SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number: 1-12216
CROWN AMERICAN REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation or organization)
25-1713733
(IRS Employer Identification No.)
Pasquerilla Plaza, Johnstown, Pennsylvania 15901
(Address of principal executive offices)
(814) 536-4441
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, par value $.01 per share
(Title of Class)
As of July 31, 1996, 27, 526,374 Common Shares of Beneficial Interest of the
registrant were issued and outstanding.
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements
for at least the past 90 days.
Yes X No ____
<PAGE>1
Crown American Realty Trust
Form 10-Q
INDEX
Part I - Financial Information Page
Item 1: Financial Statements
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 3
Consolidated Income Statements for the six and three months ended
June 30, 1996 and 1995 4
Consolidated Statement of Shareholders' Equity for the six months ended
June 30, 1996 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7 - 10
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 15
Part II - Other Information
Item 1: Legal Proceedings 16
Item 2: Changes in Securities 16
Item 3: Defaults Upon Senior Securities 16
Item 4: Submission of Matters to a Vote of Security Holders 16
Item 5: Other Information 16
Item 6: Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>2
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Balance Sheets
June 30, 1996 December 31, 1995
(Unaudited)
(in thousands)
<S> <C> <C>
Assets
Income properties:
Land $ 122,263 $ 122,445
Buildings and improvements 786,300 757,834
Deferred leasing and other charges 41,022 52,941
Net 949,585 933,220
Accumulated depreciation and amortization (267,282) (263,650)
Net 682,303 669,570
Investment in joint venture 5,808 5,893
Cash and cash equivalents 6,379 6,036
Tenant and other receivables 11,626 15,325
Deferred charges and other assets 35,422 40,694
Net $ 741,538 $ 737,518
Liabilities and Shareholders' Equity
Debt on income properties $ 562,286 $ 541,082
Accounts payable and other liabilities 31,761 39,152
Net 594,047 580,234
Minority interest in Operating Partnership 37,672 39,873
Commitments and contingencies
Shareholders' equity:
Common shares, par value $.01 per share,
120,000,000 shares authorized, 27,516,185
and 27,450,333 shares issued and outstanding
at June 30, 1996 and December 31, 1995,
respectively 275 274
Additional paid-in capital 182,479 181,337
Accumulated deficit (72,935) (64,200)
Net 109,819 117,411
Net $ 741,538 $ 737,518
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>3
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Income Statements
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Rental operations:
Revenues:
Minimum rent $ 20,584 $ 20,792 $ 41,542 $ 41,560
Percentage rent 998 1,119 2,617 2,595
Property operating cost
recoveries 6,711 7,032 14,636 14,437
Temporary and promotional
leasing 1,393 1,147 2,780 2,309
Net utility income 591 720 1,272 1,284
Business interruption insurance 356 353 830 863
Miscellaneous income 306 403 679 768
Net 30,939 31,566 64,356 63,816
Property operating costs:
Recoverable operating costs 9,549 9,858 20,277 19,411
Property administrative costs 495 373 992 963
Other operating costs 693 619 1,327 1,183
Depreciation and amortization 9,160 8,870 16,900 16,739
19,897 19,720 39,496 38,296
Net 11,042 11,846 24,860 25,520
Other expenses:
General and administrative 989 746 1,984 1,926
Interest 11,086 10,809 22,318 20,816
12,075 11,555 24,302 22,742
Net (1,033) 291 558 2,778
Property sales, disposals and
adjustments:
Adjustment to carrying value of
assets to be disposed of (35,000) (35,000)
Gain on sale of outparcel land 1,755 1,851 2,584 2,192
Net 1,755 (33,149) 2,584 (32,808)
Income (loss) before extraordinary
items and minority interest 722 (32,858) 3,142 (30,030)
Extraordinary loss on early
extinguishment of debt (120) (120)
Extraordinary gain on fire
insurance claim 7,700 11,000
Income (loss) before minority
interest 602 (25,158) 3,022 (19,030)
Minority interest in Operating
Partnership (151) 6,481 (767) 4,936
Net income (loss) $ 451 $ (18,677) $ 2,255 $ (14,094)
Per share data (after
minority interest):
Income (loss) before
extraordinary item $ .01 $ (.89) $ .08 $ (.81)
Extraordinary items .21 .30
Net income (loss) $ .01 $ (.68) $ .08 $ (.51)
Weighted average shares
outstanding 27,493 27,399 27,476 27,316
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>4
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statement of Shareholders' Equity
(Unaudited)
Common Additional
Shares Common Paid in (Accumulated
Outstanding Shares Capital Deficit) Total
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
27,450 Balance, January 1, 1996 $ 274 $ 181,337 $ (64,200) $ 117,411
66 Shares issued under
dividend reinvestment
plan 1 502 503
Transfer in (out) of
limited partner's
interest in the
Operating Partnership (438) (438)
Capital contributions
from Crown Investments
Trust:
Cash flow support 1,078 1,078
Tenant allowances
Net income 2,255 2,255
Dividends paid (10,990) (10,990)
27,516 Balance, June 30, 1996 $ 275 $ 182,479 $ (72,935) $ 109,819
</TABLE>
<PAGE>5
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
1996 1995
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,255 $ (14,094)
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in Operating Partnership 767 (4,936)
Adjustment to carrying value of assets to be
disposed of 35,000
Equity earnings in joint venture (300) (383)
Depreciation and amortization 21,277 20,904
Extraordinary loss on early extinguishment of debt 120
Extraordinary gain on fire insurance claim (11,000)
Net changes in:
Tenant and other receivables 3,699 2,031
Deferred charges and other assets 2,442 2,161
Accounts payable and other liabilities (7,391) 554
Net cash provided by operating activities 22,869 30,237
Cash flows from investing activities:
Investment in income properties (1995 includes
$53.9 million related to two purchased malls
- see Note 3) (29,536) (73,469)
Distributions from joint venture 200 300
Net cash (used in) investing activities (29,336) (73,169)
Cash flows from financing activities:
Net proceeds from sale of common shares and from
dividend reinvestment plan 503 3,374
Proceeds from issuance of debt, net of issuance cost 40,804 60,854
Debt repayments (21,179) (2,612)
Dividends and distributions paid (14,766) (24,802)
Advances from affiliate 6,400
Cash flow support 1,448 1,228
Net cash provided by financing activities 6,810 44,442
Net increase in cash and cash equivalents 343 1,510
Cash and cash equivalents, beginning of period 6,036 2,136
Cash and cash equivalents, end of period $ 6,379 $ 3,646
Interest paid (net of capitalized amounts) $ 20,188 $ 19,054
Interest capitalized $ 1,439 $ 1,587
Non-cash financing activities:
Tenant improvements funded by Crown Investments
Trust, including $0 and $15 allocated to minority
interest in Operating Partnership $ $ 57
Issuance of partnership units related to Wyoming
Valley acquisition $ $ 8,149
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>6
CROWN AMERICAN REALTY TRUST
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Organization
In 1993 Crown American Corporation, a Pennsylvania Corporation, and a wholly-
owned subsidiary of Crown Holding Company ("Crown Holding"), approved a
business combination plan in which Crown American Associates ("Crown
Associates" and "Successor to Crown American Corporation") and Crown American
Realty Trust (the "Company") were formed. The Company is a real estate
investment trust under the Internal Revenue Code of 1986, as amended. The
Company raised approximately $405 million in equity through an initial public
offering of approximately 25.5 million shares, which occurred on August 17,
1993, and used the proceeds to purchase a 78% general partnership interest in
Crown American Properties, L.P. (the "Operating Partnership"), a partnership
which was formed just prior to consummation of the offering referred to
above and is the successor entity of Crown American Realty Properties (the
"Predecessor"). The proceeds were used by the Operating Partnership to retire
debt.
Simultaneously with the public offering, Crown Associates and an affiliate
transferred certain properties (collectively, the "Properties") and the
management operations into either the Company, the Operating Partnership, or
Crown American Financing Partnership (the "Financing Partnership"), a
partnership which is 99.5% owned by the Operating Partnership and 0.5% owned
by the Company. As a result, the Company is engaged primarily in the ownership,
operation, management, leasing, acquisition, expansion, development and
financing of shopping malls.
The limited partnership interest in the Operating Partnership and the 1.6
million shares in the Company received for two malls transferred in 1993 are
held by Crown Investments Trust ("Crown Investments"), an affiliate of Crown
Associates, or members of the Pasquerilla family.
Simultaneously with the above transaction, the Financing Partnership borrowed
$300 million of mortgage debt (the "Mortgage Loans") secured by its 15 enclosed
shopping malls. The $300 million of mortgage debt, together with the
proceeds of the equity offering, were used to retire existing debt contributed
by the Predecessor.
In January and February 1995 the Company purchased two malls - see Note 3.
The Properties currently consist of: (1) 24 enclosed shopping malls (together
with adjoining outparcels and undeveloped land) located in Pennsylvania, New
Jersey, Maryland, Tennessee, West Virginia, Virginia and Georgia, (2) a 50%
general partnership interest in Palmer Park Mall Venture, which owns Palmer Park
Mall located in Easton, Pennsylvania (3) Patrick Henry Corporate Center, an
office building located in Newport News, Virginia, (4) Pasquerilla Plaza, an
office building in Johnstown, Pennsylvania, which serves as the headquarters of
the Company and is partially leased to other parties, and (5) a parcel of
land improved with a building leased to an anchor store tenant.
<PAGE>7
As the owner of real estate, the Company is subject to risks arising in
connection with the underlying real estate, including defaults under or non-
renewal of tenant leases, competition, inability to rent unleased space, failure
to generate sufficient income to meet operating expenses, as well as debt
service, capital expenditures and tenant improvements, environmental matters,
financing availability and changes in real estate and zoning laws. The success
of the Company also depends upon certain key personnel, the Company's ability
to maintain its qualification as a REIT, compliance with the terms and
conditions of the Mortgage Loans and other debt instruments, and trends in
the national and local economy, including income tax laws, governmental
regulations and legislation and population trends.
Basis of Presentation
The accompanying consolidated financial statements of the Company include all
accounts of the Company and its majority-owned subsidiary, the Operating
Partnership (74.4% owned by the Company), which in turn includes the Financing
Partnership (99.5% owned by the Operating Partnership and 0.5% by the
Company). All significant intercompany amounts have been eliminated.
In the opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments of a normal recurring nature necessary for a
fair presentation of the financial position and results of operations of the
Company. These consolidated financial statements and the accompanying notes
should be read in conjunction with the audited consolidated financial
statements of the Company for the year ended December 31, 1995, which are
included in its Annual Report on Form 10-K. The results of operations for
interim periods are not necessarily indicative of results to be expected
for the year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - DEBT ON INCOME PROPERTIES
Debt on income-producing properties consisted of the following (in thousands):
<TABLE>
<CATPION>
June 30, 1996 December 31, 1995
<S> <C> <C>
Mortgage loans $ 280,637 $ 280,637
Permanent loans 170,661 171,049
Construction loans 71,652 52,800
Secured term loans 39,336 36,596
$ 562,286 $ 541,082
</TABLE>
<PAGE>8
The Mortgage Loans are non-recourse to the Financing Partnership and are
evidenced by 14 separate notes requiring aggregate principal payments of $80.6
million in August 1998 and $100 million each in August of 2000 and 2003,
subject to optional prepayment. The notes bear fixed interest, payable monthly,
at rates of 6.55%, 7.20% and 7.85% for the loans due in 1998, 2000, and 2003,
respectively, for an average rate of 7.20% during 1993, 1994 and 1995. The
average rate as of June 30, 1996 is 7.25%. Repayment of the Mortgage Loans
is secured by separate first mortgage liens and second mortgage liens (each a
"Mortgage") on the 14 malls owned by the Financing Partnership and by
assignments of all of the Financing Partnership's interest in the rents and
the leases at each of such mortgaged properties. In order to maintain
certain tax bases, Crown Investments guaranteed approximately $250 million of
such indebtedness. Each Mortgage contains a cross-default provision allowing
the Lender to declare a default under any or all of the Mortgages if the
Financing Partnership fails to make any payment of principal, interest,
premium or any other sum due under any Mortgage Loan or another event of
default occurs under the mortgage documents.
Principal of the Mortgage Loans is subject to prepayment, in whole or in part,
at the option of the Financing Partnership, on any monthly interest payment
date after five years; provided, however, that the mandatory principal
payments due at the end of year five may be made at any time after the end of
year four. The first $80.6 million tranche can be prepaid after August 1997,
subject to the payment of a yield maintenance charge. After February 1998
prepayment of this tranche would not be subject to the yield maintenance
charge. After August 1998 voluntary prepayments of the remaining two tranches
would be subject to the payment of a yield maintenance charge; however, six
months prior to the due date of the remaining two tranches, prepayment may be
made without penalty. Principal of the Mortgage Loans is subject to mandatory
prepayment as a result of certain events of casualty or condemnation at the
Mortgaged Properties as provided in the respective Mortgages.
The Company is also required to deposit funds, either quarterly or annually, in
a restricted cash account for capital plan reserves and renovation reserves.
Amounts may be withdrawn from such accounts for the specific items related to
such account. As of June 30, 1996, $2.7 million of cash was restricted for the
above items, including a fully-funded storage tank remediation reserve, and
is included in deferred charges and other assets.
Permanent Loans
At June 30, 1996, permanent loans consisted of 10 loans secured by eight
properties held by the Operating Partnership with various maturities from
January 1997 through December 2008. Included in permanent loans are (1) a $3.2
million interest free Urban Development Action Grant loan with the City of
Johnstown, Pennsylvania, secured by an office building and due October 2006,
and (2) a 4% Industrial Development Bond secured with a $1.5 million letter of
credit. This letter of credit expires on April 30, 1997, and requires an annual
fee of $22,000.
In June 1996, the Company closed a $17.0 million mortgage loan secured by a mall
property. The new loan has a fixed interest rate of 8.7% and a five year term.
The proceeds from the new loan were primarily used to repay $16.5 million of
existing debt on the same property which had a 9.9% rate and which had been
scheduled to mature in September 1996. Unamortized deferred financing costs
of $120 thousand related to the repaid debt were written off in June 1996 as an
extraordinary loss on early extinguishment of debt.
Construction Loans
At June 30, 1996, the Company had construction loans on three malls. The loans
bear interest at variable interest rates indexed to the LIBOR rate. Crown
Investments has guaranteed one loan of $18.5 million. The loans have certain
restrictive covenants including minimum coverage ratios and limitations on
investments and borrowings without the prior consent of the lenders.
<PAGE>9
Secured Term Loans
At June 30, 1996, the Company had four secured term loan arrangements totaling
$43.3 million of which $39.3 million was outstanding ($36.6 million outstanding
at December 31, 1995). The $20.0 million and $10.0 million loans expire in
January 1997 and are restricted to be used primarily for the Viewmont Mall
expansion. The $7.7 million loan ($5.6 million outstanding at June 30, 1996)
is used for construction commitments at West Manchester, Lycoming, Uniontown
and North Hanover Malls. This loan expires in January 1997. The $5.6 million
revolving loan ($4.6 million outstanding at June 30, 1996) is used for
general corporate purposes and was renewed for an additional 12 months on
April 29. The loans have certain restrictive covenants including the
maintenance of certain coverage ratios and limitations on investments and
borrowings without the prior consent of the lenders.
The Company is required to maintain a letter of credit payable to the lender for
construction of an addition at West Manchester Mall and additions at Lycoming,
Uniontown, and North Hanover Malls. This letter of credit has been reduced
from $7.7 million to $2.0 million due to the completion of the additions at
West Manchester and Lycoming Malls. The letter of credit expires on January 31,
1997 and requires an annual fee of $40,000.
Interest Rates
The Mortgage Loans on the Financing Partnership properties and nine of the
permanent loans related to seven of the Operating Partnership properties
(aggregate principal outstanding of $401.7 million at June 30, 1996) have
fixed interest rates ranging from 0% to 9.8%. The weighted average interest
rate on this fixed-rate debt at June 30, 1996 and December 31, 1995 was 7.85%
and 7.90%, respectively. The weighted average interest rate during the six
months ended June 30, 1996 and 1995 was 7.90% and 7.74%, respectively.
All of the remaining loans (aggregate principal outstanding of $160.6 million at
June 30, 1996) have variable rated debt based on spreads ranging from 1.75% to
5.0% above 30 day LIBOR, except for one loan which is based on the prime rate
plus .625%. The weighted average interest rate on the variable rated debt at
June 30, 1996 and December 31, 1995 was 8.00% and 8.44%, respectively. The
weighted average interest rate during the six months ended June 30, 1996 and
1995 was 8.03% and 8.63%, respectively.
Debt Maturities
As of June 30, 1996, the scheduled principal payments on all debt, including
extensions available at the Company's option provided the debt is not in
default at the extension dates, are as follows (in thousands):
<TABLE>
<CAPTION>
Period/Year Ending
December 31,
<S> <C>
1996 (six months) $ 1,625
1997 (year) 159,453
1998 (year) 93,068
1999 (year) 826
2000 (year) 177,725
Thereafter 129,589
Net $ 562,286
</TABLE>
<PAGE>10
NOTE 3 - PURCHASE OF TWO MALLS
At the time of the Company's formation in 1993, Crown Associates retained (i) a
50% tenancy-in-common title to two enclosed shopping malls (Wyoming Valley Mall
located in Wilkes-Barre, Pennsylvania and Middletown Mall located in
Fairmont, West Virginia) and (ii) related ground leasehold interests pursuant to
long-term ground leases of each of such undivided interests. The other 50%
tenancy-in-common interests in both properties were held by an unrelated
third party, which at the time objected to the purchase of the properties by the
Company.
In 1994, the Company, Crown Associates and the unrelated third party entered
into agreements under which all interests in the two malls together with the
related working capital were transferred to the Operating Partnership. The
Wyoming Valley Mall was transferred on January 31, 1995 and the Middletown
Mall was transferred on February 1, 1995 in exchange for $45.2 million in cash,
the assumption of debt aggregating $7.8 million, of which $6 million is a
non-recourse note (related to the Middletown Mall), and an additional 1,786,459
partnership units equal to a 5.1% partnership interest in the Operating
Partnership, which were issued to an affiliate of Crown Investments Trust. The
Company also paid all transaction costs, including transfer taxes and legal
fees. There is additional contingent consideration to CAIC with respect to
Middletown Mall, to be paid in partnership units, based on this mall's operating
performance over the following three year period. Working capital at the
date of purchase approximated $1.0 million.
The two malls were recorded at approximately $62.0 million, including (a) $53.9
million based on the acquisition price paid to the unrelated third party, the
debt assumed, and the monetary consideration paid to Crown Associates, and
(b) $8.1 million based on the historical cost of Crown Associates as a result of
the issuance of additional partnership units. Due to use of historical cost
basis for valuing a portion of the purchase price, the additional limited
partnership units issued for Wyoming Valley Mall resulted in a net reduction in
additional paid in capital of $739,000.
NOTE 4 - EXTRAORDINARY GAIN
On December 16, 1994 a fire occurred at the Logan Valley Mall located in
Altoona, Pennsylvania. The fire destroyed 44 small shops aggregating 148,800
square feet of gross leaseable area (GLA) as well as affecting three
additional small shops containing approximately 18,000 square feet of GLA. In
1995 the Company filed a claim with its insurance company for property damage
and business interruption losses. In the first quarter of 1995 an extraordinary
gain of $3.3 million was recorded representing the excess of advances received
under the property damage insurance over the net book value of destroyed
assets and related demolition and clean up costs. In the second quarter of 1995
an additional extraordinary gain of $7.7 million was recorded representing
the remaining estimated gain expected to be realized upon settlement of the
insurance claim. In the third quarter of 1995 the Company settled the claim
with the insurance company and recorded $0.2 million of additional gain. The
Company also has business interruption insurance that has provided for lost
income on the damaged part of the mall through May 1996. The destroyed portion
of the mall is being re-built and expanded, the first phase of which will
open in the third quarter of 1996.
<PAGE>11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain following comments contain forward looking statements that involve risk
and uncertainties. Factors that could cause actual results to differ materially
include: overall economic conditions, local economic conditions in the
market areas surrounding each property, consumer buying trends, expansion and
development plans of retailers and other current and potential tenants, the
impact of competition, weather patterns and related impact on consumer spending,
changing interest rates and financing conditions, and other risk factors listed
from time to time in the Company's SEC reports, including this report on Form
10Q for the quarter ended June 30, 1996.
Selected Financial Data
The table on the following page sets forth selected financial data for the
Company for the six months and the three months ended June 30, 1996 and 1995.
Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with this table and the interim
financial statements on pages 3 to 10.
Performance Measurement
Management believes that there are several important factors that contribute to
the ability of the Company to increase rent and improve profitability of its
enclosed shopping malls and other income properties, including aggregate
anchor tenant and mall shop tenant sales volume, mall shop retail tenant sales
per square foot and occupancy levels. Each of these factors has a
significant effect on Funds from Operations and EBITDA.
Funds from Operations (FFO) is a recognized industry performance measure for
real estate investment trusts (REIT's) and as defined by the National
Association of Real Estate Investment Trusts (NAREIT) generally represents
net income or loss (computed in accordance with generally accepted accounting
principles) before real estate depreciation and amortization (as defined) and
extraordinary items, and additionally includes amounts under the Company's cash
flow support agreement (see Note 7 to the financial statements included in the
Company's 1995 Form 10K). Management believes that Funds from Operations is
an appropriate measure of the Company's operating performance because reductions
for depreciation and amortization charges are not meaningful in evaluating
the operating results of the Properties, which have historically been
appreciating assets. Gain on sales of outparcel land have been included in this
supplemental measure of performance. Gain on sales of anchor store
locations, adjustments to carrying values of assets to be disposed of, and the
extraordinary items are excluded from FFO because such transactions are uncommon
and not a part of ongoing operations.
EBITDA is defined as revenues and gain on sale of outparcel land, less operating
costs, including general and administrative expenses, before interest, and all
depreciation and amortization. Management believes this measure provides
the clearest indicator of operating performance for the following reasons:
(i) it is industry practice to evaluate the performance of real estate
properties based on net operating income (or NOI), which is generally
equivalent to EBITDA; and (ii) both NOI and EBITDA are unaffected by the debt
and equity structure of the property owner.
Funds from Operations and EBITDA (i) do not represent cash flow from operations
as defined by generally accepted accounting principles, (ii) are not
necessarily indicative of cash available to fund all cash flow needs and
(iii) should not be considered as an alternative to net income for purposes of
evaluating the Company's operating performance.
<PAGE>12
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the Selected Financial Data and
the accompanying consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Selected Financial Data:
EBITDA (2 & 4) $ 22,063 $ 22,939 $ 44,617 $ 44,928
Funds from Operations (FFO) (3&4)
Net Income $ 451 $(18,677) $ 2,255 $(14,094)
Adjustments:
Minority interest in Operating
Partnership 151 (6,481) 767 (4,936)
Adjustment to carrying value of
assets to be disposed of 35,000 35,000
Depreciation and amortization 9,449 9,025 17,520 17,313
Operating covenant amortization 647 745 1,293 1,392
Cash flow support 690 658 1,448 1,226
Extraordinary loss on early
extinguishment 120 120
Extraordinary gain on fire
insurance claim (7,700) (11,000)
Funds from Operations (FFO) $ 11,508 $ 12,570 $ 23,403 $ 24,901
Funds from Operations (Company's
percentage share):
Funds from Operations $ 8,593 $ 9,388 $ 17,485 $ 18,685
Funds from Operations per share
(1) $ .32 $ .34 $ .64 $ .68
Average shares outstanding 27,493 27,399 27,476 27,316
(1) Per share data is based on the average shares outstanding for each period
as shown in the table.
(2) EBITDA represents earnings (before minority interest and extraordinary item)
before interest, and all depreciation and amortization.
(3) Funds from Operations represents net income before depreciation and
amortization of real estate assets, plus cash flow guarantee amounts, and
excluding unusual items.
(4) EBITDA and Funds from Operations (i) do not represent cash flow from
operations as defined by generally accepted accounting principles, (ii) are not
necessarily indicative of cash available to fund all cash flow needs and (iii)
should not be considered as an alternative to net income for purposes of
evaluating the Company's operating performance.
</TABLE>
<PAGE>13
Comparison of Six and Three Months Ended June 30, 1996 to the corresponding
periods of 1995
- - - Revenues
Adjusting for the effect of the two malls that were purchased at the end of
January 1995, comparable total revenues for the first six months of 1996 were
down $0.5 million compared to 1995, as $0.9 million from higher minimum
rents and higher temporary leasing income was offset by $0.9 million in lower
step rent income (due mostly to write-off's of step rent receivables related
to tenant bankruptcies and early terminations) and $0.3 million in lower lease
buyouts and $0.2 million in lower recovery and other income. Minimum rents from
small shop tenants were up slightly from last year, as higher average rental
rates were largely offset by lower mall shop occupancy rates. Percentage
rents from small shops are up $0.1 million due to higher tenant sales.
Minimum and percentage rents for anchor stores on a combined basis were flat
with 1995.
For the second quarter of 1996, total revenues were down $0.6 million compared
to 1995, as $0.4 million from higher minimum rents and temporary leasing
income was offset by $0.7 million in lower step rent income (due mostly to
write-offs of step rent receivables from tenants that terminated leases
early) and $0.3 million in lower recovery income (due mostly to lower
recoverable costs in the quarter). Minimum rents from small shop tenants were
up slightly from last year, as higher average rental rates were largely
offset by lower mall shop occupancy rates. Percentage rents from small
shops were flat with 1995. Minimum and percentage rents for anchor stores
on a combined basis were down $0.2 million compared with 1995 due mainly to
loss of rent from an anchor that closed in early 1996 (Jamesway at South Mall).
- - - Property Operating Costs:
For the first six months of 1996, property operating costs were $39.5 million, a
$1.2 million increase from the first six months of 1995. Factors
contributing to this $1.2 million increase were the following: a) $0.6 million
related to the two acquisition properties bought by the Company in January
and February 1995, b) additional recoverable costs and expenses of $0.5
million, primarily due to higher snow removal costs and real estate tax
expense, offset by c) lower depreciation and amortization expense of $0.1
million, primarily as a result of stopping depreciation and amortization on
assets held for sale in accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, which was adopted in the first quarter of 1996.
For the second quarter of 1996, property operating costs were $19.9 million
compared with $19.7 million in 1995, a $0.2 million increase. Factors
contributing to this $0.2 million increase were the following: a) $0.3
million in higher depreciation and amortization and b) $0.5 million in lower
recoverable and non-recoverable property costs from cost containment efforts.
During the second quarter, several assets that had been held for sale were no
longer being offered due to new development opportunities and other reasons,
and accordingly, depreciation was resumed in the second quarter for such
properties. (See Note 14 to the financial statements in the Company's 1995
Form 10-K.)
- - - General, Administrative and Interest Expenses:
For the first six months of 1996, general and administrative expenses were $2.0
million, up less than $0.1 million from 1995. In the second quarter of 1996,
general and administrative expenses were $1.0 million, about $0.2 million
more than 1995.
<PAGE>14
- - - Gain on Property Sales and Disposals:
The gain on the sale of outparcel land was $2.6 million for the first six months
of 1996 and $1.8 million in the second quarter. These amounts are $0.4
million higher and $0.1 million lower than the amounts in the corresponding
periods of 1995.
- - - Net Income:
Net income for the first six months of 1996 was $2.3 million, or $0.08 per
share, compared with a $14.1 million loss in 1995, or $0.51 per share. The
net loss in 1995 resulted from the $35.0 million adjustment in the carrying
value of certain assets that were to be offered for sale (see Note 14 to the
financial statements in the Company's 1995 Form 10K), offset by $11.0
million, or $0.30 per share, from extraordinary gain from fire insurance.
Net income for the second quarter of 1996 was $0.5 million, or $0.01 per share,
compared with a $18.7 million loss in 1995, or $0.68 per share. The net loss
in the second quarter of 1995 resulted from the $35.0 million adjustment in the
carrying value of certain assets that were to be offered for sale (see Note 14
to the financial statements in the Company's 1995 Form 10K), offset by $7.7
million, or $0.21 per share, from extraordinary gain from fire insurance.
- - - Funds from Operations:
Beginning in 1996, the Company adopted the new NAREIT (National Association of
Real Estate Investment Trusts) definition of Funds From Operations (FFO). All
prior period comparative figures have been restated in accordance with the
new FFO definition.
For the six months ended June 30, 1996, the Company's percentage share of Funds
from Operations (FFO) was $17.5 million, or $0.64 per share, compared with $18.7
million, or $0.68 per share for corresponding period in 1995. FFO during the
first six months of 1996 was impacted by several factors compared with the same
period of 1995. Positive factors affecting total FFO were: $0.3 million
additional contribution from the two malls purchased in the first quarter of
1995; $0.4 million in higher minimum and percentage rents; $0.5 million in
higher temporary leasing income; and $0.4 million in higher gain on land
sales. These positive factors were offset by: $1.1 million in higher interest
costs from higher average balances outstanding, higher amortization of
deferred financing costs, and lower capitalized interest; $0.3 million in
lower lease buy-out and miscellaneous income; $0.9 million in lower step rent
income; and $0.6 million in higher property operating costs (mainly snow
removal costs) net of higher recovery income.
For the quarter ended June 30, 1996, the Company's percentage share of Funds
from Operations (FFO) was $8.6 million, or $0.32 per share, compared with
$9.4 million, or $0.34 per share for corresponding period in 1995. FFO
during the second quarter of 1996 was impacted by several factors compared with
the same period of 1995. Positive factors affecting total FFO were:
$0.1 million in higher minimum and percentage rents; $0.2 million in higher
temporary leasing income; and $0.2 million in higher lease buyout income.
These positive factors were offset by: $0.3 million in higher interest costs
from higher average balances outstanding, higher amortization of deferred
financing costs, offset by higher capitalized interest; $0.2 million in lower
utility and miscellaneous income; $0.7 million in lower step rent income; $0.1
million lower gain on land sales; and $0.2 million higher general and
administrative costs.
<PAGE>15
EBITDA - Earnings before Interest, Taxes, Depreciation And Amortization, and
Unusual Items
For the six months ended June 30, 1996, EBITDA was $44.6 million compared to
$44.9 million in 1995. For the second quarter of 1996, EBITDA was $22.1
million compared to $22.9 million in 1995.
Liquidity and Capital Resources
The Company believes that its cash generated from property operations and funds
obtained from property financings will provide the necessary funds on a short
- - -term and long-term basis for its operating expenses, interest expense on
outstanding indebtedness and recurring capital expenditures and tenant
allowances, and dividends to shareholders in amounts that would be necessary
to satisfy the REIT requirements under the Internal Revenue Code. The Company's
ability to pay dividends is affected by several factors, including cash flow
from operations and capital expenditures. Dividends by the Company will be
at the discretion of the Board of Trustees and will depend on the cash available
to the Company, its financial condition, investment needs and opportunities,
capital and other requirements, and such other factors as the Trustees may
consider.
Sources of capital for non-recurring capital expenditures, such as major
building renovations and expansions, as well as for scheduled principal
payments, including balloon payments on the outstanding indebtedness, are
expected to be obtained from additional Company or property financings and
refinancings, sale of non-strategic assets, additional equity raised in the
public or private markets, and from retained internally generated cash flows, or
from combinations thereof.
During 1995 the Company started the reconstruction and expansion of the fire-
damaged Logan Valley Mall; the entire construction project is expected to be
completed in late 1997 and to cost approximately $68 million, including tenant
allowances for new tenants; construction financing in an amount up to $57.8
million has been arranged, with the remaining project costs to be funded from
the Company's internal cash flows and other sources.
Part II - Other Information
Item 1: Legal Proceedings
The Company from time to time is involved in litigation incidental to its
business. Except as described below, neither the Company, the Operating
Partnership nor the Financing Partnership are currently involved in any
material litigation and, to the best of the Company's knowledge, there is no
material litigation currently threatened against the Company, the Operating
Partnership, the Financing Partnership or the Properties, other than routine
litigation arising in the ordinary course of business, most of which is
expected to be covered by liability insurance or established reserves.
On August 10, 1995, August 17, 1995, and September 8, 1995, complaints were
filed by various individuals on behalf of themselves, and also purportedly on
behalf of other similarly situated persons, against the Company and certain
of its executive officers in United States District Court for the Western
District of Pennsylvania to recover unspecified damages under the federal
securities laws resulting from a decline in the market price for the Company's
common shares of beneficial interest which are listed and traded on the New York
Stock Exchange. The decline in the Company's share price followed the
announcement on August 8, 1995, of various operational and capital resource
initiatives by the Company, including a reduction of the Company's quarterly
dividend to increase its level of retained internal cash flow and the sale of
certain assets that do not currently fit the Company's growth strategy.
<PAGE>16
A fourth Complaint was filed the week of December 15, 1995, by an individual on
behalf of himself and also purportedly on behalf of other similarly situated
persons, against the Company and certain of its current and former executive
officers in United States District Court for the Eastern District of
Pennsylvania. While this Complaint is substantially similar to the previous
Complaints, it alleges a class period extending from August 17, 1993, (the IPO
Date) to August 8, 1995.
All four cases have been consolidated in the Western District, and a
consolidated amended complaint has been filed. The Company has a motion seeking
to dismiss the consolidated action which is currently pending before the Court.
This consolidated legal action is in a very preliminary stage. However, the
Company believes, based on advice of legal counsel, that it and the named
officers have substantial defenses to the Plaintiffs' claims, and the Company
intends to vigorously defend the action. The Company's current and former
officers that are named in this litigation are covered under a liability
insurance policy paid for by the Company. The Company's officers also have
indemnification agreements with the Company. While the final resolution of this
litigation cannot be presently determined, management does not believe that
it will have a material adverse affect on the Company's results of operations or
financial condition.
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held in Johnstown, Pennsylvania on
May 1, 1996 for the purpose of considering and acting on the following
proposals:
1. Election of persons (Mark E. Pasquerilla, Clifford A. Barton, and
Margaret T. Monaco) to serve as Trustees for a three-year term.
The proposals were described in a proxy statement dated March 20, 1996.
A quorum was present at the meeting, and the three proposals were approved.
The holders of 93.5% of the Common Shares which were present in person or by
proxy at the Annual Meeting voted for the election of Mark E. Pasquerilla,
Clifford A. Barton, and Margaret T. Monaco as Trustees of the Company for three-
year terms expiring at the annual meeting of shareholders in 1999.
There were no other nominees for election as a Trustee for a three-year term
expiring at the annual meeting of shareholders in 1999. Accordingly, Mark E.
Pasquerilla, Clifford A. Barton, and Margaret T. Monaco were elected as
Trustees of the Company for a three-year term expiring at the annual meeting of
shareholders in 1999.
Item 5: Other Information
On August 7, 1996, the Company issued its regular quarterly earnings release
and its Second Quarter 1996 Supplemental Financial and Operational Information
Package for analysts and investors. Copies of these documents are hereby filed
as Exhibits to the Form 10-Q.
Exhibit 99 (a) - Press release dated August 7, 1996
Exhibit 99 (b) - Second Quarter 1996 Supplemental Financial and Operational
Information Package
Item 6: Exhibits and Reports on Form 8-K
None
<PAGE>17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 7, 1996 CROWN AMERICAN REALTY TRUST
/s/ Frank J. Pasquerilla
Frank J. Pasquerilla
Chairman of the Board
of Trustees and Chief Executive Officer
(Authorized Officer of the Registrant
and Principal Executive Officer)
Date: August 7, 1996 CROWN AMERICAN REALTY TRUST
/s/ Mark E. Pasquerilla
Mark E. Pasquerilla
President
(Authorized Officer of the Registrant
and Principal Executive Officer)
Date: August 7, 1996 CROWN AMERICAN REALTY TRUST
/s/ John M. Kriak
John M. Kriak
Executive Vice-President and
Chief Financial Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)
Date: August 7, 1996 CROWN AMERICAN REALTY TRUST
/s/ Terry L. Stevens
Terry L. Stevens
Senior Vice President and
Chief Accounting Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)
<PAGE>18
Exhibit 99(a)
NEWS FROM:
C R O W N A M E R I C A N R E A L T Y T R U S T
CONTACT: Media: Christine Menna 814-536-9520
Investors: Frank Pasquerilla 814-535-9347
Mark Pasquerilla 814-535-9364
Internet: http://www.crownam.com
IMMEDIATE RELEASE: Wednesday, August 7, 1996
CROWN AMERICAN REALTY TRUST
ANNOUNCES SECOND QUARTER RESULTS AND DECLARES DIVIDEND
Johnstown, Pa. - Crown American Realty Trust (NYSE:CWN), a real estate
investment trust, today announced financial results and operating information
for the second quarter (April 1 to June 30) and the first six months of 1996.
The Company also declared a regular quarterly dividend.
Dividend Information
For the quarter ended June 30, 1996, the Board of Trustees declared a regular
quarterly dividend of $.20 per share. The dividend is payable September 13,
1996 to shareholders of record on August 28, 1996.
Financial Information
For the quarter ended June 30, 1996, the Company reports that its percentage
share of Funds from Operations (FFO) was $8.6 million, or $0.32 per share,
compared with $9.4 million, or $0.34 per share for second quarter 1995.
Positive factors affecting total FFO were: $0.1 million in higher minimum and
percentage rents; $0.2 million in higher temporary leasing income; and $0.2
million in higher lease buyout income. These positive factors were offset by:
$0.3 million in higher interest costs from higher average balances
outstanding and amortization of deferred financing costs offset by higher
capitalized interest; $0.2 million in lower utility and miscellaneous income;
$0.7 million in lower step rent income (due mostly to write-off's of step rent
receivables related to tenant bankruptcies and early terminations); $0.1
million lower gain on land sales; and $0.2 million higher general and
administrative costs.
For the first six months of 1996, the Company's share of FFO was $17.5 million
or, $0.64 per share, as compared to $18.7 million, or $0.68 per share, for
the first six months of 1995. Positive factors affecting total FFO were: $0.3
million additional contribution from the two malls purchased in the first
quarter of 1995; $0.4 million in higher minimum and percentage rents; $0.5
million in higher temporary leasing income; and $0.4 million in higher gain
on land sales. These positive factors were offset by: $1.1 million in higher
interest costs from higher average balances outstanding, higher amortization
of deferred financing costs, and lower capitalized interest; $0.3 million in
lower lease buy-out and miscellaneous income; $0.9 million in lower step rent
income; and $0.6 million in higher property operating costs (mainly snow
removal costs) net of higher recovery income.
<PAGE>19
Total revenues for the second quarter of 1996 were $30.9 million compared to
$31.6 million for the second quarter of 1995. Compared to the second quarter
1995 and to the first quarter of this year, total revenues were lower
primarily due to lower operating cost recovery income caused mainly from lower
recoverable costs and to lower step rent income, as noted above. For the
first six months of 1996, total revenues were $64.4 million compared to $63.8
million for the same period in 1995; $1.0 million of the increase relates to
inclusion of six months of revenues in 1996 from two malls purchased in early
1995 versus only five months of revenues last year.
Net income for the second quarter of 1996 was $0.5 million, or $0.01 per share,
compared with an $18.7 million loss, or ($0.68) per share, in 1995. The net loss
in the second quarter of 1995 resulted from the $35.0 million adjustment in
the carrying value of certain assets to be disposed of (see Note 14 to the
financial statements in the Company's 1995 Form 10K), offset by $7.7 million, or
$0.21 per share, from extraordinary gain from fire insurance. For the first
six months of 1996, net income was $2.3 million, or $0.08 per share, compared to
a $14.1 million loss, or ($0.51) per share, in 1995.
Operating Information
During the second quarter of 1996, leases for 65,000 square feet of mall shops
were signed resulting in $1.4 million in annual base rental income. A total of
45 leases were signed, which included 13 renewals and 32 new leases. The
average rent for leases signed was $22.32 per square foot which is 9 percent
higher than the average rental rate achieved in the second quarter of 1995. The
1996 rate includes $21.20 for new leases and $26.51 for renewals.
For the eleventh consecutive quarter the average base rent of the portfolio
has increased. The average base rent as of June 30, 1996 was $15.56 per square
foot. This is a 4.7 percent increase from $14.86 per square foot as of
June 30, 1995.
Overall, mall shop occupancy was 77 percent as of June 30, 1996, compared with
79 percent at March 31, 1996, and 81 percent at June 30, 1995.
Mall shop comparable tenant sales for the first six months of 1996 were $88.88
per square foot. This is a 4.7 percent increase over the same period of 1995.
In the six centers where the May Company opened new stores in 1995,
comparable mall shop tenant sales were up 4.4 percent.
Occupancy costs (base rent, percentage rent and expense recoveries divided by
mall shop sales) were 10.9 percent at both June 30, 1996 and 1995.
In May 1996, another milestone was completed in the rebuilding and expansion
of Logan Valley Mall in Altoona, Pa. (the Company's largest construction
project). The mall shop area between JCPenney and Sears that was destroyed in
the December 1994 fire has reopened with tenants opening in the third
quarter. Despite bad weather conditions in the first quarter of this year, the
construction remains on time and on budget. To date, the Company has
expended $38 million of the $68 million total project cost. The first level of
the new three level parking deck is now open with the remainder of the
structure scheduled for a late August completion. In October, the Sears
expansion and renovation will be completed and JCPenney is scheduled to open in
its new location in February 1997. The current JCPenney area will be
converted into mall shops and a food court with a Summer 1997 completion
expected. Comparable mall shop tenant sales show continuing momentum with a 6.2
percent increase over the prior year.
Temporary and seasonal leasing continues to be on track for a record year,
with an increase of $0.5 million in the first six months of this year
compared to 1995, a 20 percent increase.
<PAGE>20
In July 1996, the Company announced that Jacksonville, Florida-based Stein
Mart will make its Pennsylvania debut in Allentown's South Mall. The retailer
will occupy 37,000 square feet in the former Jamesway location with a November
1996 opening planned. This is the first step in the transformation of South
Mall into an upscale village center in accord with the very high household
income demographics within a mile radius of the property.
In June, the Company closed a five-year $17 million mortgage loan secured by
Mount Berry Square in Rome, Georgia. The new loan carries a fixed interest rate
of 8.7 percent. Proceeds from the new loan were used to repay existing
indebtedness on the property which was scheduled to mature later in 1996 and
which carried an interest rate of 9.9 percent.
"With the addition of six new May Company anchor stores, five Sears expansions,
and a JCPenney replacement, 1995 was a year of anchor transformations in our
portfolio, and 1996 is the beginning of a positive transformation of our mall
shop tenants," stated Crown American President, Mark E. Pasquerilla. "The
current consolidation and rationalization in mall specialty retailing,
particularly apparel-based retailing, has impacted our occupancy levels in 1996
through a higher than expected level of mall shop closings (123,000 square feet
more than in 1995) and a slowing of new lease signings. However, the specialty
retailers that closed in the first half were not strong performers, with an
average of only $107 per square foot in annual sales productivity. The
closings were also concentrated in popular priced women's apparel, thus
reducing our reliance on this category by six percent."
Pasquerilla continued, "This ongoing rationalization of mall shop specialty
retailers creates an important opportunity to transform the portfolio in a
positive way to create long-term value. We believe the elimination of poorer
performing and poorer credit quality specialty retailers will allow us to
build a stronger and more viable mall shop tenant base positioned to thrive
in future years. Furthermore, our efforts to introduce retail formats which
are new to our portfolio, to expand service providers, particularly in the
medical industry, and to increase the entertainment component through cinema
and theme restaurant operators, will create a more productive portfolio in the
long term. However, for the balance of this year, we expect mall shop occupancy
to remain relatively stable and to end the year within a range of 77 to 80
percent. Despite the lower occupancy, mall shop revenues should be relatively
stable compared with 1995 as lower occupancy will be somewhat offset by higher
average rental rates, and be further cushioned by an expected record year in
temporary leasing and another strong year in land sales. We continue to
expect that our full year 1996 FFO results will be near that of 1995."
Certain preceding quotations contain forward looking statements that involve
risk and uncertainties, including overall economic conditions, the impact of
competition, consumer buying trends, weather patterns and other factors.
Crown American Realty Trust (the "Company") is the sole general partner and
74.4 percent owner of Crown American Properties, L.P. (the "Operating
Partnership"). The Operating Partnership is a general partner of Crown
American Financing Partnership, which together own, acquire, operate and develop
regional shopping malls. Currently, the Company solely owns and operates 24
regional shopping malls in Pennsylvania, Maryland, Virginia, West Virginia, New
Jersey, Tennessee and Georgia. The Company also has a 50 percent joint
venture interest in a 25th mall property in Pennsylvania.
A copy of the Company's Supplemental Financial and Operational Information
package follows.
<PAGE>21
Exhibit 99 (b)
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
SECOND QUARTER 1996
OTHER FINANCIAL AND OPERATING DATA
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(in thousands, except as noted)
<S> <C> <C> <C> <C>
FINANCIAL DATA:
Funds from Operations ($000 except per share data):
Net Income (loss) $ 451 $ (18,677) $ 2,255 $ (14,094)
Adjustments:
Minority Interest in Operating
Partnership 151 (6,481) 767 (4,936)
Adjustment to carrying value
of assets to disposed 35,000 35,000
Depreciation and amortization
- real estate 9,449 9,025 17,520 17,313
Operating covenant amortization 647 745 1,293 1,392
Cash flow support amounts 690 658 1,448 1,226
Extraordinary gain on fire
insurance (7,700) (11,000)
Extraordinary loss on early
extinguishment of debt 120 120
Funds from Operations - - Total $ 11,508 $ 12,570 $ 23,403 $ 24,901
Funds from Operations - -
Company's percentage share $ 8,593 $ 9,388 $ 17,485 $ 18,685
FFO per share $ 0.32 $ 0.34 $ 0.64 $ 0.68
Average Shares Outstanding
during the period (000) 27,493 27,399 27,476 27,316
Shares Outstanding at period
end (000) 27,516 27,410 27,516 27,410
Average Operating Units
Outstanding during the period 36,932 36,837 36,915 36,458
Operating Units Outstanding at
period end (000) 36,955 36,849 36,955 36,849
Debt and Interest ($000):
Fixed rate debt at period end $ 401,666 $ 405,022 $ 401,666 $ 405,022
Variable rate debt at period end 160,620 132,565 160,620 132,565
Total debt at period end $ 562,286 $ 537,587 $ 562,286 $ 537,587
Weighted avg. interest rate on
fixed rate debt for the period 7.9% 7.8% 7.9% 7.8%
Weighted avg. interest rate on
variable rate debt for the
period 8.0% 8.5% 8.0% 8.6%
Total interest expense for period $ 11,086 $ 10,809 $ 22,318 $ 20,816
Amort. of deferred debt cost for
period (incl. in interest exp) 1,073 947 2,130 1,762
Capitalized interest costs during
period 832 585 1,439 1,587
</TABLE>
<PAGE>22
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
SECOND QUARTER 1996
OTHER FINANCIAL AND OPERATING DATA
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(in thousands, except as noted)
<S> <C> <C> <C> <C>
Capital Expenditures Incurred ($000):
Tenant improvements, including
those funded by Crown Investments
Trust $ 4,102 $ 2,575 $ 7,344 $ 5,599
Leasing costs and commissions 429 432 1,251 678
Expansions and major renovations 11,841 6,930 20,941 13,349
Acquired properties 53,900
All other capital expenditures
(included in Other Assets) 298 308 460 1,298
Total Capital Expenditures during
the period $16,670 $10,245 $29,996 $74,824
Other Data ($000):
Straight Line rental income during
the period $ (425) $ 252 $ (333) $ 611
OPERATING DATA:
Mall shop GLA at period end
(000 sq. ft.) 5,234 4,925
Occupancy percentage at period end 77% 81%
Comp. Store Mall shop sales -
6 months (per square foot) $ 88.88 $ 84.89
Mall shop occupancy cost percentage
at period end 10.9% 10.9%
Average mall shop base rent at
period end (psf) $ 15.56 $ 14.86
Mall shop leasing for the period:
New leases - sq feet (000) 51 75 150 143
New leases - $ per sq foot $ 21.20 $ 18.92 $ 19.89 $ 21.16
Number of new leases signed. 32 40 76 84
Renewal leases - sq feet (000) 14 31 82 109
Renewal leases - $ per sq foot $ 26.51 $ 24.44 $ 17.50 $ 16.78
Number of renewal leases signed. 13 27 52 58
Tenant Allowances for leases
signed during the period:
First Generation Space -
per sq. ft. $ 52.04 $ 32.10 $ 33.54 $ 22.62
Second Generation Space -
per sq. ft. $ 33.35 $ 9.66 $ 12.06 $ 6.92
Leases Signed during the period
by:
First Generation Space -
sq. feet (000) 8 10 61 22
Second Generation Space -
sq. feet (000) $ 57 $ 96 $ 171 $ 230
</TABLE>
<PAGE>23
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
SECOND QUARTER 1996
TOP 25 REVENUE -GENERATING TENANTS
(Unaudited)
Percent of Total
Total Number Sq. Ft.
Tenant Notes Revenues Of Stores Occupied
<S> <C> <C> <C> <C>
Sears, Roebuck And Co. 6.0% 19 2,081,245
J C Penney Inc. (1) 4.3% 24 1,493,296
The Bon-Ton (2) 3.8% 14 1,072,905
May Department Stores Co. (3) 1.8% 8 991,612
Value City Department Stores 1.2% 6 441,665
K-Mart Corporation 1.5% 5 377,575
The Limited Stores Inc. (4) 5.2% 46 351,792
Proffitts, Inc. 0.9% 5 318,989
Wal-Mart Stores 1.2% 3 302,204
Leggett Department Stores (5) 0.8% 3 249,255
F.W. Woolworth (6) 4.0% 76 241,612
Charming Shops (7) 1.9% 22 203,156
Deb Shops, Inc. 1.2% 15 91,447
Hallmark-Owned Stores 1.7% 26 83,734
The Wall Music Inc. (9) 1.5% 20 76,993
Shoe Show Of Rocky Mt. Inc. 1.4% 19 76,654
Walden Book Co., Inc. 1.7% 20 67,366
Maurices 1.1% 13 64,901
Consolidated Stores (8) 1.3% 20 64,422
Payless Shoesource Inc. 1.2% 20 63,899
County Seat Stores 1.2% 16 59,396
Tandy Corporation 1.1% 24 59,265
Intimate Brands, Inc. (10) 0.9% 12 48,280
The Gap, Inc. 0.9% 9 36,093
General Nutrition Inc. 0.8% 21 31,810
TOTALS 48.6% 8,949,566
Notes:
(1) Includes 16 J.C. Penney department stores and 8 Thrift Drug stores.
(2) Excludes 5 former Hess's locations operated on a temporary basis.
(3) May Co. owns 5 of 8 stores totaling 619,333 square feet.
(4) Includes Limited Express, Lane Bryant, Lerner Shops, The Limited (core
division), and Structures.
(5) Also affiliated with Belks department stores.
(6) Includes Woolworth, Afterthoughts, Kinney, Footlocker, Lady Footlocker, and
Northern Reflections.
(7) Charming Shops recently completed a public offering of $120 million of
long-term debt.
(8) Includes Kay-Bee Toys which it recently purchased from Melville Realty Co.
(9) Subsidiary of W.H. Smith Group Holdings USA, Inc.
(10) Spun off by the Limited. Includes Victoria Secrets and Bath & Body.
</TABLE>
<PAGE>24
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30,
1996 1995 1996 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Rental operations
Revenues
Minimum rent $20,584 20,792 41,542 41,560
Percentage rent 998 1,119 2,617 2,595
Property operating cost recoveries 6,711 7,032 14,636 14,437
Temporary and promotional leasing 1,393 1,147 2,780 2,309
Net utility income 591 720 1,272 1,284
Business interruption insurance 356 353 830 863
Miscellaneous income 306 403 679 768
Net 30,939 31,566 64,356 63,816
Property operating costs
Recoverable operating costs 9,549 9,858 20,277 19,411
Property administrative costs 495 373 992 963
Other operating costs 693 619 1,327 1,183
Depreciation and amortization 9,160 8,870 16,900 16,739
19,897 19,720 39,496 38,296
Net 11,042 11,846 24,860 25,520
Other expenses
General and administrative 989 746 1,984 1,926
Interest 11,086 10,809 22,318 20,816
12,075 11,555 24,302 22,742
Net (1,033) 291 558 2,778
Property sales, disposals and
adjustments:
Adjustment to carrying value of
assets to be disposed of (35,000) (35,000)
Gain on sale of outparcel land 1,755 1,851 2,584 2,192
Net 1,755 (33,149) 2,584 (32,808)
Income (loss) before extraordinary
items and minority interest 722 (32,858) 3,142 (30,030)
Extraordinary loss on early
extinguishment of debt (120) (120)
Extraordinary gain on fire
insurance claim 7,700 11,000
Income (loss) before minority
interest 602 (25,158) 3,022 (19,030)
Minority interest in Operating
Partnership (151) 6,481 (767) 4,936
Net income (loss) $ 451 (18,677) 2,255 (14,094)
Per share data (after minority
interest):
Income (loss) before
extraordinary item $ .01 (.89) .08 (.81)
Extraordinary items .21 .30
Net income (loss) $ .01 (.68) .08 (.51)
Weighted average shares
outstanding 27,493 27,399 27,476 27,316
</TABLE>
<PAGE>25
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Balance Sheets
June 30, 1996 December 31, 1995
(Unaudited)
(in thousands)
<S> <C> <C>
Assets
Income properties:
Land $122,263 $122,445
Buildings and improvements 786,300 757,834
Deferred leasing and other charges 41,022 52,941
Net 949,585 933,220
Accumulated depreciation and amortization (267,282) (263,650)
Net 682,303 669,570
Investment in joint venture 5,808 5,893
Cash and cash equivalents 6,379 6,036
Tenant and other receivables 11,626 15,325
Deferred charges and other assets 35,422 40,694
Net $741,538 $737,518
Liabilities and Shareholders' Equity
Debt on income properties $562,286 $541,082
Accounts payable and other liabilities 31,761 39,152
Net 594,047 580,234
Minority interest in Operating Partnership 37,672 39,873
Commitments and contingencies
Shareholders' equity:
Common shares, par value $.01 per share,
120,000,000 shares authorized, 27,516,185
and 27,450,333 shares issued and outstanding
at June 30, 1996 and December 31, 1995,
respectively 275 274
Additional paid-in capital 182,479 181,337
Accumulated deficit (72,935) (64,200)
Net 109,819 117,411
Net $741,538 $737,518
</TABLE>
<PAGE>26
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Cash Flow
(unaudited)
Six Months Ended June 30,
1996 1995
(in thousands)
<S> <C> <C>
Cash flows from operating acitivities:
Net income (loss) $2,255 $(14,094)
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in Operating Partnership 767 (4,936)
Adjustment to carrying value of assets to be
disposed of 35,000
Equity earnings in joint venture (300) (383)
Depreciation and amortization 21,277 20,904
Extraordinary loss on early extinguishment of debt 120
Extraordinary gain on fire insurance claim (11,000)
Net changes in:
Tenant and other receivables 3,699 2,031
Deferred charges and other assets 2,442 2,161
Accounts payable and oter liabilities (7,391) 554
Net cash provided by operating activities 22,869 30,237
Cash flows from investing activities:
Investment in income properties (1995 includes
($53.9 million related to two purchased malls -
see Note 3) (29,536) (73,469)
Distributions from joint venture 200 300
Net cash (used in) investing activities (29,336) (73,169)
Cash flows from financing activities:
Net proceeds from sale of common shares and from
dividend reinvestment plan 503 3,374
Proceeds from issuance of debt, net of issuance cost 40,804 60,854
Debt repayments (21,179) (2,612)
Dividends and distributions paid (14,766) (24,802)
Advances from affiliate 6,400
Cash flow support 1,448 1,228
Net cash provided by financing activities 6,810 44,442
Net increase in cash and cash equivalents 343 1,510
Cash and cash equivalents, beginnng of period 6,036 2,136
Cash and cash equivalents, end of period $ 6,379 $ 3,646
Interest paid (net of capitalized amounts) $20,188 $19,054
Interest capitalized $ 1,439 $ 1,587
Non-cash financing activities:
Tenant improvements funded by Crown Investments
Trust, including $0 and $15 allocated to minority
interest in Operating Partnership $ $ 57
Issuance of partnership units related to
Wyoming Valley acquisition $ $ 8,149
</TABLE>
<PAGE>27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,379
<SECURITIES> 0
<RECEIVABLES> 11,626
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 949,585
<DEPRECIATION> 267,282
<TOTAL-ASSETS> 741,538
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 275
<OTHER-SE> 109,544
<TOTAL-LIABILITY-AND-EQUITY> 741,538
<SALES> 64,356
<TOTAL-REVENUES> 64,356
<CGS> 39,496
<TOTAL-COSTS> 39,496
<OTHER-EXPENSES> 1,984
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,318
<INCOME-PRETAX> 3,142
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,142
<DISCONTINUED> 0
<EXTRAORDINARY> 120
<CHANGES> 0
<NET-INCOME> 2,255
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
