<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-12482
GLIMCHER REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 31-1390518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SOUTH THIRD STREET 43215
COLUMBUS, OHIO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 621-9000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
9-1/4% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES OF NEW YORK STOCK EXCHANGE
BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE
</TABLE>
-------------------------------------
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
As of October 30, 1998, there were 23,705,469 Common Shares of Beneficial
Interest outstanding, par value $16.1875 per share.
1 of 23 pages
<PAGE> 2
GLIMCHER REALTY TRUST
FORM 10-Q
<TABLE>
INDEX
-----
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations for the three months ended September 30, 1998 and 1997 4
Consolidated Statements of Operations for the nine months ended September 30, 1998 and 1997 5
Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 6
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
</TABLE>
2
<PAGE> 3
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
GLIMCHER REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<CAPTION>
ASSETS
(UNAUDITED)
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Investment in real estate:
Land ...................................................................... $ 170,893 $ 92,247
Buildings, improvements and equipment ..................................... 1,230,955 976,645
Developments in progress:
Land ................................................................... 5,608 6,541
Developments ........................................................... 15,604 15,989
---------- ----------
1,423,060 1,091,422
Less accumulated depreciation ............................................. 135,164 107,611
---------- ----------
Net investment in real estate .......................................... 1,287,896 983,811
Cash and cash equivalents ................................................... 11,703 7,434
Cash in escrow .............................................................. 9,813 7,668
Investment in and advances to unconsolidated entities ....................... 192,550 118,195
Tenant accounts receivable, net ............................................. 26,341 23,938
Deferred expenses, net ...................................................... 10,300 7,980
Prepaid and other assets .................................................... 6,464 15,203
---------- ----------
$1,545,067 $1,164,229
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable ...................................................... $ 773,208 $ 501,272
Notes payable ............................................................... 177,400 90,000
Other notes payable ......................................................... 25,267 416
Accounts payable and accrued expenses ....................................... 31,062 25,500
Distributions payable ....................................................... 17,810 14,079
---------- ----------
1,024,747 631,267
Commitments and contingencies
Minority interest in operating partnership .................................. 34,065 31,907
Redeemable preferred shares:
Series A-1 and Series D convertible preferred shares of beneficial
interest, $0.01 par value, 90,000 shares issued and outstanding
as of September 30, 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, 23,700,549 and
23,669,960 shares issued and outstanding as of September 30, 1998
and December 31, 1997, respectively .................................... 237 237
Additional paid-in capital ................................................ 353,097 348,433
Distributions in excess of accumulated earnings ........................... (85,029) (65,565)
---------- ----------
$1,545,067 $1,164,229
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
<TABLE>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Minimum rents ..................................................... $34,109 $26,813
Percentage rents .................................................. 640 873
Tenant recoveries ................................................. 9,854 5,887
Other ............................................................. 1,899 828
------- -------
Total revenues .................................................. 46,502 34,401
------- -------
Operating expenses:
Real estate taxes ................................................. 4,243 2,852
Recoverable operating expenses ..................................... 6,342 3,697
------- -------
10,585 6,549
Other operating expenses ........................................... 827 863
------- -------
Total operating expenses ........................................ 11,412 7,412
------- -------
Depreciation and amortization .......................................... 8,949 7,001
General and administrative ............................................. 2,461 1,952
Interest income ........................................................ 338 265
Interest expense ....................................................... 12,872 11,229
Equity in income (loss) of unconsolidated entities ..................... (497) 124
Minority interest in operating partnership ............................. 578 791
------- -------
Income before extraordinary item ....................................... 10,071 6,405
Extraordinary item:
Extinguishment of debt-payment fees and write-off of deferred
financing fees .................................................... 490
------- -------
Net income ...................................................... 9,581 6,405
Preferred stock dividends .............................................. 4,982 728
------- -------
Net income available to common shareholders ..................... $ 4,599 $ 5,677
======= =======
Earnings per share before extraordinary item (basic and diluted) ....... $ 0.21 $ 0.26
Extraordinary item ..................................................... 0.02
------- -------
Earnings per share (basic and diluted) ................................. $ 0.19 $ 0.26
======= =======
Cash distributions declared per common share of beneficial interest..... $0.4808 $0.4808
======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
<TABLE>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Minimum rents ........................................................ $ 94,001 $ 80,539
Percentage rents ..................................................... 2,481 2,720
Tenant recoveries .................................................... 24,656 17,575
Other ................................................................ 5,218 2,678
-------- --------
Total revenues ..................................................... 126,356 103,512
-------- --------
Operating expenses:
Real estate taxes .................................................... 11,603 8,059
Recoverable operating expenses ........................................ 15,284 10,993
-------- --------
26,887 19,052
Other operating expenses .............................................. 2,215 2,483
-------- --------
Total operating expenses ........................................... 29,102 21,535
-------- --------
Depreciation and amortization ............................................. 25,304 20,658
General and administrative ................................................ 6,969 6,255
Gain on sales of property/outparcels ...................................... 155
Interest income ........................................................... 1,572 507
Interest expense .......................................................... 33,069 31,850
Equity in income (loss) of unconsolidated entities ........................ (1,652) (951)
Minority interest in operating partnership ................................ 1,848 2,502
-------- --------
Income before extraordinary item .......................................... 29,984 20,423
Extraordinary item:
Extinquishment of debt-prepayment fees and write-off of deferred
financing fees ...................................................... 490
-------- --------
Net income ......................................................... 29,494 20,423
Preferred stock dividends ................................................. 14,784 2,169
-------- --------
Net income available to common shareholders ........................ $ 14,710 $ 18,254
======== ========
Earnings per share before extraordinary item (basic and diluted) .......... $ 0.64 $ 0.83
Extraordinary item ........................................................ 0.02
-------- --------
Earnings per share (basic and diluted) .................................... $ 0.62 $ 0.83
======== ========
Cash distributions declared per common share of beneficial interest........ $ 1.4424 $ 1.4424
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
<TABLE>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $ 29,494 $ 20,423
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss on long term debt extinguishment ........... 490
Provision for doubtful accounts ............................... 1,177 1,865
Depreciation and amortization ................................. 25,304 20,658
Gain on sales of properties/outparcels ........................ (155)
Other non-cash expenses ....................................... 537 582
Equity in (income) loss of unconsolidated entities ............ 1,653 951
Minority interest in operating partnership .................... 1,848 2,502
Net changes in operating assets and liabilities:
Tenant accounts receivable, net ............................... (3,584) (2,981)
Deferred expenses, prepaid and other assets ................... (2,376) 577
Accounts payable and accrued expenses ......................... 1,474 (3,501)
--------- --------
Net cash provided by operating activities .............................. 56,017 40,921
--------- --------
Cash flows from investing activities:
Proceeds from sales of properties .................................. 253
Additions to investment in real estate ............................. (20,230) (16,766)
Acquisition of properties .......................................... (296,393)
Investment in unconsolidated entities .............................. (67,191) (29,780)
Withdrawals from (payments to) cash in escrow ...................... 1,892 (130)
Additions to deferred expenses, prepaid and other assets ........... (3,204) (9,711)
--------- --------
Net cash used in investing activities .................................. (385,126) (56,134)
--------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit, net ........................ 87,400 48,600
Proceeds from issuance of mortgage and notes payable ............... 356,467 4,559
Principal payments on mortgage and notes payable ................... (61,419) (2,192)
Proceeds from issuance of shares ................................... 454 395
Cash distributions ................................................. (49,524) (37,772)
--------- --------
Net cash provided by financing activities .............................. 333,378 13,590
--------- --------
Net change in cash and cash equivalents ..................................... 4,269 (1,623)
Cash and cash equivalents, at beginning of period ........................... 7,434 8,968
--------- --------
Cash and cash equivalents, at end of period ................................. $ 11,703 $ 7,345
========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 7
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 September 30,
1998 and 90.1% at December 31, 1997), six Delaware limited partnerships
(Glimcher Holdings Limited Partnership, Glimcher Centers Limited Partnership,
Grand Central Limited Partnership, Glimcher York Associates Limited Partnership,
Glimcher University Mall Limited Partnership and Montgomery Mall Associates
Limited Partnership), one Ohio limited partnership (Morgantown Mall Associates
Limited Partnership) and three Delaware limited liability companies (Glimcher
Northtown Venture, LLC, Weberstown Mall, LLC and Glimcher Lloyd Venture, LLC),
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 nine months ended September 30, 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.
During the second quarter of 1998 the Financial Accounting Standards
Board Emerging Issues Task Force issued EITF 98-9 relating to the recognition of
contingent rental income in interim periods. Under EITF 98-9 the Company is
required to recognize percentage rents in interim periods only after the
contingent sales level is exceeded rather than estimating and accruing
percentage rents as if earned ratably over the lease year. The Company has
adopted EITF 98-9 on a prospective basis beginning second quarter 1998 and has
not restated the first quarter of 1998 or the comparable interim periods of
1997. The adoption of EITF 98-9 reduced net income available to common
shareholders by approximately $500,000 ($0.02 per share) for the three months
and $1.1 million ($0.04 per share) for the nine months ended September 30, 1998.
Comparative pro forma results if the standard had been adopted at the beginning
of 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
<S> <C> <C>
1998 Earnings per share (basic and diluted)................... $0.19 $0.62
1997 Earnings per share....................................... $0.26 $0.83
1997 Pro Forma Earnings per share if EITF 98-9 adopted
at 1/1/97..................................................... $0.25 $0.79
</TABLE>
Supplemental disclosure of non-cash financing and investing activities:
The Company accrued accounts payable of $2,898 and $356 for real estate
improvements as of September 30, 1998 and September 30, 1997, respectively.
7
<PAGE> 8
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. INVESTMENT IN UNCONSOLIDATED ENTITIES
Investment in unconsolidated entities consists of preferred stock and
non-voting common stock of Glimcher Development Corporation, a 45.00% interest
in Great Plains Metro Mall, LLC, a 33.33% interest in Johnson City Venture, LLC,
a 40.00% interest in Dayton Mall Venture, LLC, a 40.00% interest in Colonial
Park Mall Limited Partnership, a 30.00% interest in Elizabeth Metro Mall, LLC, a
34.85% interest in Glimcher SuperMall Venture, LLC, a 20.00% interest in San
Mall, LLC, a 50.00% interest in Polaris Center, LLC and a 20.00% interest in
Eastland Mall, 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:
<TABLE>
<CAPTION>
BALANCE SHEETS
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Assets:
Investment properties at cost, net .................. $636,297 $357,416
Other assets ........................................ 34,747 20,452
-------- --------
$671,044 $377,868
======== ========
Liabilities and Members' Equity:
Mortgage notes payable .............................. $376,372 $205,058
Accounts payable and accrued expenses ............... 88,692 26,842
-------- --------
465,064 231,900
Members' equity ......................................... 205,980 145,968
-------- --------
$671,044 $377,868
======== ========
Operating Partnership's share of:
Members' equity ..................................... $140,255 $111,529
======== ========
RECONCILIATION OF MEMBERS' EQUITY TO COMPANY
INVESTMENT IN UNCONSOLIDATED ENTITIES:
Members' equity ..................................... $140,255 $111,529
Advances and additional costs ....................... 52,295 6,666
-------- --------
Investment in unconsolidated entities ............... $192,550 $118,195
======== ========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ -----------------
<S> <C> <C>
Total revenues .......................................... $ 21,904 $ 60,422
Operating expenses ...................................... (10,735) (30,377)
-------- --------
Net operating income .................................... 11,169 30,045
Depreciation and amortization ........................... (3,879) (10,639)
Interest expense ........................................ (6,864) (18,373)
-------- --------
Net income (loss) ................................ $ 426 $ 1,033
======== ========
Operating Partnership's share of net income (loss)....... $ (497) $ (1,652)
======== ========
</TABLE>
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. MORTGAGE NOTES PAYABLE AS OF SEPTEMBER 30, 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......... 58,350 50,200 6.890% 7.500% (b) (c) (c)
University Mall Limited Partnership.... 70,886 71,376 7.090% 7.090% (b) (d) (d)
Northtown Mall, LLC.................... 40,000 6.912% (a) 40,000 Aug. 30, 2001
Montgomery Mall Associates, LP......... 47,718 6.740% (b) (e) (e)
Weberstown Mall ....................... 11,587 8.800% (b) Nov. 15, 2016
Glimcher Lloyd Venture, LLC............ 130,000 (f) (a) 130,000 Oct. 11, 2001
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................... 102,146 113,456 (g) (g) (b) 91,229 (h)
Bridge Facility........................ 50,000 (i) (a) 50,000 July 31, 1999
Construction Loans..................... 31,521 35,240 (j) (j) (a) (k)
-------- --------
Total Mortgage Notes Payable........... $773,208 $501,272
======== ========
</TABLE>
(a) The loan requires monthly payments of interest only.
(b) The loan requires monthly payments of principal and interest.
(c) The loan matures in September 2028, with an optional prepayment date in
2008.
(d) The loan matures in January 2028, with an optional prepayment date in 2013.
(e) The loan matures in August 2028, with an optional prepayment date in 2005.
(f) Interest rate of Libor plus 125 basis points per annum (6.840% at September
30, 1998).
(g) Interest rates ranging from 7.375% to 9.125% per annum.
(h) Final maturity dates ranging from June 1999 to April 2016.
(i) Interest rate of Libor plus 160 basis points per annum (7.225% at September
30, 1998).
(j) Interest rates of 7.625% at September 30, 1998 and ranging from 7.688% to
8.000% per annum in 1997.
(k) Final maturity dates ranging from October 1999 to November 1999.
All mortgage notes payable are collateralized by certain properties
owned by the respective partnerships. Certain of the loans contain financial
covenants regarding minimum net operating income and coverage ratios.
4. NOTES PAYABLE
At September 30, 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 160 basis points per annum (6.975% at September 30, 1998). Payments
due under the Credit Facility are guaranteed by GRT and by Glimcher Properties
Corporation, a wholly owned subsidiary of the Company. On April 29, 1998, the
Company elected to extend the Credit Facility to July 31, 1999.
The Company has other short term notes payable of $25,000, of which
$10,000 has a maturity date of December 15, 1998, with an extension option to
March 15, 1999 and $15,000 has a maturity date of February 1, 1999.
9
<PAGE> 10
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 SEPTEMBER 30,
-------------------------------------------------------
1998 1997
------------------------- --------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
stockholders.................... $4,599 23,699 $0.19 $5,677 21,908 $0.26
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units........ 578 2,978
Options............................ 13 83
DILUTED EPS
Income available plus assumed ------ ------ ----- ------ ------ -----
conversions..................... $5,177 26,690 $0.19 $5,677 21,991 $0.26
====== ====== ===== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------
1998 1997
------------------------- --------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
stockholders.................... $14,710 23,689 $0.62 $18,254 21,899 $0.83
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units........ 1,848 2,966
Options............................ 56 56
DILUTED EPS
Income available plus assumed ------- ------ ----- ------- ------ -----
conversions..................... $16,558 26,711 $0.62 $18,254 21,955 $0.83
======= ====== ===== ======= ====== =====
</TABLE>
The Series A-1 and Series D 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.
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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, $1.4424 per share... (34,174)
Preferred stock dividends................... (14,784)
Net income.................................. 29,494
--------
Balance, September 30, 1998...................... $(85,029)
========
7. PROPERTY ACQUISITIONS
<TABLE>
<CAPTION>
NET
AMOUNT LIABILITIES
ACQUISITION PROPERTY NAME ALLOCATED TO AND DEBT
DATE AND LOCATION ASSETS ACQUIRED CASH ASSUMED
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 1998 Northtown Mall-
Blaine, Minnesota............. $ 55,131 $ 54,961 $ 170
July 1998 Montgomery Mall-
Montgomery, Alabama........... 71,023 70,602 421
August 1998 Weberstown Mall-
Stockton, California.......... 24,586 24,586
September 1998 Lloyd Center Mall-
Portland, Oregon.............. 173,192 170,830 2,362
-------- -------- -------
Total.................................................. $323,932 $296,393 $27,539
======== ======== =======
</TABLE>
11
<PAGE> 12
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, particularly in light of certain
adverse factors disclosed recently about Nomura's financial condition;
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
The Emerging Issues Task Force ("EITF") addressed the timing of income
recognition for percentage rents by a lessor in EITF 98-9, Accounting for
Contingent Rent in Interim Financial Periods. This issue provides that a lessor
should defer recognition of contingent rental income in interim periods until
specified targets that trigger the contingent rent are met. The EITF concluded
that this issue may be applied on a prospective basis. The effect of this issue
was the deferral of approximately $600,000 ($0.03 per diluted share) of
percentage rents from the second quarter and approximately $500,000 ($0.02 per
diluted share) of percentage rents from the third quarter until the fourth
quarter of 1998. The Company elected not to restate the 1997 quarterly results
or the first quarter of 1998.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997
REVENUES
Total revenues increased 35.2%, or $12.1 million, for the three months
ended September 30, 1998. Of the $12.1 million increase, $11.3 million was the
result of increased revenues at the malls, $550,000 was the result of increased
revenues at the community centers, $350,000 was the result of decreased revenues
from dispositions and $600,000 was related to other revenue increases.
Minimum rents
Minimum rents increased 27.2%, or $7.3 million, for the three months
ended September 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.5 $ 0.5 $ 1.0 3.7%
Acquisitions/Developments.... 6.6 6.6 24.6
Dispositions................. (0.3) (0.3) (1.1)
---- ----- ----- ----
$7.1 $ 0.2 $ 7.3 27.2%
==== ===== ===== ====
</TABLE>
12
<PAGE> 13
Percentage rents
After reflecting the adoption of EITF 98-9 as described above,
percentage rents decreased $230,000 for the three months ended September 30,
1998. Of this decrease, $40,000 was from the malls, $180,000 was from the
community centers, and $10,000 was from dispositions. The overall decrease in
the third quarter of 1998 was a result of the prospective adoption of a change
in accounting for percentage rents as required by EITF 98-9, without a
restatement of the prior year amounts.
Tenant recoveries
Tenant recoveries reflect a net increase of 67.4% or $4.0 million for
the three months ended September 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.4 $ 0.2 $ 0.6 10.1%
Acquisitions/Developments.... 3.5 3.5 59.0
Dispositions................. (0.1) (0.1) (1.7)
---- ----- ----- ----
$3.9 $ 0.1 $ 4.0 67.4%
==== ===== ===== ====
</TABLE>
Other revenues
The $1.1 million increase in other revenues is primarily the result of
increases in management fee revenues of $570,000 and an increase of $430,000 in
temporary tenant income at the malls.
OPERATING EXPENSES
Total operating expenses increased 54.0%, or $4.0 million, for the
three months ended September 30, 1998. Recoverable operating expenses increased
$4.0 million, the provision for credit losses decreased $200,000 and other
operating expenses increased $160,000.
Recoverable expenses
Recoverable operating expenses increased 61.6% or $4.0 million for the
three months ended September 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.4 $ 0.2 $ 0.6 9.2%
Acquisitions/Developments.... 3.5 3.5 53.9
Dispositions................. (0.1) (0.1) (1.5)
---- ----- ----- ----
$3.9 $ 0.1 $ 4.0 61.6%
==== ===== ===== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $420,000 and
represented 1.0% of tenant revenues for the three months ended September 30,
1998, compared to 1.8% of tenant revenues for the three months ended September
30, 1997.
13
<PAGE> 14
Depreciation and amortization
The $1.9 million increase in depreciation and amortization consists
primarily of an increase of $1.5 million from mall acquisitions, an increase of
$430,000 in the core portfolio properties, offset with a decrease of $60,000
from dispositions.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.5 million and represented
5.3% of total revenues for the three months ended September 30, 1998, compared
to $2.0 million and 5.7% of total revenues for the corresponding period in 1997.
The increase is primarily due to an increase in corporate associates in 1998.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 14.6%, or $1.6 million, for the three months
ended September 30, 1998. The summary below identifies the increase by its
various components (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
1998 1997 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance ............... $815,191 $614,580 $200,611
Average rate ....................... 7.53% 7.65% (0.12)%
Total interest ..................... $ 15,346 $ 11,754 $ 3,592
Less: Capitalized interest ........ (1,651) (484) (1,167)
Add: Amortization of rate buydown.. 129 194 (65)
Other .............................. (952) (235) (717)
-------- -------- --------
Interest expense ................... $ 12,872 $ 11,229 $ 1,643
======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
REVENUES
Total revenues increased 22.1%, or $22.8 million, for the nine months
ended September 30, 1998. Of the $22.8 million increase, $21.5 million was the
result of increased revenues at the malls, $950,000 was the result of increased
revenues at the community centers, $1.2 million was the result of decreased
revenues from dispositions and $1.5 million was related to other revenue
increases.
Minimum rents
Minimum rents increased 16.7%, or $13.5 million, for the nine months
ended September 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $ 1.0 $ 0.1 $ 1.1 1.4%
Acquisitions/Developments.... 12.4 0.9 13.3 16.4
Dispositions................. (0.9) (0.9) (1.1)
----- ----- ----- ----
$13.4 $ 0.1 $13.5 16.7%
===== ===== ===== ====
</TABLE>
14
<PAGE> 15
Percentage rents
After reflecting the adoption of EITF 98-9 as described above,
percentage rents decreased $240,000 for the nine months ended September 30,
1998. An increase of $290,000 at the malls was offset by a $380,000 decrease at
the community centers and a $150,000 decrease from dispositions. The overall
decrease was a result of the adoption of a change in accounting for percentage
rents as required by EITF 98-9, without a restatement of the prior year amounts.
Tenant recoveries
Tenant recoveries reflect a net increase of 40.3% or $7.1 million for
the nine months ended September 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
--------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- --------- ----- -------
<S> <C> <C> <C> <C>
Same center.................. $0.9 $(0.2) $ 0.7 4.0%
Acquisitions/Developments.... 6.1 0.5 6.6 37.4
Dispositions................. (0.2) (0.2) (1.1)
---- ----- ----- ----
$7.0 $ 0.1 $ 7.1 40.3%
==== ===== ===== ====
</TABLE>
Other revenues
The $2.5 million increase in other revenues is primarily the result of
increases in management fee revenues of $1.6 million, and an increase of
$870,000 in temporary tenant income at the malls.
OPERATING EXPENSES
Total operating expenses increased 35.1%, or $7.6 million, for the nine
months ended September 30, 1998. Recoverable operating expenses increased $7.8
million, the provision for credit losses decreased $690,000 and other operating
expenses increased $420,000.
Recoverable expenses
Recoverable expenses increased 41.1% or $7.8 million for the nine
months ended September 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
--------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- --------- ----- -------
<S> <C> <C> <C> <C>
Same center.................. $1.0 $ 0.3 $ 1.3 6.9%
Acquisitions/Developments.... 6.2 0.5 6.7 35.3
Dispositions................. (0.2) (0.2) (1.1)
---- ----- ----- ----
$7.2 $ 0.6 $ 7.8 41.1%
==== ===== ===== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $1.2 million and
represented 1.0% of tenant revenues for the nine months ended September 30,
1998, compared to 1.8% of tenant revenues for the nine months ended
September 30, 1997.
15
<PAGE> 16
Depreciation and amortization
The $4.6 million increase in depreciation and amortization consists
primarily of an increase of $3.2 million from mall acquisitions, $300,000 from
the opening of two new community centers, an increase of $920,000 in the core
portfolio properties, offset with a decrease of $190,000 from dispositions.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $7.0 million and represented
5.5% of total revenues for the nine months ended September 30, 1998, compared to
$6.3 million and 6.0% of total revenues for the corresponding period in 1997.
The increase is primarily due to an increase in corporate associates in 1998.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 3.8% or $1.2 million, for the nine months
ended September 30, 1998. The summary below identifies the increase by its
various components (dollars in thousands).
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
1998 1997 INC. (DEC.)
-------- -------- -----------
<S> <C> <C> <C>
Average loan balance .................... $707,680 $595,461 $112,219
Average rate ............................ 7.52% 7.65% (0.13)%
Total interest .......................... $ 39,913 $ 34,165 $ 5,748
Less: Capitalized interest ............. (4,916) (2,564) (2,352)
Add: Amortization of rate buydown....... 517 582 (65)
Other ................................... (2,445) 333 (2,112)
-------- -------- --------
Interest expense ........................ $ 33,069 $ 31,850 $ 1,219
======== ======== ========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company has several active development, renovation and expansion
projects and will continue to secure other projects in these areas. Certain
development projects relate 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.
On April 29, 1998, the Company elected to extend its credit facility to
July 31, 1999. In June 1998, the Company, in connection with the Northtown Mall
acquisition, secured a $40.0 million mortgage note payable which matures on
August 30, 2001 and bears interest at Libor plus 125 points. In August 1998, the
Company entered into a SWAP agreement which fixed the Libor rate at 5.662% per
annum. In July 1998, the Company, in connection with the Montgomery Mall
acquisition, secured a $47.8 million mortgage note payable which matures in
August 2028 and bears interest at 6.740% per annum. In August 1998, the Company,
in connection with the Weberstown Mall acquisition, assumed the existing
mortgage of $11.6 million which matures in November 2016 and bears interest at
8.800% per annum. Also in August 1998, the Company refinanced its existing $50.2
million mortgage note payable on Morgantown Mall, with a new $58.4 million
mortgage note payable which matures in September 2028 and bears interest at
6.890% per annum. In September 1998, the Company, in connection with the Lloyd
Center Mall acquisition, secured a $130.0 million mortgage note payable which
matures on October 2001 and bears interest at Libor plus 125 basis points. The
Company entered into an interest rate protection agreement for this loan which
capped Libor at 7.750% per annum. Additionally, the Company entered into two
short term note payable agreements of $25.0 million, of which $10.0 million has
a maturity date of December 15, 1998, with an extension option to March 15, 1999
and $15.0 million has a maturity date of February, 1999.
16
<PAGE> 17
Management anticipates that the funds available under its credit
facility, its construction financing, long-term mortgage debt, venture structure
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 September 30, 1998, the Company's debt to total market
capitalization was 59.1%, 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 nine months ended
September 30, 1998, was $56.0 million versus $40.9 million for the corresponding
period of 1997. Net income adjusted for non-cash items accounted for a $13.7
million increase, while changes in operating assets and liabilities accounted
for a $1.4 million increase.
Net cash used in investing activities for the nine months ended
September 30, 1998, was $385.1 million, and reflects additional direct
investments in real estate assets, including the acquisition of Northtown Mall
for approximately $54.0 million, Montgomery Mall for $70.0 million and Lloyd
Center Mall for $168.0 million and additional indirect investments in real
estate through investments in unconsolidated entities of $67.2 million.
Net cash provided by financing activities for the nine months ended
September 30, 1998 was $333.4 million. Cash was provided by additional
borrowings under the credit facility of $87.4 million and issuance of mortgage
and notes payable of $356.5 million. Cash was used to fund distributions of
$49.5 million and principal payments on mortgage and notes payable of $61.4
million.
ACQUISITION, RENOVATION, EXPANSION AND DEVELOPMENT ACTIVITY
The Company continues to be active in its acquisition, renovation,
expansion and development activities. Its business strategy is to grow the
Company's assets and cash flow available to provide for dividend requirements.
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 gross leasable area ("GLA") including eight
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 $39.0 million. Almeda Mall
consists of approximately 792,000 square feet of GLA including four anchors and
Northwest Mall consists of approximately 798,000 square feet of GLA including
four anchors. The Company managed these malls since November 1, 1997. The
Company has a 20.0% ownership interest in the entity that owns these properties.
On June 1, 1998, the Company completed the acquisition of Northtown
Mall in Blaine, Minnesota, for a purchase price of approximately $54.0 million.
Northtown Mall consists of approximately 825,000 square feet of GLA and includes
anchors Kohl's, Mervyn's California and Montgomery Ward.
On July 16, 1998, the Company completed the acquisition of Montgomery
Mall in Montgomery, Alabama, for a purchase price of approximately $70.0
million. Montgomery Mall consists of approximately 730,000 square feet of GLA
and includes anchors Gayfers, JC Penney and Parisian.
On August 1, 1998, the Company completed the acquisition of Weberstown
Mall in Stockton, California, for a purchase price of approximately $23.0
million. Weberstown Mall has approximately 827,000 square feet of GLA and
includes anchors Dillard's, JC Penney and Sears.
17
<PAGE> 18
On August 20, 1998, the Company, in a joint venture with Nomura
completed the acquisition of Eastland Mall in Charlotte, North Carolina, for a
purchase price of $54.0 million. Eastland Mall consists of approximately 1.0
million square feet of GLA and includes anchors JC Penney, Sears, Dillard's and
Belk.
On September 15, 1998, the Company completed the acquisition of Lloyd
Center Mall in Portland, Oregon, for a purchase price of approximately $168.0
million. Lloyd Center Mall consists of approximately 1.5 million square feet of
GLA and includes anchors Nordstrom and Meier & Frank.
Renovations and Expansions
- --------------------------
The Company maintains a strategy of selective expansions and
renovations in order to improve the operating performance and the competitive
position of its existing portfolio. The Company also engages in an active
redevelopment program with the objective of attracting innovative retailers
which management believes will enhance the operating performance of the
properties.
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 phase which was completed in 1996 added a
food court and relocated and enlarged the cinema. An approximately 23,500 square
foot OfficeMax opened in January 1998 and a new 83,600 square foot Proffitt's
opened in March 1998. Early in 1999 County Market is expected to relocate to a
new 58,000 square foot outparcel building which is currently under construction.
Georgesville Square
A new 63,000 square-foot 16-screen cinema opened in May 1998. The
budgeted construction costs for the cinema totaled approximately $6.2 million,
of which $5.6 million has been spent to date.
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 which opened in August 1998.
Indian Mound Mall
The Company is in the process of expanding the existing Elder-Beerman
store at this mall by approximately 21,000 square feet of GLA. Upon completion
in the fourth quarter of 1998, the mall's GLA will increase to approximately
563,000 square feet.
Developments
- ------------
Polaris Towne Center
In February 1998, the Company, in a joint venture in which it has a
50.0% ownership interest, announced plans for the development of an
approximately 696,000 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 the fourth quarter of 1998
with the remainder to open in the second quarter of 1999.
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 of the mall and related infrastructure is underway, and
completion is projected for fourth quarter of 1999.
18
<PAGE> 19
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 is expected to be a bi-level mall featuring
six anchor tenants, approximately 150 mall stores and 4 restaurants. The mall,
which will be located across the street from Polaris Towne Center, is projected
to open in 2001.
Carson
The Company has a contingent contract to acquire the land for a value
oriented super-regional mall located in Carson, California.
Bolingbrook
In October 1998, the Company announced plans for the development of a
1.0 million square foot super regional mall in the Chicago suburb of
Bolingbrook, Illinois. The Company has obtained an option to acquire a 203 acre
parcel as the site of this project which could open in 2001.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended September 30, 1998, and 1997, represent 18.8 million square feet
of GLA, or 86.5% of the 1998/1997 "same store" population.
<TABLE>
<CAPTION>
MALLS COMMUNITY CENTERS
----------------------- -----------------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF %INCREASE
------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Anchors ................. $164.21 2.1% $240.64 2.7%
Stores................... $261.60 4.5% $177.86 4.1%
Total ................... $209.61 3.4% $232.71 2.8%
</TABLE>
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
-------------------------------------------------------
9/30/98 6/30/98 3/31/98 12/31/97 9/30/97
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Mall Anchors ........................ 96.5% 97.7% 99.1% 99.5% 99.4%
Mall Stores ......................... 82.5% 79.2% 83.1% 82.6% 79.4%
Mall Stores Comparable 12 Months..... 82.3% 80.8% 80.0% 81.6% 79.4%
Total Mall Portfolio ................ 91.3% 91.0% 92.6% 93.3% 91.7%
Community Center Anchors ............ 97.9% 97.9% 98.2% 97.3% 97.6%
Community Center Stores ............. 88.1% 87.6% 86.0% 85.9% 83.8%
Total Community Centers ............. 95.6% 95.5% 95.5% 94.7% 94.4%
Single Tenant Retail Properties ..... 92.2% 92.2% 100.0% 92.2% 92.2%
Total Community Center Portfolio .... 95.3% 95.2% 96.0% 94.4% 94.2%
</TABLE>
(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.
19
<PAGE> 20
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 and nine months ended September
30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income available to common shareholders ........... $ 4,599 $ 5,677 $14,710 $18,254
Add back (less):
Real estate depreciation and amortization ........ 8,116 6,298 22,894 18,780
GRT share of joint venture depreciation
and amortization .............................. 2,219 967 6,307 1,209
Gain on sale of property ..................... (155)
Extraordinary item ............................... 490 490
Minority interest in operating partnership-------- 578 791 1,848 2,502
------- ------- ------- -------
Funds from operations ................................. $16,002 $13,733 $46,249 $40,590
======= ======= ======= =======
</TABLE>
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 fiscal 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 recognizes that Year 2000 issues may have an impact on its
business, operations and financial condition. The Company has completed an
assessment of its Year 2000 readiness with respect to all of its information
technology ("IT") systems and is currently addressing the reliability and
condition of its non-IT systems. These assessments will continue to be updated
as additional information becomes available and as new concerns are identified.
The Company's IT systems generally consist of file servers, operating
systems, application programs and workstations that utilize purchased systems.
The Company has evaluated the Year 2000 compliance status of each vendor and
believes that its existing systems or planned upgrades during 1998 will be Year
2000 compliant. Implementation of planned upgrades will not result in
significant additional cost to the Company.
The Company's non-IT systems which may result in Year 2000 issues are
facility related and encompass areas such as HVAC systems, elevators, security,
lighting, telecommunications, electrical, plumbing, fire and sprinkler controls.
The Company is currently addressing the potential impact of Year 2000 in these
areas and has not identified any instances where Year 2000 issues will require
material costs to repair or replace any of these systems.
The significant risks to the Company in the event that Year 2000 issues
are not identified and corrected are that IT system problems could cause delays
or errors in processing financial and operation information and non-IT system
problems could result in certain facilities being unavailable which could limit
the efficient operation of the Company's properties.
20
<PAGE> 21
While the Company believes its planning efforts are adequate to address
its Year 2000 concerns, there can be no guarantee that the systems of other
companies on which the Company's systems and operations rely will be converted
on a timely basis and will not have a material effect on the Company.
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.
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.
21
<PAGE> 22
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
Shareholder Proposals
---------------------
Any shareholder proposal submitted outside the processes of
Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for presentation at the Company's
1999 Annual Meeting will be considered untimely for purposes of
Rules 14a-4 and 14a-5 under the Exchange Act if notice of such
shareholder proposal is received by the Company after February
12, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
During its fiscal quarter ended September 30, 1998, the
Company filed the following Reports on Form 8-K:
o Form 8-K dated September 29, 1998, filed September 29,
1998, reporting information under Item 2 and Item 7 in
connection with the acquisition of Lloyd Center Mall and
containing the (i) statement of revenues and certain expenses
for the year ended December 31, 1997 (audited) and the six
months ended June 30, 1998 (unaudited) for Lloyd Center Mall,
and (ii) unaudited pro forma consolidated balance sheet as of
June 30, 1998 and unaudited pro forma consolidated balance
sheet as of June 30, 1998 and unaudited pro forma consolidated
statements of operations for the six months ended June 30,
1998 and for the year ended December 31, 1997 for the Company.
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLIMCHER REALTY TRUST
November 12, 1998 /s/ Herbert Glimcher
- ----------------- -----------------------------------------------------
(Date) Herbert Glimcher, Chairman of the Board, President
Chief Executive Officer (Principle Executive Officer)
and Trustee
November 12, 1998 /s/ William G. Cornely
- ----------------- -----------------------------------------------------
(Date) William G. Cornely, Senior Executive Vice President
Chief Operating Officer & Chief Financial Officer
23
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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90,000
127,950
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