<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: Commission File Number:
SEPTEMBER 30, 1996 1-12244
EXCEL REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 33-0160389
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
16955 VIA DEL CAMPO, SUITE 110 SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 485-9400
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
(2) Yes X No
Indicated the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period cover by this report.
Class Outstanding at November 4, 1996
- ---------------------------- -------------------------------
Common stock, $.01 par value 15,023,564
<PAGE> 2
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
INDEX
FORM 10-Q
----------
PAGE
----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets
September 30, 1996 (Unaudited)
December 31, 1995 ..................................... 3
Consolidated Statements of Income
Three Months Ended September 30, 1996 (Unaudited)
Three Months Ended September 30, 1995 (Unaudited)
Nine Months Ended September 30, 1996 (Unaudited)
Nine Months Ended September 30, 1995 (Unaudited)....... 4
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended September 30, 1996 (Unaudited)
Nine Months Ended September 30, 1995 (Unaudited)....... 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 (Unaudited)
Nine Months Ended September 30, 1995 (Unaudited)....... 6
Notes to Consolidated Financial Statements (Unaudited).... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 16
PART II. OTHER INFORMATION ....................................... 22
2
<PAGE> 3
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
----------
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
------------- ------------
<S> <C> <C>
ASSETS
Real estate:
Land $ 137,567 $ 122,394
Buildings 277,930 251,012
Accumulated depreciation (20,229) (14,909)
Real estate held for sale 14,094 13,519
--------- ---------
Net real estate 409,362 372,016
Cash 5,379 9,812
Escrow and other cash deposits 904 14,890
Accounts receivable, less allowance for bad debts of
$1,194 and $726 in 1996 and 1995, respectively 3,242 2,156
Notes receivable from affiliates 29,842 18,561
Notes receivable - other 17,572 4,289
Loan acquisition costs 1,941 2,662
Other assets 5,389 3,921
--------- ---------
$ 473,631 $ 428,307
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable $ 143,661 $ 123,813
Notes payable 78,267 86,984
Accounts payable and accrued liabilities 5,017 4,806
Deferred rental income 2,379 2,760
Other liabilities 1,461 1,266
--------- ---------
Total liabilities 230,785 219,629
--------- ---------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized -- --
Common stock, $.01 par value, 100,000,000 shares authorized,
15,023,564 and 13,171,353 shares issued and outstanding
in 1996 and 1995, respectively 150 132
Additional paid-in capital 254,490 218,531
Accumulated distributions in excess of net income (11,794) (9,985)
--------- ---------
Total stockholders' equity 242,846 208,678
--------- ---------
$ 473,631 $ 428,307
========= =========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
3
<PAGE> 4
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Base rent $ 12,487 $ 12,369 $ 36,025 $ 37,120
Percentage rent 122 147 268 239
Expense reimbursements 990 1,005 3,273 2,569
------- ------- ------ ------
Total revenue 13,599 13,521 39,566 39,928
------ ------ ------- ------
Operating expenses:
Property taxes 669 832 2,031 2,083
Repairs and maintenance 390 494 1,435 1,286
Bad debts 299 118 659 281
Other property expenses 534 719 1,361 1,715
Master lease - 948 351 3,834
General and administrative expenses 608 428 2,127 1,470
Depreciation and amortization 1,894 1,764 5,552 5,103
------ ------ ------ ------
Total operating expenses 4,394 5,303 13,516 15,772
------ ------ ------- -------
Operating income 9,205 8,218 26,050 24,156
Other income (expense):
Interest expense (4,886) (4,604) (14,911) (14,038)
Interest and other income 2,307 1,838 6,537 3,075
------ -------- -------- ------
Income before real estate sales 6,626 5,452 17,676 13,193
Gain (loss) on sale of real estate 273 82 (825) (49)
------ -------- -------- ---------
Net income $ 6,899 $ 5,534 $ 16,851 $ 13,144
====== ====== ======= =======
Net income per common share $0.46 $0.43 $1.21 $1.12
==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of the
financial statements.
4
<PAGE> 5
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
(IN THOUSANDS, EXCEPT NUMBER OF SHARE AMOUNTS)
----------
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL DISTRIBUTIONS TOTAL
COMMON STOCK PAID-IN IN EXCESS OF STOCKHOLDERS'
NUMBER AMOUNT CAPITAL NET INCOME EQUITY
------ ------ ------- ---------- ------
<S> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1996:
Balance at January 1, 1996 13,171,353 $ 132 $ 218,531 $ (9,985) $ 208,678
Issuance of new shares of
common stock 1,852,211 18 38,006 -- 38,024
Selling expenses -- -- (2,047) -- (2,047)
Net income -- -- -- 16,851 16,851
Distributions declared -- -- -- (18,660) (18,660)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1996 15,023,564 $ 150 $ 254,490 $ (11,794) $ 242,846
=========== =========== =========== =========== ===========
NINE MONTHS ENDED SEPTEMBER 30, 1995:
Balance at January 1, 1995 10,883,570 $ 109 $ 175,702 $ (11,913) $ 163,898
Issuance of new shares of
common stock 2,231,322 22 44,603 -- 44,625
Selling expenses -- -- (2,623) -- (2,623)
Net income -- -- -- 13,144 13,144
Distributions declared -- -- -- (10,427) (10,427)
----------- ----------- -----------
Balance at September 30, 1995 13,114,892 $ 131 $ 217,682 $ (9,196) $ 208,617
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
5
<PAGE> 6
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 16,851 $ 13,144
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 5,549 5,101
Amortized loan costs, leasing commissions and other 918 2,233
Loss on sale of real estate 825 49
Provision for bad debts 659 230
Changes in operating assets and liabilities:
Increase in assets:
Accounts receivable (1,745) (1,152)
Other assets (2,422) (1,249)
Increase (decrease) in liabilities:
Accounts payable (311) 798
Other liabilities (277) 2,749
---------- --------
Net cash provided by operating activities 20,047 21,903
--------- -------
Cash flows from investing activities:
Real estate acquisitions and building improvements (19,039) (21,387)
Advances for notes receivable (26,323) (29,409)
Principal payments on notes receivable 1,759 14,206
Escrow deposits paid (4,445) (6,736)
Escrow deposits collected 18,431 4,725
Proceeds from real estate sales 2,475 9,672
Other 753 (315)
--------- ---------
Net cash used in investing activities ( 26,389) ( 29,244)
-------- --------
Cash flows from financing activities:
Issuance of common stock 36,978 43,707
Selling and offering costs paid (2,047) (2,623)
Distributions paid (18,660) (15,112)
Proceeds from notes payable 26,833 21,409
Principal payments of mortgages and notes payable (41,102) (39,027)
Loan costs refunded 125 -
Loan costs paid (218) (749)
--------- ---------
Net cash provided by financing activities 1,909 7,605
-------- -------
Net increase (decrease) in cash (4,433) 264
Cash at January 1 9,812 4,131
--------- ---------
Cash at September 30 $ 5,379 $ 4,395
======== =========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
6
<PAGE> 7
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements reflect all adjustments of a recurring nature
which are, in the opinion of management, necessary for a fair presentation
of the financial statements. No adjustments were necessary which were not
of a normal recurring nature. Certain reclassifications have been made to
the consolidated financial statements for the periods ended September 30,
1995 in order to conform with the current period presentation. These
financial statements should be read in conjunction with the consolidated
financial statements and accompanying footnotes included in the Company's
December 31, 1995 Annual Report on Form 10-K, as amended.
ORGANIZATION
Excel Realty Trust, Inc. (the "Company") was formed in 1985 and is a
Maryland corporation. The Company is in the business of purchasing and
operating commercial real estate. The Company is operated as a
self-administered, self-managed real estate investment trust (REIT).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, Excel Mortgage Funding Corporation ("EMFC"),
Excel Credit Corporation ("ECC"), Excel Realty Trust - NC, Excel Realty
Trust - TX, Excel Realty Trust - NE, Inc., Excel Realty Trust - ST, Inc.,
and Excel Realty - PA, Inc., and its interest in 50% or more owned
partnerships. All significant intercompany accounts and transactions have
been eliminated. EMFC and ECC were dissolved in 1995.
The equity method of accounting is used for investments in partnerships
which the Company owns less than 50%, but is able to exercise significant
influence over the partnership's operations. The Company also uses the
equity method to account for its investment in ERT Development Corporation
("EDV") (see Note 5). The investment was recorded initially at cost and
subsequently adjusted for net income (loss) of EDV, and contributions paid
and distributions received. Previous to 1996, the Company accounted for EDV
on the cost method but adopted the equity method in 1996 pursuant to the
Financial Accounting Standards Board ("FASB") Emerging Issues Task Force
95-6. There was no significant effect from the change of accounting method
and thus, 1995 financial statements have not been restated.
7
<PAGE> 8
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
REAL ESTATE
Land, buildings and building improvements, and real estate held for sale
are recorded at cost. Depreciation is computed using the straight-line
method over estimated useful lives of 40 years for buildings and 2 to 40
years for building improvements. Expenditures for maintenance and repairs
are charged to expense as incurred and significant renovations are
capitalized. The Company assesses whether there has been a permanent
impairment in the value of its real estate by considering factors such as
expected future operating income, trends and prospects, as well as the
effects of demand, competition and other economic factors. Such factors
include a lessee's ability to pay rent under the terms of the lease. If a
property is leased at a significantly lower rent, the Company may recognize
a permanent impairment loss if the value of the income stream is not
considered sufficient to recover its cost. Such a loss would be determined
as the difference between the carrying value and the fair value of the
property.
LEASE TERMINATION FEES
Revenue recognition of fees received for lease terminations are deferred
and amortized using the straight-line method over the estimated time to
re-lease or sell the related property.
DEFERRED LEASING AND LOAN ACQUISITION COSTS
Costs incurred in obtaining tenant leases and long-term financing are
amortized to leasing commission expense and interest expense, respectively,
on the straight-line method over the terms of the related leases or debt
agreements.
REVENUE RECOGNITION
Rental revenue is recognized on the straight-line basis, which averages
annual minimum rents over the terms of the leases. Certain of the leases
provide for additional rental revenue by way of percentage rents to be paid
based upon the level of sales achieved by the lessee. These percentage
rents are recorded on the accrual basis. Revenue is also recognized for
tenant reimbursement of common area maintenance and other operating
expenses.
INCOME TAXES
The Company has elected to be treated as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended. Under these
provisions, the Company and its subsidiaries will not be subject to federal
income tax if 95% of its real estate investment trust taxable income
(before dividends paid deduction) is distributed to shareholders and
certain gross income, asset diversification, share ownership and disclosure
requirements are met. Accordingly, no provision for federal income taxes is
included in the accompanying consolidated financial statements.
8
<PAGE> 9
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NET INCOME PER COMMON SHARE
Net income per common share is based upon the weighted average number of
common shares and common share equivalents outstanding during each period.
Common share equivalents included in the computation represent shares
issuable upon assumed exercise of common stock options and warrants which
would have a dilutive effect. The weighted average shares outstanding for
the nine months ended September 30, 1996 and 1995 were 13,923,783 and
11,684,018, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
2. REGISTRATION STATEMENT:
In May 1995, the Company filed with the Securities and Exchange Commission
a $250,000,000 shelf registration statement. This registration statement
was filed for the purpose of issuing debt securities, preferred stock,
depositary shares, common stock or warrants for general corporate purposes.
In June 1996, the Company issued from the shelf, 1,725,000 shares of common
stock in a publicly underwritten offering at a price of $20.625 per share.
Net proceeds of approximately $33,819,000 were received in July and were
used primarily to pay down notes payable. In May, 1995, the Company issued
from the shelf 2,140,000 shares of common stock at a price of $20.125 per
share. Net proceeds of approximately $40,500,000 from this offering were
used to pay off debt, purchase properties, and to make loans to facilitate
the development of certain properties.
3. REAL ESTATE TRANSACTIONS:
In 1996, the Company acquired three shopping centers in North Carolina
remaining under the option agreements described below, and two shopping
centers in Georgia. The total cost of the five properties was approximately
$40,917,000 of which the Company assumed $25,417,000 in mortgage debt. Also
in 1996, the Company purchased two out-parcel pads for approximately
$945,000. In the nine months ended September 30, 1995, the Company acquired
seven shopping centers in North Carolina under the option agreements. The
total cost of these five properties was approximately $37,977,000 of which
the Company assumed $17,800,000 in debt.
9
<PAGE> 10
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
3. REAL ESTATE TRANSACTIONS, CONTINUED:
In 1995, the Company entered into master lease and option agreements to
purchase certain shopping centers in North Carolina. The master leases
required the payment equal to eight percent of the lessor/sellers equity in
the properties and gave the Company all management and operating
responsibilities for the shopping centers. Under the master leases, the
Company received all cash flow, if any, in excess of the master lease
expense. The master lease expense included master lease and interest
payments from debt service. All of the rental revenue and related operating
expenses from the master leased properties were consolidated in the
Company's consolidated financial statements. The option agreements gave the
Company the option to purchase the properties. Upon purchase of the
remaining North Carolina properties in 1996, the master lease and option
agreements were terminated.
The Company sold two single tenant properties in 1996 for a total net sales
price of $1,985,000 and a land parcel for $490,000. The cost of one of the
single tenant properties sold was written down by $1,246,000 to its
estimated sales price in June 1996 in accordance with FASB Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". This property was sold in August 1996 and the
amount written-down is shown as part of the net gain (loss) on real estate
sales in the Consolidated Statement of Income. During the nine months ended
September 30, 1995, the Company sold six single tenant properties for a
total net sales price of $9,672,000. The net loss on the sales was $49,000.
4. NOTES RECEIVABLE (IN THOUSANDS):
The Company had the following notes receivable at September 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Notes from affiliates, interest at 12-14% per annum,
unsecured, due upon demand. $ 29,842 $ 18,561
Note from a development company, interest at 25% per annum, 9,539 -
payable in Canadian dollars.
Notes from development companies, interest from 10% to 12%
per annum. Maturity dates vary from the completion of
certain properties. 7,273 3,500
Other 760 789
-------- -------
Total notes receivable $ 47,414 $ 22,850
======= =======
</TABLE>
10
<PAGE> 11
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
4. NOTES RECEIVABLE (IN THOUSANDS), CONTINUED:
Notes from affiliates are due from EDV and Excel Realty Partners, L.P.
("ERP"), a Delaware limited partnership (see Note 14). Interest and
principal payments from EDV are received upon the completion of certain
development projects. Interest receivable from EDV was $1,380 at September
30, 1996. Interest and principal payments from ERP are received on a
monthly basis or as excess cash is available. Interest receivable from ERP
was $234 at September 30, 1996.
In 1996, the Company made a loan in the amount of $13,000 Canadian dollars
($9,539 in U.S. dollars at September 30, 1996) to a Canadian company which
used the proceeds to acquire a 50% joint venture interest in a commercial
building known as "Atrium on Bay" in Toronto, Canada. The loan is secured
by the Canadian company's interest in the "Atrium on Bay." The Canadian
loan bears interest at 25% per annum and matures in seven years. The
Company has reserved $360 against the interest receivable and the 1996
interest income pending future leasing activity. The net interest
receivable at September 30, 1996 is $579.
5. INVESTMENTS:
In April 1995, ERP was formed to own and manage certain real estate
properties. The Company is a 1% partner and the sole general partner of
ERP. In May 1995, ERP entered into an agreement for certain unaffiliated
entities to contribute to the partnership shopping centers in the
southeastern United States. Through September 30, 1996, ten properties with
a net basis of approximately $59,000,000 at September 30, 1996, have been
contributed to ERP in exchange for limited partnership units and cash. The
Company is entitled to receive 99% of all earnings, if any, after the
limited partners receive their distributions. Annual distributions
approximate $530,000 based on limited partner units held at September 30,
1996. The partnership had net income of $499,000 and $0 for the nine months
ended September 30, 1996 and 1995, respectively. The Company's investment
in the partnership at September 30, 1996 and December 31, 1995 was $911,000
and $139,000, respectively, and is included in other assets on the
Consolidated Balance Sheets.
In April 1995, ERT Development Corp. ("EDV"), a Delaware corporation was
organized. The Company owns 100% of the outstanding preferred shares of
EDV. The preferred shares receive 95% of the dividends, if any from EDV.
EDV was formed to acquire, develop, hold and sell real estate in the
short-term for capital gains and/or receive fee income (see Note 14).
11
<PAGE> 12
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
6. MORTGAGES PAYABLE (IN THOUSANDS):
The Company had the following mortgages payable at September 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
Mortgage notes at 6.73% to 10%, payable in installments through
2018 (monthly payments at September 30, 1996 of $1,326):
<S> <C> <C>
Insurance companies $ 70,001 $ 67,356
Banks 41,829 23,603
Private bonds 28,884 29,907
Other 2,947 2,947
-------- ---------
Total mortgages payable $ 143,661 $ 123,813
======== ========
</TABLE>
The principal payments required to be made on mortgages payable are as
follows:
<TABLE>
<CAPTION>
YEAR
<S> <C> <C>
1996, remaining three months $ 1,714
1997 4,065
1998 6,668
1999 27,174
2000 18,132
Thereafter 85,908
-------
$ 143,661
=========
</TABLE>
Mortgages of $58,742 are fully amortizing with no balloon payments with the
final monthly payments coming between the years 2004 and 2018. In October
1996, the Company agreed to convert $2,947 of mortgage debt into common
stock.
12
<PAGE> 13
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
7. NOTES PAYABLE (IN THOUSANDS):
The Company had the following notes payable at September 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
Unsecured credit agreement of $150,000, interest at
LIBOR + 1.75% (7.19% at September 30, 1996). $ 75,000 $ 82,800
Line of credit payable to a financial institution,
interest at the lender's base rate plus 1.25% (8.92% at
September 30, 1996). 3,223 3,184
Revolving line of credit of $1,000, interest at 9.5%. - 1,000
Other 44 -
--------- --------
Total notes payable $ 78,267 $ 86,984
======= =======
</TABLE>
In December 1995, the Company received a two-year revolving credit facility
of up to $150,000 in unsecured advances through December 1997, from a
consortium of six banks. The actual amount available to the Company is
dependent on certain covenants such as the value of unencumbered assets and
the ratio of earnings before interest, depreciation, and amortization to
fixed charges. The principal outstanding is due in December 1997. The
Company also has a $4,000 line of credit that is collateralized by certain
notes receivable, and an unsecured $1,000 revolving bank line.
In 1996, the Company obtained a term loan of $10,000 and used the proceeds
to make a loan to a Canadian company which used the proceeds to acquire a
50% joint venture interest in a commercial building (see Note 4). The loan
was repaid in July 1996.
In 1996, the Company sold certain interest rate protection agreements
related to certain variable rate mortgage debt that was repaid in December
1995. Based upon market quotes obtained, the carrying value of the interest
rate protection agreements was written down by $790 at December 31, 1995 to
the estimated fair market value of $803, and charged to interest expense.
The Company then sold these interest rate protection agreements in March
1996 for $1,218 and recognized a gain of $415. The Company also purchased
for $50, an additional interest rate protection agreement in March 1996
which limits $50,000 of the outstanding balance on the unsecured credit
agreement to 10%.
13
<PAGE> 14
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
8. COMMITMENTS AND CONTINGENCIES:
As part of an agreement with unaffiliated parties to contribute certain
properties to ERP for limited partnership units, certain of the limited
partners are guaranteed distributions as defined by the contribution
agreement. The Company is obligated to advance loans to ERP to pay the
distributions in the event ERP is unable to make these payments (see Note
5). Also, at September 30, 1996, ERP mortgage debt of $2,885,000 was
guaranteed by the Company.
The Company has committed to loan $14,000,000 to a developer related to a
joint development project in Florida. As of September 30, 1996, $3,097,000
had been advanced under this commitment.
9. DISTRIBUTIONS
In April 1995, the Company adopted a policy of declaring distributions to
stockholders of record on the first day of the succeeding quarter, instead
of the last day of the current quarter. The payment date of 15 days
following each quarter remained unchanged. As such, in 1995 a distribution
of $0.43 was declared on March 31 and paid on April 15, and the normal
distribution of June 30 was instead declared on July 1 and paid on July 15,
1995. In 1996, distributions of $0.445, $0.445, and $0.46 per share were
declared on January 2, April 1, and July 1, and paid on January 15, April
15, and July 15, respectively. For the nine months ended September 30, 1996
and 1995, approximately 10% and 19% of the distributions received by
shareholders, respectively, were considered to be a return of capital for
tax purposes.
10. OPTIONS & WARRANTS:
The Company has adopted the 1993 Stock Option Plan (the "1993 Plan") for
executive officers and other employees of the Company, and the Directors
1994 Stock Option Plan (the "1994 Stock Plan") for directors options. In
the nine months ended September 30, 1996, the Company granted 213,000
options at $20.375 and 21,000 options at $18.25 under the 1993 Plan and
1994 Plan, respectively. In the nine months ended June 1995, the Company
granted 131,250 options at $19.25 and 14,000 options at $16.375 under the
1993 Plan and 1994 Plan, respectively.
11. STATEMENTS OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE:
The amounts paid for interest during the nine months ended September 30,
1996 and 1995 were $13,991,000 and $12,301,000, respectively. State income
taxes of $246,000 and $0 were paid in 1996 and 1995, respectively. For the
nine months ended September 30, 1996, the Company acquired real estate and
interests in partnerships of $26,380,000 without the use of cash. The
Company assumed $25,490,000 of mortgage debt and other liabilities and
issued $890,000 of common stock. In 1995, the Company acquired $18,706,000
in real estate without the use of cash by assuming $17,788,000 in mortgages
payable and $918,000 in common stock.
14
<PAGE> 15
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
12. MINIMUM FUTURE RENTALS (IN THOUSANDS):
The Company leases its shopping centers and single-tenant buildings to
tenants under noncancelable operating leases generally requiring the tenant
to pay a minimum rent adjusted by either (i) fixed increases, (ii) a
percentage of gross sales, or (iii) a CPI index. The leases are generally
either (i) triple-net, requiring the tenant to pay all expenses of
operating the property such as insurance, property taxes, repairs and
utilities, or (ii) require the tenant to reimburse the Company for the
tenant's share of real estate taxes and other common area maintenance
expenses.
Minimum future rental revenue for the commercial real estate currently
owned at September 30, 1996 and subject to noncancelable operating leases
is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR
1996, remaining three months $ 10,984
1997 42,549
1998 40,098
1999 37,102
2000 35,004
Thereafter 300,867
</TABLE>
13. LEASE TERMINATION FEES
The Company had $1,247,000 and $2,446,000 in deferred lease termination
fees at September 30, 1996 and December 31, 1995, respectively, which are
included as part of deferred rental income on the Consolidated Balance
Sheets. For the nine months ended September 30, 1996 and 1995, the Company
recognized $2,499,000 and $1,350,000 in revenue from lease termination
fees, respectively, which are included in base rents on the Consolidated
Statements of Income. For the first three quarters of 1996 and 1995, the
Company received $1,300,000 and $3,533,000 in lease termination fees,
respectively.
14. RELATED PARTY TRANSACTIONS:
Notes receivable at September 30, 1996 and December 31, 1995 included
$15,108,000 and $12,611,000 from EDV and $14,734,000 and $5,950,000 from
ERP, respectively. Total interest income recognized in 1996 from EDV and
ERP amounted to $1,533,000 and $897,000, respectively. For the first nine
months in 1995, $1,109,000 and $0 was recognized as interest income from
EDV and ERP, respectively.
In 1996 and 1995, the Company recognized as income $641,000 and $344,000 in
fees and other income from EDV, respectively. The Company also recognized
$753,000 and $0 in partnership income from ERP in the nine months ended
September 30, 1996 and 1995, respectively.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
NATURE OF BUSINESS
Excel Realty Trust, Inc. (the "Company") is a self-administered, self-managed
equity real estate investment trust ("REIT") which owns and manages commercial
retail income-producing properties primarily leased on a long-term basis. The
terms of such leases typically provide that the tenant is responsible for all
costs and expenses associated with the ongoing maintenance of the property,
including but not limited to property taxes, insurance and common area
maintenance. The majority of the single tenant property leases also require that
tenants pay for roof and structure repairs and maintenance. The properties are
generally either (i) neighborhood or community shopping centers, anchored by a
major retail discount department store and/or a major grocery chain store, or
(ii) single tenant properties leased to a major retail tenant.
The Company has operated and intends to operate in a manner to qualify as a REIT
under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended.
As a REIT, the Company is not subject to federal income tax with respect to that
portion of its income which meets certain criteria and is distributed annually
to the stockholders.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto.
Comparison of the three months ended September 30, 1996 to the three months
ended September 30, 1995.
Total revenue increased $78,000 or 1%, to $13,599,000 for the three months ended
September 30, 1996 from $13,521,000 for the three months ended September 30,
1995. There were four new shopping centers and two out-parcels that were
acquired after September 30, 1995 which contributed $441,000 of additional
revenue in the three months ended September 30, 1996. Also, the Company
recognized revenue of $1,239,000 from lease termination fees in 1996 compared
with $672,000 in 1995. These increases in revenue were offset primarily from the
sale of an office building in December 1995 which accounted for $768,000 in
revenue for the third quarter of 1995. The proceeds of this building were
primarily used to purchase three shopping centers that were being master leased
in 1995. Under the master lease agreements, the Company recognized revenue and
expenses from the properties' owners. Accordingly, as rents were already being
recognized on the master leased properties, there was no increase in rents from
purchasing these properties. Also, the Company sold two single tenant buildings
which decreased rents $95,000 in the three months ended September 30, 1996.
Total operating expenses decreased $909,000 or 17%, to $4,394,000 in the third
quarter of 1996 from $5,303,000 in the third quarter of 1995. The decrease was
primarily related to a decrease in master lease expense of $948,000. In the
first nine months of 1995, there were eleven properties that were being master
leased for all or part of the period. In the first quarter of 1996, the final
three properties remaining under the master leases were purchased. General and
administrative expense increased by $180,000 from 1995. The Company has hired
additional personnel to manage the properties owned by its operating
partnership, Excel Realty Partners, L.P., to accommodate future growth, and to
perform certain property management functions that were previously being
rendered by third parties. Also, general and administrative expense included
$90,000 of expenses for accrued bonuses compared with $12,000 in 1995.
Depreciation and amortization increased $130,000 or 7% in 1996 from 1995,
primarily from the master leased properties that were purchased. The remaining
operating expenses included property taxes, repairs and maintenance, bad debts
and other property expenses which decreased a total of $271,000 or 12% in 1996
from 1995.
16
<PAGE> 17
This decrease primarily relates to the sale of an office building in December
1995 which accounted for more expenses than the new properties acquired.
Interest expense increased to $4,886,000 in 1996 from $4,604,000 in 1995, or 6%.
This increase related to the increase in the Company's debt. At September 30,
1996, the Company had mortgages and notes payable of $221,928,000 compared with
$201,342,000 at September 30, 1995, an increase of 10%. Interest expense did not
increase proportionally with the outstanding balance of debt at the end of each
period, primarily because approximately $195,000 of loan costs related to the
repayment of debt, were written off to interest expense in July 1995.
Interest and other income increased $469,000 or 26% from 1995, primarily related
to additional cash invested and loans made to Excel Realty Partners, L.P.
("ERP"), ERT Development Corporation ("EDV"), and other development companies.
The Company had $47,414,000 in notes receivable outstanding at September 30,
1996 compared to $22,850,000 outstanding at September 30, 1995. Also, the
Company recognized $357,000 in income from its equity interest in ERP compared
to $0 in 1995. The increase in interest and other income was offset in part from
the revenue recognized from EDV which decreased in the third quarter from
$343,000 in 1995 to $195,000 in 1996.
In the third quarter of 1996, the Company sold a land parcel for a $352,000
gain, and recognized a $79,000 loss related to the sale of a single tenant
property. The single tenant property was previously written down in the second
quarter by $1,246,000. In the third quarter of 1995, the Company sold one single
tenant property for a $82,000 gain.
Net income increased $1,365,000, or 25% to $6,899,000 for the three months ended
September 30, 1996 from $5,534,000 for the three months ended September 30,
1995, and increased to $0.46 per share in 1996 from $0.43 per share in 1995.
Comparison of the nine months ended September 30, 1996 to the nine months ended
September 30, 1995.
Total revenue decreased $362,000 or 1% to $39,566,000 for the nine months ended
September 30, 1996 from $39,928,000 for the nine months ended September 30,
1995. The decrease is primarily related to a sale of the office building in
December 1995 which accounted for $2,270,000 in revenue for the nine months
ended September 30, 1995. The decrease in rents from the office building was
partly offset by an increase in revenues from lease termination fees. For the
nine months ended September 30, 1996, the Company recognized $1,149,000 more in
lease termination fees than in 1995. Also, four new shopping centers and two
out-parcels that were acquired after September 30, 1995 contributed $932,000 of
revenue in the nine months ended September 30, 1996.
Total operating expenses decreased $2,256,000 or 14%, to $13,516,000 in the
first three quarters of 1996 from $15,772,000 in the first three quarters of
1995. The decrease was primarily related to a decrease in master lease expense
of $3,483,000 since the first quarter of 1996, the final three properties
remaining under master leases were purchased. General and administrative expense
increased by $657,000 from 1995 and was approximately 6% of base rents in 1996
compared to 4% of base rents in 1995. The increase is primarily related to an
increase in the Company's personnel to manage the properties owned by its
operating partnership, Excel Realty Partners, L.P., to accommodate future
growth, and to perform certain property management functions that were
previously being rendered by third parties. Additionally, the general and
administrative expense included $170,000 of expenses for accrued bonuses
compared with $36,000 in 1995. Depreciation and amortization increased $449,000
or 9% in 1996 from 1995, primarily from the master leased and other properties
that were purchased. The remaining operating expenses including property taxes,
repairs and maintenance, other property expenses, and bad debts, increased a
17
<PAGE> 18
total of $121,000 or 2%.
Interest expense increased to $14,911,000 in 1996 from $14,038,000, or 6%. This
increase related to the increase in the Company's debt. Interest expense did not
increase proportionally with the outstanding balance of debt at the end of each
period, due in part because $195,000 of loan costs related to the repayment of
debt, were written off to interest expense in July 1995.
Interest and other income increased $3,462,000 or 113% from 1995, primarily
related to additional cash invested and loans made to Excel Realty Partners,
L.P., ERT Development Corporation, and other development companies. Also, the
Company recognized $753,000 in partnership income in 1996 compared to $0 in
1995, and in the first quarter of 1996, the Company sold certain interest rate
protection agreements related to the REMIC debt for a gain of $415,000.
Net income increased $3,707,000, or 28% to $16,851,000, $1.21 per share, in the
nine months ended September 30, 1996 from $13,144,000, $1.12 per share for the
nine months ended September 30, 1995.
Other information.
The Company calculates funds from operations ("FFO") as net income before gains
or losses on real estate sales (net of gain or losses on sales of undepreciated
property), plus depreciation on real estate, amortization, amortized leasing
commission costs and loan costs written off. FFO does not represent cash flows
from operations as defined by generally accepted accounting principles, and may
not be comparable to other similarly titled measures of other REITs. The Company
believes however, that to facilitate a clear understanding of its operating
results, FFO should be examined in conjunction with its net income as reductions
for certain items are not meaningful in evaluating income-producing real estate,
which historically has not depreciated. The following information is included to
show the items included in the Company's FFO for the three months ended
September 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net income $ 6,899 $ 5,534
Depreciation:
Buildings 1,761 1,615
Tenant improvements 90 131
From equity investments 3 -
Amortization (1):
Organization costs 1 1
Leasing commissions 39 71
Loan costs written-off - 195
Loss on sale of buildings (273) (81)
Gain related to undepreciated real estate 352 -
-------- -------
Funds from operations (2) $ 8,872 $ 7,466
====== ======
Other Information:
Leasing commissions paid $ 63 $ 155
Tenant improvements paid 124 210
Building improvements paid (Parking lots, roofs, etc.) 62 33
</TABLE>
(1) Only amortization of organization costs is shown as amortization expense in
the Consolidated Statements of Income. Leasing commission amortization is
classified as other operating expenses in the Consolidated Statements of Income.
18
<PAGE> 19
(2) Beginning in 1996, the Company revised its definition of FFO to exclude the
amortization of loan costs and depreciation of furniture, equipment and vehicles
as add-back items. Under the previous definition, FFO was $7,797 for the three
months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations has been the principal source of capital to fund the
Company's on-going operations. The Company's issuance of common shares, use of
the Company's credit facilities, and long-term financing have been the principal
sources of capital used to fund its property acquisitions. In order to continue
to expand and develop its portfolio of properties, the Company may seek to
obtain funds through additional equity offerings or debt financing in a manner
consistent with its intention to operate with what it believes to be an
appropriate debt level with respect to prudent interest coverage ratios. The
Company anticipates that adequate cash from operations will be available to fund
its operating and administrative expenses, continuing debt service obligations
and the payment of distributions in both the short-term and long-term. In the
nine month period ended September 30, 1996, property acquisitions were primarily
funded through the use of existing cash deposits from previous property sales
and long-term mortgage financing. Investments in ERP and advances to ERP and EDV
were primarily funded through the use of the Company's credit facility.
In 1995, the Company obtained a two-year unsecured revolving credit facility for
up to $150,000,000 through 1997 from a consortium of six banks (the "Credit
Facility). The actual amount available to the Company is dependent on certain
covenants such as the value of unencumbered properties and the ratio of earnings
before interest, depreciation, and amortization to fixed charges. At September
30, 1996, approximately $34,400,000 was available under the Credit Facility.
Subsequent to September 30, 1996, $16,800,000 was borrowed on the Credit
Facility, primarily to make an advance to EDV. In December 1995, the Company
used proceeds from the Credit Facility to repay existing debt related to the
REMIC. The Credit Facility carries an interest rate of LIBOR plus 1.75% (7.19%
at September 30, 1996), while the REMIC carried interest rates of LIBOR plus
0.6% to 0.8%, plus a servicing fee of 0.1865%. Although the REMIC carried lower
interest rates than the Credit Facility, the Company believes that other capital
resources may become accessible at lower costs with the increase in the
Company's unsecured portfolio. The Company also has a $4,000,000 line of credit
and an unsecured $1,000,000 revolving bank line. Approximately $1,700,000 in
total is available under these two facilities at September 30, 1996.
In June 1996, the Company issued 1,725,000 shares of common stock in a publicly
underwritten offering at a price of $20.625 per share. Net proceeds of
approximately $33,819,000 were received in July and were used primarily to pay
down notes payable of which $22,600,000 was paid on the Company's Credit
Facility and $10,000,000 to repay a note.
During 1996, the Company has loaned ERP $8,784,000 and may advance additional
amounts in the future. Also, the Company is committed to make loans to ERP to
pay certain of the partner distributions in the event ERP is unable to. There
are a minimum of four remaining properties scheduled to be contributed to ERP in
1996. Should all four properties be contributed, ERP would assume approximately
$18,000,000 in debt and pay $8,000,000 in a combination of cash and partnership
units. It is anticipated that the cash requirements would be principally loaned
to ERP by the Company. There is no assurance that all or any of the four
properties will be contributed to ERP.
In 1996, the Company loaned $3,097,000 to a developer and is committed to loan
an additional $10,903,000 related to a joint development retail project in
Florida. It is anticipated that cash requirements for this commitment, as well
as cash needed for properties to be contributed to ERP, will be primarily
obtained from the Credit Facility, future equity offerings, or other bank
facilities.
19
<PAGE> 20
The Company has elected REIT status for federal income tax purposes and must
distribute at least 95% of its taxable income to its stockholders in order to
avoid federal income taxes. Although the Company receives most of its rental
revenue on a monthly basis, it intends to make quarterly distribution payments.
Amounts accumulated for distribution will be invested by the Company in
short-term marketable instruments including deposits at commercial banks, money
market accounts, certificates of deposit, U.S. government securities, commercial
paper or other liquid investments (including GNMA, FNMA, and FHLMC
mortgage-backed securities).
ECONOMIC CONDITIONS
The majority of the Company's leases contain provisions designed to mitigate the
adverse impact of inflation. Such provisions include clauses enabling the
Company to receive percentage rents which generally increase as prices rise,
and/or escalation clauses which are typically related to increases in the
consumer price index or similar inflation indices. In addition, the Company
believes that many of its existing lease rates are below current market levels
for comparable space and that upon renewal or re-rental such rates may be
increased to current market rates. This belief is based upon an analysis of
relevant market conditions, including a comparison of comparable market rental
rates, and upon the fact that many of such leases have been in place for a
number of years and may not contain escalation clauses sufficient to match the
increases in market rental rates over such time. Most of the Company's leases
require the tenant to pay its share of operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
In addition, the Company periodically evaluates its exposure to interest rate
fluctuations, and may enter into interest rate protection agreements which
mitigate, but do not eliminate, the effect of changes in interest rates on its
variable rate loans.
Many regions of the United States, including regions in which the Company owns
property, may experience an economic recession. Such recessions, or other
adverse changes in general or local economic conditions, could result in the
inability of some existing tenants of the Company to meet their lease
obligations and could otherwise adversely effect the Company's ability to
attract or retain tenants. The Company's shopping centers are typically anchored
by discount department stores, supermarkets and drug stores which usually offer
day-to-day necessities rather than high priced luxury items. These types of
tenants, in the experience of the Company generally continue to maintain their
volume of sales despite a slowdown in economic conditions.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-Q that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results of the Company to be materially different from historical results or
from any results expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors include, but are not limited to, the
following risks:
Economic Performance and Value of Centers Dependent on Many Factors. Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate can be affected by many factors, including
changes in the national, regional and local economic climates, local conditions
such as an oversupply of space or a reduction in demand for real estate in the
area, the attractiveness of the properties to tenants, competition from other
available space, the ability of the owner to provide adequate maintenance and
insurance and increased operating costs.
20
<PAGE> 21
Dependence on Rental Income from Real Property. Since substantially all of the
Company's income is derived from rental income from real property, the Company's
income and funds for distribution would be adversely affected if a significant
number of the Company's tenants were unable to meet their obligations to the
Company or if the Company were unable to lease a significant amount of space in
its properties on economically favorable lease terms. There can be no assurance
that any tenant whose lease expires in the future will renew such lease or that
the Company will be able to re-lease space on economically advantageous terms.
Illiquidity of Real Estate Investments. Equity real estate investments are
relatively illiquid and therefore tend to limit the ability of the Company to
vary its portfolio promptly in response to changes in economic or other
conditions. In addition, mortgage payments and, to the extent the properties are
not subject to triple net leases, certain significant expenditures such as real
estate taxes and maintenance costs, are generally not reduced when circumstances
cause a reduction in income from the investment, and should such events occur,
the Company's income and funds for distribution would be adversely affected. A
portion of the Company's properties are mortgaged to secure payment of
indebtedness, and if the Company were unable to meet its mortgage payments, a
loss could be sustained as a result of foreclosure on such properties by the
mortgagee.
Risk of Bankruptcy of Major Tenants. The bankruptcy or insolvency of a major
tenant or a number of smaller tenants may have an adverse impact on the
properties affected and on the income produced by such properties. Under
bankruptcy law, a tenant has the option of assuming (continuing) or rejecting
(terminating) any unexpired lease. If the tenant assumes its lease with the
Company, the tenant must cure all defaults under the lease and provide the
Company with adequate assurance of its future performance under the lease. If
the tenant rejects the lease, the Company's claim for breach of the lease would
(absent collateral securing the claim) be treated as a general unsecured claim.
The amount of the claim would be capped at the amount owed for unpaid
pre-petition lease payments unrelated to the rejection, plus the greater of one
years' lease payments or 15% of the remaining lease payments payable under the
lease (but not to exceed the amount of three years' lease payments).
Environmental Risks. Under various federal, state and local laws, ordinances and
regulations, the Company may be considered an owner or operator of real property
or may have arranged for the disposal or treatment of hazardous or toxic
substances and, therefore, may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property or
disposed of by it, as well as certain other potential costs which could relate
to hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such liability may be imposed whether or not the Company
knew of, or was responsible for, the presence of such hazardous or toxic
substances.
Reliance on Major Tenants. As of September 30, 1996, the Company's two largest
tenants were Wal-Mart Stores, Inc. and Kmart Corporation which accounted for
approximately 15% and 14%, respectively, of the Company's annualized base rental
income as of such date. The financial position of the Company and its ability to
make distributions may be adversely affected by financial difficulties
experienced by either of such tenants, or any other major tenant of the Company,
including a bankruptcy, insolvency or general downturn in business of any such
tenant, or in the event any such tenant does not renew its leases as they
expire.
Control by Directors and Executive Officers. Directors and executive officers of
the Company beneficially own approximately 8.3% of the Company's common stock.
Accordingly, such persons should continue to have substantial influence over the
Company and on the outcome of matters submitted to the Company's stockholders
for approval.
21
<PAGE> 22
PART II. OTHER INFORMATION
Items 1 through 4 have been omitted since no events occurred with respect to
these items.
Item 5. Other Information.
The Company purchased five shopping centers and tow outparcel pad, and sold two
single tenant properties and a land parcel in 1996. These transactions are
described in Note 2 to the financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K filed July 2, 1996, respecting the Underwriting
Agreement dated June 26, 1996 between Excel Realty Trust, Inc. and
Smith Barney Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 4, 1996
EXCEL REALTY TRUST, INC.
- ------------------------
(Registrant)
By:/s/ Gary B. Sabin
-------------------------------
Gary B. Sabin, President
By:/s/ David A. Lund
-------------------------------
David A. Lund, Principal Financial Officer
22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,379,000
<SECURITIES> 0
<RECEIVABLES> 4,436,000
<ALLOWANCES> (1,194,000)
<INVENTORY> 0
<CURRENT-ASSETS> 14,914,000
<PP&E> 429,591,000
<DEPRECIATION> (20,229,000)
<TOTAL-ASSETS> 473,631,000
<CURRENT-LIABILITIES> 5,017,000
<BONDS> 143,661,000
0
0
<COMMON> 254,640,000
<OTHER-SE> (11,794,000)
<TOTAL-LIABILITY-AND-EQUITY> 473,631,000
<SALES> 0
<TOTAL-REVENUES> 39,566,000
<CGS> 0
<TOTAL-COSTS> 13,516,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 659,000
<INTEREST-EXPENSE> 14,911,000
<INCOME-PRETAX> 16,851,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,851,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,851,000
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
</TABLE>
