<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 13, 1996
(October 17, 1996)
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
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<PAGE> 2
The undersigned registrant hereby amends Item 7 - Financial Statements of
Business Acquired and Pro Forma Financial Information of its Current Report on
Form 8-K, dated November 7, 1996.
ITEM 7. (a) and (b) Financial Statements of Business Acquired and Pro Forma
Financial Information
(i) Included in this amendment are the following
financial statements of Retail Property Investors,
Inc. (RPI) (and the Independent Accountants' Report
thereon), which were not available at the time of the
filing of the Report being amended hereby:
- Balance Sheet as of August 31, 1996 and 1995
- Statements of Operations, Shareholders' Equity and
Cash Flows for each of the three years in the
period ended August 31, 1996
- Schedule III - Real Estate and Accumulated
Depreciation
(ii) Pro Forma Financial Information
Included in this amendment is the Pro Forma financial
information required to be filed by the Registrant in
connection with the acquisition relative to the 22
community shopping centers owned by RPI, which was
not available at the time of the filing of the report
being amended hereby.
(c) Exhibits
Included herewith is Exhibit No. 23, the consent of
independent accountants.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Retail Property Investors, Inc.
In our opinion, the financial statements listed in the index appearing
under Item 7 (a) on page 2 present fairly, in all material respects, the
financial position of Retail Property Investors, Inc. (the "Company") at August
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended August 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed further in Note 8 to the financial statements, the Company
completed the sale of all of its operating investment properties on October 17,
1996 and adopted a plan of liquidation.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 22, 1996
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RETAIL PROPERTY INVESTORS, INC.
BALANCE SHEETS
August 31, 1996 and 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
ASSETS
------
1996 1995
---- ----
<S> <C> <C>
Operating investment properties
held for sale, net (Note 4) $ 185,541 $ 192,311
Cash and cash equivalents 9,208 5,943
Escrowed cash 1,379 1,067
Accounts receivable, net of
allowance for doubtful accounts of
$162 ($80 in 1995) 640 170
Other assets 1 77
Prepaid expenses 336 308
Capital improvement reserve - 1,201
Deferred expenses, net of accumulated
amortization of $856 ($446 in 1995) 1,059 1,467
---------- ----------
$ 198,164 $ 202,544
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable - affiliates $ 4 $ 4
Accounts payable and accrued expenses 1,909 1,316
Mortgage interest payable 371 358
Note payable - affiliate - 1,168
Security deposits and other liabilities 513 768
Mortgage notes payable, net 155,483 156,508
---------- ---------
Total liabilities 158,280 160,122
Shareholders' equity (Note 2.I):
Common stock, $.01 par value, 50,000,000 shares authorized,
5,010,050 shares issued and outstanding 50 50
Additional paid-in capital, net of offering costs 87,181 87,181
Accumulated deficit (47,347) (44,809)
---------- ----------
Total shareholders' equity 39,884 42,422
---------- ----------
$ 198,164 $ 202,544
========== ==========
</TABLE>
See accompanying notes to financial statements.
4
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RETAIL PROPERTY INVESTORS, INC.
STATEMENTS OF OPERATIONS
For the years ended August 31, 1996, 1995 and 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income and expense reimbursements $ 25,010 $ 24,682 $ 24,442
Interest income 503 327 148
--------- -------- --------
25,513 25,009 24,590
Expenses:
Interest expense and related fees 14,808 15,283 15,459
Depreciation and amortization 6,411 6,495 6,334
Property expenses 2,515 2,348 2,207
Real estate taxes 1,453 1,329 1,370
Portfolio sale expenses 1,834 - -
Loss on impairment of assets held for sale 1,030 3,850 -
General and administrative 947 1,702 968
Bad debt expense 169 21 241
Cash management fees 23 8 8
Financial and investor servicing expenses - 111 260
REIT management fees - 125 237
Non-deferrable offering expenses - - 1,561
Investment analysis expense - 101 2,015
--------- -------- --------
29,190 31,373 30,660
--------- -------- --------
Loss before extraordinary gain (3,677) (6,364) (6,070)
Extraordinary gain from forgiveness of debt 1,139 - -
--------- -------- --------
Net loss $ (2,538) $ (6,364) $ (6,070)
========= ======== ========
Per share amounts (Note 2.I):
Loss before extraordinary gain $ (0.74) $ (1.27) $ (1.21)
Extraordinary gain from forgiveness of debt 0.23 - -
--------- -------- --------
Net loss $ (0.51) $ (1.27) $ (1.21)
========= ======== ========
Cash dividends declared $ - $ - $ 0.80
========= ======== ========
</TABLE>
See accompanying notes to financial statements.
5
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RETAIL PROPERTY INVESTORS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended August 31, 1996, 1995 and 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Common Stock
$.01 Par Value Additional
--------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Shareholders' equity
at August 31, 1993 5,010,050 $ 50 $ 87,181 $ (28,367) $ 58,864
Cash dividends declared -- -- -- (4,008) (4,008)
Net loss -- -- -- (6,070) (6,070)
--------- --------- --------- --------- ---------
Shareholders' equity
at August 31, 1994 5,010,050 50 87,181 (38,445) 48,786
Net loss -- -- -- (6,364) (6,364)
--------- --------- --------- --------- ---------
Shareholders' equity
at August 31, 1995 5,010,050 50 87,181 (44,809) 42,422
Net loss -- -- -- (2,538) (2,538)
--------- --------- --------- --------- ---------
Shareholders' equity
at August 31, 1996 5,010,050 $ 50 $ 87,181 $ (47,347) $ 39,884
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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RETAIL PROPERTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
For the years ended August 31, 1996, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,538) $ (6,364) $ (6,070)
Adjustments to reconcile net
loss to net cash provided by operating activities:
Depreciation and amortization 6,411 6,495 6,334
Amortization of loan buydown fees 982 1,566 1,572
Amortization of deferred financing costs 392 265 29
Loss on impairment of assets held for sale 1,030 3,850 --
Extraordinary gain from forgiveness of debt (1,139) -- --
Changes in assets and liabilities:
Accounts receivable (521) 22 543
Other assets 76 (8) 422
Prepaid expenses (28) (48) 66
Deferred expenses (183) (224) 238
Accounts payable - affiliates -- (63) (578)
Accounts payable and accrued expenses 593 (27) 202
Mortgage interest payable 16 191 (60)
Security deposits and other liabilities (255) (180) (714)
-------- -------- --------
Total adjustments 7,374 11,839 8,054
-------- -------- --------
Net cash provided by operating activities 4,836 5,475 1,984
-------- -------- --------
Cash flows from investing activities:
Additions to operating investment properties (421) (178) (767)
Use of (additions to) escrowed cash (312) 311 65
Withdrawals from (additions to) capital improvement reserve 1,201 (19) (939)
Master lease payments received -- -- 326
-------- -------- --------
Net cash provided by (used in) investing activities 468 114 (1,315)
-------- -------- --------
Cash flows from financing activities:
Dividends paid to shareholders -- -- (4,008)
Proceeds from issuance of mortgage notes payable -- 45,825 100
Payment of debt issuance costs -- (1,439) --
Proceeds from issuance of unsecured note payable -- 1,175 --
Repayment of principal on mortgage notes payable (2,007) (48,482) (620)
Repayment of principal on unsecured note payable (32) (7) --
-------- -------- --------
Net cash used in financing activities (2,039) (2,928) (4,528)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 3,265 2,661 (3,859)
Cash and cash equivalents, beginning of year 5,943 3,282 7,141
-------- -------- --------
Cash and cash equivalents, end of year $ 9,208 $ 5,943 $ 3,282
======== ======== ========
Supplemental Disclosure:
- ------------------------
Cash paid during the year for interest $ 13,421 $ 13,261 $ 13,917
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
7
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1. Organization and Recent Business Developments
---------------------------------------------
Retail Property Investors, Inc. (the "Company"), formerly
PaineWebber Retail Property Investments, Inc., is a corporation organized
on August 9, 1989 in the Commonwealth of Virginia for the purpose of
investing in a portfolio of retail shopping centers located throughout the
midwestern, southern and southeastern United States. The Company commenced
an initial public offering of up to 10,000,000 shares of its common stock
(the "Shares"), priced at $10 per Share, on October 23, 1989 pursuant to a
Registration Statement filed on Form S-11 under the Securities Act of 1933
(Registration Statement No. 33-29755). The initial offering closed on
December 24, 1990 after 10,020,100 shares had been sold. The Company
received capital contributions of $100,201,000, of which $201,000 was
received from the sale of 20,100 shares to an affiliate, PaineWebber
Group, Inc. ("PaineWebber"). Effective September 7, 1993, the Company's
shareholders approved a resolution to complete a 1 for 2 reverse stock
split. Consequently, the resulting outstanding shares, which number
5,010,050, have an effective original issue price of $20 per share. As of
November 1, 1996, PaineWebber and its affiliates held 111,601 shares of
the Company's common stock. The Company was originally organized as a
finite-life, non-traded real estate investment trust that had a stated
investment policy of investing exclusively in shopping centers in which
Wal-Mart Stores, Inc. ("Wal-Mart") was or would be an anchor tenant. In
September 1993 and November 1994, the Company's shareholders approved
certain amendments to the Company's Articles of Incorporation and Bylaws
as part of a plan to reposition the Company to take advantage of the
liquidity and potentially attractive source of capital available in the
market for publicly held REITs which had existed at that time. However,
due to a deterioration in the public equity markets for REIT stocks during
the latter part of calendar 1994, management delayed its plans to proceed
with a public offering and subsequent listing of the Company's common
stock on a national securities exchange pending an improvement in the
market conditions. As a result of the delays in the timing of the planned
public offering which had been contemplated in fiscal 1994, the Company
took significant charges against earnings in fiscal 1994 to reflect
certain costs incurred in connection with the Company's restructuring
plans which were either no longer expected to have future economic benefit
or were no longer deferrable because the prospects for a second equity
offering were uncertain. Acquisition due diligence costs totalling
approximately $2,015,000 related to certain properties that had been
reviewed for potential acquisition as part of the planned public offering
were written off to investment analysis expense during fiscal 1994. All
expenses incurred in connection with the planned equity offering, as well
as a possible securitized debt offering, in the aggregate amount of
approximately $1,561,000, were written off to non-deferrable offering
expenses in fiscal 1994. In addition, extension fees of $760,000 related
to a debt prepayment agreement which lapsed during fiscal 1994 were
written off to interest expense during that year.
Due to changes in interest rate levels and other market factors
which continued to adversely affect the market for new public REIT equity
offerings during the first half of calendar 1995, the Company did not
complete the final phase of its restructuring plans. In view of the then
existing capital market conditions, the Company's Board of Directors
engaged the investment banking firm of Lehman Brothers Inc. ("Lehman") in
June of 1995 to act as its financial adviser and to provide financial and
strategic advisory services to the Board of Directors regarding other
options available to the Company. The strategic options considered
included, among other things, a recapitalization of the Company, sales of
the Company's assets and the exploration of merger opportunities. Lehman's
services included the solicitation and identification of potential
transactions for the Company, the evaluation of these transactions, and
the provision of advice to the Board regarding them. In November 1995,
Lehman presented a summary to the Board of the proposals which it had
received to date, all of which were indications of interest from third
parties to buy the Company's real estate assets. The Board concluded that
it would be in the shareholders' best interests to immediately initiate
the process of soliciting firm offers to purchase the Company's portfolio
of operating investment properties. The Directors instructed Lehman to
work with the various third parties that expressed an interest in such a
transaction to obtain transaction terms most favorable to the Company and
its shareholders.
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<PAGE> 9
In March 1996, the Company announced the execution of a definitive
agreement for the sale of its assets to Glimcher Realty Trust ("GRT").
Under the original terms of the agreement, GRT was to have purchased the
properties of the Company subject to certain indebtedness and leases for
an aggregate purchase price of $203 million plus prepayment penalties on
debt to be prepaid and assumption fees on debt to be assumed, subject to
certain adjustments. As of May 14, 1996, the terms of the purchase
contract were amended to reduce the aggregate purchase price to $197
million plus prepayment penalties and assumption fees. The sale
transaction closed into escrow on June 27, 1996 with GRT depositing the
net proceeds required to close the transaction in the form of bank letters
of credit. Pursuant to the Company's Articles of Incorporation and
Virginia law, the sale of all or substantially all of the Company's real
estate assets required approval by vote of at least two-thirds of the
outstanding shares of common stock. A proxy statement describing the sale
transaction and a proposed subsequent liquidation plan for the Company was
mailed to shareholders in August 1996 and received the requisite vote of
the outstanding shares at a special meeting of the shareholders held on
October 16, 1996. Upon receiving the required shareholder approval, the
Company finalized the closing of the sale transaction, which occurred on
October 17, 1996. See Note 8 for a further discussion of the net proceeds
realized from the sale of the Company's real estate assets, the expected
liquidation distribution to the shareholders and the timing of the
Company's plan of liquidation. The Company's financial statements as of
August 31, 1996 and 1995 reflect the reclassification of operating
investment properties and certain related assets as operating investment
properties held for sale and the writedown of the individual operating
properties to the lower of adjusted cost or net realizable value. The
Company recorded losses of $1,030,000 and $3,850,000 in fiscal 1996 and
1995, respectively, in connection with this accounting treatment. Since
the sale transaction and associated liquidation plan were contingent upon
the receipt of the shareholder vote, which did not occur until after
August 31, 1996, the accompanying financial statements continue to reflect
the going concern basis of accounting. The Company will adopt the
liquidation basis of accounting effective as of October 16, 1996.
2. Use of Estimates and Summary of Significant Accounting Policies
---------------------------------------------------------------
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of August 31, 1996 and
1995 and revenues and expenses for each of the three years in the period
ended August 31, 1996. Actual results could differ from the estimates and
assumptions used.
The Company's significant accounting policies are summarized as
follows:
A. INCOME TAXES
The Company has elected to qualify to be taxed as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code of 1986,
as amended, for each taxable year of operations. As a REIT, the
Company is allowed a tax deduction for the amount of dividends
paid to its shareholders, thereby effectively subjecting the
distributed net income of the Company to taxation at the
shareholder level only, provided it distributes at least 95% of
its real estate investment trust taxable income and meets certain
other requirements for qualifying as a REIT. The Company incurred
a loss for both book and tax purposes in fiscal 1996 and 1995 and,
therefore, was not required to pay a cash dividend in order to
retain its REIT status.
B. OPERATING INVESTMENT PROPERTIES
Operating investment properties are carried at the lower of cost,
reduced by guaranteed master lease payments (see Note 4) and
accumulated depreciation, or net realizable value. The net
realizable value of a property held for long-term investment
purposes is measured by the recoverability of the
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Company's investment through expected future cash flows on an
undiscounted basis, which may exceed the property's current market
value. The net realizable value of a property held for sale
approximates its current market value, less disposal costs, plus
depreciation through the expected date of sale. As discussed
further in Notes 1 and 4, all of the Company's operating
investment properties were held for sale as of August 31, 1996 and
1995. Accordingly, the Company has reclassified the operating
properties and certain related assets to operating investment
properties held for sale and has recorded each property at the
lower of adjusted cost or net realizable value at August 31, 1996
and 1995. In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets To be Disposed Of." In accordance with SFAS 121,
an impairment loss with respect to an operating investment
property is recognized when the sum of the expected future net
cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset. An impairment loss is
measured as the amount by which the carrying amount of the assets
exceeds its fair value, where fair value is defined as the amount
at which the asset could be bought or sold in a current
transaction between willing parties, that is other than a forced
or liquidation sale. Due to the subsequent sale of the Company's
real estate assets in October 1996, FAS No. 121, which is
effective for financial statements for years beginning after
December 15, 1995, will not have a material effect on the
Company's financial statements.
Depreciation expense has been computed using the straight-line
method over an estimated useful life of forty years for the
buildings and improvements, twenty years for land improvements and
twelve years for personal property. Certain costs and fees
(including the acquisition fees paid to an affiliate, as described
in Note 3) related to the acquisition of the properties have been
capitalized and are included in the cost of the operating
investment properties. Major additions and betterments are
capitalized, while minor repairs and maintenance are charged to
expense.
C. CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts held in banks and money market
accounts and overnight, investment-grade commercial paper
investments administered by Mitchell Hutchins Institutional
Investors, Inc. (see Note 3).
D. ESCROWED CASH
Escrowed cash consists of various lender escrows and real estate
tax and insurance premium escrows. The lender escrows were amounts
held by various mortgage lenders to be released upon the
completion of certain construction projects and other events
relating to the individual property refinancings or acquisitions.
The balance of the lender escrows amounted to approximately
$75,000 at both August 31, 1996 and 1995. The lender escrows were
refunded to the Company subsequent to the closing of the sale of
the Company's real estate assets in October 1996. The Company
maintained separate real estate tax and insurance premium escrows
for each property. The balance of these escrows was approximately
$1,304,000 and $992,000 at August 31, 1996 and 1995, respectively.
Such funds were generally used to pay the Company's pro rated
share of real estate tax expenses upon the sale of the Company's
real estate assets in October 1996.
E. CAPITAL IMPROVEMENT RESERVE
The Company had elected to fund a capital improvement reserve to
cover the potential cost of future capital improvement
expenditures. The balance of the capital improvement reserve at
August 31, 1995 was approximately $1,201,000. The Company funded
$.06 per square foot of leasable space owned (approximately 4.4
million square feet) to the reserve through August 31, 1995. The
capital improvement reserve was not restricted by any third
parties. Due to the pending sale of the Company's investment
properties, the balance of the capital improvement reserve was
reclassified to cash and cash equivalents as of August 31, 1996.
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F. DEFERRED EXPENSES
Deferred expenses as of August 31, 1996 and 1995 include costs
incurred in connection with the mortgage notes payable, leasing
commissions and computer software. Capitalized loan costs have
been amortized using the straight-line method over the term of the
related loans, which range from 3 to 20 years (see Note 5). The
amortization of capitalized loan costs is included in interest
expense on the accompanying statements of operations. Leasing
commissions have been amortized using the straight-line method
over the term of the related lease, generally 3 to 5 years.
Software costs have been amortized using the straight-line method
over a 60-month period. As discussed further in Note 4, due to the
Company's plans to pursue a sale of its operating investment
properties, deferred leasing commissions as of August 31, 1996 and
1995 were reclassified as part of the balance of operating
investment properties held for sale for purposes of measuring the
expected losses to be incurred upon disposal. The unamortized
balance of capitalized loan costs will be written off as a loss on
the early extinguishment of debt effective as of October 17, 1996
due to the subsequent sale of the Company's real estate assets.
G. OFFERING COSTS
Offering costs consist primarily of selling commissions and other
costs such as printing and mailing costs, legal fees, filing fees
and other marketing costs associated with the initial offering of
Shares. Selling commissions incurred in connection with the
Company's initial public offering were equal to approximately 8%
of the gross proceeds raised. Commissions totalling $7,984,000
were paid to PaineWebber Incorporated in connection with the sale
of Shares from the initial public offering. All of the offering
costs associated with the initial public offering are shown as a
reduction of additional paid-in capital on the accompanying
balance sheets.
H. REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the
life of the related lease agreements. The revenue recognition
method takes into consideration scheduled rent increases. As of
August 31, 1996 and 1995, the difference between the revenue
recorded on the straight-line method and the payments made in
accordance with the lease agreements totalled $356,000 and
$305,000, respectively. As discussed further in Note 4, due to the
Company's plans to pursue a sale of its operating investment
properties, deferred rent receivable as of August 31, 1996 and
1995 was reclassified as part of the balance of operating
investment properties held for sale for purposes of measuring the
expected losses to be incurred upon disposal. The Company uses the
allowance method to account for bad debt expense on its tenant
receivables.
I. COMMON STOCK AND EARNINGS PER SHARE OF COMMON STOCK
The earnings and cash dividends declared per share of common stock
on the accompanying statements of operations are based upon the
weighted average number of shares outstanding on a daily basis
during each of the three years in the period ended August 31,
1996, of 5,010,050.
J. FAIR VALUE DISCLOSURES
FASB Statement No. 107, "Disclosures about Fair Value of Financial
Instruments" ("SFAS 107"), requires disclosure of fair value
information about financial instruments, whether or not recognized
in the balance sheet, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other
valuation techniques. SFAS 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
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<PAGE> 12
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported on the
balance sheet for cash and cash equivalents approximates its fair
value due to the short-term maturities of such instruments.
Escrowed cash: The carrying amount reported on the balance sheet
for escrowed cash approximates its fair value due to the
short-term maturities of such instruments.
Mortgage notes payable: Due to the subsequent sale of the
Company's real estate assets in October 1996 and the related
settlement of the Company's outstanding mortgage loan liabilities,
the fair value of the Company's mortgage indebtedness was deemed
to equal its face value as of August 31, 1996.
The carrying amounts and fair values of the Company's financial
instruments at August 31, 1996 are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Carrying Amount Fair Value
--------------- ----------
<S> <C> <C>
Cash and cash equivalents $ 9,208 $ 9,208
Escrowed cash $ 1,379 $ 1,379
Mortgage notes payable, net $155,483 $159,144
</TABLE>
3. The Advisory Agreement and Related Party Transactions
-----------------------------------------------------
The Company has entered into an advisory agreement with
PaineWebber Realty Advisors, L.P. (the "Advisor") to perform various
services in connection with the sale of the Shares, the management of the
Company and the acquisition, management and disposition of the Company's
investments. The Advisor is a limited partnership composed of PaineWebber
Properties Incorporated ("PWPI") as the general partner and Properties
Associates, L.P. ("PA") as the limited partner. Both partners of the
Advisor are affiliates of PaineWebber Incorporated ("PWI"), which is a
wholly owned subsidiary of PaineWebber Group, Inc. ("PaineWebber"). The
advisory agreement is renewable on an annual basis at the discretion of
the Company's Board of Directors. The type of compensation due to the
Advisor and its affiliates under the terms of the Advisory Agreement is as
follows:
(i) Under the Advisory Agreement, the Advisor has specific management
responsibilities to perform day-to-day operations of the Company
and to act as the investment advisor and consultant for the
Company in connection with general policy and investment
decisions. The Advisor earns an annual Asset Management Fee and an
Advisory Incentive Fee of 0.25% and 0.25%, respectively, of the
Capital Contributions of the Company. The Advisory Incentive Fee
is subordinated to the shareholders' receipt of distributions of
net cash sufficient to provide a return equal to 8% per annum on
their Invested Capital, as defined. During the quarter ended
February 28, 1994, the payment of regular quarterly distributions
was suspended. Accordingly, the Advisor has not earned any
Advisory Incentive Fees since December 1, 1993. Furthermore,
during the quarter ended May 31, 1994 the Advisor agreed to waive
its rights to the collection of previously deferred Advisory
Incentive Fees in the aggregate amount of $76,000. This amount is
reflected as a reduction of management fee expense for the year
ended August 31, 1994. Effective March 1, 1995, the Advisor agreed
to waive its management fees indefinitely in order to maximize the
Company's earnings and cash flow while the strategic plans
regarding the Company's future operations were evaluated and
implemented. Accordingly no management fees were paid during the
year ended August 31, 1996. The Advisor received total management
fees of $125,000 and $237,000 for the period September 1, 1994
through February 28, 1995 and the year ended August 31, 1994,
respectively.
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<PAGE> 13
(ii) For its services in finding and recommending investments, and for
analyzing, structuring and negotiating the purchase of properties
by the Company, PWPI received non-recurring Acquisition Fees equal
to 3% of the Capital Contributions. PWPI received acquisition fees
in connection with the Company's real estate investments in the
amount of $3,006,000.
(iii) Fees equal to 1/2 of 1% of any financing and 1% of any refinancing
obtained by the Company for which the Advisor rendered substantial
services, and for which no fees were paid to a third party, were
to be paid to the Advisor as compensation for such services. No
such fees will be due to the Advisor through the Company's
expected liquidation date.
(iv) Upon disposition of the Company's investments, the Advisor could
have earned sales commissions and disposition fees. These fees and
commissions are subordinated to the repayment to shareholders of
their Capital Contributions plus certain minimum returns on their
Invested Capital. In no event were the disposition fees to exceed
an amount equal to 15% of Disposition Proceeds remaining after the
shareholders have received an amount equal to their Capital
Contributions plus a return on Invested Capital of 6% per annum,
cumulative and noncompounded. No disposition fees or sales
commissions will be due to the Advisor through the Company's
expected liquidation date.
Financial and investor servicing expenses represent reimbursements to
an affiliate of the Advisor for providing certain financial, accounting
and investor communication services to the Company. Effective March 1,
1995, the Advisor agreed that it will not be reimbursed for providing
these services to the Company. As with the management fees described
above, the Advisor agreed to waive these servicing fees indefinitely in
order to maximize the Company's earnings and cash flow while the strategic
plans regarding the Company's future operations were evaluated and
implemented. Accordingly, no servicing fees were paid during the year
ended August 31, 1996. For the period September 1, 1994 through February
28, 1995 and the year ended August 31, 1994, the Company paid $111,000 and
$260,000, respectively, to this affiliate for providing such services to
the Company.
Mitchell Hutchins Institutional Investors, Inc. ("Mitchell Hutchins")
provides cash management services with respect to the Company's cash
assets. Mitchell Hutchins is a subsidiary of Mitchell Hutchins Asset
Management, Inc., an independently operated subsidiary of PaineWebber. For
the years ended August 31, 1996, 1995 and 1994, Mitchell Hutchins earned
fees of $23,000, $8,000 and $8,000, respectively, for managing the
Company's cash assets. Accounts payable - affiliates at both August 31,
1996 and 1995 consists of $4,000 payable to Mitchell Hutchins.
The Company had engaged the services of a consulting firm for certain
professional services related to its mortgage loan refinancing and
acquisition due diligence activities prior to August 31, 1995. The
consulting firm was a partnership in which Mr. Robert J. Pansegrau was
one of two partners. Mr. Pansegrau is formerly a Senior Vice President of
the Company who resigned effective March 31, 1993. The consulting firm
received fee compensation from the Company totalling $186,000 and
$282,000 for the years ended August 31, 1995 and 1994, respectively. The
consulting firm also received reimbursement for out-of-pocket expenses of
$79,000 and $167,000 for the years ended August 31, 1995 and 1994,
respectively.
In June 1995, the Company secured a new mortgage loan in the amount of
$4,000,000 to repay a portion of the first mortgage loan held by PWPI,
which was secured by the Applewood Village operating property, in the
amount of $5,175,000 (see Note 5). PWPI agreed to make an unsecured loan
for the difference, in the amount of $1,175,000, which had a 15-year term
and carried an interest rate tied to PWPI's cost of funds, not to exceed
8% per annum. The note was to be fully amortizing over its term and
required monthly payments of principal and interest through maturity in
June 2010. The balance of this note payable to affiliate as of August 31,
1995 was $1,168,000. On June 1, 1996, PWPI forgave the entire balance on
this unsecured loan of $1,136,000 plus accrued interest of $3,000. The
Company recorded this transaction as an extraordinary gain from
forgiveness of debt in the fiscal 1996 statement of operations. Interest
expense incurred by the Company under the terms of this note agreement
totalled $53,000 and $12,000 in fiscal 1996 and 1995, respectively.
13
<PAGE> 14
4. Operating Investment Properties
-------------------------------
Through August 31, 1996, the Company had acquired 22 Wal-Mart
anchored shopping centers. The ownership of the Company's operating
properties described below was legally held by four limited partnerships
in which the Company is the sole general partner. These partnerships were
created in order to, among other things, facilitate the communication of
income tax information to the Company's shareholders. The limited partner
of the partnerships is PaineWebber Properties Incorporated ("PWPI"), which
is the general partner of the Advisor (see Note 3). The economic interest
of PWPI in the partnerships was generally limited to a share of the
Company's Disposition Proceeds, as defined, to which the Advisor was
originally entitled through the Disposition Fee, as defined in the
Company's original offering prospectus. Per the terms of the limited
partnership agreements, all distributions of operating cash flow and sale
proceeds generated through the disposition of the operating properties in
October 1996 were allocated to the Company. Furthermore, as a limited
partner in the partnerships, PWPI had no control over the operations of
the partnerships or of the operating properties, other than in its
capacity as a partner of the Advisor. The legal ownership of the Company's
operating investment properties by the partnerships has had virtually no
impact on the Company's financial position or results of operations.
Accordingly, the partnerships are consolidated with the Company for
financial reporting purposes. The name, location and size of the acquired
properties, along with information related to the respective purchase
prices and adjusted cost basis as of August 31, 1996, are as follows (in
thousands):
14
<PAGE> 15
<TABLE>
<CAPTION>
Costs
Name Acquisition Capitalized Master Adjusted
Location Date Purchase Fees and Subsequent to Lease Cost at
Size Acquired Price Expenses (1) Acquisition Payments (2) 8/31/96
- ------------- -------- ----------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Village Plaza 8/16/89 $23,975 $394 $ 826 $618 $ 24,577
Augusta, GA
490,970
square feet
Logan Place 1/18/90 4,917 189 16 232 4,890
Russellville, KY
114,748
square feet
Piedmont Plaza 1/19/90 13,500 263 29 107 13,685
Greenwood, SC
249,052
square feet
Artesian Square 1/30/90 6,990 203 989 392 7,790
Martinsville, IN
177,428
square feet
Sycamore Square 4/26/90 4,970 172 23 130 5,035
Ashland City, TN
93,304
square feet
Audubon Village 5/22/90 6,350 215 30 - 6,595
Henderson, KY
124,592
square feet
Crossroads Centre 6/15/90 9,914 246 42 - 10,202
Knoxville, TN
242,430
square feet
East Pointe Plaza 8/07/90 13,936 269 737 306 14,636
Columbia, SC
279,261
square feet
Walterboro Plaza - 12/19/90 6,645 284 18 136 6,811
Phases I and II
Walterboro, SC
132,130
square feet
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Costs
Name Acquisition Capitalized Master Adjusted
Location Date Purchase Fees and Subsequent to Lease Cost at
Size Acquired Price Expenses (1) Acquisition Payments (2) 8/31/96
- ------------- -------- ----------- ------------ ------------ ------------ -------
(continued)
<S> <C> <C> <C> <C> <C> <C>
Cypress Bay Plaza 12/19/90 12,235 215 88 522 12,016
Morehead City, NC
258,245
square feet
Cross Creek Plaza 12/19/90 13,565 302 20 525 13,362
Beaufort, SC
237,801
square feet
Lexington Parkway
Plaza 3/05/91 10,290 251 115 208 10,448
Lexington, NC
210,190
square feet
Roane County
Plaza 3/05/91 7,000 197 - 43 7,154
Rockwood, TN
160,198
square feet
Franklin Square 6/21/91 9,018 232 45 26 9,269
Spartanburg, SC
237,062
square feet
Barren River Plaza 8/09/91 11,788 412 49 57 12,192
Glasgow, KY
234,795
square feet
Cumberland
Crossing 8/09/91 7,458 370 39 116 7,751
LaFollette, TN
144,734
square feet
Applewood Village 10/25/91 6,965 389 - - 7,354
Fremont, OH
140,039
square feet
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Aviation Plaza 8/31/92 8,349 337 - - 8,686
Oshkosh, WI
174,715
square feet
Crossing
Meadows Plaza 8/31/92 12,100 356 6 - 12,462
Onalaska, WI
233,984
square feet
Southside Plaza 10/21/92 9,200 356 7 - 9,563
Sanford, NC
172,293
square feet
College Plaza 4/29/93 9,900 461 - 2 10,359
Bluefield, VA
178,431
square feet
Marion Towne 6/23/93 7,907 624 27 - 8,558
Center
Marion, SC
156,558
square feet
-------- ------ ------- ------- ---------
$216,972 $6,737 $ 3,106 $ 3,420 $ 223,395
======== ====== ======= ======= =========
<FN>
(1) Acquisition fees and expenses include the 3% fee payable to PWPI
(see Note 3) and other capitalized costs incurred in connection
with the acquisition of the properties (e.g. legal fees, appraisal
fees, other closing costs, etc.). Certain expenses incurred to
investigate potential investments were recorded as other assets
pending the closing of a transaction and were reclassified after
acquisition to the cost basis of the related property. Expenses
incurred to review potential investments which were subsequently
not acquired by the Company were charged to investment analysis
expense once the Company stopped pursuing the acquisition.
(2) The Company originally entered into master lease agreements with
the sellers and certain of their affiliates (the "Guarantors") of
each of the operating properties acquired. The master lease
agreements generally provided that, for a period of up to 36 to 60
months (depending on the credit status of the tenant in occupancy)
from the date of the acquisition of the operating property, the
Guarantors guaranteed that the aggregate cash flow from all
non-anchor tenants would not be less than the aggregate pro-forma
net cash flow from non-anchor tenants projected at the time of the
purchase. In the event that the actual aggregate net cash flow was
less than the guaranteed amount, the Guarantors were obligated to
make cash payments to the Company equal to any such deficit. All
amounts earned under the master lease agreements were treated as
purchase price adjustments and recorded as reductions to the
carrying values of the related operating property for financial
reporting purposes. Certain of the Guarantors secured their
guarantees with cash collateral held by the Company or with
letters of credit. During fiscal 1995, the Company entered into
settlement agreements related to the outstanding master lease
obligations on the Southside Plaza, College Plaza, Aviation Plaza
and Crossing Meadows properties. As part of these settlement
agreements, the Company agreed to the early termination of the
</TABLE>
17
<PAGE> 18
respective master leases and to the release of the related cash
collateral or letters of credit in return for the agreement of the
related management agent to certain changes to the property
management contracts. As of August 31, 1996, Applewood Village was
the only property remaining under a master lease and was not
generating any master lease payments based on the property's
leasing level. The Applewood Village master lease was terminated
subsequent to year-end in connection with the October 1996 sale of
the Company's real estate assets.
As discussed in Note 1, as a result of the decision by the Board
of Directors to pursue a sale of the Company's portfolio of properties,
the accompanying statements of operations for fiscal 1996 and 1995 include
losses of $1,030,000 and $3,850,000, respectively, to reflect the
writedown of the individual operating investment properties and certain
related assets to the lower of adjusted cost or net realizable value as of
August 31, 1996 and 1995. Such losses apply only to the properties for
which losses were expected based on the estimated fair values. The gains
on properties for which the estimated fair value less costs to sell
exceeded the adjusted cost basis will be recognized in the period in which
the sale transaction was completed. The Company also incurred portfolio
sale expenses of $1,834,000 in fiscal 1996. Portfolio sale related
expenses consisted primarily of legal fees associated with negotiating the
sale agreement and preparing, distributing and soliciting the shareholder
proxy. Such costs were expensed as incurred because of the impairment
issues discussed further above and the uncertainty regarding the ability
to complete the sale transaction which existed until the subsequent
shareholder vote. The Company continued to recognize depreciation on its
assets held for sale through the date of disposal. Operating investment
properties held for sale on the accompanying balance sheets as of August
31, 1996 and 1995 is comprised of the following amounts (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 37,845 $ 37,845
Buildings and improvements 175,874 175,453
Furniture and equipment 9,676 9,676
--------- ---------
223,395 222,974
Less: accumulated depreciation (33,666) (27,409)
--------- ---------
189,729 195,565
Deferred rent receivable 356 305
Deferred leasing commissions, net 336 291
--------- ---------
190,421 196,161
Less: Allowance for possible
impairment loss (4,880) (3,850)
--------- ---------
$ 185,541 $ 192,311
========= =========
</TABLE>
5. Mortgage Notes Payable
----------------------
Mortgage notes payable, reduced by unamortized loan buydown fees
(see below), at August 31, 1996 and 1995 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Mortgage notes payable to a financial institution
which were secured by Village Plaza, Piedmont Plaza, $ 49,005 $ 49,005
Artesian Square, Logan Place, Sycamore Square and (2,034) (2,504)
Crossroads Centre. These mortgage notes required -------- --------
monthly payments of interest only at 8% for the first seven years and then 46,971 46,501
principal and interest at 8% until maturity, which ranged from November 1,
1999 to July 1, 2000. These notes contained certain cross default and
cross collateral provisions. See discussion of effective interest rates
and loan buydown fees below.
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
(continued) 1996 1995
---- ----
<S> <C> <C>
Mortgage notes payable to a financial institution which 24,426 24,678
were secured by East Pointe Plaza, Cumberland (875) (1,022)
Crossing and Barren River Plaza. The mortgage note ------ ------
on East Pointe Plaza, in the original principal amount of $11,150, called 23,551 23,656
for monthly interest only payments at 8% per annum through June 1996. The
balance of these mortgage notes required monthly payments of principal and
interest at 8% through June 1996. Effective June 10, 1996, all three notes
required monthly payments of principal and interest at 8.75% per annum
through maturity on June 10, 2001. These notes contained certain cross
default and cross collateral provisions. See discussion of effective
interest rates and loan buydown fees below.
Mortgage note payable to a bank secured by Franklin 13,439 13,498
Square and College Plaza. The Franklin note required - (83)
monthly interest only payments at 8% per annum until ------ ------
maturity, which was originally scheduled for June 21, 1996. Interest on 13,439 13,415
the College Plaza note accrued at prime plus 0.75% per annum. Monthly
payments equal to the greater of $58 or accrued interest for such month
were payable until maturity, which was originally scheduled for April 23,
1996. The Company obtained a loan modification on both these loans,
effective as of their respective maturity dates, extending the due dates
to March 31, 1997. Both loans required monthly interest payments based on
a variable interest rate equal to either prime plus 0.75% or LIBOR plus
2.75%, as selected by the Company. The College Plaza loan also required
monthly principal payments of $7.5.
Mortgage note payable to a financial institution secured 22,840 23,680
by Cross Creek Plaza, Cypress Bay Plaza and Walterboro Plaza
(Phases I and II). The loan bore interest at a variable rate equal
to 30-day LIBOR plus 3.50% per annum for the first twelve months, 30-day
LIBOR plus 3.75% for the next twelve months (9.25% as of August 31, 1996),
and 30-day LIBOR plus 4.25% for the final twelve months. Monthly payments
of interest and principal (based on a 15-year amortization schedule) were
due until maturity on December 10, 1997.
</TABLE>
19
<PAGE> 20
(continued):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mortgage notes payable to a financial institution 17,110 17,487
secured by Audubon Village, Lexington Parkway Plaza and Roane County
Plaza. The notes secured by the Lexington and Roane properties bore
interest at a fixed rate of 9.125% per annum and required monthly payments
of principal and interest aggregating $119 through maturity on March 1,
2015. The note secured by Audubon Village bore interest at 8.75% per annum
and required monthly payments of principal and interest of $43 through
maturity on June 1, 2000.
Mortgage notes payable to a financial institution which 16,139 16,321
were secured by Aviation Plaza and Crossing Meadows. Monthly (621) (815)
payment terms for the loan secured by Aviation Plaza, ------ ------
in the principal amount of $6,800, called for interest only 15,518 15,506
payments at 8% per annum through August 1, 1995 and principal
and interest payments at 8% thereafter until maturity. The loan
secured by Crossing Meadows required monthly payments, including
interest at 8% per annum, of $71 until maturity. Both notes were scheduled
to mature on June 1, 1999. See discussion of effective interest rates and
loan buydown fees below.
Mortgage note payable to a financial institution which 6,583 6,686
was secured by Southside Plaza. The note required (131) (219)
monthly payments, including interest at 6.83% per ------ -----
annum, of $46 until maturity on November 5, 1997. See discussion of 6,452 6,467
effective interest rates and loan buydown fees below.
Mortgage note payable to a financial institution which 5,757 5,817
was secured by Marion Towne Center. The note, which
was issued on June 23, 1993, called for monthly
payments, including interest at 8% per annum, of $44
until maturity on July 1, 2002. The lender had the
option, upon 120 days' written notice, to call the
loan due at the end of each of the third year and the
sixth year of the loan. If the loan was not called at
such time, the interest rate on the loan was subject
to adjustment. During fiscal 1996, the lender
adjusted the interest rate to 7.375%, thereby
reducing the monthly principal and interest payments
to $41 effective with the August 1, 1996 payment.
</TABLE>
20
<PAGE> 21
(continued):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mortgage note payable to a financial institution secured 3,845 3,979
by Applewood Village. The note bore interest at 9%
per annum and required monthly principal and interest payments of $41
until maturity on June 10, 2010. -------- --------
Total mortgage notes payable, net $155,483 $156,508
======== ========
Summary of outstanding mortgage notes payable
Total outstanding mortgage principal
balances as of August 31, 1996 and August 31, 1995 $159,144 $161,151
Aggregate unamortized loan buydown fees (3,661) (4,643)
-------- --------
Total mortgage notes payable, net $155,483 $156,508
======== ========
</TABLE>
At the time of the closing of certain of the mortgage notes listed
above, the Company paid fees to the lenders in return for the lenders'
agreement to reduce the stated interest rate on the loans to 8% per annum
(6.83% in the case of Southside Plaza) over the terms of the loans. The
fees have been recorded as reductions of the outstanding principal amounts
and have been amortized, using the effective interest method, over the
terms of the respective loans. The effective interest rates on these
outstanding loans ranged from 7.38% to 9.80% per annum as of August 31,
1996. As discussed further in Note 1, the Company completed the sale of
the operating investment properties which serve as collateral for the
above mortgage loans subsequent to year end, on October 17, 1996. The
obligation to repay the lenders with respect to such loans at the time of
the sale transaction was equal to the outstanding mortgage principal
balances prior to unamortized loan buydown fees. In conjunction with the
sale transaction, the amount of the remaining unamortized buydown fees
will be written off as a loss on the early extinguishment of debt in the
period in which the sale occurred.
During fiscal 1996 and 1995, the Company was not in technical
compliance with provisions in certain of the above mortgage loan
agreements which required formal lender approval of all property
expansions and lease modifications. Under the terms of the loan
agreements, failure to comply with such terms could have constituted
events of default. Management had been working with the lenders to obtain
the necessary approvals and, subsequent to year end, all instances of
non-compliance were cured prior to the final closing of the sale
transaction referred to above.
As of August 31, 1996, aggregate scheduled maturities of mortgage
notes payable for the next five years and thereafter were as follows (in
thousands):
<TABLE>
<CAPTION>
Year ended August 31:
---------------------
<S> <C>
1997 $ 15,590
1998 29,895
1999 17,286
2000 52,945
2001 24,037
Thereafter 19,391
----------
$ 159,144
==========
</TABLE>
21
<PAGE> 22
6. Rental income
-------------
The Company has earned rental income from leasing shopping center
space. All of the Company's leasing agreements were operating leases
expiring in one to twenty years. Base rental income of $22,271,000
$22,183,000 and $21,958,000 was earned for the years ended August 31,
1996, 1995 and 1994, respectively. The following is a schedule of minimum
future lease payments from noncancellable operating leases as of August
31, 1996 (in thousands):
<TABLE>
<CAPTION>
Year ended August 31:
---------------------
<S> <C>
1997 $ 21,463
1998 19,805
1999 18,461
2000 16,535
2001 15,068
Thereafter 117,293
----------
$ 208,625
==========
</TABLE>
Total minimum future lease payments do not include percentage rentals
due under certain leases, which are based upon lessees' sales volumes.
Percentage rentals of approximately $247,000, $160,000 and $92,000 were
earned for the years ended August 31, 1996, 1995 and 1994, respectively.
Virtually all tenant leases also required lessees to pay all or a portion
of real estate taxes and certain property operating costs.
Rental income of approximately $7,990,000, $7,913,000 and $7,913,000
was received from leases with Wal-Mart and its affiliates for the years
ended August 31, 1996, 1995 and 1994 respectively. Such amounts comprised
36% of total base rental income for each of those years. No other tenant
has accounted for more than 10% of the Company's rental income during any
period since inception.
7. Legal Proceedings
-----------------
In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District
Court for the Southern District of New York concerning PaineWebber
Incorporated's sale and sponsorship of various limited partnership
interests and common stock, including the securities offered by the
Company. The lawsuits were brought against PaineWebber Incorporated and
Paine Webber Group, Inc. (together, "PaineWebber"), among others, by
allegedly dissatisfied investors. In March 1995, after the actions were
consolidated under the title In re PaineWebber Limited Partnership
Litigation, the plaintiffs amended their complaint to assert claims
against a variety of other defendants, including PaineWebber Properties
Incorporated, which is the General Partner of the Advisor. The Company is
not a defendant in the New York Limited Partnership Actions. On May 30,
1995, the court certified class action treatment of the claims asserted
in the litigation.
The amended complaint in the New York Limited Partnership Actions
alleged, among other things, that, in connection with the sale of common
stock of the Company, the defendants (1) failed to provide adequate
disclosure of the risks involved; (2) made false and misleading
representations about the safety of the investments and the Company's
anticipated performance; and (3) marketed the Company to investors for
whom such investments were not suitable. The plaintiffs, who are not
shareholders of the Company but are suing on behalf of all persons who
invested in the Company, also alleged that following the sale of the
common stock of the Company the defendants misrepresented financial
information about the Company's value and performance. The amended
complaint alleged that the defendants violated the Racketeer Influenced
and Corrupt Organizations Act ("RICO") and the federal securities laws.
The plaintiffs sought unspecified damages, including reimbursement for
all sums invested by them in the Company, as well as disgorgement of all
fees and other income derived by PaineWebber from the Company. In
addition, the plaintiffs also sought treble damages under RICO.
22
<PAGE> 23
In January 1996, PaineWebber signed a memorandum of understanding
with the plaintiffs in this class action outlining the terms under which
the parties have agreed to settle the case. Pursuant to that memorandum
of understanding, PaineWebber irrevocably deposited $125 million into an
escrow fund under the supervision of the United States District Court for
the Southern District of New York to be used to resolve the litigation in
accordance with a definitive settlement agreement and a plan of
allocation. On July 17, 1996, PaineWebber and the class plaintiffs
submitted a definitive settlement agreement which has been preliminarily
approved by the court and provides for the complete resolution of the
class action litigation, including releases in favor of the Company and
the General Partner of the Advisor, and the allocation of the $125
million settlement fund among investors in the various partnerships and
REITs at issue in the case. As part of the settlement, PaineWebber also
agreed to provide class members with certain financial guarantees
relating to some of the partnerships and REITs. The details of the
settlement are described in a notice mailed directly to class members at
the direction of the court. A final hearing on the fairness of the
proposed settlement is scheduled to continue in November 1996.
Under certain limited circumstances, pursuant to the Advisory
Agreement and other contractual obligations, PaineWebber affiliates could
be entitled to indemnification for expenses and liabilities in connection
with this litigation. However, by written agreement dated April 1, 1996
PaineWebber and its affiliates have waived all such rights with regard to
this litigation and any other similar litigation that has been or may be
threatened, asserted or filed by or on behalf of purchasers of the
Company's common stock. Thus, the Advisor believes that these matters
will have no material effect on the Company's financial statements, taken
as a whole.
The Company is a party to certain other legal actions in the normal
course of business. Management believes these actions will be resolved
without material adverse effect on the Company's financial statements,
taken as a whole.
8. Subsequent Events
-----------------
In March 1996, the Company announced the execution of a definitive
agreement for the sale of its real estate assets to Glimcher Realty Trust
("GRT"). Under the original terms of the agreement, GRT was to have
purchased the properties of the Company subject to certain indebtedness
and leases for an aggregate purchase price of $203 million plus
prepayment penalties on debt to be prepaid and assumption fees on debt to
be assumed, subject to certain adjustments. As of May 14, 1996, the terms
of the purchase contract were amended to reduce the aggregate purchase
price to $197 million plus prepayment penalties and assumption fees. The
sale transaction closed into escrow on June 27, 1996 pending the receipt
of the approval of the transaction by the Company's shareholders, which
was received on October 16, 1996. On October 17, 1996, the sale
transaction closed out of escrow and the Company received net proceeds of
$36,371,000. The net proceeds reflected the aggregate sales price of
$197,000,000, less selling costs paid at closing of $489,000, capital
improvement and repair allowances of $572,000, mortgage debt outstanding
of $158,857,000 and other closing prorations and purchase price
adjustments of $711,000. During the escrow period in which the Company
sought to obtain the required shareholder approval, the Company's
operating properties were managed by GRT. Under the terms of the
management agreement, GRT received a base fee of 3% of the gross
operating revenues of the properties. In addition, GRT earned an
incentive management fee equal to the net cash flow of the properties
attributable to the period commencing on May 14, 1996 and ending on the
date of the final closing of the sale transaction. A portion of the
incentive management fee was paid to GRT out of the net closing proceeds.
In addition, the Company transferred to GRT at the time of the closing
certain cash balances, together with outstanding receivables and
payables, related to the net cash flow generated subsequent to May 14,
1996. The total incentive management fee through the date of the sale
transaction aggregated approximately $3.2 million. The Company received
interest earnings from GRT beginning June 20, 1996 through the escrow
period on a net equity amount of approximately $37,401,000 at a rate
equivalent to the published market rate on 6-month U.S. Treasury Bills as
of June 20, 1996 (5.39% per annum). The interest credit totalled $657,000
through the date of the sale transaction and is included in the net
proceeds of $36,371,000 referred to above. The incentive management fee
and the interest credit described above were treated as purchase price
adjustments in connection with the sale and will be recorded
23
<PAGE> 24
in the Company's financial statements as of the sale closing date. In
addition to the net proceeds received upon the closing of the sale
transaction, the Company retained an interest in tenant receivables with
a carrying value of approximately $878,000 as of October 17, 1996 (net of
an allowance for possible uncollectible amounts of $162,000). Such
receivables are primarily comprised of expense reimbursements for real
estate taxes, insurance and common area maintenance associated with the
Company's period of ownership of the properties. The majority of these
receivables are expected to be collected over the next several months
with the major portion expected to be received in early calendar year
1997 after the preparation of the annual tenant reconciliations of common
area charges is completed. However, subsequent to year-end the Advisor
agreed to buy the outstanding receivables from the Company at their net
carrying value so that the Company can complete its liquidation during
calendar 1996 without the need to establish a liquidating trust for any
remaining non-cash assets.
The accompanying balance sheet as of August 31, 1996 reflects cash
and cash equivalents totalling $9,208,000. A portion of such cash
balance, in the amount of $1,471,000, relates to net cash flow of the
operating properties subsequent to May 14, 1996 which was due to GRT as
part of the incentive management fee calculation described above and was
transferred to GRT on October 17, 1996 in conjunction with the sale
closing. The Company's balance sheet at August 31, 1996 also included
escrowed cash of $1,379,000. The majority of this amount, which primarily
represented cash designated for real estate taxes and insurance premiums,
was either transferred to GRT at the time of the sale or applied by
certain lenders against the respective mortgage debt liabilities. The
remaining net cash balance of approximately $7,737,000, along with the
net proceeds of $36,371,000 received at closing, $86,000 of escrowed cash
refunded to the Company subsequent to the closing and a recovery of
prepaid insurance in the amount of $167,000 received subsequent to the
closing, were available to be used to pay for the expenses associated
with winding up the Company's business and for liquidation distributions
to the shareholders. In addition, as discussed further above, the Company
retains outstanding tenant receivables in the net amount of $878,000
which the Advisor has agreed to purchase at carrying value. The Company
also expects to receive certain state tax refunds of approximately
$109,000 and interest income of approximately $441,000. From the
available cash and receivables, the Company expects to pay expenses
totalling $1,354,000 subsequent to August 31, 1996. Such costs are
comprised of operating expenses through the date of the sale transaction
of approximately $98,000, expenses related to the sale transaction of
approximately $930,000 and estimated liquidation expenses of $326,000.
After these estimated expenses, the Company expects to have net assets
totalling approximately $44.4 million available for distribution to the
shareholders. From these net assets, the Company expects to make a final
liquidating distribution to the shareholders of approximately $8.80 per
share in December 1996 which will be followed by the formal liquidation
of the Company by December 31, 1996.
24
<PAGE> 25
Schedule III - Real Estate and Accumulated Depreciation
- -------------------------------------------------------
RETAIL PROPERTY INVESTORS, INC.
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
August 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Initial Cost to Gross Amount at Which Carried at
Partnership Close of period
----------- Costs -----------------------------------
Buildings Capitalized Buildings,
Improvements (Removed) Improvements Total, Less
& Personal Subsequent to & Personal Allowance for Acccumulated
Description Encumbrances (A) Land Property Acquisition(B) Land Property Impairment(C) Depreciation
- ----------- ---------------- ---- -------- -------------- ---- -------- ------------- ------------
(continued)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center $ 18,900 $ 6,307 $ 18,062 $ 208 $ 6,307 $ 18,270 $ 24,577 $ 4,359
Augusta, GA
Shopping Center 10,125 1,532 12,231 (78) 1,532 12,153 13,685 2,639
Greenwood, SC
Shopping Center 3,715 448 4,659 (313) 448 4,442 4,890 964
Russellville, KY (96)
------
4,794
Shopping Center 5,340 730 6,464 596 730 7,060 7,790 1,504
Martinsville, IN
Shopping Center 3,595 616 4,527 (789) 616 4,419 5,035 1,048
Ashland City, TN (681)
------
4,354
Shopping Center 4,383 704 5,860 (226) 704 5,891 6,595 1,190
Henderson, KY (257)
------
6,338
Shopping Center 7,330 1,813 8,347 (76) 1,813 8,389 10,202 1,713
Knoxville, TN (118)
------
10,084
Shopping Center 11,137 4,244 9,965 (57) 4,244 10,392 14,636 2,216
Columbia, SC (484)
------
14,152
<CAPTION>
Life on Which
Depreciation
in Latest
Income
Date of Date Statement
Description Construction Acquired is Computed
- ----------- ------------ -------- -------------
(continued)
<S> <C> <C> <C>
Shopping Center 1988 8/16/89 12 - 40 yrs.
Augusta, GA
Shopping Center 1990 1/19/90 12 - 40 yrs.
Greenwood, SC
Shopping Center 1988 1/18/90 12 - 40 yrs.
Russellville, KY
Shopping Center 1989 1/30/90 12 - 40 yrs.
Martinsville, IN
Shopping Center 1990 4/26/90 12 - 40 yrs.
Ashland City, TN
Shopping Center 1989 5/22/90 12 - 40 yrs.
Henderson, KY
Shopping Center 1990 6/15/90 12 - 40 yrs.
Knoxville, TN
Shopping Center 1990 8/7/90 12 - 40 yrs.
Columbia, SC
</TABLE>
25
<PAGE> 26
Schedule III - Real Estate and Accumulated Depreciation
- -------------------------------------------------------
(continued) RETAIL PROPERTY INVESTORS, INC.
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
August 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Initial Cost to Gross Amount at Which Carried at
Partnership Close of period
----------- Costs -------------------------------------
Buildings Capitalized Buildings,
Improvements (Removed) Improvements Total, Less
& Personal Subsequent to & Personal Allowance for Accumulated
Description Encumbrances (A) Land Property Acquisition(B) Land Property Impairment(C) Depreciation
- ----------- ---------------- ---- ---------- -------------- ---- -------- ------------- ------------
(continued)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center 9,438 3,292 10,578 (508) 3,292 10,070 13,362 1,846
Beaufort, SC
Shopping Center 8,683 1,104 11,346 (434) 1,104 10,912 12,016 2,055
Morehead City, NC
Shopping Center 4,719 929 6,001 (357) 929 5,882 6,811 981
Walterboro, SC (238)
------
6,573
Shopping Center 7,577 2,438 8,103 (230) 2,438 8,010 10,448 1,569
Lexington, NC (137)
------
10,311
Shopping Center 5,150 1,280 5,918 (44) 1,280 5,874 7,154 1,125
Rockwood, TN
Shopping Center 6,600 2,361 6,888 20 2,361 6,908 9,269 1,277
Spartanburg, SC
Shopping Center 8,132 929 11,275 (152) 929 11,263 12,192 1,879
Glasgow, KY (140)
------
12,052
Shopping Center 5,156 737 7,093 (169) 737 7,014 7,751 1,199
LaFollette, TN (90)
------
7,661
<CAPTION>
Life on Which
Depreciation
in Latest
Income
Date of Date Statement
Description Construction Acquired is Computed
- ----------- ------------ -------- -------------
(continued)
<S> <C> <C> <C>
Shopping Center 1990 12/19/90 12 - 40 yrs.
Beaufort, SC
Shopping Center 1989 12/19/90 12 - 40 yrs.
Morehead City, NC
Shopping Center 1989 12/19/90 12 - 40 yrs.
Walterboro, SC
Shopping Center 1990 3/5/91 12 - 40 yrs.
Lexington, NC
Shopping Center 1989 3/5/91 12 - 40 yrs.
Rockwood, TN
Shopping Center 1987 6/21/91 12 - 40 yrs.
Spartanburg, SC
Shopping Center 1990 8/9/91 12 - 40 yrs.
Glasgow, KY
Shopping Center 1990 8/9/91 12 - 40 yrs.
LaFollette, TN
</TABLE>
26
<PAGE> 27
Schedule III - Real Estate and Accumulated Depreciation
- -------------------------------------------------------
(continued) RETAIL PROPERTY INVESTORS, INC.
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
August 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Initial Cost to Gross Amount at Which Carried at
Partnership Close of period
--------------------- Costs --------------------------------
Buildings Capitalized Buildings,
Improvements (Removed) Improvements Total, Less
& Personal Subsequent to & Personal Allowance for Accumulated
Description Encumbrances (A) Land Property Acquisition (B) Land Property Impairment (C) Depreciation
----------- ---------------- ---- ----------- --------------- ---- ----------- -------------- ------------
(continued)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center 3,845 728 6,626 (1,989) 728 6,626 7,354 1,023
Fremont, OH (1,989)
------
5,365
Shopping Center 6,739 1,806 6,880 - 1,806 6,880 8,686 905
Osh Kosh, WI
Shopping Center 9,401 2,570 9,886 6 2,570 9,892 12,462 1,261
Onalaska, WI
Shopping Center 6,583 1,274 8,282 (274) 1,274 8,289 9,563 1,049
Sanford, NC (281)
------
9,282
Shopping Center 6,839 1,626 8,735 (2) 1,626 8,733 10,359 980
Bluefield, VA
Shopping Center 5,757 377 8,153 (341) 377 8,181 8,558 884
Marion, SC -------- ------- -------- ------- ------- -------- (369) -------
--------
8,189
--------
$159,144 $37,845 $185,879 $(5,209) $37,845 $185,550 $218,515 $33,666
======== ======= ======== ======= ======= ======== ======== =======
<CAPTION>
Life on Which
Depreciation
in Latest
Income
Date of Date Statement
Description Construction Acquired is Computed
----------- ------------ -------- -----------
(continued)
<S> <C> <C> <C>
Shopping Center 1990 10/25/91 12 - 40 yrs.
Fremont, OH
Shopping Center 1990 8/31/92 12 - 40 yrs.
Osh Kosh, WI
Shopping Center 1991 8/31/92 12 - 40 yrs.
Onalaska, WI
Shopping Center 1991 10/21/92 3 - 40 yrs.
Sanford, NC
Shopping Center 1992 4/29/93 12 - 40 yrs.
Bluefield, VA
Shopping Center 1992 6/23/93 12 - 40 yrs.
Marion, SC
</TABLE>
27
<PAGE> 28
Schedule III - Real Estate and Accumulated Depreciation
- -------------------------------------------------------
(continued) RETAIL PROPERTY INVESTORS, INC.
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
August 31, 1996
(In thousands)
Notes
- -----
(A) See Note 5 of Notes to Financial Statements for a description of the debt
encumbering the properties.
(B) Included in Costs Capitalized (Removed) Subsequent to Acquisition are
certain master lease payments earned that were recorded as reductions in
the cost basis of the properties for financial reporting purposes. See Note
4 to the financial statements for a further description of these payments.
Also included in Costs Capitalized (Removed) Subsequent to Acquisition is
the provision for impairment loss described in Note C below.
(C) The gross amount reflected above includes impairment losses of $1,030 and
$3,850 recognized in fiscal 1996 and 1995, respectively, to writedown the
operating investment properties to the lower of adjusted cost or net
realizable value. See Notes 1, 2 and 4 for a further discussion. The
aggregate cost of real estate owned at August 31, 1996 for Federal income
tax purposes is approximately $226,815,000.
(D) Reconciliation of real estate owned:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 219,124 $ 222,814 $ 222,373
Acquisitions and improvements 421 178 767
Disposal of fully depreciated tenant improvements -- (18) --
Reduction of basis due to master
lease payments received -- -- (326)
Provision for loss on impairment of
assets held for sale (1,030) (3,850) --
--------- --------- ---------
Balance at end of year $ 218,515 $ 219,124 $ 222,814
========= ========= =========
(E) Reconciliation of accumulated depreciation:
Balance at beginning of year $ 27,409 $ 21,080 $ 14,863
Depreciation expense 6,257 6,347 6,217
Disposal of fully depreciated tenant improvements -- (18) --
--------- --------- ---------
Balance at end of year $ 33,666 $ 27,409 $ 21,080
========= ========= =========
</TABLE>
28
<PAGE> 29
GLIMCHER REALTY TRUST
Preface to unaudited Pro Forma Consolidated Balance Sheets as of September 30,
1996 and the unaudited Pro Forma Consolidated Statements of Operations for the
nine months ended September 30, 1996 and the year ended December 31, 1995.
On October 17, 1996, Glimcher Realty Trust (the "Company" or GRT)
acquired from Retail Property Investors, Inc. 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 Glimcher
Properties Limited Partnership (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 Partnership'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
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.
29
<PAGE> 30
GLIMCHER REALTY TRUST
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
GLIMCHER
GLIMCHER REALTY TRUST
REALTY CONSOLIDATED
TRUST ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(A)
<S> <C> <C> <C>
Investment in real estate:
Land................................................................... $ 56,180 $ 20,535 (B) $ 76,715
Buildings, improvements and equipment.................................. 649,617 184,815 (B) 834,432
Developments in progress:
Land ............................................................... 27,578 27,578
Developments........................................................ 45,423 (2,058)(C) 43,365
-------- --------- ----------
778,798 203,292 982,090
Less accumulated depreciation.......................................... 80,730 80,730
-------- --------- ----------
Net investment in real estate................................... 698,068 203,292 901,360
Cash and cash equivalents................................................ 5,996 (389)(C) 5,607
Cash in escrow........................................................... 32,771 (27,853)(D) 4,918
Tenant accounts receivable, net.......................................... 19,617 19,617
Deferred expenses, net................................................... 9,352 9,352
Prepaid and other assets................................................. 806 806
-------- --------- ----------
$766,610 $175,050 $ 941,660
======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable................................................... $313,543 $151,470 (E) $465,013
Notes payable............................................................ 109,254 15,272 (F) 124,526
Accounts payable and accrued expenses.................................... 15,780 8,308 (G) 24,088
Distributions payable.................................................... 11,776 11,776
-------- --------- ----------
450,353 175,050 625,403
-------- --------- ----------
Minority interest in partnerships........................................ 43,131 43,131
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............................................. 316,672 316,672
Distributions in excess of accumulated earnings........................ ( 43,765) (43,765)
-------- --------- ----------
$766,610 $175,050 $941,660
======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
30
<PAGE> 31
GLIMCHER REALTY TRUST
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
GLIMCHER
GLIMCHER REALTY TRUST
REALTY CONSOLIDATED
TRUST PROPERTIES ADJUSTMENTS PRO FORMA
----- ---------- ----------- ---------
(A) (B)
<S> <C> <C> <C> <C>
Total revenues................................ $ 81,977 $ 19,063 $ 101,040
--------- --------- ----------
Real estate taxes............................. 7,453 1,109 8,562
Recoverable operating expenses................ 9,855 1,972 $ (564)(C) 11,263
---------- ---------- -------- -----------
17,308 3,081 (564) 19,825
Other operating expenses...................... 1,986 154 2,140
General and administrative.................... 6,583 678 (383)(D) 6,878
---------- ---------- -------- -----------
Total operating expenses...................... 25,877 3,913 (947) 28,843
---------- ---------- -------- -----------
Net operating income.......................... 56,100 15,150 947 72,197
Depreciation and amortization 16,157 4,815 (1,350)(E) 19,622
Portfolio sale expenses....................... 1,834 (1,834)(G)
Loss on impairment of assets held for sale.... 926 (926)(G)
Cash management fees.......................... 16 (16)(G)
Forgiveness of debt........................... (1,139) 1,139 (G)
Gain on sale of properties.................... 1,501 1,501
Interest income............................... 332 380 712
Interest expense.............................. 19,477 11,118 572 (F) 31,167
Minority interest in partnerships............. 2,406 141 (H) 2,547
--------- ---------- ------- ----------
Net income $ 19,893 $ (2,040) $ 3,221 $ 21,074
========= ========== ======= ==========
Earnings per common share of beneficial interest $ 0.91 $ 0.96(I)
========= ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
31
<PAGE> 32
GLIMCHER REALTY TRUST
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
GLIMCHER
GLIMCHER REALTY TRUST
REALTY CONSOLIDATED
TRUST PROPERTIES ADJUSTMENTS PRO FORMA
--------- ---------- ----------- -----------
(A) (B)
<S> <C> <C> <C> <C>
Total revenues..................................... $ 104,248 $ 24,696 $ 128,944
--------- -------- ---------
Real estate taxes.................................. 8,588 1,319 9,907
Recoverable operating expenses..................... 11,920 2,365 $ (737)(C) 13,548
--------- -------- -------- ---------
20,508 3,684 (737) 23,455
Other operating expenses........................... 2,198 2,198
General and administrative......................... 6,409 1,579 (1,185)(D) 6,803
--------- -------- ------- ---------
Total operating expenses........................... 29,115 5,263 (1,922) 32,456
--------- -------- ------- ---------
Net operating income............................... 75,133 19,433 1,922 96,488
Depreciation and amortization 20,560 6,504 (1,884)(E) 25,180
Loss on impairment of assets held for sale......... 3,954 (3,954)(G)
Cash management fees............................... 13 (13)(G)
Financial and investor servicing expenses.......... 45 (45)(G)
REIT management fees............................... 62 (62)(G)
Investment analysis expense........................ 28 (28)(G)
Interest income.................................... 649 393 1,042
Interest expense................................... 26,215 15,300 287 (F) 41,802
Minority interest in partnerships.................. 3,294 164 (H) 3,458
--------- -------- ------- ---------
Net income......................................... $ 25,713 $ (6,080) $ 7,457 $ 27,090
========= ========= ======== =========
Earnings per common share of beneficial interest $ 1.27 $ 1.34(I)
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
32
<PAGE> 33
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated balance sheet is
presented as if the acquisition of the Properties occurred as of September 30,
1996.
The accompanying unaudited pro forma consolidated statements of
operations are presented as if the acquisition of the Properties had been made
as of January 1, 1996 and January 1, 1995, respectively.
These pro forma financial statements should be read in conjunction with
the historical financial statements and notes thereto of Glimcher Realty Trust
and Retail Property Investors, Inc. (RPI). In management's opinion, all
adjustments necessary to reflect the effects of the acquisition of the
Properties have been made.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of what the actual financial position as of September 30,
1996 or what the actual results of operations of the Company would have been
assuming the acquisition of the Properties had been completed as of January 1,
1996 and January 1, 1995, respectively, nor do they purport to represent the
results for future periods.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET
(A) Reflects the balance sheet of Glimcher Realty Trust as of September
30, 1996.
(B) Reflects the allocation of the purchase price of $205,350 between
land and buildings, improvements and equipment.
(C) Reflects the reclassification of amounts related to the acquisition
of the Properties and reflected in the Company's balance sheet as of September
30, 1996.
(D) Reflects the elimination of cash in escrow of $28,128 which was
borrowed on the Company's revolving line of credit and deposited in escrow to
secure letters of credit relating to the acquisition of the Properties.
Additionally it reflects $275 relating to a real estate tax escrow which was
received as part of the acquisition of the Properties.
(E) Reflects the assumption of mortgage notes payable and placement of
a new mortgage note payable of $117,098 and $34,372, respectively, relating to
the acquisition of the Properties.
(F) Reflects the net increase in the Company's credit facility and
consists of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
<S> <C>
New borrowings on credit facility $45,847
Return of letters of credit (28,128)
Elimination of borrowings through September 30, 1996 (2,447)
-------
$15,272
=======
</TABLE>
(G) Reflects the assumption of accured expenses relating to the
purchase of the Properties.
33
<PAGE> 34
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(A) Reflects the operations of Glimcher Realty Trust for the pro forma
periods indicated.
(B) Reflects the operations of the Properties for the pro forma
periods. To correspond to Glimcher Realty Trust's results for the year ended
December 31, 1995 and nine months ended September 30, 1996, RPI nine months
ended August 31, 1996 was computed as RPI twelve months ended August 31, 1996,
minus RPI three months ended November 30, 1995. For the year ended December 31,
1995, RPI twelve months ended November 30, 1995 was computed as RPI twelve
months ended August 31, 1995, plus RPI three months ended November 30, 1995,
minus RPI three months ended November 30, 1994.
(C) Reflects the decrease in operating expenses to eliminate management
fees of the Properties.
(D) Reflects the net decrease in general and administrative expenses
which consists of the elimination of general and administrative costs of Retail
Property Investors, Inc. of $678 for the nine months ended September 30, 1996
and $1,579 for the year ended December 31, 1995, offset by general and
administrative costs of the Company relating to salaries and benefits of
additional staff needed for the leasing, maintenance and financial reporting of
the Properties.
(E) Reflects the decrease in depreciation and amortization relative to
the purchase of the Properties.
(F) Reflects the increase in interest expense as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
<S> <C> <C>
Interest on assumed loans $ 7,403 $ 9,871
Interest on new debt 1,837 2,449
Interest on credit facility 2,450 3,267
-------- -------
$ 11,690 $15,587
======== =======
</TABLE>
(G) Reflects the elimination of costs relating to the exclusion of
other expense items not comparable to the future operations of the Properties.
(H) Reflects increase in minority interest in partnerships relative to
the operations of the Properties.
(I) Pro Forma earnings per common share of beneficial interest is based
upon 21,887,778 and 20,169,138 weighted average common shares of beneficial
interest outstanding as of September 30, 1996 and December 31, 1995,
respectively.
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 16, 1996
GLIMCHER REALTY TRUST
By: /s/ Terry A. Schreiner
------------------------------------
Terry A. Schreiner,
Senior Vice President and Chief
Financial Officer
35
<PAGE> 1
EXHIBIT
23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-3 (No. 33-90730) and in the Registration Statements on
Form S-8 (No. 33-94542, No. 33-90730 and No. 333-10221) of
Glimcher Realty Trust of our report dated November 22, 1996
relating to the financial statements of Retail Property
Investors, Inc., which appears in the Current Report on Form
8-K/A of Glimcher Realty Trust dated December 16, 1996.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 16, 1996
