<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12482
GLIMCHER REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 31-1390518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SOUTH THIRD STREET 43215
COLUMBUS, OHIO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 621-9000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
</TABLE>
-------------------------------------
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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
--- ---
As of October 31, 1996, there were 21,888,931 Common Shares of
Beneficial Interest outstanding, par value $ .01 per share.
1 of 25 pages
<PAGE> 2
GLIMCHER REALTY TRUST
FORM 10-Q
INDEX
-----
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations for the three months ended September 30, 1996 and 1995 4
Consolidated Statements of Operations for the nine months ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
</TABLE>
2
<PAGE> 3
GLIMCHER REALTY TRUST
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
<S> <C> <C>
Investment in real estate:
Land................................................................... $ 56,180 $ 57,181
Buildings, improvements and equipment.................................. 649,617 623,471
Developments in progress:
Land ............................................................... 27,578 4,885
Developments........................................................ 45,423 11,361
--------- ---------
778,798 696,898
Less accumulated depreciation......................................... 80,730 66,699
--------- ---------
Net investment in real estate.................................. 698,068 630,199
Cash and cash equivalents................................................ 5,996 5,832
Cash in escrow........................................................... 32,771 4,722
Tenant accounts receivable, net.......................................... 19,617 15,507
Deferred expenses, net................................................... 9,352 11,542
Prepaid and other assets................................................. 806 1,201
--------- ---------
$ 766,610 $ 669,003
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable................................................... $ 313,543 $ 291,579
Notes payable............................................................ 109,254 33,200
Accounts payable and accrued expenses.................................... 15,780 14,011
Distributions payable.................................................... 11,776 11,773
--------- ---------
450,353 350,563
--------- ---------
Minority interest in partnerships........................................ 43,131 33,749
Shareholders' equity:
Common shares of beneficial interest, $.01 par value, 100,000,000 shares
authorized, 21,888,931 and 21,881,921 shares issued and outstanding at
September 30, 1996 and December 31, 1995, respectively.............. 219 219
Additional paid-in capital............................................. 316,672 316,558
Distributions in excess of accumulated earnings........................ (43,765) (32,086)
--------- ---------
$ 766,610 $ 669,003
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
3
<PAGE> 4
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Minimum rents......................................................... $ 20,887 $ 20,030
Percentage rents...................................................... 592 634
Tenant recoveries..................................................... 5,641 4,801
Other................................................................. 514 595
--------- ---------
Total revenues..................................................... 27,634 26,060
---------- ----------
Operating Expenses:
Real estate taxes..................................................... 2,536 2,024
Recoverable operating expenses........................................ 3,116 2,921
---------- ----------
5,652 4,945
Provision for credit losses............................................ 453 448
Other operating expenses............................................... 200 114
General and administrative............................................. 2,354 1,431
---------- ----------
Total operating expenses............................................ 8,659 6,938
---------- ----------
Net operating income................................................ 18,975 19,122
Depreciation and Amortization:
Real estate depreciation............................................... 4,890 4,511
Non-real estate depreciation........................................... 229 205
Loan fee amortization.................................................. 337 440
---------- ----------
5,456 5,156
Gain on sale of properties................................................. 382
Interest income............................................................ 121 122
Interest expense........................................................... 6,320 5,514
Amortization of interest rate buydown...................................... 194 194
Minority interest in partnerships.......................................... 829 899
---------- ----------
Net income.......................................................... $ 6,679 $ 7,481
========== ==========
Earnings per common share of beneficial interest........................... $ .31 $ .34
========== ==========
Cash distributions declared per common share of beneficial interest........ $ .4808 $ .4808
========== ==========
Weighted average number of common shares of beneficial interest
outstanding............................................................ 21,888,931 21,866,127
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
4
<PAGE> 5
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Minimum rents............................................................ $ 62,104 $ 58,787
Percentage rents......................................................... 2,199 2,181
Tenant recoveries........................................................ 16,315 14,323
Other.................................................................... 1,359 1,441
--------- --------
Total revenues...................................................... 81,977 76,732
--------- --------
Operating Expenses:
Real estate taxes........................................................ 7,453 6,309
Recoverable operating expenses........................................... 9,855 8,709
-------- --------
17,308 15,018
Provision for credit losses.............................................. 1,461 1,208
Other operating expenses................................................. 525 341
General and administrative............................................... 6,583 4,874
-------- --------
Total operating expenses............................................ 25,877 21,441
-------- --------
Net operating income................................................ 56,100 55,291
Depreciation and Amortization:
Real estate depreciation............................................... 14,473 13,312
Non-real estate depreciation........................................... 672 599
Loan fee amortization.................................................. 1,012 1,523
-------- --------
16,157 15,434
Gain on sale of properties................................................. 1,501
Interest income............................................................ 332 404
Interest expense........................................................... 18,895 19,522
Amortization of interest rate buydown...................................... 582 582
Minority interest in partnerships.......................................... 2,406 2,359
-------- --------
Net income.......................................................... $ 19,893 $ 17,798
======== ========
Earnings per common share of beneficial interest........................... $ .91 $ .91
======== ========
Cash distributions declared per common share of beneficial interest........ $ 1.4424 $ 1.4291
======== ========
Weighted average number of common shares of beneficial interest
outstanding............................................................ 21,887,778 19,592,587
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
5
<PAGE> 6
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $19,893 $17,798
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses.................................... 1,461 1,208
Depreciation and amortization.................................. 16,157 15,434
Gain on sale of properties..................................... (1,501)
Other non-cash expenses........................................ 622 582
Minority interest in partnerships.............................. 2,406 2,359
Net changes in operating assets and liabilities:
Tenant accounts receivable..................................... (5,518) (3,717)
Prepaid and other assets....................................... 885 194
Accounts payable and accrued expenses.......................... (1,889) (7,318)
------- -------
Net cash provided by operating activities........................... 32,516 26,540
------- -------
Cash flows from investing activities:
Proceeds from sale of properties .............................. 4,325
Additions to investment in real estate......................... (59,252) (23,299)
Acquisition of properties...................................... (5,167) (5,601)
(Additions to) withdrawals from cash in escrow................. (27,132) 3,964
Additions to deferred expenses................................. (116) (2,284)
------- -------
Net cash used in investing activities............................... (87,342) (27,220)
------- -------
</TABLE>
(continued)
The accompanying notes are an integral part of these consolidated
financial statements
6
<PAGE> 7
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of mortgage and notes payable.............. 739,872 275,544
Principal payments on mortgage and notes payable.................. (649,633) (316,581)
Proceeds from the issuance of common shares of beneficial
interest, net of underwriting and other offering costs of $4,690 68,810
Proceeds from the issuance of common shares of beneficial
interest under the Distribution Reinvestment and Share
Purchase Plan and other......................................... 77 129
Cash distributions, shareholders.................................. (31,572) (25,993)
Cash distributions, Operating Partnership unit holders............ (3,754) (3,685)
-------- --------
Net cash provided by (used in) financing activities.................... 54,990 (1,776)
-------- --------
Net change in cash and cash equivalents......................................... 164 (2,456)
Cash and cash equivalents, at beginning of period............................... 5,832 7,042
-------- --------
Cash and cash equivalents, at end of period..................................... $ 5,996 $ 4,586
======== ========
</TABLE>
Non-cash financing and investing transactions:
1995:
Glimcher Realty Trust accrued accounts payable of $1,196 and $3,131 for real
estate improvements and other assets as of September 30, 1995 and December 31,
1994, respectively.
1996:
Glimcher Realty Trust accrued accounts payable of $2,623 and $2,152 for real
estate improvements as of September 30, 1996 and December 31, 1995,
respectively.
During the third quarter of 1996 and 1995, Glimcher Realty Trust accrued
distributions payable for $11,776 and $11,770, respectively.
Glimcher Realty Trust, through Glimcher Properties Limited Partnership, acquired
one community shopping center during the nine months ended September 30, 1996.
The purchase price of $12,500 was paid with $5,167 in cash and the balance by
the assumption of net liabilities and mortgage debt of $7,383.
The accompanying notes are an integral part of these consolidated
financial statements
7
<PAGE> 8
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include Glimcher
Realty Trust, Glimcher Properties Limited Partnership (the "Operating
Partnership") (89.4% owned by GRT at September 30, 1996 and December 31, 1995),
four Delaware limited partnerships (Glimcher Holdings Limited Partnership,
Glimcher Centers Limited Partnership, Grand Central Limited Partnership, and
Glimcher York Associates Limited Partnership), and one Ohio limited partnership
(Morgantown Mall Associates Limited Partnership) all of which are directly or
indirectly wholly-owned by the Operating Partnership; and one Colorado limited
liability company (Olathe Mall, L.L.C.), collectively referred to as "GRT" or
the "Company". All significant inter-company balances and transactions have been
eliminated.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and in accordance with instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The information furnished in the accompanying consolidated balance
sheets, consolidated statements of operations, and consolidated statements of
cash flows reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of the aforementioned financial statements for
the interim periods. Operating results for the nine months ended September 30,
1996, are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996.
The consolidated financial statements should be read in conjunction
with the notes to the consolidated financial statements, Management's Discussion
and Analysis of Financial Condition and Results of Operations included in
Glimcher Realty Trust's Form 10-K for year ended December 31, 1995.
2. INVESTMENT IN REAL ESTATE
Investment in real estate before depreciation consists of: (a) eight
malls with an investment of $344,249; (b) 64 community shopping centers with an
investment of $313,587; (c) 17 single tenant retail with an investment of
$47,961; and (d) developments in progress which relate to the Company's
renovation, expansion and development activities. The increase in investment in
real estate is due primarily to the acquisition of one community shopping center
and the Company's expansion, renovation and development activities.
3. CASH IN ESCROW
Cash in escrow consists primarily of cash held for real estate taxes,
payments by tenants for early termination of their leases, and property
maintenance and expansion or leasehold improvements as required by certain of
the loan agreements. Cash in escrow may be released as certain income
requirements have been met. At September 30, 1996, cash in escrow also includes
$28,128 that was drawn under the revolving line of credit (the "Credit
Facility") and deposited with two banks to secure letters of credit for $28,128.
The letters of credit were deposited at the June 1996 escrow closing of the
Retail Property Investors Inc. (RPI) acquisition.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. MORTGAGE NOTES PAYABLE
Mortgage notes payable at September 30, 1996 and December 31, 1995 consist
of the following:
<TABLE>
<CAPTION>
BALANCE SEPTEMBER 30, 1996
--------------------- -------------------------------------------------
SEPT. 30, DEC. 31, INTEREST PAYMENT PAYMENT AT FINAL
DESCRIPTION 1996 1995 RATE TERMS MATURITY MATURITY DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Grand Central Limited Partnership...................... $25,000 $ 25,000 6.935% (a) $25,000 Oct. 1, 2000
Glimcher Holdings Limited Partnership - Loan A......... 40,000 40,000 6.995% (a) 40,000 Feb. 1, 1999
Glimcher Holdings Limited Partnership - Loan B......... 40,000 40,000 7.505% (a) 40,000 Feb. 1, 2003
Glimcher Centers Limited Partnership................... 76,000 76,000 7.625% (a) 76,000 Aug. 1, 2000
-------- --------
181,000 181,000
Morgantown Mall Associates Limited Partnership 50,200 50,200 7.500% (a) 50,200 Apr. 1, 1999
Glimcher Properties Limited Partnership -
Mortgage Notes Payable:
Glimcher Properties Limited Partnership.......... 50,000 50,000 7.470% (a) 50,000 Oct. 26, 2002
Georgesville Square.............................. 1,646
Meadowview Square................................ 866
Delaware Community Shopping Center............... 8,426 7.875% (b) April 1, 2016
Construction Loans:
Morgantown Commons ($10,500 available)........... 9,403 7,867 (c) (a) Jun. 1, 1998
The Great Mall of the Great Plains
($74,100 available)............................ 14,384 (d) (a) July 1, 1999
Georgesville Square ($16,900 available).......... 130 (c) (a) Oct. 1, 1999
-------- --------
Total Mortgage Notes Payable........................... $313,543 $291,579
======== ========
<FN>
(a) The loan requires monthly payments of interest only.
(b) The loan required monthly payments of interest only until May 1, 1996;
thereafter, a $70 monthly payment of principal and interest.
(c) The loan bears interest at LIBOR plus 200 basis points (7.438% at September
30, 1996).
(d) The loan bears interest at LIBOR plus 225 basis points (7.688% at September
30, 1996).
</TABLE>
All mortgage notes payable are collateralized by certain properties
held within the respective partnerships. The loan agreement for $181,000 with
Grand Central Limited Partnership, Glimcher Holdings Limited Partnership and
Glimcher Centers Limited Partnership contains certain financial covenants
regarding minimum net operating income and coverage ratios.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. NOTES PAYABLE
At September 30, 1996, the Company maintained a Credit Facility with
two banks, as agents, of $175,000 which is due in June 1998. All borrowings
under the Credit Facility are unsecured and bear interest at variable rates
ranging from LIBOR plus 150 basis points to LIBOR plus 250 basis points. The
variable rate is set quarterly based on the Company's leverage ratio (as defined
in the Credit Facility loan agreement) of total consolidated liabilities
($450,353 at September 30, 1996) to consolidated tangible net worth ($316,257 at
September 30, 1996). Consolidated tangible net worth is defined as the Company's
total assets less total liabilities and intangible assets. At September 30, 1996
the Credit Facility interest rate was LIBOR plus 175 basis points (7.413%).
The Credit Facility contains customary covenants, representations,
warranties and events of default, including maintenance of a specified minimum
net worth requirement, loan to value ratios, net operating income requirements
on the negative pledge pool, restrictions on the incurrence of additional
indebtedness and approval of anchor leases with respect to the properties which
are part of the negative pledge pool for the Credit Facility.
At September 30, 1996 the balance outstanding on the Credit Facility
was $108,800. In addition, $19,171 represents a holdback on the available
balance of the Credit Facility for letters of credit issued under the Credit
Facility; $18,721 of the holdback relates to a letter of credit issued in
connection with the escrow closing of the RPI acquisition. As of September 30,
1996 the unused balance of the Credit Facility available to the Company was
$47,029.
In connection with the Credit Facility the Company entered into a rate
protection agreement on July 14, 1995 under which the obligor has agreed to
reimburse the Company to the extent interest expense increases as a result of an
increase in LIBOR above 8.500% per annum, and the Company has agreed to
reimburse the obligor to the extent of interest expense decreases as a result of
an decrease in LIBOR below 4.500% per annum. Thus, the majority of the Company's
variable-rate debt has contractual protection against interest rate
fluctuations.
On February 23, 1996, GRT entered into a note payable for its three
year directors and officers liability insurance premium of $600 at a fixed rate
of 7.575%. The note requires quarterly payments of principal and interest in the
amount of $55 with the final payment due November 23, 1998. The balance
outstanding was $454 at September 30, 1996.
6. MINORITY INTEREST IN PARTNERSHIPS
The $9,382 increase is primarily due to the unaffiliated members'
interest ($10,729 as of September 30, 1996) in Olathe Mall L.L.C. ("Olathe").
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. JOINT VENTURE
On January 11, 1996, the Operating Partnership purchased a 65.0%
controlling interest in Olathe which was formed to develop an enclosed value and
entertainment oriented regional mall, The Great Mall of the Great Plains (the
"Mall"), in Olathe, Kansas. On September 19, 1996 the operating agreement was
amended to provide for the Operating Partnership to increase its ownership
interest in Olathe from 65.0% to 90.0% provided that scheduled payments to the
unaffiliated members are made. The Mall is currently under construction. The
operations of the Olathe joint venture are included in the accompanying balance
sheet using the consolidation method of accounting.
During construction substantially all costs associated with the
development have been capitalized. Below is a summarized balance sheet of Olathe
as of September 30, 1996:
<TABLE>
<CAPTION>
Assets:
<S> <C>
Construction in progress $47,572
Cash and cash equivalents 191
-------
$47,763
=======
Liabilities and Partner's Equity:
Construction loan payable $14,384
Accounts payable 2,031
Advances from partner 1,689
Partners' equity 29,659
-------
$47,763
=======
</TABLE>
8. SHAREHOLDERS' EQUITY
The following table summarizes the change in the shareholders' equity
since December 31, 1995:
<TABLE>
<CAPTION>
COMMON SHARES OF DISTRIBUTIONS
BENEFICIAL INTEREST IN EXCESS OF ADDITIONAL
------------------------- ACCUMULATED PAID IN
SHARES AMOUNT EARNINGS CAPITAL TOTAL
------ ------ -------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996............................. 21,881,921 $219 $(32,086) $316,558 $284,691
Distributions declared, $1.4424 per Share............ (31,572) (31,572)
Distribution Reinvestment and Share
Purchase Plan and other........................... 3,540 60 60
Stock based compensation............................. 3,470 57 57
Net income for the period January 1, 1996
to September 30, 1996............................ 19,893 19,893
Transfer to minority interest in partnership......... (3) (3)
---------- ---- --------- -------- --------
Balance, September 30, 1996.......................... 21,888,931 $219 $(43,765) $316,672 $273,126
========== ==== ========= ======== ========
</TABLE>
9. EARNINGS PER SHARE
Primary earnings per share is computed based upon the weighted average
number of Shares outstanding during the periods represented. Since fully diluted
earnings per share is not materially dilutive or antidilutive, such amounts are
not presented.
11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. COMMITMENT AND CONTINGENCIES
Litigation
In December 1994, the Estate of Amos Ginor ("Ginor") and Langhorne
Plaza Associates ("Langhorne") commenced a lawsuit, The Estate of Amos Ginor, et
al. v. Dennis Landsberg, et al., against various defendants, including Glimcher
Holdings Limited Partnership ("GHLP") and GRT (collectively, the "Glimcher
Entities"), that is pending in the United States District Court for the Southern
District of New York.
The complaint alleges that Langhorne's general partner, defendant
Washington General Corp. ("Washington"), and its corporate parent, Concord
Assets Group, Inc. ("Concord"), breached their fiduciary duty and defrauded
Langhorne and Ginor, Langhorne's limited partner, by selling two single tenant
retail properties to GHLP for a low price, without adequately taking into
account the tax consequences of the sale, at a time when Ginor was seeking to
oust Washington as Langhorne's general partner. Those claims are also asserted
against the Glimcher Entities alleging that they had knowledge of the facts and
failed to disclose or take other action. The complaint seeks compensatory and
punitive damages against all the defendants in an unspecified amount and
rescission of the sale of the two single tenant retail properties.
The Glimcher Entities are seeking indemnification and contributions
against all codefendants, and with respect to the rescission claims,
indemnification pursuant to the title policies obtained by the Glimcher Entities
in connection with the acquisition of the retail properties. At this stage of
the proceedings, the Glimcher Entities maintain that the claims against them are
not meritorious and intend to vigorously defend themselves in the lawsuit. In
the event that any recovery against them exceeds the $2.0 million limit on the
Concord indemnification, the Glimcher Entities will seek contributions from
other defendants.
In May 1996, ACPA Fund II, Ltd. and various individual investors of
certain limited partnerships (collectively, "Plaintiffs") commenced a lawsuit,
ACPA Fund II, Ltd., et al. v. Dennis Landsberg, et al. ("Lawsuit"), against
various defendants, including Glimcher Entities, that is pending in the United
States District Court for the Southern District of Texas, Houston Division.
Joint consent has been obtained to transfer venue of the Lawsuit to the United
States District Court for the Southern District of New York.
The complaint alleges that the partnerships' general partner,
Washington General Corp., and its corporate parent, Concord Assets Group, Inc.,
breached their fiduciary duty and defrauded the Plaintiffs by selling retail
properties to GHLP for low prices, without adequately taking into account the
tax consequences of the sales. Those claims are also asserted against the
Glimcher Entities alleging that they had knowledge of the facts and failed to
disclose or take other action. The complaint seeks compensatory and punitive
damages against all the defendants in an unspecified amount and rescission of
the sale of the two single tenant retail properties.
At this stage of the proceedings, the Glimcher Entities maintain that
the claims against them are not meritorious and intend to vigorously defend
themselves in the Lawsuit. The Glimcher Entities will seek indemnification and
contributions against all co-defendants, and with respect to the rescission
claims, indemnification pursuant to the title policies obtained by the Glimcher
Entities in connection with the acquisition of the retail properties.
12
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Environmental Matters
The Company has been advised that the United States Environmental
Protection Agency (the "EPA") is likely to include its Stewart Plaza in
Mansfield, Ohio as part of a much larger National Priority List site, designated
by the EPA for remedial activities under the Federal hazardous site cleanup
program. This action is the result of the discovery of perchloroethylene (a
solvent used predominantly in cleaning) in drinking water wells located near the
property. In accordance with Federal law, the Company may, to some extent, be
liable for costs associated with remedial activities which might be performed in
connection with the site. However, no contamination has been discovered on the
property itself and the company believes its liability may be limited by the
fact that the property does not appear to be a source of the contamination on
the site.
11. RECLASSIFICATIONS
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 1996 presentation.
Certain land costs related to new developments have been reclassified
to developments in progress for both the 1996 and 1995 presentations. This
reclassification will reflect total project cost until a project's grand opening
date, at which time the project cost will be transferred to land and buildings,
improvements and equipment.
12. SUBSEQUENT EVENT
On October 17, 1996, the Company acquired from RPI 22 Wal-Mart anchored
community shopping centers located in nine central and eastern states,
containing approximately 4.4 million square feet of gross leasable area for a
purchase price of $197,000.
13
<PAGE> 14
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the unaudited
consolidated financial statements of Glimcher Realty Trust (the "Company" or
"GRT") including the respective notes thereto, all of which are included in this
Form 10-Q.
This Form 10-Q, together with other statements and information
publicly disseminated by the Company, contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements are based on assumptions and expectations which may not be
realized and are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, financial and otherwise, may
differ from the results discussed in the forward-looking statements. Risks and
other factors that might cause differences, some of which could be material,
include, but are not limited to, the effect of economic and market conditions;
failure to consummate financing and joint venture arrangements; development
risks, including lack of satisfactory financing, construction and lease-up
delays and cost overruns; the level and volatility of interest rates; financial
stability of tenants within the retail industry; the rate of revenue increases
versus expense increases, as well as other risks listed from time to time in the
Company's reports filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
REVENUES
Total revenues increased 6.0%, or $1.6 million, for the three months
ended September 30, 1996. The total revenue increase is $1.9 million after
adjusting for the net effect of 1995/1996 non-comparable items totaling
$330,000, of which $440,000 relates to a net 1995 increase in minimum rents,
$290,000 relates to a 1996 increase in tenant recoveries and $180,000 relates to
a 1995 increase in other income. The $1.9 million increase was primarily the
result of increased revenues of $260,000 at the malls and $1.5 million at the
community shopping centers.
Minimum rents
Minimum rents increased 4.3%, or $860,000, for the three months ended
September 30, 1996. The minimum rent increase was $1.3 million after the effect
of non-comparable items totaling $440,000. Same center minimum rents increased
2.4%. The summary below identifies the 4.3% increase by its various components.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS) PERCENT
-------------------------------------------------- -------
COMMUNITY SHOPPING CENTERS/
MALLS SINGLE TENANT RETAIL PROPERTIES TOTAL TOTAL
----- -------------------------------- ----- -----
<S> <C> <C> <C> <C>
Same center $ 0.3 $ 0.2 $ 0.5 2.4%
Acquisitions/Developments 0.0 0.8 0.8 4.1
Non-comparable items (0.3) (0.1) (0.4) (2.2)
------ ------ ----- ----
After non-comparable items $ 0.0 $ 0 .9 $ 0.9 4.3%
====== ====== ===== ====
</TABLE>
14
<PAGE> 15
Tenant recoveries
Tenant recoveries increased 17.5%, or $840,000, for the three months
ended September 30, 1996. The tenant recoveries increase was $550,000 after
adjusting for the effect of 1996 non-comparable items totaling $290,000. Same
center properties accounted for $710,000 of the $840,000 increase and related
primarily to increased real estate tax assessments and the effect of the 1996
non-comparable item. Acquisitions and openings of new developments during 1995
and 1996 accounted for $130,000 of the $840,000 increase. The recovery ratio for
the three months ended September 30, 1996 was 94.7% (after adjusting for the
effect of the $290,000 non-comparable item) compared to 97.1% for the
corresponding period of 1995.
OPERATING EXPENSES
Total operating expenses increased 24.8%, or $1.7 million, for the
three months ended September 30, 1996. Recoverable expenses increased $710,000,
other operating expenses increased $90,000 and general and administrative
expenses increased $920,000.
Recoverable expenses
The $710,000 increase in recoverable expenses was the result of a
$510,000 increase in real estate taxes resulting from reassessments and a
$200,000 increase in recoverable operating expenses. Of the $710,000 increase,
$120,000 relates to acquisitions and developments opened in 1995 and 1996.
Provision for credit losses
The provision for credit losses remained constant at $450,000 and
represented 1.6% and 1.7% of total revenues for the three months ended September
30, 1996, and 1995, respectively. The Company's allowance for credit risk as a
percent of tenant accounts receivable was 9.4%, or $2.0 million, at September
30, 1996, compared to 14.2%, or $2.2 million, at September 30, 1995. The
$200,000 decrease in the allowance for credit risk was due primarily to the
write-off of $510,000 of tenant accounts receivable, the majority of which were
previously reserved.
Other operating expenses
The $90,000 increase in other operating expenses was primarily the
result of increased net marketing costs and includes the effect of a 1995
non-comparable item totaling $40,000.
General and administrative
General and administrative expenses increased $920,000 to 8.5% of total
revenues for the three months ended September 30, 1996. This increase includes
the effect of a $40,000 non-comparable item relating primarily to a 1995
litigation settlement. The general and administrative expense increase is due
primarily to wage and benefit costs relating to staff expansions since September
30, 1995 to support the recent Retail Property Investors, Inc. (RPI)
acquisition, current and future developments, an expanded leasing function and
increased support staff.
GAIN ON SALE OF PROPERTIES
During the three months ended September 30, 1996, the Company completed
the sale of one parcel of land in Columbus, Ohio, which resulted in a gain of
$380,000. There were no sales of land during the corresponding period of 1995.
INTEREST EXPENSE/CAPITALIZED INTEREST
For the three months ended September 30, 1996 interest expense
increased 14.6%, or $810,000. The increase was due to increased debt levels
partially off-set by a lower effective interest rate. The effective interest
15
<PAGE> 16
rate and the weighted average debt balance for the three months ended September
30, 1996 were 7.42% and $414.0 million, respectively, compared to 7.57% and
$298.8 million, respectively, for the corresponding period of 1995.
Capitalized interest increased $1.2 million as a result of the
Company's expanded development activity.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
REVENUES
Total revenues increased 6.8%, or $5.2 million, for the nine months
ended September 30, 1996. The total revenue increase is $6.1 million after
adjusting for the net effect of 1995/1996 non-comparable items totaling
$840,000, of which $600,000 relates to a net 1995 increase in minimum rents,
$60,000 relates to a net 1995 increase in tenant recoveries and $180,000 relates
to a 1995 increase in other. The $6.1 million increase was primarily the result
of increased revenues of $1.3 million at the malls and $4.6 million at the
community shopping centers.
Minimum rents
Minimum rents increased 5.6% or $3.3 million for the nine months ended
September 30, 1996. The minimum rent increase was $3.9 million after the net
effect of 1995/1996 non-comparable items totaling $600,000. Same center minimum
rents increased 1.7%. The summary below identifies the 5.6% increase by its
various components.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS) PERCENT
------------------------------------------------ -------
COMMUNITY SHOPPING CENTERS/
MALLS SINGLE TENANT RETAIL PROPERTIES TOTAL TOTAL
----- ------------------------------- ----- -----
<S> <C> <C> <C> <C>
Same center $0.4 $0.6 $1.0 1.7%
Acquisitions/Developments 2.9 2.9 4.9
Non-comparable items (0.1) (0.5) (0.6) (1.0)
---- ---- ---- ----
After non-comparable items $0.3 $3.0 $3.3 5.6%
==== ==== ==== ====
</TABLE>
Tenant recoveries
Tenant recoveries increased 13.9%, or $2.0 million, for the nine months
ended September 30, 1996. The tenant recoveries increase was $2.1 million after
adjusting for the net effect of 1995/1996 non-comparable items totaling $60,000.
Same center properties accounted for $1.5 million of the $2.0 million increase
and related primarily to increases in real estate tax assessments and increased
snow removal costs due to the harsh winter. Acquisitions and openings of new
developments during 1995 and 1996 accounted for $460,000 of the $2.0 million
increase. The recovery ratio for the nine months ended September 30, 1996 was
92.6% (after adjusting for the effect of the $290,000 non-comparable item),
compared to 93.0% for the corresponding period of 1995 (after adjusting for the
effect of the $350,000 non-comparable item).
OPERATING EXPENSES
Total operating expenses increased 20.7%, or $4.4 million, for the nine
months ended September 30, 1996. Recoverable expenses accounted for $2.3 million
of the increase, the provision for credit losses increased $250,000, other
operating expenses increased $180,000 and general and administrative expenses
increased $1.7 million.
Recoverable expenses
The $2.3 million increase in recoverable expenses was the result of a
$1.1 increase in real estate taxes resulting from increased assessments and a
$1.2 million increase in recoverable operating expenses of which $510,000 was an
increase in snow removal cost. Of the $2.3 million increase, $440,000 relates to
acquisitions and developments opened in 1995 and 1996.
16
<PAGE> 17
Provision for credit losses
The provision for credit losses increased $250,000 and represented
1.8% and 1.6% of total revenues for the nine months ended September 30, 1996,
and 1995, respectively. The Company's allowance for credit risk as a percent
of tenant accounts receivable was 9.4%, or $2.0 million, at September 30, 1996,
compared to 14.2%, or $2.2 million, at September 30, 1995. The $200,000
decrease in the allowance for credit risk was due primarily to the write-off
of $510,000 of tenant accounts receivable, the majority of which were
previously reserved.
Other operating expenses
The $180,000 increase in other operating expenses was primarily the
result of increases in net marketing costs and the effect of 1995/1996
non-comparable items primarily relating to ground leases totaling $110,000.
General and administrative
General and administrative expenses increased $1.7 million to 8.0% of
total revenues for the nine months ended September 30, 1996. This increase
includes the effect of a $340,000 non-comparable item relating primarily to
rents for the corporate office, litigation settlement costs and state and local
income taxes. The general and administrative expense increase is due primarily
to wage and benefit costs for staff expansions since September 30, 1995 to
support the recent RPI acquisition, current and future developments, an expanded
leasing function and increased support staff.
GAIN ON SALE OF PROPERTIES
During the nine months ended September 30, 1996, the Company sold one
parcel of land in Lancaster, Ohio, one parcel of land in Allentown, Pennsylvania
and one parcel of land in Columbus, Ohio, which combined resulted in a gain of
$1.5 million. There were no sales of land during the corresponding period of
1995.
INTEREST EXPENSE/CAPITALIZED INTEREST
For the nine months ended September 30, 1996 interest expense decreased
3.2%, or $630,000. The decrease was due to a lower effective interest rate,
partially offset by increased debt levels. The effective interest rate and the
weighted average debt balance for the nine months ended September 30, 1996 were
7.44% and $377.4 million, respectively, compared to 7.74% and $340.3 million,
respectively, for the corresponding period of 1995.
Capitalized interest increased $1.8 million as a result of the
Company's expanded development activity.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company has several active development, renovation and expansion
projects and has plans for future development projects primarily relating to the
announced joint venture commitment between the Company and Nomura Asset Capital
Corporation ("Nomura") discussed below. Management anticipates that the funds
available under its credit facility and the Company's plan to utilize
construction financing, long-term mortgage debt and the joint venture structure
to raise equity and financing for acquisitions and developments will provide
sufficient capital resources to carry out the Company's business strategy
relative to the acquisitions, renovations, expansions and developments discussed
herein.
At September 30, 1996 the Company's debt to total market capitalization
was 46.8% which is consistent with the current policy of the Company to maintain
this ratio between 40.0% and 60.0%. The Company is reviewing this policy and
other measurements of leverage including debt service coverage and debt to asset
values.
17
<PAGE> 18
Net cash provided by operating activities for the nine months ended
September 30, 1996 increased $6.0 million, or 22.5%. Net income accounted for
$2.1 million of this increase with the remaining $3.9 million increase resulting
from non-cash net operating income and operating asset and liability changes.
Net cash used in investment activities for the nine months ended
September 30, 1996 increased $60.1 million. The increase was primarily the
result of real estate development and acquisition activity and the cash escrow
for the RPI transaction discussed below.
Net cash provided by financing activities for the nine months ended
September 30, 1996 increased $56.8 million and was primarily used to fund the
increase in real estate investments.
Tenant accounts receivable, net has increased $4.1 million since
December 31, 1995. The primary reasons for the increase were a $3.1 million
increase in 1996 tenant recoveries resulting primarily from new properties,
increased real estate tax assessments and snow removal costs and a $1.0 million
increase relating to straight-line rents.
Retail Property Investors, Inc. Acquisition
On October 17, 1996, the Company acquired from RPI 22 Wal-Mart
anchored community shopping centers (the "Properties") located in nine central
and eastern states and containing approximately 4.4 million square feet of gross
leaseable area (GLA). The purchase price of the Properties was $197.0 million,
which was the estimated value of the Properties and was paid (a) by the
assumption by the Operating Partnership of debt of approximately $117.1 million,
secured by first mortgage liens on 16 of the Properties, having an annual debt
service of approximately $10.6 million and a weighted average effective interest
rate of approximately 8.4%, with debt maturities of 6.0% in 1997, 30.0% in 1999,
35.0% in 2000 and 29.0% between 2001 and 2010, and (b) approximately $79.9
million in cash. The cash portion of the purchase price was obtained by the
Company by borrowing (a) approximately $34.4 million from two banks pursuant to
a loan which is secured by first mortgage liens on six of the Properties and
matures on October 17, 1997, unless the Operating Partnership elects to exercise
its option to renew such financing for an additional year, and pursuant to which
interest is payable at the rate of LIBOR plus 175 basis points, and (b)
approximately $45.5 million under the Operating Partnershp's credit facility,
which currently bears interest at a rate of LIBOR plus 175 basis points per
annum and of which $28.1 million is included in the credit facility outstanding
balance at September 30, 1996. The 22 properties are projected to increase net
operating income by approximately $20.0 million in 1997. The Company will
receive an incentive management fee with respect to the operation of the
Properties covering the period from May 14, 1996, through October 16, 1996. The
incentive management fee calculation which is based on various components tied
to revenues, expenses, tenant accounts receivable collections, debt service
payments, and capital/tenant improvement payments is being finalized and will be
reflected in the fourth quarter 1996.
Nomura Asset Capital Corporation Financing and Joint Venture
On September 18, 1996, the Company announced the receipt of a
commitment from Nomura to provide equity to the Company and permanent debt
financing to joint ventures. These potential sources of capital would be used to
fund three projects scheduled to be completed between 1997 and 1999. The
ownership of the projects to be developed under the Nomura commitment will be
joint ventures with the principal parties being the Company, Nomura and the
various land owners. Prior to receipt of the permanent debt financing from
Nomura, the joint ventures will obtain construction loans and municipal bond
financing to fund the development of the projects. The closing of each
transaction contemplated under the Nomura commitment with respect to a
particular project is subject to due diligence which is in process.
In addition to receiving equity for developments and a permanent
financing commitment for development projects, the Company would receive income
for development and leasing fees through its ownership interest in a
non-qualified REIT subsidiary, to be formed and management fees for services
provided to the properties by the Operating Partnership.
18
<PAGE> 19
Under the commitment, Nomura would be issued up to $135.0 million of
convertible preferred shares of stock (the "Preferred Equity") in the Company.
The Preferred Equity would earn dividends based upon one of the following two
dividend options available to the Company: (a) a floating rate at the 90 day
LIBOR, reset quarterly, plus 285 basis points; or, (b) a rate fixed at the time
of funding for four years at a rate equal to the four year U.S. Treasury
Security plus 285 basis points, then converted to the terms under (a) above. The
payment obligation of the dividends and the redemption of the Preferred Equity
would be secured by a pledge by the Company of its corresponding Preferred
Equity interests in Glimcher Properties Limited Partnership (the "Operating
Partnership"). Beginning in the 6th year the Preferred Equity is convertible at
the option of Nomura to common shares of beneficial interest of the Company at
varying discount rates from the then current market price, however, the Company
may redeem the Preferred Equity at any time, prior to conversion, at its option
without any penalty or premiums.
The cash proceeds received by the Company from the Preferred Equity
would be invested by the Company through the Operating Partnership in three
proposed joint ventures as preferred equity (the "Joint Venture Equity"). The
Joint Venture Equity would be entitled to receive a preferred yield at least
equal to the dividend yield on the Preferred Equity. The Joint Venture Equity
yield is cumulative and payable from the cash flow of each joint venture. The
Preferred Equity dividend is payable quarterly by the Company. The issuance of
Preferred Equity by the Company to Nomura and the related Joint Venture Equity
investment by the Company in each joint venture is subject to due diligence.
Currently due diligence is being done on The Great Mall of the Great Plains as
discussed below; due diligence is also being done for the proposed development
projects in Elizabeth, New Jersey and Carson, California.
Under the Nomura commitment, Nomura, the Operating Partnership and the
land owners, would hold, directly or indirectly, an interest in both the New
Jersey and California joint ventures of 40.0%, 30.0% and 30.0%, respectively,
and in the Olathe joint venture of 45.0%, 45.0% and 10.0%, respectively. These
interests would be subordinate to the Joint Venture Equity interest held by the
Operating Partnership.
Additionally, under the Nomura commitment, and subject to Nomura's due
diligence, Nomura would provide each of the joint ventures with permanent
financing (the "Permanent Financing"). The principal amount of the Permanent
Financing for each of the joint ventures would be based on the net operating
income of the project, loan value and debt service coverage ratios and a debt
service coverage constant. The Permanent Financing would mature 15 years
following the closing of each of the loans and would amortize based on a 25 year
amortization schedule containing level principal and interest payments.
Development, Expansion, and Renovation
THE GREAT MALL OF THE GREAT PLAINS This development is a single level
enclosed super regional, value and entertainment oriented mall totaling
approximately 1.0 million square feet of gross buildable area located in Olathe,
Kansas (Kansas City, Kansas metropolitan area). The property will contain
approximately 850,000 square feet of gross leasable area (GLA), consisting of 10
anchors, a 16 screen cinema, approximately 150 small shop tenants and
approximately 20 food court and kiosk units. Current projections have the
opening scheduled for the third quarter of 1997. The estimated cost of the
development is $107.0 million, of which $74.1 million is financed from a
construction loan. The construction loan, which was finalized July 2, 1996,
bears interest at LIBOR plus 225 basis points and matures July 1, 1999. The
Operating Partnership provided the lender with a completion guarantee and an
unconditional guarantee of payment of the greater of 25.0% of the outstanding
obligation or the indebtedness minus capitalized net operating income calculated
in accordance with the agreement.
The Olathe Mall L.L.C. operating agreement requires the Operating
Partnership to make capital contributions to the joint venture totaling $21.8
million for its 65.0% interest. The operating agreement was amended September
19, 1996 to provide for the Operating Partnership to increase its interest from
65.0% to 90.0% if payments of $10.7 million plus interest at 10.0% from January
12, 1996 are made to the unaffiliated members. The Operating Partnership's
interest of 90.0% would be reduced to 81.8% at the time the Nomura commitment
for Olathe is funded. The 81.8% Olathe interest would equate to a 45.0 interest
in the development level joint venture.
19
<PAGE> 20
MEADOWVIEW SQUARE This development is a community shopping center
containing 151,000 square feet of GLA located in Kent/Ravenna, Ohio. The center
will be anchored by a 126,000 square foot Wal-Mart with the balance of the space
in small shops. Wal-Mart is scheduled to open in the first quarter of 1997 with
the small shops to follow. The estimated cost of the development is $11.1
million, of which $9.8 million will be financed from a construction loan which
was finalized October 21, 1996, bears interest at LIBOR plus 200 basis points
and matures November 1, 1999. At September 30, 1996, expended dollars total $5.4
million.
GEORGESVILLE SQUARE - PHASE I This development is a community shopping
center containing 232,000 square feet of GLA located in Columbus, Ohio. The
center will be anchored by a 132,000 square foot Lowe's and a 63,000 square foot
Kroger, with the balance of the GLA in small shops. Lowe's opened in October
1996, with Kroger and the small shops expected to open in the second quarter of
1997. The estimated cost of the development is $17.4 million, of which $16.9
million will be financed from a construction loan which was finalized September
20, 1996, bears interest at LIBOR plus 200 basis points and matures October 1,
1999. At September 30, 1996, expended dollars total $10.3 million.
GRAND CENTRAL MALL The renovation and expansion plan for this mall
located in Parkersburg, West Virginia will bring its GLA to 887,000 square feet.
The plan renovates a portion of the existing mall which includes the addition of
a food court and expands the mall with a 37,000 square foot 12 screen cinema and
an 83,000 square foot Proffitt's. The estimated cost of the renovation and
expansion is $11.2 million. At September 30, 1996 expended dollars total $7.0
million.
INDIAN MOUND MALL The expansion plans for this mall located in
Newark/Heath, Ohio, will add approximately 120,000 square feet of GLA to the
mall and bring its GLA to 539,000 square feet. The expansion includes the
addition of a 92,000 square foot Sears, expanding the current cinema from 20,000
square feet to 42,000 square feet and adding 6,000 square feet of small shops.
The estimated cost of the expansion is $4.4 million of which $320,000 has been
expended as of September 30, 1996. The opening of the new retail is projected
for the fall of 1997.
Capital Invested in Real Estate
Investment in real estate consists of: (a) eight malls totaling 4.5
million square feet of GLA; (b) 64 community shopping centers totaling 7.5
million square feet of GLA; (c) 17 single tenant retail properties totaling 1.4
million square feet of GLA; and (d) developments in progress which relate to the
Company's renovation, expansion and development activities totaling 1.2 million
square feet of GLA.
The investment in real estate has increased $81.9 million since
December 31, 1995. The primary components of this increase are summarized below
(in thousands):
<TABLE>
<CAPTION>
NAME OF PROPERTY/DESCRIPTION COST PROJECT TYPE
- ------- -------------------- ---- ------------
<S> <C> <C>
Delaware Community Center................................. $12,500 Acquisition
The Great Mall of the Great Plains........................ 49,428 Development
Georgesville Square....................................... 10,590 Development
Meadowview Square......................................... 3,004 Development
Grand Central Mall........................................ 1,738 Renovation/Expansion
Morgantown Commons........................................ 802 Renovation/Expansion
Capital expenditures...................................... 2,936 Cap-X (a)
Retail Property Investors, Inc. .......................... 2,056 Acquisition
Sale of properties........................................ (2,757) Property Sales
Various properties - other................................ 1,603
-------
$81,900
=======
<FN>
(a) Capital expenditures include tenant allowances on second generation space,
routine, recurring maintenance capital expenditures that can not be passed
through to the tenants and leasing commissions on second generation space.
</TABLE>
20
<PAGE> 21
PORTFOLIO DATA
Tenants reporting sales data for the twelve month period ended
September 30, 1996 and September 30, 1995 represented 7.5 million square feet of
GLA, or 75.1% of the 1995/1996 "same store" population. Below is a summary of
the "same store" data:
<TABLE>
<CAPTION>
COMMUNITY SINGLE TENANT
ENCLOSED MALLS SHOPPING CENTERS RETAIL PROPERTIES
-------------- ---------------- -----------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF % INCREASE SALES PSF % DECREASED
------------- --------- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Anchors $161.75 1.1% $204.70 2.3% $164.37 (0.7)%
Stores 251.94 1.8% 165.88 4.5% -
------- ------- -------
Total $193.95 $199.19 $164.37
======= ======= =======
</TABLE>
The total portfolio occupancy rates have remained relatively constant
at 94.1% at September 30, 1996 and 95.6% at September 30, 1995. The Company has
focused significant efforts on maintaining its occupancy levels during the
difficult retail environment experienced over the past several years. The
occupancy levels by property type are summarized below:
<TABLE>
<CAPTION>
PROPERTY TYPE OCCUPANCY
------------- ---------
9/30/96 6/30/96 3/31/96 12/31/95 9/30/95 6/30/95
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Enclosed Malls:
Anchors 95.7% 95.8% 95.8% 100.0% 100.0% 100.0%
Stores 83.1% 84.2% 84.2% 85.0% 82.5% 81.2%
------ ------ ------ ------ ------ ------
Total 90.6% 91.2% 91.2% 94.0% 93.1% 92.6%
------ ------ ------ ------ ------ ------
Community Shopping Centers:
Anchors 97.8% 97.0% 97.2% 98.2% 98.6% 98.5%
Stores 87.1% 87.9% 87.9% 88.2% 89.6% 88.8%
------ ------ ------ ------ ------ ------
Total 95.1% 94.7% 94.9% 95.7% 96.3% 96.1%
------ ------ ------ ------ ------ ------
Single Tenant Retail Properties: 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ ------ ------
Total Portfolio 94.1% 94.1% 94.2% 95.6% 95.6% 95.3%
====== ====== ====== ====== ====== ======
</TABLE>
The 4.3% mall anchor tenant vacancy totals 114,000 square feet of GLA
and represents one space at Morgantown Mall which is being renovated to include
a Proffitt's store with occupancy projected for the end of 1996, and one space
at Southside Mall. The 2.2% community shopping center anchor tenant vacancy
represents three spaces totaling 129,000 square feet of GLA. Mall store
vacancies total 305,000 square feet of GLA and community shopping centers store
vacancies total 238,000 square feet of GLA.
21
<PAGE> 22
In the first nine months of 1996 new and rollover leases totaled
423,000 square feet. Rollover leases represent expiring leases where the tenant
renewed. All other leases are categorized as new. The average annualized base
rents for new and rollover leases show a positive trend when compared to the
portfolio's average annualized base rents. The following chart illustrates this
trend for the nine months.
<TABLE>
<CAPTION>
SQUARE FEET ANALYSIS AVERAGE ANNUALIZED BASE RENT
-------------------- ----------------------------
NEW ROLLOVER NEW ROLLOVER PORTFOLIO
PROPERTY TYPE LEASES LEASES TOTAL LEASES LEASES TOTAL AVERAGE
------------- ------ ------ ----- ------ ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Enclosed Malls:
Anchors - - - $ - $ - $ - $ 4.13
Stores 85,966 42,481 128,447 22.54 22.79 22.62 20.61
Outparcels 6,790 - 6,790 12.20 - 12.20 7.29
------- ------ ------- ------- ------- ------- -------
92,756 42,481 135,237 21.78 22.79 22.10 10.05
Community
Shopping Centers:
Anchors 171,291 - 171,291 7.35 - 7.35 4.36
Stores 64,500 51,850 116,350 8.40 8.54 8.46 7.97
Outparcels - - - - - - 8.86
------- ------ ------- ------- ------- ------- -------
235,791 51,850 287,641 7.63 8.54 7.80 5.19
Single Tenant
Retail Properties: - - - - - - 4.27
------- ------ ------- ------- ------- ------- -------
Total 328,547 94,331 422,878 $ 11.63 $ 14.96 $ 12.37 $ 6.59
======= ====== ======= ======= ======= ======= =======
</TABLE>
FUNDS FROM OPERATIONS
Management considers funds from operations (the "FFO") to be a
supplemental measure of the Company's operating performance. FFO, as modified in
January 1996 by NAREIT is defined as net income (computed in accordance with
Generally Accepted Accounting Principles (GAAP), excluding gains or losses from
debt restructuring, plus real estate depreciation and amortization and minority
interest in partnerships. FFO does not represent cash generated from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. FFO should not be considered as an alternative to
net income as the primary indicator of the Company's operating performance or as
an alternative to cash flow as a measure of liquidity.
The following table illustrates the calculation of FFO for the three and nine
months ended September 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 NAREIT FFO DEFINITION
--------------------------
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income..................................... $ 6,679 $ 7,481 $19,893 $17,798
Add back:
Real estate depreciation and amortization. 4,890 4,511 14,473 13,312
Litigation settlement..................... 36 279
Gain on sale of cap and collar............ (178) (178)
Minority interest in partnership.......... 829 899 2,406 2,359
------- ------- ------- -------
Funds from operations.......................... $12,398 $12,749 $36,772 $33,570
======= ======= ======= =======
Weighted average shares/units outstanding...... 24,493 24,470 24,492 22,196
======= ======= ======= =======
</TABLE>
22
<PAGE> 23
Under the new NAREIT definition of FFO, non-cash charges for non-real
estate depreciation, loan amortization fees and interest rate buydown
amortization are deducted in computing FFO. For the three months ended September
30, 1996 and 1995 these non-cash charges total $760,000 and $839,000,
respectively. For the nine months ended September 30, 1996 and 1995, the
non-cash charges total $2.3 million and $2.7 million, respectively.
FFO decreased 2.7%, or $350,000, for the three months ended September
30, 1996. The decrease was the result of increased interest expense of $800,000,
operating expense increases net of revenue increases of $150,000, the gain on
the sale of one outparcel of $380,000, with the balance representing primarily
litigation cost and net change in the non-cash charges noted above.
FFO increased 9.5%, or $3.2 million, for the nine months ended
September 30, 1996. The increase was the result of interest expense savings of
$630,000, improved revenues net of operating expense increases of $810,000, the
gain on the sales of three outparcels of $1.5 million with the balance
representing primarily litigation settlement costs and the net change in the
non-cash charges noted above.
INFLATION
Inflation has remained relatively low during the past three years and
has had a minimal impact on the Company's properties. Nonetheless, substantially
all of the tenants' leases contain provisions designed to lessen the impact of
inflation. Such provisions include clauses enabling the Company to receive
percentage rentals based on tenants' gross sales, which generally increase as
prices rise, and/or escalation clauses, which generally increase rental rates
during the terms of the leases. In addition, many of the leases are for terms of
less than 10 years, which may enable the Company to replace existing leases with
new leases at higher base and/or percentage rentals if rents of the existing
leases are below the then-existing market rate. Substantially all of the leases,
other than those for anchors, require the tenants to pay a proportionate share
of operating expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in costs and
operating expenses resulting from inflation.
However, inflation may have a negative impact on some of the Company's
other operating items. Interest expense and general and administrative expenses
may be adversely affected by inflation as these specified costs could increase
at a rate higher than rents. Also, for tenant leases with stated rent increases,
inflation may have a negative effect as the stated rent increases in these
leases could be lower than the increase in inflation at any given time.
OTHER
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season, when tenant occupancy and retail sales
are typically at their highest levels. In addition, shopping malls achieve most
of their temporary tenant rents during the holiday season. As a result of the
above, earnings are generally highest in the fourth quarter of each year.
The retail industry has experienced some difficulty, which is reflected
in sales trends and in the bankruptcies and continued restructuring of several
prominent retail organizations. Continuation of these trends could impact future
earnings performance.
23
<PAGE> 24
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits - None
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
24
<PAGE> 25
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.
GLIMCHER REALTY TRUST
November 7, 1996 /s/ David J. Glimcher
- ---------------- ----------------------
(Date) David J. Glimcher
President and Trustee (Principal Executive
Officer)
November 7, 1996 /s/ Terry A. Schreiner
- ---------------- ----------------------
(Date) Terry A. Schreiner
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
25
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,996
<SECURITIES> 0
<RECEIVABLES> 19,617
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 778,798
<DEPRECIATION> 80,730
<TOTAL-ASSETS> 766,610
<CURRENT-LIABILITIES> 0
<BONDS> 313,543
<COMMON> 219
0
0
<OTHER-SE> 316,672
<TOTAL-LIABILITY-AND-EQUITY> 766,610
<SALES> 0
<TOTAL-REVENUES> 81,977
<CGS> 0
<TOTAL-COSTS> 25,877
<OTHER-EXPENSES> 16,157
<LOSS-PROVISION> 1,461
<INTEREST-EXPENSE> 18,895
<INCOME-PRETAX> 19,893
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,893
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
