<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 March 31, 1998
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:
Name of each exchange
Title of each class on which registered
------------------- -------------------
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE
$0.01 PER SHARE NEW YORK STOCK EXCHANGE
9 1/4% SERIES B CUMULATIVE REDEEMABLE PREFERRED
SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01
PER SHARE NEW YORK STOCK EXCHANGE
-------------------------------------
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 April 29, 1998, there were 23,687,901 Common Shares of Beneficial Interest
outstanding, par value $ 0.01 per share.
1 of 18 pages
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<TABLE>
GLIMCHER REALTY TRUST
FORM 10-Q
INDEX
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<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
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<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations for the three months ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
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<TABLE>
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLIMCHER REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<CAPTION>
ASSETS
(UNAUDITED)
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Investment in real estate:
Land ..................................................................... $ 91,177 $ 92,247
Buildings, improvements and equipment .................................... 977,609 976,645
Developments in progress:
Land .................................................................. 6,521 6,541
Developments .......................................................... 11,162 15,989
---------- ----------
1,086,469 1,091,422
Less accumulated depreciation ............................................ 114,554 107,611
---------- ----------
Net investment in real estate ......................................... 971,915 983,811
Cash and cash equivalents .................................................. 5,619 7,434
Cash in escrow ............................................................. 7,062 7,668
Investment in and advances to unconsolidated entities ...................... 176,452 118,195
Tenant accounts receivable, net ............................................ 25,043 23,938
Deferred expenses, net ..................................................... 7,623 7,980
Prepaid and other assets ................................................... 17,321 15,203
---------- ----------
$1,211,035 $1,164,229
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable ..................................................... $ 494,149 $ 501,272
Notes payable .............................................................. 142,167 90,416
Accounts payable and accrued expenses ...................................... 21,915 25,500
Distributions payable ...................................................... 17,726 14,079
---------- ----------
675,957 631,267
Commitments and contingencies
Minority interest in operating partnership ................................. 35,733 31,907
Redeemable preferred shares:
Series A-1 and Series C convertible preferred shares of beneficial
interest, $0.01 par value, 90,000 and 34,000 shares issued and
outstanding as of March 31, 1998 and December 31, 1997,
respectively .......................................................... 90,000 90,000
Shareholders' equity:
Series B cumulative redeemable preferred shares of beneficial
interest, $0.01 par value, 5,118,000 shares issued and outstanding .... 127,950 127,950
Common shares of beneficial interest, $0.01 par value, 23,681,312
and 23,669,960 shares issued and outstanding as of March 31, 1998
and December 31, 1997, respectively ................................... 237 237
Additional paid-in capital ............................................... 352,804 348,433
Distributions in excess of accumulated earnings .......................... (71,646) (65,565)
---------- ----------
$1,211,035 $1,164,229
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
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<TABLE>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Minimum rents .................................................... $29,638 $26,904
Percentage rents ................................................. 1,175 1,016
Tenant recoveries ................................................ 7,190 5,762
Other ............................................................ 1,661 708
------- -------
Total revenues ................................................. 39,664 34,390
------- -------
Operating expenses:
Real estate taxes ................................................ 3,796 2,563
Recoverable operating expenses ................................... 4,152 3,609
------- -------
7,948 6,172
Other operating expenses ......................................... 875 789
------- -------
Total operating expenses ....................................... 8,823 6,961
------- -------
Depreciation and amortization ......................................... 8,051 6,816
General and administrative ............................................ 2,138 2,163
Interest income ....................................................... 620 109
Interest expense ...................................................... 10,205 10,267
Equity in income (loss) of unconsolidated entities .................... (188) (523)
Minority interest in operating partnership ............................ 667 837
------- -------
Net income ..................................................... 10,212 6,932
Preferred stock dividends ............................................. 4,908 715
------- -------
Net income available to common shareholders .................... $ 5,304 $ 6,217
======= =======
Earnings per share (basic and diluted) ................................ $ 0.22 $ 0.28
======= =======
Cash distributions declared per common share of beneficial interest.... $0.4808 $0.4808
======= =======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 10,212 $ 6,932
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for doubtful accounts ...................... 536 629
Depreciation and amortization ........................ 8,051 6,816
Other non-cash expenses .............................. 207 194
Equity in (income) loss of unconsolidated entities ... 229 523
Minority interest in operating partnership ........... 667 837
Net changes in operating assets and liabilities:
Tenant accounts receivable, net ...................... (1,704) (2,637)
Deferred expenses, prepaid and other assets .......... (644) 23
Accounts payable and accrued expenses ................ (3,820) (3,453)
-------- --------
Net cash provided by operating activities ..................... 13,734 9,864
-------- --------
Cash flows from investing activities:
Additions to investment in real estate .................... (5,368) (4,009)
Investment in unconsolidated entities ..................... (49,669) (4,714)
Withdrawals from cash in escrow ........................... 582 551
Additions to deferred expenses, prepaid and other assets .. (1,681) (257)
-------- --------
Net cash used in investing activities ......................... (56,136) (8,429)
-------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit, net ............... 51,800 6,400
Proceeds from issuance of mortgage and notes payable ...... 3,339 3,068
Principal payments on mortgage and notes payable .......... (618) (810)
Proceeds from issuance of shares .......................... 145
Cash distributions ........................................ (14,079) (12,761)
-------- --------
Net cash provided by (used in) financing activities ........... 40,587 (4,103)
-------- --------
Net change in cash and cash equivalents ............................ (1,815) (2,668)
Cash and cash equivalents, at beginning of period .................. 7,434 8,968
-------- --------
Cash and cash equivalents, at end of period ........................ $ 5,619 $ 6,300
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
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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 the accounts
of Glimcher Realty Trust, (the "Company" or "GRT"), Glimcher Properties Limited
Partnership (the "Operating Partnership") (88.8% owned by GRT at March 31, 1998
and 90.1% at December 31, 1997), five Delaware limited partnerships (Glimcher
Holdings Limited Partnership, Glimcher Centers Limited Partnership, Grand
Central Limited Partnership, Glimcher York Associates Limited Partnership and
Glimcher University Mall Limited Partnership) and one Ohio limited partnership
(Morgantown Mall Associates Limited Partnership), all of which are owned
directly or indirectly by GRT. The Operating Partnership has an investment in
several joint ventures and one other corporation which are accounted for under
the equity method. All significant inter-entity 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, statements of operations, and 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 three months ended March 31, 1998, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998.
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 GRT's
Form 10-K for the year ended December 31, 1997.
Supplemental disclosure of non-cash financing and investing activities:
The Company accrued accounts payable of $3,439 and $4,439 for real
estate improvements as of March 31, 1998 and March 31, 1997, respectively.
2. INVESTMENT IN UNCONSOLIDATED ENTITIES
Investment in unconsolidated entities consists of preferred stock and
non-voting common stock of Glimcher Development Corporation, a 45.0% interest in
Great Plains Metro Mall LLC, a 33.3% interest in Johnson City Venture LLC, a
40.0% interest in Dayton Mall LLC, a 40.0% interest in Colonial Park Mall
Limited Partnership, a 30.0% interest in Elizabeth Metro Mall, LLC, a 34.85%
interest in Glimcher SuperMall Venture LLC, a 20.0% interest in San Mall LLC,
and a 50.0% interest in Polaris Center LLC.
The net income (loss) for each unconsolidated entity is allocated in
accordance with the provisions of the applicable operating agreements. The
allocation provisions in these agreements may differ from the ownership interest
held by each member under the terms of these agreements.
The summary financial information of the Company's unconsolidated
entities accounted for using the equity method, and a summary of the Operating
Partnership's investment in and share of net income (loss) from such
unconsolidated entities are presented below:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
BALANCE SHEETS
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Assets:
Investment properties at cost, net ................... $494,851 $357,416
Other assets ......................................... 26,207 20,452
-------- --------
$521,058 $377,868
======== ========
Liabilities and Members' Equity:
Mortgage notes payable ............................... $268,796 $205,058
Accounts payable and accrued expenses ................ 52,344 26,842
-------- --------
321,140 231,900
Members' equity .......................................... 199,918 145,968
-------- --------
$521,058 $377,868
======== ========
Operating Partnership's Share of:
Members' equity ...................................... $142,153 $111,529
======== ========
RECONCILIATION OF MEMBERS' EQUITY TO COMPANY
INVESTMENT IN UNCONSOLIDATED ENTITIES:
Members' equity ...................................... $142,153 $111,529
Advances and additional costs ........................ 34,299 6,666
-------- --------
Investment in unconsolidated entities ................ $176,452 $118,195
======== ========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Total revenues ........................................... $ 16,062 $ 2,174
Operating expenses ....................................... (7,052) (1,782)
-------- --------
Net operating income ..................................... 9,010 392
Depreciation and amortization ............................ (3,132) (261)
Interest expense ......................................... (5,316) (528)
-------- --------
Net income (loss) ................................. $ 562 $ (397)
======== ========
Operating Partnership's share of net income (loss) ....... $ (188) $ (523)
======== ========
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. MORTGAGE NOTES PAYABLE AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
CARRYING AMOUNT OF PAYMENT PAYMENT AT MATURITY
DESCRIPTION MORTGAGE NOTES PAYABLE INTEREST RATE TERMS MATURITY DATE
- ------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Grand Central Limited Partnership .... $ 25,000 $ 25,000 6.935% 6.935% (a) $25,000 Oct. 1, 2000
Glimcher Holdings L.P. - Loan A ...... 40,000 40,000 6.995% 6.995% (a) 40,000 Feb. 1, 1999
Glimcher Holdings L.P. - Loan B ...... 40,000 40,000 7.505% 7.505% (a) 40,000 Feb. 1, 2003
Glimcher Centers L.P. ................ 76,000 76,000 7.625% 7.625% (a) 76,000 Aug. 1, 2000
Morgantown Mall Associates L.P. ...... 50,200 50,200 7.500% 7.500% (a) 50,200 Apr. 1, 1999
Glimcher Properties L.P. Mortgage
Notes Payable:
Glimcher Properties L.P. ............. 50,000 50,000 7.470% 7.470% (a) 50,000 Oct. 26, 2002
Other Mortgage Notes ................. 102,992 113,456 (d) (d) (b) 91,229 (f)
University Mall Limited Partnership .. 71,231 71,376 (g) (g) (b) (g) (g)
Construction Loans ................... 38,726 35,240 (c) (c) (a) (e)
-------- --------
Total Mortgage Notes Payable ......... $494,149 $501,272
======== ========
</TABLE>
(a) The loan requires monthly payments of interest only.
(b) The loans require monthly payments of principal and interest.
(c) Interest rates ranging from 7.6875% to 7.8800% in 1998 and 7.6875% to
8.0000% in 1997.
(d) Interest rates ranging from 7.3750% to 9.1250%.
(e) Final maturity dates ranging from June 1998 to November 1999.
(f) Final maturity dates ranging from June 1999 to April 2016.
(g) The loan has an effective interest rate of 7.0900% and matures in January
2028, with an optional prepayment rate in January 2013.
All mortgage notes payable are collateralized by certain properties
owned by the respective partnerships. The loan agreement for Grand Central
Limited Partnership, Glimcher Holdings Limited Partnership and Glimcher Centers
Limited Partnership contains financial covenants regarding minimum net operating
income and coverage ratios.
4. NOTES PAYABLE
At March 31, 1998, the Company maintained a revolving line of credit
(the "Credit Facility") of $190,000. Borrowings under the Credit Facility are
secured by 11 properties and currently bear interest at a rate equal to LIBOR
plus 150 basis points per annum (7.1875% at March 31, 1998). Payments due under
the Credit Facility are guaranteed by GRT and by Glimcher Properties
Corporation, a wholly owned subsidiary of the Company.
8
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 establishes standards for computing and presenting earnings
per share ("EPS") and replaces the presentation of primary EPS with a
presentation of basic EPS and diluted EPS, as summarized in the table below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------------------------
1998 1997
-------------------------- ------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
stockholders.................. $5,304 23,675 $0.22 $6,217 21,889 $0.28
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units....... 667 2,944
Options........................... 196 55
------ ------ ----- ------ ------ -----
DILUTED EPS
Income available plus assumed
conversions................... $5,971 26,815 $0.22 $6,217 21,944 $0.28
====== ====== ===== ====== ====== =====
</TABLE>
The Series A-1 and Series C convertible preferred shares of beneficial
interest include certain conversion features that could potentially dilute EPS
in the future, but were not included in the computation of diluted EPS because
to do so would have been antidilutive (based on period end share prices) for
the periods presented.
6. SHAREHOLDERS' EQUITY
The Company's Declaration of Trust authorizes the Company to issue up
to an aggregate of 100,000,000 shares of beneficial interest, consisting of
common shares or one or more series of preferred shares of beneficial interest.
The following table summarizes the change in distributions in excess of
accumulated earnings since January 1, 1998:
Balance, January 1, 1998......................... $(65,565)
--------
Distributions declared, $0.4808 per share... (11,385)
Preferred stock dividends................... (4,908)
Net income.................................. 10,212
--------
Balance, March 31, 1998.......................... $(71,646)
========
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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 GRT, contains certain statements which may be deemed to be
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 venture arrangements, including the failure
of Nomura Asset Capital Corporation, ("Nomura") to purchase additional preferred
shares or to provide permanent financing; development risks, including lack of
satisfactory financing, construction and lease-up delays and cost overruns; the
level and volatility of interest rates; the 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 this Form 10-Q and
in GRT's other reports filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUES
Total revenues increased 15.3%, or $5.3 million, for the three months
ended March 31, 1998. Of the $5.3 million increase, $4.8 million was the result
of increased revenues at the malls, $320,000 was the result of increased
revenues at the community centers, $510,000 was the result of decreased revenues
from dispositions and $700,000 was related to other revenue increases.
Minimum rents
Minimum rents increased 10.2%, or $2.7 million, for the three months
ended March 31, 1998.
INCREASE (DOLLARS IN MILLIONS)
------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
Same center.................... $0.2 $(0.2) $ 0.0 0.0%
Acquisitions/Developments...... 2.7 0.3 3.0 11.3
Dispositions................... 0.0 (0.3) (0.3) (1.1)
---- ----- ----- ----
$2.9 $(0.2) $ 2.7 10.2%
==== ===== ===== ====
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Percentage rents
Percentage rents increased $160,000 for the three months ended March
31, 1998. Of this increase, $300,000 was earned at the malls, which was
partially offset by a $40,000 decrease at the community centers and a $100,000
decrease from dispositions.
Tenant recoveries
Tenant recoveries reflect a net increase of 24.8% or $1.4 million for
the three months ended March 31, 1998.
INCREASE (DOLLARS IN MILLIONS)
------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
Same center........................ $0.3 $(0.1) $ 0.2 3.6%
Acquisitions/Developments.......... 1.1 0.2 1.3 23.0
Dispositions....................... 0.0 (0.1) (0.1) (1.8)
---- ----- ----- ----
$1.4 $ 0.0 $ 1.4 24.8%
==== ===== ===== ====
Other revenues
The $950,000 increase in other revenues is primarily the result of
increases in management fee revenues from unconsolidated joint ventures of
$670,000 and an increase of $230,000 in temporary tenant income at the malls.
OPERATING EXPENSES
Total operating expenses increased 26.7%, or $1.9 million, for the
three months ended March 31, 1998. Recoverable expenses increased $1.8 million,
the provision for credit losses decreased $100,000 and other operating expenses
increased $180,000.
Recoverable expenses
Recoverable operating expenses increased 28.8% or $1.8 million for the
three months ended March 31, 1998.
INCREASE (DOLLARS IN MILLIONS)
------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
Same center.................. $0.4 $ 0.1 $ 0.5 8.0%
Acquisitions/Developments.... 1.1 0.3 1.4 22.4
Dispositions................. 0.0 (0.1) (0.1) (1.6)
---- ----- ----- ----
$1.5 $ 0.3 $ 1.8 28.8%
==== ===== ===== ====
The increase in the same center expenses at the malls reflects a
$360,000 increase in real estate taxes due to increased assessments in certain
of the properties.
Provision for credit losses
The provision for credit losses was approximately $540,000 and
represented 1.3% of total revenues for the three months ended March 31, 1998,
compared to 1.8% of total revenues for the three months ended March 31, 1997.
11
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Depreciation and amortization
The $1.2 million increase in depreciation and amortization consists of
an increase of $800,000 from acquisitions, $100,000 from the opening of two new
community centers, an increase of $170,000 in the core portfolio properties and
the balance from increased loan fee amortization on the Company's credit
facility.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.1 million and represented
5.4% of total revenues for the three months ended March 31, 1998, compared to
$2.2 million and 6.3% of total revenues for the corresponding period in 1997.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense decreased 0.6% or $60,000, for the three months ended
March 31, 1998. The summary below identifies the increase by its various
components (dollars in thousands).
THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997 INC. (DEC.)
---- ---- -----------
Average loan balance................. $625,565 $582,409 $43,156
Average rate......................... 7.54% 7.59% (0.05)%
-------- --------
Total interest....................... 11,792 11,051 741
Less: Capitalized interest.......... (1,484) (1,033) (451)
Add: Amortization of rate buydown... 194 194
Other................................ (297) 55 (352)
-------- -------- -------
Interest expense..................... $ 10,205 $ 10,267 $ (62)
======== ======== =======
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company has several active development, renovation and expansion
projects and will continue to be active in these areas. Future development
projects being considered include those relating to the commitment between the
Company and Nomura, pursuant to which Nomura has agreed, subject to satisfaction
of certain conditions, to provide equity to the Company and permanent debt
financing for certain of the Company's developments. Management anticipates that
the funds available under its credit facility, the Company's plans to utilize
construction financing, long-term mortgage debt and the venture structure to
raise equity and financing for acquisitions and developments, and the issuance
of preferred and common stock will provide sufficient capital resources to carry
out the Company's business strategy relative to the acquisitions, renovations,
expansions and developments discussed herein.
At March 31, 1998 the Company's debt to total market capitalization was
44.3% which is consistent with the current policy of the Company to maintain
this ratio between 40.0% and 60.0%.
Net cash provided by operating activities for the three months ended
March 31, 1998 was $13.7 million versus $9.9 million for the corresponding
period of 1997. Net income adjusted for non-cash items accounted for a $4.0
million increase, while changes in operating assets and liabilities accounted
for a $100,000 decrease.
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Net cash used in investing activities for the three months ended March
31, 1998, was $56.1 million, and reflects additional direct investments in real
estate assets and additional indirect investments in real estate through
investments in unconsolidated entities.
Net cash provided by financing activities for the three months ended
March 31, 1998, was $40.6 million. Cash was provided by additional borrowings of
$51.8 million and issuance of mortgage and notes payable of $3.3 million. Cash
was used to fund distributions of $14.1 million and principal payments on
mortgage and notes payable of $620,000.
ACQUISITION, RENOVATION, EXPANSION AND DEVELOPMENT ACTIVITY
The Company continues to be very active in its acquisition, renovation,
expansion and development activities. Its business strategy is to set in place
activities that will allow the Company's assets and cash flow to grow.
Acquisitions
- ------------
The Company continues to pursue strategic acquisitions which will
complement and enhance its existing portfolio. On January 15, 1998, the Company,
in a joint venture with Nomura completed a transaction for the recapitalization
of the ownership of the SuperMall of the Great Northwest in Seattle, Washington,
for $103.0 million. The SuperMall of the Great Northwest consists of
approximately 933,000 square feet of GLA including seven anchors. The Company
has a 34.85% ownership interest in this property.
On March 31, 1998, the Company purchased an interest in a joint venture
which owned Almeda Mall and Northwest Mall, both in Houston, Texas. The two
malls were previously purchased by Nomura for $41.5 million. Almeda Mall
consists of approximately 792,000 square feet of GLA including three anchors and
Northwest Mall consists of approximately 782,000 square feet of GLA including
three anchors. The Company managed these malls since November 1, 1997. The
Company has a 20.0% ownership interest in these properties.
Renovations and Expansions
- --------------------------
Grand Central Mall
The expansion and renovation of this mall located in Parkersburg, West
Virginia, continues and will increase its GLA to approximately 900,000 square
feet upon its completion. The initial expansion which was completed in 1996
added a food court and relocated and enlarged the cinema. A new 83,600 square
foot Proffitt's opened in March 1998 and an approximately 23,500 square foot
OfficeMax opened in January 1998.
River Valley Mall
In March 1998, the Company announced plans for an expansion at this
mall with the addition of an approximately 23,500 square foot OfficeMax on one
of the mall's outparcels. Opening is projected for late summer 1998.
Developments
- ------------
Polaris Towne Center
In February 1998, the Company in a joint venture in which it has a
50% ownership interest announced plans for the development of an approximately
700,000 square foot power community center in northern Columbus, Ohio. Upon
completion, the center will feature grocery and discount store anchors,
restaurants, big box retailers and several specialty shops. The initial phase
of this development is projected to open in late 1998 with the remainder to
open in late 1999.
13
<PAGE> 14
The Mall at Polaris
In March 1998, the Company announced plans for the development of a new
super-regional mall of approximately 1.5 million square feet in northern
Columbus, Ohio. The Mall at Polaris will be a bi-level mall featuring six anchor
tenants, approximately 150 mall stores and four restaurants. The mall, which
will be located across the street from Polaris Towne Center, is projected to
open in the year 2000.
Jersey Gardens
The Company, in a joint venture in which the Company has a 30.0%
ownership interest, is currently developing a 1.3 million square foot
value-oriented fashion and entertainment megamall, located in Elizabeth, New
Jersey. Construction is underway, and completion is projected for late 1999.
Georgesville Square
Construction of this community center continues on one of the center's
outparcels. A new 70,000 square-foot 16-screen cinema is scheduled to open in
the second quarter of 1998. The cinema has budgeted costs of $6.2 million with
costs to date of $3.2 million.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended March 31, 1998 and 1997, represent 13.8 million square feet of
GLA, or 84.8% of the 1998/1997 "same store" population.
MALLS COMMUNITY CENTERS
--------------------- ---------------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF %INCREASE
------------- --------- ---------- --------- ---------
Anchors.................. $161.66 2.6% $230.55 3.5%
Stores................... $253.29 4.1% $178.16 4.4%
Total.................... $204.56 3.4% $224.40 3.6%
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
---------------------------------------------
3/31/98 12/31/97 9/30/97 6/30/97 3/31/97
------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Mall Anchors....................... 97.6% 99.5% 99.4% 99.1% 99.1%
Mall Stores........................ 79.6% 82.6% 79.4% 82.6% 83.1%
Total Mall portfolio............... 91.1% 93.3% 91.7% 92.8% 92.6%
Community Center Anchors........... 97.6% 97.3% 97.6% 97.9% 98.2%
Community Center Stores............ 85.9% 85.9% 83.8% 86.0% 86.0%
Total Community Centers............ 94.9% 94.7% 94.4% 95.4% 95.5%
Single Tenant Retail Properties.... 92.2% 92.2% 92.2% 100.0% 100.0%
Total Community Center Portfolio... 94.6% 94.4% 94.2% 95.8% 96.0%
</TABLE>
The stabilized mall portfolio (excluding The Great Mall of the Great
Plains which opened in August 1997), had a mall store occupancy rate of 80.4%
and 84.0% at March 31, 1998, and December 31, 1997, respectively.
(1) Occupancy statistics included in the above table are based on the total
Company portfolio which includes properties owned by the Company and
properties held in joint ventures.
(2) Occupied space is defined as any space where a tenant is occupying the
space and/or paying rent at the date indicated, excluding all tenants with
leases having an initial term of less than one year.
14
<PAGE> 15
FUNDS FROM OPERATIONS
Management considers funds from operations ("FFO") to be a supplemental
measure of the Company's operating performance. FFO does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles ("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 months ended March 31, 1998,
and 1997 (in thousands):
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
---- ----
Net income available to common shareholders......... $ 5,304 $ 6,217
Add back (less):
Real estate depreciation and amortization...... 7,298 6,244
GRT share of joint venture depreciation
and amortization............................ 1,938 121
Minority interest in operating partnership..... 667 837
------- -------
Funds from operations............................... $15,207 $13,419
======= =======
FFO increased 13.3%, or $1.8 million for the three months ended March
31, 1998. The Company's aggressive acquisition program was the primary reason
for such increase.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 is effective for
financial statements for years beginning after December 15, 1997. SFAS No. 131
establishes standards for publicly-held business enterprises to report
information about operating segments in annual financial statements and requires
that these enterprises report selected information about operating segments in
interim financial reports issued to shareholders. The Company plans to adopt
SFAS No. 131 in its 1998 annual report on Form 10-K.
The Company is assessing the impact of the year 2000 issue as it
relates to the Company's information systems and vendor supplied application
software. Management does not currently anticipate any significant or material
impact on the Company as a result of implications associated with that issue.
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.
15
<PAGE> 16
INFLATION
Inflation has remained relatively low during the past three years and
has had a minimal impact on the Company's Properties. Many 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 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.
16
<PAGE> 17
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
(a) Exhibits - None
(b) Reports on Forms 8-K
During the three months ended March 31, 1998, the Company
filed a Report on Form 8-K/A with the Securities and Exchange
Commission on January 28, 1998, in connection with the
acquisition of University Mall.
17
<PAGE> 18
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
May 5, 1998 /s/ Herbert Glimcher
- ----------- ---------------------------------------------------
(Date) Herbert Glimcher, Chairman, Chief Executive Officer
& President
May 5, 1998 /s/ William G. Cornely
- ----------- ---------------------------------------------------
(Date) William G. Cornely, Senior Executive Vice President
Chief Operating Officer & Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,619
<SECURITIES> 0
<RECEIVABLES> 25,043
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,086,469
<DEPRECIATION> 114,554
<TOTAL-ASSETS> 1,211,035
<CURRENT-LIABILITIES> 0
<BONDS> 636,316
90,000
127,950
<COMMON> 237
<OTHER-SE> 281,158
<TOTAL-LIABILITY-AND-EQUITY> 1,211,035
<SALES> 0
<TOTAL-REVENUES> 39,664
<CGS> 0
<TOTAL-COSTS> 8,287
<OTHER-EXPENSES> 9,653
<LOSS-PROVISION> 536
<INTEREST-EXPENSE> 10,205
<INCOME-PRETAX> 10,212
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,212
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
