<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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
91/4% 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 April 28, 2000, there were 23,788,959 Common Shares of Beneficial Interest
outstanding, par value $0.01 per share.
1 of 19 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 March 31, 2000 and December 31, 1999 3
Consolidated Statements of Operations for the three months ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</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)
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Investment in real estate:
Land ............................................................ $ 187,201 $ 182,559
Buildings, improvements and equipment ........................... 1,357,656 1,358,901
Developments in progress:
Land ......................................................... 7,994 8,221
Developments ................................................. 8,473 8,771
---------- ----------
1,561,324 1,558,452
Less accumulated depreciation ................................... 194,566 183,487
---------- ----------
Net investment in real estate ................................ 1,366,758 1,374,965
Cash and cash equivalents ......................................... 12,427 9,039
Cash in escrow .................................................... 22,290 24,553
Investment in and advances to unconsolidated entities ............. 134,253 121,777
Tenant accounts receivable, net ................................... 36,418 37,167
Deferred expenses, net ............................................ 12,395 12,173
Prepaid and other assets .......................................... 6,590 6,376
---------- ----------
$1,591,131 $1,586,050
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable ............................................ $ 903,716 $ 907,229
Notes payable ..................................................... 154,200 125,000
Accounts payable and accrued expenses ............................. 37,146 45,180
Distributions payable ............................................. 18,258 23,018
---------- ----------
1,113,320 1,100,427
Commitments and contingencies
Minority interest in partnership .................................. 29,070 29,963
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 March 31, 2000 and December 31,
1999, 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,
23,782,331 and 23,764,879 shares issued and outstanding
as of March 31, 2000 and December 31, 1999, respectively ..... 238 238
Additional paid-in capital ...................................... 354,074 353,856
Distributions in excess of accumulated earnings ................. (123,521) (116,384)
---------- ----------
$1,591,131 $1,586,050
========== ==========
</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 MARCH 31, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Minimum rents ................................................... $40,897 $37,796
Percentage rents ................................................ 1,615 1,556
Tenant recoveries ............................................... 13,521 12,155
Other ........................................................... 3,479 2,579
------- -------
Total revenues ................................................ 59,512 54,086
------- -------
Operating expenses:
Real estate taxes ............................................... 5,554 5,073
Recoverable operating expenses .................................. 9,087 8,105
------- -------
14,641 13,178
Other operating expenses ........................................ 1,800 1,227
------- -------
Total operating expenses ...................................... 16,441 14,405
------- -------
Property net operating income ................................. 43,071 39,681
Depreciation and amortization ........................................ 12,448 10,350
General and administrative ........................................... 2,409 2,687
Gain on sales of property/outparcels ................................. 1,269
Interest income ...................................................... 628 231
Interest expense ..................................................... 19,873 14,883
Equity in income (loss) of unconsolidated entities ................... (14) (908)
Minority interest in operating partnership ........................... 526 627
------- -------
Net income .................................................... 9,698 10,457
Preferred stock dividends ............................................ 5,402 5,366
------- -------
Net income available to common shareholders ................... $ 4,296 $ 5,091
======= =======
Earnings per share (basic and diluted) ............................... $ 0.18 $ 0.21
======= =======
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 CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 9,698 $ 10,457
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for doubtful accounts ......................... 736 622
Depreciation and amortization ........................... 12,448 10,350
Equity in (income) loss of unconsolidated entities ...... 14 908
Gain on sale of property/outparcels ..................... (1,269)
Minority interest in operating partnership .............. 526 627
Net changes in operating assets and liabilities:
Tenant accounts receivable, net ......................... 38 477
Deferred expenses, prepaid and other assets ............. 302 327
Accounts payable and accrued expenses ................... (9,028) (1,674)
-------- --------
Net cash provided by operating activities ............ 13,465 22,094
-------- --------
Cash flows from investing activities:
Additions to investment in real estate ....................... (2,811) (9,700)
Investment in unconsolidated entities, net ................... (12,490) (4,527)
Proceeds from sales of outparcels ............................ 1,477
Withdrawals from (payments to) cash in escrow ................ 2,263 (688)
Additions to deferred expenses, prepaid and other assets ..... (1,326) (994)
-------- --------
Net cash used in investing activities ................ (12,887) (15,909)
-------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit, net .................. 29,200 10,200
Proceeds from issuance of mortgage and notes payable ......... 26,394 66,104
Principal payments on mortgage and notes payable ............. (29,907) (67,059)
Net proceeds from issuance of shares ......................... 143 126
Cash distributions ........................................... (23,020) (18,118)
-------- --------
Net cash provided by (used in) financing activities .. 2,810 (8,747)
-------- --------
Net change in cash and cash equivalents ............................... 3,388 (2,562)
Cash and cash equivalents, at beginning of period ..................... 9,039 8,949
-------- --------
Cash and cash equivalents, at end of period ........................... $ 12,427 $ 6,387
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE> 6
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 March 31, 2000
and December 31, 1999), 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), one Colorado limited
liability company ("Olathe Mall 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. Inter-entity balances and transactions have been eliminated.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and in accordance with instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The information furnished in the accompanying consolidated balance
sheets, statements of operations, and statements of cash flows reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the aforementioned financial statements for the interim periods.
Operating results for the three months ended March 31, 2000, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.
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, 1999.
Supplemental disclosure of non-cash financing and investing activities:
The Company accrued accounts payable of $1,747 and $6,751 for real
estate improvements as of March 31, 2000 and 1999, respectively.
Reclassifications
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 2000 presentation.
2. INVESTMENT IN UNCONSOLIDATED ENTITIES
Investment in unconsolidated entities consists of preferred stock and
non-voting common stock of Glimcher Development Corporation, 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 equity in income (loss) of unconsolidated entities for the period
January 1, 1999 to March 31, 1999 includes the Company's 45.00% interest in
Great Plains MetroMall, LLC. Effective October 1, 1999, the Company acquired an
additional 10.00% interest and Great Plains MetroMall, LLC is included in the
consolidated financial statements from that date.
6
<PAGE> 7
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Assets:
Investment properties at cost, net ................ $655,736 $635,834
Other assets ...................................... 54,616 58,901
-------- --------
$710,352 $694,735
======== ========
Liabilities and Members' Equity:
Mortgage notes payable ............................ $473,615 $458,211
Accounts payable and accrued expenses ............. 60,895 62,996
-------- --------
534,510 521,207
Members' equity ................................... 175,842 173,528
-------- --------
$710,352 $694,735
======== ========
Operating Partnership's share of:
Members' equity ................................... $103,062 $103,592
======== ========
RECONCILIATION OF MEMBERS' EQUITY TO COMPANY
INVESTMENT IN UNCONSOLIDATED ENTITIES:
Members' equity ....................................... $103,062 $103,592
Advances and additional costs ......................... 31,191 18,185
-------- --------
Investment in unconsolidated entities ................. $134,253 $121,777
======== ========
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------
2000 1999
---- ----
<S> <C> <C>
Total revenues ........................................ $ 30,470 $ 23,155
Operating expenses .................................... (11,905) (10,452)
-------- --------
Net operating income .................................. 18,565 12,703
Depreciation and amortization ......................... (6,050) (4,236)
Other expenses ........................................ (1,331) (1,300)
Interest expense, net ................................. (9,355) (6,864)
-------- --------
Net income (loss) ..................................... $ 1,829 $ 303
======== ========
Operating Partnership's share of net income (loss) .... $ (14) $ (908)
======== ========
</TABLE>
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. MORTGAGE NOTES PAYABLE AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
CARRYING AMOUNT OF PAYMENT PAYMENT AT MATURITY
DESCRIPTION MORTGAGE NOTES PAYABLE INTEREST RATE TERMS MATURITY DATE
- -----------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<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 B.. 40,000 40,000 7.505% 7.505% (a) 40,000 Feb. 1, 2003
Glimcher Centers L.P............. 73,052 73,052 7.625% 7.625% (a) 76,000 Aug. 1, 2000
Grand Central L.P................ 51,983 52,105 7.180% 7.180% (b) 46,065 Feb. 1, 2009
Morgantown Mall Associates L.P... 57,507 57,656 6.890% 6.890% (b) (c) (c)
University Mall L.P.............. 69,702 69,910 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.. 47,008 47,133 6.740% 6.740% (b) (e) (e)
Weberstown Mall, LLC ............ 20,363 20,407 7.430% 7.430% (b) 19,151 May 1, 2006
Glimcher Lloyd Venture, LLC...... 130,000 130,000 (f) (f) (a) 130,000 Oct. 11, 2001
Great Plains Metro Mall, LLC..... 54,725 54,892 (g) (g) (b) 54,461 July 1, 2000
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...... 88,949 89,420 8.460% (h) (b) 63,346 July 1, 2009
Other Mortgage Notes......... 64,667 60,458 (i) (i) (b) 54,905 (j)
Other Bridge Facilities...... 53,725 43,725 (k) (k) (a) 43,725 (l)
Tax Exempt Bonds............. 19,000 19,000 6.000% 6.000% (m) Nov. 1, 2028
Construction Loans........... 18,035 34,471 (n) (n) (a),(b) (o)
-------- --------
Total Mortgage Notes Payable..... $903,716 $907,229
======== ========
</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 (7.250% at March 31, 2000 and 7.720% at December 31, 1999).
(g) Interest rate of LIBOR plus 250 basis points (8.375% at March 31, 2000
and 7.938% at December 31, 1999).
(h) Interest rate of LIBOR plus 210 basis points (8.179% at December 31,
1999).
(i) Interest rates ranging from 7.875% to 9.125%.
(j) Final maturity dates ranging from May 2000 to April 2016.
(k) Interest rates ranging from LIBOR plus 200-275 basis points (8.0625% -
8.680% at March 31, 2000 and 8.500% - 9.227% at December 31, 1999).
(l) Final maturity dates ranging from May to June 2000.
(m) The loan requires semi-annual payments of interest.
(n) Interest rates ranging from 7.776% - 7.876% at March 31, 2000 and
8.376% - 8.476% at December 31, 1999.
(o) Final maturity dates ranging from November 2000 to February 2001.
All mortgage notes payable are collateralized by certain properties
owned by the respective partnerships with net book value of $1,203,976 and
$1,217,603 at March 31, 2000 and December 31, 1999, respectively. Certain of the
loans contain financial covenants regarding minimum net operating income and
coverage ratios.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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 with
first mortgage liens on three properties and currently bears interest at a rate
equal to LIBOR plus 190 basis points per annum (8.0325% at March 31, 2000).
Payments due under the Credit Facility are guaranteed by GRT and the Operating
Partnership.
The Credit Facility, as amended, contains customary covenants,
representations, warranties and events of default, including maintenance of a
specified minimum net worth requirement, loan to value ratios, project costs to
asset value ratios, total debt to asset value ratios and EBITDA to total debt
service, restrictions on the incurrence of additional indebtedness and approval
of anchor leases with respect to the properties which secure the Credit
Facility.
5. EARNINGS PER SHARE
The Company follows Financial Accounting Standards Board SFAS No. 128,
"Earnings Per Share." SFAS No. 128 requires the presentation of basic EPS and
diluted EPS, as summarized in the table below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------
2000 1999
-------------------------- -------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common shareholders....... $4,296 23,771 $0.18 $5,091 23,718 $0.21
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units................... 526 2,966 627 2,971
Options....................................... 10 1
------ ------ ----- ------ ------ -----
DILUTED EPS
Income available plus assumed conversions..... $4,822 26,747 $0.18 $5,718 26,690 $0.21
====== ====== ===== ====== ====== =====
</TABLE>
The A-1 and D Preferred Shares include certain conversion features that could
potentially dilute basic 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. Additionally, options
with exercise prices greater than the average share prices for the periods
presented were excluded from the respective computations of diluted EPS because
to do so would have been antidilutive.
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, 2000:
<TABLE>
<S> <C>
Balance, January 1, 2000............................ $(116,384)
Distributions declared, $0.4808 per share...... (11,433)
Preferred stock dividends...................... (5,402)
Net income..................................... 9,698
---------
Balance, March 31, 2000............................. $(123,521)
=========
</TABLE>
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. SEGMENT REPORTING
Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" 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 MARCH 31, 2000
--------------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues ................... $ 39,118 $ 20,394 $ $ 59,512
Total operating expenses ......... 12,874 3,567 16,441
-------- -------- ------ ----------
Property net operating income .... $ 26,244 $ 16,827 $ $ 43,071
======== ======== ====== ==========
Net investment in real estate .... $842,095 $519,426 $5,237 $1,366,758
======== ======== ====== ==========
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
--------------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues ................... $ 33,696 $ 20,390 $ $ 54,086
Total operating expenses ......... 10,616 3,789 14,405
-------- -------- ------ ----------
Property net operating income .... $ 23,080 $ 16,601 $ $ 39,681
======== ======== ====== ==========
Net investment in real estate .... $750,132 $539,997 $4,027 $1,294,156
======== ======== ====== ==========
</TABLE>
10
<PAGE> 11
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 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 MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
REVENUES
Total revenues increased 10.0%, or $5.4 million, for the three months
ended March 31, 2000. The $5.4 million increase was the result of a $4.6 million
increase in revenues at the malls, a $900,000 increase in other revenues and a
$100,000 decrease in the revenues at the community centers.
Minimum rents
Minimum rents increased 8.2%, or $3.1 million, for the three months
ended March 31, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.8 $0.0 $0.8 2.1%
Acquisitions/Developments.... 2.3 0.0 2.3 6.1
---- ---- ---- ----
$3.1 $0.0 $3.1 8.2%
==== ==== ==== ====
</TABLE>
Percentage rents
Percentage rents increased $60,000 for the three months ended March 31,
2000. The increase was primarily due to the malls.
11
<PAGE> 12
Tenant recoveries
Tenant recoveries reflect a net increase of 11.2%, or $1.4 million, for
the three months ended March 31, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.3 $0.0 $0.3 2.4%
Acquisitions/Developments.... 1.1 0.0 1.1 8.8
---- ---- ---- ----
$1.4 $0.0 $1.4 11.2%
==== ==== ==== ====
</TABLE>
Other revenues
The $900,000 increase in other revenues is primarily the result of a
$420,000 increase in management fee revenues from the joint ventures, a $290,000
increase in temporary tenant income at the malls and an increase of $130,000 in
compactor pad rentals at the malls.
OPERATING EXPENSES
Total operating expenses increased 14.1%, or $2.0 million, for the
three months ended March 31, 2000. Recoverable operating expenses increased $1.5
million, the provision for credit losses increased $110,000 and other operating
expenses increased $460,000.
Recoverable expenses
Recoverable expenses increased 11.1%, or $1.5 million, for the three
months ended March 31, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.0 $0.1 $0.1 0.7%
Acquisitions/Developments.... 1.4 0.0 1.4 10.4
---- ---- ---- ----
$1.4 $0.1 $1.5 11.1%
==== ==== ==== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $740,000 and
represented 1.2% of tenant revenues for both the three months ended March 31,
2000 and the three months ended March 31, 1999.
Depreciation and amortization
The $2.1 million increase in depreciation and amortization consists
primarily of an increase of $1.6 million from mall acquisitions and an increase
of $500,000 in the core portfolio properties.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.4 million and represented
4.0% of total revenues for the three months ended March 31, 2000, compared to
$2.7 million and 5.0% of total revenues for the corresponding period in 1999.
GAIN ON SALES
During the first quarter of 2000, the Company completed $1.5 million in
asset sales and recognized net gains of $1.3 million.
12
<PAGE> 13
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 33.5%, or $5.0 million, for the three months
ended March 31, 2000. The summary below identifies the increase by its various
components (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------
2000 1999 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance..................... $1,067,000 $1,012,193 $54,807
Average rate............................. 7.62% 7.17% 0.45%
Total interest........................... $ 20,326 $ 18,144 $ 2,182
Less: Capitalized interest.............. (231) (1,708) 1,477
Other (1)................................ (222) (1,553) 1,331
---------- ---------- -------
Interest expense......................... $ 19,873 $ 14,883 $ 4,990
========== ========== =======
</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 February 2000, the Company refinanced a $16.2 million construction
loan payable with a new $16.2 million mortgage note payable on Georgesville
Square, which matures in March 2010 and bears interest at 8.52% per annum. The
Company also repaid $11.7 million in mortgage notes during the first quarter and
executed a new short-term note payable of $10.0 million.
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 March 31, 2000, the Company's debt-to-total-market capitalization
was 64.6%, compared to 64.7% at December 31, 1999. 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 2000.
Net cash provided by operating activities for the three months ended
March 31, 2000, was $13.5 million versus $22.1 million for the corresponding
period of 1999. Net income adjusted for non-cash items accounted for an $810,000
decrease, while changes in operating assets and liabilities accounted for a $7.8
million decrease.
Net cash used in investing activities for the three months ended March
31, 2000, was $12.9 million. It primarily reflects additional direct investments
in real estate assets of $2.8 million, an increase in indirect investments in
real estate through investments in unconsolidated entities of $12.5 million, an
increase in deferred expenses, prepaid and other assets of $1.3 million,
withdrawals from cash in escrow of $2.3 million and proceeds from sale of assets
of $1.5 million.
Net cash provided by financing activities for the three months ended
March 31, 2000, was $2.8 million. Cash was used to fund distributions of $23.0
million and make principal payments on mortgage and notes payable of $29.9
million. Cash was provided by additional borrowings on the Credit Facility of
$29.2 million and issuance of new mortgage and notes payable of $26.4 million.
13
<PAGE> 14
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 The Great Mall of the Great Plains, in Olathe, Kansas, Saks Fifth
Avenue's value brand, Off 5th opened as an anchor in 25,000 square feet of gross
leasable area. Additionally, at Jersey Gardens, in Elizabeth, New Jersey, Old
Navy is scheduled to open in the second quarter 2000 in a 45,000 square foot
store.
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. The total financial commitment in connection with these
projects is approximately $5.0 million.
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, Polaris Towne Center in northern Columbus,
Ohio. Upon completion, Polaris Towne 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. During 1999, seven additional anchor tenants, 16 small shop tenants, three
outparcel tenants and Target opened and are occupying in excess of 468,000
square feet. Two tenants purchased land and are constructing their own stores.
Target opened 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 space for which
construction has been completed was 100.0% occupied at March 31, 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. Occupancy of
Jersey Gardens was 87.7% at March 31, 2000. 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.
14
<PAGE> 15
Polaris Fashion Place
In March 1998, the Company announced plans for the development of a new
super-regional mall of approximately 1.4 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, and will be located across the street from Polaris Towne Center.
Construction is expected to commence in 2000 with a projected opening date in
the fourth quarter of 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.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended March 31, 2000, and 1999, represent 19.2 million square feet of
GLA, or 70.9% of the "same store" population.
<TABLE>
<CAPTION>
MALLS COMMUNITY CENTERS
-------------------------- -------------------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF % INCREASE
------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Anchors ... $157.58 1.8% $248.77 0.6%
Stores .... $287.06 2.4% $202.58 3.7%
Total ..... $223.36 2.2% $243.87 0.8%
</TABLE>
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
------------------------------------------------------------
3/31/00 12/31/99 9/30/99 6/30/99 3/31/99
------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Mall Anchors........................ 99.0% 98.8% 97.3% 97.5% 96.1%
Mall Stores......................... 83.5% 84.8% 82.9% 81.9% 82.5%
Mall Stores Comparable 12 Months.... 83.4% 85.0% 82.9% 81.9% 82.5%
Total Mall Portfolio................ 93.0% 93.4% 91.9% 91.8% 90.8%
Community Center Anchors............ 97.2% 98.3% 97.5% 97.5% 98.7%
Community Center Stores............. 90.6% 90.8% 89.1% 89.1% 89.4%
Total Community Centers............. 95.7% 96.5% 95.5% 95.6% 96.6%
Single Tenant Retail Properties..... 92.2% 92.2% 92.2% 92.2% 92.2%
Total Community Center Portfolio.... 95.3% 96.1% 95.2% 95.2% 96.1%
</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.
15
<PAGE> 16
The following table illustrates the calculation of FFO for the three months
ended March 31, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------
2000 1999
---- ----
<S> <C> <C>
Net income available to common shareholders ............... $ 4,296 $ 5,091
Add back (less):
Real estate depreciation and amortization ............ 11,002 9,313
GRT share of joint venture depreciation
and amortization .................................. 3,927 2,329
(Gain) loss on sales of depreciated property ......... (461)
(Gain) loss on sales of undepreciated property ....... (808)
Minority interest in operating partnership ........... 526 627
------- -------
Funds from operations ..................................... $18,482 $17,360
======= =======
Funds from operations ..................................... $18,482 $17,360
Add back (less):
Capital expenditures ................................. (2,018) (1,149)
Straight-line of minimum rents ....................... (420) (530)
Straight-line of ground lease expense ................ 6 16
GRT share of joint venture capital expenditures and
straight-line of minimum rents ..................... (383) (313)
------- -------
Adjusted funds from operations ............................ $15,667 $15,384
======= =======
</TABLE>
FFO increased 6.5%, or $1.1 million, for the three months ended March
31, 2000. The increase was the result of the Company's continuous focus on its
core portfolio. Property net operating income increased $3.4 million, FFO from
unconsolidated entities increased $2.5 million and general and administrative
expense decreased $280,000. These increases were partially offset by an increase
in net interest expense of $4.6 million, and an increase in non-real estate
depreciation and amortization of $410,000.
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
Year 2000 issues had a minimal impact on the business, operations and
financial condition of the Company. All known issues have been remedied, and we
continue to exercise caution as we approach certain milestone dates.
With respect to its Year 2000 readiness on its information technology
("IT") there were no hardware related issues. All file servers, workstations and
routers continue to function normally. We experienced two minor software related
issues. These issues have been fixed and tested across all related databases.
With respect to its Year 2000 reliability and condition of its non-IT
systems, there were a total of three non-IT related issues. One involved an
obsolete time clock, which had been replaced but not removed from a Property.
The other two issues involved improper year displays on electro-mechanical
equipment panels. Both units continued to function properly. Both display issues
have been fixed.
16
<PAGE> 17
The costs incurred by the Company have been less then $100,000 and the
Company has not experienced any material adverse effect due to failure of any of
its or its partner's systems. Our tenants did not report any failures.
Even though the Company has successfully completed the year-end
financial reporting with minimal impact, and first quarter-end with no impact,
we continue to exercise caution as we approach other critical dates.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk. The
Company uses interest rate protection agreements to manage interest rate risks
associated with long-term, floating rate debt. At March 31, 2000 and 1999,
approximately 61.2% and 58.9%, respectively, of the Company's debt, after giving
effect to interest rate protection agreements, bore interest at fixed rates with
weighted-average maturity of 6.2 years and 6.3 years, respectively, and
weighted-average interest rates of approximately 7.597% and 7.440%,
respectively. The remainder of the Company's debt bears interest at variable
rates with weighted-average interest rates of approximately 7.929% and 6.792%,
respectively.
At March 31, 2000 and 1999, the fair value of the Company's debt was
$883.8 million and $824.8 million, respectively, compared to its carrying
amounts of $903.7 million and $829.8 million, respectively. The Company's
combined future earnings, cash flows and fair values relating to financial
instruments are dependent upon prevalent market rates of interest, primarily
LIBOR. Based upon consolidated indebtedness and interest rates at March 31, 2000
and 1999, a 100 basis points increase in the market rates of interest would
decrease future earnings and cash flows, on a quarterly basis, by $1.0 million
in both years and decrease the fair value of debt by approximately $19.4 million
and $18.4 million, at the respective balance sheet dates. A 100 basis points
decrease in the market rates of interest would increase future earnings and cash
flows, on a quarterly basis, by $1.0 million in both years and increase the fair
value of debt by approximately $20.9 million and $19.8 million, at the
respective balance sheet dates.
17
<PAGE> 18
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
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLIMCHER REALTY TRUST
May 12, 2000 /s/ Herbert Glimcher
- --------------------- -----------------------------------------------------
(Date) Herbert Glimcher, Chairman of the Board and
Chief Executive Officer (Principle Executive Officer)
May 12, 2000 /s/ William G. Cornely
- --------------------- -----------------------------------------------------
(Date) William G. Cornely, Executive Vice President
Chief Operating Officer & Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 12,427
<SECURITIES> 0
<RECEIVABLES> 36,418
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,561,324
<DEPRECIATION> 194,566
<TOTAL-ASSETS> 1,591,131
<CURRENT-LIABILITIES> 0
<BONDS> 1,057,916
90,000
127,950
<COMMON> 238
<OTHER-SE> 230,553
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 59,512
<CGS> 0
<TOTAL-COSTS> 15,705
<OTHER-EXPENSES> 14,857
<LOSS-PROVISION> 736
<INTEREST-EXPENSE> 19,873
<INCOME-PRETAX> 9,698
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,698
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.18
</TABLE>
