UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ________to ________
Commission File Number 1-7859
IRT PARTNERS LP
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(Exact name of registrant as specified in its charter)
Georgia 58-2404832
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
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(Address of principal executive offices) (Zip Code)
(770) 955-4406
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
1
CERTAIN INFORMATION CONTAINED IN THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. READERS OF THIS
REPORT SHOULD BE AWARE THAT THERE ARE VARIOUS FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS MADE HEREIN.
THIS INFORMATION IS FURTHER QUALIFIED BY THE SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS AND THE INFORMATION IN THE SECTION ENTITLED "RISK
FACTORS" CONTAINED IN THE IRT PROPERTY COMPANY ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2000, WHICH ARE INCORPORATED HEREIN BY REFERENCE.
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Item 1. Financial Statements
IRT PARTNERS L.P.
BALANCE SHEETS
(Dollars in thousands, except unit amounts)
September 30, December 31,
2001 2000
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(Unaudited)
ASSETS
Rental properties $ 163,661 $ 161,213
Accumulated depreciation (26,133) (24,099)
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Net rental properties 137,528 137,114
Cash and cash equivalents 1,000 6,643
Advances to affiliate, net 20,410 19
Prepaid expenses and other assets 3,325 2,038
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Total assets $ 162,263 $ 145,814
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LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable, net $ 37,644 $ 30,595
Accrued expenses and other liabilities 3,140 1,699
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Total liabilities 40,784 32,294
Limited partners' capital interest (815,852 OP Units in 2001
and 2000, respectively) at redemption value 8,811 6,621
Commitments and contingencies (Note 6)
Partners' capital
General partner (137,958 and 129,433 OP Units
in 2001 and 2000, respectively) 1,213 1,131
Limited partner (12,841,814 and 11,997,929 OP Units
in 2001 and 2000, respectively) 111,455 105,768
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Total partners' capital 112,668 106,899
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Total liabilities and partners' capital $ 162,263 $ 145,814
=============== ==============
The accompanying notes are an integral part of these balance sheets.
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IRT PARTNERS L.P.
STATEMENTS OF EARNINGS
For the Three and Nine Months Ended September 30, 2001 and 2000
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
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2001 2000 2001 2000
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Revenues:
Income from rental properties $5,942 $5,049 $17,540 $15,224
Gain on sale of outparcel - - 293 -
Interest income from affiliate 158 70 328 304
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Total revenues 6,100 5,119 18,161 15,528
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Expenses:
Operating expenses of rental properties 1,523 1,357 4,623 3,990
Interest on mortgages 732 609 2,044 1,835
Depreciation 954 873 2,883 2,619
Amortization of debt costs 3 - 6 -
General and administrative 268 271 762 641
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Total expenses 3,480 3,110 10,318 9,085
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Earnings before gain on
sales of properties 2,620 2,009 7,843 6,443
Gain on sales of properties - - 1,108 -
------ ------ ------- -------
Net earnings $2,620 $2,009 $ 8,951 $ 6,443
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The accompanying notes are an integral part of these statements.
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IRT PARTNERS L.P.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2001 and 2000
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
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2001 2000
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Cash flows from operating activities:
Net earnings $ 8,951 $ 6,443
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 2,883 2,619
Gain on sale of operating properties (1,108) -
Gain on sale of outparcel (293) -
Straight line rent adjustment (136) (24)
Amortization of debt costs and discounts 6 -
Changes in assets and liabilities:
Increase in prepaid expenses and other assets (1,078) (587)
Increase (decrease) in accrued expenses and other liabilities 1,441 (1)
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Net cash flows from operating activities 10,666 8,450
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Cash flows used in investing activities:
Additions to operating properties, net (8,401) (2,301)
Proceeds from sales of operating properties, net 6,210 -
Proceeds from sale of outparcel, net 348 -
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Net cash flows used in investing activities (1,843) (2,301)
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Cash flows used in financing activities:
Issuance of units for cash 7,903 -
Distributions paid, net (8,897) (8,083)
Collection of advances to affiliate, net - 6,220
Advances to affiliate, net (20,391) -
Proceeds from mortgage notes payable 7,540 -
Principal amortization of mortgage notes payable (491) (435)
Payment of deferred financing costs (130) -
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Net cash flows used in financing activities (14,466) (2,298)
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Net (decrease) increase in cash and cash equivalents (5,643) 3,851
Cash and cash equivalents at beginning of period 6,643 359
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Cash and cash equivalents at end of period $ 1,000 $ 4,210
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Supplemental disclosures of cash flow information:
Total cash paid for interest $ 2,016 $ 1,838
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The accompanying notes are an integral part of these statements.
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IRT PARTNERS L.P.
Notes to Financial Statements
September 30, 2001 and 2000
(Dollars in thousands, except unit amounts)
1. Unaudited Financial Statements
These financial statements for interim periods are unaudited. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to a fair presentation of the financial statements as of
September 30, 2001 and 2000 have been recorded. The results of operations for
the interim periods are not necessarily indicative of the results that may be
expected for future interim periods or for the full year.
2. Organization and Nature of Operations
IRT Partners L.P. ("LP"), a Georgia limited partnership formed July 15,
1998, is the entity through which IRT Property Company (the "Company"), a
self-administered and self-managed real estate investment trust ("REIT"),
conducts a portion of its business and owns (either directly or through
subsidiaries) a portion of its assets.
The Company is the sole general partner of LP and maintains an indirect
partnership interest through its wholly-owned subsidiary, IRT Management
Company. The Company initially contributed 20 shopping centers, related assets
and cash to LP in exchange for 8,486,217 limited partnership units ("OP Units").
The Company was issued additional OP Units in exchange for cash contributions to
fund further acquisition activity. Since the formation of LP, the Company has
contributed cash to acquire six shopping centers, and LP has divested five
shopping centers. At September 30, 2001, the Company owned approximately 94.1%
of LP.
LP was formed by the Company in order to enhance the Company's acquisition
opportunities by offering potential sellers the ability to engage in tax
deferred sales of properties in exchange for OP Units. In August 1998, certain
unaffiliated persons contributed their interests in three Florida shopping
centers in exchange for a total of 815,852 OP Units.
LP is obligated to redeem each OP Unit held by a person other than the
Company, at the request of the holder, for cash equal to the fair market value
of a share of the Company's common stock at the time of such redemption,
provided that the Company may elect to acquire any such OP Unit presented for
redemption for one common share or cash. Such limited partnership interest held
by persons unaffiliated with the Company is reflected as "Limited Partners'
Capital Interest" in the accompanying balance sheets at the cash redemption
amount on the balance sheet dates.
Federal income tax laws require the Company, as a REIT, to distribute 90%
of its ordinary taxable income for 2001 (95% for 2000 and earlier). LP makes
quarterly distributions to holders of OP Units to enable the Company to satisfy
this requirement.
At September 30, 2001, LP owns 24 neighborhood and community shopping
centers located in Florida, Tennessee, Georgia and North Carolina. The shopping
centers are anchored by necessity-oriented retailers such as supermarkets, drug
stores and/or discount variety stores.
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3. Rental Properties
ACQUISITIONS
Date Square Year % Leased Total Initial
Acquired Property Name City, State Footage Built at Acquisition Cost Cash Paid
- ------------ ----------------------- ------------------ ------- ------ ---------------- ------------- ----------
4/12/01 Unigold Shopping Center Orlando, FL 102,985 1987 97% $ 8,000 $ 7,903
=======================================================================================================================
DISPOSITIONS
Date Square Sales Net Gain
Sold Property Name City, State Footage Price Proceeds (Loss)
- ------------ ----------------------- ------------------ ------- ------ ----------- -------
4/18/01 Eden Center Eden, NC 56,355 $3,950 $ 3,830 $ 742
5/31/01 Chadwick Square Hendersonville, NC 32,100 2,401 2,351 366
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88,455 $6,351 $ 6,181 $ 1,108
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4. Mortgage Notes Payable
On April 19, 2001, LP obtained a non-recourse, secured loan on Pine Ridge
Square of $7,540, at a fixed interest rate of 7.02%. The loan is due and payable
in ten years and principal amortization is based on a thirty year amortization
schedule. Costs associated with obtaining the secured loan totaled $130 and is
being amortized over the term of the loan.
5. Related Party Transactions
LP advances cash generated by the properties within LP to the Company based
on cash flow requirements. Also, in certain instances, the Company advances cash
to LP for operating requirements. As of September 30, 2001, LP had advances to
the Company of $20,391. During 2001, the Company has paid LP approximately $328
in interest from the advances, which bear interest calculated on a monthly
basis, at the three-month treasury bill rate.
6. Commitments and Contingencies
LP has guaranteed the bank indebtedness and senior indebtedness of the
Company.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(Dollars in thousands)
Material Changes in Financial Condition.
During the nine months ended September 30, 2001 LP obtained cash proceeds
of:
- - approximately $7,540 from obtaining non-recourse, secured loans on a
shopping center at an interest rate of 7.02%,
- - approximately $7,903 from the issuance of units due to a shopping center
acquisition,
- - approximately $6,210 upon the sales of four properties and recognized a
gain of approximately $1,108 for financial reporting purposes, and
- - approximately $348 upon the sale of an outparcel and recognized a gain of
approximately $293 for financial reporting purposes.
During the nine months ended September 30, 2001, LP utilized funds of:
- - approximately $8,897 to pay distributions to the holders of the OP Units,
- - approximately $7,903 for the acquisition of a shopping center investment,
and
- - approximately $20,391 for advances to the Company,
During the nine months ended September 30, 2000, the Company advanced LP
$6,220. LP utilized funds of approximately $8,083 to pay distributions to the
holders of the OP Units.
Material Changes in Results of Operations.
During the three and nine months ended September 30, 2001, rental income
from LP's portfolio of shopping center investments:
- - increased approximately $291 and $564, respectively, for the core
portfolio,
- - increased approximately $805 and $2,077, respectively due to the
acquisition of a shopping center in 2000 and a shopping center in the
second quarter of 2001, and
- - decreased approximately $203 and $325, respectively, due to sales of two
investments in 2001.
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During the three and nine months ended September 30, 2000, compared to the
corresponding periods of 1999, rental income from LP's portfolio of shopping
center investments:
- - increased approximately $237 and $425, respectively, for the core
portfolio,
- - increased approximately $29 and $531, respectively, due to the acquisition
of two shopping centers in 1999, and
- - decreased approximately $0 and $520, respectively, due to the sales of
three shopping centers in 1999.
Percentage rentals received from shopping center investments totaled
approximately $1 and $58 during the three months ended September 30, 2001 and
2000, respectively, and $330 and $284 for the nine months ended September 30,
2001 and 2000, respectively. Percentage rental income is recorded upon
collection based on the tenants' lease year end.
Interest due from affiliate increased during the three and nine months
ended September 30, 2001 approximately $88 and $24, respectively, due primarily
to the timing of the advances from the Company.
During the three and nine months ended September 30, 2001, operating
expenses related to LP's portfolio of real estate investments:
- - decreased approximately $2 and increased approximately $96, respectively,
for the core portfolio,
- - increased approximately $224 and $591, respectively, due to the
acquisition of a shopping center in 2000 and a shopping center in 2001, and
- - decreased approximately $56 and $54, respectively, due to the sales of two
properties in 2001.
During the three and nine months ended September 30, 2000, operating
expenses related to LP's portfolio of real estate investments:
- - increased approximately $136 and $311, respectively, for the core
portfolio,
- - increased approximately $32 and $156, respectively, due to the acquisition
of two shopping center investments in 1999, and
- - decreased approximately $19 and $92, respectively, due to the sales of
three shopping centers in 1999.
The net increase of $81 and $264 for the three and nine months ended
September 30, 2001 as compared to the same prior year periods, respectively, in
depreciation expense was due to the acquisition of a real estate investment in
the fourth quarter of 2000 and one investment in the second quarter of 2001.
The net decrease in general and administrative expense of approximately $3
for the three months ended September 30, 2001 was due to the closing of a
regional office in the second quarter of 2001 and increase of $121 for the nine
months ended September 30, 2001, was primarily due to a larger allocation of
expenses from the Company due to the additional real estate investments acquired
in 2000 and 2001.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by LP during the
quarter ended September 30, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
IRT PARTNERS, L.P.
Date: November 13, 2001 /s/ Thomas H. McAuley
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Thomas H. McAuley
President & Chief Executive Officer
Date: November 13, 2001 /s/ James G. Levy
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James G. Levy
Executive Vice President &
Chief Financial Officer
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