UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
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 organizational documents)
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MARYLAND 87-0516235
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(State of organization) (I.R.S. Employer
Identification No.)
35 CENTURY PARK-WAY
SALT LAKE CITY, UTAH 84115 (801) 486-3911
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(Address of principal executive offices, including zip code) (Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of JP Realty Inc.'s proxy statement for its 2000 Annual Meeting
of Stockholders scheduled to be held on May 3, 2000 are incorporated by
reference into Part III of this Annual Report on Form 10-K.
<PAGE>
Certain matters discussed under the captions "Business and Properties",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Quantitative and Qualitative Disclosures About Market Risk" and
elsewhere in this Annual Report on Form 10-K and the information incorporated
by reference herein may constitute forward-looking statements and as such may
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance and achievements of Price Development
Company, Limited Partnership to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
JP Realty, Inc., a Maryland Corporation (together with its subsidiaries,
the "Company"), is the sole general partner of Price Development Company,
Limited Partnership, a Maryland Limited Partnership (the "Operating
Partnership"). The Company is a fully integrated, self-administered and self-
managed real estate investment trust ("REIT") primarily engaged in the business
of owning, leasing, managing, operating, developing, redeveloping and acquiring
regional malls, community centers and other commercial and retail properties in
Utah, Idaho, Colorado, Arizona, Nevada, New Mexico and Wyoming (the
"Intermountain Region"), as well as in Oregon, Washington and California
(together with the Intermountain region, the "Western States"). The Company
was formed on September 8, 1993 to continue and expand the business, commenced
in 1957, of certain companies (the "Predecessor Companies") affiliated with
John Price, Chairman of the Board and Chief Executive Officer of the Company.
The Company conducts all of its business operations through, and as of December
31, 1999 held an 82.2% controlling general partner interest in, the Operating
Partnership. As of December 31, 1999, the Operating Partnership, on behalf of
the Company, held a portfolio consisting of 51 properties (the "Properties" or
"Property"), including 18 enclosed regional malls, 25 community centers and two
free-standing retail Properties located in ten states and six mixed-use
commercial Properties located primarily in the Salt Lake City, Utah
metropolitan area. Since 1976, the Company and the Predecessor Companies have
been responsible for developing more retail malls in the region covered by
Utah, Idaho, Colorado, Nevada, New Mexico and Wyoming than any other developer
having constructed, developed or redeveloped 12 malls in this region (as well
as four other malls in Arizona, Oregon and Washington).
Based on total gross leasable area (Company-owned leasable area plus any
tenant-owned leasable area within the Company's Properties ("Total GLA")), the
Company owns and operates the largest retail property portfolio in each of the
states of Utah, Idaho and Wyoming, and is one of the leading owners and
operators of retail shopping center properties throughout the Intermountain
Region. As of December 31, 1999, the Company's retail portfolio contained an
aggregate of 13,658,418 square feet of Total GLA and its commercial portfolio
contained an aggregate of 1,353,576 square feet of gross leasable area
(Company-owned leasable area within the Company's Properties ("GLA")). Based
on Total GLA, the Company's retail Properties were approximately 94% leased as
of December 31, 1999 and, based on GLA, its commercial Properties were
approximately 93% leased as of that date. Segment information for the three
years ended December 31, 1999, 1998 and 1997 is included in the financial
statements attached to this Annual Report on Form 10-K on pages F-16 and F-17.
The Company's strategy is to expand its dominant market position in the
Intermountain Region, and to continue to achieve cash flow growth and enhance
the value of the Properties by increasing their rental income and net operating
income over time. The Company expects to achieve rental income and net
operating income growth through re-leasing available space at higher rent
levels and selectively renovating, expanding and redeveloping the Properties.
In order to expand its market position, the Company expects to concentrate its
acquisition and other development activities in the Western States.
On April 23, 1999, the Operating Partnership issued 510,000 Series A
8.75% cumulative redeemable preferred units of limited partner interest (the
"Series A Preferred Units") in a private placement. Each Series A Preferred
Unit has a liquidation value of twenty-five dollars per unit. The Operating
Partnership used the net proceeds of approximately $12.3 million for the
partial repayment of borrowings outstanding under the Operating Partnership's
$200 million unsecured credit facility. The Series A Preferred Units, which
may be redeemed by the Operating Partnership on or after April 23, 2004, have
no stated maturity or mandatory redemption and are not convertible into any
other securities of the Operating Partnership. The Series A Preferred Units
are exchangeable at the option of the preferred unitholder at a rate of one
Series A Preferred Unit for one share of the Company's Series A 8.75%
cumulative redeemable preferred stock beginning April 23, 2009 or earlier under
certain circumstances.
<PAGE> 2
On July 28, 1999, the Operating Partnership issued 3,800,000 Series B
8.95% cumulative redeemable preferred units of limited partner interest (the
"Series B Preferred Units") in a private placement. Each Series B Preferred
Unit has a liquidation value of twenty-five dollars per unit. The Operating
Partnership used the net proceeds of approximately $92 million to repay $90
million in borrowings outstanding under the Operating Partnership's $200
million unsecured credit facility and increase operating cash. The Series B
Preferred Units, which may be redeemed by the Operating Partnership on or after
July 28, 2004, have no stated maturity or mandatory redemption and are not
convertible into any other securities of the Operating Partnership. The Series
B Preferred Units are exchangeable at the option of the preferred unitholder at
a rate of one Series B Preferred Unit for one share of the Company's Series B
8.95% cumulative redeemable preferred stock beginning July 28, 2009 or earlier
under certain circumstances.
In October 1999, the Board of Trustees authorized the Company to
repurchase up to $25,000,000 of the Company's Common Stock through open market
purchases and private transactions. Through March 7, 2000, the Company had
repurchased approximately 1,337,000 shares of Common Stock for a total cost of
approximately $22,758,000. In connection with the Company's repurchase of its
Common Stock the Operating Partnership has repurchased an equivalent number of
Units from the Company for approximately $22,758,000. In connection with the
Company's repurchase of its Common Stock the Operating Parnterhsip has
repurchased an equivalent number of Units from the Company for approximately
$22,758,000.
On July 21, 1999, the Operating Partnership borrowed $33,777,000 from the
$200 million unsecured credit facility to reduce the notes secured by real
estate, bearing interest at a fixed 6.37% per annum, from $95,000,000 to
$61,223,000. This transaction unencumbered four regional mall Properties.
On October 20, 1999, the Company held a grand opening of its newly
developed regional mall in Sierra Vista, Arizona. The Mall at Sierra Vista is
anchored by Dillard's, Sears and Cinemark Theaters and added approximately
335,000 square feet of additional Total GLA to the Company's existing
portfolio.
The Operating Partnership developed Provo Towne Centre, an enclosed
regional mall in Provo, Utah. The mall held its grand opening on October 28,
1998 and added approximately 723,000 square feet of Total GLA as of December
31, 1998. Provo Towne Centre is anchored by Dillard's, JCPenney, Sears and
Cinemark Theaters and includes space for more than 80 mall shops. On November
11, 1999, the mall held a grand opening for its sixteen screen Cinemark Theater
which added approximately 74,000 square feet of additional GLA.
The Operating Partnership, through its consolidated partnership Price
Spokane, Limited Partnership, has initiated the expansion of NorthTown Mall, an
enclosed regional mall in Spokane, Washington. The project will be funded by
the Company's $200 million unsecured credit facility and is expected to be
completed in the third quarter of 2000 which will add approximately 100,000
square feet of additional GLA to the Company's existing portfolio.
Each of the Company's regional malls is the premier and dominant mall
and, in some cases, the only mall within its trade area and is generally
considered to be the financial, economic and social center for a given
geographic area. The trade areas surrounding the Company's malls have a
drawing radius, depending on the mall, ranging from five to over 150 miles.
The malls have attracted as anchor tenants some of the leading national and
regional retail companies such as JCPenney, Nordstrom, Wal-Mart, The Bon
March<e'>, Sears, Dillard's, Mervyn's and ZCMI. The 18 regional malls in the
portfolio contain an aggregate of approximately 10,291,000 square feet of Total
GLA and range in size from approximately 296,000 to 1,171,000 square feet of
Total GLA. The community center portfolio consists of 25 Properties in seven
states containing approximately 3,362,000 square feet of Total GLA. The two
free-standing retail Properties contain a total of approximately 5,000 square
feet of GLA. The commercial portfolio, which includes 38 commercial buildings
containing approximately 1,354,000 square feet of GLA, is primarily located in
the Salt Lake City, Utah area where the Company's headquarters are located.
<PAGE> 3
PROPERTIES
The following tables set forth certain information relating to the
Properties, all of which (except as otherwise indicated) are 100% owned by the
Operating Partnership. The Company believes that all such Properties are
adequately covered by insurance.
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RETAIL PROPERTIES
OCCUPANCY AS OF
12/31/99
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FREE BASED
STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER-
PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP
PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS
- ----------------- -------- ----- --------- --------- --------- ---------- ---------- --------- ----- ------------ ------ ---------
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REGIONAL MALLS
UTAH
- ----
Cache Valley
Mall Logan RM 30,120 98,132 182,889 311,141 308,641 2,500 94.6% 94.5% 82.8% Fee JCPenney,
ZCMI,
Lamonts,
C-A-L
Ranch
Cottonwood Mall Holladay RM 53,300 322,091 379,508 754,899 754,899 -- 91.0% 91.0% 78.8% Fee/ JCPenney,
(7) GL(8) ZCMI
Provo Towne Provo RM 9,564 231,552 556,145 797,261 456,632 340,629 96.0% 93.1% 86.4% Fee JCPenney,
Centre (7) (9) Dillard's
Cinemark
Theaters,
Sears
Red Cliffs Mall St. RM 17,425 90,926 277,057 385,408 271,137 114,271 98.6% 98.1% 94.2% Fee JCPenney,
George (10) Sears,
ZCMI,
Wal-
Mart
IDAHO
- ------
Boise Towne
Square (7) Boise RM 84,418 392,035 694,463 1,170,916 589,279 581,637 98.6% 97.2% 95.8% Fee/ JCPenney,
(11) GL Dillard's
(12) Sears,
The Bon
March<e'>
Mervyn's
Grand Teton Mall Idaho RM 29,089 172,624 323,925 525,638 520,018 5,620 95.3% 95.2% 85.7% Fee JCPenney,
Falls Sears,
ZCMI,
The Bon
March<e'>
Pine Ridge Mall Pocatello RM 25,818 148,908 437,987 612,713 501,213 111,500 97.5% 96.9% 89.5% Fee/ JCPenney,
(13) GL ZCMI,
(14) The Bon
March<e'>
Sears,
ShopKo
Silver Lake Mall Coeur RM 20,090 97,266 217,493 334,849 327,913 6,936 97.1% 97.1% 90.1% Fee JCPenney,
(7) d'Alene Sears,
Emporium,
Lamonts
WASHINGTON
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NorthTown Mall Spokane RM -- 412,255 541,209 953,464 711,072 242,392 93.9% 91.8% 85.9% Fee JCPenney,
(7) (15) Sears,
Mervyn's,
The Bon
March<e'>
Emporium
Spokane Valley Spokane RM 78,480 273,776 371,731 723,987 469,290 254,697 93.3% 89.7% 82.3% Fee JCPenney,
Mall (7) (16) Sears,
The Bon
March<e'>
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RETAIL PROPERTIES (continued)
OCCUPANCY AS OF
12/31/99
-------------------
FREE BASED
STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER-
PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP
PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS
- ----------------- -------- ----- --------- --------- --------- ---------- ---------- --------- ----- ------------ ------ ---------
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REGIONAL MALLS
(continued)
Three Rivers Mall Kelso RM 246,890 126,687 188,076 561,653 379,772 181,881 95.6% 93.4% 80.3% Fee JCPenney,
(7) (17) Sears,
The Bon
March<e'>
Emporium
Oregon
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Salem Center Salem RM 45,000 167,037 438,000 650,037 212,037 438,000 94.3% 82.5% 77.7% Fee/ JCPenney,
(18) GL Nordstrom
(19) Meier &
Frank,
Mervyn's
WYOMING
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Eastridge Mall Casper RM 17,500 264,371 289,796 571,667 495,784 75,883 91.7% 90.5% 82.1% Fee JCPenney,
(20) Target,
The Bon
March<e'>
Sears
White Mountain Rock RM 26,025 105,992 208,452 340,469 340,469 -- 78.1% 78.1% 76.5% Fee JCPenney,
Mall Springs Herber-
gers
Wal-Mart
NEW MEXICO
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Animas Valley Farming- RM 33,000 221,946 271,155 526,101 466,763 59,338 88.9% 87.5% 73.8% Fee JCPenney
Mall ton (21) Sears,
Dillard's
Beall's,
North Plains
Mall (7) Clovis RM 19,076 81,416 195,431 295,923 292,803 3,120 63.9% 63.6% 86.7% Fee JCPenney,
(22) Sears,
Beall's,
Mall at Sierra
Vista Sierra
Vista RM -- 103,386 231,918 335,304 138,812 196,492 94.3% 86.2% 81.4% Fee Dillards,
(9) Cinemark
Theaters,
Sears
CALIFORNIA
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Visalia Mall Visalia RM 8,510 174,229 257,000 439,739 439,739 -- 97.8% 97.8% 94.3% Fee JCPenney,
--------- --------- --------- ---------- ---------- --------- ----- ----- ----- Gotts-
Subtotal chalk's
Regional Malls 744,305 3,484,629 6,062,235 10,291,169 7,676,273 2,614,896 93.5% 91.2% 84.9%
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RETAIL PROPERTIES (continued)
OCCUPANCY AS OF
12/31/99
-------------------
FREE BASED
STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER-
PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP
PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS
- ----------------- -------- ----- --------- --------- --------- ---------- ---------- --------- ----- ------------ ------ ---------
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COMMUNITY CENTERS
AND FREE-STANDING
RETAIL PROPERTIES
UTAH
- -----
Cottonwood
Square Salt CC -- 35,467 41,612 77,079 77,079 -- 87.2% 87.2% 72.1% Fee/ Albert-
Lake GL sons
City
Fort
Union Plaza Salt CC 32,968 -- -- 32,968 32,968 -- 65.1% 65.1% -- GL None
Lake
City
Gateway Crossing Bountiful CC 35,982 65,853 174,669 276,504 146,466 130,038 82.6% 67.1% 100.0% Fee ShopKo,
(22) (13) TJ Maxx
Nephi Bank Nephi FR 3,590 -- -- 3,590 3,590 -- 100.0% 100.0% -- Fee None
North Temple Salt CC -- 10,085 72,376 82,461 10,085 72,376 100.0% 100.0% 100.0% Fee Albert-
Shops Lake (23) sons,
City Rite-Aid
Orem Plaza-
Center Street Orem CC 15,491 18,814 62,420 96,725 91,125 5,600 97.0% 96.8% 84.6% Fee Savers,
Showbiz
Pizza
Orem Plaza-
State Street Orem CC 16,595 19,057 59,055 94,707 27,102 67,605 100.0% 100.0% 100.0% Fee Rite-Aid
(24)
Plaza 9400 Sandy CC 34,510 55,445 136,745 226,700 226,700 -- 100.0% 100.0% 100.0% GL Albert-
sons,
Fred Meyer
Red Cliffs
Plaza St. CC 20,023 -- 46,608 66,631 57,304 9,327 100.0% 100.0% -- Fee America's
George Best
Furniture
Warehouse
River Pointe West CC 18,522 56,120 135,707 210,349 56,120 154,229 99.2% 97.1% 97.1% Fee Albert-
Plaza Jordan (25) sons,
ShopKo
Riverside Plaza Provo CC 10,050 11,384 156,454 177,888 174,888 3,000 99.0% 99.0% 84.8% Fee Macey's,
Rite-Aid,
Mac
Frugals
University Orem CC 33,401 38,544 128,091 200,036 199,136 900 97.0% 97.0% 84.7% Fee Burlington
Crossing Coat (26),
Office
Max (27),
CompUSA
IDAHO
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Alameda Plaza Pocatello CC 19,049 27,346 143,946 190,341 190,341 -- 100.0% 100.0% 100.0% Fee Albert-
sons,
Fred Meyer
Baskin Robbins Idaho FR 1,814 -- -- 1,814 1,814 -- 100.0% 100.0% -- Fee None
17th Street Falls
Boise Plaza Boise CC -- -- 108,464 108,464 108,464 -- 100.0% 100.0% -- PI Burlington
(28) Coat (26),
Albertsons
Boise Towne Boise CC 6,000 12,000 91,534 109,534 109,534 -- 100.0% 100.0% -- Fee Circuit
Plaza City,
Linens' n
Things,
Old
Navy
Twin Falls Twin CC -- 37,680 -- 37,680 37,680 -- 100.0% 100.0% -- Fee None(29)
Crossing Falls
Yellowstone Idaho CC 18,419 36,923 166,733 222,075 220,275 1,800 84.6% 84.5% 55.8% PI Albert-
Square Falls (30) sons,
Fred Meyer
(31)
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RETAIL PROPERTIES (continued)
OCCUPANCY AS OF
12/31/99
-------------------
FREE BASED
STANDING TENANT TOTAL TENANT ON BASED TENANT OWNER-
PROPERTY STORES(2) SHOPS(3) ANCHORS GLA(4) GLA(5) OWNED TOTAL ON SHOP SHIP
PROPERTY LOCATION TYPE(1) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) (SQ.FT.) GLA GLA SPACE TYPE(6) ANCHORS
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COMMUNITY CENTERS
AND FREE-STANDING
RETAIL PROPERTIES
OREGON
- ------
Bailey Hills Eugene CC 12,000 11,895 155,000 178,895 11,895 167,000 100.0% 100.0% 100.0% Fee Safeway,
Plaza (32) ShopKo
Division
Crossing Portland CC 2,589 24,091 67,960 94,640 92,051 2,589 95.0% 94.9% 80.5% Fee Thirtfway,
Rite-Aid
Halsey Crossing Gresham CC 7,267 39,342 52,764 99,373 99,373 -- 93.6% 93.6% 83.8% GL Safeway
NEVADA
- -------
Fremont Plaza Las CC 6,542 19,648 77,348 103,538 103,538 -- 100.0% 100.0% 100.0% GL Smith's
Vegas Food &
Drug,
Sav-On
Drug
Plaza 800 Sparks CC 5,985 21,821 139,607 167,413 167,413 -- 100.0% 100.0% 100.0% GL Albert-
sons,
ShopKo
COLORADO
- ---------
Austin Bluffs Colorado CC 9,447 35,859 71,543 116,849 78,902 37,947 100.0% 100.0% 100.0% Fee Albert-
Plaza Springs (33) sons,
Longs
Drug
ARIZONA
- -------
Fry's Shopping Glendale CC 8,564 38,781 71,919 119,264 119,264 -- 100.0% 100.0% 100.0% Fee Fry's
Plaza Foods
Woodlands
Village Flagstaff CC 4,020 43,380 146,898 194,298 91,858 102,440 98.9% 97.7% 95.1% Fee Bashas',
(10) Wal-Mart
CALIFORNIA
- ----------
Anaheim Plaza Anaheim CC 10,000 -- 67,433 77,433 77,433 -- 12.9% 12.9% -- PI
(22) (34)
--------- --------- --------- ---------- ---------- --------- ----- ----- -----
Subtotal
Community
Centers 332,828 659,535 2,374,886 3,367,249 2,612,398 754,851 94.2% 92.5% 92.2%
--------- --------- --------- ---------- ---------- --------- ----- ----- -----
Total Retail
Properties 1,077,133 4,144,164 8,437,121 13,658,418 10,288,671 3,369,747 93.6% 91.6% 86.0%
========= ========= ========= ========== ========== ========= ===== ===== =====
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RETAIL PROPERTIES (CONTINUED)
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(1) Property type definitions are as follows: Regional Mall--RM, Community
Centers--CC, Free-standing Retail Properties--FR.
(2) Freestanding stores means leasable buildings or other structures located on
a property which are not physically attached to a mall or community center.
(3) Tenant shops means non-anchor retail stores located in a mall or community
center.
(4) Represents Operating Partnership-owned leasable area and tenant-owned
leasable area within the Properties.
(5) Represents Operating Partnership-owned leasable area within the Properties.
(6) Ownership type definitions are as follows: Fee, Ground lease-GL and
Partnership Interest-PI.
(7) Secured Property as of December 31, 1999.
(8) The Operating Partnership owns a ground lease on one-half acre.
(9) Tenant-owned space at this Property includes Dillard's and Sears.
(10) Tenant-owned space at this Property includes Wal-Mart.
(11) Tenant-owned space at this Property includes Dillard's, JCPenney, Sears
and Mervyn's.
(12) The Operating Partnership owns a ground lease on two acres.
(13) Tenant owned space at this Property includes ShopKo.
(14) The Operating Partnership owns two ground leases on 7.3 acres and 1.2
acres.
(15) Tenant-owned space at this Property includes Sears and Mervyn's.
(16) Tenant-owned space at this Property includes Sears and The Bon March<e'>
(17) Tenant-owned space at this Property includes Target and Top Foods.
(18) Tenant-owned space at this Property includes JCPenney, Mervyn's,
Nordstrom and Meier & Frank.
(19) The Operating Partnership owns 2.35 acres in fee and also owns seven
ground leases on 1.58 acres.
(20) Tenant-owned space at this Property includes Target.
(21) Tenant-owned space at this Property includes property owned by a third
party that is vacant.
(22) Anchor space is vacant as of December 31, 1999.
(23) Tenant-owned space at this Property includes Albertsons and Rite Aid.
(24) Tenant-owned space at this Property includes Rite Aid.
(25) Tenant-owned space at this Property includes Albertsons and ShopKo.
(26) The Operating Partnership's lease is with Fred Meyer which subleases the
Property space to Burlington Coat.
(27) The Operating Partnership's lease is with Fred Meyer which subleases the
space to Burlington Coat. 33.6% of the space represented by the
Burlington Coat sublease is further subleased to Office Max.
(28) The Operating Partnership's ownership represents a 73.3% partnership
interest in the current fee holder of the Property.
(29) The Operating Partnership's lease subleases the Property to several
other retailers.
(30) The Operating Partnership's ownership represents a 83.5% partnership
interest in the current fee holder of the Property.
(31) Fred Meyer is paying rent but not occupying the space. The lease ends
in November 2002.
(32) Tenant-owned space at this Property includes Safeway and ShopKo.
(33) Tenant-owned space at this Property includes Longs Drugs.
(34) The Operating Partnership's ownership interest represents a 50%
partnership interest in the current ground lease holder of the Property.
<PAGE> 8
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COMMERCIAL PROPERTIES
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OCCUPANCY
PROPERTY GLA BASED ON OWNERSHIP
PROPERTY LOCATION TYPE (1) (SQ. FT.) GLA TYPE
- ----------------------------------------- ------------------- --------- ------------- ---------------- -------------
UTAH
- ----
Price Business Center-Pioneer Square Salt Lake City BP 497,892 89.9% Fee
Price Business Center-South Main Salt Lake City BP 112,963 94.0% Fee
Price Business Center-Timesquare Salt Lake City BP 289,423 90.3% Fee
Sears-Eastbay Provo CP 48,880 100.0% Fee
Price Business Center-Commerce Park West Valley City BP 393,360 100.0% Fee
IDAHO Boise
- -----
Boise/FSB Plaza CP 11,058 38.6% Fee
------------- ----------------
1,353,576 93.2%
============= ================
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(1) Property type definitions are as follows: Business Park--BP, Commercial
Property--CP.
SIGNIFICANT PROPERTIES
Boise Towne Square contributed approximately 10% of the Company's total
rental revenue (i.e. minimum rents plus percentage rents ("Rental Revenue"))
for the year ended December 31, 1999. Additionally, NorthTown Mall comprised
in excess of 10% of the book value of Company assets and total Rental Revenue
for the year ended December 31, 1999. Certain additional information relating
to these Properties is set forth below.
BOISE TOWNE SQUARE
Boise Towne Square is centrally located in Boise, Idaho adjacent to the
main thoroughfare of the city. Boise Towne Square was opened by the
Predecessor Companies in October of 1988. Boise Towne Square is the dominant
regional mall in its trade area, with several community centers as its major
competition.
The Company completed in August 1998, a 294,804 square foot expansion of
Boise Towne Square. The project added 186,500 square feet of Total GLA for
Dillard's, approximately 44,900 square feet of GLA for the expansion of The Bon
March<e'> and approximately 63,400 square feet of GLA for additional shops.
The Company leases approximately two acres of land which are utilized for
perimeter parking and landscaping from Union Pacific Railroad Company on a
year-to-year basis from December 1 to November 30 at a current rental rate of
$25,000 per year. Boise Towne Square is part of the collateral of the notes
secured by real estate, bearing interest at a fixed 6.37% per annum, and the
Company believes it is adequately insured. Depreciation and amortization are
taken utilizing the straight-line method over a period of 10 - 40 years with a
net book basis of approximately $47,833,000, $44,720,000 and $31,301,000 at
December 31, 1999, 1998 and 1997, respectively. It is the Company's policy to
renovate, expand and upgrade as warranted by market conditions.
As of December 31, 1999, 1998 and 1997, Boise Towne Square was 99%, 98%
and 98% leased, respectively, with an average annual rent from shop tenants per
square foot of $22.77, $22.26 and $19.93 for the years ended on those
respective dates. Three department stores, JCPenney, Dillard's and the Bon
March<e'>, are the only tenants which occupy 10% or more of Total GLA at this
Property. JCPenney and Dillard's own their own land and buildings and are
subject to a Construction, Operation and Reciprocal Easement Agreement that
expires in 2078, while The Bon March<e'>'s lease is for a term of 20 years,
expiring in 2008, with two 20-year extension options.
<PAGE> 9
Boise Towne Square's leases will expire on the following schedule:
<TABLE>
<CAPTION>
AVERAGE PERCENTAGE OF GLA
ANNUALIZED REPRESENTED BY EXPIRING LEASES
------------------------------
ANNUALIZED BASE RENT PER ASSUMING NO ASSUMING FULL
NUMBER APPROXIMATE BASE RENT SQ. FT. UNDER EXERCISE OF EXERCISE OF
LEASE EXPIRATION OF LEASES GLA UNDER EXPIRING RENEWAL RENEWAL
YEAR ENDING DECEMBER 31, (1) EXPIRING SQUARE FEET EXPIRING LEASES OPTIONS OPTIONS
- --------------------------- --------- ----------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
2000 23 42,092 $ 909,038 $ 21.60 7.14% 5.92%
2001 10 23,145 437,824 18.92 3.93% 3.82%
2002 11 17,315 287,968 16.63 2.94% 1.83%
2003 18 29,353 670,747 22.85 4.98% 4.49%
2004 12 39,078 690,975 17.68 6.63% 3.73%
2005 4 12,251 208,843 17.05 2.08% 2.08%
2006 7 19,541 362,979 18.58 3.32% 2.29%
2007 4 9,249 227,900 24.64 1.57% 1.57%
2008 22 214,328 2,089,711 9.75 36.37% 5.72%
2009 and thereafter 41 119,812 2,926,947 24.43 20.33% 16.50%
--------- ----------- -------------- ------------
Total 152 526,164 89.29% 47.95%
========= =========== ============== ============
</TABLE>
- --------------------------
(1) Table excludes tenants paying percentage rents in lieu of minimum rents.
<PAGE> 10
NORTHTOWN MALL
On August 6, 1998, the Company purchased NorthTown Mall, a two-level
949,880 square foot regional mall, located in Spokane, Washington. NorthTown
Mall is Spokane's largest mall with competition coming from the Company's
Spokane Valley Mall as well as one other mall and several community centers.
As of December 31, 1999 and 1998, the mall was 94% and 91% leased,
respectively, with an average annual rent from shop tenants per square foot of
$29.47 for the year ended December 31, 1999. Two department stores, JCPenney
and Sears, are the only tenants which occupy 10% or more of Total GLA at this
Property. Sears owns its own land and buildings and is subject to a
Construction, Operation and Reciprocal Easement Agreement that expires in 2040,
while JCPenney's lease is for a term of 20 years, expiring in 2011 with six
five-year extension options.
NorthTown Mall is financed in part by a first mortgage. The balance at
December 31, 1999 and 1998 on the first mortgage was $83,382,000 and
$84,277,000, respectively. Depreciation and amortization are taken utilizing
the straight-line method over a period of 10 - 40 years with a net book basis
of approximately $135,183,000 and $126,126,000, at December 31, 1999 and 1998,
respectively. The Company is currently constructing a 100,000 square feet
expansion at NorthTown Mall, which is expected to be completed in the third
quarter of 2000. It is the Company's policy to renovate, expand and upgrade as
warranted by market conditions.
NorthTown Mall's leases will expire on the following schedule:
<TABLE>
<CAPTION>
AVERAGE PERCENTAGE OF GLA
ANNUALIZED REPRESENTED BY EXPIRING LEASES
------------------------------
ANNUALIZED BASE RENT PER ASSUMING NO ASSUMING FULL
NUMBER APPROXIMATE BASE RENT SQ. FT. UNDER EXERCISE OF EXERCISE OF
LEASE EXPIRATION OF LEASES GLA UNDER EXPIRING RENEWAL RENEWAL
YEAR ENDING DECEMBER 31, (1) EXPIRING SQUARE FEET EXPIRING LEASES OPTIONS OPTIONS
- --------------------------- --------- ----------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
2000 10 16,132 $ 395,674 $ 24.53 2.27% 2.27%
2001 22 25,496 819,833 32.16 3.59% 3.48%
2002 27 80,294 1,575,141 19.62 11.29% 10.99%
2003 14 21,006 608,234 28.96 2.95% 2.95%
2004 14 32,339 756,357 23.39 4.55% 4.55%
2005 10 19,956 609,476 30.54 2.81% 2.81%
2006 10 22,283 691,066 31.01 3.13% 3.13%
2007 11 28,246 825,772 29.24 3.97% 3.97%
2008 2 3,957 97,500 24.64 .56% .56%
2009 and thereafter 16 354,930 2,786,740 7.85 49.91% 7.23%
--------- ----------- -------------- -------------
Total 136 604,639 85.03% 41.94%
========= =========== ============== =============
</TABLE>
- -------------------------
(1) Table excludes tenants paying percentage rents in lieu of minimum rents.
<PAGE> 11
THE OPERATING PARTNERSHIP'S LARGEST TENANTS
Large stores (over 20,000 square feet per store) occupy 61.53% of the
Total GLA of the Company's regional malls and community centers. The Company's
largest tenants include JCPenney, Sears, The Bon March<e'>, Dillard's, ZCMI,
Wal-Mart, Mervyns, Meier & Frank, The Emporium, Gottschalk's, ShopKo,
Albertsons, Fred Meyer and Burlington Coat. No tenant represented more than
4.37% of the Company's total Rental Revenues for the year ended December 31,
1999.
ANCHORS
Regional malls and community centers usually contain one or more large
retail companies known as "anchors." Anchors, which include traditional
department stores, general merchandise stores, large fashion specialty stores,
value oriented specialty stores and discount stores, usually inventory a broad
range of products that appeal to many shoppers. Anchors either own their own
stores (and sufficient parking) or lease their stores from the owner of the
mall or center. Although the rent and other charges paid by anchors are
usually much less (on a per square foot basis) than the rent and other charges
paid by other tenants, their presence typically attracts many shoppers and
enhances the value of a mall or community center.
Anchor tenants in the regional malls include: JCPenney, Sears, The Bon
March<e'>, Dillard's, ZCMI, Mervyn's, Wal-Mart, Meier & Frank, The Emporium,
Gottschalk's, ShopKo, Cinemark Theaters, Lamonts, Target and Nordstrom.
Anchors in the regional malls occupy 58.9% of Total GLA of the regional malls.
The following table summarizes the Total GLA owned and leased as of December
31, 1999 by these anchors:
<TABLE>
<CAPTION>
COMPANY-
COMPANY- OWNED
NUMBER OF OWNED ANCHOR ANCHOR SPACES
ANCHOR SQUARE ANCHOR-OWNED TOTAL GLA PERCENT AS % OF
ANCHOR STORES FEET SQUARE FEET SQUARE FEET TOTAL GLA REVENUE (1)
- -------------------------- ---------- -------------- ---------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
JCPenney 17 1,205,146 243,591 1,448,737 9.65% 4.37%
Sears 13 546,847 611,001 1,157,848 7.71% 2.10%
The Bon March<e'> 7 499,927 120,420 620,347 4.13% 2.94%
Dillard's 4 72,212 493,863 566,075 3.77% *
ZCMI 5 562,754 -- 562,754 3.75% 1.64%
Mervyn's 3 -- 241,560 241,560 1.61% --
Wal-Mart 2 86,944 114,271 201,215 1.34% *
Meier & Frank 1 -- 183,500 183,500 1.22% --
The Emporium 3 153,003 -- 153,003 1.02% *
Gottschalk's 1 150,000 -- 150,000 1.00% *
ShopKo 1 -- 111,500 111,500 .74% --
Cinemark Theaters 2 109,416 -- 109,416 .73% *
Lamonts 2 80,953 -- 80,953 .54% *
Target 1 -- 75,883 75,883 .51% --
Nordstrom 1 -- 72,000 72,000 .48% --
</TABLE>
- --------------------------
* Less than 1%
(1) Revenue defined as minimum rents plus percentage rents
<PAGE> 12
Anchor tenants occupying the greatest amount of Total GLA in the Company's
community centers are ShopKo, Albertsons, Fred Meyer, Burlington Coat, Rite
Aid, Safeway, Wal-Mart and Macey's. Anchors in the community centers occupy
approximately 70.5% of Total GLA of the community centers. The following
table summarizes the Total GLA owned and leased as of December 31, 1999 by
these anchors:
<TABLE>
<CAPTION> COMPANY-
ANCHOR- ANCHOR OWNED
NUMBER COMPANY- OWNED TOTAL GLA PERCENT ANCHOR SPACES
OF ANCHOR OWNED SQUARE SQUARE FEET TOATL AS % OF
ANCHOR STORES SQUARE FEET FEET ANCHOR SPACES GLA REVENUE
- -------------------------------- --------- -------------- ---------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ShopKo 4 104,000 297,140 401,140 2.67% *
Albertsons 9 269,098 82,663 351,761 2.34% *
Fred Meyer 3 309,944 -- 309,944 2.06% *
Burlington Coat (2) 2 174,248 -- 174,248 1.16% *
Rite Aid 4 70,583 52,080 122,663 0.82% *
Safeway 2 52,764 53,000 105,764 0.70% *
Wal-Mart 1 -- 102,440 102,440 0.68% --
Macey's 1 59,350 -- 59,350 0.40% *
</TABLE>
- --------------------------
* Less than 1%.
(1) Revenue defined as minimum rents plus percentage rents.
(2) Sublease from Fred Meyer, Inc.
MAJOR TENANTS
Non-anchor tenants owned by major national retail chains lease a
considerable amount of space in the Company's retail Properties. Such retail
chains include: Venator Group (Footlocker, Lady Footlocker, Kids Footlocker,
Northern Reflections, Afterthoughts, Champs and San Francisco Music Box),
Limited Group (Lane Bryant, Lerner, Limited Express, Victoria's Secret, Bath &
Body Works, Structure and Ambercrombie & Fitch), The Buckle, Eddie Bauer, Zales
Corporation, Gymboree, Lenscrafters, Disney, Fred Meyer Jewelers, Millers
Outpost, Waldenbooks, B. Dalton Bookseller, Barnes & Noble, Gap Stores Inc.
(Gap, Gap Kids, Baby Gap, Gap Body, Old Navy and Banana Republic), General
Mills (Olive Garden and Red Lobster), Deb Shops, Regis, Maurices, Famous
Footwear, Pearle Vision, Radio Shack, Kay-Bee Toys, Claire's Boutique, Schubach
Jewelers, Helzberg, Ben Bridge, Camelot Music, Musicland (Sam Goody, Musicland
and Sun Coast Pictures), Sole Outdoors, Finish Line, Foot Action, Ann Taylor,
Natural Wonders, Hallmark, American Greetings, Contempo Casuals, Payless
Shoesource, Ritz Camera, Motherhood Maternity, GNC, Wet Seal, Brookstone, Vista
Optical and Couch House.
LEASES
Most of the Company's leases are long-term leases that contain fixed base
rents and step-ups in rent typically occurring every three to five years.
These leases generally pass through to the tenant such tenant's share of common
area charges, including insurance costs and real estate taxes. Generally, all
of the regional mall leases and certain of the community center leases include
roof and structure repair costs in common area charges. The Company's leases
also generally provide for additional rents based on a percentage of tenant
sales. For the years ended December 31, 1999, 1998 and 1997, such percentage
and overage rents accounted for approximately 4.8%, 5.4%, and 6.1%,
respectively, of total Rental Revenue from the Properties owned by the Company
during such periods.
<PAGE> 13
The following table sets forth information relating to the Rental Revenue
from the Properties for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
PROPERTY TYPE 1999 1998 1997 1996 1995
- ------------------------------ ------------- -------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Regional Malls $ 79,218 $ 62,673 $ 44,005 $ 36,286 $ 29,299
Community Centers and
Free-Standing Retail Properties 16,999 14,718 13,192 13,591 12,173
Commercial Properties 6,518 6,548 6,323 6,631 5,633
------------- -------------- --------------- --------------- ----------------
Total $ 102,735 $ 83,939 $ 63,520 $ 56,508 $ 47,105
============= ============== =============== =============== ================
</TABLE>
VACANT SPACE
Approximately 961,000 square feet or 6.4% of Total GLA was vacant as of
December 31, 1999. Of this vacant space, approximately 673,000 square feet was
in the regional mall portfolio (21.6% of which is anchor and 78.4% of which is
mall shop space), 196,000 square feet was in the community center portfolio and
92,000 square feet was in the commercial portfolio.
The following tables set forth information relating to lease expirations
for retail stores in the regional malls and community centers as well as
commercial property leases in effect as of December 31, 1999 over the ten-year
period commencing January 1, 2000 and thereafter for large stores (over 20,000
square feet) and small stores (20,000 square feet or less) at the retail
Properties and for all leases at the commercial Properties. Unless otherwise
indicated, all information set forth below assumes that none of the tenants
exercise renewal options and excludes leases that had not commenced as of
December 31, 1999.
<PAGE> 14
<TABLE>
<CAPTION>
REGIONAL MALLS
Lease Expirations for
Retail Store Leases (over 20,000 square feet)
AVERAGE
ANNUALIZED ANNUALIZED BASE
BASE RENT PER SQUARE
LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER
YEAR ENDING LEASES GLA IN EXPIRING EXPIRING
DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1)
- ----------------------------------- -------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C>
2000 -- -- $ -- $ --
2001 4 212,118 616,346 2.91
2002 4 189,375 817,984 4.32
2003 3 106,613 330,302 3.10
2004 4 328,748 768,601 2.34
2005 1 33,421 111,605 3.34
2006 2 147,560 440,236 2.98
2007 1 50,061 222,992 4.45
2008 4 385,466 1,661,205 4.31
2009 and thereafter 25 2,042,558 10,663,310 5.22
-------------- ---------------
Total 48 3,495,920
============== ===============
</TABLE>
<TABLE>
<CAPTION>
REGIONAL MALLS
Lease Expirations for
Retail Store Leases (20,000 square feet or less)
AVERAGE
ANNUALIZED ANNUALIZED BASE
BASE RENT PER SQUARE
LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER
YEAR ENDING LEASES GLA IN EXPIRING EXPIRING
DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1)
- ----------------------------------- -------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C>
2000 148 249,818 $ 4,243,572 $ 16.99
2001 132 247,427 4,002,370 16.18
2002 144 291,890 4,969,568 17.03
2003 106 217,477 3,858,692 17.74
2004 114 277,294 4,843,109 17.47
2005 71 160,806 3,539,309 22.01
2006 65 154,460 3,527,866 22.84
2007 94 218,649 5,193,045 23.75
2008 113 295,855 6,086,232 20.57
2009 and thereafter 186 634,582 12,234,121 19.28
-------------- ---------------
Total 1,173 2,748,258
============== ===============
</TABLE>
- ------------------------
(1) Excludes tenants paying percentage rents in lieu of minimum rents.
<PAGE> 15
<TABLE>
<CAPTION>
COMMUNITY CENTERS
Lease Expirations for
Retail Store Leases (over 20,000 square feet)
AVERAGE
ANNUALIZED BASE
ANNUALIZED BASE RENT PER SQUARE
LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER
YEAR ENDING LEASES GLA IN EXPIRING EXPIRING
DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1)
- ----------------------------------- -------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C>
2000 1 40,320 $ 162,288 $ 4.03
2001 4 323,260 749,011 2.32
2002 2 133,861 343,645 2.57
2003 6 246,867 751,486 3.04
2004 1 25,525 37,956 1.49
2005 1 43,118 70,246 1.63
2006 1 37,680 122,460 3.25
2007 2 90,960 120,000 1.32
2008 1 41,612 139,761 3.36
2009 and thereafter 14 502,475 3,828,481 7.62
-------------- ---------------
Total 33 1,485,678
============== ===============
</TABLE>
<TABLE>
<CAPTION>
COMMUNITY CENTERS
Lease Expirations for
Retail Store Leases (20,000 square feet or less)
AVERAGE
ANNUALIZED ANNUALIZED BASE
BASE RENT PER SQUARE
LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER
YEAR ENDING LEASES GLA IN EXPIRING EXPIRING
DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1)
- ----------------------------------- -------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C>
2000 44 97,753 $ 1,074,260 $ 10.99
2001 55 130,036 1,309,274 10.07
2002 40 111,434 1,016,478 9.12
2003 25 94,923 1,094,947 11.54
2004 34 92,479 1,243,582 13.45
2005 5 21,826 250,308 11.47
2006 8 36,235 464,925 12.83
2007 3 9,363 115,143 12.30
2008 3 7,352 127,727 17.37
2009 and thereafter 14 83,521 1,231,307 14.74
-------------- ---------------
Total 231 684,922
============== ===============
</TABLE>
- --------------------------
(1) Excludes tenants paying percentage rents in lieu of minimum rents.
<PAGE> 16
<TABLE>
<CAPTION>
LEASE EXPIRATIONS FOR
COMMERCIAL PROPERTIES
AVERAGE
ANNUALIZED ANNUALIZED BASE
BASE RENT PER SQUARE
LEASE EXPIRATION NUMBER OF APPROXIMATE RENT UNDER FOOT UNDER
YEAR ENDING LEASES GLA IN EXPIRING EXPIRING
DECEMBER 31, EXPIRING SQUARE FEET LEASES LEASES (1)
- ----------------------------------- -------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C>
2000 15 439,934 $ 2,272,404 $ 5.17
2001 7 56,215 354,027 6.30
2002 9 163,585 1,173,975 7.18
2003 6 171,275 723,061 4.22
2004 11 224,746 1,318,004 5.86
2005 -- -- -- --
2006 -- -- -- --
2007 -- -- -- --
2008 -- -- -- --
2009 and thereafter 1 72,133 375,638 5.21
-------------- ---------------
Total 49 1,127,888
============== ===============
</TABLE>
- ---------------------
(1) Excludes tenants paying percentage rents in lieu of minimum rents.
As leases expire, the Company currently expects to be able to increase
Rental Revenue by re-leasing the underlying space (either to a new tenant or to
an existing tenant) at rental rates that are at or higher than the existing
rates.
OPERATIONS AND MANAGEMENT
The Company performs all property management functions for the
Properties. At December 31, 1999, the Company had 353 full-time employees
devoted exclusively to property management. Each of the regional malls has on-
site management and maintenance personnel as well as a marketing staff to
assist the mall tenants in promoting and advertising their products. Overall
supervision of mall operations, headed by a Director of Enclosed Malls, is
conducted in a centralized fashion in order to take advantage of economies of
scale and to deliver a uniform presentation of all management functions. The
Company's internal property management information system enables it to quickly
determine tenant status, tenant gross sales, insurance, and other critical
information in order to effectively manage the affairs of its real property
portfolio. The data collected regarding percentage sales allows the Company to
predict sales, to retain tenants and enhance mall stability.
The Leasing/Development Department is responsible for maintaining
relationships with tenants that afford the Company opportunities for new
development and expansion. The Company conducts an active program of leasing,
within the common area space of its malls and community centers, kiosks and
other promotional displays on a seasonal basis. In addition to increased
customer traffic, this approach generates additional revenue for the Company.
The Company's property management efforts will continue to be directed
toward improving the attractiveness and appeal of its retail Properties and
providing a pleasant shopping environment in order to increase overall tenant
sales and rents. The Company strives to meet the needs of its tenants in the
areas of promotion, marketing and ongoing management of its Properties and
seeks to bring together a sufficient critical mass of complementary upscale and
brand-name tenants. As part of its Property management efforts, the Company
monitors tenant mix, store size, sales results and store locations, and works
closely with tenants to improve the overall performance of their stores. The
Company seeks to anticipate trends in the retailing industry and introduce new
retail names and concepts into its retail Properties in response to these
trends. The Company maintains its malls and community centers to very high
standards and believes that the aesthetics, ambiance and cleanliness of these
Properties contribute to repeat visits by customers.
<PAGE> 17
DEVELOPMENTS
Since 1976, the Company and the Predecessor Companies have been
responsible for developing more retail malls in the region covered by Utah,
Idaho, Colorado, Nevada, New Mexico and Wyoming than any other developer,
having constructed, developed or redeveloped 12 malls in this region (as well
as four other malls in Arizona, Oregon and Washington). The Company maintains
the in-house capability to bring a project from concept to completion. The
Leasing/Development Department had a total of 30 full-time employees at
December 31, 1999, including directors of Leasing, Development, Tenant
Coordination and Design/Drafting.
The Operating Partnership developed the Mall at Sierra Vista, an enclosed
regional mall in Sierra Vista, Arizona. The mall held its grand opening on
October 20, 1999 and added approximately 335,000 square feet of Total GLA to
the Company's existing portfolio. The Mall at Sierra Vista is anchored by
Dillard's, Sears and Cinemark Theaters and includes space for approximately 48
mall shops.
The Operating Partnership developed Provo Towne Centre, an enclosed
regional mall in Provo, Utah. The mall held its grand opening on October 28,
1998 and added approximately 723,000 square feet of Total GLA to the Company's
existing portfolio as of December 31, 1998. Provo Towne Centre is anchored by
Dillard's, JCPenney, Sears and Cinemark Theaters and includes space for more
than 80 mall shops. On November 11, 1999, the mall held a grand opening for
its sixteen screen Cinemark Theater which added approximately 74,000 square
feet of additional GLA.
During 1999, the Operating Partnership developed an additional building
at Halsey Crossing, a community center in Gresham, Oregon, and added
approximately 16,300 square feet of GLA to this community center. During 1999,
the Company also added approximately 18,000 square feet of GLA at Boise Towne
Plaza in Boise, Idaho, approximately 12,500 square feet of GLA at Spokane
Valley Mall in Spokane, Washington and approximately 34,200 square feet of
Total GLA for Guesthouse Inn at Three Rivers Mall in Kelso, Washington.
The Operating Partnership, through its consolidated partnership Price
Spokane, Limited Partnership, has initiated the expansion of NorthTown Mall, an
enclosed regional mall in Spokane, Washington. The project will be funded by
the Company's $200 million unsecured credit facility and is expected to be
completed in the third quarter of 2000 which will add approximately 100,000
square feet of additional GLA. Additionally, the Company is currently
contemplating the expansion and renovation of several other of its Properties
as well as other developments and acquisitions.
Further, the Properties contain approximately 108 acres of vacant land
suitable for additional retail expansion projects. Likewise, the Properties
include additional improved land ready for development of approximately 273,100
square feet of free- standing retail space. The Company will seek to expand
these and other Properties in its retail portfolio, as well as newly acquired
properties, depending on tenant demand and market conditions.
THIRD-PARTY PROPERTY MANAGEMENT
The Company provides third-party property management for two office
buildings, one located in Salt Lake City, Utah, and one in Park City, Utah,
five commercial buildings located in Albuquerque, New Mexico, Creve Coeur,
Missouri, Dallas, Texas, Escondido, California, Houston, Texas and Silver Lake
Plaza, a community center, located in Coeur d'Alene, Idaho. In addition to
these arrangements, the Company plans to pursue other property management
opportunities. Because property management facilitates an understanding of a
property's value and potential for cash flow growth, the Company believes that,
in addition to generating property management fees, third-party property
management arrangements can be a source of future acquisitions for the Company.
For example, the Company was the property manager for Eastridge Mall and Silver
Lake Mall prior to their acquisitions by the Company.
EMPLOYEES
The Operating Partnership, which is managed by the Company as sole
general partner, does not have any employees. The Company had approximately
440 full-time employees and approximately 160 part-time employees at December
31, 1999. The Company believes its relationship with its employees is very
good. None of the Company's employees are unionized.
<PAGE> 18
ITEM 3. LEGAL PROCEEDINGS
The Operating Partnership is not aware of any pending or threatened
litigation at this time that will have a materially adverse effect on the
Company, the Operating Partnership or any of the Properties or its development
parcels.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the limited partners of the Operating
Partnership during the fourth quarter period covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
At December 31, 1999, there was no established public trading market for
the Operating Partnership's common units of limited partner interest ("OP
Units"), Series A Preferred Units or Series B Preferred Units. As of March 22,
2000, there were 61 holders of OP Units, 1 holder of Series A Preferred Units
and 2 holders of Series B Preferred Units.
The following table sets forth the distributions declared per OP Unit
for each of the quarters presented:
<TABLE>
<CAPTION>
Distributions
Declared
Per OP Unit
--------------
<S> <C>
YEAR ENDED 12/31/98
First Quarter $ .450
Second Quarter .450
Third Quarter .450
Fourth Quarter .465
YEAR ENDED 12/31/99
First Quarter $ .465
Second Quarter .465
Third Quarter .465
Fourth Quarter .480
</TABLE>
During 1999 and 1998, the Operating Partnership recorded regular
quarterly distributions to common unitholders totaling $39,615,000 and
$38,609,000, respectively, or $1.875 and $1.815 per OP Unit, respectively.
On behalf of the Operating Partnership, the Board of Directors of the Company
has declared a quarterly distribution, payable to holders of OP Units of
record as of April 6, 2000, of $.48 per OP Unit which is an amount equivalent
to an annual distribution of $1.92 per OP Unit. Future distributions will be
determined by the Board of Directors of the Company, the general partner of
the Operating Partnership, and will be dependent upon cash available for
distribution, financial position and cash requirements of the Company and the
Operating Partnership.
The Operating Partnership makes quarterly distributions to the Series A
and Series B preferred unitholders on the last day of each March, June,
September and December. For the year ended December 31, 1999, distributions
for the Series A Preferred Units and Series B Preferred Units were $768,000
and $3,661,000, respectively.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and other data for
the Operating Partnership for the years ended December 31, 1999, 1998, 1997,
1996 and 1995. The historical financial information for all the periods have
been derived from the audited historical consolidated financial statements.
<PAGE> 19
The following selected financial information should be read in
conjunction with all of the financial statements included elsewhere herein
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Revenues $ 133,565 $ 109,069 $ 82,973 $ 72,949 $ 60,950
------------ ------------ ------------- ------------ --------------
Expenses
Operating Expenses before Interest,
Depreciation and Amortization 43,620 36,088 27,434 24,405 20,389
Interest 27,769 20,501 9,066 7,776 6,623
Depreciation and Amortization 25,798 19,543 13,410 11,979 11,528
------------ ------------ ------------- ------------ --------------
Total 97,187 76,132 49,910 44,160 38,540
------------ ------------ ------------- ------------ --------------
36,378 32,937 33,063 28,789 22,410
Minority Interest in Income of
Consolidated Partnerships (482) (421) (394) (389) (421)
Equity in Net Loss of Partnership -- -- -- -- (184)
Interest
Gain on Sales of Real Estate -- 1,096 339 94 918
------------ ------------ ------------- ------------ --------------
Income Before Extraordinary Item 35,896 33,612 33,008 28,494 22,723
Extraordinary Item - Loss on Early
Extinguishment of Debt (985) -- (162) -- --
------------ ------------ ------------- ------------ --------------
Net Income 34,911 33,612 32,846 28,494 22,723
Preferred Unit Distribution (4,429) -- -- -- --
------------ ------------ ------------- ------------ --------------
Net Income Available to Common $ 30,482 $ 33,612 $ 32,846 $ 28,494 $ 22,723
============ ============ ============= ============ ==============
Unitholders
Basic Earnings Per OP Unit (1):
Income Before Extraordinary Item $ 1.48 $ 1.58 $ 1.57 $ 1.45 $ 1.26
Extraordinary Item (0.04) -- (0.01) -- --
------------ ------------ ------------- ------------ --------------
Net Income $ 1.44 $ 1.58 $ 1.56 $ 1.45 $ 1.26
============ ============ ============= ============ ==============
Diluted Earnings Per OP Unit (1):
Income Before Extraordinary Item $ 1.48 $ 1.57 $ 1.55 $ 1.44 $ 1.26
Extraordinary Item (0.05) -- (0.01) -- --
------------ ------------ ------------- ------------ --------------
Net Income $ 1.43 $ 1.57 $ 1.54 $ 1.44 $ 1.26
============ ============ ============= ============ ==============
Distributions per OP Unit $ 1.875 $ 1.815 $ 1.755 $ 1.695 $ 1.635
============ ============ ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C>
Real Estate, before Accumulated
Depreciation $ 876,388 $ 815,756 $ 619,371 $ 453,241 $ 388,205
Total Assets 776,226 733,155 545,684 381,360 327,061
Borrowings 438,241 472,990 283,390 162,375 106,406
Partners' Capital
General Partner 182,951 204,384 207,581 172,286 175,604
Preferred Limited Partner 104,571 -- -- -- --
Common Limited Partner 30,471 32,537 33,426 32,380 34,138
OTHER DATA
Funds From Operations (2) 53,880 50,397 45,028 39,195 32,139
Net Operating Income 89,945 72,981 55,539 48,544 40,561
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
NUMBER OF PROPERTIES/TOTAL GLA AT DECEMBER 31,
1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Number of Properties at Year-End 51 50 48 44 43
============= ============ ============ ============ =============
Total GLA in Square Feet at Year-End:
Malls 10,291,000 9,810,000 7,745,000 5,553,000 5,020,000
Community Centers and
Free-Standing Retail Properties 3,367,000 3,191,000 3,164,000 3,091,000 3,091,000
Commercial Properties 1,354,000 1,354,000 1,418,000 1,418,000 1,394,000
------------- ------------ ------------ ------------ -------------
Total 15,012,000 14,355,000 12,327,000 10,062,000 9,505,000
============= ============ ============ ============ =============
</TABLE>
- -------------------------
(1) Basic Earnings Per OP Unit based on 21,238,000, 21,298,000, 21,119,000,
19,668,000 and 18,037,000 weighted average number of OP Units outstanding
for the years ended December 31, 1999, 1998, 1997, 1996 and 1995,
respectively. Diluted Earnings Per OP Unit based on 21,267,000,
21,401,000, 21,285,000, 19,753,000 and 18,103,000 weighted diluted average
number of OP Units outstanding for years ended December 31, 1999, 1998,
1997, 1996, and 1995, respectively.
(2) The Company, the general partner of the Operating Partnership, considers
funds from operations to be an appropriate measure of the performance of
an equity REIT. Funds from operations ("FFO") is defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as "net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures." While the Company
believes that FFO is the most relevant and widely used measure of its
operating performance, it does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and
is not indicative of cash available to fund cash needs. FFO should not be
considered as an alternative to net income as an indication of the
Company's or the Operating Partnership's operating performance or as an
alternative to cash flow as a measure of liquidity. The Company's
presentation of FFO, however, may not be comparable to other similarly
titled measures used by other equity REITs. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity
and Capital Resources."
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with "Selected
Financial Data" and the consolidated financial statements of the Operating
Partnership and the notes thereto appearing elsewhere herein.
The Company is a fully integrated, self-administered and self-managed
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 conducts all of its business operations through, and held an 82.2%
controlling general partner interest in, the Operating Partnership as of
December 31, 1999. The Company's general partner interest of the Operating
Partnership was calculated using the outstanding OP Units and excludes any
outstanding Series A or Series B Preferred Units. The Operating Partnership's
existing portfolio consists of 51 Properties, in three operating segments,
including 18 enclosed regional malls, 25 community centers together and two
free-standing retail Properties and six mixed-use commercial Properties. The
Operating Partnership's financial condition as of December 31, 1999 and 1998
and results of operations before depreciation for the years then ended were
positively impacted by the October 20, 1999 opening of the Mall at Sierra
Vista, the October 28, 1998 opening of Provo Towne Centre, the August 6, 1998
acquisition of NorthTown Mall, the December 30, 1997 acquisition of Salem
Center, the June 1997 acquisitions of Silver Lake Mall and Visalia Mall and
the August 13, 1997 opening of Spokane Valley Mall. The Operating
Partnership's acquisition and development activities added a combined 4,757,000
square feet of Total GLA to the retail portfolio during 1999, 1998 and 1997.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31,
1998
For the year ended December 31, 1999, income before extraordinary item
and minority interest of unitholders in the Operating Partnership increased
$2,284,000 or 7% when compared to the year ended December 31, 1998. The
improvement in operations was primarily attributable to the following factors:
an increase in minimum rents of $18,381,000; an increase in percentage and
overage rents of $415,000; and an increase in recoveries from tenants of
$5,693,000. These increases were offset by an increase in operating expenses
of $7,320,000, an increase in general and administrative expense of $212,000,
an increase in interest expense of $7,268,000 and an increase in depreciation
and amortization of $6,255,000.
For the year ended December 31, 1999, funds from operations increased
$3,483,000 or 7% as compared to 1998, primarily as a result of acquisitions and
developments as discussed herein.
Total revenues for the year ended December 31, 1999 increased $24,496,000
or 22% to $133,565,000 as compared to $109,069,000 in 1998. This increase is
primarily attributable to a $18,381,000 or 23% increase in minimum rents to
$97,829,000 compared to $79,448,000 in 1998. Percentage and overage rents
increased $415,000 or 9% to $4,906,000, as compared to $4,491,000 in 1998.
Additionally, recoveries from tenants increased $5,693,000 or 24% to
$29,471,000 as compared to $23,778,000 in 1998. Recoveries from tenants as a
percentage of operating expenses were 80% in both 1999 and 1998.
The October 1999 opening at the Mall at Sierra Vista, the August 1998
acquisition of NorthTown Mall, the August 1998 expansion of Boise Towne Square,
the October 1998 opening of Provo Towne Centre and the October 1998 addition of
Sears to Red Cliffs Mall and Sears Tire and Battery to Red Cliff Plaza
contributed $12,296,000 to the minimum rent increase, $355,000 to the
percentage and overage rents increase and $3,833,000 of the increase in
recoveries from tenants. Minimum rents increased $1,957,000 from a non-cash
transaction in which a consolidated partnership of the Operating Partnership
received a building in exchange for cancellation of a long-term ground lease.
The remaining $4,128,000 increase in minimum rents was the result of increases
experienced for the balance of the Operating Partnership's portfolio of
Properties.
Revenues recognized from straight-line rents were $1,273,000 in 1999 as
compared to $931,000 in 1998.
Property operating expenses, including operating and maintenance expense,
and real estate taxes and insurance expense increased $4,819,000 or 27% and
$2,501,000 or 21%, respectively, for the year ended December 31, 1999, as
compared to 1998. These increases were attributable mainly to the opening of
the Mall at Sierra Vista, the acquisition of NorthTown Mall, the opening
<PAGE> 22
of Provo Towne Centre and the expansion of Boise Towne Square. These Properties
contributed $3,708,000 to operating and maintenance expense and $1,565,000 to
taxes and insurance.
General and administrative expenses increased $212,000 or 3% to
$6,618,000 in 1999 as compared to $6,406,000 in 1998. The increase is
primarily related to increased costs associated with the growth of the Company
due to the acquisition of NorthTown Mall and the openings of developed
Properties.
Interest expense increased $7,268,000 or 35% to $27,769,000 in 1999 as
compared to $20,501,000 in 1998. This increase is the result of additional
interest on new borrowings for newly added GLA, the acquisition of NorthTown
Mall and a decrease in capitalized interest due to completed GLA and was
partially offset by the reduction of borrowings outstanding, funded by the sale
of the Series A Preferred Units and the Series B Preferred Units by the
Operating Partnership. Interest capitalized on projects under development was
$2,404,000 in 1999 as compared to $3,754,000 in 1998.
Depreciation expense increased $6,208,000 or 36% to $23,514,000 as
compared to $17,306,000 in 1998. This increase was primarily due to the
acquisition of NorthTown Mall, changes in asset lives on certain tenant
improvements as a result of early lease terminations and increased GLA.
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
For the year ended December 31, 1998, income before extraordinary item
and minority interest of unitholders in the Operating Partnership increased
$604,000 or 2% when compared to the year ended December 31, 1997. The
improvement in operations was primarily attributable to the following factors:
an increase in minimum rents of $19,824,000; an increase in percentage and
overage rents of $595,000; an increase in recoveries from tenants of
$5,579,000; and an increase in other revenues of $240,000. These increases
were offset by an increase in operating expenses of $7,695,000, an increase in
general and administrative expense of $959,000, an increase in interest expense
of $11,435,000 and an increase in depreciation and amortization of $6,133,000.
For the year ended December 31, 1998, funds from operations increased
$5,369,000 or 12% as compared to 1997 primarily as a result of acquisitions and
developments as discussed herein.
Total revenues for the year ended December 31, 1998 increased $26,096,000
or 31% to $109,069,000 as compared to $82,973,000 in 1997. This increase is
primarily attributable to a $19,824,000 or 33% increase in minimum rents to
$79,448,000 in 1998 as compared to $59,624,000 in 1997. Percentage and overage
rents increased $595,000 or 15% to $4,491,000 in 1998 as compared to $3,896,000
in 1997. Additionally, recoveries from tenants increased $5,579,000 or 31% to
$23,778,000 in 1998 as compared to $18,199,000 in 1997 and other income
increased $240,000. Recoveries from tenants as a percentage of operating
expenses were 80% in 1998 as compared to 83% in 1997.
The June 1997 acquisitions of Silver Lake Mall and Visalia Mall, the
August 13, 1997 opening of Spokane Valley Mall, the December 30, 1997
acquisition of Salem Center, the August 6, 1998 acquisition of NorthTown Mall
and the October 28, 1998 opening of Provo Towne Centre contributed $15,371,000
to the minimum rent increase, $887,000 to the percentage and overage rents
increase and $4,971,000 of the increase in recoveries from tenants. The
November 1997 opening of Boise Towne Plaza contributed $1,100,000 to the
minimum rent increase and $139,000 to the increase in recoveries from tenants.
Commercial property revenues increased $950,000 to $8,299,000 in 1998 as
compared to $7,349,000 in 1997. The increase in commercial properties revenue
was primarily due to new tenant leases with higher tenant recoveries offset
somewhat by decreased occupancy levels.
Revenues recognized from straight-line rents were $931,000 in 1998 as
compared to $505,000 in 1997.
Property operating expenses, including operating and maintenance expense,
and real estate taxes and insurance expense increased $4,601,000 or 34% and
$3,094,000 or 36%, respectively, for the year ended December 31, 1998 as
compared to 1997. These increases were attributable to the acquisitions of
NorthTown Mall, Salem Center, Silver Lake Mall and Visalia Mall and the opening
of Spokane Valley Mall, Boise Towne Plaza and Provo Towne Centre. These
Properties contributed $4,570,000 to operating and maintenance expense and
$2,487,000 to taxes and insurance.
General and administrative expenses increased $959,000 or 18% to
$6,406,000 in 1998 as compared to $5,447,000 in 1997. The increase is
primarily related to increased costs associated with the growth of the Company
due to the acquisitions of NorthTown Mall, Salem Center, Silver Lake Mall and
Visalia Mall and the opening of Spokane Valley Mall, Boise Towne Plaza and
Provo Towne Centre.
<PAGE> 23
Interest expense increased $11,435,000 or 126% to $20,501,000 in 1998 as
compared to $9,066,000 in 1997. This increase is the result of additional
interest on new borrowings to acquire NorthTown Mall, Salem Center, Silver Lake
Mall and Visalia Mall and on borrowings related to Spokane Valley Mall and
Provo Towne Centre. Interest capitalized on projects under development was
$3,754,000 in 1998 as compared to $3,509,000 in 1997.
Depreciation expense increased $5,504,000 or 47% to $17,306,000 in 1998
as compared to $11,802,000 in 1997. This increase was primarily due to the
acquisition of NorthTown Mall, Salem Center, Silver Lake Mall and Visalia Mall,
the opening of Spokane Valley Mall, Boise Towne Plaza and Provo Towne
Centre and tenant allowances given on existing GLA.
LIQUIDITY AND CAPITAL RESOURCES
The Operating Partnership's principal uses of its liquidity and capital
resources have historically been for distributions, property acquisitions,
development, expansion and renovation programs and debt repayment. The
Operating Partnership declared quarterly distributions aggregating $1.875 per
OP Unit in 1999. Future distributions will be determined based on actual
results of operations and cash available for distribution.
The Operating Partnership's principal source of liquidity is the cash
flow from operations generated from its real estate investments. As of
December 31, 1999, the Operating Partnership's cash and restricted cash
amounted to approximately $10.9 million. In addition to its cash and
restricted cash, unused capacity under its $200 million unsecured credit
facility totaled $99.5 million at year end.
The Operating Partnership generally intends to distribute approximately
70% to 80% of its funds from operations with the remaining amounts to be held
for capital expenditures and additional growth. The Operating Partnership
expects to meet its other short-term cash requirements, including recurring
capital expenditures related to maintenance and improvements of existing
Properties, through undistributed funds from operations, cash balances and
advances under the credit facility.
The Operating Partnership prepares an annual capital expenditure and
maintenance budget for each Property which includes provisions for all
necessary recurring capital improvements. The Operating Partnership believes
that its undistributed funds from operations will provide the necessary funding
for these requirements. The Operating Partnership believes that these funds
will be sufficient to cover (i) tenant finish costs associated with the renewal
or replacement of current tenant leases as existing leases expire and (ii)
capital expenditures which will not be reimbursed by tenants. During 1999, the
Operating Partnership had capital expenditures, totaling approximately
$64,869,000. This amount consists of $56,801,000 in revenue enhancing
construction and development, $4,793,000 in revenue enhancing tenant
allowances, $1,782,000 in non-revenue enhancing tenant allowances and $658,000
in other non-revenue enhancing capital expenditures. The Operating Partnership
also paid $835,000 in leasing commissions to outside parties. Of this amount,
$125,000 was considered revenue enhancing and $710,000 was considered non-
revenue enhancing. Exclusive of construction and development, capital
expenditures (both revenue and non-revenue enhancing) for the existing
Properties are budgeted in 2000 to be approximately $7.8 million.
The Operating Partnership's principal long-term liquidity requirements
will be the repayment of principal on its outstanding secured and unsecured
indebtedness. At December 31, 1999, the Operating Partnership's total
outstanding indebtedness was approximately $438.2 million. Such indebtedness
included: (i) the outstanding balance on the $200 million unsecured credit
facility which equaled approximately $91 million at December 31, 1999 and is
due October 2000; (ii) the $12.2 million 8.5% note secured by real estate,
which requires a balloon payment of approximately $11.9 million in October
2000; (iii) the $61.2 million 6.37% notes secured by real estate which mature
in January 2001; (iv) the Provo Towne Centre construction loan of approximately
$43.8 million which is due in July 2001; (v) the Spokane Valley Mall
construction loan of approximately $41.6 million which is due in August 2001;
(vi) the $100 million senior notes principal payable at $25 million a year
beginning March 2005; and (vii) the $83.4 million 6.68% first mortgage, which
requires a balloon payment of approximately $73.0 million in September 2008.
The Operating Partnership 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 Operating
Partnership does not expect to generate sufficient funds from operations to
meet such long-term needs and intends to finance these amounts primarily
through advances under the $200 million unsecured credit facility, together
with equity and debt offerings and individual property financings. The
availability of such financing will influence the Operating Partnership's
decision to proceed with, and the pace of its development and acquisition
activities.
<PAGE> 24
On April 23, 1999, the Operating Partnership issued 510,000 Series A
Preferred Units in a private placement. Each Series A Preferred Unit
represents a limited partner interest with a liquidation value of twenty-five
dollars per unit. The Operating Partnership used the net proceeds of
approximately $12.3 million for the partial repayment of borrowings outstanding
under the $200 million unsecured credit facility. On July 28, 1999, the
Operating Partnership also issued 3,800,000 Series B 8.95% Preferred Units in a
private placement. Each Series B Preferred Unit represents a limited
partnership interest with a liquidation value of twenty-five dollars per unit.
The Company used the proceeds of approximately $92 million to repay $90 million
in borrowings outstanding under the $200 million unsecured credit facility and
increase operating cash. Quarterly distributions to the holders of the Series
A and Series B Preferred Units are due on the last day of each March, June,
September and December.
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 guarantees. This
registration statement, when combined with the Company's unused portion of its
previous shelf registration, allowed for up to an aggregate of $400 million of
securities to be offered by the Company and the Operating Partnership. On
March 11, 1998, the Operating Partnership under this registration statement,
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
$270,000 as a result of terminating this agreement, making the effective rate
of interest on these notes at 7.24%. Interest payments are due semi annually on
March 11 and September 11 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 $200 million unsecured credit facility. At
December 31, 1999, the Company and the Operating Partnership had an aggregate
of $300 million in registered securities available under its effective shelf
registration statement.
The Operating Partnership intends to fund its distribution, development,
expansion, renovation, acquisition and debt repayment activities from its $200
million unsecured credit facility as well as other debt and equity financings,
including public financings. The Operating Partnership's ratio of debt-to-
total market capitalization was approximately 50% as of December 31, 1999.
The Company believes that to facilitate a clear understanding of the
Operating Partnership's consolidated historical operating results, the
Operating Partnership's net income should be examined in conjunction with funds
from operations. The Company considers funds from operations to be an
appropriate measure of the performance of an equity REIT. Funds from
operations ("FFO") is defined by NAREIT as "net income (computed in accordance
with generally accepted accounting principles), excluding gains (or losses)
from debt restructuring and sales of property, plus depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures." While the Company believes that FFO is the most relevant and widely
used measure of its operating performance, it does not represent cash generated
from operating activities in accordance with generally accepted accounting
principles and is not indicative of cash available to fund cash needs. FFO
should not be considered as an alternative to net income as an indication of
the Company's operating performance or as an alternative to cash flow as a
measure of liquidity. The Company's presentation of FFO, however, may not be
comparable to other similarly titled measures used by other equity REITs.
The Operating Partnership's calculation of FFO is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
<S> <C> <C>
1999 1998
-------------- -------------
(DOLLARS IN THOUSANDS)
Income Before Minority Interest, Gain on Sales
of Real Estate and Extraordinary Item $ 36,378 $ 32,937
Add: Depreciation of Buildings & Improvements 23,395 17,072
Add: Amortization of Deferred Leasing Costs 632 665
Less: Minority Interest of the Preferred Unitholders (4,429) --
Less: Minority Interest in Income of Consolidated Partnerships (349) (277)
Less: Minority Interest in Depreciation (769) --
Less: Income from One-Time, Lease Termination Settlement
Net of Minority Interest of $979 (978) --
------------- -------------
Funds From Operations $ 53,880 $ 50,397
============= =============
</TABLE>
<PAGE> 25
YEAR 2000 ISSUES
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result, date-
sensitive computer software may recognize a date using "00" as the year 1900
rather than the year 2000. This is generally referred to as the Year 2000
("Y2K") issue. If this situation were to occur, the potential exists for
computer system failures or miscalculations by computer programs, which could
disrupt the Operating Partnership's operations.
The Operating Partnership developed a comprehensive strategy for updating
its systems for Y2K compliance. The Operating Partnership's information
technology ("IT") systems include software and hardware purchased from outside
vendors, as well as in-house developed software. The Operating Partnership is
confident that vendor developed software and hardware has been made Y2K
compliant through installing and compliance testing vendor provided Y2K
updates. In-house developed software has been identified, assessed and tested.
As of the date of this report, the Operating Partnership has not experienced any
significant failures in its IT system as a result of the date change to the
year 2000.
The Operating Partnership believes that the identification of its non-IT
systems which may be impacted by the Y2K problem, including those relating to
property management (e.g. alarm systems and HVAC systems) has been completed,
and that modifications, validation and implementation are complete. The
Operating Partnership did not experience any problems in this area when the
year changed to 2000 and we do not anticipate any future problems.
As of December 31, 1999, the Operating Partnership has spent an aggregate
of approximately $131,000 to address the Y2K issue. Costs included incremental
salary and fringe benefits for personnel, hardware and software costs and
consulting and travel expenses associated with addressing Y2K issues. These
costs were expensed as incurred or, in the case of equipment or software
replacement, were capitalized and depreciated over the expected useful life.
The Operating Partnership believes additional costs related to the Y2K issues
will not be material.
The pervasiveness of the Y2K issue makes it likely that previously
unidentified issues will require remediation during the normal course of
business. In such a case, the Operating Partnership anticipates that
transactions could be processed manually while IT and other systems are
repaired or updated and that such interruptions would have a minor effect on
the Operating Partnership's operations.
INFLATION
Inflation has remained relatively low during the past three years and has
had minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the retail tenants' leases contain provisions
designed to protect the Operating Partnership from the impact of inflation.
Such provisions include clauses enabling the Operating Partnership to receive
percentage rents based on tenants' gross sales, which generally increase as
prices rise, and/or escalation clauses, which generally increase rents during
the terms of the leases. In addition, many of the leases are for terms less
than ten years, which may enable the Operating Partnership to replace existing
leases with new leases at higher base and/or percentage rents if rents of the
existing leases are below then-existing market rates. Substantially all of the
leases, other than those for anchors, require the tenants to pay a
proportionate share of operating expenses, including common area maintenance,
real estate taxes and insurance, thereby reducing the Operating Partnership's
exposure to increases in costs and operating expenses resulting from inflation.
However, inflation may have a negative impact on some of the Operating
Partnership's other operating items. Interest and general and administrative
expenses may be adversely affected by inflation as these specified costs could
increase at a rate higher than rents. Also, for tenant leases with specified
rent increases, inflation may have a negative effect as the specified rent
increases in these leases could be lower than the increase in the inflation
rate at any given time.
OTHER MATTERS
The Operating Partnership has reviewed all recently issued, but not yet
adopted accounting standards in order to determine their effects, if any, on
the results of operations or financial position of the Operating Partnership.
Based on that review, the Operating Partnership believes that none of these
pronouncements will have a significant effect on current or future results of
operations or financial position.
<PAGE> 26
The statements contained in this Annual Report on Form 10-K that are not
purely historical fact are forward looking statements including statements
regarding the Operating Partnership's expectations, budgets, estimates,
contemplations and Y2K compliance. 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 statements. It is important to note that the
Operating Partnership's actual results could differ materially from those in
such forward looking statements. Certain factors that might cause such
differences include those relating to changes in economic 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 and unexpected developments
surrounding the Y2K issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Operating Partnership's exposure to market risk is limited to
fluctuations in the general level of interest rates on its current and future
fixed and variable rate debt obligations. Even though its philosophy is to
maintain a fairly low tolerance to interest rate fluctuation risk, the
Operating Partnership is still vulnerable, however, to significant fluctuations
in interest rates on its variable rate debt, on any future repricing or
refinancing of its fixed rate debt and on future debt.
The Operating Partnership uses long-term and medium-term debt as a source
of capital. At December 31, 1999, the Operating Partnership had approximately
$261,849,000 in outstanding fixed rate debt, consisting of $100,000,000
unsecured senior notes and $161,849,000 in mortgages and notes secured by real
estate. The various fixed rate debt instruments mature starting in the year
2000 through 2095. The weighted average rate of interest on the fixed rate
debt was approximately 7.0% for the year ended December 31, 1999. When debt
instruments of this type mature, the Operating Partnership typically refinances
such debt at the then-existing market interest rates which may be more or less
than the interest rates on the maturing debt. In addition, the Operating
Partnership may attempt to reduce interest rate risk associated with a
forecasted issuance of new fixed rate debt by entering into interest rate
protection agreements. The Operating Partnership has approximately $12,211,000
in fixed rate debt maturing in 2000.
The Operating Partnership's credit facility and existing construction
loans have variable interest rates and any fluctuation in interest rates could
increase or decrease the Operating Partnership's interest expense. At December
31, 1999, the Operating Partnership had approximately $176,392,000 in
outstanding variable rate debt. The weighted average rate of interest on the
variable interest rate debt was approximately 6.8% for the year ended December
31, 1999. If the interest rate for the Operating Partnership's variable rate
debt increased or decreased by 1% during 2000, the Operating Partnership's
interest rate expense on its outstanding variable rate debt would increase or
decrease, as the case may be, by approximately $1,764,000.
Due to the uncertainty of fluctuations in interest rates and the specific
actions that might be taken by the Operating Partnership to mitigate the impact
of such fluctuations and their possible effects, the foregoing sensitivity
analysis assumes no changes in the Operating Partnership's financial structure.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed in the Index
to Financial Statements and Financial Statement Schedules appearing on Page F-1
of this Form 10-K.
<PAGE> 27
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During the two most recent fiscal years, the Operating Partnership has
not experienced any changes in or disagreements with its independent auditors.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Operating Partnership does not have any directors or executive
officers. The Company, as the sole general partner of the Operating
Partnership, controls the day-to-day operations of the Operating Partnership.
Information regarding (i) the Company's Directors appears under the appropriate
caption in the Company's proxy statement for its 2000 Annual Meeting of
Stockholders to be filed with the Commission pursuant to Regulation 14A and
(ii) the Company's Executive Officers appears in Item 4A of the Company's
Annual Report on Form 10-K for the year ended December 31, 1999. The Operating
Partnership does not have any equity securities registered pursuant to Section
12 of the Securities Exchange Act of 1934 and, therefore, is not required to
provide the information requested by Item 405 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
The Operating Partnership does not have any directors or executive
officers. The Company, as the sole general partner of the Operating
Partnership, controls the day-to-day operations of the Operating Partnership.
Information regarding executive compensation of the Company's Executive
Officers appears under the appropriate caption in the Company's proxy statement
for its 2000 Annual Meeting of Stockholders to be filed with the Commission
pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Operating Partnership does not have any voting securities or any
directors or executive officers and, therefore, is not required to provide the
information requested by Item 403 of Regulation S-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Operating Partnership does not have any voting securities or any
directors or executive officers and, therefore, is not required to provide the
information requested by Item 404 of Regulation S-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statements Schedules
See Index to Financial Statements and Financial Statement Schedules
appearing on page F-1 of this Form 10-K
(b)Reports on Form 8-K
None
(c) Exhibits
<PAGE> 28
EXHIBIT INDEX
DESCRIPTION
-----------
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
- ------ ------
<S> <C> <C> <C>
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 Second Amended and Restated Agreement of Limited Partnership of Price Development
Company, Limited Partnership**
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))***
10.10 Amendment 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))***
10.11 Lease 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))***
10.12 Indenture 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))***
10.13 Lease Agreement between Advance Management Corporation and Price Rentals, Inc. and
dated August 1, 1975 and Amendments thereto. (Groundlease for Price Fremont)
(10(m))***
10.14 Groundlease between Aldo Rossi and Price Development Company, dated June 1, 1989,
and related documents. (Groundlease for Halsey Crossing) (10(n))***
10.15 First Amendment to Second Amended and Restated Agreement of Limited Partnership of
Price Development Company, Limited Partnership**
10.16 Second Amendment to Second Amended and Restated Agreement of Limited Partnership of
Price Development Company, Limited Partnership**
10.17 Third Amendment to Second Amended and Restated Agreement of Limited Partnership of
Price Development Company, Limited Partnership****
10.18 Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of
Price Development Company, Limited Partnership
23. Consent of Independent Accountants
27. Financial Data Schedule
</TABLE>
- ---------------------------
* Documents were previously filed with the Operating Partnership's Current
Report on Form 8-K dated March 12, 1998, under the exhibit numbered in the
parenthetical, and are incorporated herein by reference.
** Documents were previously filed with the Operating Partnership's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 and are
incorporated herein by reference.
*** Documents were previously filed with the Company's Registration Statement
on Form S-11, File No. 33-68844, under the exhibit numbered in the
parenthetical, and are incorporated herein by reference.
****Documents were previously filed with the Operating Partnership's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999 and are
incorporated herein by reference.
<PAGE> 29
ITEM 14A.SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE EXCHANGE ACT BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE EXCHANGE ACT
No annual report to security holders or any proxy statement, form of
proxy or other proxy soliciting material will be sent by the Registrant to
security holders.
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<CAPTION>
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
<S> <C> <C>
By: JP Realty, Inc., as a General Partner
By: /s/ John Price
--------------------------
John Price
Date: March 24, 2000 Chairman of the Board of Directors
and Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C> <C>
/s/ John Price
- --------------------------- Chairman of the Board of Directors, March 24, 2000
John Price Chief Executive Officer, Director
(Principal Executive Officer) of JP
Realty, Inc. a General Partner
/s/ G. Rex Frazier
- --------------------------- President and Chief Operating Officer, March 24, 2000
G. Rex Frazier Director of JP Realty, Inc., a General
Partner
/s/ M. Scott Collins
- --------------------------- Vice President-Chief Financial Officer March 24, 2000
M. Scott Collins and Treasurer (Principal Financial and
Accounting Officer) of JP Realty,
Inc., a General Partner
/s/ Warren P. King
- --------------------------- Director of JP Realty, Inc., a General March 24, 2000
Warren P. King Partner
/s/ Sam W. Souvall
- --------------------------- Director of JP Realty, Inc., a General March 24, 2000
Sam W. Souvall Partner
</TABLE>
<PAGE>
EXHIBIT INDEX
DESCRIPTION
-----------
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
- ------ ------
<S> <C> <C> <C>
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 Second Amended and Restated Agreement of Limited Partnership of Price Development
Company, Limited Partnership**
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))***
10.10 Amendment 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))***
10.11 Lease 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))***
10.12 Indenture 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))***
10.13 Lease Agreement between Advance Management Corporation and Price Rentals, Inc. and dated
August 1, 1975 and Amendments thereto. (Groundlease for Price Fremont) (10(m))***
10.14 Groundlease between Aldo Rossi and Price Development Company, dated June 1, 1989, and
related documents. (Groundlease for Halsey Crossing) (10(n))***
10.15 First Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership**
10.16 Second Amendment to Second Amended and restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership**
10.17 Third Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership****
10.18 Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of Price
Development Company, Limited Partnership
23. Consent of Independent Accountants
27. Financial Data Schedule
</TABLE>
* Documents were previously filed with the Operating Partnership's Current
Report on Form 8-K dated March 12, 1998, under the exhibit numbered in the
parenthetical, and are incorporated herein by reference.
**Documents were previously filed with the Operating Partnership's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 and are incorporated
herein by reference.
*** Documents were previously filed with the Company's Registration Statement
on Form S-11, File No. 33-68844, under the exhibit numbered in the
parenthetical, and are incorporated herein by reference.
**** Documents were previously filed with the Operating Partnership's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999 and are
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP PAGE
<S> <C>
Report of Independent Accountants F-2
Consolidated Balance Sheet as of December 31, 1999 and 1998 F-3
Consolidated Statement of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statement of Partners' Capital F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7
Schedule II - Valuation and Qualifying Accounts F-20
Schedule III - Real Estate and Accumulated Depreciation F-21
</TABLE>
<PAGE> F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
of Price Development Company, Limited Partnership
In our opinion, the consolidated financial statements and schedules listed in
the accompanying index, present fairly, in all material respects, the financial
position of Price Development Company, Limited Partnership and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999,
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/S/ PricewaterhouseCoopers LLP
- ---------------------------------
PricewaterhouseCoopers LLP
Salt Lake City, Utah
February 2, 2000
<PAGE> F-2
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
--------------- --------------
<S> <C> <C>
ASSETS
Real Estate Assets
Land $ 105,959 $ 102,921
Buildings 752,040 684,762
--------------- --------------
857,999 787,683
Less: Accumulated Depreciation (135,027) (114,136)
--------------- --------------
Operating Real Estate Assets 722,972 673,547
Real Estate Under Development 18,389 28,073
--------------- --------------
Net Real Estate Assets 741,361 701,620
Cash 7,767 5,123
Restricted Cash 3,149 3,605
Accounts Receivable, Net 10,368 9,713
Deferred Charges, Net 7,526 8,570
Other Assets 6,055 4,524
--------------- --------------
$ 776,226 $ 733,155
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Borrowings $ 438,241 $ 472,990
Accounts Payable and Accrued Expenses 16,716 20,411
Other Liabilities 847 798
--------------- -------------
455,804 494,199
--------------- -------------
Minority Interest 2,429 2,035
--------------- -------------
Commitments and Contingencies
PARTNERS' CAPITAL
General Partner 182,951 204,384
Preferred Limited Partners 104,571 --
Common Limited Partners 30,471 32,537
--------------- --------------
317,993 236,921
--------------- --------------
$ 776,226 $ 733,155
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> F-3
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS - EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
--------------- -------------- ---------------
REVENUES
Minimum Rents $ 97,829 $ 79,448 $ 59,624
Percentage and Overage Rents 4,906 4,491 3,896
Recoveries from Tenants 29,471 23,778 18,199
Interest 637 404 546
Other 722 948 708
--------------- -------------- ---------------
133,565 109,069 82,973
--------------- -------------- ---------------
EXPENSES
Operating and Maintenance 22,142 17,366 12,990
Real Estate Taxes and Insurance 14,141 11,640 8,546
Advertising and Promotions 719 676 451
General and Administrative 6,618 6,406 5,447
Depreciation 23,514 17,306 11,802
Amortization of Deferred Financing Costs 1,652 1,572 969
Amortization of Deferred Leasing Costs 632 665 639
Interest 27,769 20,501 9,066
--------------- -------------- ---------------
97,187 76,132 49,910
--------------- -------------- ---------------
36,378 32,937 33,063
Minority Interest Income of Consolidated Partnerships (482) (421) (394)
Gain on Sales of Real Estate -- 1,096 339
--------------- -------------- ---------------
Income Before Extraordinary Item 35,896 33,612 33,008
Extraordinary Item - Loss on Early
Extinguishment of Debt (985) -- (162)
--------------- -------------- ---------------
Net Income 34,911 33,612 32,846
Preferred Unit Distribution (4,429) -- --
--------------- -------------- ---------------
Net Income Available to Common Unitholders $ 30,482 $ 33,612 $ 32,846
=============== ============== ===============
Basic Earnings Per Partnership Common Unit:
Income Before Extraordinary Item $ 1.48 $ 1.58 $ 1.57
Extraordinary Item (0.04) -- (0.01)
--------------- -------------- ---------------
Net Income $ 1.44 $ 1.58 $ 1.56
=============== ============== ===============
Diluted Earnings Per Partnership Common Unit:
Income Before Extraordinary Item $ 1.48 $ 1.57 $ 1.55
Extraordinary Item (0.05) -- (0.01)
--------------- -------------- ---------------
Net Income $ 1.43 $ 1.57 $ 1.54
=============== ============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> F-4
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED COMMON
GENERAL LIMITED LIMITED
PARTNER PARTNERS PARTNERS Total
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Partners' Capital at December 31, 1996 $ 172,286 $ -- $ 32,380 $ 204,666
Units Issued for Proceeds from Sale of
Common Stock 38,632 -- -- 38,632
Units Issued Upon Exercise of Stock Options 220 -- -- 220
Conversion of Limited Partners' Interests 40 -- (40) --
Units Issued for Acquisition -- -- 1,863 1,863
Common Unit Distributions (30,797) -- (6,423) (37,220)
Net Income 27,200 -- 5,646 32,846
----------- ----------- ----------- ----------
Partners' Capital at December 31, 1997 207,581 -- 33,426 241,007
Units Issued Upon Exercise of Common Stock 911 -- -- 911
Conversion of Limited Partners' Interest 3 -- (3) --
Common Unit Distributions (31,916) -- (6,693) (38,609)
Net Income 27,805 -- 5,807 33,612
----------- ----------- ----------- ----------
Partners' Capital at December 31, 1998 204,384 -- 32,537 236,921
Conversion of Limited Partners' Interest 437 -- (437) --
Preferred Units Issued -- 104,571 -- 104,571
Common Unit Distributions (32,719) -- (6,896) (39,615)
Net Income 25,215 4,429 5,267 34,911
Preferred Unit Distributions -- (4,429) -- (4,429)
Repurchase of Common Units (14,366) -- -- (14,366)
----------- ----------- ----------- ----------
Partners Capital at December 31, 1999 $ 182,951 $ 104,571 $ 30,471 $ 317,993
=========== =========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> F-5
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
------------------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 34,911 $ 33,612 $ 32,846
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Extraordinary Item 985 -- 162
Depreciation 23,514 17,306 11,802
Amortization 2,284 2,237 1,608
Minority Interest in Income of Consolidated Partnerships 482 421 394
Gain on Sales of Real Estate -- (1,096) (339)
Real Estate Received due to Lease Termination (1,957) -- --
Increase in Accounts Receivable, Net (698) (4,112) (2,261)
Increase in Deferred Charges (926) (927) (1,290)
(Decrease) Increase in Accounts Payable and Accrued Expenses (6,647) 3,739 3,368
Increase in Other Assets (1,793) (1,129) (1,917)
------------- -------------- --------------
Net Cash Provided by Operating Activities 50,155 50,051 44,373
------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Real Estate Assets, Developed or Acquired (57,993) (200,022) (137,560)
Proceeds from Sales of Real Estate -- 1,289 469
Decrease (Increase) in Restricted Cash 456 (1,140) (93)
------------- -------------- --------------
Net Cash Used in Investing Activities (57,537) (199,873) (137,184)
------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Borrowings 125,842 289,384 219,088
Penalty Paid on Early Retirement of Debt (527) -- --
Repayment of Borrowings (160,591) (99,784) (123,320)
Deferred Financing Costs (771) (2,344) (1,503)
Net Proceeds from Sale of Partnership Common Units -- 923 38,865
Proceeds from Issuance of Preferred Units 104,571 -- --
Distributions to Preferred Unitholders (4,429) -- --
Capital Contribution by Minority Partner -- -- 1,000
Distributions Paid to Partners (39,615) (38,609) (37,220)
Distributions Paid to Minority Interest (88) (228) (246)
Repurchase of Common Units (14,366) -- --
------------- -------------- --------------
Net Cash Provided by Financing Activities 10,026 149,342 96,664
------------- -------------- --------------
Net Increase (Decrease) in Cash 2,644 (480) 3,853
Cash, Beginning of Period 5,123 5,603 1,750
------------- -------------- --------------
Cash, End of Period $ 7,767 $ 5,123 $ 5,603
============= ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> F-6
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
1. BUSINESS AND BASIS OF PRESENTATION
BUSINESS
Price Development Company, Limited Partnership (the "Operating
Partnership"), a Maryland Limited Partnership, is primarily engaged in the
business of owning, leasing, managing, operating, developing and redeveloping
regional malls, community centers and other commercial properties. The
Operating Partnership's general partner, JP Realty, Inc. (the "Company"), a
Maryland Corporation, is a real estate investment trust ("REIT") as defined by
the Internal Revenue Code and owns an interest in and conducts its business
activities through the Operating Partnership. The Company owned an 82.2 and
82.7 percent general partnership interest in the Operating Partnership at
December 31, 1999 and 1998, respectively. The Operating Partnership owns a
portfolio of 51 properties ("Properties" or "Property") consisting of 18
enclosed regional malls, 25 community centers, two free-standing retail
Properties and six mixed-use commercial Properties located in the Western
United States. The tenant base includes primarily national, regional and local
retailers; as such, the Company's credit risk is concentrated in the retail
industry.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of the Operating Partnership and all controlled affiliates.
The effect of all significant intercompany balances and transactions have
been eliminated in the consolidated presentation. Certain amounts in the 1998
and 1997 financial statements have been reclassified to conform with the 1999
presentation.
The preparation of these 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REAL ESTATE ASSETS
Real estate assets are stated at cost less accumulated depreciation. At
each balance sheet date, the Operating Partnership reviews recorded book values
of real estate assets for possible impairment based upon expectations of future
nondiscounted cash flows (excluding interest) from each property. There have
been no impairments as of December 31, 1999.
Costs directly related to the acquisition and development of real estate
assets, including overhead costs directly attributable to property development,
are capitalized. Interest and real estate taxes incurred during the
development and construction periods are also capitalized.
Depreciation is computed on a straight-line basis generally over 40 years
for buildings and four to ten years for equipment and fixtures. Tenant
improvements are capitalized and depreciated on a straight-line basis over the
life of the related lease. Expenditures for maintenance and repairs are
charged to operations as incurred. Major replacements and betterments which
improve or extend the life of the asset are capitalized and depreciated over
their estimated useful lives.
REVENUE RECOGNITION
Certain minimum rents are recognized monthly based upon amounts which are
currently due from tenants, when such amounts are not materially different than
recognizing the fixed cash flow over the initial term of the lease using the
straight-line method. All other minimum rents are recognized using the
straight-line method.
<PAGE> F-7
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (CONTINUED)
On April 1, 1998, the Company stopped accruing revenues for percentage
and overage rents based upon the adoption of Emerging Issues Task Force Issue
98-9. On January 1, 1999, the Company started accruing these revenues again on
a straight-line basis and continued to do so through December 31, 1999.
Beginning January 1, 2000, the Company will stop accruing revenues for
Percentage and Overage Rents based upon recent accounting guidance issued by
Staff Accounting Bulletin No. 101 "Revenue Recognition". The cumulative effect
of adopting this new guidance will not be material to the first quarter of
2000.
An allowance for doubtful accounts has been provided against the portion
of tenant accounts receivable which is estimated to be uncollectible. Tenant
accounts receivable in the accompanying consolidated balance sheet are shown
net of allowance for doubtful accounts of $1,217 and $741 as of December 31,
1999 and 1998, respectively.
RESTRICTED CASH
Restricted cash is held under terms of loan agreements to be used for
certain capital expenditures, property tax payments and funds held in reserve
by a trustee for principal and interest.
DEFERRED CHARGES
Deferred charges consist principally of financing fees and leasing
commissions paid to third parties. These costs are amortized on a straight-
line basis, which amounts, for deferred financing fees, approximate those
amortized using the effective interest method, over the terms of the respective
agreements. Deferred charges in the accompanying consolidated balance sheet
are shown net of accumulated amortization of $8,335 and $6,981 as of December
31, 1999 and 1998, respectively.
INCOME TAXES
Income taxes have not been provided in the accompanying financial
statements as the tax effects of the Operating Partnership's operations accrue
directly to the partners.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement will be effective for the Operating
Partnership beginning January 1, 2001. The Operating Partnership did not hold
any derivative instruments at December 31, 1999.
3. ACQUISITION AND DEVELOPMENTS (GLA AMOUNT UNAUDITED)
ACQUISITION
On August 6, 1998, the Company, through a consolidated partnership of
which the Operating Partnership owns 99% and is a limited partner and a wholly
owned subsidiary owns 1% and is the general partner, bought NorthTown Mall,
located in Spokane, Washington for $128,000. The acquisition was financed
utilizing a first mortgage of $84,500 and $43,500 of borrowings on the
Operating Partnership's unsecured credit facility. The Operating Partnership
issued a letter of credit to the first mortgage holder in the amount of $9,500
to guarantee the completion of additional property development work.
<PAGE> F-8
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
3. ACQUISITION AND DEVELOPMENTS (GLA AMOUNTS UNAUDITED) (CONTINUED)
DEVELOPMENTS
The Operating Partnership, through its consolidated partnership Price
Spokane, Limited Partnership, has initiated the expansion of NorthTown Mall, an
enclosed regional mall in Spokane, Washington. The project is expected to be
completed in the third quarter of 2000 and will add approximately 100,000 square
feet of gross leasable area (Company-owned leasable area within the Company's
properties ("GLA")). At December 31, 1999, the Operating Partnership had
expended approximately $10,828 for expansion costs and anticipates expending an
additional $9,408 to complete the project.
The Operating Partnership developed the Mall at Sierra Vista, an enclosed
regional mall in Sierra Vista, Arizona. The mall held its grand opening on
October 20, 1999 and added approximately 335,000 square feet of total gross
leasable area (Company-owned leasable area plus any tenant-owned leasable area
within the Company's properties ("Total GLA")). At December 31, 1999, the
Operating Partnership had cumulative expenditures of $17,728 for development
costs and had leased approximately 94% of the mall.
The Operating Partnership developed Provo Towne Centre, an enclosed
regional mall in Provo, Utah through its consolidated partnership Provo Mall
Development Company, LTD. The mall held it's grand opening on October 28, 1998
and added approximately 723,000 square feet of Total GLA as of December 31,
1998. On November 11, 1999, Provo Towne Centre held a grand opening for its
newly developed sixteen-screen Cinemark Theater which added approximately
74,000 square feet of additional GLA. At December 31, 1999, the Operating
Partnership had cumulative expenditures of approximately $76,896 for
development costs and had leased approximately 96% of the mall.
During 1999, the Operating Partnership developed an additional building
at Halsey Crossing, a community center in Gresham, Oregon. During 1999 the
Operating Partnership had expended approximately $790 for development costs and
added approximately 16,300 square feet of GLA to the community center.
In August 1998, the Company completed an expansion at Boise Towne Square
in Boise, Idaho adding 294,804 square feet of Total GLA. Dillard's was added
as a new anchor with approximately 186,500 square feet of Total GLA, The Bon
March<e'> expanded its space by 44,900 square feet of GLA and approximately
63,400 square feet of additional shop GLA was added.
The Company has added Sears as a fourth anchor tenant at Red Cliffs Mall
in St. George, Utah. The Sears store opened in October 1998 and added
approximately 70,400 square feet of GLA to Red Cliffs Mall and a Sears Tire and
Battery shop added approximately 9,600 square feet of GLA at Red Cliffs Plaza.
The first phase of construction at Boise Towne Plaza in Boise, Idaho
opened in November 1997, adding 76,414 square feet of retail space. The
Company added approximately 15,000 square feet of GLA at Boise Towne Plaza in
March 1998. During 1999, approximately 18,000 square feet of GLA was developed
at Boise Towne Plaza. At December 31, 1999, Total GLA for the plaza was
approximately 109,500 square feet.
The Operating Partnership, through its consolidated partnership Spokane
Mall Development Company, Limited Partnership, completed the development of
Spokane Valley Mall located in Spokane, Washington and held a grand opening on
August 13, 1997. Additional activities included the development of two
freestanding pads during 1999 and two freestanding pads during 1998, which
included a Sears Tire and Battery Shop, a Pier 1 Imports, an Outback Steakhouse
and a Red Robin. The partnership had cumulative expenditures of approximately
$65,886 for the mall. At December 31, 1999, the mall contained approximately
724,000 square feet of Total GLA and was approximately 93% leased.
<PAGE> F-9
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
4. BORROWINGS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
<S> <C> <C>
1999 1998
------------- -------------
Notes, unsecured; interest at 7.29%, maturing 2005 to 2008 $ 100,000 $ 100,000
Credit Facility, unsecured; weighted average interest at 6.10%
during 1999 and 6.43% during 1998, due in 2000 91,000 100,800
Mortgage payable, secured by real estate; interest at 6.68%,
due in 2008 83,382 84,277
Notes, secured by real estate; interest at 6.37%, due in 2001 61,223 95,000
Construction loan, secured by real estate; interest at 7.63%
and 7.08% as of December 31, 1999 and 1998, respectively, due in 2001 43,792 27,550
Construction loan, secured by real estate; interest at 7.69%
and 6.81% as of December 31, 1999 and 1998, respectively, due in 2001 41,600 47,505
Mortgage payable, secured by real estate; interest at 8.5%,
due in 2000 12,165 12,510
Other notes payable, secured by real estate; interest ranging
from 7.0% to 9.99%, maturing 2000 to 2095 5,079 5,348
------------- ------------
$ 438,241 $ 472,990
============= ============
</TABLE>
CREDIT FACILITY
On October 16, 1997, the Operating Partnership obtained a $150,000 three-year
unsecured credit facility (the "Credit Facility") from a group of banks. On
December 18, 1997, the amount was increased to $200,000. The facility has a
three-year term and bears interest, at the option of the Operating Partnership,
at one, or a combination, of (i) the higher of the federal funds rate plus 50
basis points or the prime rate, or (ii) LIBOR plus a spread of 70 to 130 basis
points. The LIBOR spread is determined by the Operating Partnership's credit
rating and/or leverage ratio. The Credit Facility also includes a competitive
bid option in the amount of $100,000 which will allow the Operating Partnership
to solicit bids for borrowings from the bank group. The facility is used for
general corporate purposes including stock repurchase, development, working
capital, repayment of indebtedness and/or amortization payments. The facility
contains restrictive covenants including limitations on the amount of secured
and unsecured debt, and requires the Operating Partnership to maintain certain
financial ratios. At December 31, 1999, the Operating Partnership was in
compliance with all these covenants. The Credit Facility is due October 2000,
at which time the Operating Partnership will renew or refinance the loan. The
Operating Partnership paid commitment fees on the Credit Facility totaling $506
and $514 in 1999 and 1998, respectively.
On November 7, 1997, the Operating Partnership borrowed $85,000 from the
Credit Facility and utilized the proceeds to retire and cancel previously
existing credit facilities and to pay for development activities. Deferred
financing costs related to the canceled credit facilities were written-off
resulting in an extraordinary loss of $162. On December 29, 1997, the
Operating Partnership borrowed an additional $42,000 to pay for the acquisition
of Salem Center and for development activities. On August 6, 1998, the
Operating Partnership borrowed $43,500 from its Credit Facility as part of the
purchase of NorthTown Mall (Note 3). In August 1998, the Operating Partnership
issued a $9,500 letter of credit backed by the Credit Facility to the NorthTown
Mall first mortgage holder to guarantee the completion of additional property
development work. The Company does not expect any material losses to result
from the letter of credit and management is therefore of the opinion that the
fair value of this instrument at December 31, 1999 is zero. During 1999,
proceeds from the sale of cumulative redeemable preferred units of the
Operating Partnership were used to pay down the amount outstanding on the
Credit Facility (Note 5). The Operating Partnership borrowed an additional
$57,993 for development activities during 1999. At December 31, 1999 and 1998,
the Credit Facility had a balance of $91,000 and $100,800, respectively.
NOTES
On March 11, 1998, the Operating Partnership under its shelf registration,
issued $100,000 of ten year senior unsecured notes bearing interest at a fixed
7.29% per annum. The Operating Partnership had entered into an interest rate
protection agreement in anticipation of issuing these notes and received $270
as a result of terminating this agreement, making the effective fixed rate of
interest on these notes 7.24% per annum. Interest payments are due semi-
annually on March 11 and September 11 of each year. Principal payments of
$25,000 are due annually beginning March 2005. The proceeds were used to
partially repay outstanding borrowings under the Credit Facility.
<PAGE> F-10
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
4. BORROWINGS (CONTINUED)
On January 21, 1994, a subsidiary of the Operating Partnership issued $95,000
in secured notes bearing interest at a fixed 6.37% per annum. On July 21,
1999, the Operating Partnership borrowed $33,777 from the Credit Facility to
reduce the notes to $61,223. The transaction unencumbered four regional mall
Properties. The write-off of deferred financing costs related to the reduction
of the notes plus direct expenses, including a prepayment penalty, make up the
extraordinary loss of $985. The notes require quarterly interest payments and
are due on January 21, 2001. The subsidiary has an option to extend the notes
to January 21, 2003.
CONSTRUCTION LOANS
On September 4, 1998, Provo Mall Development Company, LTD., a consolidated
partnership of which the Operating Partnership is the general partner, entered
into a $50,000 construction loan facility. The proceeds from the construction
loan facility have been used to fund the development and construction of Provo
Towne Centre in Provo, Utah. The construction loan facility, which matures on
July 1, 2001, with an optional two-year extension, is collateralized by Provo
Towne Centre and guaranteed by the Operating Partnership. The loan bears
interest at a variable rate indexed to the LIBOR rate. At December 31, 1999
and 1998, the loan had a balance of $43,792 and $27,550, respectively.
On July 30, 1996, Spokane Mall Development Company Limited Partnership, a
consolidated partnership of which the Operating Partnership is the general
partner, entered into a $50,000 construction loan facility. The proceeds from
this construction loan facility have been used to fund the development and
construction of the Spokane Valley Mall in Spokane, Washington. The
construction loan facility is collateralized by the Spokane Valley Mall and
guaranteed by the Operating Partnership. On July 30, 1999, the Operating
Partnership borrowed $5,905 from the Credit Facility to reduce the principal
outstanding on the construction loan and exercised the option to extend the
construction loan to August 2001. The fee to extend the loan was $154. The
loan bears interest at a variable interest rate indexed to the LIBOR rate. At
December 31, 1999 and 1998, the loan had a balance of $41,600 and $47,505,
respectively.
MORTGAGES PAYABLE
On August 6, 1998, the Company and Operating Partnership, through a
consolidated partnership, acquired NorthTown Mall. The partnership obtained a
new first mortgage in the amount of $84,500. The loan has a ten year term,
6.68% fixed rate, and a thirty-year amortization payoff schedule with a balloon
payment of approximately $73,000. At December 31, 1999 and 1998, the loan had
a balance of $83,382 and $84,277, respectively.
In June 1997, the Operating Partnership assumed a mortgage note of $24,755 as
part of the acquisition of Silver Lake Mall and retired portions of the debt
principally using borrowings under a credit facility. The assumed debt bears
interest at a fixed 8.5% per annum and has a maturity date of October 1, 2000
when a balloon payment of approximately $11,887 is due. At December 31, 1999
and 1998, the loan had a balance of $12,165 and $12,510, respectively.
Schedule of Maturities of Borrowings
<TABLE>
<CAPTION>
The following summarizes the scheduled maturities of borrowings at December 31, 1999:
Total
-------------
<S> <C>
Year
- ----
2000 $ 104,115
2001 149,200
2002 1,078
2003 1,426
2004 1,187
Thereafter 181,235
-------------
$ 438,241
=============
</TABLE>
<PAGE> F-11
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
5. CAPITAL TRANSACTIONS
The limited partners of the Operating Partnership have an option to
convert their Operating Partnership Common Units ("OP Units") into shares of the
Company's Common Stock. The Operating Partnership will issue an equivalent
number of OP Units to the Company as general partnership interests. In 1999
and 1998, respectively, 41,718 and 285 OP Units were converted into shares.
In October 1999, the Board of Trustee authorized the Company to
repurchase up to $25,000 of the Company's Common Stock through open market
purchases and private transactions. Through December 31, 1999, the Company had
repurchased approximately 857,000 shares of Common Stock for a total cost of
approximately $14,366. As of February 2, 2000, approximately 190,000
additional shares of stock were purchased for $3,170. The Operating
Partnership purchased an equivalent number of OP Units from the Company.
In April 1999, the Operating Partnership issued 510,000 Series A 8.75%
cumulative redeemable preferred units (the "Series A Preferred Units") in
exchange for a gross contribution of $12,750. Each Series A Preferred Unit
represents a limited partnership interest with a liquidation value of twenty-
five dollars per unit. The Operating Partnership used the proceeds, less
applicable transaction costs of $405, for the repayment of borrowings
outstanding under the Credit Facility. The Series A Preferred Units, which may
be redeemed by the Operating Partnership on or after April 23, 2004, have no
stated maturity or mandatory redemption and are not convertible into any other
securities of the Operating Partnership. The Series A Preferred Units are
exchangeable at the option of the preferred unitholder at a rate of one Series
A Preferred Unit for one share of the Company's Series A 8.75% cumulative
redeemable preferred stock beginning April 23, 2009, or earlier under certain
circumstances.
On July 28, 1999, the Operating Partnership issued 3.8 million Series B
8.95% cumulative redeemable preferred units (the "Series B Preferred Units") in
exchange for a gross contribution of $95,000. Each Series B Preferred Unit
represents a limited partnership interest with a liquidation value of twenty-
five dollars per unit. The Operating Partnership used the proceeds, less
applicable transaction costs of $2,774, to repay $90,000 in borrowings under
the Credit Facility and increase operating cash. The Series B Preferred Units,
which may be redeemed by the Operating Partnership on or after July 28, 2004,
have no stated maturity or mandatory redemption and are not convertible into
any other securities of the Operating Partnership. The Series B Preferred
Units are exchangeable at the option of the preferred unitholder at a rate of
one Series B Preferred Unit for one share of the Company's Series B 8.95%
cumulative redeemable preferred stock beginning July 28, 2009, or earlier under
certain circumstances.
The Operating Partnership makes quarterly distributions to the Series A
and Series B Preferred unitholders on the last day of each March, June,
September and December. For the year ending 1999, distributions for the Series
A and Series B Preferred Units were $768 and $3,661, respectively.
6. RENTAL INCOME
Substantially all real estate held for investment is leased to retail and
commercial tenants. These operating leases generally range from 1 to 25 years
and provide for minimum monthly rents, and in certain instances percentage
rents based on the tenants' sales, and generally require the tenants to pay
property taxes, insurance and maintenance charges.
All non-cancelable leases, assuming no new or renegotiated leases or
option extensions, in effect at December 31, 1999 provide for the following
minimum future rental income:
<TABLE>
<CAPTION>
<S> <C>
Year Total
- ---- ------------
2000 $ 83,240
2001 76,351
2002 69,296
2003 62,277
2004 55,205
Thereafter 302,358
------------
$ 648,727
============
</TABLE>
<PAGE> F-12
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
7. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments under the terms of all non-cancelable
operating leases under which the Operating Partnership is the lessee,
principally for ground leases, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Total
- ---- ----------
2000 $ 986
2001 998
2002 1,012
2003 968
2004 938
Thereafter 25,453
-----------
$ 30,355
===========
</TABLE>
The Operating Partnership recorded rental expenses of $983, $971 and $550
for 1999, 1998 and 1997, respectively.
The Operating Partnership is a defendant in certain litigation relating
to its business activities. Management does not believe that the resolution of
these matters will have a materially adverse effect upon the financial
position, results of operations or cash flows of the Operating Partnership.
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During 1999, Price James, a consolidated partnership of the Operating
Partnership, received a building appraised at $2,000 in exchange for accounts
receivable of $43 and $1,957 for termination of a long-term ground lease, which
amount was recorded in minimum rents.
During 1999, 1998 and 1997, non-cash investing and financing transactions
included an increase in accounts payable of $4,645, $1,693 and $3,861,
respectively, related to building and development activities, the assumption of
debt related to the acquisition of Salem Center totaling $494 in December 1997,
the assumption of debt related to the acquisition of Silver Lake Mall totaling
$24,755 in June 1997, and the write-off of capitalized tenant allowances of
$2,313, $657 and $406, respectively. In addition, the holders of Operating
Partnership units elected to convert 41,718, 285 and 4,000 Operating
Partnership Common Units, having a recorded value of $437, $3 and $40, into
Common Stock in 1999, 1998 and 1997, respectively.
Interest paid (net of capitalized amounts of $2,404, $3,754 and $3,509
for 1999, 1998 and 1997) aggregated $28,553, $17,763 and $8,276 for 1999, 1998
and 1997, respectively.
Purchase of the remaining 70% interest in Silver Lake Mall, Ltd. in June
1997 was comprised of:
<TABLE>
<CAPTION>
<S> <C> <C>
72,000 Operating Partnership Units issued $ 1,863
Book value of 30% equity investment in Silver Lake Mall, Ltd. (1,555)
Debt assumed 24,755
-------------
$ 25,063
=============
</TABLE>
<PAGE> F-13
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
9. RELATED PARTY TRANSACTIONS
The Operating Partnership buys computer services from Alta Computer
Services, Inc. ("Alta"). Alta is majority owned by three directors of the
Company. The Operating Partnership paid $192, $175, and $200 in 1999, 1998 and
1997, respectively, for such services.
The Operating Partnership has entered into a management agreement under
which the Operating Partnership performs certain accounting and management
functions on behalf of a company, whose majority owner is the Chairman of the
Board of Directors of the Company. Management fees collected by the Operating
Partnership under this agreement totaled $72 for each of the three years ended
December 31, 1999.
The Company provided third-party management services for certain
properties owned directly or indirectly by the Chairman of the Board of
Directors of the Company as follows: (i) an office building in Salt Lake City,
Utah, the owner of which paid the Company a management fee of $113, $115 and
$105 in 1999, 1998 and 1997, respectively (Fairfax, a company which is wholly-
owned by the Chairman of the Board, is a general partner of the owner of this
building), (ii) a commercial building in Salt Lake City, Utah, the owner of
which paid the Company a management fee of $2 in 1997 (the Chairman of the
Board was the general partner of the owner of this building), and (iii) a
commercial building in Albuquerque, New Mexico, the owner of which paid the
Company a management fee of $6 and $5 in 1999 and 1998, respectively (the
Chairman of the Board is the general partner owner of the building).
10. STOCK INCENTIVE PLAN
On October 26, 1993, the Company adopted the 1993 Stock Option Plan which
authorizes the discretionary grant by the Executive Compensation Committee of
options intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code to key employees of the Company and
the discretionary grant of nonqualified stock options to key employees,
directors and consultants of the Company. The maximum number of shares of
Common Stock subject to option under the Company's Plan is 1,100,000. The
proceeds received by the Company upon exercise of options are contributed to
the Operating Partnership in exchange for the issuance of an equivalent number
of Operating Partnership Units. No stock options may be granted after ten
years from the date of adoption and options must be granted at a price
generally not less than the fair market value of the Company's Common Stock at
the date of grant. These options vest over a period of not more than five
years.
A summary of the Company's 1993 Stock Option Plan activity is set forth
below:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES OF EXERCISE SHARES OF EXERCISE SHARES OF EXERCISE
STOCK PRICE STOCK PRICE STOCK PRICE
---------- ----------- ----------- ----------- ----------- ------------
Outstanding at beginning of year 631,000 $ 18.06 553,000 $ 18.07 558,000 $ 17.99
Granted 60,000 18.31 165,000 25.21 7,000 25.38
Exercised -- -- (51,000) 17.92 (12,000) 18.64
Forfeited (4,000) 22.43 (36,000) 22.49 -- --
---------- ----------- ----------- ----------- ----------- ------------
Outstanding at end of year 687,000* $ 19.55 631,000 $ 21.37 553,000 $ 18.07
========== =========== =========== =========== =========== ============
Exercisable at end of year 494,000 $ 18.41 360,000 $ 18.06 277,000 $ 17.87
========== =========== =========== =========== =========== ============
</TABLE>
- --------------------
* The weighted average remaining contractual life of options outstanding as of
December 31, 1999 was 4 years. The range of option prices was $17.50 to
$25.38 per share.
<PAGE> F-14
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
10. STOCK INCENTIVE PLAN (CONTINUED)
The Company has applied Accounting Principles Board Opinion 25 in
accounting for its plan. Accordingly, no compensation costs have been
recognized. Had the Operating Partnership's compensation costs for the
Company's plan been determined based on the fair value at the grant date in
accordance with the method required by SFAS No. 123, "Accounting for
Stock-Based Compensation", the Operating Partnership's net income and net
income per share would have been reduced to the proforma amounts as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
Net income ------------ ------------- -------------
As reported $ 30,482 $ 33,612 $ 32,846
Proforma $ 30,411 $ 33,477 $ 32,800
Basic net income per share
As reported $ 1.44 $ 1.58 $ 1.56
Proforma $ 1.44 $ 1.57 $ 1.55
Diluted net income per share
As reported $ 1.43 $ 1.57 $ 1.54
Proforma $ 1.43 $ 1.56 $ 1.54
</TABLE>
The fair value of each option grant was estimated on the date of
grant using the Black-Scholes options pricing model using the following
assumptions:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
-------------- --------------- --------------
Risk free interest rate 4.79% 5.51% 6.67%
Dividend yield 11.09% 7.14% 7.00%
Expected life 4 years 5 years 9 years
Expected volatility 16.40% 17.00% 16.50%
Weighted average per share fair value of
options granted during the year $ 0.55 $ 2.08 $ 2.53
</TABLE>
11. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) profit sharing plan which permits
participating employees to defer up to a maximum of 15% of their
compensation up to the maximum allowed by the Internal Revenue Code.
The Company matches 50% of the qualified employees' contributions up
to a maximum of $1 per employee each year. Employees working a
minimum of 1,000 hours per year who have completed at least one year
of service and attained the age of 21 are qualified to participate
in the plan. The employees' contributions are immediately vested.
Additionally, the Company annually contributes 3% of base salary to
the plan for each qualified employee. Contributions from the
Company vest based upon employees' years of service beginning at 20%
per year after one year of service. The Company's contributions to
the plan in 1999, 1998 and 1997, which are reflected as an expense
of the Operating Partnership, were $333, $279 and $225,
respectively.
<PAGE> F-15
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were
determined by management using available market information.
Considerable judgment is necessary to interpret market data and
develop estimated fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Operating
Partnership could realize on disposition of the financial
instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated
fair value amounts.
The carrying value of cash, accounts receivable and accounts
payable at December 31, 1999 and 1998 are reasonable estimates of
their fair values because of the short maturity of these financial
instruments.
Borrowings with an aggregate carrying value of $438,241 and
$472,990 have an estimated aggregate fair value of $422,295 and
$472,690 at December 31, 1999 and 1998, respectively. Estimated
fair value is based on interest rates currently available to the
Operating Partnership for issuance of borrowings with similar terms
and remaining maturities.
13. EARNINGS PER OPERATING PARTNERSHIP COMMON UNIT
The following table provides a reconciliation of both income
before extraordinary items and the number of OP Units used in the
computations of basic earnings per OP Unit, which utilizes the
weighted average number of OP Units outstanding without regard to
potentially dilutive OP Units and diluted earnings per OP Unit,
which includes all such OP Units. Effect has been given to the
Company's stock option plan (Note 10) since proceeds received by the
Company upon exercise of options are contributed to the Operating
Partnership in exchange for the issuance of an equivalent number of
OP Units.
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
--------------- --------------- ----------------
Income (Numerator)
Before Extraordinary Item $ 31,467 $ 33,612 $ 33,008
=============== =============== ================
OP Units (Denominator)
Basic-average common units outstanding 21,238,000 21,298,000 21,119,000
Add: Dilutive effect of stock options 29,000 103,000 166,000
--------------- --------------- ----------------
Diluted OP Units 21,267,000 21,401,000 21,285,000
=============== =============== ================
Per-Unit Amounts - Income Before Extraordinary Item
Basic $ 1.48 $ 1.58 $ 1.57
=============== =============== ================
Diluted $ 1.48 $ 1.57 $ 1.55
=============== =============== ================
</TABLE>
Options to purchase 687,000, 631,000 and 553,000 shares of Common Stock
were outstanding at December 31, 1999, 1998 and 1997, respectively (Note 10), a
portion of which has been reflected above using the treasury stock method.
14. SEGMENT INFORMATION (GLA AMOUNTS UNAUDITED)
In 1998, the Operating Partnership adopted SFAS No. 131 "Disclosures
About Segments of an Enterprise and Related Information." The information
presents the Operating Partnership's three reportable segments: 1) regional
malls, 2) community centers and 3) commercial properties in conformity with
SFAS No. 131.
The accounting policies of the segments are the same as those described
in the "Summary of Significant Accounting Policies." Segment data includes
total revenues and property net operating income (revenues less operating and
maintenance expense, real estate taxes and insurance expense and advertising and
promotions expense ("Property NOI")). The Operating Partnership evaluates the
performance of its segments and allocates resources to them based on Property
NOI.
The regional mall segment consists of 18 regional malls in eight states
containing approximately 10,291,000 square feet of Total GLA and which range
in size from approximately 296,000 to 1,171,000 square feet of Total GLA.
<PAGE> F-16
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
14. SEGMENT INFORMATION (GLA AMOUNTS UNAUDITED) (CONTINUED)
The community center segment consists of 25 Properties in
seven states containing approximately 3,362,000 square feet of Total
GLA and two freestanding retail Properties containing approximately
5,000 square feet of GLA.
The commercial Properties include six mixed-use
commercial/business Properties with 38 commercial buildings
containing approximately 1,354,000 square feet of GLA which are
located primarily in the Salt Lake City, Utah area where the
Company's headquarters is located.
The table below presents information about the Operating
Partnership's reportable segments for the years ending December 31:
<TABLE>
<CAPTION>
REGIONAL COMMUNITY COMMERCIAL
MALLS CENTERS PROPERTIES OTHER TOTAL
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1999
- ----
Total Revenues $ 104,205 $ 20,297 $ 7,555 $ 1,508 $ 133,565
Property Operating Expenses (1) (30,620) (4,568) (1,814) -- (37,002)
----------- ----------- ----------- ----------- ----------
Property NOI (2) 73,585 15,729 5,741 1,508 96,563
Unallocated Expenses (3) -- -- -- (60,185) (60,185)
Unallocated Minority Interest (4) -- -- -- (482) (482)
Unallocated Other (5) -- -- -- (985) (985)
Consolidated Net Income -- -- -- -- 34,911
Additions to Real Estate Assets 55,593 6,094 1,133 125 62,945
Total Assets (6) 641,871 84,329 30,837 19,189 776,226
1998
- ----
Total Revenues 82,622 17,849 8,299 299 109,069
Property Operating Expenses (1) (23,895) (4,144) (1,643) -- (29,682)
----------- ----------- ----------- ----------- ----------
Property NOI (2) 58,727 13,705 6,656 299 79,387
Unallocated Expenses (3) -- -- -- (46,450) (46,450)
Unallocated Minority Interest (4) -- -- -- (421) (421)
Unallocated Other (5) -- -- -- 1,096 1,096
Consolidated Net Income -- -- -- -- 33,612
Additions to Real Estate Assets 190,942 845 597 5,470 197,854
Total Assets(6) 604,937 80,307 30,899 17,012 733,155
1997
- ----
Total Revenues 58,069 16,649 7,349 906 82,973
Property Operating Expenses (1) (16,175) (4,053) (1,759) -- (21,987)
----------- ----------- ----------- ----------- ----------
Property NOI (2) 41,894 12,596 5,590 906 60,986
Unallocated Expenses (3) -- -- -- (27,923) (27,923)
Unallocated Minority Interest (4) -- -- -- (394) (394)
Unallocated Other (5) -- -- -- 177 177
Consolidated Net Income -- -- -- -- 32,846
Additions to Real Estate Assets 154,331 11,246 907 -- 166,484
Total Assets (6) 423,800 80,274 31,909 9,701 545,684
</TABLE>
- -----------------
(1) Property operating expenses consist of operating, maintenance,
real estate taxes, insurance, advertising and promotion expenses
as listed in the consolidated statement of operations.
(2) Total revenues minus property operating expenses.
(3) Unallocated expenses consist of general and administrative,
depreciation, amortization of deferred financing costs,
amortization of deferred leasing costs and interest as listed in
the consolidated statement of operations.
(4) Unallocated minority interest includes minority interest in
income of consolidated partnerships.
(5) Unallocated other includes gain on sale of real estate and
extraordinary loss on extinguishment of debt as listed in the
consolidated statement of operations.
(6) Unallocated other total assets include cash, corporate offices,
miscellaneous real estate and deferred financing costs.
<PAGE> F-17
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Financial information for each of the quarters in
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED 1999
- ---------------
Total Revenues $ 32,989 $ 31,738 $ 32,398 $ 36,440 $ 133,565
Income Before Extraordinary Item
and Minority Interest 9,244 7,011 9,049 11,074 36,378
Net Income 8,221 6,896 6,465 8,900 30,482
Basic Earnings Per OP Unit 0.39 0.32 0.30 0.42 1.44**
Diluted Earnings Per OP Unit 0.38 0.32 0.30 0.42 1.43**
Distributions Declared Per OP Unit 0.465 0.465 0.465 0.480 1.875***
YEAR ENDED 1998
- ---------------
Total Revenues $ 24,503 $ 24,407* $ 27,958* $ 32,201* $ 109,069
Income Before Minority Interest 8,093 8,236 7,834 8,774 32,937
Net Income 7,991 8,142 7,963 9,516 33,612
Basic Earnings Per OP Unit 0.38 0.38 0.37 0.45 1.58**
Diluted Earnings Per OP Unit 0.37 0.38 0.37 0.46 1.57**
Distributions Declared Per OP Unit 0.450 0.450 0.450 0.465 1.815***
</TABLE>
- ------------------------------
* 1998 percentage and overage rents have been restated to reflect the
Company's accrual of these revenues on the straight line basis
as allowed by the Emerging Issues Task Force in late 1998. As a result
of the restatement, percentage and overage rents were adjusted for
the second, third and fourth quarters of 1998 by $1,124, $912 and ($2,036),
respectively. (Note 2)
** The sum of quarterly earnings per share may differ from yearly totals
due to rounding and the fluxuation of weighted average units on a
quarterly basis.
*** Of which $.433 and $.308 represents a non-taxable return of capital for
1999 and 1998, respectively.
16. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited proforma summary financial information for
1999 and 1998, is presented as if the 1998 acquisition of NorthTown
Mall and the 1999 issuances of Series A and Series B preferred units had
been consummated as of January 1, 1998.
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Revenues $ 133,565 $ 117,384
Income Before Extraordinary Item $ 29,787 $ 30,021
Net Income $ 28,802 $ 30,021
Basic Earnings Per OP Unit
Income Before Extraordinary Item $ 1.40 $ 1.41
Net Income $ 1.36 $ 1.41
Diluted Earnings Per OP Unit
Income Before Extraordinary Item $ 1.40 $ 1.40
Net Income $ 1.35 $ 1.40
</TABLE>
The proforma financial information summarized above is presented
for information purposes only and may not be indicative of what actual results
of operations would have been had the 1998 acquisition of NorthTown Mall and
the 1999 issuances of Series A and Series B preferred units been completed as
of the beginning of the periods presented, nor does it purport to
represent the results of operations for future periods.
<PAGE> F-18
SCHEDULE II
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO BALANCE AT
OF YEAR EXPENSE DEDUCTIONS END OF YEAR
------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1999
Allowance for uncollectible accounts $ 741 $ 1,479 $ 1,003 $ 1,217
Year ended December 31, 1998
Allowance for uncollectible accounts $ 570 $ 537 $ 366 $ 741
Year ended December 31, 1997
Allowance for uncollectible accounts $ 489 $ 346 $ 265 $ 570
</TABLE>
<PAGE> F-19
SCHEDULE III
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COSTS CAPITALIZED CARRIED AT CLOSE OF PERIOD DEPREC-
--------------------- SUBSEQUENT ------------------------------ IABLE
RELATED BUILDING & TO BLDG. & ACCUMULATED DATE OF DATE LIVES
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION(1) LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED YEARS
- ----------- ------------ -------- ------------ ------------- -------- ------------ -------- ------------ ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REGIONAL
MALLS
Animas
Valley
Mall,
Farmington,
NM $ -- $ 3,902 $ 24,059 $ 1,730 $ 3,902 $ 25,789 $ 29,691 $ 2,893 -- 1995 40
Boise Towne
Square,
Boise, ID 29,248 9,218 -- 53,633 9,218 53,633 62,851 15,317 1987-88 1985-86 5-40
Cache
Valley
Mall,
Logan, UT -- 909 -- 8,949 909 8,949 9,858 4,758 1975-76 1973-76 10-40
Cottonwood
Mall,
Holladay,
UT 17,884 7,514 20,776 31,820 7,514 52,596 60,110 21,429 1981-87 1980 4-40
Eastridge
Mall,
Casper, WY -- 4,300 19,896 6,332 4,300 26,228 30,528 2,716 -- 1995 40
Grand Teton
Mall, Idaho
Falls, ID -- 5,802 28,614 4,367 7,743 31,040 38,783 2,865 -- 1996 40
Mall at
Sierra
Vista,
Sierra
Vista, AZ -- 1,660 16,068 -- 1,660 16,068 17,728 66 1998-99 1998 40
North
Plains
Mall,
Clovis,
NM 4,928 2,664 -- 13,015 2,664 13,015 15,679 3,990 1984-85 1979-84 10-40
NorthTown
Mall,
Spokane,
WA 83,382 6,902 120,458 11,220 6,902 131,678 138,580 4,263 1997-98 1997 40
Pine Ridge
Mall,
Pocatello,
ID -- 1,883 -- 21,934 1,883 21,934 23,817 8,990 1979-81 1979 10-40
Provo Towne
Centre,
Provo,
UT 46,792 13,829 41,820 21,247 9,360 67,536 76,896 2,249 1997-98 1997 40
Red Cliffs
Mall,
St. George,
UT -- 903 -- 13,846 903 13,846 14,749 3,619 1989-90 1989 3-40
Salem
Center,
Salem, OR -- 1,704 30,504 937 1,704 31,441 33,145 1,586 -- 1997 40
Silver Lake
Mall, Coeur
d'Alene, ID 12,165 4,055 21,379 444 4,055 21,823 25,878 1,435 -- 1997 40
Spokane
Valley
Mall,
Spokane, WA 41,600 6,645 34,341 24,900 6,745 59,141 65,886 4,552 1990-97 1990 40
Three
Rivers
Mall,
Kelso, WA 9,163 1,977 -- 20,680 1,977 20,680 22,657 6,170 1986-87 1984 10-40
Visalia
Mall,
Visalia, CA -- 6,146 31,812 1,323 6,146 33,135 39,281 2,223 -- 1997 40
White
Mountain
Mall, Rock
Springs, WY -- 1,120 -- 15,550 1,120 15,550 16,670 6,642 1977-78 1977 40
COMMUNITY
CENTERS
Alameda
Plaza,
Pocatello,
ID -- 500 -- 3,365 500 3,365 3,865 2,007 1973 1973 40
Anaheim
Plaza,
Anaheim, CA -- -- -- 2,053 -- 2,053 2,053 87 1980-81 1979 40
Austin
Bluffs
Plaza,
Colorado
Springs, CO -- 1,488 -- 1,923 1,488 1,923 3,411 682 1985 1979 3-40
Bailey
Hills
Plaza,
Eugene,
OR -- 157 -- 297 157 297 454 61 1988-89 1988 40
Baskin
Robbins
17th St.,
Idaho
Falls, ID -- 9 67 7 9 74 83 23 -- 1988 40
Boise
Plaza,
Boise, ID -- 322 -- 1,529 322 1,529 1,851 976 1970-71 1970 40
Boise
Towne
Plaza,
Boise, ID -- 3,316 4,243 2,646 3,316 6,889 10,205 535 1996-97 1994 40
Cottonwood
Square,
Salt Lake
City, UT -- 1,926 3,535 43 1,926 3,578 5,504 358 -- 1995 40
Division
Crossing,
Portland,
OR -- 2,429 -- 4,495 2,429 4,495 6,924 1,053 1990-91 1990 20-40
Fort Union
Plaza, Salt
Lake City
UT -- 21 -- 1,623 21 1,623 1,644 698 1979-84 -- 40
Fremont
Plaza, Las
Vegas, NV -- -- -- 2,317 -- 2,317 2,317 1,247 1976-80 -- 40
Fry's
Shopping
Plaza,
Glendale,
AZ -- 353 -- 4,625 1,254 3,724 4,978 1,710 1980-81 1980 40
Gateway
Crossing,
Bountiful,
UT -- 3,644 -- 8,516 3,644 8,516 12,160 1,504 1990-92 1990 40
</TABLE>
<PAGE> F-20
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COSTS CAPITALIZED CARRIED AT CLOSE OF PERIOD DEPREC-
--------------------- SUBSEQUENT ------------------------------ IABLE
RELATED BUILDING & TO BLDG. & ACCUMULATED DATE OF DATE LIVES
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION(1) LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED YEARS
- ----------- ------------ -------- ------------ ------------- -------- ------------ -------- ------------ ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMUNITY
CENTERS
(CONTINUED)
Halsey
Crossing,
Gresham, OR -- -- -- 3,173 -- 3,173 3,173 655 1989-91 -- 4-40
Nephi Bank,
Nephi, UT -- 17 183 -- 17 183 200 149 -- 1976 --
North
Temple
Shops,
Salt Lake
City, UT -- 60 -- 177 60 177 237 96 1970 1970 40
Orem Plaza
Center Street,
Orem, UT -- 371 330 1,111 344 1,468 1,812 718 1976-87 1973 10-40
Orem Plaza
State Street,
Orem, UT -- 126 -- 697 126 697 823 391 1975 1973 29-40
Plaza 800,
Sparks, NV -- 33 2,969 42 33 3,011 3,044 1,830 1974 -- 40
Plaza 9400,
Sandy, UT -- -- -- 4,570 -- 4,570 4,570 2,181 1976-84 -- 10-40
Red Cliffs
Plaza, St.
George, UT -- -- 2,403 215 -- 2,618 2,618 315 1994-95 1994-95 40
River
Pointe
Plaza,
West Jordan
UT -- 1,130 -- 2,710 1,130 2,710 3,840 855 1987-88 1986-87 5-40
Riverside
Plaza,
Provo, UT -- 427 1,886 4,327 427 6,213 6,640 1,746 1978-81 1977 40
Twin Falls
Crossing,
Twin
Falls, ID -- 125 -- 776 125 776 901 445 1976 1975 40
University
Crossing,
Orem,
UT -- 230 -- 5,027 230 5,027 5,257 1,960 1971-92 1971 40
Woodlands
Village,
Flagstaff,
AZ -- 2,068 5,329 236 2,068 5,565 7,633 752 -- 1994 40
Yellowstone
Square,
Idaho
Falls, ID -- 355 -- 4,527 355 4,527 4,882 2,791 1972-77 1972 40
COMMERCIAL
PROPERTIES
First
Security
Place,
Boise,
ID -- 300 -- 3,253 300 3,253 3,553 1,652 1978-80 1978 10-40
Price
Business
Center -
Commerce
Park,
West Valley
City, UT -- 415 2,109 8,803 1,147 10,180 11,327 1,864 1980 1973-95 40
Price
Business
Center-
Pioneer
Square,
Salt Lake
City, UT -- 658 -- 10,061 651 10,068 10,719 3,559 1974-92 1973 3-40
Price
Business
Center-
South
Main,
Salt Lake
City, UT -- 317 -- 2,127 295 2,149 2,444 1,116 1967-82 1966-81 3-40
Price
Business
Center-
Timesquare,
Salt Lake
City, UT -- 581 -- 9,948 546 9,983 10,529 4,217 1974-80 1972-80 5-40
Sears-
Eastbay,
Provo, UT 1,591 275 -- 2,079 275 2,079 2,354 561 1989-90 1989 40
OTHER REAL
ESTATE
Miscel-
laneous
Real Estate -- 1,164 17 10,415 4,059 7,537 11,596 470 -- 1980-98 40
------------ -------- ------------ ------------ --------- ---------- ---------- -----------
TOTAL $ 246,753 $103,950 $ 412,798 $ 359,640 $ 105,959 $ 770,429 $ 876,388 $ 135,027
============ ======== ============ ============ ========= ========== ========== ===========
</TABLE>
- ---------------------------
(1) Included are development costs subsequent to acquisition or opening of
property.
<PAGE> F-21
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
A summary of activity for real estate investments and accumulated depreciation
is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
Real Estate Investments
Balance at Beginning of Year $ 815,756 $ 619,371 $ 453,241
Acquisitions -- 128,000 96,615
Improvements 62,945 69,854 69,921
Disposition of Property (2,313) (1,469) (406)
--------------- --------------- ---------------
Balance at End of Year $ 876,388 $ 815,756 $ 619,371
=============== =============== ===============
Accumulated Depreciation
Balance at Beginning of Year $ 114,136 $ 98,404 $ 87,318
Depreciation 23,204 17,072 11,492
Depreciation of Disposed Property (2,313) (1,340) (406)
--------------- --------------- --------------
Balance at End of Year $ 135,027 $ 114,136 $ 98,404
=============== =============== ==============
</TABLE>
<PAGE> F-22
<PAGE>
EXHIBIT 10.18
FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
The undersigned, being the sole general partner of Price Development
Company, Limited Partnership (the "Partnership"), a limited partnership
formed under the Maryland Revised Uniform Limited Partnership Act and
pursuant to the terms of that certain Second Amended and Restated Agreement
of Limited Partnership, dated July 15, 1999 (the "Partnership Agreement"),
does hereby amend the Partnership Agreement as follows:
1. EXHIBIT OF PARTNERS AND PARTNERSHIP INTERESTS. EXHIBIT A to the
Partnership Agreement is hereby deleted in its entirety and replaced by
EXHIBIT A hereto which identifies, as December 31, 1999, each Partner of
the Partnership, the number of Partnership Units held by such Partner and
such Partner's respective Percentage Interest in the Partnership.
2. RATIFICATION. Except as expressly modified by this Fourth
Amendment, all of the provisions of the Partnership Agreement are affirmed
and ratified and remain in full force and effect.
Capitalized terms used but not defined in this Fourth Amendment shall
have the same meanings that are ascribed to them in the Partnership
Agreement.
Dated: March 10, 2000
-----------------
JP Realty, Inc.,
as General Partner
By: /s/ G. Rex Frazier
-----------------------
Name: G. Rex Frazier
Title: President
<PAGE>
EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Partnership Percentage
Name of Partner Units Interest
- ---------------------------------------- --------------------- ----------------------
<S> <C> <C>
GENERAL PARTNER
JP Realty, Inc.
35 Century Park-Way
Salt Lake City, Utah 84115 16,825,665 82.229410%
LIMITED PARTNERS
Boise Mall Investment Company, Ltd. 824,411 4.02901%
Brown, Mike 125 0.00061%
Bybee, Terry 320 0.00156%
Cache Valley Mall Partnership, Ltd. 328,813 1.60696%
Chandler, Harry 100 0.00049%
Clauson, Pat 100 0.00049%
Cloward, Burke 35,460 0.17330%
Cordano, Alan 765 0.00374%
Cordano, James 1,531 0.00748%
Curtis, Greg 24 0.00012%
Curtis, Vardell 125 0.00061%
East Ridge Partnership 100 0.00049%
Enslow, Mike 320 0.00156%
Fairfax Holding, LLC 786,226 3.84240%
Frank, Alan 5,486 0.02681%
Frazier, G. Rex 3,680 0.01798%
Frei, Michael 6,817 0.03332%
Gillette, Jerry 100 0.00049%
Hall Investment Company 10,204 0.04987%
Hansen, Kenneth 5,102 0.02493%
JCP Realty, Inc. 350,460 1.71275%
KFC Advertising 5,487 0.02682%
Kelley, Chad 125 0.00061%
Kelley, Paul 25 0.00012%
King American Hospital, Ltd. 63,424 0.30996%
King Provo, Ltd. 64,872 0.31704%
King, Warren P. 6,244 0.03052%
Mendenhall, Paul K. 214 0.00105%
Mulkey, Tom 100 0.00049%
North Plains Development Company, Ltd. 19,033 0.09302%
North Plains Land Company, Ltd. 1,758 0.00859%
Olson, Carl 1,894 0.00926%
Orton, Byron 125 0.00061%
Peterson, Martin G. 692 0.00338%
Pine Ridge Development Company, Ltd. 77,641 0.37944%
Pine Ridge Land Company, Ltd. 5,176 0.02530%
Price, John 200 0.00098%
Price, Steven 350 0.00171%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Partnership Percentage
Name of Partner Units Interest
- ---------------------------------------- --------------------- ----------------------
<S> <C> <C>
Price 800 Company, Ltd. 156,615 0.76540%
Price Commerce, Ltd. 63,423 0.30996%
Price East Bay, Ltd. 37,157 0.18159%
Price Eugene Bailey Company, Ltd. 17,497 0.08551%
Price Fremont Company, Ltd. 166,315 0.81281%
Price Glendale Company, Ltd. 3,935 0.01923%
Price Orem Investment Company, Ltd. 66,747 0.32620%
Price Plaza 800 Company, Ltd. 12,199 0.05962%
Price Riverside Company, Ltd. 10,983 0.05368%
Price Rock Springs Company, Ltd. 11,100 0.05425%
Price Taywin Company, Ltd. 106,381 0.51990%
Priet, Nettie 100 0.00049%
Red Cliff Mall Investment Company 167,379 0.81801%
Roebbelen Engineering 72,000 0.35187%
Souvall, Sam 23,371 0.11422%
Taycor Ltd. 35,462 0.17331%
Tech Park II Company, Ltd. 4,929 0.02409%
Timothy, Jodi 150 0.00073%
Vise, Phil 160 0.00078%
Watcott, Keith 35,460 0.17330%
Watkins, Gary 5,102 0.02493%
Wilcher, Abe 5,306 0.02593%
Wilcher, Lena 10,000 0.04887%
YSP 16,787 0.08204%
-------------------- ----------------------
Total 20,461,852 100.00000%
-------------------- ----------------------
SSB Tax Advantaged Exchange Fund I, LLC 510,000 100.00000%{1}
-------------------- ----------------------
Belcrest Realty Corporation 2,575,000 73.02632%{2}
Belair Real Estate Corporation 1,255,000 26.97368%{2}
-------------------- ----------------------
3,800,000 100.00000%
-------------------- ----------------------
</TABLE>
- --------------------------
1. Represents all of the Series A Preferred Units issued by the
Partnership.
2. Represents a percentage of the Series B Preferred Units issued
by the Partnership.
<PAGE> EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (No. 333-34835
and No. 333-34835-01) of Price Development Company, Limited Partnership of our
report dated February 2, 2000, on our audits of the consolidated financial
statements and financial statement schedules of Price Development Company,
Limited Partnership as of December 31, 1999 and 1998, and for the years ended
December 31, 1999, 1998 and 1997, which report is included in this Annual
Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Salt Lake City, Utah
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CATAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PRICE
DEVELOPMENT COMPANY, LIMITED PARTNERSHIP FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> $7,767 $5,123 0
<SECURITIES> 0 0 0
<RECEIVABLES> 11,585 10,454 0
<ALLOWANCES> (1,217) (741) 0
<INVENTORY> 0<F1> 0<F1> 0
<CURRENT-ASSETS> 0 0 0
<PP&E> 0<F2> 0<F2> 0
<DEPRECIATION> 0<F2> 0<F2> 0
<TOTAL-ASSETS> 776,226 733,155 0
<CURRENT-LIABILITIES> 0<F1> 0<F1> 0
<BONDS> 0 0 0
0 0 0
104,571 0 0
<COMMON> 213,422 236,921 0
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 776,226 733,155 0
<SALES> 0 0 0
<TOTAL-REVENUES> 133,565 109,069 82,973
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 69,418<F3> 55,631<F4> 40,844<F5>
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 27,769 20,501 9,066
<INCOME-PRETAX> 0 0 0
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> (801) 0 (133)
<CHANGES> 0 0 0
<NET-INCOME> 25,347 27,950 27,321
<EPS-BASIC> $1.44 $1.59 $1.56
<EPS-DILUTED> $1.44 $1.58 $1.55
<FN>
<F1>The financial statements reflect an unclassified balance sheet due to the
nature of the Company's industry - Real Estate.
<F2>The Company utilizes a condensed balance sheet format for 10-K reporting.
Amounts are included in Other Assets.
<F3>Amount is comprised of $97,187 of expenses less interest expense of $27,769
reflected elsewhere in this Financial Data Schedule.
<F4>Amount is comprised of $76,132 of expenses less interest expense of $20,501
reflected elsewhere in this Financial Data Schedule.
<F5>Amount is comprised of $49,910 of expenses less interest expense of $9,066
reflected elsewhere in this Financial Data Schedule.
</FN>
</TABLE>
