<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
--------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to ___________
Commission File Number 1-7859
----------------------------------
IRT PROPERTY COMPANY
--------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Georgia 58-1366611
- -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
(770) 955-4406
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
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 3, 1999
- -------------------------- -----------------------------
Common Stock, $1 Par Value 33,234,206 Shares
1
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CERTAIN INFORMATION CONTAINED IN THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES ACT OF 1934. READERS OF THIS REPORT SHOULD BE
AWARE THAT THERE ARE VARIOUS FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS MADE HEREIN. THIS INFORMATION IS
FURTHER QUALIFIED BY THE SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING
STATEMENTS CONTAINED IN THE IRT PROPERTY COMPANY ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998, WHICH IS INCORPORATED HEREIN BY REFERENCE.
2
<PAGE> 3
Item 1. Financial Statements.
IRT PROPERTY COMPANY
& SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data )
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate investments:
Rental properties $ 628,021 $ 622,117
Accumulated depreciation (79,270) (74,943)
--------- ---------
Net rental properties 548,751 547,174
Equity Investment in subsidiary 3,789 0
Net investment in direct financing leases 4,490 4,572
Mortgage loans, net 95 1,097
--------- ---------
Net real estate investments 557,125 552,843
Cash and cash equivalents 1,232 344
Accrued interest receivable 14 59
Prepaid expenses and other assets 9,121 9,013
--------- ---------
Total Assets $ 567,492 $ 562,259
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net $ 126,524 $ 82,215
7.3% convertible subordinated debentures, net 23,275 23,275
Senior notes, net 124,625 124,595
Indebtedness to banks 8,000 51,500
Accrued interest 3,612 3,612
Accrued expenses and other liabilities 11,565 7,204
--------- ---------
Total liabilities 297,601 292,401
Commitments and contingencies 0 0
Minority interest payable 7,535 7,085
Shareholders' equity:
Common stock, $1 par value, authorized 150,000,000 shares; 33,234 33,252
33,234,206 shares issued and outstanding in 1999 and
33,251,763 shares in 1998
Preferred stock, $1 par value, authorized 10,000,000 shares; 0 0
none issued
Additional paid-in capital 272,420 272,975
Deferred compensation/stock loans (2,108) (2,386)
Cumulative distributions in excess of net earnings (41,190) (41,068)
--------- ---------
Total shareholders' equity 262,356 262,773
--------- ---------
Total Liabilities and Shareholders' Equity $ 567,492 $ 562,259
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
3
<PAGE> 4
IRT PROPERTY COMPANY
& SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Six Months Ended June 30, 1999 and 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Income from rental properties $ 21,304 $ 19,663 $ 42,116 $ 37,887
Interest income 50 116 90 230
Interest on direct financing leases 124 128 315 317
-------- -------- -------- --------
Total Revenues 21,478 19,907 42,521 38,434
Expenses:
Operating expenses of real estate investments 5,063 4,516 9,590 8,504
Interest expense 5,471 4,657 10,799 9,082
Depreciation 3,498 3,186 6,970 6,271
Amortization of debt costs 113 108 223 219
General & administrative 888 1,807 1,833 2,724
-------- -------- -------- --------
Total expenses 15,033 14,274 29,415 26,800
Equity in income of joint venture 0 0 0 54
-------- -------- -------- --------
Income before minority interest and
gain on sales of properties 6,445 5,633 13,106 11,688
Gain on sales of properties 2,483 744 2,483 744
Minority interest of unitholders in
operating partnership (254) 0 (424) 0
-------- -------- -------- --------
Net earnings $ 8,674 $ 6,377 $ 15,165 $ 12,432
======== ======== ======== ========
Per Share: (Note 2)
Basic $ 0.26 $ 0.19 $ 0.46 $ 0.38
======== ======== ======== ========
Diluted $ 0.26 $ 0.19 $ 0.46 $ 0.38
======== ======== ======== ========
Weighted average number of shares outstanding:
Basic 33,148 32,992 33,146 32,754
======== ======== ======== ========
Diluted 33,961 33,010 33,958 32,788
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
IRT PROPERTY COMPANY
& SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
-------- --------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 15,165 $ 12,432
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 6,970 6,271
Gain on sales of properties (2,483) (744)
Minority interest of unitholders in operating partnership 424 0
Amortization of deferred compensation 52 63
Amortization of debt costs and discount 253 249
Amortization of capitalized leasing income 82 67
Changes in assets and liabilities:
Decrease in accrued interest on debentures and senior notes 0 (143)
Decrease (increase) in interest receivable, prepaid expenses
and other assets 317 (3,248)
Increase in accrued expenses and other liabilities 4,361 3,680
-------- --------
Net cash flows from operating activities 25,141 18,627
Cash flows used in investing activities:
Proceeds from sales of properties, net 12,409 825
Non-operating distributions from unconsolidated joint venture 0 356
Investment in affiliate (3,763) 0
Additions to real estate investments, net (12,756) (30,717)
Collections of mortgage loans, net 1,002 19
-------- --------
Net cash flows used in investing activities (3,108) (29,517)
Cash flows (used in) from financing activities:
Cash dividends and distributions paid, net (15,647) (13,113)
Exercise of stock options 37 2
Repayment of mortgage notes payable (1,432) (3,396)
Payment of deferred financing costs (603) 0
Proceeds from mortgage notes payable 40,000 0
(Decrease) increase in bank indebtedness, net (43,500) 27,600
-------- --------
Net cash flows (used in) from financing activities (21,145) 11,093
-------- --------
Net increase in cash and cash equivalents 888 203
Cash and cash equivalents at beginning of period 344 275
-------- --------
Cash and cash equivalents at end of period $ 1,232 $ 478
======== ========
Supplemental disclosures of cash flow information:
Total cash paid during the period for interest $ 10,782 $ 9,056
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
IRT PROPERTY COMPANY
& SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
1. Unaudited Financial Statements
These consolidated financial statements for interim periods are
unaudited and should be read in conjunction with the Company's Annual Report to
Shareholders for the year ended December 31, 1998. The accompanying consolidated
financial statements include the accounts of IRT Property Company and its
wholly-owned subsidiaries, IRT Management Company, VW Mall, Inc and IRT Alabama,
Inc., and its majority owned subsidiary IRT Partners L.P. Intercompany
transactions and balances have been eliminated in the consolidation. The
Company's investments in IRT Capital Corporation and IRT Capital Corporation II
have been accounted for under the equity method of accounting. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to a fair presentation of the financial statements as of June 30, 1999
and 1998 have been recorded. The results of operations for the interim period
are not necessarily indicative of the results that may be expected for future
interim periods or for the full year.
2. Earnings Per Share
Basic earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding during the period consistent with
the guidelines of Statement of Accounting Standards No. 128, "Earnings Per
Share." The effect of the Convertible Debentures and certain stock options and
non-vested restricted stock, using the treasury stock method, have been excluded
from the calculation of dilutive earnings per share, as they are anti-dilutive.
6
<PAGE> 7
<TABLE>
<CAPTION>
Per-Share
Income Shares Amount
------- ------ ---------
<S> <C> <C> <C>
(in thousands except per share data)
For the three months ended June 30, 1999
Basic net earnings available to shareholders $ 8,674 33,148 $ 0.26
========
Options outstanding 2
Minority interest of unitholders in operating partnership 254 811
------- ------
Diluted net earnings available to shareholders $ 8,928 33,961 $ 0.26
========
For the three months ended June 30, 1998
Basic net earnings available to shareholders $ 6,377 32,992 $ 0.19
========
Options outstanding 18
Minority interest of unitholders in operating partnership 0 0
------- ------
Diluted net earnings available to shareholders $ 6,377 33,010 $ 0.19
========
For the six months ended June 30, 1999
Basic net earnings available to shareholders $15,165 33,146 $ 0.46
========
Options outstanding 1
Minority interest of unitholders in operating partnership 424 811
------- ------
Diluted net earnings available to shareholders $15,589 33,958 $ 0.46
========
For the six months ended June 30, 1998
Basic net earnings available to shareholders $12,432 32,754 $ 0.38
========
Options outstanding 34
Minority interest of unitholders in operating partnership 0 0
------- ------
Diluted net earnings available to shareholders $12,432 32,788 $ 0.38
========
</TABLE>
3. 7.3% Convertible Subordinated Debentures
During February and March 1998, $5,178,000 of the 7.3% convertible
subordinated debentures were converted into 460,263 shares of common stock at
$11.25 per share.
Based upon the $11.25 conversion price, 2,068,889 authorized but
unissued common shares have been reserved for possible issuance if the remaining
$23,275,000 of debentures outstanding June 30, 1999 are converted.
7
<PAGE> 8
4. Rental Properties
Property Acquisitions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Year % Leased Total Initial Mortgage Principal
Acquired Property Name City, State Footage Built at Acquisition Cost Cash Paid Assumed Tenants
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/26/99 The Shoppes at Lago Mar Kendall, FL 82,613 1995 98% $ 9,916 $4,174 $5,742 Publix,
Blockbuster
3/15/99 Williamsburg at Dunwoody Dunwoody, GA 44,928 1983 100% 5,602 5,602 0
------- ----------------------------
127,541 $15,518 $9,776 $5,742
</TABLE>
Property Dispositions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Sales Cash Principal
Sold Property Name City, State Footage Price Proceeds Gain Tenants
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
06/01/99 Litchfield Landing Pawley's Island, SC 42,201 $ 3,190 $ 3,129 $1,191 Harris Teeter,
Eckerd
06/01/99 First Street Station Albemarle, NC 52,230 3,137 3,038 320 Harris Teeter,
Eckerd
06/01/99 Taylorsville Taylorsville, NC 48,537 2,571 2,430 609 Harris Teeter
06/01/99 University Center Greenville, NC 56,180 3,462 3,399 202 Harris Teeter,
Eckerd
Other 417 413 161
---------------------------------------------
199,148 $12,777 $12,409 $2,483
</TABLE>
5. Investment in Joint Venture
On May 24, 1999 IRT Capital Corporation II ("IRTCCII"), a taxable
subsidiary of the Company, was formed under the laws of Georgia. This
taxable subsidiary will have the ability to develop properties, buy and
sell properties, provide equity to developers who are merchant builders and
perform third party management, leasing and brokerage. The Company holds
96% of the non-voting common stock and 1% of the voting common stock of
IRTCCII. The remaining voting common stock is held by the CEO and Chairman
of the Company and an independent director of the Company. The ownership of
the common stock of IRTCCII entitles the Company to substantially all of
the economic benefits from the results of operations of this subsidiary.
IRTCCII is accounted for by the Company under the equity method of
accounting.
On June 1, 1999 the Company loaned IRTCCII $3.8 million to purchase
23 acres of undeveloped land in Miramar Florida. The Company may lend
additional money to IRTCCII for the development of this property.
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<PAGE> 9
6. Commitments and Contingencies
IRTCC has entered into a co-development agreement for the development
of a Kroger anchored shopping center in Decatur, Georgia. The project will be
developed in two phases totaling approximately 140,000 square feet, not
including two outparcels, at a total anticipated cost of approximately
$14,100,000. The venture may require the Company to purchase the shopping center
upon the completion of Phase I at cost or upon the completion of Phase II at the
greater of cost or a 10.75% capitalization rate. It is anticipated that the
Company will ultimately acquire the project upon completion.
The Company's subsidiary, IRT Partners LP has entered into a contract
to purchase a shopping center valued at $9,015,000. This transaction is expected
to close in the third quarter of 1999.
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<PAGE> 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Material Changes in Financial Condition. During the six months ended
June 30, 1999 the Company:
- obtained a $40,000,000, 6.5% fixed rate, 25 year fully amortizing loan
secured by first mortgages on eight properties, and
- obtained cash proceeds of approximately $12,409,000 upon the sales of
properties and recognized a gain of approximately $2,483,000 for
financial reporting purposes.
The Company utilized funds of:
- $43,500,000 to pay down its unsecured revolving term loan,
- $15,518,000 for the acquisition of two shopping center investments,
consisting of cash of approximately $9,776,000 and mortgage debt of
approximately $5,742,000 secured by one of the centers,
- $3,800,000 for a loan to IRTCCII for the acquisition of 23 acres of
undeveloped land in Miramar, Florida, and
- $625,000 to repay at maturity a 9% purchase-money mortgage.
During the six months ended June 30, 1998 the Company borrowed
$27,600,000 under its unsecured revolving term loan. It utilized funds of:
- $30,775,000 for the acquisition of four shopping center investments,
consisting of cash of approximately $28,984,000 and mortgage debt of
approximately $2,232,000 secured by one of the centers,
- $2,224,000 to repay at maturity an 11% mortgage (discounted to 9.75%
for financial reporting purposes), and
- $625,000 to make a scheduled principal payment under a 9%
purchase-money mortgage.
Additionally, in 1998, $5,178,000 of the Company's 7.3% convertible
subordinated debentures were converted into 460,263 shares of common stock at
$11.25 per share.
Material Changes in Results of Operations. During the three months and
six months ended June 30, 1999, rental income from the Company's portfolio of
shopping center investments:
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<PAGE> 11
- increased approximately $499,000 and $752,000 respectively,
for the core portfolio ,
- increased approximately $2,205,000 and $4,896,000
respectively, due to the acquisition of nine shopping centers
in 1998 and two in 1999,
- decreased approximately $172,000 and $324,000 respectively,
due to sales of two investments in 1998, five investments in
1999 and the foreclosure of the Spanish Quarter mortgage held
by the Company in 1998, and
- decreased approximately $891,000 and $1,095,000 respectively,
due to centers under redevelopment.
During the three months and six months ended June 30, 1998, rental
income from the Company's portfolio of shopping center investments:
- increased approximately $282,000 and $645,000 respectively,
for the core portfolio ,
- increased approximately $2,597,000 and $5,170,000
respectively, due to the acquisition of thirteen shopping
centers in 1998 and 1997,
- increased approximately $303,000 and $698,000 respectively,
due to the acquisition of an apartment investment, obtained by
the Company through foreclosure of the wrap-around mortgage,
in February, 1998,
- decreased approximately $114,000 and $165,000 respectively,
due to a tenant bankruptcy during 1997,
- decreased approximately $382,000 and $698,000 respectively,
due to sales of two investments in 1997, and
- the Company recognized approximately $792,000 of income upon
the termination of an anchor tenant's lease necessitated by
the redevelopment of McAlpin Square.
Percentage rentals received from shopping center investments, excluding
percentage rentals received from the two Wal-Mart investments classified as
direct financing leases, totaled approximately $199,000 and $188,000 during the
three months ended June 30, 1999 and 1998 respectively, and $742,000 and
$599,000 during the six months ended June 30, 1999 and 1998, respectively.
Percentage rental income is recorded upon collection based on the tenants' lease
years.
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<PAGE> 12
Interest income during the three months and six months ended June 30,
1999, decreased approximately $66,000 and $140,000 respectively, due primarily
to the foreclosure of a mortgage loan in the third quarter of 1998.
Interest income during the three months and six months ended June 30,
1998:
- decreased approximately $225,000 and $493,000 due to the
repayment of one purchase-money mortgage in the third quarter
1997 and the foreclosure of the wrap-around mortgage during
the first quarter of 1998, and
- decreased approximately $13,000 and $60,000 respectively, due
to less interest being earned on short-term money market
investments compared to the same time periods in 1997.
IRTCC, which is accounted for by the Company under the equity method,
recognized $54,000 of income from a joint venture upon the sale during the first
quarter of 1998 of the 1.31 acre parcel of land held by the joint venture.
During the three months and six months ended June 30, 1999, operating
expenses related to the Company's portfolio of real estate investments:
- decreased approximately $21,000 for the quarter and increased
approximately $9,000 year to date, for the core portfolio ,
- increased approximately $776,000 and $1,443,000 respectively,
due to the acquisition of nine shopping centers in 1998 and
two in 1999, and
- decreased approximately $159,000 and $209,000 respectively,
due to the sale of an apartment investment in 1998.
During the three months and six months ended June 30, 1998 operating
expenses related to the Company's portfolio of real estate investments:
- increased approximately $587,000 and $934,000 respectively,
for the core portfolio,
- increased approximately $600,000 and $1,170,000 respectively,
due to the acquisition of thirteen shopping centers in 1998
and 1997,
- increased approximately $159,000 and $209,000 respectively,
due to the acquisition of an apartment investment obtained
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<PAGE> 13
through foreclosure of the wrap-around mortgage loan held by
the Company in the first quarter of 1998, and
- decreased by approximately $177,000 and $327,000 respectively,
due to sales in 1997.
During the three months and six months ended June 30, 1999 interest
expense on mortgages decreased approximately $169,000 and $373,000 respectively,
due to four mortgages being repaid in 1998 and one in 1999 and increased
approximately $1,361,000 and $2,255,000 respectively, due to:
- the assumption of a $2,232,000 mortgage bearing interest at
7.65% upon the acquisition of Town & Country shopping center
in January, 1998,
- the assumption of three mortgages for a combined amount of
$20,083,000 bearing interest at 9.1875% upon the acquisition
of Charlotte Square, Riverside Square and Tamarac Square in
August, 1998 (these mortgages were discounted to the then
current market rate of 8% for financial reporting purposes),
- the assumption of a $5,937,000 mortgage bearing interest at 8%
upon the acquisition of Treasure Coast shopping center in
August, 1998,
- the placement of a $4,500,000 mortgage, bearing interest at
6.85%, on Mableton Crossing in August, 1998 (Mableton was
acquired without debt in June, 1998),
- the assumption of a $5,742,000 mortgage bearing interest at 8%
upon the acquisition of Lago Mar shopping center in February,
1999, and
- the placement of a 25 year fully amortizing $40,000,000 loan,
secured by first mortgages on eight properties, bearing fixed
interest at 6.5% in February, 1999.
During the three months and six months ended June 30, 1998 interest
expense on mortgages decreased approximately $577,000 and $1,087,000
respectively, due to the repayment of five mortgages in 1997 and one in 1998 and
increased approximately $108,000 and $274,000 respectively, due to:
- the assumption of a $6,793,000 mortgage bearing interest at
7.865% upon the acquisition of Grassland Crossing in February,
1997,
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<PAGE> 14
- the placement of a $1,250,000 purchase-money mortgage bearing
interest at 9% taken upon the acquisition of Powers Ferry
Plaza in May, 1997,
- the assumption of a $3,502,000 mortgage bearing interest at
7.75% upon the acquisition of Shoppes of Silverlakes in
November, 1997, and
- the assumption of a $2,232,000 mortgage bearing interest at
7.675% upon the acquisition of Town and Country Shopping
Center in January, 1998.
Interest expense on bank indebtedness decreased approximately $376,000
and $87,000 respectively, for the three months and six months ended June 30,
1999. The Company had average borrowings of approximately $15,293,000 and
$35,826,000 at effective interest rates of 6.25% and 6.95%, under its bank
credit facility during the three months ended June 30, 1999 and 1998,
respectively. The Company had average borrowings of approximately $26,301,000
and $26,488,000 at effective interest rates of 6.37% and 6.97%, under its bank
credit facility during the six months ended June 30, 1999 and 1998,
respectively. In addition, the Company incurred commitment fees of approximately
$90,000 and $91,000 in 1999 and 1998, respectively, based on the aggregate
unused portion of the commitment.
The net increase in depreciation expense in 1999 was primarily due to
the eleven shopping center investments acquired during 1998 and 1999, partially
offset by the two investments sold during 1998.
The net decrease in general and administrative expense of $890,000 for
the six months ended June 30, 1999 was primarily due to:
- a reduction in incentive compensation expense of $219,000,
- capitalization of $240,000 of incremental compensation and
other personnel costs associated with leasing space, and
- merger expenses of approximately $373,000, incurred in 1998
which did not result in a merger.
Year 2000 Readiness Disclosure. The Company has assessed the possible
effects of the Year 2000 computer problem in connection with its technology
investments and operations. Management currently believes the Company has
limited exposure and expects the cost of addressing all Year 2000 issues to be
less than $30,000 in 1999. As part of its assessment, Company management
evaluated Year 2000 compliance by those with which it does business and to date
has not discovered any Year 2000 problem with significant counterparties that
it believes are reasonably
14
<PAGE> 15
likely to have a material adverse effect upon the Company. Due to the nature of
Year 2000 issues, the Company realizes that additional information can come to
light at any time during the year and the Company intends to continue to monitor
significant counterparties in the future in the event that circumstances
change. Overall, however, even with Year 2000 related failures at all major
tenants, the Company believes that it can receive its rent payments via
alternative methods of payment. However, no assurance can be given that
potential Year 2000 problems at those companies with which the Company does
business will not occur, and if these occur, consequences to the Company will
not be material. Most of the Company's technology systems have already been
certified as Year 2000 compliant. The Company designates each of the statements
made by it herein as a Year 2000 Readiness Disclosure. Such statements are made
pursuant to the Year 2000 Information and Readiness Disclosure Act.
Funds from Operations. The Company defines funds from operations,
consistent with the NAREIT definition, as net earnings on real estate
investments and extraordinary items plus depreciation and amortization of
capitalized leasing costs. Interest and amortization of issuance costs related
to convertible debentures are added to funds from operations when assumed
conversion of the debentures is dilutive. Conversion of the debentures is
dilutive and therefore assumed for the three months ended June 30, 1999 and
1998. Management believes funds from operations should be considered along with,
but not as an alternative to, net income as defined by generally accepted
accounting principles as a measure of the Company's operating performance. Funds
from operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is not necessarily
indicative of cash available to fund cash needs.
15
<PAGE> 16
The following data is presented with respect to the calculation of funds from
operations under the NAREIT definition for the quarters ended June 30, 1999 and
1998 (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings $ 8,674 $ 6,377 $ 15,165 $ 12,432
Loss/(gain) on sales (2,483) (744) (2,483) (744)
Depreciation* 3,437 3,186 6,875 6,272
Amortization of capitalized leasing fees* 109 69 209 131
Amortization of capitalized leasing income 38 34 82 66
Nonrecurring merger expenses -- 373 -- 373
-------- -------- -------- --------
Funds from operations 9,775 9,295 19,848 18,530
Interest on convertible debentures 425 425 850 896
Amortization of convertible debenture costs 25 25 50 53
Amounts attributable to minority interests 316 -- 521 --
-------- -------- -------- --------
Fully Diluted Funds From Operations $ 10,541 $ 9,745 $ 21,269 $ 19,479
======== ======== ======== ========
Per Share:
Fully Diluted Funds From Operations $ 0.29 $ 0.28 $ 0.59 $ 0.56
======== ======== ======== ========
Applicable weighted average shares 36,030 35,079 36,027 35,037
======== ======== ======== ========
</TABLE>
* Net of amounts attributable to minority interests
Additional Information. The following data is presented with respect to
amounts incurred for improvements to the Company's real estate investments and
for leasing fees during the quarters ended June 30, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Tenant Improvements:
Shopping Centers $ 429 $ 448 $ 602 $ 572
Industrial -- 17 -- 17
------ ------ ------ ------
Total Tenant Improvements 429 465 602 589
------ ------ ------ ------
Capital Expenditures:
Shopping Centers 1,262 658 1,537 1,093
Industrial 4 50 21 52
------ ------ ------ ------
Total Capital Expenditures 1,266 708 1,558 1,145
------ ------ ------ ------
Total Improvements $1,695 $1,173 $2,160 $1,734
====== ====== ====== ======
Leasing Fees Paid $ 273 $ 139 $ 505 $ 232
====== ====== ====== ======
Principal Amortization of Mortgage Notes Payable $ 496 $ 276 $ 807 $ 547
====== ====== ====== ======
</TABLE>
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<PAGE> 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(21) Company Subsidiaries
(27) Financial Data Schedule (for S.E.C. use only)
(99) Unaudited Financial statements of IRT Partners L.P.
for the three and six months ended June 30, 1999
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter ended June 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed by the
undersigned, thereunto duly authorized.
IRT PROPERTY COMPANY
Date: August 3, 1999 /s/ Thomas H. McAuley
------------------------------------
Thomas H. McAuley
President & Chief Executive Officer
Date: August 3, 1999 /s/ James G. Levy
------------------------------------
James G. Levy
Senior Vice President &
Chief Accounting Officer
17
<PAGE> 1
EXHIBIT 21 Company Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction of Year
Name Organization Incorporated
---- ------------ ------------
<S> <C> <C>
IRT Management Company Georgia 1990
VW Mall, Inc. Georgia 1994
IRT Capital Corporation Georgia 1996
IRT Alabama, Inc. Alabama 1997
IRT Partners L.P. Georgia 1998
IRT Capital Corporation II Georgia 1999
</TABLE>
All are wholly-owned subsidiaries of the Company except IRT Capital
Corporation ("IRTCC"), IRT Capital Corporation II ("IRTCCII") and IRT Partners
L.P. ("LP"). The Company owns 96% of IRTCC's and IRTCCII's non-voting common
stock and 1% of its voting stock. The Company and IRT Management Company
combined, own 92.9% of IRT Partners L.P.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF IRT PROPERTY COMPANY AS OF AND FOR THE QUARTER ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,232
<SECURITIES> 0
<RECEIVABLES> 14
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,121
<PP&E> 628,021
<DEPRECIATION> 79,270
<TOTAL-ASSETS> 567,492
<CURRENT-LIABILITIES> 15,177
<BONDS> 282,424
0
0
<COMMON> 33,234
<OTHER-SE> 229,122
<TOTAL-LIABILITY-AND-EQUITY> 567,492
<SALES> 0
<TOTAL-REVENUES> 42,521
<CGS> 9,590
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,022
<INCOME-PRETAX> 15,165
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,165
<EPS-BASIC> 0.46
<EPS-DILUTED> 0.46
</TABLE>
<PAGE> 1
EXHIBIT 99 Unaudited Financial Statements of IRT Partners L.P. for the
three and six months ended June 30, 1999.
IRT PARTNERS L.P.
BALANCE SHEET
(In thousands except unit data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Rental properties $ 146,439 $ 139,936
Accumulated depreciation (18,865) (19,099)
--------------------------
Net rental properties 127,574 120,837
Cash and cash equivalents 885 1,103
Advances to affiliate, net 10,014 0
Prepaid expenses and other assets 1,947 1,269
--------------------------
Total Assets $ 140,420 $ 123,209
==========================
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable, net $ 31,456 $ 25,963
Advances to affiliate, net 0 33
Accrued expenses and other liabilities 3,352 1,660
--------------------------
Total liabilities 34,808 27,656
Limited partners' capital interest (779,385 OP Units at June 30, 7,697 7,794
1999 and December 31, 1998) at redemption value
Commitments and contingencies (Note 4) 0 0
Partners' Capital
General partner (114,249 OP Units at June 30, 1999 and
103,982 OP Units at December 31, 1998) 1,053 955
Limited partner (10,531,247 OP Units at June 30, 1999 and
9,514,844 OP Units at December 31, 1998) 96,862 86,804
--------------------------
Total Partners' Capital 97,915 87,759
--------------------------
Total Liabilities and Partners' Capital $ 140,420 $ 123,209
==========================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
19
<PAGE> 2
IRT PARTNERS L.P.
STATEMENTS OF EARNINGS
For the Three and Six Months Ended June 30, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1999 1999
------------ ----------
<S> <C> <C>
Revenues:
Income from rental properties $5,216 $10,005
Interest income 58 72
------ -------
Total Revenues 5,274 10,077
Expenses:
Operating expenses of real estate investments 1,321 2,407
Interest expense 623 1,180
Depreciation 865 1,698
General & administrative 1 3
------ -------
Total expenses 2,810 5,288
------ -------
Income before gain on sales of properties 2,464 4,789
Gain on sales of properties 1,130 1,130
------ -------
Net earnings $3,594 $ 5,919
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 3
IRT PARTNERS L.P.
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1999
(Unaudited)
(In thousands)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net earnings $ 5,919
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 1,698
Gain on sales of properties (1,130)
Changes in assets and liabilities:
Increase in prepaid expenses
and other assets (678)
Increase in accrued expenses and other liabilities 1,692
--------
Net cash flows from operating activities 7,501
Cash flows used in investing activities:
Proceeds from sales of properties, net 8,867
Additions to real estate investments, net (16,172)
--------
Net cash flows from operating activities (7,305)
Cash flows (used in) from financing activities:
Cash distributions paid, net (5,120)
Principal amortization of mortgage notes payable (248)
Increase in mortgage notes payable 5,742
Net advances from affiliate (10,047)
Issuance of units for cash 9,259
--------
Net cash flows used in financing activities (414)
--------
Net decrease in cash and cash equivalents (218)
Cash and cash equivalents at beginning of period 1,103
--------
Cash and cash equivalents at end of period $ 885
========
Supplemental disclosures of cash flow information:
Total cash paid during the period for interest $ 1,146
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 4
IRT PARTNERS L. P.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
1. Unaudited Financial Statements
These financial statements for interim periods are unaudited. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to a fair presentation of the financial statements as of
June 30, 1999 have been recorded. The results of operations for the interim
periods are not necessarily indicative of the results that may be expected for
future interim periods or for a full year.
2. Organization and Nature of Operations
IRT Partners L.P. ("LP"), a Georgia limited partnership formed July 15,
1998, is the entity through which IRT Property Company (the "Company"), a
self-administered and self-managed real estate investment trust, conducts a
portion of its business and owns (either directly or through subsidiaries) a
portion of its assets. LP was formed by the Company in order to enhance
acquisition opportunities by offering potential sellers of properties the
ability to engage in tax-deferred sales in exchange for Operating Partnership
Units ("OP Units") of LP which are redeemable for shares of common stock of the
Company. The Company serves as general partner of LP and, as of August 1, 1998,
contributed 20 of its shopping centers and related assets and cash to LP in
exchange for OP Units
As a result of acquisitions and dispositions, as of June 30, 1999 LP
owned 24 neighborhood and community shopping centers located in Florida,
Georgia, Tennessee and North Carolina. The Company and IRT Management Company,
one of the Company's wholly-owned subsidiaries, own approximately 92.9% of LP as
of June 30, 1999. The shopping centers are anchored by necessity-oriented
retailers such as supermarkets, drug stores and/or discount variety stores.
LP currently has several unaffiliated limited partners resulting from
the acquisition of three Florida properties in August 1998. The unaffiliated
limited partners have the option to require LP to redeem their OP Units at any
time after one year, in which event LP has the option to purchase the OP Units
for cash or convert them into one share of the Company's common stock for each
OP Unit.
22
<PAGE> 5
3. Rental Properties
Property Acquisitions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Year % Leased Total Initial Mortgage Principal
Acquired Property Name City, State Footage Built at Acquisition Cost Cash Paid Assumed Tenants
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/26/99 The Shoppes at Lago Mar Kendall, FL 82,613 1995 98% $ 9,916 $4,174 $5,742 Publix,
Blockbuster
3/15/99 Williamsburg at Dunwoody Dunwoody, GA 44,928 1983 100% 5,602 5,602 0
------- -----------------------------
127,541 $15,518 $9,776 $5,742
</TABLE>
Property Dispositions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Sales Cash Principal
Sold Property Name City, State Footage Price Proceeds Gain Tenants
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
06/01/99 First Street Station Albemarle, NC 52,230 $3,137 $3,038 $ 320 Harris Teeter,
Eckerd
06/01/99 Taylorsville Taylorsville, NC 48,537 2,571 2,430 609 Harris Teeter
06/01/99 University Center Greenville, NC 56,180 3,462 3,399 201 Harris Teeter,
------------------------------------------ Eckerd
156,947 $9,170 $8,867 $1,130
</TABLE>
4. Commitments and Contingencies
In connection with the formulation of LP and its proposed
operations, LP has guaranteed the bank indebtedness and senior
indebtedness of the Company.
LP has entered into a contract to purchase a shopping center
valued at $9,015,000. This transaction is expected to close in the
third quarter of 1999.
23
