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 June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 1-9496
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 August 7, 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 Financial Condition
and Results of Operations 9
3 Quantitative and Qualitative Disclosures
About Market Risk 16
PART II - Other Information
4 Submission of Matters to a Vote of Security Holders 17
5 Other Information 17
6 Exhibits and Reports on Form 8-K 18
2
<PAGE>
PART I - Financial Information
Item 1. Financial Statements.
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Assets
Real estate investments at cost:
Apartment properties $204,575,254 $203,365,405
Restaurant properties 39,702,060 40,544,741
------------------ ------------------
244,277,314 243,910,146
Less accumulated depreciation (29,289,466) (25,926,208)
------------------ ------------------
214,987,848 217,983,938
Cash and cash equivalents 927,287 431,531
Other current assets 2,249,717 1,638,199
Investment in and advances to Management Company 519,418 452,489
Notes receivable 100,000 625,000
Intangible assets, net of accumulated amortization:
Intangible related to acquisition of management operations 1,724,388 1,927,488
Deferred financing costs 1,123,750 1,210,990
------------------ ------------------
Total assets $221,632,408 $224,269,635
================== ==================
Liabilities and Shareholders' Equity
Mortgage and other notes payable $150,945,109 $150,883,348
Accounts payable and accrued expenses 1,785,092 852,994
Escrowed security deposits and deferred revenue 434,220 486,748
Deferred credit for defeasance of interest,
net of accumulated amortization 750,016 833,344
------------------ ------------------
Total liabilities 153,914,437 153,056,434
Minority interest in Operating Partnership 20,544,147 21,316,760
Shareholders' equity:
Common stock, $.01 par value, 100,000,000 shares
authorized; issued and outstanding shares--
5,706,950 at June 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 (22,590,400) (20,122,533)
------------------ ------------------
Total shareholders' equity 47,173,824 49,896,441
------------------ ------------------
Total liabilities and shareholders' equity $221,632,408 $224,269,635
================== ==================
</TABLE>
3
<PAGE>
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues
Apartment rental income $7,346,100 $7,243,015 $14,620,321 $14,359,439
Restaurant rental income 1,050,266 1,107,447 2,103,457 2,232,447
Interest and other income 60,162 190,335 213,239 309,377
----------------- ---------------- ----------------- ----------------
8,456,528 8,540,797 16,937,017 16,901,263
Expenses
Apartment operations 2,576,666 2,471,035 4,857,334 4,650,300
Administrative 685,526 691,733 1,326,269 1,291,085
Depreciation 1,794,124 1,731,849 3,563,605 3,463,633
Amortization of intangibles 144,804 143,136 289,608 286,272
Interest 2,761,989 2,676,316 5,508,707 5,358,675
----------------- ---------------- ----------------- ----------------
7,963,109 7,714,069 15,545,523 15,049,965
----------------- ---------------- ----------------- ----------------
Income before
minority interest 493,419 826,728 1,391,494 1,851,298
Minority interest in
Operating Partnership 113,766 172,119 321,052 386,203
----------------- ---------------- ----------------- ----------------
Net income $ 379,653 $ 654,609 $ 1,070,442 $ 1,465,095
================= ================ ================= ================
Per share data:
Basic earnings per share $0.07 $0.10 $0.19 $0.24
================= ================ ================= ================
Diluted earnings per share $0.07 $0.10 $0.19 $0.24
================= ================ ================= ================
Dividends declared $0.31 $0.31 $0.31 $0.31
================= ================ ================= ================
Weighted average shares
outstanding 5,706,950 5,998,997 5,708,179 5,991,908
================= ================ ================= ================
</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
============ =========== =============== =============== ===============
</TABLE>
5
<PAGE>
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30
2000 1999
----------------- ----------------
<S> <C> <C>
Operating activities:
Net income $1,070,442 $1,465,095
Adjustments to reconcile net income to
net cash provided by operations:
Minority interest in Operating Partnership 321,052 386,203
Equity in income of Management Company (66,929) (50,095)
Depreciation and amortization of intangibles 3,853,213 3,749,905
Amortization of defeasance credit (83,328) (83,334)
Changes in operating assets and liabilities:
Other current assets (628,946) (962,973)
Accounts payable and accrued expenses 932,098 1,132,529
Security deposits and deferred revenue (36,364) 178,684
----------------- ----------------
Net cash provided by operating activities 5,361,238 5,816,014
Investing activities:
Acquisitions of apartment properties - (1,796,746)
Additions to apartment properties (1,209,849) (1,135,660)
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 (41,251) 1,059,125
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 (1,041,451) (958,442)
Dividends paid to common shareholders (3,538,309) (3,710,539)
Proceeds from notes payable 850,000 1,838,188
Principal payments on notes payable (788,239) (4,366,043)
Refund of deferred financing costs 732 -
----------------- ----------------
Net cash used in financing activities (4,824,231) (6,872,456)
----------------- ----------------
Net increase in cash and cash equivalents 495,756 2,683
Cash and cash equivalents at
beginning of period 431,531 489,694
----------------- ----------------
Cash and cash equivalents at end of period $ 927,287 $ 492,377
================= ================
</TABLE>
6
<PAGE>
BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - June 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 Six months ended
June 30 June 30
2000 1999 2000 1999
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Numerators:
Numerator for basic earnings
per share - net income $379,653 $654,609 $1,070,442 $1,465,095
Add minority interest in
Operating Partnership (1) 113,766 172,119 321,052 386,203
----------------- ---------------- ----------------- ----------------
Numerator for diluted earnings
per share - net income
before minority interest (1) $493,419 $826,728 $1,391,494 $1,851,298
================= ================ ================= ================
Denominators:
Denominator for basic
earnings per share -
weighted average shares
outstanding 5,706,950 5,998,997 5,708,179 5,991,908
Effect of dilutive securities:
Convertible Operating
Partnership units 1,710,131 1,579,027 1,711,759 1,579,027
Stock options (2) - - - 334
----------------- ---------------- ----------------- ----------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 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 7,578,024 7,419,938 7,571,269
================= ================ ================= ================
<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 2000 calculations
because they were antidilutive at June 30, 2000. We also excluded all
outstanding options except 60,000 options granted in 1998 (exercise price
$11.25) from the 1999 calculations because they were antidilutive at June
30, 1999.
</FN>
</TABLE>
Note 3. Subsequent events
On July 20, 2000, we declared a regular quarterly cash dividend of $0.31 per
share, which we will pay on August 15, 2000, to shareholders of record on August
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 second quarter of 2000 was $8.5 million, a 1.0%
decrease compared to the second quarter of 1999. For the first six months of
2000, total revenue was $16.9 million, a 0.2% increase over the first six months
of 1999.
Apartment rental income for the second quarter of 2000 was $7.3 million, a
1.4% increase over the second quarter of 1999. For the first six months of 2000,
apartment rental income was $14.6 million, a 1.8% increase over the first six
months of 1999. These increases were primarily due to increases in average
occupancy at our apartment communities. For the second quarter of 2000, overall
average economic occupancy increased by 0.8%, while average monthly revenue per
occupied unit increased 0.3%, compared to the second quarter of 1999. For the
first six
9
<PAGE>
months of 2000, overall average economic occupancy increased by 1.3%, while
average monthly revenue per occupied unit increased 0.1%, compared to the first
six months of 1999. All 3,440 apartment units were in operation throughout the
first six months of both 2000 and 1999.
Summary amounts for our apartment communities' occupancy and revenue per
occupied unit for the second quarter and first six months of 2000 follow:
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 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 96.1% 97.7% $767 96.1% 97.3% $759
Allerton Place 228 95.1% 95.7% 777 94.7% 95.2% 780
Chason Ridge 252 94.7% 96.6% 662 96.0% 97.0% 653
Harris Hill 184 93.6% 94.6% 730 94.0% 95.1% 731
Latitudes 448 97.5% 98.4% 732 97.5% 98.2% 719
Madison Hall 128 94.1% 95.7% 606 94.0% 95.8% 607
Oakbrook 162 96.8% 97.5% 781 95.3% 96.5% 780
Oak Hollow 220 96.6% 97.2% 721 96.1% 96.7% 716
Paces Commons 336 92.5% 93.2% 722 93.8% 94.1% 723
Paces Village 198 97.1% 97.7% 648 96.2% 97.0% 656
Pepperstone 108 94.2% 96.3% 674 95.2% 96.7% 680
Savannah Place 172 92.6% 93.4% 742 93.3% 94.0% 739
Summerlyn Place 140 95.2% 96.3% 803 95.8% 96.9% 799
Waterford Place 240 96.1% 96.9% 842 97.0% 97.4% 841
Woods Edge 264 96.9% 97.6% 750 95.8% 96.6% 746
All apartments 3,440
- 2000 95.5% 96.5% 735 95.6% 96.4% 732
- 1999 94.9% 95.7% 733 94.7% 95.1% 731
</TABLE>
Apartment rental income was consistent with our expectations in the first
and second quarters of 2000. Our apartment communities continue to maintain 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 second quarter and first six months of
both 2000 and 1999 was the minimum rent specified in the lease agreement.
Restaurant rental income for the second quarter of 2000 was $1.1 million, a
decline of 5.2% compared to the second quarter of 1999. Restaurant rental income
for the first six months of 2000 was $2.1 million, a decline of 5.8% compared to
the first six months of 1999. 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 will be 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>
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 quarter of both years) declined by 4.8% compared to the
first quarter of 1999 and by 2.2% compared to the first six 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 very disappointed in the continued decline in sales at our
restaurant properties. Because we currently receive the minimum rent, the
decline in sales does not directly result in us receiving less rent. However,
the decline in restaurant sales has resulted in the closure and sale of four of
our restaurants during the last two years. This, in turn, as resulted in a
$380,000 reduction in the annual minimum rent. While the restaurant operator has
not given us any indication that it intends to close any more restaurants, the
operator does have the right to close and purchase from us up to three more
"non-economic" restaurants. If the operator were to elect to close and purchase
additional restaurants from us, the annual minimum rent would be reduced by
$95,745 per closed restaurant.
We will continue to monitor the situation, but, in reality, there is
little we can do to improve our restaurant related income. We are not the
operator of the restaurants, nor are we the owner of the Hardee's concept; we
are merely the landlord to the restaurant operator. As such, we have no input as
to the operation of the restaurants or Hardee's.
While the loss of rental income from the restaurants is troublesome, the
real problem is the impact on the investing public of the continual stream of
bad press concerning Hardee's Food Systems, the franchisor, and CKE Restaurants,
the owner of Hardee's. It is important to note that neither Hardee's nor CKE is
our tenant. Boddie-Noell Enterprises is our tenant and is solely responsible for
payment of the rent. We are in frequent contact with Boddie-Noell Enterprises
management and are monitoring its financial condition. We are comfortable that
Boddie-Noell Enterprises will have sufficient liquidity and capital resources to
meet its obligations under the lease.
Expenses
Total expense for the second quarter of 2000 was $8.0 million, an increase
of 3.2% over the second quarter of 1999. For the first six months of 2000, total
expense was $15.5 million, an increase of 3.3% over the first six months of
1999.
Apartment operations expense for the second quarter of 2000 was $2.6
million, an increase of 4.3% over the second quarter of 1999. Apartment
operations expense for the first six months of 2000 was $4.9 million, an
increase of 4.5% over the first six months of 1999.
Apartment operations expense represented 35.1% of related rental income
for the second quarter of 2000, compared to 34.1% for the second quarter of
1999. For the first six months of 2000, apartment operations expense represented
33.2% of related rental income, compared to 32.4% for the first six 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 $178,000 for the second quarter of 1999, and
$308,000 for the first six months of
11
<PAGE>
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 $686,000 for the second quarter of 2000, a
decrease of 0.9% compared to the second quarter of 1999. For the first six
months of 2000, administrative costs totaled $1.3 million, an increase of 2.7%
over the first six 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, reflecting expected increases in
compensation and certain professional fees.
Depreciation expense was $1.8 million for the second quarter of 2000, an
increase of 3.6% compared to the second quarter of 1999. For the first six
months of 2000, depreciation expense was $3.6 million, an increase of 2.9%
compared to the first six 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 second quarter of 2000, an
increase of 3.2% over the second quarter of 1999. For the first six months of
2000, interest expense was $5.5 million, an increase of 2.8% over the first six
months of 1999. This increase is primarily attributable to the approximately
1.5% rise in variable interest rates during the last 12 months. Overall weighted
average interest rates were 7.3% in the second quarter and first six months of
2000 compared to 7.2% in the second quarter and first six months of 1999.
Net income
Net income available to common shareholders was $380,000 for the second
quarter of 2000, a decrease of 42.0% compared to the second quarter of 1999. For
the first six months of 2000, net income available to common shareholders was
$1,070,000, a decrease of 26.9% compared to the first six months of 1999. These
decreases reflect the impact of declines in operating results, increases in
non-cash charges for depreciation, and increases in the minority interest in the
Operating Partnership. Earnings before depreciation, amortization, and minority
interest for the second quarter of 2000 declined by 10.0% compared to the second
quarter of 1999. For the first six months of 2000, earnings before depreciation,
amortization, and minority interest declined by 6.4% compared to the first six
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. In late 1999, we revised our calculation of funds available for
distribution to conform to the prevalent industry practice. We no longer deduct
scheduled debt principal payments from funds from operations in calculating
funds available for distribution. We have restated amounts shown for the first
quarter and first six months of 1999 to conform to our current practice.
12
<PAGE>
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.
Funds from operations of the Operating Partnership declined by 10.2% for
the second quarter of 2000 compared to the second quarter of 1999. For the first
six months of 2000, funds from operations of the Operating Partnership declined
by 6.5% compared to the first six months of 1999. These decreases reflect the
impact of declines in operating results discussed above.
We calculated funds from operations of the Operating Partnership as
follows (all amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income before minority interest $ 493 $ 827 $ 1,391 $ 1,851
Depreciation 1,794 1,732 3,564 3,464
Amortization of
management intangible 102 102 203 203
--------------- --------------- --------------- ---------------
Funds from operations -
Operating Partnership $ 2,389 $ 2,660 $ 5,158 $ 5,518
=============== =============== =============== ===============
</TABLE>
13
<PAGE>
A reconciliation of funds from operations to funds available for
distribution follows (all amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Funds from operations -
Operating Partnership $ 2,389 $ 2,660 $ 5,158 $ 5,518
Amortization of loan costs 43 42 87 83
Recurring capital expenditures (263) (352) (423) (520)
--------------- --------------- --------------- ---------------
Funds available for distribution $ 2,169 $ 2,350 $ 4,822 $ 5,081
=============== =============== =============== ===============
</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 Six months ended
June 30 June 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Funds from operations -
Operating Partnership $2,389 $2,660 $ 5,158 $ 5,518
Minority interest in
funds from operations (551) (554) (1,190) (1,151)
--------------- --------------- --------------- ---------------
Basic funds from operations
available to common shareholders $1,838 $2,106 $ 3,968 $ 4,367
=============== =============== =============== ===============
</TABLE>
Other information about our historical cash flows follows (all amounts in
thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities $ 2,308 $ 2,669 $ 5,361 $ 5,816
Investing activities (204) 1,291 (41) 1,059
Financing activities (2,031) (4,411) (4,824) (6,872)
Dividends and distributions paid to:
Shareholders $ 1,769 $ 1,857 $ 3,538 $ 3,711
Minority unitholders in
Operating Partnership 530 489 1,041 958
Scheduled debt principal payments $ 82 $ 135 $ 163 $ 266
Non-recurring capital expenditures 484 437 787 616
</TABLE>
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<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 5,707 5,999 5,708 5,992
Weighted average Operating
Partnership minority units
outstanding 1,710 1,579 1,712 1,579
</TABLE>
Capital Resources and Liquidity
Capital Resources
At June 30, 2000, total long-term debt was $150.9 million, including
$116.4 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. The
weighted average interest rate on debt outstanding was 7.5% at June 30, 2000,
compared to 7.2% at December 31, 1999, and at June 30, 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 approximately $484,000 of this cash to fund capital
improvements at our apartment properties.
Cash flows and liquidity
Net cash flows from operating activities for the second quarter of 2000
were $2.3 million, a decrease of 13.5% compared to the second quarter of 1999.
For the first six months of 2000, net cash flows from operating activities were
$5.4 million, a decrease of 7.8% compared to the first six months of 1999.
Investing and financing activities focused on capital expenditures at apartment
communities, along with payments of dividends and distributions.
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 August 15, 2000, to shareholders of record on
August 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.
During the first six months of 2000, we invested approximately $354,000 to
substantially complete installation of water sub-metering systems at seven of
our apartment properties. We
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<PAGE>
expect these installations to be completed and placed in service during the
third quarter of 2000. In addition, we have made contractual commitments to
invest approximately $82,000 for installation of water sub-metering systems at
two more of our apartment properties. We are exploring the possibilities of
installing sub-metering systems at three additional communities before the end
of 2000.
While sub-metering is expensive to put in place, it will allow us to
recover a significant portion of our water and sewer costs. We completed the
$109,000 installation of a water sub-metering system at Latitudes in December
1999 and placed the system in service in late January 2000. From mid-February
through June, we have recovered approximately $40,000 of our $70,000 cost for
water and sewer service at that property. In addition, we are finding that our
total cost for water and sewer service at Latitudes has declined as residents
reduce their usage.
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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<PAGE>
PART II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
We held our Annual Meeting of Shareholders on May 25, 2000. Of the
5,706,950 shares of common stock issued, outstanding, and entitled to vote at
this meeting, 4,948,939, or 87%, were present in person or by proxy. The
following proposal was approved:
<TABLE>
<CAPTION>
Withheld/ Broker
For Against Abstained Non-votes
---------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Election of directors to serve until
the 2003 annual meeting:
William H. Stanley 4,912,918 - 36,021 381,319
W. Michael Gilley 4,924,979 - 23,961 381,319
</TABLE>
Other directors, whose terms of office as directors continued after the
meeting, are as follows:
Serving until the 2001 annual meeting:
Philip S. Payne
Stephen R. Blank
Serving until the 2002 annual meeting:
B. Mayo Boddie
D. Scott Wilkerson
Paul G. Chrysson
Item 5. Other Information
Re-election of officers
The Company has announced the re-election of the following officers:
D. Scott Wilkerson President and Chief Executive Officer
Philip S. Payne Executive Vice President, Treasurer, Chief Financial
Officer, and Assistant Secretary
Douglas E. Anderson Vice President, Secretary
Pamela B. Bruno Vice President, Controller, Chief Accounting Officer,
and Assistant Secretary
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 27 Financial data schedule (electronic filing)
b) Reports on Form 8-K:
We filed a Form 8-K as of April 24, 2000, to report our name change from
Boddie-Noell Properties, Inc. to BNP Residential Properties, Inc.
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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)
August 11, 2000 /s/ Philip S. Payne
------------------------------
Philip S. Payne
Executive Vice President and
Chief Financial Officer
(Duly authorized officer)
August 11, 2000 /s/ Pamela B. Bruno
------------------------------
Pamela B. Bruno
Vice President, Controller and
Chief Accounting Officer
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