<PAGE>
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, 1998.
/ / 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 000-22091
GOLF TRUST OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 33-0724736
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
14 NORTH ADGER'S WHARF, SOUTH CAROLINA 29401
(Address of principal executive offices) (Zip Code)
(843)723-4653
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
- -
On November 13, 1998 there were 7,637,488 common shares outstanding of the
registrant's only class of common stock.
<PAGE>
GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS PAGE
<S> <C> <C>
Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997. . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three Months Ended September 30, 1998 and 1997 . . . . . . . . . 4
Consolidated Statements of Income for the Nine Months Ended September 30, 1998, the Period from
February 12, 1997 (inception) through September 30, 1997 and the Pro Forma Nine Months Ended
September 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity for the Period from February 12, 1997 (inception)
through December 31, 1997 and for the Nine Months Ended September 30, 1998. . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1998 and the
Period from February 12, 1997 (inception) through September 30, 1997 . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . 20
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . . . 30
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ITEM 6. EXHIBITS INDEX AND REPORT ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
----------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Property and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . . $ 50,008 $ 25,796
Golf course improvements . . . . . . . . . . . . . . 156,289 58,494
Buildings and improvements . . . . . . . . . . . . . 72,815 22,199
Furniture, fixtures, and equipment . . . . . . . . . 40,459 8,556
-------- --------
Total property and equipment . . . . . . . . . . . . . 319,571 115,045
Less accumulated depreciation. . . . . . . . . . . . 21,390 14,001
-------- --------
Property and equipment, net. . . . . . . . . . . . . . 298,181 101,044
-------- --------
Mortgage notes receivable. . . . . . . . . . . . . . . 70,775 65,129
Cash and cash equivalents. . . . . . . . . . . . . . . 3,094 14,968
Receivable from affiliates (Note 7). . . . . . . . . . 1,163 1,004
Other assets . . . . . . . . . . . . . . . . . . . . . 10,377 4,161
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . $383,590 $186,306
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt (Note 4). . . . . . . . . . . . . . . . . . . . . $186,831 $4,325
Accounts payable and other liabilities . . . . . . . . 11,540 3,029
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . 198,371 7,354
-------- --------
Minority interest. . . . . . . . . . . . . . . . . . . 64,753 54,625
-------- --------
Commitments (Note 3)
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued. . . . . . . . . . . . - -
Common stock, $.01 par value, 90,000,000 shares
authorized, 7,637,488 shares issued and
outstanding . . . . . . . . . . . . . . . . . . . . 76 76
Additional paid-in capital . . . . . . . . . . . . . 128,254 127,488
Accumulated earnings (dividends in excess of
accumulated earnings) . . . . . . . . . . . . . . . (2,705) 1,774
Unamortized restricted stock compensation. . . . . . (1,861) (1,713)
Note receivable from stock sale. . . . . . . . . . . (3,298) (3,298)
-------- --------
Stockholders' equity . . . . . . . . . . . . . . . . . 120,466 124,327
-------- --------
Total liabilities and stockholders' equity . . . . . . $383,590 $186,306
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
-----------------------------
<S> <C> <C>
REVENUES:
Rent from affiliates (Note 7). . . . . . . . . . . . $ 3,099 $ 3,095
Rent . . . . . . . . . . . . . . . . . . . . . . . . 6,774 919
Mortgage interest. . . . . . . . . . . . . . . . . . 2,166 2,051
-------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . 12,039 6,065
-------- --------
EXPENSES:
Depreciation and amortization. . . . . . . . . . . . 3,089 912
General and administrative . . . . . . . . . . . . . 1,304 937
-------- --------
Total expenses . . . . . . . . . . . . . . . . . . . . 4,393 1,849
-------- --------
Operating income . . . . . . . . . . . . . . . . . . . 7,646 4,216
-------- --------
OTHER INCOME (EXPENSE):
Interest income. . . . . . . . . . . . . . . . . . . 162 45
Interest expense . . . . . . . . . . . . . . . . . . (3,139) (889)
-------- --------
Total other income (expense) . . . . . . . . . . . . . (2,977) (844)
-------- --------
Net income before minority interest. . . . . . . . . . 4,669 3,372
Income applicable to minority interest . . . . . . . . 1,890 1,757
-------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . $ 2,779 $ 1,615
-------- --------
-------- --------
Basic earnings per share . . . . . . . . . . . . . . . $ .36 $ .40
-------- --------
-------- --------
Weighted average number of shares - basic. . . . . . . 7,637 4,088
-------- --------
-------- --------
Diluted earnings per share . . . . . . . . . . . . . . $ .35 $ .38
-------- --------
-------- --------
Weighted average number of shares - diluted. . . . . . 7,865 4,227
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
FOR THE NINE FEBRUARY 12 FOR THE NINE
MONTHS ENDED THROUGH MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1997
--------------------------------------------
(PRO FORMA)
<S> <C> <C> <C>
REVENUES:
Rent from affiliates (Note 7). . . . . . . . . . . . $ 9,406 $ 7,827 $ 9,226
Rent . . . . . . . . . . . . . . . . . . . . . . . . 15,526 2,046 2,390
Mortgage interest. . . . . . . . . . . . . . . . . . 6,475 2,232 2,232
-------- -------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . 31,407 12,105 13,848
-------- -------- --------
EXPENSES:
Depreciation and amortization. . . . . . . . . . . . 7,389 2,061 2,509
General and administrative . . . . . . . . . . . . . 3,737 1,847 2,059
-------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . . . . 11,126 3,908 4,568
-------- -------- --------
Operating income . . . . . . . . . . . . . . . . . . . 20,281 8,197 9,280
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income. . . . . . . . . . . . . . . . . . . 325 493 493
Interest expense . . . . . . . . . . . . . . . . . . (6,061) (1,179) (1,231)
Loss on disposal of assets . . . . . . . . . . . . . (370) - -
-------- -------- --------
Total other income (expense) . . . . . . . . . . . . . (6,106) (686) (738)
-------- -------- --------
Net income before minority interest. . . . . . . . . . 14,175 7,511 8,542
Income applicable to minority interest . . . . . . . . 5,676 3,913 4,450
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . $ 8,499 $ 3,598 $ 4,092
-------- -------- --------
-------- -------- --------
Basic earnings per share . . . . . . . . . . . . . . . $ 1.11 $ .91 $ 1.01
-------- -------- --------
-------- -------- --------
Weighted average number of shares - basic. . . . . . . 7,634 3,968 4,053
-------- -------- --------
-------- -------- --------
Diluted earnings per share . . . . . . . . . . . . . . $ 1.08 $ .89 $ .99
-------- -------- --------
-------- -------- --------
Weighted average number of shares - diluted. . . . . . 7,875 4,066 4,151
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Earnings
(Dividends Note
Additional in Excess Receivable Total
Paid-In of Accumulated Unearned From Stock Stockholders'
Shares Amount Capital Earnings) Compensation Sale Equity
--------- -------- ------------ ---------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 12, 1997 . . . . . . . - $ - $ - $ - $ - $ - $ -
Proceeds from Initial Public Offering. . 3,910 39 82,071 - - - 82,110
Payment of underwriters discount and
initial offering costs . . . . . . . . . - - (9,055) - - - (9,055)
Adjustment for minority interest in
operating partnership. . . . . . . . . . - - (33,882) - - - (33,882)
Issuance of shares in exchange for
note . . . . . . . . . . . . . . . . . . 159 2 3,296 - - (3,298) -
Issuance of shares for acquisition . . . 22 - 600 - - - 600
Issuance of restricted stock . . . . . . 70 1 1,827 - (1,828) - -
Proceeds from follow-on offering . . . . 3,450 34 88,372 - - - 88,406
Payment of underwriters discount and
costs. . . . . . . . . . . . . . . . . . - - (5,741) - - - (5,741)
Amortization of restricted stock
Compensation . . . . . . . . . . . . . . - - - - 115 - 115
Dividends. . . . . . . . . . . . . . . . - - - (4,195) - - (4,195)
Net income . . . . . . . . . . . . . . . - - - 5,969 - - 5,969
------ ---- -------- -------- --------- ------- --------
BALANCE, December 31, 1997 . . . . . . . 7,611 $ 76 $127,488 $ 1,774 $ (1,713) $(3,298) $124,327
------ ---- -------- -------- --------- ------- --------
Issuance of restricted stock . . . . . . 21 - 607 - (607) - -
Issuance of shares for option exercise
and employee stock purchase plans. . . . 6 - 159 - - - 159
Amortization of restricted stock
compensation . . . . . . . . . . . . . . - - - - 459 - 459
Dividends. . . . . . . . . . . . . . . . - - - (12,978) - - (12,978)
Net income . . . . . . . . . . . . . . . - - - 8,499 - - 8,499
------ ---- -------- -------- --------- ------- --------
BALANCE, September 30, 1998. . . . . . . 7,638 $ 76 $128,254 $ (2,705) $ (1,861) $(3,298) $120,466
------ ---- -------- -------- --------- ------- --------
------ ---- -------- -------- --------- ------- --------
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS FEBRUARY 12
ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 8,499 $ 3,598
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 7,389 2,061
Loan cost amortization . . . . . . . . . . . . . . . . . 432 -
Straight-line interest and rent. . . . . . . . . . . . . (1,062) -
Amortization of restricted stock compensation. . . . . . 459 -
Income applicable to minority interest . . . . . . . . . 5,676 3,913
Increase in receivables. . . . . . . . . . . . . . . . . (159) (1,760)
Increase in other assets . . . . . . . . . . . . . . . . (5,590) (1,486)
Increase in accounts payable and other liabilities . . . 741 1,163
-----------------------------
Net cash provided by operating activities. . . . . . . . . . 16,385 7,489
-----------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Golf course acquisitions and improvements. . . . . . . . . (171,229) (66,021)
Increase in mortgage notes receivable. . . . . . . . . . . (4,734) (63,742)
-----------------------------
Net cash used in investing activities. . . . . . . . . . . . (175,963) (129,763)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit . . . . . . . . . . . . . 120,675 54,790
Payments on notes. . . . . . . . . . . . . . . . . . . . . (195) -
Bridge loan proceeds . . . . . . . . . . . . . . . . . . . 44,025 -
Loan fees. . . . . . . . . . . . . . . . . . . . . . . . . (908) -
Net proceeds from offering . . . . . . . . . . . . . . . . - 73,055
Net proceeds from issuance of common stock . . . . . . . . 159 601
Distributions to partners. . . . . . . . . . . . . . . . . (6,434) (2,565)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (9,618) (2,489)
-----------------------------
Net cash provided by financing activities. . . . . . . . . . 147,704 123,392
-----------------------------
Net increase in cash and cash equivalents. . . . . . . . . . 11,874 1,118
-----------------------------
Cash and cash equivalents, beginning of period . . . . . . . 14,968 -
Cash and cash equivalents, end of period . . . . . . . . . . $3,094 $1,118
-----------------------------
-----------------------------
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS FEBRUARY 12
ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
-----------------------------
<S> <C> <C>
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Net assets of Legends Golf transferred to the Company. . . . . $ - $ 981
Accrual of, or deferred payment for property and equipment . . $ 4,034 $ -
OP Units issued in golf course acquisitions. . . . . . . . . . $ 3,167 $ 12,654
Common stock issued in golf course acquisition . . . . . . . . $ - $ 600
Debt acquired with acquisitions. . . . . . . . . . . . . . . . $ 18,001 $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period. . . . . . . . . . . . . . . . $ 5,973 $ 1,179
</TABLE>
See accompanying notes to consolidated financial statements
8
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Golf Trust of America, Inc. (the "Company") was incorporated in Maryland on
November 8, 1996. The Company is a self-administered real estate investment
trust ("REIT") formed to capitalize upon consolidation opportunities in the
ownership of upscale golf courses in the United States. The principal business
strategy of the Company is to acquire upscale golf courses and to lease the golf
courses pursuant to long-term triple net leases to qualified third party
operators, including affiliates of the sellers. Title to the acquired courses
is held by Golf Trust of America, L.P., a Delaware limited partnership (the
"Operating Partnership") or a wholly owned subsidiary of the Operating
Partnership. Golf Trust of America, Inc., through its wholly owned subsidiaries
GTA GP, Inc. ("GTA GP") and GTA LP, Inc. ("GTA LP"), holds a 59.2 percent
interest in the Operating Partnership. GTA GP is the sole general partner of
the Operating Partnership and owns a 0.2 percent interest therein. GTA LP is a
limited partner in the Operating Partnership and owns a 59.0 percent interest
therein. Larry D. Young, a director of the Company, along with his affiliates,
owns 29.0 percent of the Operating Partnership and is a significant lessee.
Operators of the golf courses, their affiliates and officers of the Company hold
the remaining interest in the Operating Partnership.
The accompanying unaudited financial statements have been prepared by the
management of Golf Trust of America, Inc. in accordance with generally accepted
accounting principles for interim financial statements and in conformity with
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for the three and nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the full year. These financial statements should be read in
conjunction with the Company's December 31, 1997 audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K.
The unaudited Pro Forma Consolidated Statement of Income for the nine
months ended September 30, 1997 is presented as if the Formation Transactions
(i.e. the events occurring or resulting from the Company's initial public
offering) had occurred January 1, 1997 and includes the pro forma period from
January 1, 1997 to February 11, 1997 and actual results for the period from
February 12 to September 30, 1997. In management's opinion, all adjustments
necessary to reflect the effects of the Formation Transaction have been made.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This
pronouncement specifies the computation, presentation and disclosure
requirements for earnings per share. The new standard had no material impact on
the Company's financial statements as "diluted" earnings per share disclosure
required by the pronouncement were the same as earnings per share previously
reported. The only difference in "basic" and "diluted" weighted average shares
is the dilutive effect of the Company's stock options outstanding (approximately
228,000 and 276,000 shares added to weighted shares outstanding for the three
months ended September 30, 1998 and 1997, respectively, and approximately
241,000 and 98,000 shares added to weighted shares outstanding for the nine
months ended September 30, 1998 and 1997, respectively).
9
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITION OF GOLF COURSES
During the third quarter of 1998, the Company purchased an additional
7.5 golf courses for an aggregate initial investment of approximately $45.4
million. $36.9 million of this was paid in cash and repayment of
indebtedness, the assumption of a property subject to a lien of $5.0 million,
and $3.5 million was paid in Operating Partnership Units ("OP Units")
(approximately 125,000 OP Units). All of the aforementioned golf courses are
leased to third party operators pursuant to long-term triple net leases.
On July 10, 1998, the Company acquired Polo Trace Golf and Country Club,
an 18-hole upscale golf facility located in Delray Beach, Florida for $12.3
million. The Company leases the golf facility to an affiliate of Emerald
Dunes Golf Group. For this acquisition the Company assumed a loan with
NationsCredit for approximately $5.0 million. The Company has agreed to
maintain this debt until January of 1999 to avoid certain prepayment
penalties. In addition, options to acquire 20,000 shares of Common Stock
were granted to J. Graffeo, J. Galante, H. Rostoff, I. Smoley and A. Inelli
as partial consideration for their interest in Polo Trace Golf Course.
10,000 of the options vest on January 4, 1999 and 10,000 vest on January 4,
2000, each at the trailing 5-day average closing price immediately prior to
vesting, and all expire on July 1, 2000.
On July 17, 1998, the Company acquired Ohio Prestwick Country Club for
$6.4 million. The 18-hole upscale private facility, located near Akron,
Ohio, is leased to the lessee of Raintree Country Club, another current
Company course.
On August 28, 1998 the Company acquired Osage National Golf Course, a
27-hole upscale daily fee golf facility located near Lake of the Ozarks,
Missouri for $11.2 million. The purchase price included the issuance of OP
Units valued at approximately $3.5 million. The golf course is leased to the
prior owner of Osage National.
On September 15, 1998, the Company acquired Wekiva Golf Club and Sweetwater
Country Club located near Orlando, Florida for $11.5 million. Wekiva, a
semi-private course, and Sweetwater, a private club, are two upscale, 18-hole
facilities, located within two miles of each other, effectively giving the
market a 36-hole complex under one management. Both properties are leased to
Diamond Players Club.
On September 18, 1998, the Company acquired Cypress Creek Country Club, an
18-hole semi-private golf facility located in Boynton Beach, Florida (Palm Beach
County) for $4.2 million. The golf course is leased to an affiliate of Emerald
Dunes Golf Group. Emerald Dunes Golf Management and its affiliates now lease
five courses from the Company (Bonaventure (2), Emerald Dunes, Polo Trace, and
Cypress Creek).
10
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITION OF GOLF COURSES (CONT'D)
The following is a summary of the acquisitions through September 30, 1998:
<TABLE>
<CAPTION>
INITIAL
ACQUISITION INVESTMENT
DATE COURSE NAME LOCATION (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1/2/98 Bonaventure - East and West Courses Fort Lauderdale, FL $ 23,700
1/16/98 Mystic Creek Golf Club & Banquet Center Dearborn, MI 10,000
2/1/98 Emerald Dunes Golf Course West Palm Beach, FL 22,400
3/6/98 Sandpiper Golf Course (i) Santa Barbara, CA 36,500
3/9/98 Persimmon Ridge Country Club Louisville, KY 7,500
5/22/98 Eagle Ridge Inn & Resort Galena, IL 47,000
5/28/98 Tierra Del Sol Albuquerque, NM 3,600
6/22/98 Silverthorn Country Club Brooksville, FL 4,700
7/10/98 Polo Trace Golf and Country Club Delray Beach, FL 12,300
7/17/98 Ohio Prestwick Country Club Akron, OH 6,400
8/28/98 Osage National Golf Course Lake of the Ozarks, MO 11,200
9/15/98 Sweetwater Country Club Orlando, FL 6,500
9/15/98 Wekiva Golf Club Orlando, FL 5,000
9/18/98 Cypress Creek Country Club Boynton Beach, FL 4,200
--------------
$ 201,000
--------------
--------------
</TABLE>
(i) Includes adjacent development site - 14 acres
For the nine months ended September 30, 1998 the Company has purchased 18
golf courses for an aggregate initial investment of approximately $168.0 million
in cash and repayment of indebtedness, deferred payments of $1.9 million, the
assumption of properties subject to liens of $18.0 million and the issuance of
$13.1 million in OP Units (approximately 467,000 OP Units).
11
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. COMMITMENTS
LESSEES
Typically, the Company, leases its golf courses to affiliates of the prior
owners and other qualified operators under non-cancelable lease agreements for
an initial period of ten years with options to extend the term of each lease up
to six consecutive times for a period of 5 years. From the minimum lease
payments, the Company is generally required to make available a reserve of 2 to
5 percent of the annual gross golf revenue of each course for capital
expenditure reimbursement to the lessee subject to approval by the Company. At
September 30, 1998, the amount reserved was $1,638,000 compared to $390,000 for
September 30, 1997. The capital expenditure reserve is used for replacement and
enhancement of the existing facilities and is allocated to short and long term
categories and therefore the balance may not be currently available to the
lessee.
Under certain circumstances, the underlying base rent for a course will be
increased when the Company agrees to pay for significant capital improvements or
to expand the existing golf facilities. Of the Company's $27.2 million capital
improvement commitments, approximately $14.2 million has been funded to date.
In limited circumstances the Company agrees to provide working capital loans to
existing lessees. Working capital lines are evidenced by promissory notes or as
set forth in the lease agreement and bear interest at fixed rates between 9.25%
and 10.47%. Of the Company's $8.1 million working capital commitments,
approximately $1.2 million has been funded to date. Typically, the lessee is
required to increase the pledged collateral for the funded amounts.
In summary, the Company has currently funded $15.4 million of these
commitments, and subject to certain conditions, anticipates it will fund an
additional $19.9 million over the next three years.
The Company has agreed to maintain minimum loan balances of approximately
$17.2 million for up to ten years to accommodate certain prior owners' efforts
to seek to minimize certain adverse tax consequences from their contribution of
their courses to the Company.
ACQUISITIONS
The Company is in various stages of negotiation and due diligence review
for several acquisitions. Completion of these transactions is subject to
negotiation and execution of definitive documentation and certain other
customary closing conditions. No assurances can be given that the Company will
continue to pursue or complete any of these golf course acquisitions.
12
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------- ------------
<S> <C> <C>
REVOLVING CREDIT FACILITY $125,000,000 $4,325,000
$125.0 million unsecured revolver with
weighted average interest rates of 6.7%
maturing February 2001
BRIDGE LOAN 44,025,000 -
$100.0 million unsecured with weighted
average interest rates of 6.7% maturing
January 1999
NOTES PAYABLE TO BANKS 17,806,000 -
Secured financing with interest rates
from 8.75% to 10% maturing through
November 2016
-------------- ------------
TOTAL $186,831,000 $4,325,000
-------------- ------------
-------------- ------------
</TABLE>
REVOLVING CREDIT FACILITY AND BRIDGE LOAN.
In October 1998, the Company amended its $125.0 million unsecured
Revolving Credit Facility ("Credit Facility") with a consortium of banks led
by NationsBank N.A., as agent. Currently, the Credit Facility has only
interest due with the principal balances due in February 2001. Cash
borrowings under the Credit Facility bear interest at a base rate or at an
adjusted Eurodollar rate plus an applicable margin. The applicable margin
between 1.35% and 1.75% over the Eurodollar rate is subject to adjustment
based upon achieving certain leverage ratios. At September 30, 1998, all
loans outstanding under the Credit Facility (and Bridge Loan as discussed
below) were based on the Eurodollar rate and a margin of 1.55%.
A $100.0 million Bridge Loan (the "Bridge Loan") was obtained on July 9,
1998 with NationsBank N. A. and Bank of America National Trust and Savings
Association. The Bridge Loan has the same interest rates and covenant
requirements as the $125.0 million Credit Facility. The Bridge Loan has an
original term of 90 days with 3 options to extend for an additional 30 days
each. The Company has exercised the first two extension options and intends
to exercise the final option. The Company is currently working with the
consortium of banks to amend the existing $125.0 million Credit Facility to
increase availability to $200.0 to $225.0 million and to extend the term of
the Credit Facility. The Company expects to have this amendment completed by
the end of 1998.
13
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. DEBT (CONT'D)
REVOLVING CREDIT FACILITY AND BRIDGE LOAN (CONT'D).
The Credit Facility and Bridge Loan availability is limited to an
unencumbered pool calculation (as defined in the Credit Agreement) including a
20% limitation for working capital needs. Financial covenants include net
worth, liquidity and cash flow covenants. Non-financial covenants include
restrictions on loans outstanding, construction in progress, loans to officers
and changes in the Board of Directors. At the present time, these covenants
have been met.
COMMITMENTS
The Company has agreed to maintain minimum loan balances of approximately
$17.2 million for up to ten years to accommodate certain prior owners' efforts
to seek to minimize certain adverse tax consequences from their contribution of
their courses to the Company.
INTEREST RATE SWAP AGREEMENTS
In September 1998, the Company entered into an interest rate swap agreement
with NationsBank N. A. to reduce the impact of changes in interest rates on its
floating rate Credit Facility. The agreement matures in eighteen months and has
a total notional amount of $76,800,000. The swap agreement effectively converts
a portion of the Company's floating rate debt to a fixed rate. The Company pays
NationsBank a fixed rate of 5.08% per annum (for an all inclusive rate of 6.63%
for September 30, 1998) and receives payments based on the floating one month
Eurodollar rate. The Company is exposed to credit loss in the event of
nonperformance by NationsBank, however the Company does not anticipate
nonperformance by NationsBank.
DEBT MATURITIES
Aggregate maturities of long-term debt for each of the five years following
December 31, 1998, assuming (i) the unpaid principal balance at September 30,
1998 under the Credit Facility and the Bridge Loan remain unchanged and (ii) the
Bridge Loan is extended to January 9, 1999; are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
----------------------------------------------
<S> <C>
1998 $ 97,000
----------------------------------------------
1999 $ 49,351,000
----------------------------------------------
2000 $ 335,000
----------------------------------------------
2001 $ 125,365,000
----------------------------------------------
2002 $ 398,000
----------------------------------------------
Thereafter $ 11,285,000
----------------------------------------------
</TABLE>
14
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. STOCK OPTIONS AND AWARDS
EMPLOYEE STOCK OPTIONS AND AWARDS
In February 1997, the Company adopted the 1997 Non-Employee Directors' Plan
(the "Directors' Plan"). Under the Directors Plan, the Compensation Committee
is authorized to grant stock awards to purchase up to 100,000 shares of the
Company's common stock at prices equal to the fair value of the stock on the
date of grant. On February 6, 1997 and February 6, 1998, 20,000 options were
granted and vested immediately.
In May 1997, the Company adopted the 1997 Stock-Based Incentive Plan (the
"New 1997 Plan"). Under the New 1997 Plan, the Compensation Committee of the
Board of Directors is authorized to grant awards relating in the aggregate of up
to 600,000 shares of the Company's common stock. Option grants generally vest
ratably over a period of three years from the date of grant and expire ten years
from the date of grant. Restricted stock grants vest twenty five percent per
year from the date of grant. The Company has agreed to make loans to officers
related to tax liabilities for stock grants totaling $1.2 million of which $.7
million has been funded to date. On January 30, and June 3, 1998, 50,000 and
25,000 options, respectively, were granted to new employees. There are 14,061
shares remaining to be issued.
Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION SHARES SHARES EXERCISE PRICE
- ------------- --------- --------------
<S> <C> <C>
Outstanding at February 12, 1997 . . . . . . . . . . - $ -
Granted. . . . . . . . . . . . . . . . . . . . . . . 940,000 23.88
Exercised. . . . . . . . . . . . . . . . . . . . . . - -
Expired and/or canceled. . . . . . . . . . . . . . . - -
--------- --------------
Outstanding at December 31, 1997 . . . . . . . . . . 940,000 $ 23.88
--------- --------------
--------- --------------
Granted. . . . . . . . . . . . . . . . . . . . . . . 95,000 29.82
Exercised. . . . . . . . . . . . . . . . . . . . . . (4,666) (25.75)
Expired and/or canceled. . . . . . . . . . . . . . . - -
--------- --------------
Outstanding at September 30, 1998. . . . . . . . . . 1,030,334 $ 24.42
--------- --------------
--------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------- ------------------------
RANGE OF REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE
PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE
- ------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
$21 335,000 8.4 $21.00 125,000 $21.00
$24 - $26 600,334 8.5 $25.48 197,001 $25.48
$29 - $32 70,000 9.3 $29.00 20,000 $29.00
$32 - $35 25,000 9.7 $32.13 - -
</TABLE>
15
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. STOCK OPTIONS AND AWARDS (CONT'D)
EMPLOYEE STOCK PURCHASE PLAN
Effective March 1, 1998, the Company adopted an Employee Stock Purchase
Plan to provide substantially all employees an opportunity to purchase shares of
its common stock through payroll deduction, up to 10% of eligible compensation
with a $25,000 maximum deferral. Semi-annually, participant account balances
will be used to purchase shares of stock at the lesser of 85 percent of the fair
market value of shares at the beginning or ending of such six-month period. The
Employee Stock Purchase Plan expires on February 28, 2008. A total of 250,000
shares will be available for purchase under this plan. At June 30, 1998, 1,128
shares were issued.
NON-AFFILIATED STOCK OPTIONS
In conjunction with the purchase of the Emerald Dunes Golf Course, Raymon
Finch, Jr. and Ray Finch, III (collectively, the "Finches") were granted 50,000
options each, of which 25,000 in the aggregate will vest when, in any calendar
year, the Company acquires $25.0 million in golf courses identified by the
Finches. After year five, all options immediately vest if the stock price is
$10.00 over the strike price at which the options were issued ($28.00) and if
the Finches have otherwise undertaken to promote and market the Company.
In addition, options to acquire 20,000 shares of Common Stock were granted
to J. Graffeo, J. Galante, H. Rostoff, I. Smoley and A. Inelli as partial
consideration for their interest in Polo Trace Golf Course. 10,000 of the
options vest on January 4, 1999 and 10,000 vest on January 4, 2000, each at the
trailing 5-day closing price average immediately prior to vesting, and expire on
July 1, 2000.
6. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information set forth below is presented as if the
1998 acquisitions (Note 3) had been consummated as of January 1, 1997. The pro
forma financial information is not necessarily indicative of what actual results
of operations of the Company would have been assuming the acquisitions had been
consummated as of January 1, 1997, nor does it purport to represent the results
of operations for future periods (in thousands, except per share amounts).
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 1998 September 30, 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 37,664 $ 29,142
Net income $ 6,640 $ 2,031
Basic earnings per share $ .88 $ .59
Diluted earnings per share $ .85 $ .58
</TABLE>
The pro forma financial information includes the following adjustments: (i)
an increase in depreciation and amortization expense; (ii) an increase in
general and administrative expenses to reflect a whole year of operations for
1997 only; (iii) an increase in interest expense; and (iv) an increase in
income applicable to minority interest.
16
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE
Legends Golf is a significant lessee of the golf courses in the Company's
portfolio. Legends Golf is a golf course management group consisting of eight
companies affiliated through common ownership that operates a portfolio of golf
courses owned by the Company under triple-net leases. Legends Golf derives
revenues from the operation of golf courses principally through receipt of green
fees, membership fees, golf cart rentals, and sales of food, beverage and
merchandise.
The following table sets forth certain combined condensed financial
information for Legends Golf.
<TABLE>
<CAPTION>
September 30, December 31,
(IN THOUSANDS) 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 2,393 $ 2,454
Non-current assets 23,798 19,765
------------ -----------
Total assets $ 26,191 $ 22,219
------------ -----------
------------ -----------
Payable to Golf Trust of America, L.P. $ 1,163 $ 1,004
Other current liabilities 1,415 1,721
Total long-term liabilities 14,874 10,897
Total owners' equity 8,739 8,597
------------ -----------
Total liabilities and owners' equity $ 26,191 $ 22,219
------------ -----------
------------ -----------
<CAPTION>
For the three months ended September 30,
(IN THOUSANDS) 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Total Revenues $ 4,549 $ 4,583
Operating Loss $ (2,669) $ (2,721)
Net Loss $ (1,450) $ (1,287)
</TABLE>
Total revenues from golf course operations for Legends Golf were unchanged
at $4.5 million where minor decreases at the Myrtle Beach area courses were
offset by increases at the Virginia courses.
Operating loss was unchanged at $2.7 million for the three months ended
September 30, 1998 and 1997. Net loss was $1.5 million for the three months
ended September 30, 1998 compared to a net loss of $1.3 million for the three
months ended September 30, 1997 primarily due to the increased interest expense
related to borrowings acquired for completion of the club houses and a reduction
in the equity in the earnings of Golf Trust of America, L.P.
17
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE (CONT'D)
<TABLE>
<CAPTION>
For the nine months ended September 30,
(IN THOUSANDS) 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C>
Total Revenues $ 17,810 $ 17,579
Operating Loss $ (3,034) $ (3,073)
Net Income (loss) $ 644 $ (143)
</TABLE>
Total revenues from golf course operations for Legends Golf increased by
$.2 million or one percent to $17.8 million for the nine months ended September
30, 1997. The increase was primarily attributed to slightly increased greens
fees at all courses net of reduced cart rentals, pro shop revenues and food and
beverage revenues.
Operating loss was unchanged at $3 million for the nine months ended
September 30, 1998 and 1997. Net income was $.6 million for the nine months
ended September 30, 1998 compared to a net loss of $.1 million for the nine
months ended September 30, 1997 primarily due to the increased interest expense
and the increase in the equity in the earnings of Golf Trust of America, L.P.
RELATED PARTY TRANSACTIONS
Concurrent with the acquisition of the Sandpiper Golf Course, the
Company formed Sandpiper-Golf Trust, LLC (of which the Operating Partnership
is the sole member), to hold title to the golf course. In addition, the
Operating Partnership owns approximately 95% of the economic interest in a
taxable subsidiary formed to hold title to a 14 acre development site
adjacent to the Sandpiper Golf Course, with the balance owned by Mr. Blair,
President, and Mr. Young, a director of the Company, in order to comply with
certain REIT restrictions imposed by the Internal Revenue Code.
8. SUBSEQUENT EVENTS
PAYMENT OF DIVIDENDS
On September 15, 1998, the Board of Directors declared a quarterly
dividend distribution of $.44 per share for the quarter ended September 30,
1998, to stockholders of record on September 30, 1998, which was paid on
October 15, 1998.
ACQUISITIONS
On October 13, 1998 the Company had purchased Cooks Creek Golf Course,
an 18-hole upscale, public golf facility located in Ashville, Ohio, near
Columbus, for $6.1 million in cash. The golf course is leased to
Cook/Rainieri Management.
18
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. SUBSEQUENT EVENTS
1998 STOCK OPTION PLAN
On November 11, 1998, the Company adopted the 1998 Stock-Based Incentive
Plan (the "1998 Plan"). Under the 1998 Plan, the Compensation Committee of the
Board of Directors is authorized to grant awards totaling 500,000 shares of the
Company's common stock. 350,000 of these options were granted concurrently with
the plan approval. These generally vest ratably over a period of five years
from the date of grant and expire ten years from the date of grant.
The 1998 Plan provides that the Company may grant stock options or
restricted stock to executive officers and other key employees. The
Compensation Committee, comprised of Directors who are not officers of the
Company, determines compensation, including awards under the Company's option
Plans, for the Company's executive officers. The Company has agreed to make
additional loans of $2.0 million to the Company's executive officers, the
proceeds of which (i) must be used (at least sixty percent in total) for the
purchase of Company stock on the open market and (ii) the remainder to be
used for taxes.
19
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
OVERVIEW AND FORMATION
Golf Trust of America, Inc. (the "Company") conducts business through Golf
Trust of America, L.P. (the "Operating Partnership"), of which the Company owns
59.2 percent interest through its two wholly owned subsidiaries and is the
general partner. Larry D. Young, a director of the Company, along with his
affiliates, owns 29.0 percent of the Operating Partnership and is a significant
lessee. Operators of the golf courses, their affiliates and officers of the
Company hold the remaining interest in the Operating Partnership.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and other sections of this report contain various "forward-looking
statements" which represent the Company's expectations concerning future events
including the following: statements regarding the Company's continuing ability
to target and acquire high-quality golf courses; the expected availability of
the Credit Facility, Bridge Loan and other debt and equity financing; the
Lessees' and Mortgagee's future cash flows and ability to make Lease and
Mortgage Payments, results of operations and overall financial performance; the
expected tax treatment of the Company's operations; the Company's beliefs about
continued growth in the golf industry. Because of the foregoing factors, the
actual results achieved by the Company in the future may differ materially from
the expected results described in the forward-looking statements. The following
discussion should read in conjunction with the accompanying Consolidated
Financial Statements appearing elsewhere herein.
GOLF COURSE ACQUISITIONS
During the three months ended September 30, 1998, the Company acquired
interests in 7.5 additional eighteen hole equivalent golf courses for an
aggregate of approximately $45.4 million.
For the nine months ended September 30, 1998, the Company has purchased 18
golf courses for an aggregate initial investment of approximately $168.0 million
in cash and repayment of indebtedness, deferred payments of $1.9 million, the
assumption of properties subject to liens of $18.0 million and the issuance of
$13.1 million in OP Units (approximately 467,000 OP Units).
THIRD QUARTER 1998 ACQUISITIONS
On July 10, 1998, the Company acquired Polo Trace Golf and Country Club, an
18-hole upscale golf facility located in Delray Beach, Florida for $12.3
million. The Company leases the golf facility to an affiliate of Emerald Dunes
Golf Group. For this acquisition the Company assumed a loan with NationsCredit
for approximately $5.0 million. The Company has agreed to maintain this debt
until January of 1999 to avoid certain prepayment penalties.
On July 17, 1998, the Company acquired Ohio Prestwick Country Club for $6.4
million. The 18-hole upscale private facility, located near Akron, Ohio, is
leased to the lessee of Raintree Country Club, another current Company course.
On August 28, 1998 the Company acquired Osage National Golf Course, a 27-hole
upscale daily fee golf facility located near Lake of the Ozarks, Missouri for
$11.2 million. The purchase price includes the issuance of OP Units valued at
approximately $3.5 million. Osage National was recently rated by Golf Digest's
"Places To Play" as one of only four four-star public courses in the state of
Missouri. The golf course is leased to the prior owner of Osage National.
20
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
GOLF COURSE ACQUISITIONS (CONT'D)
THIRD QUARTER 1998 ACQUISITIONS (CONT'D)
On September 15, 1998, the Company acquired Wekiva Golf Club and Sweetwater
Country Club located near Orlando, Florida for $11.5 million. Wekiva, a
semi-private course, and Sweetwater, a private club, are two upscale, 18-hole
facilities, located within two miles of each other, effectively giving the
market a 36-hole complex under one management. Both properties are leased to
Diamond Players Cub, a professional golf management company.
On September 18, 1998, the Company acquired Cypress Creek Country Club,
an 18-hole semi-private golf facility located in Boynton Beach, Florida (Palm
Beach County) for $4.2 million. The golf course is leased to an affiliate of
Emerald Dunes Golf Group. Emerald Dunes Golf Management and its affiliates
now lease five courses from the Company (Bonaventure (2), Emerald Dunes, Polo
Trace, and Cypress Creek).
SUBSEQUENT ACQUISITIONS
Thus far in the fourth quarter of 1998, the Company has purchased Cooks
Creek Golf Course, an 18-hole upscale, public golf facility located in
Ashville, Ohio, near Columbus, for $6.1 million in a cash-out transaction.
The golf course is leased to Cook/Rainieri Management. Cook/Rainieri
Management consists of John Cook, his father Jim Cook, and John Rainieri.
John Cook is a veteran of the PGA Tour, who was a member of the 1993 Ryder
Cup team, and has 10 PGA Tour victories. Jim Cook has been a tournament
director with the PGA for over 20 years. John Rainieri currently leases two
other Company courses in the Akron, Ohio market. This is the first project
for the three to combine resources and manage a facility together.
21
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LESSEES AND STRATEGIC PARTNERS
The following table is a summary of the current golf course management and
development operations of the Company's ("GTA") current lessees/golf operators:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
GTA AND NON-GTA
COURSES UNDER
GTA COURSES UNDER MANAGEMENT/
MANAGEMENT DEVELOPMENT(1)
GOLF LESSEES/OPERATORS (18-HOLE EQUIVALENTS) (18-HOLE EQUIVALENTS)
----------------------------------------------------------------------------------------------
<S> <C> <C>
Troon Golf 8.5 30.5
Legends Group 7.0 8.0
Granite Golf Group 5.5 27.0
Emerald Dunes Golf Group 5.0 5.0
John Rainieri and Cook/Rainieri Management 3.0 3.0
Crescent Company 2.0 3.0
Stonehenge Golf Development 2.0 2.0
Diamond Players Club 2.0 4.0
Northgate Forest 1.5 1.5
Total Golf 1.5 7.0
Osage Golf Properties 1.5 1.5
Craft Farms 1.0 2.0
Environmental Golf 1.0 5.0
Golf Classic Resorts 1.0 1.0
----------------------------------------------------------------------------------------------
TOTAL 18-HOLE EQUIVALENTS 42.5 100.5
----------------------------------------------------------------------------------------------
------------------------------
RESORT/HOTEL OPERATORS
------------------------------
Westin Hotels
Starwood Hotels and Resorts
------------------------------
</TABLE>
(1)GTA has no rights or interest in any non-GTA courses
22
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS OF THE COMPANY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
For the three months ended September 30, 1998, the Company received
$12,039,000 in revenue from the Participating Leases and the Mortgage Note
Receivable, including $151,000 in Participating Rent. For the three months
ended September 30, 1997, the Company received $6,065,000 in revenue from the
Participating Leases and the Mortgage Note Receivable, including $145,000 in
Participating Rent. The increase in revenues is due to 1) minimum rent
increases of approximately $95,000, 2) rent of $5,758,000 from new course
acquisitions and expansions, 3) the $6,000 increase in participating rent to
$151,000 from $145,000, and 4) $2,166,000 of interest recognized from the
Mortgage Note Receivable for 1998 compared to $2,051,000 for 1997.
Expenses totaling $4,393,000 for the three months ended September 30, 1998
and $1,849,000 for three months ended September 30, 1997, reflect depreciation,
amortization, general and administrative expenses. The increase in expenses
reflects 1) additional depreciation of $2,177,000 for the acquisitions made
subsequent to June 30, 1997 and 2) additional general and administrative costs
of $367,000.
For the three months ended September 30, 1998, interest expense was
$3,139,000, compared to $889,000 for the three months ended September 30, 1997.
The increase for $2,250,000 reflects the increase in outstanding borrowings from
$54,865,000 at September 30,1997 to $186,831,000 at September 30, 1998. The
proceeds of the current year borrowings and $14,968,000 of the proceeds of the
Company's secondary offering were used to fund the approximate $201,000,000 of
acquisitions made since the beginning of the year.
For the three months ended September 30, 1998 net income was $2,779,000, an
increase of 72% compared to $1,615,000 for the three months ended September 30,
1997.
Basic earnings per share was $0.36 for the three months ended September
30, 1998 compared to $0.40 for the three months ended September 30, 1997, an
11% decrease. Although net operating income increased, the number of
outstanding shares increased by 3,549,000 primarily as a result of the
issuance of 3,450,000 shares in a secondary offering of the Company's common
stock in the fourth quarter of 1997.
23
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS OF THE COMPANY (CONT'D)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND THE PROFORMA NINE MONTHS ENDED
SEPTEMBER 30, 1997
The 1997 proforma results have been computed using actual results for the
period from February 12, 1997 to September 30, 1997 and projected results for
the period from January 1 to February 12, 1997.
For the nine months ended September 30, 1998 and the nine months ended
September 30, 1997, the Company received $31,407,000 and $13,848,000,
respectively, in revenue from the Participating Leases and from the Mortgage
Note Receivable. The increase in revenues is due to 1) minimum increases in
rent of approximately $285,000, 2) rent of $14,257,000 from new course
acquisitions and expansions subsequent to September 30, 1997, 3) $4,243,000
of increased interest from the Mortgage Note Receivable, which was issued
June 20, 1997, 4) the $517,000 increase in Participating Rent, and 5)
$1,743,000 of additional rent for the pro forma period.
Expenses totaled $11,126,000 and $4,568,000 for the nine months ended
September 30, 1998 and the nine months ended September 30, 1997,
respectively. The increase of $6,558,000 or 131%, reflects 1) additional
depreciation of $4,753,000 for the acquisitions made after September 30, 1998
and 2) additional general and administrative costs of $1,330,000, and 3)
additional pro forma expenses of $660,000.
For the nine months ended September 30, 1998, interest expense was
$6,061,000, compared to $1,231,000 for the nine months ended September 30, 1997.
The increase for $4,830,000 reflects the increase in outstanding borrowings from
$54,865,000 at September 30,1997 to $186,831,000 at September 30, 1998. The
proceeds of the current year borrowings and $14,968,000 of the proceeds of the
Company's secondary offering were used to fund the approximate $201,000,000 of
acquisitions made since the beginning of the year.
The loss on disposal of assets occurred when the golf carts at one course
were traded in as part of a new leasing program and another location where a new
clubhouse was built and the existing facility was removed.
Net income for the nine months ended September 30, 1998 and the proforma
nine months ended 1997 was $8,499,000 and $4,092,000, respectively.
For the nine months ended September 30, 1998 the basic earnings per share
was $1.11, reflecting a $0.10, or 10% increase for the corresponding period of
1997.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
CASH FLOWS
Cash flow from operating activities for the nine months ended September
30, 1998 was $16,385,000 compared to $7,489,000 for the period from February
12, 1997 to September 30, 1997. This reflects net income before minority
interest, plus noncash charges to income for depreciation, loan cost
amortization and working capital changes. Cash flows used in investing
activities reflect increases in the mortgage receivable related to the
Participating Facility of $4,734,000 and golf course acquisitions of
$171,229,000 for the nine months ended September 30, 1998. This compares to
acquisitions and capital additions of $66,021,000 and the Participating
Mortgage for $63,742,000 for the period from February 12 to September 30,
1997. Cash flows provided by financing activities, totaling $147,704,000,
represents the net borrowing of $164,700,000 under the Credit Facility and
Bridge Loan, less dividends and partner distributions totaling $16,052,000
for the nine months ended September 30, 1998. This compares to borrowings of
$54,790,000 to fund a portion of the Participating Mortgage and third quarter
1997 acquisitions, and the initial offering proceeds of $73,055,000 for the
period from February 12, 1997 to September 30, 1997. Distributions to
partners and shareholders totaled $5,054,000 represented a partial period
distribution of $.21 per share for the first quarter of 1997 and $.41 per
share for the remaining quarters through September 30, 1997.
24
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY (CONT'D)
FINANCING AND CAPITAL RESOURCES
In October 1998, the Company amended its $125.0 million unsecured
Revolving Credit Facility ("Credit Facility") with a consortium of banks led
by NationsBank N.A., as agent. Currently, the Credit Facility has only
interest due with the principal balances due in February 2001. Cash
borrowings under the Credit Facility bear interest at a base rate or at an
adjusted Eurodollar rate plus an applicable margin. The applicable margin
between 1.35% and 1.75% over the Eurodollar rate is subject to adjustment
based upon achieving certain leverage ratios. At September 30, 1998, all
loans outstanding under the Credit Facility (and Bridge Loan as discussed
below) were based on the Eurodollar rate and a margin of 1.55%.
A $100.0 million Bridge Loan (the "Bridge Loan") was obtained on July 9,
1998 with NationsBank N. A. and Bank of America National Trust and Savings
Association. The Bridge Loan has the same interest rates and covenant
requirements as the $125.0 million Credit Facility. The Bridge Loan has an
original term of 90 days with 3 options to extend for an additional 30 days
each. The Company has exercised the first two extension options and intends
to exercise the final option. The Company is currently working with the
consortium of banks to amend the existing $125.0 million Credit Facility to
increase availability to $200.0 to $225.0 million and to extend the term of
the Credit Facility. The Company expects to have this amendment completed by
the end of 1998.
The Credit Facility and Bridge Loan availability is limited to an
unencumbered pool calculation (as defined in the Credit Agreement) including a
20% limitation for working capital needs. Financial covenants include net
worth, liquidity and cash flow covenants. Non-financial covenants include
restrictions on loans outstanding, construction in progress, loans to officers
and changes to the Board of Directors. At the present time, these covenants
have been met.
The Company believes that its current borrowing capacity and anticipated
cash flow from operations are sufficient to meet liquidity needs for the
foreseeable future. However, as discussed above, the Bridge Loan will mature in
the first quarter of 1999. There can be no assurance that the Company will be
able to negotiate extensions of such facilities or borrow from other lenders on
similar terms. There can be no assurance that the impact of market conditions
on the debt and equity markets will not adversely affect the Company's future
needs for capital.
The Company intends to invest in additional golf courses as suitable
opportunities arise, but the Company will not undertake investments unless
adequate sources of financing are available. The Company anticipates that
future acquisitions would be funded with debt financing provided by the
Credit Facility, the Bridge Loan, the issuance of OP Units or with proceeds
of additional equity offerings. In the future, the Company may negotiate
additional credit facilities or issue corporate debt instruments. Any debt
issued or incurred by the Company may be secured or unsecured, long-term or
short-term, fixed or variable interest rate and may be subject to such other
terms as the Board of Directors deems prudent.
25
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY (CONT'D)
COMMITMENTS TO LESSEES
The Participating Leases generally require the Company to reserve annually
between 2.0% and 5.0% of the Gross Golf Revenues of the golf courses to fund
capital expenditures. These amounts are funded on a monthly basis from the
lessees in addition to the Base Rent. The Lessees will fund any capital
expenditures in excess of such amounts.
Under certain circumstances, the underlying base rent for a course will be
increased when the Company agrees to pay for significant capital improvements or
to expand the existing golf facilities. Of the Company's $27.2 million capital
improvement commitments, approximately $14.2 million has been funded to date.
In limited circumstances the Company agrees to provide working capital
loans to existing lessees. Working capital lines are evidenced by promissory
notes or as set forth in the lease agreement and bear interest at fixed rates
between 9.25% and 10.47%. Of the Company's $8.1 million working capital
commitments, approximately $1.2 million has been funded to date. Typically,
the lessee is required to increase the pledged collateral for the funded
amounts.
The Company has agreed to maintain minimum loan balances of approximately
$17.2 million for up to ten years to accommodate certain prior owners' efforts
to seek to minimize certain adverse tax consequences from their contribution of
their courses to the Company.
The Company is in various stages of negotiation and due diligence review
for several acquisitions. Completion of these transactions is subject to
negotiation and execution of definitive documentation and certain other
customary closing conditions. No assurances can be given that the Company will
continue to pursue or complete any of these golf course acquisitions.
COMMITMENTS TO OFFICERS
The Company has agreed to make loans to officers (i) related to tax
liabilities for stock grants, (ii) for the exercise of options and (iii) for
the purchase of Company shares, totaling $3.2 million. $.7 million of this
commitment has been funded to date.
26
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Funds from Operations and Cash Available for Distribution are calculated as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(PRO FORMA)
<S> <C> <C> <C> <C>
Income before minority interest. . . $ 4,669 $ 3,372 $ 14,175 $ 8,542
Depreciation and amortization for
real estate assets . . . . . . . . . 3,089 912 7,362 2,509
------- ------- -------- --------
Funds from Operations. . . . . . . . 7,758 4,284 21,907 11,051
------- ------- -------- --------
Adjustments:
Noncash mortgage interest and
straight line rents. . . . . . . . (398) - (635) (453)
Capital Expenditure Reserve (net). (400) (143) (1,062) (362)
------- ------- -------- --------
Cash Available for Distribution. . . $ 6,960 $ 4,284 $ 20,210 $ 10,236
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
Noncash mortgage interest revenue and straight line rents represents the
difference between interest revenue on the Participating Mortgage and the rent
recognized and reported by the Company in accordance with generally accepted
accounting principles ("GAAP") and the actual cash payments received by the
Company. The participating leases generally require the Company to reserve
annually between 2.0% and 5.0% of the Gross Golf Revenues of the golf courses to
fund capital expenditures. The lessees will fund any capital expenditures in
excess of such amounts.
27
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION (CONT'D)
In accordance with the resolution adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), Funds
From Operations represents net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring or sales of property, plus
depreciation of real property, and after adjustments for unconsolidated
partnership and joint ventures. Funds From Operations should not be considered
as an alternative to net income or other measurements under GAAP as an
indication of operating performance or to cash flows from operating investing or
financial activities as a measure of liquidity. Funds From Operations does not
reflect working capital changes, cash expenditures for capital improvements or
principal payments on indebtedness. The Company believes that Funds From
Operations is helpful to investors as a measure of the performance of an equity
REIT, because along with cash flows from operating activities, financing
activities and investing activities, it provides investors with an understanding
of the ability of the Company to incur and service debt and make capital
expenditures. Compliance with the NAREIT definition of Funds From Operations is
voluntary. Accordingly, the Company's calculation of Funds From Operations in
accordance with the NAREIT definition may be different than similarly titled
measures used by other REITs.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") issued a ruling, EITF 97-11, entitled
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions".
The ruling provides that internal costs of identifying and acquiring operating
property should be expensed as incurred. The effect of the adoption of EITF
97-11 did not have a material impact on the financial statements of the Company.
In May 1998, the EITF of the FASB issued a ruling, EITF 98-9, entitled
"Accounting for Contingent Rent in Interim Financial Periods" that
potentially affects recognition of percentage rent of the Company. Under
EITF 98-9, revenues from percentage rents are recognized in the quarterly
period in which the specified target which triggers the percentage rent is
achieved. Under the terms of the participating leases entered into by the
Company, percentage rent is payable quarterly based on an increase in
revenues over a corresponding quarter in a base year subject to quarterly and
annual reconciliation. The Company will continue to evaluate the adoption
of EITF 98-9 and any impact subject to annual and quarterly reconciliation
such adoption may have on the Company in the future. Based on the structure
of the of the Company's leases, EITF 98-9 should not have a material effect
on the Company's current results of operations. Regardless of the
application of EITF 98-9, no change in the calculations of FFO will occur and
on an annual basis there will be no change in the Company's earnings.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133) which establishes new accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement is effective for all fiscal quarters beginning after June 15, 1999.
Management is presently assessing the impact of the adoption of SFAS No.133
on its consolidated financial statements.
28
<PAGE>
GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
IMPACT OF YEAR 2000
The Company has completed its internal assessment and believes that its
computer system will function properly with respect to dates in the Year 2000
and thereafter.
The Company anticipates that there is a possibility of significant
business disruptions involving year 2000 problems with its vendors and
vendors to its lessees. The Company has not completed its assessment of the
readiness of third parties where the failure to be Year 2000 compliant could
have a material impact on the Company. For instance, financial service
providers, including lenders, may incur significant costs and even temporary
shutdowns as a result of computer problems. The Company is dependent upon
its lessees to determine that their systems and applications and those of
other parties utilized by them are Year 2000 compliant.
The ability of lenders to advance funds, or lessees to operate, may be
negatively impacted. Any problems with the foregoing systems may have a
material adverse effect on the Company and results of operations. The Company
will continue to address the readiness of such third parties and to the extent
appropriate, prepare contingency plans.
29
<PAGE>
GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
30
<PAGE>
GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
On August 28, 1998, the Operating Partnership issued 124,700 OP Units to
the prior owner of Osage National Golf Course as partial consideration for
its interest in Osage National Golf Course. OP Units may generally be
redeemed by their holder one-year after issuance for cash or, at the option
of the Company, shares of Common Stock on a one-for-one basis. In addition,
options to acquire 20,000 shares of Common Stock were granted to J. Graffeo,
J. Galante, H. Rostoff, I. Smoley and A. Inelli as partial consideration for
their interest in Polo Trace Golf Course. 10,000 of the options vest on
January 4, 1999 and 10,000 vest on January 4, 2000, each at the trailing
5-day average closing price immediately prior to vesting, and expire on July
1, 2000. These issuances were effected in reliance upon an exemption from
registration under Section 4(2) of the Securities Act as a transaction not
involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
31
<PAGE>
GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are part of this quarterly report on
Form 10-Q for the quarterly period ended September 30, 1998 (and are numbered
in accordance with Item 601 of Regulation S-K). Items marked with an
asterisk (*) are filed herewith.
EXHIBIT NO. DESCRIPTION
- -------------- -----------
3.1 ARTICLES OF AMENDMENT AND RESTATEMENT OF THE COMPANY, AS FILED
WITH THE STATE DEPARTMENT OF ASSESSMENTS and Taxation of
Maryland on January 31, 1997, (previously filed as Exhibit 3.1A
to the Company's Registration Statement on Form S-11
(Commission File No. 333-15965) Amendment No. 2 (filed January
30, 1997) and incorporated herein by reference) as amended by
the affirmative vote of the shareholders and filed with the
Maryland State Department of Assessments and Taxation on June
9, 1998 and as currently in effect. (previously filed as
Exhibit 3.1B to the Company's Quarterly Report on Form 10-Q
(Commission File No. 000-22091), filed August 14, 1998 and
incorporated herein by reference).
3.2 Bylaws of the Company as amended by the Board of Directors on
February 16, 1998 and as currently in effect. (Previously
filed as Exhibit 3.2 to the Company's Quarterly Report Form
10-Q (Commission File No. 000-22091) filed May 15, 1998 and
incorporated herein by reference).
10.1.2 First Amendment to the Partnership Agreement, dated as of
February 1, 1998 (previously filed as Exhibit 10.1.2 to the
Company's Annual Report on Form 10-K (Commission File No.
000-22091), filed March 31, 1998, and incorporated herein by
reference).
27.1* Financial Data Schedule
* Filed Herewith
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLF TRUST OF AMERICA, INC., registrant
By: /s/ W. Bradley Blair, II
----------------------------------------------
W. Bradley Blair, II
President and Chief Executive Officer
/s/ W. Bradley Blair, II 11/13/98
- ------------------------------------ -----------------------
/s/ Scott D. Peters 11/13/98
- ------------------------------------ -----------------------
Scott D. Peters Date
Senior Vice President and
Chief Financial Officer
33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOL.
BAL. SHEET AS OF 9-30-98, CONSOL. STMTS. OF INCOME FOR THE 3 MOS ENDED 9-30-98
(COL 1) AND 1997 (COL 2), FOR THE 9 MOS ENDED 9-30-98 (COL 3), THE PERIOD FROM
2-12-97 (INCEPTION) THROUGH 9-30-97 (COL 4) AND THE PRO FORMA 9 MOS ENDED
9-30-97 (COL 5), AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS OTHER 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1998 DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1998 JUL-01-1997 JAN-01-1998 FEB-12-1997 JAN-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997 SEP-30-1998 SEP-30-1997 SEP-30-1997
<CASH> 3,094 0 0 0 0
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 8,589 0 0 0 0
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0 0
<PP&E> 319,571 0 0 0 0
<DEPRECIATION> 21,390 0 0 0 0
<TOTAL-ASSETS> 383,590 0 0 0 0
<CURRENT-LIABILITIES> 11,540 0 0 0 0
<BONDS> 186,831 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 76 0 0 0 0
<OTHER-SE> 120,466 0 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 383,590 0 0 0 0
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 12,039 6,065 31,407 12,105 13,848
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 4,393 1,849 11,126 3,908 4,568
<OTHER-EXPENSES> 162<F1> 45<F1> (45)<F1> 493<F1> 493<F1>
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> (3,139) (889) (6,061) (1,179) (1,231)
<INCOME-PRETAX> 4,669 3,372 14,175 7,511 8,542
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> 4,669 3,372 14,175 7,511 8,542
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 2,779 1,615 8,499 3,598 4,092
<EPS-PRIMARY> .36 .40 1.11 .91 1.01
<EPS-DILUTED> .35 .38 1.08 .89 .99
<FN>
<F1>Interest income and loss on disposal of assets
</FN>
</TABLE>
