the amount of $715,000.
Interest and amoritzation of financing fees increased by $7.7 million,
or 151.9%, to $12.8 million for the year ended December 31, 2000 from $5.1
million for the year ended December 31, 1999. The increase in interest expense
was primarily due to interest of $5.4 million attributed to indebtedness assumed
in connection with the acquisition of CEFUS. In addition, 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, an increase in
interest payable with respect to our line of credit of approximately $598,000
and an increase in capitalized interest of $373,000 which reduced interest
expense.
General and administrative expenses increased by $937,000, or 57.8%, to
$2.6 million for the year ended December 31, 2000 from $1.6 million for the year
ended December 31, 1999. The increase was primarily the product of increases in
compensation costs of $748,000, directors' fees of $78,000 and general and
administrative costs related to the acquisition of CEFUS of $198,000. All other
costs decreased by $87,000.
As a result of the foregoing, net income decreased by $1.0 million, or
7.6%, to $12.6 million for the year ended December 31, 2000 compared to $13.6
million for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We anticipate that cash generated from operating activities will
provide the necessary funds on a short-term basis for our operating expenses,
interest expense and scheduled principal and interest payments on outstanding
indebtedness, recurring capital expenditures necessary to properly maintain the
shopping centers and distributions to stockholders.
During 2001, we generated cash from operations of $32.8 million,
reflecting our net income of $18.7 million plus non-cash deductions to income,
the most significant of which were depreciation and amortization of
23
$12.9 million, minority interest in CEFUS of $1.6 million and a loss on the sale
of real estate of $609,000. In addition, operating cash benefited from, among
other items, a $3.9 million reduction in restricted cash resulting from the
release of the escrow on our loan related to our Skylake property, a $1.8
million reduction in accounts and other receivables, $2.6 million decrease in
notes receivable resulting from repayments, a $1.6 million reduction in prepaid
and other assets, partially offset by an increase in deposits of $3.0 million
and a reduction in accounts payable and accrued expenses of $7.4 million.
We used $44.3 million of cash in investing activities, reflecting $37.4
million used for additions to property and $36.3 million of cash used in the
acquisition of UIRT. These uses were partially offset by sales of rental
property of $22.3 million and $6.6 million from the sale of joint venture
interests, among other items.
We generated $10.1 million in cash from financing activities primarily
reflecting approximately $9.4 million in borrowings in excess of mortgage note
repayments, $19.9 million from the sale of common stock net of stock issuance
costs and the payment of $18.6 million in cash dividends to stockholders.
For 2001 we incurred cash payments for interest, net of capitalized
interest, of $20.5 million. Capitalized interest, which includes interest for
development properties and interest incurred to finance additions and
renovations until operational, amounted to $2.1 million.
Moreover, we expect to meet long-term liquidity requirements for
maturing debt, non-recurring capital expenditures and acquisition, renovation
and development of shopping centers from excess cash generated from operating
activities, working capital reserves, additional borrowings under our existing
credit facilities, long-term secured and unsecured indebtedness and through the
issuance of additional equity or debt securities raised in the private or public
markets.
Our total mortgage notes payable at December 31, 2001 and 2000
consisted of the following:
(in thousands)
MORTGAGE NOTES PAYABLE 2001 2000
---------------------------- ---------- ----------
Fixed rate mortgage loans................................. $ 296,887 $ 243,279
Variable rate mortgage loans.............................. 48,160 37,117
---------- ----------
Total notes payable............................... $ 345,047 $ 280,396
========== ==========
Each of these loans is secured by a mortgage on one or more of certain
of our properties. As of December 31, 2001, the percentage of the total real
estate cost of our properties that was encumbered by debt was 55.9%. For a more
complete description of our mortgage indebtedness, see "--Mortgage Indebtedness"
below.
Certain of the mortgages on our properties involving an aggregate
principal amount of approximately $62 million contain prohibitions on transfers
of ownership which may have been violated by our previous issuances of common
stock or in connection with past acquisitions and may be violated by
transactions involving our capital stock in the future. If a violation were
established, it could serve as a basis for a lender to accelerate amounts due
under the affected mortgage. We are in the process of obtaining the necessary
consents from the lenders. Based on discussions with various lenders, current
credit market conditions and other factors, we believe that such consents will
be obtained or that the mortgages would not be accelerated. Accordingly, we
believe that the ultimate outcome of this matter will not have a material
adverse impact on our results of operations or financial condition.
As of December 31, 2001, we had a $20.6 million credit agreement
secured by six properties with City National Bank of Florida, of which $1.4
million was outstanding on that date. This facility accrues interest at 2.25%
over the thirty-day LIBOR rate, payable monthly, adjusted every six months, and
matures on May 4, 2002. In February 2002, the facility was reduced to an
availability of $10.8 million secured by five properties, and there was a zero
balance outstanding. This facility 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 approximately $448,000 in escrows for property taxes on the properties
comprising its collateral, thereby reducing its gross availability to
approximately $9.4 million.
24
On September 17, 2001, we entered into a $30.0 million revolving line
of credit with Bank Leumi Le-Israel B.M. This facility accrues interest at 1.25%
over the 30 or 90-day LIBOR rate, at our option, and is payable monthly or
quarterly depending on our rate selection. The facility matures on September 16,
2002, with an option to extend it an additional 180 days. Under the Bank Leumi
credit agreement, we agreed not to mortgage or encumber seven of our properties,
as amended on February 18, 2002. The outstanding balance on this facility was
$26.0 million as of December 31, 2001, and was increased to $30.0 million as of
March 1, 2002.
On February 27, 2002, we entered into a variable-rate revolving credit
facility with Wells Fargo under which we may borrow up to $29.4 million against
a borrowing base of five properties pledged to secure the facility. Borrowings
under the facility will bear interest, at our option, at the prime rate or based
on LIBOR plus a margin ranging from 1.15% if the ratio of our total liabilities
to gross asset value is less than 0.5, to 1.50% if the ratio of our total
liabilities to gross asset value is or exceeds 0.6. The entire principal amount
is due February 14, 2005. This new facility also prohibits shareholder
distributions in excess of 95% of funds for operations calculated at the end of
each fiscal quarter for the four fiscal quarters then ending. Notwithstanding
this limitation, we can make shareholder distributions to avoid income taxes on
asset sales. If a default under the facility exists, our ability to pay
dividends would be limited to the amount necessary to maintain our status as a
REIT.
The facility also contains financial covenants that require us to
maintain:
o A consolidated net worth of not less than $251.4 million plus 90% of
net proceeds of equity issuances;
o A ratio of total liabilities to gross asset value of not more than
0.65;
o A ratio of EBITDA to interest expense of not less than 1.90;
o A ratio of EBITDA to fixed charges of not less than 1.65; and
o An occupancy rate on properties in the borrowing base of not less than
85%.
We expect to commence development in early 2002 of an 84,000 square
foot shopping center on a parcel of land located at the southeast corner of S.W.
147th Avenue and Coral Way in Miami-Dade County, Florida. We anticipate the cost
of development to be approximately $10.0 million, including the $2.0 million of
costs we incurred upon the exercise of our option to purchase from several of
our affiliates all of the outstanding shares of common stock of Equity One
(Coral Way), Inc. the sole asset of which consisted of this parcel of land. We
expect to commence development in late 2002 of a 25,000 square foot drug-store
anchored shopping center on a parcel of land we already own at the northeast
corner of S.W. 147th Avenue and Coral Way in Miami-Dade County, Florida at a
total cost of $2.0 million. Development of phase three of the Shops at Skylake,
totaling approximately 105,000 square feet is anticipated to commence and be
completed in 2003 at an estimated cost of approximately $7.3 million. We expect
to fund the costs of these development projects from cash flow from operations,
borrowings under our various revolving credit facilities and other sources of
cash, including obtaining permanent debt on certain unencumbered rental
properties.
Our debt level could subject us to various risks, including the risk
that our cash flow will be insufficient to meet required payments of principal
and interest, and the risk that the resulting reduced financial flexibility
could inhibit our ability to develop or improve our rental properties, withstand
downturns in our rental income or take advantage of business opportunities. In
addition, because we currently anticipate that only a small portion of the
principal of our indebtedness will be repaid prior to maturity, it is expected
that it will be necessary to refinance the majority of our debt. Accordingly,
there is a risk that such indebtedness will not be able to be refinanced or that
the terms of any refinancing will not be as favorable as the terms of our
current indebtedness.
On August 17, 2001, we sold 1,300,000 unregistered shares of our common
stock to Alony Hetz Properties & Investments Ltd. at a price of $10.875 per
share, resulting in net proceeds of $14.1 million. On September 17, 2001, we
sold 650,000 unregistered shares of our common stock to Alony Hetz at a price of
$10.875 per share, resulting in net proceeds of $7.1 million.
On January 18, 2002, we completed a private placement of 688,000 shares
of our common stock to a limited number of accredited investors. In connection
with the private placement, we sold an aggregate of 344,000 shares of our common
stock at a price of $12.80 per share to unaffiliated investors and 344,000
shares of our
25
common stock at price of $13.05 per share to investors that are affiliates of
ours. The $8.9 million proceeds from the private placement were raised for
general corporate purposes.
In addition, on January 23, 2002, we filed a universal shelf
registration statement with the Securities and Exchange Commission, which will
permit us, from time to time, to offer and sell various types of securities,
including common stock, preferred stock, debt securities, depositary shares and
warrants, up to a value of $250 million. The registration statement provides us
additional flexibility in accessing capital markets to fund future growth and
for general corporate purposes.
We believe, based on currently proposed plans and assumptions relating
to our operations, that our existing financial arrangements, together with cash
flows from operations, will be sufficient to satisfy our cash requirements for a
period of at least twelve months. In the event that our plans change, our
assumptions change or prove to be inaccurate or cash flows from operations or
amounts available under existing financing arrangements prove to be insufficient
to fund our expansion and development efforts our to the extent we discover
suitable acquisition targets the purchase price of which exceed our existing
liquidity, we would be required to seek additional sources of financing. There
can be no assurance that any additional financing will be available on
acceptable terms, or at all and any equity financing could be dilutive to
existing shareholders. If adequate funds are not available, our business
operations could be materially adversely affected.
We believe that we qualify and intend to qualify as a REIT under the
Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all
or a portion of our distributions to stockholders. As distributions have
exceeded taxable income, no provision for federal income taxes has been made.
While we intend to continue to pay dividends to our stockholders, we also will
reserve such amounts of cash flow as we consider necessary for the proper
maintenance and improvement of our real estate, while still maintaining our
qualification as a REIT.
MORTGAGE INDEBTEDNESS
The following table sets forth certain information regarding our
mortgage indebtedness related to our properties as of December 31, 2001:
BALANCE AT
DECEMBER INTEREST BALANCE DUE
31, 2001 RATE(1) MATURITY DATE AT MATURITY
------------ ---------- ------------- ------------
(in thousands)
FIXED RATE MORTGAGE DEBT
Ft. Caroline $2,098 9.350% April 2002 $2,078
Village by the Parks 3,723 8.180% June 2002 3,687
Eustis Square 4,474 9.000% July 2002 4,344
Forest Edge 1,646 6.900% October 2002 1,567
Lantana 3,953 6.950% March 2005 3,484
Benchmark 3,466 9.250% July 2005 3,170
Sterling Plaza 4,175 8.750% September 2005 3,794
Townsend Square 4,989 8.500% October 2005 4,703
Green Oaks 3,172 8.375% November 2005 2,861
Melbourne Plaza 1,833 8.375% November 2005 1,654
Northwest Crossing 1,745 8.375% November 2005 1,574
Oak Hill 2,103 7.625% January 2006 1,713
Walden Woods 2,590 7.875% August 2006 2,071
Big Curve 5,658 9.190% October 2006 5,059
Highland Square 4,215 8.870% December 2006 3,743
Park Northern 2,463 8.370% December 2006 1,963
University Mall 12,837 8.440% December 2006 11,922
Rosemeade 3,305 8.295% December 2007 2,864
Colony Plaza 3,088 7.540% January 2008 2,834
Parkwood(2) 6,353 7.280% January 2008 5,805
Richwood(2) 3,273 7.280% January 2008 2,990
Mariners Crossing 3,468 7.080% March 2008 3,154
Commonwealth 2,967 7.000% March 2008 2,204
Pine Island/Ridge Plaza 25,588 6.910% July 2008 23,104
Shoppes at Westburry 2,330 7.300% October 2008 2,113
26
BALANCE AT
DECEMBER INTEREST BALANCE DUE
31, 2001 RATE(1) MATURITY DATE AT MATURITY
------------ ---------- ------------- ------------
(in thousands)
Shoppes of Northport 4,288 6.650% February 2009 3,526
Prosperity Centre 7,045 7.875% March 2009 4,137
Park Promenade 6,413 8.100% February 2010 5,833
Skipper Palms 3,611 8.625% March 2010 3,318
Jonathan's Landing 2,960 8.050% May 2010 2,639
Bluff's Square 10,232 8.740% June 2010 9,401
Kirkman Shoppes 9,662 8.740% June 2010 8,878
Ross Plaza 6,739 8.740% June 2010 6,192
Boynton Plaza 7,622 8.030% July 2010 6,902
Pointe Royale 4,974 7.950% July 2010 2,502
Plymouth Park East 1(3) 158 8.250% August 2010 113
Plymouth Park East 2(3) 474 8.250% August 2010 340
Plymouth Park North(3) 8,459 8.250% August 2010 6,076
Plymouth Park South(3) 632 8.250% August 2010 454
Plymouth Park Story North(3) 389 8.250% August 2010 279
Plymouth Park West 2,528 8.250% August 2010 1,816
Shops at Skylake 15,275 7.650% August 2010 11,644
Minyard's 2,578 8.320% November 2010 2,175
Forest Village 4,575 7.270% April 2011 4,134
Boca Village 8,459 7.200% May 2011 7,466
Sawgrass Promenade 8,459 7.200% May 2011 7,466
Plaza del Rey 2,368 8.125% September 2011 --
Lake Mary 24,980 7.250% November 2011 21,973
Lake St. Charles 3,947 7.130% November 2011 3,461
Marco Island 9,000 6.700% January 2012 7,150
Summerlin Square 4,398 6.750% February 2014 --
Bird Ludlum 11,378 7.680% February 2015 --
West Lake 5,175 7.875% June 2016 130
Atlantic Village 4,597 6.850% November 2018 --
-------- -------------- -------------------
TOTAL FIXED RATE MORTGAGE DEBT (54 LOANS) $296,887 7.76% 7.32 YEARS
-------- ============== ===================
(wtd-avg. rate) (wtd-avg. maturity)
BANK VARIABLE RATE MORTGAGE DEBT
First Union/Cashmere 5,198 LIBOR+200 March 2002 5,198
Comerica/Copperfield(4) $8,000 LIBOR+141 October 2003 $8,000
Bank of Nova Scotia/Oakbrook(5) 9,277 LIBOR+150 November 2003 9,277
Comerica/4 properties(6) 24,635 LIBOR+150 February 2004 24,635
Bank of America/Wurzbach 1,050 LIBOR+225 December 2004 1,011
--------
TOTAL VARIABLE RATE MORTGAGE DEBT $48,160
--------
TOTAL MORTGAGE NOTES PAYABLE $345,047
--------
VARIABLE RATE REVOLVING CREDIT FACILITIES
City National Bank(7) $1,409 LIBOR+225 May 2002 $1,409
Bank Leumi(8) 26,000 LIBOR+125 September 2002 26,000
--------
TOTAL VARIABLE RATE REVOLVING CREDIT FACILITIES $27,409
--------
TOTAL DEBT $372,456
========
- -----------------------
(1) The rate in effect on December 31, 2001.
(2) The mortgage balances for Parkwood and Ridgewood represent the future
minimum lease payments (net of imputed interest) attributable to lease
payments on these two properties, both of which are owned pursuant to
capital lease obligations.
27
(3) All of the Plymouth loans are with Sun Life of Canada. In the case of
Plymouth Park North and East, the collateral has been split into two parts;
hence the two individual loans.
(4) The floating rate is LIBOR plus 141 basis points, but has been fixed at
6.49% (5.08% plus 1.41%) through October 30, 2003. This loan was repaid in
full on January 18, 2002 without any prepayment penalty.
(5) The Oakbrook loan was repaid in full on February 15, 2002, without any
prepayment penalty, and the collateral was assigned to the new Wells Fargo
facility, described above.
(6) This Comerica facility is secured by Grogans Mill ($7,995), Steeplechase
($6,305), Mission Bend ($6,370) and Beechcrest ($3,965). The floating rate
is LIBOR plus 150 basis points, but has been fixed at 6.88% (5.38% plus
1.50%) through February 19, 2002, after which the rate will float at LIBOR
+ 200 basis points.
(7) This facility was authorized to $20,640 as of December 31, 2001, and as of
December 31, 2001 was secured by Mandarin Landing and Mini-Storage, Skylake
Phase III land, Montclair Apartments, Beauclerc Village and East Bay Plaza.
Effective February 4, 2002, the line was extended for an additional 90
days, with advances limited to $17,876 due to the sale of the Equity One
Building subsequently further reduced to $10,826 when Mandarin Landing was
released and pledged to Wells Fargo in connection with the new facility
described above.
(8) The Bank Leumi facility is secured by negative pledges on Hedwig, McMinn,
Southwest Walgreens, Albertsons Bissonnet, Albertsons Spring Shadows,
Bandera, Market at First Colony and Mason Park. On February 18, 2002, the
Albertsons Bissonet, Albertsons Spring Shadows and Hedwig properties were
released by Bank Leumi and were pledged to secure the new Wells Fargo
facility described above. In their place, Ryanwood and Pompano were pledged
to Bank Leumi.
In addition to ongoing amortization payments throughout the terms of
the mortgages, our mortgage indebtedness outstanding at December 31, 2001
(including the balance on our revolving credit facilities) will require
approximate balloon principal payments as follows:
BALLOON
YEAR DUE PAYMENTS
---------- ---------
2002 $44,282
2003 17,277
2004 25,646
2005 21,254
2006 26,470
2007 2,864
2008 42,217
2009 7,663
2010 68,564
2011 44,410
thereafter 7,280
---------- --------
TOTAL $307,927
========== ========
We may not have sufficient funds on hand to repay these balloon amounts
at maturity. Therefore, we expect 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. Our results of operations could be affected if the cost of
refinancing debt is greater or lesser than existing debt. If refinancing debt is
not available, our business would be adversely affected.
The following table sets forth certain information regarding the
indebtedness related to our joint venture properties as of December 31, 2001:
BALANCE AT
DECEMBER BALANCE DUE
31, 2001 INTEREST RATE MATURITY DATE AT MATURITY
----------- ------------- -------------- -----------
JOINT VENTURE DEBT
Park Place* $13,951 LIBOR+1.85% April 2002 $13,951
City Centre 13,079 8.54% April 2010 11,989
Oaks Square 16,786 7.63% December 2010 14,805
- -------------------
* Guaranteed by CEFUS, our wholly owned subsidiary. Discussions are currently
underway for a replacement facility at comparable terms.
28
NEW ACCOUNTING STANDARDS AND ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards ("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 us 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. We adopted SFAS No. 133 on January 1,
2001. The adoption of SFAS No. 133 had no effect on our results of operations or
financial position.
In June 2001, FASB approved the issuance of SFAS No. 141, BUSINESS
COMBINATIONS, and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. These
standards, which were issued in July 2001, established accounting and reporting
for business combinations. SFAS No. 141 requires all business combinations
entered into subsequent to June 30, 2001 to be accounted for using the purchase
method of accounting. SFAS No. 142 provides that goodwill and other intangible
assets with indefinite lives will not be amortized, but will be tested for
impairment at least annually. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. We adopted SFAS No. 142 on January 1, 2002,
at which time goodwill amortization ceased. We are currently evaluating the
impact of the new accounting standards on existing goodwill and other intangible
assets. For the year ended December 31, 2001, goodwill amortization was $69,000.
In August 2001, FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS, which supersedes, but does not replace, SFAS
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, as well as other earlier related pronouncements,
either in whole or in part. SFAS No. 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001 and interim periods
within those fiscal years, though earlier application is encouraged. We do not
expect that the adoption of this statement on January 1, 2002 will have a
significant effect on our financial position, results of operations or cash
flows.
ENVIRONMENTAL MATTERS
We, like others in the commercial real estate industry, are subject to
numerous environmental laws and regulations. The operation of dry cleaning
facilities at our shopping centers is the principal environmental concern. We
believe that the tenants who operate these facilities do so in accordance with
current laws and regulations and we have established procedures to monitor their
operations. Additionally, we use all legal means to cause tenants to remove dry
cleaning plants from our shopping centers. Where available, we have applied and
been accepted into state sponsored environmental programs. We have a blanket
environmental insurance policy that covers us against third party liabilities
and remediation costs on shopping centers that currently have no known
environmental contamination. We have also placed environmental insurance on
specific properties with known contamination in order to mitigate our
environmental risk. We believe that the ultimate disposition of currently known
environmental matters will not have a material effect on our financial position,
liquidity or operations.
INFLATION AND RECESSION CONSIDERATIONS
Most of our leases contain provisions designed to partially mitigate
the adverse impact of inflation. Most of our leases require the tenant to pay
its share of operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing our exposure to increases in costs and
operating expenses resulting from inflation. A small portion of our leases also
include clauses enabling us to receive percentage rents based on a tenant's
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.
Our financial results are affected by general economic conditions in
the markets in which our properties are located. An economic recession, or other
adverse changes in general or local economic conditions, could result in the
inability of some of our existing tenants to meet their lease obligations and
could otherwise adversely affect our ability to attract or retain tenants.
Supermarkets, drugstores and other anchor tenants that offer day-to-day
necessities
29
rather than luxury items anchor our existing properties. These types of tenants,
in our experience, generally maintain more consistent sales performance during
periods of adverse economic conditions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary market risk to which we have exposure is interest rate
risk. Changes in interest rates can affect our 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 our debt balances
will move in the same direction. With respect to our investment portfolio,
changes in interest rates generally do not affect our interest income as our
investments are predominantly in equity securities. In addition, most of our
mortgage notes payable currently have fixed interest rates and therefore changes
in interest rates generally do not have a material effect on our operations.
However, some mortgage notes that we assumed in connection with our acquisition
of CEFUS and UIRT do have variable rates. In addition, each of our City
National, Bank Leumi and Wells Fargo facilities have a variable-rate component
and we may enter into additional variable-rate facilities in the future.
Therefore, increases in interest rates could in the future have a materially
adverse impact on our results of operations. Moreover, increases in long-term
real estate mortgage rates that may occur over a decade or more may decrease the
overall value of real estate. We estimate the fair value of our 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, 2001, the
fair value of the mortgage loans was estimated to be approximately $302.7
million compared to a carrying value amount of approximately $296.9 million.
If the weighted average interest rate on our fixed rate debt at
December 31, 2001 were 100 basis points higher or lower, the fair market value
would be approximately $280.9 million and approximately $310.9 million,
respectively.
If the weighted average interest rate on our variable rate debt at
December 31, 2001 were 100 basis points higher or lower, annual interest expense
would be increased or decreased by approximately $756,000.
Our objective in managing our exposure to interest rate changes is to
limit the impact of interest rate changes on earnings and cash flows. We may use
a variety of financial instruments to reduce our interest rate risk, including
interest rate swap agreements whereby we exchange our 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 we will incur on the amount of
debt subject to the cap and for the time period specified in the interest rate
cap. As of December 31, 2001, we have 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.
30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from our definitive proxy statement to be
filed within 120 days after the end of our fiscal year, covered by this Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from our definitive proxy statement to be
filed within 120 days after the end of our fiscal year, covered by this Form
10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from our definitive proxy statement to be
filed within 120 days after the end of our fiscal year, covered by this Form
10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from our definitive proxy statement to be
filed within 120 days after the end our fiscal year, covered by this Form 10-K
31
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 Comprehensive Income F-6
Statements of Stockholders Equity F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-10
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
----------- -----------
2.1 Stock Exchange Agreement dated May 18, 2001 among the Company, First Capital Realty Inc.
(formerly Centrefund Realty Corporation) and First Capital America Holding Corp. (1)
2.2 Amended and Restated Agreement and Plan of Merger Dated June 29, 2001 among the Company, UIRT
Holding Corp. and United Investors Realty Trust. (2)
3.1 Articles of Amendment and Restatement of the Company. (Exhibit 3.1; Amendment No. 5) (3)
3.2 Amended and Restated Bylaws of the Company. (Exhibit 3.2; Amendment No. 5) (3)
10.1 Form of Indemnification Agreement. (Exhibit 10.1; Amendment No. 2) (3)
10.2 Employment Agreement, dated as of January 1, 1996 by and between the Company and Chaim Katzman.
(Exhibit 10.2; Amendment No. 2) (3)*
10.3 Employment Agreement, dated as of January 1, 1996 by and between the Company and Doron Valero.
(Exhibit 10.3; Amendment No. 2) (3)*
10.4 1995 Stock Option Plan, as amended. (4)*
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) (3)
10.6 Stock Pledge Agreement, dated June 17, 1996, by and between Chaim Katzman and the Company.
(Exhibit 10.7; Amendment No. 2) (3)
10.7 Promissory Note, in the amount of $1,128,750 from Chaim Katzman payable to the Company.
(Exhibit 10.8; Amendment No. 3) (3)
10.8 Stock Pledge Agreement, dated December 30, 1996, by and between the Company and Doron Valero.
(Exhibit 10.9; Amendment No. 2) (3)
10.9 Promissory Note, in the amount of $396,000 from Doron Valero payable to the Company. (Exhibit
10.10; Amendment No. 3) (3)
10.10 Use Agreement, regarding use of facilities, by and between Gazit (1995), Inc. and the Company,
dated January 1, 1996. (3)
10.11 2000 Executive Incentive Plan. (5)*
10.12 First Amended Employment Agreement dated April 6, 2000 between Howard
Sipzner and the Company. (6)*
10.13 Subscription Agreement dated October 4, 2000 made by Alony Hetz Properties & Investments, Ltd.
10.14 Stockholders Agreement October 4, 2000 among the Company, Alony Hetz Properties & Investments,
Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995), Inc.
10.15 First Amendment to Stockholders Agreement dated December 19, 2001 among the Company Alony Hetz
Properties & Investments, Ltd., Gazit-Globe (1982), Ltd., M.G.N. (USA), Inc. and Gazit (1995),
Inc.
32
EXHIBIT NO. DESCRIPTION
----------- -----------
10.16 Stock Pledge Agreement, dated September 18, 2001, by and between Chaim Katzman and the Company.
10.17 Promissory Note, in the amount of $2,879,840 from Chaim Katzman payable to the Company.
10.18 Stock Pledge Agreement, dated September 18, 2001, by and between Doron Valero and the Company.
10.19 Promissory Note, in the amount of $2,153,470 from Doron Valero payable to the Company.
12.1 Statements regarding Computation of Ratios
21.1 List of Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
*Identifies employee agreements, management contracts, compensatory
plans or other arrangements.
(b) Reports on Form 8-K:
From 8-K filed on October 4, 2001 regarding the acquisitions
of Centrefund Realty (U.S.) Corporation and United Investors
Realty Trust by the Company, as amended by the Form 8-K/A
filed on November 30, 2001.
- -------------------------------------------------------------------------------
(1) Previously filed as Appendix A to our definitive Proxy Statement for the
Special Meeting of Stockholders held on September 6, 2001 and incorporated
herein by reference.
(2) Previously filed as Annex B with our Registration Statement on Form S-4, as
amended (Registration No. 333-64272), and incorporated herein by reference.
(3) Previously filed with our Registration Statement on Form S-11, as amended
(Registration No. 333-3397), and incorporated herein by reference.
(4) Previously filed with our definitive Proxy Statement for the Annual Meeting
of Stockholders held on June 30, 1999, and incorporated herein by
reference.
(5) Previously filed with our definitive Proxy Statement for the Annual Meeting
of Stockholders held on June 23, 2000, and incorporated herein by
reference.
(6) Previously filed with our Form 10-K405/A filed on April 20, 2001, and
incorporated herein by reference.
33
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.
Date: March 11, 2002 EQUITY ONE, INC.
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 March 11, 2002
- ------------------------- Chief Executive Officer
Chaim Katzman (Principal Executive Officer)
/s/ DORON VALERO President, Chief Operating Officer March 11, 2002
- ------------------------- and Director
Doron Valero
/s/ HOWARD M. SIPZNER Treasurer and Chief Financial Officer March 11, 2002
- ------------------------- (Principal Financial Officer)
Howard M. Sipzner
/s/ NOAM BEN OZER Director March 11, 2002
- -------------------------
Noam Ben Ozer
/s/ DR. SHAIY PILPEL Director March 11, 2002
- -------------------------
Dr. Shaiy Pilpel
/s/ ROBERT COONEY Director March 11, 2002
- -------------------------
Robert Cooney
/s/ RONALD CHASE Director March 11, 2002
- -------------------------
Ronald Chase
/s/ DORI SEGAL Director March 11, 2002
- -------------------------
Dori Segal
/s/ NATHAN HETZ Director March 11, 2002
- -------------------------
Nathan Hetz
/s/ PETER LINNEMAN Director March 11, 2002
- -------------------------
Peter Linneman
34
EQUITY ONE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT ................................................... F-1
Consolidated Balance Sheets ................................................ F-2 - F-3
Consolidated Statements of Operations ...................................... F-4 - F-5
Consolidated Statements of Comprehensive Income ............................ F-6
Consolidated Statements of Stockholders' Equity ............................ F-7
Consolidated Statements of Cash Flows ...................................... F-8 - F-9
Notes to the Consolidated Financial Statements ............................. F-10 - F-26
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, 2001 and 2000, 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, 2001. 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, 2001
and 2000 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
March 8, 2002
F-1
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
2001 2000
ASSETS
RENTAL PROPERTY:
Land, buildings, and equipment ................................ $607,507 $468,957
Building improvements ......................................... 18,794 10,901
Land held for development ..................................... 23,792 13,468
Construction in progress ...................................... 5,912 8,202
--------- ---------
Total rental property ....................................... 656,005 501,528
Less: accumulated depreciation .............................. (28,318) (17,829)
--------- ---------
Rental property, net ........................................ 627,687 483,699
CASH AND CASH EQUIVALENTS ....................................... 906 2,347
RESTRICTED CASH ................................................. 1,715 4,273
SECURITIES AVAILABLE FOR SALE ................................... 1,681 1,403
ACCOUNTS AND OTHER RECEIVABLES (net of allowance for doubtful
accounts of $759 and $437 for 2001 and 2000, respectively) .... 5,564 5,822
NOTES RECEIVABLE ................................................ 9,697 12,259
DUE FROM RELATED PARTIES ........................................ 57 9,361
DEPOSITS ........................................................ 6,219 822
PREPAID AND OTHER ASSETS ........................................ 2,855 5,062
DEFERRED EXPENSES (net of accumulated amortization of
$1,924 and $938 for 2001 and 2000, respectively) .............. 3,132 3,734
INVESTMENTS IN JOINT VENTURES ................................... 7,742 11,707
GOODWILL (net of accumulated amortization of $404 and
$348 for 2001 and 2000, respectively) ......................... 1,281 1,352
DEFERRED INCOME TAX ASSETS ...................................... -- 976
--------- ---------
TOTAL ........................................................... $668,536 $542,817
========= =========
(Continued)
F-2
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
2001 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
NOTES PAYABLE
Mortgage notes payable .............................................. $345,047 $280,396
Revolving credit facilities ......................................... 27,409 4,243
--------- ---------
Total notes payable ............................................... 372,456 284,639
OTHER LIABILITIES
Accounts payable and accrued expenses ............................... 8,987 14,650
Tenants' security deposits .......................................... 4,090 1,476
Minority interest in equity of consolidated subsidiaries ............ 3,869 3,875
Deferred rental income .............................................. 766 662
Due to related parties .............................................. 101 15,965
--------- ---------
Total liabilities ................................................. 390,269 321,267
--------- ---------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 9)
MINORITY INTEREST IN CEFUS ............................................ -- 33,887
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value - 5,000 shares authorized but unissued -- --
Common stock, $0.01 par value - 40,000 shares authorized,
28,781 and 12,786 shares issued and outstanding for
2001 and 2000, respectively ....................................... 288 128
Additional paid-in capital .......................................... 283,619 105,368
Equity related to step acquisition .................................. -- 82,123
Retained earnings ................................................... 1,808 1,709
Accumulated other comprehensive loss ................................ (34) (311)
Unamortized restricted stock compensation ........................... (1,836) (809)
Notes receivable from issuance of common stock ...................... (5,578) (545)
--------- ---------
Total stockholders' equity ........................................ 278,267 187,663
--------- ---------
TOTAL ................................................................. $668,536 $542,817
========= =========
(Concluded)
See accompanying notes to the consolidated financial statements.
F-3
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
2001 2000 1999
RENTAL INCOME:
Minimum rental .......................................... $ 61,134 $ 37,202 $ 21,242
Expense recoveries ...................................... 18,029 9,728 5,148
Percentage rent payments ................................ 967 746 169
-------- -------- --------
Total rental income ................................... 80,130 47,676 26,559
-------- -------- --------
MANAGEMENT FEES ........................................... 927 360 263
-------- -------- --------
INVESTMENT REVENUE:
Gain on sale of securities .............................. 33 -- --
Interest and dividends .................................. 1,897 1,585 341
-------- -------- --------
Total investment revenue .............................. 1,930 1,585 341
-------- -------- --------
Total revenues ...................................... 82,987 49,621 27,163
-------- -------- --------
COSTS AND EXPENSES:
Property operating expenses ............................. 24,936 13,661 7,082
Interest and amortization of deferred financing fees..... 22,243 12,807 5,086
Rental property depreciation and amortization ........... 11,114 6,284 3,502
General and administrative expenses ..................... 3,553 2,559 1,622
-------- -------- --------
Total costs and expenses .............................. 61,846 35,311 17,292
-------- -------- --------
INCOME BEFORE (LOSS)/GAIN ON SALE OF REAL ESTATE, EQUITY
IN INCOME OF JOINT VENTURES, MINORITY INTEREST
IN EARNINGS OF CONSOLIDATED SUBSIDIARY, INCOME
TAXES, MINORITY INTEREST IN CEFUS AND EXTRAORDINARY
ITEM .................................................... 21,141 14,310 9,871
(LOSS)/GAIN ON SALE OF REAL ESTATE ........................ (609) (63) 3,814
EQUITY IN INCOME OF JOINT VENTURES ........................ 494 5 --
MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARY... (99) -- (96)
-------- -------- --------
INCOME BEFORE INCOME TAX, MINORITY INTEREST IN CEFUS
AND EXTRAORDINARY ITEM................................... 20,927 14,252 13,589
-------- -------- --------
INCOME TAX BENEFIT/(EXPENSE)
Current ................................................. 593 (23) --
Deferred ................................................ 374 (1,071) --
-------- -------- --------
Total Income Tax benefit/(expense) .................... 967 (1,094) --
-------- -------- --------
INCOME BEFORE MINORITY INTEREST IN CEFUS AND
EXTRAODINARY ITEM ....................................... 21,894 13,158 13,589
MINORITY INTEREST IN CEFUS ................................ (1,627) (603) --
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM .......................... 20,267 12,555 13,589
EXTRAORDINARY ITEM - PREPAYMENT PENALTY ................... (1,546) -- --
-------- -------- --------
NET INCOME ................................................ $ 18,721 $ 12,555 $ 13,589
======== ======== ========
(Continued)
F-4
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
2001 2000 1999
EARNINGS PER SHARE:
BASIC EARNINGS PER SHARE
Income before extraordinary item .................. $ 0.90 $ 0.88 $ 1.26
Extraordinary item ................................ (0.07) -- --
------- ------- -------
Net income ...................................... $ 0.83 $ 0.88 $ 1.26
======= ======= =======
NUMBER OF SHARES USED IN COMPUTING
BASIC EARNINGS PER SHARE .......................... 22,414 14,285 10,805
======= ======= =======
DILUTED EARNINGS PER SHARE
Income before extraordinary item .................. $ 0.90 $ 0.87 $ 1.26
Extraordinary item ................................ (0.07) -- --
------- ------- -------
Net income ...................................... $ 0.83 $ 0.87 $ 1.26
======= ======= =======
NUMBER OF SHARES USED IN COMPUTING
DILUTED EARNINGS PER SHARE ........................ 23,037 14,504 10,901
======= ======= =======
(Concluded)
See accompanying notes to the consolidated financial statements.
F-5
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
2001 2000 1999
NET INCOME $ 18,721 $ 12,555 $ 13,589
-------- -------- --------
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized holding gain (loss) on securities available for sale .......... 310 208 (421)
Reclassification adjustment for gains included in net income ................. (33) -- --
-------- -------- --------
TOTAL ...................................................................... 277 208 (421)
-------- -------- --------
COMPREHENSIVE INCOME ........................................................... $ 18,998 $ 12,763 $ 13,168
======== ======== ========
See accompanying notes to the consolidated financial statements.
F-6
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
ACCUMULATED NOTES
OTHER RECEIVABLE
EQUITY COMPRE- UNAMORTIZED FROM THE TOTAL
ADDITIONAL RELATED TO HENSIVE RESTRICTED ISSUANCE OF STOCK-
COMMON PAID-IN STEP RETAINED (LOSS)/ STOCK COM- COMMON HOLDERS'
STOCK CAPITAL ACQUISITION EARNINGS INCOME PENSATION STOCK EQUITY
BALANCE, DECEMBER 31, 1998 ........... $ 102 $ 81,214 $ -- $ -- $ (98) $ -- $ -- $ 81,218
Issuance of common stock ........... 11 8,737 (545) 8,203
Reduction of 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
Equity related to step acquisition.. 82,123 82,123
Stock issuance cost ................ (152) (152)
Net income ......................... 12,555 12,555
Dividends paid ..................... (13,236) (13,236)
Net unrealized holding gain
on securities available for sale.. 208 208
----- -------- -------- ------- ------- ------- -------- --------
BALANCE, DECEMBER 31, 2000 ........... 128 105,368 82,123 1,709 (311) (809) (545) 187,663
Issuance of common stock
CEFUS transaction ................ 105 120,540 (82,123) 38,522
UIRT transaction ................. 29 31,450 31,479
Alony Hetz ....................... 20 21,187 21,207
Other issuances .................. 6 6,550 (1,027) (5,033) 496
Stock issuance cost ................ (1,476) (1,476)
Net income ......................... 18,721 18,721
Dividends paid ..................... (18,622) (18,622)
Net unrealized holding gain
on securities available for sale.. 277 277
----- -------- -------- ------- ------- ------- -------- --------
BALANCE, DECEMBER 31, 2001 ........... $ 288 $283,619 $ -- $ 1,808 $ (34) $(1,836) $ (5,578) $278,267
===== ======== ======== ======= ======= ======= ======== ========
See accompanying notes to the consolidated financial statements.
F-7
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
2001 2000 1999
OPERATING ACTIVITIES:
Net income ................................................................ $ 18,721 $ 12,555 $ 13,589
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ......................................... 12,926 6,921 3,607
Provision for losses on accounts receivable ........................... 322 261 64
Loss (gain) on sale of real estate .................................... 609 63 (3,814)
Equity in income of unconsolidated entities ........................... (494) (5) --
Minority interest in earnings of consolidated subsidiary .............. 99 -- 96
Minority interest in CEFUS ............................................ 1,627 603 --
Deferred income tax (benefit)/expense ................................. (374) 1,071 --
Changes in assets and liabilities:
Restricted cash ....................................................... 3,871 (4,273) 6,780
Accounts and other receivables ........................................ 1,757 1,455 (1,072)
Notes receivable ...................................................... 2,643 -- --
Deposits .............................................................. (2,975) (115) (178)
Prepaid and other assets .............................................. 1,550 429 104
Accounts payable and accrued expenses ................................. (7,389) (4,061) 452
Deferred rental income ................................................ (405) 414 96
Tenants' security deposits ............................................ 206 202 439
Due from related parties .............................................. 110 (14) 6
-------- -------- --------
Net cash provided by operating activities ........................... 32,804 15,506 20,169
-------- -------- --------
INVESTING ACTIVITIES:
Additions to rental property .............................................. (37,409) (11,944) (69,949)
Proceeds from sales of rental property .................................... 22,276 -- 7,716
Proceeds from sales of joint venture interest ............................. 6,630 -- --
Distributions from joint ventures ......................................... 287 2,057 --
Purchases of securities ................................................... -- (44) (4,733)
Sales and prepayments of securities ....................................... -- 67 4,727
Purchase of UIRT, including transaction costs, net of cash acquisition .... (36,294) -- --
Cash acquired in CEFUS acquisition ........................................ -- 1,995 --
Due to / from affiliates .................................................. 212 (3,296) --
-------- -------- --------
Net cash used in investing activities ............................... (44,298) (11,165) (62,239)
-------- -------- --------
FINANCING ACTIVITIES:
Repayments of mortgage notes payable ...................................... (64,664) (13,229) (3,462)
Borrowings under mortgage notes payable ................................... 64,884 26,366 31,234
Borrowings/ (repayments) under credit agreements .......................... 9,210 (15,232) 18,915
Due to affiliates ......................................................... -- (1,490) --
Deferred financing expenses ............................................... (540) (190) (628)
Stock subscription and issuance of common stock ........................... 21,366 14,736 8,203
Stock issuance (costs)/reduction .......................................... (1,476) (152) 39
Cash dividends paid to stockholders ....................................... (18,622) (13,236) (11,199)
Payment of put option ..................................................... -- -- (2,127)
Change in minority interest ............................................... (105) 6 (72)
-------- -------- --------
Net cash provided by (used in) financing activities ................. 10,053 (2,421) 40,903
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ........................ (1,441) 1,920 (1,167)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................................ 2,347 427 1,594
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR ...................................... $ 906 $ 2,347 $ 427
======== ======== ========
(Continued)
F-8
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands, Except Per Share Amounts)
- --------------------------------------------------------------------------------
2001 2000 1999
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amount capitalized ............................ $ 20,457 $ 12,216 $ 4,780
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Change in unrealized holding gain (loss) on securities available for sale... $ 277 $ 208 $ (421)
======== ======== ========
Issuance of restricted stock ............................................... $ 1,525 $ 1,208
======== ========
Common stock issued for notes receivable ................................... $ 5,033 $ 545
======== ========
Sale of joint venture interest in settlement of notes receivable ........... $ 1,438
========
Issuance of CEFUS common stock in settlement of affiliated debt ............ $ 3,345
========
Purchase of minority interest in CEFUS ..................................... $ 40,893
========
The Company acquired all the outstanding capital stock of UIRT:
Fair value of assets acquired ............................................ $147,640
Liabilities assumed ...................................................... 79,867
Common stock issued ...................................................... 31,479
--------
Cash paid for acquisition, including transaction costs ................... $ 36,294
========
The Company acquired 68.07% of the outstanding capital stock of CEFUS:
Fair value of assets acquired ............................................ $315,195
Liabilities assumed ...................................................... 198,480
Minority interest ........................................................ 34,592
--------
Equity related to step acquisition ....................................... $ 82,123
========
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-9
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Equity One, Inc. was incorporated in Maryland on June 15, 1992, as a
wholly-owned subsidiary of Gazit Holdings, Inc., a wholly-owned
subsidiary of Gazit, Inc. Equity One, Inc., its related real estate joint
ventures and subsidiaries ("the Company") was formed for the purpose of
holding various real estate investments located in the United States of
America. As of December 31, 2001 (and pursuant to a prior transfer of
interests between Gazit, Inc. and Gazit-Globe (1982) Ltd. ("Gazit-Globe")
whereby Gazit became a wholly-owned subsidiary of Gazit-Globe),
Gazit-Globe's direct and indirect beneficial ownership of the Company's
common stock is approximately 66%.
On September 20, 2001, the Company completed the acquisition of
Centrefund Realty (U.S.) Corporation ("CEFUS") from First Capital Realty
Inc. ("FCR"), formerly known as Centrefund Realty Corporation, for
approximately $281,000 (including assumed debt). As provided for in the
stock exchange agreement, the Company issued 10,500 shares of its common
stock to subsidiaries of FCR and assumed $149,021 of CEFUS's outstanding
debt. The acquisition of CEFUS has been treated as a step transaction and
partially accounted for on a push-down basis and partially in a manner
similar to a pooling of interests, due to the acquisition by Gazit-Globe,
the majority shareholder of the Company, of a 68.07% controlling interest
in Centrefund Realty Corporation on August 18, 2000. As a result of the
CEFUS acquisition, the Company acquired 28 shopping centers and other
retail properties.
To reflect the events of August 18, 2000, the Company recorded equity
related to step acquisition in the consolidated financial statements
equivalent to 68.07% of the value of the consideration paid to
subsidiaries of FCR (the "Equity Related to Step Acquisition"). In
addition, the Company recorded a minority interest equivalent to 31.93%
of the value of the net assets acquired on August 18, 2000 (the "31.93%
Minority Interest"), which was eliminated on September 20, 2001 when the
acquisition of CEFUS was completed.
The results for the year ended December 31, 2000 have been restated to
incorporate the results of CEFUS for the period from August 18, 2000 to
December 31, 2000. The results for the year ended December 31, 2001 have
been adjusted to incorporate the results of CEFUS for the period from
January 1, 2001 to September 19, 2001. The restatement consolidates the
operations of the Company and CEFUS between August 18, 2000 and September
19, 2001, subject to a 31.93% minority interest in CEFUS (the "CEFUS
Accounting Treatment"). During the period from August 18, 2000 to
September 19, 2001, CEFUS operated under the control of FCR as a
subchapter C-corporation under the Internal Revenue Code (the "Code") and
recorded current and deferred income taxes in connection with its
operations. These taxes are reflected on our financial statements as a
deferred income tax asset (the "Future Income Tax Assets") and as current
or deferred tax expenses or tax benefits in connection with the CEFUS
Accounting Treatment. Effective September 20, 2001, the Company no longer
recorded any provision for income taxes consistent with the acquisition
of 100% of CEFUS, and the Company's intent to operate CEFUS as a
qualified REIT subsidiary. In addition, with the September 20, 2001
acquisition of 100% of CEFUS, the Company has eliminated the Equity
Related to Step Acquisition, the 31.93% Minority Interest and
F-10
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the deferred income tax assets, and has recorded in their place the
issuance of 10,500 shares of the Company's common stock.
The effect of the CEFUS Accounting Treatment on the 2001 and 2000
financial statements is as follows:
YEAR ENDED
DECEMBER 31,
-------------------------------
2001 2000
------------ -------------
REVENUES:
Equity One (includes CEFUS since September 20, 2001)........ $ 56,367 $ 34,442
CEFUS revenues prior to September 20, 2001.................. 26,620 15,179
------------ -------------
Total revenues................................................ $ 82,987 $ 49,621
============ =============
NET INCOME:
Equity One (includes CEFUS since September 20, 2001)........ $ 15,253 $ 11,269
CEFUS net income prior to September 20, 2001................ 3,468 1,286
------------ -------------
Total net income.............................................. $ 18,721 $ 12,555
============ =============
On September 21, 2001, the Company completed the acquisition of United
Investors Realty Trust ("UIRT"), a Texas-based REIT, for $147,640
(including assumed debt). As a result of the transaction with UIRT, the
Company issued 2,896 shares of its common stock, paid $32,876 in cash
consideration to former UIRT shareholders and assumed approximately
$79,867 of UIRT's outstanding debt. The acquisition of UIRT was accounted
for using the purchase method and the results of UIRT are included in the
Company's financial statements from the date of its acquisition. As a
result of this transaction, the Company acquired 22 shopping centers.
The following unaudited supplemental pro forma information is presented
to reflect the effects of the UIRT and CEFUS acquisitions, including the
issuance of the common stock and the impact on the Company's results, as
if the transactions have occurred on January 1, 2000. The pro forma
financial information is presented for informational purposes only and
may not be indicative of what actual results of operations would have
been had the acquisition occurred as indicated nor does it purport to
represent the result of the operations for future periods:
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2001 2000
(UNAUDITED) (UNAUDITED)
------------- -------------
Pro forma revenues.......................................... $ 98,427 $ 97,783
============= =============
Pro forma income before extraordinary item.................. $ 24,338 $ 25,193
============= =============
Pro forma net income........................................ $ 22,792 $ 25,193
============= =============
Pro forma earnings per share
Basic................................................... $ 0.85 $ 0.98
============= =============
Diluted................................................. $ 0.84 $ 0.97
============= =============
F-11
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As of December 31, 2001, the Company owned a total of 85 rental
properties, primarily located in metropolitan areas of Florida and Texas,
encompassing 55 supermarket-anchored shopping centers, 6 drug
store-anchored shopping centers, 18 other retail-anchored shopping
centers, 5 commercial properties and one drug store-anchored development,
as well as interests in 3 real estate joint ventures which own and
operate commercial real estate properties. Publix Supermarkets, Inc. and
Winn-Dixie Stores Inc., the Company's two largest tenants, rent
approximately 7.6% and 5.9% of the Company's total rentable square
footage, respectively, which accounts for 5.5% and 4.4%, respectively, of
the Company's total annualized minimum rent at December 31, 2001.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Equity One,
Inc. and its wholly-owned subsidiaries and partnerships where the Company
has financial and operating control. All subsidiaries are hereinafter
referred to as "the consolidated companies or the Company." All
intercompany transactions have been eliminated. The Company has a 50%
investment in two joint ventures and a 50.1% interest in one joint
venture of which it does not have financial or operating control and
accordingly uses the equity method of accounting for those joint
ventures.
RENTAL PROPERTY
Rental property is stated at cost. Renovations which extend or improve
the useful life of the asset are capitalized. Expenditures for
maintenance and repairs are charged to operating expense as incurred.
Depreciation is provided for using the straight-line method as follows:
Buildings..................... 30 - 40 years
Building Improvements......... 5 - 20 years
Tenant Improvements........... Over the terms of the related lease
Equipment..................... 5 - 7 years
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
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 our expectations of future profitability and
undiscounted cash flows of the related operations. These factors, along
with plans with respect to the operations, are considered in assessing
the recoverability of long-lived assets. If the Company determines that
the carrying amount is impaired, the long-lived assets are written down
to their recoverable value with a corresponding charge to earnings.
During the periods presented, no such impairment was incurred.
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.
F-12
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESTRICTED CASH
Restricted cash at December 31, 2000 consists of cash held in escrow by
lenders pending the achievement of certain conditions, and at December
31, 2001 consists of cash escrowed in anticipation of the execution of a
tax-free exchange under Section 1031 of the Code.
INVESTMENT SECURITIES
As of December 31, 2001 and 2000, all of the 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 or loss until realized.
DEPOSITS
Deposits are comprised of funds held by various institutions for future
payments of property taxes and insurance, utility and other service
deposits.
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 has been recorded to reflect the excess of cost over the fair
value of net assets acquired in the acquisitions of Global Realty and
Management, Inc. and CEFUS. Goodwill is amortized on a straight-line
basis over 20 years in the case of the Global Realty and Management
acquisition and over 35 years in the case of CEFUS. Amortization expense
amounted to $69, $50 and $50 for the years ended December 31, 2001, 2000
and 1999, respectively.
MINORITY INTEREST
On January 1, 1999, Equity One (Walden Woods) Inc., a wholly-owned
subsidiary, 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 (the "Walden Woods Shares") 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 has entered into a Redemption Agreement with the Minority
Partners whereby the Minority Partners can request that the Company
purchase either their limited partnership units or any shares of common
stock which they received in exchange for their 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 Company has consolidated the
accounts of the partnership with the Company's financial data. In
addition, under the terms of the limited partnership agreement, the
Minority Partners do not have an interest in the Walden Woods Shares
except to the extent of dividends. Accordingly, a preference in earnings
has been allocated to the Minority Partners to the extent of the
dividends declared. The Walden Woods Shares are not considered
outstanding in the consolidated financial statements, and are excluded
from the share count in the calculation of primary earnings per share.
On December 5, 2000, Equity One (North Port), Inc., a wholly-owned
subsidiary, entered into a limited partnership (the "Shoppes of North
Port, Ltd.") as a general partner. An income producing
F-13
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Company has consolidated the accounts of the partnership with the
Company's financial data. The North Port Minority Partners are to receive
a preferred quarterly distribution equal to a 9.0% annual return on their
initial capital contribution. This amount is reflected as interest
expense in the consolidated financial statements.
RENTAL INCOME
Rental income is comprised of minimum rents, expense reimbursements and
percentage rent payments. Rental income is recognized as earned. Expense
reimbursements are recognized in the period the applicable costs are
incurred. Percentage rent payments based on a tenant's revenues exceeding
certain thresholds are accrued when a tenant reports revenues exceeding
the established thresholds.
MANAGEMENT FEES
Management fees consist of fees earned in connection with certain
third-party leasing activities and other third-party management
activities. Management fees are recognized when earned.
INCOME TAXES
The Company elected to be taxed as a real estate investment trust (REIT)
under the Code, commencing with its taxable year ended December 31, 1995.
To qualify as a REIT, the Company must meet a number of organizational
and operational requirements, including a requirement that it currently
distribute at least 90% of its REIT taxable income to its stockholders.
It is management's current intention to adhere to these requirements and
maintain the Company's REIT status. As a REIT, the Company generally will
not be subject to corporate level federal income tax on taxable income it
distributes currently to its stockholders. If the Company fails to
qualify as a REIT in any taxable year, it will be subject to federal
income taxes at regular corporate rates (including any applicable
alternative minimum tax) and may not be able to qualify as a REIT for
four subsequent taxable years. Even if the Company qualifies for taxation
as a REIT, the Company may be subject to certain state and local taxes on
its income and property, and to federal income and excise taxes on its
undistributed taxable income.
During the period from August 18, 2000 to September 19, 2001, CEFUS, a
wholly owned subsidiary of FCR, was taxed as a Corporation and
accordingly recorded current and deferred income taxes. Deferred income
taxes reflect the net tax effects of temporary differences between the
carrying amounts of the assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. These taxes are
reflected in the accompanying consolidated financial statements as
deferred tax assets and as the current and deferred components of the
income tax benefit/expense. In addition to the deferred tax items and the
income tax benefit/expense, certain corporate tax attributes will carry
over to the Company as a result of this transaction (e.g., net operating
losses, alternative minimum tax credit carryforwards, etc.). Net
operating losses available to the
F-14
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company are estimated to be approximately $18,000, but their utilization
is limited subject to the provisions of the Code.
As a result of the acquisition of CEFUS, the Code imposes a tax on the
built-in gain of C corporation (i.e. CEFUS) assets that become assets of
a REIT (i.e. Company) in a carryover-basis transaction. The estimated
built-in gain at the date of acquisition is approximately $47,000. In
lieu of the tax imposed on the transferor C corporation (i.e. CEFUS), the
Company can elect to be subject to a Ten-Year Rule which defers
recognition of the built-in gain tax liability if the asset subject to
the tax is not disposed of within ten years from the date of the
acquisition. In addition to the Ten-Year Rule, the Company has the
ability to utilize like-kind exchanges, carry-over C corporation tax
attributes, and other tax planning strategies to mitigate the potential
recognition of built-in gain tax. If the Company were to be subject to
any taxes as a result of this contingency, such taxes would be recorded
as a cost of the acquisition.
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 primarily in Florida and
Texas. 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 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
Statement of Financial Accounting Standards ("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 this statement
had no effect on the Company's results of operations or financial
position.
In June 2001, FASB approved the issuance of SFAS No. 141, BUSINESS
COMBINATIONS, and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS.
These standards, which were issued in July 2001, established accounting
and reporting for business combinations. SFAS No. 141 requires all
business combinations entered into subsequent to June 30, 2001 to be
accounted for using the purchase method of accounting. SFAS No. 142
provides that goodwill and other intangible assets
F-15
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
with indefinite lives will not be amortized, but will be tested for
impairment at least annually. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. The Company adopted SFAS No. 142 on
January 1, 2002 at which time goodwill amortization ceased. The Company
is currently evaluating the impact of the new accounting standards on
existing goodwill and other intangible assets. During the year ended
December 31, 2001, goodwill amortization was $69.
In August 2001, FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS, which supersedes, but does not replace,
SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, as well as other earlier related
pronouncements, either in whole or in part. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15,
2001 and interim periods within those fiscal years, though earlier
application is encouraged. The Company does not expect that the adoption
of this statement on January 1, 2002 will have a significant effect on
the Company's financial position, results of operations or cash flows.
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 AND ACCOUNTS AND OTHER RECEIVABLE - The
carrying amounts reported in the balance sheets for these financial
instruments approximate fair value because of their short
maturities.
SECURITIES AVAILABLE FOR SALE - Fair values are based on quoted
market prices, dealer quotes, and independent pricing services.
NOTES RECEIVABLE - The fair value is estimated by using the current
rates at which similar loans would be made. The carrying amounts
reported in the balance sheets approximate fair value.
MORTGAGE NOTES PAYABLE AND LINE OF CREDIT AGREEMENTS - The estimated
fair value at December 31, 2001 and 2000 was $352,898 and $286,411,
respectively, calculated based on the net present value of payments
over the term of the notes using estimated market rates for similar
notes payable.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
2001 financial presentation.
F-16
2. ACCOUNTS AND OTHER RECEIVABLES
Composition in the consolidated balance sheets:
DECEMBER 31,
----------------------
2001 2000
------- ------
Tenants................................................................... $ 5,513 $5,735
Other..................................................................... 810 524
Allowance for doubtful accounts........................................... (759) (437)
------- ------
Total accounts and other receivables...................................... $ 5,564 $5,822
======= ======
3. NOTES RECEIVABLE
Composition in the consolidated balance sheets:
DECEMBER 31,
-----------------------
2001 2000
------- -------
Mortgage notes receivable, bearing interest at 9% and 10% per annum, due
December 2002 and March 2006........................................... $ 6,471 $ --
Loan receivable from a partner in a Joint Venture to fund development
activities, bearing interest at the Company's cost of funds up to 10%
per annum, due upon refinancing or sale of the property................ 2,940 12,213
Other..................................................................... 286 46
------- -------
Total notes receivable.................................................... $ 9,697 $12,259
======= =======
F-17
4. RENTAL PROPERTY
Composition in the consolidated balance sheets:
LAND,
BUILDINGS BUILDING LAND HELD FOR CONSTRUCTION
AND EQUIPMENT IMPROVEMENTS DEVELOPMENT IN PROGRESS TOTAL
-------------- ------------ -------------- ------------ --------
COST
Balance as of December 31, 2000 $ 468,957 $10,901 $13,468 $8,202 $501,528
Additions in the reporting year 161,802 8,081 10,324 5,492 185,699
Dispositions in reporting year. (23,252) (188) -- (7,782) (31,222)
--------- -------- ------- ------- --------
Balance as of December 31, 2001 607,507 18,794 23,792 5,912 656,005
--------- -------- ------- ------- --------
ACCUMULATED DEPRECIATION
Balance as of December 31, 2000 16,114 1,715 17,829
Depreciation for the year...... 10,001 1,042 11,043
Reduction of depreciation...... (553) (1) (554)
--------- -------- --------
Balance as of December 31, 2001 25,562 2,756 28,318
--------- -------- --------
Undepreciated balance as of
December 31, 2001........... $ 581,945 $ 16,038 $23,792 $5,912 $627,687
========= ======== ======= ====== ========
Undepreciated balance as of
December 31, 2000........... $ 452,843 $ 9,186 $13,468 $8,202 $483,699
========= ======== ======= ====== ========
F-18
5. NOTES PAYABLE
Composition in the consolidated balance sheets:
DECEMBER 31,
-----------------------------
2001 2000
--------- --------
FIXED RATE MORTGAGE LOANS
Various mortgage notes payable secured by rental properties, bearing
interest at 6.65% to 9.35% per annum, with maturity dates ranging from
April 2002 through November 2018...................................... $ 296,887 $ 243,279
VARIABLE RATE MORTGAGE LOANS
Various mortgage notes payable secured by rental properties, bearing
interest from LIBOR plus 1.41% to LIBOR plus 2.25% (the interest rates
at December 31, 2001 ranged from 4.19% to 6.89%), with maturity dates
ranging from October 2003 to December 2004............................. 48,160 37,117
--------- --------
Total mortgage notes payable.............................................. 345,047 280,396
--------- --------
REVOLVING CREDIT FACILITIES
Line of credit of $20,600, subsequently reduced to $10,800
due to disposition and transfer of secured properties, with
a bank, bearing interest at LIBOR plus 2.25% matures May 2002.
The credit agreement is secured by various rental
properties............................................................ 1,409 4,243
Line of credit of $30,000 with a bank, bearing interest at
LIBOR plus 1.25%, matures September 2002. The credit
agreement is secured by various rental properties...................... 26,000 --
--------- --------
Total revolving credit facilities........................................ 27,409 4,243
--------- --------
Total notes payable...................................................... $ 372,456 $284,639
========= ========
Principal maturities of the notes payable as of December 31, 2001 are as
follows:
YEAR ENDING
DECEMBER 31, AMOUNT
----------------------- -----------
2002................... $ 49,844
2003................... 23,109
2004................... 31,804
2005................... 27,634
2006................... 32,703
Thereafter............. 207,362
---------
Total.................. $ 372,456
=========
F-19
5. NOTES PAYABLE (CONTINUED)
Certain of the mortgages on the Company's properties involving an
aggregate principal amount of approximately $62,000 contain prohibitions
on transfers of ownership which may have been violated by the Company's
previous issuances of common stock or in connection with past
acquisitions and may be violated by transactions involving the Company's
capital stock in the future. If a violation were established, it could
serve as a basis for a lender to accelerate amounts due under the
affected mortgage. The Company is in the process of obtaining the
necessary consents from the lenders. Based on discussions with various
lenders, current credit market conditions and other factors, the Company
believes that such consents will be obtained or that the mortgages would
not be accelerated. Accordingly, the Company believes that the ultimate
outcome of this matter will not have a material impact on the Company's
results of operations or financial condition.
The Company intends to monitor and manage interest rate costs on its
variable rate debt. The Company may, from time to time, enter into
interest rate hedge agreements to manage interest costs and risk
associated with changing interest rates. There were no rate hedge
agreements outstanding as of December 31, 2001 and 2000.
During 2001, the Company paid $1,546 as a prepayment penalty for early
extinguishment of debt which is reflected as an extraordinary item in the
accompanying statements of operations.
Interest costs incurred were $24,345 and $14,988 in the years ended
December 31, 2001 and 2000, respectively, of which $2,102 and $2,181 were
capitalized in the years ended December 31, 2001 and 2000, respectively.
6. STOCKHOLDERS' EQUITY
As of December 31, 2001 and 2000, the Company has authority to issue
40,000 shares of common stock and 5,000 shares of preferred stock.
During 2001, the Company issued 145 shares of restricted stock to its
employees and directors. The Company also issued 925 shares of common
stock to Alony Hetz Properties & Investments, Ltd. ("Alony Hetz") under a
subscription agreement at $10.875 per share, and Alony Hetz exercised
warrants to purchase 1,025 shares of common stock at the exercise price
of $10.875 per share. Additional shares were issued for the acquisition
of CEFUS and UIRT as discussed in Note 1.
During 2001, two officers exercised stock options to purchase 503 shares
of common stock the exercise price for which was paid with promissory
notes totaling $5,033. These notes are full recourse promissory notes
bearing interest at 5% and are secured by the stock issued upon exercise
of the options. Interest is payable quarterly and principal is due
September 30, 2006. The notes have been reflected in the consolidated
financial statements as a reduction of stockholders' equity.
During 1999, two officers exercised warrants to purchase 92 shares of
common stock the exercise price for which was paid with promissory notes
totaling $545. These notes are full resourse 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.
During 2001, the Company paid cash dividends of $0.26, $0.26, $0.27 and
$0.27 per share on March 30, June 29, September 28 and December 31,
respectively. Gross dividends paid were $18,622 for the year ended
December 31, 2001.
F-20
6. STOCKHOLDERS' EQUITY (CONTINUED)
During 2000, the Company paid cash dividends of $0.26, $0.26, $0.26 and
$0.32 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 $0.25, $0.25, $0.26 and
$0.26 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.
7. BENEFIT PLANS
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. 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 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 Compensation
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.
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. The persons eligible to
receive an award under the 2000 Plan are the officers, directors,
employees and independent contractors of the Company and its
subsidiaries.
During the term of the 2000 Plan, the total number of shares of Common
Stock that may be subject to awards may not exceed 1,000 shares, plus (i)
the number of shares with respect to which options previously granted
under the 1995 Stock Option Plan terminate without being exercised, and
(ii) the number of shares that are surrendered in payment of the exercise
price for any awards or any tax withholding requirements.
The Company applies the intrinsic value method as prescribed by
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 as no grants were made
at less than market value. 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
would have been:
2001 2000 1999
----------- ------------ -------------
Net income As reported............. $18,721 $12,555 $13,589
Pro forma............... 18,483 11,820 13,062
Basic earnings per share As reported............. $0.83 $0.88 $1.26
Pro forma............... 0.82 0.83 1.21
F-21
7. BENEFIT PLANS (CONTINUED)
2001 2000 1999
----------- ------------ -------------
Diluted earnings per As reported............. $0.83 $0.87 $1.26
share Pro forma............... 0.82 0.82 1.21
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, 2001, 2000 and 1999:
2001 2000 1999
----------- ----------- ------------
Dividend Yield................... 7.5% 10.6% 10.3%
Risk-free interest rate.......... 4.3% - 5.1% 5.3% - 6.0% 6.4% - 6.5%
Expected option life (years)..... 7 7 5
Expected volatility.............. 25% 17% 23%
In accordance with SFAS No. 123, the following is a summary of the
Company's stock option activity for the years ended December 31, 2001,
2000 and 1999:
2001 2000 1999
------------------- --------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
STOCK EXERCISE STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- --------- ------- --------- ------- ----------
Outstanding beginning of
year..................... 953 $10.08 737 $10.45 777 $10.41
Granted..................... 175 10.00 332 9.95 58 10.38
Forfeited................... -- -- (116) 12.05 (50) 11.83
Exercised................... (503) 10.00 -- -- (48) 8.25
------ ------- ----- ------- ----- -------
Outstanding end of year..... 625 $10.12 953 $10.08 737 $10.45
====== ======= ===== ======= ===== =======
Exercisable, end of year.... 325 $10.23 716 $10.08 447 $10.21
====== ======= ===== ======= ===== =======
Weighted average fair value
of options granted
during the year.......... $2.39 $0.92 $1.36
------- ------- -------
F-22
The following table summarizes information about outstanding stock options
as of December 31, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------------- -------------------
WEIGHTED AVERAGE
REMAINING
CONTRACTUAL LIFE
EXERCISE PRICE NUMBER OUTSTANDING (IN YEARS) NUMBER EXERCISABLE
-------------- ------------------ ----------------- ------------------
$ 9.90 175 7.7 88
$10.00 370 7.3 182
$10.44 50 7.7 25
$12.38 30 5.0 30
----- -----
625 325
===== =====
7. BENEFIT PLANS (CONTINUED)
401(K) PLAN
The Company has a 401(k) defined contribution plan (the "401(k) Plan")
covering substantially all of the officers and employees of the Company
which permits participants to defer up to a maximum of 15% of their
compensation. The Company matches 50% of the employees' contribution up
to a maximum of 3% of an employees' annual compensation. Employees'
contributions vest immediately and the Company's matching contributions
vest pro rata over three years. The Company's contributions to the 401(k)
Plan for the year ended December 31, 2001 and 2000 (inception) were $49
and $10, respectively. The 401(k) Plan invests the Company's matching
contributions by purchasing publicly traded shares of the Company's
common stock.
8. EARNINGS PER SHARE
The following is a reconciliation of the amounts of net income and shares
of common stock used in calculating basic and diluted per-share net
income ("EPS") for the years ended December 31, 2001, 2000 and 1999:
FOR THE YEAR ENDED DECEMBER 31, 2001
-------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------- ------------- -----------
NET INCOME $18,721
=======
BASIC EPS
Income available to common stockholders......... $18,721 22,414 $0.83
------- ------ =====
EFFECT OF DILUTIVE SECURITIES
Walden Woods Village, Ltd....................... 99 94
Employee restricted stock....................... -- 192
Convertible partnership units................... 259 262
Stock Options................................... -- 75
------- ------
358 623
------- ------
DILUTED EPS
Income available to common stockholders +
assumed conversions............................. $19,079 23,037 $0.83
======= ====== =====
Options to purchase 30 shares of common stock at $12.38 per share were outstanding at year end but were
not included in the computation of diluted EPS because the option price was greater than the average
market price of common shares.
F-23
8. EARNINGS PER SHARE (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2000
------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
NET INCOME $12,555
=======
BASIC EPS
Income available to common stockholders.......... 12,555 14,285 $0.88
------- ------ =====
EFFECT OF DILUTIVE SECURITIES
Walden Woods Village, Ltd........................ -- 94
Employee restricted stock........................ -- 122
Convertible partnership units................... 20 3
------- ------
20 219
------- ------
DILUTED EPS
Income available to common stockholders
assumed conversions............................ $12,575 14,504 $0.87
======= ====== =====
Options to purchase 953 shares of common stock from $9.90 to $12.38 per share were outstanding at year
end but were not included in the computation of diluted EPS because the option price was greater than
the average market price of common shares.
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 10,805 $1.26
------- ------ =====
EFFECT OF DILUTIVE SECURITIES
Walden Woods Village, Ltd......................... 95 94
Employee restricted stock......................... -- 2
------- ------
95 96
------- ------
DILUTED EPS
Income available to common stockholders + assumed
conversions....................................... $13,684 10,901 $1.26
======= ====== =====
Options to purchase 737 shares of common stock from $10.00 to $12.38 per share were outstanding at year
end but were not included in the computation of diluted EPS because the option price was greater than
the average market price of common shares.
F-24
9. FUTURE MINIMUM RENTAL INCOME, COMMITMENTS AND CONTINGENT
LIABILITIES
Future minimum rental income under noncancelable operating leases
approximates the following as of December 31, 2001:
YEAR ENDING
DECEMBER 31, AMOUNT
----------------------- -----------
2002................... $ 69,412
2003................... 60,190
2004................... 49,975
2005................... 40,057
2006................... 31,177
Thereafter............. 145,011
---------
Total.................. $ 395,822
=========
As of December 31, 2001 and 2000, the Company has pledged letters of
credit for $2,000 and $1,500, respectively, as additional security for
financing.
The Company has guaranteed the mortgage note payable for one of its joint
ventures of approximately $14,000.
The Company is subject to litigation in the normal course of business,
none of which as of December 31, 2001 in the opinion of management, will
have a material adverse effect on the financial condition or results of
operations of the Company.
10. RELATED PARTY TRANSACTIONS
The Company provided an affiliated entity 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, 2001,
2000 and 1999, such fees totaled $40, $40 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, 2001 and 2000, balances due from and to related
parties are non-interest bearing with no specified due dates. During
2001, amounts due from and to related parties were offset by the issuance
of common stock of CEFUS.
11. SUBSEQUENT EVENTS
In January 2002, the Company completed a private placement of 688 shares
of common stock to a limited number of accredited investors, half of
which was purchased by investors that are affiliates of the Company, with
gross proceeds of $8,892. The proceeds will be used for general corporate
purposes.
In January 2002, the Company filed a shelf registration statement with
the Securities and Exchange Commission, which will permit the Company
from time to time, to offer and sell various securities up to a value of
$250,000.
In February 2002, the Company completed the sale of an office building,
located in Florida, for $6,050.
In February 2002, the Company entered into a variable-rate revolving
credit facility with a bank for $29,400. The line of credit is secured by
various rental properties and has a maturity date of February 2005. The
loan has convenants and other restructions on the Company.
In February 2002, the Company completed the acquisition of two
free-standing drug-stores located in Florida, for purchase prices of
$2,400 and $3,800.
In February 2002, the Company exercised existing options and acquired
two parcels of land located in Florida. The Company paid approximately
$2,000 and approximately $1,000 to purchase the parcels.
In February 2002, the Company completed the sale of a retail center,
located in Texas, for $1,100.
F-25
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL(1)
-------- -------- -------- -------- --------
2001:
Total revenues........................... $ 19,426 $ 18,846 $ 20,035 $ 24,680 $ 82,987
Income before (loss)/gain on sale of real
estate, equity in income of
unconsolidated entities, minority
interest in earnings of consolidated
subsidiaries, income taxes, minority
interest and extraordinary item........ 5,128 4,446 4,941 6,626 21,141
Income before extraordinary item......... 4,024 3,775 5,826 6,642 20,267
Net income............................... $ 4,024 $ 3,775 $ 5,826 $ 5,096 $ 18,721
Basic per share data
Income before extraordinary item....... $ 0.20 $ 0.19 $ 0.27 $ 0.23 $ 0.90
Net Income............................. $ 0.20 $ 0.19 $ 0.27 $ 0.18 $ 0.83
Diluted per share data
Income before extraordinary item....... $ 0.20 $ 0.19 $ 0.27 $ 0.23 $ 0.90
Net income............................. $ 0.20 $ 0.19 $ 0.27 $ 0.17 $ 0.83
2000:
Total revenues........................... $ 8,104 $ 7,991 $ 12,956 $ 20,570 $ 49,621
Income before (loss)/gain on sale of real
estate, equity in income of
unconsolidated entities, minority
interest in earnings of consolidated
subsidiaries, income taxes, minority
interest............................... 2,647 2,812 3,391 5,460 14,310
Net income............................... $ 2,623 $ 2,787 $ 3,003 $ 4,142 $ 12,555
Basic per share data.....................
Net income............................ $ 0.23 $ 0.24 $ 0.20 $ 0.21 $ 0.88
Diluted per share data
Net income............................ $ 0.23 $ 0.24 $ 0.20 $ 0.21 $ 0.87
------------------
(1) The sum of the quarterly earnings per share amounts may differ from
annual earnings per share.
* * * * *
F-26
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, 2001 and 2000, and for each of
the three years in the period ended December 31, 2001, and have issued our
report thereon dated March 8, 2002; 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 consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
March 8, 2002
S-1
Schedule III
Real Estate Investments and Accumulated Depreciation
December 31, 2001
(in thousands)
GROSS AMOUNTS AT
WHICH CARRIED AT
INITIAL COST TO COMPANY CLOSE OF PERIOD
-------------------------- ------------------------
CAPITALIZED
SUBSE-
QUENT TO
BUILDING ACQUISI- CLOSE OF ACCUMU-
& TION OR PERIOD LATED DEPRE-
ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- DATE CIABLE
PROPERTY LOCATION BRANCES LAND MENTS MENTS LAND MENTS TOTAL TION ACQUIRED LIFE
-------- -------------- ------- ------ ------ ---------- ------- ------- ------ ------- ---------------- --------
INCOME PRODUCING PROPERTIES
NORTH FLORIDA
Atlantic Village Atlantic Beach $4,599 $1,190 $4,760 $943 $1,190 $5,703 $6,893 $1,063 June 30, 1995 40
Oak Hill Village Jacksonville 2,103 690 2,760 46 690 2,806 3,496 436 December 7, 1995 40
Fort Caroline
Trading Post Jacksonville 2,098 738 2,432 544 738 2,976 3,714 577 January 24, 1994 40
Commonwealth Jacksonville 2,967 730 2,920 1,416 730 4,336 5,066 833 February 28, 1994 40
Beauclerc Village Jacksonville 0 651 2,246 216 651 2,462 3,113 234 May 15, 1998 40
Mandarin Mini-storage Jacksonville 0 362 1,448 24 362 1,472 1,834 284 May 10, 1994 40
Monument Point Jacksonville 0 1,336 2,330 99 1,336 2,429 3,765 310 January 31, 1997 40
Forest Village Tallahassee 4,575 1,042 0 5,456 1,042 5,456 6,498 167 January 28, 1999 40
Losco Jacksonville 0 253 0 682 253 682 935 19 May 17, 1999 40
Mandarin Landing Jacksonville 0 4,443 4,754 1,215 4,443 5,969 10,412 355 December 10, 1999 40
CENTRAL FLORIDA
Walden Woods Plant City 2,590 950 2,854 9 950 2,863 3,813 216 January 1, 1999 40
Eustis Square Eustis 4,474 1,463 5,799 78 1,463 5,877 7,340 1,621 October 22, 1993 40
Lake Mary Lake Mary 24,980 6,665 13,878 3,119 6,665 16,997 23,662 2,249 November 9, 1995 40
Forest Edge Orlando 1,646 1,250 1,850 44 1,250 1,894 3,144 241 December 31, 199 40
Park Promenade Orlando 6,413 2,810 6,444 425 2,810 6,869 9,679 542 January 31, 1999 40
Kirkman Shoppes Orlando 9,662 3,237 9,714 3,237 9,714 12,951 399 August 15, 2000 33
FLORIDA WEST COAST
East Bay Plaza Largo 0 325 1,296 583 325 1,879 2,204 756 July 27, 1993 30
Summerlin Square Fort Myers 4,398 1,043 7,988 99 1,043 8,087 9,130 745 June 10, 1998 40
Mariners Crossing Spring Hill 3,468 1,511 4,447 2 1,511 4,449 5,960 145 September 12, 2001 40
Ross Plaza Tampa 6,739 2,115 6,346 14 2,115 6,360 8,475 260 August 15, 2000 33
Marco Town Center Marco Isla 9,000 3,872 11,966 3,872 11,966 15,838 427 August 15, 2000 37
Shoppes of North Port North Port 4,288 1,452 5,807 24 1,452 5,831 7,283 156 December 5, 2000 40
Lake St. Charles Tampa 3,947 1,256 3,768 1,256 3,768 5,024 26 August 15, 2000 40
Skipper Palms Tampa 3,611 1,302 3,940 1,302 3,940 5,242 28 September 21, 2001 40
SOUTH FLORIDA
Bird Ludlum Miami 11,378 4,088 16,318 330 4,088 16,648 20,736 3,111 August 11, 1994 40
Bluff Square Jupiter 10,232 3,232 9,917 3,232 9,917 13,149 401 August 15, 2000 33
S-2
Schedule III
Real Estate Investments and Accumulated Depreciation
December 31, 2001
(in thousands)
GROSS AMOUNTS AT
WHICH CARRIED AT
INITIAL COST TO COMPANY CLOSE OF PERIOD
-------------------------- ------------------------
CAPITALIZED
SUBSE-
QUENT TO
BUILDING ACQUISI- CLOSE OF ACCUMU-
& TION OR PERIOD LATED DEPRE-
ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- DATE CIABLE
PROPERTY LOCATION BRANCES LAND MENTS MENTS LAND MENTS TOTAL TION ACQUIRED LIFE
-------- -------------- ------- ------ ------ ---------- ------- ------- ------ ------- ---------------- --------
Boca Village Boca Raton 8,459 3,385 10,174 3,385 10,174 13,559 370 August 15, 2000 37
Boynton Plaza Boynton Be 7,622 2,943 9,100 2,943 9,100 12,043 369 August 15, 2000 33
Cashmere Corners Port St. Lucie 5,198 1,822 5,530 1,822 5,530 7,352 75 August 15, 2000 40
Epsilon West Palm Beach 0 123 493 944 123 1,437 1,560 212 February 15, 199 40
Gazit Meridian Miami Beach 0 229 423 776 229 1,199 1,428 250 April 10, 1992 40
Jonathan's Landing Jupiter 2,960 1,146 3,442 1,146 3,442 4,588 125 August 15, 2000 37
Lantana Village Lantana 3,953 1,350 7,978 140 1,350 8,118 9,468 739 January 6, 1998 40
Montclair Apartments Miami 0 199 801 7 199 808 1,007 68 August 31, 1998 40
Oakbrook Palm Beach
Gardens 9,277 5,115 16,087 5,115 16,087 21,202 505 August 15, 2000 36
Pompano (Equity One) Pompano Beach 0 900 2,005 113 900 2,118 3,018 48 January 27, 2001 40
Plaza Del Rey Miami 2,368 740 2,961 147 740 3,108 3,848 1,142 August 22, 1991 40
Point Royale Miami 4,975 3,720 5,005 1,187 3,720 6,192 9,912 912 July 27, 1995 40
West Lakes Plaza Miami 5,175 2,141 5,789 278 2,141 6,067 8,208 834 November 6, 1996 40
Shops at Skylake N. Miami 15,275 12,048 0 16,163 12,048 16,163 28,211 646 August 19, 1997 40
El Novillo Miami 0 250 1,000 151 250 1,151 1,401 169 April 30, 1998 40
Ridge Plaza Davie 0 3,905 7,453 416 3,905 7,869 11,774 517 August 15, 2000 40
Pine Island Davie 25,588 8,557 12,860 90 8,557 12,950 21,507 793 August 26, 1999 40
Sawgrass Promenade Deerfield 8,459 3,280 9,851 3,280 9,851 13,131 405 August 15, 2000 32
Prosperity Centre Palm Beach
Gardens 7,045 4,597 13,838 4,597 13,838 18,435 516 August 15, 2000 36
Westburry Miami 2,330 1,263 3,798 1,263 3,798 5,061 138 August 15, 2000 37
University Mall Ft. Lauderdale 12,837 1,462 4,405 1,462 4,405 5,867 67 August 15, 2000 40
Ryanwood Vero Beach 0 2,281 6,880 2,281 6,880 9,161 29 August 15, 2000 40
Equity One 2,536 2,536 2,536 485 Various
TEXAS
Albertson's Bissonnet Houston 0 445 1,335 445 1,335 1,780 9 September 21, 2001 40
Albertson's Spring
Shadows Houston 0 1,206 3,619 1,206 3,619 4,825 25 August 15, 2000 40
Benchmark Crossing Houston 3,466 1,459 4,377 1,459 4,377 5,836 30 September 21, 2001 40
Colony Plaza Houston 3,088 970 2,909 970 2,909 3,879 20 September 21, 2001 40
Hedwig Houston 0 1,875 5,625 1,875 5,625 7,500 39 September 21, 2001 40
Highland Square Houston 4,215 1,923 5,768 1,923 5,768 7,691 40 September 21, 2001 40
Market at First
Colony Houston 0 3,292 9,906 3,292 9,906 13,198 69 September 21, 2001 40
Mason Park Houston 0 2,524 7,578 2,524 7,578 10,102 53 September 21, 2001 40
Copperfield Houston 8,000 780 2,468 780 2,468 3,248 188 August 15, 2000 34
Grogan's Mill Houston 7,995 3,117 9,373 3,117 9,373 12,490 341 August 15, 2000 37
Mission Bend Houston 6,370 2,514 7,854 2,514 7,854 10,368 280 August 15, 2000 37
Steeplechase Houston 6,305 2,666 8,021 2,666 8,021 10,687 292 August 15, 2000 37
Beechcrest Houston 3,965 1,408 4,291 1,408 4,291 5,699 155 August 15, 2000 37
Woodforest Houston 0 428 1,306 428 1,306 1,734 55 August 15, 2000 32
Barker Cypress Houston 0 1,676 5,029 1,676 5,029 6,705 0 August 15, 2000 40
DALLAS
Green Oaks Dallas 3,172 1,045 3,134 1,045 3,134 4,179 22 September 21, 2001 40
S-3
Schedule III
Real Estate Investments and Accumulated Depreciation
December 31, 2001
(in thousands)
GROSS AMOUNTS AT
WHICH CARRIED AT
INITIAL COST TO COMPANY CLOSE OF PERIOD
-------------------------- ------------------------
CAPITALIZED
SUBSE-
QUENT TO
BUILDING ACQUISI- CLOSE OF ACCUMU-
& TION OR PERIOD LATED DEPRE-
ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- DATE CIABLE
PROPERTY LOCATION BRANCES LAND MENTS MENTS LAND MENTS TOTAL TION ACQUIRED LIFE
-------- -------------- ------- ------ ------ ---------- ------- ------- ------ ------- ---------------- --------
Melbourne Plaza Dallas 1,833 932 2,796 932 2,796 3,728 19 September 21, 2001 40
Northwest Crossing Dallas 1,744 500 1,503 500 1,503 2,003 10 September 21, 2001 40
Parkwood Dallas 6,353 2,222 6,668 2,222 6,668 8,890 46 September 21, 2001 40
Richwood Dallas 3,272 1,170 3,512 1,170 3,512 4,682 24 September 21, 2001 40
Rosemeade Park Dallas 3,304 1,175 3,525 1,175 3,525 4,700 25 September 21, 2001 40
Plymouth South Dallas 632 528 1,585 528 1,585 2,113 59 September 21, 2001 36
Plymouth North Dallas 8,848 1,639 5,408 1,639 5,408 7,047 354 September 21, 2001 36
Plymouth East Dallas 632 472 1,416 472 1,416 1,888 53 September 21, 2001 36
Plymouth West Dallas 2,528 981 2,944 981 2,944 3,925 110 September 21, 2001 36
Benbrook Fort Worth 0 361 1,179 361 1,179 1,540 37 August 15, 2000 37
Sterling Plaza Dallas 4,175 1,834 5,504 1,834 5,504 7,338 200 August 15, 2000 37
Minyard's (Garland) Dallas 2,578 885 2,666 885 2,666 3,551 94 August 15, 2000 38
Townsend Dallas 4,989 2,247 6,793 2,247 6,793 9,040 246 August 15, 2000 37
Village Park
(Wimbledon) Dallas 3,723 1,671 5,066 1,671 5,066 6,737 188 August 15, 2000 36
SAN ANTONIO
Bandera Festival San Antonio 0 2,629 7,890 2,629 7,890 10,519 55 September 21, 2001 40
Wurzbach San Antoni 1,050 389 1,226 389 1,226 1,615 42 August 15, 2000 38
ARIZONA
Big Curve Yuma 5,658 2,403 7,206 2,403 7,206 9,609 50 September 21, 2001 40
Park Northern Phoenix 2,463 1,058 3,176 1,058 3,176 4,234 22 August 15, 2000 40
Southwest Walgreen's Phoenix 0 1,177 3,531 1,177 3,531 4,708 25 September 21, 2001 40
TENNESSEE
McMinn Plaza Athens 0 1,218 3,663 1,218 3,663 4,881 26 September 21, 2001 40
----------------------------------------------------------------------
TOTAL INCOME PRODUCING PROPERTIES 345,047 162,281 425,705 38,316 162,281 464,021 626,302 28,318
----------------------------------------------------------------------
LAND HELD FOR/UNDER DEVELOPMENT
Albertson's
Bissonnet Houston 0 103 103 0 103 September 21, 2001
Beauclerc Village Jacksonville 0 12 12 12 May 15, 1998
Cashmere Corners Port St. Lucie 0 790 62 790 62 852 August 15, 2000
Cashmere CornersJV 2 Port St. Lucie 0 68 68 68 August 15, 2000
Centerfund PGA Palm Beach Gardens 0 27 27 27 August 15, 2000
Copperfield Houston 0 3,135 274 3,135 274 3,409 August 15, 2000
Coral Way Miami 0 988 295 988 295 1,283 July 23, 1999
Forest Village Tallahassee 0 1,461 653 1,461 653 2,114 January 28, 1999
S-4
Schedule III
Real Estate Investments and Accumulated Depreciation
December 31, 2001
(in thousands)
GROSS AMOUNTS AT
WHICH CARRIED AT
INITIAL COST TO COMPANY CLOSE OF PERIOD
-------------------------- ------------------------
CAPITALIZED
SUBSE-
QUENT TO
BUILDING ACQUISI- CLOSE OF ACCUMU-
& TION OR PERIOD LATED DEPRE-
ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- DATE CIABLE
PROPERTY LOCATION BRANCES LAND MENTS MENTS LAND MENTS TOTAL TION ACQUIRED LIFE
-------- ------------ ------- ------ ------ ---------- ------- ------- ------ ------- ---------------- --------
Gazit Meridian Miami Beach 0 372 496 372 496 868 April 10, 1992
Lake Mary Lake Mary 0 426 381 426 381 807 November 9, 1995
Lake St Charles Tampa 0 206 206 0 206 September 21, 2001
Losco Jacksonville 0 1 1 1 May 17, 1999
Marco Town Center Marco Island 0 371 371 371 August 15, 2000
Mariners Crossing Spring Hill 0 5 5 5 September 12, 2000
Plymouth North Dallas 0 5,740 417 5,740 417 6,157 August 15, 2000
Point Royal Miami 0 17 17 17 July 27, 1995
Prosperity Centre Palm Beach
Gardens 17 17 17 August 15, 2000
Shoppes at Skylake Miami 0 2,452 2,428 2,452 2,428 4,880 August 19, 1997
Southwest Wallgreens Phoenix 0 29 29 29 August 15, 2000
Summerlin Square FortrMyers 0 913 182 913 182 1,095 June 10, 1998
Texas CP Land Texas 0 206 206 0 206 August 15, 2000
University Mall
(Pembroke) Pembroke 0 7,000 176 7,000 176 7,176 September 21, 2001
----------------------------------------------------------------------------
TOTAL LAND HELD FOR/UNDER
DEVELOPMENT - 23,792 - 5,911 23,792 5,911 29,703 -
----------------------------------------------------------------------------
Credit Agreement 0 0 0 0 0 0 0 0
City National Bank 1,409
Bank Leumi 26,000
----------------------------------------------------------------------------
Total $372,456 $186,073 $425,705 $44,227 $186,073 $469,932 $656,005 $28,318
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S-5