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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
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Commission File Number 1-7859
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IRT PROPERTY COMPANY
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(Exact name of registrant as specified in its charter)
Georgia 58-1366611
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 955-4406
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Shares of Common Stock New York Stock Exchange
$1 Par Value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X ---
The aggregate market value of the common stock of the registrant held by
nonaffiliates of the registrant at March 19, 1999 was $288,381,296.
33,234,206 shares of Common Stock, $1 Par Value, were outstanding at March 19,
1999.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III (Items 10, 11, 12 and 13) is incorporated
by reference to the registrant's definitive proxy statement for the 1999 Annual
Meeting of Shareholders of the Company to be filed pursuant to Regulation 14A.
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SPECIAL CAUTIONARY NOTICE
REGARDING FORWARD LOOKING STATEMENTS
CERTAIN OF THE STATEMENTS MADE HEREIN UNDER THE CAPTIONS "RISK
FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS ANNUAL REPORT ARE FORWARD-LOOKING
STATEMENTS FOR PURPOSES OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT"), AND AS SUCH MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF IRT PROPERTY COMPANY ("IRT" OR THE "COMPANY") TO BE MATERIALLY
DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED
BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD LOOKING STATEMENTS INCLUDE
STATEMENTS USING THE WORDS SUCH AS "MAY," "WILL," "ANTICIPATE," "SHOULD,"
"WOULD," "BELIEVE," "CONTEMPLATE," "EXPECT," "ESTIMATE," "CONTINUE," "INTEND,"
"POSSIBLE" OR OTHER SIMILAR WORDS AND EXPRESSIONS OF THE FUTURE. OUR ACTUAL
RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS WE DISCUSS IN THESE
FORWARD-LOOKING STATEMENTS.
THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND
MAY NOT BE REALIZED DUE TO A VARIETY OF FACTORS, INCLUDING, WITHOUT LIMITATION:
GOVERNMENTAL MONETARY AND FISCAL POLICIES, AS WELL AS LEGISLATIVE AND REGULATORY
CHANGES, ESPECIALLY CHANGES IN THE TAXATION OF REITS; THE RISKS OF CHANGES IN
INTEREST RATES; THE EFFECTS OF COMPETITION FROM OTHER OPERATORS OF RETAIL
PROPERTIES; ALTERNATIVES TO THE COMPANY'S TRADITIONAL TENANT BASE, INCLUDING
ELECTRONIC COMMERCE AND INTERNET-BASED SHOPPING, AS WELL AS THE ENTRY OF NEW
COMPETITORS, SUCH AS THE MASS MERCHANDISE RETAILERS INTO THE GROCERY BUSINESS;
VACANCIES AND LEASE RENEWALS; TENANT CLOSINGS; CONSOLIDATION AMONG TENANTS; THE
FINANCIAL CONDITION AND COMPETITIVENESS OF TENANTS; CHANGES IN NATIONAL,
REGIONAL AND LOCAL ECONOMIC CONDITIONS AND CONSUMER SHOPPING PATTERNS; POSSIBLE
ENVIRONMENTAL ISSUES; AND CHANGES IN THE AVAILABILITY OF CAPITAL AND FUNDING TO
THE REIT INDUSTRY AND REAL ESTATE INVESTMENTS, GENERALLY. ALL WRITTEN OR ORAL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY ARE EXPRESSLY QUALIFIED
IN THEIR ENTIRETY BY THESE CAUTIONARY STATEMENTS.
PART I
Item 1. Business.
General Development of Business. IRT Property Company (the "Company"),
is an owner, operator and redeveloper of neighborhood and community shopping
centers located primarily in the Southeastern United States and generally
anchored by necessity-oriented retailers such as supermarkets, drug stores
and/or
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discount variety stores. The Company is a self-administered and self-managed
equity real estate investment trust with acquisition, development,
redevelopment, financing, property management and leasing capabilities. The
Company's business was started in 1969 and the Company has been a Georgia
corporation since 1979.
The Company has elected since inception to be treated as a "Real Estate
Investment Trust" ("REIT") under the Internal Revenue Code (the "Code"). The
Company intends to continue such election, although it is not required to do so.
For the special provisions applicable to REITs, reference is made to Sections
856-860 of the Code, as amended.
IRT Partners L.P. ("LP"), a Georgia limited partnership, was formed in
1998 to enhance the acquisition opportunities of IRT Property Company by
offering potential sellers the ability to engage in tax-deferred sales in
exchange for Operating Partnership Units ("OP Units") of LP which may be
redeemable for shares of Company common stock. The Company serves as general
partner of LP and has contributed 20 of its shopping centers and related assets
and cash to LP in exchange for partnership interests.
LP currently has several unaffiliated limited partners resulting from
the acquisition of three Florida properties by LP 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.
In connection with the Company's formation of LP and its proposed
operations, LP has guaranteed the Company's bank and senior indebtedness.
The Company has three wholly-owned subsidiaries. IRT Management Company
("Management Company") was formed in 1990 as a wholly-owned subsidiary of the
Company. Management Company currently holds 91.5% of the operating units of LP.
As a result, the Company and Management Company own approximately 92.5% of LP,
which is included in the Company's consolidated financial statements.
VW Mall, Inc. ("VWM") was formed in July 1994. VWM is not
currently engaged in any activities but may do so in the future.
IRT Alabama, Inc. ("IRTAL") was formed in August 1997. Upon its
formation, IRTAL purchased Madison Centre in Huntsville, Alabama and has no
other significant operations beyond this property.
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The Company also has an affiliation with another subsidiary that is not
wholly-owned. IRT Capital Corporation ("Capital Corporation"), a taxable
subsidiary of the Company, was formed under the laws of Georgia in 1996. Capital
Corporation has the ability to develop properties, buy and sell properties,
provide equity to developers 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 Capital Corporation. The remaining voting common stock is
currently held by a former member of the Board of Directors and an executive
officer of the Company. Capital Corporation, which is accounted for by the
Company under the equity method, is taxed as a regular corporation and not as a
REIT.
Financial Information and Description of Business. The Company owns and
manages real estate investments which consist principally of equity investments
in income-producing properties, with primary emphasis on neighborhood and
community shopping centers in the Southeastern United States. The Company's
investment portfolio also includes one industrial and certain other properties,
and to a lesser extent various purchase-money mortgages taken back on the sales
of former equity investments. In addition, the Company has authority to make
other types of equity and mortgage investments in real estate.
For a description of the Company's individual investments and of
material developments during 1998 regarding these investments and the Company as
a whole, reference is made to Items 2 and 7 hereof.
The Company continually reviews possible acquisitions. In making new
real estate investments, the Company intends to continue to place primary
emphasis on obtaining equity interests in well-located income-producing
properties with attractive yields and potential for increases in income and
capital appreciation. The Company focuses on neighborhood and community shopping
centers, primarily in the Southeastern United States; however, the Company will
consider acquisitions in other regions. Existing investments are continuously
reviewed by Company management, and appropriate programs to renovate and
modernize properties are designed and implemented to improve leasing
arrangements, to increase funds from operations and property values. The Company
also from time to time considers the disposition or exchange of existing
investments in order to improve its investment portfolio or increase its funds
from operations. The Company's investment and portfolio management philosophy is
designed to implement its overall objective of maximizing funds from operations
and distributions to shareholders.
The Company directly manages and leases its operating
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properties. Self-management enables the Company to emphasize and more closely
control leasing and property management. Internal property management also
provides the Company opportunities for operating efficiencies by enabling it to
acquire additional properties without proportionate increases in property
management expenses. The Company's property management program is implemented by
property management and leasing professionals located in regional offices in
Atlanta, Charlotte, Orlando, Ft. Lauderdale and New Orleans.
The results of the Company's operations depend upon the performance of
its existing investment portfolio, the availability of suitable opportunities
for new investments, the yields then available on such investments and the
Company's cost of capital. Yields will vary with the type of investment
involved, the condition of the financial and real estate markets, the nature and
geographic location of the investment, competition and other factors. The
performance of a real estate investment company is strongly influenced by the
cycles of the real estate industry. As financial intermediaries providing equity
funds for real estate projects, real estate investment companies are generally
subject to the same market and economic forces as other real estate investors.
Competitive Conditions. In seeking new investment opportunities, the
Company competes with other real estate investors, including pension funds,
foreign investors, real estate partnerships, other REITs and other domestic real
estate companies. On properties presently owned by the Company or in which it
has investments, the Company and its tenants and borrowers compete with other
owners of like properties for tenants and/or customers depending on the nature
of the investment. Management believes that the Company is well positioned to
compete effectively for new investments and tenants.
For any borrowed funds that may be used in new investment activity, the
Company would be in competition with other borrowers seeking both secured and
unsecured borrowings in the banking, real estate lending and public debt
markets.
Regulation. The Company is subject to Federal, state and local
environmental regulations regarding the ownership, development and operation of
real property. The Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state laws
subject the owner of real property to claims or liability for the costs of
removal or remediation of hazardous substances that are disposed of on real
property in amounts that require removal or remediation. Liability under CERCLA
and applicable state superfund laws can be imposed on the owner of real property
or the operator of a facility
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without regard to fault or even knowledge of the disposal of hazardous
substances. The failure to undertake remediation where it is necessary may
adversely affect the owner's ability to sell real estate or borrow money using
such real estate as collateral. In addition to claims for cleanup costs, the
presence of hazardous substances on a property could result in claims by private
parties for personal injury or property damage.
The Company has obtained independent Phase I environmental site
assessments (which generally did not include environmental sampling, monitoring
or laboratory analysis) for property acquisitions beginning in 1989, and
otherwise as required by its lenders. Except as otherwise disclosed and based
upon information presently available to the Company, the Company has no reason
to believe that any environmental contamination has occurred nor any violation
of any applicable environmental law, statute, regulation or ordinance exists
that would have a material adverse effect on the Company's financial position.
The Company presently carries only limited insurance coverage for the types of
environmental risks described herein.
During 1996, the Company discovered that releases of petroleum products
had occurred at a garage facility previously operated by a former tenant at the
Company's Charlotte, North Carolina industrial facility. The Company is
continuing to evaluate the extent of the related contamination, and Company
management is negotiating with the former tenant to obtain contribution for
potential cleanup costs. The Company does not believe the cost of addressing
these releases will have a material adverse effect on the Company's results of
operations, financial position, or liquidity.
During its soil and groundwater investigation at Bluebonnet Village
Shopping Center in Baton Rouge, Louisiana, the Company's environmental
consultant discovered concentrations of various chemicals in a groundwater
monitoring well that exceeded the maximum contaminant levels under the Federal
Safe Drinking Water Act. Remediation of the condition is underway and to date
has cost the Company approximately $80,000. At another site, leaking petroleum
underground storage tanks ("USTs") formerly located at the Company's Venice
Plaza Shopping Center in Venice, Florida, have affected soil and groundwater at
this center. Kash n' Karry Food Stores, Inc., formerly a Florida division of
Lucky Stores, Inc., operated such USTs and has assumed the responsibility for
all related corrective action. The Company presently believes that there will be
no further corrective action required which would have a material adverse effect
on the Company's results of operation, financial position or liquidity.
A number of Company properties include facilities leased to dry
cleaners. At some of these properties, dry cleaning solvents
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have been discovered in soil and or groundwater. In each such instance either
(a) the amount detected was below reportable limits or (b) the state regulatory
authority has informed the Company that no further enforcement action would be
taken, (or in the case of Florida, the state regulatory authority has admitted
the affected Company property to the state sponsored fund responsible for the
clean up of dry cleaning spills). Neither the admission of a property to the
Florida fund nor the assurances of the relevant state regulatory authority
ensures that the Company will not incur costs associated with corrective action.
Petroleum related chemical releases and other environmental concerns
located on property owned by third parties may affect nearby or adjacent Company
properties. The Company presently believes that the third party landowners or
UST operators are principally responsible for corrective action for any such
matters. Accordingly, the Company currently believes that the costs of any
corrective action with respect to the migration of environmentally hazardous
materials onto Company properties are not expected to have a material adverse
effect on the Company's results of operations, financial position or liquidity
Employees. The Company presently employs 56 persons, 2 of
whom are on-site maintenance personnel at two of the Company's real
estate investments.
RISK FACTORS
Set forth below are the risks that we believe are material to investors
in the Company's common stock (which we refer to as "Shares") or limited
operating partnership units of IRT Partners L.P. (which we refer to as "OP
Units"), which are redeemable on a one-for-one basis for Shares or their cash
equivalent. We refer to the Shares and the OP Units together as our
"securities", and the investors who own Shares or OP Units as our
"Securityholders".
Owning and Operating Retail Real Estate Entails Certain Risks That
Could Adversely Affect Our Performance
Dependence on the Retail Industry. Our properties consist predominately
of community and neighborhood shopping centers. The market for retail
space may be adversely affected by consolidation of retailers, the
relatively weak financial condition of certain retailers and
overbuilding in certain markets. Market rents and our performance could
be adversely affected by such factors.
Internet Sales. Retail sales over the Internet have been increasing
rapidly. Electronic commerce could adversely affect the demand for
retail space, although we believe that our supermarket anchor tenants
and local service oriented tenants may be less affected than other
retailers.
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Financial Condition of Tenants. If any of our anchor tenants or a
sufficient number of key tenants were unable to make scheduled rental
payments due to poor financial condition, we could experience an
adverse effect on our financial condition.
Bankruptcy of Tenants. A financially troubled tenant could become the
subject of a bankruptcy proceeding, which might result in termination
of the tenant's lease. Whether or not a financially troubled tenant
becomes subject to the protection of the bankruptcy laws, we could
experience delays and incur significant costs and delays in enforcing
our rights against a financially troubled tenant that does not pay its
rent when becomes due.
Vacancies and Lease Renewals. Our tenants' leases generally have terms
from three to 20 years, tenants' often have one or more renewal
options. We may not be able to find a replacement tenant at the end of
a lease. The space may remain vacant or may be re-let at rents more or
less favorable than the original rents. Long-term leases provide
stability, but limit opportunities to re-let space at a higher rate.
Tenant Closings. Certain leases permit the tenant to close its
operations at the leased location. Although the tenant would still be
responsible for its rental obligations, any rents based on the sales of
that tenant could be lost. Such a closure could also adversely affect
customer traffic and, thus, the other tenants at a shopping center.
Rental rates and occupancy may also be affected adversely at such a
center.
Real Estate Investments Are Illiquid. Real estate investments
generally cannot be sold quickly. We may not be able to change
our portfolio promptly in response to economic or other
conditions.
Real Estate Industry Risks May Affect Our Performance
Concentration in the Southeast. Most of our real estate portfolio is
located in the Southeastern United States. This region has had rapid
growth in recent years. Our business could be adversely affected by
changes in the Southeast's economy or in the local markets for retail
space.
Uncertainty of Meeting Acquisition Objectives. We continually seek to
acquire additional shopping centers and portfolios of shopping centers.
We seek purchases at attractive initial yields and/or which may enhance
our revenues and funds from operations through renovation, expansion
and re-leasing programs. We also evaluate mergers and acquisitions with
companies engaged in businesses similar to ours. We incur certain costs
to evaluate possible transactions. We may not
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complete such transactions and certain costs are not recoverable in the
event the transactions are not consummated. We cannot guarantee that we
will be able to meet our acquisition goals.
Uncertainty of Acquired Property Performance. We cannot assure that any
acquisition will increase our revenues or funds from operations or
result in a certain yield.
Competition. We compete with numerous other real estate companies.
Other retail properties within our markets compete with us for tenants.
The location and number of competitive retail properties could affect
the Company's occupancy levels and rental rates.
Development Competition. Other real estate companies compete with us
for development, redevelopment and acquisition opportunities. Such
competitors may be willing and able to pay more for such opportunities
than we would. This may increase the prices sought by sellers of these
properties.
Environmental Problems Are Possible and Could Be Costly
Possible Environmental Liabilities. An owner or operator of real estate
may be liable for the costs of removal of releases of certain hazardous
or toxic substances. The presence of hazardous or toxic substances on
or near our properties, or the failure to properly clean them up, may
adversely affect our ability to rent or sell the property or to use
such property as collateral for our borrowings. Corrective costs could
adversely affect our financial condition and performance.
Limited Environmental Analyses. The Company has obtained independent
Phase I environmental site assessments (which generally did not include
environmental sampling, monitoring or laboratory analysis) for property
acquisitions beginning in 1989, and otherwise as required by its
lenders. Except as otherwise disclosed and based upon information
presently available to the Company, the Company does not believe that
any environmental contamination has occurred nor any violation of any
applicable environmental law, statute, regulation or ordinance exists
that would have a material adverse effect on the Company's financial
position. The Company presently carries only limited insurance coverage
for environmental risks.
Presence of Dry Cleaning Solvents. A number of Company properties
include facilities leased to dry cleaners. At some of these properties,
dry cleaning solvents have been discovered in soil and or groundwater.
In each such instance
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either (a) the amount detected was below reportable limits or (b) the
state regulatory authority has informed the Company that no further
enforcement action would be taken (or in the case of Florida, the state
regulatory authority has admitted the affected Company property to the
state sponsored fund responsible for the clean up of dry cleaning
spills). Neither the admission of a property to the Florida fund nor
the assurances of the relevant state regulatory authority ensures that
the Company will not incur costs associated with corrective action.
Americans with Disabilities Act
Compliance with the Americans with Disabilities Act and Other Laws. Our
properties must comply with the federal Americans with Disabilities Act
of 1990 (the "ADA"). This law requires that disabled persons must be
able to enter and use public properties like our shopping centers. The
ADA and state and local laws may require us to modify our properties
and may limit renovations. If we fail to obey such laws, we may pay
fines or damages.
Some Potential Losses Are Not Covered by Insurance
We carry comprehensive liability, fire, extended coverage and rental
loss insurance on all of our properties. We believe these insurance
coverages are reasonably adequate. Certain types of losses, such as
lease and other contract claims generally are not insured. Should an
uninsured loss or a loss in excess of insured limits occur, we could
lose some or all of our investment in a property and future revenue
from the property could be adversely affected. We would still owe
mortgage debt or other financial obligations related to the property.
Our Performance is Subject to Risks Associated With Debt Financing
On December 31, 1998, we had $281 million in long term debt. On
December 31, 1998, our debt-to-total market capitalization ratio was
46% without conversion of convertible debt and 42% assuming conversion
of convertible debt. Of our long term debt, 29% is secured by mortgages
on our properties. We must pay our debts on time. We cannot pay
dividends to our securityholders unless our debt has been paid when
due.
Securityholders May Be Adversely Affected by the Dilution of Common
Stock
The Company may issue additional Shares or OP Units without
Securityholder approval. Additionally, each OP Unit may be redeemed by
the holder for one share of common stock or, at our option, the cash
value of one share of common stock. Such actions may dilute your
interest in the Company.
Our Liquidity is Subject to the Restrictions on Sale of Certain Properties
We currently have agreements that limit our sale of certain properties
acquired by LP for up to 10 years. We may enter into similar agreements
with future sellers of properties to LP. Such agreements may prevent
sales of properties that could be advantageous to our Securityholders,
generally.
The Ability to Effect Changes in Control of the Company May Be Limited
Certain provisions of the law, our governing documents and the
Company's Shareholders Rights Plan may have the effect of delaying or
preventing a merger or similar transaction that could, if consummated,
provide investors with a premium over the then-prevailing market price
of the Company's securities. Also, any future series of Preferred Stock
may contain certain provisions that could delay or prevent a change of
control, or other transaction, that might be favored by certain
Securityholders. For a description of the Company's Shareholders Rights
Plan, see the Company's current report on Form 8-K dated August 21,
1998.
The Company is Subject to Ownership Limits and Certain Adverse Effects of
Failing to Qualify as REIT
Concentration of Ownership of the Company Is Limited. In order to
qualify as a REIT under the Code we must satisfy various tests related
to the sources and amounts of our income, the nature of our assets, and
our stock ownership. For example, not more than 50% in value of the
outstanding shares of the Company may be owned, directly or indirectly,
by five or fewer individuals. Our charter authorizes our directors to
take such action as may be required to preserve our qualification as a
REIT including placing limits on the ownership of our securities. These
limits may have the ancillary effect of delaying, deferring or
preventing a change in control of the Company.
REIT Investment Limitations. We must hold certain types of real estate
and other investments. This limits our ability to diversify our assets
outside of real estate.
Adverse Effects of Failing to Qualify as a REIT. If the Company fails
to qualify as a REIT, it will be subject to income taxes on its taxable
income. The Company also may be disqualified from treatment as a REIT
for the four taxable years following the year during which
qualification is lost. This would reduce the net earnings of the
Company available for investment or distribution to Securityholders
because of the additional tax liability for the year(s) involved. In
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addition, distributions to our Securityholders would no longer be
required by the Code.
Item 2. Properties.
The following tables and notes thereto describe the properties in which
the Company had investments at December 31, 1998, as well as the mortgage
indebtedness to which the Company's investments were subject. Reference is made
to Note 4 to the consolidated financial statements included as a part of this
report for information on minimum base rentals on noncancellable operating
leases for the next five years and thereafter.
I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements thereon
as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Leased Year Company Cost FFO Net Income
Description Acquired Area 12/31/1998 Completed 12/31/98 12/31/98 1998 (1) 1998 (2)
SHOPPING CENTERS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Abbeville Plaza 04/86 59,525 sq. ft. 19% 1970 $ 561,850 $ 237,831 $ 17,910 $(41,562)
Abbeville, SC
Alafaya Commons 11/96 120,586 sq. ft. 96% 1987 10,304,479 10,054,670 1,060,185 938,317
Orlando, FL
Ambassador Row 12/94 193,982 sq. ft. 99% 1980 & 9,991,577 9,174,106 1,041,678 818,526
Lafayette, LA 1991
Ambassador Row Courtyard 12/94 155,483 sq. ft. 95% 1986 & 11,844,881 10,933,696 1,211,017 969,376
Lafayette, LA 1991
Asheville Plaza (5) 04/86 49,800 sq. ft. 100% 1967 405,287 261,131 96,282 85,086
Asheville, NC
Bay Pointe Plaza (5) 12/98 97,390 sq. ft. 94% 1984 6,388,436 6,381,897 36,099 29,560
St. Petersburg, FL
Bluebonnet Village 12/94 90,215 sq. ft. 97% 1983 8,137,457 7,560,832 885,311 736,343
Baton Rouge, LA
The Boulevard 12/94 68,012 sq. ft. 54% 1976 & 3,834,345 3,538,934 290,079 214,803
Lafayette, LA 1994
Carolina Place 05/89 36,560 sq. ft. 97% 1989 2,351,494 1,872,094 220,928 170,588
Hartsville, SC
Centre Pointe Plaza (5) 12/92 & 163,642 sq. ft. 99% 1989 & 9,293,791 8,028,045 818,068 587,872
Smithfield, NC 12/93 1993
Chadwick Square (5) 01/92 31,700 sq. ft. 100% 1985 1,555,591 1,348,889 168,793 136,609
Hendersonville, NC
Charlotte Square (5) 08/98 96,188 sq. ft. 96% 1980 6,005,745 5,965,204 237,274 56,732
Port Charlotte, FL
Chastain Square 12/97 74,315 sq. ft. 83% 1981 6,778,976 6,648,116 584,652 457,944
Atlanta, GA
Chelsea Place 07/93 81,144 sq. ft. 98% 1992 6,942,585 6,183,547 734,417 594,833
New Port Richey, FL
Chester Plaza 04/86 & 71,443 sq. ft. 59% 1967 & 2,301,514 1,548,379 199,486 77,158
Chester, SC 02/92 1992
</TABLE>
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I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements thereon
as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Leased Year Company Cost FFO Net Income
Description Acquired Area 12/31/1998 Completed 12/31/98 12/31/98 1998 (1) 1998 (2)
SHOPPING CENTERS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chestnut Square (5) 01/92 39,640 sq. ft. 100% 1985 $ 1,432,106 $ 1,227,350 $ 245,375 $ 213,767
Brevard, NC
Colony Square 02/88 50,000 sq. ft. 86% 1987 2,936,430 2,070,715 263,324 171,836
Fitzgerald, GA
Commerce Crossing 12/92 100,668 sq. ft. 100% 1988 4,501,943 3,877,731 441,670 335,458
Commerce, GA
Country Club Plaza 01/95 64,686 sq. ft. 86% 1982 4,217,057 3,871,619 433,860 335,556
Slidell, LA
Countryside Shops 06/94 173,161 sq. ft. 98% 1986,1988 16,809,320 15,524,362 1,894,681 1,599,097
Cooper City, FL & 1991
The Crossing 12/94 113,989 sq. ft. 100% 1988 & 4,604,816 4,238,736 569,565 471,031
Slidell, LA 1993
Daniel Village 03/98 164,549 sq. ft. 95% 1954 & 12,333,120 12,152,978 938,800 758,658
Augusta, GA 1997
Delchamps Plaza 04/88 66,857 sq. ft. 100% 1987 4,586,446 3,450,684 458,097 342,309
Pascagoula, MS
Douglas Commons 08/92 97,027 sq. ft. 100% 1988 8,653,687 7,624,724 870,812 700,028
Douglasville, GA
Eden Centre (5) 11/94 56,355 sq. ft. 100% 1991 3,549,003 3,246,789 386,165 313,637
Eden, NC
Elmwood Oaks 01/92 130,284 sq. ft. 100% 1989 11,209,439 10,046,821 1,250,638 443,605
Harahan, LA
Fairview Oaks 06/97 77,052 sq. ft. 100% 1997 7,109,994 6,863,502 722,649 562,749
Ellenwood, GA
First Street Station (5) 08/94 52,230 sq. ft. 95% 1989 3,065,440 2,750,050 299,068 223,120
Albemarle, NC
Forest Hills Centre (5) 08/90 74,180 sq. ft. 100% 1990 5,551,725 4,643,378 626,824 498,136
Wilson, NC
Forrest Gallery (5) 12/92 214,450 sq. ft. 98% 1987 12,745,199 11,091,892 1,064,986 764,386
Tullahoma, TN
</TABLE>
11
<PAGE> 13
I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements thereon
as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Leased Year Company Cost FFO Net Income
Description Acquired Area 12/31/1998 Completed 12/31/98 12/31/98 1998 (1) 1998 (2)
SHOPPING CENTERS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ft. Walton Beach Plaza 07/86 48,248 sq. ft. 100% 1986 $ 2,676,717 $ 1,887,651 $ 252,628 $ 186,040
Ft. Walton Beach, FL
The Galleria (5) 08/86 & 92,344 sq. ft. 93% 1986, 1990 8,523,501 6,548,450 663,913 447,102
Wrightsville Beach, NC 12/87 & 1996
Grassland Crossing 02/97 90,906 sq. ft. 100% 1996 10,128,390 9,705,279 950,651 206,335
Alpharetta, GA
Greenwood 07/97 134,132 sq. ft. 92% 1982 & 13,113,217 12,777,364 1,280,253 1,055,371
Palm Springs, FL 1994
Gulf Gate Plaza 06/79 174,566 sq. ft. 74% 1969 & 4,511,576 1,567,813 481,710 290,729
Naples, FL 1974
Harris Teeter 06/88 & 36,535 sq. ft. 100% 1981 & 2,600,657 1,807,797 300,843 223,803
Lexington, VA 06/89 1989
Heritage Walk 06/93 159,362 sq. ft. 100% 1991 & 8,783,529 7,674,559 938,577 739,437
Milledgeville, GA 1992
Hoffner Plaza 06/79 6,000 sq. ft. 67% 1972 581,127 445,458 34,630 18,205
Orlando, FL
Lancaster Plaza 04/86 77,400 sq. ft. 100% 1971 1,436,305 848,872 174,995 96,587
Lancaster, SC
Lancaster Shopping Center 08/86 & 29,047 sq. ft. 100% 1963 & 1,630,862 1,154,539 164,360 123,248
Lancaster, SC 12/87 1987
Lawrence Commons (5) 08/92 52,295 sq. ft. 93% 1987 3,585,507 3,127,753 351,001 273,661
Lawrenceburg, TN
Litchfield Landing 08/86 42,201 sq. ft. 98% 1984 2,647,351 1,961,145 325,542 270,186
North Litchfield, SC
Mableton Crossing 06/98 86,819 sq. ft. 96% 1997 8,169,668 8,098,575 375,831 180,473
Mableton, GA
Macland Pointe 01/93 79,699 sq. ft. 100% 1992 & 6,140,677 5,407,654 690,464 277,588
Marietta, GA 1993
Madison Centre 08/97 64,837 sq. ft. 100% 1997 5,818,308 5,713,538 583,500 507,336
Madison, AL
</TABLE>
12
<PAGE> 14
I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements
thereon as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Leased Year Company Cost FFO Net Income
Description Acquired Area 12/31/1998 Completed 12/31/98 12/31/98 1998(1) 1998(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
Market Place 04/97 73,686 sq. ft. 97% 1976 $ 7,174,481 $ 7,035,570 $ 802,915 $ 721,568
Norcross, GA
McAlpin Square 12/97 176,807 sq. ft. 65% 1979 6,151,926 5,995,226 1,646,588 1,494,591
Savannah, GA
Millervillage
Shopping Center 12/94 94,559 sq. ft. 93% 1983 & 7,717,195 7,118,395 795,258 640,765
Baton Rouge, LA 1992
New Smyrna
Beach Regional 08/92 118,451 sq. ft. 97% 1987 10,455,201 9,254,734 965,936 753,104
New Smyrna
Beach, FL
North River
Village Center 12/92 & 177,128 sq. ft. 100% 1988 & 10,206,396 9,188,886 1,076,300 879,708
Ellenton, FL 12/93 1993
North Village 08/86 60,356 sq. ft. 100% 1984 3,279,033 2,439,377 314,730 33,202
Center(3)
North Myrtle
Beach, SC
Old Kings Commons 05/88 84,759 sq. ft. 100% 1988 6,151,008 4,847,131 564,967 431,815
Palm Coast, FL
Palm Gardens 06/79 49,890 sq. ft. 32% 1970 1,879,069 735,262 1,486,107 1,362,807
Largo, FL
Parkmore Plaza 12/92 159,067 sq. ft. 100% 1986 & 8,400,260 7,389,230 910,861 731,413
Milton, FL 1992
Paulding Commons 08/92 192,391 sq. ft. 98% 1991 13,095,512 11,357,957 1,276,871 990,635
Dallas, GA
Pensacola Plaza 07/86 56,098 sq. ft. 100% 1985 2,678,939 1,560,180 211,529 106,421
Pensacola, FL
Pinhook Plaza 12/94 192,501 sq. ft. 96% 1979 & 11,207,458 10,355,644 1,108,454 379,338
Lafayette, LA 1992
Plaza Acadienne(4) 12/94 105,419 sq. ft. 100% 1980 3,016,749 2,710,703 389,920 177,849
Eunice, LA
Plaza North(5) 08/92 47,240 sq. ft. 95% 1986 2,469,023 2,178,175 277,147 231,511
Hendersonville, NC
Powers Ferry 05/97 83,101 sq. ft. 80% 1979 & 7,554,455 7,344,854 530,427 338,531
Marietta, GA 1983
</TABLE>
13
<PAGE> 15
I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements thereon
as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Leased Year Company Cost FFO Net Income
Description Acquired Area 12/31/1998 Completed 12/31/98 12/31/98 1998(1) 1998 (2)
SHOPPING CENTERS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Providence Square(5) 12/71 85,930 sq. ft. 94% 1973 $ 4,595,197 $ 1,661,853 $ 523,976 $ 322,124
Charlotte, NC
Riverside Square(5) 08/98 103,241 sq. ft. 90% 1987 13,024,842 12,950,556 438,758 69,591
Coral Springs, FL
Riverview Shopping
Center(5) 03/72 130,058 sq. ft. 88% 1973 & 6,589,592 4,206,206 678,463 439,663
Durham, NC 1994
Salisbury
Marketplace(5) 08/96 76,970 sq. ft. 92% 1987 4,651,714 4,425,530 511,624 414,688
Salisbury, NC
Scottsville Square 08/92 38,450 sq. ft. 86% 1986 2,565,086 2,150,390 53,942 (54,382)
Bowling Green, KY
Seven Hills 07/93 64,590 sq. ft. 99% 1991 4,914,220 4,491,129 520,682 440,520
Spring Hill, FL
Shelby Plaza(4)(5) 04/86 103,000 sq. ft. 81% 1972 1,682,066 1,007,346 149,673 39,657
Shelby, NC
Sherwood South 12/94 75,607 sq. ft. 100% 1972, 1988 2,248,485 2,081,368 352,947 307,311
Baton Rouge, LA & 1992
Shoppes of
Silverlakes 11/97 126,638 sq. ft. 93% 1995 & 16,868,742 16,508,019 1,512,054 924,627
Pembroke, FL 1996
Siegen Village 12/94 174,578 sq. ft. 100% 1988 & 9,107,218 8,536,321 1,004,439 826,011
Baton Rouge, LA 1996
Smyrna Village(5) 08/92 83,334 sq. ft. 100% 1992 5,913,492 5,130,424 639,088 512,836
Smyrna, TN
Smyth Valley Crossing 12/92 126,841 sq. ft. 100% 1989 7,093,193 6,234,822 624,287 474,023
Marion, VA
South Beach Regional 08/92 289,319 sq. ft. 97% 1990 & 21,984,886 18,961,844 2,195,363 1,699,259
Jacksonville 1991
Beach, FL
Spalding Village 08/92 235,318 sq. ft. 99% 1989 15,465,057 13,402,496 1,568,533 299,967
Griffin, GA
Spring Valley 03/98 75,415 sq. ft. 100% 1988 & 6,104,376 6,005,993 515,704 417,321
Columbia, SC 1997
</TABLE>
14
<PAGE> 16
I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements
thereon as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Leased Year Company Cost FFO Net Income
Description Acquired Area 12/31/1998 Completed 12/31/98 12/31/98 1998(1) 1998(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
Stadium Plaza 08/92 70,475 sq. ft. 99% 1988 $ 4,488,822 $ 4,056,610 $ 459,522 $ 389,706
Phenix City, AL
Stanley Market Place(5) 01/92 40,364 sq. ft. 100% 1980 & 1,867,232 1,578,972 224,072 172,952
Stanley, NC 1991
Tamarac Town Square(5) 08/98 123,385 sq. ft. 90% 1982 10,654,803 10,592,151 319,627 21,052
Tamarac, FL
Tarpon Heights 01/95 56,605 sq. ft. 100% 1982 2,837,287 2,622,797 394,351 304,572
Galliano, LA
Taylorsville Shopping
Center(5) 08/86 & 48,537 sq. ft. 100% 1982 & 2,612,159 1,847,264 271,206 198,762
Taylorsville, NC 12/88 1988
Thomasville Commons 08/92 148,754 sq. ft. 100% 1991 7,221,233 6,203,227 795,968 108,379
Thomasville, NC
Town & Country 01/98 71,283 sq. ft. 98% 1993 4,265,496 4,185,487 419,345 175,868
Kissimmee, FL
Treasure Coast(5) 08/98 133,781 sq. ft. 100% 1970 & 11,185,860 11,114,006 376,671 139,536
Vero Beach, FL 1995
University Center(5) 12/89 56,180 sq. ft. 95% 1989 3,991,119 3,236,100 368,539 279,703
Greenville, NC
Venice Plaza(3) 06/79 155,988 sq. ft. 83% 1971 & 3,002,218 1,145,622 356,361 233,793
Venice, FL 1979
Village at Northshore 12/94 144,373 sq. ft. 100% 1988 & 8,330,713 7,695,467 904,700 260,692
Slidell, LA 1993
Walton Plaza 06/90 43,460 sq. ft. 98% 1991 3,158,124 3,115,469 126,366 83,711
Augusta, GA
Waterlick Plaza 10/89 98,694 sq. ft. 87% 1973 & 6,311,631 5,032,548 666,083 514,967
Lynchburg, VA 1988
Watson Central 12/92 & 227,747 sq. ft. 98% 1989 & 13,131,685 11,438,710 1,333,137 1,035,777
Warner Robins, GA 10/93 1993
Wesley Chapel Crossing 12/92 170,792 sq. ft. 100% 1989 10,967,896 9,885,570 1,034,003 850,031
Decatur, GA
</TABLE>
15
<PAGE> 17
I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements
thereon as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Leased Year Company Cost FFO Net Income
Description Acquired Area 12/31/1998 Completed 12/31/98 12/31/98 1998(1) 1998(2)
SHOPPING CENTERS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
West Gate Plaza 06/74 & 64,378 sq. ft. 100% 1974 & $ 4,776,992 $ 3,579,197 $ 415,275 $ 258,039
Mobile, AL 01/85 1995
West Towne Square 03/90 89,596 sq. ft. 40% 1988 6,047,549 4,751,487 297,062 139,214
Rome, GA
Westgate Square 06/94 104,853 sq. ft. 97% 1984 & 9,365,785 8,546,169 1,096,204 900,772
Sunrise, FL 1988
Willowdaile
Shopping
Center(5) 08/86 & 120,815 sq. ft. 98% 1986 8,598,078 6,287,800 1,058,467 847,075
Durham, NC 12/87
--------- ------------ ------------ ----------- -----------
9,470,306 sq. ft 617,410,682 545,325,425 60,202,093 41,782,734
========= ------------ ------------ ----------- -----------
INDUSTRIAL PROPERTIES
Industrial Buildings 06/79 188,513 sq. ft. 82% 1956 & 3,778,080 920,759 332,610 221,538
Charlotte, NC 1963
========= ------------ ------------ ----------- -----------
SEE NOTES $621,188,758 $546,246,182 $60,534,703 $42,004,272
============ ============ =========== ===========
</TABLE>
16
<PAGE> 18
I. EQUITY INVESTMENTS (LAND & BUILDINGS)
NOTES:
(1) Property FFO represents cash flows from operating activities before
interest expense excluding changes in accrued assets and liabilities
for fiscal year ended December 31, 1998 or from the date of acquisition
(if acquired in 1998) through December 31, 1998. Property FFO is
presented as an additional measure in valuing and analyzing the
underlying real estate investments. Property FFO should not be
considered an alternative to net income or other measurements under
generally accepted accounting principles as an indicator of operating
performance; or to cash flow from operating, investing, or financing
activities as a measure of liquidity.
(2) Property Net Income represents net income of the property calculated in
accordance with generally accepted accounting principles, excluding any
allocation of general and administrative expenses of the Company.
(3) The Company owns a 49.5% interest in the property of North Village
Center and is entitled to 54.5% of the financial performance of the
property. The Company also owns a 75% interest in Venice Plaza Shopping
Center. These interests are consolidated for financial reporting
purposes and minority interests recorded.
(4) Subject to ground leases expiring in 2002 for Shelby Plaza, 2005 for
McAlpin Square and 2008 for Plaza Acadienne, with renewal options to
extend the terms to 2017, 2033 and 2035, respectively. The Company has
options to purchase the land at Shelby Plaza and McAlpin Square.
(5) Ownership through IRT Partners L.P.
17
<PAGE> 19
II. EQUITY INVESTMENTS (DIRECT FINANCING LEASES)
The Company also had a fee interest in land and improvements thereon in the
following properties occupied by tenants under leases which are treated as
direct financing leases:
<TABLE>
<CAPTION>
Percent Cost to Property Property
Date Leased Year Company FFO Net Income
Description Acquired Square Feet 12/31/98 Completed 12/31/98 1998 (1) 1998 (2)
----------- -------- ----------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE
The Old Phoenix National Bank (3) 12/84 73,074 sq. ft. 100% Various $2,054,328 $313,049 $269,557
Medina County, OH
======= --------------------------------
SHOPPING CENTERS
Wal-Mart Stores, Inc. (4) 06/85 54,223 sq. ft. 100% 1985 1,190,594 224,153 174,073
Mathews, LA
Wal-Mart Stores, Inc. (4) 07/85 53,571 sq. ft. 100% 1985 1,327,018 175,350 126,274
Marble Falls, TX
------- --------------------------------
107,794 sq. ft. 2,517,612 399,503 300,347
======= --------------------------------
$4,571,940 $712,552 $569,904
================================
</TABLE>
NOTES:
(1) Property FFO represents cash flows from operating activities before
interest expense excluding changes in accrued assets and liabilities
for the fiscal year ended December 31, 1998 or from the date of
acquisition (if acquired in 1998) through December 31, 1998. Property
FFO should not be considered an alternative to net income or other
measurements under generally accepted accounting principles as an
indicator of operating performance; or to cash flows from operating,
investing or financing activities as a measure of liquidity. Property
FFO is presented as an additional measure in valuing and analyzing the
underlying real estate investments.
(2) Property Net Income represents net income of the property calculated in
accordance with generally accepted accounting principles, excluding any
allocation of general and administrative expenses of the Company.
(3) This investment represents ten banking facilities leased to The Old
Phoenix National Bank at an annual rental of $313,049. The leases
expire March 2013 with no purchase or renewal options.
(4) These two retail facilities are leased to Wal-Mart Stores, Inc. at a
total annual rental of $332,850 plus percentage rentals of 1% of gross
sales in excess of fourth year sales. The leases expire January 2011,
with five 5-year renewal options. There are no purchase options.
Percentage rental of $60,653 was received during the fiscal year ended
December 31, 1998.
18
<PAGE> 20
III. EQUITY INVESTMENTS (LAND PURCHASE-LEASEBACKS)
The Company owned land under the following properties, all of which are
net leased back to lessees on terms summarized below. The improvements on
such properties are owned by others but will revert to the Company at the
end of the lease terms unless the purchase options of the lessees, as
referred to below, are exercised.
<TABLE>
<CAPTION>
Lease Cost to Property Property
Date Land Area Year Expiration Company FFO Net Income
Description Acquired In Acres Improvements Completed Date 12/31/98 1998 (1) 1998 (2)
----------- -------- -------- ------------ --------- ---- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
Lawrence County Shopping Center 05/71 13.62 135,605 sq. ft. 1971 2069 (3) $435,994 $ 67,200 $ 67,200
Sybene, OH
Grand Marche Shopping Center 09/72 11.38 200,585 sq. ft. 1969 2012 250,500 27,500 27,500
Lafayette, LA
Manatee County Shopping Center 05/71 16.00 120,500 sq. ft. 1971 2069 (3) 241,798 30,000 30,000
Bradenton, FL
------- ------------------------------
456,690 sq. ft. $928,292 $124,700 $124,700
======= ==============================
</TABLE>
NOTES:
(1) Property FFO represents cash flows from operating activities before
interest expense excluding changes in accrued assets and liabilities
for the fiscal year ended December 31, 1998. Property FFO should not be
considered an alternative to net income or other measurements under
generally accepted accounting principles as an indicator of operating
performance; or to cash flows from operating, investing or financing
activities as a measure of liquidity. Property FFO is presented as an
additional measure in valuing and analyzing the underlying real estate
investments.
(2) Property Net Income represents net income of the property calculated in
accordance with generally accepted accounting principles, excluding any
allocation of general and administrative expenses of the Company.
(3) Each lessee has a repurchase option exercisable at a specified price
(in each case higher than the cost to the Company of its investment)
which increases annually by a fixed amount.
19
<PAGE> 21
IV. MORTGAGE LOAN INVESTMENTS
The Company had mortgage loans receivable on the following properties:
<TABLE>
<CAPTION>
Security
----------------------------------- Principal Stated
Type of Land Area Outstanding Maturity Interest
Location Loan In Acres Improvements 12/31/98 Date Rate
-------- ---- -------- ------------ -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Wal-Mart - Kearney, NE 2nd Mortgage 8.491 83,249 sq. ft. 594,000 12/98 (1) 7.00%
Kearney, NE
Wal-Mart - Fremont, NE 2nd Mortgage 7.77 64,890 sq. ft. 406,000 12/98 (1) 7.00%
Fremont, NE
Mill Creek Club Condominiums 1st Mortgage -- 4 units 23,585 2006- (3) 8.63% -
Nashville, TN Participation 2007 12.38%
Cypress Chase "A" Condominiums 1st Mortgage 2.00 recreational 114,009 05/09 (4) 10.00%
Lauderdale Lakes, FL
----------
1,137,594
Less interest discounts and negative goodwill (40,419)
----------
$1,097,175
==========
</TABLE>
NOTES:
(1) Monthly payments of $3,465 and $2,368 interest only for Kearney and
Fremont, respectively, with the entire principal balance due at
maturity December 31, 1998. Although the mortgagee was in default of
these mortgages as of December 31, 1998 they were paid in full
subsequent to year end. On February 3, 1999 the Company received the
principle due plus all accrued interest through February 3, 1999.
(2) Principal outstanding December 31, 1998 represents the Company's
46.154% participation in the total loan outstanding of $51,104.
(3) Monthly payments include principal and interest of $1,472.
20
<PAGE> 22
V. MORTGAGE INDEBTEDNESS
Indebtedness of the Company secured by its investments (not including
mortgage debt owed by lessees of its land purchase-leaseback investments)
was as follows:
<TABLE>
<CAPTION>
Principal Balance Annual
Investment 12/31/1998 Maturity Date Interest Rate Constant Payment
---------- ---------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Powers Ferry Plaza $ 625,000 01/31/99 (1) 9.0000% 0 (1)
Marietta, GA
Pinhook Plaza Phase III 3,381,382 01/01/00 (2) 9.8750% 396,072
Lafayette, LA
Macland Pointe 3,613,921 02/01/00 (2) 7.7500% 362,558
Marietta, GA
Thomasville Commons 5,423,548 06/01/02 (2) 9.6250% 583,303
Thomasville, NC
Town & Country 2,190,432 12/01/02 (2) 7.6500% 214,169
Kissimmee, FL
Elmwood Oaks 7,500,000 06/01/05 8.3750% 628,125 (3)
Harahan, LA
North Village Center 2,382,018 (4) 03/15/09 8.1250% 343,171
North Myrtle Beach, SC
Tamarac Town Square (9) 6,530,912 10/01/09 (2) 9.1875% 651,411
Tamarac, FL
Spalding Village 11,376,690 09/01/10 (2) 8.1940% 932,206 (5)
Griffin, GA
Charlotte Square (9) 3,860,904 02/01/11 (2) 9.1875% 393,767
Port Charlotte, FL
Riverside Square (9) 8,095,969 03/01/12 (2) 9.1875% 807,514
Coral Springs, FL
Village at Northshore 5,251,033 07/01/13 (6) 9.0000% 647,803
Slidell, LA
Treasure Coast (9) 5,879,456 04/01/15 8.0000% 646,003
Vero Beach, FL
Shoppes of Silverlakes 3,396,975 07/01/15 7.7500% 364,500
Pembroke Pines, FL
Grassland Crossing 6,610,717 12/01/16 (2) 7.8650% 622,524
Alpharetta, GA
Mableton Crossing 4,500,000 08/15/18 (2) 6.8500% 308,250 (7)
Mableton, GA
----------- ----------
80,618,957 $7,901,376
==========
Interest Premium (8) 1,595,895
-----------
$82,214,852
===========
</TABLE>
NOTES:
(1) Accrued and unpaid interest and the outstanding principal paid at
maturity 01/31/99.
(2) Balloon payment at maturity.
(3) Interest only. Entire principal due at maturity.
(4) Although the Company is a partner or joint venturer in this investment,
100% of the mortgage note payable is recorded for financial reporting
purposes.
(5) Interest only through 09/01/00; then principal and interest of
$1,158,448 annually for the last 10 years.
(6) Callable anytime after 07/30/03.
(7) Interest only through 08/15/99; then principal and interest of $376,509
annually for remainder of term.
(8) For financial reporting purposes, mortgage indebtedness is valued
assuming current interest rates at the date of acquisition.
(9) Ownership through IRT Partners L.P.
21
<PAGE> 23
VI. SHOPPING CENTER ACQUISITIONS
(THOUSANDS, EXCEPT SQUARE FOOTAGE)
<TABLE>
<CAPTION>
Total OP Units
Date Rentable Initial Cash Issued
Acquired Property Name City, State Sq Ft Cost Paid by LP (1) Mortgage (2) Principal Tenants
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
01/13/98 Town & Country Kissimmee, FL 71,283 $ 4,265 $ 2,033 $ 2,232 Albertson's
03/12/98 Spring Valley Commons Columbia, SC 75,415 6,104 6,104 Bi-Lo
Eckerd Drugs
03/31/98 Daniel Village Augusta, GA 164,451 12,245 12,245 Bi-Lo
Eckerd Drugs
06/11/98 Mableton Crossing Mableton, GA 86,819 8,170 3,670 4,500 (3) Kroger
08/01/98 Charlotte Square Port Charlotte, FL 96,188 6,006 159 1,637 4,210 Publix
08/01/98 Riverside Square Coral Springs, FL 103,241 13,025 316 3,846 8,863 Publix
Eckerd Drugs
08/01/98 Tamarac Town Square Tamarac, FL 123,385 10,652 678 2,882 7,092 Publix
Eckerd Drugs
08/25/98 Treasure Coast Vero Beach, FL 133,781 11,094 5,157 5,937 Winn-Dixie
TJX
12/10/98 Bay Pointe Plaza St. Petersburg, FL 97,390 6,388 6,388 Publix
Eckerd Drugs
------------------------------------------------
951,953 $77,949 $36,750 8,365 $32,834
================================================
</TABLE>
(1) Value of OP Units determined based on value of common stock on date of
acquisition.
(2) Mortgage assumed from previous owner unless otherwise noted (see Table V,
Mortgage Indebtedness).
(3) Mortgage placed on property in August 1998.
22
<PAGE> 24
VII. PROPERTY ACQUIRED THROUGH FORECLOSURE
(IN THOUSANDS, EXCEPT SQUARE FOOTAGE)
<TABLE>
<CAPTION>
Net Book
Date Value Property
Foreclosed Property Name City, State Sq Ft/Units at Foreclosure Type Principal Tenants
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
02/18/1998 Spanish Quarter Apartments (1) Montgomery, AL 276 Units $ 4,478 Apartments N/A
08/31/1998 Walton Plaza (2) Augusta, GA 43,460 3,157 Shopping Center Harris Teeter
--------------
$ 7,635
==============
</TABLE>
(1) Property sold August 14, 1998. See 1998 Property Dispositions table.
(2) Property acquired by deed in lieu of foreclosure.
23
<PAGE> 25
VIII. PROPERTY DISPOSITIONS
(IN THOUSANDS, EXCEPT SQUARE FOOTAGE)
<TABLE>
<CAPTION>
Date Sales Cash Financial Property
Sold Property Name City, State Sq Ft/Units Price Proceeds Gain Type Principal Tenants
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/30/1998 Plasti-Kote Medina, OH 41,000 $ 827 $ 825 $ 744 Industrial Plasti-Kote Co., Inc.
08/14/1998 Spanish Quarter
Apartments (1) Montgomery, AL 276 Units 5,100 4,806 469 Apartments N/A
--------------------------
$5,927 $5,631 $1,213
==========================
</TABLE>
(1) Property acquired through foreclosure February 18, 1998. See Property
Acquired Through Foreclosure table.
Investment in Joint Ventures. During 1997, Capital Corporation entered
into a co-development agreement for the development of a Kroger anchored
shopping center in Decatur, Georgia. The project is being developed in two
phases totaling approximately 140,000 square feet, not including two out
parcels, 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 (which is now substantially completed) 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.
Capital Corporation was a 50% owner of a joint venture which
purchased, in 1996, a 1.31 acre parcel of land located in Savannah, Georgia for
development or sale. The Company had approximately $356,000 invested in this
joint venture as of December 31, 1997. During March 1998, this parcel was sold
for a total profit to the Company of $54,000.
Mortgage Investments. The Company obtained a deed in lieu of
foreclosure to Walton Plaza, Augusta, Georgia on August 31, 1998. The principal
outstanding on the mortgage at the time of foreclosure was $3,157,000. Walton
Plaza is a 43,640 square foot shopping center, the anchor tenant of which is a
Harris Teeter Supermarket that closed but is obligated to pay rent through
March, 2011. Both the Company and Harris Teeter are actively seeking a
replacement tenant.
Mortgage Indebtedness. During 1998, the Company a) repaid at maturity a
$2,224,000 mortgage bearing interest at 11%, b) prepaid two mortgages
aggregating $3,525,000 bearing interest at 9.875%, resulting in a $35,000 loss
on extinguishment of debt, c) prepaid a $2,175,000 mortgage bearing interest at
10.25%, resulting in a $22,000 loss on extinguishment of debt, d) prepaid a
$543,000 mortgage bearing interest at 8.25% and e) repaid a $625,000 installment
of a $1,250,000 purchase note bearing interest at 9%.
24
<PAGE> 26
Item 3. Legal Proceedings.
There are no material pending legal proceedings of which the Company is
aware involving the Company, its subsidiaries or its properties.
Item 4. Submission of Matters to a Vote of Securityholders.
Not applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Securityholder Matters.
a) The following table shows the high and low sale prices for the
Company's common stock, as reported on the New York Stock Exchange for
the periods indicated.
<TABLE>
<CAPTION>
1998 High Low
---- ---- ---
<S> <C> <C>
First Quarter $12.31 $11.25
Second Quarter 12.06 10.19
Third Quarter 11.50 8.38
Fourth Quarter 10.50 8.81
1997
----
First Quarter $12.13 $10.63
Second Quarter 12.00 10.63
Third Quarter 13.00 11.63
Fourth Quarter 12.94 11.13
</TABLE>
b) Approximate number of Equity Securityholders.
<TABLE>
<CAPTION>
Approximate Number of Record
Title of Class Holders at March 19, 1999
-------------- -------------------------
<S> <C>
Shares of Common Stock 3,000
$1 Par Value
</TABLE>
25
<PAGE> 27
c) The Company paid quarterly cash dividends per share of common stock
during the years 1997 and 1998 as follows:
<TABLE>
<CAPTION>
Cash Dividends
1998 Paid
---- --------------
<S> <C>
First Quarter $ .225
Second Quarter .230
Third Quarter .230
Fourth Quarter .230
1997
----
First Quarter $ .225
Second Quarter .225
Third Quarter .225
Fourth Quarter .225
</TABLE>
IRT has paid 84 consecutive quarterly dividends. The current
annualized dividend rate is $.92. The Company does not foresee any
restrictions upon its ability to continue its dividend payment policy
of distributing at least the 95% of its otherwise taxable ordinary
income required for qualification as a REIT.
26
<PAGE> 28
Item 6. Selected Consolidated Financial Data
The following table sets forth selected consolidated financial data for the
Company and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this report.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------
As of or for the years ended 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross revenues $ 79,869,711 $ 67,117,835 $ 60,233,422 $ 60,196,247 $ 49,202,144
============ ============ ============ ============ ============
Earnings from operations $ 24,690,370 $ 22,215,863 $ 15,602,112 $ 15,550,026 $ 12,788,923
Minority interest of unitholders in operating partnership (261,764) -- -- -- --
(Loss) gain on real estate investments 1,213,090 3,896,817 1,232,092 173,025 (3,825,418)
------------ ------------ ------------ ------------ ------------
Earnings before extraordinary items 25,641,696 26,112,680 16,834,204 15,723,051 8,963,505
Extraordinary items:
(Loss) gain on extinguishment of debt (57,003) -- (16,500) (137,260) 3,748,095
------------ ------------ ------------ ------------ ------------
Net earnings $ 25,584,693 $ 26,112,680 $ 16,817,704 $ 15,585,791 $ 12,711,600
============ ============ ============ ============ ============
Per share (basic and diluted):
Earnings before extraordinary items $ .78 $ .82 $ .65 $ .61 $ .35
Extraordinary items -- -- -- -- .15
------------ ------------ ------------ ------------ ------------
Net earnings $ .78 $ .82 $ .65 $ .61 $ .50
============ ============ ============ ============ ============
Dividends paid $ .915 $ .90 $ .90 $ .885 $ .84
============ ============ ============ ============ ============
Federal income tax status of dividends
paid to shareholders:
Ordinary income $ .787 $ .73 $ .47 $ .635 $ .72
Capital gain .054 .08 -- -- .04
Return of capital .074 .09 .43 .250 .08
------------ ------------ ------------ ------------ ------------
$ .915 $ .90 $ .90 $ .885 $ .84
============ ============ ============ ============ ============
Weighted average shares outstanding
Basic 32,940,399 31,867,743 25,749,860 25,590,129 25,349,303
============ ============ ============ ============ ============
Diluted 33,304,588 31,921,212 25,754,941 25,595,130 25,351,936
============ ============ ============ ============ ============
Total assets $562,258,903 $498,152,798 $437,694,691 $427,398,018 $428,579,355
============ ============ ============ ============ ============
Indebtedness:
Mortgage notes payable $ 82,214,852 $ 59,558,650 $ 84,000,628 $ 99,188,181 $105,107,084
7.30% convertible subordinated debentures 23,275,000 28,453,000 84,905,000 84,905,000 86,250,000
Senior notes 124,595,045 124,535,765 49,929,110 -- --
Indebtedness to banks 51,500,000 14,400,000 15,000,000 36,000,000 26,000,000
------------ ------------ ------------ ------------ ------------
$281,584,897 $226,947,415 $233,834,738 $220,093,181 $217,357,084
============ ============ ============ ============ ============
Shareholders' equity $262,773,214 $259,676,155 $193,354,922 $198,630,147 $203,038,464
============ ============ ============ ============ ============
Other Data:
Funds from operations (1) $ 38,117,585 $ 34,079,239 $ 26,388,787 $ 26,406,099 $ 21,342,209
Assuming conversion of 7.30% debentures: (1)
Funds from operations (1) $ 40,323,818 $ 36,542,758 $ 32,952,612 $ 32,982,552
Weighted average shares 35,462,595 34,765,758 33,302,052 33,161,751
Net Cash Flows from (used in) -
Operating activities $ 36,785,445 $ 34,792,210 $ 27,751,020 $ 25,946,987 $ 22,511,731
Investing activities $(39,586,620) $(60,273,355) $(15,659,704) $ (7,769,022) $(99,052,456)
Financing activities $ 2,869,604 $ 22,582,152 $ (8,933,374) $(20,002,953) $ (247,587)
</TABLE>
(1) The Company defines funds from operations, consistent with the NAREIT
definition, as net income before gains(losses) on real estate
investments and extraordinary items plus depreciation and amortization
of capitalized leasing costs. Conversion of the 7.30% convertible
debentures is dilutive and therefore assumed for 1998, 1997, 1996 and
1995. 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. See Item 7.
27
<PAGE> 29
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Changes in Financial Condition. During 1998, the Company utilized funds
of:
1) $77,280,000 for the acquisition of nine shopping center
investments, consisting of cash of $36,610,000, OP Units
valued at $9,462,000 and mortgage debt of $31,208,000 secured
by six of the centers,
2) $9,100,000 to repay six mortgage notes payable.
These transactions were funded with cash proceeds of $5,631,000 on the sale of
an industrial investment and an apartment complex, the Company's revolving
credit facility and internally generated funds. Additionally, during 1998,
$5,178,000 of the Company's 7.3% convertible subordinated debentures (the
"Convertible Debentures") were converted into 460,263 shares of common stock at
$11.25 per share.
During 1997, the Company utilized funds of:
1) $79,596,000 for the acquisition of nine shopping center
investments,
2) Approximately $38,224,000 in cash plus the issuance of
1,500,000 shares of common stock valued at $11.05 per share to
repurchase $54,799,000 of its Convertible Debentures due
August 15, 2003, and
3) $34,676,000 to repay five mortgage notes payable at
maturity.
These transactions were funded with approximately $49,534,000 of proceeds from
the issuance of 4,653,747 shares of its common stock at $11.25 per share, net
proceeds of approximately $73,817,000 from the issuance of $75,000,000 of senior
notes due August 15, 2007, cash proceeds of approximately $6,077,000 from the
sale of an apartment investment, cash proceeds of approximately $3,587,000 from
the prepayment of a mortgage loan and internally generated funds, as well as the
Company's revolving credit facility.
Changes in Results of Operations. During 1998, rental income from the
Company's core portfolio of shopping center investments increased approximately
$736,000 despite a $190,000 reduction in rental income due to a tenant
bankruptcy during 1998. The increase in the Company's core portfolio income was
offset by a decrease of approximately $1,198,000 due to two investments sold
during the
28
<PAGE> 30
fourth quarter of 1997 and one investment sold during the second quarter of 1998
and was supplemented by approximately $10,213,000 of income earned from nine
shopping center investments acquired in each of 1997 and 1998.
During 1997, rental income from the Company's core portfolio of
shopping center investments increased $1,634,000. This increase includes
$525,000 of additional income earned from two property expansions completed
during 1996 despite a $112,000 reduction in rental income due to a tenant
bankruptcy during 1997. The increase in the Company's core portfolio income was
offset by a decrease of $257,000 due to one investment sold during the first
quarter of 1996 and two investments sold during the fourth quarter of 1997 and
was supplemented by $5,913,000 of income earned from two shopping center
investments acquired in 1996 and nine shopping center investments acquired
during 1997.
The percentage leased of the Company's shopping center investments was
94%, 96% and 94% in 1996, 1997 and 1998, respectively. Percentage rentals
received from shopping center investments, excluding percentage rentals received
from the Wal-Mart investments classified as direct financing leases, totaled
$586,000, $649,000 and $776,000 in 1996, 1997 and 1998, respectively.
Interest income in 1998 decreased primarily due to decreases of
approximately $110,000 on short-term money market investments, $518,000 on the
wrap-around mortgage secured by Spanish Quarter Apartments (the borrower
defaulted under this mortgage and the Company acquired title through foreclosure
of this property in February 1998 and subsequently sold this property in August
1998), $110,000 on the Walton Plaza Shopping Center mortgage (the borrower
defaulted under this mortgage and the Company obtained title by deed in lieu of
foreclosure in August 1998), and $251,000 on the mortgage secured by Valley West
Mall that was paid in full in 1997.
The decrease in interest income during 1997 was primarily due to
decreases of $62,000 on short-term money market investments and $54,000 on the
wrap-around mortgage secured by Spanish Quarter Apartments. These decreases were
partially offset by interest income earned on purchase-money mortgages taken
back on the sales of two investments in December 1996.
The decrease in interest income on direct financing leases in 1997 was
due to the sale of two Wal-Mart investments in December 1996.
Operating expenses related to the Company's core portfolio of
real estate investments increased $850,000 during 1998. This
29
<PAGE> 31
increase was offset by a decrease of approximately $527,000 due to the sale of
three investments during 1997 and 1998. Additionally, operating expenses
increased $2,835,000 due to the purchase of nine shopping centers in both 1998
and 1997, $344,000 due to the foreclosure on two properties in 1998, and
$366,000 due to the properties under redevelopment in 1998, one of which was
acquired in December 1997.
Operating expenses related to the Company's core portfolio of real
estate investments increased $657,000 during 1997. This increase was offset by a
decrease of approximately $5,000 incurred on three investments sold during 1996
and 1997. Additionally, $1,310,000 of operating expenses in 1997 were attributed
to the two shopping center investments acquired in late 1996 and the nine
shopping center investments acquired during 1997.
The net decrease in interest expense on mortgages in 1998 was primarily
due to the repayment of various mortgages during 1997 and 1998. During 1998, the
Company a) repaid at maturity a $2,224,000 mortgage bearing interest at 11%,
b) prepaid two mortgages aggregating $3,525,000 bearing interest at 9.875%,
resulting in a $35,000 loss on extinguishment of debt, c) prepaid a $2,175,000
mortgage bearing interest at 10.25%, resulting in a $22,000 loss on
extinguishment of debt, d) prepaid a $543,000 mortgage bearing interest at 8.25%
and e) repaid a $625,000 installment of a $1,250,000 purchase note bearing
interest at 9%. The decrease was offset by 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 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 and the placement of a
$4,500,000 mortgage on Mableton Crossing in August 1998 (Mableton was acquired
without debt in June 1998).
The net decrease in interest expense on mortgages in 1997 was primarily
due to various mortgages repaid during 1996 and 1997, partially offset by the
assumption of a $6,793,000 mortgage bearing interest at 7.865% upon the
acquisition of Grassland Crossing in February 1997, the $1,250,000
purchase-money mortgage bearing interest at 9% taken upon the acquisition of
Powers Ferry Plaza in May 1997 and the assumption of a $3,502,000 mortgage
bearing interest at 7.75% upon the acquisition of Shoppes of Silverlakes in
November 1997. During 1997, the Company a) repaid at maturity a $3,800,000
mortgage bearing interest at 9.75%, b) repaid at maturity three mortgages
aggregating $27,721,000 bearing interest at 7.6% and, c) repaid at maturity a
$3,155,000 mortgage bearing interest at 9.375%.
30
<PAGE> 32
Interest on the Convertible Debentures decreased in 1998 due to the
repurchase of $54,799,000 of debentures in January 1997, the conversion of
$1,653,000 of debentures during 1997 and the conversion of $5,178,000 of
debentures in the first quarter of 1998.
Interest on the Convertible Debentures decreased in 1997 due to the
repurchase of $54,799,000 of debentures in January 1997 and the conversion of
$1,653,000 of debentures during 1997.
Interest on 7.45% senior notes increased in 1997 due to the issuance in
March 1996 of $50 million of 7.45% senior notes due April 2001.
The increase in interest on 7.25% senior notes in 1998 was due to the
issuance in August 1997 of $75 million of 7.25% senior notes due August 2007.
The Company had average borrowings under its revolving term loan of
$35,211,000, $14,165,000 and $11,750,000 during 1998, 1997 and 1996,
respectively, which resulted in increased interest on bank debt during 1998 and
1997. In addition, the Company incurred commitment fees of $160,110, $212,000
and $221,000 during 1998, 1997 and 1996, respectively, based on the aggregate
unused portion of the commitment. The Company's revolving term loan commitment
increased to $100,000,000 from $50,000,000 in December 1995. The interest rate
on the $50 million secured revolver was, at the option of the Company, either
prime or 1.25% over LIBOR. The $50 million revolver was replaced December 15,
1995 with a $100 million unsecured revolver with an interest rate, at the option
of the Company, of either LIBOR plus an Applicable Margin or prime. The current
Applicable Margin for LIBOR borrowings is 1.25%. See Note 11 to the consolidated
financial statements for a description of the reduction in the Applicable Margin
charged on LIBOR borrowings and the change in the commitment fee payable under
the Company's unsecured revolving term loan effective July 1, 1997.
The increase in depreciation expense in 1998 was primarily due to the
eighteen shopping center investments acquired during 1997 and 1998.
The increase in depreciation expense in 1997 was primarily due to the
eleven shopping center investments acquired during 1996 and 1997.
Amortization of debt costs decreased in 1998 and 1997 due to
the repurchase of $54,799,000 of Convertible Debentures in January
31
<PAGE> 33
1997, the conversion of $1,653,000 of Convertible Debentures during 1997 and the
conversion of $5,178,000 of Convertible Debentures in the first quarter of 1998.
This decrease was partially offset by the amortization of costs associated with
the issuance of $75 million of 7.25% senior notes in August 1997.
The increase in general and administrative expenses in 1998 was
primarily due to increased employment related costs which included the
implementation of the Incentive Compensation Plan. General and Administrative
expenses also include $358,000 in merger related expenses for a merger that was
not consummated.
The decrease in general and administrative expenses in 1997 was
primarily due to decreases in employee benefit costs. In addition, the Company
has a policy of allocating management fees to operating expenses of real estate
investments with a resultant offset in general and administrative expenses. The
management and leasing of the eleven centers acquired during 1996 and 1997 is
being accomplished without additions to the Company's personnel, and, as such,
the management fee allocation for these acquisitions has resulted in a decrease
in general and administrative expenses.
The amount of gains recognized on sales of investments have fluctuated
and in the future may continue to fluctuate depending upon sales activity in any
given year. During 1998, 1997 and 1996, the Company recognized gains on sales of
properties of $1,213,000, $3,897,000 and $1,232,000, respectively.
During 1998, the Company prepaid three mortgages for total of
$5,700,000 and recognized an extraordinary loss of $57,000 on the early
extinguishment of debt.
Funds From Operations. The Company defines funds from operations,
consistent with the NAREIT definition, as net income before gains (losses) on
real estate investments and extraordinary items plus depreciation and
amortization of capitalized leasing costs. Interest on debentures and
amortization of convertible debenture costs are added to funds from operations
when assumed conversion of the debentures is dilutive. 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.
32
<PAGE> 34
The following data is presented with respect to the calculation of
funds from operations under the NAREIT definition for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings $ 25,584,693 $ 26,112,680 $ 16,817,704
Gain on real estate
investments (1,213,090) (3,896,817) (1,232,092)
Loss on extinguishment of debt 57,003 - 16,500
Depreciation* 12,833,290 11,453,460 10,310,344
Amortization of capitalized
leasing fees* 349,977 288,152 249,292
Amortization of capitalized
leasing income 132,355 121,764 227,039
Nonrecurring merger expenses 373,357 - -
------------ ------------ ------------
Funds from operations 38,117,585 34,079,239 26,388,787
Interest on convertible
debentures 1,754,274 2,325,020 6,198,065
Amortization of convertible
debenture costs 103,709 138,499 365,760
Amounts attributed to
minority interests 357,250 - -
------------ ------------ ------------
Fully diluted funds from
operations $ 40,323,818 $ 36,542,758 $ 32,952,612
============ ============ ============
Applicable weighted average
shares 35,462,594 34,765,758 33,302,052
============ ============ ============
</TABLE>
* net of amounts attributed to minority interest
33
<PAGE> 35
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 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Tenant improvements:
Shopping centers $1,014,078 $ 974,024 $ 812,248
Industrial 16,967 9,391 464,469
---------- ---------- ----------
Total tenant
improvements 1,031,045 983,415 1,276,717
---------- ---------- ----------
Capital expenditures:
Shopping centers 2,114,013 1,044,469 1,030,650
Apartment 0 97,338 537,616
Industrial 130,508 34,531 158,072
---------- ---------- ----------
Total capital
expenditures 2,244,521 1,176,338 1,726,338
---------- ---------- ----------
Total improvements $3,275,566 $2,159,753 $3,003,055
========== ========== ==========
Leasing fees $ 532,102 $ 268,122 $ 350,989
========== ========== ==========
</TABLE>
Liquidity and Capital Resources. In 1998 and 1997, the Company's
dividends, mortgage amortization payments and capital improvements were funded
primarily by funds from operations and also through supplemental funding from
available cash investments, bank borrowings and other sources. The Company
believes that dividends, mortgage amortization payments and necessary capital
improvements will continue to be funded primarily by funds from operations.
Other planned activities, including property acquisitions, certain capital
improvement programs and debt repayments are expected to be funded to the extent
necessary by bank borrowings, mortgage financing, periodic sales or exchanges of
existing properties, the issuance of OP Units and public or private offerings of
stock or debt.
For a description of the Company's mortgage debt, reference is made to
Table V in Item 2 hereof and to Note 8 to the consolidated financial statements
included as a part of this report. For a description of commitments and
contingencies, reference is made to Notes 17 and 18 to the consolidated
financial statements included as a part of this report.
34
<PAGE> 36
For additional information on the outstanding debentures and senior
notes, reference is made to Note 9 and Note 10 to the consolidated financial
statements included as a part of this report.
In May 1998, the Company filed a shelf registration statement covering
up to $300 million of common stock, preferred stock, depositary shares and
warrants. The Company intends to use the net proceeds of any offerings under
such shelf registration for general corporate purposes, which may include,
without limitation, repayment of maturing obligations, redemption of outstanding
indebtedness or other securities, financing future acquisitions and for working
capital. As of December 31, 1998, there had been no issuances of securities in
connection with such shelf registration statement.
On December 15, 1995, the Company entered into a $100,000,000 unsecured
revolving term loan maturing January 4, 1999, subject to extension. The maturity
date is currently January 4, 2001. The interest rate is, at the option of the
Company, either prime, fluctuating daily or LIBOR plus the "Applicable Margin"
(currently 1.25%), which is subject to adjustment based upon the rating of the
senior unsecured long-term debt obligations of the Company. The Company may
borrow, repay and/or reborrow under this loan at any time. As of December 31,
1998 and 1997, the borrowings under this credit facility totaled $51,500,000 and
$14,400,000, respectively. For additional information on this revolving term
loan, reference is made to Note 11 to the consolidated financial statements
included as a part of this report.
In connection with the Company's formation of LP and its proposed
operations, the Company's senior bank creditors requested that LP guarantee the
Company's indebtedness under the Company's existing unsecured revolving term
loan. As a result, the Company and its bank creditors entered into an Amended
and Restated Loan Agreement as of September 9, 1998 (the "Amended and Restated
Agreement"). Under the terms of the Amended and Restated Agreement, (i) LP,
Capital Corporation and IRTAL guaranteed the Company's indebtedness, (ii) the
maturity of the revolving term loan has been extended, and (iii) certain
financial ratios have been modified.
The Company's Dividend Reinvestment Plan allowed shareholders to elect
to reinvest all or a portion of their distributions in newly issued shares of
common stock of the Company at 95% of the market price of the shares. This plan
was amended in July 1998 to eliminate the discount. During 1998, 1997 and 1996,
the Company received net proceeds under this plan of $1,739,000, $2,864,000 and
$1,024,000, respectively.
35
<PAGE> 37
Inflation and Economic Factors. The effects of inflation upon the
Company's results of operations and investment portfolio are varied. From the
standpoint of revenues, inflation has the dual effect of both increasing the
tenant revenues upon which percentage rentals are based and allowing increased
fixed rentals as rental rates rise generally to reflect higher construction
costs on new properties. This positive effect is partially offset by increasing
operating expenses, but usually not to the extent of the increases in revenues.
Environmental Factors. During 1996, the Company discovered that
releases of petroleum products had occurred at and around a garage
facility previously operated by a former tenant at the Company's Charlotte,
North Carolina industrial facility. The Company is continuing to evaluate the
extent of the related contamination, and Company management is negotiating with
the former tenant to obtain contribution for potential cleanup costs. At this
time, the Company does not believe the cost of addressing these additional
releases will have a material adverse effect on the Company's financial
condition.
Certain of the Company's properties have environmental concerns that
have been or are being addressed. The Company maintains only limited insurance
coverage for this type of environmental risk. Although no assurance can be given
that Company properties will not be affected adversely in the future by
environmental problems, the Company presently believes that there are no
environmental matters that are reasonably likely to have a material adverse
effect on the Company's financial position. See "Regulation."
Recent Accounting Pronouncements. In 1998 the Company adopted SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 established standards for
reporting and disclosing comprehensive income (defined as revenues, expenses,
gains and losses that under generally accepted accounting principles are not
included in net income) and its components. As of December 31, 1998 the Company
had no items of other comprehensive income.
In 1998 the Company adopted SFAS No.131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 established standards for
reporting financial and descriptive information about operating segments in
annual financial statements. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company's chief operating
decision maker is its senior management group.
36
<PAGE> 38
The Company owns and operates retail shopping centers in nine states in
the southeast. Such shopping centers generate rental and other revenue through
the leasing of shop spaces to a diverse base of tenants. The Company evaluates
the performance of each of its shopping centers on an individual basis. However,
because each of the shopping centers have similar economic characteristics and
tenants, the shopping centers have been aggregated into one reportable segment.
In June 1998 SFAS No.133, "Accounting for Derivative Instruments and
Hedging Activities" was issued establishing accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair market value. SFAS No. 133
requires that changes in the derivatives fair market value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. The Company has never used
derivative instruments or hedging activities.
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 counter parties that
it believes are reasonably 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 coming 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 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. Many 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.
37
<PAGE> 39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
IRT's exposure to market risk for changes in interest rates relates
primarily to its line of credit facility. IRT has no involvement with derivative
financial instruments.
The table below provides information about IRT's financial instruments
that are sensitive to changes in interest rates or market conditions, including
estimated fair values for IRT's interest rate sensitive liabilities as of
December 31, 1998. As the table incorporates only those exposures that exist as
of December 31, 1998, it does not consider exposures which could arise after
that date. Moreover, because there were no firm commitments to actually sell the
obligations at fair value as of December 31, 1998, the information presented has
limited predictive value. As a result, IRT's ultimate realized gain or loss with
respect to interest rate fluctuations will depend on the exposures that arise
during a future period and prevailing interest rates. Dollar amounts in the
following table are in thousands.
<TABLE>
<CAPTION>
Expected Maturity/Principal Repayment December 31,
-------------------------------------------------------------------------------------------
Nominal
Interest Total Fair
Rate 1999 2000 2001 2002 2003 Thereafter Balance Value
-------- ---- ---- ---- ---- ---- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Sensitive Liabilities:
Lines of Credit Facilities-
variable rate 6.69% $ -- $ -- $51,500 $ -- $ -- $ -- $51,500 $51,500
7.3% Convertible
Subordinated Debentures-
fixed rate 7.3% -- -- -- -- 23,275 -- 23,275 22,286
7.25% Senior Notes-
fixed rate 7.25% -- -- -- -- -- 75,000 75,000 74,633
7.45% Senior Notes-
fixed rate 7.45% -- -- 50,000 -- -- -- 50,000 49,962
</TABLE>
38
<PAGE> 40
Item 8. Financial Statements and Supplementary Data.
IRT PROPERTY COMPANY & SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants 40
Consolidated Balance Sheets -
December 31, 1998 and 1997 41
Consolidated Statements of Earnings -
For the Years Ended December 31, 1998,
1997 and 1996 42
Consolidated Statements of Changes
in Shareholders' Equity - For the Years Ended
December 31, 1998, 1997 and 1996 43
Consolidated Statements of Cash Flows -
For the Years Ended December 31, 1998,
1997 and 1996 44
Notes to Consolidated Financial Statements -
December 31, 1998, 1997 and 1996 45
Schedules:
III Real Estate and Accumulated Depreciation 64
IV Mortgage Loans on Real Estate 80
</TABLE>
39
<PAGE> 41
Report of Independent Public Accountants
To IRT Property Company:
We have audited the accompanying consolidated balance sheets of IRT
PROPERTY COMPANY (a Georgia corporation) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of earnings, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IRT Property Company
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
consolidated financial statements are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 29, 1999
40
<PAGE> 42
IRT PROPERTY COMPANY & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Real estate investments:
Rental properties $ 622,117,050 $ 537,160,220
Accumulated depreciation (74,942,576) (62,526,989)
------------- -------------
547,174,474 474,633,231
Net investment in direct financing leases 4,571,940 4,704,295
Investment in joint venture - 355,832
Mortgage loans, net 1,097,175 9,321,205
------------- -------------
Net real estate investments 552,843,589 489,014,563
Cash and cash equivalents 343,778 275,349
Accrued interest receivable 58,954 528,094
Prepaid expenses and other assets 9,012,582 8,334,792
------------- -------------
$ 562,258,903 $ 498,152,798
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net $ 82,214,852 $ 59,558,650
7.30% convertible subordinated debentures, net 23,275,000 28,453,000
Senior notes, net 124,595,045 124,535,765
Indebtedness to banks 51,500,000 14,400,000
Accrued interest 3,612,186 3,754,984
Accrued expenses and other liabilities 6,464,504 6,718,749
Deferred income taxes - 1,055,000
------------- -------------
Total liabilities 291,661,587 238,476,148
------------- -------------
Commitments and Contingencies (Note 17 and Note 18)
Minority interest payable 7,824,101 495
Shareholders' Equity:
Common stock, $1 par value, 75,000,000 shares authorized;
33,251,763 shares issued and outstanding in 1998 and
32,385,664 shares in 1997 33,251,763 32,385,664
Preferred stock, $1 par value, authorized 10,000,000 shares;
none issued - -
Additional paid-in capital 272,974,700 263,786,165
Deferred compensation/stock loans (2,385,417) -
Cumulative distributions in excess of net earnings (41,067,831) (36,495,674)
------------- -------------
Total shareholders' equity 262,773,215 259,676,155
------------- -------------
$ 562,258,903 $ 498,152,798
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
41
<PAGE> 43
IRT PROPERTY COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
Revenues:
Income from rental properties $ 78,937,147 $65,215,479 $ 57,925,659
Interest income 362,659 1,330,080 1,388,733
Interest on direct financing leases 569,905 572,276 919,030
------------ ----------- ------------
79,869,711 67,117,835 60,233,422
------------ ----------- ------------
Expenses:
Operating expenses of rental properties 17,944,408 14,075,505 12,113,108
Interest on mortgages 5,727,268 6,249,412 7,750,389
Interest on debentures 1,745,274 2,325,020 6,198,065
Interest on senior notes 9,221,781 5,796,718 2,798,433
Interest on indebtedness to banks 2,577,651 1,216,204 1,003,331
Depreciation 12,925,299 11,453,460 10,310,344
Amortization of debt costs 436,988 422,606 595,604
General & administrative 4,654,693 3,363,047 3,862,036
------------ ----------- ------------
Total expenses 55,233,362 44,901,972 44,631,310
------------ ----------- ------------
Equity in income of joint venture 54,021 - -
------------ ----------- ------------
Income before minority interest, gain
on sales of properties and
extraordinary item 24,690,370 22,215,863 15,602,112
Minority interest of unitholders in
operating partnership (261,764) - -
Gain on sales of properties 1,213,090 3,896,817 1,232,092
------------ ----------- ------------
Income before extraordinary item 25,641,696 26,112,680 16,834,204
Extraordinary item:
Loss on extinguishment of debt (57,003) - (16,500)
------------ ----------- ------------
Net Earnings $ 25,584,693 $26,112,680 $ 16,817,704
============ =========== ============
Per Share (Note 12):
Basic $ 0.78 $ 0.82 $ 0.65
============ =========== ============
Diluted $ 0.78 $ 0.82 $ 0.65
============ =========== ============
Weighted average number of shares outstanding:
Basic 32,940,399 31,867,743 25,749,860
============ =========== ============
Diluted 33,304,588 31,921,212 25,754,941
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE> 44
IRT PROPERTY COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Cumulative
Additional Deferred Distributions Total
Common Paid-In Compensation/ in Excess of Shareholders'
Stock Capital Stock Loans Net Earnings Equity
----- ------- ----------- ------------ ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $25,689,002 $ 200,318,168 $ - $(27,377,023) $ 198,630,147
Net earnings - - - 16,817,704 16,817,704
Dividends declared -
$.90 per share - - - (23,166,404) (23,166,404)
Issuance of shares under Dividend
Reinvestment Plan, net 112,561 911,734 - - 1,024,295
Exercise of stock options 2,400 16,063 - - 18,463
Issuance of shares for the
acquisition of properties 3,339 27,378 - - 30,717
----------- ------------- ------------ ------------ -------------
Balance at December 31, 1996 25,807,302 201,273,343 - (33,725,723) 193,354,922
Net Earnings - - - 26,112,680 26,112,680
Dividends declared -
$.90 per share - - - (28,882,631) (28,882,631)
Issuance of shares under Dividend
Reinvestment Plan, net 259,991 2,603,840 - - 2,863,831
Conversion of debentures, net 146,921 1,463,540 - - 1,610,461
Exercise of stock options, net 17,703 87,548 - - 105,251
Issuance of common stock, net 4,653,747 44,880,749 - - 49,534,496
Issuance of shares for the
acquisition of convertible
debentures, net 1,500,000 13,477,145 - - 14,977,145
----------- ------------- ------------ ------------ -------------
Balance at December 31, 1997 32,385,664 263,786,165 - (36,495,674) 259,676,155
Net earnings - 25,584,693 25,584,693
Dividends declared -
$.915 per share - (30,156,850) (30,156,850)
Issuance of shares under Dividend
Reinvestment Plan, net 163,505 1,575,853 - - 1,739,358
Conversion of debentures, net 460,263 4,595,696 - - 5,055,959
Exercise of stock options 2,811 17,616 - - 20,427
Issuance of restricted stock to
employees 119,760 1,130,240 (1,250,000) - -
Amortization of deferred
compensation - - 114,583 - 114,583
Issuance of shares subject to
employee loans 119,760 1,130,240 (1,250,000) - -
Adjustments for minority interest
of unitholders in operating
partnership for issuance of
additional units - 738,890 - - 738,890
----------- ------------- ------------ ------------ -------------
Balance at December 31, 1998 $33,251,763 $ 272,974,700 $ (2,385,417) $(41,067,831) $ 262,773,215
=========== ============= ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE> 45
IRT PROPERTY COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 25,584,693 $ 26,112,680 $ 16,817,704
Adjustments to reconcile earnings to net cash
from operating activities:
Depreciation 12,925,299 11,453,460 10,310,344
Gain on sales of properties (1,213,090) (3,896,817) (1,232,092)
Extraordinary loss on extinguishment of
debt 57,003 - 16,500
Minority interest expense 261,764 - -
Amortization of deferred compensation 114,583 - -
Amortization of debt costs and discount 496,268 455,261 608,016
Amortization of capital leasing income 132,355 121,764 227,039
Changes in accrued assets and liabilities:
Decrease in accrued interest on
debentures (142,798) (1,556,817) -
Increase in accrued interest on senior
notes - 2,039,063 931,250
Increase in interest receivable, prepaid
expenses and other assets (1,112,206) (478,335) (839,832)
(Decrease) increase in accrued expenses
and other liabilities (318,426) 541,951 912,091
------------ ------------ ------------
Net cash flows from operating activities 36,785,445 34,792,210 27,751,020
------------ ------------ ------------
Cash flows used in investing activities:
Proceeds from sales of properties, net 5,782,542 6,076,520 5,658,531
Non-operating distributions from unconsolidated
joint venture 355,832 - -
Additions to real estate investments, net (45,749,013) (70,211,190) (21,079,093)
Collections of mortgage loans, net 24,019 3,861,315 116,690
Contributions to joint venture - - (355,832)
------------ ------------ ------------
Net cash flows used in investing activities (39,586,620) (60,273,355) (15,659,704)
------------ ------------ ------------
Cash flows from (used in) financing activities:
Cash dividends paid, net (28,417,492) (26,018,800) (22,142,109)
Issuance of common stock, net - 49,534,496 -
Exercise of stock options 20,427 105,251 18,463
Principal amortization of mortgage notes
payable (1,083,812) (1,146,359) (1,238,802)
Repayment of mortgage notes payable (9,092,919) (34,840,154) (13,948,751)
Increase in mortgage notes payable 4,400,446 - -
Increase (decrease) in bank indebtedness, net 37,100,000 (600,000) (21,000,000)
Issuance of senior notes, net - 73,817,209 49,394,325
Repurchase of 7.3% convertible subordinated
debentures, net - (38,269,338) -
Cash in lieu of fractional shares on conversion
of debentures (43) (153) -
Extraordinary loss on extinguishment of debt (57,003) - (16,500)
------------ ------------ ------------
Net cash flows from (used in) financing
activities 2,869,604 22,582,152 (8,933,374)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 68,429 (2,898,993) 3,157,942
Cash and cash equivalents at beginning of year 275,349 3,174,342 16,400
------------ ------------ ------------
Cash and cash equivalents at end of year $ 343,778 $ 275,349 $ 3,174,342
============ ============ ============
Supplemental disclosures of cash flow information:
- -------------------------------------------------
Total cash paid during the year for interest $ 19,008,087 $ 15,517,788 $ 17,077,993
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
44
<PAGE> 46
IRT PROPERTY COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(Unaudited with respect to square footage)
1. ORGANIZATION AND NATURE OF OPERATIONS:
IRT Property Company ("The Company"), founded in 1969, is a
self-administered and self-managed equity real estate investment trust
("REIT") which invests primarily in neighborhood and community shopping
centers which are located in the Southeastern United States and are
anchored by necessity-oriented retailers such as supermarkets, drug
stores and/or discount variety stores. No one retailer accounts for
more than 6.6% of the Company's gross revenues.
In 1998 IRT Partners L.P. ("LP"), a Georgia limited
partnership, was formed to enhance the acquisition opportunities of IRT
Property Company by offering potential sellers the ability to engage in
tax-deferred sales in exchange for Operating Partnership Units ("OP
Units") of LP which may be redeemable for shares of Company common
stock. The Company serves as general partner of LP and has contributed
20 of its shopping centers and related assets and cash to LP in
exchange for OP Units and partnership interests. As a result, the
Company and one of its wholly-owned subsidiaries IRT Management Company
("Management Company") own approximately 92.5% of LP as of December 31,
1998, which is included in the Company's consolidated financial
statements.
In 1997, IRT Alabama, Inc. ("IRTAL"), a wholly-owned
subsidiary of the Company, was formed under the laws of
Alabama. Upon its formation, IRTAL purchased Madison Centre
in Huntsville, Alabama.
In 1996, IRT Capital Corporation ("Capital Corporation"), a
taxable subsidiary of the Company, was formed under the laws of
Georgia. This taxable subsidiary has the ability to develop properties,
buy and sell properties, provide equity to
45
<PAGE> 47
developers 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 Capital Corporation. The remaining voting common
stock is currently held by a former member of the Board of Directors of
IRT Property Company and an executive officer of the Company.
Additionally, Capital Corporation is taxed as a regular corporation and
not as a REIT.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation-
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
affiliated subsidiary, LP. Intercompany transactions and balances have
been eliminated in consolidation. The Company's investment in Capital
Corporation has been accounted for under the equity method of
accounting.
Income Recognition-
The Company follows the policy of suspending the accrual of
income on any investments where interest or rental payments are
delinquent 60 days or more. Percentage rental income is recorded upon
collection.
Depreciation-
The Company provides depreciation on buildings and other
improvements on the straight-line basis over their estimated useful
lives. Such lives are from 16 to 40 years for buildings and 6 years for
improvements. Maintenance and repairs are charged to expense as
incurred, while significant improvements are capitalized.
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 and disclosure of contingent assets and liabilities at
the date of the financial
46
<PAGE> 48
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents-
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Earnings Per Share-
Earnings per share is computed by dividing net earnings
by the weighted average number of shares outstanding
consistent with the guidelines of Statement of Accounting
Standards No. 128, "Earnings Per Share." See Note 12 for the
required disclosures.
Reclassification of Prior Year Amounts-
Certain items in the consolidated financial statements have
been reclassified to conform with the 1998 presentation.
Recent Accounting Pronouncements-
In 1998 the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 established standards for reporting
and disclosing comprehensive income (defined as revenues, expenses,
gains and losses that under generally accepted accounting principles
are not included in net income) and its components. As of December 31,
1998 the Company had no items of other comprehensive income.
In 1998 the Company adopted SFAS No.131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131
established standards for reporting financial and descriptive
information about operating segments in annual financial statements.
Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company's chief
operating decision maker is its senior management group.
The Company owns and operates retail shopping centers in
47
<PAGE> 49
nine states in the southeast. Such shopping centers generate rental and
other revenue through the leasing of shop spaces to a diverse base of
tenants. The Company evaluates the performance of each of its shopping
centers on an individual basis. However, because each of the shopping
centers have similar economic characteristics and tenants, the shopping
centers have been aggregated into one reportable segment.
In June 1998 SFAS No.133, "Accounting for Derivative
Instruments and Hedging Activities" was issued establishing accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts)
be recorded in the balance sheet as either an asset or liability
measured at its fair market value. SFAS No. 133 requires that changes
in the derivatives fair market value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement
and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
The Company has never used derivative instruments or hedging
activities.
Income Taxes-
The Company has in past years elected to qualify, and intends
to continue such election, to be taxed as a REIT under Sections 856-860
of the Internal Revenue Code, as amended. In general terms, under such
Code provisions a trust or corporation which, in any taxable year,
meets certain requirements and distributes to its shareholders at
least 95% of its taxable income will not be subject to Federal income
tax. Additionally, Capital Corporation, formed to provide management
and other services to third and related parties, is a separate taxable
entity. The tax attributes of this entity are immaterial to the
accompanying consolidated financial statements.
3. PUBLIC OFFERINGS:
On January 14 and 22, 1997, the Company completed the offering
of 4,653,747 shares of its common stock at $11.25 per share. The net
proceeds from the offering totaled approximately $49,534,000.
48
<PAGE> 50
On August 15, 1997, the Company issued $75,000,000 of 7.25%
senior notes due August 15, 2007. The senior notes were issued at a
discount of $426,000 which is being amortized over the life of the
notes for financial reporting purposes. Net proceeds from the issuance
totaled approximately $73,817,000. For more information regarding these
senior notes, see Note 10.
4. RENTAL PROPERTIES:
Rental properties are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
---- ----
<S> <C> <C>
Land covered by purchase-
leaseback agreements $ 928,292 $ 928,292
Land related to buildings
and improvements 143,647,452 118,374,360
Buildings & improvements 477,541,306 417,857,568
----------- -----------
$622,117,050 $537,160,220
============ ============
</TABLE>
Upon expiration of the leases for land covered by
purchase-leaseback agreements, all improvements on the land will become
the property of the Company.
The lessees of two of the leaseback purchase agreements have
the option, subject to certain conditions, to repurchase the land. Such
option prices are for amounts greater than the Company's carrying value
of the related land.
Minimum base rentals on noncancellable operating leases for
the Company's shopping center, industrial and land purchase-leaseback
investments for the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 65,046,535
2000 58,867,367
2001 51,454,170
2002 44,072,728
2003 39,056,170
Thereafter 255,113,495
------------
$513,610,465
============
</TABLE>
49
<PAGE> 51
Shopping Center Acquisitions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Total OP Units
Date Rentable Initial Cash Issued
Acquired Property Name City, State Sq Ft Cost Paid by LP (1) Mortgage (2) Principal Tenants
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
01/13/98 Town & Country Kissimmee, FL 71,283 $4,265 $ 2,033 $2,232 Albertson's
03/12/98 Spring Valley Commons Columbia, SC 75,415 6,104 6,104 Bi-Lo
Eckerd Drugs
03/31/98 Daniel Village Augusta, GA 164,451 12,245 12,245 Bi-Lo
Eckerd Drugs
06/11/98 Mableton Crossing Mableton, GA 86,819 8,170 3,670 4,500 (3) Kroger
08/01/98 Charlotte Square Port Charlotte, FL 96,188 6,006 159 1,637 4,210 Publix
08/01/98 Riverside Square Coral Springs, FL 103,241 13,025 316 3,846 8,863 Publix
Eckerd Drugs
08/01/98 Tamarac Town Square Tamarac, FL 123,385 10,652 678 2,882 7,092 Publix
Eckerd Drugs
08/25/98 Treasure Coast Vero Beach, FL 133,781 11,094 5,157 5,937 Winn-Dixie
TJX
12/10/98 Bay Pointe Plaza St. Petersburg, FL 97,390 6,388 6,388 Publix
Eckerd Drugs
--------------------------------------------------
951,953 $77,949 $36,750 8,365 $32,834
==================================================
</TABLE>
(1) Value of OP Units determined based on value of common stock on date of
acquisition.
(2) Mortgage assumed from previous owner unless otherwise noted.
(3) Mortgage placed on property in August 1998.
Property Acquired through Foreclosure
(in thousands, except square footage)
<TABLE>
<CAPTION>
Net Book
Date Value Property
Foreclosed Property Name City, State Sq Ft/Units at Foreclosure Type Principal Tenants
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
02/18/98 Spanish Quarter Apartments (1) Montgomery, AL 276 Units $ 4,478 Apartments N/A
08/31/98 Walton Plaza (2) Augusta, GA 43,460 3,157 Shopping Center Harris Teeter
--------
$ 7,635
========
</TABLE>
(1) Property sold August 14, 1998. See Property Dispositions table.
(2) Property acquired by deed in lieu of foreclosure.
Property Dispositions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Sales Cash Financial Property
Sold Property Name City, State Sq Ft/Units Price Proceeds Gain Type Principal Tenants
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/30/98 Plasti-Kote Medina, OH 41,000 $ 827 $ 825 $ 744 Industrial Plasti-Kote Co., Inc.
08/14/98 Spanish Quarter
Apartments (1) Montgomery, AL 276 Units 5,100 4,806 469 Apartments N/A
--------------------------
$5,927 $ 5,631 $ 1,213
==========================
</TABLE>
(1) Property acquired through foreclosure February 18, 1998. See Property
Acquired Through Foreclosure table.
50
<PAGE> 52
5. NET INVESTMENT IN DIRECT FINANCING LEASES:
As of December 31, 1998, two retail facilities are leased to
Wal-Mart Stores, Inc. at a total annual rental of $332,850 plus
percentage rentals of 1% of gross sales in excess of the tenant's
actual sales for its fiscal year ended January 31, 1990. Rental income
from these leases totaled $399,503, $381,414 and $376,639 in 1998,1997
and 1996 respectively .
The Company acquired ten branch bank buildings in a 1984
merger. These facilities are leased to The Old Phoenix National Bank at
a total annual rental of $313,049.
Of the total rental income on direct financing leases,
$132,355, $121,764 and $227,039 were recorded as amortization of
capitalized leasing income in 1998, 1997 and 1996, respectively.
The Company is to receive minimum lease payments of $645,899
per year during 1999 through 2003 and a total of $5,253,386 thereafter
through the remaining lease terms.
6. INVESTMENT IN JOINT VENTURE:
Capital Corporation was a 50% owner of a joint venture which
purchased a 1.31 acre parcel of land located in Savannah, Georgia, for
development or sale. The Company had approximately $356,000 invested in
this joint venture as of December 31, 1997. In March 1998, this parcel
was sold for a total sales price of $464,000. The Company recognized
equity in income from the joint venture of approximately $54,000.
7. MORTGAGE LOANS:
The Company's investments in mortgage loans, all of which are
secured by real estate investments, are summarized by type of loan at
December 31, 1998 and 1997, as follows:
Based on current rates at which similar loans would be made,
the estimated fair value of mortgage loans was approximately $1,160,000
and $9,394,000 at December 31, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
Number Amount Number Amount
of Loans Outstanding of Loans Outstanding
-------- ----------- -------- ------------
<S> <C> <C> <C> <C>
First mortgage 1 $ 114,009 2 $3,283,231
Mortgage
participation 1 23,585 1 25,753
Wrap-around
mortgage - - 1 5,212,708
Second mortgage 2 1,000,000 2 1,000,000
-- ---------- -- ----------
4 1,137,594 6 9,521,692
Less-Interest
discounts and
negative
goodwill - (40,419) - (200,487)
-- ---------- -- ----------
Mortgage
loans, net 4 $1,097,175 6 $9,321,205
-- ---------- -- ----------
</TABLE>
51
<PAGE> 53
During the fourth quarter of 1997, the borrower under the Spanish Quarter
Apartments wrap around mortgage loan defaulted under the terms of the mortgage,
and on February 18, 1998, the Company obtained title to the property through
foreclosure. On August 14, 1998, the Company sold Spanish Quarter Apartments
for approximately $5,100,000. The Company received net cash proceeds from the
sale of approximately $4,806,000 and recognized a gain, net of deferred income
tax, of approximately $469,000 for financial reporting purposes.
On August 1, 1998, the borrower under the Walton Plaza first mortgage
defaulted under the terms of the mortgage and on August 31, 1998, the
Company obtained title to Walton Plaza through a deed in lieu of foreclosure.
Management believes that the market value of the property equals or exceeds the
net carrying value of the wrap-around mortgage.
Annual principal payments applicable to mortgage loan investments in the
next five years and thereafter are as follows:
<TABLE>
<CAPTION>
Year Amount
------ ----------
<S> <C>
1999 $1,005,976
2000 6,805
2001 7,719
2002 8,724
2003 9,828
Thereafter 58,123
----------
$1,097,175
==========
</TABLE>
Based on current rates at which similar loans would be made, the estimated
fair value of mortgage loans was approximately $1,160,000 and $9,394,000 at
December 31, 1998 and 1997, respectively.
8. MORTGAGE NOTES PAYABLE:
Mortgage notes payable are collateralized by various real
estate investments having a net carrying value of approximately
$131,784,000 as of December 31, 1998. These notes have stated interest
rates ranging from 6.85% to 9.875% and are due in monthly installments
with maturity dates ranging from 1999 to 2018.
During 1998, the Company a) repaid at maturity a
$2,224,000 mortgage bearing interest at 11%, b) prepaid two
mortgages aggregating $3,525,000 bearing interest at 9.875%,
resulting in a $35,000 extraordinary loss on extinguishment of
debt, c) prepaid a $2,175,000 mortgage bearing interest at
10.25%, resulting in a $22,000 extraordinary loss on
extinguishment of debt and d) prepaid a $543,000 mortgage
bearing interest at 8.25% and e) repaid a $625,000 installment
of a $1,250,000 purchase note bearing interest at 9%.
Principal amortization and balloon payments applicable to
mortgage notes payable in the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
Principal Balloon
Year Amortization Payments Total
---- ------------ -------- -----
<S> <C> <C> <C>
1999 $ 1,178,143 $ 625,000 $ 1,803,143
2000 1,229,168 6,837,352 8,066,520
2001 1,505,590 -- 1,505,590
2002 1,579,787 7,155,174 8,734,961
2003 1,617,939 -- 1,617,939
Thereafter 23,883,268 35,007,536 58,890,804
----------- ----------- -----------
$30,993,895 $49,625,062 $80,618,957
Interest Premium 1,595,895
-----------
$82,214,852
</TABLE>
Based on the borrowing rates currently available to the
Company for mortgages with similar terms and maturities, the estimated
fair value of mortgage notes payable was approximately $88,622,000 and
$64,229,000 at December 31, 1998 and 1997, respectively.
52
<PAGE> 54
9. CONVERTIBLE SUBORDINATED DEBENTURES:
Effective August 31, 1993, the Company issued $86,250,000 of
7.3% convertible subordinated debentures due August 15, 2003, ("The
Convertible Debenture") $23,275,000 of which is outstanding as
of December 31, 1998. Interest on the debentures is payable
semi-annually on February 15 and August 15. The debentures are
convertible at any time prior to maturity into common stock of the
Company at $11.25 per share, subject to adjustment in certain events.
The Company has the option toredeem the debentures at par at any time
after August 15, 1996. Costs associated with the issuance of the
debentures were approximately $3,701,000 and are being amortized over
the life of the debentures.
In March 1995, $1,345,000 of the Company's 7.3% convertible
subordinated debentures were converted into 119,554 shares of common
stock at $11.25 per share. On January 17, 1997, the Company completed
the repurchase of $54,799,000 of these debentures in a private
transaction with a single debenture holder. The debentures were
repurchased by the Company at par plus $1,689,000 of accrued interest.
The seller had informed the Company that the seller had both
$54,799,000 par value of the debentures and a short position of
1,500,000 shares in the Company's common stock. The consideration paid
by the Company was comprised of 1,500,000 shares of common stock,
valued for purposes of the exchange at $11.05 per share, and cash in
the amount of $38,224,000. Additional paid-in-capital was reduced by
approximately $1,553,000 of unamortized issuance costs associated with
the debentures repurchased and canceled and by approximately $45,000 of
costs associated with the transaction.
The repurchase of the debentures was transacted pursuant to a
Purchase and Standstill Agreement under which the seller agreed to
eliminate its short position in Company common stock, after which the
seller did not own any Company securities. The seller further agreed
not to take any position with respect to any Company securities or to
attempt to influence Company policies or management in the future.
During 1997, $1,653,000 of these debentures were converted
into 146,921 shares of common stock at $11.25 per share. During 1998,
$5,178,000 of these debentures were converted into 460,263 shares of
common stock. Based upon the conversion price, 2,068,889 authorized but
unissued common shares have been reserved for possible issuance if the
$23,275,000 debentures outstanding at December 31, 1998 are converted.
53
<PAGE> 55
Based on the closing market price at year end, the estimated
fair value of the Convertible Debentures was approximately $22,286,000
and $29,307,000 at December 31, 1998 and 1997, respectively.
10. SENIOR NOTES:
On March 26, 1996, the Company issued $50,000,000 of 7.45%
senior notes due April 1, 2001. These senior notes were issued at a
discount of $83,500 which is being amortized over the life of the notes
for financial reporting purposes. Net proceeds from the issuance
totaled approximately $49,394,000.
Interest on the 7.45% senior notes is payable semi-annually on
April 1 and October 1. Costs associated with the issuance of these
senior notes totaled approximately $522,000 and are being amortized
over the life of the notes.
On August 15, 1997, the Company issued $75,000,000 of 7.25%
senior notes due August 15, 2007. These senior notes were issued at a
discount of $426,000 which is being amortized over the life of the
notes for financial reporting purposes. Net proceeds from the issuance
totaled $73,817,000.
Interest on the 7.25% senior notes is payable semi-annually on
February 15 and August 15. Costs associated with the issuance of these
senior notes totaled approximately $757,000 and are being amortized
over the life of the notes.
11. INDEBTEDNESS TO BANKS:
On December 15, 1995, the Company obtained a $100,000,000
unsecured revolving term loan the maturity of which was extended
through January 4, 2001. The Company may request to extend the maturity
date for an additional twelve-month period beyond the existing maturity
date.
The Company may elect to pay interest at either a) the lenders
prime, adjusted daily, or b) the London Interbank Offered Rates
("LIBOR"), plus the "Applicable Margin" based upon the rating of the
senior unsecured long-term debt obligations of the Company. Effective
June 30, 1997, the Applicable Margin was reduced from a range of 1.3%
to 1.5% to a range of .95% to 1.4%. The Applicable Margin based on the
Company's current rating is 1.25%. LIBOR borrowings may be set for the
term selected by the Company not to exceed 12 months.
54
<PAGE> 56
Prepayments may be made on all advances, provided that the
Company may be required to reimburse the lenders for any loss or
out-of-pocket expense incurred in connection with any LIBOR prepayment.
The Company pays an annual fee of 25 basis points on the unused portion
of the loan commitment. Since June 1997, this fee has been 15 basis
points, whenever the unused commitment is less than 50% of the total
commitment.
The loan agreement contains restrictive covenants pertaining
to net worth, the ratio of debt to equity, interest coverage, debt
service coverage, net operating losses, and the ratio of total
liabilities to total assets. The Company has agreed not to encumber
certain properties ("Negative Pledge Properties"). The commitment may
fluctuate up to a maximum of $100,000,000 based on 65% of the value of
the Negative Pledge Properties and as of December 31, 1998, the Company
may borrow the maximum commitment amount. The Company and its bank
creditors entered into an Amended and Restated Loan Agreement as of
September 9, 1998 (the "Amended and Restated Agreement"). Under the
terms of the Amended and Restated Agreement, LP guarantees the
Company's indebtedness.
The following data is presented with respect to the revolving term loan
agreement in 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Unused at year-end $48,500,000 $85,600,000
Average borrowing for
the period 35,211,000 14,165,000
Maximum amount outstanding
during the period 52,000,000 64,700,000
Average interest rate for
the period 6.87% 7.09%
Interest rate at
year-end 6.69% 7.45%
</TABLE>
The Company incurred commitment fees of approximately $160,110
and $212,000 for the years ended December 31, 1998 and 1997,
respectively, based on the aggregate unused portion of the commitment.
55
<PAGE> 57
12. EARNINGS PER SHARE:
<TABLE>
<CAPTION>
Per-Share
Income Shares Amount
------ ------ ------
<S> <C> <C> <C>
For the year ended December 31, 1998
- ------------------------------------
Basic Net Earnings available to
shareholders $25,584,693 32,940,399 $0.78
=====
Options outstanding (See Note 14) - 22,607
Minority interest LP 261,764 339,776
Restricted stock - 1,806
----------- ----------
Diluted Net Earnings available to
shareholders $25,846,457 33,304,588 $0.78
=========== ========== =====
For the year ended December 31, 1997
- ------------------------------------
Basic Net Earnings available to
shareholders $26,112,680 31,867,743 $0.82
=====
Options outstanding (See Note 14) - 53,469
----------- ----------
Dilute Net Earnings available to
shareholders $26,112,680 31,921,212 $0.82
=========== ========== =====
For the year ended December 31, 1996
- ------------------------------------
Basic Net Earnings available to
shareholders $16,817,704 25,749,860 $0.65
=====
Options outstanding (See Note 14) - 5,081
----------- ----------
Diluted Net Earnings available to
shareholders $16,817,704 25,754,941 $0.65
=========== ========== =====
</TABLE>
Basic earnings per share were computed by dividing net
earnings by the weighted average number of shares of common stock
outstanding during the year. The effect of the Convertible Debentures
and certain stock options, using the treasury stock method, have been
excluded from the calculation of dilutive earnings per share, as they
are anti-dilutive.
56
<PAGE> 58
13. CASH DISTRIBUTIONS AND DIVIDEND REINVESTMENT PLAN:
The taxability of per share distributions paid to shareholders
during the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Ordinary income $.787 $ .730 $ .470
Capital gains .054 .080 --
Return of capital .074 .090 .430
----- ------ ------
$.915 $ .900 $ .900
===== ====== ======
</TABLE>
In addition, the 5% discount received upon purchase of shares
under the Dividend Reinvestment Plan is taxable as ordinary income to
the participant.
The Company's Dividend Reinvestment Plan allowed shareholders
to elect to reinvest all or a portion of their distributions in newly
issued shares of common stock of the Company at 95% of the market price
of the shares. This plan was amended in July 1998 to eliminate the
discount. During 1998, 1997 and 1996, the Company received net proceeds
under this plan of $1,739,000, $2,864,000 and $1,024,000, respectively.
14. STOCK OPTIONS:
Effective May 8, 1989, the Company adopted and its
shareholders approved the 1989 Stock Option Plan (the "1989 Plan"). The
1989 Plan includes provisions for a) the granting of both Incentive
Stock Options ("ISOs") (as defined in Section 422A of the Internal
Revenue Code) and nonqualified options to officers and employees and b)
the automatic granting of nonqualified options for 1,250 shares to each
non-employee director upon the election and each annual re-election of
each non-employee director. Under the terms of the 1989 Plan, the
option price shall be no less than the fair market value of the
optioned shares at the date of grant. The options are automatically
vested and expire after ten years.
Effective June 18, 1998 the Company adopted and its
shareholders approved the 1998 Long-Term Incentive Plan (the "1998
Plan"). The 1998 Plan includes provisions for the granting of ISOs,
nonqualified options, stock appreciation
57
<PAGE> 59
rights, performance shares, restricted stock, dividend equivalents, and
other stock-based awards. Under the terms of the 1998 Plan, the option
exercise price shall be no less than the fair market value of the
optioned shares at the date of the grant.
The Company accounts for these plans under APB 25, under which
no compensation cost has been recognized.
Had compensation cost for these plans been determined
consistent with SFAS 123, the Company's net income and earnings per
share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C> <C>
Net Earnings: As Reported $25,846,457 $26,112,680
Pro Forma $25,411,748 $26,006,756
EPS (Basic and Diluted): As Reported $ 0.78 $ 0.82
Pro Forma $ 0.77 $ 0.82
</TABLE>
Because the SFAS 123 method of accounting has not been applied
to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
The weighted average fair value of options granted is $1.10
and $1.11 for 1998 and 1997, respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions
used for grants in 1998 and 1997, respectively: risk-free interest
rates of 5.48% and 6.28% for qualified employee options, 5.54% and
6.50% for director options; expected dividend yields of 7.87% and 7.91%
for qualified employee options, 8.62% and 7.74% for director options;
expected lives of 5 years; expected volatility of 21% and 20%.
58
<PAGE> 60
Details of the stock option activity during 1998, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
Number of Shares
---------------- Option Price
Employees Directors Per Share
--------- --------- --------------
<S> <C> <C> <C>
Options outstanding,
December 31, 1995 336,155 55,000 $7.63-$15.10
Granted, 1996 89,000 -- $ 9.25
Granted, 1996 -- 6,250 $ 9.75
Exercised, 1996 (2,400) -- $ 7.63-$9.25
Expired unexercised,
1996 (25,562) -- $9.25-$14.90
------- ------
Options outstanding,
December 31, 1996 397,193 61,250 $7.63-$15.10
Granted, 1997 90,000 -- $ 11.375
Granted, 1997 -- 5,000 $ 11.625
Exercised, 1997 (44,200) -- $9.25-$10.75
Exercised, 1997 -- (6,250) $9.50-$10.25
Expired unexercised,
1997 (60,000) -- $9.25-$15.10
------- ------
Options outstanding,
December 31, 1997 382,993 60,000 $7.63-$14.90
Granted, 1998 150,300 -- $11.688-$11.813
Granted, 1998 -- 7,500 $10.4375
Exercised, 1998 (4,750) -- $9.25
Expired unexercised,
1998 (42,575) -- $9.25-$12.60
------- ------
Options outstanding,
December 31, 1998 485,968 67,500
======= ======
</TABLE>
15. DEFERRED COMPENSATION AND STOCK LOANS:
On June 18, 1998, 119,760 restricted shares of common stock
(the "Restricted Shares") were granted and 119,760 shares (the "Loan
Shares") were issued pursuant to full recourse loans due 6/18/2008 made
to certain Company officers as incentives for future services. The
Restricted Shares and the Loan Shares were valued at the closing price
of the Company's common stock on June 18, 1998 of $10.437.
59
<PAGE> 61
16. EMPLOYEE RETIREMENT BENEFITS:
Effective June 30, 1990, the Board of Directors terminated a
defined contribution pension plan which had been adopted in 1980 and
implemented a program of year-end cash payments to certain employees of
the Company ("Cash in Lieu of Pension"). The Cash in Lieu of Pension
program was terminated upon the adoption of the Company's 401(k) Plan
effective August 1, 1996.
Under the Company's 401(k) Plan, employees who have completed
one year of service and are at least 18 years of age are eligible for
participation in the plan. Employees may elect to make contributions to
the plan, and the Company matches 100% of such contributions up to 6%
of the individual participant's compensation, based on the length of
service. The Company contributed approximately $145,000, $131,000 and
$56,000 to the 401(k) Plan in 1998, 1997 and 1996, respectively. The
Company accrued approximately $179,000 under the Cash in Lieu of
Pension program in 1996.
17. COMMITMENTS AND CONTINGENCIES:
Capital Corporation 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 out parcels, 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.
As of November 11, 1997, the Company entered into an Amended
and Restated Employment Agreement with its President and Chief
Executive Officer. This Employment Agreement provides for an initial
annual salary of $306,000 with annual reviews and permits participation
in all other incentive, benefit, welfare and retirement plans offered
by the Company. It is automatically renewable each year unless sooner
terminated. Following a "Change In Control" as defined therein, the
President may, for good reason, terminate his employment and receive
the sum of 2.99 times the executive's annual base salary and 2.99 times
his most recent bonus.
60
<PAGE> 62
Following a Change In Control and termination of employment, the
Company will continue to provide benefits to the executive consistent
with what he received prior to such termination.
As of November 11, 1997, the Company also entered into Change
In Control Employment Agreements with its Executive Vice Presidents.
These are generally similar to the Change In Control provisions
contained in the President's Employment Agreement and provide for
payments of the sum of one year's salary and bonus in the event of a
Change In Control and termination of employment. The Change In Control
Employment Agreement with the former CFO expired upon her resignation
December 31, 1998.
18. ENVIRONMENTAL INVESTIGATIONS:
During 1996, the Company discovered that releases of petroleum
products had occurred at and around a garage facility previously
operated by a former tenant at the Company's Charlotte, North Carolina
industrial facility. The Company is continuing to evaluate the extent
of the related contamination, and Company management is negotiating
with the former tenant to obtain contribution for potential cleanup
costs. At this time, the Company does not believe the cost of
addressing these additional releases will have a material adverse
effect on the Company's financial condition.
Certain of the Company's properties have environmental
concerns that have been or are being addressed. The Company maintains
only limited insurance coverage for this type of environmental risk.
Although no assurance can be given that Company properties will not be
affected adversely in the future by environmental problems, the Company
presently believes that there are no environmental matters that are
reasonably likely to have a material adverse effect on the Company's
financial position.
61
<PAGE> 63
19. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT:
On February 25, 1999, the Company, entered into a $40 million
loan secured by first mortgages on eight properties at an approximate
cost of $625,000. This loan is a 25 year fully amortizing loan that
bears a fixed interest rate of 6.5%. The Company's cost basis of these
eight properties as of December 31, 1998 was approximately $73,865,000.
On February 26, 1999, IRT Partners L.P. acquired a shopping
center in Miami, Florida for total consideration of approximately
$9,908,000, including approximately $100,000 of acquisition costs. The
consideration was the assumption of an existing mortgage of
approximately $5,742,000 and cash of approximately $4,166,000.
On March 15, 1999, IRT Partners L.P. acquired a shopping
center in Atlanta, Georgia for approximately $5,596,000 cash,
consisting of the initial purchase price of $5,325,000, $246,000 of
capital expenditures and $25,000 of acquisition costs.
62
<PAGE> 64
20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following is a summary of the unaudited quarterly financial
information for the years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $18,527,190 $19,906,484 $20,816,824 $20,619,213
=========== =========== =========== ===========
Income before minority interest, gain
on sales of properties and
extraordinary item $ 6,054,744 $ 5,633,194 $ 6,918,973 $ 6,083,459
Minority interest of unitholders in
operating partnership -- -- (104,473) (157,291)
Gain on sales of properties -- 744,074 469,016 --
----------- ----------- ----------- -----------
Income before extraordinary
item 6,054,744 6,377,268 7,283,516 5,926,168
Extraordinary item:
Loss on Extinguishment of Debt -- -- (57,003) --
----------- ----------- ----------- -----------
Net Earnings $ 6,054,744 $ 6,377,268 $ 7,226,513 $5,926,168
=========== -========== =========== ===========
Per Share:
Basic $ .19 $ .19 $ .22 $ .18
=========== ========== =========== ===========
Diluted $ .19 $ .19 $ .22 $ .18
=========== ========== =========== ===========
1997
-------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $16,032,212 $16,543,840 $17,188,894 $17,352,889
=========== =========== =========== ===========
Income before gain on sales of
properties and extraordinary item $ 5,458,274 $ 5,658,714 $ 5,483,826 $ 5,615,049
Gain on sales of properties -- -- -- 3,896,817
----------- ------------ ----------- -----------
Income 5,458,274 5,658,714 5,483,826 9,511,866
Extraordinary item -- -- -- --
----------- ------------ ----------- -----------
Net Earnings $ 5,458,274 $ 5,658,714 $ 5,483,826 $ 9,511,866
=========== =========== =========== ===========
Per Share:
Basic $ .19 $ .17 $ .17 $ .29
=========== ========== =========== ===========
Diluted $ .19 $ .17 $ .17 $ .29
=========== ========== =========== ===========
</TABLE>
63
<PAGE> 65
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
- ---------------- ------------ --------- ------------- ------------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Abbeville Plaza
Abbeville, SC
Land $ -- $ 48,066 $ -- $ 48,066 $ -- 21 April, 1986 1970
Buildings 458,062 55,722 513,784 324,019
Alafaya Commons
Orlando, FL
Land -- 5,525,976 -- 5,525,976 -- 40 November, 1996 1987
Buildings 4,723,994 54,509 4,778,503 249,809
Ambassador Row
Lafayette, LA
Land -- 2,451,860 -- 2,451,860 -- 40 December, 1994 1980 &
Buildings 7,244,580 295,137 7,539,717 817,471 1991
Ambassador Row Courtyard
Lafayette, LA
Land -- 2,899,438 -- 2,899,438 -- 40 December, 1994 1986 &
Buildings 8,698,313 247,130 8,945,443 911,185 1991
Asheville Plaza (1)
Asheville, NC
Land -- 52,710 15,000 67,710 -- 30 April, 1986 1967
Buildings 335,717 1,860 337,577 144,156
Bay Pointe (1)
St. Petersburg, FL
Land -- 3,249,918 -- 3,249,918 -- 40 December, 1998 1998
Buildings 3,138,518 -- 3,138,518 6,539
Bluebonnet Village
Baton Rouge, LA
Land -- 2,540,594 (4,802) 2,535,792 -- 40 December, 1994 1983
Buildings 5,509,995 91,670 5,601,665 576,625
</TABLE>
64
<PAGE> 66
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
- ------------------ ------------ --------- ------------- ------------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Boulevard
Lafayette, LA
Land $ -- $ 948,334 $ -- $ 948,334 $ -- 40 December, 1994 1976 &
Buildings 2,845,003 41,008 2,886,011 295,411 1994
Carolina Place
Hartsville, SC
Land -- 345,000 -- 345,000 -- 40 May, 1989 1989
Buildings 2,006,494 -- 2,006,494 479,400
Centre Pointe Plaza (1)
Smithfield, NC
Land -- 983,612 12,583 996,195 -- 40 December, 1992 & 1989 &
Buildings 8,002,885 294,711 8,297,596 1,265,746 December, 1993 1993
Chadwick Square (1)
Hendersonville, NC
Land -- 276,778 -- 276,778 -- 40 January, 1992 1985
Buildings 1,179,949 98,864 1,278,813 206,702
Charlotte Square (1)
Port Charlotte, FL
Land 3,860,904 2,113,763 -- 2,113,763 -- 40 August, 1998 1998
Buildings 3,891,982 -- 3,891,982 40,541
Chastain Square
Atlanta, GA
Land -- 1,689,421 -- 1,689,421 -- 40 December, 1997 1981
Buildings 5,068,661 20,894 5,089,555 130,860
Chelsea Place
New Port Richey, FL
Land -- 1,387,517 -- 1,387,517 -- 40 July, 1993 1992
Buildings 5,550,068 5,000 5,555,068 759,038
</TABLE>
65
<PAGE> 67
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
- ------------------ ------------- -------- ------------- ------------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Plaza
Chester, SC
Land $ -- $ 68,649 $ 143,504 $ 212,153 $ -- 16 April, 1986 & 1967 &
Buildings 414,117 1,675,244 2,089,361 753,135 February, 1992 1992
Chestnut Square (1)
Brevard, NC
Land -- 295,984 -- 295,984 -- 40 January, 1992 1985
Buildings 1,113,464 22,658 1,136,122 204,756
Colony Square
Fitzgerald, GA
Land -- 272,833 -- 272,833 -- 40 February, 1988 1987
Buildings 2,455,826 207,771 2,663,597 865,715
Commerce Crossing
Commerce, GA
Land -- 379,648 889 380,537 -- 40 December, 1992 1988
Buildings 4,089,737 31,669 4,121,406 624,212
Country Club Plaza
Slidell, LA
Land -- 1,068,686 -- 1,068,686 -- 40 January, 1995 1982
Buildings 3,010,039 138,332 3,148,371 345,438
Countryside Shops
Cooper City, FL
Land -- 5,652,437 -- 5,652,437 -- 40 June, 1994 1986, 1988
Buildings 10,977,241 179,642 11,156,883 1,284,958 & 1991
The Crossing
Slidell, LA
Land -- 1,282,036 -- 1,282,036 -- 40 December, 1994 1988 &
Buildings 3,213,616 109,164 3,322,780 366,080 1993
</TABLE>
66
<PAGE> 68
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
----------- ------------ ------- ------------- ------------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel Village
Augusta, GA
Land $ -- $ 2,632,857 $ -- $ 2,632,857 $ -- 40 March, 1998 1998
Buildings 9,612,077 88,186 9,700,263 180,142
Delchamps Plaza
Pascagoula, MS
Land -- 359,000 -- 359,000 -- 40 April, 1988 1987
Buildings 4,130,247 97,199 4,227,446 1,135,762
Douglas Commons
Douglasville, GA
Land -- 2,543,385 2,951 2,546,336 -- 40 August, 1992 1988
Buildings 5,958,475 148,876 6,107,351 1,028,963
Eden Centre (1)
Eden, NC
Land -- 625,901 -- 625,901 -- 40 November, 1994 1991
Buildings 2,901,316 21,786 2,923,102 302,214
Elmwood Oaks
Harahan, LA
Land 7,500,000 4,558,654 -- 4,558,654 -- 40 January, 1992 1989
Buildings 6,560,014 90,771 6,650,785 1,162,618
Fairview Oaks
Ellenwood, GA
Land -- 713,978 -- 713,978 -- 40 June, 1997 1997
Buildings 6,396,016 -- 6,396,016 246,492
First Street Station (1)
Albemarle, NC
Land -- 201,811 -- 201,811 -- 40 August, 1994 1989
Buildings 2,832,859 30,770 2,863,629 315,390
</TABLE>
67
<PAGE> 69
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
----------- ------------ ------- ------------- ------------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Forest Hills Centre (1)
Wilson, NC
Land $ -- $ 869,981 $ (9,160) $ 860,821 $ -- 40 August, 1990 1990 &
Buildings 4,120,606 570,298 4,690,904 908,347 1995
Forrest Gallery (1)
Tullahoma, TN
Land -- 2,136,921 10,639 2,147,560 -- 40 December, 1992 1987
Buildings 9,977,815 619,824 10,597,639 1,653,307
Ft. Walton Beach Plaza
Ft. Walton Beach, FL
Land -- 787,583 -- 787,583 -- 30 July, 1986 1986
Buildings 1,860,360 28,774 1,889,134 789,066
The Galleria (1)
Wrightsville Beach, NC
Land -- 1,069,672 -- 1,069,672 -- 40 August, 1986 & 1986, 1990
Buildings 6,138,818 1,315,011 7,453,829 1,975,051 December, 1987 &1996
Grassland Crossing
Alpharetta, GA
Land 6,610,717 1,075,000 -- 1,075,000 -- 40 February, 1997 1996
Buildings 8,831,655 221,735 9,053,390 423,111
Greenwood Shopping Center
Palm Springs, FL
Land -- 4,129,000 -- 4,129,000 -- 40 July, 1997 1982 &
Buildings 8,953,855 30,362 8,984,217 335,853 1994
Gulf Gate Plaza
Naples, FL
Land -- 277,562 -- 277,562 -- 28 June, 1979 1969 &
Buildings 1,857,532 2,376,482 4,234,014 2,943,763 1974
</TABLE>
68
<PAGE> 70
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Years (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harris Teeter
Lexington, VA
Land $ -- $ 312,105 $ -- $ 312,105 $ -- 30 June, 1988 & 1981 &
Buildings 1,638,552 650,000 2,288,552 792,860 June, 1989 1989
Heritage Walk
Milledgeville, GA
Land -- 810,292 -- 810,292 -- 40 June,1993 1991 &
Buildings 7,944,260 28,977 7,973,237 1,108,970 1992
Hoffner Plaza
Orlando, FL
Land -- 337,182 77,728 414,910 -- 28 June, 1979 1972
Buildings 146,554 19,663 166,217 135,669
Lancaster Plaza
Lancaster, SC
Land -- 120,790 -- 120,790 -- 30 April, 1986 1971
Buildings 743,852 571,663 1,315,515 587,433
Lancaster Shopping Center
Lancaster, SC
Land -- 338,355 -- 338,355 -- 30 August, 1986 & 1963 &
Buildings 1,227,552 64,955 1,292,507 476,323 December, 1987 1987
Lawrence Commons (1)
Lawrenceburg, TN
Land -- 816,482 -- 816,482 -- 40 August, 1992 1987
Buildings 2,728,692 40,333 2,769,025 457,754
Litchfield Landing
North Litchfield, SC
Land -- 475,000 -- 475,000 -- 40 August, 1986 1984
Buildings 2,118,429 53,922 2,172,351 686,206
</TABLE>
69
<PAGE> 71
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mableton Crossing
Mableton, GA
Land $4,500,000 $2,780,814 $ -- $2,780,814 $ -- 40 June, 1998 1998
Buildings 5,388,854 -- 5,388,854 71,093
Macland Pointe
Marietta, GA
Land 3,613,921 1,252,098 (5,875) 1,246,223 -- 40 January, 1993 1992 &
Buildings 4,317,234 577,220 4,894,454 733,023 1993
Madison Centre
Huntsville, AL
Land -- 2,772,000 -- 2,772,000 -- 40 August, 1997 1997
Buildings 3,046,308 -- 3,046,308 104,770
Market Place
Norcross, GA
Land -- 3,819,654 -- 3,819,654 -- 40 April, 1997 1976
Buildings 3,253,872 100,955 3,354,827 138,911
McAlpin Square
Savannah, GA
Land -- -- -- -- -- 40 December, 1997 1979
Buildings 6,151,926 -- 6,151,926 156,700
Millervillage Shopping Center
Baton Rouge, LA
Land -- 1,926,535 -- 1,926,535 -- 40 December, 1994 1983 &
Buildings 5,661,992 128,668 5,790,660 598,800 1992
New Smyrna Beach Regional
New Smyrna Beach, FL
Land -- 3,704,368 6,757 3,711,125 -- 40 August, 1992 1987
Buildings 6,400,556 343,520 6,744,076 1,200,467
</TABLE>
70
<PAGE> 72
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Years (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North River Village
Ellenton, FL
Land $ -- $ 2,949,031 $ -- $ 2,949,031 $ -- 40 December, 1992 & 1993 &
Buildings 7,161,093 96,272 7,257,365 1,017,510 December, 1993 1998
North Village Center
North Myrtle Beach, SC
Land 2,382,018 483,400 -- 483,400 -- 37 August, 1986 1984
Buildings 2,785,154 10,479 2,795,633 839,656
Old Kings Commons
Palm Coast, FL
Land -- 1,491,458 -- 1,491,458 -- 40 May, 1988 1988
Buildings 4,474,372 185,178 4,659,550 1,303,877
Palm Gardens
Largo, FL
Land -- 98,279 -- 98,279 -- 26 June, 1979 1970 &
Buildings 657,716 1,123,074 1,780,790 1,143,807 1993
Parkmore Plaza
Milton, FL
Land -- 1,799,419 8,141 1,807,560 -- 40 December, 1992 1986 &
Buildings 6,454,261 138,439 6,592,700 1,011,030 1992
Paulding Commons
Dallas, GA
Land -- 2,312,372 2,687 2,315,059 -- 40 August, 1992 1991
Buildings 10,606,781 173,672 10,780,453 1,737,555
Pensacola Plaza
Pensacola, FL
Land -- 130,688 -- 130,688 -- 30 July, 1986 1985
Buildings 2,392,249 156,002 2,548,251 1,118,759
</TABLE>
71
<PAGE> 73
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pinhook Plaza
Lafayette, LA
Land $3,381,382 $2,768,151 $ -- $2,768,151 $ -- 40 December, 1994 1979 &
Buildings 8,304,453 134,854 8,439,307 851,814 1992
Plaza Acadienne
Eunice, LA
Land -- -- -- -- -- 40 December, 1994 1980
Buildings 2,917,925 98,824 3,016,749 306,046
Plaza North (1)
Hendersonville, NC
Land -- 657,797 121 657,918 -- 40 August, 1992 1986
Buildings 1,795,992 15,113 1,811,105 290,848
Powers Ferry Plaza
Marietta, GA
Land 625,000 1,725,213 -- 1,725,213 -- 40 May, 1997 1979 &
Buildings 5,785,034 44,208 5,829,242 209,601 1983
Providence Square (1)
Charlotte, NC
Land -- 450,000 300 450,300 -- 35 December, 1971 1973
Buildings 1,895,606 2,249,291 4,144,897 2,933,344
Riverside Square (1)
Coral Springs, FL
Land 8,095,969 5,893,410 -- 5,893,410 -- 40 August, 1998 1998
Buildings 7,131,432 -- 7,131,432 74,286
Riverview Shopping Center (1)
Durham, NC
Land -- 400,000 322 400,322 -- 35 March, 1972 1973 &
Buildings 1,822,918 4,366,352 6,189,270 2,383,386 1994
</TABLE>
72
<PAGE> 74
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Year (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salisbury Marketplace(1)
Salisbury, NC
Land $ -- $ 733,599 $ -- $ 733,599 $ -- 40 August, 1996 1987
Buildings 3,877,552 40,563 3,918,115 226,184
Scottsville Square
Bowling Green, KY
Land -- 653,010 765 653,775 -- 20 August, 1992 1986
Buildings 1,782,340 128,971 1,911,311 414,696
Seven Hills
Spring Hill, FL
Land -- 1,903,090 -- 1,903,090 -- 40 July, 1993 1991
Buildings 2,976,628 34,502 3,011,130 423,091
Shelby Plaza(1)
Shelby, NC
Land -- -- -- -- -- 21 April, 1986 1972
Buildings 937,483 744,583 1,682,066 674,720
Sherwood South
Baton Rouge, LA
Land -- 496,174 -- 496,174 -- 40 December, 1994 1972, 1988
Buildings 1,488,521 263,790 1,752,311 167,117 & 1992
Shoppes of Silverlakes
Pembroke Pines, FL
Land 3,396,975 4,042,613 -- 4,042,613 -- 40 November, 1997 1995 &
Buildings 12,826,129 -- 12,826,129 360,723 1996
Siegen Village
Baton Rouge, LA
Land -- 2,375,168 (325,000) 2,050,168 -- 40 December, 1994 1988 &
Buildings 6,952,314 104,736 7,057,050 570,897 1996
</TABLE>
73
<PAGE> 75
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Years (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Smyrna Village(1)
Smyrna, TN
Land $ -- $ 968,358 $ 20,601 $ 988,959 $ -- 40 August, 1992 1992
Buildings 4,743,708 180,825 4,924,533 783,068
Smyth Valley Crossing
Marion, VA
Land -- 1,693,137 6,523 1,699,660 -- 40 December, 1992 1989
Buildings 5,231,283 162,250 5,393,533 858,371
South Beach Regional
Jacksonville Beach, FL
Land -- 3,957,680 19,710 3,977,390 -- 40 August, 1992 1990 &
Buildings 17,130,242 877,254 18,007,496 3,023,042 1991
Spalding Village
Griffin, GA
Land 11,376,690 2,813,854 3,281 2,817,135 -- 40 August, 1992 1989
Buildings 12,470,446 177,476 12,647,922 2,062,561
Spring Valley Commons
Columbia, SC
Land -- 1,382,000 -- 1,382,000 -- 40 March, 1998 1998
Buildings 4,722,376 -- 4,722,376 98,383
Stadium Plaza
Phenix City, AL
Land -- 1,828,942 2,130 1,831,072 -- 40 August, 1992 1988
Buildings 2,614,155 43,595 2,657,750 432,212
Stanley Market Place(1)
Stanley, NC
Land -- 198,103 -- 198,103 -- 35 January, 1992 1980 &
Buildings 1,602,832 66,297 1,669,129 288,260 1991
</TABLE>
74
<PAGE> 76
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Years (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tamarac Square(1)
Tamarac, FL
Land $ 6,530,912 $4,637,325 -- $ $4,637,325 $ -- 40 August, 1998 1998
Buildings 6,014,619 2,859 6,017,478 62,652
Tarpon Heights
Galliano, LA
Land -- 705,570 -- 705,570 -- 40 January, 1995 1982
Buildings 2,116,712 15,005 2,131,717 214,490
Taylorsville Shopping
Center(1)
Taylorsville, NC
Land -- 89,689 -- 89,689 -- 40 August, 1986 & 1982 &
Buildings 1,443,704 1,078,766 2,522,470 764,895 December, 1988 1988
Thomasville Commons
Thomasville, NC
Land 5,423,548 963,333 -- 963,333 -- 40 August, 1992 1991
Buildings 6,183,052 74,848 6,257,900 1,018,006
Town & Country
Kissimmee, FL
Land 2,190,432 1,065,129 -- 1,065,129 -- 40 January, 1998 1998
Buildings 3,200,367 -- 3,200,367 80,009
Treasure Coast(1)
Vero Beach, FL
Land 5,879,456 2,471,286 -- 2,471,286 -- 40 May, 1998 1998
Buildings 8,622,474 92,100 8,714,574 71,854
University Center(1)
Greenville, NC
Land -- 750,000 -- 750,000 -- 40 December, 1989 1989
Buildings 3,159,065 82,054 3,241,119 755,019
</TABLE>
75
<PAGE> 77
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Years (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Venice Plaza
Venice, FL
Land $ -- $ 333,127 $ -- $ 333,127 $ -- 27 June, 1979 1971 &
Buildings 1,973,023 696,068 2,669,091 1,856,596 1979
Village at Northshore
Slidell, LA
Land 5,251,033 2,065,633 -- 2,065,633 -- 40 December, 1994 1988 &
Buildings 6,196,900 68,180 6,265,080 635,246 1993
Walton Plaza
Augusta, GA
Land -- 597,553 -- 597,553 -- 40 August, 1998 1991
Buildings 2,560,571 -- 2,560,571 42,655
Waterlick Plaza
Lynchburg, VA
Land -- 1,071,000 -- 1,071,000 -- 40 October, 1989 1973 &
Buildings 5,091,222 149,409 5,240,631 1,279,083 1988
Watson Central
Warner Robins, GA
Land -- 1,645,548 12,478 1,658,026 -- 40 December, 1992 1989 &
Buildings 11,316,940 156,719 11,473,659 1,692,975 & October, 1993 1993
Wesley Chapel Crossing
Decatur, GA
Land -- 3,828,806 9,154 3,837,960 -- 40 December, 1992 1989
Buildings 7,031,767 98,169 7,129,936 1,082,326
West Gate Plaza
Mobile, AL
Land -- 475,270 -- 475,270 -- 25 June, 1974 & 1974 &
Buildings 3,781,823 519,899 4,301,722 1,197,795 January, 1985 1995
</TABLE>
76
<PAGE> 78
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Years (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
West Towne Square
Rome, GA
Land $ -- $ 324,800 $ -- $ 324,800 $ -- 40 March, 1990 1988
Buildings 5,580,776 141,973 5,722,749 1,296,062
Westgate Square
Sunrise, FL
Land -- 2,228,724 -- 2,228,724 -- 40 June, 1994 1984 &
Buildings 6,850,131 286,930 7,137,061 819,616 1988
Willowdaile Shopping
Center(1)
Durham, NC
Land -- 936,977 (60,579) 876,398 -- 40 August, 1986 & 1986
Buildings 7,351,612 370,068 7,721,680 2,310,278 December, 1987
Industrial Buildings
Charlotte, NC - Industrial
Land -- 143,160 178,490 321,650 -- 14 June, 1979 1956 &
Buildings 2,170,057 1,286,373 3,456,430 2,857,321 1963
Plasti-Kote
Medina, OH - Industrial
Land -- 81,390 (81,390) -- -- 14 June, 1979 1961 &
Buildings 346,979 (346,979) -- -- 1966
Lawrence County
Shopping Center
Sybene, OH
Land -- 435,994 -- 435,994 -- May, 1971 1971
Grand Marche
Shopping Center
Lafayette, LA
Land -- 250,000 500 250,500 -- September, 1972 1969
</TABLE>
77
<PAGE> 79
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings Date Year
Description Encumbrances Company Acquisition Close of Year of Years (Years) Acquired Completed
----------- ------------ ------- ----------- ------------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Manatee County
Shopping Center
Bradenton, FL
Land $ -- $ 241,798 $ -- $ 241,798 $ -- May, 1971 1971
----------- ------------ ----------- ------------ -----------
$80,618,957 $593,888,622 $28,228,428 $622,117,050 $74,942,576
=========== ============ =========== ============ ===========
</TABLE>
(1) Ownership through IRT Partners L.P.
78
<PAGE> 80
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
NOTE:
Real estate activity is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
RENTAL PROPERTIES:
Cost -
Balance at beginning of year $ 537,160,220 $ 463,392,557 $ 452,508,601
Acquisitions and improvements 90,035,993 81,755,725 21,109,810
Retirements -- (663,197) --
Reduction in carrying value -- -- --
------------- ------------- -------------
627,196,213 544,485,085 473,618,411
Cost of properties sold (5,079,163) (7,324,865) (10,225,854)
------------- ------------- -------------
Balance at end of year $ 622,117,050 $ 537,160,220 $ 463,392,557
============= ============= =============
Accumulated depreciation -
Balance at beginning of year $ 62,526,989 $ 56,881,888 $ 51,600,890
Depreciation 12,925,299 11,453,460 10,310,344
Retirements -- (663,197) --
------------- ------------- -------------
75,452,288 67,672,151 61,911,234
Accumulated depreciation related to
rental properties sold (509,712) (5,145,162) (5,029,346)
------------- ------------- -------------
Balance at end of year $ 74,942,576 $ 62,526,989 $ 56,881,888
============= ============= =============
</TABLE>
79
<PAGE> 81
IRT PROPERTY COMPANY SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1998
<TABLE>
<CAPTION>
Principal
Amount of
Face Amount Loans Subject
Final Periodic and Carrying to Delinquent
Type of Type of Interest Maturity Payment Amount of Principal
Location of Property Loan Property Rate Date Terms Prior Liens Mortgages or Interest
- -------------------- ---- -------- ---- ---- ----- ----------- --------- -----------
(See Notes) (See Notes)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kearney, NE Second Mortgage Shopping Center 7.00% December, 1998 (1) 2,625,900 594,000 594,000
Fremont, NE Second Mortgage Shopping Center 7.00% December, 1998 (1) 1,794,800 406,000 406,000
Lauderdale Lakes, FL First Mortgage Condominiums 10.00% May, 2009 (2) -- 114,009 --
Nashville, TN First Mortgage Condominiums 8.63%- 2006-2007 (2) -- 23,585 --
Participation 12.38%
---------- ----------
4,420,700 1,137,594
Less interest discounts and negative goodwill -- (40,419)
---------- ----------
$4,420,700 $1,097,175
========== ==========
</TABLE>
NOTES:
(1) Monthly payments are interest only; principal due at maturity. The
principal of these mortgages was due December 31, 1998 but was not received
until February 3, 1999.
(2) Monthly payments include principal and interest.
Mortgage loan activity is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 9,321,205 $ 13,182,520 $ 8,499,210
New mortgage loans -- -- --
Additions to mortgage loans -- -- 4,800,000
Amortization of interest discounts and negative
goodwill 160,068 41,402 45,998
Collections of principal (8,384,098) (3,902,717) (162,688)
----------- ------------ ------------
Balance at end of year $ 1,097,175 $ 9,321,205 $ 13,182,520
=========== ============ ============
</TABLE>
80
<PAGE> 82
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
81
<PAGE> 83
PART III
The information called for by Part III (Items 10, 11, 12, and 13) is
incorporated herein by reference to the Company's definitive proxy statement for
the Company's 1999 Annual Meeting of Shareholders of the Company, to be filed
pursuant to Regulation 14A, pursuant to General Instruction G(3) to the Report
on Form 10-K.
82
<PAGE> 84
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial Statements and Schedules. Included in Part II of this Report
are the following:
Report of Independent Public Accountants
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Earnings for the Years Ended December 31,
1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
Schedule III - Real Estate and Accumulated Depreciation
Schedule IV - Mortgage Loans on Real Estate
Exhibits.
3.1 The Company's Amended and Restated Articles of Incorporation
were filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997, which is
incorporated by reference herein.
3.2 The Company's By-Laws, as amended, were filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, which is incorporated by reference
herein.
3.2.1 Amendments to By-laws of IRT Property Company filed as an
exhibit to the Company's report on Form 8-K dated August 21,
1998, which is incorporated by reference herein.
4.1 The Indenture dated August 15, 1993 between the Company and
Trust Company Bank, as Trustee, relating to the 7.3%
Convertible Subordinated Debentures due August 15, 2003 was
filed as an exhibit to the Company's Form 10-K for the year
ended December 31, 1993, which is incorporated by reference
herein.
83
<PAGE> 85
4.2 The form of 7.3% Convertible Subordinated Debenture was
included in 4.1 above.
4.3 The Indentures dated as of November 9, 1995 between the
Company and SunTrust Bank, Atlanta, as Trustee, relating to
Senior Debt Securities and Subordinated Debt Securities were
filed as an exhibit to the Company's Form 10-K for the year
ended December 31, 1995, which is incorporated by reference
herein.
4.4 First Supplemental Indenture dated as of March 26, 1996
between IRT Property Company and SunTrust Bank, Atlanta was
filed as an exhibit to the Company's Form 8-K dated March 26,
1996, which is incorporated by reference herein.
4.5 Supplemental Indenture No. 2, dated August 15, 1997, between
IRT Property Company and SunTrust Bank, Atlanta was filed as
an exhibit to the Company's Form 8-K dated August 15, 1997,
which is incorporated by reference herein.
4.6 Supplemental Indenture No. 3, dated September 9, 1998, between
IRT Property Company and SunTrust Bank, Atlanta was filed as
an exhibit to the Company's Form 8-K dated September 15, 1998,
which is incorporated by reference herein.
10.1 The Deferred Compensation Agreement between the Company and
Donald W. MacLeod was filed as an exhibit to the Company's
Registration Statement on Form S-2 (No. 2-88716) dated January
4, 1984, which is incorporated by reference herein.
10.2 The Company's 1989 Stock Option Plan was filed as an exhibit
to the Company's Form 8-K dated March 22, 1989, which is
incorporated by reference herein.
10.3 Amendment No. 1 to the Company's 1989 Stock Option Plan was
filed as an exhibit to the Company's Form 10-K for the year
ended December 31, 1993, which is incorporated by reference
herein.
10.4 The Company's Key Employee Stock Option Plan was filed as an
exhibit to the Company's Registration Statement on Form S-2
(No. 2-88716) dated January 4, 1984, which is incorporated by
reference herein.
84
<PAGE> 86
10.5 IRT Property Company Long-Term Incentive Plan was filed in the
Company's Definitive Proxy Statement dated May 22, 1998, which
is incorporated by reference herein.
10.6 The Company's Deferred Compensation Plan for Outside Directors
dated December 22, 1995 was filed as an exhibit to the
Company's Form 10-K for the year ended December 31, 1995,
which is incorporated by reference herein.
10.7 Agreement between the Company and Donald W. MacLeod, effective
October 1, 1995 was filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1995, which is
incorporated by reference herein.
10.7.1 Consulting Agreement between the Company and Donald W. MacLeod
dated June 12, 1997, which amends the Agreement contained in
Exhibit 10.7, was filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, which is incorporated by reference herein.
10.8 Amended and Restated Employment Agreement between the Company
and Thomas H. McAuley dated as of November 11, 1997 was filed
as an exhibit to the Company's Form 10-K for the year ended
December 31, 1997, which is incorporated by reference herein.
10.9 Change in Control Employment Agreement between the Company and
Mary M. Thomas dated as of November 11, 1997 was filed as an
exhibit to the Company's Form 10-K for the year ended December
31, 1997, which is incorporated by reference herein.
10.10 Change in Control Employment Agreement between the Company and
W. Benjamin Jones III dated as of November 11, 1997 was filed
as an exhibit to the Company's Form 10-K for the year ended
December 31, 1997, which is incorporated by reference herein.
10.11 Change in Control Employment Agreement between the Company and
Robert E. Mitzel dated as of November 11, 1997 was filed as an
exhibit to the Company's Form 10-K for the year ended December
31, 1997, which is incorporated by reference herein.
10.12 Amended and Restated Loan Agreement, dated as of September 9,
1998, by and among the Company and NationsBank, N.A., AmSouth
Bank and First Union National Bank, as Banks, NationsBank,
N.A., as the Swing Loan Lender, and NationsBank, N.A., as the
Administrative Agent for the Banks, including the Guaranty
filed as an exhibit to the Company's report on Form 8-K dated
September 15, 1998, which is incorporated by reference herein.
85
<PAGE> 87
10.13 The Company's $100 million revolving term loan agreement dated
December 15, 1995 was filed as an exhibit to the Company's
Form 8-K dated January 2, 1996, which is incorporated by
reference herein.
10.13.1 First Amendment to Loan Agreement dated June 30, 1997 amending
the Company's $100 million revolving term loan agreement dated
December 15, 1995 was filed as an exhibit to the Company's
Quarter Report on Form 10-Q for the quarter ended June 30,
1997, which is incorporated by reference herein.
10.13.2 Second Amendment to Loan Agreement dated July 1, 1997 amending
the Company's $100 million revolving term loan agreement dated
December 15, 1995 was filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, which is incorporated by reference herein.
10.14 Form of Agreement for the Sale and Purchase of Property dated
October 30, 1992 and the letter amendment thereto dated
November 19, 1992 relative to the Company's acquisition of the
seven Dreyfus Centers was filed as an exhibit to the Company's
report on Form 8-K dated January 6, 1993 which is incorporated
by reference herein.
10.15 Agreement of Limited Partnership of IRT Partners L.P., and
Amendment No. 1 was filed as an exhibit to the Company's
report on Form 8-K dated September 15, 1998, which is
incorporated by reference herein.
10.16 Loan Agreement dated February 25, 1999 between IRT Property
Company, IRT Alabama, Inc. and General Electric Capital
Assurance Company.
10.17 Secured Promissory Note from Mary M. Thomas to IRT Property
Company dated June 18, 1998 was filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, which is incorporated by reference
herein.
10.18 Pledge Agreement by and between Mary M. Thomas and IRT
Property Company dated June 18, 1998 was filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, which is incorporated by reference
herein.
10.19 Restricted Stock Award Agreement by and between Mary M. Thomas
and IRT Property Company dated June 18, 1998 was filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, which is incorporated by
reference herein.
86
<PAGE> 88
10.20 Secured Promissory Note from W. Benjamin Jones III to IRT
Property Company dated June 18, 1998 was filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, which is incorporated by reference
herein.
10.21 Pledge Agreement by and between W. Benjamin Jones III and IRT
Property Company dated June 18, 1998 was filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, which is incorporated by reference
herein.
10.22 Restricted Stock Award Agreement by and between W. Benjamin
Jones III and IRT Property Company dated June 18, 1998 was
filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998, which is
incorporated by reference herein.
10.23 Secured Promissory Note from Robert E. Mitzel to IRT Property
Company dated June 18, 1998 was filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, which is incorporated by reference herein.
10.24 Pledge Agreement by and between Robert E. Mitzel and IRT
Property Company dated June 18, 1998 was filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, which is incorporated by reference
herein.
10.25 Restricted Stock Award Agreement by and between Robert E.
Mitzel and IRT Property Company dated June 18, 1998 was filed
as an exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998, which is incorporated by
reference herein.
10.26 Secured Promissory Note from Thomas H. McAuley to IRT Property
Company dated June 18, 1998 was filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, which is incorporated by reference herein.
10.27 Pledge Agreement by and between Thomas H. McAuley and IRT
Property Company dated June 18, 1998 was filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, which is incorporated by reference
herein.
10.28 Restricted Stock Award Agreement by and between Thomas H.
McAuley and IRT Property Company dated June 18, 1998 was
filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, which is
incorporated by reference herein.
10.29 Separation Agreement between the Company and Mary M. Thomas,
dated January 13, 1999.
11. Computation of Per Share Earnings.
21. Company Subsidiaries.
23. Consent of Arthur Andersen LLP to the incorporation of their
report included in this Form 10-K in the Company's previously
filed Registration Statements File Nos. 33-65604, 33-66780,
33-59938, 33-64628, 33-64741, 33-63523, 333-38847, 333-62435,
and 333-38847.
27. Financial Data Schedule (for SEC use only)
99. Audited Financial statements of IRT Partners L.P. as of and
for the period from inception (July 15, 1998) through December
31, 1998.
Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the fourth quarter of 1998.
87
<PAGE> 89
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
March 31, 1999 IRT PROPERTY COMPANY
By: /s/ Thomas H. McAuley
----------------------------------
Thomas H. McAuley
President &
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Thomas H. McAuley President, Chief March 31, 1999
- ---------------------------- Executive Officer
Thomas H. McAuley and Director
/s/ James G. Levy Senior Vice March 31, 1999
- ---------------------------- President, Chief
James G. Levy Accounting Officer
(Principal Financial
& Accounting Officer)
/s/ Patrick L. Flinn Director March 31, 1999
- ----------------------------
Patrick L. Flinn
/s/ Homer B. Gibbs, Jr. Director March 31, 1999
- ----------------------------
Homer B. Gibbs, Jr.
/s/ Samuel W. Kendrick Director March 31, 1999
- ----------------------------
Samuel W. Kendrick
/s/ Bruce A. Morrice Director March 31, 1999
- ----------------------------
Bruce A. Morrice
88
<PAGE> 1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") made and entered into this 25th day
of February, 1999, by and between IRT PROPERTY COMPANY, a Georgia corporation
and IRT Alabama, INC., an Alabama corporation (individually and collectively the
"Borrower"), and GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY, a Delaware
corporation ("Lender").
PRELIMINARY RECITALS
A. The Borrower consists of two (2) affiliated corporations, each
organized for the purpose of owning commercial properties.
B. The Borrower is the owner of those certain retail facilities
later defined as the "Retail Facilities."
C. Borrower has applied to Lender and Lender has agreed, pursuant
to those Loan Commitments dated October 26, 1998, as modified and amended prior
to acceptance (individually and collectively "Commitments"), to loan to Borrower
the cumulative amount of Forty Million and 00/100 ($40,000,000.00), which loan
is later defined herein as the "Loan."
D. Pursuant to the Commitments the Lender and Borrower are
entering into this Agreement to set forth the terms and conditions under which
the Loan will be made and the terms of repayment thereof.
E. The Loan will be evidenced by a series of notes in the
aggregate amount of Forty Million and 00/100 Dollars ($40,000,000.00), all as
more fully defined and set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
1. DEFINITIONS. In addition to the defined terms appearing above,
capitalized terms used in this Agreement shall have (unless otherwise provided
elsewhere in this Agreement) the following respective meanings when used herein:
"Agreement" shall mean this Loan Agreement, including all
amendments, modifications and supplements hereto and any appendices,
exhibits and schedules to any of the foregoing, and shall refer to this
Loan Agreement as the same may be in effect at the time such reference
becomes operative.
"Ancillary Agreements" shall mean any supplemental agreement,
undertaking, instrument, document or other writing executed by Borrower
as a condition to advances or funding under this Agreement or otherwise
in connection
-1-
<PAGE> 2
herewith, including, without limitation, the Loan Documents and all
amendments and supplements thereto.
"Appraisal" shall mean, as to each Property, the appraisal
delivered to the Lender under the terms of the Commitments.
"Assets" shall mean, collectively, the Retail Facilities.
"Assignment of Rents and Leases" shall mean the Assignment of
Rents and Leases executed by Borrower for each of the Retail
Facilities.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed
in the State of Georgia.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental taxes at the time due
and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Assets, (ii) the Obligations,
(iii) the Borrower's employees, payroll, income or gross receipts, (iv)
the Borrower's ownership or use of any of the Assets, or (v) any other
aspect of the Borrower's business.
"Closing Date" shall mean the actual date of the closing of
the Loan.
"Code" shall mean the Uniform Commercial Code of each
jurisdiction in which a Retail Facility is located, as in effect from
time to time.
"Collateral" shall mean the collateral covered by the
Collateral Documents.
"Collateral Documents" shall mean the following documents
given as additional security for the Loan with respect to each Retail
Facility and consisting of the following, to wit:
The Mortgages
The Assignment of Rents and Leases
The Indemnities
The UCC Financing Statements
"Environmental Indemnity" shall mean the Indemnity executed by
the Borrower to Lender indemnifying and holding the Lender harmless
against Hazardous Substances, any Release or Remedial Action.
"Event of Default" shall have the meaning assigned to such
term in Section 5.1 hereof.
-2-
<PAGE> 3
"Financing Statements" shall mean financing statements filed
under the provisions of the Code given by the parties to the Collateral
Documents as may be necessary to perfect any security interests granted
thereunder.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Retail Facilities" shall mean the following Retail Facilities
located as follows:
Chastain Square Retail
Atlanta, Georgia
A retail property consisting of approximately 74,315 square feet of
buildings on a site of approximately 386,377 square feet located at 4279 Roswell
Road, N.E., Atlanta, Georgia 30342, sometimes herein referred to as "Chastain
Square Retail."
Fairview Oaks Retail
Ellenwood, Georgia
A retail property consisting of approximately 77,052 square feet of
buildings on a site of approximately 451,804 square feet located at 129 Fairview
Road, Ellenwood, Georgia 30049, sometimes herein referred to as "Fairview Oaks
Retail."
Madison Centre Retail
Madison, Alabama
A retail property consisting of approximately 64,837 square feet of
buildings on a site of approximately 402,233 square feet located at Alabama
Highway 20 and Shelton Road, Madison, Alabama 35738, sometimes herein referred
to as "Madison Centre Retail."
Daniel Village Retail
Augusta, Georgia
A retail property consisting of approximately 164,549 square feet of
buildings on a site of approximately 709,156 square feet, located at Wrightsboro
Road, Augusta, Georgia 30909, sometimes herein referred to as "Daniel Village
Retail."
-3-
<PAGE> 4
Paulding Commons Retail
Hiram, Georgia
A retail property consisting of approximately 192,391 square feet of
buildings on a site of approximately 959,148 square feet located at 2221 Highway
278 at Highway 92, Hiram, Georgia 30141, sometimes herein referred to as
"Paulding Commons Retail."
Douglas Commons Retail
Douglasville, Georgia
A retail property consisting of approximately 97,027 square feet of
buildings on a site of approximately 443,048 square feet located at 8471 - 8515
Hospital Drive, Douglasville, Georgia 30134, sometimes herein referred to as
"Douglas Commons Retail."
Wesley Chapel Crossing Retail
Decatur, Georgia
A retail property consisting of approximately 170,792 square feet of
buildings on a site of approximately 1,004,276 square feet located at 2440-2460
Wesley Chapel Road, Decatur, Georgia 30035, sometimes herein referred to as
"Wesley Chapel Crossing Retail."
Siegen Village Retail
Baton Rouge, Louisiana
A retail property consisting of approximately 174,578 square feet of
buildings on a site of approximately 343,556 square feet located at Siegen Lane
and Interstate 10, Baton Rouge, Louisiana 70824, sometimes herein referred to as
"Siegen Village Retail."
"Lender" shall mean General Electric Capital Assurance
Company, a Delaware corporation and any future holder of all or any
portion of the Notes.
"Lien" shall mean any mortgage, deed to secure debt or deed of
trust (including any mortgage, pledge, hypothecation, assignment,
deposit arrangement, lien, Charge that becomes a lien on real property,
claim, security interest, easement or encumbrance, or preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any lease (but not including a tenant
lease of a unit within a Retail Facility made in the ordinary course of
business and in compliance with the Loan Documents) or title retention
agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the
Code or comparable law of any jurisdiction).
-4-
<PAGE> 5
"Loan" shall mean a loan to be made by the Lender to the
Borrower pursuant to this Agreement in the aggregate amount of Forty
Million and 00/100 Dollars ($40,000,000.00). The Loan is to be
evidenced by the Notes.
"Loan Year" shall mean a full calendar year of twelve (12)
months commencing on February 1 of each year and ending January 31 of
the next year and including in the first Loan Year any days before
February 1, 1999.
"Loan Documents" shall mean this Agreement, the Notes, the
SNDAs, the Collateral Documents, and all other agreements, instruments,
documents and certificates, including, without limitation, pledges,
powers of attorney, consents, assignments, contracts, notices, and all
other written matter whether heretofore, now or hereafter executed by
or on behalf of the Borrower and delivered to Lender, in connection
with this Agreement or the transactions contemplated hereby.
"Mandatory Release" shall mean the required release of a
particular Retail Facility from the lien or liens of the Mortgage at
Borrower's written request upon the payment to the Lender of the
Release Price.
"Maturity Date" shall mean the earliest of (i) February 28,
2024, or (ii) the date of acceleration of the Loan pursuant to the
terms hereof.
"Mortgages" shall mean those respective mortgages, deeds of
trust and deeds to secure debt executed by the Borrower creating a
first mortgage lien on and security interest in the individual Retail
Facility securing the respective Note for that particular Retail
Facility and those respective mortgages and deeds to secure debt
executed by the Borrower creating a second mortgage lien on and
security interest in each individual Retail Facility and securing the
Notes other than the Note secured by the first mortgage lien on such
Retail Facility.
"Notes" shall mean the series of notes executed and delivered
by the Borrower to the Lender pursuant to this Agreement in the
aggregate amount of $40,000,000.00 secured by the Mortgages and in the
respective amounts as follows:
<TABLE>
<CAPTION>
Note Amount Retail Facility
----------- ---------------
<S> <C>
$4,300,000.00 Chastain Square
$5,300,000.00 Fairview Oaks
$4,300,000.00 Madison Centre
$4,700,000.00 Daniel Village
$7,300,000.00 Paulding Commons
$5,600,000.00 Douglas Commons
$3,750,000.00 Wesley Chapel
$4,750,000.00 Siegen Retail
</TABLE>
-5-
<PAGE> 6
When the context requires each individual note shall be referred to as
"Note" or with reference to the particular Retail Facility as in
"Chastain Square Note," "Fairview Oaks Note," etc. Each of the Notes
shall be cross-defaulted to all of the other Notes, collateralized by a
first mortgage lien on and security interest in the respective Retail
Facility and cross-collateralized by a second mortgage lien on and
security interest in each of the seven other Retail Facilities.
"Obligations" shall mean all loans, advances, debts,
liabilities, and obligations, for monetary amounts (whether or not such
amounts are liquidated or determinable) owing by the Borrower to
Lender, and all covenants and duties regarding such amounts, of any
kind or nature, present or future, whether or not evidenced by any
note, agreement or other instrument arising under any of the Loan
Documents. This term includes, without limitation, all interest,
charges, expenses, attorneys' fees and any other sum chargeable to the
Borrower under any of the Loan Documents.
"Organizational Documents" shall mean in the case of the
Borrower the documents organizing and creating the corporations
consisting of the following for each such entity:
Articles of Incorporation
By-Laws
Good Standing Certificate from its state of incorporation
Certificate of Good Standing as a foreign corporation from
each state in which the Retail Facilities which it owns or
operates are located Resolutions of its Board of Directors
authorizing the incurring of the Loan and the execution and
delivery of the Loan Documents
"Permitted Encumbrances" shall mean (i) liens for taxes or
assessments or other governmental charges not yet due and payable or to
the extent that nonpayment thereof is expressly permitted by this
Agreement; and (ii) liens, restrictions, and encumbrances listed in the
title insurance policy issued in connection with each Retail Facility
insuring Lender in this transaction (including in particular tenants in
possession under unrecorded leases from whom Subordination,
Nondisturbance and Attornment Agreements are not required. The
leasehold interests of tenants from whom Subordination, Nondisturbance
and Attornment Agreements are required may be shown in the title
insurance policy as subordinate items).
"Persons" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal
or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
-6-
<PAGE> 7
"Premises" shall mean each Retail Facility from and after the
date the Borrower acquires title to such Retail Facility, including,
without limitation, all right, title and interest of the Borrower, if
any, in and to the streets, the land lying in the bed of any streets,
roads or avenues, opened or proposed, in front of, adjoining, or
abutting such land to the center line thereof, the air space and
development rights pertaining to such land and right to use such air
space and development rights, all rights of way, privileges, liberties,
tenements, hereditaments, and appurtenances belonging or in any way
appertaining thereto, all fixtures, all easements now or hereafter
benefiting such land and all royalties and rights appertaining to the
use and enjoyment of such land, including, without limitation, all
alley, vault, drainage, mineral, water, oil, and gas rights, together
with all of the buildings and other improvements now or hereafter
erected on such land, and all fixtures and equipment, furnishings,
furniture and articles of personal property appertaining thereto,
additions thereto and substitutions and replacements thereof. When the
context addresses a single property, the term "Premises" shall be
construed to refer to the single "Retail Facility," as the context
requires.
"Properties" shall mean the Retail Facilities.
"Release" shall mean the release from the lien of the Loan
Documents of a particular property under the conditions in the
Agreement.
"Title" shall mean Commonwealth Land Title Insurance Company,
255 Park Square Court, 400 Sibley Street, St. Paul, Minnesota 55101.
"Transfer" shall mean any sale, pledge, assignment, mortgage,
encumbrance, security interest, consensual lien, hypothecation,
transfer or divesture, the effect of which is to grant another an
interest in the Premises or the Undersigned, either directly or
indirectly, including an interest taken as security but not including a
tenant lease of a unit within a Retail Facility made in the ordinary
course of business and in compliance with the Loan Documents. Any
change in the legal or equitable title of the Premises or in the
beneficial ownership of a Premises whether or not of record and whether
or not for consideration shall be deemed a Transfer.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, as the same may from time to time be amended, modified or supplemented
and not to any particular section, subsection or clause contained in this
Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
-7-
<PAGE> 8
2. AMOUNT AND TERMS OF LOAN
2.1 Loan. Upon and subject to the terms and conditions hereof and
the Commitments, Lender agrees to advance to Borrower an aggregate principal
amount of $40,000,000.00 by federal wire transfer to the escrow account of Title
for disbursement in accordance with this Agreement.
2.2 Interest on the Loan. Interest shall be payable on the Loan at
the following rates:
(a) Interest Rate. During the entire term of the Loan, the
interest rate shall be at a per annum rate of six and one-half
(6.5%) ("Interest Rate"), computed in accordance with the
terms of the Notes.
(b) Default Rate. If an Event of Default occurs, then, at the
option of the Lender during the entire period during which
such Event of Default shall occur and be continuing interest
shall be payable on the whole of the unpaid principal sum at a
per annum rate of interest equal to the lesser of (i) the
maximum lawful rate of interest permitted to be paid on the
respective Notes, or (ii) eleven and one-half percent (11.5%)
per annum ("Default Rate"), whether or not the Lender has
exercised its option to accelerate the maturity of the Note(s)
and declare the entire unpaid principal balance due and
payable.
(c) Savings Clause. Notwithstanding anything to the contrary set
forth in this Section 2.2, if at any time until payment in
full of all of the Obligations, the Interest Rate payable on
any Note exceeds the highest rate of interest permissible
under any law which a court of competent jurisdiction shall,
in a final determination, deem applicable to a particular Note
(the "Maximum Lawful Rate"), then in such event and so long as
the Maximum Lawful Rate would be so exceeded, the Interest
Rate shall be equal to the Maximum Lawful Rate; provided,
however, that if at any time thereafter the Interest Rate is
less than the Maximum Lawful Rate, Borrower shall continue to
pay interest on that particular Note at the Maximum Lawful
Rate until such time as the total interest received by Lender
on that Note is equal to the total interest which Lender would
have received had the Interest Rate been (but for the
operation of this paragraph) the interest rate payable since
the initial funding of the Loan. Thereafter, the interest rate
payable on that particular Note shall be the Interest Rate
unless and until the Interest Rate again exceeds the Maximum
Lawful Rate, in which event this paragraph shall again apply.
In no event shall the total interest received by Lender on a
particular Note exceed the amount which such Lender could
lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful
Rate. In the event the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated
at a daily rate equal to the Maximum
-8-
<PAGE> 9
Lawful Rate divided by the number of days in the year in which
such calculation is made. In the event that a court of
competent jurisdiction, notwithstanding the provisions of this
Section 2.2, shall make a final determination that Lender has
received interest under any Note in excess of the Maximum
Lawful Rate, Lender shall, to the extent permitted by
applicable law, promptly apply such excess first to any
interest due and not yet paid under that Note, then to the
outstanding principal due under that Note, then to other
unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise
order.
(d) Late Charge. In the event that any payment required under the
Notes is not received by lender within ten (10) days of its
due date, the Borrower agrees to pay a late charge of five
percent (5%) of the amount of the unpaid payment to defray the
costs of the Lender incident to collecting such late payment.
This late charge shall apply individually to all payments past
due and there will be no daily pro rata adjustment. This
provision shall not be deemed to excuse a late payment or be
deemed a waiver of any other rights the Lender may have,
including the right to declare the entire unpaid principal and
interest immediately due and payable.
2.3 Prepayment. The Loan may be prepaid in whole or in part upon
payment of the Prepayment Fee set forth in the Notes. Any prepayment shall be
made on thirty (30) days advance written notice to the Lender. No Prepayment Fee
shall be required for a prepayment of principal attributable to the receipt of
proceeds of insurance or condemnation.
2.4 Single Loan. All of the obligations of Borrower arising under
this Agreement and the other Loan Documents shall constitute one general
obligation of the Borrower secured by the Lender's Lien on all of the Assets.
3. CONDITIONS PRECEDENT
3.1 Conditions to Loan. Borrower represents and warrants to Lender
that all conditions contained in the Commitment that are precedent to the
closing have been satisfied or have been waived by Lender.
4. SURVIVAL OF OBLIGATIONS
4.1 Survival of Obligations Upon Termination of Financing
Agreement. Except as otherwise expressly provided for in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair the powers,
obligations, duties, rights and liabilities of the Borrower or the rights of
Lender relating to any transaction or event occurring prior to such termination.
Except as otherwise expressly provided herein or in
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<PAGE> 10
any other Loan Document, all undertakings, agreements, covenants, warranties and
representations contained in the Loan Documents shall survive such termination
or cancellation and shall continue in full force and effect until such time as
all of the Obligations have been paid in full in accordance with the terms of
the agreements creating such Obligations, at which time the same shall
terminate.
5. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
5.1 Events of Default: The occurrence of an Event of Default under
any of the Notes or of an Event of Default under any Deed to Secure Debt or
Mortgage securing said Notes (regardless of the reason therefor) shall
constitute an "Event of Default" hereunder.
5.2 Remedies. Upon the occurrence of any Event of Default, the
Lender may declare the entire unpaid principal balance of the Loan together with
all fees and interest due and payable in full, and may, without demand,
advertisement, or notice of any kind (except such notice as may be required by
the Loan Documents) and all of which are to the extent permitted by law,
expressly waived:
(a) Enforce the payment and performance of obligations owed by the
Borrower under any of the Loan Documents and this Agreement.
(b) Enforce the provisions of this Agreement.
(c) Notify all obligors under any Collateral that the Collateral
has been assigned to the Lender and that all payments thereon
are to be made directly to the Lender or such other party as
may be designated by the Lender; settle, compromise, or
release, in whole or in part, any amounts owing on the
Collateral, or by any such obligor on any portion of the
Collateral, on terms acceptable to the Lender; enforce payment
and prosecute any action or proceeding with respect to any and
all Collateral; and where any such Collateral is in default,
foreclose on and enforce security interests in, such
Collateral by any available judicial procedure or without
judicial process and sell property acquired as a result of any
such foreclosure.
(d) Exercise all rights and remedies of a secured creditor under
the Code, including, but not limited to selling the Collateral
at public or private sale. The Lender shall give the debtor
not less than ten (10) days' notice of any such public sale or
of the date after which private sale may be held. The Borrower
agrees that ten (10) days' notice shall be reasonable notice.
At any such sale the Collateral may be sold as an entirety or
in separate parts, as the Lender may determine. The Lender
may, without notice or publication, adjourn under any
Financing Statement any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made
at any
-10-
<PAGE> 11
time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by
the Lender until the selling price is paid by the purchaser
thereof, but the Lender shall not incur any liability in case
of the failure of such purchaser to take up and pay for the
Collateral so sold and, in the case of any such failure, such
Collateral may again be sold upon like notice. The Lender may,
however, instead of exercising the power of sale herein
conferred upon it, proceed by a suit or suits at law or in
equity to collect all amounts due upon the Collateral or to
foreclose the pledge and sell the Collateral or any portion
thereof under a judgment or decree of a court or courts of
competent jurisdiction, or both.
(e) Proceed against the Borrower on one or more of the Notes.
(f) Enforce one or more of the Mortgages.
(g) Exercise any rights granted under the Loan Documents
permitting the Lender to enter into possession of one or more
of the Retail Facilities and in furtherance thereof operate
the same or engage a third party operator to enter into and
operate one or more of the Retail Facilities.
5.3 Waivers by the Borrower. Except as otherwise provided for in
this Agreement and applicable law, Borrower waives (iii) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate and
notice of acceleration, (iv) all rights to notice and a hearing prior to
Lender's taking possession or control of, or to Lender's replevy, attachment or
levy upon, the Assets or any bond or security which might be required by any
court prior to allowing Lender to exercise any of its remedies, and (v) the
benefit of all valuation, appraisal and exemption laws. The Borrower
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement, the other Loan Documents and the transactions evidenced by this
Agreement and the other Loan Documents.
5.4 Upon an Event of Default, the Lender shall have the right at
any time and from time to time, without notice, to set-off and to appropriate or
apply any and all property or indebtedness of any kind at any time held or owing
by the Lender to or for the credit of the account of the Borrower against and on
account of the obligations and liabilities of the Borrower under the Note and
this Agreement, irrespective of whether or not the Lender shall have made any
demand hereunder and whether or not said obligations and liabilities shall have
matured.
6. MISCELLANEOUS
6.1 Complete Agreement; Modification of Agreement; Sale of
Interest
(a) The Loan Documents constitute the complete agreement
between the parties with respect to the subject
matter hereof and may not be
-11-
<PAGE> 12
modified, altered or amended except by an agreement
in writing signed by the Borrower and Lender.
(b) Borrower hereby consents to Lender's sale,
assignment, transfer or other disposition, at any
time or times, of any of the Loan Documents or of any
portion thereof or interest therein, including,
without limitation, the sale of participation rights
in the Loan and Loan Documents to commercial banks,
savings banks, pension plans, savings and loan
associations, insurance companies, other financial
institutions and lenders engaged in the commercial
banking market place. The Borrower agrees to use its
best efforts to assist and cooperate with Lender in
any manner reasonably requested by lender to effect
the sale of any participation in, or any assignment
of the Loan, any of the Loan Documents or of any
portion thereof or interest therein, including,
without limitation, assistance in the preparation of
appropriate disclosure documents or placement
memoranda, provided that Borrower shall not be
required to participate in the selling process in a
manner which could rise to liability on their part
under Sections 11 or 12 of the Securities Act of 1933
or other federal or state securities laws.
(c) No amendment or waiver of any provision of this
Agreement or the Notes or any other Loan Document,
nor consent to any departure by the Borrower
therefrom, or release of any Asset from the Lien
granted to Lender hereunder, shall in any event be
effective unless the same shall be in writing and
signed by Lender, and then such waiver or consent
shall be effective only in the specific instance and
for the specific purpose for which given.
6.2 Fees and Expenses. Borrower shall pay all reasonable
out-of-pocket expenses of Lender in connection with the preparation of the Loan
Documents (including all environmental appraisals and structural appraisals and
the administration of the Loan made pursuant hereto (including the reasonable
fees and expenses of all of its counsel and advisors retained in connection with
the Loan Documents and the transactions contemplated thereby and advice in
connection therewith) and all fees and expenses of Lender. If, any time or
times, regardless of the existence of an Event of Default (except with respect
to paragraphs (a) and (d) below, which shall be subject to an Event of Default
having occurred and be continuing), Lender shall employ counsel or other
advisors for advice or other representation or shall incur reasonable legal or
other costs and expenses in connection with:
(a) any amendment, modification or waiver of, or consent
with respect to, any of the Loan Documents or advice
in connection with the administration of the Loan
made pursuant hereto or its rights hereunder or
thereunder;
-12-
<PAGE> 13
(b) any litigation, content, dispute, suit, proceeding or
action (whether instituted by Lender, the Borrower,
any Indemnitor or any other Person) in any way
relating to the Assets, any of the Loan Documents or
any other agreements to be executed or delivered in
connection herewith (including, without limitation,
any lenders' liability claim, contest, dispute, suit,
proceeding or action);
(c) any attempt to enforce any rights of Lender against
the Borrower or any other Person, that may be
obligated to Lender by virtue of any of the Loan
Documents;
(d) any attempt to verify, protect, collect, sell,
liquidate or otherwise dispose of the Assets;
then, and in any such event, the reasonable attorneys' and other parties' fees
arising from such services, including those of any appellate proceedings, and
all reasonable expenses, costs, charges and other fees incurred by such counsel
and others in any way or respect arising in connection with or relating to any
of the events or actions described in this Section shall be payable, on demand,
by Borrower to Lender and shall be additional obligations secured under this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: reasonable
paralegal fees, costs and expenses; accountants' and investment bankers' fees,
costs and expenses; court costs and expenses; photocopying and duplicating
expenses; court reporter fees, costs and expenses; long distance telephone
charges; air express charges; telegram charges; secretarial overtime charges;
and expenses for travel, lodging and food paid or incurred in connection with
the performance of such legal services. Notwithstanding anything in this
Agreement or any of the Loan Documents to the contrary, all references to the
collection of attorneys' fees and costs shall mean attorneys' fees and costs
actually incurred, and while such attorneys' fees shall be reasonable in amount,
such reasonable amount shall not be determined by the statutory provision for
attorneys' fees nor the definition of reasonable attorneys fees under OCGA
ss. 13-1-11.
6.3 No Waiver by Lender. Lender's failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement and
any of the other Loan Documents shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default by Borrower under the Loan
Documents shall not suspend, waive or affect any other Event of Default by
Borrower under this Agreement and any of the other Loan Documents whether the
same is prior or subsequent thereto and whether of the same or of a different
type. None of the undertakings, agreements, warranties, covenants and
representations contained in this Agreement or any of the other Loan Documents
shall be deemed to have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing signed by an officer of
Lender and directed to Borrower specifying such suspension or waiver.
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<PAGE> 14
6.4 Remedies. Lender's rights and remedies under this Agreement
shall be cumulative and non-exclusive of any other rights and remedies which
Lender may have under any other agreement, including, without limitation, the
Loan Documents, by operation of law or otherwise.
6.5 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES TRIAL BY JURY AND
RIGHTS OF SET-OFF IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT
HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN
BORROWER AND THE LENDER. BORROWER CONFIRMS THAT THE FOREGOING WAIVERS ARE
INFORMED AND FREELY MADE.
6.6 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF GEORGIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
6.7 CONSENT TO JURISDICTION AND VENUE; SERVICE OF PROCESS.
BORROWER AGREES THAT, IN ADDITION TO ANY OTHER COURTS THAT MAY HAVE JURISDICTION
UNDER APPLICABLE LAWS, ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE COMMENCED IN ANY STATE
OR FEDERAL COURT LOCATED IN THE STATE OF GEORGIA, AND BORROWER CONSENTS AND
SUBMITS IN ADVANCE TO SUCH JURISDICTION AND AGREES THAT VENUE WILL BE PROPER IN
SUCH COURTS ON ANY SUCH MATTER. THE CHOICE OF FORUM SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH
FORUM, OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME, IN
ANY APPROPRIATE JURISDICTION.
6.8 Notices. Any notices and other communications permitted or
required by the provisions of this Mortgage (except for telephonic notices
expressly permitted) shall be in writing and shall be deemed to have been
properly given or served by depositing the same with the United States Postal
Service, or any official successor thereto, designated as Registered or
Certified Mail, Return Receipt Requested, bearing adequate postage, or delivery
by reputable private carrier such as Federal Express, Airborne, DHL or similar
-14-
<PAGE> 15
overnight delivery service, and addressed as hereinafter provided. Each such
notice shall be effective upon being deposited as aforesaid. The time period
within which a response to any such notice must be given, however, shall
commence to run from the date of receipt of the notice by the addressee thereof.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given shall be deemed to be receipt of
the notice sent. By giving to the other party hereto at least ten (10) days'
notice thereof, either party hereto shall have the right from time to time and
at any time during the term of this Mortgage to change its address and shall
have the right to specify as its address any other address within the United
States of America.
Each notice to Lender shall be addressed as follows:
General Electric Capital Assurance Company
P. O. Box 490
Seattle, Washington 98111-0490
ATTN: Real Estate Department
Each notice to Borrower shall be addressed as follows:
IRT Property Company
200 Galleria Parkway, Suite 1400,
Atlanta, Georgia 30339
IRT Alabama, Inc.
200 Galleria Parkway, Suite 1400,
Atlanta, GA 30339
6.9 Survival. The representations and warranties in this Agreement
shall survive the execution, delivery and acceptance hereof by the parties
hereto and the closing of the transactions described herein or related hereto.
6.10 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
6.11 Counterparts. It is understood and agreed that this Agreement
may be executed in several counterparts, each of which shall, for all purposes,
be deemed an original and all of such counterparts, taken together, shall
constitute one and the same agreement, even though all of the parties hereto may
not have executed the same counterpart of this Agreement.
6.12 Siegen Village Tract. Borrower and Lender acknowledge that
Borrower may sell a tract of land adjacent to Siegen Village Retail. In the
event of such a sale, Lender shall cooperate in good faith with Borrower for the
purpose of creating such use restrictions and easements between Siegen Village
Retail and the adjacent parcel as Borrower deems reasonable or necessary to
satisfy the business and/or legal requirements
-15-
<PAGE> 16
of Borrower and/or the purchaser of the adjacent tract, including those with
respect to use restrictions, parking, ingress and egress and easements necessary
to comply with applicable law or to provide utility services to either Siegen
Village Retail or the adjacent tract. All such easements may be expressly made
superior to the Mortgage.
Executed by the parties hereto.
IRT PROPERTY COMPANY
By: /s/ Kip R. Marshall
---------------------------------
Its: Senior Vice President
---------------------------------
IRT ALABAMA, INC.
By: /s/ W. Benjamin Jones III
---------------------------------
Its: Vice President
---------------------------------
GENERAL ELECTRIC CAPITAL
ASSURANCE COMPANY
By: /s/ Janet M. Aaron
---------------------------------
Its: Vice President
---------------------------------
-16-
<PAGE> 1
SEPARATION AGREEMENT
This Separation Agreement is made and entered into by and between IRT
director and officer, Mary M. Thomas ("Thomas"), on her own behalf, and IRT
Property Company on behalf of the Company, its other directors and officers,
agents, successors and assigns (collectively referred to herein as "IRT").
1. After discussion with IRT President Thomas H. McAuley
regarding the business changes desired by McAuley and the Board of Directors,
and the cooperation requested from Thomas concerning this and future matters,
Thomas has agreed to tender her resignation from the company and from the Board
of Directors effective December 31, 1998. In consideration of such action and
the promises made by Thomas in this Agreement and the actions to be taken by
her, IRT agrees to the following:
(a) Thomas's current salary level and benefits will
remain in effect until December 31, 1998;
(b) A separation/transition incentive in the amount of
$202,000.00 will be paid to Thomas on or before the 19th day of January 1999;
(c) To the extent legally allowed, the company will
match up to $10,000.00 in contributions by Thomas to the company 401K plan in
1999. Should the company determine such a match is not allowed, this amount
will be paid to Thomas as soon as practicable but no later than December 31,
1999;
(d) For purposes of continuance of dental and health
insurance Thomas will make a COBRA election immediately after December 31,
1998, and the company will pay directly all such premiums for medical and
dental insurance through December 31,
-1-
<PAGE> 2
1999. The company will likewise, for one year period only, expend an amount of
money equal to the per capita premium it is currently paying for IRT senior
executives for group life and disability, to procure whatever amount of life
and disability insurance for Thomas such premium amount will cover. To the
extent practicable, Thomas will be offered proposed allocations between various
life and disability policies for her designation;
(e) On January 31, 1999, Thomas will be vested for 10%
of her "IRT Restricted Stock grant" pursuant to the IRT Restricted Stock Award
Agreement of June 18, 1998. The remainder of any of Thomas's "restricted stock"
and any rights thereto are forfeited;
(f) The $250,000.00 IRT Stock Purchase loan, previously
given to Thomas (Promissory Note dated June 18, 1998) will be extended until
December 31, 1999, but Thomas will pay for all interest payments and accrued
interest under the terms of the Loan. In the event Thomas desires, on or before
December 31, 1999, to sell to IRT the 23,952 shares of IRT stock currently held
as collateral, and retire the underlying note, IRT agrees to repurchase those
shares of stock for $10.437541 per share (the original purchase price);
(g) Any benefits available to departing employees, or
former employees, if any, under the IRT 1989 Stock Option Plan and the IRT Key
Employee Stock Option Plan, shall be available to Thomas under the terms of the
Plans;
(h) The company will provide to Thomas, for one dollar
or less the Compaq computer and printer presently in Thomas' office with any
nonproprietary software;
(i) The company will reimburse Thomas up to $600.00 for
basic and advanced computer classes taken in the first nine months of 1999;
- 2 -
<PAGE> 3
(j) The company will provide reasonable out-placement
services through Transition Solutions, Inc. until either June 30, 1999 or until
the date upon which Thomas is re-employed, which ever is earlier, as well as
provide a letter of reference emphasizing her strongest skills, should she so
desire; and
(k) As Thomas has returned to IRT, at the time of her
resignation, the automobile she was driving, the company will pay Thomas the
sum of $10,000.00 on or before the 19th day of January, 1999 for transition
transportation costs.
2. In consideration of the payments, benefits, and mutual
promises and obligations herein described pursuant to this agreement, the
parties as referenced below agree as follows:
(a) the parties hereby fully release and discharge each
other, (IRT to include its past and present officers, shareholders, directors,
agents and representatives) of and from all claims of any type and nature
whatsoever, which each now have or claims to have, or might hereafter have or
claim, under any federal, state or local laws, or the common laws of any state.
This release is intended by both parties to be comprehensive to preclude any
future claims or legal actions, and to completely eliminate the risk and
expense and inconvenience to the parties from any such actions. The parties
represent that they have not filed, and will not file, any complaint, charge or
lawsuit against each other; that they know of no basis for any such claims, and
this document is signed in good faith to resolve any and all matters between
the parties. In particular, Thomas also acknowledges she has asserted no
informal legal claims concerning any aspect of her past work duties,
employment, or separation; and avows she has no evidence whatsoever of any
illegal actions concerning any
- 3 -
<PAGE> 4
aspect of her employment or the company's dealings with her; and understands
that in view of this stipulated absence of any issues of contention and the
parties' mutual belief in that fact, the Board is extending substantial
consideration to Thomas. This release is not intending to include or apply to a
breach of the terms of this Agreement by any party. Further, this release is not
intended to apply, nor does it include a release of claims for defense,
indemnity, or contribution by Thomas against IRT or its insurers in the event
any entity or individual asserts a claim against Thomas as a result of her
status as an employee, officer, or director of IRT, and allegedly arising out
of, or relating to, any conduct, duty, action or failure of conduct, duty or
action on the part of Thomas as employee, officer and/or director of IRT;
(b) Thomas will provide full cooperation and transition
of her former employment duties and, after her departure, will respond within a
reasonable business time frame to all reasonable inquiries from company
personnel concerning any financial, legal, or securities issues which may arise
following her departure from active employment. In the event Thomas is required
by IRT to spend any significant time reviewing documents, ledgers, or other
data or information, or is required to meet with company personnel or their
agents or attorneys about a particular matter, Thomas will be compensated by
the Company at the rate of $200.00 per hour, which amount represents an amount
commensurate with consultants with the experience and background of Thomas, and
further, bears direct relation to Thomas's overall compensation while an
officer of the Company and on the Board;
(c) Thomas will keep the terms, amount and facts of this
separation Agreement confidential and shall not disclose them except to
immediate family members, her attorneys, accountants, financial and tax
advisers who, in turn, agree in writing to the
- 4 -
<PAGE> 5
confidential provisions in paragraph 5. Nothing herein, however, shall prohibit
Thomas from discussing the Agreement or disclosing the terms hereof pursuant to
lawful subpoena, other court order, or federal regulation, or in the event a
dispute arises between the parties as a result of breach or alleged breach of
this agreement;
(d) Thomas agrees that she will not use any information
confidential to IRT in a way that would likely be detrimental to IRT's business
relationships;
(e) Thomas agrees to return to IRT all company property
belonging to IRT which was obtained by Thomas as a consequence of her
employment with IRT; and
(f) Thomas agrees not to make any public statement to
media or investor groups or to engage in any private conduct which may
reasonably be expected to have the effect of harming the reputation or business
of IRT, including its officers and directors.
3. EEOC regulations require a specific notice to Thomas, given
here, that her waiver of claims includes all claims under the Age
Discrimination in Employment Act. While only this statute is specifically
mentioned, it is understood by the parties that the release in paragraph 2(a)
above does in fact cover all claims of all types including all conceivable
claims of employment discrimination.
4. It is stipulated that this Agreement and Release, if signed,
is executed by Thomas knowingly and voluntarily, and that the financial
consideration stated above is acknowledged as not being compensation previously
owed to Thomas. Thomas has twenty-one days to consider the merits of this
agreement with her own professional counsel, and will have seven days after any
such written acceptance to revoke, in writing, such
- 5 -
<PAGE> 6
acceptance. Any earlier date in this agreement on which a payment or action by
IRT is required, shall be extended until the day after this "revocation date"
(i.e. seven days from the date of initial written acceptance) to insure any
payments made or actions taken by IRT, are done pursuant to a valid agreement
which has not been subsequently revoked.
5. This Agreement and the terms hereof shall be binding upon and
inure to the benefit of each of the parties hereto and each of their heirs,
executors, conservators, administrators, successors and assigns, and in the
event of Thomas' death, any amounts payable to her shall be paid to her estate
or legal representative thereof. Further, the confidential nature of this
Agreement and the terms set forth in Paragraph 2(c) shall likewise be binding
upon Thomas' family member, attorneys, and tax and financial advisors.
6. Each of the parties agrees to execute any and all additional
documents necessary to effectuate the provisions of this Agreement.
7. This Agreement shall be interpreted in accordance with the
laws of the State of Georgia.
8. This Agreement constitutes the only existing and valid
agreement between the parties. This Agreement sets forth the entire Agreement
between the parties hereto and fully supersedes any and all prior agreements or
understandings between the parties pertaining to the subject matter hereof
(with the exception of the plans and benefits, and the terms thereof,
referenced and incorporated in this agreement by reference.) Thomas
- 6 -
<PAGE> 7
acknowledges that except as otherwise provided herein, no other promises or
agreements of any kind have been made to her or with her by any person
whatsoever to cause her o sign this Agreement. This Agreement can be changed or
amended only by subsequent written amendment specifically referencing this
document which is signed by the parties.
EXECUTIVE:
/s/ Mary M. Thomas
---------------------------------------
Mary M. Thomas
1/13/99
---------------------------------------
Date
IRT Property Company:
By: /s/ Thomas H. McAuley
------------------------------------
Its: CEO
-----------------------------------
1/13/99
---------------------------------------
Date
- 7 -
<PAGE> 1
Item 14
<TABLE>
<CAPTION>
EXHIBIT 11 Computation of Per Share Earnings
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Basic:
Net earnings $25,584,693 $26,112,680 $16,817,704
=========== =========== ===========
Net earnings available to common shareholders $25,584,693 $26,112,680 $16,817,704
=========== =========== ===========
Average common shares outstanding 32,940,399 31,867,743 25,749,860
=========== =========== ===========
Basic earnings per share $ 0.78 $ 0.82 $ 0.65
=========== =========== ===========
Diluted:
Net earnings $25,584,693 $26,112,680 $16,817,704
Minority interest OP unitholders 261,764 -- --
----------- ----------- -----------
$25,846,457 $26,112,680 $16,817,704
=========== =========== ===========
Net earnings available to common shareholders $25,846,457 $26,112,680 $16,817,704
=========== =========== ===========
Dilutive stock options 22,607 53,469 5,081
Dilutive stock loans 1,806 -- --
Dilutive OP Units 339,776 -- --
Average common shares outstanding 32,940,399 31,867,743 25,749,860
----------- ----------- -----------
Average diluted common shares outstanding 33,304,588 31,921,212 25,754,941
=========== =========== ===========
Basic earnings per share $ 0.78 $ 0.82 $ 0.65
=========== =========== ===========
</TABLE>
<PAGE> 1
Item 14
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 Alabama, Inc. Alabama 1997
IRT Capital Corporation Georgia 1996
IRT Partners L.P. Georgia 1998
</TABLE>
All are wholly-owned subsidiaries of the Company except IRT Capital
Corporation ("Capital Corporation") and IRT Partners L.P. ("LP"). The Company
owns 96% of Capital Corporation's non-voting common stock and 1% of its
voting stock. The Company and IRT Management Company combined, own 92.5%
of IRT Partners L.P.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated January 29, 1999 and to all
references to our firm, included in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 33-65604, 33-66780, 33-59938,
33-64628, 33-64741, 33-63523, 33-38847, 333-62435 and 333-38847.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 31, 1999
<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 YEAR ENDED
DECEMBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 344
<SECURITIES> 0
<RECEIVABLES> 59
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,416
<PP&E> 626,688
<DEPRECIATION> 75,943
<TOTAL-ASSETS> 562,259
<CURRENT-LIABILITIES> 10,077
<BONDS> 281,585
0
0
<COMMON> 33,252
<OTHER-SE> 229,522
<TOTAL-LIABILITY-AND-EQUITY> 562,259
<SALES> 0
<TOTAL-REVENUES> 79,870
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 35,524
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,709
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,585
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
</TABLE>
<PAGE> 1
EXHIBIT 99
Report of Independent Public Accountants
To IRT Partners, L.P.:
We have audited the accompanying balance sheet of IRT Partners, L.P. (a
Georgia limited partnership) as of December 31, 1998, and the related
statements of earnings, changes in partners' capital, and cash flows for the
period from inception (July 15, 1998) to December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IRT Partners, L.P., as of
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (July 15, 1998) to December 31, 1998, in conformity with
generally accepted accounting principals.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 29, 1999
<PAGE> 2
IRT PARTNERS L.P.
BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Rental properties ...................... $139,936,508
Accumulated depreciation ............... (19,099,297)
------------
120,837,211
Cash & cash equivalents ................ 1,103,387
Prepaid expenses and other assets ...... 1,268,792
------------
$123,209,390
============
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable, net .......... $ 25,963,136
Advances from affiliate, net ......... 32,990
Accrued expenses and other liabilities 1,660,334
------------
27,656,460
------------
Limited partners' capital interest
(779,385 OP Units), at redemption
value .................................. 7,793,850
Commitments and contingencies (Note 5)
Partners' Capital:
General partner ( 103,982 OP units) ... 955,529
Limited partner (9,514,844 OP units) ... 86,803,551
------------
Total partners' capital ......... 87,759,080
------------
$123,209,390
============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
1
<PAGE> 3
IRT PARTNERS L.P.
STATEMENT OF EARNINGS
For the Period from Inception (July 15, 1998)
through December 31, 1998
<TABLE>
<S> <C>
Income from rental properties ........... $7,187,107
----------
Expenses:
Operating expenses of rental properties 1,794,406
Interest on mortgages ................. 836,085
Depreciation .......................... 1,280,532
General & administrative .............. 1,438
----------
3,912,461
----------
Net Earnings ................... $3,274,646
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE> 4
IRT PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the Period from Inception (July 15, 1998)
through December 31, 1998
<TABLE>
<CAPTION>
Limited
Total Partners'
General Limited Partners' Capital
Partner Partner Capital Interest
------- ------- ------- --------
<S> <C> <C> <C> <C>
Opening balance ...... $ -- $ -- $ -- $ --
Initial capital
contributions....... 832,250 74,651,612 75,483,862
Issuance of units
for acquisitions
of real estate...... -- -- -- 7,741,100
Cash contributions for
acquisitions of real
estate ............. 112,949 11,181,958 11,294,907 --
Issuance of units for
cash ............... 7,355 675,418 682,773 52,750
Distributions ........ (29,771) (2,715,328) (2,745,099) (232,009)
Net earnings ......... 32,746 2,980,136 3,012,882 261,764
Adjustment to reflect
limited partners'
capital interest at
redemption value ... -- 29,755 29,755 (29,755)
-------- ----------- ----------- ----------
Balance at
December 31, 1998 .... $955,529 $86,803,551 $87,759,080 $7,793,850
======== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE> 5
IRT PARTNERS L.P.
STATEMENT OF CASH FLOWS
For the Period from Inception (July 15, 1998)
through December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net earnings ............................................................... $ 3,274,646
Adjustments to reconcile earnings to net cash from
operating activities:
Depreciation ........................................................... 1,280,532
Changes in accrued assets and liabilities:
Decrease in prepaid expenses and other assets ........................ 117,194
Decrease in accrued expenses and other liabilities ................... (543,824)
------------
Net cash flows from operating activities................................ 4,128,548
------------
Cash flows used in investing activities:
Additions to real estate investments, net .................................. (11,973,238)
------------
Net cash flows used in investing activities............................. (11,973,238)
------------
Cash flows used in financing activities:
Cash distributions paid .................................................... (2,241,585)
Principal amortization of mortgage notes payable ........................... (138,235)
Net advances from affiliate ................................................ 32,990
Issuance of units for cash ................................................. 11,294,907
------------
Net cash flows from financing activities ............................... 8,948,077
------------
Net increase in cash and cash equivalents .................................... 1,103,387
Cash and cash equivalents at beginning of period ............................. --
------------
Cash and cash equivalents at end of period ................................... $ 1,103,387
============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ..................................... $ 662,997
============
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE> 6
IRT PARTNERS L. P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(Unaudited with respect to square footage)
1. 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.
The Company is the sole general partner of LP and maintains an
indirect partnership interest through its wholly-owned subsidiary, IRT
Management Company. The Company initially contributed 20 shopping
centers, related assets and cash to LP in exchange for 8,486,217
limited partnership units ("OP Units"). Subsequently, the Company was
issued additional OP Units, in exchange for cash contributions, to fund
the acquisition of additional shopping centers. At December 31, 1998,
the Company was a 92.5% economic owner of LP.
LP was formed by the Company in order to enhance the Company's
acquisition opportunities by offering potential sellers the ability to
engage in tax deferred sales of properties in exchange for OP Units. In
August 1998, certain unaffiliated persons contributed their interests
in three Florida shopping centers to LP in exchange for 774,110 OP
Units.
LP is obligated to redeem each OP Unit held by a person other
than the Company, at the request of the holder, for cash equal to the
fair market value of a share of the Company's common stock at the time
of such redemption, provided that the Company may elect to acquire any
such OP Unit presented for redemption for one common share or cash.
Such limited partnership interest held by persons unaffiliated with the
Company is reflected as "Limited Partners' Capital Interest," in the
accompanying balance sheets at the cash redemption amount on the
balance sheet date.
Federal income tax laws require the Company, as a REIT, to
distribute 95% of its ordinary taxable income. LP makes distributions
to holders of OP units to enable the Company to satisfy this
requirement.
As of December 31, 1998 LP owns 25 neighborhood and community
shopping centers located in Florida, Tennessee and North Carolina. The
shopping centers are anchored by necessity-oriented retailers such as
supermarkets, drug stores and/or discount variety stores.
5
<PAGE> 7
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Income Recognition-
LP follows the policy of suspending the accrual of income on
any investments where interest or rental payments are delinquent 60
days or more. Percentage rental income is recorded upon collection.
Depreciation-
LP provides depreciation on buildings and other improvements
on the straight-line basis over their estimated useful lives. Such
lives are from 16 to 40 years for buildings and 6 years for
improvements. Maintenance and repairs are charged to expense as
incurred, while significant improvements are capitalized.
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 and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash Equivalents-
LP considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Recent Accounting Pronouncements-
In 1998 LP adopted SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 established standards for reporting and
disclosing comprehensive income (defined as revenues, expenses, gains
and losses that under generally accepted accounting principles are not
included in net income) and its components. As of December 31, 1998 LP
had no items of other comprehensive income.
In 1998 LP adopted SFAS No.131, "Disclosures about
6
<PAGE> 8
Segments of an Enterprise and Related Information". SFAS No. 131
established standards for reporting financial and descriptive
information about operating segments in annual financial statements.
Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. LP's chief operating
decision maker is its senior management group.
LP owns and operates retail shopping centers in three states
in the southeast. Such shopping centers generate rental and other
revenue through the leasing of shop spaces to a diverse base of
tenants. LP evaluates the performance of each of its shopping centers
on an individual basis. However, because each of the shopping centers
have similar economic characteristics and tenants, the shopping centers
have been aggregated into one reportable segment.
In June 1998 SFAS No.133, "Accounting for Derivative
Instruments and Hedging Activities" was issued establishing accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts)
be recorded in the balance sheet as either an asset or liability
measured at its fair market value. SFAS No. 133 requires that changes
in the derivatives fair market value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement
and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
LP has never used derivative instruments or hedging activities.
Income Taxes-
No federal or state income taxes are reflected in the
accompanying financial statements since LP is a partnership and its
partners are required to include their respective share of profits and
losses in their income tax returns.
7
<PAGE> 9
3. RENTAL PROPERTIES:
Rental properties are comprised of the following:
<TABLE>
<CAPTION>
1998
December 31,
------------
<S> <C>
Land related to buildings
and improvements ............................................... $ 30,760,904
Buildings & improvements ......................................... 109,175,604
------------
$139,936,508
============
</TABLE>
Minimum base rentals on noncancellable operating leases for
LP's shopping center investments for the next five years and thereafter
are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $14,394,562
2000 13,091,637
2001 11,211,991
2002 9,662,647
2003 8,376,385
Thereafter 40,606,421
-----------
$97,343,643
===========
</TABLE>
1998 SHOPPING CENTER ACQUISITIONS
(IN THOUSANDS, EXCEPT SQUARE FOOTAGE)
<TABLE>
<CAPTION>
Total OP Units
Date Rentable Initial Cash Issued Mortgages
Acquired Property Name City, State Sq Ft Cost Paid by LP(1) Assumed Principal Tenants
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/01/98 Charlotte Square Port Charlotte, FL 96,188 $ 6,006 $ 159 1,637 $ 4,210 Publix
08/01/98 Riverside Square Coral Springs, FL 103,241 13,025 316 3,846 8,863 Publix
Eckerd Drugs
08/01/98 Tamarac Town Square Tamarac, FL 123,385 10,652 678 2,882 7,092 Publix
Eckerd Drugs
08/25/98 Treasure Coast Vero Beach, FL 133,781 11,094 5,157 5,937 Winn-Dixie
TJX
12/10/1998 Bay Pointe Plaza St. Petersburg, FL 97,390 6,388 6,388 Publix
Eckerd Drugs
--------------------------------------------------
553,985 $47,165 $12,698 8,365 $26,102
==================================================
</TABLE>
(1) Value of OP Units determined based on value of common stock on date of
acquisition.
4. MORTGAGE NOTES PAYABLE:
Mortgage notes payable are collateralized by various real
estate investments having a net carrying value of approximately
$40,622,000 as of December 31, 1998. These notes have stated interest
rates ranging from 8.00% to 9.1875% and are due in monthly installments
with maturity dates ranging from 2009 to 2015.
8
<PAGE> 10
Principal amortization and balloon payments applicable to
mortgage notes payable in the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
Principle Balloon
Year Amortization Payments Total
---- ------------ -------- -----
<S> <C> <C> <C>
1999 $ 343,018 $ -- $ 343,018
2000 373,554 -- 373,554
2001 406,822 -- 406,822
2002 443,068 -- 443,068
2003 482,560 -- 482,560
Thereafter 7,246,762 15,071,457 22,318,219
----------- ----------- -----------
$ 9,295,784 $15,071,457 $24,367,241
Interest Premium 1,595,895
-----------
$25,963,136
===========
</TABLE>
Based on the borrowing rates currently available to the
Company for mortgages with similar terms and maturities, the estimated
fair value of mortgage notes payable was approximately $28,267,000 at
December 31, 1998.
5. ENVIRONMENTAL INVESTIGATIONS:
LP is not aware of any environmental problems on the
properties owned. While LP has not obtained phase one environmental
surveys on those properties owned by LP and located in North Carolina,
and the fact that phase one environmentals which have been obtained
provide no assurance that properties will not be adversely affected in
the future by environmental problems, LP presently believes that there
are no environmental matters that are reasonably likely to have a
material adverse effect on LP's financial position.
9
<PAGE> 11
6. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITOR'S REPORT:
On February 26, 1999, LP acquired a shopping center in Miami,
Florida for total consideration of approximately $9,908,000, including
approximately $100,000 of acquisition costs. The consideration was the
assumption of an existing mortgage of approximately $5,742,000 and cash
of approximately $4,166,000.
On March 15, 1999, LP acquired a shopping center in Atlanta,
Georgia for approximately $5,596,000 cash, consisting of the initial
purchase price of $5,325,000, $246,000 of capital expenditures and
$25,000 of acquisition costs.
-10-
