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 MARCH 31, 2000
Commission File No. 0001042810
EQUITY ONE, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
1600 N.E. MIAMI GARDENS DRIVE, SUITE 200
N. MIAMI BEACH, FLORIDA 33179
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(Address of Principal Executive Offices)
(305) 947-1664
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(Issuer's Telephone Number, Including Area Code)
MARYLAND 52-1794271
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Act of 1934 during the past 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of the close of business on May 3, 2000, 11,683,842 shares of the Company's
common stock, par value $0.01 per share, were issued and outstanding.
<PAGE>
EQUITY ONE, INC.
INDEX TO FORM 10-Q
THREE MONTHS ENDED MARCH 31, 2000
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets- As of March 31, 2000
(unaudited) and December 31, 1999
Condensed Consolidated Statements of Operations-
For the three-month periods ended March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Statements of Comprehensive Income- For the
three-month periods ended March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Statements of Stockholders' Equity- For the
three-month periods ended March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Statements of Cash Flows-
For the three-month periods ended March 31, 2000 and 1999 (unaudited)
Notes to the Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Rental Properties:
Land, building and equipment ......................... $ 186,482 $ 186,154
Building improvements ................................ 6,998 6,311
Land held for development ............................ 15,400 15,401
Construction in progress ............................. 13,124 8,722
--------- ---------
222,004 216,588
Accumulated depreciation ............................. (12,636) (11,669)
--------- ---------
Rental properties, net ............................. 209,368 204,919
Cash and cash equivalents ............................... 192 427
Securities available for sale ........................... 1,285 1,218
Accounts and other receivables, net ..................... 1,192 2,209
Due from related parties ................................ 5 33
Deposits ................................................ 1,350 707
Prepaid and other assets ................................ 762 567
Deferred expenses, net .................................. 2,514 1,723
Goodwill, net ........................................... 682 694
--------- ---------
Total assets ..................................... $ 217,350 $ 212,497
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable ............................... $ 103,577 $ 97,752
Credit Agreement ..................................... 15,086 19,475
Accounts payable and accrued expenses ................ 2,228 1,330
Tenants' security deposits ........................... 1,340 1,274
Deferred rental income ............................... 307 248
Minority interest in equity of consolidated subsidiary 989 989
--------- ---------
Total liabilities ................................ 123,527 121,068
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock ......................................... 116 113
Additional paid-in capital ........................... 92,692 89,990
Retained earnings .................................... 2,023 2,390
Accumulated other comprehensive income ............... (463) (519)
Notes receivable from stock sales .................... (545) (545)
--------- ---------
Total stockholders' equity ....................... 93,823 91,429
--------- ---------
Total liabilities and stockholders' equity .............. $ 217,350 $ 212,497
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------- -------
(UNAUDITED)
REVENUES:
Rental income ......................... $ 8,065 $ 5,985
Investment revenue .................... 39 110
------- -------
Total revenues ...................... 8,104 6,095
------- -------
COSTS AND EXPENSES:
Operating expenses .................... 2,178 1,591
Depreciation and amortization ......... 980 797
Interest .............................. 1,726 1,072
General and administrative expenses ... 573 412
Minority interest in earnings of
consolidated subsidiary ............ 24 23
------- -------
Total costs and expenses ............ 5,481 3,895
------- -------
Net income ............................... $ 2,623 $ 2,200
======= =======
EARNINGS PER SHARE:
Basic earnings per share ................. $ 0.23 $ 0.21
======= =======
Number of shares used in computing basic
earnings per share .................... 11,299 10,298
======= =======
Diluted earnings per share ............... $ 0.23 $ 0.21
======= =======
Number of shares used in computing diluted
earnings per share .................... 11,479 10,433
======= =======
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------- -------
(UNAUDITED)
Net income ............................. $ 2,623 $ 2,200
Other comprehensive income:
Net unrealized holding gain (loss) on
securities available for sale ..... 56 (41)
------- -------
Comprehensive income ................... $ 2,679 $ 2,159
======= =======
See accompanying notes to the condensed consolidated financial statements.
5
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EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
NOTES ACCUMULATED
ADDITIONAL RECEIVABLE OTHER TOTAL
COMMON PAID-IN RETAINED FROM STOCK COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL EARNINGS SALES INCOME EQUITY
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Balance, January 1, 2000............ $ 113 $ 89,990 $ 2,390 $ (545) $ (519) $ 91,429
Issuance of common stock......... 3 2,835 2,838
Stock issuance cost.............. (133) (133)
Net income....................... 2,623 2,623
Dividends paid................... (2,990) (2,990)
Net unrealized holding gain on
securities available for sale.. 56 56
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 31, 2000 (Unaudited). $ 116 $ 92,692 $ 2,023 $ (545) $ (463) $ 93,823
========== ========== ========== ========== ========== ==========
THREE MONTHS ENDED MARCH 30, 1999
Balance, January 1, 1999............ $ 102 $ 81,214 $ -- $ -- $ (98) $ 81,218
Issuance of Common Stock......... 3 1,991 1,994
Net income ...................... $ 2,200 2,200
Dividends paid................... (420) (2,200) (2,620)
Net unrealized holding loss on
securities available for sale.. (41) (41)
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 31, 1999 (Unaudited). $ 105 $ 82,785 $ -- $ -- $ (139) $ 82,751
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................... $ 2,623 $ 2,200
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ..................................... 1,052 828
Provision for losses on accounts receivable ....................... 32 16
Minority interest in earnings of consolidated subsidiary .......... 24 23
Changes in assets and liabilities:
Restricted cash ................................................. -- 6,780
Accounts and other receivables .................................. 985 294
Deposits ........................................................ (643) (466)
Prepaid and other assets ........................................ (195) 150
Accounts payable and accrued expenses ........................... 898 575
Tenants' security deposits ...................................... 66 ---
Deferred rental income .......................................... 59 38
Due from related parties ........................................ 28 32
-------- --------
Net cash provided by operating activities ....................... 4,929 10,470
-------- --------
INVESTING ACTIVITIES:
Acquisition of land held for development ............................ --- (45)
Acquisition of rental property ...................................... (328) (11,350)
Improvements to rental property ..................................... (686) (54)
Construction costs incurred ......................................... (4,402) (3,169)
Purchases of available for sale securities .......................... (11) (155)
Sales and prepayments of securities ................................. --- 7
Change in deposits for acquisition of rental property ............... --- (38)
-------- --------
Net cash used in investing activities ........................... (5,427) (14,804)
-------- --------
FINANCING ACTIVITIES:
Repayments of mortgage notes payable ................................ (675) (540)
Borrowings under mortgage notes payable ............................. 6,500 5,001
Borrowings (repayments) under credit agreement ...................... (4,389) 25
Cash dividends paid to stockholders ................................. (2,990) (2,620)
Stock subscription and issuance ..................................... 1,714 1,994
Stock issuance cost ................................................. (133) ---
Deferred financing expenses, net .................................... 260 (118)
Change in minority interest ......................................... (24) ---
-------- --------
Net cash provided by financing activities ....................... 263 3,742
-------- --------
Net Decrease in Cash and Cash Equivalents .............................. (235) (592)
Cash and Cash Equivalents, Beginning of Period ......................... 427 1,594
-------- --------
Cash and Cash Equivalents, End of Period ............................... $ 192 $ 1,002
======== ========
(Continued)
</TABLE>
7
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest, net of amount capitalized .................. $ 1,695 $ 1,021
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Change in unrealized holding gain (loss) on securities
available for sale ................................................. $ 56 $ (41)
======== ========
Issuance of restricted stock ....................................... $ 1,124
========
Acquisition of rental property ..................................... $ 3,800
Change in minority interest ........................................ 965
--------
Assumption of mortgage note payable ................................ $ 2,835
========
(Concluded)
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
8
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1999
1. BASIS OF PRESENTATION
The accompanying interim condensed financial data of Equity One, Inc.
("the Company") are unaudited; however, in the opinion of management,
the interim data include all adjustments necessary for a fair
presentation of the results for the interim periods. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting periods. Actual results could differ from
those estimates.
The results of operations for the three months ended March 31, 2000 are
not necessarily indicative of the results to be expected for the year
ending December 31, 2000. The December 31, 1999 condensed consolidated
balance sheet was derived from the audited consolidated financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
The interim unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1999
appearing in the Company's Form 10-K/A filed with the Securities and
Exchange Commission.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of the
condensed consolidated financial statements are identical to those
applied in the preparation of the most recent annual consolidated
financial statements.
3. INCOME TAX STATUS
The Company has claimed a special Real Estate Investment Trust ("REIT")
tax status effective January 1, 1995 and in the opinion of management,
the Company continues to meet all of the eligibility requirements for
REIT tax status. Accordingly, the Company has not recorded any
provision for federal income tax.
4. EARNINGS PER SHARE
Basic earnings per share is computed by dividing earnings attributable
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the Company.
9
<PAGE>
5. MINORITY INTEREST
On January 1, 1999, a wholly-owned subsidiary of the Company, Equity
One (Walden Woods) Inc., entered into a limited partnership as a
general partner. An income producing shopping center ("Walden Woods
Village") was contributed by its owners (the "Minority Partners") and
the Company contributed 93,656 shares of common stock to the limited
partnership at an agreed-upon price of $10.30 per share. Based on this
per share price and the net value of property contributed by the
Minority Partners, each of the Partners received 93,656 limited
partnership units. The Company and the Minority Partners have entered
into a Redemption Agreement whereby the Minority Partners can request
that the Company purchase back all or part of the common stock at
$10.30 per share no earlier than two years nor later than fifteen years
after the exchange date of January 1, 1999. As a result of the
Redemption Agreement, the minority interest has been presented as a
liability. In addition, under the terms of the limited partnership
agreement, the Minority Partners do not have an interest in the common
stock of the Company except to the extent of dividends declared on such
common stock. Accordingly, a preference in earnings has been allocated
to the Minority Partners to the extent of the dividends declared.
The shares of the Company's common stock held by the consolidated
limited partnership are not considered outstanding in the consolidated
financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the Company's
Condensed Consolidated Financial Statements, including the notes thereto, which
are included elsewhere herein.
(1) RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1999
Total revenues increased by approximately $2.0 million, or 32.8% to
$8.1 million for the three months ended March 31, 2000 from $6.1 million for the
comparable period of 1999. The majority of the increase (approximately $1.8
million) can be attributed to the following acquisitions: Park Promenade, a
Supermarket Shopping Center (as defined in the Company's Form 10-K/A), located
in Orlando, Florida on January 31, 1999; a K-Mart lease and building located in
the Company's Lantana Village Shopping Center in Lantana, Florida on March 31,
1999; Pine Island Plaza, a Supermarket and Home Depot Expo anchored Shopping
Center, and the adjacent Ridge Plaza, both located in Davie, Florida on August
26, 1999; and Mandarin Landing, a Supermarket Shopping Center located in
Jacksonville, Florida on December 9, 1999. Additional sources of increased
revenues were the opening of phase one at The Shops at Skylake, a Supermarket
Shopping Center located in North Miami Beach, Florida, which contributed
$289,000 and an increase in same property revenues of $309,000, offset by the
loss of $314,000 in revenues relating to the sale of Four Corners, a Supermarket
Shopping Center, located in Tomball, Texas sold on December 7, 1999.
Operating expenses increased by approximately $587,000, or 36.7% to
$2.2 million for the three months ended March 31, 2000 from $1.6 million for the
comparable period of 1999. The primary cause for the increase was a $512,000
increase relating to the aforementioned acquisitions and the opening of phase
one at Skylake reported above, and an increase in same property operating
expenses of $150,000 offset by a reduction of $74,000 in operating expenses
relating to the sale of Four Corners.
10
<PAGE>
Depreciation and amortization expense increased by approximately
$183,000, or 23.0% to $980,000 for the three months ended March 31, 2000 from
$797,000 for the comparable period of 1999. The increase resulted primarily from
the net addition of properties to the Company's portfolio reported above.
Interest expense increased by approximately $654,000, or 59.5% to $1.7
million for the three months ended March 31, 2000 from $1.1 million for the
comparable period of 1999. The increase resulted primarily from an increase in
the Company's line of credit interest of $299,000, an increase in mortgage note
interest on new loans of $542,000, offset by a $148,000 increase in capitalized
interest to a total of $545,000, and a decline in interest on same mortgage
notes of $29,000.
General and administrative expenses increased by approximately
$161,000, or 39.1% to $573,000 for the three months ended March 31, 2000 from
$412,000 for the comparable period of 1999. The increase resulted primarily from
increases in payroll costs of $147,000 and in professional fees of $29,000, and
a net increase in all other expenses totaling $63,000 offset by a $78,000
increase in capitalization of costs relating to development projects to a total
of $236,000. In the first quarter 1999, capitalized development costs were
allocated solely to the Skylake project, whereas in the first quarter 2000,
capitalized development costs were allocated to several development projects.
As a result of the foregoing, net income increased by approximately
$423,000, or 19.2% to $2.6 million for the three months ended March 31, 2000,
compared to $2.2 million for the comparable period of 1999.
FUNDS FROM OPERATIONS
In March, 1995, the National Association of Real Estate Investment
Trusts ("NAREIT") adopted the NAREIT White Paper on Funds from Operations (the
"White Paper") which provided additional guidance on the calculation of funds
from operations. The White Paper defines funds from operations ("FFO") as net
income (computed in accordance with generally accepted accounting principles
("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
believes that FFO is a helpful measure of the performance of an equity REIT
because, along with cash flows from operating activities, investing activities
and financing activities, it provides an understanding of the Company's ability
to incur and service debt and make capital expenditures. The Company computes
FFO in accordance with standards established by the White Paper, which may
differ from the methodology for calculating FFO utilized by other equity REITs,
and, accordingly, may not be comparable to such other REITs. Further, FFO does
not represent amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. The Company believes that in order to facilitate
a clear understanding of the consolidated historical operating results of the
Company, FFO should be examined in conjunction with the net income as presented
in the condensed consolidated financial statements and information included
elsewhere herein. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's financial
performance or to cash flows from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it indicative of
funds available to fund the Company's cash needs, including its ability to make
distributions.
11
<PAGE>
The following table illustrates the calculation of FFO for the
three-month periods ended March 31, 2000 and 1999 (in thousands except per share
data):
THREE MONTHS ENDED
MARCH 31,
------- -------
2000 1999
------- -------
(UNAUDITED)
Net income .................................. $ 2,623 $ 2,200
Depreciation of real estate assets .......... 961 776
Amortization of leasing costs ............... 26 8
Minority interest ........................... 24 23
Lease termination fee ....................... -- 112
------- -------
FUNDS FROM OPERATIONS ....................... $ 3,634 $ 3,119
======= =======
FUNDS FROM OPERATIONS PER SHARE (DILUTED) ... $ 0.32 $ 0.30
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) 11,479 10,433
======= =======
FFO increased by approximately $515,000, or 16.5% to $3.6 million for
the three months ended March 31, 2000, from $3.1 million for the comparable
period of 1999. The increase is primarily the result of the acquisition of
additional properties, the opening of Skylake phase one and the difference
between the increases in same property revenues and expenses, as noted above.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the principal sources of funding for the Company's
operations, including the renovation, expansion, development and acquisition of
shopping centers, have been operating cash flows, the issuance of securities and
mortgage loans. The Company's principal demands for liquidity are maintenance,
repair and tenant improvements of existing properties, acquisitions and
development activities, debt service and repayment obligations and distributions
to its stockholders.
As of March 31, 2000, the Company had total mortgage indebtedness of
approximately $103.6 million, all of which was fixed rate mortgage indebtedness
bearing interest at a weighted average rate of 7.53% and collateralized by 17 of
the Company's existing properties. The Company also has provided a $1.5 million
letter of credit to secure certain obligations in connection with the
acquisition of one of the Company's properties. This letter of credit is
collateralized by a mixed-use property located in West Palm Beach, Florida.
In order to meet the Company's expansion objectives, the Company
secured a $35.0 million Credit Agreement with City National Bank of Florida on
February 4, 1999. On November 29, 1999, the limitation on advances under this
Credit Agreement was increased from approximately $16.6 million to approximately
$22.1 million, with future increases conditioned on the posting of additional
collateral. As of March 31, 2000 the Credit Agreement was secured by mortgages
on Skylake, East Bay Plaza, Beauclerc Village, and the Equity One Office
Building. The Credit Agreement accrues interest at 225 basis points over the
thirty day LIBOR rate, payable monthly, adjusted every six months and matures
February 4, 2002. Advances under the Credit Agreement will be used to fund
property acquisitions, development activities and other Company activities. As
of March 31, 2000, the outstanding balance under the Credit Agreement and other
floating rate facilities had been reduced to $15.1 million from $19.5 million as
of December 31, 1999.
The terms of the Credit Agreement allow the lender to cease funding
and/or accelerate the maturity date if neither Mr. Katzman nor Mr. Valero
remains as the executives in control of the Company. The Credit Agreement
12
<PAGE>
also limits the amount that can be borrowed for the purchase of vacant land and
contains other customary conditions and covenants, including, among other
things, the payment of commitment fees and the required delivery of various
title, insurance, zoning and environmental assurances on the secured properties,
and a prohibition on secondary financing on any of the secured properties.
As of March 31, 2000, the percentage of the total real estate cost of
the Company's Existing Properties (as defined in the Company's Form 10-K/A) that
was encumbered by debt was 53.8%. None of the existing mortgages are subject to
cross default provisions of a mortgage on any other property nor are any
cross-collateralized. However, in connection with the Company's acquisition of
Lake Mary, the Company has provided a $1.5 million letter of credit to secure
certain obligations, which letter of credit is collateralized by the mixed-use
property located in West Palm Beach, Florida.
The Company has two major construction projects underway. The Skylake
development project will add an aggregate of 280,000 square feet of retail space
to the Company's portfolio. Phase one was completed in July 1999, phase two
should be completed during the second quarter of 2000 and it is anticipated that
construction of the third phase will commence by year end 2000. It is
anticipated that the future funding required for this project will be
approximately $8.3 million. The other project is Forest Village, a new
development that will add up to 172,480 square feet of retail space to the
Company's portfolio. Phase one will be completed in the second quarter of 2000,
and has a remaining net construction cost of approximately $208,000. Phase two
is anticipated to be completed in 2002 at an estimated construction cost of $6.0
million. These construction costs will be funded from borrowings under the
Credit Agreement and other sources of cash, including obtaining permanent debt
on certain unencumbered existing properties. Upon stabilization, management
expects these developments to have a positive effect on cash generated by
operating activities and FFO.
On February 22, 2000, the Company instituted a Dividend Reinvestment
and Stock Purchase Plan (the "Plan") that allows its shareholders to reinvest
all or a portion of their cash dividends in additional shares of the Company's
common stock and to purchase shares of the Company's common stock. On March 8,
2000, Gazit (1995), Inc., M.G.N. (USA), Inc. and Gazit-Globe (1982), Ltd.,
affiliates of the Company, enrolled in the Plan with respect to the majority of
their shares of common stock. On March 31, 2000, these affiliates reinvested
cash dividends totaling approximately $1.7 million for the purchase of 180,797
shares of the Company's authorized but unissued shares of common stock. While
the affiliates have expressed a desire to participate in the Plan, no assurances
can be made that they will continue to do so.
The Company believes that cash provided by operations is adequate and
anticipates that it will continue to be adequate in both the short and long-term
to meet operating requirements (including recurring capital expenditures at its
properties) and payment of distributions by the Company in accordance with REIT
requirements under the Internal Revenue Code.
During the three months ended March 31, 2000, the Company declared and
paid a cash dividend of $0.26 per outstanding share of common stock. The
dividends were paid on March 31, 2000 to shareholders of record on March 15,
2000.
CASH FLOW
The net cash provided by operations of approximately $4.9 million for
the three months ended March 31, 2000 included: (1) net income of $2.6 million,
(2) adjustment for non-cash items of $1.1 million, and (3) a net change in
operating assets and liabilities of $1.2 million, compared to net cash provided
by operations of approximately $10.5 million for the three months ended March
31, 1999, which included (1) net income of $2.2 million, (2) adjustment for
non-cash items of $867,000, and (3) a change in operating assets and liabilities
of $7.4 million of which $6.8 million was an escrow deposit relating to the sale
of one of the Company's properties.
13
<PAGE>
Net cash used in investing activities of approximately $5.4 million for
the three months ended March 31, 2000 included: (1) the purchase of one building
and lease for $312,000, and (2) improvements to Existing Properties and
construction expenditures relating to development projects totaling $5.1
million, compared to cash used in investing activities of approximately $14.8
million for the three months ended March 31, 1999 which included (1) the
acquisition of two supermarket anchored shopping centers and a K-Mart lease and
a building located at one of the Company's Existing Properties for $11.4
million, (2) construction costs primarily relating to the Skylake project in the
amount of $3.2 million and (3) the purchase of securities for $155,000.
Net cash provided by financing activities of $263,000 for the three
months ended March 31, 2000 included (1) principal payments on mortgage notes of
$675,000, (2) borrowings under a new mortgage note of $6.5 million, (3) net
repayment on the credit agreement of $4.4 million, (4) cash dividends paid to
common stock shareholders of $3.0 million, (5) proceeds from the issuance of
stock under the Company's new Dividend Reinvestment and Stock Purchase Plan of
$1.7 million, and (6) other miscellaneous items producing net proceeds of
$123,000, compared to net cash provided by financing activities of approximately
$3.7 million for the three months ended March 31, 1999, which included (1)
principal payments on mortgage notes of $540,000, (2) borrowing under a new
mortgage note of $5.0 million, (3) net borrowings under a line of credit of
$25,000, (4) cash dividends paid to common stock shareholders of $2.6 million,
(5) proceeds from the exercise of C-Warrants to purchase common stock of $2.0
million, and (6) and an adjustment to deferred financing expenses of $118,000.
INFLATION
Most of the Company's leases contain provisions designed to partially
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rents based on tenant gross sales
above predetermined levels, which rents generally increase as prices rise, or
escalation clauses which are typically related to increases in the Consumer
Price Index or similar inflation indices. Most of the Company's leases require
the tenant to pay its share of operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
The Company's financial results are affected by general economic
conditions in the markets in which its properties are located. An economic
recession, or other adverse changes in general or local economic conditions,
could result in the inability of some existing tenants of the Company to meet
their lease obligations and could otherwise adversely affect the Company's
ability to attract or retain tenants. The properties are typically anchored by
supermarkets, drug stores and other consumer necessity and service retailers
which typically offer day-to-day necessities rather than luxury items. These
types of tenants, in the experience of the Company, generally maintain more
consistent sales performance during periods of adverse economic conditions.
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS
Certain statements made in this report may constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and section 21E of the Securities Exchange Act of
1934, as amended the (the "Securities Act"). Such forward looking statements
include statements regarding the intent, belief or current expectations of the
company and its management and involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, the following: maintaining
REIT status, general economic and business conditions which will, among other
things, affect the demand for retail space or retail goods, availability and
creditworthiness of prospective tenants, lease rents and the terms and
availability of financing; competition with other companies; risks of real
estate markets including, development and acquisition; governmental actions and
initiatives; and environment/safety requirements.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Company's properties are subject to any
material litigation. Further, to the Company's knowledge there is no litigation
threatened against the Company or any of its properties, other than routine
litigation and administrative proceedings arising in the ordinary course of
business, which collectively are not expected to have a material adverse affect
on the business, financial condition, results of operations or cash flows of the
Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 22, 2000 the Company instituted a Dividend Reinvestment and
Stock Purchase Plan. On March 31, 2000 shareholders owning 6,567,592 shares of
common stock participated in the Plan, by acquiring 180,935 shares of common
stock. The issuance of shares generated cash proceeds to the Company of
approximately $1.7 million. Of the total shares participating, 6,562,592 were
shares of affiliated Companies.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reported on Form 8-K.
None
15
<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.
Date: May 10, 2000 EQUITY ONE, INC.
/S/ CHAIM KATZMAN
-------------------------------------------
Chaim Katzman
Chief Executive Officer
(Principal Executive Officer)
/S/ HOWARD M. SIPZNER
-------------------------------------------
Howard M. Sipzner
Chief Financial Officer
(Principal Accounting Financial Officer)
16
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 192,000
<SECURITIES> 1,285,000
<RECEIVABLES> 1,192,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 222,204,000
<DEPRECIATION> 12,636,000
<TOTAL-ASSETS> 217,350,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 116,000
<OTHER-SE> 93,707,000
<TOTAL-LIABILITY-AND-EQUITY> 217,350,000
<SALES> 8,065,000
<TOTAL-REVENUES> 8,104,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,755,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,726,000
<INCOME-PRETAX> 2,623,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,623,000
<EPS-BASIC> 0.23
<EPS-DILUTED> 0.23
</TABLE>
