<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 SEPTEMBER 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 November 1, 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rental revenues $86,318 $88,627 $261,345 $264,729
Percentage rents 1,184 1,039 5,454 4,208
Expense reimbursements 13,139 12,991 39,779 41,437
Interest, dividend and other income 7,477 6,072 22,252 17,588
Equity participation in ERT (5,075) (597) (14,363) 300
Foreign currency (loss) gain (116) 35 (408) 492
------- ------- ------- -------
Total revenues 102,927 108,167 314,059 328,754
------- ------- ------- -------
Expenses:
Operating costs 20,436 23,305 64,640 67,340
Real estate and other taxes 10,466 9,683 32,186 28,735
Interest 23,193 20,895 69,305 59,252
Depreciation and amortization 15,591 15,523 47,134 46,921
Provision for doubtful accounts 776 1,717 2,902 5,020
Non-recurring charge 1 58 3,665 8,487
General and administrative 1,140 2,290 5,718 6,041
------- ------- ------- -------
Total expenses 71,603 73,471 225,550 221,796
------- ------- ------- -------
Income before real estate sales, impairment
of real estate and minority interest 31,324 34,696 88,509 106,958
Gain on sale of real estate and securities 1,185 191 9,099 191
Impairment of real estate -- -- (1,900) --
Minority interest in income of partnership (276) (199) (755) (1,004)
------- ------- ------- -------
Net income before extraordinary item 32,233 34,688 94,953 106,145
Extraordinary item, early extinguishment of
debt -- -- 758 --
------- ------- ------- -------
Net income 32,233 34,688 95,711 106,145
Other comprehensive income:
Unrealized (loss) gain on securities (6) (168) 229 (167)
------- ------- ------- -------
Comprehensive income $32,227 $34,520 $95,940 $105,978
======= ======= ======= ========
Net income available to common stock - basic $26,574 $29,029 $78,735 $89,025
======= ======= ======= =======
Net income available to common stock -
diluted $26,850 $29,228 $79,490 $90,029
======= ======= ======= =======
Basic earnings per common share before
extraordinary item $0.30 $0.33 $0.89 $1.00
===== ===== ===== =====
Diluted earnings per common share before
extraordinary item $0.30 $0.32 $0.88 $0.99
===== ===== ===== =====
Basic earnings per common share after
extraordinary item $0.30 $0.33 $0.90 $1.00
===== ===== ===== =====
Diluted earnings per common share after
extraordinary item $0.30 $0.32 $0.89 $0.99
===== ===== ===== =====
Average shares outstanding - basic 87,651 88,718 87,636 88,779
====== ====== ====== ======
Average shares outstanding - diluted 89,020 90,105 89,023 90,781
====== ====== ====== ======
</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 SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
ASSETS
<S> <C> <C>
Real estate:
Land $531,837 $552,146
Building and improvements 2,262,851 2,328,499
Accumulated depreciation (256,582) (216,274)
--------- ---------
Net real estate 2,538,106 2,664,371
Real estate held for sale 62,824 --
Cash and cash equivalents 9,801 10,834
Marketable securities 1,419 1,190
Receivables:
Trade, less allowance for doubtful accounts of $13,842 and
$13,897 at September 30, 2000 and December 31, 1999, respectively 33,620 30,225
Other, net 23,160 15,825
Mortgages and notes receivable 59,182 59,142
Prepaid expenses and deferred charges 14,183 13,076
Investment in and loans to ERT Development Corporation 173,990 150,432
Other assets 8,634 8,046
--------- ---------
Total assets $2,924,919 $2,953,141
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable, including unamortized premium of $8,110 and
$9,921 at September 30, 2000 and December 31, 1999, respectively $336,748 $341,643
Notes payable, net of unamortized discount of $2,072 and
$2,264 at September 30, 2000 and December 31, 1999, respectively 612,928 662,736
Credit facilities 238,721 188,721
Capital leases 27,351 27,351
Other liabilities 94,420 88,591
Tenant security deposits 7,851 7,480
--------- ---------
Total liabilities 1,318,019 1,316,522
--------- ---------
Minority interest in partnership 24,244 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 September 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 September 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 September 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
September 30, 2000 and December 31, 1999, respectively 876 875
Additional paid-in capital 1,708,825 1,708,186
Accumulated other comprehensive income 443 214
Accumulated distribution in excess of net income (127,511) (97,779)
--------- --------
Total stockholders' equity 1,582,656 1,611,519
--------- ---------
Total liabilities and stockholders' equity $2,924,919 $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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $95,711 $106,145
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 47,134 46,921
Amortization of net premium/discount on mortgages and notes payable (862) (3,218)
Amortization of deferred debt and loan acquisition costs 732 --
Foreign currency loss (gain) 408 (493)
Provision for doubtful accounts 2,902 5,020
Gain on sale of real estate and securities, net (9,099) (191)
Minority interest in income of partnership 755 1,004
Extraordinary item (758) --
Impairment of real estate assets 1,900 --
Equity in loss/(income) of affiliate 14,363 (459)
Change in investment in and accrued interest on loans to ERT Development
Corporation (10,217) (6,017)
Changes in operating assets and liabilities, net:
Change in trade and notes receivable (5,290) (8,499)
Change in other receivables (7,089) (5,191)
Change in other liabilities 8,347 7,269
Change in sundry assets and liabilities (2,589) (8,006)
------- -------
Net cash provided by operating activities 136,348 134,285
------- -------
Cash flows from investing activities:
Real estate acquisitions and building improvements (17,497) (44,912)
Proceeds from real estate sales, net 41,530 --
Advances for mortgage notes receivable, net (3,359) (8,758)
Loans to ERT Development Corporation (37,024) (4,426)
Repayments from ERT Development Corporation 9,284 --
Repayments of mortgage notes receivable 765 655
Sales of marketable securities -- 84
Purchase of minority interest -- (20,000)
Sale of property -- 7,168
------- --------
Net cash used in investing activities (6,301) (70,189)
------- --------
Cash flows from financing activities:
Proceeds from issuing notes -- 175,000
Principal payments of mortgages and notes payable (101,287) (86,248)
Dividends paid (125,228) (124,605)
Proceeds from mortgages payable 48,000 --
Proceeds from dividend reinvestment plan -- 16,856
Proceeds from credit facility borrowing 162,000 171,137
Repayment of credit facility (112,000) (173,810)
Proceeds from exercise of stock options 6,600 1,334
Distributions paid to minority partners (1,611) (2,665)
Payments for the repurchase of common stock (7,554) (24,814)
-------- --------
Net cash used in financing activities (131,080) (47,815)
--------- --------
Net increase in cash and cash equivalents (1,033) 16,281
Cash and cash equivalents at beginning of year 10,834 13,951
------ ------
Cash and cash equivalents at end of year $9,801 $30,232
====== =======
</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 nine months ended September 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>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
Investment ($10,138) $4,227
Uncollateralized loans and accounts receivable 72,267 129,790
Collateralized loans receivable 84,424 --
Accrued interest 27,437 16,415
-------- --------
$173,990 $150,432
======== ========
</TABLE>
Interest and principal payments from ERT are primarily received upon the
completion of development projects. Interest receivable from ERT was
approximately $27.4 million and $16.4 million at September 30, 2000 and December
31, 1999, respectively. Interest income recognized by the Company was
approximately $13.9 million and $10.8 million for the nine months ended
September 30, 2000 and 1999, respectively. For the three months ended September
30, 2000 and 1999, interest income recognized by the Company was approximately
$4.6 million and $3.7 million, 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 nine months ended September 30, 2000 and 1999, the equity in the
(losses)/income of ERT recorded by the Company was ($14.4) million and $0.3
million, respectively. For the three months ended September 30, 2000 and 1999,
the equity in the (losses) of ERT recorded by the Company was ($5.1) million and
($0.6) million, respectively.
Summary unaudited financial information for ERT is as follows (in
thousands).
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
CONDENSED BALANCE SHEETS
Mortgages, notes and interest receivable from developers,
interest at 10% to 12% $69,533 $40,074
Real estate and other assets, net of depreciation 192,939 205,569
-------- --------
Total Assets $262,472 $245,643
======== ========
Notes payable to New Plan Excel Realty Trust, Inc. $156,643 $128,903
Accrued interest payable to New Plan Excel Realty Trust, Inc. 27,437 16,415
Construction and land loans 78,475 84,013
Other liabilities 10,053 12,085
------- -------
Total liabilities 272,608 241,416
Total stockholders' equity (10,136) 4,227
-------- --------
Total liabilities and stockholders' equity $262,472 $245,643
======== ========
THREE MONTHS ENDED THREE MONTHS ENDED
------------------ ------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
CONDENSED STATEMENTS OF INCOME
Revenues $6,007 $3,946
Interest expense to New Plan Excel Realty Trust, Inc. (4,571) (3,660)
Other expenses (6,511) (883)
-------- ------
Net income (loss) ($5,075) ($597)
======== ======
NINE MONTHS ENDED NINE MONTHS ENDED
----------------- -----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
Revenues $19,288 $14,181
Interest expense to New Plan Excel Realty Trust, Inc. (13,865) (10,831)
Other expenses (19,786) (3,050)
--------- --------
Net income (loss) ($14,363) $300
========= ====
</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 September 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 in the aggregate of $32.9
million at September 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 for the project, which guarantee now totals approximately
$8.1 million. This guarantee is reduced commensurately as the funds are
provided. In addition, the Company has guaranteed $1.3 million of the $5.4
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 nine months ended September 30, 2000
and 1999 were $69.4 million and $61.8 million, respectively. State and local
income taxes paid for the nine months ended September 30, 2000 and 1999 were
$0.8 million and $0.3 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 SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic EPS
Numerator:
Net income before extraordinary item $32,233 $34,688 $94,953 $106,145
Preferred dividends (5,659) (5,659) (16,976) (17,120)
------- ------- -------- --------
Net income available to common shares
- basic, before extraordinary item $26,574 $29,029 $77,977 $89,025
=======
Extraordinary item -- -- 758 --
------- ------- -------- -------
Net income available to common shares
- basic, after extraordinary item $26,574 $29,029 $78,735 $89,025
======= ======= ======= =======
Denominator:
Weighted average of common shares
outstanding 87,651 88,718 87,636 88,779
====== ====== ====== ======
Earnings Per Share before extraordinary
item $0.30 $0.33 $0.89 $1.00
===== ===== ===== =====
Earnings Per Share after extraordinary item $0.30 $0.33 $0.90 $1.00
===== ===== ===== =====
Diluted EPS
Numerator:
Net income before extraordinary item $32,233 $34,688 $94,953 $106,145
Preferred dividends (5,659) (5,659) (16,976) (17,120)
Minority interest 276 199 755 1,004
------- ------- ------- -------
Net income available to common shares
- diluted, before extraordinary item $26,850 $29,228 $78,732 $90,029
Extraordinary item -- -- 758 --
------- ------- ------- -------
Net income available to common shares
- diluted, after extraordinary item $26,850 $29,228 $79,490 $90,029
======= ======= ======= =======
Denominator:
Weighted average of common shares
outstanding 87,651 88,718 87,636 88,779
Effect of diluted securities:
Common stock options 134 21 152 73
Excel Realty Partners, L.P. third
party units 1,235 1,366 1,235 1,929
------ ------ ------ -----
89,020 90,105 89,023 90,781
====== ====== ====== ======
Earnings Per Share before extraordinary
item $0.30 $0.32 $0.88 $0.99
===== ===== ===== =====
Earnings Per Share after extraordinary item $0.30 $0.32 $0.89 $0.99
===== ===== ===== =====
</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 September 30, 2000, the retail segment consists of
294 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 SEPTEMBER 30, 2000
-----------------------------------------
Revenue $81,540 $19,101 $2,286 $102,927
Expenses and minority interest 21,312 10,366 1,417 33,095
Interest expense -- -- 23,193 23,193
Depreciation and amortization 13,293 2,298 -- 15,591
Gain/(loss) on sale of securities/properties 1,185 -- -- 1,185
------- ------ --------- -------
Net income $48,120 $6,437 ($22,324) $32,233
======= ====== ========= =======
Real estate Assets, net $2,192,047 $346,059 $2,538,106
========== ======== ==========
FOR THREE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------
Revenue $83,234 $19,423 $5,510 $108,167
Expenses and minority interest 23,647 11,058 2,547 37,252
Interest expense -- -- 20,895 20,895
Depreciation and amortization 13,378 2,145 -- 15,523
Gain on sale of securities/properties -- -- 191 191
------- ------ --------- -------
Net income $46,209 $6,220 ($17,741) $34,688
======= ====== ========= =======
Real estate assets, net $2,292,207 $344,803 $2,637,010
========== ======== ==========
FOR NINE MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------
Revenue $249,393 $57,186 $7,480 $314,059
Expenses and minority interest 68,926 30,802 10,138 109,866
Interest expense -- -- 69,305 69,305
Depreciation and amortization 40,344 6,790 -- 47,134
Gain/(loss) on sale of securities/properties 9,099 -- -- 9,099
Impairment of real estate 1,900 -- -- 1,900
Extraordinary item 758 -- -- 758
-------- ------- --------- -------
Net income $148,080 $19,594 ($71,963) $95,711
======== ======= ========= =======
Real estate assets, net $2,192,047 $346,059 $2,538,106
========== ======== ==========
FOR NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------
Revenue $252,173 $58,201 $18,380 $328,754
Expenses and minority interest 69,240 31,855 15,532 116,627
Interest expense -- -- 59,252 59,252
Depreciation and amortization 40,381 6,540 -- 46,921
Gain on sale of securities/properties -- -- 191 191
-------- ------- --------- --------
Net income $142,552 $19,806 ($56,213) $106,145
======== ======= ========= ========
Real estate assets, net $2,292,207 $344,803 $2,637,010
========== ======== ==========
</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 third quarter, two retail shopping centers, one
commercial property and 41 single tenant retail properties were classified as
"Real estate held for sale". These properties are located in 20 states and have
an aggregate gross leasable area of 1,405,000 square feet. The estimated fair
market value of the one commercial property and the 41 single tenant retail
properties is less than their book value resulting in an impairment expense of
$1.9 million recorded in the quarter ended June 30, 2000.
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 September 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.
NOTE 10: SUBSEQUENT EVENTS
On October 2, 2000, ERT, the Company's development affiliate,
executed agreements with Wilton Partners, one of its joint venture partners,
with respect to various projects. Specifically, (i) note receivables totaling
$490,900 on Miami Gardens and Meadows Tampa, as well as the $215,000 Wilton Line
of Credit, were paid off in full; (ii) ERT acquired ownership to Annie Land
Plaza and New Market Shopping Center in consideration for the assumption of
existing indebtedness encumbering these properties; (iii) ERT received the right
to acquire in January 2001 Colonnades West Shopping Center in consideration for
the assumption of existing indebtedness encumbering the property, subject
however to the rights of a third party to acquire the property prior to 2001;
and (iv) Wilton Partners relinquished all of its management, development and
ownership interests and rights in and to Clearwater Mall and The Mall at 163rd
Street in exchange for a payment of approximately $1.8 million.
10
<PAGE> 11
On October 11, 2000, the Company entered into a two-year swap
agreement with Fleet National Bank relating to $125 million of the Company's
variable rate debt. The agreement effectively fixes the debt at a LIBOR base
rate of 6.67% plus applicable spreads associated with the Company's variable
rate credit facilities.
On November 3, 2000, the Company extended the maturity on $122.5
million of its unsecured senior revolving credit facility with The Bank of New
York for one year, to November 2001. The extended facility currently bears
interest at its original terms of LIBOR plus 72.5 basis points.
11
<PAGE> 12
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 September
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 September 30, 2000, the Company had approximately $11.2 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 ("Facility #1"), which was scheduled to
expire 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. Facility
#1 was extended on November 3, 2000 for one year. The other facility ("Facility
#2") expires in November 2002. As of September 30, 2000, the Company had
outstanding under Facility #1, $66.2 million which bears interest at LIBOR plus
72.5 basis points and $97.5 million outstanding under Facility #2 which
currently bears interest at LIBOR plus 67.5 basis points. 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 $75.0 million term loan facility
with Fleet National Bank, all of which was outstanding as of September 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 September
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 September 30, 2000 consisted of $336.7 million of mortgages payable
and $612.9 million of notes payable. Of the total mortgages payable, $53.7
million have variable interest rates with the balance having a weighted average
interest rate of 8.1%. The notes payable have a weighted average interest rate
of 7.3%. 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. $10.7 million as of
September 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 September 30, 2000 was $49.2 million. In
addition, the Company has guaranteed that ERT will provide additional funding,
currently approximately $8.1 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
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<PAGE> 13
average interest rate of 8.0%. The Company provides substantially all of the
capital required to fund ERT's operations.
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 September 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 nine months ended September
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 had three classes of preferred stock outstanding as of
September 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 $0.4125
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 SEPTEMBER 30, 2000 AND 1999
REVENUES:
Rental revenue, percentage rents and expense reimbursements decreased by
approximately $2.0 million. Between July 1, 1999 and September 30, 2000, two
retail shopping centers were acquired. These acquisitions produced revenue
increases of approximately $0.6 million. During the same period, the Company
sold all or a portion of thirteen retail and 2 residential properties which
accounted for revenue reductions of $2.0 million. Clearwater Mall, a property
with redevelopment plans under reevaluation, had a revenue decline of $0.3
million. Lease settlement income declined $0.6 million. The balance of the
change was a $0.3 million increase.
Interest, dividend and other income increased $1.4 million. This was due
to higher fees on development projects and interest from ERT. There was a
partial offset from lower interest from mortgages receivable and short term
investments of excess cash.
The decrease in equity participation in ERT, from a loss of $0.6 million
in the quarter ended September 30, 1999 to a loss of $5.1 million in the quarter
ended September 30, 2000, was primarily the result of factors relating to two
operating malls (The Mall at 163rd Street in North Miami Beach, Florida and
Pointe Orlando in Orlando, Florida) and 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 approximately $0.5 million, due primarily to a reduction in retail
revenue of $1.0 million due to redevelopment plans, which was partially offset
by a decrease in bad debt expense of $0.2 million. 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
September 30, 2000 of $1.5 million. This was due primarily to increased
litigation costs relating to a legal action revolving around the construction
and delayed opening of the mall and an increase in bad debt expense.
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<PAGE> 14
ERT had a decrease in interest income due primarily to the acquisition of
the remaining 61.5% ownership interest and consolidation of Pointe Orlando and
the elimination of interest income therefrom, which was $1.5 million in the
quarter ended September 30, 1999. ERT's interest expense to New Plan Excel
increased $0.9 million due to higher borrowings.
Foreign currency loss increased by approximately $0.2 million for the
quarter ended September 30, 2000 compared to the quarter ended September 30,
1999, because of the decline in value of the Canadian dollar
EXPENSES:
Total expenses decreased $2.0 million. The major areas of change are
discussed below.
Interest expense increased $2.3 million due primarily to increased
borrowings in connection with stock repurchases, the redemption of Excel Realty
Partners, L.P. partnership units and property improvements and additional
investments in ERT Development Corporation.
Real estate and other taxes increased $0.8 million. The increase was due
to generally higher real estate taxes in the retail and residential portfolios
and an increase in state and local taxes.
Bad debt expense decreased $0.9 million due to the improved collection
experience which resulted in significantly lower provisions for loss.
Operating expenses, after eliminating the impact of acquisitions and
dispositions, decreased $0.6 million.
Administrative expenses decreased $1.2 million. A prior period cost of
$0.8 million related to a terminated acquisition of another company did not
recur in the current period. Professional costs, which were lower in the current
quarter, accounted for the balance of the decrease.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES:
Rental revenue, percentage rents and expense reimbursements decreased by
approximately $3.8 million. Between January 1, 1999 and September 30, 2000, five
retail shopping centers and one residential property were acquired. These
acquisitions produced revenue increases of approximately $2.5 million. During
the same period, the Company sold all or a portion of 13 retail and two
residential properties which accounted for revenue reductions of $2.5 million
and $2.1 million, respectively. Clearwater Mall, a property with redevelopment
plans under reevaluation, accounted for a revenue decline of $1.6 million. Lease
settlement income declined $0.9 million. The balance of the change in revenue
was an increase of $0.8 million.
Interest, dividend and other income increased $4.7 million. This was due
to higher fee revenue and increased interest on loans to ERT Development
Corporation and the Superior, Arapahoe and Atrium development projects.
The decrease in equity participation in ERT, from a gain of $0.3 million
in the nine months ended September 30, 1999 to a loss of $14.4 million in the
nine months ended September 30, 2000, was primarily the result of factors
relating to the two operating mall properties (The Mall at 163rd Street and
Pointe Orlando), 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 approximately $3.5 million due primarily to an increase in the bad
debt expense of $0.5 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 $2.1 million due to redevelopment plans, offset by lower
operating expenses of approximately $1.0 million.
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 nine months
ended September 30, 2000 of approximately $4.5 million. This was due primarily
to increased
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<PAGE> 15
litigation costs of $2.5 million relating to a legal action revolving around the
construction and delayed opening of the mall, an increase in bad debt expense of
approximately $1.4 million and lower revenues and higher operating expenses of
$0.6 million.
ERT had a decrease in interest income of approximately $4.3 million due
primarily 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 $3.0 million due to
higher borrowings by ERT and this was the primary reason for the $4.7 million
increase in interest income of the Company.
Foreign currency loss increased $0.9 million due to the decline in value
of the Canadian dollar.
EXPENSES:
Total expenses increased $3.8 million. The major areas of increase were
interest expense, real estate and other taxes. These increases were partially
offset by decreases in the remaining categories.
Interest expense increased $10.1 million due primarily to increased
borrowings in connection with stock repurchases, the redemption of Excel Realty
Partners, L.P. partnership units, property acquisitions and improvements and
additional investments in ERT Development Corporation.
Real estate and other taxes increased $3.5 million. Approximately $0.1 of
the increase was attributable to the net effect of acquisitions and
dispositions. The remaining $3.4 million was due to generally higher real estate
taxes across the retail and residential portfolios.
Bad debt expense decreased $2.1 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 $8.5 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 $0.4 million, a 0.6% increase.
Administrative expenses decreased $0.3 million. Increased personnel costs
were offset by reduced travel and professional fees.
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<PAGE> 16
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. The 1999 calculations
have been restated to conform to the NAREIT definition to include non-recurring
charges. 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income before extraordinary items $32,233 $34,688 $94,953 $106,145
Preferred dividends (5,659) (5,659) (16,976) (17,120)
Minority interest 276 199 755 1,004
------- ------ ------ ------
Net income applicable to common shareholders - diluted 26,850 29,228 78,732 90,029
Gain on sale of real estate - New Plan Excel (1,185) (191) (9,099) (191)
Impairment of real estate - New Plan Excel -- -- 1,900 --
Depreciation and amortization
New Plan Excel real estate assets 15,591 15,523 47,134 46,921
ERT Development Corp. real estate assets(1) 1,200 1,491 3,516 1,704
Preferred dividends 800 800 2,400 2,543
------- ------- -------- --------
Funds from operations $43,256 $46,851 $124,583 $141,006
======= ======= ======== ========
Weighted average of common shares outstanding - diluted 90,894 91,979 90,897 92,766
====== ====== ====== ======
FFO per share - diluted $0.48 $0.51 $1.37 $1.52
===== ===== ===== =====
Preferred A shares have a dilutive effect for FFO calculations.
</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.
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QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2000, the Company had approximately $53.7 million of
outstanding floating rate mortgages. In addition, the Company had $238.7 million
outstanding as of September 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 $1.216 billion of outstanding total debt of the
Company, the approximately $2.925 billion of total assets of the Company and the
approximately $2.664 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 September 30, 2000. On October 11, 2000, the Company
entered into a two-year swap agreement with Fleet National Bank relating to $125
million of the Company's variable rate debt. The agreement effectively fixes the
debt at a base rate of 6.67% plus applicable spreads associated with the
Company's variable rate credit facilities. Hedging agreements enable the Company
to convert floating rate liabilities into fixed rate liabilities. Such
agreements do 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 enters into are 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. Future decreases in interest rates
will 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 September 30, 2000, the Company had notes receivable in the total
amount of Canadian $16 million (approximately U.S. $10.7 million as of September
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 September 30, 2000.
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<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Employment Agreement, dated as of September 14, 2000, by
and between the Company and Leonard Brumberg.
10.2 Guaranty, dated as of April 5, 2000, by the Company for
the benefit of Bank One, Texas, National Association
(Briar Preston Ridge).
12.1 Ratio of Earnings to Fixed Charges and Preferred Dividends
27(1) Financial Data Schedule
---------------
(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 August 9, 2000 containing Item 5, Other
Events. This is the filing of the Supplemental Disclosure
of the registrant for the quarter ended June 30, 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: November 13, 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
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<PAGE> 20
EXHIBIT INDEX
NUMBER DESCRIPTION
10.1 Employment Agreement, dated as of September 14, 2000, by and
between the Company and Leonard Brumberg.
10.2 Guaranty, dated as of April 5, 2000, by the Company for the
benefit of Bank One, Texas, National Association (Briar
Preston Ridge).
12.1 Ratio of Earnings to Fixed Charges and Preferred Dividends
27(1) Financial Data Schedule
---------------
(1) Filed as an exhibit to the electronic filing only.
20
