<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, 1999
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 29, 1999, there were 23,759,975 Common Shares of Beneficial
Interest outstanding, par value $0.01 per share.
1 of 24 pages
<PAGE> 2
GLIMCHER REALTY TRUST
FORM 10-Q
<TABLE>
INDEX
-----
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998 3
Consolidated Statement of Operations for the three months ended September 30, 1999 and 1998 4
Consolidated Statement of Operations for the nine months ended September 30, 1999 and 1998 5
Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
</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, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Investment in real estate:
Land ......................................................................... $ 171,073 $ 171,266
Buildings, improvements and equipment ........................................ 1,261,583 1,240,121
Developments in progress:
Land ...................................................................... 5,439 6,183
Developments .............................................................. 4,643 11,071
---------- ----------
1,442,738 1,428,641
Less accumulated depreciation ................................................ 161,861 137,229
---------- ----------
Net investment in real estate ............................................. 1,280,877 1,291,412
Cash and cash equivalents ...................................................... 17,405 8,949
Cash in escrow ................................................................. 18,567 11,327
Investment in and advances to unconsolidated entities .......................... 193,064 200,205
Tenant accounts receivable, net ................................................ 28,059 29,050
Deferred expenses, net ......................................................... 11,122 10,742
Prepaid and other assets ....................................................... 5,882 6,810
---------- ----------
$1,554,976 $1,558,495
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Mortgage notes payable ......................................................... $ 856,622 $ 830,795
Notes payable .................................................................. 144,200 163,000
Accounts payable and accrued expenses .......................................... 37,986 32,143
Distributions payable .......................................................... 21,257 18,126
---------- ----------
1,060,065 1,044,064
Commitments and contingencies
Minority interest in partnership ............................................... 31,016 33,356
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, 1999 and December 31, 1998, respectively .............. 90,000 90,000
Shareholders' equity:
Series B cumulative 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, 23,753,898
and 23,711,098 shares issued and outstanding as of September 30,
1999 and December 31, 1998, respectively .................................. 238 237
Additional paid-in capital ................................................... 353,701 353,117
Distributions in excess of accumulated earnings .............................. (107,994) (90,229)
---------- ----------
$1,554,976 $1,558,495
========== ==========
</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, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenues:
Minimum rents ................................................ $37,860 $34,109
Percentage rents ............................................. 1,490 640
Tenant recoveries ............................................ 12,038 9,854
Other ........................................................ 2,955 1,899
------- -------
Total revenues.............................................. 54,343 46,502
------- ------
Operating expenses:
Real estate taxes ............................................ 5,005 4,243
Recoverable operating expenses ................................ 8,477 6,342
------- -------
13,482 10,585
Other operating expenses ...................................... 1,237 827
------- -------
Total operating expenses ................................... 14,719 11,412
------- -------
Depreciation and amortization ..................................... 10,710 8,949
General and administrative ........................................ 2,199 2,461
Gain on sales ..................................................... 2,203
Interest income ................................................... 288 338
Interest expense .................................................. 15,420 12,872
Equity in income (loss) of unconsolidated entities ................ (76) (497)
Minority interest in operating partnership ........................ 871 578
------- -------
Income before extraordinary item ........................... 12,839 10,071
Extraordinary item:
Charges related to extinguishment of debt ..................... 250 490
------- -------
Net income ................................................. 12,589 9,581
Preferred stock dividends ......................................... 5,521 4,982
------- -------
Net income available to common shareholders ................ $ 7,068 $ 4,599
======= =======
Earnings per share before extraordinary item (basic) .............. $ 0.31 $ 0.21
Extraordinary item ................................................ 0.01 0.02
------- -------
Earnings per share (basic) ........................................ $ 0.30 $ 0.19
======= =======
Earnings per share before extraordinary item (diluted) ............ $ 0.31 $ 0.21
Extraordinary item ................................................ 0.01 0.02
------- -------
Earnings per share (diluted) ...................................... $ 0.30 $ 0.19
======= =======
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, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenues:
Minimum rents ................................................... $113,595 $ 94,001
Percentage rents ................................................ 3,874 2,481
Tenant recoveries ............................................... 35,965 24,656
Other ........................................................... 8,254 5,218
-------- --------
Total revenues ................................................ 161,688 126,356
-------- --------
Operating expenses:
Real estate taxes ............................................... 14,937 11,603
Recoverable operating expenses .................................. 24,576 15,284
-------- --------
39,513 26,887
Other operating expenses ......................................... 3,633 2,215
-------- --------
Total operating expenses ...................................... 43,146 29,102
-------- --------
Depreciation and amortization ........................................ 31,702 25,304
General and administrative ........................................... 7,315 6,969
Gain on sales ........................................................ 2,203
Interest income ...................................................... 774 1,572
Interest expense ..................................................... 45,443 33,069
Equity in income (loss) of unconsolidated entities ................... (2,072) (1,652)
Minority interest in operating partnership ........................... 1,949 1,848
-------- --------
Income before extraordinary item ................................. 33,038 29,984
Extraordinary item:
Charges related to extinguishment of debt ........................ 545 490
-------- --------
Net income .................................................... 32,493 29,494
Preferred stock dividends ............................................ 16,019 14,784
-------- --------
Net income available to common shareholders ................... $ 16,474 $ 14,710
======== ========
Earnings per share before extraordinary items (basic) ................ $ 0.71 $ 0.64
Extraordinary item ................................................... 0.02 0.02
-------- --------
Earnings per share (basic) ........................................... $ 0.69 $ 0.62
======== ========
Earnings per share before extraordinary item (diluted) ............... $ 0.71 $ 0.64
Extraordinary item ................................................... 0.02 0.02
-------- --------
Earnings per share (diluted) ......................................... $ 0.69 $ 0.62
======== ========
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, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 32,493 $ 29,494
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss on long term debt extinguishment ...... 545 490
Provision for doubtful accounts .......................... 1,819 1,177
Depreciation and amortization ............................ 31,702 25,304
Gain on sale of property/outparcels ...................... (2,203)
Other non-cash expenses .................................. 537
Equity in (income) loss of unconsolidated entities ....... 2,072 1,652
Minority interest in operating partnership ............... 1,949 1,848
Net changes in operating assets and liabilities:
Tenant accounts receivable, net .......................... (828) (3,584)
Deferred expenses, prepaid and other assets .............. 1,015 (2,375)
Accounts payable and accrued expenses .................... 4,133 1,474
--------- ---------
Net cash provided by operating activities ............. 72,697 56,017
--------- ---------
Cash flows from investing activities:
Proceeds from sale of properties .............................. 1,510
Additions to investment in real estate ........................ (22,214) (20,230)
Acquisition of properties ..................................... (296,393)
Distributions from (investment in) unconsolidated entities, net 5,069 (67,191)
(Payments to) withdrawals from cash in escrow ................. (7,240) 1,892
Additions to deferred expenses, prepaid and other assets ...... (3,877) (3,204)
--------- ---------
Net cash used in investing activities ................. (26,752) (385,126)
--------- ---------
Cash flows from financing activities:
(Payments to) proceeds from revolving line of credit, net ..... (18,800) 87,400
Proceeds from issuance of mortgage and notes payable .......... 199,104 356,467
Principal payments on mortgage and notes payable .............. (166,778) (61,419)
Proceeds from issuance of shares .............................. 391 454
Cash distributions ............................................ (51,406) (49,524)
--------- ---------
Net cash (used in) provided by financing activities ... (37,489) 333,378
--------- ---------
Net change in cash and cash equivalents ................................ 8,456 4,269
Cash and cash equivalents, at beginning of period ...................... 8,949 7,434
--------- ---------
Cash and cash equivalents, at end of period ............................ $ 17,405 $ 11,703
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
6
<PAGE> 7
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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") (88.9% owned by GRT at September 30,
1999 and December 31, 1998), 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), three Delaware limited liability companies (Glimcher
Northtown Venture, LLC, Weberstown Mall, LLC and Glimcher Lloyd Venture, LLC)
and one Ohio limited partnership (Morgantown Mall Associates Limited
Partnership), all of which are owned directly or indirectly by GRT. The
Operating Partnership has an investment in several joint ventures and one other
corporation which are accounted for under the equity method. All significant
inter-entity balances and transactions have been eliminated.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and in accordance with instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The information furnished in the accompanying consolidated balance
sheets, statements of operations, and statements of cash flows reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the aforementioned financial statements for the interim periods.
Operating results for the nine months ended September 30, 1999, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
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, 1998.
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 after the contingent
sales level is exceeded rather than estimating and accruing percentage rents as
if earned ratably over the lease year. The Company adopted EITF 98-9 on a
prospective basis beginning second quarter 1998 and did not restate the first
quarter of 1998. Comparative pro forma results if the standard had been adopted
at the beginning of 1998 would have reduced net income available to common
shareholders by approximately $300,000 ($0.01 per share) for the nine months
ended September 30, 1998.
Supplemental disclosure of non-cash financing and investing activities:
The Company accrued accounts payable of $1,418 and $2,898 for real
estate improvements as of September 30, 1999 and 1998, respectively.
Reclassifications
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 1999 presentation.
7
<PAGE> 8
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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>
BALANCE SHEETS
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Assets:
Investment properties at cost, net ..... $723,933 $675,993
Other assets ........................... 45,447 41,701
-------- --------
$769,380 $717,694
======== ========
Liabilities and Members' Equity:
Mortgage notes payable ................. $464,512 $401,927
Accounts payable and accrued expenses .. 102,767 113,837
-------- --------
567,279 515,764
Members' equity ........................ 202,101 201,930
-------- --------
$769,380 $717,694
======== ========
Operating Partnership's share of:
Members' equity ........................ $134,038 $136,645
======== ========
RECONCILIATION OF MEMBERS' EQUITY TO COMPANY
INVESTMENT IN UNCONSOLIDATED ENTITIES:
Members' equity ............................ $134,038 $136,645
Advances and additional costs .............. 59,026 63,560
-------- --------
Investment in unconsolidated entities ...... $193,064 $200,205
======== ========
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues ...................................... $ 23,847 $21,790 $ 69,810 $ 60,177
Operating expenses .................................. (10,513) (9,129) (30,934) (25,812)
-------- ------- -------- --------
Net operating income ................................ 13,334 12,661 38,876 34,365
Depreciation and amortization ....................... (4,393) (3,879) (13,000) (10,639)
Other expenses ...................................... (985) (1,606) (3,485) (4,565)
Gain/loss on sales of property ...................... 623 623
Interest expense, net ............................... (7,470) (6,750) (21,464) (18,128)
-------- ------- -------- --------
Net income (loss) ................................... $ 1,109 $ 426 $ 1,550 $ 1,033
======== ======= ======== ========
Operating Partnership's share of net income (loss) .. $ (76) $ (497) $ (2,072) $ (1,652)
======== ======= ======== ========
</TABLE>
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. MORTGAGE NOTES PAYABLE AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
CARRYING AMOUNT OF PAYMENT PAYMENT AT MATURITY
DESCRIPTION MORTGAGE NOTES PAYABLE INTEREST RATE TERMS MATURITY DATE
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Glimcher Holdings L.P. ............ $ 25,000 $ 25,000 6.935% 6.935% (a) $ 25,000 Oct. 1, 2000
Glimcher Holdings L.P. - Loan A ... 40,000 6.995%
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
Grand Central L.P. ................ 52,225 7.180% (b) 46,065 Feb. 1, 2009
Morgantown Mall Associates L.P. ... 57,802 58,214 6.890% 6.890% (b) (c) (c)
University Mall L.P. .............. 70,115 70,695 7.090% 7.090% (b) (d) (d)
Northtown Mall, LLC ............... 40,000 40,000 6.912% 6.912% (a) 40,000 Aug. 30, 2001
Montgomery Mall Associates, L.P. .. 47,256 47,602 6.740% 6.740% (b) (e) (e)
Weberstown Mall, LLC .............. 20,450 11,520 7.430% 8.800% (b) 19,151 May 1, 2006
Glimcher Lloyd Venture, LLC ....... 130,000 130,000 (f) (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
Glimcher Properties L.P.(o) ... 71,425 (g) (b) 18,645 July 1, 2009
Other Mortgage Notes (o) ...... 79,227 101,709 (h) (h) (b) 70,304 (i)
Other Bridge Facilities ....... 43,725 89,000 (j) (j) (a) 43,725 (k)
Tax Exempt Bonds .............. 19,000 19,000 6.000% 6.000% (l) Nov. 1, 2028
Construction Loans ............ 34,397 32,055 (m) (m) (a) (n)
-------- --------
Total Mortgage Notes Payable ...... $856,622 $830,795
======== ========
</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 (capped at 7.750% until maturity) plus 125 basis
points (6.630% at September 30, 1999 and 6.790% at December 31, 1998).
(g) Interest rate of LIBOR plus 210 basis points (7.360% at September 30, 1999);
converts to fixed rate of 10 year treasury plus 210 basis points prior to
April 2000.
(h) Interest rates ranging from 7.875% to 9.125%.
(i) Final maturity dates ranging from November 1999 to April 2016.
(j) Interest rates ranging from LIBOR plus 200-275 basis points (7.438% - 8.121%
at September 30, 1999 and 7.147% - 11.375% at December 31, 1998).
(k) Final maturity dates ranging from April to June 2000.
(l) The loan requires semi-annual payments of interest.
(m) Interest rates ranging from 7.271% to 7.371% at September 30, 1999 and
7.626% at December 31, 1998.
(n) Final maturity dates ranging from April 2000 to February 2001.
(o) Permanent financing commitment of $90,000 of which $21,520 was used to
refinance maturities in June 1999, $50,000 was drawn in July 1999 to
refinance a maturing bridge facility and $18,480 was drawn in October 1999
to refinance a maturing note payable (included in Other Mortgage Notes at
September 30, 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
On June 17, 1999, the Company, through the Operating Partnership,
amended its existing revolving line of credit (the "Credit Facility"). The
amended Credit Facility provides the Company with the ability to borrow up-to
$170,000, extends the term through January 31, 2001, is collateralized by three
properties and currently bears interest at a rate equal to LIBOR plus 190 basis
points per annum (7.301% at September 30, 1999). Payments due under the Credit
Facility are guaranteed by GRT.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. EARNINGS PER SHARE
Presentation of basic EPS and diluted EPS is summarized in the table
below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1999 1998
----------------------------- ---------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common shareholders .... $7,068 23,748 $0.30 $4,599 23,699 $0.19
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units ................ 871 2,965 578 2,978
Options .................................... 40 13
DILUTED EPS
------ ------ ----- ------ ------ -----
Income available plus assumed conversions .. $7,939 26,753 $0.30 $5,177 26,690 $0.19
====== ====== ===== ====== ====== =====
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------
1999 1998
--------------------------- ---------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common shareholders....... $16,474 23,734 $0.69 $14,710 23,689 $0.62
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units................... 1,949 2,967 1,848 2,966
Options....................................... 35 56
DILUTED EPS
------- ------ ----- ------- ------ -----
Income available plus assumed conversions..... $18,423 26,736 $0.69 $16,558 26,711 $0.62
======= ====== ===== ======= ====== =====
</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.
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, 1999:
<TABLE>
<S> <C>
Balance, January 1, 1999............................ $ (90,229)
Distributions declared, $1.4424 per share...... (34,239)
Preferred stock dividends...................... (16,019)
Net income..................................... 32,493
---------
Balance, September 30, 1999......................... $(107,994)
=========
</TABLE>
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. SEGMENT REPORTING
Statement of Financial Accounting Standards 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, as summarized in the table below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
----- ------- --------- -----
<S> <C> <C> <C> <C>
Total revenues ................. $ 34,312 $ 20,031 $ $ 54,343
Total operating expenses ....... 11,237 3,482 14,719
-------- -------- ------ ----------
Property net operating income .. $ 23,075 $ 16,549 $ $ 39,624
======== ======== ====== ==========
Net investment in real estate .. $747,445 $528,659 $4,773 $1,280,877
======== ======== ====== ==========
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
----- ------- --------- -----
<S> <C> <C> <C> <C>
Total revenues ................. $ 27,005 $ 19,497 $ $ 46,502
Total operating expenses ....... 8,280 3,132 11,412
-------- -------- ------ ----------
Property net operating income .. $ 18,725 $ 16,365 $ $ 35,090
======== ======== ====== ==========
Net investment in real estate .. $740,587 $542,807 $4,502 $1,287,896
======== ======== ====== ==========
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
----- ------- --------- -----
<S> <C> <C> <C> <C>
Total revenues ................. $101,555 $ 60,133 $ $ 161,688
Total operating expenses ....... 32,582 10,564 43,146
-------- -------- ------ ----------
Property net operating income .. $ 68,973 $ 49,569 $ $ 118,542
======== ======== ====== ==========
Net investment in real estate .. $747,445 $528,659 $4,773 $1,280,877
======== ======== ====== ==========
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
----- ------- --------- -----
<S> <C> <C> <C> <C>
Total revenues ................. $ 67,984 $ 58,372 $ $ 126,356
Total operating expenses ....... 19,267 9,835 29,102
-------- -------- ------ ----------
Property net operating income .. $ 48,717 $ 48,537 $ $ 97,254
======== ======== ====== ==========
Net investment in real estate .. $740,587 $542,807 $4,502 $1,287,896
======== ======== ====== ==========
</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 joint venture arrangements; development
risks, including lack of satisfactory financing, construction and lease-up
delays and cost overruns; the level and volatility of interest rates; the
financial stability of tenants within the retail industry; the rate of revenue
increases versus expense increases; as well as other risks listed from time to
time in this Form 10-Q and in GRT's other reports filed with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
REVENUES
Total revenues increased 16.9%, or $7.8 million, for the three months
ended September 30, 1999. Of the $7.8 million increase, $7.1 million was the
result of increased revenues at the malls, $500,000 was the result of increased
revenues at the community centers and $200,000 was related to other revenue
increases.
Minimum rents
Minimum rents increased 10.9%, or $3.7 million, for the three months
ended September 30, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center .................... $0.3 $0.1 $0.4 1.2%
Acquisitions/Developments ...... 3.4 (0.1) 3.3 9.7
---- ---- ---- ----
$3.7 $0.0 $3.7 10.9%
==== ==== ==== ====
</TABLE>
Percentage rents
Percentage rents increased $850,000 for the three months ended
September 30, 1999. Of this increase, $560,000 was earned at the malls and
$290,000 was earned at the community centers.
12
<PAGE> 13
Tenant recoveries
Tenant recoveries reflect a net increase of 22.2%, or $2.2 million, for
the three months ended September 30, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
----------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center ..................... $0.0 $0.2 $0.2 2.0%
Acquisitions/Developments ....... 2.0 0.0 2.0 20.2
---- ---- ---- ----
$2.0 $0.2 $2.2 22.2%
==== ==== ==== ====
</TABLE>
Other revenues
The $1.1 million increase in other revenues is primarily the result of
increases in temporary tenant income at the malls of $790,000 and a net increase
of $100,000 in management fee revenues from the joint ventures.
OPERATING EXPENSES
Total operating expenses increased 28.9%, or $3.3 million, for the
three months ended September 30, 1999. Recoverable operating expenses increased
$2.9 million, the provision for credit losses increased $190,000 and other
operating expenses increased $220,000.
Recoverable expenses
Recoverable operating expenses increased 27.4%, or $2.9 million, for
the three months ended September 30, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
----------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center ..................... $0.1 $0.3 $0.4 3.8%
Acquisitions/Developments ....... 2.5 0.0 2.5 23.6
---- ---- ---- ----
$2.6 $0.3 $2.9 27.4%
==== ==== ==== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $600,000 and
represented 1.1% of tenant revenues for the three months ended September 30,
1999, compared to 0.9% of tenant revenues for the three months ended September
30, 1998.
Depreciation and amortization
The $1.8 million increase in depreciation and amortization consists
primarily of an increase of $1.2 million from mall acquisitions and an increase
of $460,000 in the core portfolio properties.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.2 million and represented
4.0% of total revenues for the three months ended September 30, 1999, compared
to $2.5 million and 5.3% of total revenues for the corresponding period in 1998.
13
<PAGE> 14
GAIN ON SALES
During the third quarter of 1999, the Company completed $13.0 million
in asset sales and recognized net gains of $2.8 million, $600,000 of which is
included in equity in income (loss) of unconsolidated entities.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 19.8%, or $2.5 million, for the three months
ended September 30, 1999. The summary below identifies the increase by its
various components (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1999 1998 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance ................ $1,031,254 $815,191 $216,063
Average rate ........................ 7.27% 7.53% (0.26)%
Total interest ...................... $ 18,743 $ 15,346 $ 3,397
Less: Capitalized interest ......... (1,923) (1,651) (272)
Add: Amortization of rate buydown .. 129 (129)
Other (1) ........................... (1,400) (952) (448)
---------- -------- --------
Interest expense .................... $ 15,420 $ 12,872 $ 2,548
========== ======== ========
</TABLE>
(1) Other consists primarily of interest costs billed to joint venture entities.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1998
REVENUES
Total revenues increased 28.0%, or $35.3 million, for the nine months
ended September 30, 1999. Of the $35.3 million increase, $32.8 million was the
result of increased revenues at the malls, $1.7 million was the result of
increased revenues at the community centers and $800,000 was related to other
revenue increases.
Minimum rents
Minimum rents increased 20.8%, or $19.6 million, for the nine months
ended September 30, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-----------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center ....................... $ 1.4 $0.7 $ 2.1 2.2%
Acquisitions/Developments ......... 17.3 0.2 17.5 18.6
----- ---- ----- ----
$18.7 $0.9 $19.6 20.8%
===== ==== ===== ====
</TABLE>
Percentage rents
Percentage rents increased $1.4 million for the nine months ended September 30,
1999. Of this increase, $1.2 million was earned at the malls and $200,000 was
earned at the community centers.
14
<PAGE> 15
Tenant recoveries
Tenant recoveries reflect a net increase of 45.9%, or $11.3 million, for the
nine months ended September 30, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-----------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center ....................... $ 0.8 0.5 $ 1.3 5.5%
Acquisitions/Developments ......... 10.0 0.0 10.0 40.4
----- ---- ----- ----
$10.8 $0.5 $11.3 45.9%
===== ==== ===== ====
</TABLE>
Other revenues
The $3.0 million increase in other revenues is primarily the result of
increases in temporary tenant income at the malls of $2.3 million and a net
increase of $450,000 in management fee revenues from the joint ventures.
OPERATING EXPENSES
Total operating expenses increased 48.3%, or $14.0 million for the nine
months ended September 30, 1999. Recoverable operating expenses increased $12.6
million, the provision for credit losses increased $640,000 and other operating
expenses increased $780,000.
Recoverable expenses
Recoverable operating expenses increased 46.9%, or $12.6 million, for
the nine months ended September 30, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-----------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center ....................... $ 1.0 $0.6 $ 1.6 6.0%
Acquisitions/Developments ......... 11.0 0.0 11.0 40.9
----- ---- ----- ----
$12.0 $0.6 $12.6 46.9%
===== ==== ===== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $1.8 million and
represented 1.1% of tenant revenues for the nine months ended September 30,
1999, compared to 1.0% of tenant revenues for the nine months ended September
30, 1998.
Depreciation and amortization
The $6.4 million increase in depreciation and amortization consists
primarily of an increase of $4.8 million from mall acquisitions and an increase
of $1.3 million in the core portfolio properties.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $7.3 million and represented
4.5% of total revenues for the nine months ended September 30, 1999, compared to
$7.0 million and 5.5% of total revenues for the corresponding period in 1998.
15
<PAGE> 16
GAIN ON SALES
During the first nine months of 1999, the Company completed $13.0
million in asset sales and recognized net gains of $2.8 million, $600,000 of
which is included in equity in income (loss) of unconsolidated entities.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 37.4%, or $12.4 million, for the nine months
ended September 30, 1999. The summary below identifies the increase by its
various components (dollars in thousands).
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------
1999 1998 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance ................ $1,021,204 $707,853 $313,351
Average rate ........................ 7.19% 7.52% (0.33)%
Total interest ...................... $ 55,068 $ 39,923 $ 15,145
Less: Capitalized interest ......... (5,297) (4,916) (381)
Add: Amortization of rate buydown .. 517 (517)
Other (1) ........................... (4,328) (2,455) (1,873)
---------- -------- --------
Interest expense .................... $ 45,443 $ 33,069 $ 12,374
========== ======== ========
</TABLE>
(1) Other consists primarily of interest costs billed to joint venture entities.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company has several active development, renovation and expansion
projects and will continue to pursue other projects in these areas.
In January 1999, the Company refinanced a maturing $40.0 million
mortgage note payable with a new $52.5 million mortgage note payable on Grand
Central Mall which matures in February 2009 and bears interest at 7.18% per
annum. The Company extinguished $16.0 in maturing short-term notes during the
first quarter and refinanced a short-term note payable of $10.0 million.
In April 1999, the Company refinanced a $11.5 million mortgage note
payable with a new $20.5 million mortgage note payable on Weberstown Mall which
matures in May 2006 and bears interest at 7.43% per annum. Also in April 1999,
the Company modified and increased an existing short term note payable to $21.5
million. The maturity of the $21.5 million note was extended to April 1, 2000 in
conjunction with a $2.2 million principal payment on September 30, 1999.
In June 1999, the Company, through the Operating Partnership, amended
its existing revolving line of credit (the "Credit Facility"). The amended
Credit Facility was reconfigured from $190.0 million collateralized by a pool of
11 properties to $170.0 million line of credit collateralized by three
properties, extended the term through January 31, 2001 and changed the interest
rate to a range of 160 to 190 basis points over LIBOR (7.301% at September 30,
1999). Payments under the Credit Facility are guaranteed by GRT. Concurrent with
the amendment to the Credit Facility, the Company closed a $24.4 million short
term note payable collateralized by five community centers previously encumbered
by the Credit Facility; three community centers previously encumbered by the
Credit Facility remain unencumbered.
In June 1999, the Company obtained a $90.0 million note payable of
which $21.5 million, $50.0 million and $18.5 million were funded in June 1999,
July 1999 and October 1999, respectively, to refinance existing mortgage
maturities. The note bears interest at LIBOR plus 210 basis points, reset
quarterly (7.360% at September 30, 1999). The Company may lock-in a fixed rate
based on the 10 year Treasury plus 210 basis points until April 19, 2000, at
which time the rate will automatically lock.
16
<PAGE> 17
Management anticipates that net cash provided by operating activities,
the funds available under its Credit Facility, its construction financing,
long-term mortgage debt, venture structure for acquisitions and developments,
issuance of preferred and common shares of beneficial interest and proceeds from
the sale of assets will provide sufficient capital resources to carry out the
Company's business strategy relative to the renovations, expansions and
developments discussed herein. Based upon its current debt-to-market
capitalization, the Company does not expect to pursue significant additional
acquisitions until such time as the Company has reduced the amount of
outstanding borrowings or has access to additional equity capital.
At September 30, 1999, the Company's debt-to-total-market
capitalization was 62.1%, compared to 61.0% at December 31, 1998. The Company's
intent is to maintain this ratio between approximately 40.0% and 60.0% and the
Company is working toward reducing this ratio below 60.0% in 1999.
Net cash provided by operating activities for the nine months ended
September 30, 1999, was $72.7 million versus $56.0 million for the corresponding
period of 1998. Net income adjusted for non-cash items accounted for a $7.9
million increase, while changes in operating assets and liabilities accounted
for a $8.8 million increase.
Net cash used in investing activities for the nine months ended
September 30, 1999, was $26.8 million and primarily reflects additional direct
investments in real estate assets of $22.2 million and a decrease in indirect
investments in real estate through investments in unconsolidated entities of
$5.1 million.
Net cash used in financing activities for the nine months ended
September 30, 1999, was $37.5 million. Cash was used to reduce outstanding
borrowings on the Credit Facility by $18.8 million, to fund distributions of
$51.4 million and principal payments on mortgage and notes payable of $166.8
million. Cash was provided by issuance of new mortgage and notes payable of
$199.1 million.
EXPANSION, RENOVATION AND DEVELOPMENT ACTIVITY
The Company continues to be active in its expansion, renovation and
development activities. Its business strategy is to grow the Company's assets
and cash flow available, to among other things, provide for dividend
requirements.
Expansions and Renovations
- --------------------------
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.
Malls
At Indian Mound Mall in Newark, Ohio, the expansion of an existing
Elder-Beerman store by approximately 21,000 square feet was completed in January
1999 and increased the mall's GLA to approximately 564,000 square feet. At Grand
Central Mall in Parkersburg, West Virginia, the Company relocated County Market
to a new 63,600 square-foot outparcel building which opened in March 1999. At
Ashland Town Center in Ashland, Kentucky, the Company added its fourth anchor
when Goody's opened in a 27,900 square-foot store in March 1999. At The Mall at
Fairfield Commons in Beavercreek, Ohio, the Company completed a 75,000
square-foot Regal Cinemas on one of the mall's outparcels, which opened August
1999.
Community Centers
The Company currently has community center anchor expansion projects in
process at Cross-Creek Plaza in Beaufort, South Carolina and Loyal Plaza in
Loyalsock, Pennsylvania. Cherry Hill Plaza in Galax, Virginia opened with its
new anchor Goody's in September 1999. The total financial commitment in
connection with these projects is approximately $5.0 million.
17
<PAGE> 18
Developments
- ------------
Polaris Towne Center
In March 1998, the Company, in a joint venture in which it has a 50.0%
ownership interest, commenced construction of an approximately 700,000
square-foot power community center in northern Columbus, Ohio. Upon completion,
the community center will feature grocery and discount store anchors,
restaurants, big box retailers and several specialty shops. The initial anchor,
a 64,000 square foot Kroger, opened in the fourth quarter of 1998, four
additional anchor tenants and twelve small shop tenants occupying in excess of
185,000 square feet opened in the first nine months of 1999, approximately
130,000 square feet of space is expected to open in the fourth quarter of 1999
and ground leases for certain outparcels will commence in late 1999 and the
first half of 2000. Two anchor tenants purchased land and are constructing their
own stores. Target opened in a 136,000 square foot store in October 1999 and
Lowes will open in a 135,000 square foot store in the second quarter of 2000.
The required equity for Polaris Towne Center was contributed to the joint
venture during 1998. The joint venture also has a construction loan facility in
place that is sufficient to fund the balance of the estimated cost of the
project.
Jersey Gardens
The Company, in a joint venture in which the Company has a 30.0%
ownership interest, developed a 1.3 million square-foot value-oriented fashion
and entertainment megamall, ("Jersey Gardens"), located in Elizabeth, New
Jersey. Construction of the mall and related infrastructure has been completed
and the grand opening of Jersey Gardens was October 21, 1999. At the opening
date leases had been executed for approximately 92.8% of the GLA. The required
equity for Jersey Gardens and off-site improvements had previously been funded.
The Company has also arranged a construction loan facility for the project which
matures in 2002.
Polaris Fashion Place
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. Polaris Fashion Place is expected to be a bi-level mall
featuring six anchor tenants, approximately 150 mall stores and four
restaurants, which will be located across the street from Polaris Towne Center
and is projected to open in 2001.
Carson
In April 1999, the Company terminated its contingent contract to
acquire the land for a value-oriented super-regional mall located in Carson,
California. The Company is currently exploring alternatives with respect to
continued participation in the development of this site.
Bolingbrook
In August 1999, the Company terminated its contract to acquire the land
for a super-regional mall in the Chicago suburb of Bolingbrook, Illinois. All
costs incurred in connection with this development in the amount of $486,000
were written-off in the third quarter of 1999.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended September 30, 1999, and 1998, represent 15.4 million square feet
of GLA, or 79.3% of the "same store" population.
<TABLE>
<CAPTION>
MALLS COMMUNITY CENTERS
--------------------- -----------------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF % INCREASE
------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Anchors ............. $169.83 1.6% $245.04 2.9%
Stores .............. $273.82 2.8% $183.20 2.7%
Total ............... $219.41 2.3% $237.62 2.8%
</TABLE>
18
<PAGE> 19
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
-----------------------------------------------
9/30/99 6/30/99 3/31/99 12/31/98 9/30/98
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Mall Anchors ........................... 97.3% 97.5% 96.1% 96.3% 96.5%
Mall Stores ............................ 82.9% 81.9% 82.5% 84.1% 82.5%
Mall Stores Comparable 12 Months ....... 82.9% 81.9% 82.5% 84.1% 82.5%
Total Mall Portfolio ................... 91.9% 91.8% 90.8% 91.8% 91.3%
Community Center Anchors ............... 97.5% 97.5% 98.7% 98.7% 97.9%
Community Center Stores ................ 89.1% 89.1% 89.4% 90.2% 88.1%
Total Community Centers ................ 95.5% 95.6% 96.6% 96.7% 95.6%
Single Tenant Retail Properties ........ 92.2% 92.2% 92.2% 92.2% 92.2%
Total Community Center Portfolio ....... 95.2% 95.2% 96.1% 96.3% 95.3%
</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 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 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, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income available to common shareholders ....... $ 7,068 $ 4,599 $16,474 $14,710
Add back (less):
Real estate depreciation and amortization .... 9,566 8,116 28,470 22,894
Gain on sales of depreciated property ........ (1,962) (1,962)
Gain on sales of undepreciated property ...... (241) (241)
GRT share of joint venture depreciation
and amortization .......................... 2,446 2,219 7,189 6,307
GRT share of joint venture gain on sales of
undepreciated property .................... (623) (623)
Extraordinary item ........................... 250 490 545 490
Minority interest in operating partnership ... 871 578 1,949 1,848
-------- -------- ------- -------
Funds from operations ............................. $ 17,375 $ 16,002 $51,801 $46,249
======== ======== ======= =======
</TABLE>
FFO increased 8.6%, or $1.4 million, for the three months ended
September 30, 1999. The increase was the result of the Company's continuous
focus on its core portfolio and the impact of its 1998 strategic acquisitions.
Property net operating income increased $4.5 million and FFO from unconsolidated
entities increased $650,000. These increases were partially offset by an
increase in net interest expense of $2.6 million, an increase in preferred stock
dividends of $540,000 and a decrease in general and administrative expenses of
$260,000.
FFO increased 12.0%, or $5.6 million, for the nine months ended
September 30, 1999. The increase was the result of the Company's continuous
focus on its core portfolio and the impact of its 1998 strategic acquisitions.
Property net operating income increased $21.3 million and was partially offset
by an increase in net interest expense of $13.2 million, an increase in
preferred stock dividends of $1.2 million, an increase in FFO from
unconsolidated entities of $460,000 and an increase in general and
administrative expenses of $350,000.
19
<PAGE> 20
ACCOUNTING PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for financial
statements for fiscal quarters of fiscal years beginning after June 15, 2000.
The Company will be required to adopt SFAS No. 133 effective January 1, 2001.
SFAS No. 133 standardizes the accounting for derivative instruments by requiring
that all entities recognize them as assets and liabilities in the balance sheet
and subsequently measure them at fair market value. It also prescribes specific
accounting principles to be applied to hedging activities and hedging
transactions, which are significantly different from prior accounting
principles. The Company has not yet determined the impact of SFAS No. 133.
YEAR 2000 ISSUES
The Company recognizes that Year 2000 issues may have an impact on its
business, operations and financial condition. The Company has completed an
assessment, remediation and testing of its Year 2000 readiness with respect to
all of its information technology ("IT") systems and the reliability and
condition of its non-IT systems. The Company has obtained status updates
regarding Year 2000 issues on these systems either via contacting the
manufacturers and vendors, or by acquiring the necessary information from their
websites.
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 are Year 2000 compliant. The Company does not
have any mainframe/midrange computer codes to verify.
All of the Company's servers and workstations use Intel based
processors and the Company has used third party applications to verify these
systems. Planned upgrades and new purchases have eliminated several
non-compliant systems. The Company continues to phase-out the remaining older
computers. As an added precaution, extra computers will be on hand at each
location. The desktop operating system and application issues have been resolved
by applying necessary fixes and patches.
The costs incurred by the Company at the present time have been
internal costs only. The Company expects to spend no more than $30,000 for
outside consultants to give additional assurance on its IT systems. The source
of these funds will be from operations. The significant risks to the Company in
the event that Year 2000 issues are not identified and corrected include the
possibility that IT system problems could cause delays or errors in processing
financial and operations information. The Year 2000 issue has not affected any
of the Company's IT system decisions. At the present time the Company has
planned upgrades in progress that will not be delayed or accelerated due to Year
2000 issues.
The Company's contingency plan recognizes that the biggest exposures
are non-IT systems, which may result in Year 2000 issues. These exposures are
facility related and encompass areas such as HVAC systems, elevators, security,
lighting, telecommunications, electrical, plumbing, fire and sprinkler controls,
as well as our reliance on outside contractors for services such as security,
janitorial and exterior maintenance. At the present time, the Company has not
identified any instances where Year 2000 issues will require material costs to
repair or replace any of these systems. If failure does occur in any of these
provided services as a result of Year 2000 issues, the Company is prepared to
correct the problem with manual labor, either hired or internally which could
cause a short term limitation in the efficiency of the Company's properties
operations.
The Company has formed a dedicated Year 2000 Task Force. The Task Force
has contacted all the tenants and vendors including utility companies. The Task
Force has compiled a list of emergency contacts including maintenance and repair
technicians. We are asking all tenants to do the same, and provide us with a
list of emergency contacts. We are also requesting that the tenants have a
representative available at each location on January 1, 2000 to ensure a smooth
transition into the next century. Members of the task force will be available
the entire weekend of the New Year and the following week. We do not expect any
significant problems, but if they arise, we will dedicate all available
resources to remedy the situation in a timely manner.
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 adverse 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, malls achieve most of their
temporary tenant rents and percentage 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
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 in 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.
Inflation may, however, 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 I
FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table presents descriptions of the financial instruments
and derivative instruments that are held by the Company at September 30, 1999,
and which are sensitive to changes in interest rates. The Company enters into
derivative financial instrument transactions in order to manage or reduce market
risk. Under interest-rate swaps, the Company agrees with other parties to
exchange, at specified intervals, the difference between fixed-rate and floating
rate interest amounts calculated by reference to an agreed notional principal
amount. The Company does not enter into derivative financial instrument
transactions for speculative purposes.
For the liabilities, the table represents principal calendar year cash
flows that exist by maturity date and the related average interest rate. For the
interest rate derivatives, the table presents the notional amounts and expected
interest rates that exist by contractual dates. The notional amount is used to
calculate the contractual payments to be exchanged under the contract. The
variable rates are estimated based upon the 30-day forward LIBOR rate which at
September 30, 1999 was 5.401%.
In August 1998, the Company entered into a three-year interest-rate
swap agreement which fixed LIBOR at 5.662% per annum on a notional amount of
$40,000. In September 1998, the Company entered into a three-year interest rate
protection agreement on $130,000 of borrowings in which the obligor agreed to
reimburse the Company as a result of an increase in LIBOR above 7.750% per
annum. In June 1999, the Company also entered into a one and a half year
interest rate protection agreement on $170,000 of borrowings in which the
obligor agreed to reimburse the Company as a result of an increase in LIBOR
above 8.000% per annum. All of these agreements have been reflected in the table
below.
All amounts are reflected in thousands:
<TABLE>
<CAPTION>
FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
---- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES:
Fixed rate ............... $ 19,408 $133,921 $ 67,197 $54,268 $44,586 $329,121 $648,501 $634,913
Average interest rate .... 7.027% 7.252% 7.194% 7.209% 7.147% 6.374% 7.350%
Variable rate ............ $ $ 69,905 $282,417 $352,322 $352,322
Average interest rate .... 7.608% 7.001% 6.938%
INTEREST RATE DERIVATIVES:
Notional amount .......... $340,000 $340,000 $340,000 $340,000 $ 468
Average pay rate ......... 5.432% 5.432% 5.432% 5.432%
Average receive rate ..... 5.401% 5.401% 5.401% 5.401%
</TABLE>
22
<PAGE> 23
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule (filed for EDGAR filing
purposes only).
(b) Reports on Form 8-K
None
23
<PAGE> 24
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 9 , 1999 /s/ Herbert Glimcher
- --------------------- --------------------
(Date) Herbert Glimcher, Chairman of the Board,
President and Chief Executive Officer
(Principle Executive Officer)
November 9, 1999 /s/ William G. Cornely
- --------------------- ----------------------
(Date) William G. Cornely, Executive Vice President
Chief Operating Officer & Chief Financial Officer
24
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 17,405
<SECURITIES> 0
<RECEIVABLES> 28,059
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,442,738
<DEPRECIATION> 161,861
<TOTAL-ASSETS> 1,554,976
<CURRENT-LIABILITIES> 0
<BONDS> 1,000,822
90,000
127,950
<COMMON> 238
<OTHER-SE> 245,707
<TOTAL-LIABILITY-AND-EQUITY> 1,554,976
<SALES> 0
<TOTAL-REVENUES> 161,688
<CGS> 0
<TOTAL-COSTS> 41,327
<OTHER-EXPENSES> 39,017
<LOSS-PROVISION> 1,819
<INTEREST-EXPENSE> 45,443
<INCOME-PRETAX> 33,038
<INCOME-TAX> 0
<INCOME-CONTINUING> 33,038
<DISCONTINUED> 0
<EXTRAORDINARY> 545
<CHANGES> 0
<NET-INCOME> 32,493
<EPS-BASIC> 0.69
<EPS-DILUTED> 0.69
</TABLE>
