<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Commission File Number 001-13243
----------
PAN PACIFIC RETAIL PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland 33-0752457
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1631-B South Melrose Drive
Vista, California 92083
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (760) 727-1002
----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of November 6, 1998, 21,162,012 shares of the registrant's Common Stock, $.01
par value, were outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PAN PACIFIC RETAIL PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Operating properties, at cost:
Land $ 165,511 $ 139,959
Buildings and improvements (including related party
development and acquisition fees of $1,235) 420,810 313,483
Tenant improvements 31,058 32,148
--------- ---------
617,379 485,590
Less accumulated depreciation and amortization (38,770) (30,076)
--------- ---------
578,609 455,514
Investments in unconsolidated partnerships 9,912 9,921
Cash and cash equivalents 791 --
Restricted cash 470 661
Accounts receivable (net of allowance for doubtful accounts
of $379 and $125, respectively) 2,844 1,626
Accrued rent receivable (net of allowance for doubtful
accounts of $1,008 and $847, respectively) 9,073 7,620
Notes receivable (net of allowance for doubtful accounts of
$225 at September 30, 1998) 2,063 2,981
Deferred lease commissions (including unamortized related
party amounts of $2,182 and $2,236, respectively, and net
of accumulated amortization of $2,117 and $2,023, respectively) 2,724 2,683
Prepaid expenses 4,023 3,860
Other assets 1,237 2,354
--------- ---------
$ 611,746 $ 487,220
========= =========
LIABILITIES AND EQUITY:
Notes payable $ 110,810 $ 108,316
Line of credit payable 100,001 62,450
Accounts payable (including related party amounts of
$3 and $11, respectively) 3,756 2,183
Accrued expenses and other liabilities (including related
party amounts of $388 and $692, respectively) 4,466 5,600
Dividends payable (including related party amounts of
$4,107 and $3,130, respectively) 8,042 6,095
--------- ---------
227,075 184,644
Minority interest 1,253 1,521
--------- ---------
Shareholders' equity:
Common stock par value $.01 per share, 100,000,000
authorized shares, 21,162,012 and 16,814,012 shares
issued and outstanding at September 30,
1998 and December 31, 1997, respectively 212 168
Paid in capital in excess of par value 481,182 395,313
Accumulated deficit (97,976) (94,426)
--------- ---------
383,418 301,055
--------- ---------
$ 611,746 $ 487,220
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
PAN PACIFIC RETAIL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUE:
Base rent $ 16,056 $ 9,699 $ 44,966 $ 25,252
Percentage rent 33 60 340 190
Recoveries from tenants 3,521 2,022 9,733 5,558
Income from unconsolidated partnerships 181 102 531 218
Other 451 271 1,360 920
-------- -------- -------- --------
20,242 12,154 56,930 32,138
-------- -------- -------- --------
EXPENSES:
Property operating 2,479 1,481 6,862 4,277
Property taxes 1,432 835 4,038 2,311
Depreciation and amortization 3,501 2,210 10,454 6,303
Interest 4,242 3,268 13,310 11,253
General and administrative 1,114 959 3,001 2,839
Other expenses 7 123 305 778
-------- -------- -------- --------
12,775 8,876 37,970 27,761
-------- -------- -------- --------
INCOME BEFORE INCOME TAX
EXPENSE, MINORITY INTEREST
AND EXTRAORDINARY ITEM 7,467 3,278 18,960 4,377
Income tax expense -- -- -- (65)
Minority interest (18) (49) (37) (106)
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 7,449 3,229 18,923 4,206
Extraordinary loss on early
extinguishment of debt -- (1,043) -- (1,043)
-------- -------- -------- --------
NET INCOME $ 7,449 $ 2,186 $ 18,923 $ 3,163
======== ======== ======== ========
Basic and diluted earnings per share:
Income before extraordinary item $ 0.35 $ 0.19 $ 1.00 $ 0.25
Extraordinary item -- $ (0.06) -- $ (0.06)
Net income $ 0.35 $ 0.13 $ 1.00 $ 0.19
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PAN PACIFIC RETAIL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
--------------------------
1998 1997
---------- ----------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,923 $ 3,163
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,454 6,303
Amortization of prepaid financing costs 524 302
Income from unconsolidated partnerships (531) (218)
Extraordinary loss on early extinguishment
of debt -- 1,043
Minority interest 37 106
Changes in assets and liabilities:
Decrease in restricted cash 191 49
Increase in accounts receivable (1,218) (926)
Increase in accrued rent receivable (1,453) (801)
Decrease in notes receivable 225 --
Increase in deferred lease commissions (637) (628)
Increase in prepaid expenses (188) (1,337)
Increase in other assets (545) (331)
Increase (decrease) in accounts payable 1,573 (1,184)
Increase (decrease) in accrued expenses and
other liabilities (301) 40
--------- ---------
Net cash provided by operating activities 27,054 5,581
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of and additions to operating
properties (127,126) (100,409)
Additions to property under development -- (3,245)
Increase (decrease) in construction accounts payable (833) 1,134
Contributions to unconsolidated partnerships -- (7,357)
Distributions from unconsolidated partnerships 540 --
Increase in notes receivable -- (4,648)
Collections of notes receivable 92 5,351
--------- ---------
Net cash used in investing activities (127,327) (109,174)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit proceeds 134,501 --
Line of credit payments (96,950) --
Notes payable proceeds -- 13,600
Notes payable payments (1,273) (122,531)
Advances from related party -- 67,393
Payment of financing costs (499) --
Acquisition of minority interest (145) (170)
Payment of prepayment penalties -- (1,035)
Refunds from loan escrow 43 393
Issuance of common stock 85,913 143,976
Dividends paid (20,526) --
--------- ---------
Net cash provided by financing activities 101,064 101,626
--------- ---------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 791 (1,967)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -- 8,235
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 791 $ 6,268
========= =========
</TABLE>
(Continued)
4
<PAGE> 5
PAN PACIFIC RETAIL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Nine Months
Ended
September 30,
--------------------
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized
of $128 and $229, respectively) $ 13,020 $11,662
Income taxes paid $ 7 $ 13
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Note payable assumed upon acquisition $ 3,767 $19,042
Note receivable/wrap note payable assumed $ -- $ 1,519
Foreclosure of a property securing a note receivable $ 601 $ --
Transfer of acquisition deposits from other assets to
property $ 1,465 $ --
Transfer from property under development to operating
properties $ -- $ 5,907
Transfer from property under development to deferred
lease commissions $ -- $ 119
Accrual of offering costs $ -- $ 692
Transfer of notes receivable to operating properties
through a deed in lieu of foreclosure $ -- $ 1,283
Reclassification of advances from parent to
shareholders' equity $ -- $99,506
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
PAN PACIFIC RETAIL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 1998 (unaudited) and December 31, 1997, and
for the three and nine months ended September 30, 1998 and 1997
(unaudited)
1. MANAGEMENT STATEMENT AND GENERAL
The consolidated financial statements of Pan Pacific Retail Properties, Inc.
(the "Company") were prepared from the books and records of the Company
without audit and in the opinion of management include all adjustments
(consisting of only normal recurring accruals) necessary to present a fair
statement of results for the interim periods presented. Readers of this
quarterly report should refer to the audited financial statements of the
Company for the year ended December 31, 1997, which are included in the
Company's 1997 Annual Report on Form 10-K, as certain disclosures which
would substantially duplicate those contained in such audited financial
statements have been omitted from this report.
Certain reclassifications of amounts have been made in order to conform to
the current presentation.
2. LINE OF CREDIT
The Company increased its $150,000,000 unsecured credit facility to
$200,000,000 in March 1998. The unsecured credit facility bears interest at
the Company's option at either LIBOR plus 1.375% or a reference rate and
expires in August 2000. At September 30, 1998, the amount drawn on this line
of credit was $100,001,000 and the interest rate was 6.97%. The net proceeds
drawn in the nine-month period ended September 30, 1998 were $37,551,000.
These net proceeds, after the effect of a paydown of approximately
$82,200,000 in connection with the Company's secondary offering (Note 4),
were used to acquire 13 properties for an aggregate amount of approximately
$127,600,000.
3. STOCK OPTION AND INCENTIVE PLAN
In 1997, the Company established the 1997 Stock Option and Incentive Plan
(the "Plan") pursuant to which the Company's Board of Directors may grant
stock options or awards to purchase up to 1,620,000 shares of common stock
to officers, directors and key employees. At the time of the Company's
initial public offering, the Company issued 900,000 common stock options
pursuant to the Plan. The stock options were granted with an exercise price
of $19.50, equal to the stock's fair market value at the date of grant. On
March 17, 1998, the Company granted an additional 277,500 common stock
options with an exercise price of $22.188, equal to the stock's fair market
value at the date of grant. The stock options have seven year terms and will
vest 331/3% per year over three years from the date of grant, except the
independent directors who received non-qualified options that vested 331/3%
immediately, with the remainder vesting ratably over two years. No other
options or awards have been granted. During the nine-month period ended
September 30, 1998, 20,666 options were forfeited. An additional 463,166
shares of common stock remain reserved for issuance under the Plan. As such,
at September 30, 1998, there were 1,156,834 common stock options
outstanding, 313,333 of which were exercisable and none had expired.
The following is a reconciliation of the denominator for the basic earnings
per share ("EPS") computation to the denominator of the diluted EPS
computation (all net income is available to common stockholders for the
periods presented):
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Weighted average shares used for the basic EPS
computation................................ 21,162,012 18,949,455
Incremental shares from the assumed exercise of
dilutive stock options..................... -- 54,029
---------- ----------
Weighted average shares used for the diluted EPS
computation................................ 21,162,012 19,003,484
========== ==========
</TABLE>
4. SECONDARY OFFERING OF COMMON STOCK
On May 18, 1998 the Company completed a secondary offering of 4,348,000
shares of common stock at $21.125 per share (including 348,000 shares issued
as a result of the partial exercise of the overallotment option by the
underwriters on June 11, 1998). The aggregate proceeds to the Company, net
of underwriters' discount, advisory fee and offering costs were
approximately $85,913,000.
6
<PAGE> 7
PAN PACIFIC RETAIL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) As of
September 30, 1998 (unaudited) and December 31, 1997, and
for the three and nine months ended September 30, 1998 and 1997 (unaudited)
5. RELATED PARTY TRANSACTIONS
(a) Included in general and administrative expenses are management fees totaling
$481,000 for the nine months ended September 30, 1997, which are a
reimbursement by Pan Pacific Development Properties of costs incurred by
Revenue Properties Company Limited ("Revenue Properties"), a related party,
for managing the development of the properties, directing corporate
strategy, and consulting on operations. Effective August 13, 1997, at the
closing of the Company's initial public offering, these fees are no longer
being incurred by the Company.
(b) Pan Pacific Development Properties paid a consulting fee of $315,000 for the
nine months ended September 30, 1997, to a sole proprietorship owned by a
director of Revenue Properties. Effective August 13, 1997, at the closing of
the Company's initial public offering, these fees are no longer being
incurred by the Company.
(c) Pan Pacific Development Properties incurred $529,000 for the nine months
ended September 30, 1997, for loan guaranty fees charged by Revenue
Properties. These fees are recorded as a component of other expenses.
Effective August 13, 1997, at the closing of the Company's initial public
offering, these fees are no longer being incurred by the Company.
(d) The Company received net advances from Revenue Properties of $67,393,000 for
the nine months ended September 30, 1997.
(e) Dividends paid to Pan Pacific Development (U.S.) Inc. ("PPD"), a
wholly-owned subsidiary of Revenue Properties, were $10,518,000 during the
nine months ended September 30, 1998. At September 30, 1998, $4,107,000 of
dividends were payable to PPD. There were no dividends paid during the
nine-month period ended September 30, 1997.
6. COMMITMENTS AND CONTINGENCIES
Various claims and legal proceedings arise in the ordinary course of
business. The ultimate amount of liability from all claims and actions
cannot be determined with certainty, but in the opinion of management, the
ultimate liability from all pending and threatened legal claims will not
materially affect the consolidated financial statements taken as a whole.
7. SUBSEQUENT EVENTS
The company has entered into a series of agreements to acquire seven retail
properties located in Oregon (the "Mercury Portfolio") as follows:
On October 9, 1998, the Company purchased Hermiston Shopping Center, a
shopping center located in Hermiston, Oregon. The purchase price was
$7,722,000 and was financed by a borrowing under the Company's line of
credit. In addition, the Company incurred a prepayment penalty of
$261,000.
On October 9, 1998, the Company executed an Amended and Restated Limited
Liability Company Agreement of Pan Pacific (Portland), LLC (the
"Agreement") forming a DownREIT entity ( the "LLC"). Pursuant to the
Agreement and other related agreements, the LLC purchased Hood River
Shopping Center, a shopping center located in Hood River, Oregon and
Oregon Trail Shopping Center, located in Gresham, Oregon. The purchase
prices for these properties were $4,676,000 and $14,372,000,
respectively. In addition, the LLC incurred prepayment penalties related
to these assets of $143,000 and $618,000, respectively. The assets were
acquired with funds contributed to the LLC by the Company, the source of
which was a borrowing under the Company's line of credit.
On November 5, 1998, pursuant to the aforementioned agreements, the LLC
purchased MIKZ Development, LLC, an entity which owns Sunset Mall, a
shopping center located in Portland, Oregon. The purchase price, net of
associated debt of $7,576,000 was $4,442,000. The LLC issued 198,597 LLC
units in exchange for all of the outstanding LLC units of MIKZ
Development, LLC.
On November 9, 1998 pursuant to the aforementioned agreements, the LLC
purchased a 99% ownership interest in Smudik Development, LLC, an entity
which owns Sandy Shopping Center, Southgate Shopping Center and Oregon
City Shopping Center. The shopping centers are located in Sandy,
Milwaukie, and Oregon City, Oregon, respectively. The purchase price,
net of associated debt of $16,995,000, was $13,831,000. The LLC issued
634,020 LLC units in exchange for 99% of the outstanding LLC units of
Smudik Development, LLC. The remaining 1% interest in Smudik
Development, LLC was purchased for cash by the Company through a newly
formed wholly-owned corporate subsidiary.
7
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in connection with the
consolidated financial statements of Pan Pacific Retail Properties, Inc. and
subsidiaries (the "Company"), and the notes thereto, appearing elsewhere in this
report.
The Company receives income primarily from rental revenue (including
recoveries from tenants) from shopping center properties. As a result of the
Company's acquisition and development program, the financial data show increases
in total revenue from period to period, largely attributable to: (i) property
acquisitions and (ii) the benefit of a full period of rental and other revenue
from a property placed into operation in the third quarter of 1997.
The Company believes that operating costs will decrease as a percentage
of revenue as the Company achieves economies of scale through increases in its
portfolio's revenue base. For example, during the nine months ended September
30, 1998, the Company owned properties comprising a weighted average gross
leasable area ("GLA") of 5,702,664 square feet. Total expenses, excluding
interest, depreciation and amortization for the nine months ended September 30,
1998 were $14,206,000 or an annualized $3.32 per square foot. By comparison,
during the nine months ended September 30, 1997, the Company owned properties
comprising a weighted average GLA of 3,374,927 square feet. Total expenses,
excluding interest, depreciation and amortization for the nine months ended
September 30, 1997 were $10,205,000 or an annualized $4.03 per square foot.
The Company expects that the more significant part of its revenue growth
in the next year or two will come from additional acquisitions and rent
increases from re-leasing and re-tenanting initiatives.
RESULTS OF OPERATIONS
Comparison of Nine months ended September 30, 1998 to Nine months ended
September 30, 1997.
Total revenue increased by $24,792,000 or 77.1% to $56,930,000 for the
nine months ended September 30, 1998 as compared to $32,138,000 for the nine
months ended September 30, 1997.
Rental revenue increased by $19,864,000 or 78.1% to $45,306,000 from
$25,442,000 for the nine months ended September 30, 1998, compared to the nine
months ended September 30, 1997. The increase in rental revenue resulted
principally from the acquisitions of Chico Crossroads in February 1997, Monterey
Plaza in April 1997, Fairmont Shopping Center in May 1997, Lakewood Shopping
Center in June 1997, Green Valley Town & Country in August 1997, Rainbow
Promenade in September 1997, Claremont Village, Olympia West Center and Tacoma
Central in November 1997, Tustin Heights Shopping Center, Palmdale Shopping
Center and Brookvale Shopping Center in December 1997, Bear Creek Plaza and San
Dimas Marketplace in January 1998, Milwaukie Marketplace, Pioneer Plaza, Powell
Valley Junction and Shute Park Plaza in February 1998, Manteca Marketplace in
March 1998, a 24 Hour Fitness Building, Panther Lake Shopping Center and
Creekside Center in April 1998, Westwood Village Shopping Center and Fashion
Faire Place in May 1998, and Pacific Commons Shopping Center in June 1998
(collectively the "Acquisitions"). In addition, the commencement of operations
of Laguna Village Phase II in the third quarter of 1997 added to this increase.
8
<PAGE> 9
Recoveries from tenants increased by $4,175,000 or 75.1% to $9,733,000
for the nine months ended September 30, 1998, compared to $5,558,000 for the
nine months ended September 30, 1997. This increase resulted primarily from the
Acquisitions and Laguna Village Phase II. Recoveries from tenants were 89.3% of
property operating expenses, property taxes and property management fees for the
nine months ended September 30, 1998 as compared to 84.4% of the same expenses
for the same period in 1997.
Property expenses include property operating expenses and property
taxes. Property operating expenses increased by $2,585,000 or 60.4% to
$6,862,000 from $4,277,000 for the nine months ended September 30, 1998,
compared to the nine months ended September 30, 1997. The increase in property
operating expenses was primarily attributable to the Acquisitions and Laguna
Village Phase II. Property taxes increased by $1,727,000 or 74.7% to $4,038,000
from $2,311,000 for the nine months ended September 30, 1998, compared to the
nine months ended September 30, 1997. The increase in property taxes was also
primarily the result of the Acquisitions and Laguna Village Phase II.
Depreciation and amortization increased by $4,151,000 or 65.9% to
$10,454,000 from $6,303,000 for the nine months ended September 30, 1998,
compared to the nine months ended September 30, 1997. This was primarily due to
the Acquisitions and Laguna Village Phase II.
Interest expense increased by $2,057,000 or 18.3% to $13,310,000 from
$11,253,000 for the nine months ended September 30, 1998, compared to the nine
months ended September 30, 1997. The increase is primarily the result of
interest expense relating to amounts drawn on the Company's unsecured credit
facility (the "Unsecured Credit Facility") to finance the Acquisitions, interest
expense related to the assumption of fixed rate mortgages on Tacoma Central and
Olympia West in the fourth quarter of 1997 as well as interest expense on the
fixed rate mortgage assumed related to Westwood Village Shopping Center in the
second quarter of 1998. These increases were offset by decreases in interest
expense related to the repayment of debt of approximately $134,000,000 in August
1997 in connection with the Company's initial public offering ("IPO") and
approximately $82,000,000 in May 1998 in connection with the Company's secondary
offering.
General and administrative expenses increased by $162,000 or 5.7% to
$3,001,000 from $2,839,000 for the nine months ended September 30, 1998,
compared to the nine months ended September 30, 1997. This increase was
primarily attributable to annual salary increases and costs associated with
additional staffing necessitated by the Acquisitions, partially offset by the
elimination of management fees paid to Revenue Properties Company Limited
("Revenue Properties") effective with the completion of the Company's IPO. As a
percentage of total revenue, general and administrative expenses were 5.3% and
8.8% for the nine months ended September 30, 1998 and 1997, respectively.
Other expenses consist primarily of loan guaranty fees and the expensing
of due diligence costs for acquisitions that were not consummated. Other
expenses decreased by $473,000 or 60.8% to $305,000 from $778,000 for the nine
months ended September 30, 1998, compared to the nine months ended September 30,
1997. The decrease was primarily due to loan guaranty fees paid to Revenue
Properties which are no longer being charged as the debt which was guaranteed
was paid off in August 1997 in connection with the Company's IPO. This decrease
was partially offset by an allowance which was provided for a corporate note
receivable and the expensing of due diligence costs related to potential
acquisitions which were not consummated in the current period. The comparable
period in 1997 also included $219,000 of due diligence costs for acquisitions
that were not completed.
9
<PAGE> 10
The following table compares the operating data for the 19 properties
("Same Store Properties") that were owned and in operation for the entirety of
both the nine months ended September 30, 1998 and September 30, 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenue:
Rental $21,525,000 $20,929,000
Recoveries from tenants 4,952,000 4,765,000
Income from unconsolidated
partnerships 687,000 651,000
Other 390,000 376,000
----------- -----------
$27,554,000 $26,721,000
Operating expenses:
Property operating, property taxes
and property management fees 6,255,000 6,426,000
----------- -----------
Operating income $21,299,000 $20,295,000
=========== ===========
</TABLE>
Operating income for the Same Store Properties for the nine months ended
September 30, 1998 increased over the same period in the prior year by
$1,004,000. This increase was attributable to increased rental revenue of
$596,000 due to increased occupancy levels primarily at Olympia Square, Sahara
Pavilion South, Sunset Square and Winterwood Pavilion, increases in rent for
anchor tenants at Chino Town Square and Winterwood Pavilion and an increase in
percentage rent at Cheyenne Commons. Recoveries increased over the same period
in the prior year by $187,000 due primarily to an increased occupancy level at
Sunset Square as well as higher billable common area maintenance expenses at
Sahara Pavilion North and Sahara Pavilion South. Also, gross leases at Arlington
were re-written as triple net leases upon re-leasing. Property operating
expenses for these Same Store Properties decreased by $171,000 for the nine
months ended September 30, 1998, over the same period in the prior year,
primarily due to bad debt expense at Sunset Square and Cheyenne Commons in the
prior period.
Comparison of the Three months ended September 30, 1998 to the Three
months ended September 30, 1997.
Total revenue increased by $8,088,000 or 66.6% to $20,242,000 for the
three months ended September 30, 1998 as compared to $12,154,000 for the three
months ended September 30, 1997.
Rental revenue increased by $6,330,000 or 64.9% to $16,089,000 from
$9,759,000 for the three months ended September 30, 1998, compared to the three
months ended September 30, 1997. The increase in rental revenue resulted
principally from the Acquisitions previously noted in the nine month comparative
results, exclusive of Chico Crossroads, Monterey Plaza, Fairmont Shopping Center
and Lakewood Shopping Center, which were acquired during the second quarter of
1997. In addition, the commencement of operations of Laguna Village Phase II in
the third quarter of 1997 added to this increase.
Recoveries from tenants increased by $1,499,000 or 74.1% to $3,521,000
for the three months ended September 30, 1998, compared to $2,022,000 for the
three months ended September 30, 1997. This increase resulted primarily from the
Acquisitions, exclusive of Chico Crossroads, Monterey Plaza, Fairmont Shopping
Center, Lakewood Shopping Center and Laguna Village Phase II. Recoveries from
tenants were 90.0% of property operating expenses, property taxes and management
fees for the three months ended September 30, 1998, as compared to 87.3% of the
same expenses for the comparable period in 1997.
10
<PAGE> 11
Property expenses include property operating expenses and property
taxes. Property operating expenses increased by $998,000 or 67.4% to $2,479,000
from $1,481,000 for the three months ended September 30, 1998, compared to the
three months ended September 30, 1997. The increase in property operating
expenses was primarily attributable to the Acquisitions, exclusive of Chico
Crossroads, Monterey Plaza, Fairmont Shopping Center, Lakewood Shopping Center
and Laguna Village Phase II. Property taxes increased by $597,000 or 71.5% to
$1,432,000 from $835,000 for the three months ended September 30, 1998, compared
to the three months ended September 30, 1997. The increase in property taxes was
also primarily the result of the Acquisitions, exclusive of Chico Crossroads,
Monterey Plaza, Fairmont Shopping Center, Lakewood Shopping Center and Laguna
Village Phase II.
Depreciation and amortization increased by $1,291,000 or 58.4% to
$3,501,000 from $2,210,000 for the three months ended September 30, 1998,
compared to the three months ended September 30, 1997. This was primarily due to
the Acquisitions, exclusive of Chico Crossroads, Monterey Plaza, Fairmont
Shopping Center, Lakewood Shopping Center and Laguna Village Phase II.
Interest expense increased by $974,000 or 29.8% to $4,242,000 from
$3,268,000 for the three months ended September 30, 1998, compared to the three
months ended September 30, 1997. The increase is primarily the result of
interest expense relating to amounts drawn on the Company's Unsecured Credit
Facility to finance the Acquisitions, interest expense related to the assumption
of fixed rate mortgages on Tacoma Central and Olympia West in the fourth quarter
of 1997 as well as interest expense on the fixed rate mortgage assumed related
to Westwood Village Shopping Center in the second quarter of 1998.
General and administrative expenses increased by $155,000 or 16.2% to
$1,114,000 from $959,000 for the three months ended September 30, 1998, compared
to the three months ended September 30, 1997. This increase was primarily
attributable to annual salary increases and costs associated with additional
staffing necessitated by the Acquisitions, partially offset by the elimination
of management fees paid to Revenue Properties effective with the completion of
the Company's IPO. As a percentage of total revenue, general and administrative
expenses were 5.5% and 7.9% for the three months ended September 30, 1998 and
1997, respectively.
Other expenses consist primarily of loan guaranty fees and the expensing
of due diligence costs for acquisitions that were not consummated. Other
expenses decreased by $116,000 or 94.3% to $7,000 from $123,000 for the three
months ended September 30, 1998, compared to the three months ended September
30, 1997. The decrease was primarily due to loan guaranty fees paid to Revenue
Properties which are no longer being charged as the debt which was guaranteed
was paid off in August 1997 in connection with the Company's IPO. This decrease
was partially offset by the expensing of due diligence costs in 1997 related to
potential acquisitions which were not consummated.
The following table compares the operating data for the 24 properties
("Same Store Properties") that were owned and in operation for the entirety of
both the three months ended September 30, 1998 and September 30, 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenue:
Rental $ 8,961,000 $ 8,915,000
Recoveries from tenants 2,072,000 1,945,000
Income from unconsolidated
partnerships 232,000 211,000
Other 90,000 40,000
----------- -----------
$11,355,000 $11,111,000
Operating expenses:
Property operating, property taxes
and property management fees 2,586,000 2,601,000
----------- -----------
Operating income $ 8,769,000 $ 8,510,000
=========== ===========
</TABLE>
11
<PAGE> 12
Operating income for the Same Store Properties for the three months
ended September 30, 1998 increased over the same periods in the prior year by
$259,000. This increase was attributable to increased rental revenue of $46,000
due to increased occupancy levels primarily at Chino Town Square, Lakewood
Shopping Center, Monterey Plaza and Olympia Square, an increase in base rent for
an anchor tenant at Winterwood Pavilion and increases in base rents at Cheyenne
Commons. Recoveries from tenants increased $127,000 due to increased occupancy
levels at Lakewood Shopping Center and Monterey Plaza as well as higher billable
common area expenses at Sahara Pavilion North. Also, gross leases at Arlington
were re-written as triple net leases upon re-leasing. Other revenue increased
$50,000 primarily due to late fees and a lease termination fee at Canyon Ridge
Plaza.
FUNDS FROM OPERATIONS
The White Paper on Funds from Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in March 1995 (the "White Paper") defines Funds from Operations as
net income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from debt restructuring and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Management considers Funds from Operations an
appropriate measure of performance of an equity REIT because it is predicated on
cash flow analyses. The Company computes Funds from Operations in accordance
with standards established by the White Paper. The Company's computation of
Funds from Operations may, however, differ from the methodology for calculating
Funds from Operations utilized by other equity REITs and, therefore, may not be
comparable to such other REITs. Funds from Operations should not be considered
as an alternative to net income (determined in accordance with GAAP) as a
measure of the Company's liquidity or profitability, nor is it indicative of
funds available to fund the Company's cash needs, including its ability to make
distributions.
The following table presents the Company's actual Funds from Operations
for the three and nine months ended September 30, 1998 and pro forma Funds from
Operations for the three and nine months ended September 30, 1997. The pro forma
information for the three and nine months ended September 30, 1997 assumes the
IPO and related formation transactions and the repayment of notes payable with
the net proceeds of the IPO all had occurred on January 1, 1997:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ,
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1998 1997 1998 1997
ACTUAL PRO FORMA ACTUAL PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 7,449,000 $ 4,627,000 $ 18,923,000 $ 11,271,000
Add:
Extraordinary loss -- -- -- 1,043,000
Depreciation and amortization 3,501,000 2,246,000 10,454,000 6,859,000
Depreciation of unconsolidated
partnerships 53,000 51,000 157,000 154,000
Depreciation of non-real estate
corporate assets (49,000) (49,000) (154,000) (152,000)
------------ ------------ ------------ ------------
Funds from Operations $ 10,954,000 $ 6,875,000 $ 29,380,000 $ 19,175,000
============ ============ ============ ============
Weighted average number of shares
of common stock outstanding
(assuming dilution) 21,162,012 -- 19,003,484 --
Number of shares of common stock
assumed to be outstanding -- 16,814,012 -- 16,814,012
</TABLE>
12
<PAGE> 13
CASH FLOWS
Comparison of the Nine months ended September 30, 1998 to the
Nine months ended September 30, 1997.
Net cash provided by operating activities increased by $21,473,000 to
$27,054,000 for the nine months ended September 30, 1998, as compared to
$5,581,000 for the nine months ended September 30, 1997. The increase was
primarily the result of an increase in net income.
Net cash used in investing activities increased by $18,153,000 to
$127,327,000 for the nine months ended September 30, 1998, compared to
$109,174,000 for the nine months ended September 30, 1997. Cash used for
investing activities was primarily for the purpose of acquiring additional
properties. In the comparable period in 1997, the cash used for investing
activities was also primarily for the purpose of acquisitions.
Net cash provided by financing activities decreased by $562,000 to
$101,064,000 for the nine months ended September 30, 1998, compared to
$101,626,000 for the nine months ended September 30, 1997. Cash provided by
financing activities resulted primarily from the issuance of capital stock
through the Company's secondary offering which closed in May 1998 and amounts
drawn on the Company's Unsecured Credit Facility. These sources of cash were
partially offset by the payments of dividends for the fourth quarter of 1997 and
the first and second quarters of 1998. In the comparable period in 1997, cash
provided by financing activities was derived from an increase in advances from a
related party primarily for the purpose of acquisitions and the issuance of
capital stock through the Company's IPO which closed in August 1997. These
sources of cash were partially offset by the pay down of mortgage debt in
connection with the IPO.
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
systems, software and devices with embedded technology that are date-sensitive
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures, miscalculations or disruptions in operations,
including, among other things, a temporary inability to process transactions or
engage in similar normal business activities.
The Company is currently in the process of assessing how it may be
impacted by the Year 2000 issue and formulating and implementing a comprehensive
plan to address all known aspects of the issue.
Based on the Company's recent assessment of its internal computer
systems (including related hardware, software, customized applications and
network systems) with respect to the Year 2000 issue, the Company determined
that its existing network and IBM AS400 operating systems were not Year 2000
compliant. Accordingly, the Company recently replaced its network operating
system with a new operating system and expects to complete the installation of a
modification to its IBM AS400 operating system by the end of the fourth quarter
of 1998. The Company believes that these measures, the actual and estimated
costs of which have been and are expected to continue to be immaterial in the
aggregate, will enable its internal computer systems to be Year 2000 compliant.
The Company is also reviewing the efforts of its significant tenants,
vendors and other service providers to become Year 2000 compliant. Letters and
questionnaires have been or are in the process of being sent to all critical
entities with which the Company does business to assess their Year 2000
readiness. The Company will review the responses to such letters and
questionnaires, assess the impact that the Year 2000 readiness status of such
entities may have on the Company's operations, and take whatever action is
deemed necessary. Based on responses received to date, there has been no
indication that the respondents have any material concerns related to their
ability to address all of their known significant Year 2000 issues on a timely
basis. The Company anticipates that these review activities will be on-going for
the remainder of 1998 and all of 1999 and will include any necessary follow-up
efforts. The Company, however, cannot presently estimate the total cost of this
phase of its Year 2000 readiness program. Although the review of such entities
is continuing, the Company is not currently aware of any third party
circumstances with respect to the Year 2000 issue that may have a material
adverse impact on the Company. The Company can provide no assurance that the
Year 2000 compliance plans of such third parties will be successfully completed
in a timely manner.
13
<PAGE> 14
Based on the results to date of the Company's internal assessment and
external inquiries, the Company does not believe that the Year 2000 issue will
pose significant operational problems for the Company or otherwise have a
material adverse effect on its results of operations or financial position.
Although management believes it has undertaken a careful and thorough analysis,
if all Year 2000 issues are not properly identified, or assessment, remediation
and testing efforts are not completed in a timely manner with respect to the
problems that are identified, there can be no assurance that the Year 2000 issue
will not have a material adverse effect on the Company's results of operations
or adversely affect the Company's relationships with tenants, vendors and other
service providers. Further, management believes it has undertaken a careful
survey of third party entities and does not believe there to be a material
concern based upon the potential third party risks that have been identified,
however, there can be no assurance that the Year 2000 issues of other entities
will not have a material adverse effect on the Company's systems or results of
operations. A contingency plan has not yet been developed for dealing with the
most reasonably likely worst case scenario resulting from the Year 2000 issues
as such scenario has not yet been clearly identified. The Company currently
plans to complete such contingency planning by June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes the IPO and the related formation transactions that
were completed in August 1997 and the secondary offering which was completed in
May 1998 improved its financial position through changes to its capital
structure, which principally included a substantial reduction of its overall
debt and its debt-to-equity ratio. In connection with the formation
transactions, the Company repaid all of its existing floating rate mortgage
debt. As a result, the total principal amount of outstanding secured debt after
the formation transactions and the acquisition of Green Valley Town & Country
was reduced by approximately $146,000,000. In connection with the secondary
offering, the Unsecured Credit Facility was paid down by approximately
$82,000,000. These transactions resulted in a significant reduction in interest
expense as a percentage of total revenue, 23.4% for the nine months ended
September 30, 1998 as compared to 35.0% for the nine months ended September 30,
1997. Thus, cash from operations required to fund debt service requirements was
substantially decreased.
The total market capitalization of the Company at September 30, 1998 was
approximately $604,953,000 based on the market closing price at September 30,
1998 of $18.625 per share and the debt outstanding of approximately $210,811,000
(exclusive of accounts payable and accrued expenses). As a result, the Company's
debt to total market capitalization ratio was approximately 34.9% at September
30, 1998. On May 18, 1998 the Company closed its secondary equity offering of
4,348,000 shares of common stock which included the partial exercise of the
underwriters' over allotment option. The Company believes that its capital
structure combined with its Unsecured Credit Facility enhances the Company's
ability to take advantage of acquisition opportunities as well as to provide
funds for general corporate purposes.
In March 1998, the Company obtained an increase to its Unsecured Credit
Facility from $150,000,000 to $200,000,000 and a reduction in the borrowing rate
thereunder to LIBOR plus 1.375% (which rate is reduced to 1.25% for as long as
the Company's debt-to-book value ratio is .30 or below). The Company had
approximately $99,999,000 available under the Unsecured Credit Facility at
September 30, 1998. At the Company's option, amounts borrowed under the
Unsecured Credit Facility bear interest at either LIBOR plus 1.375% or a
reference rate. The weighted average interest rate for amounts borrowed under
the Unsecured Credit Facility at September 30, 1998 was 6.97%. The Company
anticipates that the Unsecured Credit Facility will continue to be used
primarily to acquire additional properties and for general corporate purposes.
The Company's mortgage indebtedness outstanding at September 30, 1998
requires balloon payments of $130,060,000 in 2000, $4,004,000 in 2004,
$7,395,000 in 2005, and $52,748,000 in 2007. The balloon payments due in the
year 2000 include the balance drawn on the Unsecured Credit Facility at
September 30, 1998 of $100,001,000. It is likely that the Company will not have
sufficient funds on hand to repay these balloon amounts at maturity. Therefore,
the Company expects to refinance such debt either through additional debt
financings secured by individual properties or groups of properties, by
unsecured private or public debt offerings or by additional equity offerings.
The Unsecured Credit Facility, which matures in 2000, is renewable subject to
certain conditions.
14
<PAGE> 15
The Company expects to make distributions from cash available for
distributions which the Company believes will exceed historical cash available
for distributions due to the reduction in debt service resulting from the
repayments of indebtedness described above and from the acquisition of
additional properties. Amounts accumulated for distribution will be invested by
the Company primarily in short-term investments such as collateralized
securities of the United States government or its agencies, high-grade
commercial paper and bank deposits or will be used to pay down outstanding
balances on the Unsecured Credit Facility, if any. On October 6, 1997, the Board
of Directors of the Company declared the first dividend of $0.2128 per share
paid on October 31, 1997 to shareholders of record on October 22, 1997. The
dividend was for the prorated period from August 8, 1997 to September 30, 1997.
On December 5, 1997, the Board of Directors of the Company declared a dividend
of $0.3625 per share for the fourth quarter 1997 which was paid on January 19,
1998 to shareholders of record on December 29, 1997. On March 17, 1998, the
Board of Directors declared an increased dividend of $0.38 per share for the
first quarter 1998 which was paid on April 17, 1998 to shareholders of record on
March 31, 1998. On June 19, 1998 the Board of Directors declared a dividend of
$0.38 per share for the second quarter 1998 which was paid on July 17, 1998 to
shareholders of record on June 30, 1998. On September 11, 1998 the Board of
Directors declared a dividend of $0.38 per share for the third quarter 1998
which was paid on October 21, 1998 to shareholders of record on October 5, 1998.
The Company expects to meet its short-term liquidity requirements
generally through its current working capital and net cash provided by
operations. The Company believes that its net cash provided by operations will
be sufficient to allow the Company to make the distributions necessary to enable
the Company to continue to qualify as a REIT. The Company also believes that the
foregoing sources of liquidity will be sufficient to fund its short-term
liquidity needs for the foreseeable future.
The Company expects to meet certain long-term liquidity requirements
such as property acquisition and development, scheduled debt maturities,
renovations, expansions and other non-recurring capital improvements through
long-term secured and unsecured indebtedness and the issuance of additional
equity or debt securities. The Company also expects to use funds available under
the Unsecured Credit Facility to finance acquisition and development activities
and capital improvements on an interim basis.
INFLATION
Substantially all of the leases provide for the recovery of real estate
taxes and operating expenses incurred by the Company. In addition, many of the
leases provide for fixed base rent increases or indexed escalations (based on
the consumer price index or other measures) and percentage rent. The Company
believes that inflationary increases in expenses will be substantially offset by
the expense reimbursements, contractual rent increases and percentage rent
described above.
The Unsecured Credit Facility bears interest at a variable rate which
will be influenced by changes in short-term interest rates and will be sensitive
to inflation.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1 Articles of Amendment and Restatement of the
Company (previously filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-11
(Registration No. 333-28715) and incorporated
herein by reference)
3.2 Amended and Restated Bylaws of the Company
(previously filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-11 (Registration
No. 333- 28715) and incorporated herein by
reference)
4.1 Form of Certificate of Common Stock (previously
filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-11 (Registration No. 333-28715)
and incorporated herein by reference)
10.1 Amended and Restated Limited Liability Company
Agreement of Pan Pacific (Portland), LLC
(previously filed as Exhibit 99.1 to the Company's
Form 8-K filed October 23, 1998 and incorporated
herein by reference)
10.2 Purchase and Sale and Ground Lease Assignment and
Assumption Agreement and Escrow Instructions
(previously filed as Exhibit 99.2 to the Company's
Form 8-K filed October 23, 1998 and incorporated
herein by reference)
10.3 First Amendment To Purchase and Sale and Ground
Lease Assignment and Assumption Agreement and
Escrow Instructions (previously filed as Exhibit
99.3 to the Company's Form 8-K filed October 23,
1998 and incorporated herein by reference)
10.4 Purchase and Sale Agreement and Escrow Instructions
(previously filed as Exhibit 99.4 to the Company's
Form 8-K filed October 23, 1998 and incorporated
herein by reference)
10.5 Contribution Agreement and Escrow Instructions by
and between Portland Fixture Limited Partnership,
PFMGP, Inc., and Pan Pacific (Portland), LLC dated
September 23, 1998, and related amendments
(previously filed as Exhibit 99.2 to the Company's
Form 8-K filed November 12, 1998 and incorporated
herein by reference)
10.6 Contribution Agreement and Escrow Instructions by
and between Portland Fixture Limited Partnership,
Independent Member Corp., Byron P. Henry, Steven J.
Oliva and Pan Pacific (Portland), LLC dated
September 23, 1998, and related amendments
(previously filed as Exhibit 99.3 to the Company's
Form 8-K filed November 12, 1998 and incorporated
herein by reference)
27.1 Financial Data Schedule (electronically filed with
the Securities and Exchange Commission only)
16
<PAGE> 17
(b) Reports on Form 8-K
A Form 8-K was filed on October 23, 1998 for the purpose of
reporting the formation of a Down REIT entity through the
execution of an Amended and Restated Limited Liability
Company Agreement of Pan Pacific (Portland), LLC, (the
"LLC"), and the simultaneous acquisitions of Oregon Trail
Shopping Center, Hood River Shopping Center and Hermiston
Shopping Center by the Registrant and the LLC. No financial
statements or pro forma financial information was filed as
it was impracticable to do so at the time. An amended 8-K
which will include financial statements and pro forma
financial information will be filed on or before December
23, 1998.
A Form 8-K was filed on November 12, 1998 for the purpose of
reporting the acquisitions of four shopping centers through
the acquisition of MIKZ Development, LLC ("MIKZ") and Smudik
Development, LLC ("Smudik") by Pan Pacific (Portland), LLC
and the Registrant through a newly formed wholly-owned
corporate subsidiary. MIKZ is an entity which owns Sunset
Mall Shopping Center. Smudik is an entity which owns three
shopping centers, Sandy Marketplace, Southgate Shopping
Center and Oregon City Shopping Center. No financial
statements or pro forma financial information was filed as
it was impracticable to do so at the time. An amended 8-K
which will include financial statements and pro forma
financial information will be filed on or before January 19,
1998.
17
<PAGE> 18
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 on November 6, 1998.
PAN PACIFIC RETAIL PROPERTIES, INC.
By: /s/ STUART A. TANZ
-------------------------------------
Stuart A. Tanz
President and Chief Executive Officer
By: /s/ DAVID L. ADLARD
-------------------------------------
David L. Adlard
Executive Vice President and
Chief Financial Officer
By: /s/ LAURIE A. SNEVE
-------------------------------------
Laurie A. Sneve, CPA
Vice President and Controller
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,261
<SECURITIES> 0
<RECEIVABLES> 15,592
<ALLOWANCES> 1,612
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 617,379
<DEPRECIATION> 38,770
<TOTAL-ASSETS> 611,746
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 212
<OTHER-SE> 383,206
<TOTAL-LIABILITY-AND-EQUITY> 611,746
<SALES> 0
<TOTAL-REVENUES> 56,930
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,435
<LOSS-PROVISION> 225
<INTEREST-EXPENSE> 13,310
<INCOME-PRETAX> 18,960
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,923
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
