<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 June 30, 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:
<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 August 10, 1998, there were 23,699,710 Common Shares of Beneficial
Interest outstanding, par value $ 0.01 per share.
1 of 23 pages
<PAGE> 2
GLIMCHER REALTY TRUST
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations for the three months ended June 30, 1998 and 1997 4
Consolidated Statements of Operations for the six months ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
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
GLIMCHER REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Investment in real estate:
Land...................................................................... $ 105,357 $ 92,247
Buildings, improvements and equipment..................................... 1,027,629 976,645
Developments in progress:
Land................................................................... 5,608 6,541
Developments........................................................... 4,710 15,989
-------------- ----------
1,143,304 1,091,422
Less accumulated depreciation............................................. 119,816 107,611
------------ ----------
Net investment in real estate.......................................... 1,023,488 983,811
Cash and cash equivalents................................................... 1,624 7,434
Cash in escrow.............................................................. 6,303 7,668
Investment in and advances to unconsolidated entities....................... 209,177 118,195
Tenant accounts receivable, net............................................. 25,298 23,938
Deferred expenses, net...................................................... 8,702 7,980
Prepaid and other assets.................................................... 17,721 15,203
------------- ----------
$1,292,313 $1,164,229
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable...................................................... $ 576,354 $ 501,272
Notes payable............................................................... 145,918 90,416
Accounts payable and accrued expenses....................................... 24,414 25,500
Distributions payable....................................................... 17,719 14,079
----------- ----------
764,405 631,267
Commitments and contingencies
Minority interest in operating partnership.................................. 34,916 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 June 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, 23,695,247
and 23,669,960 shares issued and outstanding as of June 30, 1998
and December 31, 1997, respectively.................................... 237 237
Additional paid-in capital................................................ 353,037 348,433
Distributions in excess of accumulated earnings.......................... (78,232) (65,565)
------------- ----------
$1,292,313 $1,164,229
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Minimum rents............................................................ $ 30,254 $ 26,822
Percentage rents......................................................... 666 831
Tenant recoveries........................................................ 7,612 5,926
Other.................................................................... 1,658 1,142
------------ ------------
Total revenues......................................................... 40,190 34,721
------------ -----------
Operating expenses:
Real estate taxes........................................................ 3,564 2,644
Recoverable operating expenses............................................ 4,790 3,687
------------ ------------
8,354 6,331
Other operating expenses.................................................. 513 831
------------ -------------
Total operating expenses............................................... 8,867 7,162
------------ ------------
Depreciation and amortization................................................. 8,304 6,841
General and administrative.................................................... 2,370 2,140
Gain on sales of property/outparcels.......................................... 155
Interest income............................................................... 614 133
Interest expense.............................................................. 9,992 10,354
Equity in income (loss) of unconsolidated entities............................ (967) (552)
Minority interest in operating partnership.................................... 603 874
------------ -------------
Net income............................................................. 9,701 7,086
Preferred stock dividends..................................................... 4,894 726
------------ -------------
Net income available to common shareholders............................$ 4,807 $ 6,360
============ ===========
Earnings per share (basic and diluted)........................................$ 0.20 $ 0.29
============ ============
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
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Minimum rents............................................................ $ 59,892 $ 53,726
Percentage rents......................................................... 1,841 1,847
Tenant recoveries........................................................ 14,802 11,688
Other.................................................................... 3,319 1,850
---------- ----------
Total revenues......................................................... 79,854 69,111
---------- ----------
Operating expenses:
Real estate taxes........................................................ 7,360 5,207
Recoverable operating expenses............................................ 8,942 7,296
---------- ----------
16,302 12,503
Other operating expenses.................................................. 1,388 1,620
---------- ----------
Total operating expenses............................................... 17,690 14,123
---------- ----------
Depreciation and amortization................................................. 16,355 13,657
General and administrative.................................................... 4,508 4,303
Gain on sales of property/outparcels.......................................... 155
Interest income............................................................... 1,234 242
Interest expense.............................................................. 20,197 20,621
Equity in income (loss) of unconsolidated entities............................ (1,155) (1,075)
Minority interest in operating partnership.................................... 1,270 1,711
---------- ----------
Net income............................................................. 19,913 14,018
Preferred stock dividends..................................................... 9,802 1,441
---------- ----------
Net income available to common shareholders............................ $ 10,111 $ 12,577
========== ==========
Earnings per share (basic and diluted)........................................ $ 0.43 $ 0.57
========== ==========
Cash distributions declared per common share of beneficial interest........... $ 0.9616 $ 0.9616
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................................ $ 19,913 $ 14,018
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for doubtful accounts................................... 762 1,250
Depreciation and amortization..................................... 16,355 13,657
Gain on sales of properties/outparcels............................ (155)
Other non-cash expenses........................................... 401 388
Equity in (income) loss of unconsolidated entities................ 1,155 1,075
Minority interest in operating partnership........................ 1,271 1,711
Net changes in operating assets and liabilities:
Tenant accounts receivable, net................................... (2,185) (2,087)
Deferred expenses, prepaid and other assets....................... (166) (2,163)
Accounts payable and accrued expenses............................. (961) (3,328)
----------- ---------
Net cash provided by operating activities.................................. 36,545 24,366
----------- ---------
Cash flows from investing activities:
Proceeds from sales of properties..................................... 253
Additions to investment in real estate................................ (11,190) (9,714)
Acquisition of properties ............................................ (54,961)
Investment in unconsolidated entities................................. (83,320) (9,863)
Withdrawals from (payments to) cash in escrow......................... 2,242 (296)
Additions to deferred expenses, prepaid and other assets.............. (4,187) (700)
----------- ---------
Net cash used in investing activities ..................................... (151,416) (20,320)
----------- ---------
Cash flows from financing activities:
Proceeds from revolving line of credit, net........................... 55,600 17,800
Proceeds from issuance of mortgage and notes payable.................. 95,418 3,574
Principal payments on mortgage and notes payable...................... (10,542) (1,752)
Proceeds from issuance of shares...................................... 390 273
Cash distributions.................................................... (31,805) (25,261)
----------- ---------
Net cash provided by (used in) financing activities........................ 109,061 (5,366)
----------- ---------
Net change in cash and cash equivalents......................................... (5,810) (1,320)
Cash and cash equivalents, at beginning of period............................... 7,434 8,968
----------- ---------
Cash and cash equivalents, at end of period..................................... $ 1,624 $ 7,648
=========== =========
</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 June
30, 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), one Ohio limited partnership
(Morgantown Mall Associates Limited Partnership) and one Delaware limited
liability company (Glimcher Northtown 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 six months ended June 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 $600,000 ($.03 per share) for the three months and
six months ended June 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 Six months ended
June 30 June 30
------- -------
<S> <C> <C> <C>
1998 Earnings per share (basic and diluted).................... $0.20 $0.43
1997 Earnings per share ....................................... $0.29 $0.57
1997 Pro Forma Earnings per share if EITF 98-9 adopted
at 1/1/97...................................................... $0.27 $0.55
</TABLE>
Supplemental disclosure of non-cash financing and investing activities:
The Company accrued accounts payable of $2,814 and $280 for real estate
improvements as of June 30, 1998 and June 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, LP and a 50.00% 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:
<TABLE>
<CAPTION>
BALANCE SHEETS
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Assets:
Investment properties at cost, net.......................... $ 578,861 $ 357,416
Other assets................................................ 30,222 20,452
----------- -----------
$ 609,083 $ 377,868
=========== ===========
Liabilities and Members' Equity:
Mortgage notes payable...................................... $ 317,221 $ 205,058
Accounts payable and accrued expenses....................... 84,979 26,842
----------- -----------
402,200 231,900
Members' equity................................................ 206,883 145,968
----------- -----------
$ 609,083 $ 377,868
=========== ===========
Operating Partnership's share of:
Members' equity............................................. $ 140,240 $ 111,529
=========== ===========
RECONCILIATION OF MEMBERS' EQUITY TO COMPANY
INVESTMENT IN UNCONSOLIDATED ENTITIES:
Members' equity............................................. $ 140,240 $ 111,529
Advances and additional costs............................... 68,937 6,666
----------- -----------
Investment in unconsolidated entities....................... $ 209,177 $ 118,195
=========== ===========
STATEMENTS OF OPERATIONS FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
------------- -------------
Total revenues................................................. $ 22,456 $ 38,518
Operating expenses............................................. (12,590) (19,642)
----------- -----------
Net operating income........................................... 9,866 18,876
Depreciation and amortization.................................. (3,628) (6,760)
Interest expense............................................... (6,193) (11,509)
----------- -----------
Net income (loss)........................................ $ 45 $ 607
=========== ===========
Operating Partnership's share of net income (loss)............ $ (967) $ (1,155)
=========== ===========
</TABLE>
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
3. MORTGAGE NOTES PAYABLE AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 CONSIST OF THE FOLLOWING:
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>
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
University Mall Limited Partnership... 71,060 71,376 7.090% 7.090% (b) (g) (g)
Northtown Mall, LLC................... 40,000 (i) (a) 40,000 Aug. 30, 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
Bridge Facility....................... 50,000 (h) (a) 50,000 July 31, 1999
Other Mortgage Notes.................. 102,573 113,456 (d) (d) (b) 91,229 (f)
Construction Loans.................... 31,521 35,240 (c) (c) (a) (e)
-------- --------
Total Mortgage Notes Payable.......... $576,354 $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 of 7.656% at June 30, 1998 and ranging from 7.688% to
8.000% in 1997.
(d) Interest rates ranging from 7.375% to 9.125%.
(e) Final maturity dates ranging from October 1999 to November 1999.
(f) Final maturity dates ranging from June 1999 to April 2016.
(g) The loan matures in January 2028. The interest rate is fixed until
January 2013, at which date the unamortized balance can be repaid
without penalty.
(h) Interest rate of LIBOR plus 160 basis points (7.256% at June 30, 1998).
(i) Interest rate of LIBOR plus 125 basis points (6.906% at June 30, 1998).
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 June 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 (7.260% at June 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.
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 JUNE 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..................... $ 4,807 23,691 $ 0.20 $ 6,360 21,901 $ 0.29
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units......... 603 2,978
Options............................. 76 38
DILUTED EPS ------- ------ ------ ------- ------ ------
Income available plus assumed
conversions...................... $ 5,410 26,745 $ 0.20 $ 6,360 21,939 $ 0.29
======= ====== ====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 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..................... $10,111 23,683 $ 0.43 $12,577 21,895 $ 0.57
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units......... 1,270 2,961
Options............................. 97 47
------- ------ ------ ------- ------ ------
DILUTED EPS
Income available plus assumed
conversions...................... $11,381 26,741 $ 0.43 $12,577 21,942 $ 0.57
======= ====== ====== ======= ====== ======
</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:
<TABLE>
<S> <C>
Balance, January 1, 1998.......................... $ (65,565)
-----------
Distributions declared, $0.9616 per share..... (22,778)
Preferred stock dividends..................... (9,802)
Net income.................................... 19,913
------------
Balance, June 30, 1998............................ $ (78,232)
===========
</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;
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 Issue 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 $600,000 ($.03 per share) from the second
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 JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
REVENUES
Total revenues increased 15.8%, or $5.5 million, for the three months
ended June 30, 1998. Of the $5.5 million increase, $5.4 million was the result
of increased revenues at the malls, $130,000 was the result of increased
revenues at the community centers, $390,000 was the result of decreased revenues
from dispositions and $360,000 was related to other revenue increases.
Minimum rents
Minimum rents increased 12.8%, or $3.4 million, for the three months
ended June 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
<S> <C> <C> <C> <C>
Same center.................. $ 0.4 $ 0.0 $ 0.4 1.5%
Acquisitions/Developments.... 3.0 0.3 3.3 12.4
Dispositions................. 0.0 (0.3) (0.3) (1.1)
------- ------- ------- -----
$ 3.4 $ 0.0 $ 3.4 12.8%
====== ====== ====== =====
</TABLE>
12
<PAGE> 13
Percentage rents
Percentage rents decreased $170,000 for the three months ended June
30, 1998. Of this decrease, $30,000 was earned at the malls, which was offset by
a $160,000 decrease at the community centers and a $40,000 decrease from
dispositions. The overall decrease in the second quarter of 1998, was a result
of the prospective adoption of a change in accounting for percentage rents as
required by EITF 98-9.
Tenant recoveries
Tenant recoveries reflect a net increase of 28.5% or $1.7 million for
the three months ended June 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $ 0.2 $ (0.2) $ 0.0 0.0%
Acquisitions/Developments.... 1.6 0.1 1.7 28.5
Dispositions................. 0.0 0.0 0.0 0.0
------- -------- ------- -----
$ 1.8 $ (0.1) $ 1.7 28.5%
====== ======= ====== =====
</TABLE>
Other revenues
The $520,000 increase in other revenues is primarily the result of
increases in management fee revenues of $370,000 and an increase of $160,000 in
temporary tenant income at the malls.
OPERATING EXPENSES
Total operating expenses increased 23.8%, or $1.7 million, for the
three months ended June 30, 1998. Recoverable expenses increased $2.0 million,
the provision for credit losses decreased $400,000 and other operating expenses
increased $80,000.
Recoverable expenses
Recoverable operating expenses increased 32.0% or $2.0 million for the
three months ended June 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
--------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
<S> <C> <C> <C> <C>
Same center.................. $ 0.2 $ 0.1 $ 0.3 4.8%
Acquisitions/Developments.... 1.6 0.1 1.7 27.2
Dispositions................. 0.0 0.0 0.0 0.0
------ ------ ------ ----
$ 1.8 $ 0.2 $ 2.0 32.0%
====== ====== ====== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $230,000 and
represented 0.6% of tenant revenues for the three months ended June 30, 1998,
compared to 1.8% of tenant revenues for the three months ended June 30, 1997.
13
<PAGE> 14
Depreciation and amortization
The $1.5 million increase in depreciation and amortization primarily
consists of an increase of $890,000 from acquisitions, $100,000 from the opening
of two new community centers, and an increase of $280,000 in the core portfolio
properties.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.4 million and represented
5.9% of total revenues for the three months ended June 30, 1998, compared to
$2.1 million and 6.2% of total revenues for the corresponding period in 1997.
The increase primarily reflects annual salary and fringe benefit increases which
were implemented at the start of the second quarter.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense decreased 3.5%, or $360,000, for the three months
ended June 30, 1998. The summary below identifies the decrease by its various
components (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------
1998 1997 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance...................... $680,112 $589,924 $ 90,188
Average rate.............................. 7.51% 7.69% (0.18)%
Total interest............................ $ 12,769 $ 11,341 $ 1,428
Less: Capitalized interest............... (1,781) (1,047) (734)
Add: Amortization of rate buydown...... 194 194
Other..................................... (1,190) (134) ( 1,056)
-------- --------- ----------
Interest expense.......................... $ 9,992 $ 10,354 $ (362)
======== ========= ==========
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
REVENUES
Total revenues increased 15.5%, or $10.7 million, for the six months
ended June 30, 1998. Of the $10.7 million increase, $10.2 million was the result
of increased revenues at the malls, $310,000 was the result of increased
revenues at the community centers, $910,000 was the result of decreased revenues
from dispositions and $1.1 million was related to other revenue increases.
Minimum rents
Minimum rents increased 11.5%, or $6.2 million, for the six months
ended June 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
<S> <C> <C> <C> <C>
Same center.................. $ 0.6 $ (0.1) $ 0.5 0.9%
Acquisitions/Developments.... 5.8 0.5 6.3 11.6
Dispositions................. 0.0 (0.6) (0.6) (1.0)
------- -------- ------- -----
$ 6.4 $ (0.2) $ 6.2 11.5%
====== ======= ====== =====
</TABLE>
14
<PAGE> 15
Percentage rents
Percentage rents decreased $10,000 for the six months ended June 30,
1998. An increase of $340,000 was earned at the malls, which was offset by a
$210,0000 decrease at the community centers and a $140,000 decrease from
dispositions. The overall decrease was a result of the adoption of a change in
accounting for percentage rents as discussed earlier.
Tenant recoveries
Tenant recoveries reflect a net increase of 26.6% or $3.1 million for
the six months ended June 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
<S> <C> <C> <C> <C>
Same center.................. $ 0.5 $ (0.3) $ 0.2 1.7%
Acquisitions/Developments.... 2.7 0.4 3.1 26.6
Dispositions................. 0.0 (0.2) (0.2) (1.7)
------ ------- ------- ----
$ 3.2 $ (0.1) $ 3.1 26.6%
====== ======= ======= ====
</TABLE>
Other revenues
The $1.5 million increase in other revenues is primarily the result of
increases in management fee revenues of $1.0 million, and an increase of
$490,000 in temporary tenant income at the malls.
OPERATING EXPENSES
Total operating expenses increased 25.3%, or $3.6 million, for the six
months ended June 30, 1998. Recoverable expenses increased $3.8 million, the
provision for credit losses decreased $490,000 and other operating expenses
increased $260,000.
Recoverable expenses
Recoverable operating expenses increased 30.4% or $3.8 million for the
six months ended June 30, 1998.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $ 0.6 $ 0.2 $ 0.8 6.4%
Acquisitions/Developments.... 2.7 0.4 3.1 24.8
Dispositions................. 0.0 (0.1) (0.1) (0.8)
------ ------ ------ ----
$ 3.3 $ 0.5 $ 3.8 30.4%
====== ====== ====== ====
</TABLE>
The increase in the same center expenses at the malls reflects a
$350,000 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 $760,000 and
represented 1.0% of tenant revenues for the six months ended June 30, 1998,
compared to 1.8% of tenant revenues for the six months ended June 30, 1997.
15
<PAGE> 16
Depreciation and amortization
The $2.7 million increase in depreciation and amortization consists
primarily of an increase of $1.7 million from acquisitions, $200,000 from the
opening of two new community centers, and an increase of $800,000 in the core
portfolio properties.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $4.5 million and represented
5.6% of total revenues for the six months ended June 30, 1998, compared to $4.3
million and 6.2% of total revenues for the corresponding period in 1997. The
increase consists primarily of annual salary and fringe benefit increases
implemented at the start of second quarter 1998.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense decreased 2.1% or $420,000, for the six months ended
June 30, 1998. The summary below identifies the decrease by its various
components (dollars in thousands).
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------
1998 1997 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance...................... $653,024 $585,768 $ 67,256
Average rate.............................. 7.52% 7.65% (0.13)%
Total interest............................ $ 24,554 $ 22,406 $ 2,148
Less: Capitalized interest............... (3,265) (2,081) (1,184)
Add: Amortization of rate buydown........ 388 388
Other..................................... (1,480) (92) (1,388)
-------- -------- ---------
Interest expense.......................... $ 20,197 $ 20,621 $ (424)
======== ======== =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company has several active development, renovation and expansion
projects and will continue to be active 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. 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 June 30, 1998, the Company's debt to total market capitalization
was 49.5% which is consistent with the current policy of the Company to maintain
this ratio between 40% and 60%.
Net cash provided by operating activities for the six months ended
June 30, 1998, was $36.5 million versus $24.4 million for the corresponding
period of 1997. Net income adjusted for non-cash items accounted for a $7.9
million increase, while changes in operating assets and liabilities accounted
for a $4.3 million increase.
Net cash used in investing activities for the six months ended June
30, 1998, was $151.4 million, and reflects additional direct investments in real
estate assets, including the acquisition of Northtown Mall for approximately $54
million, and additional indirect investments in real estate through investments
in unconsolidated entities of $83.3 million.
16
<PAGE> 17
Net cash provided by financing activities for the six months ended
June 30, 1998 was $109.1 million. Cash was provided by additional borrowings of
$55.6 million and issuance of mortgage and notes payable of $95.4 million. Cash
was used to fund distributions of $31.8 million and principal payments on
mortgage and notes payable of $10.5 million.
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
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 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 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 these properties.
On June 1, 1998, the Company completed the acquisition of Northtown
Mall in Blaine, Minnesota, for a purchase price of approximately $54 million.
Northtown Mall consists of approximately 825,000 square feet of GLA. Its tenants
include anchors Kohl's, Mervyn's California and Montgomery Ward and 116 mall
shops.
On July 16, 1998, the Company completed the acquisition of Montgomery
Mall in Montgomery, Alabama, for a purchase price of approximately $70 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 million.
Weberstown Mall has approximately 827,000 square feet of GLA and includes
anchors Dillards, JC Penney and Sears.
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 expansion 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.
17
<PAGE> 18
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 to date $5.4 million has been spent.
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 August, 1998.
Indian Mound Mall
The Company is in 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 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.
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 the fourth quarter of 2000.
Jersey Gardens
The Company, in a joint venture in which the Company has a 30%
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.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended June 30, 1998, and 1997, represent 16.6 million square feet of
GLA, or 84.8% 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 .............................. $168.86 2.0% $238.72 2.6%
Stores................................ $255.61 4.2% $164.77 4.2%
Total ................................ $206.71 3.1% $227.75 2.8%
</TABLE>
18
<PAGE> 19
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
---------------------------------------------------------
6/30/98 3/31/98 12/31/97 9/30/97 6/30/97
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Mall Anchors........................... 97.7% 97.6% 99.5% 99.4% 99.1%
Mall Stores............................ 79.2% 79.6% 82.6% 79.4% 82.6%
Mall Stores Comparable 12 Months....... 82.8% 81.5% 83.5% 81.7% 82.6%
Total Mall portfolio................... 91.0% 91.1% 93.3% 91.7% 92.8%
Community Center Anchors............... 97.9% 97.6% 97.3% 97.6% 97.9%
Community Center Stores................ 87.6% 85.9% 85.9% 83.8% 86.0%
Total Community Centers................ 95.5% 94.9% 94.7% 94.4% 95.4%
Single Tenant Retail Properties........ 92.2% 92.2% 92.2% 92.2% 100.0%
Total Community Center Portfolio....... 95.2% 94.6% 94.4% 94.2% 95.8%
</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 79.8%,
80.4% and 84.0% at June 30, 1998, 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.
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 six months
ended June 30, 1998, and 1997 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ ------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income available to common shareholders................. $ 4,807 $ 6,360 $ 10,111 $ 12,577
Add back (less):
Real estate depreciation and amortization.............. 7,480 6,238 14,778 12,482
GRT share of joint venture depreciation
and amortization.................................... 2,150 121 4,088 242
Gain on sale of property............................... (155) (155)
Minority interest in operating partnership............. 603 874 1,270 1,711
----------- ------------ ----------- ------------
Funds from operations....................................... $ 15,040 $ 13,438 $ 30,247 $ 26,857
======== ========= ========= ==========
</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 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.
19
<PAGE> 20
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.
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.
20
<PAGE> 21
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On December 5, 1997, the Company issued 56,000 shares of
its Series C convertible preferred shares (the "Series C
Preferred Shares"). The Series C Preferred Shares were offered
and sold in a private placement to an affiliate of Nomura, for
an aggregate consideration of $56.0 million in order to
finance the construction of the New Jersey MetroMall to be
located in Elizabeth, New Jersey. On June 4, 1998, the Series
C Preferred Shares were exchanged for Series D preferred
shares (the "Series D Preferred Shares") having substantially
the same terms. The Company may redeem the Series D Preferred
Shares at any time, prior to conversion, at its option without
any penalty or premiums. Beginning in December 2002, the
Series D Preferred Shares are convertible into the number of
common shares of beneficial interest, $.01 par value (the
"Shares") obtained by dividing the liquidation preference by
the conversion price per Share. The conversion price per Share
is the product of (i) the average market price per Share of
the 30 trading days prior to the conversion, multiplied by
(ii) the applicable conversion percentage which ranges between
70.0% and 90.0%.
The sale of the Series D Preferred Shares was exempt
from registration under the Securities Act of 1933, as amended
(the "Securities Act") by virtue of the fact that the Series D
Preferred Shares were issued to a Nomura affiliate for its
account for investment and not with a view towards the resale,
transfer or distribution thereof, nor with any present
intention of distributing the Series D Preferred Shares, thus
qualifying the sale as transaction by an issuer not involving
any public offering in accordance with Section 4(2) of the
Securities Act. In addition, the Nomura affiliatre is an
"accredited investor" as defined in Rule 501(a) under the
Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of shareholders was held on May 15,
1998. Proxies for the meeting were solicited by the registrant
pursuant to Regulation 14 under the Securities Exchange Act of
1934. In connection with Proposal 1 regarding the election of
trustees, there was no solicitation in opposition to the
management's nominees as listed in the proxy statement and all
of such nominees were elected. There were no broker non-votes
in connection with such proposal.
Votes of 20,348,837 shares were cast for the election of
Philip G. Barach as a Trustee; votes of 1,835,092 shares were
withheld.
Votes of 20,284,093 shares were cast for the election of
Oliver Birckhead as a Trustee; votes of 1,899,836 shares were
withheld.
Votes of 20,334,734 shares were cast for the election of E.
Gordon Gee as a Trustee; votes of 1,849,195 shares were
withheld.
21
<PAGE> 22
In connection with Proposal 2, there was no solicitation in
opposition of the approval of the Company's Long-Term
Incentive Performance Plan as set forth in the proxy statement
and such proposal was approved.
Votes of 10,587,754 shares were cast for the approval of the
Company's Long-Term Incentive Performance Plan; votes of
5,780,985 shares were against; and votes of 244,046 shares
abstained. In addition, there were 5,571,144 broker non-votes
in connection with such proposal.
In connection with Proposal 3, there was no solicitation in
opposition of the ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent public
accountants as set forth in the proxy statement and such
appointment was ratified.
Votes of 22,075,588 shares were cast for the ratification of
the appointment of PricewaterhouseCoopers LLP as the Company's
independent public accountants; votes of 47,787 shares were
against; and votes of 60,554 shares abstained. In addition,
there were no broker non-votes in connection with such
proposal.
ITEM 5. OTHER INFORMATION
On December 5, 1997, the Company sold 56,000 shares of
its Series C Preferred Shares. On June 4, 1998, the Series C
Preferred Shares were exchanged for Series D Preferred Shares
having substantially the same terms. The Company may redeem
the Series D Preferred Shares at any time, prior to
conversion, at its option without any penalty or premiums.
Beginning in December 2002, the Series D Preferred Shares are
convertible into the number of Shares obtained by dividing
the liquidation preference by the conversion price per Share.
The conversion price per Share is the product of (i) the
average market price per Share over the 30 trading days prior
to the conversion, multiplied by (ii) the applicable
conversion percentage which ranges between 70.0% and 90.0%.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.10 Articles Supplementary Classifying and Designating
56,000 Shares of Beneficial Interest as 56,000
Shares of Series D Convertible Preferred Beneficial
Interest (filed as Exhibit 3.1 to the Registrant's
Registration Statement on Form S-3 File No.
333-61339 and incorporated by reference herein).
4.6 Specimen Certificate evidencing 56,000 shares of
Series D Convertible Preferred Shares of Beneficial
Interest (filed as Exhibit 4.2 to the Registrant's
Registration statement on Form S-3 (File No. 333-
61339) and incorporated by reference herein).
27.1 Financial Data Schedule (filed for EDGAR filing
purposes only).
(b) Reports on Forms 8-K
During its fiscal quarter ended June 30, 1998, the Company
filed the following Reports on Form 8-K.
Form 8-K dated June 19, 1998, filed June 19, 1998,
reporting information under Item 2 and Item 7 and containing
the (i) statement of revenues and certain expenses for the
year ended December 31, 1997 and the three months ended March
31, 1998 (unaudited) for each of Northtown Mall and Lloyd
Center Mall, (ii) pro forma consolidated balance sheet as of
March 31, 1998 (unaudited) for the Company and (iii) pro
forma consolidated statements of operations for the three
months ended March 31, 1998 (unaudited) and for the year
ended December 31, 1997 in connection with the acquisition of
Northtown Mall and the pending acquisition of Lloyd Center
Mall.
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
August 11, 1998 /s/ George A. Schmidt
- --------------- ---------------------
(Date) George A. Schmidt, Senior Vice President,
General Counsel
August 11, 1998 /s/ William G. Cornely
- --------------- ----------------------
(Date) William G. Cornely, Senior Executive Vice President
Chief Operating Officer & Chief Financial Officer
23
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