<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 10-Q
---------------------------------------
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 1-12412
ARBOR PROPERTY TRUST
(Exact name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
Delaware 23-2740383
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
Suite 800, One Tower Bridge, W. Conshohocken, PA 19428
(Address of principal executive offices) (Zip code)
</TABLE>
(215) 941-2933
(Registrant's telephone number, including area code)
EQK GREEN ACRES TRUST
(Former name of registrant if changed since last report)
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ____X____ No ____________
APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING
FIVE YEARS:
Indicate by checkmark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes _________ No ____________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: 11,908,603 shares as of May 12,
1994.
<PAGE>
ARBOR PROPERTY TRUST
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1994
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets as of
March 31, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1994
and March 31, 1993 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1994
and March 31, 1993 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II - OTHER INFORMATION
Items 1 through 6. 11
SIGNATURES 12
</TABLE>
<PAGE>
ARBOR PROPERTY TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except common share data)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Investment in property, at cost:
Land $ 30,295 $ 27,865
Buildings and improvements 137,613 124,287
Capitalized lease 7,125 7,125
Personal property 1,086 1,075
Construction in progress 307 239
-------- --------
176,426 160,591
Less accumulated depreciation 23,533 22,674
-------- --------
152,893 137,917
Restricted cash - 500
Cash and short-term investments 2,301 885
Accounts receivable (net of allowance for
doubtful accounts of $633 and $723) 7,749 7,510
Other assets, net 6,455 7,074
-------- --------
TOTAL ASSETS $169,398 $153,886
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Collateralized floating rate notes (net of
unamortized discounts of $103 and $109) $117,897 $117,891
Distributions payable 3,275 2,826
Obligation under capitalized lease 6,974 6,971
Note payable to bank 2,700 1,800
Accounts payable and other liabilities 3,034 4,032
-------- --------
133,880 133,520
Shareholders' Equity:
Shares of beneficial interest, without par value:
Authorized: 5,000,000 preferred shares,
45,000,000 common shares, and 50,000,000
excess shares;
Issued and outstanding: 11,908,603 and
10,277,469 common shares 115,714 95,500
Distributions in excess of accumulated
earnings (80,196) (75,134)
-------- --------
35,518 20,366
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $169,398 $153,886
======== ========
</TABLE>
_______________
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ARBOR PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------
1994 1993
<S> <C> <C>
Revenues from rental operations $5,228 $4,975
Operating expenses, net of tenant
reimbursements (including fees to
affiliate of $170 and $197) 399 384
Depreciation and amortization 989 972
-------- --------
Income from rental operations 3,840 3,619
Interest expense 1,792 2,787
Advisory fees to affiliate (including $3,843
as a result of the termination of the
advisory agreement in 1994) 4,107 408
Other expenses, net of interest income 567 278
-------- --------
Income (loss) before gain on sale of
real estate (2,626) 146
Gain on sale of real estate 839 --
-------- --------
Net income (loss) $(1,787) $ 146
======== ========
Income (loss) per weighted average share:
Income (loss) before gain on sale
of real estate $(.25) $.01
Gain on sale of real estate .08 --
Net income (loss) $(.17) $.01
-------- --------
Weighted average number of shares
outstanding 10,738,640 10,277,469
========== ==========
</TABLE>
_______________
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
ARBOR PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,787) $ 146
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on sale of real estate (839) --
Depreciation and amortization 989 972
Amortization of deferred financing costs 301 --
Amortization of floating rate notes discount 6 --
Amortization of zero coupon
mortgage note discount -- 2,143
Termination of advisor agreement 3,843 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
and other assets 470 (2,223)
Increase (decrease) in accounts payable
and other liabilities (998) 742
------ ------
Net cash provided by operating activities 1,985 1,780
------ ------
Cash flows from investing activities:
Proceeds from sale of real estate, net 1,435 --
Additions to buildings and improvements
and personal property, net (10) (318)
Additions to property under contract -- (235)
Construction expenditures (68) (22)
------ ------
Net cash provided by (used in) investing activities 1,357 (575)
------ ------
Cash flows from financing activities:
Distributions paid (2,826) (2,826)
Borrowing under bank line of credit 900 -
------ ------
Net cash used in financing activities (1,926) (2,826)
------ ------
Increase (decrease) in cash and
short-term investments 1,416 (1,621)
Cash and short-term investments,
beginning of period 885 1,929
------ ------
Cash and short-term investments,
end of period $2,301 $ 308
====== ======
Supplemental disclosure of cash
flow information:
Interest paid $1,329 $ 647
====== ======
</TABLE>
See Note 1 for disclosure of non-cash investing and financing activities
_______________
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND MERGER TRANSACTION
Arbor Property Trust (the 'Trust'), formed as EQK Green Acres Trust on
September 8, 1993 as a Delaware business trust, has an indefinite life and
intends to elect real estate investment trust ('REIT') status under the Internal
Revenue Code of 1986, as amended. On February 28, 1994, EQK Green Acres, L.P.
(the 'Partnership') merged with and into Green Acres Mall Corp., a wholly-owned
subsidiary of the Trust (the 'Subsidiary'). Prior to February 28, 1994, the
Trust did not have significant operations. On May 3, 1994, EQK Green Acres Trust
filed with the Securities Exchange Commission a Current Report on Form 8-K to
announce a name change to Arbor Property Trust. The change of name is a result
of the anticipated growth of the portfolio which will no longer be limited to
the Green Acres Mall. The Trust and the Partnership are interchangeably referred
to herein as the 'Company'.
The Partnership had been formed pursuant to an Agreement of Limited
Partnership dated as of June 30, 1986 (and amended and restated as of August 27,
1986) to acquire and operate Green Acres Mall (the 'Property' or the 'Mall'), a
regional shopping mall located in Nassau County, Long Island, New York. In 1991,
the Partnership completed the conversion of a leased industrial building,
located adjacent to the Property, into a convenience shopping center known as
the Plaza at Green Acres (the 'Plaza').
Pursuant to the merger, Unitholders of the Partnership received 10,172,639
common shares of the Trust (the 'Common Shares') on account of their 98.98%
percentage interest in the Partnership; the General Partners of the Partnership
received 104,830 Common Shares on account of their 1.02% percentage interest in
the Partnership; and the Special General Partner of the Partnership received
1,316,251 Common Shares in satisfaction of its residual interest in the
Partnership. Pursuant to the termination of the Partnership's advisory agreement
(see Note 3), Equitable Realty Portfolio Management, Inc. (the 'Advisor')
received 308,933 Common Shares on March 30, 1994.
The issuance of 10,277,469 Common Shares to the Unitholders and the General
Partners on account of their respective percentage interests in the Partnership
represents a reorganization of entities under common control and, accordingly,
was accounted for in a manner similar to a pooling of interests. The financial
statements of the Partnership and the Trust have been combined at historical
cost retroactive to January 1, 1993. The issuance of these Common Shares has
been reflected as of this date at the amount of the Unitholders' and General
Partners' original contributions to the Partnership.
The issuance of Common Shares to the Special General Partner on account of
its residual interest in the Partnership and to the Advisor are reflected in the
Company's condensed consolidated financial statements as of March 31, 1994. The
issuance of Common Shares to the Special General Partner has increased the
Company's carrying value of land, and buildings and improvements by $3,024,000
and $13,347,000, respectively, representing the value of the Special General
Partner's residual interest in accordance with the allocation methodology
utilized by the Partnership in connection with the Merger. Annual depreciation
expense will increase by approximately $342,000 as a result of the increase in
the basis of the Mall. The issuance of Common Shares to the Advisor has been
reflected as a charge to earnings during the first quarter of 1994 in the amount
of $3,843,000.
<PAGE>
NOTE 2. BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. The condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and related notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
In the opinion of the Company all adjustments, which include only normal
recurring adjustments necessary to present fairly its consolidated financial
position as of March 31, 1994, its results of consolidated operations for the
three months ended March 31, 1994 and 1993 and its consolidated cash flows for
the three months ended March 31, 1994 and 1993, have been included in the
accompanying unaudited condensed consolidated financial statements.
Net income per share for the three months ended March 31, 1994 and 1993
have been computed on the basis of the 10,738,640 and 10,277,469 weighted
average shares outstanding during the respective periods.
NOTE 3. ADVISORY AND MANAGEMENT AGREEMENTS
Prior to the termination of its advisory agreement as previously discussed,
Equitable Realty Portfolio Management, Inc., a wholly owned subsidiary of
Equitable Real Estate Investment Management, Inc. ('Equitable Real Estate'),
acted as 'Advisor' to the Company. For the three months ended March 31, 1993,
the subordinated incentive advisory fee was $345,000. Fees of $100,000 were paid
to the Advisor in 1994.
Pursuant to the merger discussed in Note 1, on March 30, 1994, upon the
expiration of a 30 day transition period, the agreement with the Advisor was
terminated.
The Company had entered into a property management agreement with Compass
Retail, Inc. ('Compass'), a subsidiary of Equitable Real Estate, effective
January 1, 1991. Pursuant to this agreement, property management fees were based
on 4% of net rental and service income collected from tenants. In connection
with the merger discussed in Note 1, the agreement with Compass was amended and
restated to extend its termination date by two years to August 31, 1998, and to
limit Compass' scope of responsibilities primarily to accounting and financial
services currently provided in connection with the operations of the Property.
Compass' compensation was reduced on March 1, 1994 from 4% to 2% of net rental
and service income collected from tenants. For the three months ended March 31,
1994 and 1993 management fees earned by Compass were $170,000 and $196,000,
respectively.
NOTE 4. DISTRIBUTIONS
On February 15, 1994, the Partnership made a distribution of $.275 per Unit
to its Unitholders and to its General Partners. In addition, a distribution in
the amount of $.275 per share has been declared for payment on May 16, 1994, to
the shareholders of record on March 31, 1994.
NOTE 5. DEBT REFINANCING
The Company's secured credit line matured on June 30, 1993. Pursuant to the
terms of the line of credit, the Company elected to convert the $16,500,000
balance outstanding at June 30, 1993 under the credit agreement to a term loan
payable in five quarterly installments
<PAGE>
commencing on October 1, 1993. The term loan agreement was structured so as to
permit the prepayment of the obligation at any time without penalty.
On August 19, 1993, the Company, through a wholly-owned subsidiary, issued
collateralized floating rate notes ('floating rate notes') in the aggregate
principal amount of $118,000,000. The proceeds from the sale of the floating
rate notes were used, in part, to pay the approximately $95,399,000 purchase
price for the zero coupon first mortgage note and to repay the $16,500,000 term
loan note. The proceeds from the issuance of the floating rate notes were also
used to purchase an interest rate cap and to pay mortgage recording taxes and
other costs incurred in connection with this refinancing. The floating rate
notes were recorded net of a $118,000 discount. In connection with the early
extinguishment of the zero coupon first mortgage note, the Company recognized an
extraordinary charge to earnings of $6,373,000 in the third quarter of 1993.
The floating rate notes are due August 19, 1998 and are collateralized by a
first mortgage on substantially all of the real property comprising Green Acres
Mall and a first leasehold mortgage on the Plaza. The floating rate notes bear
interest at a rate equal to 78 basis points in excess of the three-month LIBOR,
which is payable on a quarterly basis commencing November 12, 1993. The interest
rate is subject to reset on such interest payment dates. The initial interest
rate, 4.03%, was effective for the period August 19, 1993 to November 11, 1993.
The average rate for the first quarter of 1994 was 4.31%. On February 12, 1994
the interest rate was reset to 4.34%. Effective May 12, 1994 the interest rate
on this note was 5.59% The interest rate cap provides that the effective
interest rate will not exceed 9% per annum. The mortgage and indenture
agreement relating to the floating rate notes limit additional indebtedness
that may be incurred by the owner of Green Acres Mall, namely, Green Acres Mall
Corp., a wholly owned subsidiary of the Company. Those agreements also contain
certain other covenants which, among other matters, prioritize the payment of
debt service on the floating rate notes in relation to distributions from the
Subsidiary.
As part of its comprehensive debt restructuring, the Subsidiary also
obtained a $3,400,000 unsecured line of credit facility from a bank. The line of
credit bears interest at 1% above the bank's prime rate and will mature February
1995, unless extended. As of March 31, 1994, the balance of this loan was
$2,700,000.
NOTE 6. SALE OF PROPERTY
In the first quarter of 1994, the Company completed the sale to Home Depot
of an approximately two acre parking lot and received the final installment of
$1,500,000 and recognized a gain on sale of real estate of $839,000. Home Depot
will have completed construction of the store and will open for business in May
1994.
<PAGE>
ARBOR PROPERTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Merger Transaction
On February 28, 1994, EQK Green Acres, L.P. merged with and into Green
Acres Mall Corp., a wholly-owned subsidiary of Arbor Property Trust. The Trust
and the Partnership are collectively referred to herein as the 'Company.' See
Note 1 to the condensed consolidated financial statements for a discussion of
the Company's common shares of beneficial interest without par value (the
'Common Shares') issued in connection with this merger (the 'Merger').
The issuance of 10,277,469 Common Shares to the Unitholders and the General
Partners on account of their respective percentage interests in the Partnership
represents a reorganization of entities under common control and, accordingly,
was accounted for in a manner similar to a pooling of interests. The financial
statements of the Partnership and the Trust have been combined at historical
cost retroactive to January 1, 1993. The issuance of these Common Shares has
been reflected as of this date at the amount of the Unitholders' and General
Partner' original contributions to the Partnership.
The issuance of Common Shares to the Special General Partner on account of
its residual interest in the Partnership and to Equitable Realty Portfolio
Management, Inc. (the 'Advisor') are reflected in the Company's condensed
consolidated financial statements as of March 31, 1994. The issuance of Common
Shares to the Special General Partner has increased the Company's carrying value
of land, and buildings and improvements by $3,024,000 and $13,347,000,
respectively, representing the value of the Special General Partner's residual
interest in accordance with the allocation methodology utilized by the
Partnership in connection with the Merger. Annual depreciation expense will
increase by approximately $342,000 as a result of the increase in the basis of
the Mall.
Cash Flows from Operating, Investing, and Financing Activities
Cash flows from operating activities for March 31, 1994 and 1993 were
$1,985,000 and $1,780,000, respectively. This increase is primarily a result of
several items, some of which offset each other, consisting of increased minimum
rent, increased current payment of interest expense, and changes in outstanding
accounts receivable, other assets, accounts payable and other liabilities.
<PAGE>
Cash flows from investing activities increased by $1,932,000 in 1994 over
the prior period, primarily due to the receipt of proceeds from Home Depot and
the lower level of capital expenditures in the first quarter of 1994 as
compared to the same period in the prior year.
Cash employed in financing activities during the three months ended March
31, 1994 in comparison to the prior period was supplemented by $900,000 of
additional borrowing under the line of credit.
<PAGE>
ARBOR PROPERTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the three months ended March 31, 1994, the Company reported a net loss
of $1,787,000, or $.17 per weighted average share, compared with net income of
$146,000, or $.01 per Share, for the comparable period in 1993. The 1994 results
were impacted by the termination of the Advisory Agreement which resulted in the
issuance of 308,933 Common Shares to the Advisor. The issuance of these Common
Shares was reflected as a charge to earnings of $3,843,000 during the first
quarter of 1994. This charge was partially offset by the gain on the sale to
Home Depot of the approximately two acre parking lot. The final installment on
the sale was $1,500,000, and the gain realized amounted to $839,000.
During the first three months of 1994, revenues from rental operations were
$253,000, or 5%, higher than the comparable period in 1993. This increase was
primarily attributable to increased minimum rents associated with the
remerchandising program that the mall commenced in 1992. The significant amount
of lease rollovers in 1993 and 1994 enabled management to develop a
remerchandising plan aimed at achieving an improved tenant mix while increasing
base rents.
Net operating expenses remained relatively flat for the three months ended
March 31, 1994 as compared to the same period in 1993. Operating expense
increases attributable to inflation generally do not have a significant effect
on the Company's income from retail operations as substantially all operating
expenses are reimbursed by tenants in accordance with the terms of their leases.
Interest expense decreased in the first quarter of 1994 compared to the
comparable period in 1993 due to the issuance of the collateralized floating
rate notes which were used to repay the zero coupon note and retire the term
loan. The zero coupon note had an effective interest rate of 10.4% per annum,
and the $16,500,000 in second mortgage financing accrued interest in the first
quarter of 1993 at an average rate of 6.5%. These debt instruments were replaced
with floating rate notes that had an average interest rate during the first
quarter of 1994 of 4.31%. The notes have a floating interest rate equal to 78
basis points in excess of three month LIBOR. The interest rate on this debt,
which is subject to a quarterly reset, was 5.59% at May 12, 1994.
The Company made significant changes to its management structure. While its
affairs had previously been administered by a third party pursuant to a property
management and advisory agreement, commencing on March 1, 1994 the Company
became self-managed. Additionally, the property management contract with Compass
was amended and restated to extend its termination date by two years to August
31, 1998, and to limit Compass' scope of responsibility primarily to accounting
and financial services provided in connection with the operation of the
property. Compass' compensation was reduced on March 1, 1994 from 4% to 2% of
net rental and service income collected from tenants. The aggregate expenses
during the first quarter of 1994 for property management services and
administrative services plus the Company's general overhead was $1,001,000
whereas comparable expenses in the first quarter of 1993 was $883,000.
Management, however, anticipates realizing substantial savings during succeeding
quarters in relation to prior year expenditures.
<PAGE>
ARBOR PROPERTY TRUST
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
As described in Part I, on February 28, 1994 the Partnership's Units
were converted on a one-for-one basis into Common Shares of the Trust
and additional Common Shares were issued to the General Partners of
the Partnership and, on March 30, 1994, to the Advisor.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On December 23, 1993, the Trust and the Partnership issued a written
Consent Solicitation Statement/Prospectus to the Partnership's
Unitholders of record as of December 6, 1993. The Prospectus
solicited the consent of Unitholders to a conversion of the
Partnership with and into the Trust, a real estate investment trust,
pursuant to a merger of the Partnership into a wholly-owned
subsidiary of the Trust ("Proposal 1") and an amendment to the
Amended and Restated Agreement of Limited Partnership of EQK Green
Acres, L.P. (the "Partnership Agreement") so as to permit the
acquisition of additional real estate investments ("Proposal 2").
On February 28, 1994, the conversion of the Partnership with and into
the Trust and the amendment to the Partnership Agreement were
approved by a majority of the Partnership's Unitholders. The final
tabulation of votes cast was as follows:
<TABLE>
<CAPTION>
Proposal 1 Proposal 2
--------------- ---------------
Units %(1) Units %(1)
--------- ---- --------- ----
<S> <C> <C> <C> <C>
For 5,420,478 79.0 5,432,119 79.2
Against 1,238,893 18.1 1,186,312 17.3
Abstain 201,508 2.9 242,448 3.5
</TABLE>
-----------
(1) Represents the percentage of votes cast.
The total votes cast, 6,860,879, represents 67.4% of total Units
outstanding.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K:
1. Report on Form 8-K dated February 28, 1994 regarding the
approval of the conversion of the partnership to a real
estate investment trust.
2. Report on Form 8-K dated May 3, 1994 announcing the change
in name to Arbor Property Trust.
<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 thereunto duly authorized.
Date: May 12, 1994 ARBOR PROPERTY TRUST
By: /s/ Myles H. Tanenbaum
Myles H. Tanenbaum
Managing Trustee and President
(Principal Executive and
Financial Officer)
By: /s/ Dennis J. Harkins
Dennis J. Harkins
Treasurer and Controller
Principal Accounting Officer
