UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-9496
BODDIE-NOELL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1574675
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3710 One First Union Center, Charlotte, NC 28202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704/333-1367
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each
exchange on which registered:
Common Stock, Par Value $.01 per share American 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 filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-
K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-
affiliates of the Registrant at March 17, 1995 was approximately
$34,635,592.
The number of shares of Registrant's Common Stock outstanding on
March 17, 1995 was 2,990,990.
Index to Exhibits at Page 25 Total number of Pages 71
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BODDIE NOELL PROPERTIES, INC.
TABLE OF CONTENTS
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Item No. FINANCIAL INFORMATION Page No.
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PART I
1 Business 1
2 Properties 4
3 Legal Proceedings 6
4 Submission of Matters to a Vote of Security Holders 6
PART II
5 Market for Registrant's Common Equity and Related
Stockholder Matters 7
6 Selected Financial Data 8
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
8 Financial Statements and Supplementary Data 13
9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 13
PART III
10 Directors and Executive Officers of the Registrant 14
11 Executive Compensation 16
12 Security Ownership of Certain Beneficial Owners and
Management 20
13 Certain Relationships and Related Transactions 21
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 25
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PART I
ITEM 1. BUSINESS
History and Development of Boddie-Noell Properties, Inc.
Boddie-Noell Properties, Inc., (the "Company") is a self-advised and
self-managed equity real estate investment trust ("REIT"). The
Company, formerly known as Boddie-Noell Restaurant Properties, was
formed in 1987 with an initial public offering of 2,850,000 shares of
common stock. The Company's shares are listed on the American Stock
Exchange. Its executive offices are located at 3710 One First Union
Center, Charlotte, North Carolina 28202 (704-333-1367).
From its inception through 1992, the Company's investment strategy was
limited to the purchase and ownership of 47 restaurant properties
leased on a triple net basis to Boddie-Noell Enterprises, Inc. ("BNE").
During this period the Company operated as an advised REIT with all
management and administrative functions being performed by BNE Advisory
Group, Inc. (an affiliate of BNE) under an advisory contract. While
the Company was able to maintain a relatively stable dividend
throughout this period , it experienced virtually no growth in its
operating results and its common stock did not perform as well as that
of larger, self-managed, self-advised REITs holding other types of
properties and having more emphasis on long-term growth.
In 1992, the Company began to explore ways to increase shareholder
value. Following an extensive review of its options, the Company
concluded that it was in the best interest of its shareholders to
change the focus of the Company to emphasize apartment properties;
reorganize into a self-managed, self-advised REIT; and to implement a
long-term growth strategy of acquiring additional apartment properties
with a goal of increasing funds from operations ("FFO") and its annual
dividend payment.
To this end, the Company, in December, 1992, entered a letter of intent
to acquire BT Venture Corporation ("BTVC") and its managed properties
(the "roll-up" transaction). BTVC was a fully integrated apartment
management and development company located in Charlotte, North
Carolina. At that time, BTVC owned one apartment property and managed
nine other apartment properties for limited partnerships, the general
partner of which was an affiliate of BTVC (collectively the "managed
properties") and an affiliate of certain principals of BNE. Under the
proposed transaction the owners of BTVC and the affiliated limited
partnerships would have received shares of the Company's common stock
in exchange for their respective ownership interests in BTVC and the
managed properties. Management of the Company believed that this
transaction would have resulted in the Company achieving a number of
its goals. Following the transaction over two-thirds of its assets
would have been apartments and, using personnel obtained with the
purchase of BTVC, the Company would have become self-managed and self-
advised. Management believed that this transaction would have placed
the Company in a better position to attain long-term growth in its
operating results.
As proposed, the transaction constituted a "roll-up" as defined by the
Securities and Exchange Commission ("SEC") and was subject to a special
set of rules governing the merger of multiple limited partnerships into
a single publicly traded entity (the "roll-up" rules). These rules
govern and specify the type and extent of disclosure required and
mandate certain terms and conditions for transactions such as that
contemplated by the Company. At the time the Company entered this
transaction, there had not been a transaction completed under the SEC's
roll-up rules.
In May 1993, the Company entered into a contract to purchase BTVC and
the managed properties and on August 16, 1993, filed a registration
statement together with supporting documents with the SEC. With the
passage of time, it became clear that, due to the complexity of the
"roll-up" rules and changes in the market for apartment properties, the
difficulty, time and cost required to complete a "roll-up" transaction
such as that contemplated by the Company was significantly more than
originally estimated. In early 1994, the Company's Board of Directors
came to the conclusion that, as a result of changes in the apartment
sector of the real estate industry and the burden of compliance with
the disclosure requirements, it was highly unlikely that the proposed
"roll-up" transaction
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could be completed in an acceptable period of
time and at an acceptable cost. As a result of this determination, the
Company withdrew its registration statement on March 7, 1994.
Subsequent to the withdrawal of the Registration Statement, the Company
explored alternatives to the original "roll-up" transaction that would
help the Company achieve its goals without the cost, time and
uncertainty attendant to the "roll-up" transaction. As a result, on
June 7, 1994, the Company entered a contract to purchase BTVC in a
private transaction for a combination of stock and cash. Pursuant to a
Proxy Statement filed June 15, 1994, the purchase of BTVC was approved
by the Company's shareholders on August 4, 1994. The purchase was
completed on October 1, 1994. As part of the purchase of BTVC, the
Company acquired Latitudes Apartments, a 448-unit apartment community
located in Virginia Beach, Virginia; management rights and
responsibility for ten apartment communities located in North Carolina
and Virginia (containing a total of 1,947 apartments) and three
shopping centers located in North Carolina and Virginia (containing a
total of 238,550 square feet); and the employees of BTVC, including all
administrative and management staff. Simultaneously with the
acquisition of BTVC, the Company changed its name to Boddie-Noell
Properties, Inc., and moved its corporate headquarters from Rocky
Mount, North Carolina, to Charlotte, North Carolina.
Throughout the time that the Company was involved with the "roll-up"
transaction and the subsequent purchase of BTVC, the Company was
pursuing apartment acquisitions. On June 8, 1993, the Company acquired
Paces Commons Apartments, a 336-unit apartment community located in
Matthews, North Carolina (a suburb of Charlotte). On June 7, 1994, the
Company acquired Oakbrook Apartments, a 162-unit apartment community
located in Charlotte, North Carolina. These acquisitions were
identified by and were made with the assistance of BTVC personnel.
Since the acquisition of BTVC, the Company has purchased one additional
apartment community. On December 28, 1994, the Company acquired Harris
Hill Apartments, a 184-unit apartment community located in Charlotte,
North Carolina.
Current Operations
As a result of these acquisitions, the Company now owns 47 restaurant
properties and four apartment communities, containing a total of 1,130
apartments. The Company manages an additional ten apartment
communities, containing a total of 1,947 apartments, and three
shopping centers, containing a total of 238,550 square feet (for
detailed property information see "Item 2. Properties"). All of the
properties presently owned or managed by the Company are located in the
states of North Carolina and Virginia, with multi-family residential
operations in the North Carolina cities of Raleigh, Durham, Cary,
Chapel Hill, Charlotte and Greensboro, as well as Virginia Beach,
Virginia.
The Company has 81 employees, including administrative, management,
accounting, legal, acquisitions, development, property management,
leasing, and maintenance personnel. The Company operates as a self-
advised and self-managed REIT.
Each apartment community is operated by an on-site manager assisted by
a staff trained by the Company in sales, management, accounting,
maintenance and other procedures. On-site managers report directly to
property managers who operate from the Company's corporate offices.
This flat organization provides for efficient staffing levels, reduces
overhead expenses and enables the Company to be responsive to the needs
of residents and on-site employees. Employees of the Company supervise
all renovation and repair activities, which are generally completed by
outside contractors.
Restaurant properties are leased on a triple net basis to BNE, a
privately-held company, which is the second largest Hardee's franchisee
in the United States with approximately 380 stores. The Company's
lease agreement with BNE (the "master lease")has a primary term of 15
years expiring May, 2002, grants BNE three five-year renewal options
and provides for rent equal to 9.875 percent of restaurant sales as
defined, subject to a minimum annual rent of 8 percent of the original
purchase price of the properties, the average price of which was
approximately
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$920,000 per property. Under the terms of the master lease, BNE is
responsible for all aspects the operation, maintenance and upkeep of
the restaurant properties.
Business Strategy
Building upon the acquisition of its four apartment communities and
BTVC, the Company intends to continue to acquire high quality apartment
properties. The Company currently has no plans to add to or dispose of
its restaurant properties and will not seek additional third-party
management contracts except as part of a plan to acquire additional
properties.
The Company believes that its strategy of combining the relatively
stable cash flow of the restaurant properties with increasing
investment in apartment communities will provide for growth in FFO and
enhance shareholder value. The Company will seek to acquire multi-
family properties located primarily in the states of North Carolina,
South Carolina and Virginia from unaffiliated third parties and as well
as some or all of the affiliated properties it currently manages. The
Company will also selectively consider opportunities for development of
new apartment communities. The Company's management has developed 781
apartment units and believes that its development experience will
enable it to build additional apartment communities at such time as
economic conditions make development attractive.
In evaluating potential properties for acquisition, the Company will
consider such factors as (1) the current and anticipated cash flow of
the property and its adequacy to meet operational needs and other
obligations and to facilitate the Company's ability to pay dividends;
(2) the geographic area and demographic profile; (3) the location,
construction quality, condition and design of the property (generally
properties will be or have the potential to become Class A apartment
communities); (4) the potential for increasing cash flow by means of
increasing rental rates and reducing operating expenses; (5) the
potential for capital appreciation; (6) the growth, tax and regulatory
environment of the community in which the property is located; (7)
occupancy and demand for the property; and (8) prospects for eventual
sale or refinancing. Generally, an apartment property will be acquired
only where the operating history indicates that the property will
contribute immediately to the cash flow of the Company and there is a
strong likelihood of increasing cash flow.
Prior to acquiring its first apartment community, the Company's capital
requirements were minimal as all capital expenses related to the
restaurants were borne by BNE under the terms of the master lease. In
order to acquire Paces Commons, Oakbrook, BTVC, Latitudes and Harris
Hill, the Company has incurred additional debt and issued additional
common stock. The additional debt consists of first mortgages secured
by the acquired apartment communities and draws against the Company's
credit lines. In order for the Company to continue to acquire
apartment properties, it is essential that it obtain additional equity
capital. The Company is actively exploring available sources of equity
capital. It is likely that the Company will incur additional long-term
debt as part of any apartment acquisitions. While short-term variable
rate debt may be used to facilitate an acquisition, the preferred
permanent financing will be long-term, fixed rate, and self-amortizing.
The Company is committed to reducing its exposure to variable rate
debt. During 1994, the Company converted $31.1 million of variable
rate mortgages to fixed rates. The Company intends to continue to
reduce its exposure to variable rates through conversion to fixed rate
mortgages, securitization of certain debt and debt reduction using new
equity capital. The Company is currently evaluating a number of
options in these areas.
The Company has elected and expects to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended. As such the Company generally will not be subject to federal
or state income taxes on net income. REITs are subject to a number of
organizational and operational requirements, including a requirement
that they currently distribute 95 percent of their ordinary taxable
income as dividends. The Company intends to pay dividends quarterly,
expects that these dividends will substantially exceed the 95 percent
taxable income test, and anticipates that all dividends will be paid
from current funds from operations.
In addition to the 95 percent taxable income test, the Company is
subject to a "non-qualifying" income test which requires that no more
than 5 percent of total revenue come from sources deemed to be "non-
qualifying". Failure to
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comply with this requirement may result in the loss of the Company's
REIT status. Prior to 1994, the Company had no non-qualifying income.
With the acquisition of BTVC in October 1994, the Company assumed
third-party management for ten apartment communities and three
shopping centers. Revenue from such third-party property management
is considered to be non-qualifying income. As a result, the Company,
in 1994, had non-qualifying income of approximately 3 percent of
total revenue. In the absence of corrective action, management
estimates that its third-party management activities may result in
the Company having more than 5 percent of its revenue
come from a non-qualifying source in 1995. To ensure that non-
qualifying income does not exceed 5 percent of its total revenue, the
Company has formulated several options to correct this situation. Such
corrective action may include the creation of a management subsidiary
which would be subject to federal and state income taxes. This
structure is currently being used by a number of other REITs.
The Company expects to meet its short-term liquidity requirements
generally through net cash provided by operations and utilization of
credit facilities. The Company believes that its net cash provided by
operations will be adequate and anticipates that it will continue to be
adequate to meet both operating requirements and payment of dividends
by the Company in accordance with REIT requirements in both the short
and the long term. The Company anticipates funding its acquisition
activities, if any, primarily by using short-term credit facilities or
secured debt. The Company expects to meet certain of its long-term
liquidity requirements, such as scheduled debt maturities, repayment of
short-term financing of possible property acquisitions, through long-
term secured and unsecured borrowings and the issuance of debt
securities or additional equity securities of the Company. The Company
believes that it has sufficient resources to meet its short- and long-
term liquidity requirements.
ITEM 2. PROPERTIES
The Company owns 47 restaurant properties and four apartment
communities. All of the Company's properties are located in the states
of North Carolina and Virginia.
Restaurant Properties
The locations of the Company's 47 restaurant properties are listed on
Item 14. Schedule III of this report. The restaurant properties are
leased on a triple net basis to BNE pursuant to a master lease. The
master lease provides for a primary term of fifteen years expiring on
May 27, 2002, grants BNE three five-year renewal options and provides
for rent equal to 9.875 percent of restaurant sales as defined, subject
to a minimum annual rent of 8 percent of the original purchase price of
the properties. The average price for the restaurant properties was
approximately $920,000 per property. Under the terms of the master
lease, BNE is responsible for all aspects of the operation, maintenance
and upkeep of the restaurant properties. A copy of the master lease is
incorporated by reference as Exhibit 10.1.
The restaurant properties are operated by BNE as Hardee's restaurants
pursuant to franchise agreements. These agreements require that the
properties conform to a standard design specified by Hardee's Food
Systems, Inc. ("Hardees"). The current design consists of a one-story
brick, stucco or wood building that embodies a contemporary style with
substantial plate glass window areas. The buildings average 3,300
square feet and are located on sites ranging from 1 to 1.3 acres. The
buildings are suitable for conversion to a number of uses, but the
interiors must be substantially modified prior to utilization in non-
restaurant applications. Hardee's owns a design patent on certain
elements of the building and requires franchisees to make certain
exterior modifications if the location is discontinued as a Hardee's
restaurant.
Under the master lease BNE is responsible for all normal maintenance
and repair of the restaurant properties. In addition, BNE is
responsible for the cost of any improvement, expansion, remodeling or
replacement required to keep the properties competitive or in
conformity with Hardee's building standards. The decision to modify a
particular restaurant property is based on a number of factors,
including the date of its last modification and the number, age and
design features of competing restaurants located in the market area of
the particular property.
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Since the Company's inception in 1987, 16 restaurants have been
renovated, including one that was completely rebuilt. All renovations
have been made at BNE's expense.
Apartment Properties
The Company owns four apartment properties containing a total of 1,130
units. Of these, three properties containing a total of 682 apartments
are located in Charlotte, North Carolina, and one property with 448
apartments is located in Virginia Beach, Virginia. Summary information
concerning each apartment property follows:
Paces Commons Apartments. Located in Charlotte, North Carolina, Paces
Commons was constructed in 1988 on 24.8 acres. The property consists
of 18 two and three story masonry and wood frame buildings containing
336 garden type apartments, a clubhouse, a family center, two pools, a
spa, car wash and two tennis courts. The community offers eight
different one, two and three bedroom floor plans with an average size
of 862 square feet.
The property was acquired by the Company on June 8, 1993, for a
contract price of $14,250,000. The property appraised for $16,763,000
in August 1994. Average Economic Occupancy, defined as gross potential
rent less vacancy divided by gross potential rent, was 95 percent for
both 1994 and the period June, 1993 (acquisition) to December 31, 1993.
Physical occupancy at December 31, 1994, was 95 percent as compared to
94 percent on December 31, 1993. Average Revenue per Unit, defined as
total revenue divided by the number of units times the Average Economic
Occupancy, was $611 per month for 1994 and $576 per month for the
period June, 1993 (acquisition) to December 31, 1993. For the month of
December 1994, average revenue per unit was $646 per month as compared
to $589 for December 1993. Total revenue for the month of December
1994 was $207,599 as compared to $187,433 for December 1993.
Oakbrook Apartments. Located in Charlotte, North Carolina, Oakbrook
was constructed in 1985 on a 16.37 acre site. The property consists of
17 two story wood frame buildings with cedar siding and brick veneer
containing 162 garden and townhouse style apartment units. The
property offers eight different one, two and three bedroom floor plans
averaging 1,100 square feet.
The property was acquired by the Company on June 7, 1994, for a
contract price of $9,250,000. The property appraised for $9,832,000 in
April 1994. Average Economic Occupancy for the period June, 1994
(acquisition) to December 31, 1994 was 98 percent. Physical occupancy
was 97 percent at December 31, 1994. Average Revenue per Unit was $711
per month for the period June, 1994 (acquisition) to December 31, 1994.
For the month of December 1994, Average Revenue per Unit was $740.
Latitudes Apartments. Located in Virginia Beach, Virginia, Latitudes
was constructed in 1989 on a 24.86 acre site. The property consists of
20 two and three story wood frame buildings with vinyl siding
containing 448 garden style apartment units. The property offers six
different one, two and three bedroom floor plans averaging 800 square
feet.
The property was acquired by the Company on October 1, 1994, as part
of the acquisition of BTVC. The property was purchased by BTVC on
December 3, 1992, for a contract price of $19,000,000. The property
appraised for $22,150,000 in January 1994. Average Economic Occupancy
for 1994 was 93 percent as compared to 90 percent for 1993. Physical
occupancy at December 31, 1994 was 96 percent as compared to 85 percent
on December 31, 1993. Average Revenue per Unit was $606 per month for
1994 and $593 per month for 1993. For the month of December 1994,
Average Revenue per Unit was $610 as compared to $585 for December
1993.
Harris Hill Apartments. Located in Charlotte, North Carolina, Harris
Hill was constructed in 1988 on a 18.37 acre site. The property
consists of 19 two and three story wood frame buildings with cedar
siding containing 184 garden style apartment units. The property
offers four different one and two bedroom floor plans averaging 912
square feet.
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The property was acquired by the Company on December 28, 1994, at a
contract price of $8,900,000. The property appraised for $9,500,000 in
October 1994. Physical occupancy on December 31, 1994 was 95 percent.
Rental rates in effect on December 31, 1994, ranged from $580 to $750,
with the Average Revenue per Unit for the month of December 1994 being
$641.
ITEM 3. LEGAL PROCEEDINGS
Phase I environmental studies have been performed on the Company's
apartment properties. Such studies found ground water contamination at
sites near Latitudes and Paces Commons. The Company believes that the
matters raised by such reports will not have a material adverse effect
on the Company. Environmental audits have not been conducted on the
restaurant properties. BNE has indemnified the Company for
environmental problems associated with the restaurant properties under
its master lease with the Company.
The Company is a party to a variety of legal proceedings arising in the
ordinary course of its business. In addition, the Company has become a
successor party-in-interest to certain legal proceedings as a result of
its acquisition of BTVC. These matters arose in the ordinary course of
BTVC's business either as an owner of an apartment community or as a
property management company. All of these matters, individually and in
aggregate, are not expected to have a material adverse impact on the
Company.
In the event a claim were successful, the Company believes that it is
adequately covered by insurance and indemnification agreements. The
Company has insurance coverage on each of its apartment properties.
The Company's restaurant properties are subject to an indemnification
agreement whereby BNE, the lessee, is responsible for all claims
arising from a restaurant property. In addition, BNE is required to
provide insurance on each restaurant property which identifies the
Company as a named insured. Each property which is managed, but not
owned by the Company, is covered by an insurance policy under which the
Company is a named insured. As to claims to which the Company has
become a successor party-in-interest to BTVC, the Company received, as
part of the acquisition of BTVC, an indemnification agreement from B.
Mayo Boddie and Nicholas B. Boddie (the sole shareholders of BTVC)
whereby the Company is, subject to certain limitations, indemnified
from loss arising out of a claim against BTVC.
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 year 1994.
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PART II
ITEM 5. MARKET FOR REGISTRANT S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has been traded on the American Stock Exchange
under the symbol "BNP". There were approximately 1,750 shareholders of
record at March 17, 1995. The table below sets forth for the periods
indicated the range of high and low sale prices of the Common Stock as
reported by the American Stock Exchange. As of March 17, 1995 the closing
price of the Company's Common Stock was $13 3/8 per share.
Stock Price Dividends
High Low Paid Per Share
1993
First quarter $17 1/8 $13 1/2 $ .31
Second quarter 16 1/2 14 5/8 .31
Third quarter 16 14 1/8 .31
Fourth quarter 16 1/4 13 5/8 .31
$1.24
1994
First quarter 15 5/8 13 5/8 $ .31
Second quarter 14 3/8 13 1/2 .31
Third quarter 14 3/8 13 1/2 .31
Fourth quarter 14 1/2 12 1/2 .31
$1.24
1995
Jan. 1 - Mar. 17 13 7/8 12 1/8 $ .31
The Company has a dividend reinvestment plan which is available to all
shareholders of record. Under this plan, the plan administrator, First
Union National Bank of North Carolina, will reinvest dividends on behalf of
plan participants by buying shares of the Company's stock on the open
market. In addition, shareholders who participate in the plan may elect to
supplement their reinvestment program with cash contributions of any amount
from $25 to $3,000 per quarter.
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ITEM 6. SELECTED FINANCIAL DATA
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For the years ended December 31,
1994 1993 1992 1991 1990
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Operating Data
Revenues $9,258,246 $6,425,852 $5,373,305 $5,108,207 $5,191,941
Net income (1) $2,301,919 $2,455,451 $3,158,521 $2,924,242 $3,007,838
Net income per share $.80 $.86 $1.11 $1.03 $1.06
Weighted average number of
shares 2,885,248 2,850,000 2,850,000 2,850,000 2,850,000
Distributions per share:
Ordinary income $ .63 $1.09 $1.11 $1.03 $1.06
Return of capital .61 .15 .13 .27 .30
Total $1.24 $1.24 $1.24 $1.30 $1.36
Balance Sheet Data (at year
end)
Total assets $95,954,214 $54,642,613 $40,465,345 $40,837,589 $41,618,331
Notes payable $66,883,556 $26,894,378 $12,000,000 $12,000,000 $12,000,000
Shareholders' equity $27,967,909 $27,251,996 $28,330,545 $28,706,024 $29,486,782
Other Data
Funds from operations (2) $4,468,055 $4,121,286 $3,957,023 $3,731,494 $3,854,929
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(1) 1994 and 1993 net income include a special charge of $377,000 and
$600,000, respectively, to write off certain acquisition costs .
(2) The Company considers funds from operations ("FFO")to be an appropriate
measure of the performance of an equity REIT. FFO is generally defined as
net income (loss) plus certain non-cash items, primarily depreciation and
amortization. Adjustments for all periods shown consisted only of
depreciation and amortization and write-offs of deferred acquisition costs
and deferred financing costs. FFO should not be considered as an
alternative to net income as an indication of the Company's performance or
to cash flow as a measure of liquidity.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Revenues
Total revenues were essentially stable from the beginning of the Company
until 1993 when the Company purchased its first apartment community. Total
revenues for 1993 were $6,426,000, increasing 19.6 percent from the
$5,373,000 realized in 1992. This increase is attributable to the
acquisition of Paces Commons Apartments in June 1993. For 1994, total
revenues were $9,258,000. This represents a 44.1 percent increase over
1993 and is attributable to Paces Commons having been in place for the
entire period and the acquisition of Oakbrook Apartments, BT Venture
Corporation ("BTVC"), Latitudes Apartments and Harris Hill Apartments during
1994.
The Company's revenues come from two primary sources - restaurant rental
payments and apartment rental income. Restaurant rental payments are
comprised of minimum and percentage rent. For years 1992 through 2002, the
minimum rent is $3,459,433, which equals 8 percent of the purchase price of
the restaurant properties. Percentage rent is an amount equal to 9.875
percent of the net sales of the restaurant properties less any minimum
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rent payments. Except for 1992, restaurant revenues have remained generally
consistent since the inception of the Company. In 1992, restaurant revenues
increased by 5.2 percent over 1991, but have since returned to pre-1992
levels. The revenue increase experienced in 1992 was primarily attributable
to the introduction by Boddie-Noell Enterprises, Inc. ("BNE") of fried
chicken at the Company's restaurants. To a lesser extent, 1992 revenues
were bolstered by the addition of several other new products including the
Frisco Sandwich line. Restaurant revenues for 1993 declined by 3.1 percent
from 1992 and for 1994 declined by 2.3 percent from the prior year. The
1993 decline reflects the return to a more normal sales level following the
increased sales in 1992 occasioned by the introduction of new products. The
1994 decline is primarily attributable to the closing of seven restaurants
at various times during the year for remodeling. The master lease provides
for the payment of the minimum rent for the first 60 days during which a
restaurant is closed and for the payment thereafter, until the restaurant
reopens, of an amount equal to the average rental payment for all
restaurants which were open during the period.
The Company first received apartment rental income with the acquisition of
Paces Commons in June 1993. For 1993, Paces Commons contributed $1,245,000
of rental income. For 1994, the Company had apartment rental revenues of
$3,889,000. This includes rental income from Paces Commons, Oakbrook,
Latitudes and Harris Hill Apartments.
In addition to revenues from restaurant and apartment rentals, the Company
now receives property management and administration fees arising from the
management contracts it obtained as part of the acquisition of BTVC in
October 1994. For 1994, the Company received management fees of $276,000.
Expenses
For the years 1988 through 1992, total expenses remained relatively constant
at approximately $2,200,000 per year. In 1993, total expenses increased to
$3,970,000. The increase was primarily attributed to the acquisition of
Paces Commons. For 1994, total expenses were $6,956,000, an increase of
75.2 percent over 1993. The increase in 1994 was due to the inclusion of
Paces Commons for the entire period and the acquisition of BTVC and
Oakbrook, Latitudes and Harris Hill apartments.
Depreciation and amortization totaled $1,066,000 for 1993, increasing 33.5
percent from that recorded during 1992. The increase was primarily due to
the depreciation recorded on Paces Commons and the amortization of deferred
financing costs related to the acquisition of Paces Commons. For 1994,
depreciation and amortization were $1,648,000, an increase of 54.6 percent
over 1993. The increase was attributable to the inclusion of Paces Commons
for the entire period and the acquisition of BTVC and Oakbrook, Latitudes
and Harris Hill apartments.
Interest expense increased in 1993 to $1,442,000 from $1,035,000 in 1992.
The increase was primarily due to an increase of $14,894,000 in outstanding
indebtedness, of which $14,200,000 was incurred in connection with the
acquisition of Paces Commons. For 1994, interest expense was $2,802,000, a
94.4 percent increase over 1993. The increase was due to interest paid on
the Paces Commons acquisition debt for the full year, an increase in
indebtedness of $39,989,000 related to the acquisition of BTVC and
Oakbrook, Latitudes and Harris Hill apartments, and higher interest rates.
Property operating expenses relating to Paces Commons, the Company's only
apartment property in 1993, totaled $360,000 from June 8, 1993 (date of
acquisition), through the end of the year. For 1994, the Company had
property operating expenses related to apartment properties of $1,101,000.
The increase was due to the addition of Oakbrook, Latitudes and Harris Hill
apartments to the Company's portfolio. Operating expenses at the Company's
apartment properties are in line with the Company's expectations.
Operating expenses relating to the restaurants are insignificant because of
the restaurant properties' triple net lease arrangements.
In 1993, the Company paid $56,000 in property management fees (5 percent of
rental revenues collected) to BTVC for the management of Paces Commons. For
the first three quarters of 1994, the Company paid property management fees
of $112,000, which represented management fees for Paces Commons and
Oakbrook. With the
9
<PAGE>
acquisition of BTVC in October 1994, the Company began to manage its
own properties and no longer pays property management fees.
In addition to property management fees, the Company paid an advisory fee of
$201,000 (4.65 percent of net cash available for distribution as defined by
the Advisory Agreement) to BNE Advisory Group in 1993. Advisory fees for
the first three quarters of 1994 were $153,000. With the acquisition of
BTVC, the Company terminated its advisory contract with BNE Advisory Group
and became self-advised, thereby eliminating all future advisory fees.
Administrative expense totaled $622,600, $245,700, and $188,300 in 1994,
1993, and 1992 respectively. Increases are due primarily to implementation
of directors' and officers' insurance coverage effective October, 1993 and
the assumption of property management activities in October, 1994.
Funds From Operations
FFO is defined by the National Association of Real Estate Investment Trusts
(NAREIT) as "net income (computed in accordance with generally accepted
accounting principles), excluding gains (losses) from debt restructuring and
sales of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures". The
Company considers FFO in evaluating property acquisitions and its operating
performance and believes that FFO should be considered along with, but not
as an alternative to, net income and cash flows as a measure of the
Company's operating performance and liquidity. FFO does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs.
Through 1991, FFO remained generally unchanged. In 1992, FFO increased 6.1
percent to $1.39 per share. This increase was attributable to the increase
in restaurant rental payments occasioned by the introduction of fried
chicken and several other new products at the Company's restaurant
properties. FFO in 1993, excluding a special charge to income of $600,000,
increased by 4.3 percent to $1.45 per share ($1.24 net of the special
charge). This increase was due to the acquisition of Paces Commons
Apartments. For 1994, FFO, excluding special charges of $519,000, was
$1.55 per share ($1.37 net of the special charge), an increase of 6.9
percent over 1993.
Net Income
Net income for the years 1988 through 1991 ranged between $1.03 and $1.06
per share ($2,961,000 to $3,032,000). In 1992, net income increased to
$1.11 per share ($3,159,000), which was attributable to the increase in
restaurant rental payments that resulted from the introduction of fried
chicken and several other new products at the Company's restaurants. Net
income for 1993 totaled $2,455,000 or $0.86 per share after a special charge
of $600,000 which was related to the write off of certain costs incurred as
part of the attempted "roll-up" transaction (see discussion at Item 1.
Business). If not for the special charge, net income for 1993 would have
been $3,055,000 or $1.07 per share.
For 1994, net income declined 6.3 percent to $2,302,000 or $0.80 per share
after special charges of $519,000. Of this charge $377,000 was related to
the write-off of certain expenses incurred as part of the attempted "roll-
up" transaction and $142,000 was related to the write-off of deferred loan
costs incurred upon the refinancing of Paces Commons, Oakbrook and
Latitudes apartments. If not for the special charge, net income for 1994
would have been $2,820,000 or $0.98 per share. The disparity in the trends
of FFO and net income results from the increase in depreciation expense (a
deduction in determining net income, but not a factor in FFO) related to the
apartment properties.
Dividends
The Company paid dividends of $1.24 in 1988 and $1.36 per share in the years
1989 and 1990. In response to several quarters of negative sales trends and
the reduction in minimum rent effective June 30, 1991, the Company reduced
its quarterly dividend in July, 1991 by $.03 per share to $.31 per quarter.
The Company has maintained
10
<PAGE>
the per share dividend at this level since that time. As a result, the
Company has paid dividends of $1.30 in 1991 and $1.24 per share in the
years 1992, 1993 and 1994.
The Company's dividend payout ratio (the ratio of dividends paid to FFO,
which excludes the special charges to income in 1993 and 1994) was 94.6
percent for 1988, 103.0 percent for 1989, 100.7 percent for 1990, 99.2
percent for 1991, 89.2 percent for 1992, 85.7 percent for 1993 and 80.1
percent for 1994.
Liquidity and Capital Resources
Capitalization
Prior to acquiring its first apartment community, the Company's capital
requirements were minimal as all capital expenses related to the restaurants
were borne by BNE under the terms of the master lease. In order to acquire
Paces Commons, Oakbrook, BTVC, Latitudes and Harris Hill, the Company has
incurred additional debt and issued additional common stock. The additional
debt consists of first mortgages secured by the acquired apartment
communities and draws against the Company's credit lines. As the Company
continues to acquire apartment properties, it is likely that the Company
will incur additional long-term debt and seek additional equity capital.
The Company is committed to reducing its exposure to variable rate debt.
During 1994, the Company converted $31,100,000 of variable rate mortgages
to fixed rates.
At December 31, 1994, the Company's total book capitalization was
$94,851,000. This was comprised of $27,968,000 of shareholders' equity
and $66,883,000 of debt. At December 31, 1993, the Company had 2,850,000
shares of common stock outstanding. On October 1, 1994, an additional
140,990 shares were issued in conjunction with the acquisition of BTVC.
As of December 31, 1994, the Company's debt was comprised of $7,056,000 in
notes payable to affiliates; $41,577,000 of first mortgages; and $18,250,000
outstanding under a $20,000,000 secured revolving credit facility. The
notes payable to affiliates consist of a $6,100,000 note payable to BNE and
a $956,300 note payable to Boddie Investment Company ("BIC"), with interest
at 30 Day LIBOR plus 150 basis points capped at 8.0%, interest only paid
quarterly, due in full May, 1999.
The Company's mortgage debt is as follows:
- a $12,000,000 mortgage note at 8.625 percent, interest only paid
monthly, due in full June 15, 1995. Secured by a mortgage on fourteen
restaurant properties and assignment of the master lease as it relates to
such properties. Outstanding balance at December 31, 1994, was $4,000,000.
- a $11,000,000 mortgage note, payable in monthly installments of
$85,813 including principal and interest at 8.125 percent through September,
1999, subject to adjustment annually thereafter to the Moody's A Corporate
Bond Index Daily Rate plus 0.125 percent, with a balloon payment October,
2019. May be prepaid in whole or part subject to certain fees. Secured by
a deed of trust and assignment of the rents of Paces Commons. Outstanding
balance at December 31, 1994, was $10,977,000.
- a $13,450,000 mortgage note, payable in monthly installments of
$107,850 including principal and interest at 8.45 percent through December
1999, due in full on January 1, 2000. May be prepaid in whole or part
subject to certain fees. Secured by a deed of trust and assignment of the
rents of Latitudes. Outstanding balance at December 31, 1994, was
$13,450,000.
- a $6,650,000 mortgage note, payable in monthly installments of
$50,711 including principal and interest at 7.86 percent through December,
1997, then at the Moody's A Corporate Bond Index Daily Rate minus 0.125
percent, due in full on January 1, 2020. May be prepaid in whole or part
subject to certain fees. Secured by a deed of trust and assignment of the
rents of Oakbrook. Outstanding balance at December 31, 1994, was
$6,650,000.
11
<PAGE>
- a $6,500,000 mortgage note, payable in monthly installments
equal to the principal component of the equal monthly payment which would be
required to fully amortize the loan at an interest rate of 8.0 percent over
a 25 year term and interest at a variable rate equal to the 30 Day LIBOR
rate plus 1.85 percent through December 22, 1995, then at a variable rate
equal to the 30 Day LIBOR rate plus 2.35 percent, due in full on December
28, 1997. May be prepaid in whole or part subject to certain fees. Secured
by a deed of trust and assignment of the rents of Harris Hill. Outstanding
balance at December 31, 1994, was $6,500,000.
The Company has a $20,000,000 credit facility ("Credit Facility") arranged
through NationsBank and First Union National Bank ("Banks"). The Credit
Facility bears interest at the Company's option at 30, 60, or 90 day LIBOR
plus 162.5 basis points or at the floating CD rate plus 162.5 basis points
or the prime rate. The Company may prepay any outstanding amounts under the
Credit Facility, in whole or in part without penalty. At December 31, 1994,
the outstanding balance under the credit facility was $18,250,000. The
Credit Facility is secured by a Deed of Trust and Security Agreement on 20
of the Company's restaurant properties. As further security, BNE has
entered into a Purchase Agreement under which the Banks can require BNE, in
the event of a default, to purchase the pledged restaurants for an aggregate
purchase price equal to the lesser of $20,000,000 or the principal and
interest then outstanding. The proceeds from the mandated purchase would be
paid directly to the Banks in satisfaction of the Credit Facility. In lieu
of purchasing the restaurants, BNE has the option to purchase the Credit
Facility from the Banks for the amount then outstanding under the Credit
Facility.
The Company has obtained a commitment from the Banks to extend the maturity
date of the Credit Facility to April 30, 1996, and to increase the amount of
the facility to $24,000,000. As a result, the Company will add four
additional restaurants to the Deed of Trust and Security Agreement and BNE
has agreed to add four additional restaurants to the Purchase Agreement.
The Company intends to draw an additional $4,000,000 against this line to
pay the final installment on the restaurant mortgage loan at its maturity in
June 1995.
In addition to the Credit Facility, the Company has an unsecured revolving
line of credit of $2,000,000 with BNE. This line bears interest at the
prime rate. At December 31, 1994, there were no draws on this line.
Cash Flow
For the years 1988 through 1992, cash flow from operating activities was
generally consistent, at approximately $3.8 million in all years except
1991, in which cash flow from operating activities was approximately $3.4
million. In each of those years the Company utilized its cash flow
principally to fund dividend payments.
During 1993, the Company generated $4,066,000 of net cash provided by
operating activities, an increase of 5.5 percent over 1992. The increase
was primarily attributable to the acquisition of Paces Commons Apartments in
June, 1993. Net cash provided by operating activities increased by 10.6
percent to $4,496,000 in 1994. The increase was attributable to Paces
Commons having been included for the entire period and cash flow from the
properties acquired in 1994 (BTVC and Oakbrook, Latitudes and Harris Hill
apartments) which more than offset the decrease in restaurant rental
revenue.
Net cash used by investing activities increased from $134,000 in 1992 to
$16,366,000 in 1993 due to the acquisition of Paces Commons Apartments and
payments of $2,014,000 of deferred acquisition and financing costs. In
1994, cash used by investing activities increased to $19,239,000. This
increase was primarily attributable to the acquisition of Oakbrook and
Harris Hill apartments.
Net cash flows from financing activities increased from a negative
$3,534,000 in 1992 (primarily for payment of dividends) to positive
$11,360,000 in 1993. This $14.8 million increase was the result of
borrowing activity ($18,950,000 of borrowings which were used to purchase
Paces Commons Apartments and to make a $4,000,000 principal payment against
the mortgage note on the restaurant properties). In 1994, net cash provided
by financing activities increased to $15,573,000. This increase of $4.2
million was also due primarily to borrowings related to acquisitions
($22,500,000 in borrowings associated with the acquisition of Oakbrook and
Harris Hill apartments and $817,000 net proceeds from the refinancing of
Paces Commons, Oakbrook, and Latitudes apartments, offset by the repayment
of $4,167,000 of outstanding principal).
12
<PAGE>
The Company has elected and expects to be taxed as a Real Estate Investment
Trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended. As such the Company generally will not be subject to
federal or state income taxes on net income. REITs are subject to a number
of organizational and operational requirements, including a requirement that
they currently distribute 95 percent of their ordinary taxable income as
dividends. The Company intends to pay dividends quarterly, expects that
these dividends will substantially exceed the 95 percent taxable income test
and anticipates that all dividends will be paid from current FFO.
The Company expects to meet its short-term liquidity requirements generally
through net cash provided by operations and utilization of credit
facilities. The Company believes that its net cash provided by operations
will be adequate and anticipates that it will continue to be adequate to
meet both operating requirements and payment of dividends by the Company in
accordance with REIT requirements in both the short and the long term. The
Company anticipates funding its acquisition activities, if any, primarily by
using short-term credit facilities or secured debt. The Company expects to
meet certain of its long-term liquidity requirements, such as scheduled debt
maturities, repayment of short-term financing of possible property
acquisitions, through long-term secured and unsecured borrowings and the
issuance of debt securities or additional equity securities of the Company.
The Company believes that it has sufficient resources to meet its short- and
long-term liquidity requirements.
Inflation
Management does not believe that inflation poses a material risk to the
Company. The leases are the Company's apartment properties are short-term
in nature. The majority of the apartment leases are for terms of one year
or less, with none longer than two years. All apartment leases allow, at
the time of renewal, for adjustments in the rent payable thereunder and thus
enable the Company to seek increases in rents to compensate for increases in
expenses brought about by inflation. In addition, the apartment lease
agreements give the Company the right to terminate any lease at the end of
its term on sixty days notice. The restaurant properties are leased on a
triple-net basis, which places the risk of rising operating and maintenance
cost on the lessee.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Item 14(a)
and filed as part of this report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of Directors
Set forth below is a listing and brief biography of each of the directors of
the Company as of December 31, 1994. The Board of Directors consists of
five directors, whose terms of office expire annually. All of the directors
have served in that capacity since the Company's formation in 1987.
Name Age Position
B. Mayo Boddie 65 Chairman of the Board, Director
Nicholas B. Boddie 67 Vice Chairman, Director
James B. Powers 70 Director
William H. Stanley 69 Director
Richard A. Urquhart, Jr. 76 Director
B. Mayo Boddie - Chairman of the Board of Directors. Mr. Boddie was a
founder of the Company and a co-founder of Boddie-Noell Enterprises, Inc.
("BNE")in 1961 and serves as Chairman of the Board of both companies. Mr.
Boddie serves as a director of First Union National Bank of North Carolina,
Factory Stores of America, which is a publicly traded REIT, North Carolina
Wesleyan College, the East Carolina Council of Boy Scouts of America, a
member of the Board of Visitors of the Kenan-Flagler Business School
(University of North Carolina at Chapel Hill) and is President of the Rocky
Mount Chamber of Commerce. He attended the University of North Carolina at
Chapel Hill.
Nicholas B. Boddie - Vice Chairman and Director. Mr. Boddie was a co-
founder of BNE in 1961 and is currently Vice-Chairman and a director of that
company. He is a director of First Union National Bank of Rocky Mount, Lake
Waccamaw Boys and Girls Home of North Carolina, East Carolina Council of Boy
Scouts and Rocky Mount Junior Achievement. Mr. Boddie attended the
University of North Carolina at Chapel Hill. He is the brother of B. Mayo
Boddie.
James B. Powers - Director. Mr. Powers is retired from the position of
Chairman of the Board of Directors and Chief Executive Officer of The
Planters Corporation and The Planters National Bank and Trust Co. in Rocky
Mount, North Carolina, which he held from 1984 to 1989. Planters National
Bank and Peoples National Bank merged in 1990 to form Centura Bank and Trust
Company.
William H. Stanley - Director. Mr. Stanley is retired from the position of
Chairman of the Board of Peoples Bank and Trust Company, Rocky Mount, North
Carolina, which he held from 1975 to 1985 and Chairman of the Board and
Chief Executive Officer of Peoples Bank Corporation from 1982 to 1985.
Richard A. Urquhart, Jr. - Director. Mr. Urquhart is a retired certified
public accountant, and was a partner in the public accounting firm of KPMG
Peat Marwick. Mr. Urquhart is also a former Chairman of the Board of
Trustees of Rex Hospital, Raleigh, North Carolina and is a former director
of Golden Corral Restaurant Real Estate Investment Trust.
Executive Officers
Set forth below is a listing and brief biography of each of the executive
officers of the Company as of December 31, 1994.
14
<PAGE>
<TABLE>
<CAPTION>
Name Age Position Officer Since
<S> <C> <C> <C>
D. Scott Wilkerson 37 President October, 1994
Philip S. Payne 43 Executive Vice President, Chief Financial Officer October, 1994
Douglas E. Anderson 47 Vice President, Secretary 1987
W. Craig Worthy 42 Vice President, Treasurer 1987
Lisa K. McCourt 31 Vice President, Property Management Services October, 1994
Pamela B. Novak 41 Vice President, Controller October, 1994
</TABLE>
D. Scott Wilkerson - President. From 1980 to 1986, Mr. Wilkerson was with
Arthur Andersen LLP, Charlotte, North Carolina, serving as Tax Manager from
1985 to 1986. His specialization was in the representation of real estate
syndicators, developers and management companies. He joined BT Venture
Corporation ("BTVC") in 1987 and served in various officer level positions,
including vice president of administration and finance and vice president
for acquisitions and development before becoming president in January 1994.
Mr. Wilkerson received a B.S. degree in accounting from the University of
North Carolina at Charlotte in 1980. He is a C.P.A. and licensed real
estate broker. He has been active in various professional, civic and
charitable activities.
Philip S. Payne - Executive Vice President and Chief Financial Officer. Mr.
Payne joined BTVC in 1990 as vice president of capital market activities and
became executive vice president and chief financial officer in January 1993.
From 1987 to 1990 he was a principal in Payne Knowles Investment Group, a
financial planning firm. From 1983 to 1987 he was a registered
representative with Legg Mason Wood Walker. From 1978 to 1983, Mr. Payne
practiced law. He received a B.S. degree from the College of William and
Mary in 1973 and a J.D. degree in 1978 from the same institution.
Douglas E. Anderson - Vice President and Secretary. Mr. Anderson has served
as vice president and secretary of The Company since its inception in 1987.
He has been with BNE since 1977 and is currently a director, executive vice
president and secretary of BNE, primarily responsible for supervising
financial and other administrative activities. Mr. Anderson is also
president of BNE Land and Development Company, the real estate development
division of BNE. He serves as a director of Wachovia Bank of Rocky Mount,
North Carolina, the Educational Foundation of the University of North
Carolina and is a former director of Golden Corral Real Estate Investment
Trust. He received a B.S. degree in accounting from the University of North
Carolina of Chapel Hill in 1970.
W. Craig Worthy - Vice President and Treasurer. Mr. Worthy has served as
vice president and treasurer of The Company since its inception in 1987. He
is a certified public accountant and has been employed by BNE since 1979.
Mr. Worthy is currently senior vice president and chief financial officer of
BNE. He serves as a director of First Union Bank of Rocky Mount, North
Carolina. He received a B.A. degree from the University of Virginia in 1974
and a Master of Accountancy and of Business Administration from the
University of South Carolina in 1977.
Lisa K. McCourt - Vice President, Property Management Services. Ms. McCourt
has been vice president of property management since 1993. She joined BTVC
in 1989 as a community manager and was promoted to regional property manager
and oversaw all apartment and shopping center operations in the Raleigh-
Durham-Chapel Hill area of North Carolina and Virginia Beach, Virginia.
Prior to joining the Company, she worked for eight years in property
management with fee-managed properties for Boyd & Hassell Property
Management Company.
Pamela B. Novak - Vice President and Controller. A certified public
accountant, Ms. Novak joined BTVC in 1993 as controller. From 1984 to 1993,
she was employed by Ernst & Young as an audit manager. She received a B.S.
in accounting from the University of North Carolina at Charlotte in 1984.
15
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Officers
The following table sets forth the annual and long-term compensation of the
Company's chief executive officer and the executive officers whose salaries
and bonuses exceed $100,000 per year on an annual basis.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Name and Other Restr. Options/ All
Principal Annual Stock No. of LTIP Other
Position Year Salary Bonus Comp. Awards Shares Payouts Comp.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B. Mayo Boddie 1994 -0- -0- -0- -0- -0- -0- -0-
Chairman of the 1993 -0- -0- -0- -0- -0- -0- -0-
Board of 1992 -0- -0- -0- -0- -0- -0- -0-
Directors (1)
D. Scott Wilkerson, 1994 $27,693 -0- -0- -0- 50,000 -0- $160
President (2) (3) 1993 n/a n/a n/a n/a n/a n/a n/a
1992 n/a n/a n/a n/a n/a n/a n/a
Philip S. Payne, 1994 $27,693 -0- -0- -0- 50,000 -0- -0-
Executive Vice 1993 n/a n/a n/a n/a n/a n/a n/a
President and Chief 1992 n/a n/a n/a n/a n/a n/a n/a
Financial Officer
(2)
</TABLE>
(1) Mr. Boddie also served in the capacity of chief executive officer from
the Company's formation through September 30, 1994.
(2) Messrs. Wilkerson and Payne were named to the positions identified
herein effective October 1, 1994 and serve under employment agreements that
provide for annual base salaries of $120,000. Compensation shown on the
table reflects actual payments made during the period October 1 through
December 31, 1994.
(3) Mr. Wilkerson received additional compensation as reimbursement for
automobile mileage.
16
<PAGE>
Option/SAR Grants in the Last Fiscal Year:
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
% of Total Per at Expiration Based on Assumed
Options Options Share Annual Rates of Stock Price
Granted Granted to Exercise Expiration Appreciation for Option Term*
Name (Shares) Employees Price Date 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
B. Mayo Boddie -0- -0- - - -0- -0- -0-
D. Scott
Wilkerson (1) 50,000 31.25% $13.75 Oct. 2004 $-0- $432,365 $1,095,698
Philip S. Payne (1) 50,000 31.25% $13.75 Oct. 2004 $-0- $432,365 $1,095,698
Stock price per
share - - - - $13.75 $22.40 $35.66
All optionees 160,000 100.00% $13.75 Oct. 2004 $-0- $1,383,568 $3,506,233
All stockholders at
12/31/94 - - - - - $25,863,991 $65,544,432
Optionees' gain as
% of all
stockholders' gain - - - - - 5.35% 5.35%
</TABLE>
*Amounts shown reflect the difference between the value at assumed
appreciation rates and the exercise price at the expiration date.
(1) Options vest at 12,500 shares per year over a four-year period beginning
October, 1995 and ending October, 1998.
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values:
<TABLE>
<CAPTION>
Shares Number of Securities
Acquired Underlying Unexercised Options Value of Unexercised In-the-Money
on Value at Fiscal Year End Options at Fiscal Year End
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
B. Mayo Boddie n/a n/a n/a n/a n/a n/a
D. Scott
Wilkerson (1) -0- -0- -0- 50,000 -0- -0-
Philip S. Payne (1) -0- -0- -0- 50,000 -0- -0-
</TABLE>
(1) Options vest at 12,500 shares per year over a four-year period beginning
October, 1995 and ending October, 1998.
Long-term Incentive Plan Awards: None
17
<PAGE>
Defined Benefit or Actuarial Plan: None
Compensation of Directors
The Company pays directors' fees to each director who is not an officer of
the Company or of Boddie-Noell Enterprises, Inc. During the year ended
December 31, 1994, Mr. James B. Powers, Mr. William H. Stanley, and Mr.
Richard A. Urquhart, Jr. were each paid an annual retainer of $7,500 plus a
fee of $750 for each of nine Board meetings attended in person during the
period. Mr. B. Mayo Boddie and Mr. Nicholas B. Boddie did not receive any
compensation.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
In October, 1994 the Company entered into substantially identical employment
agreements with D. Scott Wilkerson (President) and Philip S. Payne
(Executive Vice President). These three-year agreements, subject to
automatic renewal for additional three-year periods, provide for initial
annual base salaries of $120,000 and participation in an incentive
compensation plan to be established by the Company. The agreements provide
for severance payments equal to base salary for the period ending the
earlier of March 1, 1998 or 12 months from the date of termination in the
event of termination without cause, or base salary for the period ending the
later of October 1, 1997 or 6 months from the date of termination in the
event of change in control of the Company.
Repricing of Options: None
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was or is a paid officer or employee
of the Company.
Board Compensation Committee Report on Executive Compensation
This report is provided by the Management Compensation Committee of the
Board of Directors (the "Committee")to assist shareholders in understanding
the Committee's objectives and procedures in establishing the compensation
of the Company's Executive Officers.
The Committee is responsible for establishing and administering the
Company's executive compensation plan. It is made up of the Company's three
outside directors and Douglas E. Anderson, who is a non-compensated officer
of the Company.
Prior to the acquisition of BTVC the Company had no paid officers or
employees. Upon the acquisition of BTVC, the executive officers of BTVC
became the executive officers of the Company with the terms and conditions
of their employment remaining substantially the same as those that were in
place with BTVC.
The Committee is currently developing a comprehensive compensation plan for
its executive officers. The Committee believes that compensation of the
Company's executive officers should link rewards to business results and
shareholder returns; encourage creation of shareholder value and achievement
of strategic objectives; maintain an appropriate balance between base salary
and short- and long-term incentive opportunity; attract and retain, on a
long term basis, high caliber personnel; and provide total compensation
opportunity that is competitive with other REITs, taking into account
relative company size and performance as well as individual responsibilities
and performance. It is expected that this plan will consist of three key
elements: Base Pay, Short-Term Incentives and Long-Term Incentives.
Base pay for the Company's executive officers is expected to be in line with
that paid by other REITs, taking into account the size of the Company and
individual responsibilities and performance, and will be reviewed annually.
18
<PAGE>
Short-term Incentives, generally cash payments, will be based on the
attainment of certain targeted performance results. Such targets may
include measures such as total shareholder return, reported and operating
earnings, funds from operations and cash flow. Actual individual awards
will depend on assessments of individual and Company success in meeting the
specified targets.
Long-term Incentives may include a variety of incentives including stock
options, stock appreciation rights and direct grants of the Company's stock.
The Company, with the approval of its shareholders, adopted a Stock Option
and Incentive Plan on August 4, 1994. The Company has reserved 280,000
shares of the Company's common stock for issuance under the plan. On
October 17, 1994, options to purchase 160,000 shares at $13.75 per share
(the fair market value of the stock on the grant date) were granted to
certain executive officers. The options vest on a schedule of one-fourth of
the granted options per year beginning on October 17, 1995. The granted
options have a ten-year term.
1994 Compensation of D. Scott Wilkerson, President
D. Scott Wilkerson became President of the Company on October 1, 1994. Mr.
Wilkerson's employment
contract provides for base pay of $120,000 per year with provision for
short-term incentive compensation of up to 50 percent of base pay. For the
period October 1, 1994, to December 31, 1994, Mr. Wilkerson received
compensation of $27,900. This was comprised entirely of base pay. No
short-term incentive compensation was provided. As long-term incentive
compensation, Mr. Wilkerson was granted options to purchase 50,000 shares of
the Company's stock at $13.75 per share (the fair market value of the stock
on the grant date. The options vest on a schedule of one-fourth of the
granted options per year beginning on October 17, 1995. The granted options
have a ten-year term.
March 24, 1995 Management Compensation Committee
James B. Powers
William H. Stanley
Richard A. Urquhart, Jr.
Douglas E. Anderson
Company Stock Price Performance
The following line graph compares cumulative total shareholder return for
the Company with a performance indicator of the overall stock market, the
S&P 500 Stock Index ("S&P 500"), and a national recognized industry index,
the National Association of Real Estate Investment Trusts ("NAREIT") index
of equity REITs, for the last five fiscal years.
19
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
Among The Company, the NAREIT Equity REIT Index and the S&P 500 Index
Fiscal Years Ending December 31
Assumes $100 Invested on December 31, 1989 with Dividends Reinvested
(GRAPH APPEARS HERE)
Data points:
1989 1990 1991 1992 1993 1994
The Company 100 100 153 173 211 191
NAREIT 100 85 115 132 157 163
S&P 500 100 97 126 136 150 152
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 13, 1995 (i) by each
person who is known by the Company to own beneficially more than five
percent of the Company's Common Stock, (ii) by each of the Company's
directors, (iii) by each of the executive officers for whom compensation
information is provided in Item 11 herein and (iv) by all directors and
executive officers who served as directors and executive officers at
December 31, 1994 as a group.
20
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
Directors, Officers and Five Percent (5%) Shareholders Number Percent
<S> <C> <C>
PRINCIPAL SHAREHOLDERS - (none) - -
DIRECTORS
B. Mayo Boddie (1) 73,551 2.46
Nicholas B. Boddie (1) 73,551 2.46
James B. Powers 3,500 0.12
William H. Stanley 3,000 0.10
Richard A. Urquhart, Jr. 100 0.00
OTHER EXECUTIVE OFFICERS
D. Scott Wilkerson 39,570 1.32
Philip S. Payne 39,570 1.32
All directors and executive officers as a group (11 persons) 315,875 10.55
</TABLE>
(1) Includes 1,856 shares each to be issued as part of the acquisition of BTVC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and B. Mayo Boddie and Nicholas B. Boddie.
B. Mayo Boddie, Chairman of the Board of Directors of the Company, is
Chairman of the Board of Directors and Chief Executive Officer of BNE.
At December 31, 1994, Mr. B. Boddie beneficially owned 71,695 shares and
was entitled to receive an additional 1,856 shares as additional
compensation related to the acquisition of BTVC (see "The Company and
BTVC" below). Following the issuance of the additional shares, Mr. B.
Boddie will beneficially own 73,551 shares or 2.46 percent of the
outstanding common stock of the Company. Nicholas B. Boddie is Vice
Chairman and director of both the Company and BNE. At December 31,
1994, Mr. N. Boddie beneficially owned 71,695 shares and was entitled to
receive an additional 1,856 shares as additional compensation related to
the acquisition of BTVC (see "The Company and BTVC", below). Following
the issuance of the additional shares, Mr. N. Boddie will beneficially
own 73,551 shares or 2.46 percent of the outstanding common stock of the
Company.
B. Mayo Boddie and Nicholas B. Boddie were Chairman and Vice Chairman,
respectively, and directors of BNE Advisory Group, Inc., an affiliate of
BNE. From the inception of the Company until October 1, 1994, BNE
Advisory Group was the Advisor to the Company (see "The Company and BNE
Advisory Group" below).
B. Mayo Boddie and Nicholas B. Boddie were the sole shareholders and
directors of BTVC. From June 1993 until October 1, 1994, BTVC was the
management agent for the Company's apartment properties. On October 1,
1994, the Company acquired BTVC (see "The Company and BTVC" below).
B. Mayo Boddie and Nicholas B. Boddie are the sole shareholders and
directors of Boddie Investment Company ("BIC"). BIC is the general
partner of the various limited partnerships which own nine of the
apartment properties and three shopping centers managed on a fee basis
by the Company (see "The Company and Boddie Investment Company" below).
B. Mayo Boddie and Nicholas B. Boddie do not receive any compensation
from the Company for their services as Chairman, Vice Chairman or
directors of the Company.
21
<PAGE>
The Company and Certain Officers
Douglas E. Anderson is Vice President and Secretary of the Company and
is a director, Executive Vice President and Secretary of BNE. He is
also President of BNE Land and Development Company, the real estate
development division of BNE, and Vice President of BIC. Mr. Anderson
does not receive any compensation from the Company. Mr. Anderson owns
42,471 shares of the Company's common stock. Mr. Anderson is a trustee
of the BNE Savings and Employee Retirement Plan.
W. Craig Worthy is Vice President and Treasurer of the Company and is
Senior Vice President and Chief Financial Officer of BNE. He is also a
Vice President of BIC. In 1994, Mr. Worthy was granted options to
purchase 30,000 shares of the Company's common stock. The exercise
price of these options is $13.75 per share and vest on a schedule of
7,500 shares in October 1995, 1996, 1997 and 1998. Other than the
granted options, Mr. Worthy does not receive compensation from the
Company. Mr. Worthy owns 40,462 shares of the Company's common stock.
Mr. Worthy is a trustee of the BNE Savings and Employee Retirement Plan.
The Company and BNE
In 1987 the Company purchased 47 existing Hardee's restaurant properties
from BNE Realty Partners, Limited Partnership, an affiliate of BNE, for
an aggregate purchase price of $43,243,000, or an average purchase price
of $920,000 per property. The restaurants were being operated prior to
acquisition and are currently being operated by BNE under franchise
agreements with Hardee's Food Systems, Inc. Concurrent with the
acquisition of the properties, the properties were leased to BNE under a
triple net lease (" Master Lease"). The Master Lease has a primary term
of 15 years, grants BNE three five-year renewal options and provides for
rent equal to 9.875 percent of net restaurant sales, subject to a
minimum annual rent of 8 percent of the purchase price.
BNE, a privately owned corporation headquartered in Rocky Mount, North
Carolina, opened its first Hardee's restaurant in 1962 and currently
operates approximately 380 Hardee's restaurants in seven states. Based
on the number of franchised restaurants, BNE is the second largest
Hardee's franchisee. BNE also engages in real estate development and
other activities.
For the period ended December 31, 1994, the Master Lease with BNE
resulted in rental income of $5,047,000.
Because the Master Lease is a triple net lease, BNE is responsible for
all taxes, utilities, insurance, maintenance and alteration expenses
relating to the operation of the restaurant properties.
BNE has extended to the Company an unsecured revolving line of credit of
up to $2,000,000. The line of credit bears interest at a floating rate
per annum equal to the prime rate of First Union National Bank of North
Carolina. During 1994, draws of $1,100,000 were made and repaid.
Interest paid under this line in 1994 was $18,000. At December 31,
1994, there were no draws against this line.
With the acquisition of BTVC in October, 1994 the Company assumed a note
payable to BNE in the amount of $6,100,000. The note bears interest at
a floating rate equal to the 30 Day LIBOR rate plus 150 basis points
capped at 8.0 percent. Payments are interest only and paid quarterly.
The note is due in full on May 1, 1999. During 1994, the Company
recorded interest on this note to BNE in the amount of $105,500.
As additional security for the Company's $20,000,000 Credit Facility,
BNE has entered into a purchase agreement under which the lending banks
can require BNE, in the event of a default, to purchase up to 20
restaurant properties for an aggregate purchase price equal to the
lesser of $20,000,000 or the principal and interest then outstanding.
The proceeds from the mandated purchase would be used to satisfy the
Credit Facility. In lieu of purchasing the restaurants, BNE would have
the option to purchase the Credit Facility for the amount then
outstanding. To facilitate the extension and expansion of the Company's
Credit Facility, BNE has agreed to increase the purchase agreement to
include 24 restaurants or $24,000,000.
The BNE Savings and Employee Retirement Plan owns 89,250 shares of the
Company's common stock.
22
<PAGE>
The Company and BNE Advisory Group
From the inception of the Company until October 1, 1994, BNE Advisory
Group, an affiliate of BNE, served as the advisor to Company. As
advisor BNE Advisory Group provided administrative services to the
Company and managed the day-to-day operations of the Company. In
addition, BNE Advisory Group provided executive and administrative
personnel and office space for such personnel to the Company.
As compensation for such services, the Company agreed to pay BNE
Advisory Group an annual fee equal to 4.65 percent of the Company's net
cash available from operations. In addition, the Company agreed to
indemnify the advisor and each of its directors, officers and employees
against expense of liability arising out of such person's activities in
rendering services to the Company, provided that the conduct against
which the claim is made was determined by such person, in good faith, to
be in the best interests of the company and was not the result of
negligence or willful misconduct. Such indemnification is subject to
certain limitations where claims under securities laws are involved.
During the first three quarters of 1994, the Company paid BNE Advisory
Services fees in the amount of $153,000. With the acquisition of BTVC
on October 1, 1994, the Company terminated its advisory contract with
BNE Advisory Services.
The Company and BIC
With the acquisition of BTVC, the Company assumed fee management of ten
apartment properties and three shopping centers on October 1, 1994. BIC
is the general partner of the various limited partnerships which own
nine of the apartment properties and the three shopping centers managed
by the Company. For its management services the Company receives
certain property management and administrative fees (generally 5 percent
of apartment revenues collected and 3 percent of shopping center
revenues collected) from those limited partnerships. In addition the
Company receives reimbursement for certain expenses. For the period of
October 1, 1994, to December 31, 1994, the Company received management
fees of $276,000 and expense reimbursement of $39,000.
With the acquisition of BTVC in October, 1994 the Company assumed a note
payable to BIC in the amount of $956,000. The note bears interest at a
floating rate equal to the 30 Day LIBOR rate plus 150 basis points
capped at 8.0 percent. Payments are interest only and paid quarterly.
The note is due in full on May 1, 1999. During 1994, the Company
recorded interest on this note to BIC in the amount of $16,900.
The Company and BTVC
Prior to the acquisition of BTVC on October 1, 1994, the Company
contracted with BTVC to provide management services for its two
apartment properties, Paces Commons and Oakbrook. Under the management
agreement BTVC was responsible for the leasing, maintenance, rent
collection, property accounting and day-to-day operations of these
properties. As compensation for these services, the Company agreed to
pay a management fee equal to 5 percent of the rental and other revenue
collected and to reimburse BTVC for certain expenses. For the first
three quarters of 1994, the Company paid BTVC property management fees
of $112,000 and expense reimbursements of $23,000. With the
acquisition of BTVC on October 1, 1994, the Company began to manage its
own properties.
On October 1, 1994, the Company acquired by merger BTVC. B. Mayo Boddie
and Nicholas B. Boddie, who are Chairman and Vice Chairman and directors
of the Company, were the sole shareholders of BTVC. The acquisition of
BTVC was made pursuant to a Proxy Statement which was filed with the
Securities Exchange Commission on June 15, 1994. The acquisition was
approved by the Company's shareholders at its Annual Meeting on August
4, 1994, and was also approved by the Company's debt holders. As a
result of the acquisition, B. Mayo Boddie and Nicholas B. Boddie
received substantial compensation comprised of cash, shares of the
Company's common stock and relief from certain debt and contractual and
contingent obligations. In addition,
23
<PAGE>
they are entitled to receive additional shares of the Company's common
stock in the event the Company meets certain performance standards.
The contract purchase price for BTVC was $23,112,000 (the "Initial
Consideration"). The Initial Consideration was paid by the Company as
follows: (i) $91,000 in cash; (ii) assumption of $21,251,000 in
indebtedness and other liabilities (including the current liability for
outstanding accounts payable, accrued expenses, and tenant security
deposits as of September 30, 1994); and (iii) 134,610 shares of the
Company's common stock valued at $1,899,000 (value based on a price of
$14.1125 per share which was the average closing price for the 20
trading days ending on the third business day prior to the closing of
the acquisition).
The acquisition agreement, provides for additional consideration of up
to $1,700,000 if the Company meets or exceeds certain performance
standards in the future (the "Additional Consideration"). The
Additional Consideration will be payable in shares of common stock or
cash, at the option of the Company, on a quarterly basis over a period
of up to 14 quarters commencing with the quarter ended December 31,
1994. The Additional Consideration is contingent upon the Company
generating funds from operations, as adjusted for additional non-cash
items such as acquisition expenses and loan cost charge-offs ("Adjusted
FFO"), which equals or exceeds certain agreed upon levels. Quarterly
targets for Adjusted FFO range from $1,134,000 to $1,264,000, with a
total cumulative target of $16,507,000 over the 14-quarter period.
The performance targets are cumulative. In the event the Company fails
to meet a target in any particular quarter, the Additional
Consideration will be deemed to be earned in a subsequent quarter if the
cumulative Adjusted FFO meets or exceeds the cumulative Adjusted FFO
specified in the schedule. To the extent the issuance of shares of the
common stock to Messrs. Boddie and Boddie as Additional Consideration
would cause the Company to become disqualified as a REIT, the BTVC
shareholders will be paid cash in lieu of the shares that would result
in the disqualification.
On October 1, 1994, the Company issued a total of 140,990 shares to
Messrs. Boddie and Boddie as part of the Initial Consideration. This
number of shares was issued based on a preliminary estimate of the
outstanding accounts payable, accrued expenses, and tenant security
deposits as of September 30, 1994. Upon further review, it was
determined that 6,380 shares had been issued in excess of the amount
required by the acquisition agreement ("excess shares"). During the
fourth quarter of 1994, the Company attained the financial targets
specified for Additional Compensation. At December 31, 1994, Messrs.
Boddie and Boddie are entitled to Additional Compensation, net of the
excess shares previously paid, of $49,647 ($141,667 less the value of
excess shares previously issued), to be paid in the form of 3,712 shares
of common stock during the first quarter of 1995.
Assuming the maximum amount of Additional Consideration is earned and
paid, the Company will issue approximately 121,000 additional shares.
This would result in total consideration for the acquisition of BTVC,
including the assumption of debt and liabilities, of approximately
$24,941,000.
As part of the indebtedness assumed by the Company in the acquisition of
BTVC, the Company assumed a note payable to BNE in the amount of
$6,100,000 and a note payable to BIC in the amount of $956,000. Both
notes bear interest at a floating rate equal to the 30 Day LIBOR rate
plus 150 basis points capped at 8.0%. Payments are interest only and
paid quarterly. The notes are due in full on May 1, 1999. During 1994,
the Company recorded interest on these notes to BNE in the amount of
$105,500 and to BIC in the amount of $16,900.
At the time of the acquisition, BTVC was an integrated real estate
management, development and acquisition Company that owned one apartment
property and managed an additional twelve apartment communities,
including two owned by the Company, and three shopping centers. As
result of the acquisition, the Company succeeded to BTVC's third-party
management business. As part of the acquisition, Messrs. Boddie and
Boddie have indemnified the Company, subject to certain limitations,
against any claim against the Company which inures to the Company as a
result of its being the successor-in-interest to BTVC.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Schedules
The financial statements and schedules listed below are filed as part of
this annual report on the pages indicated.
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS PAGE
<S> <C>
Financial Statements and Notes:
Report of Independent Accountants 28
Balance Sheets as of December 31, 1994 and 1993 29
Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992 30
Statements of Shareholders' Equity for the Years Ended
December 31, 1994, 1993 and 1992 31
Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 32
Notes to Financial Statements 33
Schedules:
Schedule III - Real Estate and Accumulated Depreciation 40
</TABLE>
The financial statements and schedule are filed as part of this report.
All other schedules are omitted because they are not applicable or the
required information is included in the financial statements or notes
thereto.
(a) 3. Exhibits
The exhibits required by Item 601 of Regulation S-K have been filed with
previous reports by the Registrant and are herein incorporated by
reference thereto.
The Registrant agrees to furnish a copy of all agreements related to
long- term debt upon request of the Commission.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No.
<S> <C>
2* Agreement and Plan of Merger between BT Venture Corporation and Boddie-Noell Restaurant
Properties, Inc. (filed as Exhibit (2)-2 to Boddie-Noell Properties, Inc. Current Report
on Form 8-K dated October 1, 1994, and incorporated herein by reference)
3.1* Articles of Incorporation (filed as Exhibit 3(a) to Registration Statement No. 33-13155
on Form S-11 and incorporated herein by reference)
3.2* By-Laws (filed as Exhibit 3(b) to Amendment No. 1 to Registration Statement No. 33-13155
on Form S-11 and incorporated herein by reference)
10.1* Master Lease Agreement dated May 1, 1987, as amended (filed as Exhibit 10(b) to Amendment
No. 2 to Registration Statement No. 33-13155 on Form S-11 and incorporated herein by
reference)
10.2* Indenture of Mortgage, Deed of Trust and Security Agreement dated May 1, 1987, as amended
(filed as Exhibit 10(c) to Amendment No. 2 to Registration Statement No. 33-13155 on Form
S-11 and incorporated herein by reference)
10.3* Assignment of Master Lease Agreement dated May 1, 1987, as amended (filed as Exhibit
25
<PAGE>
10(d) to Amendment No. 2 to Registration Statement No. 33-13155 on Form S-11 and
incorporated herein by reference)
10.4* Note Purchase Agreement dated May 1, 1987, as amended (filed as Exhibit 10(e) to
Amendment No. 2 to Registration Statement No. 33-13155 on Form S-11 and incorporated
herein by reference)
10.5* Put Agreement dated May 1, 1987, as amended (filed as Exhibit 10(f) to Amendment No. 2 to
Registration Statement No. 33-13155 on Form S-11 and incorporated herein by reference)
10.6* Acquisition Agreement by and among Boddie-Noell Restaurant Properties, Inc., BT Venture
Corporation and Related Entities dated June 7, 1994 (filed as an exhibit in Schedule 14A
of Proxy Statement dated June 15, 1994 and incorporated herein by reference)
10.7* Boddie-Noell Restaurant Properties, Inc. 1994 Stock Option and Incentive Plan effective
August 4, 1994 (filed as an exhibit in Schedule 14A of Proxy Statement dated June 15,
1994 and incorporated herein by reference)
10.8 Form and description of Incentive Stock Option Agreements dated October 17, 1994 between
the Company and certain officers
10.9 Form and description of Nonqualified Stock Option Agreements dated October 17, 1994
between the Company and certain officers
10.10 Form and description of Employment Agreements dated October 1, 1994 between the Company
and certain officers
11 Computation of Per Share Earnings
13 Quarterly report to shareholders, Third Quarter, 1994, issued November, 1994
27 Financial Data Schedule
</TABLE>
* Incorporated herein by reference
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K, dated October 1,
1994, announcing the acquisition by merger of BT Venture
Corporation.
The Company filed a Current Report on Form 8-K, dated December 28,
1994, announcing the purchase of Harris Hill Apartments.
26
<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 by the undersigned, thereunto duly authorized.
BODDIE-NOELL PROPERTIES, INC.
(Registrant)
March 27, 1995 /s/ Philip S. Payne
Philip S. Payne
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
March 28, 1995 /s/ B. Mayo Boddie
B. Mayo Boddie
Chairman of the Board and Director
March 27, 1995 /s/ D. Scott Wilkerson
D. Scott Wilkerson
President
March 27, 1995 /s/ Philip S. Payne
Philip S. Payne
Executive Vice President and Chief
Financial Officer
March 27, 1995 /s/ Pamela B. Novak
Pamela B. Novak
Vice President and Controller
March 28, 1995 /s/ Nicholas B. Boddie
Nicholas B. Boddie
Vice Chairman of the Board and Director
March 29, 1995 /s/ James B. Powers
James B. Powers
Director
March 28, 1995 /s/ William H. Stanley
William H. Stanley
Director
March 27, 1995 /s/ Richard A. Urquhart, Jr.
Richard A. Urquhart, Jr.
Director
27
<PAGE>
Report of Independent Public Accountants
To the Shareholders of
Boddie-Noell Properties, Inc.:
We have audited the accompanying balance sheets of Boddie-Noell
Properties, Inc. (a Delaware corporation) as of December 31, 1994 and
1993, and the related statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 31,
1994. These financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule 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 financial statements referred to above present
fairly, in all material respects, the financial position of Boddie-Noell
Properties, Inc. as of December 31, 1994 and 1993, and the results of
its operations and its cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial
statements. The schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
January 27, 1995.
28
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Assets
Real estate investments at cost:
Restaurant properties $43,205,075 $43,205,075
Apartment properties 54,723,503 14,352,168
97,928,578 57,557,243
Less accumulated depreciation (6,827,337) (5,416,818)
91,101,241 52,140,425
Cash and cash equivalents 952,363 121,530
Rent and other receivables 493,306 396,348
Other assets, net of applicable amortization:
Intangible related to property management operations 2,318,335 -
Deferred acquisition costs 255,999 1,496,891
Deferred financing costs 466,217 238,480
Prepaid expenses and other assets 366,753 248,939
Total assets $95,954,214 $54,642,613
Liabilities and Shareholders' Equity
Mortgage and other notes payable $59,827,256 $26,894,378
Notes payable to affiliates 7,056,300 -
Deferred acquisition and financing costs payable 91,000 247,000
Accounts payable and accrued expenses 785,886 218,914
Escrowed security deposits and deferred revenue 225,863 30,325
Total liabilities 67,986,305 27,390,617
Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized, 2,990,990 shares issued and
outstanding at December 31, 1994, 2,850,000
shares issued and outstanding at
December 31, 1993 29,910 28,500
Additional paid-in capital 33,452,611 31,462,322
Dividends distributed in excess of net income (5,514,612) (4,238,826)
Total shareholders' equity 27,967,909 27,251,996
Total liabilities and shareholders' equity $95,954,214 $54,642,613
</TABLE>
The accompanying notes to financial statements are an integral part of
these balance sheets.
29
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Revenues
Restaurant rental income $5,046,837 $5,165,432 $5,333,183
Apartment rental income 3,889,277 1,244,803 -
Management fees 276,157 - -
Interest and other income 45,975 15,617 40,122
9,258,246 6,425,852 5,373,305
Expenses
Depreciation 1,414,800 973,434 778,404
Amortization 232,856 92,401 20,098
Apartment operations 1,101,370 360,447 -
Property management fees 111,575 55,964 -
Administrative 622,605 245,660 188,306
Advisory fees 152,747 200,829 192,976
Interest 2,801,894 1,441,666 1,035,000
Write-off of deferred loan costs upon
refinancing 141,582 - -
Write-off of deferred acquisition costs 376,898 600,000 -
6,956,327 3,970,401 2,214,784
Net income $2,301,919 $2,455,451 $3,158,521
Net income per share $ 0.80 $ 0.86 $ 1.11
Weighted average number of shares
outstanding 2,885,248 2,850,000 2,850,000
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
30
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Dividends
Additional distributed
Common Stock paid-in in excess of
Shares Amount capital net income Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 2,850,000 $28,500 $31,462,322 $(2,784,798) $28,706,024
Net income 3,158,521 3,158,521
Dividends paid
($1.24 per share) (3,534,000) (3,534,000)
Balance at December 31, 1992 2,850,000 28,500 31,462,322 (3,160,277) 28,330,545
Net income 2,455,451 2,455,451
Dividends paid
($1.24 per share) (3,534,000) (3,534,000)
Balance at December 31, 1993 2,850,000 28,500 31,462,322 (4,238,826) 27,251,996
Net income 2,301,919 2,301,919
Common stock issued 140,990 1,410 1,990,289 1,991,699
Dividends paid
($1.24 per share) (3,577,705) (3,577,705)
Balance at December 31, 1994 2,990,990 $29,910 $33,452,611 $(5,514,612) $27,967,909
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
31
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,301,919 $ 2,455,451 $ 3,158,521
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 1,647,656 1,065,835 798,502
Write-off of deferred loan costs 141,582 - -
Write-off of deferred acquisition costs 376,898 600,000 -
Changes in operating assets and liabilities:
Rent and other receivables (78,046) 56,398 (98,207)
Prepaid expenses and other assets (5,584) (225,899) (7,605)
Accounts payable and accrued expenses 150,443 84,114 3,235
Escrowed security deposits and deferred revenue (38,407) 30,325 -
Net cash provided by operating activities 4,496,461 4,066,224 3,854,446
Cash flows from investing activities:
Acquisitions of apartment properties (18,055,659) (14,302,078) -
Acquisition of BT Venture Corp., net of cash payment 164,838 - -
Additions to apartment properties (161,294) (50,090) -
Payment of deferred acquisition and financing costs (1,186,605) (2,013,516) (133,764)
Net cash used in investing activities (19,238,720) (16,365,684) (133,764)
Cash flows from financing activities:
Payment of dividends (3,577,705) (3,534,000) (3,534,000)
Proceeds from notes payable 53,600,000 18,950,000 -
Principal payments on notes payable (34,449,203) (4,055,622) -
Net cash provided by financing activities 15,573,092 11,360,378 (3,534,000)
Increase (decrease) in cash and cash equivalents 830,833 (939,082) 186,682
Cash and cash equivalents at beginning of year 121,530 1,060,612 873,930
Cash and cash equivalents at end of year $952,363 $121,530 $1,060,612
Supplemental disclosures of cash flow information:
Cash payments for interest $2,557,026 $1,402,257 $1,035,000
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
32
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Notes to Financial Statements
December 31, 1994
Note 1. Organization and Summary of Significant Accounting and Reporting
Policies
Organization and History
Boddie-Noell Restaurant Properties, Inc. (the "Company") was
incorporated on April 1, 1987. On October 1, 1994 the Company changed
its name to Boddie- Noell Properties, Inc.
In April, 1987 the Company acquired 47 existing Hardee's restaurant
properties located in Virginia and North Carolina, operated by
Boddie-Noell Enterprises, Inc. ("BNE") under franchise agreements with
Hardee's Food Systems, Inc. Simultaneously with their purchase, the
properties were leased to BNE under a master lease agreement.
On June 8, 1993 the Company acquired Paces Commons Apartments, a
336-unit apartment property in Charlotte, North Carolina. On June 7,
1994 the Company acquired Oakbrook Apartments, a 162-unit apartment
property in Charlotte, North Carolina. Effective October 1, 1994 the
Company acquired by merger BT Venture Corporation ("BTVC"), an
integrated real estate management, development and acquisition company
and owner of the Latitudes Apartments, a 448-unit apartment property in
Virginia Beach, Virginia. As of October 1, 1994 the Company succeeded
to BTVC's third-party management business, terminated its advisory
agreement with BNE Advisory Group, Inc., and began operations as a
self-administered and self-managed real estate investment trust. On
December 28, 1994 the Company acquired Harris Hill Apartments, a
184-unit apartment property in Charlotte, North Carolina.
Real Estate Investments
Restaurant properties, which include only real property, are carried at
cost. Cost of repairs and maintenance and capital improvements are
borne by BNE. Depreciation of the buildings is computed using the
straight-line method over the estimated useful lives (40 years) of the
respective properties.
Apartment properties are carried at cost. Ordinary repairs and
maintenance costs are expensed as incurred while significant
improvements, renovations and replacements are capitalized.
Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets, which are 40 years for
buildings, 20 years for land improvements, and 10 years for fixtures,
equipment and other personal property.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents.
Deferred Costs
The intangible asset related to property management operations acquired
by merger is amortized using the straight-line method over a period of
ten years. Accumulated amortization on this asset totaled $56,000 at
December 31, 1994.
Deferred acquisition costs represent costs incurred in connection with
the proposed acquisition of properties and the associated offering
costs. The costs are deferred until such time as the acquisition is
consummated. Upon completion of the acquisition, the costs will be
capitalized to the underlying assets and/or charged to shareholders'
equity. At such time as an acquisition is deemed not probable, the
costs are charged to expense.
33
<PAGE>
Deferred financing costs are amortized using the straight-line method
over the original terms of the related notes. Organization costs are
amortized using the straight-line method over a period of five years.
Accumulated amortization on these assets totaled $205,000 and $245,000
at December 31, 1994 and 1993 respectively.
Income Taxes
The Company operates as and elects to be taxed as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code. Accordingly,
the Company will not be subject to Federal or state income taxes on
amounts distributed to shareholders, provided it distributes at least 95
percent of its REIT taxable income and meets certain other requirements
for qualifying as a REIT. Accordingly, no provision has been made for
federal or state income taxes.
Net Income Per Share
Net income per share for the years ended December 31, 1994, 1993, and
1992 is calculated based on the weighted average number of shares
outstanding during the respective periods.
Fair Values of Financial Instruments
The following methods and assumptions are used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and cash equivalents: The carrying amount reported on the balance
sheet for cash and cash equivalents approximates fair value.
Notes payable: The fair value of the Company's fixed rate mortgage
notes is estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates. The carrying amounts of
the Company's borrowings under its revolving credit agreement and
variable rate notes payable approximate their fair value.
Note 2. Real Estate Investments
Real estate investments consist of the following at December 31, 1994
and 1993:
1994 1993
Restaurants
Land $12,068,737 $12,068,737
Buildings and land improvements 31,136,338 31,136,338
less accumulated depreciation (6,000,196) (5,221,788)
37,204,879 37,983,287
Apartments
Land 6,642,291 1,430,158
Buildings and land improvements 46,205,625 12,605,915
Fixtures, equipment, and other
personal property 1,875,587 316,095
less accumulated depreciation (827,141) (195,030)
53,896,362 14,157,138
$91,101,241 $52,140,425
34
<PAGE>
The Company has established a policy of capitalizing those expenditures
relating to acquiring new assets, materially enhancing the value of an
existing asset, or substantially extending the useful life of an
existing asset. Carpet, vinyl, and wallpaper replacements are generally
expensed as incurred, except when these replacements are made in
conjunction with a plan of acquisition.
Capitalized property additions, replacements and improvements are
summarized as follows:
1994 1993
Property acquisitions through purchase $18,243,374 $14,302,078
Property acquisitions through merger 21,950,000
Capitalized carpet, vinyl, and wallpaper
replacements 91,434 24,274
Other property additions and improvements 69,860 25,816
$40,354,668 $14,352,168
Note 3. Notes Payable
Notes payable consist of the following at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
8.625% note, payable in equal annual installments of $4,000,000 in
June, 1994 and 1995, plus interest payable monthly. The note is
secured by a mortgage on 14 restaurant properties and assignment of the
master lease as it relates to such properties. The Company has the
option to require BNE to purchase restaurant properties from the
Company, as described in the agreement, in order to fund maturities in
the event the Company is unable to refinance or otherwise retire such $ 4,000,000 $ 8,000,000
maturities.
Fixed rate mortgage notes comprised of three loans, payable in monthly
installments totaling approximately $244,000 including principal and
interest at rates ranging from 7.86% to 8.45%, with maturities in 2000
(balloon of approximately $12,500,000) through 2020. The notes are
secured by deeds of trust and assignments of rents of three apartment
properties. 31,077,256 ---
Variable rate mortgage note, payable in monthly principal installments
based on a 25-year amortization schedule (approximately $7,000) plus
interest at 30-day LIBOR plus 1.85% (7.85% at December 31, 1994)
through December, 1995, and 30-day LIBOR plus 2.35% thereafter. The
note matures December, 1995, but may be extended for an additional two
years if certain conditions are met. The note is secured by a deed of
trust on an apartment property. 6,500,000 ---
Variable rate mortgage note, payable in monthly principal installments
based on a 25-year amortization schedule (approximately $9,500) plus
interest at prime (6.0% at December 31, 1993) through June, 1994 and
prime plus 0.5% thereafter. The note was secured by a deed of trust
on one apartment property and two restaurant properties. --- 10,144,378
Variable rate revolving line of credit, originally at $15,000,000
increased to $20,000,000, due June, 1995. Interest is charged and
payable monthly,
35
<PAGE>
at the Company's option, at LIBOR plus 1.625%, floating CD rate plus
1.625%, or prime rate. At December 31, 1994 the weighted average rate
in effect was 7.81%. The Company is obligated to pay quarterly a fee
equal to 0.25% per annum on the unused amount. Lender has the right to
require BNE to purchase 20 restaurants in the 18,250,000 8,750,000
event of a default.
Variable rate notes payable to affiliates comprised of two loans due
May, 1999, interest at 30-day LIBOR plus 1.5% (7.69% at December 31,
1994) payable quarterly. Liability for these notes was assumed at the
acquisition of BTVC (see Note 7). 7,056,300 ---
$66,883,556 $26,894,378
</TABLE>
In addition, BNE has extended to the Company an unsecured revolving line
of credit up to $2,000,000. The line of credit bears interest at a
variable rate equal to a bank's prime rate. At December 31, 1994 and
1993 there was no obligation outstanding.
Subsequent to December 31, 1994 the Company obtained commitments to
increase the variable rate revolving line of credit to $24,000,000,
extend the maturity to April, 1996, and increase to 24 the number of
restaurants subject to the purchase agreement. For purposes of
describing scheduled maturities below, the $18,250,000 balance
outstanding at December 31, 1994 related to this revolving line of
credit has been treated as maturing in 1996.
Scheduled principal payments are approximately as follows: 1995 -
$4,452,000; 1996 - $18,769,000; 1997 - $6,795,000; 1998 - $504,000; 1999
- $7,603,000; thereafter - $28,761,000. Loan agreements related to
certain notes include covenants and restrictions relating to, among
other things, a specified level of tangible net worth and certain
minimum ratios of debt coverage and total liabilities to tangible net
worth.
During 1994 the Company applied $31,100,000 proceeds of three fixed rate
mortgages to pay off variable rate mortgages totaling approximately
$30,300,000. In conjunction with these refinancing transactions,
unamortized loan costs of approximately $142,000 were charged to
expense.
The estimated fair value of the Company's fixed rate mortgage notes
payable at December 31, 1994 approximates the carrying value.
Note 4. Dividends
Dividends of $1.24 per share were paid during 1994, 1993, and 1992. The
allocation of these dividends between non-taxable return of capital and
taxable ordinary dividend income to shareholders was as follows.
1994 1993 1992
Non-taxable return of capital 49.3% 12.5% 10.6%
Taxable ordinary dividend income 50.7 87.5 89.4
A regular quarterly dividend of $.31 per share was declared by the Board
of Directors on January 10, 1995, payable on February 15, 1995 to
shareholders of record on January 31, 1995.
36
<PAGE>
Note 5. Rental Operations
Restaurant Properties - Master Lease Agreement
The master lease agreement provides for a primary term of 15 years and
grants BNE (the lessee) three successive 5-year options to extend the
Master Lease (under similar terms) with respect to all of the properties
as a group. The lease requires the lessee to pay minimum annual rent
equal to an annualized rate of 8.0 percent of the aggregate purchase
price of the properties, and percentage rent at 9.875 percent of the
quarterly aggregate net sales from restaurant operations on the
properties, less the aggregate minimum rent payable for such calendar
quarter. The lessee is responsible for all taxes, utilities,
renovations, insurance and maintenance expenses relating to the
operation of the restaurant properties. Under certain conditions as
defined in the agreement, BNE and the Company each have the right to
substitute another restaurant property for a property covered by the
lease.
Future minimum rentals to be received by the Company under the master
lease agreement are $3,459,433 per year through May, 2002.
These amounts above do not include percentage
rentals which may be received in addition to minimum rent.
The components of rental income were as follows:
1994 1993 1992
Minimum rent $3,459,433 $3,459,433 $3,459,433
Percentage rent 1,587,404 1,705,999 1,873,750
$5,046,837 $5,165,432 $5,333,183
Apartment Properties
The Company leases its residential apartments under operating leases
with terms generally of one year or less, with monthly payments due in
advance. Rental and other revenues are recorded as earned.
Note 6. Related Party Transactions
Certain directors and officers of the Company hold similar positions
with BNE and BNE Advisory Group, Inc. (an affiliate of BNE), and held
similar positions with BTVC.
The Company purchased the 47 Hardee's restaurant properties from BNE
Realty Partners, Limited Partnership, an affiliate of BNE for
$43,243,000 in 1987.
The Company had an agreement through September 30, 1994 under which BNE
Advisory Group, Inc. provided all administrative services and was
responsible for the day-to-day operations of the Company. The agreement
provided for compensation to BNE Advisory Group, Inc. at an annual fee
equal to 4.65 percent of the Company's net cash available for
distribution (as defined in the agreement) before the advisory fee.
Advisory fee expense totaled $153,000, $201,000, and $193,000 in 1994,
1993, and 1992, respectively. Accrued advisory fee payable was $49,000
at December 31, 1993. Effective with the merger of BTVC on October 1,
1994 the agreement with BNE Advisory Group, Inc. was terminated.
Prior to the Company's acquisition of BTVC, the Company paid BTVC
$112,000 and $56,000 for property management services in 1994 and 1993,
respectively.
37
<PAGE>
BNE has extended to the Company an unsecured revolving line of credit up
to $2,000,000. The line of credit bears interest at a variable rate
equal to a bank's prime rate. At December 31, 1994 and 1993 there was
no obligation outstanding. Draws totaling $1,100,000 were made and
repaid in full during 1994.
Note 7. Acquisitions
On June 8, 1993 the Company acquired Paces Commons Apartments, a
residential apartment community located in Charlotte, North Carolina for
a total purchase cost of $14,302,000. The purchase was financed
primarily through bank and mortgage borrowings. The results of
operations of Paces Commons are included in the financial statements
from June 8, 1993.
On June 7, 1994 the Company acquired Oakbrook Apartments, a residential
apartment community located in Charlotte, North Carolina for a total
purchase cost of $9,372,000. The purchase was financed primarily
through bank and mortgage borrowings. The results of operations of
Oakbrook are included in the financial statements from June 7, 1994.
On October 1, 1994 the Company acquired by merger BTVC, including
Latitudes Apartments, for an initial purchase price including $91,000 in
cash, $21,251,000 through assumption of liabilities, and 134,610 shares
of the Company's common stock valued at $1,899,000. Additional
consideration of $1,700,000 may be paid to the BTVC shareholders if
certain future financial targets are attained. This contingent purchase
price will be payable in shares of common stock or cash, at the option
of the Company, on a quarterly basis over a period of up to 14 quarters
commencing with the quarter ended December 31, 1994. Assuming the full
contingent purchase price is to be paid, it is anticipated that the
Company will issue approximately 121,000 additional shares of common
stock in conjunction with the acquisition. The acquisition has been
accounted for by the purchase method of accounting, and the total
acquisition cost of $26,326,000 (assuming full earn-out of the
contingent purchase price and including approximately $1,385,000 in
acquisition costs) approximates the fair value of assets acquired.
Significant assets acquired include the Latitudes Apartments and an
intangible related to the property management operations, initially
recorded at $21,950,000 and $2,250,000, respectively. Contingent
purchase price payments will be allocated primarily to the intangible
related to property management operations, which will be amortized over
ten years. The results of operations of Latitudes and the property
management operations are included in the financial statements from
October 1, 1994.
In conjunction with the BTVC acquisition and based on an earlier
estimate, the Company issued 140,990 shares, including 6,380 "excess
shares" to the BTVC shareholders. During the fourth quarter of 1994 the
financial target for additional consideration was met. At December 31,
1994 the BTVC shareholders are due a contingent purchase price payment
of $49,647 ($141,667 less the value of excess shares previously issued),
to be paid in the form of 3,712 shares of common stock during the first
quarter of 1995.
On December 28, 1994 the Company acquired Harris Hill Apartments, a
residential apartment community located in Charlotte, North Carolina for
a total purchase cost of $8,871,000. The purchase was financed
primarily through bank and mortgage borrowings. The results of
operations of Harris Hill are included in the financial statements from
December 28, 1994.
The following unaudited pro forma summary presents the results of
operations as if the acquisitions had occurred at the beginning of
periods presented and does not purport to be indicative of what would
have occurred had the acquisitions been made as of those dates or of
results which may occur in the future.
38
<PAGE>
1994 1993
Total revenues $13,994,000 $13,401,000
Net income $2,160,000 $2,452,000
Net income per common share $0.72 $0.82
Funds from operations $5,250,000 $5,508,000
Note 8. Profit Sharing Plan
The employees of the Company are participants in a profit sharing plan
pursuant to Section 401 of the Internal Revenue Code. The Company makes
limited matching contributions based on the level of employee
participation as defined.
Note 9. Stock Option and Incentive Plan
In 1994 the Company established an employee Stock Option and Incentive
Plan under which 280,000 shares of the Company's common stock are
reserved for issuance. On October 17, 1994 options to purchase 160,000
shares were granted to certain eligible employees at $13.75 per share,
the fair value of the Company's stock on the date the options were
granted. The options vest and are exercisable one-fourth per year
beginning October 17, 1995 and expire October 17, 2004. At December 31,
1994 no options have been exercised and none have vested.
Note 10. Quarterly Financial Data (Unaudited)
Set forth below is selected financial data (unaudited) for the years
ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Funds
from Net income
operations Revenues Net income per share
<S> <C> <C> <C> <C>
1994
First quarter $ 902,755 $1,693,400 $ 584,239 $0.20
Second quarter 1,090,308 2,021,918 761,094 0.27
Third quarter 1,139,076 2,279,216 641,049 0.22
Fourth quarter (1) 1,335,916 3,263,712 315,537 0.11
$4,468,055 $9,258,246 $2,301,919 $0.80
1993
First quarter $ 822,328 $1,167,431 $ 624,265 $0.22
Second quarter 1,086,013 1,515,889 837,478 0.29
Third quarter 1,206,231 1,928,354 855,366 0.30
Fourth quarter (1) 1,006,714 1,814,178 138,342 0.05
$4,121,286 $6,425,852 $2,455,451 $0.86
</TABLE>
(1) Net income includes a special charge of $377,000 and $600,000 to
write off certain deferred acquisition costs in 1994 and 1993,
respectively.
39
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Costs Gross Amount at Which
Description Encumb. Initial Costs Capitalized Carried at Close of Period
Buildings & Subsequent Buildings &
Land Improvem'ts to Acquisition Land Improvem'ts Total
<S> <C> <C> <C> <C> <C> <C> <C>
Hardee's Restaurant Properties:
North Carolina:
Bessemer City (2) $ 152,079 $ 391,060 $ - $ 152,079 $ 391,060 $ 543,139
Burlington (2) 162,411 417,629 - 162,411 417,629 580,040
Chapel Hill (2) 273,556 703,430 - 273,556 703,430 976,986
Denver - 275,484 708,387 - 275,484 708,387 983,871
Eden (2) 253,282 651,296 - 253,282 651,296 904,578
Fayetteville (Ramsey) (2) 260,135 668,919 - 260,135 668,919 929,054
Fayetteville (N.Eastern) - 308,271 792,696 - 308,271 792,696 1,100,967
Fayetteville (Bragg) (2) 235,951 606,730 - 235,951 606,730 842,681
Gastonia (E. Franklin) (2) 230,421 592,511 - 230,421 592,511 822,932
Gastonia (N. Chester) (2) 199,133 512,055 - 199,133 512,055 711,188
Hillsborough (2) 290,868 747,948 - 290,868 747,948 1,038,816
Kinston (W. Vernon) (2) 237,135 609,777 - 237,135 609,777 846,912
Kinston (Richlands) (2) 231,678 595,743 - 231,678 595,743 827,421
Mt. Airy (2) 272,205 699,955 - 272,205 699,955 972,160
Newton (2) 223,453 574,594 - 223,453 574,594 798,047
Siler City (2) 268,312 689,945 - 268,312 689,945 958,257
Spring Lake - 218,925 562,949 - 218,925 562,949 781,874
Thomasville (E. Main) - 253,716 652,411 - 253,716 652,411 906,127
Thomasville (Randolph) (2) 327,727 842,726 - 327,727 842,726 1,170,453
4,674,742 12,020,761 - 4,674,742 12,020,761 16,695,503
Virginia:
Ashland (1) 296,509 762,452 - 296,509 762,452 1,058,961
Blackstone - 275,565 708,596 - 275,565 708,596 984,161
Bluefield - 205,700 528,947 - 205,700 528,947 734,647
Chester - 300,165 771,852 - 300,165 771,852 1,072,017
Clarksville (1) 211,545 543,972 - 211,545 543,972 755,517
Clintwood (2) 222,673 572,588 - 222,673 572,588 795,261
Dublin - 364,065 936,168 - 364,065 936,168 1,300,233
Franklin - 287,867 740,230 - 287,867 740,230 1,028,097
Galax (2) 309,578 796,057 - 309,578 796,057 1,105,635
Hopewell (1) 263,939 678,701 - 263,939 678,701 942,640
Lebanon (2) 266,340 684,876 - 266,340 684,876 951,216
Lynchburg (Langhorne) (1) 249,865 642,509 - 249,865 642,509 892,374
Lynchburg (Timberlake) (1) 276,153 710,107 - 276,153 710,107 986,260
Norfolk (1) 325,822 837,829 - 325,822 837,829 1,163,651
Orange (2) 244,883 629,699 - 244,883 629,699 874,582
Petersburg - 357,984 920,531 - 357,984 920,531 1,278,515
Richmond (Forest Hill) - 196,084 504,216 - 196,084 504,216 700,300
Richmond (Midlothian) (1) 270,736 696,179 - 270,736 696,179 966,915
Richmond (Myers) (1) 321,946 827,861 - 321,946 827,861 1,149,807
</TABLE>
<TABLE>
<CAPTION>
Accumulated Date of Date Life
Depreciation Construction Acquired (Years)
<S> <C> <C> <C> <C>
Hardee's Restaurant Properties:
North Carolina:
Bessemer City $ 75,361 Nov-77 Apr-87 40
Burlington 80,480 Oct-85 Apr-87 40
Chapel Hill 135,556 Aug-64 Apr-87 40
Denver 136,512 Jul-83 Apr-87 40
Eden 125,509 Jun-73 Apr-87 40
Fayetteville (Ramsey) 128,906 Oct-73 Apr-87 40
Fayetteville (N.Eastern) 152,758 Sep-83 Apr-87 40
Fayetteville (Bragg) 116,921 Jan-85 Apr-87 40
Gastonia (E. Franklin) 114,181 Apr-63 Apr-87 40
Gastonia (N. Chester) 98,676 Jan-78 Apr-87 40
Hillsborough 144,135 Mar-78 Apr-87 40
Kinston (W. Vernon) 117,508 Jul-62 Apr-87 40
Kinston (Richlands) 114,804 Dec-81 Apr-87 40
Mt. Airy 134,886 May-73 Apr-87 40
Newton 110,729 Mar-76 Apr-87 40
Siler City 132,958 May-79 Apr-87 40
Spring Lake 108,485 Mar-76 Apr-87 40
Thomasville (E. Main) 125,724 Feb-66 Apr-87 40
Thomasville (Randolph) 162,399 Apr-74 Apr-87 40
2,316,487
Virginia:
Ashland 146,930 Apr-87 Apr-87 40
Blackstone 136,552 Sep-79 Apr-87 40
Bluefield 101,932 Feb-85 Apr-87 40
Chester 148,741 May-73 Apr-87 40
Clarksville 104,827 Oct-85 Apr-87 40
Clintwood 110,342 Jan-81 Apr-87 40
Dublin 180,406 Jul-83 Apr-87 40
Franklin 142,648 Feb-75 Apr-87 40
Galax 153,405 Jun-74 Apr-87 40
Hopewell 130,791 Jun-78 Apr-87 40
Lebanon 131,981 Jun-83 Apr-87 40
Lynchburg (Langhorne) 123,816 Sep-82 Apr-87 40
Lynchburg (Timberlake) 136,843 Aug-83 Apr-87 40
Norfolk 161,456 Aug-84 Apr-87 40
Orange 121,347 Aug-74 Apr-87 40
Petersburg 177,393 Mar-74 Apr-87 40
Richmond (Forest Hill) 97,166 Nov-74 Apr-87 40
Richmond (Midlothian) 134,158 Jan-74 Apr-87 40
Richmond (Myers) 159,535 Apr-83 Apr-87 40
</TABLE>
40
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Costs Gross Amount at Which
Description Encumb. Initial Costs Capitalized Carried at Close of Period
Buildings & Subsequent Buildings &
Land Improvem'ts to Acquisition Land Improvem'ts Total
<S> <C> <C> <C> <C> <C> <C> <C>
Roanoke (Hollins) - 257,863 663,076 - 257,863 663,076 920,939
Roanoke (Abenham) (1) 235,864 606,507 - 235,864 606,507 842,371
Rocky Mount (1) 248,434 638,829 - 248,434 638,829 887,263
Smithfield (1) 223,070 573,608 - 223,070 573,608 796,678
Staunton - 260,569 670,035 - 260,569 670,035 930,604
Verona (1) 191,631 492,765 - 191,631 492,765 684,396
Virginia Beach (Lynnhaven) (1) 271,570 698,322 - 231,731 698,322 930,053
Virginia Beach (Holland) (1) 277,943 714,710 - 277,943 714,710 992,653
Wise (2) 219,471 564,355 - 219,471 564,355 783,826
7,433,834 19,115,577 - 7,393,995 19,115,577 26,509,572
Total Restaurant Properties 22,250,000 12,108,576 31,136,338 - 12,068,737 31,136,338 43,205,075
Apartment Properties:
North Carolina:
Paces Commons 10,977,256 1,430,157 12,871,424 167,148 1,430,157 13,038,572 14,468,729
Oakbrook 6,650,000 848,835 8,523,384 42,216 848,835 8,565,600 9,414,435
Harris Hill 6,500,000 1,003,298 7,867,857 - 1,003,298 7,867,857 8,871,155
3,282,290 29,262,665 209,364 3,282,290 29,472,029 32,754,319
Virginia:
Latitudes 13,450,000 3,360,000 18,606,667 2,517 3,360,000 18,609,184 21,969,184
Total Apartment Properties 37,577,256 6,642,290 47,869,332 211,881 6,642,290 48,081,213 54,723,503
Total Real Estate $ 59,827,256 $18,750,866 $ 79,005,670 $ 211,881 $18,711,027 $79,217,551 $97,928,578
</TABLE>
<TABLE>
<CAPTION>
Accumulated Date of Date Life
Depreciation Construction Acquired (Years)
<S> <C> <C> <C> <C>
Roanoke (Hollins) 127,780 Feb-73 Apr-87 40
Roanoke (Abenham) 116,879 Nov-82 Apr-87 40
Rocky Mount 123,107 May-80 Apr-87 40
Smithfield 110,538 Apr-77 Apr-87 40
Staunton 129,121 Sep-83 Apr-87 40
Verona 94,959 Jan-85 May-87 40
Virginia Beach (Lynnhaven) 134,572 Jun-80 Apr-87 40
Virginia Beach (Holland) 137,730 Aug-83 Apr-87 40
Wise 108,755 Jun-80 Apr-87 40
3,683,709
Total Restaurant Properties 6,000,196
Apartment Properties:
North Carolina:
Paces Commons 546,918 1988 Jun-93 40
Oakbrook 128,072 1985 Jun-94 40
Harris Hill 13,241 1988 Dec-94 40
688,231
Virginia:
Latitudes 138,910 1989 Oct-94 38
Total Apartment Properties 827,141
Total Real Estate $6,827,337
</TABLE>
Notes:
(1) Indicates the 14 properties encumbered by the $4,000,000 8 5/8%
mortgage note
(2) Indicates the 20 properties encumbered by the $20,000,000 credit
facility ($18,250,000 outstanding at 12/31/94)
41
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Years ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year $57,557,243 $43,205,075 $43,205,075
Additions during year
Acquisitions by merger 21,966,667 - -
Other acquisitions 18,243,374 14,301,581 -
Improvements, etc. 161,294 50,587 -
Deductions during year - -
Balance at close of year $97,928,578 $57,557,243 $43,205,075
Accumulated depreciation:
Balance at beginning of year $ 5,416,818 $ 4,443,384 $ 3,664,980
Provision for depreciation 1,410,519 973,434 778,404
Deductions during year - - -
Balance at close of year $ 6,827,337 $ 5,416,818 $ 4,443,384
</TABLE>
42
BODDIE-NOELL PROPERTIES, INC.
EXHIBIT 10.8 FORM AND DESCRIPTION OF INCENTIVE STOCK OPTION AGREEMENT
DATED OCTOBER 17, 1994
Agreements between the Company and the following individuals are substantially
identical in all material respects except as identified below:
Number of Shares Subject to Option
Employee Name Total Annual Vesting
Philip S. Payne* 28,000 7,000
Lisa K. McCourt 10,000 2,500
Pamela B. Novak 10,000 2,500
D. Scott Wilkerson 28,000 7,000
Debra Baker White 10,000 2,500
W. Craig Worthy 28,000 7,000
* Copy of agreement attached
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
INCENTIVE STOCK OPTION AGREEMENT
An incentive stock option, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Option") is hereby granted by
Boddie-Noell Properties, Inc., a Delaware corporation (the "Company"),
to the employee named below (the "Employee"), with respect to common
stock of the Company, $.01 par value per share ("Common Stock"), subject
to the following terms and conditions:
1. Subject to the provisions set forth herein and the terms and conditions
of the Boddie-Noell Properties, Inc. 1994 Stock Option and Incentive Plan
(the "Plan"), the terms of which are hereby incorporated by reference, and
in consideration of the agreements of Employee herein provided, the Company
hereby grants to Employee an Option to purchase from the Company the number
of shares of Common Stock, at the purchase price per share, and on the
schedule, all as set forth below. Any capitalized term not otherwise defined
in this Agreement shall have the meaning given to such term in the Plan. The
terms and conditions of exercise of the Option and the payment of the Purchase
price are as provided at Section 5 of the Plan. Upon the exercise of an Option,
the Committee shall have the right to require the Employee to remit to the
Company, in any such manner or combination of manners permitted under the
terms of the Plan, an amount sufficient to satisfy all federal, state and
local withholding tax requirements prior to the delivery by the Company of
any certificate for shares of Common Stock.
Name of Employee: Philip S. Payne
Date of Grant: October 17, 1994
Number of Shares Subject to Option: 28,000
Exercise Price Per Share: $ 13 3/4
Reload Option: (Yes) or (No)
Vesting and Exercise Schedule:
Exercise Period
Number Vesting Expiration
of Shares Date Date
7,000 October 17, 1995 October 17, 2004
7,000 October 17, 1996 October 17, 2004
7,000 October 17, 1997 October 17, 2004
7,000 October 17, 1998 October 17, 2004
<PAGE>
provided, however, that the Expiration Date of the Exercise Period for
the Option hereby granted may not be more than ten (10) years after the
Date of Grant of the Option; and further provided, that if the Employee
owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation,
the term of the Option shall be no more than five (5) years from the
Date of Grant; and further provided, that the aggregate Fair Market Value
(determined as of the Date of Grant) of the shares of the Common Stock
with respect to which incentive stock options, as defined in Section
422 of the Code, have been granted either under the Plan or under any
other plan of the Company or its Subsidiaries become exercisable for the
first time by Employee during any calendar year shall not exceed
$100,000.00.
2. The exercise of the Option is conditioned upon the acceptance by
Employee of the terms hereof and the Plan as evidenced by his or her
execution of this Agreement and the return of an executed copy to the
Secretary of the Company no later than November 17, 1994.
If Employee's employment with the Company and all subsidiaries is
terminated by reason of death or Disability, as that term is defined in
Section 22(e)(3) of the Code or as may be otherwise determined by the
Committee, the vested portion of the Option shall remain exercisable for a
period of six months following the date of such termination of employment (or
such longer period as the Committee shall specify at any time) or until the
expiration of the stated term of the Option as set forth in paragraph 1 hereof
(the "Expiration Date"), if earlier. If Employee s employment with the
Company and all Subsidiaries is terminated under any other circumstance other
than for Cause, the vested portion of the Option shall remain exercisable
for a period of three months from the date of such termination of employment
(or such longer period as the Committee shall specify at any time) or until
the Expiration Date, if earlier. If Employee's employment with the Company and
all subsidiaries is terminated for Cause, the Option shall terminate
immediately and be of no further force and effect; provided, however, that
the Committee may, in its sole discretion, provide that the Option can be
exercised for up to thirty (30) days from the date of termination of
employment or until the Expiration Date, if earlier.
Written notice of an election to exercise any portion of the Option,
specifying the portion thereof being exercised and the exercise date, shall
be given by Employee, or his personal representative in the event of
Employee's death, (i) by delivering such notice to the Secretary of the
Company at the principal executive offices of the Company or (ii) by
delivering such notice to a broker-dealer with a copy to the Secretary of
the Company.
If expressly permitted in the schedule set forth in paragraph 1 above, the
Option set forth herein shall include a so-called "reload" feature pursuant
to which the Employee exercising an Option pursuant to this paragraph 2
shall automatically be granted an additional Option with an exercise price
equal to the Fair Market Value of the Common Stock on the date the
additional Option is granted and with the same expiration date as the original
Option being exercised, and with such other terms as the Committee may
provide, to purchase that number of shares of the Common Stock equal to
the number delivered to exercise the original Option. If not expressly
permitted in the schedule set
<PAGE>
forth in paragraph 1 above, the Option granted in this Agreement shall not
include such a "reload" feature.
3. In the event of a Change in Control as defined in the Plan, the Option
shall automatically become fully exercisable, notwithstanding any provision
in the Plan or herein to the contrary.
4. The Option may be exercised only by Employee during his lifetime and may
not be transferred other than by will or the applicable laws of descent or
distribution. The Option shall not otherwise be transferred, assigned,
pledged or hypothecated for any purpose whatsoever and is not subject,
in whole or in part, to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge or hypothecation or other disposition
of the Option, other than in accordance with the terms set forth herein,
shall be void and of no effect.
5. Neither Employee nor any other person entitled to exercise the Option
under the terms hereof shall be, or have any of the rights or privileges
of, a shareholder of the Company in respect of any of the shares of Common
Stock issuable on exercise of the Option, unless and until the purchase
price for such shares shall have been paid in full.
6. In the event the Option shall be exercised in whole, this Agreement shall
be surrendered to the Company for cancellation. In the event the Option shall
be exercised in part, or a change in the number or designation of the Common
Stock shall be made, this Agreement shall be delivered by Employee to the
Company for the purpose of making appropriate notation thereon, or of otherwise
reflecting, in such manner as the Company shall determine, the partial
exercise or the change in the number of designation of the Common Stock.
7. The Option shall be exercised in accordance with such administrative
regulations as the Committee shall from time to time adopt.
8. The Option and this Agreement shall be construed, administered and
governed in all respects under any by the laws of the State of North Carolina.
BODDIE-NOELL PROPERTIES, INC.
By: (Signature of Douglas E. Anderson)
Title: Vice President and Secretary
The undersigned hereby accepts the foregoing Option and the terms and
conditions hereof.
(Signature of Philip S. Payne) (SEAL)
Philip S. Payne
BODDIE-NOELL PROPERTIES, INC.
EXHIBIT 10.9 FORM AND DESCRIPTION OF NONQUALIFIED STOCK OPTION AGREEMENT
DATED OCTOBER 17, 1994
Agreements between the Company and the following individuals are substantially
identical in all material respects except as identified below:
Number of Shares Subject to Option
Employee Name Total Annual Vesting
Philip S. Payne* 22,000 5,500
D. Scott Wilkerson 22,000 5,500
W. Craig Worthy 2,000 500
* Copy of agreement attached
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
A nonstatutory stock option (the "Option") is hereby granted by
Boddie-Noell Properties, Inc., a Delaware corporation (the "Company"), to
the employee named below (the "Employee"), with respect to common stock
of the Company, $.01 par value per share ("Common Stock"), subject to the
following terms and conditions:
1. Subject to the provisions set forth herein and the terms and
conditions of the Boddie-Noell Properties, Inc. 1994 Stock Option and
Incentive Plan (the "Plan"), the terms of which are hereby incorporated by
reference, and in consideration of the agreements of Employee herein
provided, the Company hereby grants to Employee an Option to purchase from
the Company the number of shares of Common Stock, at the purchase price per
share, and on the schedule. all as set forth below. Any capitalized term
not otherwise defined in this Agreement shall have the meaning given to such
term in the Plan. The terms and conditions of exercise of the Option and
the payment of the purchase price are as provided at Section 5 of the Plan.
Upon the exercise of an Option, the Committee shall have the right to require
the Employee to remit to the Company, in any such manner or combination of
manners permitted under the terms of the Plan, an amount sufficient to
satisfy all federal, state and local withholding tax requirements prior
to the delivery by the Company of any certificate for shares of Common Stock.
Name of Employee: Philip S. Payne
Date of Grant: October 17, 1994
Number of Shares Subject to Option: 22,000
Exercise Price Per Share: $13 3/4
Reload Option: (Yes) or (No)
Vesting and Exercise Schedule:
Exercise Period
Number Vesting Expiration
of Shares Date Date
5.500 October 17, 1995 October 17, 2004
5,500 October 17,1996 October 17, 2004
5,500 October 17, 1997 October 17, 2004
5,500 October 17, 1998 October 17, 2004
<PAGE>
2. The exercise of the Option is conditioned upon the acceptance by
Employee of the terms hereof and the Plan as evidenced by his or her
execution of this Agreement and the return of an executed copy to the
Secretary of the Company no later than November 17, 1994.
If Employee's employment with the Company and all subsidiaries is
terminated by reason of death or Disability, as that term is defined in
Section 22(e)(3) of the Code or as may be otherwise determined by the
Committee, the vested portion of the Option shall remain exercisable for a
period of six months following the date of such termination of employment
(or such longer period as the Committee shall specify at any time) or until
the expiration of the stated term of the Option as set forth in paragraph
1 hereof (the "Expiration Date"), if earlier. If Employee's employment
with the Company and all Subsidiaries is terminated under any other
circumstance other than for Cause, the vested portion of the Option shall
remain exercisable for a period of three months from the date of such
termination of employment (or such longer period as the Committee shall specify
at any time) or until the Expiration Date, if earlier. If Employee's
employment with the Company and all subsidiaries is terminated for Cause, the
Option shall terminate immediately and be of no further force and effect;
provided, however, that the Committee may, in its sole discretion, provide
that the Option can be exercised for up to thirty (30) days from the date
of termination of employment or until the Expiration Date, if earlier.
Written notice of an election to exercise any portion of the Option,
specifying the portion thereof being exercised and the exercise date,
shall be given by Employee, or his personal representative in the event of
Employee's death, (i) by delivering such notice to the Secretary of the
Company at the principal executive offices of the Company or (ii) by
delivering such notice to a broker-dealer with a copy to the Secretary
of the Company.
If expressly permitted in the schedule set forth in paragraph I above, the
Option set forth herein shall include a so-called "reload' feature pursuant
to which the Employee exercising an Option pursuant to this paragraph 2 shall
automatically be granted an additional Option with an exercise price equal
to the Fair Market Value of the Common Stock on the date the additional
Option is granted and with the same expiration date as the original Option
being exercised, and with such other terms as the Committee may provide,
to purchase that number of shares of the Common Stock equal to the number
delivered to exercise the original Option. If not expressly permitted in the
schedule set forth in paragraph I above, the Option granted in this
Agreement shall not include such a "reload" feature.
3. In the event of a Change in Control as defined in the Plan, the Option
shall automatically become fully exercisable, notwithstanding any provision in
the Plan or herein to the contrary.
4. The Option may be exercised only by Employee during his lifetime and
may not be transferred other than by will or the applicable laws of descent
or distribution. The Option shall not otherwise be transferred, assigned,
pledged or hypothecated for any purpose whatsoever and is not subject, in
whole or in part, to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge or hypothecation or other
<PAGE>
disposition of the Option, other than in accordance with the terms set
forth-herein, shall be void and of no effect.
5. Neither Employee nor any other person entitled to exercise the Option
under the terms hereof shall be, or have any of the rights or privileges of,
a shareholder of the Company in respect of any of the shares of Common Stock
issuable on exercise of the Option, unless and until the purchase price
for such shares shall have been paid in full.
6. In the event the Option shall be exercised in whole, this Agreement
shall be surrendered to the Company for cancellation. In the event the
Option shall be exercised in part, or a change in the number or designation
of the Common Stock shall be made, this Agreement shall be delivered by
Employee to the Company for the purpose of making appropriate notation
thereon, or of otherwise reflecting, in such manner as the Company shall
determine, the partial exercise or the change in the number of designation
of the Common Stock.
7. The Option shall be exercised in accordance with such administrative
regulations as the Committee shall from time to time adopt.
8. The Option and this Agreement shall be construed, administered and
governed in all respects under and by the laws of the State of North Carolina.
BODDIE-NOELL PROPERTIES, INC.
By: (Signature of Douglas E. Anderson appears here)
Title: Vice President and Secretary
The undersigned hereby accepts the foregoing Option and the terms and
conditions hereof.
(Signature of Philip S. Payne) (SEAL)
Philip S. Payne
BODDIE-NOELL PROPERTIES, INC.
EXHIBIT 10.10 FORM AND DESCRIPTION OF EMPLOYMENT AGREEMENTS
DATED OCTOBER 1, 1994 BETWEEN THE COMPANY AND
CERTAIN OFFICERS
Agreements between the Company and the following individuals are
substantially identical in all material respects except as identified below:
<TABLE>
<CAPTION>
<S> <C>
Employee Name Title
Philip S. Payne * Executive Vice President
D. Scott Wilkerson President
</TABLE>
* Copy of agreement attached
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 1st day of October,
1994, by and between Boddie-Noell Restaurant Properties, Inc., a
Delaware corporation, and Philip S. Payne, a resident of Charlotte,
North Carolina (the "Employee").
W I T N E S E T H :
WHEREAS, the Company desires to obtain the services of
Employee, for its own benefit and for the benefit of any existing
and future Affiliated Company (defined as any corporation or other
business entity that directly or indirectly controls, is controlled
by, or is under common control with the Company), and Employee
desires to secure employment from the Company upon the following
terms and conditions;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties agree that the
following provisions shall constitute their agreement of
employment:
1. Employment. The Company hereby employs the Employee, and
the Employee hereby accept employment with the Company, for the
term set forth in Section 2 below, in the position and with the
duties and responsibilities set forth in Section 3 below, and upon
the other terms and conditions hereinafter stated.
2. Period of EmPloyment. The term of this Agreement (the
"Period of Employment") shall commence on the date hereof, and
unless otherwise terminated as hereinafter provided, shall continue
through the third anniversary of such date. The Period of
<PAGE>
Employment shall be automatically renewed for successive additional
three year periods unless the Employee or the Company shall notify
the other in writing, no later than 180 days and no earlier than
210 days prior to the next succeeding expiration date of the Period
of Employment, that such party does not desire to renew the Period
of Employment in which case the term hereof shall expire on such
expiration date. Subject to the provisions of Sections 8 and 11,
the Company shall pay the Employee compensation as provided in
Section 4 through the end of the Period of Employment, and
thereafter the Company's obligations hereunder shall end. In the
event that this Agreement expires and a new written agreement is
not entered into by the parties, the provisions of Sections 9, 10,
and 11 of this Agreement will apply with respect to any continued
employment of the Employee by the Company or by any successor to
the business of the Company.
3. Position: Duties: Extent of Services.
(a) Duties: Position. The Employee shall serve
initially as Executive Vice President of the Company, and he
shall have such title, responsibilities, duties and
authorities and shall perform such services of an executive
character as shall be designated from time to time by the
Board of Directors of the Company. The Company shall retain
full direction and control of the means and methods by which
Employee performs the above services and of the place(s) at
which such services are to be provided.
(b) Other Activities. Except upon the prior written
consent of the Board, Employee, during the Period of
2
<PAGE>
Employment, will not (i) accept any other employment, or (ii) engage,
directly or indirectly, in any other business activity (whether or not
pursued for pecuniary advantage) that is or may be competitive with,
or that might place him in a competing position to that of the Company
or any Affiliated Company with respect to the development, operation,
management or leasing of any multi-family or retail properties.
4. Compensation. In consideration of the services to be rendered by the
Employee to the Company and in consideration of the Employee's other
covenants hereunder, the Employee will receive a base salary at the rate of
$120,000 per year, payable at such intervals as may be established by the
Company from time to time for salary payments to its management employees.
The employee shall receive such salary increases and/or bonuses as the Board of
Directors of the Company may from time to time approve in its discretion.
In no event, however, will the Employee's gross annual salary be less than
$120,000. The Employee shall also be entitled to participate in such
incentive compensation plans as the Company may from time to time maintain
for its executive employees generally and as described at Section 5 hereof.
5. Incentive Compensation Plan. The Company will establish and the
Employee will participate in an incentive compensation plan for executive
officers of the Company. The plan will provide for payment of a cash
bonus to the Employee if certain Company performance objectives established
for the Employee are achieved. The amount of the bonus to participating
officers will be based on a formula determined for the Employee by the
Compensation
3
<PAGE>
Committee, but may not exceed 100% of base salary. The formula
will be based primarily upon improvements in funds from operations,
computed on a per share basis. All bonuses may be subject to
adjustment to reflect individual performance as measured by
specific qualitative criteria to be approved by the Compensation
Committee. In addition, the Company may also establish a deferred
compensation plan which provides for phantom stock awards. Under
this program, phantom stock equal in value to 25% of an officer's
yearly cash bonus may be set aside in an incentive pool, with
payment to the officer after five years. If an officer leaves the
Company's employ for any reason (other than death, disability,
termination without cause or normal retirement) prior to the end of
the five-year period, all awards shall be forfeited. Otherwise,
accrued incentive awards will be paid under the terms of the
incentive plan.
6. Employee Benefits. The Employee will be entitled to
participate, in accordance with the provisions thereof, in the
employee benefit plans made available by the Company to its
employees generally. In the event of the death or total disability
of the Employee, the Employee or his estate or beneficiaries shall
also be entitled to benefits in accordance with Section 8 hereof.
7. Business Expense Reimbursements. During the period of
his employment under this Agreement, the Employee will be entitled
to reimbursement for all reasonable, out-of-pocket expenses
incurred by him in performing services hereunder, provided that
such expenses are incurred in accordance with the applicable
policies of the Company. The Employee shall be entitled to such
4
<PAGE>
reimbursement upon presentation by the Employee, from time to time,
of an itemized account of such expenses and appropriate
documentation therefor.
8. Termination of Employment.
(a) Death. In the event of the death of the Employee
during his employment under this Agreement, the following
payments shall be made to the Employee's designated
beneficiary, or, in the absence of such designation, to the
estate or other legal representative of the Employee: (i) his
base salary for the month in which his death occurs, and
(ii) such bonuses (if any) as have been earned by the Employee
and not paid to him at the time of his death. Any rights and
benefits the Employee or is estate or any other person may
have under employee benefit plans and programs of the Company
generally in the event of the Employee's death shall be
determined in accordance with the terms of such plans and
programs. Except as provided in this Section 8, neither the
Employee's estate nor any other person shall have any rights
or claims against the Company in the event of the death of the
Employee during his employment hereunder.
(b) Long-Term Disability. In the event of the
Employee's disability (as hereinafter defined) during his
employment under this Agreement, the Period of Employment may
be terminated by the Company. For the first six months
following termination of employment due to disability, the
Employee shall be paid his base salary at the rate in effect
at the time of the commencement of disability. Thereafter,
5
<PAGE>
the Employee shall be entitled to benefits in accordance with
and subject to the terms and provisions of the Company's long-
term disability plan for senior management employees, as in
effect at the time of the commencement of disability. For
purposes of this Agreement, "disability" shall have the same
meaning as given that term under the Company's long-term
disability plan for senior management employees, as in effect
from time to time. Anything herein to the contrary
notwithstanding, if, during the six-month period following a
termination of employment under this Section 8 in which salary
continuation payments are payable by the Company, the Employee
becomes reemployed or otherwise engaged (whether as an
employee, partner consultant, or otherwise), any salary or
other remuneration or benefits earned by him from such
employment or engagement shall offset any payments due him
under this Section 8. In the event of the Employee's
disability, any rights and benefits the Employee may have
under employee benefit plans and programs of the Company
generally shall be determined in accordance with the terms of
such plans and programs. Upon termination of the Employee's
employment by reason of disability under this Section 8, the
Employee shall be entitled, in addition to the other payments
provided for in this Section 8, to payment of such bonuses (if
any) as may have been earned by the Employee and not paid to
him at the time of such termination. Except as provided in
this Section 8, neither the Employee- nor his estate, or any
other person, shall have any rights or claims against the
6
<PAGE>
Company in the event of the termination of the Employee's
employment by reason of disability.
(c) Termination for Cause. Nothing herein shall prevent
the Company from terminating the Period of Employment for
Cause (as hereinafter defined). Upon termination for Cause,
the Employee shall receive his base salary only through the
date of termination, and neither the Employee nor any other
person shall be entitled to any further payments from the
Company, for salary, unpaid bonuses or any other amounts. Any
rights and benefits the Employee may have under employee
benefit plans and programs of the Company generally following
a termination of the Employee's employment for Cause shall be
determined in accordance with the terms of such plans and
programs. For purposes of this Agreement, termination for
Cause shall mean (i) termination due to (y) willful or gross
neglect of duties for which employed, or (z) willful
misconduct in the performance of duties for which employed, in
either such instance so as to cause material harm to the
Company, all such facts to be determined in good faith by the
Board of Directors of the Company, (ii) termination due to the
Employee's committing fraud, misappropriation or embezzlement
in the performance of his duties as an employee of the
Company, or (iii) termination due to the Employee's committing
any felony for which he is convicted and which, as determined
in good faith by the Board of Directors of the Company,
constitutes a crime involving moral turpitude.
7
<PAGE>
(d) Termination by the Company Other than for Cause.
Except for a termination following a Change in Control as
provided at Section 11 hereof, notwithstanding any other term
or provision of this Agreement, the Company may terminate the
Period of Employment at any time and for whatever reason it
deems appropriate, or for no reason. In the event such
termination by the Company occurs, including an election not
to renew this Agreement under the provisions of Section 2
hereof, and is not due to disability as provided in Section
8(b) above or for Cause as provided in Section 8(c) above, the
Employee shall be entitled to payment of his base salary, at
the rate in effect at the time of such termination, for the
period ending the earlier of six months following the third
anniversary of the date hereof, or the expiration of twelve
months from the date of such termination; provided, however,
that such salary continuation payments shall cease in the
event of the Employee's death prior to completion of such
payments. In the event of a termination of the Employee's
employment under this Section 8(d) after this Agreement has
expired, and in the event that a new written agreement is not
entered into by the parties, the Employee shall receive his
base salary for each of the succeeding six months following
such termination. The Employee shall also be entitled to such
bonuses (if any) as have been earned by the Employee and not
paid to him at the time of such termination. Following a
termination of his employment by the Company under the
circumstances described above in this Section 8(d), the
Employee will make reasonable efforts to find other employment
8
<PAGE>
and, upon his becoming reemployed or otherwise engaged
(whether as an employee, partner, consultant, or otherwise),
any salary or other remuneration or benefits accruing to him
from such other employment or engagement shall offset any
salary continuation payments due him under this Section 8.
Any rights and benefits the Employee may have under employee
benefit plans and programs of the Company generally following
a termination of the Employee's employment under the
circumstances described in this Section 8(d) shall be
determined in accordance with the terms of such plans and
programs. Except as provided in this Section 8(d), neither
the Employee nor any other person shall have any rights or
claims against the Company by reason of the termination of the
Employee's employment under the circumstances described in
this Section 8(d).
(e) By Employee For Good Reason. Employee may
terminate, without liability, the Period of Employment for
Good Reason (as defined below) upon ten (10) days' advance
written notice to the Company. The Company shall pay Employee
the compensation to which he is entitled pursuant to Section
4 through the date of termination and thereafter all
obligations of the Company hereunder shall terminate. Good
Reason shall exist if: (i) there is an assignment to Employee
of any duties materially inconsistent with or which constitute
a material change in Employee's position, duties,
responsibilities, or status with the Company, or a material
change in Employee's reporting responsibilities, title,-or
offices; or removal of Employee from or failure to re-elect
9
<PAGE>
Employee to any of such positions, except in connection with
the termination of the Period of Employment for Cause, or due
to disability, early or normal retirement as defined by the
Company's pension plan, death, or termination of the Period of
Employment by Employee other than for Good Reason; (ii) there
is a reduction by the Company in Employee's annual salary then
in effect; or (iii) the Company acts in any way that would
have a disproportionately material adverse effect on
Employee's participation in or disproportionately and
materially reduce Employee's benefit under any benefit plan of
the Company in which Employee is participating or deprive
Employee of any material fringe benefit enjoyed by Employee
when compared to other executives of the Company.
(f) Voluntary Termination by the Employee. At any time,
Employee may terminate, without liability, the Period of
Employment for any reason, by giving thirty (30) days' advance
written notice to the Company. If Employee terminates his
employment pursuant to this Section 8(f), the Company shall
have the option, in its complete discretion, to terminate
Employee immediately without the running of the notice period.
The Company shall pay Employee the compensation to which he is
entitled pursuant to Section 4 through the end of the notice
period, or, if elected, through the day upon which early
termination is elected pursuant to the foregoing sentence, and
thereafter all obligations of the Company hereunder shall
terminate.
10
<PAGE>
9. Covenants Not to Compete.
(a) Except as provided in Section 8(d) with regard to a
termination of the Period of Employment by the Company other
than for Cause, the Employee promises and agrees that, until
the expiration of one year following the termination or
expiration of the Period of Employment, he will not for
himself or any third party, directly or indirectly (i) engage
in the development, operation, management or leasing of any
multi-family or retail properties in any county in North
Carolina or counties in any other state in which the Company
is engaged in business at the time of such termination, or
(ii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company
and any third party, including but not limited to its
employees, contractors, tenants and lessees.
(b) It is the desire and intent of the parties that the
provisions of this Section 9 shall be enforced to the fullest
extent permitted under the laws and public policies of each
jurisdiction in which enforcement is sought. Accordingly, if
any particular portion of this Section 9 shall be adjudicated
to be invalid or unenforceable, such adjudication shall apply
only with respect to the operation of that portion in the
particular jurisdiction in which such adjudication is made,
and all other portions shall continue in full force and
effect.
(c) It is expressly agreed that the provisions and
covenants in this Section 9 shall not apply and shall be of no
11
<PAGE>
force or effect in the event the Company terminates the
Employee's employment under this Agreement and such
termination is not due to disability or for Cause.
10. Confidential Information: Rights to Materials.
(a) Confidential Information. The Employee promises and
agrees that he will not, either while in the Company's employ
or at any time thereafter, disclose to any person not employed
by the Company, or not engaged to render services to the
Company, or use, for himself or any other person, firm,
corporation or entity, any confidential information of the
Company obtained by him while in the employ of the Company,
including, without limitation, any of the Company's methods,
processes, techniques, practices, research data, marketing and
sales information, personnel data, customer lists, financial
data, plans, know-how, trade secrets, and proprietary
information of the Company; provided, however, that this
provision shall not preclude the Employee from use or
disclosure of information known generally to the public (other
than information known generally to the public as a result of
a violation of this Section 10(a) by the Employee), from use
or disclosure of information acquired by the Employee outside
of his affiliation with the Company, from disclosure required
by law or court order, or from disclosure or use appropriate
and in the ordinary course of carrying out his duties as an
employee of the Company.
(b) Rights to Materials. The Employee further promises
and agrees that, upon termination of his employment for
12
<PAGE>
whatever reason and at whatever time, he will not take with
him, without the prior written consent of an officer
authorized to act in the matter by the Board of Directors of
the Company, any records, files, memoranda, reports, customer
lists, drawings, plans, sketches, documents, specifications,
and the like (or any copies thereof) relating to the business
of the Company or any of its current or future Affiliated
Companies.
11. Change in Control. In the event of (i) the adoption of
a plan of merger or consolidation of the Company with any other
corporation, trust or partnership as a result of which the holders
of the voting interests of the Company as a group would receive
less than 50% of the voting capital stock of the surviving or
resulting corporation, (ii) the approval by the Board of Directors
of the Company of an agreement providing for the sale or transfer
(other than as security or obligations of the Company) of
substantially all the assets of the Company, or (iii) in the
absence of a prior expression of approval by the Board of Directors
of the Company, the acquisition of more than 20% of the Company's
voting capital stock by any period within the meaning of Section
13(d)(3) of the Exchange Act (any such event being a Change in
Control); then upon any termination of the Period of Employment by
the Company other than for cause under the provisions of Section
8(d) or upon a termination caused by the Employee's refusal to
relocate his principal place of work to a location outside the
state of North Carolina at the request of the Company, the Employee
shall be entitled to the payment of his base salary at the rate in
13
<PAGE>
effect at the time of such termination, for a period ending the
later of the expiration of the then current Period of Employment or
six months following the date of termination.
12. Injunctive Relief. The Employee acknowledges and agrees
that the Company would suffer irreparable injury in the event of a
breach by him or any of the provisions of Section 9 or Section 10
of this Agreement and that the Company shall be entitled to an
injunction restraining him from any breach or threatened breach
thereof. The Employee further agrees that, in the event of his
breach of any provision of Section 9 or 10 hereof, the Company
shall be entitled to cease any payments otherwise due and payable
to the Employee hereunder. Nothing herein shall be construed,
however, as prohibiting the -Company from pursuing any other
remedies at law or in equity which it may have for any such breach
or threatened breach of any provision of Section 9 or 10 hereof,
including the recovery of damages from the Employee.
13. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Employee and his
personal representatives, estate and heirs and the Company and its
successors and assigns, including without limitation any
corporation or other entity to which the Company may transfer all
or substantially all of its assets and business (by operation of
law or otherwise) and to which the Company may assign this
Agreement. The Employee may not assign this Agreement or any part
hereof without the prior written consent of the Company, which
consent may be withheld by the Company for any reason it deems
appropriate.
14
<PAGE>
14. Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the employment of the
Employee by the Company and supersedes and replaces all other
understandings and agreements, whether oral or in writing, if any
there be, previously entered into be the parties with respect to
such employment.
15. Amendment: Waiver. No provisions of this Agreement may
be amended, modified or waived unless such amendment, modification
or waiver is agreed to in writing and signed by the Employee and by
a duly authorized officer of the Company. No waiver by either
party of any breach by the other party of any provision of this
Agreement shall be deemed a waiver of any other breach.
16. Notices. Any notice to be given hereunder shall be in
writing and delivered personally, or sent by certified mail or
registered mail, postage prepaid, return receipt requested,
addressed to the party concerned at, if to the Company, the
Company's address and if to the Employee, at the Employee's home
address.
17. Severability. If any one or more of the provisions
contained in this Agreement shall be invalid, illegal, or
unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
18. Withholding. Anything herein to the contrary
notwithstanding, all payments made by the Company hereunder shall
be subject to the withholding of such amounts relating to taxes as
15
<PAGE>
the Company may reasonably determined it should withhold pursuant
to any applicable law or regulation.
19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws and judicial decisions of the
State of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement
on--the day and year first above written.
BODDIE-NOELL RESTAURANT PROPERTIES, INC.
(Corporate Seal) By: (Signature of W. Craig Worthy)
Title: Vice President
ATTEST:
(Signature of Kimberly L. Webb)
Assistant Secretary
(Signature of Philip S. Payne) (SEAL)
(Employee)
BODDIE-NOELL PROPERTIES, INC.
EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Price # SHARES Total Amt.
<S> <C> <C> <C>
Common shares outstanding:
January 1 - September 30 2,850,000
October 1 - December 31 2,990,990
Weighted average 2,885,248
Common stock equivalents:
Options granted October 17, 1994 $13.75 160,000
Other potentially dilutive securities: none
Assumed exercise of options @ January 1 13.75 160,000 $2,200,000
Assumed purchase of treasury stock w/proceeds
Average price of stock (per AMEX reports)
January 15.09
February 14.94
March 14.34
April 13.80
May 14.01
June 13.94
July 13.92
August 14.15
September 14.07
October 14.10
November 13.74
December 13.15
Overall average $14.10 (155,982) (2,200,000)
Assumed increase(decrease) in # shares/equity 4,018 $ -
Weighted average # shares outstanding 2,885,248
Assumed # shares for calculation of
earnings per common and common equivalent share 2,889,265
Net income, year ended December 31, 1994 $2,301,919
Earnings per share, weighted average common shares outstanding $ 0.7978
Earnings per common and common equivalent share 0.7967
Dilution percentage 0.14%*
</TABLE>
* Reduction of less than 3% in the aggregate is not considered dilution;
financial statement presentation of fully diluted earnings per share is not
required. Primary earnings per share is presented based on weighted average
number of common shares outstanding.
<PAGE>
To Our Shareholders
The directors and officers of Boddie-Noell Properties are pleased to submit the
results of the third quarter ended September 30, 1994.
Since its inception the goal of the Company has been to provide its shareholders
with a high quality dividend that would increase over time. In 1992, the Board
of Directors determined that to achieve this goal it was necessary for the
Company to expand its focus to include apartment properties.
On August 4, 1994, our shareholders approved the acquisition of BT Venture
Corporation ("BTVC"), an integrated real estate management, development and
acquisition company specializing in apartment properties. As a result of the
purchase of BTVC, which was completed on October 1, 1994, the Company has a
staff of eighty employees and owns forty-seven restaurants and three apartment
communities. It also manages an additional ten apartment communities and three
shopping centers. The Company is exploring additional acquisitions and growth
opportunities.
We believe the acquisition of BTVC has placed the Company in an excellent
position to achieve its goal of providing shareholders with a high quality
dividend.
OPERATING RESULTS
For the quarter ended September 30, 1994, the Company's revenues increased 18.2%
to $2,279,000 from $1,928,000 for the same period last year. The increase in
revenues was primarily attributable to the acquisition of Oakbrook Apartments on
June 7, 1994. Revenues for the quarter for Oakbrook were $334,000. The average
occupancy for the quarter for Oakbrook was 98% with an average rental rate of
$677. Also contributing to the increase was Paces Commons Apartments, which was
acquired in June 1993. Paces Commons contributed $608,000 to revenues during the
quarter, an increase of 10.1% over the same period a year ago. The average
occupancy for Paces Commons during the quarter was 97% with an average monthly
rental rate of $594.
For the nine months ended September 30, 1994, the Company's revenues increased
30.0% to $5,995,000 as compared to $4,612,000 for the same period in 1993. The
increase was primarily attributable to Oakbrook Apartments, which had revenues
of $425,000 since acquisition, and Paces Commons Apartments, which had revenues
of $1,735,000 as compared to $694,000 in 1993.
Restaurant rental revenue declined by 3.1% for the third quarter compared to the
third quarter of 1993. For the nine month period, restaurant rental revenue
declined by 2.8%. "Same-store" restaurant sales for the locations open for the
full periods in both years declined by 2.3% and 2.4% for the three and nine
month periods ended September 30. Widespread price discounting in the
quick-service restaurant industry is the primary reason for the decline in
restaurant sales volume. The difference in the 1994 trends in rental revenue and
"same-store" sales can be attributed to the closing of one store due to fire
damage during the third quarter and five stores at various times during the
year-to-date
CONTINUED...
Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1994 1993
<S> <C> <C>
(Unaudited)
Real estate investments at cost:
Restaurant properties $ 43,205,075 $43,205,075
Apartment properties 23,818,047 14,352,168
67,023,122 57,557,243
Less accumulated depreciation (6,329,063) (5,416,818)
60,694,059 52,140,425
Cash and short-term investments 1,162,183 121,530
Rent and interest receivable 468,145 396,348
Deferred acquisition and financing costs, net of applicable amortization 2,320,858 1,735,371
Prepaid expenses and other assets 80,484 248,939
Total assets $ 64,725,729 $54,642,613
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 37,486,194 $26,894,378
Deferred acquisition and financing costs payable 172,000 247,000
Accounts payable and accrued expenses 367,217 218,914
Escrowed security deposits and deferred revenue 112,438 30,325
Total liabilities 38,137,849 27,390,617
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares
authorized, 2,850,000 issued and outstanding 28,500 28,500
Additional paid-in capital 31,462,322 31,462,322
Dividends distributed in excess of net income (4,902,942) (4,238,826)
Total shareholders' equity 26,587,880 27,251,996
Total liabilities and shareholders' equity $ 64,725,729 $54,642,613
See accompanying notes to financial statements.
</TABLE>
Statements of Income and Funds from Operations (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
REVENUES 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Restaurant rental income $1,333,003 $1,375,523 $3,793,685 $3,904,225
Apartment rental income 941,323 551,820 2,157,396 693,571
Other income 3,080 -- 38,149 --
Interest on short-term investments 1,810 1,011 5,304 13,878
Total revenues 2,279,216 1,928,354 5,994,534 4,611,674
EXPENSES
Depreciation and amortization 388,538 350,865 1,036,268 797,463
Apartment operations 244,094 153,476 635,194 177,396
Administrative 105,375 46,250 316,125 138,750
Interest 683,442 435,536 1,646,754 999,926
Property management fee 50,216 28,036 111,575 29,140
Advisory fee 57,013 58,825 152,747 151,890
Write-off of loan costs at refinancing 109,489 -- 109,489 --
Total expenses 1,638,167 1,072,988 4,008,152 2,294,565
NET INCOME $ 641,049 $ 855,366 $1,986,382 $2,317,109
NET INCOME PER SHARE $ 0.22 $ 0.30 $ 0.70 $ 0.81
FUNDS FROM OPERATIONS $1,139,076 $1,206,231 $3,132,139 $3,114,572
See accompanying notes to financial statements.
</TABLE>
Notes to Financial Statements
(1) Management Opinion. The financial statements in this report as of September
30, 1994 and 1993 and for the three and nine month periods then ended are
unaudited, but in the opinion of management, they include all adjustments (none
of which were other than normal accruals) necessary for a fair presentation of
the financial position and results of operations for the periods presented.
Amounts as of December 31, 1993 included in the financial statements have been
derived from audited financial statements as of that date.
(2) Funds from operations is defined as income before gains (losses) on
investments and extraordinary items adjusted for certain non-cash items,
primarily real estate depreciation. The Company considers funds from operations
in evaluating property acquisitions and operating performance and believes that
funds from operations should be considered along with, but not as an alternative
to, net income and cash flows as a measure of the Company's operating
performance and liquidity.
<PAGE>
...CONTINUED FROM INSIDE FRONT COVER
period for scheduled remodeling (the costs of which are borne by the lessee,
Boddie-Noell Enterprises, Inc.). All stores that were closed for remodeling and
fire damage have reopened.
For the third quarter of 1994, funds from operations declined to $0.40 per
share, totaling $1,139,000 as compared to $0.42 per share and $1,206,000 for the
third quarter last year. The decline in funds from operations for the third
quarter was primarily attributable to increased administrative insurance costs
and interest expense. For the nine month period, funds from operations increased
to $1.10 per share or $3,132,000 from $1.09 per share or $3,115,000 for the
comparable period last year. Paces Commons Apartments contributed approximately
$0.07 and $0.20 for the three and nine month periods, respectively. Oakbrook
Apartments contributed approximately $0.04 and $0.06 for the three and nine
month periods.
Net income for the third quarter of 1994 totaled $641,000 or $0.22 per share
compared to $855,000 or $0.30 per share recorded during the third quarter last
year. For the nine month period, net income totaled $1,986,000 or $0.70 per
share compared to $2,317,000 or $0.81 per share recorded in the first nine
months of 1993. The disparity in the trends of funds from operations and net
income results from the increase in depreciation expense (a deduction in
determining net income, but not a factor in funds from operations) related to
Paces Commons and Oakbrook. In addition, a one time charge of $109,000 was taken
in the third quarter as a result of the refinancing of Paces Commons Apartments.
With the completion of the acquisition of BTVC, management expects that certain
one time charges related to the acquisition may be taken against net income in
the fourth quarter of 1994. These changes will not affect the Company's ability
to pay its dividend.
During the quarter the Company paid its regular dividend of $0.31 per share. On
October 11, 1994, the Company declared its intention to pay a dividend of $0.31
per share on November 15, 1994, to shareholders of record on October 31, 1994.
Our next report to you will be the 1994 Annual Report. In the interim, please
remember that your questions, comments or suggestions are always welcome.
Sincerely,
(Signature of B. Mayo Boddie appears here)
B. Mayo Boddie
CHAIRMAN
(Signature of D. Scott Wilkerson appears here)
D. Scott Wilkerson
PRESIDENT
November 8, 1994
<PAGE>
Corporate Information
DIRECTORS
Ben Mayo Boddie, Chairman
Nick B. Boddie, Vice-Chairman
James B. Powers
William H. Stanley
Richard A. Urquhart, Jr.
REGISTRAR AND TRANSFER AGENT
First Union National Bank
Securities Transfer Department
Two First Union Center
Charlotte, NC 28288-1154
(800) 829-8432
DIVIDEND REINVESTMENT PLAN
The Company's Dividend Reinvestment Plan provides shareholders with a convenient
way to purchase additional shares of BNP common stock. Shareholders who enroll
in the Plan will have their quarterly dividends automatically reinvested toward
the purchase of additional BNP shares. Plan participants may also elect to make
quarterly cash contributions of up to $3,000 to supplement the reinvested
dividends. For more information about the Plan, please contact the transfer
agent, First Union National Bank.
SECURITIES LISTING
The shares are listed on the American Stock Exchange.
Ticker symbol: BNP
INVESTOR INFORMATION
Analysts, shareholders and others seeking information about Boddie-Noell
Properties, Inc. are invited to contact:
Philip S. Payne
Executive Vice President
Boddie-Noell Properties, Inc.
3710 One First Union Center
Charlotte, NC 28202
(704) 333-1367
<PAGE>
BODDIE-NOELL
PROPERTIES, INC.
THIRD QUARTER REPORT
1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BODDIE-NOELL PROPERTIES, INC. FINANCIAL STATEMENTS AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 952,363
<SECURITIES> 0
<RECEIVABLES> 493,306
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,812,422
<PP&E> 97,928,578
<DEPRECIATION> (6,827,337)
<TOTAL-ASSETS> 95,954,214
<CURRENT-LIABILITIES> 1,011,749
<BONDS> 59,827,256
<COMMON> 0
0
29,910
<OTHER-SE> 27,937,999
<TOTAL-LIABILITY-AND-EQUITY> 95,954,214
<SALES> 0
<TOTAL-REVENUES> 9,212,271
<CGS> 0
<TOTAL-COSTS> 2,627,745
<OTHER-EXPENSES> 1,526,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,801,894
<INCOME-PRETAX> 2,301,919
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,301,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,301,919
<EPS-PRIMARY> .80
<EPS-DILUTED> 0
</TABLE>
