<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 10-K
---------------------------------------
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 Identification No.)
of incorporation or organization)
</TABLE>
<TABLE>
<S> <C>
Suite 800, One Tower Bridge, W. Conshohocken, PA 19428
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: _(610) 941-2933_
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Common Shares of Beneficial Interest New York Stock Exchange
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 ____________
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Shares of Beneficial Interest held by
non-affiliates of the Registrant, based on the closing price of Common Shares of
Beneficial Interest on March 23, 1995 on the New York Stock Exchange of $8.63
per Share, is $104,675,458. As of March 27, 1995, 12,136,285 Common Shares of
Beneficial Interest were outstanding. Officers and Managing Trustees of the
Arbor Property Trust, The Equitable Life Assurance Society of the United States
and its affiliated entities; and executive officers of Compass Retail, Inc. (and
certain of their family members) are treated as affiliates for purposes of this
computation, with no admission being made that such people or entities are
actually affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> PAGE
-----
<S> <C> <C>
PART I
Item 1. Business....................................................................................... 2
Item 2. Properties..................................................................................... 4
Item 3. Legal Proceedings.............................................................................. 6
Item 4. Submission of Matters to a Vote of Security Holders............................................ 6
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters...................... 7
Item 6. Selected Financial Data........................................................................ 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 8
Item 8. Financial Statements and Supplementary Data.................................................... 13
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 13
PART III
Item 10. Directors and Executive Officers of the Registrant............................................. 14
Item 11. Executive Compensation......................................................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 21
Item 13. Certain Relationships and Related Transactions................................................. 22
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.............................. 24
</TABLE>
1
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Arbor Property Trust (the 'Trust' or the 'Company'), a Delaware business
trust, was formed pursuant to a Certificate of Trust dated September 8, 1993.
The Trust has an indefinite life and will elect real estate investment trust
('REIT') status under the Internal Revenue Code of 1986, as amended ('Internal
Revenue Code'), upon its filing of the Federal income tax return for the year
ended December 31, 1994. Under the Internal Revenue Code, a real estate
investment trust that meets applicable requirements is not subject to Federal
income tax on that portion of its taxable income that is distributed to its
shareholders. The principal executive offices of the Trust are located at Suite
800, One Tower Bridge, W. Conshohocken, Pennsylvania, 19428, and the telephone
number is (610) 941-2933.
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
'Merger'). Prior to February 28, 1994, the Trust did not have significant
operations. On May 3, 1994, the Trust changed its name from EQK Green Acres
Trust to Arbor Property Trust.
The Partnership was a Delaware limited partnership formed pursuant to a
certificate of limited partnership dated June 30, 1986. Equitable Realty
Portfolio Management, Inc. ('ERPM', successor in interest to EQK Partners),
which is wholly owned by Equitable Real Estate Investment Management, Inc.
('Equitable Real Estate'), itself an indirect wholly owned subsidiary of The
Equitable Life Assurance Society of the United States ('Equitable'), acted as
the advisor (the 'Advisor') to the Partnership.
The Partnership had been formed to acquire and operate Green Acres Mall
(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'). The Mall and
the Plaza are referred to collectively as the 'Property' and are described below
and under Item 2.
Pursuant to the Merger, Unitholders of the Partnership received 10,172,639
Common Shares of Beneficial Interest of the Trust (the 'Common Shares') on
account of their 98.98% percentage interest in the Partnership; the general
partners of the Partnership (the 'General Partners') received 104,830 Common
Shares on account of their 1.02% percentage interest in the Partnership; and the
special general partner of the Partnership (the 'Special General Partner')
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, the Advisor received 308,933 Common Shares, net of reduction by
54,800 Common Shares in settlement of Equitable's obligations for partial
indemnity relating to the New York State Real Estate and Property Transfer and
Gains Tax on March 30, 1994.
The Company's agreement with its primary mortgage lender, representing debt
outstanding of $117,914,000 at December 31, 1994, limits additional indebtedness
that may be incurred by Green Acres Mall Corp., but not by the Trust. Such debt,
along with a line of credit facility, originated in connection with a
refinancing in August 1993 (see Items 7 and 8).
The Company does not intend to engage in any activities or invest in any
securities which would violate the income or asset holding requirements for a
REIT. The Company's investment objectives and policies may be changed from time
to time by the Board of Trustees without shareholder approval.
On February 14, 1995, the Company announced that it had retained Goldman,
Sachs & Co. in connection with a possible merger of the Company into another
REIT or a sale of the Company's real estate. The Company is currently pursuing
such possibilities; however, no agreement has been reached with respect to any
such transaction. There is no assurance that the Company will be able to reach
2
<PAGE>
agreement with any party with respect to valuation, form of consideration,
structure or other terms of any such transaction or that, if an agreement is
reached, the transaction will be consummated.
NARRATIVE DESCRIPTION OF BUSINESS
The Company, through its wholly-owned subsidiary, Green Acres Mall Corp.,
owns and operates the Mall, a 1.6 million square foot super-regional enclosed
shopping mall complex situated in southwestern Nassau County, Long Island, New
York. The Mall is anchored by four major department stores: Sears, Roebuck and
Co. ('Sears'), J.C. Penney Company, Inc., and Federated Department Stores, Inc.,
doing business as Stern's and Abraham & Straus ('A&S', which is to be converted
to Macy's, May 1, 1995). The complex also includes the Plaza, a 170,000 square
foot convenience shopping center which is currently anchored by Kmart and
Waldbaums. Integral to the complex, but situated on property not owned by the
Company, are Home Depot and Caldor stores comprising an additional approximately
240,000 square feet.
Location and Area Overview. The Property is located partly in the Village
of Valley Stream and partly in the Town of Hempstead in southwestern Nassau
County, Long Island, New York less than one mile east of the Nassau
County/Queens County (New York City) border. It is situated on the south side of
Sunrise Highway (N.Y. State Route 27), a major east/west highway that extends
the length of Long Island and provides access to communities in eastern
Brooklyn, southeastern Queens and Nassau County. Sunrise Highway connects with
Belt Parkway about one and one-half miles west of the Property. The Belt Parkway
is a major limited access east/west highway which runs directly past John F.
Kennedy International Airport, which is approximately four miles west of the
Property. Merrick Road, a four lane east/west artery provides access from the
east. The Southern State, Cross Island and Meadowbrook Parkways are major nearby
thoroughfares providing access to the Property from communities in Nassau and
Queens Counties.
The Property is also accessible by public transportation. The Rosedale and
Valley Stream stations of the Long Island Railroad provide commuter passenger
rail services to the area and are each located within approximately one-half
mile of the Property, in addition to local bus transportation.
An external research study commissioned by the Company in November 1991
estimates that the Property's trade area had a total population in 1990 of
approximately 1.3 million. Average household income of trade area residents in
1990 was $42,000, 15% above the average in the United States. The study
indicates that approximately 750,000 people live within five miles of the
Property.
Tenants. At December 31, 1994, the Property had 173 mall and outparcel
building tenants (excluding anchor store tenants) occupying 722,000 square feet
of gross leasable area, representing an occupancy rate at that date of 93.2% of
the Property (excluding anchor stores). No tenant (excluding anchor store
tenants) occupies more than five percent of the gross leasable area of the
Property.
Competition. Green Acres Mall is the dominant shopping destination in its
trade area by virtue of its excellent location, proximity to dense population
areas and targeted merchandising. The addition of the Plaza, and the Home Depot
and Caldor stores have further strengthened the Mall's position. The primary
trade area is comprised principally of densely populated residential
neighborhoods and is easily accessed by local and arterial roads. The primary
trade area is a mature area, and is expected to experience low to moderate
growth in population and disposable income in the future. The closest regional
mall to Green Acres is Roosevelt Field which competes for the consumers to the
north and east of the Mall. Roosevelt Field recently completed an expansion
which added additional second level mall retail area and A&S (converting to
Bloomingdale's) as a replacement for Alexanders. Other Long Island centers
include Queens Center, Kings Plaza, Sunrise Mall and Broadway Center. Some
additional competition is also provided by freestanding retailers in the nearby
area.
The following table provides selected information with respect to the
Property's primary existing competitors in its secondary trade area.
3
<PAGE>
<TABLE>
<Caption
APPROXIMATE
DISTANCE APPROXIMATE
FROM PROPERTY NUMBER OF
SHOPPING CENTER (MILES)(A) MALL STORES ANCHOR STORES
-------------------------------- ----------------- --------------- ------------------------------------
<S> <C> <C> <C>
Roosevelt Field................. 7 155 Macy's
Sterns
J.C. Penney
Abraham & Straus
(Converting to Bloomingdales)
Queens Center................... 9 75 Abraham & Straus
(Converting to Macy's)
J.C. Penney
Kings Plaza..................... 10 150 Macy's
</TABLE>
------------------
(a) Driving distance is greater.
Adjacent to the Property on the north, but not owned by the Company, is a
free-standing building on land which formerly housed a multi-level Alexander's
department store and a parking structure. The Caldor Corporation ('Caldor')
acquired the leases to the structures. Caldor demolished the former Alexander's
building to enable it to construct a one-level Caldor store which opened in June
1994. Because of its one-level more modern structure, it has significantly
enhanced the visibility and appearance of the entrance to the Property. Adjacent
to the south side of the Property is a free-standing Home Depot store on land
which formerly housed an industrial building. Home Depot acquired its 9.2 acres
from the Company for $11 million and opened its store in May 1994. The Company,
in 1993, purchased 7.2 of the acres from the prior owner; inclusive of the two
additional acres which the Company owned from inception, the Company netted
$1.28 million profit on the transaction.
Three additional commercial areas that compete with the Property are
downtown Garden City, Long Island, a commercial area six and one-half miles
northeast of the Property, containing free-standing department stores occupied
by Saks Fifth Avenue, Lord & Taylor and Bloomingdale's (converting to Sears);
A&S (converting to Macy's); 'The Miracle Mile', a commercial stretch of Northern
Boulevard in Manhasset, Long Island, ten miles north of the Property, containing
a Bloomingdale's Home Furnishings store and Lord & Taylor and Bloomingdale's
department stores; and, to a lesser extent, the Borough of Manhattan with its
numerous department stores and retail shops.
The Property has a strong competitive position in its primary and secondary
trade areas, due to the Property's size, location and tenant mix, and it should
be able to maintain such position since there are not any logical sites in the
Property's primary trade area which would permit the development of another
competitive regional shopping mall in the foreseeable future. It is anticipated
that the Property will continue to experience growth in sales and percentage
rents although the population in its primary trade area is expected to
experience only low to moderate growth in the future.
ITEM 2. PROPERTIES
GENERAL
Green Acres Mall is a one-level and two-level T-shaped enclosed regional
shopping mall, which, together with 14 free-standing outparcel buildings and a
convenience center known as the Plaza at Green Acres, is located on a site of
approximately 100 acres (91 acres owned by the Company and the balance held by a
long term lease). Adjacent to the Mall parking area are parcels owned by
unaffiliated parties consisting of Home Depot (opened in May 1994) and Caldor
stores which are not part of the Property and in which the Company has not
acquired any interest.
4
<PAGE>
The total building area of the Property is allocated as shown in the table
below.
<TABLE>
<Caption
NUMBER OF
STORES AT AREA % OF TOTAL OCCUPANCY AT
12/31/94 (SQ. FT.) BUILDING AREA 12/31/94
------------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Gross leasable area:
Anchor stores (a)(b).................................... 4 747,268 39.7% 100.0%
Mall stores............................................. 175 529,176 28.1% 94.0%
Convenience center...................................... 3 179,235 9.5% 100.0%
Outparcel stores (c).................................... 16 192,499 10.3% 90.9%
----- ----------- ------- -------------
Total gross leasable area................................. 198 1,648,178 87.6% 97.0%
----- -------------
----- -------------
Common area............................................... 233,751 12.4%
----------- -------
Total building area....................................... 1,881,929 100.0%
----------- -------
----------- -------
</TABLE>
------------------
(a) The improvements constituting the Sears department and auto accessory stores
(aggregating 144,537 gross leasable square feet) are owned by Sears pursuant
to ground leases of the land underlying such improvements. The Company has
acquired fee title to such land, but will not acquire title to such
improvements until such ground leases have terminated. Gross leasable area
information contained herein includes the gross leasable area of such
improvements.
(b) Anchor tenant square footage includes approximately 51,920 square feet of
separately leased storage space.
(c) Includes stores leased to Kids 'R' Us, Nobody Beats the Wiz, Red Lobster and
Home Federal Savings Bank, among others. Does not include five outparcel
buildings which are owned by the respective tenants subject to ground leases
from the Company of the land underlying such stores.
The Company is a lessee in a long-term lease for a ten-acre site adjacent
to the Property on which there is situated a 170,000 square foot retail
facility. The lease provides for an initial term of 30 years expiring in 2020
with three six-year option terms for a total term of up to 48 years. This
building was converted in 1991 into the Plaza, a convenience shopping center
which initially contained a supermarket (Waldbaum, Inc., a division of The Great
Atlantic and Pacific Tea Company, Inc.), a home improvement center (Pergament
Home Improvement Center) and several small retail shops. In January 1993, the
Company terminated its lease with Pergament and entered into a new lease
agreement covering Pergament's space and all but one of the Plaza's small store
spaces with Kmart Corporation. The convenience center began operations in
September 1991.
In April 1993, the Company completed the acquisition of an adjacent
industrial tract (the 'Bulova Parcel') through a subsidiary partnership and
entered into a lease/purchase agreement for this real estate with Home Depot.
Pursuant to the lease/purchase agreement, Home Depot paid $9,500,000 to the
Company, a portion of which was used to complete the purchase of the Bulova
Parcel. As a result of the completion in 1993 of specified environmental work,
the lease/purchase agreement obligated Home Depot to take title to the Bulova
Parcel. In connection with this lease/purchase agreement, the Company recognized
a gain on sale of real estate of $440,000 during 1993.
In January 1994, the Company completed the sale to Home Depot of an
approximate two acre parking lot and received the final installment of
$1,500,000, and recognized an additional gain on the sale of $839,000. Home
Depot opened for business in May 1994.
DEVELOPMENT HISTORY
The Property opened in 1958 as a single-level, open-air mall. The Mall was
enclosed and climate-controlled in 1970.
An extensive renovation, expansion and remerchandising program carried out
in 1982-1983 included the following: (i) the addition of the Sears store and
Auto Service Center, and a new two-level mall connecting the Sears store with
the existing one-level mall; (ii) construction of a new three-level
5
<PAGE>
parking structure adjacent to the Sears store; and (iii) renovation of the
existing one-level mall area and the J.C. Penney store. The outparcel buildings
were not renovated in connection with this program.
A more recent renovation of the interior of the Mall was completed during
1991-1992. The program included new tile flooring throughout the common areas,
intensified lighting, new seating areas, and decorative columns and other
features in a new color scheme. The food court was also renovated.
REMERCHANDISING PROGRAM
In anticipation of lease expirations scheduled to occur in 1993-1995, the
Company undertook a remerchandising campaign, the primary goal of which was to
alter the tenant mix to appeal to a broader cross-section of the market while
achieving increased revenues. Management estimates that approximately 70% of
tenants whose leases expire between 1993 and 1995 are paying below market rents.
The remerchandising program involved negotiating with a group of prominent
national retailers that Management believes will further enhance the overall
financial stability of the Mall while maintaining the Mall's distinctive
character associated with successful local and regional tenants.
Over 50% of the Mall (excluding the four anchor department stores) is
leased to national retailers, including such major chains as The Limited (The
Limited, Express, Victoria's Secret, and Bath & Body Works), The Gap,
Footlocker, Mothercare, Edison Brothers (5-7-9, Coda, J. Riggins etc.), Melville
(Kay-Bee Toy & Hobby, Wilson's Suede and Leather), Waldenbooks and Radio Shack.
The Company has been able to accommodate the requests of the larger national
retailers, while at the same time meeting the space needs of smaller regional
and local tenants. Management believes the remerchandising program will address
consumers' needs for an updated, diversified retail mix, thus strengthening the
Mall's overall competitive position. Management estimates that the program will
be completed in 1995 and that the cost of tenant allowance required for the
program will be approximately $3.0 million, approximately $2.5 million of which
has already been expended.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 7, 1994 the Trust issued a proxy statement to Shareholders of
record as of September 30, 1994. The proxy statement solicited the approval of
the election of two Managing Trustees ('Proposal 1') and the approval of the
adoption of the Arbor Property Trust Incentive Share Plan ('Proposal 2'). On
November 22, 1994, the election of the two Managing Trustees and the adoption of
the Arbor Property Trust Incentive Share Plan was approved. The final tabulation
of votes cast was as follows:
<TABLE>
<CAPTION>
PROPOSAL 1 PROPOSAL 2
------------------------ ----------------------
SHARES %(1)(2) SHARES %(1)
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
For................................................. 9,221,048 96.2 5,204,951 80.4
Against............................................. 368,425 3.8 1,046,663 16.2
Abstain............................................. -- 221,722 3.4
</TABLE>
------------------
(1) Represents percentage of votes cast.
(2) The voting with respect to the election of the two Managing Trustees was
equivalent, except that 22,840 votes were cast against the election of one
Managing Trustee, but for the other.
The total votes cast of 9,589,473 with respect to Proposal 1 represent
80% of total shares outstanding on September 30, 1994.
The total votes cast of 6,473,336 with respect to Proposal 2 represent 54%
of the total shares outstanding on September 30, 1994.
6
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Shares are traded on the New York Stock Exchange
(symbol ABR). The Company is listed in the stock tables as 'Arbor Prop.'
Although the Company does not know the exact number of beneficial holders of the
Company's Common Shares, it believes the number exceeds 5,900.
The Company's Common Shares began trading on the New York Stock Exchange on
March 1, 1994. The following table presents cash distributions and the high and
low prices of the Common Shares and the predecessor Partnership's Units in the
last two years based on The New York Stock Exchange daily composite
transactions.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTION(A)
--------- --------- -------------
<S> <C> <C> <C>
Year ended December 31, 1994:
First Quarter........................................... $ 10.75 $ 9.00 $ .2750
Second Quarter.......................................... 8.88 7.50 .2750
Third Quarter........................................... 9.50 8.63 .2750
Fourth Quarter.......................................... 9.88 7.25 .2750
-------------
$ 1.10
-------------
-------------
Year ended December 31, 1993:
First Quarter........................................... $ 11.875 $ 8.125 $ .2750
Second Quarter.......................................... 11.125 8.750 .2750
Third Quarter........................................... 12.250 10.000 .2750
Fourth Quarter.......................................... 12.375 10.750 .2750
-------------
$ 1.10
-------------
-------------
</TABLE>
------------------
(a) On March 21, 1995, a distribution of $.175 per Common Share was declared
with a record date of March 31, 1995 and a payment date of May 15, 1995.
ITEM 6. SELECTED FINANCIAL DATA.
The February 28, 1994 merger of the Partnership with and into Green Acres
Mall Corp., a wholly-owned subsidiary of the Company, represented 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 Company and Partnership have been combined at historical cost retroactive to
the beginning of the earliest year presented.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER COMMON SHARE DATA)
<S> <C> <C> <C> <C> <C>
Gross income from rental operations............................ $ 21,465 $ 20,370 $ 20,476 $ 17,415 $ 16,866
Income (loss) before extraordinary loss........................ 334 1,150 (163) 2,511 4,327
Extraordinary loss from early retirement of debt............... -- (6,373) -- -- --
Net income (loss).............................................. 334 (5,223) (163) 2,511 4,327
Total assets................................................... 164,822 153,886 157,781 152,479 147,362
Long-term obligations:
Collateralized floating rate notes, net of unamortized
discount................................................... 117,914 117,891 -- -- --
Zero coupon mortgage note, net of unamortized discount....... -- -- 83,739 75,665 68,370
Obligation under capitalized lease........................... 6,994 6,971 6,959 7,062 6,642
Per Common Share data: (a)
Net income (loss)............................................ $ .03 $ (.51) $ (.02) $ .24 $ .42
Distributions (b)............................................ 1.10 1.10 1.17 1.35 1.31
</TABLE>
7
<PAGE>
------------------
(a) Per weighted average share; net income for 1994 was computed at 11,681,960
weighted average shares outstanding. Net income (loss) for the years 1993,
1992 1991 and 1990 have been computed using 10,277,469 Common Shares
outstanding during the periods.
(b) The distribution for the first quarter of 1990 of $.3225 was declared on
December 8, 1989. Such amount was accrued as a distribution in the 1989
financial statements but is reflected as a 1990 distribution in the table
above.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This discussion should be read in conjunction with the Consolidated
Financial Statements and accompanying Notes to Consolidated Financial
Statements.
FINANCIAL CONDITION
RECENT DEVELOPMENTS
On February 28, 1994, the Partnership merged with and into Green Acres Mall
Corp., a wholly-owned subsidiary of the Trust. The Trust and the Partnership are
interchangeably referred to herein as the 'Company.' See Item 1 and Note 1 to
the consolidated financial statements for a discussion of the Company's Common
Shares issued in connection with this 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 the beginning of the earliest year presented. 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 ERPM, the Partnership's Advisor,
is reflected in the Company's consolidated financial statements as of February
28, 1994 and March 30, 1994, respectively. The issuance of Common Shares to the
Special General Partner 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 has increased by
approximately $342,000 as a result of the increase in the basis of the Mall. The
issuance of Common Shares to the Advisor is reflected as a charge to earnings
during the first quarter of 1994 in the amount of $3,843,000.
In connection with the Merger in 1993, the Company recognized as an expense
nonrecurring legal, accounting, and printing costs aggregating approximately
$1,250,000.
On February 14, 1995, the Company announced that it had retained Goldman,
Sachs & Co. in connection with a possible merger of the Company into another
REIT or a sale of the Company's real estate. The Company is currently pursuing
such possibilities; however, no agreement has been reached with respect to any
such transaction. There is no assurance that the Company will be able to reach
agreement with any party with respect to valuation, form of consideration,
structure or other terms of any such transaction or that, if an agreement is
reached, the transaction will be consummated.
On March 21, 1995, the Company announced a reduction in its quarterly
dividend from $.275 to $.175 per Common Share, establishing an annual dividend
rate of $.70 per Common Share. In its announcement of the dividend reduction,
the Company noted that the new dividend represents 90% of projected funds
available for distribution for the period April 1, 1995 through December 31,
1996. That estimate was based upon (i) continuation of the current interest rate
on the Company's collateralized
8
<PAGE>
floating rate debt ('Floating Rate Notes'); (ii) currently projected net income
from operation of the Green Acres Mall complex; (iii) estimated overhead
expenses for the Company; and (iv) projected capital expenditures.
CASH FLOWS FROM OPERATING, INVESTING, AND FINANCING ACTIVITIES
Cash flows from operating activities for 1994 and 1993 were $7,715,000 and
$6,709,000, respectively. This increase is primarily attributable to the
remerchandising program which began in 1992 and was substantially completed in
1994. 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. In addition, higher interest payments in
1994 were offset by significant working capital changes in 1993 as discussed in
the following paragraph.
Cash flows from operating activities for 1993 and 1992 were $6,709,000 and
$13,719,000, respectively. The 1993 results, and the related decline from 1992,
are principally attributable to payments in 1993 of $1,951,000 and $2,684,000
for 1992 real estate taxes and deferred advisory and property management fees,
respectively, and the payments of $1,123,000 for interest on the Company's
Floating Rate Notes, $686,000 for deferred leasing costs, and $382,000 for
Merger costs.
Cash flows from investing activities for 1994 were $446,000. Net proceeds
of $1,435,000 were received from the completion of the Home Depot transaction
and $500,000 related to the 1993 payment made by Home Depot in connection with
such transaction was released from escrow. In addition, capital expenditures of
$1,489,000 were incurred in 1994. In the prior year, cash provided from
investing activities was $1,060,000. This activity is primarily due to receipt
of net proceeds of $9,377,000 from the transfer of the Bulova Parcel to Home
Depot. A portion of these proceeds ($5,703,000) were used to purchase the Bulova
Parcel.
Cash flows from investing activities increased by $6,713,000 in 1993 over
1992, primarily due to the receipt of proceeds from the April 1993 transfer of
the Bulova Parcel to Home Depot. Pursuant to a lease/purchase agreement, Home
Depot paid $9,500,000 to the Company, a portion of which was used to complete
the purchase of the Bulova Parcel. In connection with this lease/purchase
agreement, the Company recognized a gain on sale of real estate of $440,000
during 1993. The Company's capital expenditures for 1992 included payments of
$1,884,000 related to the acquisition of the Bulova Parcel, predevelopment costs
of $1,110,000 related to the mall expansion project and tenant allowance and
other capital items.
Cash flow used in financing activities was $8,734,000 and $8,753,000 in
1994 and 1993, respectively. Distributions paid by the Company in 1994 increased
$1,418,000 as a result of the Common Shares that were issued in respect of the
Special General Partner's residual interest in the Partnership and the
termination of the agreement with the Advisor (the 'Advisory Agreement').
Pursuant to contractual obligations entered into in connection with the Merger,
the dividends on these shares were reinvested in the Company through a
distribution reinvestment plan in newly issued Common Shares. The total amount
of proceeds from all dividend reinvestments was $1,489,000 in 1994.
Additionally, in August 1993, the Company received net proceeds from the
issuance of the Floating Rate Notes, which were used to purchase the existing
zero coupon first mortgage note (the 'Zero Note') and to repay $16,500,000 in
second mortgage financing. This activity was partially offset by an increase in
borrowings of $2,500,000 from the existing credit line in 1994.
Cash flows used in financing activities for 1993 and 1992 were $8,753,000
and $8,220,000, respectively. The increase in cash used in financing activities
was primarily attributable to the refinancing activities in August 1993
described in the preceding paragraph in which the net proceeds from the issuance
of the Floating Rate Notes were used to purchase the Zero Note and to repay
$16,500,000 in second mortgage financing.
The Company believes that Funds from Operations represents an indicator of
its ability to make cash distributions. The Company defines 'Funds from
Operations' as net income before depreciation, amortization of financing and
other deferred expenses, gains or losses on sales of assets and other
9
<PAGE>
significant non-cash charges. Management believes that Funds from Operations is
the most significant factor in determining the amount of cash distributions,
although Funds from Operations does not represent net income or cash flows from
operating activities as defined by generally accepted accounting principles and
is not necessarily indicative of cash available to fund all cash flow needs.
Furthermore, Funds from Operations should not be considered as an alternative to
net income as an indicator of the Company's operating performance or to cash
flows from operating activities as a measure of liquidity.
The following table sets forth Funds from Operations and cash provided by
operating activities of the Company for the periods indicated:
<TABLE>
<CAPTION>
CASH PROVIDED
FUNDS FROM BY OPERATING
OPERATIONS ACTIVITIES
-------------- --------------
<S> <C> <C>
Year ended December 31, 1992....................................... $ 11,972,000 $ 13,719,000
Year ended December 31, 1993....................................... 10,828,000 6,709,000
Year ended December 31, 1994....................................... 8,737,000 7,715,000
</TABLE>
The Funds from Operations of the Company decreased $2,091,000 in 1994 as
compared to 1993. This decrease is primarily attributable to an increase in the
amount of interest currently payable. Although interest expense decreased from
$9,834,000 in 1993 to $8,573,000 in 1994, the prior year expense included
$6,149,000 of non-cash charges while the current year expense included only
$1,235,000 of such charges. These decreases were partially offset by an increase
in rental revenue of $1,095,000.
The decrease of $1,152,000 in Funds from Operations for 1993 compared to
1992 is attributable to the 1993 incurrence of currently payable interest
expense on the Floating Rate Notes and payments of Merger expenses of $1,824,000
and $1,250,000, respectively, offset by the nonrecurrence of the $1,439,000
write-off of capitalized predevelopment costs in 1992.
DEBT REFINANCING
On August 19, 1993, the Company, through a wholly-owned subsidiary, issued
the Floating Rate Notes in an aggregate principal amount of $118,000,000. The
Floating Rate Notes 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 early extinguishment of the Zero Note, as described above,
resulted in an extraordinary charge of $6,373,000. The remainder of the proceeds
from the Floating Rate Notes was used to purchase an interest rate cap and to
pay mortgage recording taxes and other costs incurred in connection with the
refinancing. The entire principal amount of the Floating Rate Notes is due on
their maturity date, August 19, 1998. The Floating Rate Notes have a floating
interest rate equal to 78 basis points in excess of the three-month LIBOR. The
annualized interest rate on this debt, which is subject to quarterly reset, was
6.59% at December 31, 1994 (7.03% effective February 1995).
Payments of interest expense will be funded from cash flows from operations
supplemented, if necessary, by borrowings under the revolving credit facility
described below (amortization of the deferred financing costs, approximately
$1,200,000 per annum, will result in an additional non-cash charge to interest
expense). As a result of an interest rate cap agreement also entered into on
August 19, 1993, the effective interest rate of the Floating Rate Notes will not
exceed 9% per annum.
The mortgage and indenture relating to the Floating Rate Notes limit
additional indebtedness that may be incurred by Green Acres Mall Corp., but not
by the Trust. Those agreements also contain certain other covenants which, among
other matters, effectively subordinate distributions from Green Acres Mall Corp.
to the debt service requirements of the Floating Rate Notes.
On August 19, 1993, the Partnership also obtained an 18 month unsecured
revolving credit facility in the amount of $3,400,000 with interest at 1% over
the lender's prime rate (effective interest rate of 9.5% at December 31, 1994).
The amount available under this loan was increased to $5,900,000 in
10
<PAGE>
August 1994 and the line's maturity was extended to April 1995. As of December
31, 1994, the balance of this loan was $4,300,000. In February 1995, the Company
borrowed an additional $1,600,000 under this credit facility. Amounts
outstanding under this loan as of April 1995 can be repaid in four quarterly
installments beginning July 1995. The Company is currently negotiating a
$1,000,000 increase in the line of credit and an extension of the expiration
date to December 31, 1995, with amortization thereafter. The Floating Rate
Notes' mortgage agreement places certain limitations on the Company's ability to
borrow under the line of credit agreement.
The Company anticipates that it will refinance the Floating Rate Notes at
maturity in August 1998. Given the substantial equity the Partnership has in the
Property (the principal amount of the Floating Rate Notes represents less than
50% of the Property's estimated fair value at December 31, 1994), Management
anticipates that it will have considerable flexibility in obtaining such
refinancing. However, Management has determined it is not necessary at this time
to identify any specific sources of such refinancing.
DIVIDENDS
The Company's quarterly dividend rate for 1994 was $.275 per Common Share,
representing an annual dividend rate of $1.10 per Common Share. On March 21,
1995, the Company announced a new quarterly dividend rate of $.175 per Common
Share, representing an annual dividend rate of $.70 per Common Share.
The reduction in the Company's dividend rate was primarily attributable to
the surprisingly sharp rise in interest on the Floating Rate Notes. Between
August 1993 and February 1995, the interest rate rose 3%, from an annual rate of
4.03% to an annual rate of 7.03%. The Trustees were concerned about possible
further increases and the adverse impact on the Company's share pricing if
another dividend rate reduction would become necessary. For that reason, the new
dividend rate was set at approximately 90% of funds available for distribution
projected from April 1, 1995 through December 31, 1996.
RESULTS OF OPERATIONS
COMPARISON OF 1994, 1993 AND 1992
The Company reported net income of $334,000 ($.03 per weighted average
Common Share) in 1994, compared with a net loss of $5,223,000 ($.51 per weighted
average Common Share) in 1993 and a net loss of $163,000 ($.02 per weighted
average Common Share) in 1992.
The 1994 results were adversely affected by a one time charge of
$3,843,000, resulting from the termination of the Advisory Agreement. This
charge was partially offset by a gain on sale from the Home Depot transaction of
$839,000.
The 1993 results were impacted by the recognition of an extraordinary loss
of $6,373,000 ($.62 per Common Share) from the early retirement of the Zero
Note. The extraordinary loss was comprised principally of prepayment penalties
and the write-off of deferred financing costs. Earnings in 1993 also declined as
a result of the recognition of $1,250,000 of Merger costs. The earnings decline
in 1993 was partially offset by the $440,000 gain on sale of real estate from
the Bulova Parcel.
The 1992 results were impacted by the write-off of predevelopment costs. In
June 1992, the Company announced its decision to defer a planned expansion of
the Mall due to its inability to secure financing for this project. It is
uncertain when, or if, the expansion program will be resumed. Accordingly,
capitalized costs related to the predevelopment phase of the expansion, totaling
$1,439,000 were written off.
In 1994, revenues from rental operations increased 5%, or $1,095,000, from
1993. This increase is a direct result of the remerchandising program at the
Mall, commenced in 1992. The significant
11
<PAGE>
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.
Revenues from rental operations in 1993 decreased modestly from the prior
year. The decline in 1993 revenues of $106,000 was attributable to a $334,000
decline in Plaza revenues, primarily related to the buildout of the new Kmart
discount store, partially offset by higher Mall revenues attributable to
specialty leasing of space to temporary tenants.
In January 1993, the Company replaced Pergament, one of the Plaza's anchor
tenants, and all but one of the Plaza's small store spaces, with a new Kmart
discount store. In connection with the lease termination, the Partnership paid
$450,000 to Pergament on July 1, 1993. The Company also paid a $150,000 fee to
the Advisor for securing Kmart as a new anchor tenant. This change in Plaza
tenants has generated an additional $350,000 of income from rental operations on
an annualized basis compared to the income generated from the Plaza in 1992.
Revenues from rental operations in 1992 was $20,476,000. The Plaza was open
for its first full year of business in 1992. In 1992 minimum rent from mall
tenants increased due to improved occupancy, percentage rents increased due to
higher tenant sales levels and other income increased due to an expanded
temporary leasing program.
Net operating expenses decreased in 1994 to $1,908,000 from $2,059,000 in
1993 and $1,779,000 in 1992. This $151,000 decrease in 1994 is primarily
attributable to the decline in management fees, as described below. This
decrease was partially offset by structural nonreimbursable repairs made to the
Property due to the severe weather in 1994. The $280,000 increase in 1993 as
compared to 1992 is primarily attributable to increases in net real estate taxes
and food court costs of $147,000 and $119,000, respectively.
The Company made significant changes to management structure in connection
with the Merger. While its affairs had previously been administered by third
parties pursuant to property management and advisory agreements, commencing on
March 1, 1994, the Company became primarily self-managed. The property
management contract with Compass Retail Inc. ('Compass') was amended and
restated to extend its termination date 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. This reduction is a direct result of the Company's
conversion to a primarily self managed REIT. However, such reduction has been
offset, in part, by compensation expenses resulting from internal management.
Included in net operating expenses are property management fees of
$289,000, $786,000, and $785,000 for 1994, 1993, and 1992, respectively,
attributable to the related agreement with Compass.
Operating expenses increases attributable to inflation generally do not
have a significant effect on the Company's income from rental operations as
substantially all operating expenses are reimbursed by tenants in accordance
with the terms of their leases.
During 1993 and 1992 the Company incurred advisory fees of $1,625,000 and
$1,709,000. During the first quarter of 1994 the Company paid $264,000 in
advisory fees. However, due to the termination of the Advisory Agreement in
March 1994, the Company will no longer incur advisory fees. The advisory fee was
comprised of an annual base fee of $250,000 and an annual subordinated incentive
advisory fee of $1,250,000 which increased in proportion to the amount by which
aggregate distributions of operating cash flow to Unitholders exceed a ten
percent return on the Unitholders' Adjusted Capital Contributions (as defined in
the Partnership Agreement). The advisory agreement terminated on March 30, 1994.
The provision for doubtful accounts was $453,000 in 1994, $424,000 in 1993
and $809,000 in 1992. The 1992 provision was attributable to anticipated losses
associated with certain delinquent tenants whose leases were subsequently
terminated. Such tenants were symptomatic of credit risk found in the retail
industry, particularly among smaller local and regional tenants. Due to the
absence
12
<PAGE>
of significant credit losses and certain recoveries of receivables previously
written off, the Company experienced an improvement in its provision for
doubtful accounts in 1994 and 1993.
Interest expense was $8,573,000, $9,834,000, and $10,787,000 for 1994,
1993, and 1992, respectively. The decrease in interest expense in 1994 and 1993
over 1992 is due to the August 19, 1993 debt refinancing. The Zero Note, with an
effective interest rate of 10.4% per annum, and the $16,500,000 in second
mortgage financing, bearing interest at rates between 6% and 7% per annum, were
replaced with Floating Rate Notes that had an initial interest rate of 4.03% and
an average interest rate of 5.29% in 1994. The interest rate was adjusted to
7.03% on February 11, 1995. Interest expense in 1995 is expected to exceed 1994.
Distributions to security holders were $12,723,000 ($1.10 per Common Share)
in 1994, $11,305,000 ($1.10 per Common Share) in 1993, and $12,667,000 ($1.235
per Common Share) in 1992. The dividends on the shares in the dividend
reinvestment plan were paid to the Company resulting in proceeds of $1,489,000
in 1994. The Company has paid out substantially all of its net cash flow since
inception.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Registrant's consolidated financial statements and supplementary data
listed in Item 14(a) appear immediately following the signature pages.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company is managed by members of a Board of Trustees (the 'Managing
Trustees') initially comprised of the directors of the Partnership's former
managing general partner. The Managing Trustees are divided into three classes
as nearly equal in number as possible, with the term of office of one class
expiring in each year. After expiration of the initial terms as set forth in the
following table, Managing Trustees will serve for three-year terms. The Managing
Trustees are responsible for electing the Company's executive officers, who
serve at the discretion of the Board of Trustees. Myles H. Tanenbaum serves as
the Company's President and as a member of the Company's Board of Trustees. In
addition to Mr. Tanenbaum, the Company's executive officers include Kimli Cross
Smith, Senior Vice President -- Leasing; Richard P. Ferrell, Vice President --
Management; and Dennis Harkins, Treasurer and Controller. Brief summaries of Mr.
Tanenbaum's and the other Managing Trustees' and executive officers' business
experience and certain other information are set forth following the table.
<TABLE>
<CAPTION>
YEAR
NAME TERM EXPIRES POSITION
------------------------------------------ --------------- ------------------------------------------------------
<S> <C> <C>
Myles H. Tanenbaum (1).................... 1997 Managing Trustee and President (Principal Executive
and Financial Officer)
Sylvan M. Cohen(1)(2)..................... 1995 Managing Trustee
Alton G. Marshall(2)(3)................... 1996 Managing Trustee
George R. Peacock(1)(3)................... 1996 Managing Trustee
Phillip E. Stephens(3).................... 1997 Managing Trustee
Kimli Cross Smith......................... N/A Vice President -- Leasing and Secretary
Richard P. Ferrell........................ N/A Vice President -- Management
Dennis Harkins............................ N/A Treasurer and Controller (Principal Accounting
Officer)
</TABLE>
------------------
(1) Member of the nominating committee.
(2) Member of the audit committee.
(3) Member of the compensation committee.
Myles H. Tanenbaum, age 64, is a Managing Trustee and President of the
Company and Chairman of Arbor Enterprises, an investment and holding company. He
formerly served as a consultant to Equitable Real Estate, of which the former
Advisor to the Partnership is a wholly-owned subsidiary. He was formerly the
President of EQK Partners (formerly the Partnership's advisor) from its
inception in September 1983 until October 1987 and was Chairman until December
1989. Prior to that time, from 1970 he served as Executive Vice President and
Chairman of the Executive Committee of Kravco, Inc. Mr. Tanenbaum was also
managing partner of the Partnership's former special general partner, a general
partnership which was the sole shareholder of the Partnership's former managing
general partner. Prior to joining Kravco, Inc. in 1970, Mr. Tanenbaum had been a
partner in the law firm of Wolf, Block, Schorr and Solis-Cohen, Philadelphia,
Pennsylvania. He is also a certified public accountant. Mr. Tanenbaum is
currently a director of Universal Health Realty Trust, a New York Stock Exchange
('NYSE')-listed real estate investment trust which owns hospitals, and of The
Pep Boys-- Manny, Moe & Jack, Inc., an NYSE-listed company engaged in the retail
sale of automotive parts and accessories, and the provision of automotive
services.
Sylvan M. Cohen, age 80, is Chairman and Chief Executive Officer of
Pennsylvania Real Estate Investment Trust (PREIT), an American Stock
Exchange-listed real estate investment trust since its inception in 1960. Prior
to that he was President of PREIT since its inception. Mr. Cohen has been a
Trustee of PREIT since its inception. Mr. Cohen is also a partner in the
Philadelphia law firm of Cohen, Shapiro, Polisher, Shiekman and Cohen. Mr. Cohen
is a former director of Fidelity Bank,
14
<PAGE>
Philadelphia, Pennsylvania, and is a director of FPA Corporation, an American
Stock Exchange-listed real estate development company, and a trustee of EQK
Realty Investors I, an NYSE-listed real estate investment trust. He formerly
served as President of the National Association of Real Estate Investment Trusts
and the International Council of Shopping Centers.
Alton Marshall, age 73, is President of Alton G. Marshall Associates, Inc.,
a New York City real estate investment firm since 1971. He has been Senior
Fellow of the Nelson A. Rockefeller Institute of Government in Albany, New York
since January 1, 1991. He was Chairman of the Board and Chief Executive Officer
of Lincoln Savings Bank, FSB, from March 1984 through December 1990. From 1971
to 1981, he was President of Rockefeller Center, Inc., a real estate,
manufacturing and entertainment company. Mr. Marshall is currently a director of
The Hudson River Trust, and New York State Electric & Gas Corp., and a trustee
of EQK Realty Investors I. He is an independent partner of Alliance Capital and
Alliance Capital Retirement Fund.
George R. Peacock, age 71, retired in August 1988 after serving as Chairman
and Chief Executive Officer of Equitable Real Estate, parent of the
Partnership's former Advisor which is a wholly-owned subsidiary of Equitable.
Mr. Peacock is a past member of Equitable's Investment Policy Committee. Prior
to his retirement he was also a Senior Vice President of parent Equitable for
approximately twelve years. Mr. Peacock is a former director of Equitable Real
Estate and remains a trustee of EQK Realty Investors I. He is sole owner,
President and Chief Executive Officer of Carluke, Inc.
Phillip E. Stephens, age 47, has been President of Compass Retail, the
Partnership's former property manager and a subsidiary of Equitable Real Estate,
since January 1992 and was Executive Vice President of the Compass Retail
division of Equitable Real Estate from January 1990 to December 1991. He has
also served as President of ERPM, the Partnership's former Advisor and a
wholly-owned subsidiary of Equitable Real Estate, since December 1989. From
October 1987 to December 1989, he was President of EQK Partners (formerly the
Partnership's advisor), the predecessor in interest to ERPM. From its inception
in September 1983 to October 1987, he was Senior Vice President of EQK Partners.
He is also President and a trustee of EQK Realty Investors I.
Kimli Cross Smith, age 32, has been Vice President -- Leasing and Secretary
since March 1994. Prior to that, Ms. Smith had been a leasing representative for
Compass, the Partnership's former property manager and a subsidiary of Equitable
Real Estate, since November 1990. From March 1988 until she joined Compass, Ms.
Smith was a leasing representative for Strouse, Greenberg & Co., Inc.,
Philadelphia, Pennsylvania.
Richard P. Ferrell, age 37, has been a Vice President -- Management of the
Trust since March 1994. Prior to that, from December 1992, Mr. Ferrell was Vice
President of the Partnership's former managing general partner and the Manager
of Green Acres Mall. From December 1991 to December 1992 Mr. Ferrell worked for
the Rouse Company as Vice President and General Manager of the Citadel, an
enclosed mall located in Colorado Springs, Colorado. Prior to that, from
February 1989 to December 1991, Mr. Ferrell was employed by the Rouse Company as
Manager of Retail Operations for the Cherry Hill Mall in Cherry Hill, New
Jersey.
Dennis Harkins, age 32, has been the Controller of Green Acres Mall since
June 1993. Prior to that, from August 1990 Mr. Harkins was Controller for Hayim
and Co., Hempstead, New York, a company engaged in the importation and
distribution of rugs. Prior to that, from January 1990 Mr. Harkins was Assistant
Controller of the Yarmouth Group, New York, New York, a real estate investment
company. From June 1987 until January 1990, Mr. Harkins was an accounting
manager for Angeles Corp., Los Angeles, California, a real estate investment
company.
Pursuant to the Delaware Business Trust Act, the Company is required to
have as a trustee a person or entity that is a resident of or has its principal
place of business in the State of Delaware. The Delaware resident trustee is
Wilmington Trust Company (the 'Resident Trustee'). The Declaration of Trust
provides that the management of the Company is vested exclusively in the
Managing Trustees who make up the Board of Trustees of the Company and that the
Resident Trustee will not participate in the management of the Company except as
directed by the Board of Trustees and consented to by
15
<PAGE>
the Resident Trustee. The principal offices of the Resident Trustee are located
at 1100 N. Market Street, Rodney Square North, Wilmington, Delaware 19890-0001.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and trustees and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, the 'Reporting Persons')
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish the Company with copies of these reports.
Based on the Company's review of the copies of these reports received by
it, and written representations received from Reporting Persons, the Company
believes that all filings required to be made by the Reporting Persons during
1994 were made on a timely basis, except for the following filings: (i) Randall
C. Stein, a former executive officer of the Company, filed one report (relating
to two transactions) subsequent to the applicable due date; (ii) George R.
Peacock, a Managing Trustee of the Company, filed one report (relating to one
transaction involving issuances pursuant to the Company's Dividend Reinvestment
Plan during 1994) subsequent to the applicable due date; (iii) Phillip E.
Stephens, a Managing Trustee of the Company, filed one report (relating to three
transactions involving issuances pursuant to the Company's Dividend Reinvestment
Plan during 1994) subsequent to the applicable due date; and (iv) Myles H.
Tanenbaum, a Managing Trustee and President of the Company, filed one report
(relating to six transactions involving issuances pursuant to the Company's
Dividend Reinvestment Plan during 1994) subsequent to the applicable due date.
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid by the Trust during the fiscal year ended December 31, 1994 to
the Trust's President and each of the Trusts other most highly compensated
executive officers whose compensation exceeds $100,000 in 1994. Until the
conversion to a REIT on February 28, 1994, the Company was not internally
managed, and was not responsible for executive compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL OTHER
------------------------ STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) AWARDS($) OPTIONS(#) ($)(2)
-------------------------------------------- --------- ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Myles H. Tanenbaum.......................... 1994 145,833 100,000 -- 750,000 --
President
Randall Stein(3)............................ 1994 112,500 25,000 25,000(4) 50,000 3,500
Vice President Acquisitions
Kimli Smith................................. 1994 85,871 32,500 15,000(5) 32,500 5,500
Vice President Leasing
Richard Ferrell............................. 1994 84,041 22,500 12,500(6) 25,000 3,500
Vice President Management
</TABLE>
------------------
(1) This salary information is for the period of March 1, 1994 through December
31, 1994. Prior to that time the Trust was not internally managed.
(2) Represents annual premium payments on life insurance on the lives of Mr.
Stein, Ms. Smith and Mr. Ferrell, for which they designate the
beneficiaries, which policies are designed to comply with Section 79 of the
Internal Revenue Code.
(3) Mr. Stein resigned effective March 3, 1995. (See '-- Employment Agreements')
(4) Represents the dollar value of a grant of 2,500 shares at $10 per share as
of January 25, 1994, the grant date. The dollar value of such shares on
December 31, 1994 was $19,688, or $7.875 per share. All such shares are
entitled to the receipt of
16
<PAGE>
dividends. All of the restricted shares awarded to Mr. Stein became fully
vested upon his resignation from the Company (see '-- Employment
Agreement').
(5) Represents the dollar value of a grant of 1,500 shares at $10 per share as
of January 25, 1994, the grant date. The dollar value of such shares on
December 31, 1994 was $11,813, or $7.875 per share. All such shares are
entitled to the receipt of dividends. These shares vest in equal increments
over three years.
(6) Represents the dollar value of a grant of 1,250 shares at $10 per share as
of January 25, 1994, the grant date. The dollar value of such shares on
December 31, 1994 was $9,844, or $7.875 per share. All such shares are
entitled to the receipt of dividends. These shares vest in equal increments
over three years.
The following table sets forth certain information with respect to stock
options granted January 25, 1994 to the officers named in the Summary
Compensation Table.
STOCK OPTIONS GRANTED IN 1994 (1)(2)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
% OF TOTAL STOCK
OPTIONS PRICE APPRECIATION
NUMBER GRANTED TO FOR
OF SECURITIES EMPLOYEES EXERCISE OPTION TERM (3)
UNDERLYING IN FISCAL OR BASE EXPIRATION --------------------
NAME OPTIONS GRANTED YEAR PRICE ($/SH) DATE 5%($) 10%($)
---------------------------------- --------------- --------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Myles H. Tanenbaum................ 750,000 86% $ 10.00 1/25/04 2,126,767 7,829,018
Randall Stein..................... 50,000 6% $ 10.00 1/25/04 141,784 521,935
Kimli Smith....................... 32,500 4% $ 10.00 1/25/04 92,160 339,257
Richard Ferrell................... 25,000 3% $ 10.00 1/25/04 70,892 260,967
</TABLE>
------------------
(1) None of these options were exercised in 1994. At December 31, 1994 the share
price was $7.88 and therefore no options were in the money options at
December 31, 1994.
(2) The options vest pro-rata over a five year period commencing one year from
the grant date, or January 25, 1995, subject to acceleration upon a change
of control (as defined).
(3) Assumes share price appreciates over a ten year term at rates of 5% and 10%
compounded annually. The assumed annual rate of share appreciation is
specified by the Securities and Exchange Commission and is not intended to
forecast possible future appreciation of the Trust's share price.
STOCK OPTIONS
At the Company's annual shareholder meeting in November 1994, the
shareholders approved an Incentive Share Plan ('The Plan'). An aggregate of
1,500,000 Common Shares may be awarded under the Plan. Persons eligible for
participation in the Plan include all non-employee Managing Trustees, officers
and other key executives of the Company (collectively 'Eligible Participants').
There are currently 589,050 shares available to be awarded under the Plan. No
Eligible Participant may receive an award of more than 750,000 Options, stock
appreciation rights and restricted Shares in any one calendar year.
COMPENSATION OF DIRECTORS
Trustees who are not employees of the Trust are entitled to receive an
annual fee of $15,000, plus a fee of $1,000 for attendance at each of the
Trustee's meetings and $1,000 for attendance at Committee meetings. Other fees
are payable for special services performed for the Trust, but no such services
were provided in 1994. Mr. Tanenbaum is not paid any fees for attendance at
Trustee meetings or for any other special services performed for the Trust.
17
<PAGE>
EMPLOYMENT AGREEMENTS
The Trust entered into an Employment Agreement with Mr. Stein dated January
10, 1994, for a term extending to June 30, 1996, which was terminated March 3,
1995, subject to the following: (i) Mr. Stein is to receive $15,000 per month
through October 31, 1995; (ii) Mr. Stein's restricted shares are to become fully
vested; and (iii) Mr. Stein's stock options are to terminate.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following Managing Trustees served on the Compensation Committee of the
Company:
Phillip E. Stephens, Chairman
Alton G. Marshall
George R. Peacock
None of these committee members served as an officer or employee of the
Company during 1994 or any time prior thereto. However, Mr. Stephens is
President of Compass and President of ERPM, the Company's former Advisor. The
Trust paid Compass $329,000 and $786,000, and ERPM $264,000 and $1,665,000 in
the years ended December 31, 1994 and 1993, respectively. (See Item 13)
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Trust commenced substantial operations as of February 28, 1994, the
date upon which the Company's operations converted from partnership form into a
real estate investment trust. As part of that conversion, the Trust became
largely self-managed. Prior to the conversion, the predecessor partnership was
managed by the Advisor and, accordingly, it did not bear the expense of
executive compensation directly. As part of the planning process in connection
with the conversion, the Company retained a compensation consulting firm to
render a report (the 'Report') with respect to compensation to be paid to the
Company's President and other senior management personnel.
Based upon the Report and discussions with Mr. Tanenbaum, it was determined
that a compensation structure would be implemented for the President that would
consist of base compensation, a discretionary bonus and share options. It was
also determined that (i) the base compensation would be set at a level
substantially below the median compensation of chief executive officers of
comparable companies as identified in the Report; and (ii) the share option
grant would be made larger to reflect the lower level of cash compensation.
As a result of the foregoing, the base compensation for 1994 for the
President was set at an annual rate of $175,000 and Mr. Tanenbaum was granted
options to purchase 750,000 Common Shares at $10.00 per Common Share (the market
price at date of grant). Such options vest at the rate of 20% per year
commencing December 31, 1994 so long as Mr. Tanenbaum is employed by the Company
at the applicable year-end, subject to immediate vesting upon death, disability
or change in control. By structuring compensation in this manner, the
President's total compensation was made heavily dependent upon the performance
of the Common Shares in the market. The base compensation and option awards were
reflected in the Company's Consent Solicitation Statement/Prospectus dated
December 23, 1993 that was provided to Unitholders in the predecessor
partnership in connection with their decision on whether to approve the
conversion. Mr. Tanenbaum's year-end bonus was set by the Compensation Committee
at $100,000. This amount reflected a subjective evaluation of Mr. Tanenbaum's
performance, as well as the performance of the Company. The relatively low level
of Mr. Tanenbaum's overall cash compensation was also considered in determining
the amount of the bonus. No specific qualitative or quantitative measures of the
performance of Mr. Tanenbaum or the Company were utilized in reaching the
determination as to Mr. Tanenbaum's bonus.
18
<PAGE>
The compensation structure for the other members of senior management was
also based in large part upon the Report. In addition to base compensation, an
annual discretionary bonus and share option grants, the other members of senior
management also received grants of restricted shares, which vest annually over
three years. The cash compensation and share option grants of the senior
management other than Mr. Tanenbaum were set at levels closer to industry norms
and, accordingly, a greater proportion of the other senior management's
compensation consisted of cash as compared to Mr. Tanenbaum's compensation.
Compensation Committee:
Phillip E. Stephens, Chairman
Alton G. Marshall
George R. Peacock
19
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Share with the cumulative stockholder return of (i) the S&P
Smallcap 600 Index and (ii) the NAREIT Equity Index, assuming an investment of
$100 on March 1, 1994 in the Common Shares of the Company and an investment of
$100 on February 28, 1994 in the stocks comprising the S&P Smallcap 600 Index
and the NAREIT Equity Index (in each case assuming the reinvestment of all
dividends).
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------------
MARCH 1, 1994 DECEMBER 31, 1994
--------------- ---------------------
<S> <C> <C>
Arbor Property Trust $ 100 $ 89
S&P Smallcap 600 Index $ 100 $ 93
NAREIT Equity Index $ 100 $ 96
</TABLE>
20
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table shows the beneficial holdings of Common Shares as of
March 1, 1995 of: (i) all persons known by the Company, based upon filings with
the Securities and Exchange Commission, to be beneficial owners of more than 5%
of its outstanding common shares; (ii) all Managing Trustees of the Company
individually; (iii) all Executive Officers of the Company individually; and (iv)
all Trustees and Executive Officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF % OF
NAME ADDRESS OUTSTANDING SHARES SHARES
------------------------------------- ------------------------------------- ------------------ -------------
<S> <C> <C> <C>
Equitable 787 7th Avenue 1,450,447(1) 11.8%
New York, NY 10019
Sylvan M. Cohen 12 S. 12th Street 2,500(2) (3)
Philadelphia, PA 19107
Alton G. Marshall 136 E. 79th Street 2,500(2) (3)
New York, NY 10021
George R. Peacock Monarch Plaza 12,943(4) (3)
3414 Peachtree Road
Suite 816
Atlanta, GA 30326
Phillip E. Stephens 5775 Peachtree Dunwoody 110,974(1)(2) (3)
Suite 200D
Atlanta, GA 30342
Myles H. Tanenbaum One Tower Bridge 1,198,268(1)(5) 9.7%
Suite 800
W. Conshohocken, PA 19428
Kimli Cross Smith One Tower Bridge 8,800(6)(7) (3)
Suite 800
W. Conshohocken, PA 19428
Richard P. Ferrell 2034 Green Acres Mall 6,250(6)(8) (3)
Valley Stream, NY 11581
All Directors and Executive 1,342,235 10.9%
Officers as a Group
(7 persons)
</TABLE>
------------------
(1) Includes the estimated allocation of Common Shares issued to the former
General Partners of the Partnership, although a final allocation has not yet
been completed. Until the Common Shares are distributed, voting of the
shares will be controlled by Mr. Tanenbaum.
(2) Includes 2,500 Common Shares issuable upon the exercise of the vested
portion of the 7,500 options which were granted to each Managing Trustee on
January 25, 1994 and vest pro-rata over a three year period from the date of
grant.
(3) The number of Common Shares represents less than 1% of the outstanding
Common Shares.
(4) Includes 1,000 Common Shares owned by Mr. Peacock's wife, of which Mr.
Peacock disclaims beneficial ownership. Also includes 2,500 Common Shares
issuable upon the exercise of the vested portion of the 7,500 options which
were granted on January 25, 1994 and vest pro-rata over a three year period
from the date of grant.
(5) Includes 12,700 Common Shares owned by Mr. Tanenbaum's wife and 10,000
Common Shares owned by a trust of which he is a trustee. Excludes 125,445
Common Shares owned by Mr. Tanenbaum's adult children, of which Mr.
Tanenbaum disclaims beneficial ownership. Also
21
<PAGE>
includes 150,000 Common Shares issuable upon the exercise of the vested
portion of 750,000 options which were granted to Mr. Tanenbaum on January
25, 1994 and which vest pro-rata over a five year period from the date of
grant.
(6) Includes restricted Common Shares that will become unrestricted in equal
annual increments over three years commencing one year from the grant date,
or January 25, 1995.
(7) Includes 6,500 Common Shares issuable upon the exercise of the vested
portion of the 32,500 options which were granted on January 25, 1994 and
vest pro-rata over a five year period from the date of grant.
(8) Includes 5,000 Common Shares issuable upon the exercise of the vested
portion of the 25,000 options which were granted on January 25, 1994 and
vest pro-rata over a five year period from the date of grant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Property was acquired by the Partnership on August 27, 1986 at a
purchase price of $135,859,782 from Green Acres Associates, a general
partnership among Equitable, Sunrise Associates and the General Partners of the
Partnership. Sunrise Associates, a limited partnership, is an affiliate of the
General Partners of the Partnership.
On December 1, 1989, a wholly owned subsidiary of Equitable Real Estate
acquired the 50% interest in EQK Partners (former advisor to the Partnership)
owned by Kravco Partners, Ltd., bringing to 100% Equitable Real Estate's
ownership interest in EQK Partners. Mr. Tanenbaum and Mr. Stephens owned,
directly or indirectly, 25.2% and 14.4%, respectively, of Kravco Partners, Ltd.
Subsequently, ERPM, a wholly owned subsidiary of Equitable Real Estate, became
Advisor to the Partnership as the successor in interest to EQK Partners.
As advisor, ERPM received an advisory fee which was comprised of an annual
base fee of $250,000 and an annual subordinated incentive advisory fee of
$1,250,000 which increased in proportion to the amount by which aggregate
distributions of operating cash flow to Unitholders exceed a ten percent return
on the Unitholders' Adjusted Capital Contributions (as defined in the
Partnership Agreement). The advisory agreement terminated on March 30, 1994.
ERPM received an annual base advisory fee of $164,000, $250,000 and $250,000 for
the years ended December 31, 1994, 1993, and 1992, respectively. ERPM also
earned a subordinated incentive advisory fee of $100,000, $1,375,000 and
$1,459,000, respectively, for the years ended December 31, 1994, 1993 and 1992.
In addition, ERPM earned fees of $40,000 in each of 1993 and 1992 for tax
reporting services. Compass received a fee of $40,000 for tax reporting services
in 1994.
In December 1992, the Partnership entered into an agreement with ERPM
pursuant to which ERPM development services in conjunction with the termination
of the Company's lease with Pergament, a former anchor tenant at the Plaza, and
the procurement of a new lease with Kmart. The fee for these services was
$150,000.
Upon sale of all or any portion of any real estate investment of the
Partnership, the Advisor was entitled to receive a disposition fee equal to 2%
of the gross sale price (including outstanding indebtedness taken subject to or
assumed by the buyer and any purchase money indebtedness taken back by the
Partnership). The disposition fee was to be reduced by the amount of any
brokerage commissions and legal expenses incurred by the Partnership in
connection with such sales. Pursuant to this agreement with the Advisor, the
Company paid a $290,000 fee to the Advisor during 1993 relating to service
rendered in connection with the acquisition and development of the Bulova Parcel
and its ultimate transfer to Home Depot (see Items 1,7 and 8). Pursuant to the
Merger discussed in Item 4, the agreement with the Advisor was terminated as of
March 31, 1994.
The Partnership had entered into a property management agreement with
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 Items 1 and 4, the agreement with Compass was amended and restated
to extend
22
<PAGE>
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 from 4% to 2% of net rental and service income
collected from tenants. For the years ended December 31, 1994, 1993 and 1992,
management fees earned by Compass were $289,000, $786,000, and $785,000,
respectively.
In 1992, the Partnership agreed to pay interest to both the Advisor and
Compass as consideration for their willingness to defer the payment of fees
which were otherwise due and payable. The Advisor and Compass deferred such fees
as an accommodation to the Company in connection with its refinancing efforts as
described in Items 7 and 8. For the years ended December 31, 1993 and 1992, the
Partnership recorded interest expense on deferred fees of $249,000 and $223,000,
respectively, representing an interest rate of 7.31% through April 1, 1993 and
8.5% thereafter applied to the cumulative unpaid fee balance. Such fees and the
interest thereon were paid in full from the proceeds from the August 19, 1993
issuance of collateralized floating rate notes (see Items 7 and 8). Pursuant to
an agreement with the Advisor to provide such services in connection with such
debt refinancing, the Advisor received a fee of $300,000 in 1993.
The Company's executive offices are located at One Tower Bridge, W.
Conshohocken, PA 19428. These offices, including furniture, telephones, and
certain office services and equipment, have been furnished for periods of
between four and seven months at a monthly rate of $11,500 from a partnership
owned by Mr. Tanenbaum and his sons.
For a description of Common Shares issued to the Advisor pursuant to the
Merger in connection with the termination of the Advisory Agreement and of
Common Shares issued to the General Partners, see Items 1, 7 and 8.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C> <C> <C>
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements
Reports of Independent Public Accountants 29
Consolidated Balance Sheets at December 31, 1994 and 1993 31
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 32
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1994, 1993 and 1992 33
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 34
Notes to Consolidated Financial Statements, including
supplementary data 35
2. Financial Statement Schedules 44
Schedule II: Valuation & Qualifying Accounts
Schedule III: Real Estate and Accumulated Depreciation
All other schedules are omitted as the required information is
inapplicable or the information is presented in the
consolidated financial statements, or the related notes
thereto.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
3. Exhibits
(2) Form of Agreement and Plan of Merger by and among the
Partnership, the General Partners, the Company and Green
Acres Mall Corp.(7)
(3) (a) Amended and Restated Declaration of Trust of the
Company(8)
(b) Certificate of Trust of the Company(7)
(c) Form of By-laws of the Company(7)
(4) Specimen of Common Share Certificate(7)
(9) None
(10) (a) Agreement regarding post-closing obligations.(1)
(b) Modification and restatement of Lease between Green
Acres Associates and Gimbels Valley Stream, Inc.
dated August 6, 1986.(1)
(c) Rent credit agreement dated August 6, 1986 between
Green Acres Associates and Federated Department
Stores, Inc.(1)
(d) Agreement dated August 6, 1986 among Green Acres
Associates, Gimbels Valley Stream, Inc. and Federated
Department Stores, Inc.(1)
(e) Lease dated February 6, 1981 between the Equitable
Life Assurance Society of the United States and
Allied Stores of New York, Inc.(1)
(f) Lease dated December 15, 1954 by and between Sterling
Estates, Inc. and JC Penney Company, as amended.(1)
(g) Lease dated February 22, 1989 by and between Blumfold
Corporation and the Partnership.(2)
(h) First Amendment to Advisory Agreement dated as of
December 15, 1989 between the Partnership and EQK
Partners.(3)
(i) Amendment to Lease between Blumfold Corporation and
the Partnership dated June 22, 1990.(4)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
PAGE
NUMBER
--------
<S> <C> <C> <C> <C> <C>
(j) Amendment to Lease between Blumfold Corporation and
the Partnership dated August 13, 1990.(4)
(k) Amendment to Amended and Restated Limited Partnership
Agreement of the Partnership dated December 17,
1990.(4)
(l) Acquisition Agreement between Bulova Corporation and
the Partnership dated September 13, 1991.(5)
(m) Agreement of Lease between Home Depot, USA, Inc. and
the Partnership dated March 2, 1993.
(n) Lease Agreement between Kmart Corporation and the
Partnership dated March 8, 1993.(6)
(o) Form of Advisory Services Termination Agreement by
and between the Company and Equitable Realty
Portfolio Management, Inc.(7)
(p) Form of Amended and Restated Property Management
Agreement by and between the Company and Compass
Retail, Inc.(7)
(q) Consolidated and Restated Mortgage, Security
Agreement, Assignment of Leases and Rents and Future
Filing, dated as of August 19, 1993, by and between
the Partnership and EQK Green Acres Funding Corp.(7)
(r) Note due August 19, 1998 in the principal amount of
$118,000 from the Partnership to EQK Green Acres
Funding Corp.(7)
(s) Form of Collateralized Floating Rate Note due August
19, 1998 from EQK Green Acres Funding Corp.(7)
(t) Interest Rate and Currency Exchange Agreement, dated
as of August 12, 1993, by and between AIG Financial
Products Corp. and EQK Green Acres Funding Corp., as
agent for the Partnership.(7)
(u) Indenture, dated as of August 19, 1993, by and
between EQK Green Acres Funding Corp. and Bankers
Trust Company.(7)
(v) Agreement between the Partnership and PNC Bank dated
August 19, 1993.(7)
(w) Form of Agreement Relating to New York State Real
Property Transfer Gains Tax by and among Equitable
Life Assurance Society of the United States,
Equitable Realty Portfolio Management, Inc., the
Company and the other signatories thereto.(7)
(x) Loan Extension Agreement between PNC Bank and the
Registrant dated March 30, 1993(6)
(y) EQK Green Acres Trust Incentive Share Plan.(8)
(z) Amended and restated loan agreement by and between
Green Acres Mall Corp. and PNC Bank, National
Association, dated as of August 8, 1994.(9)
(aa) Guaranty and Surety Agreement by and between the
Trust and PNC Bank, National Association, dated
August 8, 1994.(9)
(11) See the Consolidated Statement of Operations.
(12) Inapplicable.
(13) Inapplicable.
(16) None.
(18) None.
(21) Subsidiaries of the Registrant schedule(7)
(22) Inapplicable.
(23) None.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C> <C> <C> <C>
(24) None.
(27) Financial Data Schedule
(28) None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1994.
(c) See paragraph (a) 3. above
(d) See paragraph (a) 2. above
</TABLE>
------------------
(1) Incorporated herein by reference to exhibit filed with Registrant's
Registration Statement on Form S-11, File No. 33-6992.
(2) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1988.
(3) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1989.
(4) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1990.
(5) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1991.
(6) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1992.
(7) Incorporated herein by reference to exhibit filed with Registrant's
Registration Statement on Form S-4, File No. 38-68664.
(8) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1993.
(9) Incorporated herein by reference to exhibit filed with Registrant's Form
10-Q for the quarter ended June 30, 1994.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 28th day of
March, 1995.
Arbor Property Trust
By: /s/ Myles H. Tanenbaum
______________________________
Myles H. Tanenbaum,
Managing Trustee and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 28, 1995 by the following persons on behalf of
the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
-------------------------------------------------------- --------------------------------------------------------
<S> <C>
/s/Myles H. Tanenbaum Managing Trustee and President
Myles H. Tanenbaum (Principal Executive and Financial Officer)
/s/Phillip E. Stephens Managing Trustee
Phillip E. Stephens
/s/Sylvan M. Cohen Managing Trustee
Sylvan M. Cohen
/s/Alton G. Marshall Managing Trustee
Alton G. Marshall
/s/George R. Peacock Managing Trustee
George R. Peacock
/s/Dennis Harkins Treasurer and Controller
Dennis Harkins
</TABLE>
27
<PAGE>
ARBOR PROPERTY TRUST
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARBOR PROPERTY TRUST
Reports of Independent Public Accountants................................................................. 29
Consolidated Balance Sheets as of December 31, 1994 and 1993.............................................. 31
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993, and 1992....................................................................... 32
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1994, 1993, and 1992....................................................................... 33
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993, and 1992....................................................................... 34
Notes to Consolidated Financial Statements................................................................ 35
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts.......................................................... 44
Schedule III -- Real Estate and Accumulated Depreciation.................................................. 44
</TABLE>
28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
Arbor Property Trust
We have audited the accompanying consolidated balance sheets of Arbor Property
Trust and Subsidiary (a Delaware Business Trust) as of December 31, 1994, and
the related consolidated statements of operations, shareholders equity and cash
flows for the year ended December 31, 1994. These consolidated financial
statements and the schedules referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Arbor
Property Trust and Subsidiary as of December 31, 1994, and the consolidated
results of their operations and their cash flows for the year ended December 31,
1994 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The 1994 schedules listed in
the Index to the Financial Statements and Financial Statement Schedules are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a part of the basic consolidated financial
statements. The 1994 schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA
March 10, 1995
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and
Shareholders of Arbor Property Trust
We have audited the accompanying consolidated balance sheet of Arbor
Property Trust (the 'Trust'), a Delaware business trust as of December 31, 1993,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the two years in the period ended December 31, 1993.
These consolidated financial statements and the consolidated financial statement
schedules discussed below are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Trust as of December 31,
1993, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
Our audits also comprehended the consolidated financial statement schedules
of the Trust as of December 31, 1993 and for each of the two years in the period
ended December 31, 1993. In our opinion, such consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements, present fairly, in all material respects, the information set forth
therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 10, 1994
30
<PAGE>
ARBOR PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Investments in Green Acres Mall, at cost:
Land.................................................................................. $ 30,295 $ 27,865
Buildings and improvements............................................................ 139,249 124,287
Capitalized lease..................................................................... 7,125 7,125
Personal property..................................................................... 1,075 1,075
Construction in progress.............................................................. 10 239
----------- -----------
177,754 160,591
Less accumulated depreciation......................................................... 26,621 22,674
----------- -----------
151,133 137,917
Restricted cash......................................................................... -- 500
Tenant security deposits................................................................ 315 312
Cash and short-term investments......................................................... -- 573
Accounts receivable (net of allowances for doubtful accounts of $898 and $723).......... 7,306 7,510
Other assets, net....................................................................... 6,068 7,074
----------- -----------
TOTAL ASSETS....................................................................... $ 164,822 $ 153,886
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Collateralized floating rate notes (net of unamortized discount of $86 and $109)...... $ 117,914 $ 117,891
Distributions payable................................................................. 3,321 2,826
Obligation under capital lease........................................................ 6,994 6,971
Note payable to bank.................................................................. 4,300 1,800
Accounts payable and other liabilities................................................ 3,082 3,513
Due to affiliates..................................................................... 20 519
----------- -----------
135,631 133,520
----------- -----------
Commitments and Contingencies:
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: 12,074,774 and 10,277,469 common shares.................... 117,209 95,500
Distributions in excess of accumulated earnings....................................... (88,018) (75,134)
----------- -----------
29,191 20,366
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................................... $ 164,822 $ 153,886
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
ARBOR PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Revenues from rental operations....................................... $ 21,465 $ 20,370 $ 20,476
Operating expenses, net of tenant reimbursements (includes fees to
affiliate of $289, $786 and $785)................................... 1,908 2,059 1,779
Advisory and termination fees paid to former advisor, discontinued
March 30, 1994 (including $3,843 as a result of the termination of
the advisory agreement in 1994)..................................... 4,107 1,625 1,709
Provision for doubtful accounts....................................... 453 424 809
Depreciation and amortization......................................... 4,164 3,969 3,574
Write-off of capitalized predevelopment costs......................... -- -- 1,439
------------- ------------- -------------
Income from rental operations......................................... 10,833 12,293 11,166
Interest expense (includes interest expense to affiliate of $0, $249
and $223 and amortization of refinancing costs)..................... 8,573 9,834 10,787
Merger expenses....................................................... -- 1,250 --
Other expenses, net of interest income................................ 2,765 499 542
------------- ------------- -------------
Income (loss) before gain on sale of real estate and extraordinary
loss................................................................ (505) 710 (163)
Gain on sale of real estate........................................... 839 440 --
------------- ------------- -------------
Income (loss) before extraordinary loss............................... 334 1,150 (163)
Extraordinary loss from early retirement of debt...................... -- (6,373) --
------------- ------------- -------------
Net income (loss)..................................................... $ 334 $ (5,223) $ (163)
------------- ------------- -------------
------------- ------------- -------------
Income (loss) per weighted average share:
Income (loss) before gain on sale of real estate and extraordinary
loss................................................................ $ (0.04) $ 0.07 $ (0.02)
Gain on sale of real estate........................................... 0.07 0.04 --
------------- ------------- -------------
Income (loss) before extraordinary loss............................... 0.03 0.11 (0.02)
Extraordinary loss from early retirement of debt...................... -- (0.62) --
------------- ------------- -------------
Net income (loss)..................................................... $ 0.03 $ (0.51) $ (0.02)
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of shares outstanding......................... 11,681,960 10,277,469 10,277,469
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
32
<PAGE>
ARBOR PROPERTY TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
DISTRIBUTIONS
IN
SHARES OF EXCESS OF
BENEFICIAL ACCUMULATED
INTEREST EARNINGS TOTAL
----------- -------------- ---------
<S> <C> <C> <C>
Balance, January 1, 1992................................................. $ 95,500 $ (46,444) $ 49,056
Net loss for the year ended December 31, 1992............................ (163) (163)
Distributions ($1.17 per Common Share)................................... (11,999) (11,999)
----------- -------------- ---------
Balance, December 31, 1992............................................... 95,500 (58,606) 36,894
Net loss for the year ended December 31, 1993............................ (5,223) (5,223)
Distributions ($1.10 per Common Share)................................... (11,305) (11,305)
----------- -------------- ---------
Balance, December 31, 1993............................................... 95,500 (75,134) 20,366
Net income for the year ended December 31, 1994.......................... 334 334
Distributions ($1.10 per Common Share)................................... (13,218) (13,218)
Shares issued in conversion to REIT...................................... 16,371 16,371
Shares issued in termination of Advisory Agreement....................... 3,843 3,843
Restricted Shares issued to executive officers........................... 6 6
Shares issued upon dividend reinvestment................................. 1,489 1,489
----------- -------------- ---------
Balance, December 31, 1994............................................... $ 117,209 $ (88,018) $ 29,191
----------- -------------- ---------
----------- -------------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE>
ARBOR PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................ $ 334 $ (5,223) $ (163)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Extraordinary loss from early retirement of debt.......................... -- 6,373 --
Provision for doubtful accounts........................................... 453 424 809
Depreciation and amortization............................................. 4,164 3,969 3,574
Amortization of deferred financing costs.................................. 1,212 582 487
Amortization of zero coupon mortgage note discount........................ -- 5,558 8,074
Amortization of collateralized floating rate note discount................ 23 9 --
Termination of advisor agreement.......................................... 3,843 -- --
Gain on sale of real estate............................................... (839) (440) --
Write-off of capitalized predevelopment costs............................. -- -- 1,439
Changes in assets and liabilities:
Increase in accrued rent receivable.................................... (1,208) (869) (732)
Decrease (increase) in accounts receivable, tenant security deposits
and other assets.................................................... 663 (1,574) (530)
Increase (decrease) in accounts payable and other liabilities and due
to affiliates....................................................... (930) (2,100) 761
--------- --------- ---------
Net cash provided by operating activities.................................... 7,715 6,709 13,719
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of real estate, net....................................... 1,435 9,377 --
Additions to buildings and improvements and personal property................ (1,489) (2,114) (1,413)
Additions to property under contract......................................... -- (5,703) (3,234)
Construction and development costs, net of tenant
reimbursements............................................................ -- -- (1,006)
Decrease (increase) in restricted cash....................................... 500 (500) --
--------- --------- ---------
Net cash provided by (used in) investing activities.......................... 446 1,060 (5,653)
--------- --------- ---------
Cash flows from financing activities:
Distributions paid........................................................... (12,723) (11,305) (12,667)
Proceeds from dividend reinvestment.......................................... 1,489 -- --
Retirement of zero coupon mortgage note...................................... -- (95,399) --
Payments under capital lease................................................. -- -- (103)
Proceeds from issuance of collateralized floating rate notes................. -- 117,882 --
Payment of deferred financing costs.......................................... -- (5,231) --
Borrowings under (repayment of) bank line of credit.......................... 2,500 (14,700) 4,550
--------- --------- ---------
Net cash used in financing activities........................................ (8,734) (8,753) (8,220)
--------- --------- ---------
Decrease in cash and short-term investments.................................... (573) (984) (154)
Cash and short-term investments, beginning of year............................. 573 1,557 1,711
--------- --------- ---------
Cash and short-term investments, end of year................................... $ 0 $ 573 $ 1,557
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1: MERGER TRANSACTION AND BASIS OF PRESENTATION
Arbor Property Trust (the 'Trust'), formed 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, upon the filing of its Federal income tax return for the year ended
December 31, 1994. 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. Prior to February 28, 1994, the Trust did not have
significant operations. The Trust and the Partnership are collectively 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 Beneficial Interest 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 5), the Advisor received 308,933 Common Shares on
March 30, 1994. In addition, the Special General Partner and the Advisor have
agreed that all distributions, prior to May 1995 with respect to the Common
Shares issued for the Special General Partner's residual interest in the
Partnership and the termination of the agreement with the Advisor will be
reinvested through a dividend reinvestment plan in newly issued Common Shares.
In 1994, distributions aggregating $1,489,000 were reinvested under this plan.
The issuance of 10,277,469 Common Shares to the Unitholders and the General
Partners on account of their respective interests in the Partnership represented
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 Trust and the Partnership have been combined at historical
cost retroactive to January 1, 1992. The issuance of these Common Shares have
been reflected as of January 1, 1992 at an amount that equals the Unitholders'
and General Partners' original contribution to the Partnership.
The issuances of Common Shares to the Special General Partner and the
Advisor have been reflected in the Company's financial statements as of February
28, 1994 and March 30, 1994, respectively. The issuance of such Common Shares to
the Special General Partner has increased the Trust's carrying value of land and
buildings and improvements by $3,024,000 and $13,347,000, respectively,
representing the agreed-upon value of the Special General Partner's residual
interest in the Partnership in connection with the merger. Had this Common Share
issuance been recorded on January 1, 1992, depreciation expense would have
increased by approximately $342,000 in each of the three years ended December
31, 1994 ($.03 per Common Share outstanding). The issuance of Common Shares to
the Advisor was reflected as a charge to earnings during 1994 in the amount of
$3,843,000.
In connection with the merger, the Company recorded as expense in 1993
nonrecurring legal, accounting, and printing costs aggregating approximately
$1,250,000 ($.12 per Common Share).
35
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Arbor
Property Trust and its wholly-owned subsidiary Green Acres Mall Corp. All
significant intercompany transactions and balances have been eliminated.
REVENUE RECOGNITION
The Company recognizes minimum rental income from leases with scheduled
rent increases on a straight-line basis over the lease term. Accrued rent
receivable, included in accounts receivable in the accompanying balance sheets,
represents the difference between the straight line rent and amounts currently
due. At December 31, 1994 and 1993 the accrued rent receivable was $3,261,000
and $2,053,000, respectively. Percentage rents and payments for taxes, insurance
and maintenance by tenants are estimated and accrued.
CAPITALIZATION, DEPRECIATION AND AMORTIZATION
Depreciation of the Property is provided on a straight-line basis over the
estimated useful lives of the related assets, ranging generally from 10 to 40
years. The capitalized lease asset is amortized over its term. Deferred
financing costs, which are included in other assets in the accompanying balance
sheets, are amortized on a straight line basis over the term of the related
debt. At December 31, 1994 and 1993 deferred financing costs were $5,988,000 and
$5,988,000, net of accumulated amortization of $1,694,000 and $482,000,
respectively.
DEFERRED LEASING COSTS
Costs incurred in connection with the execution of a new lease, including
leasing commissions, costs associated with the acquisition or buyout of existing
leases and legal fees, which are included in other assets in the accompanying
balance sheets, are deferred and amortized over the term of the new lease. At
December 31, 1994 and 1993 deferred leasing costs were $1,964,000 and
$1,964,000, net of accumulated amortization of $357,000 and $243,000,
respectively.
INCOME TAXES
Effective with the filing of the Federal income tax return for the year
ended December 31, 1994, the Company intends to elect and will qualify as a real
investment trust under Sections 856-860 of the Internal Revenue Code and intends
to remain so qualified. Accordingly, no provision has been made for Federal
income taxes in the accompanying 1994 financial statements.
The Company is subject to a Federal excise tax computed on a calendar year.
The excise tax equals 4% of the excess, if any, of 85% of the Company's ordinary
income plus 95% of the Company's capital gain net income for the calendar year
over cash distributions during the calendar year, as defined. No provision for
excise tax was made for fiscal year 1994, as no tax was due.
In 1993 and 1992, no provision was made in the accompanying consolidated
financial statements for income tax liabilities since the Unitholders and
General Partners of the Partnership were required to include their respective
share of profits and losses in their individual tax returns.
36
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash equivalents include short-term investments with an original maturity
of three months or less.
Included in the consolidated statements of cash flows are cash payments for
interest of $6,859,000, $3,334,000 and $1,986,000 for the years ended December
31, 1994, 1993, and 1992, respectively.
Other non-cash financing and investing activities are discussed in Note 1.
FAIR VALUE DISCLOSURES
The carrying value of the Company's collateralized floating rate notes
approximates fair value since the interest rate on the notes is reset quarterly.
The interest rate cap agreement described in Note 4 entitles the Company to
receive from the counterparty (a major insurance company) the amounts, if any,
by which the Company's interest payments on $118,000,000 of collateralized
floating rate notes exceed 9%. The purchase price paid for the interest rate cap
is included in other assets in the accompanying balance sheets and is amortized
to interest expense over the term of the agreement. At December 31, 1994, the
unamortized value of the cap was $750,000. The fair value of the cap at December
31, 1994 ($2,590,000) was determined by reference to a quote obtained from a
nationally recognized investment banking firm.
The carrying values of the Company's other financial instruments (cash,
receivables and payables) approximates the their value because of the short
maturity of those instruments
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' consolidated
financial statements in order to conform their presentation to that used in the
current year.
NOTE 3: LEASING ARRANGEMENTS
THE COMPANY AS LESSOR
The Company leases shopping center space to approximately 200 tenants,
generally under non-cancelable operating leases. The leases generally provide
for minimum rentals, plus percentage rentals based upon the retail stores' sales
volume.
Percentage rentals amounted to $1,871,000, $2,563,000 and $2,621,000 for
the years ended December 31, 1994, 1993, and 1992, respectively. In addition,
the tenants pay certain utility charges to the Company and, in most leases,
reimburse their proportionate share of real estate taxes and common area
expenses.
The Company leases space to national, regional, and local tenants.
Diversity in the tenant mix minimizes exposure to credit risk from geographic
concentration. However, regional and local tenants may represent a higher level
of credit risk. In certain instances, the Company obtains security deposits to
mitigate risk from less creditworthy tenants.
37
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 3: LEASING ARRANGEMENTS--(CONTINUED)
Future minimum rentals under existing leases at December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, AMOUNT
-------------------------------------------------------------------------- ----------------
<S> <C>
1995...................................................................... $ 16,726,000
1996...................................................................... 15,893,000
1997...................................................................... 15,621,000
1998...................................................................... 15,218,000
1999...................................................................... 14,799,000
Thereafter................................................................ 97,414,000
----------------
$ 175,671,000
----------------
----------------
</TABLE>
THE COMPANY AS LESSEE
In 1990, the Company entered into a 30-year lease, with three, six-year
renewal options, on the Plaza, an adjacent 9-acre site on which there is
situated an industrial building that has been renovated and converted into
retail shopping space. The Plaza opened for business in September 1991. In
addition to specified rents, the Plaza lease requires the Company to pay
property taxes, insurance, operating expenses and additional rentals based on a
percentage of revenues generated by the operations of the Plaza. No such
additional rentals were paid in 1994, 1993 or 1992. In accordance with generally
accepted accounting standards, the portion of the lease related to the building
is accounted for as a capital lease while the portion related to the land is
accounted for as an operating lease.
The following is a schedule of future minimum lease payments under the
lease as of December 31, 1994:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASE
COMPONENT COMPONENT
-------------- --------------
<S> <C> <C>
1995............................................................... $ 678,000 $ 762,000
1996............................................................... 678,000 762,000
1997............................................................... 702,000 788,000
1998............................................................... 707,000 793,000
1999............................................................... 707,000 793,000
Thereafter......................................................... $ 28,047,000 $ 31,476,000
-------------- --------------
Minimum Lease Payments............................................. $ 31,519,000 $ 35,374,000
--------------
--------------
Less Amount Representing Interest.................................. (24,525,000)
--------------
Present Value of Minimum Lease Payments............................ $ 6,994,000
--------------
--------------
</TABLE>
For the years ended December 31, 1994, 1993, and 1992, total rental expense
under the operating lease portion of this lease was $731,000, $734,000 and
$709,000, respectively, all of which represented minimum lease payments.
As of December 31, 1994, the Company has signed sublease agreements with
certain tenants of the Plaza, which agreements generally provide for rentals
based on a percentage of tenant sales in addition to base rental. Sublease
income of $40,559,000 will be received over the remaining terms of the
respective leases. Such income is included in the future minimum rentals table
presented above. Sublease income totaled $2,394,000, $2,189,000, and $2,523,000
for the years ended December 31, 1994, 1993, and 1992, respectively.
38
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 3: LEASING ARRANGEMENTS--(CONTINUED)
In January 1993, the Partnership terminated its lease with Pergament Home
Improvement Center ('Pergament'), one of the anchor tenants at the Plaza, and
entered into a new lease agreement covering Pergament's space and all but one of
the Plaza's small store spaces with Kmart Corporation. In connection with the
lease termination, the Company paid Pergament $450,000. This cost has been
deferred and is amortized over the term of the lease with the Kmart Corporation.
NOTE 4: DEBT FINANCING
On August 19, 1993, the Company completed a comprehensive refinancing by
issuing 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 approximate $95,399,000
purchase price for the zero coupon first mortgage note previously outstanding
and retire a $16,500,000 term loan note at face value. The proceeds from the
issuance of the floating rate notes were also used to purchase an interest rate
cap for $1,023,000 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.
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 which commenced on 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. On November 12, 1993, the interest rate was reset to 4.28%. On
November 12, 1994, the interest rate was reset to 6.59%. The weighted average
interest rate for 1994 was 5.29%. The interest rate cap provides that the
effective interest rate applicable to the $118,000,000 face value of the notes
will not exceed 9% per annum through their maturity date. Should such debt's
interest rate rise above 9%, the Company would record amounts receivable from
the counter-party as a reduction to interest expense. The Company is exposed to
certain losses in the event of non-performance by the counter-party to this
agreement. The mortgage and indenture agreement relating to the floating rate
notes limit additional indebtedness that may be incurred by the Green Acres Mall
Corp. Those agreements also contain certain other covenants which, among other
matters, effectively subordinate distributions from Green Acres Mall Corp. to
debt service requirements of the floating rate notes. Management believes it is
in compliance with all covenants under the indenture and line of credit
agreements, discussed below, at December 31, 1994.
As part of its comprehensive debt restructuring, the Company also obtained
a $3,400,000 unsecured line of credit facility from a bank. The line of credit
agreement bears interest at 1% above the bank's prime rate (at December 31, 1994
the bank s prime rate was 8.5%). Effective August 8, 1994, this line of credit
was increased to $5,900,000 and will mature in April 1995. Amounts outstanding
under this loan as of April 1995 can be repaid in four quarterly installments
beginning July 1995. The line of credit agreement also contains certain
covenants which, among other matters, limit the amount of the Company's annual
dividend to an amount that does not exceed operating cash flow (as defined), and
require the Company to maintain a quarterly debt service coverage ratio (as
defined). At December 31, 1994 and 1993, the Company had borrowed $4,300,000 and
$1,800,000, respectively, under this credit facility. The floating rate notes'
mortgage agreement places certain limitations on Green Acres Mall Corp.'s
ability to borrow under the line of credit agreement. Subsequent to year end,
the Company borrowed an additional $1,600,000 under this credit facility.
39
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 4: DEBT FINANCING--(CONTINUED)
The Partnership had issued the previously outstanding zero coupon mortgage
note on August 27, 1986 in connection with its financing of the acquisition of
the Property. The zero coupon mortgage note, which was secured by substantially
all of the real property comprising Green Acres Mall, had an effective annual
interest rate of 10.4% compounded semi-annually.
The $16,500,000 term loan note retired on August 19, 1993 originated on
June 30, 1993 upon the conversion of a matured line of credit. This line of
credit, along with predecessor facilities, bore interest at rates ranging from
the bank's prime rate to such prime rate plus 1%. In connection with a renewal
and the conversion of the line of credit facility to a term loan in 1993, the
Company paid fees to the bank of approximately $125,000. Borrowings under these
facilities were collateralized by a second mortgage on substantially all of the
real property comprising Green Acres Mall and a first leasehold mortgage on the
Plaza.
The weighted average amounts outstanding under short term borrowings during
1994, 1993 and 1992 were $2,890,000, $9,925,000 and $15,850,000, with
corresponding interest rates of 8.2%, 7.4% and 6.7%. The maximum outstanding
borrowings during 1994, 1993 and 1992 were $5,150,000 in 1994 and $16,500,000 in
1993 and 1992.
NOTE 5: TRANSACTIONS WITH AFFILIATES
Prior to the termination of its advisory agreement as discussed below,
Equitable Realty Portfolio Management, Inc., a wholly owned subsidiary of
Equitable Real Estate Investment Management, Inc. ('Equitable Real Estate'),
acted as 'Advisor' to the Partnership. The Advisor made recommendations to the
Managing General Partner concerning investments, administration and day-to-day
operations. For performing these services, the Advisor received an annual base
advisory fee of $250,000 in 1993 and 1992. In 1994, the Advisor earned a base
advisory fee of $164,000. The Advisor also received an annual subordinated
incentive advisory fee of $1,250,000 which increased in proportion to the amount
by which aggregate distributions of operating cash flow to Unitholders exceeded
a 10% return on the Unitholders' Adjusted Capital Contributions (as defined in
the Partnership Agreement). Payment of this fee was subordinated to a minimum
annual distribution equal to a 10% return to Unitholders. Portions of the fee
not paid in any year because of such subordination were to be deferred and paid
from future operating cash flow on a subordinated basis. For the years ended
December 31, 1993, and 1992, the subordinated incentive advisory fee was
$1,375,000, and $1,459,000, respectively. In 1994, the Advisor earned an
incentive advisory fee of $100,000. In addition, the Advisor earned a fee of
$40,000 in 1993 and 1992 related to certain tax reporting services provided to
the Company.
Upon sale of all or any portion of any real estate investment of the
Partnership, the Advisor was entitled to receive a disposition fee equal to 2%
of the gross sale price (including outstanding indebtedness taken subject to or
assumed by the buyer and any purchase money indebtedness taken back by the
Partnership). The disposition fee was to be reduced by the amount of any
brokerage commissions and legal expenses incurred by the Partnership in
connection with such sales. Pursuant to this agreement with the Advisor, the
Company paid a $290,000 fee to the Advisor during 1993 relating to service
rendered in connection with the acquisition and development of the Bulova Parcel
and its ultimate transfer to Home Depot (see Note 6). Such fees paid to the
Advisor reduced the amount of the gain recognized from this transaction.
Pursuant to an agreement with the Advisor to provide services in connection
with the refinancing of the Company's debt as described in Note 4, the Advisor
was paid a $300,000 fee in 1993.
40
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 5: TRANSACTIONS WITH AFFILIATES--(CONTINUED)
In December 1992, the Partnership entered into an agreement with the
Advisor pursuant to which the Advisor provided development services in
conjunction with the termination of its lease with Pergament and the procurement
of a new lease with Kmart Corporation (see Note 3). The fee for these services
was $150,000, which was paid in 1993.
Pursuant to the merger discussed in Note 1, upon the expiration of a 30 day
transition period agreement commenced March 1, 1994, the agreement with the
Advisor was terminated.
The Partnership 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 and the Plaza. Compass' compensation was reduced from 4% to 2% of
net rental and service income collected from tenants as of March 1, 1994. For
the years ended December 31, 1994, 1993 and 1992, management fees earned by
Compass were $289,000, $786,000, and $785,000, respectively. In addition, in
1994 Compass earned a fee of $40,000 for certain tax reporting services provided
to the Company.
In 1992, the Partnership agreed to pay interest to both the Advisor and
Compass as consideration for their willingness to defer the payment of fees
which were otherwise due and payable. The Advisor and Compass deferred such fees
as an accommodation to the Partnership in connection with its refinancing effort
(see Note 4). For the years ended December 31, 1993 and 1992, the Company
recorded interest expense on deferred fees of $249,000 and $223,000
respectively, representing interest rates of 7.31% through April 1, 1993 and
8.5% thereafter applied to the cumulative unpaid fee balances. No interest was
payable in 1994 as the fees were paid in 1994.
In 1994, the Company incurred $144,000 related to a lease for the executive
offices with a partnership owned by the managing trustee and president of the
Company and his sons. Under the terms of this lease, the Company has an ongoing
lease commitments of approximately $11,500 monthly through March 31, 1995.
NOTE 6: DEVELOPMENT ACTIVITIES
In January 1992, the Company announced plans for a major expansion of the
Mall. The Company filed the required zoning and other related applications
necessary for the commencement of such expansion. In June 1992, the Company
announced its decision to defer the planned expansion of the Mall due to its
inability to secure financing for this project. It is uncertain when, or if, the
expansion program will be resumed. Accordingly, capitalized costs of $1,439,000
related to the predevelopment phase of the expansion were written-off in 1992.
In April 1993, the Company completed the acquisition of an adjacent
industrial tract (the 'Bulova Parcel') through a subsidiary partnership and
entered into a lease/purchase agreement for this real estate with Home Depot.
Pursuant to the lease/purchase agreement, Home Depot paid $9,500,000 to the
Company, a portion of which was used to complete the purchase of the Bulova
Parcel. As a result of the completion in 1993 of specified environmental work,
the lease/purchase agreement obligated Home Depot to take title to the Bulova
Parcel. In connection with this lease/purchase agreement, the Company recognized
a gain on sale of real estate of $440,000 during 1993. Subsequent to December
31, 1993, the Company's restricted cash balance of $500,000 was released from
escrow.
41
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 6: DEVELOPMENT ACTIVITIES--(CONTINUED)
In January 1994, the Company completed the sale to Home Depot of an
approximate two acre parking lot tract adjacent to the Bulova Parcel. The
proceeds from the sale were $1,500,000, resulting in a 1994 gain on sale of real
estate of approximately $839,000.
NOTE 7: INCENTIVE SHARE PLAN
On January 25, 1994, the Board of Trustees adopted an Incentive Share Plan
(the Plan ) which provides for the issuance of up to 1,500,000 Common Shares to
outside Trustees, officers and key executives of the Company through options to
purchase Common Shares, share appreciation rights, and restricted share grants.
Common Share options may be options that are intended to qualify as incentive
options under the Internal Revenue Code of 1986, as amended, or options which
are not intended to so qualify. The Plan was approved by the shareholders at the
annual meeting in November 1994. Options will be granted with an exercise price
that approximates the fair value of the Common Shares on the grant date.
Concurrent with the adoption of this Plan, the Company granted options to
purchase 7,500 Common Shares to each of its four eligible Trustees and options
to purchase an aggregate of 875,000 Common Shares to certain officers. Certain
officers also received in aggregate 5,950 restricted Common Shares. All such
options have an exercise price of $10 per Common Share and vest ratably
commencing one year from the grant date in equal annual increments over three
and five years for the Trustee and officer options, respectively. The restricted
shares become unrestricted in equal annual increments over three years
commencing one year from the grant date. No options were exercised during 1994.
At December 31, 1994, 589,050 Common Shares are available to be awarded under
the Plan.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Pursuant to the terms of the Plaza lease, the Company was required to
provide, or cause a third party lender to provide, mortgage financing of
$4,800,000 to the lessor.
In January, 1992, the Company arranged such financing from a third party
lender for a term of five years at an interest rate of 10.25%. The Company has
an option to extend the financing for an additional five years at a variable
rate of interest. This financing replaced an existing mortgage, and is secured
by the Plaza property, but is non-recourse to the lessor. The Company is
required to make all debt service payments on behalf of the lessor and will
receive an annual offset to its minimum rent equal to 12% of the total financing
provided to the lessor.
42
<PAGE>
ARBOR PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
NOTE 9: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for the
years ended December 31, 1994 and 1993. Such data includes certain
reclassifications to accounts presented in quarterly reports on Form 10-Q in
order to conform their presentation to that used in the consolidated statements
of operations presented herein.
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT FOR COMMON SHARE AMOUNTS)
QUARTER ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1994
Revenues from rental operations................................ $ 5,228 $ 5,244 $ 5,273 $ 5,720
Income from rental operations.................................. (267) 3,459 3,531 4,110
Income (loss) before gains on sale of real estate.............. (2,626) 926 822 373
Gain on sale of real estate.................................... 839 -- -- --
Net income (loss).............................................. (1,787) 926 822 373
Income (loss) before gain on sale of real estate per weighted
average Common Share......................................... $ (.25) $ .08 $ .07 $ .03
Gain on sale of real estate.................................... .08 -- -- --
----------- ----------- ----------- -----------
Net income (loss) per Share.................................... $ (.17) $ .08 $ .07 $ .03
Weighted average number of shares outstanding.................. 10,738,640 11,931,988 11,990,044 12,046,403
1993
Revenues from rental operations................................ $ 4,975 $ 5,037 $ 5,010 $ 5,348
Income from rental operations.................................. 3,201 3,314 3,022 2,756
Income (loss) before extraordinary loss........................ 146 753 622 (371)
Extraordinary loss from early retirement of debt............... -- -- (6,373) --
Net income (loss).............................................. 146 753 (5,751) (371)
Income (loss) before extraordinary loss per Common Share....... .01 .08 .06 (.04)
Extraordinary loss from early retirement of debt per Common
Share........................................................ -- -- (.62) --
Net income (loss) per Common Share............................. $ .01 $ .08 $ (.56) $ (.04)
Weighted Average number of Shares outstanding.................. 10,277,469 10,277,469 10,277,469 10,277,469
</TABLE>
The decrease in net income in the fourth quarter of 1994 in comparison to
the second and third quarters of 1994 relates to increased interest expense on
the floating rate notes and accruals for management bonuses and other expenses
associated with winding down the Partnership.
In connection with the merger discussed in Note 1, the Company recorded as
expense in the fourth quarter of 1993 nonrecurring legal, accounting, and
printing costs aggregating $1,250,000 ($.12 per Common Share).
As discussed in Note 1, the Company recorded a charge of $3,843,000 in the
first quarter of 1994 related to the termination of the advisory agreement.
NOTE 10: SUBSEQUENT EVENTS
On February 14, 1995, the Company announced that it had retained Goldman,
Sachs & Co. as its financial advisor to assist in connection with a possibility
of a merger of the Company into another REIT, or a sale of the Company's real
estate.
43
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL STATEMENT SCHEDULES
DECEMBER 31, 1994
(IN THOUSANDS)
--------------------------------------------------------------------------------
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
--------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) PERIOD
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
1994 $ 723 $ 453 -- $ 278 $ 898
1993 $ 994 $ 424 -- $ 695 $ 723
1992 $ 648 $ 809 -- $ 463 $ 994
</TABLE>
--------------------------------------------------------------------------------
(1) Write-offs of accounts receivable
--------------------------------------------------------------------------------
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST
CAPITALIZED GROSS AMOUNT
SUBSEQUENT AT WHICH CARRIED
INITIAL COST(3) TO AT CLOSE OF PERIOD(5)(6)
-------------------- ACQUISITION -------------------------------
BLDG & ----------- BLDG & ACCUM. DATE OF
DESCRIPTION ENCUMBRANCE LAND IMPROVE. IMPROVEMENTS LAND IMPROVE. TOTAL DEPREC. CONSTRUCTION
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Green Acres Mall $ 117,914(1) $ 27,865 $ 108,895 $ 16,413 $ 30,295 $ 139,249 $ 169,544 $ 25,227 1955(4)
Plaza at Green
Acres 117,914(2) -- 6,913 212 -- 7,125 7,125 762 1991
6,994(2)
Miscellaneous -- -- -- 10 -- 10 10 -- N/A
---------------------------------------------------------------------------------------------------------------------------
Totals $ 124,908 $ 27,865 $ 115,808 $ 16,635 $ 30,295 $ 146,384 $ 176,679 $ 25,989
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIFE ON
WHICH
DEPRECIATION
IN
LATEST
INCOME
STMT.
DATE IS
DESCRIPTION ACQUIRED COMPUTED
-------------------------------------------
Green Acres Mall 8/27/86 40 yrs.
Plaza at Green
Acres 8/13/90 40-48 yrs.
Miscellaneous Various N/A
------------------------------------------
Totals
------------------------------------------
<CAPTION>
</TABLE>
(1) Encumbrance is a floating rate note constituting a first lien on the real
estate.
(2) The Plaza at Green Acres is a leased asset. Encumbrances constitute a first
leasehold mortgage collateralizing the floating rate notes ($117,914) and
the obligation under the capitalized lease ($6,994).
(3) Includes $10,175 representing the deemed value of units issued to affiliates
of the former owners of Green Acres Mall and the General Partnership
interest ($2,075 in Land, $8,100 in Buildings and Improvements).
(4) Original construction was completed in 1955; mall was expanded/renovated in
1982-83 and renovated again in 1990-91.
(5) The aggregate tax basis of the Trust's property is $143,000,000 as of
December 31, 1994.
(6) Includes $3,024,000 and $13,347,000 which are included in Land and Building
& Improvements as a result of the conversion (See Note 1 to the consolidated
December 31, 1994 financial statements.)
<TABLE>
<CAPTION>
RECONCILIATION OF GROSS CARRYING AMOUNT OF REAL
ESTATE: RECONCILIATION OF ACCUMULATED DEPRECIATION:
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1991 $ 156,635 Balance, December 31, 1991 $ 15,194
Improvements and Additions, 1992 980 Depreciation expense, 1992 3,468
--------- ---------
Balance, December 31, 1992 $ 157,615 Balance, December 31, 1992 $ 18,662
Improvements and Additions, 1993 $ 2,084 Depreciation expense, 1993 3,727
Write-off of fully depreciated assets (183) Write-off of fully depreciated assets (183)
--------- ---------
Balance, December 31, 1993 $ 159,516 Balance, December 31, 1993 $ 22,206
Improvements and Additions, 1994 1,489 Depreciation expense, 1994 3,886
Sale to Home Depot (594) Write-off of fully depreciated assets (103)
---------
Additions relating to conversion to REIT 16,371 Balance, December 31, 1994 $ 25,989
---------
---------
Write-off of fully depreciated assets (103)
---------
Balance, December 31, 1994 $ 176,679
---------
---------
</TABLE>
44
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 8,204
<ALLOWANCES> 898
<INVENTORY> 0
<CURRENT-ASSETS> 6,383
<PP&E> 177,754
<DEPRECIATION> 26,621
<TOTAL-ASSETS> 164,822
<CURRENT-LIABILITIES> 13,417
<BONDS> 122,214
<COMMON> 117,209
0
0
<OTHER-SE> (88,018)
<TOTAL-LIABILITY-AND-EQUITY> 164,822
<SALES> 0
<TOTAL-REVENUES> 21,465
<CGS> 0
<TOTAL-COSTS> 10,632
<OTHER-EXPENSES> 2,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,573
<INCOME-PRETAX> (505)
<INCOME-TAX> 0
<INCOME-CONTINUING> (505)
<DISCONTINUED> 0
<EXTRAORDINARY> 839
<CHANGES> 0
<NET-INCOME> 334
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
