<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, 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:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
COMMON SHARES OF BENEFICIAL INTEREST,
PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
9 1/4% SERIES B CUMULATIVE NEW YORK STOCK EXCHANGE
REDEEMABLE PREFERRED SHARES OF
BENEFICIAL INTEREST,
PAR VALUE $0.01 PER SHARE
-------------------------------------
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 31, 2000 there were 23,815,896 Common Shares of Beneficial
Interest outstanding, par value $0.01 per share.
1 of 23 pages
<PAGE> 2
GLIMCHER REALTY TRUST
FORM 10-Q
INDEX
-----
PART I: FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999 3
Consolidated Statements of Operations for the three months ended
September 30, 2000 and 1999 4
Consolidated Statements of Operations for the nine months ended
September 30, 2000, and 1999 5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 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 21
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
<PAGE> 3
<TABLE>
<CAPTION>
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLIMCHER REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
ASSETS
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
Investment in real estate:
Land ....................................................................... $ 183,657 $ 182,559
Buildings, improvements and equipment ...................................... 1,337,509 1,358,901
Developments in progress:
Land .................................................................... 7,166 8,221
Developments ............................................................ 12,675 8,771
----------- -----------
1,541,007 1,558,452
Less accumulated depreciation .............................................. 211,639 183,487
----------- -----------
Net investment in real estate ........................................... 1,329,368 1,374,965
Cash and cash equivalents .................................................... 7,528 9,039
Cash in escrow ............................................................... 22,020 24,553
Investment in and advances to unconsolidated entities ........................ 125,436 121,777
Tenant accounts receivable, net .............................................. 41,340 37,167
Deferred expenses, net ....................................................... 16,341 12,173
Prepaid and other assets ..................................................... 9,391 6,376
----------- -----------
$ 1,551,424 $ 1,586,050
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable ....................................................... $ 867,651 $ 907,229
Notes payable ................................................................ 160,000 125,000
Accounts payable and accrued expenses ........................................ 40,557 45,180
Distributions payable ........................................................ 18,630 23,018
----------- -----------
1,086,838 1,100,427
Commitments and contingencies
Minority interest in partnership ............................................. 29,695 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 September 30, 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, 23,809,052 and
23,764,879 shares issued and outstanding as of September 30, 2000
and December 31, 1999, respectively ..................................... 238 238
Additional paid-in capital ................................................. 355,772 353,856
Distributions in excess of accumulated earnings ............................ (139,069) (116,384)
----------- -----------
$ 1,551,424 $ 1,586,050
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
<TABLE>
<CAPTION>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999
-------- --------
<S> <C> <C>
Revenues:
Minimum rents ........................................................ $ 40,238 $ 37,860
Percentage rents ..................................................... 1,562 1,490
Tenant recoveries .................................................... 13,850 12,038
Other ................................................................ 3,716 2,955
-------- --------
Total revenues ................................................. 59,366 54,343
-------- --------
Operating expenses:
Real estate taxes .................................................... 5,527 5,005
Recoverable operating expenses ........................................ 9,427 8,477
-------- --------
14,954 13,482
Other operating expenses .............................................. 1,413 1,237
-------- --------
Total operating expenses ....................................... 16,367 14,719
-------- --------
Property net operating income ...................................... 42,999 39,624
Depreciation and amortization ............................................. 13,175 10,710
General and administrative ................................................ 2,660 2,199
Gain (loss) on sales of property/outparcels ............................... 541 2,203
Interest income ........................................................... 714 288
Interest expense .......................................................... 20,413 15,420
Equity in income (loss) of unconsolidated entities ........................ 2,048 (76)
Minority interest in operating partnership ................................ 459 871
-------- --------
Income before extraordinary item .......................................... 9,595 12,839
Extraordinary item:
Extinguishment of debt prepayment fees and write-off of deferred
financing fees ...................................................... 373 250
-------- --------
Net income ......................................................... 9,222 12,589
Preferred stock dividends ................................................. 5,615 5,521
-------- --------
Net income available to common shareholders ........................ $ 3,607 $ 7,068
======== ========
Earnings per share before extraordinary item (basic) ...................... $ 0.17 $ 0.31
Extraordinary item ........................................................ $ 0.01 $ 0.01
Earnings per share (basic) ................................................ $ 0.15 $ 0.30
Earnings per share before extraordinary item (diluted) .................... $ 0.16 $ 0.31
Extraordinary item ........................................................ $ 0.01 $ 0.01
Earnings per share (diluted) .............................................. $ 0.15 $ 0.30
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>
<CAPTION>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999
--------- ---------
<S> <C> <C>
Revenues:
Minimum rents ......................................................... $ 122,297 $ 113,595
Percentage rents ...................................................... 3,779 3,874
Tenant recoveries ..................................................... 40,800 35,965
Other ................................................................. 10,427 8,254
--------- ---------
Total revenues ...................................................... 177,303 161,688
--------- ---------
Operating expenses:
Real estate taxes ...................................................... 16,918 14,937
Recoverable operating expenses ......................................... 27,698 24,576
--------- ---------
44,616 39,513
Other operating expenses ............................................... 4,458 3,633
--------- ---------
Total operating expenses ............................................ 49,074 43,146
--------- ---------
Property net operating income ....................................... 128,229 118,542
Depreciation and amortization .............................................. 38,216 31,702
General and administrative ................................................. 7,440 7,315
Gain (loss) on sales of property/outparcels ................................ 2,541 2,203
Interest income ............................................................ 1,948 774
Interest expense ........................................................... 60,614 45,443
Equity in income (loss) of unconsolidated entities ......................... 3,879 (2,072)
Minority interest in operating partnership ................................. 1,451 1,949
--------- ---------
Income before extraordinary item ........................................... 28,876 33,038
Extraordinary item:
Extinguishment of debt prepayment fees and write-off of deferred
financing fees ...................................................... 443 545
--------- ---------
Net income .......................................................... 28,433 32,493
Preferred stock dividends .................................................. 16,783 16,019
--------- ---------
Net income available to common shareholders ......................... $ 11,650 $ 16,474
========= =========
Earnings per share before extraordinary item (basic) ....................... $ 0.51 $ 0.71
Extraordinary item ......................................................... $ 0.02 $ 0.02
Earnings per share (basic) ................................................. $ 0.49 $ 0.69
Earnings per share before extraordinary item (diluted) ..................... $ 0.50 $ 0.71
Extraordinary item ......................................................... $ 0.02 $ 0.02
Earnings per share (diluted) ............................................... $ 0.49 $ 0.69
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>
<CAPTION>
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................................. $ 28,433 $ 32,493
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for doubtful accounts ................................... 2,046 1,819
Depreciation and amortization ..................................... 38,216 31,702
Extraordinary loss on long term debt extinguisment ................ 443 545
Equity in (income) loss of unconsolidated entities ................ (3,879) 2,072
(Gain) loss on sale of property/outparcels ........................ (2,541) (2,203)
Minority interest in operating partnership ........................ 1,451 1,949
Net changes in operating assets and liabilities:
Tenant accounts receivable, net ................................... (6,219) (828)
Deferred expenses, prepaid and other assets ....................... 3,735 1,015
Accounts payable and accrued expenses ............................. (3,927) 4,133
--------- ---------
Net cash provided by operating activities ...................... 57,758 72,697
--------- ---------
Cash flows from investing activities:
Additions to investment in real estate ................................. (18,335) (22,214)
Proceeds from unconsolidated entities, net ............................. 3,965 5,069
Proceeds from sales of properties/outparcels ........................... 32,779 1,510
Withdrawals from (payments to) cash in escrow .......................... 2,533 (7,240)
Additions to deferred expenses, prepaid and other assets ............... (15,943) (3,877)
--------- ---------
Net cash provided by (used in) investing activities ............ 4,999 (26,752)
--------- ---------
Cash flows from financing activities:
Proceeds from (payments to) revolving line of credit, net .............. 35,000 (18,800)
Proceeds from issuance of mortgage and notes payable ................... 199,687 199,104
Principal payments on mortgage and notes payable ....................... (239,453) (166,778)
Net proceeds from issuance of shares ................................... 408 391
Cash distributions ..................................................... (59,910) (51,406)
--------- ---------
Net cash used in financing activities .......................... (64,268) (37,489)
--------- ---------
Net change in cash and cash equivalents ......................................... (1,511) 8,456
Cash and cash equivalents, at beginning of period ............................... 9,039 8,949
--------- ---------
Cash and cash equivalents, at end of period ..................................... $ 7,528 $ 17,405
========= =========
</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") (88.1% and 88.9% owned by GRT
at September 30, 2000 and December 31, 1999, respectively), 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, recurring and necessary
for a fair statement of the aforementioned financial statements for the interim
periods. Operating results for each of the three and nine months ended
September 30, 2000, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
The December 31, 1999 balance sheet data were derived from audited
financial statements but do not include all disclosures required by accounting
principles generally accepted in the United States. The consolidated financial
statements should be read in conjunction with the notes to the consolidated
financial statements and 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 $2,022 and $1,418 for real
estate improvements as of September 30, 2000 and 1999, respectively. During the
third quarter, the Company issued 260,583 new Operating Partnership units with
a value of $4.0 million in connection with the Polaris Mall LLC transaction.
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 50.00% interest
in Johnson City Venture, LLC, a 50.00% interest in Dayton Mall Venture, LLC, a
50.00% interest in Colonial Park Mall Limited Partnership, a 30.00% interest in
Elizabeth Metro Mall, LLC, a 30.00% interest in Jersey Gardens Center, 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, a 20.00% interest in
Eastland Mall, LLC and a 39.29% interest in Polaris Mall, LLC.
7
<PAGE> 8
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The equity in income (loss) of unconsolidated entities for the period
January 1, 1999 to September 30, 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.
The net income (loss) for each unconsolidated entity is allocated in
accordance with the provisions of the applicable operating agreements. The
allocation provisions in these agreements may differ from the ownership
interest held by each member under the terms of these agreements.
The summary financial information of the Company's unconsolidated
entities, accounted for using the equity method, and a summary of the Operating
Partnership's investment in and share of net income (loss) from such
unconsolidated entities are presented below:
<TABLE>
<CAPTION>
BALANCE SHEETS
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
Assets:
Investment properties at cost, net............................. $ 666,538 $ 635,834
Other assets................................................... 79,370 58,901
----------- ---------
$ 745,908 $ 694,735
=========== =========
Liabilities and Members' Equity:...................................
Mortgage notes payable......................................... $ 489,313 $ 458,211
Accounts payable and accrued expenses.......................... 72,877 62,996
----------- ---------
562,190 521,207
Members' equity................................................ 183,718 173,528
----------- ---------
$ 745,908 $ 694,735
=========== =========
Operating Partnership's share of:
Members' equity................................................ $ 92,099 $ 103,592
=========== =========
RECONCILIATION OF MEMBERS' EQUITY TO COMPANY
INVESTMENT IN UNCONSOLIDATED ENTITIES:
Members' equity.................................................... $ 92,099 $ 103,592
Advances and additional costs...................................... 33,337 18,185
----------- ---------
Investment in unconsolidated entities.............................. $ 125,436 $ 121,777
=========== =========
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues ........................................... $ 32,727 $ 23,847 $ 95,625 $ 69,810
Operating expenses ....................................... 12,750 10,513 36,355 30,934
-------- -------- -------- --------
Net operating income ..................................... 19,977 13,334 59,270 38,876
Depreciation and amortization ............................ 5,793 4,393 17,967 13,000
Other income/expenses .................................... 291 362 2,519 2,862
Interest expense, net .................................... 9,909 7,470 29,070 21,464
-------- -------- -------- --------
Income before extraordinary item ......................... 3,984 1,109 9,714 1,550
Extraordinary item ....................................... 198 277
-------- -------- -------- --------
Net income (loss) ........................................ $ 3,786 $ 1,109 $ 9,437 $ 1,550
======== ======== ======== ========
Operating Partnership's share of net income (loss) ....... $ 1,850 $ (76) $ 3,624 $ (2,072)
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. MORTGAGE NOTES PAYABLE AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 CONSIST OF THE FOLLOWING:
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 6.935% (a)
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 7.625% (a)
Grand Central L.P................ 51,753 52,105 7.180% 7.180% (b) 46,065 Feb. 1, 2009
Morgantown Mall Associates L.P. 57,225 57,656 6.890% 6.890% (b) (c) (c)
University Mall L.P.............. 69,301 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. 46,780 47,133 6.740% 6.740% (b) (e) (e)
Weberstown Mall, LLC ............ 20,281 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..... 42,000 54,892 (g) (h) (a) 42,000 July 1, 2002
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...... 88,016 89,420 8.460% (i) (b) 63,346 July 1, 2009
Other Mortgage Notes......... 47,038 60,458 (j) (j) (b) 37,751 (k)
Other Bridge Facilities...... 148,246 43,725 (l) (l) (a) 148,246 (m)
Tax Exempt Bonds............. 19,000 19,000 6.000% 6.000% (n) 19,000 Nov. 1, 2028
Construction Loans........... 18,011 34,471 (o) (o) (a),(b) 17,899 (p)
-------- ---------
Total Mortgage Notes Payable..... $867,651 $ 907,229
======== =========
<FN>
(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 (7.870% at September 30, 2000) and 200-275 basis points (7.720% at
December 31, 1999).
(g) Interest rate of LIBOR (capped at 8.000% until maturity) plus 355 basis
points (10.18% at September 30, 2000).
(h) Interest rate of LIBOR plus 250 basis points (7.938% at December 31, 1999).
(i) Interest rate of LIBOR plus 210 basis points (8.179% at December 31, 1999).
(j) Interest rates ranging from 7.875% to 8.75%.
(k) Final maturity dates ranging from June 2001 to April 2016.
(l) Interest rates ranging from LIBOR plus 175-200 basis points (8.370%-8.688%
at September 30, 2000) and 200-275 basis points (8.500%-9.227% at December
31, 1999).
(m) Final maturity dates ranging from March 2001 to October 2001.
(n) The loan requires semi-annual payments of interest.
(o) Interest rates ranging from 8.541%-8.641% at September 30, 2000 and 8.376%-8.476% at December 31,
1999.
(p) Final maturity dates ranging from February 2001 to May 2001.
</TABLE>
All mortgage notes payable are collateralized by certain properties
owned by the respective partnerships with net book value of $1,311,951 and
$1,217,603 at September 30, 2000 and December 31, 1999, respectively. 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 with
first mortgage liens on three properties and currently bears interest at a rate
equal to LIBOR plus 190 basis points per annum (8.518% at September 30, 2000).
Payments due under the Credit Facility are guaranteed by GRT and the Operating
Partnership.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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 presentation of basic EPS and diluted EPS is summarized in the
table below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
2000 1999
----------------------------- ----------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common shareholders....... $ 3,607 23,804 $ 0.15 $ 7,068 23,748 $0.30
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units................... 459 3,053 871 2,965
Options....................................... 157 40
DILUTED EPS
-------- ------ ------- -------- ------ -----
Income available plus assumed conversions..... $ 4,066 27,014 $ 0.15 $ 7,939 26,753 $0.30
======== ======= ======= ======== ====== =====
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
2000 1999
----------------------------- ------------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common shareholders....... $11,650 23,788 $ 0.49 $16,474 23,734 $0.69
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units................... 1,451 2,995 1,949 2,967
Options....................................... 50 35
DILUTED EPS
-------- ------ ------- ------- ------ -----
Income available plus assumed conversions..... $ 13,101 26,833 $ 0.49 $18,423 26,736 $0.69
======== ======= ======= ======= ====== =====
</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, $1.4424 per share............ (34,335)
Preferred stock dividends............................ (16,783)
Net income........................................... 28,433
-----------
Balance, September 30, 2000............................... $ (139,069)
===========
</TABLE>
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. SEGMENT REPORTING
Selected information about operating segments of the Company is
summarized in the table below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
------------------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues ......................... $ 40,946 $ 18,420 $ $ 59,366
Total operating expenses ............... 13,851 2,516 16,367
---------- ---------- --------- ----------
Property net operating income .......... $ 27,095 $ 15,904 $ $ 42,999
========== ========== ========= ==========
Net investment in real estate .......... $ 835,659 $ 487,641 $ 6,068 $1,329,368
========== ========== ========= ==========
<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 NINE MONTHS ENDED SEPTEMBER 30, 2000
------------------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues ......................... $ 119,024 $ 58,279 $ $ 177,303
Total operating expenses ............... 39,461 9,613 49,074
---------- ---------- --------- ----------
Property net operating income .......... $ 79,563 $ 48,666 $ $ 128,229
========== ========== ========= ==========
Net investment in real estate .......... $ 835,659 $ 487,641 $ 6,068 $1,329,368
========== ========== ========= ==========
<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
========== ========== ========= ==========
</TABLE>
8. CONTINGENCIES
The Company has provided guarantees in connection with the outstanding
debt of certain joint ventures in which the Company is an equity member.
In connection with the development of Polaris Fashion Place, the
Operating Partnership provided the lender with a completion guarantee and an
unconditional guarantee of payment of 50.0% of the outstanding obligation on
the indebtedness on the Property.
11
<PAGE> 12
In connection with the development of Jersey Gardens, the Operating
Partnership provided the senior lending group with a completion guarantee and
payment of interest on the senior portion of the construction facility to a
maximum of $30,000 until the Property achieves a coverage ratio of 1.25.
As of September 30, 2000, no reserves for losses have been provided in
connection with these guarantees, as the Company does not expect to incur any
liability.
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; tenant bankruptcies;
failure to consummate financing and joint venture arrangements; development
risks, including lack of satisfactory equity and debt financing, construction
and lease-up delays and cost overruns; the level and volatility of interest
rates; the consummation of asset sales at acceptable prices; 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, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
REVENUES
Total revenues increased 9.2%, or $5.0 million, for the three months
ended September 30, 2000. Of the $5.0 million increase, $5.9 million was the
result of increased revenues at the malls, $1.6 million was the result of
decreased revenues at the community centers (including a $1.1 million decrease
from dispositions) and $760,000 was related to other revenue increases. Mall
acquisitions for the three month period ended September 30, 2000, reflects the
inclusion of The Great Mall of the Great Plains in the consolidated financial
statements effective October 1, 1999, as a result of an increase in the
Company's ownership to 55.0% at that date.
Minimum rents
Minimum rents increased 6.3%, or $2.4 million, for the three months
ended September 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-----------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $1.3 $ 0.1 $ 1.4 3.7%
Acquisitions/Developments.... 2.0 0.0 2.0 5.2
Dispositions................. 0.0 (1.0) (1.0) (2.6)
---- ----- ----- -----
$3.3 $(0.9) $ 2.4 6.3%
==== ===== ===== =====
</TABLE>
12
<PAGE> 13
Tenant recoveries
Tenant recoveries reflect a net increase of 15.1%, or $1.8 million, for the
three months ended September 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-----------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $1.2 $(0.3) $0.9 7.5%
Acquisitions/Developments.... 1.0 0.0 1.0 8.4
Dispositions................. 0.0 (0.1) (0.1) (0.8)
---- ----- ---- ----
$2.2 $(0.4) $1.8 15.1%
==== ===== ==== ====
</TABLE>
Other revenues
The $760,000 increase in other revenues is primarily the result of a
net increase of $370,000 in management fee revenues from the joint ventures as
a result of the opening of Jersey Gardens in October 1999, an increase of
$190,000 in temporary tenant income at the malls and an increase of $200,000 in
other income items.
OPERATING EXPENSES
Total operating expenses increased 11.2%, or $1.6 million, for the
three months ended September 30, 2000. Recoverable expenses increased $1.5
million and other operating expenses increased $100,000.
Recoverable expenses
Recoverable expenses increased 10.9%, or $1.5 million for the three
months ended September 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $0.9 $(0.5) $0.4 2.9%
Acquisitions/Developments.... 1.4 0.0 1.4 10.2
Dispositions................. 0.0 (0.3) (0.3) (2.2)
---- ----- ---- ----
$2.3 $(0.8) $1.5 10.9%
==== ===== ==== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $660,000 and
represented 1.1% of tenant revenues for both the three months ended September
30, 2000 and 1999.
DEPRECIATION AND AMORTIZATION
The $2.5 million increase in depreciation and amortization consists
primarily of an increase of $1.7 million from mall acquisitions and an increase
of $1.0 million in the core portfolio properties and corporate assets, offset
with a $200,000 decrease from dispositions.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.7 million and represented
4.5% of total revenues for the three months ended September 30, 2000, compared
to $2.2 million and 4.0% of total revenues for the corresponding period in
1999. The $500,000 increase consists primarily of increases in state and local
taxes of $190,000 and increases in wages and benefits of $160,000.
GAIN ON SALES
During the third quarter of 2000, the Company completed $31.4 million
in asset sales and recognized net gains of $540,000.
13
<PAGE> 14
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 32.4%, or $5.0 million for the three months
ended September 30, 2000. The summary below identifies the increase by its
various components (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------
2000 1999 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance ..................... $ 1,053,113 $ 1,031,254 $ 21,859
Average rate ............................. 7.99% 7.27% 0.72%
Total interest ........................... $ 21,036 $ 18,743 $ 2,293
Less: Capitalized interest .............. (321) (1,923) 1,602
Other (1) ................................ (302) (1,400) 1,098
----------- ----------- -----------
Interest expense ......................... $ 20,413 $ 15,420 $ 4,993
=========== =========== ===========
</TABLE>
(1) Other consists primarily of interest costs billed to joint venture
entities.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
REVENUES
Total revenues increased 9.7%, or $15.6 million, for the nine months
ended September 30, 2000. Of the $15.6 million increase, $15.9 million was the
result of increased revenues at the malls, $1.8 million was the result of
decreased revenues at the community centers (including a $1.2 million decrease
from dispositions) and $1.5 million was related to other revenue increases.
Mall acquisitions for the nine month period ended September 30, 2000, reflects
the inclusion of The Great Mall of the Great Plains in the consolidated
financial statements effective October 1, 1999, as a result of an increase in
the Company's ownership to 55.0% at that date.
Minimum rents
Minimum rents increased 7.7%, or $8.7 million, for the nine months
ended September 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $2.8 $ (0.1) $2.7 2.4%
Acquisitions/Developments.... 7.1 0.0 7.1 6.3
Dispositions................. 0.0 (1.1) (1.1) (1.0)
---- ------ ---- -----
$9.9 $ (1.2) $8.7 7.7%
==== ====== ==== =====
</TABLE>
Other revenues
The 2.2 million increase in other revenues is primarily the result of
a net increase of $1.1 million in management fee revenues from the joint
ventures as a result of the opening of Jersey Gardens in October 1999, an
increase of $470,000 in temporary tenant income at the malls and an increase of
$300,000 in compactor pad rentals at the malls.
OPERATING EXPENSES
Total operating expenses increased 13.7%, or $5.9 million, for the
nine months ended September 30, 2000. Recoverable expenses increased $5.1
million, the provision for credit losses increased $230,000 and other operating
expenses increased $600,000.
14
<PAGE> 15
Recoverable expenses
Recoverable expenses increased 12.9%, or $5.1 million, for the nine
months ended September 30, 2000.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
---------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $1.6 $(0.4) $1.2 3.0%
Acquisitions/Developments.... 4.2 0.0 4.2 10.6
Dispositions 0.0 (0.3) (0.3) (0.7)
----- ----- ---- ----
$5.8 $(0.7) $5.1 12.9%
==== ===== ==== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $2.0 million and
represented 1.2% of tenant revenues for the nine months ended September 30,
2000, compared to 1.1% of tenant revenues for the nine months ended September
30, 1999.
DEPRECIATION AND AMORTIZATION
The $6.5 million increase in depreciation and amortization consists
primarily of an increase of $4.9 million from mall acquisitions and an increase
of $1.9 in the core portfolio properties and corporate assets, offset with a
$280,000 decrease from dispositions.
GAIN ON SALES
During the first nine months of 2000, the Company completed $36.3
million in asset sales and recognized net gains of $2.5 million.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 33.3%, or $15.2 million for the nine months
ended September 30, 2000. The summary below identifies the increase by its
various components (dollars in thousands).
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------
2000 1999 INC. (DEC.)
---- ---- -----------
<S> <C> <C> <C>
Average loan balance ..................... $ 1,062,622 $ 1,021,204 $ 41,418
Average rate ............................. 7.80% 7.19% 0.61%
Total interest ........................... $ 62,163 $ 55,068 $ 7,095
Less: Capitalized interest .............. (810) (5,297) 4,487
Other (1) ................................ (739) (4,328) 3,589
----------- ----------- -----------
Interest expense ......................... $ 60,614 $ 45,443 $ 15,171
=========== =========== ===========
</TABLE>
(1) Other consists primarily of interest costs billed to joint venture
entities.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's short term (less than one year) liquidity requirements
include recurring operating costs, capital expenditures, debt service
requirements and preferred and common dividend requirements. The Company
anticipates that these needs will be met with cash flows provided by
operations, the refinancing of maturing debt and proceeds from the sale of
assets.
The Company has a $170.0 million revolving line of credit with a group
of banks that matures January 31, 2001. The Company has initiated discussions
with the lead banks and anticipates that a new agreement, on comparable terms,
will be executed prior to December 31, 2000.
15
<PAGE> 16
In February 2000, the Company refinanced a $16.2 million construction
loan payable with a new $16.2 million loan secured by a first mortgage lien on
Georgesville Square, which matures in March 2010 and bears interest at 8.52%
per annum. In July 2000, the Company refinanced a $45.0 million maturing
construction loan on The Great Mall of the Great Plains with a new $42.0
million loan. This loan matures in July 2002 and can be extended for one year.
It requires payments of interest only and carries a floating rate of LIBOR plus
3.55% per annum. During the first nine months of 2000, the Company refinanced
certain maturing debt with short term floating rate debt of $123.9 million at a
rate of LIBOR plus 1.75% per annum secured by 50 community center and single
tenant assets. In total, the Company repaid $239.5 million in mortgage notes
during the first nine months of 2000 and executed new notes payable of $199.7
million; net additional borrowings on the Company's Credit Facility were $35.0
million.
The Company is pursuing a strategy of selling single tenant and
non-strategic community center assets and focusing on the regional mall
portfolio. The timing and selling prices of future asset sales is dependent
upon the Company being able to consummate sales transactions under acceptable
terms and at satisfactory pricing as the intent is to redeploy capital as the
value of existing assets can be realized through sale transactions. Net
proceeds from asset sales are being used to reduce debt. The Company believes
that these short term borrowings provide maximum flexibility in structuring
such sales.
During the third quarter, the Company completed the sale of three
community centers, seven single tenant assets and one outparcel for total
proceeds of $31.4 million and recognized a net gain of $540,000. For the first
nine months, the Company has sold four community centers, eight single tenant
assets and six outparcels for total proceeds of $36.3 million and recognized a
net gain of $2.5 million.
The Company's long term (greater than one year) liquidity requirements
include scheduled debt maturities, capital expenditures to maintain, renovate
and expand existing assets, property acquisitions and development projects.
Management anticipates that net cash provided by operating activities, the
funds available under its Credit Facility, its construction financing,
long-term mortgage debt, the 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 acquisitions,
renovations, expansions and developments. 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, 2000, the Company's debt-to-total-market
capitalization was 62.3%, 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. As noted
earlier, the Company is pursuing the sale of certain assets as a means of
reducing its leverage, and during the third quarter reduced total outstanding
debt by approximately $21.6 million.
Net cash provided by operating activities for the nine months ended
September 30, 2000, was $57.8 million versus $72.7 million for the
corresponding period of 1999. Net income adjusted for non-cash items accounted
for a $4.2 million decrease, while changes in operating assets and liabilities
accounted for a $10.7 million decrease.
Net cash provided by investing activities for the nine months ended
September 30, 2000, was $5.0 million. It primarily reflects proceeds from the
sale of assets of $32.8 million, additional direct investments in real estate
assets of $18.3 million, proceeds from unconsolidated entities of $4.0 million,
an increase in deferred expenses, prepaid and other assets of $15.9 million and
withdrawals from cash in escrow of $2.5 million.
Net cash used in financing activities for the nine months ended
September 30, 2000, was $64.3 million. Cash was used to fund distributions of
$59.9 million and make principal payments on mortgage and notes payable of
$239.5 million. Cash was provided by additional borrowings on the Credit
Facility of $35.0 million, issuance of new mortgage and notes payable of $199.7
million and proceeds from issuance of shares of $400,000.
16
<PAGE> 17
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 during the first quarter 2000 as an anchor
in 25,000 square feet of gross leasable area. Additionally, at Jersey Gardens,
in Elizabeth, New Jersey, Old Navy opened during the second quarter 2000 in a
45,000 square foot store.
Community Centers
The Company currently has community center anchor expansion and
redevelopment projects in process at Cross-Creek Plaza in Beaufort, South
Carolina, Stewart Plaza in Mansfield, Ohio 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. At September 30, 2000, approximately 690,000 square feet of retail space
was open. 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 and the first nine months of 2000, seven
additional anchor tenants, 17 small shop tenants and eight outparcel tenants
opened for business. Included in the total square footage are Target and Lowes
which purchased land and constructed their own stores. Target opened a 136,000
square-foot store in the fourth quarter of 1999 and Lowes opened 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 September 30, 2000. The required equity for Polaris Towne Center
was contributed to the joint venture during 1998. During the second quarter of
2000, the joint venture refinanced the construction loan with a permanent
10-year mortgage note payable at an interest rate of 8.20% per annum and
secured by a first mortgage lien on Polaris Towne Center.
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 90.2% at September 30, 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 and is secured by a first mortgage lien on the project.
17
<PAGE> 18
The Company also has a 30.0% ownership interest in a separate joint
venture formed to subdivide and sell approximately 28.8 acres adjacent to the
Jersey Gardens site. The joint venture expects to incur additional costs of
$6.1 million related to remediation and infrastructure improvements for this
site. These costs will be funded from proceeds of sales of development parcels
out of the 28.8 acre site and to the extent necessary, advances from the joint
venture participants. In September 2000, the venture sold its interest in 6.0
acres of this site for $5.4 million. Equity in earnings of unconsolidated
entities includes $770,000 which is the Company's share of the gain or this
transaction.
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. In September 2000, Polaris Mall LLC was formed and acquired
146.3 acres of land for the development of the mall and adjacent outparcels.
Construction and operating agreements with the mall's department store anchors
which include Kaufman's, Lord & Taylor, JCPenney, Lazarus, Saks Fifth Avenue
and Sears were also executed at that time. The Company has a 39.29% ownership
interest in this joint venture. The partnership which previously owned the land
retained a 21.42% ownership interest and a group of investors holds the
remaining 39.29% ownership interest. During the third quarter, the Company
issued 260,583 new Operating Partnership units with a value of $4.0 million in
connection with this transaction.
The total estimated cost of the project is approximately $145.0
million. During October 2000, the joint venture obtained a $120.0 million
construction loan for this project from a group of banks secured by a first
mortgage lien on the project. The construction loan matures in October 2003 and
bears interest at an initial rate of LIBOR plus 2.25% per annum. This rate can
be reduced in stages to LIBOR plus 1.75% per annum as specified debt service
coverage ratios are achieved. The Company has provided a completion guarantee
and a guaranty of payment of 50.0% of the loan amount. Glimcher Development
Corporation will provide all leasing, legal, development and management services
for the project. The initial draw under the construction loan was funded in
October 2000.
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 has executed a development agreement with the City of
Carson and is currently exploring alternatives with respect to the development
of this site.
Forest Fair Fashion Outlets
As of September 30, 2000, the Company is no longer acting as the
leasing agent for Forest Fair Fashion Outlets in Cincinnati, Ohio.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended September 30, 2000, and 1999, represent 18.3 million square feet
of GLA, or 75.3% of the "same store" population.
<TABLE>
<CAPTION>
MALLS COMMUNITY CENTERS
---------------------------- -------------------------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF % INCREASE
------------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Anchors ........................... $ 165.85 (0.3%) $ 254.95 0.2%
Stores ............................ $ 288.79 1.6% $ 196.82 0.2%
Total ............................. $ 223.15 0.8% $ 249.02 0.2%
</TABLE>
18
<PAGE> 19
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
------------------------------------------------------------
9/30/00 6/30/00 3/31/00 12/30/99 9/30/99
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Mall Anchors........................ 97.3% 99.0% 99.0% 98.8% 97.3%
Mall Stores......................... 84.1% 82.7% 83.5% 84.8% 82.9%
Mall Stores Comparable 12 Months.... 83.8% 82.5% 83.4% 85.0% 82.9%
Total Mall Portfolio................ 92.2% 92.8% 93.0% 93.4% 91.9%
Community Center Anchors............ 96.8% 96.9% 97.2% 98.3% 97.5%
Community Center Stores............. 89.7% 89.6% 90.6% 90.8% 89.1%
Total Community Centers............. 95.1% 95.2% 95.7% 96.5% 95.5%
Single Tenant Retail Properties..... 100.0% 100.0% 92.2% 92.2% 92.2%
Total Community Center Portfolio.... 95.3% 95.6% 95.3% 96.1% 95.2%
</TABLE>
(1) Occupancy statistics included in the above table are based on the total
Company portfolio which includes properties owned by the Company and
properties held in joint ventures.
(2) Occupied space is defined as any space where a tenant is occupying the
space 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, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income available to common shareholders ............... $ 3,607 $ 7,068 $ 11,650 $ 16,474
Add back (less):
Real estate depreciation and amortization ............ 11,024 9,566 33,076 28,470
GRT share of joint venture depreciation
and amortization .................................. 3,983 2,446 11,946 7,189
(Gain) loss on sales of depreciated property ......... (110) (1,962) (684) (1,962)
(Gain) loss on sales of undepreciated property ....... (431) (241) (1,857) (241)
GRT share of joint venture (gain) loss on sales of
undepreciated property ............................ (623) (623)
Extraordinary item ................................... 373 250 443 545
Minority interest in operating partnership ........... 459 871 1,451 1,949
-------- -------- -------- --------
Funds from operations ..................................... $ 18,905 $ 17,375 $ 56,025 $ 51,801
======== ======== ======== ========
Funds from operations ..................................... $ 18,905 $ 17,375 $ 56,025 $ 51,801
Add back (less):
Capital expenditures ................................. (2,752) (1,520) (10,030) (4,258)
Straight-line of minimum rents ....................... (727) (597) (1,486) (1,698)
Straight-line of ground lease expense ................ 1 10 8 37
GRT share of joint venture capital expenditures and
straight-line of minimum rents ..................... (1,077) (747) (1,943) (1,804)
-------- -------- -------- --------
Adjusted funds from operations ............................ $ 14,350 $ 14,521 $ 42,574 $ 44,078
======== ======== ======== ========
</TABLE>
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FFO increased 8.8%, or $1.5 million for the three months ended
September 30, 2000. The increase was the result of the Company's continuous
focus on its core portfolio. Property net operating income increased $3.4
million and FFO from unconsolidated entities increased $4.3 million. These
increases were partially offset by an increase in net interest expense of $4.6
million, an increase in non-real estate depreciation and amortization of $1.0
million, an increase in general and administrative expense of $460,000 and an
increase in preferred stock dividends of $100,000.
FFO increased 8.2% or $4.2 million for the nine months ended September
30, 2000. The increase was the result of the Company's continuous focus on its
core portfolio. Property net operating income increased $9.7 million and FFO
from unconsolidated entities increased $11.3 million. These increases were
partially offset by an increase in net interest expense of $14.0 million, an
increase in non-real estate depreciation and amortization of $1.9 million, an
increase in preferred stock dividends of $760,000 and an increase in general
and administrative expense of $120,000.
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 began the process for adopting SFAS No.
133 but has not yet determined its impact.
INFORMATION TECHNOLOGY
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. Even
though the Company has successfully completed the year-end financial reporting
with minimal impact, and first nine months with no impact, we continue to
exercise caution as we approach another year-end.
In the third quarter, the Company launched several key technology
initiatives. On July 31, 2000, the Company announced its plans to implement the
Oracle E-Business Suite of financial applications as well as Oracle Property
Manager. As part of the implementation the Company will work with Oracle to
develop a comprehensive web-based property management solution for REIT's. In
August 2000, the Company announced an agreement for Energy System Management
services with Johnson Controls, Inc. This program will utilize innovative
metering technology to remotely monitor and profile energy usage providing a
clear picture of consumption patterns that can be utilized to lower demand-side
usage and reduce unit costs.
During the third quarter of 2000, the Company also entered into a
five-year national agreement to bring the Genesisintermedia.com Centerlinq
public Internet access network to each of its malls. In addition to Internet
access, the Centerlinq kiosks provide coupons, directories and e-mail via a
touch screen computer terminal. The first kiosks are being installed at Jersey
Gardens and University Mall and all 23 malls are projected to be on-line by the
end of 2001. The Company is also finalizing a program to provide broadband
access at each mall and expects to announce the details of the program prior to
year-end with full implementation by mid-2001.
The Company expects the total financial commitments in connection with
software, hardware and implementation assistance for the Oracle implementation
will not exceed $5.0 million and will be incurred throughout the years 2000 and
2001.
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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 risk
associated with long-term, floating rate debt. At September 30, 2000 and 1999,
approximately 51.5% and 64.7%, respectively, of the Company's debt, after
giving effect to interest rate protection agreements, bore interest at fixed
rates with a weighted-average maturity of 7.5 years and 7.0 years,
respectively, and weighted-average interest rates of approximately 7.538% and
7.416%, respectively. The remainder of the Company's debt bears interest at
variable rates with weighted-average interest rates of approximately 8.652% and
7.203%, respectively.
At September 30, 2000 and 1999, the fair value of the Company's debt
was $856.7 million and $843.0 million, respectively, compared to its carrying
amounts of $867.7 million and $856.6 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 September 30,
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 $1.2
million in 2000 and by $880,000 in 1999 and decrease the fair value of debt by
approximately $18.5 million and $16.3 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 $1.2 million
in 2000 and by $880,000 in 1999 and increase the fair value of debt by
approximately $19.9 million and $17.6 million, at the respective balance sheet
dates.
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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
Financial Data Schedule (filed for EDGAR filing purposes only).
(b) Reports on Form 8-K
None
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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 6, 2000 /s/ Herbert Glimcher
------------------- ----------------------------------------------------
(Date) Herbert Glimcher, Chairman of the Board and
Chief Executive Officer (Principle Executive Officer)
November 6, 2000 /s/ William G. Cornely
------------------- ---------------------------------------------------
(Date) William G. Cornely, Executive Vice President
Chief Operating Officer & Chief Financial Officer
23
