<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(D) OF REGULATION S-T.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12588
ALEXANDER HAAGEN PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MARYLAND 95-4444963
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
3500 SEPULVEDA BOULEVARD 90266
MANHATTAN BEACH, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 546-4520
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 at least the past 90 days. YES [X] NO [_] .
As of May 12, 1998, 19,014,158 shares of Common Stock, Par Value $.01 Per
Share, were outstanding.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 (unaudited)
and December 31, 1997......................................... 3
Consolidated Statements of Operations (unaudited) for the three
months ended March 31, 1998 and 1997.......................... 4
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 1998 and 1997.......................... 5
Notes to Consolidated Financial Statements (unaudited)......... 6
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations......................................... 10
PART II OTHER INFORMATION.............................................. 15
SIGNATURES..................................................... 16
</TABLE>
2
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Rental properties..................................... $ 902,455 $783,279
Accumulated depreciation and amortization............. (126,106) (121,202)
--------- --------
Rental properties, net................................ 776,349 662,077
Cash and cash equivalents............................. 5,666 3,613
Tenant receivables, net............................... 7,464 6,017
Other receivables..................................... 6,530 4,449
Restricted cash....................................... 7,005 9,435
Note Receivable from Officer.......................... 3,088 3,126
Deferred charges, net................................. 18,976 19,759
Other assets.......................................... 2,078 2,237
--------- --------
TOTAL............................................. $ 827,156 $710,713
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Secured Debt.......................................... $ 386,041 $313,660
7 1/2% Convertible subordinated debentures............ 138,599 138,599
7 1/4% Exchangeable subordinated debentures........... 30,000 30,000
Accrued construction costs............................ 6,091 10,996
Accounts payable and other accrued expenses........... 7,926 8,482
Accrued dividends and distributions .................. 8,427 7,371
Accrued interest...................................... 4,206 5,604
Tenant security and other deposits.................... 5,395 4,729
--------- --------
Total liabilities................................. 586,685 519,441
--------- --------
MINORITY INTERESTS:
Operating Partnership (5,193,261 and 4,280,789 units
issued as of March 31, 1998 and December 31, 1997,
respectively)........................................ 51,273 39,685
Other minorities...................................... 1,657 1,748
--------- --------
Total minority interests............................ 52,930 41,433
--------- --------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK
510,034 shares outstanding as March 31, 1998 and
December 31, 1997, redeemable on May 25, 1999...... 8,543 8,385
--------- --------
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 50,000,000 shares
authorized; 18,504,124 and 15,664,814 shares issued
and outstanding as of March 31, 1998 and
December 31, 1997, respectively) .................. 185 157
Additional paid-in capital.......................... 266,553 223,972
Accumulated distributions and deficit............... (87,740) (82,675)
--------- --------
Total stockholders' equity........................ 178,998 141,454
--------- --------
TOTAL............................................. $ 827,156 $710,713
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Minimum rents............................................. $ 19,532 $ 15,926
Recoveries from tenants................................... 6,173 4,987
Percentage rents.......................................... 239 271
Other income.............................................. 1,225 999
--------- ---------
Total revenues........................................ 27,169 22,183
--------- ---------
EXPENSES:
Interest.................................................. 10,254 8,897
Depreciation and amortization............................. 5,389 4,315
Property Operating Costs:
Common area............................................. 4,077 3,349
Property taxes.......................................... 2,772 2,076
Leasehold rentals....................................... 411 403
Marketing............................................... 75 112
Other operating......................................... 430 452
General and administrative................................ 1,469 1,238
--------- ---------
Total expenses........................................ 24,877 20,842
--------- ---------
INCOME FROM OPERATIONS BEFORE MINORITY INTEREST........... 2,292 1,341
MINORITY INTERESTS:
Operating Partnership................................... (443) (332)
Other minorities........................................ (69) (76)
--------- ---------
NET INCOME................................................ $ 1,780 $ 933
========= =========
BASIC INCOME PER SHARE.................................... $ 0.10 $ 0.08
========= =========
DILUTED INCOME PER SHARE.................................. $ 0.08 $ 0.06
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING--BASIC................ 17,646 12,024
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING--DILUTED.............. 22,142 16,310
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................... $ 1,780 $ 933
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of rental properties....... 5,389 4,315
Amortization of deferred financing costs................. 683 554
Minority interests in operations......................... 512 408
Net changes in operating assets and liabilities.......... (5,022) 61
--------- --------
Net cash provided by operating activities............ 3,342 6,271
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of properties................................ (42,128) --
Construction and development costs....................... (8,027) (4,599)
Proceeds from note receivable from officer............... 38 --
--------- --------
Net cash used by investing activities................ (50,117) (4,599)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage financing................. (740) (610)
Borrowings on secured line of credit..................... 56,508 8,000
Repayment of secured line of credit...................... (42,000) (2,500)
Proceeds from issuance of common stock................... 40,473 --
Costs of obtaining financing............................. (320) --
Decrease in restricted cash.............................. 2,430 63
Dividends to shareholders................................ (5,823) (4,329)
Distributions to minority interests...................... (1,700) (2,895)
Other.................................................... -- (34)
--------- --------
Net cash provided by (used in) financing activities.. 48,828 (2,305)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 2,053 (633)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD........ 3,613 5,941
--------- --------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD.............. $ 5,666 $ 5,308
========= ========
NON-CASH TRANSACTIONS:
Fair value of debt assumed to acquire properties......... $ 58,613
=========
Issuance of Operating Partnership Units to acquire
properties.............................................. $ 15,089
=========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.BASIS OF PRESENTATION
Alexander Haagen Properties, Inc. (the "Company"), is a self-administered
and self-managed real estate investment trust ("REIT"). The Company engages in
the ownership, management, leasing, acquisition, development and redevelopment
of unenclosed retail shopping centers in the Western United States. As of
March 31, 1998 the Company owned 54 retail shopping centers (the "Properties")
comprising 10.3 million square feet of total shopping center gross leasable
area.
The accompanying financial statements and related notes of the Company are
unaudited; however, they have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and the
instructions to Form 10-Q and the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared under generally accepted
accounting principles have been condensed or omitted pursuant to such rule. In
the opinion of management, all adjustments considered necessary for fair
presentation of the Company's financial position, results of operations and
cash flows have been included. These financial statements should be read in
conjunction with the Company's Form 10-K for the year ended December 31, 1997.
2. REDEEMABLE COMMON STOCK
In connection with the Separation Agreement, as defined in Note 4 below, the
Company has agreed to purchase, or cause to have purchased, from the Haagen
Family, on May 25, 1999, an aggregate of 3,656,818 shares of common stock and
Operating Partnership Units (the "Shares") at a price per share equal to the
greater of $17 or the then current market price (as determined in accordance
with the Separation Agreement). Under the terms of the Separation Agreement,
the Haagen Family retain all rights and privileges as owners of the Shares up
to the date of purchase and may therefore sell such shares on the American
Stock Exchange, subject to certain limitations set forth under the Securities
Act of 1933. Included in the Shares to be repurchased are 510,034 shares of
common stock. As of March 31, 1998 and December 31, 1997, such shares have
been reflected as Redeemable Common Stock at the fair value on such dates.
3.STOCKHOLDER'S EQUITY
On June 1, 1997 the Company entered into a Stock Purchase Agreement with LF
Strategic Realty Investors, L.P. and Prometheus Western Retail, LLC,
affiliates of Lazard Freres Real Estate Investors, LLC, (together "LFREI"),
providing for LFREI to invest a total of up to $235 million in Common Stock of
the Company (the "Transaction"). Pursuant to the Stock Purchase Agreement the
Company will sell an aggregate of 15,666,666 shares of Common Stock to LFREI
at a price of $15.00 per share, for an aggregate purchase price of $235
million (the "Total Equity Commitment"). The purchase price per share was
determined as a result of arm's length negotiations between the Company and
its advisors and LFREI and its advisors. On August 14, 1997, the Stockholders
of the Company approved the Transaction.
As of December 31, 1997, the Company had sold 4,006,434 shares, to LFREI
under the terms of the Transaction for aggregate proceeds of $60.1 million. On
February 13, 1998 the Company sold an additional 2,700,000 shares to LFREI. As
of March 31, 1998, LFREI is obligated to purchase an additional 8,960,232
Shares of Common Stock for aggregate proceeds of $134.4 million (the
"Remaining Equity Commitment"). As of March 31, 1998, LFREI owned
approximately 35.4% of the outstanding Common Stock. On May 4, 1998, the
Company notified LFREI of its intent to sell an additional 2,000,000 shares to
LFREI effective June 2, 1998.
The Company must sell the Remaining Equity Commitment not later than
February 14, 1999. If the Company has not drawn the Remaining Equity
Commitment by such date, LFREI will have the right on such date to purchase
such shares from the Company, at a price of $15.00 per share. If LFREI
acquires all of the
6
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
shares represented by the Remaining Equity Commitment (and assuming no other
change in the number of outstanding shares), LFREI will own approximately 56.3%
of the outstanding Common Stock (37.9% on a Diluted Basis).
Subject to certain restrictions, in the event that the Company issues or
sells shares of capital stock for cash, LFREI will be entitled to purchase or
subscribe for, either as part of such issuance or in a concurrent issuance,
that portion of the total number of shares to be issued equal to LFREI's
proportionate holdings of Common Stock prior to such issuance (but not to
exceed 37.5% of the offering).
For a period of five years following stockholder approval (the "Standstill
Period") and any Standstill Extension Term, LFREI and its affiliates may not
(i) acquire beneficial ownership of more than 49.9% of the outstanding shares
of Common Stock, on an Adjusted Fully Diluted Basis (as defined below), (ii)
sell, transfer or otherwise dispose of any shares of Common Stock except in
accordance with certain specified limitations (including a requirement that the
Company, in its sole and absolute discretion, approve any transfer in a
negotiated transaction that would result in the transferee beneficially owning
more than 9.8% of the Company's capital stock). As used herein, the term
Adjusted Fully Diluted Basis shall mean on a Diluted Basis, except that shares
of Common Stock issuable upon conversion of the Company's outstanding
convertible debt or upon exercise of options granted under management benefit
plans shall not be included. After giving effect to the sale of 15,666,666
shares to LFREI, and assuming no other change in the number of outstanding
shares, LFREI will own 49.0% of the Common Stock on an Adjusted Fully Diluted
Basis. In the event that the number of outstanding shares were to increase for
any reason (including as a result of issuance of Common Stock upon conversion
or exercise of the outstanding convertible debt or management stock options),
then LFREI would be allowed to acquire additional shares of Common Stock, up to
49.9% on an Adjusted Fully Diluted Basis. In addition to the above, LFREI
nominated four members to the Company's Board of Directors. Further, LFREI is
entitled to receive access to certain operating statements and other financial
reports used in operating the Company on a monthly basis.
4.INVESTMENT IN MANAGEMENT COMPANY
Through December 31, 1997, Haagen Property Management, Inc. ("HPMI")
conducted all of the executive, construction, leasing, legal, acquisition, and
property management functions pursuant to management agreements between the
Alexander Haagen Properties Operating Partnership, Ltd. (the "OP") and HPMI.
Prior to December 31, 1997, the OP owned a 95% economic interest in, but did
not control, HPMI. The investment had been accounted for on the equity basis as
an unconsolidated subsidiary. No dividends were paid by HPMI during the three
months ended March 31, 1998 or the year ended December 31, 1997. HPMI provided
leasing and property management services to other properties owned by certain
third parties. In connection with an agreement dated November 24, 1997 between
the Company and Alexander Haagen, Sr., Charlotte Haagen and Alexander Haagen,
III (collectively the "Haagen Family"), (the "Separation Agreement"), the OP
purchased the remaining 5% economic interest in HPMI. As such, the balance
sheet of HPMI has been consolidated as of December 31, 1997. Executive and
property management fees paid to HPMI for the three months ended March 31, 1997
totaled $997,000 and are included in general and administrative expenses. In
addition, HPMI provided acquisition, leasing, legal and construction services
for the properties owned or acquired by the Company, such fees for the three
months ended March 31, 1997, of $716,000 were capitalized and are being
amortized over the useful lives of the related leases and/or properties.
7
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
5.PROPERTY ACQUISITIONS
During the three months ended March 31, 1998, the Company has acquired eight
unenclosed shopping centers comprising approximately 1,052,000 square feet of
Company owned GLA for an aggregate purchase price of approximately $114
million. The acquisitions consist of the following:
<TABLE>
<CAPTION>
COMPANY
DATE ACQUIRED PROPERTY LOCATION OWNED GLA
------------- -------- -------- ---------
<S> <C> <C> <C>
January 20,
1998............ Covington Square Kent, WA 155,370
March 11, 1998... Pavilions Centre Federal Way, WA 200,191
March 27, 1998... Bakersfield Shopping Center Bakersfield, CA 14,115
March 27, 1998... Center of El Centro El Centro, CA 179,189
March 27, 1998... Loma Square San Diego, CA 210,704
March 27, 1998... Vineyards Marketplace Rancho Cucamonga, CA 56,035
March 27, 1998... North County Plaza Carlsbad, CA 153,325
March 31, 1998... Southpointe Plaza Sacramento, CA 83,409
</TABLE>
In connection with the above acquisitions, the Company assumed three non-
recourse mortgage notes aggregating $58.3 million. The first mortgage of $24.8
million matures in August, 2006, bears interest at 7.44% and requires monthly
principal and interest payments. The second note has a face value of $14.5
million, bears interest at 10.38% and requires monthly interest payments
through maturity of January, 2003. The final note has a face value of $19.0
million, bears interest at 9.31% and matures August, 1999. This note requires
monthly principal and interest payments. In addition, the Company issued
912,472 Operating Partnership Units valued at approximately $15.1 million in
connection with six of the above acquisitions.
6.UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION.
The accompanying unaudited pro forma information for the three months ended
March 31, 1998 and 1997 is presented as if the acquisitions, as described in
Note 5 to the financial statements had occurred on January 1, 1997. Such pro
forma information is based upon the historical consolidated financial
statements of the Company and should be read in conjunction with the
consolidated and combined financial statements and the notes thereto.
This unaudited pro forma condensed consolidated information does not purport
to represent what the actual results of operations of the Company would have
been assuming such Acquisitions had been completed as set forth above, nor do
they purport to predict the results of operations for future periods.
PRO FORMA INCOME STATEMENT
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
---------------
1998 1997
------- -------
<S> <C> <C>
Total revenues............................................. $29,821 $25,542
======= =======
Net income................................................. 2,019 1,290
======= =======
Basic income per share..................................... 0.11 0.11
======= =======
Diluted income per share................................... 0.09 0.07
======= =======
Basic weighted average number of shares of common stock
outstanding............................................... 17,646 12,024
======= =======
Diluted weighted average number of shares of common stock
outstanding............................................... 22,962 17,252
======= =======
</TABLE>
8
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
7.SUBSEQUENT EVENTS.
Subsequent to March 31, 1998, the Company acquired four unenclosed shopping
centers comprising approximately 608,000 square feet of Company owned GLA for
an aggregate purchase price of approximately $48.5 million. The acquisitions
consist of the following:
<TABLE>
<CAPTION>
COMPANY
DATE ACQUIRED PROPERTY LOCATION OWNED GLA
------------- -------- -------- ---------
<S> <C> <C> <C>
April 30, 1998................... Southern Palms Center Tempe, AZ 254,863
April 30, 1998................... Sixth Avenue Plaza Tacoma, WA 139,107
May 1, 1998...................... Mineral King Plaza Visalia, CA 39,060
May 12, 1998..................... Madera MarketPlace Madera, CA 175,096
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
HISTORICAL RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 1998 to the three months ended
March 31, 1997
Revenues increased by $5.0 million to $27.2 million for the three months
ended March 31, 1998 from $22.2 million for the three months ended March 31,
1997. The revenue increase was primarily a result of the opening of the major
anchor tenants of the Company's redevelopment projects in Medford, Oregon and
Covina, CA, and the acquisition of sixteen community shopping centers between
August 1997 and March 1998. Offsetting these increases were decreases in
revenues from the Company's two regional malls and Empire Center in Fontana.
Interest expense increased to $10.3 million for the three months ended March
31, 1998 from $8.9 million for the three months ended March 31, 1997. The
increase was caused by additional borrowings on the Company's line of credit
to finance the acquisition of sixteen community shopping centers acquired
between August 1997 and March 1998.
Property operating costs increased by $1.4 million to $7.8 million for the
three months ended March 31, 1998 from $6.4 million for the three months ended
March 31, 1997. The increase is a result of increased property taxes and an
increase in operating costs as a result of the sixteen properties acquired in
the later part of 1997 and the first quarter of 1998. These costs were
partially offset by a decrease in marketing and other operating costs at the
Company's properties.
Net income increased by $0.9 million from $0.9 million for the three months
ended March 31, 1997 to income of $1.8 million for the three months ended
March 31, 1998 for the reasons stated above. Net income is expected to be
effected in future periods as a result of a required change in accounting for
costs associated with the Company's internal acquisition department. Such
costs have previously been capitalized as part of the costs associated with
acquired properties.
Selected Property Financial Information
Net operating income (defined as revenues, less property operating costs)
for the Company's properties is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1998 1997
------- -------
<S> <C> <C>
Retail Properties (54 in 1998 and 35 in 1997):
Regional Malls............................................ $ 4,626 $ 4,697
Community Centers......................................... 12,684 9,086
Single Tenants............................................ 1,924 1,931
Other income................................................ 170 77
------- -------
Net Operating Income...................................... $19,404 $15,791
======= =======
</TABLE>
10
<PAGE>
The following summarizes the percentage of leased GLA (excluding non-owned
GLA and GLA leased but not yet constructed) as of:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
Retail Properties (54 in 1998 and 46 in 1997):
Regional Malls....................................... 89.2% 91.3%
Community Centers.................................... 91.5 93.8
Portfolio Sub-total (excluding Single Tenants)..... 91.1 93.3
Single Tenants....................................... 100.0 100.0
Aggregate Portfolio................................ 92.6 94.6
</TABLE>
In the first quarter of 1997 the non-owned IKEA store and several other
tenants in Empire Center (Fontana, California) vacated their premises. The
leased space of Empire Center was 60.6% at March 31, 1998 compared to 94.2% at
March 31, 1997.
FUNDS FROM OPERATIONS
The Company considers funds from operations ("FFO") to be an alternative
measure of the performance of an equity REIT since such measure does not
recognize depreciation and amortization expenses as operating expenses. FFO
has been defined by the National Association of Real Estate Investment Trusts
("NAREIT") as net income plus depreciation and amortization of real estate,
less gains on sales of properties. Management concurs with NAREIT in believing
that reductions for the depreciation and amortization of real estate and its
related costs are not meaningful in evaluating income-producing real estate.
11
<PAGE>
The Company computes FFO on both a basic and diluted basis and considers
Operating Partnership Units as the equivalent of shares for the purpose of
these computations. The diluted basis assumes the conversion of the convertible
and exchangeable debentures and other common stock equivalents into shares of
common stock. In computing fully-diluted FFO the Company adds back the
amortization of deferred financing costs related to the outstanding debentures,
principally representing the underwriting discount on the convertible
debentures. The following table summarizes the Company's computation of FFO and
provides certain additional disclosures (dollars in thousands, except per share
amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
---------- ---------
<S> <C> <C>
FUNDS FROM OPERATIONS:
Net income................................................ $ 1,780 $ 933
Adjustments to reconcile net income to funds from
operations:
Depreciation and Amortization:
Buildings and improvements.............................. 3,953 2,917
Tenant improvements and allowances...................... 1,066 1,071
Leasing costs........................................... 329 314
Minority Interests........................................ 367 259
Other..................................................... 25 --
---------- --------
Funds from Operations, basic.............................. 7,520 5,494
Debenture interest expense................................ 3,142 3,142
Amortization of debenture financing costs................. 325 325
---------- --------
Funds from operations, diluted............................ $ 10,987 $ 8,961
========== ========
SUPPLEMENTAL DISCLOSURES
Expansion of Portfolio:
Acquisitions............................................ $ 115,830 $ --
Construction and Development............................ 3,346 5,713
Leasing................................................. 484 501
---------- --------
$ 119,660 $ 6,214
========== ========
Releasing and Maintenance of Portfolio:
Construction and Development............................ $ -- $ 49
Leasing................................................. 112 134
---------- --------
$ 112 $ 183
========== ========
</TABLE>
The Company considers any space that was vacant or unbuilt at the date of its
initial public offering to be expansion of its portfolio.
Funds from operations, on a basic basis, increased to $7.5 million for the
three months ended March 31, 1998, as compared to $5.5 million for the same
period in 1997. On a diluted basis, assuming conversion of the debentures and
other common stock equivalents, funds from operations increased to $11.0
million from $9.0 million. The increase in funds from operations is principally
a result of the reasons stated above under Results of Operations.
Funds from operations do not represent cash flows from operations as defined
by Generally Accepted Accounting Principles and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.
12
<PAGE>
LIQUIDITY SOURCES AND REQUIREMENTS
In December 1997, the Operating Partnership entered into a new revolving line
of credit with a maximum borrowing limit of $250 million (the "Credit
Facility"). The Credit Facility will primarily provide continued funding for
the Company's planned acquisition and redevelopment activities. The Credit
Facility expires in December 2000. Borrowings under the Credit Facility are
secured by first mortgage liens on Montebello Town Square, The City Center,
Media City Center, Empire Center, Medford Center, Pacific Linen Plaza, Ross
Center, Vancouver Park Place, Smitty's Tucson, Frontier Village, Marshalls
Plaza, Silverdale and Covington Square. At March 31, 1998, outstanding
borrowings on the Credit Facility were approximately $123.2 million, with an
additional $4.2 million having been utilized to provide letters of credit.
To the extent that borrowings under the facility are less than the
outstanding commitment from LFREI the interest rate will be London Inter-Bank
Offering Rate ("LIBOR") plus 100 basis points. To the extent the borrowings are
in excess of the outstanding LFREI commitment such excess will bear interest at
LIBOR plus 137.5 basis points.
Upon conversion to an unsecured facility, borrowings will bear interest at
varying rates based upon the company's leverage ratio and investment grade
rating interest. The range of rates is from 75 to 137.5 basis points over
LIBOR.
On June 1, 1997 the Company entered into a Stock Purchase Agreement with LF
Strategic Realty Investors, L.P. and Prometheus Western Retail, LLC, affiliates
of Lazard Freres Real Estate Investors, LLC, (together "LFREI"), providing for
LFREI to invest a total of up to $235 million in Common Stock of the Company
(the "Transaction"). Pursuant to the Stock Purchase Agreement the Company will
sell an aggregate of 15,666,666 shares of Common Stock to LFREI at a price of
$15.00 per share, for an aggregate purchase price of $235 million (the "Total
Equity Commitment"). The purchase price per share was determined as a result of
arm's length negotiations between the Company and its advisors and LFREI and
its advisors.
As of December 31, 1997, the Company had sold 4,006,434 shares, to LFREI
under the terms of the Transaction for aggregate proceeds of $60.1 million. On
February 13, 1998 the Company sold an additional 2,700,000 shares to LFREI for
proceeds of $40.5 million, which was used to reduce the outstanding borrowings
on the Credit Facility, reducing the Remaining Equity Commitment to $134.4
million. On May 4, 1998, the Company notified LFREI of its intent to sell an
additional 2,000,000 shares to LFREI effective June 2, 1998.
Loans maturing of $28.2 million in 1999 and $18.7 million in 2002, as well as
significant amounts due from 2004 to 2015, may require refinancing.
Additionally, the Company's secured line of credit is due in 2000 and the
convertible debentures of $138.6 million and exchangeable debentures of $30.0
million are due in 2001 and 2003, respectively. The Company believes, based on
the collateral available within the Properties and improvements in cash flow at
the Redevelopment Properties, that it will be able to effect such refinancings
for the foreseeable future.
During the three months ended March 31, 1998, the Company has acquired eight
unenclosed shopping centers comprising approximately 1,052,000 square feet of
Company owned GLA for an aggregate purchase price of approximately $114
million. The acquisitions consist of the following:
<TABLE>
<CAPTION>
DATE ACQUIRED PROPERTY LOCATION TOTAL GLA
------------- -------- -------- ---------
<S> <C> <C> <C>
January 20,
1998............ Covington Square Kent, WA 155,370
March 11, 1998... Pavilions Centre Federal Way, WA 200,191
March 27, 1998... Bakersfield Shopping Center Bakersfield, CA 14,115
March 27, 1998... Center of El Centro El Centro, CA 179,189
March 27, 1998... Loma Square San Diego, CA 210,704
March 27, 1998... Vineyards Marketplace Rancho Cucamonga, CA 56,035
March 27, 1998... North County Plaza Carlsbad, CA 153,325
March 31, 1998... Southpointe Plaza Sacramento, CA 83,409
</TABLE>
13
<PAGE>
These acquisitions were funded from borrowings under the Credit Facility, the
assumption of certain non-recourse mortgage notes and the issuance of Operating
Partnership Units.
The Company anticipates continuing to execute its acquisition and
redevelopment strategy during the next 12 months. The Company believes that
such acquisitions will be funded from the LFREI Equity Commitment, the
Company's Credit Facility, future debt refinancings and financings, and the
issuance of equity.
CASH FLOWS
Net cash provided by operating activities decreased from $6.3 million for the
three months ended March 31, 1997 to $3.3 million for the same period in 1998.
Net cash used by investment activities increased to $50.1 million for the three
months ended March 31, 1998 from $5.0 million for the three months ended
March 31, 1997. Net cash provided by financing activities increased to $48.8
million for the three months ended March 31, 1998 from $2.3 million used in
financing activities in the three months ended March 31, 1997. The decrease in
cash provided by operating activity was primarily due to an increase in tenant
and other receivables as well as a decrease in accrued interest payable. The
increase in cash used by investment activities was a result of the acquisition
of eight community centers during the first quarter of 1998 and the completion
of the Company's AMC Theatres at Covina Town Square. The principal cause of the
increase in cash provided by financing activities was the result of the sale of
Common Stock to LFREI and additional borrowings on the Company's Credit
Facility.
14
<PAGE>
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
Exhibit 27 Financial Data Schedule
Exhibit 27.2 Restated Financial Data Schedule
(b)Reports on Form 8-K
None
15
<PAGE>
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.
ALEXANDER HAAGEN PROPERTIES, INC.
/s/ Stuart J.S. Gulland
By: _________________________________
STUART J.S. GULLAND
SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
/s/ Edward A. Stokx
By: _________________________________
EDWARD A. STOKX
CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
Dated: May 15, 1998
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,666
<SECURITIES> 0
<RECEIVABLES> 7,464
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 902,455
<DEPRECIATION> 126,106
<TOTAL-ASSETS> 827,156
<CURRENT-LIABILITIES> 0
<BONDS> 554,640
0
0
<COMMON> 190
<OTHER-SE> 187,351
<TOTAL-LIABILITY-AND-EQUITY> 827,156
<SALES> 0
<TOTAL-REVENUES> 27,169
<CGS> 0
<TOTAL-COSTS> 7,765
<OTHER-EXPENSES> 7,370<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,254
<INCOME-PRETAX> 1,780
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,780
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.08
<FN>
<F1>INCLUDES DEPRECIATION AND AMORTIZATION OF $5,389, $512 ALLOCATED TO MINORITY
INTERESTS AND $1,469 IN $1,469 OF G & A COSTS.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,308
<SECURITIES> 0
<RECEIVABLES> 5,894
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 665,327
<DEPRECIATION> 105,328
<TOTAL-ASSETS> 595,632
<CURRENT-LIABILITIES> 0
<BONDS> 416,130
0
0
<COMMON> 120
<OTHER-SE> 113,100
<TOTAL-LIABILITY-AND-EQUITY> 595,632
<SALES> 0
<TOTAL-REVENUES> 22,183
<CGS> 0
<TOTAL-COSTS> 6,392
<OTHER-EXPENSES> 5,961<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,897
<INCOME-PRETAX> 933
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 933
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.06
<FN>
<F1>INCLUDES DEPRECIATION AND AMORTIZATION OF $4,315, AND $408 ALLOCATED TO
MINORITY INTERESTS, RESPECTIVELY.
</FN>
</TABLE>
