<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBER 1-9349
SIZELER PROPERTY INVESTORS, INC.
(Exact name of registrant, as specified in its charter)
DELAWARE 72-1082589
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2542 WILLIAMS BLVD. 70062
KENNER, LOUISIANA (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (504) 471-6200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
8% Convertible Subordinated
Debentures, due 2003 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
Indicate by check mark if disclosure of delinquent files pursuant to
Item 405 of the Registration S-K ((S) 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statement incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K ( X ).
-----
The aggregate market value of voting stock held by non-affiliates of
the registrant was $58,102,000 at March 22, 1999.
The number of shares of common stock outstanding at March 22, 1999, was
7,930,483.
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the registrant's definitive proxy statement for the annual
meeting of its shareholders to be held in May 1999 are incorporated by reference
in Part III of this report.
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Sizeler Property Investors, Inc. (the "Company") was organized as a
Delaware corporation with perpetual existence on October 28, 1986.
The Company is a self-administered equity real estate investment trust
(REIT) that invests in income- producing shopping center and apartment
properties in the southern United States. At December 31, 1998, the Company's
investment portfolio included interests in three enclosed regional shopping
malls, two power shopping centers, eleven community shopping centers, and
fourteen apartment communities. The properties are located in Louisiana (15),
Florida (10), Alabama (4), and Texas (1). Leasable area of the retail
properties totalled approximately 2.7 million s.f., and the apartment
communities contained 3,341 units. At December 31, 1998, the Company's retail
and apartment properties were each approximately 95% leased.
The Company has elected to qualify and be treated as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to maintain
its qualification as a REIT in the future. As a qualified REIT, with limited
exceptions, the Company will not be taxed under federal and certain state income
tax laws at the corporate level on income that it distributes to its
shareholders. For special tax provisions applicable to REITs, refer to
Sections 856-860 of the Code.
INVESTMENT OBJECTIVE AND STRATEGIC PLAN
The Company's fundamental investment objective is to create long-term value
for its shareholders. The Company expects to achieve this objective through an
overall strategy, focused on making opportunistic property acquisitions and
employing an effective value-added asset management program, which emphasizes
cash flow growth and the appreciation of property values. The Company may also
participate with other entities in property ownership, through joint ventures or
other types of co-ownership.
The Company's strategy for future growth is to acquire shopping center and
apartment properties in fundamentally strong markets in the southern United
States as capital and real estate market conditions permit, and to improve the
operating performance of those properties through its effective and efficient
leasing and management programs. The Company also intends, from time to time,
to implement programs of redevelopment or expansion of certain of its properties
and, subject to market conditions, develop new properties within its
geographical region. The Company believes that its regional concentration and
substantial knowledge of the markets in which it operates affords it a
competitive advantage in the identification of real estate trends and investment
opportunities within those markets.
At December 31, 1998, approximately 61% of the Company's portfolio
consisted of investments in shopping centers and 39% consisted of investments in
apartments. In order to provide a degree of portfolio risk diversification,
while maintaining a focused approach to asset management, the Company has
elected to expand its ownership of apartment properties and, to the extent
practical, intends to achieve a balanced portfolio of investments in shopping
centers and apartments.
The Company considers numerous factors in the evaluation of potential real
estate investments, including, but not limited to, the following:
--acquisition and/or development cost and initial cash flow in relation to
yield objective;
--the potential to increase cash flow through effective property
management;
--geographic area and demographic profile;
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--property size and composition of tenants;
--availability of financing, including the possibility of assuming existing
financing or the potential for refinancing;
--condition, quality of design, construction, and other physical
attributes;
--current and expected economic environment of local and regional real
estate markets;
--the presence of or proximity to potential environmental problems;
--current and historical occupancy levels;
--current and historical sales levels of retail tenants;
--other characteristics of existing tenants, including credit-worthiness;
--anticipated future treatment under applicable federal, state, and local
tax laws and regulations; and
--potential for appreciation in value.
Although the Company presently makes equity investments in real estate, it
may invest in mortgages and other types of interests in real estate. The
Company may also invest in the securities of other entities engaged in real
estate activities or securities of other issuers, subject to the limitations of
such investments necessary to maintain its REIT qualification.
An important part of the Company's overall strategic initiative is to
increase cash flow and to enhance the value of its portfolio through: (1)
maximizing rental income by achieving an optimum level of rental rates and
occupancy levels; (2) operating properties in a cost-effective manner; (3)
renovating existing properties in order to maintain or improve their competitive
position and performance in the marketplace; (4) developing new properties; and
(5) accessing the most cost effective sources of capital to finance its
properties.
The Company expects to hold its properties as long-term investments and has
no maximum period for retention of each investment. Under ordinary
circumstances, the Company would not expect to sell property held for less than
four years.
COMPETITION
There are numerous real estate entities which compete with the Company in
seeking properties for acquisition and/or development and tenants for occupancy
in its market area. The Company believes that the principal competitive factors
affecting the attraction and retention of its tenants are property location,
visibility, and accessibility, as well as the quality, condition, and overall
appearance of its properties. The Company also competes with other entities for
capital funds necessary to support its investment activities and asset growth.
ENVIRONMENTAL MATTERS
Investments in real property have the potential for environmental liability
on the part of the owner of such property. The Company is not aware of any
environmental liabilities relating to the Company's investment properties which
would have a material adverse effect on the Company's business, assets, or
results of operations.
The Company's guidelines require a Phase I environmental study prior to the
acquisition or development of
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a property that, because of its prior use or its proximity to other properties
with environmental risks, may be subject to possible environmental hazards.
Where determined appropriate by a Phase I study, a more extensive evaluation may
be undertaken to further investigate the potential for environmental liability
prior to an investment in a property. The Company does not presently maintain
insurance coverage for environmental liabilities.
EXECUTIVE OFFICERS
The Company is self-administered and does not engage a separate advisor or
pay an advisory fee for administrative or investment services. Management of
the Company is provided by its officers. The executive officers of the Company
are elected annually by, and serve at the discretion of, the Board of Directors.
The executive officers of the Company are as follows:
Name Age Position(s) with the Company
---- --- ----------------------------
Sidney W. Lassen .......... 64 Chairman of the Board, Chief
Executive Officer, and Director
Thomas A. Masilla, Jr...... 52 Vice Chairman, President, Principal
Operating and Chief Financial
Officer, and Director
Mr. Lassen has been an executive officer of the Company since its inception
in 1986, and has been involved in the acquisition, development, management, and
disposition of shopping center and apartment properties for approximately 40
years. He has previously served as a trustee of the International Council of
Shopping Centers, the national association for the shopping center industry.
Mr. Lassen is Chairman of the Board and Chief Executive Officer of Sizeler
Realty Co., Inc., and a Director of the Hibernia Corporation.
Mr. Masilla was elected to the position of Vice Chairman of the Company in
1994, Principal Operating Officer and President in 1995, Chief Financial Officer
in 1996, and has been a member of the Company's Board of Directors since 1986.
Mr. Masilla, a certified public accountant, was a consultant to the Company from
1992 to 1994, and was a consultant to Sizeler Realty Co., Inc. from 1992 to
1994. Mr. Masilla has been a corporate executive and manager for more than 25
years, with extensive experience in commercial bank management.
PROPERTY MANAGEMENT
The Company has a management agreement with Sizeler Real Estate Management
Co., Inc. (the "Management Company"), which is wholly-owned by Sizeler Realty
Co., Inc. ("Sizeler Realty"). Sizeler Realty is a diversified real estate
service company in which a beneficial minority interest is directly owned by
Sidney W. Lassen and the balance is owned by members of the family of Mr.
Lassen's wife, and residual entities of the estates of her mother and father.
Under the terms of the management agreement with the Company, the
Management Company performs leasing and management services with respect to the
Company's properties, including, for each property, the annual preparation of
detailed operating and capital budgets, accounting, data processing, collection
of rents, repairs, cleaning, maintenance, and other operating services. Upon
request of the Company, the Management Company also performs, or causes to be
performed, additional services, such as advertising, promotion, market research,
and other management information, and may perform for fees, services for tenants
and other third parties, which fees may not qualify under REIT income tests.
The Management Company is paid a fee based on the Company's gross
investment in real estate, subject to adjustment for year-to-year increases or
decreases in funds from operations per share of the Company.
ECONOMIC CONDITIONS
The Company is affected by national and local economic conditions and
changes in real estate markets. The financial performance of shopping center
properties depends upon the strength of retail sales, which are directly
affected
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by trends in employment and personal income. Apartment properties are, likewise,
affected by the economic conditions and employment trends of the communities in
which they are located.
Fifteen of the Company's properties, comprising approximately 46% of its
investment portfolio, are located in Louisiana. The Louisiana economy, since
the late 1980's, has experienced positive growth as reflected in higher levels
of employment and an increase in general economic activity. The national and
global economies also have an impact on Louisiana, particularly as they affect
the tourism, convention, energy, and port industries, which are important
segments of the Louisiana economy.
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To diversify its portfolio and reduce the risks of geographic concentration
and economic dependency on a primary industry, the Company began a program in
1988 of acquiring properties in other states of the Gulf South region. Today,
the Company has properties in Louisiana, Florida, Alabama, and Texas.
ITEM 2. PROPERTIES
As of December 31, 1998, the Company's real estate portfolio included
interests in sixteen shopping centers and fourteen apartment communities. The
Company holds, directly, or indirectly through partnerships, a fee interest in
all of its properties, with the exception of the Southwood Shopping Center in
Gretna, Louisiana, and the Westland Shopping Center, in Kenner, Louisiana, in
which it holds its interests under long-term ground leases. Thirteen of the
Company's properties were subject to mortgage loans at December 31, 1998.
In the opinion of Management, all of the Company's properties are well-
maintained and in good repair, suitable for their intended uses, and are
adequately covered by insurance.
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The following table sets forth certain information concerning the Company's
real estate investments as of December 31, 1998:
<TABLE>
<CAPTION>
Percent
Leased (d)
Gross Leasable Area December 31
Year Year Last in Square Feet or -------------
Description Completed Renovated Rentable Units 1998 1997
- ----------- --------- --------- ------------------- ----- -----
<S> <C> <C> <C> <C> <C>
REGIONAL ENCLOSED MALLS (3)
- ---------------------------
Hammond Square (b) 1978 1992 364,681 89% 91%
(Hammond, Louisiana) 435,085 (a)
North Shore Square (b) 1986 1995 355,865 97% 97%
(Slidell, Louisiana) 623,914 (a)
Southland Mall (b) 1970, 1981 1994 469,807 98% 98%
(Houma, Louisiana) 623,479 (a)
POWER SHOPPING CENTERS (2)
- --------------------------
Lantana Plaza 1992 --- 275,928 98% 98%
(Palm Beach County, Florida)
Westward 1961, 1990 1995 226,547 100% 100%
(W. Palm Beach, Florida)
COMMUNITY SHOPPING CENTERS (11)
- -------------------------------
Airline Park(b) 1973 1986 71,368 92% 93%
(Metairie, Louisiana)
Azalea Gardens (b) 1950 1986 45,032 100% 100%
(Jefferson, Louisiana)
Camelot Plaza 1981 --- 80,760 84% 89%
(San Antonio, Texas)
Colonial (b) 1967 1987 43,230 22% 35%
(Harahan, Louisiana)
Delchamps Plaza (b) 1989 --- 72,649 100% 100%
(Gonzales, Louisiana) 186,649 (a)
Rainbow Square 1986 --- 74,746 100% 100%
(Dunnellon, Florida) 116,746 (a)
Southwood (c) 1986 --- 40,000 100% 100%
(Gretna, Louisiana)
Town & Country 1989 --- 148,782 99% 99%
(Palatka, Florida)
Weeki Wachee Village 1987 --- 82,349 91% 94%
(Weeki Wachee, Florida)
Westgate (b) 1964 1987 208,319 98% 98%
(Alexandria, Louisiana)
Westland (b) 1966 1990 108,271 94% 98%
(Kenner, Louisiana) --------- ---- ----
2,668,334 95% 96%
========= ==== ===
APARTMENTS (14)
- ---------------
Bel Air 1968, 1974 --- 202 units 98% 96%
(Mobile, Alabama)
Bryn Mawr 1991 --- 240 units 99% 100%
(Naples, Florida)
Colonial Manor (b) 1967 1994 48 units 100% 98%
(Harahan, Louisiana)
Garden Lane (b) 1966, 1971 --- 261 units 100% 95%
(Gretna, Louisiana)
Georgian (b) 1951 1993 135 units 99% 93%
(New Orleans, Louisiana)
Governors Gate (b) (e) --- --- 184 units 66% n/a
(Pensacola, Florida)
Hampton Park 1977 1995 300 units 96% 97%
(Mobile, Alabama)
Jamestown Estates 1972 --- 177 units 96% 97%
(Pensacola, Florida)
Lafayette Square 1969-1972 1995 675 units 94% 93%
(Mobile, Alabama)
Lakeview Club 1992 --- 443 units 96% 98%
(Ft. Lauderdale, Florida)
Magnolia Place (b) 1984 --- 148 units 91% 99%
(New Iberia, Louisiana)
Pine Bend 1979 --- 152 units 97% 98%
(Mobile, Alabama)
Steeplechase (b) 1982 --- 192 units 98% 100%
(Lafayette, Louisiana)
Woodcliff 1977 --- 184 units 95% 96%
(Pensacola, Florida) ----------- ---- ----
3,341 units 95% 96%
=========== ==== ====
</TABLE>
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(a) The larger number is the total area of the indicated center, including
owner-occupied stores in which the Company has no ownership interest.
Hammond Square and Southland Mall have stores owned by Dillard Department
Stores, Inc., comprising 70,404 s.f. and 153,672 s.f. of space,
respectively; North Shore Square Mall has stores owned by Dillard
Department Stores, Inc. comprising 115,776 s.f. and 76,954 s.f. of space,
and Mervyn's comprising 75,319 s.f. of space; Delchamps Plaza and Rainbow
Square Shopping Centers have stores owned by Wal-Mart Stores, Inc.,
comprising 114,000 s.f. and 42,000 s.f., respectively.
(b) The Company has a 99% partnership interest in these properties.
(c) The Company has a 50% partnership interest in Southwood Shopping Center.
(d) Percent leased for retail is computed as the ratio of total space leased,
including anchor stores, to total leasable space, expressed as a
percentage. The computation excludes owner-occupied stores in which the
Company has no ownership interest.
(e) This apartment community is under development. As of December 31, 1998, the
contractor had released 184 units, of which 66% were leased. The
development will have 240 units and completion is expected in early 1999.
This property is in the initial lease-up stage and is expected to stabilize
occupancy levels by the end of 1999.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not presently involved in any material litigation nor, to
its knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business or which is expected to be covered by the Company's liability
insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's shares of common stock ("shares") and its 8% convertible
subordinated debentures are listed for trading on the New York Stock Exchange
under the symbol "SIZ" and "SIZ 03," respectively.
The following table sets forth the high and low sales price of the shares
for the periods indicated, as reported by the New York Stock Exchange, and the
dividends paid per share in such periods.
Dividends
High Low Paid
--------- ------- ---------
1998
- ----
1st Quarter................... $ 11 3/8 $10 5/16 $0.22
2nd Quarter................... 11 3/16 9 13/16 $0.22
3rd Quarter................... 10 5/16 8 5/8 $0.22
4th Quarter................... 9 3/16 8 1/16 $0.22
1997
- ----
1st Quarter................... $ 10 5/8 $ 9 5/8 $0.22
2nd Quarter................... 10 1/2 9 5/8 $0.22
3rd Quarter................... 11 3/4 10 1/4 $0.22
4th Quarter................... 11 5/8 9 11/16 $0.22
As of March 22, 1999, there were 475 individually-listed owners of record
of the Company's shares. Approximately 82% of the Company's outstanding shares
are held by CEDE & Co., which is accounted for as a single shareholder of record
for multiple beneficial owners. CEDE & Co. is a nominee of the Depository Trust
Company (DTC), with respect to securities deposited by participants with DTC,
e.g., mutual funds, brokerage firms, banks, and other financial organizations.
The Company has paid dividends in each quarter since its inception as a
publicly-owned company in 1987, with a cumulative total of approximately $77.7
million paid to shareholders over this time period.
Under the REIT rules of the Internal Revenue Code, the Company must pay at
least 95% of its ordinary taxable income as dividends in order to avoid taxation
as a regular corporation. The declaration of dividends is a discretionary
decision of the Board of Directors and depends upon the Company's distributable
funds, financial requirements, tax considerations, and other factors. A portion
of the Company's dividends paid may be deemed capital gain income, a return of
capital, or both, to its shareholders. The Company annually provides its
shareholders a statement as to its designation of the taxability of the
dividend.
The federal income tax status of dividends per share paid for each of the
five years ended December 31 was as follows:
1998 1997 1996 1995 1994
-------- ----- ----- ----- -----
Ordinary Income $0.62 $0.54 $0.37 $0.40 $0.72
Return of Capital 0.27(a) 0.34 0.51 0.72 0.38
Capital Gain --- --- --- --- ---
----- ----- ----- ----- -----
Total $0.89 $0.88 $0.88 $1.12 $1.10
===== ===== ===== ===== =====
(a) Includes a $0.01 per share distribution for the redemption of stock
purchase rights in connection with the Company's adoption of a
replacement shareholder rights plan.
The Company has a dividend reinvestment plan pursuant to which the
Company's shareholders of record may use their dividends to purchase additional
shares. The Company has acquired shares for the plan by open market
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purchases. Brokerage commissions on all such purchases are paid by the Company
and are not charged to plan participants.
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Item 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial data (in
thousands, except per share data) for the Company and its subsidiaries and
should be read in conjunction with the consolidated financial statements and
notes thereto included herein.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
OPERATING DATA (1) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenue
Rents and other income $ 47,648 $ 46,286 $ 44,255 $ 43,087 $ 36,621
Equity in income of partnership 111 94 103 106 75
--------- --------- --------- --------- ---------
47,759 46,380 44,358 43,193 36,696
Operating Expenses 30,481 29,280 27,630 26,044 21,382
--------- --------- --------- --------- ---------
INCOME FROM OPERATIONS 17,278 17,100 16,728 17,149 15,314
--------- --------- --------- --------- ---------
Other Income (Expenses)
Interest and dividend income 32 63 98 42 82
Interest expense (14,554) (14,608) (14,542) (14,497) (10,248)
--------- --------- --------- --------- ---------
(14,522) (14,545) (14,444) (14,455) (10,166)
--------- --------- --------- --------- ---------
INCOME BEFORE GAIN ON SALE
OF REAL ESTATE 2,756 2,555 2,284 2,694 5,148
--------- --------- --------- --------- ---------
Gain on Sale of Real Estate Investments ---- ---- ---- ---- 8
--------- --------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 2,756 2,555 2,284 2,694 5,156
Extraordinary Item--Early Extinguishment
of Debt ---- ---- (449) ---- ----
--------- --------- --------- --------- ---------
NET INCOME $ 2,756 $ 2,555 $ 1,835 $ 2,694 $ 5,156
========= ========= ========= ========= =========
Funds From Operations (2) $ 12,284 $ 11,509 $ 10,771 $ 10,492 $ 11,118
Net Cash Provided by (Used in):
Operating Activities $ 12,510 $ 13,027 $ 13,583 $ 10,117 $ 10,615
Investing Activities $ (17,020) $ (6,836) $ (7,555) $ (17,857) $ (52,748)
Financing Activities $ 4,532 $ (5,531) $ (6,834) $ 7,591 $ 37,257
Dividends Paid $ 7,330 $ 7,413 $ 7,425 $ 9,723 $ 9,806
Per Share Data:
Net Income (Basic and Diluted) $ 0.33 $ 0.30 $ 0.22 $ 0.31 $ 0.58
Dividends Paid $ 0.88 $ 0.88 $ 0.88 $ 1.12 $ 1.10
Weighted Average Shares Outstanding 8,331 8,423 8,433 8,690 8,914
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
BALANCE SHEET DATA
Gross Investment in Real Estate $ 329,390 $ 311,216 $ 304,424 $ 296,884 $ 279,698
Total Assets 285,886 276,345 278,380 281,857 269,923
Mortgage Notes Payable 89,869 90,615 68,080 68,317 42,139
Notes Payable 49,178 32,342 52,639 51,419 52,987
Convertible Subordinated Debentures 62,878 62,878 62,878 62,878 62,878
Total Liabilities 209,669 191,818 189,013 186,534 163,213
Shareholders' Equity 76,217 84,527 89,367 95,323 106,710
</TABLE>
________________
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for information regarding factors such as property
acquisitions and dispositions and other transactions which have affected
operating performance during the periods indicated.
(2) Using guidelines established by the National Association of Real Estate
Investment Trusts, funds from operations has been defined by the
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Company as net income, excluding gains or losses from sales of property and
other non-operating extraordinary items, plus depreciation on real estate
assets, and after adjustments for unconsolidated partnerships to reflect
funds from operations on the same basis.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
Annual Report on Form 10-K. Historical results and percentage relationships,
including trends which might appear, set forth in the consolidated statements of
income contained in the consolidated financial statements, should not be taken
as indicative of future operations.
The Company's real estate investment portfolio is composed of sixteen
shopping center properties and fourteen apartment properties. As of
December 31, 1998, the Company's gross investment in real estate totalled $329.4
million, and consisted of approximately 61%, or $199.9 million, in shopping
centers, and approximately 39%, or $129.5 million, in apartments. Total revenue
for 1998 was $47.8 million, and consisted of approximately 57%, or $27.4
million, generated by the shopping center properties, and approximately 43%, or
$20.4 million, generated by the apartment properties.
RESULTS OF OPERATIONS
Comparison of the years ended December 31, 1998, and 1997.
For the year ended December 31, 1998, operating revenue from shopping
centers and apartments increased approximately $894,000 and $485,000,
respectively, resulting in a combined total increase of approximately $1.4
million. The increase in operating revenue is primarily attributable to
increases in rental rates coupled with sustained occupancy levels at the
properties, offset by the effect of the new accounting method for recognizing
percentage rental income for the retail properties (see Note A of Notes to
Consolidated Financial Statements). Operating expenses, before depreciation,
increased approximately $677,000 in 1998 compared to 1997. The increase in
operating expenses associated with the retail properties is $396,000 and with
the apartment properties is $281,000. The increase in operating expenses is
attributable to the following: (i) an increase in management fees due to
increases in investments in real estate properties on which the management fee
is based, and an increase in leasing fees due to higher leasing activity in
1998; (ii) an increase in real estate taxes due to increased property value
assessments at certain properties; and (iii) an increase in maintenance and
administrative expenses due to higher payroll costs, professional fees and other
administrative costs associated with the Company's real estate portfolio and
capital structure. Depreciation increased $524,000 due to capital improvements
made to the Company's properties during 1998 and 1997. Accordingly, income from
operations totalled $17.3 million in 1998, compared to $17.1 million in 1997,
and income from operations, before depreciation, totalled $27.4 million in 1998,
compared to $26.7 million in 1997.
Interest and dividend income decreased in 1998 compared to 1997 due to
reduced interest earnings on mortgage escrow deposits resulting from lower
escrow balances during 1998.
Interest expense reflects a net decrease of $54,000 resulting from the
following activity completed within the past twelve months. In December 1997,
mortgage financing was completed at one of the Company's enclosed regional malls
and has increased interest expense approximately $1.8 million. In the second
quarter of 1998, the Company refinanced mortgage debt on ten of its apartment
properties, and repaid a mortgage note payable on one of its retail centers, all
of which resulted in a reduction in interest expense totalling $394,000. The
mortgage proceeds derived from the mortgage financing and refinancing mentioned
above were used to pay down variable-rate bank debt and as a result, interest
expense on bank debt decreased $1.4 million. During 1998, the Company drew on
its bank lines to fund contract payments on the Governors Gate development in
Florida, and the related interest charges of $308,000 have been capitalized to
the development. The average bank borrowings were approximately $38.6 million
and $51.6 million for 1998 and 1997, respectively, with an average rate of 7.6%
and 7.8%, respectively.
Net income in 1998, compared to 1997, increased in the aggregate and on a
per-share basis.
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Comparison of the years ended December 31, 1997, and 1996.
For the year ended December 31, 1997, operating revenue from shopping
centers and apartments increased approximately $1.2 million and $844,000,
respectively, resulting in a combined total increase of approximately
$2.0 million. The increase in operating revenue is primarily attributable to
increases in rental rates coupled with sustained higher occupancy levels at the
properties. Operating expenses, before depreciation, in 1997 increased $1.1
million, compared to 1996. The increase in operating expenses associated with
the retail properties is $650,000 and with the apartment properties is $498,000.
The increase in operating expenses is attributable to the following: (i) an
increase in management and leasing fees due to increases in investments in real
estate properties, combined with an increase in the rate used to calculate the
management fee due to the increase in funds from operations in 1997 over 1996,
and an increase in leasing fees due to higher leasing activity in 1997; (ii) an
increase in real estate taxes due to increased property value assessments at
several properties; and (iii) an increase in maintenance and administrative
expenses due to higher payroll costs, professional fees, and other
administrative costs associated with the Company's real estate portfolio and
capital structure. Depreciation increased $502,000 due to capital improvements
made to the Company's properties during 1997 and 1996. Accordingly, income from
operations totalled $17.1 million, compared to $16.7 million reported in 1996,
and income from operations, before depreciation, totalled $26.7 million in 1997,
compared to $25.8 million in 1996.
Interest and dividend income decreased in 1997 compared to 1996 due to
reduced interest earnings on mortgage escrow deposits resulting from lower
escrow balances during 1997.
Interest expense increased $66,000 over 1996, attributable to the
following: (1) an increase of $98,000 in interest on bank debt (average bank
borrowings were approximately $51.6 million and $51.9 million, with average
interest rates of 7.8% and 7.6% in 1997 and 1996, respectively) offset by (2) a
net decrease of approximately $32,000 in mortgage interest due to: (i)
refinancing of existing mortgage debt of approximately $19.8 million in the
first quarter of 1996, and $3.4 million in the third quarter of 1996, which
resulted in reductions in the interest rates of approximately 200 and 113 basis
points, respectively, offset by (ii) mortgage debt financing totalling $23
million completed in December 1997.
Net income in 1997, compared to 1996, increased in the aggregate and on a
per-share basis. Net income in 1996 included an extraordinary charge of
$449,000 resulting from deferred financing costs expensed in connection with the
refinancing of mortgage debt.
LIQUIDITY AND CAPITAL RESOURCES
The primary source of working capital for the Company is net cash provided
by operating activities, from which the Company funds normal operating
requirements and distributions to shareholders. In addition, the Company
maintains unsecured credit lines with commercial banks, which it utilizes to
temporarily finance the cost of portfolio growth, property improvements, and
other expenditures. At December 31, 1998, the Company had $1.2 million in cash
and cash equivalents, and commitments for a total of $100.0 million of bank
lines of credit, of which approximately $49.2 million was available.
Utilization of the bank lines is subject to certain restrictive covenants that
impose maximum borrowing levels by the Company through the maintenance of
prescribed debt-to-equity or other financial ratios.
Net cash flows provided by operating activities decreased $517,000 in 1998
from 1997, and decreased $556,000 in 1997 from 1996. The decrease between 1998
and 1997 is primarily attributable to a net increase in operating assets over
1997, offset by an increase in income from operations before depreciation. The
decrease between 1997 and 1996 is primarily attributable to a net decrease in
operating liabilities offset by an increase in income from operations before
depreciation.
Net cash flows used in investing activities increased $10.2 million
primarily attributable to the development of a new luxury apartment community in
Florida. During 1997, the Company entered into a construction contract with a
third-party construction company to build the apartment community. When
completed, this community will have
15
<PAGE>
240 garden-style units, with a mix of one, two, and three bedroom units. As of
December 31, 1998, the Company had $14.0 million invested in this development.
The total development will cost approximately $14.3 million and is expected to
be completed in early 1999. Also during 1998, the Company acquired two parcels
of land for future development totalling approximately $611,000 located next to
two properties owned by the Company. The Company had no other material
commitments for capital improvements at December 31, 1998.
Net cash flows used in investing activities decreased $719,000 in 1997 from
1996, attributable to a decrease in capital expenditures on real estate
properties due to the completion of a roofing project at one of the Company's
retail centers in 1996, offset by an increase in acquisitions of real estate
reflecting the acquisition of land for future development located in Florida as
mentioned above. The Company had no other material commitments for capital
improvements at December 31, 1997.
Net cash flows provided by financing activities increased approximately
$10.1 million in 1998 from 1997 primarily attributable to using the Company's
available bank lines to fund contract payments in connection with the
development of the apartment community in Florida. Also in the second quarter
of 1998, the Company completed mortgage debt refinancing involving ten of the
Company's apartment properties. Mortgage debt totalling $59.1 million was
refinanced resulting in new mortgage debt totalling $61.5 million, of which the
net proceeds totalling $2.4 million were used to pay down short-term variable-
rate bank debt. The Company was able to achieve a reduction of 100 basis points
in the average interest rate on the mortgages refinanced, from an average rate
of approximately 7.8% down to an average rate of approximately 6.8%. Offsetting
the increase in cash flows from financing activities, in the second quarter of
1998, the Company repaid mortgage debt totalling $1.7 million having an interest
rate of 9.0% on one of its retail centers, and the Company has additional debt
amortization resulting from mortgage debt financing completed in 1997.
Additionally during 1998, pursuant to the Company's stock repurchase program
initiated in 1995, the Company repurchased 449,000 shares at a total cost of
$3.8 million compared to 17,100 shares repurchased at a total cost of $176,000
in 1997.
Net cash flows used in financing activities decreased $1.3 million in 1997
from 1996 primarily attributable to mortgage debt financing totalling $23
million completed in December 1997 combined with a decrease in treasury shares
purchased in 1997 compared to 1996. Proceeds derived from the mortgage debt
financing were used to pay down short-term variable-rate bank debt. During
1997, pursuant to the Company's stock repurchase program initiated in 1995,
17,100 shares were repurchased at a total cost of $176,000, compared to 62,800
shares repurchased at a total cost of $516,000 in 1996.
As of December 31, 1998, thirteen of the Company's properties, comprising
approximately 47% of its gross investment in real estate, were subject to a
total of $89.9 million in mortgage debt, all of which bear a fixed rate of
interest for a fixed term. The remaining seventeen properties in the portfolio
are currently unencumbered by mortgage debt. The Company anticipates that its
current cash balance, operating cash flows, and borrowings (including borrowings
under its lines of credit) will be adequate to fund the Company's future (i)
operating and administrative expenses, (ii) debt service obligations, (iii)
distributions to shareholders, (iv) capital improvements on existing properties,
(v) development of new properties, and (vi) normal repair and maintenance
expenses at its properties.
The Company's current dividend policy is to pay quarterly dividends to
shareholders, based upon, among other factors, funds from operations, as opposed
to net income. Because funds from operations excludes the deduction of non-cash
charges, principally depreciation of real estate assets, and certain non-
operating items, quarterly dividends will typically be greater than net income
and may include a tax-deferred return of capital component. The Board of
Directors, on February 5, 1999, declared a cash dividend with respect to the
period October 1, 1998, through December 31, 1998, of $.22 per share, to
shareholders of record as of February 25, 1999.
FUNDS FROM OPERATIONS
Real estate industry analysts utilize the concept of funds from operations
as an important analytical measure of a REIT's financial performance. The
Company considers funds from operations in evaluating its operating results, and
its dividend policy is also based, in part, on the concept of funds from
operations.
16
<PAGE>
Funds from operations is defined by the Company as net income, excluding
gains or losses from sales of property and other non-operating extraordinary
items, plus depreciation on real estate assets, and after adjustments for
unconsolidated partnerships to reflect funds from operations on the same basis.
Funds from operations do not represent cash flows from operations as defined by
generally accepted accounting principles, nor is it indicative that cash flows
17
<PAGE>
are adequate to fund all cash needs, including distributions to shareholders.
Funds from operations should not be considered as an alternative to net income
as defined by generally accepted accounting principles or to cash flows as a
measure of liquidity.
For the year ended December 31, 1998, funds from operations totalled $12.3
million, compared to $11.5 million in 1997, an increase of approximately
$800,000. This increase in funds from operations results from internal growth
and improved operating performance by the Company's real estate properties,
which experienced overall income growth, primarily from higher rental rates
coupled with sustained occupancy.
For the year ended December 31, 1997, funds from operations totalled $11.5
million, compared to $10.8 million in 1996, an increase of approximately
$700,000. This increase in funds from operations results from internal growth
and improved operating performance by the Company's real estate properties,
which experienced overall income growth, primarily from higher rental rates
coupled with sustained occupancy, offset by a slight increase in interest
expense due to a higher level of average borrowings.
FUTURE RESULTS
This Form 10-K and other documents prepared, and statements made by the
Company, may contain certain forward-looking statements that are subject to risk
and uncertainty. Investors and potential investors in the Company's securities
are cautioned that a number of factors could adversely affect the Company and
cause actual results to differ materially from those in the forward-looking
statements, including, but not limited to (a) the inability to lease currently
vacant space in the Company's properties; (b) decisions by tenants and anchor
tenants who own their space to close stores at the Company's properties; (c) the
inability of tenants to pay rent and other expenses; (d) tenant bankruptcies;
(e) decreases in rental rates available from tenants; (f) increases in operating
costs at the Company's properties; (g) lack of availability of financing for
acquisition, development and rehabilitation of properties by the Company; (h)
increases in interest rates; (i) Year 2000 issues; (j) a general economic
downturn resulting in lower retail sales and causing downward pressure on
occupancies and rents at retail properties; as well as (k) the adverse tax
consequences if the Company were to fail to qualify as a REIT in any taxable
year; and (l) the competitive factors described in "Item 1 - Competition" of
this report.
YEAR 2000 ISSUE
The Company has been addressing the potential computer program problems
resulting from the arrival of Year 2000 (Y2K). The Company has established a
Y2K compliance review process to assess the impact on the Company's internal
financial information systems and property mechanical operations systems, as
well as the potential impact from Y2K problems of significant tenants, vendors
and suppliers of financial and other services (collectively "independent third
parties"). The Company has identified required modifications to its internal
corporate computer operating systems and certain software modifications at its
apartment properties. The Company has completed these identified modifications
and continues to test and monitor its systems. The Company has been working
with external consultants to have every computer system evaluated to determine
their Y2K compliance. This evaluation has shown that approximately 65% of the
Company's computer systems are Y2K compliant. The remaining 35% will either be
fixed to become compliant, or they will be replaced with new systems during
1999. The estimated cost to fix and/or completely replace these remaining
computer systems range from $5,000 to $25,000. The Company's compliance plan is
to continue the process of conducting inquiries of its independent third parties
in order to determine if these third parties have Y2K problems, and what
contingency plans they have developed to deal with identified exposures. Based
on the results of these inquiries, the Company will formulate appropriate
contingency back-up plans to take necessary and feasible precautions against
problems not within its control. The Company is also continuing the process of
reviewing, testing, and monitoring its own internal systems to ensure that they
are Y2K compliant and to make necessary and timely corrections of identified Y2K
problems under its direct control. This overall process will be on-going
throughout 1999 due to the dependence upon the timeliness of activities of the
Company's third parties, whom it does not control.
Pursuant to the disclosure requirements of the Securities and Exchange
Commission, the Company is
18
<PAGE>
attempting to identify possible worst case scenarios concerning Y2K issues and
the related risks to the Company should one or more of these scenarios occur. It
should be noted, however, that the Company cannot predict the probability of
these scenarios actually materializing.
In the Company's opinion, risks which could have a material effect on the
Company's business, results of operations, or financial statements would likely
be due to the Company's dependence on the services of independent third parties
over which the Company has no control. Such potentially material risks would
include, but are not limited to, the following: (i) failure of tenants to make
rental payments because either their internal systems or their banking
institutions will be unable to process such payments; (ii) the Company will be
unable to pay vendors and/or creditors due to the failure of tenants to pay
rents and/or the Company's banking institutions' failure to process such
payments; and (iii) the complete failure or extended interruption of utility
services to the Company's properties, which are served by various utilities, due
to the utilities' inability to provide such services.
As of the time of this report, the Company is continuing to evaluate
contingency plans for the above described scenarios. However, the Company's
plans will depend upon the assessments and contingency plans of the independent
third parties. The Company has requested such information from several thousand
independent third parties, and it is awaiting receipt of their responses.
Responses received to date indicate that independent third parties are working
on their own assessments at this time. The Company will continue to assess this
matter so as to develop appropriate plans to reasonably mitigate such risks, if
and when identified. A widespread failure of tenants (or their banks) to
deliver collectible rent payments, or a failure of the Company's principal banks
of account to credit deposits to the Company's account or process the Company's
checks, or a sustained interruption of utility services to any of the Company's
properties is likely to have a material adverse effect on the Company's revenues
(which will be extremely adverse if multiple tenants or properties are so
affected) and may subject the Company to claims by tenants and contractual
counterparties and may result in Company claims against non-performing suppliers
and service providers. If such a worse case scenario occurs, it will likely be
of catastrophic proportions impacting multiple companies and industries of all
kinds. Accordingly, the Company's ability to mitigate its exposures to such
risks will be limited to what it can control, and corrective measures will be
subject to the Company's resources as well as the efforts which industry and
government make to alleviate the problems.
EFFECTS OF INFLATION
Substantially all of the Company's retail leases contain provisions
designed to provide the Company with a hedge against inflation. Most of the
Company's retail leases contain provisions which enable the Company to receive
percentage rentals based on tenant sales in excess of a stated breakpoint and/or
provide for periodic increases in minimum rent during the lease term. The
majority of the Company's retail leases are for terms of less than ten years,
which allows the Company to adjust rentals to changing market conditions. In
addition, most retail leases require tenants to pay a contribution towards
property operating expenses, thereby reducing the Company's exposure to higher
costs caused by inflation. The Company's apartment leases are written for short
terms, generally six to twelve months, and are adjusted according to changing
market conditions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to interest rate changes primarily as a result of
its bank lines of credit and long-term debt used to maintain liquidity, and fund
capital expenditures and expansion of the Company's real estate investment
portfolio and operations. The Company's interest rate risk management objective
is to limit the impact of interest rate changes on earnings and cash flows, and
to optimize its overall borrowing costs. To achieve its objective, the Company
utilizes its variable LIBOR-based, short-term (one to six month maturities) bank
credit lines to fund new investments until such investments can be financed with
long-term fixed-rate mortgage debt.
19
<PAGE>
The Company's interest rate risk is monitored on an on-going basis, using a
variety of techniques. The table below presents the principal amounts, weighted
average interest rates, fair values and other terms required by year of expected
maturity based on contractual terms to evaluate the expected cash flows and
sensitivity to interest changes.
<TABLE>
<CAPTION>
Fixed Average Variable Average
Rate Interest Rate Interest
Debt Rate Debt Rate
------------ -------- ----------- ---------
<S> <C> <C> <C> <C>
1999 $ 5,148,000 7.62% $49,178,000 7.10%
2000 1,831,000 7.55% ---- ----
2001 4,662,000 7.54% ---- ----
2002 1,949,000 7.53% ---- ----
2003 64,980,000 7.43% ---- ----
Thereafter 74,177,000 7.13% ---- ----
------------ -----------
Total at December 31, 1998 $152,747,000 7.62% $49,178,000 7.10%
============ ===========
Fair Value at December 31, 1998 $150,391,000 $47,999,000
============ ===========
</TABLE>
As the table incorporates only those exposures that exist as of
December 31, 1998, it does not consider those exposures or positions which could
arise after that date. Moreover, because firm commitments are not presented in
the table above, the information presented therein has limited predictive value.
As a result, the Company's ultimate realized gain or loss with respect to
interest rate fluctuations will depend on the exposures that arise during the
period and the level of interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's Consolidated Balance Sheets as of December 31, 1998 and 1997,
and its Consolidated Statements of Income, Shareholders' Equity, Cash Flows, and
Notes to Consolidated Financial Statements for the years ended December 1998,
1997, and 1996, together with the Reports of Independent Auditors thereon, are
included under Item 14 of this report and are incorporated herein by reference.
Unaudited quarterly results of operations included in Notes to Consolidated
Financial Statements are also incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have be no disagreements with Accountants on accounting and financial
disclosures.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information regarding the executive officers of the Company, see
"Executive Officers" in Part I, Item 1 of this report. The other information
required by this Item 10 is incorporated herein by reference to the Company's
definitive proxy statement, which will be filed with the Securities and Exchange
Commission, pursuant to Regulation 14A within 120 days of the end of the
Company's fiscal year.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 is incorporated herein by
reference to the Company's definitive proxy statement, which will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120
days of the end of the Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 12 is incorporated herein by
reference to the Company's definitive proxy statement, which will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120
days of the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item 13 is incorporated herein by
reference to the Company's definitive proxy statement, which will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120
days of the end of the Company's fiscal year.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) and (2) Financial Statements and Financial Statement Schedules
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors 18
Consolidated Balance Sheets as of December 31, 1998, and 1997 19
Consolidated Statements of Income for the years ended December 31, 1998, 1997,
and 1996 20
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998,
1997, and 1996 21
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997, and 1996 22
Notes to Consolidated Financial Statements 23-34
Financial Statement Schedules
Schedule II. Valuation and Qualifying Accounts 35
Schedule III. Real Estate and Accumulated Depreciation 36-37
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
submitted because they are not required or the required information appears in
the financial statements or notes thereto.
22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Sizeler Property Investors, Inc.
We have audited the consolidated balance sheets of Sizeler Property
Investors, Inc. and subsidiaries as of December 31, 1998, and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1998. In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedules listed in the Index at Item
14(a). These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sizeler
Property Investors, Inc. and subsidiaries as of December 31, 1998, and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
KPMG LLP
New Orleans, Louisiana
February 4, 1999,
except for Note H, as to
which the date is March 4, 1999
23
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Real estate investments (Notes B and D)
Land $ 49,814,000 $ 49,203,000
Buildings and improvements, net of accumulated depreciation
of $55,964,000 in 1998 and $46,454,000 in 1997 222,699,000 214,655,000
Investments in real estate partnership (Notes A and F) 913,000 904,000
------------- -------------
273,426,000 264,762,000
Cash and cash equivalents 1,150,000 1,128,000
Accounts receivable and accrued revenue, net of allowance for
doubtful accounts of $423,000 in 1998 and $281,000 in 1997 2,829,000 2,696,000
Prepaid expenses and other assets, net 8,481,000 7,759,000
------------- -------------
Total Assets $ 285,886,000 $ 276,345,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable (Notes D and M) $ 89,869,000 $ 90,615,000
Notes payable (Note D) 49,178,000 32,342,000
Accounts payable and accrued expenses 6,657,000 4,903,000
Tenant deposits and advance rents 878,000 871,000
Minority interest in real estate partnerships (Note K) 209,000 209,000
------------- -------------
146,791,000 128,940,000
Convertible subordinated debentures (Notes D and M) 62,878,000 62,878,000
------------- -------------
Total Liabilities 209,669,000 191,818,000
------------- -------------
SHAREHOLDERS' EQUITY (Notes E and L)
Preferred stock, 6,000,000 shares authorized in 1998 and
3,000,000 shares authorized in 1997, none issued ---- ----
Common stock, par value $.01 per share, 30,000,000 shares authorized
in 1998 and 15,000,000 shares authorized in 1997, shares issued
and outstanding--8,979,806 in 1998 and 8,966,119 in 1997 90,000 90,000
Additional paid-in capital 127,750,000 127,602,000
Accumulated distributions in excess of net income (Note G) (42,688,000) (38,028,000)
------------- -------------
85,152,000 89,664,000
Treasury shares, at cost, 989,800 shares in 1998 and 540,800 shares in 1997 (8,926,000) (5,146,000)
Accumulated other comprehensive income (Note A) (9,000) 9,000
------------- -------------
Total Shareholders' Equity 76,217,000 84,527,000
------------- -------------
Commitments and contingencies (Note J) ---- ----
------------- -------------
Total Liabilities and Shareholders' Equity $ 285,886,000 $ 276,345,000
============= =============
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------
1998 1997 1996
------------- ------------ -------------
OPERATING REVENUE (Notes C & F)
<S> <C> <C> <C>
Rents and other income $ 47,648,000 $ 46,286,000 $ 44,255,000
Equity in income of partnership 111,000 94,000 103,000
------------- ------------ -------------
47,759,000 46,380,000 44,358,000
------------- ------------ -------------
OPERATING EXPENSES
Management and leasing (Note F) 2,468,000 2,429,000 2,228,000
Utilities 1,999,000 2,004,000 1,977,000
Real estate taxes 3,692,000 3,446,000 3,363,000
Administrative expenses 2,431,000 2,520,000 2,194,000
Operations and maintenance (Note F) 7,201,000 6,828,000 6,391,000
Other operating expenses 2,545,000 2,432,000 2,358,000
Depreciation and amortization (Note A) 10,145,000 9,621,000 9,119,000
------------- ------------ -------------
30,481,000 29,280,000 27,630,000
------------- ------------ -------------
INCOME FROM OPERATIONS 17,278,000 17,100,000 16,728,000
------------- ------------ -------------
OTHER INCOME (EXPENSES)
Interest, dividends, and other income 32,000 63,000 98,000
Interest expense (Note D) (14,554,000) (14,608,000) (14,542,000)
------------- ------------ -------------
(14,522,000) (14,545,000) (14,444,000)
------------- ------------ -------------
INCOME BEFORE EXTRAORDINARY ITEM 2,756,000 2,555,000 2,284,000
------------- ------------ -------------
Extraordinary item--early extinguishment of debt (Note A) ---- ---- (449,000)
------------- ------------ -------------
NET INCOME $ 2,756,000 $ 2,555,000 $ 1,835,000
============= ============ =============
BASIC AND DILUTED EARNINGS PER
SHARE DATA (Note A):
Income before extraordinary item $ 0.33 $ 0.30 $ 0.27
============= ============ =============
Extraordinary item $ ---- $ ---- $ (0.05)
============= ============ =============
Net income $ 0.33 $ 0.30 $ 0.22
============= ============ =============
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Distributions Unrealized
------------------- Paid-in in Excess of Treasury Gain/(Loss) on
Shares Amount Capital Net Income Stock Securities Total
--------- ------- ------------ ------------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 8,930,069 $89,000 $127,273,000 $(27,580,000) $(4,454,000) $ (5,000) $95,323,000
Net income for 1996 1,835,000 1,835,000
Cash dividends declared and
paid ($.88 per share)
(Note G) (7,425,000) (7,425,000)
Exercise of stock options
(Note E) 10,000 88,000 88,000
Shares issued pursuant to
Directors' Stock Ownership
Plan (Note E) 6,000 56,000 56,000
Shares issued pursuant to
Incentive Award Plan 300 3,000 3,000
Unrealized gain on securities
(Note A) 3,000 3,000
Purchase of treasury shares,
62,800 shares (516,000) (516,000)
--------- ------- ------------ ------------- ------------ --------------- -----------
Balance at December 31, 1996 8,946,369 $89,000 $127,420,000 $(33,170,000) $(4,970,000) $ (2,000) $89,367,000
Net income for 1997 2,555,000 2,555,000
Cash dividends declared and
paid ($.88 per share)
(Note G) (7,413,000) (7,413,000)
Exercise of stock options
(Note E) 8,750 75,000 75,000
Shares issued pursuant to
Directors' Stock Ownership
Plan (Note E) 9,000 1,000 90,000 91,000
Shares issued pursuant to
Incentive Award Plan 2,000 17,000 17,000
Unrealized gain on securities
(Note A) 11,000 11,000
Purchase of treasury shares,
17,100 share (176,000) (176,000)
--------- ------- ------------ ------------- ------------ --------------- -----------
Balance at December 31, 1997 8,966,119 $90,000 $127,602,000 $(38,028,000) $(5,146,000) $ 9,000 $84,527,000
Net income for 1998 2,756,000 2,756,000
Cash dividends declared and
paid ($.88 per share)
(Note G and H) (7,330,000) (7,330,000)
Stock Rights Redemption (Note L) (86,000) (86,000)
Shares issued pursuant to
Directors' Stock Ownership
Plan (Note E) 9,000 98,000 98,000
Shares issued pursuant to
Incentive Award Plan 4,687 50,000 50,000
Unrealized gain on securities
(Note A) (18,000) (18,000)
Purchase of treasury shares,
449,000 shares (3,780,000) (3,780,000)
--------- ------- ------------ ------------- ------------ --------------- -----------
Balance at December 31, 1998 8,979,806 $90,000 $127,750,000 $(42,688,000) $(8,926,000) $ (9,000) $76,217,000
========= ======= ============ ============= ============ =============== ===========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,756,000 $ 2,555,000 $ 1,835,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 10,145,000 9,621,000 9,119,000
Extraordinary item--early extinguishment of debt ---- ---- 449,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable and
accrued revenue (133,000) 332,000 60,000
(Increase) decrease in prepaid expenses and
other assets (962,000) (196,000) 538,000
Increase (decrease) in accounts payable and accrued
expenses 609,000 531,000 1,610,000
Other, net 95,000 184,000 (28,000)
------------ ------------ ------------
Net Cash Provided by Operating Activities 12,510,000 13,027,000 13,583,000
------------ ------------ ------------
INVESTING ACTIVITIES:
Acquisitions of land (611,000) (550,000) ----
Improvements to real estate investments, net of
related retainage payable (16,409,000) (6,286,000) (7,555,000)
------------ ------------ ------------
Net Cash Used in Investing Activities (17,020,000) (6,836,000) (7,555,000)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable and notes
payable to banks (Note I) 78,345,000 23,000,000 24,649,000
Principal payments on mortgage notes payable and
notes payable to banks (Note I) (62,255,000) (20,764,000) (23,664,000)
Debt issuance costs and mortgage escrow deposits (414,000) (267,000) 82,000
Cash dividends and other distributions to
Shareholders (Note G) (7,414,000) (7,413,000) (7,425,000)
Issuance of shares pursuant to stock option and award plans 50,000 92,000 90,000
Minority interest in real estate partnerships (Note K) ---- (3,000) (50,000)
Purchases of treasury shares (3,780,000) (176,000) (516,000)
------------ ------------ ------------
Net Cash Provided by (Used in) Financing Activities 4,532,000 (5,531,000) (6,834,000)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 22,000 660,000 (806,000)
Cash and cash equivalents at beginning of year 1,128,000 468,000 1,274,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF YEAR $ 1,150,000 $ 1,128,000 $ 468,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, and 1996
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of Sizeler Property Investors, Inc., and its majority-owned and
controlled subsidiaries and partnerships (the "Company"). All significant
intercompany transactions and balances have been eliminated in consolidation.
The Company's investment in a real estate partnership at December 31, 1998 and
1997, represents a 50% interest in a partnership which owns a community shopping
center and is accounted for by the equity method.
Cash and Cash Equivalents. Cash equivalents represent investments that are
highly liquid and have a maturity of three months or less at the time the
investment is made.
Real Estate Investments. Real estate investments are recorded at cost.
Depreciation of buildings and improvements is provided by the straight-line
method over the estimated useful lives of the assets, ranging from ten to forty
years. Betterments and major replacements are capitalized, and the replaced
asset and accumulated depreciation are removed from the accounts. Tenant
improvement costs are depreciated using the straight-line method over the term
of the related leases. Maintenance and repairs are expensed in the period
incurred.
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, the Company reviews real estate (and other long-lived
assets) and certain identifiable intangibles to be held and used, whenever
events or changes in circumstances indicate that the carrying amounts of an
asset may not be recoverable. If it is indicated that the carrying amount may
not be recoverable from future cash flows generated by the asset, an impairment
loss will be recognized. No real estate is held for sale at December 31, 1998.
Securities. In accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, investment securities have been
classified as available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of taxes, reported as a separate component of
shareholders' equity.
Deferred Charges. Debt issuance costs in connection with issuance of the
Company's 8% Convertible Subordinated Debentures (the "Debentures") and other
financings are included in prepaid expense and other assets and are being
amortized over the term of the related obligations. Unamortized costs are
charged to expense upon prepayment of the obligation. Unamortized costs related
to the Debentures are offset against shareholders' equity upon conversion by
debenture-holders. Costs incurred in connection with the execution of leases
are included in prepaid expenses and other assets, and are amortized over the
term of the respective leases. Unamortized costs are charged to expense upon
cancellation of leases prior to the expiration of lease terms.
Rental Income. Rental income includes rents from shopping center and
apartment properties. Minimum
28
<PAGE>
rents from shopping center leases are accounted for ratably over the term of the
lease. Percentage rents are recognized based upon tenant sales that exceed
specific levels. Tenant reimbursements are recognized as the applicable services
are rendered or expenses are incurred.
On May 21, 1998, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus decision on Issue No. 98-9,
Accounting for Contingent Rent in Interim Financial Periods, which provides that
recognition of contingent (percentage) rental income in interim periods must be
deferred until the specified target (breakpoint) that triggers the percentage
rental income is achieved. Consistent with industry practice, the Company has
historically recognized percentage rental income based on a percentage of
tenants' sales ratably over the course of the year. The Company has adopted
Issue No. 98-9 and has deferred the recognition of percentage rental income
until the date that the tenants' sales exceed the breakpoint set forth in the
lease agreements. However, on November 19, 1998, the EITF withdrew its May 21,
1998, consensus on Issue No. 98-9. This change in thinking by the EITF was met
with strong objections from the Securities and Exchange Commission (SEC) on the
basis that income should not be accrued if it can be reversed. The SEC is
expected to pursue this matter further in 1999 and state its position through a
release of the SEC's Staff Accounting Bulletin (SAB) on revenue recognition.
Based on the strong objection taken by the SEC to the withdrawal of Issue
No. 98-9 by the EITF, the Company has elected to continue accounting for
percentage rental income as prescribed by Issue No. 98-9 until the SEC renders
its final position on the recognition of percentage rents.
Federal Income Taxes. The Company has elected to be taxed as a real estate
investment trust (REIT) under the Internal Revenue Code and intends to maintain
its qualification as a REIT in the future. As a REIT, the Company is allowed to
reduce taxable income by all or a portion of its distribution to shareholders.
As distributions have exceeded taxable income, no provision for federal or state
income taxes has been recorded.
A real estate investment trust is required to distribute to shareholders at
least 95% of its ordinary taxable income and meet certain income source and
investment restriction requirements. Taxable income differs from net income for
financial reporting purposes principally because of differences in the amount
and timing of depreciation of the properties. At December 31, 1998, the income
tax basis, net of accumulated tax depreciation, of the Company's real estate
properties was approximately $260 million.
Comprehensive Income. Effective January 1, 1998, the Company adopted SFAS
No. 130, Reporting Comprehensive Income. This Statement requires the reporting
of comprehensive income and its components, the purpose of which is to report a
measure of all changes in equity of an enterprise that result from recognized
transactions and other economic events of the period other than transactions
with owners in their capacity as owners. The term comprehensive income is used
to describe the total of all components of comprehensive income, including net
income. Other comprehensive income refers to revenues, expenses, gains, and
losses that under generally accepted accounting principles (GAAP) are included
in comprehensive income, but excluded from net income. Comprehensive income for
the years ended December 31, 1998 and 1997, was $2,738,000 and $2,566,000,
respectively. Other comprehensive income was composed of unrealized holding
gains or losses on marketable securities.
Earnings Per Share. The Company adopted SFAS No. 128, Earnings Per Share,
which superseded Accounting Principles Board (APB) Opinion No. 15, Earnings Per
Share, and replaced the presentation of "primary EPS", which the Company has
historically presented, with a presentation of "basic EPS", and replaced the
presentation of "fully diluted EPS", which the Company has not been required to
present due to the immaterial difference from primary EPS, with "diluted EPS."
Basic EPS, unlike primary EPS, excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. As required by SFAS
No. 128, the Company adopted the provisions of the new standard in 1997, and
accordingly, restated 1996.
A reconciliation of the basic EPS computation to the diluted EPS
computation considers the effect of dilution on both net income and shares of
common stock. There is no effect on net income in the calculation of diluted
EPS for the years ended December 31, 1998, 1997, and 1996. The effect of
dilution on shares of common stock for each
29
<PAGE>
of those years is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- -----------------------
Shares Per Share Shares Per Share Shares Per Share
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS 8,330,835 $0.33 8,423,277 $0.30 8,432,676 $0.22
Effect of dilutive securities:
Stock options 17,634 25,508 1,381
--------- ----- --------- ----- --------- -----
Diluted EPS 8,348,469 $0.33 8,448,785 $0.30 8,434,057 $0.22
========= ===== ========= ===== ========= =====
</TABLE>
For the years ended December 31, 1998, 1997, and 1996, options to purchase
316,940, 147,000, and 209,500 shares of common stock, respectively, were
outstanding but excluded in the computation of diluted EPS because the options'
exercise prices were greater than the average market prices of common shares.
The Company's outstanding Debentures are also excluded from the computation for
1998, 1997, and 1996 due to their antidilutive effect.
Common Stock and Preferred Stock. In March 1998, the Board of Directors
approved an increase in the Company's authorized Preferred Stock, from 3 million
shares to 6 million shares, and its authorized Common Stock, from 15 million to
30 million shares, pursuant to shareholder approval given at the Company's 1994
Annual Meeting of Shareholders, which gave the Board of Directors authority to
effect the said increases in the Company's authorized shares for a period of
five years. The Company has one class of Common Stock, and the additional
authorized shares have the same voting rights and other attributes as the
existing outstanding shares of Common Stock. The Board of Directors is
authorized to provide for the issuance of the Preferred Stock, and to fix the
designations, powers, preferences and rights of the shares of each series, and
the qualifications, limitations, or restrictions thereof. The Company does not
have any outstanding shares of Preferred Stock.
Stock Option Plans. Prior to January 1, 1996, the Company accounted for
its stock option plan in accordance with the provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. As such,
compensation expense was recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On January 1,
1996, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize, as expense over the vesting period, the
fair value of all stock-based awards on the date of grant. Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.
Extraordinary Item. Net income for 1996 includes an extraordinary non-cash
charge of $449,000 resulting from deferred financing costs expensed in
connection with the refinancing of approximately $20 million of mortgage debt.
Use of Estimates. The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from these estimates.
Reclassifications. Certain reclassifications have been made in the 1997
and 1996 Consolidated Financial Statements to conform to the 1998 financial
statement presentation.
NOTE B: REAL ESTATE INVESTMENTS
Certain real estate with a book value of approximately $131,220,000 at
December 31, 1998, is pledged as collateral for notes payable described in
Note D. In addition, certain notes are secured by assignments of rents and
leases on such real estate. Certain real estate is located on land subject to
long-term ground leases expiring at dates through 2046.
30
<PAGE>
In 1998, the Company incurred total development costs of $12.2 million on
the development of an apartment property and expects the development to be
completed in early 1999. At December 31, 1998, the Company had a total
investment in the development of $14.0 million, of which construction in
progress totalled $7.9 million. Also in 1998, the Company acquired two parcels
of developable land, one parcel adjacent to a retail center and the other parcel
adjacent to an apartment property, totalling approximately $611,000.
In 1997, the Company acquired land for approximately $550,000 for the
purpose of developing new apartment units. At December 31, 1997, the Company
had total investment and total construction in progress in the apartment
development of $1.8 million.
There were no acquisitions of real estate properties made by the Company in
1996.
NOTE C: REAL ESTATE OPERATIONS
The Company's principal business is investing in shopping centers and
apartment communities, located in the southern United States. Tenants in the
Company's shopping centers include national, regional, and local retailers. Most
of the Company's shopping center leases provide for the payment of fixed monthly
rentals (minimum rents), reimbursement of common area maintenance, utilities,
taxes and insurance expenses, and payment of additional rents based upon a
percentage of retail sales in excess of stated minimums. The non-cancellable
portions of such lease terms range from one to forty years.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents
with high credit-quality financial institutions. With respect to accounts
receivable and accrued revenue, the Company believes that such items do not
represent significant concentrations of credit risk due to diversity in the
Company's tenant base and its geographical dispersion throughout the southern
United States.
Rents and other income in the Company's Consolidated Statements of Income
include reimbursed expenses, comprised of the following items:
Year Ended December 31
------------------------------------
1998 1997 1996
---------- ---------- ----------
Common area maintenance $3,124,000 $2,873,000 $2,802,000
Real estate tax and insurance 2,083,000 1,956,000 1,796,000
Utility charges 1,115,000 1,058,000 949,000
Other tenant income 1,072,000 923,000 877,000
Other income 470,000 443,000 460,000
---------- ---------- ----------
$7,864,000 $7,253,000 $6,884,000
========== ========== ==========
The Company's shopping centers are leased to tenants under operating
leases. The future minimum rents on non-cancellable operating leases at
December 31, 1998, are as follows:
Year Amount
---- -------------
1999 $ 17,846,000
2000 15,886,000
2001 14,660,000
2002 13,252,000
2003 11,799,000
Thereafter 49,122,000
-------------
$ 122,565,000
=============
The above amounts do not include rental income that is based on tenants'
sales or reimbursed expenses.
31
<PAGE>
Reportable Operating Segments. Effective January 1, 1998, the Company
adopted SFAS No. 131, Disclosure About Segments of an Enterprise and Related
Information. This Statement establishes standards for the way that public
business enterprises report information about operating segments in financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers.
The Company is engaged in two operating segments, the ownership and rental
of retail shopping center properties and apartment properties. These reportable
segments offer different products or services and are managed separately because
each requires different operating strategies and management expertise. There
are no intersegment sales or transfers. The accounting policies of the segments
are the same as those described in Note A, Significant Accounting Policies.
The Company assesses and measures segment operating results based on a
performance measure referred to as Income from Rental Operations, and is based
on the revenues and expenses associated with the operations of the real estate
properties. Income from Rental Operations is not a measure of operating results
or cash flows from operating activities as measured by generally accepted
accounting principles, and is not necessarily indicative of cash available to
fund cash needs and should not be considered an alternative to cash flows as a
measure of liquidity.
32
<PAGE>
The operating revenues, operating expenses, income from rental operations,
and real estate investments for each of the reportable segments are summarized
below for the years ended December 31, 1998, 1997, and 1996.
1998 1997 1996
Operating revenues: ------------ ------------ ------------
Retail $ 27,416,000 $ 26,522,000 $ 25,344,000
Apartments 20,343,000 19,858,000 19,014,000
------------ ------------ ------------
$ 47,759,000 $ 46,380,000 $ 44,358,000
============ ============ ============
Operating expenses:
Retail $ 10,921,000 $ 10,525,000 $ 9,875,000
Apartments 9,415,000 9,134,000 8,636,000
------------ ------------ ------------
20,336,000 19,659,000 18,511,000
Depreciation 10,145,000 9,621,000 9,119,000
------------ ------------ ------------
$ 30,481,000 $ 29,280,000 $ 27,630,000
============ ============ ============
Income from Rental Operations:
Retail $ 16,495,000 $ 15,997,000 $ 15,469,000
Apartments 10,928,000 10,724,000 10,378,000
------------ ------------ ------------
27,423,000 26,721,000 25,847,000
Depreciation (10,145,000) (9,621,000) (9,119,000)
------------ ------------ ------------
Income from operations 17,278,000 17,100,000 16,728,000
Other Income/(Expenses) (1) (14,522,000) (14,545,000) (14,893,000)
------------ ------------ ------------
Net Income $ 2,756,000 $ 2,555,000 $ 1,835,000
============ ============ ============
Real Estate Investments: (2)
Retail $199,880,000 $197,770,000 $195,188,000
Apartments 129,510,000 113,446,000 109,236,000
------------ ------------ ------------
$329,390,000 $311,216,000 $304,424,000
============ ============ ============
(1) Includes interest and dividend income, interest expense, and for the
year 1996, extraordinary item for early extinguishment of debt.
(2) Includes investments in land which the Company can use for future
development, and an investment in a real estate partnership, which is
accounted for by the equity method.
33
<PAGE>
NOTE D: NOTES PAYABLE
The Company's mortgage notes payable at December 31, 1998 and 1997, are as
follows:
<TABLE>
<CAPTION>
Secured by Land, Balance
Buildings, and Outstanding at
Improvements, December 31,
Interest with Book Value on -----------------------------
Principal Maturity Rate (c) December 31, 1998 1998 1997
- ------------------ -------- ------------------ ---------- ------------
<S> <C> <C> <C> <C>
March 1, 1999 (a) 9.00% $ (a) $ ---- $ 1,749,000
December 1, 1999 10.88% 4,188,000 3,450,000 3,491,000
May 1, 2008 (b) 6.85% 25,981,000 16,048,000 16,000,000
June 1, 2008 (b) 6.87% 10,011,000 8,548,000 6,709,000
May 1, 2008 (b) 6.85% 3,718,000 3,009,000 3,000,000
May 1, 2008 (b) 6.85% 4,431,000 3,611,000 3,600,000
May 1, 2008 (b) 6.85% 4,421,000 3,260,000 3,250,000
May 1, 2008 (b) 6.85% 5,034,000 3,230,000 3,220,000
May 1, 2008 (b) 6.85% 4,751,000 3,325,000 3,315,000
May 1, 2008 (b) 6.85% 19,082,000 12,237,000 12,200,000
May 1, 2008 (b) 6.85% 12,724,000 7,824,000 7,800,000
September 30, 2001 8.63% 4,206,000 3,151,000 3,281,000
January 1, 2013 8.05% 32,673,000 22,176,000 23,000,000
------------ ----------- -----------
$131,220,000 $89,869,000 $90,615,000
============ =========== ===========
</TABLE>
___________________________
(a) In June 1998, the Company repaid this mortgage debt totalling $1.7 million.
(b) In April and May 1998, the Company refinanced these mortgage notes payable,
thereby reducing the fixed rates of interest from an average of 7.85% to an
average of 6.85%.
(c) The weighted average interest rate on mortgage debt at December 31, 1998,
was 7.36%.
Future principal payments on the Company's mortgage notes payable at
December 31, 1998, are as follows:
Year Amount
---- -----------
1999 $ 5,148,000
2000 1,831,000
2001 4,662,000
2002 1,949,000
2003 2,102,000
-----------
$15,692,000
===========
In May 1993, the Company completed an offering of $65 million of 8%
Convertible Subordinated Debentures, due 2003 (less $2.6 million of underwriting
costs). The debentures are convertible into common stock of the Company, based
on $13.00 per share, at any time prior to maturity, unless previously redeemed.
No debentures were converted in 1998, 1997, or 1996.
The Company has commitments for lines of credit from commercial banks
totalling $100 million, of which $49.2 million was available at December 31,
1998. The weighted average interest rate was 7.6% and 7.8% for the years ended
December 31, 1998 and 1997, respectively. The terms of the agreements for the
bank lines of credit are renewable on an annualized basis, and generally provide
for the right of the banks to terminate such commitments and to accelerate all
outstanding advances upon the occurrence of any material adverse change in the
financial
34
<PAGE>
condition or operation of the Company. In addition, the bank credit agreements
also contain restrictive covenants that impose maximum borrowing levels by the
Company through the maintenance of prescribed debt-to-equity or other financial
ratios. The Company was in compliance with the bank debt covenant agreements at
December 31, 1998.
NOTE E: STOCK OPTION AND OWNERSHIP PLANS
On February 1, 1996, the Company adopted the 1996 Stock Option Plan (the
"1996 Plan"). Under the 1996 Plan, 10-year options may be granted to key
employees, and are annually granted to directors at the fair market value of the
Company's common stock on the date of grant. A total of 350,000 shares of
common stock of the Company are available for grant, of which a maximum of
125,000 shares may be issued to non-employee directors upon the exercise of non-
qualified stock options granted. Options granted under the 1996 Plan vest, for
key employees, 50% after one year, and the remaining 50% after two years, from
the grant date; for directors, 100% vests six months from the grant date. No
options will be granted under the 1996 Plan after February 1, 2006. A total of
58,500 options were exercisable under the 1996 Plan at December 31, 1998.
The Company had a 1986 Stock Option Plan (the "1986 Plan"), which
terminated in October 1996. Under the 1986 Plan, 10-year options were granted
to key employees and were annually granted to directors at the fair market value
of the Company's common stock at the date of grant. At December 31, 1998,
there were a total of 267,250 shares of common stock reserved for issuance upon
exercise of options granted under the 1986 Plan. Options granted under the 1986
Plan vest, for key employees, 50% after one year, and the remaining 50% after
two years, from the grant date; for directors, 100% vests six months from the
grant date.
The Company applies APB Opinion No. 25 in accounting for its Plans, and
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
As Reported Pro Forma Results
------------------------------------ ------------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income $2,756,000 $2,555,000 $1,835,000 $2,671,000 $2,501,000 $1,821,000
========== ========== ========== ========== ========== ==========
Net income per share $ 0.33 $ 0.30 $ 0.22 $ 0.32 $ 0.30 $ 0.22
========== ========== ========== ========== ========== ==========
</TABLE>
Pro forma net income reflects only options granted in 1998, 1997 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options' vesting
period and compensation cost for options granted prior to January 1, 1995 is not
considered.
For grants in 1998, 1997 and 1996, the fair value of each option grant is
estimated on the date of grant using an option pricing model based on the
following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Risk free interest rate 5.8% 6.8% 6.6%
Expected life 10 years 10 years 10 years
Expected volatility 23.7% 26.6% 29.5%
Expected dividend 8.0% 8.3% 10.5%
</TABLE>
35
<PAGE>
The following summary is on the Company's 1996 and 1986 Plans combined for
the years ended December 31, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ----------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- ------ --------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 368,750 $11.18 327,500 $11.44 309,500 $12.83
Granted 107,000 11.00 60,000 10.25 115,500 8.67
Exercised 0 0.00 (8,750) 8.63 (10,000) 8.75
Expired (25,000) 16.75 (10,000) 16.38 (87,500) 13.02
------- ------ ------- ------ ------- ------
Outstanding at end of year 450,750 $10.83 368,750 $11.18 327,500 $11.44
======= ====== ======= ====== ======= ======
Options exercisable 325,750 $10.83 260,000 $11.86 205,500 $13.00
======= ====== ======= ====== ======= ======
</TABLE>
The weighted-average grant date fair value of options granted in 1998,
1997, and 1996, was $11.00, $10.25, and $8.67, respectively.
The following table summarizes information about the Company's stock option
plans outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------------- -------------------------------------
Number Weighted-Average Number
Range of Outstanding at Remaining Weighted-Average Exercisable at Weighted Average
Exercise Prices December 31, 1998 Contractual Life Exercise Price December 31, 1998 Exercise Price
- --------------------------- ----------------- ------------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 8.50-$10.19 161,750 6.5 yrs. $ 9.00 161,750 $ 9.00
$ 10.20-$11.94 178,000 7.8 yrs. 10.79 53,000 10.73
$ 11.95-$14.94 111,000 3.7 yrs. 13.54 111,000 13.54
------- -------- -------- -------- ------
450,750 6.3 yrs. $ 10.83 325,750 $ 10.83
======= ======== ======== ======== ========
</TABLE>
The 1994 Directors' Stock Ownership Plan, effective in January 1994,
provides that directors of the Company, who are not salaried officers of the
Company, are entitled to receive an annual director's fee of 750 shares. The
number of shares entitled was amended to 1,000 shares, effective January 1,
1996, and amended to 1,500 shares, effective January 1, 1997. Alternatively, a
director may elect to be paid a cash substitute, equal to 90% of the value of
the shares for which the director elects the cash substitute, in lieu of all or
part of the annual stock award. Under this Plan, there were 9,000 shares issued
in each year 1998 and 1997, and there were 6,000 shares issued in 1996.
The Company adopted an Incentive Award Plan, effective January 1, 1994. The
purpose of the Plan is to reward eligible officers of the Company on the basis
of their contribution to the Company, and in particular on the basis of their
contribution to the Company's achievement of planned growth in funds from
operations per share. The Plan is administered by a committee of the Board of
Directors of the Company, composed of those members of the Compensation
Committee. An award under this Plan is payable by the Company one-half in cash
and one-half in shares of common stock of the Company. The Company recognized
compensation costs totalling $101,000 in 1998, $100,000 in 1997, and $39,000 in
1996, which includes the issuance of 5,677, 4,687, and 2,000 shares,
respectively.
NOTE F: RELATED PARTY TRANSACTIONS
The Company has a contract with Sizeler Real Estate Management Co., Inc.
(the "Management Company") to manage the Company's real estate properties. A
beneficial minority interest is directly owned in Sizeler Realty Co., Inc.
("Sizeler Realty"), the parent of the Management Company, by an officer of the
Company, and the balance is owned by members of the family of the officer's wife
and residual entities of the estates of her mother and father. The agreement is
renewable annually, subject to the approval of a majority of the unaffiliated
directors of the Company, and subject to the termination rights of the parties.
The management agreement may be terminated for any reason by either party upon
180 days' written notice.
36
<PAGE>
The management fee is based on the Company's gross investment in real estate,
adjusted for year-to-year increases (or decreases) in funds from operations per
share. The annual management fee, which is calculated based upon .65% of the
Company's gross investment in real estate at the beginning of each year, is paid
ratably on a monthly basis, adjusted for acquisitions or dispositions of
property during a year. At the end of each year, the management fee for that
year will be adjusted (either upward or downward) by the percentage increase or
decrease in the Company's funds from operations per share, compared to the
previous year. Accordingly, the management fee paid to the Management Company
for 1998 and 1997 was based upon .697% each year, and for 1996, was based upon
.688% of the Company's gross investment in real estate due to an increase in
funds from operations per share year over year. The Management Company also
receives a leasing fee equal to 3% of the total fixed minimum rent payable for
retail properties during the term of a new lease (2.5% on renewal leases). In
addition to management and leasing fees, the Management Company is reimbursed
for certain administrative expenses of the Company.
Under the management contract, the Company made cash payments to the
Management Company of $2,752,000, $2,478,000, and $2,448,000 in 1998, 1997, and
1996, respectively. At December 31, 1998, there were no amounts accrued or
payable, and for 1997, $141,000 was accrued and payable.
The Company leases approximately 14,000 s.f. at the Westland Shopping Center
to Sizeler Realty. Under this lease, Sizeler Realty paid annual rent, including
expense reimbursements, of $101,000 in 1998, $99,000 in 1997, and $100,000 in
1996. The lease provides for two five-year renewal options.
The Company holds its interest in the Westland Shopping Center pursuant to a
long-term ground lease, expiring on December 31, 2046, with two trusts that own
the land, the respective beneficiaries of which are an officer and director's
wife and her brother. The two trusts were extinguished upon the last to die of
the parents of the officer and director's wife and her brother, and a residual
entity succeeded to ownership. The Company was charged $45,000 in 1998, $51,000
in 1997, and $52,000 in 1996.
In March 1991, the Company purchased a 50% interest in the Southwood Shopping
Center ("Southwood") from Sizeler Realty (LaPalco), Inc. ("LaPalco"), a wholly-
owned subsidiary of Sizeler Realty, for $900,000. Southwood is subject to a
long-term ground lease from an entity in which an officer and director and his
wife and her brother and her brother's wife own interests, expiring on March 31,
2031. The rent under the ground lease is 50% of cash flow (after debt service
and certain other adjustments) up to a maximum of $225,000, and in the event the
rental payment shall reach $225,000 in any year, it shall remain fixed at
$225,000 for each year thereafter. No ground rent was payable under the lease
agreement in 1998, 1997, or 1996. LaPalco is the primary obligor on a mortgage
note payable, guaranteed by Sizeler Realty, which LaPalco is solely obligated to
pay out of its partnership distributions or other sources. At December 31,
1998, the balance of the mortgage note payable was $1,199,000. Although the
Company is not an obligor on the mortgage note payable, the partnership's
interest in Southwood is subordinated to the mortgage encumbering the property.
The Company incurred $37,000 in each year 1998 and 1997, and $41,000 in 1996
for maintenance services provided by an affiliate of the Management Company.
A director and officer of the Company is a director of Hibernia National Bank
("Hibernia"). At December 31, 1998, $20,000,000 of the Company's $100,000,000
bank lines of credit was provided by Hibernia. The Company had borrowings under
this line totalling $14,092,000 at December 31, 1998, and $2,948,000 at December
31, 1997.
37
<PAGE>
NOTE G: DIVIDEND DISTRIBUTION
The dividends paid in 1998, 1997, and 1996 for federal income tax purposes
were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ------------------------ ------------------
Per Per Per
Total Share Total Share Total Share
---------- ----------- ---------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Ordinary income $5,165,000 $ 0.62 $4,549,000 $ 0.54 $3,122,000 $0.37
Return of capital 2,249,000 0.27(a) 2,864,000 0.34 4,303,000 0.51
---------- ---------- ---------- ---------- ---------- -----
$7,414,000 $ 0.89 $7,413,000 $ 0.88 $7,425,000 $0.88
========== ========== ========== ========== ========== =====
</TABLE>
(a) Includes a $0.01 per share distribution for the redemption of stock
purchase rights in connection with the Company's adoption of a
replacement shareholder rights plan.
38
<PAGE>
NOTE H: SUBSEQUENT EVENTS
On March 4, 1999, the Company paid a $.22 per share quarterly dividend, to
shareholders of record as of February 25, 1999.
In March 1999, the Company increased its committed bank lines of credit by $5
million, bringing its total committed bank lines of credit to $105 million.
NOTE I: CASH FLOWS
During 1998, the Company completed mortgage refinancing involving ten of the
Company's apartment properties. Mortgage debt totalling $59.1 million was
refinanced resulting in new mortgage debt totalling $61.5 million, of which net
proceeds totalling $2.4 million were used to pay-down short-term variable-rate
debt. The Company was able to achieve a reduction in the average interest rate
paid on the mortgages refinanced by approximately 100 basis points, from an
average rate of approximately 7.8% down to an average rate of approximately
6.8%. During 1998, the Company also repaid mortgage debt totalling $1.7 million
bearing a fixed rate of interest of 9.0% on a retail community center.
During 1997, the Company completed mortgage financing on a regional enclosed
mall incurring a mortgage note payable totalling $23,000,000.
During 1996, the Company refinanced three mortgage notes payable, which
resulted in reductions of the fixed rates of interest from a high of 9.8% and
9.5% to a low of 8.6% and 7.4%, respectively, and extended the maturity dates
ranging from one to five years.
Cash interest payments made in 1998, 1997, and 1996 totalled $14,562,000,
$14,591,000, and $14,659,000, respectively.
NOTE J: COMMITMENTS AND CONTINGENCIES
The Company's officers defer a portion of their current compensation. Total
charges to earnings associated with such deferred compensation were $111,000,
$115,000, and $114,000, in 1998, 1997, and 1996, respectively.
The Company, from time to time, may be subject to litigation arising from the
conduct of its business. Management does not believe that any existing
litigation involving the Company will materially affect its financial condition
or future results of operations.
NOTE K: MINORITY INTEREST IN REAL ESTATE PARTNERSHIP
The Company, directly or through wholly-owned subsidiaries, owns its
interests in its Louisiana-based properties (with the exception of the Southwood
Shopping Center) through separate partnerships, in which the Company has a 99%
interest and its partner has a 1% interest. In each case, its partner is a
wholly-owned subsidiary of Sizeler Realty (see Note F). The Company's
consolidated financial statements include 100% of the assets, liabilities, and
operations of its Louisiana-based properties. Sizeler Realty's ownership
portion is reflected in the Company's consolidated financial statements as
minority interest.
NOTE L: SHAREHOLDER RIGHTS PLAN
On August 6, 1998, the Company's Board of Directors adopted a replacement
shareholder rights plan ("Plan") to supersede a shareholder rights plan which
had been in effect since 1989. Simultaneously, the board declared a dividend
distribution of one purchase right ("Right") for each share of the Company's
Common Stock
39
<PAGE>
outstanding at the close of business August 27, 1998, or subsequently issued.
Each Right entitles the holder to purchase 1/1,000 of a share of a new Series A
Preferred Stock of the Company ("Preferred Stock").
The Rights become exercisable upon the earlier of (i) the date of the
Company's public announcement that a person or affiliated group has acquired, or
obtained the right to, beneficial ownership of 15% or more of the Company's
Common Stock; (ii) ten business days following the commencement of a tender
offer that would result in a person or affiliated group owning 30% or more of
the Company's Common Stock; or (iii) ten business days after the Company's Board
of Directors determines that a person or affiliated group has become the
beneficial owner of at least 10% of the Company's Common Stock and that
ownership (a) is intended to cause pressure on the Company to take action or
enter into a transaction or transactions intended to provide such persons with
short-term financial gain under circumstances where the best long-term interests
of the Company and its shareholders would not be served, or (b) is causing or is
reasonably likely to cause a material adverse impact on the business or
prospects of the Company (including but not limited to jeopardizing the
Company's status as a real estate investment trust, impairing relationships with
the Company's tenants, customers, lenders, providers of financial and other
services, or regulators or impairing the Company's ability to maintain its
competitive position).
The exercise price of a Right has been established at $40, subject to
adjustment as provided in the Plan. Once exercisable, each Right would entitle
the holder to purchase Preferred Stock having a value equal to two times the
value of the Right. The Rights expire on August 27, 2008.
NOTE M: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosure about Fair Value of Financial Instruments. The estimated fair value
amounts have been determined by the Company using available market information
and appropriate valuation methodologies and are described in the following
paragraphs.
Fair value estimates are subject to certain inherent limitations.
Estimates of fair value are made at a specific point in time, based on relevant
market information and information about the financial instrument. The
estimated fair values of financial instruments presented below are not
necessarily indicative of amounts the Company might realize in actual market
transactions. Estimates of fair value are subjective in nature and involve
uncertainties and matters of significant judgement and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates.
The carrying amounts of cash and cash equivalents, accounts receivable and
accrued revenue, accounts payable, accrued expenses and deposits approximate
fair value because of the short maturity of these items. The carrying amounts
of notes payable outstanding under the Company's lines of credit with commercial
banks approximate fair value because the interest rates on these instruments
change with market interest rates.
The carrying value of mortgage notes payable is $89.9 million and $90.6
million at December 31, 1998, and 1997, respectively, while the estimated fair
value is $90.3 million and $90.0 million, respectively. The estimated fair
value is based upon interest rates available to the Company for issuance of
similar debt with similar terms and remaining maturities. The estimated fair
value of the Company's 8% convertible subordinated debentures, with a carrying
value of $62.9 million at December 31, 1998, and 1997, was $59.1 million and
$60.4 million, respectively, based upon the quoted market prices of the
securities as of the end of the respective years.
40
<PAGE>
NOTE N: QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized (unaudited) quarterly financial data for the years ended 1998
and 1997 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended in 1998
-----------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $11,777 $11,834 $11,720 $12,428
Net income $ 664 $ 711 $ 680 $ 701
Net income per share $ 0.08 $ 0.08 $ 0.08 $ 0.09
Three months ended in 1997
-----------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Revenues $11,332 $11,486 $11,565 $11,997
Net income $ 606 $ 630 $ 620 $ 699
Net income per share $ 0.07 $ 0.08 $ 0.07 $ 0.08
</TABLE>
41
<PAGE>
SCHEDULE II
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- ---------- ---------- ---------- ----------
Balance at Additions Balance
Beginning Charged to at End
of Period Operations Deductions of Period
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1998
Allowance for doubtful accounts $281,000 $248,000 $106,000 $423,000
======== ======== ======== ========
Year ended December 31, 1997
Allowance for doubtful accounts $204,000 $149,000 $ 72,000 $281,000
======== ======== ======== ========
Year ended December 31, 1996
Allowance for doubtful accounts $166,000 $191,000 $153,000 $204,000
======== ======== ======== ========
</TABLE>
42
<PAGE>
SCHEDULE III
SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------- ----------- -------------------------- ------------ ----------------------------------------
Costs
Capitalized
Subsequent to Gross Amount at Which
Initial Cost to Company Acquisition Carried at Close of Period
-------------------------- ------------- ----------------------------------------
Buildings & Net Buildings &
Description Encumbrance Land Improvements Improvements Land Improvements
- ----------------------------- ----------- ----------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Regional enclosed malls:
Hammond Square $ --- $ 2,574,000 $ 23,664,000 $ 2,661,000 $2,559,000 $26,340,000
North Shore Square 22,176,000 4,000,000 30,150,000 4,103,000 4,366,000 33,887,000
Southland --- 2,408,000 28,289,000 12,064,000 2,945,000 39,816,000
----------- ----------- ------------ ----------- ---------- -----------
22,176,000 8,982,000 82,103,000 18,828,000 9,870,000 100,043,000
----------- ----------- ------------ ----------- ---------- -----------
Power shopping centers:
Lantana Plaza --- 6,000,000 14,107,000 3,849,000 7,808,000 16,148,000
Westward Plaza --- 5,676,000 13,506,000 3,406,000 5,677,000 16,911,000
----------- ------------ ----------- ---------- -----------
11,676,000 27,613,000 7,255,000 13,485,000 33,059,000
----------- ------------ ----------- ----------- ----------
Community shopping centers:
Airline Park --- 977,000 1,037,000 205,000 977,000 1,242,000
Azalea Gardens --- 574,000 806,000 509,000 574,000 1,315,000
Camelot Plaza --- 993,000 2,281,000 568,000 1,126,000 2,716,000
Colonial --- 554,000 555,000 347,000 559,000 897,000
Delchamps Plaza 3,450,000 713,000 4,381,000 116,000 713,000 4,497,000
Rainbow Square 3,151,000 970,000 4,443,000 142,000 984,000 4,571,000
Town & Country --- 860,000 3,194,000 1,025,000 1,491,000 3,588,000
Weeki Wachee --- 2,185,000 4,179,000 667,000 2,819,000 4,212,000
Westgate --- 1,809,000 2,162,000 1,103,000 1,774,000 3,300,000
Westland (e) --- --- 3,068,000 2,087,000 --- 5,155,000
----------- ----------- ------------ ----------- ---------- -----------
6,601,000 9,635,000 26,106,000 6,769,000 11,017,000 31,493,000
----------- ----------- ------------ ----------- ---------- -----------
Apartments:
Bel Air 3,260,000 500,000 3,674,000 1,148,000 500,000 4,822,000
Bryn Mawr 8,548,000 1,575,000 9,020,000 894,000 1,575,000 9,914,000
Colonial Manor --- 212,000 771,000 383,000 212,000 1,154,000
Garden Lane 3,611,000 500,000 3,117,000 1,709,000 500,000 4,826,000
Georgian --- 839,000 2,420,000 1,359,000 839,000 3,779,000
Governors Gate (f) --- 550,000 --- 13,402,000 550,000 13,402,000
Hampton Park 5,477,000 1,305,000 6,616,000 3,220,000 1,305,000 9,836,000
Jamestown 3,230,000 712,000 4,035,000 919,000 712,000 4,954,000
Lafayette Square 12,237,000 2,632,000 14,282,000 6,393,000 2,632,000 20,675,000
Lakeview Club 16,048,000 4,400,000 23,200,000 1,687,000 4,400,000 24,887,000
Magnolia Place --- 175,000 2,050,000 634,000 175,000 2,684,000
Pine Bend 2,347,000 450,000 3,029,000 1,151,000 753,000 3,877,000
Steeplechase 3,009,000 458,000 3,068,000 1,378,000 594,000 4,310,000
Woodcliff 3,325,000 695,000 4,047,000 901,000 695,000 4,948,000
----------- ----------- ------------ ----------- ---------- -----------
61,092,000 15,003,000 79,329,000 35,178,000 15,442,000 114,068,000
----------- ----------- ------------ ----------- ---------- -----------
TOTAL $89,869,000 $45,296,000 $215,151,000 $68,030,000 $49,814,000 $278,663,000
=========== =========== ============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
----------- ----------- ---------------- -------- ----------
Life on
which
Depreciation
in Latest
Income
Accumulated Date of Date Statement is
Description Total Depreciation Construction Acquired Computed
- ----------- -------------- ------------- ----------------- -------- ------------
<S> <C> <C> <C> <C> <C>
Regional enclosed malls:
Hammond Square $ 28,899,000 $8,017,000 1978 1987 10-40 yrs
North Shore Square 38,253,000 5,272,000 1986 1994 10-40 yrs
Southland 42,761,000 11,541,000 1970, 1981, 1994 1986 10-40 yrs
------------ ----------
109,913,000 24,830,000
------------ ----------
Power shopping centers:
Lantana Plaza 23,956,000 2,152,000 1992 1993 10-40 yrs
Westward Plaza 22,588,000 3,142,000 1961, 1990, 1995 1992 10-40 yrs
------------ ----------
46,544,000 5,294,000
------------ ----------
Community shopping centers:
Airline Park 2,219,000 377,000 1973 1987 10-40 yrs
Azalea Gardens 1,889,000 434,000 1950 1987 10-40 yrs
Camelot Plaza 3,842,000 466,000 1981 1992 10-40 yrs
Colonial 1,456,000 305,000 1967 1987 10-40 yrs
Delchamps Plaza 5,210,000 1,022,000 1989 1991 10-40 yrs
Rainbow Square 5,555,000 1,349,000 1986 1988 10-40 yrs
Town & Country 5,079,000 431,000 1989 1993 10-40 yrs
Weeki Wachee 7,031,000 1,299,000 1987 1988 10-40 yrs
Westgate 5,074,000 1,066,000 1964 1987 10-40 yrs
Westland (e) 5,155,000 1,609,000 1966 1987 10-40 yrs
------------ ----------
42,510,000 8,358,000
------------ ----------
Apartments:
Bel Air 5,322,000 901,000 1968, 1974 1992 10-40 yrs
Bryn Mawr 11,489,000 1,478,000 1991 1993 10-40 yrs
Colonial Manor 1,366,000 381,000 1967 1987 10-40 yrs
Garden Lane 5,326,000 895,000 1966, 1971 1992 10-40 yrs
Georgian 4,618,000 821,000 1951, 1980 1992 10-40 yrs
Governors Gate (f) 13,952,000 64,000 --- --- 10-40 yrs
Hampton Park 11,141,000 1,911,000 1977 1993 10-40 yrs
Jamestown 5,666,000 631,000 1972 1995 10-40 yrs
Lafayette Square 23,307,000 4,051,000 1969 - 1972 1993 10-40 yrs
Lakeview Club 29,287,000 3,305,000 1992 1994 10-40 yrs
Magnolia Place 2,859,000 633,000 1984 1991 10-40 yrs
Pine Bend 4,630,000 675,000 1979 1992 10-40 yrs
Steeplechase 4,904,000 844,000 1982 1992 10-40 yrs
Woodcliff 5,643,000 892,000 1977 1993 10-40 yrs
------------ -----------
129,510,000 17,482,000
------------ -----------
TOTAL $328,477,000 $55,964,000
============ ===========
Note: This schedule does not include the Company's 50% interest in a
real estate partnership.
</TABLE>
43
<PAGE>
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
Note (a) Changes in real estate owned were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of year $310,312,000 $303,476,000 $295,921,000
Additions during period:
Investments in land 611,000 550,000 ----
Improvements 17,554,000 6,286,000 7,555,000
------------ ------------ ------------
Balance at end of year $328,477,000 $310,312,000 $303,476,000
============ ============ ============
</TABLE>
Note (b) Changes in accumulated depreciation of real estate assets owned were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $46,454,000 $37,518,000 $29,041,000
Additions during period:
Depreciation on real estate assets 9,510,000 8,936,000 8,477,000
----------- ----------- -----------
Balance at end of year $55,964,000 $46,454,000 $37,518,000
=========== =========== ===========
</TABLE>
Note (c) The income tax basis of real estate, net of accumulated tax
depreciation, is approximately $259,908,000 at December 31, 1998.
Note (d) Depreciation is provided by the straight-line method over the
estimated useful lives, which are as follows:
Buildings and improvements 10 - 40 years
Parking lots 20 years
Tenant improvements Lease term
Note (e) The Company holds its interest in the Westland Shopping Center under a
long-term ground lease.
Note (f) The Company acquired land in 1997 for the development of a 240-unit
luxury apartment community. Construction commenced in early 1998, and
the Company expects the development to be completed in early 1999.
44
<PAGE>
FORM 10-K EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
3.1A Restated Certificate of Incorporation, as amended Incorporated by Reference (1)
3.1B Amendment No. 1 to Restated Certificate of Incorporation, Incorporated by Reference (6)
as amended
3.1C Amendment No. 2 to Restated Certificate of Incorporation, Incorporated by Reference (11)
as amended
3.2 Restated By-Laws as amended through March 1, 1999 Filed herewith
4.0A Form of Certificate for Common Stock, $.01 par value Incorporated by Reference (3)
4.1A Indenture for the Registrant's 8% Convertible Incorporated by Reference (12)
Subordinated Debentures, due 2003
4.2A Debenture for the Registrant's 8% Convertible Incorporated by Reference (12)
Subordinated Debentures, due 2003
10.1A Management Agreement Incorporated by Reference (1)
10.1B Amendment No. 1 to Management Agreement Incorporated by Reference (3)
10.1C Amendment No. 2 to Management Agreement Incorporated by Reference (4)
10.1D Amendment No. 3 to Management Agreement Incorporated by Reference (9)
10.1E Amendment No. 5 to Management Agreement Incorporated by Reference (11)
10.1F Amendment No. 4 to Management Agreement Incorporated by Reference (15)
10.1G Amendment No. 6 to Management Agreement Incorporated by Reference (15)
10.1H Amendment No. 7 to Management Agreement Incorporated by Reference (15)
10.2 Form of Indemnification Agreement (which the Company Incorporated by Reference (1)
has entered into with each officer and director)
10.3 Form of Right of First Refusal which has been entered Incorporated by Reference (2)
into by the Company and each of Sidney W. Lassen
and Sizeler Realty Co., Inc.
10.4 The Company's 1986 Stock Option Plan, as amended Incorporated by Reference (9)
through January 25, 1991*
10.5 Form of Deferred Compensation Agreement (the Incorporated by Reference (10)
Company has such an agreement with Sidney W.
Lassen)*
10.6 The Company's 1989 Directors Stock Option Plan Incorporated by Reference (5)
10.7 Sizeler Property Investors, Inc. Incentive Award Plan* Incorporated by Reference (13)
10.8 First Amendment to the Sizeler Property Investors, Inc. Incorporated by Reference (13)
Incentive Award Plan*
10.9 Sizeler Property Investors, Inc. 1994 Directors' Stock Incorporated by Reference (16)
Ownership Plan, as amended*
10.10 Agreement between the Company and Sidney W. Lassen* Incorporated by Reference (13)
10.11 Agreement between the Company and Thomas A.
Masilla, Jr.* Incorporated by Reference (14)
10.12 Non-Elective Deferred Compensation Agreement Incorporated by Reference (14)
between Company and Thomas A. Masilla, Jr.
(The Company also has a Non-Elective Deferred
Compensation Agreement with Sidney W. Lassen,
which is identical to Mr. Masilla's Agreement).*
10.13 The Company's 1996 Stock Option Plan, as amended Incorporated by Reference (16)
19.1 Shareholder Rights Agreement dated as of Incorporated by Reference (7)
August 6, 1998
19.2 Amendment No. 1 to Shareholder Rights Agreement Filed herewith
21 List of Subsidiaries Filed herewith
23.1 Consent of KPMG LLP Filed herewith
27 Financial Data Schedule Filed herewith
</TABLE>
______________________
45
<PAGE>
(1) Incorporated by reference to the exhibits filed on November 5, 1986, with
the Company's original registration statement on Form S-11 (No. 33-9973).
(2) Incorporated by reference to the exhibits filed on November 24, 1986, with
Amendment No. 1 to the Company's registration statement on Form S-11.
(3) Incorporated by reference to the exhibits filed on January 14, 1987, with
Amendment No. 3 to the Company's registration statement on Form S-11.
(4) Incorporated by reference to the exhibits filed on February 6, 1987, with
Post-Effective Amendment No. 1 to the Company's registration statement on
Form S-11.
(5) Incorporated by reference to the Exhibit A to the Company's Proxy
Statement, dated March 23, 1989.
(6) Incorporated by reference to the exhibits to the Company's Form 10-K
for the year ended December 31, 1988.
(7) Incorporated by reference to the exhibit to the Company's Form 8-A, filed
on August 26, 1998.
(8) Incorporated by reference to the Exhibit A to the Company's Proxy
Statement, dated April 5, 1991.
(9) Incorporated by reference to the exhibits filed with the Company's
Form 10-K for the year ended December 31, 1990.
(10) Incorporated by reference to the exhibits filed with the Company's
Form 10-K for the year ended December 31, 1991.
(11) Incorporated by reference to the exhibits filed with the Company's
Form 10-K for the year ended December 31, 1992.
(12) Incorporated by reference to the exhibits filed with the Company's
Form 8-K, dated May 26, 1993.
(13) Incorporated by reference to the exhibits filed on March 7, 1994, with the
Company's registration statement on Form S-3 (No. 33-76134).
(14) Incorporated by reference to the exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(15) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
(16) Incorporated by reference to the exhibits to the Company's definitive proxy
material for its 1997 Annual Meeting of Stockholders.
* Management compensation plan agreements.
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.
SIZELER PROPERTY INVESTORS, INC.
By: /s/ Sidney W. Lassen
-----------------------------------
Sidney W. Lassen
Chairman of the Board
(Chief Executive Officer)
Date: March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ------------------------------- ------------------------ ----------------
By: /s/ SIDNEY W. LASSEN Chairman of the Board March 24, 1999
-------------------------- (Chief Executive Officer)
Sidney W. Lassen
By: /s/ THOMAS A. MASILLA, JR. Vice Chairman, President and March 24, 1999
-------------------------- Director (Principal Operating
Thomas A. Masilla, Jr. and Chief Financial Officer)
By: /s/ DAVID A. O'FLYNN, JR. Controller/Secretary March 24, 1999
-------------------------- (Principal Accounting Officer)
David A. O'Flynn, Jr.
By: /s/ J. TERRELL BROWN Director March 24, 1999
--------------------------
J. Terrell Brown
By: /s/ FRANCIS L. FRAENKEL Director March 24, 1999
--------------------------
Francis L. Fraenkel
By: /s/ HAROLD B. JUDELL Director March 24, 1999
--------------------------
Harold B. Judell
By: /s/ JAMES W. McFARLAND Director March 24, 1999
--------------------------
James W. McFarland
By: /s/ RICHARD L. PEARLSTONE Director March 24, 1999
--------------------------
Richard L. Pearlstone
By: /s/ THEODORE H. STRAUSS Director March 24, 1999
--------------------------
Theodore H. Strauss
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EXHIBIT 3.2
RESTATED BY-LAWS
OF
SIZELER PROPERTY INVESTORS, INC.
AS AMENDED THROUGH MARCH 1, 1999
ARTICLE I - STOCKHOLDERS
SECTION 1. ANNUAL MEETING
An annual meeting of the stockholders, for the election of Directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix.
SECTION 2. SPECIAL MEETINGS
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of Directors
and shall be held at such place, on such date, and at such time as the Board
shall fix. The call of a special meeting shall state the nature of the business
to be transacted and that no other business shall be considered at the meeting.
SECTION 3. NOTICE OF MEETINGS
Written notice of the place, date and time of all meetings of the
stockholders shall be given to each stockholder, whether or not such stockholder
is entitled to vote at such meeting, not less than ten (10) nor more than sixty
(60) days before the date on which the meeting is to be held, except as
otherwise provided herein or required by law.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date for any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed, or
if a new record date is fixed for the adjourned meeting, written notice of the
place, date and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
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SECTION 4. QUORUM
At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chair of the meeting
or the holders of a majority of the shares of the stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
SECTION 5. ORGANIZATION
Such person as the Board of Directors may have designated or in the
absence of such a person the highest ranking officer of the Corporation who is
present shall call to order any meeting of the stockholders and act as chairman
of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman appoints. The
chairman of the meeting shall have the power, in his sole discretion, to
adjourn, recess, delay or otherwise postpone the date or time of any annual or
special meeting of stockholders.
SECTION 6. CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him in order.
SECTION 7. NOMINATION OF DIRECTORS
Nominations of persons for election to the Board of Directors and the
proposal of business to be transacted by the stockholders at an annual meeting
of stockholders may be made (a) pursuant to the Corporation's notice with
respect to such meeting, (b) by or at the direction of the Board or (c) by any
stockholder of record of the Corporation who was a stockholder of record at the
time of the giving of the notice provided for in the following paragraph, who is
entitled to vote at the meeting and who has complied with the notice procedures
set forth in this section.
For nominations of directors or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of the
foregoing paragraph, (1) the stockholder must have given timely notice thereof
in writing to the Chairman of the Board or President of the Corporation, and (2)
such business must be a proper matter for stockholder action under the General
Corporation Law of the State of Delaware. To be timely, a stockholder's notice
shall be delivered to the Chairman of the Board or President at the principal
executive offices of the Corporation not less than 60 or more than 90 days prior
to the first anniversary (the "Anniversary") of the date on which the
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Corporation first mailed its proxy materials for the preceding year's annual
meeting of stockholders; provided, however, that if the date of the annual
meeting is advanced more than 30 days prior to or delayed by more than 30 days
after the anniversary of the preceding year's annual meeting, notice by the
stockholder to be timely must be so delivered not later than the close of
business on the later of (i) the 90/th/ day prior to such annual meeting or (ii)
the 10/th/ day following the day on which public announcement of the date of
such meeting is first made. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director all information relating to such person as would be required to be
disclosed in solicitations of proxies for the election of such nominees as
directors pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and such person's written consent to serve as a
director if elected; (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of such business, the reasons
for conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such stockholder, as they appear on the Corporation's
books, and of such beneficial owner, (ii) the class and number of shares of the
Corporation that are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of a proposal, at least the percentage of the Corporation's voting
shares required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the Corporation's
voting shares to elect such nominee or nominees.
Notwithstanding anything in the second sentence of the second
paragraph of this Section 7 to the contrary, in the event that the number of
directors to be elected to the Board is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board made by the Corporation at least 55 days prior to the
Anniversary, a stockholder's notice required by this Bylaw shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Chairman of the Board
or President at the principal executive offices of the Corporation not later
than the close of business on the 10/th/ day following the day on which such
public announcement is first made by the Corporation.
Only persons nominated in accordance with the procedures set forth in
this Section 7 shall be eligible to serve as directors and only such business
shall be conducted at an annual meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
section. The
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chair of the meeting shall have the power and the duty to determine whether a
nomination or any business proposed to be brought before the meeting has been
made in accordance with the procedures set forth in these Bylaws and, if any
proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposed business or nomination shall not be
presented for stockholder action at the meeting and shall be disregarded.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board may be made at a special meeting of stockholders at which directors are to
be elected pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board or (b) by any stockholder of record of the Corporation
who is a stockholder of record at the time of giving of notice provided for in
this paragraph, who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section 7. Nominations by
stockholders of persons for election to the Board may be made at such a special
meeting of stockholders if the stockholder's notice required by the second
paragraph of this Section 7 shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
later of the 90/th/ day prior to such special meeting or the 10/th/ day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board to be elected at such
meeting.
For purposes of this section, "public announcement" shall mean
disclosure in a press release reported by either the Dow Jones News Service,
Reuters Business News Service, Bloomberg Business News Service, Associated Press
or a comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this Section 7, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to matters set forth
in this Section 7. Nothing in this Section 7 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act. A request by a
stockholder to include proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act does not constitute the notice required by
this Section 7 unless it complies in every respect with the requirements of the
notice set forth in this Section 7 if the Corporation has given the requesting
shareholder a copy of the notice of the Corporation's intention to refuse the
request for inclusion of the proposal within the time specified in Rule 14a-8.
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SECTION 8. PROXIES AND VOTING
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his name on the record date for the meeting.
All voting, except on the election of directors and where otherwise
required by law, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or his proxy, a stock vote shall be
taken. Every stock vote shall be taken by ballots, each of which shall state
the name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting. Every vote taken by
ballots shall be counted by an inspector or inspectors appointed by the chairman
of the meeting.
SECTION 9. STOCKHOLDER LIST
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each stockholder and the number of shares registered in his name,
shall be open to the examination of any such stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. The stock ledger from which this list is prepared
shall presumptively determine the identity of the stockholders entitled to vote
at the meeting and the number of shares held by each of them.
SECTION 10. BUSINESS OF MEETING
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, an item of business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise brought before the
meeting by or at the direction of the Board of Directors, or (c) otherwise
brought before the meeting by a stockholder (i) involving an item of business
which is appropriate for stockholder action and does not pertain to ordinary
business operations of the Corporation or to any other item which, under
applicable corporate law, is a matter for primary decision by the Board of
Directors; and (ii) as
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to which item, the stockholder shall have given timely notice thereof in writing
to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
20 days nor more than 40 days prior to the meeting. A request to the
Corporation by a stockholder to include a proposal in the Corporation's proxy
statement for the annual meeting will not constitute the stockholder's notice
required by this Section if the Corporation has not granted the request for
inclusion in the proxy statement and the stockholder has been so informed in
writing by the Corporation prior to the date of the Corporation's proxy
statement to stockholders with respect to the annual meeting.
A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the item or items of business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business, (c) the class and number of shares of
the Corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at any annual meeting except in accordance with the
procedures set forth in this Section 10. The Chairman of the annual meeting
shall, if the facts warrant, determine and declare to the meeting that an item
of business was not properly brought before the meeting in accordance with the
provisions of this Section 10 or for any other appropriate reason; and if he
should so determine, the Chairman shall so declare to the meeting and any such
item of business shall not be transacted.
At any special meeting of stockholders, no business shall be
transacted except as stated in the notice or notices of meeting.
ARTICLE II - BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE
The number of Directors of the Corporation shall be determined by the
Board of Directors as provided in the Certificate of Incorporation. Any
reference to the "Board" in these Bylaws shall mean the Board of Directors of
the Corporation.
SECTION 2. VACANCIES
Vacancies on the Board of Directors shall be filled as provided in the
Certificate of Incorporation.
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SECTION 3. REGULAR MEETINGS
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
SECTION 4. SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by one-third
of the Directors then in office or by the Chairman of the Board and shall be
held at such place, on such date and at such time as they or he shall fix.
Notice of the place, date and time of each such special meeting shall be given
to each director by whom it is not waived by mailing written notice not less
than four (4) days before the meeting or by telegraphing the same not less than
twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
SECTION 5. QUORUM
At any meeting of the Board of Directors, a majority of the total
number of the whole Board shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may adjourn
the meeting to another place, date or time, without further notice or waiver
thereof.
SECTION 6. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment that enables all persons
participating in the meeting to hear each other. Such participation shall
constitute presence in person at such meeting.
SECTION 7. CONDUCT OF BUSINESS; UNANIMOUS WRITTEN CONSENT
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
Action may be taken by the Board of Directors without a meeting if all
members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
SECTION 8. POWERS
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as
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may be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To issue and sell shares of the Corporation's authorized stock;
(2) To declare and pay dividends from time to time in accordance with
law;
(3) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(4) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in connection
therewith;
(5) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(6) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers and agents;
(7) To adopt, amend or terminate from time to time such stock option,
stock purchase, bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it may
determine;
(8) To adopt, amend or terminate from time to time such insurance,
retirement and other benefit plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine; and
(9) To adopt, amend or terminate from time to time regulations not
inconsistent with these By-Laws for the management of the Corporation's business
and affairs.
SECTION 9. COMPENSATION OF DIRECTORS
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors, by a vote of a majority of the whole Board,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a Director or
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Directors to serve as the member or members, and designate, if it desires, other
Directors as alternative members who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
any member of any committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may by unanimous vote
appoint another member of the Board of Directors to act at the meeting in the
place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provisions shall be made
for notice to members of all meetings; a majority of the members shall
constitute a quorum, and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
SECTION 1. GENERALLY
The officers of the Corporation shall consist of a chairman of the
board, a president, one or more vice-presidents, a secretary, a treasurer and
such other subordinate officers as may from time to time be appointed by the
Board of Directors. The Board of Directors, in its discretion, may establish
for such period of time as it deems advisable the offices of vice chairman and
of principal operating officer, respectively. Officers shall be elected by the
Board of Directors, which shall consider that subject at its first meeting after
every annual meeting of stockholders and at other meetings as may be appropriate
to fill a vacancy in an office. Each officer shall hold his office until his
successor is elected and qualified or until his earlier resignation or removal.
Any number of offices may be held by the same person, including without
limitation the offices of Chairman of the Board and President and the offices of
Vice Chairman and Principal Operating Officer, except that holders of the
offices of Chairman of the Board, Principal Operating Officer or President shall
not simultaneously hold the office of Secretary.
SECTION 2. CHAIRMAN OF THE BOARD
The Chairman of the Board shall be the Chief Executive Officer of the
Corporation. Subject to the provisions of these By-Laws and to the direction of
the Board of Directors, he shall have the responsibility for the general
management and control of the affairs and business of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chief executive or which are delegated to him by the Board of Directors.
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SECTION 3. VICE CHAIRMAN
The Vice Chairman, if any, shall exercise such duties as are delegated
to him by the Chairman of the Board, and he shall report primarily to the
Chairman of the Board. In the absence or disability of the Chairman of the
Board, the Vice Chairman shall perform the duties of the Chairman of the Board,
subject to the right of the Board of Directors to designate another officer to
perform some or all of these duties.
SECTION 4. PRINCIPAL OPERATING OFFICER
The Principal Operating Officer, if any, shall have supervision of the
assets of the Corporation and shall perform so much of the duties normally
performed by a chief operating officer as shall be assigned to him by the Board
of Directors or, to the extent not inconsistent with any assignment by the Board
of Directors, by the Chairman of the Board. The Principal Operating Officer
shall report primarily to the Chairman of the Board.
SECTION 5. PRESIDENT
The President shall be the Chief Operating Officer of the Company and,
except as set forth in the following sentence, shall perform all duties incident
to the Office of Chief Operating Officer and such other duties as from time to
time may be assigned to him by the Board of Directors. If there shall be a
Principal Operating Officer, the President shall perform such duties as are
assigned to him by the Chairman of the Board or, to the extent not inconsistent
with any assignment by the Chairman of the Board, by the Principal Operating
Officer. The President shall report primarily to the Chairman of the Board, but
if there shall be a Principal Operating Officer, the President shall report
primarily to the Principal Operating Officer.
SECTION 6. VICE-PRESIDENTS
Each vice-president shall perform such duties as the Board of
Directors shall prescribe. In the absence or disability of the President, the
vice-president who is designated by the Board of Directors shall perform the
duties and exercise the powers of the President; and in the absence or
disability of the Principal Operating Officer, the person who is designated by
the Board of Directors shall perform the duties and exercise the powers of the
Principal Operating Officer.
SECTION 7. TREASURER
The Treasurer shall be the Chief Financial Officer of the Corporation
and shall have the custody of all monies and securities of the Corporation and
shall keep regular books of account. He shall make such disbursements of the
funds of the Corporation as
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are proper and shall render to the Board of Directors from time to time an
account of all such transactions and of the financial condition of the
Corporation.
SECTION 8. SECRETARY
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He
shall have charge of the corporate books.
SECTION 9. DELEGATION OF AUTHORITY
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officer or agents, notwithstanding any
provision hereof.
SECTION 10. REMOVAL
Any officer of the Corporation may be removed at any time, with or
without cause, by the Board of Directors.
SECTION 11. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS AND
ENTITIES
Unless otherwise directed by the Board of Directors, the Chairman of
the Board, or any other officer of the Corporation authorized by the Chairman of
the Board, shall have power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of stockholders of or with
respect to any action of stockholders of any other corporation or entity in
which this Corporation may hold securities and otherwise to exercise any and all
rights and powers which this Corporation may possess by reason of its ownership
of securities in such other corporation or entity.
ARTICLE V - INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("Proceeding"), by reason of the fact
that he, or a person of whom he is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, trust or other enterprise, including service with respect
to an employee benefit plan, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by the Delaware General Corporation Law, as the same exists or
hereafter may be amended (but, in the case of any amendment, only to the extent
that such amendment permits the
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Corporation to provide broader indemnification rights than said Law permitted
the Corporation to provide prior to such amendment) against all expenses,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith. Such right shall
include the right to be paid by the Corporation expenses incurred in defending
any such Proceeding in advance of its final disposition; provided, however, that
the payment of such expenses incurred by a director or officer in his capacity
as a director or officer (and not in any other capacity in which service was or
is rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of such Proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this section or
otherwise.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT
If a claim under Section 1 of this Article V is not paid in full by
the Corporation within 90 days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending a
Proceeding in advance of its final disposition where the required undertaking
has been tendered to the Corporation) that the claimant has not met the standard
of conduct which makes it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel
or its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or its stock
holders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS
The rights conferred on a person by Sections 1 and 2 of this Article V
shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
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SECTION 4. INSURANCE
The Corporation may maintain insurance, at its expense, to protect
itself and any such director, officer, employee or agent of the Corporation or
another corporation, partnership, trust or other enterprise against any such
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
SECTION 5. COOPERATION BY INDEMNITEE
Subject to, and not in nullification of, any right of indemnification
conferred by Section 145(c) of the Delaware General Corporation Law, as amended,
or any successor provision in the Delaware statutes, the right of
indemnification granted by this Article V to any person ("indemnitee") is
governed by the following provisions: The Corporation is entitled to the
cooperation and assistance of the indemnitee in obtaining or directing payments
by an insurer or insurers (collectively, "Insurer") issuing a directors' and
officers' liability insurance policy (i) from which the Company is seeking total
or partial recovery for indemnification payments which the Corporation has made
to or on behalf of the indemnitee or (ii) from which the indemnitee or others on
behalf of the indemnitee are receiving indemnification payments. Without
limiting the generality of the preceding sentence, the ways in which the
indemnitee shall assist the Corporation shall include the following:
After all indemnifiable losses of the indemnitee with
respect to any particular Proceeding against the indemnitee
shall have been paid, the indemnitee, at the request of
the Corporation, shall execute and deliver to the Corporation
a written confirmation of that fact.
At the Corporation's request, the indemnitee shall execute,
acknowledge before a notary public, and deliver to the
Corporation a Power of Attorney specifically authorizing each
of certain designated officers of the Corporation as attorneys-
in-fact for indemnitee to execute, acknowledge and deliver
indemnitee's written release to the Insurer with respect to the
losses arising from a particular Proceeding for which indemnitee
has been fully indemnified; and, if requested by the Corporation,
indemnitee shall execute, acknowledge before a notary public, and
deliver to the Insurer indemnitee's written release with respect
to the losses arising from a particular Proceeding for which
indemnitee has been fully indemnified.
-13-
<PAGE>
If the indemnitee were to revoke the Power of Attorney or refuse to provide the
Corporation with the written confirmation to which it is entitled under the
provisions of this Section 5, the Corporation shall have no further
indemnification obligations hereunder with respect to any then-pending or future
Proceeding. In any event, indemnitee is deemed to have released the Corporation
from liability to indemnitee hereunder with respect to any specific claim for
which indemnitee has been fully indemnified hereunder, regardless whether
indemnitee executes a separate release.
ARTICLE VI - STOCK
SECTION 1. CERTIFICATES OF STOCK
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the Chairman of the Board, the President or a
vice president, and by the Secretary or an assistant secretary, or the Treasurer
or an assistant treasurer, certifying the number of shares owned by him. Any of
or all the signatures on the certificate may be facsimile.
SECTION 2. TRANSFERS OF STOCK
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article VI of these By-
Laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE
The Board of Directors may fix a record date, which shall not be more
than sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for the other
action hereinafter described, as of which there shall be determined the
stockholders who are entitled: to notice of or to vote at any meeting of
stockholders or any adjournment thereof; to express consent to corporate action
in writing without a meeting; to receive payment of any dividend or other
distribution or allotment of any rights; or to exercise any rights with respect
to any change, conversion or exchange of stock or with respect to any other
lawful action.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
-14-
<PAGE>
ARTICLE VII - NOTICES
SECTION 1. NOTICES
Whenever notice is required to be given to any stock holder, director,
officer or agent, such requirement shall not be construed to mean personal
notice. Such notice may in every instance be effectively given by depositing a
writing in a post office or letter box, in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram, addressed to such stockholder, director, officer
or agent at his or her address as the same appears on the books of the
Corporation. The time when such notice is dispatched shall be the time of the
giving of the notice, provided that where any provision of these By-Laws or the
Certificate of Incorporation prescribes a manner in which notices must be given,
there shall have been compliance with such provision.
SECTION 2. WAIVERS
A written waiver of any notice, signed by a stockholder, director,
officer or agent, whether before or after the time of the event for which notice
is to be given, shall be deemed equivalent to the notice required to be given to
such stockholder, director, officer or agent. Neither the business nor the
purpose of any meeting need be specified in such a waiver.
ARTICLE VII - SPECIAL REIT PROVISIONS
SECTION 1. DEFINITIONS
The following definitions of terms apply to the provisions contained
in this Article VIII:
(1) "Advisor" means the person(s) or entity responsible for directing
or performing the day-to-day business affairs of the Company, including a person
or entity to which an Advisor subcontracts substantially all such functions. To
the extent the provisions of this Article VIII are germane, they shall apply to
an independent contractor the Company has engaged to manage the Company's
properties.
(2) "Affiliate" means (i) any person directly or indirectly
controlling, controlled by or under common control with another person, (ii) any
person owning or controlling 10% or more of the outstanding voting securities or
beneficial interests of such other person, (iii) any officer, director or
trustee of, or general partner in, of such person and (iv) if such other person
is an officer, director or trustee of, or general partner in, another entity,
then the entity for which that person acts in any such capacity.
(3) "Competitive Real Estate Commission" means that real estate or
brokerage commission paid for the purchase or sale of a
-15-
<PAGE>
property which is reasonable, customary and competitive in light of the size,
type and location of such property.
(4) "Unaffiliated Director(s)" means the Directors of the Company who
are not affiliated, directly or indirectly, with an Advisor of the Company,
whether by ownership of, ownership interest in, employment by, any material
business or professional relationship with, or service as an officer or director
of, such Advisor or an affiliated business entity of such Advisor. Unaffiliated
Directors shall also mean those Directors who perform no other services for the
Company, except as Director(s). An indirect relationship shall include
circumstances in which a member of the immediate family of a Director (which
shall include such person's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law and brothers and sisters-in-law) has
one of the foregoing relationships with an Advisor of the Company or the
Company.
(5) "REIT" is a corporation, trust or association (other than a real
estate syndication) which is engaged primarily in investing in equity interests
in real estate (including fee ownership and leasehold interests) or in loans
secured by real estate or both.
SECTION 2. CONFLICTS OF INTEREST
(1) The Company shall not purchase property from an Advisor, a
Director or Affiliate thereof, unless a majority of directors (including a
majority of Unaffiliated Directors) not otherwise interested in such transaction
approve the transaction as being fair and reasonable to the Company and at a
price to the Company no greater than the cost of the asset to such Advisor,
Director or Affiliate thereof, or, if the price to the Company is in excess of
such cost, that substantial justification for such excess exists and such excess
is not unreasonable. In no event shall the cost of such asset to the Company
exceed its current appraised value.
(2) The Company shall not sell property to an Advisor, a Director or
Affiliates thereof, unless a majority of Directors (including a majority of
Unaffiliated Directors) not otherwise interested in such transaction approve the
transaction as being fair and reasonable to the Company. In no event shall the
price of an interest in real property to be sold by the Company to the Advisor,
a Director or any Affiliate thereof be less than its current appraised value.
(3) The Company may not make loans to or borrow money from an Advisor,
a Director or Affiliate thereof, unless a majority of Directors (including a
majority of Unaffiliated Directors) not otherwise interested in such transaction
approve the transaction as being fair, competitive, and commercially reasonable
and no less favorable to the Company than loans between unaffiliated lenders and
borrowers under the same circumstances.
-16-
<PAGE>
(4) The Company shall not invest in any joint venture with an Advisor,
a Director or Affiliates thereof, unless a majority of Directors (including a
majority of Unaffiliated Directors) not otherwise interested in such transaction
approve the transaction as being fair and reasonable to the Company and the
participation of the Company is on substantially the same terms and conditions
as that of the other joint venturers.
(5) All other transactions between the Company and an Advisor, a
Director or Affiliates thereof shall require approval by a majority of the
Directors (including a majority of Unaffiliated Directors) not otherwise
interested in such transactions as being fair and reasonable to the Company and
on terms and conditions not less favorable to the Company than those available
from unaffiliated third parties.
SECTION 3. ANNUAL REPORTS
(1) The Company shall prepare an annual report concerning its
operations for each fiscal year containing financial statements prepared in
accordance with generally accepted accounting principles which are audited and
reported on by independent certified public accountants.
(2) Annual reports shall be mailed or delivered to each stockholder of
the Company as of a record date after the end of such fiscal year within 120
days after the end of the fiscal year to which it relates.
SECTION 4. ADVISORY CONTRACT
It shall be the duty of the Directors to evaluate the performance of
the Advisor before entering into or renewing an Advisory Contract. The criteria
used in such evaluation shall be reflected in the minutes of such meeting. Each
contract for the services of an Advisor entered into by the Company shall have a
term of no more than one year.
SECTION 5. ADVISOR COMPENSATION
The Unaffiliated Directors shall determine from time to time and at
least annually that the compensation which the Company contracts to pay to the
Advisor is reasonable in relation to the nature and quality of services
performed. The Unaffiliated Directors shall also supervise the performance of
the Advisor and the compensation paid to it by the Company to determine that the
provisions of such contract are being carried out. Each such determination
shall be based on the factors set forth below and all other factors such
Unaffiliated Directors may deem relevant, and the findings of such Directors on
each of such factors shall be recorded in the minutes of the Directors:
(1) The size of the advisory fee in relation to the size, composition
and profitability of the portfolio of the Company;
-17-
<PAGE>
(2) The rates charged to other REITs and to investors other than REITs
by advisors performing similar services;
(3) Additional revenues realized by the Advisor and its Affiliates
through their relationship with the Company, including loan administration,
underwriting or broker commissions, servicing, engineering, inspection and other
fees, whether paid by the Company or by others with whom the Company does
business;
(4) The quality and extent of service and advice furnished by the
Advisor; and
(5) The performance of the investment portfolio of the Company,
including income, conservation or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations.
SECTION 6. REAL ESTATE BROKERAGE COMMISSIONS ON RESALE OF PROPERTY
If an Advisor, Director or Affiliate provides a substantial amount of
the services in the effort to sell any property of the Company, then such person
may receive up to one-half of the brokerage commission paid but in no event in
excess of an amount equal to 3% of the contracted-for sales price. In addition,
the amount paid when added to the sums paid to unaffiliated parties in such a
capacity shall not exceed the lesser of the Competitive Real Estate Commission
or an amount equal to 6% of the contracted for sales price.
SECTION 7. DISTRIBUTION REINVESTMENT PLANS
All Distribution Reinvestment Plans adopted by the Company shall, at a
minimum, provide for the following:
(1) All material information regarding the distribution to the
stockholders and the effect of reinvesting such distribution, including the tax
consequences thereof, shall be provided to the stockholders at least annually,
and
(2) Each stockholder participating in the plan shall have a reasonable
opportunity to withdraw from the plan at least annually after receipt of the
information required in subparagraph (1) above.
ARTICLE IX - MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES
In addition to the provisions for the use of facsimile signatures
elsewhere specifically authorized in these By-Laws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.
-18-
<PAGE>
SECTION 2. CORPORATE SEAL
The Board of Directors may provide a suitable seal, containing the
name of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by the assistant
secretary or assistant treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS
Each Director, each member of any committee designated by the Board of
Directors and each officer of the Corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account or
other records of the Corporation, including reports made to the Corporation by
any of its officers, by an independent certified public accountant or by an
appraiser selected with reasonable care.
SECTION 4. FISCAL YEAR
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
SECTION 5. TIME PERIODS
In applying any provision of these By-Laws which require that an act
be done or not done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
ARTICLE X - AMENDMENTS
SECTION 1. AMENDMENTS
These By-Laws may be amended or repealed by the Board Of Directors or
by the stockholders at any meeting, so long as any amendment is not inconsistent
with the Certificate of Incorporation.
-19-
<PAGE>
EXHIBIT 19.2
Amendment No. 1
To The
Rights Agreement
This Amendment (the "Amendment") is entered into as of the 5th day of
February, 1999, between SIZELER PROPERTY INVESTORS, INC., a Delaware corporation
(the "Company"), and THE BANK OF NEW YORK, a New York banking corporation (the
"Rights Agent").
W I T N E S S E T H
WHEREAS, Company and the Rights Agent entered into a Rights Agreement dated
as of August 6, 1998, to correct two typographical errors which respectively
appeared in Sections 7(c) and 9(e) and to delete a provision in response to
recent decisions of the Delaware courts.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. The first sentence of the legend appearing in Section 3, paragraph
(c), shall be amended by inserting the underlined language as follows:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Sizeler
Property Investors, Inc. (the "Company") and The Bank of New York, as
Rights Agent, dated as of August 6, 1998, as amended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of the
Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or an Adverse Person or any Affiliate or Associate thereof
(as such terms are defined in the Rights
<PAGE>
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void."
2. Section 7, paragraph (c) shall be amended as follows:
(c) Action by Rights Agent. Upon receipt of a Rights
Certificate representing exercisable Rights, with the form of election
to purchase and the certificate duly executed, accompanied by payment
with respect to each Right so exercised in compliance with paragraphs
(a) and (b) of this Section 7, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly requisition from any transfer
agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for
the total number of one one-thousandths of a share of Preferred Stock
to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or if the Company
shall have elected to deposit the total number of shares of Preferred
Stock issuable upon exercise of the Rights hereunder with a depositary
agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of
Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request,
requisition from the Company the amount of cash, if any, to be paid in
lieu of fractional shares in accordance with Section 14, after receipt
of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by
such holder, and after receipt thereof, deliver such cash, if any, to
or upon the order of the registered holder of such Rights Certificate.
3. Section 9, paragraph (e) shall be amended as follows:
(e) Transfer Taxes and Charges. The Company will pay when due and
payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-thousandths of
a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) upon the
-2-
<PAGE>
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of
a number of one one-thousandths of a share of Preferred Stock (or Common
Stock and/or other securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) in a
name other than that of the registered holder upon the exercise of any
Rights until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it
has been established to the Company's satisfaction that no such tax is due.
4. Section 23, paragraph (c) shall be deleted in its entirety.
5. All other provisions of the Agreement are hereby affirmed.
6. This Amendment may be signed in separate counterparts which together
shall constitute a valid Amendment to the Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: SIZELER PROPERTY INVESTORS, INC.
By: /s/ David A. O'Flynn, Jr. By: /s/ Thomas A. Masilla, Jr.
--------------------------- ------------------------------------
David A. O'Flynn, Jr., Thomas A. Masilla, Jr., Vice Chairman
Secretary and President
Attest: THE BANK OF NEW YORK, as Rights Agent
By: /s/ Jeffrey Grosse By: /s/ John I. Sivertsen
--------------------------- ----------------------------------
Jeffrey Grosse John I. Sivertsen
Assistant Vice President Vice President
-3-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name of Corporation State of Incorporation
- ------------------- ----------------------
Clearwater Acquisition Corporation Delaware
SPIANTONIO, Inc. Delaware
SPIAPTLA, Inc. Delaware
SPIBILE, Inc. Alabama
SPICLIFF, Inc. Delaware
SPICOMLA, Inc. Delaware
SPILAF, Inc. Alabama
SPILAKE, Inc. Delaware
SPILAN, Inc. Delaware
SPIMALLA, Inc. Delaware
SPINAP, Inc. Delaware
SPINELLON, Inc. Delaware
SPINO, Inc. Delaware
SPIPAL, Inc. Delaware
SPITON, Inc. Alabama
SPITOWN Corporation Delaware
SPIWACHEE, Inc. Delaware
SPIWARD, Inc. Delaware
<PAGE>
[LOGO OF KPMG APPEARS HERE]
Suite 3500 One Shell Square Telephone 504 523 5000
New Orleans, LA 70139-3599 Fax 504 529 1516
Exhibit
-------
23.1
Consent of Independent Auditors
Board of Directors
Sizeler Property Investors, Inc.:
We consent to incorporation by reference in the registration statement
(No. 33-76134) on Form S-3 and in the registration statement (No. 333-16073)
on Form S-8 of Sizeler Property Investors, Inc. of our report dated February 4,
1999, except for Note H as to which the date is March 4, 1999, relating to the
consolidated balance sheets of Sizeler Property Investors, Inc. and subsidiaries
as of December 31, 1998 and 1997 and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the years in the three-
year period ended December 31, 1998, and the related financial statement
schedules, which report appears in the December 31, 1998 annual report on Form
10-K of Sizeler Property Investors, Inc.
/s/ KPMG LLP
------------------------
New Orleans, Louisiana
February 4, 1999, except for
Note H as to which the date is
March 4, 1999
[LOGO OF KPMG APPEARS HERE]
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,150,000
<SECURITIES> 0
<RECEIVABLES> 3,252,000
<ALLOWANCES> 423,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 329,390,000
<DEPRECIATION> 55,964,000
<TOTAL-ASSETS> 285,886,000
<CURRENT-LIABILITIES> 55,835,000
<BONDS> 152,747,000
0
0
<COMMON> 90,000
<OTHER-SE> 76,127,000
<TOTAL-LIABILITY-AND-EQUITY> 285,886,000
<SALES> 0
<TOTAL-REVENUES> 47,759,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 30,481,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,554,000
<INCOME-PRETAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,756,000
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
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