<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-12560
JP REALTY, INC.
---------------
(Exact name of registrant as specified in its charter)
MARYLAND 87-0515088
- ------------------------------------------------------------------
(State of organization) (I.R.S. Employer
Identification No.)
35 CENTURY PARK-WAY
SALT LAKE CITY, UTAH
84115
- ------------------------------------------------------------------
(Address of principal executive offices)
(801) 486-3911
- ------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No
/X/ / /
17,589,827 Shares of Common Stock were outstanding as of November 13, 1997
<PAGE> 2
JP REALTY, INC.
FORM 10-Q
INDEX
Part I: Financial Information Page
- ------------------------------ ----
Item 1. Financial Statements. . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets of
JP Realty, Inc. as of September 30, 1997
and December 31, 1996 . . . . . . . . . . . . 4
Condensed Consolidated Statement of
Operations of JP Realty, Inc. for the
Three Months and Nine Months Ended
September 30, 1997 and 1996 . . . . . . . . . 5
Condensed Consolidated Statement of
Cash Flows of JP Realty, Inc. for the
Nine Months Ended September 30, 1997
and 1996. . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . 15
Part II: Other Information
- -----------------------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . 16
Item 2. Changes in Securities and Use of Proceeds . . 16
Item 3. Defaults Upon Senior Securities . . . . . . . 16
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . 16
Item 5. Other Information . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 17
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The information furnished in the accompanying financial statements
listed in the index on page 2 consists only of normal recurring
adjustments which are, in the opinion of management, necessary for a
fair presentation of the aforementioned financial statements for the
interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to the aforementioned financial statements and
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
<PAGE> 4
JP REALTY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
-----------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ -----------
<C> <C>
<S>
Assets
Real Estate Assets, Including
Assets Under Development of $28,243
and $30,027. . . . . . . . . . . . . $ 563,089 $ 453,241
Less: Accumulated Depreciation . . (95,251) (87,318)
Net Real Estate Assets. . . . . . 467,838 365,923
Cash. . . . . . . . . . . . . . . . . 2,870 1,750
Restricted Cash . . . . . . . . . . . 2,442 2,372
Other Assets. . . . . . . . . . . . . 14,598 11,315
----------- -----------
$ 487,748 $ 381,360
=========== ===========
Liabilities and Shareholders' Equity
Borrowings. . . . . . . . . . . . . . $ 216,456 $ 162,375
Accounts Payable and Accrued Expenses 16,344 11,611
Dividends Payable . . . . . . . . . . 9,234 --
Accumulated Losses in Excess of
Equity Investment. . . . . . . . . . -- 1,555
Other Liabilities . . . . . . . . . . 2,263 485
------------ ------------
244,297 176,026
------------ ------------
Minority Interest . . . . . . . . . . 34,951 32,778
------------ -----------
Commitments and Contingencies
Shareholders' Equity
Common Stock, $.0001 par value,
124,800,000 shares authorized,
17,389,727 shares and 15,873,553
shares issued and outstanding at
September 30, 1997 and December 31,
1996, respectively . . . . . . . . . 2 2
Price Group Stock, $.0001 par value,
200,000 shares authorized, issued
and outstanding. . . . . . . . -- --
Excess Stock, 75,000,000 shares
authorized, none issued or
outstanding. . . . . . . . . . . . . -- --
Additional Paid-in Capital. . . . . . 232,130 193,229
Accumulated Dividends in Excess of
Net Income . . . . . . . . . . . . . (23,632) (20,675)
------------ -----------
208,500 172,556
------------ -----------
$ 487,748 $ 381,360
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
JP REALTY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
<C> <C> <C> <C>
<S>
Revenues:
Minimum Rents . . . . . . $ 15,313 $ 13,051 $ 41,761 $ 38,440
Percentage and Overage
Rents. . . . . . . . . . 1,095 1,029 3,087 3,190
Recoveries from Tenants . 4,858 4,192 12,911 11,526
Interest. . . . . . . . . 80 145 397 451
Other . . . . . . . . . . 427 80 609 239
-------- -------- -------- --------
21,773 18,497 58,765 53,846
-------- -------- -------- --------
Expenses:
Operating and Maintenance 3,676 2,923 9,220 8,380
Real Estate Taxes and
Insurance. . . . . . . . 2,202 2,102 6,134 6,053
General and Administrative 1,446 1,190 4,014 3,780
Depreciation. . . . . . . 3,092 2,637 8,381 7,580
Amortization of Deferred
Financing Costs. . . . . 232 264 719 821
Amortization of Deferred
Leasing Costs. . . . . . 161 159 476 522
Interest. . . . . . . . . 2,733 2,134 5,899 5,695
-------- -------- -------- --------
13,542 11,409 34,843 32,831
-------- -------- -------- --------
8,231 7,088 23,922 21,015
Minority Interest in Income
of Consolidated
Partnerships . . . . . . . (63) (65) (209) (211)
Gain on Sale of Real Estate -- -- 339 94
-------- -------- -------- --------
Income Before Minority
Interest of the Operating
Partnership Unitholders 8,168 7,023 24,052 20,898
Minority Interest of the
Operating Partnership
Unitholders . . . . . . . (1,408) (1,274) (4,110) (3,823)
-------- -------- -------- --------
Net Income. . . . . . . . . $ 6,760 $ 5,749 $ 19,942 $ 17,075
======== ======== ======== ========
Earnings Per Share:
Net Income . . . . . . . $ .38 $ .36 $ 1.14 $ 1.06
======== ======== ======== ========
Weighted Average Number of
Common Shares 17,587 16,052 17,430 16,042
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
JP REALTY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
1997 1996
------------ -----------
<C> <C>
<S>
Net Cash Provided by Operating
Activities . . . . . . . . . . . . . $ 37,152 $ 31,575
Cash Flows from Investing Activities:
Real Estate Assets, Developed or
Acquired . . . . . . . . . . . . . . (86,486) (51,395)
Proceeds from Sales of Real Estate. . 410 --
Increase in Restricted Cash . . . . . (70) (400)
Net Cash Used in Investing Activities (86,146) (51,795)
Cash Flows from Financing Activities
Proceeds from Borrowings. . . . . . . 85,414 52,890
Repayment of Borrowings . . . . . . . (56,087) (9,440)
Deferred Financing Costs. . . . . . . (431) --
Net Proceeds from Sale of Common Stock 38,852 141
Distributions Paid to Shareholders. . (15,265) (13,438)
Distributions Paid to Minority
Interests and Unitholders. . . . . . (3,369) (3,988)
Capital Contributions by Minority
Interests. . . . . . . . . . . . . . 1,000 --
------------- -----------
Net Cash Provided by Financing
Activities. . . . . . . . . . . . . 50,114 26,165
------------- -----------
Net Increase in Cash. . . . . . . . . 1,120 5,945
Cash, Beginning of Period . . . . . . 1,750 1,827
------------- -----------
Cash, End of Period . . . . . . . . . $ 2,870 $ 7,772
============= ===========
Supplemental Disclosure of Non-Cash
Transactions
The following non-cash transactions
occurred:
Distributions accrued for shareholders
not paid . . . . . . . . . . . . . . $ 7,634 $ 6,729
Distributions accrued for
unitholders not paid . . . . . . . . 1,600 --
Purchase of the Remaining 70%
Interest in Silver Lake Mall:
72,000 OP Units Issued. . . . . . . $ 1,863 $ --
30% Equity Investment Consolidated. (1,555) --
Debt Assumed. . . . . . . . . . . . 24,755 --
------------ -----------
Total . . . . . . . . . . . . . . . $ 25,063 $ --
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
JP REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BUSINESS SUMMARY AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
JP Realty, Inc. (the "Company") is primarily engaged in the
business of owning, leasing, managing, operating, developing and
redeveloping malls, community centers and other commercial properties.
The tenant base includes primarily national retail chains and local
retail companies. Consequently, the Company's credit risk is
concentrated in the retail industry. The Company's properties are
owned and controlled by the Company through its 83% general partner
interest in Price Development Company, Limited Partnership ("the
Operating Partnership"). Since there are no material differences
between the Company and the Operating Partnership they will be
collectively referred to as "the Company" unless the text requires
otherwise.
The interim financial data for the nine-months ended September 30,
1996 and 1997 is unaudited; however, in the opinion of the Company,
the interim financial data includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of
the results for the interim periods.
2. SECONDARY OFFERING
On January 28, 1997, JP Realty, Inc. sold 1,500,000 shares of
common stock in an underwritten public offering at an offering price
of $27.125 per share. Net proceeds to the Company of approximately
$38,600 were used to purchase additional partnership units ("OP units")
in the Operating Partnership. The Operating Partnership used the
proceeds and additional operating cash to reduce the $50,000 credit
facility by $39,900.
3. BORROWINGS
The Operating Partnership borrowed funds from its $50,000 credit
facility and $25,000 credit facility (collectively, the "Credit
Facilities") to fund various projects and acquisitions in 1997. The
Operating Partnership borrowed $8,000 for the May, 1997 purchase a parcel
of land in Provo, Utah for the development of an enclosed regional mall.
In June 1997, the Operating Partnership borrowed $9,000 to pay down a
portion of the debt assumed in the acquisition transaction with Silver
Lake Mall and $37,000 to purchase Visalia Mall (Note 6). In July, 1997,
the Operating Partnership borrowed $9,021 to fund various development
projects. Balances outstanding on the Credit Facilities as of September
30, 1997 were $67,121.
In June 1997, the Operating Partnership assumed debt of $24,755
as part of the acquisition of Silver Lake Mall (Note 6) and retired
portions of the debt with $2,791 cash and $9,000 from the Credit
Facility. As of September 30, 1997, borrowings on the debt were
$12,902. The loan rate of interest is 8.5% per annum and has a
maturity date of October 1, 2000 when a balloon payment of $11,971
is due.
On July 30, 1996, Spokane Mall Development Co. Limited, a
Consolidated Partnership of which the Operating Partnership is
the General Partner, entered into a $50,000 construction facility.
The construction facility has be used to fund the development and
construction of the Spokane Valley Mall in Spokane, Washington.
The construction loan has a three-year term with an optional
two-year extension and is secured by the Spokane Valley
Mall and guaranteed by the Operating Partnership. As of September
30, 1997, borrowings on the loan were $36,336.
<PAGE> 8
JP REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. RECENT ACCOUNTING PRONOUNCEMENTS
The Company is required to adopt Statement of Financial
Accounting Standard ("SFAS") No. 128. Earnings Per Share as of
December 15, 1997; earlier application is not permitted. SFAS 128
specifies the computation, presentation, and disclosure requirements
for earnings per share. The following table presents pro forma
earnings per share amounts computed using SFAS 128 as if the new
standard had been adopted for the respective periods.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
<C> <C> <C> <C>
<S>
Basic Earnings Per Share. . $ .38 $ .36 $ 1.14 $ 1.06
======== ======== ======== ========
Diluted Earnings Per Share. $ .38 $ .36 $ 1.13 $ 1.06
======== ======== ======== ========
</TABLE>
In June 1997, the SFAB issued SFAS No. 130 Reporting Comprehensive
Income. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements. Comprehensive income is
defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from
nonowner sources. The Company does not expect this pronouncement
to materially impact the presentation or form of the Company's
financial statements.
In June 1997, the FASB issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for disclosure about operating segments in
annual financial statements and selected information in interim
financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and
major customers. This statement supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise. The new standard
becomes effective for the Company for the year ending December 31,
1998, and requires that comparative information from earlier years
be restated to conform to the requirements of this standard. The
Company does not expect this pronouncement to materially
change the Company's current reporting and disclosures.
<PAGE> 9
JP REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. SHAREHOLDERS' EQUITY
The following table summarizes changes in shareholders' equity
since December 31, 1996:
<TABLE>
<CAPTION>
Accumulated
Additional Dividends in
Common Paid-in Excess of
Shares Stock Capital Net Income Total
---------- ------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Shareholders' Equity
at December 31, 1996. 16,073,553 $ 2 $ 193,229 $ (20,675) $172,556
Stock Option
Compensation. . . . . -- -- 10 -- 10
Issued Shares Common
Stock -
Additional Offering. 1,500,000 -- 38,632 -- 38,632
Stock Options
Exercised . . . . . 11,810 -- 220 -- 220
OP Units Converted . 4,364 -- 39 -- 39
Net Income for the
Period. . . . . . . . -- -- -- 19,942 19,942
Dividends Paid . . . . -- -- -- (15,265) (15,265)
Dividends Accrued. . . -- -- -- (7,634) (7,634)
---------- ----- --------- ----------- --------
Shareholders' Equity at
September 30, 1997. . 17,589,727 $ 2 $ 232,130 $ (23,632) $208,500
========== ===== ========= ========== ========
</TABLE>
6. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
In June, 1997, the Operating Partnership acquired two enclosed
regional malls. Silver Lake Mall located in Coeur D'Alene, Idaho and
Visalia Mall located in Visalia, California. The Operating Partnership
previously held a 30% interest and acquired the remaining 70% interest
in Silver Lake Mall, Ltd. a limited partnership owning Silver Lake Mall
by issuing 72,000 OP units and assuming debt of $24,755. The Operating
Partnership acquired Visalia Mall for $38,000 paying $1,000 from
operations and $37,000 from borrowings (Note 3).
<PAGE> 10
On January 28, 1997, JP Realty, Inc. sold 1,500,000 shares of
common stock in an underwritten public offering at an offering price
of $27.125 per share. Net proceeds of $38,600 were contributed to
Operating Partnership in exchange for OP units. Operating Partnership
used the net proceeds to repay borrowings under the $50,000 Credit
Facility. On April 4, 1996, the Operating Partnership acquired the
Grand Teton Mall located in Idaho Falls, Idaho for a purchase price
of $34,400.
The following unaudited pro forma condensed consolidated statement
of operation for the nine-month period ended September 30, 1997 is
presented as if the offering of common stock and the acquisition of
the properties purchased on June 1, 1997 and June 30, 1997 had
occurred on January 1, 1997. The unaudited pro forma condensed
statement of operations for the nine-month period ended September 30,
1996 is presented as if the offering of common stock and the
acquisition of the properties purchased on April 4, 1996, June 1,
1997 and June 30, 1997 had occurred on January 1, 1996.
Pro forma information is based upon the historical consolidated
results of operations of the Company for the nine-month period ended
September 30, 1997 and 1996 giving effect to the transactions described
above. The pro forma condensed consolidated statement of operations
should be read in conjunction with the historical financial statements
and notes thereto of the Company included elsewhere herein.
The unaudited pro forma condensed consolidated statement of
operations is not necessarily indicative of what the actual results
of operations of the Company would have been assuming the transactions
had been completed as set forth above, nor does it purport to
represent the Company's results of operations for future periods.
<PAGE> 11
JP REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Acquired
Properties and
Company Partnership Units Company
Historical(A) Issued(B) Pro Forma
------------ --------------- ---------
<C> <C> <C>
<S>
Revenues:
Minimum Rents . . . . . . $ 41,761 $ 3,222 $ 44,983
Percentage and Overage
Rents. . . . . . . . . . 3,087 64 3,151
Recoveries from Tenants . 12,911 1,444 14,355
Interest and Other Income 1,006 (104)(C) 902
------------ --------------- ---------
58,765 4,626 63,391
Expenses:
Operating Expenses Before
Depreciation and Interest 19,368 1,718 21,086
Interest. . . . . . . . . 5,899 1,659(D) 7,558
Depreciation and
Amortization . . . . . . 9,576 660(E) 10,236
------------ --------------- ---------
34,843 4,037 38,880
------------ --------------- ---------
Net Operating Income . . . 23,922 589 24,511
Minority Interests in
Income of Consolidated
Partnerships. . . . . . . (209) -- (209)
Gain on Sale of Real Estate 339 -- 339
----------- --------------- ---------
Income before Minority
Interests of Operating
Partnership
Unitholders . . . . . . . 24,052 589 24,641
Minority Interests of
Operating Partnership
Unitholders in
Consolidated Operating
Partnerships . . . . . . (4,110) (153) (4,263)
------------ --------------- ---------
Net Income . . . . . . . . $ 19,942 $ 436 $ 20,378
============ =============== =========
Net Income Per Share . . . $ 1.14 $ 1.16
============ =========
Weighted Average Number of
Shares Outstanding. . . . 17,430 17,584
============ =========
</TABLE>
(A) Reflects the Company's historical consolidated statement of
operations for the period January 1, 1997 to September 30, 1997.
(B) Reflects revenues and certain expenses of the properties acquired
on June 1, 1997 and June 30, 1997 for the five months ended May 31,
1997 and the six months ended June 30, 1997, respectively, and
the common stock offering on January 28, 1997 of JP Realty, as
if consummated on January 1, 1997.
(C) Reflects a reduction in outside management fees received for
management services of Silver Lake Mall prior to the acquisition.
(D) Reflects interest expense on borrowings outstanding under the
revolving Credit Facilities, drawn for purposes of the acquisition
of the properties, at a rate equal to the average interest rate
incurred under the Credit Facilities, and interest on assumed debt
at 8.5% fixed rate. A change in the interest rate of 1/8% on the
Credit Facility used to finance the acquisition of the properties
would result in $44 interest expense increase or decrease for the
nine-month period ended September 30, 1997.
Interest expense is reduced for the period January 1, 1997 through
February 11, 1997 by $289, reflecting the $38,600 in net proceeds
from the January 28, 1997 common stock offering of JP Realty, Inc.
The proceeds were used to retire borrowings outstanding on the
$50,000 Credit Facility.
(E) Reflects depreciation on the purchase price allocated to buildings
over a 40-year useful life.
<PAGE> 12
JP REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Acquired
Properties and
Company Partnership Units Company
Historical(A) Issued(B) Pro Forma
------------ --------------- ---------
<C> <C> <C>
<S>
Revenues:
Minimum Rents . . . . . . $ 38,440 $ 5,775 $ 44,215
Percentage and Overage
Rents 3,190 194 3,384
Recoveries from Tenants . 11,526 2,150 13,676
Interest and Other Income 690 (105)(C) 585
----------- --------------- ---------
53,846 8,014 61,860
Expenses:
Operating Expenses Before
Depreciation and Interest 18,213 3,166 21,379
Interest. . . . . . . . . 5,695 1,687(D) 6,864
Depreciation and
Amortization . . . . . . 8,923 1,169(E) 10,610
----------- --------------- ---------
32,831 6,022 38,853
----------- --------------- ---------
Net Operating Income . 21,015 1,992 23,007
Minority Interests in Income
of Consolidated
Partnerships. . . . . . . (211) -- (211)
Gain on Sale of Real Estate 94 -- 94
----------- --------------- --------
Income Before Minority
Interest of Operating
Partnership Unitholders 20,898 1,992 22,890
Minority Interests of
Operating Partnership
Unitholders In Consolidated
Operating Partnerships. . (3,823) (377) (4,200)
------------ --------------- ---------
Net Income. . . . . . . $ 17,075 $ 1,615 $ 18,690
============ =============== ========
Net Income Per Share . . . $ 1.06 $ 1.09
============ ========
Weighted Average Number of
Shares Outstanding . . . 16,042 17,182
============ ========
</TABLE>
<PAGE> 13
JP REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(A) Reflects the Company's historical consolidated statement of operations
for the period January 1, 1996 to September 30, 1996.
(B) Reflects revenues and certain expenses of the properties acquired on
April 4, 1996, June 1, 1997 and June 30, 1997, and the common stock
offering on January 28, 1997 of JP Realty, as if consummated on January
1, 1996.
(C) Adjustment reflects a reduction in outside management fees received for
management services of Silver Lake Mall prior to the acquisition.
(D) Reflects interest expense on borrowings outstanding under the revolving
Credit Facilities, drawn for purposes of the acquisition of the
properties, at a rate equal to the average interest rate incurred
under the Credit Facilities, and interest on assumed debt at 8.5%
fixed rate. A change in the interest rate of 1/8% on the Credit
Facility used to finance the acquisition of the properties would
result in $44 interest expense increase or decrease for the nine-
month period ended September 30, 1996. Interest expense is reduced
by using the $38,600 in net proceeds from the January 28, 1997 common
stock offering. The proceeds were used to retire borrowings outstanding
on the $50,000 Credit Facility. Prior to April 4, 1996, only $10,000
was outstanding on this Credit Facility. As a result, the interest
expense reduction is computed based on that amount outstanding
during the period January 1, 1996 to April 4, 1996.
(E) Reflects depreciation on the purchase price allocated to buildings,
over a 40-year useful life.
<PAGE> 14
JP REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. SUBSEQUENT EVENTS
On October 6, 1997, the Operating Partnership increased the size
of its $25 million Credit Facility to $40 million. All other terms
remaining essentially the same.
On October 16, 1997, Operating Partnership obtained a $150 million
three-year unsecured credit facility (the "unsecured Credit Facility")
from a group of banks. The unsecured Credit Facility bears interest
at either i) the higher of the Federal Funds Rate plus 50 basis
points or the prime rate, or ii) LIBOR plus a spread of 70 to 130
basis points. The LIBOR spread is determined by the Operating
Partnership's credit rating and/or leverage ratio. The unsecured
Credit Facility also includes a competitive bid option in the amount
of $100 million which will allow Operating Partnership to solicit
bids for borrowings from the bank group. The bid option is available
if Operating Partnership obtains an investment grade credit rating.
The unsecured Credit Facility will be used for general corporate
purposes including development, working capital, equity investments,
repayment of amounts outstanding under its other Credit Facilities,
repayment of indebtedness and/or amortization payments.
On November 7, 1997, the Operating Partnership borrowed $85
million from the $150 million Credit Facility and paid off and
canceled the $50 million Credit Facility and paid off the $40
million Credit Facility. The interest rate on the $85 million
was locked in at 90 basis points above the one month LIBOR rate.
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company completed its initial public offering on January
21, 1994, and conducts all of its business operations through its
83% controlling general partner interest in Price Development
Company, Limited Partnership ("the Operating Partnership").
The Company is a fully integrated, self administered and self-
managed real estate investment trust ("REIT") primarily engaged
in the ownership, leasing, management, operation, development,
redevelopment and acquisition of retail properties in the
Intermountain Region, as well as in Oregon, Washington and
California. The Company's existing portfolio consists of 46
properties, including 14 enclosed regional malls, 24 community
centers, two freestanding retail properties and six mixed-use
commercial properties.
The Company's financial condition and results of operations
were positively impacted by the Operating Partnerships's April 1996
acquisition of the Grand Teton Mall, June 1997 acquisitions of
Silver Lake Mall and Visalia Mall, and the August 13, 1997 opening
of the Spokane Valley Mall as well as its other development
activities which added a combined 2,022,000 square feet of gross
leasable area ("GLA") to the retail portfolio and 24,000 square
feet of GLA to the commercial portfolio.
The Company completed an additional public offering in
January 1997, raising approximately $40.7 million in gross
proceeds through the sale of 1,500,000 shares of its common stock.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO NINE MONTHS
ENDED SEPTEMBER 30, 1996 (DOLLARS IN THOUSANDS).
Total revenues for the nine months ended September 30, 1997
increased $4,919 or 9% to $58,765 as compared to $53,846 in 1996.
This increase is primarily attributable to a $3,321 or 9% increase
in minimum rents to $41,761 as compared to $38,440 in 1996.
Additionally, other income increased $370 due to development
and leasing fees relating to the opening of the Spokane
Valley Mall.
The increase in minimum rents was primarily due to the
April 1996 acquisition of the Grand Teton Mall and the June
1997 acquisitions of Silver Lake Mall and Visalia Mall, the
August 13, 1997 opening of Spokane Valley Mall offset somewhat
by certain unexpected vacancies in the retail and commercial
properties.
Recoveries from tenants increased $1,385 or 12% to $12,911
as compared to $11,526 in 1996. Operating and maintenance
increased $840 or 10% and real estate taxes and insurance
increased $81. These increases are mainly due to the 1996
acquisition of Grand Teton Mall property acquisition and the
June 1997 acquisitions of Silver Lake Mall and Visalia Mall.
Grand Teton Mall, Silver Lake Mall, Visalia Mall and
Spokane Valley Mall had tenant recoveries of $1,286 and
operating and maintenance, real estate taxes and insurance
of $1,330. Recoveries from tenants as a percentage of property
operating expenses for the nine months ended September 30, 1997
were 84% compared to 80% in 1996.
General and administrative expenses increased $234 or 6% to
4,014 as compared to $3,780. The main increase is the result of
increased payroll costs from additional personnel added to support
the Company's growth.
Depreciation and amortization increased $653 or 7% to $9,576 as
compared to $8,923 in 1996. This increase is primarily due to the
acquisitions of Grand Teton Mall, Silver Lake Mall, Visalia Mall, the
opening of the Spokane Valley Mall and tenant allowances given on
existing GLA.
Interest expense increased $204 or 4% to $5,899 as compared to
$5,695 in 1996. This increase was primarily a result of borrowings
to acquire Silver Lake Mall, Visalia Mall and borrowings to construct
Spokane Valley Mall. The increase is offset by interest in 1996 on
Grand Teton Mall purchase. The debt was repaid in February 1997
(Note 2).
<PAGE> 16
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THREE MONTHS
ENDED SEPTEMBER 30, 1996 (DOLLARS IN THOUSANDS)
Total revenues for the three months ended September 30, 1997
increased $3,276 or 18% to $21,773 as compared to $18,497 in 1996.
This increase is attributable to a $2,262 or 17% increase in
minimum rents to $15,313 as compared to $13,051 in 1996. Additionally,
percentage and overage rents increased $66 or 6% to $1,095 as compared
to $1,029 in 1996. Other income increased $347 due to a development
and leasing fees relating to the opening of the Spokane Valley Mall.
The June 1997 acquisitions of the Silver Lake Mall and Visalia
Mall and the August 13, 1997 opening of Spokane Valley Mall offset
by the impact of certain unexpected vacancies in retail and commercial
properties, was the primary reason for the quarterly minimum rent
increase and to the quarterly percentage and overage rent amount.
The Company's retail properties operating revenues decreased $125
for the three months ended September 30, 1997 as a result of lease
rejections by Ernst Home Centers, Inc. (February 16, 1997) and Best
Products Co., Inc. (May 26, 1997) in their bankruptcy proceedings.
The vacancies in the commercial properties resulted in a $31
decrease in operating revenues for the quarter.
Recoveries from tenants increased $666 to $4,858 as compared
to $4,192 in 1996. Operating and maintenance increased $753 or 26%
and real estate taxes and insurance increased $100 or 5%. These
increases are due to the acquisitions of Silver Lake Mall, Visalia
Mall and the opening of the Spokane Valley Mall. Recoveries from
tenants as a percentage of property operating expenses for the
three months ended September 30, 1997 were 83% compared to 83%
in 1996.
General and administrative expenses increased $256 to $1,446
compared to $1,190 in 1996. The main increase is the result of
increased payroll costs from additional personnel added to support
the Company's growth.
Depreciation increased $455 or 17% to $3,092 as compared to $2,637
in 1996. This increase is primarily due to the acquisitions of
Silver Lake Mall and Visalia Mall and the August 13, 1997 opening
of the Spokane Valley Mall and the tenant allowances given on
existing GLA.
Interest expense increased $599 or 28% to $2,733 as compared
to $2,134 in 1996. This increase was primarily a result of
borrowings to acquire Silver Lake Mall, Visalia Mall and borrowings
to construct Spokane Valley Mall. The increase is offset by interest
in 1996 on Grand Teton Mall purchase. The debt was repaid in February
1997 (Note 2).
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of capital resources have
historically been for distributions, acquisitions, property development,
expansion and renovation programs and debt repayment. To maintain its
qualification as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"), the Company, is among other things, required
to distribute to its shareholders at least 95% of its "Real Estate
Investment Trust Taxable Income," as defined in the Code. During
the quarter ended September 30, 1997, the Company declared a
distribution of $.435 per share and OP units payable October 21,
1997 to the shareholders and unit holders of record as of October
3, 1997.
The Company's principal source of capital is its cash flow from
operations generated from its real estate investments. As of
September 30, 1997, the Company's cash and restricted cash amounted
to approximately $5.3 million. In addition to its cash and
restricted cash, unused capacity under its Credit Facilities
totaled $7.5 million at September 30, 1997. Additionally, the
Company entered into a new $150 million unsecured Credit
Facility (Note 7) which will replace both of its previous
Credit Facilities thereby providing a total unused capacity of
$65 million. On January 28, 1997, the Company completed an
additional public offering of 1,500,000 shares of common stock,
raising approximately $40.7 million in gross proceeds. The proceeds
to the Company of approximately $38.8 million were used to pay
costs of the offering and to reduce outstanding borrowings
under the Credit Facilities by approximately $38.6 million.
The Company expects to meet its short term cash requirements,
including recurring capital expenditures related to maintenance and
improvement of existing properties, through undistributed funds
from operations, cash balances and advances under the Credit
Facilities. Exclusive of construction and development activities,
capital expenditures (both revenue and non-revenue enhancing) for
the existing properties are budgeted in 1997 to be approximately
$4.2 million.
<PAGE> 17
The Company's principal long-term capital requirements include
the repayment of principal on the $95 million mortgage debt, which
matures in 2001 and requires principal payments in an amount
necessary to reduce the debt to $83.1 million as of January 21,
2000, and the retirement of outstanding balances under the Credit
Facilities.
An additional long-term capital need of the Company is the
construction of the regional mall in Spokane, Washington, through
its Consolidated Partnership, Spokane Mall Development Co. Limited.
On July 30, 1996, the Consolidated Partnership entered into a $50
million construction facility to meet its development and construction
needs regarding the Spokane project. The Mall opened August 13, 1997
and contains approximately 714,000 square feet of total gross
leasable area. Continued payments for initial tenant construction
allowances and completion of construction will increase borrowings
on the loan. The Company estimates the total cost of this project
will be approximately $67 million. The difference between the
estimated cost of the project and amount of the construction
facility is comprised of cost incurred to date for the purchase
of land and payment of fees and other development costs. As of
September 30, 1997 borrowings on the loan were approximately
$36.3 million.
The Operating Partnership has initiated the development of an
enclosed regional mall in Provo, Utah through its Consolidated
Partnership Provo Mall Development Co. Ltd. The Provo project
will also represent a future long-term capital need for the Company.
The Company expects to fund this project through advances under
its Credit Facilities in combination with construction financing.
The availability of financing and the status of other projects
will influence the Operating Partnership's decision to proceed
with, and the pace of, the Provo project.
The Company is also contemplating the expansion and renovation
of several of its existing properties and additional development
projects and acquisitions as a means to expand its portfolio. The
Company does not expect to generate sufficient funds from operations
to meet such long-term needs and intends to finance these costs
primarily through advances under the Credit Facilities, together
with equity and debt offerings and individual property financings.
On September 2, 1997, the Company and the Operating Partnership
filed a shelf registration statement with the Securities and Exchange
Commission for the purposse of registering common stock, preferred
stock, depositary shares, common stock warrants, debt securities
and guaranties. This registration statement, when combined with
the Company's unused portion of its previous shelf registration,
would allow for up to $400 million of securities to be offered by
the Company and the Operating Partnership.
The Company intends to fund its distribution, development,
expansion, renovation, acquisition and debt repayment activities
from its Credit Facilities as well as other debt and equity
financings, including public financing, in a manner consistent
with its intention to operate with a conservative debt-to-total
market capitalization ratio of less than 50%. The Company's
ratio of debt-to-total market capitalization was approximately
28% as September 30, 1997.
The statements contained in this Quarterly Report on Form 10-Q
that are not purely historical fact are forward looking
statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements regarding the Company's expectations, budgets,
estimates, and contemplations. All forward looking statements
included in this document are based on information available to
the Company on the date hereof, and the Company assumes no
obligation to update any such forward looking statement.
It is important to note that the Company's actual results could
differ materially from those in such forward looking statements.
Certain factors that might cause such differences include those
relating to changes in economic climate, local conditions, laws
and regulations, the relative illiquidity of real property
investments, the potential bankruptcy of tenants and the
development, redevelopment or expansion of properties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
<PAGE> 18
PART II
ITEM 1. LEGAL PROCEEDINGS
-----------------
The Company is not aware of any pending or threatened
litigation at this time that will have a material adverse
effect on the Company or any of its properties.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
-----------------
Not applicable.
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
---------------------------------
3.1 Amended and Restated Articles of Incorporation the Company
(3(a))*
3.2 Amended and Restated Bylaws of the Company (3(b))**
4.1 Specimen of Common Stock Certificate (4)*
10.1 Amended and Restated Agreement of Limited
Partnership of Price. Development Company, Limited
Partnership (10(a))*
10.2 Agreement of Limited Partnership of Price Financing
Partnership, L.P. (10(b))*
10.3 Loan Agreements related to Mortgage Debt and related
documents (10(c))*
i) Deed of Trust, Mortgage, Security Agreement and
Assignment of Leases and Rents of Price Financing
Partnership, L.P.
ii) Intentionally Omitted
iii) Indenture between Price Capital Corp. and a Trustee
iv) Limited Guarantee Agreement (Guarantee of Collection)
for outside investors
v) Limited Guarantee Agreement (Guarantee of Collection)
for Price Group Investors
vi) Cash Collateral Account Security, Pledge and
Assignment Agreement among Price Financing
Partnership, L.P., Price Capital Corp. and Continental
Bank N.A.
vii) Note Issuance Agency Agreement between Price Capital
Corp. and Price Financing Partnership, L.P.
viii) Management and Leasing Agreement among Price Financing
Partnership, L.P. and Price Development Company,
Limited Partnership
ix) Assignment of Management and Leasing Agreement of
Price Financing Partnership, L.P.
10.4 Employment and Non-Competition Agreement between the
Company and John Price (10(d))*
10.5 Indemnification Agreement for Directors and Officers (10(f))*
10.6 Registration Rights Agreement among the Company and the
Limited Partners of Price Development Company, Limited
Partnership (10(g))*
10.7 Amendment No. 1 to Registration Rights Agreement, dated
August 1, 1995, among the Company and the Limited Partners
of Price Development Company, Limited Partnership***
10.8 Exchange Agreement among the Company and the Limited
Partners of Price Development Company, Limited
Partnership (10(g))*
10.9 1993 Stock Option Plan (10(i))*
10.10 Amendment to Groundlease between Price Development
Company and Alvin Malstrom as Trustee and C.F. Malstrom,
dated December 31, 1985. (Groundlease for Plaza 9400)
(10(j))*
10.11 Lease Agreement between The Corporation of the President
of the Church of Jesus Christ of Latter Day Saints and
Price-James and Assumptions, dated September 24, 1979.
Groundlease for Anaheim Plaza) (10(k))*
10.12 Indenture of Lease between Ambrose and Zelda Motta and
Cordova Village, dated July 26, 1974, and Amendments
and Transfers thereto.
(Groundlease for Fort Union Plaza)(10(l))*
10.13 Lease Agreement between Advance Management Corporation
and Price Rentals, Inc. and dated August 1, 1975 and
Amendments thereto. (Groundlease for Price Fremont)(10(m))*
10.14 Groundlease between Aldo Rossi and Price Development Company,
Dated June 1, 1989, and related documents. (Groundlease for
Halsey Crossing) (10(n))*
10.15 Loan Agreements related to 1995 Credit Facility ***
i) Credit Agreement, dated March 8, 1995, between Price
Development Company, Limited Partnership and Lexington
Mortgage Company
ii) Note dated March 8, 1995
iii) Guaranty of Payment dated March 8, 1995 between the
Company and Lexington Mortgage Company
iv) Cash Collateral Account Security, Pledge and Assignment
Agreement dated March 8, 1995 between Price Development
Company, Limited Partnership, Bank One, Utah, N.A. and
Lexington Mortgage Company
v) Amended and Restated Credit Agreement dated June 29, 1995
between Price Development Company, Limited Partnership,
Merrill Lynch Mortgage Capital, Inc. and Capital Market
Assurance Corporation
vi) Amendment to Cash collateral Account, Security, Pledge
and Assignment Agreement dated June 29, 1995
- --------------------------------
*Documents were previously filed with the Registration Statement on Form S-11,
File No. 33-68844, under the exhibit numbered in parentheticals, and are
incorporated herein by reference.
**Documents were previously filed with the Company's first quarter 1997 10-Q
and are incorporated herein by reference.
***Documents were previously filed with the Company's Annual Report of Form
10-K for the year ended December 31, 1995 and are incorporated herein by
reference.
(b) Current Reports on Form 8-K
The Company filed on September 11, 1997, a Report on Form
8-K dated September 11, 1997 and filed September 11, 1997
reporting the pro forma information for the six-months
ended June 30, 1997.
The Financial Statements Filed Were As Follows:
JP Realty, Inc.
Pro Forma - Unaudited:
Condensed Consolidated Statement of Operations for the
Six-Month Period Ended June 30, 1997. Pro Forma
Statement of Taxable Net Operating Income and Operating
Funds Available.
vii) Reaffirmation of Guaranty dated June 29, 1995
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
JP REALTY, INC.
(Registrant)
November 13, 1997 /S/ G. Rex Frazier
- --------------------------------- --------------------
(Date) G. Rex Frazier
President, Chief Operating
Officer, and Director
November 13, 1997 /S/ M. Scott Collins
- --------------------------------- --------------------
(Date) M. Scott Collins
Vice President--
Chief Financial Officer
(Principal Financial
& Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JP
REALTY, INC. FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> $2,870
<SECURITIES> 0
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 0<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 487,748
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 487,748
<SALES> 0
<TOTAL-REVENUES> 58,765
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 28,944<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,899
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $19,942
<EPS-PRIMARY> $1.14
<EPS-DILUTED> 0
<FN>
<F1>The Company utilizes a condensed balance sheet format for 10-Q reporting.
Amounts are included in Other Assets.
<F2>The financial statements reflect an unclassified balance sheet due to the
nature of the Company's industry - Real Estate Investment Trust.
<F3>Amount is comprised of $34,843 of expenses less interest expense of $5,899
reflected elsewhere in this Financial Data Schedule.
</FN>
</TABLE>
