<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 June 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 August 13, 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 JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998................. 3
Consolidated Statements of Income for the Three Months Ended June 30, 1999 and 1998.... 4
Consolidated Statements of Income for the Six Months Ended June 30, 1999 and 1998...... 5
Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 1998 6
and the Three Months Ended June 30, 1999...............................................
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 7
Notes to Consolidated Financial Statements............................................. 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 26
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.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-----------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Property and equipment:
Land............................................................... $ 52,799 $ 55,462
Golf course improvements........................................... 179,533 171,348
Buildings.......................................................... 78,284 77,629
Furniture, fixtures, and equipment................................. 50,200 44,756
------------ -------------
Total property and equipment......................................... 360,816 349,195
Less accumulated depreciation...................................... 33,662 25,695
------------ -------------
Property and equipment, net.......................................... 330,681 323,500
------------ -------------
Mortgage notes receivable............................................ 72,850 72,252
Cash and cash equivalents ........................................... 2,500 1,891
Receivable from affiliates (Note 8).................................. 1,060 1,030
Other assets......................................................... 15,925 13,308
------------ -------------
Total assets......................................................... $ 419,489 $ 411,981
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ................................................................ $ 204,440 $ 210,634
Accounts payable and other liabilities............................... 12,629 15,190
------------ -------------
Total liabilities.................................................... 217,069 225,824
------------ -------------
Commitments
Minority interest.................................................... 74,898 76,510
------------ -------------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, 20,000 -
800,000 shares issued............................................
Common stock, $.01 par value, 90,000,000 shares authorized,
7,730,206 and 7,637,488 shares issued and outstanding,
respectively..................................................... 77 76
Additional paid-in capital....................................... 121,176 120,253
Dividends in excess of accumulated earnings...................... (5,587) (3,958)
Unamortized restricted stock compensation........................ (2,255) (1,533)
Note receivable from stock sale ................................. (3,298) (3,298)
Loans to officers ............................................... (2,591) (1,893)
------------ -------------
Stockholders' equity................................................ 127,522 109,647
------------ -------------
Total liabilities and stockholders' equity.......................... $ 419,489 $ 411,981
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1999 JUNE 30, 1998
--------------------------------------
<S> <C> <C>
REVENUES:
Rent from affiliates (Note 6)....................................$ 3,179 $ 3,152
Rent............................................................. 8,245 5,113
Mortgage interest ............................................... 2,296 2,183
-------- --------
Total revenues..................................................... 13,720 10,448
-------- --------
EXPENSES:
Depreciation and amortization ................................... 3,942 2,452
General and administrative....................................... 1,265 1,304
-------- --------
Total expenses..................................................... 5,207 3,756
-------- --------
Operating income................................................... 8,513 6,692
-------- --------
OTHER INCOME (EXPENSE):
Interest income.................................................. 240 91
Interest expense................................................. (3,830) (2,006)
Loss on sale of assets........................................... - (370)
-------- --------
Total other income (expense)....................................... (3,590) (2,285)
-------- --------
Net income before minority interest................................ 4,923 4,407
Income applicable to minority interest............................. 2,006 1,768
-------- --------
Net income.........................................................$ 2,917 $ 2,639
======== ========
Basic earnings per share...........................................$ 0.38 $ 0.35
======== ========
Weighted average number of shares (basic).......................... 7,728 7,632
======== ========
Diluted earnings per share.........................................$ 0.38 $ 0.33
======== ========
Weighted average number of shares (diluted)........................ 7,764 7,928
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
-----------------------------------
<S> <C> <C>
REVENUES:
Rent from affiliates (Note 6)................................. $ 6,359 $ 6,307
Rent.......................................................... 16,095 8,752
Mortgage interest ............................................ 4,591 4,309
-------- --------
Total revenues.................................................. 27,045 19,368
-------- --------
EXPENSES:
Depreciation and amortization ................................ 7,953 4,273
General and administrative.................................... 2,776 2,460
-------- --------
Total expenses.................................................. 10,729 6,733
-------- --------
Operating income................................................ 16,316 12,635
-------- --------
OTHER INCOME (EXPENSE):
Interest income............................................... 373 163
Interest expense.............................................. (7,508) (2,922)
Loss on sale of assets.......................................... (370) -
-------- --------
Total other income (expense).................................... (7,135) (3,129)
-------- --------
Net income before minority interest............................. 9,181 9,506
Income applicable to minority interest.......................... 3,550 3,786
-------- --------
Net income...................................................... $ 5,631 $ 5,720
======== ========
Basic earnings per share........................................ $ 0.73 $ 0.75
======== ========
Weighted average number of shares (basic)....................... 7,705 7,632
======== ========
Diluted earnings per share...................................... $ 0.73 $ 0.73
======== ========
Weighted average number of shares (diluted)..................... 7,745 7,826
======== ========
</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>
NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
--------------- ------------ PAID-IN RETAINED UNEARNED FROM STOCK LOANS TO STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS COMPENSATION SALE OFFICERS EQUITY
--------------- ------------- ---------- -------- ------------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE at January 1, 1998..... - - 7,611 $ 76 $127,488 $ 1,774 $(1,713) $(3,298) - $124,327
Issuance of restricted stock... - - 21 - (607) - 607 - - -
Issuance of shares of option
exercise and employee stock
purchase plans................ - - 5 - 159 - - - - 159
Amortization of restricted
stock compensation ........... - - - - - - 787 - - 787
Loans to officers.............. - - - - - - - - (1,893) (1,893)
Adjustments for minority
interest in operating
partnership................... - - - - (8,001) - - - - (8,001)
Dividends...................... - - - - - (16,338) - - - (16,338)
Net income..................... - - - - - 10,606 - - - 10,606
----------------------------------------------------------------------------------------------
BALANCE at December 31, 1998... - - 7,637 $ 76 $120,253 $(3,958) $(1,533) $(3,298) $(1,893) $109,647
==============================================================================================
Issuance of preferred stock.... 800 $20,000 - - - - - - - 20,000
Costs of preferred stock
issuance...................... - - - (878) - - - - (878)
Issuance of restricted stock... - - 44 1 1,000 - (1,001) - - -
Amortization of restricted
stock......................... - - - - - - 279 - - 279
Adjustments for minority interest
in operating partnership...... - - (483) - - - - (483)
Conversion of OP Units into
common Stock.................. - - 47 - 1,242 - - - - 1,242
Loans to officers.............. - - - - - - - - (698) (698)
Issuance of shares of employee
stock purchase plan........... - - 2 - 42 - - - - 42
Dividends...................... - - - - - (7,258) - - - (7,258)
Net income..................... - - - - - 5,629 - - - 5,629
----------------------------------------------------------------------------------------------
BALANCE at June 30, 1999....... 800 $20,000 7,730 $ 77 $121,176 $(5,587) $(2,255) $(3,298) $(2,591) $127,522
==============================================================================================
</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>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 5,631 $ 5,720
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................. 7,953 4,265
Loan cost amortization......................................... 421 280
Straight-line interest and rent................................ (640) (664)
Amortization of restricted stock compensation.................. 279 306
Income applicable to minority interest......................... 3,550 3,786
Increase in receivable from affiliates......................... (30) (375)
Increase (decrease) in other assets............................ 221 (4,938)
Increase (decrease) in accounts payable and other liabilities.. (2,561) 2,522
---------- ----------
Net cash provided by operating activities.......................... 14,824 10,902
---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Golf course acquisitions and improvements........................ (12,263) (136,236)
Increase in mortgage notes receivable............................ (104) (3,063)
Cash proceeds from sale of land................................. 975 -
---------- ----------
Net cash used in investing activities.............................. (11,392) (139,299)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings payments on line of credit....................... (1,025) 120,675
Payments on notes and line of credit............................ (5,169) (92)
Loan fees....................................................... (1,399) 5,000
Loans to officers............................................... (648) (765)
Preferred stock proceeds........................................ 20,000
Preferred stock cost............................................ (878)
Redemption of OP Units.......................................... (1,775) 159
Distributions to partners....................................... (4,671) (3,965)
Dividends paid.................................................. (7,258) (6,258)
---------- ----------
Net cash provided by (used in) financing activities............... (2,823) 114,754
---------- ----------
Net increase in cash.............................................. 609 (13,643)
Cash and cash equivalents, beginning of period.................... 1,891 14,968
---------- ----------
Cash and cash equivalents, end of period.......................... $ 2,500 $ 1,325
========== ==========
</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>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period.................................. $ 7,508 $ 2,834
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Property and equipment in accruals or deferred purchases.......... $ - $ 3,992
OP Units issued in golf course acquisitions and financing......... $ 979 $ 9,716
Debt acquired with acquisition ................................... $ - $ 12,927
</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
GENERAL
The accompanying consolidated financial statements included 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 46 golf courses
(the "golf courses"), 42 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 42 courses that we own, 40 are held in fee simple and two are
held pursuant to long-term ground leases. The golf courses are located in
Florida (14), South Carolina (6), Illinois (3.5), Ohio (3), California (2.5),
Michigan (3.5), Georgia (2), Virginia (2), Nebraska (1.5), Missouri (1.5),
Texas (1.5), Alabama, Kansas, Kentucky, North Carolina, and New Mexico. 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
six months ended June 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 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 six month period ended June 30, 1999 and the year ended
December 31, 1998 was approximately $0.5 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 June 30,
1999 and 1998 were 36,000 and 296,000 respectively. The incremental common
shares for the six months ended June 30, 1999 and 1998 were 40,000 and
248,000 respectively. Since the conversion of the preferred shares would be
anti-dilutive, these amounts are not included in the calculation of diluted
shares.
PERCENTAGE RENT AND PARTICIPATING INTEREST
In May 1998, the define 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 applies to all contingent rental income
effective with the second quarter of 1998. On a quarterly basis, there may be
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, the Company 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 two quarters of 1999.
2. ACQUISITIONS AND DISPOSITION
In May 1999, GTA acquired Metamora Golf and Country Club, an 18-hole
upscale golf facility located in Metamora, Michigan for $5.9 million. GTA
leases the golf facility to an affiliate of Total Golf. Total Golf and its
affiliates lease 3.5 courses from GTA, including Mystic Creek Golf Club and
Brentwood Golf & Country Club. As part of the purchase price, 10,172 units of
Series B OP Units valued at $295,000 were issued at the closing of the
acquisition. The newly created Series B OP Units are convertible into OP
Units on a one-for-one basis at the election of the holder. Distributions on
the Series B OP Units are cumulative from the date of original issue 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
July 15, 1999. Such distributions will be in an amount per share equal to the
greater of (i) $0.60 per quarter (or $2.40 per annum) (equal to a annual rate
of 8.25% of the issue price per share) or (ii) the cash distribution paid or
payable on the number of OP Units into which a Series B OP Unit is then
convertible (determined on each of the quarterly distribution payment dates
referred to above). The initial distribution for the quarter in which the
closing occurred was prorated based on the number of days between issuance of
the Series B OP Units and June 30, 1999, the final day of the fiscal quarter.
10
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITIONS AND DISPOSITION (CONTINUED)
On May 1, 1999, Olde Atlanta exercised its lessee performance
option, as permitted by the applicable participating lease. In this "re-cap"
procedure, earnings in excess of the tenant's rental obligations were
capitalized at our forward-looking equity cost of capital. The value of the
OP Unit was $22.19 and the acquisition cap rate was 12.5%. The tenant,
pursuant to the re-cap procedure, increased the collateral supporting its
obligation under the participating lease. The re-cap was calculated pursuant
to our normal underwriting process. Golf Trust of America, L.P. issued 30,826
OP Units valued at $684,000 and paid cash of $293,000, resulting in an
increase in base rent from $891,000 to $1,000,000.
In June 1999, Sandpiper GTA Development, Inc. (a taxable subsidiary
in which GTA holds a 95% economic interest,) sold the 14-acre parcel of land
located across from the Sandpiper Golf Course in Santa Barbara, California
for a total sales price of $5.3 million, which approximates the basis in the
property. The sales price included a $4.2 million note secured by a first
deed of trust on the parcel, which accrues interest at 10% per annum and is
due in one year with two one-year extensions. These extensions require
partial repayment and increase the interest rate to 12% for the third and
final year of the note.
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 six
months ended June 30, 1999, compared to $155,000 and $520,000 for the three
and six months ended June 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.
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 June 30, 1999, and 1998 of $2,056,000 and
$791,000, 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 $16.0 million capital
improvement commitments, approximately $7.0 million has been funded to date.
In limited circumstances, we agree to provide working capital loans to
existing lessees. Working capital loans are evidenced by promissory notes, or
as set forth in the participating lease, and bear interest at fixed rates
between 9.24% and 10.0%. Of our $9.0 million working capital commitments,
approximately $4.8 million has been funded to date. Typically, we require the
lessee to increase the pledged collateral for the funded amounts.
11
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. COMMITMENTS (CONTINUED)
In addition, we are engaged in preliminary negotiations with the lessee
of one of the golf courses 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 certain golf course sellers who have
received OP Units as partial consideration for the acquisition cost of golf
courses, we have agreed to maintain minimum loan balances of approximately
$17.2 million for up to ten years.
5. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------- --------------- --------------
JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1999 1998
-------------------------------------------------------- --------------- --------------
<S> <C> <C>
REVOLVING CREDIT FACILITY
$200.0 million unsecured revolver with weighted $191,900 $125,000
average interest rates of 6.7% maturing April 2002 -
-------------------------------------------------------- --------------- --------------
BRIDGE LOAN
$100.0 million unsecured with weighted average - $ 67,925
interest rates of 6.7% maturing April 1999
-------------------------------------------------------- --------------- --------------
NOTES PAYABLE
Secured financing with net book value of the $ 12,540 $ 17,709
properties of $21.2 million with interest
rates of 8.75% maturing in November 2016
-------------------------------------------------------- --------------- --------------
TOTAL $204,440 $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 June 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 6.7% 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 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 in
the case of the $25 million line of credit.
12
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. DEBT (CONTINUED)
DEBT MATURITIES
Aggregate maturities of long-term debt for each of the five years
following June 30, 1999 are as follows:
<TABLE>
<CAPTION>
------------------- -------------
(In thousands) Amount
<S> <C>
1999(6 months) $ 157
2000 $ 335
2001 $ 365
2002 $192,298
2003 $ 435
2004 $ 474
Thereafter $ 10,376
------------------- -------------
</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 June 30, 1999). We are exposed to credit loss in the event of
nonperformance by Bank of America.
13
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO 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 initial dividend for
the quarter was prorated and paid on July 15, 1999 based on the number of
days between April 2, 1999 and June 30, 1999, the final day of the fiscal
quarter.
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 (which reflects a 20%
conversion premium at the time of closing). The newly created Series B OP
Units are convertible into OP Units on a one-for-one basis 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.
14
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO 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 this 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 $8,000 for
1999 compared to $10,000 in 1998.
RESTRICTED STOCK
For the six months ended June 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
June 30, 1999 and 1998, respectively, and $273,000 and $305,000 for the six
months ended June 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 in
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; and (2) to finance an
executive officer's payment of the exercise price of options to purchase
common shares granted to such employees under GTA's option plans; or (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 June 30,
1999, GTA had made loans in the amount of $2,600,000 and had an undisbursed
remaining commitment of $900,000.
15
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. 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 eight
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.
The following table sets forth certain combined condensed financial
information for Legends Golf.
<TABLE>
<CAPTION>
June 30, December 31,
(IN THOUSANDS) 1999 1998
-------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Current assets $ 7,856 $ 2,978
Non-current assets 15,648 20,650
------ --------
Total assets $ 23,504 $ 23,628
======== ========
Payable to Golf Trust of America, L.P. $ 1,060 $ 1,030
Other current liabilities 886 1,340
Total long-term liabilities 18,745 20,916
Total owners' equity 2,813 342
------- --------
Total liabilities and owners' equity $ 23,504 $ 23,628
========= ========
For the three months
ended June 30,
---------------------
(IN THOUSANDS) 1999 1998
---------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
Total Revenues $ 7,859 $ 7,908
Operating Income $ 743 $ 516
Net Income $ 2,016 $ 1,815
</TABLE>
Total revenues from golf course operations for Legends Golf remained the
same for the three months ended June 30, 1999, compared to the three months
ended June 30, 1999. Increases in revenues in Myrtle Beach were offset by
decreases in the revenues in Virginia. Total rounds played decreased by
approximately 5.1% from the same period in 1998.
Operating income increased by $0.2 million to $0.7 million for the three
months ended June 30, 1999 compared to $0.5 million for the corresponding
period in 1998. The increase is primarily due to a decrease in maintenance
and administrative expenses. Net income was $2.0 million for the three months
ended June 30, 1999 compared to $1.8 million for the three months ended June
30, 1998, primarily due to the increased operating income net of a reduction
of the equity in earnings of Golf Trust of America, L.P.
16
<PAGE>
GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE (CONTINUED)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
(IN THOUSANDS) 1999 1998
---------------------------------------------------------------------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Total Revenues $ 13,610 $ 13,207
Operating Loss $ (280) $ (654)
Net Income $ 2,140 $ 2,094
</TABLE>
Total revenue from golf course operations for Legends Golf increased by
$0.4 million to $13.6 million from $13.2 million for the six months ended
June 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.
Operating loss decreased by $0.4 million to $0.3 million for the six
month ended June 30, 1999 compared to $.7 million for the corresponding
period in 1998. The decrease was primarily the result of the increase in
revenues. Net income was $2.1 million for the six months ended June 30, 1998
compared to $2.0 million for the six months ended June 30, 1998, primarily due
to the reduction in operating loss net of the reduction in the equity in
earnings of Golf Trust of America, LP.
Effective July 1, 1999, Larry D. Young, a director of GTA, acquired the
stock of the lessee of the Bonaventure courses. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Lessee
Results of Operations - Bonaventure Restructuring."
9. SUBSEQUENT EVENTS
PAYMENT OF DIVIDENDS
On June 14, 1999, the Board of Directors declared a quarterly dividend
distribution of $0.44 per common share for the quarter ended June 30, 1999,
to stockholders of record on June 30, 1999, which was paid on July 15, 1999.
Also, on July 15, 1999, the Series A Preferred Stock, and Series B OP Unit
holders were paid partial period dividends of $0.572 per share and
distributions of $0.336 per unit, respectively. These amounts were funded
primarily from an advance on our Credit Facility.
ACQUISITION OF THE PETE DYE GOLF CLUB
On July 27, 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
$1,350,000. 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). 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
$1,350,000 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.
17
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 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 59.5% interest
through our two wholly owned subsidiaries, one of which is the general
partner. Larry D. Young, a director of GTA, along with his affiliates own
28.7% of the operating partnership and are a significant lessee. The remaining
interest in the operating partnership is held by operators of the golf
courses, their affiliates and officers of GTA.
"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; a potential
paper-clip structure; 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 on a
one-for-one basis. 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.
ACQUISITIONS AND DISPOSITION
In May 1999, GTA acquired Metamora Golf and Country Club, an 18-hole
upscale golf facility located in Metamora, Michigan for $5.9 million. GTA
leases the golf facility to an affiliate of Total Golf. Total Golf and its
affiliates lease 3.5 courses from GTA, including Mystic Creek Golf Club and
Brentwood Golf & Country Club. As part of the purchase price at closing,
10,172 Series B OP Units valued at $295,000 were issued. The newly created
Series B OP Units are convertible into common OP Units on a one-for-one basis
at the election of the holder. Distributions on the Series B 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 July 15, 1999. Such
distributions will be in an amount per unit equal to the greater of (i) $0.60
per quarter (or $2.40 per annum) (equal to an annual rate of 8.25% of the
issue price per share) or (ii) the cash distribution paid or payable on the
number of common OP Units into which a Series B OP Unit is then convertible
(determined on each of the quarterly distribution payment dates referred to
above).
18
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
ACQUISITIONS AND DISPOSITION (CONTINUED)
On July 27, 1999, GTA closed its acquisition of 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 included the issuance at closing of preferred OP Units valued
at approximately $1,350,000. 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%. 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 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 $1,350,000 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.
In June 1999, Sandpiper GTA Development, Inc. sold the undeveloped
14-acre parcel of land located across from the Sandpiper Golf Course in Santa
Barbara, California for $5.3 million, which approximates the basis in the
property. The sales price includes a $4.2 million note secured by a first
deed of trust on the parcel, and the note accrues interest at 10% per annum
and is due one year from closing with two one-year extensions. These
extensions require partial repayment and increase the interest rate to 12%
per annum for the third and final year of the note.
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.
19
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
For the three months ended June 30, 1999 and 1998, GTA received
$13,720,000 and $10,448,000, 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 $397,000, (2) a
full quarter of operations for 1999 for 1998 acquisitions resulting in
$2,819,000 in additional rental revenue, (3) rent from new course
acquisitions of $98,000, (4) $113,000 of additional interest from the
mortgage note receivable reflecting increased principal outstanding and
minimum increases under the mortgage note, and (5) the decrease in
participating rent of $155,000.
Expenses totaling $5,207,000 and $3,756,000 for the three months ended
June 30, 1999 and 1998, respectively, reflect depreciation and amortization
and general and administrative expenses. The increase reflects additional
depreciation of $1,490,000 for the 1998 acquisitions. Interest expense was
$3,830,000 for the three months ended June 30, 1999, compared to $2,006,000
for the three months ended June 30, 1998, due to the increased leverage
required to fund over $200 million in acquisitions for 1998.
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.
For the three months ended June 30, 1999 and 1998, net income was
$2,917,000 and $2,639,000, respectively. The increase in net income is
primarily the result of the loss from the sale of assets of $370,000
incurred in 1998 and for which no corresponding loss was incurred in 1999.
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
For the six months ended June 30, 1999 and 1998, respectively, GTA
received $27,045,000 and $19,368,000 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 $559,000, (ii)
rent of $7,357,000 from new course acquisitions and expansions, (iii)
$281,000 in interest from the mortgage note receivable, as a result of future
advances, which was issued on June 20, 1997, and (iv) a $520,000 decrease in
participating rent, which, as discussed above in Note 1 to the Consolidated
Financial Statements, reflects primarily a change in accounting treatment for
contingent rents.
Expenses totaled $10,729,000 and $6,733,00 for the six months ended June
30, 1999 and 1998, respectively, and reflect depreciation, amortization,
general and administrative expenses. The increase reflects (i) additional
depreciation of $3,680,000 for the acquisitions made after June 30, 1998, and
(ii) additional general and administrative costs of $316,000.
Additional interest expense of $4,586,000 results from the acquisitions
made during 1998 and which were either partially included in the first six
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 six months ended June 30, 1999 and 1998, was
$5,631,000 and $5,720,000, respectively.
20
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
LESSEE RESULTS OF OPERATIONS
OSAGE REDEMPTION OF UNPLEDGED OP UNITS
On March 19, 1999, we declared an event of default under the Osage
National Golf Club Lease for, among other reasons, tenant's failure to timely
pay rent. GTA, the prior owner and tenant agreed to address the default as
follows: (i) GTA redeemed certain unpledged OP Units owned by the prior owner
to bring rent and other sums due under the lease current; (ii) the prior
owner entered into a redemption agreement for all OP Units pledged as
collateral under the participating lease; (the redemption agreement is being
held in escrow and will be released from escrow and the pledged OP Units
redeemed as a termination payment in the event that another default occurs
under the participating lease before June 30, 2001); (iii) we obtained
greater control of operating accounts at the course and the tenant agreed to
fund an operating shortfall reserve account from excess cash flow up to a
maximum amount of $500,000 for the remaining term of the participating lease;
and (iv) we consented to a management agreement between the tenant and
Granite Golf Management, Inc. who will now manage the golf course.
On June 30, 1999, the parties entered into a Settlement Agreement and
First Amendment to Lease, along with several other related documents,
evidencing the foregoing. As a part of the transaction, we neither released
nor redeemed any collateral securing the participating lease, and we believe
we strengthened our collateral position by obtaining the right to promptly
redeem the existing pledged collateral as a termination payment in the event
of another default. Additionally, the terms of the participating lease were
not changed in any material way except for the inclusion of the operating
shortfall reserve account to be funded by the tenant. The operating results
of the golf course are generally consistent with management's expectations
and underwriting criteria.
BONAVENTURE LESSEE
Effective July 1, 1999, an affiliate of The Legends Group acquired the
outstanding stock of Emerald Dunes - Bonaventure, Inc., the lessee at
Bonaventure. The $181,000 funding still available under GTA's capital
improvement commitment to Bonaventure was converted to a working capital
reserve. There has been no reduction in payment terms under the participating
lease, however, we are considering modifying the participating lease to allow
the new lessee additional capital improvement and working capital funding to
facilitate the continued repositioning and improvement of the facility. 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 DEFAULT
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 in part caused by corporate level
reorganizational measures undertaken by Granite Golf. GTA and the Granite
tenants have agreed to (i) permit us to redeem all of the OP Units and GTA
common shares pledged to us, and apply the same against past due obligations
and retain any balance, and (ii) permit us to terminate the participating
leases with the Granite tenants as a result of such defaults, subject to
permitting Granite the right to consult with GTA in the management of the
courses for a limited period which will help facilitate the orderly
transition of the course operations. We anticipate entering into new
participating leases with respect to the courses and have commenced
discussions to seek to re-let such courses. We do not believe the
participating leases will need to be restructured in any material manner, and
we believe the revenues and expenses of the courses, in the aggregate, is
consistent with our expectations and underwriting criteria.
21
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
Cash flow from operating activities for the six months ended June 30,
1999 and 1998 was $14,824,000 and $10,902,000, 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 $12,263,000 for the first six 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
for $5.0 million, the cash portion of the Olde Atlanta re-cap of $293,000,
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 $3,063,000 and the cash portion of our golf
course acquisitions of $136,236,000 for the first six months of 1998. During
the first two quarters of 1998, we acquired 13 courses for a total investment
of $155,400,000, including $12,927,000 of assumed indebtedness and $9,716,000
in the issuance of OP Units. During the first six months of 1999, our
financing activities netted to $609,000. As previously mentioned on April 2,
1999, we sold 800,000 preferred shares for gross proceeds of $20,000,000 net
of associated costs of $878,000. With the proceeds we paid down $1,025,000
under the Credit Facility, repaid notes of $5,169,000, paid loan costs
associated with the amendment and restatement of the Credit Facility of
$1,399,000, made new officer loans of $648,000 and paid dividends and partner
distributions of $11,929,000 for the six months ended June 30, 1999. This
compares to $14,754,000 of financing activities for 1998, including net
borrowings of $125,675,000, less payment of dividends and partner
distributions of $10,223,000 for the six months ended June 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 June 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 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 in
the case of the $25 million line of credit. Currently, there are $700,000 of
borrowings outstanding under such facility.
In connection with the issuance of OP Units, we have agreed to maintain
a minimum loan balance of approximately $17.2 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.
22
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 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. Except as
described below, we currently have no binding agreement to acquire any
additional golf courses. We are currently in active negotiations regarding
the acquisition of additional golf courses.
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
June 30, 1999 and 1998 was $1,400,000 and $790,000, 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 $16.0 million capital
improvement commitments, approximately $7.0 million has been funded as of
June 30, 1999.
In limited circumstances we agree to provide working capital loans to
existing lessees. Working capital loans are evidenced by promissory notes or
as set forth in the applicable participating lease, require appropriate
collateral and bear interest at fixed rates between 9.0% and 10.0% per annum.
Of our $9.0 million working capital commitments, approximately $4.8 million
has been funded to date.
In addition, we are engaged in preliminary negotiations with a lessee of
one of the golf courses to increase the aggregate amount of the capital
improvement and working capital loan from $11.0 million to up to $22.0
million. Working capital loans are evidenced by promissory notes or as set
forth in the participating lease.
In the normal course of business, we enter into commitments and letters
of intent to acquire golf courses and related facilities. We are in various
stages of negotiation and due diligence review for each of these
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 we will continue to pursue or
complete the acquisition of any of these golf course acquisitions.
23
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING COMPANY
We, like many other REITs which are prohibited by tax laws from
operating their properties, are exploring the possibility of creating an
operating company, often called a "paper-clip" company. Such a structure
permits a REIT to form a new company, generally a public company, and
dividend shares in such company to its shareholders. The shares can then be
traded together, although there is no requirement that they do so. In our
case, any such new operating company would enter into leases with the REIT to
operate some or all of our golf courses.
The purpose of such a structure is generally twofold. First, it
minimizes any perceived conflict of interest between the operators of the
golf courses and the REIT, because the shareholders of each are generally the
same parties. Second, it permits shareholders to participate in the net
operating income at the golf course level.
For our purposes, we do not view such a structure as a material
departure from the business plan we have pursued from our inception. In
particular, even if we were to implement such a structure, we would still
actively target acquiring golf courses from experienced operators and lease
the courses back to such operators independent of the operating company. We
believe that such a structure would, however, permit us to more effectively
acquire and operate golf courses which today are leased to third parties
unaffiliated with the prior owner and to otherwise expand our platform for
golf course acquisitions.
Our analysis of the foregoing structure is preliminary at this time and
there are no assurances that we will undertake the implementation of the same
or that it would be advisable to do so.
24
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 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 June 30, 1999 and 1998 presented
on a historical basis are summarized in the following table:
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1998
--------------------------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Income before minority interest....................... $4,923 $ 4,442
Depreciation and amortization for real estate assets.. 3,942 2,452
Loss on sale of assets................................ - 370
Preferred Dividends................................... (458) -
Preferred Distributions............................... ( 3) -
--------------------------------
Funds from Operations................................. 8,404 7,244
Adjustments:
Non-cash mortgage interest and rent................. (321) (332)
Capital expenditure reserve......................... (601) (155)
--------------------------------
Cash Available for Distribution....................... 7,482 6,757
================================
</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.
25
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
TERMS OF SERIES A PREFERRED SECURITIES
On April 2, 1999, we completed a public offering of 800,000 shares of
GTA's 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, as and 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 a 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 initial dividend for
the quarter in which the closing of the offering occurred was prorated based
on the number of days between issuance of the shares and the final day of the
fiscal quarter.
The Series A Preferred Stock is convertible, in whole or in part, at the
option of the holder at any time, unless previously redeemed, into Common
Stock at a conversion price of $26.25 per Common Share (equivalent to an
initial conversion rate of approximately 0.95238 Common Share per Series A
Preferred Share), subject to adjustment in certain circumstances.
Except in certain circumstances relating to preservation of GTA's status
as a real estate investment trust ("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. The offering of the Series A Preferred Stock was made pursuant
to a Prospectus Supplement dated April 2, 1999 relating to the Prospectus
dated June 5, 1998, which is a part of GTA's registration statement on Form
S-3 (File No. 333-56251).
TERMS OF 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. GTA
leases the golf facility to an affiliate of Total Golf. Total Golf and its
affiliates lease 3.5 courses from GTA, including Mystic Creek Golf Club and
Brentwood Golf & Country Club. As part of the purchase price at the closing,
10,172 Series B Preferred OP Units valued at $295,000 were issued at $29.00
per Unit, which reflects a 20% conversion premium at the time of closing. The
newly created Series B Preferred OP Units are convertible into common OP
Units on a one-for-one basis at the election of the holder. These perpetual
preferred units pay a dividend of 8.25%.
26
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
ITEM 2. CHANGES IN SECURITIES
TERMS OF SERIES C OP PREFERRED UNITS
On July 27, 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 included the issuance at closing of OP Units valued at approximately
$1,350,000. The OP Units were issued in the form of Series C convertible
preferred OP Units which have a conversion price of $27.58 per share and have
a preferred return of 8.91%.
ADOPTION OF SHAREHOLDER RIGHTS PLAN
On August 6, 1999, the Board of Directors of Golf Trust of America, Inc.
declared a dividend distribution of one preferred stock purchase right
("Right") for each outstanding share of Common Stock to stockholders of
record at the close of business on September 6, 1999 (the "Record Date").
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series B Junior Participating Preferred Stock,
par value $0.01 per share (the "Preferred Stock"), at a purchase price of
$75.00, subject to adjustment. The Agreement (the "Rights Agreement") between
the Company and the rights agent thereunder. Upon execution of the definitive
agreement, the Company will file a current report on Form 8-K more fully
describing the terms of the Rights.
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.
27
<PAGE>
GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1999
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 June 30, 1999 (and are numbered in
accordance with Item 601 of Regulation S-K). Items marked with an asterisk
(*) are filed herewith.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------------------------
<S> <C>
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 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).
10.1* Designation of Series B Preferred OP Units of Golf Trust of
America, L.P. dated May 11, 1999 (which designation has been
entered as Exhibit D3 to the First Amended and Restated
Agreement of Limited Partnership of Golf Trust of America,
L.P., dated February 12, 1997, as amended February 1, 1998
(the "Partnership Agreement").
10.2* Designation of Series C Preferred OP Units of Golf Trust of
America, L.P. dated July 28, 1999 (which designation has been
entered as Exhibit D4 to the Partnership Agreement).
27.1* Financial Data Schedule
</TABLE>
28
<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 8/13/99
- ------------------------------------------ ----------------
W. Bradley Blair, II Date
President, Chief Executive Officer and
Chairman of the Board of Directors
/S/ SCOTT D. PETERS 8/13/99
- ------------------------------------------ ----------------
Scott D. Peters Date
Senior Vice President and
Chief Financial Officer
29
<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.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------------------------
<S> <C>
3.1 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 (incorporated by reference to Exhibit 3.1 of the
Company's Current Report on Form 8-K dated April 2, 1999 and
filed by the Company on April 13, 1999).
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 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).
10.1* Designation of Series B Preferred OP Units of Golf Trust of
America, L.P. dated May 11, 1999 (which designation has been
entered as Exhibit D3 to the First Amended and Restated
Agreement of Limited Partnership of Golf Trust of America,
L.P., dated February 12, 1997, as amended February 1, 1998
(the "Partnership Agreement").
10.2* Designation of Series C Preferred OP Units of Golf Trust of
America, L.P. dated July 28, 1999 (which designation has
been entered as Exhibit D4 to the Partnership Agreement).
27.1* Financial Data Schedule
</TABLE>
30
<PAGE>
[EXPLANATORY NOTE: The following Articles of Designation have been added to
Exhibit D to the Partnership Agreement by GTA GP, Inc., as general partner,
pursuant to the First Amendment to the Partnership Agreement, dated February
1, 1998, which is filed as Exhibit 10.1.2 to the Company's Form 10-K filed
March 31, 1998.]
GOLF TRUST OF AMERICA, L.P.
ARTICLES OF DESIGNATION
CLASSIFYING AND DESIGNATING 10,169 UNITS OF
8.29% SERIES B LIMITED PARTNERSHIP INTEREST
MAY 11, 1999
SECTION 1. NUMBER OF UNITS AND DESIGNATION. This series of preferred
partnership interest shall be designated as the 8.29% Series B Preferred
Partnership Interest (the "Series B Preferred Units") and the number of units
of 8.29% Series B Preferred Partnership Interest which shall initially
constitute such series shall be 10,169 units.
SECTION 2. DEFINITIONS. For purposes of the Series B Preferred Units,
the following terms shall have the meanings indicated:
"AMEX" shall mean the American Stock Exchange.
"Asset Disposition" shall mean a sale, transfer or capital lease (as
determined in accordance with GAAP) of all or substantially all of the assets of
the Partnership to a Person that is not an affiliate of the Corporation or the
Operating Partnership.
"Articles of Designation" shall mean these provisions in EXHIBIT D to
the Partnership Agreement recording the preferences, conversion and other
rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms and conditions of redemption and other terms and
conditions of the Series B Preferred Units.
"Board of Directors" shall mean the Board of Directors of the General
Partner or any committee authorized by such Board of Directors to perform any of
its responsibilities with respect to the Series B Preferred Units.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
"Common Share" shall mean one share of the common stock of GTA.
"Common Units" shall mean the common units of limited partnership
interest in the Partnership.
"Constituent Person" shall have the meaning set forth in paragraph (e)
of Section 7
Exhibit D - Series B Preferred Page 1
<PAGE>
hereof.
"Conversion Price" shall mean the conversion price per Common Share
for which each Series B Preferred Unit is convertible. The initial conversion
price shall be $29.01 (equivalent to a conversion rate of 1.0 Common Units
for each Series B Preferred Unit).
"Corporation" means Golf Trust of America, Inc., a Maryland
Corporation.
"Current Market Price" shall mean, on any date specified herein, the
average of the Market Price during the period of the most recent twenty
consecutive trading days ending on such date.
"Distribution Payment Date" shall mean, with respect to each
Distribution Period, the 15th calendar day of January, April, July and
October, in each year, commencing on July 15, 1999; provided, however, that
if any Distribution Payment Date falls on any day other than a Business Day,
the distribution payment due on such Distribution Payment Date shall be paid
on the first Business Day immediately following such Distribution Payment
Date.
"Distribution Periods" shall mean quarterly distribution periods
commencing on January 1, April 1, July 1 and October 1 of each year and
ending on and including the day preceding the first day of the next
succeeding Distribution Period (other than the initial Distribution Period,
which shall commence on the Issue Date and end on and include June 30, 1999).
"GAAP" shall mean generally acceptable accounting practices,
consistently applied.
"Issue Date" shall mean the first date on which any Series B
Preferred Units are issued and sold.
"Junior Units" shall have the meaning set forth in paragraph (c) of
Section 9 hereof.
"Liquidation" shall mean a liquidation, dissolution or winding up of
the Corporation or the Partnership, whether voluntary or involuntary.
"Liquidation Event" shall mean (A) a Liquidation, or (B) an Asset
Disposition.
"Liquidation Preference" shall have the meaning set forth in
paragraph (a) of Section 4 hereof.
"Market Price" shall mean, with respect to the Common Shares on any
date, the last reported sales price, regular way on such day, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the American Stock Exchange ("AMEX") or, if the
Common Shares are not listed or admitted for trading on AMEX, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Shares are listed or admitted for trading or, if the Common Shares are
not listed or admitted for trading on any national securities exchange, the
last quoted
Exhibit D - Series B Preferred Page 2
<PAGE>
price, or if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the NASD Automated Quotation
System or, if such system is no longer in use, the principal other automated
quotation system that may then be in use, or if the Common Shares are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker regularly making a market
in the Common Shares selected for such purpose by the Board of Directors or,
if there is no such professional market maker, such amount as an independent
investment banking firm selected by the Board of Directors determines to be
the value of a Common Share.
"Partnership" shall mean Golf Trust of America, L.P., a Delaware
limited partnership.
"Partnership Agreement" shall mean the First Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, dated February
12, 1997, as amended.
"Parity Units" shall have the meaning set forth in paragraph (b) of
Section 9 hereof.
"Person" shall mean any individual, firm, partnership, Corporation,
limited liability company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Preferred Units" shall mean the Series B Preferred Units of limited
partnership interest in the Partnership in number and with rights and
preferences identical to the Series B Preferred Units.
"Senior Units" shall have the meaning set forth in paragraph (a) of
Section 9 hereof.
"Series B Preferred Unit" shall have the meaning set forth in
Section 1 hereof.
"Set apart for payment" shall be deemed to include, without any
action other than the following, the recording by the Partnership in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of a distribution or other distribution by the
Board of Directors, the allocation of funds to be so paid on any series or
class of units of partnership interest of the Partnership; PROVIDED, HOWEVER,
that if any funds for any class or series of Junior Units or any class or
series of Parity Units are placed in a separate account of the Partnership or
delivered to a disbursing, paying or other similar agent, then "set apart for
payment" with respect to the Series B Preferred Units shall mean placing such
funds in a separate account or delivering such funds to a disbursing, paying
or other similar agent.
"Trading Day" shall mean any day on which the securities in question
are traded on the AMEX, or if such securities are not listed or admitted for
trading on the AMEX, on the principal national securities exchange on which
such securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on the Nasdaq National Market,
or if such securities are not quoted on such Nasdaq National Market, in the
applicable securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in paragraph (e) of
Section 7 hereof.
Exhibit D - Series B Preferred Page 3
<PAGE>
SECTION 3. DISTRIBUTIONS.
(a) The holders of the Series B Preferred Units shall be entitled
to receive, when, as and if authorized and declared by the General Partner
out of funds legally available for that purpose, distributions payable in
cash at the rate per annum equal to the greater of (i) $2.40 per Series B
Preferred Unit or (ii) an amount per Series B Preferred Unit equal to the
aggregate annual amount of cash distributions paid or payable, if any, with
respect to that number of Common Units, or portion thereof, into which each
Series B Preferred Unit is then convertible, in accordance with the terms of
these Articles of Designation (such greater amount, the "Annual Distribution
Rate"). The amount referred in clause (ii) of this subparagraph (a) with
respect to each Distribution Period shall be determined as of the applicable
Distribution Payment Date by multiplying the number of Common Units, or
portion thereof calculated to the fourth decimal point, into which a Series B
Preferred Unit would be convertible at the opening of business on such
Distribution Payment Date (based on the Conversion Price then in effect) by
the quarterly cash distribution payable or paid for such Distribution Period
in respect of a Common Unit outstanding as of the record date for the payment
of distributions on the Common Units with respect to such Distribution Period
and multiplying such product by four. Such distributions shall be cumulative
from the Issue Date, whether or not in any Distribution Period or Periods
there shall be funds of the Partnership legally available for the payment of
such distributions and shall be payable quarterly, when, as and if authorized
and declared by the Board of Directors, in arrears on Distribution Payment
Dates, commencing on the first Distribution Payment Date after the Issue
Date. Each such distribution shall be payable in arrears to the holders of
record of the Series B Preferred Units, as they appear on the records of the
Partnership at the close of business on each record date which shall not be
more than 30 days preceding the applicable Distribution Payment Date (the
"Distribution Payment Record Date"), as shall be fixed by the Board of
Directors. Accrued and unpaid distributions for any past Distribution Periods
may be authorized and declared and paid at any time, without reference to any
regular Distribution Payment Date, to holders of record on such date, which
shall not be more than 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors. The amount of accrued and unpaid
distributions on any Series B Preferred Unit at any date shall be the amount
of any distributions accumulated to and including such date, whether or not
earned or declared, which have not been paid in cash or set aside for
payment. Accumulated and unpaid distributions will not bear interest.
(b) The amount of distributions payable for each full Distribution
Period for the Series B Preferred Units shall be computed by dividing the
Annual Distribution Rate by four. The amount of distributions payable for the
initial Distribution Period, or any other period shorter or longer than a
full Distribution Period, on the Series B Preferred Units shall be computed
on the basis of twelve 30-day months and a 360-day year. Holders of Series B
Preferred Units shall not be entitled to any distributions, whether payable
in cash, property or stock, in excess of cumulative distributions, as herein
provided, on the Series B Preferred Units, plus any other amounts provided in
these Articles of Designation.
So long as any Series B Preferred Units are outstanding, no
distributions, except as described in the immediately following sentence,
shall be authorized and declared or
Exhibit D - Series B Preferred Page 4
<PAGE>
paid or set apart for payment on any series or class or classes of Parity
Units for any period unless full cumulative distributions have been or
contemporaneously are authorized and declared and paid or authorized and
declared and a sum sufficient for the payment thereof set apart for such
payment on the Series B Preferred Units for all Distribution Periods
terminating on or prior to the distribution payment date for such class or
series of Parity Units. When distributions are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, all distributions
authorized and declared upon Series B Preferred Units and all distributions
authorized and declared upon any other series or class or classes of Parity
Units shall be authorized and declared ratably in proportion to the
respective amounts of distributions accumulated and unpaid on the Series B
Preferred Units and such Parity Units.
(c) So long as any Series B Preferred Units are outstanding, no
distributions (other than distributions or distributions paid solely in Units
of, or options, warrants or rights to subscribe for or purchase Units of,
Junior Units) shall be authorized and declared or paid or set apart for
payment or other distribution authorized and declared or made upon Junior
Units, nor shall any Junior Units be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Common
Units made in connection with an employee incentive or benefit plan of GTA or
any subsidiary or pursuant to the Redemption Right referred to in Section
8.05 of the Partnership Agreement), for any consideration (or any moneys to
be paid to or made available for a sinking fund for the redemption of any
such Units by the Partnership, directly or indirectly (except by conversion
into or exchange for Junior Units), unless in each case (i) the full
cumulative distributions on all outstanding Series B Preferred Units and any
other Parity Units of the Partnership shall have been paid or set apart for
payment for all past Distribution Periods with respect to the Series B
Preferred Units and all past distribution periods with respect to such Parity
Units and (ii) sufficient funds shall have been paid or set apart for the
payment of the distribution for the current Distribution Period with respect
to the Series B Preferred Units and any Parity Units.
(d) Any distribution payment made on the Series B Preferred Units
shall first be credited against the earliest accrued but unpaid distribution
due with respect to such Units which remains payable.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any Liquidation Event, before any payment or
distribution of the assets of the Partnership (whether capital or surplus)
shall be made to or set apart for the holders of Junior Units, the holders of
Series B Preferred Units shall be entitled to receive a liquidation
preference which is an amount equal to the greater of (i) Twenty-Nine Dollars
and One Cent ($29.01) per Series B Preferred Unit plus distributions (whether
or not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holder (the "Liquidation Preference") or (ii) an amount
per Series B Preferred Unit equal to the amount which would have been payable
on the Common Units, or portion thereof, into which one Series B Preferred
Unit is then convertible had each Series B Preferred Unit been converted into
Common Units immediately prior to such Liquidation Event. The foregoing
amounts shall be subject to equitable adjustment whenever there shall occur a
stock distribution, stock split,
Exhibit D - Series B Preferred Page 5
<PAGE>
combination, reorganization, recapitalization, reclassification or other
similar event involving a change in the capital structure of the Series B
Preferred Units. Until the holders of the Series B Preferred Units have been
paid in full the amounts owed pursuant to this Section 4(a), no payment will
be made to any holder of Junior Units upon a Liquidation Event. If, upon any
such Liquidation Event, the assets of the Partnership, or proceeds thereof,
distributable among the holders of Series B Preferred Units shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other Units of any class or series of Parity Units, then such
assets, or the proceeds thereof, shall be distributed among the holders of
such Series B Preferred Units and such other Parity Units ratably in
accordance with the amounts that would be payable on such Series B Preferred
Units and such other Parity Units if all amounts payable thereon were paid in
full.
(b) Subject to the rights of the holders of any Parity Units, upon
any Liquidation Event of the Partnership, after payment shall have been made
in full to the holders of Series B Preferred Units and any Parity Units, as
provided in this Section 4, any other series or class or classes of Junior
Units shall, subject to the respective terms thereof, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of
the Series B Preferred Units and any Parity Units shall not be entitled to
share therein.
SECTION 5. MANDATORY REDEMPTION. Upon the occurrence of a Liquidation,
the Partnership will automatically redeem for cash all, and not less than
all, of the outstanding shares of Series B Preferred Units at a price per
Series B Preferred Unit equal to the Liquidation Preference. In order to
effect the mandatory redemption, the Partnership will deliver written notice
to all holders of Series B Preferred Units (the "Mandatory Redemption
Notice"), such notice not be delivered later than 60 days prior to the
Liquidation, setting forth the date of the intended redemption and the
Liquidation Preference amount.
SECTION 6. REACQUIRED UNITS TO BE RETIRED. All Series B Preferred Units
which shall have been issued and reacquired in any manner by the Partnership
(including any Series B Preferred Units surrendered upon conversion as
described in Section 7) shall be retired and cancelled.
SECTION 7. CONVERSION. Holders of Series B Preferred Units shall have
the right to convert all or a portion of such shares into Common Units, as
follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of Series B Preferred Units shall have the right, at such
holder's option, at any time and from time to time, to convert such shares
into the number of fully paid and non-assessable Common Units obtained by
dividing the aggregate Liquidation Preference (excluding, for this purpose
only, any dividends accrued in respect of the then-current Distribution
Period) of such Series B Preferred Units by the Conversion Price (as in
effect at the time and on the date provided for in the last paragraph of
paragraph (b) of this Section 7) by surrendering such Series B Preferred
Units to be converted, such surrender to be made in the manner provided in
paragraph (b) of this Section 7; provided, however, that the right to convert
Series B Preferred
Exhibit D - Series B Preferred Page 6
<PAGE>
Units called for redemption pursuant to Section 5 hereof shall terminate at
the close of business on the Redemption Date fixed for such redemption,
unless the Partnership shall default in making payment of any cash payable
upon such redemption under Section 5 hereof.
(b) In order to exercise the conversion right, the holder of each
Series B Preferred Unit to be converted shall provide written notice to the
Partnership that the holder thereof elects to convert such Series B Preferred
Units. Unless the Common Units issuable on conversion are to be issued in the
same name as the name in which such Series B Preferred Units are registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Partnership, duly executed by the
holder or such holder's duly authorized attorney and an amount sufficient to
pay any transfer or similar tax (or evidence reasonably satisfactory to the
Partnership demonstrating that such taxes have been paid).
Holders of Series B Preferred Units at the close of business on any
Distribution Payment Record Date shall be entitled to receive the dividend
payable on such shares on the corresponding Distribution Payment Date
notwithstanding the conversion thereof following such Distribution Payment
Record Date and prior to such Distribution Payment Date. A holder of Series B
Preferred Units on a Distribution Payment Record Date who (or whose
transferee) tenders any such shares for conversion into Common Units on such
Distribution Payment Date will receive the distribution payable by the
Partnership on such Series B Preferred Units on such date.
As promptly as practicable, the Partnership shall issue and shall
deliver at such office to such holder, or send on such holder's written
order, a confirmation of the number of full Common Units issuable upon the
conversion of such Series B Preferred Units in accordance with the provisions
of this Section 7, and any fractional interest in respect of a Common Unit
arising upon such conversion shall be settled as provided in paragraph (c) of
this Section 7.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which notice is received by the
Partnership as aforesaid, and the Person or Persons in whose name or names
any certificate or certificates for Common Units shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the Common Units represented thereby at such time on such date, and such
conversion shall be at the Conversion Price in effect at such time and on
such date unless the stock transfer books of the Partnership shall be closed
on that date, in which event such Person or Persons shall be deemed to have
become such holder or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date on which
such Series B Preferred Units shall have been surrendered and such notice
received by the Partnership. If the Distribution Payment Record Date for the
Series B Preferred and Common Units do not coincide, and the preceding
sentence does not operate to ensure that a holder of Series B Preferred Units
whose shares are converted into Common Units does not receive dividends on
both the Series B Preferred Units and the Common Units into which such shares
are converted for the same Distribution Period, then notwithstanding anything
herein to the contrary, it is the intent of this paragraph that, and the
transfer agent is authorized to ensure that, no conversion after the earlier
of such record dates will
Exhibit D - Series B Preferred Page 7
<PAGE>
be accepted until after the latter of such record dates.
(c) No fractional shares or scrip representing fractions of Common
Units shall be issued upon conversion of the Series B Preferred Units.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of a Series B Preferred Shares, the
Partnership shall pay to the holder of such Series B Preferred Shares an
amount in cash based upon the Current Market Price of Common Share on the
Trading Day immediately preceding the date of conversion. If more than one
Series B Preferred Shares shall be surrendered for conversion at one time by
the same holder, the number of full Common Units issuable upon conversion
thereof shall be computed on the basis of the aggregate number of Series B
Preferred Units so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Partnership shall after the Issue Date (A) pay a
dividend or make a distribution on its shares of capital stock in Common
Units, (B) subdivide its outstanding Common Units into a greater number of
shares, (C) combine its outstanding Common Units into a smaller number of
shares or (D) issue any shares of capital stock by reclassification of its
Common Units, the Conversion Price in effect at the opening of business on
the day following the date fixed for the determination of shareholders
entitled to receive such dividend or distribution or at the opening of
business on the day following the day on which such subdivision, combination
or reclassification becomes effective, as the case may be, shall be adjusted
so that the holder of any Series B Preferred Units thereafter surrendered for
conversion shall be entitled to receive the number of Common Units that such
holder would have owned or have been entitled to receive after the happening
of any of the events described above, had such Series B Preferred Units been
converted immediately prior to the record date in the case of a dividend or
distribution or the effective date in the case of a subdivision, combination
or reclassification. An adjustment made pursuant to this subparagraph (i)
shall become effective immediately upon the opening of business on the day
next following the record date (subject to paragraph (h) below) in the case
of a dividend or distribution and shall become effective immediately upon the
opening of business on the day next following the effective date in the case
of a subdivision, combination or reclassification.
(ii) Notwithstanding anything else contained herein, if the
Partnership shall issue, after the Issue Date, rights, options or warrants to
all holders of Common Units entitling them (for a period expiring within 45
days after the record date mentioned below in this subparagraph (ii)) to
subscribe for or purchase Common Units at a price per share less than the
Market Price per Common Share on the record date for the determination of
stockholders entitled to receive such rights, options or warrants, then the
Conversion Price in effect at the opening of business on the day next
following such record date shall be adjusted to equal the price determined by
multiplying (A) the Conversion Price in effect immediately prior to the
opening of business on the day following the date fixed for such
determination by (B) a fraction, the numerator of which shall be the sum of
(I) the number of Common Units outstanding on the close of business on the
date fixed for such determination and (II) the number of Common Units
Exhibit D - Series B Preferred Page 8
<PAGE>
that the aggregate proceeds to the Partnership from the exercise of such
rights, options or warrants for Common Units would purchase at such Market
Price, and the denominator of which shall be the sum of (I) the number of
Common Units outstanding on the close of business on the date fixed for such
determination and (II) the number of additional Common Units offered for
subscription or purchase pursuant to such rights, options or warrants. Such
adjustment shall become effective immediately upon the opening of business on
the day next following such record date (subject to paragraph (h) below). In
determining whether any rights, options or warrants entitle the holders of
Common Units to subscribe for or purchase Common Units at less than such
Market Price, there shall be taken into account any consideration received by
the Partnership upon issuance and upon exercise of such rights, options or
warrants, the value of such consideration, if other than cash, to be
determined in good faith by the Board of Directors, whose determination shall
be conclusive.
(iii) If the Corporation shall distribute to all holders of its
Common Shares any shares of capital stock of the Corporation (other than
Common Shares) or evidence of its indebtedness or assets (excluding cash
dividends or distributions paid out of assets based upon a fair valuation of
the assets, in excess of the sum of the liabilities of the Corporation and
the amount of stated capital attributable to Common Shares, determined on the
basis of the most recent annual consolidated cost basis and current value
basis and quarterly consolidated balance sheets of the Corporation and its
consolidated subsidiaries available at the time of the declaration of the
dividend or distribution) or rights or warrants to subscribe for or purchase
any of its securities (excluding those rights and warrants issued to all
holders of Common Shares entitling them for a period expiring within 45 days
after the record date referred to in subparagraph (ii) above to subscribe for
or purchase Common Shares, which rights and warrants are referred to in and
treated under subparagraph (ii) above) (any of the foregoing being
hereinafter in this subparagraph (iii) called the "Securities"), then in each
case the Conversion Price shall be adjusted so that it shall equal the price
determined by multiplying (A) the Conversion Price in effect immediately
prior to the close of business on the date fixed for the determination of
shareholders entitled to receive such distribution by (B) a fraction, the
numerator of which shall be the Market Price per Common Share on the record
date mentioned below less the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive) of the portion
of the shares of capital stock or assets or evidences of indebtedness so
distributed or of such rights or warrants applicable to one Common Share, and
the denominator of which shall be the Current Market Price per Common Share
on the record date mentioned below. Such adjustment shall become effective
immediately upon the opening of business on the day next following (subject
to paragraph (h) below) the record date for the determination of stockholders
entitled to receive such distribution. For the purposes of this subparagraph
(iii), the distribution of a Security, which is distributed not only to the
holders of the Common Shares on the date fixed for the determination of
shareholders entitled to such distribution of such Security, but also is
required to be distributed with each Common Share delivered to a Person
converting a Series B Preferred Share after such determination date, shall
not require an adjustment of the Conversion Price pursuant to this
subparagraph (iii); provided that on the date, if any, on which a person
converting a Series B Preferred Share would no longer be entitled to receive
such Security with a Common Share (other than as a result of the termination
of all such Securities), a distribution of such Securities shall be deemed to
have occurred, and the Conversion Price shall
Exhibit D - Series B Preferred Page 9
<PAGE>
be adjusted as provided in this subparagraph (iii) (and such day shall be
deemed to be "the date fixed for the determination of the shareholders
entitled to receive such distribution" and "the record date" within the
meaning of the two preceding sentences).
The occurrence of a distribution or the occurrence of any other
event as a result of which holders of Series B Preferred Shares shall not be
entitled to receive rights, including exchange rights (the "Rights"),
pursuant to any shareholders protective rights agreement (the "Agreement")
that may be adopted by the Corporation as if such holders had converted such
shares into Common Shares immediately prior to the occurrence of such
distribution or event shall not be deemed a distribution of Securities for
the purposes of any Conversion Price adjustment pursuant to this subparagraph
(iii) or otherwise give rise to any Conversion Price adjustment pursuant to
this Section 7; provided, however, that in lieu of any adjustment to the
Conversion Price as a result of any such a distribution or occurrence, the
Corporation shall make provision so that Rights, to the extent issuable at
the time of conversion of any Series B Preferred Shares into Common Shares,
shall issue and attach to such Common Shares then issued upon conversion in
the amount and manner and to the extent and as provided in the Agreement in
respect of issuances at the time of Common Shares other than upon conversion.
(iv) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1% in such price; provided, however, that any adjustments that by
reason of this subparagraph (iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in
accordance with the provisions of this Section 7 (other than this
subparagraph (iv)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of Common
Shares. Notwithstanding any other provisions of this Section 7, the
Corporation shall not be required to make any adjustment of the Conversion
Price for the issuance of any Common Shares pursuant to any plan providing
for the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of additional optional amounts in Common
Shares under such plan. All calculations under this Section 7 shall be made
to the nearest cent (with $.005 being rounded upward) or to the nearest
one-tenth of a share (with .05 of a share being rounded upward), as the case
may be. Anything in this paragraph (d) to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to make such
reductions in the Conversion Price, in addition to those required by this
paragraph (d), as it in its discretion shall determine to be advisable in
order that any stock dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights, options or warrants to
purchase stock or securities, or a distribution of other assets (other than
cash dividends) hereafter made by the Corporation to its shareholders shall
not be taxable.
(e) If the Partnership shall be a party to any transaction
(including without limitation a merger, consolidation, partnership interest
exchange, self tender offer for all or substantially all Common Units
outstanding, sale of all or substantially all of the Partnership's assets or
recapitalization of the Common Units (each of the foregoing being referred to
herein as a "Transaction"), in each case as a result of which Common Units
shall be converted into the right to receive stock, securities or other
property (including cash or any combination thereof),
Exhibit D - Series B Preferred Page 10
<PAGE>
each Series B Preferred Unit that is not redeemed or converted into the right
to receive stock, securities or other property in connection with such
Transaction shall thereafter be convertible into the kind and amount of Units
of stock, securities and other property (including cash or any combination
thereof) receivable upon the consummation of such Transaction by a holder of
that number of Common Units into which one Series B Preferred Unit was
convertible immediately prior to such Transaction, assuming such holder of
Common Units (i) is not a Person with which the Partnership consolidated or
into which the Partnership merged or which merged into the Partnership or to
which such sale or transfer was made, as the case may be (a "Constituent
Person"), or an affiliate of a Constituent Person and (ii) failed to exercise
his or her rights of the election, if any, as to the kind or amount of stock,
securities and other property (including cash) receivable upon such
Transaction (provided that if the kind or amount of stock, securities and
other property (including cash) receivable upon such Transaction is not the
same for each Common Unit of the Partnership held immediately prior to such
Transaction by other than a Constituent Person or an affiliate thereof and in
respect of which such rights of election shall not have been exercised
("Non-Electing Unit"), then for the purpose of this paragraph (d) the kind
and amount of stock, securities and other property (including cash)
receivable upon such Transaction by each Non-Electing Unit shall be deemed to
be the kind and amount so receivable per Unit by a plurality of the
Non-Electing Units). The Partnership shall not be a party to any Transaction
unless the terms of such Transaction are consistent with the provisions of
this paragraph (c), and it shall not consent or agree to the occurrence of
any Transaction until the Partnership has entered into an agreement with the
successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series B Preferred Units that will contain provisions enabling
the holders of the Series B Preferred Units that remain outstanding after
such Transaction to convert their Series B Preferred Units into the
consideration received by holders of Common Units at the Conversion Price in
effect under the Articles of Designation immediately prior to such
Transaction. The provisions of this paragraph (e) shall similarly apply to
successive Transactions.
(f) The Partnership covenants that any Common Units issued upon
conversion of the Series B Preferred Units shall be validly issued and fully
paid.
(g) Prior to the delivery of any securities that the Partnership
shall be obligated to deliver upon conversion of the Series B Preferred
Units, the Partnership shall comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval or consent to the delivery thereof, by any governmental
authority.
(h) The Partnership shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of Common Units or other securities or property on conversion of the Series B
Preferred Units pursuant hereto; provided, however, that the Partnership
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issue or delivery of any Common Units or other
securities or property in a name other than that of the holder of the Series
B Preferred Units to be converted, and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid
to the Partnership the amount of any such tax or established, to the
reasonable satisfaction of
Exhibit D - Series B Preferred Page 11
<PAGE>
the Partnership, that such tax has been paid.
(i) In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective on the day next following the
record date for an event, the Partnership may defer until the occurrence of
such event (A) issuing to the holder of any Series B Preferred Share
converted after such record date and before the occurrence of such event the
additional Common Units issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Units issuable
upon such conversion before giving effect to such adjustment and (B) paying
to such holder any amount of cash in lieu of any fraction pursuant to
paragraph (c) of this Section 7.
(j) There shall be no adjustment of the Conversion Price in case of
the issuance of any shares of capital stock of the Partnership in a
reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 7. If any action or transaction would
require adjustment of the Conversion Price pursuant to more than one
paragraph of this Section 7, only one adjustment shall be made, and such
adjustment shall be the amount of adjustment that has the highest absolute
value.
(k) If the Partnership shall take any action affecting the Common
Units, other than action described in this Section 7, that in the opinion of
the Board of Directors would materially adversely affect the conversion
rights of the holders of the Series B Preferred Shares, the Conversion Price
for the Series B Preferred Shares may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board of Directors, in
its sole discretion, may determine to be equitable in the circumstances.
SECTION 8. PERMISSIBLE DISTRIBUTIONS. In determining whether a
distribution (other than upon liquidation, dissolution or winding up),
whether by distribution, or upon redemption or other acquisition of Units or
otherwise, is permitted under Delaware law, amounts that would be needed, if
the Partnership were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders of Units of any
class or series of capital stock whose preferential rights upon dissolution
are superior or prior to those receiving the distribution shall not be added
to the Partnership's total liabilities.
SECTION 9. RANKING. Any class or series of partnership interests of
the Partnership shall be deemed to rank:
(a) prior to the Series B Preferred Units, as to the payment of
distributions and as to distribution of assets upon liquidation, dissolution
or winding up, if the holders of such class or series shall be entitled to
the receipt of distributions or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Series B Preferred Units ("Senior Units");
(b) on a parity with the Series B Preferred Units, as to the
payment of distributions and as to the distribution of assets upon
liquidation, dissolution or winding up,
Exhibit D - Series B Preferred Page 12
<PAGE>
whether or not the distribution rates, distribution payment dates or
redemption or liquidation prices per Unit thereof be different from those of
the Series B Preferred Units, if the holders of such class of stock or series
and the Series B Preferred Units shall be entitled to the receipt of
distributions and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
distributions per Unit or liquidation preferences, without preference or
priority one over the other ("Parity Units"); and
(c) junior to the Series B Preferred Units, as to the payment of
distributions or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock or series shall be Common Units or
Class B Limited Partnership Interests or if the holders of Series B Preferred
Units shall be entitled to receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in preference or priority to the holders of units of such class series of
partnership interest, and such class or series shall not in either case rank
prior to the Series B Preferred Units ("Junior Units").
SECTION 10. VOTING.
(a) Other than as required by law or paragraph (b) and (c) of this
Section 10, the Series B Preferred Units shall not have any voting rights or
powers, and the consent of the holders thereof shall not be required for the
taking of any partnership action.
(b) So long as any Series B Preferred Units are outstanding, in
addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of at least 66-2/3% of the votes
entitled to be cast by the holders of Series B Preferred Units, at the time
outstanding, voting as a single class, given in person or by proxy, either in
writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating any amendment, alteration of
or repeal of the Partnership Agreement materially and adversely affecting,
directly or indirectly, the terms and conditions of, or the rights or
preferences of the Preferred Units; PROVIDED, HOWEVER, that (A) the amendment
or supplement of the provisions of the Partnership Agreement so as to
authorize or create, or to increase the authorized amount of, any Junior
Units or any Parity Units shall not be deemed to adversely affect Series B
Preferred Units, and (B) any amendment, alteration of or repeal of the
Partnership Agreement in connection with a merger or consolidation of GTA or
the Partnership or the sale of all or substantially all of the assets of the
Partnership shall not be deemed to adversely affect the Series B Preferred
Units so long as (1) the Partnership is the surviving entity and the Series B
Preferred Units remains outstanding with the terms thereof materially
unchanged or (2) the Series B Preferred Units are exchanged for a security of
the resulting, surviving or transferee entity having substantially the same
terms and rights as the Series B Preferred Stock, including with respect to
distributions, voting rights and rights upon liquidation, dissolution or
winding-up.
(c) So long as any Series B Preferred Units are outstanding, in
addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of 100% of the votes entitled to
be cast by the holders of Series B Preferred Units, at the time outstanding,
voting as a single class, given in person or by proxy, either in writing
without a
Exhibit D - Series B Preferred Page 13
<PAGE>
meeting or by vote at any meeting called for the purpose, shall be necessary
for effecting or validating the authorization or creation of, or the issuance
of, any Senior Units.
(d) The foregoing voting provisions shall not apply if, at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding Series B Preferred Units shall
have been redeemed or called for redemption upon proper notice and sufficient
funds shall have been deposited in trust to effect such redemption.
(e) Except as otherwise required by law or provided herein or
elsewhere in the Partnership Agreement, the holders of Series B Preferred
Units shall not be entitled to receive any notice of any proceedings of the
Company or the Partnership.
For purposes of the foregoing provisions of this Section 10, each
Series B Preferred Unit shall have one (1) vote per Unit.
SECTION 11. RECORD HOLDERS. The Partnership may deem and treat the
record holder of any Series B Preferred Units as the true and lawful owner
thereof for all purposes, and the Partnership shall not be affected by any
notice to the contrary.
SECTION 12. EFFECTIVE DATE. These Articles of Designation shall be
effective as of May 11, 1999.
Exhibit D - Series B Preferred Page 14
<PAGE>
[EXPLANATORY NOTE: The following Articles of Designation have been added to
Exhibit D to the Partnership Agreement by GTA GP, Inc., as general partner,
pursuant to the First Amendment to the Partnership Agreement, dated February
1, 1998, which is filed as Exhibit 10.1.2 to the Company's Form 10-K filed
March 31, 1998.]
GOLF TRUST OF AMERICA, L.P.
ARTICLES OF DESIGNATION
CLASSIFYING AND DESIGNATING
48,949 UNITS OF
8.90% SERIES C LIMITED PARTNERSHIP INTEREST
JULY 28, 1999
SECTION 1. NUMBER OF UNITS AND DESIGNATION. This series of preferred
partnership interest shall be designated as the 8.90% Series C Preferred
Partnership Interest (the "Series C Preferred Units") and the number of units
of 8.90% Series C Preferred Partnership Interest which shall initially
constitute such series shall be 48,949 units.
SECTION 2. DEFINITIONS. For purposes of the Series C Preferred Units,
the following terms shall have the meanings indicated:
"AMEX" shall mean the American Stock Exchange.
"Asset Disposition" shall mean a sale, transfer or capital lease (as
determined in accordance with GAAP) of all or substantially all of the assets
of the Partnership to a Person that is not an affiliate of the Corporation or
the Operating Partnership.
"Articles of Designation" shall mean these provisions in EXHIBIT D
to the Partnership Agreement recording the preferences, conversion and other
rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms and conditions of redemption and other terms and
conditions of the Series C Preferred Units.
"Board of Directors" shall mean the Board of Directors of the
General Partner or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series C Preferred
Units.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York,
New York are not required to be open.
"Common Share" shall mean one share of the common stock of GTA.
"Common Units" shall mean the common units of limited partnership
interest in the Partnership.
"Constituent Person" shall have the meaning set forth in paragraph
(e) of Section 7
Exhibit D - Series C Preferred Page 1
<PAGE>
hereof.
"Conversion Price" shall mean the conversion price per Common Share for
which each Series C Preferred Unit is convertible. The initial conversion price
shall $27.58 (equivalent to a conversion rate of 1.0 Common Units for each
Series C Preferred Unit).
"Corporation" means Golf Trust of America, Inc., a Maryland
corporation.
"Current Market Price" shall mean, on any date specified herein, the
average of the Market Price during the period of the most recent twenty
consecutive trading days ending on such date.
"Distribution Payment Date" shall mean, with respect to each
Distribution Period, the 15th calendar day of January, April, July and
October, in each year, commencing on October 15, 1999; provided, however,
that if any Distribution Payment Date falls on any day other than a Business
Day, the distribution payment due on such Distribution Payment Date shall be
paid on the first Business Day immediately following such Distribution
Payment Date.
"Distribution Periods" shall mean quarterly distribution periods
commencing on January 1, April 1, July 1 and October 1 of each year and
ending on and including the day preceding the first day of the next
succeeding Distribution Period (other than the initial Distribution Period,
which shall commence on the Issue Date and end on and include September 30,
1999).
"GAAP" shall mean generally acceptable accounting practices,
consistently applied.
"Issue Date" shall mean the first date on which any Series C
Preferred Units are issued and sold.
"Junior Units" shall have the meaning set forth in paragraph (c) of
Section 9 hereof.
"Liquidation" shall mean a liquidation, dissolution or winding up of
the Corporation or the Partnership, whether voluntary or involuntary.
"Liquidation Event" shall mean (A) a Liquidation, or (B) an Asset
Disposition.
"Liquidation Preference" shall have the meaning set forth in
paragraph (a) of Section 4 hereof.
"Market Price" shall mean, with respect to the Common Shares on any
date, the last reported sales price, regular way on such day, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the American Stock Exchange ("AMEX") or, if the
Common Shares are not listed or admitted for trading on AMEX, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Shares are listed or admitted for trading or, if the Common Shares are
not listed or admitted for trading on any national securities exchange, the
last quoted price, or if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the NASD
Automated Quotation System or, if such system is no longer in
Exhibit D - Series C Preferred Page 2
<PAGE>
use, the principal other automated quotation system that may then be in use,
or if the Common Shares are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market
maker regularly making a market in the Common Shares selected for such
purpose by the Board of Directors or, if there is no such professional market
maker, such amount as an independent investment banking firm selected by the
Board of Directors determines to be the value of a Common Share.
"Partnership" shall mean Golf Trust of America, L.P., a Delaware
limited partnership.
"Partnership Agreement" shall mean the First Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, dated February
12, 1997, as amended.
"Parity Units" shall have the meaning set forth in paragraph (b) of
Section 9 hereof.
"Person" shall mean any individual, firm, partnership, Corporation,
limited liability company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Preferred Units" shall mean the Series C Preferred Units of limited
partnership interest in the Partnership in number and with rights and
preferences identical to the Series C Preferred Units.
"Senior Units" shall have the meaning set forth in paragraph (a) of
Section 9 hereof.
"Series C Preferred Unit" shall have the meaning set forth in
Section 1 hereof.
"Set apart for payment" shall be deemed to include, without any
action other than the following, the recording by the Partnership in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of a distribution or other distribution by the
Board of Directors, the allocation of funds to be so paid on any series or
class of units of partnership interest of the Partnership; PROVIDED, HOWEVER,
that if any funds for any class or series of Junior Units or any class or
series of Parity Units are placed in a separate account of the Partnership or
delivered to a disbursing, paying or other similar agent, then "set apart for
payment" with respect to the Series C Preferred Units shall mean placing such
funds in a separate account or delivering such funds to a disbursing, paying
or other similar agent.
"Trading Day" shall mean any day on which the securities in question
are traded on the AMEX, or if such securities are not listed or admitted for
trading on the AMEX, on the principal national securities exchange on which
such securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on the Nasdaq National Market,
or if such securities are not quoted on such Nasdaq National Market, in the
applicable securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in paragraph (e) of
Section 7 hereof.
SECTION 3. DISTRIBUTIONS.
(a) The holders of the Series C Preferred Units shall be entitled
to receive, when, as and if authorized and declared by the General Partner
out of funds legally available for
Exhibit D - Series C Preferred Page 3
<PAGE>
that purpose, distributions payable in cash at the rate per annum equal to
the greater of (i) $2.45 per Series C Preferred Unit or (ii) an amount per
Series C Preferred Unit equal to the aggregate annual amount of cash
distributions paid or payable, if any, with respect to that number of Common
Units, or portion thereof, into which each Series C Preferred Unit is then
convertible, in accordance with the terms of these Articles of Designation
(such greater amount, the "Annual Distribution Rate"). The amount referred in
clause (ii) of this subparagraph (a) with respect to each Distribution Period
shall be determined as of the applicable Distribution Payment Date by
multiplying the number of Common Units, or portion thereof calculated to the
fourth decimal point, into which a Series C Preferred Unit would be
convertible at the opening of business on such Distribution Payment Date
(based on the Conversion Price then in effect) by the quarterly cash
distribution payable or paid for such Distribution Period in respect of a
Common Unit outstanding as of the record date for the payment of
distributions on the Common Units with respect to such Distribution Period
and multiplying such product by four. Such distributions shall be cumulative
from the Issue Date, whether or not in any Distribution Period or Periods
there shall be funds of the Partnership legally available for the payment of
such distributions and shall be payable quarterly, when, as and if authorized
and declared by the Board of Directors, in arrears on Distribution Payment
Dates, commencing on the first Distribution Payment Date after the Issue
Date. Each such distribution shall be payable in arrears to the holders of
record of the Series C Preferred Units, as they appear on the records of the
Partnership at the close of business on each record date which shall not be
more than 30 days preceding the applicable Distribution Payment Date (the
"Distribution Payment Record Date"), as shall be fixed by the Board of
Directors. Accrued and unpaid distributions for any past Distribution Periods
may be authorized and declared and paid at any time, without reference to any
regular Distribution Payment Date, to holders of record on such date, which
shall not be more than 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors. The amount of accrued and unpaid
distributions on any Series C Preferred Unit at any date shall be the amount
of any distributions accumulated to and including such date, whether or not
earned or declared, which have not been paid in cash or set aside for
payment. Accumulated and unpaid distributions will not bear interest.
(b) The amount of distributions payable for each full Distribution
Period for the Series C Preferred Units shall be computed by dividing the
Annual Distribution Rate by four. The amount of distributions payable for the
initial Distribution Period, or any other period shorter or longer than a
full Distribution Period, on the Series C Preferred Units shall be computed
on the basis of twelve 30-day months and a 360-day year. Holders of Series C
Preferred Units shall not be entitled to any distributions, whether payable
in cash, property or stock, in excess of cumulative distributions, as herein
provided, on the Series C Preferred Units, plus any other amounts provided in
these Articles of Designation.
So long as any Series C Preferred Units are outstanding, no
distributions, except as described in the immediately following sentence,
shall be authorized and declared or paid or set apart for payment on any
series or class or classes of Parity Units for any period unless full
cumulative distributions have been or contemporaneously are authorized and
declared and paid or authorized and declared and a sum sufficient for the
payment thereof set apart for such payment on the Series C Preferred Units
for all Distribution Periods terminating on or prior to the distribution
payment date for such class or series of Parity Units. When distributions are
not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all distributions
Exhibit D - Series C Preferred Page 4
<PAGE>
authorized and declared upon Series C Preferred Units and all distributions
authorized and declared upon any other series or class or classes of Parity
Units shall be authorized and declared ratably in proportion to the
respective amounts of distributions accumulated and unpaid on the Series C
Preferred Units and such Parity Units.
(c) So long as any Series C Preferred Units are outstanding, no
distributions (other than distributions or distributions paid solely in Units
of, or options, warrants or rights to subscribe for or purchase Units of,
Junior Units) shall be authorized and declared or paid or set apart for
payment or other distribution authorized and declared or made upon Junior
Units, nor shall any Junior Units be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Common
Units made in connection with an employee incentive or benefit plan of GTA or
any subsidiary or pursuant to the Redemption Right referred to in Section
8.05 of the Partnership Agreement), for any consideration (or any moneys to
be paid to or made available for a sinking fund for the redemption of any
such Units by the Partnership, directly or indirectly (except by conversion
into or exchange for Junior Units), unless in each case (i) the full
cumulative distributions on all outstanding Series C Preferred Units and any
other Parity Units of the Partnership shall have been paid or set apart for
payment for all past Distribution Periods with respect to the Series C
Preferred Units and all past distribution periods with respect to such Parity
Units and (ii) sufficient funds shall have been paid or set apart for the
payment of the distribution for the current Distribution Period with respect
to the Series C Preferred Units and any Parity Units.
(d) Any distribution payment made on the Series C Preferred Units
shall first be credited against the earliest accrued but unpaid distribution
due with respect to such Units which remains payable.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any Liquidation Event, before any payment or
distribution of the assets of the Partnership (whether capital or surplus)
shall be made to or set apart for the holders of Junior Units, the holders of
Series C Preferred Units shall be entitled to receive a liquidation
preference which is an amount equal to the greater of (i) $27.58 per Series C
Preferred Unit plus distributions (whether or not earned or declared) accrued
and unpaid thereon to the date of final distribution to such holder (the
"Liquidation Preference") or (ii) an amount per Series C Preferred Unit equal
to the amount which would have been payable on the Common Units, or portion
thereof, into which one Series C Preferred Unit is then convertible had each
Series C Preferred Unit been converted into Common Units immediately prior to
such Liquidation Event. The foregoing amounts shall be subject to equitable
adjustment whenever there shall occur a stock distribution, stock split,
combination, reorganization, recapitalization, reclassification or other
similar event involving a change in the capital structure of the Series C
Preferred Units. Until the holders of the Series C Preferred Units have been
paid in full the amounts owed pursuant to this Section 4(a), no payment will
be made to any holder of Junior Units upon a Liquidation Event. If, upon any
such Liquidation Event, the assets of the Partnership, or proceeds thereof,
distributable among the holders of Series C Preferred Units shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other Units of any class or series of Parity Units, then such
assets, or the proceeds thereof, shall be distributed among the holders of
such Series C Preferred Units and such other Parity
Exhibit D - Series C Preferred Page 5
<PAGE>
Units ratably in accordance with the amounts that would be payable on such
Series C Preferred Units and such other Parity Units if all amounts payable
thereon were paid in full.
(b) Subject to the rights of the holders of any Parity Units, upon
any Liquidation Event of the Partnership, after payment shall have been made
in full to the holders of Series C Preferred Units and any Parity Units, as
provided in this Section 4, any other series or class or classes of Junior
Units shall, subject to the respective terms thereof, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of
the Series C Preferred Units and any Parity Units shall not be entitled to
share therein.
SECTION 5. MANDATORY REDEMPTION. Upon the occurrence of a Liquidation,
the Partnership will automatically redeem for cash all, and not less than
all, of the outstanding shares of Series C Preferred Units at a price per
Series C Preferred Unit equal to the Liquidation Preference. In order to
effect the mandatory redemption, the Partnership will deliver written notice
to all holders of Series C Preferred Units (the "Mandatory Redemption
Notice"), such notice not be delivered later than 60 days prior to the
Liquidation, setting forth the date of the intended redemption and the
Liquidation Preference amount.
SECTION 6. REACQUIRED UNITS TO BE RETIRED. All Series C Preferred
Units which shall have been issued and reacquired in any manner by the
Partnership (including any Series C Preferred Units surrendered upon
conversion as described in Section 7) shall be retired and cancelled.
SECTION 7. CONVERSION. Holders of Series C Preferred Units shall have
the right to convert all or a portion of such shares into Common Units, as
follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of Series C Preferred Units shall have the right, at such
holder's option, at any time and from time to time, to convert such shares
into the number of fully paid and non-assessable Common Units obtained by
dividing the aggregate Liquidation Preference (excluding, for this purpose
only, any dividends accrued in respect of the then-current Distribution
Period) of such Series C Preferred Units by the Conversion Price (as in
effect at the time and on the date provided for in the last paragraph of
paragraph (b) of this Section 7) by surrendering such Series C Preferred
Units to be converted, such surrender to be made in the manner provided in
paragraph (b) of this Section 7; provided, however, that the right to convert
Series C Preferred Units called for redemption pursuant to Section 5 hereof
shall terminate at the close of business on the Redemption Date fixed for
such redemption, unless the Partnership shall default in making payment of
any cash payable upon such redemption under Section 5 hereof.
(b) In order to exercise the conversion right, the holder of each
Series C Preferred Unit to be converted shall provide written notice to the
Partnership that the holder thereof elects to convert such Series C Preferred
Units. Unless the Common Units issuable on conversion are to be issued in the
same name as the name in which such Series C Preferred Units are registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Partnership, duly executed by the
holder or such holder's duly authorized attorney and an amount sufficient to
pay any transfer or similar tax (or evidence
Exhibit D - Series C Preferred Page 6
<PAGE>
reasonably satisfactory to the Partnership demonstrating that such taxes have
been paid).
Holders of Series C Preferred Units at the close of business on any
Distribution Payment Record Date shall be entitled to receive the dividend
payable on such shares on the corresponding Distribution Payment Date
notwithstanding the conversion thereof following such Distribution Payment
Record Date and prior to such Distribution Payment Date. A holder of Series C
Preferred Units on a Distribution Payment Record Date who (or whose
transferee) tenders any such shares for conversion into Common Units on such
Distribution Payment Date will receive the distribution payable by the
Partnership on such Series C Preferred Units on such date.
As promptly as practicable, the Partnership shall issue and shall
deliver at such office to such holder, or send on such holder's written
order, a confirmation of the number of full Common Units issuable upon the
conversion of such Series C Preferred Units in accordance with the provisions
of this Section 7, and any fractional interest in respect of a Common Unit
arising upon such conversion shall be settled as provided in paragraph (c) of
this Section 7.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which notice is received by the
Partnership as aforesaid, and the Person or Persons in whose name or names
any certificate or certificates for Common Units shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the Common Units represented thereby at such time on such date, and such
conversion shall be at the Conversion Price in effect at such time and on
such date unless the stock transfer books of the Partnership shall be closed
on that date, in which event such Person or Persons shall be deemed to have
become such holder or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date on which
such Series C Preferred Units shall have been surrendered and such notice
received by the Partnership. If the Distribution Payment Record Date for the
Series C Preferred and Common Units do not coincide, and the preceding
sentence does not operate to ensure that a holder of Series C Preferred Units
whose shares are converted into Common Units does not receive dividends on
both the Series C Preferred Units and the Common Units into which such shares
are converted for the same Distribution Period, then notwithstanding anything
herein to the contrary, it is the intent of this paragraph that, and the
transfer agent is authorized to ensure that, no conversion after the earlier
of such record dates will be accepted until after the latter of such record
dates.
(c) No fractional shares or scrip representing fractions of Common
Units shall be issued upon conversion of the Series C Preferred Units.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of a Series C Preferred Shares, the
Partnership shall pay to the holder of such Series C Preferred Shares an
amount in cash based upon the Current Market Price of Common Share on the
Trading Day immediately preceding the date of conversion. If more than one
Series C Preferred Shares shall be surrendered for conversion at one time by
the same holder, the number of full Common Units issuable upon conversion
thereof shall be computed on the basis of the aggregate number of Series C
Preferred Units so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
Exhibit D - Series C Preferred Page 7
<PAGE>
(i) If the Partnership shall after the Issue Date (A) pay a
dividend or make a distribution on its shares of capital stock in Common
Units, (B) subdivide its outstanding Common Units into a greater number of
shares, (C) combine its outstanding Common Units into a smaller number of
shares or (D) issue any shares of capital stock by reclassification of its
Common Units, the Conversion Price in effect at the opening of business on
the day following the date fixed for the determination of shareholders
entitled to receive such dividend or distribution or at the opening of
business on the day following the day on which such subdivision, combination
or reclassification becomes effective, as the case may be, shall be adjusted
so that the holder of any Series C Preferred Units thereafter surrendered for
conversion shall be entitled to receive the number of Common Units that such
holder would have owned or have been entitled to receive after the happening
of any of the events described above, had such Series C Preferred Units been
converted immediately prior to the record date in the case of a dividend or
distribution or the effective date in the case of a subdivision, combination
or reclassification. An adjustment made pursuant to this subparagraph (i)
shall become effective immediately upon the opening of business on the day
next following the record date (subject to paragraph (h) below) in the case
of a dividend or distribution and shall become effective immediately upon the
opening of business on the day next following the effective date in the case
of a subdivision, combination or reclassification.
(ii) Notwithstanding anything else contained herein, if the
Partnership shall issue, after the Issue Date, rights, options or warrants to
all holders of Common Units entitling them (for a period expiring within 45
days after the record date mentioned below in this subparagraph (ii)) to
subscribe for or purchase Common Units at a price per share less than the
Market Price per Common Share on the record date for the determination of
stockholders entitled to receive such rights, options or warrants, then the
Conversion Price in effect at the opening of business on the day next
following such record date shall be adjusted to equal the price determined by
multiplying (A) the Conversion Price in effect immediately prior to the
opening of business on the day following the date fixed for such
determination by (B) a fraction, the numerator of which shall be the sum of
(I) the number of Common Units outstanding on the close of business on the
date fixed for such determination and (II) the number of Common Units that
the aggregate proceeds to the Partnership from the exercise of such rights,
options or warrants for Common Units would purchase at such Market Price, and
the denominator of which shall be the sum of (I) the number of Common Units
outstanding on the close of business on the date fixed for such determination
and (II) the number of additional Common Units offered for subscription or
purchase pursuant to such rights, options or warrants. Such adjustment shall
become effective immediately upon the opening of business on the day next
following such record date (subject to paragraph (h) below). In determining
whether any rights, options or warrants entitle the holders of Common Units
to subscribe for or purchase Common Units at less than such Market Price,
there shall be taken into account any consideration received by the
Partnership upon issuance and upon exercise of such rights, options or
warrants, the value of such consideration, if other than cash, to be
determined in good faith by the Board of Directors, whose determination shall
be conclusive.
(iii) If the Corporation shall distribute to all holders of its
Common Shares any shares of capital stock of the Corporation (other than
Common Shares) or evidence of its indebtedness or assets (excluding cash
dividends or distributions paid out of assets based upon
Exhibit D - Series C Preferred Page 8
<PAGE>
a fair valuation of the assets, in excess of the sum of the liabilities of
the Corporation and the amount of stated capital attributable to Common
Shares, determined on the basis of the most recent annual consolidated cost
basis and current value basis and quarterly consolidated balance sheets of
the Corporation and its consolidated subsidiaries available at the time of
the declaration of the dividend or distribution) or rights or warrants to
subscribe for or purchase any of its securities (excluding those rights and
warrants issued to all holders of Common Shares entitling them for a period
expiring within 45 days after the record date referred to in subparagraph
(ii) above to subscribe for or purchase Common Shares, which rights and
warrants are referred to in and treated under subparagraph (ii) above) (any
of the foregoing being hereinafter in this subparagraph (iii) called the
"Securities"), then in each case the Conversion Price shall be adjusted so
that it shall equal the price determined by multiplying (A) the Conversion
Price in effect immediately prior to the close of business on the date fixed
for the determination of shareholders entitled to receive such distribution
by (B) a fraction, the numerator of which shall be the Market Price per
Common Share on the record date mentioned below less the then fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive) of the portion of the shares of capital stock or assets or
evidences of indebtedness so distributed or of such rights or warrants
applicable to one Common Share, and the denominator of which shall be the
Current Market Price per Common Share on the record date mentioned below.
Such adjustment shall become effective immediately upon the opening of
business on the day next following (subject to paragraph (h) below) the
record date for the determination of stockholders entitled to receive such
distribution. For the purposes of this subparagraph (iii), the distribution
of a Security, which is distributed not only to the holders of the Common
Shares on the date fixed for the determination of shareholders entitled to
such distribution of such Security, but also is required to be distributed
with each Common Share delivered to a Person converting a Series C Preferred
Share after such determination date, shall not require an adjustment of the
Conversion Price pursuant to this subparagraph (iii); provided that on the
date, if any, on which a person converting a Series C Preferred Share would
no longer be entitled to receive such Security with a Common Share (other
than as a result of the termination of all such Securities), a distribution
of such Securities shall be deemed to have occurred, and the Conversion Price
shall be adjusted as provided in this subparagraph (iii) (and such day shall
be deemed to be "the date fixed for the determination of the shareholders
entitled to receive such distribution" and "the record date" within the
meaning of the two preceding sentences).
The occurrence of a distribution or the occurrence of any other
event as a result of which holders of Series C Preferred Shares shall not be
entitled to receive rights, including exchange rights (the "Rights"),
pursuant to any shareholders protective rights agreement (the "Agreement")
that may be adopted by the Corporation as if such holders had converted such
shares into Common Shares immediately prior to the occurrence of such
distribution or event shall not be deemed a distribution of Securities for
the purposes of any Conversion Price adjustment pursuant to this subparagraph
(iii) or otherwise give rise to any Conversion Price adjustment pursuant to
this Section 7; provided, however, that in lieu of any adjustment to the
Conversion Price as a result of any such a distribution or occurrence, the
Corporation shall make provision so that Rights, to the extent issuable at
the time of conversion of any Series C Preferred Shares into Common Shares,
shall issue and attach to such Common Shares then issued upon conversion in
the amount and manner and to the extent and as provided in the Agreement in
respect of issuances at the time of Common Shares other than upon conversion.
Exhibit D - Series C Preferred Page 9
<PAGE>
(iv) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1% in such price; provided, however, that any adjustments that by
reason of this subparagraph (iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in
accordance with the provisions of this Section 7 (other than this
subparagraph (iv)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of Common
Shares. Notwithstanding any other provisions of this Section 7, the
Corporation shall not be required to make any adjustment of the Conversion
Price for the issuance of any Common Shares pursuant to any plan providing
for the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of additional optional amounts in Common
Shares under such plan. All calculations under this Section 7 shall be made
to the nearest cent (with $.005 being rounded upward) or to the nearest
one-tenth of a share (with .05 of a share being rounded upward), as the case
may be. Anything in this paragraph (d) to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to make such
reductions in the Conversion Price, in addition to those required by this
paragraph (d), as it in its discretion shall determine to be advisable in
order that any stock dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights, options or warrants to
purchase stock or securities, or a distribution of other assets (other than
cash dividends) hereafter made by the Corporation to its shareholders shall
not be taxable.
(e) If the Partnership shall be a party to any transaction
(including without limitation a merger, consolidation, partnership interest
exchange, self tender offer for all or substantially all Common Units
outstanding, sale of all or substantially all of the Partnership's assets or
recapitalization of the Common Units (each of the foregoing being referred to
herein as a "Transaction"), in each case as a result of which Common Units
shall be converted into the right to receive stock, securities or other
property (including cash or any combination thereof), each Series C Preferred
Unit that is not redeemed or converted into the right to receive stock,
securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of Units of stock,
securities and other property (including cash or any combination thereof)
receivable upon the consummation of such Transaction by a holder of that
number of Common Units into which one Series C Preferred Unit was convertible
immediately prior to such Transaction, assuming such holder of Common Units
(i) is not a Person with which the Partnership consolidated or into which the
Partnership merged or which merged into the Partnership or to which such sale
or transfer was made, as the case may be (a "Constituent Person"), or an
affiliate of a Constituent Person and (ii) failed to exercise his or her
rights of the election, if any, as to the kind or amount of stock, securities
and other property (including cash) receivable upon such Transaction
(provided that if the kind or amount of stock, securities and other property
(including cash) receivable upon such Transaction is not the same for each
Common Unit of the Partnership held immediately prior to such Transaction by
other than a Constituent Person or an affiliate thereof and in respect of
which such rights of election shall not have been exercised ("Non-Electing
Unit"), then for the purpose of this paragraph (d) the kind and amount of
stock, securities and other property (including cash) receivable upon such
Transaction by each Non-Electing Unit shall be deemed to be the kind and
amount so receivable per Unit by a plurality of the Non-Electing Units). The
Partnership shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (c), and it
shall not consent or agree to the occurrence of any Transaction until the
Exhibit D - Series C Preferred Page 10
<PAGE>
Partnership has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series C
Preferred Units that will contain provisions enabling the holders of the
Series C Preferred Units that remain outstanding after such Transaction to
convert their Series C Preferred Units into the consideration received by
holders of Common Units at the Conversion Price in effect under the Articles
of Designation immediately prior to such Transaction. The provisions of this
paragraph (e) shall similarly apply to successive Transactions.
(f) The Partnership covenants that any Common Units issued upon
conversion of the Series C Preferred Units shall be validly issued and fully
paid.
(g) Prior to the delivery of any securities that the Partnership
shall be obligated to deliver upon conversion of the Series C Preferred
Units, the Partnership shall comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval or consent to the delivery thereof, by any governmental
authority.
(h) The Partnership shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of Common Units or other securities or property on conversion of the Series C
Preferred Units pursuant hereto; provided, however, that the Partnership
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issue or delivery of any Common Units or other
securities or property in a name other than that of the holder of the Series
C Preferred Units to be converted, and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid
to the Partnership the amount of any such tax or established, to the
reasonable satisfaction of the Partnership, that such tax has been paid.
(i) In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective on the day next following the
record date for an event, the Partnership may defer until the occurrence of
such event (A) issuing to the holder of any Series C Preferred Share
converted after such record date and before the occurrence of such event the
additional Common Units issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Units issuable
upon such conversion before giving effect to such adjustment and (B) paying
to such holder any amount of cash in lieu of any fraction pursuant to
paragraph (c) of this Section 7.
(j) There shall be no adjustment of the Conversion Price in case of
the issuance of any shares of capital stock of the Partnership in a
reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 7. If any action or transaction would
require adjustment of the Conversion Price pursuant to more than one
paragraph of this Section 7, only one adjustment shall be made, and such
adjustment shall be the amount of adjustment that has the highest absolute
value.
(k) If the Partnership shall take any action affecting the Common
Units, other than action described in this Section 7, that in the opinion of
the Board of Directors would materially adversely affect the conversion
rights of the holders of the Series C Preferred Shares, the Conversion Price
for the Series C Preferred Shares may be adjusted, to the extent permitted
Exhibit D - Series C Preferred Page 11
<PAGE>
by law, in such manner, if any, and at such time, as the Board of Directors,
in its sole discretion, may determine to be equitable in the circumstances.
SECTION 8. PERMISSIBLE DISTRIBUTIONS. In determining whether a
distribution (other than upon liquidation, dissolution or winding up),
whether by distribution, or upon redemption or other acquisition of Units or
otherwise, is permitted under Delaware law, amounts that would be needed, if
the Partnership were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders of Units of any
class or series of capital stock whose preferential rights upon dissolution
are superior or prior to those receiving the distribution shall not be added
to the Partnership's total liabilities.
SECTION 9. RANKING. Any class or series of partnership interests of
the Partnership shall be deemed to rank:
(a) prior to the Series C Preferred Units, as to the payment of
distributions and as to distribution of assets upon liquidation, dissolution
or winding up, if the holders of such class or series shall be entitled to
the receipt of distributions or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Series C Preferred Units ("Senior Units");
(b) on a parity with the Series C Preferred Units, as to the
payment of distributions and as to the distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution
rates, distribution payment dates or redemption or liquidation prices per
Unit thereof be different from those of the Series C Preferred Units, if the
holders of such class of stock or series and the Series C Preferred Units
shall be entitled to the receipt of distributions and of amounts
distributable upon liquidation, dissolution or winding up in proportion to
their respective amounts of accrued and unpaid distributions per Unit or
liquidation preferences, without preference or priority one over the other
("Parity Units"); and
(c) junior to the Series C Preferred Units, as to the payment of
distributions or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock or series shall be Common Units or
Class B Limited Partnership Interests or if the holders of Series C Preferred
Units shall be entitled to receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in preference or priority to the holders of units of such class series of
partnership interest, and such class or series shall not in either case rank
prior to the Series C Preferred Units ("Junior Units").
SECTION 10. VOTING.
(a) Other than as required by law or paragraph (b) and (c) of this
Section 10, the Series C Preferred Units shall not have any voting rights or
powers, and the consent of the holders thereof shall not be required for the
taking of any partnership action.
(b) So long as any Series C Preferred Units are outstanding, in
addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of at least 66-2/3% of the votes
entitled to be cast by the holders of Series C Preferred Units, at
Exhibit D - Series C Preferred Page 12
<PAGE>
the time outstanding, voting as a single class, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating any amendment,
alteration of or repeal of the Partnership Agreement materially and adversely
affecting, directly or indirectly, the terms and conditions of, or the rights
or preferences of the Preferred Units; PROVIDED, HOWEVER, that (A) the
amendment or supplement of the provisions of the Partnership Agreement so as
to authorize or create, or to increase the authorized amount of, any Junior
Units or any Parity Units shall not be deemed to adversely affect Series C
Preferred Units, and (B) any amendment, alteration of or repeal of the
Partnership Agreement in connection with a merger or consolidation of GTA or
the Partnership or the sale of all or substantially all of the assets of the
Partnership shall not be deemed to adversely affect the Series C Preferred
Units so long as (1) the Partnership is the surviving entity and the Series C
Preferred Units remains outstanding with the terms thereof materially
unchanged or (2) the Series C Preferred Units are exchanged for a security of
the resulting, surviving or transferee entity having substantially the same
terms and rights as the Series C Preferred Stock, including with respect to
distributions, voting rights and rights upon liquidation, dissolution or
winding-up.
(c) So long as any Series C Preferred Units are outstanding, in
addition to any other vote or consent of Unitholders required by the
Partnership Agreement, the affirmative vote of 100% of the votes entitled to
be cast by the holders of Series C Preferred Units, at the time outstanding,
voting as a single class, given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the purpose, shall be
necessary for effecting or validating the authorization or creation of, or
the issuance of, any Senior Units.
(d) The foregoing voting provisions shall not apply if, at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding Series C Preferred Units shall
have been redeemed or called for redemption upon proper notice and sufficient
funds shall have been deposited in trust to effect such redemption.
(e) Except as otherwise required by law or provided herein or
elsewhere in the Partnership Agreement, the holders of Series C Preferred
Units shall not be entitled to receive any notice of any proceedings of the
Company or the Partnership.
For purposes of the foregoing provisions of this Section 10,
each Series C Preferred Unit shall have one (1) vote per Unit.
SECTION 11. RECORD HOLDERS. The Partnership may deem and treat the
record holder of any Series C Preferred Units as the true and lawful owner
thereof for all purposes, and the Partnership shall not be affected by any
notice to the contrary.
SECTION 12. EFFECTIVE DATE. These Articles of Designation shall be
effective as of July 28, 1999.
Exhibit D - Series C Preferred Page 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AS OF JUNE 30, 1999 AND DECEMBER 31, 1998 AND CONSOLIDATED
STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1999 DEC-31-1998
DEC-31-1998
<PERIOD-START> APR-01-1999 APR-01-1998 JAN-01-1999 JAN-01-1998
DEC-31-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998 JUN-30-1999 JUN-30-1998
DEC-31-1999
<CASH> 2,500 0 0 0
1,891
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 1,060 0 0 0
1,030
<ALLOWANCES> 0 0 0 0
0
<INVENTORY> 0 0 0 0
0
<CURRENT-ASSETS> 0<F1> 0 0 0
0<F1>
<PP&E> 364,343 0 0 0
349,195
<DEPRECIATION> 33,662 0 0 0
25,695
<TOTAL-ASSETS> 419,489 0 0 0
419,489
<CURRENT-LIABILITIES> 12,629<F2> 0 0 0
15,190<F2>
<BONDS> 204,440 0 0 0
210,634
0 0 0 0
0
20,000 0 0 0
0
<COMMON> 77 0 0 0
76
<OTHER-SE> 107,368 0 0 0
109,571
<TOTAL-LIABILITY-AND-EQUITY> 127,445 0 0 0
109,647
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 13,720 10,448 27,045 19,368
0
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 5,207 3,756 10,729 6,733
0
<OTHER-EXPENSES> (240)<F3> 279 (373) 207
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 3,830 2,006 7,508 2,922
0
<INCOME-PRETAX> 2,917 2,639 5,631 5,720
0
<INCOME-TAX> 0 0 0 0
0
<INCOME-CONTINUING> 2,917 2,639 5,631 5,720
0
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 2,917 2,639 5,631 5,720
0
<EPS-BASIC> .38 .35 .73 .75
0
<EPS-DILUTED> .38 .33 .73 .73
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 OR DISPOSAL OF ASSETS.
</FN>
</TABLE>
