<PAGE> 1
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UNITED STATES
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, 1999
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 1-13092
MALAN REALTY INVESTORS, INC.
(Exact name of registrant as specified in charter)
Michigan 38-1841410
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
30200 Telegraph Rd., Ste. 105 48025
Bingham Farms, Michigan (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (248) 644-7110
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 April 30, 1999, 5,169,590 shares of Common Stock, Par Value $.01
Per share, were outstanding.
<PAGE> 2
MALAN REALTY INVESTORS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets as of March 31, 1999
(unaudited) and December 31, 1998 3
Statements of Operations (unaudited) for
the three months ended March 31, 1999 and 1998 4
Statements of Cash Flows (unaudited) for the
three months ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II OTHER INFORMATION 14
SIGNATURES 15
</TABLE>
2
<PAGE> 3
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate
Land, buildings and improvements $265,318 $261,783
Less: accumulated depreciation (22,130) (21,286)
------------ -------------
243,188 240,497
Accounts receivable, net 2,810 1,662
Deferred financing and other 8,923 9,450
Cash and cash equivalents 1,354 2,898
Escrow deposits 2,477 2,330
------------ -------------
Total Assets $258,752 $256,837
============ =============
LIABILITIES
Mortgages $125,286 $122,279
Convertible debentures 44,925 44,925
Convertible notes 27,000 27,000
Deferred income 1,305 1,160
Accrued distributions payable 2,197 2,200
Accounts payable and other 2,457 2,871
Accrued property taxes 2,175 1,265
Accrued interest payable 2,220 3,900
------------ -------------
Total Liabilities 207,565 205,600
------------ -------------
SHAREHOLDERS' EQUITY
Common stock ($.01 par value, 30 million shares
authorized, 5,169,590 and 5,168,742 shares
issued and outstanding at March 31, 1999 and
December 31, 1998, respectively) 52 52
Additional paid in capital 74,129 74,117
Accumulated distributions in excess of net income (22,994) (22,932)
------------ -------------
Total shareholders' equity 51,187 51,237
------------ -------------
Total Liabilities and
Shareholders' Equity $258,752 $256,837
============ =============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
----------------- ------------------
REVENUES
<S> <C> <C>
Minimum rent $7,682 $6,283
Percentage and overage rents 348 301
Recoveries from tenants 2,984 2,399
Interest and other income 87 71
Gain on sale of real estate 1,751
----------------- ------------------
Total Revenues 12,852 9,054
----------------- ------------------
EXPENSES
Property operating and maintenance 1,170 736
Other operating expenses 368 347
Real estate taxes 2,158 1,957
General and administrative 545 389
Depreciation and amortization 1,579 1,310
----------------- ------------------
Total Operating Expenses 5,820 4,739
----------------- ------------------
OPERATING INCOME 7,032 4,315
INTEREST EXPENSE 4,438 4,016
----------------- ------------------
INCOME BEFORE
EXTRAORDINARY ITEM 2,594 299
EXTRAORDINARY ITEM:
Loss on extinguishment of debt (459)
----------------- ------------------
NET INCOME $2,135 $299
================= ==================
BASIC AND DILUTED EARNINGS PER
SHARE BEFORE EXTRAORDINARY ITEM $0.50 $0.08
================= ==================
BASIC AND DILUTED EARNINGS
PER SHARE $0.41 $0.08
================= ==================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $2,135 $299
------------ -------------
Adjustments to reconcile net income to
net cash flows provided by operating activities:
Depreciation and amortization 1,579 1,310
Amortization of deferred financing costs 480 447
Directors compensation issued in stock 12 12
Gain on sale of real estate (1,751)
Loss on extinguishment of debt 459
Change in operating assets and liabilities that used cash:
Accounts receivable and other assets (1,273) (2,601)
Accounts payable, deferred income and
other accrued liabilities (1,039) (370)
------------ -------------
Total adjustments (1,533) (1,202)
------------ -------------
NET CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES 602 (903)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate developed, acquired or improved, net
of mortgage assumed (9,873) (2,037)
Deposits to escrow (5,300) (4,741)
Disbursements from escrow 5,153 4,867
Net proceeds from sale of real estate 7,175
------------ -------------
NET CASH FLOWS USED FOR
INVESTING ACTIVITIES (2,845) (1,911)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on mortgages (3,787) (84)
Proceeds from mortgages 3,800
Debt issuance costs (108)
Draws on lines of credit 11,294 4,350
Repayments on lines of credit (8,300)
Proceeds from stock options exercised 36
Distributions to shareholders (2,200) (1,620)
------------ -------------
NET CASH FLOWS PROVIDED BY 699 2,682
FINANCING ACTIVITIES ------------ -------------
Net (decrease) in cash and cash equivalents (1,544) (132)
Cash and cash equivalents at beginning of
period 2,898 1,717
------------ -------------
Cash and cash equivalents at end of period $1,354 $1,585
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION-
CASH PAID FOR INTEREST DURING THE PERIOD $5,628 $5,515
============ =============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation - The accompanying interim consolidated 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, 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 rules. In the opinion of management, all adjustments
considered necessary for a fair presentation of the Company's consolidated
financial position, results of operations and cash flows have been included. The
results of such interim periods are not necessarily indicative of the results of
operations for the full year.
Principles of Consolidation - The accompanying consolidated financial statements
include the activity of the Company and its wholly owned subsidiaries, Malan
Mortgagor, Inc., Malan Meadows, Inc., Malan Revolver, Inc and Malan Midwest,
LLC. All significant inter-company balances and transactions have been
eliminated.
Reclassifications- Certain reclassifications have been made to prior years
financial statements in order to conform with the current year presentation.
Management Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. COMPENSATION PLANS
The activity in the Directors Stock Compensation Plan for the three
months ended March 31, 1999 consisted of 848 shares issued at $14.125 per share.
Compensation expense in connection with the Company's 401(k)
retirement plan for the three months ended March 31, 1999 was $8,000.
6
<PAGE> 7
3. MORTGAGES
In February 1999, the Company obtained a $3.8 million mortgage with
Mercantile Bank collateralized by its interest in the Southwind Theater complex
located in Lawrence, Kansas. The loan is for seven year term due February 2,
2006 with interest fixed at 7.49% for the first five years and a provision for
readjustment after five years. Payments of interest and principal amortized over
20 years are due monthly.
In April 1999, the Company and Bloomfield Acceptance Company amended a
previous loan agreement dated May 1998 to reflect additional loan proceeds of
$3.0 million. As part of the amended agreement, the Company transferred its
interest in the Wal-Mart Plaza in Decatur, Illinois, purchased in January 1999,
to its wholly owned subsidiary, Malan Midwest, LLC as additional collateral for
the loan. Terms of the loan agreement were amended to include monthly payments
of interest on the incremental balance at the rate of 8.245% per year and
principal amortized over 30 years.
4. EARNINGS PER SHARE
Earnings per share ("EPS") data were computed as follows (in thousands
except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Income before extraordinary item .............. $ 2,594 $ 299
======== =======
Net Income .................................... $ 2,135 $ 299
======== =======
BASIC EPS:
Weighted-average shares outstanding ........... 5,169 3,784
======== =======
Basic earnings per share before
extraordinary item ............................ $ 0.50 $ 0.08
======== =======
Basic earnings per share ...................... $ 0.41 $ 0.08
======== =======
DILUTED EPS:
Weighted-average shares outstanding ........... 5,169 3,784
Shares issued upon exercise of dilutive
options...................................... 101 267
Shares purchased with proceeds of options ..... (96) (223)
-------- -------
Shares applicable to diluted earnings ......... 5,174 3,828
======== =======
Diluted earnings per share before
extraordinary item ............................ $ 0.50 $ 0.08
======== =======
Diluted earnings per share .................... $ 0.41 $ 0.08
======== =======
</TABLE>
Diluted EPS reflects the potential dilution of securities that could share in
the earnings but does not include shares issuable upon conversion of securities
that would have an antidilutive effect on earnings per share.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1999 to Three Months Ended March 31,
1998
Total revenues increased $3.798 million from 1998. Approximately $1.751
million of the increase resulted from gain on the sale of a freestanding Kmart
retail building located in Colma, California in March 1999. Rents and recoveries
from tenants increased $2.031 million resulting primarily from the Company's
acquisition of a 12 shopping center portfolio in May 1998 , the Wal-Mart Plaza
at Decatur, Illinois in March 1999 and the completion of redevelopments at
Melrose Park, Illinois in March 1999, North Aurora, Illinois in November 1998
and Lawrence, Kansas in October 1998.
Total operating expenses increased $1.081 million from 1998 to 1999.
Property operating and maintenance expense, real estate taxes and depreciation
and amortization increased $434,000, $201,000 and $269,000 respectively,
primarily due to the acquisitions and redevelopments discussed above. General
and administrative expense and other property operating expenses increased
$156,000 and $21,000, respectively, primarily due to increased compensation
expense.
Interest expense (including related amortization of deferred financing
costs) increased approximately $422,000 due to increased debt levels from
borrowing on the Company's lines of credit, long-term financing related to the
acquisitions of properties and amortization of deferred financing costs on such
borrowings.
As a result of the pay down of a portion of the Company's Securitized
Mortgage Loan in connection with the sale of property in Colma, California, the
Company incurred a loss on extinguishment of debt of $459,000, primarily from
the charge off of deferred financing costs associated with the pay down and a
related prepayment penalty.
Overall, net income increased approximately $1.836 million to $2.135
million in 1999 primarily as a result of an increase in operating income from
property sales, acquisitions and redevelopments offset by a loss incurred from
the extinguishment of debt.
YEAR 2000 DATE CONVERSION
Certain computer systems that have time-sensitive programs may not
properly recognize the year 2000 which could result in major system failures or
miscalculations. The Company has developed a high-level plan to address the
risks posed by the Year 2000 issue which includes the testing of internal
systems and inquiry of third parties with which the Company conducts business
including major tenants, vendors, contractors and creditors. The Company is in
the process of obtaining written confirmation of Year 2000 readiness from third
parties. Implementation and testing of Year 2000 remedies for all critical
systems have begun and are expected to be conducted throughout 1999 in
sufficient time to correct any additional Year 2000 issues that may be
identified.
8
<PAGE> 9
There are Year 2000 issues that will generally affect all businesses
including the Company, such as the Year 2000 compliance of public utility
companies and governmental agencies. If such issues occur, then there could be
an interruption in, or failure of, the Companies normal business activities,
that could have a material adverse effect on the Company's operations, liquidity
and financial condition. At this time, there is insufficient information to
evaluate the likelihood of such an occurrence.
While the Company would generally expect to manage business
interruptions relating to Year 2000 issues in a manner similar to other
potential interruption issues encountered in the regular course of business, the
Company is developing certain contingency plans relating specifically to Year
2000 issues. For example, the current contingency plan would allow the Company
to operate for a short period of time without the intervention of computers. The
Company intends to modify its contingency plans as necessary as it progresses
with its Year 2000 project. However, the contingency plans are expected to
provide relief only for short periods, after which there could be an
interruption in, or failure of, the Company's normal business activities, that
could have a material adverse effect on the Company's operations, liquidity and
financial condition. The Company does not expect the costs to address the Year
2000 issue to be material.
FUNDS FROM OPERATIONS
Management considers Funds From Operations ("FFO") to be an appropriate
measure of performance of an equity real estate investment trust. Effective
beginning with the quarter ended June 30, 1998, the Company adopted the method
of calculating FFO as prescribed by the National Association of Real Estate
Investment Trusts (NAREIT) as further clarified in a 1995 opinion paper (the
"White Paper") which utilizes net income or loss excluding gains and losses from
sales of property and debt restructuring, further adjusted for certain non-cash
items including depreciation and amortization of real estate assets and other
nonrecurring items. It is the opinion of the management that reduction for, or
inclusion of these items, is not meaningful in evaluating income-producing real
estate which, in general, has historically not depreciated. FFO does not
represent cash generated from operating activities in accordance with generally
accepted accounting principles and is not necessarily indicative of cash
available to fund cash needs, including distributions. FFO should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure of
liquidity or the ability to pay distributions but rather, as a supplemental tool
to be used in conjunction with these factors in analyzing the Company's overall
performance.
The primary differences between the method in which the Company
previously computed FFO and the White Paper definition is in the treatment of
amortization of nonrecurring deferred financing costs and certain depreciation
expense. Also effective with the quarter ended June 30, 1998, the Company began
reporting FFO on both a basic and diluted basis. The diluted basis assumes the
conversion of the Company's convertible debentures and convertible notes into
shares of common stock as well as other common stock equivalents including those
which are antidilutive to earnings per share.
9
<PAGE> 10
The following table shows the components that comprise the Company's FFO for the
three months ended March 31, 1999 and 1998 and the reconciliation of basic to
diluted FFO. The 1998 period has been restated to conform with the 1999
presentation (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
--------- ---------
<S> <C> <C>
NET INCOME ...................................................... $ 2,135 $ 299
DEPRECIATION AND AMORTIZATION:
Depreciation of buildings and improvements ................. 1,507 1,251
Amortization of tenant allowances and tenant improvements .. 38 29
Amortization of leasing costs .............................. 33 28
Gain on sale of real estate .................................... (1,751)
Loss on extinguishment of debt ................................. 459 -
--------- ---------
FUNDS FROM OPERATIONS, BASIC ................................... $ 2,421 $ 1,607
--------- ---------
Interest expense on convertible securities ..................... 1,641 1,896
Amortization of deferred financing costs on convertible
securities.................................................. 71 84
--------- ---------
FUNDS FROM OPERATIONS, DILUTED ................................... $ 4,133 $ 3,587
========= =========
Weighted average shares outstanding:
Basic ............................................................ 5,169 3,784
========= =========
Diluted, assuming conversion of convertible securities ........... 9,405 8,705
========= =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations is the principal source of capital to fund
the Company's ongoing operations. Current efforts to increase cash flow have
centered on additional acquisitions of properties and redevelopment
opportunities at certain of the Company's existing properties.
Acquisitions
In January 1999, the Company completed the acquisition of the Wal-Mart
Plaza, a 45,000 square foot community shopping center in Decatur, Illinois, for
$4.68 million. The acquisition was originally part of a larger portfolio of
Wal-Mart anchored shopping centers which was acquired by the Company in 1998 and
was delayed to accommodate the completion of an expansion of the center. The
acquisition was funded out of proceeds from the Company's line of credit with
NBD First Chicago (the "NBD Line") and from available cash reserves.
Redevelopments
In March 1999, construction was completed at the Company's property in
Melrose Park, Illinois on a 61,000 square foot, 10-plex theater complex under an
agreement with Cinemark USA ("Cinemark") to replace a freestanding former
Builders Square building which had been vacant
10
<PAGE> 11
since 1995. Upon completion, the Company provided a construction allowance to
Cinemark of approximately $3.9 million which was funded primarily out of
proceeds of a $3.8 million mortgage with Mercantile Bank discussed further
below. Total costs of the development including capitalized interest, taxes and
leasing commissions were approximately $4.8 million.
Construction was completed in March 1999 on a new 24,000 square foot
Ace Hardware Store in Arkansas City, Kansas. The former Kmart building was
redeveloped and subdivided at a cost of approximately $599,000 which was funded
primarily from the Company's line of credit with Greenwich Capital Markets, Inc.
(the "Greenwich Capital Line"). The Company is negotiating with several national
and regional retailers to lease the remaining 16,000 square feet of the
building.
Construction is currently underway at the Company's property in
Lincoln, Illinois to redevelop the balance of a former Kmart store into a 25,000
square feet Staples, Inc. office supply store. The space is anticipated to be
completed during the Second Quarter 1999 at a cost of approximately $700,000 and
is anticipated to be funded out of available working capital and/or draws on the
Company's lines of credit.
Phase II of the redevelopment of the Pine Ridge Plaza in Lawrence,
Kansas is anticipated to begin shortly. Current plans call for the addition of
two "big box" national retailers consisting of 20-25,000 square feet each and
approximately 20,000 square feet of additional in-line retail space.
Construction on the two big box retailers is anticipated to begin sometime in
the second quarter 1999, when lease terms are finalized. Total costs of the
Phase II development are anticipated to range from approximately $3.7 million to
$4.0 million depending on the final scope of the project and are anticipated to
be expended over the next twelve to eighteen months. Possible sources of funding
for the project include the Company's lines of credit and property specific
financing.
Capital Expenditures
The Company incurs capital expenditures in the ordinary course of
business in order to maintain its properties. Such capital expenditures
typically include roof, parking lot and other structural repairs, some of which
are reimbursed by tenants. In 1999, the Company anticipates spending
approximately $1.1 million (of which none had been incurred in the three months
ended March 31, 1999) for capital expenditures to be funded primarily out of
reserves required for the Company's collateralized mortgages and partially from
operating cash flows.
The Company will occasionally provide inducements such as building
allowances or space improvements and/or pay leasing commissions to outside
brokers in order to procure new tenants or renegotiate expiring leases with
current tenants. The total cost of these expenditures in 1999 is estimated to be
approximately $333,000 (of which $87,000 had been incurred in the three months
ended March 31, 1999). These expenditures are generally funded by operating cash
flows and increased revenues resulting from such expenditures.
Sources of Capital
In March 1999, the Company sold a property in Colma, California
containing a freestanding Kmart store for $7.665 million. In conjunction with
the sale, the Company paid down $3.625 million on its
11
<PAGE> 12
Securitized Mortgage Loan to have the property released from the collateral
pool. Net proceeds from the sale of $3.5 million after pay down of the mortgage
and selling expenses were used to pay down the Company's lines of credit.
The Company has entered into a contract to sell its interest in the
Miller Mall, a 130,000 square foot shopping center in Gary, Indiana. The sale is
anticipated to close in the Second Quarter 1999 after details of the sale are
finalized. Net proceeds from the sale of approximately $600,000 are anticipated
to be used to pay down outstanding indebtedness.
In February 1999, the Company obtained a $3.8 million mortgage with
Mercantile Bank collateralized by its interest in the Southwind Theater complex
located in Lawrence, Kansas. The loan is for a seven year term due February 2,
2006 with interest fixed at 7.49% for the first five years and a provision for
readjustment after five years. Payments of interest and principal amortized over
20 years are due monthly. Proceeds of the loan were utilized to pay a portion of
the construction allowance due Cinemark for the theater in Melrose Park,
Illinois.
In April 1999, the Company and Bloomfield Acceptance Company amended a
previous loan agreement dated May 1998 to reflect additional loan proceeds of
$3.0 million. As part of the amended agreement, the Company transferred its
interest in the Wal-Mart Plaza in Decatur, Illinois purchased in January 1999 to
its wholly owned subsidiary, Malan Midwest, LLC as additional collateral for the
loan. Terms of the loan agreement were amended to include monthly payments of
interest on the incremental balance at the rate of 8.245% per year and principal
amortized over 30 years. The additional loan proceeds were used to pay down the
Greenwich Capital Line and for general working capital purposes.
The Company has in place a plan to repurchase and retire up to $15
million aggregate principal of its 9.5% Subordinated Convertible Debentures
("Debentures") due July 2004. Through March 31, 1999, the Company had
repurchased $9.625 million of Debentures. No Debentures were repurchased during
the quarter ended March 31, 1999, however, the Company intends to make
additional purchases in the future as funds become available.
The Company anticipates that its cash flow from operations will
generally be sufficient to fund its cash needs for payment of expenses, capital
expenditures (other than acquisitions and redevelopments) and to maintain the
Company's current distribution policy. The Company currently has two lines of
credit available for temporary working capital needs and intends to enter into
other secured and unsecured financing agreements in the future as the need
arises.
In March 1999, the Company extended the NBD Line through March 31,
2000. The NBD Line calls for monthly payments of interest at the rate of 200
basis points over LIBOR and is collateralized by the Company's interest in
Orchard-14 Shopping Center in Farmington Hills, Michigan. The Greenwich Capital
Line is a revolving line of credit which expires November 1999 and is
collateralized by 16 properties owned by the Company's wholly owned subsidiary,
Malan Revolver, Inc. The Greenwich Capital Line requires monthly payments of
interest only at LIBOR plus 150 basis points. Amounts outstanding as of March
31, 1999 under the Greenwich Capital Line and the NBD Line were $17.8 million
and $200,000, respectively, and the total maximum borrowings under each line as
of that date were $17.8 million and $4.5 million, respectively.
The Company is in discussions with several lenders to replace the
Greenwich Capital Line
12
<PAGE> 13
and obtain permanent financings on several of its unencumbered properties.
Each of the above statements regarding future revenues or expenses may
be a "forward-looking statement" within the meaning of the Securities Exchange
Act of 1934. Such statements are subject to important factors that could cause
actual results to differ materially from those in the forward-looking statement,
including the factors set forth in the Management's Discussion and Analysis of
Financial Condition and Results of Operations.
INFLATION
The Company's long-term leases contain provisions to mitigate the
adverse impact of inflation on its results of operations. Such provisions
include clauses entitling the Company to receive (i) scheduled base rent
increases and (ii) percentage rents based upon tenants' gross sales, which
generally increase as prices rise. In addition, many of the Company's non-anchor
leases are for terms of less than ten years, which permits the Company to seek
increases in rents upon re-rental at then current market rates if rents provided
in the expiring leases are below then existing market rates. Most of the
Company's leases require tenants to pay a share of operating expenses, including
common area maintenance, real estate taxes, insurance and utilities, thereby
reducing the Company's exposure to increases in costs and operating expenses
resulting from inflation.
ITEM 3A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has exposure to interest rate risk on its debt obligations
and interest rate instruments. Based on the Company's outstanding variable rate
debt at March 31, 1999, a one percent increase or decrease in interest rates
would decrease or increase, respectively, the Company earnings and cash flows by
approximately $180,000 on an annualized basis.
13
<PAGE> 14
MALAN REALTY INVESTORS, INC.
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) Exhibit Index:
27 Financial Data Schedule Filed with
this document
b) Reports on Form 8-K
During the three-month period ended March 31, 1999, one report
was filed on Form 8-K under Item 5 - Other Events, relative to the creation of a
shareholders rights plan the Company has initiated. This report was dated
January 15, 1999 and filed February 3, 1999.
14
<PAGE> 15
MALAN REALTY INVESTORS, INC.
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.
MALAN REALTY INVESTORS, INC.
By: /s/ Anthony S. Gramer
-------------------------------------
Anthony S. Gramer
Chief Executive Officer and President
By: /s/ Elliott J. Broderick
-------------------------------------
Elliott J. Broderick
Chief Accounting Officer
Dated: May 10, 1999
15
<PAGE> 16
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,831
<SECURITIES> 0
<RECEIVABLES> 11,733
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,564
<PP&E> 265,318
<DEPRECIATION> 22,130
<TOTAL-ASSETS> 258,752
<CURRENT-LIABILITIES> 10,354
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0
0
<COMMON> 74,181
<OTHER-SE> (22,994)
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<CGS> 0
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<EXTRAORDINARY> (459)
<CHANGES> 0
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<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
