<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
<TABLE>
<S> <C>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-12923
------------------------
WESTFIELD AMERICA, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MISSOURI 43-0758627
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11601 WILSHIRE BOULEVARD 90025
12TH FLOOR (Zip Code)
LOS ANGELES, CALIFORNIA
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (310) 478-4456
------------------------
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 November 14, 2000, 73,354,863 shares of Common Stock, par value $0.01
per share, were outstanding.
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<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
PART I--FINANCIAL INFORMATION
Item 1: Condensed Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2000
(unaudited) and December 31, 1999.......................... 1
Consolidated Statements of Income (unaudited) for the three
months ended September 30, 2000 and 1999 and for the nine
months ended September 30, 2000 and 1999................... 2
Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 2000 and 1999.............. 3
Notes to Condensed Consolidated Financial Statements
(unaudited)................................................ 4
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 16
Item 3: Quantitative and Qualitative Disclosures about Market
Risk....................................................... 25
PART II--OTHER INFORMATION
Item 1: Legal Proceedings........................................... 26
Item 2: Changes in Securities and Use of Proceeds................... 26
Item 3: Defaults Upon Senior Securities............................. 26
Item 4: Submission of Matters to a Vote of Security Holders......... 26
Item 5: Other Information........................................... 26
Item 6: Exhibits and Reports on Form 8-K............................ 27
SIGNATURES................................................................. 28
</TABLE>
i
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Land........................................................ $ 465,340 $ 454,267
Buildings, improvements and equipment....................... 3,146,747 2,990,537
Less accumulated depreciation............................... (529,403) (444,831)
---------- ----------
Net property and equipment.............................. 3,082,684 2,999,973
Construction in progress.................................... 76,906 67,115
Investments in unconsolidated real estate affiliates........ 362,389 175,123
Participating loan to affiliates............................ -- 145,000
Direct financing leases receivable.......................... 79,107 80,927
---------- ----------
Net investment in real estate........................... 3,601,086 3,468,138
Cash and cash equivalents................................... 27,179 17,094
Restricted cash............................................. 20,373 29,358
Accounts receivable, net of allowance of $6,594 and $7,366
in 2000 and 1999, respectively............................ 50,831 47,632
Deferred expenses and other assets, net..................... 49,750 41,439
---------- ----------
Total assets............................................ $3,749,219 $3,603,661
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable............................................... $2,531,634 $2,392,137
Accounts payable and accrued expenses....................... 119,494 119,680
Distribution payable........................................ 39,566 37,824
---------- ----------
Total liabilities....................................... 2,690,694 2,549,641
---------- ----------
Minority interests.......................................... 104,925 33,180
Series C, D and E preferred stock........................... 361,000 361,000
Common stock................................................ 733 733
Series A and B preferred stock.............................. 121,000 121,000
Additional paid-in capital.................................. 470,867 538,107
---------- ----------
Total shareholders' equity.............................. 592,600 659,840
---------- ----------
Total liabilities and shareholders' equity.............. $3,749,219 $3,603,661
========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
1
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED AND IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Minimum rents..................................... $ 89,114 $ 82,119 $259,926 $252,596
Tenant recoveries................................. 42,000 34,924 120,155 110,553
Percentage rents.................................. 3,531 2,908 12,170 9,373
-------- -------- -------- --------
Total revenues.................................. 134,645 119,951 392,251 372,522
-------- -------- -------- --------
EXPENSES:
Operating......................................... 43,124 37,690 122,000 113,841
Management fees................................... 2,215 2,497 6,839 7,725
Advisory fee...................................... 2,603 2,309 8,011 5,951
General and administrative........................ 246 160 1,394 1,342
Depreciation and amortization..................... 29,051 26,950 84,050 84,769
-------- -------- -------- --------
Total expenses.................................. 77,239 69,606 222,294 213,628
-------- -------- -------- --------
OPERATING INCOME.................................... 57,406 50,345 169,957 158,894
INTEREST EXPENSE, net............................... (46,794) (42,424) (138,510) (141,609)
OTHER INCOME:
Equity in income of unconsolidated real estate
affiliates...................................... 4,232 1,958 7,823 5,344
Gain on sale of investments....................... -- -- -- 1,971
Interest and other income......................... 901 4,691 9,090 13,464
-------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST..................... 15,745 14,570 48,360 38,064
Minority interests in earnings of consolidated
real estate affiliates.......................... (2,440) (1,014) (4,516) (3,416)
-------- -------- -------- --------
NET INCOME.......................................... $ 13,305 $ 13,556 $ 43,844 $ 34,648
======== ======== ======== ========
Net income allocable to preferred shares.......... $ 10,510 $ 9,559 $ 31,530 $ 26,809
Net income allocable to common shares............. 2,795 3,997 12,314 7,839
-------- -------- -------- --------
$ 13,305 $ 13,556 $ 43,844 $ 34,648
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Basic............................................. $ 0.04 $ 0.05 $ 0.17 $ 0.11
======== ======== ======== ========
Diluted........................................... $ 0.04 $ 0.05 $ 0.16 $ 0.11
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic............................................. 73,354 73,345 73,350 73,342
======== ======== ======== ========
Diluted........................................... 76,461 74,413 76,511 74,373
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
2
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 43,844 $ 34,648
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 84,050 84,769
Amortization of deferred loan fees...................... 3,969 4,209
Equity in income of unconsolidated real estate
affiliates............................................ (7,823) (5,344)
Minority interests in earnings of consolidated real
estate affiliates..................................... 4,516 3,416
Gain on sale of investments............................. -- (1,971)
Issuance of common stock to independent directors....... 120 140
Changes in assets and liabilities:
Accounts receivable, net................................ (2,570) (6,871)
Deferred expenses and other assets...................... (13,178) (7,733)
Accounts payable and accrued expenses................... 1,876 11,966
-------- --------
Net cash flows provided by operating activities........... 114,804 117,229
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and acquisitions..................... (116,220) (306,525)
Proceeds from sale of investments......................... -- 314,527
Investment in unconsolidated joint ventures............... (2,842) (5,925)
Cash distributions from unconsolidated real estate
affiliates.............................................. 11,040 3,996
Cash and cash equivalents of consolidated partnership..... 1,270 --
Notes receivable repayments............................... -- 500
Direct financing leases receivable repayments............. 1,820 1,701
Decrease in restricted cash............................... 8,985 10,853
-------- --------
Net cash flows (used in) provided by investing
activities.............................................. (95,947) 19,127
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of warrants and options, net....... 1,741 2,901
Proceeds from issuance of preferred stock................. -- 86,000
Cash distributions paid to preferred shareholders......... (31,471) (24,273)
Cash distributions paid to common shareholders............ (80,867) (79,208)
Cash distributions paid to minority interests............. (5,350) (3,694)
Proceeds from notes payable............................... 454,212 738,019
Principal payments on notes payable....................... (347,037) (860,625)
-------- --------
Net cash flows used in financing activities............... (8,772) (140,880)
-------- --------
Net increase (decrease) in cash and cash equivalents...... 10,085 (4,524)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 17,094 25,272
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 27,179 $ 20,748
======== ========
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION PROVIDED IN NOTE 8.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
1. ORGANIZATION:
Westfield America, Inc., a Missouri corporation (the "Company") is primarily
in the business of owning, operating, leasing, developing, redeveloping and
acquiring super-regional and regional retail shopping centers in major
metropolitan areas in the United States. The Company is a publicly traded real
estate investment trust ("REIT") with interests in 39 major shopping centers
branded nationwide as "Westfield Shoppingtowns." The Company's portfolio of
Westfield Shoppingtowns includes clusters of regional and super-regional
shopping centers located in nine states in the east coast, midwest and west
coast regions of the United States.
The Company, through its controlling interest in Westfield America Limited
Partnership (the "Operating Partnership") and its other subsidiaries and
affiliates, owns interests in a portfolio of 24 super-regional shopping centers,
12 regional shopping centers, three power centers (individually, a "Center" and
collectively, the "Centers"), 12 separate department store properties which are
net leased under financing leases to The May Department Stores Company and
certain other real estate investments (collectively, the "Properties").
The Company is externally managed and advised by Westfield Holdings Limited
("WHL"), an affiliate of the Company and an Australian public company. The
Company has engaged a property management company (the "Manager"), an asset
management company (the "Advisor") and a development company (the "Developer")
to provide property management, asset management and development services to the
Company under agreements that are renewable annually. Each of the Manager,
Advisor and Developer is a wholly-owned subsidiary of WHL giving the Company
access to WHL's worldwide management expertise and resources.
2. BASIS OF PRESENTATION:
The accompanying Condensed Consolidated Financial Statements of the Company
are unaudited; however, they have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Accordingly, they do not include all of the disclosures
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
(consisting solely of normal recurring matters) necessary for a fair
presentation of the Condensed Consolidated Financial Statements for these
interim periods have been included. The results for the interim period ended
September 30, 2000 are not necessarily indicative of the results to be obtained
for the full calendar year. These unaudited Condensed Consolidated Financial
Statements should be read in conjunction with the December 31, 1999 audited
Consolidated Financial Statements, and Notes thereto, included in the Company's
1999 Annual Report on Form 10-K filed on March 30, 2000.
The Company conducts its business through its Operating Partnership,
wholly-owned subsidiaries and affiliates. The Condensed Consolidated Financial
Statements include the accounts of the Company and all controlled subsidiaries.
The Company does not consider itself to be in control when the other partners
have important approval rights over major actions. Investments in non-controlled
real estate affiliates are accounted for using the equity method, and
investments in entities in which the Company owns less than 20%, and is not able
to exercise significant influence are accounted for using the cost method. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
4
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT, PER SHARE AND FLOOR AREA
AMOUNTS)
2. BASIS OF PRESENTATION: (CONTINUED)
Certain amounts in the 1999 Condensed Consolidated Financial Statements were
reclassified to conform with the 2000 presentation.
3. ACQUISITIONS:
In 1996, the Company obtained an option to acquire a 50% interest in
Westfield Shoppingtown Garden State Plaza ("GSP"), a super-regional mall with
1,978,000 square feet of gross leasable area, held by affiliates of WHL ("WHL
Group"). Additionally, at the time of the Company's initial public offering in
May 1997, the Company made a $145,000 secured participating loan to the WHL
Group. In June 2000, the Operating Partnership acquired the 50% interest in GSP
for $52,483 after taking into account the mortgage debt on the property, capital
obligations and the assumption of the $145,000 secured participating loan. The
consideration paid consisted of issuing 52,483 Series F Preferred Partnership
Units in the Operating Partnership ("Series F Preferred Partnership Units") to
the WHL Group.
In August 1999, the Company acquired Palm Desert Town Center in Palm Desert,
California for $82,010. Westfield Shoppingtown Palm Desert is an 869,000 square
foot super-regional shopping center with five anchors and 129 specialty stores.
Funds for the purchase of Palm Desert were obtained from the issuance of $86,000
in convertible preferred stock as further described in Note 7.
4. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES:
As of September 30, 2000, the Company's economic interest in Properties held
by unconsolidated real estate affiliates is as follows:
<TABLE>
<CAPTION>
ECONOMIC
PROPERTY LOCATION INTEREST
-------- -------- --------
<S> <C> <C>
Garden State Plaza............ Paramus, NJ 50.0%
Plaza Camino Real............. Carlsbad, CA 40.0%
UTC........................... La Jolla, CA 50.0%
Valley Fair................... San Jose, CA 50.0%
Vancouver..................... Vancouver, WA 50.0%
West Valley................... Canoga Park, CA 42.5%
</TABLE>
5
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
4. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES: (CONTINUED)
A summary of the condensed combined balance sheets and statements of income
for unconsolidated real estate affiliates is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(AUDITED)
<S> <C> <C>
CONDENSED COMBINED BALANCE SHEETS:
Investment in real estate:
Land, building and improvements, at cost.................. $1,085,368 $642,914
Less accumulated depreciation and amortization............ (179,570) (46,264)
Construction in progress.................................. 74,052 54,589
---------- --------
Net investment in real estate............................... 979,850 651,239
Notes payable............................................... (594,455) (352,250)
Other net assets and liabilities and outside interests...... (23,006) (123,866)
---------- --------
Investments in unconsolidated real estate affiliates........ $ 362,389 $175,123
========== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CONDENSED COMBINED STATEMENTS OF INCOME:
Total revenues.......................................... $40,015 $21,856 $85,987 $51,308
Costs and expenses:
Operating, general and administrative................. 10,287 6,635 23,006 16,123
Interest expense, net................................. 11,187 6,151 24,192 12,820
Depreciation and amortization......................... 8,745 4,747 19,662 11,540
------- ------- ------- -------
Net income.............................................. 9,796 4,323 19,127 10,825
Outside interests' share of income...................... (5,564) (2,365) (11,304) (5,481)
------- ------- ------- -------
Equity in income of unconsolidated real estate
affiliates............................................ $ 4,232 $ 1,958 $ 7,823 $ 5,344
======= ======= ======= =======
</TABLE>
Significant accounting policies used by the unconsolidated real estate
affiliates are similar to those used by the Company.
6
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
5. NOTES PAYABLE:
As of September 30, 2000 and December 31, 1999, the Company had consolidated
indebtedness as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(AUDITED)
<S> <C> <C>
Secured line of credit with a group of banks with a maximum
commitment of $450,000, interest only payable monthly at
LIBOR +1.30% (7.64% effective rate at September 30, 2000),
due in 2002 with an option to extend...................... $197,000 $150,766
Unsecured bridge facility with a group of banks, interest
only payable monthly at LIBOR + 1.75% (7.83% effective
rate at September 30, 2000), due in 2001.................. 150,000 --
Unsecured subordinated notes to Australian investors,
interest payable semi-annually at LIBOR + 2.32% (8.38%
effective rate at September 30, 2000), due in equal
installments in 2001, 2002 and 2003....................... 301,088 301,088
Collateralized note payable, interest only payable monthly
at LIBOR + 0.53% (6.28% effective rate at September 30,
2000) due in 2001......................................... 754,100 754,100
Senior collateralized non-recourse notes, interest at 6.39%,
principal and interest payable quarterly, due in 2004..... 11,796 14,001
Senior collateralized non-recourse notes bearing interest at
7.33%, interest only payable quarterly until 2004,
principal and interest payable quarterly thereafter, due
in 2014................................................... 55,167 55,167
Collateralized commercial mortgage notes due in 2004,
interest only payable monthly at 6.78%.................... 75,000 75,000
Collateralized non-recourse note payable to an insurance
company, effective interest at 7.00%, principal and
interest payable monthly, due in 2018..................... 18,181 18,556
Collateralized non-recourse note payable to an insurance
company, effective interest at 7.00%, principal and
interest payable monthly, due in 2006..................... 22,124 22,532
Collateralized non-recourse note payable to an insurance
company, effective interest at 7.00%, principal and
interest payable monthly, due in 2022..................... 71,378 72,399
Collateralized non-recourse note payable to an insurance
company, effective interest at 7.00%, principal and
interest payable monthly, due in 2002..................... 57,897 59,518
Collateralized non-recourse note payable to an insurance
company, effective interest at 7.77%, principal and
interest payable monthly, due in 2002..................... 43,412 43,714
Collateralized non-recourse notes payable to an insurance
company, effective interest at 7.00%, principal and
interest payable monthly, due in 2004..................... 59,964 61,518
Collateralized non-recourse notes payable to insurance
companies, interest at 7.72%, principal and interest
payable monthly, due in 2010.............................. 157,718 158,773
Collateralized commercial mortgage notes due in 2009,
effective interest at 8.31%, principal and interest
payable monthly........................................... 375,181 377,000
Collateralized term loan, interest only payable monthly at
LIBOR + 1.50% (7.88% effective rate at September 30,
2000), due in 2001........................................ 64,000 64,000
</TABLE>
7
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
5. NOTES PAYABLE: (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
Collateralized construction loan with a maximum commitment
of $37,500, interest only payable monthly at LIBOR +1.75%
(8.08% effective rate at September 30, 2000), due in
2001...................................................... 35,241 32,311
Collateralized term loan, interest only payable monthly at
LIBOR +1.45% (7.73% effective rate at September 30, 2000),
due in 2002............................................... 37,500 --
Collateralized construction loan with a maximum commitment
of $55,000, interest only payable at LIBOR +1.75% (8.04%
effective rate at September 30, 2000), due in 2002........ 4,887 --
Collateralized non-recourse term loan, interest only payable
at LIBOR +1.55% (8.30% effective rate at September 30,
2000), due in 2003........................................ 40,000 --
Collateralized non-recourse note payable to an insurance
company, interest at an effective rate of 7.15%, the note
was repaid and retired in May 2000........................ -- 131,694
---------- ----------
$2,531,634 $2,392,137
========== ==========
</TABLE>
On September 28, 2000, the Company obtained a secured construction loan with
a bank with a maximum commitment of $54,000, of which the entire amount was
undrawn at September 30, 2000. The terms of the loan are interest only payable
monthly at LIBOR + 1.80%, due in March 2003. The proceeds from this secured loan
will be used to redevelop Westfield Shoppingtown South County.
Interest costs capitalized for the three months ended September 30, 2000 and
1999 and nine months ended September 30, 2000 and 1999, totaled $1,346, $844,
$2,885 and $1,688, respectively.
In June 1998, the Company issued $301,088 of unsecured notes ("Capital
Notes") to Australian investors. The Capital Notes, which are listed on the
Australian Stock Exchange, are denominated in Australian dollars. In conjunction
with the issuance of the Capital Notes, the Company entered into interest rate
swaps and foreign currency hedge agreements which effectively fixed the interest
and principal payments due to the holders of the Capital Notes in U.S. dollars
and fixed the interest rate at 8.38%. The unrealized loss on the interest rate
swap and foreign currency hedge agreement was approximately $56,274 at
September 30, 2000 as compared to an unrealized gain of $5,403 at December 31,
1999.
A certain collateralized non-recourse note payable requires the Company to
pay contingent interest equal to 30% of the excess of each year's rental
receipts (as defined) over a stipulated minimum. During the three months ended
September 30, 2000 and 1999, and nine months ended September 30, 2000 and 1999,
contingent interest totaled $349, $300, $947, and $875, respectively.
8
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
5. NOTES PAYABLE: (CONTINUED)
The annual maturities of the notes payable as of September 30, 2000, are as
follows:
<TABLE>
<S> <C>
2000........................................................ $ 3,636
2001........................................................ 1,118,833
2002........................................................ 450,885
2003........................................................ 154,626
2004........................................................ 139,703
Thereafter.................................................. 663,951
----------
$2,531,634
==========
</TABLE>
6. INTEREST RATE SWAP CONTRACTS:
It is the Company's policy to enter into interest rate swap contracts only
to the extent necessary to reduce exposure to fluctuations in interest rates.
The Company does not enter into interest rate swap contracts for speculative
purposes. Interest rate swaps are contractual agreements between the Company and
third parties to exchange fixed and floating interest payments periodically
without the exchange of the underlying principal amounts (notional amounts). In
the unlikely event that a counterparty fails to meet the terms of an interest
rate swap contract, the Company's exposure is limited to the interest rate
differential on the notional amount. The Company does not anticipate
non-performance by any of the counterparties.
The Company has also entered into deferred interest rate exchange agreements
to manage future interest rates. The agreements consist of swaps and involve the
future receipt, corresponding with the expiration of existing fixed rate debt,
of a floating rate based on LIBOR and the payment of a fixed rate.
<TABLE>
<CAPTION>
NOTIONAL RANGE OF RANGE OF
AMOUNT FIXED RATES MATURITY DATES
---------- -------------- -------------------
<S> <C> <C> <C>
Current swaps where the Company is a receiver
of LIBOR................................... $1,477,000 5.84% to 7.09% 6/30/01 to 12/11/08
Deferred swaps where the Company is a
receiver of LIBOR.......................... $1,025,000 5.99% to 6.90% 6/11/05 to 4/01/08
</TABLE>
The net unrealized gain on interest rate swap contracts was approximately
$29,513 at September 30, 2000 as compared to an unrealized gain of $48,744 at
December 31, 1999.
9
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
7. CAPITAL STOCK:
In June 2000, the Company issued a warrant ("2000 Warrant") to Westfield
America Trust ("WAT"), an Australian public company and an affiliate of the
Company, to purchase the Company's common stock. The 2000 Warrant, which expires
in June 2025, entitles WAT to purchase up to 2,840,000 shares of the Company's
common stock at an exercise price of $19.42 per share. WAT can, with the
Company's consent at such time, surrender any Series F Preferred Stock owned by
WAT as consideration for the exercise of the 2000 Warrants.
As consideration for the 50% partnership interest in GSP in June 2000, the
Operating Partnership issued 52,483 Series F Preferred Partnership Units. Under
certain circumstances, the holders of Series F Preferred Partnership Units may
exchange their units for cash, or, at the discretion of the Company, an
equivalent number of shares of Series F Preferred Stock. Each Series F Preferred
Partnership Unit has a liquidation preference of $1,000, plus all accrued and
unpaid distributions, and the holder of a Series F Preferred Partnership Unit is
entitled to receive from the Operating Partnership annual distributions equal to
the greater of $85.00 per unit or 51.4933 multiplied by the dividend per share
declared per common share. The Operating Partnership has the option to redeem
the Series F Preferred Partnership Units any time after June 2020 at a
redemption price of $1,000 per unit, which is equal to the liquidation
preference.
In August 1999, the Company issued 477,778 shares of Series E cumulative
convertible redeemable preferred stock (the "Series E Preferred Stock") to
Westfield America Trust for $86,000. Holders of the Series E Preferred Stock are
entitled to receive, when declared, cumulative cash dividends equal to the
greater of $15.30 per annum per share or an amount equal to 10.0 times the
dollar amount declared on the Company's common stock during the period. Each
share of Series E Preferred Stock is currently convertible into 10 shares of
common stock of the Company, subject to adjustment. The Company has the option
to redeem the Series E Preferred Stock anytime on or after August 2009 at a
redemption price of $180 per share, which is equal to the liquidation
preference. The original holders of the Company's Series E Preferred Stock have
the right to require the Company to redeem the Series E Preferred Stock if the
Company ceases to qualify as a REIT for federal tax purposes. Additionally, if
there is a change in control, as defined, or, if after August 2009, the market
price of the Company's common stock is less than $18.00 per share, holders of
the Company's Series E Preferred Stock have the right to require the Company to
redeem the Series E Preferred Stock.
The holders of the Company's common stock vote together as a class on all
matters and are entitled to receive distributions declared after payment of
dividends on preferred stock. Distributions were declared on September 19, 2000
to shareholders of record on September 30, 2000 totaling $37,650, including
$0.37 per common share, for the quarter ended September 30, 2000, and were paid
on October 31, 2000. These distributions are equal to $1.48 per common share on
an annualized basis.
In May 1998, the Company entered into a stock subscription agreement ("1998
Subscription Agreement") with WAT. Under the 1998 Subscription Agreement, the
Company has the obligation to sell, and WAT has the obligation to purchase, up
to A$465,000 (approximately US$253,425 at September 30, 2000) of the Company's
common stock in three equal installments at a 5% discount to the then prevailing
market price of the Company's common stock at June 2001, 2002 and 2003. In lieu
of issuing common stock at each installment date, the Company has the option to
pay the 5% discount in cash or common stock.
Each director who is not an officer of the Company or an employee of WHL or
its affiliates is entitled to annual compensation equal to $20 in cash and $20
in common stock. The number of shares issued is based on the share price of the
Company's common stock on the anniversary of the director's appointment.
10
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
7. CAPITAL STOCK: (CONTINUED)
In May and September 2000, the Company issued a total of 6,900 and 1,422 shares,
respectively of common stock to directors.
Under certain circumstances, investors in the Operating Partnership may
exchange their investor unit rights ("Investor Unit Rights") for cash or, at the
discretion of the Company, shares of the Company's common stock. Holders of
Investor Unit Rights are entitled to receive from the Operating Partnership,
when declared, distributions per Investor Unit Right equal to the distribution
per share paid to holders of the Company's common stock. At September 30, 2000
and December 31, 1999 there were 2,164,235 Investor Unit Rights outstanding.
In 1998 and 1999, the Company acquired partnership interests in Independence
Mall. The acquisition price consisted of cash and partnership units in
affiliated partnerships. Under certain circumstances, the holders of these
partnership units may exchange their units for 1) an equivalent number of
Investor Unit Rights, 2) cash or, 3) at the discretion of the Company, an
equivalent number of shares of the Company's common stock. At September 30, 2000
and December 31, 1999, there were 911,185 of these partnership units
outstanding.
As of September 30, 2000, there were 73,354,863 shares of common stock, par
value $0.01 per share, outstanding.
The following is a summary of the elements used in calculating basic and
diluted earnings per share ("EPS"):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -------------------------
2000 1999 2000 1999
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net income.................................. $ 13,305 $ 13,556 $ 43,844 $ 34,648
Less: preferred stock dividends............. (10,510) (9,559) (31,530) (26,809)
---------- ---------- ---------- ----------
Net income for basic EPS.................... 2,795 3,997 12,314 7,839
Add: net income allocable to Investor Unit
Rights.................................... 31 -- 197 --
---------- ---------- ---------- ----------
Net income for diluted EPS.................. $ 2,826 $ 3,997 $ 12,511 $ 7,839
========== ========== ========== ==========
Weighted average common shares outstanding
(denominator for basic EPS)............... 73,353,626 73,345,335 73,350,078 73,341,576
Diluted equivalent common shares:
1996, 1997 and 2000 Warrants.............. -- -- -- 12,026
1998 Subscription Agreement............... 943,293 1,067,347 996,873 1,019,607
Investor Unit Rights...................... 2,164,235 -- 2,164,235 --
---------- ---------- ---------- ----------
Weighted average common shares and common
share equivalents outstanding (denominator
for diluted EPS).......................... 76,461,154 74,412,682 76,511,186 74,373,209
========== ========== ========== ==========
EPS:
Basic..................................... $ 0.04 $ 0.05 $ 0.17 $ 0.11
========== ========== ========== ==========
Diluted................................... $ 0.04 $ 0.05 $ 0.16 $ 0.11
========== ========== ========== ==========
</TABLE>
The Company's convertible preferred shares were not included in the earnings
per share calculation as their effect is antidilutive.
11
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
8. SUPPLEMENTAL CASH FLOW INFORMATION:
For the nine months ended September 30, 2000 and 1999, the Company paid
interest totaling $134,604 and $134,743, respectively, net of capitalized
interest.
NON CASH INVESTING AND FINANCING INFORMATION:
The Company's purchase of a 50% managing interest in GSP in June 2000
included the assumption of the Garden State Plaza participating loan of $145,000
and the issuance of the Series F Preferred Partnership Units valued at $52,483,
which resulted in a non-cash addition to investments in unconsolidated real
estate affiliates of $197,483.
Independence Mall was accounted for under the equity method during 1999 and
has been consolidated beginning in 2000. The Company's 85% interest in the
condensed assets and liabilities of Independence at January 1, 2000 was as
follows:
<TABLE>
<S> <C>
Net investment in real estate............................... $61,326
Cash and cash equivalents................................... 1,270
Accounts receivable......................................... 630
Deferred expenses and other assets, net..................... 231
Notes payable............................................... (32,322)
Accounts payable and accrued liabilities.................... (855)
Minority/other partners' interest........................... (20,497)
-------
The Company's investment in Independence Mall............... $ 9,783
=======
</TABLE>
During the nine months ended September 30, 2000, construction in progress
totaling $73,563 was placed into service.
During the nine months ended September 30, 1999, the Company recorded a
decrease in minority interest totaling $5,213 as a result of the acquisition of
a 16% interest in Wheaton Plaza for Investor Unit Rights in January 1999.
In June 1999, the Company completed a joint venture transaction (the "Joint
Venture") with J.P. Morgan Investment Management, Inc., acting for a group of
pension trusts ("J.P. Morgan"), which effectively transferred a 50% interest in
UTC and Valley Fair to J.P. Morgan for approximately $246,000 including the
assumption of debt totaling approximately $120,000.
12
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
8. SUPPLEMENTAL CASH FLOW INFORMATION: (CONTINUED)
Prior to formation of the Joint Venture with J.P. Morgan, UTC was included
in the Company's consolidated accounts. After completion of the Joint Venture,
the Company began accounting for UTC under the equity method. The Company's 50%
interest in the fixed assets and liabilities transferred to the Joint Venture
was as follows:
<TABLE>
<S> <C>
Land........................................................ $ 9,540
Building and improvements................................... 177,925
Less accumulated depreciation............................... (4,180)
--------
Net investment in real estate............................. 183,285
Note payable................................................ (80,269)
--------
Net investment in UTC....................................... 103,016
Cash proceeds from J.P. Morgan.............................. (50,865)
--------
Non-cash addition to investments in unconsolidated real
estate affiliates......................................... $ 52,151
========
</TABLE>
9. RELATED PARTIES:
The Manager entered into an agreement with the Company to manage and lease
the properties in the Company's portfolio beginning January 1, 1995. In
consideration for providing these management services, the Manager is reimbursed
certain recoverable property operating costs including mall related payroll, and
is entitled to receive gross fees of 5% of minimum and percentage rents received
by the Company. Property management fees totaling $2,215 and $2,497, net of
capitalized leasing fees of $1,932 and $1,793 were expensed by the Company for
the three months ended September 30, 2000 and 1999, respectively. Property
management fees totaling $6,839 and $7,725, net of capitalized leasing fees of
$6,626 and $5,349 were expensed by the Company for the nine months ended
September 30, 2000 and 1999, respectively. Included in accounts payable and
accrued expenses at September 30, 2000 and December 31, 1999 are management fees
payable to the Manager totaling $1,441 and $1,461, respectively.
In addition to the management fees, the Manager was reimbursed for
recoverable operating costs, including mall related payroll costs, totaling
$4,939 and $5,261 for the three months ended September 30, 2000 and 1999,
respectively, and $16,721 and $15,968 for the nine months ended September 30,
2000 and 1999, respectively.
The Company entered into a Master Development Framework Agreement with the
Developer under which the Company granted the Developer the exclusive right to
carry out expansion, redevelopment and related works on the Company's
wholly-owned shopping centers and to endeavor to have the Developer be appointed
by the relevant partner to carry out similar activities for jointly owned real
estate affiliates. During the three months ended September 30, 2000 and 1999,
the Company reimbursed the Developer $32,419 and $30,762, respectively, and
$64,072 and $65,949 for the nine months ended September 30, 2000 and 1999,
respectively, for expansion, redevelopment and related work.
13
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT AND PER SHARE AMOUNTS)
9. RELATED PARTIES: (CONTINUED)
In July 1996, the Company engaged the Advisor to provide a variety of asset
management and investment services, subject to supervision of the Company. The
Advisor is entitled to an annual fee equal to 25% of the annual Funds from
Operations ("FFO") in excess of the Advisory FFO Amount ($157,692 at
September 30, 2000), but not to exceed 55 basis points of the Net Equity Value
(as defined) of the Company's assets. The Advisory FFO amount increases whenever
the Company issues additional equity. The advisory fee was $2,603 and $2,309 for
the three months ended September 30, 2000 and 1999, respectively and $8,011 and
$5,951 for the nine months ended September 30, 2000 and 1999, respectively.
Included in interest and other income for the three and nine months ended
September 30, 2000 and 1999 is interest income earned on the Garden State Plaza
loan totaling $0, $4,280, $6,646, and $11,943, respectively.
10. COMMITMENTS AND CONTINGENCIES:
The Company is currently involved in several development projects and had
outstanding commitments totaling approximately $366,175 at September 30, 2000.
The Company is subject to the risks inherent in the ownership and operation
of commercial real estate. These include, among others, the risks normally
associated with changes in the general economic climate, trends in the retail
industry, including creditworthiness of retailers, competition for retailers,
changes in tax laws, interest rate levels, the availability of financing, and
potential liability under environmental and other laws.
Substantially all of the properties have been subjected to Phase I
environmental reviews. Such reviews have not revealed, nor is management aware
of, any probable or reasonably possible environmental costs that management
believes would be material to the Condensed Consolidated Financial Statements.
The Company currently is not subject to any litigation which management
believes would have a material adverse impact on the Company's consolidated
financial position or results of operations. Nor, to management's knowledge, is
any material litigation currently threatened against the Company other than
routine litigation and administrative proceedings arising in the ordinary course
of business.
11. NEW ACCOUNTING PRONOUNCEMENTS:
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101") which addressed certain revenue recognition policies, including the
accounting for percentage rent by a landlord. SAB 101 requires percentage rent
to be recognized as revenue only when each tenant's sales exceed their sales
threshold. In June 2000, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101B, "Second Amendment: Revenue Recognition in
Financial Statements" which effectively delays the implementation date of SAB
101 until no later than the fourth quarter of 2000. The Company had previously
accrued interim percentage rents as income upon the tenant's sales meeting the
threshold or when achievement of the threshold was probable based upon reported
and estimated sales. The Company will adopt SAB 101 effective January 1, 2000,
no later than the fourth quarter of 2000. The effect of SAB 101 on the quarters
will be determined and disclosed in connection with the Company's annual
financial statements.
14
<PAGE>
WESTFIELD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS EXCEPT SHARE, UNIT, PER SHARE, AND FLOOR AREA
AMOUNTS)
11. NEW ACCOUNTING PRONOUNCEMENTS: (CONTINUED)
In June 1998, the FASB Issued Statement of Financial Accounting Standard
("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities,"
("SFAS 133") which requires companies to record derivatives on the balance
sheet, measured at fair value. Changes in the fair values of those derivatives
will be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The key criterion for hedge accounting is that
the hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. In June 1999, the FASB issued SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities," which delays the
implementation of SFAS 133 from January 1, 2000 to January 1, 2001. In
June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities--an Amendment of FASB Statement
No. 133," ("SFAS 138"), which amends the accounting and reporting standards of
SFAS 133. The Company will implement SFAS 133 and SFAS 138 effective January 1,
2001. The Company has not determined the impact of SFAS 133 and SFAS 138 on its
consolidated financial statements.
12. SUBSEQUENT EVENT:
On October 6, 2000, the Company acquired an additional 49.5% interest in
Westfield Shoppingtown Vancouver in Vancouver, Washington for approximately
$24,500 plus the assumption of debt of $15,137. Westfield Shoppingtown Vancouver
is an 870,000 square foot super-regional shopping center with five anchors and
144 specialty stores. Funds for the acquisition were obtained from the
refinancing of a secured loan on the property.
15
<PAGE>
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Westfield America, Inc., a Missouri corporation (the "Company"), is a
publicly traded real estate investment trust ("REIT") specializing in enclosed
shopping centers. At September 30, 2000, the Company had interests in 39 major
shopping centers branded as "Westfield Shoppingtowns". The Company's portfolio
of Westfield Shoppingtowns includes clusters of shopping centers in major
markets in the east coast, midwest and west coast regions of the United States.
The Company has been engaged for over 40 years in the business of owning,
operating, leasing, developing, redeveloping and acquiring regional and
super-regional shopping centers. As of September 30, 2000, the Company's
portfolio of 39 shopping centers (the "Centers") consisted of 24 super-regional
shopping centers with approximately 27.4 million square feet of space, 12
regional shopping centers with approximately 8.3 million square feet of space,
three power centers with approximately 1.4 million square feet of space and
seven office buildings adjacent to its Centers with approximately 600,000 square
feet of space, representing approximately 72.7%, 22.0%, 3.7%, and 1.6%,
respectively, of the Company's 37.7 million square feet of retail and office
space generally referred to as gross leasable area ("Total GLA").
The following discussion should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements of the Company and the Notes thereto
for the nine months ended September 30, 2000 and the Consolidated Financial
Statements of the Company for the year ended December 31, 1999 included in the
Company's 1999 Annual Report on Form 10-K filed on March 30, 2000.
GENERAL BACKGROUND
At September 30, 2000 and for the nine months then ended, the Condensed
Consolidated Financial Statements and Notes thereto reflect the consolidated
financial results of 33 Centers, the equity in income in six properties held by
unconsolidated real estate affiliates, including Westfield Shoppingtown Garden
State Plaza, which was acquired in June 2000 and Westfield Shoppingtown UTC
which became a deconsolidated entity in June 1999, 12 separate department store
properties that are net leased to The May Department Stores Company (the "May
Company") under finance leases, and a $145 million secured participating loan
(the "Garden State Plaza Loan") which was assumed in June 2000 in connection
with the Garden State Plaza acquisition.
At September 30, 1999 and for the nine months then ended, the Condensed
Consolidated Financial Statements and Notes thereto reflect the consolidated
financial results of 31 Centers, including Westfield Shoppingtown Palm Desert,
which was acquired in August 1999, the equity in income of six properties held
by unconsolidated real estate affiliates, including Westfield Shoppingtown UTC
which became a deconsolidated entity in June 1999, Los Cerritos until this
Center was sold in June 1999 and an additional 32% interest and 15% interest in
Westfield Shoppingtown Wheaton Plaza and Independence Mall, respectively, which
were acquired effectively in January 1999, 12 separate department store
properties that are net leased to The May Company under financing leases, and
the Garden State Plaza Loan.
Fluctuations in the Company's results of operations from period to period
reflect the acquisition of a 50% interest in Westfield Shoppingtown Garden State
Plaza in June 2000 and the acquisition of Westfield Shoppingtown Palm Desert in
August 1999 and the sale of Westfield Shoppingtown Los Cerritos and conveyance
of a joint venture interest in Westfield Shoppingtown UTC, both in June of 1999.
These transactions are referred to as the "Property Transactions".
The acquisition of a 50% interest in Garden State Plaza was facilitated
through the issuance of Series F Preferred Partnership Units in Westfield
America Limited Partnership (the "Operating Partnership") and the assumption of
the $145 million Garden State Plaza Loan. The proceeds obtained from the
16
<PAGE>
sale of Los Cerritos and the conveyance of a joint venture interest in UTC were
used to pay down the Company's unsecured corporate credit facility in 1999 and
to provide liquidity for future redevelopments and strategic acquisitions. Palm
Desert was acquired with proceeds obtained from the issuance of Series E
Cumulative Redeemable Preferred Stock (the "Series E Preferred Shares").
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1999
TOTAL REVENUES increased $14.6 million or 12.3% to $134.6 million for the
three months ended September 30, 2000 compared to $120.0 million for the same
period in 1999. Excluding the Property Transactions previously noted, total
revenues increased $11.3 million or 9.6% due to increased occupancy at Westfield
Shoppingtowns Fox Hills, Parkway Plaza, Santa Anita, West Covina, and Solano,
higher minimum rents generated by recently completed redevelopments at Westfield
Shoppingtowns Meriden, Annapolis, Connecticut Post, Mid Rivers and Crestwood,
higher specialty leasing throughout the portfolio, higher percentage rents due
to higher sales during the quarter ended September 30, 2000 and higher recovery
revenues due to higher operating expenses.
TOTAL EXPENSES increased $7.6 million to $77.2 million for the three months
ended September 30, 2000 as compared to $69.6 million for the same period in
1999. Excluding the Property Transactions previously noted, total expenses
increased $5.8 million or 8.5% primarily due to property tax re-assessments and
recently completed redevelopments.
INTEREST EXPENSE, net of capitalized interest of $1.3 million, increased
$4.4 million to $46.8 million for the three months ended September 30, 2000 as
compared to $42.4 million for the same period in 1999. The increase in interest
expense was due primarily to increases in floating rate debt, interest rates and
interest expense on redevelopments placed in service.
EQUITY IN INCOME OF UNCONSOLIDATED REAL ESTATE AFFILIATES increased
$2.2 million to $4.2 million for the three months ended September 30, 2000 as
compared to $2.0 million for the same period in 1999, due primarily to the
acquisition of Garden State Plaza in June 2000 partially offset by an increase
in interest expense at Valley Fair as a result of a refinancing in June 1999.
INTEREST AND OTHER INCOME decreased $3.8 million to $0.9 million for the
three months ended September 30, 2000 as compared to $4.7 million for the same
period in 1999. The decrease was due primarily to the assumption of the Garden
State Plaza Loan in connection with the Garden State Plaza acquisition in
June 2000.
NET INCOME decreased $0.3 million or 1.9% to $13.3 million for the three
months ended September 30, 2000 as compared to $13.6 million for the same period
in 1999. Excluding the Property Transactions, previously noted, net income
increased $1.0 million for the reasons discussed above.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999.
TOTAL REVENUES increased $19.7 million or 5.3% to $392.2 million for the
nine months ended September 30, 2000 compared to $372.5 million for the same
period in 1999. Excluding the Property Transactions previously noted, total
revenues increased $26.3 million or 7.5% due to increased occupancy at Westfield
Shoppingtowns Downtown Plaza, Fox Hills, Parkway Plaza, Santa Anita, West
Covina, Solano and Wheaton, higher minimum rents generated by recently completed
redevelopments at Westfield Shoppingtowns Annapolis, Connecticut Post, Meriden,
Mid Rivers, Mission Valley West and Crestwood, higher specialty leasing and
percentage rents throughout the portfolio and higher recovery revenues due to
higher operating expenses.
17
<PAGE>
TOTAL EXPENSES increased $8.7 million to $222.3 million for the nine months
ended September 30, 2000 as compared to $213.6 million for the same period in
1999. Excluding the Property Transactions previously noted, total expenses
increased $12.7 million or 6.3% primarily due to property tax re-assessments,
recently completed redevelopments and an increase in the advisory fee.
INTEREST EXPENSE, net of capitalized interest of $2.9 million, decreased
$3.1 million to $138.5 million for the nine months ended September 30, 2000 as
compared to $141.6 million for the same period in 1999, due primarily to the
sale of Los Cerritos and conveyance of a joint venture interest in UTC. The
decrease in interest expense was partially offset by increases in floating rate
debt, interest rates and interest expense on redevelopments placed in service.
EQUITY IN INCOME OF UNCONSOLIDATED REAL ESTATE AFFILIATES increased
$2.5 million to $7.8 million for the nine months ended September 30, 2000 due
primarily to the acquisition of Garden State Plaza in June 2000 and the
conveyance of a joint venture interest in UTC in June 1999, partially offset by
an increase in interest expense at Valley Fair as a result of a refinancing in
June 1999.
GAIN ON SALE OF INVESTMENTS was $2.0 million for the nine months ended
September 30, 1999 due to the sale of Los Cerritos in June 1999.
INTEREST AND OTHER INCOME decreased $4.4 million for the nine months ended
September 30, 2000 as compared to the same period in 1999. The decrease was due
primarily to the assumption of the Garden State Plaza Loan in connection with
the Garden State Plaza acquisition in June 2000.
NET INCOME increased $9.2 million or 26.5% to $43.8 million for the nine
months ended September 30, 2000 as compared to $34.6 million for the same period
in 1999. Excluding the Property Transactions previously noted and the 1999 gain
on sale of investments, net income increased $13.0 million for the reasons
discussed above.
FFO FUNDS FROM OPERATIONS
The Company computes FFO in accordance with standards established by the
White Paper on FFO approved by the Board of Governors of NAREIT in March 1995
which defines FFO as net income (loss) (computed in accordance with accounting
principles generally accepted in the United States ("GAAP")), excluding gains
(or losses) from debt restructuring and sales of property, plus real estate
related depreciation and amortization and after adjustments for unconsolidated
real estate affiliates. FFO should not be considered as an alternative to net
income (determined in accordance with GAAP) as a measure of the Company's
financial performance or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make distributions. In addition, FFO as computed by the Company, may
not be comparable to similarly titled figures reported by other REITs. The
Company believes that FFO is an effective measure of the Company's operating
performance because analysts and investors usually use FFO in analyzing the
operating results of real estate companies rather than using earnings per share.
18
<PAGE>
The following is a summary of the Company's FFO and a reconciliation of net
income to FFO for the periods presented (amounts in thousands, except
percentages):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Funds from Operations................................. $49,238 $44,087 $142,445 $127,294
======= ======= ======== ========
Increase in Funds from Operations from prior period... 11.7% 11.9%
======= ========
Reconciliation:
Net income.......................................... $13,305 $13,556 $ 43,844 $ 34,648
Gain on sale of investments......................... -- -- -- (1,971)
Income allocable to Investor Unit Rights............ 1,654 490 2,834 2,023
Depreciation and amortization:
Deferred financing leases......................... 615 577 1,820 1,701
Consolidated properties........................... 29,051 26,950 84,050 84,769
Unconsolidated real estate affiliates............. 4,963 2,777 10,917 6,920
Minority interest portion......................... (350) (263) (1,020) (796)
------- ------- -------- --------
Funds from Operations................................. $49,238 $44,087 $142,445 $127,294
======= ======= ======== ========
</TABLE>
EBITDA EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
The Company believes that there are several important factors that
contribute to the ability of the Company to increase rent and improve
profitability of its shopping centers, including aggregate retailer sales
volume, sales per square foot, occupancy levels and retailer costs. Each of
these factors has a significant effect on EBITDA. The Company believes that
EBITDA is an effective measure of operating performance because EBITDA is
unaffected by the debt and equity structure of the property owner. EBITDA:
(i) does not represent cash flow from operations as defined by GAAP;
(ii) should not be considered as an alternative to net income (determined in
accordance with GAAP) as a measure of the Company's overall performance;
(iii) is not indicative of cash flows from operating, investing and financing
activities (determined in accordance with GAAP); and (iv) is not an alternative
to cash flows (determined in accordance with GAAP) as a measure of the Company's
liquidity.
The Company's EBITDA after minority interest plus its pro-rata share of
EBITDA of unconsolidated real estate affiliates increased from $274.3 million
for the nine months ended September 30, 1999 to $291.2 million for the same
period in 2000. The growth in EBITDA reflects the Property Transactions
previously noted, increased rental rates, increased retailer sales, improved
occupancy levels and effective control of operating costs throughout the rest of
the portfolio.
The following is a summary of the Company's EBITDA and a reconciliation of
EBITDA to FFO (which has been reconciled to the Company's net income above) for
the periods presented (amounts in thousands, except percentages):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EBITDA............................................... $100,886 $89,251 $291,247 $274,268
======== ======= ======== ========
Increase in EBITDA from prior period................. 13.0% 6.2%
======== ========
Reconciliation:
Funds from Operations.............................. $ 49,238 $44,087 $142,445 $127,294
Interest expense:
Consolidated properties.......................... 46,794 42,424 138,510 141,609
Unconsolidated real estate affiliates............ 5,430 3,211 11,962 6,750
Minority interest portion........................ (576) (471) (1,670) (1,385)
-------- ------- -------- --------
EBITDA............................................... $100,886 $89,251 $291,247 $274,268
======== ======= ======== ========
</TABLE>
19
<PAGE>
PORTFOLIO DATA
SEASONALITY
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season when retailer occupancy and retail
sales are typically at their highest levels. In addition, shopping centers
achieve a substantial portion of their specialty (temporary retailer) rents
during the holiday season. As a result of the above, earnings in the shopping
center industry are generally highest in the fourth quarter of each year.
The following table summarizes certain quarterly data for 1999 and the first
three quarters of 2000 for the Company's Centers (amounts in thousands, except
percentages):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
2000 QUARTERLY DATA:
Mall Shop sales(2)............................ $700,778 778,533 759,758 N/A
Revenues...................................... $151,588 (1) 160,172 175,561 N/A
Percentage leased............................. 92% 93% 94% N/A
1999 QUARTERLY DATA:(1)
Mall Shop sales............................... $659,438 $729,237 $733,418 $1,118,513
Revenues...................................... $145,599 $145,197 $146,498 $ 159,872
Percentage leased............................. 92% 92% 93% 94%
</TABLE>
------------------------
(1) Excluding recently acquired Garden State Plaza
(2) Excluding recently acquired Garden State Plaza, and West County, currently
under redevelopment.
REPORTED TENANT SALES VOLUME
Total sales for Mall Shops (retail stores with less than 20,000 square feet
of GLA) affect revenue and profitability levels of the Company because they
determine the amount of minimum rent the Company can charge, the percentage rent
it realizes and the recoverable expenses (common area maintenance, real estate
taxes, etc.) the retailers can afford to pay. Mall Shop sales for the Company's
Centers, excluding Garden State Plaza and West County, for the nine months ended
September 30, 2000 increased 6.0% on a per square foot basis over the same
period in 1999. The Company believes that these sales trends enhance the
Company's ability to obtain higher rents from retailers.
The table below sets forth Mall Shop sales and per square foot percentage
increases of those sales over the same period in 1999 for the Company's Centers,
in the east coast excluding Garden State Plaza, the midwest excluding West
County and the west coast regions of the United States (amounts in thousands,
except percentages):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------ -------------------------
MALL SHOP INCREASE PER MALL SHOP INCREASE PER
SALES SQ. FT. SALES SQ. FT.
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
East coast...................................... $219,360 3.0% $ 629,883 3.2%
Midwest......................................... 67,679 4.0% 238,729 3.8%
West coast...................................... 472,719 5.4% 1,370,457 7.7%
-------- --- ---------- ---
Total Centers................................. $759,758 4.6% $2,239,069 6.0%
======== === ========== ===
</TABLE>
20
<PAGE>
LEASING
Mall Shop space was 94% leased at September 30, 2000. Leasing percentages
are calculated on the basis of signed leases and exclude temporary leasing
because such leases are on a short term basis (less than one year) and are
subject to termination by the Company upon providing the retailer thirty days
notice. The following table sets forth leased status for the Company's Centers
in the east coast, the midwest and the west coast regions of the United States.
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
East coast.................................................. 95% 95%
Midwest..................................................... 92% 92%
West coast.................................................. 94% 91%
Total centers............................................. 94% 93%
</TABLE>
MALL SHOP RENTAL RATES
As leases have expired, the Company has generally sought to rent the
available space, either to the existing retailer or a new retailer, at rental
rates that are higher than those of the expiring leases. In a period of
increasing sales, rents on new leases will tend to rise as retailers'
expectations of future growth become more optimistic. In periods of slower
growth or declining sales, rents on new leases will grow more slowly or will
decline for the opposite reason.
Average Mall Shop base rent was $32.59 per square foot at September 30,
2000. The following table contains certain information regarding base rent per
square foot of Mall Shop leases that have been executed or expired since
January 1, 2000.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Average base rent of Mall Shop leases, at the end of the
period.................................................... $32.59 $30.03 $32.59 $30.03
Leases expired during the period............................ 33.12 26.86 30.01 25.09
Leases executed during the period........................... 39.84 36.21 35.38 37.24
</TABLE>
As required by GAAP, contractual rent increases are recognized as rental
income using the straight-line method over the respective lease terms, which may
result in the recognition of income not currently billable under the terms of
the lease. The amounts of contractual rent recognized for GAAP purposes in
excess of rent billed for the three months ended September 30, 2000 and 1999
were $0.8 million and $1.1 million, respectively and $2.4 million and
$3.6 million for the nine months ended September 30, 2000 and 1999,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had $253 million undrawn under the
secured line of credit, which is being used as a revolving working capital
facility to fund acquisition and redevelopment activities. Through its hedging
activities, the Company has fixed borrowings under the secured line of credit at
average rates ranging from 7.54% to 7.68%.
At September 30, 2000, the Company's balance of cash and cash equivalents
was $27.2 million, not including its proportionate share of cash held by
unconsolidated real estate affiliates.
21
<PAGE>
The Company's consolidated indebtedness at September 30, 2000 was
$2,531.6 million, of which $2,424.8 million is fixed rate debt and
$106.8 million is variable rate debt after considering interest rate protection
agreements totaling $1.5 billion. The interest rate on the fixed rate debt
ranges from 6.39% to 8.38%. The Company's pro-rata share of debt-to-total market
capitalization, based on the common stock share price at September 30, 2000, was
58.3%, excluding the Capital Notes from the numerator. The maturity dates of
consolidated indebtedness range from 2001 to 2022. Scheduled principal
amortization and balloon payments in connection with maturing mortgage
indebtedness are included in Note 5 of the Condensed Consolidated Financial
Statements included in this quarterly report on Form 10-Q.
The Company believes that redevelopment, repositioning and expansion are key
to maximizing the use and performance of its assets and increasing its income
growth and capital appreciation. The Company continually evaluates the
redevelopment potential of its properties, including properties that have
undergone redevelopment in the past five years. Due to the financial and
regulatory burdens presented by the development of new regional shopping
centers, the Company believes that an on-going redevelopment program provides a
cost efficient means of ensuring that the Company's existing Centers compete
effectively within their existing markets and are able to attract new customers.
Capital expenditures and capitalized leasing costs totaled $116.7 million
and $90.8 million, for the nine months ended September 30, 2000 and 1999,
respectively. The following table shows the components of capital expenditures
and capitalized leasing costs:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
($ IN MILLIONS)
<S> <C> <C>
Renovations and expansions.................................. $ 92.7 $73.1
Tenant allowances........................................... 15.4 10.2
Capitalized leasing costs................................... 6.6 5.3
Other capital expenditures.................................. 2.0 2.2
------ -----
Total..................................................... $116.7 $90.8
====== =====
</TABLE>
Capital expenditures were financed by external funding and recovery of costs
from retailers where applicable. The Company is currently involved in several
development projects and had outstanding commitments totaling approximately
$366.2 million as of September 30, 2000, which will be funded through existing
mortgage debt, new mortgage debt and the secured line of credit.
The historical sources of capital used to fund the Company's operating
expenses, interest expense, recurring capital expenditures and non-recurring
capital expenditures (such as major building renovations and expansions) have
been: (i) FFO, (ii) the issuance of secured and unsecured debt and
(iii) issuance of equity. The Company anticipates that development projects,
expansion projects and potential acquisitions will be funded by external
financing sources.
The Company anticipates that its FFO will provide the necessary funds on a
short-term and long-term basis for its operating expenses, interest expense on
outstanding indebtedness and all distributions to the shareholders in accordance
with REIT requirements. Sources of recurring and non-recurring capital
expenditures on a short-term and long-term basis, such as major building
renovations and expansions, as well as for scheduled principal payments,
including balloon payments on outstanding indebtedness, are expected to be
obtained from: (i) additional debt financing, (ii) additional equity and
(iii) working capital reserves.
Although no assurance can be given, the Company believes that it will have
access to capital resources sufficient to satisfy the Company's cash
requirements and expand and develop its business in accordance with its strategy
for growth.
DISTRIBUTIONS
Distributions were declared on September 19, 2000 to shareholders of record
on September 30, 2000 of $37.7 million including $0.37 per common share for the
quarter ended September 30, 2000, which is equal to $1.48 per common share on an
annualized basis. The Company intends to pay regular quarterly distributions to
holders of its preferred and common stock.
22
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This report includes, and future public filings and oral and written
statements by the Company and its management may include, statements (other than
the consolidated financial statements and other statements of historical fact)
that are subject to risks and uncertainties. Forward-looking statements include
the information concerning possible future results of operations, earnings,
expenses, cash flows, funds from operations and other capital resources of the
Company (including with respect to increased revenues and rental rates, cost
savings and operating efficiencies) and market trends set forth under
(a) "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Portfolio Data," "Liquidity and Capital Resources," and
"Distributions," (b) "Quantitative and Qualitative Disclosure about Market Risk"
and (c) "Legal Proceedings" and (d) statements preceded by, followed by or that
include the words "believes," "expects," "may," "will," "anticipates,"
"intends," "plans," "estimates," "proposes," "scheduled," or other similar
expressions.
Forward-looking statements are made based on management's current
expectations and beliefs concerning future developments and their potential
effects on the Company. There can be no assurance that future developments will
be in accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by management. Many of the
factors that will determine these results are beyond the Company's ability to
control or predict.
The following important factors, and those important factors described
elsewhere in this report (including without limitation those discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Quantitative and Qualitative Disclosures about Market Risk" and
"Legal Proceedings"), or in other Securities and Exchange Commission filings,
could affect (and in some cases have affected) the Company's actual results and
could cause such results to differ materially from estimates or expectations
reflected in such forward-looking statements: (a) risks generally inherent in
real estate investment, such as: changes in the national economic climate, the
regional economic climate (including the impact of local employers or industry
concentrations on the economic climate) or local real estate conditions;
perceptions by retailers or shoppers of the safety, convenience and
attractiveness of a shopping center; trends in the retail industry; competition
for retailers; changes in market rental rates and vacancy rates; the ability to
collect rent from retailers; the need to periodically renovate, repair and relet
space and the costs thereof; the ability of an owner to provide adequate
management and maintenance and insurance; increased operating costs; changes in
governmental regulations, zoning or tax laws; environmental or other legal
liabilities; and changes in interests rate levels; (b) the ability of the
Company to successfully redevelop properties (including the ability to complete
the redevelopment, to complete construction within the estimated time frame and
budget or to realize anticipated occupancy and rental rates from completed
projects), or to achieve anticipated operating results from acquired properties;
(c) competition from other shopping centers and other forms of retailing,
including electronic commerce; (d) the impact of the financial condition of
anchors and major tenants on the Centers' operations, including the bankruptcy
or insolvency of anchors or retailers or the decision of any anchor or major
tenant to not renew its lease when it expires; (e) possible conflicts of
interest with unrelated third parties in jointly owned properties, as well as
the impact of the financial condition of unaffiliated partners; (f) the
Company's ability to make scheduled payments of principal or interest on, or to
refinance its obligations with respect to its indebtedness and to comply with
the covenants and restrictions contained in the instruments governing such
indebtedness, which will depend on its future operating performance and cash
flow, which are subject to prevailing economic conditions, prevailing interest
rate levels, and financial, competitive, business and other factors beyond its
control, including changes in consumer buying patterns, regulatory developments
and increased operating costs; (g) the Company's ability to continue to qualify
as a REIT for federal income tax purposes and the taxation of the Company as a
regular corporation if it were to lose that status; the 100% tax on net income
from transactions that constitute prohibited transactions pursuant to the rules
relating to REIT's under the Code; possible taxation of the Company with respect
to built-in gain on disposition of certain property if such property were
disposed of during a
23
<PAGE>
ten-year period; and the possibility of a dramatic decrease in cash available
for distributions if such taxes become payable; and (h) possible conflicts of
interest due to the controlling ownership interest of affiliates.
While the Company periodically reassesses material trends and uncertainties
affecting the operations and financial condition in connection with the
preparation of its quarterly and annual reports, the Company does not intend to
review or revise any particular forward-looking statement referenced in this
report in light of future events, even if new information, future events or
other circumstances have made them incorrect or misleading.
The information referred to above should be considered by investors when
reviewing any forward-looking statements contained in this report, in any
documents incorporated herein by reference, in any of the Company's public
filings or press releases or in any oral statements made by the Company or any
of its officers or any other persons acting on its behalf. For those statements,
the Company intends to avail itself of the protection of the safe harbor from
liability with respect to forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
24
<PAGE>
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company enters into interest rate swap contracts to reduce its exposure
to fluctuations in interest rates. Net interest differentials to be paid or
received related to these contracts are accrued as incurred or earned. Any gain
or loss from terminating swap contracts is recognized in the period the swap
contract or related debt is terminated or reversed. Unamortized gains or losses
are recognized in income when the related debt matures or is extinguished. The
Company's policy is to maintain fixed rate borrowing (including fixed rate
mortgages and interest rate swaps) for approximately 75% of forecast debt for a
term of not more than ten years. Additional hedging may be entered into for up
to 100% of forecast debt if interest rates are considered by management to be
favorable.
It is the Company's policy to enter into interest rate swap contracts to
hedge fluctuations in interest rates only to the extent necessary to meet its
objectives as stated above. The Company does not enter into interest rate swap
contracts for speculative purposes.
Interest rate exchange agreements are contractual agreements between the
Company and third parties to exchange fixed and floating interest payments
periodically without the exchange of the underlying principal amounts (notional
amounts). The agreements consist of swaps and involve the future receipt of a
floating rate based on LIBOR and the payment of a fixed rate. In the unlikely
event that a counterparty fails to meet the terms of an interest rate swap
contract, the Company's exposure is limited to the interest rate differential
between the contract rate and the market rate on the notional amount. The
Company does not anticipate non-performance by any of the counterparties.
The following is a summary of fixed rate debt, average fixed interest rate
and average remaining term to maturity for the Company's pro rata share of fixed
rate debt and variable rate debt that has been fixed through the use of interest
rate swap contracts:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
($ IN THOUSANDS)
<S> <C> <C>
Principal amount of fixed rate debt................. $1,126,192 $1,135,067
Principal amount of other current fixed rate payable
instruments....................................... 1,477,000 1,287,000
---------- ----------
$2,603,192 $2,422,067
========== ==========
Fixed rate debt as a percentage of total notes
payable........................................... 93.0% 94.9%
========== ==========
Average effective fixed rate (inclusive of margins)
of total borrowings and hedges, including delayed
start swaps....................................... 7.48% 7.39%
========== ==========
Average remaining term (in years) of total fixed
rate borrowings and hedges, including delayed
start swaps....................................... 7.8 8.0
========== ==========
Interest coverage ratio for the quarter ended....... 2.0 2.2
========== ==========
</TABLE>
The Company has entered into one foreign currency exchange agreement related
to the Capital Notes in order to eliminate its exposure to fluctuations in
exchange rates.
As of September 30, 2000, there have been no material changes in the market
risks reported in the Company's 1999 Annual Report on Form 10-K other than those
disclosed in Notes 5 and 6 of the Condensed Consolidated Financial Statements
for the quarter ended September 30, 2000 included in this quarterly report on
Form 10-Q.
25
<PAGE>
PART II-OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Except as set forth below, the Company currently is neither subject to any
material litigation nor, to management's knowledge, is any material litigation
currently threatened against the Company other than routine litigation and
administrative proceedings arising in the ordinary course of business.
On August 3, 2000, the City of New Haven, Connecticut, the Long Wharf
Galleria LLC and New Haven Acquisition, LLC filed a lawsuit against us, certain
of our affiliates and the City of Milford. The lawsuit was filed in the
Connecticut Superior Court in New Haven. The complaint alleges, among other
things, that the defendants are obstructing the development of the proposed Long
Wharf Galleria Mall in New Haven. In addition, the complaint alleges that the
defendants have violated various Connecticut antitrust and unfair trade practice
laws, engaged in vexatious litigation, abuse of legal process and tortuous
interference with contracts and business relations. The complaint seeks to
enjoin us from further obstructing such development. The complaint also seeks
unspecified compensatory and punitive damages. We believe that we have
meritorious defenses against the claims alleged in this litigation, and we
intend to defend the case vigorously. Based on consultation with counsel,
management believes that these items will not have a material adverse impact on
the Company's consolidated financial position or results of operations.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
SHARES ISSUED TO DIRECTORS
Each director who is not an officer of the Company or an employee of
Westfield Holdings Limited ("WHL") is entitled to annual compensation equal to
$20,000 in cash and $20,000 in common stock. The number of shares issued is
based on the share price of the Company's common stock on the anniversary of the
director's appointment. On September 18, 2000, the Company issued a total of
1,422 shares of common stock to a director. Such shares of common stock were
issued in a private placement to the director pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) of the Securities Act.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5: OTHER INFORMATION
None.
26
<PAGE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 6, 2000,
between Vancouver Mall and Vancouver Mall II Limited
Partnership.
2.2 Limited Partnership Agreement for Vancouver Mall II Limited
Partnership, dated as of October 6, 2000, by and between
Vancouver Mall LLC and Vancouver Associates.
2.3 Assignment and Assumption of Partnership Interest, dated as
of October 6, 2000, by and among Vancouver Associates and
Vancouver Mall LLC.
3.1 Restated Articles of Incorporation of the Company
(Exhibit 3.1(1)).
3.2 Second Amended and Restated By-Laws of the Company
(Exhibit 3.2 (2)).
3.3 Amendment No. 1 to the Second Amended and Restated By-Laws
of the Company (Exhibit 3.3 (2)).
3.4 Amendment No. 2 to the Second Amended and Restated By-Laws
of the Company (Exhibit 3.4 (2)).
3.5 Amendment No. 3 to the Second Amended and Restated By-Laws
of the Company (Exhibit 3.5 (2)).
3.6 Amendment No. 4 to the Second Amended and Restated By-Laws
of the Company (Exhibit 3.6 (3)).
11.1 Statement regarding Computation of Per Share Earnings for
the three months ended September 30, 2000.
11.2 Statement regarding Computation of Per Share Earnings for
the three months ended September 30, 1999.
11.3 Statement regarding Computation of Per Share Earnings for
the nine months ended September 30, 2000.
11.4 Statement regarding Computation of Per Share Earnings for
the nine months ended September 30, 1999.
12 Statement regarding Computation of Ratios.
27 Financial Data Schedule.
99.1 Agreement regarding Disclosure of Long-Term Debt
Instruments.
</TABLE>
------------------------
(1) Incorporated by reference to designated exhibit to Amendment No. 1 to
the Company's registration statement on Form S-3 filed July 7, 2000
(Registration No. 333-93163).
(2) Incorporated by reference to designated exhibit to the Company's
quarterly report on Form 10-Q filed May 17, 1999, File
No. 333-22731.
(3) Incorporated by reference to designated exhibit to the Company's
quarterly report on Form 10-Q filed May 15, 2000, File
No. 333-22731.
(b) Reports on Form 8-K:
None.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: November 14, 2000
<TABLE>
<S> <C> <C>
WESTFIELD AMERICA, INC.
By: /s/ PETER S. LOWY
-----------------------------------------
Peter S. Lowy
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ MARK A. STEFANEK
-----------------------------------------
Mark A. Stefanek
CHIEF FINANCIAL OFFICER AND TREASURER
</TABLE>
28
