<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 JUNE 30, 2000 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 July 31, 2000 was
87,650,665.
<PAGE> 2
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX
MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income and related revenues $ 102,540 $ 103,394 $ 205,938 $ 207,717
Interest, dividend, equity participation and
other income 3,064 6,027 5,194 12,870
---------- ---------- ---------- ----------
Total revenues 105,604 109,421 211,132 220,587
---------- ---------- ---------- ----------
Expenses:
Operating costs 21,015 20,747 44,204 44,035
Real estate and other taxes 10,931 9,546 21,720 19,052
Interest 23,539 19,410 46,112 38,357
Depreciation and amortization 15,554 15,759 31,543 31,398
Provision for doubtful accounts 1,372 1,897 2,126 3,303
Non-recurring charge 915 8,429 3,664 8,429
General and administrative 2,581 1,497 4,578 3,751
---------- ---------- ---------- ----------
Total expenses 75,907 77,285 153,947 148,325
---------- ---------- ---------- ----------
Income before real estate sales, impairment of
real estate and minority interest 29,697 32,136 57,185 72,262
Gain on sale of real estate and securities 7,915 -- 7,914 --
Impairment of real estate (1,900) -- (1,900) --
Minority interest in income of partnership (241) (348) (479) (805)
---------- ---------- ---------- ----------
Net income before extraordinary item 35,471 31,788 62,720 71,457
Extraordinary item, early extinguishment of debt 758 -- 758 --
---------- ---------- ---------- ----------
Net income 36,229 31,788 63,478 71,457
Other comprehensive income:
Unrealized gain on securities for the period 115 72 235 1
---------- ---------- ---------- ----------
Comprehensive income $ 36,344 $ 31,860 $ 63,713 $ 71,458
========== ========== ========== ==========
Net income available to common stock - basic $ 30,571 $ 26,129 $ 52,161 $ 59,996
========== ========== ========== ==========
Net income available to common stock - diluted $ 30,812 $ 26,477 $ 52,640 $ 60,801
========== ========== ========== ==========
Basic earnings per common share before
extraordinary item $ 0.34 $ 0.29 $ 0.59 $ 0.68
========== ========== ========== ==========
Diluted earnings per common share before
extraordinary item $ 0.34 $ 0.29 $ 0.58 $ 0.67
========== ========== ========== ==========
Basic earnings per common share after
extraordinary item $ 0.35 $ 0.29 $ 0.60 $ 0.68
========== ========== ========== ==========
Diluted earnings per common share after
extraordinary item $ 0.35 $ 0.29 $ 0.59 $ 0.67
========== ========== ========== ==========
Average shares outstanding - basic 87,651 88,815 87,629 88,810
========== ========== ========== ==========
Average shares outstanding - diluted 89,014 91,113 89,021 91,140
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 3
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNAUDITED
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
ASSETS
Real estate:
Land $ 547,386 $ 552,146
Building and improvements 2,240,435 2,328,499
Accumulated depreciation (241,735) (216,274)
------------ ------------
Net real estate 2,546,086 2,664,371
Real estate held for sale 70,135 --
Cash and cash equivalents 13,678 10,834
Marketable securities 1,426 1,190
Receivables:
Trade, less allowance for doubtful accounts of $14,357 and
$13,897 at June 30, 2000 and December 31, 1999, respectively 34,880 30,225
Other, net 22,402 15,825
Mortgages and notes receivable 59,585 59,142
Prepaid expenses and deferred charges 12,889 13,076
Investment in and loans to ERT Development Corporation 170,391 150,432
Other assets 7,407 8,046
------------ ------------
Total assets $ 2,938,879 $ 2,953,141
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable, including unamortized premium of $8,457 and
$9,921 at June 30, 2000 and December 31, 1999, respectively $ 338,988 $ 341,643
Notes payable, net of unamortized discount of $2,136 and
$2,264 at June 30, 2000 and December 31, 1999, respectively 622,864 662,736
Credit facilities 238,721 188,721
Capital leases 27,351 27,351
Other liabilities 86,415 88,591
Tenant security deposits 7,789 7,480
------------ ------------
Total liabilities 1,322,128 1,316,522
------------ ------------
Minority interest in partnership 24,505 25,100
------------ ------------
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, 1,507
shares outstanding at June 30, 2000 and December 31, 1999, 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
June 30, 2000 and December 31, 1999, 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 June 30, 2000 and December 31, 1999 23 23
Common stock, $.01 par value, 250,000 shares authorized;
87,651 and 87,555 shares issued and outstanding as of
June 30, 2000 and December 31, 1999, respectively 876 875
Additional paid-in capital 1,708,825 1,708,186
Accumulated other comprehensive income 450 214
Accumulated distribution in excess of net income (117,928) (97,779)
------------ ------------
Total stockholders' equity 1,592,246 1,611,519
------------ ------------
Total liabilities and stockholders' equity $ 2,938,879 $ 2,953,141
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 63,478 $ 71,457
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 31,543 31,398
Amortization of net premium/discount on mortgages and notes payable (578) (1,404)
Foreign currency loss 292 --
Provision for doubtful accounts 2,126 3,303
Gain on sale of real estate and securities, net (7,914) --
Minority interest in income of partnership 479 805
Extraordinary item (758) --
Impairment of real estate assets 1,900 --
Equity in loss/(income) of affiliate 9,288 (897)
Change in investment in and accrued interest on loans to ERT Development
Corporation (5,643) --
Changes in operating assets and liabilities, net:
Change in trade and notes receivable (6,781) (4,097)
Change in other receivables (6,375) (6,365)
Change in other liabilities 342 (3,201)
Change in sundry assets and liabilities (92) (2,603)
----------- ----------
Net cash provided by operating activities 81,307 88,396
----------- ----------
Cash flows from investing activities:
Real estate acquisitions and building improvements (6,972) (36,209)
Proceeds from real estate sales, net 30,858 --
Advances for mortgage notes receivable, net (3,359) (4,953)
Loans to ERT Development Corporation (32,924) (3,509)
Repayments from ERT Development Corporation 9,284 --
Repayments of mortgage notes receivable 1,485 638
Sales of marketable securities -- 53
----------- ----------
Net cash used in investing activities (1,628) (43,980)
----------- ----------
Cash flows from financing activities:
Principal payments of mortgages and notes payable (71,395) (29,030)
Dividends paid (83,413) (83,139)
Proceeds from mortgages payable 30,000 --
Proceeds from dividend reinvestment plan -- 10,932
Proceeds from credit facility borrowing 142,000 93,836
Repayment of credit facility (92,000) --
Proceeds from exercise of stock options 6,600 639
Distributions paid to minority partners (1,073) (1,879)
Payments for the repurchase of common stock (7,554) (24,819)
----------- ----------
Net cash used in financing activities (76,835) (33,460)
----------- ----------
Net increase in cash and cash equivalents 2,844 10,956
Cash and cash equivalents at beginning of year 10,834 13,951
----------- ----------
Cash and cash equivalents at end of year $ 13,678 $ 24,907
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
4
<PAGE> 5
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited 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
accounting principles generally accepted in the United States of America.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America 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 and six months ended June 30, 2000 and 1999 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.
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, the Merger has been treated as a purchase by the Trust of the assets and
liabilities of Excel using the purchase method of accounting.
NOTE 2: ERT DEVELOPMENT
In 1995, ERT Development Corporation ("ERT") was organized to finance,
acquire, develop, hold and sell real estate in the short-term for capital gains
and/or to receive fee income. The Company owns 100% of the outstanding preferred
shares of ERT. An officer and director of the Company owns all the common
shares. The preferred shares are entitled to receive 95% of dividends, if any.
Cash requirements to facilitate ERT's transactions have primarily been obtained
through borrowings from the Company.
Investment in and loans to ERT are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
Investment $ (5,063) $ 4,227
Uncollateralized loans and accounts receivable 70,764 129,790
Collateralized loans receivable 81,824 --
Accrued interest 22,866 16,415
---------- ----------
$ 170,391 $ 150,432
========== ==========
</TABLE>
Interest and principal payments from ERT are primarily received upon the
completion of development projects. Interest receivable from ERT was
approximately $22.9 million and $16.4 million at June 30, 2000 and December 31,
1999, respectively. Interest income recognized by the Company was approximately
$9.3 million and $7.2 million for the six months ended June 30, 2000 and 1999,
respectively.
5
<PAGE> 6
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 2: ERT DEVELOPMENT CORPORATION, CONTINUED
For the six months ended June 30, 2000 and 1999, the equity in the
(losses)/income of ERT recorded by New Plan Excel Realty Trust, Inc. was ($9.3)
million and $0.9 million, respectively. For the three months ended June 30, 2000
and 1999, the equity in the (losses) of ERT recorded by New Plan Excel Realty
Trust, Inc. was ($4.0) million and ($0.1) million, respectively.
Summary unaudited financial information for ERT is as follows (in
thousands).
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
CONDENSED BALANCE SHEETS
Mortgages, notes and interest receivable from developers,
interest at 10% to 12% $ 64,897 $ 40,074
Real estate and other assets, net of depreciation 194,163 205,569
---------- ----------
Total Assets $ 259,060 $ 245,643
========== ==========
Notes payable to New Plan Excel Realty Trust, Inc. $ 152,588 $ 128,903
Accrued interest payable to New Plan Excel Realty Trust, Inc. 22,866 16,415
Construction and land loans 78,475 84,013
Other liabilities 10,192 12,085
---------- ----------
Total liabilities 264,121 241,416
Total stockholders' equity (5,061) 4,227
---------- ----------
Total liabilities and stockholders' equity $ 259,060 $ 245,643
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------ ------------------
<S> <C> <C>
CONDENSED STATEMENTS OF INCOME
Revenues $ 6,825 $ 4,513
Interest expense to New Plan Excel Realty Trust, Inc. (4,613) (3,566)
Other expenses (6,224) (1,073)
---------- ---------
Net income (loss) $ (4,012) $ (126)
========== =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
---------------- ----------------
<S> <C> <C>
Revenues $ 13, 281 $ 9,892
Interest expense to New Plan Excel Realty Trust, Inc. (9,294) (7,170)
Other expenses (13,275) (1,825)
---------- --------
Net income (loss) $ (9,288) $ 897
========== ========
</TABLE>
6
<PAGE> 7
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 2: ERT DEVELOPMENT CORPORATION, CONTINUED
Pointe Orlando Development Company, which is consolidated with ERT, has a
term loan which had a balance of $78.5 million at June 30, 2000 of which $15.0
million was guaranteed by the Company. At December 31, 1999 Pointe Orlando had
outstanding construction and land loans totaling $84.0 million of which $35.0
million was guaranteed by the Company. ERT has an investment in a joint venture
partnership related to a retail development project in Frisco, Texas (The Centre
at Preston Ridge). The Company has guaranteed $37.8 million of the loans on this
project, which had outstanding balances of $49.5 million at June 30, 2000. The
Company initially had guaranteed $68.0 million of the loans on the project, of
which $58.6 million was outstanding at December 31, 1999. The Company also has
guaranteed that ERT will provide additional funding of approximately $11.9
million for the project. This guarantee is reduced commensurately as the funds
are provided. In addition, the Company has guaranteed $1.3 million of the $3.8
million outstanding debt on an ERT retail development project, Vail Ranch II, in
Temecula, California.
NOTE 3: STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE
The amounts paid for interest for the six months ended June 30, 2000 and
1999 were $46.6 million and $37.9 million, respectively. State and local income
taxes paid for the six months ended June 30, 2000 and 1999 were $0.4 million and
$0.2 million, respectively.
7
<PAGE> 8
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 4: 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 SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic EPS
Numerator:
Net income before extraordinary item $ 35,471 $ 31,788 $ 62,720 $ 71,457
Preferred dividends (5,658) (5,659) (11,317) (11,461)
-------- -------- -------- --------
Net income available to common shares -
basic, before extraordinary item 29,813 26,129 51,403 59,996
Extraordinary item 758 -- 758
-------- -------- -------- --------
Net income available to common shares -
basic, after extraordinary item $ 30,571 $ 26,129 $ 52,161 $ 59,996
======== ======== ======== ========
Denominator:
Weighted average of common shares outstanding 87,651 88,815 87,629 88,810
======== ======== ======== ========
Earnings Per Share before extraordinary item $ 0.34 $ 0.29 $ 0.59 $ 0.68
======== ======== ======== ========
Earnings Per Share after extraordinary item $ 0.35 $ 0.29 $ 0.60 $ 0.68
======== ======== ======== ========
Diluted EPS
Numerator:
Net income before extraordinary item $ 35,471 $ 31,788 $ 62,720 $ 71,457
Preferred dividends (5,658) (5,659) (11,317) (11,461)
Minority interest 241 348 479 805
-------- -------- -------- --------
Net income available to common shares -
diluted, before extraordinary item 30,054 26,477 51,882 60,801
Extraordinary item 758 -- 758
-------- -------- -------- --------
Net income available to common shares -
diluted, after extraordinary item $ 30,812 $ 26,477 $ 52,640 $ 60,801
======== ======== ======== ========
Denominator:
Weighted average of common shares outstanding 87,651 88,815 87,629 88,810
Effect of diluted securities:
Common stock options and warrants 128 78 157 119
Excel Realty Partners, L.P. third party units 1,235 2,220 1,235 2,211
-------- -------- -------- --------
89,014 91,113 89,021 91,140
======== ======== ======== ========
Earnings Per Share before extraordinary item $ 0.34 $ 0.29 $ 0.58 $ 0.67
======== ======== ======== ========
Earnings Per Share after extraordinary item $ 0.35 $ 0.29 $ 0.59 $ 0.67
======== ======== ======== ========
</TABLE>
Preferred A shares are anti-dilutive for earnings per share calculations.
8
<PAGE> 9
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 5: SEGMENT INFORMATION
The Company's two reportable business segments are retail and residential
properties. At June 30, 2000, the retail segment consists of 298 shopping
centers (included in this amount are seven office and other properties) and the
residential segment consists of 53 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
JUNE 30, 2000
Revenue $ 83,302 $ 19,238 $ 3,064 $ 105,604
Expenses and minority interest 23,392 9,926 3,737 37,055
Interest expense 23,539 23,539
Depreciation and amortization 13,285 2,269 15,554
Gain/(loss) on sale of securities/properties 7,915 7,915
Impairment of real estate 1,900 1,900
Extraordinary item 758 758
----------- ---------- ---------- -----------
Net income $ 53,398 $ 7,043 $ (24,212) $ 36,229
=========== ========== ========== ===========
Real Estate Assets, net $ 2,201,999 $ 344,087 $ 2,546,086
=========== ========== ===========
FOR THREE MONTHS ENDED
JUNE 30, 1999
Revenue $ 83,986 $ 19,408 $ 6,027 $ 109,421
Expenses and minority interest 21,957 10,233 10,274 42,464
Interest expense 19,410 19,410
Depreciation and amortization 13,538 2,221 15,759
----------- ---------- ---------- -----------
Net income $ 48,491 $ 6,954 $ (23,657) $ 31,788
=========== ========== ========== ===========
Real Estate Assets, net $ 2,324,347 $ 354,467 $ 2,678,814
=========== ========== ===========
FOR SIX MONTHS ENDED
JUNE 30, 2000
Revenue $ 167,853 $ 38,085 $ 5,194 $ 211,132
Expenses and minority interest 47,614 20,436 8,721 76,771
Interest expense 46,112 46,112
Depreciation and amortization 27,051 4,492 31,543
Gain/(loss) on sale of securities/properties 7,914 7,914
Impairment of real estate 1,900 1,900
Extraordinary item 758 758
----------- ---------- ---------- -----------
Net income $ 99,960 $ 13,157 $ (49,639) $ 63,478
=========== ========== ========== ===========
Real Estate Assets, net $ 2,201,999 $ 344,087 $ 2,546,086
=========== ========== ===========
FOR SIX MONTHS ENDED
JUNE 30, 1999
Revenue $ 168,939 $ 38,778 $ 12,870 $ 220,587
Expenses and minority interest 45,593 20,797 12,985 79,375
Interest expense 38,357 38,357
Depreciation and amortization 27,003 4,395 31,398
----------- ---------- ---------- -----------
Net income $ 96,343 $ 13,586 $ (38,472) $ 71,457
=========== ========== ========== ===========
Real Estate Assets, net $ 2,324,347 $ 354,467 $ 2,678,814
=========== ========== ===========
</TABLE>
9
<PAGE> 10
NEW PLAN EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 6: REAL ESTATE HELD FOR SALE AND IMPAIRMENT OF REAL ESTATE
At the end of the second quarter, two retail shopping centers, one
commercial and 43 single tenant retail properties were classified as "Real
estate held for sale". These properties are located in 19 states and have an
aggregate gross leasable area of 1,472,000 square feet. The estimated fair
market value of the one commercial and 43 single tenant retail properties is
less than their book value resulting in an impairment expense of $1.9 million.
NOTE 7: ENVIRONMENTAL MATTERS
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. Except as
discussed below, the Company is not aware of any significant environmental
condition at any of its properties.
Soil and groundwater contamination exists at certain of the Company's
properties. The Company currently estimates that the total cumulative cost of
remediation for these properties will be approximately $2.8 million to $6.5
million. In connection with certain of these properties, the Company has entered
into remediation and indemnity agreements, which obligate the prior owners of
certain of the properties (including in some cases, principals of the prior
owners) to perform the remediation and to indemnify the Company for any losses
the Company may suffer because of the contamination or remediation. Although
there can be no assurance that the remediation estimates of the Company will
prove accurate or that the prior owners will perform their obligations under the
remediation and indemnity agreements, the Company does not expect the
environmental conditions at these properties to have a material adverse effect
on the Company. The Company has also identified asbestos minerals relating to
spray-applied fireproofing materials at certain properties. Included in other
liabilities in the Company's Consolidated Balance Sheet at June 30, 2000 is $3.2
million related to the clean-up of these asbestos minerals.
NOTE 8: NON-RECURRING CHARGE
This charge consists of the payments made to Mr. Arnold Laubich in February
2000 in connection with his retirement from his position as President and Chief
Executive Officer and the resignation of Mr. James Steuterman from his position
as Chief Operating Officer in May 2000.
NOTE 9: EXTRAORDINARY ITEM
This item relates to the write off of a mortgage premium for a mortgage
debt which was repaid prior to the maturity date. The payment was funded by the
use of current cash flow.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The following information should be read in conjunction with the Company's
consolidated financial statements and notes thereto as of June 30, 2000 included
in this quarterly report and the Company's Annual Report on Form 10-K for the
year ended December 31, 1999. This quarterly report contains forward-looking
statements. Such statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievement of
the Company to be materially different from the results of operations or plans
expressed or implied from such forward-looking statements.
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
uncollateralized notes and mortgage debt are additional sources of capital.
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, which may include excess cash flow, the sale of common stock, preferred
stock or debt securities through public offerings or private placements, the
incurrence of additional indebtedness through borrowings, and the reinvestment
of proceeds from the disposition of assets. The Company also may enter into
joint ventures with institutions to acquire portfolios of properties. 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 and (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.
As of June 30, 2000, the Company had approximately $15.1 million in
available cash, cash equivalents and marketable securities.
The Company has two revolving credit facilities with The Bank of New York,
each of which provides for $122.5 million in uncollateralized advances from a
group of banks. One facility, which expires in November 2000, has a provision
which allows the Company to extend the then existing loan for up to two years at
the existing interest spread. The other facility expires in November 2002. As of
June 30, 2000, the Company had $163.7 million outstanding under these
facilities. The covenants of these credit facilities include maintaining certain
ratios such as liabilities to assets of less than 50% and maintaining a minimum
unencumbered assets coverage ratio of 2 to 1. In addition, the Company has a
term loan facility with Fleet National Bank. The Company had $75.0 million
outstanding under this facility as of June 30, 2000. Loans drawn under this
facility mature on March 7, 2001, and accrue interest at LIBOR plus 90 basis
points (based on the Company's credit rating at June 30, 2000). The term loan
agreement prepared in connection with the facility contains covenants
substantially similar to those included in the two credit facilities of the
Company with The Bank of New York.
In addition to outstanding amounts on the Company's credit facilities, debt
as of June 30, 2000 consisted of $339.0 million of mortgages payable having a
weighted average interest rate of 7.7% and $622.9 million of notes payable with
a weighted average interest rate of 7.3%. Of this debt, $75.4 million have
variable interest rates. Additionally, the Company has $1.4 million in
marketable equity securities which are sensitive to market price changes and
notes receivable in the amount of Canadian $16.0 million (approximately U.S.
$10.8 million as of June 30, 2000) which are sensitive to currency exchange rate
fluctuations. The Company has guaranteed a maximum of $54.1 million of
indebtedness of ERT and the related debt outstanding as of June 30, 2000 was
$50.2 million. In addition, the Company has guaranteed that ERT will provide
additional funding of approximately $11.9 million for the Centre at Preston
Ridge, a community shopping center project in Frisco, Texas. This guarantee is
reduced commensurately as funds are provided. ERT has third-party debt of $78.5
million, excluding notes payable to the Company, having a weighted average
interest rate of 7.8%. The Company provides substantially all of the capital
required to fund ERT's operations.
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<PAGE> 12
In October 1999, the Company commenced a program to repurchase up to $75
million of the Company's outstanding common stock from time to time through
periodic open market transactions or through privately negotiated transactions.
Through June 30, 2000, 1,651,000 shares had been repurchased and retired at an
average purchase price of $15.77 per share. Of this amount, approximately
420,000 shares were repurchased and retired in the six months ended June 30,
2000.
Other sources of funds are available to the Company. Based on management's
internal evaluation 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 June 30,
2000: (i) 1,507,000 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 $50.0 and $3.90 per
depositary share, respectively.
The current quarterly dividend on the Company's common stock is $.4125 per
share. The maintenance of this dividend 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.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
REVENUES:
Rental revenue decreased by approximately $0.9 million due to several
factors. Between April 1, 1999 and June 30, 2000, four retail shopping centers
were acquired. These acquisitions produced revenue increases of approximately
$0.7 million. During the same period, the Company sold all or a portion of nine
retail and two residential properties which accounted for revenue reductions of
$1.5 million. In addition, $0.6 million of the decrease was due to a decline at
Clearwater Mall, a property with redevelopment plans under reevaluation. The
balance of the change, a $0.5 million increase, was in the retail division.
Interest, dividend and other revenue decreased $3.0 million. The primary
reasons for the decline were an increased loss of $3.9 million in the equity
participation in ERT Development Corporation, a decrease due to the change in
foreign currency of $0.7 million and a $1.0 million increase in interest income
from loans to ERT. The remaining $0.6 million increase was due primarily to
increased fee income. The $3.9 million decrease in the equity participation in
ERT was primarily the result of factors relating to two operating mall
properties, a decrease in interest income and an increase in interest expense.
The Mall at 163rd Street, a property owned by ERT, had a reduction in net
income of $0.7 million, due primarily to an increase in the bad debt expense of
$0.3 million and a reduction in retail revenue of $0.6 million due to
redevelopment plans. Reductions in other operating expenses accounted for the
remaining change in net income.
Pointe Orlando, a mall in Florida, which in the prior year was accounted
for using the equity method because ERT was a 38.5% owner, is now 100% owned and
consolidated with ERT. Pointe Orlando had an increased loss in the quarter ended
June 2000 of $0.7 million. This was due primarily to increased litigation costs
of $0.9 million relating to a legal action revolving around the construction and
delayed opening of the mall.
Interest income decreased $1.4 million mainly due to the acquisition of the
remaining 61.5% ownership interest and consolidation of Pointe Orlando and the
elimination of interest income, which was $1.4 million in the quarter ended June
30, 1999. ERT's interest expense to New Plan Excel increased $1.0 million due to
higher borrowings. This was the primary reason for the $1.1 million increase in
interest income in the Company.
12
<PAGE> 13
EXPENSES:
Total expenses decreased $1.4 million. The major areas of change are
discussed below.
Interest expense increased $4.1 million due primarily to increased
borrowings in connection with stock repurchases, the redemption of Excel Realty
Partners, L.P. partnership units and property acquisitions.
Real estate and other taxes increased $1.4 million. The increase was due to
generally higher real estate taxes across the retail and residential portfolios.
Bad debt expense decreased $0.5 million due to the collection of amounts
previously thought to be uncollectible and improved collection experience. The
decrease was partially offset by an increase in the reserve for bad debts at the
Clearwater Mall.
In May 2000, James Steuterman resigned from his position as Chief Operating
Officer of the Company. The $0.9 million non-recurring charge is payments made
in connection with his resignation.
Operating expenses, after eliminating the impact of acquisitions and
dispositions, increased $0.7 million.
Administrative expenses increased $1.1 million. The increase was due to
higher personnel and professional costs. A portion of these increases was offset
by lower travel costs.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
REVENUES:
Rental revenue decreased by approximately $1.8 million due to several
factors. Between January 1, 1999 and June 30, 2000, five retail shopping centers
and one residential property were acquired. These acquisitions produced revenue
increases of approximately $1.9 million. During the same period, the Company
sold all or a portion of nine retail and two residential properties which
accounted for revenue reductions of $1.2 million and $1.5 million, respectively.
In addition, the Clearwater Mall, a property with redevelopment plans under
reevaluation, accounted for a revenue decline of $1.2 million. The balance of
the change in revenue was an increase of $0.2 million.
Interest, dividend and other revenue decreased $7.7 million. The primary
reasons for the decline were a decrease of $10.2 million in the equity
participation in ERT Development Corporation and a $2.6 million increase in
interest income. Fee revenue and foreign currency change reflected a net
decrease of $0.1 million. The decrease in the equity participation in ERT, from
a gain of $0.9 million in the six months ended June 1999 to a loss of $9.3
million in the six months ended June 2000, was primarily the result of factors
relating to two operating mall properties, a decrease in interest income and an
increase in interest expense.
The Mall at 163rd Street, a property owned by ERT, had a reduction in net
income of $3.4 million due primarily to an increase in the bad debt expense of
$0.8 million, lease settlement income of $1.9 million received in the prior
period, which did not recur in the current period, and a reduction in rental
revenue of $0.9 million due to redevelopment plans.
Pointe Orlando, a mall in Florida, which in the prior year was accounted
for using the equity method when ERT was a 38.5% owner, is now 100% owned and
consolidated with ERT. Pointe Orlando had an increased loss in the six months
ended June 2000 of $1.4 million. This was due primarily to increased litigation
costs of $1.7 million relating to a legal action revolving around the
construction and delayed opening of the mall and an increase in bad debt expense
of approximately $0.8 million.
13
<PAGE> 14
Interest income decreased $2.9 million mainly due to the acquisition and
consolidation of Pointe Orlando and the elimination of the interest income
charged to the previously unconsolidated entity. ERT's interest expense to New
Plan Excel increased $2.1 million due to higher borrowings by ERT and this was
the primary reason for the $2.6 million increase in interest income of the
Company.
EXPENSES:
Total expenses increased $5.6 million. The major areas of increase were
interest expense, real estate and other taxes and a non-recurring charge.
Interest expense increased $7.8 million due primarily to increased
borrowings in connection with stock repurchases, the redemption of Excel Realty
Partners, L.P. partnership units and property acquisitions.
Real estate and other taxes increased $2.7 million. Approximately $139,000
was attributable to the net effect of acquisitions and dispositions. The
remaining $2.6 million was due to generally higher real estate taxes across the
retail and residential portfolios.
Bad debt expense decreased $1.2 million due to the collection of amounts
previously thought to be uncollectible and improved collection experience. The
decrease was partially offset by an increase in the reserve for bad debts at the
Clearwater Mall.
Non-recurring charges declined $4.8 million. In February 2000, Arnold
Laubich retired from his positions as President and Chief Executive Officer of
the Company and in May 2000, James Steuterman resigned from his position as
Chief Operating Officer of the Company. The $3.7 million non-recurring charges
are payments made to them in connection with their retirement and employment
agreements. In the prior year, the $8.4 million was the result of the
resignation of seven former Excel executives and the payments made to them in
accordance with their employment agreements.
Operating expenses, after eliminating the impact of acquisitions and
dispositions, increased $0.9 million, a 2% increase.
Administrative expenses increased $0.8 million due primarily to increased
professional costs.
14
<PAGE> 15
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 and before extraordinary items, plus
depreciation and amortization on real estate, amortized leasing commission costs
and the minority interest share of income. Effective January 1, 2000, the
Company adopted the NAREIT definition of FFO which requires the inclusion of
both recurring and non-recurring results of operations. 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 SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income before extraordinary items $ 35,471 $ 31,788 $ 62,720 $ 71,457
Preferred dividends (5,658) (5,659) (11,317) (11,461)
Minority interest 241 348 479 805
--------- --------- --------- ---------
Net income applicable to common shareholders - diluted 30,054 26,477 51,882 60,801
Gain on sale of real estate - New Plan Excel (7,915) -- (7,914) --
Impairment of real estate - New Plan Excel 1,900 -- 1,900 --
Depreciation and amortization
New Plan Excel real estate assets 15,554 15,759 31,543 31,398
ERT Development Corp. real estate assets(1) 1,200 106 2,316 213
Preferred dividends 800 800 1,600 1,743
--------- --------- --------- ---------
Funds from operations $ 41,593 $ 43,142 $ 81,327 $ 94,155
========= ========= ========= =========
Weighted average of common shares outstanding - diluted 90,888 93,090 90,895 93,276
========= ========= ========= =========
FFO per share - diluted $ 0.46 $ 0.46 $ 0.89 $ 1.01
========= ========= ========= =========
</TABLE>
----------
(1) As of the quarter ended September 30, 1999, the Company recognizes
depreciation and amortization from Pointe Orlando, The Mall at 163rd Street
and Valley Fair Apartments for FFO purposes. 1999 amounts have been
restated to reflect this change.
15
<PAGE> 16
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2000, the Company had approximately $75.4 million of
outstanding floating rate mortgages and notes payable. In addition, the Company
had $238.7 million outstanding as of June 30, 2000 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 $1.2 billion of outstanding total debt of
the Company, the approximately $2.9 billion of total assets of the Company and
the approximately $1.1 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 June 30, 2000. 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 floating 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 June 30, 2000, the Company had notes receivable in the total amount
of Canadian $16.0 million (approximately U.S. $10.8 million as of June 30,
2000). 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 June 30, 2000.
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<PAGE> 17
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2000 annual meeting of stockholders was held on May 31, 2000. Proxies
for the meeting were solicited by the Company pursuant to Regulation 14
under the Securities Exchange Act of 1934, as amended; there was no
solicitation in opposition to management's nominees as listed in the proxy
statement and all of such nominees were elected.
Proposal One: Election of Directors.
(a) 75,689,135 votes were cast for the election of Matthew Goldstein as a
Director; 2,753,396 votes were withheld.
(b) 75,866,505 votes were cast for the election of Melvin Newman as a
Director; 2,576,026 votes were withheld.
(c) 76,185,034 votes were cast for the election of Glenn J. Rufrano as a
Director; 2,257,497 votes were withheld.
(d) 75,933,057 votes were cast for the election of Bruce A. Staller as a
Director; 2,509,474 votes were withheld.
(e) 75,942,522 votes were cast for the election of John Wetzler as a
Director; 2,500,009 votes were withheld.
There were no abstentions or broker non-votes in connection with this
proposal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
*10.1 Employment Agreement, dated as of April 14, 2000, by and
between the Company and John Roche, filed as Exhibit 10.15
to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.
*10.2 Agreement, dated as of May 5, 2000, by and between the
Company and James M. Steuterman, filed as Exhibit 10.16 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000.
10.3 Amendment No. 1 to Credit Agreement, dated as of June 27,
2000, by and among the Company, the lenders party thereto,
The Bank of New York, as administrative agent, and Bank One,
NA and BankBoston, N.A., each as co-documentation agent.
10.4 Amendment No. 1 to Credit Agreement, dated as of June 27,
2000, by and among the Company, the lenders party
thereto, The Bank of New York, as administrative agent, and
Bank One, NA and BankBoston, N.A., each as co-documentation
agent.
10.5 Amendment No. 1 to Term Loan Agreement, dated as of
June 27, 2000, between the Company and Fleet National Bank.
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<PAGE> 18
10.6 Amendment to the Amended and Restated 1994 Directors'
Stock Option Plan of the Company, effective as of May 24,
2000.
10.7 Amended and Restated Guaranty of Payment, dated as of
April 28, 2000, by the Company (Pointe Orlando).
10.8 Amended and Restated Unconditional Guaranty of Payment
and Performance, dated as of April 5, 2000, by the Company
(Briar Preston Ridge).
12.1 Ratio of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements
27(1) Financial Data Schedule
-----------------
* Incorporated herein by reference as indicated above.
(1) Filed as an exhibit to the electronic filing only.
(b) During the period covered by this report the Company filed the
following reports on Form 8-K:
Form 8-K filed on May 11, 2000 containing Item 7, Other Events. This
is the filing of the Supplemental Disclosure of the registrant for the
quarter ended March 31, 2000.
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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: August 10, 2000
NEW PLAN EXCEL REALTY TRUST, INC.
By: /s/ Glenn J. Rufrano
-------------------------------------
Glenn J. Rufrano
President and
Chief Executive Officer
By: /s/ John B. Roche
-------------------------------------
John B. Roche
Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
NUMBER DESCRIPTION
------ -----------
*10.1 Employment Agreement, dated as of April 14, 2000, by and between the
Company and John Roche, filed as Exhibit 10.15 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
*10.2 Agreement, dated as of May 5, 2000, by and between the Company and
James M. Steuterman, filed as Exhibit 10.16 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000.
10.3 Amendment No. 1 to Credit Agreement, dated as of June 27, 2000, by and
among the Company, the lenders party thereto, The Bank of New York, as
administrative agent, and Bank One, NA and BankBoston, N.A., each as
co-documentation agent.
10.4 Amendment No. 1 to Credit Agreement, dated as of June 27, 2000, by and
among the Company, the lenders party thereto, The Bank of New York, as
administrative agent, and Bank One, NA and BankBoston, N.A., each as
co-documentation agent.
10.5 Amendment No. 1 to Term Loan Agreement, dated as of June 27, 2000,
between the Company and Fleet National Bank.
10.6 Amendment to the Amended and Restated 1994 Directors' Stock Option
Plan of the Company, effective as of May 24, 2000.
10.7 Amended and Restated Guaranty of Payment, dated as of April 28, 2000,
by the Company (Pointe Orlando).
10.8 Amended and Restated Unconditional Guaranty of Payment and
Performance, dated as of April 5, 2000, by the Company (Briar Preston
Ridge).
12.1 Ratio of Earnings to Fixed Charges and Preferred Stock Dividend
Requirements
27(1) Financial Data Schedule
-------------------
* Incorporated herein by reference as indicated above.
(1) Filed as an exhibit to the electronic filing only.
20
