<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, 1999.
/ / 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, Charleston, 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 15, 1999, there were 7,735,855 common shares outstanding of the
registrant's only class of common stock.
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998.............. 3
Condensed Consolidated Statements of Income for the Three Months Ended September 30, 1999 and 4
1998...............................................................................................
Condensed Consolidated Statements of Income for the Nine Months Ended September 30, 1999 and 1998.. 5
Condensed Consolidated Statements of Stockholders' Equity for the [Nine Months Ended September
30, 1999] and the [Year Ended December 31, 1998]................................................... 6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 7
1998 ..............................................................................................
Notes to Condensed Consolidated Financial Statements............................................... 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 27
ITEM 2. CHANGES IN SECURITIES 27
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 27
ITEM 5. OTHER INFORMATION 27
ITEM 6. EXHIBITS INDEX AND REPORT ON FORM 8-K 28
SIGNATURES 29
</TABLE>
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Property and equipment:
Land ................................................................................. $ 53,877 $ 55,462
Golf course improvements ............................................................. 188,120 171,348
Buildings ............................................................................ 78,258 77,629
Furniture, fixtures, and equipment ................................................... 51,196 44,756
--------- ---------
Total property and equipment ........................................................... 371,451 349,195
Less accumulated depreciation ........................................................ 37,984 25,695
--------- ---------
Property and equipment, net ............................................................ 333,467 323,500
--------- ---------
Mortgage notes receivable .............................................................. 73,005 72,252
Cash and cash equivalents .............................................................. 8,324 1,891
Receivables from affiliates (Note 9) ................................................... 4,595 1,030
Other assets ........................................................................... 15,354 13,308
--------- ---------
Total assets ........................................................................... $ 434,745 $ 411,981
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ........................................................................... $223,164 $ 210,634
Accounts payable and other liabilities............................................ 10,865 15,190
--------- ---------
Total liabilities................................................................ 234,029 225,824
--------- ---------
Commitments (Note 4)
Minority interest ...................................................................... 70,396 76,510
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
800,000 shares issued and outstanding .............................................. 20,000 --
Common stock, $.01 par value, 90,000,000 shares authorized,
7,735,855 and 7,637,488 shares issued and outstanding,
respectively ........................................................................ 77 76
Additional paid-in capital .......................................................... 125,593 120,253
Dividends in excess of accumulated earnings ......................................... (6,577) (3,958)
Unamortized restricted stock compensation ........................................... (2,096) (1,533)
Note receivable from stock sale ..................................................... (3,298) (3,298)
Loans to officers ................................................................... (3,379) (1,893)
--------- ---------
Stockholders' equity ................................................................... 130,320 109,647
--------- ---------
Total liabilities and stockholders' equity ............................................. $ 434,745 $ 411,981
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------- --------
<S> <C> <C>
REVENUES:
Rent from affiliates (Note 9) ........... $ 4,105 $ 3,099
Rent .................................... 7,791 6,774
Mortgage interest ....................... 2,208 2,166
-------- --------
Total revenues ............................ 14,104 12,039
-------- --------
EXPENSES:
Depreciation and amortization ........... 4,322 3,089
General and administrative .............. 1,468 1,304
-------- --------
Total expenses ............................ 5,790 4,393
-------- --------
Operating income .......................... 8,314 7,646
-------- --------
OTHER INCOME (EXPENSE):
Interest income ......................... 377 162
Interest expense ........................ (4,030) (3,139)
-------- --------
Total other income (expense) .............. (3,653) (2,977)
-------- --------
Net income before minority interest ....... 4,661 4,669
Income applicable to minority interest .... 1,785 1,890
-------- --------
Net income ................................ $ 2,876 $ 2,779
-------- --------
Preferred Dividends ....................... $ 463 $ -
Net income available to common shareholders $ 2,413 $ 2,779
-------- --------
-------- --------
Basic earnings per share .................. $ 0.31 $ 0.36
-------- --------
-------- --------
Weighted average number of shares (basic) . 7,735 7,637
-------- --------
-------- --------
Diluted earnings per share ................ $ 0.31 $ 0.35
-------- --------
-------- --------
Weighted average number of shares (diluted) 7,740 7,865
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------- --------
<S> <C> <C>
REVENUES:
Rent from affiliates (Note 9) ........... $ 10,464 $ 9,406
Rent .................................... 23,886 15,526
Mortgage interest ....................... 6,799 6,475
-------- --------
Total revenues ............................ 41,149 31,407
-------- --------
EXPENSES:
Depreciation and amortization ........... 12,275 7,389
General and administrative .............. 4,244 3,737
-------- --------
Total expenses ............................ 16,519 11,126
-------- --------
Operating income .......................... 24,630 20,281
-------- --------
OTHER INCOME (EXPENSE):
Interest income ......................... 750 325
Interest expense ........................ (11,538) (6,061)
Loss on disposal of assets ............. -- (370)
-------- --------
Total other income (expense) .............. (10,788) (6,106)
-------- --------
Net income before minority interest ....... 13,842 14,175
Income applicable to minority interest .... 5,335 5,676
-------- --------
Net income ................................ $ 8,507 $ 8,499
-------- --------
Preferred Dividends ....................... $ 920 $ -
Net income available to common shareholders $ 7,587 $ 8,499
-------- --------
-------- --------
Basic earnings per share .................. $ .98 $ 1.11
-------- --------
-------- --------
Weighted average number of shares (basic).. 7,715 7,634
-------- --------
-------- --------
Diluted earnings per share ................ $ .98 $ 1.08
-------- --------
-------- --------
Weighted average number of shares (diluted) 7,745 7,875
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------ ------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
------- ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE at January 1, 1998 ........ -- -- 7,611 $ 76 $ 127,488 $ 1,774
Issuance of restricted stock ...... -- -- 21 -- 607 --
Issuance of shares of option
exercise and employee stock
purchase plans .................. -- -- 5 -- 159 --
Amortization of restricted stock
compensation ................. -- -- -- -- -- --
Loans to officers ................. -- -- -- -- -- --
Adjustments for minority interest
in operating partnership .......... -- -- -- -- (8,001) --
Dividends ......................... -- -- -- -- -- (16,338)
Net income ........................ -- -- -- -- -- 10,606
------- ------- -------- -------- -------- ---------
BALANCE at December 31, 1998 ...... -- -- 7,637 $ 76 $ 120,253 $ (3,958)
------- ------- -------- -------- -------- ---------
Issuance of preferred stock ...... 800 $ 20,000 -- -- -- --
Costs of preferred stock issuance . -- -- -- -- (878) --
Issuance of restricted stock ...... -- -- 44 1 1,000 --
Amortization of restricted stock .. -- -- -- -- -- --
Adjustments for minority interest
in operating partnership .......... -- -- -- -- 3,714 --
Conversion of OP Units into common
stock ........................ -- -- 50 -- 1,462 --
Loans to officers ................. -- -- -- -- -- --
Issuance of shares of employee
stock purchase plan ............... -- -- 4 -- 42 --
Dividends ......................... -- -- -- -- -- (11,124)
Net income ........................ -- -- -- -- -- 8,507
------- ------- -------- -------- -------- ---------
BALANCE at September 30, 1999 ..... 800 $ 20,000 7,735 $ 77 $ 125,593 $ (6,575)
------- ------- -------- -------- -------- ---------
<CAPTION>
NOTE
RECEIVABLE TOTAL
UNEARNED FROM STOCK LOANS TO STOCKHOLDERS'
COMPENSATION SALE OFFICERS EQUITY
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
BALANCE at January 1, 1998 ........ $ (1,713) $ (3,298) -- $ 124,327
Issuance of restricted stock ...... (607) -- -- --
Issuance of shares of option
exercise and employee stock
purchase plans .................. -- -- -- 159
Amortization of restricted stock
compensation ................. 787 -- -- 787
Loans to officers ................. -- -- (1,893) (1,893)
Adjustments for minority interest
in operating partnership .......... -- -- -- (8,001)
Dividends ......................... -- -- -- (16,338)
Net income ........................ -- -- -- 10,606
--------- -------- -------- ---------
BALANCE at December 31, 1998 ...... $ (1,533) $ (3,298) $ (1,893) $ 109,647
--------- -------- -------- ---------
Issuance of preferred stock ...... -- -- -- $ 20,000
Costs of preferred stock issuance . -- -- -- (878)
Issuance of restricted stock ...... (1,001) -- -- --
Amortization of restricted stock .. 438 -- -- 438
Adjustments for minority interest
in operating partnership .......... -- -- -- 3,714
Conversion of OP Units into common
stock ........................ -- -- -- 1,462
Loans to officers ................. -- -- (1,486) (1,486)
Issuance of shares of employee
stock purchase plan ............... -- -- -- 42
Dividends ......................... -- -- -- (11,124)
Net income ........................ -- -- -- 8,505
--------- -------- -------- ---------
BALANCE at September 30, 1999 ..... $ (2,096) $ (3,298) $ (3,379) $ 130,320
--------- -------- -------- ---------
--------- -------- -------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
---------------------- ----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................... $ 8,507 $ 8,499
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................... 12,275 7,389
Loan cost amortization ...................................... 684 432
Straight-line interest and rent ............................. (872) (1,062)
Amortization of restricted stock compensation ............... 438 459
Income applicable to minority interest ...................... 5,335 5,676
Increase in receivable from affiliates ...................... (6,764) (159)
Increase (decrease) in other assets ......................... 3,582 (5,590)
Increase (decrease) in accounts payable and other liabilities (4,452) 741
--------- ---------
Net cash provided by operating activities ....................... 18,733 16,385
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Golf course acquisitions and improvements ..................... (21,049) (171,229)
Cash proceeds from sale of land .............................. 975 --
Mortgage notes receivable ..................................... (100) (4,734)
--------- ---------
Net cash used in investing activities ........................... (20,174) (175,963)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings/payments on line of credit ..................... 7,775 120,675
Payments on notes and line of credit .......................... (5,245) (195)
Long term debt proceeds ....................................... 10,000 --
Bridge loan proceeds .......................................... -- 44,025
Loan fees ..................................................... (1,508) (908)
Loans to officers ............................................. (1,341) --
Preferred stock proceeds ...................................... 20,000 --
Preferred stock cost .......................................... (878) --
Net proceeds from issuance of common stock .................... -- 159
Redemption of OP Units ........................................ (2,814) --
Distributions to partners ..................................... (6,991) (6,434)
Dividends paid ................................................ (11,124) (9,618)
--------- ---------
Net cash provided by financing activities ....................... 7,874 147,704
--------- ---------
Net increase (decrease) in cash ................................. 6,433 (11,874)
Cash and cash equivalents, beginning of period .................. 1,891 14,968
--------- ---------
Cash and cash equivalents, end of period ........................ $ 8,324 $ 3,094
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
GOLD TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
--------------- --------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period ........................ $11,538 $ 5,973
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Property and equipment in accruals or deferred purchases $ 650 $ 4,034
OP Units issued in golf course acquisitions and financing $ 2,329 $ 3,167
Debt acquired with acquisitions ......................... $10,000 $18,001
</TABLE>
See accompanying notes to consolidated financial statements
8
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
GENERAL
The accompanying consolidated financial statements include the accounts
of Golf Trust of America, Inc., its wholly owned subsidiary corporations and
limited liability companies, and its majority-owned and controlled partnership
("GTA"). The outside equity interests in the consolidated partnership not owned
and controlled by GTA are reflected as the minority interest in the consolidated
financial statements. All significant inter-company balances and transactions
have been eliminated in consolidation.
GTA is a self-administered real estate investment trust ("REIT") formed
to capitalize upon consolidation opportunities in the ownership of upscale golf
courses throughout the United States. We hold our golf course interests through
Golf Trust of America, L.P., a Delaware limited partnership and, in one
instance, through a wholly owned subsidiary of Golf Trust of America, L.P.
Currently, we hold participating interests in 47 golf courses (the "golf
courses"), 43 of which are owned by us and four of which serve as collateral for
a 30-year participating mortgage loan wherein we are the lender. Of the 43
courses that we own, 41 are held in fee simple and two held pursuant to
long-term ground leases. The golf courses are located in Florida (14), South
Carolina (6), Michigan (3.5), Illinois (3.5), Ohio (3), California (2.5),
Georgia (2), Virginia (2), Nebraska (1.5), Missouri (1.5), Texas (1.5), Alabama,
Kansas, Kentucky, North Carolina, New Mexico and West Virginia. Golf course
quantities are stated in terms of 18-hole equivalents, such that one 27-hole
golf course facility would be counted as 1.5 golf courses.
Because of the tax rules applicable to REIT's, we cannot operate our
golf courses. Thus when we acquire a golf course, we lease it back to an
affiliate of the seller or to another qualified operator. Often times, we lease
the golf course back to the seller's affiliate in instances where we believe
that the seller's familiarity with local conditions and continuity of management
facilitates the golf course's growth and profitability (which we participate in
under certain conditions as described below). However, we also have developed
strong relationships with multi-course operators who lease a number of our golf
courses.
INTERIM STATEMENTS
The accompanying consolidated financial statements for the three and
nine months ended September 30, 1999 and 1998 have been prepared in accordance
with generally accepted accounting principles ("GAAP") and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. These financial statements have
not been audited by independent public accountants but include all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial condition,
results of operations and cash flows for such periods. However, these results
are not necessarily indicative of results for any other interim period or for
the full year. The accompanying consolidated balance sheet as of December 31,
1998 has been derived from the audited financial statements, but does not
include all disclosures required by GAAP.
Certain information and footnote disclosures normally included in
financial statements in accordance with GAAP have been omitted pursuant to
requirements of the Securities and Exchange Commission (the "SEC"). Management
believes that the disclosures included in the accompanying interim financial
statements and footnotes are adequate to make the information not misleading but
should be read in conjunction with the consolidated financial statements and
notes thereto included in GTA's annual report of Form 10-K/A for the year ended
December 31, 1998.
9
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
MINORITY INTEREST
The accompanying consolidated balance sheets have been adjusted to
reflect an accounting allocation for reporting purposes from additional paid in
capital to minority interest for the limited partners' percentage interest in
the net assets of Golf Trust of America, L.P. This adjustment had no effect on
earnings per share or results of operations or allocations of net income to the
general and limited partners of Golf Trust of America, L.P. The reallocation for
the nine month period ended September 30, 1999 and the year ended December 31,
1998 was approximately $3.7 million and $8.0 million, respectively.
EARNINGS PER SHARE
The computation of basic earnings per share is computed by dividing net
income by the weighted average number of outstanding common shares during the
period. The computation of diluted earnings per share is based on the weighted
average number of outstanding common shares during the period and the
incremental common shares, using the treasury stock method for stock options.
The incremental common shares for the three months ended September 30, 1999 and
1998 were 5,000 and 228,000 respectively. The incremental common shares for the
nine months ended September 30, 1999 and 1998 were 30,000 and 241,000
respectively. Since the conversion of the preferred shares would be
anti-dilutive, these amounts are not included in the calculations of diluted
shares.
PERCENTAGE RENT AND PARTICIPATING INTEREST
In May 1998, the Emerging Issues Task Force ("EITF") issued Issue No.
98-9, "Accounting for Contingent Rent in Interim Financial Periods." This
statement provided that recognition of contingent rental income should be
deferred until specified targets that trigger the contingent rent are achieved.
Consequently, we generally will not recognize percentage rent until the third or
fourth quarter of a tenant's fiscal year, which in some instances may be
different than the third and fourth quarter of the calendar year. This statement
applied to all contingent rental income effective with the second quarter of
1998. On a quarterly basis, there may be a material impact to GTA's earnings per
share, financial condition, and results of operations while, on an annual basis,
there is no effect to GTA's earnings per share, financial condition, or results
of operations. In November 1998, Issue No. 98-9 was withdrawn by the EITF.
However, GTA has continued to account for contingent rents in accordance with
Issue No. 98-9. As a result of EITF 98-9, no percentage rent or participating
interest was recognized in the first three quarters of 1999.
10
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITIONS
During the nine months ended September 30, 1999, GTA purchased two
eighteen-hole equivalent golf courses for an aggregate initial investment
of approximately $15.9 million of which $5.6 million was paid in cash,
$10.0 million of assumed indebtedness (which also covered the Pete Dye
Clubhouse funding discussed below) and $.3 million in Series B OP Units
and $1.4 million in Series C OP Units (approximately 10,000 Series B and
50,000 Series C units).
The following is a summary of the acquisitions for 1999:
<TABLE>
<CAPTION>
INITIAL
ACQUISITION INVESTMENT
DATE COURSE NAME LOCATION (IN THOUSANDS)
---------------- ------------------------------------- --------------------------------- -----------------------
<S> <C> <C> <C>
5/11/99 Metamora Golf & Country Club Metamora, MI $ 5,900
7/28/99 Pete Dye Golf Club Bridgeport, WV 10,000
-----------------------
$15,900
-----------------------
</TABLE>
In July, 1999, GTA acquired the Pete Dye Golf Club, an 18-hole upscale,
private golf facility located in Bridgeport, West Virginia, approximately 90
miles south of Pittsburgh. The purchase price of $10.0 million includes the
issuance of preferred OP Units valued at approximately $1.4 million. The OP
Units were issued in the form of Series C convertible preferred OP Units at a
conversion price of $27.58 per share and have a preferred return equivalent
to 8.91%. The course is leased to an affiliate of the prior owner of the
club. The initial term of the participating lease is 10 years with four
5-year extensions. In addition, GTA made the prior owner a loan of $5.8
million, at a 10.5% per annum interest rate, to complete the construction of
a new clubhouse and other amenities at the club (of this $5.8 million amount,
$5.1 million was funded at closing). This loan matures July 28, 2004. The
purchase and loan were funded through a $10.0 million secured loan from City
National Bank of West Virginia, a $3.1 million advance on our Credit Facility
and $1.4 in preferred OP Units. The City National Bank loan bears interest at
prime, subject to adjustment quarterly (the interest rate was 8.0% per annum
at the time of closing) and is due in July 2002, with a requirement to have
the balance be no more than $5.0 million in July 2001.
3. LEASES
All of our golf course leases are participating leases that require the
lessees to make payments of a fixed amount of base rent and a variable amount of
additional rent based on growth in revenue at the golf course. Participating
rent will generally be paid each year in the amount, if any, by which the sum of
33 1/3% of gross golf revenue exceeds the cumulative base rent escalation since
the commencement date of such leases. The base rent generally increases annually
by the lesser of 3% to 5%, or a multiple of the change in the Consumer Price
Index ("CPI"). Annual increases in lease payments are generally limited to
between 5% and 7% during the first five years of the lease term. There was no
participating rent (or participating mortgage interest under the mortgage note
receivable) for the three and nine months ended September 30, 1999, compared to
$151,000 and $516,000 for the three and nine months ended September 30, 1998.
The decrease in participating rent and participating mortgage interest reflects
the application of EITF No. 98-9 and we believe that on an annualized basis the
participating rent and participating mortgage interest should be materially
consistent with the prior year.
11
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. COMMITMENTS
LESSEES
Typically, we lease our golf courses to affiliates of the prior owners and
other initial operators believed to be qualified under non-cancelable
participating leases for an initial term of ten years, with options to extend
the initial term of each participating lease up to a maximum of forty years.
From the lease payments, we are generally required to make available a reserve
of between 2% and 5% of the annual gross golf revenue of each course for the
replacement and enhancement of the existing facilities. These reimbursements are
allocated between short and long-term categories and, therefore, the balance (at
September 30, 1999, and 1998 of $1,996,000 and $1,047,000 respectively) may not
be currently available to the lessees.
Under certain circumstances, the base rent for a golf course will be
increased when GTA agrees to pay for significant capital improvements or for
expansion of the existing facilities. Of our $17.5 million capital improvement
commitments, approximately $8.6 million has been funded to date.
In limited circumstances, we agree to provide working capital loans and
other loans to existing lessees. These loans are evidenced by promissory notes,
or are set forth in the participating lease, and bear interest at fixed rates
between 9.74% and 10.5%. Of our $18.4 million working capital commitments,
approximately $10.3 million has been funded to date. Typically, we require the
lessee to increase the pledged collateral for the funded amounts.
In addition, we are engaged in preliminary negotiations with the lessee of
Sandpiper to increase the aggregate amount of the capital improvement and
working capital loans from $11.0 million to up to $22.0 million, subject to
final approval by the Board of Directors.
To accommodate the tax objectives of the sellers of certain golf courses,
who have received OP Units as partial consideration for the acquisition cost of
their golf courses, we have agreed to maintain minimum loan balances of
approximately $17.0 million for up to ten years.
12
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------- ------------------ -----------------
SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS) 1999 1998
-------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
REVOLVING CREDIT FACILITY
$200.0 million unsecured revolver with weighted average interest rates
of 6.7% maturing April 2002 $200,000 $125,000
-------------------------------------------------------------------------- ------------------ -----------------
LINE OF CREDIT
$25.0 million unsecured line of credit with weighted average interest
rates of 7.1% maturing March, 2000 $ 700 -
-------------------------------------------------------------------------- ------------------ -----------------
BRIDGE LOAN
$100.0 million unsecured bridge loan with weighted average interest
rates of 6.7% that matured April 1999 and was consolidated into the
Revolving Credit Facility - $67,925
-------------------------------------------------------------------------- ------------------ -----------------
NOTE PAYABLE
Secured financing, net book value of the property of $21.2 million and
$33.7 million, respectively with interest rates of 8.75% to 10% maturing
thru November 2016 $ 12,463 $17,709
-------------------------------------------------------------------------- ------------------ -----------------
NOTE PAYABLE
Secured financing, net book value of the property is $10.0 million with
interest rate of prime (8% at September 30, 1999) maturing thru 2002 $ 10,000
-------------------------------------------------------------------------- ------------------ -----------------
TOTAL $223,164 $210,634
-------------------------------------------------------------------------- ------------------ -----------------
</TABLE>
REVOLVING CREDIT FACILITY AND BRIDGE LOAN
As of April 6, 1999, GTA amended and restated its unsecured Revolving
Credit Facility ("Credit Facility") to increase the borrowing capacity to $200.0
million with a consortium of banks led by Bank of America, as lead agent. GTA
pays interest-only on the Credit Facility with the principal balance due in
April 2002. Borrowings typically bear interest at an adjusted Eurodollar rate
plus an applicable margin. The applicable margin (between 1.50% and 2.00%) is
subject to adjustment based upon certain leverage ratios. At September 30, 1999,
all amounts outstanding under the Credit Facility were based on the Eurodollar
rate and a margin of 1.75% for an average interest rate of 7.1% per annum. The
amended and restated Credit Facility replaced the Bridge Loan.
The Credit Facility availability is limited to an unencumbered pool
calculation, including a 20% limitation for working capital needs. Financial
covenants include net worth, liquidity and cash flow covenants, among others.
Non-financial covenants include restrictions on loans outstanding, construction
in progress, loan to officers and changes in the Board of Directors, among
others. At the present time, these covenants have been met.
In addition to the amended and restated Credit Facility, on April 6, 1999,
GTA also obtained a $25.0 million unsecured line of credit from Bank of America
which may be incorporated into the $200.0 million Credit Facility at a later
date. The rates, covenants, conditions and other material provisions are
essentially the same as the Credit Facility, except for the term, which is one
year for the $25.0 million line of credit.
13
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. DEBT (CONTINUED)
DEBT MATURITIES
Aggregate maturities of long-term debt for each of the five years following
September 30, 1999 are as follows:
<TABLE>
<CAPTION>
------------------------ --------------------
YEAR AMOUNT
------------------------ --------------------
(In thousands)
<S> <C> <C>
1999 (3 months) $ 79
2000 $ 1,035
2001 $ 5,365
2002 $ 205,398
2003 $ 435
2004 $ 474
Thereafter $ 10,377
------------------------ --------------------
</TABLE>
INTEREST RATE SWAP AGREEMENT
In September 1998, we entered into an interest rate swap agreement with
Bank of America to reduce the impact of changes in interest rates on our Credit
Facility. The swap agreement matures in February 2000, and has a total notional
amount of $76,800,000. The swap agreement effectively converts a portion of our
floating rate debt to fixed rate debt. We pay Bank of America a fixed rate of
5.08% per annum (for an all-inclusive rate of 6.83% per annum for September 30,
1999). We are exposed to credit loss in the event of nonperformance by Bank of
America.
14
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. PREFERRED STOCK AND OTHER PREFERRED INTERESTS
SERIES A PREFERRED STOCK
On April 2, 1999, GTA completed a public offering of 800,000 shares of its
9.25% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share
("Series A Preferred Stock"), at a price of $25.00 per share to a single
purchaser, AEW Targeted Securities Fund, L.P.
Dividends on the Series A Preferred Shares are cumulative from the date of
original issue and are payable quarterly in arrears, when, and as if declared by
the Board of Directors, on the 15th day of January, April, July and October,
commencing on July 15, 1999. Such dividends will be in an amount per share equal
to the greater of (i) $0.578125 per quarter (or $2.3125 per annum)(equal to an
annual rate of 9.25% of the $25 price per share) or (ii) the cash dividend paid
or payable on the number of common shares into which a Series A Preferred Share
is then convertible (determined on each of the quarterly dividend payment dates
referred to above).
The Series A Preferred Stock is convertible, in whole or in part, at the
option of the holder at any time into common shares at a conversion price of
$26.25 per common share (equivalent to an initial conversion rate of
approximately 0.95238 common shares per Series A Preferred Share), subject to
adjustment in certain circumstances.
Except in certain circumstances relating to preservation of GTA's status as
a "REIT", the Series A Preferred Shares are not redeemable at GTA's option prior
to April 2, 2004. On and after such date, the Series A Preferred Shares will be
redeemable, in whole but not in part, at the option of GTA on 20 days notice for
a cash payment equal to $25.00 plus accrued and unpaid dividends (whether or not
declared) to the redemption date without interest, plus a premium initially
equal to 4% of such sum and, thereafter, declining by 1% each year so that the
premium is zero on and after April 2, 2008.
SERIES B OP UNITS
In May 1999, GTA acquired Metamora Golf and Country Club, an 18-hole
upscale golf facility located in Metamora, Michigan for $5.9 million. As part
of the purchase price, at the closing, 10,172 units of Series B OP Units
valued at $295,000 were issued at $29.00 per share. The newly created Series
B OP Units are convertible into OP Units at the election of the holder. These
perpetual preferred units are scheduled to pay a distribution of 8.25% based
on the initial issuance price.
SERIES C OP UNITS
In July 1999, GTA acquired the Pete Dye Golf Club, an 18-hole upscale,
private golf facility located in Bridgeport, West Virginia, approximately 90
miles south of Pittsburgh. As part of the $10.0 million purchase price, at
the closing, 48,949 units of Series C OP Units valued at $1,350,000 were
issued at $27.58 per share. The newly created Series C OP Units are
convertible into common OP units at the election of the holder. These
perpetual preferred units are scheduled to pay a distribution of 8.91% based
on the initial issuance price.
15
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. STOCK OPTIONS AND AWARDS
EMPLOYEE STOCK PURCHASE PLAN
On March 1, 1998, we adopted an Employee Stock Purchase Plan ("the Plan")
to provide most employees with an opportunity to purchase common shares in GTA
through payroll deductions of up to 10% of eligible compensation with a $25,000
maximum deferral. Semi-annually, participant account balances will be used to
purchase common shares at the lesser of 85% of the fair market value of common
shares at the beginning or ending of such six-month period. The Plan expires on
February 28, 2008. A total of 250,000 common shares are available for purchase
under the Plan. In January 1999, 1,768 common shares were issued and in July
1999, an additional 2,152 common shares were issued. Compensation expense
related to the Plan was $11,000 for 1999 compared to $14,000 in 1998.
RESTRICTED STOCK
For the nine months ended September 30, 1999 and 1998, GTA granted 44,000
and 20,939 common shares, respectively, of restricted stock to employees under
GTA's 1998 and 1997 Stock-Based Incentive Plans. The market value of the
restricted stock grants in 1999 and 1998 totaled $1,001,000 and $607,000,
respectively. Unearned compensation is being amortized to an expense item over
the vesting period, which ranges from three to five years. Such expense amounted
to approximately $159,000 and $153,000 for the three months ended September 30,
1999 and 1998, respectively, and $432,000 and $457,000 for the nine months ended
September 30, 1999 and 1998, respectively. During the 4th quarter of 1998, the
Compensation Committee accelerated to January 4, 1999 the vesting of 6,685
common shares of restricted stock that otherwise would have vested on September
19, 1999.
LOANS TO OFFICERS
In 1997, the Board of Directors of GTA approved a Company Policy, which has
subsequently been amended and restated with respect to loans to executive
officers and certain key employees relating to purchases of GTA common shares
(the "Loan Program"). Pursuant to the Loan Program, GTA may lend amounts to
certain GTA executive officers for one or more of the following purposes: (1) to
finance the purchase of common shares by certain executive officers on the open
market at the then-current market prices; (2) to finance an executive officer's
payment of the exercise price of options to purchase common shares granted to
such employee under GTA's option plans; and (3) to finance the annual tax
liability of certain executive officers related to the vesting of shares of
common shares which constitute a portion of a restricted stock award granted to
such employees under GTA's option plans. The maximum aggregate amount GTA may
loan to an executive officer is determined on a case-by-case basis by the
Compensation Committee. Common shares, which are the subject of a loan, serve as
collateral for the repayment of the note until the note has been paid in full.
Each note bears interest at the applicable federal rate, as defined by the
Internal Revenue Service, in effect on the execution date of the loan. Interest
is paid on an annual basis and varies from 4.4% - 6.0% per annum. Each note
becomes due and payable in full on the fifth anniversary of the execution date
thereof. As of September 30, 1999, GTA had made loans in the amount of
approximately $3,379,000 and had an undisbursed remaining commitment of
$500,000.
16
<PAGE>
8. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information set forth below is presented as if the 1999
acquisitions (Note 3) had been consummated as of January 1, 1998. 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, 1998, 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, 1999 September 30, 1998
-------------------------- --------------------------
<S> <C> <C>
Revenues $ 42,049 $ 32,790
Net Income $ 8,573 $ 8,652
Basic earnings per share $ 1.11 $ 1.13
Diluted earnings per share $ 1.11 $ 1.10
</TABLE>
The pro forma financial information includes the following adjustments: (1)
increase in revenues; (2) an increase in depreciation and amortization expense;
(3) an increase in interest expense; (4) an increase in interest income related
to assumed debt; and (5) an increase in income applicable to minority interest.
17
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE
Legends Golf is a significant lessee of the golf courses in GTA's
portfolio. Legends Golf is a golf course management group consisting of 10
companies affiliated through common ownership that operates a portfolio of golf
courses owned by GTA 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.
Effective July 1, 1999, Larry D. Young, a director of GTA and principle
owner of Legends Golf, acquired the stock of the lessee of the Bonaventure
courses.
Effective August 17, 1999, Mr. Young, through an affiliated entity named
"Legend National Golf Management, LLC," also became the lessee at four
courses previously leased to Granite Golf Group or its affiliates. These
courses are Persimmon Ridge Golf Club, Silverthorn Country Club, Black Bear
Golf Club and Tiburon Golf Club. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Lessee Results of
Operations-Granite Assignment of Leases."
The following table sets forth certain combined condensed financial
information for Legends Golf.
<TABLE>
<CAPTION>
September 30, December 31,
(IN THOUSANDS) 1999 1998
----------------------------------------------------------------------- ------------- ------------------
(UNAUDITED)
<S> <C> <C>
Current assets $ 5,071 $ 2,978
Non-current assets 26,735 20,650
------ ------
Total assets $ 31,806 $ 23,628
======== ========
Payable to Golf Trust of America, L.P. $ 4,595 $ 1,030
Other current liabilities 2,593 1,340
Long-term liabilities 26,431 20,916
Owners' equity (1,813) 342
----------- ----------
Total liabilities and owners' equity $ 31,806 $ 23,628
========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the three months ended
September 30,
(IN THOUSANDS) 1999 1998
----------------------------------------------------------------------- ------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Total Revenues $ 5,683 $ 4,549
Operating Loss $ (3,002) $ (2,669)
Net Loss $ (1,915) $ (1,450)
</TABLE>
Total revenues from golf course operations for Legends Golf increased by
$1.1 million to $5.7 million for the three months ended September 30, 1999,
compared to $4.5 million for the three months ended September 30, 1998.
Decreases in revenues in Myrtle Beach and Virginia of $.5 million were offset by
the increases in the revenues of $1.6 million from the acquisition of additional
leases. Total rounds played decreased in Myrtle Beach and Virginia by
approximately 10.5% from the same period in 1998, primarily due to two
hurricanes and related excessive raninfall that occurred in this region during
the three month period ended September 30, 1999.
Operating loss increased by $.3 million to $3.0 million for the three
months ended September 30, 1999 compared to $2.7 million for the corresponding
period in 1998. The increase is primarily due to a decrease in maintenance and
administrative expenses in Myrtle Beach and Virginia offset by an increase of
$2.4 million in operating and administrative expenses from the acquisition of
additional leases. Net loss was $1.9 million for the
18
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
three months ended September 30, 1999 compared to $1.5 million for the three
months ended September 30, 1998, primarily due to the increased operating loss
and a reduction in the equity in earnings of Golf Trust of America, L.P.
19
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE (CONTINUED)
<TABLE>
<CAPTION>
For the nine months ended September 30,
(IN THOUSANDS) 1999 1998
-------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Total Revenues $ 19,293 $ 17,810
Operating Loss $ (3,282) $ (3,034)
Net Income $ 225 $ 644
</TABLE>
Total revenue from golf course operations for Legends Golf increased by
$1.5 million to $19.3 million from $17.8 million for the nine months ended
September 30, 1998. The increase was primarily attributable to increased greens
fees, cart rentals, and food and beverage sales at the Myrtle Beach area courses
net of reduced green fees in Virginia and the additional $1.6 million of revenue
as a result of the acquisition of the additional leases.
Operating loss increased by $.3 million to $3.3 million for the nine months
ended September 30, 1999 compared to $3.0 million for the corresponding period
in 1998. The increase was primarily the result of the increase in operating and
administrative expenses from the additional leases of $2.4 million net of the
increase in revenues and the reduction in maintenance and administrative
expenses in Myrtle Beach and Virginia. Net income was $.2 million for the nine
months ended September 30, 1999, compared to $.6 million for the nine months
ended September 30, 1998 primarily due to the increase in operating loss net of
the reduction in the equity in earnings of Golf Trust of America, LP.
10. SUBSEQUENT EVENTS
PAYMENT OF DIVIDENDS
On September 15, 1999, the Board of Directors declared a quarterly dividend
distribution of $0.44 per common share for the quarter ended September 30, 1999,
to stockholders of record on September 30, 1999, which was paid on October 15,
1999. Also, on October 15, 1999, the Series A Preferred Stockholder was paid a
dividend of $.58 per share.
RESIGNATION OF OFFICER AND DIRECTOR
Mr. David D. Joseph has recently tendered his resignation as our
Executive Vice President and a member of our Board of Directors in order to
pursue other business opportunities. In order to accommodate transition
issues for our benefit, the resignation from the Board of Directors was
effective October 31, 1999 and the resignation as Executive Vice President is
effective between November 15, 1999 and November 30, 1999, at our election.
The one time charge for Mr. Joseph's financial settlement, to be recognized
in the fourth quarter of 1999, will be approximately $300,000 tied to a
two-year non-compete agreement. See Part II, Item 5, "Other Information"
following the Management Discussion and Analysis.
20
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW AND FORMATION
Golf Trust of America, Inc. conducts business through an operating
partnership, Golf Trust of America, L.P., of which we own a majority interest in
common partnership units through our two wholly owned subsidiaries, one of which
is the general partner. Larry D. Young, a director of GTA, along with his
affiliates owns 27.1% of the common partnership units and is a significant
lessee. The remaining interest in the common operating partnership is held by
operators of the golf courses, their affiliates and officers of GTA. In
addition, Golf Trust of America, L.P. has issued, and may issue in the future,
preferred partnership units either directly to third parties or to GTA in
instances where GTA has issued prefers stock. See "Note 6" to the Condensed
Consolidated Financial Statements.
"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 our expectations concerning future events, including
the following: statements regarding GTA's continuing ability to target and
acquire high quality golf courses; the expected availability of the Credit
Facility and other debt and equity financing; the lessees' future cash flows,
results of operations and overall financial performance; the expected tax
treatment of our operations and our beliefs about continued growth in the golf
industry. Because of the foregoing factors, the actual results achieved by GTA
in the future may differ materially from the expected results described in our
forward-looking statements. The following discussion should read in conjunction
with the accompanying Consolidated Financial Statements and Notes thereto
appearing elsewhere in this report and with GTA's Annual Report for 1998 on Form
10-K (as amended by Form 10-K/A).
GTA was formed to capitalize upon consolidation opportunities in the
ownership of upscale golf courses in the United States. Our principal
business strategy is to acquire upscale golf courses and then lease the golf
courses to qualified third party operators, including affiliates of the
sellers. We have the ability to issue units of limited partnership interest
("OP Units") in the operating partnership. OP Units are redeemable by their
holder for cash, or at our election, for common shares of GTA. When we
acquire a golf course in exchange for OP Units, in most instances the seller
of the course does not recognize income until it exercises the redemption
right. OP Units can thus provide an attractive tax-deferred sale structure
for golf course sellers. We believe we have a competitive advantage in the
acquisition of upscale golf courses, including those which might not
otherwise be available for purchase, because of the utilization of a multiple
independent lessee structure, our substantial industry knowledge, experience,
and relationships within the golf community, our strategic alliances with
prominent golf course operators and our ability to issue OP Units to golf
course owners on a tax-deferred basis.
21
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
In July, 1999, GTA acquired Pete Dye Golf Club, an 18-hole upscale,
private golf facility located in Bridgeport, West Virginia, approximately 90
miles south of Pittsburgh. The purchase price of $10.0 million included the
issuance at closing of preferred OP Units valued at approximately $1.4
million. The OP Units were issued in the form of Series C Convertible
Preferred OP Units at a conversion price of $27.58 per unit and have a
preferred return equivalent to 8.91%. Distributions on the Series C OP Units
are cumulative from the date of original issuance and are payable quarterly
in arrears, when, as and if declared by the Board of Directors, on the 15th
day of January, April, July and October, commencing on October 15, 1999. Such
distributions will be in an amount per unit equal to the greater of (i)
$0.615 per quarter (or $2.458 per annum) (equal to an annual rate of 8.91% of
the issue price per share) or (ii) the cash distributions paid or payable on
the number of common OP Units into which a Series C OP Unit is then
convertible (determined on each of the quarterly distributions payment dates
referred to above). The course is leased to an affiliate of the prior owner
of the golf course. The initial term of the participating lease is 10 years
with four 5-year extensions. In addition, GTA made the prior owner a loan of
$5.8 million at a 10.5% per annum interest rate which matures July 28, 2004,
to complete the construction of a new clubhouse and other amenities at the
golf course (of this $5.8 million amount, $5.1 million was funded at
closing). The purchase and loan were funded through a $10.0 million secured
loan from City National Bank of West Virginia, a $3.1 million advance on our
Credit Facility and $1.4 million in preferred OP Units. The City National
Bank loan bears interest at prime, subject to adjustment quarterly (8.0% per
annum at the time of closing) and is due in July 2002, with a requirement to
reduce the balance outstanding to a maximum of $5.0 million by July 2001.
REVENUE GROWTH
Our primary sources of revenue are lease payments under the participating
leases and mortgage payments under the participating mortgage. Participating
rent is generally equal to 33-1/3% of the increase in gross golf revenues over
the gross golf revenues for the golf course for the base year, as adjusted by us
in determining the initial base rent. Base rent will generally increase each
year by the base rent escalator during the first five years of the lease term,
generally equal to the lesser of 3% to 5% or a multiple of the change in the CPI
over the prior year. Annual increases in lease payments are generally limited to
a maximum between 5% and 7% for the first five years of the lease term.
We believe the principal source of growth in gross golf revenues at the
golf courses will be increased green fees, cart fees, and other related fees. In
order to achieve higher revenues, we believe the lessees will need to continue
to offer golfers a high quality golf experience as it relates to the pace of
play, condition of the golf course and overall quality of the facilities.
22
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
For the three months ended September 30, 1999 and 1998, GTA received
$14,104,000 and $12,041,000 respectively, in revenue from the participating
leases and the mortgage note receivable, respectively. The increase in revenues
is due to (1) minimum increases of approximately $559,000, (2) a full quarter of
operations for 1999 and 1998 acquisitions resulting in $1,316,000 in additional
rental revenue, (3) rent from new course acquisitions of $208,000, and (4)
$42,000 of additional interest from the mortgage note receivable reflecting
increased principal outstanding and minimum increases under the mortgage note.
The increase was partially offset by a decrease in participating rent of
$752,000 which is discussed in Note 1 to the Condensed Consolidated Financial
Statements and reflects primarily a change in accounting treatment for
contingent rents.
Expenses totaling $5,790,000 and $4,393,000 for the three months ended
September 30, 1999 and 1998, respectively, reflect depreciation and
amortization and general and administrative expenses. The increase reflects
additional depreciation of $1,070,000 for the 1998 and 1999 acquisitions.
Interest expense was $4,030,000 for the three months ended September 30,
1999, compared to $3,139,000 for the three months ended September 30, 1998,
due to the increased leverage required to fund over $200 million in
acquisitions for 1998 and 1999 additions, a portion which was funded in the
last six months of 1998 and therefore not fully reflected in the comparable
period in 1998.
For the three months ended September 30, 1999 and 1998, net income was
$2,876,000 and $2,779,000, respectively. For the three months ended September
30, 1999 and 1998, earnings per share decreased from $.35 to $.31 or 11.4%. The
increases in interest expense and the preferred dividends which resulted from
the issuance of 800,000 shares of Series A Preferred Stock in April 1999 more
than offset the increase in revenue.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
For the nine months ended September 30, 1999 and 1998, GTA received
$41,149,000 and $31,407,000 in revenue from the participating leases and from
the mortgage note receivable, respectively. The increase in revenues is due to
(i) minimum base rental increases of approximately $4,951,000, (ii) rent of
$2,064,000 from new course acquisitions and expansions, (iii) $323,000 in
interest from the mortgage note receivable, as a result of advances for capital
improvements which increased the outstanding principal amount and minimum
increases under the mortgage note. The increase was partially offset by a
$672,000 decrease in participating rent, which, as previously mentioned is
discussed in Note 1 to the Condensed Consolidated Financial Statements.
Expenses totaled $16,519,000 and $11,126,000 for the nine months ended
September 30, 1999 and 1998, respectively, and reflect depreciation,
amortization, general and administrative expenses. The increase reflects (i)
additional depreciation of $4,913,000 for the acquisitions made after September
30, 1998, and (ii) additional general and administrative costs of $480,000.
Additional interest expense of $5,477,000 results from the acquisitions
made during 1998 and which were either partially included in the first nine
months of 1998 or not included at all.
The loss of the sale of assets in 1998 derived from one location where the
golf carts were traded in as part of a new leasing program and another location
where a new clubhouse was built and the old facility replaced, and no
corresponding loss was incurred in 1999.
Net income for the nine months ended September 30, 1999 and 1998, was
$8,507,000 and $8,499,000, respectively. For the nine months ended September 30,
1999 and 1998, earnings per share decreased from $1.08 to $.98 or 9.3%. The
increases in interest expense and the preferred dividends which resulted from
the issuance of 800,000 shares of Series A Preferred Stock in April 1999 more
than offset the increase in revenue.
23
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
LESSEE RESULTS OF OPERATIONS
BONAVENTURE RESTRUCTURING
Effective July 1, 1999, Mr. Young acquired the outstanding stock of
Emerald Dunes - Bonaventure, Inc., the lessee at Bonaventure. Currently, $2.9
million is the outstanding under the working capital loan due from the
Bonaventure lessee. There was no reduction in payment terms under the
participating lease; however, we have amended the participating lease to
allow the new lessee additional working capital funding up to $3.0 million to
facilitate the repositioning of the facility and meet seasonal operating
needs. The collateral to secure the lessee's obligations under the
participating lease pledged by the initial lessee was released and
substituted with equivalent collateral held by Mr. Young and his affiliates.
Mr. Young is a Director of GTA.
GRANITE ASSIGNMENT OF LEASES
On June 24, 1999, GTA declared a default under each of the participating
leases where Granite Golf or one of its affiliates is the lessee ("Granite")
(Tiburon Golf Club, Silverthorn Country Club, Persimmon Ridge Golf Club and
Black Bear Golf Course), for failure to timely pay rent under the terms of
the respective participating leases. GTA and the Granite tenants agreed to
apply the redemption value of their OP units against past due obligations and
permit us to retain any balance. W. Bradley Blair, II, President and Chief
Executive Officer of GTA, purchased the 21,429 shares for $22.15 per share,
the 10 day trailing average market price of the common stock from Golf Trust
of America, L.P., in conjunction with this default. Effective August 17, 1999
each of the leases with Granite was assigned to and assumed by Legends
National Golf Management, LLC, an affiliate of Mr. Young. We did not
restructure the participating leases in any material manner. However, new
working capital loans aggregating $1.2 million and bearing interest under
existing lease terms were committed to facilitate the transaction period and
to cover seasonal financial needs.
24
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
Cash flow from operating activities for the nine months ended September
30, 1999 and 1998 was $18,733,000 and $16,385,000, respectively. This
reflects net income before minority interest, plus non-cash charges to income
for depreciation, loan cost amortization, straight line rents and interest
and working capital changes. Our investing activities reflect course
improvements and capital replacement reserve costs of $21.0 million for the
first nine months of 1999 which included the $3.3 million acquisition of an
additional nine holes at Northgate Country Club, the cash portion of the
Metamora Golf Course of $5.0 million, the cash portion of the Pete Dye Golf
Course of $4.0 million, and $3.6 million for improvements at Eagle Ridge and
other courses. This compares to our advances on our mortgage note receivable
related to the Westin Innisbrook facility of $4.7 million and the cash
portion of our golf course acquisitions of $171.2 million for the first nine
months of 1998. During the first three quarters of 1998, we acquired 18
courses for a total investment of $201.8 million, including $12.9 million of
assumed indebtedness and $13.1 million in the issuance of OP Units. During
the first three quarters of 1999, our financing activities netted to $7.9
million. As discussed above, on April 2, 1999, we sold 800,000 preferred
shares of our Series A Preferred Stock for gross proceeds of $20.0 million,
net of associated costs of $878,000. With the proceeds we paid down $1.0
million under the Credit Facility, and used the balance for working capital.
This compares to $147.7 million of financing activities for the first three
quarters of 1998, including net borrowings of $164.7 million, less payment of
dividends and partner distributions of $16.1 million for the nine months
ended September 30, 1998.
As of April 6, 1999, we amended and restated our unsecured revolving credit
facility ("Credit Facility") to $200.0 million with a consortium of banks led by
Bank of America, as lead agent. We pay interest only on the Credit Facility with
the principal balance due in April 2002. Borrowings typically bear interest at
an adjusted Eurodollar rate plus an applicable margin. The applicable margin
(between 1.50% and 2.00%) is subject to adjustment based upon certain leverage
ratios. At September 30, 1999, all amounts outstanding under the Credit Facility
were based on the Eurodollar rate and a margin of 1.75%.
Funds available under the Credit Facility are limited to an unencumbered
pool calculation, including a 20% limitation for working capital needs.
Financial covenants include net worth, liquidity and cash flow covenants, among
others. Non-financial covenants include restrictions on loans outstanding,
construction in progress, loan to officers and certain changes in the Board of
Directors, among others. At the present time, these covenants have been met.
In addition to the Credit Facility, we also obtained a $25.0 million dollar
unsecured line of credit from Bank of America which may be incorporated into the
$200.0 million Credit Facility at a later date. The rates, covenants, conditions
and other material provisions are essentially the same as the Credit Facility,
except for the term, which is one year for the $25 million line of credit.
Currently, there is $700,000 of borrowings outstanding under this unsecured
line.
In connection with the issuance of OP Units, we have agreed to maintain a
minimum loan balance of approximately $17.0 million for up to ten years to
accommodate certain prior owners' efforts to minimize certain adverse tax
consequences from their contribution of their courses to GTA.
25
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY (CONTINUED)
We intend to invest in additional golf courses as suitable opportunities
arise, but we will not undertake investments unless adequate sources of
financing are available. We anticipate that future acquisitions would be funded
with debt financing provided by the Credit Facility, the issuance of OP Units or
with net proceeds of additional equity offerings. In the future, we may
negotiate additional credit facilities or issue corporate debt instruments. Any
debt issued or incurred by GTA 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. We currently have no binding
agreement to acquire any additional golf courses, although we are pursuing
various options.
We have on file with the Securities and Exchange Commission a universal
shelf registration statement registering the issuance of debt securities, common
stock, preferred stock or warrants as well as resales of securities issued upon
redemption of certain OP Units by their holders, with a remaining availability
of approximately $280.0 million. The exact amount of debt, common stock,
preferred stock, and warrants issued will depend on acquisitions, asset shares,
GTA's unsecured debt and preferred stock ratings, and the general interest rate
environment.
Our acquisition capabilities are enhanced by our existing capital
structure. We generally intend to maintain a capital structure with consolidated
indebtedness representing no more than 50% of our total capitalization, although
we have no express limitation on our ability to incur indebtedness.
COMMITMENTS
Typically, we lease our golf courses to affiliates of the prior owners
and other qualified operators under non-cancelable participating leases for an
initial period of ten years with options to extend the term of each
participating lease up to forty years. From the lease payments, we are generally
required to make available a reserve between 2% and 5% of the annual gross golf
revenue of each course for the replacement and enhancement of the existing
facilities. These reimbursements are allocated between short-term and long-term
categories and, therefore, the balance which, at September 30, 1999 and 1998 was
$1,996,000 and $1,047,000, respectively, may not be currently available to the
lessees.
Under certain circumstances, the base rent for a course will be increased
when GTA agrees to pay for significant capital improvements or for expansion of
the existing facilities. Of our $17.5 million capital improvement commitments,
approximately $8.3 million has been funded as of September 30, 1999.
In limited circumstances we agree to provide working capital loans to
existing lessees. Working capital loans generally require appropriate collateral
and bear interest at fixed rates between 9.0% and 11.0% per annum. Of our $18.4
million working capital commitments, approximately $10.3 million has been funded
to date. Working capital loans are evidenced by promissory notes or as set forth
in the participating lease.
In addition, we are engaged in preliminary negotiations with Sandpiper
to increase the aggregate amount of the capital improvement and working
capital loan from $11.0 million to up to $22.0 million subject to final
approval by the Board of Directors.
26
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
GTA considers Funds From Operations ("FFO") as an appropriate measure of
performance of an equity REIT. In accordance with the resolution adopted by the
Board of Governors of the National Association of Real Estate Investment Trusts,
Inc. ("NAREIT"), FFO represents net income (loss) (computed in accordance with
generally accepted accounting principles ("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. FFO should not be considered as an alternative to net income or other
measurements under GAAP as an indicator of operating performance or to cash
flows from operating investing or financial activities as a measure of
liquidity. FFO does not reflect working capital changes, cash expenditures for
capital improvements or principal payments on indebtedness. We believe that FFO
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 GTA's
ability to incur and service debt and make capital expenditures. Compliance with
the NAREIT definition of FFO is voluntary. Accordingly, GTA's calculation of
funds from operations in accordance with the NAREIT definition may be different
than similarly titled measures used by other REITs.
Cash available for distribution ("CAD") is defined as FFO less capital
expenditures funded by operations and straight line rent and interest payments.
GTA believes that in order to facilitate a clear understanding of the
consolidated historical operating results of GTA, FFO and CAD should be examined
in conjunction with net income as presented in the consolidated financial
statements and data included elsewhere in this report.
FFO and CAD for the three months ended September 30, 1999 and 1998
presented on a historical basis are summarized in the following table:
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS ENDED
ENDED SEPTEMBER 30, 1998
SEPTEMBER 30, 1999
-------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Income before minority interest .................... $ 4,661 $ 4,669
Depreciation and amortization for real estate assets 4,297 3,089
Preferred Dividends ................................ (463) --
Preferred Distributions ............................ (27) --
-------------------------
Funds from Operations .............................. 8,468 7,758
Adjustments:
Non-cash mortgage interest and rent .............. (232) (398)
Capital expenditure reserve ...................... (623) (400)
-------------------------
Cash Available for Distribution .................... $ 7,613 $ 6,960
-------------------------
-------------------------
</TABLE>
Non-cash mortgage and rent interest revenue represents the difference
between revenue on the participating mortgage reported by the Company in
according with GAAP and the actual cash payment to be received by GTA. The
participating leases generally require GTA to reserve annually between 2.0% and
5.0% of the gross golf revenues of the golf courses to fund a capital
replacement reserve. The lessees will fund any capital expenditures in excess of
such amounts.
27
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
See Item 2 of our 10-Q filed for the period ending
June 30, 1999. In addition, on August 12, 1999, Golf
Trust of America, L.P., sold 21,429 shares of common
stock it acquired from Granite Golf Group as part of
a settlement of a lease default. These shares were
sold in reliance upon an exemption from registration
under the Securities Act.
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
CHANGE IN DIRECTORS
Mr. David D. Joseph has recently tendered his resignation as our
Executive Vice President and a member of our Board of Directors in order to
pursue other business opportunities. Mr. Joseph has primarily been involved
in acquisitions and related matters and has been a valuable member of our
management team. In order to accommodate transition issues for our benefit,
the resignation from the Board of Directors was effective October 31, 1999
and the resignation as Executive Vice President is effective between
November 15, 1999, and November 30, 1999, at our election.
The number of our currently pending transactions is limited and the
Company believes that our current focus should be on effectively managing
our assets in this period in which the share value of equity REITs in
general has fallen and acquisition opportunities are elusive and costly. We
believe that by effectively managing our assets we will be better-suited
to take advantage of opportunities in the future to acquire properties. We
have a number of our current personnel devoted to acquisitions and do not
presently intend to replace Mr. Joseph's officer position, but instead rely
on our current personnel and third party sources.
Mr. Joseph has agreed to remain available on a consulting basis to
address certain pending matters, as well as to be available for new
matters. We do not anticipate that Mr. Joseph's departure will have any
material adverse effect on our results of operations or business
prospects. Mr. Joseph has advised us that, in his capacity as a board
member, he does not have any disagreement with any our operations,
policies or procedures.
Mr. Scott Peters, our Senior Vice President and Chief Financial
Officer, has been appointed by the Board of Directors to replace Mr.
Joseph until Mr. Joseph's position can be filled at our next annual
shareholders meeting. We anticipate that Mr. Peters will make a valuable
addition to our Board of Directors.
28
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
The Company filed an 8-K on August 30, 1999 for Adoption of
Shareholder's Right Plan. The filing did not include any financial reports.
(b) Exhibits
The following exhibits are part of this quarterly report on
Form 10-Q for the quarterly period ended September 30, 1999 (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).
3.2 Articles of Amendment of the Company, as filed with the
Maryland State Department of Assessments and Taxation on June
9, 1998 (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).
3.3 Articles Supplementary of the Company relating to the Series A
Preferred Stock, as filed with the State Department of
Assessments and Taxation of the State of Maryland on April 2,
1999 (previously filed as Exhibit 3.1 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).
3.4 Articles Supplementary of the Company relating to the Series B
Junior Participating Preferred Stock, as filed with the State
Department of Assessments and Taxation of the State of
Maryland on August 27, 1999 (previously filed as Exhibit 3.1
to the Company's Current Report on Form 8-K, filed August 30,
1999, and incorporated herein by reference).
3.6 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 on Form 10-Q
(Commission File No. 000-22091) filed May 15, 1998 and
incorporated herein by reference).
4.1 Form of Share Certificates for the Common Stock (previously
filed as Exhibit 4.3 to the Company's Current Report on Form
8-K, filed August 30, 1999, and incorporated herein by
reference).
4.2 Form of Share Certificates for the Series A Preferred Stock
(previously filed as Exhibit 3.2 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).
4.3 Shareholder Rights Agreement, by and between the Company and
ChaseMellon Shareholder Services, L.L.C., as rights agent,
dated August 24, 1999 (previously filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K, filed August 30, 1999,
and incorporated herein by reference).
27.1* Financial Data Schedule
29
<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 11/13/99
- -------------------------------------------- --------------------------
W. Bradley Blair, II Date
President, Chief Executive Officer and
Chairman of the Board of Directors
/s/ Scott D. Peters 11/13/99
- -------------------------------------------- --------------------------
Scott D. Peters... Date
Senior Vice President and
Chief Financial Officer
30
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index
immediately precedes the exhibits.
The following exhibits are part of this Quarterly Report on Form 10-Q
(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).
3.2 Articles of Amendment of the Company, as filed with the
Maryland State Department of Assessments and Taxation on June
9, 1998 (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).
3.3 Articles Supplementary of the Company relating to the Series A
Preferred Stock, as filed with the State Department of
Assessments and Taxation of the State of Maryland on April 2,
1999 (previously filed as Exhibit 3.1 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).
3.4 Articles Supplementary of the Company relating to the Series B
Junior Participating Preferred Stock, as filed with the State
Department of Assessments and Taxation of the State of
Maryland on August 27, 1999 (previously filed as Exhibit 3.1
to the Company's Current Report on Form 8-K, filed August 30,
1999, and incorporated herein by reference).
3.6 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 on Form 10-Q
(Commission File No. 000-22091) filed May 15, 1998 and
incorporated herein by reference).
4.1 Form of Share Certificates for the Common Stock (previously
filed as Exhibit 4.3 to the Company's Current Report on Form
8-K, filed August 30, 1999, and incorporated herein by
reference).
4.2 Form of Share Certificates for the Series A Preferred Stock
(previously filed as Exhibit 3.2 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).
4.3 Shareholder Rights Agreement, by and between the Company and
ChaseMellon Shareholder Services, L.L.C., as rights agent,
dated August 24, 1999 (previously filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K, filed August 30, 1999,
and incorporated herein by reference).
27.1* Financial Data Schedule
31
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 AND CONSOLIDATED
STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1999
<PERIOD-START> JUL-01-1999 JUL-01-1998 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1998 SEP-30-1999
<CASH> 8,324 0 0
<SECURITIES> 0 0 0
<RECEIVABLES> 4,595 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0<F1> 0 0
<PP&E> 371,451 0 0
<DEPRECIATION> 37,984 0 0
<TOTAL-ASSETS> 434,745 0 0
<CURRENT-LIABILITIES> 10,865<F2> 0 0
<BONDS> 223,164 0 0
0 0 0
20,000 0 0
<COMMON> 77 0 0
<OTHER-SE> 110,243 0 0
<TOTAL-LIABILITY-AND-EQUITY> 434,745 0 0
<SALES> 0 0 0
<TOTAL-REVENUES> 14,104 12,039 41,149
<CGS> 0 0 0
<TOTAL-COSTS> 5,790 4,393 16,519
<OTHER-EXPENSES> (377)<F3> (162)<F3> (750)<F3>
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 4,030 3,139 11,538
<INCOME-PRETAX> 2,876 2,779 8,507
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 2,876 2,779 8,507
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 2,413<F4> 2,779<F4> 7,587<F4>
<EPS-BASIC> .31 .36 .98
<EPS-DILUTED> .31 .35 .98
<FN>
<F1> AS A REIT WE DO HAVE A CLASSIFIED BALANCE SHEET
<F2> AS A REIT WE DO HAVE A CLASSIFIED BALANCE SHEET
<F3> INTEREST INCOME AND LOSS ON DISPOSAL OF ASSETS
<F4> NET INCOME AFTER PREFERRED DIVIDENDS
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 AND CONSOLIDATED
STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 DEC-31-1999
<PERIOD-END> SEP-30-1998 DEC-31-1999
<CASH> 0 1,891
<SECURITIES> 0 0
<RECEIVABLES> 0 1,030
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0<F1>
<PP&E> 0 349,195
<DEPRECIATION> 0 25,695
<TOTAL-ASSETS> 0 411,981
<CURRENT-LIABILITIES> 0 15,190<F2>
<BONDS> 0 210,634
0 0
0 0
<COMMON> 0 76
<OTHER-SE> 0 109,571
<TOTAL-LIABILITY-AND-EQUITY> 0 109,647
<SALES> 0 0
<TOTAL-REVENUES> 31,407 0
<CGS> 0 0
<TOTAL-COSTS> 11,126 0
<OTHER-EXPENSES> 18<F3> 0<F3>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,061 0
<INCOME-PRETAX> 8,499 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 8,499 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 8,499<F4> 0<F4>
<EPS-BASIC> 1.11 0
<EPS-DILUTED> 1.08 0
<FN>
<F1>AS A REIT WE DO HAVE A CLASSIFIED BALANCE SHEET
<F2>AS A REIT WE DO HAVE A CLASSIFIED BALANCE SHEET
<F3>INTEREST INCOME AND LOSS ON DISPOSAL OF ASSETS
<F4>NET INCOME AFTER PREFERRED DIVIDENDS
</FN>
</TABLE>
