<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO __________
Commission file number 1-12244
NEW PLAN EXCEL REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 33-0160389
(State or other Jurisdiction of (IRS Employer
Incorporation) Identification No.)
1120 Avenue of the Americas, New York, New York 10036
(Address of Principal Executive Office) (Zip Code)
212-869-3000
Registrant's Telephone Number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
The number of shares of common stock outstanding at April 27, 1999 was
89,265,827.
<PAGE> 2
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME and COMPREHENSIVE INCOME
For the Three Months Ended March 31, 1999 and April 30, 1998
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income and related revenues $ 104,323 $ 62,424
Interest, dividend and other income 6,843 1,057
--------- ---------
Total revenues 111,166 63,481
Expenses:
Operating costs 23,288 15,354
Real Estate and other taxes 9,506 5,874
Interest 18,947 9,754
Depreciation and amortization 15,639 7,921
Provision for doubtful accounts 1,406 968
General and administrative 2,254 719
--------- ---------
Total expenses 71,040 40,590
--------- ---------
Income before real estate sales and minority
interest 40,126 22,891
Gain on sale of real estate and securities -- 8
Minority interest in income of partnership (457) --
--------- ---------
Net income 39,669 22,899
Unrealized gain (loss) on securities reported (71) 5
--------- ---------
Comprehensive income $ 39,598 $ 22,904
========= =========
Basic earnings per share $ 0.38 $ 0.36
========= =========
Diluted earnings per share $ 0.38 $ 0.36
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 3
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
ASSETS
<S> <C> <C>
Real estate:
Land $ 549,000 $ 545,400
Building and improvements 2,299,559 2,280,069
Accumulated depreciation (173,446) (158,021)
----------- -----------
Net real estate 2,675,113 2,667,448
Cash and cash equivalents 34,838 13,951
Marketable securities 1,628 1,700
Receivables:
Trade, less allowance for bad debts of $12,770 and $11,636 at
March 31, 1999 and December 31, 1998, respectively 22,380 23,422
Other 22,673 16,621
Mortgage and notes receivable 153,835 150,123
Prepaid expenses and deferred charges 9,574 6,181
Other assets 15,680 15,100
----------- -----------
$ 2,935,721 $ 2,894,546
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable, including unamortized premium of $11,813 and
$12,345 at March 31, 1999 and December 31, 1998, respectively $ 385,723 $ 388,185
Notes payable, net of unamortized discount of $1,088 and
$1,141 at March 31, 1999 and December 31, 1998, respectively 488,912 489,235
Credit facilities 238,000 200,500
Capital leases 27,351 27,351
Other liabilities 50,273 45,909
Tenant security deposits 7,291 7,141
----------- -----------
Total liabilities 1,197,550 1,158,321
----------- -----------
Minority interest in partnership 40,217 40,651
----------- -----------
Commitments and contingencies --
Stockholders' equity:
Preferred stock, $.01 par value, 25,000 shares authorized: 4,600
shares designated as 8 1/2% Series A Cumulative Convertible
Preferred, 1,775 and 2,124 shares outstanding at March
31, 1999 and December 31, 1998, respectively; 6,300 depository
shares, each representing 1/10 of one share of 8 5/8% Series B
Cumulative Redeemable Preferred, 630 shares outstanding at
March 31, 1999 and December 31, 1998, respectively; 1,500
depositary shares, each representing 1/10 of one share of
Series D Cumulative Voting Step-Up Premium Rate Preferred,
150 shares outstanding at March 31, 1999 and December 31,
1998 26 29
Common stock, $.01 par value, 250,000 shares authorized; 88,947
and 88,384 shares issued and outstanding as of March 31, 1999
and December 31, 1998, respectively 889 884
Additional paid-in capital 1,740,465 1,735,207
Loans receivable for purchase of shares of
beneficial interest (2,022) (2,022)
Accumulated other comprehensive income 655 726
Accumulated distributions in excess of net income (42,059) (39,250)
----------- -----------
Total stockholders' equity 1,697,954 1,695,574
----------- -----------
$ 2,935,721 $ 2,894,546
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 4
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and April 30, 1998
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
March 31, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 39,669 $ 22,899
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 15,639 7,918
Provision for doubtful accounts 1,406 832
Gain on sale of real estate and securities -- (8)
Minority interest in income of partnership 457 --
Changes in operating assets and liabilities, net:
Change in trade and notes receivable (1,020) 591
Change in other receivables (6,052) 260
Change in other liabilities 4,364 1,488
Change in sundry assets and liabilities (4,268) 1,976
-------- --------
Net cash provided by operating activities 50,195 35,956
-------- --------
Cash flows from investing activities:
Real estate acquisitions and building improvements (24,374) (42,739)
Advances for mortgage notes receivable, net (2,496) --
Advances to ERT Development Corporation (1,280) --
Repayments of mortgage notes receivable 64 10,163
Sales of marketable securities -- 2
Purchases of marketable securities -- (1)
-------- --------
Net cash used in investing activities (28,086) (32,575)
-------- --------
Cash flows from financing activities:
Principal payments of mortgages and notes payable (1,930) (631)
Distributions paid (40,863) (23,464)
Proceeds from dividend reinvestment plan 4,804 4,545
Proceeds from credit facility borrowing 37,500 --
Proceeds from exercise of stock options 158 649
Minority interest distributions paid (891) --
Repayment of loans receivable for the purchase of common stock -- 75
-------- --------
Net cash used in financing activities (1,222) (18,826)
-------- --------
Net increase (decrease) in cash and cash equivalents 20,887 (15,445)
Cash and cash equivalents at beginning of period 13,951 49,381
-------- --------
Cash and cash equivalents at end of period $ 34,838 $ 33,936
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A:
The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company pursuant to the rules of the Securities and Exchange
Commission ("SEC") and, in the opinion of the Company, include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of financial position, results of operations and cash flows in accordance with
generally accepted accounting principles. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such SEC rules. The Company believes that the disclosures made are
adequate to make the information presented not misleading. The consolidated
statements of income for the three months ended March 31, 1999 and April 30,
1998 are not necessarily indicative of the results expected for the full year.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's latest annual
report on Form 10-K/A.
Excel Realty Trust, Inc. ("Excel") was formed in 1985 and subsequently
reincorporated as a Maryland corporation. New Plan Realty Trust (the "Trust")
was organized in 1972 as a Massachusetts business trust. On September 28, 1998,
Excel and the Trust consummated a merger pursuant to an Agreement and Plan of
Merger dated as of May 14, 1998, as amended as of August 7, 1998 (the "Merger
Agreement"). As discussed more fully in the Company's Annual Report on Form 10
K/A, the Merger has been treated as a purchase by the Trust of the assets and
liabilities of Excel using the purchase method of accounting in the accompanying
consolidated financial statements. Therefore, financial statements and related
disclosures herein for periods prior to September 28, 1998 are that of the
Trust. Immediately following the Merger, each of the Company and the Trust
adopted a fiscal year end of December 31. The Trust's fiscal year end prior to
the Merger was July 31, and accordingly, comparative information reported in
this Form 10-Q for 1998 represents information previously reported by the Trust
for the 3 month period ended April 30, 1998.
Note B: Statement of Cash Flows - Supplemental Disclosure (in thousands)
In the three months ended April 30, 1998, the Company acquired properties by
assuming mortgages payable of $19,404. No mortgages were assumed in the three
months ended March 31, 1999. The amounts paid for interest for the three months
ended March 31, 1999 and April 30, 1998 were $22,173 and $9,322, respectively.
State and local income taxes paid for the three months ended March 31, 1999 and
April 30, 1998 were $144 and $93, respectively.
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Note C: Stockholders' Equity
Earnings Per Share (EPS)
In accordance with the disclosure requirements of SFAS No. 128, a reconciliation
of the numerator and denominator of basic and diluted EPS is provided as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Basic EPS
Numerator:
Net income $ 39,669 $ 22,899
Preferred dividends (5,802) (1,463)
-------- --------
$ 33,867 $ 21,436
======== ========
Denominator:
Weighted average of common shares outstanding 88,804 59,522
======== ========
Earnings Per Share $ 0.38 $ 0.36
======== ========
Diluted EPS
Numerator:
Net income $ 39,669 $ 22,899
Preferred dividends (5,802) (1,463)
Minority interest 457 --
-------- --------
Net income available to common shares $ 34,324 $ 21,436
======== ========
Denominator:
Weighted average of common shares outstanding 88,804 59,522
Effect of diluted securities:
Common stock options and warrants 388 517
Excel Realty Partners, L.P. third party units 2,202 --
-------- --------
91,394 60,039
======== ========
Earnings Per Share $ 0.38 $ 0.36
======== ========
</TABLE>
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<PAGE> 7
Note D: Segment Information
The Company's two reportable business segments are retail and residential
properties. At March 31, 1999, the retail segment consists of 299 shopping
centers (included in this amount are nine office and other properties) and the
residential segment consists of 55 garden apartment communities. Selected
financial information for each segment is as follows (in thousands):
<TABLE>
<CAPTION>
Retail Residential Other Total
------ ----------- ----- -----
<S> <C> <C> <C> <C>
For Three Months Ended
March 31, 1999
Revenue $ 84,953 $ 19,370 $ 6,843 $ 111,166
Operating expenses and
minority interest 24,093 10,564 2,254 36,911
Interest expense 18,947 18,947
Depreciation and amortization 13,465 2,174 -- 15,639
----------- ----------- ----------- -----------
Net income $ 47,395 $ 6,632 $ (14,358) $ 39,669
=========== =========== =========== ===========
Real Estate Assets, net $ 2,321,468 $ 353,645 $ 2,675,113
=========== =========== ===========
For Three Months Ended
April 30, 1998
Revenue $ 44,699 $ 17,725 $ 1,057 $ 63,481
Operating expenses and minority interest 12,598 9,598 719 22,915
Interest expense 9,754 9,754
Depreciation and amortization 6,020 1,901 7,921
Gain on sale of securities/properties 8 8
----------- ----------- ----------- -----------
Net income $ 26,081 $ 6,226 $ (9,408) $ 22,899
=========== =========== =========== ===========
Real Estate Assets, net $ 950,869 $ 329,323 $ 1,280,192
=========== =========== ===========
</TABLE>
Note E: Subsequent Event
In April 1999, seven executives, all formerly of Excel Realty Trust, Inc.,
agreed to resign. Under the terms of their severance arrangements, the departing
executives will receive a total of approximately $1.7 million in severance
payments. In addition, for a total of approximately $33.5 million, the Company
agreed to repurchase these executives' approximately 1.3 million shares, which
were held by such executives for more than six months, and certain of their "in
the money" vested options on approximately 900,000 shares. These events
represent the core of a corporate reorganization, in connection with which the
Company expects to recognize approximately $8.0 million in expenses during the
2nd and/or 3rd quarter of 1999.
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
I. Liquidity and Capital Resources
Cash flow from operations has been the principal source of capital to fund the
Company's ongoing operations. The Company's issuance of common and preferred
stock, use of the Company's revolving credit facilities and financing from
unsecured notes and mortgage debt have been the principal sources of capital
required to fund its growth.
In order to continue to expand and develop its portfolio of properties and other
investments, the Company intends to finance future acquisitions and growth
through the most advantageous sources of capital available to the Company at the
time. This may include the sale of common stock, preferred stock or debt
securities through public offerings or private placements, incurring additional
indebtedness through secured or unsecured borrowings, and the reinvestment of
proceeds from the disposition of assets. The Company also may enter into joint
ventures with institutions to acquire large properties. In these instances, the
Company generally receives property management and leasing fees in addition to a
disproportionate share of the profits after a preferred return is received by
the institutional partner. The Company's financing strategy is to maintain a
strong and flexible financial position by (i) maintaining a prudent level of
leverage, (ii) maintaining a large pool of unencumbered properties, (iii)
managing its exposure to interest rate risk represented by its floating rate
debt, (iv) where possible, amortizing existing non-recourse mortgage debt
secured by specific properties over the term of the leases with anchor tenants
at such mortgaged properties, and (v) maintaining a conservative distribution
payout ratio.
On March 31, 1999, the Company had approximately $36.4 million in available
cash, cash equivalents and marketable securities.
Debt as of March 31, 1999 consisted of $385.7 million of mortgages payable and
$726.9 million of notes payable. Included in the outstanding notes payable is
$238.0 million outstanding on the Company's two unsecured credit facilities. One
facility is for $250.0 million through December 1999, with an interest rate of
LIBOR plus 1.2% of which $188.0 million was outstanding at March 31, 1999. The
covenants of the credit facility include maintaining certain ratios such as
liabilities to assets of less than 50% and maintaining a minimum interest
coverage ratio of 2 to 1. The Company also has an unsecured revolving credit
facility of $50 million through November 1999, all of which was outstanding at
March 31, 1999.
In November 1998, the Company filed a $1 billion shelf registration statement.
This registration statement was filed for the purpose of issuing debt
securities, preferred stock, depository shares, common stock, warrants or
rights. Currently, no securities have been issued under this shelf registration
statement. On February 3, 1999, the Company established under this shelf
registration statement a program for the sale of up to $500 million aggregate
principal amount of medium-term notes due nine months or more from date of
issue.
Other sources of funds are available to the Company. Based on management's
internal valuation of the Company's properties, many of which are free and clear
of mortgages, the estimated value is considerably in excess of the outstanding
mortgage indebtedness. Accordingly, management believes that potential exists
for additional mortgage financing as well as unsecured borrowing capacity from
banks and other lenders.
The Company has three classes of preferred stock outstanding as of March 31,
1999: (i) 1,775,000 shares of 8 1/2% Series A Cumulative Convertible Preferred
Stock outstanding which have an annual distribution of $2.125 per share payable
quarterly; (ii) 6,300,000 depositary shares outstanding, each representing 1/10
of a share of 8 5/8% Series B Cumulative Redeemable Preferred Stock, with an
annual distribution of $2.15625 per depositary share payable quarterly; and
(iii) 1,500,000 depositary shares outstanding, each representing 1/10 of one
share of 7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred Stock,
with a liquidation preference and annual distribution of $50 and $3.90 per
depositary share, respectively.
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The current quarterly dividend on the Company's common stock is $.4025 per
share. The Company anticipates that the quarterly dividend will increase at
least $.0025 per share per quarter (which quarterly increases amount to $.01 per
share on an annualized basis and effectively increase the annualized dividend
rate by $.04 per share for each share held over a 12-month period) until the
annualized quarterly dividend on the Company's common stock is at least $1.67
per share. The maintenance of this dividend policy will be subject to various
factors, including the discretion of the Board of Directors of the Company, the
ability to pay dividends under applicable law and the effect which the payment
of dividends may have from time to time on the maintenance by the Company of its
status as a REIT.
In the normal course of business, the Company also faces risks that are either
non-financial or non-qualitative. Such risks are not included in the
aforementioned notes, but are described in "Item 1 - Business - Risk Factors" in
the Company's Annual Report on Form 10 K/A for the year ended December 31, 1998.
Results of operations for the three months ended March 31, 1999 and April
30, 1998
The results of operations reflected in the Consolidated Statements of Income and
Comprehensive Income include post-merger results for the three months ended
March 31, 1999 and pre-merger results of New Plan Realty Trust for the three
months ended April 30, 1998. The following includes pro forma financial
information presented as if the Merger had been consummated on February 1, 1998
in order to make the comparison of these periods more informative. Except as
stated otherwise, the discussions below relate to comparison of pro forma
results for the three month period ended April 30, 1998 to actual results for
the three month period ended March 31, 1999. The pro forma information is not
necessarily indicative of what results would have been had the Merger actually
occurred on February 1, 1998.
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999 April 30, 1998 April 30, 1998
(Actual) (Pro Forma) (Actual)
-------- ----------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Revenues:
Retail $ 84,953 $ 75,399 $ 44,699
Residential 19,370 17,725 17,725
Interest, dividend and other 6,843 5,424 1,057
--------- --------- ---------
Total revenues 98,548 98,548 63,481
Expenses:
Operating costs 23,288 19,373 15,354
Real estate and other taxes 9,506 8,887 5,874
Interest 18,947 16,385 9,754
Depreciation and amortization 15,639 13,591 7,921
Provision for doubtful accounts 1,406 1,438 968
General and administrative 2,254 1,241 719
--------- --------- ---------
Total expenses 71,040 60,915 40,590
Gain on sale of real
estate/securities -- (15) 8
Minority interest (457) (405) --
--------- --------- ---------
Net income $ 39,669 $ 37,213 $ 22,899
========= ========= =========
Net income per share:
Basic $ 0.38 $ 0.37 $ 0.36
========= ========= =========
Diluted $ 0.38 $ 0.36 $ 0.36
========= ========= =========
</TABLE>
The Company acquired 23 properties between May 1, 1998 and December 31, 1998,
including 20 retail and 3 residential properties. These acquisitions produced
revenue increases of $6.1 million and $1.3 million between the quarter ended on
April 30, 1998 and the quarter ended on March 31, 1999 for the retail and
residential portfolios, respectively. The remaining $3.4 million and $.4 million
increases represent 4.6% and 2.1% improvements in rentals on the remainder of
the retail and residential portfolios, respectively. The increase in interest,
dividend and other income was principally due to a $1.1 million improvement in
the Company's equity participation in ERT Development Corporation ("EDV"). Of
this increase, $1.8 million is associated with lease termination fees received
on a property held by EDV. This was offset by EDV's participation in the 1st
quarter of 1999 in joint venture losses caused by the excess of
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<PAGE> 10
interest carry costs over net operating income on a property that is just
emerging from the development stage.
Property acquisitions caused $4.4 million of the $9.7 million increase in total
expenses, including a $1.4 million increase in operating costs, $1.2 million in
additional depreciation, $477,000 in additional real estate and taxes, and $1.3
million in interest expense. The remaining $2.5 million increase in operating
costs is largely attributable a significant increase in snow removal, utilities
and contract services in the current year. The remaining $1.3 million increase
in interest expense was primarily driven by increased credit line borrowing in
connection with property acquisitions. General and administrative cost increases
of $1.0 million primarily relate to staffing increases, and to increases in
compensation.
Funds From Operations
The company calculates funds from operations ("FFO") as net income attributable
to common shareholders on a diluted basis before gain or loss on sales of real
estate and securities, plus depreciation and amortization on real estate and
amortized leasing commission costs, and other non-recurring items. FFO is not a
substitute for cash flows from operations or net income as defined by generally
accepted accounting principles, and may not be comparable to other similarly
titled measures of other REITs. FFO is presented because industry analysts and
the Company consider FFO to be an appropriate supplemental measure of
performance of REITs.
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999 April 30, 1998
-------------- --------------
(in thousands, except per share amounts)
<S> <C> <C>
Net income $ 39,669 $ 22,899
Preferred Dividends (5,802) (1,463)
Minority interest 457 --
-------- --------
Net income applicable to common shareholders - diluted 34,324 21,436
Gain on sale of real estate and securities -- (8)
Depreciation and amortization 15,639 7,921
-------- --------
Funds from operations $ 49,963 $ 29,349
======== ========
Weighted average of common shares outstanding - diluted 91,394 60,039
======== ========
FFO per share $ 0.55 $ 0.49
======== ========
</TABLE>
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<PAGE> 11
II. Year 2000 Compliance
Year 2000 Compliance Readiness
The Company's centralized corporate business and technical information
systems have been assessed as to Year 2000 compliance and functionality. Year
2000 compliance issues with respect to the Company's internal business and
technical information systems were substantially remediated as of March 31,
1999. See "--Year 2000 Compliance Detail" below. In addition, the Company has
completed the identification and review of major computer hardware and software
suppliers and has verified the Year 2000 preparedness of these suppliers.
Year 2000 Compliance Detail
The Company addressed the Year 2000 issue with respect to the following:
(i) the Company's information technology and operating systems, including its
billing, accounting and financial reporting systems; (ii) the Company's
non-information technology systems, including building access, parking lot light
and energy management, equipment and other infrastructure systems that may
contain or use computer systems or embedded micro controller technology; and
(iii) certain systems of the Company's major suppliers and material service
providers (insofar as such systems relate to the Company's business activities
such as payroll, health services and alarm systems). As described below, the
Company's Year 2000 review involves (a) an assessment of the Year 2000 problems
that may affect the Company, (b) the development of remedies to address the
problems discovered in the assessment phase to the extent practical or feasible,
(c) the testing of such remedies and (d) the preparation of contingency plans to
deal with worst case scenarios.
Assessment Phase
As part of the internal assessment phase, the Company has attempted to
substantially identify all the major components of the systems described above.
In determining the extent to which such systems are vulnerable to the Year 2000
issue, the Company is evaluating internally developed and/or purchased software
applications and property operational control systems (e.g., heating ventilation
and air conditioning (HVAC), lighting timers, alarms, fire, sewage and access).
In addition, in October 1998, the Company began sending letters to or making
inquiries of certain of its major suppliers and service providers, requesting
them to provide the Company with assurance of existing or anticipated Year 2000
compliance by their systems insofar as the systems relate to their activities
with the Company. The Company expects that it will complete its distribution of
these inquiries by May 31, 1999. The Company is requesting that all responses to
the inquiries be returned to it no later than June 30, 1999.
Remediation and Testing Phase
Based upon the assessment and remediation efforts to date, the Company has
completed, tested and put on line the Year 2000 compliance modification in all
the internally developed software for its accounting and property management
applications. The Company's personal computers are Year 2000 compliant in all
material respects. Any personal computers that are not currently Year 2000
compliant will be replaced with Year 2000 compliant personal computers.
The versions of the purchased software that the Company uses for spread
sheet analysis, database applications, word processing systems and its apartment
rent collection system have been tested and are compliant. The outsourced
payroll service and the integrated internal input system are compliant. The
Company's data collection networks are Year 2000 compliant. The Company will be
replacing the New York office phone system (including the voicemail system) with
a Year 2000 compliant system, which replacement is scheduled to occur by June
30, 1999. Phone systems at other than the New York office and the Company's
apartment communities are Year 2000 compliant. Phone systems at the apartment
communities are 87% Year 2000 compliant. The balance of the phone systems at the
apartment communities are scheduled to be reviewed and be Year 2000 compliant by
June 1999. The cost estimates derived from this assessment are treated as worst
case. Most of the Company's shopping centers are
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<PAGE> 12
"open air" type and are simple and very limited in terms of technology. Field
systems for shopping center HVAC, sprinkler and lighting are more than 95%
reviewed and Year 2000 compliant for those systems supplied by the Company (some
are supplied by tenants). The systems not supplied by the Company, the number of
which is small, are being reviewed and are projected to not have a material
impact. All of the 55 apartment communities have had reviews completed and,
except for phone systems (as discussed above), are Year 2000 compliant.
Costs Related to the Year 2000 Issue
The total historical or anticipated remaining costs for the Year 2000
remediation are estimated to be immaterial to the Company's financial condition.
The costs to date have been expensed as incurred and consist of immaterial
internal staff costs and other expenses such as telephone and mailing costs. The
Company currently estimates that to have all systems Year 2000 compliant will
require certain additional expenditures. At this time, the expenditures are
expected to range from a total of $60,000 to a "worst case" of $260,000.
Risks and Contingency Plans
Considering the substantial progress made to date, the Company does not
anticipate delays in finalizing internal Year 2000 remediation within remaining
time schedules. However, third parties having a material relationship with the
Company (e.g., utilities, financial institutions, major tenants, suppliers,
governmental agencies and municipalities) may be a potential risk based on their
individual Year 2000 preparedness which may not be within the Company's
reasonable control. The failure of critical third parties' computer software
programs and operating systems to achieve Year 2000 compliance may result in
system malfunctions or failures. Such an occurrence would potentially affect the
ability of the third party to operate its business and thereby raise adequate
revenue to meet its contractual obligations to the Company or provide services
to the Company. In that event, the Company may not receive revenue or services
that it had otherwise expected to receive pursuant to existing leases and
contracts. The failure of critical third parties to achieve Year 2000 compliance
may have a material adverse impact on the Company's business, operating results
and financial condition.
The Company is in the process of identifying and reviewing the Year 2000
preparedness of critical third parties. Anticipated completion of this review is
May 31, 1999. Pending the results of that review, the Company will determine
what course of action and contingencies, if any, will need to be made.
Although the Company's Year 2000 efforts are intended to minimize the
adverse effects of the Year 2000 issue on the Company's business, operating
results and financial condition, the actual effects of the issue and the success
or failure of the Company's efforts cannot be known until the year 2000. At this
point, the Company believes that the most likely external sources of a material
adverse impact on the Company's business, operating results and financial
condition as a result of Year 2000 issues are utilities (i.e., electricity,
natural gas, telephone service and water) furnished by third parties to the
Company and a wide universe of other customers, none of which utilities are
readily available from alternate sources. The reasonably likely worst case
scenario that could affect the Company's business, operating results and
financial condition would be a widespread prolonged power failure affecting a
substantial number of the geographic regions in which the Company's properties
are located. In the event of such a widespread prolonged power failure, a
significant number of tenants may not be able to operate their stores and, as a
result, their ability to pay rent could be substantially impaired. The Company
is not aware of an economically feasible contingency plan which could be
implemented to prevent such a power failure from having a material adverse
effect on the Company's business, operating results and financial condition.
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-12-
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<PAGE> 13
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 1999, the Company had approximately $170.2 million of
outstanding floating rate mortgages and notes payable. In addition, the Company
had $238.0 million outstanding as of March 31, 1999 in connection with floating
rate borrowings under credit facilities. The Company does not believe that the
interest rate risk represented by its floating rate debt is material as of that
date in relation to the approximately $1.1 billion of outstanding total debt of
the Company, the approximately $2.9 billion of total assets of the Company and
the approximately $1.7 billion market capitalization of the Company's common
stock as of that date.
The Company was not a party to any hedging agreements with respect to its
floating rate debt as of March 31, 1999. In the event of a significant increase
in interest rates, the Company would consider entering into hedging agreements
with respect to all or a portion of its floating rate debt. Although hedging
agreements would enable the Company to convert folating rate liabilities into
fixed rate liabilities, such agreements would expose the Company to the risk
that the counterparties to such agreements may not perform, which could
increase the Company's exposure to rising interest rates. Generally, however,
the counterparties to hedging agreements that the Company would enter into
would be major financial institutions. The Company may borrow additional money
with floating interest rates in the future. Increases in interest rates, or the
loss of the benefits of any hedging agreements that the Company may enter into
in the future, would increase the Company's interest expense, which would
adversely affect cash flow and the ability of the Company to service its debt.
If the Company enters into any hedging agreements in the future, decreases in
interest rates thereafter would increase the Company's interest expense as
compared to the underlying floating rate debt and could result in the Company
making payments to unwind such agreements.
As of March 31, 1999, the Company had notes receivable in the total amount
of Canadian $16 million (approximately U.S. $10.6 million as of March 31,
1999). The Company does not believe that the foreign currency exchange risk
associated with these loans is material. The Company had no other material
exposure to market risk (including foreign currency exchange risk, commodity
price risk or equity price risk) as of March 31, 1999.
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-13-
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<PAGE> 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 12.1 - Ratio of Earnings to Fixed Charges
Exhibit 27 - Financial Data Schedule (This exhibit is filed
for EDGAR filing purposes only.)
(b) During the period covered by this report the Company filed the
following reports on Form 8-K:
Form 8-K filed on February 3, 1999 relating to the filing of certain
exhibits to the Company's Registration Statement on Form S-3 (No.
333-67511) in connection with the establishment of a medium-term
notes program.
SIGNATURE
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: May 14, 1999
NEW PLAN EXCEL REALTY TRUST, INC.
By: /s/ Jeffrey D. Egertson
-----------------------
Jeffrey D. Egertson
Senior Vice President
Chief Financial Officer
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-14-
- --------------------------------------------------------------------------------
<PAGE> 15
EXHIBIT INDEX
Number Description Page
- ------ ----------- ----
12.1 Ratio of Earnings to Fixed Charges 16
27 Financial Data Schedule (Included only
in EDGAR filing)
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-15-
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the three months ended March
31, 1999 is: 2.4 : 1
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income before
extraordinary items. Fixed charges consist of interest costs, whether expensed
or capitalized, preferred stock dividend requirements, the interest component of
rental expense, if any, and amortization of debt discounts and issue costs,
whether expensed or capitalized.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
THREE MONTHS ENDED MARCH 31, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
EARNINGS:
<S> <C>
Net income $39,669
Interest expense (including debt
discount and debt issuing costs) 18,947
Capitalized interest 126
Other adjustments 96
--------
$58,838
=========
FIXED CHARGES:
Interest expense (including debt
discount and debt issuing costs) $18,947
Capitalized interest 126
Preferred stock dividends 5,802
Other adjustments 96
-------
$24,971
========
RATIO OF EARNINGS TO FIXED CHARGES 2.4 : 1
</TABLE>
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-16-
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 34,838
<SECURITIES> 1,628
<RECEIVABLES> 22,380
<ALLOWANCES> 12,770
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,848,559
<DEPRECIATION> 173,446
<TOTAL-ASSETS> 2,935,721
<CURRENT-LIABILITIES> 0
<BONDS> 1,112,635
0
26
<COMMON> 889
<OTHER-SE> (41,404)
<TOTAL-LIABILITY-AND-EQUITY> 2,935,721
<SALES> 0
<TOTAL-REVENUES> 111,166
<CGS> 0
<TOTAL-COSTS> 50,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,406
<INTEREST-EXPENSE> 18,947
<INCOME-PRETAX> 39,669
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,669
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
