<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: JUNE 30, 1999 Commission File Number: 0-23503
EXCEL LEGACY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 33-0781747
- ------------------------------- -----------------------------------------
(State of incorporation) (IRS Employer Identification Number)
16955 VIA DEL CAMPO, SUITE 100 SAN DIEGO, CALIFORNIA 92127
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number: (858) 675-9400
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 11, 1999
- ---------------------------- -----------------------------------
Common Stock, $.01 par value 33,457,804
<PAGE> 2
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
INDEX
FORM 10-Q
----------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets
June 30, 1999
December 31, 1998 ............................................................. 3
Consolidated Statements of Income
Three Months Ended June 30, 1999
Three Months Ended June 30, 1998
Six Months Ended June 30, 1999
Six Months Ended June 30, 1998................................................. 4
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended June 30, 1999
Six Months Ended June 30, 1998................................................. 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999
Six Months Ended June 30, 1998................................................. 6
Notes to Consolidated Financial Statements........................................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................................15
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................................21
</TABLE>
2
<PAGE> 3
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
----------
<TABLE>
JUNE 30, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS
Real estate:
Land $ 55,128 $ 54,915
Buildings 140,036 136,118
Leasehold interest 2,351 2,351
Accumulated depreciation (3,990) (2,506)
--------- ---------
Net real estate 193,525 190,878
Cash 8,070 1,387
Accounts receivable, less allowance for bad debts of
$168 and $14 in 1999 and 1998, respectively 498 204
Notes receivable 23,305 23,204
Investment in partnerships 17,738 11,423
Interest receivable 7,079 5,341
Pre-development costs 25,049 13,569
Other assets 9,304 9,087
Deferred tax asset 6,112 6,203
--------- ---------
$ 290,680 $ 261,296
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages and notes payable $ 118,596 $ 90,986
Accounts payable and accrued liabilities 3,285 2,604
Other liabilities 623 220
--------- ---------
Total liabilities 122,504 93,810
--------- ---------
Commitments and contingencies -- --
Minority interests 850 846
--------- ---------
Stockholders' equity:
Series B Preferred stock, $.01 par value, 50,000,000 shares
authorized, 21,281,000 shares issued and outstanding 213 213
Common stock, $.01 par value, 150,000,000 shares authorized,
33,457,804 shares issued and outstanding 335 335
Additional paid-in capital 174,508 174,508
Retained earnings 3,142 2,456
Notes receivable from affiliates for common shares (10,872) (10,872)
--------- ---------
Total stockholders' equity 167,326 166,640
--------- ---------
$ 290,680 $ 261,296
========= =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
3
<PAGE> 4
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 30, JULY 31, JUNE 30, JULY 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 3,128 $ 3,383 $ 6,440 $ 4,417
Operating income 2,002 1,732 6,898 1,732
Interest income 936 1,687 1,794 1,996
Partnership income 150 -- 301 --
------- ------- ------- -------
Total revenue 6,216 6,802 15,433 8,145
------- ------- ------- -------
Operating expenses:
Interest 1,929 1,207 3,954 1,518
Depreciation and amortization 883 795 2,079 1,057
Property operating expenses 578 807 1,060 915
Other operating expenses 1,305 879 3,816 879
General and administrative 735 840 3,425 898
------- ------- ------- -------
Total operating expenses 5,430 4,528 14,334 5,267
------- ------- ------- -------
Income before income taxes 786 2,274 1,099 2,878
Provision for income taxes 274 902 413 1,143
------- ------- ------- -------
Net income $ 512 $ 1,372 $ 686 $ 1,735
======= ======= ======= =======
Basic net income per common share $ 0.02 $ 0.04 $ 0.02 $ 0.08
======= ======= ======= =======
Diluted net income per common share $ 0.01 $ 0.03 $ 0.01 $ 0.05
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part
of the financial statements
4
<PAGE> 5
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
----------
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL AFFILIATE TOTAL
------------------- ----------------- PAID-IN RETAINED NOTES STOCKHOLDERS'
NUMBER AMOUNT NUMBER AMOUNT CAPITAL EARNINGS RECEIVABLE EQUITY
---------- ------ ---------- ------ --------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1999:
Balance at January 1, 1999 21,281,000 $213 33,457,804 $335 $ 174,508 $ 2,456 $(10,872) $ 166,640
Net income -- -- -- -- -- 686 -- 686
---------- ---- ---------- ---- --------- ------- -------- ---------
Balance at June 30, 1999 21,281,000 $213 33,457,804 $335 $ 174,508 $ 3,142 $(10,872) $ 167,326
========== ==== ========== ==== ========= ======= ======== =========
Six Months Ended July 31, 1998:
Balance at February 1, 1998 -- $ -- 100 $ -- $ -- $ -- $ -- $ --
Issuance of preferred stock 21,281,000 213 -- -- 106,192 -- -- 106,405
Issuance of common stock -- -- 32,607,704 326 67,469 -- -- 67,795
Notes receivable from affiliates
for common shares -- -- -- -- -- -- (10,872) (10,872)
Issuance costs -- -- -- -- (2,697) -- -- (2,697)
Net income -- -- -- -- -- (70) -- (70)
---------- ---- ---------- ---- --------- ------- -------- ---------
Balance at July 31, 1998 21,281,000 $213 32,607,804 $326 $ 170,964 $ (70) $(10,872) $ 160,561
========== ==== ========== ==== ========= ======= ======== =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
5
<PAGE> 6
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
----------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
JUNE 30, JULY 31,
1999 1998
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 686 $ 1,735
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 2,079 1,057
Provision for bad debts 136 16
Minority interests in income of partnership 4 3
Change in accounts receivable and other assets (3,055) (6,353)
Change in accounts payable and other liabilities 1,149 6,927
-------- ---------
Net cash provided by operating activities 999 3,385
-------- ---------
Cash flows from investing activities:
Real estate acquired and construction costs paid (1,227) (98,951)
Investment in partnerships (6,315) (11,138)
Pre-development costs paid (11,480) (6,662)
-------- ---------
Net cash used in investing activities (19,022) (116,751)
-------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 106,405
Proceeds from issuance of common stock -- 11,104
Issuance costs paid -- (2,697)
Principal payments of mortgages (1,593) (11,146)
Borrowings from issuance of notes 26,299 21,191
-------- ---------
Net cash provided by financing activities 24,706 124,857
-------- ---------
Net increase in cash 6,683 11,491
Cash at the beginning of the period 1,387 --
-------- ---------
Cash at the end of the period $ 8,070 $ 11,491
======== =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
6
<PAGE> 7
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements reflect all adjustments of a recurring nature
which are, in the opinion of management, necessary for a fair presentation
of the financial statements. No adjustments were necessary which were not
of a normal recurring nature. Certain footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the quarterly
reporting rules of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the consolidated financial
statements and accompanying footnotes included in the Company's July 31,
1998 Form 10-K.
ORGANIZATION
Excel Legacy Corporation (the "Company"), a Delaware corporation was
formed on November 17, 1997. The Company was originally a wholly-owned
subsidiary of Excel Realty Trust, Inc. ("Excel"), a Maryland corporation
and a self-administered, self-managed real estate investment trust
("REIT"), now known as New Plan Excel Realty Trust, Inc. On March 31,
1998, Excel effected a spin-off of the Company through a special dividend
to the holders of common stock of Excel of all of the outstanding common
stock of the Company held by Excel (the "Spin-off").
The Company was formed to pursue opportunities available to those
investors that are not restricted by the federal income tax laws governing
REITs or influenced by Excel's investment and leverage guidelines. In
connection with the Spin-off, certain real properties, notes receivable
and related assets and liabilities were transferred to the Company from
Excel (Note 2). Upon completion of the Spin-off, the Company ceased to be
a wholly-owned subsidiary of Excel and began operating as an independent
public real estate operating company.
CHANGE IN FISCAL YEAR
By unanimous consent dated December 11, 1998, the Board of Directors of
the Company adopted a fiscal year-end of December 31, beginning with a
short fiscal year ending on December 31, 1998. The Company's previous
fiscal year-end was July 31, and accordingly, comparative information
reported in the Form 10-Q for 1998 represents information previously
reported by the Company for the periods ended July 31, 1998.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and all affiliates in which the
Company has an ownership interest greater than 50%. The Company uses the
equity method of accounting to account for its investments in which its
ownership interest is less than 50% but in which it has significant
influence.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
less than three months when purchased to be cash and cash equivalents. The
cash balance includes $7,500,000 which is on deposit for the acquisition
of Common Shares of Price Enterprises, Inc., a Maryland corporation.
7
<PAGE> 8
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
REAL ESTATE
Certain real estate assets were transferred to the Company from Excel and
recorded at Excel's cost basis. Other real estate assets acquired
subsequent to the Spin-off were recorded at the Company's cost.
Depreciation is computed using the straight-line method over estimated
useful lives of 40 years for buildings. Expenditures for maintenance and
repairs are charged to expense as incurred and significant renovations are
capitalized.
The Company assesses its properties individually for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the property may not be recoverable. Recoverability of property to be held
and used is measured by comparing the carrying amount of the property to
future undiscounted net cash flows expected to be generated by the
property. If the sum of the expected undiscounted future cash flows is
less than the carrying amount of the property, the property is considered
to be impaired. If the property is impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
property exceeds the fair value of the property.
PRE-DEVELOPMENT COSTS
Pre-development costs that are directly related to specific construction
projects are capitalized as incurred. The Company expenses these costs to
the extent they are unrecoverable or it is determined that the related
project will not be pursued.
MANAGEMENT CONTRACTS
Management contracts are recorded at cost and amortized over a period of
seven years.
INCOME TAXES
The Company uses the liability method to account for income taxes.
Deferred income tax assets have been recorded to reflect the future tax
benefit of assets acquired from Excel that were recorded at Excel's cost
for book purposes and fair market value for tax purposes.
DEFERRED LEASING AND LOAN ACQUISITION COSTS
Costs incurred in obtaining tenant leases and long-term financing are
amortized to other property expense and interest expense, respectively, on
the straight-line method over the terms of the related leases or debt
agreements.
REVENUE RECOGNITION
Base rental revenue is recognized on the straight-line basis, which
averages annual minimum rents over the terms of the leases. Certain of the
leases provide for additional rental revenue by way of percentage rents to
be paid based upon the level of sales achieved by the lessee. Percentage
rents and tenant reimbursements are recognized when they are earned.
8
<PAGE> 9
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
2. SPIN-OFF:
On March 31, 1998, Excel transferred certain real estate assets to the
Company in exchange for 23,412,580 common shares of the Company,
assumption of mortgage debt by the Company, and issuance of a note payable
to Excel from the Company which was subsequently repaid. The Spin-off took
place through a dividend distribution to Excel's common stockholders of
all the Company's common stock (23,412,580 shares) held by Excel. The
distribution consisted of one share of the Company's common stock for each
share of Excel's common stock held on the record date of March 2, 1998.
The fair market value of the distribution was approximately $55,956,000 or
$2.39 per share. While the Company has recorded the acquisition of assets
and liabilities at fair market value for tax purposes, the Company has
recorded for book purposes, the assets and liabilities at Excel's original
book value in accordance with accounting standards for distributions of
non-monetary assets to owners in a spin-off. The tax effect of the
difference between fair market value and book value was $6,528,000 and was
recorded as a deferred tax asset.
3. MILLENNIA:
The Company has a joint venture arrangement with Millennia Car Wash
("Millennia"). Millennia owns or leases 19 car wash properties in Arizona
and Texas. Millennia entered into an agreement to sell its assets in
exchange for approximately 4.1 million shares of common stock and 62,500
common stock purchase warrants of Mace Security International ("MSI").
In connection with the agreement, Millennia has assigned the operations of
its car wash properties to MSI effective April 1, 1999. As such, the
Company has not included any operations of Millennia since that date.
Millennia, however, has retained ownership of the car wash properties
until certain approvals and other customary closing conditions are
finalized which is expected to occur in the third or fourth quarter of
1999, after which the Company will receive the MSI shares.
4. MORTGAGES AND NOTES PAYABLE:
The Company had $118,596,000 in mortgages and notes payable outstanding at
June 30, 1999 with an average interest rate of 8.25% and average maturity
of approximately 10 years. The mortgages and notes are due on various
dates through 2018, have monthly payments of approximately $1,101,000, and
are collateralized by real estate and an assignment of rents.
The Company has a revolving credit facility of $35,000,000 from
BankBoston, N.A. (the "Credit Facility") which carries an interest rate of
LIBOR plus 3.75% (8.9% at June 30, 1999). The Credit Facility expires in
June 2000. Through June 30, 1999, $30,000,000 was outstanding under the
Credit Facility.
9
<PAGE> 10
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
4. MORTGAGES AND NOTES PAYABLE, CONTINUED:
The principal payments required to be made on mortgages and notes payable
over the next five years are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1999 (remaining six months) $ 4,467
2000 34,094
2001 4,096
2002 4,431
2003 5,230
Thereafter 66,278
---------
$ 118,596
=========
</TABLE>
5. INCOME TAXES:
At June 30, 1999, the Company had a net deferred tax asset of $6,112,000.
The deferred tax asset primarily relates to the difference between the tax
basis and costs basis of the real estate assets acquired from Excel in
connection with the Spin-off (Note 2) and is non-current. The offsetting
portion of the deferred asset relates to timing differences in recognizing
revenue and expenses for tax purposes through operations of the Company.
No valuation allowance has been provided against the deferred tax asset as
the Company believes future taxable income is more likely than not. The
provision for income taxes for the six months ended June 30, 1999 consists
of the following:
<TABLE>
<CAPTION>
FEDERAL STATE
------- -----
<S> <C> <C>
Current payable $ 223,000 $ 99,000
Deferred tax expense 78,000 13,000
-------- -------
Provision for income taxes $ 301,000 $ 112,000
======= =======
</TABLE>
6. CAPITAL STOCK:
SERIES B PREFERRED SHARES
At June 30, 1999, the Company had 21,281,000 shares of Series B Preferred
Stock outstanding (the "Preferred B Shares"). Holders of the Preferred B
Shares are entitled to receive, when, as and if declared by the Board of
Directors, cumulative cash dividends payable in an amount per share equal
to the cash dividends, if any, on the shares of common stock into which
the Preferred B Shares are convertible. Holders of the Preferred B Shares
are also entitled to a liquidation preference of $5.00 per share, plus a
premium of 7% per annum, in the event of any liquidation, dissolution or
other winding up of the affairs of the Company.
The Preferred B Shares are convertible into common stock of the Company at
the election of the holders at any time, on a one-for-one basis, subject
to adjustment in certain circumstances. The Preferred B Shares also are
convertible into common stock by the Company at any time and from time to
time after the earlier to occur of (i) the date which is six months
following the date on which the Company's common stock becomes listed or
admitted for trading on a national securities exchange
10
<PAGE> 11
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
6. CAPITAL STOCK, CONTINUED:
or (ii) March 31, 2000. The Company's common stock became listed on the
American Stock Exchange on November 17, 1998. As a result, the Preferred B
Shares are convertible into common stock at the option of the Company at
any time.
The Preferred B Shares were issued in March 1999 in exchange for all of
the issued and outstanding shares of Series A Preferred Stock of the
Company (the "Preferred A Shares"). Following such exchange, all Preferred
A Shares were retired and restored to the status of authorized and
unissued shares of preferred stock, without designation as to series, and
may be reissued as shares of any series of preferred stock of the Company.
EARNINGS PER SHARE (EPS)
A reconciliation of the numerator and denominator of basic and diluted EPS
is provided as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------
JUNE 30, JULY 31, JUNE 30, JULY 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
BASIC EPS
NUMERATOR:
Net income $ 512 $ 1,372 $ 686 $ 1,735
======= ======= ======= =======
DENOMINATOR:
Weighted average of common
shares outstanding 33,458 33,458 33,458 22,552
======= ======= ======= =======
EARNINGS PER SHARE: $ 0.02 $ 0.04 $ 0.02 $ 0.08
======= ======= ======= =======
DILUTED EPS
NUMERATOR:
Net income $ 512 $ 1,372 $ 686 $ 1,735
======= ======= ======= =======
DENOMINATOR:
Weighted average of common
shares outstanding 33,458 33,458 33,458 22,552
Effect of diluted securities:
Preferred B Shares 21,281 21,281 21,281 14,344
Options 21 -- 16 --
------- ------- ------- -------
54,760 54,739 54,755 36,896
======= ======= ======= =======
EARNINGS PER SHARE: $ 0.01 $ 0.03 $ 0.01 $ 0.05
======= ======= ======= =======
</TABLE>
11
<PAGE> 12
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE:
The amounts paid for interest and income taxes in the six months ended
June 30, 1999 were approximately $2,215,000 and $622,000, respectively.
Additionally, the Company assumed $2,903,000 in debt related to the
construction of an office building. In the six months ended July 30, 1998,
the amounts paid for interest and income taxes were approximately
$1,648,000 and $0, respectively. Additionally in 1998, the Company
acquired certain assets in conjunction with the Spin-off (Note 2).
8. SEGMENT REPORTING:
The Company is a partner in a joint venture, Grand Tusayan, LLC ("Grand
Hotel") for the operation of a hotel and dinner theater and retail shop
situated near the south rim entrance to the Grand Canyon National Park in
Tusayan, Arizona. At June 30, 1999, the Company's ownership in the Grand
Hotel was 65% although the Company was entitled to approximately 98% of
the Grand Hotel's net income based upon its equity contributed. The
accounts of the Grand Hotel are consolidated in the Company's financial
statements.
. SFAS No. 131 establishes standards for the way that a public enterprise
reports information about operating segments in annual financial
statements, and requires that those enterprises report selected
information about operating segments in interim financial reports to
shareholders (Note 1). The following unaudited information has been
provided in accordance with SFAS No. 131 for operations related to
Millennia, the Grand Hotel, and all other real estate related activities
as of June 30, 1999 and 1998 and for periods then ended (in thousands):
<TABLE>
<CAPTION>
Other
Millennia Grand Hotel Real Estate Total
--------- ----------- ----------- --------
<S> <C> <C> <C> <C>
The three months ended June 30, 1999:
Total revenues $ 7 $ 1,559 $ 4,650 $ 6,216
-------- -------- -------- --------
Interest -- -- 1,929 1,929
Depreciation and amortization -- 161 722 883
General and administrative 106 -- 629 735
Operating expenses -- 1,304 579 1,883
-------- -------- -------- --------
Total operating expenses 106 1,465 3,859 5,430
-------- -------- -------- --------
Income (loss) before
income taxes $ (99) $ 94 $ 791 $ 786
======== ======== ======== ========
The six months ended June 30, 1999:
Total revenues $ 4,311 $ 2,139 $ 8,983 $ 15,433
-------- -------- -------- --------
Interest 419 -- 3,535 3,954
Depreciation and amortization 334 322 1,423 2,079
General and administrative 2,015 -- 1,410 3,425
Operating expenses 1,809 2,007 1,060 4,876
-------- -------- -------- --------
Total operating expenses 4,577 2,329 7,428 14,334
-------- -------- -------- --------
Income (loss) before
income taxes $ (266) $ (190) $ 1,555 $ 1,099
======== ======== ======== ========
Real estate, net $ 30,038 $ 13,725 $149,762 $193,525
======== ======== ======== ========
</TABLE>
12
<PAGE> 13
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
8. SEGMENT REPORTING, CONTINUED:
<TABLE>
<CAPTION>
Other
Millennia Grand Hotel Real Estate Total
--------- ----------- ----------- --------
<S> <C> <C> <C> <C>
The three months ended July 31, 1998:
Total revenues $ 1,178 $ 95 $ 5,529 $ 6,802
------- -------- -------- --------
Interest -- -- 1,207 1,207
Depreciation and amortization 85 38 672 795
General and administrative 288 -- 552 840
Operating expenses 747 114 825 1,686
------- -------- -------- --------
Total operating expenses 1,120 152 3,256 4,528
------- -------- -------- --------
Income (loss) before
income taxes $ 58 $ (57) $ 2,273 $ 2,274
======= ======== ======== ========
The six months ended July 31, 1998:
Total revenues $ 1,178 $ 95 $ 6,872 $ 8,145
------- -------- -------- --------
Interest -- -- 1,518 1,518
Depreciation and amortization 85 38 934 1,057
General and administrative 288 -- 610 898
Operating expenses 747 114 933 1,794
------- -------- -------- --------
Total operating expenses 1,120 152 3,995 5,267
------- -------- -------- --------
Income (loss) before
income taxes $ 58 $ (57) $ 2,879 $ 2,878
======= ======== ======== ========
Real estate, net $20,220 $ 13,717 $141,819 $175,756
======= ======== ======== ========
</TABLE>
9. RELATED PARTY TRANSACTIONS:
In connection with the sale of common stock to certain affiliates, the
Company issued $10,872,000 of notes receivable. The notes bear interest at
7%, are recourse obligations of the note holders, and are due in March
2003. The total interest receivable at June 30, 1999 from these notes
totaled $945,000. The notes have been offset against stockholders' equity
on the Company's accompanying Consolidated Balance Sheet.
13
<PAGE> 14
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
10. MINIMUM FUTURE RENTALS:
The Company leases its operating properties, except the Millennia carwash
properties and the Grand Hotel property, under noncancelable operating
leases generally requiring the tenant to pay a minimum rent. The leases
generally either (i) require the tenant to pay all expenses of operating
the property such as insurance, property taxes, and structural repairs and
maintenance, or (ii) require the tenant to reimburse the Company for the
tenant's share of real estate taxes and other common area maintenance
expenses or for the tenant's share of any increase in expenses over a base
year. Minimum future rental revenue for the next five years for the real
estate owned at June 30, 1999 and subject to noncancelable operating
leases is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
<S> <C>
1999 (remaining six months) $5,573
2000 11,208
2001 11,470
2002 11,263
2003 11,089
Thereafter 116,364
</TABLE>
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NATURE OF BUSINESS
Excel Legacy Corporation (the "Company"), a Delaware Corporation, was formed on
November 17, 1997. The Company was organized to create and realize value by
identifying and making opportunistic real estate and other investments through
the direct acquisition, rehabilitation, development, financing and management of
real properties and/or participation in these activities through the purchase of
debt instruments or equity interests of entities in real estate and other
businesses.
RESULTS OF OPERATIONS
The Company has a joint venture arrangement with Millennia Car Wash
("Millennia"). Millennia owns or leases 19 car wash properties in Arizona and
Texas. Millennia entered into an agreement to sell its assets in exchange for
approximately 4.1 million shares of common stock and 62,500 common stock
purchase warrants of Mace Security International ("MSI"). In connection with the
agreement, Millennia has assigned the operations of its car wash properties to
MSI effective April 1, 1999. As such, the Company has not included any
operations of Millennia since that date. The following discussion should be read
in conjunction with the Financial Statements and the Notes thereto.
Comparison of the three months ended June 30, 1999 to the three months ended
July 31, 1998
Rental revenue was $3.1 million during the three months ended June 30, 1999
compared to $3.3 million in the three months ended July 31, 1998 . The decrease
of $0.2 million primarily attributable to a shopping mall located in Palm
Springs, California. Rental revenue from this property was $0.3 million in 1999
compared to $0.5 million in 1998. The Company intends to redevelop this property
and is not leasing vacant space or renewing expired leases. Twelve single tenant
properties owned by the Company accounted for $2.5 million of rental revenue in
both periods. Eight of these properties are leased to Wal-Mart Stores, Inc.
("Wal-Mart"), two of these properties are leased to Lowe's Home Centers, Inc.
("Lowe's") and two properties in Colorado are leased to AMC Multi-Cinema, Inc.
("AMC"). The remaining $0.3 million of rental revenue was primarily attributable
to three properties which were acquired by the Company in conjunction with a
redevelopment project in Scottsdale, Arizona.
Operating income totaled $2.0 million in the three months ended June 30, 1999
compared to $1.7 million in the three months ended July 31, 1998. In 1999, $1.6
million related to operations from the Grand Hotel. The remaining $0.4 million
related to income from TenantFirst Real Estate Services and revenues from
various management contracts. In 1998, $1.2 million related to operations from
Millennia, $0.1 million related to operations from the Grand Hotel, and $0.4
million related to income from TenantFirst Real Estate Services and revenues
from various management contracts. Income from the Grand Hotel increased as the
Hotel was opened in July 1998 and thus had no substantial operations in 1998.
Income related to Millennia was $0 in the three months ended June 30, 1999 as
noted above.
Interest income was $0.9 million in the three months ended June 30, 1999
compared to $1.7 million in the three months ended July 31, 1998. The decrease
primarily relates to an average decrease in cash balances in 1999 compared to
1998.
Partnership income and other revenues totaled $0.2 million for the three months
ended June 30, 1999 and primarily related to the Company's interest in a Nova
Scotia unlimited liability company which owns an office building in Canada.
There was no partnership income in the three months ended July 31, 1998.
Interest expense was $1.9 million in the three months ended June 30, 1999 and
primarily related to the $119.0 million of mortgages and notes payable
outstanding at June 30, 1999. In the three months ended July 31, 1998, interest
expense was $1.2 million. The increase in interest expense in 1999 compared to
1998 relates to an overall increase in mortgages and notes payable outstanding
which totaled $72.7 million
15
<PAGE> 16
at July 31, 1998.
Depreciation and amortization expense totaled $0.9 million in the three months
ended June 30, 1999 compared to $0.8 million in the three months ended July 31,
1998. The increase of $0.1 million primarily relates to depreciation on the
Grand Hotel which began operations in July 1998.
Property operating expenses were $0.6 million in the three months ended June 30,
1999 compared to $0.8 million in the three months ended July 31, 1998. The
decrease of $0.2 million relates to certain non- incremental expenses that were
capitalized in 1999 on properties in Scottsdale, Arizona and Palm Springs,
California that the Company intends to redevelop.
Other operating expenses were $1.3 million in the three months ended June 30,
1999 compared to $0.9 million in the three months ended July 31, 1998. In 1999,
expenses of $1.3 million related to the Grand Hotel compared to $0.1 million in
1998. Millennia had no operating expenses in the three months ended June 30,
1999 compared to $0.8 in the three months ended July 31, 1998.
General and administrative expenses were $0.7 million in the three months ended
June 30, 1999 compared to $0.8 million in the three months ended July 31, 1998.
The decrease of $0.1 million primarily relates to Millennia which ceased
operations of its car wash properties effective April 1, 1999.
Provision for income taxes was $0.3 million in the three months ended June 30,
1999 compared to $0.9 million in the three months ended July 31, 1998.
Comparison of the six months ended June 30, 1999 to the six months ended July
31, 1998
Rental revenue was $6.4 million during the six months ended June 30, 1999
compared to $4.4 million in the six months ended July 31, 1998 . The increase of
$2.0 million is due to operations from real estate properties which were not
owned by the Company until April 1, 1998. As such its operations only reflect
four months of activity in 1998.
Operating income totaled $6.9 million in the six months ended June 30, 1999
compared to $1.7 million in the six months ended July 31, 1998. In 1999, $4.3
million related to operations from Millennia and $2.1 million related to
operations from the Grand Hotel. The remaining $0.5 million related to income
from TenantFirst Real Estate Services and revenues from various management
contracts. In 1998, $1.2 million related to operations from Millennia, $0.1
million related to operations from the Grand Hotel, and $0.4 million related to
income from TenantFirst Real Estate Services and revenues from various
management contracts.
Interest income was $1.8 million in the six months ended June 30, 1999 compared
to $2.0 million in the six months ended July 31, 1998. Although cash balances
were, on average, larger in 1998 than in 1999, operations in 1998 only include
four months of activity from the date the Company acquired most of its assets on
March 31, 1998.
Partnership income and other revenues totaled $0.3 million for the six months
ended June 30, 1999 and primarily related to the Company's interest in a Nova
Scotia unlimited liability company which owns an office building in Canada.
There was no partnership income in the six months ended July 31, 1998.
Interest expense was $4.0 million in the six months ended June 30, 1999 and
primarily related to the $119.0 million of mortgages and notes payable
outstanding at June 30, 1999. In the six months ended July 31, 1998, interest
expense was $1.5 million. The increase in interest expense in 1999 compared to
1998 relates to an overall increase in mortgages and notes payable outstanding
which totaled $72.7 million at July 31, 1998. Additionally, in 1998, mortgages
were only outstanding from April 1.
Depreciation and amortization expense totaled $2.1 million in the six months
ended June 30, 1999 compared to $1.1 million in the six months ended July 31,
1998. The increase of $1.0 million primarily relates to depreciation of the
Company's assets which the Company did not own until April 1, 1998.
16
<PAGE> 17
Property operating expenses were $1.1 million in the six months ended June 30,
1999 compared to $0.9 million in the six months ended July 31, 1998. The
decrease of $0.2 million relates to certain non- incremental expenses that were
capitalized in 1999 on properties in Scottsdale, Arizona and Palm Springs,
California that the Company intends to redevelop.
Other operating expenses were $3.8 million in the six months ended June 30, 1999
compared to $0.9 million in the six months ended July 31, 1998. In 1999,
expenses of $2.0 million related to the Grand Hotel compared to $0.1 million in
1998. Millennia had expenses of $1.8 million in the six months ended June 30,
1999 compared to $0.8 million in the six months ended July 31, 1998.
General and administrative expenses were $3.4 million in the six months ended
June 30, 1999 compared to $0.9 million in the six months ended July 31, 1998. Of
the increase of $1.9 million, $1.7 million related to Millennia. In addition,
the Company did not have any significant expenses until April 1, 1998.
Provision for income taxes was $0.4 million in the six months ended June 30,
1999 compared to $1.1 million in the six months ended July 31, 1998.
The Company calculates Earnings Before Depreciation, Amortization and Deferred
Taxes ("EBDADT") as net income, plus depreciation and amortization on real
estate and real estate related assets, amortized leasing commission costs and
certain non-recurring items. EBDADT does not represent cash flows from
operations as defined by generally accepted accounting principles, and may not
be comparable to other similarly titled measures of other companies. The Company
believes, however, that to facilitate a clear understanding of its operating
results, EBDADT should be examined in conjunction with its net income as
reductions for certain items are not meaningful in evaluating income-producing
real estate. The following information is included to show the items included in
the Company's EBDADT:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -------------------
JUNE 30, JULY 31, JUNE 30, JULY 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 512 $ 1,372 $ 686 $ 1,735
Depreciation and
amortization (financial statements) 883 795 2,079 1,057
Less depreciation of non-real estate assets (22) (12) (44) (22)
Deferred tax expense 57 209 91 209
------- ------- ------- -------
EBDADT $ 1,430 $ 2,364 $ 2,812 $ 2,979
======= ======= ======= =======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
In May 1999, the Company entered into an agreement whereby it agreed, subject to
certain conditions including regulatory clearances, to make an exchange offer at
$8.50 per share for any and all Common Shares of Price Enterprises, Inc., a
Maryland corporation which is operated as a real estate investment trust
("PREN"). The exchange offer will consist of per share consideration for PREN
Common Stock of at least $4.25 in cash, at least $2.75 in principal amount of
newly issued 9% Convertible Redeemable Subordinated Debentures of the Company
due in 2004 (convertible at any time into the Company's Common Stock at $5.50
per share) ("Debentures"), and $1.50 in newly issued 10% Senior Redeemable Notes
of the Company due in 2004. The Company has the right prior to commencing the
exchange offer to elect to offer $8.50 per share in cash for any and all shares
of PREN Common Stock. At July 28, 1999 PREN had 13,304,041 shares of Common
Stock outstanding. The Company anticipates that the cash requirements for this
offer may come from asset sales, available amounts on the Company's credit
facilities, or additional debt or equity issuances.
17
<PAGE> 18
In March 1999, the Company entered into a Real Estate and Asset Purchase
Agreement with American Wash Services, Inc. ("AWS"), pursuant to which the
Company has agreed to sell substantially all of the assets of Millennia, in
exchange for 4,087,678 shares of common stock of the parent of AWS, Mace
Security International, Inc. ("MSI"), a warrant to acquire an additional 62,500
shares of MSI common stock at an exercise price of $4.00 per share, and the
assumption by AWS of certain liabilities of Millennia. Although the transaction
is subject to various conditions, Millennia has assigned the operations of its
assets to AWS effective April 1, 1999. The Company expects that the transaction
will be finalized during the third or fourth quarter of 1999.
At June 30, 1999, the total mortgage debt and notes payable of the Company
consisted of the following: (i) $24.1 million in mortgages on eight properties
leased to Wal-Mart which have fixed interest rates of 7.9% to 8.5%. These
mortgages are self-amortizing with the rent being paid by Wal-Mart directly to
the mortgage holders. The mortgages will be entirely repaid when the initial
terms of the leases with Wal-Mart expire (2008 to 2009). (ii) $7.5 million in
mortgages on two properties leased to Lowe's which have fixed interest rates of
7.6% and 8.8%. These mortgages are also self-amortizing over the term of the
leases with Lowe's and will be repaid when the leases expire (2003 and 2014).
(iii) A $2.2 million mortgage secured by an office building in Scottsdale,
Arizona, monthly payments of which are approximately $25,000 with a balloon
payment in the year 2006. (iv) $36.1 million in mortgages on two properties
leased to AMC. These mortgages amortize over a period of twenty years which is
equivalent to the term of the leases. The mortgages have fixed interest rates of
7.48% and 7.52%, respectively and mature in 2018. (v) $15.1 million in notes
related to Millennia's car wash assets. Of the notes, $14.6 million have fixed
interest rates of 8.5% and are due in fifteen years and $0.4 million have fixed
interest rates of 8.0% and are due in two years. These notes will be transferred
to the pending buyer for these properties upon closing. (vi) $2.9 million
outstanding on a $11.0 million construction loan related to the construction of
an office building. Interest on the construction loan varies based upon the
Eurodollar and was 8.1% at June 30, 1999. (vii) $0.7 million outstanding related
to certain costs on a project in Anaheim. This note bears interest at 10% and is
due January 2000. All of the above mortgage debt and notes payable are
non-recourse to the Company.(vii) $30.0 million outstanding on the Company's
$35.0 million credit facility. The facility bears interest at LIBOR plus 3.75%
(8.9% at June 30, 1999) and expires in June 2000.
At June 30, 1999, the Company had 21,281,000 shares of Series B Preferred Stock
outstanding (the "Preferred B Shares"). Holders of the Preferred B Shares are
entitled to receive, when, as and if declared by the Board of Directors,
cumulative cash dividends payable in an amount per share equal to the cash
dividends, if any, on the shares of common stock into which the Preferred B
Shares are convertible. Holders of the Preferred B Shares are also entitled to a
liquidation preference of $5.00 per share, plus a premium of 7% per annum, in
the event of any liquidation, dissolution or other winding up of the affairs of
the Company.
The Preferred B Shares are convertible into common stock of the Company at the
election of the holders at any time, on a one-for-one basis, subject to
adjustment in certain circumstances. The Preferred B Shares also are convertible
into common stock by the Company at any time and from time to time after the
earlier to occur of (i) the date which is six months following the date on which
the Company's common stock becomes listed or admitted for trading on a national
securities exchange or (ii) March 31, 2000. The Company's common stock became
listed on the American Stock Exchange on November 17, 1998. As a result, the
Preferred B Shares are convertible into common stock at the option of the
Company at any time.
The Preferred B Shares were issued in March 1999 in exchange for all of the
issued and outstanding shares of Series A Preferred Stock of the Company (the
"Preferred A Shares"). Following such exchange, all Preferred A Shares were
retired and restored to the status of authorized and unissued shares of
preferred stock, without designation as to series, and may be reissued as shares
of any series of preferred stock of the Company.
Eight of the Company's single tenant properties leased to Wal-Mart do not
generate cash flow as rent payments are directly used to service outstanding
debt obligations. The Company anticipates that existing cash flow from
operations will be adequate to meet the current cash requirements of its
operating properties.
18
<PAGE> 19
The Company expects to meet its long-term liquidity requirements, such as
property acquisitions and development, mortgage debt maturities, and other
investment opportunities, through the most advantageous sources of capital
available to the Company at the time, which may include operating cash flows,
the sale of common stock, preferred stock or debt securities through public
offerings or private placements, entering into joint venture arrangements with
financial partners, the incurrence of indebtedness through secured or unsecured
borrowings and the reinvestment of proceeds from the disposition of assets.
YEAR 2000
Some of the Company's information technology ("IT") systems were originally
written using two digits rather than four to define the applicable year. As a
result, those IT systems had time sensitive software that recognizes dates using
"00" as the Year 1900 rather than the Year 2000. The Company has upgraded its
existing computer software and IT systems and believes that they are able to
recognize the Year 2000 and that the Year 2000 issue will not have a material
impact on the Company's operations.
The Year 2000 issue affects the Company's internal systems, including IT and
non-IT systems. The Company is reviewing its utility systems (heat, light,
telephones, etc.) and other non-IT systems for the impact of Year 2000. The
Company has solicited assurances from its contractors, vendors and other third
parties that their systems (including building management and mechanical
systems) are currently Year 2000 compliant or will be made compliant before the
advent of the Year 2000. No assurances can be made that all contractors and
other third parties will comply with their assurances. The Company intends to
take continuous steps to identify Year 2000 problems related to its vendors and
to formulate a system of working with key third parties, including financial
institutions and utility providers, to understand their ability to continue
providing services and products through the change to Year 2000. The failure to
correct a material Year 2000 problem either within the Company or within a
vendor or supplier could result in an interruption in, or a failure of, certain
normal business activities or operations of the Company. Such interruptions or
failures could materially adversely affect the Company's business, operating
results and financial condition.
The Company's Year 2000 project is substantially completed. As of June 30, 1999,
the Company had expended less than $60,000 and does not expect to expend any
significant additional costs in connection with its Year 2000 project, including
the cost of identification, assessment, remediation and testing efforts. The
cost of the Company's Year 2000 project, and the target date on which the
Company expects the Year 2000 modifications to be complete are based upon a
variety of assumptions of future events, including the continued availability of
certain resources. No assurance can be made that these estimates will be
achieved and actual results could materially differ from those anticipated.
Specific factors that might cause material differences include, but are not
limited to, the availability and costs of personnel trained in this area, the
ability to locate and correct relevant computer codes and the timing and
compliance by the Company's outside vendors and suppliers.
A contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario, and such scenario has not yet been clearly
identified. Since the Company has adopted a plan to address these Year 2000
issues, it has not developed a comprehensive contingency plan should Year 2000
issues fail to be addressed successfully or in their entirety. However, if the
Company identifies significant risks or is unable to meet its anticipated time
line, the Company will develop contingency plans as deemed necessary at that
time. This discussion contains forward-looking statements and should be read,
along with all other forward-looking statements herein, in conjunction with the
Company's disclosures under the heading "Certain Cautionary Statements" below.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, including, but not
limited to, "Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations," contain forward- looking statement within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, that are not historical
facts, but rather reflect current expectations concerning future results and
events. The words "believes," "expects," "intends,"
19
<PAGE> 20
"plans," "anticipates," "likely," "will" and similar expressions identify such
forward-looking statements. These forward-looking statements are subject to
risks, uncertainties and other factors, some of which are beyond the Company's
control that could cause actual results to differ materially from those forecast
or anticipated in such forward-looking statements. These factors include, but
are not limited to, the Company's development activities, reliance on major
tenants, competition, dependence on regional economic conditions, fluctuations
in operating results, integration of acquired businesses, costs of regulatory
compliance, dependence on senior management, and possible stock price
volatility. These factors are discussed in greater detail under the caption
"Certain Cautionary Statements" in the Company's annual Report on Form 10-K, as
amended, for the fiscal year ended July 31, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure affecting its market risk sensitive
financial instruments is interest rate risk. The Company's balance sheet
contains financial instruments in the form of interest-earning notes receivable
and interest-bearing mortgages payable. The Company manages the risk to its cash
flow from changes in interest rates by monitoring its variable rate financial
instruments. Although the fair value of its financial instruments may be
affected by changes in interest rates, the Company typically does not dispose of
them prior to maturity. Thus, the primary effect of changes in interest rates
would occur to the extent that financial instruments mature and are replaced
with others at different interest rates. The table below presents (1) the
scheduled principal payments on notes receivable and, (2) the scheduled
principal repayments on mortgages payable: over the next five years and
thereafter. The table also includes the average interest rates of the financial
instruments during each respective year and the fair value of the notes
receivable and mortgages payable. The Company determines the fair value of
financial instruments through the use of discounted cash flow analysis using
current interest rates for (1) notes receivable with terms and credit
characteristics similar to its existing portfolio and (2) borrowings under terms
similar to its existing mortgages payable. Accordingly, the Company has
determined that the carrying value of its financial instruments at June 30, 1999
approximates fair value.
<TABLE>
<CAPTION>
Expected Maturity Date
(dollar amounts in thousands)
============================================================================================================================
There- Fair
2000 2001 2002 2003 2003 after Total Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Notes Receivable, including notes
from affiliates $ 445 -- -- $27,097 $5,518 $ 1,051 $ 34,111 $ 34,100
Average interest rate 11.00% -- -- 9.99% 11.00% 10.00% 10.03%
- ----------------------------------------------------------------------------------------------------------------------------
Mortgages and Notes Payable $4,467 $34,094 $4,096 $ 4,431 $5,230 $66,278 $118,596 $119,000
Average interest rate 8.97% 8.83% 8.51% 8.51% 8.51% 7.87% 8.25%
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>
20
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated May 12, 1999, as updated on
Form 8-K dated June 2, 1999, was filed with the Commission
regarding the Company's agreement with Price Enterprises,
Inc., a Maryland corporation, ("PREN") to make an exchange
offer at $8.50 per share for any and all shares of PREN Common
Stock.
A Current Report on Form 8-K, dated March 23, 1999, was filed
with the Commission regarding the Company's Real Estate and
Asset Purchase Agreement, with American Wash Services, Inc.,
pursuant to which the Company has agreed to sell substantially
all of the assets of Millennia Car Wash, LLC, a majority owned
subsidiary of the Company, in exchange for common shares and
warrants of Mace Security International, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXCEL LEGACY CORPORATION
(Registrant)
DATE: August 11, 1999 By: /s/ Gary B. Sabin
--------------------------------------
GARY B. SABIN
President and Chief Executive Officer
DATE: August 11, 1999 By: /s/ James Y. Nakagawa
--------------------------------------
JAMES Y. NAKAGAWA
Principal Financial Officer
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,070,000
<SECURITIES> 0
<RECEIVABLES> 666,000
<ALLOWANCES> (168,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 197,515,000
<DEPRECIATION> (3,990,000)
<TOTAL-ASSETS> 290,680,000
<CURRENT-LIABILITIES> 0
<BONDS> 118,596,000
0
213,000
<COMMON> 335,000
<OTHER-SE> 166,778,000
<TOTAL-LIABILITY-AND-EQUITY> 290,680,000
<SALES> 0
<TOTAL-REVENUES> 15,433,000
<CGS> 0
<TOTAL-COSTS> 14,334,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 136,000
<INTEREST-EXPENSE> 3,954,000
<INCOME-PRETAX> 1,099,000
<INCOME-TAX> 413,000
<INCOME-CONTINUING> 686,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 686,000
<EPS-BASIC> $0.02
<EPS-DILUTED> $0.01
</TABLE>
