UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number 333-34835-01
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MARYLAND 87-0516235
-------- ----------
(State of organization) (I.R.S. Employer
Identification No.)
35 CENTURY PARK-WAY
SALT LAKE CITY, UTAH 84115 (801) 486-3911
--------------------------- -------------
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
<PAGE> 1
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
FORM 10-Q
INDEX
-----
PART I: FINANCIAL INFORMATION PAGE
- - ----------------------------- ----
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheet as of June 30, 1998
and December 31, 1997 4
Consolidated Statement of Operations for the Six Months Ended
June 30, 1998 and 1997 5
Consolidated Statement of Operations for the Three Months Ended
June 30, 1998 and 1997 6
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II: OTHER INFORMATION
- - --------------------------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
The information furnished in the accompanying financial statements listed
in the index on page 2 reflects only normal recurring adjustments which are, in
the opinion of management, necessary for a fair presentation of the
aforementioned financial statements for the interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to the financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Operating Partnership's quarterly report on Form 10-Q for the three months
ended March 31, 1998 and the annual report on From 10-K for the year ended
December 31, 1997, including the financial statements and notes thereto.
<PAGE> 3
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
----------
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
ASSETS
Real Estate Assets, Including Assets Under
Development of $55,104 and $33,664 $ 652,610 $ 619,371
Less: Accumulated Depreciation (105,804) (98,404)
--------- --------
Net Real Estate Assets 546,806 520,967
Cash 2,503 5,603
Restricted Cash 2,357 2,465
Other Assets 16,972 16,649
--------- ---------
$ 568,638 $ 545,684
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Borrowings $ 297,103 $ 283,390
Accounts Payable and Accrued Expenses 22,048 18,840
Dividends Payable 9,565 --
Other Liabilities 637 617
--------- ---------
329,353 302,847
--------- ---------
Minority Interest 1,892 1,830
--------- ---------
Commitments and Contingencies
Partners' Capital
General Partner 204,684 207,581
Limited Partners 32,709 33,426
--------- ---------
237,393 241,007
--------- ---------
$ 568,638 $ 545,684
========= =========
See accompanying notes to financial statements.
<PAGE> 4
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1998 1997
---------- ------------
<S> <C> <C>
Revenues:
Minimum Rents $ 36,077 $ 26,448
Percentage and Overage Rents 1,185 1,992
Recoveries from Tenants 10,133 8,053
Interest 194 317
Other 197 182
--------- --------
47,786 36,992
Expenses: --------- --------
Operating and Maintenance 7,838 5,544
Real Estate Taxes and Insurance 5,297 3,932
General and Administrative 3,000 2,568
Depreciation 7,564 5,289
Amortization of Deferred Financing Costs 744 486
Amortization of Deferred Leasing Costs 342 316
Interest 7,796 3,166
--------- --------
32,581 21,301
--------- --------
15,205 15,691
Minority Interest in Income of Consolidated Partnerships (196) (207)
Gain on Sale of Real Estate $ -- $ 339
========= ========
Net Income $ 15,009 $ 15,823
========= ========
Basic Earnings Per Partnership Unit $ .70 $ .75
========= ========
Diluted Earnings Per Partnership Unit $ .70 $ .75
========= ========
PRO FORMA DATA:
Pro Forma Net Income $ 13,939 $ 13,946
========= ========
Pro Forma Basic Earnings Per Partnership Unit $ .65 $ .67
========= ========
Pro Forma Diluted Earnings Per Partnership Unit $ .65 $ .66
========= ========
Basic Weighted Average Number of Partnership
Units Outstanding 21,293 20,969
Add: Diluted Effect of Stock Options 128 173
--------- --------
Diluted Weighted Average Number of Partnership
Units Outstanding 21,421 21,142
========= ========
See accompanying notes to financial statements.
<PAGE> 5
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
----------------------------------
1998 1997
---------- ------------
<S> <C> <C>
Revenues:
Minimum Rents $ 18,166 $ 13,241
Percentage and Overage Rents 115 989
Recoveries from Tenants 4,793 4,175
Interest 105 98
Other 104 114
--------- --------
23,283 18,617
--------- --------
Expenses:
Operating and Maintenance 3,672 2,809
Real Estate Taxes and Insurance 2,657 2,026
General and Administrative 1,426 1,132
Depreciation 3,918 2,647
Amortization of Deferred Financing Costs 485 232
Amortization of Deferred Leasing Costs 175 145
Interest 3,838 1,490
--------- --------
16,171 10,481
--------- --------
7,112 8,136
Minority Interest in Income of Consolidated Partnerships (94) (107)
Gain on Sale of Real Estate $ -- $ 339
========= ========
Net Income $ 7,018 $ 8,368
========= ========
Basic Earnings Per Partnership Unit $ .33 $ .39
========= ========
Diluted Earnings Per Partnership Unit $ .33 $ .39
========= ========
PRO FORMA DATA:
Pro Forma Net Income $ 7,018 $ 7,494
========= ========
Pro Forma Basic Earnings Per Partnership Unit $ .33 $ .35
========= ========
Pro Forma Diluted Earnings Per Partnership Unit $ .33 $ .35
========= ========
Basic Weighted Average Number of Partnership
Units Outstanding 21,296 21,215
Add:Diluted Effect of Stock Options 124 169
--------- ---------
Diluted Weighted Average Number of
Partnership Units Outstanding 21,420 21,384
========= =========
See accompanying notes to financial statements.
<PAGE> 6
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1998 1997
---------- ------------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 30,917 $ 22,382
--------- ------------
Cash Flows from Investing Activities:
Real Estate Assets, Developed or Acquired,
Net of Accounts Payable (37,151) (70,246)
Increase in Restricted Cash 108 309
--------- ------------
Net Cash Used in Investing Activities (37,043) (69,937)
--------- ------------
Cash Flows from Financing Activities:
Proceeds from Borrowings 112,977 72,487
Repayments of Borrowings (99,264) (55,962)
Net Proceeds from Sale of Partnership Units 507 38,777
Capital Contributions by Minority Interest -- 1,000
Distributions to Partners (9,565) (9,201)
Distributions to Minority Interest (141) (113)
Deferred Financing Costs (1,488) (406)
--------- ------------
Net Cash Provided by Financing Activities 3,026 46,582
--------- ------------
Net Increase in Cash (3,100) (973)
Cash, Beginning of Period 5,603 1,750
--------- ------------
Cash, End of Period $ 2,503 $ 777
========= ============
Supplemental Disclosure of Non-Cash Transactions:
The following non-cash transactions occurred:
Distributions accrued for General Partner not paid $ 7,910 $ 7,633
Distributions accrued for Limited Partner not paid $ 1,655 $ --
Purchase of the Remaining 70% Interest in
Silver Lake Mall:
72,000 Operating Partnership Units Issued 1,863
30% Equity Investment Consolidated (1,555)
Debt Assumed 24,755
----------
Total $ 25,063
==========
See accompanying notes to financial statements.
<PAGE> 7
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT DATA)
1. BUSINESS SUMMARY AND SIGNIFICANT ACCOUNTING POLICIES
Price Development Company, Limited Partnership (the "Operating
Partnership") is primarily engaged in the business of owning, leasing,
managing, operating, developing and redeveloping malls, community centers and
other commercial properties. The tenant base includes primarily national
retail chains and local retail companies. Consequently, the credit risk is
concentrated in the retail industry. Price Development Company, Limited
Partnership is the Operating Partnership of JP Realty, Inc. (the "Company") who
is the general partner. JP Realty, Inc. completed its initial public offering
on January 21, 1994 and conducts all of its business operations through, and
holds an 83% controlling general partner interest in the Operating Partnership.
Since there are no material differences between the Company and the Operating
Partnership they will be collectively referred to as "the Company" unless the
text requires otherwise.
The interim financial data for the six-months and the three months ended
June 30, 1998 and 1997, respectively, is unaudited; however, in the opinion of
the Company, the interim financial data includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for the interim periods.
Earnings per partnership unit for all periods presented has been restated
to reflect the adoption of Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128"). SFAS 128 requires companies to present basic
earnings per partnership unit, and if applicable, diluted earnings per
partnership unit, instead of primary and fully diluted earnings per partnership
unit. Basic earnings per partnership unit excludes dilution and is computed by
dividing net earnings available to common stockholders by the weighted average
number of partnership units outstanding for the period. Diluted earnings per
partnership units reflects the potential dilution that could occur if options
to purchase partnership units were exercised.
2. CHANGE IN REVENUE RECOGNITION POLICY
Effective April 1, 1998 the Company has prospectively adopted the
provisions of Issue No. 98-9 ("EITF 98-9") Accounting For Contingent Rent in
Interim Financial Periods, which was issued on May 21, 1998 by the Financial
Accounting Standards Board Emerging Issues Task Force, which significantly
changes the Company's recognition of percentage and overage revenue in interim
periods. Prior to the adoption of EITF 98-9, the Company recognized percentage
and overage rents revenue monthly on an accrual basis based on estimated annual
amounts. Under the provisions of EITF 98-9 percentage and overage rents
revenue is recognized in the interim periods in which the specified target that
triggers the contingent rental income is achieved.
Under its implementation guidelines, the Emerging Issues Task Force
("EITF") provides for and the Company has chosen prospective adoption of this
EITF consensus position in the quarter in which the consensus is reached.
As a result of adopting EITF 98-9, percentage and overage rents revenue
and total revenues decreased $1,124 during the three and six months ended June
30, 1998 from the amounts that would have been reported if the change described
above had not been made. In addition, if the change in revenue recognition
described above had not been made, the net income for the three and six month
periods ended June 30, 1998 would have been $6,761 ($.38 diluted net income per
partnership unit) and $13,404 ($.76 diluted net income per partnership unit),
respectively.
<PAGE> 8
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT DATA)
2. CHANGE IN REVENUE RECOGNITION POLICY (CONTINUED)
Pro forma net income, pro forma basic net income per partnership unit and
pro forma diluted net income per partnership unit for the three and six months
ended June 30, 1998 and 1997, assuming the Company had always followed the
provisions of EITF 98-9 are presented on the respective consolidated statements
of operations. Further discussion, including additional pro forma effects of
the new accounting policy, is included in Management's Discussions and Analysis
of Financial Condition and Results of Operations.
3. BORROWINGS
On March 11, 1998 the Operating Partnership issued $100,000 in ten year
senior notes bearing annual interest at a rate of 7.29% with interest payments
due semi annually. Principle payments of $25,000 are due annually beginning
March 2005. The Operating Partnership had entered into an interest rate
protection agreement in anticipation of issuing these notes and received $270
as a result of this agreement making the effective rate of interest on these
notes at 7.24%. Proceeds from the notes were used to partially repay
outstanding borrowings under the Operating Partnership's $200,000 unsecured
credit facility.
On March 16, 1998 the Operating Partnership entered into a $10,000
unsecured credit facility. The credit facility will be used for general
business and cash management purposes.
On July 30, 1996, Spokane Mall Development Company, a consolidated
partnership, of which the Operating Partnership is the General Partner, entered
into a $50,000 construction facility. The construction facility will be used
to fund the development and construction of the Spokane Valley Mall in Spokane,
Washington. The construction loan has a 3 year term with an optional 2 year
extension and is collateralized by the Spokane Valley Mall and guaranteed by
the Operating Partnership. As of June 30, 1998, borrowings on the loan were
$44,948.
The Operating Partnership borrowed $9,000 on April 21, 1998 and $11,000
on July 20, 1998 from its $200,000 unsecured credit facility to fund
construction projects.
4. PRO FORMA FINANCIAL INFORMATION
The following unaudited proforma summary financial information for the
six months ended June 30, 1998 and 1997, is presented as if the acquisitions of
Silver Lake Mall, Visalia Mall, Salem Center and the additional common stock
offering on January 22, 1997, had been consummated as of January 1, 1997.
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
--------------------------------
1998 1997
---------- ------------
<S> <C> <C>
Revenues $ 47,786 $ 42,479
Net Income 15,009 16,188
Basic Net Income Per Partnership Unit .70 .76
Diluted Net Income Per Partnership Unit .70 .76
<PAGE> 9
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT DATA)
5. PARTNERS' CAPITAL
The following table summarizes changes in partners' capital since
December 31, 1997:
</TABLE>
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------- ---------- ---------
<S> <C> <C> <C>
Partners' Capital at December 31, 1997 $ 207,581 $ 33,426 $ 241,007
Units Issued Upon Exercise of Stock Options 507 -- 507
Conversion of Limited Partners' Interests 1 (1) --
Distributions Paid (7,910) (1,655) (9,565)
Distributions Accrued (7,910) (1,655) (9,565)
Net Income 12,415 2,594 15,009
---------- --------- ---------
Partners' Capital at June 30, 1998 $ 204,684 $ 32,709 $ 237,393
========== ========= =========
6. SUBSEQUENT EVENT
On August 6, 1998, the Operating Partnership through a consolidated
partnership purchased NorthTown Mall located in Spokane, Washington. The Mall
has approximately 952,000 square feet of gross leasable space and is anchored
by The Bon Marche, Sears, JC Penney, Mervyns and Emporium.
The $128,000 NorthTown Mall acquisition was financed utilizing the
assumption of a 10 year $84,500 first mortgage provided by Morgan Stanley
Mortgage Capital, Inc. with the balance of the purchase price being drawn from
the Operating Partnership's credit facilities. The current going forward yield
to the Company based on the $128,000 acquisition price, will be approximately
9%. The interest rate on the first mortgage is 6.68%.
<PAGE> 10
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
JP Realty, Inc. (the "Company") completed its initial public offering on
January 21, 1994, and conducts all of its business operations through its 83%
controlling general partner interest in, Price Development Company, Limited
Partnership (the "Operating Partnership"). Since there are not material
differences between the Company and the Operating Partnership they will be
collectively referred to as the "Company" unless the text requires otherwise.
The Company is a fully integrated, self administered and self-managed
real estate investment trust ("REIT") primarily engaged in the ownership,
leasing, management, operation, development, redevelopment and acquisition of
retail properties in the Intermountain Region, as well as in Oregon, Washington
and California. The Company's existing portfolio consists of 48 properties,
including 15 enclosed regional malls, 25 community centers, two freestanding
retail properties and six mixed-use commercial properties.
The Company's financial condition and results of operations were
positively impacted by the Operating Partnership's December 1997 acquisition of
Salem Center and the June 1997 acquisitions of Silver Lake Mall and Visalia
Mall, as well as its completed development activities which added a combined
840,000 square feet of gross leasable area ("GLA") to the retail portfolio from
August 1997 through November 1997.
The Company completed an additional public offering in January 1997,
raising approximately $40.7 million in gross proceeds through the sale of
1,500,000 shares of its common stock.
CHANGE IN REVENUE RECOGNITION POLICY
As described in Note 2 to the financial statements, the Company has
adopted EITF 98-9 ("EITF 98-9") Accounting For Contingent Rent in Interim
Financial Periods, effective April 1, 1998, which significantly changes the
Company's recognition of percentage and overage rents revenue in interim
periods. Prior to the adoption of EITF 98-9, the Company recognized percentage
and overage rents revenue monthly on an accrual basis based on estimated annual
amounts. As a result of the change, percentage and overage rents revenue is
recognized in interim periods when the specified target that triggers the
contingent rental income is achieved.
Under its implementation guidelines, the EITF provides for, and the
Company has chosen, prospective adoption of this EITF consensus position in the
quarter in which the consensus is reached. As a result, the Company's reported
revenues and net income will be reduced in the second and third quarter of 1998
by approximately $.05 and $.04 earnings per diluted share, respectively,
increased in the fourth quarter of 1998 by approximately $.09 earnings per
diluted share (thus having no material impact on the 1998 calendar year period)
and reduced in the first quarter of 1999 compared to the first quarter of 1998
by approximately $.05 earnings per diluted share. In Company leases containing
percentage and overage rent targets, the majority of such targets are triggered
during the fourth quarter of each year. Therefore revenues and net income will
hereinafter be reduced in the first, second and third quarters of each year and
increased in the fourth quarter as compared to results reported prior to the
implementation of EITF 98-9. Over the course of a full calendar year there
will be no material impact, just a shift in earnings to later in the year.
<PAGE> 11
PRO FORMA PRESENTATION
Set forth below are pro forma data which assume that the Company's
accounting for percentage and overage rents revenue had always conformed to the
provisions of EITF 98-9.
Presentation of Pro Forma Data
(In thousands, except per partnership unit amounts)
(unaudited)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Total Revenues $ 23,283 $ 17,743 $ 46,716 $ 35,115
Net Income 5,832 6,244 11,588 11,627
Basic Net Income Per
partnership unit .33 .36 .66 .67
Diluted Net Income Per
partnership unit .33 .35 .65 .66
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED JUNE 30,
1997 (DOLLARS IN THOUSANDS)
Total revenues for the six months ended June 30, 1998 increased $10,794
or 29% to $47,786 as compared to $36,992 in 1997. This increase is primarily
attributable to a $9,629 or 36% increase in minimum rents to $36,077 as
compared to $26,448 in 1997. Additionally, percentage and overage rents
decreased $807 or 41% to $1,185 as compared to $1,992 in 1997. The decrease in
percentage and overage rents is the result of implementing the new accounting
guidance from the EITF No. 98-9 (See Note 2 to financial statements).
The June 1997 acquisitions of Silver Lake Mall and Visalia Mall as well
as the December 1997 acquisition of Salem Center, contributed $5,393 to the
minimum rent increase and $138 to percentage and overage rents. Revenues from
completed development activities contributed $3,020 to the increase in minimum
rents. The additional $1,216 increase in minimum rents was the result of
increases experienced from the balance of the property portfolio.
Recoveries from tenants increased $2,080 or 26% to $10,133 as compared to
$8,053 in 1997. Property operating expenses, including operating and
maintenance, and real estate taxes and insurance increased $2,294 or 41% and
$1,365 or 35% respectively. The acquisition of Silver Lake Mall, Visalia Mall
and Salem Center contributed $1,694 to recoveries from tenants, $2,095 to
property operating expenses, including operating and maintenance, and $695 to
real estate taxes and insurance. Recoveries from tenants as percentage of
property operating expenses were 77% compared to 85% in 1997.
Depreciation and amortization increased $2,559 or 42% to $8,650 as
compared to $6,091 in 1997. This increase is primarily due to the 1997
acquisitions and the increase in newly developed GLA.
Interest expense increased $4,630 or 146% to $7,796 as compared to
$3,166 in 1997. This increase resulted from additional borrowings used to
acquire Silver Lake Mall, Visalia Mall, Salem Center and newly constructed GLA.
Interest capitalized on projects under development were $1,980 in 1998 and
$1,771 in 1997.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THREE MONTHS ENDED JUNE 1997
30, 1997 (DOLLARS IN THOUSANDS)
Total revenues for the three months ended June 30, 1998 increased $4,666
or 25% to $23,283 as compared to $18,617 in 1997. This increase is
attributable to a $4,925 or 37% increase in minimum rents to $18,166 as
compared to $13,241 in 1997. Additionally percentage and overage rents
decreased $874 or 88% to $115 as compared to $989 in 1997. The decrease in
percentage and overage rents is the result of implementing the new accounting
guidance from the EITF No. 98-9 (See Note 2 to financial statements).
<PAGE> 12
The June 1997 acquisitions of Silver Lake Mall and Visalia Mall as well
as the December 1997 acquisition of Salem Center, contributed $2,632 to the
minimum rent increase. Revenues from completed development activities
contributed $1,546 to the increase in minimum rents. The additional $747
increase in minimum rents was the result of increases experienced from the
balance of the property portfolio.
Recoveries from tenants increased $618 or 15% to $4,793 as compared to
$4,175 in 1997. Property operating expenses, including operating and
maintenance, and real estate taxes and insurance increased $863 or 31% and $631
or 31% respectively. The acquisition of Silver Lake Mall, Visalia Mall and
Salem Center contributed $910 to recoveries from tenants, $907 to property
operating expenses, including operating and maintenance, and $346 real estate
taxes and insurance. Recoveries from tenants as percentage of property
operating expenses were 76% compared to 86% in 1997.
Depreciation and amortization increased $1,554 or 51% to $4,578 as
compared to $3,024 in 1997. This increase is primarily due to the 1997
acquisitions and the increase in newly developed GLA.
Interest expense increased $2,348 or 158% to $3,838 as compared to $1,490
in 1997. This increase resulted from additional borrowings used to acquire
Silver Lake Mall, Visalia Mall, Salem Center and newly constructed GLA.
Interest capitalized on projects under development were $1,107 in 1998 and $927
in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of its liquidity and capital resources have
historically been for distributions, property acquisitions, property
development, expansion and renovation programs and debt repayment. To maintain
its qualification as a REIT under the Internal Revenue Code of 1986, as amended
(the "Code"), the Company is required to distribute to its shareholders at
least 95% of its "Real Estate Investment Trust Taxable Income", as defined in
the Code. During the quarter ended June 30, 1998 the Company declared a
distribution of $.45 per partnership unit payable July 21, 1998 to the
shareholders of record as of July 2, 1998.
The Company's principal source of liquidity is its cash flow from
operations generated from its real estate investments. As of June 30, 1998,
the Company's cash and restricted cash amounted to approximately $4.9 million.
In addition to its cash and restricted cash, unused capacity under its credit
facilities totaled $171 million.
The Company expects to meet its short-term cash requirements, including
recurring capital expenditures related to maintenance and improvement of
existing properties, through undistributed funds from operations, cash balances
and advances under the credit facilities. Exclusive of construction and
development activities, capital expenditures (both revenue and non-revenue
enhancing) for the existing properties are budgeted in 1998 to be approximately
$5 million.
The Company's principal long-term liquidity requirements will be the
repayment of principal on the $95 million mortgage debt, which matures in 2001
and requires principal payments in an amount necessary to reduce the debt to
$83.1 million as of January 21, 2000, the repayment of the $100 million senior
notes principle payable at $25 million a year starting in March 2005, and the
retirement of outstanding balances under the credit facilities.
An additional long-term capital need of the Company is the construction
of the regional mall in Spokane, Washington, through its consolidated
partnership, Spokane Mall Development Company Limited Partnership. On July 30,
1996, this consolidated partnership entered into a $50 million construction
facility to meet its development and construction needs regarding the Spokane
project. The mall opened August 13, 1997, and contains approximately 689,000
square feet of total GLA. Continued payments for initial tenant construction
allowances and completion of construction will increase borrowings on the loan.
The Company estimates the total cost of this project is estimated to be
approximately $67 million. The difference between the estimated cost of the
project and amount of the construction facility is comprised of costs incurred
to date for the purchase of land and payment of fees and other development
costs. As of June 30, 1998, borrowings on the loan were approximately $44.9
million.
<PAGE> 13
The Operating Partnership is continuing the development of Provo Towne
Centre, an enclosed regional mall in Provo, Utah through its consolidated
partnership Provo Mall Development Company, Ltd. This property will also
represent a future long-term capital need for the Company, the total cost of
the project is estimated to be approximately $71 million. The Company expects
to fund this project through advances under its credit facilities in
combination with construction financing.
The Company is also contemplating the expansion and renovation of several
of its existing properties and additional development projects and acquisitions
as a means to expand its portfolio. The Company does not expect to generate
sufficient funds from operations to meet such long-term needs and intends to
finance these costs primarily through advances under the credit facilities
together with equity and debt offerings and individual property financing.
On September 2, 1997 the Company and the Operating Partnership filed a
shelf registration statement on Form S-3 with the Securities and Exchange
Commission for the purpose of registering common stock, preferred stock,
depositary shares, common stock warrants, debt securities and guaranties. This
registration statement, when combined with the Company's unused portion of its
previous shelf registration, would allow for up to $400 million of securities
to be offered by the Company and the Operating Partnership. On March 11, 1998
the Operating Partnership under its shelf registration, issued $100 million of
ten year senior unsecured notes bearing annual interest at a rate of 7.29%.
The Operating Partnership had entered into an interest rate protection
agreement in anticipation of issuing these notes and received $270 as a result
of this agreement making the effective rate of interest on these notes at
7.24%. Interest payments are due semi annually on March 11th and September
11th of each year. Principal payments of $25 million are due annually
beginning March 2005. The proceeds were used to partially repay outstanding
borrowings under the credit facility.
The Company intends to incur additional borrowings in the future in a
manner consistent with its policy of maintaining a ratio of debt-to-total
market capitalization of less than 50%. The Company's ratio of debt-to-total
market capitalization was approximately 37% at June 30, 1998.
All forward looking statements included in this document are based on
information available to the Operating Partnership on the date hereof, and the
Operating Partnership assumes no obligation to update any such forward looking
statement. It is important to note that the Operating Partnership's actual
results could differ materially from those in such climate, local conditions,
law and regulations, the relative illiquidity of real property investments, the
potential bankruptcy of tenants and the development, redevelopment or expansion
of properties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
<PAGE> 14
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened litigation at this
time that will have a material adverse effect on the Company or any of its
properties.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<PAGE> 15
EXHIBIT PAGE
NUMBER NUMBER
- - ------ ------
4.1 Form of Debt Security (4.6)*
4.2 Indenture, dated March 11, 1998, by and between the Operating Partnership
and The Chase Manhattan Bank as trustee (4.8)*
4.3 First Supplemental Indenture, dated March 11, 1998, by and between the
Operating Partnership and The Chase Manhattan Bank as trustee (4.9)*
10.1 Amended and Restated Agreement of Limited Partnership of Price Development
Company, Limited Partnership (10(a))**
10.2 Agreement of Limited Partnership of Price Financing Partnership, L.P.
(10(b))**
10.3 Loan Agreements related to Mortgage Debt and related documents (10(c))**
i) Deed of Trust, Mortgage, Security Agreement and Assignment of Leases
and Rents of Price Financing Partnership, L.P.
ii)Intentionally Omitted
iii)Indenture between Price Capital Corp. and a Trustee
iv)Limited Guarantee Agreement (Guarantee of Collection) for outside
investors
v) Limited Guarantee Agreement (Guarantee of Collection) for Price Group
Investors
vi)Cash Collateral Account Security, Pledge and Assignment Agreement among
Price Financing Partnership, L.P., Price Capital Corp. and Continental
Bank N.A.
vii)Note Issuance Agency Agreement between Price Capital Corp. and Price
Financing Partnership, L.P.
viii)Management and Leasing Agreement among Price Financing Partnership,
L.P.and Price Development Company, Limited Partnership
ix)Assignment of Management and Leasing Agreement of Price Financing
Partnership, L.P.
10.6 Registration Rights Agreement among the Company and the Limited Partners
of Price Development Company, Limited Partnership (10(g))**
10.7 Amendment No. 1 to Registration Rights Agreement, dated August 1, 1995,
among the Company and the Limited Partners of Price Development Company,
Limited Partnership**
10.8 Exchange Agreement among the Company and the Limited Partners of Price
Development Company, Limited Partnership (10(h))**
10.10Amendment to Groundlease between Price Development Company and Alvin
Malstrom as Trustee and C.F. Malstrom, dated December 31, 1985.
(Groundlease for Plaza 9400) (10(j))**
10.11Lease Agreement between The Corporation of the President of the Church of
Jesus Christ of Latter Day Saints and Price-James and Assumptions, dated
September 24, 1979. (Groundlease for Anaheim
Plaza) (10(k))**
10.12Indenture of Lease between Ambrose and Zelda Motta and Cordova Village,
dated July 26, 1974, and Amendments and Transfers thereto.
(Groundlease for Fort Union Plaza) (10(l))**
10.13Lease Agreement between Advance Management Corporation and Price Rentals,
Inc. and dated August 1, 1975 and Amendments thereto. (Groundlease for
Price Fremont) (10(m))**
10.14Groundlease between Aldo Rossi and Price Development Company, dated June
1, 1989, and related documents. (Groundlease for Halsey Crossing)
(10(n))**
(b)Reports on Form 8-K.
None
- - ---------------------------
*Documents were previously filed with the Company's current report Form 8-K.
**Documents were previously filed with the Company's Annual Report of Form 10-K
for the year ended December 31, 1995 and are incorporated herein by reference.
<PAGE> 16
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.
PRICE DEVELOPMENT COMPANY,
LIMITED PARTNERSHIP
(Registrant)
By: JP Realty, Inc., its
General Partner
AUGUST 13, 1998 /S/ G. Rex Frazier
- - ------------------------- -----------------------------------
(Date) G. Rex Frazier
PRESIDENT, CHIEF OPERATING OFFICER,
AND DIRECTOR OF JP REALTY, INC.
AUGUST 13, 1998 /s/ M. Scott Collins
- - ------------------------- -------------------------------
(Date) M. Scott Collins
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND TREASURER OF JP REALTY, INC.
(PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PRICE
DEVELOPMENT COMPANY LIMITED PARTNERSHIP FORM 10-Q FOR THE PERIOD ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> $4,860 $2,840
<SECURITIES> 0 0
<RECEIVABLES> 0<F1> 0<F1>
<ALLOWANCES> 0<F1> 0<F1>
<INVENTORY> 0 0
<CURRENT-ASSETS> 0<F2> 0<F2>
<PP&E> 0<F1> 0<F1>
<DEPRECIATION> 0<F1> 0<F1>
<TOTAL-ASSETS> 568,638 470,545
<CURRENT-LIABILITIES> 0<F2> 0<F2>
<BONDS> 0 0
0 0
0 0
<COMMON> 2 2
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 568,638 470,545
<SALES> 0 0
<TOTAL-REVENUES> 47,786 36,992
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 24,785<F3> 18,135<F4>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,796 3,166
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 15,009 15,823
<EPS-PRIMARY> .70<F5> .75<F5>
<EPS-DILUTED> .70<F5> .75<F5>
<FN>
<F1>The Company utilizes a condensed balance sheet format for 10-Q reporting.
Amounts are included in Other Assets.
<F2>The financial statements reflect an unclassifed balance sheet due to the
nature of the Company's industry - Real Estate.
<F3>Amount is comprised of $32,581 of expenses less interest expense of $7,796
reflected elsewhere in this Financial Data Schedule.
<F4>Amount is comprised of $21,301 of expenses less interest expense of $3,166
reflected elsewhere in this Financial Data Schedule.
<F5>Amount reflects new standard of FAS 128 for Basic Earnings Per Share and
Diluted Earnings Per Share.
</FN>
</TABLE>
