<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
January 28, 1998
Date of Report (Date of earliest event reported)
Kimco Realty Corporation
(Exact name of registrant as specified in its charter)
Maryland 1-10899 13-2744380
- ----------------------- ----------------- ------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
3333 New Hyde Park Road
New Hyde Park, New York 11042-0020
- ------------------------------------- ------------------
(Address of principal executive (zip code)
offices)
516/869-9000
-----------------------------------
Registrant's telephone,
including area code
Not Applicable
- --------------------------------------------------------------------------------
(former name or former address, if changed since last report.)
1 of 4
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CURRENT REPORT
ON
FORM 8-K
Item 5. Other Events
As previously disclosed in Kimco Realty Corporation's Current Report on
Form 8-K dated January 13, 1998, Kimco Realty Corporation ("Kimco" or the
"Company") and The Price REIT, Inc. ("Price REIT") announced a definitive
agreement to merge (the "Merger"). Pursuant to the terms of the Merger, Price
REIT will merge into a newly formed wholly-owned subsidiary of Kimco. The
transaction is intended, for financial accounting purposes, to be accounted for
as a purchase. Under the terms of the Merger, each share of Price REIT common
stock will be exchanged for a combination of Kimco common stock and Kimco
depositary shares, each depositary share representing a 1/10 of a share
interest in a new issue of Kimco 7.5% Class D Cumulative Convertible Preferred
Stock having an aggregate value of at least $45. The Merger, which is expected
to be completed in mid-1998, is subject to customary closing conditions,
including certain regulatory approvals and the approval of the stockholders of
both companies.
Attached and incorporated by reference herein as Exhibit 99.1, Exhibit
99.2, Exhibit 99.3, Exhibit 99.4, and Exhibit 99.5, respectively, are certain
financial information for Price REIT and unaudited pro forma combined financial
information for the combined entity giving effect to the Merger.
Attached and incorporated herein by reference as Exhibits 15.5 and
23.1, respectively, are copies of an acknowledgment letter and consent of Ernst
& Young LLP.
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
15.1 Acknowledgment Letter of Ernst & Young LLP
23.1 Consent of Ernst & Young LLP
99.1 The audited consolidated balance sheets of Price REIT as of December
31, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1996 (incorporated by reference from pages 39
to 63 of Price REIT's 1996 Annual Report on Form 10-K for the year
ended December 31, 1996 (File No. 0-19628))
99.2 The unaudited condensed consolidated balance sheet of Price REIT as of
September 30, 1997 and the unaudited condensed consolidated statements
of income and cash flows of Price REIT for the nine months ended
September 30, 1997 and 1996 (incorporated by reference from pages 3 to
15 of Price REIT's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997 (File No. 1-13432))
99.3 Pro Forma Combined Condensed Consolidated Balance Sheet as of September
30, 1997 and Pro Forma Combined Condensed Consolidated Statements of
Income for the year ended December 31, 1996 and the nine months ended
September 30, 1997
2
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99.4 Pro Forma Combined Funds from Operations for the year ended December
31, 1996 and the nine months ended September 30, 1997
99.5 Pro Forma Condensed Statements of Income of Price REIT for the year
ended December 31, 1996 and the nine months ended September 30, 1997
(incorporated by reference from pages 16 to 22 of Price REIT's Current
Report on Form 8K/A ) (Amendment No. 1) dated November 13, 1997
(October 8, 1997) (File No. 1-13432))
3
<PAGE>
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 hereunto duly authorized.
Kimco Realty Corporation
------------------------
Registrant
Date: January 28, 1998
By: /s/ Michael V. Pappagallo
-----------------------------
Michael V. Pappagallo
Chief Financial Officer
4
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Exhibit 15.1 Letter Re: Unaudited Interim Financial Information
The Board of Directors
The Price REIT, Inc.
We are aware of the incorporation by reference in this Current Report (Form 8-K)
of Kimco Realty Corporation of our report dated October 27, 1997 relating to the
unaudited condensed consolidated interim financial statements of The Price REIT,
Inc. that is included in its Form 10-Q for the quarter ended September 30, 1997.
/s/ Ernst & Young LLP
San Diego, California
January 28, 1998
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Current Report (Form 8-K)
of Kimco Realty Corporation of our report dated January 22, 1997, with respect
to the consolidated financial statements of The Price REIT, Inc. included in its
Annual Report on Form 10-K for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Diego, California
January 28, 1997
<PAGE>
Consolidated Financial Statements
The Price REIT, Inc.
December 31, 1996, 1995 and 1994
with Report of Independent Auditors
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
The Price REIT, Inc.
We have audited the accompanying consolidated balance sheets of The Price REIT,
Inc. as of December 31, 1996 and 1995, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Price REIT, Inc. at December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
San Diego, California
January 22, 1997
<PAGE>
The Price REIT, Inc.
Consolidated Balance Sheets
December 31
1996 1995
---------- ----------
(In Thousands)
Assets
Rental property, net (Note 2) $380,482 $351,585
Investments in Joint Ventures (Note 3) 19,202 17,568
Cash and cash equivalents 11,369 1,241
Deferred rent receivable 8,489 6,219
Other assets 6,749 5,431
Secured note receivable (Note 4) 1,346 -
Investment in Development Company (Note 12) 434 434
---------- ----------
Total assets $428,071 $382,478
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 4,474 $ 3,408
Senior Notes payable (Note 5) 154,114 99,082
Unsecured line of credit (Note 5) 19,000 56,000
Secured notes payable (Note 5) 11,794 2,750
---------- ----------
Total liabilities 189,382 161,240
Minority interest 1,707 -
Commitments and contigencies (Note 10) - -
Stockholders' Equity (Notes 6, 7 and 8):
Preferred stock, $.01 par value;
2,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, $.01 par value;
25,000,000 shares authorized
Series A Common Stock, 0 and 44,546 shares issued
and outstanding, convertible 1 for 1 to Common Stock - 1
Common Stock, 9,069,249 and 8,256,302 shares
issued and outstanding 91 82
Additional paid-in capital 259,518 236,365
Accumulated deficit (22,627) (15,210)
---------- ----------
Total stockholders' equity 236,982 221,238
---------- ----------
Total liabilities and stockholders' equity $428,071 $382,478
========== ==========
See accompanying notes.
<PAGE>
The Price REIT, Inc.
Consolidated Statements of Income
Year ended December 31
1996 1995 1994
-------- -------- --------
(In Thousands, except
per share data)
Revenue
Rental Income $ 51,292 $ 40,152 $ 37,599
Management fees (Note 9) 1,085 1,042 789
Equity in earnings of Joint Ventures 1,556 1,456 584
Dividend from Development Company - 432 536
Interest and other income 392 441 417
-------- -------- --------
54,325 43,523 39,925
======== ======== ========
Expenses
Rental operations 4,344 3,266 2,978
Real estate taxes 5,565 3,911 3,606
General and administrative (Note 9) 3,550 3,335 3,187
Depreciation 11,876 9,686 9,165
Interest 12,071 6,939 4,085
-------- -------- --------
37,406 27,137 23,021
-------- -------- --------
Net income $ 16,919 $ 16,386 $ 16,904
======== ======== ========
Net income per share $ 1.98 $ 1.98 $ 2.07
======== ======== ========
Weighted average number of shares
outstanding 8,560 8,259 8,165
======== ======== ========
See accompanying notes.
<PAGE>
The Price REIT, Inc.
Consolidated Statements of Stockholders' Equity
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ --------- --------- ---------
(In Thousands)
Balance at January 1, 1994 8,143 $ 81 $231,783 $ (5,603) $226,261
Issuance of Common Stock
under dividend reinvestment
and share purchase plan 74 1 2,293 - 2,294
Dividends paid - - - (20,859) (20,859)
Net income - - - 16,904 16,904
------ ------ --------- --------- ---------
Balance at December 31, 1994 8,217 82 234,076 (9,558) 224,600
Issuance of Common Stock
under dividend reinvestment
and share purchase plan 56 1 1,589 - 1,590
Exercise of stock options 28 - 700 - 700
Dividends paid - - - (22,038) (22,038)
Net income - - - 16,386 16,386
------- ------ --------- --------- ---------
Balance at December 31, 1995 8,301 83 236,365 (15,210) 221,238
Issuance of Common Stock
Public offering 690 7 22,159 - 22,166
Offering costs - - (1,389) - (1,389)
Issuance of Common Stock
under dividend reinvestment
and share purchase plan 37 - 1,164 - 1,164
Exercise of stock options 41 1 1,219 - 1,220
Dividends paid - - - (24,336) (24,336)
Net income - - - 16,919 16,919
------- ------ --------- --------- ---------
Balance at December 31, 1996 9,069 $ 91 $259,518 $(22,627) $236,982
======= ====== ========= ========= =========
See accompanying notes.
<PAGE>
The Price REIT, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1996 1995 1994
--------- --------- ---------
(In Thousands)
Operating activities
Net Income $ 16,919 $ 16,386 $ 16,904
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 11,876 9,686 9,165
Amortization of deferred loan fees 543 284 152
Amortization of debt discount 162 32 -
Equity in earnings of Joint Ventures (1,556) (1,456) (584)
Deferred rent (2,269) (1,806) (2,129)
Changes in operating assets and liabilities:
Decrease in deferred rent receivable - 68 -
Increase in rent receivable and other
assets (1,495) (1,313) (1,459)
Increase in accounts payable and accrued
liabilities 577 920 105
Increase (decrease) in security deposits 28 109 (42)
Increase in accured interest payable 462 1,310 72
--------- --------- ---------
Net cash provided by operating activities 25,247 24,220 22,184
--------- --------- ---------
Investing activities
Purchases of rental property (30,600) (61,831) (8,240)
Additions to rental property (9,845) (12,401) (2,947)
Investments in Joint Ventures (2,000) (1,977) (15,837)
Distributions from Joint Ventures 1,867 1,660 555
Secured note receivable (1,347) - -
Distributions from Development Company - 113 203
--------- --------- ---------
Net cash used in investing activities (41,925) (74,436) (26,266)
--------- --------- ---------
<PAGE>
The Price REIT, Inc.
Consolidated Statements of Cash Flows
(Continued)
Year ended December 31
1996 1995 1994
--------- --------- ---------
(In Thousands)
Financing activities
Proceeds from Senior Notes payable due 2000 - 99,050 -
Proceeds from Senior Notes payable due 2006 54,870 - -
Payment of debt issuance costs (640) (1,938) -
Proceeds from unsecured line of credit 39,000 68,000 19,000
Repayment of unsecured line of credit (76,000) (96,000) -
Proceeds from secured notes payable 11,841 - 2,750
Repayment of secured notes payable (2,797) - -
Minority interest contributions 1,707 - -
Gross proceeds from issuance of Common Stock 23,642 919 329
Issuance costs (1,389) - -
Dividends paid, net of dividends reinvested (23,428) (20,667) (18,893)
-------------------- ---------
Net cash provided by financing activities 26,806 49,364 3,186
-------------------- ---------
Increase (decrease) in cash and cash
equivalents 10,128 (852) (896)
Cash and cash equivalents at beginning of
the year 1,241 2,093 2,989
-------------------- ---------
Cash and cash equivalents at end of year $ 11,369 $ 1,241 $ 2,093
==================== =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for interest $ 11,364 $ 5,759 $ 4,247
===============================
See accompanying notes.
<PAGE>
The Price REIT, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
1.Organization and Summary of Significant Accounting Policies
Organization
The Price REIT, Inc., a Maryland corporation formed in 1991, is a self-
administered and self-managed real estate investment trust which is focused on
the acquisition, development, redevelopment and management of retail shopping
center properties.
Consolidation
The consolidated financial statements include the accounts of The Price REIT,
Inc.; Price/Texas, Inc., a wholly-owned subsidiary; Price/Baybrook, Ltd., a
limited partnership between The Price REIT, Inc. and Price/Texas, Inc.; and
Smithtown Venture Limited Liability Company ("Smithtown Venture"), an
approximate 80% owned joint venture (collectively referred to as the "Company").
All significant intercompany accounts and transactions have been eliminated.
The Company acquired its ownership in Smithtown Venture in October 1996.
Use of Estimates
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the financial
statement date and the reported amounts of revenue and expenses during the
reporting period. Due to uncertainties inherent in the estimation process, it
is reasonably possible that actual results could differ from these estimates.
Rental Property and Depreciation
Rental property is recorded at cost. At such times where events or
circumstances indicate that the carrying amount of property may be impaired, the
Company makes an assessment of its recoverability by estimating the future
undiscounted cash flows, excluding interest charges, of the property. If the
carrying amount exceeds the aggregate future cash flows, the Company would
recognize an impairment loss to the extent the carrying amount exceeds the fair
value of the property.
<PAGE>
The Price REIT, Inc.
1. Organization and Summary of Significant Accounting Policies (continued)
Rental Property and Depreciation (continue)
Depreciation is provided using the straight-line method over estimated useful
lives as follows:
Furniture and fixtures 7 years
Land improvements 15 years
Buildings 25 years
Investments
The equity method of accounting is used for investments in joint ventures in
which the Company has a financial interest and exercises significant influence.
Under this method, the Company recognizes its share of the net earnings or
losses of the joint ventures as earned or incurred and reduces or increases the
carrying value of the investments by the amount of distributions received or
contributions paid.
The cost method of accounting is used for the Company's investment in K&F
Development Company ("Development Company"). Under this method, the Company
recognizes as income, dividends received that are distributed from net
accumulated earnings of the Development Company.
Cash Equivalents
The Company considers highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
The Company has no requirements for compensating balances. The Company
maintains its operating cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company also maintains a money market
mutual fund which invests primarily in U.S. Treasury obligations. The Company
has not experienced any losses in such accounts. The Company believes it is not
exposed to any significant credit risk on cash and cash equivalents.
Deferred Loan Fees
Deferred loan fees are amortized, using the straight-line method, over the term
of the related loan and are reflected as a component of interest expense.
<PAGE>
The Price REIT, Inc.
1. Organization and Summary of Significant Accounting Policies (continued)
Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires that the Company disclose estimated
fair values for its financial instruments, as well as the methods and
significant assumptions used to estimate fair values. The Company believes that
the carrying values reflected in the balance sheets at December 31, 1996 and
1995 reasonably approximate the fair values for cash and cash equivalents,
receivables and all liabilities. In making such assessments, the Company used
estimates and market rates for similar instruments.
Minority Interest
Minority interest represents the approximate 20% ownership of Smithtown Venture
not owned by the Company.
Revenue Recognition
Rental income is recorded on a straight-line basis over the term of the leases.
Deferred rent receivable represents the excess of rental revenue recognized on a
straight-line basis over cash received under the applicable lease provisions.
Income Taxes
The Company has met all conditions necessary to qualify as a real estate
investment trust under the Internal Revenue Code. To qualify as a real estate
investment trust, the Company is required to pay dividends of at least 95% of
its ordinary taxable income each year and meet certain other criteria. As a
qualifying real estate investment trust, the Company will not be taxed on income
distributed to its shareholders. Since the Company distributed all of its
taxable income to stockholders for the years ended December 31, 1996, 1995 and
1994, the accompanying financial statements contain no provision for income
taxes.
Taxable income differs from net income for financial reporting purposes
principally due to differences in the timing of recognition of depreciation
expense and rental revenue.
The reported amounts of the Company's net assets as of December 31, 1996 and
1995 were less than its tax basis for Federal tax purposes by approximately
$272,000 and $451,000, respectively.
<PAGE>
The Price REIT, Inc.
1. Organization and Summary of Significant Accounting Policies (continued)
Net Income Per Share
Net income per share is calculated using the weighted average number of shares
outstanding. The assumed exercise of outstanding stock options, using the
treasury stock method, is not materially dilutive for the earnings per share
computation.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2.Rental Property
Rental property as of December 31, 1996, geographically by state, is as follows:
Total California Arizona Connecticut
---------------------------------------------
(In Thousands)
Land $ 136,148 $ 63,754 $ 21,662 $ 7,713
Land improvements 40,907 15,578 6,264 4,201
Buildings 245,038 111,737 31,543 15,952
---------------------------------------------
422,093 191,069 59,469 27,866
Accumulated depreciation (41,611) (21,612) (5,951) (4,705)
---------------------------------------------
$ 380,482 $ 169,457 $ 53,518 $ 23,161
=============================================
Net rentable square feet 4,858 2,022 855 332
=============================================
Maryland New York Virginia Texas Oklahoma
-------------------------------------------------
Land $ 2,582 $ 10,321 $ 12,575 $ 13,174 $ 4,367
Land improvements 3,409 2,270 9,185 - -
Buildings 6,858 22,637 17,063 26,814 12,434
-------------------------------------------------
12,849 35,228 38,823 39,988 16,801
Accumulated depreciation (1,607) (2,394) (4,366) (914) (62)
-------------------------------------------------
$ 11,242 $ 32,834 $ 34,457 $ 39,074 $ 16,739
=================================================
Net rentable square feet 210 246 323 636 234
=================================================
<PAGE>
The Price REIT, Inc.
2. Rental Property (continued)
Rental property as of December 31, 1995, geographically by state, is as follows:
Total California Arizona Connecticut
----------------------------------------------
(In Thousands)
Land $ 127,625 $ 63,736 $ 21,662 $ 7,713
Land improvements 40,833 15,568 6,199 4,201
Buildings 213,190 110,400 30,825 15,952
----------------------------------------------
381,648 189,704 58,686 27,866
Accumulated depreciation (30,063) (16,128) (4,288) (3,787)
----------------------------------------------
$ 351,585 $ 173,576 $ 54,398 $ 24,079
==============================================
Net rentable square feet 4,393 2,016 840 332
==============================================
Maryland New York Virginia Texas
----------------------------------------------
Land $ 2,582 $ 10,321 $ 12,575 $ 9,036
Land improvements 3,411 2,270 9,184 -
Buildings 6,858 15,246 17,063 16,846
----------------------------------------------
12,851 27,837 38,822 25,882
Accumulated depreciation (1,106) (1,599) (3,071) (84)
----------------------------------------------
$ 11,745 $ 26,238 $ 35,751 $ 25,798
==============================================
Net rentable square feet 210 246 323 426
==============================================
Rental property owned through the Company's investments in joint ventures is
described in Note 3.
The Company's shopping centers are generally leased under noncancellable
operating leases with remaining terms ranging from 1 to 25 years. Certain of
the leases contain up to seven five-year renewal options. The leases generally
contain provisions for increases in rents based on the Consumer Price Index, or
a predetermined fixed amount, and require the tenant to reimburse the Company
for substantially all operating expenses of the properties.
Certain of the leases provide for additional rental payments based on gross
tenant revenues in excess of specified amounts. During the year ended December
31, 1996, 1995 and 1994, the Company earned additional rents of approximately
$418,000, $372,000 and $225,000, respectively, relating to these leases.
<PAGE>
The Price REIT, Inc.
2. Rental Property (continued)
Future minimum rental income due under the terms of noncancellable operating
leases is as follows (in thousands):
1997 $ 42,279
1998 41,812
1999 40,789
2000 39,722
2001 38,431
Thereafter 287,290
The following tenants account for greater than 10% of total revenues:
Year ended December 31
1996 1995 1994
------ ------ ------
(In Thousands)
The Home Depot $8,955 $7,401 $6,119
Price/Costco 5,029 5,268 5,985
Acquisitions of Shopping Centers
In November 1996, the Company acquired a 234,000 square foot shopping center in
Oklahoma City, Oklahoma for $16,700,000 (Note 5).
In July 1996, the Company acquired a 210,000 square foot shopping center near
Dallas, Texas for $12,650,000.
In January 1996, the Company acquired a 9.7 acre land parcel adjacent to the
Company's shopping center near Houston, Texas for $1,250,000.
In December 1995, the Company acquired a 172,000 square foot shopping center in
Oxnard (Ventura County), California for $10,332,000 and a 279,000 square foot
shopping center in La Mirada (Los Angeles County), California for $25,824,000.
In November 1995, the Company acquired a 426,000 square foot shopping center
near Houston, Texas for $25,675,000.
<PAGE>
The Price REIT, Inc.
2. Rental Property (continued)
Acquisitions of Shopping Centers (continued)
In December 1994, the Company acquired a 143,000 square foot shopping center in
Phoenix, Arizona for $8,240,000. During 1995, the Company began redevelopment
and expansion activities to increase the center by approximately 85,000 square
feet of new space.
Smithtown Venture
The Company acquired its interest in Smithtown Venture from Development Company
for $250,000. Prior to its ownership acquisition, the Company had advanced
$4,550,000 to Smithtown Venture for development of a shopping center in Long
Island, New York. Condensed financial information of Smithtown Venture, upon
acquisition by the Company on October 2, 1996, is as follows (in thousands):
Rental property under development $6,059
--------
Company advances $4,550
Members' capital 1,509
------
$6,059
======
In connection with the development of the shopping center, Smithtown Venture
entered into a 49-year ground lease, with four ten-year renewal options, which
provides for monthly payments. While the shopping center is under development,
the lease payments are being capitalized to rental property. Future minimum
lease payments, excluding renewal options, are as follows (in thousands):
1997 $ 1,067
1998 1,400
1999 1,400
2000 1,400
2001 1,400
Thereafter 82,653
<PAGE>
The Price REIT, Inc.
3.Investment in Joint Ventures
Centrepoint Associates
In April 1994, the Company acquired a 50% general partnership interest in
Centrepoint Associates for $11,388,000. The general partnership interest was
acquired from a partnership in which Price/Costco and Messrs. Kornwasser and
Friedman were the general partners. The joint venture owns and operates a
236,000 square foot power center in Tempe, Arizona, with an additional 149,000
square feet of adjacent retail space, constructed and completed in 1995. During
the years ended December 31, 1996 and 1995 and for the period from April 15,
1994 through December 31, 1994, the Company contributed cash of approximately
$271,000, $1,186,000 and $4,449,000, respectively, to the joint venture, to fund
construction costs and acquisitions.
In accordance with the original purchase agreement, certain development
contingencies required Price/Costco to advance the Company approximately
$130,000 during 1994 and the Company was required to make net payments to
Price/Costco totaling $791,000 during 1995 resulting in a net additional cost to
the Company of $661,000. As a result of these payments, the recorded amount of
the Company's investment in the joint venture was $661,000 greater than the
amount of its capital account as reflected in the joint venture's accounting
records. The Company is amortizing the excess cost over 15 years.
In December 1995, the joint venture purchased two properties located in the
Phoenix metropolitan area. One of the properties is located in Glendale,
Arizona, which was purchased for $6,724,000, and consists of an existing 85,000
square foot shopping center with potential to expand by approximately 20,000
additional square feet. The other property is located in Goodyear, Arizona,
which was purchased for $4,232,000, and contains approximately 40 acres of
vacant land for future development. In connection with these purchases, the
joint venture obtained a $10,500,000 loan which is due in December 1997.
Hayden Plaza North Associates
In April 1996, the Company formed a partnership with Kimco Realty Corporation
("Kimco"), a retail real estate investment trust, to purchase a 191,000 square
foot shopping center in Phoenix, Arizona at a cost of $3,490,000. The Company
holds a 50% general partnership interest. The acquisition was completed in May
1996.
<PAGE>
The Price REIT, Inc.
3.Investment in Joint Ventures (continued)
Condensed combined financial information of the joint ventures is as follows:
December 31
1996 1995
---------------------
(In Thousands)
Rental property, net $45,648 $41,590
Other assets 3,125 2,038
---------------------
$48,773 $43,628
=====================
Liabilities $11,701 $10,989
The Company's capital 18,596 16,907
Other partner's capital 18,476 15,732
---------------------
$48,773 $43,628
=====================
Year ended
December 31
1996 1995
---------------------
(In Thousands)
Revenue $ 6,723 $ 5,201
Expenses (3,538) (2,248)
---------------------
Net income $ 3,185 $ 2,953
=====================
The accounting policies of the joint ventures are substantially the same as the
Company's.
4.Secured Note Receivable
In connection with the development of a shopping center in Long Island, New
York, Smithtown Venture made a loan to the ground lessor for the payoff of an
existing mortgage on the property. The secured note receivable bears interest at
a fixed rate of 7.41% and is due in monthly principal and interest payments
through October 2026.
<PAGE>
The Price REIT, Inc.
5.Notes Payable
Notes payable consists of the following:
December 31
1996 1995
---------------------
(In Thousands)
Senior Notes payable due 2000 $ 99,242 $ 99,082
Senior Notes payable due 2006 54,872 -
---------------------
154,114 99,082
Unsecured line of credit 19,000 56,000
Secured notes payable 11,794 2,750
---------------------
$184,908 $157,832
=====================
Senior Notes Payable
In November 1996, the Company issued unsecured 7.50% Senior Notes in the
aggregate principal amount of $55,000,000 which are due November 2006. Interest
on the 7.50% Senior Notes is payable semi-annually in arrears on May 5 and
November 5. The notes were priced at an aggregate amount of $54,870,000 and
have an effective interest rate of 7.53%.
In November 1995, the Company issued unsecured 7.25% Senior Notes in the
aggregate principal amount of $100,000,000 which are due November 2000. Interest
on the 7.25% Senior Notes is payable semi-annually in arrears on May 1 and
November 1. The notes were priced at an aggregate amount of $99,050,000 and have
an effective interest rate of 7.48%.
As of December 31, 1996 and 1995, the unamortized discount of senior notes
payable was $886,000 and $918,000, respectively. Amortization of the discount
during the year ended December 31, 1996 and 1995, in the amount of $162,000 and
$32,000 is reported as a component of interest expense and an increase to Senior
Notes payable.
The Senior Notes payable contain certain restrictive financial covenants
relating to debt-to-asset ratios, cash flow coverage ratio and distribution
limitations.
<PAGE>
The Price REIT, Inc.
5. Notes Payable (continued)
Unsecured Line of Credit
In September 1993, the Company obtained a revolving credit facility from a group
of banks for up to $75 million in unsecured advances through September 1996. In
May 1994, the credit facility was modified to increase the commitment amount to
$100 million. In November 1995, the credit facility was modified in various
respects including a reduction in the borrowing capacity to $75 million,
amendment of the interest rate, extension of the maturity to October 1997, and
the incorporation of certain additional financial covenants. In October 1996,
the credit facility was further modified to provide for an interest rate
reduction.
Advances under the credit facility, at the Company's option, bear interest at
either LIBOR plus 1.25% or a Base Rate, as defined, plus .50%. The effective
rate of interest as of December 31, 1996 and 1995 was 6.63% and 7.05%,
respectively. Interest on the out-standing balance is payable no less than
quarterly.
The agreement requires the Company to meet various financial covenant ratios,
including minimum net operating income and net worth levels, as defined, and the
Company is precluded from paying dividends in excess of 95% of its annual net
income plus depreciation. The Company is required to pay a commitment fee of
.25% per annum on the unused portion of the unsecured line of credit under its
current borrowings.
Secured Notes Payable
At December 31, 1996, the secured notes payable bear interest at fixed rates of
9.0% and 9.25% and are secured by a shopping center in Oklahoma City, Oklahoma.
The notes provide for monthly payments of principal and interest with all
principal due in June 2013 and December 2014.
Principal maturities of all notes payable as of December 31, 1996 are summarized
as follows (in thousands):
1997 $ 19,299
1998 328
1999 359
2000 100,393
2001 430
Thereafter 64,985
-----------
$ 185,794
===========
<PAGE>
The Price REIT, Inc.
5. Notes Payable (continued)
The Company incurred $12,540,000, $7,354,000 and $4,471,000 of interest costs
which included amortization of loan discount and fees, of which $469,000,
$415,000 and $234,000 were capitalized to rental property for the years ended
December 31, 1996, 1995 and 1994, respectively.
6. 1996 Stock Offering
On September 9, 1996, the Company completed a public offering of 690,000 shares
of Common Stock at an offering price of $32.125 per share (the "Stock
Offering"). The Company used the net proceeds of approximately $21 million for
repayment of indebtedness under the Company's unsecured line of credit and for
general corporate purposes. Expenses of the Stock Offering were approximately
$1,389,000 and were charged against the gross proceeds of the Stock Offering.
7. Dividends
The Company paid quarterly dividends to stockholders as follows:
Year ended December 31
1996 1995 1994
-----------------------------------
Series A Common Stock
First $ 0.6667 $ 0.6286 $ 0.6000
Second N/A 0.6286 0.6000
Third N/A 0.6381 0.6190
Fourth N/A 0.6476 0.6190
-----------------------------------
Total $ 0.6667 $ 2.5429 $ 2.4380
===================================
Common Stock
First $ 0.7000 $ 0.6600 $ 0.6300
Second 0.7000 0.6600 0.6300
Third 0.7000 0.6700 0.6500
Fourth 0.7000 0.6800 0.6500
-----------------------------------
Total $ 2.8000 $ 2.6700 $ 2.5600
===================================
Taxable portion - ordinary dividend 78.36% 82.00% 86.92%
Return of capital portion 21.64% 18.00% 13.08%
-----------------------------------
100.00% 100.00% 100.00%
===================================
<PAGE>
The Price REIT, Inc.
7. Dividends (continued)
Common Stock
The Company had previously issued two series of common stock equity, Common
Stock and Series A Common Stock. On May 23, 1996, the Company's stockholders
approved an amendment to the Company's charter to provide that all outstanding
shares of Series A Common Stock be converted into shares of Common Stock;
eliminate the provision which entitled holders of Common Stock to receive an
annualized quarterly per share dividend equal to 105% of the annualized
quarterly per share dividend on the Series A Common Stock and changed the name
of the Company's Series A Common Stock to Common Stock. There were 38,266
shares of Series A Common Stock that were converted into Common Stock.
8. Stock Options/Dividend Reinvestment Plan
In 1991, the Company adopted a stock option plan for certain of its employees.
The options generally vest 20% upon grant and 20% per year over the subsequent
four years. Vested options expire ten years from the date of vesting. Unvested
options expire at termination of employment.
In 1993, the Company adopted an incentive stock option plan for certain of its
officers and other key employees. The options generally vest 20% upon grant and
20% per year over the subsequent four years. The options are exercisable upon
vesting and expire ten years from the date of grant. Unvested options expire at
termination of employment.
In 1996, the Company adopted a stock option plan for non-employee directors of
its Board of Directors. The options are fully vested and exercisable on the
date of grant.
<PAGE>
The Price REIT, Inc.
8. Stock Options/Dividend Reinvestment Plan (continued)
Stock options outstanding are as follows (in thousands, except per share data):
Stock Options
--------------------------------
Non- Total Price
Incentive Incentive Exercise Range
Shares Shares Value Per Share
----------------------------------------------
Outstanding at January 1, 1994 128 399 $ 16,643 $25.00-$32.50
Granted on February 14, 1994 - 27 905 33.50
--------------------------------
Outstanding at December 31, 1994 128 426 17,548 25.00-33.50
Exercised on June 30, 1995 (28) - (700) 25.00
Expired on July 1, 1995 (17) - (506) 29.75
Granted on December 11, 1995 - 148 4,237 28.63
--------------------------------
Outstanding at December 31, 1995 83 574 20,579 28.63-33.50
Granted on January 29, 1996 31 49 2,360 29.50
Exercised on February 29, 1996 (41) - (1,220) 29.75
Expired on March 31, 1996 (2) - (60) 29.75
Granted on August 1, 1996 12 - 354 29.50
Granted on December 18, 1996 - 34 1,224 36.00
Granted on December 31, 1996 12 - 462 38.50
--------------------------------
Outstanding at December 31, 1996 95 657 $ 23,699 $28.63-$38.50
================================
At December 31, 1996, 1995 and 1994, 423,100, 325,200 and 253,000 stock options,
respectively, were exercisable.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). The new accounting standards prescribed by SFAS
No. 123 are optional, and the Company has elected to account for its stock
option plans under the previous accounting standards as prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
The effect of applying the SFAS No. 123 fair value method to the Company's stock
based awards would result in net income and net income per share that are not
materially different from amounts reported.
<PAGE>
The Price REIT, Inc.
8. Stock Options/Dividend Reinvestment Plan (continued)
In February 1994, the Company adopted a dividend reinvestment and share purchase
plan (the "Plan"). This Plan gives the holders of shares of common stock the
opportunity to purchase additional common stock shares through reinvestment of
distributions or volun-tary cash investments. At the Company's option, the
common stock shares purchased under the Plan can be newly issued or purchased on
the open market. Concurrent with the adoption of this Plan, the Company filed a
Form S-3 Registration Statement with the Securities and Exchange Commission to
register 500,000 common stock shares that are eligible to be issued under this
Plan. During the years ended December 31, 1996 and 1995, 37,000 and 56,000
shares, respectively, were issued under the Plan. Through December 31, 1996, a
total of 167,000 shares have been issued under the Plan.
9. Related Party Transactions
Mr. Sol Price previously provided office space to the Company's corporate
headquarters at no cost. Effective December 1995, the Company has agreed to pay
Mr. Price $7,200 per year for office space provided.
1996
Management fees revenue includes $817,000 earned from Price Enterprises, Inc.
owned rental properties and $92,000 earned from K&F affiliated companies.
Development fees totaling $142,000 were paid to Development Company and
capitalized to rental property.
Leasing commissions totaling $250,000 were paid to Development Company and
capitalized to other assets.
Other income includes $30,000 of consulting fee income received from Price
Enterprises, Inc.
1995
Management fees revenue includes $785,000 earned from Price Enterprises, Inc.
owned rental properties and $128,000 earned from K&F affiliated companies.
General and administrative expense includes $114,000 of rent expense paid to a
partnership in which Messrs. Joseph Kornwasser and Jerald Friedman are partners.
<PAGE>
The Price REIT, Inc.
9. Related Party Transactions (continued)
1995 (continued)
Development fees totaling $379,000 were paid to Development Company and
capitalized to rental property.
Leasing commissions totaling $489,000 were paid to Development Company and
capitalized to other assets.
Other income includes $164,000 of consulting fee income received from Price
Enterprises, Inc. for various consulting services.
1994
Management fees revenue includes $617,000 earned from Price Enterprises, Inc.
owned rental properties and $134,000 earned from K&F affiliated companies.
General and administrative expense includes $139,000 of rent expense paid to a
partnership in which Messrs. Kornwasser and Friedman are partners.
Development fees totaling $207,000 were paid to Development Company and
capitalized to rental property.
Leasing commissions totaling $364,000 were paid to Development Company and
capitalized to other assets.
10. Commitments and Contingencies
The Company sponsors a 401(k) deferred compensation plan. Employees may
contribute up to 15% of their wages subject to Internal Revenue Code limits.
The plan provides for discretionary matching and profit sharing contributions by
the Company. The Company may match contributions up to 2.5% of an employee's
annual compensation for annual compensation below $50,000 or up to 2.0% for
annual compensation equal to or above $50,000. During the years ended December
31, 1996, 1995 and 1994, the Company contributed $23,000, $23,000 and $17,000,
respectively, to the plan. The plan is fully funded.
<PAGE>
The Price REIT, Inc.
10. Commitments and Contingencies (continued)
Certain of the Company's properties were acquired from The Price Company or its
successor, Price/Costco. The Price Company has indemnified the Company, with the
exception of the Company's 50% interest in the Tempe, Arizona property, with
respect to the presence of any hazardous material (as defined under various
environmental laws) on properties purchased from The Price Company in the event
such hazardous materials were determined to be present on the date of the
purchase. The Company is not aware of any environmental issues with respect to
its properties which would require a material expenditure by the Company,
regardless of whether the Company might ultimately be indemnified by The Price
Company.
11. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for the years ended December 31, 1996, 1995
and 1994 is as follows:
Earnings
Revenues Net Income Per Share
---------------------------------
(In Thousands, except
per share data)
1996
----
First $13,430 $ 4,058 $ 0.49
Second 12,883 4,135 0.50
Third 13,362 4,103 0.48
Fourth 14,650 $,623 0.51
1995
----
First $10,366 $ 4,008 $ 0.49
Second 10,405 4,091 0.50
Third 10,579 4,082 0.49
Fourth 12,173 4,205 0.50
1994
----
First $ 9,216 $ 3,938 $ 0.48
Second 9,653 4,148 0.51
Third 9,828 4,477 0.55
Fourth 11,228 4,341 0.53
<PAGE>
The Price REIT, Inc.
12. Subsequent Events
On January 22, 1997, the Company completed a public offering of 1,600,000 shares
of Common Stock at an offering price of $37.625 per share. The Company plans to
use the net proceeds of approximately $57 million for repayment of indebtedness
under the Company's unsecured line of credit and to fund its future acquisition
and development activities.
On January 16, 1997, the Company acquired a 134,000 square foot shopping center
in Wichita, Kansas for $9.8 million.
Effective January 1, 1997, the Company acquired the assets and assumed the
liabilities of the Development Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- -----------------------------
The Price REIT, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
1997 1996
--------- ---------
ASSETS (In Thousands)
Rental property, net $534,467 $380,482
Investment in joint ventures 21,201 19,202
Cash and cash equivalents 15,097 11,369
Deferred rent receivable 9,506 8,489
Secured note receivable 1,313 1,346
Other assets 10,773 7,183
--------- ---------
Total assets $592,357 $428,071
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities 12,674 4,474
Senior Notes payable 204,038 154,114
Unsecured line of credit 19,000 19,000
Secured notes payable 26,301 11,794
--------- ---------
Total liabilities 262,013 189,382
Minority interest 2,293 1,707
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 2,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.01 par value, 25,000,000 shares
authorized: 11,692,793 and 9,069,249 shares
issued and outstanding 117 91
Additional paid-in capital 354,624 259,518
Accumulated deficit (26,690) (22,627)
--------- ---------
Total stockholders' equity 328,051 236,982
--------- ---------
Total liabilities and stockholders' equity $592,357 $428,071
========= =========
See notes to condensed consolidated financial statements.
3
<PAGE>
The Price REIT, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- --------
(In Thousands, except
per share data)
REVENUE
Rental income $17,696 $12,620 $48,450 $37,453
Management fees 82 270 226 809
Equity in earnings of joint ventures 391 411 1,276 1,149
Interest and other income 294 61 1,090 265
Net gain from sale of rental property 2,787 - 2,787 -
-------- -------- -------- --------
Total revenue 21,250 13,362 53,829 39,676
-------- -------- -------- --------
EXPENSES
Rental operations 1,489 1,037 4,075 3,300
Real estate taxes 1,843 1,311 5,172 3,755
General and administrative 885 824 2,815 2,485
Depreciation 4,252 3,031 11,201 8,823
Interest 4,002 3,056 10,667 9,017
-------- -------- -------- --------
Total expenses 12,471 9,259 33,930 27,380
-------- -------- -------- --------
NET INCOME 8,779 4,103 19,899 12,296
======== ======== ======== ========
Net income per share $0.78 $0.48 $1.85 $1.47
------ ------ ------ ------
Dividends paid per share of
Common Stock $0.725 $0.70 $2.18 $2.10
------ ------ ------ ------
Weighted average number of
shares outstanding 11,240 8,505 10,742 8,392
------ ------ ------ ------
See notes to condensed consolidated financial statements.
4
<PAGE>
The Price REIT, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1997 1996
--------- --------
(In Thousands)
OPERATING ACTIVITIES
Net income $19,899 $12,296
Adjustments to reconcile net income to net
cash provided by operating activities:
Net gain on sale of rental property (2,787) -
Depreciation 11,201 8,823
Amortization of loan fees and discount 623 512
Equity in earnings of joint ventures (1,276) (1,149)
Deferred rent (1,017) (1,774)
Changes in operating assets and liabilities:
Other assets (4,860) (915)
Accounts payable and accrued liabilities 8,198 2,047
--------- ---------
Net cash provided by operating activities 29,981 19,840
INVESTING ACTIVITIES
Purchases of rental property (145,475) -
Additions to rental property (19,186) (15,780)
Payment received on secured note receivable 33 -
Investments in joint ventures (2,456) (6,339)
Distributions from joint ventures 2,134 1,443
Gross proceeds from sale of rental property 17,400 -
--------- ---------
Net cash used in investing activities (147,550) (20,676)
FINANCING ACTIVITIES
Proceeds from Senior Notes payable 49,779 -
Proceeds from unsecured line of credit 90,000 22,000
Repayment of unsecured line of credit (90,000) (26,000)
Repayment of secured notes payable (238) -
Minority interest contribution 585 -
Gross proceeds from issuance of common stock 97,890 23,598
Common stock issuance costs (3,452) (1,381)
Dividends paid, net of dividends reinvested (23,267) (17,338)
--------- --------
Net cash provided by financing activities 121,297 879
--------- --------
Increase in cash and cash equivalents 3,728 43
Cash and cash equivalents at beginning of period 11,369 1,241
--------- --------
Cash and cash equivalents at end of period $15,097 $1,284
========= ========
5
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $6,160 $6,963
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Common Stock issued in accordance with
the dividend reinvestment plan $694 $673
======== ========
In conjunction with the acquisition of the Farmington, Connecticut property, a
non-recourse loan of $14.7 million was assumed.
See notes to condensed consolidated financial statements.
6
<PAGE>
The Price REIT, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited condensed consolidated financial statements of The
Price REIT, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three- and nine-month periods ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the financial
statement date and the reported amounts of revenue and expenses during the
reporting period. Due to uncertainties inherent in the estimation process, it is
reasonably possible that actual results could differ from these estimates.
NOTE 2 - PROPERTY ACQUISITIONS
- ------------------------------
PURCHASE OF SHOPPING CENTERS AND UNDEVELOPED LAND
On January 29, 1996, the Company purchased a 9.7 acre parcel of undeveloped land
that is adjacent and contiguous to the Webster, Texas center for $1.25 million.
The Company intends to use such land for expansion of the center and development
for new tenants. The Company financed this acquisition with operating cash.
7
<PAGE>
In July 1996, the Company acquired a 210,000 square foot shopping center in
Mesquite, Texas (Dallas area) at a cost of $12.7 million. The Company financed
this acquisition with borrowings under its unsecured line of credit (the "Line
of Credit").
On November 20, 1996, the Company acquired a 234,000 square foot shopping center
in Oklahoma City, Oklahoma. The purchase price was $16.7 million, of which $11.8
million was evidenced by the assumption of two non-recourse loans (subject to
customary exceptions) secured by the property. The balance of the purchase price
was financed with $4.9 million of operating cash.
On January 16, 1997, the Company acquired Westgate Market, a 134,000 square foot
shopping center in Wichita, Kansas for $9.8 million. The Company financed this
acquisition with borrowings under its Line of Credit.
On March 19, 1997, the Company acquired Broadmoor Village Shopping Center, a
62,000 square foot shopping center in Garland, Texas for $4.75 million. The
Company financed this acquisition with operating cash.
On March 20, 1997, the Company acquired Richardson Plaza Shopping Center, a
116,000 square foot shopping center in Richardson, Texas for $8.5 million. The
Company financed this acquisition with operating cash.
On March 28, 1997, the Company acquired City Place Market, an 84,000 square foot
shopping center in Dallas, Texas for $8.75 million. The Company financed this
acquisition with operating cash.
On March 31, 1997, the Company acquired Wendover Ridge Retail Center, a 41,000
square foot shopping center in Greensboro, North Carolina for $4.975 million.
The Company financed this acquisition with operating cash.
On April 1, 1997, the Company acquired Arboretum Crossing, a 187,000 square foot
shopping center in Austin, Texas for $23.4 million. The Company financed this
acquisition with borrowings of $14 million under its Line of Credit and $9.4
million of operating cash.
On May 14, 1997, the Company acquired Smoketown Stations Center, a 483,000
square foot shopping center in Woodbridge, Virginia
8
<PAGE>
for $46.5 million. The Company financed this acquisition with borrowings
under its Line of Credit.
On August 28, 1997, the Company acquired West Farms Shopping Center, a 185,000
square foot shopping center in Farmington, Connecticut for $20 million. As of
September 30, 1997, the shopping center was 99% leased and is anchored by The
Sports Authority, T.J. Maxx, Linen N Things and Petco. The acquisition was
financed through the assumption of an existing $14.7 million non-recourse loan
secured by the property and $5.3 million of proceeds from the sale of the
Cerritos property.
HAYDEN PLAZA NORTH JOINT VENTURE ACQUISITION
On April 23, 1996, the Company formed a partnership (the "Partnership") with
Kimco Realty Corporation ("Kimco"), a major New York-based retail real estate
investment trust, to purchase a 191,000 square foot shopping center in Phoenix,
Arizona at a cost of $3,490,000. The acquisition was completed by the
Partnership on May 3, 1996. The Company holds a 50% interest in the Partnership
and Kimco holds the remaining 50% interest. The Company's 50% share of the
acquisition cost was funded by borrowings of $1 million under the Line of Credit
and $750,000 of operating cash. The operations of the Partnership are accounted
for under the equity method of accounting.
CENTREPOINT ASSOCIATES JOINT VENTURE ACQUISITION
On March 21, 1997, Centrepoint Associates (the "Joint Venture"), a partnership
in which the Company owns a 50% interest, acquired a parcel of property
containing 25,000 rentable square feet of buildings ("Talavi III") within an
existing shopping center in Glendale, Arizona. The Joint Venture currently owns
three additional parcels within this existing shopping center: two parcels
containing 85,000 rentable square feet of buildings and a vacant pad parcel for
future development. Talavi III was purchased for $3 million. The Joint Venture
financed this acquisition with borrowings under a $13.5 million line of credit
obtained from Wells Fargo Bank ("Wells Fargo Line"). The Wells Fargo Line is
secured by the new Talavi III acquisition and a 236,000 square foot power center
located in Tempe, Arizona which is owned by the Joint Venture.
As of September 30, 1997, the Joint Venture owned several shopping center
properties located in Glendale and Tempe,
9
<PAGE>
Arizona which contain an aggregate of 495,000 square feet of building area and a
40 acre vacant land parcel in Goodyear, Arizona for future development. The
operations of the Joint Venture are accounted for under the equity method of
accounting.
SMITHTOWN VENTURE
On October 2, 1996, the Company purchased an approximate 80% ownership interest
in Smithtown Venture LLC ("Smithtown Venture"). The remaining approximate 20%
ownership was held by King Kullen Grocery Co., Inc. ("King Kullen"), a major
Long Island, New York grocery chain. Smithtown Venture is currently constructing
a power center located in Commack, New York (Long Island) which is anticipated
to contain 270,000 leasable square feet of space when completed on land which is
subject to a forty-nine year ground lease with four ten year renewal options.
The shopping center is anchored by King Kullen, Borders Books & Music,
HomePlace, Babies "R" Us (Toys "R" Us) and The Sports Authority. In addition,
Target plans to open a 125,000 square foot store on a contiguous parcel of land.
As of September 30, 1997, all anchor tenants except Babies "R" Us have opened
for business. The center is in its final construction phase and the Company
expects that it will be completed by the end of the fourth quarter of 1997,
although no assurance can be given that it will be completed on schedule. The
construction cost is estimated at $23 million. The Company's share of
construction and development costs will be funded by borrowings under the
Company's Line of Credit and operating funds to the extent such funds are
available. As of September 30, 1997, the Company has cumulatively funded
$18,931,000 for its share of the Smithtown Venture construction costs.
On March 26, 1997, King Kullen was granted a put option to reduce its capital
interest in the joint venture from approximately 20% to 10%. On April 23, 1997,
King Kullen elected to exercise its put option to reduce its equity interest in
Smithtown Venture from approximately 20% to 10%. The Company paid King Kullen
$1,232,000 pursuant to the put option agreement. The Company presently holds an
ownership interest of 90% in Smithtown Venture and King Kullen holds the
remaining interest of 10%.
PRICE/FRY LLC JOINT VENTURE
In February 1997, Price/Baybrook, Ltd. (a wholly-owned subsidiary of the
Company) formed a joint venture with I-10/Fry Road 27, Ltd. and I-10/Park Row
40, Ltd. (the "Outside
10
<PAGE>
Partners") to develop an approximately 470,000 square foot retail power center
in Houston, Texas. The joint venture agreement provides for the Outside Partners
to contribute the land with a net fair market value of $4.225 million and
Price/Baybrook, Ltd. to contribute $4.225 million as needed to fund development
costs. After Price/Baybrook, Ltd. has funded its share of capital, it is
anticipated that the joint venture will seek construction financing to complete
the center.
The development will be located on 47 acres of land at the intersection of
Interstate 10 and Fry Road in the western part of Houston. The Company will be
the managing partner with a 50% joint venture interest, and the remaining 50%
will be owned by the Outside Partners.
The new power center will be anchored by Home Depot, which purchased
approximately ten acres from the joint venture for the construction of a 106,000
square foot store and a 30,000 square foot garden center. The sale of land to
Home Depot was completed on July 31, 1997. The joint venture intends to develop
the balance of the 470,000 square foot center, with multiple national value
retailers and an entertainment component. The Home Depot construction is near
completion, with opening anticipated by mid-January 1998, and it is anticipated
that the balance of the center will be completed in phases over the next two
years. There can be no assurance, however, that construction of Home Depot or
the balance of the center will commence or be completed on schedule. The
operations of the joint venture will be accounted for under the equity method of
accounting.
PRICE REIT RENAISSANCE PARTNERSHIP
On August 29, 1997, the Company formed a limited partnership (the "Limited
Partnership") with Altamonte Joint Venture ("Altamonte") to acquire the
Renaissance Centre, a 271,000 square foot shopping center in Altamonte Springs
(Orlando), Florida. The Company acquired a 99% interest in the Limited
Partnership for $33.5 million. The Company is the managing General Partner with
a 99% interest and Altamonte, a limited partner holding the remaining 1%
interest. As of September 30, 1997, the Center was 99% leased and is anchored by
Uptons, Michael's, Ross Stores, General Cinema, Blockbuster and Portfolio Home
Furnishing. The Company's share of the acquisition was financed with borrowings
of $13 million under its Line of Credit and $20.5 million of operating cash.
11
<PAGE>
K & F DEVELOPMENT COMPANY
Effective January 1, 1997, the Company acquired the assets and assumed the
liabilities of its affiliate K & F Development Company (the "Development
Company") and elected certain of the officers of the Development Company to
serve as officers of the Company. The Company acquired the assets pursuant to a
distribution to the Company as owner of 100% of the non-voting preferred stock
of the Development Company.
NOTE 3 - PROPERTY DISPOSITIONS
- ------------------------------
On July 9, 1997, the Company sold its Cerritos, California property for $17.4
million in a transaction designed to enable the sale to qualify as a tax-
deferred exchange under Section 1031 of the Internal Revenue Code (the "Code").
The Company used the sale proceeds to acquire the Farmington, Connecticut
property on August 28, 1997 and the Minnetonka, Minnesota property on October 8,
1997. The Company realized a gain on sale of the Cerritos shopping center in the
amount of $3,643,000. This gain was partially offset by an impairment loss of
$856,000 relating to the sale of property in Copiague, New York which closed on
October 22, 1997.
NOTE 4 - NOTES PAYABLE
- ----------------------
SENIOR NOTES PAYABLE
In November 1995, the Company issued unsecured 7.25% Senior Notes in the
aggregate principal amount of $100 million which are due November 2000. Interest
on the 7.25% Senior Notes is payable semi-annually in arrears on May 1 and
November 1. The notes were priced at an aggregate amount of $99,050,000 and have
an effective interest rate of 7.48%.
On November 5, 1996, the Company completed an underwritten public offering
("1996 Offering") of $55 million aggregate principal amount of the Company's
Senior Notes at an interest rate of 7.50%. The 7.50% Senior Notes were priced at
an aggregate of $54,870,000. The net proceeds from the 1996 Offering were used
to repay $50 million of indebtedness outstanding under the Company's Line of
Credit. The remaining net proceeds were used for general corporate purposes. The
7.50% Senior Notes provide for semi-annual payment of interest only due on May 5
and November 5 of each year until the maturity date
12
<PAGE>
of November 5, 2006 at which time the principal is due.
On June 19, 1997, the Company issued unsecured 7.125% Senior Notes in the
aggregate principal amount of $50 million which are due June 15, 2004 pursuant
to its $175 million shelf registration statement. Interest on the 7.125% Senior
Notes is payable semi-annually in arrears on June 15 and December 15. The notes
were priced at an aggregate amount of $49,778,000 and have an effective interest
rate of 7.21%. The Company used the net proceeds to repay indebtedness under the
Line of Credit.
UNSECURED LINE OF CREDIT
On July 1, 1997, the Company amended its $75 million Line of Credit (i) to
modify certain restrictive covenants, including the secured and unsecured debt
incurrence restrictions, (ii) to provide the Company with an option, subject to
consent of its lenders and certain other conditions, to increase the
availability under the Line of Credit to $100 million and (iii) to extend the
maturity to June 30, 2000 with a Company option, subject to consent of its
lenders and certain other conditions, to extend it one additional year to June
30, 2001.
The agreement requires the Company to maintain certain minimum net operating
income and net worth levels, as defined, and provides that the Company will not
pay dividends in excess of 95% of its annual net income plus depreciation. The
Company is required to pay a commitment fee of 0.25% per annum of the unused
portion of the Line of Credit.
On October 23, 1996 the Company modified its Line of Credit to reduce the LIBOR
interest rate margin from 1.4% to 1.25%.
The effective rate of interest at September 30, 1997 from the borrowings under
the Line of Credit was 6.9375%. Interest on the outstanding balance of the Line
of Credit is payable periodically, but at least quarterly.
The Company typically funds short-term financing for its acquisition and
development activities through its $75 million Line of Credit. On January 22,
1997, the Company used the net proceeds from sale of Common Stock to repay $19
million of indebtedness under the Line of Credit. During the second quarter of
1997, the Company borrowed $60 million to purchase the Austin and Woodbridge
properties. The Company borrowed an additional $11 million to replenish
operating funds. On June 20, 1997, the Company used the net proceeds from the
sale of Senior Notes to
13
<PAGE>
repay $50 million of indebtedness outstanding under the Company's Line of
Credit. On August 11, 1997, the Company used the net proceeds from the sale of
common stock to repay $21 million of indebtedness outstanding under the
Company's Line of Credit. On August 28, 1997, the Company borrowed $13 million
to purchase the Renaissance Center. On September 28, 1997, The Company borrowed
an additional $6 million to replenish operating funds. At September 30, 1997,
the outstanding balance under the Line of Credit was $19 million.
NOTE 5 - COMMON STOCK
- ---------------------
On January 22, 1997, the Company issued and sold 1,600,000 shares of Common
Stock at a price to the public of $37.625 per share pursuant to its $175 million
shelf registration statement. The Company used the net proceeds of approximately
$57 million for repayment of indebtedness under the Company's Line of Credit, to
fund its property acquisition activities and for general corporate purposes.
On August 11, 1997, the Company issued and sold 1,000,000 shares of Common Stock
at a price to the public of $37.50 per share pursuant to its $175 million shelf
registration statement. The Company used the proceeds of $37.5 million for
repayment of indebtedness under the Company's Line of Credit, to fund its
property acquisition activities and for general corporate purposes.
NOTE 6 - NET INCOME PER SHARE
- -----------------------------
Net income per share was calculated by dividing net income by the weighted
average number of shares outstanding. The assumed exercise of outstanding stock
options, using the treasury stock method, is not materially dilutive to the
earnings per share computation.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
The Company has not yet determined what the impact of Statement 128 will be on
the calculation of fully diluted earnings per share.
NOTE 7 - SUBSEQUENT EVENTS
- --------------------------
On October 8, 1997, the Company completed the acquisition of the Ridgedale
Festival Shopping Center in Minnetonka (Minneapolis),
14
<PAGE>
Minnesota. The purchase price was $11.9 million. Ridgedale shopping center
contains 120,000 rentable square feet, is anchored by Office Max, Toys `R' Us,
Golfsmith, and Schmidt Music and was 100% leased. The Company financed this
acquisition with the proceeds from the tax-deferred sale of the Cerritos
property.
On October 17, 1997, the Company acquired the Cordata Centre located in
Bellingham, Washington. The purchase price was $20.25 million. The center
contains 174,000 rentable square feet and is anchored by Costco (not part of
purchase), Office Depot, Bon Marche Home, T.J. Maxx, Drug Emporium, Future Shop,
and other retail tenants. The Company financed the acquisition with borrowings
of $18 million under the Line of Credit and the remainder from operating cash.
On October 22, 1997, the Company completed the sale of approximately nine acres
of land in its Copiague, New York shopping center for $10.25 million. The land
was sold to Dayton Hudson Corp. which intends to develop a 133,000 square foot
Target store within the center. The Company used the sale proceeds to repay
borrowings under its Line of Credit.
On October 31, 1997, the Company acquired a 97,000 square foot shopping center
in Piscataway, New Jersey. The purchase price was $15.1 million. The center is
100% leased and anchored by Shop Rite Supermarket, Applebee's, Lauriat's and
other retail tenants. The Company financed this acquisition by the assumption of
a $11.4 million non-recourse loan secured by the property maturing in August
2000, and the remainder with borrowings under its Line of Credit.
<PAGE>
Exhibit 99.3
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
-------------------------------
(Unaudited)
The following unaudited Pro Forma Combined Condensed Consolidated Balance Sheet
gives effect to the proposed Merger as if the Merger had occurred on September
30, 1997, under the purchase method of accounting in accordance with Accounting
Standards Board Opinion No. 16. In addition, the Kimco Pro Forma Balance Sheet
column at September 30, 1997 assumes the completion, as of September 30, 1997,of
the acquisition of eight shopping center properties (See Note 1 to the unaudited
Pro Forma Combined Condensed Consolidated Balance Sheet).
The unaudited Pro Forma Combined Condensed Consolidated Balance Sheet is
presented for comparative purposes only and is not necessarily indicative of
what the actual combined financial position of Kimco and Price REIT would have
been at September 30, 1997, nor does it purport to represent the future combined
financial position of Kimco and Price REIT. This information should be read in
conjunction with the audited consolidated financial statements and other
financial information contained in Kimco's Annual Report on Form 10-K and Price
REIT's Annual Report on Form 10-K for the year ended December 31, 1996,
respectively, including the notes thereto, and the unaudited condensed
consolidated financial statements contained in Kimco's Quarterly Report on Form
10-Q and Price REIT's Quarterly Report on Form 10-Q for the period ended
September 30, 1997, including the notes thereto, and in each case incorporated
by reference herein.
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
------------
(Unaudited)
(000's)
<TABLE>
<CAPTION>
Kimco Price Reit Pro Forma Pro Forma
Pro Forma Historical Adjustments Results
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets:
Real estate, net of accumulated depreciation $ 1,184,936 $ 534,467 $ 215,019 $ 1,934,422
Investment in retail store leases 16,409 -- -- 16,409
Cash and cash equivalents 55,042 15,097 (6,000) 64,139
Other assets 92,118 42,793 -- 134,911
----------- ----------- ----------- -----------
$ 1,348,505 $ 592,357 $ 209,019 $ 2,149,881
=========== =========== =========== ===========
Liabilities:
Notes payable $ 410,250 $ 223,038 $ -- $ 633,288
Mortgages payable 122,121 26,301 -- 148,422
Other liabilities, including minority interests
in partnerships 72,451 14,967 2,179 89,597
----------- ----------- ----------- -----------
604,822 264,306 2,179 871,307
----------- ----------- ----------- -----------
Stockholders' Equity:
Preferred stock 900 -- 476 1,376
Common stock 404 117 2 523
Paid-in capital 857,569 354,624 179,672 1,391,865
Cumulative distributions in excess of net income (115,190) (26,690) 26,690 (115,190)
----------- ----------- ----------- -----------
743,683 328,051 206,840 1,278,574
----------- ----------- ----------- -----------
$ 1,348,505 $ 592,357 $ 209,019 $ 2,149,881
=========== =========== =========== ===========
</TABLE>
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED
BALANCE SHEET
---------------------
1. Basis of Presentation
- ------------------------
The Kimco Pro Forma Balance Sheet at September 30, 1997 represents the
historical condensed consolidated balance sheet adjusted to give effect
to the purchase of eight shopping center properties acquired by the
Company in October, November and December 1997 as if these properties
had been acquired at September 30, 1997. Information related to these
properties is included in the Kimco Current Report on Form 8-K dated
January 15, 1997.
2. Reclassification
- -------------------
Certain amounts reflected in the historical financial statements of
both companies have been reclassified to conform to the Pro Forma
Combined Condensed Consolidated Balance Sheet presentation.
3. Pro Forma Adjustments
- ------------------------
(i) Real estate net of accumulated depreciation -
The adjustment to Real estate, net of accumulated depreciation reflects
the increase in book value of Price REIT's real estate assets based
upon the Kimco purchase price (assuming Kimco common stock is valued at
$35 per share) and an exchange ratio of one share of Price REIT
common stock for one share of Kimco common stock and 0.4 depositary
shares, each depositary share (the "Kimco Class D Depositary Shares")
representing 1/10 of a share of a new issue of Kimco 7.5% Class D
Cumulative Convertible Preferred Stock, par value $1.00 per share,
liquidation preference $250.00 per share (the "Kimco Class D Preferred
Stock") as follows:
(000's)
-------
Issuance of 11,886,444 shares of Kimco common stock
(assumed value of $35 per share)
based on an exchange ratio of one for one $416,026
and
Issuance of 475,458 shares of Kimco Class D
Preferred Stock (represented by 4,754,580 Kimco Class D
Depositary Shares) based on an exchange ratio of 0.04
shares of Kimco Class D Preferred Stock (represented
by .4 Kimco Class D Depositary Shares) for one share
of Price REIT common stock in exchange for 11,886,444
shares of Price REIT common stock 118,865
Assumption of Price REIT liabilities 2,179
Merger costs 6,000 see (ii)
---------
Purchase price 543,070
Less: Historical book basis of Price REIT's
net assets acquired (328,051)
---------
Real estate, net of accumulated depreciation
Pro Forma adjustment $215,019
========
<PAGE>
(ii) Cash and cash equivalents -
The adjustment to cash and cash equivalents reflects the estimated fees and
other expenses relating to the Merger, including, but not limited to, investment
banking fees, legal and accounting fees, printing, filing and other related
costs.
(iii) Stockholders' equity -
The adjustments to stockholders' equity reflect the issuance of 11,886,444
shares of Kimco common stock, par value $.01 per share, and 475,458 shares of
Kimco Class D Preferred Stock, (represented by 4,754,580 Kimco Class D
Depositary Shares) based on the exchange ratio of one share of Price REIT
common stock for one share of Kimco common stock and 0.04 shares of Kimco Class
D Preferred Stock (represented by 0.4 Kimco Class D Depositary Shares) as
follows:
<TABLE>
<CAPTION>
Cumulative
Distributions
Common Preferred Paid-in in Excess of
Stock Stock Capital Net Income
(000's) (000's) (000's) (000's)
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Issuance of Kimco common stock $ 119 $ -- $ 415,907 $ --
Issuance of Kimco Class D Preferred Stock
-- 476 118,389 --
Price REIT's historical Stockholders'
equity (117) -- (354,624) (26,690)
--------- --------- --------- -------------
Stockholders' equity
Pro Forma adjustments $ 2 $ 476 $ 179,672 $ 26,690
========= ========= ========= =============
</TABLE>
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
-----------------------------
(Unaudited)
The following unaudited Pro Forma Combined Condensed Consolidated Statements of
Income for the year ended December 31, 1996 and the nine months ended September
30, 1997 give effect to the proposed Merger as if the Merger had occurred as of
January 1, 1996 under the purchase method of accounting in accordance with
Accounting Standards Board Opinion No. 16. In addition, the Kimco Pro Forma
Statements of Income columns for the year ended December 31, 1996 and the nine
months ended September 30, 1997 assumes the completion, as of January 1, 1996,
of the acquisition of 14 shopping center properties as previously reported in
the Current Report on Form 8-K dated January 15, 1997, incorporated by reference
herein. The Price REIT Pro Forma Statements of Income columns for the year ended
December 31, 1996 and the nine months ended September 30, 1997 assumes the
completion, as of January 1, 1996 of the acquisition of 12 shopping center
properties as previously reported in the Current Report on Form 8-K/A dated
November 13, 1997, incorporated by reference herein. (See Note 1 to the
unaudited Pro Forma Combined Condensed Consolidated Statements of Income).
The unaudited Pro Forma Combined Condensed Consolidated Statements of Income are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined operating results of Kimco and Price REIT would have
been for the year ended December 31, 1996 and the nine months ended September
30, 1997, nor does it purport to represent the future combined operating results
of Kimco and Price REIT. This information should be read in conjunction with the
audited consolidated financial statements and other financial information
contained in Kimco's Annual Report on Form 10-K and Price REIT's Annual Report
on Form 10-K for the year ended December 31, 1996, respectively, including the
notes thereto, and the unaudited condensed consolidated finanical statements
contained in Kimco's Quarterly Report of Form 10-Q and Price REIT's Quarterly
Report on Form 10-Q for the period ended September 30, 1997, respectively,
including the notes thereto, and in each case incorporated by reference herein.
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
---------------
(Unaudited)
(000's except per share data)
<TABLE>
<CAPTION>
Price Reit
1997 Property
Acquisition Merger Combined
Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma
Pro Forma Historical Adjustments Pro Forma Adjustments Results
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from rental property $ 187,804 $ 51,292 $ 24,364 $ 75,656 $ -- $ 263,460
----------- ----------- ----------- ----------- ----------- -----------
Rental property expenses-
Rent 1,455 -- -- -- -- 1,455
Real estate taxes and operating and maintenance 46,625 9,909 5,439 15,348 -- 61,973
Interest 31,282 12,071 8,868 20,939 -- 52,221
Depreciation and amortization 29,985 11,876 5,536 17,412 (1,769) 45,628
----------- ----------- ----------- ----------- ----------- -----------
109,347 33,856 19,843 53,699 (1,769) 161,277
----------- ----------- ----------- ----------- ----------- -----------
Income from rental property 78,457 17,436 4,521 21,957 1,769 102,183
Income from investment in retail store leases 3,632 3,632
----------- ----------- ----------- ----------- ----------- -----------
82,089 17,436 4,521 21,957 1,769 105,815
Management fee income 3,448 1,085 -- 1,085 -- 4,533
General and administrative expenses (10,334) (3,550) -- (3,550) 1,200 (12,684)
Other income (expenses), net 3,584 1,948 -- 1,948 -- 5,532
----------- ----------- ----------- ----------- ----------- -----------
Income before gain on sale of shopping center 78,787 16,919 4,521 21,440 2,969 103,196
Gain on sale of shopping center property 802 -- -- -- -- 802
----------- ----------- ----------- ----------- ----------- -----------
Net income $ 79,589 $ 16,919 $ 4,521 $ 21,440 $ 2,969 $ 103,998
=========== =========== =========== =========== =========== ===========
Net income applicable to common shares $ 63,453 $ 16,919 $ 4,521 $ 21,440 ($ 5,946) $ 78,947
=========== =========== =========== =========== =========== ===========
Net income per common share $1.77 $1.98 $2.50 $1.65
===== ===== ===== =====
Historical weighted average number of shares outstanding 35,906 8,560 8,560
====== ===== =====
Pro forma weighted number of shares outstanding 47,792
======
</TABLE>
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------
(Unaudited)
(000's, except per share data)
<TABLE>
<CAPTION>
Price Reit
1997 Property
Acquisition Merger Combined
Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma
Pro Forma Historical Adjustments Pro Forma Adjustments Results
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from rental property $ 153,701 $ 48,450 $ 13,302 $ 61,752 $ -- $ 215,453
----------- ----------- ----------- ----------- ----------- -----------
Rental property expenses-
Rent 2,527 -- -- -- -- 2,527
Real estate taxes and operating and maintenance 37,418 9,247 2,656 11,903 -- 49,321
Interest 24,439 10,667 6,990 17,657 -- 42,096
Depreciation and amortization 23,522 11,201 2,992 14,193 (2,328) 35,387
----------- ----------- ----------- ----------- ----------- -----------
87,906 31,115 12,638 43,753 (2,328) 129,331
----------- ----------- ----------- ----------- ----------- -----------
Income from rental property 65,795 17,335 664 17,999 2,328 86,122
Income from investment in retail store leases 2,705 -- -- -- -- 2,705
----------- ----------- ----------- ----------- ----------- -----------
68,500 17,335 664 17,999 2,328 88,827
Management fee income 2,755 226 -- 226 -- 2,981
General and administrative expenses (8,526) (2,815) -- (2,815) 900 (10,441)
Other income (expenses), net 3,750 2,366 -- 2,366 -- 6,116
----------- ----------- ----------- ----------- ----------- -----------
Income before gain on sale of shopping center 66,479 17,112 664 17,776 3,228 87,483
Gain on sale of shopping center property 244 2,787 -- 2,787 -- 3,031
----------- ----------- ----------- ----------- ----------- -----------
Net income $ 66,723 $ 19,899 $ 664 $ 20,563 $ 3,228 $ 90,514
=========== =========== =========== =========== =========== ===========
Net income applicable to common shares $ 52,896 $ 19,899 $ 664 $ 20,563 $ (3,458) $ 70,001
=========== =========== =========== =========== =========== ===========
Net income per common share $1.45 $1.85 $1.91 $1.45
===== ===== ===== =====
Historical weighted average number of shares
outstanding 36,375 10,742 10,742
====== ====== ======
Pro forma weighted number of shares outstanding 48,261
======
</TABLE>
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENTS
OF INCOME
-------------------
1. Basis of Presentation
- ------------------------
The Kimco Pro Forma Statements of Income for the year ended December
31, 1996 and the nine months ended September 30, 1997 reflect the
historical results of Kimco adjusted to give effect, as of January 1,
1996 to the purchase of 14 shopping center properties acquired by the
Company throughout 1997 as previously reported in the Current Report on
Form 8-K dated January 15, 1997 and incorporated by reference herein.
The Price REIT Pro Forma Statements of Income for the year ended
December 31, 1996 and the nine months ended September 30, 1997 reflect
the historical results of Price REIT adjusted to give effect, as of
January 1, 1996 to the purchase of 12 shopping center properties
acquired by Price REIT throughout 1997 as previously reported in the
Current Report on Form 8-K/A dated November 13, 1997, and incorporated
by reference herein.
2. Reclassification
- -------------------
Certain amounts reflected in the historical financial statements of
both companies have been reclassified to conform to the presentation of
the unaudited Pro Forma Combined Condensed Statements of Income.
3. Pro Forma Adjustments
- ------------------------
Depreciation and amortization -
The adjustment to depreciation and amortization results from the net
increase in real estate owned as a result of recording Price REIT's
real estate assets at fair value versus historical cost. Depreciation
is computed on the straight-line method based upon an estimated useful
life of 39 years and an allocation of the stepped-up basis to land and
building of 20% and 80%, respectively.
Calculation of depreciation of real estate owned for the year ended December 31,
1996 and the nine months ended September 30, 1997 is as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, 1996 September 30, 1997
(000's) (000's)
----------------- ------------------
<S> <C> <C>
Depreciation expense based upon an estimated
useful life of 39 years $15,374 $11,530
Less: Pro Forma Price REIT depreciation of
real estate owned based upon an estimated useful life of (17,143) (13,858)
15 to 25 years
----------------- ------------------
Depreciation and amortization
Pro Forma adjustment ($1,769) ($2,328)
================= ==================
</TABLE>
<PAGE>
General and administrative -
The adjustment to general and administrative expenses reflects the net
estimated reduction of those costs which are anticipated to be eliminated or
reduced as a result of the Merger, as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended
1996 September 30, 1997
(000's) (000's)
------------------------ ------------------
<S> <C> <C>
Net reduction in salary and benefit costs $550 $413
Net reduction in duplication of public company expenses 500 375
Net reduction in directors and officers insurance and
directors fees 150 112
------------------------ ------------------
General and administrative
Pro Forma adjustment $1,200 $900
======================== ==================
</TABLE>
Weighted average number of common shares outstanding -
The pro forma weighted average number of common shares outstanding for
the year ended December 31, 1996 and the nine months ended September 30, 1997
are computed as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended
1996 September 30, 1997
(000's) (000's)
------------------------ ------------------
<S> <C> <C>
Kimco's historical weighted average
number of shares outstanding 35,906 36,375
Issuance of Kimco common stock
at an exchange ratio of one for one for all Price
REIT common stock outstanding in connection
with the Merger 11,693 11,693
Add: Conversion of Price REIT stock options
to Kimco common stock in connection with the
Merger 193 193
------------------------ ------------------
Pro Forma weighted average number of Kimco
common shares outstanding 47,792 48,261
======================== ==================
</TABLE>
<PAGE>
Exhibit 99.4
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED FUNDS FROM OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------
The following unaudited Pro Forma Combined Funds from Operations for the year
ended December 31, 1996 and the nine months ended September 30, 1997 give effect
to the proposed Merger as if the Merger had occurred January 1, 1996. In
addition, the Kimco Pro Forma columns for the year ended December 31, 1996 and
the nine months ended September 30, 1997 assumes the completion, as of January
1, 1996, of the acquisition of 14 shopping center properties as previously
reported in the Current Report on Form 8-K dated January 15, 1997, incorporated
by reference herein. The Price REIT Pro Forma columns for the year ended
December 31, 1996 and the nine months ended September 30,1997 assume the
completion, as of January 1, 1996, of the acquisition of 12 shopping center
properties as previously reported in the Current Report on Form 8-K/A dated
November 13, 1997, incorporated by reference herein.
Most industry analysts and equity real estate investment trusts ("REIT"),
including the Company, generally consider Funds from Operations to be an
appropriate supplemental measure of the performance of an equity REIT. Funds
from Operations is defined as net income applicable to common shares before
depreciation and amortization, extraordinary items, gains or losses on sales of
real estate, plus Funds from Operations of unconsolidated joint ventures
determined on a consistent basis. Funds from Operations does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and, therefore, should not be considered an alternative to
net income as a measure of results of operations, or for cash flows from
operations calculated in accordance with generally accepted accounting
principles as a measure of liquidity.
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED FUNDS FROM OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
---------------
(Unaudited)
(000's except per share data)
<TABLE>
<CAPTION>
Price Reit
1997 Property
Acquisition
Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma
Funds from Operations Pro Forma Historical Adjustments Pro Forma Adjustments Results
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 79,589 $ 16,919 $ 4,521 $ 21,440 $ 2,969 $ 103,998
Depreciation & amortization 29,985 11,876 5,536 17,412 (1,769) 45,628
Gain on Sale of Shopping Center Property (802) -- -- -- -- (802)
Funds from Joint Venture Operations 1,146 661 -- 661 -- 1,807
Preferred Stock Dividends (16,136) -- -- -- (8,915) (25,051)
----------- ----------- ----------- ----------- ----------- -----------
Funds from Operations $ 93,782 $ 29,456 $ 10,057 $ 39,513 ($ 7,715) $ 125,580
=========== =========== =========== =========== =========== ===========
Per Common Share $2.61 $3.44 $4.62 $2.63
===== ===== ===== =====
Historical weighted average number of
shares outstanding 35,906 8,560 8,560
====== ===== =====
Pro forma weighted number of
shares outstanding 47,792
======
</TABLE>
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED FUNDS FROM OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------
(Unaudited)
(000's, except per share data)
<TABLE>
<CAPTION>
Price Reit
1997 Property
Acquisition Merger Combined
Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma
Funds from Operations Pro Forma Historical Adjustments Pro Forma Adjustments Results
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 66,723 $ 19,899 $ 664 $ 20,563 $ 3,228 $ 90,514
Depreciation & amortization 23,522 11,201 2,992 14,193 (2,328) 35,387
Gain on Sale of Shopping Center Property (244) (2,787) -- (2,787) -- (3,031)
Funds from Joint Venture Operations 850 537 -- 537 -- 1,387
Preferred Stock Dividends (13,827) -- -- -- (6,686) (20,513)
----------- ----------- ----------- ----------- ----------- -----------
Funds from Operations $ 77,024 $ 28,850 $ 3,656 $ 32,506 $ (5,786) $ 103,744
=========== =========== =========== =========== =========== ===========
Per Common Share $2.12 $2.69 $3.03 $2.15
===== ===== ===== =====
Historical weighted average number of shares
outstanding 36,375 10,742 10,742
====== ====== ======
Pro forma weighted number of shares outstanding 48,261
======
</TABLE>
<PAGE>
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
The following unaudited pro forma condensed statement of income for the year
ended December 31, 1996 has been presented as if the Piscataway Towne Center,
Cordata Centre and Ridgedale Festival Shopping Center and the 1997 Acquired
Properties were acquired on January 1, 1996. The 1997 Acquired Properties
include Westgate Market, Broadmoor Village, Richardson Plaza, Cityplace Market,
Wendover Ridge Center, Arboretum Crossing Center, Smoketown Stations Center,
Renaissance Centre, and West Farms Shopping Center, that were previously
presented in the Company's Current Report on Form 8-K dated April 16, 1997 (and
Amendment No. 1 thereto), Current Report on Form 8-K dated May 28, 1997 (and
Amendment No. 1 thereto) and Current Report on Form 8-K dated September 12, 1997
(and Amendment No.1 thereto) filed with the Securities and Exchange Commission.
The unaudited pro forma condensed statement of income should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, Current Report on Form 8-K dated April 16, 1997 (and
Amendment No. 1 thereto), Current Report on Form 8-K dated May 28, 1997 (and
Amendment No. 1 thereto) and Current Report on Form 8-K dated September 12, 1997
(and Amendment No.1 thereto). In management's opinion, all adjustments necessary
to reflect the above acquisitions and related significant transactions have been
made. The unaudited pro forma condensed statement of income is not necessarily
indicative of what actual results of operations would have been had the
acquisitions and related transactions actually occurred as of January 1, 1996,
nor does it purport to represent the results of operations of the Company for
future periods.
16
<PAGE>
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------
Ridgedale
The 1997 Piscataway Festival The
Company Acquired Towne Cordata Shopping Company
Historical Properties Center Centre Center Pro Forma
-------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Revenue
<S> <C> <C> <C> <C> <C> <C>
Rental income $51,292 $18,039(a) $2,083(a) $2,347(a) $1,895 (a) $ 75,656
Other income 3,033 - - - - 3,033
---------------------------------------------------------------------------------------------
54,325 18,039 2,083 2,347 1,895 78,689
Expenses
Rental operations 9,909 4,032(b) 441(b) 345(b) 621 (b) 15,348
General and
administrative 3,550 - - - - 3,550
Depreciation 11,876 4,169(c) 434(c) 590(c) 343 (c) 17,412
Interest 12,071 6,022(d) 1,478(d)(e) 1,368(d) - 20,939
--------------------------------------------------------------------------------------------
37,406 14,223 2,353 2,303 964 57,249
--------------------------------------------------------------------------------------------
Net Income (loss) $16,919 $ 3,816 $ (270) $ 44 $ 931 $21,440
============================================================================================
Per Share Data
Net income per $ 1.92
share $ 1.98 =======
======
Weighted average
number of shares 11,160(f)
outstanding 8,560 ======
======
Other Data
Number of
properties at 36
end of period 24 ======
======
</TABLE>
17
See accompanying pro forma adustments.
<PAGE>
The Price REIT, Inc.
Pro Forma Adjustments to Condensed Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
(In Thousands)
(a) Record the rental income of the 1997 Acquired Properties, Piscataway
Towne Center, Cordata Centre and Ridgedale Festival Shopping Center
(the"Properties").
(b) Record the rental operating expenses of the Properties less property
management fees (as the Company self-manages its properties) as
follows:
Ridgedale
1997 Piscataway Festival
Acquired Towne Cordata Shopping
Properties Center Centre Center
----------------------------------------
Rental operations $4,522 $ 515 $ 395 $ 683
Less: management fees (490) (74) (50) (62)
----------------------------------------
$4,032 $ 441 $ 345 $ 621
========================================
(c) Record the additional depreciation expense to be recognized for the
acquisition of the Properties under the straight-line method as
follows:
<TABLE>
<CAPTION>
1997 Acquired Piscataway Ridgedale Festival
Properties Towne Center Cordata Centre Shopping Center
--------------- -------------- --------------- --------------
Years Cost Deprec. Cost Deprec. Cost Deprec. Cost Deprec.
------- ---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land - $ 50,440 $ - $ 4,832 $ - $ 6,310 $ - $ 3,808 $ -
Land
improvements 15 10,465 623 906 60 1,230 82 714 48
Buildings 25 99,248 3,546 9,362 374 12,710 508 7,378 295
--------------- -------------- --------------- --------------
$160,153 $ 4,169 $15,100 $ 434 $20,250 $ 590 $11,900 $ 343
================ =============== ================ ===============
</TABLE>
(d) Record the additional interest expense resulting from the acquisitions
of the 1997 Acquired Properties, Piscataway Towne Center and Cordata
Centre with the proceeds from the unsecured line of credit, using the
Company's weighted average interest rate on its unsecured line of
credit for the year ended December 31, 1996 of 7.6%.
(e) Record the additional interest expense resulting from the assumption of
the $11,400 million secured loan on the Piscataway Towne Center. The
interest rate on the loan is 10.5%.
(f) Includes the issuance of 1.6 million shares of common stock sold on
January 22, 1997 and the issuance of 1.0 million shares of common stock
sold on August 5, 1997.
18
<PAGE>
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Nine Months Ended September 30, 1997
(Unaudited)
The following unaudited pro forma condensed statement of income for the nine
months ended September 30, 1997 has been presented as if the Piscataway Towne
Center, Cordata Centre and Ridgedale Festival Shopping Center and the 1997
Acquired Properties were acquired on January 1, 1997. The 1997 Acquired
Properties include Westgate Market, Broadmoor Village, Richardson Plaza,
Cityplace Market, Wendover Ridge Center, Arboretum Crossing Center, Smoketown
Stations Center, Renaissance Centre and West Farms Shopping Center that were
previously presented in the Company's Current Report on Form 8-K dated April 16,
1997 (and Amendment No. 1 thereto), Current Report on Form 8-K dated May 28,
1997 (and Amendment No. 1 thereto) and Current Report on Form 8-K dated
September 12, 1997 (and Amendment No. 1 thereto) filed with the Securities and
Exchange Commission. The unaudited pro forma condensed statement of income
should be read in conjunction with the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1997, Current Report on Form 8-K
dated April 16, 1997 (and Amendment No. 1 thereto), Current Report on Form 8-K
dated May 28, 1997 (and Amendment No. 1 thereto) and Current Report on Form 8-K
dated September 12, 1997 (and Amendment No. 1 thereto). In management's opinion,
all adjustments necessary to reflect the above acquisitions and related
significant transactions have been made. The unaudited pro forma condensed
statement of income is not necessarily indicative of what actual results of
operations would have been had the acquisitions and related transactions
actually occurred as of January 1, 1997, nor does it purport to represent the
results of operations of the Company for future periods.
19
<PAGE>
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Nine Months Ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------------------------------------
Ridgedale
The 1997 Piscataway Festival The
Company Acquired Towne Cordata Shopping Company
Historical Properties Center Centre Center Pro Forma
-----------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Revenue
<S> <C> <C> <C> <C> <C> <C>
Rental income $48,450 $8,613(a) $ 1,551(a) $ 1,824(a) $ 1,314(a) $61,752
Other income 5,379 - - - - 5,379
-----------------------------------------------------------------------------------------
53,829 8,613 1,551 1,824 1,314 67,131
Expenses
Rental operations 9,247 1,639(b) 327(b) 260(b) 430 (b) 11,903
General and
Administrative 2,815 - - - - 2,815
Depreciation 11,201 1,966(c) 326(c) 443(c) 257 (c) 14,193
Interest 10,667 4,920(d) 1,098(d)(e) 972(d) - 17,657
-----------------------------------------------------------------------------------------
33,930 8,525 1,751 1,675 687 46,568
-----------------------------------------------------------------------------------------
Net income $19,899 $ 88 $ (200) $ 149 $ 627 $20,563
loss) =========================================================================================
Per Share Data
Net income per $ 1.85
share ======= $ 1.76
Weighted average =======
number of
shares
outstanding 10,742
====== 11,684(f)
Other Data =======
Number of
properties at
end of period 32 35
====== =======
</TABLE>
See accompanying pro forma adjustments.
20
<PAGE>
The Price REIT, Inc.
Pro Forma Adjustments to Condensed Statement of Income
For the Nine Months Ended September 30, 1997
(Unaudited)
(In Thousands)
(a) Record the rental income less amount included in the Company historical
of the 1997 Acquired Properties, Piscataway Towne Center, Cordata
Centre, and Ridgedale Festival Shopping Center (the "Properties").
(b) Record the rental operating expenses of the Properties less property
management fees (as the Company self-manages its properties) net of
amount included in the Company historical as follows:
Ridgedale
1997 Piscataway Festival
Acquired Towne Cordata Shopping
Properties Center Centre Center
---------------------------------------------
Rental operations $1,845 $384 $ 298 $ 474
Less: management fees (206) (57) (38) (44)
---------------------------------------------
$1,639 $327 $ 260 $ 430
=============================================
(c) Record the additional depreciation expense to be recognized for the
acquisition of the Properties under the straight-line method as
follows:
<TABLE>
<CAPTION>
1997 Acquired Piscataway Ridgedale Festival
Properties Towne Center Cordata Centre Shopping Center
-----------------------------------------------------------------------------------
Years Cost Deprec. Cost Deprec. Cost Deprec. Cost Deprec.
-------- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land - $50,440 $ - $ 4,832 $ - $ 6,310 $ - $ 3,808 $ -
Land
improvements 15 10,465 523 906 45 1,230 62 714 36
Buildings 25 99,248 2,977 9,362 281 12,710 381 7,378 221
-----------------------------------------------------------------------------------
$160,153 3,500 $15,100 $ 326 $ 20,250 443 $11,900 $ 257
======== =============================================================
Less amount included in the
Company historical (1,534)
-------
$1,966
=======
</TABLE>
(d) Record the additional interest expense resulting from the acquisitions
of the 1997 Acquired Properties, Piscataway Towne Center and Cordata
Centre with the proceeds from the unsecured line of credit, using the
Company's weighted average interest rate on its unsecured line of
credit for the nine months ended September 30, 1997 of 7.2%.
21
<PAGE>
The Price REIT, Inc.
Pro Forma Adjustments to Condensed Statement of Income
(Continued)
For the Nine Months Ended September 30, 1997
(Unaudited)
(In Thousands)
(e) Record the additional interest expense resulting from the assumption of
the $11,400 million secured loan on the Piscataway Towne Center. The
interest rate on the loan is 10.5%.
(f) Includes the issuance of 1.6 million shares of common stock sold on
January 22, 1997 and the issuance of 1.0 million shares of common stock
sold on August 5, 1997.
22
