UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 1-9496
BNP RESIDENTIAL PROPERTIES, INC.
--------------------------------
(Exact name of Registrant as specified in its charter)
Maryland 56-1574675
-------- ----------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3850 One First Union Center, Charlotte, NC 28202-6032
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
704/944-0100
------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of November 1, 2000 (the latest practicable date).
Common Stock, $.01 par value 5,706,950
---------------------------- ---------
(Class) (Number of shares)
<PAGE>
TABLE OF CONTENTS
Item No. Page No.
PART I - Financial Information
1 Financial Statements 3
2 Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
3 Quantitative and Qualitative Disclosures 15
About Market Risk
PART II - Other Information
6 Exhibits and Reports on Form 8-K 16
2
<PAGE>
PART I - Financial Information
Item 1. Financial Statements.
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Assets
Real estate investments at cost:
Apartment properties $204,862,919 $203,365,405
Restaurant properties 39,702,060 40,544,741
------------------ ------------------
244,564,979 243,910,146
Less accumulated depreciation (31,007,402) (25,926,208)
------------------ ------------------
213,557,577 217,983,938
Cash and cash equivalents 978,628 431,531
Other current assets 2,619,099 1,638,199
Investment in and advances to Management Company 545,159 452,489
Notes receivable 100,000 625,000
Intangible assets, net of accumulated amortization:
Intangible related to acquisition of management operations 1,622,838 1,927,488
Deferred financing costs 1,080,496 1,210,990
------------------ ------------------
Total assets $220,503,797 $224,269,635
================== ==================
Liabilities and Shareholders' Equity
Mortgage and other notes payable $150,861,430 $150,883,348
Accounts payable and accrued expenses 2,371,760 852,994
Escrowed security deposits and deferred revenue 407,000 486,748
Deferred credit for defeasance of interest,
net of accumulated amortization 708,352 833,344
------------------ ------------------
Total liabilities 154,348,542 153,056,434
Minority interest in Operating Partnership 20,183,837 21,316,760
Shareholders' equity:
Common stock, $.01 par value, 100,000,000 shares
authorized; issued and outstanding shares--
5,706,950 at September 30, 2000, and
5,734,906 at December 31, 1999 57,069 57,349
Additional paid-in capital 69,707,155 69,961,625
Dividend distributions in excess of net income (23,792,806) (20,122,533)
------------------ ------------------
Total shareholders' equity 45,971,418 49,896,441
------------------ ------------------
Total liabilities and shareholders' equity $220,503,797 $224,269,635
================== ==================
</TABLE>
3
<PAGE>
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues
Apartment rental income $7,341,027 $7,097,103 $21,961,348 $21,456,542
Restaurant rental income 1,029,256 1,053,192 3,132,713 3,285,639
Interest and other income 84,212 137,265 297,451 446,642
----------------- ---------------- ----------------- ----------------
8,454,495 8,287,560 25,391,512 25,188,823
Expenses
Apartment operations 2,397,150 2,312,130 7,254,484 6,962,430
Administrative 575,953 604,502 1,902,222 1,895,587
Depreciation 1,784,289 1,717,891 5,347,894 5,181,524
Amortization of intangibles 144,804 143,136 434,412 429,408
Interest 2,815,719 2,656,118 8,324,426 8,014,793
----------------- ---------------- ----------------- ----------------
7,717,915 7,433,777 23,263,438 22,483,742
----------------- ---------------- ----------------- ----------------
Income before
minority interest 736,580 853,783 2,128,074 2,705,081
Minority interest in
Operating Partnership 169,831 179,357 490,883 565,560
----------------- ---------------- ----------------- ----------------
Net income $ 566,749 $ 674,426 $1,637,191 $2,139,521
================= ================ ================= ================
Per share data:
Basic earnings per share $0.10 $0.12 $0.29 $0.36
================= ================ ================= ================
Diluted earnings per share $0.10 $0.12 $0.29 $0.36
================= ================ ================= ================
Dividends declared $0.31 $0.31 $0.93 $0.93
================= ================ ================= ================
Weighted average shares
outstanding 5,706,950 6,006,950 5,707,766 5,996,977
================= ================ ================= ================
</TABLE>
4
<PAGE>
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Consolidated Statement of Shareholders' Equity
(Unaudited)
<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, 1999 5,734,906 $57,349 $69,961,625 $(20,122,533) $49,896,441
Common stock repurchased (27,956) (280) (254,470) - (254,750)
Dividends paid ($0.31) - - - (1,769,155) (1,769,155)
Net income - - - 690,789 690,789
------------ ----------- --------------- --------------- ---------------
Balance at March 31, 2000 5,706,950 $57,069 $69,707,155 $(21,200,899) $48,563,325
Dividends paid ($0.31) - - - (1,769,154) (1,769,154)
Net income - - - 379,653 379,653
------------ ----------- --------------- --------------- ---------------
Balance at June 30, 2000 5,706,950 $57,069 $69,707,155 $(22,590,400) $47,173,824
Dividends paid ($0.31) - - - (1,769,155) (1,769,155)
Net income - - - 566,749 566,749
------------ ----------- --------------- --------------- ---------------
Balance at September 30, 2000 5,706,950 $57,069 $69,707,155 $(23,792,806) $45,971,418
============ =========== =============== =============== ===============
</TABLE>
5
<PAGE>
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30
2000 1999
----------------- ----------------
<S> <C> <C>
Operating activities:
Net income $1,637,191 $2,139,521
Adjustments to reconcile net income to
net cash provided by operations:
Minority interest in Operating Partnership 490,883 565,560
Equity in income of Management Company (92,670) (128,932)
Depreciation and amortization of intangibles 5,782,306 5,610,932
Amortization of defeasance credit (124,992) (124,992)
Changes in operating assets and liabilities:
Other current assets (1,003,023) (1,217,943)
Accounts payable and accrued expenses 1,518,766 1,394,513
Security deposits and deferred revenue (58,889) 152,182
----------------- ----------------
Net cash provided by operating activities 8,149,572 8,390,841
Investing activities:
Acquisitions of apartment properties - (1,796,746)
Additions to apartment properties (1,563,867) (1,799,344)
Repayment of advances to Management
Company - 330,000
Sale of restaurant properties 643,598 2,079,719
Reduction in notes receivable 525,000 1,911,812
----------------- ----------------
Net cash (used in) provided by
investing activities (395,269) 725,441
Financing activities:
Net proceeds from issue of common stock - 324,380
Redemption of Operating Partnership
minority units (52,214) -
Repurchase of common stock (254,750) -
Distributions to Operating Partnership
minority unitholders (1,571,592) (1,447,941)
Dividends paid to common shareholders (5,307,464) (5,572,808)
Proceeds from notes payable 850,000 2,838,188
Principal payments on notes payable (871,918) (4,504,682)
Refund of deferred financing costs 732 -
----------------- ----------------
Net cash used in financing activities (7,207,206) (8,362,863)
----------------- ----------------
Net increase in cash and cash equivalents 547,097 753,419
Cash and cash equivalents at
beginning of period 431,531 489,694
----------------- ----------------
Cash and cash equivalents at end of period $ 978,628 $1,243,113
================= ================
</TABLE>
6
<PAGE>
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - September 30, 2000
(Unaudited)
Note 1. Interim financial statements
Our independent accountants have not audited the accompanying financial
statements of BNP Residential Properties, Inc., formerly Boddie-Noell
Properties, Inc., except for the balance sheet at December 31, 1999. We derived
the amounts in the balance sheet at December 31, 1999, from the financial
statements included in our 1999 Annual Report on Form 10-K. We believe that we
have included all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the financial position and results of
operations for the periods presented.
We have condensed or omitted certain notes and other information from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
You should read these financial statements in conjunction with our 1999 Annual
Report on Form 10-K.
We have reclassified amounts for apartment operations expense and administrative
expense in the 1999 financial statements to conform to our 2000 presentation of
these amounts.
Note 2. Shareholders' Equity
We calculated basic and diluted earnings per share using the following amounts:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Numerators:
-----------
Numerator for basic earnings
per share - net income $566,749 $674,426 $1,637,191 $2,139,521
Add minority interest in
Operating Partnership (1) 169,831 179,357 490,883 565,560
----------------- ---------------- ----------------- ----------------
Numerator for diluted earnings
per share - net income
before minority interest (1) $736,580 $853,783 $2,128,074 $2,705,081
================= ================ ================= ================
Denominators:
Denominator for basic
earnings per share -
weighted average shares
outstanding 5,706,950 6,006,950 5,707,766 5,996,977
Effect of dilutive securities:
Convertible Operating
Partnership units 1,710,131 1,594,969 1,711,212 1,584,399
Stock options (2) - - - -
----------------- ---------------- ----------------- ----------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Denominator for diluted
earnings per share - adjusted
weighted average shares and
assumed conversions 7,417,081 7,601,919 7,418,978 7,581,376
================= ================ ================= ================
<FN>
(1) Assumes conversion of Operating Partnership units to common shares.
(2) We excluded 140,000 options granted in 1994 (exercise price $12.50),
110,000 options granted in 1997 (exercise price $12.25), 180,000 options
granted in 1998 (exercise price $13.125 and $11.25), and 47,500 options
granted in February 2000 (exercise price $9.25) from the above calculations
because they were antidilutive at September 30, 2000 and at September 30,
1999.
</FN>
</TABLE>
Note 3. Subsequent events
On October 18, 2000, we declared a regular quarterly cash dividend of $0.31 per
share, which we will pay on November 15, 2000, to shareholders of record on
November 1, 2000.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion contains forward-looking statements within the
meaning of federal securities law. You can identify such statements by the use
of forward-looking terminology, such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. Although we believe that
our plans, intentions, and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you that we will
achieve our plans, intentions or expectations. Such statements are subject to
various risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors identified in our Annual
Report on Form 10-K for the year ending December 31, 1999. You should read the
following discussion in conjunction with the financial statements and notes
thereto included in this Quarterly Report and our Annual Report on Form 10-K.
Company Profile
BNP Residential Properties, Inc., (formerly Boddie-Noell Properties, Inc.)
is a self-administered and self-managed real estate investment trust that owns
and operates apartment communities in North Carolina and Virginia. We currently
own and operate 15 apartment communities containing 3,440 units and have the
right to acquire one additional apartment community containing 108 units. We
also own 43 restaurant properties, which we lease to a third party under a
master lease on a triple-net basis. We manage four other apartment communities
through BNP Management, Inc., an unconsolidated subsidiary. We refer to BNP
Management, Inc. as the Management Company.
We are structured as an UpREIT, or umbrella partnership real estate
investment trust. The company is the sole general partner and owns a controlling
interest in BNP Residential Properties Limited Partnership (formerly
Boddie-Noell Properties Limited Partnership), through which we conduct all of
our operations. We refer to this partnership as the Operating Partnership. We
refer to the limited partners of the Operating Partnership as minority
unitholders or as the minority interest.
Our executive offices are located at 3850 One First Union Center,
Charlotte, North Carolina 28202-6032, telephone 704/944-0100.
Results of Operations
Revenues
Total revenue for the third quarter of 2000 was $8.5 million, a 2.0%
increase over the third quarter of 1999. For the first nine months of 2000,
total revenue was $25.4 million, a 0.8% increase over the first nine months of
1999.
Apartment rental income for the third quarter of 2000 was $7.3 million, a
3.4% increase over the third quarter of 1999. For the first nine months of 2000,
apartment rental income was $22.0 million, a 2.4% increase over the first nine
months of 1999. These increases are primarily due to increases in average
occupancy at our apartment communities. For the third quarter of 2000, overall
average economic occupancy increased by 1.4%, while average monthly revenue per
occupied unit increased 1.5%, compared to the third quarter of 1999. For the
first nine months of
9
<PAGE>
2000, average economic occupancy increased by 1.3%, while average monthly
revenue per occupied unit increased 0.5%, compared to the first nine months of
1999. All 3,440 apartment units were in operation throughout the first nine
months of both 2000 and 1999.
Summary amounts for our apartment communities' occupancy and revenue per
occupied unit for the third quarter and first nine months of 2000 follow:
<TABLE>
<CAPTION>
Three months ended September 30 Nine months ended September 30
------------ ----------- ----------- ----------- ----------- -----------
Average Average
monthly monthly
Number revenue revenue
of Average Average per Average Average per
apartment Physical Economic occupied physical Economic occupied
units Occupancy occupancy unit occupancy occupancy unit
------------ ------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Abbington Place 360 94.7% 95.9% $764 95.7% 96.8% $761
Allerton Place 228 92.7% 95.7% 771 94.1% 95.3% 777
Chason Ridge 252 93.5% 95.3% 665 95.2% 96.4% 657
Harris Hill 184 95.1% 96.4% 722 94.3% 95.5% 728
Latitudes 448 96.7% 98.1% 736 97.2% 98.2% 725
Madison Hall 128 94.1% 96.4% 613 94.1% 96.0% 609
Oakbrook 162 96.5% 97.3% 788 95.7% 96.8% 783
Oak Hollow 220 93.5% 95.1% 730 95.2% 96.2% 721
Paces Commons 336 95.1% 95.5% 713 94.3% 94.6% 720
Paces Village 198 96.3% 96.8% 675 96.2% 96.9% 662
Pepperstone 108 94.4% 96.0% 673 94.9% 96.5% 678
Savannah Place 172 90.4% 91.1% 739 92.3% 93.1% 739
Summerlyn Place 140 95.9% 97.9% 789 95.8% 97.2% 796
Waterford Place 240 94.3% 95.9% 862 96.1% 96.9% 848
Woods Edge 264 96.4% 97.2% 750 96.0% 96.8% 747
All apartments 3,440
- 2000 94.8% 96.1% 737 95.3% 96.3% 734
- 1999 94.6% 94.7% 726 94.7% 95.0% 730
</TABLE>
Apartment rental income was consistent with our expectations in the first
three quarters of 2000. Our apartment communities continue to maintain and
improve good occupancy levels despite the fact that we operate in some of the
most competitive apartment markets in the United States. We will continue to
emphasize occupancy as a means of maximizing cash flow from our apartment
communities. We will also strive to maintain our competitive position by keeping
the apartment communities in an excellent state of repair and by making
selective improvements. We believe our apartment communities are well positioned
to compete effectively in our markets.
Restaurant rental income for the third quarter of 2000 was $1.0 million, a
2.3% decline compared to the third quarter of 1999. Restaurant rental income for
the first nine months of 2000 was $3.1 million, a 4.7% decline compared to the
first nine months of 1999. Restaurant rental income for the third quarter and
first nine months of both 2000 and 1999 was the minimum rent specified in the
lease agreement. The decline in restaurant rental income is due to the sales of
three restaurant properties in June 1999 and one restaurant property in June
2000.
We sold these four restaurant properties to Boddie-Noell Enterprises, the
lessee, under the non-economic clause of the restaurant master lease. Following
the June 2000 sale, the minimum rent is approximately $343,000 per month. We do
not expect the sale of this property to have a material effect on our operating
results.
10
<PAGE>
Under the terms of the master lease, the lessee has the right to close and
purchase from us three additional "non-economic" restaurants. To date, we have
not received any indication of its intention to exercise this right. However,
should the lessee elect to close more restaurants, the minimum rent would be
further reduced by approximately $96,000 per year for each closed restaurant.
Restaurant rental income is the greater of the minimum rent or 9.875% of
food sales. "Same store" sales (for our 43 restaurant properties that were open
throughout the first three quarters of both years) declined by 4.7% compared to
the third quarter of 1999 and by 3.0% compared to the first nine months of 1999.
Sales at these restaurants would have to increase by an additional 7% before we
would receive rent exceeding the minimum rent. We are in regular contact with
the operator of our restaurant properties, and we are impressed with their
commitment in seeking to find a solution to the declining sales. We are also
confident of their ability to continue to pay the required rent.
Expenses
Total expense for the third quarter of 2000 was $7.7 million, an increase
of 3.8% over the third quarter of 1999. For the first nine months of 2000, total
expense was $23.3 million, an increase of 3.5% over the first nine months of
1999.
Apartment operations expense for the third quarter of 2000 was $2.4
million, an increase of 3.7% over the third quarter of 1999. Apartment
operations expense for the first nine months of 2000 was $7.3 million, an
increase of 4.2% over the first nine months of 1999.
Apartment operations expense represented 32.7% of related rental income
for the third quarter of 2000, compared to 32.6% for the third quarter of 1999.
For the first nine months of 2000, apartment operations expense represented
33.0% of related rental income, compared to 32.4% for the first nine months of
1999. These increases are primarily attributable to higher costs for
compensation of on-site staff, utilities, repairs and maintenance, and taxes and
insurance. Apartment operations expenses were generally in line with
management's expectations.
We reclassified certain 1999 expenses from Apartment operations expense to
Administrative expense to conform to our current classification. The amounts we
reclassified were approximately $162,000 for the third quarter of 1999, and
$470,000 for the first nine months of 1999. Amounts included in apartment
operations expense in this Quarterly Report represent only direct costs of
on-site operations for both years shown.
Operating expenses for restaurant properties are insignificant because the
restaurant properties' triple-net lease arrangement requires the lessee to pay
virtually all of the expenses associated with the restaurant properties.
Administrative costs totaled $576,000 for the third quarter of 2000, a
decrease of 4.7% compared to the third quarter of 1999. For the first nine
months of 2000, administrative costs totaled $1.9 million, an increase of 0.4%
over the first nine months of 1999. We include our apartment property management
costs as well as corporate expenses in this line item. Administrative costs were
in line with management's expectations.
Depreciation expense was $1.8 million for the third quarter of 2000, an
increase of 3.9% compared to the third quarter of 1999. For the first nine
months of 2000, depreciation expense
11
<PAGE>
was $5.3 million, an increase of 3.2% compared to the first nine months of 1999.
These increases reflect the impact of 1999 and early 2000 additions and
replacements at apartment communities.
Interest expense was $2.8 million for the third quarter of 2000, an
increase of 6.0% over the third quarter of 1999. For the first nine months of
2000, interest expense was $8.3 million, an increase of 3.9% over the first nine
months of 1999. This increase is primarily attributable to the approximately
1.3% rise in variable interest rates during the last 12 months. Overall weighted
average interest rates were 7.5% in the third quarter and 7.4% in the first nine
months of 2000 compared to 7.2% in the third quarter and first nine months of
1999.
Net income
Net income available to common shareholders was $567,000 for the third
quarter of 2000, a decrease of 16.0% compared to the third quarter of 1999. For
the first nine months of 2000, net income available to common shareholders was
$1,637,000, a decrease of 23.5% compared to the first nine months of 1999. These
decreases reflect the impact of increases in interest expense and non-cash
charges for depreciation. Earnings before depreciation, amortization, and
minority interest for the third quarter of 2000 increased by 2.1% over the third
quarter of 1999. For the first nine months of 2000, earnings before
depreciation, amortization, and minority interest decreased by 0.6% compared to
the first nine months of 1999.
Funds from Operations
Funds from operations 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 sales
of property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures."
We calculate funds available for distribution as funds from operations
plus non-cash expense for amortization of loan costs, less recurring capital
expenditures.
We consider funds from operations and funds available for distribution to
be useful in evaluating potential property acquisitions and measuring the
operating performance of an equity REIT. We believe that, together with net
income and cash flows, funds from operations and funds available for
distribution provide investors with additional measures to evaluate the ability
of the REIT to incur and service debt and to fund acquisitions and other capital
expenditures. Funds from operations and funds available for distribution do not
represent net income or cash flows from operations as defined by generally
accepted accounting principles. You should not consider funds from operations or
funds available for distribution:
o to be alternatives to net income as reliable measures of our
operating performance, or
o to be alternatives to cash flows as measures of liquidity.
Funds from operations and funds available for distribution do not measure
whether cash flow is sufficient to fund all of our cash needs, including
principal amortization, capital improvements and distributions to shareholders.
Funds from operations and funds available for distribution do not represent cash
flows from operating, investing or financing activities as defined by generally
accepted accounting principles. Further, funds from operations and funds
available for distribution as disclosed by other REITs might not be comparable
to our calculation of funds from operations or funds available for distribution.
12
<PAGE>
Funds from operations of the Operating Partnership declined by 1.9% for
the third quarter of 2000 compared to the third quarter of 1999. For the first
nine months of 2000, Funds from operations of the Operating Partnership declined
by 5.0% compared to the first nine months of 1999. These decreases reflect the
impact of increases in interest expense.
We calculated funds from operations of the Operating Partnership as
follows (all amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income before minority interest $ 737 $ 854 $ 2,128 $ 2,705
Depreciation 1,784 1,718 5,348 5,182
Amortization of
management intangible 102 102 305 305
--------------- --------------- --------------- ---------------
Funds from operations -
Operating Partnership $ 2,622 $ 2,673 $ 7,781 $ 8,191
=============== =============== =============== ===============
</TABLE>
A reconciliation of funds from operations to funds available for
distribution follows (all amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Funds from operations -
Operating Partnership $ 2,622 $ 2,673 $ 7,781 $ 8,191
Amortization of loan costs 43 42 130 125
Recurring capital expenditures (242) (339) (665) (859)
--------------- --------------- --------------- ---------------
Funds available for distribution $ 2,423 $ 2,376 $ 7,244 $ 7,457
=============== =============== =============== ===============
</TABLE>
A further reconciliation of funds from operations of the Operating
Partnership to basic funds from operations available to common shareholders
follows (all amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Funds from operations -
Operating Partnership $2,622 $2,673 $ 7,781 $ 8,191
Minority interest in
funds from operations (605) (561) (1,795) (1,713)
--------------- --------------- --------------- ---------------
Basic funds from operations
available to common shareholders $2,018 $2,112 $ 5,986 $ 6,479
=============== =============== =============== ===============
</TABLE>
13
<PAGE>
Other information about our historical cash flows follows (all amounts in
thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities $ 2,788 $ 2,575 $ 8,150 $ 8,391
Investing activities (354) (334) (395) 725
Financing activities (2,383) (1,490) (7,207) (8,363)
Dividends and distributions paid to:
Shareholders $ 1,769 $ 1,862 $ 5,307 $ 5,573
Minority unitholders in
Operating Partnership 530 489 1,572 1,448
Scheduled debt principal payments $ 84 $ 139 $ 247 $ 405
Non-recurring capital expenditures 113 326 900 942
Weighted average common
shares outstanding 5,707 6,007 5,708 5,997
Weighted average Operating
Partnership minority units
outstanding 1,710 1,595 1,711 1,584
</TABLE>
Capital Resources and Liquidity
Capital Resources
At September 30, 2000, total long-term debt was $150.9 million, including
$116.3 million of notes payable at fixed interest rates ranging from 6.345% to
8.55%, and $34.5 million at variable rates indexed on 30-day LIBOR rates.
Approximately $6.8 million additional borrowings are available under our line of
credit arrangements.
The weighted average interest rate on debt outstanding at September 30,
2000, was 7.5%, compared to 7.2% at December 31, 1999. A 1% fluctuation in
variable interest rates would increase or decrease our annual interest expense
by approximately $350,000.
In June 2000, we received approximately $644,000 proceeds from sale of a
restaurant. We applied this cash to fund capital improvements at our apartment
properties.
Cash flows and liquidity
Net cash flows from operating activities for the third quarter of 2000
were $2.8 million, an increase of 8.3% over the third quarter of 1999. For the
first nine months of 2000, net cash flows from operating activities were $8.1
million, a decrease of 2.9% compared to the first nine months of 1999. Investing
and financing activities focused on capital expenditures at apartment
communities, along with payments of dividends and distributions.
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During the first quarter of 2000, we repurchased and retired approximately
28,000 shares of our common stock at a cost of approximately $255,000. In
addition, during the first quarter of 2000, the Operating Partnership
repurchased and retired approximately 5,600 minority units at a cost of
approximately $52,000.
To date we have produced sufficient cash flow to fund our regular
dividend. We have announced that the company will pay a regular quarterly
dividend of $0.31 per share on November 15, 2000, to shareholders of record on
November 1, 2000.
We capitalize our expenditures to acquire new assets, to materially
enhance the value of existing assets, or to substantially extend the useful life
of existing assets. We record all floor covering, appliance, and HVAC
replacements, as well as major capital maintenance projects, as capital
expenditures. We have generally funded these capital expenditures from cash
provided by operating activities.
We generally expect to meet our short-term liquidity requirements through
net cash provided by operations and utilization of credit facilities. We believe
that net cash provided by operations is, and will continue to be, adequate to
meet the REIT operating requirements in both the short term and the long term.
We anticipate funding our future acquisition activities primarily by using
short-term credit facilities as an interim measure, to be replaced by funds from
equity offerings, long-term debt, or joint venture investments. We expect to
meet our long-term liquidity requirements, such as scheduled debt maturities and
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. We believe we have sufficient resources to meet
our short-term liquidity requirements.
We do not believe that inflation poses a material risk to the company. The
leases at our apartment properties are short term in nature; none are longer
than two years. The restaurant properties are leased on a triple-net basis,
which places the risk of rising operating and maintenance costs on the lessee.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
Statement, as amended by Statement No. 137, must be adopted in years beginning
after June 15, 2000. The Statement will require the recognition of all
derivatives on our consolidated balance sheet at fair value. We do not
anticipate that the adoption of this Statement will have a material impact on
our results of operations or financial position.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in information that would be provided
under Item 305 of Regulation S-K since December 31, 1999.
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PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 27 Financial data schedule (electronic filing)
b) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BNP RESIDENTIAL PROPERTIES, INC.
(Registrant)
November 13, 2000 /s/ Philip S. Payne
----------------------------------------
Philip S. Payne
Executive Vice President and
Chief Financial Officer
(Duly authorized officer)
November 13, 2000 /s/ Pamela B. Bruno
----------------------------------------
Pamela B. Bruno
Vice President, Controller and
Chief Accounting Officer
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