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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - 12G/A
AMENDMENT NUMBER 2
AMENDMENT TO GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
SEC FILE NUMBER 000-06181
J.C. NICHOLS COMPANY
(Exact name of registrant as specified in its charter)
Missouri 44-0371610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
310 Ward Parkway, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 561-3456
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.01 per share.
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TABLE OF CONTENTS
PAGE NO.
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 3. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 33
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY . . . . . . . . . 35
ITEM 6. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . 37
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . 39
ITEM 8. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 40
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . 42
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . . 43
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED . . . . . 43
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . 46
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . 46
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE . . . . . . .. . . . . . . . . . . . . . . . 47
ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS,
AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . 47
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THE COMPANY HAS RECENTLY COMPLETED AN 80-TO-1 STOCK SPLIT. AS A RESULT,
THE COMPANY HAS 4,852,400 SHARES OF ITS COMMON STOCK OUTSTANDING. ALL SHARE
AND PER SHARE INFORMATION CONTAINED HEREIN AND IN THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO HAS BEEN ADJUSTED TO REFLECT THE IMPACT OF THIS
SPLIT UNLESS OTHERWISE INDICATED.
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE
SUBJECT TO FUTURE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY
DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN. SOME OF THE IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHER THINGS, CHANGES FROM THE COMPANY'S ANTICIPATED LEVELS OF
RENTAL INCOME OR PROPERTY-RELATED EXPENSES, WHETHER DUE TO FUTURE NATIONAL OR
REGIONAL ECONOMIC AND COMPETITIVE CONDITIONS, AN ADVERSE TREND IN THE REAL
ESTATE MARKETS IN WHICH THE COMPANY OWNS PROPERTIES, LACK OF SUCCESS OF ANY OF
THE COMPANY'S DEVELOPMENTS, A LACK OF TENANT ACCEPTANCE OF THE PROPERTIES OF THE
COMPANY, CHANGES IN TAX RATES OR INTEREST RATES, OR OTHER UNCERTAINTIES, ALL OF
WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE
COMPANY.
ITEM 1. BUSINESS
The J.C. Nichols Company (the "Company" or "JCN") is a real estate
operating company engaged in the acquisition, development, ownership, and
management of a diversified portfolio of real estate properties, principally
located in the Kansas City, Missouri metropolitan area. The Company's real
estate development activities were initiated in 1902. The Company was
incorporated in Missouri in 1908 and its principal office has been at 310 Ward
Parkway, Kansas City, Missouri since July 1930.
The Company is best known for its development, ownership, and management of
the Country Club Plaza area (the "Plaza"), a prestigious shopping,
entertainment, and office district of Spanish architecture containing
approximately 1,100,000 square feet of retail space (including basement space)
and approximately 1,100,000 square feet of office space. The Plaza is
surrounded principally by single family residences, condominiums, and upscale
apartments, many of which are owned by the Company. The Plaza is generally
regarded as the oldest major suburban shopping center in the United States.
At December 31, 1995, the portfolio of real estate assets of JCN and
consolidated subsidiaries included 54 retail, office and industrial properties
with over 4.6 million square feet of leasable space, approximately 2,400
residential apartment units, three residential subdivisions under development,
and over 1,000 acres of land held for development.
In addition, the Company owns equity interests in twelve active
partnerships whose holdings are not consolidated with the financial statements
of JCN. The largest of these interests relates to property in the Des Moines,
Iowa area, which, at December 31, 1995, consisted of approximately 600,000
square feet of office space, 200,000 square feet of industrial space, and 110
acres to be developed.
Management estimates the Company's real estate holdings had a total fair
market value of approximately $494.4 million at December 31, 1995, including the
Company's percentage interest in the real estate holdings of consolidated and
unconsolidated subsidiaries, but exclusive of any related liabilities or
potential liquidation costs. See Item 3, "Properties" for an explanation of
this estimate and the assumptions used in preparing the estimate.
Senior management of the Company has changed significantly since May 1995.
This change occurred as a result of a number of factors described below under
"Development of the Business" and in Item 8, "Legal Proceedings." The new
management team is focusing on reducing the Company's financial leverage,
enhancing the condition and revenue stream of the Company's existing properties,
developing
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selected strategic properties, and generally returning the Company to its
historically successful mission of creating value for its shareholders through
the development, ownership, and management of high quality, diverse real estate
properties. Management expects to concentrate primarily on the development,
ownership, and management of the retail and residential segments of the real
estate industry. See "Description of the Business" in this Item.
DEVELOPMENT OF THE BUSINESS.
The Company was founded by Mr. J.C. Nichols, who began developing real
estate in the Kansas City area following his return from Harvard University in
1902. Mr. Nichols was captivated by the real estate development theories of
landscape architect Frederick Law Olmsted, a designer of New York's Central
Park. To pursue these theories, Mr. Nichols formed a syndicate to purchase land
for development in 1904 and incorporated the Company as a Missouri corporation
on December 8, 1908.
Mr. J.C. Nichols died in 1950 and management of the Company passed to his
son, Miller Nichols, who led the Company until his retirement as Chairman of the
Board in July 1988. During the management tenure of Miller Nichols, the Company
followed a strategy of completing "Quality of Life" mixed use community
developments that combined shopping, recreation (generally golf courses), and
upscale residences. From 1950 until the late 1980s (approximating the date of
Miller Nichols' retirement), the Company continued its aggressive purchase,
development and management of Kansas City area properties, as well as hotels in
Chicago and San Francisco. During this period, the Company developed
approximately 50 subdivisions, 15 shopping centers, and 30 office buildings and
built or acquired over 2,000 apartment units, several hotels, and two industrial
parks. Most of these shopping centers and office buildings are still owned by
the Company today. Following Miller Nichols' sale of shares to the Company's
Employee Stock Ownership Trust ("ESOT") and subsequent retirement, the
Company's development activities slowed significantly.
In 1987, a subsidiary of the Company entered into various contracts with
the City of St. Petersburg, Florida (the "City") for the redevelopment and
construction of certain parking, commercial and retail facilities to be known
as Bay Plaza. Due to a delay in significant development activities, the
Company ceased capitalization of interest, property taxes, insurance, and
other development costs in 1990, and reduced the properties' carrying value
by $23.8 million to $3.0 million at December 31, 1994. In November 1995, the
Company informed the City that it had ceased plans to develop the properties
and on December 31, 1995, management reduced the carrying value of the Bay
Plaza assets, net of liabilities, to $0. JCN intends to sell properties
owned by it within the Bay Plaza development.
The Company sold its hotel division in 1989, but retained its leasehold
interest in the Raphael Hotel of San Francisco. The underlying lease of the
Raphael Hotel of San Francisco expires on September 30, 1996, and was not
renewed. In the opinion of management, the impact of this lease expiration is
not material to the Company's consolidated financial position or results of
operations.
In 1991, the Company purchased a 5% limited partnership interest in Raphael
Hotel Group, L.P, the partnership to which the hotel division was originally
sold. At the same time, the Company also purchased a 50% interest in a
management agreement for a hotel in Kansas City managed by the limited
partnership. The contract has provided revenues to the Company of approximately
$259,000 and $304,000 for the years ended December 31, 1995 and 1994,
respectively, and expires in December 1997.
In 1989, the Company acquired a 50% interest in a joint venture, Kantel,
L.P. (the "Venture"), with an affiliate of The Ritz-Carlton Hotel Company (the
"Ritz") to convert an existing hotel owned by the Company to a Ritz-Carlton.
The Company borrowed $70 million from an unaffiliated entity, Teachers
Insurance and Annuity Association of America, on a non-recourse basis using
the assets of the hotel as collateral. The Company then advanced funds to
the Venture for the conversion. As a result of low
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occupancy, the hotel did not meet expected operating results or cash flows, and,
accordingly, the Venture was unable to meet its obligations under the debt and
lease agreements. In September 1993, the Company acquired an additional 49%
interest in the Venture from the Ritz when the Ritz assigned $7.5 million of
mortgage notes to the Company and assigned to the Company its interest in the
Venture. The Company paid no amounts for the additional interest in the
Venture. The notes acquired by the Company were secured by a second mortgage
on improvements to the hotel and subsequently proved worthless.
On February 22, 1994, the lender foreclosed on the hotel, and the Company
was released from its obligations under the non-recourse debt and from its
interest payable obligation aggregating approximately $14.1 million which had
been accrued through December 31, 1993. In 1994, the Company recognized a gain
(net of taxes) of approximately $29.1 million as an extraordinary item related
to gain on extinguishment of debt. The transaction also resulted in the
reduction of the Company's revenue producing properties by approximately $23.9
million ($10.6 million, net of accumulated depreciation) and the segregation of
$5.6 million and $1.7 million of operating losses in 1993 and 1994,
respectively, related to the hotel's operation into a separate classification in
the Company's consolidated statements of operations.
The 5% ownership in Raphael Hotel Group, L.P. and the 50% interest in the
hotel management agreement for the Kansas City hotel that expires in 1997, as
discussed above, represent the Company's only remaining involvement after
September 1996 in either the ownership or management of hotels.
In 1987, the Company formed an Employee Stock Ownership Trust ("ESOT"). In
1988, the ESOT purchased 133,684 shares (pre-split) of the Company's stock (69%
of the then outstanding shares), the majority of which was acquired from
descendants of the Company's founder (including Mr. Miller Nichols) and his
business associates. These shares were purchased for $98.2 million, with $50.0
million borrowed from an outside source and guaranteed by the Company and $48.2
million borrowed directly by the Company and advanced to the ESOT. At December
31, 1987 (prior to the management transition and ESOT transaction), the
Company's interest bearing debt was approximately $198.8 million. By December
31, 1988, the Company's direct and guaranteed interest bearing debt had
increased by approximately $129.9 million to $328.7 million, while the Company's
assets had increased by $26.3 million, of which $15.0 million were classified as
assets related to discontinued operations. In January 1991, the Company
effected the retirement of the remaining $45.8 million of the ESOT's debt to
outside lenders, although the ESOT remained indebted to the Company.
In May 1992, a limited partnership (the "Bowser Partnership") controlled by
the Company's former president, acquired 125,242 unallocated shares (pre-split)
of the Company's common stock from the ESOT for $124.5 million by the
assumption of existing principal indebtedness of $94.3 million and accrued
interest and other advances of $30.2 million owed by the ESOT to the Company.
These shares were later conveyed back to the Company as treasury stock and the
debt to the Company extinguished as a part of the settlement agreement (the
"Settlement Agreement") referred to in Item 8, "Legal Proceedings."
In late 1994, various shareholders attempted to restructure the Company and
the Company's shares were the subject of various purchase offers. The then
current management and board of directors did not accept any of these offers.
Concurrently, as a result of certain transactions occurring among JCN, former
executive officers, the ESOT, and others, JCN became involved in various legal
actions as plaintiff and defendant. In May 1995, the long time chief executive
officer and chief financial officer each resigned. In addition, by virtue of
certain directors resigning, others not standing for re-election, appointment of
new directors to the Board, and election of new directors by the shareholders at
the Company's December 13, 1995 annual meeting, a majority of the Company's
directors, following the meeting, were new to the Board.
As a result of the litigation and certain transactions among JCN, former
executive officers, the ESOT, and others, JCN and other parties entered into the
Settlement Agreement. The result of the litigation and this agreement was the
installation of a new management team, the conveyance to the Company from the
Bowser Partnership of 125,242 shares (pre-split) of the Company's common
stock (approximately 64%
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of the then outstanding shares) as treasury stock in exchange for extinguishment
of a $94.3 million note receivable and accrued interest and advances thereon,
and the rescinding and unwinding of several transactions and conveyances
involving the exchange of properties and stock as described in the Settlement
Agreement. See Item 8, "Legal Proceedings" for a detailed explanation of the
Settlement Agreement.
Following this settlement, the new management team is initially focusing on
reducing the Company's financial leverage, enhancing the condition and revenue
stream of the Company's existing properties, developing selected strategic
properties and generally returning the Company to its historically successful
mission of creating value for its shareholders through the aggressive ownership,
management and development of high quality, diverse real estate properties.
Management expects to concentrate primarily on the development, ownership, and
management of the retail and residential segments of the real estate
industry. Management expects to accomplish the foregoing goals by improving
the efficiency of its operations by establishing performance benchmarks and
streamlining current operations, by using positive cash flow from operations
and cash on hand to pay down existing mortgage indebtedness, by refinancing
existing mortgage indebtedness when favorable market opportunities permit,
and by identifying strategic opportunities for additional development. See
"Description of the Business" in this Item.
DESCRIPTION OF THE BUSINESS.
JCN is a diversified real estate operating company engaged in the
acquisition, development, ownership, and management of income producing
properties located primarily in the Kansas City, Missouri metropolitan area.
These properties include retail centers, apartments, office buildings,
industrial properties, and mixed-use projects. The Company is also engaged in
the development and sale of land for residential and commercial use.
At December 31, 1995, JCN and consolidated subsidiaries owned 18
retail centers consisting of approximately 2,600,000 square feet of retail
space occupied by approximately 550 tenants, 14 apartment communities
(including a majority interest in a partnership owning a Des Moines, Iowa
area apartment complex) representing approximately 2,400 residential
apartment units, 33 office properties (including majority interests in
partnerships owning seven Des Moines, Iowa area office buildings) consisting
of approximately 1,629,000 square feet of office space occupied by over 500
tenants, three industrial and warehouse properties consisting of
approximately 379,000 square feet of space occupied by approximately 150
tenants, three developments containing approximately 200 lots available for
sale, and over 1,000 acres available for residential and commercial
development, as well as complete or partial ownership in several other minor
properties. JCN also owns 15 unsold units in its Alameda Towers condominium
project, and continues to own assets now held for sale which are a part of
the Company's discontinued Bay Plaza project in St. Petersburg, Florida. In
the opinion of management, all of the properties of the Company and its
consolidated and unconsolidated subsidiaries are adequately insured.
The Company owns an equity interest in twelve active partnerships
whose holdings are not consolidated with the financial statements of JCN.
The largest of these holdings are the Company's approximately 50% interest in
six partnerships in the Des Moines, Iowa area. At December 31, 1995, these
partnerships owned nine buildings containing approximately 600,000 square
feet of offices, 200,000 square feet of industrial space and 110 acres to be
developed. The 110 acres are located in three separate developments in the
Des Moines, Iowa area. Eighty acres are owned by Dallas County Partners, a
general partnership, and are planned for development as an office complex
with related retail development and, perhaps, a hotel. Approximately 50,000
square feet of speculative office space was started and completed in 1996
and, when that space is significantly leased, additional office space will be
constructed. Management of the Company expects additional office
construction to occur in 1997. Approximately 18 acres are held by Fountain
III, a general partnership, and are also planned for office and related
retail development. The partnership started construction of the necessary
infrastructure and expects within the next three years to build approximately
60,000 square feet of restaurant and retail space suitable for an office
development. The remaining 12 acres are owned by Meredith Drive Associates,
L.P., a limited partnership. Management of the Company expects such property
to be developed within three to five years as an industrial park. One of the
Company's twelve partnership interests is a 40% interest in J.C. Nichols Real
Estate, a residential sales and brokerage business. J.C. Nichols Real Estate
also has an interest in an entity which owns a mortgage origination company.
Management estimates that the Company's real estate holdings had a total
fair market value of approximately $494.4 million at December 31, 1995, as
compared to a $238.5 million depreciated cost basis (including the Company's
percentage interest in the real estate holdings of consolidated and
unconsolidated subsidiaries, but exclusive of any related liabilities or
potential liquidation costs). Of the estimated $494.4 million of real estate
value held by the Company, approximately $172.5 million is in retail properties,
$99.4 million is in office and industrial properties, $74.9 million is in
apartments, $68.5 million is in its Iowa investments, $54.8 million is in land
awaiting sale or development and $24.3 million is in other miscellaneous real
estate assets of the Company. See Item 3, "Properties," for an explanation of
these estimates and the assumptions used in their preparation.
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For the years 1993, 1994, and 1995, the Company derived approximately $73.7
million (76.6%), $75.0 million (79.6%), and $79.8 million (80.4%), respectively,
of its consolidated revenues from rental income and $6.1 million (6.4%), $10.7
million (11.4%), and $6.0 million (6.1%) from property sales.
RETAIL PROPERTIES.
The Company owns and manages 18 retail centers consisting of approximately
2,600,000 square feet of retail space, of which approximately 1,100,000 square
feet (42%) is located in the Plaza (including basement space) and the balance is
in suburban shopping centers. The Company's retail properties are leased to
over 500 tenants and management does not believe the Company is dependent upon
any single tenant. Management estimates the fair market value of its retail
properties was approximately $172.5 million at December 31, 1995. Consolidated
rental income from these properties was approximately $24.2 million in 1993,
$25.2 million in 1994 and $27.4 million in 1995.
The Plaza is a mixed-use area of Spanish architecture composed of upscale
specialty stores (such as Halls, Saks Fifth Avenue, Williams-Sonoma, Talbots,
Brooks Brothers, and Eddie Bauer), restaurants, art galleries, and two movie
theaters containing a total of seven screens. The shopping and entertainment
area is bordered on its south side by a contained waterway, Brush Creek, and
surrounded principally by single family residences, condominiums, and upscale
apartments, many of which are owned by the Company. Development of the Plaza
began in 1922, and it is regarded as one of the oldest suburban shopping centers
in the United States. In 1993, the Plaza received the Urban Land Institute
Heritage Award for Excellence, in only its second presentation, the first being
to Rockefeller Center in New York City. In 1994, the Plaza received a special
award for Shopping Center Excellence at the International Property Market in
Cannes, France.
The Company's suburban shopping centers are generally located in
relatively affluent areas and contain a mix of grocery stores, local department
stores, restaurants, and smaller shops. The average retail tenant, including
both Plaza and suburban centers, leases approximately 5,000 square feet. Rents
at both the Plaza and suburban centers typically include minimum annual rents,
contingent rentals based on a percentage of the lessee's sales, and, in many
instances, the tenant's proportionate share of real estate taxes, insurance, and
maintenance. These leases generally have a term of three to five years, or
longer in the case of most major tenants.
The Company's services related to its retail properties include initial
market and consumer research, evaluating tenant mix and consumer demographics,
identifying potential tenants, negotiating lease terms, renovating and expanding
its retail properties, and the ongoing management of those properties.
Management believes that managing the Company's properties enables the Company
to better control operating expenses and establish long-term relationships with
its retail tenants.
Over the last five years, the Company's retail properties, particularly the
Plaza, have reflected national trends in retailing with a changing mix of
operations. For example, in 1991 the Company signed a number of new tenants for
the Plaza such as the Jayne Gallery, the Body Shop, Circle Gallery and KC
Masterpiece BBQ. In that same year, the retailing division of Hallmark Cards
made the decision to close its women's clothing store, Swansons, and combine its
operation with Halls, the division's larger specialty store in the Plaza. The
majority of the space vacated by Swansons was leased promptly to another upscale
clothing store. In 1992, Woolf Brothers, an upscale clothing store that had
maintained a store in Kansas City continuously since 1927, announced the closing
of its Plaza store, among other of its store closings. The Company quickly
replaced it with one of the country's largest premier Eddie Bauer stores.
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An older Dillard's store closed in 1993 and the space was quickly leased to
Barnes and Noble for a major book store. Also in 1993, many of the Plaza's
restaurants were remodeled and older style restaurants replaced with newer ones.
Existing properties performed well in 1994 and important new tenants such as FAO
Schwarz were brought to the Plaza.
The retail industry met with mixed performance in 1995, as certain retail
types performed better than others and the continuing difficulties of major
retailers emphasized the competitiveness within the retail environment. While
the overall retail vacancy rate in the Kansas City market was approximately 10%,
as compared to the national average of 8.4%, the Company maintained a vacancy
rate of approximately 3% in the retail division. The Company's tenants also did
well in 1995 with average sales at the Company's retail tenants up 5.5% over
1994.
Several new leases were signed in 1995 with local and national retailers
such as The Cheesecake Factory. Also, late in 1995 construction began on a
new building located on the Plaza's central parking lot which is now home for
The Great Train Store and the Store of Knowledge, a store affiliated with
public television.
Management believes the "repositioning" of the Company's tenant mix is
critical and niche marketing will be necessary to move with the changing
demographics of an aging society. These changes require retailers to re-
merchandise to meet the makeup of local submarkets. Management believes the
Company, by virtue of its first-hand knowledge of growth patterns and local
economics in the Kansas City market, is especially well positioned to assist
retailers as they work to meet the needs of the changing Midwest market place.
Management intends to increase the value of the Company's portfolio of
retail income producing properties by increasing revenues from existing
properties through improved tenant mix, improved tenant relations and
communication, completion of deferred maintenance, and improved services to
tenants from its team of experienced management and service personnel. In 1996,
the primary emphasis has been and will continue to be on improving the
performance of the Company's existing properties. Specifically, management
expects to increase revenues from the Company's retail properties division by
focusing on the following:
- Expanding and renovating retail properties
- Increasing minimum rents for new and existing leases
- Negotiating contractual rent escalations
The Company seeks to require tenants to pay 100% of their pro rata share of
operating expenses, real estate taxes, and promotional expenses in addition to
an administrative charge. Currently, approximately 80% of the Company's
retail leases require tenants to pay their pro rata share of such expenses.
In order to reduce the risk of certain operating expense increases to the
Company, the Company has a goal of attempting to convert, upon expiration or
termination, the approximately 20% of retail leases which do not now share
expenses pro rata. The Company anticipates completion of this conversion
when possible over the next five to ten years.
In the past, the Company has developed suburban retail centers primarily
for ownership. No significant retail center developments are now underway.
In the future, the Company will seek to take advantage of opportunities to
develop or acquire additional retail properties both on the Plaza and in
suburban areas.
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OFFICE AND INDUSTRIAL PROPERTIES.
At December 31, 1995, JCN and its consolidated subsidiaries owned and
managed 33 office properties containing approximately 1,629,000 square feet.
The largest portion of this space, approximately 700,000 square feet (43%), is
located in the Plaza area of Kansas City, with the balance located in suburban
Kansas City and the Des Moines area. Consolidated rental income from the
Company's office and industrial properties division was $26.1 million in 1993,
$26.2 million in 1994, and $27.9 million in 1995.
In addition to the Company's consolidated office properties, the Company
owns an equity interest in partnerships whose office holdings are not
consolidated with the financial statements of JCN. These holdings include nine
buildings containing approximately 600,000 square feet of office space in the
Des Moines, Iowa area and two buildings in the Plaza area of Kansas City,
containing approximately 400,000 square feet of office space.
The Company leases the majority of its space to smaller tenants, although
it has entered into a long term lease for 175,000 square feet with a major
tenant. At December 31, 1995, the average lease for the Company's over 500
office tenants was 2,877 square feet.
Office rental rates in the Kansas City area ranked in the bottom third of
rates nationwide during 1995. Vacancy rates, however, are slightly lower than
the national average. According to Valuation International, an independent
valuation source, the Kansas City metropolitan area experienced office occupancy
rates of approximately 85% during 1995. Occupancy rates for the Company's
office properties were 94% in 1993, 90% in 1994, and 89% in 1995. During 1995,
occupancy rates for the Company's Plaza properties were 92% and for its suburban
properties were 83%. Approximately 60% of the Company's suburban vacancy rate
was due to one building which was vacant during 1995. Management is attempting
to lease or sell this building.
At December 31, 1995, the Company owned three industrial properties
containing approximately 379,000 square feet, 96% of which was occupied by 153
tenants. The Company's industrial properties generated consolidated revenues of
approximately $2.0 million in 1993, $2.1 million in 1994, and $1.9 million in
1995. The Company also has an interest in an unconsolidated partnership in the
Des Moines, Iowa area, which owns an industrial property containing 200,000
square feet.
The Company's office and industrial properties contribute positive cash
flows to the Company. However, primarily due to the recurring nature of
capital contributions required for tenant finish and the relatively low
rental rates in the Kansas City market, not all of the Company's office
properties are meeting management's return objective of at least 10% on
existing properties. Management is evaluating each of its office properties
with the goal of improving its return. If management determines that a
property is unlikely to meet its return objectives or does not fit within its
long term strategy, it will consider its options, including disposal,
regarding that property.
APARTMENTS.
At December 31, 1995, JCN and consolidated subsidiaries owned and managed
14 apartment communities with 2,437 units. These units experienced occupancy
of approximately 97% in 1993, 98% in 1994, and 96% in 1995. During 1995, 26
units near the Plaza were razed to make way for additional surface parking.
Consolidated revenue from the Company's apartments was $17.8 million in 1993,
$17.7 million in 1994, and $18.6 million in 1995.
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The Company seeks to distinguish itself by providing high quality customer
service to both prospective and existing residents by training and motivating
its management teams to surpass industry standards in all areas. In an effort
to give the Company's properties an advantage over their competition, close
attention is paid to marketing requirements such as drive-by appeal, physical
appearance, signage, clubhouse amenities, model apartments and brochures. As a
result of this focus on service and appearance, the Company believes that its
resident retention rate is higher than industry averages and, as a result,
turnover and capital improvement cost are lower.
During past years, the market for the Company's apartment units has been
strong, although there has been some pressure in recent years from newer
suburban units. The strength of the Kansas City area market is confirmed by a
recent survey presented by a major real estate valuation and vacancy survey
firm, which indicated 1995 apartment vacancy rates in the Kansas City area
market of 5%. As market occupancies exceed 95%, there is an upward pressure on
rental rates that typically grows faster than the median income levels. The
Company attempts to balance rent increases with high occupancy and controlled
turnover costs. The Company believes that its customer service program allows
for increases in market rental rates while maintaining lower overall resident
turnover, resulting in lower operating expenses than most of the competition.
The Company is currently seeking to expand its apartment operations and
looking for opportunities to buy or develop new apartments. The Company is also
evaluating plans to develop a new residential community ("Kirkwood Circle") on
approximately 10 acres it owns near the Plaza.
The Company generally will seek to acquire or develop multifamily
properties that are similar to those in its existing portfolio and are (i) no
more than ten years old at the time of acquisition; (ii) strategically located
in the Company's market; (iii) capable of enhanced performance through intensive
management and cosmetic improvements; and (iv) capable of producing a high
component of anticipated total return derived from current income. In
connection with its acquisition and development of multifamily properties, the
Company will consider such factors as: (i) the geographic location and type of
property; (ii) the age, construction quality and cost, condition, and design of
the property; (iii) the current and projected cash flow of the property and the
ability to increase cash flow; (iv) the potential for capital appreciation of
the property; (v) the terms of tenant leases, including the potential for rent
increases; (vi) the potential for economic growth and the tax and regulatory
environment in the area in which the property is located; (vii) the occupancy
and demand by tenants for properties of similar type in the vicinity; and (viii)
the prospects for liquidity through sale, financing, or refinancing of the
property.
RESIDENTIAL PROPERTIES.
At December 31, 1995, the Company had three residential subdivisions
("Woodsonia," "Green Meadows," and "White Horse") under development with
approximately 200 lots platted for sale and over 500 acres yet to be developed.
All of the subdivisions are within the Kansas City metropolitan area. The
Company sold 92 lots in 1993, 138 lots in 1994, and 101 lots in 1995. Revenues
from sales of lots were $3.4 million in 1993, $4.6 million in 1994, and $3.5
million in 1995.
The Company acquires land periodically in order to provide an adequate and
optimally located supply for its residential subdivisions. In evaluating
possible opportunities to acquire land, the Company considers such factors as
the feasibility of development, proximity to developed areas, population growth
patterns, customer preferences, estimated cost of development, and availability
and cost of financing.
The Company engages in many phases of development activity, including land
and site planning, obtaining environmental and other regulatory approvals, and
contracting for the construction of roads, sewer, water, and drainage
facilities, recreation facilities, and other amenities.
8
<PAGE>
The Company agreed to sell the 812 acre residential portion of its
LionsGate property in 1994, while keeping 88 acres for the future development of
offices and a shopping center. Management remains committed to quality
developments and dedicated to planned communities and will continue to consider
the purchase of additional land for future development of planned communities.
The Company also continues to market the 15 remaining condominium units in
its upscale Alameda Towers project. The project was completed and sales
commenced in September 1989. The project was originally conceived as having two
connected towers with approximately 120 units. However, the Company currently
has no plans to complete the second tower. Revenues from sales of condominiums
were $2.6 million in 1993, $5.6 million in 1994, and $2.5 million in 1995.
FUTURE ACQUISITIONS AND DEVELOPMENT.
Management's objective is to earn a normalized annual cash flow rate of
return of at least 10% on new acquisitions of income producing properties and
higher rates of return on properties that the Company develops. Management
believes that the Company's reputation for quality and its extensive knowledge
and thorough understanding of the Kansas City market gives it a distinct
advantage in purchasing, developing, and managing properties compared to many
other real estate entities operating in the area.
DEVELOPMENT FOR THIRD PARTIES.
JCN has in the past engaged in the development of retail, apartment,
office, and mixed-use projects primarily for ownership. The activities involved
in the development, renovation, and expansion of retail centers and mixed use
projects include: initial market and consumer research, land site evaluation
and acquisition, public and governmental approval, oversight of project design,
cost control, contractor selection and supervision, acquisition of financing,
identification of tenants, negotiation of lease terms, negotiation of
partnership and other combination agreements, and promoting completed projects.
Third parties have requested JCN to consider performing various of these
services on their behalf. Management will consider such requests on a case-by-
case basis, and the Company may in the future develop properties or provide
services on behalf of third parties.
MANAGEMENT OF PROPERTIES FOR OTHERS.
JCN also operates and manages six properties in which it does not own a
controlling interest. The largest of these is the Plaza West building, a
257,932 square foot office building in which the Company owns a 12.5% interest.
The Company also manages the 147,642 square foot Board of Trade building in
which the Company owns a 49% interest. The remaining properties managed by the
Company, in which the Company has no ownership interest, are primarily
residential in nature and generally include communities or projects developed by
the Company. Management of the Company is considering expanding its third
party real estate management services.
OTHER BUSINESS LINES.
In addition to owning, operating, and managing real property, JCN, through
partnerships and other business combinations, is involved in real estate
brokerage services and providing other services incidental to ownership,
management, and development of real property. A wholly-owned subsidiary of JCN
has a 40% equity interest in J.C. Nichols Real Estate, a residential sales and
brokerage business. J.C. Nichols Real Estate also has an interest in an entity
which owns a mortgage origination company.
9
<PAGE>
BUSINESS STRATEGY.
Management intends to operate the Company as a real estate operating
company and, as such, retain the majority of the Company's funds from operations
in the business. These funds will be used to reduce indebtedness and to improve
and increase the value of the Company's portfolio of revenue producing
properties. The Board of Directors of the Company has not determined if, when,
or in what amount future dividends will be declared or paid, but expects that
the primary factor in the Company's total return to shareholders will be the
increase in the Company's equity value per share.
Management will strive to increase the equity value of the Company's income
producing portfolio by increasing the net operating income from existing
properties, increasing the number of properties in its portfolio, and by
reducing the amount of debt associated with its existing properties. The number
of properties in the Company's portfolio is expected to increase by both the
acquisition and development of revenue producing properties, as well as by the
acquisition of land for development and resale principally in the Midwest, and
predominately in the Kansas City metropolitan area.
In management's opinion, the Kansas City metropolitan area represents a
stable and growing market for the Company's properties. According to Valuation
International, during the period 1991-1996, the Kansas City metropolitan area
population grew at an annual rate of approximately .9%, 24th among the 45 major
metropolitan statistical areas in the United States, while average household
income during the period grew at a rate of 1.8%, 17th among this same group of
cities.
Management believes the Company's strategy of enhancing its existing
portfolio of properties and focusing initially on acquisitions and developments
in Kansas City and surrounding markets allows the Company to best capitalize on
its reputation for quality and its employees' in-depth knowledge and experience
in those markets. Management also believes that by developing, owning, and
managing a diverse portfolio of properties in a relatively small geographic
area, it can better control the overall character of the Company's developments
and thus create greater value than were it to concentrate on a single type of
property over a wider geographic area.
In management's opinion, the success of this strategy is more appropriately
measured by changes in the underlying value of the assets, less related
liabilities, than by "Net Income," as defined by generally accepted accounting
principles. For this reason, management has estimated the fair market value of
the Company's real estate assets at December 31, 1995 and expects to develop
similar estimates at subsequent year end periods. Management may consider
involving independent third party appraisers in this process, but has not yet
determined the relative cost versus the benefit of doing so.
COMPETITION.
Substantially all of the Company's properties are located in the Kansas
City metropolitan area, except those held in its Iowa investment partnerships.
The Kansas City market area is a highly competitive one for real estate and real
estate services. The Company's retail properties face increasing competition
from newer upscale shopping centers, discount shopping centers, outlet malls,
catalogues, discount shopping clubs, and telemarketing. All of the Company's
retail properties overlap to some degree with the trade area of other shopping
centers. Renovations and expansions at existing competing centers as well as
the development of new centers in the Company's market area could negatively
affect revenues of the Company.
The Company's office building properties compete for tenants principally
with office buildings in the same general geographic location. In many areas
where the Company's office buildings are located, there have been new office
buildings built and planned office building construction which have and will
continue to increase the supply of rentable office space, potentially placing
downward pressure on market rental rates.
10
<PAGE>
With respect to its apartment properties, there are numerous other
apartment properties within the market area of each of the Company's properties
which could have a material effect on the rental rates charged at the
properties, as well as the Company's ability to rent its apartment properties.
JCN competes directly with developers and other buyers with respect to the
acquisition of development sites for retail, office, and apartment development
and for financing sources.
With respect to all of its real estate operations, the Company competes for
tenants and property acquisitions with others who may have greater resources
than the Company and whose management may have more experience in operating and
acquiring properties than the Company's management.
REGULATION AND LEGISLATION.
Federal, state, and local statutes and regulations relating to
environmental protection have not had a material impact on the businesses of
JCN. However, existing properties and future development of other opportunities
by JCN may require additional capital and other expenditures in order to comply
with such statutes and regulations. It is impossible at this time to predict
with any certainty the magnitude of any such expenditures or the long range
affect, if any, on JCN's operations. JCN is currently not aware of any material
violation of any applicable environmental statute or regulation with respect to
any of its properties owned, managed, or held for development.
The federal government and the states in which JCN operates have adopted
handicapped facilities and energy laws and regulations impacting the use and
development of real estate. These laws and regulations may operate to reduce
the number, attractiveness, and investment potential of properties and
developments available to JCN. JCN has reviewed the properties it owns or in
which it has an interest to determine the extent and amount of capital
expenditures necessary to comply with the aforementioned laws and regulations.
These expenditures will be incurred by the Company over the course of the next
several years as modifications to such properties are undertaken. The
expenditures to be incurred by the Company as a result of such modifications are
not expected to be material in any single year.
GENERAL CONDITIONS.
General economic conditions and trends, including interest rates,
inflation, availability of credit, real estate trends, construction costs,
income tax laws, governmental regulations and legislation, increases or
decreases in operating expenses, zoning laws, population trends, and the ability
of JCN to attract tenants and purchasers for its properties, among other
factors, will affect JCN's success.
Generally, JCN's business and that of the industry is not seasonal in
nature.
RELIANCE ON CUSTOMERS OR TENANTS.
None of JCN's business segments depends upon a sole customer or tenant or a
few customers or tenants, the loss of which would materially adversely effect
the business or financial condition of JCN. No single customer or tenant
accounts for 5% or more of the consolidated revenues of JCN.
EMPLOYEES.
JCN and consolidated subsidiaries directly employed 320 full or part-time
employees as of December 31, 1995. Overall, management believes JCN has good
employee relations.
11
<PAGE>
STOCK SPLIT.
On May 29, 1996, the shareholders of JCN approved a resolution to amend the
Articles of Incorporation of JCN to increase from 225,000 to 10,000,000 the
number of shares of common stock authorized for issuance by the Company and to
decrease the par value per share of common stock from $20.00 to $.01.
Additionally, the Board of Directors of JCN approved, in conjunction with such
increase in the authorized number of shares and decrease in the par value, an
80-for-1 stock split of the Company's common stock for all issued and
outstanding shares not then held in the Company's treasury. The Company
currently has 4,852,400 shares of common stock outstanding.
The increase in the number of shares authorized, decrease in par value, and
stock split described above had offsetting effects on the shareholders' equity
section of JCN's consolidated balance sheet. The common stock, par value line
of the shareholders' equity section of JCN's consolidated balance sheet
decreased from $4,500,000 to $100,000, with an offsetting increase in the
additional paid in capital line of the consolidated balance sheet from
$2,679,000 to $7,079,000.
Unless otherwise indicated in this Form 10, all references to per share
data shall be on a post-stock split basis.
12
<PAGE>
ITEM 2. FINANCIAL INFORMATION
The following table contains certain selected historical consolidated
financial information and is supplemented by the more detailed Consolidated
Financial Statements and Notes presented elsewhere in this Registration
Statement on Form 10. The selected consolidated financial information has
been derived from the Company's audited consolidated financial statements for
each of the five consecutive years ended December 31, 1995, and from the
Company's unaudited consolidated financial statements for the nine months
ended September 30, 1996 and 1995. The information below should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Registration
Statement on Form 10.
SELECTED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
------------------- ------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
-------------------
Total properties $222,530 $233,801 $229,524 $244,105 $239,008 $258,785 $271,053
Total assets 321,996 364,017 328,695 350,302 362,112 410,897 406,994
Mortgage indebtedness 311,035 333,733 326,349 339,881 327,354 400,539 381,784
Treasury stock 117,427 13,872 117,427 14,582 23,058 22,306 16,139
Total stockholders' equity (deficit) (30,704) (15,873) (36,725) (25,821) (31,568) (29,526) (25,109)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
---------------
Sales and revenues $108,215 $ 72,822 $ 99,305 $ 94,213 $ 96,204 $112,554 $108,896
S,G & O expenses 34,439 36,741 46,118 43,203 44,615 46,769 46,418
Interest expense 17,572 21,345 27,696 27,049 26,693 33,832 34,699
Income (loss) before income taxes
and extraordinary gain and
cumulative effect of change in
accounting principle 41,559 (294) (16,498) (44,698) 26 5,483 (3,033)
Net income (loss) 25,959 (324) (10,752) (14,534) 510 3,663 1,961
PER SHARE DATA:
---------------
Income (loss) before extraordinary
gain and cumulative effect of
change in accounting principle $5.31 $(.02) $(.74) $(2.89) $.04 $.25 $(.13)
Net income (loss) 5.31 (.02) (.74) (.96) .04 .25 (.13)
Dividends 0 0 0 .13 .13 .13 .13
Weighted average common shares
outstanding (in thousands) 4,884 15,850 14,469 15,136 14,408 14,574 15,168
</TABLE>
13
<PAGE>
As part of the settlement resulting from the 1995 litigation (which is
described in Item 8 below), the Company received from the Bowser Partnership
125,242 shares ( pre-split) and became obligated to convey 8,500 shares
(680,000 shares post-split) of the Company's common stock and $2.0 million
cash to the ESOT or to beneficiaries of the ESOT. The receipt by the Company
of shares from the Bowser Partnership, which was reflected in the Company's
consolidated financial statements in November 1995, significantly reduced the
weighted average common shares outstanding for the year ended December 31,
1995 and subsequent periods. The conveyance to the ESOT has not occurred and
will not occur until certain related issues are addressed by the Internal
Revenue Service (the "IRS"). Conveyance of the 680,000 shares of the
Company's common stock will result in a decrease in stockholders' deficit of
$11.1 million, which, together with the $2.0 million cash contribution to be
made, have already been reflected as expenses in the Company's 1995
consolidated statement of operations and as liabilities in the Company's 1995
consolidated balance sheet. The following table provides pro-forma data for
the nine months ended September 30, 1996, and the year ended December 31,
1995, had the conveyance occurred on December 31, 1995:
PRO FORMA FOR CONVEYANCE TO ESOT
--------------------------------
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------------ -----------------
Weighted average common shares
outstanding (in thousands) 5,564 14,469
Net income (loss) (in thousands) $25,959 $(10,752)
Net income (loss) per share $4.67 $(.74)
AS OF AS OF
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
Total stockholders' equity (deficit) $(19,654) $(25,675)
(in thousands)
See Item 9, "Market Price Of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters" for additional Information on the outstanding
shares of the Company's common stock.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW.
The Company's operating results depend primarily upon income from
the rental of its retail, office, industrial, and residential properties.
This income is substantially influenced by the demand for the Company's
rental space in the Kansas City metropolitan area and, to a lesser degree,
the Des Moines, Iowa metropolitan area. The ability of the Company to
increase its rental income is dependent upon its ability to increase either
or both of its occupancy rates and rental rates, control expenses on its
existing properties, and to acquire or develop additional rental properties.
The Company's operating results are also dependent on the demand
for lots in its residential subdivisions. Demand for these lots is
influenced by a number of factors, including population growth in the Kansas
City metropolitan area, availability of existing housing stock, interest
rates, tax rates, and the number and financial health of home builders in the
area.
The Company's primary markets in the Midwest have continued to
offer strong and stable local economies. Management believes this will
continue and the markets will offer attractive new acquisition and
development opportunities because of their central location, established
business and industrial base, skilled work force, and moderate labor cost.
In 1995, the occupancy rate for the Company's retail properties was
97%, 92% for its Plaza office properties and 83% for its suburban office
properties (the lower percentage being due principally to one vacant
property), 96% for its industrial properties, and 96% for its multi-family
residential properties.
Prior to 1995, the Company typically declared and paid an annual
cash dividend of $10.00 on each share of its common stock ($.125 per share
post-split). No dividend was declared or paid on common stock in 1995 or
during the first nine months of 1996.
15
<PAGE>
RESULTS OF OPERATIONS
Following is a summary of the Company's sales and revenues and
costs and expenses for the three years ended December 31, 1995 and the nine
months ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
SALES AND REVENUES ($000)
-------------------------------------------------------
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ---------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rents $60,938 $59,196 $79,818 $74,973 $73,662
Property sales 5,392 4,163 6,047 10,694 6,094
Commissions and fees 1,015 1,016 1,459 1,862 2,483
Dividends and interest 3,165 3,026 4,806 4,053 5,989
Gains on sale of investments and
other assets 33,079 4,682 5,711 727 6,268
Other 4,626 739 1,464 1,904 396(1)
------- ------- ------- ------- -------
Total sales and revenues $108,215 $72,822 $99,305 $94,213 $94,892
-------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
COSTS AND EXPENSES ($000)
-----------------------------------------------------
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ---------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selling, general, and operating $34,439 $36,741 $46,118 $43,203 $44,115(2)
expenses
Cost of property sales 4,423 2,535 3,944 8,822 5,566
Interest 17,572 21,345 27,696 27,049 26,693
Depreciation and amortization 10,222 10,708 14,355 18,488 12,855(2)
ESOT contribution - 1,787 1,787 - -
Valuation allowances - - 2,350 39,699 -
Litigation settlement - - 19,553 - -
Net operations of property subject
to debt extinguishment - - - 1,650 5,637
-------- -------- -------- -------- -------
Total costs and expenses $66,656 $73,116 $115,803 $138,911 $94,866
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
</TABLE>
(1) Certain amounts in the "Other" line item for 1993 have been reclassified
to be consistent with the 1995 and 1994 presentation.
(2) Reflects a reclassification of $500,000 from "Selling, general, and
operating expenses" to "Depreciation and amortization" to be consistent
with the 1995 and 1994 presentation.
16
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
SUMMARY. Net income increased by $26.3 million from a loss of $324,000
for the nine months ended September 30, 1995 to $26.0 million for the nine
months ended September 30, 1996, primarily as a result of the gains from
disposition of the Company's marketable equity securities portfolio.
RENTS. Rental income increased by $1.7 million (2.9%) to $60.9 million for
the nine months ended September 30, 1996. This increase occurred even though
one of the Company's larger office buildings was substantially vacant during
the nine months ended September 30, 1996 while the Company made significant
tenant improvements for a new tenant that is now leasing all of the vacant
space. This vacancy resulted in a $1.6 million reduction in rental income
for the nine months ended September 30, 1996, compared to the nine months
ended September 30, 1995. During the nine months ended September 30, 1996,
the Company collected approximately $1.0 million in rents from apartment
properties obtained pursuant to the Settlement Agreement. The remainder of
the $2.3 million increase over the nine months ended September 30, 1995 is
due primarily to $500,000 of certain nonrecurring items and $1.8 million in
improved rents on the Company's office, retail, and apartment properties.
PROPERTY SALES. Property sales primarily represent sales of residential lots
in subdivisions developed by the Company, sales of condominiums in the
Alameda Towers project, and sales of villas in the Corinth Place Villas
project. Property sales increased by $1.2 million (29.5%) to $5.4 million
for the nine months ended September 30, 1996 and included lot sales of $1.7
million, condominium sales of $2.9 million, and villa sales of approximately
$800,000. Property sales of $4.2 million for the nine months ended September
30, 1995 included $2.6 million of lot sales and condominium sales of $1.6
million.
DIVIDENDS AND INTEREST. Dividends are received on marketable equity
securities held by the Company for investment purposes. Interest income is
received on the Company's cash balances held in banks and on notes
receivable. Interest income fluctuates with interest rates, the level of the
Company's excess cash, and the level of notes receivable. Despite the sale
by the Company of its entire portfolio of marketable equity securities, the
amount of dividends and interest received by the Company in the nine-month
period ended September 30, 1996 increased over the nine-month period ended
September 30, 1995 because the proceeds from such sales were invested in
interest-earning assets.
GAINS ON SALES OF INVESTMENTS AND OTHER ASSETS. Gains on sales of investments
and other assets represent gains associated with the sales of revenue producing
properties, property held for future development, marketable equity securities,
and other assets used in the business. The magnitude of these gains fluctuates
with the volume of asset dispositions and the magnitude of the difference
between sales proceeds and carrying value. In early 1996, the Company
liquidated for $38.6 million its entire investment in marketable equity
securities held at December 31, 1995, recognizing a pre-tax gain of
approximately $33.0 million.
OTHER. Other includes equity in earnings (losses) of unconsolidated
affiliates and other miscellaneous revenues. Other increased by $3.9 million
for the nine months ended September 30, 1996 to $4.6 million principally due
to benefits received by the Company from the resolution of certain claims.
During the nine months ended September 30, 1996, the Company has resolved
certain claims by the Company that have resulted in the Company recognizing
approximately $3.2 million in other income. As a part of such resolution,
the Company has agreed to and is exposed to certain obligations that may
reduce such amount to zero. However, management of the Company does not
believe such a material reduction is likely. In addition, the Company
recently received approximately $378,000 as a result of a claim it filed in
the National Gypsum bankruptcy proceeding now pending in the United States
Bankruptcy Court. The Company has received notice that it may receive an
additional $800,000 in satisfaction of such claim. The actual amount and
date of any such payment is uncertain and therefore will not be recorded
until received. See, Item 8, "Legal Proceedings."
SELLING, GENERAL, AND OPERATING EXPENSES. Selling, general, and operating
expenses (S,G & O) represent the expenses directly associated with operating
the Company's real estate assets and expenses that are considered to be
overhead. These expenses decreased by $2.3 million (6.2%) to $34.4 million
for the nine months ended September 30, 1996, principally due to a decline of
$1.3 million in operating expenses of the discontinued Bay Plaza project and
a reduction in legal and professional expenses. S,G & O for the nine months
ended September 30, 1995 inlcuded $4.2 million legal and professional fees
related to the litigation that resulted in the Settlement Agreement. These
reductions were partially offset by additional costs of $1.6 million incurred
to secure a new management team and additional operating expenses of $500,000
related to apartment properties obtained in the Settlement Agreement. The
remainder of the $1.1 million increase over the nine months ended September
30, 1995 is due primarily to $400,000 of certain nonrecurring items and
$700,000 of increased overhead and property operating costs.
COST OF PROPERTY SALES. Cost of property sales represents the Company's
cost basis in residential lots, condominium units, and villas sold during the
year. The cost of property sales is a function of the number of lots,
condominium units, and villas sold and their underlying cost basis. Cost of
proeprty sales increased by $1.9 million (74.5%) for the nine months ended
September 30, 1996 from $2.5 million to $4.4 million. Of this $1.9 million
increase, the cost of condominium sales increased by $1.7 million, the cost
of lots sold decreased by approximately $600,000, and the cost of villas
sales increased by approximately $800,000. The gross margin percentage on
lot sales was 37% for the nine months ended September 30, 1996, as compared
to 35% for the nine months ended September 30, 1995. The gross margin
percentages on condominium sales was 11% for the nine months ended September
30, 1996, as compared to 47% for the nine months ended September 30, 1995.
The decrease in gross margin percentage on condominium sales for the nine
months ended September 30, 1996 resulted from the Company incurring greater
finishing costs on condominium sales in the nine months ended September 30,
1996 than in the nine months ended September 30, 1995. The gross margin
percentage on villas sales in 1996 was less than 1%.
17
<PAGE>
INTEREST EXPENSE. Fluctuations in interest expense occur due to the level of
the Company's interest bearing indebtedness and the effect changes in
interest rates have on the Company's variable rate indebtedness. Interest
expense declined by $3.8 million (17.7%) to $17.6 million for the nine months
ended September 30, 1996. The primary reason for this decline is a decrease
of approximately $1.3 million related to a mortgage note that was
restructured as discussed in Note 9 to the Company's 1995 consolidated
financial statements and the payoff of certain notes and mortgages during the
nine months ended September 30, 1996.
DEPRECIATION AND AMORTIZATION. Depreciation of the Company's revenue
producing properties is computed using the straight-line method over the
estimated useful lives of the assets, generally seven to thirty-one years.
Depreciation expense fluctuates to some degree as properties are bought and
sold. In addition, certain financing charges and certain lease related costs
are amortized over the term of the associated loan or lease as applicable.
The Company experienced no significant change in depreciation and
amortization for the nine months ended September 30, 1996 as compared to the
nine months ended September 30, 1995.
EMPLOYEE STOCK OWNERSHIP TRUST CONTRIBUTION. The Company maintains an ESOT to
which it has the right to make annual contributions in amounts determined by the
Board of Directors. The Company made no contributions during the first nine
months of 1996.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
SUMMARY. The net loss from continuing operations, before extraordinary items,
decreased by $32.9 million from $43.7 million to $10.8 million principally
due to increased rental income and gains on sale of investments and other
assets, decreased depreciation and amortization expense, and decreased
valuation allowances. These reductions to the net loss from continuing
operations, before extraordinary items were partially offset by increased
selling, general, and operating expenses and litigation settlement expenses.
RENTS. Rental income increased by $4.8 million (6.5%) to $79.8 million in 1995
due principally to increases in the occupancy and rental rates for the Company's
retail properties and increased rental income of approximately $2.2 million
associated with having a full year of operations in 1995 for an office property
that was acquired in late 1994. Retail occupancy increased from 88% in 1994 to
97% in 1995, while office occupancy rates declined slightly to 89% in 1995 from
90% in 1994. The Company's rental income from apartments increased by 5.1% in
1995 to $18.6 million from $17.7 million in 1994. Contingent rental income, or
percentage rents, remained flat from 1995 to 1994 at approximately $4.2 million.
PROPERTY SALES. Property sales decreased by $4.7 million (43.5%) to $6.0
million in 1995. Property sales of $6.0 million in 1995 included lot sales of
$3.5 million and condominium sales of $2.5 million. Property sales of $10.7
million in 1994 included lot sales of $4.6 million, condominium sales of $5.6
million, and villa sales of approximately $500,000.
18
<PAGE>
SELLING, GENERAL, AND OPERATING EXPENSES. Selling, general, and operating
expenses (S, G & O) increased by $2.9 million (6.7%) from $43.2 million in 1994
to $46.1 million in 1995 due principally to a refund of property taxes of
approximately $800,000 received in 1994 and credited against S, G & O, legal and
professional fees of approximately $500,000 incurred in 1995 during the
transition of management and the board of directors, and additional operating
expenses associated with the growth in the portfolio of revenue producing
properties.
COST OF PROPERTY SALES. Cost of property sales decreased by $4.9 million
(55.3%) from $8.8 million in 1994 to $3.9 million in 1995. Of this $4.9 million
decrease, the cost of condominium sales decreased by $3.4 million, the cost of
lots sold decreased by approximately $800,000, and the cost of villa sales
decreased by approximately $700,000. The gross margin percentage on lot sales
was 33% in 1995 as compared to 31% in 1994. The gross margin percentage on
condominium sales was 37% in 1995 as compared to 11% in 1994. The increase in
gross margin percentage on condominium sales in 1995 resulted from the Company
incurring less finishing cost on condominium sales in 1995 than in 1994.
DEPRECIATION AND AMORTIZATION. In 1995, depreciation and amortization
declined by $4.1 million (22.4%) to $14.4 million principally due to a
special one time expense in 1994. Until 1994, the Company amortized tenant
improvements over their financial reporting or tax lives. In 1994, the
Company changed its depreciation of tenant improvements to correspond with
the terms of the individual leases. This change in amortization resulted in
a more conservative accounting treatment and an increase of approximately
$4.O million in depreciation expense during 1994.
EMPLOYEE STOCK OWNERSHIP TRUST CONTRIBUTION. In 1995, the Company contributed
1,375 shares (or 110,000 post-split shares) of the Company's common stock valued
at $1.8 million to the ESOT. The Company made no contributions to the ESOT
during 1994.
VALUATION ALLOWANCES. The Company's assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset
is in excess of its net realizable value. If the carrying value of an asset is
determined, in the opinion of management, to be in excess of its net realizable
value, a charge to expense is recognized in the form of a valuation allowance.
In 1994, the Company recorded a charge of $39.7 million resulting
from valuation allowances, principally due to a reduction in carrying value
of $23.8 million on the Company's Bay Plaza project, $6.0 million on various
notes and accounts receivable of the Company, and $4.6 million on the
Company's Alameda Towers condominium project. The Company recorded a charge
of $2.3 million in valuation allowances in 1995 principally due to further
reductions in carrying value of the Bay Plaza project and various notes and
accounts receivable not related to Bay Plaza. See note 5 in the Company's
1995 consolidated financial statements.
The Company's development activities on the Bay Plaza Project have
ceased and, after further review by management, its carrying value net of
liabilities was reduced to zero at December 31, 1995. The Company plans to
dispose of all Bay Plaza properties as soon as practical. The various notes
and accounts receivable for which the Company's carrying value was reduced
were related principally to business activities in which the Company is no
longer actively involved. The 1994 valuation allowance related to the
Company's Alameda Towers condominium project reflects the write-off of the
costs associated with Phase II of the project, which has been postponed
indefinitely.
LITIGATION SETTLEMENT. In 1995, the Company recorded a one time charge of
$19.6 million as "Litigation Settlement" in its consolidated statement of
operations as a result of the Settlement Agreement. The circumstances
leading to and the impact of the Settlement Agreement are described in Item
8, LEGAL PROCEEDINGS below and in Note 16 "Litigation and Settlements"of the
Company's 1995 consolidated financial statements.
NET OPERATIONS OF PROPERTY SUBJECT TO DEBT EXTINGUISHMENT. On February 22,
1994, a lender foreclosed on a hotel owned by a venture in which the Company
owned a 99% interest. Because of the non-recourse nature of the debt, the
Company was released from its obligations and, as a result, recognized a gain in
1994 of approximately $29.1 million. See "Extraordinary item" below. Operating
expenses relating to the hotel
19
<PAGE>
property of $1.7 million in 1994 were reclassified and included in the
Company's consolidated statement of operations as "Net operations of property
subject to debt extinguishment."
EXTRAORDINARY ITEM. The company recorded an extraordinary item gain of $29.1
million in 1994. This gain stemmed from a lender's foreclosure on non-recourse
debt secured by a hotel property owned by Kantel L.P., a 99%-owned joint venture
(the "Venture") of the Company and an affiliate of the Ritz-Carlton Hotel
Company ("Ritz").
In 1989, the Company borrowed $70.0 million on a non-recourse basis
using the assets of the hotel as collateral. The hotel did not meet expected
operating results or cash flows, and the Venture was unable to meet its
obligations under the debt and lease agreements.
On February 22, 1994, the lender foreclosed on the hotel, and the
Company was released from its obligations under the non-recourse debt. In
addition to being released from obligations for the principal balance,
interest payable aggregating $14.1 million had been accrued and was included
in the release. As a result of this release, the Company recognized, as an
extraordinary item, a gain of approximately $29.1 million on extinguishment
of debt ($38.3 million net of $9.2 million of income taxes).
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
SUMMARY. The net loss from continuing operations, before extraordinary item, of
$43.7 million in 1994 as compared to the net income from continuing operations,
before extraordinary item, of $510,000 in 1993 is primarily the result of
increased depreciation and amortization expense and valuation allowances, and
decreased gains on sales of investments and other assets.
RENTS. Rental income increased by $1.3 million (1.8%) in 1994 to $75.0 million
due to improved base rents in both the retail and office divisions and an
increase in contingent rental income to $4.2 million from $3.9 million (7.7%).
Despite the sale of two apartment complexes that resulted in a rental income
reduction of $700,000 in 1994, apartment rental income only declined to $17.7
million in 1994 from $17.8 million in 1993.
PROPERTY SALES. In 1994, total property sales increased by $4.6 million (75.5%)
to $10.7 million, including lot sales of $4.6 million, condominium sales of $5.6
million, and villa sales of approximately $500,000. Property sales of $6.1
million in 1993 included lot sales of $3.4 million, condominium sales of $2.6
million, and villa sales of approximately $80,000.
SELLING, GENERAL, AND OPERATING EXPENSES. Selling, general, and operating
expenses (S, G & O) decreased by $912,000 from $44.1 million in 1993 to $43.2
million in 1994 due principally to a refund of property taxes of approximately
$800,000 which was received in 1994 and credited against S, G & O.
COST OF PROPERTY SALES. Cost of property sales increased by $3.2 million
(58.5%) in 1994 from $5.6 million to $8.8 million. Of this $3.2 million
increase, the Company's cost of condominium sales increased by $2.0 million, its
cost of lots sold increased by $600,000, and its cost of villa sales increased
by approximately $600,000. The gross margin percentage on lot sales was 31% in
1994 as compared to 28% in 1993. The increase in gross margin percentage on lot
sales in 1994 resulted from a change in sales mix, as 1994 sales contained a
larger percentage of sales from higher margin subdivisions. The gross margin
percentage on condominium sales was 11% in 1994 as compared to (16%) in 1993.
The increase in gross margin percentage on condominium sales in 1994 resulted
from the Company incurring less finishing costs on condominium sales in 1994
than in 1993.
20
<PAGE>
DEPRECIATION AND AMORTIZATION. In 1994, depreciation and amortization increased
by $5.6 million (43.8%) to $18.5 million principally due to a special one time
charge in 1994. Until 1994, the Company amortized tenant improvements over
their financial reporting or tax lives. In 1994, the Company changed its
depreciation of tenant improvements to correspond with the terms of the
individual leases. This change in amortization resulted in a more
conservative accounting treatment and an increase of approximately
$4.0 Million in depreciation expense during 1994.
VALUATION ALLOWANCES. In 1994, the Company recorded a charge of $39.7 million
related to valuation allowances, principally due to a reduction in carrying
value of $23.8 million recognized on the Company's Bay Plaza project, $6.0
million on various notes and accounts receivable of the Company, and $4.6
million on the Company's Alameda Towers condominium project. There were no
valuation allowances recorded in 1993.
NET OPERATIONS OF PROPERTY SUBJECT TO DEBT EXTINGUISHMENT. On February 22,
1994, a lender foreclosed on a hotel owned by a venture in which the Company
owned a 99% interest. Because of the non-recourse nature of the debt, the
Company was released from its obligations and recognized a gain in 1994 of
approximately $38.3 million. See "Extraordinary item" above. Operating
expenses relating to the hotel property of $1.7 million in 1994 and $5.6 million
in 1993 were reclassified and are included as "Net operations of property
subject to debt extinguishment."
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, permanent mortgage
financing, and short term notes payable to banks represent the Company's
primary sources of liquidity to fund recurring capital costs associated with
renovating and renewing leases of the Company's properties, payments on the
Company's outstanding indebtedness, and distributions to shareholders. In
January 1996, the Company replaced its previous lines of credit with a $10
million unsecured line of credit bearing interest at the prime rate. At
September 30, 1996, there were no outstanding borrowings on this line of
credit.
Management anticipates that cash generated before debt payments and
capital expenditures, together with the bank line of credit, will provide
adequate liquidity to conduct the Company's operations, fund its recurring
capital costs and interest expense, and permit normal amortization payments
on outstanding indebtedness.
In addition to recurring capital expenditures, management estimated
at the end of 1995 that the Company should plan to expend approximately $15
million for "deferred maintenance" items over the next five years in order to
maintain and restore the Company's properties to the condition and quality
standards established by management.
At September 30, 1996, the total of the Company's consolidated
interest bearing debt was $313.0 million. Such amount, with certain
exceptions discussed below, bears interest at rates ranging from 3.8% to
10.5%. Of the Company's consolidated debt at that date, $2.0 million was a
note payable to the ESOT and $311.0 million was mortgage indebtedness.
Approximately $266.7 million of the Company's $311.0 million of mortgage
indebtedness at September 30, 1996, was non-recourse to the Company. By
including the Company's percentage interest in the indebtedness of
unconsolidated subsidiaries and excluding the minority interest percentage in
the indebtedness of consolidated subsidiaries of the Company, the
interest-bearing debt of the Company at September 30, 1996 would be $317.4
million.
Of the Company's $313.0 million in consolidated debt at September
30, 1996, approximately $220.1 million accrued interest at fixed rates and
$92.9 million was floating rate debt of various types. Interest expense of
the Company in future periods may be expected to fluctuate with short term
interest rates.
As discussed in Note 9 to the Company's 1995 consolidated financial
statements, the Company has restructured two debt agreements. At September
30, 1996, the Company has classified as mortgage indebtedness approximately
$11.0 million in debt that will be forgiven if the Company complies with
certain
21
<PAGE>
conditions established by the lenders. This treatment is in compliance with
Generally Accepted Accounting Principles (GAAP) as the sum of the future
undiscounted debt service payments exceeded the face value of the debt
obligations at the time of the restructurings. The $11.0 million in forgiven
debt will be amortized into income over the life of the mortgages through
monthly credits to interest expense. This amortization reduces the effective
rate to the Company on restructured debt to approximately 3% for financial
statement purposes.
Also, as discussed in Note 9 to the Company's 1995 consolidated
financial statements, certain agreements to which the Company is a party
provide for a 50% sharing of positive and negative cash flows from operations
and certain capital expenditures. Interest expense recognized for such
sharing arrangements was $479,000 and $709,000 for 1995 and 1994,
respectively, and was $685,000 for the nine months ended September 30, 1996.
In addition, at September 30, 1996, mortgage indebtedness includes a
non-interest bearing preference item of $4.0 million related to these
agreements. The Company's liability is contingent upon certain conditions
being met upon the sale or refinancing of the mortgaged properties.
At December 31, 1995, the Company's consolidated interest bearing
debt of $332.0 million was equal to approximately 67% of management's
estimated value of the Company's real estate assets as of that date. Through
September 30, 1996, consolidated interest bearing debt has been reduced to
$313.0 million. Management intends, over a substantial period of time, to
continue to reduce the amount of indebtedness in relation to the fair value
of its existing real estate assets to approximately 50%.
On September 30, 1996, the ESOT held 825,280 shares of the
Company's common stock. As a part of the Settlement Agreement referred to in
Item 8 below, the Company has committed to convey from its treasury an
additional 680,000 shares (8,500 shares pre-split) of its common stock to the
ESOT. Until such time as shares distributed by the ESOT to its beneficiaries
can be readily traded on an established securities market, the Company is
obligated to repurchase such shares for a specified period of time at a price
determined by a qualified appraiser. The most recent appraisal of the common
stock held by the ESOT was made as of December 31, 1995, and established a
price of $28.75 per share.
An unusually large percentage of ESOT beneficiaries may have the
right to receive a distribution of their interest in the ESOT over a two year
period beginning in 1996. Such beneficiaries currently have a right to
request that their interest be distributed in cash. The ESOT does not have
sufficient cash to satisfy all such potential requests. The Company has
agreed to loan to the ESOT up to $2.4 million to permit the ESOT to meet its
1996 obligations without selling shares of the common stock of the Company
now held by the ESOT. The Company may have to loan additional funds to the
ESOT in future years. For instance, if the common stock of the Company is
not readily tradable on an established securities market, the ESOT's 1997
obligation could be $2.9 million. ESOT obligations in 1998, 1999, and 2000
are estimated to be $5.1 million, $3.2 million, and $3.2 million,
respectively. All such loans are unsecured and are non-interest bearing. The
Company expects such loans to be repaid in full.
Management is taking actions, including the filing of this
Registration Statement, to attempt to develop a liquid market for shares of
the Company's common stock. However, it can give no assurance that such a
market will develop. In as many as the absence of a liquid market, the
Company's obligation to repurchase approximately 1.5 million shares of its
common stock that may in the future be distributed to beneficiaries of the
ESOT could constrain the Company's liquidity. Given expected retirement
trends, management expects it can meet anticipated stock repurchase
requirements with funds generated from operations or additional borrowings.
22
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 TO NINE MONTHS ENDED
SEPTEMBER 30, 1995.
Net cash provided by operating activities increased by approximately $10.8
million to $26.6 million for the nine months ended September 30, 1996. The
primary reasons for such increase are discussed above under "Results of
Operations."
Net cash flows from investing activities increased by $17.4 million to a net
amount of $4.8 million for the nine months ended September 30, 1996. This
increase in net cash provided by investing activities was due primarily to
the liquidation of the Company's marketable equity securities portfolio,
which was partially offset by the Company's purchase of temporary investments.
Net cash used by financing activities increased by $9.4 million to $17.2 million
for the nine months ended September 30, 1996. The principal use of cash for
financing activities for the nine months ended September 30, 1996 and 1995 was
for payments on mortgage and notes payable indebtedness of $23.5 million and
$18.0 million, respectively. This use of cash was offset by $6.3 million of
proceeds from new mortgage indebtedness for the nine months ended September 30,
1996. Of the $23.5 million in payments on mortgage and notes payable
indebtedness during the nine months ended September 30, 1996, approximately
$16.6 million represents pay-off or significant pay-down of indebtedness outside
of normal principal amortization.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Net cash provided by operating activities increased by $16.7 million to
$22.0 million in 1995. The primary reasons for such increase are discussed
above under "Results of Operations." Additionally, the timing of income tax
payments and refunds relating to the Company's $38 million extraordinary gain on
extinguishment of debt and nonrecurring losses, made net cash provided by
operating activities higher in 1995 as compared to 1994.
Net cash used in investing activities increased by approximately $1.5
million in 1995 to $1.7 million, which amount was principally a result of
issuing an additional $6.2 million of notes receivable, investing $7.9 million
for additions to revenue producing properties, and purchasing $3.0 million of
marketable equity securities. These investments were substantially offset by
the receipt of $6.9 million of payments on notes receivable, sales of capital
assets of $5.3 million, and the maturing of marketable securities of $2.4
million. In 1994, the Company's net cash used in investing activities of
approximately $230,000 was principally a result of issuing an additional $19.5
million of notes receivable and investing $11.9 million for additions to revenue
producing properties. These investments were substantially offset by the
receipt of $18.9 million of payments on notes receivable, sales of capital
assets of $4.0 million, and a decrease of $7.9 million in the Company's
temporary investments.
Net cash used by financing activities increased by approximately $5.8
million in 1995 to $27.3 million. The principal use of cash in financing
activities in 1995 and 1994 was a net reduction of mortgage and notes payable
indebtedness of $22.8 million and $18.7 million, respectively.
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
Net cash provided by operating activities decreased by $13.4 million to
$5.3 million in 1994. The primary reasons for such decrease are discussed above
under "Results of Operations." Additionally, the timing of income tax payments
and refunds relating to the Company's $38 million extraordinary gain on
extinguishment of debt and nonrecurring losses, made net cash provided by
operating activities lower in 1994 as compared to 1993.
Net cash used in investing activities decreased by $16.6 million in 1994 to
approximately $230,000, which amount was principally a result of issuing an
additional $19.5 million of notes receivable and investing
23
<PAGE>
$11.9 million for additions to revenue producing properties. These investments
were substantially offset by the receipt of $18.9 million of payments on notes
receivable, sales of capital assets of $4.0 million, and a decrease of $7.9
million in the Company's temporary investments. In 1993, the Company's net cash
used in investing activities of $16.8 million was principally a result of
issuing an additional $10.2 million of notes receivable, investing $7.0 million
for additions to revenue producing properties, investing $6.6 million in
unconsolidated affiliates, and investing an additional $12.3 million in
temporary investments. These expenditures were partially offset by receipt of
$14.0 million of payments on notes receivable and the receipt of $5.5 million
from sales of capital assets.
Net cash used by financing activities increased by approximately $20.5
million in 1994 to $21.4 million. In 1994, the net reduction of mortgages and
notes payable indebtedness was $18.7 million. In 1993, the net addition of
mortgages and notes payable indebtedness was $1.6 million.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION
It is management's intent, as described in Item 1 "Business--Business
Strategy," to apply the majority of the Company's operating cash flows to
reduce indebtedness and to improve and increase the Company's portfolio of
revenue producing properties. The Company is organized as a "Subchapter C"
corporation and as such pays income taxes on its taxable income and is
generally not subject to distribution requirements based on net income.
Management believes that the Company's core operations are best measured by
its earnings before interest and dividend income, interest expense, income
taxes, depreciation and amortization, gains or losses from debt restructuring
and sales of assets, and valuation allowances, and after adjustments needed
to similarly convert the earnings of minority interests and unconsolidated
partnerships. Earnings, as so computed, are referred to herein as "EBITDA".
This is a supplemental performance measure used along with net income to
report operating results. EBITDA is not a measure of operating results or
cash flows from operating activities as defined by generally accepted
accounting principles. Additionally, EBITDA is not necessarily indicative of
cash available to fund operating needs and should not be considered as an
alternative to cash flow as a measure of liquidity. However, the Company
believes that EBITDA provides relevant information about its operations and,
along with net earnings (loss), facilitates understanding of its operating
results. The EBITDA and EBITDA, as adjusted, set forth below may not be
comparable to other real estate companies, as each real estate company may
define differently such terms.
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<PAGE>
Following is a summary of the Company's EBITDA for the three years ended
December 31, 1995, 1994, and 1993, and the nine months ended September 30,
1996 and 1995:
EBITDA
$(000)
<TABLE>
<CAPTION>
Nine Months
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income (loss) $25,959 $(324) $(10,752) $(14,534) $510
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO EBITDA:
Interest and dividend income (3,165) (3,026) (4,806) (4,053) (5,989)
Interest expense 17,572 21,345 27,696 27,049 26,693
Income tax expense (benefit) 15,600 30 (5,746) (1,028) (484)
Depreciation and amortization 10,222 10,708 14,355 18,488 12,855
Net operations of property subject
to debt extinguishment - - - 1,650 5,637
Gain on extinguishment of debt, net of income taxes - - - (29,136) -
Gain on investments and other assets (33,079) (4,682) (5,711) (727) (6,268)
Valuation allowances - - 2,350 39,699 -
Minority interest portion of add-backs (2,056) (2,281) (3,081) (2,296) (1,968)
Unconsolidated subsidiaries' portion of add-backs 2,912 3,008 3,997 3,892 3,831
--------- --------- --------- --------- ---------
EBITDA $ 33,965 $ 24,778 $ 18,302 $ 39,004 $ 34,817
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Because of the number and size of non-recurring transactions included in
the Company's consolidated financial statements during the last three years,
management believes it is important to also present a reconciliation of the
foregoing EBITDA to "adjusted" EBITDA, as described below, which represents
EBITDA exclusive of certain non-recurring transactions. Management believes
adjusted EBITDA is more representative of the Company's underlying operations.
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<PAGE>
Adjusted EBITDA
$(000)
Nine Months
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
EBITDA $33,965 $24,778 $18,302 $39,004 $34,817
NON-RECURRING ITEMS:
Income from resolution
of Claims (3,578) - - - -
Litigation settlement
expense - 4,200 19,553 - -
Costs of securing
new management
(including stock
options) 1,600 - - - -
Property tax refund, net - - - (800) -
ESOT contribution - 1,787 1,787 - -
Other, net (25) (428) (28) - -
------- ------- ------- ------- -------
Adjusted EBITDA $31,962 $30,337 $39,614 $38,204 $34,817
------- ------- ------- ------- -------
------- ------- ------- ------- -------
The above adjusted EBITDA amounts illustrate the Company's EBITDA if
certain non-recurring items had been eliminated from the Company's statements
of operations. These amounts are not necessarily indicative of future
performance. However, management does believe that, when read in conjunction
with the Company's consolidated financial statements, they assist the reader
in better understanding the Company's underlying business operations. The
adjustments made to arrive at adjusted EBITDA are explained as follows:
"Income from resolution of claims" reflects the income to the Company from
the resolution of certain claims in 1996. "Litigation settlement expense"
reflects the expenses incurred by the Company in connection with the
Settlement Agreement. The $4.2 million amount reflected for the nine months
ended September 30, 1995 includes legal and other professional fees incurred
by the Company that were subsequently reclassified as part of "litigation
settlement expense." The $19.6 million amount reflected for the year ended
December 31, 1995 includes the expense to the Company of implementation of
substantially all of its obligations set forth in the Settlement Agreement
and the related legal and other professional expenses. "Costs of securing
new management (including stock options)" reflects the expense to the Company
in 1996 of obtaining the new members of its senior management. "Property tax
refund, net" reflects an $800,000 property tax refund received by the
Company in 1994 for excess property taxes paid under protest in prior years
on Missouri apartments owned by the Company. "ESOT contribution" reflects
the contribution by the Company to the ESOT of 1,375 shares (or 110,000
post-split) of common stock of the Company for the nine months ended
September 30, 1995. The value of the contributed shares was established at
$1,300 (or $16.25 post-split), determined as the then prevailing market price
of a share of common stock of the Company. "Other, net" for the nine months
ended September 30, 1996 and 1995, and for the year ended December 31, 1995,
reflects the net of other less significant, non-recurring adjustments.
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<PAGE>
ACCOUNTING PRINCIPLES
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of," was adopted by the
Company beginning January 1, 1996. This pronouncement requires that long-lived
assets, including real estate projects, and certain identifiable assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the entity should estimate the future cash flows
expected to result from the use of the asset and its eventual disposition. If
the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment is
recognized. Management of the Company does not believe adoption of SFAS No. 121
will have a significant impact on the Company's financial position or results of
operations.
Also, SFAS No. 123, "Accounting for Stock-Based Compensation," will require
pro forma disclosures in 1996 of net income and earnings per share as if the
accounting method based on the estimated fair value of employee stock options
had been adopted. The Company has not decided if the optional accounting
treatment allowed by SFAS No. 123 will be adopted.
ITEM 3. PROPERTIES
Management has estimated the market value of the Company's real estate
holdings, including the properties itemized below, to be approximately $494.4
million as of December 31, 1995 (including the Company's percentage interest
in the real estate holdings of consolidated and unconsolidated subsidiaries,
but exclusive of any related liabilities or potential liquidation costs). The
estimated value of the Company's wholly-owned real estate holdings and the
Company's percentage interest in real estate holdings of consolidated
subsidiaries was determined to be approximately $451.0 million at December
31, 1995. The carrying value of such holdings was $207.6 million at December
31, 1995. The estimated value of the Company's percentage interest in real
estate holdings of unconsolidated subsidiaries was determined to be
approximately $43.4 million. The Company's percentage interest in the
carrying value of properties held by unconsolidated subsidiaries was $30.9
million at December 31, 1995. Market values were determined based on a
market capitalization approach for revenue-producing properties and estimates
of fair value based on the values of comparable properties for land and
improvement inventories and property held for future development. Under the
market capitalization approach for revenue-producing properties,
capitalization rates were determined based on the characteristics of each
property (such as age, property type, location, condition, etc.) and by
reference to information on capitalization rates made available by Valuation
International, an independent valuation source. The capitalization rates
were applied to stabilized net operating income amounts for each
revenue-producing property less an estimate of recurring capital
expenditures. Capitalization rates applied ranged from 8% to 15%.
Management's estimate of market value is primarily based upon the value of
these assets as an investment and is not intended to present the current
liquidation value of real estate holdings. Such an estimation requires
significant and subjective judgments to be made by management. These
estimates are based on information and assumptions considered by management
to be adequate and appropriate under the then existing circumstances. The
estimates are not based on technical appraisals and may change from time to
time as economic and market factors change, and as management evaluates those
and other factors.
27
<PAGE>
<TABLE>
<CAPTION>
LAND RENTABLE PERCENT
---- -------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
RETAIL
- ------
KANSAS CITY, MISSOURI
County Club Plaza (Retail Only,
includes basement space)
Millcreek Block Fee 100% 1920 1906-1910 0.971 51,114 100%
Triangle Block Fee 100% 1925 1906-1910 0.435 25,634 94%
Balcony Block Fee 100% 1925 1906-1910 1.068 38,571 100%
Macy Building Fee 100% 1926 1906-1910 0.555 71,365 85%
Esplanade Block Fee 100% 1928 1906-1910 1.838 145,694 100%
Plaza Central Fee 100% 1958 1906-1910 1.478 9,653 100%
Theatre Block Fee 100% 1928 1906-1910 1.223 99,699 96%
Swanson Block Fee 100% 1967 1906-1910 1.373 78,020 100%
Halls Building Fee 100% 1964 1906-1910 1.346 73,680 100%
Nichols Block Fee 100% 1930 1906-1910 1.161 59,085 100%
Time Block Fee 100% 1929 1906-1910 2.8592 249,844 97%
48th & Penn Fee 100% 1948 1906-1910 0.560 37,654 92%
Seville Shops West Fee 100% 1980 1906-1910 2.972 19,517 100%
Plaza Savings South Fee 100% 1948 1906-1910 0.853 39,967 100%
Court of the Penguins Fee 100% 1945 1975 0.678 28,707 100%
Seville Square Fee 100% 1945 1975 0.832 70.426 94%
Colonial Shops Fee 100% 1907 1907 0.517 14,160 100%
Crestwood Shops Fee 100% 1932 1923 1.079 20,261 100%
Brookside Shops (Retail Only) Fee 100% 1919 1920 10.000 159,254 100%
Romanelli Shops Fee 100% 1925 1925 1.500 24,360 100%
Red Bridge Shops (Retail Only) Fee 100% 1959 1959 21.592 153,015 97%
Romanelli Annex (Retail Only) Fee 100% 1963 1993 1.000 4,500 100%
GRANDVIEW, MISSOURI
Grandview Shops Fee 100% 1987 1987 2.623 34,140 97%
SHAWNEE MISSION, KANSAS
Westwood Shops Fee 100% 1926 1926 0.626 5,773 100%
Fairway Shops Fee 100% 1940 1940 3.558 49,582 100%
Prairie Village Shops (Retail Only) Fee 100% 1948 1948 21.375 363,311 100%
Corinth Square Shops Fee 100% 1962 1955 24.987 231,550 100%
95th & Mission Shops Fee 100% 1965 1972 1.788 13,136 82%
Corinth Shops South Fee 100% 1953 1953 6.880 86,390 100%
Trailwood Shops Fee 100% 1968 1972 8.855 57,583 100%
Trailwood III Shops Fee 100% 1986 1972 2.946 25,279 90%
96th & Nall Shops Fee 100% 1976 1981 1.027 7,202 100%
Shannon Valley Shops Fee 100% 1988 1988 11.378 98,127 98%
Oak Park Mall Land Lease Fee 100% 1959 1959 109.000 N/A 100%
Georgetown Market Place Fee 100% 1974 1965 12.191 101,613 95%
28
<PAGE>
LAND RENTABLE PERCENT
---- -------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OLATHE, KANSAS
119th Plaza Fee 100% 1994 1992 7.261 47,623 100%
INDUSTRIAL
- ----------
KANSAS CITY, MISSOURI
Bannister Business Center Fee 100% 1985 1985 4.365 32,346 96%
Surface Warehouse I Fee 100% 1973 1973 1.740 20,848 100%
Surface Warehouse II Fee 100% 1975 1975 1.740 21,042 100%
SHAWNEE MISSION, KANSAS
Quivira Business Park
Building A Fee 100% 1975 1973 1.695 20,848 100%
Building B Fee 100% 1973 1973 2.064 12,960 100%
Building C Fee 100% 1973 1973 1.589 20,778 100%
Building D Fee 100% 1973 1973 1.597 20,798 100%
Building E Fee 100% 1973 1973 2.156 28,797 100%
Building F Fee 100% 1973 1973 2.346 29,876 100%
Building G Fee 100% 1973 1973 1.913 21,136 100%
Building H Fee 100% 1973 1973 2.485 26,060 100%
Southwestern Bell Fee 100% 1973 1973 3.127 58,644 100%
Building J Fee 100% 1973 1973 2.953 46,764 100%
Building K Fee 100% 1985 1965 1.179 9,017 100%
Building L Fee 100% 1985 1965 1.223 8,891 100%
URBANDALE, IOWA
Meredith Drive Fee 49.5% (1) 1986 1985 13.910 200,000 100%
OFFICE
- ------
KANSAS CITY, MISSOURI
Country Club Plaza (Office Only)
Millcreek Block Fee 100% 1925 1925 N/A 11,463(2) 90%
Balcony Block Fee 100% 1928 1928 N/A 10,096(2) 97%
Esplanade Block Fee 100% 1945 1945 N/A 37,133(2) 94%
Theatre Block Fee 100% 1928 1928 N/A 29,740(2) 100%
Nichols Block Fee 100% 1938 1938 N/A 13,310(2) 100%
Time Block Fee 100% 1945 1945 N/A 25,964(2) 100%
Seville Square Fee 100% 1962 1962 N/A 20,412(2) 100%
Parkway Building Fee 100% 1906-1910 1955 0.588 26,365(2) 96%
Brookside (Office Only) Fee 100% 1919 1919 N/A 6,796(2) 100%
Romanelli Annex (Office Only) Fee 100% 1963 1993 N/A 7,948 89%
Two Brush Creek Fee 100% 1983 1983 1.500 63,325 96%
One Ward Parkway Fee 100% 1980 1980 1.500 54,580(2) 100%
Red Bridge Professional Fee 100% 1972 1976 1.428 40,693(2) 96%
Park Plaza Fee 100% 1983 1983 0.952 80,315 86%
4900 Main Fee 100% 1986 1985 5.000 182,153 100%
Board of Trade Fee 49% (1) 1966 1966 3.000 147,642(2) 84%
29
<PAGE>
LAND RENTABLE PERCENT
---- --------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Park Central Fee 51% (1) 1988-1990 1994 1.500 110,413 96%
Park Central II Fee 51% (1) 1994 1994 2.500 37,718 100%
Plaza West Fee 12.5%(1) 1988 1989 3.000 257,932 84%
SHAWNEE MISSION, KANSAS
Prairie Village (Office Only) Fee 100% 1956 1956 1.500 9,265(2) 92%
Corinth Office Building Fee 100% 1960 1984 2.142 45,600(2) 88%
Corinth Executive Building Fee 100% 1973 1986 3.638 44,441(2) 96%
Nichols Building Fee 100% 1978 1979 3.941 37,964(2) 86%
Prairie Village Office Center Fee 100% 1960 1981 4.443 69,002(2) 87%
Brymar Building Fee 100% 1968 1984 1.500 55,890 0%
Hartford Fee 100% 1978 1975 4.322 44,441(2) 100%
Fairway West Fee 100% (3) 1983 1948 5.483 67,519 98%
Fairway North Fee 100% (3) 1985 1948 4.141 61,225 96%
Oak Park National Bank Fee 100% 1976 1978 4.038 28,555(2) 97%
DES MOINES, IOWA
Terrace Place Fee 50% (1) 1987 1987 1.500 51,058 81%
WEST DES MOINES, IOWA
Crestwood Building Fee 90% (1) 1987 1987 3.208 29,967 93%
Highland Building Fee 90% (1) 1987 1987 6.120 72,637 76%
Waterford Building Fee 60% (1) 1990 1988 4.414 51,793 100%
Edgewater Fee 60% (1) 1989 1988 8.629 102,400 93%
Veridian Fee 60% (1) 1989 1988 7.480 78,116 90%
Sunset Building Fee 60% (1) 1989 1988 1.763 10,727 100%
Norwest Day Care Center Fee 50% (1) 1994 1994 1.030 6,500 100%
Wedgewood Building Fee 50% (1) 1994 1994 5.170 51,400 85%
Coronado Building Fee 50% (1) 1994 1994 2.500 25,512 31%
Ashford Building I Fee 50% (1) 1993 1993 3.990 41,400 100%
Bristol Building I Fee 50% (1) 1992 1992 5.210 51,400 99%
Ashford Building II Fee 50% (1) 1994 1994 4.110 41,400 100%
Augusta Building I Fee 50% (1) 1994 1994 4.930 50,800 73%
Neptune Building Fee 85% (1) 1986 1986 6.530 61,430 98%
Norwest Card Services Building Fee 50% (1) 1993 1993 35.250 272,490 100%
APARTMENTS
- ----------
KANSAS CITY, MISSOURI
Coach House South Fee 100% (3) 1986-1987 1986-1987 35.276 489 units 100%
Wornall Road Fee 100% 1918 1968 0.220 17 units 100%
Coach House Fee 100% (3) 1984 1984 8.930 160 units 99%
Coach Lamp Fee 100% 1961 1962 8.500 158 units 98%
Saint Charles Fee 100% 1922 1971 0.150 12 units 100%
Alta Loma Fee 100% 1918 1983 0.210 18 units 100%
Biscayne Towers Fee 100% 1918 1975 0.200 24 units 100%
Santa Ana Fee 100% 1960's 1987 0.160 11 units 100%
30
<PAGE>
LAND RENTABLE PERCENT
---- --------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Valencia Fee 100% 1918 1983 0.320 19 units 100%
La Solana Fee 100% 1918 1986 0.210 18 units 100%
Neptune Fee 100% 1988 1988 N/A 96 units 96%
Regency Fee 100% 1960 1976 1.150 131 units 99%
Sulgrave Fee 100% 1967 1976 1.410 144 units 99%
Park Lane Fee 100% 1924 1975 0.300 89 units 100%
Penn Wick Fee 100% 1960's 1987 0.150 6 units 100%
Cole Gardens Fee 100% 1960 1986 0.200 8 units 100%
Tama Fee 100% 1960's 1979 0.140 6 units 100%
Wornall Point Fee 100% 1950 1987 0.200 24 units 92%
SHAWNEE MISSION, KANSAS
Corinth Gardens Fee 100% 1961 1995 3.722 52 units 100%
Kenilworth Fee 100% 1965 1972 17.219 246 units 98%
Corinth Place Fee 100% (3) 1987 1987 7.888 76 units 96%
Mission Valley Fee 100% 1964 1972 5.300 89 units 97%
Corinth Paddock Fee 100% 1973 1995 10.128 126 units 98%
JOHNSTON, IOWA
Winwood Apartments Fee 65% (1) 1986-1987 1985 31.237 418 units 92%
REAL ESTATE LOTS
- ----------------
AND MISCELLANEOUS
- -----------------
SHAWNEE MISSION, KANSAS
Whitehorse (Residential) Fee 100% 1994 1983 29.444 N/A N/A
Whitehorse (unplatted) Fee 100% N/A 1984 16.598 N/A N/A
Whitehorse (Commercial and Multifamily) Fee 100% N/A 1983 26.600 N/A N/A
Green Meadows Fee 100% 1986-1995 1984 20.670 N/A N/A
Green Meadows (unplatted) Fee 100% N/A 1983 83.000 N/A N/A
LionsGate (Residential-under contract) Fee 100% N/A 1989 569.000 N/A N/A
Lions Gate (Commercial) Fee 100% N/A 1989 88.000 N/A N/A
Woodsonia (Commercial and Residential) Fee 100% 1985-1994 1981 401.360 N/A N/A
Waterford (1 lot) Fee 100% 1985-1994 1983 0.480 N/A N/A
KANSAS CITY, MISSOURI
Alameda Towers (Condominiums) Fee 100% 1988-1995 1988 18 Units N/A N/A
54 Rental Houses Fee 100% N/A 1928-1989 10.800 N/A 95%
Vacant Commercial Land and Fee 100% 1974 1954-1972 49.400 N/A 100%
Land Leases (See exhibit F-8.1
for detail)
Building Lease
(see exhibit F-8.1
for detail) Fee 100% N/A 9129 2.928 1,200 100%
RAYMORE, MISSOURI
Ridgway Drive - 9 Duplexes Fee 100% 1985 1990 2.000 N/A 89%
LEE'S SUMMIT, MISSOURI
Lakewood Sales Office Fee 100% 1975 1993 8.738 1,363 100%
31
<PAGE>
LAND RENTABLE PERCENT
---- -------- -------
NAME/LOCATION OWNERSHIP COMPANY'S YEAR YEAR AREA AREA LEASED
------------- --------- --------- ---- ---- ---- ---- ------
INTEREST OWNERSHIP DEVELOPED ACQUIRED (ACRES) (SQ.FT.) 12/31/95
-------- --------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS
Vacant Commercial Land and
Land Leases (See exhibit
F-8.1 for detail) Fee 100% 1956-1972 1956-1972 238.000 N/A 100%
Corinth Place Villas Fee 100% 1989 1957 0.400 N/A 100%
9 rental condominiums)
Farm Houses and Buildings Fee 100% 1940 1981-1983 N/A N/A N/A
OLATHE, KANSAS
Land Leases (See Exhibit F-8.1
for detail) Fee 100% 1960 1995 1.070 N/A 100%
OSAGE CITY, KANSAS
Manufactured Homes Plant Fee 100% (4) 1985 1985 29.800 N/A 100%
SAN FRANCISCO, CALIFORNIA
Raphael Hotel of San Francisco Leasehold 100% 1908 1971 1.000 152 rooms N/A
STONE COUNTY, MISSOURI
Ozark Mountain Village Lots Fee 100% 1986-1995 1986 60.000 N/A N/A
MIAMI COUNTY, KANSAS
810 Acre Farm (Someday, Inc.) Fee 100% N/A 1994 810.000 N/A 100%
Vacant Land Fee 100% N/A 1983 33.000 N/A N/A
DES MOINES, IOWA
Vacant Commercial Land Fee 50% (1) NA 1984-1985 98.000 N/A N/A
Vacant Commercial Land Fee 49.5% (1) N/A 1985 13.000 N/A N/A
SANTA FE, NEW MEXICO
Sun Mountain Village Partners Fee 44.1% (1) 1986 1986 6.000 74 lots N/A
ST. PETERSBURG, FLORIDA
Bay Plaza Shops Fee 100% 1992 1990 5.211 N/A N/A
Tropicana Fee 100% 1914 1992 1.000 39,690 95%
Women's Tennis Association Fee 50% (1) 1990 1990 0.750 13,367 96%
South Core Parking Garage Fee 50% (1) 1991 1991 1.520 132,343 0%
</TABLE>
(1) The indicated percentage interest in the property reflects the
interest of the Company in the entity that owns the property.
(2) This square footage represents useable rather than rentable square
footage.
(3) The Company shares 50% of the cash flow from this property with an
outside entity providing credit enhancement support related to the
financing of such property.
(4) The Company owns a 99% profit sharing interest and a 100% loss sharing
interest in the partnership that owns this facility.
The Company's only property that provided 10% or more of total 1995 rental
income or 10% or more of the total gross land and building assets of the Company
at December 31, 1995 is the "Plaza" project, when the multiple blocks of the
Plaza are considered to be a single property.
The following table summarizes the Plaza's occupancy rates and average rental
rates per square foot (showing only "minimum rents, or rents excluding the
percentage component) for the last five years. These figures include both
the retail and office portions of the Plaza.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Occupancy percentage 94.00% 97.00% 94.00% 93.00% 95.00%
Avg. rental rate per square foot $8.98 $9.15 $10.28 $10.83 $11.29
</TABLE>
The Plaza has more than 300 leases and there is no single tenant that leases
more than ten percent of the project's total rentable square footage. The
leases expire at various dates over the next 20 years. The percentage of the
Company's gross annual rental revenue represented by such leases in 1995 was
approximately 20 percent.
The following table sets forth tax information for the Plaza.
Federal Rate of Life 1995
Tax Basis Depreciation Method (in years) Property Taxes
--------------------------------------------------------------------
Plaza $54,075,521 2%-33% Straight Line 3-40 $1,666,965
The Company is currently developing a strategic plan for the Plaza. It is not
possible at this time to estimate the costs of any improvements or new
developments that will arise from the ultimate fulfillment of such strategic
plan.
32
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
MANAGEMENT
The information set forth below does not reflect the impact of
the future conveyance by the Company of the 680,000 shares of the Company's
common stock to be conveyed to the ESOT or beneficiaries of the ESOT. See Item
2, "Financial Information - Selected Financial Information."
TABLE A - BENEFICIAL OWNERSHIP OF THOSE OWNING MORE THAN FIVE PERCENT OF THE
OUTSTANDING SHARES OF THE COMPANY(a)
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNER ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cede & Co. Cede & Co.
P.O. Box 20
Bowling Green Station
New York, NY 10274 1,258,349(b) 25.9%
- --------------------------------------------------------------------------------------------
AHI Metnall, L.P. AHI Metnall, L.P.
c/o Allen & Company
Incorporated
Attn: James W. Quinn
711 Fifth Avenue
New York, NY 10022 948,880(c) 19.6%
- --------------------------------------------------------------------------------------------
BANK IV, as Trustee BANK IV, Trustee
Attn: Diane Summers
P.O. Box 41903
Kansas City, MO 64183 880,640(d) 18.1%
- --------------------------------------------------------------------------------------------
The Miller Nichols Miller Nichols, Jeannette Nichols
Living Trust and Clarence Roeder, Trustees
400 West 49th Terrace
Alameda Towers
Kansas City, MO 64112 569,760(e) 11.7%
- --------------------------------------------------------------------------------------------
Kay N. Callison Kay N. Callison
55 Lemans Court
Shawnee Mission, KS 66208 277,440(f) 5.7%
- --------------------------------------------------------------------------------------------
</TABLE>
(a) All information obtained from the shareholder register of the Company
and Officer and Director Questionnaires as of September 16, 1996 and
November 15, 1996, respectively.
(b) All of these shares are owned of record by Cede & Co. for other persons,
none of whom, to the knowledge of the Company, own beneficially 5% or more
of the outstanding shares.
(c) Mr. John Simon and Mr. James W. Quinn, directors of the Company, are
directors of Allen Holding Inc., a 100% owner of AHI Kansas, Inc., which is
in turn the sole general partner of AHI Metnall, L.P. Mr. Simon and Mr.
Quinn are also limited partners of AHI Metnall, L.P. Mr. Simon directly or
indirectly owns approximately 29.9% of AHI Metnall, L.P. and Mr. Quinn
directly or indirectly owns approximately 1% of AHI Metnall, L.P., which is
the beneficial owner of 948,000 shares of the Company. Although Mr. Simon
and Mr. Quinn each, as an officer and director of AHI Kansas, Inc. and
companies related to and affiliated with AHI Metnall, L.P., may be deemed
beneficial owners of such shares, each disclaims personal beneficial
ownership of such shares.
(d) Of the 880,640 shares held by BANK IV as trustee, 825,280 of those shares
are held by BANK IV as Trustee of the J.C. Nichols Company Employee Stock
Ownership Trust. The remainder are held by BANK IV as trustee for others.
Although: (i) Boatmen's Bancshares, Inc. recently acquired Fourth Financial
Corporation, the parent company of BANK IV, and (ii) NationsBank
Corporation agreed recently to acquire Boatmen's Bancshares, Inc., BANK IV
is still the trustee of the Company's ESOT. BANK IV and Boatmen's
Bancshares disclaim beneficial ownership of all such shares.
(e) Shares reflected include shares beneficially owned by the Miller Nichols
Living Trust. Miller Nichols and Clarence Roeder, Chairman Emeritus and
Director of the Company, respectively, and Ms. Jeanette Nichols are
trustees of the Miller Nichols Living Trust, none of whom have sole voting
or investment powers.
(f) Ms. Callison is a director of the Company. Of the shares reported by Ms.
Callison, 115,440 shares are held individually by Ms. Callison and she has
sole voting and investment power over such shares. Additionally, 36,240
shares are held in trusts for which Ms. Callison's spouse has sole voting
and dispositive power. Ms. Callison is the trustee and has sole investment
and voting power for two trusts for the benefit of her children, Mark
Callison and Elizabeth Callison. Such trusts hold 103,280 shares. Ms.
Callison is co-trustee with Ann Nichols and UMB Bank, N.A. of Kansas City
of the Nancy Nichols Lopez Trust, which owns 7,680 shares. Ms. Callison,
Ms. Nichols, and UMB Bank share investment and voting power over such
shares. Ms. Callison is the co-trustee with Commerce Bank of the Miller
Nichols Trust, which owns 14,800 shares for the benefit of Ms. Ann Nichols.
Ms. Callison and Commerce Bank share investment and voting power over such
shares.
33
<PAGE>
The information set forth below does not reflect the impact of the
future conveyance by the Company of the 680,000 shares of the Company's common
stock to be conveyed to the ESOT or beneficiaries of the ESOT. See Item 2,
"Financial Information - Selected Financial Information."
TABLE B - MANAGEMENT OWNERSHIP(a)
AMOUNT AND NATURE OF PERCENTAGE OF
NAME, TITLE BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- -------------------------------------------------------------------------------
Barrett Brady, Director, President
Chief Executive Officer 110,000(b) 2.3%
John Simon, Director (See James W. Quinn) 948,880(c) 19.6%
James W. Quinn, Director (See John Simon) 948,880(c) 19.6%
John A. Ovel, Director 880,640(d) 18.1%
Clarence Roeder, Director 569,760(e) 11.7%
Kay N. Callison, Director 277,440(f) 5.7%
William K. Hoskins, Director 240 less than .1%
Beneficial Ownership of Directors and
Executive Officers as a Group 2,738,960(g) 56.4%
(a) All information obtained from the shareholder register of the Company
and Officer and Director Questionnaires of the Company as of September 16, 1996
and August 22, 1996, respectively.
(b) Of the 62,000 shares reported by Mr. Brady, 2,400 shares are held
individually by Mr. Brady's spouse. Mr. Brady disclaims beneficial ownership
of such shares. Additionally, shares reflected as beneficially owned by Mr.
Brady include 8,000 shares held by the Fred Brady Trust dated December 5,
1985. Mr. Brady is a Trustee of such trust and has sole voting and investment
power over such shares. An additional 64,000 shares reported by Mr. Brady
are attributable to an unexercised but vested stock option from the Company
that can be exercised at any time prior to December 31, 2010 and an
additional 16,000 shares reported by Mr. Brady are attributable to an
unexercised but vested stock option from the Company that can be exercised at
any time prior to May 30, 2006. For purposes of this disclosure, options are
considered vested if they vest within 60 days of the effective date of this
Form 10.
(c) Mr. John Simon and Mr. James W. Quinn are directors of Allen Holding
Inc., a 100% owner of AHI Kansas, Inc., which is in turn the sole general
partner of AHI Metnall, L.P. Mr. Simon and Mr. Quinn are also limited partners
of AHI Metnall, L.P. AHI Metnall, L.P. is the beneficial owner of 948,880
shares of the Company, ownership of which is reported above. Although Mr. Simon
and Mr. Quinn each, as an officer and director of AHI Kansas, Inc. and companies
related to and affiliated with AHI Metnall, L.P., may be deemed beneficial
owners of such shares, each disclaims personal beneficial ownership of such
shares.
(d) John A. Ovel is the Regional President of Boatmen's Trust Company, a
subsidiary of Boatmen's Bancshares, Inc. Although: (i) Boatmen's Bancshares,
Inc., recently acquired Fourth Financial Corporation, the parent company of BANK
IV, and (ii) NationsBank Corporation agreed recently to acquire Boatmen's
Bancshares, Inc., Bank IV is still the trustee of the Company's ESOT. In such
capacity, BANK IV is still the record owner of 825,280 shares held by the
Company's ESOT. The other 55,360 shares reported here are held by BANK IV and
Boatmen's Trust Company as trustee for other parties. Mr. Ovel, BANK IV, and
Boatmen's Trust Company disclaim all beneficial ownership of such shares.
(e) All 569,760 shares reported by Mr. Roeder are held by the Miller
Nichols Living Trust. Mr. Roeder, Ms. Jeannette Nichols, and Mr. Miller
Nichols, Chairman Emeritus, are co-trustees of the Miller Nichols Living Trust.
Mr. Roeder does not have sole voting or investment powers for such shares. Mr.
Roeder disclaims all beneficial ownership of such shares.
(f) Ms. Callison is a director of the Company. Of the shares reported by
Ms. Callison, 115,440 shares are held individually by Ms. Callison and she has
sole voting and investment power over such shares. Additionally, 36,240 shares
are held in trusts for which Ms. Callison's spouse has sole voting and
dispositive power. Ms. Callison is the trustee and has sole investment and
voting power for two trusts for the benefit of her children, Mark Callison and
Elizabeth Callison. Such trusts hold 103,280 shares. Ms. Callison is co-
trustee with Ann Nichols and UMB Bank, N.A. of Kansas City of the Nancy Nichols
Lopez Trust, which owns 7,680 shares. Ms. Callison, Ms. Nichols, and UMB Bank
share investment and voting power over such shares. Ms. Callison is the co-
trustee with Commerce Bank of the Miller Nichols Trust, which owns 14,800 shares
for the benefit of Ms. Ann Nichols. Ms. Callison and Commerce Bank share
investment and voting power over such shares.
(g) See individual ownership footnotes above for voting and investment
powers and disclaimers of beneficial ownership and general disclosures. The
shares reflected for Mr. Quinn and Mr. Simon are only included once in this
total.
34
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by this item with respect to directors and
officers is set forth below.
EXECUTIVE OFFICERS.
The following are the executive officers of the Company, all of whose
term of office expires at the Annual Meeting of the Board of Directors and all
of whom serve at the will of the Board of Directors.
BARRETT BRADY - Age 50. Mr. Brady is the President and Chief Executive
Officer of the Company and has been acting in those
capacities since September of 1995. Mr. Brady has served
as a director of the Company since December 1995. For
more than five years prior to becoming President and
Chief Executive Officer of the Company, Mr. Brady served
as President of Dunn Industries, Inc., an investment
holding company in the primary business of regional
commercial and industrial general contracting. Mr. Brady
is also a Director of North American Savings Bank. Mr.
Brady is the brother-in-law of Mr. John Fox, Vice
President of Special Projects for the Company.
G. REID TEANEY - Age 50. Mr. Teaney is Senior Vice President of the Company
and has served in that capacity since July 1996. For
more than five years prior to becoming Senior Vice
President of the Company, Mr. Teaney served as Senior
Vice President and Executive Managing Officer of the
Kansas City office of CB Commercial Group, a commercial
real estate marketing, sales, leasing, and brokerage
company. From January 1988 through March 1996, Mr.
Teaney served as a director of Columbia Trust Company.
EDWARD A. de AVILA - Age 41. Mr. de Avila is Senior Vice President of
Development of the Company and has been acting in that
capacity since August 1996. Since November 1993, Mr. de
Avila has been Managing Director of Centertainment, Inc.,
an indirect wholly-owned subsidiary of AMC Entertainment,
Inc., one of the largest motion picture exhibitors in the
United States. Centertainment, Inc. pursued the
development of entertainment based retail centers with
AMC Multiscreen Theatres as major anchors. From March
1988 through May 1993, Mr. de Avila was Vice President,
Director of Retail for Reston Town Center Associates, a
major developer of retail space in Reston, Virginia.
JOHN H. FOX - Age 51. Mr. Fox is a Vice President of the Company with
primary responsibility for special projects, and has been
acting in that capacity for more than five years. Mr.
Fox is the brother-in-law of Mr. Brady.
BRIAN G. SHANAHAN - Age 58. Mr. Shanahan is a Vice President of the Company
with primary responsibility for apartment leasing and
related operations, and has been acting in that capacity
for more than five years.
MICHAEL T. SHIELDS - Age 57. Mr. Shields is a Vice President of the Company
with primary responsibility for retail and industrial
leasing and related operations, and has been acting in
that capacity for more than five years.
DONNELL J. DIXON - Age 53. Mr. Dixon is a Vice President of the Company with
primary responsibility for office leasing and related
operations, and has been acting in that capacity for more
than five years.
35
<PAGE>
WILLIAM E. BELL - Age 61. Mr. Bell is the Vice President of Administration
for the Company and has been acting in that capacity for
more than five years.
MARK A. PETERSON - Age 33. Mr. Peterson is the Vice President, Treasurer, and
Chief Financial Officer of the Company and has been
acting in that capacity since June 1995. For more than
five years prior to that time, Mr. Peterson acted in
levels of increasing responsibility, concluding as senior
audit manager for Donnelly Meiners Jordan Kline, P.C., a
certified public accounting firm that has provided
services to the Company.
PRICE A. SLOAN - Age 34. Mr. Sloan is the Secretary and General Counsel
of the Company and has been acting in that capacity since
March 1996. For more than five years prior to that time
Mr. Sloan was an attorney with Blackwell Sanders Matheny
Weary & Lombardi L.C., the law firm that has acted and
continues to act as legal counsel to the Company.
DIRECTORS.
WILLIAM K. HOSKINS - Age 61. For more than five years Mr. Hoskins has
served as Vice President, General Counsel, and Secretary
to the entity now named Hoechst Marion Roussel, Inc. and
which was formerly known both as Marion Merrell Dow, Inc.
and Marion Laboratories, Inc., a major pharmaceutical
company. Mr. Hoskins is currently the Chairman of the
Board of Directors of the Company and has served in that
capacity since May 1996. Mr. Hoskins is also a Director
of the Company and has served in that capacity since
December 1995. Mr. Hoskins's term as a Director of the
Company expires in 1999.
BARRETT BRADY - Information relating to Mr. Brady can be found above
under Executive Officers. Mr. Brady's term as a Director
of the Company expires in 1997.
KAY N. CALLISON - Age 53. Ms. Callison has served as a Director of the
Company since 1982. For more than five years, Ms.
Callison has been active in charitable activities in the
Kansas City metropolitan area. Ms. Callison's term as a
Director of the Company expires in 1997.
MARK C. DEMETREE - Age 39. Since February 1993, Mr. Demetree has been the
President of North American Salt Company, a company that
is the second largest producer of salt in the United
States and Canada and is a unit of Harris Chemical Group,
Inc. From 1989 through January 1993, Mr. Demetree was a
Senior Vice President of D.G. Harris & Associates, Inc.
From 1991 through February 1993, Mr. Demetree was also
President of the Trona Railway Company. Mr. Demetree is
also a member of the Board of Directors of Advanced Radio
Telecom Corp., NAMSCO, Inc. and Sifto Canada, Inc. and is
a member of the Board of Governors of the Chamber of
Maritime Commerce for the Great Lakes and St. Lawrence
Seaway. Mr. Demetree's term as a Director of the Company
expires in 1999.
JOHN A. OVEL - Age 49. For more than five years Mr. Ovel has served as
Regional President of Boatmen's Trust Company, a
subsidiary of Boatmen's Bancshares, Inc. Mr. Ovel's term
as a Director of the Company expires in 1999.
JAMES W. QUINN - Age 39. Mr. Quinn has served as a Director of the Company
since December 1995. For more than five years, Mr. Quinn
has served as the Chief Financial Officer and, for the
last one and a half years, as a Director of Allen &
Company Incorporated, an investment banking and
securities brokerage firm. Mr. Quinn's term as a
Director of the Company expires in 1998.
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<PAGE>
JOHN SIMON - Age 53. Mr. Simon has served as a Director of the
Company since August 1995. For more than five years, Mr.
Simon has been a Managing Director of Allen & Company
Incorporated, an investment banking and securities
brokerage firm. Mr. Simon is also a member of the Board
of Directors of T Cell Sciences Incorporated, Neurogen
Corporation, Lunn Industries, Inc., Batteries Batteries,
Inc., and The Immune Response Corporation. Mr. Simon's
term as a Director of the Company expires in 1997.
CLARENCE L. ROEDER - Age 63. Mr. Roeder has served as a Director of the
Company since 1974. For more than five years prior to
July 1995, Mr. Roeder was Secretary of the Company. For
more than five years prior to January 1993, Mr. Roeder
was Vice President and General Counsel of the Company.
Mr. Roeder is also a member of the Board of Directors of
Mercantile Bank of Kansas and Mercantile Bank of Kansas
City. Mr. Roeder's term as a Director of the Company
expires in 1998.
THOMAS J. TURNER, III - Age 52. Mr. Turner has served as a Director of the
Company since December 1995. For more than five years,
Mr. Turner has served as President of Charter American
Mortgage Company, a business that operates as a
correspondent, and originates and services commercial
loans, for institutional mortgage lenders. Mr. Turner is
an advisory director of BANK IV Kansas City. Mr.
Turner's term as a Director of the Company expires in
1998.
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE OFFICER COMPENSATION.
The following table sets forth the compensation of certain executive
officers of the Company for the last three fiscal years.
SUMMARY COMPENSATION TABLE(a)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
OTHER ANNUAL ALL OTHER
NAME AND SALARY BONUS COMPENSATION COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Barrett Brady, CEO 1995 110,000 N/A N/A N/A
- --------------------------------------------------------------------------------------
Jack Frost, CEO 1995 61,025 N/A N/A $6,975(b)
- --------------------------------------------------------------------------------------
1995 87,667(d) 50,000 1,080(e) 5,388(f)
Lynn L. McCarthy, CEO(c) 1994 253,900(g) 10,000 1,508(e) 9,122(h)
1993 179,875(i) N/A 1,476(e) 7,393(j)
- --------------------------------------------------------------------------------------
</TABLE>
(a) No officers of the Company during 1995 other than those serving
as Chief Executive Officer meet the threshold criteria for reporting.
(b) The amount reported includes $6,975 paid to Mr. Frost as director
fees.
(c) The amounts reflected for Mr. McCarthy in 1995 do not attempt to
adjust for the value of cash and property received by Mr. McCarthy
pursuant to the Settlement Agreement that resolved the significant
shareholder litigation that occurred in 1995.
(d) The amount reported includes $6,533 deferred by Mr. McCarthy and $4,333
contributed by the Company under the Company's 401(k) savings plan.
(e) The amount reflects the value of the personal use of a Company-
owned automobile attributable to Mr. McCarthy.
(f) The amount reported includes $1,050 paid to Mr. McCarthy as
director fees, $4,338 paid as premiums under supplemental split dollar
life insurance policies for Mr. McCarthy.
(g) The amount reported includes $62,304 deferred at the election of Mr.
McCarthy as deferred compensation, $9,065 deferred by Mr. McCarthy and
$5,663 contributed by the Company under the Company's 401(k) savings
plan and $10,933 contributed by the Company for Mr. McCarthy to the J.C.
Nichols Company Employee Stock Ownership Plan.
(h) The amount reported includes $2,575 paid to Mr. McCarthy as
director fees and $6,547 paid as premiums under supplemental split dollar
life insurance policies for Mr. McCarthy.
(i) The amount reported includes $8,575 deferred by Mr. McCarthy and $4,875
contributed by the Company under the Company's 401(k) savings plan.
(j) The amount reported includes $1,375 paid to Mr. McCarthy as director
fees and $6,018 paid as premiums under supplemental split dollar life
insurance policies for Mr. McCarthy.
37
<PAGE>
OUTSIDE DIRECTOR COMPENSATION.
Directors attending, whether by telephone or in person, any regular or
special meeting of the Board of Directors of the Company are paid $1,000 per
meeting. Directors who are members of committees of the Board of Directors
attending, whether by telephone or in person, any regular or special meeting of
a committee of the Board of Directors are paid $500 per meeting. Directors who
are also employees of the Company are not paid Director's fees. Director and
committee member fees were increased in early 1996 from $400 per meeting.
EMPLOYMENT AGREEMENTS.
The Company has an employment agreement with its President and
Chief Executive Officer, Mr. Barrett Brady. The principal terms of Mr.
Brady's employment agreement provide that for a period of five years ending
on December 31, 2000, Mr. Brady shall receive a base salary of $225,000 per
year subject to annual review and adjustment at the discretion of the
Company's Board of Directors. Additionally, Mr. Brady shall be entitled to
an annual incentive discretionary bonus based upon achieving goals to be set
annually, with an opportunity to receive up to 80% of his base salary as
annual incentive discretionary bonus. Moreover, Mr. Brady shall be entitled
to fixed supplemental retirement benefits of $78,000 per year payable for 15
years commencing upon the earlier of his disability or reaching the age of
60. Such supplemental retirement benefits vest at a rate of 40% on January
1, 1996, 20% on December 31, 1996, and 10% annually on December 31st for the
years 1997, 1998, 1999, and 2000. Mr. Brady has been granted a stock option
to purchase 64,000 shares, or their equivalent, at a price of $.0125 per
share, which option vested 50% on January 1, 1996 and the remaining 50% will
vest on January 1, 1997. Mr. Brady has also been granted an option to
purchase 160,000 shares of common stock of the Company, or their equivalent,
at a price of $19.375 per share. Such option vesting at a rate of 10% on
December 31, 1996, 15% on December 31, 1997, and 25% annually on December
31st for the years 1998, 1999 and 2000. Mr. Brady shall be subject to a
confidentiality and non-competition agreement during the term of the
agreement and for a period of one year after termination.
Mr. Brady's employment agreement provides for termination by the
Company for cause, by voluntary resignation of Mr. Brady, or by the Company
without cause. The agreement also provides Mr. Brady the right to terminate the
agreement upon a change in control of the Company, which is defined as the
acquisition by any entity or affiliated group of 35% or more of the combined
voting power of the outstanding securities of the Company. Upon termination of
the agreement by either party as a result of a change of control or by the
Company without cause, Mr. Brady shall be entitled to certain rights, including,
but not limited to, immediate vesting of all stock options and the right to
receive his salary and normal employee benefits for the longer of twenty-four
months or the remainder of the agreement's term.
The Company has an employment agreement with its Senior Vice President
of Development, Mr. Edward A. de Avila. The principal terms of Mr. de Avila's
employment agreement provide that for a period of three years ending on August
12, 1999, Mr. de Avila shall receive a base salary of $200,000 per year subject
to annual review and increase at the discretion of the Company's Board of
Directors. Additionally, Mr. de Avila shall be entitled to an annual incentive
discretionary bonus, with an opportunity to receive up to 40% of his base salary
as annual incentive discretionary bonus. Mr. de Avila's employment agreement
provides for termination by the Company for cause, by voluntary resignation of
Mr. de Avila, or by the Company without cause. Upon termination of the
Agreement by the Company without cause, Mr. de Avila shall be entitled to
certain rights, including, but not limited to, the right to receive his annual
salary and normal employee benefits from the date of termination until August
12, 1999.
The Company has an employment agreement with its Senior Vice
President, Mr. G. Reid Teaney. The principal terms of Mr. Teaney's employment
agreement provide that for a period of three years ending on July 14, 1999,
Mr. Teaney shall receive a base salary of $160,000 per year subject to annual
review and increase at the discretion of the Company's Board of Directors.
Additionally, Mr. Teaney shall be entitled to an annual incentive discretionary
bonus with an opportunity to receive up to 60% of his base salary as
38
<PAGE>
annual incentive discretionary bonus. Mr. Teaney's employment agreement
provides for termination by the Company for cause, by voluntary resignation
of Mr. Teaney, or by the Company without cause. Upon termination of the
Agreement by the Company without cause, Mr. Teaney shall be entitled to
certain rights, including, but not limited to, the right to receive his
annual salary and normal employee benefits from the date of termination until
July 14, 1999.
The Company has an employment agreement with its Chief Financial
Officer, Mr. Mark A. Peterson. The principal terms of Mr. Peterson's
employment agreement provide that for a period of three years ending on
December 31, 1998, Mr. Peterson shall receive a base salary of $100,000 per
year subject to annual review and increase at the discretion of the Company's
Board of Directors. Additionally, Mr. Peterson shall be entitled to an annual
incentive discretionary bonus set by the Company's Board of Directors. Mr.
Peterson's employment agreement provides for termination by the Company for
cause, by voluntary resignation of Mr. Peterson, or by the Company without
cause. Upon termination of the Agreement by the Company without cause, Mr.
Peterson shall be entitled to certain rights, including, but not limited to,
the right to receive his annual salary and normal employee benefits for a
period of not less than twelve months following the date of termination.
The Company has an employment agreement with its General Counsel and
Secretary, Mr. Price A. Sloan. The principal terms of Mr. Sloan's employment
agreement provide that for a period of three years ending on March 19, 1999, Mr.
Sloan shall receive a base salary of $100,000 per year subject to annual review
and increase at the discretion of the Company's Board of Directors.
Additionally, Mr. Sloan shall be entitled to an annual incentive discretionary
bonus set by the Company's Board of Directors. Mr. Sloan's employment agreement
provides for termination by the Company for cause, by voluntary resignation of
Mr. Sloan, or by the Company without cause. Upon termination of the Agreement
by the Company without cause, Mr. Sloan shall be entitled to certain rights,
including, but not limited to, the right to receive his annual salary and normal
employee benefits for a period of not less than twelve months following the date
of termination.
STOCK OPTION PLAN.
The Board of Directors of the Company on March 28, 1996 adopted the 1996
Stock Option Plan ("Plan") that allowed the granting of stock options to
eligible Plan Participants. The Shareholders of the Company approved the Plan
at their 1996 Annual Meeting on May 29, 1996. An amendment and restatement of
the plan was approved subsequently by the Board of Directors to reflect recent
changes in the federal securities regulations relevant to the Plan. The Plan
authorizes the Board to issue up to 240,000 shares of the Company's common
stock. If an option granted under the Plan expires or is canceled without
having been exercised or vested, the shares subject to the unvested and canceled
options will be available thereunder for grants of options. The type, amount,
and conditions of any options granted under the Plan are determined by the
Compensation Committee, or such other committee as the Board of Directors
determines.
COMPENSATION COMMITTEE.
The Board of Directors of the Company recently appointed a Compensation
Committee to recommend compensation guidelines and policies for the Company and
compensation for the senior officers of the Company and to administer the Plan.
The Compensation Committee is currently composed of Thomas J. Turner, III,
Chairman, Mark C. Demetree and James W. Quinn. Mr. Brady, the President and
Chief Executive Officer of the Company, served on the Compensation Committee
from December 13, 1995 until his resignation from the committee as of February
1, 1996.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Thomas J. Turner, III is a Director of the Company and is president and
principal shareholder of Charter American Mortgage Company, a business that
prepares and presents mortgage loan applications to institutional mortgage
lenders. Charter American Mortgage Company has from time to time been asked to
provide services to the Company, and the Company has obtained loans as a result
of loan applications taken by Charter American Mortgage Company. Such loans
were obtained by the Company at rates
39
<PAGE>
competitive with the rates charged by other mortgage lenders. Charter American
Mortgage Company has earned approximately $63,000 in the last year in loan
origination fees as the result of mortgage financing obtained by the Company as
a result of services provided by Charter American Mortgage Company.
The Company has agreed to loan to the ESOT up to $2.4 million to permit the
ESOT to meet its 1996 obligations without selling shares of common stock of
the Company now held by the ESOT. All such loans are unsecured and are
non-interest bearing. The Company expects such loans to be repaid in full.
Mr. John A. Ovel is Director of the Company and is Regional President of
Boatmen's Trust Company, a subsidiary of Boatmen's Bancshares, Inc. In January
of 1996, Boatmen's Bancshares, Inc. acquired Fourth Financial Corporation, the
parent company of BANK IV, trustee of the ESOT. As trustee, BANK IV is record
owner of the shares beneficially owned by the ESOT. Boatmen's Trust Company
provides administrative services for the ESOT under an agency agreement with
BANK IV, and will continue to do so until Boatmen's Trust Company is appointed
as successor trustee of the ESOT. BANK IV receives a fee for serving as
trustee of the ESOT. The fee currently is determined by the number of shares
held by the ESOT, the amount of cash held by the ESOT, the appraised value of
the shares held by the ESOT, and the level of service requested by the ESOT. In
1996, that fee is likely to exceed $100,000.
Mr. Clarence L. Roeder and Ms. Kay N. Callison are Directors of the
Company. Mr. Roeder and Mr. Miller Nichols, father of Ms. Callison, are each a
director of Westport Today, Inc. In addition, Mr. Roeder is a vice president of
that entity. Westport Today, Inc. entered into a Supplemental Settlement
Agreement with the Company in September 1995 pursuant to which Westport Today,
Inc. agreed to retire outstanding indebtedness of approximately $3,250,000 to
the Company. Such indebtedness has been paid in full.
ITEM 8. LEGAL PROCEEDINGS
On April 20, 1995, a shareholder derivative lawsuit was filed in which the
Company, each of the then existing members of the Board of Directors of the
Company, and the Bowser Partnership were named as defendants. Among other
things, the plaintiffs alleged a breach of fiduciary duties by the then
existing directors of the Company and alleged that certain then existing
officers of the Company had engaged in insider transactions from which they
benefitted personally at the expense of the Company. This litigation was
followed by a lawsuit initiated on behalf of the beneficiaries of the ESOT
against many of those defendants, including the Company, named in the
shareholder derivative lawsuit. After completion of an internal
investigation by a committee of outside directors of the Company, the Company
then filed a lawsuit against many of the defendants named in the shareholder
derivative lawsuit. All of such legal actions were consolidated in the
Federal District Court, Western District of Missouri, where certain
litigants, including the Company, requested, among other things, that the
District Court rescind certain transactions to which individuals who were
then officers or directors of the Company were a party.
The consolidated litigation ended when the Company and the other
parties thereto entered into a Mutual Release and Settlement Agreement dated
as of June 30, 1995 ("Settlement Agreement"). The parties to the Settlement
Agreement included the shareholders who had initiated the derivative
litigation, the Company, the ESOT beneficiaries that had initiated the
litigation on behalf of all ESOT participants, all of the individuals who
were then directors of the Company, four former directors of the Company who
were on the Board of Directors of the Company at the time of certain
transactions that were, in part, the subject of the litigation, the
individuals who were at various times prior to the Settlement Agreement the
trustees of the ESOT, certain individuals and entities related to or under
the control of the former chief executive officer and former chief financial
officer of the Company, and two entities that had entered into a business
arrangement with the Company prior to the Settlement Agreement. The
provisions of the Settlement Agreement that are material to the Company,
include the following: (i) the Company received $6.6 million in cash from
the insurance companies providing director and officer liability insurance;
(ii) the Company agreed to indemnify the then existing directors and former
directors for their litigation expenses; (iii) the Bowser Partnership
conveyed to the Company 125,242 shares (pre-split) of stock of the Company
acquired by that partnership from the ESOT, and the indebtedness owed by the
Bowser Partnership to the Company was deemed satisfied; (iv) all rights of
the Bowser Partnership and other entities pursuant to an option agreement
entered into with the ESOT were forfeited; (v) the former chief executive
officer of the Company conveyed to the Company 5,719 shares (pre-split) of
stock of the Company; (vi) the former chief executive officer of the Company
conveyed to the Company 6,508 shares of stock of the Company that were
pledged as collateral for an obligation owed to another defendant in the
litigation, and the Company agreed to pay approximately $6.1 million to
acquire such shares; (vii) the Company received title to six properties from
the former chief executive officer of the Company and entities under his
control; (viii) the Company agreed to pay $3.6 million to the former chief
executive officer of the Company and indebtedness owed by such individual to
the Company or its subsidiaries, in the approximate amount of $9.5 million,
was canceled; (ix) the Company received a new secured note in the approximate
amount of $1.2 million from an entity affiliated with the former chief
financial officer of the Company; (x) the former chief financial officer of
the Company agreed to provide to the Company the benefits of stock ownership
of certain stock of an entity affiliated with the Company; (xi) the Company
agreed to pay all attorneys' fees, costs, and expenses incurred on behalf of
the shareholders initiating the shareholder derivative litigation and on
behalf of the ESOT beneficiaries; (xii) the Company agreed to transfer 8,500
shares (pre-split) of stock received from the Bowser Partnership to the ESOT
or the beneficiaries of the ESOT and the Company agreed to pay $2 million to
the ESOT; and (xiii) the Company agreed to appoint an independent
institutional trustee for the ESOT>
A quantification of litigation settlement expense is set forth in note 16
to the consolidated financial statements of the Company for the years ended
December 31, 1995 and 1994.
Except for those involving the ESOT, nearly all transactions, conveyances,
payments, and extinguishments required by the Settlement Agreement were
completed by November 30, 1995. As part of the Settlement Agreement, the
Company was given the option to submit to the IRS a request for a private
letter ruling on matters related to the ESOT's duties pursuant to the
Settlement Agreement. The private letter ruling request may result in JCN
entering into a closing agreement with the IRS, and the Company may be
requested to pay to the IRS some amount in order to obtain such a closing
agreement.
The Company has filed as a plaintiff a complaint against its former
attorney, Charles Schleicher, and the law firm of Schleicher Latz, P.C.
alleging certain breaches of fiduciary duties and obligations as an attorney
and the attorneys for the Company, and alleging certain failures in
performance of duties as attorney and attorneys for the Company. The suit
against Mr. Schleicher and his law firm was filed in December 1995 in the
Circuit Court of Jackson County, Missouri. The Settlement Agreement
described above limits the potential recovery realizable by the Company to
$2.0 million. The actual amount recovered by the Company, by settlement or
otherwise, may be substantially less than such amount.
The Company has no claims pending against it and no claims pending by it
against others that relate to the matters covered by the Settlement
Agreement, arise out of events or circumstances that gave rise to the
Settlement Agreement, or involve former officers, former directors, or
professionals providing services to the Company prior to the Settlement
Agreement.
40
<PAGE>
The Company has filed as a plaintiff a $3.0 million proof of claim in
the National Gypsum bankruptcy proceeding pending in United States Bankruptcy
Court, Northern District of Texas. The Company recently received an initial
payment of approximately $378,000. The Company's proof of claim in the
National Gypsum bankruptcy is based on tort liability arising from claims
relating to the quality of certain materials used in the construction of
properties owned by the Company. Total payments received by the Company
under the National Gypsum plan of reorganization will not equal the full
amount of the proof of claim originally filed by the Company. However,
counsel for the Company has advised management that such plan does provide
for two additional payments on the Company's claim that are expected to total
approximately $800,000. Such additional payments, if any, will be booked
as income when received.
The Company has filed a complaint as a plaintiff against National United
Investment Group, Inc. and Mr. Thomas W. Mahoney for failure by the entity to
make payments due on a promissory note held by the Company and failure by Mr.
Mahoney to make payments due as a result of his guarantee of the equity's
obligations. The amount currently outstanding on the note is approximately
$850,000. The suit against the entity and Mr. Mahoney was filed in April
1996 in the United States District Court, Western District of Missouri. The
amount actually recovered by the Company, by settlement or otherwise, is
likely to be substantially less than such amount.
Nichols Equity, Inc., a wholly-owned subsidiary of JCN, received as
defendant a complaint filed by Justin Management, Inc. ("Justin") and
Winstead's Restaurant, Inc. ("Winstead's") in August 1996 in the United
States District Court, Western District of Missouri. The suit sought to
compel Nichols Equity to participate in an arbitration hearing allegedly
required by an agreement allegedly entered into among Nichols Equity, Justin,
and Winstead's. The parties have now agreed to an arbitration hearing to
determine whether a separate provision of the agreement should be enforced
which purports to require Nichols Equity to forfeit its interest in 47th
Street Development Corporation, Grand Street Partners I, L.P., and Creekview
Partners II, L.P. An adverse outcome in this arbitration is not expected to
have a material adverse impact on the financial condition of the Company or
results of operations.
The Company and its subsidiaries are parties to certain other legal
proceedings incident to their business. In the opinion of management, none
of these other matters, either individually or in the aggregate, is material
to the Company's financial condition or results of operations. All material
legal proceedings are described above.
41
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ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET.
Although there is currently no established trading market for shares of
common stock of the Company, such shares have for many years been traded over-
the-counter very infrequently through inter-broker bulletin boards trading under
the symbol "NCJC.BB." The high and low bid information reflecting inter-dealer
bulletin board prices without retail mark-up, mark-down or commission, for each
quarter during the two most recent fiscal years is as follows:
1994 HIGH LOW
- ------------------------------------------------------------------------------
1st Quarter $6.25 $5.625
- ------------------------------------------------------------------------------
2nd Quarter $6.25 $5.625
- ------------------------------------------------------------------------------
3rd Quarter $7.375 $7.3125
- ------------------------------------------------------------------------------
4th Quarter $9.375 $7.1875
- ------------------------------------------------------------------------------
1995 HIGH LOW
- ------------------------------------------------------------------------------
1st Quarter $11.41 $9.375
- ------------------------------------------------------------------------------
2nd Quarter $10.3125 $10
- ------------------------------------------------------------------------------
3rd Quarter No Trades No Trades
- ------------------------------------------------------------------------------
4th Quarter $21.875 $14.375
- ------------------------------------------------------------------------------
1996 HIGH LOW
- ------------------------------------------------------------------------------
1st Quarter $21.0625 $20.00
- ------------------------------------------------------------------------------
2nd Quarter $36.50 $32.00
- ------------------------------------------------------------------------------
3rd Quarter $34.00 $28.125
- ------------------------------------------------------------------------------
These quotations merely reflect the prices at which transactions were
proposed, and do not necessarily represent actual transactions. The quotations
on November 18, 1996, were Bid $27.00 and Ask $30.00.
The Company has 32,000 shares of its common stock that are subject to a
vested option held by Mr. Brady, President and Chief Executive Officer. Other
than 1,253,200 shares of common stock held by the Company's Employee Stock
Ownership Trust, AHI Metnall, L.P., and various other shareholders, the
4,852,400 currently outstanding shares of common stock of the Company may be
sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The Company has entered into no agreements to register any
shares of its common stock pursuant to the Securities Act and is not publicly
offering, and has not publicly proposed to offer, any of its shares of common
stock.
The number of shares reflected in the foregoing paragraph does not include
the 680,000 shares awaiting conveyance to the ESOT or ESOT beneficiaries and
does not include any shares subject to options granted to management of the
Company, but not yet exercised.
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<PAGE>
HOLDERS.
As of September 23, 1996, there were approximately 175 record holders of
common stock and including those individuals and entities for whom shares are
held in nominee or street name by brokers, there were approximately 324 holders
of the common stock.
DIVIDEND POLICY.
Prior to 1995, the Company typically declared and paid an annual cash
dividend of $10.00 on each share of its common stock (or approximately $.125 per
post-split share). No dividend was paid on common stock in 1995 or in the first
nine months of 1996. The Board of Directors of the Company has not determined
if, when, or in what amount future dividends will be declared or paid. The
Company is not currently under any dividend payment prohibition or restriction.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On January 31, 1994, the Company sold 12,956 shares (or 1,036,480 post-
split shares) of its common stock to AHI Metnall, L.P. These shares were sold
in exchange for a 50% partnership interest then held by AHI Metnall, L.P. in the
partnership Metnall Associates. This negotiated transaction was made in
reliance on the exemption from registration set forth in Section 4(2) of the
Securities Act, as this isolated transaction with a single investor did not
involve any public offering of the common stock of the Company.
On December 31, 1994, the Company sold 5,524 shares (or 441,920 post
split shares) of its common stock to Mr. Lynn L. McCarthy, the individual who
was then the Chief Executive Officer of the Company. These shares were sold
in exchange for a 51% partnership interest then held by Mr. McCarthy in a
Kansas general partnership, World Resources Company. This negotiated
transaction was made in reliance on the exemption from registration set forth
in Section 4(2) of the Securities Act, as this isolated transaction with a
single investor did not involve any public offering of the common stock of
the Company. The sale of stock to Mr. McCarthy was unrelated to the sale of
stock to AHI Metnall, L.P. The stock sold to Mr. McCarthy was returned to
the Company as part of the 1995 litigation settlement.
In addition to the two stock sales set forth above, in March 1995 the
Company contributed 375 shares and 1,000 shares (or 30,000 and 80,000
post-split shares, respectively) to the Company's Employee Stock Ownership
Trust, representing the 1994 and 1995 contributions, respectively, by the
Company to that Trust.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The capital stock of the Company is Common Stock, par value $0.01 per share
(the "Common Stock"). The Bylaws of the Company (the "Bylaws"), the Articles of
Incorporation of the Company (the "Articles"), and Missouri law provide the
following with respect to the Common Stock and holders thereof:
DIVIDEND RIGHTS.
The bylaws provide that dividends upon the outstanding shares of Common
Stock may be declared by the Board of Directors at any meeting and that such
dividends may be paid in cash, in property, or in shares of the Company's stock.
43
<PAGE>
REDEMPTION PROVISIONS.
Shares of Common Stock are not subject to redemption.
VOTING RIGHTS.
Shares of Common Stock possess general voting powers. The Bylaws provide
that in the election of directors, shareholders vote cumulatively unless
cumulative voting is unanimously waived by all shareholders present.
Accordingly, unless such right is unanimously waived, each shareholder may
cast as many votes in the aggregate as shall equal the number of voting
shares held by such shareholder, multiplied by the number of directors to be
elected at such election, and such votes may all be cast for one candidate or
may be distributed among two or more candidates. The Bylaws otherwise grant
each holder of Common Stock one vote for each share of Common Stock entitled
to vote and registered in the name of such holder on the books of the
Company. Pursuant to the Bylaws, every shareholder entitled to vote at a
meeting may vote either in person or by proxy executed in writing by the
shareholder or his duly authorized attorney in fact.
The Bylaws provide that the vote of the holders of a majority of shares
of a quorum constitutes a valid corporate act, except in those specific
instances in which a larger vote is required by law or by the Articles. Under
the Bylaws, a quorum consists of the holders of a majority of the outstanding
shares entitled to vote at a meeting of shareholders, present in person or by
proxy.
With respect to certain actions, authorization by the shareholders
requires an affirmative vote by the holders of a majority of the outstanding
shares of stock of the Company entitled to vote thereon, whether or not
present at the meeting at which the vote is held. Such actions include, under
the Articles, the amendment of the Articles and the amendment of the Bylaws.
Under Missouri law, such actions include the amendment of the Articles, the
restatement of the Articles and the approval of certain business
combinations. Under the Bylaws, such actions include the removal of a
director, unless the vote of a greater number of shares is required by law.
Missouri law requires the affirmative vote by the holders of two-thirds
of the outstanding shares entitled to vote for any reduction in the stated
capital of the Company, the sale of substantially all of the Company's assets
not in the ordinary course of business, the merger or consolidation of the
Company, or the dissolution of the Company.
So long as the directors of the Company are elected through cumulative
voting, Missouri law provides, with respect to the number of directors, that
such number may not be reduced to less than three if the number of shares
voting against such a decrease would be sufficient to elect a director at an
election of three directors, and, with respect to the removal of a director,
that if less than the entire board is to be removed, no one of the directors
may be removed if the votes cast against his or her removal would be
sufficient to elect such person if cumulatively voted at an election of the
class of directors of which such person is a part.
Pursuant to the Bylaws, any action required to be taken or which may be
taken upon a vote of the holders of Common Stock at a meeting of the
shareholders may be taken without a meeting if consents in writing, setting
forth the action so taken, shall be signed by all of the holders of Common
Stock.
CLASSIFICATION OF THE BOARD OF DIRECTORS.
The Articles provide for a nine (9) member Board of Directors (the
"Board"). The Bylaws provide for such board to be divided into three classes,
with one-third of the total number of the full Board elected by the
shareholders at each annual meeting.
44
<PAGE>
LIQUIDATION RIGHTS.
In the event that the Company is dissolved, Missouri law provides that
the property of the Company remaining after the Company has discharged or
made provisions for discharging its liabilities will be distributed among the
Company's shareholders according to their interests. Currently, the
liquidation rights of the holders of Common Stock are not subordinate to
those of the holders of any other class of stock.
PREEMPTION RIGHTS.
Pursuant to the Articles, no holder of Common Stock is entitled as such,
as a matter of right, to purchase or subscribe for any shares of stock of the
Company of any class, whether now or hereafter authorized or whether issued
for cash, property or services or as a dividend or otherwise, or to purchase
or subscribe for any obligations, bonds, notes, debentures, other securities
or stock convertible into shares of stock of the Company or carrying or
evidencing any right to purchase shares of stock of any class.
LIABILITIES.
Holders of Common Stock are not liable to further calls or to assessment
by the Company. Under Missouri law, the holders of shares of Common Stock
have no liability to the Company or its creditors with respect to such
shares other than the obligation to pay the Company the full consideration
for which such shares were issued or to be issued.
PROVISIONS DISCRIMINATING AGAINST SUBSTANTIAL SHAREHOLDERS.
Pursuant to the Articles, the terms, provisions and procedures of the
Missouri Control Share Acquisition Statute do not apply to acquisitions of
shares of Common Stock. No Article or Bylaw provision discriminates against
any existing or prospective holder of Common Stock as a result of such
shareholder owning a substantial amount of securities.
MODIFICATION OF RIGHTS.
Rights granted to holders of Common Stock by the Articles or the Bylaws
may be modified through amendment to the Articles or Bylaws, respectively.
Pursuant to the Articles, Article provisions may be amended only upon the
affirmative vote of a majority of the shares of stock entitled to vote
thereon, or, in the event the laws of Missouri require a separate vote by
classes of shares, upon the affirmative vote of the holders of a majority of
the shares of each class whose separate vote is required thereon. Pursuant to
the Articles, the Bylaws may be altered, amended, suspended or repealed, or
new Bylaws may be adopted, in any of the following ways: (i) by the
affirmative vote, at any annual or special meeting of the shareholders, of
the holders of a majority of the outstanding shares of stock of the Company
entitled to vote; (ii) by resolution adopted by a majority of the full Board
at a meeting thereof; or (iii) by unanimous written consent of all the
shareholders or all the directors in lieu of a meeting; provided, however,
that the power of the Directors to alter, amend, suspend or repeal the Bylaws
or any portion thereof may be denied as to any Bylaws or any portion thereof
enacted by the shareholders if at the time of such enactment the shareholders
so expressly state. This restriction on the power of directors to modify
Bylaws enacted by shareholders has not been stated with respect to any
currently existing Bylaw.
SUBORDINATION TO OTHER SECURITIES.
The rights evidenced by, or amounts payable with respect to, Common
Stock are not materially limited or qualified by the rights of any other
authorized class of securities.
45
<PAGE>
IMPEDIMENTS TO A CHANGE IN CONTROL.
The Company has not opted out of the Missouri Business Combination
Statute. The statute restricts the ability of the Company to enter into
certain "Business Combinations" with an "Interested Shareholder" or with any
"Affiliates" and "Associates" of the Company (as defined therein). A
"Business Combination" is defined to include, generally, a merger or
consolidation, certain sales, leases, exchanges, pledges and similar
dispositions of corporate assets or stock and any reclassification,
recapitalization or reorganization that increases the proportionate voting
power of the Interested Shareholder. An "Interested Shareholder" includes,
generally, any person or entity that beneficially owns or controls 20% or
more of the outstanding voting shares of the corporation. Pursuant to the
statute, the Company may at no time engage in a Business Combination with an
Interested Shareholder other than (i) a Business Combination approved by the
Board prior to the date on which the Interested Stockholder acquired such
status; (ii) a Business Combination approved by the holders of a majority of
the outstanding voting stock not beneficially owned by the Interested
Shareholder or its Affiliates or Associates at a meeting called no earlier
than five years after the date on which the Interested Shareholder acquired
such status; or (ii) a Business Combination that satisfies certain detailed
fairness requirements. Notwithstanding the foregoing, unless the
Board of the Company approved such Business Combination prior to the date on
which the Interested Shareholder acquired such status or approved the
transaction by which the Interested Shareholder acquired such status, no such
Business Combination may be engaged in for a period of five years after the
date the Interested Shareholder acquired such status.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The officers and directors of the Company: (i) are insured against
personal liability by a directors' and officers' insurance policy that has a
maximum policy limit of $10,000,000 per claim and per year purchased pursuant
to Missouri statutory law, and (ii) have entered into an Indemnification
Agreement with the Company. Officers and directors are also indemnified for
actions taken while performing as officers and directors of the Company by
the Bylaws of the Company and by Missouri law.
The Bylaws, Missouri law and the Indemnification Agreement as it relates
to directors and certain officers of the Company provide that the Company
shall indemnify an officer or director of the Company who is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
or to any threatened, pending or completed action or suit by or in the right
of the Company to procure a judgment in its favor, by reason of the fact that
such person is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding.
Indemnification is limited to those cases where an officer's or
director's conduct is not finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited consolidated financial statements of the Company for the
years ended December 31, 1995 and 1994, and the report thereon, the related
financial statement schedules and the report thereon, and the unaudited
consolidated financial statements of the Company for the nine months ended
September 30, 1996 and 1995, are set forth below, beginning on page F-1.
46
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The relationship between the Company and its prior auditor was terminated
on May 26, 1995. The Board of Directors of the Company decided to terminate
that relationship. KPMG Peat Marwick LLP was engaged as auditor for the
Company on May 26, 1995. The prior auditor qualified its report on the
consolidated financial statements of the Company for the years ended December
31, 1993 and 1992. The prior auditor stated its qualification resulted from
its inability to obtain sufficient evidence to evaluate whether certain
capitalized cost balances as of December 31, 1993 and 1992 were in excess of
recoverable amounts. To the knowledge of current management of the Company,
there was not at any time prior to May 26, 1995 any disagreement expressed to
the prior auditor on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
Subsequent to May 26, 1995, current management of the Company had a
disagreement with the prior auditor concerning: (i) the manner in which
certain transactions between the Company and individuals who were at the time
officers or directors of the Company were described, or, alternatively, not
disclosed, in the financial statements of the Company for the years ended
December 31, 1993 and 1992; (ii) the alleged failure of the prior auditor to
forcefully and clearly bring to the attention of the Board of Directors of
the Company the financial impact on the Company of such transactions; and
(iii) the alleged failure by the prior auditor to identify for appropriate
management or the Board of Directors of the Company deficiencies in the
Company's internal accounting control structure. The disagreements with the
prior auditor, Deloitte & Touche LLP, was not communicated to the prior
auditor by the Company until after May 26, 1995. The transactions between
the Company and individuals who were at the time officers or directors of the
Company that were the subject of the disagreement between the Company and its
prior auditor were also the subject of the litigation, to which the prior
auditor was not a party, resulting in the Settlement Agreement described in
Item 8 above.
ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS, AND FINANCIAL
STATEMENT SCHEDULES
Exhibit
Number
--------
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
1. Years Ended December 31, 1995 and 1994
Independent Auditors' Report [F-1]*
FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31,
1995 and 1994 [F-2]*
Consolidated Statements of Operations For the
Years Ended December 31, 1995 and 1994 [F-3]*
Consolidated Statements of Stockholders' Equity
(Deficit) For the Years Ended December 31,
1995 and 1994 [F-4]*
Consolidated Statements of Cash Flows For the Years
Ended December 31, 1995 and 1994 [F-5]*
Notes to Consolidated Financial Statements [F-6]*
Independent Auditors' Report [F-7]*
FINANCIAL STATEMENT SCHEDULES:
Schedule of Real Estate and Accumulated
Depreciation at December 31, 1995 [F-8.1]*
Schedule of Real Estate and Accumulated
Depreciation Rollforwards For the Year
End December 31, 1995 [F-8.2]*
47
<PAGE>
Schedule of Real Estate and Accumulated
Depreciation Rollforwards For the Year Ended
December 31, 1994 [F-8.3]*
Schedule of Mortgage Loans on Real Estate at
December 31, 1995 [F-9.1]*
Schedule of Rollforward of Mortgage Loans on Real
Estate For the Year Ended December 31, 1995 [F-9.2]*
Schedule of Rollforward of Mortgage Loans on Real
Estate For the Year Ended December 31, 1994 [F-9.3]*
Schedule of Valuation and Qualifying Accounts For
the Year Ended December 31, 1995 [F-10.1]*
Schedule of Valuation and Qualifying Accounts For
the Year Ended December 31, 1994 [F-10.2]*
Schedule of Mortgages and Contracts Payable
at December 31, 1995 [F-11]
2. Nine Months Ended September 30, 1996 and 1995
FINANCIAL STATEMENTS:
Consolidated Balance Sheets at September 30, 1996
(Unaudited) and December 31, 1995 [F-12]
Consolidated Statements of Operations For the
Nine Months Ended September 30, 1996 and 1995
(Unaudited) [F-13]
Consolidated Statement of Stockholders' Equity
(Deficit) For the Nine Months Ended September 30,
1996 (Unaudited) [F-14]
Consolidated Statements of Cash Flows For the
Nine Months Ended September 30, 1996 and 1995
(Unaudited) [F-15]
Notes to Unaudited Consolidated Financial Statements [F-16]
(b) EXHIBITS
The Articles of Incorporation of the Company [3.1]*
The Bylaws of the Company [3.2]*
The Articles of Incorporation of the Company (Included
in Exhibit 3.1 [4.1]*
The Bylaws of the Company (Included in Exhibit 3.2) [4.2]*
Amendment to and Restatement of J.C. Nichols Company
Employee Stock Ownership Plan [10.1(a)]*
First Amendment to the Amended and Restated J.C.
Nichols Company Employee Stock Ownership Plan [10.1(b)]*
Third Amendment to the Amended and Restated J.C.
Nichols Company Employee Stock Ownership Plan [10.1(c)]*
48
<PAGE>
Amendment to and Restatement of J.C. Nichols Company
Employee Stock Ownership Trust [10.2(a)]*
First Amendment to the Amended and Restated J.C.
Nichols Company Employee Stock Ownership Trust [10.2(b)]*
Real Estate Contract of Sale (between J.C. Nichols
Company and Synergy Development Alliance, L.C.) [10.3(a)]*
Amendment to Real Estate Contract of Sale [10.3(b)]*
Second Amendment to Real Estate Contract of Sale [10.3(c)]*
April 25, 1995 Letter Agreement [constituting third
amendment to Real Estate Contract of Sale] [10.3(d)]*
May 11, 1995 Letter Agreement [constituting fourth
amendment to Real Estate Contract of Sale] [10.3(e)]*
Secured Promissory Note - Note A [10.4(a)]*
Secured Promissory Note - Note B [10.4(b)]*
Deed of Trust, Security Agreement and Assignment of
Rents [10.4(c)]*
Assignment of Leases and Rents [10.4(d)]*
Hotel Management Fee Participation Sale Agreement [10.5]*
Restated Joint Venture Agreement [10.6]*
J.C. Nichols Company 1996 Stock Option Plan, Amended
and Restated Effective May 30, 1996 [10.7]*
Form of Indemnification Agreement entered into between
the Company and each of the members of the Board
of Directors and certain Officers [10.8]*
Form Employment Agreement between the Company and
certain Officers [10.9]*
Employment Agreement between the Company and Mr.
Brady, President and Chief Executive Officer of
the Company [10.10]*
Settlement Agreement [Filed separately with the
Securities and Exchange Commission, Confidential
Treatment of Entire Agreement Sought] [10.11]*
Letter re: Change in Certifying Accountant [16.1]
List of Subsidiaries and Affiliates of the Company [21.1]*
Power of Attorney for the members of the Board of
Directors and certain Officers of the Company
(included in Signature Pages to the Registration
Statement) [24.1]*
Financial Data Schedule [27.1]*
Settlement Agreement and Mutual Releases as of
June 30, 1995 [99.1]*
* Previously provided with Registration Statement on Form 10 and
Amendments thereto.
49
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
J. C. Nichols Company
Kansas City, Missouri:
We have audited the accompanying consolidated balance sheets of J. C. Nichols
Company and subsidiaries (the Company) as of December 31, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries as
of December 31, 1995 and 1994, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
As discussed in note 1, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" as of January 1, 1994.
/s/ KPMG Peat Marwick LLP
Kansas City, Missouri
March 22, 1996, except as to note 17,
which is as of May 29, 1996
F-1
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Revenue-producing properties (note 5) $ 195,688,000 200,606,000
Land and improvement inventories 32,344,000 41,655,000
Property held for future development 1,492,000 1,844,000
----------- -----------
Total properties 229,524,000 244,105,000
Cash and cash equivalents 7,209,000 14,186,000
Temporary investments 4,606,000 4,404,000
Marketable equity securities available for sale (note 3) 38,114,000 26,686,000
Accounts receivable (note 13) 4,205,000 5,936,000
Prepaid expenses 9,992,000 10,952,000
Income taxes receivable 4,192,000 5,629,000
Notes receivable (notes 4 and 13) 24,032,000 31,814,000
Investments in real estate partnerships (note 6) 1,857,000 889,000
Minority interest in consolidated partnerships 4,284,000 4,926,000
Other assets, net 680,000 775,000
----------- -----------
$ 328,695,000 350,302,000
----------- -----------
----------- -----------
(Continued)
F-2
</TABLE>
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1995 1994
---------------------------------------------- ---- ----
<S> <C> <C>
Mortgage indebtedness (note 9) $ 326,349,000 339,881,000
Notes payable to banks and others (note 7) 5,658,000 13,329,000
Accounts payable and tenants' deposits (note 13) 6,266,000 6,805,000
Accrued expenses and other liabilities 9,597,000 9,237,000
Accrued contribution to Employee Stock Ownership Trust
(note 14) 11,050,000 -
Dividends payable - 1,180,000
Deferred gains on the sale of property 552,000 1,127,000
Deferred income taxes 5,948,000 4,564,000
----------- -----------
365,420,000 376,123,000
----------- -----------
Stockholders' equity (deficit):
Common stock, par value $.01 per share; 10,000,000
shares authorized and 5,016,745 shares issued
(note 17) 100,000 100,000
Additional paid-in capital 7,079,000 6,002,000
Unrealized gain on marketable equity securities available
for sale, net of income taxes of $11,466,000 and
$7,485,000 21,023,000 13,755,000
Retained earnings 52,500,000 63,252,000
----------- -----------
80,702,000 83,109,000
Less:
Treasury stock, at cost (164,345 and 28,251 shares
of common stock) 117,427,000 14,582,000
Note receivable secured by company stock - 94,348,000
----------- -----------
Total stockholders' equity (deficit) (36,725,000) (25,821,000)
Commitments and contingencies (notes 5, 12 and 16)
----------- -----------
$ 328,695,000 350,302,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Sales and revenues:
Rents $ 79,818,000 74,973,000
Property sales 6,047,000 10,694,000
Commissions and fees 1,459,000 1,862,000
Dividends and interest 4,806,000 4,053,000
Gains on sales of investments and other assets 5,711,000 727,000
Equity in earnings of unconsolidated affiliates 157,000 411,000
Other 1,307,000 1,493,000
----------- -----------
99,305,000 94,213,000
----------- -----------
Costs and expenses:
Selling, general and operating expenses 46,118,000 43,203,000
Cost of property sales 3,944,000 8,822,000
Interest 27,696,000 27,049,000
Depreciation and amortization 14,355,000 18,488,000
Employee Stock Ownership Trust contribution (note 14) 1,787,000 -
Valuation allowances 2,350,000 39,699,000
Litigation settlement (note 16) 19,553,000 -
Net operations of property subject to debt extinguishment
(note 10) - 1,650,000
----------- -----------
115,803,000 138,911,000
----------- -----------
Loss before income taxes and extraordinary gain (16,498,000) (44,698,000)
Income tax benefit (note 11) 5,746,000 1,028,000
----------- -----------
Loss before extraordinary gain (10,752,000) (43,670,000)
Extraordinary gain on extinguishment of debt, net of income taxes
of $9,175,000 (note 10) - 29,136,000
----------- -----------
Net loss $ (10,752,000) (14,534,000)
----------- -----------
----------- -----------
Per share data (note 17):
Loss before extraordinary gain $ (.74) (2.89)
Extraordinary gain on extinguishment of debt - 1.93
----------- -----------
Net loss $ (.74) (.96)
----------- -----------
----------- -----------
Dividends $ - .125
----------- -----------
----------- -----------
Average number of shares outstanding (note 17) 14,469,360 15,135,520
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Common stock:
Balance at beginning and end of year (note 17) $ 100,000 100,000
------------ ------------
Additional paid-in capital (note 17):
Balance at beginning of year 6,002,000 6,002,000
Contribution of 110,000 shares to Employee Stock Ownership Trust
(note 14) 1,077,000 -
------------ ------------
Balance at end of year 7,079,000 6,002,000
------------ ------------
Unrealized gain on marketable equity securities available for sale, net of
income taxes:
Balance at beginning of year 13,755,000 -
Unrealized gain upon adoption of Statement of Financial Accounting
Standards No. 115 on January 1, 1994, net of income taxes of
$8,185,000 - 15,053,000
Unrealized gain (loss) net of income taxes of $4,165,000 and $700,000 7,612,000 (1,298,000)
Realized loss from sale of securities, net of income taxes of $23,000 42,000 -
Realized gain from sale of securities, net of income taxes of $208,000 (386,000) -
------------ ------------
Balance at end of year 21,023,000 13,755,000
------------ ------------
Retained earnings:
Balance at beginning of year 63,252,000 79,736,000
Net loss (10,752,000) (14,534,000)
Cash dividends ($.125 per share in 1994) - (1,950,000)
------------ ------------
Balance at end of year 52,500,000 63,252,000
------------ ------------
Treasury stock:
Balance at beginning of year (14,582,000) (23,058,000)
Contribution of 110,000 shares to Employee Stock Ownership Trust
(notes 14 and 17) 710,000 -
Issuances of 1,478,400 shares (note 17) - 9,392,000
Receipt of 12,227 shares in litigation settlement (note 16) (9,207,000) -
Purchases of 1,295 shares - (916,000)
Receipt of 125,242 shares previously securing note receivable (note 16) (94,348,000) -
------------ ------------
Balance at end of year (117,427,000) (14,582,000)
------------ ------------
Note receivable secured by the Company's common stock:
Balance at beginning of year (94,348,000) (94,348,000)
Transfer of 125,242 shares to treasury stock in settlement of note
receivable (note 16) 94,348,000 -
------------ ------------
Balance at end of year - (94,348,000)
------------ ------------
Total stockholders' deficit $ (36,725,000) (25,821,000)
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C>
Operating activities:
Net loss $ (10,752,000) (14,534,000)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation of properties 13,316,000 17,502,000
Amortization of deferred costs 1,039,000 986,000
Extraordinary gain - (29,136,000)
Valuation allowances 2,350,000 39,699,000
Noncash portion of litigation settlement 13,588,000 -
Deferred income taxes (2,597,000) (9,752,000)
Equity in earnings of unconsolidated affiliates (157,000) (411,000)
Employee Stock Ownership Trust contribution 1,787,000 -
Gains on sales of investments and other assets (5,182,000) (809,000)
(Gains) losses on sales of marketable equity securities (529,000) 82,000
Net operations of property subject to debt extinguishment - 1,650,000
Changes in:
Land and improvement inventories 7,280,000 3,253,000
Accounts receivable 577,000 160,000
Minority interest in consolidated partnerships (430,000) (385,000)
Accounts payable and tenants' deposits (539,000) (160,000)
Accrued expenses and other liabilities (640,000) (451,000)
Deferred gains on the sale of property 38,000 (46,000)
Other, net 2,868,000 (2,309,000)
------------ ------------
Net cash provided by operating activities 22,017,000 5,339,000
------------ ------------
Investing activities:
Net (increase) decrease in temporary investments (202,000) 7,882,000
Payments on notes receivable 6,927,000 18,870,000
Issuance of notes receivable (6,174,000) (19,531,000)
Additions to revenue-producing properties (7,862,000) (11,915,000)
Purchase of marketable equity securities (3,021,000) (162,000)
Proceeds from sales of capital assets 5,269,000 4,031,000
Return of capital from unconsolidated affiliates 420,000 389,000
Proceeds from sales of marketable equity securities 925,000 215,000
Maturities of marketable securities 2,359,000 -
Investments in and advances to unconsolidated affiliates (394,000) -
Other, net 30,000 (10,000)
------------ ------------
Net cash used in investing activities $ (1,723,000) (231,000)
------------ ------------
(Continued)
</TABLE>
F-5
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Financing activities:
Payments on mortgage indebtedness $ (11,825,000) (11,459,000)
Issuance of mortgage indebtedness - 2,448,000
Purchases of treasury stock (4,901,000) (916,000)
Issuance of notes to banks and others 11,356,000 11,236,000
Payments on notes to banks and others (22,362,000) (20,904,000)
Dividends paid (1,180,000) (1,847,000)
Capital contributions from minority partners 1,641,000 -
------------ ------------
Net cash used in financing activities (27,271,000) (21,442,000)
------------ ------------
Net decrease in cash and cash equivalents (6,977,000) (16,334,000)
Cash and cash equivalents, beginning of year 14,186,000 30,520,000
------------ ------------
Cash and cash equivalents, end of year $ 7,209,000 14,186,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of J. C. Nichols
Company and its majority controlled affiliates (the Company).
Significant intercompany profits, transactions and balances have been
eliminated.
Minority interest in consolidated partnerships represents the cumulative
losses, after capital contributions, attributable to minority
interests in consolidated general partnership investments of the
Company.
REVENUE-PRODUCING PROPERTIES
Revenue-producing properties are carried at cost less accumulated
depreciation. All direct and indirect costs clearly associated with
the acquisition and development of real estate projects are
capitalized. Interest and certain indirect costs are capitalized
during periods in which activities necessary to ready the property for
its intended use are in progress. Depreciation is generally computed
using the straight-line method over the estimated useful lives of the
assets, generally seven to thirty-one years.
Real estate projects are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset may
not be recoverable. If the sum of the expected future cash flows
(undiscounted and without interest changes) of the asset is less than
the carrying amount of the asset, an impairment loss is recognized.
The amount of the impairment loss is calculated based on an evaluation
of discounted cash flows.
Leases for office and warehouse space provide for fixed monthly rents and
may contain provisions for rent escalations, utility charges and other
adjustments. Retail leases generally provide for minimum annual
rents, contingent rentals based on a percentage of the lessee's sales
and, in many instances, the tenant's proportionate share of real
estate taxes, insurance and maintenance. These leases generally have
a term of three to five years or longer in the case of most major
tenants. Apartment leases provide for a fixed monthly rental
primarily for a term of one year. All leases are accounted for as
operating leases.
LAND AND IMPROVEMENT INVENTORIES
Land and improvement inventories includes residentially zoned land, land
improvements and building improvements, and are carried at the lower
of average cost or market. Revenues from property sales are recorded
when sufficient funds are received from the buyer and all conditions
precedent to the sale are completed, generally when the property is
deeded to the buyer. Improvement costs are allocated to the parcels
benefited on the basis of estimated relative sales value.
(Continued)
F-6
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEFERRED GAINS ON THE SALE OF PROPERTY
Gains on the sale of property are deferred until such time as the Company
is no longer required to perform significant activities related to the
property sold, has no continuing involvement and has transferred the
risks and rewards of ownership. Additionally, the buyer must have
evidenced a substantial initial and continuing investment in the
property.
Gains on the sale of property to unconsolidated affiliates are deferred to
the extent of the Company's ownership interest in such affiliates.
INVESTMENTS IN REAL ESTATE PARTNERSHIPS
Investments in real estate partnerships primarily consist of investments in
and advances to unconsolidated affiliates. Investments in real estate
partnerships are accounted for on the equity method and reflect the
Company's share of income or loss of the partnerships, reduced by
distributions received and increased by contributions made.
TEMPORARY INVESTMENTS AND CASH EQUIVALENTS
Temporary investments are marketable securities which are callable within
30 to 150 days of purchase and are carried at the lower of amortized
cost or market value. Cash equivalents include money market funds,
certificates of deposit and debt securities acquired with an original
maturity of three months or less.
MARKETABLE EQUITY SECURITIES
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) 115, "Accounting for Certain Investments in Debt and
Equity Securities." Under SFAS 115, the Company classifies marketable
securities as either available for sale, held to maturity, or trading.
Held to maturity securities are those securities in which the Company
has the ability and intent to hold the security to maturity. Trading
securities are those securities that are bought and held principally
for the purpose of selling them in the near term. All other
securities are classified as available for sale.
Held to maturity securities are recorded at amortized cost. Available for
sale and trading securities are recorded at fair value. Unrealized
holding gains and losses, net of related tax effect, on available for
sale securities are excluded from earnings and are reported as a
separate component of stockholders' equity until realized. Unrealized
holding gains and losses for trading securities are included in
earnings.
The Company classifies all investments in marketable equity securities as
available for sale. The impact of adopting SFAS 115 on January 1,
1994 resulted in an increase in stockholders' equity of approximately
$15,053,000, net of income taxes of $8,185,000. The Company computes
the cost of securities sold using the specific identification method.
(Continued)
<PAGE>
3
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
Deferred tax assets and liabilities are recognized for temporary
differences between the financial reporting basis and the income tax
basis of the Company's assets and liabilities. The impact on deferred
taxes of changes in tax rates and laws is reflected in the financial
statements in the period of change.
TREASURY STOCK
Treasury stock purchases have been recorded at cost. Other receipts of
treasury stock have been recorded at estimated fair value.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported balances of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
INCOME (LOSS) PER SHARE
Income (loss) per share has been computed based on the average number of
shares outstanding during the year (see note 17).
RECLASSIFICATIONS
Certain amounts in the 1994 consolidated financial statements have been
reclassified to conform with the 1995 presentation.
(2) SUPPLEMENTAL CASH FLOW INFORMATION
During 1994, the Company assumed debt of $18,316,000 in exchange for a 51%
interest in three separate consolidated partnerships. The assets of
these partnerships consisted of revenue-producing properties with a
cost basis of approximately $18,472,000.
In 1994, the Company issued 1,036,480 shares of common stock to acquire the
remaining 50% interest in a partnership. Upon acquisition of the
remaining partnership interest, the Company dissolved the partnership
and assumed its assets and liabilities. The net assets transferred
had a carrying value of approximately $12,795,000.
(Continued)
<PAGE>
4
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) MARKETABLE EQUITY SECURITIES
The following table summarizes the cost, fair value and gross unrealized
gains and losses of the Company's investment in marketable equity
securities at December 31, 1995 and 1994:
1995 1994
---- ----
Cost $ 5,625,000 5,446,000
Fair value 38,114,000 26,686,000
Unrealized gains 32,551,000 21,383,000
Unrealized losses 62,000 143,000
During 1995, the Company sold equity securities for $3,284,000 resulting in
gross realized gains of $594,000 and gross realized losses of $65,000.
During the first quarter of 1996, the Company liquidated its investment in
marketable equity securities held at December 31, 1995 for
$38,617,000, realizing a gain, net of income taxes, of $21,343,000.
(4) NOTES RECEIVABLE
Notes receivable at December 31, 1995 and 1994 consisted of:
1995 1994
---- ----
Promissory notes, collateralized by
real estate, due 1996 to 2012 $ 16,448,000 20,558,000
Notes receivable - miscellaneous 4,163,000 7,882,000
First mortgage and construction loans
on residential property 3,421,000 3,374,000
------------ ------------
$ 24,032,000 31,814,000
------------ ------------
------------ ------------
At December 31, 1995, the Company has valuation reserves of approximately
$3,453,000 related to notes receivable.
(5) REVENUE-PRODUCING PROPERTIES
Revenue-producing properties at December 31, 1995 and 1994 consisted of:
1995 1994
---- ----
Land and improvements $ 32,546,000 30,976,000
Buildings and improvements 302,585,000 300,105,000
Furnishings and equipment 6,361,000 6,010,000
Construction in progress 507,000 592,000
------------ ------------
341,999,000 337,683,000
Less accumulated depreciation 146,311,000 137,077,000
------------ ------------
$ 195,688,000 200,606,000
------------ ------------
------------ ------------
Until 1994, the Company amortized tenant improvements over their financial
reporting or tax lives. In 1994, the Company changed its depreciation of
tenant improvements to correspond with the terms of the individual leases.
This change in amortization resulted in a more conservative accounting
treatment and an increase of approximately $4,000,000 in depreciation
expense during 1994.
(Continued)
<PAGE>
5
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 1995, future minimum lease payments receivable under
noncancelable operating leases, excluding apartments, are as follows:
Year Amount
---- ------
1996 $ 38,749,000
1997 32,449,000
1998 26,682,000
1999 22,139,000
2000 16,959,000
Thereafter 135,528,000
-----------
Total future minimum lease payments $ 272,506,000
-----------
-----------
Contingent rents amounted to $4,162,000 and $4,201,000 for 1995 and 1994,
respectively. Apartment rentals under leases of one year or less
aggregated $18,681,000 and $17,806,000 for 1995 and 1994,
respectively.
In 1987, a subsidiary of the Company entered into various contracts with
the City of St. Petersburg, Florida (the City) for the redevelopment
and construction of certain parking, commercial and retail facilities
known as Bay Plaza. Due to a delay in significant development
activities, the Company ceased capitalization of interest, property
taxes, insurance and other development costs on December 31, 1990. On
June 30, 1995, the Company and the City agreed to extend the
Redevelopment Agreement for an initial period of six months. In
November 1995, the Company informed the City that it had ceased plans
to develop the properties. The Company expects to dispose of the
properties as soon as practicable.
Based on its assessment of the feasibility of developing Bay Plaza under
the existing cost structure, management determined that the value of
Bay Plaza had declined, and a reduction in its carrying value of
$18,600,000 was recorded to reduce the carrying value of the assets to
$3,000,000 at December 31, 1994. The method used for estimating the
property value of Bay Plaza requires making certain assumptions
regarding market and economic conditions. After further review by
management in 1995, the carrying value of Bay Plaza assets, net of
liabilities, was reduced to zero at December 31, 1995.
(Continued)
<PAGE>
6
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INVESTMENTS IN REAL ESTATE PARTNERSHIPS
At December 31, 1995, the Company had an equity interest in the following
unconsolidated entities:
Percent Owned
-------------
Center Court Partners 50.0%
Dallas County Partners 50.0
Dallas County Partners II 50.0
Dallas County Partners III L.C. 50.0
Fountain Three 50.0
Terrace Place Partners 50.0
Meredith Drive Associates L.P. 49.5
Board of Trade Investment Company 49.0
Sun Mountain Village Partners L.P. 44.1
J. C. Nichols Real Estate 40.0
4600 Madison Associates, L.P. 12.5
Raphael Hotel Group L.P. 5.0
Selected aggregate financial data for unconsolidated affiliates for 1995
and 1994, is presented below:
1995 1994
---- ----
Total assets $ 117,763,000 134,145,000
----------- -----------
----------- -----------
Total liabilities $ 129,954,000 143,140,000
----------- -----------
----------- -----------
Net income $ 759,000 2,435,000
----------- -----------
----------- -----------
(7) NOTES PAYABLE TO BANKS AND OTHERS
The Company's short-term borrowings include lines of credit with banks of
$2,500,000 and $7,756,000 as of December 31, 1995 and 1994,
respectively. These lines are generally extended at prime rates and,
as of December 31, 1994, were secured by certain marketable equity
securities.
In January 1996, the Company replaced its previous lines of credit with a
$10 million unsecured line of credit with a bank. Interest on the
line's outstanding borrowings are at the prime rate and are due on
demand.
As of December 31, 1995 and 1994, notes payable also includes $1,008,000
and $5,363,000 of borrowings from certain individuals or entities who
are generally related to the Company through employment or stock
ownership. Such borrowings are demand in nature and bear interest at
rates fluctuating with or below the prime interest rate. As discussed
in note 16, the Company also has a $2,000,000 note payable to the
Employee Stock Ownership Trust at December 31, 1995, which bears
interest at the prime rate (8.5% as of December 31, 1995).
(Continued)
<PAGE>
7
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) DEFERRED COMPENSATION
The Company accrues deferred compensation for certain key personnel to be
paid over a five or ten-year period following retirement or death.
Charges to operations, including interest, amounted to $275,000 and
$482,000 for 1995 and 1994, respectively, with the accrued liability
as of December 31, 1995 and 1994 aggregating $3,561,000 and
$4,192,000, respectively. As part of the settlement described in note
16, the deferred compensation of one former officer amounting to
$814,000 will be paid according to the plan agreement, and another
former officer waived his rights to $243,000 in deferred compensation.
(9) MORTGAGE INDEBTEDNESS
Mortgage indebtedness consists principally of first mortgage notes on
revenue-producing properties. These obligations, with minor
exceptions, bear annual interest at rates ranging from 4% to 10.5% and
mature from 1996 to 2021. Substantially all of the Company's revenue-
producing properties are pledged to secure this debt.
Aggregate annual principal payments applicable to mortgage indebtedness
subsequent to December 31, 1995 are:
1996 $ 26,236,000
1997 28,368,000
1998 8,503,000
1999 25,455,000
2000 7,670,000
Thereafter 230,117,000
-----------
$ 326,349,000
-----------
-----------
As a result of the bankruptcy of a primary tenant, the Company ceased
making debt service payments on the underlying loan in 1991 and began
negotiations with the lender to restructure the debt agreement. As of
December 31, 1993, this nonrecourse debt had a principal balance of
$7,149,000 and accrued interest of $1,818,000. In March, 1994, the
Company and the lender agreed to restructure the loan which required a
cash payment of $1,649,000 to reduce the loan balance to $5,500,000.
Accrued interest through February 1994 was waived under the agreement.
The restructuring reduced the effective interest rate, for financial
statement purposes, from 12% to approximately 3%.
Due to the loss of a primary tenant in an office building that had an
underlying mortgage, the Company began negotiations with the lender to
restructure the debt agreement. As of December 31, 1995, this
nonrecourse debt had a principal balance of $22,500,000 and accrued
interest of $3,720,000. In January 1996, the Company and the lender
agreed to restructure the loan, which required a cash payment by the
Company of $2,500,000. In addition, the Company has the option to
retire the outstanding indebtedness prior to maturity for $14,000,000
less future principal payments thereon. The restructuring reduced the
effective interest rate beginning in 1996, for financial statement
purposes, from 10.5% to approximately 3%.
(Continued)
<PAGE>
8
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain debt agreements provide for a 50% sharing of positive and negative
cash flows from operations and capital expenditures as defined between
the parties. Interest expense recognized for such sharing was
$479,000 and $709,000 for 1995 and 1994, respectively. Additionally,
as of December 31, 1995 and 1994, mortgage indebtedness includes a
$3,963,000 preference item related to these agreements. The Company's
liability is contingent upon certain conditions being met upon the
sale or refinancing of the mortgaged properties.
Interest payments (net of capitalized interest of $114,000 and $289,000,
respectively) aggregated $28,274,000 and $26,977,000 for 1995 and
1994, respectively.
(10) NET LIABILITIES SUBJECT TO EXTINGUISHMENT
The Company had a 50% interest in a joint venture, Kantel, L.P. (the
Venture), with an affiliate of The Ritz-Carlton Hotel Company (Ritz)
to convert and operate an existing hotel owned by the Company. To
finance the conversion, the Company, through a wholly-owned
subsidiary, borrowed $70,000,000 on a nonrecourse basis using the
assets of the hotel as collateral, and through another wholly-owned
subsidiary, also leased the land and building to the Venture. The
hotel did not meet expected operating results or cash flows, and the
Venture was unable to meet its obligations under the debt and lease
agreements.
On February 22, 1994, the lender foreclosed on the hotel, and the Company
was released from its obligations under the nonrecourse debt. As a
result of extinguishing the nonrecourse debt of $84,298,000,
including interest, and the write-off of all related assets, the
Company recognized a gain of $38,311,000, which is presented as
an extraordinary item, net of an allocation of income taxes of
$9,175,000.
Operations relating to the hotel property and related debt are included in
"net operations of property subject to debt extinguishment" and
consist of the following in 1994:
Rent and interest income $ 504,000
Interest expense (206,000)
Depreciation and amortization (114,000)
General and administrative expenses (135,000)
Equity in loss of Kantel, L.P. (1,699,000)
-----------
$ (1,650,000)
-----------
-----------
(Continued)
<PAGE>
9
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) INCOME TAXES
Income tax expense (benefit) is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current $ (3,149,000) (3,762,000)
Deferred (2,597,000) 11,909,000
----------- ----------
Total income tax expense (benefit) (5,746,000) 8,147,000
----------- ---------
----------- ---------
Income tax benefit before
extraordinary item (5,746,000) (1,028,000)
Income tax expense on extraordinary item - 9,175,000
----------- -----------
Total income tax expense (benefit) $ (5,746,000) 8,147,000
----------- -----------
----------- -----------
Deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities for financial reporting
purposes and such amounts measured by tax laws and regulations.
Deferred income taxes are comprised of the following:
1995 1994
---- ----
Deferred tax assets:
Property and receivable allowances $ 14,047,000 15,484,000
Litigation settlement issues 15,715,000 15,715,000
Deferred compensation 1,211,000 1,474,000
ESOT contributions 4,437,000 -
Gains recognized for tax purposes,
deferred for book purposes 1,949,000 1,725,000
Other 26,000 26,000
----------- -----------
Total gross deferred tax assets 37,385,000 34,424,000
Less valuation allowance (15,715,000) (15,715,000)
----------- -----------
Total deferred tax assets 21,670,000 18,709,000
----------- -----------
Deferred tax liabilities:
Accelerated depreciation (11,825,000) (11,059,000)
Gains recognized for book purposes,
deferred for tax purposes (4,288,000) (4,557,000)
Investment securities valuation adjustment (11,466,000) (7,485,000)
Other (39,000) (172,000)
----------- -----------
Total deferred tax liabilities (27,618,000) (23,273,000)
----------- -----------
Net deferred tax liabilities $ (5,948,000) (4,564,000)
----------- -----------
----------- -----------
</TABLE>
(Continued)
<PAGE>
10
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total income tax expense (benefit) differs from expected income tax benefit
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Expected income tax benefit at 34% $ (5,609,000) (2,172,000)
Tax exempt income (26,000) (113,000)
Valuation allowance for deferred tax assets
related to ESOT contributions and deferred
interest income - 15,715,000
Difference in tax basis on partnership interest - (5,000,000)
State income tax items - (161,000)
Dividend exclusion (170,000) (167,000)
Excess fair value of contributions - (8,000)
Other, net 59,000 53,000
----------- -----------
Total income tax expense (benefit) $ (5,746,000) 8,147,000
----------- -----------
----------- -----------
</TABLE>
Net cash refunds (payments) for income taxes during 1995 and 1994 were
$4,588,000 and $(8,297,000), respectively.
(12) CONCENTRATION OF CREDIT RISK
Several of the Company's consolidated general partnerships and subsidiaries
have revenue-producing real estate. During the initial lease-up
phase, this real estate generated net operating losses, which upon
consolidation resulted in minority obligations to the Company of
$4,284,000 and $4,926,000 at December 31, 1995 and 1994, respectively.
If the outside partners fail to perform their obligations, such
amounts may not be realized by the Company. Based on its evaluation
of the outside partners, the Company has determined their outside
partners have the financial ability to perform their obligations.
As of December 31, 1995 and 1994, the aggregate of the liabilities of
unconsolidated partnerships in which the Company is a general partner,
excluding nonrecourse debt, is approximately $6,238,000 and
$6,983,000, respectively. The Company could become liable for such
amounts in the event of default by the various partnerships and
nonperformance by the outside partners.
The collection of principal and interest balances secured by revenue-
producing properties and real estate under development is dependent
upon sufficient cash flows from operations of the properties,
refinancing, capital infusions from outside parties or the sale of the
related property. All such property is principally located in the
metropolitan Kansas City, Missouri area.
(Continued)
<PAGE>
11
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) AFFILIATED PARTY BALANCES AND TRANSACTIONS
Included in the consolidated financial statements are the following
affiliated party balances:
1995 1994
---- ----
Notes receivable $ 3,336,000 12,538,000
Accounts receivable 1,207,000 3,459,000
Notes payable 1,008,000 6,144,000
Accounts payable - 921,000
Subsequent to December 31, 1995, affiliated notes and accounts receivable
were reduced by payments of approximately $2,588,000.
The Company established a valuation allowance of $2,467,000 at December 31,
1994 related to notes and accounts receivable from former executive
officers and directors of the Company who were removed from their
positions on May 26, 1995 by action of the Board of Directors. The
Company entered settlement agreements in August 1995 with certain
former executive officers and directors (see note 16).
Effective January 1, 1994, the Company sold a controlling interest in its
wholly-owned subsidiary, Plaza Insurers, Inc., to the President of
Plaza Insurers and a minority interest to an officer of the Company.
This officer was removed from his position with the Company on May 26,
1995 by action of the Board of Directors. The Company has an
exclusive insurance brokerage agreement with Plaza Insurers through
December 31, 1996. As part of the settlement agreement described in
note 16, the former officer has relinquished his rights to any profits
from Plaza Insurers, and future distributions in excess of the former
officer's tax liability on profits, if any, from Plaza Insurers will
be made to the Company.
The Company also entered into a service agreement with Plaza Insurers
whereby the Company will continue to provide certain management and
clerical personnel to Plaza Insurers and will be reimbursed for all
related costs. In addition, Plaza Insurers will pay service and
stability fees to the Company equal to 45% of the gross commissions
received by Plaza Insurers for all insurance business effected,
renewed or brokered by the Company through Plaza Insurers. The
service agreement remains in effect for the same period as the
exclusive insurance brokerage agreement.
(14) EMPLOYEE STOCK OWNERSHIP TRUST
The Company has an Employee Stock Ownership Plan (ESOP) related to the
Employee Stock Ownership Trust (ESOT). The cost of the ESOP is borne
by the Company through annual contributions to the ESOT in amounts
determined by the Board of Directors .
As of December 31, 1995, the ESOT held 825,280 shares of common stock of
the Company which were allocated to participants.
(Continued)
<PAGE>
12
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1995, the Company contributed 110,000 shares of the Company's common
stock to the ESOT which were valued at $1,787,500.
As part of the settlement described in note 16, the Company will convey
680,000 shares of the Company's common stock and $2,000,000 cash to
the ESOT. The conveyance will occur upon receipt of approval from the
Internal Revenue Service. The transfer of the 680,000 shares of
Company common stock held in treasury to the ESOT will result in a
decrease in stockholders' deficit of $11,050,000.
ESOT participants may request their distributions from the ESOT in cash or
Company common stock that is held by the ESOT. Future distributions
to ESOT participants for the next five years, based on December 31,
1995 market values of Company common stock, could be as much as:
1996 $3,200,000
1997 $2,900,000
1998 $5,100,000
1999 $3,200,000
2000 $3,200,000
The Company expects to provide some short-term advances to the ESOT to
assist in funding distributions, if necessary. All advances to the
ESOT will be unsecured and non interest-bearing. The ESOT has
sufficient assets to meet its obligations, and the Company has
recorded no additional liability beyond its contributions to the ESOT.
(15) FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No.
107, "Disclosures About Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company,
using available market information and appropriate valuation
methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company might realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated
fair value amounts.
NOTES RECEIVABLE - Fair value for notes receivable was estimated
utilizing discounted cash flow calculations based on interest rates
currently offered for notes with similar terms and credit risk.
Nonaccrual notes were valued at face value adjusted for potential
credit loss.
TEMPORARY INVESTMENTS AND MARKETABLE EQUITY SECURITIES - Fair values
for temporary investments and marketable equity securities were based
upon quoted market prices.
NOTES PAYABLE TO BANKS AND OTHERS - The carrying value of these
financial instruments approximates fair value as interest rates change
with market conditions.
MORTGAGE INDEBTEDNESS - The carrying value of variable rate mortgages
approximates fair value. Fair value for fixed rate mortgage
indebtedness was estimated utilizing discounted cash flow calculations
based on the Company's incremental borrowing rates for similar types
of borrowing arrangements.
OFF-BALANCE SHEET INSTRUMENTS - Fair value of commitments to extend
credit, guarantees of debt and letters of credits is based on the
estimated fees which would be charged for similar arrangements or the
estimated cost to terminate or otherwise settle the obligations with
the counterparties at the reporting date. The aggregate amount of the
fees are not material to the consolidated financial statements.
(Continued)
<PAGE>
13
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial assets:
Temporary investments $ 4,606,000 4,606,000 4,404,000 4,404,000
Notes receivable 24,032,000 22,316,000 31,814,000 28,227,000
Marketable equity securities 38,114,000 38,114,000 26,686,000 26,686,000
Financial liabilities:
Notes payable to banks
and others 5,658,000 5,658,000 13,329,000 13,329,000
Mortgage indebtedness 326,349,000 301,568,000 339,881,000 314,219,000
</TABLE>
The fair value estimates presented are based on information available to
management as of December 31, 1995 and 1994. Although management is
not aware of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been revalued for purposes
of these consolidated financial statements since the balance sheet
date, and current estimates may differ significantly from the amounts
presented above.
(16) LITIGATION AND SETTLEMENTS
The Company was involved in various legal actions as plaintiff and
defendant against former officers and directors, representatives of
the Employees Stock Ownership Trust, minority shareholders and others.
The Company had requested, among other things, that the District Court
rescind certain transactions (including the 1992 transactions
described below) between the Company and former executive officers,
the Employee Stock Ownership Plan and others.
The Company and various other parties entered settlement agreements in
August 1995 which require conveyance of Company common stock, payment
of cash, and extinguishment of amounts due to and from the Company in
consideration of releases from all present and future claims by, among
and between the parties to the settlements. At December 31, 1995,
the Company had 4,852,400 shares of common stock outstanding and
164,345 shares held as treasury stock.
During 1992, the Company entered into a transaction with the Company's
former president, whereby properties with aggregate carrying values of
$2,592,000 and marketable equity securities with aggregate carrying
values of $1,103,000 were exchanged for 517,920 shares of common stock
of the Company and a note receivable for $2,700,000. The fair values
of the properties received, based on current appraisals, aggregated
$5,907,000. The quoted market values of the marketable equity
securities aggregated $2,781,000. The purchase price of the common
stock was equivalent to the former president's basis in such shares.
The Company recognized a gain on the transaction of $4,993,000 in
1992. As part of the 1995 settlement, the common stock was retained
by the Company, the properties were returned to the Company and the
note receivable was canceled.
(Continued)
<PAGE>
14
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 1992, a limited partnership owned in part by the Company's former
president, acquired 125,242 unallocated shares of common stock of the
Company from J. C. Nichols Company Employee Stock Ownership Trust
(ESOT). These shares were acquired for $124,529,000 through the
assumption of existing principal indebtedness of $94,348,000 and
accrued interest and other advances of $30,181,000 owed by the ESOT to
the Company. The Company had previously recorded, as contribution
expense, the accrued interest and other advances to the ESOT. At the
time the shares were sold, the $30,181,000 was deferred and recorded
as a reduction of the contractual note receivable from the limited
partnership. The $94,348,000 note receivable, secured by Company
stock as of December 31, 1994, was comprised of the contractual note
receivable from the limited partnership of $124,529,000 net of the
$30,181,000 deferrals. Contractual interest of $12,291,000 on the
note receivable from the limited partnership was deferred as of
December 31, 1993. Pursuant to a Pledge Agreement, the shares of
common stock were pledged as collateral to secure the note receivable
from the limited partnership. The related note receivable was due in
ten annual equal installments beginning December 31, 1994 and had a
stated interest rate of prime (6.0% as of December 31, 1993) payable
annually beginning December 31, 1994. As part of the 1995 settlement,
the unallocated 125,242 shares were conveyed to the Company as
treasury stock in exchange for extinguishment of the $94,348,000 note
receivable and all defeased interest amounts. This portion of the
settlement had no impact on the 1995 statement of operations.
In 1994, the Company provided valuation allowances of $2,502,000 on notes
and accounts receivable that were part of the 1995 litigation
settlement. The impact of the litigation settlement included in the
1995 statement of operations was as follows:
ESOT contribution $ 13,050,000
Settlement of notes and accounts
receivable ($7,807,000) and cash paid
($9,665,000), net of related
obligations ($1,064,000) and receipt of
12,227 shares of Company common stock
($9,207,000) 7,201,000
Legal expenses, net of insurance reimbursement 1,490,000
Receipt of real estate properties (2,188,000)
----------
$ 19,553,000
----------
----------
(17) STOCK SPLIT
On May 29, 1996, the Company approved an increase from 225,000 to
10,000,000 in the number of shares of common stock authorized for
issuance by the Company and to decrease the par value per share of
common stock from $20.00 to $.01. Additionally, the Company approved
an 80-for-1 stock split of the Company's common stock for all issued
and outstanding shares not then held in the Company's treasury.
Accordingly, the common stock par value decreased from $4,500,000 to
$100,000 with an off-setting increase in additional paid-in capital
from $2,679,000 to $7,079,000. All periods presented have been
restated to reflect the effect of the Company's stock split.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
J. C. Nichols Company
Kansas City, Missouri:
Under date of March 22, 1996, except as to note 17, which is as of May 29, 1996,
we reported on the consolidated balance sheets of J. C. Nichols Company and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended, as contained in the 1995 annual report to stockholders. These
consolidated financial statements and our report thereon are included in the
registration statement on Form 10. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedules in the registration statement
on Form 10. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statement schedules based on our audits.
In our opinion, these consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
- -------------------------
Kansas City, Missouri
March 22, 1996
F-7
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
SCHEDULE REAL ESTATE AND ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
REVENUE-PRODUCING PROPERTIES
KANSAS CITY, MISSOURI
COUNTRY CLUB PLAZA MILLCREEK BLOCK OFFICE & RETAIL 2,743,640.61 73,342.82
COUNTRY CLUB PLAZA TRIANGLE BLOCK RETAIL 1,806,787.71 32,856.98
COUNTRY CLUB PLAZA BALCONY BLOCK OFFICE & RETAIL 3,948,165.76 80,669.55
COUNTRY CLUB PLAZA MACY BUILDING RETAIL 41,920.97
COUNTRY CLUB PLAZA ESPLANADE BLOCK OFFICE & RETAIL 8,097,085.73 138,830.18
COUNTRY CLUB PLAZA PLAZA CENTRAL RETAIL 1,606,033.51 111,638.19
COUNTRY CLUB PLAZA THEATRE BLOCK OFFICE & RETAIL 5,821,871.57 92,377.21
COUNTRY CLUB PLAZA SWANSON BLOCK RETAIL 3,814,329.63 103,707.20
COUNTRY CLUB PLAZA HALLS BUILDING RETAIL 1,739,869.64 101,667.80
COUNTRY CLUB PLAZA NICHOLS BLOCK OFFICE & RETAIL 3,345,903.17 87,694.14
COUNTRY CLUB PLAZA TIME BLOCK OFFICE & RETAIL 12,446,759.89 215,949.66
COUNTRY CLUB PLAZA 48th & PENN RETAIL 1,873,705.79 42,298.64
COUNTRY CLUB PLAZA SEVILLE SHOPS WEST RETAIL 2,409,050.32 224,484.92
COUNTRY CLUB PLAZA PLAZA SAVINGS SOUTH RETAIL 2,074,459.99 64,429.89
COUNTRY CLUB PLAZA COURT OF THE PENGUINS RETAIL 2,810,558.68 51,211.57
COUNTRY CLUB PLAZA SEVILLE SQUARE OFFICE & RETAIL 6,357,216.06 62,843.69
COUNTRY CLUB PLAZA PLAZA PARKING PARKING 370,188.63
COUNTRY CLUB PLAZA COMMON AREAS SIDEWALKS, FOUNTAINS, STATUES 0.00
4620 NICHOLS PARKWAY PARKWAY BUILDING OFFICE 44,413.58
300-320 EAST 51st ST. COLONIAL SHOPS RETAIL 6,804.88
301-337 EAST 55th ST. CRESTWOOD SHOPS RETAIL 18,204.54
63rd & BROOKSIDE BROOKSIDE SHOPS OFFICE & RETAIL 4,515,846.80 128,392.11
7100-7126 WORNALL RD. ROMANELLI SHOPS RETAIL 4,656.10
7140 WORNALL ROAD ROMANELLI ANNEX OFFICE & RETAIL 1,403.95
RED BRIDGE & HOLMES RED BRIDGE SHOPS RETAIL 14,933.61
TWO BRUSH CREEK BLVD. TWO BRUSH CREEK PLAZA OFFICE 7,245,439.92 6,539.16
ONE WARD PARKWAY ONE WARD PARKWAY OFFICE 10,755.20
400 EAST RED BRIDGE RD. RED BRIDGE PROF. BLDG. OFFICE 728,828.29 2,367.58
801 WEST 47th ST. PARK PLAZA OFFICE 6,022,625.76 132,572.17
4900 MAIN 4900 MAIN BLDG. OFFICE 26,219,600.54 2,138,450.69
(1) 4717 & 4740 GRAND AVENUE PARK CENTRAL OFFICE 18,028,401.03 436,553.00
400 EAST BANNISTER RD. BANNISTER BUSINESS CENTER INDUSTRIAL 1,311,428.49 5,839.43
414-428 EAST BANNISTER RD. SURFACE WAREHOUSE I INDUSTRIAL 2,327.59
430-444 EAST BANNISTER RD. SURFACE WAREHOUSE II INDUSTRIAL 2,327.59
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
REVENUE-PRODUCING PROPERTIES
KANSAS CITY, MISSOURI
COUNTRY CLUB PLAZA 82,819.59 4,847,490.27 73,342.82 4,930,309.86 5,003,652.68
COUNTRY CLUB PLAZA 284,950.97 691,163.79 32,856.98 976,114.76 1,008,971.74
COUNTRY CLUB PLAZA 4,755,505.89 1,712,939.83 80,669.55 6,468,445.72 6,549,115.27
COUNTRY CLUB PLAZA 140,668.53 2,083,298.85 41,920.97 2,223,967.38 2,265,888.35
COUNTRY CLUB PLAZA 883,230.10 2,133,373.11 138,830.18 3,016,603.21 3,155,433.39
COUNTRY CLUB PLAZA 818,483.56 1,502,132.62 111,638.19 2,320,616.18 2,432,254.37
COUNTRY CLUB PLAZA 796,865.22 1,513,289.04 92,377.21 2,310,154.26 2,402,531.47
COUNTRY CLUB PLAZA 83,719.74 5,126,584.26 103,707.20 5,210,304.00 5,314,011.20
COUNTRY CLUB PLAZA 3,209,722.71 337,687.07 101,667.80 3,547,409.78 3,649,077.58
COUNTRY CLUB PLAZA 349,267.35 2,145,089.22 87,694.14 2,494,356.57 2,582,050.71
COUNTRY CLUB PLAZA 1,907,745.67 2,560,230.79 215,949.66 4,467,976.46 4,683,926.12
COUNTRY CLUB PLAZA 177,782.33 250,233.68 42,298.64 428,016.01 470,314.65
COUNTRY CLUB PLAZA 572,083.60 163,525.65 224,484.92 735,609.25 960,094.17
COUNTRY CLUB PLAZA 1,949,328.02 49,179.81 64,429.89 1,998,507.83 2,062,937.72
COUNTRY CLUB PLAZA 2,744,638.62 145,791.14 51,211.57 2,890,429.76 2,941,641.33
COUNTRY CLUB PLAZA 1,969,500.00 7,212,082.63 62,843.69 9,181,582.63 9,244,426.32
COUNTRY CLUB PLAZA 204,290.80 0.00 370,188.63 204,290.80 574,479.43
COUNTRY CLUB PLAZA 336,921.67 744,254.08 744,254.08 336,921.67 1,081,175.75
F-8.1
4620 NICHOLS PARKWAY 858,939.42 209,185.54 44,413.58 1,068,124.96 1,112,538.54
300-320 EAST 51st ST. 139,679.88 6,575.38 6,804.88 146,255.26 153,060.14
301-337 EAST 55th ST. 114,195.77 71,004.20 36,356.57 167,047.94 203,404.51
63rd & BROOKSIDE 521,791.88 726,953.32 142,843.61 1,234,293.70 1,377,137.31
7100-7126 WORNALL RD. 87,628.86 22,407.00 4,656.10 110,035.86 114,691.96
7140 WORNALL ROAD 8,351.00 0.00 1,403.95 8,351.00 9,754.95
RED BRIDGE & HOLMES 1,717,885.47 1,734,783.94 538,696.66 2,928,906.36 3,467,603.02
TWO BRUSH CREEK BLVD. 7,327,125.19 219,848.67 6,539.16 7,546,973.86 7,553,513.02
ONE WARD PARKWAY 5,946,412.67 251,920.95 10,755.20 6,198,333.62 6,209,088.82
400 EAST RED BRIDGE RD. 1,382,757.68 301,908.49 2,367.58 1,684,666.17 1,687,033.75
801 WEST 47th ST. 6,769,352.14 760,198.33 132,572.17 7,529,550.47 7,662,122.64
4900 MAIN 18,977,119.61 32,572.83 2,138,450.69 19,009,692.44 21,148,143.13
(1) 4717 & 4740 GRAND AVENUE 17,977,602.41 0.00 436,553.00 17,977,602.41 18,414,155.41
400 EAST BANNISTER RD. 1,553,689.17 181,353.63 177,540.66 1,563,341.57 1,740,882.23
414-428 EAST BANNISTER RD. 241,768.94 114,175.00 2,327.59 355,943.94 358,271.53
430-444 EAST BANNISTER RD. 332,433.23 57,047.00 2,327.59 389,480.23 391,807.82
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
REVENUE-PRODUCING PROPERTIES
KANSAS CITY, MISSOURI
COUNTRY CLUB PLAZA 1,733,728.18 1920 1906-1910 20-40
COUNTRY CLUB PLAZA 358,566.66 1925 1906-1910 20-50
COUNTRY CLUB PLAZA 2,576,399.07 1925 1906-1910 20-50
COUNTRY CLUB PLAZA 725,930.51 1926 1906-1910 20-50
COUNTRY CLUB PLAZA 1,962,133.98 1928 1906-1910 20-50
COUNTRY CLUB PLAZA 1,768,134.86 1958 1906-1910 20-40
COUNTRY CLUB PLAZA 1,231,256.06 1928 1906-1910 20-45
COUNTRY CLUB PLAZA 2,309,874.78 1967 1906-1910 20-55
COUNTRY CLUB PLAZA 2,475,024.25 1964 1906-1910 20-60
COUNTRY CLUB PLAZA 1,912,621.43 1930 1906-1910 20-45
COUNTRY CLUB PLAZA 3,038,537.24 1929 1906-1910 20-45
COUNTRY CLUB PLAZA 293,356.78 1948 1906-1910 20-40
COUNTRY CLUB PLAZA 240,831.09 1980 1906-1910 20-45
COUNTRY CLUB PLAZA 538,413.55 1948 1906-1910 20-40
COUNTRY CLUB PLAZA 2,605,026.36 1945 1975 10-20
COUNTRY CLUB PLAZA 6,579,918.28 1945 1975 10-39
COUNTRY CLUB PLAZA 126,170.29 1920-1964 1906-1910 15
COUNTRY CLUB PLAZA 746,565.53 1920-1964 1906-1910 10-20
4620 NICHOLS PARKWAY 813,171.82 1955 1906-1910 20-45
300-320 EAST 51st ST. 139,975.36 1907 1907 20-25
301-337 EAST 55th ST. 140,335.83 1932 1923 15-50
63rd & BROOKSIDE 884,055.43 1919 1920 10-50
7100-7126 WORNALL RD. 97,300.77 1925 1925 10-49
7140 WORNALL ROAD 0.00 1963 1993 20
RED BRIDGE & HOLMES 2,675,911.42 1959 1959 10-50
TWO BRUSH CREEK BLVD. 4,104,834.94 1983 1983 10-45
ONE WARD PARKWAY 3,540,170.54 1980 1980 10-45
400 EAST RED BRIDGE RD. 1,080,037.63 1972 1976 10-31.5
801 WEST 47th ST. 3,242,027.31 1983 1983 10-45
4900 MAIN 7,241,549.34 1986 1985 10-50
(1) 4717 & 4740 GRAND AVENUE 590,434.65 1988-1990 1994 39
400 EAST BANNISTER RD. 965,447.53 1985 1985 10-40
414-428 EAST BANNISTER RD. 219,120.18 1973 1973 10-45
430-444 EAST BANNISTER RD. 288,629.53 1975 1975 10-35
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
KANSAS CITY,MISSOURI (cont.)
6310 TROOST RETAIL SHOPS LAND LEASE 13,763.66
11049 HOLMES BURGER KING LAND LEASE 100,465.40
135th & HOLMES (18.6 ACRES) GOLF DRIVING RANGE LAND LEASE 5,074.28
BANNISTER & RAYTOWNRD 2.928 ACRES BLDG. LEASE 1,588.90
(7) 655 EAST MINOR DRIVE COACH HOUSE SOUTH 489-UNIT APARTMENT COMPLEX 20,000,000 54,753.88
(7) 11230 OAK COACH HOUSE 160-UNIT APARTMENT COMPLEX 8,000,000 16,284.96
11209 McGEE DRIVE COACH LAMP 158-UNIT APARTMENT COMPLEX 16,374.35
4509 WORNALL RD. WORNALL ROAD 17-UNIT APARTMENT BLDG. 5,188.00
4517 WORNALL RD. ST. CHARLES 12-UNIT APARTMENT BLDG. 4,200.00
420 WEST 46th TERR. ALTA LOMA 18-UNIT APARTMENT BLDG. 50,000.00
426 WEST 46th TERR. BISCAYNE TOWERS 24-UNIT APARTMENT BLDG. 17,000.00
406 WEST 46th TERR. SANTA ANA 11-UNIT APARTMENT BLDG. 3,317.18
408-410 WEST 46th TERR. VALENCIA 19-UNIT APARTMENT BLDG. 8,250.00
414 WEST 46th TERR. LA SOLANA 18-UNIT APARTMENT BLDG. 5,475.00
221 WEST 48th ST. REGENCY HOUSE 131-UNIT APARTMENT BLDG. 3,634,000.00 35,263.51
121 WEST 48th ST. SULGRAVE 144-UNIT APARTMENT BLDG. 5,446,000.00 240,000.00
4600 NICHOLS PARKWAY PARK LANE 89-UNIT APARTMENT BLDG. 55,960.00
4417 PENNSYLVANIA PENN WICK 6-UNIT APARTMENT BLDG. 4,108.00
4424-4426 PENNSYLVANIA COLE GARDENS 8-UNIT APARTMENT BLDG. 225,530.51 4,521.00
4419 PENNSYLVANIA TAMA 6-UNIT APARTMENT BLDG. 15,951.53
333 WEST 46th TERR. NEPTUNE 96-UNIT APARTMENT BLDG. 3,601,538.02 0.00
4921 WORNALL RD. WORNALL POINT 24-UNIT APARTMENT BLDG. 18,750.00
PLAZA AREA 54 RENTAL HOUSES SINGLE FAMILY 28,735.83 177,323.62
95th & NOLAND ROAD VACANT LOT 2.72 ACRES 6,000.00
72nd & WYANDOTTE MAINTENANCE SHOP 1,243.59
26 MISCELLANEOUSVACANT LOTS,
LESS THAN 1 ACRE EACH 38,377.97 1,406,939.63
46th TERR. & PENNSYLVANIA SURFACE PARKING CONST. IN PROGRESS
VARIOUS LOCATIONS TENANT IMPROVEMENTS, ETC. CONST. IN PROGRESS
GRANDVIEW, MISSOURI
11900 SO. BLUERIDGE EXT. GRANDVIEW SHOPS RETAIL 675,000.00
LEE'S SUMMIT,MISSOURI
211 N. E. LAKEWOOD BLVD. SALES OFFICE OFFICE 150,000.00 267,122.00
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
KANSAS CITY,MISSOURI (cont.)
6310 TROOST 0.00 44,034.27 57,797.93 0.00 57,797.93
11049 HOLMES 0.00 0.00 100,465.40 0.00 100,465.40
135th & HOLMES (18.6 ACRES) 1.00 0.00 5,074.28 1.00 5,075.28
BANNISTER & RAYTOWN RD 1.00 0.00 1,588.90 1.00 1,589.90
(7) 655 EAST MINOR DRIVE 23,400,786.69 2,947,451.70 2,980,304.04 23,422,688.23 26,402,992.27
(7) 11230 OAK 6,474,534.86 1,131,179.87 854,239.52 6,767,760.17 7,621,999.69
11209 McGEE DRIVE 1,989,363.01 565,500.13 189,645.44 2,381,592.05 2,571,237.49
4509 WORNALL RD. 93,720.03 13,735.78 5,188.00 107,455.81 112,643.81
4517 WORNALL RD. 57,600.00 16,137.63 4,200.00 73,737.63 77,937.63
420 WEST 46th TERR. 450,000.00 18,559.94 50,000.00 468,559.94 518,559.94
426 WEST 46th TERR. 150,000.00 17,299.19 17,000.00 167,299.19 184,299.19
406 WEST 46th TERR. 95,169.25 16,701.70 3,317.18 111,870.95 115,188.13
408-410 WEST 46th TERR. 329,149.95 0.00 8,250.00 329,149.95 337,399.95
414 WEST 46th TERR. 629,525.00 20,869.11 5,475.00 650,394.11 655,869.11
221 WEST 48th ST. 3,085,365.24 3,044,766.99 35,263.51 6,130,132.23 6,165,395.74
121 WEST 48th ST. 5,145,372.69 2,264,701.40 240,000.00 7,410,074.09 7,650,074.09
4600 NICHOLS PARKWAY 554,839.89 311,885.89 55,960.00 866,725.78 922,685.78
4417 PENNSYLVANIA 208,509.21 5,227.00 4,108.00 213,736.21 217,844.21
4424-4426 PENNSYLVANIA 287,843.77 0.00 4,521.00 287,843.77 292,364.77
4419 PENNSYLVANIA 1.00 0.00 15,951.53 1.00 15,952.53
333 WEST 46th TERR. 5,987,039.83 99,099.13 94,557.30 5,991,581.66 6,086,138.96
4921 WORNALL RD. 656,250.00 1,931.37 20,681.37 656,250.00 676,931.37
PLAZA AREA 3,339,090.68 4,587.60 177,323.62 3,343,678.28 3,521,001.90
95th & NOLAND ROAD 0.00 0.00 6,000.00 0.00 6,000.00
72nd & WYANDOTTE 684,964.29 0.00 1,243.59 684,964.29 686,207.88
26 MISCELLANEOUS VACANT LOTS,
LESS THAN 1 ACRE EACH 0.00 105,913.24 1,483,407.87 29,445.00 1,512,852.87
46th TERR. & PENNSYLVANIA 0.00 212,485.66 0.00 212,485.66 212,485.66
VARIOUS LOCATIONS 0.00 190,995.71 0.00 190,995.71 190,995.71
GRANDVIEW, MISSOURI
11900 SO. BLUERIDGE EXT. 1,370,892.36 413,708.24 898,923.85 1,560,676.75 2,459,600.60
LEE'S SUMMIT,MISSOURI
211 N. E. LAKEWOOD BLVD. 133,333.00 0.00 267,122.00 133,333.00 400,455.00
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
KANSAS CITY,MISSOURI (cont.)
6310 TROOST 44,034.27 1974 1971 20
11049 HOLMES 0.00 -- 1954 --
135th & HOLMES (18.6 ACRES) 0.00 -- 1972 --
BANNISTER & RAYTOWN RD 0.00 -- 1929 --
(7) 655 EAST MINOR DRIVE 9,451,099.01 1986 1986 10-35
(7) 11230 OAK 3,497,638.23 1984 1984 10-45
11209 McGEE DRIVE 1,970,524.89 1961 1963 10-50
4509 WORNALL RD. 107,453.81 1918 1968 15
4517 WORNALL RD. 58,043.94 1922 1972 15-27.5
420 WEST 46th TERR. 371,049.17 1918 1983 15-27.5
426 WEST 46th TERR. 165,985.58 1918 1975 14-15
406 WEST 46th TERR. 96,926.57 1960 1980 8-31.5
408-410 WEST 46th TERR. 279,334.96 1918 1983 15
414 WEST 46th TERR. 402.614.78 1918 1986 15-31.5
221 WEST 48th ST. 4,509,042.86 1960 1961 10-40
121 WEST 48th ST. 3,887,868.79 1967 1976 10-31
4600 NICHOLS PARKWAY 826,779.63 1924 1971 8-21
4417 PENNSYLVANIA 208,810.17 1960 1987 7-31.5
4424-4426 PENNSYLVANIA 287,843.77 1960 1987 7
4419 PENNSYLVANIA 0.00 1960 1979 15
333 WEST 46th TERR. 1,960,744.74 1988 1910 10-40
4921 WORNALL RD. 205,290.49 1950 1987 31.5
PLAZA AREA 1,608,519.27 1920's & 1930's 1929-1989 10-31.5
95th & NOLAND ROAD 0.00 -- 1956 --
72nd & WYANDOTTE 230,374.83 1986 1983 10-40
26 MISCELLANEOUS VACANT LOTS,
LESS THAN 1 ACRE EACH 42,252.70 -- 1930-1985 --
46th TERR. & PENNSYLVANIA 0.00 -- N/A --
VARIOUS LOCATIONS 0.00 -- N/A --
GRANDVIEW, MISSOURI
11900 SO. BLUERIDGE EXT. 544,859.15 1987 1987 10-39
LEE'S SUMMIT,MISSOURI
211 N. E. LAKEWOOD BLVD. 13,703.55 1975 1993 15-31.5
<PAGE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
RAYMORE, MISSOURI
RIDGWAY DRIVE 9 DUPLEXES RESIDENTIAL 876,138.38 180,000.00
VALUATION RESERVE
SHAWNEE MISSION, KANSAS
5000-5012 STATELINE WESTWOOD SHOPS RETAIL 2,469.58
2700-2812 W. 53rd STREET FAIRWAY SHOPS RETAIL 1,099.01
MISSION ROAD & TOMAHAWK PRAIRIE VILLAGE SHOPS RETAIL & OFFICE 11,500,000.00 30,888.91
83rd & MISSION ROAD CORINTH SQUARE SHOPS RETAIL 7,398,513.68 43,329.48
3910-4024 W. 95th STREET 95 & MISSION ROAD SHOPS RETAIL 3,041.37
9507-9541 NALL TRAILWOOD SHOPS RETAIL 4,232.31
9555-9563 NALL 96 & NALL SHOPS RETAIL 508.98
5205-5287 W. 95th STREET TRAILWOOD III SHOPS RETAIL 928,928.49 1,459.41
4101-4117 W. 83rd STREET CORINTH SHOPS SOUTH RETAIL 2,086,760.25 11,930.82
75th STREET & I-35 GEORGETOWN SHOPS RETAIL 11,335.48
8340 MISSION ROAD CORINTH OFFICE BUILDING OFFICE 1,428,292.09 3,714.75
4121 W. 83rd STREET CORINTH EXECUTIVE BUILDING OFFICE 503,906.24 6,309.20
7315 FRONTAGE ROAD HARTFORD OFFICE BUILDING OFFICE 5,003.67
4200 SOMERSET NICHOLS BUILDING OFFICE 1,666,340.74 6,833.98
11111 W. 95th STREET OAK PARK BANK BUILDING OFFICE 554,994.02 4,912.28
7301 MISSION ROAD PRAIRIE VILLAGE OFFICE CTR OFFICE 2,221,787.68 44,254.01
(7) 4350 SHAWNEE MSN PKWAY FAIRWAY WEST OFFICE CTR OFFICE 4,775,000.00 68,829.26
2400 W. 75th STREET BRYMAR BUILDING OFFICE 793,495.60 0.00
(7) 4330 SHAWNEE MSN PKWAY FAIRWAY NORTH OFFICE 4,500,000.00 109,738.65
11836-50 W. 85th STREET QUIVIRA BUS PARK - BLDG A INDUSTRIAL 50,687.34 24,605.05
8441-8457 QUIVIRA QUIVIRA BUS PARK - BLDG B INDUSTRIAL 29,967.49
8419-8433 QUIVIRA QUIVIRA BUS PARK - BLDG C INDUSTRIAL 50,687.34 23,078.94
8403-8417 QUIVIRA QUIVIRA BUS PARK - BLDG D INDUSTRIAL 50,687.34 23,189.30
8347-8363 QUIVIRA QUIVIRA BUS PARK - BLDG E INDUSTRIAL 179,327.62 31,309.18
11835-55 W. 83rd STREET QUIVIRA BUS PARK - BLDG F INDUSTRIAL 185,920.55 34,060.83
8605-8619 QUIVIRA QUIVIRA BUS PARK - BLDG G INDUSTRIAL 131,858.54 27,279.24
11730-11748 W. 86th TERRACE QUIVIRA BUS PARK - BLDG H INDUSTRIAL 162,186.03 36,082.09
11705 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG WE INDUSTRIAL 142,631.83 45,411.53
11531-11621 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG J INDUSTRIAL 1,396,000.00 4,962.42
11633-11647 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG K INDUSTRIAL 304,000.00 1,981.54
11505-11517 W. 83rd TERRACE QUIVIRA BUS PARK - BLDG L INDUSTRIAL 300,000.00 2,055.81
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
RAYMORE, MISSOURI
RIDGWAY DRIVE 1,126,000.00 0.00 180,000.00 1,126,000.00 1,306,000.00
(205,000,000) (205,000,000) (205,000,000)
SHAWNEE MISSION, KANSAS
5000-5012 STATELINE 21,235.73 200.00 2,469.58 21,435.73 23,905.31
2700-2812 W. 53rd STREET 243,393.58 1,363,598.94 29,748.12 1,578,343.41 1,608,091.53
MISSION ROAD & TOMAHAWK 2,150,388.48 3,698,579.35 147,327.98 5,732,528.76 5,879,856.74
83rd & MISSION ROAD 2,033,397.41 3,810,913.30 519,634.88 5,368,005.31 5,887,640.19
3910-4024 W. 95th STREET 110,784.72 71,487.42 63,253.95 122,059.56 185,313.51
9507-9541 NALL 567,657.15 6,919.43 4,232.31 574,576.58 578,808.89
9555-9563 NALL 151,582.59 12,102.31 2,358.11 161,835.77 164,193.88
5205-5287 W. 95th STREET 1,473,876.95 1,250.00 1,459.41 1,475,126.95 1,476,586.36
4101-4117 W. 83rd STREET 191,765.49 2,523,472.27 116,998.94 2,610,169.64 2,727,168.58
75th STREET & I-35 1,548,724.51 1,043,700.63 69,784.00 2,533,976.62 2,603,760.62
8340 MISSION ROAD 1,121,969.53 263,711.42 3,714.75 1,385,680.95 1,389,395.70
4121 W. 83rd STREET 1,117,443.04 352,791.56 6,309.20 1,470,234.60 1,476,543.80
7315 FRONTAGE ROAD 1,344,996.63 360,546.84 64,376.48 1,646,170.66 1,710,547.14
4200 SOMERSET 1,849,885.15 181,596.23 25,135.39 2,013,179.97 2,038,315.36
11111 W. 95th STREET 1,025,675.81 43,574.02 13,202.36 1,060,959.75 1,074,162.11
7301 MISSION ROAD 443,776.10 359,491.16 65,022.18 782,499.09 847,521.27
(7) 4350 SHAWNEE MSN PKWAY 3,771,257.18 233,707.36 147,318.97 3,926,474.83 4,073,793.80
2400 W. 75th STREET 1,634,057.96 70,802.25 12,115.75 1,692,744.46 1,704,860.21
(7) 4330 SHAWNEE MSN PKWAY 3,809,023.27 327,277.05 209,650.61 4,036,388.36 4,246,038.97
11836-50 W. 85th STREET 246,154.19 137,984.66 105,800.85 302,943.05 408,743.90
8441-8457 QUIVIRA 284,610.40 30,284.28 29,967.49 314,894.68 344,862.17
8419-8433 QUIVIRA 235,350.87 70,474.69 23,078.94 305,825.56 328,904.50
8403-8417 QUIVIRA 256,012.59 45,549.66 23,189.30 301,562.25 324,751.55
8347-8363 QUIVIRA 304,367.65 85,714.18 31,309.18 390,081.83 421,391.01
11835-55 W. 83rd STREET 463,200.18 103,179.69 34,060.83 566,379.87 600,440.70
8605-8619 QUIVIRA 244,255.93 4,349.50 27,279.24 248,605.43 275,884.67
11730-11748 W. 86th TERRACE 324,805.22 44,923.28 36,082.09 369,728.50 405,810.59
11705 W. 83rd TERRACE 516,014.72 163,690.84 45,411.53 679,705.56 725,117.09
11531-11621 W. 83rd TERRACE 1,064,466.89 364,385.86 351,273.76 1,082,541.41 1,433,815.17
11633-11647 W. 83rd TERRACE 364,696.36 82,694.58 77,886.82 371,485.66 449,372.48
11505-11517 W. 83rd TERRACE 400,516.67 77,746.77 77,935.78 402,383.47 480,319.25
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
RAYMORE, MISSOURI
RIDGWAY DRIVE 225,201.00 1985 1990 27.5
SHAWNEE MISSION, KANSAS
5000-5012 STATELINE 21,433.73 1926 1926 48
2700-2812 W. 53rd STREET 309,085.36 1940 1940 10-39
MISSION ROAD & TOMAHAWK 3,279,262.29 1948 1948 10-50
83rd & MISSION ROAD 3,497,235.94 1962 1955 10-50
3910-4024 W. 95th STREET 142,497.92 1965 1972 15-50
9507-9541 NALL 455,345.96 1968 1972 10-50
9555-9563 NALL 125,534.85 1976 1981 15-35
5205-5287 W. 95th STREET 679,493.90 1986 1972 10-40
4101-4117 W. 83rd STREET 1,194,941.49 1953 1953 10-55
75th STREET & I-35 1,371,994.79 1974 1965 10-40
8340 MISSION ROAD 932,631.85 1960 1984 15-20
4121 W. 83rd STREET 848,736.55 1973 1986 10-55
7315 FRONTAGE ROAD 1,118,538.58 1978 1975 10-45
4200 SOMERSET 1,228,794.41 1978 1979 10-45
11111 W. 95th STREET 731,437.83 1976 1978 15-40
7301 MISSION ROAD 469,315.41 1960 1981 15-20
(7) 4350 SHAWNEE MSN PKWAY 1,936,510.30 1983 1948 15-32
2400 W. 75th STREET 1,469,987.21 1968 1984 15-20
(7) 4330 SHAWNEE MSN PKWAY 1,929,532.24 1985 1948 10-45
11836-50 W. 85th STREET 246,829.95 1973 1973 15-45
8441-8457 QUIVIRA 217,016.96 1975 1973 15-35
8419-8433 QUIVIRA 167,878.18 1973 1973 15-45
8403-8417 QUIVIRA 175,173.05 1973 1973 15-45
8347-8363 QUIVIRA 231,963.42 1973 1973 10-45
11835-55 W. 83rd STREET 298,993.76 1973 1973 15-45
8605-8619 QUIVIRA 143,468.90 1973 1973 15-45
11730-11748 W. 86th TERRACE 187,931.78 1973 1973 15-45
11705 W. 83rd TERRACE 343,769.74 1973 1973 15-45
11531-11621 W. 83rd TERRACE 769,783.47 1983 1965 10-35
11633-11647 W. 83rd TERRACE 260,030.63 1985 1965 15-35
11505-11517 W. 83rd TERRACE 282,926.87 1985 1965 15-35
<PAGE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS (cont.)
11100-11200 ANTIOCH SHANNON VALLEY SHOPS RETAIL 5,443,497.62 1,800,000.00
SHAWNEE MISSION PKWY & BUENA VISTA RETAIL & IND. 1,265.94
8201 MISSION ROAD FIRST BANK OFFICE BUILDING LAND LEASE 276,648.00
4010 SOMERSET INTRUST BANK BUILDING LAND LEASE 2,165.69
I-35 & 75th ST. (1.1 ACRES) PERKINS RESTAURANT LAND LEASE 1,302.97
I-35 & 75th ST. (.45 ACRES) BANK DRIVE-IN LAND LEASE 537.31
I-35 & 75th ST. (.86 ACRES) CONVENIENCE STORE LAND LEASE 1,019.61
I-35 & 75th ST. (.64 ACRES) VACANT LAND 390.44
5301 WEST 95th ST. (.31 ACRES) SAVINGS & LOAN LAND LEASE 155.00
75th & REINHARDT SERVICE STATION LAND LEASE 12,825.00
8100-8300 QUIVIRA VACANT LAND 45 ACRES 81,308.30
99TH & NIEMAN ROAD VACANT LAND 22 ACRES 26,830.15
3541 SOMERSET DRIVE MAINTENANCE SHOP 849.70
151st & NALL 11.214 ACRES LAND 32,079.05
JOHNSON DRIVE & HWY. 7 FARM HOUSE & BLDGS. 0.00
135th -143rd, METCALF TO NALL FARM HOUSES & BLDGS. 0.00
VARIOUS LOCATIONS TENANT IMPROVEMENTS, ETC. CONST. IN PROGRESS 0.00
3617-3737 SOMERSET DRIVE CORINTH PLACE VILLAS 9 RENTAL CONDOMINIUMS 2,322.78
84th & MISSION ROAD CORINTH GARDENS 52-UNIT APARTMENT COMPLEX 43,000.00
4120 WEST 94th TERR. KENILWORTH 246-UNIT APARTMENT COMPLEX 6,008,417.88 63,527.39
(7) 3815 SOMERSET DRIVE CORINTH PLACE 76-UNIT APARTMENT COMPLEX 4,500,000.00 27,100.81
3518 WEST 83rd ST. MISSION VALLEY 89-UNIT APARTMENT COMPLEX 1,825,039.89 38,191.65
8037 MOHAWK CORINTH PADDOCK 126-UNIT APARTMENT COMPLEX 694,440.49 205,500.00
OLATHE, KANSAS
LOTS ON SANTA FE 1.07 ACRES LAND LEASE 44,441.00
11912-11950 STRANGLINE RD 119 PLAZA RETAIL SHOPS RETAIL 1,366,385.71
MIAMI COUNTY,KANSAS
247th & FARLEY (BUCYRUS, KS) 810 ACRE FARMLAND LAND LEASE 1,173,082.50
OSAGE CITY, KANSAS
(2) EAST HIWAY 31 MANUFACTURED HOMES PLANT BUILDING LEASE (30-ACRE SITE) 4,800,000.00 47,840.00
VALUATION RESERVE
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS (cont.)
11100-11200 ANTIOCH 5,649,764.48 2,462,327.96 2,457,244.77 7,454,847.67 9,912,092.44
SHAWNEE MISSION PKWY & BUENA VISTA 12,695.26 3,284.00 1,265.94 15,979.26 17,245.20
8201 MISSION ROAD 0.00 0.00 276,648.00 0.00 276,648.00
4010 SOMERSET 0.00 0.00 2,165.69 0.00 2,165.69
I-35 & 75th ST. (1.1 ACRES) 0.00 0.00 1,302.97 0.00 1,302.97
I-35 & 75th ST. (.45 ACRES) 0.00 0.00 537.31 0.00 537.31
I-35 & 75th ST. (.86 ACRES) 0.00 0.00 1,019.61 0.00 1,019.61
I-35 & 75th ST. (.64 ACRES) 0.00 0.00 390.44 0.00 390.44
5301 WEST 95th ST. (.31 ACRES) 0.00 0.00 155.00 0.00 155.00
75th & REINHARDT 0.00 0.00 12,825.00 0.00 12,825.00
8100-8300 QUIVIRA 0.00 0.00 81,308.30 0.00 81,308.30
99TH & NIEMAN ROAD 0.00 210,627.96 237,458.11 0.00 237,458.11
3541 SOMERSET DRIVE 266,120.49 0.00 849.70 266,120.49 266,970.19
151st & NALL 159,770.00 11,945.38 44,024.43 159,770.00 203,794.43
JOHNSON DRIVE & HWY. 7 53,106.00 0.00 0.00 53,106.00 53,106.00
135th -143rd, METCALF TO NALL 467,986.81 0.00 0.00 467,986.81 467,986.81
VARIOUS LOCATIONS 0.00 96,642.51 0.00 96,642.51 96,642.51
3617-3737 SOMERSET DRIVE 1,403,220.87 0.00 2,322.78 1,403,220.87 1,405,543.65
84th & MISSION ROAD 228,396.00 16,920.61 47,979.00 240,337.61 288,316.61
4120 WEST 94th TERR. 4,085,514.60 2,483,507.22 347,301.65 6,285,247.56 6,632,549.21
(7) 3815 SOMERSET DRIVE 3,868,981.82 648,655.84 650,565.04 3,894,173.43 4,544,738.47
3518 WEST 83rd ST. 930,038.99 865,441.32 93,437.21 1,740,234.75 1,833,671.96
8037 MOHAWK 986,170.00 228,766.27 307,897.00 1,112,539.27 1,420,436.27
OLATHE, KANSAS
LOTS ON SANTA FE 0.00 0.00 44,441.00 0.00 44,441.00
11912-11950 STRANGLINE RD 2,566,613.12 426,980.68 1,793,366.39 2,566,613.12 4,359,979.51
MIAMI COUNTY,KANSAS
247th & FARLEY (BUCYRUS, KS) 357,950.00 0.00 1,173,082.50 357,950.00 1,531,032.50
OSAGE CITY, KANSAS
(2) EAST HIWAY 31 3,866,625.30 682,582.50 730,422.50 3,866,625.30 4,597,047.80
0.00 (1,333,180.00) 0.00 (1,333,180.00) (1,333,180.00)
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
SHAWNEE MISSION, KANSAS (cont.)
11100-11200 ANTIOCH 3,639,060.88 1988 1988 10-48
SHAWNEE MISSION PKWY & BUENA VISTA 13,419.30 1956 1928 20-25
8201 MISSION ROAD 0.00 -- 1957 --
4010 SOMERSET 0.00 -- 1955 --
I-35 & 75th ST. (1.1 ACRES) 0.00 -- 1953 --
I-35 & 75th ST. (.45 ACRES) 0.00 -- 1953 --
I-35 & 75th ST. (.86 ACRES) 0.00 -- 1953 --
I-35 & 75th ST. (.64 ACRES) 0.00 -- 1953 --
5301 WEST 95th ST. (.31 ACRES) 0.00 -- 1972 --
75th & REINHARDT 0.00 -- 1950 --
8100-8300 QUIVIRA 0.00 -- 1955 --
99TH & NIEMAN ROAD 169,792.55 1966-1995 1959 15-20
3541 SOMERSET DRIVE 108,479.64 1987 1957 10-40
151st & NALL 135,176.33 1940's 1983 15
JOHNSON DRIVE & HWY. 7 51,926.02 1940's 1981 15
135th -143rd, METCALF TO NALL 121,905.57 1950's 1989 20-27.5
VARIOUS LOCATIONS 0.00 -- 1995 --
3617-3737 SOMERSET DRIVE 56,017.54 1989 1957 15-27.5
84th & MISSION ROAD 5,266.74 1961 1995 15-27.5
4120 WEST 94th TERR. 4,318,520.28 1965 1972 10-40
(7) 3815 SOMERSET DRIVE 1,595,307.22 1987 1987 10-40
3518 WEST 83rd ST. 912,235.71 1964 1972 10-40
8037 MOHAWK 27,907.60 1973 1995 15-27.5
OLATHE, KANSAS
LOTS ON SANTA FE 0.00 -- 1995 --
11912-11950 STRANGLINE RD 167,192.00 1994 1992 15-30
MIAMI COUNTY,KANSAS
247th & FARLEY (BUCYRUS, KS) 16,601.62 1940's-50's 1994 5-30
OSAGE CITY, KANSAS
(2) EAST HIWAY 31 2,138,141.92 1985 1985 5-35
0.00
<PAGE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
WEST DES MOINES, IOWA
(3) 4201 WESTOWN PARK WAY HIGHLAND BUILDING OFFICE 6,430,107.97 322,206.34
(3) 4200 CORPORATE DRIVE CRESTWOOD BUILDING OFFICE 2,378,259.11 171,121.39
(4) 4344 CORPORATE DRIVE SUNSET BUILDING OFFICE 932,508.37 93,758.60
(4) 4601 WESTOWN PARK WAY VERIDIAN BUILDING OFFICE 7,415,661.83 396,386.65
(4) 4200 UNIVERSITY AVE. EDGEWATER BUILDING OFFICE 9,169,665.68 458,901.10
(4) 4445 CORPORATE DRIVE WATERFORD BUILDING OFFICE 4,684,744.45 234,529.32
(5) 4401 WESTOWN PARKWAY NEPTUNE BUILDING OFFICE 6,000,000.00 624,327.00
JOHNSTON, IOWA
(6) 6031 MEADOW CREST DRIVE WINWOOD APARTMENTS 418-UNIT APARTMENT COMPLEX 23,000,000.00 1,299,865.00
SAN FRANCISCO, CALIFORNIA
386 GEARY STREET RAPHAEL HOTEL (152 ROOMS) LEASEHOLD IMPROVEMENTS
ST.PETERSBURG, FLORIDA
2nd ST. SOUTH & CENTRAL BAY PLAZA SHOPS RETAIL 3,382,200.00 6,940,488.09
25 2nd ST. NORTH TROPICANA BUILDING OFFICE 525,000.00 500,000.00
VALUATION RESERVE
TOTAL REVENUE-PRODUCING
PROPERTIES 295,469,478.27 25,176,798.77
(8) PREFERENCE ITEM 3,962,988.29
--------------
TOTAL ENCUMBRANCES 299,432,466.56
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED ---------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
WEST DES MOINES, IOWA
(3) 4201 WESTOWN PARK WAY 4,462,463.32 817,238.60 916,426.87 4,685,481.39 5,601,908.26
(3) 4200 CORPORATE DRIVE 1,918,468.87 290,736.81 320,937.24 2,059,389.83 2,380,327.07
(4) 4344 CORPORATE DRIVE 834,073.21 176,590.97 93,758.60 1,010,664.18 1,104,422.78
(4) 4601 WESTOWN PARK WAY 5,530,002.53 526,712.06 396,386.65 6,056,714.59 6,453,101.24
(4) 4200 UNIVERSITY AVE. 6,699,068.74 1,072,847.44 679,183.47 7,551,633.81 8,230,817.28
(4) 4445 CORPORATE DRIVE 3,977,761.07 0.00 234,529.32 3,977,761.07 4,212,290.39
(5) 4401 WESTOWN PARKWAY 3,915,102.43 2,277,913.00 1,161,419.48 5,655,922.95 6,817,342.43
JOHNSTON, IOWA
(6) 6031 MEADOW CREST DRIVE 18,100,057.71 1,105,295.20 2,303,504.26 18,201,713.65 20,505,217.91
SAN FRANCISCO, CALIFORNIA
386 GEARY STREET 363,472.67 1,490,001.20 0.00 1,853,473.87 1,853,473.87
ST.PETERSBURG, FLORIDA
2nd ST. SOUTH & CENTRAL 6,309,613.62 3,461,626.95 6,940,488.09 9,771,240.57 16,711,728.66
25 2nd ST. NORTH 1,333,070.23 18,593.65 500,000.00 1,351,663.88 1,851,663.88
VALUATION RESERVE (15,441,963.00) (5,641,963.00) (9,800,000.00) (15,441,963.00)
TOTAL REVENUE-PRODUCING
PROPERTIES 248,930,061.53 67,891,846.33 32,672,654.54 309,326,052.09 341,998,706.63
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
WEST DES MOINES, IOWA
(3) 4201 WESTOWN PARK WAY 2,015,863.60 1987 1987 10-40
(3) 4200 CORPORATE DRIVE 747,936.60 1987 1987 10-40
(4) 4344 CORPORATE DRIVE 206,735.92 1989 1988 5-39
(4) 4601 WESTOWN PARK WAY 1,226,896.25 1989 1988 7-39
(4) 4200 UNIVERSITY AVE. 1,556,987.41 1989 1988 7-39
(4) 4445 CORPORATE DRIVE 746,876.29 1990 1988 31.5
(5) 4401 WESTOWN PARKWAY 2,422,303.44 1986 1986 10-50
JOHNSTON, IOWA
(6) 6031 MEADOW CREST DRIVE 7,515,745.10 1986-87 1985 5-28
SAN FRANCISCO, CALIFORNIA
386 GEARY STREET 1,767,059.95 1908 1971 7-25
ST.PETERSBURG, FLORIDA
2nd ST. SOUTH & CENTRAL 1,155,100.43 1992 1990 31.5
25 2nd ST. NORTH 162,916.66 1914 1992 15-31.5
VALUATION RESERVE 0.00
TOTAL REVENUE-PRODUCING
PROPERTIES 146,310,937.23
</TABLE>
(1) The Company owns a 51.3% interest in the partnership owning these two
office buildings.
(2) The Company owns a 99% profit-sharing interest and a 100% loss-sharing
interest in the partnership owning this facility.
(3) The Company owns a 90% interest in the partnership owning these two office
buildings.
(4) The Company owns a 60% interest in the partnership owning these four office
buildings.
(5) The Company owns an 85% interest in the partnership owning this office
building.
(6) The Company owns a 65% interest in the partnership owning this apartment
complex.
(7) The Company shares 50% of the cash flow from these properties with an
outside company providing credit enhancement support related to the
financing of these properties.
(8) See discussion in Note 9 to the 1995 Consolidated Financial Statements and
Management's Discussion and Analysis - Liquidity and Capital Resources.
<PAGE>
<TABLE>
<CAPTION>
BUILDING
LOCATION/DEVELOPMENT BUILDING TYPE ENCUMBRANCES LAND
- -------------------- -------- -------- ------------ ----
<S> <C> <C> <C> <C>
LAND AND IMPROVEMENT INVENTORIES
KANSAS CITY, MISSOURI
400 WEST 49th TERR. ALAMEDA TOWERS CONDMINIUMS 37 UNITS SOLD 7,916,240.59 0.00
(19-STORY BUILDING) 18 UNITS REMAINING FOR SALE
VALUATION RESERVE
STONE COUNTY, MISSOURI
TABLE ROCK LAKE (20 MILES 257-LOT SUBDIVISION (104 ACRES) 148 LOTS REMAINING FOR SALE 1,229,735.58
WEST OF BRANSON, MO.)
VALUATION RESERVE (425,000.00)
SHAWNEE MISSION, KANSAS
135th & MISSION ROAD 67 ACRES VACANT LAND 3,163,034.98
JOHNSON DR. & MONTICELLO RD. 371 ACRES VACANT LAND 293,265.19
(1) 135th -151st, METCALF TO NALL 657 ACRES VACANT LAND 13,637,758.24
RESIDENTIAL SUBDIVISIONS:
151st & NALL (S.W. CORNER) GREEN MEADOWS 62 LOTS AVAILABLE FOR SALE 193,987.36
13200 HOWE WATERFORD 1 LOT REMAINING FOR SALE 5,499.65
148th & NALL WHITE HORSE 64 LOTS AVAILABLE FOR SALE 65,698.83
JOHNSON DR. & HWY. K-7 WOODSONIA 85 LOTS AVAILABLE FOR SALE 111,170.85
------------------------------
TOTAL LAND AND IMPROVEMENT
INVENTORIES 7,916,240.59 18,275,150.68
PROPERTY HELD FOR FUTURE DEVELOPMENT
VARIOUS LAND PARCELS KANSAS CITY,
MISSOURI; JOHNSON COUNTY,
KANSAS AND MIAMI COUNTY, KANSAS
HELD FOR FUTURE DEVELOPMENT 19,000,000.00 1,491,879.16
------------------------------
TOTAL PROPERTIES AND MORTGAGE
INDEBTEDNESS PER BALANCE SHEET 326,348,707.15 44,943,828.61
------------------------------
------------------------------
LESS ACCUMULATED DEPRECIATION
TOTAL PROPERTIES, NET OF
ACCUMULATED DEPRECIATION
<CAPTION>
COSTS TOTAL COST
TOTAL CAPITALIZED -------------------------------------------------
INITIAL SUBSEQ. TO LAND & BUILDINGS/
LOCATION/DEVELOPMENT BLDG. COSTS ACQUISITION IMPTS IMPTS TOTAL
- -------------------- ----------- ----------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
LAND AND IMPROVEMENT INVENTORIES
KANSAS CITY, MISSOURI
400 WEST 49th TERR. 13,008,412.56 0.00 13,008,412.56 13,008,412.56
(4,558,443.00) 0.00 (4,558,443.00) (4,558,443.00)
STONE COUNTY, MISSOURI
TABLE ROCK LAKE (20 MILES 0.00 1,229,735.58 0.00 1,229,735.58
WEST OF BRANSON, MO.)
(425,000.00) 0.00 (425,000.00)
SHAWNEE MISSION, KANSAS
135th & MISSION ROAD 0.00 0.00 3,163,034.98 0.00 3,163,034.98
JOHNSON DR. & MONTICELLO RD. 0.00 0.00 293,265.19 0.00 293,265.19
(1) 135th -151st, METCALF TO NALL 0.00 0.00 13,637,758.24 0.00 13,637,758.24
RESIDENTIAL SUBDIVISIONS:
151st & NALL (S.W. CORNER) 0.00 0.00 1,903,486.11 0.00 1,903,486.11
13200 HOWE 0.00 0.00 22,574.75 0.00 22,574.75
148th & NALL 0.00 0.00 1,725,961.06 0.00 1,725,961.06
JOHNSON DR. & HWY. K-7 0.00 0.00 2,342,738.76 0.00 2,342,738.76
---------------------------------------------------------------------------------------
TOTAL LAND AND IMPROVEMENT
INVENTORIES 8,449,969.56 0.00 23,893,554.67 8,449,969.56 32,343,524.23
PROPERTY HELD FOR FUTURE DEVELOPMENT
VARIOUS LAND PARCELS KANSAS CITY,
MISSOURI; JOHNSON COUNTY,
KANSAS AND MIAMI COUNTY, KANSAS
HELD FOR FUTURE DEVELOPMENT
0.00 0.00 1,491,879.16 0.00 1,491,879.16
---------------------------------------------------------------------------------------
TOTAL PROPERTIES AND MORTGAGE
INDEBTEDNESS PER BALANCE SHEET 257,380,031.09 67,891,846.33 58,058,088.37 317,776,021.65 375,834,110.02
--------------------------------------------------------------------
--------------------------------------------------------------------
LESS ACCUMULATED DEPRECIATION 146,310,937.23
--------------
TOTAL PROPERTIES, NET OF
ACCUMULATED DEPRECIATION 229,523,172.79
--------------
--------------
<CAPTION>
ACCUM. DATE OF DATE DEPR.
LOCATION/DEVELOPMENT DEPR. CONST. ACQUIRED LIFE
- -------------------- ----- ------- -------- ----
<S> <C> <C> <C> <C>
LAND AND IMPROVEMENT INVENTORIES
KANSAS CITY, MISSOURI
400 WEST 49th TERR. 1988-1995 1962
STONE COUNTY, MISSOURI
TABLE ROCK LAKE (20 MILES 1986
WEST OF BRANSON, MO.)
SHAWNEE MISSION, KANSAS
135th & MISSION ROAD 1994
JOHNSON DR. & MONTICELLO RD. 1978
(1) 135th -151st, METCALF TO NALL 1989
RESIDENTIAL SUBDIVISIONS:
151st & NALL (S.W. CORNER) 1984
13200 HOWE 1983
148th & NALL 1983
JOHNSON DR. & HWY. K-7 1981
TOTAL LAND AND IMPROVEMENT
INVENTORIES
PROPERTY HELD FOR FUTURE DEVELOPMENT
VARIOUS LAND PARCELS KANSAS CITY,
MISSOURI, JOHNSON COUNTY,
KANSAS AND MIAMI COUNTY, KANSAS
HELD FOR FUTURE DEVELOPMENT -------------- 1978-1984
TOTAL PROPERTIES AND MORTGAGE
INDEBTEDNESS PER BALANCE SHEET 146,310,937.23
--------------
--------------
LESS ACCUMULATED DEPRECIATION
TOTAL PROPERTIES, NET OF
ACCUMULATED DEPRECIATION
</TABLE>
(1) All but 88 acres of this property is under contract for sale.
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION ROLLFORWARDS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Real Estate Assets Accumulated Depreciation
------------------------ ------------------------
<S> <C> <C>
Balance at beginning of year $381,182,000 $137,077,000
Additions during year:
Acquisitions 3,700,542 0
Construction and tenant improvements 7,449,127 0
Depreciation and amortization expense (3,324,818) 9,991,182
Deductions during year:
Cost of real estate sold (11,055,540) (757,245)
Valuation allowances and write-offs (2,117,201) 0
------------------------ ------------------------
Balance at end of year $375,834,110 $146,310,937
------------------------ ------------------------
------------------------ ------------------------
</TABLE>
F-8.2
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION ROLLFORWARDS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Real Estate Assets Accumulated Depreciation
------------------------ ------------------------
<S> <C> <C>
Balance at beginning of year $365,840,263 $126,832,000
Additions during year:
Acquisitions 45,210,536 626,000
Construction and tenant improvements 14,580,346 0
Depreciation and amortization expense (6,857,025) 10,644,975
Deductions during year:
Cost of real estate sold (12,925,339) (1,025,975)
Valuation allowances and write-offs (24,666,781) 0
------------------------ ------------------------
Balance at end of year $381,182,000 $137,077,000
------------------------ ------------------------
------------------------ ------------------------
</TABLE>
F-8.3
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
amount loans
subject to
delinquent
Interest Maturity Periodic Prior Face Amt Carrying Amt principal or
Description Rate Date Pymt. Term Liens of Mortgage of Mortgage interest
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Landing Ventures
Shopping Center
Kansas City, MO Prime adj. qtrly 8/15/98 Varying amounts 0 $3,255,000 $3,073,520 $0
over life to maturity
Westport Today Balloon at maturity
Residential Houses & of $2,861,723
3 office bldgs.
Kansas City, MO 8.5% 1/1/12 Level monthly 0 2,768,824 2,280,640 0
at $20,123
Lemons Descendents
Shopping Center
Kansas City, MO 11% 11/30/01 Level monthly 0 750,000 698,053 0
at $7,741
Balloon at maturity
Rayman, Steven M. of $564,556
Apartments
Merriam, KS 7% 12/1/02 Level monthly 0 11,750,000 11,102,003 0
at $87,000
Balloon at maturity
of $8,736,325
Construction loans
on single family
residences 10.50% 3/96 to 6/96 N/A N/A N/A 3,589,862 1,614,766
Other misc. mortgages 0% to 9.5% 1/96 to 4/96 N/A N/A N/A 592,922 299,000
-----------------------------------------
Totals $18,523,824 21,337,000 $1,913,766
------------- ------------
------------- ------------
Reserve for uncollectible accounts (1,468,000)
------------
$19,869,000
------------
------------
</TABLE>
F-9.1
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
ROLLFORWARD OF MORTGAGE LOANS ON REAL ESTATE
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Balance at beginning of year $ 24,332,000
Additions during year:
New mortgage loans 4,591,994
Deductions during year:
Collections of principal (5,065,040)
Settlement expense items (see financial statement note 16) (2,271,954)
Write-offs (250,000)
-------------
Balance at close of year $ 21,337,000
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1995
--------------------------
<S> <C> <C>
Gross Balance $ 24,332,000 $ 21,337,000
Reserve for uncollectible accounts (400,000) (1,468,000)
--------------------------
$ 23,932,000 $ 19,869,000
--------------------------
--------------------------
</TABLE>
F-9.2
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
ROLLFORWARD OF MORTGAGE LOANS ON REAL ESTATE
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Balance at beginning of year $ 28,590,283
Additions during year:
New mortgage loans 9,362,703
Deductions during year:
Collections of principal (13,620,986)
Write-offs -
------------
Balance at close of year $ 24,332,000
------------
------------
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1993 1994
--------------------------
<S> <C> <C>
Gross Balance $ 28,590,283 $ 24,332,000
Reserve for uncollectible accounts (192,283) (400,000)
--------------------------
$ 28,398,000 $ 23,932,000
--------------------------
--------------------------
</TABLE>
F-9.3
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Balance at Charged to
beginning of costs and Charged to Balance at end
Description year expenses other accounts* Write -offs of year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Valuation Reserve - Revenue producing property $ 15,025,400 $ 1,830,000 $ 0 $ (139,925) $ 16,715,475
Valuation Reserve - Land and improvements inventory 4,696,242 287,201 0 0 4,983,443
Valuation Reserve - Property held for future development 1,327,450 0 (1,327,450) 0 0
Valuation Reserve - Marketable equity securities 0 85,000 0 0 85,000
Valuation Reserve - Notes and accounts receivable 4,259,930 2,380,750 0 (1,497,679) 5,143,001
Valuation Reserve - Prepaid expenses 1,208,631 0 (1,208,631) 0 0
Valuation Reserve - Investments in real estate
partnerships 1,360,239 0 (68,400) (75,000) 1,216,839
Valuation Reserve - Minority interest 952,474 0 (952,474) 0 0
------------ ------------ ------------ ------------ ------------
Totals $ 28,830,366 $ 4,582,951 $ (3,556,955) $ (1,712,604) $ 28,143,758
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
* These amounts were taken as credits to valuation allowance expense as the
Company was released from the assets and liabilities (net liability position)
of a consolidated affiliate during 1995.
F-10.1
<PAGE>
J.C. NICHOLS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Balance at Charged to
beginning of costs and Charged to Balance at end
Description year expenses other accounts Write -offs of year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Valuation Reserve - Revenue producing property $ 443,512 $ 14,581,888 $ 0 $ 0 $ 15,025,400
Valuation Reserve - Land and improvements inventory 137,799 4,558,443 0 0 4,696,242
Valuation Reserve - Property held for future development 0 1,327,450 0 0 1,327,450
Valuation Reserve - Notes and accounts receivable 1,195,894 3,064,036 0 0 4,259,930
Valuation Reserve - Prepaid expenses 0 1,208,631 0 0 1,208,631
Valuation Reserve - Investments in real estate
partnerships 0 1,360,239 0 0 1,360,239
Valuation Reserve - Minority interest 0 952,474 0 0 952,474
------------ ------------ ------------ ------------ ------------
Totals $ 1,777,205 $ 27,053,161 $ 0 $ 0 $ 28,830,366
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
F-10.2
<PAGE>
J. C. NICHOLS COMPANY
MORTGAGES PAYABLE
DECEMBER 31, 1995
<TABLE>
<CAPTION>
BALANCE
MATURITY OUTSTANDING AS OF
PROPERTY LENDER OR TRUSTEE DATE 12/31/95 INTEREST RATE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Millcreek Block Principal Mutual 12/13/13 $ 2,743,641 Fixed at 8% until 2004; rate adjusted
by holder at 2004 and 2009
Swanson Block Principal Mutual 12/13/13 $ 3,814,330 "
Hall's Building Principal Mutual 12/13/13 $ 1,739,870 "
Theatre Block Principal Mutual 12/13/13 $ 5,821,872 "
Triangle Block Principal Mutual 12/13/13 $ 1,806,788 "
Balcony Block Principal Mutual 12/13/13 $ 3,948,166 "
Plaza Central Principal Mutual 12/13/13 $ 1,606,034 "
Nichols Block Principal Mutual 12/13/13 $ 3,345,903 "
Time Block Principal Mutual 12/13/13 $12,446,760 "
Esplanade Block Principal Mutual 12/13/13 $ 8,097,086 "
Plaza Savings South Principal Mutual 12/13/13 $ 2,074,460 "
48th & Penn Principal Mutual 12/13/13 $ 1,873,706 "
Court of the Penguins Principal Mutual 12/13/13 $ 2,810,559 "
Seville Shops West Principal Mutual 12/13/13 $ 2,409,050 "
Seville Square Principal Mutual 12/13/13 $ 6,357,216 "
Park Plaza Principal Mutual 12/13/13 $ 6,022,626 "
Mission Valley Apartments Mark Twain 04/09/96 $ 1,825,040 Prime
Corinth Office Building Mark Twain 04/09/96 $ 1,428,292 Prime
Nichols Building Mark Twain 04/09/96 $ 1,666,341 Prime
Prairie Village Office Center Mark Twain 04/09/96 $ 2,221,788 Prime
<CAPTION>
AMORTIZATION BALANCE DUE
PREPAYMENT PROVISIONS PERIOD AT MATURITY
- ----------------------------------------------------------------------
<S> <C> <C>
Greater of 1% of principal or 20 years Fully Amortized
a calculated re-investment yield
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
* 20 years Fully Amortized
None 5 years $ 1,825,040
None 5 years $ 1,428,292
None 5 years $ 1,666,341
None 5 years $ 2,221,788
</TABLE>
<TABLE>
<CAPTION>
BALANCE
OUTSTANDING
MATURITY AS OF
PROPERTY LENDER OR TRUSTEE DATE 12/31/95 INTEREST RATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brymar Building Mark Twain 04/09/96 $ 793,496 Prime
Trailwood III Shops Bank Midwest 05/01/21 $ 928,928 Monthly weighted average plus 2%
Bannister Business Center Bank Midwest 05/01/21 $ 1,311,428 Monthly weighted average plus 2%
Regency House Mercantile Bank 07/07/99 $ 3,634,000 Prime + 1/4%
Sulgrave Mercantile Bank 07/07/99 $ 5,446,000 Prime + 1/4%
Tropicana Building Barnett Bank 03/27/01 $ 525,000 Prime + 1/4%
Corinth Place Boatmens Bank 12/01/15 $ 4,500,000 Lower floater, adjusted monthly
Coach House South Boatmens Bank 12/01/15 $20,000,000 Lower floater, adjusted monthly
Coach House U. S. Trust 05/01/15 $ 8,000,000 Lower floater, adjusted monthly
Fairway North U. S. Trust 11/01/14 $ 4,500,000 Lower floater, adjusted monthly
(1) Two Brush Creek Plaza Lincoln National 01/01/02 $ 7,245,440 8.000%
Brookside Shops Lutheran 01/01/11 $ 4,515,847 10.500%
Prairie Village Shops Lutheran 01/01/11 $11,500,000 10.500%
Rental Houses Mages 05/01/04 $ 28,736 8.000%
Lakewood Sales Office Roosevelt Bank 12/15/97 $ 150,000 Prime + 2%
Neptune Apartments Lutheran 01/01/99 $ 3,601,538 9.875%
Quivira Business Park Commerce Bank 08/01/98 $ 2,000,000 9.800%
Buildings J, K and L
Corinth Square Shops Farm Bureau 04/01/02 $ 7,398,514 9.375%
<CAPTION>
AMORTIZATION BALANCE DUE
PREPAYMENT PROVISIONS PERIOD AT MATURITY
- -------------------------------------------------------------------------
<S> <C> <C>
None 5 years $ 793,496
None 35 years Fully Amortized
None 35 years Fully Amortized
None 5 years $ 3,202,000
None 5 years $ 4,798,000
None 9 years Fully Amortized
Administrative costs for early call Interest Only $ 4,500,000
Administrative costs for early call Interest Only $ 20,000,000
Administrative costs for early call Interest Only $ 8,000,000
Administrative costs for early call Interest Only $ 4,500,000
Requires lender's approval and 6 years $ 5,001,164
payment of all contingent interest
In the first ten years additional 20 years Fully Amortized
charge at re-investment rate.
Beginning in 11th year 5% of
principal, declining by
1/2% each year thereafter
In the first ten years additional 20 years $ 9,516,048
charge at re-investment rate.
Beginning in 11th year 5% of
principal, declining by
1/2% each year thereafter
None 10 years Fully Amortized
None 5 years Fully Amortized
Beginning in 4th year, 5% of 7 years $ 3,497,643
principal and declining 1%
each year to a minimum of 2%
Administrative costs for Interest Only $ 2,000,000
early call
Beginning in 8th year, 10 years $ 5,853,074
greater of 1% of principal
or calculated reinvestment yield
</TABLE>
<TABLE>
<CAPTION>
BALANCE
MATURITY OUTSTANDING AS OF
PROPERTY LENDER OR TRUSTEE DATE 12/31/95 INTEREST RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corinth Shops South Farm Bureau 04/01/02 $ 2,086,760 9.375%
Kenilworth Apartments Aegon 05/01/97 $ 6,008,418 9.250%
Red Bridge Professional
Building NYLIC 07/10/98 $ 728,828 9.125%
Cole Garden Apartments Musgrave 07/01/96 $ 225,531 9.000%
Fairway West Office Center Commerce Bank 03/01/03 $ 4,775,000 9.000%
Oak Park Bank Building NYLIC 01/10/03 $ 554,994 8.875%
Quivira Business Park Northland Financial 01/01/99 $ 294,692 8.875%
Buildings A, C, D, and WE
Quivira Business Park Northland Financial 11/01/98 $ 659,291 8.750%
Buildings E, F, G and H
Corinth Paddock Apartments NYLIC 05/10/99 $ 694,440 8.500%
(1) 4900 Main Building KPERS 05/30/06 $ 26,219,601 9.375%
Vacant Lots - Penn Plaza Bright 12/01/99 $ 33,188 8.000%
Corinth Executive Building NYLIC 10/01/02 $ 503,906 8.000%
Vacant Lots - Santa Maria Capitol Federal 09/01/96 $ 5,190 7.000%
Savings
Winwood Apartments Iowa Finance 11/01/15 $ 23,000,000 Lower floater, adjusted weekly
Authority
Neptune Building Iowa Finance 09/01/15 $ 6,000,000 Lower floater, adjusted weekly
Authority
Shannon Valley Shops Principal Mutual 11/01/96 $ 5,443,498 9.750%
Manufactured Homes Plant Commerce Bank 12/01/99 $ 4,800,000 Lower floater, adjusted weekly
<CAPTION>
AMORTIZATION BALANCE DUE
PREPAYMENT PROVISIONS PERIOD AT MATURITY
- -------------------------------------------------------------------------
<S> <C> <C>
Beginning in 8th year, greater 10 years $ 1,650,867
of 1% of principal or a calculated
reinvestment yield
Beginning in 38th month, greater of 5 years $ 5,842,921
1% of principal or re-investment
yield.
Beginning in 14th year, 5% of 25 years $ 617,578
principal declining 1/4% per year
None 10 years $ 223,000
Redeemable on 3/1/98 and thereafter 20 years $ 1,775,000
on interest payment dates declining
from 102% to 100% of principal
Beginning in 11th year, 5% of 25 years Fully Amortized
principal declining 1/4% per year
Beginning in 11th year, 5% of 27 years $ 101,228
principal declining 1/2 of 1% per
year to not less than 1%
Beginning in 11th year, 5% of 25 years $ 527,720
principal declining 1/2 of 1% per
year to not less than 1%
Beginning in 11th year, 5% of 25 years Fully Amortized
principal declining 1/2% per year
to a minimum of 1% thereafter
None 20 years Fully Amortized
None 25 years Fully Amortized
Beginning in 11th year 3% of principal 30 years Fully Amortized
declining 1/2% per yr to 1%
None 20 years Fully Amortized
Redeemable at rates declining fm Interest Only $ 23,000,000
102% to 100% of principal
Redeemable at rates declining fm Interest Only $ 6,000,000
102% to 100% of principal
Holder is entitled to re-investment
yield per prescribed formula 10 years $ 5,393,498
Redeemable at rates declining fm Interest Only $ 4,800,000
103% to 100% of principal
</TABLE>
<TABLE>
<CAPTION>
BALANCE
MATURITY OUTSTANDING AS OF
PROPERTY LENDER OR TRUSTEE DATE 12/31/95 INTEREST RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Highland and Crestwood Cigna 12/01/02 $ 8,808,367 8.290%
Buildings
Sunset, Veridian, Cigna 12/01/02 $ 22,202,580 8.290%
Edgewater,and Waterford
Buildings
Bay Plaza Shops Colonial Hotel, Inc. 08/21/00 $ 800,000 9.000%
Bay Plaza Shops Princess Mary Hotel 08/21/00 $ 475,000 9.000%
Co., Inc.
Bay Plaza Shops Princess Mary Hotel 08/21/00 $ 307,200 9.000%
Co., Inc.
Bay Plaza Shops Barnett Bank 11/22/99 $ 400,000 Prime + 1%
Bay Plaza Shops City of St. Petersburg 12/31/02 $ 1,400,000 7.000%
Alameda Towers Boatmen's Bank 06/01/97 $ 7,916,241 Prime
Condominiums
Land under ground lease Cigna Corp. 03/01/09 $ 19,000,000 9.050%
Duplexes-MAPC J. B. Nutter 02/01/96 $ 474,008 275 Basis Points above weekly
J. B. Nutter 02/01/96 $ 402,130 Treasury bill average, adjusted annually
Park Central Building I Hibernia Bank 9/30/97 $ 13,617,372 9.000%
Park Central Building II Midland Bank 10/15/99 $ 3,513,931 Boatmen's corporate rate plus 1%;
adjusted 11/15 each year
Park Central Building III F.D.I.C. 9/1/99 $ 897,098 Boatmen's corporate rate plus .5%;
adjusted 9/1 each year
(1) Preference Items $ 3,962,988
----------------
Total mortgages payable $ 326,348,707
----------------
----------------
(1) See discussion in Note 9 to the 1995 Consolidated Financial Statements and Management's Discussion and
Analysis - Liquidity and Capital Resources.
<CAPTION>
AMORTIZATION BALANCE DUE
PREPAYMENT PROVISIONS PERIOD AT MATURITY
- -------------------------------------------------------------------------
<S> <C> <C>
None 25 years $ 7,918,383
None 25 years $ 19,737,955
None 10 years $ 800,000
None 10 years $ 475,000
None 10 years $ 307,200
None 5 years Fully Amortized
None 7 years $ 1,400,000
None 5 years $ 3,941,600
Beginning in 9th year, 1% plus 25 years $ 17,429,339
yield maintenance
None 10 years $ 474,008
None 10 years $ 402,130
None 3 years $ 13,409,016
None 5 years $ 3,347,109
None 5 years $ 854,484
</TABLE>
F-11
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
September 30, December 31,
Assets 1996 1995
------ ---- ----
(unaudited)
Revenue-producing properties $ 191,454,000 195,688,000
Land and improvement inventories 29,584,000 32,344,000
Property held for future development 1,492,000 1,492,000
------------ ------------
Total properties 222,530,000 229,524,000
Cash and cash equivalents 21,416,000 7,209,000
Temporary investments 37,293,000 4,606,000
Marketable equity securities available for sale - 38,114,000
Accounts receivable 1,012,000 4,205,000
Prepaid expenses 7,937,000 9,992,000
Income taxes receivable 4,227,000 4,192,000
Notes receivable 20,801,000 24,032,000
Investments in real estate partnerships 1,725,000 1,857,000
Minority interest in consolidated partnerships 4,357,000 4,284,000
Other assets, net 698,000 680,000
------------ ------------
$ 321,996,000 328,695,000
------------ ------------
------------ ------------
(Continued)
F-12
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
September 30, December 31,
Liabilities and Stockholders' Equity (Deficit) 1996 1995
---------------------------------------------- ---- ----
(unaudited)
Mortgage indebtedness $ 311,035,000 326,349,000
Notes payable to banks and others 2,000,000 5,658,000
Accounts payable and tenants' deposits 6,107,000 6,266,000
Accrued expenses and other liabilities 11,898,000 9,597,000
Accrued contribution to Employee Stock Ownership
Trust 11,050,000 11,050,000
Deferred gains on the sale of property 527,000 552,000
Deferred income taxes 10,083,000 5,948,000
------------ ------------
352,700,000 365,420,000
------------ ------------
Stockholders' equity (deficit):
Common stock, par value $.01 per share;
10,000,000 shares authorized and 5,016,745
shares issued (note 2) 100,000 100,000
Additional paid-in capital (notes 2 and 3) 8,164,000 7,079,000
Unrealized gain on marketable equity securities
available for sale, net of income taxes of
$0 and $11,466,000 - 21,023,000
Retained earnings 78,459,000 52,500,000
------------ ------------
86,723,000 80,702,000
Less:
Treasury stock, at cost (164,345 shares of
common stock) 117,427,000 117,427,000
------------ ------------
Total stockholders' equity (deficit) (30,704,000) (36,725,000)
Commitments and contingencies
------------ ------------
$ 321,996,000 328,695,000
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
Sales and revenues:
Rents $ 60,938,000 59,196,000
Property sales 5,392,000 4,163,000
Commissions and fees 1,015,000 1,016,000
Dividends and interest 3,165,000 3,026,000
Gains on sales of investments and other assets 33,079,000 4,682,000
Equity in earnings of unconsolidated affiliates 314,000 261,000
Other 4,312,000 478,000
------------- ----------
108,215,000 72,822,000
------------- ----------
Costs and expenses:
Selling, general and operating expenses 34,439,000 36,741,000
Cost of property sales 4,423,000 2,535,000
Interest 17,572,000 21,345,000
Depreciation and amortization 10,222,000 10,708,000
Employee Stock Ownership Trust contribution - 1,787,000
------------- ----------
66,656,000 73,116,000
------------- ----------
Income (loss) before income taxes 41,559,000 (294,000)
Income tax expense 15,600,000 30,000
------------- ----------
Net income (loss) $ 25,959,000 (324,000)
------------- ----------
------------- ----------
Net income (loss) per share (notes 2 and 4) $ 5.31 (.02)
------------- ----------
------------- ----------
Dividends $ - -
------------- ----------
------------- ----------
Average number of shares outstanding
(notes 2 and 4) 4,884,400 15,849,920
------------- ----------
------------- ----------
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
Common stock:
Balance at beginning and end of period (note 2) $ 100,000
-------------
Additional paid-in capital (note 2):
Balance at beginning of period 7,079,000
Earned stock compensation 1,085,000
-------------
Balance at end of period 8,164,000
-------------
Unrealized gain on marketable equity securities available
for sale, net of income taxes
Balance at beginning of period 21,023,000
Unrealized gain, net of income taxes of $183,000 320,000
Realized gain from sale of securities, net of income taxes
of $17,274,000 (21,343,000)
-------------
Balance at end of period -
-------------
Retained earnings:
Balance at beginning of period 52,500,000
Net income 25,959,000
-------------
Balance at end of period 78,459,000
-------------
Treasury stock:
Balance at beginning and end of period (117,427,000)
-------------
Total stockholders' deficit $ (30,704,000)
-------------
-------------
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
------ ------
Operating activities:
Net income $ 25,959,000 (324,000)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of properties 9,447,000 9,937,000
Amortization of deferred costs 775,000 771,000
Deferred income taxes 15,600,000 -
Equity in earnings of unconsolidated affiliates (314,000) (261,000)
Employee Stock Ownership Trust contribution - 1,787,000
Earned stock compensation 1,085,000 -
Gains on sales of investments and other assets (99,000) (4,511,000)
(Gains) losses on sales of marketable equity
securities (32,980,000) (171,000)
Changes in:
Land and improvement inventories 2,760,000 7,299,000
Accounts receivable 3,193,000 1,607,000
Minority interest in consolidated partnerships (73,000) 202,000
Accounts payable and tenants' deposits (159,000) 5,254,000
Accrued expenses and other liabilities 1,821,000 (405,000)
Deferred gains on the sale of property - 22,000
Other, net (383,000) (5,395,000)
------------ ----------
Net cash provided by operating activities 26,632,000 15,812,000
------------ ----------
Investing activities:
Net (increase) decrease in temporary investments (32,687,000)(13,082,000)
Payments on notes receivable 6,630,000 4,622,000
Issuance of notes receivable (2,919,000) (4,142,000)
Additions to revenue-producing properties (5,691,000) (4,883,000)
Proceeds from sales of capital assets 413,000 3,698,000
Return of capital from unconsolidated affiliates 446,000 420,000
Proceeds from sales of marketable equity securities 38,617,000 799,000
Other, net (12,000) -
------------ ----------
Net cash provided (used) by investing
activities $ 4,797,000 (12,568,000)
------------ -----------
(Continued)
F-15
<PAGE>
2
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
1996 1995
---- ----
Financing activities:
Payments on mortgage indebtedness $ (19,849,000) (4,124,000)
Issuance of mortgage indebtedness 6,285,000 -
Issuance of notes to banks and others - 11,186,000
Payments on notes to banks and others (3,658,000) (13,878,000)
Dividends paid - (1,180,000)
Capital contributions from minority partners - 126,000
------------ -----------
Net cash used in financing activities (17,222,000) (7,870,000)
------------ -----------
Net increase (decrease) in cash and cash
equivalents 14,207,000 (4,626,000)
Cash and cash equivalents, beginning of period 7,209,000 14,186,000
------------ -----------
Cash and cash equivalents, end of period $ 21,416,000 9,560,000
------------ -----------
------------ -----------
See accompanying notes to consolidated financial statements.
<PAGE>
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(1) INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of J.C. Nichols Company and
subsidiaries (the Company) have been prepared in accordance with the
instructions to interim financial statements. To the extent that
information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or
consistent with the audited consolidated financial statements, such
information and footnotes have not been duplicated herein. The
December 31, 1995 consolidated balance sheet has been derived from
the audited consolidated financial statements as of that date. In
the opinion of management, all adjustments, including normal
recurring accruals, considered necessary for a fair presentation of
financial statements have been reflected herein. The results of the
interim period ended September 30, 1996 are not necessarily
indicative of the results expected for the year ended December 31,
1996.
(2) STOCK SPLIT
On May 29, 1996, the Company approved an increase from 225,000 to
10,000,000 in the number of shares of common stock authorized for
issuance by the Company and to decrease the par value per share of
common stock from $20.00 to $.01. Additionally, the Company approved
an 80-for-1 stock split of the Company's common stock for all issued
and outstanding shares not then held in the Company's treasury.
Accordingly, the common stock par value decreased from $4,500,000 to
$100,000 with an offsetting increase in additional paid-in capital
from $2,679,000 to $7,079,000. All periods presented have been
restated to reflect the effect of the Company's stock split.
(3) EARNED STOCK COMPENSATION
The Company has granted to an executive officer a stock option to purchase
64,000 shares at a price of $.0125 per share, which option vested 50%
on January 1, 1996 and the remaining 50% will vest on January 1,
1997. The Company recorded compensation expense and additional paid
in capital relating to this stock option during the nine months ended
September 30, 1996 of approximately $1,085,000. Another option has
been granted to this executive officer to purchase 160,000 shares of
common stock of the Company at a price of $19.375 per share, which
option vests at a rate of 10% on December 31, 1996, 15% on
December 31, 1997 and, 25% annually on December 31 for the years
ended 1998, 1999 and 2000. The fair market value of the Company
Stock was $19.375 per share at the date these options were granted.
(4) NET INCOME PER SHARE
Net income per share has been computed based on the average number of
common and common equivalent shares outstanding during the year.
All periods presented reflect retroactive adjustment for the
stock split approved by the Company on May 29, 1996 (note 2).
(5) MARKETABLE EQUITY SECURITIES
During the nine months ended September 30, 1996, the Company liquidated
its investment in marketable equity securities for $38,617,000,
realizing a gain, net of taxes, of $21,343,000.
F-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
J.C. NICHOLS COMPANY
By: /s/ BARRETT BRADY
--------------------------
Barrett Brady
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE POSITION DATE
--------- -------- ----
/s/ WILLIAM K. HOSKINS* Chairman of the Board November 20, 1996
- ------------------------ and Director
William K. Hoskins
/s/ BARRETT BRADY President, Chief Executive November 20, 1996
- ------------------------ Officer and Director
Barrett Brady
/s/ KAY N. CALLISON* Director November 20, 1996
- ------------------------
Kay N. Callison
/s/ MARK C. DEMETREE* Director November 20, 1996
- ------------------------
Mark C. Demetree
/s/ JOHN A. OVEL* Director November 20, 1996
- ------------------------
John A. Ovel
/s/ JAMES W. QUINN* Director November 20, 1996
- ------------------------
James W. Quinn
/s/ CLARENCE L. ROEDER* Director November 20, 1996
- ------------------------
Clarence L. Roeder
/s/ JOHN SIMON* Director November 20, 1996
- ------------------------
John Simon
/s/ THOMAS J. TURNER, III* Director November 20, 1996
- ------------------------
Thomas J. Turner, III
/s/ MARK A. PETERSON* Vice President,
- ------------------------ Chief Financial November 20, 1996
Mark A. Peterson Officer and
Treasurer (Principal
Accounting Officer)
* Signed pursuant to Power of Attorney provided on signature page of
registrant's Registration Statement on Form 10.
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
*3.1 The Articles of Incorporation of the Company
*3.2 The Bylaws of the Company
*4.1 The Articles of Incorporation of the Company
(Included in Exhibit 3.1)
*4.2 The Bylaws of the Company (Included in Exhibit 3.2)
*10.1(a) Amendment to and Restatement of J.C. Nichols Company
Employee Stock Ownership Plan
*10.1(b) First Amendment to the Amended and Restated
J.C. Nichols Company Employee Stock
Ownership Plan
*10.1(c) Third Amendment to the Amended and Restated
J.C. Nichols Company Employee Stock
Ownership Plan
*10.2(a) Amendment to and Restatement of J.C. Nichols
Employee Stock Ownership Trust
*10.2(b) First Amendment to the Amended and Restated
J.C. Nichols Company Employee Stock
Ownership Trust
*10.3(a) Real Estate Contract of Sale (between J.C. Nichols
Company and Synergy Development Alliance, L.C.)
*10.3(b) Amendment to Real Estate Contract of Sale
*10.3(c) Second Amendment to Real Estate Contract of Sale
*10.3(d) April 25, 1995 Letter Agreement [constituting third
amendment to Real Estate Contract for Sale]
*10.3(e) May 11, 1995 Letter Agreement [constituting fourth
amendment to Real Estate Contract of Sale]
*10.4(a) Secured Promissory Note - Note A
*10.4(b) Secured Promissory Note - Note B
*10.4(c) Deed of Trust, Security Agreement and Assignment of
Rents
*10.4(d) Assignment of Leases and Rents
*10.5 Hotel Management Fee Participation Sale Agreement
*10.6 Restated Joint Venture Agreement
<PAGE>
Exhibit No.
- -----------
*10.7 J.C. Nichols Company 1996 Stock Option Plan,
Amended and Restated Effective May 30, 1996
*10.8 Form of Indemnification Agreement entered into between
the Company and each of the members of the Board
of Directors and certain Officers
*10.9 Form Employment Agreement between the Company and
Certain Officers
*10.10 Employment Agreement between the Company and
Mr. Brady, President and Chief Executive Officer
of the Company
*10.11 Settlement Agreement [Filed separately with the
Securities and Exchange Commission, Confidential
Treatment of Entire Agreement Sought]
*16.1 Letter re: Change in Certifying Accountant
*21.1 List of Subsidiaries and Affiliates of the Company
*24.1 Power of Attorney for the members of the Board of
Directors and certain Officers of the Company
(Included in Signature Pages to the Registration
Statement)
*27.1 Financial Data Schedule
*99.1 Settlement Agreement and Mutual Releases as
of June 30, 1995
* Previously provided with Registration Statement on Form 10 and amendments
thereto.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 SEP-30-1996
<CASH> 11,815 58,709
<SECURITIES> 38,114 0
<RECEIVABLES> 21,378 19,368
<ALLOWANCES> 1,594 1,321
<INVENTORY> 32,344 29,584
<CURRENT-ASSETS> 0 0
<PP&E> 345,448 349,244
<DEPRECIATION> 149,261 157,273
<TOTAL-ASSETS> 328,695 321,996
<CURRENT-LIABILITIES> 0 0
<BONDS> 332,007 313,035
0 0
0 0
<COMMON> 100<F1> 100
<OTHER-SE> (36,825)<F1> (30,804)
<TOTAL-LIABILITY-AND-EQUITY> 328,695 321,996
<SALES> 6,047 5,392
<TOTAL-REVENUES> 99,305 108,215
<CGS> 3,944 4,423
<TOTAL-COSTS> 115,803 66,656
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 1,901 0
<INTEREST-EXPENSE> 27,696 17,572
<INCOME-PRETAX> (16,498) 41,559
<INCOME-TAX> (5,746) 15,600
<INCOME-CONTINUING> (10,752) 25,959
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,752) 25,959
<EPS-PRIMARY> 0.74<F1> 5.31
<EPS-DILUTED> 0.74<F1> 5.31
<FN>
<F1>Item has been adjusted for an 80:1 stock split effective May 29, 1996
</FN>
</TABLE>
